-----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, FhtcVLEmlOinscO3qkArrXbw5H/6Sn8lRuVgjVqE1yI30kf7VjEP8yttBjwwO0ei xZVpUebPzYKwvuguL1BfOQ== 0000950123-96-002340.txt : 19960515 0000950123-96-002340.hdr.sgml : 19960515 ACCESSION NUMBER: 0000950123-96-002340 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ONCOGENE SCIENCE 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15190 FILM NUMBER: 96564434 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 10-Q 1 FORM 10-Q 1 WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 ------------------------------------------------- OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------ ------------- Commission file number 0-15190 --------------------------------------------------------- ONCOGENE SCIENCE, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 13-3159796 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 106 Charles Lindbergh Blvd., Uniondale, New York 11553 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) 516-222-0023 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- APPLICABLE ONLY TO CORPORATE ISSUERS: At May 9, 1996 the registrant had outstanding 21,482,353 shares of common stock .$01 par value. 2 ONCOGENE SCIENCE, INC. AND SUBSIDIARIES INDEX
Page No. -------- PART I - FINANCIAL INFORMATION - UNAUDITED Consolidated Balance Sheets - March 31, 1996 and September 30, 1995 3 Consolidated Statements of Operations - Three months ended March 31, 1996 and 1995 4 Consolidated Statements of Operations - Six months ended March 31, 1996 and 1995 5 Consolidated Statements of Cash Flows - Six months ended March 31, 1996 and 1995 6, 7 Notes to Consolidated Financial Statements 8, 9 Management's Discussion and Analysis of Financial Condition and Results of Operations 10, 11 PART II - OTHER INFORMATION 12-15 SIGNATURES 16
* * * * 3 ONCOGENE SCIENCE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, September 30, 1996 1995 ------------ ------------ Assets Current assets: Cash and cash equivalents $ 28,765,848 $ 17,919,609 Short-term investments 20,013,287 8,866,957 Receivables, including trade receivables of $62,363 and $163,132 at March 31, 1996 and September 30, 1995, respectively 3,129,056 1,320,015 Interest receivable 231,765 45,263 Grants receivable 216,039 433,530 Prepaid expenses and other 686,465 518,150 ------------ ------------ Total current assets 53,042,460 29,103,524 Property, equipment and leasehold improvements - net 5,429,752 5,709,515 Other receivables 594,815 262,703 Loans to officers and employees 25,343 25,516 Other assets 380,751 325,582 Intangible assets, net 7,904,203 8,630,581 ------------ ------------ $ 67,377,324 $ 44,057,421 ============ ============ Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued expenses $ 1,787,957 $ 2,825,702 Current portion of unearned revenue 91,539 150,041 ------------ ------------ Total current liabilities 1,879,496 2,975,743 Other liabilities: Long-term portion of unearned revenue 137,178 165,839 Accrued post-retirement benefit cost 434,018 366,203 ------------ ------------ Total liabilities 2,450,692 3,507,785 ------------ ------------ Stockholders' equity: Common stock, $.01 par value; 50,000,000 shares authorized, 21,091,971 and 17,683,047 shares issued at March 31, 1996 and September 30, 1995, respectively 210,920 176,830 Additional paid-in capital 95,020,176 66,735,375 Accumulated deficit (29,893,685) (26,129,341) Cumulative foreign currency translation adjustment (40,220) (55,669) Unrealized holding loss on short-term investments (228,000) (35,000) ------------ ------------ 65,069,191 40,692,195 Less: treasury stock, at cost, 222,521 shares at March 31, 1996 and September 30, 1995 (142,559) (142,559) ------------ ------------ Total stockholders' equity 64,926,632 40,549,636 ------------ ------------ Commitments and contingencies $ 67,377,324 $ 44,057,421 ============ ============
See accompanying notes to consolidated financial statements. 3 4 ONCOGENE SCIENCE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended March 31, -------------------------------- Revenues: 1996 1995 ------------ ------------ Collaborative program revenues, principally from related parties $ 2,298,649 $ 2,461,403 Sales 31,525 1,283,899 Other research revenue 216,039 523,780 ------------ ------------ 2,546,213 4,269,082 ------------ ------------ Expenses: Research and development 3,231,892 3,348,571 Production 41,525 393,974 Selling, general and administrative 1,320,014 1,826,436 Amortization of intangibles 363,188 436,507 ------------ ------------ 4,956,619 6,005,488 ------------ ------------ Loss from operations (2,410,406) (1,736,406) Other income: Net investment income 390,540 221,219 Other 26,116 46,419 ------------ ------------ Net loss $ (1,993,750) $ (1,468,768) ============ ============ Weighted average number of shares of common stock outstanding 18,016,251 16,343,241 ============ ============ Net loss per weighted share of common stock outstanding $ (.11) $ (.09) ============ ============
See accompanying notes to consolidated financial statements. 4 5 ONCOGENE SCIENCE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Six Months Ended March 31, -------------------------------- Revenues: 1996 1995 ------------ ------------ Collaborative program revenues, principally from related parties $ 4,286,107 $ 4,779,777 Sales 60,567 2,597,588 Other research revenue 475,787 1,099,698 ------------ ------------ 4,822,461 8,477,063 ------------ ------------ Expenses: Research and development 5,915,154 6,425,536 Production 63,388 799,252 Selling, general and administrative 2,651,553 3,700,865 Amortization of intangibles 726,377 872,841 ------------ ------------ 9,356,472 11,798,494 ------------ ------------ Loss from operations (4,534,011) (3,321,431) Other income: Net investment income 755,065 441,891 Other 14,602 19,785 ------------ ------------ Net loss $ (3,764,344) (2,859,755) ============ ============ Weighted average number of shares of common stock outstanding 17,745,190 16,342,919 ============ ============ Net loss per weighted share of common stock outstanding $ (.21) $ (.18) ============ ============
See accompanying notes to consolidated financial statements. 5 6 ONCOGENE SCIENCE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended March 31, ------------------------------ 1996 1995 ----------- ----------- Cash flows from operating activities: Net loss $(3,764,344) $(2,859,755) Adjustments to reconcile net loss to net cash used by operating activities: Gain on sale of investments (61,276) -- Depreciation and amortization 665,312 650,187 Amortization of intangibles 726,377 872,841 Foreign exchange (gain) loss 15,449 (44,034) Changes in assets and liabilities: Receivables (1,809,041) 21,980 Inventory -- 152,902 Interest receivable (186,502) (140,721) Grants receivable 217,491 160,686 Prepaid expenses and other (168,315) 122,164 Other receivables (332,112) 168,460 Other assets (55,169) (3,430) Accounts payable and accrued expenses (1,037,745) (680,103) Unearned revenue (87,163) 397,935 Accrued postretirement benefit cost 67,815 69,378 ----------- ----------- Net cash used by operating activities $(5,809,223) $(1,111,510) ----------- -----------
Continued See accompanying notes to consolidated financial statements. 6 7 ONCOGENE SCIENCE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (UNAUDITED)
Six Months Ended March 31, -------------------------------- 1996 1995 ------------ ------------ Cash flows from investing activities: Additions to short-term investments $(22,564,209) $ (499,688) Maturities and sales of short-term investments 11,286,155 3,441,932 Additions to property, equipment and leasehold improvements (385,548) (539,668) Net change in loans to officers and employees 173 10,400 Other -- (13,306) ------------ ------------ Net cash provided by (used in) investing activities (11,663,429) 2,399,670 ------------ ------------ Cash flows from financing activities: Net proceeds from issuance of common stock 27,995,708 -- Proceeds from exercise of stock options and employee stock purchase plan 323,183 3,622 ------------ ------------ Net cash provided by financing activities 28,318,891 3,622 Net increase in cash and cash equivalents 10,846,239 1,291,782 Cash and cash equivalents at beginning of period 17,919,609 322,308 ------------ ------------ Cash and cash equivalents at end of period $ 28,765,848 $ 1,614,090 ============ ============
7 8 ONCOGENE SCIENCE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) Opinion of Management In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company's financial position as of March 31, 1996 and September 30, 1995, its results of operations for the three and six months ended March 31, 1996 and 1995 and its cash flows for the six months ended March 31, 1996 and 1995. Certain reclassifications have been made to the prior period financial statements to conform them to the current presentation. It is recommended that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto in the Company's 1995 Annual Report on Form 10-K. Results for interim periods are not necessarily indicative of results for the entire year. Net loss per share of common stock outstanding is based on the weighted average number of shares outstanding. Common share equivalents (stock options) are not included in the computation for the three months and six months ended March 31, 1996 and 1995 since their inclusion would be anti-dilutive. (2) Stock Offering In March 1996, the Company completed a public offering for 2,825,000 shares of common stock. The sale price was $9.125 per share. Concurrent with the public offering, the Company sold 500,000 shares at $9.125 per share directly to BioChem Pharma, Inc. The proceeds to the Company from these sales, net of underwriting commissions and other costs, was approximately $28.0 million. The net proceeds were added to the Company's general funds and are to be used for research and development expenses, including funds for enhancing the Company's drug discovery technologies, and for general corporate purposes. In April 1996, the Company's underwriter exercised its option to purchase an additional 293,750 shares of common stock at $9.125 per share to cover over-allotments. The additional net proceeds to the Company from this sale was approximately $2.5 million. (3) Subsequent Events Effective April 1, 1996, the Company and Pfizer Inc. ("Pfizer") renewed their ten-year-old collaboration for a new five-year term by entering into new Collaborative Research and License Agreements. Under these documents, all patent rights and patentable inventions derived from the research under this collaboration are owned jointly by the Company and Pfizer. Under the collaborative research agreement, Pfizer has committed to provide research funding to the Company in an aggregate amount of approximately $18.8 million. Pursuant to a schedule set forth in the collaborative research agreement, Pfizer will make maximum annual research funding payments to the company, which will gradually increase from approximately $3.5 million in the first year of the five-year term to approximately $4 million in the fifth year. The collaborative research agreement will expire on April 1, 2001. However, it may be terminated earlier by either party upon the occurrence of certain defaults by the other party. Any termination of the collaboration resulting 8 9 from a Pfizer default will cause a termination of Pfizer's license rights. Pfizer will retain its license rights if it terminates the agreement in response to a default by the Company. In addition, between July 1 and September 30, 1998, Pfizer may terminate the collaborative research agreement, with or without cause, effective March 31, 1999. Furthermore, between July 1 and September 30, 1999, Pfizer may termiinate the collaborative research agreement, with or without cause, effective March 31, 2000. Upon such early termination by Pfizer, Pfizer will retain its license rights. The Company has granted Pfizer an exclusive, worldwide license to make, use, and sell the therapeutic products resulting from this collaboration in exchange for royalty payments. This license terminates on the date of the last to expire of the Company's relevant patent rights. On April 11, 1996, the Company acquired MYCOsearch, Inc., a privately owned North Carolina corporation ("MYCOsearch"), in a transaction in which MYCOsearch was merged into a newly formed subsidiary (the "Subsidiary") of the Company pursuant to an Agreement and Plan of Merger dated April 11, 1996 among the Company, MYCOsearch Acquisition Corp., MYCOsearch and the shareholders of MYCOsearch (the "Merger"). The Subsidiary was the surviving corporation in the Merger, and in connection therewith, its name was changed to MYCOsearch, Inc. The purchase price paid by the Company to the shareholders of MYCOsearch consisted of $1.75 million in cash, $2.95 million in common stock of the Company (316,553 shares at $9.319 per share, plus cash for fractional shares) and warrants to purchase 100,000 shares of the Company's common stock at $9.319 per share (the "Warrants"). The Warrants, which will be exercisable for a three-year period starting on April 11, 1998, were valued at approximately $483,000. In connection with the Merger, two principals of MYCOsearch became employed by the Company as its Vice President, Microbial Discovery, Pharmaceutical Division and Director, Fermentation Biology. MYCOsearch specializes in the collection of fungi cultures and the development of extracts derived therefrom. These fungal extracts contain natural chemical structures that the Company tests against target proteins in its high throughput drug screens. Effective as of May 1, 1996, the Company entered into a Collaborative Research, Development and Commercialization Agreement with BioChem Pharma (International) Inc. ("BioChem Pharma"). Under this agreement, the parties will seek to discover and develop antiviral drugs for the treatment of Hepatitis C virus and for HIV, although the focus of the collaborative efforts may change at the discretion of a joint steering committee. This agreement provides that the Company and BioChem Pharma will jointly commit resources to the collaborative program. The Company and BioChem Pharma will share equally the commercialization rights in the U.S. and Europe for any product resulting from the collaboration. BioChem Pharma will exclusively own commercialization rights in Canada. The agreement is for a term of five years, with automatic, successive one-year renewal periods thereafter. After May 1, 1999, however, either party may terminate the agreement by giving the other party six-months prior written notice. The agreement is also subject to early termination in the event of certain defaults by either party. 9 10 THREE MONTHS ENDED MARCH 31, 1996 AND 1995 REVENUES Revenues for the three and six months ended December 31, 1996 were approximately $2.5 million and $4.8 million, respectively, a decrease of $1.7 million and $3.9 million or 40% and 43%, respectively, compared to revenues of $4.2 million and $8.5 million, respectively, reported for the three and six months ended March 31, 1995. The decrease was due to lower sales of research products, which accounted for approximately $1.3 million and $2.5, respectively, of the decrease in revenues. The Company sold its Research Products Business for $6.0 million in cash plus other considerations in August 1995, and accordingly there were no significant sales of research products recorded after this date. In the sale agreement, the Company agreed to indemnify the purchaser for a period of two years for certain breaches of the agreement. Collaborative program revenue decreased approximately $163,000 and $494,000 or 7% and 10%, respectively. This was largely due to a reduction in revenue under the collaborative arrangement with Hoechst Marion Roussel, Inc. (HMRI) as compared to the total revenue in the prior year's periods from Marion Merrell Dow Inc. (MMDI), Hoechst Roussel Pharmaceuticals, Inc. (Hoechst Roussel) and Hoechst AG ("Hoechst"). Other research revenues, representing primarily government grants, decreased approximately $308,000 and $624,000, respectively, due in part to the expiration of a U.S. government grant. The balance of the decrease represents changes in the timing and amount of grant awards. The Company expects that grant revenue will be somewhat lower in the current fiscal year. EXPENSES The Company's operating expenses decreased by approximately $1.0 million and $2.4 million or 17% and 21%, respectively, for the three and six months ended March 31, 1996, compared to the three and six months ended March 31, 1995. Research and development expenses decreased approximately $117,000 and $510,000 or 3% and 8% respectively, due to reductions in expenses in the collaborations with HMRI and Becton Dickinson and Company ("Becton") commensurate with the reduced funding in these programs. This was offset in part by increased expenditures in the Company's proprietary research programs. Production expenses and selling, general and administrative expenses decreased approximately $859,000 and $1.8 million, respectively. These reductions were directly related to expenses that were associated with the Company's Research Products Business in the prior year's periods. The reduction of approximately $73,000 and $146,000, respectively, of amortization of intangibles is due to a portion of goodwill relating to the Research Products Business, which was expensed when the business was sold in 1995. OTHER INCOME AND EXPENSE Net investment income increased approximately $169,000 and $313,000 or 77% and 71%, respectively, for the three and six months ended March 31, 1996 compared to the three and six months ended March 31, 1995. This increase was largely due to the increase in funds invested as a result of the proceeds from the sale of the Research Products Business, the sale of stock to Ciba-Geigy, Ltd. ("Ciba") in April 1995, and the stock offering, which was completed in April 1996. 10 11 LIQUIDITY AND CAPITAL RESOURCES At March 31, 1996, working capital (representing primarily cash, cash equivalents and short-term investments) aggregated approximately $51.2 million. The Company has been, and will continue to be, dependent upon collaborative research revenues, government research grants, interest income and cash balances until products developed from its technology are commercially marketed. In April 1995, Ciba purchased 909,091 shares of the Company's common stock for an aggregate purchase price of $5.0 million. In April 1996, the Company completed a public offering of its common stock that provided total net proceeds of approximately $30.5 million. During 1995, the pharmaceutical operations of Hoechst, Hoechst Roussel and MMDI were consolidated into HMRI. The Company is aware that HMRI is conducting a review of all its research and development programs. Based on discussions with HMRI, the Company expects its programs with HMRI to continue under one overall agreement in the future, although there can be no assurance that the Company and HMRI will enter into such an agreement, or if such an agreement is entered into, that it will not be on terms less favorable than the existing agreements with each of Hoechst, Hoechst Roussel and MMDI. The Company anticipates that the total funding under the consolidated agreement will be lower than the aggregate funding under the three previously separate agreements. Since its commencement in 1991 and until the second quarter of fiscal 1995, the cancer diagnostics collaborative program with Becton has focused on both serum-based and histochemical immunoassays. During the second quarter of fiscal 1995, Becton decided to focus exclusively on cellular cancer diagnostics, including histochemical immunoassays. Becton has reduced its funding under this program in fiscal 1996, and the Company is uncertain as to Becton's ongoing support for this program. The Company is continuing the development of serum-based cancer diagnostic products and is in discussions with possible new collaborative partners in this area. However, there can be no assurance that the development of these products will not be terminated. The Company believes that with the funding from its collaborative research programs, government research grants, interest income, and cash balances, the Company's financial resources are adequate for its operations through fiscal 1999. However, the Company's capital requirements may vary as a result of a number of factors, including competitive and technological developments, funds required for expansion of the Company's technology platorm, including possible joint ventures, collaborations, and acquisitions, the time and expense required to obtain governmental approval of products, and any potential indemnification payments to the purchaser of the Research Products Business, some of which factors are beyond the Company's control. The Company intends to substantially increase its expenditures and capital investment over the next several years to enhance its drug discovery technologies, pursue internal proprietary drug discovery programs, and to commit resources to new collaborative ventures, such as the new programs with Anaderm and BioChem Pharma. In April 1996, the Company purchased MYCOsearch, Inc., owner of a collection of fungi and actinomycetes, for approximately $1.7 million in cash and $3.4 million in common stock and warrants. There can be no assurance that scheduled payments will be made by third parties, that current agreements will not be cancelled, that government research grants will continue to be received at current levels or that unanticipated events requiring the expenditure of funds will not occur. Further, there can be no assurance that the Company will be able to obtain any additional required funds, or, if such funds are available, that such funds will be 11 12 available on favorable terms. Failure to obtain additional funds when required would have a material adverse effect on the company's business, financial condition and result of operations. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not applicable. ITEM 2. CHANGES IN SECURITIES Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Company's annual meeting of stockholders was held March 25, 1996. The following ten directors were elected:
Name For Withholding Authority ---- --- --------------------- Edwin A. Gee 12,538,807 115,639 Shares Gary E. Frashier 12,541,248 113,198 Shares Steve M. Peltzman 12,541,248 113,198 Shares J. Gordon Foulkes 12,533,242 121,204 Shares G. Morgan Browne 12,541,907 112,539 Shares John French, II 12,541,777 112,669 Shares Walter M. Lovenberg 12,542,007 112,439 Shares Walter M. Miller 12,540,107 114,339 Shares Gary Takata 12,521,277 133,169 Shares John P. White 12,526,926 127,520 Shares
In addition, the following matters were voted upon: (1) the appointment of KPMG Peat Marwick LLP as auditors for fiscal year ended September 30, 1996 was ratified (12,582,930 shares voted in favor, 17,480 shares against and 54,036 shares abstained); (2) a proposal to amend the Company's 1993 Incentive and Non-Qualified Stock Option Plan was approved (9,923,043 shares voted in favor, 602,892 shares against, and 74,752 shares abstained); (3) a proposal to adopt the 1995 Employee Stock Purchase Plan was approved (10,268,725 shares voted in favor, 110,148 shares against, and 85,367 shares abstained); (4) a proposal to adopt the Non-Employee Directors' Stock Purchase Plan was approved (9,818,096 shares voted in favor, 564,642 shares against, and 81,502 shares abstained). ITEM 5. OTHER INFORMATION. FORMATION OF ANADERM RESEARCH CORP. In connection with the formation of Anaderm Research Corp. ("Anaderm"), a Stockholders' Agreement dated April 23, 1996 (the "Stockholders' Agreement") was entered into by Oncogene Science, Inc. (the "Company"), Pfizer Inc. ("Pfizer"), New York University ("NYU") and certain individual members of the faculty of NYU (the "Faculty Members"). Andem will focus on the discovery and development of new compounds for use in humans for the prevention or treatment baldness and wrinkles and for the control of skin and hair pigmentation. Anaderm has issued common stock to 12 13 Pfizer and the Company and options to purchase common stock to NYU and the Faculty Members. If NYU and the Faculty Members exercise their options fully, then Pfizer will hold 82%, the Company will hold 14%, and NYU and the Faculty Members collectively will hold 4%, of Anaderm's common stock. Pfizer's shares of Anaderm's common stock have been issued in exchange for a cash contribution and cash commitments. In exchange for its 14% of the outstanding shares of Anaderm common stock, the Company will provide formatting for high-throughput screens and will conduct compound screening for 18 months at its own expense under a Collaborative Research Agreement dated April 23, 1996 (the "Collaborative Research Agreement") among the Company, Anaderm and Pfizer, which is discussed below. Anaderm has granted the stock options to NYU and the Faculty Members as partial consideration for NYU entering into a separate research agreement with Pfizer and Anaderm. The Stockholders' Agreement also provides for the mutual management of Anaderm by the Company and Pfizer, as well as certain restrictions on the transfer of Anaderm's common stock and Anaderm's repurchase of the shares of its common stock upon the occurrence of certain events. Under this agreement, the Scientific Advisory Board of Anaderm, composed of appointees of the Company, Pfizer and Anaderm will prepare a written plan approved by the Anaderm Board of Directors that describes the research to be carried out in the collaborative research program for each annual period. The term of the Collaborative Research Agreement is three years. During the initial phase of the agreement (the first 18 months) the Company is required to provide at its own cost formatting for high throughput compound screens and perform screening of its own compounds and those compounds provided by Pfizer. Upon the termination of the initial phase, the Board of Directors of Anaderm will make a determination as to whether the initial phase was successfully completed. If the board determines that the initial phase was unsuccessful, the collaborative Research Agreement will then terminate. If the Anaderm Board of Directors, with Pfizer's approval, determines the initial phase was successful, then the funded phase will commence and will continue for the term of the Collaborative Research Agreement. During this phase, Anaderm will make payments to the Company equal to its research costs, including overhead, plus 10%. Subject to a right of first refusal granted to Pfizer and to any rights of third parties, Anaderm has the right to develop and market any compounds that are invented or for which a new use is invented for the prevention or treatment of baldness and wrinkles and for the control of hair and skin pigmentation. Anaderm also has the right to develop for its own use or to license to third parties other than NYU, human therapeutic products for certain proliferative and inflammatory disorders of the skin. The Company and Pfizer will assign to Anaderm their worldwide rights in any patentable invention based on non-Pfizer compounds that is made in the course of Anaderm's participation in the research program. Furthermore, the Company will assign to Pfizer its worldwide rights in any patentable invention based on Pfizer compounds and made in the course of its participation in the research program. Anaderm or Pfizer will pay royalties to the Company on the sales of products resulting from this collaboration. Under the agreement, Anaderm will have the right to prosecute and maintain all patents on research program inventions that were made by any of the parties to the agreement in the course of their participation in the program. During the term of the Collaborative Research Agreement, the Company is prohibited from conducting or sponsoring any research related to the purpose of the research program outside of this collaboration without the prior unanimous written consent of the Anaderm Board of Directors. COLLABORATION WITH BIOCHEM PHARMA (INTERNATIONAL) INC. Effective as of May 1, 1996, the Company entered into a Collaborative Research, Development and Commercialization Agreement with BioChem Pharma 13 14 (International) Inc. ("BioChem Pharma"). Under this agreement, the parties will seek to discover and develop antiviral drugs for the treatment of Hepatitis C virus and HIV, although the focus of the collaborative efforts may change at the discretion of a joint steering committee. This agreement provides that the Company and BioChem Pharma will jointly commit resources to the collaborative program. The Company and BioChem Pharma will share equally the commercialization rights in the U.S. and Europe for any product resulting from the collaboration. BioChem Pharma will exclusively own commercialization rights in Canada. The agreement is for a term of five years, with automatic successive one-year renewal periods thereafter. After May 1, 1999, however, either party may terminate the agreement by giving the other party six-months prior written notice. The agreement is also subject to early termination in the event of certain defaults by either party. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) EXHIBITS. 3.1 Certificate of Incorporation, as amended (1) 3.2 By-Laws, as amended (1) *10.1 Collaborative Research Agreement dated April 1, 1996, between the Company and Pfizer Inc. *10.2 License Agreement dated April 1, 1996 between the Company and Pfizer Inc. *10.3 Stockholders' Agreement dated April 23, 1996 among Anaderm Research Corp., the Company, Pfizer Inc., New York University and certain individuals *10.4 Collaborative Research Agreement dated April 23, 1996 among the Company, Pfizer Inc. and Anaderm Research Corp. 10.5 Registration Rights Agreement dated April 11, 1996 among the Company and the former stockholders of MYCOsearch, Inc. and their designees 10.6 Form of Warrants issued by the Company to the former stockholders of MYCOsearch, Inc. and their designees covering an aggregate of 100,000 shares of common stock 10.7 Employment Agreement dated April 11, 1996 between the Company and Dr. Barry Katz 27 Financial Data Schedule ------------------ * Portions of this exhibit have been redacted and are 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. (1) Included as an exhibit to the Company's registration 14 15 statement on Form S-3 (File No. 333-937) initially filed on February 14, 1996, and incorporated herein by reference. (b) REPORTS ON FORM 8-K. The Company filed a Current Report on Form 8-K on April 26, 1996, and amended such report by filing a Form 8-K/A on May 10, 1996. The earliest event covered by such report occurred on April 1, 1996. The items included in this report, as amended, consisted of: Item 2. Acquisition of Assets (describing the acquisition of MYCOsearch, Inc.) Item 3. Other Events (a) Completion of Public Offering (b) Renewal of Pfizer Collaboration Item 7. Financial Statements and Exhibits (a) Financial Statements of Business Acquired (b) Pro Forma Financial Information (c) Exhibits 15 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ONCOGENE SCIENCE, INC. (Registrant) Date May 14, 1996 /s/ GARY E. FRASHIER ------------------- ---------------------------------------- Gary E. Frashier President and Chief Executive Officer Date May 14, 1996 /s/ ROBERT L. VAN NOSTRAND ------------------- ---------------------------------------- Robert L. Van Nostrand Vice President Finance & Administration 16 17 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 3.1 Certificate of Incorporation, as amended (1) 3.2 By-Laws, as amended (1) *10.1 Collaborative research Agreement dated April 1, 1996 between the Company and Pfizer Inc. *10.2 License Agreement dated April 1, 1996 between the Company and Pfizer Inc. *10.3 Stockholders' Agreement dated April 23, 1996 among Anaderm Research Corp., the Company, Pfizer Inc., New York University and certain individuals *10.4 Collaborative Research Agreement dated April 23, 1996 among the Company, Pfizer Inc. and Anaderm Research Corp. 10.5 Registration Rights Agreement dated April 11, 1996 among the Company and the former stockholders of MYCOsearch, Inc. and their designees 10.6 Form of Warrants issued by the Company to the former stockholders of MYCOsearch, Inc. and their designees covering an aggregate of 100,000 shares of common stock 10.7 Employment Agreement dated April 11, 1996 between the Company and Dr. Barry Katz 27 Financial Data Schedule ------------------ * Portions of this exhibit have been redacted and are subject to 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. (1) Included as an exhibit to the company's registration statement on Form S-3 (File No. 333-937) initially filed on February 14, 1996, and incorporated herein by reference. 17 EX-10.1 2 COLLABORATIVE RESEARCH AGREEMENT - 4-1-96 1 EXHIBIT 10.1 - ----------------------------------------------------------------------------- Portions of this Exhibit 10.1 have been redacted and are the subject of a confidential treatment request filed with the Secretary of the Securities and Exchange Commission. - ----------------------------------------------------------------------------- 2 EXHIBIT 10.1 COLLABORATIVE RESEARCH AGREEMENT This COLLABORATIVE RESEARCH AGREEMENT is entered into as of April 1, 1996 by and between Pfizer Inc ("Pfizer"), a Delaware corporation, having an office at 235 East 42nd Street, New York, New York 10017, and Oncogene Science, Inc. ("OSI"), a Delaware corporation, having an office at 106 Charles Lindbergh Boulevard, Uniondale, New York 11553. WHEREAS, OSI was organized to develop, produce and market therapeutic and diagnostic products for, among other things, the early detection, monitoring and treatment of human disease; and WHEREAS, Pfizer has the capability to undertake research for the discovery and evaluation of agents for treatment of disease and also the capability for clinical analysis, manufacturing and marketing of such agents; and WHEREAS, Pfizer and OSI entered into a Collaborative Research Agreement effective April 1, 1986 (the "1986 Research Agreement"); and renewed and modified it on April 1, 1991; and WHEREAS, Pfizer and OSI wish to continue to pursue the research performed under the 1986 and 1991 Research Agreements; NOW, THEREFORE, the parties agree as follows: 1. Definitions Whenever used in this Agreement, the terms defined in this Section 1 shall have the meanings specified. 1.1 "Affiliate" means any corporation or other legal entity owning, directly or indirectly, fifty percent or more of the voting capital shares or similar voting securities of Pfizer or OSI; any corporation or other legal entity fifty percent or more of the voting capital shares or similar voting rights of which is owned, directly or indirectly, by Pfizer or OSI or any corporation or other legal entity fifty percent or more of the voting capital shares or similar voting rights of which is owned, directly or indirectly, by a corporation or other legal entity which owns, directly or indirectly, fifty percent or more of the voting capital shares or similar voting securities of Pfizer or OSI. 3 1.2 "Annual Commitment" means the maximum amount to be paid to OSI by Pfizer to fund the Sponsored Research Program for any Commitment Year. 1.3 "Allocated Overhead" means the amount of overhead, including general and administrative costs, determined in accordance with generally accepted accounting principles, incurred by OSI and allocated to the Sponsored Research Program in the same proportion that the total man-hours of work performed in the Sponsored Research Program bears to the total man-hours of work performed in all OSI research programs, or such other customary allocation basis that may be agreed in writing between the parties. 1.4 "Annual Research Plan" means the written plan describing the annual research and budgets in the area to be carried out during each Commitment Year by Pfizer and OSI pursuant to this Agreement, including both the Annual Sponsored Research Plan to be carried out by OSI and the specific Projects, timetables and technical goals to be pursued by Pfizer and OSI. 1.5 "Annual Sponsored Research Plan" means the written plan describing the research in the Area to be carried out during each Commitment Year by OSI pursuant to this Agreement, including the specific Projects, timetables and technical goals to be pursued by OSI. 1.6 "Research Program" is the collaborative research program in the Area conducted by Pfizer and OSI. 1.7 "Sponsored Research Program" is that part of the Research Program that is to be carried out by OSI. 1.8 "Effective Date" is April 1, 1996. 1.9 "Project" means each of those projects set forth in the table of contents of the Annual Research Plans described in this Agreement. 1.10 "Contract Period" means the period beginning on the Effective Date and ending on the date on which this Agreement terminates. 1.11 "Commitment Year" means a twelve-month period terminating on each anniversary of the Effective Date. 1.12 "Area" means research as described in each Annual Research Plan and Annual Sponsored Research Plan adopted pursuant to this Agreement or the 1986 or 1991 -2- 4 Research Agreements directed to the treatment and diagnosis of cancer or any other indication identified in the course of that research. 1.13 "Technology" means and includes all technology and technical information that pertain to the development of human therapeutic and diagnostic products, including all laboratory notebooks, research plans, inventions, cultures, strains, vectors, genes and gene fragments and their sequences, cell lines, hybridoma cell line, monoclonal and polyclonal antibodies, proteins and protein fragments, non-protein chemical structures and methods for synthesis, structure-activity relationships, computer models of chemical structures, computer software, assay methodology, processes, materials and methods for production, recovery and purification of nature products, formulas, plans, specifications, characteristics, equipment and equipment designs, marketing surveys and plans, business plans, know-how, experience and trade secrets. 1.14 "OSI Technology" means Technology that is or was: (a) developed by employees, of or consultants to, OSI alone or jointly with third parties other than Pfizer prior to the Effective Date of the 1986 Research Agreement or in the course of activities not described in an Annual Research Plan adopted pursuant to this Research Agreement or the 1986 and 1991 Research Agreements; or (b) acquired by purchase, license, assignment or other means from third parties by OSI prior to the Effective Date of the 1986 Research Agreement or since that date that would not be otherwise part of Joint Technology. 1.15 "Pfizer Technology" means all Technology outside the Area developed independently or acquired by Pfizer. 1.16 "Joint Technology" means Technology in the Area that is or was: (a) developed by employees of or consultants to Pfizer or OSI solely or jointly with each other since April 1, 1986; or (b) acquired by purchase, license, assignment or other means from third parties by OSI or Pfizer since April 1, 1986; provided, however, that candidates acquired by Pfizer by license or otherwise pursuant to Section 2.1.3(b) shall be Pfizer's property solely. -3- 5 1.17 "OSI Confidential Information" means all information about any element of the OSI or Joint Technology which is disclosed by OSI to Pfizer and designated "Confidential" in writing by OSI at the time of disclosure to Pfizer to the extent that such information as of the date of disclosure to Pfizer is not (i) known to Pfizer other than by virtue of a prior confidential disclosure to Pfizer by OSI or (ii) disclosed in the published literature, or otherwise generally known to the public, or (iii) obtained from a third party free from any obligation of secrecy; provided, however, that such third party has no obligation of confidentiality to Pfizer. 1.18 "Pfizer Confidential Information" means all information about any element of Pfizer or Joint Technology which is disclosed by Pfizer to OSI and designated "Confidential" in writing by Pfizer at the time of disclosure to OSI to the extent that such information as of the date of disclosure to OSI is not (i) known to OSI other than by virtue of a prior confidential to OSI by Pfizer or (ii) disclosed in the published literature, or otherwise generally known to the public, or (iii) obtained from a third party free from any obligation of secrecy; provided, however, that such third party has no obligation of confidentiality to OSI. 1.19 "Patent Rights" means and includes OSI Patent Rights and all patentable inventions derived from Joint Technology, including all applications for letters patent, whether domestic or foreign, claiming such patentable inventions, including all continuations, continuations-in-part, divisions, renewals and patents of addition thereof, all letters patent granted thereon, and all reissues and extensions thereof. 1.20 (a) "OSI Patent Rights" shall have the same meaning as that set forth in Section 15(a) of Exhibit I to the 1986 Research Agreement. Patent applications and patents relating to transcriptional modulation of gene expression are specifically excluded from this definition. (b) "Pfizer Patent Rights" shall have the same meaning as that set forth in Section 15(a) of Exhibit I to the 1986 Research Agreement. Patent applications and patents relating to transcriptional modulation of gene expression are specifically excluded from this definition. 1.21 "Valid Claim" means a claim within Patent Rights so long as such claim shall not have been disclaimed by both Pfizer and OSI or shall not have been held -4- 6 invalid in a final decision rendered by a tribunal of competent jurisdiction from which no appeal has been or can be taken. 1.22 "Human Diagnostic Product" means any product within the Area useful for the identification or quantification of the propensity toward or actual existence of any cancerous state in a human patient or any other human diagnostic utility identified in the course of research within the area. 1.23 "Human Therapeutic Product" means any product within the Area for the management of any cancerous or pre-cancerous state in a human patient or any other human therapeutic indication identified in the course of research within the Area. 1.24 "Licensed Human Diagnostic Product" means a Human Diagnostic Product that employs Patent Rights or Joint Technology in its manufacture, use or sale. 1.25 "Licensed Human Therapeutic Product" means a Human Therapeutic Product that employs Patent Rights or Joint Technology in its manufacture, use or sale. 1.26 "Event of Termination" has the meaning set forth in Section 9.3. 1.27 "Funding Payments" has the meaning set forth in Section 3. 1.28 "Person" means any individual, estate, trust, partnership, joint venture, association, firm, corporation, company, or other entity. 1.29 "Research Committee" has the meaning specified in Section 2.2. 2. Collaborative Research Program 2.1 Collaborative Research Program 2.1.1 Purpose. OSI and Pfizer shall conduct a collaborative research program in the Area (the "Research Program") throughout the Contract Period. Technology in the Area developed in the Research Program will become part of the Joint Technology. The Research Program shall include, as a component, a research program that shall be pursued by OSI and that shall be funded by Pfizer throughout the Contract Period (the "Sponsored Research Program"). The objectives of the Research Program are to discover Human Therapeutic and Diagnostic Products. 2.1.2 Annual Research Plan. The Annual Research Plan for the first Commitment Year is described in the attached Exhibit I. For each Commitment Year after the first Commitment Year, the Annual Research Plan, shall be prepared by the Research -5- 7 Commitment for submission to, and approval by Pfizer and OSI no later than ninety (90) days before the end of the prior Commitment Year. If Pfizer and OSI cannot agree on the Annual Research Plan or Annual Sponsored Research Plan, Pfizer shall determine its content. The Annual Research Plan and the Annual Sponsored Research Plan for each Commitment Year shall be appended to and made part of this Agreement. 2.1.3 Exclusivity. (a) OSI agrees that during the Contract Period neither OSI nor any of its Affiliates shall conduct research itself or sponsor any other research, or engage in any research sponsored by any Person not a party to the Agreement, if the objectives of such research are the discovery and development of novel Human Therapeutic Products; provided, however, that, if OSI becomes aware during the Contract Period of an opportunity to sponsor other research having any of the objectives of the Research Program or to engage in such research sponsored by a Person that is not a party to this Agreement, it shall promptly notify Pfizer of such opportunity. Pfizer and OSI shall then negotiate in good faith for a period of one hundred twenty (120) days an agreement by which such opportunity can be incorporated into the Research Program or otherwise used to further the purposes of the Research Program to their mutual advantage. If at the end of the one hundred twenty (120) day period, the parties have not reached agreement, OSI shall be free to pursue such opportunity with a third party without further obligation to Pfizer. (b) Pfizer agrees that during the Contract Period neither Pfizer nor any of its Affiliates shall sponsor any other research, or engage in any research sponsored by any Person not a party to this Agreement, if the objectives of such research are the discovery of novel Human Therapeutic and Diagnostic Products; provided, however, that, if Pfizer becomes aware during the Contract Period of an opportunity to sponsor other research having any of the objectives of the Research Program or to engage in such research sponsored by a Person that is not a party to this Agreement, it shall promptly notify OSI of such opportunity. Pfizer and OSI shall then negotiate in good faith for period of one hundred twenty (120) days an agreement by which such opportunity can be incorporated into the Research Program or otherwise used to further the purposes of the Research Program to their mutual advantage. If at the end of the one hundred twenty (120) day period, the parties have not reached -6- 8 agreement, Pfizer shall be free to pursue such opportunity with a third party without further obligation to OSI. Nothing in this Section shall prevent Pfizer from engaging in such research by itself or acquiring candidates for development by license or otherwise. 2.2 Research Committee 2.2.1 Purpose. The research committee established in the 1986 Research Agreement (the "Research Committee") shall be continued by Pfizer and OSI: (a) to review and evaluate progress under each Annual Research Plan; (b) to prepare the Annual Research Plan and for each Commitment Year; and (c) to coordinate and monitor publication of research results obtained from the exchange of information and materials that relate to the Research Program. 2.2.2 Membership. Pfizer and OSI each shall appoint, in its sole discretion, four members to the Research Committee. Substitutes may be appointed at any time. The members initially shall be: Appointees: *** *** *** *** *** Appointees: *** *** *** *** *** 2.2.3 Chair. The Research Committee shall be chaired by two co-chairpersons, one appointed by Pfizer and the other appointed by OSI. 2.2.4 Meetings. The Research Committee shall meet at least quarterly, at places and on dates selected by each party in turn. Representatives of Pfizer or OSI or both, *** These portions deleted pursuant to a request for confidential treatment. -7- 9 in addition to members of the Research Committee, may attend such meetings at the invitation of both parties. 2.2.5 Minutes. The Research Committee shall keep accurate minutes of its deliberations which record all proposed decisions and all actions recommended or taken. The minutes shall be delivered to all Research Committee members within five working days after each meeting. The party hosting the meeting shall be responsible for the preparation of the minutes. Draft minutes shall be edited by the co-chairpersons and shall be issued in final form only with their approval and agreement. 2.2.6 Decisions. Subject to the provisions of 2.1.2, all technical decisions of the Research Committee shall be made by majority of the members. 2.2.7 Expenses. Pfizer and OSI shall each bear all expenses of their respective members related to the participation on the Research Committee. 2.3 Reports and Materials 2.3.1 Reports. During the Contract Period, Pfizer and OSI each shall furnish to the Research Committee: (a) summary reports within fifteen (15) days after the end of each month, commencing on the Effective Date, describing its progress under the Annual Research Plan; and (b) comprehensive written reports within thirty (30) days after each Research Committee Meeting, describing in detail the work accomplished by it under the Annual Research Plan during the Commitment Year and discussing and evaluating the results of such work. 2.3.2 Materials. OSI and Pfizer shall, during the Contract Period as a matter of course as described in the Annual Research Plan or upon each other's oral or written request, furnish to each other samples of biochemical, biological or synthetic chemical materials which are part of the Joint Technology and which are necessary for each party to carry out its responsibilities under the Annual Research Plan. To the extent that the quantities of materials requested by either party exceed the quantities set forth in the Annual Research Plan, the requesting party shall reimburse the other party for the reasonable costs of such materials if they are furnished. -8- 10 2.4 Laboratory Facilities and Personnel. OSI shall provide suitable laboratory facilities, equipment and personnel for the work to be done by OSI in carrying out the Annual Sponsored Research Plan. 2.5 Diligent Efforts. Pfizer and OSI each shall use reasonably diligent efforts to achieve the objectives of the Research Program. OSI will use reasonably diligent efforts to achieve the objectives listed in Exhibit I and Pfizer will use reasonably diligent efforts to assist OSI in the pursuit of those objectives. To achieve the objections of the Research Program, Pfizer will specifically use diligent efforts: (a) to advance the pharmacological assessment of materials in the Area identified by OSI or Pfizer in order to select those worthy of further investigation; (b) to determine the chemical structure of the selected materials and to make related compounds to determine the relationship between structure and activity and to identify potential development candidates; (c) to select development candidates; (d) to assess safety and efficacy of the selected development candidates in animals and in human patients under conditions designed to yield data suitable for inclusion in approval applications to be submitted to the U.S. Food and Drug Administration; and (e) to develop manufacturing methods and pharmaceutical formulations for those selected candidates. 3. Funding of the Sponsored Research Program. 3.1 The Annual Commitment for each Commitment Year is as follows:
Commitment Year Annual Commitment --------------- ----------------- 1 $3,550,000.00 2 3,656,000.00 3 3,766,000.00 4 3,879,000.00 5 3,995,000.00
These payments are intended to cover the expenses for 16.5 OSI man-years. 3.2 Payments by Pfizer to cover OSI's total, actual research costs, plus Allocated Overhead, plus ten percent (10%) of the sum of the actual research costs and the -9- 11 Allocated Overhead (the "Funding Payments") shall not exceed the annual Commitment in any Commitment Year. 3.2.1 All Funding Payments shall be made quarterly in advance for work scheduled to be performed by OSI during any three (3) month period, against OSI's invoice for such three (3) month period. Adjustments as necessary to reflect the work actually performed by OSI shall be made at the end of each three (3) month period and shall be reflected in OSI's invoice for the next three (3) month period. 3.2.2 The amount of the Funding Payment for each quarter shall be based on the work in progress pursuant to the applicable Annual Sponsored Research Plan and the associated annual budget; provided, however, that the aggregate amount of Funding Payments made in any Commitment Year shall not exceed the Annual Commitment for such Commitment Year. 3.2.3 Each Funding Payment shall be paid on the first day of the quarter or ten (10) days after receipt of invoice, whichever is later. 3.2.4 OSI shall keep for three (3) years from the expiration of this Agreement complete and accurate records of its expenditures of Funding Payments received by it. The records shall conform to good accounting principles as applied to a similar company similarly situated. Pfizer shall have the right at its own expense during the term of this Agreement and during the subsequent three-year period to appoint an independent certified public accountant reasonably acceptable to OSI to inspect said records to verify the accuracy of such expenditures, pursuant to each Annual Sponsored Research Plan. OSI shall make its records available for inspection by the independent certified public accountant during regular business hours at the place or places where such records are customarily kept, upon reasonable notice from Pfizer to the extent reasonably necessary to verify the accuracy of the expenditures and required reports. This right of inspection shall not be exercised more than once in any calendar year and not more than once with respect to records covering any specific period of time. Pfizer agrees to hold in strict confidence all information concerning such expenditures, other than their total amounts, and all information learned in the course of any audit or inspection, except to the extent that it is necessary for Pfizer to reveal the information in order to enforce any rights it may have pursuant to this Agreement or if -10- 12 disclosure is required by law. The failure of Pfizer to request verification of any expenditures before or during the three-year period shall be considered acceptance of the accuracy of such expenditures, and OSI shall have no obligation to maintain any records pertaining to such report or statement beyond the three-year period. 4. Treatment of Confidential Information. 4.1 Confidentiality. 4.1.1 Pfizer and OSI recognize that the other's Confidential Information constitutes highly valuable proprietary, confidential information. Subject to the terms and conditions of the License Agreement, the disclosure obligations set forth in Section 4.3 and 4.4 and publication rights set forth in Section 4.2, Pfizer and OSI each agree that during the term of this Agreement and for five (5) years thereafter, they will keep confidential, and will cause their Affiliates to keep confidential, all Confidential Information that is disclosed to them or to any of their Affiliates pursuant to this Agreement. Neither Pfizer nor OSI nor any of their Affiliates shall use such Confidential Information except as expressly permitted in this Agreement. 4.1.2 Pfizer and OSI acknowledge that the Pfizer and OSI Confidential Information is highly valuable, proprietary, confidential information, and agree that any disclosure of Confidential Information to any officer, employee or agent of the other or of any of its Affiliates shall be made only if and to the extent necessary to carry out its responsibilities under this Agreement and shall be limited to the maximum extent possible consistent with such responsibilities. They agree not to disclose the other's Confidential Information to any third parties under any circumstance without written permission. Both parties shall take such action, and shall cause its Affiliates to take such action, to preserve the confidentiality of each other's Confidential Information as they would customarily take to preserve the confidentiality of their own confidential information. Each party, upon the other's request, will return all the Confidential Information disclosed pursuant to this Agreement including all copies and extracts of documents within sixty (60) days of the request after the termination of this Agreement. -11- 13 4.1.3 OSI represents that all of its employees participating in the Research Program who shall have access to Joint Technology and Pfizer Confidential Information are bound, by agreement to maintain such information in confidence. Consultants will be similarly bound. 4.2 Publication. Section 4.1 to the contrary notwithstanding, the results obtained in the course of the Research Program may be submitted for publication following scientific review by the Research Committee and subsequent approval by OSI's and Pfizer's managements. After receipt of the proposed publication by both Pfizer's and OSI's managements, written approval or disapproval shall be provided within 30 days for a manuscript, within 14 days for an abstract for presentation at, or inclusion in the proceedings of, a scientific meeting, and within 14 days for a transcript of an oral presentation to be given at a scientific meeting. 4.3 Publicity. Except as required by law, neither party may disclose the existence of this Agreement nor the research described in it except with the written consent of the other party, which consent shall not be unreasonably withheld. 4.4 Disclosure of Inventions. Each party shall promptly inform the other about all inventions in the Area that are conceived, made or developed in the course of carrying out the Research Program by employees of, or consultants to, either of them solely, or jointly with employees of, or consultants to the other. This Agreement shall not be construed to obligate either party to disclose to the other any invention which is not part of Joint Technology. 4.5 Restrictions of Transferring Materials. Pfizer and OSI recognize that the biological and biochemical materials which are part of OSI Technology, Pfizer Technology, or Joint Technology, represent valuable commercial assets. Therefore, throughout the Contract Period and for five (5) years thereafter, OSI and Pfizer agree not to transfer to any third party any such materials which constitute Technology owned solely by the other party. Additionally, throughout the Contract Period and for six (6) months thereafter, OSI and Pfizer agree not to transfer to any third party any materials which are part of Joint Technology, unless prior consent for any such transfer is obtained from the other, which consent shall not be unreasonably withheld, and unless such third party agrees -12- 14 as a condition of any such transfer not to transfer the material further and to use the material only for research purposes not directed toward the development of Human Therapeutic Products. The provisions of this Section 4.5 specifically do not apply to (a) transfers to a diagnostic partner(s) of OSI, pursuant to agreements between OSI and diagnostic partner(s), for purposes other than developing Human Therapeutic Products, of materials which are part of OSI Technology or Joint Technology, or (b) to limit Pfizer's rights under Section 2.1.3. 5. Intellectual Property Rights. The following provisions relate to rights in the intellectual property developed by OSI or Pfizer, or both, during the course of carrying out the Research Program: 5.1 Ownership. All Patent Rights shall be owned jointly by OSI and Pfizer. 5.2 Grants of Research Licenses. OSI and Pfizer each grants to the other a nonexclusive, irrevocable, worldwide, royalty-free, perpetual license, including the right to grant sublicenses to Affiliates, to use its Confidential Information, Technology and Patent Rights for all research purposes other than the sale or manufacture for sale of products or processes. 5.3 Grants or Other Licenses. Pfizer and OSI grant to each other certain rights in Joint Technology and Joint Patents as set forth in the License Agreement of December 14, 1990 between Pfizer and OSI. 6. Provisions Concerning the Filing, Prosecution and Maintenance of Patent Rights. The following provisions relate to the filing, prosecution and maintenance of OSI Patent Rights, Joint Patent Rights, and Pfizer Patent Rights during the term of this Agreement: 6.1 Filing, Prosecution and Maintenance. Except for Patent Rights covering compositions of matter, methods of making them, formulating them or using them in the treatment of diseases, OSI shall have the exclusive right and obligation: (a) to file applications for letters patent on any patentable invention included in OSI Patent Rights or in Joint Patent Rights; provided, however, that OSI shall consult with Pfizer regarding countries in which such patent applications should be filed and shall file patent applications in those countries where Pfizer requests that OSI file; and further -13- 15 provided, that OSI, at its option and expense, may file in countries where Pfizer does not request that OSI file; (b) to prosecute all pending and new patent applications included within OSI Patent Rights or Joint Patent Rights and to respond to oppositions filed by third parties against the grant of letters patent for such applications; and (c) to maintain in force any letters patent included in OSI Patent Rights or Joint patent included in OSI Patent Rights or Joint Patent Rights by duly filing all necessary papers and paying any fees required by the patent laws of the particular country in which such letters patent were granted. OSI shall notify Pfizer in a timely manner of any decision to abandon a pending patent application or an issued patent included in OSI Patent Rights or Joint Patent Rights. Thereafter, Pfizer shall have the option, at its expense, of continuing to prosecute any such pending patent application or of keeping the issued patent in force. 6.2 OSI shall provide to Pfizer copies of all patent applications prior to filing, for the purpose of obtaining substantive comment of Pfizer patent counsel. OSI shall also provide to Pfizer copies of all documents relating to prosecution of all patent applications in a timely manner. OSI shall provide to Pfizer every six (6) months a report detailing the status of all patent applications that are part of OSI Patent Rights or of Joint Patent Rights. Pfizer shall provide to OSI every six (6) months a report detailing the status of all patent applications that are a part of Pfizer Patent Rights. 6.3 Reimbursement of Costs for Filing, Prosecuting and Maintaining. Pfizer shall reimburse OSI for the costs of filing, prosecuting and maintaining patent applications and patents in countries where Pfizer requests that patent applications be filed, prosecuted and maintained, upon receipt of invoices from OSI. Such reimbursement shall be in addition to Funding Payments. However, Pfizer may, upon sixty (60) days advance written notice, discontinue reimbursing OSI for the costs of filing, prosecuting or maintaining any patent application or patent in any country. OSI shall pay all costs in those countries in which Pfizer does not request that OSI file, prosecute or maintain patent applications and patents, but in which OSI, at its option, elects to do so. -14- 16 6.4 With respect to Patent Rights covering compositions of matter, methods of making them, formulating them or using them in the treatment of diseases, Pfizer shall have the exclusive right and obligation: (a) to file applications for letters patent on any patentable invention included in Pfizer Patent Rights or in Joint Patent Rights; provided, however, that Pfizer shall consult with OSI regarding countries in which such patent applications should be filed and shall file patent applications in those countries where OSI requests that Pfizer file; and further provided, that Pfizer, at its option and expense, may file in countries where OSI does not request that Pfizer file; (b) to prosecute all pending and new patent applications included within Pfizer Patent Rights or Joint Patent Rights and to respond to oppositions filed by third parties against the grant of letters patent for such applications; and (c) to maintain in force any letters patent included in Pfizer Patent Rights or Joint patent included in Pfizer Patent Rights or Joint Patent Rights by duly filing all necessary papers and paying any fees required by the patent laws of the particular country in which such letters patent were granted. Pfizer shall notify OSI in a timely manner of any decision to abandon a pending patent application or an issued patent included in Pfizer Patent Rights or Joint Patent Rights. Thereafter, OSI shall have the option, at its expense, of continuing to prosecute any such pending patent application or of keeping the issued patent in force. 6.5 Pfizer shall provide to OSI copies of all patent applications prior to filing, for the purpose of obtaining substantive comment of OSI patent counsel. Pfizer shall also provide to OSI copies of all documents relating to prosecution of all patent applications in a timely manner. Pfizer shall provide to OSI every six (6) months a report detailing the status of all patent applications that are part of Pfizer Patent Rights or of Joint Patent Rights. OSI shall provide to Pfizer every six (6) months a report detailing the status of all patent applications that are part of OSI Patent Rights. 7. Other Rights of the Parties. 7.1 Research Outside the Area. During the Contract Period: -15- 17 (a) Neither OSI nor Pfizer shall carry out research within the Area with any third party. (b) OSI may carry out research, related to treatment or cancer outside the Area with third parties, and may acquire from third parties such products for such treatment; provided, however, that such research is supported, or such products are acquired, exclusively with OSI and Pfizer funds, and not with funds from any other source, unless Pfizer gives its prior written consent for such research support or product acquisition; and, further provided, that any such product which results from research support or product acquisition shall be included in Joint Technology. 7.2 Other OSI Ventures. Outside the Area and with respect to diagnostics, OSI shall have the right to apply for, and receive grants or contracts from, public and private sources, including without limitation, the National Institutes of Health and the National Science Foundation. Outside the Area, OSI shall also have the right to enter into co-venture arrangements, whether written or oral, with third parties to develop any product including, without limitation, cancer diagnostic products. 7.3 Acquisition of Rights from Third Parties. During the Contract Period, OSI and Pfizer shall promptly notify each other in writing of any and all opportunities to acquire in any manner from third parties, technology or patents which may be useful in, or may relate to the Research Program. OSI and Pfizer shall decide if such rights should be acquired and, if so, whether by OSI or Pfizer. If acquired, such rights shall become part of Joint Technology. 7.4 No Rights to Products Outside the Area. Pfizer acknowledges that OSI is granting to Pfizer pursuant to this Agreement no rights to products other than those within the Area. 7.5 Board of Director's Seat. During the Contract Period, OSI shall use its best efforts to have elected to the Board of Directors of OSI, a representative selected by Pfizer and acceptable to OSI, if Pfizer elects to do so. 8. Other Agreements. Concurrently with the execution of this Agreement, OSI and Pfizer shall enter into a License Agreement which will be appended to and made part of this Agreement. This Agreement, the License Agreement and the 1986 and 1991 Research -16- 18 Agreements, but not Exhibits V through IV, inclusive, of that Agreement which are superseded, are the sole agreements with respect to the subject matter. If there are any conflicts between the provisions of this Agreement and the 1986 and 1991 Research Agreements, the provisions of this Agreement shall prevail. 9. Term, Extension, Termination and Disengagement. 9.1 Term. Unless sooner terminated or extended, this Agreement shall expire on April 1, 2001. 9.2 Extension. Pfizer, at least six (6) months prior to the end of the term, shall notify OSI in writing that it desires to extend the Sponsored Research Program. If OSI is willing to extend the Sponsored Research Program on mutually acceptable terms, OSI must so notify Pfizer within three (3) months after receipt of Pfizer's notice. Pfizer and OSI shall thereafter promptly negotiate in good faith the terms of any extension to this Agreement. 9.3 Events of Termination. The following events shall constitute events of termination ("Events of Termination"): (a) Any representation or warranty by OSI or Pfizer, or any of its officers, under or in connection with this Agreement shall prove to have been incorrect in any material respect when made. (b) OSI or Pfizer shall fail in any material respect to perform or observe any term, covenant or understanding contained in this Agreement or in any of the other documents or instruments delivered pursuant to, or concurrently with, this Agreement, and any such failure shall remain unremedied for thirty (30) days after written notice to the filing party. 9.4 Termination. 9.4.1 Upon the occurrence of any Event of Termination, the party not responsible may, by notice to the other party, terminate this Agreement. 9.4.2 If Pfizer terminates this Agreement pursuant to Section 9.4.1, the License Agreement shall continue according to its terms. If OSI terminates this agreement pursuant to Section 9.4.1, the License Agreement shall also terminate. 9.5 Termination by Pfizer. Between July 1 and September 30, 1998, Pfizer may terminate this Agreement, with or without cause, effective March 31, 1999. Between -17- 19 July 1 and September 30, 1999, Pfizer may terminate this Agreement, with or without cause, effective March 31, 2000. Upon receipt of such notice, OSI may, at its sole option, terminate all work under the Annual Research Plan unless otherwise agreed with Pfizer. If Pfizer terminates this Agreement pursuant to this Section, it will make the Funding Payments which would otherwise have been due for such six-month period and will retain all rights set forth in the License Agreement subject to the requirements of Section 2.6 of that Agreement. 9.6 Termination of this Agreement by either party, with or without cause, will not terminate the licenses granted pursuant to Section 5.2. 10. Representations and Warranties. OSI and Pfizer each represents and warrants as follows: 10.1 It is a corporation duly organized, validly existing and is in good standing under the laws of the State of Delaware, is qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification and has all requisite power and authority, corporate or otherwise, to conduct its business as now being conducted, to own, lease and operate its properties and to execute, deliver and perform this Agreement. 10.2 The execution, delivery and performance by it of this Agreement have been duly authorized by all necessary corporate action and do not and will not (a) require any consent or approval of its stockholders, (b) violate any provision or any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to it or any provision of its charter or by-laws or (c) result in a breach of or constitute a default under any material agreement, mortgage, lease, license, permit or other instrument or obligation to which it is a party or by which it or its properties may be bound or affected. 10.3 This Agreement is a legal, valid and binding obligation of it enforceable against it in accordance with its terms and conditions, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar laws, from time to time in effect, affecting creditor's rights generally. -18- 20 10.4 It is not under any obligation to any Person, contractual or otherwise, that is conflicting or inconsistent in any respect with the terms of this Agreement or that would impede the diligent and complete fulfillment of its obligations. 10.5 It has good and marketable title to or valid leases or licenses for, all of its properties, rights and assets necessary for the fulfillment of its responsibilities and the Research Program, subject to no claim of any third party other than the relevant lessors or licensors. 11. Covenants of OSI. 11.1 Affirmative Covenants of OSI Other Than Reporting, Requirements. Throughout the Contract Period, OSI shall: 11.1.1 maintain and preserve its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified as a foreign corporation in good standing in each jurisdiction in which such qualification is from time to time necessary or desirable in view of its business and operations or the ownership of its properties. 11.1.2 comply in all material respects with the requirements of all applicable laws, rules, regulations and orders of any government authority to the extent necessary to conduct the Sponsored Research Program. 12. Dispute Resolution. 12.1 Any dispute which cannot be resolved by discussion between the parties under this Agreement shall be resolved by binding arbitration in the manner described in this Section. 12.2 If a party intends to begin arbitration to resolve a dispute, such party shall provide written notice to the other party of such intention. Within ten (10) business days following receipt of such notice three arbitrators shall be selected by the following process: (a) Each party shall designate one individual, not an employee, director, or shareholder of the party or of any Affiliate of sublicensee of the party to serve as an arbitrator. -19- 21 (b) These arbitrators shall select a third individual, who shall be an attorney, to serve as the third arbitrator and to preside in resolution of the dispute. The third arbitrator shall not be an employee, director or shareholder of either party or of an Affiliate or sublicensee of either party. 12.3 Within five (5) business days after selection, the arbitrators shall meet with the parties at which time the parties shall present, in writing, the issues to be resolved and a proposed ruling on each issue. The writing shall be served on the other party and limited to no more than fifty (50) pages. 12.4 The following general provisions shall apply to the arbitration proceeding: (a) No later than thirty (30) days after the appointment of the third arbitrator, the arbitrators shall set a date for a hearing to resolve each of the issues identified by the parties. The hearing shall take place no later than two hundred seventy (270) days from the original notice to arbitrate. (b) Prior to the hearing, the arbitrators shall permit the taking of not more than two (2) depositions by each party, and shall permit, subject to the provisions of a mutually agreeable protective order, the production of only those documents immediately and directly bearing on the issue or issues subject to arbitration and only to the extent necessary for the convenience and use of the arbitrators, and shall not require to permit any other discovery by any means, including, but not limited to, depositions, interrogatories or additional production of documents. (c) Each party may submit a written brief or memorandum in support of its position which may be no more than fifty (50) pages. Each party shall be entitled to no more than five (5) hours time to present testimony or documentary evidence at the hearing. Such time limitation shall include any direct, cross or rebuttal testimony, but such time limitation shall only be charged against the party conducting such direct, cross or rebuttal testimony. It shall be the responsibility of the arbitrators to determine whether the parties have had the five (5) hours to which they are entitled. -20- 22 (d) Each party shall have the right to be represented by counsel. The arbitrators shall have sole discretion with regard to the admissibility of evidence. Admissibility will be decided by two-thirds vote. (e) Within fifteen (15) days of the conclusion of the hearing, each party must submit proposed findings to the arbitrators. 12.5 The arbitrators shall rule on each disputed issue within thirty (30) days following the completion of the testimony of both parties. Such ruling shall adopt in their entirety the proposed findings of one of the parties on each disputed issue. Each issue shall be resolved upon two-thirds vote of the arbitrators. 12.6 Arbitration shall take place in New York, New York. All hearing costs shall be shared equally between the parties. 12.7 The arbitrations shall be paid reasonable fees plus expenses, which fees and expenses shall be shared equally by the parties. 12.8 The decision of the arbitrators shall be enforceable in any court of competent jurisdiction. 13. Notices. All notices shall be mailed via certified mail, return receipt requested, or courier addressed as follows, or to such other address as may be designated from time to time: If to Pfizer: To Pfizer at its address as set forth at the beginning of the Agreement Attention: President, Central Research with copy to: Office of the General Counsel If to OSI: To OSI at its address as set forth at the beginning of this Agreement Attention: Chief Executive Officer Notices shall be deemed given as of the date of receipt. 14. Governing Law. This Agreement shall be construed in accordance with the laws of the State of New York. -21- 23 15. Miscellaneous. 15.1 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties and their respective legal representatives, successors and permitted assigns. 15.2 Headings. Paragraph headings are inserted for convenience of reference only and do not form a part of this Agreement. 15.3 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original. 15.4 Amendment, Waiver, etc. This Agreement may be amended, modified, superseded or canceled, and any of the terms may be waived, only by a written instrument executed by each party or, in the case of waiver, by the party or parties waiving compliance. The delay or failure of any party at any time or times to require performance of any provision shall in no manner affect the rights at a later time to enforce the same. 15.5 No Third Party Beneficiaries. No Person not a party to this Agreement, including any employee of any party to this Agreement, shall have or acquire any rights by reason of this Agreement. Nothing contained in this Agreement shall be deemed to constitute the parties partners with each other or any Person. 15.6 Assignment and Successors. This Agreement may not be assigned by either party, except that Pfizer may assign this Agreement and the rights and interests of Pfizer, in whole or in part, to any of its Affiliates, any purchaser of all or substantially all of its assets or to any successor corporation resulting from any merger or consolidation of Pfizer with or into such corporation. -22- 24 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives. PFIZER INC By: /s/ GEORGE M. MILNE --------------------------- Title: Vice President ------------------------ ONCOGENE SCIENCE, INC. By: /s/ GARY E. FRASHIER --------------------------- Title: Chief Executive Officer ------------------------ -23- 25 Research Plan for the Pfizer-Oncogene Science, Inc. Collaborative Agreement March 1996 Index
Pages ----- Executive Summary 2 - 3 Key Oncogene Science Contributions 1991 - present 4 - 5 Research Plan 1996 and Beyond 6 - 8 Mission Statement Current Targets: OSI as Major Contributor Targets in the Queue: The Future Technology Acquisition 8 - 9 Networking in Molecular Oncology 9 - 10
26 EXECUTIVE SUMMARY-- A VIEW OF THE COLLABORATION The major objective of the Pfizer cancer program is to exploit new target opportunities for drug discovery, and progress well-differentiated drugs to their ultimate utilization as safer, more effective therapies for malignant diseases. Our collaborators at Oncogene Science, Inc. (OSI) play a vital role in this mission by developing and executing assays for HTS. Beyond this they provide, across all aspects of our cancer effort, creativity, critical intellectual input, important research tools and access to emerging technologies. They have also proven to be an important conduit to the world's experts in Molecular Oncology. In total, this collaboration represents an important and, in the current competitive climate, a virtually irreplaceable resource for the cancer discovery effort at Central Research. New information on the molecular mechanisms that result in the malignant progression of normal somatic cells continues to accumulate at a rapid pace. These findings provide a steady stream of exciting opportunities for the discovery of novel mechanism-based cancer therapeutants with enhanced efficacy and tolerability. In the process of evaluating potential new targets, our collaboration with Oncogene Science has been guided by three principles: *** Currently, there is a queue of *** targets being pursued or under consideration for inclusion in the cancer discovery program (see following Research Plan). These targets are reviewed in a comprehensive manner twice a year in alternating Quarterly Program Review Meetings; selected targets are nominated for progression and new opportunities are discussed. This process is supplemented by periodic (one per each 18 months) Strategic Retreats, in which the views and experiences of outside consultants are also accessed. Our recent experience has shown that *** new target opportunities can be prosecuted each year on the basis of the criteria that we have established. Oncogene Science's role is to collaborate in the identification of the most promising of the new targets, to develop and run primary HTS, and to develop secondary assays for the evaluation and prioritization of lead compounds by the Pfizer cancer group. It *** These portions deleted pursuant to a request for confidential treatment. -2- 27 is anticipated that the current staffing level *** will provide resources adequate for continuation of a program of this scope. The rate at which new opportunities can be prosecuted has been accelerated significantly this year by the transfer to OSI of the entire Pfizer file of compounds in a compressed format. The quantity of the data generated, and the quality of the tactics to which they are applied, are almost certain to increase significantly; OSI has already completed a limited number of screens in approximately 8 - 10 weeks per 2 target. We believe that the quality of the decisions that are based on those data will continue to improve, in that an entire view can be taken of the best of the leads against a given target before additional resources are utilized. At no other time since the inception of the collaboration is the OSI resource being applied in a manner which so minimizes risk while clearly optimizing chances for success. While the scope and focus of the collaboration continues to evolve, OSI has already made very significant and tangible contributions to Pfizer. First and foremost, OSI was a major force in the discovery and progression of our *** receptor inhibitor leads, which culminated in the nomination of ***. Included among these contributions were the development and execution of the cell-based HTS which identified the lead compounds, primary screening (336,000 compounds) and testing of all hits for cell-based potency and cytotoxicity, development of the in vitro *** assay used to validate the hits from the cell-based HTS, development and execution of a cell-based assay for testing selectivity against three other *** (selective inhibition of ***), generation of purified *** that were used to assess biochemical selectivity of lead compounds, and identification and co-development of an assay for measuring tumor *** levels in vivo. Specific discovery contributions in other areas have also been significant (see following section). Another dimension provided by OSI is an ongoing pursuit of new technology to improve the process through which we identify novel compounds. They continue to provide access to novel methodologies and technologies which enable the prosecution of specific targets. Included among the more recent initiatives is access to ***, a small *** These portions deleted pursuant to a request for confidential treatment. -3- 28 company which has developed novel *** technologies for the identification of novel cancer targets (see Technology Acquisition). Beyond this, OSI has brought to the collaboration their network of experts in the field of Molecular Oncology. Many of these individuals continue to be a source of new ideas and critical perspective as target opportunities become fully-manned discovery projects. While this contribution is somewhat more difficult to quantitate, this may represent one of the more important aspects that OSI brings to the collaboration. In a therapeutic area as dynamic and as competitive as oncology, OSI plays a unique and important role by providing an informed perspective and access to expertise and technology, as well as the manpower required to widely prosecute compelling discovery opportunities. Continuation of this collaboration is recommended with significant enthusiasm. *** These portions deleted pursuant to a request for confidential treatment. -4- 29 KEY OSI CONTRIBUTIONS TO THE PFIZER CANCER PROGRAM *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** These portions deleted pursuant to a request for confidential treatment. -5- 30 *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** These portions deleted pursuant to a request for confidential treatment. -6- 31 *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** These portions deleted pursuant to a request for confidential treatment. -7- 32 *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** These portions deleted pursuant to a request for confidential treatment. -8- 33 *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** These portions deleted pursuant to a request for confidential treatment. -9- 34 *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** These portions deleted pursuant to a request for confidential treatment. -10- 35 *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** These portions deleted pursuant to a request for confidential treatment. -11- 36 *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** These portions deleted pursuant to a request for confidential treatment. -12- 37 *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** These portions deleted pursuant to a request for confidential treatment. -13- 38 *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** These portions deleted pursuant to a request for confidential treatment. -14- EX-10.2 3 LICENSE AGREEMENT - 4-1-96 1 EXHIBIT 10.2 - ----------------------------------------------------------------------------- Portions of this Exhibit 10.2 have been redacted and are the subject of a confidential treatment request filed with the Secretary of the Securities and Exchange Commission. - ----------------------------------------------------------------------------- 2 EXHIBIT 10.2 LICENSE AGREEMENT This LICENSE AGREEMENT is entered into as of ______________ (the "Effective Date") by and between PFIZER INC ("Pfizer"), a Delaware corporation, having an office at 235 East 42nd Street, New York, New York 10017 and ONCOGENE SCIENCE, INC. ("OSI"), a Delaware corporation, having an office at 106 Charles Lindbergh Boulevard, Uniondale, New York 11553. In consideration of the mutual covenants and promises set forth in this Agreement, the parties agree as follows: 1. Definitions. The capitalized terms used in this Agreement shall have the meanings specified for such terms in this Section 1 and in Section 1 of the Collaborative Research Agreement. 1.1 "Collaborative Research Agreement" means the Collaborative Research Agreements between Pfizer and OSI effective April 1, 1991 and April 1, 1996. 1.2 "Net Sales" means the gross amount invoiced by Pfizer or any sublicensee of Pfizer for arm's-length sales to a third party or parties of Licensed Human Therapeutic Products, after deducting, normal and customary trade discounts actually allowed, returns, credits, taxes the legal incidence of which is on the purchaser and separately shown on Pfizer's or any sublicensee of Pfizer's invoices and transportation, insurance and postage charges, if prepaid by Pfizer or any sublicensee of Pfizer and billed on Pfizer's or any sublicensee of Pfizer's invoices as a separate item. 2. Grant of Licenses. 2.1 License Granted to Pfizer under the Patent Rights. OSI grants to Pfizer the exclusive, worldwide license, including the right to grant sublicenses, to make, use and sell Human Therapeutic Products under all OSI's right, title and interest in the Patent Rights. 2.2 License Granted to Pfizer under the Joint Technology. OSI grants to Pfizer the exclusive worldwide license, including the right to grant sublicenses, to make, use and sell Human Therapeutic Products, under all OSI's right, title and interest in the Joint Technology. 3 2.3 Licenses Granted to OSI under the Patents and Joint Technology. Sections 2.1 and 2.2 to the contrary notwithstanding: 2.3.1 Pfizer grants to OSI the exclusive, perpetual, royalty free license, including the right to grant sublicenses, to make use and sell Human Diagnostic Products and products sold exclusively for research purposes under all Pfizer's right, title and interest in the Patent Rights and Joint Technology. 2.4 Term of License Grants and Payment of Royalties. 2.4.1 The term of the grant set forth in Section 2.1 shall commence on the Effective Date and shall terminate on the date of the last to expire of the Patent Rights. 2.4.2 The term of the grant set forth in Section 2.2 shall commence on the Effective Date and shall run perpetually except in those countries of the world in which such term is limited by law. 2.5 Paid-Up License. Pfizer shall have a paid-up license permitting royalty-free manufacture, use and sale of each Licensed Human Therapeutic Product in each country after the expiration of Pfizer's last obligation to pay royalties on Net Sales of each such Licensed Human Therapeutic Product in each such country. 2.6 Pfizer Obligations 2.6.1 Pfizer shall use reasonably diligent efforts to exploit Licensed Human Therapeutic Products commercially. This requirement shall be deemed satisfied: (a) with respect to all Projects within the Annual Research Plan, if OSI is receiving Funding Payments at a rate of no less that seventy-five percent (75%) of those amounts set forth in Section 3.1 of the Collaborative Research Agreement; or (b) with respect to any specific Project within an Annual Research Plan, if OSI is receiving Funding Payments at a rate of one hundred percent (100%) of budget for that specific Project; or (c) with respect to any specific Project within an Annual Research Plan, if Pfizer is developing any Human Therapeutic Product for cancer or any other therapeutic indication identification in the course of executing that part of the Annual Research Plan covering that specific Project. Such development will be shown by semi- -2- 4 annual reports which demonstrate that Pfizer has an open or complete Request for Development ("RFD") and, in the case of a completed RFD, the Human Therapeutic Product remains an active candidate for an Investigative New Drug application with the US Food & Drug Administration or foreign equivalent. 2.6.2 If Pfizer ceases to exercise diligence with respect to a specific Project, Pfizer shall, at OSI's request, grant OSI the rights necessary to develop at least one Licensed Human Therapeutic Product identified in the course of executing that part of the Annual Research Plan covering that specific Project. OSI may develop such Licensed Human Therapeutic Products itself or with third parties on the same terms and conditions, including the payment of royalties to Pfizer, as otherwise would have been applied to Pfizer. 2.6.3 If Pfizer grants a sublicense pursuant to Section 2, Pfizer shall guarantee that any sublicensee fulfills all of Pfizer's obligations under this Agreement. 2.7 Rights to Product Improvements. For a period of five (5) years from the termination of the Collaborative License Agreement, Pfizer shall acquire an exclusive, (nonexclusive in the countries of the world in which this Section might otherwise be deemed to violate restrictive trade practices laws) worldwide, royalty-free license to any product improvements made by OSI to any Licensed Human Therapeutic Products, but only to the extent necessary to guarantee that Pfizer can fully enjoy all the rights granted to it pursuant to Section 2. Pfizer shall reimburse OSI for its reasonable costs of making such product improvements. OSI shall promptly and fully notify Pfizer of any such product improvements made by OSI, including costs. All such improvements shall be included within the scope of this Agreement. 2.8 Technical Assistance. OSI shall provide to Pfizer or any sublicensee of Pfizer, at Pfizer's request and expense, any assistance reasonably necessary to enable Pfizer or such sublicensee to manufacture, use or sell each Licensed Human Therapeutic Product and to enjoy fully all the rights granted to Pfizer pursuant to this Agreement. -3- 5 3. Royalties, Payments of Royalties, Accounting for Royalties, Records. 3.1 Patent Rights. Pfizer shall pay OSI a royalty based on the Net Sales of each Licensed Human Therapeutic Product, the manufacture, use or sale of which would infringe a Valid Claim within Patent Rights if such manufacture, use or sale were by an unlicensed third party. Such royalty shall be paid in each country of the world from the date of first commercial sale of such Licensed Human Therapeutic Product in each such country until the expiration of the last applicable patent to expire with respect to each such country. 3.2 Joint Technology. Pfizer shall pay OSI a royalty based on the Net Sales of each Licensed Human Therapeutic Product, the manufacture, use or sale of which would not infringe a Valid Claim within Patent Rights if such manufacture, use or sale were by an unlicensed third party, but which employs Joint Technology. Such royalty to be paid in each country of the world for ten (10) years from the date of first commercial sale of such Licensed Human Therapeutic Product in each such country, except that in the case of countries signatory to the Treaty of Rome said obligation to pay royalties shall terminate on the earlier of the termination of said ten (10) year period or the date on which Joint Technology enters the public domain. 3.3 Royalty Rates - Patent Rights. Pfizer shall pay OSI a royalty for each Human Therapeutic Product licensed under Section 2.1 of *** percent *** of Net Sales of each Product in which the active ingredient is a synthetic compound. 3.4 Royalty Rate - Joint Technology. Pfizer shall pay OSI a royalty of *** percent *** of Net Sales of each Human Therapeutic Product licensed under Section 2.2 of this Agreement. 3.5 Single Royalty. The parties acknowledge that only one royalty rate, the highest one applicable, under Section 3.3 or Section 3.4 will be applicable to Net Sales of each Licensed Human Therapeutic Product. *** These portions deleted pursuant to a request for confidential treatment. -4- 6 3.6 Payment Dates. Royalties shall be paid by Pfizer on Net Sales within ninety (90) days after the end of each calendar quarter in which such Net Sales are made. Such payments shall be accompanied by a statement showing the Net Sales of each Licensed Human Therapeutic Product by Pfizer in each country, the applicable royalty rate for such Licensed Human Therapeutic Product, and a calculation of the amount of royalty due. 3.7 Accounting. The Net Sales used for computing the royalties payable to OSI by Pfizer shall be computed and paid in dollars. For purposes of determining the amount of royalties due, the amount of Net Sales in any foreign currency shall be computed by (a) converting such amount into dollars at the prevailing commercial rate of exchange for purchasing dollars with such foreign currency as quoted by Citibank in New York on the last business day of the calendar quarter for which the relevant royalty payment is to be made by Pfizer and (b) deducting the amount of any tax, duty, charge, commission, discount or other fee payable in respect of such conversion into, and remittance of, dollars. 3.8 Records. Pfizer shall keep for three (3) years from the date of each payment of royalties complete and accurate records of sales by Pfizer of each Licensed Human Therapeutic Product in sufficient detail to allow the accruing royalties to be determined accurately. OSI shall have the right for a period of three (3) years after receiving any report or statement with respect to royalties due and payable to appoint at its expense an independent certified public accountant reasonably acceptable to Pfizer to inspect the relevant records of Pfizer to verify such report or statement. Pfizer shall make its records available for inspection by such independent certified public accountant during regular business hours at such place or places where such records are customarily kept, upon reasonable notice from OSI, to the extent reasonably necessary to verify the accuracy of the reports and payments. Such inspection right shall not be exercised more than once in any calendar year nor more than once with respect to sales in any given period. OSI agrees to hold in strict confidence all information concerning royalty payments and reports, and all information learned in the course of any audit or inspection, except to the extent necessary for OSI to reveal such information in order -5- 7 to enforce its rights under this Agreement or disclosure is required by law. The failure of OSI to request verification of any report or statement during said three-year period shall be considered acceptance of the accuracy of such report, and Pfizer shall have no obligation to maintain records pertaining to such report or statement beyond said three-year period. The results of the inspection shall be binding on both parties. 4. Legal Action. 4.1 Actual or Threatened Disclosure or Infringement. When information comes to the attention of Pfizer to the effect that any Patent Rights or Joint Technology relating to a Licensed Human Therapeutic have been or are threatened to be unlawfully disclosed or that any of the exclusive rights granted by this Agreement has been or is threatened to be unlawfully infringed, Pfizer shall have the right at its expense to take such action as it may deem necessary to prosecute or prevent such unlawful disclosure or infringement, including the right to bring or defend any suit, action or proceeding involving any such disclosure or infringement. Pfizer shall notify OSI promptly of the receipt of any such information and of the commencement of any such suit, action or proceeding. If Pfizer determines that it is necessary or desirable for OSI to join any such suit, action or proceeding, OSI shall execute all papers and perform such other acts as may be reasonably required to permit Pfizer to act in OSI's name. In the event that Pfizer brings a suit, it shall have the right first to reimburse itself out of any sums recovered in such suit or in its settlement for all reasonable costs and expenses of every kind and character, including reasonable attorney's fees, involved in the prosecution of any suit, and twenty-five percent (25%) of any funds that shall remain from said recovery shall be distributed to OSI and the balance of such funds shall be retained by Pfizer. If Pfizer does not, within one hundred twenty (120) days after giving notice to OSI of the above-described information, notify OSI of Pfizer's intent to bring suit against any infringer, OSI shall have the right to bring suit for such alleged infringement, but it shall not be obligated to do so, and may join Pfizer as party plaintiff, if appropriate, in which event OSI shall hold Pfizer free, clear and harmless from any and all costs and expenses of such litigation, including attorney's fees, and any sums recovered in any such suit or in its settlement shall belong to OSI. However, twenty-five percent (25%) of any such sums received by OSI, after deduction of the costs and -6- 8 expenses of litigation, including attorney's fees paid, shall be paid to Pfizer. Each party shall always have the right to be represented by counsel of its own selection and at its own expense in any suit instituted by the other for infringement, under the terms of this Section. If Pfizer lacks standing to bring any such suit, action or proceeding, then OSI shall do so at the request of Pfizer and at Pfizer's expense. 4.2 Defense or Infringement Claims. OSI will cooperate with Pfizer at Pfizer's expense in the defense of any suit, action or proceeding against Pfizer or any sublicensee of Pfizer alleging the infringement of the intellectual property rights of a third party by reason of the use of Patent Rights or Joint Technology in the manufacture, use or sale of the Licensed Human Therapeutic Products. Pfizer shall give OSI prompt written notice of the commencement of any such suit, action or proceeding or claim of infringement and will furnish OSI a copy of each communication relating to the alleged infringement. OSI shall give to Pfizer all authority (including the right to exclusive control of the defense of any such suit, action or proceeding and the exclusive right to compromise, litigate, settle or otherwise dispose of any such suit, action or proceeding), information and assistance necessary to defend or settle any such suit, action or proceeding. If the parties agree that OSI should institute or join any suit, action or proceeding pursuant to this Section, Pfizer may join OSI as a defendant if necessary or desirable, and OSI shall execute all documents and take all other actions, including giving testimony, which may reasonably be required in connection with the prosecution of such suit, action or proceeding. 4.3 Hold Harmless. OSI agrees to defend, protect, indemnify and hold harmless Pfizer and any sublicensee of Pfizer, from and against any loss or expense arising from any proven claim of a third party that it has been granted rights by OSI that Pfizer or any sublicensee of Pfizer in exercising their rights granted to Pfizer by OSI pursuant to this Agreement, has infringed upon such rights granted to such third party by OSI. Pfizer agrees to defend, protect, indemnify and hold harmless OSI from and against any liability, claim, loss, cost or expense arising from any claim for product liability based upon Pfizer's manufacture, use or sale of any Licensed Human Therapeutic Product. -7- 9 4.4 Third Party Licenses. If the manufacture, use or sale by Pfizer of a Licensed Human Therapeutic Product in any country would, in the opinion of both Pfizer and OSI, infringe a patent owned by a third party, Pfizer and OSI shall attempt to obtain a license under such patent. If Pfizer obtains a license under such patent, fifty percent (50%) of any payments made by Pfizer to such third party shall be deductible from royalty payments due from Pfizer to OSI pursuant to this Agreement; provided, however, that in no event shall royalties payable to OSI be reduced by more that twenty-five percent (25%) as a result of all such deductions. All such computations, payments, and adjustments shall be on a country by country and patent by patent basis. If OSI is of the opinion that such manufacture, use or sale would not infringe such patent owned by a third party, OSI may, at its direction, bring suit against such third party seeking a declaration that such patent is invalid or not infringed by Pfizer's manufacture, use or sale of Licensed Human Therapeutic Product involved, or may bring opposition, nullity or other proceedings against such patent, as appropriate. If OSI is successful in such suit, Pfizer shall continue to pay royalties in such country as provided in Section 3. If OSI does not bring such suit or is unsuccessful in such suit, it shall join Pfizer in an attempt to obtain a license under such patent, and fifty percent (50%) of any payments made by Pfizer to such third party for such license shall be deductible from royalty payments due from Pfizer to OSI as to that patent and that country pursuant to this Agreement. 5. Representation and Warranty. OSI and Pfizer represent and warrant to each other that they have the right to grant to each other the licenses granted to them pursuant to this Agreement, and that the licenses so granted do not conflict with or violate the terms of any agreement between either of them and any third party. 6. Additional Terms. The following terms of the Collaborative Research Agreement are incorporated into this Agreement as if set forth verbatim: (a) Sections 9.3, 9.4 and 9.6. (b) Section 4.1 through 4.3, inclusive. (c) Section 6. Provisions Concerning the Filing Prosecution and Maintenance of Patent Rights. -8- 10 (d) Section 12. Dispute Resolution. (e) Section 13. Notices. (f) Section 14. Governing Law. (g) Section 15. Miscellaneous. IN WITNESS WHEREOF, the parties have caused this agreement to be executed by their duly authorized representative. PFIZER INC By: /s/ GEORGE M. MILNE --------------------------- Title: Vice President ------------------------ ONCOGENE SCIENCE, INC. By: /s/ GARY E. FRASHIER --------------------------- Title: Chief Executive Officer ------------------------ -9- EX-10.3 4 STOCKHOLDERS' AGREEMENT - 4-23-96 1 EXHIBIT 10.3 - ----------------------------------------------------------------------------- Portions of this Exhibit 10.3 have been redacted and are the subject of a confidential treatment request filed with the Secretary of the Securities and Exchange Commission. - ----------------------------------------------------------------------------- 2 EXHIBIT 10.3 STOCKHOLDERS' AGREEMENT THIS STOCKHOLDERS' AGREEMENT made the 23rd day of April 1996, among ANADERM RESEARCH CORP., a Delaware corporation, having its principal place of business at 235 East 42nd Street, New York, New York 10017 (the "Company"), PFIZER INC., a Delaware corporation, having its principal place of business at 235 East 42nd Street, New York, New York 10017 ("Pfizer"), ONCOGENE SCIENCE, INC., a Delaware corporation, having its principal place of business at 106 Charles Lindbergh Boulevard, Uniondale, New York 11553 ("OSI"), NEW YORK UNIVERSITY, a New York corporation, having a principal place of business at 550 First Avenue, New York, New York 10016 ("NYU"),***, each having a business address at New York University Medical Center, 550 First Avenue, New York, New York 10016 (*** collectively referred to herein as the "NYU Faculty Members"). Pfizer, OSI, NYU and the NYU Faculty Members shall collectively be referred to herein as the "Stockholders". WHEREAS, the Company was organized to discover, develop and market pharmaceutical products for the treatment of baldness and wrinkles, and for the control of skin and hair pigmentation; and WHEREAS, Pfizer and OSI have each agreed to make certain contributions to the Company in consideration for 164 and 28 shares, respectively, of Common Stock, $.01 par value per share of the Company (the "Common Stock"), representing 82% and 14%, respectively, of the *** These portions deleted pursuant to a request for confidential treatment. 3 shares of Common Stock outstanding if all of the shares issued pursuant to the Stock Option Agreement referred to below are issued; and WHEREAS, NYU is willing to enter into the NYU Research Agreement (as hereinafter defined) and the Company, in partial consideration for NYU entering into the NYU Research Agreement, has agreed to grant stock options, pursuant to a Stock Option Agreement, covering, as to NYU 2% of the Company's Common Stock, and as to each of ***, 0.5% of the Company's Common Stock, with such percentages, in each case, to be determined assuming full exercise of all authorized stock options and full conversion of all authorized convertible securities; and WHEREAS, the parties to this Agreement believe it is in their mutual best interest to provide for continuity and harmony in the management and the policies of the Company; and WHEREAS, the parties hereto are entering into this Agreement for the mutual purpose of (a) providing for the management of the Company, (b) providing for certain restrictions on transfer of the Common Stock, and (c) providing for the Company's repurchase of shares of Common Stock upon the occurrence of certain events. NOW, THEREFORE, in consideration of the agreements and covenants contained herein and for other valuable consideration, receipt of which is hereby acknowledged, it is mutually agreed and covenanted by and among the parties to this Agreement as follows: ARTICLE I - DEFINITIONS As used in this Agreement or any of the Schedules or Exhibits hereto, the following terms have the meanings indicated. All capitalized terms used but not defined herein shall have the same meanings ascribed to them, respectively, in the Research Agreements, as such may be amended from time to time. *** These portions deleted pursuant to a request for confidential treatment. - 2 - 4 1.1 "Affiliate" means any corporation or other legal entity owning, directly or indirectly, 50% or more of the voting capital shares or similar voting securities of the Company, OSI or Pfizer, or any corporation or other legal entity 50% or more of the voting capital shares or similar voting rights of which is owned, directly or indirectly, by the Company, OSI or Pfizer. However, a foreign corporation or other legal entity shall be considered an Affiliate of the Company, OSI or Pfizer, if the Company, OSI or Pfizer, respectively, owns the maximum amount of voting securities of such corporation or entity that a U. S. company is permitted to own under the laws of the applicable foreign country and such maximum amount is at least 40%. 1.2 "Anaderm Royalty" shall have the meaning given to such term in Section 7.3 hereof. 1.3 "Annual Research Budget" means the research budget prepared annually by the SAB setting forth the funding requirements of the Research Program. 1.4 "Dermatology Indications" shall have the meaning given to such term in the Research Agreements. 1.5 "Fair Value" means the price per share of Common Stock determined by an independent appraiser selected by the American Arbitration Association in the City of New York. In determining Fair Value, the independent appraiser shall ***. The appraiser may obtain and rely on information provided by any source or sources reasonably believed by it to be accurate and all valuations by the appraiser shall be final and conclusive on the parties hereto. *** These portions deleted pursuant to a request for confidential treatment. - 3 - 5 1.6 "Involuntary Transfer" means any involuntary sale, transfer, encumbrance or other disposition by, or in which, any Stockholder is deprived or divested of any right, title or interest in or to its shares of Common Stock, including, without limitation, any transfer in connection with a divorce, death, bankruptcy (whether voluntary or involuntary), reorganization, insolvency or similar proceeding, distraint, levy, attachment, execution or other involuntary event of any nature whatsoever. 1.7 "Lead Compound" shall have the meaning given to such term in the Research Agreements. 1.8 "New Use" shall have the meaning given to such term in the Research Agreements. 1.9 "NYU Research Agreement" means the Research and Licensing Agreement, of even date herewith, between the Company and NYU. 1.10 "Options" means the options to purchase up to that number of shares of Common Stock as would represent, after their issuance, 4% of the then outstanding shares of Common Stock pursuant to the Stock Option Agreement. 1.11 "OSI Research Agreement" means the Collaborative Research Agreement, of even date herewith, among the Company, OSI and Pfizer. 1.12 "Permitted Transferee" shall have the meaning given to such term in Section 3.4. 1.13 "Pfizer Compound File" means the compounds maintained by Pfizer's Central Research Division. 1.14 "Research Agreements" means the OSI Research Agreement and the NYU Research Agreement. 1.15 "SAB" means the Scientific Advisory Board of the Company appointed by the Board of Directors to advise the Company on matters related to the Research Program. - 4 - 6 1.16 "Stock Option Agreement" means the agreement, of even date herewith, between the Company on the one hand, and NYU and the NYU Faculty Members on the other hand, pursuant to which the Company grants NYU and the NYU Faculty Members options to acquire up to that number of shares of Common Stock as would represent, after their issuance, 4% of the shares of the then outstanding Common Stock, of which NYU is granted options to acquire up to 2.0% of such Common Stock, and *** are each granted options to acquire up to 0.5% of such Common Stock. 1.17 "Valid Claim" shall have the meaning given to such term in either of the Research Agreements, as applicable. ARTICLE II - CAPITAL CONTRIBUTIONS 2.1 Capital Contributions. The Stockholders shall make the following capital contributions to the Company: (a) Capital Contribution by Pfizer Upon Execution of this Stockholders' Agreement. Upon execution of this Agreement and in consideration of the issuance of 164 shares of Common Stock to Pfizer, Pfizer shall make an initial capital contribution to the Company of $ *** in cash for use as follows: (i) *** to be paid by the Company to NYU on the date of this Agreement under Section 3.6 of the NYU Research Agreement; (ii) *** to be paid by the Company to NYU on the date of this Agreement under Section 3.7 of the NYU Research Agreement; (iii) an aggregate of *** to be paid by the Company to the NYU Faculty Members on the date of this Agreement pursuant to the four Exclusive Consultantship Agreements of even date herewith between the Company and each of the NYU Faculty Members; and (iv) *** to be used as working capital. *** These portions deleted pursuant to a request for confidential treatment. - 5 - 7 (b) Capital Contribution by OSI. In consideration of the issuance of 28 shares of Common Stock of the Company to OSI, OSI shall contribute to the Company (i) the formatting for high-throughput screens, (ii) a commitment to provide up to eighteen (18) months of screening at OSI's expense, (iii) access to OSI's fermentation product files, (iv) any Technology internally developed or externally acquired relating to the Field, and (v) cash equal to $0.28. (c) Additional Capital Contributions by Pfizer. (i) Within 12 months following the date of this Agreement, Pfizer shall make an additional capital contribution to the Company of *** in cash, to supplement the contribution referred to in Section 2.1(a) hereof. This additional capital contribution shall be used as working capital. (ii) During the three-year period beginning the date of this Agreement, provided the Company owes each of the five payments of *** that may be due to NYU under Section 3.6 of the NYU Research Agreement, Pfizer shall make such additional capital contributions to the Company in cash as are necessary to fund such payments. (iii) During the Funded Phase (as defined in the OSI Research Agreement), if any, Pfizer shall make such additional capital contributions to the Company in cash as are necessary to fund the payments due to OSI pursuant to the last sentence of Article 3 of the OSI Research Agreement; provided, however, that the aggregate amount Pfizer is obligated to contribute under this Section 2(c)(iii) shall not exceed ***. (iv) None of the capital contributions provided for in this Section 2.1(c) shall entitle Pfizer to the issuance of any additional shares of stock. *** These portions deleted pursuant to a request for confidential treatment. - 6 - 8 (d) Other Capital Contributions. In addition to the capital contributions provided for in Section 2.1(a) through (c), additional contributions may be made to the capital of the Company in accordance with the General Corporation Law of the State of Delaware, subject to the provisions of Section 6.1 hereof. (e) Other Support by Pfizer for the Company. To support the Company's research activities and subject to Section 2.3 hereof, Pfizer agrees to permit the Company to use without any additional consideration certain compounds from the Pfizer Compound File as it exists from time to time, solely for screening purposes in connection with the Research Program. In addition, Pfizer shall make available to the Company without any additional consideration certain services of Pfizer employees for a period of 18 months. 2.2 Options. (a) In partial consideration of NYU executing and delivering the NYU Research Agreement, which execution and delivery shall occur simultaneously with the execution of this Agreement, the Company shall grant stock options, in the form set forth in the Stock Option Agreement (the "Options"), covering, as to NYU, the number of shares which, when issued, shall constitute 2.0% of the Company's Common Stock (after giving effect to the exercise of all outstanding options and warrants and the conversion of all convertible securities), and as to each of [ ], the number of shares which, when issued, shall constitute 0.5% of the Company's Common Stock (after giving effect to the exercise of all outstanding options and warrants and the conversion of all convertible securities). The Options shall be exercised in accordance the Stock Option Agreement and are exercisable at any time during the six-month period following their issuance, subject to the terms of the Stock Option Agreement. - 7 - 9 (b) Unless and until each shall exercise his or its Option under the Stock Option Agreement, neither NYU nor any NYU Faculty Member, respectively, shall be bound by any of the provisions of this Agreement. Upon the exercise of any Option by NYU or any NYU Faculty Member, all rights, benefits and obligations with respect to the party so exercising his or its Option as a Stockholder hereunder shall automatically, without any further action on his or its part or any other party hereto, become effective and binding. 2.3 The Pfizer Compound File. Pfizer shall make available to the Company compounds from the Pfizer Compound File, pursuant to Section 2.1(e), provided that the selection of compounds for use in screening satisfies the Company's research goals and is consistent with Pfizer corporate policy. Pfizer shall not be obligated to make available to the Company for any purpose any Pfizer compound that has been designated a clinical candidate or a backup to a clinical candidate. ARTICLE III - APPLICABILITY; RESTRICTIONS ON TRANSFER OF SHARES 3.1 Shares Subject to Agreement. Each of the Stockholders hereby agrees that all shares of Common Stock acquired on the date hereof or at any time hereafter by such Stockholder shall be subject to the provisions set forth in this Agreement. 3.2 Outstanding Shares. For purposes of this Agreement, unless otherwise indicated, any reference to shares of Common Stock outstanding shall not include shares of Common Stock underlying unexercised options, warrants, rights or convertible securities of the Company (unless such reference states that such amount is determined after giving effect to such exercise or conversion, until such options, warrants or rights have been duly exercised or convertible securities duly converted. 3.3 General Restriction on Transfer. Each Stockholder hereby agrees not to sell, assign, hypothecate, transfer, pledge, encumber, give - 8 - 10 away, or otherwise dispose of any shares of Common Stock that such Stockholder acquires on the date hereof or at any time hereafter except pursuant to and in compliance with the terms and conditions of this Agreement. The Company hereby agrees that it will not transfer or recognize any transfer of Common Stock except in compliance with the terms of this Agreement. All certificates representing shares of Common Stock of the Company shall be legended in accordance with Article IX hereof. 3.4 Permitted Transfers. Notwithstanding any provision to the contrary in this Article III, any Stockholder may, upon prior notice thereof to the Company, transfer title to its shares of Common Stock to (i) a trust established by such Stockholder, if the sole beneficiaries of such trust are the Stockholder, the Stockholder's spouse or the Stockholder's children, or (ii) an Affiliate of such Stockholder (each a "Permitted Transferee"), if such Permitted Transferee executes an instrument satisfactory to the Company agreeing to be bound by the terms and provisions of this Agreement. ARTICLE IV - CORPORATE GOVERNANCE 4.1 Board of Directors. In accordance with the By-Laws of the Company and Section 141 of the General Corporation Law of the State of Delaware, the Board of Directors shall be responsible for the governance of the Company. The initial Board of Directors shall consist of *** as provided in Section 4.3. Thereafter, the number of directors may be increased or decreased as provided in the By-Laws. 4.2 Nomination and Election of Directors. As long as Pfizer owns a majority of the outstanding shares of Common Stock, the Stockholders agree that Pfizer shall have the right to nominate a majority of the members of the Board of Directors, and OSI shall have the right to nominate the remaining members of the Board of Directors. Pfizer and OSI *** These portions deleted pursuant to a request for confidential treatment. - 9 - 11 each hereby agree to vote their respective shares of Common Stock for the election of the nominees of Pfizer and OSI in accordance with this Section 4.2. 4.3 Initial Board of Directors. The Stockholders hereby agree that on the date hereof the Board of Directors of the Company shall consist of the following four persons, each of whom is nominated by the Stockholder set forth opposite such director's name:
Name of Director Nominated by: ---------------- ------------- *** Pfizer *** Pfizer *** Pfizer *** OSI
4.4 Initial Officers of the Company. The Stockholders acknowledge that the Board of Directors of the Company has elected, in accordance with the By-Laws, the following persons as officers of the Company in the positions set forth opposite their respective names:
Name Office ---- ------ *** President *** Vice President *** Secretary *** Treasurer *** Assistant Treasurer *** Assistant Secretary *** Assistant Secretary
4.5 Quorum of the Board. No action shall be taken at any meeting of the Board of Directors of the Company, unless at least a majority of the entire Board shall be present. For purposes of a quorum, any director may be present at any meeting in person, by means of telephone or similar communications equipment by means of which each person *** These portions deleted pursuant to a request for confidential treatment. - 10 - 12 participating in the meeting can hear and speak to each other or, to the extent permitted by applicable law, by proxy. 4.6 Action by the Board of Directors. If a quorum exists, any action taken by the Board of Directors shall be authorized by the affirmative vote of a majority of those members of Board of Directors present at the meeting; provided, however, that the affirmative vote of three quarters of the members of the Board of Directors is required to take the following actions: (i) to authorize, issue or enter into any agreement providing for the issuance (contingent or otherwise) of any equity securities or any notes or debt securities containing equity features (including, without limitation, any notes or debt securities convertible into or exchangeable for equity securities); (ii) to directly or indirectly redeem, purchase or otherwise acquire, any of the Company's equity securities; (iii) to make any amendments, modifications or changes to the Certificate of Incorporation or By-Laws of the Company, the OSI Research Agreement, the NYU Research Agreement, the Annual Research Plan or the Annual Research Budget; (iv) to make any changes to the members of the Scientific Advisory Board; (v) to hire, fire and determine the amount of compensation paid to Officers of the Company; (vi) to sell, lease or otherwise dispose of more than 25% of the Company's assets in any transaction or series of transactions; (vii) to merge or consolidate with any person or entity; - 11 - 13 (viii) to create, incur, assume or suffer to exist any indebtedness exceeding in the aggregate $10,000 outstanding at any time; or (ix) to make any capital expenditures exceeding $10,000 with respect to any single capital expenditure or $250,000 in the aggregate during any twelve-month period. 4.7 Quorum of Stockholders. No action shall be taken at any meeting of stockholders of the Company unless at least a majority of the holders of the outstanding shares of Common Stock entitled to vote are present in person or by proxy. 4.8 Action by Stockholder. If a quorum exists, any corporate action taken, except as otherwise set forth herein and except as may be required by law, shall be authorized by the affirmative vote of a majority of the votes cast at a meeting of stockholders by the holders of shares of Common Stock entitled to vote thereon. ARTICLE V - DISPOSITION OF SHARES 5.1 Right of First Refusal. (a) If NYU or any NYU Faculty Member (the "NYU Seller") desires to sell, transfer or otherwise dispose of any or all of his or its shares of Common Stock, such NYU Seller may offer to sell such shares (the "Offered Shares") to an unaffiliated third party for all cash payable at the closing of such sale, subject to the Company's rights as hereinafter set forth, or offer to sell such Offered Shares to the Company directly. The NYU Seller shall give written notice thereof (an "Offering Notice") to the Company, with a copy to each of the other Stockholders, which Offering Notice shall state or contain (i) the name of such NYU Stockholder, (ii) the number of Offered Shares, (iii) the name, address and the amount of cash proposed to be paid by a prospective purchaser pursuant to a bona fide offer (the "Offer Price"), if any, and - 12 - 14 all the other terms and conditions relating to such bona fide offer. The delivery by any NYU Seller of an Offering Notice shall constitute a binding offer by the NYU Seller to sell to the Company, and the Company shall thereupon have the right, but not the obligation, to purchase any or all, of the Offered Shares at the Offer Price, if any, or if there is no Offer Price at the Fair Value (the applicable price being herein referred to as the "Purchase Price"); provided, however, that such Purchase Price shall be paid in accordance with Section 5.1(g) hereof. Within thirty (30) days after the Company's receipt of the Offering Notice, the Company shall notify the NYU Seller in writing of its acceptance or rejection of the offer to purchase the Offered Shares. (b) In the event that the Company elects to purchase all of the Offered Shares, the closing shall take place in accordance with Section 6.1(g) hereof. (c) In the event that the Company rejects the offer to purchase the Offered Shares from the NYU Seller or elects to purchase fewer than all of the Offered Shares, the NYU Seller shall deliver written notice thereof (the "Second Notice") to each of the other Stockholders with a copy to the Company, within ten (10) days after the NYU Seller's receipt of the Company's response to its offer. The Second Notice shall state or contain (i) the number of Offered Shares, (ii) the number of Offered Shares which the Company has subscribed for, if any, (iii) the number of Offered Shares available for sale to the other Stockholders, (iv) the name, address and the Offer Price proposed to be paid by the prospective purchaser. The delivery by any NYU Seller of a Second Notice shall constitute a binding offer by the NYU Seller to sell to the Company and the other Stockholders, and the Company and the other Stockholders shall thereupon have the right, but not the obligation, to purchase in the aggregate, all, but not less than all, of the Offered - 13 - 15 Shares at the Purchase Price; provided, however, that such Purchase Price shall be paid in accordance with Section 5.1(g) hereof. (d) Any Stockholder (other than the NYU Seller) electing to purchase Offered Shares shall deliver to the NYU Seller, with a copy to the Company, within twenty (20) days after the Second Notice is sent to the Stockholders (the "Acceptance Period"), a notice (an "Acceptance Notice") of such Stockholder's election stating the maximum number of Offered Shares which such Stockholder desires to purchase (such Stockholder's "Elected Share Number"). The giving of such Acceptance Notice shall irrevocably commit the Stockholder giving such notice (an "Electing Stockholder") to purchase the Elected Share Number (or any lesser number thereof as may be determined as hereinafter provided). (e) In the event the Company, together with the Electing Stockholders, have not elected to purchase, in the aggregate, all of the Offered Shares, then the NYU Seller may sell the Offered Shares to the prospective purchaser at the Offer Price for cash consideration payable at closing and on the other terms and conditions specified in the Offering Notice, and such sale shall take place within sixty (60) days after the expiration of the Acceptance Period; provided, however, that such prospective purchaser shall execute an instrument satisfactory to the Company agreeing to be bound by the terms and provisions of this Agreement. References herein to Stockholders and to shares of Common Stock held or owned by any Stockholder shall be deemed to include any such prospective purchaser that purchases Common Stock hereunder and such shares held or owned by such prospective purchaser, respectively. If such sale has not taken place within sixty (60) days following the expiration of the Acceptance Period, all the provisions contained in this Agreement shall again be in effect with respect to such Offered Shares. - 14 - 16 (f) If all of the Offered Shares offered to the Stockholders have been fully subscribed for by the Company and the Electing Stockholders pursuant to Section 5.1(e), then the Company shall send to the NYU Seller, within five days after the expiration of the Acceptance Period, a written notice to such effect and shall include in such notice the name of each Electing Stockholder, the number of such Offered Shares allocated to such Electing Stockholder and the Company for purchase and the closing date of the purchase and sale of the Offered Shares. In the event the Offered Shares available to the Electing Stockholders are oversubscribed for, the number of Offered Shares each Electing Stockholder shall be allocated shall be determined pro rata based on the percentage that each Electing Stockholder's shares of Common Stock bears to the total outstanding shares of Common Stock. (g) In the event that the Company and/or the Electing Stockholders, as the case may be, elect to purchase all of the Offered Shares under this Section 5.1, the closing of the purchase and sale of the Offered Shares shall take place at the principal executive offices of the Company within thirty (30) days following the date the notice to such effect is given by the Company to the NYU Seller pursuant to Sections 5.1(a), 5.1(c) or 5.1(f) (whichever is applicable), or at such other place, on such other date, or both, as the NYU Seller, the Company and the Electing Stockholders, as applicable, may agree upon in writing. The Purchase Price payable by the Electing Stockholders and/or the Company hereunder shall be paid either (i) in full by cash or certified check at the closing of such purchase, or (ii) one-third of the Purchase Price shall be paid in cash or by certified check at the closing; and the balance of the Offer Price shall be payable on the first and second anniversaries of such closing in two equal annual installments, together with interest from the closing calculated on the amount of such - 15 - 17 installment at the prime rate, as in effect from time to time during the period prior to the payment of such installment, as published by Citibank N.A. 5.2 Involuntary Transfers. If any Involuntary Transfer of Common Stock takes place, the following procedures shall apply: (a) Any Stockholder deprived or divested of any shares of Common Stock by Involuntary Transfer (the "Transferor") shall promptly give written notice thereof in reasonable detail to the Company. Any person or entity that takes or proposes to take any ownership interest in such shares of Common Stock (the "Transferred Shares") as a result of such Involuntary Transfer (the "Transferee") shall hold such interest subject to the rights of the Company as set forth in Section 5.2(b). (b) For a period of 180 days following the earlier to occur of receipt of the notice referred to in Section 5.2(a) or discovery of any Involuntary Transfer, the Company may purchase the Transferred Shares in accordance with Section 5.2(c), subject to the terms set forth herein. If the Company elects to purchase the Transferred Shares, the Company shall notify the Transferee of its rights hereunder and specify the number of Transferred Shares to be purchased. (c) The closing for any sale of Transferred Shares to the Company shall take place at the Company's principal executive office not later than sixty (60) days after the Transferee receives the notice referred to in Section 5.2(b). The purchase price payable by the Company for any Transferred Shares purchased hereunder shall be the Fair Value of such Transferred Shares. (d) In the event that the Company does not purchase all or any of the Transferred Shares pursuant to Section 5.2, the Transferee shall take and hold all rights and interests in any Transferred Shares that are not so purchased subject to the terms of this Agreement. - 16 - 18 5.3 Put and Call Rights. (a) On the terms and subject to the conditions set forth in Section 5.3, at any time subsequent to the fourth anniversary of the date hereof, NYU and each of the NYU Faculty Members may require the Company to purchase all but not less than all of the shares of Common Stock held by each such Stockholder at a price equal to the Fair Value of such shares (the "Put Right"), subject to the limitations set forth in Section 12.1. (b) On the terms and subject to the conditions set forth in this Section 5.3, at any time subsequent to the sixth anniversary of the date hereof, the Company may require NYU or any NYU Faculty Member to sell to the Company all but not less than all of the shares of Common Stock held by such Stockholder at a price equal to the Fair Value of such shares (the "Call Right"). (c) NYU or any NYU Faculty Member may exercise the Put Right by delivering to the Company written notice setting forth the number of shares of Common Stock held by such Stockholder. The Company may exercise the Call Right with respect to NYU or any NYU Faculty Member by delivering to such Stockholder written notice setting forth the terms of the proposed purchase of Common Stock. (d) Unless otherwise agreed to by the Company and the selling Stockholder, the closing of any purchase of Common Stock pursuant to the exercise of any Put Right or any Call Right hereunder shall take place at the principal executive offices of the Company within sixty (60) days after the delivery of the notice referred to in Section 5.3(c). The Company shall pay the Fair Value of such shares either (i) in full by cash or certified check at the closing, or (ii) one-third of the total amount due shall be paid in cash or by certified check at the closing, and the balance of the amount due shall be payable on the first and - 17 - 19 second anniversaries of such closing in two equal installments, together with interest on the amount of such installments from the date of closing calculated at the prime rate, as in effect from time to time during the period prior to the payment of such installment, as published by Citibank, N.A. 5.4 Tag Along Rights. (a) In the event that one or more Stockholders propose to sell or otherwise dispose of shares representing more than fifty percent of the outstanding shares of Common Stock then outstanding (the "Majority Stockholders") in one or a series of transactions to any third party (other than a Permitted Transferee), such Majority Stockholders shall not consummate or enter into any agreement to consummate such sale unless such third party purchaser offers to purchase from each other Stockholder the number of shares of such other Stockholder's Common Stock as determined in accordance with Section 5.4(b) at the same price and on the same other terms as such purchaser offered to purchase such shares from the Majority Stockholders ("Tag Along Rights"). Any Stockholder proposing to sell or otherwise dispose of its Common Stock to a third party purchaser pursuant to Section 5.4 shall agree, and be able, to transfer to such purchaser good and marketable title to the shares that such Stockholder proposes to sell, free and clear of all liens, claims and encumbrances. (b) The maximum number of shares of Common Stock that any Stockholder may require any third party to purchase pursuant to Section 5.4(a) shall be the total number of shares of Common Stock owned by each such Stockholder multiplied by the percentage that the total number of shares of Common Stock to be purchased by the third party bears to the total number of outstanding shares of Common Stock. - 18 - 20 (c) Prior to any sale under Section 5.4(a), the Majority Stockholders shall notify the Company and each of the other Stockholders in writing of such proposed sale, setting forth (i) the number of shares of Common Stock that such Stockholder proposes to sell, (ii) the name and address of the third party purchaser; and (iii) the amount of consideration (including the value of any non-cash consideration) offered by the third party purchaser. Within ten (10) days after receiving the foregoing notice, any Stockholder may elect to exercise its Tag Along Rights by delivering written notice to the Majority Stockholders of such Stockholder's election to purchase the shares of Common Stock offered for sale pursuant to Section 5.4. If none of the Stockholders so notifies the Majority Stockholders within the foregoing ten (10) day period, then the Majority Stockholders shall have the right to effect the proposed sale of such shares for a period of sixty (60) days thereafter on substantially the same terms and conditions as such shares were offered to the other Stockholders. 5.5 Take Along Right. (a) If Pfizer and OSI (together, the "Control Group") approve any sale of the Company by merger, consolidation, sale of the Company's assets, sale of Common Stock or otherwise, to any person other than a member of the Control Group or an Affiliate of a member of the Control Group, each of the other Stockholders hereby agree to consent to, vote for and raise no objections against, such sale. If such sale is structured as a sale of all of the outstanding Common Stock, each other Stockholder hereby agrees to sell all of its shares of Common Stock on the terms approved by the Control Group and to take all reasonable actions requested by the Control Group or the purchaser in connection with the consummation of any such sale ("Take Along Right"). As consideration for the sale of such Stockholders' shares of Common Stock, - 19 - 21 each Stockholder will receive for each share of Common Stock cash and the fair market value of any non-cash consideration in the same amount as the Control Group receives for the sale of each share of Common Stock. (b) If the closing of any sale of Common Stock pursuant to Section 5.5(a) has not been effected within 180 days after the Control Group first approves of such sale, the obligation of any Stockholder to participate in such sale shall terminate and the provisions of Section 5.5 shall be reinstated. (c) Nothing contained in Section 5.5 shall obligate the Control Group to consummate any sale or the Company hereunder, and any such sale may be abandoned by the Control Group at any time. If any such proposed sale is abandoned, the Control Group shall promptly send written notice thereof to each of the other Stockholders. ARTICLE VI - PREEMPTIVE RIGHTS 6.1 Preemptive Rights. (a) After the date hereof, the Company shall not issue any additional shares of Common Stock ("New Shares") to any person or entity (the "New Stockholder") (except for Common Stock issued upon the exercise of the Options granted under the Stock Option Agreement) unless the Company grants to all Stockholders the right to subscribe for and purchase the same aggregate number of additional shares of Common Stock (the "Preemptive Shares") as the number of New Shares, at the same price and upon the same terms as the New Shares are being offered. The Company shall determine the number of Preemptive Shares to be offered to each Stockholder by multiplying the total number of Preemptive Shares by the percentage that each such Stockholder's shares of Common Stock bears to the total number of shares of Common Stock outstanding immediately prior to the issuance of New Shares and Preemptive Shares hereunder. - 20 - 22 Notwithstanding the foregoing, there shall be no preemptive rights by reason of any underwritten public offering. (b) Prior to the issuance of any New Shares pursuant to Section 6.1, the Company shall give each Stockholder written notice setting forth the terms upon which such Stockholder may purchase Preemptive Shares hereunder. (c) After receiving the notice described in Section 6.1(b), any Stockholder may exercise its preemptive rights hereunder by replying in writing within twenty (20) days after the date of such notice that such Stockholder agrees to purchase the Preemptive Shares offered pursuant to Section 6.1. Each Stockholder may exercise preemptive rights with respect to all, but not less than all, of the Preemptive Shares which such Stockholder has the right to purchase pursuant to Section 6.1. (d) If any Stockholder fails to reply in accordance with Section 6.1(c), the Company shall have ninety (90) days thereafter to consummate the sale of Common Stock to a New Stockholder pursuant to Section 6.1. If the Company has not consummated such sale within such ninety (90) day period, the Company may not sell shares of common stock subsequently to any New Stockholder without first offering the Stockholders preemptive rights with respect to such shares in the manner provided for in Section 6.1. (e) If the offering price for any New Shares consists of any consideration other than cash, then the price at which the Stockholders shall be offered preemptive rights hereunder with respect to any Preemptive Shares shall be determined by an independent appraiser selected by the Company. Any Stockholder purchasing Preemptive Shares hereunder shall pay the purchase price therefor to the Company in cash; provided, however, that after obtaining the consent of the Board of Directors of the Company, OSI may give consideration other than cash if - 21 - 23 the value of such non-cash consideration is determined by such independent appraiser to be at least equal to the amount of consideration proposed to be paid by the New Stockholder for the New Shares hereunder. ARTICLE VII - DEVELOPMENT OF A LEAD COMPOUND 7.1 Pfizer's Right of First Refusal for Initial Development. (a) If the SAB makes a preliminary assessment that any compound that was invented, or for which a New Use was invented, by any person in the course of such person's participation in the Research Program is or may be effective in treating any indication in the Field or the Dermatology Indications, such compound shall be considered a Lead Compound and the Company shall promptly present such compound or New Use to Pfizer. Within sixty (60) days of such presentation, Pfizer may notify the Company in writing of Pfizer's election to (i) make an additional capital contribution to the Company to enable the Company to further develop such Lead Compound or New Use, or (ii) negotiate the terms pursuant to which Pfizer may collaborate with the Company in the development of such Lead Compound or New Use, or obtain all of the Company's rights and interests in such Lead Compound or New Use. Any rights acquired by Pfizer from the Company hereunder with respect to any Lead Compound are subject to the royalty fees payable to OSI and NYU under the Research Agreements and the royalty fees payable to the Company under Section 8.3 hereof. (b) If Pfizer makes any additional capital contribution to the Company pursuant to Section 7.1(a)(i), any additional shares of Common Stock issued in exchange therefor are subject to the preemptive rights provisions of Section 6.1. (c) If Pfizer elects not to exercise its right of first refusal pursuant to Section 7.1(a), or if Pfizer fails to pursue diligently the development of any Lead Compound or New Use with respect to which it has obtained rights under Section 7.1(a)(ii), which - 22 - 24 determination shall be made by the Board of Directors of the Company, then the Company may further develop and market such Lead Compound or New Use independently, or the Company may enter into licensing, joint venture or other arrangements with third parties to facilitate such development. 7.2 Pfizer's Right of First Refusal for Further Development. (a) If any Lead Compound or New Use developed by the Company with respect to which Pfizer has made a capital contribution pursuant to Section 7.1(a)(i) reaches the stage where the Company has decided to submit an application to the Food and Drug Administration for designation of such Lead Compound or New Use as an Investigational New Drug, or to pursue clinical testing of such Lead Compound or New Use in humans, the Company shall present such Lead Compound or New Use to Pfizer. Within sixty (60) days of such presentation, Pfizer shall notify the Company in writing if Pfizer elects to negotiate the terms under which it may obtain the Company's rights and interest in such Lead Compound or New Use. Any such rights acquired by Pfizer are subject to the royalty fees payable to OSI and NYU under the Research Agreements and the royalty fees payable to the Company under Article 7.3 hereof. (b) If Pfizer elects not to exercise its right of first refusal pursuant to Section 7.2(a), then the Company may further develop and market such Lead Compound or New Use independently, or by entering into licensing, joint venture or other arrangements with third parties to facilitate such development. 7.3 Development by Pfizer. (a) If Pfizer acquires rights in any Lead Compound pursuant to Section 7.1 or 7.2 hereof, Pfizer shall pay to the Company a royalty equal to *** percent *** of the net sales of any Human Therapeutic Product based on such Lead Compound (the "Anaderm Royalty"). The Anaderm Royalty shall be in addition to, and not in lieu of, any royalties or other payments that may be due to NYU or OSI *** These portions deleted pursuant to a request for confidential treatment. - 23 - 25 under the Research Agreements. The Anaderm Royalty shall be paid to the Company, notwithstanding the termination provisions of Article 11 of this Agreement, for a period of ten years beginning with the first commercial sale of such Human Therapeutic Product in any country, unless at the end of such ten year period there exists in that country a Valid Claim of an issued patent to such Human Therapeutic Product, a compound or composition contained therein, a method or process employed in making such Human Therapeutic Product, or a method of use for which such Human Therapeutic Product is being marketed in that country, in which case Pfizer shall continue to pay the Anaderm Royalty to the Company during the period in which any such claim exists in that country. (b) If Pfizer decides to negotiate an agreement with a third party pursuant to which Pfizer would grant such third party a license under Pfizer's rights in any Lead Compound or Human Therapeutic Product, which rights Pfizer acquired from the Company pursuant to its Rights of First Refusal under Section 7.1 or 7.2 hereof, and Pfizer determines that payment of the Anaderm Royalty would render the proposed licensing arrangement commercially unfeasible to Pfizer, then Pfizer may negotiate with the Company in good faith to determine the amount of royalties or other compensation that the Company will receive in lieu of the Anaderm Royalty from such arrangement. 7.4 Development by Anaderm. In the event that Pfizer elects not to exercise its Rights of First Refusal with respect to any Lead Compound or New Use pursuant to Section 7.1 or 7.2 hereof and the Company decides to license such Lead Compound or New Use to a third party, any payments received in connection with such license arrangement, less any associated expenses, shall be paid *** to the Company, *** to OSI under the OSI Research Agreement, *** to NYU under the NYU Research Agreement, and *** to Pfizer. *** These portions deleted pursuant to a request for confidential treatment. - 24 - 26 ARTICLE VIII - SCIENTIFIC ADVISORY BOARD 8.1 Responsibility of Scientific Advisory Board. The Company shall establish a Scientific Advisory Board (the "SAB") in accordance with the provisions hereof. The SAB shall have the following major responsibilities: (i) to prepare the Annual Research Plan and the Annual Research Budget for the approval of the Board of Directors, (ii) to make recommendations to the Board of Directors regarding the selection, development and transfer of screens and the selection of Lead Compounds, (iii) monitor competitive developments, (iv) evaluate licensing opportunities, and (v) to perform such other duties as the Board of Directors shall deem advisable. 8.2 Composition of SAB. (a) The SAB shall consist of three persons designated by Pfizer, three persons designated by OSI, and such other persons as may be appointed by the Company from time to time. (b) The members of the SAB designated by Pfizer and OSI shall be appointed for an initial term of two (2) years, and the NYU Faculty Members shall be appointed for an initial term of two (2) years. After the expiration of each SAB member's initial term, each person selected then to be a member of the SAB shall be appointed for a term of two (2) years. The parties hereto hereby agree that the initial members of the SAB and the date of the expiration of their respective terms shall be as follows:
Expiration of Name Initial Term Designated By: - ---- ------------- -------------- *** March 1998 Pfizer *** March 1998 Pfizer *** March 1998 Pfizer *** March 1998 OSI *** March 1998 OSI *** March 1998 OSI *** March 1998 Company *** March 1998 Company *** March 1998 Company *** March 1998 Company
*** These portions deleted pursuant to a request for confidential treatment. - 25 - 27 (c) Members of the SAB shall be appointed by the Board of Directors of the Company; provided, however, that each of Pfizer and OSI shall first approve the appointment of any person as their respective designee on the SAB. A Pfizer designee shall serve as chairman of the SAB, and an OSI designee shall serve as co-chair of the SAB. 8.3 Meetings of the SAB. Meetings of the SAB shall be held on a bi-monthly basis or more frequently as the Board of Directors of the Company deems necessary at places and on dates selected by the Chairman and the Co-Chairman. 8.4 Minutes of SAB. The SAB shall designate one of its members to prepare the minutes of each meeting. Minutes of each meeting of the SAB shall be distributed to each member of the SAB and to the Board of Directors of the Company within ten (10) business days after each meeting. 8.5 Action by the SAB. All actions taken by the SAB shall be approved by majority vote of all members of the SAB, subject to approval of the Board of Directors of the Company. 8.6 Reports. The SAB, OSI and Pfizer shall each provide the following to the Board of Directors of the Company: (a) summary reports within fifteen (15) days after the end of each quarter, commencing on March 31, describing its progress under the Annual Research Plan; (b) comprehensive written reports within thirty (30) days after the end of each fiscal year, describing in detail the work each has accomplished under the Annual Research Plan during such fiscal year and evaluating the results of such work. - 26 - 28 ARTICLE IX - LEGENDING OF SECURITIES 9.1 Legends. Each certificate representing shares of Common Stock shall bear a legend in substantially the form set forth below: "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM." "THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF AN AGREEMENT, DATED APRIL 23, 1996, AMONG THE COMPANY AND THE STOCKHOLDERS OF THE COMPANY SPECIFIED THEREIN, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY. THE SALE, TRANSFER OR OTHER DISPOSITION OF THESE SECURITIES IS SUBJECT TO THE TERMS OF SUCH AGREEMENT. SUCH AGREEMENT ALSO CONTAINS PROVISIONS RELATING TO THE COMPOSITION OF THE BOARD OF DIRECTORS OF THE COMPANY AND THE EXERCISE OF VOTING RIGHTS OF THE HOLDERS OF THE SECURITIES REPRESENTED HEREBY." ARTICLE X - TERMINATION 10.1 Termination. This Agreement shall terminate upon the earlier to occur of (i) the date upon which the parties then bound by this Agreement consent in writing to terminate this Agreement; (ii) the date as of which there remains only one Stockholder of the Company; and (iii) the dissolution or liquidation of the Company. ARTICLE XI - REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS 11.1 Representations and Warranties of Each Stockholder. Each Stockholder represents and warrants to the other parties, solely with respect to itself, that: (a) If such Stockholder is a corporation, partnership or trust, (i) such party is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; (ii) such party has all requisite corporate, partnership or trust power and authority to execute, deliver and perform this Agreement; and (iii) such party has taken all corporate, partnership or trust action required to duly authorize such execution, delivery and performance. - 27 - 29 (b) If such Stockholder is a natural person, he or she has full legal capacity, right, power and authority to execute, deliver and perform this Agreement. (c) This Agreement has been duly executed and delivered by such Stockholder and constitutes a binding obligation of such Stockholder enforceable in accordance with its terms, except insofar as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditor's rights generally, or by principles governing the availability of equitable remedies. (d) Neither the execution, delivery or performance by such Stockholder of this Agreement, nor the consummation by such Stockholder of the transactions contemplated hereby, does or will (with the giving of notice or the passage of time or both) conflict in any material respect with, or constitute a material default under, (i) if such party is a corporation, partnership or other entity, the Certificate of Incorporation, Bylaws, partnership agreement or other organizational or governing documents of such party, (ii) any judgment to or by which such party is or may be subject, bound or affected, or (iii) any applicable law or obligation to which such Stockholder is bound. (e) No judgment has been issued, and no action or proceeding has been instituted or, to the knowledge of such Stockholder, threatened, against or otherwise involving such Stockholder, (i) to set aside or modify any authorization of the execution, delivery and performance by such Stockholder of this Agreement, (ii) to enjoin or prevent the execution, delivery or performance by such Stockholder of this Agreement, or (iii) seeking damages in connection with the execution, delivery or performance by such Stockholder of this Agreement. - 28 - 30 ARTICLE XII - INSUFFICIENT SURPLUS AND INSOLVENCY 12.1 Notwithstanding anything contained herein to the contrary, the Company shall not be obligated to purchase, redeem, receive, take or otherwise acquire shares of Common Stock of a selling Stockholder if the capital of the Company is impaired or would become impaired thereby. If the Company's capital is or would become impaired by purchasing the Common Stock of the selling Stockholder, the Company shall notify all of the Stockholders in writing of such impairment, and indicate that the Company is precluded from making such purchase. Upon receiving such notices, the Company's remaining Stockholders shall be deemed to have been offered the shares of the selling Stockholder on the same terms as such shares would have been offered to the Company. Any Stockholder may purchase such shares by paying the purchase price therefor within thirty (30) days after receiving the foregoing notice from the Company. The selling Stockholder shall retain all right, title and interest in and to any shares of Common Stock that are not purchased by the other Stockholders. ARTICLE XIII - MISCELLANEOUS 13.1 Notices. All notices, requests, consents, demands, elections and other communications required or permitted hereunder shall be in writing and shall be given to the intended recipient at the following address: if to the Company: Anaderm Research Corp. 235 East 42nd Street New York, NY 10017-5755 Att: *** Tel: 212-573-3770 Fax: 212-808-6495 *** These portions deleted pursuant to a request for confidential treatment. - 29 - 31 with copies to: Pfizer Inc. 235 East 42nd Street New York, NY 10017-5755 Att: Office of General Counsel Tel: 212-573-3637 Fax: 212-573-1445 Squadron, Ellenoff, Plesent & Sheinfeld 551 Fifth Avenue New York, NY 10176 Att: *** Tel: 212-476-8364 Fax: 212-697-6686 If to Pfizer: Pfizer Inc 235 East 42nd Street New York, NY 10017-5755 Att: Office of General Counsel Tel: 212-573-3637 Fax: 212-573-1445 If to OSI: Oncogene Science, Inc. 106 Charles Lindbergh Blvd. Uniondale, NY 11553 Att: *** Tel: 516-222-0023 Fax: 516-745-6429 If to NYU: NYU Medical Center 550 First Avenue New York, NY 10016 Att: *** Tel: 212-263-8191 Fax: 212-263-8189 with a copy to: *** NYU Medical Center 550 First Avenue, MSB 153 New York, NY 10016 Tel: 212-263-7921 Fax: 212-545-8846 *** These portions deleted pursuant to a request for confidential treatment. - 30 - 32 If to ***: *** c/o NYU Medical Center 550 First Avenue New York, NY 10016 Tel: 212-263-8191 Fax: 212-263-8189 If to ***: *** c/o NYU Medical Center 550 First Avenue New York, NY 10016 Tel: 212-263-8191 Fax: 212-263-8189 If to ***: *** c/o NYU Medical Center 550 First Avenue New York, NY 10016 Tel: 212-263-8191 Fax: 212-263-8189 If to ***: *** c/o NYU Medical Center 550 First Avenue New York, NY 10016 Tel: 212-263-8191 Fax: 212-263-8189 Any such notice, request, consent, demand, election or other communication shall be deemed to have been duly given if personally delivered or sent by registered or certified mail, return receipt requested, by Federal Express, Express Mail or similar overnight delivery service or by telegram, telex or facsimile transmission confirmed by letter, and will be deemed given, unless earlier received (i) if sent by certified or registered mail, return receipt requested, five calendar days after being deposited in the United States mail, postage prepaid; (ii) if sent by overnight delivery service for next business day delivery, the next business day after being entrusted to such service, with delivery charges prepaid or charged to the sender's account; (iii) *** These portions deleted pursuant to a request for confidential treatment. - 31 - 33 if sent by telegram or telex or facsimile transmission, on the date sent, provided confirmatory notice is sent by any other method specified in clause (i), (ii) or (iv); and (iv) if delivered by hand, on the date of delivery. 13.2 Entire Agreement. This Agreement, together with the Exhibits hereto, the Research Agreements, and the Stock Option Agreement constitute the entire understanding among the parties hereto relating to the subject matter hereof. This Agreement may not be amended except by a writing signed by all parties hereto. No discharge, or waiver, in whole or in part, of any of its provisions shall be valid, unless in writing, signed by the party against whom the same is sought to be enforced. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their legal successors, the latter being deemed to include, without limitation, all executors, administrators, receivers, committees, other personal representatives, transferees of interest pursuant hereto, and all other legal successors, and shall, in addition, be binding upon all persons who, whether in breach of this Agreement or otherwise, have or claim an interest in the shares of the Company or are in possession of a certificate representing shares in the Company, or any other evidence of an interest in the shares of the Company. 13.3 Governing Law. This Agreement shall be governed by, and interpreted and construed in accordance with, the laws of the State of New York, without regard to its conflict of law provisions. - 32 - 34 IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written. ANADERM RESEARCH CORP. By: /s/ NICHOLAS BACOPOULOS ------------------------------ Name: Nicholas Bacopoulos Title: President PFIZER INC. By: /s/ PAUL S. MILLER ------------------------------ Name: Paul S. Miller Title: Senior Vice President & General Counsel ONCOGENE SCIENCE, INC. By: /s/ GARY E. FRASHIER ------------------------------ Name: Gary E. Frashier Title: Chief Executive Officer NEW YORK UNIVERSITY By: /s/ ISAAC KOHLBERG ------------------------------ Name: Isaac Kohlberg Title: Vice President for Industrial Liason /s/ *** ---------------------------------- *** /s/ *** ---------------------------------- *** /s/ *** ---------------------------------- *** /s/ *** ---------------------------------- *** *** These portions deleted pursuant to a request for confidential treatment. - 33 - 35 TABLE OF CONTENTS
Page ARTICLE I - DEFINITIONS ARTICLE II - CAPITAL CONTRIBUTIONS 2.1 Capital Contributions.............................................. - 5 - 2.2 Options............................................................ - 7 - 2.3 The Pfizer Compound File........................................... - 8 - ARTICLE III - APPLICABILITY; RESTRICTIONS ON TRANSFER OF SHARES 3.1 Shares Subject to Agreement........................................ - 8 - 3.2 Outstanding Shares................................................. - 8 - 3.3 General Restriction on Transfer.................................... - 8 - 3.4 Permitted Transfers................................................ - 9 - ARTICLE IV - CORPORATE GOVERNANCE 4.1 Board of Directors................................................. - 9 - 4.2 Nomination and Election of Directors............................... - 9 - 4.3 Initial Board of Directors......................................... - 10 - 4.4 Initial Officers of the Company........................... - 10 - 4.5 Quorum of the Board....................................... - 10 - 4.6 Action by the Board of Directors................................... - 11 - 4.7 Quorum of Stockholders............................................. - 12 - 4.8 Action by Stockholder.............................................. - 12 - ARTICLE V - DISPOSITION OF SHARES 5.1 Right of First Refusal............................................. - 12 - 5.2 Involuntary Transfers.............................................. - 16 - 5.3 Put and Call Rights................................................ - 17 - 5.4 Tag Along Rights................................................... - 18 - 5.5 Take Along Right................................................... - 19 - ARTICLE VI - PREEMPTIVE RIGHTS 6.1 Preemptive Rights.................................................. - 20 - ARTICLE VII - DEVELOPMENT OF A LEAD COMPOUND 7.1 Pfizer's Right of First Refusal for Initial Development........................................................ - 22 - 7.2 Pfizer's Right of First Refusal for Further Development........................................................ - 23 - 7.3 Development by Pfizer.............................................. - 23 - 7.4 Development by Anaderm............................................. - 24 - ARTICLE VIII - SCIENTIFIC ADVISORY BOARD 8.1 Responsibility of Scientific Advisory Board........................ - 25 - 8.2 Composition of SAB................................................. - 25 - 8.3 Meetings of the SAB................................................ - 26 - 8.4 Minutes of SAB..................................................... - 26 - 8.5 Action by the SAB.................................................. - 26 - 8.6 Reports............................................................ - 26 - ARTICLE IX - LEGENDING OF SECURITIES 9.1 Legends............................................................ - 27 -
36 ARTICLE X - TERMINATION 10.1 Termination........................................................ - 27 - ARTICLE XI - REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS 11.1 Representations and Warranties of Each Stockholder................. - 27 - ARTICLE XII - INSUFFICIENT SURPLUS AND INSOLVENCY ARTICLE XIII - MISCELLANEOUS 13.1 Notices............................................................ - 29 - 13.2 Entire Agreement................................................... - 32 - 13.3 Governing Law...................................................... - 32 -
EX-10.4 5 COLLABORATIVE RESEARCH AGREEMENT - 4-23-96 1 EXHIBIT 10.4 - ----------------------------------------------------------------------------- Portions of this Exhibit 10.4 have been redacted and are the subject of a confidential treatment request filed with the Secretary of the Securities and Exchange Commission. - ----------------------------------------------------------------------------- 2 EXHIBIT 10.4 COLLABORATIVE RESEARCH AGREEMENT This COLLABORATIVE RESEARCH AGREEMENT (this "Agreement") is entered into as of April 23, 1996 by and among PFIZER INC ("Pfizer"), a Delaware corporation, having its principal place of business at 235 East 42nd Street, New York, New York 10017, ONCOGENE SCIENCE, INC. ("OSI"), a Delaware corporation, having its principal place of business at 106 Charles Lindbergh Blvd., Uniondale, New York 11553, and ANADERM RESEARCH CORP. ("Anaderm"), a Delaware corporation, having its principal place of business at 235 East 42nd Street, New York, New York 10017. W I T N E S S E T H: WHEREAS, Anaderm was organized to discover, produce, purchase and market new compounds or new uses for known compounds for use in humans for the prevention or treatment of baldness and wrinkles and for the control of skin and hair pigmentation; and WHEREAS, OSI has developed proprietary gene transcription and gene expression modulation technology and high throughput screening systems which may be used to identify and develop novel transcription-based drugs; and WHEREAS, Pfizer has the capacity to undertake research for the discovery and evaluation of compounds for use in humans for the prevention or treatment of baldness and wrinkles and for the control of hair and skin pigmentation and also has the capability for clinical evaluation, manufacturing and marketing of such compounds; and WHEREAS, Anaderm, OSI and Pfizer wish to enter into a research collaboration, in which New York University will also be a participant, to identify and develop compounds for use in humans for the prevention or treatment of baldness and wrinkles and for the control of hair and skin pigmentation. 3 -2- NOW, THEREFORE, the parties agree as follows: ARTICLE 1 - DEFINITIONS Whenever used in this Agreement, the terms defined in this article (ARTICLE 1) shall have the meanings specified. 1.1 "Affiliate" means any corporation or other legal entity owning, directly or indirectly, 50% or more of the voting capital shares or similar voting securities of Anaderm, OSI or Pfizer; or any corporation or other legal entity 50% or more of the voting capital shares or similar voting rights of which is owned, directly or indirectly, by Anaderm, OSI or Pfizer. However, a foreign corporation or other legal entity shall be considered an Affiliate of Anaderm, OSI or Pfizer, if Anaderm, OSI or Pfizer, respectively, owns the maximum amount of voting securities of such corporation or entity that a U.S. company is permitted to own under the laws of the applicable foreign country and such maximum amount is at least forty percent. 1.2 "Allocated Overhead" shall mean the amount of overhead, including general and administrative costs, determined in accordance with generally accepted accounting principles, incurred by OSI and allocated to the Research Program in the same proportion that the total man-hours of work performed by OSI in the Research Program bears to the total number of man-hours of work performed in all OSI research programs, or shall be determined according to another customary allocation basis that is agreed upon in writing between the parties. 1.3 "Anaderm Confidential Information" means all information about any element of Anaderm Technology which is disclosed by Anaderm to OSI or Pfizer, orally or in writing, and designated "Confidential" in writing by Anaderm no later than 30 days after the time of disclosure to OSI or Pfizer, to the extent that such information as of the date of 4 -3- disclosure to OSI or Pfizer is not (i) known to the recipient (i.e., OSI or Pfizer) other than by virtue of a prior confidential disclosure to the recipient by Anaderm, or (ii) disclosed in the published literature, or otherwise generally known to the public, or (iii) obtained by the recipient from a Third Party free from any obligation of secrecy to Anaderm. "Anaderm Confidential Information" shall include, without limitation and subject to the foregoing exceptions (i) through (iii), any agreements between Anaderm and Third Parties and any information contained in such agreements that Anaderm provides to OSI. 1.4 "Anaderm Patent Rights" means Anaderm's rights in all Inventions within Anaderm Technology, including the worldwide rights in all applications for letters patent on Inventions that are encompassed within Anaderm Technology, including all continuations, continuations-in- part, divisionals, renewals and patents of addition thereof, all letters patent granted thereon, and all reissues, Supplementary Protection Certificates and extensions thereof. "Anaderm Patent Rights" includes any rights in Inventions that are acquired by Anaderm pursuant to Article 6 of this Agreement. 1.5 "Anaderm Technology" means all Technology that pertains to the Field or to the Dermatology Indications, that is developed or created by employees of, or consultants to Anaderm, alone or jointly with or one or more Third Parties or with Pfizer or OSI, or that is acquired by Anaderm by purchase, license, assignment or other means from one or more Third Parties or from Pfizer or OSI. 1.6 "Annual Research Plan" means the written plan that describes the research to be carried out in the Research Program during each annual period, and which shall be prepared by Anaderm's SAB and 5 -4- approved by the Board of Directors of Anaderm, in accordance with Articles IV and IX of the Stockholders' Agreement. 1.7 "Class 1 Compound" means any compound that is invented, or for which a New Use is invented, pertaining to the Field or the Dermatology Indications, by one or more persons in the course of participating in the Research Program as an employee or otherwise on behalf of (e.g., as a consultant for or student of) Anaderm, OSI, Pfizer or NYU. "New Use", as used throughout this Agreement, means new therapeutic indications for known compounds, new compositions containing known compounds and new methods of administering known compounds, and includes, e.g., combination therapies involving the administration of two or more known therapeutically active compounds or new compositions containing one or more known therapeutically active compounds. 1.8 "Class 2 Compound" means any compound that is invented, or for which a New Use is invented, pertaining to the Field or the Dermatology Indications, by one or more persons in the course of participating in the Research Program, as an employee or otherwise on behalf of (e.g., as a consultant for or a student of) Anaderm, OSI, Pfizer or NYU, and in which an entity other than OSI, Pfizer, Anaderm or NYU has the right to receive a royalty if such compound or New Use is commercialized, for example, a New Use for a compound that is discovered using screens owned by an entity other than Anaderm, Pfizer, OSI or NYU. 1.9 "Class 3 Compound" means any compound pertaining to the Field or the Dermatology Indications, that is invented or for which a New Use is invented by an entity other than Pfizer, OSI, Anaderm or NYU, and of which Anaderm becomes aware. Class 3 Compounds also include compounds invented by Third Parties outside the Research Program and licensed to Pfizer or Anaderm, compounds invented by a business acquired by Pfizer 6 -5- or an Affiliate of Pfizer after the Effective Date, and Pfizer compounds ***. 1.10 "Contract Period" means the period beginning on the Effective Date and ending on the earlier of three years from the Effective Date or upon the unsuccessful completion of the Initial Phase pursuant to Article 3. 1.11 "Dermatology Indications" means proliferative and inflammatory disorders of the skin such as acne, psoriasis, itching and eczema. 1.12 "Effective Date" means April 23, 1996. 1.13 "Field" means the (a) stimulation or control of hair growth, (b) prevention or reversal of wrinkling of the skin, or (c) alteration of skin or hair pigmentation, in each case in human subjects. Technology, as defined herein, shall be considered to "pertain to the Field" if either: (a) it is a compound having activity within the Field; (b) it is a New Use for a compound having activity within the Field; or (c) it is useful for discovering compounds within the Field. 1.14 "Funded Phase" shall have the meaning set forth in Article 3 of this Agreement. 1.15 "Human Therapeutic Product" means any Rx or OTC Drug Product for an indication within the Field or the Dermatology Indications. "Drug Product", as used herein, means a product that contains one or more therapeutically active compounds or that relates to a method of administering or using one or more therapeutically active compounds. "Human Therapeutic Product" does not include Rx or OTC veterinary Drug Products. 1.16 "Human Therapeutic Product based on a Class 1 Compound" means a Human Therapeutic Product: (a) that contains or relates to a *** These portions deleted pursuant to a request for confidential treatment. 7 -6- method of administering or using a Class 1 Compound; and (b) in which no Third Party other than NYU has a right to receive a royalty if such Human Therapeutic Product is commercialized. Thus, the parties intend to exclude from this definition any Human Therapeutic Product based on a Class 2 Compound, as defined below in Section 1.17. 1.17 "Human Therapeutic Product based on a Class 2 Compound" means a Human Therapeutic Product that contains or relates to a method of administering or using a Class 2 Compound. 1.18 "Human Therapeutic Product based on a Class 3 Compound" means a Human Therapeutic Product that contains or relates to a method of administering or using a Class 3 Compound. 1.19 "Initial Phase" shall have the meaning set forth in Article 3 of this Agreement. 1.20 "Invention" means an invention (i.e., a conception and actual or constructive reduction to practice of an idea) that is deemed patentable by a party to this Agreement. 1.21 "Lead Compound" means a Class 1 or Class 2 Compound that has been preliminarily assessed by the SAB of Anaderm to be effective or potentially effective, or to be a compound for which a New Use is effective or potentially effective, in treating an indication within the Field or the Dermatology Indications. 1.22 "Net Sales" means the gross sales by Anaderm or Pfizer or an Affiliate or Co-developer of Anaderm or Pfizer, or by a licensee or sublicensee of Pfizer, for arm's-length sales to a Third Party or Third Parties, excluding NYU, of Human Therapeutic Products, less transportation expenses, normal returns and allowances (actually paid or allowed), rebates, customary discounts and sales or other taxes based on the sales prices, but not including taxes assessed against 8 -7- income derived from such sales. The term "Co-developer" refers to a Person that, pursuant to an agreement with Pfizer or Anaderm, shares with Pfizer or Anaderm, respectively, the right to market a Human Therapeutic Product based on a Class 1 or Class 2 Compound. 1.23 "NYU" means New York University, having a principal place of business at 550 First Avenue, New York, New York 10016. 1.24 "NYU Agreement" means the Research and Collaboration Agreement between Anaderm, NYU and Pfizer having an effective date of April 23, 1994. 1.25 "OSI Confidential Information" means all information about any element of OSI Technology which is disclosed by OSI to Anaderm or Pfizer, orally or in writing, and designated "Confidential" in writing by OSI no later than 30 days after the time of disclosure to Anaderm or Pfizer to the extent that such information as of the date of disclosure to Anaderm or Pfizer is not (i) known to the recipient (i.e., Anaderm or Pfizer) other than by virtue of a prior confidential disclosure to the recipient by OSI, or (ii) disclosed in the published literature, or otherwise generally known to the public, or (iii) obtained by the recipient from a Third Party free from any obligation of secrecy to OSI. 1.26 "OSI Patent Rights" means OSI's rights in all Inventions within OSI Technology, including the worldwide rights in all applications for letters patent on Inventions that are encompassed within OSI Technology, including all continuations, continuations-in-part, divisions, renewals and patents of addition thereof, all letters patent granted thereon, and all reissues, Supplementary Protection Certificates and extensions thereof. "OSI Patent Rights" includes any rights in Inventions that are acquired by OSI pursuant to Article 6 of this Agreement. 9 -8- 1.27 "OSI Technology" means all Technology that pertains to the Field or to the Dermatology Indications, including Technology that relates to transcriptional modulation of gene expression of the gene encoding a target, including all improvements thereto and the use of such Technology to develop transcription-based drugs, that is or was developed by employees of or consultants to OSI, alone or jointly with one or more Third Parties or with Anaderm or Pfizer, or that is or was acquired by OSI by purchase, license, assignment or other means from one or more Third Parties or from Anaderm or Pfizer. 1.28 "OTC" means drugs sold over-the-counter without prescription. 1.29 "Person" means any individual, estate, trust, partnership, joint venture, association, firm, corporation, company, or other entity. 1.30 "Pfizer Confidential Information" means all information about any element of Pfizer Technology which is disclosed by Pfizer to OSI or Anaderm, orally or in writing, and designated "Confidential" in writing by Pfizer no later than 30 days after the time of disclosure to OSI or Anaderm to the extent that such information as of the date of disclosure to OSI or Anaderm is not (i) known to the recipient (i.e., OSI or Anaderm) other than by virtue of a prior confidential disclosure to the recipient by Pfizer, or (ii) disclosed in the published literature, or otherwise generally known to the public, or (iii) obtained by the recipient from a Third Party free from any obligation of secrecy to Pfizer. "Pfizer Confidential Information" shall include, without limitation and subject to the foregoing exceptions (i) through (iii), any agreements between Pfizer and Third Parties and any information contained in such agreements that Pfizer provides to OSI. 10 -9- 1.31 "Pfizer Patent Rights" means the rights of Pfizer and its Affiliates in all Inventions within Pfizer Technology, including worldwide rights in all applications for letters patent on Inventions that are encompassed within Pfizer Technology, including all continuations, continuations-in-part, divisions, renewals and patents of addition thereof, all letters patent granted thereon, and all reissues and extensions thereof. "Pfizer Patent Rights" includes any rights in Inventions that are acquired by Pfizer or any of its Affiliates pursuant to Article 6 of this Agreement. 1.32 "Pfizer's Rights of First Refusal" means "Pfizer's Right of First Refusal for Initial Development" and "Pfizer's Right of First Refusal for Further Development", as these terms are defined in Article VIII of the Stockholders' Agreement. 1.33 "Pfizer Technology" means all Technology that pertains to the Field that is or was a developed by employees of, or consultants to Pfizer, alone or jointly with one or more Third Parties or with OSI or Anaderm, or that is or was acquired by Pfizer by purchase, license, assignment or other means from one or more Third Parties or from OSI or Anaderm, excluding Technology acquired by Pfizer pursuant to its acquisition of an entity or business that relates to, in whole or in part, or incorporates the discovery, development, purchase or marketing of one or more Drug Products for an indication within the Field or the Dermatology Indications. 1.34 "Research Program" means the collaborative research program that is to be conducted by Anaderm, NYU, Pfizer and OSI pursuant to Article 2 of this Agreement and the Stockholders' Agreement. 1.35 "Rights in an Invention" or "rights in an Invention" means all proprietary rights in an Invention worldwide, including the 11 -10- worldwide rights in all patent applications for letters patent on such Invention, including all continuations, continuations-in-part, divisionals, renewals and patents of addition thereof and all letters patent granted thereon and all reissues and extensions thereof. 1.36 "Rx" means a prescription drug. 1.37 "SAB" means the Scientific Advisory Board of Anaderm. 1.38 "Stockholders' Agreement" means the Stockholders Agreement among Anaderm, Pfizer, OSI, New York University, ***, having an effective date of April 23, 1996. 1.39 "Technology" means and includes all technology and technical information that pertains to the discovery or development of pharmacologically active compounds or Rx and OTC products for use in humans, including all laboratory notebooks, research plans, inventions, cultures, strains, vectors, genes and gene fragments and their sequences, cell lines, hybridoma cell lines, monoclonal and polyclonal antibodies, proteins and protein fragments, non-protein chemical structures and methods for synthesis, structure-activity relationships, computer models of chemical structures, computer software, assay methodology, processes, materials and methods for production, recovery and purification of natural products, formulas, plans, specifications, characteristics and equipment designs, but does not mean and does not include nontechnical information such as marketing plans that relate solely to marketing or finance. 1.40 "Territory" means all the countries of the world. 1.41 "Therapeutically Active Compound" means a compound that exhibits a biological or pharmacological activity. *** These portions deleted pursuant to a request for confidential treatment. 12 -11- 1.42 "Third Party" means a party other than Pfizer, Anaderm or OSI. 1.43 "Valid Claim" means a claim of an issued patent within OSI Patent Rights, Pfizer Patent Rights or Anaderm Patent Rights, including patents in which OSI, Pfizer or Anaderm, respectively, has rights as a licensee pursuant to Article 6 of this Agreement, so long as such claim shall not have been disclaimed by the owner or owners of such patent, and shall not have been held invalid in a final decision rendered by a tribunal of competent jurisdiction from which no appeal has been or can be taken. ARTICLE 2 - THE RESEARCH PROGRAM 2.1 Purpose. Anaderm has been formed to conduct a collaborative research program among Pfizer, OSI and NYU to discover, develop, produce, purchase and market new compounds or New Uses for known compounds for human use within the Field or the Dermatology Indications (the "Research Program") throughout the Contract Period. 2.2 Rights of Anaderm. 2.2.1 Class 1 and Class 2 Compounds. Subject to Pfizer's Rights of First Refusal and to any rights of Third Parties, as referred to in Section 1.8 of this Agreement, Anaderm shall have, with respect to Lead Compounds, the development, marketing and other rights set forth in Section 7.1(c) of the Stockholders' Agreement. 2.2.2 Certain Discoveries Outside the Field. Subject to Pfizer's Rights of First Refusal and to any rights of Third Parties, as referred to in Section 1.8 of this Agreement, Anaderm shall have the right to develop, for its own use or to license to Third Parties other than NYU, Human Therapeutic Products that are based on one or more Class 1 or Class 2 Compounds for the following indications outside the Field: 13 -12- proliferative and inflammatory disorders of the skin such as acne, psoriasis, itching and eczema (the "Dermatology Indications"). 2.2.3 Class 3 Compounds. Anaderm shall have the right to bring to the attention of Pfizer opportunities to license in rights in Human Therapeutic Products that are based on Class 3 Compounds. If Anaderm is able to demonstrate to Pfizer the commercial value of any such products, Anaderm may negotiate a compensation arrangement with Pfizer. Anaderm shall not license in rights in a Human Therapeutic Product based on a Class 3 Compound without Pfizer's approval. 2.3 Restrictions as to OSI and Anaderm. 2.3.1 Other Cosmeceutical Business. In the event that Anaderm participates in, either through equity ownership, collaborative arrangement, license or otherwise, or financially benefits from, through royalties, finder's fees or otherwise, any acquisition by Pfizer during the Contract Period of an entity or business that relates to, in whole or in part, or incorporates the discovery, development, purchase or marketing of one or more Drug Products for indications within the Field or the Dermatology Indications, OSI shall not receive royalties from the sales of any Human Therapeutic Product that was developed by such entity or business or any Human Therapeutic Product that contains or relates to a method of administering or using a compound that was invented or developed, or for which a New Use was invented or developed by such entity or business. 2.3.2 Pfizer Discoveries. *** *** *** *** *** *** These portions deleted pursuant to a request for confidential treatment. 14 -13- *** *** *** *** *** *** *** *** *** *** 2.4 Rights of Pfizer. 2.5.1 Inventions Based on Pfizer Compounds. As provided for more specifically in Article 6 of this Agreement, Pfizer shall own all Inventions made in the course of conducting the Research Program that are either compounds owned by Pfizer or compositions containing one or more such compounds or methods of administering, making or using one or more such compounds. A compound shall be considered to be owned by Pfizer, Anaderm or OSI, throughout this Agreement, if such compound was provided to a participant in the Research Program by Pfizer, Anaderm or OSI, respectively, for use in conducting the Research Program, or if Pfizer, Anaderm or OSI, respectively, has rights in such compound in the United States under the patent laws (i.e., if such compound is an Invention that is owned, in whole or in part, by such party or is claimed in a patent application or patent that is owned, in whole or in part, by such party) or the laws governing the protection of trade secrets and confidential business information. 2.4.2 Dermatological Discoveries. Notwithstanding the provisions of Section 2.2.2 hereof, Pfizer shall have the right during *** These portions deleted pursuant to a request for confidential treatment. 15 -14- the Contract Period to perform or sponsor research in the area of the Dermatology Indications. 2.4.3 Other Pfizer Business. This Agreement shall in no way restrict the operations of, interfere with, impede or otherwise adversely influence Pfizer's current business, including, without limitation, the operations of its divisions, subsidiaries and Affiliates, or any business or operations acquired or undertaken by Pfizer during the Contract Period. 2.4.4 Pfizer Discoveries. Subject to the provisions of Section 2.4.4 hereof, Pfizer shall have the sole rights to any compounds, Technologies or Inventions pertaining to the Field (which may or may not also be used to treat indications outside of the Field) that are invented, developed or discovered by Pfizer, solely or jointly with a Third Party, in the course of its research or other activities outside of the Field and outside of the Research Program. Such compounds, Technologies and Inventions may be developed and exploited by Pfizer in its sole discretion without the need for permission by Anaderm and without benefit to Anaderm. 2.5 Restrictions as to Pfizer. *** *** *** *** ARTICLE 3 - PHASES OF AGREEMENT The Initial Phase of this Agreement shall commence on the date hereof and shall continue until 18 months from the date hereof. Upon the conclusion of the Initial Phase, the Board of Directors of Anaderm shall make a determination as to whether the Initial Phase was successfully completed. Such determination shall be made by an affirmative vote of *** These portions deleted pursuant to a request for confidential treatment. 16 -15- all of the members of the Board of Directors of Anaderm and shall be subject to the approval of Pfizer. If the Board determines that the Initial Phase was unsuccessful, this Agreement shall terminate forthwith. During the Initial Phase, OSI shall provide formatting for high throughput screens pertaining to the Field and the Dermatology Indications and shall perform screening of compounds from its fermentation file and compounds provided to it by Pfizer in accordance with the Stockholders Agreement. If the Board, with the approval of Pfizer, determines that the Initial Phase was successful, the Funded Phase of this Agreement shall commence and shall continue for the duration of the Contract Period. During the Funded Phase, Anaderm shall pay OSI its actual research costs, plus Allocated Overhead, plus 10% of the sum of the actual research costs and the Allocated Overhead. ARTICLE 4 - ROYALTIES 4.1 OSI Royalty Rate. In consideration for fulfilling its obligations under this Agreement, Anaderm or Pfizer shall pay to OSI a royalty of *** percent *** of Net Sales (the "OSI Royalty") of any Human Therapeutic Product based on a Class 1 Compound or, subject to the provisions of Section 4.2 of this Agreement, a Class 2 Compound, that is marketed by Anaderm, Pfizer, an Affiliate or Co-developer of Anaderm or Pfizer or a licensee or sublicensee of Pfizer, respectively, pursuant to Article VII of the Stockholders' Agreement. The OSI Royalty shall be paid to OSI, on a product by product, country by country basis, notwithstanding the termination provisions of Article 10 of this Agreement, for a period of ten years beginning with the first commercial sale of any such Human Therapeutic Product in a particular country, unless at the end of such ten year period there exists in that country a Valid Claim to either such Human Therapeutic Product or a compound or *** These portions deleted pursuant to a request for confidential treatment. 17 -16- composition contained in it, or a method or process employed in making it, or to a method of use for which such Human Therapeutic Product is being marketed in that country, in which case the OSI Royalty shall continue to be paid during the period in which any such Valid Claim exists in that country. 4.2 Limitations. In the event that Anaderm, Pfizer, an Affiliate or Co-developer of Anaderm or Pfizer, or a licensee or sublicensee of Pfizer markets a Human Therapeutic Product based on a Class 2 Compound, and such compound is subject to a royalty encumbrance with respect to a Third Party other than NYU, the OSI Royalty, in lieu of the *** referred to in Section 4.1, shall be equal to *** percent *** of Net Sales of Human Therapeutic Products based on such Class 2 Compound, where *** and *** is equal to the total percentage of Net Sales that is owed to one or more such Third Parties (i.e., the total royalty encumbrance). 4.3 Licensing by Anaderm. In the event that Pfizer elects not to exercise Pfizer's Rights of First Refusal and Anaderm determines to license a Class 1 or Class 2 Compound to a Third Party other than NYU rather than exploit it, OSI shall receive *** of any payments received by Anaderm under such license arrangements in lieu of the OSI Royalty. 4.4 Licensing by Pfizer. If Pfizer decides to negotiate an agreement with a Third Party pursuant to which Pfizer would grant such Third Party a license under Pfizer's rights in a Lead Compound or Human Therapeutic Product, which rights Pfizer acquired from Anaderm pursuant to its Rights of First Refusal, for the purposes of developing a Lead Compound and developing and marketing a Human Therapeutic Product, and Pfizer determines that payment of the OSI Royalty, as defined in Sections 4.1 and 4.2 of this Agreement, would render the proposed licensing *** These portions deleted pursuant to a request for confidential treatment. 18 -17- arrangement commercially unfeasible to Pfizer, then Pfizer shall negotiate with OSI in good faith to determine the amount of royalties or other compensation that OSI will receive from such arrangement. 4.5 Notification to OSI of Third Party Licenses. Anaderm or Pfizer shall notify OSI in writing of the following within sixty (60) days of the granting by Anaderm or Pfizer or any of their Affiliates, respectively, of a license to a Third Party (including but not limited to a Co-developer) under Anaderm's, Pfizer's or such Affiliate's rights in a Lead Compound or Human Therapeutic Product: (a) the name of the party or Affiliate that has granted the license; (b) the name of the licensee or Co-developer (or sublicensee, as the case may be); (c) the names of any Lead Compounds and Human Therapeutic Products in which rights were licensed; and (d) the royalty to be paid pursuant to the license. 4.6 Royalty Exclusion. OSI shall not receive any royalty from sales of Human Therapeutic Products based on Class 3 Compounds. 4.7 Payment Dates. Royalties due to OSI shall be paid by Anaderm or Pfizer on Net Sales within sixty days after the end of each calendar quarter in which such Net Sales are made. Such payments shall be accompanied by a statement showing the Net Sales of each Human Therapeutic Product on which such payment is based and a calculation of the amount of royalties due. Payments due to OSI pursuant to Section 4.3 of this Agreement shall be paid by Anaderm within sixty (60) days after receipt by Anaderm of the payment from a Third Party upon which the payment due OSI is based. Anaderm and Pfizer shall use their reasonable best efforts to obtain royalty payments due to them or their Affiliates based on Net Sales of Human Therapeutic Products by their Co-developers (and, in the case of Pfizer, its licensees and sublicensees). 19 -18- 4.8 Accounting. No royalties on Net Sales shall be payable on sales transactions between or among Anaderm and its Affiliates or Pfizer and its Affiliates; the final vendee sale to a Third Party (other than NYU) alone shall be used for the purpose of determining the royalty payments due hereunder. The Human Therapeutic Product subject to royalty payment shall be deemed sold when invoiced, or if not invoiced, when the same shall be shipped or delivered to the third party. All taxes, assessments and fees of any nature levied or incurred on account of any payments accruing under this Agreement, by national, state or local governments, will be assumed and paid by Anaderm or Pfizer, depending on which party is marketing the Human Therapeutic Product, and, in the case of payments accruing under Section 4.3 of this Agreement, by Anaderm, except taxes levied thereon as income to OSI, and, if such taxes are required to be withheld by Anaderm or Pfizer, they will be deducted from such payments due to OSI and will be paid by Anaderm or Pfizer, respectively, for the account of OSI, and a receipt therefor secured and sent to OSI. 4.9 Records. Anaderm or Pfizer, depending on which party is marketing the Human Therapeutic Product, shall keep for three years from the date of each payment of royalties complete and accurate records of sales by Anaderm or Pfizer or an Affiliate of Anaderm or Pfizer, respectively, of each Human Therapeutic Product in sufficient detail to allow the accruing royalties to be determined accurately. OSI shall have the right for a period of three years after receiving any report or statement with respect to royalties due and payable to appoint, at its expense, an independent certified public accountant reasonably acceptable to Anaderm or Pfizer, respectively, to inspect the relevant records of Anaderm or Pfizer, respectively, to verify such report or statement. 20 -19- Anaderm or Pfizer, respectively, shall make its records available for inspection by such independent certified public accountant during regular business hours at such place or places where such records are customarily kept, upon reasonable notice from OSI, to the extent reasonably necessary to verify the accuracy of the reports and payments. With respect to each of Anaderm, Pfizer and OSI, such inspection right shall not be exercised more than once in any calendar year nor more than once with respect to sales in any given period. Anaderm or Pfizer, respectively, shall use its reasonable best efforts to make available to OSI the information, records and reports referred to in this Section (Section 4.6) that relate to sales by a licensee, sublicensee or Co-developer of such party. OSI agrees to hold in strict confidence all information concerning royalty payments and reports, and all information learned in the course of any audit or inspection, except to the extent it is necessary for OSI to reveal such information in order to enforce its rights under this Agreement or if disclosure is required by law. The failure of OSI to request verification of any report or statement during said three-year period shall be considered acceptance of the accuracy of such report, and Anaderm shall have no obligation to maintain records pertaining to such report or statement beyond said three-year period. The results of the inspection shall be binding on all parties. ARTICLE 5 - TREATMENT OF CONFIDENTIAL INFORMATION 5.1 Confidentiality. 5.1.1 Each of Pfizer, OSI and Anaderm recognize that the other parties' Confidential Information constitutes highly valuable proprietary, confidential information. Each of Pfizer, OSI and Anaderm agree that during the Contract Period and for five years thereafter, they will keep confidential all Confidential Information that is disclosed to 21 -20- them or to any of their Affiliates pursuant to this Agreement. Neither Pfizer, OSI or Anaderm nor any of their Affiliates shall use the Confidential Information of any other party, during the Contract Period and for five years thereafter, in any manner or for any purpose other than as necessary to fulfill their responsibilities under this Agreement, which includes the disclosure, in patent applications on Inventions made in the course of conducting the Research Program, of information that is sufficient under the applicable law to support the patentability of such Inventions. In addition, Pfizer and Anaderm may disclose such Confidential Information to government agencies to the extent necessary or desirable to secure governmental approval for development, clinical testing or marketing of Lead Compounds or Human Therapeutic Products based on Class 1 or Class 2 Compounds, and, with respect to clinical testing of the same, to preclinical and clinical investigators where necessary or desirable to the extent normal and usual in the custom of the trade and under a secrecy agreement with essentially the same confidentiality provisions as those contained herein. 5.1.2 Each of Pfizer, OSI and Anaderm acknowledge that the Pfizer Confidential Information, OSI Confidential Information and Anaderm Confidential Information is highly valuable, proprietary, confidential information, and agree that any disclosure of Confidential Information to any officer, employee or agent of the others or of any of their respective Affiliates shall be made only to the extent necessary to carry out their respective responsibilities under this Agreement and shall be limited to the maximum extent possible that is consistent with such responsibilities. Each party agrees not to disclose the others' Confidential Information to any Third Party during the Contract Period and for five (5) years thereafter, under any circumstances without 22 -21- written permission. Each party shall take such action, and shall cause its Affiliates to take such action, to preserve the confidentiality of the others' Confidential Information as it would customarily take to preserve the confidentiality of its own confidential information. Each party, upon the others' request, will return all the Confidential Information disclosed to it pursuant to this Agreement, including all copies and extracts of documents within 60 days of the request after the termination of this Agreement. 5.1.3 Each of Pfizer, OSI and Anaderm represents that all of their respective employees and all other persons (e.g., consultants) participating in the Research Program on their respective behalves who will have access to Pfizer Confidential Information, OSI Confidential Information or Anaderm Confidential Information will be bound, for a period beginning not later than commencement of their participation in the Research Program and ending five (5) years after termination of the Contract Period, by agreements to maintain such information in confidence. 5.2 Publication. Except as required to pursue patent protection, the parties hereto agree not to publish the results obtained in the course of the Research Program without the prior written approval of the SAB and Board of Directors of Anaderm. After receipt of any proposed publication by both the SAB and Board of Directors of Anaderm, written approval or disapproval shall be provided within thirty (30) days for a manuscript, within thirty (30) days for an abstract for presentation at, or inclusion in the proceedings of a scientific meeting, and within thirty (30) days for a transcript of an oral presentation to be given at a scientific meeting. Approval decisions shall be made in 23 -22- accordance with Pfizer's corporate policy regarding publications and shall not be unreasonably withheld. 5.3 Disclosure of Inventions. Each party shall promptly inform the others about any Invention within the Field or the Dermatology Indications, that is conceived or reduced to practice, in whole or in part, in the course of carrying out the Research Program by their respective employees or other parties participating in the Research Program on their respective behalves. Each party shall also promptly inform Pfizer or OSI about any Invention outside the Field and outside the Dermatology Indications, if such Invention is based on a compound owned by OSI or Pfizer, respectively, (i.e., any Invention that relates to such a compound or to a composition containing such a compound, or to a method of making, administering or using such a compound). This Agreement shall not be construed to obligate any party to disclose to the other parties any other Inventions outside of the Field and outside the Dermatology Indications. ARTICLE 6 - INTELLECTUAL PROPERTY RIGHTS 6.1 Grant of Technology Licenses. All grants of licenses in Technology under this section (Section 6.1) are subject to the provisions of Sections 6.2 and 6.3 of this Agreement, which relate to the transfer of rights in Inventions. 6.1.1 License in OSI Technology. OSI grants Anaderm, NYU and Pfizer and its Affiliates an exclusive license in the Territory, during the Contract Period and without the right to sublicense, under OSI's rights in OSI Technology, including that which is acquired by OSI from Third Parties during the Contract Period, and any compounds that OSI owns and makes available to the Research Program. This license is solely for the purpose of conducting the Research Program 24 -23- in accordance with the terms of Article 2 of this Agreement and is subject to OSI's retention of rights of equivalent scope for itself solely for use in conducting the Research Program. Upon expiration of the Contract Period, such license will become nonexclusive and solely for the purpose of developing and marketing Lead Compounds and Human Therapeutic Products, and such nonexclusive license shall not expire in any country, notwithstanding the termination provisions of Article 10 of the Agreement, prior to 10 years from the date of the first commercial sale in that country of a Human Therapeutic Product the manufacture, use or sale of which by a Third Party would infringe a Valid Claim to any Invention within Anaderm Patent Rights or Pfizer Patent Rights, and, if at the end of such ten year period a Valid Claim to any such Invention exists in such country, the term of the license shall continue until no such Valid Claim exists in that country. 6.1.2 License in Anaderm Technology. Anaderm grants OSI and Pfizer and its Affiliates an exclusive license in the Territory, during the Contract Period and without the right to sublicense, under Anaderm's rights in Anaderm Technology, including that which is acquired by Anaderm from Third Parties during the Contract Period. This license is solely for the purpose of conducting the Research Program in accordance with the terms of Article 2 of this Agreement and is subject to Anaderm's retention of rights of equivalent scope for itself solely for use in conducting the Research Program. Upon expiration of the Contract Period, such license, as to Pfizer and its Affiliates, will become nonexclusive and solely for the purposes of developing and marketing Lead Compounds and Human Therapeutic Products, and shall not expire in any country, notwithstanding the termination provisions of Article 10 of the Agreement, prior to 10 years from the date of the first 25 -24- commercial sale in that country of a Human Therapeutic Product the manufacture, use or sale of which by a Third Party would infringe a Valid Claim to Invention within Pfizer Patent Rights or Anaderm Patent Rights, and, if at the end of such ten year period a Valid Claim to such Invention exists in such country, the term of the license shall continue until no such Valid Claim exists in that country. 6.1.3 License in Pfizer Compounds. Pfizer grants Anaderm and OSI an exclusive license, without the right to sublicense, in the Territory, during the Contract Period, to use, solely for the purpose of screening such compounds for indications within the Field in the course of conducting the Research Program, any compounds that Pfizer owns and makes available for use in the Research Program pursuant to Sections 2.1 and 2.3 of the Stockholders' Agreement. Pfizer grants Anaderm and OSI a nonexclusive license, without the right to sublicense, in the Territory, during the Contract Period, to use any such Pfizer compounds solely for the purpose of screening such compounds for indications within the Dermatology Indications in the course of conducting the Research Program. 6.2 Rights in Inventions Within the Field or The Dermatology Indications. 6.2.1 Subject only to the provisions of Section 6.2.2 below, OSI shall assign to Anaderm its worldwide rights in any Invention within the Field or the Dermatology Indications that is made in the course of its participation in the Research Program and that relates to a Therapeutically Active Compound, a composition containing a Therapeutically Active Compound, or a New Use for a Therapeutically Active Compound. Pfizer shall do the same, except with respect to Inventions based on Pfizer compounds. Subject to the provisions of 26 -25- Section 6.2.2 below, OSI and Pfizer grant Anaderm an exclusive license in the Territory, including the right to sublicense, under their rights in all Inventions within the Field or the Dermatology Indications, that are made in the course of their participation in the Research Program and that do not relate to a Therapeutically Active Compound, a composition containing a Therapeutically Active Compound or a New Use for a Therapeutically Active Compound, to use such Inventions for the purposes of conducting the Research Program and developing and marketing Lead Compounds and Human Therapeutic Products. The term of such exclusive licenses shall not expire in any country, with respect to any particular Invention, notwithstanding the termination provisions of Article 10 of the Agreement, prior to 10 years from the date of the first commercial sale in that country of a Human Therapeutic Product the manufacture, use or sale of which by a Third Party would infringe a Valid Claim to such Invention, and, if at the end of such ten year period a Valid Claim to such Invention exists in such country, the term of the license shall continue until no such Valid Claim exists in that country. The foregoing grants of exclusive licenses to Anaderm by OSI and Pfizer are also subject, during the Contract Period, to OSI's and Pfizer's retention of rights of equivalent scope for themselves, for use solely in conducting the Research Program. 6.2.2 OSI shall assign to Pfizer its worldwide rights in any Invention that is made in the course of its participation in the Research Program and that relates to compound owned by Pfizer, a composition containing such a compound or a New Use for such a compound. Pfizer grants Anaderm an exclusive license in the Territory, including the right to sublicense without restriction, under its rights in any Inventions pertaining to the Field or the Dermatology Indications that 27 -26- are assigned to it pursuant to this section, for the purposes of conducting the Research Program and developing and marketing Lead Compounds and Human Therapeutic Products. Such exclusive license is subject, during the Contract Period, to Pfizer's retention of rights of equivalent scope, solely for the purpose of conducting the Research Program. The term of such exclusive license shall not expire in any country, notwithstanding the termination provisions of Article 10 of the Agreement, prior to 10 years from the date of the first commercial sale in that country of a Human Therapeutic Product the manufacture, use or sale of which by a Third Party would infringe a Valid Claim to any such Invention, and, if at the end of such ten year period a Valid Claim to such Invention exists in such country, the term of the exclusive license shall continue until no such Valid Claim exists in that country. 6.3 Rights in Inventions Outside the Field and The Dermatology Indications. Neither OSI, Anaderm nor Pfizer shall be obligated to assign or license their rights in any Invention made in the course of conducting the Research Program, where such Invention does not relate to the Field or to the Dermatology Indications, or to a compound owned by Pfizer, OSI or Anaderm, a composition containing such a compound or a method of making, using or administering such a compound. 6.4 Actual or Threatened Infringement. When information comes to the attention of OSI, Anaderm or Pfizer to the effect that any patent in which a party to this Agreement owns rights (either pursuant to this Agreement or otherwise) and which claims either (a) a Human Therapeutic Product based on a Class 1 or Class 2 Compound that is being developed or marketed by Anaderm or Pfizer or an Affiliate of Pfizer (excluding Anaderm) or (b) a compound or composition contained in such a Human Therapeutic Product, or (c) a Class 1 or Class 2 compound being 28 -27- developed by Anaderm or Pfizer or an Affiliate of Pfizer as a Lead Compound pursuant to Article VIII of the Stockholders' Agreement or for which a New Use, as defined in Section 1.6 of this Agreement, is being developed by Anaderm or Pfizer or an Affiliate of Pfizer (excluding Anaderm), has been or is threatened to be unlawfully infringed, the party that becomes aware of such information shall promptly bring it to the attention of the other parties to this Agreement. Pfizer, or an Affiliate of Pfizer (excluding Anaderm), within 90 days after all parties have been made aware of such information, regardless of which party is developing or marketing the compound or product to which the allegedly infringed patent relates, shall have the right, but not the obligation, at its own risk and expense and using counsel of its choice, to take such action as it may deem necessary to prosecute or prevent such unlawful infringement and to notify the parties to this Agreement of the commencement of any suit, action, proceeding or assertion of infringement that it initiates. Neither Pfizer nor any of its Affiliates, however, shall be obligated to inform OSI or Anaderm prior to taking any such action if delaying such action would prejudice its right to obtain the relief sought, for example, where such action is a motion for a temporary restraining order or a claim of patent infringement based on the filing of an ANDA by a generic drug company. If, however, Pfizer decides not to take action in either of the two foregoing situations, it shall notify OSI in a timely fashion so as to allow OSI to take such action if it chooses to do so. Pfizer shall furnish Anaderm with a copy of each nonprivileged material communication relating to the alleged infringement. If Pfizer or the relevant Affiliate of Pfizer, as the case may be, determines that it is necessary or desirable for either Anaderm or OSI to join any such suit, action or proceeding, then Anaderm or OSI 29 -28- shall, at Pfizer's expense, execute all papers and perform such other acts as may be reasonably required to permit Pfizer or the relevant Affiliate of Pfizer to act in their respective names, or to join them, respectively, as parties, if required by law, in which event Pfizer shall hold the party or parties requested to be joined free, clear and harmless from any and all costs and expenses of such suit, action or proceeding, including attorney's fees. If Pfizer or one of its Affiliates brings a suit in accordance with the above terms, it shall have the right first to reimburse itself out of any sums recovered in such suit or in its settlement for all reasonable costs and expenses of every kind and character, including reasonable attorney's fees, involved in the prosecution of any suit, and fifty percent (50%) of any funds that shall remain from said recovery shall be distributed to the parties receiving royalties on the Net Sales of the Human Therapeutic Product to which the infringed claim or claims relate, in amounts proportional to the relative amounts of their respective royalties, and the remaining fifty (50%) percent shall belong, respectively, to Pfizer or the Affiliate of Pfizer that brought the suit. If, within ninety (90) days after Pfizer or an Affiliate of Pfizer other than Anaderm gives notice to Anaderm or OSI of the information relating to the alleged infringement or receiving notice of such information from Anaderm or OSI, neither Pfizer nor any of its Affiliates notifies Anaderm and OSI of its intent to bring suit or take other action against an alleged infringer, Anaderm shall have the right, but not the obligation, to bring suit or take other action against such alleged infringer, and may through joinder add Pfizer, an Affiliate of Pfizer or OSI as a party, if appropriate, in which case Anaderm shall hold the party or parties so joined free, clear and harmless from any and all costs and expenses of such litigation, including attorney's fees, and 30 -29- any sums recovered in any such suit or in its settlement shall belong to Anaderm; provided, however, that fifty percent (50%) of any such sums recovered in such suit, after deduction of the costs and expenses of litigation, including attorney's fees paid, shall be distributed to the parties receiving royalties on the Net Sales of the Human Therapeutic Product to which the allegedly infringed claim or claims relate, in amounts proportional to the relative amounts of their respective royalties, and the remaining fifty percent (50%) shall belong to Anaderm. All parties to this Agreement agree to cooperate with and lend assistance, as appropriately requested or required by law, to any party that initiates a lawsuit or other action against an alleged infringer pursuant to this section. Each party shall have the right to be represented by counsel of its own selection and at its own expense in any suit instituted by the other under the terms of this section. If either Anaderm or Pfizer lacks standing to bring any such suit, action or proceeding, then the other shall do so at the request and expense of the requesting party. The obligations of all parties under this section shall remain in effect, notwithstanding the termination provisions of Article 10 of this Agreement, until the statute of limitations applicable to every action that could be taken pursuant to this section to hold the allegedly infringing party accountable under the law has expired and until every such pending action has been resolved by a decision rendered by a tribunal of competent jurisdiction from which no appeal has been or can be taken. 6.5 Response to Infringement Claims. The parties to this Agreement agree to cooperate with any one or both of the other such parties in defense of any suit, action or proceeding against any such party or any Affiliate or sublicensee of any such party alleging the 31 -30- infringement of the intellectual property rights of a Third Party other than NYU by reason of the manufacture, use or sale of a Therapeutic Product based on a Class 1 or Class 2 compound. The cooperation and involvement of all three parties in defense of any such lawsuit shall be at the expense of the party that is developing and/or marketing the Therapeutic Product or compound the manufacture, use or sale of which gave rise to the claim of infringement (the "developing/marketing party"). However, the developing/marketing party shall not be responsible for paying any costs or fees or expenses associated with the involvement of another party in any such lawsuit if the allegedly infringing activities that gave rise to the lawsuit resulted from the negligence or breach a warranty in this Agreement or the Stockholders' Agreement of such other party. Any party to this Agreement against which such a lawsuit, action, proceeding or claim of infringement is brought shall give the other parties prompt written notice of it and shall furnish the other parties with a copy of each nonprivileged material communication relating to the alleged infringement. In consideration of the developing/marketing party's provision of costs, fees and expenses for the defense of any other party joined in such a lawsuit or other legal proceeding, and the developing/marketing party's agreement which it hereby gives to the other parties to indemnify and hold them and their directors, officers, employees and agents harmless with respect to all damages assessed against them and arising out of such action, all parties hereby grant to Pfizer or Anaderm, whichever is the developing/marketing party, all authority (including the right to exclusive control of the defense of any such suit, action or proceeding and the exclusive right to compromise, litigate, settle or otherwise dispose of any such suit, action or proceeding), and agree to provide Pfizer or Anaderm, 32 -31- respectively, with all information and assistance necessary to defend or settle any such suit, action or proceeding, except that any such compromise, litigation, settlement, or other disposition shall not include an admission of fault on the part of any such other party or require any such other party to incur any obligation or liability or take or refrain from taking any action except as otherwise obligated hereunder without such party's advance written consent. The obligations of all parties under this section shall remain in effect, notwithstanding the termination provisions of Article 10 of this Agreement, until the statute of limitations applicable to every action that could be taken pursuant to this section to hold the allegedly infringing party accountable under the law has expired and until every such pending action has been resolved by a decision rendered by a tribunal of competent jurisdiction from which no appeal has been or can be taken. 6.6 Filing, Prosecution and Maintenance of Patent Rights. 6.6.1 Anaderm shall have the right, at its expense and using counsel of its choice, to prepare, file and prosecute patent applications and to maintain and apply for extensions, Supplementary Protection Certificates and reissues of patents worldwide on Inventions within the Field or the Dermatology Indications, that were made by any of the parties in the course of their participation in the Research Program and that relate to either a therapeutically active compound, a composition containing a therapeutically active compound or a New Use for a therapeutically active compound, as well as on any Inventions in which it has rights as an owner/assignee pursuant to Article 6 of this Agreement. Pfizer and OSI hereby grant Anaderm the authority to perform the above patent related tasks with respect to such Inventions in which they, respectively, have rights as an owner/assignee pursuant to Article 33 -32- 6 of this Agreement and agree to execute any and all forms required to be submitted in the various patent offices worldwide to render such transfer of authority effective in all countries in which patent protection will be sought. 6.6.2 Anaderm shall perform or have performed on its behalf the patent related tasks that it is obligated to perform under Sections 6.6.1 above diligently, and shall provide copies of any documents related to the performance of such tasks to any other party to this Agreement that requests them. 6.6.3 The rights and obligations under this section (Section 6.6) shall not expire, notwithstanding the termination provisions of Article 10, with respect to a particular Invention, until all licenses of rights in such Invention pursuant to this Agreement have expired. ARTICLE 7 - ACQUISITION OF RIGHTS FROM THIRD PARTIES. During the Contract Period, each of OSI, Pfizer and Anaderm shall promptly notify each other in writing of any and all opportunities of which they are aware to acquire in any manner from Third Parties, Technology or patents which may be useful in, or may relate to, the Research Program. Anaderm shall decide if such rights shall be acquired. Anaderm shall use its best efforts to locate, and acquire rights to, Technology within and ancillary to the Field. ARTICLE 8 - EXCLUSIVITY 8.1 During the Contract Period, OSI shall not conduct drug discovery research itself or sponsor any research other than research conducted pursuant to the Research Program, as defined in this Agreement, if such research pertains to the Field or to the Dermatology Indications; provided, however, that OSI may sponsor or engage in such research with 34 -33- the prior written consent of all of the members of the Board of Directors of Anaderm. Research conducted by OSI outside of the Field and outside the Dermatology Indications, which results in a serendipitous discovery of a compound within the Field or the Dermatology Indications, shall not be considered a breach of this exclusivity provision. OSI may, however, conduct its own research in all areas outside the Field, without restriction, with the exception of the Dermatology Indications. 8.2 During the Contract Period, *** *** *** *** *** *** *** *** *** *** ARTICLE 9 - DEVELOPMENT OF CLASS 1 AND CLASS COMPOUNDS 9.1 Best Efforts. Anaderm or Pfizer shall use its reasonable best efforts, within the confines of their respective corporate policies and commercial interests, to commercialize any Human Therapeutic Product based on a Class 1 or Class 2 Compound for which Anaderm or Pfizer, respectively, has the exclusive right to develop. 9.2 Status Reports. Anaderm or Pfizer, depending on which party is developing a particular Lead Compound or Human Therapeutic Product, shall provide to OSI with a written report of the status of the development of such Compound or Product. Such reports shall be provided annually, beginning one year after the filing of an IND application for *** These portions deleted pursuant to a request for confidential treatment. 35 -34- such Compound or Product and continuing until either development of such Compound or Product has been discontinued or there has been a commercial sale of such Product in the United States. Anaderm or Pfizer, respectively, shall also notify OSI in writing within sixty (60) days of abandoning development of any such Compound or Product. ARTICLE 10 - TERMINATION 10.1 Term. Unless sooner terminated due to the unsuccessful completion of the Initial Phase, this Agreement shall have an initial term of three years from the Effective Date. 10.2 Renewal. This Agreement shall be automatically renewed for additional one-year periods unless terminated upon 90 days' prior written notice by one of the parties hereto to each of the other parties. 10.3 Termination for Cause. At any time prior to expiration of this Agreement, any party may terminate this Agreement forthwith for cause, as "cause" is described below, by giving written notice to the other party. Cause for termination by one party of this Agreement shall be deemed to exist if any other party materially breaches or defaults in the performance or observance of any of the provisions of this Agreement and such material breach or default is not cured within sixty (60) days after the giving of notice by the party specifying such material breach or default, or if either NYU, Pfizer or Anaderm discontinues its business or becomes insolvent or bankrupt, or if any representation or warranty by NYU, Pfizer or Anaderm, or any of its officers, under or in connection with this Agreement shall prove to have been incorrect in any material respect when made. 10.4 Termination by a Party. Upon the occurrence of a cause for termination, any party not responsible may, by notice to the other parties, terminate this Agreement. Such termination will become 36 -35- effective immediately following a 30 day period during which the failing party failed to remedy the failure that gave rise to the notice of termination. 10.5 Provisions that Survive Termination. The following provisions of this Agreement will survive termination pursuant to this article (Article 10) and will remain in force for the period specified in the sections of the Agreement in which they appear: (a) all of Article 4, relating to the payment of royalties; (b) the confidentiality obligations set forth in Sections 5.1.1 - 5.1.3. (c) the grant of exclusive and nonexclusive licenses pursuant to Article 6; (d) the obligations of all parties with respect to patent infringement matters pursuant to Sections 6.4 and 6.5; and (e) the rights and obligations of all parties with respect to the filing, prosecution and maintenance of patent rights pursuant to Section 6.6; (f) the obligations of Pfizer and Anaderm to provide notices or status reports to OSI pursuant to Section 9.2; (g) the indemnification provisions of Article 11; and (h) the choice of governing law pursuant to Section 13.2. ARTICLE 11 - INDEMNIFICATION BY ANADERM OR PFIZER *** *** *** *** *** These portions deleted pursuant to a request for confidential treatment. 37 -36- *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** These portions deleted pursuant to a request for confidential treatment. 38 -37- ARTICLE 12 - REPRESENTATIONS, WARRANTIES AND COVENANTS OSI, Pfizer and Anaderm each represents, warrants and covenants as follows: 12.1 It is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and is qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification and has all requisite power and authority, corporate or otherwise, to conduct its business as now being conducted, to own, lease and operate its properties and to execute, deliver and perform this Agreement. 12.2 The execution, delivery and performance by it of this Agreement have been duly authorized by all necessary corporate action and do not and will not (a) require any consent or approval of its stockholders, (b) violate any provision of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to it or any provision of its charter or by-laws or (c) result in a breach of or constitute a default under any material agreement, mortgage, lease, license, permit or other instrument or obligation to which it is a party or by which it or its properties may be bound or affected. 12.3 This Agreement is a legal, valid and binding obligation of it and is enforceable against it in accordance with its terms and conditions, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar laws, from time to time in effect, affecting creditor's rights generally. 12.4 It is not presently under and it will not incur in the future any obligation to any Person, contractual or otherwise, that is 39 -38- conflicting or inconsistent in any respect with the terms of this Agreement or that would impede the diligent and complete fulfillment of its obligations under this Agreement. 12.5 It has good and marketable title to or valid leases or licenses for, all of its properties, rights and assets necessary for the fulfillment of its responsibilities and the Research Program, subject to no claim of any third party other than the relevant lessors or licensors. 12.6 It shall use its diligent efforts to perform its obligations under the Annual Research Plan. 12.7 OSI, Pfizer and Anaderm represent that their respective employees that will participate in the Research Program and all other parties that will participate in the Research Program on their behalf pursuant to this Agreement will have a contractual obligation throughout the course of their participation in the Research Program to assign to OSI, Pfizer, or Anaderm, respectively, their rights in any Inventions made in the course of their participation in the Research Program. ARTICLE 13 - MISCELLANEOUS 13.1 Notices. All notices shall be mailed via certified mail, return receipt requested, or courier, addressed as follows, or to such other address as may be designated from time to time: If to Pfizer: To Pfizer at its address as set forth at the beginning of this Agreement Attention: *** Senior Vice President and General Counsel, Pfizer Inc. 235 East 42nd Street, 21st Fl. New York, N.Y. 10017-5755 If to OSI: To OSI at its address as set forth at the beginning of this Agreement *** These portions deleted pursuant to a request for confidential treatment. 40 -39- Attention: *** Chief Executive Officer, Oncogene Science Inc., 106 Charles Lindergh Blvd., Uniondale, New York 11553 If to Anaderm: To Anaderm at its address as set forth at the beginning of this Agreement Attention: *** President, Anaderm Research Corp. 235 East 42nd Street., 13th Fl. New York, N.Y. 10017-5755 cc: *** Senior Vice President and General Counsel, Pfizer Inc. 235 East 42nd Street, 21st Fl. New York, N.Y. 10017-5755 Notices shall be deemed given as of the date of receipt. 13.2. Governing Law. This Agreement shall be construed in accordance with the laws of the State of New York. 13.3 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties and their respective legal representatives, successors and permitted assigns. 13.4 Publicity. Except as required by law, no party hereto may disclose the existence of this Agreement or any of Anaderm's activities without the prior written approval of the Board of Directors of Anaderm. 13.5 Headings. Paragraph headings are inserted for convenience of reference only and do not form a part of this Agreement. 13.6 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original. 13.7 Amendment; Waiver; etc. This Agreement may be amended, modified, superseded or canceled, and any of the terms may be waived, only by a written instrument executed by each party or, in the case of *** These portions deleted pursuant to a request for confidential treatment. 41 -40- waiver, by the party or parties waiving compliance. The delay or failure of any party at any time or times to require performance of any provision, except as otherwise specifically provided in this Agreement, shall in no manner affect its rights at a later time to enforce the same. 13.8 Third Party Beneficiaries. NYU is an intended third party beneficiary to this Agreement solely to the extent that it is granted certain rights in intellectual property pursuant to Article 6. No other Person not a party to this Agreement, including any employee of any party to this Agreement, shall have or acquire any rights by reason of this Agreement. Nothing contained in this Agreement shall be deemed to constitute the parties partners with each other or any Person. 13.9 Assignment and Successors. This Agreement may not be assigned by either party, in whole or in part, except to an Affiliate, to a purchaser of all or substantially all of its assets or to any successor corporation resulting from any merger or consolidation with or into such corporation. 13.10 Force Majeure. The parties to this Agreement shall be excused from any required performance to the extent that, and for so long as such performance is rendered impossible or unfeasible due to any catastrophes or other major event beyond their reasonable control, including, without limitation, war, riot, insurrection, laws, proclamations, edicts, ordinances, regulations, strikes, lock-outs, other serious labor disputes, floods, fires, explosions or other natural disasters. When such events have abated, the parties' respective obligations and rights shall resume. 42 -41- IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives. ANADERM RESEARCH CORP. By /s/ NICHOLAS BACOPOULOS ------------------------------------- Title President ---------------------------------- ONCOGENE SCIENCE, INC. By /s/ GARY E. FRASHIER ------------------------------------- Title Chief Executive Officer ---------------------------------- PFIZER INC By /s/ PAUL S. MILLER ------------------------------------- Title Senior Vice President and ---------------------------------- General Counsel EX-10.5 6 REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 10.5 REGISTRATION RIGHTS AGREEMENT AGREEMENT dated April 11, 1996 among Barry Katz, an individual residing at 5609 Cascade Drive, Chapel Hill, North Carolina 27514 ("Katz"), Barry S. Roberts, an individual residing at 207 Stagecoach Road, Chapel Hill, North Carolina 27514 ("Roberts"), John McLaughlin, an individual residing at 901 Smyrna Drive, Whiteville, North Carolina 28472 ("McLaughlin"), Cedric Pearce, an individual residing at 102 Springhill Forest Road, Chapel Hill, North Carolina 27516 ("Pearce"), Robert Capon, an individual residing at 322 Burlage Circle, Chapel Hill, North Carolina 27514 ("Capon"), Steven Winegar, an individual residing at 3410 Cambridge Road, Durham, North Carolina 27707 ("Winegar" and together with Katz, Roberts, McLaughlin, Pearce and Capon, the "Shareholders"), and Oncogene Science, Inc., a Delaware corporation with its principal office located at 106 Charles Lindbergh Boulevard, Uniondale, New York 11553 (the "Company"). W I T N E S S E T H: WHEREAS, concurrently herewith the Company and Katz, Roberts, McLaughlin and Pearce are entering into an Agreement and Plan of Merger (the "Merger Agreement") whereby MYCOsearch, Inc. ("MYCOsearch"), a North Carolina corporation which is wholly-owned by Katz, Roberts, McLaughlin and Pearce, collectively, is merging into MYCOsearch Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of the Company (the "Merger"); and WHEREAS, pursuant to the terms of the Merger, each share of MYCOsearch outstanding on the date hereof is being exchanged for a certain number of shares of the Company (the "OSI Shares") and warrants ("Warrants") to purchase additional shares of the Company (the "Warrant Shares" and together with the OSI Shares, the "Shares"); and 2 WHEREAS, Capon and Winegar are receiving a certain number of OSI Shares and Warrants as compensation for their services to MYCOsearch in connection with the Merger; and WHEREAS, the Shareholders desire to have certain registration rights for the Shares under the securities laws, and the Company desires that the Shareholders have such registration rights. NOW, THEREFORE, in consideration of the mutual agreements contained herein and for other good and valuable consideration, the parties hereby agree as follows: 1. Registration of the Shares. Upon the execution of the Merger Agreement, the Company shall file with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3, or other appropriate form under the Securities Act of 1933, as amended (the "Securities Act"), covering the Shares (the "Registration Statement") and diligently seek, through its officers, directors, auditors and counsel, to have such Registration Statement declared effective by the Commission to permit the sale of such securities by the Shareholders, subject to Paragraph 2 hereof, through the facilities of all appropriate securities exchanges and the over-the-counter market. Any and all expenses relating to the registration of the Shares and the other matters set forth in this Registration Rights Agreement shall be borne by the Company and the Company shall be responsible for any and all costs, fees and expenses incurred by any Shareholder in connection with the registration of the Shares and reasonable ordinary costs, fees and expenses incurred by any Shareholder in connection with the sale of the Shares (other than - 2 - 3 underwriting discounts and commissions, if any). In connection with the registration of the Shares: (a) The Company will use its best efforts to register and qualify the Shares covered by the Registration Statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Shareholders for the distribution of such securities; (b) The Company shall keep the Registration Statement and any registration or qualification contemplated by this Registration Rights Agreement effective until the earlier of (i) the sale by all of the Shareholders of all of the Shares, and (ii) the fourth anniversary of the date hereof; provided, however, that if at the end of such four-year period, any Shareholder may be deemed to be an "Affiliate" of the Company, the Company shall keep such Registration Statement in effect until the earlier of the date such Shareholder has sold all his Shares and the date which, in the opinion of counsel to the Company and such Shareholder's counsel, is 90 days after such Shareholder is no longer deemed to be an Affiliate of the Company. For purposes of this Agreement, an "Affiliate" is defined as an entity controlling, controlled by, or under common control with, a party; (c) The Company shall furnish promptly to each Shareholder such number of copies of the Registration Statement and each amendment or supplement thereto, such number of copies of each preliminary and final prospectus contained in the Registration Statement, and each amendment or supplement thereto, all of which conform with the requirements of the Securities Act and the rules and regulations thereunder, and such other documents as any such Shareholder from time to time may reasonably request; - 3 - 4 (d) The Company shall prepare and file with the Commission and the applicable securities and Blue Sky authorities such amendments and supplements (including post-effective amendments), to the Registration Statement and any related prospectus, applications and documents as may be necessary or appropriate to permit the continuous sale of the Shares, shall use its best efforts to have any such post-effective amendments declared effective as promptly as practicable; and shall notify the Shareholders promptly when any such post-effective amendment has become effective. The Company shall notify the Shareholders, at any time when a prospectus relating to the Shares covered by the Registration Statement is required to be delivered under the Securities Act, of the occurrence of any event as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. The Company shall promptly amend or supplement the Registration Statement and the related prospectus to correct any such untrue statement or omission; (e) The Company agrees to indemnify and hold harmless each of the Shareholders, their respective agents and counsel, and each person, if any, who controls any such person within the meaning of Section 15 of the Securities Act or Section 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") from and against any and all loss, liability, charge, claim, damage, and expense whatsoever (which shall include, for all purposes of this Registration Rights Agreement, without limitation, attorneys' fees and any and all expenses whatsoever incurred in investigating, preparing, or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts - 4 - 5 paid in settlement of any claim or litigation), as and when incurred, arising out of, based upon, or in connection with any untrue statement or alleged untrue statement of a material fact contained (i) in any registration statement, preliminary prospectus, or final prospectus (as from time to time amended and supplemented), or any amendment or supplement thereto, relating to the sale of any of the Shares, or (ii) in any application or other document or communication (in this Registration Rights Agreement collectively called an "application") executed by or on behalf of the Company or based upon written information furnished by or on behalf of the Company filed in any jurisdiction in order to register or qualify the Shares under the securities or Blue Sky laws thereof or filed with the Commission or any securities exchange; or any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, unless such statement or omission was made in reliance upon and in conformity with written information furnished to the Company with respect to such Shareholder by or on behalf of such Shareholder expressly for inclusion in any registration statement, preliminary prospectus, or final prospectus, or any amendment or supplement thereto, or in any application, as the case may be; (f) If any action is brought against any Shareholder or any of his agents or counsel, or any controlling persons of such person (an "indemnified party") in respect of which indemnity may be sought against the Company pursuant to the foregoing section, such indemnified party or parties shall promptly notify the Company in writing of the institution of such action and the Company shall promptly assume the defense of such action, including the employment of counsel and payment of expenses. Such indemnified party or parties shall have the right to employ his or their - 5 - 6 own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless the employment of such counsel shall have been authorized in writing by the Company in connection with the defense of such action or such indemnified party or parties shall have reasonably concluded that there may be one or more legal defenses available to him or them or to other indemnified parties which are different from or additional to those available to the Company, in any of which events such fees and expenses shall be borne by the Company and the Company shall not have the right to direct the defense of such action on behalf of the indemnified party or parties. Anything in this Registration Rights Agreement to the contrary notwithstanding, the Company shall not be liable for any settlement of any such claim or action effected without its written consent, which shall not be unreasonably withheld. The Company shall not, without the prior written consent of each indemnified party that is not released as described in this sentence, settle or compromise any action, or permit a default or consent to the entry of judgment in or otherwise seek to terminate any pending or threatened action, in respect of which indemnity may be sought hereunder (whether or not any indemnified party is a party thereto), unless such settlement, compromise, consent or termination includes an unconditional release of each indemnified party from all liability in respect of such action. The Company agrees promptly to notify the Shareholders of the commencement of any litigation or proceedings against the Company or any of its officers or directors in connection with the sale of the Shares or any preliminary prospectus, prospectus, registration statement, or amendment or supplement thereto, or any application relating to any sale of any Shares; - 6 - 7 (g) The Shareholders agree to jointly and severally indemnify and hold harmless the Company, each director of the Company, each officer of the Company who shall have signed any registration statement covering Shares held by such Shareholder, each other person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act, and its or their respective counsel, to the same extent as the foregoing indemnity from the Company to such Shareholder in this Registration Rights Agreement, but only with respect to statements or omissions, if any, made in any registration statement, preliminary prospectus, or final prospectus (as from time to time amended and supplemented), or any amendment or supplement thereto, or in any application, in reliance upon and in conformity with written information furnished to the Company with respect to such Shareholder by or on behalf of such Shareholder expressly for inclusion in any such registration statement, preliminary prospectus, or final prospectus, or any amendment or supplement thereto, or in any application, as the case may be. If any action shall be brought against the Company or any other person so indemnified based on any such registration statement, preliminary prospectus, or final prospectus, or any amendment or supplement thereto, or in any application, and in respect of which indemnity may be sought against such Shareholder pursuant to this Registration Rights Agreement, such Shareholder shall have the rights and duties given to the Company, and the Company and each other person so indemnified shall have the rights and duties given to the indemnified parties, by the provisions of this Registration Rights Agreement; (h) To provide for just and equitable contribution, if (i) an indemnified party makes a claim for indemnification pursuant to this Registration Rights Agreement (subject to the limitations thereof) but it - 7 - 8 is found in a final judicial determination, not subject to further appeal, that such indemnification may not be enforced in such case, even though this Agreement expressly provides for indemnification in such case, or (ii) any indemnified or indemnifying party seeks contribution under the Securities Act, the Exchange Act or otherwise, then the Company (including for this purpose any contribution made by or on behalf of any director of the Company, any officer of the Company who signed any such registration statement, any controlling person of the Company, and its or their respective counsel), as one entity, and the Shareholders included in such registration in the aggregate (including for this purpose any contribution by or on behalf of an indemnified party), as a second entity, shall contribute to the losses, liabilities, claims, damages, and expenses whatsoever to which any of them may be subject, on the basis of relevant equitable considerations such as the relative fault of the Company and such Shareholder in connection with the facts which resulted in such losses, liabilities, claims, damages, and expenses. The relative fault, in the case of an untrue statement, alleged untrue statement, omission, or alleged omission, shall be determined by, among other things, whether such statement, alleged statement, omission, or alleged omission relates to information supplied by the Company or by such Shareholder, and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement, alleged statement, omission, or alleged omission. The Company and such Shareholder agree that it would be unjust and inequitable if the respective obligations of the Company and such Shareholder for contribution were determined by pro rata or per capita allocation of the aggregate losses, liabilities, claims, damages, and expenses (even if such Shareholder and the other indemnified parties were treated as one entity for such purpose) or by any - 8 - 9 other method of allocation that does not reflect the equitable considerations referred to in this Registration Rights Agreement. In no case shall any Shareholder be responsible for a portion of the contribution obligation imposed on all Shareholders in excess of its pro rata share based on the number of shares of the Common Stock of the Company owned by it and included in such registration as compared to the number of shares of the Common Stock of the Company owned by all Shareholders and included in such registration. No person guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who is not guilty of such fraudulent misrepresentation. For purposes of this Registration Rights Agreement, each person, if any, who controls any Shareholder within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act and each agent and counsel of each such Shareholder or control person shall have the same rights to contribution as such Shareholder or control person and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act, each officer of the Company who shall have signed any such registration statement, each director of the Company, and its or their respective counsel shall have the same rights to contribution as the Company, subject in each case to the provisions of this Registration Rights Agreement. Anything in this Registration Rights Agreement to the contrary notwithstanding, no party shall be liable for contribution with respect to the settlement of any claim or action effected without its written consent, which shall not be unreasonably withhold. The Company shall not, without the prior written consent of each indemnified party that is not released as described in this sentence, settle or compromise any action, or permit a default or consent to the - 9 - 10 entry of judgment in or otherwise seek to terminate any pending or threatened action, in respect of which indemnity may be sought hereunder (whether or not any indemnified party is a party thereto), unless such settlement, compromise, consent or termination includes an unconditional release of each indemnified party from all liability in respect of such action. This Registration Rights Agreement is intended to supersede any right to contribution under the Securities Act, the Exchange Act or otherwise; (i) The Company shall notify the Shareholders of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose. The Company will make all reasonable efforts to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible time; (j) The Company shall cause the Shares to be listed on the Nasdaq National Market and on any national securities exchange on which the Common Stock of the Company is or may in the future become listed for trading; (k) The Company shall take all other actions as may be reasonably necessary to expedite and facilitate the disposition by the Shareholders of the Shares pursuant to the Registration Statement; (l) For so long as the Shares are outstanding, the Company shall file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (m) So long as any Shareholder owns any Shares, the Company shall furnish to such Shareholder (i) forthwith upon written request, a written statement by the Company that the Company has complied with the - 10 - 11 reporting requirements of the Securities Act and the Exchange Act, (ii) a copy of its most recent annual or quarterly report to its shareholders, and (iii) a copy of each report and other document filed by the Company with the Commission pursuant to the Securities Act or Exchange Act. 2. Restrictions as to Sale of OSI Shares. Upon the effectiveness of the Registration Statement (the "Effective Date"), each Shareholder may sell up to 50% of the OSI Shares owned by him without restriction. With regard to the remaining 50% of the OSI Shares owned by each Shareholder (the "Remaining Shares"), each Shareholder may sell up to 10% of the Remaining Shares without restriction at the end of each of the 10 successive months following the Effective Date, commencing with the first full month following the Effective Date. 3. Miscellaneous. (a) Any notice required to be given hereunder shall be sufficient if in writing and sent by facsimile transmission and by courier service (with proof of service), hand delivery or certified or registered mail (return receipt requested), addressed as follows: If to the Shareholders, to: Barry Katz c/o MYCOsearch, Inc. 4905 Pine Cone Drive, Suite 5 Durham, NC 27707 If to the Company, to Oncogene Science, Inc. 106 Charles Lindbergh Blvd. Uniondale, NY 11553 Attention: Colin Goddard or to such other address as any party shall specify by written notice so given, and such notice shall be deemed to have been delivered as of the date so telecommunicated, personally delivered or mailed. - 11 - 12 (b) This Registration Rights Agreement shall be governed by and construed in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have duly executed this Registration Rights Agreement on the date first above written. ONCOGENE SCIENCE, INC. By: /s/ COLIN GODDARD ------------------------------- Name: Colin Goddard Title: VP, Pharmaceutical Operations /s/ BARRY KATZ ------------------------------------ Barry Katz /s/ BARRY S. ROBERTS ------------------------------------ Barry S. Roberts /s/ JOHN McLAUGHLIN ------------------------------------ John McLaughlin /s/ CEDRIC PEARCE ------------------------------------ Cedric Pearce /s/ ROBERT CAPON ------------------------------------ Robert Capon /s/ STEVEN WINEGAR ------------------------------------ Steven Winegar - 12 - EX-10.6 7 FORM OF WARRANTS 1 EXHIBIT 10.6 Warrant No. THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED,OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS. VOID BEFORE APRIL 11, 1998 AND AFTER 5:00 P.M. NEW YORK TIME, ON APRIL 11, 2001 ONCOGENE SCIENCE, INC. Warrant to Purchase Shares of Common Stock ________ Shares THIS CERTIFIES that, for good and valuable consideration received ______________ (the "Holder"), is entitled to subscribe for and purchase from Oncogene Science, Inc., a Delaware corporation (the "Company"), upon the terms and conditions set forth herein, at any time or from time to time after April 11, 1998 and before 5:00 P.M. New York City time on April 11, 2001 (the "Exercise Period"), all or any portion of ___________ shares of common stock of the Company, par value $0.01 per share ("Common Stock"), subject to adjustment as provided herein (the "Warrant Shares"), at a price of $9.319 per share, subject to adjustment as provided herein (the "Exercise Price"). Notwithstanding the foregoing, upon a "change of control" of the Company at any time prior to April 11, 1998, this Warrant shall be immediately exercisable. For purposes of this Warrant, "change of control" shall mean (i) a transfer of shares of capital stock of the Company to a third party, as a result of which transfer such third party obtains the right to elect a majority of the Board of Directors of the Company, or (ii) a sale or other disposition (whether effected by a merger, consolidation or otherwise) of all or substantially all of the outstanding capital stock of the Company or all or substantially all of the assets of the Company. The Warrant Shares are entitled to the registration rights set forth in that certain Registration 2 Rights Agreement dated April 11, 1996 among Barry Katz, Barry S. Roberts, John McLaughlin, Cedric Pearce, Robert Capon, Steven Winegar and the Company. 1. Method of Exercise. (a) This Warrant may be exercised at any time during the Exercise Period, as to the whole or any lesser number of Warrant Shares, by the surrender of this Warrant (with the election at the end hereof duly executed) to the Company at its office at 106 Charles Lindbergh Boulevard, Uniondale, New York 11553-3649 or at such other place as may be designated in writing by the Company, together with a certified or bank cashier's check payable to the order of the Company in an amount equal to the Exercise Price multiplied by the number of Warrant Shares for which this Warrant is being exercised. (b) Upon any exercise of this Warrant, in lieu of any fractional Warrant Shares to which the Holder shall be entitled, the Company shall pay to the Holder cash in accordance with the provisions of Section 5(d) hereof. 2. Issuance of Certificates. Upon each exercise of the Holder's rights to purchase Warrant Shares, the Holder shall be deemed to be the holder of record of the Warrant Shares issuable upon such exercise, notwithstanding that the transfer books of the Company shall then be closed or certificates representing such Warrant Shares shall not then have been actually delivered to the Holder. As soon as practicable after each such exercise of this Warrant, the Company shall issue and deliver to the Holder a certificate or certificates for the Warrant Shares issuable upon such exercise, registered in the name of the Holder or its designee. If this Warrant should be exercised in part only, upon surrender of this Warrant for cancellation, the Company shall execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the Warrant Shares (or portions thereof) subject to purchase hereunder. 3. Recording of Transfer. Any warrants issued upon the transfer or exercise in part of this Warrant shall be numbered and shall be registered in a Warrant Register as they are issued. The Company shall be entitled to treat the registered holder of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person, and shall not be liable for any registration or transfer of Warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith. This Warrant shall be transferable only on the books of the Company upon delivery thereof duly endorsed by the Holder or by his or its duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment or authority to transfer. In all cases of transfer by an attorney, executor, administrator, guardian or other legal representative, duly authenticated evidence of his or its authority shall be produced. Upon any registration of transfer, the Company shall deliver a new warrant or warrants to the person entitled thereto. This Warrant may be exchanged, at the option of the Holder hereof, for another warrant, or other warrants of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of Warrant Shares (or portions thereof), upon surrender to the -2- 3 Company or its duly authorized agent. Notwithstanding the foregoing, the Company shall have no obligation to cause this Warrant to be transferred on its books to any person if, in the written opinion of counsel to the Company, such transfer does not comply with the provisions of the Securities Act of 1933, as amended (the "Act"), and the rules and regulations thereunder. 4. Reservation of Shares of Common Stock. The Company shall at all times reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of providing for the exercise of the Warrants, such number of shares of Common Stock as shall, from time to time, be sufficient therefor. The Company covenants that all shares of Common Stock issuable upon exercise of this Warrant, upon receipt by the Company of the full payment therefor, shall be validly issued, fully paid, nonassessable and free of preemptive rights. 5. Exercise Price Adjustments. Subject to the provisions of this Section 5, the Exercise Price in effect from time to time shall be subject to adjustment, as follows: (a) In case the Company shall at any time after the date hereof (i) declare a dividend or make a distribution on the outstanding shares of Common Stock payable in shares of its capital stock, (ii) subdivide the outstanding shares of Common Stock, (iii) combine the outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any shares of Common Stock by reclassification of shares of Common Stock, other than a change in par value, or from par value to no par value, or from no par value to par value, but including any such reclassification in connection with the consolidation or merger of the Company with or into another corporation (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then, in each case, the Exercise Price in effect at the time of the record date of such dividend or distribution or of the effective date of such subdivision, combination, or reclassification shall be adjusted so that it shall equal the price determined by multiplying the Exercise Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such action and the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action. Such adjustment shall be made successively whenever any event listed above shall occur. (b) In case the Company shall distribute to all holders of shares of Common Stock (including any such distribution made to the stockholders of the Company in connection with a consolidation or merger in which the Company is the surviving or continuing corporation) evidences of its indebtedness, cash, or assets (other than distributions and dividends payable in shares of Common Stock), or rights, options, or warrants to subscribe for or purchase shares of Common Stock or securities convertible into or exchangeable for shares of Common Stock, then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date for the determination of stockholders entitled to receive such distribution by a fraction, the numerator of which shall be the Current Market Price (as determined pursuant to Section 5(e) hereof) per share of Common Stock on such record date, less the fair market value (as determined in good faith by the board of directors of the Company, whose determination shall be conclusive absent manifest error) of the portion of the evidences -3- 4 of indebtedness or assets so to be distributed, or of such rights, options, or warrants or convertible or exchangeable securities, or the amount of such cash, applicable to one share of Common Stock, and the denominator of which shall be such Current Market Price per share of Common Stock. Such adjustment shall become effective at the close of business on such record date. (c) Whenever there shall be an adjustment as provided in this Section 5, the Company shall, within 15 days thereafter, cause written notice thereof to be sent by registered mail, postage prepaid, to the Holder, at its address as it shall appear in the Warrant Register, which notice shall be accompanied by an officer's certificate setting forth the number of Warrant Shares issuable hereunder and the Exercise Price thereof after such adjustment and setting forth a brief statement of the facts requiring such adjustment and the computation thereof, which officer's certificate shall be conclusive evidence of the correctness of any such adjustment absent manifest error. (d) The Company shall not be required to issue fractions of shares of Common Stock or other shares of the Company upon the exercise of this Warrant. If any fraction of a share of Common Stock would be issuable upon the exercise of this Warrant (or specified portions thereof), the Company may issue a whole share in lieu of such fraction or the Company may purchase such fraction for an amount in cash equal to the same fraction of the Current Market Price of such shares of Common Stock on the date of exercise of this Warrant. (e) For the purposes of the various provisions of this Warrant, the Current Market Price per share of Common Stock on any date shall be deemed to be the average of the daily closing prices for the thirty (30) consecutive trading days immediately preceding the date in question. The closing price for each day shall be the last reported sales price or, in case no such reported sale takes place on such day, the closing bid price, in either case on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the highest reported bid price for the Common Stock as furnished by the National Association of Securities Dealers, Inc. through NASDAQ or a similar organization if NASDAQ is no longer reporting such information. If on any such date the Common Stock is not listed or admitted to trading on any national securities exchange and is not quoted by NASDAQ or any similar organization, the fair value of a share of Common Stock on such date, as determined in good faith by the Board of Directors of the Company, whose determination shall be conclusive absent manifest error, shall be used. (f) No adjustment in the Exercise Price shall be required if such adjustment is less than $0.05; provided, however, that any adjustments which by reason of this Section 5 are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 5 shall be made to the nearest cent or to the nearest thousandth of a share, as the case may be. -4- 5 (g) Upon each adjustment of the Exercise Price as a result of the calculations made in this Section 5, the Warrants shall thereafter evidence the right to purchase, at the adjusted Exercise Price, that number of shares of Common Stock (calculated to the nearest hundredth) obtained by dividing (i) the product obtained by multiplying the number of shares of Common Stock purchasable upon exercise of the Warrants prior to adjustment of the number of shares of Common Stock by the Exercise Price in effect prior to adjustment of the Exercise Price by (ii) the Exercise Price in effect after such adjustment of the Exercise Price. (h) Whenever the Exercise Price is adjusted as provided in this Section 5, the Company will promptly obtain a certificate of a firm of independent public accountants of recognized standing selected by the Board of Directors of the Company (which may be the regular auditors of the Company) setting forth the Exercise Price as so adjusted and a brief statement of the facts accounting for such adjustment, and will make available a brief summary thereof to the holder of this Warrant, at its address listed on the register maintained for that purpose (which summary may be included in any notice of adjustment required by Section 5(c) hereof). 6. Consolidations and Mergers. (a) In case of any consolidation with or merger of the Company with or into another corporation (other than a merger or consolidation in which the Company is the surviving or continuing corporation and which does not result in any reclassification of the outstanding shares of Common Stock or the conversion of such outstanding shares of Common Stock into shares of other stock or other securities or property), or in case of any sale, lease or conveyance to another corporation of the property and assets of any nature of the Company as an entirety or substantially as an entirety (such actions being hereinafter collectively referred to as "Reorganizations"), there shall thereafter be deliverable upon exercise of this Warrant (in lieu of the number of shares of Common Stock theretofore deliverable) the kind and amount of shares of stock or other securities, cash or other property which would otherwise have been deliverable to a holder of the number of shares of Common Stock upon the exercise of this Warrant upon such Reorganization if this Warrant had been exercised in full immediately prior to such Reorganization. In case of any Reorganization, appropriate adjustment, as determined in good faith by the Board of Directors of the Company, shall be made in the application of the provisions herein set forth with respect to the rights and interests of the Holder so that the provisions set forth herein shall thereafter be applicable, as nearly as possible, in relation to any shares or other property thereafter deliverable upon exercise of this Warrant. Any such adjustment shall be made by and set forth in a supplemental agreement between the Company, or any successor thereto, and the Holder and shall for all purposes hereof conclusively be deemed to be an appropriate adjustment. The Company shall not effect any such Reorganization unless upon or prior to the consummation thereof the successor corporation, or if the Company shall be the surviving corporation in any such Reorganization and is not the issuer of the shares of stock or other securities or property to be delivered to holders of shares of Common Stock outstanding at the effective time thereof, then such issuer, shall assume by written instrument the obligation to deliver to the Holder such shares of stock, securities, cash or other property as the Holder shall be entitled to purchase in accordance with the foregoing provisions. -5- 6 (b) In case of any reclassification or change of the shares of Common Stock issuable upon exercise of this Warrant (other than a change in par value or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), or in case of any consolidation or merger of another corporation into the Company in which the Company is the continuing corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock (other than a change in par value, or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash or any combination thereof receivable upon such reclassification, change, consolidation or merger by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such reclassification, change, consolidation or merger. Thereafter, appropriate provision shall be made for adjustments which shall be as nearly equivalent as practicable to the adjustments in Section 5. (c) The above provisions of this Section 6 shall similarly apply to successive reclassifications and changes of shares of Common Stock and to successive consolidations, mergers, sales, leases, or conveyances. 7. Notice of Certain Events. In case at any time any of the following occur: (a) The Company shall take a record of the holders of its shares of Common Stock for the purpose of entitling them to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of current or retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company; or (b) The Company shall offer to all the holders of its shares of Common Stock any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any option, right or warrant to subscribe therefor; or (c) The Company shall take any action to effect any reclassification or change of outstanding shares of Common Stock or any consolidation, merger, sale, lease or conveyance of property, described in Section 6; or (d) The Company shall take any action to effect any liquidation, dissolution or winding-up of the Company or a sale of all or substantially all of its property, assets and business; then, and in any one or more of such cases, the Company shall give written notice thereof, by registered mail, postage prepaid, to the Holder at the Holder's address as it shall appear in the -6- 7 Warrant Register, mailed at least fifteen (15) days prior to (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such dividend, distribution, rights, warrants or other securities are to be determined, (ii) the date on which any such offer to holders of shares of Common Stock is made, or (iii) the date on which any such reclassification, change of outstanding shares of Common Stock, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution or winding-up is expected to become effective and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange their shares for securities or other property, if any, deliverable upon such reclassification, change of outstanding shares, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution or winding-up. 8. Legend. The certificate or certificates evidencing the Warrant Shares shall bear the following legend: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS. 9. Replacement of Warrants. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of any Warrant (and upon surrender of any Warrant if mutilated), and upon reimbursement of the Company's reasonable incidental expenses, the Company shall execute and deliver to the Holder thereof a new Warrant of like date, tenor and denomination. 10. No Rights as Stockholder. The Holder of any Warrant shall not have, solely on account of such status, any rights of a stockholder of the Company, either at law or in equity, or to any notice of meetings of stockholders or of any other proceedings of the Company, except as provided in this Warrant. -7- 8 11. Notices. All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to have been duly made when delivered, or mailed by registered or certified mail, return receipt requested: (a) If to the registered Holder of this Warrant, to the address of such Holder as shown on the books of the Company; or (b) If to the Company, to the address set forth on the first page of this Warrant or to such other address as the Company may designate by notice to the Holder. 12. Successors. All the covenants, agreements, representations and warranties contained in this Warrant shall bind the parties hereto and their respective heirs, executors, administrators, distributees, successors and assigns. 13. Headings. The Article and Section headings in this Warrant are inserted for purposes of convenience only and shall have no substantive effect. 14. Governing Law. This Warrant shall be construed in accordance with the laws of the State of New York applicable to contracts made and performed within such State, without regard to principles of conflicts of law. 15. Modification of Agreement. This Warrant shall not otherwise be modified, supplemented or amended in any respect unless such modification, supplement or amendment is in writing and signed by the Company and the Holder of this Warrant and Holders of any portion of the Warrant subsequently assigned or transferred in accordance with the terms of this Warrant. 16. Consent to Jurisdiction. The Company and the Holder irrevocably consent to the jurisdiction of the courts of the State of New York and of any federal court located in such State in connection with any action or proceeding arising out of or relating to this Warrant, any -8- 9 document or instrument delivered pursuant to, in connection with or simultaneously with this Warrant, or a breach of this Warrant or any such document or instrument. IN WITNESS WHEREOF, the undersigned has executed this instrument as of the date set forth below. Dated: April 11, 1996 ONCOGENE SCIENCE, INC. By: /s/ COLIN GODDARD ------------------------------------- Name: Colin Goddard -------------------------------- Title: VP, Pharmaceutical Operations ------------------------------- -9- 10 FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer the attached Warrant.) FOR VALUE RECEIVED, hereby sells, assigns, and transfers unto , having an address at , the attached Warrant to the extent of the right to purchase shares of Common Stock of $0.01 par value per share, of Oncogene Science, Inc. (the "Company"), together with all right, title, and interest therein, and does hereby irrevocably constitute and appoint as attorney to transfer such Warrant on the books of the Company, with full power of substitution. Dated: , 199 --------------- - ------------------------------- Print name of holder of Warrant By: ------------------------------ Name: Title: NOTICE The signature on the foregoing Assignment must correspond to the name as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever. 11 To: The undersigned hereby exercises its rights to purchase Warrant Shares covered by the within Warrant and tenders payment herewith in the amount of $ in accordance with the terms thereof, and requests that certificates for such securities be issued in the name of, and delivered to: (Print Name, Address and Social Security or Tax Identification Number) and, if such number of Warrant Shares shall not be all the Warrant Shares covered by the within Warrant, that a new Warrant for the balance of the Warrant Shares covered by the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below. Dated: Name: -------------------- ----------------------------------------- (Print) ----------------------------------- (Signature) (Signature must conform to the name of the Warrant Holder specified on the face of the Warrant) Address: EX-10.7 8 EMPLOYMENT AGREEMENT 1 EXHIBIT 10.7 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT, dated as of April 11, 1996 between ONCOGENE SCIENCE, INC., a Delaware corporation having a place of business at 106 Charles Lindbergh Boulevard, Uniondale, New York 11553 (the "Company"), and DR. BARRY KATZ, who resides at 5609 Cascade Drive, Chapel Hill, North Carolina ("Dr. Katz"). W I T N E S S E T H: WHEREAS, concurrently with the execution hereof, MYCOsearch, Inc., a North Carolina corporation, is merging into Mycosearch Acquisition Corp. ("MYCOsearch"), a wholly-owned subsidiary of the Company; and WHEREAS, prior to and up to the date hereof Dr. Katz was employed by MYCOsearch, Inc.; and WHEREAS, the Company desires to engage Dr. Katz to perform services for the Company and any subsidiary or affiliate of the Company, and Dr. Katz desires to perform such services, on the terms and conditions hereinafter set forth. NOW, THEREFORE, the Company and Dr. Katz, in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, hereby agree as follows: 1. Term. The Company hereby employs Dr. Katz, and Dr. Katz hereby accepts such employment, upon the terms and conditions hereinafter set forth. Dr. Katz shall perform the duties required of him hereunder during the period commencing on the date hereof and ending on the third anniversary of the date hereof, provided, however, that on April 11, 1999, and on each April 11 thereafter, such period shall be automatically extended by one additional year unless at least 180 days prior to any such April 11 either party shall deliver to the other written notice that such 2 period will not be extended, in which case this Agreement will terminate upon the expiration of the existing term of this Agreement, including any previous extension. The period during which Dr. Katz shall perform the services required of him hereunder (as same may be extended as provided in this Paragraph 1 or reduced as hereinafter provided) is hereinafter referred to as the "Employment Period." 2. Duties. (a) Subject to the terms and conditions of this Agreement, Dr. Katz shall serve, at the pleasure of the Chief Executive Officer of the Company, as Divisional Vice-President for Microbial Discovery for the Company. Dr. Katz shall report directly to, and shall be supervised by, the Vice-President, Pharmaceutical Operations of the Company. Dr. Katz shall also serve in such offices of any subsidiary or affiliate of the Company in accordance with the directions of the Board of Directors of the Company. In his capacity as Divisional Vice-President for Microbial Discovery for the Company, Dr. Katz shall perform for the Company, and any subsidiary or affiliate of the Company, such duties generally associated with such position as well as such other duties consistent with such positions as may be reasonably prescribed from time to time by the President of the Company. (b) Dr. Katz agrees to devote his full time to the performance of his duties hereunder, subject to the provisions of Paragraph 10(a) hereof. (c) Dr. Katz agrees not to become involved in any personal investment or business matters which may detract from the performance of his duties or otherwise adversely affect the Company or any subsidiary or affiliate of the Company; provided, however, that Dr. Katz may remain as an investor, directly or indirectly, in Avid Therapeutics Incorporated, - 2 - 3 NHC Laboratories, Inc. ("NHC"), or any successor entities thereto, and may serve as a director, consultant or advisor to NHC. 3. Place of Performance. In connection with his employment by the Company, Dr. Katz shall be based at the offices of the Company's subsidiary, MYCOsearch, but shall also be available to travel, consistent with past practice, at such times and to such places as may be reasonably necessary in connection with the performance of his duties hereunder. In addition, the Company may not require Dr. Katz to relocate from the Raleigh/Durham, North Carolina area without his consent. 4. Compensation. (a) Base Salary. During the Employment Period, Dr. Katz shall receive a minimum base salary at the annual rate of $125,000 plus such other amounts, if any, as the Board of Directors of the Company, in its sole discretion, may from time to time determine. Dr. Katz's base salary shall be reviewed annually, provided, however, that in no event shall Dr. Katz's base salary be reduced below an annual rate of $125,000. Dr. Katz's salary shall be payable in bi-weekly installments or at such other frequency as the Company may from time to time determine for its senior managers as a group. (b) Incentive Compensation Plan. In addition to his base salary, Dr. Katz will participate in the discretionary Management Incentive Compensation Plan which is approved annually by the Board of Directors for so long as such plan, or any successor plan thereto, is in effect. The parties hereby acknowledge that the Board of Directors of the Company, in approving the terms of this Agreement, has also agreed to award Dr. Katz a performance bonus of not less than $20,000 for the first 12 months hereunder, such bonus to be paid on or about December 31, 1996. - 3 - 4 5. Stock Options. Dr. Katz shall be eligible to receive stock options as the Board of Directors of the Company, or the Stock Option Committee of the Board of Directors, as the case may be, shall determine in its sole discretion. 6. Expenses. During the Employment Period, Dr. Katz shall be entitled to reimbursement for all reasonable out-of-pocket expenses incurred in performing services hereunder within the limits of authority which may be established from time to time by the Board of Directors, provided that Dr. Katz properly accounts for such expenses in accordance with Company policy. 7. Employee Benefits. (a) Vacation. Dr. Katz shall be entitled to 22 days paid vacation per calendar year which may be taken at such time or times as Dr. Katz may elect, subject to the reasonable needs of the Company's business. Dr. Katz shall also be entitled to all paid holidays given by the Company to its senior managers. (b) Other Benefits. Dr. Katz shall be entitled to participate in such term life insurance, basic medical, major medical, dental and other employee benefit plans established by the Company from time to time and generally made available to employees at levels similar to Dr. Katz's for which he meets the eligibility requirements, subject to the terms of such plans. 8. Termination. (a) The Company may terminate this Agreement at any time and for any reason whatsoever (or for no reason), by giving not less than 30 days' prior written notice to Dr. Katz. In the event this Agreement is terminated by the Company other than for a reason set forth in Paragraph 8(b) hereof, (i) Dr. Katz shall be entitled to receive his base salary and - 4 - 5 all benefits at the rate in effect on the date notice of termination is given (the "Notice Date") through the effective date of such termination (the "Termination Date") and any bonus payment granted through such date which has not yet been paid and (ii) Dr. Katz shall continue to receive his base salary and all benefits at the rate in effect on the Notice Date (A) for the twelve months immediately succeeding the Termination Date if such termination takes place before the second anniversary of the effective date of this Agreement, (B) for six months immediately succeeding the Termination Date if such termination occurs after the second anniversary of the effective date of this Agreement. (b) Notwithstanding anything herein contained to the contrary, if after the date hereof and prior to the end of the Employment Period: (i) either (A) Dr. Katz shall be physically or mentally incapacitated or disabled or otherwise unable fully to discharge his duties hereunder ("Disabled") for a period of 120 consecutive days or for an aggregate of 120 days within any period of twelve consecutive months, (B) Dr. Katz shall be convicted of a felony or other crime involving moral turpitude, (C) Dr. Katz shall commit any act or omit to take any action in bad faith and to the detriment of the Company or any subsidiary or affiliate of the Company, or (D) Dr. Katz shall breach any material term of this Agreement and fail to correct or take reasonable steps to correct such breach within 30 days after receiving written notice of the same from the chief executive officer of the Company and an opportunity to discuss any such breach with the chief executive office of the Company, then, and in each such case, the Company shall have the right to give notice of termination of Dr. Katz's services hereunder as of a date to be specified in such notice (which date may be the date such notice is given), and this Agreement shall terminate on the date so specified; or (ii) Dr. Katz shall - 5 - 6 die, then this Agreement shall terminate on the date of Dr. Katz's death. If this Agreement is terminated by the Company for any of the reasons set forth in this paragraph 8(b), Dr. Katz or his estate, as the case may be, shall be entitled to receive his base salary at the rate in effect on the date notice of termination is given or the date of Dr. Katz's death, as the case may be, to the date on which termination shall take effect and any bonus payment granted through such date which has not been paid; provided, however, that if Dr. Katz is disabled, the amount payable to Dr. Katz pursuant to this Paragraph 8(b) shall be reduced by an amount equal to the amounts, if any, to which he is entitled with respect to such period pursuant to any insurance or other plan established by the Company in which he is a participant. (c) In the event that the duties or responsibilities of Dr. Katz hereunder shall be materially modified without the express written consent of Dr. Katz, Dr. Katz shall have the right, but not the obligation, to terminate this Agreement immediately and the Company shall be required to pay his base salary, bonus and all benefits at the rate and for the period set forth in Paragraph 8(a) hereof. 9. Confidentiality. (a) Beginning on the date hereof, and at any time hereafter, Dr. Katz shall treat as confidential any proprietary, confidential or secret information relating to the business or interests of the Company or any subsidiary or affiliate of the Company, including, without limitation, the organizational structure, operations, business plans or technical projects of the Company or any subsidiary or affiliate of the Company, and any research data or results, know how, inventions, trade secrets, contracts, customer lists, process or other work products developed by or for the Company or any subsidiary or affiliate of the - 6 - 7 Company, whether on the premises of the Company or elsewhere ("Confidential Information"). Dr. Katz shall not disclose, utilize or make accessible in any manner or in any form any Confidential Information other than in connection with performing the services required of him under this Agreement, without the prior written consent of the Company. Notwithstanding the foregoing, the provisions of this Paragraph 9(a) shall not apply to any proprietary, confidential or secret information or other research data or results, inventions, trade secrets, customer lists or work products which are (i) publicly known under circumstances involving no breach of this Agreement, (ii) required by law to be disclosed by Dr. Katz, or (iii) lawfully and in good faith made available to Dr. Katz by a third party under no obligation of confidentiality with respect thereto. (b) Dr. Katz hereby agrees that any and all information, inventions and discoveries, whether or not patentable, that he conceives and/or creates during the Employment Period and any extensions thereof, and which are a direct or indirect result of work performed hereunder, shall be the sole and exclusive property of the Company. Dr. Katz hereby assigns to the Company any and all right, title and interest which he has or may acquire in the same. Dr. Katz further agrees that he will promptly execute any and all applications, assignments or other instruments which an officer of the Company or the Board of Directors of the Company shall reasonably deem necessary or useful in order to apply for and obtain Letters Patent in the United States and all foreign countries for said information, inventions and discoveries and in order to assign and convey to the Company the sole and exclusive right, title and interest in and to said information, inventions, discoveries, patent applications and patents thereon. The Company will bear the cost of preparation of all such patent applications and assignments, and the cost of prosecution of all such - 7 - 8 patent applications in the United States patent office and in the patent offices of foreign countries. (c) All documents, records, apparatus, equipment and other physical property furnished to Dr. Katz by the Company or produced by Dr. Katz or others in connection with his employment shall be and remain the sole property of the Company. Dr. Katz will return and deliver such property to the Company as and when requested by the Company. (d) Dr. Katz agrees that the provisions of this Paragraph 9 shall survive the termination of his employment and of this Agreement. 10. Non-Competition. (a) Dr. Katz agrees that, during the period he is employed by the Company or any subsidiary or affiliate of the Company, under this Agreement or otherwise, except as expressly permitted herein, he will not engage in, or otherwise directly or indirectly be employed by, or act as a consultant, advisor or lender to, or be a director, officer, employee, stockholder, owner or partner of, any other business or organization, whether or not such business or organization now is or shall then be competing with the Company or any parent, subsidiary or affiliate of the Company; provided, however, that Dr. Katz shall not be prohibited either from managing his own personal investments on his own personal time, so long as, subject to the final paragraph of this subparagraph 10(a), such activities do not (i) involve a business or organization which competes with the Company or any subsidiary or affiliate of the Company, (ii) interfere or conflict with the performance of his duties as an employee of the Company or any subsidiary or affiliate of the Company, (iii) otherwise result in a breach of any of the provisions of this Agreement. Dr. Katz further agrees that (y) if his employment with the Company is terminated by the Company pursuant to Paragraphs 8(a) or - 8 - 9 8(b)(i) hereof, or (z) Dr. Katz resigns or otherwise continually fails or unreasonably refuses to perform the services required of him under this Agreement other than as a result of a breach of this Agreement by the Company (which breach is not cured within thirty (30) days after receiving notice thereof), then during the two-year period commencing on the date he ceases to be employed by any of the Company or any subsidiary or affiliate of the Company, under this Agreement or otherwise, Dr. Katz shall not directly or indirectly compete with or be engaged in the same business as the Company or any subsidiary or affiliate of the Company, or be employed by, or act as consultant, advisor or lender to, or be a director, officer, employee, stockholder, owner or partner of, any business or organization which, at the time of such cessation, directly or indirectly competes with or is engaged in the same business as the Company or any subsidiary or affiliate of the Company including, without limitation, the discovery, collection or sale of fungi or other similar natural products or the development, production or sale of any product relating to the diagnosis or treatment of human cancer, or the discovery of drugs which function through gene transcription or gene expression; provided, however, that if Dr. Katz's employment with the Company is terminated pursuant to Paragraphs 8(a) or 8(b)(i)(A) hereof, Dr. Katz's obligations pursuant to this sentence shall continue only so long as the Company pays Dr. Katz compensation at the same rate compensation was being paid to him pursuant to Paragraph 4 of this Agreement at the time of such termination. Notwithstanding anything contained herein to the contrary, the provisions of this Paragraph 10(a) will not be deemed breached merely because (A) Dr. Katz owns not more than 1% of the outstanding common stock of a corporation if, at the time of its acquisition by Dr. Katz, such - 9 - 10 stock is listed on a national securities exchange, is reported on NASDAQ, or is regularly traded in the over-the-counter market by a member of a national securities exchange or (B) Dr. Katz remains an investor, directly or indirectly, in Avid Therapeutics Incorporated, NHC or any successor entities thereto, or serves as a director, consultant or adviser of NHC. (b) Dr. Katz agrees that for a period of two years from the termination of this Agreement he will not, directly or indirectly, employ or solicit the employment or engagement by others of any employees of, or consultants hired by, the Company, or any subsidiary or affiliate of the Company, without the prior written consent of the Company, unless such person ceased to be employed or engaged by the Company or its subsidiary or affiliate at least four (4) months prior to the solicitation. (c) The obligations of Dr. Katz pursuant to this Paragraph 10 shall survive the termination of this Agreement, 11. Equitable Relief. Dr. Katz acknowledges that the restrictions contained in Paragraphs 9 and 10 of this Agreement are reasonable in view of the nature of the business in which the Company is engaged and the knowledge he will obtain concerning the Company's business (and the business of any subsidiary or affiliate of the Company), and that any breach of his obligations under Paragraphs 9 and 10 hereof will cause the Company irreparable harm for which the Company will have no adequate remedy at law. As a result, the Company shall be entitled to the issuance by a court of competent jurisdiction of an injunction, restraining order or other equitable relief in favor of itself restraining Dr. Katz from committing or continuing any such violation, and Dr. Katz consents to such an injunction, restraining order or other equitable relief. Any right to obtain an injunction, restraining order or other equitable relief hereunder will not be deemed a waiver of any right to assert any other - 10 - 11 remedy the Company may have under this Agreement or otherwise at law or in equity. 12. Representations and Warranties. Dr. Katz represents and warrants to the Company that (i) he is under no contractual or other restriction or obligation which is inconsistent with the execution of this Agreement, the performance of his duties hereunder or the other rights of the Company and any subsidiary or affiliate of the Company hereunder, and (ii) he is under no physical or mental disability that would hinder the performance by him of his duties under this Agreement. 13. Assignment. Under no circumstances shall Dr. Katz assign, pledge or otherwise dispose of any of his rights or obligations under this Agreement, and any such attempted assignment, pledge or disposition shall be void and shall, at the Company's option, relieve the Company of all its obligations under this Agreement. The Company may assign any of its rights or obligations under this Agreement to any parent, subsidiary, affiliate or successor, but shall remain liable in the case of any assignment to a parent or subsidiary. 14. Entire Agreement. This Agreement represents the entire agreement between the Company and Dr. Katz with respect to the subject matter hereof and there have been no oral or other agreements of any kind whatsoever as a condition precedent or inducement to the signing of this Agreement or otherwise concerning this Agreement or the subject matter hereof. 15. Waivers. Any waiver of any breach of any terms or conditions of this Agreement shall not operate as a waiver of any other breach of such terms or conditions or any other term or condition, nor shall any failure to enforce any provision hereof on any one occasion operate as a waiver of such provision or of any other provision hereof or a waiver of - 11 - 12 the right to enforce such provision or any other provision on any subsequent occasion. 16. Amendments. This Agreement may not be amended, nor shall any waiver, change, modification, consent or discharge be effected, except by an instrument in writing executed by or on behalf of the party against whom enforcement of any such amendment, waiver, change, modification, consent or discharge is sought. 17. Severability. (a) any provision of this Agreement shall be held or deemed to be invalid, inoperative or unenforceable as written, it shall be construed, to the greatest extent possible, in a manner which shall render it valid and enforceable and any limitation on the scope or duration of any such provision necessary to make it valid and enforceable shall be deemed to be part thereof. (b) any provision of this Agreement shall be held or deemed to be invalid, inoperative or unenforceable as applied to any particular case in any jurisdiction or jurisdictions, or in all jurisdictions or in all cases, because of the conflict or any provision with any constitution or statute or rule of public policy or for any other reason, such circumstance shall not have the effect of rendering the provision or provisions in question invalid, inoperative or unenforceable in any other jurisdiction or in any other case or circumstance or of rendering any other provision or provisions herein contained invalid, inoperative or unenforceable to the extent that such other provisions are not themselves actually in conflict with such constitution, statute or rule of public policy, but this Agreement shall be reformed and construed in any such jurisdiction or case as if such invalid, inoperative or unenforceable provision had never been contained herein, and such - 12 - 13 provision reformed so that it would be valid, operative and enforceable to the maximum extent permitted in such jurisdiction or in such case. 18. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York. 19. Notices. Any notice or other communication required or permitted by this Agreement shall be in writing and personally delivered or mailed by certified mail, return receipt requested, addressed to the parties at their addresses set forth above, or to such other addresses as one party may specify to the other party, from time to time, in writing. Any notice or other communication given by certified mail shall be deemed given at the time of certification thereof, except for a notice changing a party's address which shall be deemed given at the time of receipt thereof. 20. Counterparts. This Agreement may be executed in one or more counterparts each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. ONCOGENE SCIENCE, INC. By: /s/ COLIN GODDARD ------------------------------------ /s/ BARRY KATZ ------------------------------------------ Dr. Barry Katz - 13 - EX-27 9 FINANCIAL DATA SCHEDULE
5 3-MOS SEP-30-1996 JAN-01-1996 MAR-31-1996 28,765,848 20,013,287 3,217,030 (87,974) 0 53,042,460 12,653,252 7,223,500 67,377,324 1,879,496 0 0 0 210,920 64,715,712 67,377,324 31,524 2,546,212 41,524 4,956,618 (26,116) 0 0 (1,993,750) 0 0 0 0 0 (1,993,750) (0.11) (0.11)
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