Document:

Exhibit 10.2

 

 

AGREEMENT FOR PURCHASE AND SALE

 

OF

 

2280 Faraday Avenue

 

San Diego, CA 92008

 

June 28, 2005

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I

  	
  BASIC DEFINITIONS

  	
   

  
	
  ARTICLE II

  	
  PURCHASE AND SALE

  	
   

  
	
  Section 2.1

  	
  Purchase and Sale

  	
   

  
	
  Section 2.2

  	
  Purchase Price

  	
   

  
	
  Section 2.3

  	
  Buyer’s Review and Seller’s
  Disclaimer

  	
   

  
	
  Section 2.4

  	
  Permitted Title Exceptions

  	
   

  
	
  ARTICLE III

  	
  CONDITIONS PRECEDENT

  	
   

  
	
  Section 3.1

  	
  Conditions

  	
   

  
	
  Section 3.2

  	
  Failure or Waiver of
  Conditions Precedent

  	
   

  
	
  ARTICLE IV

  	
  COVENANTS, WARRANTIES AND
  REPRESENTATIONS

  	
   

  
	
  Section 4.1

  	
  Seller’s Warranties and
  Representations

  	
   

  
	
  Section 4.2

  	
  Seller’s Covenants

  	
   

  
	
  Section 4.3

  	
  Buyer’s Warranties and
  Representations

  	
   

  
	
  Section 4.4

  	
  Limitations

  	
   

  
	
  Section 4.5

  	
  Indemnifications

  	
   

  
	
  ARTICLE V

  	
  DEPOSIT

  	
   

  
	
  ARTICLE VI

  	
  ESCROW AND CLOSING

  	
   

  
	
  Section 6.1

  	
  Escrow Arrangements

  	
   

  
	
  Section 6.2

  	
  Closing

  	
   

  
	
  Section 6.3

  	
  Prorations

  	
   

  
	
  Section 6.4

  	
  Other Closing Costs

  	
   

  
	
  Section 6.5

  	
  Further Documentation

  	
   

  
	
  ARTICLE VII

  	
  MISCELLANEOUS

  	
   

  
	
  Section 7.1

  	
  Damage or Destruction

  	
   

  
	
  Section 7.2

  	
  Brokerage Commissions and
  Finder’s Fees

  	
   

  
	
  Section 7.3

  	
  Successors and Assigns

  	
   

  
	
  Section 7.4

  	
  Notices

  	
   

  
	
  Section 7.5

  	
  Time

  	
   

  
	
  Section 7.6

  	
  Possession

  	
   

  
	
  Section 7.7

  	
  Incorporation by Reference

  	
   

  
				

 

i

 

	
  Section 7.8

  	
  No Deductions or Off-Sets

  	
   

  
	
  Section 7.9

  	
  Attorneys’ Fees

  	
   

  
	
  Section 7.10

  	
  Construction

  	
   

  
	
  Section 7.11

  	
  Governing Law

  	
   

  
	
  Section 7.12

  	
  Damages

  	
   

  
	
  Section 7.13

  	
  Confidentiality

  	
   

  
	
  Section 7.14

  	
  Counterparts

  	
   

  
	
  Section 7.15

  	
  Entire Agreement

  	
   

  

 

ii

 

AGREEMENT FOR PURCHASE AND SALE

OF

2280 FARADAY AVENUE, CARLSBAD, CA

 

THIS
AGREEMENT FOR PURCHASE AND SALE is made and entered into as of June 28, 2005 (the “Effective Date”) by
and between ISIS PHARMACEUTICALS, INC.,
a Delaware corporation (“Seller”), and ELECTRO
SURFACE TECHNOLOGY, INC., a California corporation (“Buyer”).

 

RECITALS

 

A.            Seller owns certain improved real property
situated at 2280 Faraday Avenue, Carlsbad, CA 92008, together with associated
tangible and intangible personal property.

 

B.            Buyer desires to purchase from Seller and
Seller desires to sell to Buyer, subject to the terms and conditions contained
in this Agreement, the foregoing real property and any and all associated
tangible and intangible personal property owned by Seller.

 

AGREEMENT

 

NOW,
THEREFORE, Buyer and
Seller do hereby agree as follows:

 

ARTICLE I

BASIC DEFINITIONS

 

Closing Date. 
Unless otherwise agreed upon in writing by the Parties, the term
“Closing Date” shall mean the 90th day following the Effective Date
(i.e September 26, 2005), or any earlier date approved in writing by Buyer and
Seller for the close of escrow with respect to the purchase and sale of the
Property.

 

Contract
Period.  The term “Contract Period” shall mean the
period from the date of this Agreement through and including the Closing Date.

 

Disclosure
Statement.  The term “Disclosure Statement” shall mean the
statement set forth as Exhibit A
to this Agreement.

 

Inspection
Period.  The term “Inspection Period” shall mean the
period commencing on the Effective Date and ending at 5:00 p.m. California time
on the 45th day following the Effective Date (i.e. August 12, 2005),
except that solely with respect
to the condition set forth in clause (iii) of Section 3.1(a), the Inspection
Period will end at 5:00 p.m. California time on September 1, 2005.  Notwithstanding the foregoing, if prior to September
1, 2005 (I) the appraisal in connection with Buyer’s SBA loan has been
completed; (II) the result of such appraisal is an amount sufficient to fund
Buyer’s SBA loan as contemplated by clause (iii) of Section 3.1(a); (III)
Buyer’s lenders’ inform Seller that the lenders’ are prepared to fund the SBA
loan prior to the Closing Date, but subject to final loan committee approval;
and (IV) one or both 

 

1

 

of such loan committees have not met, but are
scheduled to meet to approve Buyer’s SBA loan on a date between September 1,
2005 and September 16, 2005, then with respect to the condition set forth in
clause (iii) of Section 3.1(a), the Inspection Period will end at 12:00 p.m.
California time on the first business day following the date such loan
committees are scheduled to meet to approve Buyer’s SBA loan.

 

Intangible
Property.  The term “Intangible Property” shall mean
Seller’s rights and interests in: (a) any and all transferable or assignable
permits, building plans and specifications, certificates of occupancy,
operating permits, sign permits, development rights and approvals,
certificates, licenses, warranties and guarantees, trade names, service marks,
engineering, soils, pest control and other reports relating to the Property,
tenant lists, and advertising materials identified with the Property; (b)
maintenance, service and other operating contracts, equipment leases and other
arrangements or agreements to which Seller is a party affecting the ownership,
repair, maintenance, management, leasing or operation of the Property; and (c)
all other transferable intangible property, miscellaneous rights, benefits or
privileges of any kind or character with respect to the Property.

 

Leases.  The
term “Leases” shall mean all leases, rental agreements or other agreements
(including all amendments or modifications thereto) which entitle any person to
the occupancy or use of any portion of the Property.

 

Personal
Property.  The term “Personal Property” shall mean all
furniture, furnishings, trade fixtures, building systems and equipment
(including, without limitation, HVAC, back-up generators, security and life
safety systems) and other tangible personal property owned by Seller that is
located at and used in connection with the operation of the Real Property.

 

Property.  The
term “Property” shall mean the Real Property, Seller’s interest in the Leases,
the Personal Property and the Intangible Property.

 

Real
Property.  The term “Real Property” shall mean that
certain real property (including, without limitation, any and all other
improvements thereon) situated at 2280 Faraday Avenue, Carlsbad, CA 92008.  The land component of the Real Property is
legally described in Exhibit B attached
to this Agreement.

 

Title
Company.  The term “Title Company” shall mean First
American Title Insurance Company, 411 Ivy Street, San Diego, CA 92101.

 

ARTICLE II

PURCHASE AND SALE

 

Section 2.1            Purchase and Sale. 
Seller agrees to sell the Property to Buyer, and Buyer agrees to
purchase the Property upon all of the terms, covenants and conditions set forth
in this Agreement.

 

Section 2.2            Purchase Price.  The
purchase price for the Property (the “Purchase Price”) shall be the sum of
$3,200,000.00.  The entire amount of the
Purchase Price (less the 

 

2

 

Deposit delivered pursuant to Article V
below) shall be payable by Buyer to Seller in cash on the Closing Date through
the escrow described in Section 6.1 below.

 

Section 2.3            Buyer’s Review and Seller’s
Disclaimer.

 

(a)           Subject
to the provisions of subsection 2.3(c) below, during the Inspection Period
Buyer shall be permitted to make a complete review and inspection of the
physical, legal, economic and environmental condition of the Property,
including, without limitation, any leases and contracts affecting the Real
Property, books and records maintained by Seller or its agents relating to the
Property, boundary and other survey-related issues relating to the Real
Property, pest control matters, soil condition, asbestos, PCB, hazardous waste,
toxic substance or other environmental matters, compliance with building,
health, safety, land use and zoning laws, regulations and orders, plans and
specifications, structural, life safety, HVAC and other building system and engineering
characteristics, traffic patterns and all other information pertaining to the
Property.  Without representation or
warranty, Seller shall cooperate in Buyer’s review and provide Buyer with the
opportunity to review leases, financial reports, survey and other third party
inspection reports and similar non-proprietary or non-confidential materials in
Seller’s possession relating to the Property. 
Buyer acknowledges (i) that Buyer has entered into this Agreement with
the intention of making and relying upon its own investigation of the physical,
environmental, economic and legal condition of the Property, and (ii) that
Buyer is not relying upon any representations and warranties, other than those
specifically set forth in Section 4.1 below, made by Seller or anyone acting or
claiming to act on Seller’s behalf concerning the Property.  Buyer further acknowledges that it has not
received from Seller any accounting, tax, legal, architectural, engineering,
property management or other advice with respect to this transaction and is
relying solely upon the advice of its own accounting, tax, legal,
architectural, engineering, property management and other advisors.  Buyer specifically undertakes and assumes all
risks associated with the matters disclosed by Seller on the Disclosure
Statement.  Subject to the provisions of
Section 4.1 of this Agreement, Buyer shall purchase the Property in its “as is”
condition on the Closing Date and assumes the risk that adverse physical, environmental,
economic or legal conditions may not have been revealed by its
investigation.  Furthermore, at Seller’s
expense, Seller will engage Kleinfelder Inc, or such other environmental
consulting firm as reasonably approved by Buyer, to analyze a single core
sample taken from the sump area located on the Property using the analytical
methods listed on Schedule 2.3(a) attached hereto, with the results of such
analysis to be provided electronically (the “Core Test”).  Seller will provide the results of such Core
Test to Buyer on or before 5:00 p.m. on the 25th day following the
Effective Date.

 

(b)           Except
with respect to any claims arising out of any breach of covenants,
representations or warranties set forth in Section 4.1 below, Buyer, for itself
and its agents, affiliates, successors and assigns, hereby releases and forever
discharges Seller, its agents, affiliates, successors and assigns from any and
all rights, claims and demands at law or in equity, whether known or unknown at
the time of this agreement, which Buyer has or may have in the future, arising
out of the physical, environmental, economic or legal condition of the
Property, including, without limitation, any claim for indemnification or
contribution arising under the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601, et. seq.) or any
similar federal, state or local statute, rule or ordinance relating to
liability of property owners for environmental matters.  For the foregoing purposes, Buyer hereby 

 

3

 

specifically waives the provisions of Section
1542 of the California Civil Code and any similar law of any other state,
territory or jurisdiction.  Section 1542
provides:

 

A general release does not
extend to claims which the creditor does not know or suspect to exist in his
favor at the time of executing the release, which if known by him must have
materially affected his settlement with the debtor.

 

Buyer hereby specifically
acknowledges that Buyer has carefully reviewed this subsection and discussed
its import with legal counsel and that the provisions of this subsection are a
material part of this Agreement.

 

	
   

  	
   

  
	
   

  	
  Buyer

  

 

By proceeding with the close
of escrow, Buyer shall be deemed for all purposes to have remade as of the
Closing Date, all of the statements set forth in this Section 2.3(b).

 

(c)           Buyer’s
exercise of the rights of review and inspection set forth in subsection (a)
shall be subject to the following limitations: (i) any entry onto the Real
Property by Buyer, its agents or representatives, shall be during normal
business hours, following reasonable prior notice to Seller and delivery to
Seller of satisfactory evidence of Buyer’s general liability insurance (in the
amount of at least $1,000,000 per occurrence, $3,000,000 aggregate, and with
Seller named as an additional insured), and, at Seller’s discretion,
accompanied by a representative of Seller; (ii) Buyer shall not conduct any
drilling, test borings or other disturbance of the Real Property for review of
soils, compaction, environmental, structural or other conditions without
Seller’s prior written consent; (iii) Buyer shall exercise reasonable diligence
not to disturb the use or occupancy of any occupant of the Property; and (iv)
Buyer shall indemnify, defend and hold Seller harmless from all loss, cost, and
expense resulting from any entry or inspections performed by Buyer, its agents
or representatives.

 

Section 2.4            Permitted Title Exceptions. 
During the Inspection Period, Seller with provide to Buyer from Title
Company and Buyer will review a preliminary title report with respect to the
Real Property, together with all documents and information pertaining to the
exceptions to title listed in such report. 
In addition, Buyer shall, at its expense, obtain during the Inspection
Period any survey of the Real Property desired by Buyer or required by Title
Company as a condition to the issuance of the Title Policy described in Section
3.1(a)(ii) below (the “Survey”).  Buyer
may advise Seller in writing and in reasonable detail, not later than five (5)
business days prior to the close of the Inspection Period, what exceptions to
title, if any, listed in the then current preliminary report or disclosed on
the Survey are not acceptable to Buyer (the “Title Objections”).  Buyer shall not, however, unreasonably
express disapproval of any exceptions to title and, prior to notifying Seller
of any Title Objections, shall endeavor in good faith to cause Title Company to
modify and update the preliminary report to reflect requested corrections and
revisions.  Seller shall have five (5)
business days after receipt of Buyer’s Title Objections to give Buyer notice
that (a) Seller will remove any Title Objections from title (or afford the
Title Company necessary information or certifications to permit it to insure
over such exceptions) or (b) Seller elects not to cause such exceptions to be
removed.  Seller’s failure to 

 

4

 

provide notice to Buyer within such five (5)
business day period as to any Title Objection shall be deemed an election by
Seller not to remove the Title Objection. 
If Seller so notifies or is deemed (pursuant o the previous sentence) to
have notified Buyer that Seller shall not remove any or all of the Title
Objections, Buyer shall have until the close of the Inspection Period to
determine whether (i) to proceed with the purchase and take the Property
subject to such exceptions or (ii) to terminate this Agreement, in which case
the Deposit made by Buyer to Title Company will promptly be returned to Buyer
in its entirety.  “Permitted Exceptions”
shall include and refer to any and all exceptions to title, excepting solely
Title Objections that have been timely identified by Buyer and that Seller has
notified Buyer pursuant to this Section that Seller is willing to remove.

 

ARTICLE III

CONDITIONS PRECEDENT

 

Section 3.1            Conditions.

 

(a)           Notwithstanding
anything in this Agreement to the contrary, Buyer’s obligation to purchase the
Property shall be subject to and contingent upon the satisfaction or waiver of
the following conditions precedent:

 

(i)            Buyer’s
inspection and approval, within the Inspection Period, of all physical,
environmental (including, but not limited to the Core Test), economic and legal
matters relating to the Property, pursuant to Section 2.3 above;

 

(ii)           The
willingness of Title Company to issue, upon the sole condition of the payment
of its regularly scheduled premium, its American Land Title Association
extended coverage Owner’s Policy of Title Insurance 1992 Form (the “Title
Policy”), with such endorsements as may have been requested by Buyer and agreed
to by Title Company during the Inspection Period, insuring Buyer in the amount
of the Purchase Price that title to the Real Property is vested of record in
Buyer on the Closing Date subject only to the printed conditions and exceptions
of such policy and the Permitted Exceptions;

 

(iii)         Prior
to the expiration of the Inspection Period, Buyer obtaining a commitment for an
SBA loan for a sum equal to at least 90% of the Purchase Price; provided, however, from and after the
expiry of the Inspection Period, the condition set forth in this clause (iii)
will be null and void;

 

(iv)          Seller’s
performance or tender of performance of all material obligations under this
Agreement and the material truth and accuracy of Seller’s express
representations and warranties.

 

(b)           Notwithstanding
anything in this Agreement to the contrary, Seller’s obligation to sell the
Property shall be subject to and contingent upon the satisfaction or waiver of
the following conditions precedent:

 

5

 

(i)            Buyer’s
performance or tender of performance of all material obligations under this
Agreement and the material truth and accuracy of Buyer’s express representations
and warranties;

 

(ii)           The
board of directors of Buyer will have approved the sale of the Property
pursuant to the terms of this Agreement; provided,
however that this condition (ii) will become null and void after the
expiration of the Inspection Period; and

 

(iii)         The
satisfaction of the conditions set forth in subparagraphs (a)(i) through (iii)
above.

 

Section 3.2            Failure or Waiver of
Conditions Precedent.  In the event any of the conditions set forth
in Section 3.1 are not fulfilled or waived, the party benefited by such
condition may, by written notice to the other party, terminate this Agreement,
whereupon all rights and obligations hereunder of each party shall be at an
end.  Either party may, at its election,
at any time or times on or before the date specified for the satisfaction of
the condition, waive in writing the benefit of any of the conditions set forth
in Section 3.1(a) and 3.1(b) above. 
Notwithstanding any contrary provision of this Agreement, Buyer shall be
deemed to have completed the inspection and approval described in Section
3.1(a)(i) above, and the condition set forth in that clause shall be deemed
satisfied, unless Buyer delivers to Seller written notice of failure of such
condition on or prior to the close of the Inspection Period.  In the event this Agreement is terminated as
a result of the failure of any condition set forth in Section 3.1(a), Seller
shall return the full amount of the Deposit to Buyer.  In any event, Buyer’s consent to the close of
escrow pursuant to this Agreement shall waive any remaining unfulfilled
conditions.

 

ARTICLE IV

COVENANTS, WARRANTIES AND REPRESENTATIONS

 

Section 4.1            Seller’s Warranties and
Representations.  Seller hereby makes the following
representations and warranties to Buyer as of the date of this Agreement;
provided that each of such representations and warranties shall be deemed to be
modified by any contrary or qualifying information contained in any reports,
schedules or other informational materials delivered or made available to Buyer
pursuant to this Agreement or set forth on the Disclosure Statement:

 

(a)           Seller
has full power and lawful authority to enter into and carry out the terms and
provisions of this Agreement and to execute and deliver all documents which are
contemplated by this Agreement, and all actions of Seller necessary to confer
such power and authority upon the persons executing this Agreement (and all
documents which are contemplated by this Agreement) on behalf of Seller have
been taken;

 

(b)           To
Seller’s knowledge, (i) the list of service and equipment contracts attached to
this Agreement as 

Exhibit D is a complete and
accurate list of all of the service and equipment contracts presently in effect
with respect to the Real Property, (ii) the copies of such contracts that have
been (or will be) delivered or made available to Buyer are true, correct and
complete, and (iii) each such contract is in full force and effect;

 

6

 

(c)           To
Seller’s knowledge, Seller has received no written notice from any governmental
authorities that (i) eminent domain proceedings for the condemnation of the
Real Property are pending or (ii) that the Property or its operation violates
in any way any applicable laws, ordinances, rules, regulations, judgments,
orders, covenants, conditions or restrictions, whether federal, state, local,
foreign or private, including without limitation the Americans with
Disabilities Act and applicable environmental laws, rules and regulations, the
violation of which would result in a material adverse change in the Property or
its operation;

 

(d)           To
Seller’s knowledge, Seller has received no written notice of any threatened or
pending litigation against Seller or affecting the Real Property which would
materially and adversely affect the Real Property or Seller’s capacity to
perform under this Agreement;

 

(e)           Seller
is not a “foreign person” within the meaning of Section 1445(f)(3) of the
Internal Revenue Code; and

 

(f)            To
Seller’s knowledge, Seller has received no written notice from any governmental
authority that any of the improvements located on the Real Property are
presently in violation of any applicable building codes, zoning or land use
laws, or other law, order, ordinance, rule or regulation affecting the Real
Property.

 

As used herein, the term
“Seller’s knowledge” or words of similar effect shall mean the current actual,
subjective knowledge of (i) Patricia Lowenstam, Vice President Human Resources,
Operations, Health, Safety and Environment, (ii) Elizabeth Hougen, Vice
President Finance and (iii) Grantland E. Bryce, Vice President Legal and
General Counsel.  Neither Patricia
Lowenstam, Elizabeth Hougen or Grantland Bryce nor any party other than Seller
shall bear responsibility for any breach of representation.  Notwithstanding the foregoing, an officer of
Isis identified above charged with responsibility for the aspect of the
business relevant or related to the matter at issue will be deemed to have
knowledge of a particular matter if, in the reasonable exercise of his or her
duties and responsibilities, such officer should have known of such matter.

 

Section 4.2            Seller’s Covenants. 
Seller hereby covenants and agrees as follows:

 

(a)           during
the Contract Period, Seller shall ensure that the Property is operated and
maintained in a manner consistent with current practices and maintain
reasonable and customary levels and coverages of insurance and Seller shall not
create or acquiesce in the creation of liens or exceptions to title other than
the Permitted Exceptions or voluntarily take any action (other than as may be
permitted pursuant to subparagraphs (b) and (c) of this Section 4.2) to render
any of the representations or warranties of Seller set forth in Section 4.1
materially incorrect; and

 

(b)           during
the Contract Period, Seller will not execute or modify any Leases or other
contracts, (i) without promptly notifying Buyer thereof and providing Buyer
with copies of the relevant contract documents, and (ii) as to any Lease or
other contract (or modification thereof) executed during the period between the
expiration of the Inspection Period and the Closing Date, without Buyer’s prior
approval, which approval shall not be unreasonably 

 

7

 

withheld and shall be deemed given if Buyer
should fail to approve or disapprove any such matter in writing within 5 days
following Seller’s request for such action.

 

(c)           Notwithstanding
anything to the contrary contained in this Section 4.2, Seller is permitted to
grant Electronic Online Systems International (“EOS”) a non-exclusive easement
to the parking spaces depicted on Schedule 4.2(c), solely in connection with
the sale of the property located at 2292 Faraday Avenue, Carlsbad, CA 92008
(“2292 Faraday”); provided, however,
that if Seller does not ultimately sell 2292 Faraday to EOS, this exception to
Section 4.2 will become null and void.

 

Section 4.3            Buyer’s Warranties and
Representations.  Buyer hereby represents and warrants to
Seller that (a) Buyer has and as of the Closing Date shall have, full power and
lawful authority to enter into and carry out the terms and conditions of this
Agreement and to execute and deliver all documents which are contemplated by
this Agreement, (b) all actions necessary to confer such power and authority
upon the persons executing this Agreement and all documents which are
contemplated by this Agreement to be executed on behalf of Buyer or its
assignee have been taken, (c) Buyer has received no written notice of any
threatened or pending litigation which would materially and adversely affect
Buyer’s capacity to perform under this Agreement, (d) Buyer has received a SBA
approval letter from a reputable financial institution in an amount that will
allow Buyer to satisfy its obligation to pay the Purchase Price; and (e) Buyer
believes that, unless matters having a material adverse economic effect on the
Property are discovered by Buyer during the Inspection Period, the Purchase
Price as set forth in Section 2.2 above is a fair and reasonable price to pay
for the Property.  Buyer warrants and
represents to Seller that Buyer will not attempt to renegotiate the Purchase
Price unless such matters having a material adverse economic effect on the
Property are discovered by Buyer during the Inspection Period.

 

Section 4.4            Limitations.

 

(a)           The
parties agree that (i) Seller’s warranties and representations contained in
this Agreement and in any document executed by Seller pursuant to this
Agreement shall survive Buyer’s purchase of the Property only for a period of
180 days after the Closing Date (the “Limitation Period”), (ii) Seller’s
aggregate liability for claims arising out of such representations and
warranties shall not exceed $500,000.00 and (iii) Buyer shall provide actual
written notice to Seller of any breach of such warranties or representations
and shall allow Seller 30 days within which to cure such breach, or, if such
breach cannot reasonably be cured within 30 days, an additional reasonable time
period, so long as such cure has been commenced within such 30 days and
diligently pursued.  If Seller fails to
cure such breach after actual written notice and within such cure period,
Buyer’s sole remedy shall be an action at law for damages as a consequence
thereof, which must be commenced, if at all, within the Limitation Period;
provided, however, that if within the Limitation Period Buyer gives Seller
written notice of such a breach and Seller commences to cure and thereafter
terminates such cure effort, Buyer shall have an additional 30 days from the date
of such termination within which to commence an action at law for damages as a
consequence of Seller’s failure to cure. 
The Limitation Period referred to herein shall apply to known as well as
unknown breaches of such warranties or representations.

 

8

 

(b)           Notwithstanding
any contrary provision of this Agreement, if Seller becomes aware during the
Contract Period of any matters which make any of its representations or
warranties untrue, Seller shall promptly disclose such matters to Buyer in
writing.  In the event that Seller so
discloses any matters which make any of Seller’s representations or warranties
untrue in any material respect or in the event that Buyer otherwise becomes
aware during the Contract Period of any matters which make any of Seller’s
representations or warranties untrue in any material respect, Seller shall bear
no liability for such matters (provided that Seller has not breached an express
covenant set forth in this Agreement), but Buyer shall have the right to elect
in writing on or before the Closing Date, (i) to waive such matters and
complete the purchase of the Property in accordance with the terms of this
Agreement, or (ii) as to any matters disclosed following the expiration of the
Inspection Period, to terminate this Agreement and receive a refund of the
Deposit and any earnings thereon, plus reimbursement from Seller for Buyer’s
reasonable out of pocket costs incurred in connection with the negotiation of
this Agreement, Buyer’s diligence with respect to the Property, and Buyer’s
actions in furtherance of the transactions contemplated by this Agreement
(provided that said sum recoverable as reimbursement shall not exceed
$25,000).  Buyer’s delivery of the
Additional Deposit shall constitute Buyer’s conclusive agreement to accept or
waive any such matters disclosed to Buyer prior to the close of the Inspection
Period.

 

Section 4.5            Indemnifications. 
Subject to the foregoing limitations and the provisions of Sections 6.3,
6.4 and 7.12:

 

(a)           Seller
shall indemnify and defend Buyer against and hold Buyer harmless from any and
all claims, liabilities, losses, damage, costs and expenses, including, without
limitation, all reasonable attorneys’ fees, asserted against or suffered by
Buyer resulting from (i) any breach by Seller of this Agreement, and (ii) the
untruth, inaccuracy or breach of any of the representations and warranties made
by Seller pursuant to this Agreement.

 

(b)           Buyer
shall indemnify and defend Seller against and hold Seller harmless from any
claim, loss, damage, or expense, including any reasonable attorneys fees,
asserted against or suffered by Seller resulting from (i) any breach by Buyer
of this Agreement, (ii) the untruth, inaccuracy or breach of any of the
representations or warranties made by Buyer pursuant to this Agreement, and
(iii) any liability or obligation arising in connection with the Property
accruing following the Closing Date.

 

ARTICLE V

DEPOSIT

 

Within 5 business days
following the mutual execution of this Agreement by Buyer and Seller, Buyer
shall deliver to Title Company, for deposit into such escrow, the sum of
$50,000.00 (the “Initial Deposit”).  On
or before the expiration of the Inspection Period, Buyer shall deliver to Title
Company the additional sum of $150,000.00 (the “Additional Deposit”), which,
together with the Initial Deposit, shall be referred to in this Agreement as
the “Deposit”.  In the event that this
transaction is consummated as contemplated by this Agreement, then the entire
amount of the Deposit, together with any interest accrued thereon, shall be
credited against the Purchase Price.  The
entire amount of the Deposit, together with any interest accrued thereon, shall
be 

 

9

 

returned immediately to Buyer in the event of
the failure of any of the conditions precedent set forth in Section 3.1(a)
above or in the event that (a) the conditions precedent set forth in Section
2.4 or 3.1(b) shall have been satisfied or waived, (b) Buyer shall have
performed fully or tendered performance of its obligations hereunder and (c)
Seller shall be unable or fail to perform its obligations, under this
Agreement.  IN ALL OTHER EVENTS, THE
ENTIRE AMOUNT OF THE DEPOSIT, PLUS ACCRUED INTEREST, SHALL BE RETAINED BY
SELLER AS LIQUIDATED DAMAGES.  BUYER AND
SELLER HEREBY ACKNOWLEDGE AND AGREE THAT SELLER’S DAMAGES IN THE EVENT OF SUCH
A BREACH OF THIS AGREEMENT BY BUYER WOULD BE DIFFICULT OR IMPOSSIBLE TO
DETERMINE, THAT THE AMOUNT OF THE DEPOSIT PLUS ACCRUED INTEREST IS THE PARTIES’
BEST AND MOST ACCURATE ESTIMATE OF THE DAMAGES SELLER WOULD SUFFER IN THE EVENT
THE TRANSACTION PROVIDED FOR IN THIS AGREEMENT FAILS TO CLOSE, AND THAT SUCH
ESTIMATE IS REASONABLE UNDER THE CIRCUMSTANCES EXISTING ON THE DATE OF THIS AGREEMENT.  BUYER AND SELLER AGREE THAT SELLER’S RIGHT TO
RETAIN THE DEPOSIT PLUS ACCRUED INTEREST SHALL BE THE SOLE REMEDY OF SELLER AT
LAW IN THE EVENT OF SUCH A BREACH OF THIS AGREEMENT BY BUYER.  THE FOREGOING, HOWEVER, IS A LIQUIDATED
MEASURE OF DAMAGES FOR THE SPECIFIED BREACH ONLY, AND SHALL NOT LIMIT BUYER’S
LIABILITY UNDER SECTIONS 2.3, 4.5 OR 7.9 OF THIS AGREEMENT.

 

ACCEPTED AND AGREED TO:

 

 

	
   

  	
   

  	
   

  
	
  Seller

  	
   

  	
  Buyer

  

 

ARTICLE VI

ESCROW AND CLOSING

 

Section 6.1            Escrow Arrangements.  An
escrow for the purchase and sale contemplated by this Agreement has been opened
by Buyer and Seller with Title Company. 
On or before the Closing Date, Seller and Buyer shall each deliver
escrow instructions to Title Company consistent with this Article VI, and the
parties shall deposit in escrow the funds and documents described below.

 

(a)           Seller
shall deposit (or cause to be deposited):

 

(i)            a
duly executed and acknowledged grant deed in favor of Buyer from Seller with
respect to the Real Property in the form attached to this Agreement as Exhibit E (the “Deed”);

 

(ii)           a
duly executed bill of sale with respect to the Personal Property in the form
attached to this Agreement as Exhibit F
(the “Bill of Sale”);

 

10

 

(iii)         a
duly executed counterpart of an assignment and assumption of Seller’s interest
in the Intangible Property in the form attached to this Agreement as Exhibit G (the “Assignment of Intangible
Property”);

 

(iv)          a
certificate from Seller certifying the information required by §§ 18662 of the
California Revenue and Taxation Code and the regulations issued thereunder to
establish that the transaction contemplated by this Agreement is exempt from
the tax withholding requirements of such provisions (the “California Certificate”);
and

 

(v)            a
certificate from Seller certifying the information required by §1445 of the
Internal Revenue Code and the regulations issued thereunder to establish, for
the purposes of avoiding Buyer’s tax withholding obligations, that Seller is
not a “foreign person” as defined in Internal Revenue Code § 1445(f)(3) (the
“FIRPTA Certificate”); and

 

(b)           Buyer
shall deposit:

 

(i)            immediately
available funds sufficient to pay the balance of the Purchase Price, plus
sufficient additional cash to pay Buyer’s share of all escrow costs and closing
expenses;

 

(ii)           a
duly executed counterpart of the Assignment of Intangible Property; and

 

(iii)         a
certificate duly executed by Buyer in favor of Seller confirming the waivers
and acknowledgments set forth in Sections 2.3(a) and (b) above.

 

Section 6.2            Closing. 
Title Company shall close escrow by:

 

(a)           recording
the Deed;

 

(b)           causing
Title Company to issue the Title Policy to Buyer;

 

(c)           delivering
to Buyer the Bill of Sale, the FIRPTA Certificate, the California Certificate
and the counterpart Assignment of Intangible Property executed by Seller; and

 

(d)           delivering
to Seller the counterpart Assignment of Intangible Property executed by Buyer
and the certificate described in Section 6.1(b)(iv) above, and funds in the
amount of the Purchase Price, as adjusted for credits, prorations and closing
costs in accordance with this Article VI.

 

Section 6.3            Prorations.

 

(a)           Real
estate taxes and assessments constituting a lien and allocable to the payment
period that includes the Closing Date, personal property taxes, if any, rental
income and all other items of income and expense with respect to the Property
shall be prorated between Seller and Buyer as of the Closing Date.  Income and expenses shall be prorated on the
basis of a 30-day month and on the basis of the accrual method of
accounting.  All such items attributable
to the period through and including the Closing Date shall be credited to
Seller; all such items 

 

11

 

attributable to the period following the
Closing Date shall be credited to Buyer. 
Buyer shall be credited in escrow with (i) any portion of rental
agreement or lease deposits in Seller’s possession with respect to the Property
which are refundable to the tenants and (ii) rent prepaid beyond the Closing
Date.  Buyer shall not be entitled to any
interest on rental agreement or lease deposits or prepaid rent accrued on or
before the Closing Date.  Seller shall be
credited in escrow with any refundable deposits or bonds held by any utility,
governmental agency or service contractor with respect to the Property.  Seller shall also be credited in escrow with
any prepaid real estate taxes and assessments allocable to the period after the
Closing Date.  In addition, Seller shall
be credited in escrow with any leasing commissions, free rental periods or
tenant improvement or other allowances paid or incurred by Seller during the
Contract Period to the extent such amounts (x) were disclosed in the copies of
the Leases delivered to Buyer or were otherwise disclosed to Buyer during the
Inspection Period, and (y) are equitably allocable to that portion of the
stabilized term (i.e., the term following the tenant’s entry into occupancy and
commencement of unabated rental obligations) of any new or existing Lease of
the Property following the Closing Date. 
To the extent disclosed to Buyer by Seller, Buyer shall assume all
obligations for any such leasing commissions, free rental periods or tenant
improvement or other allowances payable following the Closing Date.

 

(b)           Buyer
and Seller shall cooperate to produce prior to the Closing Date a schedule of
prorations to be made on and after the Closing Date as complete and accurate as
reasonably possible.  With respect to
taxes or other expenses payable or reimbursable by the tenants of the Property,
the amounts prorated between Buyer and Seller shall be the net amounts (if any)
not subject to payment or reimbursement by the tenants.  All prorations which can be liquidated
accurately or reasonably estimated as of the Closing Date shall be made in
escrow on the Closing Date.  All other
prorations, and adjustments to initial estimated prorations, shall be made by
the parties with due diligence and cooperation within 30 days following the Closing
Date, or such later time as may be required to obtain necessary information for
proration, by immediate cash payment to the party yielding a net credit from
such prorations from the other party.

 

Section 6.4            Other Closing Costs.

 

(a)           Seller
shall pay (i) any county documentary transfer or transaction taxes or fees due
on the transfer of the Property, (ii) fifty percent (50%) of any city
documentary transfer or transaction taxes or fees due on the transfer of the
Property, (iii) fifty percent (50%) of all escrow, recording or other fees or
costs charged by or reimbursable to Title Company, (iv) the CLTA portion of the
title insurance premium for the Title Policy (but only for a liability amount
equal to the Purchase Price), (v) all fees and expenses of its legal counsel
and other third party consultants engaged by or on behalf of Seller in
connection with this transaction and (vi) any prepayment fees or penalties, if
any, to pay off existing mortgages affecting the Property.

 

(b)           Buyer
shall pay (i) balance of the premium for the Title Policy (including costs of
endorsements, extended coverage and related survey costs), (ii) fifty percent
(50%) of all escrow, recording or other fees or costs charged by or
reimbursable to Title Company, (iii) any sales or use taxes determined to be
payable in connection with this transaction, (iv) fifty percent (50%) of any
city documentary transfer or transaction taxes or fees due on the transfer of
the Property, (v) the cost of the Survey, (vi) all fees and expenses of its
legal counsel and other third 

 

12

 

party consultants engaged by or on behalf of
Buyer in connection with this transaction, and (vi) the balance of the premium
for the Title Policy (including costs of endorsements, extended coverage and
related survey costs.

 

(c)           Any
costs and expenses of closing that are not expressly identified in subparagraph
(a) or (b) above shall be allocated between the parties in accordance with
prevailing custom in San Diego County.

 

Section 6.5            Further Documentation.  At
or following the close of escrow, Buyer and Seller each shall execute any
certificate or other instruments required by law or local custom or otherwise
reasonably requested by the other party to effect the transaction contemplated
by this Agreement.

 

ARTICLE VII

MISCELLANEOUS

 

Section 7.1            Damage or Destruction.

 

(a)           Buyer
shall be bound to purchase the Property for the Purchase Price as required by
the terms of this Agreement without regard to the occurrence or effect of any
damage to or destruction of the improvements on the Real Property or
condemnation by right of eminent domain, provided that the occurrence of any
damage or destruction is (i) covered by insurance (excepting deductibles), or
(ii) if not covered by insurance, involves repair costs of $250,000 or
less.  If Buyer is so bound to purchase
notwithstanding the occurrence of damage, destruction or condemnation, upon the
close of escrow: (A) in the event of damage covered by insurance, Buyer shall
receive a credit against the Purchase Price in the amount (net of collection
costs) of any insurance proceeds or condemnation award collected and retained
by Seller as a result of any such damage or destruction or condemnation and
Seller shall assign to Buyer all rights to such insurance proceeds or
condemnation awards as shall not have been collected prior to the close of
escrow; and (B) in the event of damage not covered by insurance, Buyer shall
receive a credit (not to exceed $250,000) in the amount of the estimated cost
to repair the damage.

 

(b)           Buyer
or Seller may terminate this Agreement by written notice of election given
promptly to the other party following the event if there occurs damage or
destruction not covered by insurance which involves repair costs in excess of
$250,000.

 

Section 7.2            Brokerage Commissions and
Finder’s Fees.  Except for Lannie R. Allee of CB Richard
Ellis and Kent Moore of Grubb & Ellis/BRE, each party to this Agreement
warrants to the other that no person or entity can properly claim a right to a
real estate commission, real estate finder’s fee, real estate acquisition fee
or other real estate brokerage-type compensation (collectively, “Real Estate
Compensation”) based upon the acts of that party with respect to the
transaction contemplated by this Agreement. 
Each party hereby agrees to indemnify and defend the other against and
to hold the other harmless from any and all loss, cost, liability or expense
(including but not limited to attorneys’ fees and returned commissions)
resulting from any claim for Real Estate Compensation by any person or entity
based upon such 

 

13

 

acts. 
Seller will be responsible for paying any Real Estate Compensation to CB
Richard Ellis and Grub & Ellis per separate agreement.

 

Section 7.3            Successors and Assigns. 
Buyer may not assign any of Buyer’s rights or duties hereunder without
the prior written consent of Seller, which consent will not be unreasonably
withheld; provided that Buyer may assign this Agreement (a) to an entity
affiliated with Buyer which has, in Seller’s reasonable judgment, the financial
capacity to perform the obligations of Buyer hereunder, or (b) to an entity
directly or indirectly owned by the principals of Buyer, which is controlled by
the principals of Buyer.  No assignment
by Buyer shall relieve Buyer of its obligations under this Agreement.  Subject to the limitations on assignment
expressed in this Section 7.3, this Agreement shall be binding upon, and inure
to the benefit of, Buyer and Seller and their respective successors and
assigns.

 

Section 7.4            Notices.  All
notices or other communications required or provided to be sent by either party
shall be in writing and shall be sent by United States Postal Service, postage
prepaid or certified mail, return receipt requested, by any nationally known
overnight delivery service, by courier, or in person.  All notices shall be deemed to have been
given forty-eight (48) hours following deposit in the United States Postal
Service or upon personal delivery if sent by overnight delivery service,
courier or personally delivered.  All
notices shall be addressed to the party at the address below:

 

	
   

  	
  To Seller:

  	
  Patricia Lowenstam

  
	
   

  	
   

  	
  VP Human Resources and
  Operations

  
	
   

  	
   

  	
  Isis Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  1896 Rutherford Road

  
	
   

  	
   

  	
  Carlsbad, CA 92008

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
  General Counsel

  
	
   

  	
   

  	
  Fax: 760-268-4922

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  To Buyer:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attn:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  and with a copy to:

  	
  The Roth Law Firm

  
	
   

  	
   

  	
  A Professional Law
  Corporation

  
	
   

  	
   

  	
  11770 Bernardo Plaza Court

  
	
   

  	
   

  	
  Suite 315

  
	
   

  	
   

  	
  San Diego, CA 92128

  
	
   

  	
   

  	
  Fax: 858-451-3643

  

 

Any address or name
specified above may be changed by notice given to the addressee by the other
party in accordance with this Section 7.4. 
The inability to deliver because of a changed 

 

14

 

address of which no notice
was given, or rejection or other refusal to accept any notice, shall be deemed
to be the receipt of the notice as of the date of such inability to deliver or
rejection or refusal to accept.  Any
notice to be given by any party hereto may be given by the counsel for such
party.

 

Section 7.5            Time.  Time
is of the essence of every provision contained in this Agreement.

 

Section 7.6            Possession.  The
rights of possession of the Property (subject to the Leases) shall be delivered
to Buyer on the Closing Date.

 

Section 7.7            Incorporation by Reference.  All
of the exhibits attached to this Agreement or referred to herein and all
documents in the nature of such exhibits, when executed, are by this reference
incorporated in and made a part of this Agreement.

 

Section 7.8            No Deductions or Off-Sets. 
Buyer acknowledges that the Purchase Price to be paid for the Property
pursuant to this Agreement is a net amount and shall not be subject to any
off-sets or deductions.

 

Section 7.9            Attorneys’ Fees.  In
the event any dispute between Buyer and Seller should result in litigation, the
prevailing party shall be reimbursed for all reasonable costs incurred in
connection with such litigation, including, without limitation, reasonable
attorneys’ fees.

 

Section 7.10         Construction.  The
parties acknowledge that each party and its counsel have reviewed and revised
this Agreement and that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or any amendments or exhibits hereto.

 

Section 7.11         Governing Law.  This
Agreement shall be construed and interpreted in accordance with and shall be
governed and enforced in all respects according to the laws of the State of
California.

 

Section 7.12         Damages. 
Buyer agrees that any liability of Seller under any claim brought prior
to the Closing Date pursuant to this Agreement or any document or instrument
delivered simultaneously or in connection with, or pursuant to this Agreement,
shall be limited solely to its interest in the Property, and no other assets of
Seller shall be subject to levy or execution. 
With respect to any such claim brought following the Closing Date, any
liability of Seller shall be limited to Seller’s assets and to the amount set
forth in clause (ii) of Section 4.4 above. 
In no event shall Buyer seek satisfaction for any such obligation from
any of Seller’s members or from any members, shareholders, officers, directors,
trustees, beneficiaries, employees, agents, legal representatives, successors
or assigns of such members, nor shall any such person or entity have any
personal liability for any such obligations of Seller.

 

Section 7.13         Confidentiality.  Each
Party hereby acknowledges and agrees that the existence of this Agreement, and
the terms and conditions set forth herein, are to be kept strictly
confidential.  Accordingly, except as may
be required by law or court order, each Party shall not, 

 

15

 

without the prior written consent of the
other Party, release, publish or otherwise distribute (and shall not authorize
or permit any other person or entity to release, publish or otherwise distribute)
any information concerning this Agreement or the transaction contemplated
herein to any person or entity other than Buyer’s prospective lenders and each
Party’s respective legal and financial advisors, each of whom shall agree to
hold such information strictly confidential as if such persons were bound by
the provisions of this Section 7.13.  The
obligations of this Section 7.13 will not apply to information that the
receiving party can establish by written records (a) was known by it prior to
the receipt of the confidential information from the disclosing Party; (b) was
disclosed to the receiving Party by a third party having the right to do so;
(c) was, or subsequently became, in the public domain through no fault of the
receiving Party, its officers, directors, employees or agents; (d) was
disclosed on a confidential basis to such Party’s accountants, attorneys and
other professional advisors in connection with the transactions contemplated by
this Agreement; or (e) was disclosed by the receiving Party pursuant to any
judicial, governmental or stock exchange request, requirement or order, so long
as the receiving party provides the disclosing party with sufficient prior
notice in order to allow the disclosing party to contest such request,
requirement or order

 

Section 7.14         Counterparts.  This
Agreement may be executed in one or more counterparts.  All counterparts so executed shall constitute
one contract, binding on all parties, even though all parties are not signatory
to the same counterpart.

 

Section 7.15         Tax Deferred Exchange.  Upon the request of either party (the “Requesting Party”) to this
Agreement, the other party (the “Non-Requesting Party”) at no cost or expense
to the Non-Requesting Party agrees to reasonably cooperate with the Requesting
Party in consummating the sale of the Property as part of a simultaneous or
non-simultaneous tax-deferred exchange (the “Exchange”) pursuant to Section
1031 of the Internal Revenue Code of 1986, as amended, provided that (i) the Non-Requesting
Party shall not be required to take title to any property other than the
Property, and (ii) the Closing Date shall not be delayed or extended
thereby.  The Requesting Party shall have
the right to assign its rights and obligations hereunder to an accommodation
entity (the “Intermediary”), who will cause the Closing to occur on the
Requesting Party’s behalf.  All of the
Requesting Party’s liabilities, representations and warranties under this
Agreement shall remain those of the Requesting Party and the Non-Requesting
Party shall not seek recourse against the Intermediary with respect to such
liabilities or for the breach of any such representations or warranties.  Performance by an Intermediary in
effectuating an exchange will be treated as if such performance were made by the
Requesting Party, and the Requesting Party shall remain the primary obligor for
the full and timely performance of all obligations of the Requesting Party
under this Agreement.  In the event of
any breach of such representations, warranties, covenants, or other
obligations, the Non-Requesting Party shall proceed directly against the
Requesting Party.  The Non-Requesting
Party shall not be required to assume any liabilities as a result of the
exchange transaction that are in addition to those which would exist if the
transaction were effectuated as a sale by the Requesting Party and not
effectuated as an exchange.  The
Requesting Party hereby agrees to indemnify, defend (with counsel reasonably
satisfactory to the Non-Requesting Party) and hold harmless the Non-Requesting
Party from and against any and all claims, loss, cost, damage, or expense
(including, without limitation, reasonable attorneys’ fees) incurred by the
Non-Requesting Party and arising out of or relating to the Non-Requesting
Party’s participation in the Exchange.

 

16

 

[Remainder of Page Intentionally Left Blank]

 

17

 

Section
7.16         Entire Agreement.  This
Agreement and the attached exhibits, which are by this reference incorporated
herein, and all documents in the nature of such exhibits, when executed,
contain the entire understanding of the parties and supersede any and all other
written or oral understanding.

 

IN WITNESS
WHEREOF, Seller and
Buyer have executed this Agreement as of the day and year first written above.

 

	
  SELLER:

  	
  ISIS
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  B. Lynne Parshall

  	
   

  
	
   

  	
   

  	
  B. Lynne Parshall

  
	
   

  	
   

  	
  Executive Vice President,
  CFO & Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BUYER:

  	
  ELECTRO
  SURFACE TECHNOLOGY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Hiroo Kirpalani

  	
   

  
	
   

  	
   

  	
  Name: Hiroo Kirpalani

  
	
   

  	
   

  	
  Title: President

  

 

1

 

EXHIBIT A

 

DISCLOSURE STATEMENT

 

None

 

 

EXHIBIT B

 

PROPERTY DESCRIPTION

 

 

EXHIBIT D

 

LIST OF SERVICE AND EQUIPMENT CONTRACTS

 

[To
be provided by Isis prior to execution of Agreement]

 

 

EXHIBIT E

 

DEED

 

Assessor’s Parcel No.

 

RECORDING REQUESTED BY

AND WHEN RECORDED RETURN TO:

 

 

MAIL TAX STATEMENTS TO:

 

 

The undersigned grantor
declares:

 

Documentary transfer tax is:

 

o            computed on full value of property conveyed,
or

o            computed on full value less value of liens
and encumbrances.

 

GRANT DEED

 

FOR VALUABLE CONSIDERATION,
the receipt and sufficiency of which are hereby acknowledged, ISIS
PHARMACEUTICALS, INC., a Delaware Corporation, HEREBY GRANTS to Electro Surface
Technology, Inc., a California Corporation, all that real property in San Diego
County, California, described as follows:

 

SEE APPENIX “A” ATTACHED
HERETO AND BY THIS REFERENCE INCORPORATED HEREIN.

 

This conveyance is made
subject to all liens and encumbrances of record.

 

	
   

  	
  GRANTOR:

  
	
   

  	
   

  
	
   

  	
  ISIS
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   B. Lynne Parshall

  
	
   

  	
   

  	
   Executive Vice
  President, CFO & Director

  

 

Date:  September     , 2005

 

MAIL
TAX STATEMENTS AS DIRECTED ABOVE

 

 

	
  STATE OF CALIFORNIA

  	
  )

  	
   

  	
  CAPACITY CLAIMED BY SIGNER

  
	
   

  	
  ) ss.

  	
   

  	
  Though statute does not
  require the Notary 

  
	
  COUNTY OF                                     

  	
  )

  	
   

  	
  to fill in the data below,
  doing so may 

  
	
   

  	
   

  	
   

  	
  prove invaluable to
  persons relying on the 

  
	
   

  	
   

  	
   

  	
  document.

  
	
   

  	
   

  	
   

  	
   

  
	
  On                                     
  , before me,                               
  ,

  	
   

  	
  o

  	
  Individual

  
	
  Personally appeared                                 
  (name of witness),

  	
   

  	
  o

  	
  Corporate Officer(s)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
  personally known to me

  	
   

  	
  o

  	
  Partner(s)

  	
  o

  	
  Limited

  
	
   

  	
  -or-

  	
   

  	
   

  	
   

  	
  o

  	
  General

  
	
  o

  	
  proved to me on the basis
  of satisfactory evidence 

  	
   

  	
  o

  	
  Attorney-in-Fact

  
	
   

  	
  to be the person whose
  name(s) is/are subscribed to the within instrument and acknowledged to me
  that he/she/they executed the same in his/her/their authorized capacity, and
  that by his/her/their signature(s) on the instrument the person(s) or the
  entity upon behalf of which the person(s) acted, executed the instrument.

  	
   

  	
  o

  	
  Trustee(s)

  
	
   

  	
  o

  	
  Guardian/Conservator

  
	
   

  	
  o

  	
  Other:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Witness my hand and
  official seal.

  	
   

  	
  SIGNER IS REPRESENTING:

  
	
   

  	
   

  	
   

  	
  Name of person(s) or
  entity(ies)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Signature of the Notary

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  This certificate must be
  attached to the

  	
  Title or Type of Document:

  	
   

  	
   

  
	
  document described at
  right:

  	
  Number of Pages:

  	
   

  	
            Date
  of Document:

  	
   

  	
   

  
	
   

  	
  Signer other than named
  above:

  	
   

  	
   

  
															

 

 

EXHIBIT F

 

BILL OF SALE

 

FOR
VALUABLE CONSIDERATION,
the receipt and sufficiency of which are hereby expressly acknowledged, ISIS
PHARMACEUTICALS, INC., a Delaware corporation (“Seller”), hereby assigns,
transfers and conveys to Electro Surface Technology, Inc. (“Buyer”), WITHOUT WARRANTY, EXPRESS OR IMPLIED, all
of Seller’s right, title and interest in and to that certain personal property
described in the attached Schedule 1
(the “Personal Property”).  The foregoing
conveyance is made pursuant to, and is subject to the terms and conditions of,
that certain Agreement for Purchase and Sale of 2280 Faraday Avenue, San Diego,
CA dated as of June 28, 2005, by and between Seller and Buyer.

 

IN WITNESS
WHEREOF, Seller has
executed this Bill of Sale as of                               ,
20    .

 

	
   

  	
  SELLER:

  
	
   

  	
   

  
	
   

  	
  ISIS
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   B. Lynne Parshall

  
	
   

  	
   

  	
   Executive Vice
  President, CFO & Director

  

 

 

SCHEDULE 1

 

(Attach
list of personal property)

 

 

APPENDIX A

 

[Attach
legal description of real property]

 

 

EXHIBIT G

 

ASSIGNMENT OF INTANGIBLE PROPERTY

 

FOR
VALUABLE CONSIDERATION,
the receipt and sufficiency of which are hereby expressly acknowledged, ISIS
PHARMACEUTICALS, INC., a Delaware corporation (“Assignor”), hereby
assigns, transfers and conveys to Electro Surface Technology, Inc., a
California corporation (“Assignee”), all of Assignor’s right, title and
interest in and to the Intangible Property, as those terms are defined in that
certain Agreement for Purchase and Sale of 2280 Faraday Avenue, Carlsbad, CA
dated June28, 2005 (the “Agreement”), entered into by and between Assignor, as
“Seller,” and Assignee, as “Buyer.”

 

In accordance with the
Agreement, Assignee hereby assumes all obligations of owner of the Intangible
Property arising on or after the date of this Assignment (collectively, the
“Assigned Obligations”).

 

IN WITNESS
WHEREOF, Assignor and
Assignee have executed this Assignment of Intangible Property as of September     ,
2005

 

	
  ASSIGNOR:

  	
  ISIS
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   B.
  Lynne Parshall

  
	
   

  	
   

  	
   Executive Vice
  President, CFO & Director

  
	
   

  	
   

  
	
  ASSIGNEES:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   Its:

  
					

 

 

SCHEDULE 2.3(A)

 

ANALYTICAL METHODS FOR CORE TEST

 

EPA 8015M for
Non-Halogenated Organics

EPA 8260B for Volatile
Organic Compounds (VOC’s)

EPA 8270C for Semi-Volatile
Organic Compounds

 

 

SCHEDULE 4.2(C)

 

PARKING SPACES SUBJECT TO EASEMENTExhibit 10.26

 

Confidential Treatment has been requested for
portions of this exhibit. The copy filed herewith omits the information subject
to the confidentiality request. Omissions are designed as[*] . A complete
version of this exhibit has been filed separately with the Securities and
Exchange Commission.

 

MANUFACTURING
AND SUPPLY AGREEMENT

 

This Manufacturing and Supply Agreement (“Agreement”)
is entered into as of the date signed by the last party to sign this Agreement,
and with an effective date of May 4, 2005 (the “Effective Date”) by and
between Hyaluron Inc., with its principal place of business at 99 S. Bedford
Street, Suite 2, Burlington, MA 
01803, (“Hyaluron”) and NeoRx, a Washington corporation, having its
principal place of business at 300 Elliott Avenue West, Suite 500,
Seattle, Wa 98119-4114. Hyaluron and NeoRx may be referred to herein as a “Party”
or, collectively, as the “Parties”.

 

WHEREAS, NeoRx is engaged in the business of developing therapeutic
product(s); and

 

WHEREAS, Hyaluron is in the business of developing, manufacturing, testing and
packaging sterile pharmaceutical products; and

 

WHEREAS, NeoRx desires to utilize Hyaluron to develop, manufacture, test,
and/or package supplies of the product(s) as designated by NeoRx:

 

NOW, THEREFORE, the Parties agree as follows:

 

Definitions. As used herein the following terms will
have the following meanings:

 

“API” means the raw material components of the
Product, as specified and provided to Hyaluron by NeoRx.

 

“Batch” means the entire amount of Product yielded
from a manufacturing event using a specific quantity of APIs, Excipients, and
components processed in accordance with the Master Batch Record and the
Manufacturing Standards.

 

“Batch Record” means the document created as and
after each Batch is Processed and Packaged. Each Batch Record will reflect and
incorporate all aspects of the Master Batch Record, the applicable Certificate
of Analysis, and any Manufacturing Variance Reports issued with respect to such
Batch.

 

“Batch Release” means the final sign-off by a party’s
quality department marking the culmination of the quality process through which
a batch of Product is shown to conform to all aspects of the Manufacturing
Standards.

 

“Bulk” means the bulk API for formulation.

 

“Compounded Bulk” means the API and Excipients which
have been compounded but not filled or packaged or finished into a final dosage
presentation.

 

“Certificate of Analysis” means a certificate that
accompanies each shipment of APIs or Product certifying that the APIs or
Product meets the specifications as defined in the Manufacturing Standards.

 

“Date of Manufacture” means the date of sterile
filtration and/or filling of the Compounded Bulk.

 

“Excipient” means any substance other than the API
used in formulating the Compounded Bulk.

 

“API Reference Standard” means a quantity of APIs
with a known assay, supplied by NeoRx, with which Hyaluron may perform
comparative analysis to API samples having an unknown assay.

 

[*] designates portions of this document that have been omitted
pursuant to a request for confidential treatment filed separately with the
Commission.

 

1

 

“API Specifications” means the specifications with
respect to the APIs as set forth in the Master Batch Record.

 

 “Manufacturing
Standards” means the specifications for Processing, Packaging, and storing the
Product set forth in the Specifications, the Master Batch Record, CGMPs (as
defined below), MSDSs, the QA Schedule and all applicable U.S. laws and
regulations, to the extent such terms and conditions are not inconsistent with
this Agreement.

 

“Manufacturing Variance Report” means a written
report indicating any significant variance in the Processing or Packaging of a
Batch from the procedures set forth in the Master Batch Record.

 

“Master Batch Record” means the document, as may be
amended from time to time, specifying: (i) the API Specifications, (ii) the
procedures for testing and releasing the APIs, (iii) the Excipients, (iv) the
Primary Components, (v) Secondary Packaging, (vi) the Specifications,
(vii) the formula (listing the APIs and the Excipients for the Product),
and (viii) the procedures for manufacturing the Product (listing the APIs,
the Excipients, the Primary Components, and the Secondary Packaging).

 

“To Package” and “Packaging” means the act of
inspecting, labeling, and packing the Product into units.

 

“Primary Components” means the vial/syringe,
stopper, and seal as identified in the Master Batch Record.

 

“Process” or “Processing” means the manufacturing
procedures, or any part thereof, involved in manufacturing the Product in
accordance with the Manufacturing Standards.

 

“Product” means finished product in final dosage
presentation.

 

“Specifications” means the specifications for the
APIs, the Excipients, the Primary Components, the Secondary Packaging, and the
in-process and release specifications for the Product, as set forth initially
in the applicable Statement or Work and, subsequently in the Master Batch
Record. Revisions to Specifications may be made by the Parties from time to
time and such changes will be reflected in the Master Batch Record.

 

“Qualified Supplier” means a supplier of materials
or components that has been audited and/or assessed by Hyaluron and has passed
Hyaluron’s quality assurance standards.

 

“Secondary Packaging” means any component other than
Primary Components used to convert primary units into units.

 

“Shipping Components” means the packaging, boxes,
and shipping containers into which the Product is placed for shipment to NeoRx.

 

“Variance” or “Deviation” means a departure from an
established quality standard (e.g., CGMP standard operating procedure, Master
Batch Record or Specifications,, analytical control procedure, water monitoring
procedure, environmental monitoring specification, equipment maintenance
schedule, or any unusual occurrence), which may be either anticipated or
unanticipated departures from established quality standards and may have the
potential to affect the safety, identity, strength, quality or purity of the
Product or Compounded Bulk.

 

1.                                       Quotation. Hyaluron will provide to
NeoRx the manufacturing and related services (the “Services”) as described in
the applicable Quotation (the “Quotation”),
a form of which is attached hereto as Exhibit A and incorporated herein by
reference. The Parties will mutually agree to the contents of each Quotation
and any amendments thereto. Each Quotation will, in addition to other matters,
address the quality assurance and control procedures. The Quotation may specify
that NeoRx will provide certain materials to Hyaluron or require that Hyaluron
acquire certain materials from a particular source. If NeoRx provides materials
to Hyaluron, title in and risk of loss of such materials will remain with
NeoRx,

 

[*] designates portions of this document that have been omitted
pursuant to a request for confidential treatment filed separately with the
Commission.

 

2

 

unless such loss occurs due to negligence by Hyaluron. In the event
NeoRx requests additional services relating to this Agreement, the Parties may
mutually agree upon such services and the costs related thereto in a separate
written agreement, which must be signed by authorized representatives of both
Parties before any such costs are incurred.

 

2.                                       Compensation for Services. Compensation for the Services will be as
specified in the Quotation. Hyaluron will bill NeoRx for the Services as
specified in the applicable Purchase Order. Such invoices will be payable upon
receipt by NeoRx. All pricing, payments, credits, allowances or other monetary
adjustments under this Agreement will be in U.S. Dollars.

 

3.                                       Advance Notice For Services. NeoRx agreesto give Hyaluron 60 days
advance written notice prior to the required date of manufacture for each
Product Order under the terms of this Agreement.

 

4.                                      Services.

 

(a)                                  All Services will be conducted in accordance
with the applicable Quotation and Hyaluron’s internal Standard Operating
Procedures (“SOPs”), copies of which will be available for inspection by NeoRx
or its designated representatives at Hyaluron upon reasonable notice.
Notwithstanding the foregoing, unless otherwise specified in the applicable
Purchase Order, the manufacturing of the Product will be conducted in accordance
with Current Good Manufacturing Practices (“CGMPs”) as described in the
relevant United States Food and Drug Administration (“FDA”) regulations and
guidelines for the manufacture, control and storage of human pharmaceutical
products, including, without limitation, the FDA’s guidance for industry titled
“Sterile Drug Products Produced by Aseptic Processing – Current Good
Manufacturing Practice”, dated September  2004.

 

(b) Hyaluron will
follow CGMP standards to manufacture for NeoRx clinical Batches of a finished
dosage form of the Product per the Manufacturing Standards, and as may be
further developed by Hyaluron, using the APIs, components and Excipients
specified. In accordance with CGMP and during the term of this Agreement,
Hyaluron will utilize validated cleaning and changeover procedures prior to
manufacturing any Product for NeoRx. Both Parties will promptly notify each
other of any new instructions or specifications required by CGMP. Hyaluron will
timely provide NeoRx with (a) a written description of any actions taken
to comply with new or revised CGMPs that affect the Product and/or (b) copies
of Hyaluron’s manufacturing records, including its Batch Records regarding the
Product, for the purposes of assuring product quality and compliance with agreed-upon
manufacturing procedures.

 

(c) Hyaluron will
adhere to the Specifications and requirements, as detailed in the Master Batch
Record, the Manufacturing Standards and mutually agreed upon protocols, where
such specifications are in compliance and agreement with FDA and other
applicable regulatory agency guidelines. Hyaluron will obtain NeoRx’s prior
approval before it implements any change in the materials, equipment, process
or procedures used to manufacture the Product that would constitute a significant
Deviation under CGMP. Hyaluron will disclose all proposed changes in such
manufacturing materials, equipment, process or procedure to NeoRx.

 

(d) In the event that
the Bulk fails to meet in-process or release specifications, NeoRx may
authorize a Deviation from the Batch Record in an attempt to salvage the Batch.
NeoRx assumes responsibility for all costs associated with batch failure(s)
until such time as Hyaluron has validated the filling line for the Product,
unless such batch failure(s) result(s) from negligence by Hyaluron. Hyaluron
will assume responsibility for Excipient costs for batch failures occurring
subsequent to product fill line validation, unless such batch failures result
from negligence by NeoRx. At no time will Hyaluron be responsible for API costs
resulting from batch failure.

 

[*] designates portions of this document that have been omitted
pursuant to a request for confidential treatment filed separately with the
Commission.

 

3

 

(e) Hyaluron will
obtain materials and components for production from Qualified Suppliers.

 

(f) Hyaluron and NeoRx
will mutually develop a Master Batch Record for the Product following the
technical specifications, methods and know-how provided by NeoRx.

 

(g) NeoRx will transfer
to Hyaluron appropriate methods and in process assays for manufacturing the
Product. Such methods and in process assays will be confirmed, or if requested,
validated by Hyaluron for their application to the finished Product.

 

(h) Hyaluron will provide NeoRx with copies of
executed Batch Records, process deviations and analytical data showing that the
Specifications have been met, following completion of the manufacture of the
Product. NeoRx will have the right to review and approve Master Batch Records,
to approve planned process deviations and to receive prompt notice of unplanned
process deviations. Hyaluron will retain original documents relating to the
manufacture of NeoRx Products and store these documents in accordance with CGMP
and Hyaluron’s internal quality assurance SOPs. Subject to the foregoing
Hyaluron will notify NeoRx before disposing of any of this Product
documentation. In such case, NeoRx may request, within seven days, to have the
documents shipped to NeoRx in accordance with NeoRx’s instructions and at NeoRx’s
expense.

 

(i) In the event that NeoRx proposes any
significant change to the Specifications or manufacturing Process, NeoRx will
deliver written notice to Hyaluron describing such Change. Hyaluron will
respond to any such notice within 15 days after Hyaluron’s receipt thereof;
provided, however, that the Specifications or Process will not be supplemented,
modified or amended in any respect without the prior written agreement of the
Parties. If any change in the Primary Components, Secondary Packaging, Shipping
Components, Processes or Product testing Specifications materially increases
Hyaluron’s cost to manufacture, test, or package the Product, Hyaluron reserves
the right to make reasonable pricing adjustments if needed to accommodate such
changes. Prior to initiating any work, Hyaluron will provide a scope of work
and cost proposal. New pricing will be effective upon implementation of the new
specifications or process.

 

(j) Hyaluron will provide NeoRx with all documents
NeoRx reasonably requests regarding its manufacturing processes and procedures
for the Product. Hyaluron further agrees to use reasonable commercial efforts
to assist NeoRx in obtaining FDA approval of a New Drug Application (NDA) with
respect to the Product. Where practicable, Hyaluron will assist NeoRx in
obtaining approvals from other government or regulatory agencies which may be
required for the conduct of clinical trials of the Product in other countries.
Hyaluron specifically agrees to cooperate with the FDA or other regulatory
agencies, including but not limited to any inspection prior to approval of any
product.

 

 (k) Labeling
and packaging will be approved by NeoRx, and all labels and package inserts
will be developed in accordance with Hyaluron’s guidelines with regard to
physical dimensions and handling procedures.

 

(l) Hyaluron will have the right to sample and
retest Product or to have an outside laboratory sample and retest Product if
NeoRx claims that such Product does not conform to the Manufacturing Standards.
Disputes between the Parties as to whether any Product rejected by NeoRx
conforms to the Manufacturing Standards will be resolved by a mutually
acceptable third party testing laboratory.

 

(m) In the event that a batch of Compounded Bulk is
found not to conform to the bulk release specification set forth in the
Manufacturing Standards prior to initiation of the fill, Hyaluron will
undertake one or more remedial steps in an attempt to bring the Compounded Bulk
into specification.

 

[*] designates portions of this document that have been omitted
pursuant to a request for confidential treatment filed separately with the
Commission.

 

4

 

Should these remedial steps fail to bring the Compounded Bulk into
specification NeoRx may direct Hyaluron to terminate the manufacturing process
at this stage.

 

(n) Hyaluron will ship Product to the destination
specified by NeoRx in accordance with the applicable NeoRx instructions and
will store the Product in compliance with CGMP at Hyaluron’s facilities until
delivery. All shipping costs will be the responsibility of NeoRx. Title to and
risk of loss of the Product shall pass to NeoRx as the Product is delivered
F.O.B. via a common carrier. Completion of the task will be deemed to occur at
the time Hyaluron informs NeoRx that the Batch Record is signed off and the
Certificate of Analysis has been issued. NeoRx will be deemed to have accepted
delivery of Batch of Product if no Notice of Rejection/Nonconformance is
received by Hyaluron within 30 days after completion of the task. If NeoRx
requests Hyaluron to store Product longer than 2 weeks past the release date,
there will be a storage charge applied which will be proportional to the
quantity stored.

 

(o) Hyaluron will retain and store samples of
Product in accordance with CGMPs and Hyaluron’s internal quality assurance
SOPs. Subject to the foregoing, Hyaluron will notify NeoRx before disposing of
any retention samples of manufacturing lots of intermediates or the Product. In
such case, NeoRx may request, within seven days, to have the samples shipped to
NeoRx in accordance with NeoRx’s instructions and at NeoRx’s expense.

 

(p) Hyaluron will dispose of all waste in accordance
with applicable local and federal regulations at NeoRx’s expense.

 

4.                                       Representations, Warranties
and Covenants.

 

(a)                                  Hyaluron represents and warrants to NeoRx
that:

 

(i)                                       All Product furnished pursuant to this
Agreement will conform to the relevant Specifications except in case of
variance or deviation of which NeoRx has been notified by Hyaluron;

 

(ii)                                    All Product furnished pursuant to this
Agreement will be manufactured and stored in accordance with, and all packaging
and labeling operations will be conducted in compliance with, CGMPs and other
applicable FDA and other governmental laws and regulations and all other
requirements set forth in the applicable Purchase Order;

 

(iii)                               All manufacturing under this Agreement will be performed with the
degree of skill and diligence normally employed by a contract manufacturer
performing the same or similar services; and

 

(iv)                              Hyaluron’s application of any intellectual property, other
than that provided to Hyaluron by NeoRx, in the performance of the Services
will not infringe any third party intellectual property rights.

 

(v)                                 Hyaluron represents as of the date of this Agreement
and continuously during the term of this Agreement that, to the best of its
knowledge, it and its employees, affiliates, contractors, and agents have never
been (i) debarred or (ii) convicted of a crime for which a person can
be debarred, under Section 335(a) or 335(b) of the Federal Food,
Drug, and Cosmetic Act (the “Act”). Hyaluron represents that it has never been
and, to the best of its knowledge, none of its employees, affiliates,
contractors, or agents has ever been (i) threatened to be debarred under
the Act or (ii) indicted for a crime or otherwise engaged in conduct for
which a person can be debarred under the Act. Hyaluron agrees that it will
promptly notify NeoRx in the event it receives notification of any such
debarment, conviction, threat or indictment.

 

[*] designates portions of this document that have been omitted
pursuant to a request for confidential treatment filed separately with the
Commission.

 

5

 

(b)                                 NeoRx represents and warrants to Hyaluron
that Hyaluron’s application of any intellectual property provided
to Hyaluron by NeoRx in the performance of the Services will not infringe any
third party intellectual property rights.

 

(c)                                  Each of NeoRx and Hyaluron represent and
warrant to the other that:

 

(i)                                     it is duly organized and validly existing
under the laws of the jurisdiction of its incorporation and has full corporate
power and authority to enter into this Agreement and to carry out the
provisions hereof;

 

(ii)                                  this Agreement is a legal and valid
obligation of it, binding upon it and enforceable against it in accordance with
the terms of this Agreement;

 

(iii)                               the execution, delivery and performance of this Agreement by it does
not conflict with any agreement, instrument or understanding, oral or written,
to which it is a party or by which such may be bound, and does not violate any
law or regulation of any court, governmental body or administrative or other agency
having authority over it; and

 

(iv)                              it has not done any act or knowingly omitted to do any act, and, to the
best of its knowledge, after due inquiry, no event has occurred, in each case
during the period between the Effective Date and the date this Agreement is
entered into, that would (1) constitute a breach by it of any provision of
this Agreement, (2) cause the other party to incur any material liability
other than as to obligations to perform work and make payments in accordance
with this Agreement or (3) render any of its representations and/or
warranties untrue.

 

5.                                       Records. Hyaluron will maintain adequate and
accurate records covering the manufacture, quality control testing and release
of the Product and all other Services provided hereunder in accordance with
CGMPs and Hyaluron’s QA SOPs.

 

6.                                      Inspections. NeoRx will have the right to schedule site
inspections/compliance audits as needed, provided reasonable advance notice is
given to schedule such audits and such audits are carried out during normal
business hours. All inspections/audits will be performed in such a manner as
not to unduly delay the performance of the Services. NeoRx will be permitted to
attend any FDA or other regulatory inspections relating to the Services
specific to NeoRx’s product(s). Routine audits in excess of one audit day per
calendar year will be billed to NeoRx at Hyaluron’s prevailing daily audit
charge rate. Audits related to FDA compliance of NeoRx’s product(s) or failures
in product quality may be conducted by NeoRx without charge by Hyaluron.

 

7.                                       Confidentiality.

 

7.1                                 NeoRx Confidential
Information

 

(a) Hyaluron agrees during the term of this
Agreement and for five (5) years thereafter that it will take all steps
reasonably necessary to: (i) hold NeoRx Confidential Information in trust
and confidence. “NeoRx Confidential Information” means (A) this Agreement
and any schedules and attachments hereto, (B) the Product, and (C) any
other information disclosed by NeoRx to Hyaluron. Notwithstanding the other
provisions of this Agreement, nothing received by Hyaluron will be considered
to be NeoRx Confidential Information if Hyaluron can establish by competent
proof that (A) such information has been published or is otherwise readily
available to the public other than by a breach of this Agreement; (B) such
information has been rightfully received by Hyaluron from a third party without
confidential

 

[*] designates portions of this document that have been omitted
pursuant to a request for confidential treatment filed separately with the
Commission.

 

6

 

limitations; (C) such information has been independently developed
for Hyaluron by personnel or agents; or (D)  such information was known to
Hyaluron prior to its first receipt from NeoRx. Hyaluron may only disclose
NeoRx Confidential Information to those employees of Hyaluron who are required
to have the information in order to perform its obligations under this
Agreement and third parties who are bound by confidentiality restrictions no
less stringent than those contained in this Agreement. Notwithstanding the
foregoing limitations on disclosure, Hyaluron may disclose such information as
is required by any law, rule, regulation, order, decision, decree, subpoena or
other legal process to be disclosed. If such disclosure is requested by legal
process, Hyaluron will notify NeoRx of this request promptly prior to any
disclosure to permit NeoRx to oppose such disclosure by appropriate legal
action.

 

(b)  Hyaluron
agrees that it will take all reasonable measures to protect the secrecy of and
avoid disclosure and unauthorized use of NeoRx Confidential Information.
Without limiting the foregoing, Hyaluron will take at least those measures that
it takes to protect its own confidential information; however, in no event,
will less than a reasonable standard of care be used. Hyaluron will make copies
of NeoRx Confidential Information solely as necessary to perform its
obligations under this Agreement. Hyaluron will immediately notify NeoRx in the
event of any unauthorized use or disclosure of NeoRx Confidential Information
of which Hyaluron is or becomes aware.

 

7.2                                                         Hyaluron Confidential
Information

 

(a) NeoRx agrees during the term of this
Agreement and for five (5) years thereafter that it will take all steps
reasonably necessary to (i) hold Hyaluron Confidential Information in
trust and confidence, (ii) not use Hyaluron Confidential Information in
any manner or for any purpose not expressly set forth in this Agreement, and (iii) not
disclose any such Hyaluron Confidential Information to any third party without
first obtaining Hyaluron’s express written consent on a case-by-case basis.
Notwithstanding the other provisions of this Agreement, nothing received by
NeoRx will be considered to be Hyaluron Confidential Information if NeoRx can
establish by competent proof that (A)  such information has been published
or is otherwise readily available to the public other than by a breach of this
Agreement; (B) such information has been rightfully received by NeoRx from
a third party without confidential limitations; (C) such information has
been independently developed for NeoRx by personnel or agents without use of or
reference to the Hyaluron Confidential Information; or (D) such
information was known to NeoRx prior to its first receipt from Hyaluron. NeoRx
may only disclose Hyaluron Confidential Information to those employees or
independent contractors of NeoRx who have a need to know the information in
order to perform their duties at NeoRx and who are bound by confidentiality
restrictions no less stringent than those contained in this Agreement.
Notwithstanding the foregoing limitations on disclosure, NeoRx may disclose
such information as is required by any law, rule, regulation, order, decision, decree,
subpoena or other legal process to be disclosed. If such disclosure is
requested by legal process, NeoRx will notify Hyaluron of this request promptly
prior to any disclosure to permit Hyaluron to oppose such disclosure by
appropriate legal action.

 

(b) NeoRx agrees that it will take reasonable
measures to protect the secrecy of and avoid disclosure and unauthorized use of
the Hyaluron Confidential Information. Without limiting the foregoing, NeoRx
will take at least those measures that it takes to protect its own confidential
information; however, in no event, will less than a reasonable standard of care
be used. NeoRx will immediately notify Hyaluron in the event of any
unauthorized use or disclosure of the Hyaluron Confidential Information of which
NeoRx is or becomes aware.

 

8.                                       Intellectual Property.

 

Hyaluron
agrees that NeoRx has and will retain sole and exclusive rights of ownership in
and to any

 

[*] designates portions of this document that have been omitted
pursuant to a request for confidential treatment filed separately with the
Commission.

 

7

 

NeoRx Confidential Information. NeoRx agrees that Hyaluron has and will
retain sole and exclusive rights of ownership in and to any Hyaluron Confidential
Information. The parties do not plan to jointly develop any devices or
processes. The parties agree, however, if a device or process is jointly
developed, they will jointly own such device or process.

 

9.                                      Term and Termination.

 

(a)                                  This Agreement will continue until April 15,
2010. Notwithstanding the foregoing, this Agreement may be extended by written
agreement of both of the parties. Termination of this Agreement will not affect
any right or obligations of the parties that arose prior to such termination.

 

(b)                                 This Agreement may be terminated by NeoRx if
Hyaluron materially breaches this Agreement and Hyaluron fails to cure such
breach within 30 days from the receipt of prior written notice from NeoRx. This
Agreement may be terminated by Hyaluron if NeoRx materially breaches this
Agreement and NeoRx fails to cure such breach within 30 days from the receipt
of prior written notice from Hyaluron. In the event of termination by Hyaluron
or by NeoRx, Hyaluron will be entitled to payment for any portion of the
Services completed and for any noncancellable expenses incurred prior to the
date of notification of termination pursuant to this Agreement. Payment is upon
the date of receipt by NeoRx of the final invoice and receipt by NeoRx of all
items specified in this Section 10(b).

 

(c)                                  This Agreement may be terminated by either
party if the other party enters into liquidation whether compulsory or
voluntarily otherwise than for the purpose of amalgamation or reconstruction,
or a petition in bankruptcy is filed by or against either party in any
competent court and the same is not dismissed within 120 days or if the other
party is adjudicated bankrupt or insolvent or if the other ceases to do
business, or otherwise terminates its business operations.

 

(d)                                 This Agreement may be terminated by NeoRx if
NeoRx decides to no longer continue manufacturing or distributing the Product.

 

(e)                                  In the event of termination for any reason,
Hyaluron will return to NeoRx all materials NeoRx provided to Hyaluron
hereunder, and, upon NeoRx’s request, work completed or in progress by Hyaluron
pursuant to this Agreement, including any reports and other documentation.

 

10.                                 Indemnification.

 

(a)                                  NeoRx agrees to defend, indemnify and hold
harmless Hyaluron, its affiliates, officers, directors, employees and agents
(collectively, the “Hyaluron Parties”) from and against any and all costs
(including reasonable legal fees), damages, expenses, losses, suits, claims and
demands, in any manner caused by, resulting from or arising out of third party
claims or suits related to: (i) activities to be carried out by NeoRx
pursuant to this Agreement; (ii) the
distribution of the Product or its use in clinical trials; and (iii) a
claim by a third party that Hyaluron’s use in the Services of intellectual property
provided to Hyaluron by NeoRx infringes such third party’s intellectual
property rights; provided, however, that the foregoing indemnification will not
apply to the extent such costs, damages, expenses, losses, suits, claims or
demands result from:

 

i.                  the negligence or willful misconduct of any
Hyaluron Party;

 

[*] designates portions of this document that have been omitted
pursuant to a request for confidential treatment filed separately with the
Commission.

 

8

 

ii.               any breach of this Agreement by Hyaluron, or
any act by Hyaluron outside the scope of this Agreement; or

 

iii.            Hyaluron’s failure to comply with applicable
FDA or other governmental laws and regulations.

 

(b)                                 Hyaluron agrees to defend, indemnify and hold
harmless NeoRx, its affiliates, officers, directors, employees and agents
(collectively, the “NeoRx Parties”) from and against any and all costs,
(including reasonable legal fees), damages, expenses, losses, suits, claims and
demands, in any manner caused by, resulting from or arising out of third party
claims or suits related to: (i) the negligence or willful misconduct of
any Hyaluron Party; (ii) any breach of this Agreement by Hyaluron, or any
act by a Hyaluron Party outside the scope of this Agreement; (iii)Hyaluron’s
failure to comply with applicable FDA or other governmental laws and
regulations; or (iv) a claim by a third party that Hyaluron’s use in the
Services of intellectual property, other than that provided to Hyaluron by
NeoRx, infringes such third party’s intellectual property rights; provided,
however, that the foregoing indemnification will not apply to the extent such
costs, damages, expenses, losses, suits, claims or demands result from:

 

i.                  the negligence or willful misconduct of any
NeoRx Party;

 

ii.               any breach of this Agreement by NeoRx; or

 

iii.            NeoRx’s failure to comply with applicable FDA
or other governmental laws and regulations.

 

(c)                                  In the event that either party seeks
indemnification under the terms of this Section 10 (“the Indemnified Party”),
it will inform the other party (the “Indemnifying Party”) of the claim as soon
as reasonably practicable after it receives notice thereof (but in any event
within 15 days of receipt of notice of such claim). The Indemnifying Party will
have the right, but not the obligation to, at the Indemnifying Party’s cost, to
assume direction and control of the defense of the claim, and will cooperate as
requested (at the expense of the Indemnifying Party), in the defense of the
claim. The Indemnifying Party will not settle or otherwise compromise any claim
or suit in any manner which requires the Indemnified Party to provide any
consideration, admit fault or take any other action that would be binding on
such Indemnified Party without the prior written consent of the Indemnified
Party.

 

11.                                 Limitation of Liability.

 

(a) In no event will either party be liable to
the other party for lost profits, loss of use, loss of business, business
interruption, loss of data, cost of cover or any indirect, special,
consequential or incidental damages of any nature whatsoever, however caused
and under any theory of liability whether based in contract, warranty, tort
(including without limitation, negligence), strict liability, statutory or
otherwise, arising out of or in connection with this Agreement even if the
other party has been advised of the possibility of such damages.

 

(b) Notwithstanding anything to the contrary
herein, any limitations on liability will not be applicable to liabilities to
the extent arising from the violations of law, recklessness or willful
misconduct of a party.

 

(c)  This Section 11 shall not preclude a
party from seeking indemnification for damages as defined in Section 10.

 

[*] designates portions of this document that have been omitted
pursuant to a request for confidential treatment filed separately with the
Commission.

 

9

 

12.                                                                                 Miscellaneous.

 

(a)                                  Changes to this Agreement must be in writing
and require the signature of authorized officers of NeoRx and Hyaluron,
provided, however that changes involving additional services will be handled in
accordance with Section 1.

 

(b)                                 Hyaluron agrees to perform all the work under
this Agreement as an independent contractor. Hyaluron is not an employee,
partner, representative or joint venture of or with NeoRx, and nothing in this
Agreement will be construed to create such a relationship. Neither party will
have the power or right to bind or obligate the other.

 

(c)                                 Notices under this Agreement will be in
writing and delivered personally or by United States mail, certified mail or
courier to the following individuals:

 

To
NeoRx:

Karen
Auditore-Hargreaves

President &
COO

300
Elliott Avenue West, Suite 500

Seattle,
WA 98119-4114

 

To
Hyaluron:

Dr. Shawn
D. Kinney

President

Hyaluron Inc.

99 South Bedford St.

Burlington, MA 01803

 

(d)                                 This Agreement will be governed and construed
in accordance with the laws of the state of Massachusetts, excluding any choice
of law rules that may direct the application of the laws of another
jurisdiction.

 

(e)                                  If any provision of this Agreement is or
becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction, such provision will be deemed amended to conform to the
applicable laws of such jurisdiction so as to be valid and enforceable. If the
offending provision cannot be so amended without materially altering the
intention of the Parties: (i) it will be stricken; (ii) the validity,
legality and enforceability of such provision will not in any way be affected
or impaired in any other jurisdiction; and (iii) the remainder of this
Agreement will remain in full force and effect.

 

(f)                                    This Agreement contains the entire
understanding of the Parties with respect to the subject matter hereof and
supercede all previous agreements (oral and written). Any form containing other
terms and conditions of sale will not have the effect of modifying the terms
and conditions of this Agreement unless this Agreement is specifically amended
as provided herein. This Agreement will be binding upon and inure to the
benefit of the Parties and their successors and permitted assigns.

 

(g)                                 Hyaluron, on behalf of itself and its
employees, agents, subcontractors and affiliates, agrees not to use the name of
NeoRx or any of its employees, agents or affiliates, or reference any of their
products, in any publicity, advertising or other publication without NeoRx’s
prior written approval. Results and services provided by Hyaluron do not
constitute an endorsement of the Product or NeoRx’s scientific conclusions.
NeoRx agrees not to use Hyaluron’s name in a manner that could reasonably be

 

[*] designates portions of this document that have been omitted
pursuant to a request for confidential treatment filed separately with the
Commission.

 

10

 

construed as such an endorsement or in any other publicity or
advertising without Hyaluron’s prior written approval.

 

(h)                                 Neither party’s failure to exercise, or delay
in exercising any privileges, powers, rights or remedies under this Agreement
will operate as a waiver thereof, nor will any single or partial exercise of
any right or remedy under this Agreement preclude further exercise of any other
right or remedy hereunder. The rights and remedies of the Parties provided in
this Agreement will not be exclusive and are in addition to any other rights
and remedies at law or in equity.

 

(i)                                     Neither party will be
liable to the other party in any manner whatsoever for any failure or delay in
performing its obligations under this Agreement if and to the extent, and for
the duration, that such is due to Force Majeure. Without prejudice to Section 10,
any said failure or delay will not give either party the right to terminate
this Agreement except, and to the extent that such Force Majeure continues for
a period exceeding three (3) months. Hyaluron will be entitled to payment for any portion of the Services
completed and for any noncancellable expenses incurred prior to the date of
notification of termination pursuant to this Agreement and Hyaluron will return
to NeoRx all materials NeoRx provided to Hyaluron hereunder, and, upon NeoRx’s
request, work completed or in progress by Hyaluron pursuant to this Agreement,
including any reports and other documentation. For the purposes of this Section 13(j),
“Force Majeure” means any cause beyond the reasonable control of the
party in question which for the avoidance of doubt and without prejudice to the
generality of the foregoing will include governmental actions, war, riots,
terrorism, civil commotion, fire, flood, epidemic, labor disputes (excluding labor disputes involving
the work force or any part thereof of the party in question.

 

(j)                                     During the term of this Agreement, Hyaluron
and NeoRx will each maintain separate insurance coverage as follows: (1) Product
Liability in amounts of at least US$2,000,000.00; (2) General Liability in
amounts of at least US$2,000,000.00; (3) Workers compensation or foreign
employer liability in amounts in accordance with local and national statute;
and (4) Property in an amount of at least US$500,000.00 in accordance with
local and national statute. All insurance amounts may be obtained by full,
individual primary policy amount; a primary amount of less than minimum
requirement enhanced by a blanket excess umbrella policy; or a combination of
either. As an alternative to such insurance minimums, a party may provide
evidence of adequate financing, for purposes of self-insurance, as certified by
an independent actuary. The Parties will provide a certificate of insurance
upon request by the other. The Parties will provide each other with at least 30
days prior written notice of any material change, cancellation or expiration of
the above-required insurance.

 

[*] designates portions of this document that have been omitted
pursuant to a request for confidential treatment filed separately with the
Commission.

 

11

 

IN
WITNESS WHEREOF, this Agreement has been signed by an authorized corporate officer
of each party as of the date first above written.

 

 

	
  Hyaluron Inc.

  
	
   

  	
   

  
	
  By:

  	
  s/Shawn D. Kinney

  	
   

  
	
   

  	
  Shawn D. Kinney, Ph.D.

  
	
   

  	
  President

  
	
  Date:

  	
  4-26-05

  
	
   

  	
   

  
	
   

  	
   

  
	
  NeoRx:

  
	
   

  	
   

  
	
  By:

  	
  s/Karen Auditore-Hargreaves

  	
   

  
	
   

  	
  Karen Auditore-Hargreaves

  
	
   

  	
  President & COO

  
	
  Date:

  	
  5-4-05

  
	
   

  	
   

  
	
   

  	
  s/Susan D. Berland, CFO

  	
   

  
					

 

[*] designates portions of this document that have been omitted
pursuant to a request for confidential treatment filed separately with the
Commission.

 

12

 

NEORX CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

Exhibit A

 

	
  QUOTATION

  	
   

  	
   

  
	
  To:

  	
  Mr. Erik D. Laursen

  	
   

  	
  Bid/Project#: 163

  	
  Date: 7/28/2005

  
	
   

  	
  Sr. Dir. Manufacturing

  	
   

  	
  Rev#: 02

  
	
   

  	
  NeoRx Corp.

  	
   

  	
  Project
  Title: Manufacture of NX 473 for Phase II

  
	
   

  	
  300 Elliott Ave. W., Suite 500

  	
   

  	
  Studies

  
	
   

  	
  Seattle, WA 98119

  	
   

  	
   

  
	
   

  	
  Tel: 206-286-2504

  	
   

  	
   

  
	
   

  	
  Fax: 206-286-2537

  	
   

  	
   

  

 

Detailed
project proposal attached.

 

Payment
Schedule:          Please
refer to attached project proposal

 

Payment
Terms:           All payments due upon receipt of invoice

 

CONFIDENTIAL:          This
document is protected in full by our confidentiality agreement and should not
be shared with any individual or company not named in the agreement without the
prior written approval of Hyaluron Inc.

 

Prepared
by:

 

	
  s/Andrea Wagner

  	
   

  
	
  Andrea Wagner, Ph.D.

  
	
  Vice President, Business Development

  

 

Client: Please
complete the following and return one original to the attention of Andrea
Wagner, Hyaluron Inc., 99 S. Bedford Street, Burlington, MA  01803.

 

	
  I agree to the terms and conditions of this quotation and its
  attached project proposal:

  	
  PO#:

  
	
   

  	
  Billing Address (if different from above):

  
	
  Authorized Signature: s/Karen Auditore-Hargreaves

  	
   

  
	
  Title: Pres/COO

  	
   

  
	
  Date: 5/4/05

  	
   

  

 

Please
direct any questions concerning this proposal to Andrea Wagner, Customer
Representative. This quotation is valid for 30 days.

 

1

 

PROJECT PROPOSAL: 163

Revision
Number: 02

 Issued: April 26, 2005

PROJECT TITLE: Manufacture of NX 473 for Phase II Studies

Hyaluron
Customer Service Contact: Dr. Andrea Wagner

 

OBJECTIVE:                                                                                                                      Hyaluron Inc. will:

 

•                  Provide aseptic filling, labeling and
packaging for Phase II Studies.

 

This
quote is offered with the assumptions that:

 

1.                                       There will be initial start up costs related
to the purchase of   equipment.

2.                                       All analytical methods are not known at
Hyaluron and some will be transferred to Hyaluron with current SOPs developed
and validated or verified at Hyaluron.

 

[*] designates portions of this document that have been omitted
pursuant to a request for confidential treatment filed separately with the
Commission.

 

2

 

TASK 1:                        BATCH RECORD/DOCUMENTATION
PACKAGE

 

Hyaluron
will prepare a documentation package for manufacturing of client’s product.
This will include preparation of documentation for material specifications,
incoming inspection, in process testing, final product release tests and
results and manufacturing directions. One copy of this documentation will be
provided to client.

 

COST

$[*]

*Includes one client review/comment of documentation, additional
revisions will require additional fees.

 

TASK 2:                        ANALYTICAL TESTING TRANSFER,
DEVELOPMENT AND VALIDATION

 

Hyaluron
will work with NeoRx Corp. to obtain release testing via outside testing groups
designated by NeoRx Corp. NeoRx Corp. will transfer the UV assay to Hyaluron
for validation to perform the cleaning validation of the filling area.
Additionally, this test will be used to release the formulation for filling and
understand the concentration of the API in the product formulation. The assay
will be incorporated into Hyaluron’s quality system with a copy sent to NeoRx
Corp. for review.

 

COST

$[*]*

*Does
not include cost of materials or outsourced testing which will be billed to
client at Hyaluron’s cost plus [*]%.

 

TASK 3:                        FORMULATION TRANSFER

 

Hyaluron
(HY) will work with NeoRx Corp., to verify the proposed product and process
requirements, and confirm all design goals such as:

 

A.                                   Batch Sizes (Input from NeoRx Corp. (NRC))

B.                                     Aseptic requirements (Nitrogen overlay/needle
sparging/vacuum) (HY & NRC)

C.                                     Formulation and storage conditions for API –
need to formulate heated between [*]
(HY)

D.                                    Homogeneity specifications – some sensitivity
to stainless steel – use polypropylene system (NRC)

E.                                      Fill size specifications and filling
requirements (Very large fill volume need to do media fills for hand or semi
automated filling of [*]
bottle)(NRC)

F.                                      Final Product container, labeling and
packaging (NRC)

 

Hyaluron
will transfer the formulation and run one engineering (10% of full scale) run.
Through this engineering run draft manufacturing directions will be finalized.
The material will used to finalize assay development, transfer and validation
if required.

 

COST

$[*]*

*Does
not include any client specific equipment costs or product components, which
will be billed at Hyaluron’s cost plus [*]%.

 

[*] designates portions of this document that have been omitted
pursuant to a request for confidential treatment filed separately with the
Commission.

 

3

 

TASK 4:                        CLEANING VERIFICATION

 

Hyaluron
will perform the follow tasks to verify cleaning effectiveness:

 

A.           Develop a cleaning specification for NeoRx Corp.’s product.

B.             Determine the most effective product sampling
program to use for the detection of residual product or cleaning agents (e.g.,
direct surface sampling and rinse samples).

C.             Establish limits for analytical detection of
product and cleaning agents (if applicable), as well as recommended
methodologies (TOC, product specific assays, HPLC, etc.)

D.            Perform verification studies to demonstrate
that remaining product residues are within established acceptance criteria when
cleaned by standard operating procedures.

 

COST

$[*]*

 

TASK 5:                        EQUIPMENT REQUIRED

 

The
following equipment will be required to conduct the validations and
manufacturing of commercial product:

 

2-
Fill Needles estimated $[*]/each

1
- Mixing bags/levitron bags estimated at $[*]

Stainless
Steel Trays for vials estimated at $[*]

Change
parts for capper estimated at $[*]

 

TOTAL ESTIMATED COST

$[*]*

 

*Cost
is Hyaluron’s cost plus [*]%.

 

TASK 6:                        ASEPTIC FILLING VALIDATION

 

Hyaluron
will perform aseptic media validation simulating the aseptic handling of NeoRx
Corp.’s product during filling operations. Sterilization validation of all
product contact parts, such as pumps, needles, tubing and any vessels, must be
performed prior to the initiation of the media fills. Hyaluron will fill up to [*] of the selected vials with the highest
volume desired (up to [*]) of
media, stopper and incubate. This will be performed in triplicate with a 2-week
incubation occurring after each fill. The filling validation will be performed
in compliance with ISO 13408-1 and the FDA 2004 Guideline on Sterile Drugs
Products Produced by Aseptic Processing.

 

Cost

$[*]/run*

 

*Does
not include the cost of bottles, stoppers or caps – requirement of [*] units to complete the validation.

 

[*] designates portions of this document that have been omitted
pursuant to a request for confidential treatment filed separately with the
Commission.

 

4

 

TASK 7:                        STERILIZATION VALIDATION OF
VIALS AND STOPPERS

 

The
objective of this task is to validate the steam autoclave cycle used to
sterilize the equipment (stoppers, transfer tubing and filling equipment) for
the aseptic filling. The depyrogenation cycle will also be validated for the
sterilization of the [*] ml vials.
Each validation will be performed with an overkill approach using appropriate
temperature monitoring and biological indicators. The validation results will
be included in a summary report upon completion of the validation, which will
be forwarded to NeoRx Corp.

 

COST

$[*]*

 

*Does
not include the cost of the vials or stoppers used in each validation. All
outside testing will be charged to NeoRx Corp. at Hyaluron’s cost plus [*]%.

 

TASK 8:                        EH&S EVALUATION

 

Hyaluron
will evaluate the product toxicity for handling purposes. Disposal, handling
during lab analysis, formulation and filling will be evaluated and a protocol
written to train operators on overall handling of the material. Operator
training on toxic substance handling as it relates to the product will be
conducted to ensure safety in the handling of the product. Additionally, spill
containment and clean-up training in the case that a spill or breach in
containment occurs with the product will be conducted with all personnel
exposed to the product. Standard operating procedures for disposal and handling
will be written.

 

Cost

$[*]

 

TASK 9:                        FILL DEVELOPMENT

 

Hyaluron
will evaluate the filling process and develop a method to fill the NX 473
solution on the SV-122 filler that will be validated and employ hand
stoppering. The material will be transferred to the West Capper for capping
after filling. The equipment will be retro-fitted to accommodate the large vial
size and ensure high volume filling and capping.

 

Cost

$[*]

 

TASK 10:                 PHASE II STUDY LOT
PRODUCTION

 

Hyaluron
will provide NeoRx Corp. with production of a [*]
ml of the NX 473 solution with [*]
gram volume into [*] ml vial in
accordance with approved manufacturing directions. Hyaluron will sterile filter
bulk solution formulated from drug substance API and excipients by Hyaluron and
aseptically fill by semi-automatic method, and send out post fill testing to
the laboratory of NeoRx’s choice, inspect, label, and package vials and ship to
NeoRx Corp or a designated storage facility.

 

[*] designates portions of this document that have been omitted
pursuant to a request for confidential treatment filed separately with the
Commission.

 

5

 

 

	
  Stability Production

  	
   

  	
  Cost*

  
	
  [*] ml Bottles

  	
   

  	
   

  
	
  2000 units

  	
   

  	
  $ [*]

  
	
  Cost of Additional Units

  	
   

  	
   

  
	
  Up to 4000

  	
   

  	
  $ [*]/each

  

 

 *Cost of bottle, stopper, cap, and outsourced
washing at estimated $[*]/vial is
not included in the above cost, if actual costs exceed this estimate then
client will be billed the additional. The product will be labeled, packed and
sent to NeoRx Corp at NeoRx expense. Minimum order quantity is 2000 units.

 

NeoRx
and Hyaluron will use best efforts, within commercial reasonableness to release
the product before the end of Q3 2005.

 

[*] designates portions of this document that have been omitted
pursuant to a request for confidential treatment filed separately with the
Commission.

 

6

 

GENERAL PROVISIONS FOR THE PROJECT

Hyaluron Inc. will not:

•                  Modify the objectives without client
approval.

•                  Delete or modify any agreed specification
without client approval.

•                  Ship any supplies without expressed written
client approval.

 

The Client will:

•                  Provide raw materials in sufficient quantity
on the agreed upon date

•                  Provide to Hyaluron Inc. any information
pertinent to the project that may be known to the client.

•                  Provide safety and toxicology data and
information (both known and suspected, including a MSDS) for any compound prior
to project initiation as well as updates as information becomes available.

•                  The client agrees that, if any document submission to the FDA, domestic
or international regulatory agencies, contains a description of work performed
by Hyaluron Inc., the content of which has not been previously submitted to the
agency, that description of work will be provided to Hyaluron Inc. after the
submission.

 

Audits:

Hyaluron
Inc. allows the client an annual one-day audit with a one-time allowance of up
to three audit days given on the first year, and one visit to the facility
during development and during the fill. The visitation limitation does not
include technology transfer issues that may arise and cause additional visits.
Additional audits or visits will be charged to the client at a rate of $[*] per day. Audits and visits will be scheduled
in advance at a reasonable time.

 

Liability:

Hyaluron
shall not be liable for damages for, nor shall this agreement be terminable by
reason of, any delay or default in Hyaluron’s performance hereunder if such a
delay or default is caused by conditions beyond Hyaluron’s control including,
but not limited to, acts of God, regulation or law or other action of
government or any agency thereof, war, insurrection, civil commotion
destruction of production facilities or materials by earthquakes, fire, flood or
storm, labor disturbances, epidemic, or failure of suppliers, public utilities
or common carriers. Hyaluron agrees to promptly notify the client of any
interruptions of supply as described above and to employ all reasonable efforts
toward prompt resumption of its performance when possible if such performance
is delayed or interrupted by reason of such event.

 

Supplies:

Unless
otherwise specified in the proposal, the client will be invoiced for the cost
plus [*]% of all excipients,
supplies and capital items necessary to complete the project (such as vials,
stoppers, seals, labels, etc.).

 

Shipping:

All
shipping, packaging materials and handling charges will be billed to the
client.

 

Waste Disposal:

Hyaluron
will be responsible for all waste disposal related to product production. NeoRx
will be charged Hyaluron’s cost plus [*]%.

 

[*] designates portions of this document that have been omitted
pursuant to a request for confidential treatment filed separately with the
Commission.

 

7

 

Variables and Additions:

The
parties recognize that this is a development project leading to a commercial
production and supply, and that, as such, unusual, unique and unexpected
problems, requirements, or developments may arise which require additional
unanticipated work such as additional analytical work due to customer request,
out of specification results and/or analysis of samples placed on hold.

 

In
the event any of these variables or others exist or occur, Hyaluron Inc will promptly
identify them, and notify the client such that mutually agreeable terms can be
reached. The additional work will proceed when agreement has been reached.
Hyaluron will supply regulatory and other support for as requested at a
billable rate of $[*]/hour.

 

Cancellations and Rescheduling:

All
cancellation and rescheduling requests must be submitted in writing.

 

Cancellation
or rescheduling of clinical runs will incur the following fees:

 

	
  Number of days before scheduled

  run

  	
   

  	
  Rescheduling Fee (if rescheduled

  within 30 days of initial)

  	
   

  	
  Cancellation Fee

  
	
  16 – 30 days

  	
   

  	
  [*]% of Manufacturing Task Price

  	
   

  	
  [*]% of Manufacturing Task Price

  
	
  8 – 15 days

  	
   

  	
  [*]% of Manufacturing Task Price

  	
   

  	
  [*]% of Manufacturing Task Price

  
	
  0 – 7 days

  	
   

  	
  [*]% of Manufacturing Task Price

  	
   

  	
  [*]% of Manufacturing Task Price

  

 

When
canceling an entire project, the client forfeits the initial deposit paid at
the beginning of the project and is responsible for project costs incurred up
to the date of receipt of the cancellation notice as well as any associated
costs to close down the project.

 

Terms of Payment:

[*]% of each task’s cost is due upon acceptance of the task; the remainder
is due upon completion of the task. All equipment costs are due prior to
Hyaluron’s placement of a P.O. for purchase. All invoices are due and
payable upon receipt and past due after thirty (30) days from the date of
invoice. All amounts past due shall incur interest at the rate of 1.5% per
month or the highest rate permitted by law (whichever is less). All payments
shall be made to Hyaluron Inc. at the address specified on the front of the
invoice.

 

The
client assumes all responsibility for all reasonable legal fees and other
reasonable collection costs made necessary by wrongful default in payment.

 

[*] designates portions of this document that have been omitted
pursuant to a request for confidential treatment filed separately with the
Commission.

 

8

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