-----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, LKF/mSAvoM1sru/o+4qNKsC+/Iz/Pl1anFH86AJaG656wkBYzwMLXoYB0gmjetlT apgGxn+icmKOSldnstilgg== 0000936392-98-000665.txt : 19980428 0000936392-98-000665.hdr.sgml : 19980428 ACCESSION NUMBER: 0000936392-98-000665 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19980427 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMBICHEM INC CENTRAL INDEX KEY: 0001002276 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 330617379 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-37981 FILM NUMBER: 98602032 BUSINESS ADDRESS: STREET 1: 9050 CAMINO STREET 2: SUITE 200 CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 6195300484 MAIL ADDRESS: STREET 1: 9050 CAMINO SANTA FE CITY: SAN DIEGO STATE: CA ZIP: 92121 S-1/A 1 AMENDMENT #7 TO FORM S-1 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 1998 REGISTRATION NO. 333-37981 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 7 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ COMBICHEM, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 8731 33-0617379 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
9050 CAMINO SANTA FE, SAN DIEGO, CALIFORNIA 92121 (619) 530-0484 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) DR. VICENTE ANIDO, JR. PRESIDENT AND CHIEF EXECUTIVE OFFICER 9050 CAMINO SANTA FE SAN DIEGO, CALIFORNIA 92121 (619) 530-0484 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ COPIES TO: FAYE H. RUSSELL, ESQ. FREDERICK T. MUTO, ESQ. THOMAS E. HORNISH, ESQ. ERIC J. LOUMEAU, ESQ. LANCE S. KURATA, ESQ. CHRISTOPHER W. KRUEGER, ESQ. BROBECK, PHLEGER & HARRISON LLP COOLEY GODWARD LLP 550 WEST "C" STREET, SUITE 1300 4365 EXECUTIVE DRIVE, SUITE 1100 SAN DIEGO, CALIFORNIA 92101 SAN DIEGO, CA 92121 (619) 234-1966 (619) 550-6000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ------------ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ------------ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a), MAY DETERMINE. ================================================================================ 2 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth all expenses, other than underwriting discounts and commissions, payable by the Registrant in connection with the sale of the Common Stock being registered. All the amounts shown are estimates, except for the registration fee, the Nasdaq National Market filing fee and the NASD fee. Registration fee............................................ $ 10,194 Nasdaq National Market fee.................................. 87,000 NASD fee.................................................... 3,864 Blue Sky fees and expenses.................................. 10,000 Printing and engraving expenses............................. 230,000 Legal fees and expenses..................................... 335,000 Accounting fees and expenses................................ 190,000 Transfer Agent and Registrar fees........................... 5,000 Miscellaneous expenses...................................... 128,942 ---------- TOTAL............................................. $1,000,000 ==========
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS. Section 145 of the Delaware General Corporation Law permits indemnification of officers and directors of the Company under certain conditions and subject to certain limitations. Section 145 of the Delaware General Corporation Law also provides that a corporation has the power to purchase and maintain insurance on behalf of its officers and directors against any liability asserted against such person and incurred by him or her in such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the provisions of Section 145 of the Delaware General Corporation Law. Article VII, Section 1 of the Restated Bylaws of the Company provides that the Company shall indemnify its directors and executive officers to the fullest extent not prohibited by the Delaware General Corporation Law. The rights to indemnity thereunder continue as to a person who has ceased to be a director, officer, employee or agent and inure to the benefit of the heirs, executors and administrators of the person. In addition, expenses incurred by a director or executive officer in defending any civil, criminal, administrative or investigative action, suit or proceeding by reason of the fact that he or she is or was a director or officer of the Company (or was serving at the Company's request as a director or officer of another corporation) shall be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Company as authorized by the relevant section of the Delaware General Corporation Law. As permitted by Section 102(b)(7) of the Delaware General Corporation Law, Article V, Section (A) of the Company's Certificate of Incorporation provides that a director of the Company shall not be personally liable for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or acts or omissions that involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived any improper personal benefit. The Company has entered into indemnification agreements with each of its directors and executive officers. Generally, the indemnification agreements attempt to provide the maximum II-1 3 protection permitted by Delaware law as it may be amended from time to time. Moreover, the indemnification agreements provide for certain additional indemnification. Under such additional indemnification provisions, however, an individual will not receive indemnification for judgments, settlements or expenses if he or she is found liable to the Company (except to the extent the court determines he or she is fairly and reasonably entitled to indemnity for expenses), for settlements not approved by the Company or for settlements and expenses if the settlement is not approved by the court. The indemnification agreements provide for the Company to advance to the individual any and all reasonable expenses (including legal fees and expenses) incurred in investigating or defending any such action, suit or proceeding. In order to receive an advance of expenses, the individual must submit to the Company copies of invoices presented to him or her for such expenses. Also, the individual must repay such advances upon a final judicial decision that he or she is not entitled to indemnification. The Company has purchased directors' and officers' liability insurance. The Company intends to enter into additional indemnification agreements with each of its directors and executive officers to effectuate these indemnity provisions. The Underwriting Agreement (Exhibit 1.1 hereto) contains provisions by which the Underwriters have agreed to indemnify the Company, each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, each director of the Company, and each officer of the Company who signs this Registration Statement, with respect to information furnished in writing by or on behalf of the Underwriters for use in the Registration Statement. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. Since September 30, 1994, the Company has sold and issued the following unregistered securities (which numbers have not been adjusted for the one-for-four reverse stock split effected in October 1997). (1) From September 30, 1994 to March 31, 1998, the Company issued an aggregate of 7,512,036 options to purchase Common Stock with exercise prices ranging from $0.062 to $2.00 per share under the Predecessor Plan and an aggregate of 5,131,596 shares of Common Stock were issued through the exercise of options granted under the Predecessor Plan for an aggregate exercise price of $527,216. For additional information concerning these transactions, reference is made to the information contained under the caption "Management -- Benefit Plans" in the form of the Prospectus included herein. (2) On October 14, 1994, the Company issued 200,000 shares of Series Z Preferred Stock to Sydney Brenner for an aggregate consideration of $100,000. (3) On October 18, 1994, the Company issued 500,000 shares of Common Stock to Robert A. Curtis, former Chief Executive Officer of the Company, at $.01 per share, of which 229,160 were vested as of the date of the termination of his employment in October 1995. (4) On October 18, 1994, the Company issued an aggregate of 2,500 shares of Common Stock to one investor for an aggregate consideration of $25. (5) On November 1, 1994, the Company issued an aggregate of 400,000 shares of Series A Preferred Stock to certain funds advised by Sequoia Capital for an aggregate consideration of $200,000. (6) On November 1, 1994, the Company issued an aggregate of 100,000 shares of Common Stock to certain venture funds advised by Sequoia Capital for an aggregate consideration of $5,000. (7) On November 8, 1994, the Company issued an aggregate of 175,000 shares of Common Stock to one investor for an aggregate consideration of $8,750. (8) On November 18, 1994, the Company issued an aggregate of 10,000 shares of Common Stock to one investor for an aggregate consideration of $500. II-2 4 (9) From November 23, 1994 through January 15, 1995, the Company issued an aggregate of 2,226,667 shares of Series B Preferred Stock to certain funds advised by Sequoia Capital, Forward Ventures II, L.P. and an individual investor for an aggregate consideration of $1,670,000. (10) In December 1994, the Company issued a warrant to purchase 83,655 shares of Series Z Preferred Stock to Comdisco, Inc. at an exercise price of $0.50 per share in connection with an equipment lease financing. (11) From January 1, 1995 through April 24, 1995, the Company issued an aggregate of 130,000 shares of Common Stock to eight investors for an aggregate consideration of $9,750. (12) On March 20, 1995, the Company issued an aggregate of 400,000 shares of Common Stock to The Scripps Research Institute for an aggregate consideration of $40,000. (13) From April 25, 1995 through July 30, 1995, the Company issued an aggregate of 650,000 shares of Common Stock to three investors for an aggregate consideration of $48,750. (14) On June 15, 1995, the Company issued a warrant to purchase 35,000 shares of Common Stock to LJL BioSystems, Inc. at an exercise price of $0.075. (15) In connection with an asset purchase agreement dated August 4, 1995, the Company issued an aggregate of 332,777 shares of Series Z Preferred Stock to Molecular Simulations, Inc. from June 1996 through July 1996 in consideration for certain technology rights. (16) On August 5, 1995, the Company issued 6,000 shares of Common Stock to Ken Rubenstein at $.075 per share in connection with a consulting agreement. (17) On August 17, 1995, August 25, 1995 and September 11, 1995, the Company issued an aggregate of 12,045,576 shares of Series C Preferred Stock to various venture capital funds and certain other investors for an aggregate consideration of $7,468,257. (18) On August 17, 1995, the Company issued warrants to purchase 120,968 shares of Series C Preferred Stock at an exercise price of $0.62 per share. (19) On September 7, 1995, the Company issued 8,065 shares of Series C Preferred Stock to one investor for an aggregate consideration of $5,000. (20) In December 1995, the Company issued an aggregate of 232,500 shares of Series J Preferred Stock to three employees upon the exercise of options to purchase Series J Preferred Stock at an exercise price of $0.10. (21) On April 9, 1996, the Company issued an aggregate of 5,104,845 shares of Series C Preferred Stock to various venture capital funds and certain other investors for an aggregate consideration of $3,165,003. (22) In April 1996 and June 1996, the Company issued warrants to purchase an aggregate of 240,321 shares of Series C Preferred Stock to Comdisco, Inc. at an exercise price of $0.62 per share in connection with an equipment lease financing. (23) In May 1996, the Company issued warrants to purchase an aggregate of 112,903 shares of Series Z Preferred Stock to Silicon Valley Bank and MMC/GATX Partnership No. 1 at an exercise price of $0.62 per share in connection with an equipment lease financing. (24) On November 15, 1996, the Company issued an aggregate of 9,869,205 shares of Series D Preferred Stock to various venture capital funds and certain other investors for an aggregate consideration of $9,869,205. (25) On January 23, 1997, the Company issued an aggregate of 5,000 shares of Common Stock to one investor at $0.10 per share pursuant to a Restricted Stock Issuance Agreement for an aggregate consideration of $500. II-3 5 (26) On June 11, 1997, the Company issued an aggregate of 40,000 shares of Common Stock to one investor at $0.075 per share for an aggregate consideration of $4,000. (27) On July 1, 1997, the Company issued an aggregate of 45,000 shares of Common Stock to the University of Pittsburgh for technology rights valued at $11,250. (28) On October 7, 1997, the Company issued an aggregate of 50,000 shares of Common Stock to two investors for past services rendered to the Company. (29) On October 10, 1997, the Company issued an aggregate of 1,000,000 shares of Common Stock to ImClone Systems Incorporated in conjunction with a collaboration agreement. (30) On October 15, 1997, the Company issued an aggregate of 4,000,000 shares of Common Stock to Elan International Services Ltd., in conjunction with a collaboration agreement. The sales and issuances of securities in the above transactions were deemed to be exempt under the Act by virtue of Section 4(2) thereof and/or Regulation D and Rule 701 promulgated thereunder as transactions not involving any public offering. The purchasers in each case represented their intention to acquire the securities for investment only and not with a view to the distribution thereof. Appropriate legends were affixed to the stock certificates issued in such transactions. Similar representations of investment intent were obtained and similar legends imposed in connection with any subsequent transfers of any such securities. The Company believes that all recipients had adequate access, through employment or other relationships, to information about the Company to make an informed investment decision. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits.
EXHIBIT NUMBER DESCRIPTION - -------- ----------- 1.1++ Form of Underwriting Agreement. 3.1++ Certificate of Incorporation of the Company, as amended. 3.2++ Form of Amended and Restated Certificate of Incorporation of the Company to become effective immediately prior to the Offering. 3.3++ Bylaws of the Company, as amended. 3.4++ Form of Restated Bylaws of the Company to be effective upon completion of the Offering. 4.1++ Form of Certificate for Common Stock. 5.1++ Opinion of Brobeck, Phleger & Harrison LLP with respect to the Common Stock being registered. 10.1++ Preferred Stock Purchase Agreement for Series A Preferred Stock between the Company and Forward Ventures II, L.P., dated August 26, 1994. 10.2++ Preferred Stock Purchase Agreement for Shares of Series Z Preferred Stock between the Company and Sydney Brenner, dated October 14, 1994. 10.3++ Stock Purchase Agreement for Shares of Series A Preferred Stock and Common Stock between the Company and the investors listed on Exhibit A thereto, dated November 1, 1994. 10.4++ Stock Purchase Agreement Series B Preferred Stock between the Company and the purchasers listed on Exhibit A thereto, dated November 29, 1994. 10.5++ Series C Preferred Stock Purchase Agreement between the Company and the purchasers listed on Schedule A thereto, dated August 17, 1995. 10.6++ Stock Purchase Agreement for Series C Preferred Stock between the Company and Todd Schmidt dated September 7, 1995.
II-4 6
EXHIBIT NUMBER DESCRIPTION - -------- ----------- 10.7*++ Supplemental Purchase Agreement between the Company and the purchasers on Schedule A thereto, dated April 8, 1996. 10.8*++ Series D Preferred Stock Purchase Agreement between the Company and the purchasers listed on Schedule A thereto, dated November 15, 1996. 10.9++ Amended and Restated Investors' Rights Agreement between the Company and the stockholders listed on Schedule A thereto, dated November 15, 1996. 10.10++ Series J Preferred Stock Purchase Agreement between the Company and Steve Teig, dated June 10, 1997. 10.11++ Series J Preferred Stock Purchase Agreement between the Company and Jonathan Greene, dated June 11, 1997. 10.12++ Series J Preferred Stock Purchase Agreement between the Company and Andrew Smellie, dated June 11, 1997. 10.13++ Warrant Agreement to Purchase Shares of the Series Z Preferred Stock, as amended between the Company and Comdisco, Inc., dated December 20, 1994. 10.14++ Common Stock Purchase Warrant between the Company and LJL BioSystems, Inc., dated June 15, 1995. 10.15++ Form of Warrant to Purchase Shares of Series C Preferred Stock between the Company and the purchasers listed on Schedule A thereto, dated August 17, 1995. 10.16++ Form of Warrant Agreement to Purchase Shares of Series C Preferred Stock of the Company, between the Company and Comdisco, Inc. in the amounts listed on Schedule A thereto. 10.17++ Form of Warrant to Purchase Shares of Series Z Preferred Stock between the Company and the purchasers listed on Schedule A thereto, dated May 20, 1996. 10.18++ Master Lease Agreement with the Company and Comdisco Inc., dated November 6, 1994, Schedule VL-1, dated November 11, 1994, Schedule VL-2 dated April 15, 1996 and Schedule VL-3 dated April 15, 1996. 10.19*++ Collaboration Agreement between the Company and Teijin Limited, dated March 29, 1996, as amended. 10.20*++ Collaborative Research and License Agreement between the Company and Roche Bioscience, dated October 25, 1996. 10.21*++ Research and Technology Development Agreement between the Company and Sumitomo Pharmaceuticals Co., Ltd., dated August 18, 1997. 10.22*++ Collaborative Research and License Agreement between the Company and ImClone Systems Incorporated, dated October 10, 1997. 10.23*++ Collaborative Research and License Agreement between the Company and Athena Neurosciences, Inc., dated October 15, 1997. 10.24++ Full Recourse Secured Promissory Note and Stock Pledge Agreement between the Company and Peter Myers, dated September 5, 1995. 10.25++ Promissory Note Secured by Deed of Trust between the Company and John Saunders, dated August 30, 1996. 10.26++ Promissory Note between the Company and Vicente Anido, Jr., dated February 24, 1997. 10.27++ Pledge Agreement between the Company and Vicente Anido, Jr., dated February 24, 1997. 10.28++ Promissory Note Secured by Stock Pledge Agreement between the Company and Vicente Anido, Jr., dated June 6, 1997 10.29++ Stock Pledge Agreement between the Company and Vicente Anido, Jr., dated June 6, 1997. 10.30++ Employment Agreement with Peter Myers, dated March 1, 1995.
II-5 7
EXHIBIT NUMBER DESCRIPTION - -------- ----------- 10.31++ Employment Agreement with John Saunders, dated January 1, 1996. 10.32++ Employment Agreement with Steven Teig, dated July 1, 1995. 10.33++ Employment Agreement with Vicente Anido, Jr., dated March 14, 1996. 10.34++ Employment Agreement with Lee R. McCracken, dated May 13, 1996. 10.35++ Employment Letter with Karin Eastham, dated March 14, 1997. 10.36++ Standard Industrial/Commercial Single-Tenant Lease between the Company and Campson Corporation, dated December 22, 1995. 10.37++ Standard Office Lease-Full Service between the Company and Nearon Enterprises, LLC, dated October 24, 1996. 10.38++ Lease Agreement between Harbor Investment Partners and the Company, dated October 6, 1997. 10.39++ 1995 Stock Option/Stock Issuance Plan. 10.40++ 1995 Stock Option/Stock Issuance Plan Form of Notice of Grant. 10.41++ 1995 Stock Option/Stock Issuance Plan Form of Stock Option Agreement. 10.42++ 1995 Stock Option/Stock Issuance Plan Form of Stock Purchase Agreement. 10.43++ 1995 Stock Option/Stock Issuance Plan Form of Restricted Stock Issuance Agreement. 10.44++ 1997 Stock Incentive Plan. 10.45++ 1997 Employee Stock Purchase Plan. 10.46++ Form of Indemnification Agreement between the Company and each of its directors. 10.47++ Form of Indemnification Agreement between the Company and each of its officers. 10.48++ 1997 Stock Incentive Plan Form of Notice of Grant of Stock Option 10.49++ 1997 Stock Incentive Plan Form of Stock Option Agreement 10.50++ 1997 Stock Incentive Plan Form of Addendum to Stock Option Agreement (Involuntary Termination Following Corporate Transaction/Change in Control) 10.51++ 1997 Stock Incentive Plan Form of Addendum to Stock Option Agreement (Limited Stock Appreciation Right) 10.52++ 1997 Stock Incentive Plan Form of Stock Issuance Agreement 10.53++ 1997 Stock Incentive Plan Form of Addendum to Stock Issuance Agreement (Involuntary Termination Following Corporate Transaction/Change in Control) 10.54++ 1997 Stock Incentive Plan Form of Notice of Grant of Automatic Stock Option (Initial Grant) 10.55++ 1997 Stock Incentive Plan Form of Notice of Grant of Automatic Stock Option (Annual Grant) 10.56++ 1997 Stock Incentive Plan Form of Automatic Stock Option Agreement 10.57++ 1997 Employee Stock Purchase Plan Form of Stock Purchase Agreement 10.58* Collaborative Research and License Agreement between the Company and ICOS Corporation, dated March 30, 1998. 11.1++ Statement of Computation of pro forma net loss per share. 23.1++ Consent of Brobeck, Phleger & Harrison LLP (contained in their opinion filed as Exhibit 5.1). 23.2++ Consent of Ernst & Young LLP, Independent Auditors. 24.1++ Power of Attorney (see page II-8). 27.1 Financial Data Schedule.
- --------------- ++ Previously filed with the Commission. II-6 8 * Certain confidential portions of this Exhibit were omitted by means of redacting a portion of the text (the "Mark"). This Exhibit has been filed separately with the Secretary of the Commission without the Mark pursuant to the Company's Application Requesting Confidential Treatment under Rule 406 under the Securities Act. (b) Financial Statement Schedules included separately in the Registration Statement. All other schedules are omitted because they are not required, are not applicable or the information is included in the Financial Statements or Notes thereto. ITEM 17. UNDERTAKINGS. The undersigned hereby undertakes to provide to the Underwriters at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the provisions described in Item 14, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-7 9 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Company has duly caused this Amendment No. 7 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Diego, County of San Diego, State of California, on the 27th day of April, 1998. COMBICHEM, INC. By: /s/ VICENTE ANIDO, JR. ------------------------------------ Vicente Anido, Jr. President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ VICENTE ANIDO, JR. President, Chief Executive Officer April 27, 1998 - ------------------------------------- and Director (Principal Executive (Vicente Anido, Jr.) Officer) Vice President of April 27, 1998 Finance and Administration and Chief /s/ KARIN EASTHAM Financial Officer (Principal - ------------------------------------- Financial (Karin Eastham) and Accounting Officer) * Chairman of the Board and Director April 27, 1998 - ------------------------------------- (Pierre Lamond) * Director April 27, 1998 - ------------------------------------- (Peter L. Myers) * Director April 27, 1998 - ------------------------------------- (Philippe O. Chambon) * Director April 27, 1998 - ------------------------------------- (Arthur Reidel) * Director April 27, 1998 - ------------------------------------- (William Scott)
By: /s/ VICENTE ANIDO, JR. ---------------------------------- Vicente Anido, Jr., Attorney-in-fact II-8 10 EXHIBIT INDEX
SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION PAGE - -------- ----------- ------------ 1.1++ Form of Underwriting Agreement. 3.1++ Certificate of Incorporation of the Company, as amended. 3.2++ Form of Amended and Restated Certificate of Incorporation of the Company to become effective immediately prior to the Offering. 3.3++ Bylaws of the Company, as amended. 3.4++ Form of Restated Bylaws of the Company to be effective upon completion of the Offering. 4.1++ Form of Certificate for Common Stock. 5.1++ Opinion of Brobeck, Phleger & Harrison LLP with respect to the Common Stock being registered. 10.1++ Preferred Stock Purchase Agreement for Series A Preferred Stock between the Company and Forward Ventures II, L.P., dated August 26, 1994. 10.2++ Preferred Stock Purchase Agreement for Shares of Series Z Preferred Stock between the Company and Sydney Brenner, dated October 14, 1994. 10.3++ Stock Purchase Agreement for Shares of Series A Preferred Stock and Common Stock between the Company and the investors listed on Exhibit A thereto, dated November 1, 1994. 10.4++ Stock Purchase Agreement Series B Preferred Stock between the Company and the purchasers listed on Exhibit A thereto, dated November 29, 1994. 10.5++ Series C Preferred Stock Purchase Agreement between the Company and the purchasers listed on Schedule A thereto, dated August 17, 1995. 10.6++ Stock Purchase Agreement for Series C Preferred Stock between the Company and Todd Schmidt dated September 7, 1995. 10.7*++ Supplemental Purchase Agreement between the Company and the purchasers on Schedule A thereto, dated April 8, 1996. 10.8*++ Series D Preferred Stock Purchase Agreement between the Company and the purchasers listed on Schedule A thereto, dated November 15, 1996. 10.9++ Amended and Restated Investors' Rights Agreement between the Company and the stockholders listed on Schedule A thereto, dated November 15, 1996. 10.10++ Series J Preferred Stock Purchase Agreement between the Company and Steve Teig, dated June 10, 1997. 10.11++ Series J Preferred Stock Purchase Agreement between the Company and Jonathan Greene, dated June 11, 1997. 10.12++ Series J Preferred Stock Purchase Agreement between the Company and Andrew Smellie, dated June 11, 1997. 10.13++ Warrant Agreement to Purchase Shares of the Series Z Preferred Stock, as amended between the Company and Comdisco, Inc., dated December 20, 1994. 10.14++ Common Stock Purchase Warrant between the Company and LJL BioSystems, Inc., dated June 15, 1995. 10.15++ Form of Warrant to Purchase Shares of Series C Preferred Stock between the Company and the purchasers listed on Schedule A thereto, dated August 17, 1995.
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SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION PAGE - -------- ----------- ------------ 10.16++ Form of Warrant Agreement to Purchase Shares of Series C Preferred Stock of the Company, between the Company and Comdisco, Inc. in the amounts listed on Schedule A thereto. 10.17++ Form of Warrant to Purchase Shares of Series Z Preferred Stock between the Company and the purchasers listed on Schedule A thereto, dated May 20, 1996. 10.18++ Master Lease Agreement with the Company and Comdisco Inc., dated November 6, 1994, Schedule VL-1, dated November 11, 1994, Schedule VL-2 dated April 15, 1996 and Schedule VL-3 dated April 15, 1996. 10.19*++ Collaboration Agreement between the Company and Teijin Limited, dated March 29, 1996, as amended. 10.20*++ Collaborative Research and License Agreement between the Company and Roche Bioscience, dated October 25, 1996. 10.21*++ Research and Technology Development Agreement between the Company and Sumitomo Pharmaceuticals Co., Ltd., dated August 18, 1997. 10.22*++ Collaborative Research and License Agreement between the Company and ImClone Systems Incorporated, dated October 10, 1997. 10.23*++ Collaborative Research and License Agreement between the Company and Athena Neurosciences, Inc., dated October 15, 1997. 10.24++ Full Recourse Secured Promissory Note and Stock Pledge Agreement between the Company and Peter Myers, dated September 5, 1995. 10.25++ Promissory Note Secured by Deed of Trust between the Company and John Saunders, dated August 30, 1996. 10.26++ Promissory Note between the Company and Vicente Anido, Jr., dated February 24, 1997. 10.27++ Pledge Agreement between the Company and Vicente Anido, Jr., dated February 24, 1997. 10.28++ Promissory Note Secured by Stock Pledge Agreement between the Company and Vicente Anido, Jr., dated June 6, 1997 10.29++ Stock Pledge Agreement between the Company and Vicente Anido, Jr., dated June 6, 1997. 10.30++ Employment Agreement with Peter Myers, dated March 1, 1995. 10.31++ Employment Agreement with John Saunders, dated January 1, 1996. 10.32++ Employment Agreement with Steven Teig, dated July 1, 1995. 10.33++ Employment Agreement with Vicente Anido, Jr., dated March 14, 1996. 10.34++ Employment Agreement with Lee R. McCracken, dated May 13, 1996. 10.35++ Employment Letter with Karin Eastham, dated March 14, 1997. 10.36++ Standard Industrial/Commercial Single-Tenant Lease between the Company and Campson Corporation, dated December 22, 1995. 10.37++ Standard Office Lease-Full Service between the Company and Nearon Enterprises, LLC, dated October 24, 1996. 10.38++ Lease Agreement between Harbor Investment Partners and the Company, dated October 6, 1997. 10.39++ 1995 Stock Option/Stock Issuance Plan. 10.40++ 1995 Stock Option/Stock Issuance Plan Form of Notice of Grant.
12
SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION PAGE - -------- ----------- ------------ 10.41++ 1995 Stock Option/Stock Issuance Plan Form of Stock Option Agreement. 10.42++ 1995 Stock Option/Stock Issuance Plan Form of Stock Purchase Agreement. 10.43++ 1995 Stock Option/Stock Issuance Plan Form of Restricted Stock Issuance Agreement. 10.44++ 1997 Stock Incentive Plan. 10.45++ 1997 Employee Stock Purchase Plan. 10.46++ Form of Indemnification Agreement between the Company and each of its directors. 10.47++ Form of Indemnification Agreement between the Company and each of its officers. 10.48++ 1997 Stock Incentive Plan Form of Notice of Grant of Stock Option 10.49++ 1997 Stock Incentive Plan Form of Stock Option Agreement 10.50++ 1997 Stock Incentive Plan Form of Addendum to Stock Option Agreement (Involuntary Termination Following Corporate Transaction/Change in Control) 10.51++ 1997 Stock Incentive Plan Form of Addendum to Stock Option Agreement (Limited Stock Appreciation Right) 10.52++ 1997 Stock Incentive Plan Form of Stock Issuance Agreement 10.53++ 1997 Stock Incentive Plan Form of Addendum to Stock Issuance Agreement (Involuntary Termination Following Corporate Transaction/Change in Control) 10.54++ 1997 Stock Incentive Plan Form of Notice of Grant of Automatic Stock Option (Initial Grant) 10.55++ 1997 Stock Incentive Plan Form of Notice of Grant of Automatic Stock Option (Annual Grant) 10.56++ 1997 Stock Incentive Plan Form of Automatic Stock Option Agreement 10.57++ 1997 Employee Stock Purchase Plan Form of Stock Purchase Agreement 10.58* Collaborative Research and License Agreement between the Company and ICOS Corporation, dated March 30, 1998. 11.1++ Statement of Computation of pro forma net loss per share. 23.1++ Consent of Brobeck, Phleger & Harrison LLP (contained in their opinion filed as Exhibit 5.1). 23.2++ Consent of Ernst & Young LLP, Independent Auditors. 24.1++ Power of Attorney (see page II-8). 27.1 Financial Data Schedule.
- --------------- ++ Previously filed with the Commission. * Certain confidential portions of this Exhibit were omitted by means of redacting a portion of the text (the "Mark"). This Exhibit has been filed separately with the Secretary of the Commission without the Mark pursuant to the Company's Application Requesting Confidential Treatment under Rule 406 under the Securities Act. EX-10.58 2 EXHIBIT 10.58 1 EXHIBIT 10.58 COLLABORATIVE RESEARCH AND LICENSE AGREEMENT BETWEEN COMBICHEM, INC. AND ICOS CORPORATION MARCH 30, 1998 ***Certain confidential portions of this Exhibit were omitted by means of blackout of the text (the "Mark"). This Exhibit has been filed separately with the Secretary of the Commission without the Mark pursuant to the Company's Application Requesting Confidential Treatment under Rule 406 of Regulation C of the Securities Act of 1933. 2 COLLABORATIVE RESEARCH AND LICENSE AGREEMENT THIS COLLABORATIVE RESEARCH AND LICENSE AGREEMENT (the "Agreement") is entered into and made effective as of March 30, 1998 (the "Effective Date"), by and between COMBICHEM, INC., a Delaware corporation having its principal offices at 9050 Camino Santa Fe, San Diego, California 92121 ("CombiChem") and ICOS CORPORATION, a Delaware corporation having its principal offices located at 22021 20th Avenue S.E., Bothell, Washington 98021 ("ICOS"). WHEREAS, CombiChem has developed, licensed and/or owns certain drug discovery technology and intellectual property rights, including chemical library design software, multi-parallel synthesis and purification methods, chemical libraries suitable for high throughput biological screening assays and medicinal chemistry (collectively, "CombiChem Technology"); WHEREAS, as of the Effective Date, ICOS and its Affiliates have developed and own certain drug discovery and intellectual property rights, including certain assays, methods and know how regarding the Initial Target and any Alternative Target(s), among other things (collectively "ICOS Technology"); WHEREAS, ICOS desires to utilize CombiChem Technology for its drug discovery activities under ICOS know-how concerning the identification and characterization of novel small molecule inhibitors for development as therapeutics for treatment of *** and other diseases in humans; WHEREAS, the parties wish to collaborate in a chemical lead and drug discovery program, commencing on the Effective Date against a Collaboration Target ("Collaboration"); WHEREAS, during the Collaboration, the Parties intend to initially focus on one (1) Initial Target, and thereafter on any Alternative Target(s) as determined by ICOS; NOW, THEREFORE, the Parties agree as follows: 1. DEFINITIONS 1.1 "Active Compound(s)" means a compound (or compounds) or its Derivatives which (a) (i) is selected by the RMC under the Research Program from Collaboration Compounds under Section 4.2, or (ii) is a Derivative of a Collaboration Compound which has been so selected by the RMC to be an Active Compound; and *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. - 1 - 3 (b) shows In Vitro Activity satisfactory to the requirements of the Research Plan. 1.2 "Affiliate" of a Party means any corporation or other business entity controlled by, controlling or under common control with, such Party. For this purpose "control" shall mean direct or indirect beneficial ownership of more than fifty percent (50%) of the voting securities or income interest in such corporation or other business, or if not meeting the preceding requirements, any company owned or controlled by or owning or controlling such Party at the maximum control or ownership right permitted in the country where such company exists. 1.3 "Alternative Target" shall have the meaning set forth in Section 3.2 hereof. 1.4 "Collaboration" has the meaning set forth in the preamble. 1.5 "Collaboration Compound(s)" means a compound (or compounds) which (a) is synthesized following the Effective Date for screening against a Collaboration Target under the Research Program, (b) is a pre-existing or hereafter acquired CombiChem compound which CombiChem desires to designate as a Collaboration Compound, or (iii) is a pre-existing or hereafter acquired ICOS compound which ICOS desires to designate as a Collaboration Compound. 1.6 "Collaboration Patent" means a Patent to which CombiChem has made an inventive contribution arising out of the Collaboration, as determined under U.S. Patent law. 1.7 "Collaboration Target" means (a) the Initial Target beginning on the Effective Date or (b) an Alternative Target substituted for the Initial Target under Section 3.2(b) or (c) any other target by mutual agreement of the Parties. 1.8 "CombiChem Compound" means a chemical compound that is proprietary to CombiChem, or whose use or manufacture is proprietary to CombiChem. 1.9 "CombiChem Technology" has the meaning set forth in the preamble. 1.10 "Confidential Information" includes, but is not limited to, (a) all information and materials received by either Party from the other Party pursuant to this Agreement which is confidential under Article 11 hereof; (b) all information and materials by either Party arising out of the Collaboration during the Research Period including, without limitation, information directly and specifically deduced from Confidential Information such as information regarding compounds that were not active against the Targets in the screening or secondary selective assays; and - 2 - 4 (c) the terms and conditions of this Agreement. 1.11 "CPI" means the Consumer Price Index, All Urban Consumers, as published by the U.S. Bureau of Labor Statistics. 1.12 "Daughter Libraries" shall mean the compound libraries which are designed and synthesized as a part of the Collaboration either by CombiChem or under the direction of the RMC. 1.13 "Derivative" shall mean a compound (or compounds) which has resulted (a) (i) from chemical synthesis, during the Exclusivity Period, to generate an Active Compound or Development Compound in support of the Research Program or (ii) from chemical synthesis on an Active Compound or Development Compound in support of the Research Program; and (b) is covered under claims of any Collaboration Patent. 1.14 "Development Compound(s)" means a Collaboration Compound (or compounds) which (a) (i) is an Active Compound or (ii) is a Derivative of an Active Compound; and (b) is determined by ICOS to be appropriate for the purpose of IND filing by ICOS either before preclinical studies or from the results of preclinical studies to determine without limitation, data on efficacy, potency, toxicity, bioavailability and other pharmacokinetics related parameters. 1.15 "Due Diligence" means the use of by a Party of its resources in the Collaboration in a manner which is consistent with the exercise of reasonable and prudent scientific and business judgment as applied to other programs of ICOS or CombiChem, as the case may be, targeting products aimed at markets or patient groups of similar sizes and of similar scientific and commercial potential. With respect to any Development Compound, "Due Diligence" shall also require ICOS or its Affiliates, partners or licensees to use commercially reasonable efforts to conduct all necessary preclinical studies and to file an IND for such Development Compound within a commercially reasonable period from the date upon which ICOS has designated such Development Compound from any Active Compound or its Derivatives. For purposes of this Agreement, failure to exercise Due Diligence by any Party may be alleged by written notice to such Party describing such failure with specificity and describing the actions necessary to cure such failure with specificity (the "Due Diligence Notice"). Sixty (60) days after delivery of a Due Diligence Notice, if the Party receiving such Due Diligence Notice has not completed the actions necessary to cure such failure as specified in such Due - 3 - 5 Diligence Notice to the reasonable satisfaction of the other Party, the Parties shall immediately be subject to the dispute resolution provisions set forth in Article 15 hereof starting at the discussions between the Parties' Chief Executive Officers described in Section 15.1 hereof. 1.16 "Exclusivity Period" means the Research Period plus *** as may be extended or reduced pursuant to Article 4 hereof. 1.17 "Field" means all therapeutic indications in humans for any Target against which a Collaboration Compound, Active Compound, Development Compound or Products may be directed. 1.18 "First Commercial Sale" of a Product shall mean the first sale for use or consumption of such Product in a country after required marketing and pricing approval has been granted by the governing health regulatory authority of such country. Sale to an Affiliate shall not constitute a First Commercial Sale unless the Affiliate is the end user of the Product. 1.19 "FTE" shall mean a full-time equivalent employee of CombiChem having the requisite skills to fulfill CombiChem's obligations under this Agreement. For purposes of this Agreement, the FTEs shall include synthetic and analytical chemists, compound control scientists and computational scientists. 1.20 "Inactive Compound(s)" means a Collaboration Compound(s) which is not an Active Compound or an Active Compound that is reclassified as described in Section 4.2 hereof. 1.21 "ICOS Compound" means a chemical compound that is proprietary to ICOS or whose use or manufacture is proprietary to ICOS or its Affiliates. 1.22 "ICOS Technology" shall have the meaning set forth in the preamble of this Agreement. 1.23 "In Vitro Activity" shall mean during the Research Term, the observation of *** in assays as described by ICOS in the Research Plan for each Collaboration Target. 1.24 "Initial Target" shall have the meaning set forth in Section 3.1 hereof. 1.25 "Net Sales" means the gross sales invoiced by ICOS, its Affiliates or its sublicensees for Products to non-Affiliated Third Parties (and to Affiliates who are the end users of such Products) less actual deductions or returns (including withdrawals and recalls), rebates (price reductions, including formulary or Medicaid and similar types of rebates, e.g. chargebacks), cash, trade or volume (quantity) discounts, discounts granted at the time of invoicing, the cost of transport, insurance, delivery, sales taxes and use, tariff, excise or other taxes (other than income taxes) directly linked to and included in the gross sales amount as computed on a product-by-product basis for the countries concerned, whereby the amount of such sales in foreign *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. - 4 - 6 currencies is converted into United States dollars at the exchange rate of the last business day for each calendar month as reported in The Wall Street Journal. 1.26 "Patent" means (a) valid and enforceable U.S. or non U.S. Patent, and any non-U.S. equivalent, including any extension (including Supplemental Protection Certificates), registration, confirmation, reissue, continuation, divisionals, continuation-in-part, reexamination or renewal thereof, or (b) pending applications for any of the foregoing, whether filed or issued before or after the Effective Date. 1.27 "Party" means CombiChem or ICOS, as the case may be, including their respective Affiliates, permitted successors and assigns. 1.28 "Product(s)" means any product containing an Active Compound or Development Compound with such compound as the active ingredient or one of the active ingredients, which is the subject of one or more claims under a Collaboration Patent and which is granted regulatory approval by the governing health regulatory authority of the applicable country for marketing in the Field. 1.29 "Project Team" shall have the meaning set forth in Section 2.1(c). 1.30 "Research Management Committee" or "RMC" has the meaning set forth in Article 6 below. 1.31 "Research Period" means that part of the Collaboration commencing *** or sooner by mutual agreement *** unless earlier terminated, and which can be extended in accordance with Section 7.1 below for the Initial Target or an Alternative Target substituted therefore under Section 3.2(b) herein. 1.32 "Research Plan" means the research plan to be agreed in writing between the Parties, which describes in mutually agreed upon detail the research activities to be performed for each Collaboration Target. 1.33 "Research Program" means the research and activities to be conducted for the Collaboration during the Research Period including, without limitation, the activities described in the Research Plan and set forth in Sections 2.1 and 2.2 of this Agreement. 1.34 "Returned Compound" shall have the meaning set forth in Section 9.2. 1.35 "Royalty Term" means, in the case of any Product, in any country, the period of time commencing on the First Commercial Sale and ending upon the later of (a) *** or (b) the expiration of the last-to-expire Patent resulting from the Research Program filed in the Field during the Exclusivity Period with claims covering that Product in the relevant country. In the event such *** period shall extend beyond the end of the term or terms of the last to expire Patents resulting from the Research Program containing a valid claim in such country, the earned royalties *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. - 5 - 7 hereunder in such country shall be *** for the remainder of such *** period so long as *** as the Product exists and is sold in competition with the Product. 1.36 "Target" means a biomolecular entity that a Collaboration Compound is synthesized against wherein the small molecule demonstrates relevant activity and unless otherwise specified may include both Initial and Alternative Targets. 1.37 "Target Exclusivity Obligations" shall have that meaning set forth in subsection 4.1(a) hereof. 1.38 "Territory" means the entire world. 1.39 "Third Party" means an entity other than CombiChem or ICOS or their respective Affiliates or assigns. 1.40 "UIL" means CombiChem's proprietary Universal Informer Library(TM). 2. RESEARCH COLLABORATION 2.1 CombiChem Responsibilities. CombiChem shall with Due Diligence provide the following resources to ICOS and conduct the following activities under the Research Program and as more fully described in the Research Plan: (a) Within thirty (30) days of the Effective Date, CombiChem will deliver to ICOS its UIL sufficient in quantity for ICOS to screen against the Initial Target and any Target contained in Appendix B at the time of such shipment. (b) At any time following the Effective Date, CombiChem shall provide to ICOS data analysis and evaluations for results from the screening of the UIL against the Initial Target and any substituted Alternative Target under Section 3.2(b) herein within *** of CombiChem's receipt of the relevant screening data from ICOS. (c) During the Research Period, CombiChem shall (i) review data and information regarding the Collaboration Target provided by ICOS and derived from the UIL by CombiChem; (ii) based on such data and information and using the CombiChem Technology, design Daughter Libraries; and (iii) supply all lead chemistries and synthesize compounds as provided in Section 5.4 hereof. (d) During the Research Period, CombiChem shall keep ICOS informed of its activities performed in connection with the Collaboration, *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. - 6 - 8 including, without limitation, providing ICOS with data and information (and, upon ICOS's request, reasonable quantities of samples pursuant to Section 5.4) regarding the status of all Collaboration Compounds prior to the meetings of the Research Management Committee. (e) Subject to Section 2.3, Article 3 and Section 8.3 hereof, and at all times during the Research Period, CombiChem shall dedicate, in separate laboratory facilities as to its chemistry efforts *** to conduct all of CombiChem's activities in connection with the Collaboration at a per annum rate of U.S. *** per FTE to be paid by ICOS. The *** unless the RMC recommends otherwise and ICOS and CombiChem agree in writing to alter the size of *** . 2.2 ICOS Responsibilities. ICOS shall with Due Diligence provide the following resources to CombiChem and conduct the following activities under the Research Program as more fully described in the Research Plan: (a) ICOS shall make payment to CombiChem for the Collaboration as set forth in Article 8 hereof, provide screening, biological and structural data and information (including leads and/or screening hits and any assay methods relating to Collaboration Compounds) to CombiChem necessary for CombiChem to perform its duties under this Agreement, and will assume scientific, financial and administrative responsibility for screening and biological support activities, drug development and regulatory filings during and after the term of the Collaboration on the terms set forth below. (b) During the Research Period, ICOS shall provide CombiChem with data and information regarding Collaboration Compounds and the Collaboration Target assays developed by ICOS under the Research Program prior to the meetings of the Research Management Committee. (c) During the Exclusivity Period, ICOS shall screen Collaboration Compounds for *** and, where ICOS reasonably deems it to be appropriate, *** against the Collaboration Target. (d) During the Exclusivity Period, with respect to any Collaboration Target against which an Active Compound has been designated by the RMC, ICOS shall (i) screen Active Compounds, (ii) determine Development Compounds, and (iii) endeavor to develop Products. *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. - 7 - 9 At any time during the Collaboration, ICOS may apply chemistry effort, including synthesis, to any Collaboration Compound as agreed and directed by the RMC. (e) Following the first IND filing through First Commercial Sale, ICOS shall provide CombiChem with an annual report similar to that which would be provided in the usage of the trade or business, by a licensee to a licensor summarizing ICOS's activities in developing Development Compounds that shall include, without limitation, all material information with respect to the following: (i) status of both regulatory filings and communications with the United States Food and Drug Administration or any foreign equivalent ("FDA"); (ii) status of Patents within and outside of the United States; (iii) status of current and planned clinical trials; (iv) occurrence of any milestone events; and (v) any permitted sublicensing under this Agreement. (f) During the Research Period and in connection with CombiChem providing the services in Section 2.1(c) hereof, ICOS shall, at its option, send *** to conduct ICOS' activities at CombiChem's facilities under the Research Program. ICOS shall have sole responsibility for the expenses associated with its visiting chemists, including, without limitation, salary, travel, living and other associated expenses of such chemists. 2.3 Conduct of Research Program. The Parties hereby agree that the Research Programs shall be carried out in accordance with the Research Plan and this Agreement, as each may be amended from time to time. The Research Management Committee shall review the Research Plan on a regular and ongoing basis and may make written changes to the Research Plan so long as such changes are mutually agreed to in writing by CombiChem and ICOS. 2.4 Third Party Licenses. Each Party shall be solely responsible for any Third Party license fees required to perform its obligations under this Agreement. 3. TARGETS 3.1 Initial Target. ***. 3.2 Alternative Target. (a) An Alternative Target is any of those alternative targets selected from Appendix B attached hereto, as amended in writing by mutual agreement of the Parties hereto from time to time, and for which ICOS has identified such selection in a written notice to CombiChem. Unless otherwise agreed by the Parties in writing or as set forth in this Section 3.2, ICOS shall have the right to screen the UIL against any target contained in Appendix B, as *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. - 8 - 10 amended, but shall *** in accordance with Section 8.1(b) hereof. (b) At any time prior to *** , ICOS may decide, or may accept a recommendation by the RMC, to pursue any Alternative Target in substitution for the Initial Target and thereafter the Alternative Target shall be deemed to be a Collaboration Target for all purposes under this Agreement. Such substitution by ICOS shall be effective upon the date of a written notice provided to CombiChem by ICOS expressly stating that such substitution shall be made and identifying the Alternative Target from Appendix B to be substituted. 3.3 Substitute Target. After the commencement of a Research Program with respect to the Collaboration Target, the Parties, by mutual agreement, may substitute another target for such Collaboration Target. 4. EXCLUSIVITY 4.1 Collaboration Target Exclusivity. (a) Following the Effective Date, so long as ICOS or its Affiliates are proceeding with Due Diligence for that Collaboration Target, CombiChem shall not work on, or provide services, or advise, either independently, or with any Third Parties (except where CombiChem is providing its UIL to Third Parties without knowledge of such Third Parties' target) (the "Target Exclusivity Obligations"), except (a) as provided for in Section 12.2 hereof with regard to any Public Statements, (b) with respect to any Third Parties who are collaborators or proposed collaborators of CombiChem, CombiChem shall have the right, consistent with its corporate policy (but without identifying any Collaboration Target), to notify any such Third Party of its decision and/or inability to work on such Collaboration Target with that Third Party or (c) if CombiChem's Target Exclusivity Obligations have terminated pursuant to subsection 4.1 (b) below. (b) Upon the commencement of the Research Period and following synthesis of a Daughter Library by CombiChem for the Collaboration Target, the Target Exclusivity Obligations with respect to such Collaboration Target shall continue until (1) ICOS has provided CombiChem with a notice and release of Target Exclusivity Obligations, effective in sixty (60) days, that, because of business and scientific reasons, ICOS has decided to cease research and/or development activities for the Initial Target, or (2) ICOS has provided CombiChem with a notice and release of Target Exclusivity Obligations, effective *** from the date of such notice and release, that ICOS has decided to cease research *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. - 9 - 11 and/or development activities for a specific Collaboration Target except the Initial Target, or (3) *** after the date of the written notice provided by ICOS under Section 3.2(b) herein, or (4) (A) ICOS has failed to exercise Due Diligence with respect to that Collaboration Target and (B) has not transferred or assigned its control of the development of its program for that Collaboration Target to a Third Party with due diligence requirements no less stringent than those set forth in this Agreement. In the event of such transfer or assignment to a Third Party, the Target Exclusivity Obligations with respect to such Collaboration Target shall continue until the earlier of (a) receipt by CombiChem of a written release from such Third Party, or (b) the failure of such Third Party to exercise Due Diligence with respect to that Target. Any notice under this subsection 4.1(b) shall be provided by ICOS to CombiChem promptly following the relevant decision under subsections (1), (2) or (3) above or failure under subsection (4) above. 4.2 Alternative Target Exclusivity. From the Effective Date through *** CombiChem shall not work on, or provide services or advise, either independently, or with any Third Parties (except where CombiChem is providing its UIL to Third Parties without knowledge of such Third Parties' target), except as provided for in Section 12.2 hereof with regard to any Public Statements or (b) with respect to any Third Parties who are collaborators or proposed collaborators of CombiChem, CombiChem shall have the right, consistent with its corporate policy (but without identifying any Alternative Target), to notify any such Third Party of its decision and/or inability to work on such Alternative Target with that Third Party. 4.3 Active Compound Exclusivity. Any Active Compound shall be exclusively available to ICOS for research or application within or outside the Collaboration, during the Research Period, and CombiChem shall not work on or provide information regarding such Active Compound to any Third Party, except to take any steps necessary to protect ICOS's exclusivity hereunder. Following the expiration of the Research Period, Active Compounds for which a Patent has not been filed within ninety (90) days following the Research Period shall be deemed to be Inactive Compounds for all purposes hereunder; provided, that any Active Compound which is the subject of claim(s) under a pending Collaboration Patent shall continue to be treated as Active Compounds until a Collaboration Patent is issued with respect to one or more of such claims; or until all of such Patent claims have been denied and all appeals and refiling procedures have been exhausted, at which time the compounds which are the subject of those claims shall be Inactive Compounds hereunder. 4.4 Inactive and Returned Compounds. Any Inactive Compounds and Returned Compounds (subject to Section 9.2 hereof) shall be available to CombiChem (except for any pre-existing ICOS Compound) and ICOS for any purpose. *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. - 10 - 12 4.5 Survival. This Article 4 shall survive termination or expiration of this Agreement. 5. COLLABORATION COMPOUNDS 5.1 Pre-Existing Compounds or Other Pre-Existing Rights. Neither Party shall have any rights then existing in the other Party to any pre-existing compound of the other Party unless and until such compound is designated as a Collaboration Compound by such Party. Additionally, CombiChem may decline (after informing ICOS) to synthesize a particular compound or library of compounds by written notice to ICOS of existing Patents, Patent Applications and/or contractual obligations with Third Parties restricting CombiChem's performance of such activities and such notice shall contain a statement of warranty that such Patents, Patent Applications and/or contractual obligations exist and that their existence and the obligations of CombiChem predate an ICOS request of CombiChem to synthesize such compound or library of compounds. 5.2 Intellectual Property Rights; License to ICOS. Subject to Section 9.2 hereof, and except as set forth in this Section 5.2, ICOS shall have *** relating to Active Compounds, Development Compounds and Products and the subject matter contained therein and resulting from the Research Program *** . ICOS shall be responsible for filing, maintaining and prosecuting all Collaboration Patents at its sole expense and CombiChem shall use commercially reasonable efforts to assist ICOS in filing such Collaboration Patent applications. Prior to the filing of any such Collaboration Patent applications, CombiChem shall assign to ICOS or its designee all intellectual property rights it may have in *** and the subject matter claimed therein which are necessary for the development and commercialization by ICOS or its designee; provided under no circumstances does *** in any Active Compound, Development Compound or Products are *** to the extent such Active Compound, Development Compound or Products may be *** . If ICOS fails to so file, maintain or prosecute such Collaboration Patent, CombiChem shall have the right to request ICOS to do so. If ICOS elects not to file, maintain or prosecute such Collaboration Patent, on a country-by-country basis, ICOS shall provide CombiChem with a fully-paid up license so that CombiChem can take over such filing, maintenance or prosecution of such Collaboration Patent, at its sole expense. 5.3 Structural Information. Neither Party shall disclose the structure of the other Party's compound, any Active Compound, Development Compound or Product to any Third Party without the other Party's written permission, unless required to do so by law, in which case such Party shall promptly notify the other Party of such required disclosure. If a subpoena or other legal process concerning the same is served upon either Party, the other Party shall *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. - 11 - 13 cooperate with the Party served in any effort to contest the validity of such subpoena or other legal process. 5.4 Supply of Collaboration Compounds. Aliquots of *** of any Collaboration Compound that has been synthesized will be prepared and given to ICOS. CombiChem shall replenish that amount upon ICOS's reasonable request. CombiChem shall maintain aliquots of any Collaboration Compound that has been synthesized by CombiChem. CombiChem shall also provide ICOS with additional requirements of samples at CombiChem's cost. To the extent that Collaboration Compounds are not available in a timely and sufficient quantity to allow the earliest start of necessary large scale preclinical or other studies such unavailability of Collaboration Compounds shall not be cited as a lack of Due Diligence provided that the Parties have made commercially reasonable attempts, and continue such attempts, to provide such unavailable Collaboration Compounds in required quantities in the most expedient manner. 6. RESEARCH MANAGEMENT COMMITTEE The design, review and conduct of the Research Program will be coordinated by the Research Management Committee, which will meet regularly on a mutually-agreeable schedule. Each Party shall bear its own expenses related to such meetings. The Research Management Committee may establish and amend or revise the Research Plan as reasonable and necessary to reflect the scientific progress and work performed under the Research Program, such amendments to be mutually agreed to in writing by ICOS and CombiChem. The Research Management Committee will consist of an equal number of members from ICOS and CombiChem and will include appropriate representatives from ICOS and CombiChem as mutually agreed. The co-chairs of the Research Management Committee will initially be *** and subsequently may change as each Party determines for its co-chair. Decisions of the Research Management Committee shall be by consensus. If a decision is not reached by the RMC with respect to management of the Research Program, the dispute will be referred to the co-chairs of the RMC. If the co-chairs of the RMC are unable to resolve the dispute, the dispute will be referred to the Chief Executive Officer of CombiChem and the Chief Executive Officer of ICOS for resolution. If those officers are unable to resolve the dispute, after good faith discussions, the dispute shall be resolved first by a process of mediation and then in the case of a failure to resolve the dispute, as determined per Section 15.2 hereof. Any decisions, recommendations, amendments or performance criteria agreed by consensus of the RMC which could, or may, materially affect any obligations concerning consideration or ownership of intellectual property shall be consistent with the terms of this Agreement and shall be ratified in writing by both CombiChem and ICOS prior to it being binding on either party and any performance or partial performance of an unratified agreement shall not be construed as a waiver or acquiescence of the right of ratification. *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. - 12 - 14 7. RESEARCH PERIOD; TERMINATION OF RESEARCH PROGRAM 7.1 Research Period: Option to Extend the Research Period. The initial term of the Collaboration shall commence on the Effective Date and conclude at the end of the Research Period, subject to extension upon mutual agreement. To extend the Research Period, ICOS must notify CombiChem no later than ninety (90) days prior to the then-current expiration date and the Parties shall negotiate in good faith the terms and conditions of any such extension. 7.2 Termination of Research Program Upon Breach. The Research Program and/or this Agreement may be terminated by a Party for the material breach by the other Party as provided by Section 10.2 hereof. 8. CONSIDERATION 8.1 Fees. (a) As of the Effective Date, ICOS shall be obligated to pay CombiChem a non-refundable, noncontingent project initiation fee of U.S. *** in cash, by registered check or wire transfer, to initiate the Research Program for the Initial Target within fifteen (15) days of the Effective Date. Such initiation fee shall include payment for the *** made for the Initial Target. Should ICOS request in writing a *** for any *** ICOS shall pay CombiChem an additional U.S. *** for the *** and *** for *** for a total of up to *** such *** . If any such request occurs after *** such *** shall only be upon the mutual agreement of the Parties. The action of replacing an *** for an *** pursuant to Section *** hereof shall not obligate ICOS to an additional *** for such *** . 8.2 Research Program Funding. (a) Research Support for Project Team. Beginning *** ,or earlier if mutually agreed by the Parties, and continuing throughout the Research Period, ICOS shall make payments to CombiChem for direct research support for its Project Team, which shall initially consist of *** full time employees ("FTEs") of CombiChem, as modified by the RMC pursuant to Section 8.2(b) below. The total amount per FTE payable shall be U.S. *** per FTE per annum, which amount shall be upwardly adjusted annually based on cumulative changes in the CPI, using 1998 as the base year. All payments for direct research support shall be paid by ICOS to CombiChem, quarterly in advance, and adjusted as necessary in subsequent quarters, of such amounts as are equal to the product of (i) the number of CombiChem FTEs allocated to the Research Program by the RMC for the calendar quarter to which each such payment applies, multiplied by (ii) U.S. *** (i.e., the quarterly amount per CombiChem FTE on the basis of U.S. *** per annum). *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. - 13 - 15 (b) Expansion or Contraction of Project Team. Notwithstanding Section 2.1(e) herein, either Party may request that CombiChem expand or contract its Project Team during the Research Period in order to properly regulate the work-flow on a Collaboration Target. In such event, the RMC shall promptly confer as to the appropriate number of FTEs to be added to the Project Team, at a cost to ICOS of U.S. *** per FTE as upwardly adjusted annually based upon cumulative changes in the CPI, using 1998 as the base year, to be paid as specified in Section 8.2(a) hereof and make a recommendation to such expansion or contraction of the Project Team which recommendation may be adopted by mutual written agreement of ICOS and CombiChem. 8.3 Milestone Payments. Within thirty (30) days of the occurrence of a development milestone triggered by the activities of ICOS or its Affiliates as shown on Appendix A attached hereto, ICOS shall pay CombiChem the related milestone payment in U.S. dollars as set forth on Appendix A attached hereto. Such payments shall apply to any milestone reached by an Active Compound, Development Compound or Product, for a Target within the Collaboration. 8.4 Royalties. During the Royalty Term, ICOS will pay CombiChem an earned royalty of (i) *** of Net Sales of Products sold by ICOS, its Affiliates or its sublicensees on the first *** of Net Sales made per calendar year in *** and (ii) *** on any Net Sales of Products sold by ICOS, its Affiliates or its sublicensees over *** made per calendar year in *** (iii) *** of Net Sales of Products sold by ICOS, its Affiliates or its sublicensees on the first *** of Net Sales made per calendar year *** and (iv) *** on any Net Sales of Products sold by ICOS, its Affiliates or its sublicensees over *** made per calendar year *** . Each payment of royalties shall be accompanied by a report of Net Sales of Products in sufficient detail to permit confirmation of the accuracy of the royalty payment made. (a) ICOS may reduce the percentage amount of earned royalties payable for a Product under this Agreement by *** the amount in excess of *** that ICOS decides, in its reasonable business judgment, to pay to third parties who are not Affiliates or sublicensees of ICOS (not including any royalties payable to CombiChem hereunder) in order to sell the Product to avoid or settle a patent infringement action relating to *** under a Collaboration Patent; provided however, that the royalties payable by ICOS to CombiChem for the sale of Product shall not be reduced to less than *** the amount that ICOS would otherwise be obligated to pay to CombiChem. (b) For any Product which is sold in combination with any other active ingredient which other ingredient is not royalty bearing hereunder (a "Combination Product"), Net Sales, for purposes of calculating royalties, as defined in this Section 8.4, on a Combination Product, shall be calculated by multiplying the net sales with respect to the Combination Product determined in the same manner as Net Sales for a Product by the fraction A/B where A is the gross selling price of the Product sold separately (i.e., without the other active ingredients) and B is the gross selling price of the Combination Product. In the event that no such separate sales *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. - 14 - 16 are made, net sales value shall be calculated by multiplying net sales of the Combination Product by the fraction C/(C + D), where C and D shall be negotiated by the Parties in good faith prior to such sales. (c) Earned royalty shall be paid in the manner provided herein on a country-by-country basis. 8.5 Manner and Place of Payment. Royalty payments and reports for Net Sales of Products shall be calculated in local currencies and reported for each calendar quarter. All royalty payments owed under this Agreement shall be made by wire transfer to the bank account to be designated by CombiChem within sixty (60) days following the end of each such calendar quarter. 8.6 Records and Audit. During the term of this Agreement and for a period of three (3) years thereafter, ICOS shall keep complete and accurate records pertaining to the sale or other disposition of Products in sufficient detail to permit CombiChem to confirm the accuracy of all payments due hereunder. CombiChem shall have the right to cause an independent certified public accounting firm reasonably acceptable to ICOS to audit such records to confirm ICOS's Net Sales for the preceding year. Any information obtained during such audit shall be treated as Confidential Information. Such audits may be exercised after reasonable notice during normal business hours of ICOS no more than once each year. CombiChem shall bear the full cost of such audit unless such audit discloses a deficiency of the greater of U.S. $100,000 or more than five percent (5%) from the amount of the Net Sales reported by ICOS for such audited period. In such case, ICOS shall bear the reasonable cost of such audit. 8.7 Taxes. All income and other taxes levied on account of the royalties and other payments accruing to CombiChem under this Agreement shall be paid by CombiChem, including taxes levied thereon as income to CombiChem. If provision is made in law or regulation for withholding, such tax shall be deducted from the royalty or other payment made by ICOS to the proper taxing authority and a receipt of payment of the tax secured and promptly delivered to CombiChem. Each Party agrees to assist the other Party reasonably in claiming exemption from such deductions or withholdings under any double taxation or similar agreement or treaty from time to time in force. 9. LICENSE GRANTS; SUBLICENSE 9.1 CombiChem License Grant to ICOS. In addition to ICOS's non-exclusive right to use CombiChem Technology as necessary to conduct activities under the Research Program as described in Section 2.2 hereof, subject to the terms and conditions of this Agreement, CombiChem hereby grants to ICOS an exclusive, royalty-free, worldwide license, with the right to sublicense to use such CombiChem Technology as is necessary to make, have made, use, have used, sell, have sold, import and export Active Compounds, Development Compounds and/or Products in the Territory. Such license shall remain exclusive (including as to CombiChem) in relation to an Active Compound, Development Compound and/or Product so - 15 - 17 long as ICOS or its licensee continues to develop and commercialize such Active Compound, Development Compound and/or Product against a Collaboration Target with Due Diligence. 9.2 ICOS License Grant to CombiChem. Subject to Article 4 hereof and following the decision of ICOS or its licensee to not develop and commercialize with Due Diligence an Active Compound, a Development Compound or Product, as the case may be (collectively, "Returned Compounds"), ICOS shall grant to CombiChem a royalty-bearing license, with the right to sublicense, under those Collaboration Patents and know-how which are resulting from the Research Program and related exclusively to the Returned Compound, to make, have made, use, have used, sell, have sold, import and export such Returned Compound in the Territory. The royalty payments payable to ICOS for the license granted to CombiChem pursuant to this Section 9.2 shall be identical to the royalty payments provided for in Section 8.4 hereof (including the Royalty Term in Section 1.35 hereof) substituting CombiChem for ICOS and ICOS for CombiChem. No additional payments shall be due ICOS in consideration of the license grant under this Section 9.2. 9.3 ICOS Sublicense. ICOS shall have the right to transfer, assign or sublicense to a Third Party the Products or Collaboration Patents covering the Products, subject to CombiChem's right to receive all royalties and milestone payments as provided in Sections 8.4 and 8.5 hereof. All payments payable hereunder shall be made to CombiChem by wire transfer to such bank account designated by CombiChem within five (5) business days after receipt by ICOS or its Affiliates of such payments from a Third Party. As an express condition of any such sublicense, any such licensee shall be required to agree in writing (a) to be bound by due diligence, royalty reporting and recordkeeping and inspection provisions no less stringent than those contained in this Agreement and (b) to allow CombiChem to institute or join legal actions against any ICOS sublicensee who fails to satisfy any obligations provided pursuant to this Section 9.3. ICOS shall remain responsible to CombiChem for all milestone and royalty payments actually received by ICOS from its sublicensees. In addition, CombiChem shall have the right to receive all audit reports relating to sales of Products of ICOS's sublicensees, and to cause ICOS or its Affiliates or assigns to have an independent certified public accounting firm (reasonably acceptable to ICOS) audit such sublicensee's records on the same terms as those specified in Section 8.6 hereof. 9.4 Rights to Inactive Compounds. Each Party shall be free to screen Inactive Compounds against any target other than a Collaboration Target. In the event that either ICOS or CombiChem shall develop, market and/or sell, or enter into a binding agreement with a Third Party to develop, market and/or sell, any product containing the Inactive Compound as an active ingredient, then except to the extent that such Inactive Compound is subject of a valid claim in a Patent or Collaboration Patent giving rights to the Party, the other Party hereto shall not be entitled to any payments, milestones, royalties, fees or compensation of any kind. - 16 - 18 10. TERM AND TERMINATION OF THE AGREEMENT 10.1 Term. The term of this Agreement shall commence upon the Effective Date and unless earlier terminated as provided in this Agreement, shall expire at the end of the Research Period. 10.2 Termination by ICOS or CombiChem. If either Party materially breaches this Agreement and fails to remedy that breach within ninety (90) days of receiving written notice thereof from the other Party, or enters into any arrangement of compromise with its creditors or goes into liquidation, insolvency, bankruptcy, receivership or reorganization proceedings, whether voluntarily or compulsorily which is not dismissed by a court of competent jurisdiction within ninety (90) days, then the other Party may at any time, by notice in writing or by facsimile transmission, terminate this Agreement. Within ninety (90) days following termination for any Research Program and/or research related to any Target under this Agreement, the RMC shall prepare a detailed, final written report to each Party, and provide any remaining supply of compounds in synthesis to date, for each Target or Research Program being terminated. 10.3 Termination by ICOS. ICOS may terminate this Agreement effective at any time after *** from the Effective Date, in its sole discretion, upon ninety (90) days' prior written notice. 10.4 Termination by CombiChem. CombiChem may terminate this Agreement effective at any time after *** from the Effective Date, in its sole discretion, upon ninety (90) days' prior written notice. In the event that CombiChem elects to terminate under this Section 10.4, CombiChem shall not work on or provide services, or advice, either independently or with any Third Party on any Collaboration Target for a period of *** from the date that the termination is effective. No termination of this Agreement pursuant to this Section 10.4 shall extend the Target Exclusivity Obligations set forth in Section 4.1 hereof. 10.5 After Termination. Any termination of this Agreement or the Research Program shall be without prejudice to the accrued rights of either Party prior to the termination. In case of termination of this Agreement or the Research Program pursuant to Sections 10.2, 10.3 or 10.4 above, all royalty, milestone, payment and confidentiality obligations set forth in Sections 8.1, 8.4, 8.5, 9.3, 9.4 hereof and Articles 11 and 12 hereof shall survive any such termination. Moreover, ICOS shall not be entitled to any refund of any payments made to CombiChem hereunder upon the expiration of the term of this Agreement or earlier termination pursuant to this Article 10. 10.6 Effect of Termination on Licensees. In the event of any termination of this Agreement pursuant to this Article 10 where such termination shall not have been caused by the action or inaction on the part of any respective licensee of ICOS or CombiChem, or by any breach by such licensee of its obligations under its license from ICOS or CombiChem, as appropriate, such termination of this Agreement shall be without prejudice to the rights of each non-breaching licensee and such licensee shall be deemed to be a direct licensee hereunder. *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. - 17 - 19 11. CONFIDENTIAL INFORMATION 11.1 Nondisclosure. During the term of this Agreement and for a period of *** years after termination or expiration thereof, each Party will maintain all Confidential Information in trust and confidence and will not disclose any Confidential Information to any third party or use any Confidential Information for any purpose except (i) as expressly authorized by this Agreement, (ii) as required by law or court order, after as much advance notice as is practical to the other Party, (iii) to its consultants, subcontractors or agents who need to know to accomplish the purposes of this Agreement and who are bound by equivalent written confidentiality obligations. Each Party may use the other Party's Confidential Information only to the extent required to accomplish the purposes of this Agreement. Each Party will use at least the same standard of care as it uses to protect proprietary or confidential information of its own to ensure that its Affiliates, employees, agents, consultants and other representatives do not disclose or make any unauthorized use of the Confidential Information. Each Party will promptly notify the other upon discovery of any unauthorized use or disclosure of the Confidential Information. 11.2 Exceptions. Confidential Information shall not include any information which the receiving Party can prove by competent evidence: (a) is now, or hereafter becomes, through no act or failure to act on the part of the receiving Party, generally known or available; (b) is known by the receiving Party at the time of receiving such information, as evidenced by its written records; (c) is hereafter disclosed to the receiving Party by a Third Party, as a matter of right and without restriction on disclosure; (d) is independently developed by the receiving Party without the aid, application or use of Confidential Information; or (e) is the subject of a written permission to disclose provided by the disclosing Party. 12. PUBLICATIONS AND PUBLIC STATEMENTS 12.1 Publications. Without affecting obligations under Article 11 above, neither Party shall publish any information with respect to Collaboration Compounds or Development Compound during the Exclusivity Period without the prior written permission of the other Party. Such permission shall be approved or disapproved within thirty (30) days of written request for permission unless the other Party requests additional time (not to exceed ninety (90) days) for the purpose of protecting its intellectual property position. Such permission shall not be unreasonably withheld. The Party proposing to publish such information shall give the other Party ninety (90) days prior written notice and an opportunity to review such manuscript in order to determine the patentability of the information contained therein. 12.2 Public Statements. Neither Party shall use the name of the other Party in any public statement, prospectus, annual report or press release or other public communication (collectively "Public Statements") (except to the extent that use of the name is required for disclosure by the Securities and Exchange Commission or other governmental rules or regulations) without the prior written approval of the other Party, which may not be unreasonably withheld or delayed; provided, however, that both Parties shall endeavor in good faith to give the other Party a minimum of two (2) business days to review such Public Statements; provided, *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. - 18 - 20 further, that, upon approval of any such Public Statement, both Parties may disclose to Third Parties the information contained in such Public Statement without the further approval of the other; and provided, further, that if a Party does not approve such Public Statement, either Party may still use the name of the other Party in any Public Statement without the prior written approval of the other Party, if such Party is advised by counsel that such disclosure is required to comply with applicable law. 13. INDEMNIFICATION 13.1 EACH PARTY HEREBY AGREES TO SAVE, DEFEND AND HOLD THE OTHER PARTY AND ITS OFFICERS, DIRECTORS, EMPLOYEES, CONSULTANTS AND AGENTS HARMLESS FROM AND AGAINST ANY AND ALL SUITS, CLAIMS, ACTIONS, DEMANDS, LIABILITIES, EXPENSES AND LOSSES, INCLUDING REASONABLE LEGAL EXPENSES AND ATTORNEYS' FEES ("LOSSES") RESULTING DIRECTLY OR INDIRECTLY FROM THE INDEMNIFYING PARTY'S ACTS OR OMISSIONS IN CONNECTION WITH THE MANUFACTURE, DEVELOPMENT, USE, HANDLING, STORAGE, SALE OR OTHER DISPOSITION OF CHEMICAL AGENTS, COLLABORATION COMPOUNDS, ACTIVE COMPOUNDS, DEVELOPMENT COMPOUNDS OR PRODUCTS BY SUCH PARTY, ITS AFFILIATES OR LICENSEES except to the extent such Losses result from the negligence (whether active, passive or imputed), breach of this Agreement or willful misconduct of the Party claiming a right of indemnification under this Article 13. 13.2 Infringement (a) Subject to Section 13.2(c) below, ICOS shall hold CombiChem and its officers, directors, employees, consultants, and agents harmless from and against any and all losses resulting from the infringement of any Third Party's Patent issued as of the Effective Date due to the performance by ICOS or its Affiliates of any activity contemplated hereunder, including, but not necessarily limited to, ICOS's responsibilities under Section 2.2 above, developing Products, and selling Products. (b) Subject to Section 13.2(c) below, CombiChem shall hold ICOS and its officers, directors, employees, consultants, and agents harmless from and against any and all losses resulting from the infringement of any Third Party's Patent issued as of the Effective Date due to the performance by CombiChem of any activity contemplated hereunder, including, but not necessarily limited to, CombiChem's responsibilities under Section 2.1 above. (c) The indemnity provided in Sections 13.2(a) and 13.2(b) above shall not apply where the loss is due to the breach by the indemnified Party of a warranty made in Article 19. 13.3 Procedures. If either Party (the "Indemnified Party") seeks indemnification under this Article 13, it shall inform the other Party (the "Indemnifying Party") of a claim as soon as reasonably practicable after it receives notice of the claim, shall permit the Indemnifying Party to assume direction and control of the defense of the claim (including the right to settle any claim - 19 - 21 brought against the Indemnified Party upon prior written consent, which shall not be unreasonably withheld), and shall give reasonable cooperation (at the expense of the Indemnifying Party) in the defense of such claim. 14. ASSIGNABILITY This Agreement may not be assigned by either Party without the prior written consent of the other Party, not to be unreasonably withheld; provided, however, that either Party may assign this Agreement, in whole or in part, to an Affiliate or to a successor of a Party in connection with the merger, consolidation or sale of all or substantially all of such Party's assets or that portion of its business pertaining to the subject matter of this Agreement (and upon doing so will promptly notify the other Party in writing); provided that the assigning Party remains fully liable as obligated hereunder. 15. DISPUTE RESOLUTION PROCEDURES 15.1 Senior Executives Discussions. If a decision on a matter regarding the management of the Research Program as provided herein is not reached by the RMC, the dispute will be resolved as set forth in Article 6 above. If a dispute arises between CombiChem and ICOS with respect to matters other than the management of the Research Program, either during or after the Research Period, such dispute will be referred to the appropriate senior management in the area of the dispute. If such senior management are unable to resolve such dispute, such dispute will be referred to the Chief Executive Officer of ICOS and the Chief Executive Officer of CombiChem. If such officers are unable to reach an agreement within thirty (30) days following the initiation of discussions between them, such dispute shall be submitted to mediation and if there is no settlement of the dispute within sixty (60) days following the commencement of such mediation process, such dispute may, at the Party's mutual written agreement, be settled by arbitration as described in Section 15.2 below. 15.2 Binding Arbitration. If the Parties have not been able to resolve the dispute as provided in Section 15.1 above and the Parties mutually agree in writing, the dispute shall be finally settled by binding arbitration. Any arbitration hereunder shall be conducted under rules of the American Arbitration Association. The arbitration shall be conducted before three arbitrators chosen according to the following procedure: each of the parties shall appoint one arbitrator and the two so nominated shall choose the third. If the arbitrators chosen by the parties cannot agree on the choice of the third arbitrator within a period of thirty (30) days after their appointment, then the third arbitrator shall be appointed by the Court of Arbitration of the American Arbitration Association. If CombiChem brings an arbitration action, such arbitration shall occur in Seattle, Washington. If ICOS brings an arbitration action, such arbitration shall occur in San Diego, California. The arbitrators shall have the authority to grant specific performance, and to allocate between the parties the costs of arbitration in such equitable manner as they determine. The arbitral award (i) shall be final and binding upon the parties; and (ii) may be entered in any court of competent jurisdiction. - 20 - 22 15.3 Injunctive and Other Relief. Nothing contained in this Article 15 or any other provisions of this Agreement shall be construed to limit or preclude a Party from bringing any action in any court of competent jurisdiction for injunctive or other provisional relief to compel the other Party to comply with its obligations hereunder before or during the pendency of arbitration proceedings. In the event that the Parties do not mutually agree to enter binding arbitration as provided in Section 15.2 hereof, the Parties may pursue all available legal remedies. 16. NOTICES Any notice required or permitted to be given hereunder shall be deemed sufficient if sent by facsimile letter or overnight courier, or delivered by hand to ICOS or CombiChem at the respective addresses and facsimile numbers as set forth below or at such other address and facsimile number as either Party hereto may designate. If sent by facsimile letter, notice shall be deemed given when the transmission is completed if the sender has a confirmed transmission report. If a confirmed transmission report does not exist, then the notice will be deemed given when the notice is actually received by the person to whom it is sent. If delivered by overnight courier, notice shall be deemed given when it has been signed for. If delivered by hand, notice shall be deemed given when received. if to CombiChem, to: CombiChem, Inc. 9050 Camino Santa Fe San Diego, California 92121 Attention: President Fax number: (619) 530-9998 with a copy to: Brobeck, Phleger & Harrison LLP 550 West C Street, Suite 1200 San Diego, California 92101 Attention: Faye H. Russell, Esq. Fax number: (619) 234-1966 - 21 - 23 if to ICOS to: ICOS Corporation 22021 20th Avenue, S.E. Bothell, Washington 98021 Attention: Legal Department Fax number: (425) 489-0356 17. SURVIVAL The provisions of Sections 2.4, 5.1, 5.2, 5.3, 10.5, 10.6 and Articles 4, 8, 9, 11, 12, 13, 15, and this Article 17 shall survive termination of this Agreement in addition to those provisions which by their terms survive. 18. ADDITIONAL TERMS 18.1 Entire Agreement. This Agreement constitutes the entire understanding between the Parties with respect to the subject matter hereto and supersedes and replaces all previous negotiations, understandings, representations, writings and contract provisions and rights relating hereof. 18.2 Amendment; No Waiver. No provision of this Agreement may be amended, revoked or waived except by a writing signed and delivered by an authorized officer of each Party. Any waiver on the part of either Party of any breach or any fight or interest hereunder shall not imply the waiver of any subsequent breach or waiver of any other right or interest. 18.3 Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, each of which shall remain in full force and effect. 18.4 Headings. The descriptive headings are inserted for convenience of reference only and are not intended to be part of or to affect the meaning of or interpretation of this Agreement. 18.5 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which together shall be deemed to be one and the same instrument. 18.6 Further Assurances. At any time and from time to time after the Effective Date, the Parties shall each do, execute, acknowledge and deliver, and cause to be done, executed, acknowledged or delivered, all such further acts, transfers, conveyances, or assignments as may be reasonably required to carry out the transactions contemplated by this Agreement. 19. REPRESENTATIONS AND WARRANTIES 19.1 Authorization. All action on the part of each of CombiChem, ICOS and their respective officers, and directors necessary for the authorization, execution and delivery of this - 22 - 24 Agreement and the performance of all obligations of CombiChem, ICOS and ICOS, respectively, hereunder has been taken. 19.2 Rights to Intellectual Property. Each Party warrants that it has the power to grant all of the rights granted and make such required assignments, and to assume all of the obligations required, under this Agreement. Under no circumstances does CombiChem warrant to ICOS that its rights in any Active Compound, Development Compound or Products are exclusive to the extent such Active Compound, Development Compound or Products may be covered under the patent claims of Third Parties wherein such claims are not the direct result of a collaboration between the Third Party and CombiChem. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] - 23 - 25 IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as of the Effective Date. COMBICHEM, INC. ICOS CORPORATION By: /s/ Illegible By: /s/ Illegible ---------------------------- -------------------------------- Its: Illegible Its: Illegible --------------------------- ------------------------------- [SIGNATURE PAGE TO COLLABORATIVE RESEARCH AND LICENSE AGREEMENT] - 24 - 26 Appendix A Milestones and Payments(1) (in U.S. Dollars) Milestone Milestone Payment(2) - --------- -------------------- *** *** Total *** (1) Paid in U.S. Dollars *** *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. Appendix A-1 27 Appendix B Targets ------- Initial Target: *** Alternative Targets: *** *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. Appendix B-1 EX-27.1 3 EXHIBIT 27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 9-MOS 12-MOS 3-MOS DEC-31-1997 DEC-31-1997 DEC-31-1998 JAN-01-1997 JAN-01-1997 JAN-01-1998 SEP-30-1997 DEC-31-1997 MAR-31-1998 8,402 16,921 14,488 0 0 0 0 528 1,922 0 0 0 0 0 0 8,920 18,479 17,567 4,080 5,961 7,124 982 1,272 1,600 13,363 25,526 25,926 3,632 5,320 5,998 0 0 0 23,130 23,130 23,130 0 0 0 1,978 12,523 12,523 (1,662) (2,001) (1,891) 13,363 25,526 25,926 0 0 0 4,599 7,471 3,372 0 0 0 0 0 0 8,341 12,003 4,130 0 0 0 (293) (252) (121) (3,669) (4,322) (674) 0 0 0 (3,669) (4,322) (674) 0 0 0 0 0 0 0 0 0 (3,669) (4,322) (674) (1.24) (0.49) (0.07) (1.24) (0.49) (0.07)
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