-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q8ot5G3vPb5UjLV+Uae5Vjf58iBmnC0TIVHiHx2bWNQNKIpG+f9QdEbguT6a5mH8 O4a9Qs017ujdjozSIjhRiA== 0000950123-01-001452.txt : 20010223 0000950123-01-001452.hdr.sgml : 20010223 ACCESSION NUMBER: 0000950123-01-001452 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20010108 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OSI PHARMACEUTICALS INC CENTRAL INDEX KEY: 0000729922 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 133159796 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-15190 FILM NUMBER: 1545908 BUSINESS ADDRESS: STREET 1: 106 CHARLES LINDBERGH BLVD CITY: UNIONDALE STATE: NY ZIP: 11553 BUSINESS PHONE: 5162220023 MAIL ADDRESS: STREET 1: 106 CHARLES LINDBERGH BLVD CITY: UNIONDALE STATE: NY ZIP: 11553-3649 FORMER COMPANY: FORMER CONFORMED NAME: ONCOGENE SCIENCE INC DATE OF NAME CHANGE: 19920703 8-K 1 y45494e8-k.txt CURRENT REPORT 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 January 8, 2001 Date of Report (Date of earliest event reported) OSI PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter) DELAWARE 0-15190 13-3159796 (State or other jurisdiction of (Commission (I.R.S. Employer incorporation) File Number) Identification No.) 106 CHARLES LINDBERGH BOULEVARD UNIONDALE, NY 11553 (Address of principal executive offices) (516) 222-0023 (Registrant's telephone number, including area code) N/A (Former name or former address, if changed since last report) 2 ITEM 5. OTHER EVENTS On January 8, 2001, OSI Pharmaceuticals, Inc., a Delaware corporation (the "Company" or "OSI") announced that it had entered into certain agreements (the "Collaboration Agreements") with Genentech, Inc. ("Genentech") and F.Hoffmann-La Roche Ltd ("Roche") for the global co-development and commercialization of OSI's lead anti-cancer drug, OSI-774. The Collaboration Agreements consist of a Development and Marketing Collaboration Agreement between OSI and Genentech (the "OSI/Genentech Agreement"); a Development Collaboration and Licensing Agreement between OSI and Roche (the "OSI/Roche Agreement"); and a Tripartite Agreement by and among OSI, Genentech and Roche (the "Tripartite Agreement"). The Company received upfront fees of $25 million related to these agreements. Under the OSI/Genentech Agreement, OSI and Genentech have agreed to collaborate in the product development of OSI-774 with the goal of obtaining regulatory approval for commercial marketing and sale in the United States of products resulting from the collaboration. Under the OSI/Genentech Agreement, the parties have established a joint steering committee composed of representatives from each of OSI and Genentech. The responsibility of the joint steering committee will be, among other things, to approve overall strategy of the collaboration; review and approve development, clinical trial strategies and budgets; review and approve manufacturing activities; review and approve marketing and sales budgets; and perform other similar functions. The parties have also established a joint project team responsible for formulating overall development plans and budgets. The parties will conduct clinical trials of indications for licensed products as defined in the OSI/Genentech Agreement in accordance with such agreement. Consistent with the parties' development plan under the OSI/Genentech Agreement, and with the approval of the joint steering committee, the parties will agree as to who will own and be responsible for the filing of drug approval applications with the Food and Drug Administration other than the first new drug application which OSI will own and be responsible for filing and the first supplemental new drug application which OSI will have the option to own and be responsible for filing. Genentech will have responsibility for the design and implementation of all product launch activities and the promotion, marketing and sales of all products resulting from the collaboration in the United States, its territories and Puerto Rico, while OSI will have certain co-promotion rights. Genentech will pay OSI certain milestone payments and OSI will share in the operating profits or losses on products resulting from the collaboration. Under the OSI/Genentech Agreement, OSI has granted to Genentech a non-transferable (except under certain circumstances), non-sublicensable (except under certain circumstances), co-exclusive license under OSI's patents related to OSI-774 to use, sell, offer for sale and import products resulting from the collaboration. In addition, Genentech has granted to OSI a non-transferable (except under certain circumstances), non-sublicensable (except under certain circumstances), co-exclusive license to certain patents held by Genentech to use, make, have made, sell, offer for sale and import products resulting from the collaboration. Each party is generally responsible for its own patent filings. In addition, each party, generally, has the right, but not the obligation, to institute, prosecute and control against patent infringement claims. The -2- 3 term of the OSI/Genentech Agreement is until the date on which the parties are no longer entitled to receive a share of the operating profits or losses on any products resulting from the collaboration. The OSI/Genentech Agreement is subject to early termination in the event of certain defaults by either party and early termination by Genentech under certain circumstances. Under the OSI/Roche Agreement, OSI has granted to Roche, and Roche has obtained, a license under OSI's intellectual property rights with respect to OSI-774. Roche will collaborate with OSI and Genentech in the product development of OSI-774 and will be responsible for future marketing and commercialization of OSI-774 outside of the United States in certain territories as defined in the OSI/Roche Agreement. The grant is a royalty-bearing, non-transferable (except under certain circumstances), non-sublicensable (except with consent), sole and exclusive license to use, sell, offer for sale and import products resulting from the development of OSI-774 in the world, other than the territories covered by the OSI/Genentech Agreement. In addition, Roche has the right, but not the obligation, to manufacture OSI-774 for its territory, subject to certain exceptions. Roche will pay milestone and royalty payments to OSI. OSI has primary responsibility for patent filings for the basic patents protecting OSI-774, and in addition, has the right, but not the obligation, to institute, prosecute and control against patent infringement claims. The term of the OSI/Roche Agreement is until the date on which OSI is no longer entitled to receive a royalty on products resulting from the development of OSI-774. The OSI/Roche Agreement is subject to early termination in the event of certain defaults by either party. In addition, after two and one half years from the effective date, Roche may terminate the agreement on a country-by-country basis. OSI may also have the right to terminate the agreement on a country-by-country basis if Roche has not launched or marketed a product in such country under certain circumstances. Under the Tripartite Agreement, OSI, Genentech and Roche have agreed to establish a structure which is intended to generally result in the optimization of the use of each party's resources to develop OSI-774 in certain countries around the world, and share certain global development costs on an equal basis; to share information generated under a global development plan, as defined in the Tripartite Agreement; to facilitate attainment of necessary regulatory approvals of OSI-774 products for commercial marketing and sale in the world; and to work together on such matters as the parties agree from time to time during the development of OSI-774. Under the Tripartite Agreement, the parties have established a global development committee composed of representatives from each party. The global development committee is generally responsible for, among other things, approving material changes to the global development plan, including the annual budget; overseeing execution of the global development plan; resolving disputes concerning overall strategy or funding; and performing other similar functions. The parties have also established a liaison team to work with the teams organized under the OSI/Roche and OSI/Genentech Agreements. The responsibilities of the liaison team include coordination of pre-clinical activities, clinical team activity, regulatory activity, manufacturing activity, and communication and publication strategy. In addition, the liaison team must prepare budgets and updates to present to the global development committee and prioritize and allocate the supply of OSI-774. Each party may at its own expense conduct clinical and pre-clinical activities for additional indications for OSI-774 not called for under the global development plan, subject to certain conditions. The Tripartite Agreement will terminate -3- 4 when either the OSI/Genentech Agreement or the OSI/Roche Agreement terminates. Concurrently with the execution of the Collaboration Agreements, OSI entered into separate Stock Purchase Agreements (the "Stock Purchase Agreements") on January 8, 2001 with each of Genentech and Roche Holdings, Inc. for the sale to each of 462,570 newly-issued shares of OSI's common stock. The purchase price was $75.664 per share, or an aggregate purchase price of $35 million each. No underwriters or placement agents were involved in the purchase and sale of the securities. The sale of the securities was exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, as sales to accredited investors in a private placement. The Company agreed to register the resale of the shares of common stock issued in the private placement and expects to file a registration statement on Form S-3 with the Securities and Exchange Commission within a commercially reasonable time upon the closing of the sale. The transactions contemplated under the Collaboration Agreements and Stock Purchase Agreements closed on January 30, 2001. The agreements and further details regarding the transactions contemplated thereby are attached hereto and contained in the Company's press release dated January 8, 2001 attached as Exhibit 99.1, respectively, and incorporated herein by reference. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements of Businesses Acquired. Not applicable. (b) Pro Forma Financial Information. Not applicable. (c) Exhibits. 4.1 Stock Purchase Agreement, dated January 8, 2001, by and between OSI Pharmaceuticals, Inc. and Genentech, Inc. 4.2 Stock Purchase Agreement, dated January 8, 2001, by and between OSI Pharmaceuticals, Inc. and Roche Holdings, Inc. *10.1 Development and Marketing Collaboration Agreement, dated January 8, 2001, between OSI Pharmaceuticals, Inc. and Genentech, Inc. *10.2 Development Collaboration and Licensing Agreement, dated January 8, 2001, between OSI Pharmaceuticals, Inc. and F. Hoffmann-La Roche Ltd -4- 5 *10.3 Tripartite Agreement, dated January 8, 2001, by and among OSI Pharmaceuticals, Inc., Genentech, Inc. and F. Hoffmann-La Roche Ltd 99.1 Press release, dated January 8, 2001. 99.2 Press release, dated February 13, 2001. ----------------------------- * Portions of this exhibit have been redacted and are the subject of a confidential treatment request filed with the Secretary of the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. ITEM 9. REGULATION FD DISCLOSURE On February 13, 2001, OSI issued the press release attached as Exhibit 99.2. -5- 6 SIGNATURE 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 hereunto duly authorized. Date: February 14, 2001 OSI PHARMACEUTICALS, INC. By: /s/ ROBERT L. VAN NOSTRAND -------------------------- Name: Robert L. Van Nostrand Title: Vice President, Chief Financial Officer and Secretary 7 EXHIBIT INDEX
Exhibit No. Description 4.1 Stock Purchase Agreement, dated January 8, 2001, by and between OSI Pharmaceuticals, Inc. and Genentech, Inc. 4.2 Stock Purchase Agreement, dated January 8, 2001, by and between OSI Pharmaceuticals, Inc. and Roche Holdings, Inc. *10.1 Development and Marketing Collaboration Agreement, dated January 8, 2001, between OSI Pharmaceuticals, Inc. and Genentech, Inc. *10.2 Development Collaboration and Licensing Agreement, dated January 8, 2001, between OSI Pharmaceuticals, Inc. and F. Hoffmann-La Roche Ltd *10.3 Tripartite Agreement, dated January 8, 2001, by and among OSI Pharmaceuticals, Inc., Genentech, Inc. and F. Hoffmann-La Roche Ltd 99.1 Press release, dated January 8, 2001. 99.2 Press release, dated February 13, 2001.
- ---------------------------- * Portions of this exhibit have been redacted and are the subject of a confidential treatment request filed with the Secretary of the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. EX-4.1 2 y45494ex4-1.txt STOCK PURCHASE AGREEMENT 1 EXHIBIT 4.1 2 STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT (the "Agreement") is made as of January 8, 2001, by and between OSI PHARMACEUTICALS, INC., a Delaware corporation (the "Company"), and GENENTECH, INC., a Delaware corporation (the "Investor"). RECITALS A. The Company, the Investor, and F.Hoffmann-La Roche Ltd have this day entered into various development and marketing collaboration and license agreements (collectively, the "Collaboration Agreements") covering the proposed development and commercialization of the Company's anti-cancer drug OSI-774. B. In connection with the Collaboration Agreements, the Company, the Investor and Roche Holdings, Inc. ("Roche") have agreed that the Investor and Roche will each purchase 462,570 shares of the Company's common stock, $.01 par value, for an aggregate purchase price of $35,000,000 each. C. The Company and the Investor are executing and delivering this Agreement in reliance upon the exemption from registration under the Securities Act of 1933, as amended, by virtue of Section 4(2) thereof and Regulation D, as promulgated thereunder by the U.S. Securities and Exchange Commission. NOW, THEREFORE, in consideration of the premises and the mutual promises made herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 1. Definitions. In addition to those terms defined above and elsewhere in this Agreement, for the purposes of this Agreement, the following terms shall have the meanings set forth here: 1.1. "Affiliate" shall mean, with respect to any Person, any other Person which directly or indirectly controls, is controlled by, or is under common control with, such Person. Notwithstanding the foregoing, for the purposes of this Agreement, F.Hoffmann-La Roche Ltd and all entities presently or in the future controlled by, controlling, or under common control with F.Hoffmann-La Roche Ltd, except for the Investor or any entity controlled by the Investor, shall not be considered an Affiliate of the Investor. For purposes of this definition, the "control" of a company shall mean either the ownership of a majority of the outstanding equity capital of the company or the ownership of (or right to acquire within 60 days) equity capital of the company which would entitle the owner to elect a majority of the board of directors or other governing body of such company. 1.2. "Closing" shall have the meaning set forth in Section 3. 1.3. "Closing Date" shall have the meaning set forth in Section 3. 1.4. "Common Stock" shall mean the common stock of the Company, $0.01 par value per share. 1.5. "Environmental Laws" shall have the meaning set forth in Section 4.18. 3 1.6. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. 1.7. "FTC" shall mean the U.S. Federal Trade Commission. 1.8. "Hart-Scott-Rodino Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder. 1.9. "Intellectual Property" shall have the meaning set forth in Section 4.8. 1.10. "Material Adverse Effect" shall mean a material adverse effect on the (i) condition (financial or otherwise), business, assets, or results of operations of the Company and its subsidiaries, taken as a whole; (ii) ability of the Company to perform any of its material obligations under the terms of this Agreement; or (iii) rights and remedies of the Investor under the terms of this Agreement. 1.11. "NASD" shall mean the National Association of Securities Dealers, Inc. 1.12. "Nasdaq National Market" shall mean The Nasdaq Stock Market, Inc. National Market. 1.13. "Person" shall mean an individual, corporation, partnership, trust, business trust, association, joint stock company, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein. 1.14. "Purchase Price" shall have the meaning set forth in Section 2. 1.15. "Registration Statement" shall have the meaning set forth in Section 9.1(a). 1.16. "Roche Stock Purchase Agreement" shall have the meaning set forth in Section 7.1(e). 1.17. "SEC" shall mean the U.S. Securities and Exchange Commission. 1.18. "SEC Documents" shall have the meaning set forth in Section 4.12. 1.19. "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. 1.20. "Shares" shall have the meaning set forth in Section 2. 1.21. "Suspension" shall have the meaning set forth in Section 9.2(c). 1.22. "Suspension Notice" shall have the meaning set forth in Section 9.2(c). 1.23. "Voting Securities" shall mean all classes of capital stock of the Company which are then entitled to vote generally in the election of directors. 2 4 2. Purchase and Sale of the Shares. Subject to the terms and conditions of this Agreement, the Investor hereby agrees to purchase from the Company and the Company hereby agrees to sell and issue to the Investor 462,570 shares of Common Stock (the "Shares") for an aggregate purchase price (the "Purchase Price") of $35,000,000 (approximately $75.664 per share). 3. Delivery of the Shares at Closing. The closing of the purchase and sale of the Shares (the "Closing") shall occur on the earlier of (a) the fifth day, unless the fifth day falls on a weekend or holiday, in which case it shall be the next business day, after the earlier of (i) receipt of written notice by the Investor, Roche and the Company of the FTC's approval of the transactions contemplated by this Agreement and the Collaboration Agreements pursuant to the filings made by the Company, F.Hoffmann-La Roche Ltd and the Investor under the Hart-Scott-Rodino Act and (ii) the expiration or termination of all applicable waiting periods, requests for information (and any extensions thereof) under the Hart-Scott-Rodino Act for such filings, and (b) the fifth day, unless the fifth day falls on a weekend or holiday, in which case it shall be the next business day, after the joint determination (by written opinion from each party to the other) that filings under the Hart-Scott-Rodino Act are not required (the "Closing Date"). The Closing shall occur at the offices of Saul Ewing LLP, Centre Square West, 1500 Market Street, 38th Floor, Philadelphia, Pennsylvania, or at such other place as the parties shall mutually agree upon. At the Closing, the Company shall deliver to the Investor one or more stock certificates representing the Shares, each such certificate to be registered in the name of the Investor or, if so indicated on the signature page hereto, in the name of a nominee designated by the Investor, and the Investor shall wire the Purchase Price in immediately available funds to an account designated by the Company. 4. Representations and Warranties of the Company. The Company hereby represents and warrants to the Investor as follows: 4.1. Organization. The Company and each of its subsidiaries is duly organized and validly existing in good standing under the laws of the jurisdiction of its organization. Each of the Company and its subsidiaries has full power and authority to own, operate and occupy its properties and to conduct its business as presently conducted. Each of the Company and its subsidiaries is registered or qualified to do business and is in good standing in each jurisdiction in which it owns or leases property or transacts business and where the failure to be so qualified would have a Material Adverse Effect. No proceeding has been instituted in any such jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such power and authority or qualification. 4.2. Due Authorization and Valid Issuance. The Company has all requisite power and authority to execute, deliver and perform its obligations under this Agreement. The Agreement has been duly authorized and validly executed and delivered by the Company and constitutes a legal, valid and binding agreement of the Company enforceable against the Company in accordance with its terms, except as (a) rights to indemnity and contribution may be limited by state or federal securities laws or the public policy underlying such laws, (b) enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights generally, and (c) enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). The Shares have been duly authorized, and will, upon issuance pursuant to the terms hereof, be duly and validly issued, fully paid and nonassessable and free and clear of all encumbrances and restrictions on transfer, except for restrictions on transfer imposed by this Agreement or by applicable federal or state securities laws. 3 5 4.3. Non-Contravention. The execution and delivery of this Agreement, the issuance and sale of the Shares to be sold by the Company under this Agreement, the fulfillment of the terms of this Agreement and the consummation of the transactions contemplated hereby will not (a) conflict with or constitute a violation of, or default (with the passage of time or otherwise) under, (i) any material bond, debenture, note or other evidence of indebtedness, lease, contract, indenture, mortgage, deed of trust, loan agreement, joint venture or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which it or any of its subsidiaries or their respective properties are bound, (ii) the charter, by-laws or other organizational documents of the Company or any subsidiary, or (iii) any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to the Company or any subsidiary or their respective properties, or (b) result in the creation or imposition of any lien, encumbrance, claim, security interest or restriction whatsoever upon any of the material properties or assets of the Company or any subsidiary or an acceleration of indebtedness pursuant to any obligation, agreement or condition contained in any material bond, debenture, note or any other evidence of indebtedness or any material indenture, mortgage, deed of trust or any other agreement or instrument to which the Company or any subsidiary is a party or by which any of them is bound or to which any of the property or assets of the Company or any subsidiary is subject. No consent, approval, authorization or other order of, or registration, qualification or filing with, any regulatory body, administrative agency, or other governmental body in the United States or any other Person is required for the execution and delivery of this Agreement and the valid issuance and sale of the Shares, other than such as have been made or obtained, and except for any securities filings or notifications required to be made after the Closing under federal or state securities laws. 4.4. Capitalization. The authorized capital of the Company consists of 50,000,000 shares of Common Stock, of which approximately 34,561,196 shares are issued and outstanding, and 5,000,000 shares of Preferred Stock, $.01 par value, none of which are issued and outstanding. The financial statements of the Company and the related notes contained in the SEC Documents set forth the number of shares of capital stock issuable pursuant to the Company's stock option and stock purchase plans and the number of shares of capital stock issuable and reserved for issuance pursuant to the Company's securities exercisable for, or convertible into or exchangeable for any shares of capital stock. The outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and were not issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. With the exception of options and rights to acquire stock pursuant to the Company's stock option and stock purchase plans, certain warrants held by employees of the Company's United Kingdom subsidiary, and rights under the Company's Shareholder Rights Plan, there are no outstanding rights (including, without limitation, preemptive rights), warrants or options to acquire, or instruments convertible into or exchangeable for, any unissued shares of capital stock or other equity interest in the Company or any subsidiary, or any contract, commitment, agreement, understanding or arrangement of any kind to which the Company is a party or of which the Company has knowledge and relating to the issuance or sale of any capital stock of the Company or any subsidiary, any such convertible or exchangeable securities or any such rights, warrants or options. Without limiting the foregoing, except for certain registration rights held by Novartis Pharma AG and the rights granted to Roche in the Roche Stock Purchase Agreement, no preemptive right, co-sale right, right of first refusal, registration right, or other similar right exists with respect to the Shares or the issuance and sale thereof. No further approval or authorization of any stockholder of the Company, the Board of Directors of the Company or others is required for the issuance and sale of the Shares. The Company owns the entire equity interest in each of its subsidiaries, free and clear of any pledge, lien, security interest, encumbrance, claim or equitable interest. There are no stockholders agreements, voting agreements or 4 6 other similar agreements with respect to the Common Stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company's stockholders. 4.5. Legal Proceedings. There is no material legal or governmental proceeding pending or, to the knowledge of the Company, threatened to which the Company or any subsidiary is or may be a party or of which the business or property of the Company or any subsidiary is subject. 4.6. No Violations. Neither the Company nor any subsidiary is in violation of its charter, by-laws or other organizational document, or in violation of any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to the Company or any subsidiary, which violation, individually or in the aggregate, would be reasonably likely to have a Material Adverse Effect or is in default (and there exists no condition which, with the passage of time or otherwise, would constitute a default) in any material respect in the performance of any bond, debenture, note or any other evidence of indebtedness in any indenture, mortgage, deed of trust or any other material agreement or instrument to which the Company or any subsidiary is a party or by which the Company or any subsidiary is bound or by which the properties of the Company or any subsidiary are bound, which would be reasonably likely to have a Material Adverse Effect. 4.7. Governmental Permits, Etc. Each of the Company and its subsidiaries has all necessary franchises, licenses, certificates and other authorizations from any foreign, federal, state or local government or governmental agency, department, or body that are currently necessary for the operation of the business of the Company and its subsidiaries as currently conducted except where the failure to currently possess could not reasonably be expected to have a Material Adverse Effect. 4.8. Intellectual Property. The Company and its subsidiaries own or possess sufficient rights to use all material patents, patent rights, trademarks, copyrights, licenses, inventions, trade secrets, trade names and know-how (collectively, "Intellectual Property") as owned or possessed by it or that are necessary for the conduct of its business as now conducted or as proposed to be conducted except where the failure to currently own or possess would not have a Material Adverse Effect. The Company has taken all commercially reasonable measures to protect its ownership or possession of the Intellectual Property. Neither the Company nor any of its subsidiaries has received any notice of, or has any knowledge of, any infringement of asserted rights of a third party with respect to any Intellectual Property that, individually or in the aggregate, would have a Material Adverse Effect, and neither the Company nor any of its subsidiaries has received any notice of any infringement of rights of a third party with respect to any Intellectual Property that, individually or in the aggregate, would have a Material Adverse Effect. 4.9. Financial Statements. The financial statements of the Company and the related notes contained in the SEC Documents present fairly, in accordance with generally accepted accounting principles, the financial position of the Company and its subsidiaries as of the dates indicated, and the results of its operations and cash flows for the periods therein specified. Such financial statements (including the related notes) have been prepared in accordance with generally accepted accounting principles. To the Company's knowledge, there are no material liabilities that are not set forth in the financial statements of the Company and the related notes contained in the SEC Documents, other than liabilities which have incurred in the regular course of business of the Company. 4.10. No Material Adverse Change. Since the filing of the Company's most recent Annual Report on Form 10-K, there has not been (a) any material adverse change in the financial condition or earnings of the Company and its subsidiaries considered as one enterprise nor has any material 5 7 adverse event occurred to the Company or its subsidiaries, (b) any material adverse event affecting the Company, (c) any obligation, direct or contingent, that is material to the Company and its subsidiaries considered as one enterprise, incurred by the Company, except obligations incurred in the ordinary course of business, (d) any dividend or distribution of any kind declared, paid or made on the capital stock of the Company or any of its subsidiaries, or (e) any loss or damage (whether or not insured) to the physical property of the Company or any of its subsidiaries which has been sustained, which has a Material Adverse Effect. 4.11. Nasdaq Compliance. The Company's Common Stock is registered pursuant to Section 12(g) of the Exchange Act and is listed on the Nasdaq National Market, and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or de-listing the Common Stock from the Nasdaq National Market, nor has the Company received any notification that the SEC or the NASD is contemplating terminating such registration or listing. 4.12. Reporting Status. The Company has filed in a timely manner all documents that the Company was required to file under the Exchange Act during the twelve months preceding the date of this Agreement. The following documents (the "SEC Documents") complied in all material respects with the SEC's requirements as of their respective filing dates, and the information contained therein as of the date thereof did not contain an untrue statement of a material fact, or omit to state a material fact required to be stated therein, or necessary to make the statements therein in light of the circumstances under which they were made, not misleading: (a) The Company's Annual Report on Form 10-K for the year ended September 30, 2000, filed with the SEC on December 19, 2000; (b) The Company's Definitive Proxy Statement filed with the SEC on January 28, 2000, in connection with the 2000 Annual Meeting of Stockholders; (c) The Company's Current Report on Form 8-K filed with the SEC on November 9, 2000; and (d) All other documents, if any, filed by the Company with the SEC since September 30, 2000, pursuant to the reporting requirements of the Exchange Act. 4.13. Contracts. The contracts described in the SEC Documents or incorporated by reference therein that are material to the Company are in full force and effect on the date hereof, and neither the Company nor, to the Company's knowledge, any other party to such contracts is in breach of or default under any of such contracts which breach or default would have a Material Adverse Effect. 4.14. Taxes. The Company has filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been or might be asserted or threatened against it which would have a Material Adverse Effect. 4.15. Investment Company. The Company is not an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for an investment company, within the meaning of the Investment Company Act of 1940, as amended. 6 8 4.16. Title to Property. The Company and its subsidiaries have good and marketable title to all real properties and all other properties and assets owned by them, in each case free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or currently planned to be made thereof by them; and the Company and its subsidiaries hold any leased, real or personal property under valid and enforceable leases with no exceptions that would materially interfere with the use made or currently planned to be made thereof by them. 4.17. No Labor Disputes. No material labor dispute with the employees of the Company or any subsidiary exists or, to the knowledge of the Company, is imminent. 4.18. Environmental Matters. Neither the Company nor any of its subsidiaries is in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, "Environmental Laws"), owns or operates any real property contaminated with any substance that is subject to any Environmental Laws, is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or is subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim would individually or in the aggregate have a Material Adverse Effect; and the Company is not aware of any pending investigation that might lead to such a claim. 4.19. Insurance. The Company maintains insurance of the types and in the amounts that the Company reasonably believes is adequate for its business, including, but without limitation, product liability insurance, insurance covering all real and personal property owned or leased by the Company against theft, damage, destruction and all other risks customarily insured against by similarly situated companies, all of which insurance is in full force and effect. 4.20. Disclosure. No representation or warranty made under any Section hereof contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements herein, in light of the circumstances under which the statements were made, not misleading. 5. Representations, Warranties and Covenants of the Investor. 5.1. Representations and Warranties. The Investor hereby represents and warrants to the Company as follows: (a) Organization and Existence. The Investor is a corporation duly organized and validly existing in good standing under the laws of the jurisdiction of its organization and has all requisite corporate power and authority to purchase the Shares pursuant to this Agreement. (b) Accredited Investor, Investment Decision. (i) The Investor is an "accredited investor" as defined in Regulation D under the Securities Act and is knowledgeable, sophisticated and experienced in making investments of the type contemplated by this Agreement. (ii) The Investor has requested, received, reviewed and considered all information it has deemed relevant in making an informed decision to purchase the Shares. 7 9 (iii) The Investor is acquiring the Shares in the ordinary course of its business and for its own account for investment only and with no present intention of distributing any of the Shares and has no arrangement or understanding with any other Persons regarding the distribution of the Shares. (iv) In connection with its decision to purchase the Shares, the Investor has relied only upon the SEC Documents and the representations and warranties of the Company contained herein. (v) The Investor understands that its acquisition of the Shares has not been registered under the Securities Act or registered or qualified under any state securities law in reliance on specific exemptions therefrom, which exemptions may depend upon, among other things, the bona fide nature of the Investor's investment intent as expressed in this Agreement. (c) Due Authorization. (i) The Investor has full right, power, authority and capacity to enter into this Agreement and to consummate the transactions contemplated hereby and has taken all necessary action to authorize the execution, delivery and performance of this Agreement. (ii) This Agreement constitutes a valid and binding obligation of the Investor enforceable against the Investor in accordance with its terms, except that (1) enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights generally, (2) enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), and (iii) the indemnification agreements of the Investor herein may be legally unenforceable. (d) NASD. The Investor has no direct or indirect affiliation or association with any member of the NASD as of the date hereof. (e) Restricted Securities, Legends. The Investor understands that the Shares are characterized as "restricted securities" under the Securities Act inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in certain limited circumstances. The Investor understands that certificates evidencing the Shares may bear one or all of the following legends: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act"), and may not be transferred without (i) an opinion of counsel satisfactory to the corporation that such transfer may lawfully be made without registration under such Act or qualification under applicable state securities laws; or (ii) such registration or qualification, except for a transfer in compliance with Rule 144 under the Act." If required by the authorities of any state in connection with the issuance of sale of the Shares, the legend required by such state authority. 8 10 Any purchaser of the Shares pursuant to an effective registration statement under the Securities Act will be entitled to receive a certificate bearing no restrictive legend. 5.2. Covenants. The Investor hereby covenants with the Company as follows: (a) The Investor will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Shares except in compliance with the Securities Act and applicable state securities laws. In furtherance thereof, the Investor will not make any disposition of the Shares except (x) pursuant to a registration statement under the Securities Act covering such proposed disposition, (y) upon prior notice to the Company and, if reasonably requested by the Company, delivery to the Company of an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration under the Securities Act, or (z) in compliance with Rule 144 under the Securities Act. (b) The Investor acknowledges and agrees that no action has been or will be taken in any jurisdiction outside the United States by the Company that would permit an offering of the Shares, or possession or distribution of offering materials in connection with the issuance of the Shares, in any jurisdiction outside the United States where legal action by the Company for that purpose is required. The Investor outside the United States will comply with all applicable laws and regulations in each foreign jurisdiction in which it purchases, offers, sells or delivers Shares or has in its possession or distributes any offering material, in all cases at its own expense. 6. Covenants Pending Closing. 6.1. Cooperation. (a) Reasonable Efforts. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all reasonable actions and to do, or cause to be done, all things necessary and appropriate to satisfy all conditions of and to consummate the transactions contemplated by this Agreement. (b) Filings. The parties shall cooperate with one another in the preparation, execution and filing of all documents that are required or permitted to be filed on or before the Closing, including without limitation, filings pursuant to the Hart-Scott-Rodino Act. 6.2. Listing. The Company shall comply with all requirements of the NASD with respect to the issuance of the Shares and the listing thereof on the Nasdaq National Market. 7. Conditions to Closing. 7.1. Conditions to Purchasers' Obligations at the Closing. The Investor's obligations to purchase the Shares at the Closing are subject to the satisfaction, at or prior to the Closing, of the following conditions: (a) Representations and Warranties True; Performance of Obligations. The representations and warranties made by the Company in Section 3 hereof shall be true and correct in all material respects as of the Closing Date with the same force and effect as if they had been made as of the Closing Date, and the Company shall have performed all obligations and conditions herein required to be performed or observed by it on or prior to the Closing. 9 11 (b) Consents, Permits, and Waivers. The Company shall have obtained any and all consents, permits and waivers necessary or appropriate for consummation of the transactions contemplated by this Agreement (except for such as may be properly obtained subsequent to the Closing), including, without limitation, approval by the FTC pursuant to the Hart-Scott Rodino Act. (c) Compliance Certificate. The Company shall have delivered to the Investor a Compliance Certificate, executed by the Chief Executive Officer or the President of the Company, dated the Closing Date, to the effect that the conditions specified in subsections (a) and (b) of this Section 7.1 have been satisfied. (d) Collaboration Agreements. The Collaboration Agreements shall have been executed and delivered by the Company, the Investor, and F.Hoffmann-La Roche Ltd, and such agreement shall be fully effective. (e) Roche Stock Purchase Agreement. Closing shall have occurred (or shall occur simultaneously with the Closing hereunder) under the Stock Purchase Agreement, dated as of January 8, 2001, between the Company and Roche (the "Roche Stock Purchase Agreement"). (f) Legal Opinion. The Investor shall have received from Saul Ewing LLP, legal counsel to the Company, an opinion addressed to them, dated as of the Closing Date, in substantially the form attached hereto as Exhibit A. (g) Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Closing hereby and all documents and instruments incident to such transactions shall be reasonably satisfactory in substance and form to the Investor and its counsel, and the Investor and its counsel shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request. 7.2. Conditions to Obligations of the Company. The Company's obligation to issue and sell the Shares at the Closing is subject to the satisfaction, at or prior to the Closing, of the following conditions: (a) Representations and Warranties True; Performance of Obligations. The representations and warranties made by the Investor in Section 4 hereof shall be true and correct in all material respects as of the Closing Date with the same force and effect as if they had been made as of the Closing Date, and the Investor shall have performed all obligations and conditions herein required to be performed or observed by it on or prior to the Closing. (b) Consents, Permits, and Waivers. The Company shall have obtained any and all consents, permits and waivers necessary or appropriate for consummation of the transactions contemplated by this Agreement (except for such as may be properly obtained subsequent to the Closing), including, without limitation, approval by the FTC pursuant to the Hart-Scott Rodino Act. (c) Collaboration Agreements. The Collaboration Agreements shall have been executed and delivered by the Company, the Investor, and F.Hoffmann-La Roche Ltd, and such agreement shall be fully effective. (d) Roche Stock Purchase Agreement. Closing shall have occurred (or shall occur simultaneously with the Closing hereunder) under the Roche Stock Purchase Agreement. 10 12 (e) Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Closing hereby and all documents and instruments incident to such transactions shall be reasonably satisfactory in substance and form to the Company and its counsel, and the Company and its counsel shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request. 8. Survival of Representations and Warranties. Notwithstanding any investigation made by either party to this Agreement, the representations and warranties made by the Company as of the date hereof in Sections 4.1 (the first sentence only), 4.2, 4.3, 4.6, 4.8, 4.14, 4.18, and 4.20 and the representations and warranties made by the Investor shall survive the Closing indefinitely. All other representations and warranties made by the Company herein shall survive the Closing for a period of two years. 9. Registration of the Shares; Compliance With the Securities Act. 9.1. Registration Procedures and Expenses. The Company shall: (a) subject to receipt of necessary information from the Investor after prompt request from the Company to the Investor to provide such information, use commercially reasonable efforts to prepare and file with the SEC, as soon as practicable after the Closing, a shelf registration statement (the "Registration Statement") to enable the resale of the Shares by the Investor from time to time on a delayed or continuous basis pursuant to Rule 415 of the Securities Act through the automated quotation system of the Nasdaq National Market or such other market as may be the principal market on which the Company's Common Stock is sold, or any other manner reasonably requested by the Investor, including privately-negotiated transactions; (b) use commercially reasonable efforts, subject to receipt of necessary information from the Investor after prompt request from the Company to the Investor to provide such information, to cause the Registration Statement to become effective as soon as practicable after the Registration Statement is filed by the Company; (c) use commercially reasonable efforts to prepare and file with the SEC such amendments and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to keep the Registration Statement current and effective for a period not exceeding the earlier of (i) the second anniversary of the Closing Date, or (ii) such time as all Shares purchased by such Investor have been sold pursuant to the Registration Statement; (d) furnish to the Investor such number of copies of the Registration Statement, prospectuses and preliminary prospectuses in conformity with the requirements of the Securities Act and such other documents as the Investor may reasonably request, in order to facilitate the public sale or other disposition of all or any of the Shares by the Investor; provided, however, that the obligation of the Company to deliver copies of prospectuses or preliminary prospectuses to the Investor shall be subject to the receipt by the Company of reasonable assurances from the Investor that the Investor will comply with the applicable provisions of the Securities Act and of such other securities or blue sky laws as may be applicable in connection with any use of such prospectuses or preliminary prospectuses; (e) file documents required of the Company for normal blue sky clearance in states specified in writing by the Investor; provided, however, that the Company shall not be 11 13 required to qualify to do business or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented; (f) bear all expenses in connection with the procedures in paragraph (a) through (e) of this Section 9.1 and the registration of the Shares pursuant to the Registration Statement; and (g) advise the Investor, promptly after it shall receive notice or obtain knowledge of the issuance of any stop order by the SEC delaying or suspending the effectiveness of the Registration Statement or of the initiation or threat of any proceeding for that purpose; and it will promptly use commercially reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal at the earliest possible moment if such stop order should be issued. The Company understands that the Investor disclaims being an underwriter, but the Investor's being deemed an underwriter by the SEC shall not relieve the Company of any obligations it has hereunder. 9.2. Transfer of Shares After Registration; Suspension. (a) The Investor agrees that it will not effect any disposition of the Shares or its right to purchase the Shares that would constitute a sale within the meaning of the Securities Act except as contemplated in the Registration Statement referred to in Section 9.1 and as described below or as otherwise permitted by law, and that it will promptly notify the Company of any changes in the information set forth in the Registration Statement regarding the Investor or its plan of distribution. (b) Except in the event that paragraph (c) below applies, the Company shall (i) if deemed necessary by the Company, prepare and file from time to time with the SEC a post-effective amendment to the Registration Statement or a supplement to the related prospectus or a supplement or amendment to any document incorporated therein by reference or file any other required document so that such Registration Statement will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and so that, as thereafter delivered to purchasers of the Shares being sold thereunder, such prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (ii) provide the Investor copies of any documents filed pursuant to this Section 9.2(b)(i); and (iii) inform the Investor that the Company has complied with its obligations in this Section 9.2(b)(i) (or that, if the Company has filed a post-effective amendment to the Registration Statement which has not yet been declared effective, the Company will notify the Investor to that effect, will use commercially reasonable efforts to secure the effectiveness of such post-effective amendment as promptly as possible and will promptly notify the Investor pursuant to this Section 9.2(b)(i) when the amendment has become effective). (c) Subject to paragraph (d) below, in the event (i) of any request by the SEC or any other federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to a Registration Statement or related prospectus or for additional information; (ii) of the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose; (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Shares 12 14 for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; or (iv) of any event or circumstance which, upon the advice of its counsel, necessitates the making of any changes in the Registration Statement or prospectus, or any document incorporated or deemed to be incorporated therein by reference, so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the prospectus, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; then the Company shall deliver a certificate in writing to the Investor (the "Suspension Notice") to the effect of the foregoing and, upon receipt of such Suspension Notice, the Investor will refrain from selling any Shares pursuant to the Registration Statement (a "Suspension") until the Investor's receipt of copies of a supplemented or amended prospectus prepared and filed by the Company, or until it is advised in writing by the Company that the current prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in any such prospectus. In the event of any Suspension, the Company will use its commercially reasonable efforts to cause the use of the prospectus so suspended to be resumed as soon as reasonably practicable. In addition to and without limiting any other remedies (including, without limitation, at law or at equity) available to the Investor, the Investor shall be entitled to specific performance in the event that the Company fails to comply with the provisions of this Section 9.2(c). (d) Notwithstanding the foregoing paragraphs of this Section 9.2, the Investor shall not be prohibited from selling the Shares under the Registration Statement as a result of Suspensions on more than two occasions of not more than thirty days each in any twelve month period, unless, in the good faith judgment of the Company's Board of Directors, upon advice of counsel, the sale of the Shares under the Registration Statement in reliance on this Section 9.2(d) would be reasonably likely to cause a violation of the Securities Act or the Exchange Act and result in liability to the Company. (e) Provided that a Suspension is not then in effect, the Investor may sell the Shares under the Registration Statement; provided, however, that it arranges for delivery of a current prospectus to the transferee of such Shares. Upon receipt of a request therefor, the Company has agreed to provide an adequate number of current prospectuses to the Investor and to supply copies to any other parties requiring such prospectuses. (f) In the event of a sale of the Shares by the Investor pursuant to the Registration Statement, the Investor must also deliver to the Company's transfer agent, with a copy to the Company, a Certificate of Subsequent Sale substantially in the form attached hereto as Exhibit B so that the Shares may be properly transferred. Assuming timely delivery to the Company's transfer agent of one or more stock certificates representing the Shares in proper form for transfer and assuming compliance by the Investor with the terms of this Agreement, the Company's transfer agent will issue and make appropriate delivery of one or more stock certificates in the name of the buyer so as to permit timely compliance by the Investor with applicable settlement requirements. 9.3. Indemnification. (a) Definitions. For the purpose of this Section 9.3: 13 15 (i) the term "Selling Stockholder" shall include the Investor and each person, if any, who controls the Investor within the meaning of Section 15 of the Securities Act, including any officer, director, trustee or Affiliate of such Investor; (ii) the term "Registration Statement" shall include any final prospectus, exhibit, supplement or amendment included in or relating to the Registration Statement referred to in Section 9.1; and (iii) the term "untrue statement" shall include any untrue statement or alleged untrue statement, or any omission or alleged omission to state in the Registration Statement a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (b) Indemnification by the Company. The Company agrees to indemnify and hold harmless the Selling Stockholder from and against any losses, claims, damages or liabilities to which such Selling Stockholder may become subject (under the Securities Act or otherwise) insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon, (i) any untrue statement of a material fact contained in the Registration Statement, or (ii) any failure by the Company to fulfill any undertaking included in the Registration Statement, and the Company will reimburse such Selling Stockholder for any reasonable legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim, or preparing to defend any such action, proceeding or claim; provided, however, that the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of, or is based upon, an untrue statement made in such Registration Statement in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Selling Stockholder specifically for use in preparation of the Registration Statement or the failure of the Selling Stockholder to comply with its covenants and agreements contained in Section 9.2 hereof respecting the sale of the Shares or any statement or omission in any prospectus that is corrected in any subsequent prospectus that was delivered to the Investor prior to the pertinent sale or sales by the Investor; provided however, that the Selling Stockholder shall be entitled to be indemnified in any such case for any statement or alleged statement in or omission or alleged omission from such Registration Statement, preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, in which such statement or omission has been corrected, in writing, by the Investor and delivered to the Company at least ten (10) days before the sale or sales from which such loss occurred. The Company shall reimburse the Selling Stockholder for the amounts provided for herein on demand as such expenses are incurred. (c) Indemnification by the Investor. The Investor agrees to indemnify and hold harmless the Company (and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, each officer of the Company who signs the Registration Statement and each director of the Company) from and against any losses, claims, damages or liabilities to which the Company (or any such officer, director or controlling person) may become subject (under the Securities Act or otherwise), insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon, (i) any failure to comply with the covenants and agreements contained in Section 9.2 hereof respecting the sale of the Shares, or (ii) any untrue statement of a material fact contained in the Registration Statement if such untrue statement was made in reliance upon and in conformity with written information furnished by or on behalf of the Investor specifically for use in preparation of the Registration Statement, and the Investor will reimburse the Company (or such officer, director or controlling person), as the case may be, for any legal or other 14 16 expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim; provided, however, that the Investor's obligation to indemnify the Company shall be limited to the net amount received by the Investor from the sale of the Shares; and further provided however, that the Selling Stockholder shall have no obligation to indemnify the Company in any such case for any statement or alleged statement in or omission or alleged omission from such Registration Statement, preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, in which such statement or omission has been corrected, in writing, by the Investor and delivered to the Company at least ten (10) days before the sale or sales from which such loss occurred. (d) Notice of Claims, Etc. Promptly after receipt by any indemnified person of a notice of a claim or the beginning of any action in respect of which indemnity is to be sought against an indemnifying person pursuant to this Section 9.3, such indemnified person shall notify the indemnifying person in writing of such claim or of the commencement of such action, but the omission to so notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party under this Section 9.3 (except to the extent that such omission materially and adversely affects the indemnifying party's ability to defend such action) or from any liability otherwise than under this Section 9.3. Subject to the provisions hereinafter stated, in case any such action shall be brought against an indemnified person, the indemnifying person shall be entitled to participate therein, and, to the extent that it shall elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to such indemnified person. After notice from the indemnifying person to such indemnified person of its election to assume the defense thereof, such indemnifying person shall not be liable to such indemnified person for any legal expenses subsequently incurred by such indemnified person in connection with the defense thereof; provided, however, that if there exists or shall exist a conflict of interest that would make it inappropriate, in the opinion of counsel to the indemnified person, for the same counsel to represent both the indemnified person and such indemnifying person or any Affiliate or associate thereof, the indemnified person shall be entitled to retain its own counsel at the expense of such indemnifying person; provided, however, that no indemnifying person shall be responsible for the fees and expenses of more than one separate counsel (together with appropriate local counsel) for all indemnified parties. In no event shall any indemnifying person be liable in respect of any amounts paid in settlement of any action unless the indemnifying person shall have approved the terms of such settlement; provided, however, that such consent shall not be unreasonably withheld. No indemnifying person shall, without the prior written consent of the indemnified person, effect any settlement of any pending or threatened proceeding in respect of which any indemnified person is or could have been a party and indemnification could have been sought hereunder by such indemnified person, unless such settlement includes an unconditional release of such indemnified person from all liability on claims that are the subject matter of such proceeding. (e) Contribution. If the indemnification provided for in this Section 9.3 is unavailable to or insufficient to hold harmless an indemnified party under paragraph (b) or (c) above in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Investor, as well as any other selling stockholders under such registration statement on the other in connection with the statements or omissions or other matters which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, in the case 15 17 of an untrue statement, whether the untrue statement relates to information supplied by the Company on the one hand or an Investor or other selling stockholder on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement. The Company and the Investor agree that it would not be just and equitable if contribution pursuant to this paragraph (e) were determined by pro rata allocation (even if the Investor and other selling stockholders were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to above in this paragraph (e). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this paragraph (e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this paragraph (e), the Investor shall not be required to contribute any amount in excess of the amount by which the net amount received by the Investor from the sale of the Shares to which such loss relates exceeds the amount of any damages which such Investor has otherwise been required to pay by reason of such untrue statement. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 9.4. Lockup Agreement. The Investor agrees, for a period of two years following the Closing, and if the Investor then beneficially owns at least 3% of the outstanding Common Stock of the Company (adjusted as hereinafter provided), in connection with any primary underwritten registration of the Company's securities (other than registrations on Forms S-4 or S-8 or comparable forms), upon the request of the underwriters managing the offering, not to sell, make any short sale of, pledge, grant any option for the purchase of or otherwise dispose of any Shares (other than those included in the registration) without the prior written consent of such underwriters during the seven days prior to and during the 90-day period beginning on the effective date of such registration as the underwriters may specify; provided that all of the following similarly agree: (a) all officers of the Company, (b) all directors of the Company, and (c) all holders of more than one percent of the outstanding capital stock of the Company who either (i) purchased such stock from the Company in connection with entering into a collaborative arrangement or (ii) purchased such stock from the Company in a private placement subsequent to the date of this Agreement. The 3% threshold shall be appropriately adjusted to reflect any stock repurchase, or similar transaction, by the Company which shall have the effect of reducing the number of outstanding shares of the Company's Common Stock. 10. Rule 144. The Company covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if the Company is not required to file such reports, it will, upon the request of the Investor, made after the first anniversary of the Closing Date, make publicly available such information as necessary to permit sales pursuant to Rule 144 under the Securities Act), and it will take such further action as the Investor may reasonably request, all to the extent required from time to time to enable the Investor to sell the Shares purchased hereunder without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. Upon the request of the Investor, the Company will deliver to it a written statement as to whether the Company has complied with such information and requirements. 16 18 11. Additional Covenant. 11.1. The Investor agrees that for a period beginning on the date of this Agreement and ending on the earlier of (a) the occurrence of a Strategic Event (as defined in Section 11.2), or (b) three years from the date of this Agreement, without the prior written consent of the Company, neither the Investor nor any Affiliate of the Investor (regardless of whether such person or entity is an Affiliate on the date of this Agreement) will (i) acquire, offer to acquire, or agree to acquire, directly, or indirectly through Affiliates or through a Group (as defined in Section 11.3), by purchase or otherwise, any Voting Securities or rights or options to acquire any Voting Securities, if such acquisition would result in aggregate voting power in the election of directors of the Company of all Voting Securities then owned by the Investor, together with any Affiliate of the Investor or any Group in which the Investor or any Affiliate of the Investor shall then be participating, of greater than 4.95% of such total combined voting power of all Voting Securities then outstanding, or (ii) make, or in any way participate, directly or indirectly through Affiliates or through membership in a Group, in any "solicitation" of "proxies" to vote (as such terms are defined in Rule 14a-1 under the Exchange Act) any Voting Securities. 11.2. The term "Strategic Event" as used in Section 11.1 shall mean any of the following events: (a) commencement by a Third Party (as defined in Section 11.4) of a tender offer or exchange offer for a majority of the outstanding Voting Securities; (b) filing by a Third Party with the SEC of a proxy statement for use in connection with the solicitation of proxies in opposition to management's slate of candidates for election to the Company's board of directors; (c) filing by a Third Party with the SEC of a Schedule 13D under the Exchange Act, if such Third Party has acquired or holds the securities of the Company with a purpose or effect of changing or influencing control of the Company, or in connection with or as a participant in any transaction having that purpose or effect; or (d) public announcement by the Company of an agreement with a Third Party to merge or consolidate the Company with a Third Party in a transaction that would result in an aggregate change in the ownership or control of more than 50% of the Voting Securities, or the sale of all or substantially all of the Company's assets to a Third Party. 11.3. The term "Group" shall mean two or more persons (other than Roche or any Affiliate of Roche) who agree to act together for the purpose of acquiring, holding, voting or disposing of Voting Securities. 11.4. The term "Third Party" shall mean a Person other than: (a) the Company or any Affiliate of the Company as of the date of this Agreement; (b) the Investor or any Affiliate of the Investor; and (c) Roche or any Roche Affiliate. 17 19 11.5. In the event a Strategic Event occurs and the Company has knowledge of it, the Company shall provide the Investor with written notice of such Strategic Event within three Business Days of its occurrence (or within three Business Days of the Company's awareness of its occurrence, whichever is later). For purposes of this Section 11.5, "Business Day" shall mean any day on which the New York Stock Exchange, Inc. is open for trading. 12. Termination. Either party may terminate this Agreement, upon ten days' prior written notice to the other party if the FTC does not approve the transactions contemplated by this Agreement and the Collaboration Agreements under the Hart-Scott-Rodino Act or if all applicable waiting periods, requests for information (and any extensions thereof) under the Hart-Scott-Rodino Act have not expired or otherwise been terminated by June 1, 2001, in which case this Agreement shall forthwith become void and there shall be no liability or obligation on the part of the Company or Genentech. 13. Notices. All notices, requests, consents and other communications hereunder shall be in writing, shall be mailed (a) if within domestic United States by first-class registered or certified airmail, or nationally recognized overnight express courier, postage prepaid, or by facsimile, or (b) if delivered from outside the United States, by International Federal Express or facsimile, and shall be deemed given (i) if delivered by first-class registered or certified mail domestic, three business days after so mailed, (ii) if delivered by nationally recognized overnight carrier, one business day after so mailed, (iii) if delivered by International Federal Express, two business days after so mailed, or (iv) if delivered by facsimile, upon electronic confirmation of receipt and shall be delivered as addressed as follows: (a) if to the Company, to: Robert L. Van Nostrand Vice President and Chief Financial Officer OSI Pharmaceuticals, Inc. 106 Charles Lindbergh Boulevard Uniondale, NY 11553 Telecopy: (516) 222-0964 with a copy to: Spencer W. Franck, Jr., Esquire Saul Ewing LLP Centre Square West 1500 Market Street, 38th Floor Philadelphia, PA 19102 Phone: (215) 972-1955 Telecopy: (215) 972-1938 (b) if to the Investor, at its address on the signature page hereto, or at such other address or addresses as may have been furnished to the Company in writing, 18 20 with a copy to: Corporate Secretary Genentech, Inc. 1 DNA Way South San Francisco, CA 94080-4990 Phone: (650) 225-1672 Telecopy: (650) 225-8654 14. Changes. This Agreement may not be modified or amended except pursuant to an instrument in writing signed by the Company and the Investor. 15. Headings. The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be part of this Agreement. 16. Severability. In case any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. 17. Successors and Assigns. This Agreement may be assigned by the Investor at any time following the Closing. Without the prior written consent of the Investor, but after notice duly given and in compliance with this Agreement, the Company may assign its rights and delegate its duties hereunder to any successor-in-interest corporation in the event of a merger or consolidation of the Company with or into another corporation, or any merger or consolidation of another corporation with or into the Company that results directly or indirectly in an aggregate change in the ownership or control of more than 50% of the voting rights of the equity securities of the Company, or the sale of all or substantially all of the Company's assets. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 18. Further Assurances. The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained. 19. Governing Law. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Delaware, without giving effect to the principles of conflicts of law. 20. Counterparts. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties. [Signatures on next page] 19 21 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. OSI PHARMACEUTICALS, INC. By: /s/ COLIN GODDARD -------------------------------------- Title: Chairman and CEO --------------------------------------- GENENTECH, INC. By: /s/ ARTHUR D. LEVINSON, PH.D. --------------------------------------- Print Name: Arthur D. Levinson, Ph.D. ------------------------------------ Title: Chairman and Chief Executive Officer ------------------------------------------- Address: 1 DNA Way, South San Francisco, CA 94080 ---------------------------------------- Tax ID No.: 94 2347624 ---------------------------------- Contact name: Myrtel Potter ---------------------------------- Telephone: 650-225-1000 ------------------------------------ Name in which shares should registered (if different): ------------------------------------------------- 20 22 EXHIBIT A FORM OF OPINION OF COMPANY'S COUNSEL The opinion shall include the following matters: 1. Organization. The Company and each of its subsidiaries is duly organized and validly existing in good standing under the laws of the jurisdiction of its organization. Each of the Company and its subsidiaries has full power and authority to own, operate and occupy its properties and to conduct its business as presently conducted. Each of the Company and its subsidiaries is registered or qualified to do business and is in good standing in each jurisdiction in which it owns or leases property or transacts business and where the failure to be so qualified would have a Material Adverse Effect. To such counsel's knowledge, no proceeding has been instituted in any such jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such power and authority or qualification. 2. Due Authorization and Valid Issuance. The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement. The Agreement has been duly authorized and validly executed and delivered by the Company and constitutes a legal, valid and binding agreement of the Company enforceable against the Company in accordance with its terms, except as (a) rights to indemnity and contribution may be limited by state or federal securities laws or the public policy underlying such laws, (b) enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights generally, and (c) enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). The Shares have been duly authorized, and duly and validly issued, fully paid and nonassessable and free and clear of all encumbrances and restrictions on transfer, except for restrictions on transfer imposed by the Agreement or by applicable federal or state securities laws. 3. Non-Contravention. The execution and delivery of the Agreement, the issuance and sale of the Shares to be sold by the Company under the Agreement, the fulfillment of the terms of the Agreement and the consummation of the transactions contemplated thereby will not (a) conflict with or constitute a violation of, or default (with the passage of time or otherwise) under (x) the charter, by-laws or other organizational documents of the Company or any subsidiary or, (y) to such counsel's knowledge, (i) any material bond, debenture, note or other evidence of indebtedness, lease, contract, indenture, mortgage, deed of trust, loan agreement, joint venture or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which it or any of its subsidiaries or their respective properties are bound, or (ii) any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to the Company or any subsidiary or their respective properties, or (b) to such counsel's knowledge, result in the creation or imposition of any lien, encumbrance, claim, security interest or restriction whatsoever upon any of the material properties or assets of the Company or any subsidiary or an acceleration of indebtedness pursuant to any obligation, agreement or condition contained in any material bond, debenture, note or any other evidence of indebtedness or any material indenture, mortgage, deed of trust or any other agreement or instrument to which the Company or any subsidiary is a party or by which any of them is bound or to which any of the property or assets of the Company or any subsidiary is subject. To such counsel's knowledge, no consent, approval, authorization or other order of, or registration, qualification or filing with, any regulatory body, administrative agency, or other governmental body in the United States or any other Person is required for the execution and delivery of the Agreement and the valid issuance and A-1 23 sale of the Shares, other than such as have been made or obtained, and except for any securities filings or notifications required to be made after the Closing under federal or state securities laws. 4. Authorized Capitalization. The authorized capital of the Company consists of 50,000,000 shares of Common Stock, par value $.01 per share, and 5,000,000 shares of Preferred Stock, $.01 par value. None of the shares of Preferred Stock are issued and outstanding. 5. Securities Act. Assuming the accuracy of the representations and warranties made by the Investor in the Agreement, the offer and sale of the Shares to the Investor is exempt from the registration requirements of the Securities Act of 1933, as amended, by virtue of Section 4(2) thereof. 6. Legal Proceedings. To such counsel's knowledge, there is no material legal or governmental proceeding pending or threatened to which the Company or any subsidiary is or may be a party or of which the business or property of the Company or any subsidiary is subject. 7. Nasdaq Compliance. The Company's Common Stock is registered pursuant to Section 12(g) of the Exchange Act and is listed on the Nasdaq National Market, and, to such counsel's knowledge, the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or de-listing the Common Stock from the Nasdaq National Market, nor, to such counsel's knowledge, has the Company received any notification that the SEC or the NASD is contemplating terminating such registration or listing. A-2 24 EXHIBIT B CERTIFICATE OF SUBSEQUENT SALE Bank of New York 101 Barclay Street New York, NY 10286 RE: Sale of Shares of Common Stock of OSI Pharmaceuticals, Inc. (the "Company") pursuant to the Company's Prospectus dated _____________, ____ (the "Prospectus") Dear Sir/Madam: The undersigned hereby certifies, in connection with the sale of shares of Common Stock of the Company included in the table of Selling Stockholders in the Prospectus, that the undersigned has sold the shares pursuant to the Prospectus and in a manner described under the caption "Plan of Distribution" in the Prospectus and that such sale complies with all applicable securities laws, applicable to the undersigned, including, without limitation, the Prospectus delivery requirements of the Securities Act of 1933, as amended. Selling Stockholder (the beneficial owner): ____________________________________ Record Holder (e.g., if held in name of nominee):______________________________ Restricted Stock Certificate No.(s): __________________________________________ Number of Shares Sold: _______________________________________ Date of Sale: _________________________________________________________ In the event that you receive a stock certificate(s) representing more shares of Common Stock than have been sold by the undersigned, then you should return to the undersigned a newly issued certificate for such excess shares in the name of the Record Holder and BEARING A RESTRICTIVE LEGEND. Further, you should place a stop transfer on your records with regard to such certificate. Very truly yours, Dated: _____________________ By:__________________________ Print Name:___________________ Title: ______________________ cc: Mr. Robert L. Van Nostrand Vice President and Chief Financial Officer OSI Pharmaceuticals, Inc. 106 Charles Lindbergh Boulevard Uniondale, NY 11553 B-1 EX-4.2 3 y45494ex4-2.txt STOCK PURCHASE AGREEMENT 1 EXHIBIT 4.2 2 STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT (the "Agreement") is made as of January 8, 2001, by and between OSI PHARMACEUTICALS, INC., a Delaware corporation (the "Company"), and ROCHE HOLDINGS, INC., a Delaware corporation (the "Investor"). RECITALS A. The Company, F.Hoffmann-La Roche Ltd and Genentech, Inc. a Delaware corporation ("Genentech"), have this day entered into various development and marketing collaboration and license agreements (collectively, the "Collaboration Agreements") covering the proposed development and commercialization of the Company's anti-cancer drug OSI-774. B. In connection with the Collaboration Agreements, the Company, the Investor and Genentech have agreed that the Investor and Genentech will each purchase 462,570 shares of the Company's common stock, $.01 par value, for an aggregate purchase price of $35,000,000 each. C. The Company and the Investor are executing and delivering this Agreement in reliance upon the exemption from registration under the Securities Act of 1933, as amended, by virtue of Section 4(2) thereof and Regulation D, as promulgated thereunder by the U.S. Securities and Exchange Commission. NOW, THEREFORE, in consideration of the premises and the mutual promises made herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 1. Definitions. In addition to those terms defined above and elsewhere in this Agreement, for the purposes of this Agreement, the following terms shall have the meanings set forth here: 1.1. "Affiliate" shall mean, with respect to any Person, any other Person which directly or indirectly controls, is controlled by, or is under common control with, such Person, except that, with respect to the Investor, Affiliate shall not include Genentech and Laboratory Corporation of America Holdings. For purposes of this definition, the "control" of a company shall mean either the ownership of a majority of the outstanding equity capital of the company or the ownership of (or right to acquire within 60 days) equity capital of the company which would entitle the owner to elect a majority of the board of directors or other governing body of such company. 1.2. "Closing" shall have the meaning set forth in Section 3. 1.3. "Closing Date" shall have the meaning set forth in Section 3. 1.4. "Common Stock" shall mean the common stock of the Company, $0.01 par value per share. 1.5. "Environmental Laws" shall have the meaning set forth in Section 4.18. 1.6. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. 3 1.7. "FTC" shall mean the U.S. Federal Trade Commission. 1.8. "Genentech Stock Purchase Agreement" shall have the meaning set forth in Section 7.1(e). 1.9. "Hart-Scott-Rodino Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder. 1.10. "Intellectual Property" shall have the meaning set forth in Section 4.8. 1.11. "Material Adverse Effect" shall mean a material adverse effect on the (i) condition (financial or otherwise), business, assets, or results of operations of the Company and its subsidiaries, taken as a whole; (ii) ability of the Company to perform any of its material obligations under the terms of this Agreement; or (iii) rights and remedies of the Investor under the terms of this Agreement. 1.12. "NASD" shall mean the National Association of Securities Dealers, Inc. 1.13. "Nasdaq National Market" shall mean The Nasdaq Stock Market, Inc. National Market. 1.14. "Person" shall mean an individual, corporation, partnership, trust, business trust, association, joint stock company, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein. 1.15. "Purchase Price" shall have the meaning set forth in Section 2. 1.16. "Registration Statement" shall have the meaning set forth in Section 9.1(a). 1.17. "SEC" shall mean the U.S. Securities and Exchange Commission. 1.18. "SEC Documents" shall have the meaning set forth in Section 4.12. 1.19. "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. 1.20. "Shares" shall have the meaning set forth in Section 2. 1.21. "Suspension" shall have the meaning set forth in Section 9.2(c). 1.22. "Suspension Notice" shall have the meaning set forth in Section 9.2(c). 1.23. "Voting Securities" shall mean all classes of capital stock of the Company which are then entitled to vote generally in the election of directors. 2. Purchase and Sale of the Shares. Subject to the terms and conditions of this Agreement, the Investor hereby agrees to purchase from the Company and the Company hereby agrees to sell and issue to the Investor 462,570 shares of Common Stock (the "Shares") for an aggregate purchase price (the "Purchase Price") of $35,000,000 (approximately $75.664 per share). 2 4 3. Delivery of the Shares at Closing. The closing of the purchase and sale of the Shares (the "Closing") shall occur on the earlier of (a) the fifth day, unless the fifth day falls on a weekend or holiday, in which case it shall be the next business day, after the earlier of (i) receipt of written notice by the Investor, Genentech and the Company of the FTC's approval of the transactions contemplated by this Agreement and the Collaboration Agreements pursuant to the filings made by the Company, F.Hoffmann-La Roche Ltd and Genentech under the Hart-Scott-Rodino Act and (ii) the expiration or termination of all applicable waiting periods, requests for information (any extensions thereof) under the Hart-Scott-Rodino Act for such filings, and (b) the fifth day, unless the fifth day falls on a weekend or holiday, in which case it shall be the next business day, after the joint determination (by written opinion from each party to the other) that filings under the Hart-Scott-Rodino Act are not required (the "Closing Date"). The Closing shall occur at the offices of Saul Ewing LLP, Centre Square West, 1500 Market Street, 38th Floor, Philadelphia, Pennsylvania, or at such other place as the parties shall mutually agree upon. At the Closing, the Company shall deliver to the Investor one or more stock certificates representing the Shares, each such certificate to be registered in the name of the Investor or, if so indicated on the signature page hereto, in the name of a nominee designated by the Investor, and the Investor shall wire the Purchase Price in immediately available funds to an account designated by the Company. 4. Representations and Warranties of the Company. The Company hereby represents and warrants to the Investor as follows: 4.1. Organization. The Company and each of its subsidiaries is duly organized and validly existing in good standing under the laws of the jurisdiction of its organization. Each of the Company and its subsidiaries has full power and authority to own, operate and occupy its properties and to conduct its business as presently conducted. Each of the Company and its subsidiaries is registered or qualified to do business and is in good standing in each jurisdiction in which it owns or leases property or transacts business and where the failure to be so qualified would have a Material Adverse Effect. No proceeding has been instituted in any such jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such power and authority or qualification. 4.2. Due Authorization and Valid Issuance. The Company has all requisite power and authority to execute, deliver and perform its obligations under this Agreement. The Agreement has been duly authorized and validly executed and delivered by the Company and constitutes a legal, valid and binding agreement of the Company enforceable against the Company in accordance with its terms, except as (a) rights to indemnity and contribution may be limited by state or federal securities laws or the public policy underlying such laws, (b) enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights generally, and (c) enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). The Shares have been duly authorized, and will, upon issuance pursuant to the terms hereof, be duly and validly issued, fully paid and nonassessable and free and clear of all encumbrances and restrictions on transfer, except for restrictions on transfer imposed by this Agreement or by applicable federal or state securities laws. 4.3. Non-Contravention. The execution and delivery of this Agreement, the issuance and sale of the Shares to be sold by the Company under this Agreement, the fulfillment of the terms of this Agreement and the consummation of the transactions contemplated hereby will not (a) conflict with or constitute a violation of, or default (with the passage of time or otherwise) under, (i) any material bond, debenture, note or other evidence of indebtedness, lease, contract, indenture, mortgage, deed of trust, loan agreement, joint venture or other agreement or instrument to which the 3 5 Company or any of its subsidiaries is a party or by which it or any of its subsidiaries or their respective properties are bound, (ii) the charter, by-laws or other organizational documents of the Company or any subsidiary, or (iii) any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to the Company or any subsidiary or their respective properties, or (b) result in the creation or imposition of any lien, encumbrance, claim, security interest or restriction whatsoever upon any of the material properties or assets of the Company or any subsidiary or an acceleration of indebtedness pursuant to any obligation, agreement or condition contained in any material bond, debenture, note or any other evidence of indebtedness or any material indenture, mortgage, deed of trust or any other agreement or instrument to which the Company or any subsidiary is a party or by which any of them is bound or to which any of the property or assets of the Company or any subsidiary is subject. No consent, approval, authorization or other order of, or registration, qualification or filing with, any regulatory body, administrative agency, or other governmental body in the United States or any other Person is required for the execution and delivery of this Agreement and the valid issuance and sale of the Shares, other than such as have been made or obtained, and except for any securities filings or notifications required to be made after the Closing under federal or state securities laws. 4.4. Capitalization. The authorized capital of the Company consists of 50,000,000 shares of Common Stock, of which approximately 34,561,196 shares are issued and outstanding, and 5,000,000 shares of Preferred Stock, $.01 par value, none of which are issued and outstanding. The financial statements of the Company and the related notes contained in the SEC Documents set forth the number of shares of capital stock issuable pursuant to the Company's stock option and stock purchase plans and the number of shares of capital stock issuable and reserved for issuance pursuant to the Company's securities exercisable for, or convertible into or exchangeable for any shares of capital stock. The outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and were not issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. With the exception of options and rights to acquire stock pursuant to the Company's stock option and stock purchase plans, certain warrants held by employees of the Company's United Kingdom subsidiary, and rights under the Company's Shareholder Rights Plan, there are no outstanding rights (including, without limitation, preemptive rights), warrants or options to acquire, or instruments convertible into or exchangeable for, any unissued shares of capital stock or other equity interest in the Company or any subsidiary, or any contract, commitment, agreement, understanding or arrangement of any kind to which the Company is a party or of which the Company has knowledge and relating to the issuance or sale of any capital stock of the Company or any subsidiary, any such convertible or exchangeable securities or any such rights, warrants or options. Without limiting the foregoing, except for certain registration rights held by Novartis Pharma AG and the rights granted to Genentech in the Genentech Stock Purchase Agreement, no preemptive right, co-sale right, right of first refusal, registration right, or other similar right exists with respect to the Shares or the issuance and sale thereof. No further approval or authorization of any stockholder of the Company, the Board of Directors of the Company or others is required for the issuance and sale of the Shares. The Company owns the entire equity interest in each of its subsidiaries, free and clear of any pledge, lien, security interest, encumbrance, claim or equitable interest. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Common Stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company's stockholders. 4.5. Legal Proceedings. There is no material legal or governmental proceeding pending or, to the knowledge of the Company, threatened to which the Company or any subsidiary is or may be a party or of which the business or property of the Company or any subsidiary is subject. 4 6 4.6. No Violations. Neither the Company nor any subsidiary is in violation of its charter, by-laws or other organizational document, or in violation of any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to the Company or any subsidiary, which violation, individually or in the aggregate, would be reasonably likely to have a Material Adverse Effect or is in default (and there exists no condition which, with the passage of time or otherwise, would constitute a default) in any material respect in the performance of any bond, debenture, note or any other evidence of indebtedness in any indenture, mortgage, deed of trust or any other material agreement or instrument to which the Company or any subsidiary is a party or by which the Company or any subsidiary is bound or by which the properties of the Company or any subsidiary are bound, which would be reasonably likely to have a Material Adverse Effect. 4.7. Governmental Permits, Etc. Each of the Company and its subsidiaries has all necessary franchises, licenses, certificates and other authorizations from any foreign, federal, state or local government or governmental agency, department, or body that are currently necessary for the operation of the business of the Company and its subsidiaries as currently conducted except where the failure to currently possess could not reasonably be expected to have a Material Adverse Effect. 4.8. Intellectual Property. The Company and its subsidiaries own or possess sufficient rights to use all material patents, patent rights, trademarks, copyrights, licenses, inventions, trade secrets, trade names and know-how (collectively, "Intellectual Property") as owned or possessed by it or that are necessary for the conduct of its business as now conducted or as proposed to be conducted except where the failure to currently own or possess would not have a Material Adverse Effect. The Company has taken all commercially reasonable measures to protect its ownership or possession of the Intellectual Property. Neither the Company nor any of its subsidiaries has received any notice of, or has any knowledge of, any infringement of asserted rights of a third party with respect to any Intellectual Property that, individually or in the aggregate, would have a Material Adverse Effect, and neither the Company nor any of its subsidiaries has received any notice of any infringement of rights of a third party with respect to any Intellectual Property that, individually or in the aggregate, would have a Material Adverse Effect. 4.9. Financial Statements. The financial statements of the Company and the related notes contained in the SEC Documents present fairly, in accordance with generally accepted accounting principles, the financial position of the Company and its subsidiaries as of the dates indicated, and the results of its operations and cash flows for the periods therein specified. Such financial statements (including the related notes) have been prepared in accordance with generally accepted accounting principles. To the Company's knowledge, there are no material liabilities that are not set forth in the financial statements of the Company and the related notes contained in the SEC Documents, other than liabilities which have incurred in the regular course of business of the Company. 4.10. No Material Adverse Change. Since the filing of the Company's most recent Annual Report on Form 10-K, there has not been (a) any material adverse change in the financial condition or earnings of the Company and its subsidiaries considered as one enterprise nor has any material adverse event occurred to the Company or its subsidiaries, (b) any material adverse event affecting the Company, (c) any obligation, direct or contingent, that is material to the Company and its subsidiaries considered as one enterprise, incurred by the Company, except obligations incurred in the ordinary course of business, (d) any dividend or distribution of any kind declared, paid or made on the capital stock of the Company or any of its subsidiaries, or (e) any loss or damage (whether or not insured) to the physical property of the Company or any of its subsidiaries which has been sustained, which has a Material Adverse Effect. 5 7 4.11. Nasdaq Compliance. The Company's Common Stock is registered pursuant to Section 12(g) of the Exchange Act and is listed on the Nasdaq National Market, and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or de-listing the Common Stock from the Nasdaq National Market, nor has the Company received any notification that the SEC or the NASD is contemplating terminating such registration or listing. 4.12. Reporting Status. The Company has filed in a timely manner all documents that the Company was required to file under the Exchange Act during the twelve months preceding the date of this Agreement. The following documents (the "SEC Documents") complied in all material respects with the SEC's requirements as of their respective filing dates, and the information contained therein as of the date thereof did not contain an untrue statement of a material fact, or omit to state a material fact required to be stated therein, or necessary to make the statements therein in light of the circumstances under which they were made, not misleading: (a) The Company's Annual Report on Form 10-K for the year ended September 30, 2000, filed with the SEC on December 19, 2000; (b) The Company's Definitive Proxy Statement filed with the SEC on January 28, 2000, in connection with the 2000 Annual Meeting of Stockholders; (c) The Company's Current Report on Form 8-K filed with the SEC on November 9, 2000; and (d) All other documents, if any, filed by the Company with the SEC since September 30, 2000, pursuant to the reporting requirements of the Exchange Act. 4.13. Contracts. The contracts described in the SEC Documents or incorporated by reference therein that are material to the Company are in full force and effect on the date hereof, and neither the Company nor, to the Company's knowledge, any other party to such contracts is in breach of or default under any of such contracts which breach or default would have a Material Adverse Effect. 4.14. Taxes. The Company has filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been or might be asserted or threatened against it which would have a Material Adverse Effect. 4.15. Investment Company. The Company is not an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for an investment company, within the meaning of the Investment Company Act of 1940, as amended. 4.16. Title to Property. The Company and its subsidiaries have good and marketable title to all real properties and all other properties and assets owned by them, in each case free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or currently planned to be made thereof by them; and the Company and its subsidiaries hold any leased, real or personal property under valid and enforceable leases with no exceptions that would materially interfere with the use made or currently planned to be made thereof by them. 6 8 4.17. No Labor Disputes. No material labor dispute with the employees of the Company or any subsidiary exists or, to the knowledge of the Company, is imminent. 4.18. Environmental Matters. Neither the Company nor any of its subsidiaries is in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, "Environmental Laws"), owns or operates any real property contaminated with any substance that is subject to any Environmental Laws, is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or is subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim would individually or in the aggregate have a Material Adverse Effect; and the Company is not aware of any pending investigation that might lead to such a claim. 4.19. Insurance. The Company maintains insurance of the types and in the amounts that the Company reasonably believes is adequate for its business, including, but without limitation, product liability insurance, insurance covering all real and personal property owned or leased by the Company against theft, damage, destruction and all other risks customarily insured against by similarly situated companies, all of which insurance is in full force and effect. 4.20. Disclosure. No representation or warranty made under any Section hereof contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements herein, in light of the circumstances under which the statements were made, not misleading. 5. Representations, Warranties and Covenants of the Investor. 5.1. Representations and Warranties. The Investor hereby represents and warrants to the Company as follows: (a) Organization and Existence. The Investor is a corporation duly organized and validly existing in good standing under the laws of the jurisdiction of its organization and has all requisite corporate power and authority to purchase the Shares pursuant to this Agreement. (b) Accredited Investor, Investment Decision. (i) The Investor is an "accredited investor" as defined in Regulation D under the Securities Act and is knowledgeable, sophisticated and experienced in making investments of the type contemplated by this Agreement (ii) The Investor has requested, received, reviewed and considered all information it has deemed relevant in making an informed decision to purchase the Shares. (iii) The Investor is acquiring the Shares in the ordinary course of its business and for its own account for investment only and with no present intention of distributing any of the Shares and has no arrangement or understanding with any other Persons regarding the distribution of the Shares. (iv) In connection with its decision to purchase the Shares, the Investor has relied only upon the SEC Documents and the representations and warranties of the Company contained herein. 7 9 (v) The Investor understands that its acquisition of the Shares has not been registered under the Securities Act or registered or qualified under any state securities law in reliance on specific exemptions therefrom, which exemptions may depend upon, among other things, the bona fide nature of the Investor's investment intent as expressed in this Agreement. (c) Due Authorization. (i) The Investor has full right, power, authority and capacity to enter into this Agreement and to consummate the transactions contemplated hereby and has taken all necessary action to authorize the execution, delivery and performance of this Agreement. (ii) This Agreement constitutes a valid and binding obligation of the Investor enforceable against the Investor in accordance with its terms, except that (1) enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights generally, (2) enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), and (iii) the indemnification agreements of the Investor herein may be legally unenforceable. (d) NASD. The Investor has no direct or indirect affiliation or association with any member of the NASD as of the date hereof. (e) Restricted Securities, Legends. The Investor understands that the Shares are characterized as "restricted securities" under the Securities Act inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in certain limited circumstances. The Investor understands that certificates evidencing the Shares may bear one or all of the following legends: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act"), and may not be transferred without (i) an opinion of counsel satisfactory to the corporation that such transfer may lawfully be made without registration under such Act or qualification under applicable state securities laws; or (ii) such registration or qualification, except for a transfer in compliance with Rule 144 under the Act." If required by the authorities of any state in connection with the issuance of sale of the Shares, the legend required by such state authority. Any purchaser of the Shares pursuant to an effective registration statement under the Securities Act will be entitled to receive a certificate bearing no restrictive legend. 5.2. Covenants. The Investor hereby covenants with the Company as follows: (a) The Investor will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Shares except in compliance with the Securities Act and applicable state securities laws. In furtherance thereof, the Investor will not make any disposition of the Shares except (x) pursuant to a 8 10 registration statement under the Securities Act covering such proposed disposition, (y) upon prior notice to the Company and, if reasonably requested by the Company, delivery to the Company of an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration under the Securities Act, or (z) in compliance with Rule 144 under the Securities Act. (b) The Investor acknowledges and agrees that no action has been or will be taken in any jurisdiction outside the United States by the Company that would permit an offering of the Shares, or possession or distribution of offering materials in connection with the issuance of the Shares, in any jurisdiction outside the United States where legal action by the Company for that purpose is required. The Investor outside the United States will comply with all applicable laws and regulations in each foreign jurisdiction in which it purchases, offers, sells or delivers Shares or has in its possession or distributes any offering material, in all cases at its own expense. 6. Covenants Pending Closing. 6.1. Cooperation. (a) Reasonable Efforts. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all reasonable actions and to do, or cause to be done, all things necessary and appropriate to satisfy all conditions of and to consummate the transactions contemplated by this Agreement. (b) Filings. The parties shall cooperate with one another in the preparation, execution and filing of all documents that are required or permitted to be filed on or before the Closing, including without limitation, filings pursuant to the Hart-Scott-Rodino Act. 6.2. Listing. The Company shall comply with all requirements of the NASD with respect to the issuance of the Shares and the listing thereof on the Nasdaq National Market. 7. Conditions to Closing. 7.1. Conditions to Purchasers' Obligations at the Closing. The Investor's obligations to purchase the Shares at the Closing are subject to the satisfaction, at or prior to the Closing, of the following conditions: (a) Representations and Warranties True; Performance of Obligations. The representations and warranties made by the Company in Section 3 hereof shall be true and correct in all material respects as of the Closing Date with the same force and effect as if they had been made as of the Closing Date, and the Company shall have performed all obligations and conditions herein required to be performed or observed by it on or prior to the Closing. (b) Consents, Permits, and Waivers. The Company shall have obtained any and all consents, permits and waivers necessary or appropriate for consummation of the transactions contemplated by this Agreement (except for such as may be properly obtained subsequent to the Closing), including, without limitation, approval by the FTC pursuant to the Hart-Scott Rodino Act. (c) Compliance Certificate. The Company shall have delivered to the Investor a Compliance Certificate, executed by the Chief Executive Officer or the President of the 9 11 Company, dated the Closing Date, to the effect that the conditions specified in subsections (a) and (b) of this Section 7.1 have been satisfied. (d) Collaboration Agreements. The Collaboration Agreements shall have been executed and delivered by the Company, F.Hoffmann-La Roche Ltd, and Genentech, and such agreement shall be fully effective. (e) Genentech Stock Purchase Agreement. Closing shall have occurred (or shall occur simultaneously with the Closing hereunder) under the Stock Purchase Agreement, dated as of January 8, 2001, between the Company and Genentech (the "Genentech Stock Purchase Agreement"). (f) Legal Opinion. The Investor shall have received from Saul Ewing LLP, legal counsel to the Company, an opinion addressed to them, dated as of the Closing Date, in substantially the form attached hereto as Exhibit A. (g) Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Closing hereby and all documents and instruments incident to such transactions shall be reasonably satisfactory in substance and form to the Investor and its counsel, and the Investor and its counsel shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request. 7.2. Conditions to Obligations of the Company. The Company's obligation to issue and sell the Shares at the Closing is subject to the satisfaction, at or prior to the Closing, of the following conditions: (a) Representations and Warranties True; Performance of Obligations. The representations and warranties made by the Investor in Section 4 hereof shall be true and correct in all material respects as of the Closing Date with the same force and effect as if they had been made as of the Closing Date, and the Investor shall have performed all obligations and conditions herein required to be performed or observed by it on or prior to the Closing. (b) Consents, Permits, and Waivers. The Company shall have obtained any and all consents, permits and waivers necessary or appropriate for consummation of the transactions contemplated by this Agreement (except for such as may be properly obtained subsequent to the Closing), including, without limitation, approval by the FTC pursuant to the Hart-Scott Rodino Act. (c) Collaboration Agreements. The Collaboration Agreements shall have been executed and delivered by the Company, F.Hoffmann-La Roche Ltd, and Genentech, and such agreement shall be fully effective. (d) Genentech Stock Purchase Agreement. Closing shall have occurred (or shall occur simultaneously with the Closing hereunder) under the Genentech Stock Purchase Agreement. (e) Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Closing hereby and all documents and instruments incident to such transactions shall be reasonably satisfactory in substance and form to the Company and 10 12 its counsel, and the Company and its counsel shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request. 8. Survival of Representations and Warranties. Notwithstanding any investigation made by either party to this Agreement, the representations and warranties made by the Company as of the date hereof in Sections 4.1 (the first sentence only), 4.2, 4.3, 4.6, 4.8, 4.14, 4.18, and 4.20 and the representations and warranties made by the Investor shall survive the Closing indefinitely. All other representations and warranties made by the Company herein shall survive the Closing for a period of two years. 9. Registration of the Shares; Compliance With the Securities Act. 9.1. Registration Procedures and Expenses. The Company shall: (a) subject to receipt of necessary information from the Investor after prompt request from the Company to the Investor to provide such information, use commercially reasonable efforts to prepare and file with the SEC, as soon as practicable after the Closing, a shelf registration statement (the "Registration Statement") to enable the resale of the Shares by the Investor from time to time on a delayed or continuous basis pursuant to Rule 415 of the Securities Act through the automated quotation system of the Nasdaq National Market or such other market as may be the principal market on which the Company's Common Stock is sold, or any other manner reasonably requested by the Investor, including privately-negotiated transactions; (b) use commercially reasonable efforts, subject to receipt of necessary information from the Investor after prompt request from the Company to the Investor to provide such information, to cause the Registration Statement to become effective as soon as practicable after the Registration Statement is filed by the Company; (c) use commercially reasonable efforts to prepare and file with the SEC such amendments and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to keep the Registration Statement current and effective for a period not exceeding the earlier of (i) the second anniversary of the Closing Date, or (ii) such time as all Shares purchased by such Investor have been sold pursuant to the Registration Statement; (d) furnish to the Investor such number of copies of the Registration Statement, prospectuses and preliminary prospectuses in conformity with the requirements of the Securities Act and such other documents as the Investor may reasonably request, in order to facilitate the public sale or other disposition of all or any of the Shares by the Investor; provided, however, that the obligation of the Company to deliver copies of prospectuses or preliminary prospectuses to the Investor shall be subject to the receipt by the Company of reasonable assurances from the Investor that the Investor will comply with the applicable provisions of the Securities Act and of such other securities or blue sky laws as may be applicable in connection with any use of such prospectuses or preliminary prospectuses; (e) file documents required of the Company for normal blue sky clearance in states specified in writing by the Investor; provided, however, that the Company shall not be required to qualify to do business or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented; 11 13 (f) bear all expenses in connection with the procedures in paragraph (a) through (e) of this Section 9.1 and the registration of the Shares pursuant to the Registration Statement; and (g) advise the Investor, promptly after it shall receive notice or obtain knowledge of the issuance of any stop order by the SEC delaying or suspending the effectiveness of the Registration Statement or of the initiation or threat of any proceeding for that purpose; and it will promptly use commercially reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal at the earliest possible moment if such stop order should be issued. The Company understands that the Investor disclaims being an underwriter, but the Investor's being deemed an underwriter by the SEC shall not relieve the Company of any obligations it has hereunder. 9.2. Transfer of Shares After Registration; Suspension. (a) The Investor agrees that it will not effect any disposition of the Shares or its right to purchase the Shares that would constitute a sale within the meaning of the Securities Act except as contemplated in the Registration Statement referred to in Section 9.1 and as described below or as otherwise permitted by law, and that it will promptly notify the Company of any changes in the information set forth in the Registration Statement regarding the Investor or its plan of distribution. (b) Except in the event that paragraph (c) below applies, the Company shall (i) if deemed necessary by the Company, prepare and file from time to time with the SEC a post-effective amendment to the Registration Statement or a supplement to the related prospectus or a supplement or amendment to any document incorporated therein by reference or file any other required document so that such Registration Statement will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and so that, as thereafter delivered to purchasers of the Shares being sold thereunder, such prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (ii) provide the Investor copies of any documents filed pursuant to this Section 9.2(b)(i); and (iii) inform the Investor that the Company has complied with its obligations in this Section 9.2(b)(i) (or that, if the Company has filed a post-effective amendment to the Registration Statement which has not yet been declared effective, the Company will notify the Investor to that effect, will use commercially reasonable efforts to secure the effectiveness of such post-effective amendment as promptly as possible and will promptly notify the Investor pursuant to this Section 9.2(b)(i) when the amendment has become effective). (c) Subject to paragraph (d) below, in the event (i) of any request by the SEC or any other federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to a Registration Statement or related prospectus or for additional information; (ii) of the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose; (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; or (iv) of any event or circumstance which, upon the advice of its counsel, necessitates the making of any changes in the Registration Statement or prospectus, or any document incorporated or deemed to be 12 14 incorporated therein by reference, so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the prospectus, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; then the Company shall deliver a certificate in writing to the Investor (the "Suspension Notice") to the effect of the foregoing and, upon receipt of such Suspension Notice, the Investor will refrain from selling any Shares pursuant to the Registration Statement (a "Suspension") until the Investor's receipt of copies of a supplemented or amended prospectus prepared and filed by the Company, or until it is advised in writing by the Company that the current prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in any such prospectus. In the event of any Suspension, the Company will use its commercially reasonable efforts to cause the use of the prospectus so suspended to be resumed as soon as reasonably practicable. In addition to and without limiting any other remedies (including, without limitation, at law or at equity) available to the Investor, the Investor shall be entitled to specific performance in the event that the Company fails to comply with the provisions of this Section 9.2(c). (d) Notwithstanding the foregoing paragraphs of this Section 9.2, the Investor shall not be prohibited from selling the Shares under the Registration Statement as a result of Suspensions on more than two occasions of not more than thirty days each in any twelve month period, unless, in the good faith judgment of the Company's Board of Directors, upon advice of counsel, the sale of the Shares under the Registration Statement in reliance on this Section 9.2(d) would be reasonably likely to cause a violation of the Securities Act or the Exchange Act and result in liability to the Company. (e) Provided that a Suspension is not then in effect, the Investor may sell the Shares under the Registration Statement; provided, however, that it arranges for delivery of a current prospectus to the transferee of such Shares. Upon receipt of a request therefor, the Company has agreed to provide an adequate number of current prospectuses to the Investor and to supply copies to any other parties requiring such prospectuses. (f) In the event of a sale of the Shares by the Investor pursuant to the Registration Statement, the Investor must also deliver to the Company's transfer agent, with a copy to the Company, a Certificate of Subsequent Sale substantially in the form attached hereto as Exhibit B so that the Shares may be properly transferred. Assuming timely delivery to the Company's transfer agent of one or more stock certificates representing the Shares in proper form for transfer and assuming compliance by the Investor with the terms of this Agreement, the Company's transfer agent will issue and make appropriate delivery of one or more stock certificates in the name of the buyer so as to permit timely compliance by the Investor with applicable settlement requirements. 9.3. Indemnification. (a) Definitions. For the purpose of this Section 9.3: (i) the term "Selling Stockholder" shall include the Investor and each person, if any, who controls the Investor within the meaning of Section 15 of the Securities Act, including any officer, director, trustee or Affiliate of such Investor; 13 15 (ii) the term "Registration Statement" shall include any final prospectus, exhibit, supplement or amendment included in or relating to the Registration Statement referred to in Section 9.1; and (iii) the term "untrue statement" shall include any untrue statement or alleged untrue statement, or any omission or alleged omission to state in the Registration Statement a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (b) Indemnification by the Company. The Company agrees to indemnify and hold harmless the Selling Stockholder from and against any losses, claims, damages or liabilities to which such Selling Stockholder may become subject (under the Securities Act or otherwise) insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon, (i) any untrue statement of a material fact contained in the Registration Statement, or (ii) any failure by the Company to fulfill any undertaking included in the Registration Statement, and the Company will reimburse such Selling Stockholder for any reasonable legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim, or preparing to defend any such action, proceeding or claim; provided, however, that the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of, or is based upon, an untrue statement made in such Registration Statement in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Selling Stockholder specifically for use in preparation of the Registration Statement or the failure of the Selling Stockholder to comply with its covenants and agreements contained in Section 9.2 hereof respecting the sale of the Shares or any statement or omission in any prospectus that is corrected in any subsequent prospectus that was delivered to the Investor prior to the pertinent sale or sales by the Investor; provided however, that the Selling Stockholder shall be entitled to be indemnified in any such case for any statement or alleged statement in or omission or alleged omission from such Registration Statement, preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, in which such statement or omission has been corrected, in writing, by the Investor and delivered to the Company at least ten (10) days before the sale or sales from which such loss occurred. The Company shall reimburse the Selling Stockholder for the amounts provided for herein on demand as such expenses are incurred. (c) Indemnification by the Investor. The Investor agrees to indemnify and hold harmless the Company (and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, each officer of the Company who signs the Registration Statement and each director of the Company) from and against any losses, claims, damages or liabilities to which the Company (or any such officer, director or controlling person) may become subject (under the Securities Act or otherwise), insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon, (i) any failure to comply with the covenants and agreements contained in Section 9.2 hereof respecting the sale of the Shares, or (ii) any untrue statement of a material fact contained in the Registration Statement if such untrue statement was made in reliance upon and in conformity with written information furnished by or on behalf of the Investor specifically for use in preparation of the Registration Statement, and the Investor will reimburse the Company (or such officer, director or controlling person), as the case may be, for any legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim; provided, however, that the Investor's obligation to indemnify the Company shall be limited to the net amount received by the Investor from the sale of the Shares; and further provided however, that the Selling Stockholder shall have no obligation to indemnify the Company in any such 14 16 case for any statement or alleged statement in or omission or alleged omission from such Registration Statement, preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, in which such statement or omission has been corrected, in writing, by the Investor and delivered to the Company at least ten (10) days before the sale or sales from which such loss occurred. (d) Notice of Claims, Etc. Promptly after receipt by any indemnified person of a notice of a claim or the beginning of any action in respect of which indemnity is to be sought against an indemnifying person pursuant to this Section 9.3, such indemnified person shall notify the indemnifying person in writing of such claim or of the commencement of such action, but the omission to so notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party under this Section 9.3 (except to the extent that such omission materially and adversely affects the indemnifying party's ability to defend such action) or from any liability otherwise than under this Section 9.3. Subject to the provisions hereinafter stated, in case any such action shall be brought against an indemnified person, the indemnifying person shall be entitled to participate therein, and, to the extent that it shall elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to such indemnified person. After notice from the indemnifying person to such indemnified person of its election to assume the defense thereof, such indemnifying person shall not be liable to such indemnified person for any legal expenses subsequently incurred by such indemnified person in connection with the defense thereof; provided, however, that if there exists or shall exist a conflict of interest that would make it inappropriate, in the opinion of counsel to the indemnified person, for the same counsel to represent both the indemnified person and such indemnifying person or any Affiliate or associate thereof, the indemnified person shall be entitled to retain its own counsel at the expense of such indemnifying person; provided, however, that no indemnifying person shall be responsible for the fees and expenses of more than one separate counsel (together with appropriate local counsel) for all indemnified parties. In no event shall any indemnifying person be liable in respect of any amounts paid in settlement of any action unless the indemnifying person shall have approved the terms of such settlement; provided, however, that such consent shall not be unreasonably withheld. No indemnifying person shall, without the prior written consent of the indemnified person, effect any settlement of any pending or threatened proceeding in respect of which any indemnified person is or could have been a party and indemnification could have been sought hereunder by such indemnified person, unless such settlement includes an unconditional release of such indemnified person from all liability on claims that are the subject matter of such proceeding. (e) Contribution. If the indemnification provided for in this Section 9.3 is unavailable to or insufficient to hold harmless an indemnified party under paragraph (b) or (c) above in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Investor, as well as any other selling stockholders under such registration statement on the other in connection with the statements or omissions or other matters which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, in the case of an untrue statement, whether the untrue statement relates to information supplied by the Company on the one hand or an Investor or other selling stockholder on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement. The Company and the Investor agree that it would not be just and equitable if contribution pursuant to this 15 17 paragraph (e) were determined by pro rata allocation (even if the Investor and other selling stockholders were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to above in this paragraph (e). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this paragraph (e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this paragraph (e), the Investor shall not be required to contribute any amount in excess of the amount by which the net amount received by the Investor from the sale of the Shares to which such loss relates exceeds the amount of any damages which such Investor has otherwise been required to pay by reason of such untrue statement. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 9.4. Lockup Agreement. The Investor agrees, for a period of two years following the Closing, and if the Investor then beneficially owns at least 3% of the outstanding Common Stock of the Company (adjusted as hereinafter provided), in connection with any primary underwritten registration of the Company's securities (other than registrations on Forms S-4 or S-8 or comparable forms), upon the request of the underwriters managing the offering, not to sell, make any short sale of, pledge, grant any option for the purchase of or otherwise dispose of any Shares (other than those included in the registration) without the prior written consent of such underwriters during the seven days prior to and during the 90-day period beginning on the effective date of such registration as the underwriters may specify; provided that all of the following similarly agree: (a) all officers of the Company, (b) all directors of the Company, and (c) all holders of more than one percent of the outstanding capital stock of the Company who either (i) purchased such stock from the Company in connection with entering into a collaborative arrangement or (ii) purchased such stock from the Company in a private placement subsequent to the date of this Agreement. The 3% threshold shall be appropriately adjusted to reflect any stock repurchase, or similar transaction, by the Company which shall have the effect of reducing the number of outstanding shares of the Company's Common Stock. 10. Rule 144. The Company covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if the Company is not required to file such reports, it will, upon the request of the Investor, made after the first anniversary of the Closing Date, make publicly available such information as necessary to permit sales pursuant to Rule 144 under the Securities Act), and it will take such further action as the Investor may reasonably request, all to the extent required from time to time to enable the Investor to sell the Shares purchased hereunder without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. Upon the request of the Investor, the Company will deliver to it a written statement as to whether the Company has complied with such information and requirements. 11. Additional Covenant. 11.1. The Investor agrees that for a period beginning on the date of this Agreement and ending on the earlier of (a) the occurrence of a Strategic Event (as defined in Section 11.2), or (b) three years from the date of this Agreement, without the prior written consent of the Company, neither the Investor nor any Affiliate of the Investor (regardless of whether such person or entity is an Affiliate on the date of this Agreement) will (i) acquire, offer to acquire, or agree to acquire, directly, or indi- 16 18 rectly through Affiliates or through a Group (as defined in Section 11.3), by purchase or otherwise, any Voting Securities or rights or options to acquire any Voting Securities, if such acquisition would result in aggregate voting power in the election of directors of the Company of all Voting Securities then owned by the Investor, together with any Affiliate of the Investor or any Group in which the Investor or any Affiliate of the Investor shall then be participating, of greater than 4.95% of such total combined voting power of all Voting Securities then outstanding, or (ii) make, or in any way participate, directly or indirectly through Affiliates or through membership in a Group, in any "solicitation" of "proxies" to vote (as such terms are defined in Rule 14a-1 under the Exchange Act) any Voting Securities. 11.2. The term "Strategic Event" as used in Section 11.1 shall mean any of the following events: (a) commencement by a Third Party (as defined in Section 11.4) of a tender offer or exchange offer for a majority of the outstanding Voting Securities; (b) filing by a Third Party with the SEC of a proxy statement for use in connection with the solicitation of proxies in opposition to management's slate of candidates for election to the Company's board of directors; (c) filing by a Third Party with the SEC of a Schedule 13D under the Exchange Act, if such Third Party has acquired or holds the securities of the Company with a purpose or effect of changing or influencing control of the Company, or in connection with or as a participant in any transaction having that purpose or effect; or (d) public announcement by the Company of an agreement with a Third Party to merge or consolidate the Company with a Third Party in a transaction that would result in an aggregate change in the ownership or control of more than 50% of the Voting Securities, or the sale of all or substantially all of the Company's assets to a Third Party. 11.3. The term "Group" shall mean two or more persons (other than Genentech or any Affiliate of Genentech) who agree to act together for the purpose of acquiring, holding, voting or disposing of Voting Securities. 11.4. The term "Third Party" shall mean a Person other than: (a) the Company or any Affiliate of the Company as of the date of this Agreement; (b) the Investor or any Affiliate of the Investor; and (c) Genentech or any company controlled by Genentech. 11.5. In the event a Strategic Event occurs and the Company has knowledge of it, the Company shall provide the Investor with written notice of such Strategic Event within three Business Days of its occurrence (or within three Business Days of the Company's awareness of its occurrence, whichever is later). For purposes of this Section 11.5, "Business Day" shall mean any day on which the New York Stock Exchange, Inc. is open for trading. 17 19 12. Termination. Either party may terminate this Agreement, upon ten days' prior written notice to the other party if the FTC does not approve the transactions contemplated by this Agreement and the Collaboration Agreements under the Hart-Scott-Rodino Act or if all applicable waiting periods, requests for information (and any extensions thereof) under the Hart-Scott-Rodino Act have not expired or otherwise been terminated by June 1, 2001, in which case this Agreement shall forthwith become void and there shall be no liability or obligation on the part of the Company or Roche. 13. Notices. All notices, requests, consents and other communications hereunder shall be in writing, shall be mailed (a) if within domestic United States by first-class registered or certified airmail, or nationally recognized overnight express courier, postage prepaid, or by facsimile, or (b) if delivered from outside the United States, by International Federal Express or facsimile, and shall be deemed given (i) if delivered by first-class registered or certified mail domestic, three business days after so mailed, (ii) if delivered by nationally recognized overnight carrier, one business day after so mailed, (iii) if delivered by International Federal Express, two business days after so mailed, or (iv) if delivered by facsimile, upon electronic confirmation of receipt and shall be delivered as addressed as follows: (a) if to the Company, to: Robert L. Van Nostrand Vice President and Chief Financial Officer OSI Pharmaceuticals, Inc. 106 Charles Lindbergh Boulevard Uniondale, NY 11553 Telecopy: (516) 222-0964 with a copy to: Spencer W. Franck, Jr., Esquire Saul Ewing LLP Centre Square West 1500 Market Street, 38th Floor Philadelphia, PA 19102 Phone: (215) 972-1955 Telecopy: (215) 972-1938 18 20 (b) if to the Investor: Marcel Kohler Roche Holdings, Inc. One Commerce Centre Suite 1050 Wilmington, DE 19801 Phone: 302-425-4701 Telecopy: 302-425-4713 with a copy to: General Counsel Roche Holdings, Inc. 340 Kingsland Street Nutley, NJ 07110 Phone: 973-235-2165 Telecopy: 973-235-3500 14. Changes. This Agreement may not be modified or amended except pursuant to an instrument in writing signed by the Company and the Investor. 15. Headings. The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be part of this Agreement. 16. Severability. In case any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. 17. Successors and Assigns. This Agreement may be assigned by the Investor at any time following the Closing. Without the prior written consent of the Investor, but after notice duly given and in compliance with this Agreement, the Company may assign its rights and delegate its duties hereunder to any successor-in-interest corporation in the event of a merger or consolidation of the Company with or into another corporation, or any merger or consolidation of another corporation with or into the Company that results directly or indirectly in an aggregate change in the ownership or control of more than 50% of the voting rights of the equity securities of the Company, or the sale of all or substantially all of the Company's assets. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 18. Further Assurances. The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained. 19. Governing Law. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Delaware, without giving effect to the principles of conflicts of law. 19 21 20. Counterparts. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties. [Signatures on next page] 20 22 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. OSI PHARMACEUTICALS, INC. By: /s/ COLIN GODDARD ------------------------------------ Title: Chairman and CEO --------------------------------------- ROCHE HOLDINGS, INC. By: /s/ MARCEL F. KOHLER ------------------------------------ Print Name: Marcel F. Kohler ----------------------------------- Title: Vice President-Controller & Secretary --------------------------------------------- Address: One Commerce Centre, Suite 1050, ------------------------------------------- Wilmington, Delaware 19801 ----------------------------------------- Tax ID No.: 51-0304944 ---------------------------------------- Contact name: Marcel F. Kohler ------------------------------------- Telephone: 302-425-4701 ----------------------------------------- Name in which shares should registered (if different): ---------------------------------------------------- 21 23 EXHIBIT A FORM OF OPINION OF COMPANY'S COUNSEL The opinion shall include the following matters: 1. Organization. The Company and each of its subsidiaries is duly organized and validly existing in good standing under the laws of the jurisdiction of its organization. Each of the Company and its subsidiaries has full power and authority to own, operate and occupy its properties and to conduct its business as presently conducted. Each of the Company and its subsidiaries is registered or qualified to do business and is in good standing in each jurisdiction in which it owns or leases property or transacts business and where the failure to be so qualified would have a Material Adverse Effect. To such counsel's knowledge, no proceeding has been instituted in any such jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such power and authority or qualification. 2. Due Authorization and Valid Issuance. The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement. The Agreement has been duly authorized and validly executed and delivered by the Company and constitutes a legal, valid and binding agreement of the Company enforceable against the Company in accordance with its terms, except as (a) rights to indemnity and contribution may be limited by state or federal securities laws or the public policy underlying such laws, (b) enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights generally, and (c) enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). The Shares have been duly authorized, and duly and validly issued, fully paid and nonassessable and free and clear of all encumbrances and restrictions on transfer, except for restrictions on transfer imposed by the Agreement or by applicable federal or state securities laws. 3. Non-Contravention. The execution and delivery of the Agreement, the issuance and sale of the Shares to be sold by the Company under the Agreement, the fulfillment of the terms of the Agreement and the consummation of the transactions contemplated thereby will not (a) conflict with or constitute a violation of, or default (with the passage of time or otherwise) under (x) the charter, by-laws or other organizational documents of the Company or any subsidiary or, (y) to such counsel's knowledge, (i) any material bond, debenture, note or other evidence of indebtedness, lease, contract, indenture, mortgage, deed of trust, loan agreement, joint venture or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which it or any of its subsidiaries or their respective properties are bound, or (ii) any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to the Company or any subsidiary or their respective properties, or (b) to such counsel's knowledge, result in the creation or imposition of any lien, encumbrance, claim, security interest or restriction whatsoever upon any of the material properties or assets of the Company or any subsidiary or an acceleration of indebtedness pursuant to any obligation, agreement or condition contained in any material bond, debenture, note or any other evidence of indebtedness or any material indenture, mortgage, deed of trust or any other agreement or instrument to which the Company or any subsidiary is a party or by which any of them is bound or to which any of the property or assets of the Company or any subsidiary is subject. To such counsel's knowledge, no consent, approval, authorization or other order of, or registration, qualification or filing with, any regulatory body, administrative agency, or other governmental body in the United States or any other Person is required for the execution and delivery of the Agreement and the valid issuance and A-1 24 sale of the Shares, other than such as have been made or obtained, and except for any securities filings or notifications required to be made after the Closing under federal or state securities laws. 4. Authorized Capitalization. The authorized capital of the Company consists of 50,000,000 shares of Common Stock, par value $.01 per share, and 5,000,000 shares of Preferred Stock, $.01 par value. None of the shares of Preferred Stock are issued and outstanding. 5. Securities Act. Assuming the accuracy of the representations and warranties made by the Investor in the Agreement, the offer and sale of the Shares to the Investor is exempt from the registration requirements of the Securities Act of 1933, as amended, by virtue of Section 4(2) thereof. 6. Legal Proceedings. To such counsel's knowledge, there is no material legal or governmental proceeding pending or threatened to which the Company or any subsidiary is or may be a party or of which the business or property of the Company or any subsidiary is subject. 7. Nasdaq Compliance. The Company's Common Stock is registered pursuant to Section 12(g) of the Exchange Act and is listed on the Nasdaq National Market, and, to such counsel's knowledge, the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or de-listing the Common Stock from the Nasdaq National Market, nor, to such counsel's knowledge, has the Company received any notification that the SEC or the NASD is contemplating terminating such registration or listing. A-2 25 EXHIBIT B CERTIFICATE OF SUBSEQUENT SALE Bank of New York 101 Barclay Street New York, NY 10286 RE: Sale of Shares of Common Stock of OSI Pharmaceuticals, Inc. (the "Company") pursuant to the Company's Prospectus dated _____________, ____ (the "Prospectus") Dear Sir/Madam: The undersigned hereby certifies, in connection with the sale of shares of Common Stock of the Company included in the table of Selling Stockholders in the Prospectus, that the undersigned has sold the shares pursuant to the Prospectus and in a manner described under the caption "Plan of Distribution" in the Prospectus and that such sale complies with all applicable securities laws, applicable to the undersigned, including, without limitation, the Prospectus delivery requirements of the Securities Act of 1933, as amended. Selling Stockholder (the beneficial owner):____________________________________ Record Holder (e.g., if held in name of nominee):______________________________ Restricted Stock Certificate No.(s):____________________________________ Number of Shares Sold:________________________________________ Date of Sale:_________________________________________________ In the event that you receive a stock certificate(s) representing more shares of Common Stock than have been sold by the undersigned, then you should return to the undersigned a newly issued certificate for such excess shares in the name of the Record Holder and BEARING A RESTRICTIVE LEGEND. Further, you should place a stop transfer on your records with regard to such certificate. Very truly yours, Dated: _____________________ By:____________________________ Print Name:____________________ Title: ________________________ cc: Mr. Robert L. Van Nostrand Vice President and Chief Financial Officer OSI Pharmaceuticals, Inc. 106 Charles Lindbergh Boulevard Uniondale, NY 11553 B-1 EX-10.1 4 y45494ex10-1.txt DEVELOPMENT AND MARKETING COLLABORATION AGREEMENT 1 EXHIBIT 10.1 Portions of this Exhibit have been redacted and are the subject of a confidential treatment request filed with the Secretary of the Securities and Exchange Commission. 2 DEVELOPMENT AND MARKETING COLLABORATION AGREEMENT BETWEEN OSI PHARMACEUTICALS, INC. AND GENENTECH, INC. JANUARY 8, 2001 3 DEVELOPMENT AND MARKETING COLLABORATION AGREEMENT This Development and Marketing Collaboration Agreement ("Agreement") is made as of January 8, 2001 by and between OSI Pharmaceuticals, Inc., a Delaware corporation with its principal office at 106 Charles Lindbergh Blvd., Uniondale, New York 11553-3649 (together with its Affiliates permitted hereunder unless the context otherwise requires "OSI") and Genentech, Inc., a Delaware corporation with its principal office at 1 DNA Way, South San Francisco, California 94080 (together with its Affiliates permitted hereunder unless the context otherwise requires "Genentech"). OSI and Genentech are sometimes referred to herein individually as a "Party" and collectively as the "Parties." RECITALS 1. OSI has participated in the development of a certain molecule known as OSI-774 (defined below) and has certain intellectual property rights related thereto. 2. Genentech and OSI each wish to conduct development and commercialization of OSI-774 in a collaborative fashion so that the resources and expertise of each is put to good use, and under such collaborative efforts each Party is willing to expend up to $100 million as may be agreed upon by the Parties. 3. By combining the development and commercialization experience and expertise of both Genentech and OSI, the Parties wish to expedite the regulatory approval and marketing of OSI-774 as a significant new therapeutic. 4. OSI wishes to grant to Genentech, and Genentech wishes to obtain, a license under OSI's intellectual property rights to permit Genentech to participate in collaborative OSI-774 product development, and marketing and promotion efforts, under the terms and conditions set forth below. 5. Simultaneous with the Closing Date hereof, Genentech will purchase shares of common stock of OSI for a purchase price of $35 million according to the terms and conditions of a Stock Purchase Agreement (the "Stock Purchase Agreement") of even date herewith. 6. Pursuant to that certain Tripartite Agreement of even date herewith (the "Tripartite Agreement"), the Parties have made certain agreements with F.Hoffmann-La Roche Ltd, a Swiss corporation with its principal office at Grenzacher Strasse 24, CH-4070-Basel Switzerland ("Roche") regarding, among other things, cost sharing, for development of OSI-774. 2 4 AGREEMENT NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties, intending to be legally bound hereby, do hereby agree as follows: ARTICLE 1 DEFINITIONS The following capitalized terms, whether used in the singular or the plural, shall have the following meanings as used in this Agreement unless otherwise specifically indicated: 1.1 "ADJUVANT ONCOLOGY INDICATION" shall mean use of Licensed Product as a systemic therapy administered after local therapy or treatment of a primary tumor (e.g. by surgery, or surgery and radiotherapy) to reduce the risk of recurrence or progression. 1.2 "AFFILIATE" shall mean any corporation, firm, limited liability company, partnership or other entity which directly or indirectly controls or is controlled by or is under common control with a Party to this Agreement. For the purposes of this Section 1.2, "control" means ownership, directly or through one or more Affiliates, of fifty percent (50%) or more of the shares of stock entitled to vote for the election of directors, in the case of a corporation, or fifty percent (50%) or more of the equity interests in the case of any other type of legal entity, status as a general partner in any partnership, or any other arrangement whereby a party controls or has the right to control the Board of Directors or equivalent governing body of a corporation or entity. For the purposes of this Agreement, Roche shall be deemed to not be an Affiliate of Genentech. 1.3 "ALLOCABLE OVERHEAD" shall have the meaning defined in Exhibit B attached hereto and incorporated herein. 1.4 "cGMP" shall mean the regulatory requirements for current good manufacturing practices promulgated by the United States Food and Drug Administration ("FDA") under the U.S. Food, Drug and Cosmetic Act ("FD&C Act") and the regulations promulgated thereunder, particularly 21 C.F.R.Section 210 et seq., and 21 C.F.R.Sections 600-610, as the same may be amended from time to time. 1.5 "CLINICAL SUPPLIES" shall mean supplies of Licensed Product, manufactured, packaged and labeled in compliance with cGMP, in such form and strength as agreed by the Parties, and ready to be used for the conduct of pre-clinical and/or human clinical trials of the Licensed Product in the Field by the Parties pursuant to the Development Budget/Plan. 1.6 "CLOSING" shall mean, subject to the satisfaction or waiver of the conditions set forth in Section 6.2, the closing of the transactions contemplated by this Agreement. 3 5 1.7 "CLOSING DATE" shall mean the earlier of: (i) the fifth (5th) day, unless the fifth (5th) day falls on a weekend or holiday, in which case it shall be the next business day, after the earlier of (a) receipt of written notice (a copy of which has been furnished to Genentech) of the U.S. Federal Trade Commission's (the "FTC") approval of the transaction contemplated by this Agreement under the Hart-Scott-Rodino filings to be made by OSI and Genentech (or the parent company of each Party) and (b) the expiration or termination of all applicable waiting periods, requests for information (and any extensions thereof) under the Hart-Scott Rodino Antitrust Improvements Act of 1976 for such Hart-Scott Rodino filings and (ii) the fifth (5th) day, unless the fifth (5th) day falls on a weekend or holiday, in which case it shall be the next business day, after the joint determination (by certification from each Party to the other) that such Hart Scott Rodino filing is not required. In the case of Genentech, such certification, if made, shall be made by its parent company, Roche, which is responsible for such filing with respect to Genentech. 1.8 "COLLABORATION INVENTION" shall mean any invention (whether patentable or not) or Know-how made after the Effective Date during the course of, in furtherance of, and as a direct result of the activities of the Parties hereunder or under the Tripartite Agreement and which relates to any Licensed Product, its manufacture or its use. A "Collaboration Invention" may be made by employees of OSI solely or jointly with a Third Party, including Roche (an "OSI Collaboration Invention"), by employees of Genentech solely or jointly with a Third Party, including Roche (a "Genentech Collaboration Invention"), or jointly by employees of OSI and Genentech alone or together with a Third Party, including Roche (a "Joint Collaboration Invention"). In addition, any invention is a Collaboration Invention to the extent that it consists of or comprises an Improvement made under this Agreement. 1.9 "COMMERCIALLY REASONABLE AND DILIGENT EFFORTS" shall mean, with respect to development and commercialization, a Party's use of best efforts and resources consistent with the exercise of prudent scientific and business judgment, as applied by such Party to other pharmaceutical products of similar potential, market size and competitive environment, and with respect to marketing, consistent with the exercise of prudent business judgment as applied by such Party to other pharmaceutical products of similar potential and market size. 1.10 "COMMERCIAL SUPPLIES" shall mean supplies of Licensed Product, manufactured, packaged and labeled in compliance with cGMP, in such form and strength as agreed by the Parties, and ready to be offered for commercial sale for use in the Field in the Territory by Genentech and OSI, pursuant to the terms of this Agreement. 1.11 "CONTROLLED" with respect to Licensed Product Patents or Know-how shall mean the ability of a Party to grant a license or sublicense to such Licensed Product Patents or Know-how as provided for herein without violating the terms of any agreement or other arrangement with any Third Party existing and in effect at the time such Party would be required hereunder to grant the other Party such license or sublicense. 1.12 "COST OF SALES" shall have the meaning set forth in Exhibit B. 1.13 "COVER" (including variations such as "Covered", "Covering" and the like) shall mean that the use, manufacture, sale, offer for sale or importation of a particular product would 4 6 infringe a claim of a patent or patent application (if that claim were to issue in a patent) in the absence of rights under such patent, as determined on a country-by-country basis. 1.14 "DEVELOPMENT BUDGET/PLAN" shall mean the comprehensive plan for the development of Licensed Products, designed to generate the development, clinical and regulatory information required for filing INDs and Drug Approval Applications and to further support the development and commercialization of Licensed Products in the Territory. The Development Budget/Plan shall initially be the Global Development Plan (hereafter defined), and is attached hereto as Exhibit C and incorporated herein, but may be modified pursuant to Section 2.3 below and which will be updated at least annually by the Joint Project Team. Development shall refer to all activities related to preclinical testing, toxicology, formulation, process development, manufacturing/quality assurance/quality control pursuant to Section 7.1(a) hereof, clinical studies and regulatory affairs for a Licensed Product in connection with obtaining Regulatory Approvals of such Licensed Product. The development budget included as part of the Development Budget/Plan for a particular calendar year shall constitute the maximum costs to be incurred thereunder during such calendar year, unless such budget is modified by the Joint Project Team, as approved by the JSC, in accordance with the terms hereinbelow. The Development Budget/Plan may be modified from time to time by the Joint Project Team, as approved by the JSC, as necessary in accordance with the terms herein below. 1.15 "DISTRIBUTION COSTS" shall have the meaning defined in Exhibit B. 1.16 "DIVESTITURE AGREEMENT" shall mean that agreement, related to the Base Patents (as hereafter defined in Section 1.39) and dated May 23, 2000 between OSI and Pfizer Inc., a Delaware corporation having an office at 235 East 42nd Street, New York, New York 10017. 1.17 "DRUG APPROVAL APPLICATION" shall mean an application for Regulatory Approval required for commercial sale or use of a Licensed Product as a drug in the Field in the Territory. 1.18 "EFFECTIVE DATE" shall mean the date first written above. 1.19 "FIELD" shall mean the treatment or prophylaxis of any human disease or condition. 1.20 "FULLY BURDENED MANUFACTURING COST" shall have the meaning defined in Exhibit B. 1.21 "GENENTECH KNOW-HOW" shall mean Know-how which: (a) is Controlled by Genentech as of the Closing Date or hereafter during the Term of this Agreement, and (b) is necessary or useful for OSI to perform its tasks directly relating to Licensed Products under the Development Budget/Plan and to use, make, have made, sell, offer for sale and/or import Licensed Products, pursuant to this Agreement, for use in the Field in the Territory. 5 7 1.22 "GENENTECH PATENTS" shall mean any and all Licensed Product Patents to the extent Controlled by Genentech as of the Closing Date or hereafter during the Term of this Agreement, including, without limitation, Genentech's interest in any Joint Patents. 1.23 "GENERAL AND ADMINISTRATIVE COSTS" shall have the meaning defined in Exhibit B. 1.24 "GLOBAL DEVELOPMENT PLAN" shall mean the plan for development of OSI-774, which is attached as Exhibit A to the Tripartite Agreement and attached hereto as Exhibit C, as may be amended from time to time. 1.25 "GROSS PROFIT" shall have the meaning set forth in Exhibit B. 1.26 "GROSS SALES" shall have the meaning defined in Exhibit B. 1.27 "IMPROVEMENT(S)" shall mean a selective inhibitor of epidermal growth factor receptor Controlled by OSI or Genentech whose primary mechanism of action is initiated by binding to epidermal growth factor receptor, and such binding is with higher binding affinity to epidermal growth factor receptor (also known as erbB1 and HER1) than to other members of the epidermal growth factor receptor family (e.g. HER2, HER3, HER4) as demonstrated in receptor binding assays. By way of illustration, and without limitation, Improvements do not include any Genentech anti-HER2 antibodies, for example the antibodies known as Herceptin and 2C4. 1.28 "IND" shall mean an effective Notice of a Claimed Investigational New Drug Exemption, as defined in Title 21 of the U.S. Code of Federal Regulations, on file with the FDA before the commencement of clinical trials of Licensed Products in humans, or any comparable filing with any relevant regulatory agencies or other governmental entities in any country in the Territory. 1.29 "JOINT COLLABORATION INVENTION" shall have the meaning set forth in Section 1.8. 1.30 "JOINT PATENTS" shall mean any and all Licensed Product Patents claiming a Joint Collaboration Invention. 1.31 "JOINT PROJECT TEAM" shall mean that body established pursuant to Section 3.2 below. 1.32 "JOINT STEERING COMMITTEE," or "JSC," shall mean that committee established pursuant to Section 3.1 below. 1.33 "KNOW-HOW" shall mean all proprietary information, trade secrets, techniques and data of a Party (including Confidential Information as defined in Article 10 below) directly relating to the Licensed Products and that are Controlled by such Party as of the Closing Date or hereafter during the Term of this Agreement, including, but not limited to, discoveries, formulae, materials, practices, methods, knowledge, know-how, processes, experience, test data (including pharmacological, toxicological and clinical information and test data), analytical and quality 6 8 control data, marketing, pricing, distribution, cost and sales data or descriptions. "Know-how" may be made prior to the Closing Date or after the Closing Date during the course of, in furtherance of, and as a direct result of the activities of the Parties hereunder or under the Tripartite Agreement. Know-how may be made by employees of OSI, solely or jointly with a Third Party, including Roche, by employees of Genentech, solely or jointly with a Third Party, including Roche, or jointly by employees of OSI and Genentech, alone or together with a Third Party, including Roche. 1.34 "LICENSED PRODUCT" shall mean any pharmaceutical formulation containing a selective inhibitor of epidermal growth factor receptor Controlled by OSI, including, without limitation, OSI-774 and inhibitors having the same mechanism of action as OSI-774, variants and derivatives thereof (including, without limitation, prodrugs, salts, solvates and polymorphs thereof) and Improvements as defined in Section 1.27 above. Licensed Product shall not include any pharmaceutical formulation containing a compound Controlled by Genentech that is not an Improvement or a compound Controlled by OSI that is not a selective inhibitor of epidermal growth factor receptor. 1.35 "LICENSED PRODUCT PATENTS" shall mean any and all patents, patent applications and any patents issuing therefrom, together with any extensions (including supplementary protection certificates), registrations, reissues, continuations, divisions, continuations-in-part, re-examinations, substitutions or renewals thereof, that contain one or more claims Covering a Licensed Product in the Field in the Territory. 1.36 "MARKETING COSTS" shall have the meaning defined in Exhibit B. 1.37 "METASTATIC ONCOLOGY INDICATION" shall mean the use of Licensed Product as a therapy for the spread of a malignancy from its site of origin to noncontiguous sites, most commonly to other organs; treatment will also involve the primary tumor, if present. 1.38 "NDA" shall mean the New Drug Application, as defined in the FDA regulations in the U.S. Code of Federal Regulations, filed with the FDA for the purpose of obtaining Regulatory Approval for Licensed Product in the Field in the Territory. 1.39 "NET SALES" shall have the meaning defined in Exhibit B. 1.40 "OPERATING PROFITS OR LOSSES" shall have the meaning defined in Exhibit B. 1.41 "OTHER OPERATING INCOME/EXPENSE" shall have the meaning set forth in Exhibit B. 1.42 "OSI/GNE DEVELOPMENT COSTS" shall have the meaning defined in Exhibit B. 1.43 "OSI KNOW-HOW" shall mean Know-how which: (a) is Controlled by OSI as of the Closing Date or hereafter during the Term of this Agreement, and (b) is necessary or useful for Genentech to perform its tasks directly relating to Licensed Products under the Development 7 9 Budget/Plan and to use, sell, offer for sale and/or import Licensed Products, pursuant to this Agreement, for use in the Field in the Territory. 1.44 "OSI PATENTS" shall mean any and all Licensed Product Patents to the extent Controlled by OSI as of the Closing Date or hereafter during the Term of this Agreement, including, without limitation, OSI's interest in any Joint Patents. The OSI Patents as of the Closing Date are set forth on Exhibit D attached hereto and incorporated herein ("Base Patents"). 1.45 "OSI-774" shall mean the selective inhibitor of epidermal growth factor receptor having the IUPAC name [6,7-bis(2-methoxyethoxy)quinazolin-4-yl]-(3-ethynylphenyl)-amine and having the U.S. Approved Name erlotinib. 1.46 "PARTY" shall mean Genentech or OSI, and, when used in the plural, shall mean both of them. 1.47 "PATENT AND TRADEMARK COSTS" shall have the meaning set forth in Exhibit B. 1.48 "PHASE II CLINICAL TRIAL" shall mean studies in humans of the safety, dose ranging and efficacy of a Licensed Product which are conducted after Phase I clinical studies of such Licensed Product. 1.49 "PHASE III ENABLING CLINICAL TRIAL" shall mean a Phase I or Phase II Clinical Trial which has generated sufficient data to commence Phase III Clinical Trials. 1.50 "REFRACTORY ONCOLOGY INDICATION" shall mean the use of Licensed Product as a therapy for the progression of a malignancy after therapy or treatment that is accepted, under generally accepted good medical practices, to have some degree of effectiveness; or for a malignancy for which there is no generally accepted effective medical therapy. 1.51 "REGULATORY APPROVAL" shall mean any approvals (including pricing and reimbursement approvals), licenses, registrations or authorizations of any federal, state or local regulatory agency, department, bureau or other governmental entity, necessary for the manufacture and sale of a Licensed Product in a regulatory jurisdiction in the Territory. 1.52 "SALES COSTS" shall have the meaning defined in Exhibit B. 1.53 "SALES RETURNS AND ALLOWANCES" shall have the meaning set forth in Exhibit B. 1.54 "TERRITORY" shall mean the United States of America, its territories and possessions, and the Commonwealth of Puerto Rico. 1.55 "THIRD PARTY" shall mean any entity other than OSI or Genentech or their permitted sublicensees, and shall include Roche. 1.56 "THIRD PARTY ROYALTIES" shall mean royalties payable to a Third Party (other than Roche) in connection with the manufacture, use, sale, offer for sale or importation of Licensed Products. 8 10 ARTICLE 2 SCOPE OF THE COLLABORATION 2.1 COLLABORATION GOALS. The Parties agree, pursuant and subject to the terms of this Agreement, to develop Licensed Products, with the goal of obtaining Regulatory Approval of Licensed Products in commercially significant indications as soon as reasonably practicable for commercial marketing and sale in the Field in the Territory, pursuant to this Agreement. Each Party shall use Commercially Reasonable and Diligent Efforts to perform its respective tasks and obligations in conducting all development work ascribed to it in the Development Budget/Plan, and each Party shall cooperate with and provide reasonable support to the other Party in such other Party's conduct of such development and commercialization work as provided in the Development Budget/Plan. 2.2 PARTICIPATION IN GLOBAL DEVELOPMENT. Each Party acknowledges that simultaneously with this Agreement, OSI will be entering into a Development Collaboration and Licensing Agreement with Roche regarding development of OSI-774 outside the Territory (the "OSI-Roche Agreement"). The Parties hereto, simultaneously with this Agreement, will enter into the Tripartite Agreement with Roche governing certain development activities and cost sharing. 2.3 INITIAL DEVELOPMENT BUDGET/PLAN; MODIFICATIONS. The Parties have attached as Exhibit C hereto the initial Development Budget/Plan (which initially is the Global Development Plan), the goals of which are, among other things: (a) the timely and strategic development, including clinical testing, of OSI-774 to seek Regulatory Approval in multiple indications as promptly as commercially practicable; (b) the acquisition of Regulatory Approval of Licensed Product allowing the commercial promotion, marketing and sale of the Licensed Product in the Territory for use in the Field; (c) the identification of the activities to be performed by each Party to accomplish such development (including clinical testing) and Regulatory Approval; and (d) the manufacture and supply of Clinical Supplies and Commercial Supplies of the Licensed Product for such development and commercialization pursuant to Section 7.1 hereof. The Development Budget/Plan includes development activities to be undertaken in accordance with the Global Development Plan and also includes activities outside the Global Development Plan which may be undertaken under this Agreement. Hereafter, the Development Budget/Plan (including the work, budget and timeline therefor) shall not be modified except upon formal decision by the Joint Project Team and approval by the JSC as described in Section 3.1(c) below, which formal approval shall automatically constitute a valid binding amendment to Exhibit C attached hereto. 9 11 ARTICLE 3 MANAGEMENT OF THE COLLABORATION 3.1 JOINT STEERING COMMITTEE. (a) ESTABLISHMENT OF JOINT STEERING COMMITTEE. The Parties hereby establish a Joint Steering Committee, or JSC, to oversee and manage the product development and commercialization collaboration contemplated by this Agreement. The JSC will be composed of up to three (3) representatives of each Party, who shall be appointed (and may be replaced at any time) by such Party on written notice to the other Party in accordance with this Agreement. Such representatives shall include individuals within the senior management of each Party with expertise in drug development and commercialization. The initial JSC members from each Party are listed on Exhibit A attached hereto. Any member of the JSC may designate a substitute to attend and perform the functions of that member at any meeting of the JSC. The JSC will meet at least twice each year during the Term of this Agreement, or at any frequency agreed by the JSC, to conduct the activities described in Section 3.1(b) below. The representatives from each Party will collectively have one vote in decisions, with decisions for overall product development strategy made by unanimous vote. (b) JOINT STEERING COMMITTEE RESPONSIBILITIES. The JSC shall perform the following functions: (i) approve the overall strategy for the collaboration hereunder and provide direction to the Joint Project Team as provided herein; (ii) review and approve development, clinical trial strategies and the Development Budget/Plans, the division of responsibilities between the Parties, the multiyear expense forecasts formulated by the Joint Project Team, and the financial results of the collaboration hereunder; (iii) review and approve the selection by the Joint Project Team of development decision criteria, and of indications for which Licensed Products are developed; (iv) review and approve activities related to manufacturing and the identification of manufacturer(s); (v) review and approve annual marketing and sales budgets for the Licensed Product based on the Commercialization Plan, and Phase IV clinical support (including scope and strategic direction); (vi) serve as the first forum for attempted settlement of disputes or disagreements that are unresolved by the Joint Project Team, unless otherwise indicated in this Agreement; 10 12 (vii) perform such other functions as appropriate to further the purposes of this Agreement as determined by the Parties; and (viii) coordinate and approve global development strategy and global development budgets with the Global Development Committee, as described in Section 3.4 below. (c) JOINT STEERING COMMITTEE CO-CHAIRPERSONS; PROCEDURES. One Co-Chairperson of the JSC shall be designated annually by each Party. The two Co-Chairpersons shall send notices and agendas for all regular JSC meetings to all JSC members. The location of regularly scheduled JSC meetings shall alternate between the offices of the Parties, unless otherwise agreed. Meetings may be held telephonically. The Party hosting any JSC meeting shall appoint one person (who need not be a member of the JSC) to attend the meeting and record the minutes of the meeting in writing. Such minutes shall be circulated to the Parties promptly following the meeting for review, comment and distribution. Any modifications to the Development Budget/Plan (including the work, budget and timeline therefor) approved at a JSC meeting shall be considered approved and shall constitute an amendment to Exhibit C upon JSC ratification of the meeting minutes related thereto. (d) DISPUTE RESOLUTION. Issues that come before the JSC that require action, approval or resolution and for which the JSC is unable to reach agreement shall be resolved by the Parties under the terms of Article 16 below. For issues regarding study implementation coming before the JSC for which the Parties' JSC members have disagreement, ultimate decision making authority will rest with the Party primarily responsible for conducting the activities at issue, provided, however, for issues that materially change the scope of a study, the deciding Party shall give prompt notice of such issue to the other Party and shall give due consideration to the input of the other Party on such issue. 3.2 JOINT PROJECT TEAM. (a) ESTABLISHMENT OF JOINT PROJECT TEAM. The Parties shall establish a Joint Project Team no later than thirty (30) days after the Effective Date to coordinate all activities for the development and commercialization of Licensed Products in the Field in the Territory, within the budget approved by the JSC, including pre-clinical research, clinical research, manufacturing, regulatory filings, and post-approval development studies. The Joint Project Team shall consist of such number of representatives of each Party as are reasonably necessary to accomplish the goals of the Team hereunder. Such representatives will include individuals with expertise and responsibilities in the areas of preclinical development, clinical development, process sciences, manufacturing, regulatory affairs or product development and marketing, as applicable to the stage of development or commercialization of the Licensed Product. One such representative from each Party shall be designated as that Party's "Project Team Leader" to act as the primary Joint Project Team contact for that Party. Either Party may replace any or all of its representatives at any time upon written notice to the other Party. Any member of the Joint Project Team may designate a substitute to attend and perform the functions of that member at 11 13 any meeting of the Joint Project Team. The Joint Project Team will meet once each calendar quarter or as agreed by the Joint Project Team. (b) JOINT PROJECT TEAM RESPONSIBILITIES. The Joint Project Team shall be responsible for formulating overall development plans and an annual budget, for making overall decisions regarding the priority and design of all clinical trials for new indications, for determining which Party will be responsible for implementing clinical studies for each indication, for developing a publication strategy and a calendar of key scientific and clinical meetings and other events for Licensed Products, for exchanging information and facilitating cooperation and coordination between the Parties as they exercise their respective rights and meet their respective obligations under this Agreement, for determining the priority with respect to seeking Regulatory Approval of Licensed Products, for approving third party manufacturing and supply agreements, and for implementing all activities approved by the JSC. In addition, the Joint Project Team may designate subteams as appropriate to facilitate coordination and cooperation in key areas. Specifically, the Joint Project Team will designate a Joint Regulatory Subteam to coordinate efforts as may be necessary for NDA filing and other regulatory activities. The Joint Project Team will prepare a draft Development Budget/Plan, and draft annual development and joint marketing and sales budgets, as applicable, by August 15 of the then-current calendar year, and a final Development Budget/Plan, for JSC approval, by September 15 of the then-current calendar year. In addition, the Joint Project Team Leaders will participate in the OSI-774 Liaison Team, described in Section 3.4 below, to exchange information, and facilitate cooperation and coordination, between the Parties and Roche, pursuant to the Tripartite Agreement. (c) JOINT PROJECT TEAM DECISION-MAKING. As a general principle, the Joint Project Team will operate by consensus. In the event that the Joint Project Team members do not reach consensus with respect to a matter that is within the purview of the Joint Project Team herein, including, without limitation, with respect to the development of a Licensed Product and of the capabilities and facilities for its manufacturing, supply and testing during the Term of this Agreement, the Joint Project Team representatives of each Party shall collectively have one vote for purposes of decision-making hereunder with respect to such matters, with decisions made by unanimous vote. For issues regarding study implementation for which the Parties' Joint Project Team members cannot agree, ultimate decision-making authority shall rest with the Party responsible for implementing the activities at issue, provided, however, for such issues that materially change the scope of a study, the deciding Party shall give prompt notice of such issue to the other Party and shall give due consideration to the input of the other Party on such issue. If the Joint Project Team is unable to resolve a dispute regarding overall strategy and project development issues, however, such dispute shall be resolved in accordance with Article 16 below. (d) CEASING OF JOINT PROJECT TEAM OPERATIONS. The Joint Project Team will cease operations and have no further function hereunder on the later of (i) the date on which the Parties are no longer developing or commercializing any Licensed Product in the Territory, or (ii) the date on which the Parties are no longer sharing Operating Profits or Losses with respect to any Licensed Product in the Territory. 12 14 (e) ANNUAL PRODUCTION REQUIREMENTS. The Joint Project Team shall be responsible for submitting annual Licensed Product production requirement reports to the JSC for approval. Such report shall include the forecasted requirements for Clinical Supplies, Licensed Product placebo and Commercial Supplies, pursuant to a Manufacturing and Supply Agreement to be entered into by the Parties in accordance with Section 7.1 hereof, for the Territory for the subsequent five (5) years, and any other related information mutually agreed upon. Each such report shall be submitted to the JSC with the annual Development Budget/Plan for the subsequent calendar year. 3.3 ACCOUNTING AND FINANCIAL REPORTING; JOINT FINANCE SUB-COMMITTEE. Each Party will appoint two representatives with expertise in the areas of accounting, cost allocation, budgeting and financial reporting. Such representatives shall comprise the Joint Finance Sub-Committee and work under the direction of the JSC to provide services to and consult with the Joint Project Team in order to address the financial, budgetary and accounting issues which arise in connection with the Development Budget/Plan and the Financial Planning, Accounting and Reporting Procedures attached hereto as Exhibit B, and updates thereto. Each representative may designate a substitute to perform such functions, or may be replaced at any time by the represented Party by providing notice thereof to the other Party. 3.4 GLOBAL DEVELOPMENT COMMITTEE. Pursuant to the terms of the Tripartite Agreement, the Parties have established with Roche a Global Development Committee ("GDC") to, among other things, direct development of OSI-774. In addition, the Parties and Roche have established a OSI-774 Liaison Team to coordinate the development activities of the Joint Project Team and the Roche Project Team as more fully described in the Tripartite Agreement. Members of the JSC hereunder will serve as the OSI and Genentech members of the GDC. The GDC will meet, review and approve a Global Development Plan, pursuant to the terms of the Tripartite Agreement. ARTICLE 4 DEVELOPMENT 4.1 DEVELOPMENT EFFORTS. OSI and Genentech each agree to collaborate diligently in the development of Licensed Products for use in the Field and to use Commercially Reasonable and Diligent Efforts to develop and bring Licensed Products to market in the Field as soon as practicable. Each Party further agrees to execute and substantially perform its respective activities under the Development Budget/Plan and to cooperate with each other in carrying out the Development Budget/Plan. 4.2 DEVELOPMENT RESPONSIBILITIES. Consistent with its responsibilities under this Agreement and the Development Budget/Plan, each Party agrees to: (a) share with and provide copies, at its own cost, to the other Party all preclinical data, assays and associated materials, protocols, procedures and any other information 13 15 and Know-how in such Party's possession that the Joint Project Team deems reasonably necessary to initiate clinical development of Licensed Products; and (b) use Commercially Reasonable and Diligent Efforts to conduct all IND-enabling studies and human clinical studies for Licensed Products for which it is responsible under the Development Budget/Plan, and to make all filings with and supporting all communications with the relevant regulatory agencies or other governmental entities necessary to conduct such studies. 4.3 CLINICAL TRIALS. The Parties will each conduct clinical trials for indications for Licensed Products in accordance with, and as assigned in, the Development Budget/Plan. All clinical data and reports related to clinical trials for Licensed Products shall be jointly owned by the Parties, and each Party shall have full use, for any purpose, of all such data and reports related to clinical trials for Licensed Products. All data, database information and safety reports from such clinical trials for Licensed Products shall be centralized and held at a contract research organization ("CRO") mutually agreed upon by the Parties, or held as otherwise agreed upon by the Parties. All such clinical trial data and information and final reports shall be accessible to the Parties, and to Roche pursuant to the Tripartite Agreement. If a Party itself conducts a clinical trial hereunder, it shall transfer all of the clean, final data for such trial to the CRO no later than six (6) months after the date that the last trial data has been collected under the trial protocol for the last clinical trial subject. 4.4 INDS AND DRUG APPROVAL APPLICATIONS. (a) Consistent with the Development Budget/Plan, for each indication for Licensed Products in the Territory, the Joint Project Team, as approved by the JSC, will determine which Party will own and be responsible for filing the IND and Drug Approval Application and seeking Regulatory Approvals for such indication. Notwithstanding anything to the contrary in the prior sentence, with respect to indications for Licensed Products in the Territory, (i) OSI shall own and be responsible for filing the first NDA for Licensed Product containing OSI-774, (ii) OSI, at its sole option, shall own and be responsible for filing the first supplemental NDA for Licensed Product containing OSI-774, and (iii) the JSC shall determine which Party shall own and be responsible for filing thereafter any subsequent supplemental NDA's or new NDA's for all Licensed Products. Prior to submitting any IND or Drug Approval Application, the Parties, through the Joint Project Team, shall consult with the other Party regarding the scope and general content of such IND or Drug Approval Application. Each Party shall have the right to review and comment on all INDs and Drug Approval Applications in accordance with specific timelines or other arrangements agreed upon by the Joint Project Team, and such comments will be given all due consideration by the other Party. Regulatory documents for each filing shall be centralized and held at the offices of the Party primarily responsible for such filing. (b) Neither Party shall transfer title or otherwise attempt in any manner to dispose of any such INDs or Drug Approval Applications for Licensed Products in the Territory, or otherwise impair the other Party's rights in such INDs or Drug Approval Applications, 14 16 without the prior written consent of such other Party, except that Genentech will have the right to require OSI to permit Genentech's sublicensee to reference or cross-reference any such INDs or Drug Approval Applications held by OSI, provided, however, that any such sublicense shall not impair OSI's rights in such INDs or Drug Approval Applications as set forth in this Agreement. (c) If a Party is primarily responsible for any regulatory filing, such Party shall provide the other Party with a copy of any documents or reports filed with the FDA or any other regulatory authority under this Agreement, including any INDs or Drug Approval Applications. Each Party shall have the right to cross reference, in any regulatory document, the INDs, NDAs, and any other Drug Approval Applications of the other Party for the purpose of conducting clinical trials and seeking Regulatory Approvals under this Agreement. 4.5 REGULATORY MEETINGS AND COMMUNICATIONS. Consistent with the Development Budget/Plan, for each indication for Licensed Products in the Territory the Party primarily responsible for conducting the clinical studies for such indication shall be primarily responsible for conducting meetings and discussions, and routine telephone communications, with the FDA related to clinical studies for such indication for Licensed Product. The Parties will coordinate their efforts through the Joint Regulatory Subteam. Both Parties will participate in all substantive discussions and meetings with regulatory authorities which relate to such indication, including, but not limited to, with respect to any Drug Approval Applications. The Party not primarily responsible for conducting a study will send only a reasonable number of representatives to any such discussion and meeting. The Parties shall cooperate in good faith with respect to the conduct of any inspections by any regulatory authority of a Party's site and facilities related to Licensed Products, and each Party shall at a minimum be given the opportunity to attend the summary, or wrap up, meeting related to Licensed Products with such regulatory authority at the conclusion of such site inspection. Each Party shall consider the attendance of the other Party at any such regulatory inspections, but shall not be obligated to accept the other Party's attendance at such inspections if such attendance would result in the disclosure to the other Party of confidential information or trade secrets unrelated to the Licensed Products. To the extent either Party receives written or material oral communication from the FDA or any other regulatory authority relating to Licensed Products, the Party receiving such communication shall notify the other Party and provide a copy of any written communication as soon as reasonably practicable. 4.6 DEVELOPMENT COSTS FOR OSI AND GENENTECH. ** 4.7 DEVELOPMENT COST SHARING FOR GLOBAL DEVELOPMENT. Development costs for activities agreed upon by the Parties and Roche and conducted in certain countries under the Tripartite Agreement shall be shared equally by each of Genentech, OSI and Roche (i.e. Genentech, OSI and Roche each shall pay one third of such costs) pursuant to the terms of the Tripartite Agreement. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 15 17 4.8 TRANSFER OF MATERIALS. During the collaboration hereunder, each Party may transfer certain of its proprietary materials to the other Party. Each Party agrees that it will use such materials of the other Party only for the purposes of the collaboration hereunder, and will not transfer such materials to any Third Party without the prior written consent of the other Party hereunder. Except as expressly provided in this Agreement, the transfer of any such proprietary materials by one Party to another shall not be deemed to be a grant of any rights in the proprietary material. All right, title and interest in and to all such proprietary materials (and any patent rights relating thereto) shall remain in the Party transferring such materials. Proprietary materials made or assembled by a Party during and in furtherance of the collaboration hereunder, and which are directly related to Licensed Product, shall be considered jointly-owned proprietary material. Each Party shall have the right to use such jointly-owned proprietary materials solely for the purposes of the collaboration hereunder or for internal research purposes and shall not transfer, license or sublicense any such proprietary materials to any Third Party without the prior written consent of the other Party. 4.9 THIRD PARTY ACADEMIC RESEARCHERS/INSTITUTIONS. (a) Each Party acknowledges that, as of the Effective Date, the other Party may have certain existing material transfer agreements and collaboration agreements for research of OSI-774 or Improvements in the Field with academic investigators or governmental research institutions ("Third Party Research Agreements"). Each Party acknowledges that the other Party is required to fulfill its respective obligations under such Third Party Research Agreements. Such obligations may include providing investigators with research quantities of OSI-774. Each Party agrees that, to the extent contemplated by the applicable Third Party Research Agreement, the other Party may continue its existing obligations under such Third Party Research Agreements for the current term of such Agreements. Subject to the obligations set forth in Section 13.1 below and the Third Party Research Agreements, and with the consent of the appropriate Third Party, if required and obtainable, each Party agrees to promptly provide the other Party with all data, reports and information related to the Field that such Party receives under such Third Party Research Agreements. After the Effective Date, the Parties shall agree upon and coordinate subsequent Third Party material transfer and collaboration agreements relating to OSI-774 and Improvements with academic or governmental research institutions, and amendments or extensions of the Third Party Research Agreements, through the Joint Project Team, in a manner to conserve the available quantities of the Parties' research materials and to avoid compromise of the Parties' abilities to fulfill their obligations under the Development Budget/Plan. Any such Third Party agreements shall be substantially in a form of a "Material Transfer Agreement" or "Collaboration Agreement" to be agreed upon by the Parties. (b) In the event that any Third Party Research Agreement, or Material Transfer Agreement or Collaboration Agreement entered into after the Effective Date among the Parties and an academic or governmental Third Party, results in an invention or know-how made, jointly or solely, by a Third Party that relates to Licensed Products, the Parties shall determine whether a license (exclusive or non-exclusive) can and should be obtained under the rights of such Third Party to such invention or know-how. If the Parties determine that such license can 16 18 and should be obtained, then the Parties will enter into a license agreement to jointly license such rights. Any royalties payable to such Third Party due to license terms provided in a Third Party Research Agreement entered into prior to the Effective Date shall be chargeable to the collaboration, in accordance with Exhibit B, up to ** of net sales by the Parties of Licensed Products. Any milestone payments, and any royalties greater than ** of net sales of Licensed Products, payable to such Third Party under such license terms shall be borne solely by the Party which originally entered into such Third Party Research Agreement prior to the Effective Date, unless otherwise agreed by the Parties. Milestone payments and royalties payable to a Third Party, due to a license granted pursuant to a Material Transfer Agreement or Collaboration Agreement entered into by the Parties and a Third Party academic or governmental institution after the Effective Date, shall be chargeable in full to the collaboration as in accordance with Exhibit B. 4.10 RESEARCH COLLABORATION. The Parties currently intend to discuss a collaboration with respect to joint research efforts in cancer therapeutics. Such research collaboration if agreed to, will be governed by a written amendment hereto or a separate research collaboration and shall be subject to any agreement OSI or Genentech each has previously entered into with Third Parties. 4.11 CONTRACTS WITH THIRD PARTIES. In addition to agreements made with academic researchers and governmental research institutions as provided in Section 4.9 above, during the Term the Parties may jointly or individually enter into written contracts with other Third Parties for activities to be performed in furtherance of the activities of the Parties hereunder, including, without limitation, Third Party consultants and clinical investigators. In addition to the confidentiality obligations required under Section 10.2 below, OSI and Genentech each shall use commercially reasonable efforts to require, as an obligation under such contracts, that: (a) such Third Party consultants assign to OSI and Genentech as joint owners all inventions made by such consultants during the course of their consulting services, and (b) such Third Party clinical investigators assign to OSI and Genentech as joint owners, or grant an option to OSI and Genentech to co-exclusively license, all inventions made by such clinical investigators during the course of conducting clinical trials hereunder. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 17 19 ARTICLE 5 COMMERCIALIZATION IN THE TERRITORY 5.1 COMMERCIALIZATION. The Parties acknowledge that Genentech is the Party that has established the infrastructure and expertise for the marketing and sales of therapeutic drugs, and that except as set forth hereinbelow, in order to maximize Operating Profits Genentech shall have the responsibility for the design and implementation of all product launch activities and the promotion, marketing and sales of Licensed Product in the Territory. OSI shall be kept apprised of the commercialization activity by and through the Joint Project Team and OSI shall be permitted to have observer status of the commercialization activities of the meetings at which it is intended that decisions will be made to effect overall strategy. Within thirty (30) days after NDA submission, Genentech shall submit to the Joint Project Team a detailed annual plan and budget (the "Commercialization Plan") for the commercialization of the Licensed Product in the Territory, for JSC approval of the budget. Thereafter, Genentech shall update the Commercialization Plan on a yearly basis on or before such anniversary date of the NDA submission and present the budget for such updated Commercialization Plan to the JSC for approval. 5.2 MARKETING AND SALES BY OSI. OSI shall have the right to co-promote a Licensed Product in the Territory provided that: ** 5.3 COMMERCIALIZATION EFFORTS. Each Party, to the extent that such Party is participating in the marketing of Licensed Products, shall use Commercially Reasonable and Diligent Efforts in marketing Licensed Product in the Territory in accordance with the Commercialization Plan developed by Genentech. Genentech shall have the responsibility for design of Licensed Product promotional materials, and shall file such promotional materials with the FDA as required under applicable law. Genentech will be designated by OSI as the Party responsible for filing such materials to OSI's NDA. Genentech shall have the final decision making authority with respect to commercialization matters. Genentech will also be solely responsible for the following with respect to Licensed Product: booking sales, handling all returns, handling all aspects of order processing, invoicing and collection, receivables, providing customer medical information, collection of data of sales to hospitals and other end users, distribution, inventory, and warehousing. Notwithstanding the foregoing, OSI shall have the right to co-promote Licensed Products to the extent provided in Section 5.2 of this Agreement. 5.4 COMMERCIALIZATION COSTS. Except as otherwise provided herein, all costs related to the commercialization of Licensed Product in the Territory shall be shared by the Parties as provided in Exhibit B. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 18 20 5.5 TRADEMARKS. It is the intent of the Parties that a single product trademark shall be developed for use on and in connection with Licensed Products both in the Territory and worldwide ("Product Trademark"). The Parties have agreed to use the trademark ** as such Product Trademark for Licensed Product containing OSI-774. Any final decision or change regarding the choice of Product Trademark will be made by the JSC. If the JSC determines that it is not possible to register or otherwise use the Product Trademark in the Territory, then the Parties shall agree on an appropriate Product Trademark for use in the Territory. In addition, registration use problems with respect to the Product Trademark in the Global Development Countries (as defined in the Tripartite Agreement) will be discussed by the Joint Project Team and the Roche project team. Any decisions or disagreements concerning the desire for a global trademark will be approved or resolved by the Parties and Roche. Subject to Section 9.3 below, the Joint Project Team will determine the use of the Product Trademark for a Licensed Product before Regulatory Approval of such Licensed Product in the Territory. OSI shall own the Product Trademark for Licensed Products containing OSI-774, and shall be responsible for procurement and maintenance of a trademark registration for such Product Trademark in connection with Licensed Products in the Territory. The costs for such procurement and maintenance of trademark registration in the Territory shall be shared by the Parties as provided in Exhibit B. ARTICLE 6 CLOSING, GENENTECH PAYMENTS AND PROFIT SHARING 6.1 COVENANTS PENDING CLOSING. (a) REASONABLE EFFORTS. Subject to the terms and conditions of this Agreement, each of the Parties agrees to use all reasonable efforts to take, or cause to be taken, all reasonable actions and to do, or cause to be done, all things necessary and appropriate to satisfy all conditions of and to consummate the transactions contemplated by this Agreement. (b) FILINGS. The Parties shall cooperate with one another in the preparation, execution and filing of all documents that are required or permitted to be filed on or before the Closing, including, without limitation, filings pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"). - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 19 21 6.2 CONDITIONS TO CLOSING. (a) The obligation of OSI to close shall be subject to the satisfaction on or before the Closing of the following conditions, any or all of which may be waived in whole or in part by OSI: (i) the approval of the transaction by the FTC under the HSR Act or the expiration or termination of all applicable waiting periods, requests for information (and any extensions thereof) under the HSR Act, unless a joint determination is made by OSI and Roche (by certification from OSI and Roche to each other and to Genentech) that such approval is not required; (ii) the representations and warranties made by Genentech in Article 12 shall be true and correct in all material respects as of the Closing Date with the same force and effect as if they had been made as of the Closing Date, and Genentech shall have performed all obligations and conditions herein required to be performed or observed by it on or prior to Closing; (iii) payments of $25 million, in the aggregate, to OSI under this Agreement and the OSI-Roche Agreement by Genentech and Roche, respectively; (iv) payments of $70 million, in the aggregate, to OSI under the Stock Purchase Agreement and the Stock Purchase Agreement between OSI and Roche by Genentech and Roche, respectively; (v) the execution and delivery of the Tripartite Agreement and the OSI-Roche Agreement; and (vi) closing shall have occurred (or shall occur simultaneously with the Closing hereunder) under the OSI-Roche Agreement. (b) The obligation of Genentech to close shall be subject to the satisfaction on or before the Closing of the following conditions any or all of which may be waived in whole or in part by Genentech: (i) the approval of the transaction by the FTC under the HSR Act or the expiration or termination of all applicable waiting periods, requests for information (and any extensions thereof) under the HSR Act, unless a joint determination is made by OSI and Roche (by certification from OSI and Roche to each other and to Genentech) that such approval is not required; 20 22 (ii) the representations and warranties made by OSI in Article 12 shall be true and correct in all material respects as of the Closing Date with the same force and effect as if they had been made as of the Closing Date, and OSI shall have performed all obligations and conditions herein required to be performed or observed by them on or prior to Closing; (iii) delivery to Genentech by OSI of the OSI common stock under the Stock Purchase Agreement; and (iv) the execution and delivery of the Tripartite Agreement. 6.3 GENENTECH PAYMENTS. Simultaneous with the Closing, and in satisfaction of its portion of the Closing Conditions under Sections 6.2(a)(iii) and (iv), Genentech shall make the following non-refundable (except as otherwise set forth in this Agreement) and non-creditable payments to OSI: (a) ** and (b) Thirty-five million dollars ($35,000,000) to purchase shares of OSI common stock as set forth in the Stock Purchase Agreement. 6.4 SHARE OF OPERATING PROFITS OR LOSSES OSI and Genentech shall share in Operating Profits or Losses from sales of Licensed Products in the Territory as provided in Exhibit B. The Parties shall share Operating Profits or Losses hereunder until the date the Parties mutually agree to terminate this collaboration, or the Agreement expires or is otherwise terminated as provided in Article 14 below. 6.5 GENENTECH MILESTONE PAYMENTS. Subject to the other terms and conditions of this Agreement, and as consideration for the license rights granted to Genentech by OSI under this Agreement, Genentech shall pay to OSI the following non-refundable and non-creditable amounts only once, upon the first occurrence of such event with respect to the first Licensed Product covered by an OSI Patent to reach such event:
EVENT PAYMENT - ----- ------- ** **
- ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 21 23 ARTICLE 7 MANUFACTURE AND SUPPLY 7.1 MANUFACTURE OF LICENSED PRODUCTS (a) CLINICAL SUPPLIES. OSI shall provide or cause to be provided all pre-clinical and Clinical Supplies of Licensed Product for the completion of pre-clinical work and human clinical trials for the indications for Licensed Products in the Territory. OSI will enter into one or more manufacturing and supply agreement(s) with a Third Party contract manufacturer(s) (one of which may be Roche) covering manufacture, supply and quality control of pre-clinical and Clinical Supplies as soon as practicable after execution of this Agreement by the Parties. Such Third Party contract manufacturer(s), and the manufacturing and supply agreement, shall be approved by the Joint Project Team prior to execution of such agreement. If the members of the Joint Project Team have a disagreement regarding the Third Party contract manufacturer(s) or the manufacturing and supply agreement, such dispute shall be referred to the JSC for resolution with ultimate decision making authority resting with OSI. The cost of such manufacture of Clinical Supplies will be shared by the Parties as provided in Exhibit B. The detailed terms of the supply of pre-clinical and Clinical Supplies by OSI will be governed by a manufacturing and supply agreement negotiated in good faith and entered into between the Parties (the "Manufacturing and Supply Agreement") as soon as practicable after the execution of this Agreement. In the event OSI is unable to supply adequate materials for Clinical Supplies, Genentech shall have the right, subject and pursuant to the Manufacturing and Supply Agreement, to supply or cause to be supplied such materials as more fully detailed in such Manufacturing and Supply Agreement. (b) COMMERCIAL SUPPLIES. OSI shall be responsible for establishing a commercial manufacturing process and for supplying or causing to be supplied Commercial Supplies of Licensed Product, at the scale and in the amounts required to meet demand for Licensed Product in the Territory. OSI will enter into a supply agreement with a Third Party contract manufacturer(s) covering the manufacture, supply and quality control of Commercial Supplies as soon as practicable after the completion of the first Phase III Enabling Clinical Trial. Such agreement shall be approved by Genentech prior to execution which approval shall not be unreasonably withheld. If the members of the Joint Project Team have a disagreement regarding choice of the Third Party contract manufacturer(s), such dispute shall be referred to the JSC for resolution. In the event OSI is unable to supply adequate materials for Commercial Supplies, Genentech shall have the right, subject and pursuant to the Manufacturing and Supply Agreement, to supply or cause to be supplied Commercial Supplies as more fully detailed in such Manufacturing and Supply Agreement. The cost of such manufacture of Commercial Supplies will be shared by the Parties as provided in Exhibit B. 22 24 ARTICLE 8 LICENSES 8.1 LICENSE TO GENENTECH. Subject to the other terms of this Agreement and upon the Closing Date, OSI hereby grants to Genentech a ** nontransferable (except pursuant to Section 17.1), non-sublicensable (except pursuant to Section 8.4), co-exclusive license under the OSI Patents and OSI Know-how to use, sell, offer for sale and import Licensed Products in the Field in the Territory. Such license shall be co-exclusive with OSI in the Territory. 8.2 LICENSE TO OSI. Subject to the other terms of this Agreement and upon the Closing Date, Genentech hereby grants to OSI a ** nontransferable (except pursuant to Section 17.1), non-sublicensable (except pursuant to Section 8.4), co-exclusive license under the Genentech Know-how and Genentech Patents to use, make, have made, sell, offer for sale and import Licensed Products in the Field in the Territory. Such license shall be co-exclusive with Genentech in the Territory. 8.3 LICENSE TO OSI AND ROCHE. Subject to the terms of this Agreement and upon the Closing Date, Genentech hereby grants to OSI and Roche a ** non-transferable (except pursuant to Section 17.1), non-sublicensable (except pursuant to Section 8.4), co-exclusive license (co-exclusive between OSI and Roche) outside the Territory under the Genentech Patents and Genentech Know-how to make, have made, use, sell, offer for sale and import Licensed Products (in the case of Roche, sole and exclusive for Licensed Product as that term is defined in the OSI-Roche Agreement, and in the case of OSI, sole and exclusive for Licensed Product as that term is defined in this Agreement, but excluding Licensed Product as that term is defined in the OSI-Roche Agreement) in accordance with the OSI-Roche Agreement and this Agreement. Roche shall be a third party beneficiary with respect to the rights granted to it in the previous sentence. 8.4 SUBLICENSES. Except as expressly provided in Section 17.1, for ** after the Closing Date, neither Party may sublicense any of its rights hereunder to any Third Party without the prior written consent of the other Party which shall be at the other Party's sole discretion. Beginning ** after the Closing Date, such prior written consent of the other Party shall not be unreasonably withheld. If any Party grants a sublicense permitted by this Agreement, all of the terms and conditions of this Agreement shall apply to the sublicensee to the same extent as they apply to such Party for all purposes. The sublicensing Party assumes full responsibility for the performance of all obligations so imposed on such sublicensee, including, without limitation, all payments due under this Agreement by reason of the operation of any such sublicense. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 23 25 ARTICLE 9 TRADEMARKS 9.1 PRODUCT TRADEMARKS. All Licensed Products shall be sold in the Territory under Product Trademarks, as described in Section 5.5 above. 9.2 GRANT OF LICENSE. OSI hereby grants to Genentech, subject to compliance with the other terms and conditions of this Agreement, a co-exclusive, non-transferable (except pursuant to Section 17.1) non-sublicensable (except pursuant to Section 8.4) license and right to use the Product Trademarks solely within the Territory and solely in connection with Licensed Product containing OSI-774. Such license shall be co-exclusive with OSI in the Territory. 9.3 QUALITY CONTROL. Genentech shall comply with all requirements that the Licensed Products conform with the appropriate standards of quality as required under this Agreement. From time to time, and upon reasonable request, with prior written notice, of OSI, Genentech shall provide to OSI copies of its marketing materials related to Licensed Products containing OSI-774 for quality review by OSI. If at any time, such Licensed Products shall, in the reasonable opinion of OSI, fail to conform with the appropriate standards of quality as required under this Agreement from the time at which Genentech takes possession of the Licensed Product, OSI or its authorized representatives shall notify Genentech. Upon such notification, Genentech shall promptly cease to use the Product Trademark until the standards of quality have been met to the reasonable satisfaction of OSI. 9.4 ACKNOWLEDGMENT OF OWNERSHIP RIGHTS. Genentech acknowledges and agrees that OSI is the exclusive owner of all right, title, and interest in and to the Product Trademarks and that all use of the Product Trademarks by Genentech will inure to the exclusive benefit of OSI. Genentech undertakes to make use of the Product Trademarks and in such a way that the rights of OSI in said marks will not be jeopardized or compromised in any way. Genentech shall not use the Product Trademarks as all or part of any corporate name, trade name, trademark, service mark, certification mark, collective membership mark, domain name, or any other designation confusingly similar to the Product Trademarks in any way that damages the Product Trademarks. If any application for registration is or has been filed on the behalf of Genentech in any country and relates to any mark which, in the reasonable opinion of OSI, is confusingly similar, deceptive, or misleading with respect to, or dilutes or in any other way damages the Product Trademarks, Genentech shall, at OSI's request, abandon all use of such mark and any registration or application for registration and shall reimburse OSI for all costs and expenses, including attorneys' fees, associated with any successful opposition or related proceeding instigated by OSI or its authorized representative in response to such filings. 9.5 USE OF TRADEMARK DESIGNATIONS. Genentech agrees to use its reasonable best efforts to use the (TM) designation in conjunction with Genentech's use of the Product Trademarks within the Territory until such time as U.S. registrations issue. Once the U.S. registrations issue, Genentech may use the (R) designation with Genentech's uses of the Product Trademarks. 24 26 9.6 INFRINGEMENT OF PRODUCT TRADEMARKS. Each Party shall notify the Joint Project Team promptly upon learning of any actual, alleged or threatened infringement of a Product Trademark applicable to a Licensed Product in the Territory, or of any unfair trade practices, trade dress imitation, passing off of counterfeit goods, or like offenses in the Territory. Upon learning of such offenses from a Party regarding a Product Trademark, the Joint Project Team shall confer with the Parties regarding the defense of the Product Trademark. The ultimate decision whether and how to defend such Product Trademark will rest with OSI, and OSI shall have the first right to respond to and defend any such infringement or offense. In the event that OSI elects, within ninety (90) days, not to respond to or defend any such infringement or offense or abandons such defense, then, in such event, Genentech shall have the option to respond to and to defend against such infringement or offense. The Party defending the Product Trademark shall take all reasonable and appropriate steps to protect, defend and maintain the Product Trademark for use by the Parties in the Territory in connection with the Licensed Product. The Parties shall cooperate in good faith with respect to all Product Trademark enforcement actions hereunder, and each Party shall notify the other Party promptly of all substantive developments with respect to such Product Trademark enforcement actions, including, but not limited to, all material filings, court papers and other related documents. Each Party shall consider the timely given, reasonable comments and advice of the other Party with respect to the strategy employed and submissions made relative to any Product Trademark enforcement actions. In addition, the Party bringing suit to enforce any trademark shall also have the right to control settlement of such claim; provided, however, that no settlement shall be entered into without the written consent of the other Party if such settlement would materially and adversely affect the interests of such other Party. If there is no agreement between the Parties regarding such settlement, then the dispute will be resolved pursuant to Article 16 below. 9.7 COSTS OF DEFENSE OF TRADEMARKS. All of the costs, expenses and legal fees in bringing, maintaining and prosecuting any action to maintain, protect or defend a Product Trademark in the Territory, and any recovery, shall be included in collaboration expenses in accordance with Exhibit B. ARTICLE 10 CONFIDENTIALITY 10.1 CONFIDENTIALITY. Except to the extent expressly authorized by this Agreement, or otherwise agreed in writing, the Parties agree that, for the Term of this Agreement and for five (5) years thereafter, the receiving Party shall keep confidential and shall not publish or otherwise disclose or use for any purpose other than as permitted under this Agreement any Know-how and other proprietary information and materials furnished to it by the other Party pursuant to this Agreement (collectively, "Confidential Information"), except to the extent that it can be established by the receiving Party that such Confidential Information: (a) was already known to the receiving Party, other than under an obligation of confidentiality, at the time of disclosure by the other Party as demonstrated by competent written records; 25 27 (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; (d) was disclosed to the receiving Party, other than under an obligation of confidentiality, by a Third Party who had no obligation to the disclosing Party not to disclose such information to others; or (e) was subsequently developed by the receiving Party without use of the Confidential Information as demonstrated by competent written records. The Parties may disclose Confidential Information to Roche in furtherance of and under confidentiality provisions of the Tripartite Agreement. 10.2 AUTHORIZED DISCLOSURE. Each Party may disclose Confidential Information hereunder to the extent such disclosure is required to comply with applicable governmental regulations or conduct pre-clinical or clinical trials or to the extent ordered by a court of competent jurisdiction (subject to entry of an appropriate protective order), provided that if a Party is required by law or regulation to make any such disclosure of the other Party's Confidential Information it will give reasonable advance notice to the other Party of such disclosure requirement and will use its reasonable best efforts to secure confidential treatment of such Confidential Information required to be disclosed. In addition, each Party shall be entitled to disclose, under a binder of confidentiality containing provisions substantially as protective as those of this Article 10, Confidential Information to its consultants, clinical investigators, and contract manufacturer, but only for any purposes provided for in this Agreement. 10.3 SURVIVAL. This Article 10 shall survive the termination or expiration of this Agreement for a period of ** . 10.4 TERMINATION OF PRIOR AGREEMENT. As of the Effective Date, this Agreement supersedes the Confidentiality Agreement between the Parties dated August 4, 2000 but only insofar as such Confidentiality Agreement relates to the subject matter of this Agreement. All Confidential Information (as defined in such Confidentiality Agreement) exchanged between the Parties under such Confidentiality Agreement relating to the subject matter of this Agreement shall be deemed Confidential Information hereunder and shall be subject to the terms of this Article 10. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 26 28 10.5 PUBLICATIONS. Prior to the launch of any Licensed Product in the Territory, the Joint Project Team will determine the overall strategy for publication in support of such Licensed Products in the Territory. All proposed publications and presentations shall be in accordance with such strategy. Except as required by law, and except as set forth in the Tripartite Agreement, each Party agrees that it shall not publish or present the results of studies or clinical trials carried out by such Party as part of the collaboration without the opportunity for prior review by the other Party. Each Party shall provide to the other Party the opportunity to review any of the submitting Party's proposed abstracts, manuscripts or presentations (including information to be presented verbally), or those submitted by a Third Party under a Third Party Research Agreement, Material Transfer Agreement or Collaboration Agreement, which relate to the Field at least thirty (30) days prior to their intended submission for publication, and such submitting Party agrees, upon written request from the other Party, not to submit such abstract or manuscript for publication or to make such presentation until the other Party is given up to forty-five (45) days from the date of such written request to seek appropriate patent protection for any material in such publication or presentation which it reasonably believes is patentable. Once such abstracts, manuscripts or presentations have been reviewed by each Party and have been approved for publication, the same abstracts, manuscripts or presentations do not have to be provided again to the other Party for review for a later submission for publication. Expedited reviews for abstract and poster presentations within ten (10) days of receipt by the other Party may be arranged by sending a prior written notice to such other Party, requesting such expedited review, unless another arrangement is mutually agreed upon by the Parties. Each Party also shall have the right to require that its Confidential Information that may be disclosed in any such proposed publication be deleted prior to such publication. In the event that either Party submits any manuscript or other publication relating to any Licensed Product, it will consider and acknowledge the contributions of the other Party, including, as appropriate, co-authorship. ARTICLE 11 OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT RIGHTS 11.1 OWNERSHIP OF INTELLECTUAL PROPERTY. (a) COLLABORATION INVENTIONS. Each Party will promptly disclose to the other all Collaboration Inventions made by it during the Term of this Agreement. Subject to Section 11.1(b), as between the Parties, OSI shall own all OSI Collaboration Inventions and Genentech shall own all Genentech Collaboration Inventions. As between the Parties, all Joint Collaboration Inventions shall be owned jointly by OSI and Genentech. OSI and Genentech each shall require all of its employees to assign all Collaboration Inventions made by them during the Term of this Agreement to OSI or Genentech, respectively, as the case may be. (b) PATENTED COLLABORATION INVENTIONS. Notwithstanding the foregoing, and subject to the provisions of Section 14.8, any Collaboration Invention that is the subject of a patent application or patent and that is made solely by employee(s) of OSI or solely by employee(s) of Genentech, shall be jointly owned by OSI and Genentech during the Term of this Agreement; provided, however, that the Party whose employee(s) were not named inventors shall not assign, license, sublicense, transfer, or otherwise dispose of or encumber any portion of its interest in 27 29 any such jointly-owned patent application or patent without the prior written consent of the other Party which shall be at such other Party's sole discretion. OSI and Genentech each shall require all of its employees, to assign all Collaboration Inventions made by them during the Term of this Agreement that are the subject of patent applications to OSI and Genentech as joint owners. (c) OTHER INVENTIONS. During the Term of this Agreement, inventions may be made by employees of either Party, solely or jointly, which are not Collaboration Inventions. As between the Parties, OSI shall own all such inventions made by its employees solely or jointly with Third Parties, and Genentech shall own all such inventions made by its employees solely or jointly with Third Parties. As between the Parties, all such inventions made jointly by employees of OSI and Genentech will be jointly owned by OSI and Genentech. Each Party, at its sole discretion and responsibility, may file, prosecute and maintain patent applications and patents covering such solely owned inventions. For such inventions which are made jointly by employees of OSI and Genentech, the Parties shall jointly decide on a patent application filing and prosecution strategy. (d) RESTRICTIONS ON JOINTLY-OWNED KNOW-HOW AND COLLABORATION INVENTIONS. During the Term of this Agreement, no Party shall license, sublicense, assign, dispose of, encumber or otherwise impair any portion of its interest in any Joint Collaboration Invention, without the prior written consent of the other Party, which consent shall not be unreasonably withheld. (e) INVENTORSHIP. The determination of inventorship for Collaboration Inventions shall be made in accordance with applicable laws relating to inventorship set forth in the patent laws of the United States (Title 35, United States Code). All such determinations shall be documented to ensure that any divisional or continuation patent applications reflect appropriate inventorship and that inventions and patent rights are assigned to the appropriate Party. The Parties' patent counsel shall determine inventorship, and failing that, refer the same to mutually acceptable outside counsel. 11.2 DISCLOSURE OF PATENT APPLICATIONS. In addition to the disclosures required under Article 13 below, each Party shall provide to the other Party a copy of any patent applications filed by the Party for Collaboration Inventions. 11.3 THIRD PARTY PATENTS. Each Party agrees to bring to the attention of the other Party in a timely manner any Third Party patent or patent application (a) that has been brought to its attention by such Third Party and the Party believes would have a material effect on the operations to be conducted by or on behalf of the Parties under this Agreement, or (b) for which it has obtained a written legal opinion from patent counsel. In addition, as of the Effective Date, to its knowledge (without investigation), neither Party has received notice from any Third Party that OSI-774 infringes on any patent or patent application owned by such Third Party that would have a material effect on the operations to be conducted by or on behalf of the Parties under the collaboration. For purposes of this Section 11.3, the knowledge of OSI shall mean the knowledge of the Chief Executive Officer, Vice President Business Development and Director of Intellectual Property of OSI. For purposes of this Section 11.3, the knowledge of Genentech 28 30 shall mean the knowledge of the Chief Executive Officer and Vice President of Intellectual Property of Genentech. 11.4 PATENT FILINGS. (a) The Parties acknowledge that the Divestiture Agreement governs the responsibility for filing, prosecuting and maintaining the Base Patents, and responsibility for all material actions relating to the prosecution or maintenance of the Base Patents in the Territory, including patent interferences, reexaminations, reissuances, oppositions and revocation proceedings. OSI shall not amend this Divestiture Agreement as it relates to the prosecution, maintenance or enforcement of the Base Patents without the prior written consent of Genentech, which consent shall not be unreasonably withheld. To the extent permitted by the Divestiture Agreement, OSI shall (i) keep Genentech apprised of the status of each such patent and patent application in the United States, (ii) share with Genentech all material information (including correspondence with the United States Patent and Trademark Office) relating thereto promptly after receipt of such information, and (iii) at Genentech's timely request and expense, intervene in such matters as may be reasonably requested by Genentech. (b) At its discretion, OSI shall file, prosecute, and maintain Licensed Product Patents for OSI Collaboration Inventions, and Genentech shall file, prosecute and maintain Licensed Product Patents for Genentech Collaboration Inventions, in such countries worldwide as each may determine. Outside patent counsel acceptable to OSI and Genentech shall file, prosecute and maintain Licensed Product Patents for any Joint Collaboration Inventions (in such countries worldwide as the Parties may determine). If either Party as described above elects not to file, prosecute or maintain any such patent worldwide, it shall promptly inform the other Party no later than ten (10) months after the priority filing. If any Party at any time elects not to further prosecute or maintain any such patent in any country in the Territory, it shall so inform the other Party immediately. The other Party may then file, prosecute and maintain any such patents in the Territory or in countries worldwide as it may determine at its own expense. The Party which is responsible for filing a patent application for such a Collaboration Invention will be termed the "filing Party." The filing Party shall keep the other Party apprised of the status of each such patent application and patent and shall seek the advice of the other Party with respect to patent strategy and draft patent applications and shall give reasonable consideration to any suggestions or recommendations promptly provided by the other Party concerning the preparation, filing, prosecution and maintenance thereof. The Parties shall cooperate reasonably in the prosecution of all such patent applications and patents and shall share all material information relating thereto promptly after receipt of such information. If, during the Term of this Agreement, the filing Party intends to allow any patent or patent application for a Collaboration Invention to lapse or become abandoned without having first filed a substitute, (e.g., a continuation, continuation-in-part, or divisional application), the filing Party shall make reasonable efforts to notify the other Party of such intention at least sixty (60) days prior to the date upon which such patent application or patent shall lapse or become abandoned, and the other Party shall thereupon have the right, but not the obligation, to assume responsibility for the prosecution and maintenance thereof at its own expense. 29 31 11.5 PATENT INTERFERENCES. In the event that an interference is declared by the U.S. Patent and Trademark Office between a claim in one or more patents or patent applications owned or exclusively licensed by OSI for Collaboration Inventions, and a claim in one or more patents or patent applications owned solely by Genentech for Collaboration Inventions, or any of the above and one or more patents or patent applications owned jointly by the Parties pursuant to the collaboration, and such declared interference does not involve any patents or patent applications for Collaboration Inventions owned by a Third Party and not exclusively licensed to OSI, then the Parties shall in good faith establish within thirty (30) days of the declaration of such interference or such other time as agreed upon a mutually agreeable process to resolve such interference in a reasonable manner in conformance with all applicable legal standards. 11.6 INITIAL FILINGS IF MADE OUTSIDE OF THE U.S. The Parties agree to use reasonable efforts to ensure that any patent filed outside of the U.S. prior to a U.S. filing will be in a form sufficient to establish the date of original filing as a priority date for the purposes of a subsequent U.S. filing. 11.7 PATENT COSTS. Patent costs arising in the Territory shall be chargeable to the collaboration in accordance with Exhibit B. 11.8 ENFORCEMENT RIGHTS. (a) NOTIFICATION OF INFRINGEMENT. If either Party learns of any infringement or threatened infringement by a Third Party of a Licensed Product Patent, such Party shall promptly notify the other Party in writing and shall provide such other Party with available evidence of such infringement. (b) ENFORCEMENT. (i) GENENTECH PATENTS. Genentech shall have the right, but not the obligation, to institute, prosecute and control any action or proceeding with respect to infringement of any Genentech Patent that is not a Joint Patent, by counsel of its own choice, and OSI shall have the right, at its own expense, to be represented in any such action by counsel of its own choice. If Genentech chooses not to bring an action or proceeding with respect to such patent within sixty (60) days (thirty (30) days in the case of an action brought under the Hatch-Waxman Act (or any foreign equivalent)) of being notified of such infringement, then OSI shall have the right (but not the obligation) to bring such action. The Party not prosecuting the action may elect to contribute ** of the costs and expenses of such action or proceeding by providing written notice to the controlling Party within forty-five (45) days of the date such action or proceeding is first brought. Otherwise, the controlling Party shall bring such action or proceeding at its own cost and expense. The party not bringing such action or proceeding agrees to be joined as a party plaintiff if necessary to prosecute the action or proceeding and to give - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 30 32 reasonable assistance and authority to file and prosecute the action or proceeding. Any damages or other monetary awards recovered from settlement or judgment from such an action or proceeding shall be allocated first to reimburse the costs and expenses of the controlling Party, then to reimburse the costs and expenses, if any, of the other Party (except for costs associated with the other Party being represented by counsel of its own choice). If a single Party has paid the cost and expense of such action or proceeding, any amounts remaining shall be paid to such Party. Alternatively, if both Parties have paid the costs and expense of such action or proceeding, any amounts remaining shall be shared equally by the Parties (ii) OSI PATENTS FOR COLLABORATION INVENTIONS. OSI shall have the right, but not the obligation, to institute, prosecute and control any action or proceeding with respect to infringement of any Licensed Product Patent for OSI Collaboration Inventions, by counsel of its own choice, and Genentech shall have the right, at its own expense, to be represented in any such action by counsel of its own choice. If OSI chooses not to bring an action or proceeding with respect to such OSI Patents for OSI Collaboration Inventions within sixty (60) days (thirty (30) days in the case of an action brought under the Hatch-Waxman Act (or any foreign equivalent)) of being notified of such infringement, then Genentech shall have the right (but not the obligation) to bring such action. The Party not prosecuting the action may elect to contribute ** of the costs and expenses of such action or proceeding by providing written notice to the controlling Party within forty-five (45) days of the date such action or proceeding is first brought. Otherwise, the controlling Party shall bring such action or proceeding at its own cost and expense. The party not bringing such action or proceeding agrees to be joined as a party plaintiff if necessary to prosecute the action or proceeding and to give reasonable assistance and authority to file and prosecute the action or proceeding. Any damages or other monetary awards recovered from settlement or judgment from such an action or proceeding shall be allocated first to reimburse the costs and expenses of the controlling Party, then to reimburse the costs and expenses, if any, of the other Party (except for costs associated with the other Party being represented by counsel of its own choice). If a single Party has paid the costs and expense of such action or proceeding, any amounts remaining shall be paid to such Party. Alternatively, if both Parties have paid the costs and expense of such action, any amounts remaining shall be shared equally by the Parties. (iii) JOINT PATENTS. In the event of an infringement of a Joint Patent, the JSC shall decide the best way for the Parties to proceed. The costs of patent enforcement, and recovery from any settlement or judgment from an action to enforce any such jointly-owned Licensed Product Patents, shall be allocated to the collaboration in accordance with Exhibit B. If the JSC chooses not to bring an action or proceeding with respect to jointly owned Collaboration Inventions within sixty (60) days (thirty (30) days in the case of an action brought under the Hatch-Waxman Act (or any foreign equivalent)) of being notified of such infringement, then either Party may bring an action or proceeding with respect to such jointly owned patents for Collaboration Inventions at its own expense. If either Party brings any action or proceeding - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 31 33 alone, the other Party agrees to be joined as a party plaintiff if necessary to prosecute the action or proceeding and to give the first Party reasonable assistance and authority to file and prosecute the suit. This Section 11.8(b)(iii) shall not apply to OSI-Genentech-Roche Joint Patents which shall be governed by Section 9.3 of the Tripartite Agreement. (iv) BASE PATENTS. The Parties acknowledge that the Divestiture Agreement governs responsibility for enforcing the Base Patents. To the extent permitted by the Divestiture Agreement, and only to the extent permitted by the Divestiture Agreement, the Parties agree that as between OSI and Genentech, the provision of this Section 11.8(b)(iv) shall apply. OSI shall have the right, but not the obligation, to institute, prosecute and control any action or proceeding with respect to infringement of any of the Base Patents by counsel of its own choice. If OSI chooses not to bring an action or proceeding in the Territory with respect to such a Base Patent within sixty (60) days of being notified of such infringement (thirty (30) days in the case of an action brought under the Hatch-Waxman Act (or any foreign equivalent)), then, to the extent permitted by the Divestiture Agreement, Genentech shall have the right (but not the obligation) to bring such action in the Territory. If Genentech is not permitted to bring such action under the Divestiture Agreement and requests OSI to bring such actions on Genentech's behalf, then OSI shall bring such action to the extent permitted by the Divestiture Agreement at Genentech's sole cost and expense. The Party not prosecuting the action may elect to contribute ** of the costs and expenses of such action or proceeding by providing written notice to the controlling Party within forty-five (45) days of the date such action or proceeding is first brought. Otherwise, the controlling Party shall bring such action or proceeding at its own cost and expense. The party not bringing such action or proceeding agrees to be joined as a party plaintiff if necessary to prosecute the action or proceeding and to give reasonable assistance and authority to file and prosecute the action or proceeding. Any damages or other monetary awards recovered from settlement or judgment from such an action or proceeding shall be allocated first to reimburse the costs and expenses of the controlling Party, then to reimburse the costs and expenses, if any, of the other Party (except for costs associated with the other Party being represented by counsel of its own choice). If a single Party has paid the costs and expense of such action or proceeding, any amounts remaining shall be paid to such Party. Alternatively, if both Parties have paid the costs and expense of such action or proceeding, any amounts remaining shall be equally shared by the Parties. (c) HATCH-WAXMAN ACT LITIGATION. Notwithstanding anything herein to the contrary, should a Party receive a certification for a Licensed Product pursuant to the Drug Price Competition and Patent Term Restoration Act of 1984 (Public Law 98-417), as amended (the "Hatch-Waxman Act"), or its equivalent in a country other than the United States of America, then such Party shall immediately provide the other Party with a copy of such certification. The Party with the right to bring suit under the Hatch-Waxman Act on account of such certification shall have thirty (30) days from the date on which it receives or provides a copy of such - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 32 34 certification to provide written notice to the other Party ("H-W Suit Notice") stating whether it will bring suit, at its expense, within a forty-five (45) day period from the date of such certification. Should such thirty (30) day period expire without the Party bringing such suit or providing such H-W Suit Notice, then the other Party shall be free immediately to bring suit in its name. (d) SETTLEMENT WITH A THIRD PARTY. The Party that brings suit to enforce a given Licensed Product Patent shall also have the right to control settlement of such claim; provided, however, that if one Party controls, no settlement shall be entered into without the written consent of the other Party if such settlement would materially and adversely affect the interests of such other Party. If there is no agreement between the Parties regarding such settlement, then the dispute will be resolved pursuant to Article 16 below. If the dispute is not resolved pursuant to Article 16, then the case may not be settled. 11.9 INFRINGEMENT DEFENSE. If a Third Party asserts that a patent or other right owned by it is infringed by any Licensed Product in the Territory, the JSC shall establish a plan for a common defense and select the Party responsible for managing such plan. The costs of any such action incurred by one or both of the Parties at the direction of the JSC (including the costs of any judgment, award, decree or settlement) will be chargeable to the collaboration as Other Operating Income/Expense. 11.10 THIRD PARTY PATENTS. The Parties shall cooperate to obtain such license(s) under any Third Party patent(s) that the Parties jointly determine are necessary or desirable to manufacture, use, sell, offer for sale or import Licensed Products in the Territory. Any such license shall only be entered into if both OSI and Genentech give their prior written consent. The cost of any such license(s), including without limitation, fees, royalties and milestone payments, will be chargeable to the collaboration in accordance with Exhibit B. The cost of any Third Party patent rights that are included in the definition of "Genentech Patents" or "OSI Patents" (e.g. on account of royalty payments and/or milestones payable to Third Parties) will be chargeable to the collaboration in accordance with Exhibit B. ARTICLE 12 REPRESENTATIONS AND WARRANTIES 12.0 REPRESENTATIONS AND WARRANTIES. Each of the Parties hereby represents and warrants as follows: (a) This Agreement is a legal and valid obligation binding upon such Party and enforceable in accordance with its terms. The execution, delivery and performance of the 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 is bound, nor violate any law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it. 33 35 (b) Such Party has not, and during the Term of the Agreement will not, grant any rights related to Licensed Products to any Third Party which would conflict with the rights granted to the other Party hereunder or under the OSI-Roche Agreement, Tripartite Agreement, or Divestiture Agreement, whether by execution of or amendment to any agreement or otherwise. (c) That such Party has the right to grant the licenses granted herein. ARTICLE 13 INFORMATION AND REPORTS 13.1 INFORMATION. Genentech and OSI will disclose and make available to each other in a timely manner all preclinical, clinical, regulatory, commercial and other information concerning Licensed Products known by Genentech or OSI at any time during the Term of this Agreement. Each Party will use Commercially Reasonable and Diligent Efforts to disclose to the other Party all significant information directly related to Licensed Products promptly after it is learned or its significance is appreciated. The maintenance of a database of serious adverse drug experience information for all Licensed Products, both before and after Regulatory Approval, will be determined in accordance with the Tripartite Agreement with respect to OSI-774. OSI shall own and maintain a database of serious adverse drug experience information for all Licensed Products, both before and after Regulatory Approval, with respect to any other compound or molecule Controlled by OSI as set forth in Section 1.27. As soon as reasonably possible after the execution of this Agreement, the Parties will enter into one or more separate safety and adverse event reporting agreements which will govern the reporting and other procedures related to adverse drug experiences under this collaboration between OSI and Genentech, and under the activities in the Tripartite Agreement between the Parties and Roche. 13.2 PRODUCT COMPLAINTS. Genentech will take all medical and non-medical Licensed Product related customer complaints and will maintain a record of such complaints, and will notify OSI of any complaint in sufficient time to allow OSI to comply with any regulatory requirements it may have with respect to such complaints and to address any manufacturing issues with respect to such complaints. OSI shall address any manufacturing issues with respect to such complaints as provided in the Manufacturing and Supply Agreement. 13.3 ADVERSE DRUG EVENTS. The Parties recognize that the Party that is the holder of an IND and a Drug Approval Application will be required to submit or cause the submission of information and file or cause the filing of reports to various governmental agencies on compounds under clinical investigation, compounds proposed for marketing, or marketed drugs. Information must be submitted at the time of initial filing for investigational use in humans and at the time of a request for market approval of a new drug. In addition, supplemental information must be provided on compounds at periodic intervals and adverse drug experiences must be reported at more frequent intervals depending on the severity of the experience. The specific obligations of each Party with respect to adverse drug experiences will be governed by the safety and adverse event reporting agreement(s) described in Section 13.1 above. 34 36 13.4 RECORDS OF NET SALES AND COSTS. Each Party will maintain complete and accurate records which are relevant to costs, expenses, and payments (and Genentech will maintain such records with respect to sales) under this Agreement and such records shall be open during reasonable business hours for a period of ** from creation of individual records for examination at the other Party's expense and not more often than once each year by an independent certified public accountant selected by the other Party as described in Section B.5 of Exhibit B. Any records or accounting information received from the other Party shall be Confidential Information for purposes of Article 10. Results of any such audit shall be provided to both Parties, subject to Article 10. 13.5 CONTRIBUTION OF INFORMATION. It is the intention of the Parties that each will bring to the collaboration such information in its possession that is useful to the development and commercialization of Licensed Products, subject to contractual obligations of the Parties entered into prior to the execution of this Agreement by the Parties. 13.6 PUBLICITY REVIEW. The Parties agree that the public announcement of the execution of this Agreement shall be in the form of a press release to be agreed upon on or before the Effective Date and thereafter each Party shall be entitled to make or publish any public statement consistent with the contents thereof. Thereafter, except as may be set forth in the Tripartite Agreement, OSI and Genentech will jointly discuss and agree, based on the principles of this Section 13.6, on any statement to the public regarding this Agreement or any aspect of this Agreement, and (subject to Section 10.5 above) the results of clinical studies conducted hereunder, subject in each case to disclosure otherwise required by law or regulation as determined in good faith by each Party. When a Party elects to make any such statement it will give the other Party at least five (5) days' notice to review and comment on such statement. In the event of a public disclosure required by law prior to the end of such five (5) day period, the Party required to make such disclosure, if it legally may, shall give the other Party at least two (2) business days to review and comment on such disclosure. If a Party was not legally able to give notice under the previous sentence, it will furnish the other Party with a copy of its disclosure as soon as practicable after the making thereof. The Parties acknowledge the importance of supporting each other's efforts to publicly disclose results and significant developments regarding Licensed Products. The principles to be observed by OSI and Genentech in such public disclosures will be: accuracy, the requirements for confidentiality under Article 10, compliance with FDA regulations and other FDA guidance documents, the advantage a competitor of OSI or Genentech may gain from any public statements under this Section 13.6, and the standards and customs in the biotechnology and pharmaceutical industries for such disclosures by companies comparable to OSI and Genentech. The terms of this Agreement may also be disclosed to: (a) government agencies where required by law, including filings required to be made by law with the United States Securities and Exchange Commission ("SEC"), the New York Stock Exchange, or any national exchange, or (b) Third Parties with the prior written consent of the other Party, which consent shall not be unreasonably withheld, so - -------- ** This portion has been redacted pursuant to a confidential treatment request. 35 37 long as such disclosure in (b) above is made under a binder of confidentiality at least as restrictive as the confidentiality provisions in Section 10.1 above, so long as highly sensitive terms and conditions such as financial terms are extracted from the Agreement (including in any disclosure required by law or the SEC) or deleted upon the request of the other Party, and so long as the disclosing Party gives reasonable advance notice of the disclosure under the circumstances requiring the disclosure. In certain cases public disclosure may be made in conjunction with Roche, but only under the terms and conditions governing such disclosures in the Tripartite Agreement. ARTICLE 14 TERM AND TERMINATION 14.1 TERM. This Agreement shall commence as of the Effective Date. The Parties have specifically provided elsewhere in this Agreement the term during which certain rights and obligations hereunder shall apply. Unless sooner terminated as provided in this Article 14, the remaining provisions of this Agreement relating to activities in the Territory shall continue in effect until the date on which the Parties are no longer entitled to receive a share of Operating Profits or Loss on any Licensed Product (the "Term"). 14.2 TERMINATION FOR BREACH. (a) MATERIAL BREACH. If either Party materially breaches this Agreement at any time, which breach is not cured within ninety (90) days after written notice thereof from the non-breaching Party specifying the nature of such breach, the non-breaching Party shall have the right to terminate this Agreement immediately upon written notice to the breaching Party. Upon such termination, the Parties shall have no further rights or obligations under this Agreement except as set forth in this Section 14 or as otherwise specifically provided in this Agreement. The Parties acknowledge and agree that failure to exercise any right or option with respect to any Licensed Product or to take any action expressly within the discretion of a Party shall not be deemed to be a material breach hereunder. (b) FAILURE OF GENENTECH TO MAKE PAYMENT. Notwithstanding Section 14.2(a), if Genentech materially breaches this Agreement by failure to make any of the payments required under Sections 6.3 or 6.5 within thirty (30) days after such payment becomes payable, and such failure is not remedied within thirty (30) days after Genentech's receipt of written notice from OSI of such breach, then OSI shall have the right to terminate this Agreement, provided however, that if the Parties disagree as to the achievement of any milestone event applicable to such payment, then Genentech will not be obligated to make such payment pending resolution of such disagreement, and the Parties will resolve such disagreement pursuant to the dispute resolution procedures in Sections 16.1, 16.2 and 16.3. (c) BREACHING PARTY OBLIGATIONS. ** - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 36 38 14.3 ADDITIONAL EFFECTS OF TERMINATION FOR MATERIAL BREACH. ** 14.4 UNILATERAL TERMINATION BY LICENSEE. (a) Beginning two (2) years after the Effective Date, Genentech shall have the unilateral right to provide six (6) months written notice to OSI to terminate this Agreement, provided, however: (i) Genentech shall use its reasonable best efforts to effect a smooth and orderly transition of any already on-going clinical studies, Regulatory Approval or pre-marketing efforts to OSI (including all data and reports in the possession of Genentech); (ii) Genentech shall make its personnel and other resources reasonably available to the other Party as necessary to effect an orderly transition of development responsibilities, with the reasonable cost of such personnel and resources to be borne by Genentech after the effective date of termination; (iii) Genentech, for no additional consideration, shall pay its share of the costs for the completion of any of the on-going clinical trials of Licensed Product, but only for such costs directly incurred for those patients already enrolled in the study at the time of giving the termination notice; (iv) all rights and licenses granted herein to Genentech shall revert to OSI, ** and immediately terminate. Thereafter, OSI shall have the sole and exclusive right and license (exclusive even as to Genentech) to make, have made, use, sell, offer for sale and import Licensed Product in the Territory under Genentech Patent Rights and a non-exclusive right and license under Genentech Know-how to make, have made, use, sell, offer for sale and import Licensed Product in the Territory; and (v) Genentech shall provide and assign to OSI, at Genentech's expense, all clinical data, INDs, NDAs, Regulatory Approvals and all other regulatory documentation specifically covering Licensed Product (but only to the extent they cover only Licensed Product and not other products or matters) that Genentech may have developed in its collaboration activities under this Agreement. (b) Genentech shall have the unilateral right to terminate this Agreement at any time upon thirty (30) days written notice to OSI if the JSC imposes a clinical hold for at least - -------- ** This portion has been redacted pursuant to a confidential treatment request. 37 39 six (6) months or there has been an FDA clinical hold for at least six (6) months, provided, however: (i) Genentech shall use its reasonable best efforts to effect a smooth and orderly transition of any already on-going clinical studies, Regulatory Approval or pre-marketing efforts to OSI (including all data and reports in the possession of Genentech); (ii) Genentech shall make its personnel and other resources reasonably available to the other Party as necessary to effect an orderly transition of development responsibilities, with the reasonable cost of such personnel and resources to be borne by Genentech after the effective date of termination; (iii) Genentech, for no additional consideration, shall pay its share of the costs for the completion of any of the on-going clinical trials of Licensed Product, but only for such costs directly incurred for those patients already enrolled in the study at the time of giving the termination notice; (iv) all rights and licenses granted herein to Genentech shall revert to OSI, **, and immediately terminate. Thereafter, OSI shall have the sole and exclusive right and license (exclusive even as to Genentech) to make, have made, use, sell, offer for sale and import Licensed Product in the Territory under Genentech Patent Rights and a non-exclusive right and license under Genentech Know-how to make, have made, use, sell, offer for sale and import Licensed Product in the Territory; and (v) Genentech shall provide and assign to OSI, at Genentech's expense, all clinical data, INDs, NDAs, Regulatory Approvals and all other regulatory documentation specifically covering Licensed Product (but only to the extent they cover only Licensed Product and not other products or matters) that Genentech may have developed in its collaboration activities under this Agreement. 14.5 TERMINATION WITHOUT CAUSE. (a) Subject to Section 6.1, either Party may terminate this Agreement, upon ten (10) days' prior written notice to the other Party if the FTC does not approve the transaction under the HSR Act or if all applicable waiting periods, requests for information (and any extensions thereof) under the HSR Act have not expired or otherwise been terminated by June 1, 2001, in which case this Agreement shall forthwith become void and there shall be no liability or obligation on the part of OSI or Genentech or their respective affiliates, officers, directors or shareholders except (i) with respect to Article 10 and (ii) that no such termination shall relieve any Party from liability for a material breach hereof. (b) OSI may terminate this Agreement, upon ten (10) days' prior written notice to Genentech, if the conditions under Section 6.2(a)(iii)-(vi) are not satisfied (but with respect to 6.2(a)(v), only if OSI complied) and the conditions under Section 6.2(a)(i) and 6.2(b)(i) have been satisfied or waived. In such case, OSI shall be entitled to any remedy it may have in - ----------- ** This portion has been redacted pursuant to a confidential treatment request. 38 40 addition to those rights under this Agreement. Genentech may terminate this Agreement upon ten (10) days' prior written notice to OSI, if the conditions under Sections 6.2(b)(iii) or 6.2(b)(iv) are not satisfied (but only if Genentech has complied with respect to Section 6.2(a)(iv) or with Section 6.2(b)(iv), respectively) and the conditions under Section 6.2(a)(i) and 6.2(b)(i) have been satisfied or waived. In such case, Genentech shall be entitled to any remedy it may have in addition to those rights under this Agreement. If either OSI or Genentech terminates this Agreement in accordance with this Section 14.6(b) and Genentech has made payments under Section 6.2(a)(iii) and/or (iv), then Genentech shall be entitled to a prompt refund to such payments. 14.6 EFFECT OF TERMINATION ON SUBLICENSES. Except with respect to sublicenses under Section 17.1, upon termination of this Agreement for any reason, all sublicenses granted in accordance with the terms of this Agreement shall be immediately terminated unless otherwise assented to in writing by the Party in Control of the intellectual property that is the subject of such sublicense. 14.7 BANKRUPTCY. Either Party may, in addition to any other remedies available to it by law or in equity, terminate this Agreement, in whole or in part as the terminating Party may determine, by written notice to the other Party in the event the other Party shall have become bankrupt, or shall have made an assignment for the benefit of its creditors or there shall have been appointed a trustee or receiver of the other Party or for all or a substantial part of its property or any case or proceeding shall have been commenced or other action taken by or against the other Party in bankruptcy or seeking reorganization, liquidation, dissolution, winding-up, arrangement, composition or readjustment of its debts or any other relief under any bankruptcy, insolvency, reorganization or other similar act or law of any jurisdiction now or hereafter in effect and any such event shall have continued for ninety (90) days undismissed, unbonded and/or undischarged. All rights and licenses granted under to this Agreement by one Party to the other Party are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the Bankruptcy Code, licenses of rights to "intellectual property" as defined under Section 101 (56) of the Bankruptcy Code. The Parties agree that the licensor under this Agreement shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code in the event of a bankruptcy by the other Party. The Parties further agree that in the event of the commencement of a bankruptcy proceeding by or against one Party under the Bankruptcy Code, the other Party shall be entitled to complete access to any such intellectual property pertaining to the rights granted in the licenses hereunder of the Party by or against whom a bankruptcy proceeding has been commenced and all embodiments of such intellectual property. 14.8 EFFECT OF EXPIRATION/TERMINATION ON INTELLECTUAL PROPERTY. Within thirty (30) days after the expiration or any other termination of this Agreement by either Party for any reason (but effective immediately prior to such termination), the Parties shall assign all jointly owned U.S. and foreign patent applications and patents covered by Section 11.1(b) above to each Party in accordance with its relationship to the named inventors. For example, patent applications and patents naming only OSI employees ("OSI Inventors") as inventors shall be assigned to OSI. Similarly, patent applications and patents naming only Genentech employees ("Genentech Inventors") as inventors shall be assigned to Genentech. The assignments in this 39 41 Section 14.8 shall not limit the rights of any Party resulting from any termination hereunder (for example, in the event of breach under Section 14.2). 14.9 SURVIVING RIGHTS. Except as modified in this Article 14, the obligations and rights of the Parties under Articles 10, 14, and 15 and Sections 4.3 (last sentence), 4.8, 8.3 (only with respect to Roche), 11.1(a) and (c), 11.2, 11.6, 13.4, 13.6 (but only regarding disclosures required by law), 16.2, 16.3, 17.4, 17.7, 17.8, 17.10(a), 17.11, 17.12, 17.17, Section B.1 of Exhibit B (only with respect to Section 14.3 and as to any outstanding reconciliation of operating profits or losses accrued prior to the date of termination) and Section B.2 of Exhibit B (only with respect to Section 14.3 and as to any outstanding reconciliation of operating profits or losses accrued prior to the date of termination) of this Agreement will survive any termination or expiration of this Agreement. 14.10 ACCRUED RIGHTS, SURVIVING OBLIGATIONS. Termination, relinquishment or expiration of the Agreement for any reason shall be without prejudice to any rights which shall have accrued to the benefit of either Party prior to such termination, relinquishment or expiration, including damages arising from any breach hereunder. Such termination, relinquishment or expiration shall not relieve either Party from obligations which are expressly indicated to survive termination or expiration of the Agreement ARTICLE 15 INDEMNIFICATION 15.1 INDEMNIFICATION BY GENENTECH. Genentech hereby agrees to save, defend and hold OSI and its agents and employees harmless from and against any and all losses, damages, liabilities, settlements, penalties, fines, costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) (collectively, "Losses") resulting from, directly or indirectly, (a) Genentech's breach of any term of this Agreement, (b) any violation of applicable law or regulation by Genentech, its Affiliates or sublicensees, (c) the manufacture, handling, use, storage, distribution or sale of Licensed Products by Genentech, its Affiliates, sublicensees and agents (including Genentech's Third Party contract manufacturer if Genentech manufactures Licensed Product under this Agreement), except to the extent such Losses result from the negligence or willful misconduct of OSI or its employees, Affiliates, sublicensees or agents. This indemnification provision shall include any reasonable attorney's fees incurred by OSI in connection with enforcing this indemnification. 15.2 INDEMNIFICATION BY OSI. OSI hereby agrees to save, defend and hold Genentech and its agents and employees harmless from and against any and all Losses resulting or alleged to result from, directly or indirectly: (a) OSI's breach of any term of this Agreement, (b) any violation of applicable law or regulation by OSI, its Affiliates or sublicensees, (c) the manufacture, handling, use, storage, distribution or sale of Licensed Products by OSI, its Affiliates, sublicensees and agents (including OSI's Third Party contract manufacturer of Licensed Product) except to the extent such Losses result from the negligence or willful misconduct of Genentech or its employees or agents. This indemnification provision shall 40 42 include any reasonable attorney's fees incurred by Genentech in connection with enforcing this indemnification. 15.3 OTHER LIABILITIES. Any other Losses resulting directly or indirectly from the manufacture, use, handling, storage, sale or other disposition of Licensed Products in the Territory shall be charged to the collaboration as an Other Operating Income/Expense at the time such claim is finally determined, whether by judgment, award, decree or settlement. 15.4 INDEMNIFICATION CONDITIONS. In the event that a Party is seeking indemnification under Section 15.1 or 15.2 above, it shall inform the indemnifying Party of a claim as soon as reasonably practicable after it receives notice of the claim, shall permit the indemnifying Party to assume direction and control of the defense of the claim (including the right to settle the claim solely for monetary consideration), shall cooperate as requested (at the expense of the indemnifying Party) in the defense of the claim, and shall not settle or compromise the claim without the express written consent of the indemnifying Party. 15.5 DEFENSE. In the event that either Party receives notice of a claim with respect to a Licensed Product in the Territory, such Party shall inform the other Party as soon as reasonably practicable. If a Party is not indemnified by the other Party for such claim, then the Parties shall confer how to respond to the claim and how to handle the claim in an efficient manner. ARTICLE 16 DISPUTE RESOLUTION 16.1 DISPUTES. The Parties recognize that disputes as to certain matters may from time to time arise during the Term of this Agreement 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 disputes arising under this Agreement 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 16 if and when a dispute arises under this Agreement. Unless otherwise specifically recited in this Agreement, disputes among members of the Joint Project Team will be resolved as recited in this Article 16. Any disputes relating to the collaboration hereunder shall be first referred to the JSC by either Party at any time after such dispute has arisen and such Party believes that there has been sufficient discussion of the matter at the Joint Project Team level. If the JSC is unable to resolve such a dispute within sixty (60) days of being requested by a Party to resolve the dispute or the JSC is unable to resolve a dispute among its members, the matter shall be presented to the chief executive officer of Genentech and OSI, or their respective designee, for resolution. In the event that the chief executive officer of Genentech and OSI, or their respective designees, cannot resolve the dispute within thirty (30) days of being requested by a Party to resolve a dispute, either Party may, by written notice to the other, invoke the provisions of Section 16.2 hereinafter. 41 43 16.2 ARBITRATION. Subject to Section 16.3 below, the Parties agree that any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination, or invalidity thereof, shall be resolved through binding arbitration. If the dispute arises between the Parties, and if such dispute cannot be resolved pursuant to Section 16.1 above, any unresolved controversy or claim between the Parties shall be resolved by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association as presently in effect, except as modified herein. Each such arbitration shall be conducted by a panel of three arbitrators appointed in accordance with the Commercial Arbitration Rules as presently in effect; provided that at least one such arbitrator shall have had, by the time of the actual arbitration, at least ten (10) years of experience as an attorney and experience in the pharmaceuticals industry so as to better understand the legal, business and scientific issues addressed in the arbitral proceeding. A reasoned arbitration decision shall be rendered in writing within thirty (30) days of the conclusion of the arbitration hearing and shall be binding and not be appealable to any court in any jurisdiction. The prevailing Party may enter such decision in any court having competent jurisdiction. Unless otherwise mutually agreed upon by the Parties, the arbitration proceedings shall be conducted at the location of the Party not originally requesting the resolution of the dispute. Each Party must bear its own attorneys' fees and associated costs and expenses. The arbitrators shall have the authority to grant specific performance and allocate costs between the Parties (excluding attorney's fees). 16.3 DETERMINATION OF PATENTS AND OTHER INTELLECTUAL PROPERTY. Notwithstanding the foregoing, any dispute relating to the determination of validity of claims, infringement or claim interpretation relating to a Party's patents shall be submitted exclusively to federal court. ARTICLE 17 MISCELLANEOUS 17.1 ASSIGNMENT. (a) Neither Party may assign this Agreement or otherwise transfer its rights and interests, nor delegate its responsibilities hereunder, without the prior written consent of the other Party, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, (i) for ** after the Closing Date, neither Party may assign this Agreement or otherwise transfer its rights and interests, nor delegate its responsibilities hereunder, without the prior written consent of the other Party, which consent shall be at the other Party's sole discretion, and (ii) beginning ** after the Closing Date, either Party may, without the consent of the other Party, assign this Agreement or otherwise transfer its rights and interests and delegate its responsibilities hereunder to any purchaser of all or substantially all of such Party's assets, or all of its capital stock, or to any successor corporation resulting from any merger or consolidation of such Party with or into such corporation. If a Party elects to assign its rights or delegate its responsibilities pursuant to Section 17.1(a)(ii) above, such Party, at its own cost, shall promptly - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 42 44 assign all NDA's and supplemental NDA's owned by such electing Party as a result of its activities under this Agreement to the other Party. In addition, the non-assigning Party shall have the right to sublicense its rights and interests and delegate its responsibilities hereunder to a Third Party at any time, without the consent of the assigning Party or its successor, provided that the responsibilities of the sublicensing Party shall continue as more fully set forth in Section 8.4. (b) This Agreement shall be binding upon and inure to the benefit of the successors and permitted assigns of the Parties. Any attempt to assign or delegate any portion of this Agreement in violation of this Section 17.1 shall be void. Subject to the foregoing, any reference to OSI and Genentech hereunder shall be deemed to include the successors and permitted assigns thereof. 17.2 LEGAL COMPLIANCE. Each Party shall comply in all material respects with all laws, rules and regulations applicable to the conduct of its business in the Territory pursuant to this Agreement. 17.3 CONSENTS NOT UNREASONABLY WITHHELD. Whenever provision is made in this Agreement for either Party to secure the consent or approval of the other, unless expressly stated otherwise, that consent or approval shall not unreasonably be withheld, delayed or conditioned, and whenever in this Agreement provision is made for one Party to object to or disapprove a matter, such objection or disapproval shall not unreasonably be exercised. 17.4 RETAINED RIGHTS. Nothing in this Agreement shall limit in any respect the right of either Party to conduct research and development with respect to and market products other than Licensed Products using such Party's own technology. 17.5 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, explosion, flood, strike, lockout, embargo, act of God, or any other cause beyond the control and without the fault or negligence of the defaulting Party, provided that the Party claiming force majeure has exerted all reasonable efforts to avoid or remedy such force majeure; provided, however, that in no event shall a Party be required to settle any labor dispute or disturbance. Such excuse shall continue as long as the condition preventing the performance continues. Upon cessation of such condition, the affected Party shall promptly resume performance hereunder. Each Party agrees to give the other Party prompt written notice of the occurrence of any such condition, the nature thereof, and the extent to which the affected Party will be unable to perform its obligations hereunder. Each Party further agrees to use all reasonable efforts to correct the condition as quickly as possible and to give the other Party prompt written notice when it is again fully able to perform its obligations. 17.6 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. 43 45 17.7 NO RIGHT TO USE NAMES. Except as otherwise provided herein, no right, express or implied, is granted by the Agreement to use in any manner the name "OSI," "Genentech" or any other trade name or trademark of the other Party or its Affiliates in connection with the performance of the Agreement. 17.8 NOTICES. All notices hereunder shall be in writing and shall be deemed given if delivered personally or by facsimile transmission (receipt verified), telexed, mailed by registered or certified mail (return receipt requested), postage prepaid, or sent by express courier service, to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice; provided, that notices of a change of address shall be effective only upon receipt thereof). If to OSI: OSI Pharmaceuticals, Inc. 106 Charles Lindbergh Blvd. Uniondale, NY 11553 Attention: Chief Executive Officer Telecopy: (516) 745-6429 with a copy to: Mintz Levin Cohn Ferris Glovsky and Popeo, P.C. 666 Third Avenue 25th Floor New York, NY 10017 Attention: Joel I. Papernik, Esq. Telecopy: (212) 983-3115 If to Genentech: Genentech, Inc. 1 DNA Way South San Francisco, CA 94080 Attention: Corporate Secretary Telecopy: (650) 952-9881 17.9 WAIVER. Except as specifically provided for herein, the waiver from time to time by either of 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. 17.10 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 alternative to the term, covenant or 44 46 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. 17.11 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with, the laws of the State of New York. 17.12 AMBIGUITIES. Ambiguities, if any, in this Agreement shall not be construed against any Party, irrespective of which Party may be deemed to have authorized the ambiguous provision. 17.13 HEADINGS. All headings are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. 17.14 COUNTERPARTS. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 17.15 NON-SOLICITATION. The Parties recognize that each Party has a substantial interest in preserving and maintaining confidential its Confidential Information hereunder. Each Party recognizes that certain of the other Party's employees, including those engaged in development, marketing and sale of any Licensed Product, may have access to such Confidential Information of the other Party. The Parties therefore agree, to the extent permitted by applicable law or regulation, not to solicit or otherwise induce or attempt to induce for purposes of employment, any employees from the other Party involved in the development, marketing or sales of any Licensed Product during the period in which any Party is developing or commercializing a Licensed Product in the Territory hereunder. 17.16 ENTIRE AGREEMENT. Except for those certain provisions of the Tripartite Agreement expressly referred to hereinabove, this Agreement, including all Exhibits attached hereto which are hereby incorporated herein by reference, sets forth all the covenants, promises, agreements, warranties, representations, conditions and understandings between the Parties hereto with respect to the subject matter hereof and supersedes and terminates all prior agreements and understandings between the Parties, subject to Section 10.4 above with respect to prior Confidentiality Agreements. Except for such Tripartite Agreement provisions referred to above, there are no covenants, promises, agreements, warranties, representations, conditions or understandings, either oral or written, between the Parties with respect to the subject matter hereof 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. If any provision of this Agreement conflicts with the provisions of the Tripartite Agreement with respect to development of OSI-774, the provisions of the Tripartite Agreement shall govern such conflict. 45 47 17.17 NO THIRD PARTY BENEFICIARY. Except as expressly provided herein, this Agreement shall not confer any rights or remedies upon any Third Party other than the Parties and their respective successors and permitted assigns. [This space is intentionally left blank.] 46 48 IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate originals by their proper officers as of the date and year first above written. OSI PHARMACEUTICALS, INC. GENENTECH, INC. By: /s/ COLIN GODDARD By: /s/ ARTHUR D. LEVINSON ----------------------------------- ---------------------------------- Name: Colin Goddard Name: Arthur D. Levinson ----------------------------------- ---------------------------------- Title: Chairman & Chief Executive Officer Title: Chairman & Chief Executive Officer ----------------------------------- ----------------------------------
47 49 EXHIBIT A LIST OF INITIAL MEMBERS OF THE JOINT STEERING COMMITTEE OSI Nicholas Bacopoulos Paul Nadler John Slack GENENTECH Stephen Dilly Susan Hellmann (TBA) A-1 50 EXHIBIT B FINANCIAL PLANNING, ACCOUNTING AND REPORTING FOR THE OSI/GENENTECH OSI-774 DEVELOPMENT AND MARKETING COLLABORATION AGREEMENT This Exhibit B to the OSI-774 Development and Marketing Collaboration Agreement (the "Agreement") made as of January 8, 2001 , between OSI Pharmaceuticals, Inc. ("OSI") and Genentech, Inc. ("Genentech") covers financial planning, accounting policies and procedures to be followed in determining OSI/GNE Development Costs and Operating Profits or Losses and related sharing of revenue and expenses pursuant to the Agreement. For such purpose, this Exhibit B sets forth the principles for reporting actual results and budgeted plans of the combined operations in the Territory, the frequency of reporting, the methods of determining payments to the Parties, auditing of accounts and other matters. For purposes of this Exhibit B only, the consolidated accounting of operations for the collaboration of the Parties hereunder shall be referred to as the "Collaboration". The Collaboration is not a legal entity, pass through or otherwise, for financial accounting or income tax reporting purposes, and has been defined for identification purposes only. This Exhibit B also provides agreed upon definitions of financial terms applicable to the Parties for purposes of the Agreement; provided, however, that the definition of "Fully Burdened Manufacturing Cost" shall apply to OSI, to the extent it manufactures or causes to be manufactured any Licensed Product under the Agreement or to Genentech if, and only if Genentech becomes responsible for manufacturing under the Agreement or the manufacturing agreement referred to in the Agreement. The definition of "OSI/GNE Development Costs" shall apply to the development work by both Parties under the Agreement. All capitalized terms used herein without definition shall have the meanings ascribed thereto in the Agreement, unless otherwise expressly provided herein. References in this Exhibit B to a "Party" or "Parties" shall be construed to mean Genentech or OSI, as the case may be, and in every case shall be deemed to include a Party's permitted sublicensees and assigns under the Agreement. The contents of this Exhibit B are hereby incorporated into the Agreement and are governed by the terms and conditions of the Agreement, including, without limitation, the confidentiality provisions set forth therein. B-1 51 B.1 PRINCIPLES OF REPORTING. (a) SHARING OSI/GNE DEVELOPMENT COSTS. OSI/GNE Development Costs shall be shared by OSI and Genentech as provided in Section 4.6 of the Agreement. The JSC will approve the balancing payments by one Party to reimburse the other Party's OSI/GNE Development Costs for purposes of the sharing of such costs under the Agreement. The presentation of results of operations of the Parties in the Territory will be based on each Party's respective financial information presented separately and on a consolidated basis in the reporting format depicted as follows: ** It is the intention of the Parties that the interpretation of these definitions will be consistent with generally accepted accounting principles ("GAAP") in the U.S. If necessary, a Party will make the appropriate adjustments to the financial information it supplies under the Agreement to conform to the above format of reporting results of operations. Without limiting the foregoing, prior to the time that Gross Sales are obtained the Parties may eliminate the above line items related to sales and the support of sales, and the costs thereof, and use only those terms relevant to the sharing of OSI/GNE Development Costs. B.2 FREQUENCY OF REPORTING. The fiscal year of the Collaboration will be a calendar year but OSI shall be furnished with the information it requires to enable it to report in a timely manner to its stockholders on a September 30 fiscal year basis. Reporting by each Party for Collaboration revenues and expenses will be performed as follows: ** - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. B-2 52 Reports of actual results compared to budget will be made to the Joint Project Team on a quarterly basis. After approval by the Joint Project Team as to amounts, the Joint Project Team will forward the report to the JSC for its approval. Variances from the total overall budgets, and significant variances in budget line items, will only be included in the calculation of OSI/GNE Development Costs or Operating Profits and Losses when approved by the JSC. Genentech will be responsible for the preparation of consolidated reporting of the Collaboration (including GNE/OSI Development Costs and any Operating Profit or Loss), calculation of the sharing and determination of the cash settlement (subject to dispute resolution by the JSC or arbitration as the case may be). Genentech will provide the financial representatives from each Party within ** days of quarter end a statement showing the consolidated results and calculations of the Operating Profit or Loss sharing (or calculation of expenses to be shared) and cash settlement required in a format substantially listed above. Genentech shall record sales in the U.S. ** The financial representatives from the Parties (i.e. the Joint Finance Subcommittee members) will meet as appropriate but at least quarterly to review and approve the following: - OSI/GNE Development Costs - actual results - forecasts - budgets - inventory levels - Sales Returns and Allowances - other financial matters, including each Party's methodologies for charging costs to the Collaboration, for determination of actuals, forecasts, budgets and long range plans and the results of applying such methodologies. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. B-3 53 B.3 BUDGET AND LONG RANGE PLAN. Budgets will be prepared annually. Responsibility for the budget and long range plan will rest with the Joint Project Team, which will develop budgets for development and commercialization, subject to final approval by the JSC. Budgets will be supplemented with detailed business plans for clinical trials, drug approval applications, and plans for product introduction, sales and promotion efforts as determined by the Joint Project Team. Budgets, once approved by the JSC, can only be changed with the approval of the JSC, as provided in the Agreement. The Joint Project Team, with the assistance of the Joint Finance Subcommittee, will be responsible for identifying, analyzing and reporting all significant line item budget variances and all overall, total budget variances. Only the JSC may approve materially unfavorable line item budget variations, as defined by the Joint Project Team, and all overall, total budget variations, chargeable to the Collaboration during the course of the year. A ** long range plan for the Collaboration will be established on a yearly basis under the direction of the JSC and submitted to Genentech and OSI by ** each year. B.4 DEFINITIONS. B.4.1 "ALLOCABLE OVERHEAD" means costs incurred by a Party or for its account which are attributable to a Party's supervisory, services, occupancy costs, corporate bonus (to the extent not charged directly to department), and its payroll, information systems, human relations or purchasing functions and which are allocated to company departments based on space occupied or headcount or other activity-based method consistently applied by a Party, or a standard rate if agreed to by the Parties. Allocable Overhead shall not include any costs attributable to general corporate activities including, by way of example, executive management, investor relations, business development, legal affairs and finance, and shall not duplicate G&A hereunder. B.4.2 "COST OF SALES" shall mean the sum of (i) Fully Burdened Manufacturing Cost (as defined below), (ii) freight, insurance and other costs of shipping Licensed Product to customers, (iii) any Third Party royalties payable with respect to the manufacture, use or sale of Licensed Product, excluding any royalties already accounted for in Fully Burdened Manufacturing Cost and (iv) the cost of free Licensed Product for indigent persons. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. B-4 54 B.4.3. "OSI/GNE DEVELOPMENT COSTS" means the development costs incurred (including accruals) by Genentech or OSI from the Effective Date of the Agreement through the later of (a) the date of Regulatory Approval (including thereafter costs to maintain or expand such Regulatory Approval) in the Territory, or (b) the date of termination of development efforts of the final indication for which Regulatory Approval is sought in the Territory. Such costs shall comprise those costs required to obtain, maintain and/or expand the authorization and/or ability to manufacture, formulate, fill, ship and/or sell a Licensed Product in commercial quantities to Third Parties in the Territory. Any Global Development Costs, as defined in and shared with Roche under the Tripartite Agreement, shall not be reflected hereunder. "OSI/GNE Development Costs" shall include, but are not limited to, costs of research or development including costs of studies on the toxicological, pharmacokinetical, metabolical or clinical aspects of a Licensed Product conducted internally or by individual investigators, or consultants necessary for the purpose of obtaining, maintaining and/or expanding marketing approval of a Licensed Product, process development, process improvement, and recovery costs, qualification lots, costs for preparing, submitting, reviewing or developing data or information for the purpose of submission to a governmental authority to obtain, maintain and/or expand marketing approval of a Licensed Product, and applicable Allocable Overhead. "OSI/GNE Development Costs" shall include expenses for data management, CROs, statistical designs and studies, document preparation, and other administration expenses associated with the clinical testing program or post-marketing studies required to maintain product approvals. In determining "OSI/GNE Development Costs" chargeable under this Agreement, each Party will use its respective project accounting systems, and will review and approve its respective project accounting systems and methodologies with the other Party. B.4.4 "DISTRIBUTION COSTS" means ** B.4.5 "FULLY BURDENED MANUFACTURING COST" means one hundred percent (100%) of a Party's manufacturing cost (as defined in the Party's accounting policies consistently applied), which shall comprise the sum of: (a) the cost of goods produced as determined by the Party manufacturing or contracting with a Third Party for each stage of the manufacturing process in accordance with GAAP consistently applied by such Party, including product quality assurance/control costs, applicable Allocable Overhead, and other costs borne by the Party for transport, customs clearance and storage of product at the request of the other Party prior to the time of sale (i.e. freight, customs, duty and insurance); and (b) all of the Party's allocable intellectual property acquisition and licensing costs (including royalties) paid to Third Parties as it relates to the manufacture of Licensed Product. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. B-5 55 Either Party holding inventory for Commercial sales shall be permitted to bill the collaboration a reasonable and customary carrying charge to compensate it for its financing and logistical product support, which amount shall be further defined and agreed upon in the Manufacturing and Supply Agreement. B.4.6 "GENERAL AND ADMINISTRATIVE COSTS" means ** B.4.7 "GROSS PROFIT" means Net Sales less Cost of Sales of a Licensed Product by a Party to Third Parties in the Territory. B.4.8 "GROSS SALES" means the gross amount invoiced by either Party, their Affiliates and/or their permitted sublicensees for sales of a Licensed Product to Third Parties in the Territory. B.4.9 "MARKETING COSTS" means the direct costs of marketing, promotion, advertising, Licensed Product promotional materials, professional education, product related public relations, relationships with opinion leaders and professional societies, market research (before and after product approval), healthcare economics studies, post-marketing studies not required to maintain product approvals, and other similar activities related to the Licensed Products, with ultimate decision making authority in Genentech with respect to marketing activities. Such costs will include both internal costs (e.g., salaries, benefits, travel, supplies and materials, etc.), applicable Allocable Overhead, and outside services and expenses (e.g., consultants, agency fees, meeting costs, etc.). "Marketing Costs" shall also include activities related to obtaining reimbursement from payers and costs of sales and marketing data. "Marketing Costs" will specifically exclude the costs of activities which promote either Party's business as a whole without being product specific (such as corporate image advertising). B.4.10 "NET SALES" means Gross Sales of a Licensed Product less applicable Sales Returns and Allowances. B.4.11 "OPERATING PROFITS OR LOSSES" means Net Sales of all Licensed Products less the following items with respect to each Product, all for a given period: Cost of Sales, Marketing Costs, Sales Costs, OSI/GNE Development Costs (to the extent chargeable to the Collaboration), General and Administrative Costs, Distribution Costs, and Other Operating Income/Expense. B.4.12 "OTHER OPERATING INCOME/EXPENSE" means ** B.4.13 "PATENT AND TRADEMARK COSTS" means the fees and expenses paid to outside legal counsel and experts, and filing and maintenance expenses, incurred after the Effective Date in connection with the establishment and maintenance of rights for Collaboration Inventions and under Licensed Product Patents covering any Licensed Product, and similar costs with respect to Product Trademarks (to the extent chargeable to the Collaboration under the Agreement), including costs of patent interference, reexamination, reissue, opposition and revocation proceedings and similar costs with respect to registration of Product Trademarks. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. B-6 56 B.4.14 "SALES COSTS" means costs, including Allocable Overhead, approved by the Joint Project Team with the annual budget, incurred by the Parties or for their account and specifically identifiable to the sales efforts of Licensed Products to all markets in the Territory including the managed care market. "Sales Costs" shall include costs associated with sales representatives for Licensed Product, including compensation, benefits and travel, supervision and training of the sales representatives, sales meetings, and other sales expenses. "Sales Costs" will not include the start-up costs associated with either Party's sales force, including recruiting, relocation and other similar costs. B.4.15 "SALES RETURNS AND ALLOWANCES" means the sum of (a) and (b), where: (a) is a provision, determined by a Party under GAAP for sales of Licensed Products in the Territory for (i) trade, cash and quantity discounts or rebates on Licensed Products (other than price discounts granted at the time of invoicing and which are included in the determination of Gross Sales), (ii) credits or allowances given or made for rejection or return of, and for uncollectable amounts on, previously sold Licensed Products or for retroactive price reductions (including Medicare and similar types of rebates and chargebacks), (iii) taxes, duties or other governmental charges levied on or measured by the billing amount for Licensed Products, as adjusted for rebates and refunds, (iv) charges for freight and insurance directly related to the distribution of Licensed Products, to the extent included in Gross Sales, (v) credits for allowances given or made for wastage replacement, and (vi) other special sales programs agreed to by the Parties for Licensed Products; and (b) is a periodic adjustment of the provision determined in (a) to reflect amounts actually incurred by a Party in the Territory for items (i), (ii), (iii), (iv), (v) and (vi) in clause (a). The provision allowed in clause (a) and adjustments made in clause (b) (if any) will be reviewed by the Joint Finance Subcommittee, subject to approval by the JSC. B.5 AUDITS AND INTERIM REVIEWS. Either Party shall have the right to request that its independent accounting firm perform an audit of the other Party's books of accounts, no more than once in a calendar year, for the sole purpose of verifying compliance with this Agreement. In such audit the firm may review books of accounts covering no more than the ** just prior to such audit. Such audits will be conducted at the expense of the requesting Party and with reasonable prior written notice to the other Party. The audited Party shall have the right to participate in scope determination in accordance with generally accepted auditing standards. Audit results will be shared with both Parties. If accounting errors found greater than net ** in the items sampled such that the Party audited has been overpaid, then the costs of such audit shall be borne by the Party audited, and such Party shall return to the requesting Party the amount of money received in error plus interest at a rate equal the rate of interest ** In addition, OSI shall at its expense and with reasonable prior written notice to Genentech, be permitted to have its auditors perform such audits and tests as are - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. B-7 57 reasonably necessary. Similarly Genentech shall at its expense and with reasonable prior notice to OSI be permitted to have its auditors perform such audits and tests as are reasonably necessary. B.6 PAYMENTS BETWEEN THE PARTIES. Payments to each Party of the agreed upon percentages of Operating Profit or Loss as provided under Section B.9 below will be made quarterly, based on actual results within ** days after the end of each quarter, adjusted for reimbursement of the net expenses or income incurred or received by each Party. A report specifying how each payment was calculated shall also be submitted with each payment to the non-paying Party. Balancing payments by one Party to reimburse the other Party's OSI/GNE Development Costs for purposes of the sharing of such costs under the Agreement will be approved by the JSC. Within ** days of the end of each calendar quarter, there shall be reconciliation of the OSI/GNE Development Costs which are to be shared and which are incurred during that quarter by Genentech and OSI, with a payment by one Party to the other to the extent necessary so that each Party bears its appropriate percentage of such shared OSI/GNE Development Costs. In the event any payment is made after ** days after the end of a calendar quarter, the paying Party shall increase the amount otherwise due and payable by adding interest thereon, computed at the ** Genentech will perform the consolidation and settlement calculations for submission to the JSC. B.7 RESPONSIBILITY FOR REPORTING. The responsibility for the consolidated reporting of the Collaboration to the JSC shall be with Genentech in close cooperation with OSI and the Joint Finance Subcommittee. This will be the basis for Collaboration accounting and determining of payments to the Parties. Genentech shall provide OSI with a copy of Collaboration consolidated reporting and the calculation serving as the basis of determining payments to the Parties. OSI will provide Genentech with financial statements within ** days after the end of the Quarter for their activities in the Territory, prepared in accordance with the terms contained in this Exhibit B in order for Genentech to prepare the consolidated reports. B.8 ACCOUNTING FOR OSI/GNE DEVELOPMENT COSTS, MARKETING COSTS AND SALES COSTS. All OSI/GNE Development Costs, Marketing Costs and Sales Costs will be based on the appropriate costs definition stated in Section B.4 of this Exhibit B. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. B-8 58 Each Party shall report OSI/GNE Development Costs within ** days after the end of each quarter in a manner consistent with its project cost system. In general, these project cost systems report actual time spent on specific projects, apply the actual labor costs, capture actual costs of specific projects and allocate other expenses to projects. For Marketing and Sales Costs, Genentech (and OSI if OSI markets Licensed Product pursuant to the Agreement) will report costs based on spending in Marketing and Sales departments in accordance with the approved budget. The Parties acknowledge that the methodologies used will be based on systems in place. B.9 OPERATING PROFITS AND LOSS SHARING. Genentech and OSI agree to share the Operating Profit or Loss in the Territory resulting from the Agreement in the following manner: (a) Genentech shall be allocated fifty percent (50%) of the Operating Profits or Losses from the sale of Licensed Products and (b) OSI shall be allocated fifty percent (50%) of the Operating Profits or Losses from the sale of Licensed Products. B.10 DEVELOPMENT COST SHARING. Genentech and OSI agree to equally share the OSI/GNE Development Costs in the Territory resulting from the Agreement as provided in Section 4.6 of the Agreement and this Exhibit B. B.11 START OF OPERATIONS AND EFFECTIVE ACCOUNTING DATE TERMINATION. Operation of the Collaboration will be deemed to have commenced as of the Closing Date of the Agreement. Costs and expenses incurred prior to such date are not chargeable to the Collaboration. For reporting and accounting purposes with respect to the Collaboration, the effective termination date of the Agreement with regard to the last detailing year in the Territory will be the nearest month end to which such termination takes place. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. B-9 59 EXHIBIT C GLOBAL DEVELOPMENT PLAN ** - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. C-1 60 EXHIBIT D OSI PATENTS
- -------------------------------------------------------------------------------------------------------------------------- Pfizer Coverage Status designation - -------------------------------------------------------------------------------------------------------------------------- PC 8836 Claims `774 and pharmaceutically acceptable salts Filed in approximately 73 countries. Issued thereof (composition-of-matter-COM), processes in US as US patent 5,747,498. Pending in for preparing `774, methods of treating Europe and Japan. hyperproliferative disorders (such as cancer) by administering `774 and pharmaceutical compositions containing `774 - -------------------------------------------------------------------------------------------------------------------------- PC 10074 Claims anhydrous and hydrate forms of the Pending in approximately 30 countries mesylate salt of `774 (COM), methods of treating (this will expand as national stage hyperproliferative disorders by administering the applications are filed from the PCT). `774 mesylate forms, and pharmaceutical Not yet issued or granted in US, compositions containing the `774 mesylate forms Europe or Japan. - -------------------------------------------------------------------------------------------------------------------------- PC 10188 Claims a process for preparing `774 and an Pending in approximately 70 countries. Not intermediate (COM) used in the process yet issued or granted in US, Europe or Japan. - -------------------------------------------------------------------------------------------------------------------------- PC 10676 Claims a method of treating disorders not Filed as US provisional patent application on specifically disclosed or claimed in prior `774 3/30/00. Not yet foreign filed. cases (non-small cell lung cancer, pediatric malignancies, cervical and other tumors caused or promoted by human papilloma virus (HPV), melanoma, Barrett's esophagus (pre-malignant syndrome), adrenal and skin cancers, auto immune neoplastic cutaneous diseases and atherosclerosis) by administering `774. Also claims chemoprevention of basal or squamos cell carcinoma of the skin - -------------------------------------------------------------------------------------------------------------------------- PC 10677 Claims two polymorphs of the hydrochloride salt of Filed as US provisional application on `774 (COM), methods of preparing the polymorphs, 11/11/99. Not yet foreign filed method of treating hyperproliferative disorders by administering the polymorphs, and pharmaceutical compositions containing the polymorphs - --------------------------------------------------------------------------------------------------------------------------
D-1 EX-10.2 5 y45494ex10-2.txt DEVELOPMENT COLLABORATION AND LICENSING AGREEMENT 1 EXHIBIT 10.2 Portions of this Exhibit have been redacted and are the subject of a confidential treatment request filed with the Secretary of the Securities and Exchange Commission. 2 DEVELOPMENT COLLABORATION AND LICENSING AGREEMENT BETWEEN OSI PHARMACEUTICALS, INC. AND F.HOFFMANN-LA ROCHE LTD JANUARY 8, 2001 3 DEVELOPMENT COLLABORATION AND LICENSING AGREEMENT This Development Collaboration And Licensing Agreement ("Agreement") dated as of January 8, 2001 by and between OSI Pharmaceuticals, Inc., a Delaware corporation, with its principal office at 106 Charles Lindbergh Blvd., Uniondale, New York 11553-3632 (together with its Affiliates (as hereinafter defined) unless the context otherwise requires, "OSI") and F.Hoffmann-La Roche Ltd, a Swiss corporation, with its principal office at Grenzacher strasse 124, CH-4070-Basel Switzerland (together with its Affiliates (as hereafter defined) unless the context otherwise requires, "Roche"). OSI and Roche are sometimes referred to herein individually as a "Party" and collectively as the "Parties." RECITALS 1. OSI has participated in the development of a certain molecule known as OSI-774 (defined below) and has certain intellectual property rights related thereto. 2. Roche and OSI each wish to conduct development of OSI-774 in a collaborative fashion so that the resources and expertise of each is put to good use, and under such collaborative efforts each Party is willing to expend up to $100 million as may be agreed upon by the Parties. 3. By combining the development experience and expertise of both Roche and OSI, the Parties wish to expedite the regulatory approval of OSI-774 as a significant new therapeutic. 4. OSI wishes to grant to Roche, and Roche wishes to obtain, a license under OSI's intellectual property rights with respect to OSI-774 to permit Roche to participate in collaborative OSI-774 product development, and to be able to market in all of the world outside of the United States and its territories under the terms and conditions set forth below. 5. Simultaneous with the Effective Date hereof, Roche will purchase shares of common stock of OSI for a purchase price of $35 million according to the terms and conditions of a Stock Purchase Agreement (the "Stock Purchase Agreement") of even date herewith. 6. Pursuant to a Tripartite Agreement of even date herewith (the "Tripartite Agreement"), the Parties have made certain agreements with Genentech, Inc., a Delaware corporation with its principal office at 1 DNA Way, South San Francisco, California 94080 ("Genentech") regarding, among other things, development of OSI-774. AGREEMENT NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties, intending to be legally bound hereby, do hereby agree as follows: 4 ARTICLE 1. DEFINITIONS The following capitalized terms, whether used in the singular or the plural, shall have the following meanings as used in this Agreement unless otherwise specifically indicated: 1.1 "ADJUVANT ONCOLOGY INDICATION" shall mean use of Licensed Product as a systemic therapy administered after local therapy or treatment of a primary tumor (e.g. by surgery, or surgery and radiotherapy) to reduce the risk of recurrence or progression. 1.2 "AFFILIATE" shall mean any corporation, firm, limited liability company, partnership or other entity which directly or indirectly controls or is controlled by or is under common control with a Party to this Agreement. For the purposes of this Section 1.2, "control" means ownership, directly or through one or more Affiliates, of fifty percent (50%) or more or the shares of stock entitled to vote for the election of directors, in the case of a corporation, or fifty percent (50%) or more of the equity interests in the case of any other type of legal entity, status as a general partner in any partnership, or any other arrangement whereby a party controls or has the right to control the Board of Directors or equivalent governing body of a corporation or entity. For the purposes of this Agreement, Genentech shall be deemed to not be an Affiliate of Roche. 1.3 "cGMP" shall mean the regulatory requirements for current good manufacturing practices promulgated (1) under the Common Technical Document for the Registration of Pharmaceuticals for Human Use (ICH CTD) Guidelines and the ICH Good Manufacturing Practice Guide (ICH-GMP.doc), as the same may be amended from time to time, and (2) by the United States Food and Drug Administration ("FDA") under the U.S. Food, Drug and Cosmetic Act ("FD&C Act") and the regulations promulgated thereunder, particularly 21 C.F.R. Section 210 et seq. and 21 C.F.R. Sections 600-610, respectively, as the same may be amended from time to time. 1.4 "CLINICAL SUPPLIES" shall mean supplies of Licensed Product, manufactured, packaged and labeled in compliance with cGMP, in such form and strength as agreed by the Parties, and ready to be used for the conduct of pre-clinical and/or human clinical trials of the Licensed Product in the Field by the Parties pursuant to the Global Development Plan. 1.5 "CLOSING" shall mean, subject to the satisfaction or waiver of the conditions set forth in Section 6.2, the closing of the transactions contemplated by this Agreement. 1.6 "CLOSING DATE" shall mean the earlier of: (i) the fifth (5th) day, unless the fifth (5th) day falls on a weekend or holiday, in which case it shall be the next business day, after the earlier of (a) receipt of written notice (a copy of which has been furnished to Genentech) of the U.S. Federal Trade Commission's (the "FTC") approval of the transaction contemplated by this Agreement under the Hart-Scott-Rodino filings to be made by OSI and Genentech (or the parent company of each Party) and (b) the expiration or termination of all applicable waiting periods, requests for information (and any extensions thereof) under the Hart-Scott Rodino Antitrust Improvements Act of 1976 for such Hart-Scott Rodino filings and (ii) the fifth (5th) day, unless the fifth (5th) day falls on a weekend or holiday, in which case it shall be the next business day, after the joint determination (by certification from each Party to the other) that such Hart Scott 2 5 Rodino filing is not required. In the case of Genentech, such certification, if made, shall be made by its parent company, Roche, which is responsible for such filing with respect to Genentech. 1.7 "COMMERCIALLY REASONABLE AND DILIGENT EFFORTS" shall mean with respect to development and commercialization, a Party's use of best efforts and resources consistent with the exercise of prudent scientific and business judgment, as applied to other pharmaceutical products of similar potential and market size by the Party in question, and reflecting the competitive environment for the development and marketing of OSI-774. 1.8 "CONTROLLED" with respect to Licensed Product Patents or Know-how shall mean the ability of a Party to grant a license or sublicense to such Licensed Product Patents or Know-how as provided for herein without violating the terms of any agreement or other arrangement with any Third Party existing and in effect at the time such Party would be required hereunder to grant the other Party such license or sublicense. 1.9 "COVER" (including variations such as "Covered", "Covering" and the like) shall mean that the manufacture, use, sale, offer for sale, or importation of a particular product would infringe a claim of a patent or patent application (if that claim were to issue in a patent) in the absence of rights under such patent, as determined on a country-by-country basis. 1.10 "DIVESTITURE AGREEMENT" shall mean that agreement, related to the Base Patents and dated May 23, 2000 between OSI and Pfizer Inc., a Delaware Corporation having an office at 235 East 42nd Street, New York, New York 10017. 1.11 "DRUG APPROVAL APPLICATION" shall mean an application for Regulatory Approval required for commercial sale or use of a Licensed Product as a drug in the Field in the Territory. 1.12 "EFFECTIVE DATE" shall mean the Closing Date. 1.13 "FIELD" shall mean the treatment or prophylaxis of any human disease or condition. 1.14 "FIRST COMMERCIAL SALE" shall mean the first sale, in any particular country, by Roche or its Affiliates or sublicensees of Licensed Product for use by the general public after all required marketing and pricing approval has been granted by the governing authorities of that country or, if no such approval is required, the date of first commercial sale of Licensed Product in such country. 1.15 "GLOBAL DEVELOPMENT COSTS" shall have the meaning set forth in Exhibit A to the Tripartite Agreement. 1.16 "GLOBAL DEVELOPMENT PLAN" shall mean the plan for development of OSI-774 which is attached as Exhibit A to the Tripartite Agreement as such plan may be amended from time to time. 1.17 "IND" shall mean an effective Notice of a Claimed Investigational New Drug Exemption, as defined in Title 21 of the U.S. Code of Federal Regulations, on file with the FDA before the commencement of clinical trials of Licensed Products in humans, or any comparable 3 6 filing with any relevant regulatory agencies or other governmental entities in any country in the Territory. 1.18 "INVENTION" shall mean any invention (whether or not patentable) or Know-how made after the Effective Date during the course of, in furtherance of, and as a direct result of the activities of the Parties hereunder and under the Tripartite Agreement, and which relates to any Licensed Product, its manufacture or its use in the Field in the Territory. An "Invention" may be made by employees of OSI solely or jointly with a Third Party, including Genentech (an "OSI Invention"), by employees of Roche solely or jointly with a Third Party, including Genentech (a "Roche Invention"), or jointly by employees of OSI and Roche with or without a Third Party (a "Joint Invention"). 1.19 "JOINT PATENTS" shall mean any and all Licensed Product Patents claiming a Joint Invention. 1.20 "KNOW-HOW" shall mean all proprietary information, trade secrets, techniques and data of a Party (including Confidential Information as defined in Article 10 below), directly relating to the Licensed Products that are Controlled by such Party as of the Effective Date or hereafter during the Term of this Agreement, including, but not limited to, discoveries, formulae, materials, practices, methods, knowledge, know-how, processes, experience, test data (including pharmacological, toxicological and clinical information and test data), analytical and quality control data, marketing, pricing, distribution, cost and sales data or descriptions. "Know-how" may be made, prior to the Effective Date or may be an Invention. 1.21 "LICENSED PRODUCT" shall mean pharmaceutical formulations of OSI-774 (including, without limitation, prodrugs, salts, solvates and polymorphs of all the above in any form or formulation). 1.22 "LICENSED PRODUCT PATENTS" shall mean any and all patents, patent applications and any patents issuing therefrom, together with any extensions (including supplementary protection certificates), registrations, reissues, continuations, divisions, continuations-in-part, re-examinations, substitutions or renewals thereof, that contain one or more claims Covering a Licensed Product in the Field in the Territory. 1.23 "METASTATIC ONCOLOGY INDICATION" shall mean the use of Licensed Product as a therapy for the spread of a malignancy from its site of origin to non-contiguous sites, most commonly to other organs; treatment will also involve the primary tumor, if present. 1.24 "NET SALES" and the related term "ADJUSTED GROSS SALES" mean: (a) "Adjusted Gross Sales"means the amount of gross invoiced sales of any Licensed Product (only in finished product form) charged by Roche, its Affiliates and sublicensees, at arm's length to independent Third Parties, less deductions of returns (including allowances actually given for spoiled, damaged, out-dated, rejected, returned Product sold, withdrawals and recalls), rebates (price reductions, rebates to social and welfare systems, chargebacks, government mandated rebates and similar types of rebates e.g., P.P.R.S., Medicaid), volume (quantity) discounts, taxes (value added or sales taxes, government mandated exceptional taxes and other taxes directly linked to the gross sales amount), as computed on a product by product basis in the Roche's Swiss Francs Sales Statistics for the countries concerned, using for internal 4 7 foreign currency translation the Roche's then current standard practices actually used on a consistent basis in preparing its audited financial statements. (b) "Net Sales" means the amount calculated by subtracting from the amount of Adjusted Gross Sales a lump sum deduction of ** of Adjusted Gross Sales in lieu of those sales related deductions which are not accounted for on a product by product basis (e.g. outward freights, postage charges, transportation insurance, packaging materials for dispatch of goods, custom duties, bad debt, discounts granted later than at the time of invoicing, cash discounts and other direct sales expenses). Notwithstanding the foregoing, amounts received by Roche, its Affiliates and sublicensees for the sale of any Licensed Product among Roche, its Affiliates and sublicensees for resale shall not be included in the computation of Adjusted Gross Sales and Net Sales. 1.25 "OSI KNOW-HOW" shall mean Know-how which: (a) is Controlled by OSI as of the Effective Date or hereafter during the Term of this Agreement, and (b) is necessary or useful for Roche to use, sell, offer for sale and/or import Licensed Products. 1.26 "OSI-774"shall mean the selective inhibitor of epidermal growth factor receptor having the IUPAC name [6,7-bis(2-methoxyethoxy)quinazolin-4-yl]-(3-ethynylphenyl)-amine and having the U.S. Approved Name erlotinib. 1.27 "OSI PATENTS" shall mean any and all Licensed Product Patents to the extent Controlled by OSI as of the Effective Date or hereafter during the Term of this Agreement, including, without limitation, OSI's interest in any Joint Patent. The OSI Patents as of the Effective Date are set forth on Exhibit A attached hereto and incorporated herein ("Base Patents"). 1.28 "OSI/ROCHE DEVELOPMENT COSTS" shall have the meaning defined in Exhibit C. 1.29 "PARTY" shall mean Roche or OSI, and, when used in the plural, shall mean both of them. 1.30 "PHASE II CLINICAL TRIAL" shall mean studies in humans of the safety, dose ranging and efficacy of a Licensed Product which are conducted after Phase I clinical studies of such Licensed Product. 1.31 "PHASE III ENABLING CLINICAL TRIAL" shall mean a Phase I or Phase II Clinical Trial which has generated sufficient data to commence Phase III Clinical Trials. 1.32 "REFRACTORY ONCOLOGY INDICATION" shall mean the use of Licensed Product as a therapy for the progression of a malignancy after therapy or treatment that is accepted, under generally accepted good medical practices, to have some degree of effectiveness has failed; or as a therapy for a malignancy for which there is no generally accepted effective medical therapy. 1.33 "REGULATORY APPROVAL" shall mean any approvals (including pricing and reimbursement approvals), licenses, registrations or authorizations of any national or international or local regulatory agency, department, bureau or other governmental entity, - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 5 8 necessary for the manufacture and sale of a Licensed Product in a regulatory jurisdiction in the Territory. 1.34 "ROCHE KNOW-HOW" shall mean Know-how which: (a) is Controlled by Roche as of the Effective Date or hereafter during the Term of this Agreement, and (b) is necessary or useful for OSI to (i) use, make, have made, sell, offer for sale and/or import Licensed Products, or (ii) use Licensed Products in the Field in the Territory in accordance with Section 8.3. 1.35 "ROCHE PATENTS" shall mean any and all Licensed Product Patents to the extent Controlled by Roche as of the Effective Date or hereafter during the Term of this Agreement, including, without limitation, Roche's interest in any Joint Patents. 1.36 "ROCHE PROJECT TEAM" shall mean that body established pursuant to Section 3.1 below. 1.37 "TERRITORY" shall mean the World other than the United States of America, its territories and possessions, and the Commonwealth of Puerto Rico. 1.38 "THIRD PARTY" shall mean any entity other than OSI or Roche or their permitted sublicensees, and shall include Genentech. 1.39 "TRIPARTITE AGREEMENT" shall have the meaning provided in the recitals. 1.40 "VALID CLAIM" shall mean a claim of the OSI Patents which has not been withdrawn, cancelled, disclaimed, abandoned, or held invalid, unpatentable or unenforceable by a tribunal of competent jurisdiction in a final decision (i) which is unappealable or (ii) from which all appeals have been exhausted. If a Valid Claim is the subject of a final decision holding it not invalid, unpatentable or unenforceable, the scope of the Valid Claim shall be interpreted so as to reflect the construction placed upon it in the final decision. ARTICLE 2. SCOPE OF THE COLLABORATION 2.1 GLOBAL GOALS. The Parties agree, pursuant and subject to the terms of this Agreement and the Tripartite Agreement, to further develop Licensed Products, with the goal of obtaining Regulatory Approval of Licensed Products in commercially significant indications as soon as reasonably practicable for commercial marketing and sale in the Field in the Territory, Roche shall use Commercially Reasonable and Diligent Efforts (as defined in Section 4.1 below) to perform its tasks and obligations in conducting all development work pursuant to the Global Development Plan, and each Party shall cooperate with and provide reasonable support to the other Party in such other Party's conduct of such development as provided in the Global Development Plan. 2.2 PARTICIPATION IN GLOBAL DEVELOPMENT. Each Party acknowledges that simultaneously with this Agreement, OSI will be entering into an agreement with Genentech regarding, among other things, development of OSI-774 outside the Territory. The Parties hereto, simultaneously with this Agreement, will enter into the Tripartite Agreement with Genentech governing development activities and cost sharing. 6 9 2.3 GLOBAL DEVELOPMENT PLAN. The Parties have attached as Exhibit B hereto the Global Development Plan. ARTICLE 3. MANAGEMENT OF THE COLLABORATION 3.1 ESTABLISHMENT OF ROCHE PROJECT TEAM. No later than thirty (30) days after the Effective Date, Roche will establish a Roche Project Team to coordinate all activities for the development of Licensed Products in the Field in the Territory, including pre-clinical research, clinical research, manufacturing, regulatory filings, and post-approval development studies. OSI will have the right to appoint an observer (the "OSI Observer") to the Roche Project Team. The Roche Project Team will meet at least once each calendar quarter, or more frequently, as agreed by the Roche Project Team. Notice of any such meeting shall be given to the OSI Observer no later than ten (10) days before any such meeting. 3.2 CEASING OF ROCHE PROJECT TEAM OPERATIONS. The Roche Project Team will cease operations and have no further function hereunder on the date on which Roche is no longer developing any Licensed Product in the Territory. 3.3 GLOBAL DEVELOPMENT COMMITTEE. Pursuant to the terms of the Tripartite Agreement, the Parties have established with Genentech a Global Development Committee to, among other things, direct development of OSI-774. In addition, the Parties and Genentech have established an OSI-774 Liaison Team to coordinate the development activities of the OSI-Genentech Project Team and the Roche Project Team as more fully described in the Tripartite Agreement. ARTICLE 4. DEVELOPMENT 4.1 DEVELOPMENT AND MARKETING AND EFFORTS. OSI and Roche each agree to (1) collaborate diligently in the development of Licensed Products for use in the Field, (2) cooperate with each other in carrying out the Tripartite Agreement, (3) use Commercially Reasonable and Diligent Efforts to develop and bring Licensed Products to market in the Field as soon as practicable. Furthermore, Roche agrees to use Commercially Reasonable and Diligent Efforts to market Licensed Products in the Territory. Each Party further agrees to execute and substantially perform its activities under the Global Development Plan. 4.2 TRANSFER OF MATERIALS. During the development of OSI-774, each Party may transfer certain of its proprietary materials to the other Party. Each Party agrees that it will use such materials of the other Party only for the purposes of this Agreement, the Tripartite Agreement or the OSI-Genentech Agreement, and will not transfer such materials to any Third Party other than Genentech without the prior written consent of the other Party hereunder. Except as expressly provided in this Agreement, the Tripartite Agreement or the OSI-Genentech Agreement, the transfer of any such proprietary materials by one Party to another shall not be deemed to be a grant of any rights in the proprietary material. All right, title and interest in and to all such proprietary materials (and any patent rights relating thereto) shall remain in the Party transferring such materials. 7 10 4.3 DEVELOPMENT COSTS FOR OSI AND ROCHE. All OSI/Roche Development Costs, shall be shared between Roche and OSI so that Roche bears ** of such costs and OSI bears ** of such costs. There shall be a reconciliation of such OSI/Roche Development Costs which are to be shared hereunder and which are incurred by a Party, with a prompt payment by one Party to the other to the extent necessary so that each Party bears its appropriate percentage of such shared OSI/Roche Development Costs, all as more fully set forth in Exhibit C. ARTICLE 5. TRADEMARK AND PACKAGING IN THE TERRITORY 5.1 TRADEMARKS. It is the intent of the Parties that a single product trademark shall be developed for use on and in connection with Licensed Products worldwide (the "Product Trademark"). The Parties have agreed to use the trademark ** as such Product Trademark. If it is determined that it is not possible to register or otherwise use the Product Trademark in any country within the Territory, then the Parties shall agree on an appropriate trademark to use in each such country, provided that the trademark used in the Major European Countries (as defined hereafter) and Japan is intended to be the same as whatever trademark is used in the U.S. In addition, registration use problems with respect to the Product Trademark in the Global Development Countries (as defined in the Tripartite Agreement) will be discussed by the OSI/Genentech project team and the Roche Project Team. Any decisions or disagreements concerning the desire for a global trademark will be approved or resolved by the Parties and Genentech. OSI shall own the Product Trademark, and shall be responsible for procurement and maintenance of a trademark registration for such trademark in connection with Licensed Products in the Territory. If OSI elects not to procure or maintain a trademark registration for such trademark in connection with Licensed Product in a country of the Territory, it shall so inform Roche in writing in a reasonable time before any action is due thereon. Roche shall then have the right but not the obligation to procure and maintain such trademark in such country. The cost of prosecution for trademarks in the Territory shall be shared equally between the Parties. 5.2 PACKAGING. Roche agrees that OSI shall be identified as licensor on the packaging of all Licensed Products sold by Roche or its sublicensees, subject to legal and commercial requirements on a country-by-country basis and in a manner in accordance with such legal and commercial requirements. Such marking shall further conform to the laws and practices of the jurisdiction, in which the Products are manufactured, sold and/or delivered. ** ARTICLE 6. CLOSING/ROCHE PAYMENTS 6.1 COVENANTS PENDING CLOSING. (a) REASONABLE EFFORTS. Subject to the terms and conditions of this Agreement, each of the Parties agrees to use all reasonable efforts to take, or cause to be taken, all reasonable actions and to do, or cause to be done, all things necessary and appropriate to satisfy all - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 8 11 conditions of and to consummate the transactions contemplated by this Agreement in accordance with the terms hereof. (b) FILINGS. The Parties shall cooperate with one another in the preparation, execution and filing of all documents that are required or permitted to be filed on or before the Closing, including, without limitation, filings pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"). 6.2 CONDITIONS TO CLOSING. (a) The obligation of OSI to close shall be subject to the satisfaction on or before the Closing of the following conditions, any or all of which may be waived in whole or in part by OSI: (i) the approval of the transaction by the FTC under the HSR Act or the expiration or termination of all applicable waiting periods, requests for information (and any extensions thereof) under the HSR Act, unless a joint determination is made by the Parties (by certification from each Party to the other) that such approval is not required; (ii) the representations and warranties made by Roche in Article 12 shall be true and correct in all material respects as of the Closing Date with the same force and effect as if they had been made as of the Closing Date, and Roche shall have performed all obligations and conditions herein required to be performed or observed by it on or prior to Closing; (iii) payments of $25 million in the aggregate, to OSI under this Agreement and the Development and Marketing Collaboration Agreement between OSI and Genentech (the "OSI-Genentech Agreement") by Roche and Genentech, respectively; (iv) payments of $70 million, in the aggregate, to OSI under the Stock Purchase Agreement and the Stock Purchase Agreement between OSI and Genentech by Roche and Genentech, respectively; (v) the execution and delivery of the Tripartite Agreement and the OSI-Genentech Agreement; and (vi) closing shall have occurred (or shall occur simultaneously with the Closing hereunder) under the OSI-Genentech Agreement. (b) The obligation of Roche to close shall be subject to the satisfaction on or before the Closing of the following conditions any or all of which may be waived in whole or in part by Roche: (i) the approval of the transaction by the FTC under the HSR Act or the expiration or termination of all applicable waiting periods, requests for information (and any extensions thereof) under the HSR Act, unless a joint determination is made by the Parties (by certification from each Party to the other) that such approval is not required; 9 12 (ii) the representations and warranties made by OSI in Article 12 shall be true and correct in all material respects as of the Closing Date with the same force and effect as if they had been made as of the Closing Date, and OSI shall have performed all obligations and conditions herein required to be performed or observed by them on or prior to Closing; (iii) delivery to Roche of the OSI common stock under the Stock Purchase Agreement; and (iv) the execution and delivery of the Tripartite Agreement. 6.3 PAYMENTS UPON THE EFFECTIVE DATE. Simultaneous with the Closing, Roche shall make the following non-refundable and non-creditable payments to OSI, except as otherwise set forth in this Agreement: (a) ** and (b) Thirty-five million dollars ($35,000,000) to purchase shares of OSI common stock as set forth in the Stock Purchase Agreement. 6.4 ROYALTIES. (a) ROYALTY. (i) As consideration for the license rights granted to Roche and its sublicensees by OSI under this Agreement, Roche shall pay to OSI a royalty at the rate of ** of Net Sales of Licensed Product sold by Roche, its Affiliates and sublicensees. Roche shall pay royalties with respect to each Licensed Product on a country by country basis until the date of expiration or revocation or complete rejection of the last to expire or to be revoked or to be completely rejected of any Valid Claim of an OSI Patent covering such Licensed Product in such country. In a country where there is no Valid Claim of an OSI Patent covering Licensed Product either issued or pending, Roche shall pay royalties with respect to such country for ten (10) years from the First Commercial Sale of Licensed Product in such country. (ii) Notwithstanding the above, if commencing on the date that is ten (10) years from the First Commercial Sale of a given Licensed Product in a country, the only remaining Valid Claim(s) of an OSI Patent in the country is of a Joint Patent, the royalty rate for the country set forth above shall be reduced by ** (iii) If a Third Party not under license from Roche sells a product containing as an active ingredient an epidermal growth factor receptor inhibitor that is Covered by an issued OSI Patent in a country or countries in which Roche, its Affiliates or sublicensee is selling a Licensed Product, then the royalty payable by Roche to OSI in such country shall be reduced by **. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 10 13 The royalty reduction shall be inapplicable during any period of time that OSI diligently investigates, institutes, prosecutes and/or controls litigation to enforce the OSI Patents to stop the sale of the products by the Third Party in the country. The royalty reduction shall be applicable if within sixty (60) days from the time Roche notifies OSI in writing of OSI's failure to diligently prosecute, OSI does not promptly investigate, institute, prosecute and/or control litigation to enforce the OSI Patents to stop the sale of the products by the Third Party in the country. (b) THIRD PARTY PAYMENTS. If Roche, in good faith and after the approval of OSI, pays consideration under patent rights or know-how owned or controlled by a Third Party, which, after receiving an opinion of competent counsel, could reasonably be considered to be required to allow Roche to use, sell, offer for sale, have sold, manufacture and import a Licensed Product in a given country, Roche may deduct ** of such consideration from the royalty payments payable by Roche to OSI under this Agreement, provided that such royalty shall not be reduced by more than ** from the royalty rate under Section 6.4(a)(i). (c) ROYALTY PAYMENT DATES. Royalties paid by Roche pursuant to Section 6.4(a) shall be paid by Roche within ** after the end of each calendar quarter in which Net Sales are made. All such payments shall be accompanied by a statement showing the source of such revenues, including the Net Sales of each Licensed Product in each country and a calculation of the amount of payment due for each such jurisdiction. In the event royalties are not paid within the time period set forth in this Section 6.4(c), such royalties shall bear interest, to the extent permitted by applicable law, at the average one-month European Interbank Offered Rate (=EURIBOR) as reported by Datastream (or a successor or similar organization) from time to time, calculated on the number of days such a payment is overdue. (d) ACCOUNTING. All payments due to OSI by Roche and royalties owed to OSI shall be paid in U.S. Dollars. Whenever for the purpose of calculating royalties conversion from any foreign currency shall be required, such conversion shall be made as follows: (i) when calculating the Adjusted Gross Sales, the amount of such sales in foreign currencies shall be converted into Swiss Francs as computed in the central Roche's Swiss Francs Sales Statistics for the countries concerned, using for internal foreign currency translation the Roche's then current standard practices actually used on a consistent basis in preparing its audited financial statements. (ii) when calculating the royalties on Net Sales, such conversion shall be at the average rate of the Swiss Franc to the U.S. Dollars as retrieved from the Reuters System (or any other source agreed upon in writing by the parties) for the applicable calendar quarter. (e) TAXES. All amounts owing to OSI specified in this Agreement shall be paid net of all applicable taxes, fees, and other charges excluding only taxes on Roche's income. In particular, any tax required to be withheld by Roche under the laws of any country for the account of OSI (withholding taxes), shall be promptly paid by Roche for and on behalf of OSI to the appropriate governmental authority, and Roche shall furnish OSI with proof of payment of - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 11 14 such tax. Any such tax actually paid on OSI's behalf shall be deducted from royalty payments due to OSI or promptly reimbursed to Roche if no further payments are due to OSI. Roche will assist OSI in minimizing the withholding taxes applicable to any payment made by Roche and in claiming tax refund at OSI's request. 6.5 MILESTONE PAYMENTS. Subject to the other terms and conditions of this Agreement, and as consideration for the license rights granted to Roche by OSI under this Agreement, Roche shall pay to OSI the following ** and ** amounts only once, upon the first occurrence of such event, with respect to the first Licensed Product Covered by an OSI Patent to reach such event:
EVENT PAYMENT ----- ------- Europe Japan ------ ----- ** ** **
Milestone Payments shall be paid by Roche to OSI within thirty (30) days after any filing or approval date. 6.6 PAID-UP LICENSE. Provided that Roche has satisfied all of its obligations to make payments hereunder with respect to a particular Licensed Product, Roche shall have a paid-up, exclusive, perpetual royalty-free license to use, import, offer for sale, and sell such Licensed Product in each country after the expiration of Roche's last obligation to make payments (including royalties) with respect to Net Sales of such Licensed Product in such country. 6.7 VALUE OF RIGHTS. OSI and Roche understand and acknowledge that the value of each of the rights granted by this Agreement might fluctuate while this Agreement is in effect. Notwithstanding any such fluctuation, OSI and Roche have agreed to allocate the value of these rights in the manner represented by the royalties and other payments contemplated hereunder and intend such allocation to be binding and unchanging. ARTICLE 7. MANUFACTURE AND SUPPLY 7.1 MANUFACTURE OF LICENSED PRODUCTS. (a) CLINICAL SUPPLIES. Unless otherwise agreed, OSI shall provide or cause to be provided all pre-clinical and Clinical Supplies of Licensed Product for the completion of pre-clinical work and human clinical trials for the indications for the Licensed Product in the Territory unless and until Roche decides and is able to supply such Licensed Product. OSI will enter into one or more "manufacturing and supply agreement(s)," with Third Party contract - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 12 15 manufacturer(s) and/or Roche for Clinical Supplies as soon as practicable after execution of this Agreement by the Parties. The cost of such manufacture of Clinical Supplies will be shared by the Parties in accordance with the Tripartite Agreement for Clinical Supplies which are part of Global Development Costs, and in accordance with this Agreement and Exhibit C hereto for Clinical Supplies which are part of OSI/Roche Development Costs. (b) COMMERCIAL SUPPLIES. Roche shall be entitled to supply Commercial Supplies of Licensed Product in the Territory, at the scale and in the amounts required to meet demand for Licensed Product in the Territory, if (i) within two (2) months after the Effective Date, Roche notifies OSI in writing that it is committed to do so and (ii) within six (6) months after such notification, OSI and Roche enter, after good faith negotiations, into an "OSI-Roche Manufacturing and Supply Agreement" for no additional consideration. Notwithstanding the foregoing, nothing is intended to preclude the Parties from negotiating an agreement with respect to the supply of Commercial Supplies of Licensed Product outside the Territory at a cost to be defined in such agreement (with OSI having audit rights with respect to the calculation of such costs). If OSI and Roche do not enter into the OSI-Roche Manufacturing and Supply Agreement in accordance with this Section 7.1(b), then Roche shall no longer be entitled to supply Commercial Supplies of Licensed Product in the Territory. In addition, OSI shall then be responsible for establishing a commercial manufacturing process and for supply of the Commercial Supplies of Licensed Products in the Territory, at the scale and in the amounts required to meet demand for Licensed Product in the Territory. In such case, as soon as practicable after the completion of the first Phase III Enabling Clinical Trial, OSI will enter into a supply agreement with a Third Party contract manufacturer(s) for Commercial Supplies wherein the costs of manufacture and supply of Commercial Supplies of Licensed Products for the Territory shall be no greater than the costs of manufacture and supply of Commercial Supply of Licensed Products outside the Territory. The cost of such manufacture and supply of Commercial Supplies for the Territory will be borne by Roche(with Roche having audit rights with respect to the calculation of such costs for the Territory). The detailed terms of the supply of Commercial Supplies by OSI will be governed by a "Manufacturing and Supply Agreement" entered into between the Parties as soon as practicable. ARTICLE 8. LICENSES 8.1 LICENSE TO ROCHE. Subject to the terms hereof and upon the Closing Date, OSI hereby grants to Roche a royalty-bearing, non-transferable (except pursuant to Section 17.1), non-sublicensable (except pursuant to Section 8.4), sole and exclusive license under the OSI Patents and OSI Know-how, to use, sell, offer for sale, and import Licensed Products in the Field in the Territory. 8.2 LICENSE TO OSI AND GENENTECH. Subject to the terms hereof and upon the Closing Date, Roche hereby grants to OSI and Genentech, ** non-transferable (except pursuant to - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 13 16 Section 17.1), non-sublicensable (except pursuant to Section 8.4), co-exclusive license (co-exclusive between OSI and Genentech) outside the Territory under the Roche Patents and Roche Know-how to make, have made, use, sell, offer for sale and import Licensed Products (as defined in the OSI-Genentech Agreement) in accordance with the OSI-Genentech Agreement and this Agreement. Genentech shall be a third party beneficiary with respect to the rights granted in the previous sentence. 8.3 RETENTION OF RIGHTS. Notwithstanding the license granted to Roche in Section 8.1, OSI shall retain the right within the Territory (i) to carry out any and all activities contemplated under the OSI-Genentech Agreement and the Tripartite Agreement, (ii) to conduct research and development relating to the Licensed Products, or (iii) to use the OSI Know-how for its own internal use and for non-commercial purposes. 8.4 SUBLICENSES. For the first ** after the Effective Date, neither Party may sublicense any of its rights hereunder to a Third Party without the prior written consent of the other Party. Beginning ** after the Effective Date, such prior written consent of the other Party shall not be unreasonably withheld. The Party requesting consent shall fully disclose to the other Party all material terms of the proposed sublicense in connection with such request. If any Party grants a sublicense permitted by this Agreement, all of the terms and conditions of this Agreement shall apply to the sublicensee to the same extent as they apply to such Party for all purposes. The sublicensing Party assumes full responsibility for the performance of all obligations so imposed on such sublicensee and will itself pay and account to the other Party for all payments due under this Agreement by reason of the operation of any such sublicense. ARTICLE 9. TRADEMARKS 9.1 PRODUCT TRADEMARK. All Licensed Products shall be sold in the Territory under the Product Trademark or described in Section 5.1. 9.2 GRANT OF LICENSE. OSI grants to Roche, subject to compliance with the other terms and conditions of this Agreement including, without limitation, Section 8.4, a sole and exclusive, royalty-free license, with the right to sublicense, to use the Product Trademark solely within the Territory and solely in connection with the Licensed Products. 9.3 QUALITY CONTROL. Roche shall apply the Product Trademark only to the Licensed Products in accordance with the terms of this Agreement. OSI shall have the right, at any time during regular business hours but no more than one time per calendar year, to conduct an examination of the Licensed Products to determine the quality of such Products. If at any time, such Licensed Products shall, in the reasonable opinion of OSI, fail to conform with the appropriate standards of quality as required under this Agreement, OSI or its authorized representatives shall notify Roche. Upon such notification, the Parties shall discuss and implement actions to meet standards of quality to the complete satisfaction of OSI. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 14 17 9.4 ACKNOWLEDGMENT OF OWNERSHIP RIGHTS. Roche acknowledges and agrees that OSI is the exclusive owner of all right, title, and interest in and to the Product Trademark and that all use of the Product Trademark by Roche will inure to the exclusive benefit of OSI. Roche undertakes to make use of the Product Trademark only in such a way that the rights of OSI in said mark will not be diminished in any way. Roche shall not use the Product Trademark as all or part of any corporate name, trade name, trademark, service mark, certification mark, collective membership mark, domain name, or any other designation confusingly similar to the Product Trademark. If any application for registration is or has been filed on behalf of Roche in any country and relates to any mark which, in the reasonable opinion of OSI, is confusingly similar, deceptive, or misleading with respect to, or dilutes or in any other way damages the Product Trademark, Roche shall, at OSI's request, abandon all use of such mark and any registration or application for registration and shall reimburse OSI for all costs and expenses, including attorneys' fees, associated with any successful opposition or related proceeding instigated by OSI or its authorized representative in response to such filings. Use of Trademark Designations. Roche, at its option, will use the (TM) designation in conjunction with any use of the Product Trademark within the Territory until such time as the foreign registrations issue, unless required by local trademark law. Once the foreign registrations issue, Roche, at its option, will use the (R) designation with all uses of the Product Trademark and any other similar designation, unless required by local trademark law. 9.5 ACTIONS FOR INFRINGEMENT. Each Party shall notify the other promptly upon learning of any actual, alleged, or threatened infringement of the Product Trademark applicable to a Licensed Product in the Territory or of any unfair trade practices, trade dress imitation, passing off of counterfeit goods, or like offenses in the Territory. Upon learning of such offense from a Party, the Parties shall confer regarding the defense of the Product Trademark. OSI shall have the first right to respond to and defend any such infringement or offense. In the event OSI elects to do so, Roche will cooperate with and provide assistance to OSI. OSI will keep Roche reasonably informed at all times as to the status of the infringement or offense. In the event that OSI elects, within ninety (90) days, not to respond to or defend any such infringement or offense or abandons such defense, then, in such event, Roche shall have the option to do so, provided that OSI will cooperate with and provide assistance to Roche. 9.6 COSTS OF DEFENSE OF TRADEMARKS. The Party not bringing the action may elect to contribute ** of the costs and expenses of such action by providing written notice to the Party bringing the action within ninety (90) days of the date such action is first brought. Otherwise, the Party bringing the action shall bring such action or proceeding at its own cost and expense. The Party not bringing such action agrees to be joined as a party plaintiff if necessary to prosecute the action and to give reasonable assistance and authority to file and prosecute the action. Any damages or other monetary awards recovered from settlement or judgment from such an action shall be allocated first to reimburse the costs and expenses of the Party bringing the action, then to reimburse the costs and expenses, if any, of the other Party (except for costs associated with the other Party being represented by counsel of its own choice). If a single Party - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 15 18 has paid the costs and expense of such action, any amounts remaining shall be paid to such Party. ** ARTICLE 10. CONFIDENTIALITY 10.1 CONFIDENTIALITY. Except to the extent expressly authorized by this Agreement, the Tripartite Agreement, or otherwise agreed in writing, the Parties agree that, for the Term of this Agreement and for five (5) years thereafter, the receiving Party shall keep confidential and shall not publish or otherwise disclose or use for any purpose other than as permitted under this Agreement any Know-how and other proprietary information and materials furnished to it by the other Party pursuant to this Agreement (collectively, "Confidential Information"), except to the extent that it can be established by the receiving Party that such Confidential Information: (a) was already known to the receiving Party, other than under an obligation of confidentiality, at the time of disclosure by the other Party as demonstrated by competent written records; (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; (d) was disclosed to the receiving Party, other than under an obligation of confidentiality, by a Third Party who had no obligation to the disclosing Party not to disclose such information to others; or (e) was subsequently developed by the receiving Party without use of the Confidential Information as demonstrated by competent written records. The Parties may disclose Confidential Information to Genentech in furtherance of and under the terms of the Tripartite Agreement. 10.2 AUTHORIZED DISCLOSURE. (a) Each Party may disclose Confidential Information hereunder to the extent such disclosure is required to comply with applicable governmental regulations or conduct pre-clinical or clinical trials or to the extent ordered by a court of competent jurisdiction (subject to entry of an appropriate protective order), provided that if a Party is required by law or regulation to make any such disclosure of the other Party's Confidential Information it will give reasonable advance notice to the other Party of such disclosure requirement and will use its reasonable best efforts to secure confidential treatment of such Confidential Information required to be disclosed. In addition, each Party shall be entitled to disclose, under a binder of confidentiality containing provisions substantially as protective as those of this Article 10, Confidential Information to its consultants, clinical investigators and contract manufacturer, if any, but only for any purposes provided for in this Agreement. - ---------------- ** This portion has been redacted pursuant to a confidential treatment request. 16 19 (b) The restrictions set forth in this Article 10 shall not prevent Roche from disclosing any technical information to the extent reasonably necessary to promote the use and sale of Licensed Product in a country upon actual Regulatory Approval of Licensed Product in the country. 10.3 SURVIVAL. This Article 10 shall survive the termination or expiration of this Agreement for a period of five (5) years; except Section 10.2(b) shall perpetually survive termination of this Agreement by Roche under Section 14.2 or 14.7, or expiration of this Agreement. 10.4 TERMINATION OF PRIOR AGREEMENT. As of the Effective Date hereof, this Agreement supersedes the Confidentiality Agreement between the Parties dated September 25, 2000 but only insofar as such Confidentiality Agreement relates to the subject matter of this Agreement. All Confidential Information (as defined in such Confidentiality Agreement) exchanged between the Parties under such Confidentiality Agreement relating to the subject matter of this Agreement shall be deemed Confidential Information hereunder and also shall be subject to the terms of this Article 10. 10.5 PUBLICATIONS. Except as required by law, and except as set forth in the Tripartite Agreement, each Party agrees that it shall not publish or present the results of studies or clinical trials carried out by such Party as part of the collaboration without the opportunity for prior review by the other Party. Each Party shall provide to the other Party the opportunity to review any of the submitting Party's proposed abstracts, manuscripts or presentations (including information to be presented verbally) which relate to the Field at least thirty (30) days prior to their intended submission for publication, and such submitting Party agrees, upon written request from the other Party, not to submit such abstract or manuscript for publication or to make such presentation until the other Party is given up to forty-five (45) days from the date of such written request to seek appropriate patent protection for any material in such publication or presentation which it reasonably believes is patentable. Once such abstracts, manuscripts or presentations have been reviewed by each Party and have been approved for publication, the same abstracts, manuscripts or presentations do not have to be provided again to the other Party for review for a later submission for publication. Expedited reviews for abstract and poster presentations within ten (10) days of receipt by the other Party may be arranged by sending a prior written notice to such other Party requesting such expedited review, unless another arrangement is mutually agreed upon by the Parties. Each Party also shall have the right to require that its Confidential Information that may be disclosed in any such proposed publication be deleted prior to such publication. In the event that either Party submits any manuscript or other publication relating to any Licensed Product, it will consider and acknowledge the contributions of the other Party, including, as appropriate, co-authorship. ARTICLE 11. OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT RIGHTS 11.1 OWNERSHIP OF INTELLECTUAL PROPERTY. (a) INVENTIONS. Each Party will promptly disclose to the other all Inventions made by it during the Term of this Agreement. As between the Parties, OSI shall own all OSI Inventions, 17 20 Roche shall own all Roche Inventions, and all Joint Inventions shall be owned jointly by OSI and Roche. OSI and Roche each shall require all of its employees to assign all inventions related to Licensed Products made by them to Roche and OSI, as the case may be. (b) OTHER INVENTIONS. During the Term of this Agreement, inventions may be made by employees of either Party, solely or jointly, which are not Inventions. As between the Parties, OSI shall own all such inventions made by its employees solely or jointly with Third Parties, Roche shall own all such inventions made by its employees solely or jointly with Third Parties and all such inventions made jointly by employees of OSI and Roche shall be jointly owned by OSI and Roche. Each Party, at its sole discretion and responsibility, may file, prosecute and maintain patent applications and patents covering such solely owned inventions. For inventions that are jointly owned by the Parties, the Parties shall jointly decide on a patent application filing and prosecution strategy. (c) INVENTORSHIP PROCEDURE. The determination of inventorship for Inventions shall be made in accordance with applicable laws in the Territory relating to inventorship on a country-by-country basis. If the Parties cannot agree as to inventorship, the Parties' patent counsel shall attempt to resolve the issue of inventorship, and failing that, refer the same to outside counsel. 11.2 DISCLOSURE OF PATENT APPLICATIONS. In addition to the disclosures required under Article 13 below, each Party shall provide to the other Party a copy of any patent applications filed by the Party for Inventions. 11.3 THIRD PARTY PATENTS. Each Party agrees to bring to the attention of the other Party in a timely manner any Third Party patent or patent application that has been brought to its attention by such Third Party that it believes would have a material affect on the operations to be conducted by or on behalf of the Parties under this Agreement. In addition, as of the Effective Date, neither Party has knowledge, without investigation, of any Third Party patent or patent application that would be reasonably expected to have a materially adverse effect on the business and operations to be conducted in the Territory as contemplated by this Agreement by the Parties under this Agreement. Additionally, as of the Effective Date, to its knowledge (without investigation), neither Party (i) has received notice from any Third Party that OSI-774 infringes on any patent or patent application owed by such Third Party that would have a material effect on the operations to be conducted by or on behalf of the Parties under this Agreement, or (ii) has received an adverse written legal opinion from competent outside patent counsel that has not been disclosed to the other Party. For purposes of this Section 11.3, the knowledge of OSI shall mean the knowledge of the Chief Executive Officer, Vice President Business Development and Director of Intellectual Property of OSI. 11.4 PATENT FILINGS. (a) The Parties acknowledge that the Divestiture Agreement governs responsibility for filing, prosecuting and maintaining the Base Patents, and responsibility for all material actions relating to the prosecution or maintenance of the Base Patents in the Territory, including patent oppositions and revocation proceedings. OSI shall not amend the Divestiture Agreement as it relates to the prosecution, maintenance or enforcement of the Base Patents without the prior written consent of Roche, which consent shall not be unreasonably withheld. To the extent and 18 21 only to the extent permitted by the Divestiture Agreement, OSI shall (i) keep Roche apprised of the status of each such patent and patent application in Major European Countries and Japan, (ii) share with Roche all material information (including correspondence with the various patent offices) relating thereto promptly after receipt of such information and (iii) at Roche's timely request intervene in such matters as may be reasonably requested by Roche. (b) At its discretion and sole expense, each party shall file, prosecute, and maintain its patents for its solely owned Inventions in such countries worldwide as it may determine. OSI and Roche shall agree on which Party shall file, prosecute and maintain patents in the Territory for any jointly-owned Inventions on a case-by-case basis. If either Party as described above elects not to file, prosecute or maintain any such patent in any country worldwide, it shall so inform the other Party no later than nine (9) months after the priority filing. If any Party at any time elects not to further prosecute or maintain any such patent in any country in the Territory, it shall so inform the other Party immediately. The other Party may then file, prosecute and maintain any such patents in such countries as it may determine at its own expense and discretion. The Party which is responsible for filing a patent application for such an Invention will be termed the "filing Party." For the U.S., the Major European Countries and Japan and as otherwise requested by the other Party, the filing Party shall keep the other Party apprised of the status of each such patent application and patent and shall seek the advice of the other Party with respect to patent strategy and draft patent applications and shall give reasonable consideration to any suggestions or recommendations promptly provided by the other Party concerning the preparation, filing, prosecution, and maintenance thereof. The Parties shall cooperate reasonably in the prosecution of all such patent applications and patents and shall share all material information relating thereto promptly after receipt of such information. If, during the Term of this Agreement, the filing Party intends to allow any patent or patent application for an Invention in any country of the World to lapse or become abandoned without having first filed a substitute, the filing Party shall make reasonable efforts to notify the other Party of such intention at least sixty (60) days prior to the date upon which such patent application or patent shall lapse or become abandoned, and the other Party shall thereupon have the right, but not the obligation, to assume responsibility for the prosecution and maintenance thereof at its own expense. 11.5 INITIAL FILINGS IF MADE OUTSIDE OF THE U.S. The Parties agree to use reasonable efforts to ensure that any patent filed outside of the U.S. prior to a U.S. filing will be in a form sufficient to establish the date of original filing as a priority date for the purposes of a subsequent U.S. filing. 11.6 ENFORCEMENT RIGHTS. (a) NOTIFICATION OF INFRINGEMENT. If either Party learns of any infringement or threatened infringement by a Third Party of a Licensed Product Patent in any country of the Territory, such Party shall promptly notify the other Party in writing and shall provide such other Party with available evidence of such infringement. (b) ENFORCEMENT. (i) ROCHE PATENTS. Roche shall have the right, but not the obligation, to institute, prosecute and control (collectively, "bring") any action of any Roche Patent that is not a Joint Patent, by counsel of its own choice, and OSI shall have the right, at its own expense, to be 19 22 represented in any such action by counsel of its own choice. If Roche chooses not to bring an action or proceeding with respect to such a Roche Patent within sixty (60) days of being notified of such infringement, then OSI shall have the right (but not the obligation) to bring such action. The Party not in control may elect to contribute ** of the costs and expenses of such action or proceeding by providing written notice to the controlling Party within forty-five (45) days of the date such action or proceeding is first brought. Otherwise, the controlling Party shall bring such action or proceeding at its own cost and expense. The Party not bringing such action or proceeding agrees to be joined as a party plaintiff if necessary to prosecute the action or proceeding and to give reasonable assistance and authority to file and prosecute the action or proceeding. Any damages or other monetary awards recovered from settlement or judgment from such an action or proceeding shall be allocated first to reimburse the costs and expenses of the controlling Party, then to reimburse the costs and expenses, if any, of the other Party (except for costs associated with the other Party being represented by counsel of its own choice). If a single Party has paid the cost and expense of such action or proceeding, any amounts remaining shall be paid to such Party.**. (ii) OSI PATENTS FOR INVENTIONS. OSI shall have the right, but not the obligation, to bring any action or proceeding with respect to infringement in the Territory of any OSI Patent for OSI Inventions, by counsel of its own choice, and Roche shall have the right, at its own expense, to be represented in any such action by counsel of its own choice. If OSI chooses not to bring an action or proceeding with respect to such OSI Patents for OSI Inventions within sixty (60) days of being notified of such infringement, then Roche shall have the right (but not the obligation) to bring such action. The Party not in control may elect to contribute ** of the costs and expense of such action or proceeding by providing written notice to the controlling Party within forty-five (45) days of the date such action or proceeding is first brought. Otherwise, the controlling Party shall bring such action or proceeding at its own cost and expense. The Party not bringing such action or proceeding agrees to be joined as a party plaintiff if necessary to prosecute the action or proceeding and to give reasonable assistance and authority to file and prosecute the action or proceeding. Any damages or other monetary awards recovered from settlement or judgment from such an action or proceeding shall be allocated first to reimburse the costs and expenses of the controlling Party, then to reimburse the costs and expenses, if any, of the other Party (except for costs associated with the other Party being represented by counsel of its own choice). If a single Party has paid the costs and expense of such action or proceeding, any amounts remaining shall be paid to such Party.**. (iii) JOINTLY-OWNED PATENTS FOR INVENTIONS. In the event of an infringement of a Joint Patent, the Parties shall promptly decide the best way for the Parties to proceed, including handling costs of enforcement, and entitlement to recovery from any settlement or judgment from any action or proceeding to enforce any such jointly-owned patent. In any event, if the Parties decide to bring an action or proceeding, the Party not bringing such action or proceeding agrees to be joined as a party plaintiff if necessary to prosecute the action or proceeding and to give reasonable assistance and authority to file and prosecute the action or proceeding. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 20 23 (iv) BASE PATENTS. The Parties acknowledge that the Divestiture Agreement governs responsibility for enforcing the Base Patents. To the extent and only to the extent permitted by the Divestiture Agreement, the Parties agree that as between OSI and Roche, the following provision shall apply. OSI shall have the right, but not the obligation, to bring any action or proceeding with respect to infringement of any such of the Base Patents in the Territory, by counsel of its own choice. If OSI chooses not to bring an action or proceeding in the Territory with respect to such a Base Patent within sixty (60) days of being notified of such infringement, then, to the extent permitted by the Divestiture Agreement, Roche shall have the right (but not the obligation) to bring such action in the Territory. The Party not in control may elect to contribute ** of the costs and expenses of such action or proceeding by providing written notice to the controlling Party within forty-five (45) days of the date such action or proceeding is first brought. Otherwise, the controlling party shall bring such action or proceeding at its own cost and expense. The Party not bringing such action or proceeding agrees to be joined as a party plaintiff if necessary to prosecute the action or proceeding and to give reasonable assistance and authority to file and prosecute the action or proceeding. Any damages or other monetary awards recovered from settlement or judgment from such an action or proceeding shall be allocated first to reimburse the costs and expenses of the controlling Party, then to reimburse the costs and expenses, if any, of the other Party (except for costs associated with the other Party being represented by counsel of its own choice). If a single Party has paid the costs and expense of such action or proceeding, any amounts remaining shall be paid to such Party. **. (c) SETTLEMENT WITH A THIRD PARTY. The Party that brings suit to enforce a given Licensed Product Patent shall also have the right to control settlement of such claim; provided, however, that if one Party controls, no settlement shall be entered into without the written consent of the other Party if such settlement would materially and adversely affect the interests of such other Party. If there is no agreement between the Parties regarding such settlement, then the dispute will be resolved pursuant to Article 16 below. If the dispute is not resolved pursuant to Article 16, then the case may not be settled. ARTICLE 12. REPRESENTATIONS AND WARRANTIES 12.1 REPRESENTATIONS AND WARRANTIES. Each of the Parties hereby represents and warrants as follows: (a) This Agreement is a legal and valid obligation binding upon such Party and enforceable in accordance with its terms. The execution, delivery and performance of the 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 is bound, nor violate any law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it. (b) Such Party has not, and during the Term of the Agreement will not, grant any rights related to Licensed Products to any Third Party which would conflict with the rights - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 21 24 granted to the other Party hereunder or under the OSI-Genentech Agreement or Tripartite Agreement. (c) That such Party has the right to grant the licenses granted herein. 12.2 ROCHE REPRESENTATION. Roche represents that during the course of this transaction and prior to the Closing Roche has had an opportunity to ask questions of, and to receive answers from, OSI and its representatives, with respect to OSI, OSI-774 and the terms and conditions of this transaction. 12.3 OSI REPRESENTATION. OSI represents that during the course of this transaction and prior to the Closing, Roche, or representatives of Roche have had the opportunity to ask questions of and receive answers from representatives of OSI concerning the terms and conditions of the transaction, and to obtain information, documents, records and books relative to OSI, its business, OSI-774 and the transaction, and OSI represents and warrants that it did not knowingly withhold any material information from Roche in response to Roche's inquiries or otherwise in connection with the subject matter of this Agreement. ** 12.4 THE EXPRESS REPRESENTATIONS AND WARRANTIES STATED IN THIS AGREEMENT ARE IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE EXCEPT THAT THIS SHALL NOT AFFECT ANY REPRESENTATION MADE ABOUT MATERIAL FURNISHED UNDER ANY SUPPLY OR MANUFACTURING AGREEMENT. 12.5 DISCLAIMER. IN NO EVENT SHALL EITHER OSI OR ROCHE BE LIABLE FOR SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS AGREEMENT BASED ON CONTRACT, TORT OR ANY LEGAL THEORY EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT. ARTICLE 13. INFORMATION AND REPORTS 13.1 INFORMATION. Roche and OSI will disclose and make available to each other in a timely manner all pre-clinical, clinical, regulatory and other information concerning Licensed Products known by Roche or OSI at any time during the Term of this Agreement in accordance with the Tripartite Agreement. Each Party will use Commercially Reasonable and Diligent Efforts to disclose to the other Party all significant information directly related to Licensed Products promptly after it is learned or its significance is appreciated. The ownership and maintenance of a database of adverse drug experience information for all commercial Licensed Products will be determined in accordance with the Tripartite Agreement. As soon as reasonably possible after the execution of this Agreement, the Parties will enter into one or more separate safety and adverse event reporting agreements which will govern the reporting and other procedures related to adverse drug experiences under this collaboration between OSI and Roche, and under the activities in the Tripartite Agreement between the Parties and Genentech. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 22 25 13.2 PRODUCT COMPLAINTS. Roche will maintain a record of all non-medical and medical Licensed Product related complaints and will notify OSI of any complaint in a sufficient time to allow OSI to comply with any regulatory requirements it may have with respect to such complaint. 13.3 ADVERSE DRUG EVENTS. The Parties recognize that the Party that is the holder of an IND and a Drug Approval Application will be required to submit information and file reports to various governmental agencies on compounds under clinical investigation, compounds proposed for marketing, or marketed drugs. Information must be submitted at the time of initial filing for investigational use in humans and at the time of a request for market approval of a new drug. In addition, supplemental information must be provided on compounds at periodic intervals and adverse drug experiences must be reported at more frequent intervals depending on the severity of the experience. The specific obligations of each Party with respect to adverse drug experiences will be governed by the safety and adverse event reporting agreement(s) described in Section 13.1 above. 13.4 RECORDS OF NET SALES. Roche and its Affiliates shall keep, and shall require its sublicensees to keep, full, true and accurate books of account containing all particulars that may be necessary for the purpose of calculating all royalties payable to OSI. Such books of accounts shall be kept at their principal place of business. At the reasonable expense of OSI, OSI or its authorized independent public accountant has the right to engage Roche's officially appointed worldwide independent public accountant to perform, on behalf of OSI or its independent public accountant, an audit, conducted in accordance with international accounting standards (IAS), of such books and records of Roche, its Affiliates and sublicensees, that are deemed necessary by Roche's independent public accountant to report on Net Sales of Licensed Product for the period or periods requested by OSI and the correctness of any report or payments made under this Agreement. Roche shall have the right to participate in the determination of the scope of such audit procedures. Upon timely request and at least thirty (30) working days' prior written notice from OSI, such audit shall be conducted as an additional audit work during Roche's annual audit of the countries specifically requested by OSI, during regular business hours in such a manner as to not unnecessarily interfere with Roche's normal business activities, and shall be limited to results in the two (2) calendar years prior to audit notification. Such audit shall not be performed more frequently than once per calendar year nor more frequently 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 Confidential Information subject to the obligations of this Agreement and need neither be retained more than one (1) year after completion of an audit hereof, if an audit has been requested; nor more than three (3) years from the end of the calendar year to which each shall pertain; nor more than one (1) year after the date of termination of this Agreement. Audit results shall be shared by Roche and OSI. If the audit reveals an underpayment, Roche shall promptly make up such underpayment. If the audit reveals that the - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 23 26 royalties owed by Roche to OSI for the countries specifically requested and for any calendar year in total have been understated by more than **. The failure of OSI to request verification of any royalty calculation within the period during which corresponding records must be maintained will be deemed to be acceptance of the royalty reporting. In the case Roche has overpaid royalties to OSI, Roche shall be entitled to claim reimbursement of any such amount overpaid and OSI shall promptly reimburse Roche for any such amount. 13.5 CONTRIBUTION OF INFORMATION. It is the intention of the Parties that each will disclose to the other Party such information in its possession that is useful to the development and commercialization of Licensed Products, subject to contractual obligations of the Parties entered into prior to the execution of this Agreement by the Parties. 13.6 PUBLICITY REVIEW. The Parties agree that the public announcement of the execution of this Agreement shall be in the form of a press release to be agreed upon on or before the Effective Date and thereafter each Party shall be entitled to make or publish any public statement consistent with the contents thereof. Thereafter, except as set forth in the Tripartite Agreement, OSI and Roche will jointly discuss and agree, based on the principles of this Section 13.6, on any statement to the public regarding this Agreement or any aspect of this Agreement and the results of clinical studies conducted hereunder, subject in each case to disclosure otherwise required by law or regulation as determined in good faith by each Party. When a Party elects to make any such statement it will give the other Party at least five (5) day's notice, unless disclosure is required by law in a shorter period of time, to the other Party to review and comment on such statement. The Parties acknowledge the importance of supporting each other's efforts to publicly disclose results and significant developments regarding Licensed Products. The principles to be observed by OSI and Roche in such public disclosures will be: accuracy, the requirements for confidentiality under Article 10, the advantage a competitor of OSI or Roche may gain from any public statements under this Section 13.6, and the standards and customs in the biotechnology and pharmaceutical industries for such disclosures by companies comparable to OSI and Roche. The terms of this Agreement may also be disclosed to (a) government agencies where required by law, including filings required to be made by law with the Securities and Exchange Commission, the New York Stock Exchange, or any national exchange, or (b) Third Parties with the prior written consent of the other Party, which consent shall not be unreasonably withheld, so long as such disclosure is made under a binder of confidentiality at least as restrictive as the confidentiality provisions in Section 10.1 above (in the case of Third Parties), so long as highly sensitive terms and conditions such as financial terms are extracted from the Agreement or not disclosed upon the request of the other Party and the disclosing Party gives reasonable advance notice of the disclosure under the circumstances requiring the disclosure. ARTICLE 14. TERM AND TERMINATION 14.1 TERM. This Agreement shall commence as of the Effective Date. The Parties have specifically provided elsewhere in this Agreement the term during which certain rights and obligations hereunder shall apply. Subject to Section 6.4, unless sooner terminated as provided in this Article 14, the remaining provisions of this Agreement relating to activities in the - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 24 27 Territory shall continue in effect until the date on which OSI is no longer entitled to receive a royalty on any Licensed Product (the "Term"). Unless sooner terminated as provided in this Article 14, the license granted to Roche in Section 9.2 shall survive the Term. 14.2 TERMINATION. (a) TERMINATION FOR BREACH. If either Party materially breaches this Agreement at any time, which breach is not cured within ninety (90) days after written notice thereof from the non-breaching Party specifying the nature of such breach, the non-breaching Party shall have the right to terminate this Agreement immediately upon written notice to the breaching Party. Upon such termination, the Parties shall have no further rights or obligations under this Agreement except as set forth in this Article 14 or as otherwise specifically provided in this Agreement. The Parties acknowledge and agree that failure to exercise any right or option with respect to any Licensed Product or to take any action expressly within the discretion of a Party shall not be deemed to be material breach hereunder. (b) FAILURE OF ROCHE TO MAKE PAYMENT. Notwithstanding Section 14.2(a), if Roche materially breaches this Agreement by failure to make any of the payments required under Section 6.3 or 6.5 within thirty (30) days after such payment becomes payable, and such failure is not remedied within thirty (30) days after Roche's receipt of written notice from OSI of such breach, then OSI shall have the right to terminate this Agreement, provided however, that if the Parties disagree as to the achievement of any milestone event applicable to such payment, then Roche will not be obligated to make such payment pending resolution of such disagreement, and the Parties will resolve such disagreement pursuant to the dispute resolution procedures in Sections 16.1, 16.2 and 16.3. (c) BREACHING PARTY OBLIGATIONS. In the event of termination by a Party due to material breach by the other Party, the breaching Party shall: (i) remain responsible to supply the amounts of Licensed Product it was obligated to supply at the time of such termination for a reasonable period of time to allow the other Party to find an alternate source of supply, or as otherwise required under a Manufacturing and Supply Agreement between the Parties; (ii) make its personnel and other resources reasonably available to the other Party as necessary to effect an orderly transition of responsibilities, with the reasonable cost of such personnel and resources to be borne by the breaching Party after the effective date of termination and (iii) if such material breach occurred prior to the second anniversary of the Closing Date, pay to the non-breaching Party, in addition to any amounts due and owing by the breaching Party under this Agreement (other than amounts, if any, that cause the breach) **. If such material breach occurs on or after the second anniversary of the Closing Date, the non-breaching Party shall have all remedies provided by law or equity with respect to such breach, that may be awarded pursuant to Article 16 below, in addition to any amounts due and owing by the breaching Party to the non-breaching Party under this Agreement. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 25 28 14.3 ADDITIONAL EFFECTS OF TERMINATION FOR MATERIAL BREACH. (a) In the event that OSI terminates this Agreement pursuant to Section 14.2 above, (i) all rights and licenses granted to Roche hereunder shall revert to OSI, (ii) title to all jointly owned Inventions shall be transferred to OSI (except that Roche shall retain ** non-exclusive worldwide license to practice such Inventions to the extent applicable to products other than Licensed Products), (iii) Roche shall grant to OSI a sole and exclusive worldwide, perpetual, ** license under Roche Patents and Roche Know-how to make, have made, use, sell, offer for sale or import Licensed Products throughout the world, and (iv) Roche shall provide and assign to OSI, at Roche's expense, for no additional consideration to be paid by OSI, all clinical data, Drug Approval Applications, Regulatory Approvals and all other regulatory documentation specifically covering Licensed Product (but only to the extent they specifically relate only to Licensed Product and not other products or matters) that Roche may have developed in its activities under this Agreement. (b) In the event that Roche terminates this Agreement pursuant to Section 14.2 above, at Roche's sole option, all licenses granted to Roche hereunder shall survive, provided that Roche shall **. 14.4 PARTIAL TERMINATION. (a) PARTIAL TERMINATION BY ROCHE. Beginning two (2) years after the Effective Date, Roche shall have the right to provide six (6) months written notice to OSI to terminate this Agreement on a country-by-country basis. Such country-by-country termination shall be effective at the end of the applicable notice period. (b) PARTIAL TERMINATION BY OSI. OSI shall have the right to terminate this Agreement on a country-by-country basis if Roche has not launched and marketed a Licensed Product in any such country within six (6) months after regulatory approval in such country without an objectively justifiable business or scientific reason adequately evidenced by competent written records. 14.5 EFFECT OF PARTIAL TERMINATION. (a) Termination pursuant to Section 14.4 shall not relieve either party of the performance of any obligations incurred or payments (i) due prior to the effective date of termination, (ii) which are uncancellable, and (iii) in accordance with the Global Development Plan. (b) Notwithstanding the foregoing, if Roche terminates the Agreement with regard to a Licensed Product in a country in accordance with Section 14.4(a) the following shall apply for the country: (i) Roche shall use its reasonable efforts to effect a smooth and orderly transition of any already on-going clinical studies, Regulatory Approval or pre-marketing efforts to OSI (including all data and reports in the possession of Roche); - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 26 29 (ii) Roche shall make its personnel and other resources reasonably available to the other Party as necessary to effect an orderly transition of development responsibilities, with the reasonable cost of such personnel and resources to be borne by Roche after the effective date of termination; (iii) **; (iv) all rights and licenses granted herein to Roche shall revert to OSI, for no additional consideration, and immediately terminate. Thereafter, OSI shall have the sole and exclusive license to make, have made, use, offer for sale, sell and import Licensed Product in the Territory under Roche Patents and Roche Know-how; and (v) Roche shall provide and assign to OSI, at Roche's expense, all clinical data, INDs, NDAs, Regulatory Approvals and all other regulatory documentation specifically relating to Licensed Product (but only to the extent they specifically relate only to Licensed Product and not other products or matters) that Roche may have developed in its activities under this Agreement. (c) In the event of termination pursuant to Section 14.4(b), with regard to such country (i) all licenses granted by OSI to Roche in such country shall terminate, (ii) all licenses granted by Roche to OSI shall continue and (iii) at the request of OSI, Roche shall assign to OSI all regulatory filings, regulatory approvals and clinical data owned and controlled by Roche relating to Licensed Products, or, if such assignment is not legally permissible, grant OSI the right to access, use and cross reference such filings, approval and data. (d) Roche shall have the unilateral right to terminate this Agreement at any time upon thirty (30) days' writtten notice to OSI if the Global Development Committee imposes a clinical hold for at least six (6) months, or there has been a clinical hold by a regulatory authority in a Major European Country or Japan for at least six (6) months, provided, however: (i) Roche shall use its reasonable efforts to effect a smooth and orderly transition of any already on-going clinical studies, Regulatory Approval or pre-marketing efforts to OSI (including all data and reports in the possession of Roche); (ii) Roche shall make its personnel and other resources reasonably available to the other Party as necessary to effect an orderly transition of development responsibilities, with the reasonable cost of such personnel and resources to be borne by Roche after the effective date of termination; (iii) **; (iv) all rights and licenses granted herein to Roche shall revert to OSI, for no additional consideration, and immediately terminate. Thereafter, OSI shall have the sole and exclusive license to make, have made, use, offer for sale, sell and import Licensed Product in the Territory under Roche Patents and Roche Know-how; and (v) Roche shall provide and assign to OSI, at Roche's expense, all clinical data, INDs, NDAs, Regulatory Approvals and all other regulatory documentation specifically - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 27 30 relating to Licensed Product (but only to the extent they specifically relate only to Licensed Product and not other products or matters) that Roche may have developed in its activities under this Agreement. 14.6 TERMINATION WITHOUT CAUSE. (a) Subject to Section 6.1, either Party may terminate this Agreement, upon ten (10) days' prior written notice to the other Party if the FTC does not approve the transaction under the HSR Act or if all applicable waiting periods, requests for information (and any extensions thereof) under the HSR Act have not expired or otherwise been terminated by June 1, 2001, in which case this Agreement shall forthwith become void and there shall be no liability or obligation on the part of OSI or Roche or their respective affiliates, officers, directors or shareholders except (i) with respect to Article 10 and (ii) that no such termination shall relieve any Party from liability for a material breach hereof. (b) OSI may terminate this Agreement, upon ten (10) days' prior written notice to Roche, if the conditions under Section 6.2(a)(iii)-(vi) are not satisfied (but only with respect to 6.2(a)(v) if OSI complied) and the conditions under Section 6.2(a)(i) and 6.2(b)(i) have been satisfied or waived. Nothing in this Section shall prevent OSI from seeking any remedy that it may have in addition to those rights it has under this Agreement. Roche may terminate this Agreement, upon ten (10) days' prior written notice to OSI, if the conditions under Section 6.2(b)(iii) or 6.2(b)(iv) are not satisfied (but only if Roche has complied with respect to Section 6.2(b)(iv) and has complied with Section 6.2(a)(iv)) and the conditions under Section 6.2(a)(i) and 6.2(b)(i) have been satisfied or waived. Nothing in this Section shall prevent Roche from seeking any remedy that it may have in addition to those rights it has under this Agreement. If either OSI or Roche terminates this Agreement in accordance with this Section 14.6(b) but Roche has made payments under Sections 6.2(a)(iii) and (iv), then Roche shall be entitled to a prompt refund to such payments. 14.7 BANKRUPTCY. Either Party may, in addition to any other remedies available to it by law or in equity, terminate this Agreement, in whole or in part as the terminating Party may determine, by written notice to the other Party in the event the other Party shall have become bankrupt, or shall have made an assignment for the benefit of its creditors or there shall have been appointed a trustee or receiver of the other Party or for all or a substantial part of its property or any case or proceeding shall have been commenced or other action taken by or against the other Party in bankruptcy or seeking reorganization, liquidation, dissolution, winding-up, arrangement, composition or readjustment of its debts or any other relief under any bankruptcy, insolvency, reorganization or other similar act or law of any jurisdiction now or hereafter in effect and any such event shall have continued for ninety (90) days undismissed, unbonded and undischarged. All rights and licenses granted under to this Agreement by one Party to the other Party are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the Bankruptcy Code, licenses of rights to "intellectual property" as defined under Section 101 (56) of the Bankruptcy Code. The Parties agree that the licensing Party under this Agreement shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code in the event of a bankruptcy by the other Party. The Parties further agree that in the event of the commencement of a bankruptcy proceeding by or against one Party under the Bankruptcy Code, the licensee shall be entitled to complete access to any such intellectual property pertaining to the 28 31 rights granted in the licenses hereunder of the Party by or against whom a bankruptcy proceeding has been commenced and all embodiments of such intellectual property. 14.8 SURVIVING RIGHTS. Except as modified in this Article 14, the obligations and rights of the Parties under Articles 10, 14 and 15 and Sections 4.2, 8.2 (only with respect to Genentech), 11.1(a) and (c), 11.2, 11.6, 13.4, 13.6 (but only regarding disclosures required by law), 16.2, 17.5, 17.6, 17.8(a), 17.9, 17.10 and 17.4 of this Agreement will survive any termination or expiration of this Agreement. In addition, the obligations and rights of any other provision of this Agreement, which by the nature of the provision and the nature of the termination or expiration, are intended to survive, shall survive and continue to be enforceable. 14.9 ACCRUED RIGHTS, SURVIVING OBLIGATIONS. Except as specifically provided in this Agreement, termination, relinquishment or expiration of the Agreement for any reason shall be without prejudice to any rights which shall have accrued to the benefit of either Party prior to such termination, relinquishment or expiration, including damages arising from any breach hereunder. Except as specifically provided, such termination, relinquishment or expiration shall not relieve either Party from obligations which are expressly indicated to survive termination or expiration of the Agreement. ARTICLE 15. INDEMNIFICATION 15.1 INDEMNIFICATION BY ROCHE. Roche hereby agrees to save, defend and hold OSI and its agents and employees harmless from and against any and all losses, damages, liabilities, settlements, penalties, fines, costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) (collectively, "Losses") resulting or alleged to result from any actual or asserted violation of applicable law or regulation by Roche, its Affiliates or sublicensees by virtue of which Licensed Products manufactured (if Roche becomes a manufacturer under an agreement with OSI with respect thereto), advertised, marketed, handled, stored, distributed or sold by Roche, its Affiliates and sublicensees shall be alleged or determined to be adulterated, mislabeled or otherwise not in compliance, relating to the foregoing, except to the extent such Losses result from the negligence or willful misconduct of OSI or its employees or agents. This indemnification provision shall include any reasonable attorney's fees incurred by OSI in connection with enforcing this indemnification. 15.2 INDEMNIFICATION BY OSI. OSI hereby agrees to save, defend and hold Roche and its agents and employees harmless from and against any and all Losses resulting or alleged to result from any actual or asserted violation of applicable law or regulation by OSI, its Affiliates or sublicensees by virtue of which Licensed Products manufactured, handled, stored, distributed or sold by OSI, its Affiliates and sublicensees shall be alleged or determined to be adulterated, mislabeled or otherwise not in compliance, relating to the foregoing except to the extent such Losses result from the negligence or willful misconduct of Roche or its employees or agents. This indemnification provision shall include any reasonable attorney's fees incurred by Roche in connection with enforcing this indemnification. 15.3 INDEMNIFICATION CONDITIONS. In the event that a Party is seeking indemnification under Section 15.1 or 15.2 above, it shall inform the indemnifying Party of a claim as soon as 29 32 reasonably practicable after it receives notice of the claim, shall permit the indemnifying Party to assume direction and control of the defense of the claim (including the right to settle the claim solely for monetary consideration), shall cooperate as requested (at the expense of the indemnifying Party) in the defense of the claim, and shall not settle or compromise the claim without the express written consent of the indemnifying Party. ARTICLE 16. DISPUTE RESOLUTION 16.1 DISPUTES. The Parties recognize that disputes as to certain matters may from time to time arise during the Term of this Agreement 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 disputes arising under this Agreement 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 16 if and when a dispute arises under this Agreement. Unless otherwise specifically recited in this Agreement, disputes among the Parties shall be presented to the chief executive officer of Roche and of OSI, or their respective designee, for resolution. In the event that the chief executive officer of Roche and OSI, or their respective designees, cannot resolve the dispute within thirty (30) days of being requested by a Party to resolve a dispute, either Party may, by written notice to the other, invoke the provisions of Section 16.2 hereinafter. 16.2 ARBITRATION. The Parties agree that any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination, performance or invalidity thereof, shall be resolved through binding arbitration. If the dispute arises between the Parties, and if such dispute cannot be resolved pursuant to Section 16.1 above, each Party shall have the right to have any such unresolved dispute, controversy or claim resolved by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, except as modified herein. Each such arbitration shall be conducted by a panel of three arbitrators; provided that each such arbitrator shall have had, by the time of the actual arbitration, at least ten (10) years of experience as an attorney and experience in the pharmaceuticals industry so as to better understand the legal, business and scientific issues addressed in the arbitral proceeding. A reasoned arbitration decision shall be rendered in writing within thirty (30) days of the conclusion of the arbitration hearing and shall be binding and not be appealable to any court in any jurisdiction. The prevailing Party may enter such decision in any court having competent jurisdiction. Each Party must bear its own attorney's fees and associated costs and expenses. The arbitrators shall have the authority to grant specific performance and shall allocate costs between the Parties (excluding attorney's fees). If brought by Roche, such arbitration shall be held in New York, New York and in accordance with the Commercial Arbitration Rules of the American Arbitration Association. If brought by OSI, such arbitration shall be held in Zurich, Switzerland under the rules of the Zurich Chamber of Commerce. 30 33 ARTICLE 17. MISCELLANEOUS 17.1 ASSIGNMENT. (a) This Agreement may not be assigned by either Party without the consent of the other, except that each Party may, without such consent, assign this Agreement and the rights, obligations and interests of such Party, in whole or in part, to any of its Affiliates, wholly-owned subsidiaries, to any purchaser of all or substantially all of its assets in the line of business to which this Agreement pertains, or of all of its capital stock, or to any successor corporation resulting from any merger or consolidation of such Party with or into such corporation. (b) This Agreement shall be binding upon and inure to the benefit of the successors and permitted assigns of the Parties. Any attempt to assign any portion of this Agreement in violation of this Section 17.1 shall be void. Subject to the foregoing, any references to OSI and Roche hereunder shall be deemed to include the successors and permitted assigns thereof. 17.2 LEGAL COMPLIANCE. Each Party shall comply in all material respects with all laws, rules and regulations applicable to the conduct of its business pursuant to this Agreement. 17.3 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, explosion, flood, strike, lockout, embargo, act of God, or any other cause beyond the control and without the fault or negligence of the defaulting Party, provided that the Party claiming force majeure has exerted all reasonable efforts to avoid or remedy such force majeure; provided, however, that in no event shall a Party be required to settle any labor dispute or disturbance. Such excuse shall continue as long as the condition preventing the performance continues. Upon cessation of such condition, the affected Party shall promptly resume performance hereunder. Each Party agrees to give the other Party prompt written notice of the occurrence of any such condition, the nature thereof, and the extent to which the affected Party will be unable to perform its obligations hereunder. Each Party further agrees to use all reasonable efforts to correct the condition as quickly as possible and to give the other Party prompt written notice when it is again fully able to perform its obligations. 17.4 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. 17.5 NO RIGHT TO USE NAMES. Except as otherwise provided herein, no right, express or implied, is granted by the Agreement to use in any manner the name "OSI," "Roche" or any other trade name or trademark of the other Party or it's Affiliates in connection with the performance of the Agreement. 17.6 NOTICES. All notices hereunder shall be in writing and shall be deemed given if delivered personally or by facsimile transmission (receipt verified), telexed, mailed by registered or certified mail (return receipt requested), postage prepaid, or sent by express courier service, to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice; provided, that notices of a change of address shall be effective only upon receipt thereof). 31 34 IF TO OSI TO: OSI PHARMACEUTICALS, INC. 106 Charles Lindbergh Boulevard Uniondale, New York 11553-3632 Attention: Colin Goddard Chief Executive Officer Telecopy: 516-745-6429 WITH A COPY TO: MINTZ LEVIN COHN FERRIS GLOVSKY AND POPEO, P.C. 666 Third Avenue New York, NY 10017 Attention: Joel I. Papernik, Esq. Telecopy: 212-983-3115 IF TO ROCHE TO: F.HOFFMANN-LA ROCHE LTD Grenzacher Strasse 124 CH-4070-Basel Switzerland Attention: Corporate Law Telecopy: 41-61-688-13-96 17.7 WAIVER. Except as specifically provided for herein, the waiver from time to time by either of 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. 17.8 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 alternative 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. 17.9 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with, the laws of the State of New York. 17.10 AMBIGUITIES. Ambiguities, if any, in this Agreement shall not be construed against any Party, irrespective of which Party may be deemed to have authorized the ambiguous provision. 17.11 HEADINGS. All headings are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. 32 35 17.12 COUNTERPARTS. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 17.13 ENTIRE AGREEMENT. Except for the Tripartite Agreement, this Agreement, including all Exhibits attached hereto which are hereby incorporated herein by reference, sets forth all the covenants, promises, agreements, warranties, representations, conditions and understandings between the Parties hereto with respect to the subject matter hereof and supersedes and terminates all prior agreements and understandings between the Parties, subject to Section 10.4 above with respect to prior Confidentiality Agreements. Except for the Tripartite Agreement, there are no covenants, promises, agreements, warranties, representations, conditions or understandings, either oral or written, between the Parties with respect to the subject matter hereof 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. If any provision of this Agreement conflicts with the provisions of the Tripartite Agreement, the provisions of the Tripartite Agreement shall govern such conflict. 17.14 NO THIRD PARTY BENEFICIARY. Except as expressly provided herein, this Agreement shall not confer any rights or remedies upon any Third Party other than the Parties and their respective successors and permitted assigns. [This space is intentionally left blank.] 33 36 IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate originals by their proper officers as of the date and year first above written. OSI PHARMACEUTICALS, INC. F.HOFFMANN-LA ROCHE LTD By: /s/ COLIN GODDARD By: /s/ WERNER HENRICH --------------------------- -------------------------- Name: Colin Goddard Name: Werner Henrich ----------------------------------- -------------------------- Title: Chairman & Chief Executive Officer Title: Senior Vice President ----------------------------------- -------------------------- By: /s/ RUDOLF SCHAFFNER -------------------------- Name: Rudolf Schaffner -------------------------- Title: Vice President -------------------------- 37 EXHIBIT A ** - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 38 EXHIBIT B GLOBAL DEVELOPMENT PLAN ** - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. B-1 39 EXHIBIT C OSI/ROCHE DEVELOPMENT COSTS AND BUDGET C.1 OSI/ROCHE DEVELOPMENT COSTS. OSI/Roche Development Costs shall mean the costs specifically attributable to the development of a Licensed Product and actually incurred in the Territory after the Effective Date of the Agreement through the date of termination as defined under the Tripartite Agreement to the extent they are not already considered and accounted as Global Development Costs as defined under Exhibit A of the Tripartite Agreement. Such costs shall comprise those costs, both direct and indirect including Development Allocable Overhead (i.e. fully burdened development costs), required to obtain, expand and/or maintain the authorization and/or ability to manufacture, formulate, fill, ship and/or sell a Licensed Product in commercial quantities in the Territory. OSI/Roche Development Costs shall include but are not limited to costs of development including cost of studies on the toxicological, pharmacokinetic, metabolic or clinical aspects of a Licensed Product conducted internally or by individual investigators, or consultants, process development, process improvement, qualification lots, costs for preparing, submitting, reviewing or developing data or information necessary for the purpose of submission to a governmental authority in order to obtain, expand and/or maintain approval of a Licensed Product in the Territory. OSI/Roche Development Costs shall include expenses for data management, statistical designs and studies, document preparation, and other administration expenses associated with the clinical testing program or post registration clinical studies required to obtain, expand and/or maintain approvals in the Territory. OSI/Roche Development Costs shall not include patent costs, pre-registration marketing costs (e.g. trademark costs, advertising agency selection costs, pre-marketing studies), post-registration clinical and marketing studies which are not conducted in order to obtain, expand and/or maintain approval of a Licensed Product in the Territory. OSI/Roche Development Costs shall include a lump sum equivalent to ** of the sum of the development costs of Roche and of OSI as defined above, in lieu of General and Administrative Costs. In determining OSI/Roche Development Costs, each Party will use its respective project accounting systems with the purpose of tracking costs as much as possible on a indication-by-indication basis, and will review and approve its respective project accounting systems and methodologies with the other Parties. In general, these project accounting systems report actual time spent on specific projects, applying the actual labor costs, capture actual costs of specific projects and allocate other expenses to projects. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. C-1 40 C.2 DEVELOPMENT ALLOCABLE OVERHEAD. Shall mean costs incurred by a Party or for its account which are attributable to a Party's supervisory services, occupancy costs, payroll, information systems, human resources or purchasing functions and which are allocated to the development activities based on a space occupied or headcount or other activity-based method. Development Allocable Overhead shall not include any costs attributable to general corporate activities including, by way of example, executive management, investor relations, business development, legal affairs and finance. C.3 OSI/ROCHE DEVELOPMENT PROGRAM. In addition to the Global Development Plan as defined in the Tripartite Agreement, the Parties shall agree on a OSI/Roche Development Program encompassing activities for mutually approved indications of a Licensed Product in the Territory which are not included in the Global Development Plan. The parties shall conduct the OSI/Roche Development Program in accordance with annual budgets in U.S. Dollars and shall share OSI/Roche Development Costs provided that they relate to activities derived from the OSI/Roche Development Program. C.4 BUDGETING OSI/ROCHE DEVELOPMENT COSTS. The development plans and budgets for a given Licensed Product shall be prepared on an indication-by-indication basis, for at least ** calendar quarters in advance and shall be updated as a rolling development budget whenever needed quarterly if changes in the Development Program so require it, but at least on an annual basis before September 15th of each year. The rolling development budget shall identify activities in sufficient detail as agreed upon between the Parties to allow an appropriate monitoring of expenses versus budget. C.5 CHARGING OSI/ROCHE DEVELOPMENT COSTS. The OSI/Roche Development Program and rolling development budget as agreed by the Parties for the Licensed Product shall be the reference for charging and sharing OSI/Roche Development Costs. The responsibility for the consolidated reporting of the OSI/Roche Development Costs shall be with Roche, in close cooperation with OSI. The Parties shall determine the structure and the level of details which shall apply to report their incurred OSI/Roche Development Costs for consolidation by Roche, taking into consideration the level of details which shall apply to report the Global Development Costs as per the Tripartite Agreement. This will be the basis for OSI/Roche Development Program accounting and determining of payments between the Parties. The Clinical Supplies for clinical studies of the OSI/Roche Development Program shall be charged as material costs, at Fully Burdened Manufacturing Cost (excluding General and Administrative Costs), whether supplied by a Party or by a Third Party. Fully Burdened Manufacturing Cost means one hundred percent (100%) of a Party's manufacturing cost (in accordance with the Party's accounting policies consistently applied), which shall comprise the cost of goods produced as determined by the Party manufacturing or contracting with a Third - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. C-2 41 Party for each stage of the manufacturing process in accordance with IAS consistently applied by such Party, including product quality assurance/control costs, applicable Allocable Overhead, and other costs borne by the Party for transport, customs clearance and storage of product at the request of the other Party prior to the time of sale (i.e., freight, customs, duty and insurance). C.6 REPORTING AND CONSOLIDATING OSI/ROCHE DEVELOPMENT COSTS. OSI/Roche Development Costs shall be reported as early as possible, but no later than ** days after the last day of the calendar quarter in question, and shall separately identify the quarterly and year-to-date cumulative figures. Each Party shall report OSI/Roche Development Costs in a manner consistent with its project accounting system. As early as possible, but no later than ** days after the last day of the calendar quarter OSI will provide Roche with financial statements for its activities, prepared in accordance with the terms contained in this Exhibit C in order for Roche to prepare the consolidated reports. No later than ** days after the last day of the calendar quarter Roche shall provide OSI with a copy of a reconciliation statement identifying on an indication-by-indication basis the OSI/Roche Development Costs and the calculation serving as the basis of determining payments between the Parties. Each quarterly report will be accompanied by and include reasonable documentation which itemizes and explains the costs incurred as to allow comparison to the annual budget and provide details as agreed upon by the Parties, in U.S. Dollars in a manner consistent with the amounts budgeted for such activities. C.7 SHARING OF OSI/ROCHE DEVELOPMENT COSTS - PAYMENTS BETWEEN THE PARTIES. OSI/Roche Development Costs will be shared pursuant to Section 4.3 of this Agreement. A settlement balancing payment will be invoiced quarterly to one of the Parties, no later than ** days after the last day of the quarter, such that each Party bears its proportionate share of the OSI/Roche Development Costs. The Parties shall meet on an annual basis no later than ** days after the last day of the year in question and a "true-up" of the calendar year actual OSI/Roche Development Costs and its sharing between the Parties shall be presented for approval. A corrective settlement payment may be issued as a consequence of the final decision taken by the Parties. Such yearly corrective settlement payment will be approved and invoiced as early as possible, but no later than ** days after the last day of the year in question. Any payment which is not paid before ** days from receipt of an invoice will bear interest, to the extent permitted by applicable law, at the average one-month European Interbank Offered Rate (=EURIBOR) as reported by Datastream (or a successor or similar organization) from time to time, calculated on the number of days such a payment is overdue. C.8 AUDITS AND INTERIM REVIEWS. The parties shall maintain and cause the third parties acting for their account to maintain books of account and complete and accurate records pertaining to the OSI/Roche Development - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. C-3 42 Costs in sufficient detail to permit to confirm the correct calculation of the OSI/Roche Development Costs. At a party's ("Auditing Party") request, the other party ("Audited Party") will cause its independent certified public accountants to prepare abstracts of its relevant business records for review by the Auditing Party. ** Such auditing shall not be requested to be performed more frequently than once per calendar year nor more frequently than once with respect to records covering any specific period of time, shall be performed upon no less than thirty (30) days prior written notice to the Audited Party, during the Audited Party's normal business hours and shall not commence later than two (2) years following the end of the period requested to be audited. All information, data, documents and abstracts herein referred to shall be used for the sole purpose of verifying compliance with this Agreement, shall be treated as Confidential Information subject to the obligations of this Agreement and need neither be retained more than one (1) year after completion of an audit hereof, if an audit has been requested; nor more than three (3) years from the end of the calendar year to which each shall pertain; nor more than one (1) year after the date of termination of this Agreement. Audit results shall be shared by Roche and OSI. The Auditing Party will bear the full cost of the preparation of abstracts and any such audit unless such abstracts or audit discloses an underpayment to the Auditing Party of more than ** from the amounts paid for the entire audited period. The Audited Party shall (1) promptly pay any underpayment due the Auditing Party and, (2) if the underpayment due to the Auditing Party is more than ** of the amount paid, bear the full reasonable cost of such audit. Any overpayment by the Audited Party shall be deducted from the next payment due the Auditing Party under Section 4 of this Agreement or, if no such further payments are due promptly reimbursed by the Auditing Party. The failure of a Party to request verification of any calculation of OSI/Roche Development Costs during the period when records have to be retained shall be considered acceptance of the accuracy of such reporting by such Party. C.9 START OF OPERATIONS AND EFFECTIVE ACCOUNTING DATE TERMINATION. Operation of the OSI/Roche Development Program will be deemed to have commenced as of the Effective Date of the Agreement. Costs and expenses incurred prior to such date are not chargeable to the OSI/Roche Development Costs. For reporting and accounting purposes with respect to the OSI/Roche Development Costs, the effective termination date of the Agreement will be the nearest month end to which such termination takes place. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. C-4 EX-10.3 6 y45494ex10-3.txt TRIPARTATE AGREEMENT 1 EXHIBIT 10.3 Portions of this Exhibit have been redacted and are the subject of a confidential treatment request filed with the Secretary of the Securities and Exchange Commission. 2 TRIPARTITE AGREEMENT This TriPartite Agreement ("Agreement") is made as of the Effective Date (as hereafter defined), by and among OSI Pharmaceuticals, Inc., a Delaware corporation with its principal offices at 106 Charles Lindbergh Boulevard, Uniondale, New York 11553-36549 (together with its Affiliates (as hereinafter defined) unless the context otherwise requires, "OSI"), Genentech, Inc., a Delaware corporation with its principal offices at 1 DNA Way, South San Francisco, California 94080 ("Genentech"), and F.Hoffmann-La Roche Ltd, a Swiss corporation with its principal offices at Grenzacher Strasse 124, CH-4070-Basel, Switzerland (together with its Affiliates (as hereinafter defined) unless the context otherwise requires, "Roche"). OSI, Genentech and Roche are sometimes referred to herein individually as a "Party" and collectively as the "Parties." RECITALS 1. OSI has participated in the development of a certain molecule known as OSI-774 (defined below) and has certain intellectual property rights related thereto. 2. Genentech, OSI and Roche each wish to conduct development of OSI-774 with Genentech and OSI emphasizing activities in the U.S. and Roche emphasizing activities in Europe. 3. The Parties wish to set up a structure which is intended to generally result in the optimization of the use of the Parties' resources to develop OSI-774 globally and to share Global Development Costs (as defined in Exhibit A hereof) on a 1/3, 1/3, 1/3 basis and facilitate their sharing of information about OSI-774. 3 4. OSI is party to an agreement with Genentech (the "OSI-Genentech Agreement") and OSI is a party to an agreement with Roche (the "OSI-Roche Agreement"). 5. To further their purposes, the Parties' personnel will participate in various Teams and Committees as set forth in the charts on Exhibit B, and 6. OSI and Roche will, pursuant to the OSI-Roche Agreement, conduct development activities which will not be covered by the Global Development Plan. 7. OSI and Genentech will, pursuant to the OSI-Genentech Agreement, conduct development activities which will not be covered by the Global Development Plan AGREEMENT NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties, intending to be legally bound hereby, do hereby agree as follows: ARTICLE 1. DEFINITIONS Section 1.1 "AFFILIATE" shall mean any corporation, firm, limited liability company, partnership or other entity which directly or indirectly controls or is controlled by or is under common control with a Party to this Agreement. For the purposes of this Section 1.1, "control" means ownership, directly or through one or more Affiliates, of fifty percent (50%) or more or the shares of stock entitled to vote for the election of directors, in the case of a corporation, or fifty percent (50%) or more of the equity interests in the case of any other type of legal entity, 2 4 status as a general partner in any partnership, or any other arrangement whereby a party controls or has the right to control the Board of Directors or equivalent governing body of a corporation or entity. For the purposes of this Agreement, Genentech shall be deemed to not be an Affiliate of Roche. Section 1.2 "EFFECTIVE DATE" shall mean the date of execution of the OSI-Roche Agreement and OSI-Genentech Agreement. Section 1.3 "GLOBAL DEVELOPMENT COMMITTEE" shall mean that body established pursuant to Section 3.1 hereof. Section 1.4 "GLOBAL DEVELOPMENT COSTS" shall have the meaning set forth in Exhibit A. Section 1.5 "GLOBAL DEVELOPMENT COUNTRIES" shall mean ** Section 1.6 "GLOBAL DEVELOPMENT PLAN", which in its initial form is attached as Exhibit C, shall mean the plan for development of OSI-774, as amended from time to time (e.g. to take into account feedback from key regulatory authorities of the Global Development Countries. Section 1.7 "OSI-774" shall mean the selective inhibitor of epidermal growth factor receptor having the IUPAC name [6,7-bis(2-methoxyethoxy)quinazolin4-y1]-(3-ethynylphenyl)-amine having the U.S. Approved Name erlotinib. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 3 5 Section 1.8 "OSI/GENENTECH JOINT PROJECT TEAM" shall mean that body established pursuant to the OSI-Genentech Agreement. Section 1.9 "ROCHE PROJECT TEAM" shall mean that body established pursuant to the OSI-Roche Agreement. Section 1.10 "TRIPARTITE LICENSED PRODUCT" shall mean pharmaceutical formulations of OSI-774 (including, without limitation, prodrugs, salts, solvates and polymorphs of all the above in any form or formulation). ARTICLE 2. GLOBAL GOALS AND PLANS Section 2.1 GLOBAL GOALS. The Parties agree, pursuant and subject to the terms of this Agreement, to set up a structure which is intended to generally result in the optimization of the use of the Parties' resources to develop OSI-774 in the Global Development Countries and share Global Development Costs on a 1/3, 1/3, 1/3 basis, to share information generated under the Global Development Plan to facilitate the obtaining of Regulatory Approval of OSI-774 Products in commercially significant indications as soon as reasonably practicable for commercial marketing and sale in the world and to work together on such other matters as the Global Development Committee shall determine. The Parties shall also coordinate matters concerning manufacturing of supplies for all development purposes. Section 2.2 GLOBAL DEVELOPMENT PLAN - MODIFICATIONS. The Parties have attached hereto as Exhibit C the initial Global Development Plan, pursuant to which, among other things, each Party will spend up to $100,000,000 for the further development of OSI-774. Hereafter, the 4 6 Global Development Plan (including the work, budget and timeline therefor) shall not be modified except upon formal decision by the OSI-774 Liaison Team and approval by the Global Development Committee as described in Section 3.1(c) below, which formal approval shall automatically constitute a valid binding amendment to Exhibit C attached hereto. The Global Development Plan will be updated annually. ARTICLE 3. TRIPARTITE MANAGEMENT Section 3.1 GLOBAL DEVELOPMENT COMMITTEE. (a) ESTABLISHMENT OF THE GLOBAL DEVELOPMENT COMMITTEE. The Parties hereby establish a Global Development Committee or GDC for directing the development of OSI-774. The GDC will be composed of up to two (2) representatives of each Party, who shall be appointed (and may be replaced at any time) by such Party on written notice to the other party in accordance with this Agreement. Such representatives shall include individuals within the senior management of each Party with expertise in pharmaceutical drug development. The initial GDC members from each Party are listed on Exhibit D attached hereto. Any member of the GDC may designate a substitute to attend and perform the functions of that member at any meeting of the GDC. The GDC will meet at least twice each year during the Term of this Agreement, or at any frequency agreed by the GDC and will operate by unanimous vote. In any event, the GDC will meet thirty (30) days after the execution of this Agreement or as soon as practicable as mutually agreed by the Parties. The representatives from each Party will collectively have one vote in decisions. 5 7 (b) GLOBAL DEVELOPMENT COMMITTEE RESPONSIBILITIES. The GDC shall perform the following functions: (i) approve material changes to the Global Development Plan including the approval of an annual budget (ii) oversee execution of the Global Development Plan (iii) resolve disputes concerning overall strategy or funding (iv) provide guidance to the OSI-774 Liaison Team (v) approve the handling of budget issues, in particular, significant variances from the approved annual budget (vi) Resolve disputes arising in the OSI-774 Liaison Team including, without limitation, determining which clinical and pre-clinical activities should be done, as well as sourcing material for such activity (vii) perform such other functions as appropriate to further the purposes of this Agreement, as determined by the Parties (c) GLOBAL DEVELOPMENT COMMITTEE PROCEDURES. Initially, OSI shall designate a Chairperson who will serve as such for the first year. Thereafter, the Chairperson shall be determined by the Global Development Committee. The Chairperson shall send notices and agendas for all regular GDC meetings to all GDC members. The location of regularly scheduled GDC meetings shall alternate among the offices of the Parties, unless otherwise agreed. Meetings may be held telephonically, but each member shall attend at least one meeting 6 8 in person each year. The Party hosting any GDC meeting shall appoint one person (who need not be a member of the GDC) to attend the meeting and record the minutes of the meeting. Such minutes shall be circulated to the Parties promptly following the meeting for review, comment and distribution. Any modifications to the Global Development Plan (including the work, budget and timeline therefor) approved at a GDC meeting shall be considered approved and shall constitute an amendment to Exhibit C upon ratification of the meeting minutes related thereto. In addition, any study referred to in Section 3.1(d) that is conducted shall be included in the Global Development Plan. (d) DISPUTE RESOLUTION. ** Section 3.2 OSI-774 LIAISON TEAM. (a) OSI-774 LIAISON TEAM. The Parties have established the OSI-774 Liaison Team to liaise between the Roche Project Team and the OSI/Genentech Joint Project Team which will be composed of one representative of each Party (who should be the head of the applicable Project Team) who has been appointed by each Party (and may be replaced at any time by such Party) on written notice to the other Parties in accordance with this Agreement. Each member may utilize and bring to meetings other personnel from such member's company. The members shall communicate frequently and outside of formal meetings. Ongoing communication and updates will be provided to the Parties as the Global Development Plan unfolds. Any member of the OSI-774 Liaison Team may designate a substitute to attend and - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 7 9 perform the functions of that member in any meeting of the OSI-774 Liaison Team. The OSI-774 Liaison Team will coordinate the activities of the Project Teams of the Parties and closely interact to establish key logistical parameters for the Global Development Plan. (b) OSI-774 LIAISON TEAM. The OSI-774 Liaison Team shall perform the following functions: (i) coordination of pre-clinical activities (ii) coordination of clinical team activity (iii) coordination of regulatory activity (iv) coordination of manufacturing activity to, among other things, assure that if there is more than one manufacturer there is uniformity as to specifications and formulations being manufactured (v) coordination of communication and publication strategy (vi) preparation of budgets and updates to present to the GDC (vii) prioritization and allocation of supply of OSI-774 (viii) such other matters as directed by the Global Development Committee (ix) Such other matters set forth in Exhibit C hereto (c) OSI-774 LIAISON TEAM PROCEDURES. OSI-774 Liaison Team meetings shall take place by telephone or video conference or in person on an as needed basis. In addition, 8 10 the OSI-774 Liaison Team shall meet in person at least once a year. The Party hosting any meeting shall appoint one person (who need not be a member of the Committee) to attend the formal meetings and record the minutes of the meeting. Such minutes shall be circulated to the Parties promptly following the meeting for review, comment and distribution. (d) DISPUTE RESOLUTION. For issues coming before the OSI-774 Liaison Team for which the Parties' OSI-774 Liaison Team members have disagreements, decision-making authority will rest with the Global Development Committee for dispute resolution under Section 3.1(d). Section 3.3 ACCOUNTING AND FINANCIAL REPORTING. Each Party will appoint a representative with expertise in the areas of accounting, cost allocation, budgeting and financial reporting. Such representatives shall work under the direction of the OSI-774 Liaison Team to provide services to and consult with the OSI-774 Liaison Team in order to address the financial, budgetary and accounting issues which arise in connection with the Global Development Plan and the Financial Planning, Accounting and Reporting Procedures attached hereto as Exhibit A. Each representative may designate a substitute to perform such functions or may be replaced at any time by the representative Party providing notice thereof to the other Party. ARTICLE 4. COVENANTS, TERM AND TERMINATION Section 4.1 REASONABLE EFFORTS. Subject to the terms and conditions of the OSI-Genentech Agreement, OSI-Roche Agreement and this Agreement, each of the Parties agrees to use all reasonable efforts to take, or cause to be taken, all reasonable actions and to do, or cause 9 11 to be done, all things necessary and appropriate to consummate the transactions contemplated by such Agreement in accordance with the terms thereof. Section 4.2 TERMINATION. This Agreement shall commence as of the Effective Date and shall terminate when either the OSI-Genentech Agreement or the OSI-Roche Agreement shall terminate. ARTICLE 5. TRANSFER OF MATERIALS Each Party may transfer certain of its proprietary materials to the other Parties. Each Party agrees that it will use such materials of the other Parties only for the purposes of the OSI-Genentech Agreement, the OSI-Roche Agreement or this Agreement, as the case may be, and will not transfer such materials to any third party without the prior written consent of the transferring Party. Except as expressly provided in the OSI-Roche Agreement, the OSI-Genentech Agreement or this Agreement, the transfer of any such proprietary materials by one Party to another shall not be deemed to be a grant of any rights in the proprietary material. All right, title and interest in and to all such proprietary materials (and any patent rights relating thereto) shall remain in the Party transferring such materials ARTICLE 6. CONFIDENTIALITY Section 6.1 CONFIDENTIALITY. Except to the extent expressly authorized by this Agreement or otherwise agreed in writing, the Parties agree that, for the Term of this Agreement and for five (5) years thereafter, the receiving Party shall keep confidential and shall not publish or otherwise disclose or use for any purpose other than as permitted under this Agreement any 10 12 Know-how (as defined in each of the OSI-Genentech Agreement and OSI-Roche Agreement) and other proprietary information and materials furnished to it by any other Party pursuant to this Agreement (collectively, "Confidential Information"), except to the extent that it can be established by the receiving Party that such Confidential Information: (a) was already known to the receiving Party as demonstrated by written records, other than under an obligation of confidentiality, at the time of disclosure by the other Party as demonstrated by competent written records; (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; (d) was disclosed to the receiving Party, other than under an obligation of confidentiality, by a third party who had no obligation to the disclosing Party not to disclose such information to others; or (e) was subsequently developed by the receiving Party without use of the Confidential Information as demonstrated by competent written records. Section 6.2 AUTHORIZED DISCLOSURE. Each Party may disclose Confidential Information hereunder to the extent such disclosure is required to comply with applicable governmental regulations or conduct pre-clinical or clinical trials or to the extent ordered by a court of competent jurisdiction (subject to an appropriate protection order) under the Global 11 13 Development Plan, provided that if a Party is required by law or regulation to make any such disclosure of any other Party's Confidential Information it will give reasonable advance notice to such other Party of such disclosure requirement and will use its reasonable best efforts to secure confidential treatment of such Confidential Information required to be disclosed. In addition, each Party shall be entitled to disclose, under a binder of confidentiality containing provisions substantially as protective as those of this Article 6, Confidential Information to its consultants, clinical investigators and contract manufacturers but only for any purposes provided for in the Global Development Plan. Section 6.3 SURVIVAL. This Article 6 shall survive the termination or expiration of this Agreement for a period of ** Section 6.4 TERMINATION OF PRIOR AGREEMENTS. As of the Effective Date hereof, this Agreement supersedes the Confidentiality Agreement between OSI and Roche dated September 25, 2000 and the Confidentiality Agreement between OSI and Genentech dated August 4, 2000 (the "Confidentiality Agreements"), but only insofar as the Confidentiality Agreements relate to the subject matter of this Agreement. All Confidential Information (as defined in the Confidentiality Agreements) exchanged between the Parties under the Confidentiality Agreements relating to the subject matter of this Agreement shall be deemed Confidential Information hereunder and shall be subject to the terms of this Article 6. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 12 14 ARTICLE 7. REPRESENTATION AND WARRANTIES Section 7.1 REPRESENTATIONS AND WARRANTIES. (a) Each of the Parties hereby represents and warrants that this Agreement is a legal and valid obligation binding upon such Party and enforceable in accordance with its terms. The execution, delivery and performance of the Agreement by such parties does not conflict with any agreement, instrument or understanding, oral or written to which it is a party or by which it is bound nor violate any law or regulation of any Court, government body or administrative agency having any jurisdiction over it. (b) Each Party has not, and during the Term of the Agreement will not, grant any rights related to Tripartite Licensed Products to any Third Party which would conflict with the rights granted to any other Party hereunder or under the OSI-Roche Agreement, OSI-Genentech Agreement or the Divestiture Agreement (as defined in the OSI-Roche Agreement and OSI-Genentech Agreement), whether by execution of or amendment to any agreement or otherwise. 13 15 ARTICLE 8. INFORMATION AND REPORTS Section 8.1 SAFETY DATA BASE. The Parties will, as soon as practical, organize a serious adverse event data base (the "SAE Data Base") that meets regulatory requirements in each of the Global Development Countries. Section 8.2 CRO DATA BASE. All data which may include, without limitation, database information, safety reports and final reports from such clinical trials under the Global Development Plan for Tripartite Licensed Products under (i) the OSI-Genentech Agreement, (ii) the OSI-Roche Agreement and ** All such clinical trial data and information shall be accessible to the Parties. If a Party itself conducts a clinical trial under the Global Development Plan, it shall transfer all of the clean, final data for such trial to ** no later than six (6) months after the date that the last trial data has been collected under the trial protocol for the last clinical trial subject. The OSI-774 Liaison Team shall coordinate the transfers of any such data. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 14 16 ARTICLE 9. INTELLECTUAL PROPERTY Section 9.1 SOLE AND JOINT INVENTIONS. The Parties recognize that any Party may make, separately or jointly with another Party, inventions during the course of the activities under the Global Development Plan ("OSI-774 Inventions"). In such event, the Parties' rights to OSI-774 Inventions and any patent applications and patents thereon made by a Party solely or jointly with either or both of the other Parties will be governed by the OSI-Genentech Agreement and the OSI-Roche Agreement. Section 9.2 GRANT OF RIGHTS TO STEP-IN. (a) The Parties acknowledge that OSI has secondary rights pursuant to the OSI-Genentech Agreement to file, prosecute, maintain and enforce patent applications and patents for certain Genentech OSI-774 Inventions, if Genentech declines to exercise its primary rights to such actions. If OSI elects not to exercise its secondary rights, Genentech and OSI grant Roche the right to file, prosecute and maintain patent applications and patents for such OSI-774 Inventions and to enforce patents for such OSI-774 Inventions. (b) The Parties acknowledge that OSI has secondary rights pursuant to the OSI-Roche Agreement to file, prosecute, maintain and enforce patent applications and patents for certain Roche OSI-774 Inventions, if Roche declines to exercise its primary rights to such actions. If OSI elects not to exercise its secondary rights, Roche and OSI grant Genentech the right to file, prosecute and maintain patent applications and patents for such OSI-774 Inventions and to enforce patents for such OSI-774 Inventions. This Section 9.2 shall survive any expiration or termination of this Agreement. 15 17 Section 9.3 ENFORCEMENT OF PATENTS FOR GENENTECH-OSI-ROCHE JOINT INVENTIONS. In the event of an infringement of a patent for a Genentech-OSI-Roche joint invention, the Parties shall decide the best way for the Parties to proceed. ARTICLE 10. MISCELLANEOUS Section 10.1 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. Section 10.2 PUBLICITY REVIEW. The Parties agree that the public announcement of the execution of the OSI-Genentech Agreement, the OSI Roche Agreement and this Agreement shall be in the form of a press release to be agreed upon on or before the Effective Date and thereafter each Party shall be entitled to make or publish any public statement consistent with the contents thereof. Thereafter, the Parties will jointly discuss and agree on any statement to the public regarding the Global Development Plan or any aspect of the Global Development Plan, and the results of clinical studies conducted thereunder, subject in each case to disclosure otherwise required by law or regulation as determined in good faith by each Party. When a Party elects to make any such statement it will give at least five (5) applicable day's notice, unless disclosure is required by law in a shorter period of time, to the other Parties to review and comment on such statement. 16 18 Section 10.3 PUBLICATIONS. Except as required by law, each Party agrees that it shall not publish or present the results of studies or clinical trials carried out by such Party under the Global Development Plan without the opportunity for prior review by the other Parties. Each Party shall provide to the other Parties the opportunity to review any of the submitting Party's proposed abstracts, manuscripts or presentations (including information to be presented verbally) which relate to the Field under either the OSI-Genentech Agreement or the OSI-Roche Agreement, as the case may be, at least thirty (30) days prior to their intended submission for publication, and such submitting Party agrees, upon written request from any other Party, not to submit such abstract or manuscript for publication or to make such presentation until such other Party is given up to forty-five (45) days from the date of such written request to seek appropriate patent protection for any material in such publication or presentation which it reasonably believes is patentable. Once such abstracts, manuscripts or presentations have been reviewed by each Party and have been approved for publication, the same abstracts, manuscripts or presentations do not have to be provided again to any Party for review for a later submission for publication. Expedited reviews for abstracts or poster presentations within ten (10) days of receipt by a Party may be arranged by sending a prior written notice to the other Parties requesting such expedited review, unless another arrangement is mutually agreed upon by the Parties. Each Party also shall have the right to require that its Confidential Information that may be disclosed in any such proposed publication be deleted prior to such publication. In the event that any Party submits any manuscript or other publication relating to any Tripartite Licensed Product under either the OSI-Genentech Agreement or OSI-Roche Agreement, it will consider and acknowledge the contributions of the other Parties, including, as appropriate, co-authorship. 17 19 Section 10.4 NOTICES. All notices hereunder shall be in writing and shall be deemed given if delivered personally or by facsimile transmission (receipt verified), telexed, mailed by registered or certified mail (return receipt requested), postage prepaid, or sent by express courier service, to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice, provided, that notices of a change of address shall be effective only upon receipt thereof). If to OSI: OSI Pharmaceuticals, Inc. 106 Charles Lindbergh Boulevard Uniondale, NY 11553 Attention: President Telecopy: (516) 745-6429 With a copy to: Mintz Levin Cohn Ferris Glovsky and Ferris, P.C. 666 Third Avenue New York, NY 10017 Attn: Joel Papernik, Esq. Telecopy: (212) 983-3115 If to Genentech: Genentech, Inc. 1 DNA Way South San Francisco, CA 94080 Attention: Corporate Secretary Telecopy: (650) 952-9881 If to F.Hoffman-La Roche Ltd: Grenzacher Strasse 124 CH-4070-Basel Switzerland Attention: Corporate Law Telecopy: 41-61-688-13-96 18 20 Section 10.5 WAIVER. Except as specifically provided for herein, the waiver from time to time by either of 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. Section 10.6 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 reasonable acceptable alternative 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. Section 10.7 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. Section 10.8 AMBIGUITIES. Ambiguities, if any, in this Agreement shall not be construed against any Party, irrespective of which Party may be deemed to have authorized the ambiguous provision. Section 10.9 HEADINGS. All headings are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. 19 21 Section 10.10 COUNTERPARTS. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 10.11 ENTIRE AGREEMENT. This Agreement, including all Exhibits attached hereto which are hereby incorporated herein by reference, sets forth all the covenants, promises, agreements, warranties, representations, conditions and understandings between the Parties hereto with respect to the subject matter hereof and supersedes and terminates all prior agreements and understandings between the Parties, subject to Section 6.4 above with respect to prior Confidentiality Agreements. There are no covenants, promises, agreements, warranties, representations, conditions or understandings, either oral or written, between the Parties with respect to the subject matter hereof 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. Section 10.12 CONFLICTS. If any provision of the OSI-Genentech Agreement or the OSI-Roche Agreement conflicts with the provisions of this Agreement, the provisions of this Agreement shall govern such conflict. Section 10.13 RIGHT TO CONDUCT OTHER STUDIES. Nothing in this Agreement shall limit in any respect the right of each Party to itself and at its own expense conduct clinical and pre-clinical activities for additional indications for OSI-774 not called for under the Global Development Plan, provided that no other Party reasonably has objected (after 60 days prior notice) and that no such activity adversely affects the goals of the Global Development Plan or the effectuation of the Global Development Plan, subject, in the case of OSI and Genentech, to 20 22 the OSI-Genentech Agreement. Any serious adverse event safety data resulting from these activities shall be part of the SAE Data Base. Any Party who did not participate may buy the data by paying ** of the total cost of these activities. Roche and OSI shall without prior notice to Genentech or Genentech's consent be able to conduct development activities not covered by the Global Development Plan outside of the Global Development Countries, but Genentech may nevertheless buy the data from such activity by payment of ** of the total cost thereof. Nothing in this Agreement shall affect the right of OSI or Genentech to conduct development of other epidermal growth factor receptor inhibitors under the OSI-Genentech Agreement. [This space is intentionally left blank] - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 21 23 IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate originals by their proper officers as of the date and year first above written. OSI PHARMACEUTICALS, INC. GENENTECH, INC. By: /s/ COLIN GODDARD By: /s/ ARTHUR D. LEVINSON ---------------------------------- ---------------------- Name: Colin Goddard Name: Arthur D. Levinson ---------------------------------- ------------------ Title: Chairman & Chief Executive Officer Title: Chairman & Chief Executive Officer ---------------------------------- ----------------------------------
F.HOFFMANN-LA ROCHE LTD By: /s/ WERNER HENRICH ---------------------------------- Name: Werner Henrich ---------------------------------- Title: Senior Vice President ---------------------------------- By: /s/ RUDOLF SCHAFFNER ---------------------------------- Name: Rudolf Schaffner ---------------------------------- Title: Vice President ---------------------------------- 22 24 EXHIBIT A Financial Planning, Accounting and Reporting Procedures A.1. GLOBAL DEVELOPMENT PLAN AND BUDGET The initial Global Development Plan and preliminary budget attached to this Agreement as Appendix C shall be expanded into a ** long range Global Development Plan, at the latest within six (6) months from the Effective Date, which shall be updated on an annual basis ** Such Global Development Plan shall be supplemented by a comprehensive budget which will project the related Global Development Costs (as defined below) by quarters for the first running 8 calendar quarters and by year for the remaining ** on an indication by indication basis, and shall be ratified by the GDC. The budget derived from the Global Development Plan will be updated as a rolling development budget whenever needed quarterly if changes in the Global Development Plan so require it, but at least on an annual basis ** The rolling development budget will be developed in a manner consistent with the accounting systems of each Party and will be supplemented with detailed business plans for clinical trials and drug approval applications as determined by the OSI-774 Liaison Team and ratified by the GDC. The Global Development Plan and rolling development budget once approved by the OSI-774 Liaison Team, and ratified by the GDC, can only be changed with the approval of the OSI-774 Liaison Team, which change is ratified by the GDC as provided in the Agreement. The rolling development budget shall identify activities and costs in sufficient detail as agreed upon between the Parties to allow an appropriate monitoring of expenses versus budget. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 25 A.2. GLOBAL DEVELOPMENT COSTS Global Development Costs shall mean the costs specifically attributable to the development of a Tripartite Licensed Product and actually incurred under the Global Development Plan after the Effective Date of the Agreement through the date of termination as defined under the Tripartite Agreement, provided that no Party shall be required to spend more than $100,000,000 unless otherwise agreed to by the Parties. Such costs shall comprise those costs, both direct and indirect including Development Allocable Overhead (i.e. fully burdened development costs), required to obtain, expand and/or maintain the authorization and/or ability to manufacture, formulate, fill, ship and/or sell a Tripartite Licensed Product in commercial quantities in the Global Development Countries. Global Development Costs shall include but are not limited to costs of development including cost of studies on the toxicological, pharmacokinetic, metabolic or clinical aspects of a Tripartite Licensed Product conducted internally or by individual investigators, or consultants, process development, process improvement, qualification lots, costs for preparing, submitting, reviewing or developing data or information necessary for the purpose of submission to a governmental authority in order to obtain, expand and/or maintain approval of a Tripartite Licensed Product in the Global Development Countries. Global Development Costs shall include expenses for data management, statistical designs and studies, document preparation, and other administration expenses associated with the clinical testing program or post registration clinical studies required to obtain, expand and/or maintain approvals in the Global Development Countries. A-2 26 Global Development Costs may include costs incurred in geographical areas other than the Global Development Countries ** only to the extent that the activities related with such costs are specifically included in the Global Development Plan and budget, as ratified by unanimous vote of the Global Development Committee and not subject to further dispute resolution, to be incurred in such geographical areas for the purpose of generating data or information required to obtain, expand and/or maintain approval of a Tripartite Licensed Product in the Global Development Countries. Global Development Costs shall not include patent costs, pre-registration marketing costs (e.g. trademark costs, advertising agency selection costs, pre-marketing studies), post-registration clinical and marketing studies which are not conducted as part of the Global Development Plan. Global Development Costs shall include amounts equivalent to ** of the development costs of each Party as defined above, in lieu of General and Administrative Costs. In determining Global Development Costs, each Party will use its respective project accounting systems with the purpose of tracking costs as much as possible on a product indication-by-product indication basis, and will review and approve its respective project accounting systems and methodologies with the other Parties. In general, these project accounting systems report actual time spent on specific projects, applying the actual labor costs, capture actual costs of specific projects and allocate other expenses to projects. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. A-3 27 A.3. DEVELOPMENT ALLOCABLE OVERHEAD Development Allocable Overhead shall mean costs incurred by a Party or for its account which are attributable to a Party's supervisory, services, occupancy costs, payroll, information systems, human resources or purchasing functions and which are allocated to the development activities based on a space occupied or headcount or other activity-based method. Development Allocable Overhead shall not include any costs attributable to general corporate activities including, by way of example, executive management, investor relations, business development, legal affairs and finance. A.4. ADDITIONAL INDICATION OPT OUT - OPT BACK IN Each Party has the right to opt out of the development of an additional indication for a Tripartite Licensed Product beyond the initial indications included in the Global Development Plan for that Tripartite Licensed Product at (and only at) the point of time when the GDC takes its formal decision to include such additional indication in the Global Development Plan, subject, in the case of OSI and Genentech, to the OSI-Genentech Agreement which might require joint action by OSI and Genentech. Prior to such opt out decision, the Parties shall have a good faith discussion about the reasons and consequences of the opt out. The Global Development Costs related to an additional indication for which a Party has opted out shall be equally shared between the Parties, or solely supported by the Party, which have not elected to opt out. A-4 28 The Party electing to opt out of an additional indication will provide the other Parties with ** notice prior to its election and will be obligated to pay its share of the cost of all ongoing clinical and preclinical studies and its share of other Global Development Costs already committed as of the date of such notice. Thereafter the Party electing to opt out will not share any costs or benefits of such additional indication within its on going share of the Global Development Costs. In the event that a Party which previously opted out of an additional indication wishes to regain its rights to such indication then it may regain such rights by electing to do so at the latest within thirty days of the first formal decision of the GDC to file for approval for that indication in the Global Development Countries and by paying within thirty days, ** of the total Global Development Costs incurred by the other Party or Parties for such indication during the period of opt out and by thereafter assuming from the opt back in date its ongoing obligations as if no opt out had occurred. Such payment shall be shared in proportion to the amount expended by each Party who contributed to the study. A.5. CHARGING, REPORTING, AND CONSOLIDATING OF GLOBAL DEVELOPMENT COSTS The Global Development Plan and rolling development budget as ratified by the GDC for the Tripartite Licensed Product shall be the reference for charging and sharing Global Development Costs. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. A-5 29 The responsibility for the consolidated reporting of the Global Development Costs to the OSI-774 Liaison Team shall be with OSI in close cooperation with Roche and Genentech. The OSI-774 Liaison Team shall determine the structure and the level of details which shall apply for the Parties to report their incurred Global Development Costs to OSI for consolidation and to allow an appropriate monitoring of expenses versus rolling development budget. This will be the basis for Global Development Plan accounting and determining of payments to the Parties. The Clinical Supplies for clinical studies of the Global Development Program shall be charged as material costs, at Fully Burdened Manufacturing Cost (excluding General and Administrative Costs), whether supplied by a Party or by a Third Party. Fully Burdened Manufacturing Cost means one hundred percent (100%) of a Party's manufacturing cost (in accordance with the Party's accounting policies consistently applied), which shall comprise the cost of goods produced as determined by the Party manufacturing or contracting with a Third Party for each stage of the manufacturing process in accordance with GAAP or IAS as consistently applied by such Party, including product quality assurance/control costs, applicable Allocable Overhead, and other costs borne by the Party for transport, customs clearance and storage of product at the request of the other Party prior to the time of sale (i.e. freight, customs, duty and insurance). A-6 30 Each Party shall report quarterly its incurred Global Development Costs in US Dollars as early as possible, but no later than ** days after the last day of the calendar quarter in question, and shall separately provide the quarterly and year-to-date cumulative figures. Each Party shall report Global Development Costs in a manner consistent with its project accounting system. As early as possible, but no later than ** days after the last day of each calendar quarter, Genentech and Roche will provide OSI with financial statements for their respective activities, prepared in accordance with the terms contained in this Exhibit A in order for OSI to prepare the consolidated reports. No later than ** after the last day of the calendar quarter OSI shall provide Genentech and Roche with a copy of a reconciliation statement identifying on an indication-by-indication basis the Global Development Costs and the calculation serving as the basis of determining payments between the Parties. Each quarterly report will be accompanied by and include reasonable documentation which itemizes and explains the costs incurred as to allow comparison to the ratified rolling development budget and provide details as agreed upon by the Parties, in US Dollars, in a manner consistent with the amounts budgeted for such activities. The financial representatives from the Parties will meet as appropriate but at least quarterly either by telecon, video conference, or in person, to address the following: - - methodologies for charging costs to the Global Development Plan - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. A-7 31 - - analysis of the consolidated actual Global Development Costs, of the determination of the quarterly settlement payments to the Parties and supporting detailed documents and reports from the Parties - - identification and reporting of all significant line item budget variances to the OSI-774 Liaison Team - - proposal for updated rolling development budget and projections to the OSI-774 Liaison Team - - submission of updates of the long range Global Development Plan and rolling development budget to the OSI-774 Liaison Team. A.6. SHARING OF GLOBAL DEVELOPMENT COSTS - PAYMENTS BETWEEN THE PARTIES Global Development Costs will be shared pursuant to Section 2.1 of this Tripartite Agreement. The OSI-774 Liaison Team, will be responsible for, analyzing and reporting all significant line item budget variances and all overall, total budget variances to the GDC. A settlement balancing payment will be invoiced ** to one or both of the other Parties, no later than ** such that each Party bears its proportionate share of the Global Development Costs. The OSI-774 Liaison Team will provisionally approve materially unfavorable deviations from the line item budget, as defined by the OSI-774 Liaison Team, and subsequently approve the calculation and basis for invoicing such balancing payments between the Parties. The Parties - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. A-8 32 shall meet on an annual basis no later than ninety (90) days after the last day of the year in question and a "true-up" of the calendar year actual Global Development Costs and its sharing between the Parties shall be presented for approval by the GDC. Only the GDC may provide final approval for materially unfavorable line item budget variations and all overall, total budget variations, chargeable under the Global Development Plan. Corrective settlement payments may be issued as a consequence of the final decision taken by the GDC. Such yearly corrective settlement payments will be approved and invoiced as early as possible, but no later than ninety (90) days after the last day of the year in question. Any payment which is not paid before ** days from receipt of an invoice will bear interest at a rate equal to the prime rate of interest **. A.7. AUDITS AND INTERIM REVIEWS. The Parties shall maintain and cause the Third Parties acting for their account to maintain books of account and complete and accurate records pertaining to the Global Development Costs in sufficient detail to permit to confirm the correct calculation of the Global Development Costs. At the reasonable expense of a Party (the "Requesting Party"), the Requesting Party or its authorized independent public accountant has the right to engage the officially appointed worldwide independent public accountant of any other Party (the "Audited Party") to perform, on behalf of the Requesting Party or its independent public accountant, an audit, conducted in - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. A-9 33 accordance with international accounting standards (IAS), of such books and records of the Audited Party, its Affiliates and sublicensees, that are deemed necessary by the Audited Party's independent public accountant to report on Global Development Costs for the period or periods requested by the Requesting Party and the correctness of any report or payments made under this Agreement. Upon timely request and at least thirty (30) working days' prior written notice from the Requesting Party, such audit shall be conducted as an additional audit work during the Audited Party's annual audit of the countries specifically requested by the Requesting Party, during regular business hours in such a manner as to not unnecessarily interfere with the Audited Party's normal business activities, **. Such audit shall not be performed more frequently than once per calendar year nor more frequently 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 Global Development Costs or compliance with this Agreement, shall be treated as Confidential Information subject to the obligations of this Agreement and need neither be retained more than one (1) year after completion of an audit hereof, if an audit has been requested; nor more than ** from the end of the calendar year to which each shall pertain; nor more than one (1) year after the date of termination of this Agreement. Audit results shall be shared by the Requesting Party and the Audited Party. If accounting errors found greater than ** in the items sampled such that the Audited Party has been overpaid, then the costs of such - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. A-10 34 audit shall be borne by the Audited Party, and such Audited Party shall return to the Requesting Party the amount of money received in error plus interest ** The failure of a Party to request verification of any calculation of Global Development Costs during the period when records have to be retained shall be considered acceptance of the accuracy of such reporting by such Party. In the case a Party has overpaid Global Development Costs to the other, such Party shall be entitled to claim reimbursement of any such amount overpaid and the other Party shall promptly reimburse the Party having overpaid for any such amount plus interest ** A.8. START OF OPERATIONS AND EFFECTIVE ACCOUNTING DATE TERMINATION. Operation of the Global Development Plan will be deemed to have commenced as of the Effective Date of the Agreement. Costs and expenses incurred prior to such date are not chargeable to the Global Development Plan. For reporting and accounting purposes with respect to the Global Development Plan, the effective termination date of the Agreement will be the nearest month end to which such termination takes place. - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. A-11 35 EXHIBIT B TRIPARTITE ------------------------------------- OSI/GNE/ROCHE ---------------- GLOBAL DEVELOPMENT COMMITTEE -Annual Plan/Dispute Resolution -Budget and Cost Reconciliation -Each company has 2 members -Chairman rotates, OSI first ------------------------------------- - ---------------------- -------------------------- ----------------------- OSI-744 LIASON TEAM OSI/GNE ROCHE --------- --------- US PROJECT TEAM (Heads of Project Team Project Team from OSI, GNE and Roche) - ---------------------- -------------------------- ----------------------- ------------------------------------- CRO MANUFACTURING DATA, ETC. ------------------------------------- 36 GENENTECH -------------------------------------------------- OSI/GNE JOINT STEERING COMMITTEE -------------------------------- US Development/Commercialization 3 Senior Managers Each -Guidance -Annual Plan and Budget Approval -------------------------------------------------- ----------------- Joint Finance Sub-Committee ----------------- ------------------------------------- OSI/GNE ---------- US PROJECT TEAM ------------------------------------- ------------------- CRO MANUFACTURING DATA, ETC. ------------------- -------------------- GNE Regulatory Affairs Clinical Sub-Committee R&D OSI Clinical Team -------------------- Activities Team 37 ROCHE ------------------------------------- ROCHE ------- Project Team ------------------------------------- - ------------------- Clinical Regulatory Marketing Manufacturing CRO MANUFACTURING DATA, ETC. - ------------------- 38 EXHIBIT C GLOBAL DEVELOPMENT PLAN ** - ------------------- ** This portion has been redacted pursuant to a confidential treatment request. 39 EXHIBIT D MEMBERS OF GLOBAL DEVELOPMENT COMMITTEE GENENTECH Susan Hellmann Stephen Dilly OSI Nicholas Bacopoulos Paul Nadler ROCHE Ed Holdener To be advised EX-99.1 7 y45494ex99-1.txt PRESS RELEASE 1 EXHIBIT 99.1 [OSI PHARMACEUTICALS LOGO] OSI Pharmaceuticals, Genentech and Roche to Develop And Commercialize OSI-774, OSI's Lead Cancer Drug UNIONDALE, N. Y., SOUTH SAN FRANCISCO, Calif., and BASEL, Switzerland, Jan. 8 /PRNewswire/ -- OSI Pharmaceuticals, Inc. (Nasdaq: OSIP), Genentech Inc. (NYSE: DNA) and Roche announced today that they have entered into concurrent agreements for the global co-development and commercialization of OSI's lead anti-cancer drug, OSI-774. An inhibitor of the epidermal growth factor receptor (EGFR), OSI-774 is currently in Phase II clinical studies for non-small cell lung, head & neck and ovarian cancers. Taken together these agreements could result in up to $187 million in upfront fees, equity investments, and scheduled milestone payments to OSI. Milestone payments will be based on the successful filing and registration of the drug in major markets. Genentech and OSI will employ an essentially equal cost and profit sharing arrangement for commercialization in the United States, while Roche will pay royalties on net sales to OSI in markets outside of the United States. The overall costs of the tripartite development program will be split equally among the three parties. Under the agreement, Genentech and Roche have each agreed to purchase $35 million of OSI common stock and will pay up-front fees. Although OSI has retained certain co-promotion rights in the United States, Genentech will be primarily responsible for commercializing the product in the United States should the product gain FDA approval. Roche will be responsible for gaining regulatory approval and marketing in territories outside the United States. The transaction is subject to review by the Federal Trade Commission under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. "This alliance allows OSI to partner with two world-class organizations, providing us with the strength to competitively develop and, following approval, market OSI-774 on a global basis," stated Colin Goddard, Ph.D., Chairman and Chief Executive Officer of OSI. "The agreements ally OSI with a Genentech team that has already demonstrated success in developing and marketing next generation anti-cancer drugs, and a Roche team that represents a strong worldwide oncology portfolio. Moreover, this collaboration not only produces a substantial strategic and economic benefit to us, it provides all of the essential elements for the rapid, comprehensive and competitive development of OSI-774." "It is with great excitement that we add OSI-774 to our robust BioOncology initiative and enter into this important collaboration with a new partner, OSI, and a proven international partner of Roche," stated Arthur O. Levinson, Ph.D., Chairman and Chief Executive Officer of Genentech. "We believe that new agents such as OSI-774 will continue to advance the future of cancer therapy and enhance Genentech's strong presence as a leading oncology company.' [more] 2 -2- "EGFR inhibitors represent a promising class of novel anti-cancer agents," stated Franz Humer, Chief Executive Officer, Roche. "OSI-774 has the potential to significantly strengthen our already powerful oncology portfolio thereby further consolidating our position as a leading company in this important therapeutic area." OSI-774 is a selective and orally active inhibitor of the EGFR, tyrosine kinase, that is associated with the aberrant growth characteristic of certain cancer cells. OSI recently reported updated findings from two ongoing Phase II single agent open label clinical studies for OSI-774 at the European Organization for the Research and Treatment of Cancer (EORTC) Symposium in Amsterdam. OSI Pharmaceuticals is a leading biopharmaceutical company with a substantial portfolio of product opportunities for commercialization with the pharmaceutical industry. OSI's research programs are focused in the areas of cancer therapeutics, respiratory diseases, diabetes, and cosmeceuticals. OSI utilizes a comprehensive drug discovery and development capability to facilitate the rapid and cost-effective discovery and development of novel, small molecule compounds against more than 40 gene targets. Genentech, Inc. is a leading biotechnology company that discovers, develops, manufactures and markets human pharmaceuticals for significant unmet medical needs. Fourteen of the currently approved biotechnology products stem from Genentech science. Genentech markets nine biotechnology products directly in the United States. The company has headquarters in South San Francisco, California and is traded on the New York Stock Exchange under the symbol DNA. Headquartered in Basel, Switzerland, Roche is one of the world's leading research-oriented healthcare groups in the fields of pharmaceuticals, diagnostics, and vitamins. Roche's products and services address prevention, diagnosis and treatment of diseases, thus enhancing people's well-being and quality-of-life. Investors may access a webcast regarding this announcement over the Internet by logging onto: www.osip.com or www.gene.com or http://www.vcall.com/NASApp/VCall/EventPage?ID=62105 on Monday, January 8th at 10:00 AM Eastern time. A replay of this call will also be available until January 9th at 12:00 PM Eastern time by dialing, 800-633-8284 or 858-812-6440 -- call number: 17555613 Additional information on OSI Pharmaceuticals is available on the World Wide Web at: http://www.osip.com This news release contains forward-looking statements. These statements are subject to known and unknown risks and uncertainties that may cause actual future experience and results to differ materially from the statements made. Factors that might cause such a difference include, among others, uncertainties related to the identification of lead compounds, the successful pre-clinical development thereof, the completion of clinical trials, the FDA review [more] 3 -3- process and other governmental regulation, pharmaceutical collaborators' ability to successfully develop and commercialize drug candidates, competition from other pharmaceutical companies, product pricing and third part reimbursement, and other factors described in OSI Pharmaceuticals' filings with the Securities and Exchange Commission. SOURCE OSI Pharmaceuticals, Inc. -0- 01/08/2001 /CONTACT: Kathy Galante of OSI Pharmaceuticals, 516-222-0023; or Ethan Denkensohn, investors, or Kathy L. Jones, Ph.D, media, both of Burns McClellan for OSI, 212-213-0006; or Marie Kennedy, media, 650-225-8751, or Neil Cohen, media, 650-225-8681, or Susan Bentley, investor relations, 650-225-1034, all for Genentech/ /Web site: http://www.osip.com http://www.gene.com / (OSIP DNA) EX-99.2 8 y45494ex99-2.txt PRESS RELEASE 1 EXHIBIT 99.2 [OSI PHARMACEUTICALS LOGO] OSI Pharmaceuticals Reports First Quarter Financial Results - Company Updates Investors on OSI-774 - UNIONDALE, N.Y., Feb. 13 /PRNewswire/ -- OSI Pharmaceuticals, Inc. (Nasdaq: OSIP) today announced its financial results for the first quarter of fiscal 2001, ended December 31, 2000. The key financial event for the quarter was the closing of a major public offering of the Company's common stock at $70 per share with gross proceeds, including the exercise of an over-allotment option, totaling $431 million. OSI increased its research and development expenses to $10.6 million, up from $8.1 million in the prior year period. Revenues for the quarter were $5.7 million, compared to $9.9 million for the prior year period. The Company reported a net loss of $5.6 million (or $0.18 per share), for the first quarter of 2001 compared to a net income of $3.5 million in the prior year period. The decreases in revenues and earnings are related to two one-time events in the prior year period, a $3.7 million gain arising from the sale of the Company's diagnostics assets to The Bayer Corporation and a $3.5 million technology access fee paid by Tanabe Seiyaku Co., Ltd. upon the initiation of a collaboration in diabetes. First quarter revenues and earnings were also impacted by the recognition of the Tanabe technology access fee over the four year term of the collaboration. Under the SEC's Staff Accounting Bulletin No. 101, effective October 1, 2000, the Company changed its accounting for non-refundable, upfront fees received under collaborative research and development contracts. Such fees had previously been recognized when received, but will now be recognized over the term of the agreement. Thus a one-time charge of $2.6 million offset by prorated revenues of $200,000, has been recorded in the first quarter of 2001. "Our successful financing will enable us to increase our level of investment in our proprietary discovery and development programs and continue our evolution away from a business model focused on partner funded research collaborations," stated Colin Goddard, Ph.D., Chairman and Chief Executive Officer of OSI. [more] 2 -2- OSI completed the research funding phase of both the Aventis Pharmaceuticals Inc. and Solvay Pharmaceuticals, B.V. collaborative programs. These partners will continue the development of several late-stage, pre-clinical candidates resulting from the collaborations in the cholesterol lowering, asthma and cardiovascular areas, while OSI will receive royalties on products which may arise from these programs. The Company will also complete the research funding phase of its cancer alliance with Pfizer Inc. in March 2001. This program to date has produced OSI-774, OSI's lead anti-cancer drug candidate which is designed to inhibit the epidermal growth factor receptor (EGFR) and is currently in Phase II clinical trials, along with an anti-cancer drug candidate targeting the ras oncogene and an anti-angiogenesis compound which inhibits the vascular endothelial growth factor receptor (VEGFR) both in Phase I clinical trials. Pfizer will continue the development of these Phase I programs and other drug candidates while OSI will receive royalties on products arising from these programs. The successful conclusion of this collaboration will allow OSI to use its cancer discovery resources and technology for the continued development of its proprietary oncology franchise. OSI will continue the funded R&D collaboration with Pfizer in the area of cosmeceuticals. OSI-774 Program The Company also updated investors on the progress of its OSI-774 development program. Together with its partners, Genentech Inc. (NYSE: DNA) and Roche, OSI has been formulating a global development plan for OSI-774. The alliance partners intend to initially pursue the development of the product in all of the major tumor markets, including non-small cell lung cancer (NSCLC), in which the alliance will focus on front-line combination approaches. Additional programs directed toward unmet clinical needs in refractory solid tumor indications will also be conducted. Moving forward, the Company intends to update investors on this program as studies are initiated and data reported. "Our co-development alliance with Genentech and Roche is off to a great start," commented Dr. Goddard. "We are delighted with the quality and commitment of the development teams on the OSI-774 program and the speed and focus with which a comprehensive development program is coming together." The Company also announced that OSI-774 has been accepted by the National Cancer Institute (NCI) for development through their Cancer Therapy Evaluation Program (CTEP). Recommendations for proposals for NCI sponsored studies in glioma, head and neck, hepatobiliary, gastro-esophageal junction, endometrial, cervical, ovarian, and renal carcinomas have been issued. The Company informed investors that it anticipates presenting data on its current Phase II program at this year's American Society of Clinical Oncologists (ASCO) meeting in San Francisco from May 12-15, 2001. Studies were conducted in NSCLC, head and neck and ovarian cancers, that examined the use of OSI-774 as a single agent in advanced, refractory patients. Intermediate data on the two main studies, a 56 patient study in NSCLC and a 113 patient study in head and neck cancer was presented at the European Organization for the Research and Treatment of Cancer (EORTC) meeting in November 2000. The drug has been generally well tolerated in all indications with an acneiform rash being the most prevalent of reported side effects. Forty-eight percent of the lung cancer patients had either stabilization of their disease or a partial response (6 with partial responses) and 42% of the 78 evaluable patients in the head and neck cancer study had either disease stabilization or partial response (10 with partial responses). The Company also stated that initial summary data of the smaller 34 patient ovarian study showed encouraging indications of activity. Scans taken at eight weeks indicated 3 of 30 evaluable patients with partial responses and 15 of 30 patients with stable disease. Data documenting the duration of responses was only available for 2 of the patients with partial responses and 3 with stable disease. Detailed updates on all three trials will be presented at the ASCO session. [more] 3 -3- OSI Pharmaceuticals is a leading biopharmaceutical company with a substantial portfolio of product opportunities for commercialization with the pharmaceutical industry. OSI's research programs are focused in the areas of cancer therapeutics, respiratory diseases, diabetes, and cosmeceuticals. OSI utilizes a comprehensive drug discovery and development capability to facilitate the rapid and cost-effective discovery and development of novel, small molecule compounds against more than 40 gene targets. Additional information on OSI Pharmaceuticals is available on the World Wide Web at http://www.osip.com. This news release contains forward-looking statements. These statements are subject to known and unknown risks and uncertainties that may cause actual future experience and results to differ materially from the statements made. Factors that might cause such a difference include, among others, uncertainties related to the identification of lead compounds, the successful pre-clinical development thereof, the completion of clinical trials, the FDA review process and other governmental regulation, pharmaceutical collaborators' ability to successfully develop and commercialize drug candidates, competition from other pharmaceutical companies, product pricing and third party reimbursement, and other factors described in OSI Pharmaceuticals' filings with the Securities and Exchange Commission. OSI Pharmaceuticals, Inc. and Subsidiaries Selected Financial Information Condensed Consolidated Income Statements
Quarter Ended December 31, 2000 1999 Revenues Collaborative program revenues, principally from related parties $ 5,268,416 $ 5,999,084 Technology access fee 218,750 3,500,000 Sales of products and services 84,193 254,163 Other research revenues 48,595 90,458 License revenues 75,000 25,000 Total revenues 5,694,954 9,868,705 Expenses Research and development 10,570,574 8,111,482 Production and service costs 129,365 221,739 Selling, general and administrative 2,950,133 2,136,650 Amortization of intangibles 185,473 313,341 Total expenses 13,835,545 10,783,212 Loss from operations $ (8,140,591) $ (914,507) Other income (expense): Net investment income 5,139,524 723,722 Other expense - net (20,648) (39,333) Gain on the sale of diagnostics business -- 3,745,844 Net (loss) income before cumulative effect of accounting change $ (3,021,715) $ 3,515,726 Cumulative effect of the change in accounting for the recognition of upfront fees (2,625,000) -- Net (loss) income $ (5,646,715) $ 3,515,726
[more] 4 -4- Net (loss) income per share: Basic: Before cumulative effect of accounting change $ (0.10) $ 0.16 Cumulative effect of accounting change $ (0.08) $-- After cumulative effect of accounting change $ (0.18) $ 0.16 Diluted: Before cumulative effect of accounting change $ (0.10) $ 0.16 Cumulative effect of accounting change $ (0.08) $-- After cumulative effect of accounting change $ (0.18) $ 0.16 Weighted average number of shares of common stock outstanding: Basic 31,403,369 21,559,280 Diluted 31,403,369 22,158,035 Pro forma information: Net (loss) income, assuming cumulative effect of accounting change is applied retroactively $ (3,021,715) $ 234,476 Basic (loss) income per share $ (0.10) $ 0.01 Diluted (loss) income per share $ (0.10) $ 0.01
Condensed Consolidated Balance Sheet December 31, September 30, 2000 2000 Cash and short-term investments $ 486,799,551 $ 85,064,671 Total assets $ 501,331,160 $ 99,776,008 Total stockholders' equity $ 491,470,785 $ 89,881,629
SOURCE OSI Pharmaceuticals, Inc. -0- 02/13/2001 /CONTACT: Kathy Galante, Corporate Communications of OSI Pharmaceuticals, Inc., 516-222-0023, kgalante@osip.com; Investors - Ethan Denkensohn, Media - Justin Jackson or Kathy Jones, Ph.D., all of Burns McClellan, 212-213-0006, for OSI Pharmaceuticals, Inc./ /Web site: http://www.osip.com/ (OSIP) -----END PRIVACY-ENHANCED MESSAGE-----