Document:

Exhibit 10.11

 

COLLABORATION AND LICENSE AGREEMENT

 

THIS COLLABORATION AND LICENSE AGREEMENT
(“Agreement”) is made and entered into effective as of January 5, 2005 (the “Effective
Date”), by and among ONCOGENEX TECHNOLOGIES INC., having offices at #400 – 1001
West Broadway, Vancouver, B.C., V6H 4B1 (“OncoGenex”) and ISIS PHARMACEUTICALS,
INC., having principal offices at 2292 Faraday Avenue, Carlsbad CA 92008 (“Isis”).
OncoGenex and Isis each may be referred to herein individually as a “Party,” or
collectively as the “Parties.”

 

WHEREAS, Isis and
OncoGenex wish to collaborate in the identification of two lead MOE Gapmers
targeted to inhibit two separate Collaboration Gene Targets, using Isis’
proprietary MOE chemistry, on the terms set forth below;

 

NOW, THEREFORE, the
Parties do hereby agree as follows:

 

ARTICLE 1 - DEFINITIONS

 

Capitalized terms used in this Agreement and
not otherwise defined herein have the meanings set forth in Appendix 1.

 

ARTICLE 2 - 

SCOPE OF COLLABORATION; COLLABORATION ACTIVITIES

 

Section
2.1                                   Scope
of Collaboration. The Parties will collaborate to jointly identify MOE
Gapmers designed to inhibit the Collaboration Gene Targets according to the
Project Plan attached hereto as Appendix 2.4.1 and made part of this Agreement
(the “Collaboration”). Following the completion of the Project Plan, OncoGenex
will be solely responsible for the continued development and commercialization
of any Products, subject to royalty and milestone payments to be paid to Isis
as set forth in this Agreement.

 

Section
2.2                                   Collaboration
Activities.

 

2.2.1                     General. The
Parties will use Commercially Reasonable Efforts to conduct their respective
responsibilities outlined in the Project Plan in accordance with this Agreement
and the Project Plan in good scientific manner, and in compliance in all
material respects with all Applicable Law, and will cooperate reasonably with
the other Party to achieve the goals of the Collaboration.

 

2.2.2                     Collaboration
Exclusivity.     During the Term
of this Agreement, neither Party nor their Affiliates will (a) engage, on
behalf of itself or any other party, in the research, development, manufacture,
use, offer for sale, sale or import of Antisense Compounds designed to modulate
the Collaboration Gene Targets, or (b) grant to any Third Party any license or
right to research, develop, make, have made, use, sell, offer for sale, have
sold or import Products, other than as provided in this Agreement.
Notwithstanding the foregoing, (i) OncoGenex retains the right (A) to use, have
used and 

 

*Certain information in this exhibit has been
omitted as confidential, as indicated by [***]. This information has been filed
separately with the Commission.

 

1

 

to grant limited sublicenses to use OncoGenex’s
Product-Specific Technology Patents for research, scholarly and other
non-commercial purposes only and, (B) to grant sublicenses to any Third Party
in accordance with Section 3.1.1; and; (ii) Isis retains the right to use
Antisense Compounds modulating the Collaboration Gene Targets or to transfer
such Antisense Compounds to third parties for non-commercial target validation
purposes. In each case such activities will not be interpreted as a breach of
this Agreement. In addition, the Parties acknowledge that Isis entered into a
Strategic Collaboration and License Agreement with Alnylam Pharmaceuticals,
Inc. dated March 11, 2004 and that Alnylam may independently discover and
develop Antisense Compounds against Collaboration Gene Targets; however, Isis
will not grant Alnylam any Isis Patent Rights specifically claiming the
applicable Collaboration Gene Target or methods of specifically treating such
Collaboration Gene Target.

 

Section
2.3                                   Target
pool. OncoGenex will have a pool (the “Target Pool”) containing up to 2
slots for which OncoGenex can designate certain gene targets for collaborative
research, development and commercialization under this Agreement (each such
slot, a “Target Slot” and any gene target occupying such a slot, a “Collaboration
Gene Target”). OncoGenex must designate at least one Collaboration Gene Target
within the first 6 months following the Effective Date and the second
Collaboration Gene Target within the first 24 months following the Effective
Date. If OncoGenex
fails to designate a Collaboration Gene Target by the applicable deadline
above, it will lose its right to designate such Collaboration Gene Target.

 

2.3.1                     New Target
Request. When OncoGenex wishes to add a new gene target to occupy a vacant
Target Slot, it will provide Isis with written notice (the “Request Notice”) of
the gene target it wishes to add (the “Proposed Collaboration Target”). The
Request Notice will include the gene name, the NCBI accession number or nucleic
acid sequence for the Proposed Collaboration Target.

 

2.3.2                     New Target
Rejection/Approval. Within 15 days of receipt of the Request Notice, Isis
will give OncoGenex written notice describing (a) if any of the criteria set
forth below in clauses (i) and (ii) applied to such Proposed Collaboration
Target at the time of Isis’ receipt of the Request Notice and (b) the nature of
any financial or other obligations to a Third Party associated with the
Proposed Collaboration Target (“Encumbrances”). If, at such time, the Proposed
Collaboration Target is (i) subject to Isis’ own Active Program or (ii)
encumbered by a contractual obligation between Isis and a Third Party that
would preclude Isis from granting a license under Section 3.1.1. with respect
to the Proposed Collaboration Target, then the Proposed Collaboration Target
will be rejected and will not become a Collaboration Gene Target. If the
Proposed Collaboration Target is not rejected under this subsection 2.3.2, the
Proposed Collaboration Target will become a Collaboration Gene Target; provided, however, that if the Proposed
Collaboration Gene Target has any Encumbrances, before such Proposed Gene
Target becomes a Collaboration Gene Target, OncoGenex must agree in writing to
assume all applicable Encumbrances for such Proposed Gene Target. At the time a
particular gene target becomes a Collaboration Gene Target, the Parties will
mutually agree whether such Collaboration Gene Target is a Level 1, Level 2 or
Level 3 Collaboration Gene Target.

 

2

 

2.3.3                     Target
Substitution Procedures. OncoGenex can substitute and replace a new gene
target for an existing Collaboration Gene Target at any time prior to the [***]
with a MOE Gapmer modulating such Collaboration Gene Target; provided however, that OncoGenex is only
allowed a total of [***] such substitutions under this Agreement. OncoGenex
will provide Isis with written notice of its intent to substitute, indicating
which Collaboration Gene Target it wishes to substitute out and which new gene
target (the “Proposed Substitution Target”) it wishes to substitute in. In
determining whether to accept or reject a Proposed Substitution Target, Isis
will follow the same procedures for adding a Proposed Collaboration Target set
forth in Section 2.3.2 (including assigning an appropriate Target Level). If
the Proposed Substitution Target is not rejected under this subsection 2.3.3,
the Proposed Substitution Target will become a Collaboration Gene Target and
the gene target substituted out will no longer be considered a Collaboration
Gene Target. In addition, for each substitution, OncoGenex will pay the
substitution fee set forth in Section 4.2. Furthermore, once a Collaboration
Gene Target is substituted out, any MOE Gapmers that modulate such former
Collaboration Gene Target will be considered a Discontinued Product pursuant to
Section 9.1 of this Agreement.

 

2.3.4                     Confidentiality.
The fact that OncoGenex has designated or removed a particular gene target
within the OncoGenex Target Pool is Confidential Information of OncoGenex, or
that Isis has rejected a particular gene target proposed for a Target Slot,
disallowed the substitution of a particular gene target and any Encumbrances
Isis discloses are Confidential Information of Isis, subject to the provisions
of Article 5.

 

2.3.5                     Commercially Reasonable Efforts For Each Collaboration Gene Target.
OncoGenex will use Commercially Reasonable Efforts to develop and commercialize
a Product that modulates such Collaboration Gene Target (whether alone, in
collaboration with an Affiliate or Third Party or through a licensee);
provided, however, that Article 9 sets forth Isis’ sole remedy in the event of
OncoGenex failing to so use Commercially Reasonable Efforts.

 

Section
2.4                                   Project
Plan.

 

2.4.1                     Goals of
Project Plan. The Project Plan and the Parties’ responsibilities thereunder
and the funding thereof are set forth in Appendix 2.4.1.

 

2.4.2                     Changes to
Project Plan. Any changes to the Project Plan will require the prior
written approval of both Parties, and if such changes require additional activities,
the Project Plan will include a budget for such activities and a method of
funding.

 

2.4.3                     Responsibilities
Following Completion of the Project Plan. Following the completion of the
Project Plan, OncoGenex will be solely responsible for further development and
commercialization of the Product, including but not limited to:

 

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(a)  Contracting
for the manufacturing of all drug needed for toxicology studies and clinical
trials.

 

(b)  Coordinating
all aspects of animal pharmacology and toxicology studies needed for IND
filing.

 

(c)  Conducting clinical
trials.

 

(d)  Negotiating
any and all sublicensing agreements with Third Parties for the ongoing
development and/or marketing of the Product.

 

If requested by OncoGenex, in order to facilitate further development
and commercialization of the Product, the Parties will mutually agree to a
consulting agreement, including an applicable hourly rate, under which Isis
will provide consulting in addition to what is described in the Project Plan.

 

After the Project Plan has been completed, the Parties will append to
this Agreement the specific sequence and chemistry of each MOE Gapmer which
constitutes the active pharmaceutical ingredient in each Product.

 

Section
2.5                                   Manufacturing
of Product.

 

2.5.1                     Isis will
have the first right to manufacture the API for the Product, on mutually
agreeable, commercially reasonable terms and conditions, and pursuant to a
supply agreement to be agreed to by the Parties containing terms customary in
the industry regarding quality control, ordering, delivery, title and risk of
loss, warranties and indemnification.

 

2.5.2                     If Isis
is unable or unwilling to manufacture the API for the Product, or if the
Parties cannot reach agreement on the terms and conditions for a supply
agreement within 60 days of a request for transfer pricing quote by OncoGenex,
OncoGenex may:

 

(a)  have the API for the
Product manufactured by a manufacturer licensed under Isis’ proprietary
manufacturing and analytical technology; or

 

(b)  have the API for the
Product manufactured using a process not covered by Isis’ proprietary
manufacturing and analytical technology.

 

ARTICLE 3 - 

GRANT OF RIGHTS

 

Section
3.1                                   License
Grant for Collaboration Activities.

 

3.1.1                     Isis Grant. Subject
to the terms and conditions of this Agreement, Isis hereby grants to OncoGenex
(a) an exclusive, worldwide license under the Isis 

 

4

 

Product-Specific Technology Patents and the
Joint Patents to any Product-Specific Technology to research, develop, make,
have made, use, sell, offer for sale, have sold and import Products, (b) a
non-exclusive, worldwide license under the Isis Core Technology Patents, solely
to research develop, make, have made, use, sell, offer for sale, have sold and
import Products and (c) a non-exclusive, worldwide license under the Isis Core
Technology Patents solely to research MOE Gapmers generated under the Research
Plan that modulate Collaboration Gene Targets. The licenses granted to
OncoGenex are sublicensable only in connection with a license of a Product to
one or more Third Parties for the continued development and commercialization
of Products in accordance with the terms of this Agreement. This license will
automatically terminate with respect to any Product that modulates a
Collaboration Gene Target that has been substituted and replaced by another
gene target pursuant to Section 2.3.3.

 

3.1.2                     OncoGenex
Grant. Subject to the terms and conditions of this Agreement, OncoGenex
hereby grants to Isis a non-exclusive, non-transferable, limited license or
sublicense, as the case may be, under the OncoGenex Product-Specific Technology
Patents, solely to perform Isis’ responsibilities in the Project Plan.

 

3.1.3                     Improvements.
To the extent that Isis has the right to license an Improvement, the Parties
will negotiate in good faith regarding the use of any such Improvement in
Products. If the Parties agree to terms under which such Improvement will be
used in Products, Isis will grant to OncoGenex a license under the Improvement
solely to research, develop, make, have made, use, sell, offer for sale, have
sold and import Products; provided, however, that to the extent such
Improvement is made by Isis while performaning work under any Project Plan,
Isis shall grant such license to OncoGenex without any further consideration
from OncoGenex. The license granted hereunder will be sublicensable only in
connection with a license of a Product to one or more Third Parties for the
continued development and commercialization of Products in accordance with the
terms of this Agreement.

 

5

 

ARTICLE 4 - 

FINANCIAL PROVISIONS

 

Section
4.1                                   Up-Front
Payment by OncoGenex. Within 15 days following the date a new gene target
is accepted as a Collaboration Gene Target pursuant to Section 2.3.2, OncoGenex
will pay Isis an up-front technology access and license fee of (i) $750,000
(U.S.) plus (ii) the applicable Target Level Fee for such target. OncoGenex can
elect, at its sole discretion, to pay this fee (a) in cash, (b) in shares of
OncoGenex Preferred Stock (as defined in Appendix 1) or (c) by issuing Isis a
convertible promissory note (pursuant to, and in substantially the form of the
Note and corresponding Note Purchase Agreement attached hereto as Appendix 4.1).
The applicable Target Level Fee for each Collaboration Gene Target will be
determined according to the following table:

 

	
  

  Target Level

  	
   

  	
  Additional

  Target Level Fee

  
	
  Level 1

  	
   

  	
  [***]

  
	
  Level 2

  	
   

  	
  [***]

  
	
  Level 3

  	
   

  	
  [***]

  

 

Section
4.2                                   Substitution
fee. OncoGenex will pay Isis (i) [***] plus (ii) the applicable Target
Level Fee (as calculated under Section 4.1 above) for such target for each
substituted Collaboration Gene Target it makes under Section 2.3.3 (a “Substitution
Fee”); provided however that
OncoGenex may credit the Target Level Fee OncoGenex paid to Isis (if any) for
the Collaboration Gene Target replaced as part of such substitution against
this substitution fee. Notwithstanding the foregoing, OncoGenex will not
receive any refund or reimbursement if the amount OncoGenex is entitled to
credit under this Section 4.2 is greater than the applicable Substitution Fee. The
payments due Isis under this Section are payable in cash or shares of OncoGenex
Preferred Stock (as defined in Appendix 1) at OncoGenex’s sole discretion.

 

6

 

Section
4.3                                   Milestone
Payments by OncoGenex for First Oncology Indication. OncoGenex will pay to
Isis the relevant milestone payment (based on the applicable milestone achieved
and Target Level) not more than thirty (30) days after achievement, by
OncoGenex or a sublicensee, of each of the applicable events within the field
of oncology for each Product developed hereunder; provided however that no additional milestone payment shall
be due or owing when a Product meets the same milestone within the field of
oncology once that milestone payment has already been paid, as follows:

 

	
  Event

  	
   

  	
  Level 1

  	
   

  	
  Level 2

  	
   

  	
  Level 3

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  

 

Section
4.4                                   Milestone
Payments by OncoGenex for First Primary Indication Outside Oncology. OncoGenex
will pay to Isis the relevant milestone payment (based on the applicable
milestone achieved and Target Level) not more than thirty (30) days after
achievement, by OncoGenex or a sublicensee, of each of the applicable events
outside the field of oncology for each Product developed hereunder; provided however that no additional
milestone payment shall be due or owing when a Product meets the same milestone
outside the field of oncology once that milestone payment has already been
paid, as follows:

 

	
  Event

  	
   

  	
  Level 1

  	
   

  	
  Level 2

  	
   

  	
  Level 3

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  

 

Section
4.5                                   Royalty
Payments by OncoGenex. In consideration of Isis’ collaborative efforts and
the licenses granted hereunder, OncoGenex will pay Isis a royalty on the Net
Sales of the Product based on the applicable Target Level attributable to the
Product in accordance with the table set forth below. OncoGenex will pay such
royalties for the Term of the Agreement.

 

7

 

	
   

  	
   

  	
  Royalty on

  
	
   

  	
   

  	
  Net Sales

  
	
  Level 1

  	
   

  	
  [***]

  
	
  Level 2

  	
   

  	
  [***]

  
	
  Level 3

  	
   

  	
  [***]

  

 

 

Section
4.6                                   Third
Party Payments. In addition to the royalty set forth in Section 4.5,
OncoGenex will pay to Isis a royalty of [***] of Net Sales of Product, pursuant
to a license agreement with [***] and a royalty of [***] of Net Sales of
Product pursuant to a license agreement with [***]. In the event that Isis
negotiates a reduction or elimination of the royalties with these Third Party
licensors, the royalties due hereunder will still be paid to Isis. Notwithstanding
the foregoing, the Parties agree that if the Isis Patent Rights licensed by
Isis from [***] and/or [***] and sublicensed under this Agreement do not
include any Valid Claims that are infringed by using, manufacturing, offering
for sale, selling or importing Products at the time of such use, manufacture,
offer for sale, sale or import, then OncoGenex will not be responsible for
paying the royalties flowing through to [***] and/or [***], as applicable, and
the total royalty payable will be reduced accordingly.

 

Section
4.7                                   Timing
of Royalty Payments. The royalties will become due and payable within sixty
(60) days after each respective Royalty Due Date and shall be calculated in
respect of the Net Sales in the three (3) month period ending with the
applicable Royalty Due Date.

 

Section
4.8                                   Payment
Method. Any amounts due to a Party under this Agreement will be paid in
U.S. dollars, by wire transfer in immediately available funds to an account
designated by the receiving Party or by check. Any payments or portions thereof
due hereunder which are not paid on the date such payments are due under this
Agreement will bear interest at a rate equal to the lesser of the prime rate as
published in The Wall Street Journal,
Eastern Edition, on the first day of each calendar quarter in which such
payments are overdue, plus two percent (2%), or the maximum rate permitted by
law, whichever is lower, calculated on the number of days such payment is
delinquent, compounded monthly.

 

Section
4.9                                   Currency;
Foreign Payments. If any currency conversion will be required in connection
with any payment hereunder, such conversion will be made by using the exchange
rate for the purchase of U.S. dollars as published in The Wall Street Journal, Eastern Edition,
on the last business day of the calendar quarter to which such payments relate.
If at any time legal restrictions prevent the prompt remittance of any payments
in any jurisdiction, the applicable Party may notify the other and make such
payments by depositing the amount thereof in local currency in a bank account
or other 

 

8

 

depository in such country in the name of the
receiving Party or its designee, and such Party will have no further
obligations under this Agreement with respect thereto.

 

Section
4.10                            Taxes.
A Party may deduct from any amounts it is required to pay to the other
Party pursuant to this Agreement an amount equal to that withheld for or due on
account of any taxes (other than taxes imposed on or measured by net income) or
similar governmental charge imposed on the receiving Party by a jurisdiction of
the paying Party (“Withholding Taxes”). The paying Party will provide the
receiving Party a certificate evidencing payment of any Withholding Taxes
hereunder within 30 days of such payment and will reasonably assist the
receiving Party, at the receiving Party’s expense, to obtain the benefit of any
applicable tax treaty.

 

Section
4.11                            Records
Retention; Audit.

 

4.11.1              Regulatory Records. With
respect to the subject matter of this Agreement, each Party will maintain, or
cause to be maintained, records of its respective research, development,
manufacturing and commercialization activities, including all Regulatory
Documentation, in sufficient detail and in good scientific manner appropriate
for patent and regulatory purposes, which will be complete and accurate and
will fully and properly reflect all work done and results achieved in the
performance of such activities. All Regulatory Documentation will be retained
for a period as may be required by Applicable Law. Each Party will have the
right, during normal business hours and upon reasonable notice, to inspect and
copy any such records for the sole purpose of performing their obligations or
exercising their rights hereunder.

 

4.11.2              Record Retention. Each
Party will maintain (and will ensure that its sublicensees will maintain)
complete and accurate books, records and accounts that fairly reflect Net Sales
with respect to the Product in sufficient detail to confirm the accuracy of any
payments required hereunder and in accordance with GAAP, which books, records
and accounts will be retained by such party until the later of (i) 3 years
after the end of the period to which such books, records and accounts pertain,
and (ii) the expiration of the applicable tax statute of limitations (or any
extensions thereof), or for such longer period as may be required by Applicable
Law.

 

4.11.3              Audit. Each
Party will have the right to have an independent certified public accounting
firm of nationally recognized standing, reasonably acceptable to the audited
Party, have access during normal business hours, and upon reasonable prior
written notice, to such of the records of the other Party as may be reasonably
necessary to verify the accuracy of Net Sales for any calendar quarter or
calendar year ending not more than 24 months prior to the date of such request;
provided, however, that neither
Party will have the right to conduct more than one such audit in any Calendar
Year. The requesting Party shall bear the cost of such audit unless the audit
reveals a variance of more than 5% from the reported results, in which case the
audited Party shall bear the cost of the audit. The results of such accounting
firm shall be final and binding upon the Parties, absent manifest error.

 

9

 

4.11.4              Payment of
Additional Amounts. If, based on the results of such audit, additional
payments are owed by the audited Party under this Agreement, the audited Party
will make such additional payments, with interest as set forth in Section 4.8,
within 60 days after the date on which such accounting firm’s written report is
delivered to such Party.

 

4.11.5              Confidentiality. The
auditing Party will treat all information subject to review under this Section
4.11 in accordance with the confidentiality provisions of Article 5 and will
cause its accounting firm to enter into a reasonably acceptable confidentiality
agreement with the audited Party obligating such firm to maintain all such
financial information in confidence pursuant to such confidentiality agreement.

 

ARTICLE 5 - 

CONFIDENTIALITY

 

Section
5.1                                   Disclosure
and Use Restriction. Except as expressly provided herein, the Parties agree
that, for the Term and for five (5) years thereafter, each Party will keep
completely confidential and will not publish, submit for publication or
otherwise disclose, and will not use for any purpose except for the purposes
contemplated by this Agreement, any Confidential Information received from the
other Party.

 

5.1.1                     Authorized
Disclosure. Each Party may disclose Confidential Information of the other
Party to the extent that such disclosure is:

 

(a)  made
in response to a valid order of a court of competent jurisdiction; provided, however, that such Party will
first have given notice to such other Party and given such other Party a
reasonable opportunity to quash such order and to obtain a protective order
requiring that the Confidential Information and documents that are the subject
of such order be held in confidence by such court or agency or, if disclosed,
be used only for the purposes for which the order was issued; and provided further that if a disclosure
order is not quashed or a protective order is not obtained, the Confidential
Information disclosed in response to such court or governmental order will be
limited to that information which is legally required to be disclosed in
response to such court or governmental order;

 

(b)  otherwise
required by applicable law or regulation; provided,
however, that the disclosing Party will provide such other Party
with notice of such disclosure in advance thereof to the extent practicable;

 

(c)  made
by such Party to the Regulatory Authorities as necessary for the development or
commercialization of a Product in a country, or as required in connection with
any filing, application or request for Regulatory Approval; provided, however, that reasonable
measures will be taken to assure confidential treatment of such information;

 

10

 

(d)  made
by such Party, in connection with the performance of this Agreement, to
permitted sublicensees, licensors, directors, officers, employees, consultants,
representatives or agents, each of whom prior to disclosure must be bound by
obligations of confidentiality and non-use at least equivalent in scope to
those set forth in this Article 5; or

 

(e)  made
by such Party to existing or potential acquirers; existing or potential
pharmaceutical collaborators (to the extent contemplated hereunder); investment
bankers; existing or potential investors, merger candidates, partners, venture
capital firms or other financial institutions or investors for purposes of
obtaining financing; or, bona fide strategic potential partners; each of whom
prior to disclosure must be bound by obligations of confidentiality and non-use
at least equivalent in scope to those set forth in this Article 5.

 

Section
5.2                                   Press
Releases. Press releases or other similar public communication by either
Party relating to this Agreement, unless relating solely to a Product being
developed by the Party making the communication, will be approved in advance by
the other Party, which approval will not be unreasonably withheld or delayed,
except for those communications required by Applicable Law, disclosures of
information for which consent has previously been obtained, and information of
a similar nature to that which has been previously disclosed publicly with
respect to this Agreement, each of which will not require advance approval, but
will be provided to the other Party as soon as practicable after the release or
communication thereof.

 

Section
5.3                                   Publications
and Presentations. The Parties acknowledge that scientific lead-time is a
key element of the value of the research and development activities under the
Collaboration and further agree that scientific publications and presentations
must be strictly monitored to prevent any adverse effect from premature
publication or disclosure of results of the research or development activities
hereunder. At least thirty (30) days prior to submission of any material
related to the research or development activities hereunder for publication or
presentation, the submitting Party will provide to the receiving Party a draft
of such material for its review and comment. The receiving Party will provide
any comments to the submitting Party within twenty (20) days of receipt of such
materials alerting the submitting Party to the presence of the receiving Party’s
Confidential Information or patentable subject matter that requires protection
and in each case, specifically identifying such information (“Notice of
Objection”). Each Party will reasonably review proposed publications and
presentations submitted by the other Party as promptly as possible and will not
unreasonably withhold its consent to such publications or presentations that
have been submitted for review with less than the required notice period.

 

5.3.1                     In the
event the receiving party makes such Notice of Objection, the submitting party
shall refrain from disclosing the material until the receiving Party’s
Confidential Information, as identified in the Notice of Objection, is removed.
Once the receiving Party’s Confidential Information has been removed, the
Notice of Objection will be deemed withdrawn and the submitting party shall not
be restricted from publishing the material, provided that any objection based
on patentable subject matter 

 

11

 

contained in the material has also been
addressed in accordance with the terms of section 5.3.2.

 

5.3.2                     If the
Notice of Objection identifies patentable subject matter then the submitting
Party will withhold the material from submission for publication or
presentation and the Parties shall work together in good faith and, as quickly
as possible after receipt of the Notice of Objection, to file patents and take
all necessary measures to establish and preserve proprietary rights that may be
contained in the material being submitted for publication or presentation as
identified in the Notice of Objection. Once the Parties have taken such steps
to protect the patentable subject matter, the Notice of Objection will be
deemed withdrawn and the submitting party shall not be restricted from
publishing the material. In no event, provided the submitting Party is acting
in good faith to protect the patentable material, shall a Notice of Objection
relating to patentable material delay publication for longer than three (3)
months from the date the Notice of Objection was received by the submitting
Party.

 

ARTICLE 6 - 

INTELLECTUAL PROPERTY

 

Section
6.1                                   Intellectual
Property Ownership.

 

6.1.1                     Ownership of
Intellectual Property. Isis will own all inventions made solely by its
employees and agents (as determined under United States patent laws) as part of
the Collaboration, and all Patents claiming such inventions. OncoGenex will own
all inventions made solely by its employees and agents (as determined under
United States patent laws) as part of the Collaboration, and all Patents
claiming such inventions. All inventions made (as determined under United
States patent laws) jointly by employees or agents of Isis and employees or
agents of OncoGenex (“Joint Technology”), and all Patents claiming such
inventions, will be owned jointly by Isis and OncoGenex. During the Term of
this Agreement, each Party shall promptly disclose in writing to the other
Party on an ongoing basis, and prior to filing any Patent, any Joint Technology
or Product-Specific Technology invented as part of the Collaboration. Once a Collaboration
Gene Target has been approved under Section 2.3.2, the Parties will each
disclose to each other the current status of all Product-Specific Technology
Patents Controlled by such Party and licensed under this Agreement with respect
to such Collaboration Gene Target.

 

6.1.2                     Ownership of
Regulatory Documentation. Unless and until Isis sends an Election Notice
pursuant to Article 9 of this Agreement, all Regulatory Documentation with
respect to a Product will be owned by OncoGenex, or its sublicensee, if
applicable. If OncoGenex discontinues development of such Product and Isis
sends an Election Notice in accordance with Section 9.2, all Regulatory
Documentation with respect to such Product will be transferred to Isis. In the
event that this Agreement terminates pursuant to Section 9.2, all Regulatory
Documentation will remain with the Party that first secured such Regulatory
Documentation.

 

12

 

Section
6.2                                   Prosecution
of Patents.

 

6.2.1                     Solely Owned
Patents. With the exception of Product-Specific Technology Patents, as set
forth in 6.2.2, each Party will have the sole right, at its cost and expense
and at its sole discretion, to obtain, prosecute and maintain throughout the
world any Patents solely owned or Controlled by such Party.

 

6.2.2                     Product-Specific
Technology Patents. OncoGenex will have the sole right and at its sole cost
and discretion, to obtain, prosecute and maintain throughout the world the
Product-Specific Technology Patents including Joint Product-Specific Technology
Patents. OncoGenex shall reimburse Isis for all of Isis’ reasonable
out-of-pocket costs incurred prior to and after entering into this Agreement to
obtain, prosecute and maintain throughout the world, any Product-Specific Technology
Patents Controlled by Isis; provided however
that OncoGenex will not be required to make any such reimbursements for
expenses incurred by Isis after a Discontinuance. OncoGenex will keep Isis
informed of all Isis Product Specific Technology Patent applications and
registrations to be filed by OncoGenex, and Isis shall have the right to
comment on such applications within the timeframes of the patent filing process
and deadlines. Until a Product has reached the dosing of the first patient in a
Phase II Clinical Trial stage of development, OncoGenex must accept Isis’
reasonable good faith comments on any Isis Product Specific Technology Patent
applications and registrations covering such Product. Notwithstanding the
foregoing, if Isis is unilaterally developing and commercializing a Product in
accordance with Section 9.2, Isis will have the first right, subject to
compliance with any Third Party agreements OncoGenex may have with respect to
such Patents, to file, prosecute and maintain any Product-Specific Technology
Patents pertaining to such Product at its sole expense, provided that if Isis elects not to (a)
pursue the filing, prosecution or maintenance of an OncoGenex Product-Specific
Technology Patent or a Joint Product-Specific Technology Patent in a particular
country, or (b) take any other action with respect to OncoGenex
Product-Specific Technology or Joint Product-Specific Technology in a
particular country that is necessary or reasonably useful to establish or
preserve rights thereto, then in each such case Isis will so notify OncoGenex
promptly in writing and in good time to enable OncoGenex to meet any deadlines
by which an action must be taken to establish or preserve any rights in such
OncoGenex Product-Specific Technology or Joint Product-Specific Technology in
such country, and OncoGenex will have the right, but not the obligation, to
pursue the filing or registration, or support the continued prosecution or
maintenance, of such OncoGenex Product-Specific Technology Patents or Joint
Product-Specific Technology Patents, at its expense in such country.

 

6.2.3                     Filing of
Joint Patents. All Joint Product Specific Technology Patents will be
governed by Section 6.2.2. For all other Joint Patents, the Parties will
cooperate with one another with respect to the filing, prosecution and
maintenance of such Joint Patents. The Parties will designate one of the
Parties to be responsible for, and to initially bear the expense of, the
preparation, filing, prosecution, and maintenance of a Joint Patent, provided that the responsible Party will
be entitled to reimbursement by the other Party of an equal share of the
responsible Party’s expenses. The responsible Party will consult with the other
Party as to the preparation, filing, prosecution, and maintenance of such Joint
Patent reasonably prior to any deadline or action with the U.S. Patent &
Trademark Office or any foreign patent office, and will furnish to the other 

 

13

 

Party copies of all relevant documents reasonably
in advance of such consultation. For the life of the Joint Patents, the Parties
will mutually agree upon all Joint Patent filings.

 

6.2.4                     Cooperation. Each
Party will cooperate reasonably in the preparation, filing, prosecution, and
maintenance of the other Party’s Patents, the Product-Specific Technology
Patents and the Joint Patents. Such cooperation includes (a) promptly executing
all papers and instruments and requiring employees to execute such papers and
instruments as reasonable and appropriate so as to enable such other Party, to
file, prosecute, and maintain its Patents in any country; and (b) promptly
informing such other Party of matters that may affect the preparation, filing,
prosecution, or maintenance of any such Patents.

 

Section
6.3                                   Enforcement
of Patents

 

6.3.1                     Rights and
Procedures. If Isis or OncoGenex determines that any Patent licensed
hereunder is being infringed by a Third Party’s activities and that such
infringement could affect the exercise by the Parties of their respective
rights and obligations under this Agreement, it will promptly notify the other
Party in writing and provide such other Party with any evidence of such
infringement that is reasonably available.

 

(a)  Joint
Patents. With respect to infringement of a Joint
Patent that is not a Product-Specific Technology Patent, the Party responsible
for filing, prosecution and maintenance of such Joint Patent under Section
6.2.3 will have the first right to bring and control any action or proceeding
with respect to such Joint Patent, and will bear all expenses thereof, and the
other Party will have the right, at its own expense, to be represented in any
such action; provided, however,
that if the Party with the first right to bring and control actions and
proceedings with respect to such Joint Patent fails to bring an action or
proceeding within ninety (90) days following notice of such infringement, or
earlier notifies the other Party in writing of its intent not to take such
steps, the other Party will have the right to do so at its expense, and the
first Party will have the right, at its own expense, to be represented in any
such action. Notwithstanding the foregoing, if the infringement is likely to
have a material adverse effect on the development or commercialization of a
Product, the Parties will meet to determine whether to defend against such
infringement based on the Joint Patents, and if the Parties mutually agree to
proceed in defending such infringement based on the Joint Patents, the Parties
will share (on a pre-determined basis as agreed to by the Parties) in the
reasonable costs incurred relating to the removal of any such infringement.

 

(b)  Product-Specific
Technology Patents. With respect to Product-Specific
Technology Patents, OncoGenex will have the first right, at OncoGenex’s
expense, but not the obligation, to enforce against such infringement. In the
event that OncoGenex fails to take commercially appropriate steps to enforce
against any infringement of any such Product-Specific Technology Patent within ninety
(90) days following notice of such infringement, or earlier notifies Isis in
writing of its intent 

 

14

 

not to take such steps, and such infringement is likely to have a
material adverse effect on the Product, Isis will have the right (the “Isis
Step-in Right”) to do so at its expense, and OncoGenex will have the right, at
its own expense, to be represented in any such action. If Isis is unilaterally
developing and commercializing the Product pursuant to Section 9.2, Isis will
have the right, at Isis’ own expense, to remove infringement of the
Product-Specific Technology Patents. In the event that Isis fails to take
commercially appropriate steps to enforce against any infringement of any such
Product-Specific Technology Patent within ninety (90) days following notice of
such infringement, or earlier notifies OncoGenex in writing of its intent not
to take such steps, and such infringement is likely to have a material adverse
effect on the Product, OncoGenex will have the right (the “OncoGenex Step-in
Right”) to do so at its expense, and Isis will have the right, at its own
expense, to be represented in any such action.

 

(c)  Isis
Patent Rights. Except as set forth in Sections
6.3.1(a) and (b) above, with respect to the Isis Patent Rights, Isis will have
the sole right, but not the obligation, at its own expense, to enforce against
such infringement using commercially appropriate steps, including the filing of
an infringement suit or taking other similar action. Notwithstanding the
foregoing, if the infringement is likely to have a material adverse effect on
the development or commercialization of any Products, the Parties will meet to
determine whether to abate such infringement based on the Isis Patent Rights,
and if the Parties mutually agree to abate such infringement based on the Isis
Patent Rights, Isis will remove the infringement using commercially appropriate
steps, and the Parties will share (on a pre-determined basis as agreed to by
the Parties) in the reasonable costs incurred relating to the removal of any
such infringement.

 

(d)  Cooperation.
The Party not enforcing the applicable Patent will
provide reasonable assistance to the other Party, including providing access to
relevant documents and other evidence, making its employees available at
reasonable business hours, and joining the action to the extent necessary to
allow the enforcing Party to maintain the action. In addition, the Party not
enforcing the applicable Patent will have the right to participate in the
action with its own counsel.

 

6.3.2                     Recovery. Any
amounts recovered by either or both Parties in connection with or as a result
of any action contemplated by Section 6.3.1, whether by settlement or judgment,
will first be used to reimburse the Parties for their reasonable costs and
expenses in making such recovery (which amounts will be allocated pro rata if
insufficient to cover the totality of such expenses), with any remainder being
retained by the Party currently developing or commercializing a Product,
provided that such remainder will be treated as Net Sales and royalties will be
owing in respect of such Net Sales pursuant to this Agreement. Notwithstanding
the foregoing, if Isis enforces Product Specific Technology Patents pursuant to
the Isis Step-in Right or OncoGenex enforces Product Specific Technology
Patents pursuant to the OncoGenex Step-in Right under Section 6.3.1(b), any
amounts recovered by the enforcing Party in connection with such enforcement,
whether by settlement or judgment, will first be used to reimburse the Parties
for their reasonable costs and expenses in making such recovery (which amounts 

 

15

 

will be allocated pro rata if insufficient to
cover the totality of such expenses), with any remainder being retained by the
enforcing Party.

 

Section
6.4                                   Validity
and Enforceability of Parties’ Technology. The Parties agree that during
the Term of this Agreement, and for 5 years thereafter, neither Party will
bring any action in a court of law, or otherwise challenge the validity or
enforceability of the other Party’s Technology licensed under this Agreement.

 

ARTICLE 7 - 

TERM AND TERMINATION

 

Section
7.1                                   Term.
Unless earlier terminated in accordance with the provisions of Section 9.2,
the term of this Agreement (the “Term”) for each Product hereunder commences
upon the Effective Date and will continue until the later of (a) 10 years after
the date of first commercial sale of such Product, or (b) the expiration of the
last to expire of any Patent that, but for the licenses granted hereunder would
be infringed by the manufacture, use or sale of such Product.

 

Section
7.2                                   Rights
in Bankruptcy. All rights and licenses granted under or pursuant to this
Agreement by Isis or OncoGenex are, and will otherwise be deemed to be, for
purposes of Section 365(n) of the United States Bankruptcy Code, licenses of
rights to “intellectual property” as defined under Section 101 of the United
States Bankruptcy Code. The Parties agree that the Parties, as licensees of
such rights under this Agreement, will retain and may fully exercise all of
their rights and elections under the United States Bankruptcy Code. The Parties
further agree that, in the event of the commencement of a bankruptcy proceeding
by or against a Party under the United States Bankruptcy Code, the Party hereto
that is not a Party to such proceeding will be entitled to a complete duplicate
of (or complete access to, as appropriate) any such intellectual property and
all embodiments of such intellectual property, which, if not already in the
non-subject Party’s possession, will be promptly delivered to it (a) upon any
such commencement of a bankruptcy proceeding upon the non-subject Party’s
written request therefor, unless the Party subject to such proceeding elects to
continue to perform all of its obligations under this Agreement or (b) if not
delivered under clause (a) above, following the rejection of this Agreement by
or on behalf of the Party subject to such proceeding upon written request
therefor by the non-subject Party.

 

Section
7.3                                   Consequences
of Expiration or Termination.

 

7.3.1                     Licenses. Upon
expiration of the Term of this Agreement in accordance with Section 7.1 or upon
termination of this Agreement as it relates to a particular Product, pursuant
to Section 9.2, the licenses granted by Isis to OncoGenex, and by OncoGenex to
Isis, hereunder will terminate as they relate to such Product.

 

7.3.2                     Return of
Information and Materials. Upon expiration of this Agreement pursuant to
Section 7.1 or upon termination of this Agreement as it relates to a particular
Product pursuant to Section 9.2, each Party, at the request of the other Party,

 

16

 

will return all data, files, records and
other materials in its possession or control relating to such other Party’s
Technology, or containing or comprising such other Party’s Information and
Inventions or other Confidential Information and, in each case, to which the
returning Party does not retain rights hereunder (except one copy of which may
be retained for archival purposes).

 

Section
7.4                                   Accrued
Rights; Surviving Obligations.

 

7.4.1                     Accrued
Rights. Termination or expiration of this Agreement for any reason will be
without prejudice to any rights or financial compensation that will have
accrued to the benefit of a Party prior to such termination or expiration. Such
termination or expiration will not relieve a Party from obligations that are
expressly indicated to survive the termination or expiration of this Agreement.

 

7.4.2                     Survival.
Articles 4, 9, 10, 11 and 12, and Sections 5.1, 5.1.1, 6.1, 6.2.3, 6.2.4, 6.3.1(a),
6.3.1(d), and 6.3.2 of this Agreement and this Section 7.4 will survive
expiration or termination of this Agreement for any reason.

 

ARTICLE 8 -

MATERIAL BREACH OF THIS AGREEMENT

 

Section
8.1                                   Material
Breach. Failure by a Party to comply with any of its material obligations
contained herein will entitle the Party not in default to give to the
defaulting Party notice specifying the nature of the material breach, requiring
the defaulting Party to make good or otherwise cure such default, and stating
its intention to trigger the provisions of Section 12.5 if such default is not
cured. If such default is not cured within 90 days after the receipt of such
notice (or, if such default cannot be cured within such 90-day period, if the
Party in default does not commence actions to cure such default within such
period and thereafter diligently continue such actions), the Party not in default
will be entitled, without prejudice to any of its other rights conferred on it
by this Agreement, to trigger the provisions of Section 12.5.; provided, however, that in the event of a
good faith dispute with respect to the existence of a material breach, the
90-day cure period will be stayed until such time as the dispute is resolved
pursuant to Section 12.5 hereof.

 

ARTICLE 9 -

DISCONTINUED DEVELOPMENT BY
ONCOGENEX

 

Section
9.1                                   Discontinued
Development.In the event of a Discontinuance, whether voluntary or as
determined under Section 9.3 below, Isis will have a reversion right as further
described in Section 9.2.

 

Section
9.2                                   Reversion
Rights. Within 90 days from the date of Discontinuance, Isis may elect to
unilaterally continue development of any such Discontinued Product by notice in
writing to OncoGenex (an “Election Notice”) that Isis 

 

17

 

is exercising its rights under this Section
9.2. If OncoGenex has not received an Election Notice from Isis within such 90
day period, Isis will be deemed to have declined to exercise its reversion
rights, and this Agreement will terminate with respect to such Discontinued
Product. Upon receipt of an Election Notice, OncoGenex will grant to Isis a
worldwide license or sublicense, as the case may be, to all OncoGenex
Product-Specific Technology Patents solely to develop, make, have made, use,
sell, offer for sale, have sold and import the Discontinued Product. This
license will be (i) exclusive with respect to Product Specific Technology
Patents claiming the composition of matter or method of using the Discontinued
Product and (ii) nonexclusive with respect to all other Product Specific
Technology Patents. Additionally, Isis will assume the Encumbrances previously
identified for such Product under Section 2.3.2 and each Party will be released
from its obligations under Section 2.2.2 but only with respect to the gene
target modulated by such Discontinued Product. The license granted hereunder
will be sublicensable only in connection with a license of a Discontinued
Product to a Third Party for the continued development and commercialization of
the Discontinued Product in accordance with the terms of this Agreement. In
consideration of OncoGenex collaborative efforts and the licenses granted
hereunder, Isis will pay to OncoGenex (i) all royalty, milestone and other
payments owing by OncoGenex to a Third Party, including, but not limited to the
University of British Columbia in respect of the development and/or
commercialization of any Discontinued Product and that were disclosed in
writing to Isis at Discontinuance, in respect of Product-Specific Technology
Patents (for flow-through to such Third Party), and (ii) a royalty on Net Sales
of any Discontinued Product at the applicable royalty rate noted in the
following table, based on the stage of development of any Discontinued Product
at the time of Discontinuance:

 

	
  Stage of development of the
  Product

  	
   

  	
  Royalty

  
	
  [***]

  	
   

  	
  [***]

  
	
  [***]

  	
   

  	
  [***]

  
	
  [***]

  	
   

  	
  [***]

  

 

Isis shall pay such royalties for the Term of
the Agreement and the provisions of Articles 7, 8 and 10 and of Sections 4.6
through 4.11 will apply to Isis mutatis mutandis .

 

Section 9.3                                   Disputes Regarding
Diligence

 

9.3.1               Diligence Notice. If Isis believes that OncoGenex has
failed to use Commercially Reasonable Efforts in accordance with Section 2.3.5,
Isis will deliver to OncoGenex a reasonably detailed statement of the basis for
such belief (a “Diligence Notice”). Within 30 calendar days after the delivery
by Isis of a Diligence Notice, OncoGenex must deliver to Isis a written notice
(a “Response Notice”) specifying one of the following (i) OncoGenex’s
acknowledgement that it has elected to abandon as a whole the concept of
modulating a particular Collaboration Gene Target using MOE Gapmers, whereby a
Discontinuance will be deemed to have occurred, (ii) OncoGenex’s desire to cure
such alleged failure, including a reasonably detailed description of OncoGenex’s
strategy for curing such alleged failure (such response , an “Intent to Cure
Notice”), or (iii) OncoGenex’s objection to the Diligence Notice, including a
reasonably 

 

18

 

detailed
statement of the basis of such objection (such response, a “Dispute Notice”). If
OncoGenex does not deliver a Response Notice within such 30-calendar day
period, a Discontinuance will be deemed to have occurred. If OncoGenex delivers
to Isis an Intent to Cure Notice, OncoGenex will have 120 days following
delivery of the applicable Diligence Notice (the “Cure Period”) to satisfy the
conditions set forth in Section 2.3.5.

 

9.3.2               Dispute. If, (i) OncoGenex delivers to Isis a
Dispute Notice or (ii) following the Cure Period Isis still believes that
OncoGenex is in breach of Section 2.3.5, the Parties will arbitrate such
dispute pursuant to Section 12.5. If such arbitration determines that OncoGenex
breached Section 2.3.5, then a Discontinuance will be deemed to have occurred.

 

ARTICLE 10 - 

INDEMNIFICATION AND INSURANCE

 

Section
10.1                            Indemnification
of Isis. OncoGenex will indemnify Isis, and its respective directors,
officers, employees and agents, and defend and hold each of them harmless, from
and against any and all losses, damages, liabilities, costs and expenses
(including reasonable attorneys’ fees and expenses) but only to the extent
arising from or occurring as a result of any and all liability suits,
investigations, claims or demands by a Third Party (collectively, “Losses”)
arising from or occurring as a result of or in connection with (a) any material
breach by OncoGenex of this Agreement, (b) the gross negligence or willful
misconduct on the part of OncoGenex or its licensees or sublicensees in
performing any activity contemplated by this Agreement, or (c) the manufacture,
use, handling, storage, sale or other disposition of a Product that is sold by
OncoGenex, its Affiliates, agents or sublicensees; except to the extent of
Losses for which Isis has an obligation to indemnify OncoGenex pursuant to
Section 10.2, as to which Losses each Party will indemnify the other to the
extent of their respective liability for the Losses, or except as may be
provided under a supply agreement under Section 2.5.

 

Section
10.2                            Indemnification
of OncoGenex. Isis will indemnify OncoGenex, and its respective directors,
officers, employees and agents, and defend and save each of them harmless, from
and against any and all Losses arising from or occurring as a result of or in
connection with (a) any material breach by Isis of this Agreement, or (b) the
gross negligence or willful misconduct on the part of Isis or its licensees or
sublicensees in performing any activity contemplated by this Agreement, or (c)
the manufacture, use, handling, storage, sale or other disposition of a Product
that is sold by Isis, its Affiliates, agents or sublicensees; except for those
Losses for which Isis has an obligation to indemnify OncoGenex pursuant to
Section 10.1, as to which Losses each Party will indemnify the other to the
extent of their respective liability for the Losses or, except as may be
provided under a supply agreement under Section 2.5.

 

19

 

Section
10.3                            Indemnification
Procedure.

 

10.3.1              Notice of Claim. The
indemnified Party will give the indemnifying Party prompt written notice (an “Indemnification
Claim Notice”) of any claim upon which such indemnified Party intends to base a
request for indemnification under Section 10.1 or Section 10.2, but in no event
will the indemnifying Party be liable for any losses that result from any delay
in providing such notice. Each Indemnification Claim Notice must contain a
description of the claim and the nature and amount of such loss (to the extent
that the nature and amount of such loss are known at such time). The
indemnified Party will furnish promptly to the indemnifying Party copies of all
papers and official documents received in respect of any claim or losses. All
indemnification claims in respect of a Party, its Affiliates or their
respective directors, officers, employees and agents (collectively, the “Indemnitees”
and each an “Indemnitee”) will be made solely by such Party to this Agreement
(the “Indemnified Party”).

 

10.3.2              Third Party Claims. The
obligations of an indemnifying Party under this Article 10 with respect to
losses arising from claims of any Third Party that are subject to
indemnification as provided for in Section 10.1 or 10.2 (a “Third Party Claim”)
will be governed by and be contingent upon the following additional terms and
conditions:

 

(a)  Control
of Defense. At its option, the indemnifying Party may
assume the defense of any Third Party Claim by giving written notice to the
Indemnified Party within 30 days after the indemnifying Party’s receipt of an
Indemnification Claim Notice. The assumption of the defense of a Third Party
Claim by the indemnifying Party will not be construed as an acknowledgment that
the indemnifying Party is liable to indemnify any Indemnitee in respect of the
Third Party Claim, nor will it constitute a waiver by the indemnifying Party of
any defenses it may assert against any Indemnitee’s claim for indemnification. Upon
assuming the defense of a Third Party Claim, the indemnifying Party may appoint
as lead counsel in the defense of the Third Party Claim any legal counsel
selected by the indemnifying Party. In the event the indemnifying Party assumes
the defense of a Third Party Claim, the Indemnified Party will immediately
deliver to the indemnifying Party all original notices and documents (including
court papers) received by any Indemnitee in connection with the Third Party
Claim. Should the indemnifying Party assume the defense of a Third Party Claim,
the indemnifying Party will not be liable to the Indemnified Party or any other
Indemnitee for any legal expenses subsequently incurred by such Indemnified
Party or other Indemnitee in connection with the analysis, defense or
settlement of the Third Party Claim. In the event that it is ultimately
determined that the indemnifying Party is not obligated to indemnify, defend or
hold harmless an Indemnitee from and against the Third Party Claim, the
Indemnified Party will reimburse the indemnifying Party for any and all costs
and expenses (including attorneys’ fees and costs of suit) and any Losses
incurred by the indemnifying Party in its defense of the Third Party Claim with
respect to such Indemnitee.

 

(b)  Right
to Participate in Defense. Without limiting Section
10.3.2(a), any Indemnitee will be entitled to participate in, but not control,
the defense of such Third Party Claim and to employ counsel of its choice for
such purpose; provided, however,
that such employment will be at the Indemnitee’s own expense unless (i) the 

 

20

 

employment thereof has been specifically authorized by the indemnifying
Party in writing, or (ii) the indemnifying Party has failed to assume the
defense and employ counsel in accordance with Section 10.3.2(a) (in which case
the Indemnified Party will control the defense).

 

(c)  Settlement.
With respect to any Losses relating solely to the payment of money damages in
connection with a Third Party Claim and that will not result in the Indemnitee’s
becoming subject to injunctive or other relief or otherwise adversely affect
the business of the Indemnitee in any manner, and as to which the indemnifying
Party will have acknowledged in writing the obligation to indemnify the
Indemnitee hereunder, the indemnifying Party will have the sole right to
consent to the entry of any judgment, enter into any settlement or otherwise
dispose of such loss, on such terms as the indemnifying Party, in its sole
discretion, will deem appropriate. With respect to all other losses in
connection with Third Party Claims, where the indemnifying Party has assumed
the defense of the Third Party Claim in accordance with Section 10.3.2(a), the
indemnifying Party will have authority to consent to the entry of any judgment,
enter into any settlement or otherwise dispose of such loss provided it obtains
the prior written consent of the Indemnified Party (which consent will not be
unreasonably withheld or delayed). The indemnifying Party will not be liable
for any settlement or other disposition of a loss by an Indemnitee that is
reached without the written consent of the indemnifying Party. Regardless of
whether the indemnifying Party chooses to defend or prosecute any Third Party
Claim, no Indemnitee will admit any liability with respect to, or settle,
compromise or discharge, any Third Party Claim without the prior written
consent of the indemnifying Party.

 

(d)  Cooperation.
Regardless of whether the indemnifying Party chooses to defend or prosecute any
Third Party Claim, the Indemnified Party will, and will cause each other
Indemnitee to, cooperate in the defense or prosecution thereof and will furnish
such records, information and testimony, provide such witnesses and attend such
conferences, discovery proceedings, hearings, trials and appeals as may be
reasonably requested in connection therewith. Such cooperation will include
access during normal business hours afforded to the indemnifying Party to, and
reasonable retention by the Indemnified Party of, records and information that
are reasonably relevant to such Third Party Claim, and making Indemnitees and
other employees and agents available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder, and
the indemnifying Party will reimburse the Indemnified Party for all its
reasonable out-of-pocket expenses in connection therewith.

 

(e)  Expenses.
Except as provided above, the reasonable and verifiable costs and expenses,
including fees and disbursements of counsel, incurred by the Indemnified Party
in connection with any claim will be reimbursed on a calendar quarter basis by
the indemnifying Party, without prejudice to the indemnifying Party’s right to
contest the Indemnified Party’s right to indemnification and subject to refund
in the event the indemnifying Party is ultimately held not to be obligated to
indemnify the Indemnified Party.

 

21

 

Section
10.4                            Insurance.
Each Party will have and maintain such types and amounts of liability
insurance as is normal and customary in the industry generally for parties
similarly situated, and will upon request provide the other Party with a
certificate of insurance. Each party will promptly notify the other Party of
any material change in insurance coverage or lapse in coverage in that regard.

 

ARTICLE 11 - 

REPRESENTATIONS AND WARRANTIES

 

Section
11.1                            Representations,
Warranties and Covenants. Each Party hereby represents, warrants and
covenants to the other Party as of the Effective Date as follows:

 

11.1.1              Corporate Authority.
Such Party (a) has the power and authority and the legal right to enter
into this Agreement and perform its obligations hereunder, and (b) has taken
all necessary action on its part required to authorize the execution and
delivery of this Agreement and the performance of its obligations hereunder. This
Agreement has been duly executed and delivered on behalf of such Party and
constitutes a legal, valid and binding obligation of such Party and is
enforceable against it in accordance with its terms subject to the effects of
bankruptcy, insolvency or other laws of general application affecting the enforcement
of creditor rights and judicial principles affecting the availability of
specific performance and general principles of equity, whether enforceability
is considered a proceeding at law or equity.

 

11.1.2              Litigation. Such
Party is not aware of any pending or threatened litigation (and has not
received any communication) that alleges that such Party’s activities related
to this Agreement have violated, or that by conducting the activities as
contemplated herein such Party would violate, any of the intellectual property
rights of any other party.

 

11.1.3              Consents,
Approvals, etc. All necessary consents, approvals and authorizations
of all Regulatory Authorities and other parties required to be obtained by such
Party in connection with the execution and delivery of this Agreement and the
performance of its obligations hereunder have been obtained.

 

11.1.4              Conflicts. The
execution and delivery of this Agreement and the performance of such Party’s
obligations hereunder (a) do not conflict with or violate any requirement of
Applicable Law or any provision of the articles of incorporation, bylaws or any
similar instrument of such Party, as applicable, in any material way, and (b)
do not conflict with, violate, or breach or constitute a default or require any
consent not already obtained under, any contractual obligation or court or
administrative order by which such Party is bound.

 

11.1.5              Debarment. No
such Party nor any of its Affiliates has been debarred or is subject to
debarment and neither such Party nor any of its Affiliates will use in any
capacity, in connection with the services to be performed under this Agreement,
any party who has been debarred pursuant to Section 306 of the Federal 

 

22

 

Food, Drug, and Cosmetic Act, as amended, or
who is the subject of a conviction described in such section. Each Party will
inform the other Party in writing immediately if it or any party who is
performing services hereunder is debarred or is the subject of a conviction described
in Section 306, or if any action, suit, claim, investigation or legal or
administrative proceeding is pending or, to such Party’s knowledge, is
threatened, relating to the debarment or conviction of such Party or any party
performing services hereunder.

 

Section
11.2                            Additional
Representations and Warranties of Isis. Isis represents and warrants to
OncoGenex that Isis is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has full corporate
power and authority and the legal right to own and operate its property and
assets and to carry on its business as it is now being conducted and as it is
contemplated to be conducted by this Agreement.

 

Section
11.3                            Additional
Representations and Warranties of OncoGenex. OncoGenex represents and
warrants to Isis that OncoGenex is a corporation duly organized, validly
existing and in good standing under the laws of Canada, and has full corporate
power and authority and the legal right to own and operate its property and
assets and to carry on its business as it is now being conducted and as it is
contemplated to be conducted by this Agreement.

 

Section
11.4                            DISCLAIMER
OF WARRANTY. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN SECTIONS 11.1,
11.2 AND 11.3, ONCOGENEX AND ISIS MAKE NO REPRESENTATIONS AND GRANT NO
WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY
STATUTE OR OTHERWISE, AND ONCOGENEX AND ISIS EACH SPECIFICALLY DISCLAIM ANY
OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY
WARRANTY OF QUALITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE
OR ANY WARRANTY AS TO THE VALIDITY OF ANY PATENTS OR THE NON-INFRINGEMENT OF
ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

 

ARTICLE 12 - 

MISCELLANEOUS

 

Section
12.1                            Force
Majeure. Neither Party will be held liable or responsible to the other
Party or be deemed to have defaulted under or breached this Agreement for
failure or delay in fulfilling or performing any term of this Agreement when such
failure or delay is caused by or results from events beyond the reasonable
control of the non-performing Party, including fires, floods, embargoes,
shortages, epidemics, quarantines, war, acts of war (whether war be declared or
not), insurrections, riots, civil commotion, strikes, lockouts or other labor
disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority. The non-performing Party will notify the other Party of
such force majeure within ten (10) days after such occurrence by giving written
notice to the other Party stating the nature of the event, its anticipated
duration, and any 

 

23

 

action being taken to avoid or minimize its
effect. The suspension of performance will be of no greater scope and no longer
duration than is necessary and the non-performing Party will use Commercially
Reasonable Efforts to remedy its inability to perform; provided, however, that in the event the
suspension of performance continues for one-hundred and eighty (180) days after
the date of the occurrence, the Parties will meet to discuss in good faith how
to proceed in order to accomplish the goals of the Collaboration outlined in
this Agreement.

 

Section
12.2                            Assignment.
Without the prior written consent of the other Party hereto, neither Party
will sell, transfer, assign, delegate, pledge or otherwise dispose of, whether
voluntarily, involuntarily, by operation of law or otherwise, this Agreement or
any of its rights or duties hereunder; provided,
however, that (i) either Party hereto may assign or transfer this
Agreement or any of its rights or obligations hereunder without the consent of
the other Party to any Third Party with which it has merged or consolidated, or
to which it has transferred all or substantially all of its assets to which
this Agreement relates if in any such event the Third Party assignee or
surviving entity assumes in writing all of the assigning Party’s obligations
under this Agreement or (ii) Isis may assign or transfer its rights under
Article 4 (but no liabilities) to a Third Party in connection with a royalty
factoring transaction. Any purported assignment or transfer in violation of
this Section will be void ab initio and
of no force or effect. Notwithstanding the foregoing, if OncoGenex assigns its
rights under this Agreement to a Third Party, the right to substitute
Collaboration Gene Targets under Section 2.3.3 under this Agreement will
terminate and no longer apply.

 

Section
12.3                            Severability.
If any provision of this Agreement is held to be illegal, invalid or
unenforceable by a court of competent jurisdiction, such adjudication shall not
affect or impair, in whole or in part, the validity, enforceability, or
legality of any remaining portions of this Agreement. All remaining portions
shall remain in full force and effect as if the original Agreement had been
executed without the invalidated, unenforceable or illegal part.

 

Section
12.4                            Governing
Law. This Agreement will be governed by and construed in accordance with
the laws of Delaware without reference to any rules of conflicts of laws.

 

Section
12.5                            Dispute
Resolution.

 

12.5.1              General. Any
dispute, controversy or claim arising from or related to this Agreement or the
breach thereof will first be referred to the attention of the Chief Executive
Officers of each of the Parties by notice in writing in accordance with the
terms of this Agreement. The Chief Executive Officers (or their respective
designees) will meet as soon as reasonably possible thereafter, and use their
good faith efforts to mutually agree upon the resolution of the dispute,
controversy or claim. If any dispute, controversy or claim is not resolved by
the Chief Executive Officers of the Parties (or their designees) within 30 days
after such dispute is referred to them, then either Party will have the right
to arbitrate such dispute in accordance with Section 12.5.2.

 

24

 

12.5.2              Arbitration. If
the Parties do not fully settle any dispute, controversy or claim pursuant to
Section 12.5.1 and a Party wishes to pursue the matter further, each such
dispute, controversy or claim will be finally resolved by binding arbitration
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association (“AAA”), and judgment on the arbitration award may be entered in
any court having jurisdiction thereof. The arbitration will be conducted by a
panel of three persons experienced in the pharmaceutical or biotechnology
business: within 30 days after initiation of arbitration, each Party will
select one person to act as arbitrator and the two Party-selected arbitrators
will select a third arbitrator within 30 days of their appointment. If the
arbitrators selected by the Parties are unable or fail to agree upon the third
arbitrator, the third arbitrator will be appointed by the AAA. No individual
shall be appointed to arbitrate a dispute pursuant to this Agreement unless he
or she agrees in writing to be bound by the provisions of this Section 12.5. The
place of arbitration will be Seattle, Washington. Notwithstanding anything to
the contrary in this Agreement, either Party may apply to any court of valid
jurisdiction for interim injunctive relief until the arbitration award is
rendered or the controversy is otherwise resolved.

 

12.5.3              Disputes Regarding
Material Breach. If the Parties are in dispute as to whether one party is
in material breach of this Agreement, then the arbitrators will first determine
if material breach has in fact occurred, and if so, will grant the defaulting
Party the cure period provided pursuant to Section 8.1. If the material breach
is not cured within the time period provided pursuant to Section 8.1, the
arbitration will continue and the arbitrators will, as part of the same
arbitration, award damages to the non-defaulting Party.

 

12.5.4              Costs and Expenses. Except
as expressly provided herein, each Party will bear its own costs and expenses
and attorneys’ fees and an equal share of the arbitrators’ and any
administrative fees of arbitration. Notwithstanding the foregoing (i), if a
Party has been found to be in material breach of this Agreement, the defaulting
Party will be responsible for the costs and expenses (including the costs of
the arbitrators and any administrative fees of arbitration) and the reasonable
attorneys’ fees of both Parties (collectively, the “Arbitration Expenses”),
(ii) if the dispute was regarding whether a Discontinuance has occurred and the
arbitrators determined that a Discontinuance did occur, then OncoGenex will be
responsible to pay the Arbitration Expenses, and (iii) if the dispute was
regarding whether a Discontinuance has occurred and the arbitrators determined
that a Discontinuance did not occur, then Isis will be responsible to pay the
Arbitration Expenses.

 

12.5.5              Procedure. The
method and manner of discovery in any arbitration proceeding under this
Agreement shall be governed California Code of Civil Procedure § 1282 et seq.
(including without limitation California Code of Civil Procedure § 1283.05).
Except to the extent necessary to confirm an award or as may be required by
law, neither a Party nor an arbitrator may disclose the existence, content, or
results of an arbitration without the prior written consent of both Parties. In
no event will an arbitration be initiated after the date when commencement of a
legal or equitable proceeding based on the dispute, controversy or claim would
be barred by the applicable statute of limitations.

 

25

 

12.5.6              Speedy Resolution. The
Parties intend, and shall take all reasonable action as is necessary or
desirable to ensure, that there be a speedy resolution to any dispute which
becomes the subject of arbitration, and the arbitrators shall conduct the
arbitration so as to resolve the dispute as expeditiously as possible.

 

12.5.7              Awards. The
arbitrators may award monetary damages and injunctive relief, but may not order
the granting or termination of licenses or assign rights to a Product to either
of the Parties. Monetary damages shall be in the form of off-set royalties or
otherwise, to account for the damages to the non-defaulting Party from the
breach, and to account for the defaulting Party’s contribution to the Product
in view of the breach. All awards shall be in writing and shall state reasons. Executed
copies of all awards shall be delivered by the arbitrators to the Parties as
soon as is reasonably possible. All awards of the arbitrators shall be final
and binding on the Parties, and there shall be no appeal of any such award
whatsoever. The Parties undertake to satisfy any award without delay.

 

Section
12.6                            Notices.
All notices or other communications that are required or permitted
hereunder will be in writing and delivered personally with acknowledgement of
receipt, sent by facsimile (and promptly confirmed by personal delivery,
registered or certified mail or overnight courier as provided herein), sent by
nationally-recognized overnight courier or sent by registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:

 

If to OncoGenex, to:

 

OncoGenex
Technologies Inc.

#400 – 1001 West Broadway

Rm 550, 2660 Oak Street

Vancouver, B.C., V6H 4B1

Attention: Scott D. Cormack, President

Facsimile: 604-736-3687

 

with a copy to:

 

Doug Seppala

McCullough O’Conner Irwin, Solicitors

1100-888 Dunsmuir Street

Vancouver, B.C., Canada

V6C3K4

fax: 604-687-7099

 

If to Isis, to:

 

Isis
Pharmaceuticals, Inc.

2292 Faraday Avenue

Carlsbad, California 92008

Attention: Executive Vice President

Facsimile: (760) 603-4650

 

26

 

with a copy to:

 

Attention: General Counsel

Facsimile: (760) 268-4922

 

or to such other address as the Party to whom notice is to be given may
have furnished to the other Party in writing in accordance herewith. Any such
communication will be deemed to have been given (i) when delivered, if
personally delivered or sent by facsimile on a Business Day, (ii) on the
Business Day after dispatch, if sent by nationally-recognized overnight courier,
and (iii) on the third business day following the date of mailing, if sent by
mail. It is understood and agreed that this Section 12.6 is not intended to
govern the day-to-day business communications necessary between the Parties in
performing their duties, in due course, under the terms of this Agreement.

 

Section
12.7                            Entire
Agreement; Modifications. This Agreement sets forth and constitutes the
entire agreement and understanding between the Parties with respect to the
subject matter hereof and all prior agreements, understanding, promises and
representations, whether written or oral, with respect thereto are superseded
hereby. Each Party confirms that it is not relying on any representations or
warranties of the other Party except as specifically set forth herein. No
amendment, modification, release or discharge will be binding upon the Parties
unless in writing and duly executed by authorized representatives of both
Parties.

 

Section
12.8                            Relationship
of the Parties. It is expressly agreed that the Parties will be independent
contractors of one another and that the relationship between the Parties will
not constitute a partnership, joint venture or agency. Neither Party will have
the authority to make any statements, representations or commitments of any
kind, or to take any action, which will be binding on the other, without the
prior written consent of the other to do so. All persons employed by a Party
will be employees of such Party and not of the other Party and all costs and
obligations incurred by reason of any such employment will be for the account
and expense of such Party.

 

Section
12.9                            Waiver.
Any term or condition of this Agreement may be waived at any time by the
Party that is entitled to the benefit thereof, but no such waiver will be effective
unless set forth in a written instrument duly executed by or on behalf of the
Party waiving such term or condition. The waiver by either Party hereto of any
right hereunder or of the failure to perform or of a breach by the other Party
will not be deemed a waiver of any other right hereunder or of any other breach
or failure by said other Party whether of a similar nature or otherwise.

 

Section
12.10                     Counterparts.
This Agreement may be executed in two (2) or more counterparts, each of
which will be deemed an original, but all of which together will constitute one
and the same instrument.

 

27

 

Section
12.11                     No
Benefit to Third Parties. The representations, warranties, covenants and
agreements set forth in this Agreement are for the sole benefit of the Parties
hereto and their successors and permitted assigns, and they will not be
construed as conferring any rights on any other parties.

 

Section
12.12                     Further
Assurance. Each Party will duly execute and deliver, or cause to be duly
executed and delivered, such further instruments and do and cause to be done
such further acts and things, including the filing of such assignments,
agreements, documents and instruments, as may be necessary or as the other Party
may reasonably request in connection with this Agreement or to carry out more
effectively the provisions and purposes, or to better assure and confirm unto
such other Party its rights and remedies under this Agreement.

 

Section
12.13                     References.
Unless otherwise specified, (a) references in this Agreement to any
Article, Section, Schedule or Exhibit will mean references to such Article,
Section, Schedule or Exhibit of this Agreement, (b) references in any section
to any clause are references to such clause of such section, and (c) references
to any agreement, instrument or other document in this Agreement refer to such
agreement, instrument or other document as originally executed or, if
subsequently varied, replaced or supplemented from time to time, as so varied,
replaced or supplemented and in effect at the relevant time of reference
thereto.

 

Section
12.14                     Construction.
Except where the context otherwise requires, wherever used, the singular
will include the plural, the plural the singular, the use of any gender will be
applicable to all genders and the word “or” is used in the inclusive sense
(and/or). The captions of this Agreement are for convenience of reference only
and in no way define, describe, extend or limit the scope or intent of this
Agreement or the intent of any provision contained in this Agreement. The term “including”
as used herein will mean including, without limiting the generality of any
description preceding such term. The language of this Agreement will be deemed
to be the language mutually chosen by the Parties and no rule of strict
construction will be applied against either Party hereto. Appendices to this
Agreement, or added hereto according to the terms of this Agreement, are made
part of this Agreement.

 

IN WITNESS WHEREOF,
the Parties hereto have caused this Agreement to be executed by their duly
authorized representatives as of the date first above written.

 

	
  ONCOGENEX
  TECHNOLOGIES INC.

  	
  ISIS
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Per: 

  	
  /s/ Scott Cormack

  	
   

  	
  Per: 

  	
  /s/ B. Lynne Parshall

  	
   

  
	
   

  	
   

  
	
  Scott D. Cormack,

  	
  B. Lynne Parshall

  
	
  President & CEO

  	
  Executive Vice President and CFO

  
						

 

28

 

APPENDIX 1

 

Definitions

 

“Active Program”
means with respect to a gene target, any ongoing drug discovery, development,
or commercialization of a compound by Isis (either on its own or in
collaboration with a Third Party) directed to such gene target.

 

“Affiliate” of a
party means any other party that, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with
such first party. For purposes of this definition only, “control” and, with
correlative meanings, the terms “controlled by” and “under common control with”
will mean (a) the possession, directly or indirectly, of the power to direct
the management or policies of a party, whether through the ownership of voting
securities or by contract relating to voting rights or corporate governance,
and (b) the ownership, directly or indirectly, of more than fifty percent (50%)
of the voting securities or other ownership interest of a party; provided that, if local law restricts
foreign ownership, control will be established by direct or indirect ownership
of the maximum ownership percentage that may, under such local law, be owned by
foreign interests.

 

“Antisense Compound” means
an oligomeric compound or analog, mimic or mimetic thereof having a sequence
that is partially or wholly complementary to the sequence of a messenger RNA
(pre-mRNA or mRNA), viral RNA, or noncoding RNA that directly modulates RNA
expression.

 

“API” means, with
respect to a Product, the bulk active pharmaceutical ingredient for such
Product.

 

“Applicable Law”
means the applicable laws, rules, and regulations, including any rules,
regulations, guidelines, or other requirements of the Regulatory Authorities,
that may be in effect from time to time.

 

“Business Day” means any day, other than
Saturday, Sunday or any statutory holiday in the Province of British Columbia
or the United States.

 

“Calendar Year” means each successive period
of 12 months commencing on January 1 and ending on December 31.

 

“Collaboration” has the meaning set forth
in Section 2.1.

 

“Collaboration Gene Target”
has the meaning set forth in Section 2.3.

 

“Commercially Reasonable Efforts”
means, with respect to the research, development, manufacture or
commercialization of the Product, efforts and resources used by a Party or such
Party’s collaborator(s) consistent with the efforts and resources commonly used
in the biotechnology industry for products of similar commercial 

 

 

potential at a
similar stage in its lifecycle, taking into consideration their safety and
efficacy, cost to develop, priority in relation to other products under
development by such Party, the size and financial resources of the Party, the
competitiveness of alternative products, proprietary position, the likelihood
of regulatory approval, profitability, and all other relevant factors.

 

“Confidential
Information” means all information and know-how and
any tangible embodiments thereof provided by or on behalf of one Party to the
other Party either in connection with the discussions and negotiations
pertaining to this Agreement or in the course of performing this Agreement,
including data; knowledge; practices; processes; ideas; research plans;
engineering designs and drawings; research data; manufacturing processes and
techniques; scientific, manufacturing, marketing and business plans; and
financial and personnel matters relating to the disclosing Party or to its present
or future products, sales, suppliers, customers, employees, investors or
business. For purposes of this Agreement, notwithstanding the Party that
disclosed such information or know-how, all information or know-how of
OncoGenex shall be Confidential Information of OncoGenex, and all information
and know-how of Isis shall be Confidential Information of Isis.

 

Notwithstanding the foregoing, information or
know-how of a Party shall not be deemed Confidential Information for purposes
of this Agreement if such information or know-how:

 

(a)                                  was
already known to the receiving Party, other than under an obligation of
confidentiality or non-use, at the time of disclosure to such receiving Party;

 

(b)                                  was
generally available or known to parties reasonably skilled in the field to
which such information or know-how pertains, or was otherwise part of the
public domain, at the time of its disclosure to, or, with respect to know-how,
discovery or development by, such receiving Party;

 

(c)                                  became
generally available or known to parties reasonably skilled in the field to
which such information or know-how pertains, or otherwise became part of the
public domain, after its disclosure to such receiving Party through no fault of
the receiving Party;

 

(d)                                  was
disclosed to such receiving Party, other than under an obligation of
confidentiality or non-use, by a Third Party who had no obligation to the
disclosing Party not to disclose such information or know-how to others; or

 

(e)                                  was
independently discovered or developed by such receiving Party, as evidenced by
their written records, without the use of Confidential Information belonging to
the disclosing Party.

 

Specific
aspects or details of Confidential Information shall not be deemed to be within
the public domain or in the possession of a Party merely because the
Confidential Information is embraced by more general information in the public
domain or in the possession of such Party. Further, any combination of
Confidential Information shall not 

 

A-2

 

be considered
to be in the public domain or in the possession of a Party merely because
individual elements of such Confidential Information are in the public domain
or in the possession of such Party unless the combination and its principles
are in the public domain or in the possession of such Party.

 

“Control” means,
with respect to any Patent or other intellectual property right, possession of
the right (whether by ownership, license or otherwise), to assign, or grant a
license, sublicense or other right to or under, such Patent or right as
provided for herein without violating the terms of any agreement or other
arrangement with any Third Party

 

“Discontinuance”
means the occurrence of any one of the following:

 

1. OncoGenex voluntarily elects to abandon as a
whole the concept of modulating a particular Collaboration Gene Target using
MOE Gapmers, as evidenced by a written communication from an authorized officer
of OncoGenex to Isis.

 

2. OncoGenex completes a substitution under
Section 2.3.3, but only with respect to the gene target substituted out.

 

3. a Discontinuance has been deemed to have
occurred pursuant to Section 9.3.

 

“Discontinued
Product”means a
pharmaceutical preparation containing a MOE Gapmer that down regulates a
Collaboration Gene Target, where such Collaboration Gene Target was abandoned
as part of a Discontinuance.

 

“Election Notice”
has the meaning set forth in Section 9.2.

 

“FDA” means the
United States Food and Drug Administration and any successor agency thereto.

 

“GAAP” means
generally accepted accounting principles of the United States consistently
applied.

 

“Improvement” means
any patented invention within the scope of inventions claimed in the Isis Core
Technology Patents and necessary for the development or commercialization of a
Product, that is made or Controlled by Isis after the Effective Date of this
Agreement, but not including any Isis Product-Specific Technology Patents;
provided, however, that all data resulting from any work under any Project Plan
shall be considered Product-Specific Technology and shall not, under any
circumstances, constitute an Improvement.

 

“IND” means an
investigational new drug application filed with the FDA or TPD for
authorization to commence human clinical trials, and its equivalent in other
countries or regulatory jurisdictions.

 

A-3

 

“IND Enabling Studies” means
the pharmacokinetic and toxicology studies required to meet the regulations for
filing an IND.

 

“Indemnification Claim Notice”, “Indemnified
Party” and “Indemnitee”
have the meanings set forth in Section 10.3.1.

 

“Isis Core Technology Patents”
means Patents Controlled by Isis on the Effective Date that are necessary for
the development and commercialization of the Product, but does not include (A)
Isis’ Product-Specific Technology Patents, or (B) Patents Controlled by Isis
that claim, and only to the extent that they claim, (i) manufacturing and
analytical technologies, (ii) formulation and delivery technologies, (iii) RNAi
technologies, (iv) microRNA technologies, and (v) other chemical modifications or
motifs besides the MOEGapmer
chemistry.

 

“Isis Patent Rights” means
any Patents owned or Controlled by Isis.

 

“Joint Patents”
means all Patents that claim, and only to the extent that they claim, Joint
Technology.

 

“Joint Technology”
has the meaning set forth in Section 6.1.1.

 

“Level 1 Collaboration Gene Target”
means a Collaboration Gene Target that at the time it became a Proposed
Collaboration Target, Isis (i) had not performed any preclinical or clinical
studies on a MOE Gapmer modulating such Collaboration Gene Target or (ii) had
performed some cell culture studies to initially screen oligonucleotide
sequences for gene target inhibition, but no animal studies on a MOE Gapmer
modulating such Collaboration Gene Target.

 

“Level 2 Collaboration Gene Target”
means a Collaboration Gene Target that at the time it became a Proposed
Collaboration Target, Isis had developed some positive pharmacological data in
cell culture and animal cancer models using a MOE Gapmer modulating such
Collaboration Gene Target.

 

“Level 3 Collaboration Gene Target”
means a Collaboration Gene Target that at the time it became a Proposed Collaboration
Target, Isis had a MOE Gapmer modulating such Collaboration Gene Target that
was ready for IND Enabling Studies.

 

“Losses” has the
meaning set forth in Section 10.1.

 

“Major Market” means
the United States, Canada, Japan and the European Union.

 

“Material Adverse Change”
means a material adverse change in the assets, business, financial condition,
results of operations or future prospects (other than prospects relating to the
economy in general or the pharmaceutical or biotechnology industries in
general) of OncoGenex.

 

A-4

 

“MOE Gapmer” means a single stranded antisense
phosphorothioate oligonucleotide of 15-30 nucleotides wherein all of the
backbone linkages are modified by adding a sulfur at the non-bridging oxygen
(phosphorothioate) and a stretch of at least 10 consecutive nucleotides remain
unmodified (deoxy sugars) and the remaining nucleotides contain an O ́-methyl
O ́-ethyl substitution at the 2 ́ position

 

“NDA” means a New
Drug Application filed with the FDA after completion of clinical trials to obtain
marketing approval for commercial product in the United States or equivalent
application for regulatory approval in other Major Market countries.

 

“Net Sales” means
the gross invoice price of the Product sold by the Party having the right to
sell or have sold the Product pursuant to this Agreement, and/or sublicensees
of such Party, to a Third Party which is not a sublicensee of the selling party
(unless such sublicensee is the end user of the Product, in which case the
amount billed therefor shall be deemed to be the amount that would be billed to
a Third Party in an arm’s-length transaction) for sales of such Product to such
end users less the following items, as allocable to such Product (if not
previously deducted from the amount invoiced): (i) trade discounts, credits or
allowances, (ii) credits or allowances additionally granted upon returns,
rejections or recalls, (iii) freight, shipping and insurance charges, (iv)
taxes, duties or other governmental tariffs (other than income taxes), and (v) government
mandated rebates.

 

“Patents” shall
include (i) all U.S. patents and patent applications, (ii) any substitutions,
divisions, continuations, reissues, renewals, registrations, confirmations,
re-examinations, extensions, supplementary protection certificates and the
like, and any provisional applications, of any such patents or patent
applications, (iii) any continuations-in-part and (iv) any foreign or
international equivalent of any of the foregoing.

 

“Phase I Clinical Trial” means the initial
clinical testing of the Product in humans (first-in-humans study) with the
intention of gaining a preliminary assessment of the safety of the Product.

 

“Phase II Clinical Trial”
means the clinical testing of the Product in humans who are patients with a
disease for which the Product is being tested, involving not more than three
dose escalation levels and occurring after at least one Phase I Clinical Trial
has been completed, with the intention of (i) determining the optimal dose to
use in a Pivotal Quality Clinical Trial, and (ii) gaining a preliminary
assessment of the efficacy of the Product in treating such disease.

 

“Pivotal Quality Clinical Trial” means
a human clinical trial of the Product designed to be of a size and statistical
power to support an NDA filing alone or in combination with other studies. If
it is unclear whether or not a study design will be sufficient to support an
NDA filing (other than by virtue of the uncertainty of efficacy data from that
trial) the study will be deemed to be a Pivotal Quality Clinical Trial on the
initiation of activities to support an NDA filing. Initiation of a Phase III
clinical study will be deemed to be initiation of a Pivotal Quality Clinical
Trial.

 

A-5

 

“Preferred Stock” means
the Preferred Stock of OncoGenex valued at the same per-share price and of the
same class with the same rights and preferences as the Preferred Stock issued
in OncoGenex’s most recent financing round; provided, however that if (i) more
than 6 months have passed since the last financing round in which OncoGenex
issued such Preferred Stock or (ii) a Material Adverse Change has occurred,
then the Parties will mutually agree upon an appropriate equity security and
corresponding value to issue. Preferred Stock will also include any other
equity securities (e.g. warrants) that were issued in conjunction with the sale
of the Preferred Stock issued in OncoGenex’s most recent financing round.

 

 “Product”
means a pharmaceutical preparation comprising any single MOE Gapmer generated
under the Project Plan which (i) down regulates a Collaboration Gene Target and
(ii) OncoGenex has provided Isis with written notice designating such MOE
Gapmer as a development candidate.

 

“Product-Specific Technology”
means any discovery, device, process, method of use, composition, formulation,
data or information, whether or not patented or patentable, which is made or
Controlled solely by Isis or OncoGenex, or jointly by Isis and OncoGenex, prior
to the Effective Date or during the Term of this Agreement, and which relates
only to the gene targets down regulated by a Product or in the case of a
Discontinued Product, such Discontinued Product.

 

“Product-Specific Technology Patents”
means all Patents that claim and only to the extent that they claim
Product-Specific Technology.

 

“Project Plan” means the Parties’ initial
development plan for Collaboration Activities, as set forth in Appendix 2.4.1.

 

“Regulatory Approval”
means (a) in the United States, approval by the FDA of an NDA, or similar
application for marketing approval, and satisfaction of any related applicable
FDA registration and notification requirements (if any), and (b) in a Major
Market other than the United States, approval by regulatory authorities having
jurisdiction over such country of a single application or set of applications
comparable to an NDA and satisfaction of any related applicable regulatory and
notification requirements (if any).

 

“Regulatory Authority”
means any applicable government entities regulating or otherwise exercising
authority with respect to the development and commercialization of the Product.

 

“Regulatory Documentation”
means all applications, registrations, licenses, authorizations and approvals
(including all Regulatory Approvals), all correspondence submitted to or
received from Regulatory Authorities (including minutes and official contact
reports relating to any communications with any Regulatory Authority), all
supporting documents and all clinical studies and tests, including the manufacturing
batch records, relating to the Product, and all data contained in any of the
foregoing, including 

 

A-6

 

all regulatory
drug lists, advertising and promotion documents, adverse event files and complaint
files.

 

“Royalty Due Dates”
means the last working days of March, June, September and December of each and
every year during which this Agreement remains in full force and effect.

 

“Target Level” means
the level (i.e. Level 1, Level 2 or Level 3) assigned to a Collaboration Gene
Target under Section 2.3.

 

“Term” has the
meaning set forth in Section 7.1.

 

“Third Party” means
any party other than Isis or OncoGenex or their Affiliates.

 

“Third Party Claims”
has the meaning set forth in Section 10.3.2.

 

“TPD” means the
Therapeutics Products Directorate, Health Products and Food Branch, Health
Canada, and any successor agency thereto.

 

“Valid Claim” means
a claim which (i) in the case of any unexpired United States or foreign patent,
shall not have been donated to the public, disclaimed or held invalid or
unenforceable by a court of competent jurisdiction in an unappealed or
unappealable decision, or (ii) in the case of any United States or foreign
patent application, shall not have been permanently cancelled, withdrawn, or
abandoned.

 

“Witholding Taxes” has
the meaning set forth in Section 4.10.

 

A-7

 

APPENDIX 2.4.1

 

PROJECT PLAN

 

The Project Plan encompasses the design, generation and testing of
various MOE Gapmers with a view to identifying and selecting optimal drug
development candidates targeted to inhibit Collaboration Gene Targets. The
Project Plan consists of and includes all work required to allow for a decision
on whether or not to proceed with a MOE Gapmer to IND-enabling toxicology
studies.

 

Isis Project Plan Responsibilities.

 

Isis will design and generate various mouse and human antisense
oligonucleotides incorporating Isis’ proprietary MOE chemistry and targeted to
Collaboration Gene Targets, for use in animal and human studies.

 

Isis will supply up to [***] grams each of mouse and human
oligonucleotide for research purposes. Isis will supply additional
oligonucleotide to OncoGenex for research purposes for [***].

 

If requested by OncoGenex within one year of the date the applicable
Collaboration Gene Target is approved under Section 2.3.2, Isis will provide
OncoGenex, at Isis’ cost, with up to [***] man hours per Collaboration Gene
Target of consulting related to pharmacology and toxicology and to assist
OncoGenex in pre-IND meetings and completing the IND package.

 

OncoGenex will pay Isis for any additional hours of consulting at a
rate of [***].

 

OncoGenex Project Plan Responsibilities.

 

OncoGenex will assist Isis in designing MOE Gapmers targeted to
Collaboration Gene Targets.

 

OncoGenex will perform in vitro and
in vivo analyses as needed to
identify a lead MOE Gapmer.

 

Funding For Project Plan.

 

OncoGenex is responsible for all costs associated with completing
OncoGenex’s responsibilities as set forth above.

 

Isis is responsible for all costs associated with Isis’s
responsibilities as set forth above.Exhibit 10.12

COLLABORATION
AND LICENSE AGREEMENT

 

THIS
COLLABORATION AND LICENSE AGREEMENT (“Agreement”) is made and
entered into effective as of August 31, 2003 (the “Effective Date”), by and
among ONCOGENEX TECHNOLOGIES INC., having offices at Jack Bell Research Centre,
Rm 550, 2660 Oak Street, Vancouver, B.C., V6H 3Z6 (“OncoGenex”) and ISIS
PHARMACEUTICALS, INC., having principal offices at 2292 Faraday Avenue,
Carlsbad CA 92008 (“Isis”). OncoGenex and Isis each may be referred to herein
individually as a “Party,” or collectively as the “Parties.”

 

WHEREAS,
Isis and OncoGenex wish to collaborate in the identification of a lead
antisense compound targeted to inhibit both IGFBP-5 and IGFBP-2 simultaneously
(a bi-specific oligonucleotide), as well as lead antisense compounds targeted
to inhibit each of IGFBP-5 and IGFBP-2 separately, using Isis’ proprietary MOE
chemistry, on the terms set forth below;

 

NOW,
THEREFORE, the Parties do hereby agree as follows:

 

ARTICLE
1 - DEFINITIONS

 

Capitalized
terms used in this Agreement and not otherwise defined herein have the meanings
set forth in Appendix 1.

 

ARTICLE
2 - 

SCOPE OF COLLABORATION; COLLABORATION ACTIVITIES

 

Section 2.1                                   Scope
of Collaboration. The Parties initiated a collaboration prior to the
Effective Date to jointly identify antisense compounds targeted to inhibit  IGFBP-5 and IGFBP-2, both genes separately
and together (the “Collaboration”), according to the Project Plan attached
hereto as Appendix 2.3.1 and made part of this Agreement. Following the completion
of the Project Plan, OncoGenex will be solely responsible for the continued
development and commercialization of any Products  subject to royalty and milestone payments to
be paid to Isis as set forth in this Agreement.

 

Section 2.2                                   Collaboration
Activities.

 

2.2.1                     General.
The Parties will use Commercially Reasonable Efforts to conduct their
respective responsibilities outlined in the Project Plan in accordance with
this Agreement and the Project Plan in good scientific manner, and in
compliance in all material respects with all Applicable Law, and will cooperate
reasonably with the other Party to achieve the goals of the Collaboration.

 

2.2.2                     Collaboration
Exclusivity.  During the Term of this
Agreement, neither Party will engage, on behalf of itself or any other party,
in the development or commercialization of antisense compounds targeted to
IGFBP-5 and/or IGFBP-2 other than as provided in this Agreement.
Notwithstanding the forgoing, OncoGenex retains

 

*Certain
information in this exhibit has been omitted as confidential, as indicated by
[***]. This information has been filed separately with the Commission.

 

1

the right to use,
have used and to grant limited sublicenses to use OncoGenex’s Product-Specific
Technology Patents for research, scholarly and other non-commercial purposes
only, and such activities will not be interpreted as a breach of this Agreement.
Isis retains the right to use antisense compounds targeted to IGFBP-5 and/or
IGFBP-2 or to transfer such antisense compounds to third parties for target
validation purposes.

 

Section 2.3                                   Project
Plan.

 

2.3.1                     Goals
of Project Plan. The Project Plan and the Parties’ responsibilities
thereunder and the funding thereof are set forth in Appendix 2.3.1.

 

2.3.2                     Changes
to Project Plan. Any changes to the Project Plan will require the prior
written approval of both Parties, and if such changes require additional
activities will include a budget for such activities and a method of funding.

 

2.3.3                     Selection
of First Antisense Oligonucleotide. From the antisense oligonucleotides
generated under the Project Plan, OncoGenex
will select one antisense oligonucleotide targeted to IGFBP-5 and/or IGFBP-2
for use in a Product to take into IND enabling toxicology for purposes of
evaluating such Product in human clinical trials. OncoGenex may replace the
selected antisense oligonucleotide with any other antisense oligonucleotide
generated under the Project Plan at any time, and for no additional cost, upon
written notice to Isis.

 

2.3.4                     Selection of Additional Antisense
Oligonucleotides.  If, in
addition to the antisense oligonucleotide selected in Section 2.3.3, OncoGenex
elects to select one or more additional antisense oligonucleotides targeted to
IGFBP-5 and/or IGFBP-2 generated under the Project Plan, for use in a Product
to take into human clinical trials beyond the first Phase II Clinical Trial,
OncoGenex will so notify Isis and will pay Isis the payment set forth in
Section 4.2.

 

2.3.5                     Responsibilities
Following Completion of the Project Plan. Following the completion of the
Project Plan, OncoGenex will be solely responsible for further development and
commercialization of the Product, including but not limited to:

 

(a)                                  Contracting
for the manufacturing of all drug needed for toxicology studies and clinical
trials, as described in Section 2.4.

 

(b)                                  Coordinating
all aspects of animal pharmacology and toxicology studies needed for IND
filing.

 

(c)                                  Conducting
clinical trials.

 

(d)                                 Negotiating
any and all sublicensing agreements with Third Parties for the ongoing
development and/or marketing of the Product.

 

If requested by OncoGenex
in order to facilitate further development and commercialization of the
Product, the Parties will mutually agree to a consulting

 

2

agreement under which
Isis will provide consulting in addition to the hours set forth in the Project
Plan at a rate of [***] per hour.

 

Section 2.4                                   Manufacturing
of Product.

 

2.4.1                     Isis
will have the first right to manufacture the Product, at mutually agreeable,
commercially reasonable terms and conditions, and pursuant to a supply
agreement to be agreed to by the Parties containing standard terms regarding
quality control, ordering, delivery, title and risk of loss, warranties and
indemnification.

 

2.4.2                     If
Isis is unable or unwilling to manufacture the Product, or if the Parties
cannot reach agreement on the terms and conditions within 60 days of a request
for transfer pricing quote by OncoGenex, OncoGenex may:

 

have the Product manufactured by a manufacturer
licensed under Isis’ proprietary manufacturing and analytical technology; or

 

have the Product manufactured using a process not
covered by Isis’ proprietary manufacturing and analytical technology.

 

ARTICLE 3 - 

GRANT OF RIGHTS

 

Section 3.1                                   License
Grant for Collaboration Activities.

 

3.1.1                     Isis
Grant. Subject to the terms and conditions of this Agreement, Isis hereby
grants to OncoGenex (a) an exclusive, worldwide license under the Isis
Product-Specific Technology Patents and the Joint Patents to any
Product-Specific Technology and (b) a non-exclusive, worldwide license under
the Isis Core Technology Patents, both licenses solely to develop, make, have
made, use, sell, offer for sale, have sold and import Products. The licenses
granted to OncoGenex are sublicensable only in connection with a license of
Products to a Third Party for the continued development and commercialization
of Products in accordance with the terms of this Agreement.

 

3.1.2                     OncoGenex
Grant. Subject to the terms and conditions of this Agreement, OncoGenex
hereby grants to Isis a non-exclusive, non-transferable, limited license or
sublicense, as the case may be, under the OncoGenex Product-Specific Technology
Patents, solely to perform Isis’ responsibilities in the Project Plan.

 

3.1.3                     Improvements.
To the extent that Isis has the right to license an Improvement, the Parties
will negotiate in good faith regarding the use of any such Improvement in
Products. If the Parties agree to terms under which such Improvement will be
used in Products, Isis will grant to OncoGenex a license under the Improvement
solely to develop, make, have made, use, sell, offer for sale, have sold and
import Products. The license granted hereunder will be sublicensable only in
connection with a license of Products to a Third Party for the continued
development and commercialization of Products in accordance with the terms of
this Agreement.

 

3

ARTICLE
4 - 

FINANCIAL PROVISIONS

 

Section 4.1                                   Up-Front
Payment by OncoGenex. Within 30 days of the Effective Date, OncoGenex will
pay an up-front license fee of [***] to Isis, payable in cash or class B equity
securities of OncoGenex, at OncoGenex’s discretion, provided
that any class B equity securities so issued to Isis will be issued
at the same per-share price and will be of the same class with the same rights
and preferences as the class B equity securities issued to new investors in
OncoGenex in the class B equity issue scheduled to be completed by OncoGenex
within 30 days of the Effective Date. In no event will Isis take equity in
excess of 18% of all shares of OncoGenex, Fully Diluted. Any remaining amounts
will be paid in cash.

 

Section 4.2                                   Payment
for Additional Antisense Oligonucleotides. If OncoGenex elects to select an
antisense oligonucleotide for use in an additional Product as set forth in
Section 2.4, OncoGenex will pay Isis an up-front fee of [***] for each
antisense oligonucleotide selected. Such up-front fee may be paid in cash or
equity securities of OncoGenex at OncoGenex’s discretion, provided
that any equity securities so issued to Isis will be issued at the
same per-share price and will be of the same class with the same rights and
preferences as the equity securities issued in OncoGenex’s most recent
financing round. In no event will Isis take equity in excess of 18% of all
shares of OncoGenex, Fully Diluted. Any remaining amounts will be paid in cash.
In addition to the up-front fee, OncoGenex will pay to Isis the milestone
payments and royalty payments detailed in Article 4 hereof as and when such
milestone payments and royalty payments are due for a Product containing such
antisense oligonucleotide. All milestone payments and royalty payments for such
Product will be in addition to all milestone payments and royalty payments
required to be made for any other Product being developed or commercialized by
OncoGenex.

 

Section 4.3                                   Milestone
Payments by OncoGenex. OncoGenex will pay to Isis the relevant milestone
payment not more than thirty (30) days after achievement, by OncoGenex or a
sublicensee, of each of the applicable events in the first Major Market country
for each Product developed hereunder; provided however
that no additional milestone payment shall be due or owing when a Product meets
the same milestone in an additional country once that milestone payment has
already been paid, and no additional milestone payment shall be due or owing
with respect to a Product which replaces a Product for which such milestone payment
has previously been made, as follows:

 

	
  Event

  	
   

  	
  Payment

  
	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  

 

4

Section 4.4                                   Royalty
Payments by OncoGenex. In consideration of Isis’ collaborative efforts and
the licenses granted hereunder, OncoGenex will pay Isis a royalty of [***] of
Net Sales of the Product. OncoGenex will pay such royalties for the Term of the
Agreement.

 

Section 4.5                                   Third
Party Payments. In addition to the royalty set forth in Section 4.4,
OncoGenex will pay to Isis a royalty of [***] of Net Sales of Product, pursuant
to a license agreement with [***] and a royalty of [***] of Net Sales of
Product pursuant to a license agreement with [***]. In the event that Isis negotiates
reduced royalties with these Third Party licensors, the royalties due hereunder
will still be paid to Isis. Notwithstanding the foregoing, the Parties agree
that if the Isis Patent Rights licensed by Isis from [***]  and/or [***] 
and sublicensed under this Agreement cease to have any Valid Claims
during the term of this Agreement, then OncoGenex will no longer be responsible
for paying the royalties flowing through to [***] and/or [***] as applicable,
and the total royalty payable will be reduced accordingly.

 

Section 4.6                                   Timing
of Royalty Payments. The royalties will become due and payable within 60
days of each respective Royalty Due Date and shall be calculated in respect of
the Net Sales in the three (3) month period immediately preceding the applicable
Royalty Due Date.

 

Section 4.7                                   Payment
Method. Any amounts due to a Party under this Agreement will be paid in
U.S. dollars, by wire transfer in immediately available funds to an account
designated by the receiving Party. Any payments or portions thereof due
hereunder which are not paid on the date such payments are due under this
Agreement will bear interest at a rate equal to the lesser of the prime rate as
published in The Wall Street Journal, Eastern
Edition, on the first day of each calendar quarter in which such payments are
overdue, plus two percent (2%), or the maximum rate permitted by law, whichever
is lower, calculated on the number of days such payment is delinquent,
compounded monthly.

 

Section 4.8                                   Currency;
Foreign Payments. If any currency conversion will be required in connection
with any payment hereunder, such conversion will be made by using the exchange
rate for the purchase of U.S. dollars as published in The Wall
Street Journal, Eastern Edition, on the last business day of the calendar
quarter to which such payments relate. If at any time legal restrictions
prevent the prompt remittance of any payments in any jurisdiction, the
applicable Party may notify the other and make such payments by depositing the
amount thereof in local currency in a bank account or other depository in such
country in the name of the receiving Party or its designee, and such Party will
have no further obligations under this Agreement with respect thereto.

 

Section 4.9                                   Taxes.
A Party may deduct from any amounts it is required to pay to the other
Party pursuant to this Agreement an amount equal to that withheld for or due on
account of any taxes (other than taxes imposed on or measured by net income) or
similar governmental charge imposed on the receiving Party by a jurisdiction of
the paying Party (“Withholding Taxes”). The paying Party will provide the
receiving Party a certificate evidencing payment of any Withholding Taxes
hereunder within 30 days of

 

5

such payment and
will reasonably assist the receiving Party, at the receiving Party’s expense,
to obtain the benefit of any applicable tax treaty.

 

Section 4.10                            Records
Retention; Audit.

 

4.10.1              Regulatory
Records. With respect to the subject matter of this Agreement, each Party
will maintain, or cause to be maintained, records of its respective research,
development, manufacturing and commercialization activities, including all
Regulatory Documentation, in sufficient detail and in good scientific manner
appropriate for patent and regulatory purposes, which will be complete and
accurate and will fully and properly reflect all work done and results achieved
in the performance of such activities. All Regulatory Documentation will be
retained for a period as may be required by Applicable Law. Each Party will
have the right, during normal business hours and upon reasonable notice, to
inspect and copy any such records for the sole purpose of performing their
obligations or exercising their rights hereunder.

 

4.10.2              Record
Retention. Each Party will maintain (and will ensure that its sublicensees
will maintain) complete and accurate books, records and accounts that fairly
reflect (a) their respective costs and expenses reimbursable or otherwise
shared by the Parties hereunder (collectively, the “Collaboration Expenses”)
and (b) Net Sales with respect to the Product, in each case in sufficient
detail to confirm the accuracy of any payments required hereunder and in
accordance with GAAP, which books, records and accounts will be retained by
such party until the later of (i) 3 years after the end of the period to which
such books, records and accounts pertain, and (ii) the expiration of the
applicable tax statute of limitations (or any extensions thereof), or for such
longer period as may be required by Applicable Law.

 

4.10.3              Audit.
Each Party will have the right to have an independent certified public
accounting firm of nationally recognized standing, reasonably acceptable to the
audited Party, have access during normal business hours, and upon reasonable
prior written notice, to such of the records of the other Party as may be
reasonably necessary to verify the accuracy of Collaboration Expenses or Net
Sales, as applicable, for any calendar quarter or calendar year ending not more
than 24 months prior to the date of such request; provided,
however, that neither Party will have the right to conduct more than
one such audit in any Calendar Year except as provided below. The requesting
Party shall bear the cost of such audit unless the audit reveals a variance of
more than 5% from the reported results, in which case the audited Party shall
bear the cost of the audit. The requesting Party will have the right to audit
previous years, if such years have not been previously audited, if the audit
reveals a variance of more than 5% from the reported results. The requesting
Party will bear the cost of such previous year audits unless such audits reveal
a variance of more than 5%. The results of such accounting firm shall be final
and binding upon the Parties, absent manifest error.

 

4.10.4              Payment
of Additional Amounts. If, based on the results of such audit, additional
payments are owed by the audited Party under this Agreement, the audited Party
will make such additional payments, with interest as set forth in Section

 

6

4.7, within 60
days after the date on which such accounting firm’s written report is delivered
to such Party.

 

4.10.5              Confidentiality.
The auditing Party will treat all information subject to review under this
Section 4.10 in accordance with the confidentiality provisions of Article 5 and
will cause its accounting firm to enter into a reasonably acceptable
confidentiality agreement with the audited Party obligating such firm to
maintain all such financial information in confidence pursuant to such
confidentiality agreement.

 

ARTICLE
5 - 

CONFIDENTIALITY

 

Section 5.1                                   Disclosure
and Use Restriction. Except as expressly provided herein, the Parties agree
that, for the Term and for five (5) years thereafter, each Party will keep
completely confidential and will not publish, submit for publication or
otherwise disclose, and will not use for any purpose except for the purposes
contemplated by this Agreement, any Confidential Information received from the
other Party.

 

5.1.1                     Authorized
Disclosure. Each Party may disclose Confidential Information of the other
Party to the extent that such disclosure is:

 

(a)                                  made
in response to a valid order of a court of competent jurisdiction; provided, however, that such Party will first have given
notice to such other Party and given such other Party a reasonable opportunity
to quash such order and to obtain a protective order requiring that the
Confidential Information and documents that are the subject of such order be
held in confidence by such court or agency or, if disclosed, be used only for
the purposes for which the order was issued; and provided
further that if a disclosure order is not quashed or a protective
order is not obtained, the Confidential Information disclosed in response to
such court or governmental order will be limited to that information which is
legally required to be disclosed in response to such court or governmental
order;

 

(b)                                  otherwise
required by law; provided, however, that the
disclosing Party will provide such other Party with notice of such disclosure
in advance thereof to the extent practicable;

 

(c)                                  made
by such Party to the Regulatory Authorities as necessary for the development or
commercialization of a Product in a country, or as required in connection with
any filing, application or request for Regulatory Approval; provided, however, that reasonable measures will be taken to
assure confidential treatment of such information;

 

(d)                                  made
by such Party, in connection with the performance of this Agreement, to
permitted sublicensees, licensors, directors, officers, employees, consultants,
representatives or agents, each of whom prior to disclosure must be bound by
obligations of confidentiality and non-use at least equivalent in scope to
those set forth in this Article 5; or

 

7

 

(e)                                  made
by such Party to existing or potential acquirers; existing or potential
pharmaceutical collaborators (to the extent contemplated hereunder); investment
bankers; existing or potential investors, merger candidates, partners, venture
capital firms or other financial institutions or investors for purposes of
obtaining financing; or, bona fide strategic potential partners; each of whom
prior to disclosure must be bound by obligations of confidentiality and non-use
at least equivalent in scope to those set forth in this Article 5.

 

Section 5.2                                   Press
Releases. Press releases or other similar public communication by either
Party relating to this Agreement, unless relating solely to a Product being
developed by the Party making the communication, will be approved in advance by
the other Party, which approval will not be unreasonably withheld or delayed,
except for those communications required by Applicable Law, disclosures of
information for which consent has previously been obtained, and information of
a similar nature to that which has been previously disclosed publicly with
respect to this Agreement, each of which will not require advance approval, but
will be provided to the other Party as soon as practicable after the release or
communication thereof.

 

Section 5.3                                   Publications.
The Parties acknowledge that scientific lead-time is a key element of the
value of the research and development activities under the Collaboration and
further agree that scientific publications must be strictly monitored to
prevent any adverse effect from premature publication or disclosure of results
of the research or development activities hereunder. At least 45 days prior to
submission of any material related to the research or development activities
hereunder for publication or presentation, the submitting Party will provide to
the other Party a draft of such material for its review and comment. The
receiving Party will provide any comments to the submitting Party within 30
days of receipt of such materials. No publication or presentation with respect
to the research or development activities hereunder will be made unless and
until the other Party’s comments on the proposed publication or presentation
have been addressed and changes have been received and agreed upon and any
information determined by the other Party to be Confidential Information has
been removed. If requested in writing by the other Party, the submitting Party
will withhold material from submission for publication or presentation for a
reasonable time to allow for the filing of a patent application or the taking
of such measures to establish and preserve proprietary rights in the
information in the material being submitted for publication or presentation. The
Parties recognize that it may not be practical under all circumstances to
comply with the above notice requirements for review of publications and
presentations. Each Party will reasonably review proposed publications and
presentations submitted by the other Party as promptly as possible and will not
unreasonably withhold its consent to such publications or presentations that
have been submitted for review with less than the required notice period.

 

8

ARTICLE
6 - 

INTELLECTUAL
PROPERTY

 

Section 6.1                                   Intellectual
Property Ownership.

 

6.1.1                     Ownership
of Intellectual Property. Isis will own all inventions made (as determined
under United States patent laws) as part of the Collaboration solely by its
employees and agents, and all Patents claiming such inventions. OncoGenex will
own all inventions made (as determined under United States patent laws) as part
of the Collaboration solely by its employees and agents, and all Patents
claiming such inventions. All inventions made (as determined under United
States patent laws) jointly by employees or agents of Isis and employees or
agents of OncoGenex (“Joint Technology”), and all Patents claiming such
inventions, will be owned jointly by Isis and OncoGenex. During the Term of
this Agreement, each Party shall promptly disclose in writing to the other
Party on an ongoing basis, and prior to filing any Patent, any Joint Technology
or Product-Specific Technology invented as part of the Collaboration. In
addition, promptly after executing this Agreement, the Parties will each
disclose to each other the current status of all Product-Specific Technology
Patents Controlled by such Party and licensed under this Agreement.

 

6.1.2                     Ownership
of Regulatory Documentation. Unless and until Isis sends an Election Notice
pursuant to Article 9 of this Agreement, all Regulatory Documentation with
respect to a Product will be owned by OncoGenex, or its sublicensee, if
applicable. If OncoGenex discontinues development of such Product and Isis
sends an Election Notice in accordance with Section 9.2, all Regulatory
Documentation with respect to such Product will be transferred to Isis. In the
event that this Agreement terminates pursuant to Section 9.2, all Regulatory
Documentation will remain with the Party that first secured such Regulatory
Documentation.

 

Section 6.2                                   Prosecution
of Patents.

 

6.2.1                     Solely
Owned Patents. With the exception of Product-Specific Technology Patents,
as set forth in 6.2.2, each Party will have the sole right, at its cost and
expense and at its sole discretion, to obtain, prosecute and maintain
throughout the world the any Patents solely owned or Controlled by such Party.

 

6.2.2                     Product-Specific
Technology Patents. OncoGenex will have the sole right and at its sole
discretion, to obtain, prosecute and maintain throughout the world the
Product-Specific Technology Patents. OncoGenex shall reimburse Isis for all of
Isis’ reasonable out-of-pocket costs incurred prior to and after entering into
this Agreement to obtain, prosecute and maintain throughout the world, any
Product-Specific Technology Patents Controlled by Isis, provided
however that OncoGenex will not be required to make any such
reimbursements for expenses incurred by Isis after receipt of a Discontinuance
Notice if, as and when OncoGenex issues such notice. OncoGenex will keep Isis
informed of all Isis Product Specific Technology Patent applications and
registrations to be filed by OncoGenex, and Isis shall have the right to
comment on such applications within the timeframes of the patent filing process
and deadlines.

 

9

Notwithstanding
the foregoing, if Isis is unilaterally developing and commercializing the
Product in accordance with Section 9.2, Isis will have the first right, subject
to compliance with any Third Party agreements OncoGenex may have with respect
to such Patents, to file, prosecute and maintain any Product-Specific
Technology Patents at its expense, provided that
if Isis elects not to (a) pursue the filing, prosecution or maintenance of an
OncoGenex Product-Specific Technology Patent in a particular country, or (b)
take any other action with respect to OncoGenex Product-Specific Technology in
a particular country that is necessary or reasonably useful to establish or
preserve rights thereto, then in each such case Isis will so notify OncoGenex
promptly in writing and in good time to enable OncoGenex to meet any deadlines
by which an action must be taken to establish or preserve any rights in such
OncoGenex Product-Specific Technology in such country, and OncoGenex will have
the right, but not the obligation, to pursue the filing or registration, or
support the continued prosecution or maintenance, of such OncoGenex
Product-Specific Technology Patents, at its expense in such country.

 

6.2.3                     Filing
of Joint Patents. The Parties will cooperate with one another with respect
to the filing, prosecution and maintenance of all Joint Patents. The Parties
will designate one of the Parties to be responsible for, and to initially bear
the expense of, the preparation, filing, prosecution, and maintenance of a
Joint Patent, provided that the responsible
Party will be entitled to reimbursement by the other Party of an equal share of
the responsible Party’s expenses. The Parties agree that for all Joint Patents
for Product-Specific Technology, OncoGenex will be deemed to be the responsible
Party for the purposes of this Section 6.2.3, and will bear all expenses for
the preparation, filing, prosecution and maintenance of such Patents. With the
exception of Joint Patent to Product-Specific Technology, which will be as set
forth in Section 6.2.2, the responsible Party will consult with the other Party
as to the preparation, filing, prosecution, and maintenance of such Joint
Patent reasonably prior to any deadline or action with the U.S. Patent &
Trademark Office or any foreign patent office, and will furnish to the other
Party copies of all relevant documents reasonably in advance of such
consultation. For the life of the Joint Patents, the Parties will mutually
agree upon all Joint Patent filings. Notwithstanding the foregoing, if Isis is
unilaterally developing and commercializing the Product in accordance with
Section 9.2, Isis will have the first right to file, prosecute and maintain any
Joint Patents to Product-Specific Technology at its expense, provided that if Isis elects not (a) to pursue the filing,
prosecution or maintenance of such a Joint Patent in a particular country, or
(b) to take any other action with respect to such Joint Patent in a particular
country that is necessary or reasonably useful to establish or preserve rights
thereto, then in each such case Isis will so notify OncoGenex promptly in
writing and in good time to enable OncoGenex to meet any deadlines by which an
action must be taken to establish or preserve any rights in such Joint
Technology in such country, and OncoGenex will have the right, but not the
obligation, to pursue the filing or registration, or support the continued
prosecution or maintenance, of such Joint Patent, at its expense in such
country.

 

6.2.4                     Cooperation.
Each Party will cooperate reasonably in the preparation, filing,
prosecution, and maintenance of the other Party’s Patents, the Product-Specific
Technology Patents and the Joint Patents. Such cooperation includes (a)
promptly executing all papers and instruments and requiring employees to
execute

 

10

such papers and
instruments as reasonable and appropriate so as to enable such other Party, to
file, prosecute, and maintain its Patents in any country; and (b) promptly
informing such other Party of matters that may affect the preparation, filing,
prosecution, or maintenance of any such Patents.

 

Section 6.3                                   Enforcement
of Patents

 

6.3.1                     Rights
and Procedures. If Isis or OncoGenex determines that any Patent licensed
hereunder is being infringed by a Third Party’s activities and that such
infringement could affect the exercise by the Parties of their respective
rights and obligations under this Agreement, it will promptly notify the other
Party in writing and provide such other Party with any evidence of such
infringement that is reasonably available.

 

(a)                                  Joint
Patents. With respect to infringement of a Joint Patent that is not a
Product-Specific Technology Patent, the Party responsible for filing,
prosecution and maintenance of such Joint Patent under Section 6.2.3 will
have the first right to bring and control any action or proceeding with respect
to such Joint Patent, and will bear all expenses thereof, and the other Party
will have the right, at its own expense, to be represented in any such action; provided, however, that if the Party with the first right to
bring and control actions and proceedings with respect to such Joint Patent
fails to bring an action or proceeding within ninety (90) days following notice
of such infringement, or earlier notifies the other Party in writing of its
intent not to take such steps, the other Party will have the right to do so at
its expense, and the first Party will have the right, at its own expense, to be
represented in any such action. Notwithstanding the foregoing, if the
infringement is likely to have a material adverse effect on the development or
commercialization of the Product, the Parties will meet to determine whether to
defend against such infringement based on the Joint Patents, and if the Parties
mutually agree to proceed in defending such infringement based on the Joint
Patents, the Parties will share (on a pre-determined basis as agreed to by the
Parties) in the reasonable costs incurred relating to the removal of any such
infringement.

 

(b)                                  Product-Specific
Technology Patents. With respect to Product-Specific Technology Patents,
OncoGenex will have the first right, at OncoGenex’s expense, but not the
obligation, to remove such infringement. In the event that OncoGenex fails to
take commercially appropriate steps to remove any infringement of any such
Product-Specific Technology Patent within ninety (90) days following notice of
such infringement, or earlier notifies Isis in writing of its intent not to
take such steps, and such infringement is likely to have a material adverse
effect on the Product, Isis will have the right to do so at its expense, and
OncoGenex will have the right, at its own expense, to be represented in any
such action. If Isis is unilaterally developing and commercializing the Product
pursuant to Section 9.2, Isis will have the right, at Isis’s own expense, to
remove infringement of the Product-Specific Technology Patents.

 

(c)                                  Isis
Patent Rights. Except as set forth in Sections 6.3.1(a) and(b) above, with
respect to the Isis Patent Rights, Isis will have the sole right, but not the
obligation, at its own expense, to remove such infringement using commercially

 

11

appropriate steps,
including the filing of an infringement suit or taking other similar action. Notwithstanding
the foregoing, if the infringement is likely to have a material adverse effect
on the development or commercialization of the Product, the Parties will meet
to determine whether to abate such infringement based on the Isis Patent
Rights, and if the Parties mutually agree to abate such infringement based on
the Isis Patent Rights, Isis will remove the infringement using commercially
appropriate steps, and the Parties will share (on a pre-determined basis as
agreed to by the Parties) in the reasonable costs incurred relating to the
removal of any such infringement.

 

(d)                                  Cooperation.
The Party not enforcing the applicable Patent will provide reasonable
assistance to the other Party, including providing access to relevant documents
and other evidence, making its employees available at reasonable business
hours, and joining the action to the extent necessary to allow the enforcing
Party to maintain the action.

 

6.3.2                     Recovery.
Any amounts recovered by either or both Parties in connection with or as a
result of any action contemplated by Section 6.3.1, whether by settlement or
judgment, will first be used to reimburse the Parties for their reasonable
costs and expenses in making such recovery (which amounts will be allocated pro
rata if insufficient to cover the totality of such expenses), with any
remainder being retained by the Party currently developing or commercializing a
Product, provided that such remainder will be treated as Net Sales and
royalties will be owing in respect of such Net Sales pursuant to this
Agreement.

 

Section 6.4                                   Validity
and Enforceability of Parties’ Technology. The Parties agree that during
the Term of this Agreement, and for 5 years thereafter, neither Party will
bring any action in a court of law, or otherwise challenge the validity or
enforceability of the other Party’s Technology licensed under this Agreement.

 

ARTICLE
7 - 

TERM
AND TERMINATION

 

Section 7.1                                   Term.
Unless earlier terminated in accordance with the provisions of this Article
7 or Section 9.2, the term of this Agreement (the “Term”) commences upon the
Effective Date and will continue until for so long as a Product is being
developed or commercialized.

 

Section 7.2                                   Termination
Upon Insolvency. Either Party may terminate this Agreement if, at any time,
the other Party files in any court or agency pursuant to any statute or regulation
of any state, country or jurisdiction, a petition in bankruptcy or insolvency
or for reorganization or for an arrangement or for the appointment of a
receiver or trustee of that Party or of its assets, or if such other Party
proposes a written agreement of composition or extension of its debts, or if
such other Party will be served with an involuntary petition against it, filed
in any insolvency proceeding, and such petition will not be dismissed within 60
days after the filing thereof, or if such other Party will propose or be a
party to any dissolution or liquidation, or if such other Party will make an
assignment for the benefit of its creditors.

 

12

Section 7.3                                   Rights
in Bankruptcy. All rights and licenses granted under or pursuant to this
Agreement by Isis or OncoGenex are, and will otherwise be deemed to be, for
purposes of Section 365(n) of the United States Bankruptcy Code, licenses of
rights to “intellectual property” as defined under Section 101 of the United
States Bankruptcy Code. The Parties agree that the Parties, as licensees of
such rights under this Agreement, will retain and may fully exercise all of
their rights and elections under the United States Bankruptcy Code. The Parties
further agree that, in the event of the commencement of a bankruptcy proceeding
by or against a Party under the United States Bankruptcy Code, the Party hereto
that is not a Party to such proceeding will be entitled to a complete duplicate
of (or complete access to, as appropriate) any such intellectual property and
all embodiments of such intellectual property, which, if not already in the
non-subject Party’s possession, will be promptly delivered to it (a) upon any
such commencement of a bankruptcy proceeding upon the non-subject Party’s
written request therefor, unless the Party subject to such proceeding elects to
continue to perform all of its obligations under this Agreement or (b) if not
delivered under clause (a) above, following the rejection of this Agreement by
or on behalf of the Party subject to such proceeding upon written request
therefor by the non-subject Party.

 

Section 7.4                                   Consequences
of Expiration or Termination.

 

7.4.1                     Licenses.
Upon expiration of the Term of this Agreement in accordance with Section
7.1 or upon termination of this Agreement in its entirety by either Party
pursuant to this Article 7 or Section 9.2, and upon payment of all amounts owed
pursuant to this Agreement, the licenses granted by Isis to OncoGenex, and by
OncoGenex to Isis, hereunder will terminate.

 

7.4.2                     Return
of Information and Materials. Upon expiration of this Agreement pursuant to
Section 7.1 or upon termination of this Agreement in its entirety by either
Party pursuant to this Article 7 or Section 9.2, each Party, at the request of
the other Party, will return all data, files, records and other materials in
its possession or control relating to such other Party’s Technology, or
containing or comprising such other Party’s Information and Inventions or other
Confidential Information and, in each case, to which the returning Party does
not retain rights hereunder (except one copy of which may be retained for
archival purposes).

 

Section 7.5                                   Accrued
Rights; Surviving Obligations.

 

7.5.1                     Accrued
Rights. Termination or expiration of this Agreement for any reason will be
without prejudice to any rights or financial compensation that will have
accrued to the benefit of a Party prior to such termination or expiration. Such
termination or expiration will not relieve a Party from obligations that are
expressly indicated to survive the termination or expiration of this Agreement.

 

7.5.2                     Survival.
Articles 4, 5, 10, 11 and 12, and Sections 6.1, 
6.2.3, 6.2.4,  6.3.1(a), 6.3.1(d),
6.3.2, and 9.3 of this Agreement and this Section 7.5 will survive expiration
or termination of this Agreement for any reason.

 

13

ARTICLE
8 -

MATERIAL
BREACH OF THIS AGREEMENT

 

Section 8.1                                   Material
Breach. Failure by a Party to comply with any of its material obligations
contained herein will entitle the Party not in default to give to the
defaulting Party notice specifying the nature of the material breach, requiring
the defaulting Party to make good or otherwise cure such default, and stating
its intention to trigger the provisions of Section 12.5 if such default is not
cured. If such default is not cured within 90 days after the receipt of such
notice (or, if such default cannot be cured within such 90-day period, if the
Party in default does not commence actions to cure such default within such
period and thereafter diligently continue such actions), the Party not in
default will be entitled, without prejudice to any of its other rights
conferred on it by this Agreement, to trigger the provisions of Section 12.5.; provided, however, that in the event of a good faith dispute
with respect to the existence of a material breach, the 90-day cure period will
be stayed until such time as the dispute is resolved pursuant to Section 12.5
hereof.

 

ARTICLE
9 -

DISCONTINUED DEVELOPMENT BY ONCOGENEX

 

Section 9.1                                   Discontinued
Development. At any time during the Term of this Agreement, OncoGenex may,
upon written notice to Isis, elect to discontinue development of all Products
being developed hereunder (a “Discontinuance Notice”).

 

Section 9.2                                   Reversion
Rights. Within 90 days of receipt by Isis of a Discontinuance Notice, Isis
may elect to unilaterally continue development of any antisense oligonucleotide
generated under the Project Plan by notice in writing to OncoGenex (an “Election
Notice”) that Isis is exercising its rights under this Section 9.2. If
OncoGenex has not received an Election Notice from Isis within such 90 day
period, Isis will be deemed to have declined to exercise its reversion rights,
and this Agreement will terminate. Upon receipt of an Election Notice,
OncoGenex will grant to Isis an exclusive, worldwide license or sublicense, as
the case may be, to all OncoGenex Product-Specific Technology Patents solely to
develop, make, have made, use, sell, offer for sale, have sold and import a
Product. The license granted hereunder will be sublicensable only in connection
with a license of a Product to a Third Party for the continued development and
commercialization of the Product in accordance with the terms of this Agreement.

 

Section 9.3                                   Royalties
and Other Payments. In consideration of OncoGenex collaborative efforts and
the licenses granted hereunder, Isis will pay to OncoGenex (a) all royalty,
milestone and other payments owing by OncoGenex to the University of British
Columbia in respect of the development and/or commercialization of a Product,
in respect of Product-Specific Technology Patents (for flow-through to the
University of British Columbia); plus (b) a royalty on Net Sales of the Product
at the applicable royalty rate noted in the following table, based on the stage
of development the Product at the time OncoGenex sent Isis the Discontinuance
Notice:

 

14

 

	
  Stage of development of the
  Product

  	
   

  	
  Royalty

  	
   

  
	
  IND Filed

  	
   

  	
  [***]

  	
   

  
	
  Dosing of first
  patient in a Phase II Clinical Trial

  	
   

  	
  [***]

  	
   

  
	
  Completion of a
  Phase II Clinical Trial with positive data sufficient to support a Pivotal
  Quality Clinical Trial.

  	
   

  	
  [***]

  	
   

  

 

Isis shall pay
such royalties for the Term of the Agreement. All royalties and other payments
due hereby will be paid in accordance with the provisions of Sections 4.6
through 4.10.

 

ARTICLE
10 - 

INDEMNIFICATION
AND INSURANCE

 

Section 10.1                            Indemnification
of Isis. OncoGenex will indemnify Isis, and its respective directors,
officers, employees and agents, and defend and hold each of them harmless, from
and against any and all losses, damages, liabilities, costs and expenses
(including reasonable attorneys’ fees and expenses) but only to the extent
arising from or occuring as a result of any and all liability suits,
investigations, claims or demands by a Third Party (collectively, “Losses”)
arising from or occurring as a result of or in connection with (a) any material
breach by OncoGenex of this Agreement, (b) the gross negligence or willful
misconduct on the part of OncoGenex or its licensees or sublicensees in
performing any activity contemplated by this Agreement, or, , (c) the
manufacture, use, handling, storage, sale or other disposition of a Product that
is sold by OncoGenex, its Affiliates, agents or sublicensees; in each case,
except for those Losses for which Isis has an obligation to indemnify OncoGenex
pursuant to Section 10.2, as to which Losses each Party will indemnify the
other to the extent of their respective liability for the Losses, or except as
may be provided under a supply agreement under Section 2.4.

 

Section 10.2                            Indemnification
of OncoGenex. Isis will indemnify OncoGenex,  and its respective directors, officers,
employees and agents, and defend and save each of them harmless, from and
against any and all Losses arising from or occurring as a result of or in
connection with (a) any material breach by Isis of this Agreement, or (b) the
gross negligence or willful misconduct on the part of Isis or its licensees or
sublicensees in performing any activity contemplated by this Agreement, or,
(c) the manufacture, use, handling, storage, sale or other disposition of
a Product that is sold by Isis, its Affiliates, agents or sublicensees; in each
case, except for those Losses for which Isis has an obligation to indemnify
OncoGenex pursuant to Section 10.1, as to which Losses each Party will
indemnify the other to the extent of their respective liability for the Losses,
or except as may be provided under a supply agreement under Section 2.4.

 

Section 10.3                            Indemnification
Procedure.

 

10.3.1              Notice
of Claim. The indemnified Party will give the indemnifying Party prompt
written notice (an “Indemnification Claim Notice”) of any claim upon which such
indemnified Party intends to base a request for indemnification under Section
10.1 or Section 10.2, but in no event will the indemnifying Party be liable

 

15

for any losses
that result from any delay in providing such notice. Each Indemnification Claim
Notice must contain a description of the claim and the nature and amount of
such loss (to the extent that the nature and amount of such loss are known at
such time). The indemnified Party will furnish promptly to the indemnifying
Party copies of all papers and official documents received in respect of any
claim or losses. All indemnification claims in respect of a Party, its
Affiliates or their respective directors, officers, employees and agents
(collectively, the “Indemnitees” and each an “Indemnitee”) will be made solely
by such Party to this Agreement (the “Indemnified Party”).

 

10.3.2              Third
Party Claims. The obligations of an indemnifying Party under this Article
10 with respect to losses arising from claims of any Third Party that are
subject to indemnification as provided for in Section 10.1 or 10.2 (a “Third
Party Claim”) will be governed by and be contingent upon the following
additional terms and conditions:

 

(a)                                  Control
of Defense. At its option, the indemnifying Party may assume the defense of
any Third Party Claim by giving written notice to the Indemnified Party within
30 days after the indemnifying Party’s receipt of an Indemnification Claim
Notice. The assumption of the defense of a Third Party Claim by the indemnifying
Party will not be construed as an acknowledgment that the indemnifying Party is
liable to indemnify any Indemnitee in respect of the Third Party Claim, nor
will it constitute a waiver by the indemnifying Party of any defenses it may
assert against any Indemnitee’s claim for indemnification. Upon assuming the
defense of a Third Party Claim, the indemnifying Party may appoint as lead
counsel in the defense of the Third Party Claim any legal counsel selected by
the indemnifying Party. In the event the indemnifying Party assumes the defense
of a Third Party Claim, the Indemnified Party will immediately deliver to the
indemnifying Party all original notices and documents (including court papers)
received by any Indemnitee in connection with the Third Party Claim. Should the
indemnifying Party assume the defense of a Third Party Claim, the indemnifying
Party will not be liable to the Indemnified Party or any other Indemnitee for
any legal expenses subsequently incurred by such Indemnified Party or other Indemnitee
in connection with the analysis, defense or settlement of the Third Party Claim.
In the event that it is ultimately determined that the indemnifying Party is
not obligated to indemnify, defend or hold harmless an Indemnitee from and
against the Third Party Claim, the Indemnified Party will reimburse the
indemnifying Party for any and all costs and expenses (including attorneys’
fees and costs of suit) and any Losses incurred by the indemnifying Party in
its defense of the Third Party Claim with respect to such Indemnitee.

 

(b)                                  Right
to Participate in Defense. Without limiting Section 10.3.2(a), any
Indemnitee will be entitled to participate in, but not control, the defense of
such Third Party Claim and to employ counsel of its choice for such purpose; provided, however, that such employment will be at the
Indemnitee’s own expense unless (i) the employment thereof has been
specifically authorized by the indemnifying Party in writing, or (ii) the
indemnifying Party has failed to assume the defense and employ counsel in
accordance with Section 10.3.2(a) (in which case the Indemnified Party will
control the defense).

 

16

(c)                                  Settlement.
With respect to any Losses relating solely to the payment of money damages in
connection with a Third Party Claim and that will not result in the
Indemnitee’s becoming subject to injunctive or other relief or otherwise
adversely affect the business of the Indemnitee in any manner, and as to which
the indemnifying Party will have acknowledged in writing the obligation to
indemnify the Indemnitee hereunder, the indemnifying Party will have the sole
right to consent to the entry of any judgment, enter into any settlement or
otherwise dispose of such loss, on such terms as the indemnifying Party, in its
sole discretion, will deem appropriate. With respect to all other losses in
connection with Third Party Claims, where the indemnifying Party has assumed
the defense of the Third Party Claim in accordance with Section 10.3.2(a), the
indemnifying Party will have authority to consent to the entry of any judgment,
enter into any settlement or otherwise dispose of such loss provided it obtains
the prior written consent of the Indemnified Party (which consent will not be
unreasonably withheld or delayed). The indemnifying Party will not be liable
for any settlement or other disposition of a loss by an Indemnitee that is
reached without the written consent of the indemnifying Party. Regardless of
whether the indemnifying Party chooses to defend or prosecute any Third Party
Claim, no Indemnitee will admit any liability with respect to, or settle,
compromise or discharge, any Third Party Claim without the prior written
consent of the indemnifying Party.

 

(d)                                  Cooperation.
Regardless of whether the indemnifying Party chooses to defend or prosecute any
Third Party Claim, the Indemnified Party will, and will cause each other
Indemnitee to, cooperate in the defense or prosecution thereof and will furnish
such records, information and testimony, provide such witnesses and attend such
conferences, discovery proceedings, hearings, trials and appeals as may be
reasonably requested in connection therewith. Such cooperation will include
access during normal business hours afforded to the indemnifying Party to, and
reasonable retention by the Indemnified Party of, records and information that
are reasonably relevant to such Third Party Claim, and making Indemnitees and
other employees and agents available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder, and
the indemnifying Party will reimburse the Indemnified Party for all its
reasonable out-of-pocket expenses in connection therewith.

 

(e)                                  Expenses.
Except as provided above, the reasonable and verifiable costs and expenses,
including fees and disbursements of counsel, incurred by the Indemnified Party
in connection with any claim will be reimbursed on a calendar quarter basis by
the indemnifying Party, without prejudice to the indemnifying Party’s right to
contest the Indemnified Party’s right to indemnification and subject to refund
in the event the indemnifying Party is ultimately held not to be obligated to
indemnify the Indemnified Party.

 

Section 10.4                            Insurance.
Each Party will have and maintain such types and amounts of liability
insurance as is normal and customary in the industry generally for parties
similarly situated, and will upon request provide the other Party with a
certificate

 

17

of insurance. Each
party will promptly notify the other Party of any material change in insurance
coverage or lapse in coverage in that regard.

 

ARTICLE
11 - 

REPRESENTATIONS
AND WARRANTIES

 

Section 11.1                            Representations,
Warranties and Covenants. Each Party hereby represents, warrants and
covenants to the other Party as of the Effective Date as follows:

 

11.1.1              Corporate
Authority. Such Party (a) has the power and authority and the legal right
to enter into this Agreement and perform its obligations hereunder, and (b) has
taken all necessary action on its part required to authorize the execution and
delivery of this Agreement and the performance of its obligations hereunder. This
Agreement has been duly executed and delivered on behalf of such Party and constitutes
a legal, valid and binding obligation of such Party and is enforceable against
it in accordance with its terms subject to the effects of bankruptcy,
insolvency or other laws of general application affecting the enforcement of
creditor rights and judicial principles affecting the availability of specific
performance and general principles of equity, whether enforceability is
considered a proceeding at law or equity.

 

11.1.2              Litigation.
Such Party is not aware of any pending or threatened litigation (and has
not received any communication) that alleges that such Party’s activities
related to this Agreement have violated, or that by conducting the activities
as contemplated herein such Party would violate, any of the intellectual
property rights of any other party.

 

11.1.3              Consents,
Approvals, etc. All necessary consents, approvals and authorizations of all
Regulatory Authorities and other parties required to be obtained by such Party
in connection with the execution and delivery of this Agreement and the
performance of its obligations hereunder have been obtained.

 

11.1.4              Conflicts.
The execution and delivery of this Agreement and the performance of such
Party’s obligations hereunder (a) do not conflict with or violate any
requirement of Applicable Law or any provision of the articles of
incorporation, bylaws or any similar instrument of such Party, as applicable,
in any material way, and (b) do not conflict with, violate, or breach or
constitute a default or require any consent not already obtained under, any
contractual obligation or court or administrative order by which such Party is
bound.

 

11.1.5              Debarment.
No such Party nor any of its Affiliates has been debarred or is subject to
debarment and neither such Party nor any of its Affiliates will use in any
capacity, in connection with the services to be performed under this Agreement,
any party who has been debarred pursuant to Section 306 of the Federal Food,
Drug, and Cosmetic Act, as amended, or who is the subject of a conviction
described in such section. Each Party will inform the other Party in writing
immediately if it or any party who is performing services hereunder is debarred
or is the subject of a conviction described in Section 306, or if any action,
suit, claim, investigation or legal or

 

18

administrative
proceeding is pending or, to such Party’s knowledge, is threatened, relating to
the debarment or conviction of such Party or any party performing services
hereunder.

 

Section 11.2                            Additional
Representations and Warranties of Isis. Isis represents and warrants to
OncoGenex that Isis is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has full corporate
power and authority and the legal right to own and operate its property and
assets and to carry on its business as it is now being conducted and as it is
contemplated to be conducted by this Agreement.

 

Section 11.3                            Additional
Representations and Warranties of OncoGenex. OncoGenex represents and
warrants to Isis that OncoGenex is a corporation duly organized, validly
existing and in good standing under the laws of Canada, and has full corporate
power and authority and the legal right to own and operate its property and
assets and to carry on its business as it is now being conducted and as it is
contemplated to be conducted by this Agreement.

 

Section 11.4                            DISCLAIMER
OF WARRANTY. EXCEPT FOR THE EXPRESS WARRANTIES SET
FORTH IN SECTIONS 11.1, 11.2 AND 11.3, ONCOGENEX AND ISIS MAKE NO REPRESENTATIONS
AND GRANT NO WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF
LAW, BY STATUTE OR OTHERWISE, AND ONCOGENEX AND ISIS EACH SPECIFICALLY DISCLAIM
ANY OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING
ANY WARRANTY OF QUALITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR
PURPOSE OR ANY WARRANTY AS TO THE VALIDITY OF ANY PATENTS OR THE
NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

 

ARTICLE
12 - 

MISCELLANEOUS

 

Section 12.1                            Force
Majeure. Neither Party will be held liable or responsible to the other
Party or be deemed to have defaulted under or breached this Agreement for
failure or delay in fulfilling or performing any term of this Agreement when
such failure or delay is caused by or results from events beyond the reasonable
control of the non-performing Party, including fires, floods, embargoes,
shortages, epidemics, quarantines, war, acts of war (whether war be declared or
not), insurrections, riots, civil commotion, strikes, lockouts or other labor
disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority. The non-performing Party will notify the other Party of
such force majeure within ten (10) days after such occurrence by giving written
notice to the other Party stating the nature of the event, its anticipated
duration, and any action being taken to avoid or minimize its effect. The
suspension of performance will be of no greater scope and no longer duration
than is necessary and the non-performing Party will use Commercially Reasonable
Efforts to remedy its inability to perform; provided, however,
that in the event the suspension of performance continues for one-

 

19

hundred and eighty
(180) days after the date of the occurrence, the Parties will meet to discuss
in good faith how to proceed in order to accomplish the goals of the
Collaboration outlined in this Agreement.

 

Section 12.2                            Assignment.
Without the prior written consent of the other Party hereto, neither Party
will sell, transfer, assign, delegate, pledge or otherwise dispose of, whether
voluntarily, involuntarily, by operation of law or otherwise, this Agreement or
any of its rights or duties hereunder; provided, however,
that either Party hereto may assign or transfer this Agreement or any of its
rights or obligations hereunder without the consent of the other Party to any
Third Party with which it has merged or consolidated, or to which it has
transferred all or substantially all of its assets to which this Agreement
relates if in any such event the Third Party assignee or surviving entity
assumes in writing all of the assigning Party’s obligations under this
Agreement. Any purported assignment or transfer in violation of this Section
will be void ab initio and of no force or
effect.

 

Section 12.3                            Severability.
If any provision of this Agreement is held to be illegal, invalid or
unenforceable by a court of competent jurisdiction, such adjudication shall not
affect or impair, in whole or in part, the validity, enforceability, or
legality of any remaining portions of this Agreement. All remaining portions
shall remain in full force and effect as if the original Agreement had been
executed without the invalidated, unenforceable or illegal part.

 

Section 12.4                            Governing
Law. This Agreement will be governed by and construed in accordance with
the laws of Delaware without reference to any rules of conflicts of laws.

 

Section 12.5                            Dispute Resolution.

 

12.5.1              General. Any dispute, controversy or claim
arising from or related to this Agreement
or the breach thereof will first be referred to the attention of the
Chief Executive Officers of each of the Parties by notice in writing in
accordance with the terms of this Agreement. The Chief Executive Officers (or
their respective designees) will meet as soon as reasonably possible
thereafter, and use their good faith efforts to mutually agree upon the
resolution of the dispute, controversy or claim. If any dispute, controversy or
claim is not resolved by the Chief Executive Officers of the Parties (or their
designees) within 30 days after such dispute is referred to them, then either
Party will have the right to arbitrate such dispute in accordance with Section
12.5.2.

 

12.5.2              Arbitration. If the Parties do not fully settle any dispute, controversy or claim
pursuant to Section 12.5.1 and a Party wishes to pursue the matter further,
each such dispute, controversy or claim will be finally resolved by binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (“AAA”), and judgment on the arbitration award may be
entered in any court having jurisdiction thereof. The arbitration will be
conducted by a panel of three persons experienced in the pharmaceutical or
biotech business: within 30 days after initiation of arbitration, each Party
will select one person to act as arbitrator and the two 

 

20

Party-selected arbitrators will select a third arbitrator within 30 days
of their appointment. If the arbitrators selected by the Parties are unable or
fail to agree upon the third arbitrator, the third arbitrator will be appointed
by the AAA. No individual shall be appointed to arbitrate a dispute
pursuant to this Agreement unless he or she agrees in writing to be bound by
the provisions of this Section 12.5. The
place of arbitration will be Seattle, Washington. Either Party may apply to the
arbitrators for interim injunctive relief until the arbitration award is
rendered or the controversy is otherwise resolved.

 

12.5.3              Disputes Regarding Material Breach. If the Parties are in dispute as to whether one
party is in material breach of this Agreement, then the arbitrators will first
determine if material breach has in fact occurred, and if so, will grant the
defaulting Party the cure period provided pursuant to Section 8.1. If the
material breach is not cured within the time period provided pursuant to
Section 8.1, the arbitration will continue and the arbitrators will, as part of
the same arbitration, award damages to the non-defaulting Party.

 

12.5.4              Costs and Expenses. Except as expressly provided herein, each Party
will bear its own costs and expenses and attorneys’ fees and an equal share of
the arbitrators’ and any administrative fees of arbitration. Notwithstanding
the foregoing, if a Party has been found to be in material breach of this
Agreement, the defaulting Party will be responsible for both Parties’ costs and
expenses (including the costs of the arbitrators and any administrative fees of
arbitration) and the reasonable attorneys’ fees of the non-defaulting Party.

 

12.5.5              Procedure. Except to the extent necessary to confirm an award or as may be required
by law, neither a Party nor an arbitrator may disclose the existence, content,
or results of an arbitration without the prior written consent of both Parties.
In no event will an arbitration be initiated after the date when commencement
of a legal or equitable proceeding based on the dispute, controversy or claim
would be barred by the applicable Delaware statute of limitations.

 

12.5.6              Speedy Resolution. The Parties intend, and shall take all reasonable action as is
necessary or desirable to ensure, that there be a speedy resolution to any
dispute which becomes the subject of arbitration, and the arbitrators shall
conduct the arbitration so as to resolve the dispute as expeditiously as
possible.

 

12.5.7              Awards.
The arbitrators may award monetary damages
and injunctive relief, but may not order the granting or termination of
licenses or assign rights to a Product to either of the Parties. Monetary
damages shall be in the form of off-set
royalties or otherwise, to account for the damages to the non-defaulting Party
from the breach, and to account for the defaulting Party’s contribution to the
Product in view of the breach. All awards shall be in writing and shall
state reasons. Executed copies of all awards shall be delivered by the
arbitrators to the Parties as soon as is reasonably possible. All awards of the
arbitrators shall be final and binding on the Parties, and there shall be no
appeal of any such award whatsoever. The Parties undertake to satisfy any award
without delay.

 

21

Section 12.6                            Notices.
All notices or other communications that are required or permitted
hereunder will be in writing and delivered personally with acknowledgement of
receipt, sent by facsimile (and promptly confirmed by personal delivery,
registered or certified mail or overnight courier as provided herein), sent by
nationally-recognized overnight courier or sent by registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:

 

If to OncoGenex, to:

 

OncoGenex
Technologies Inc.

Jack
Bell Research Centre

Rm
550, 2660 Oak Street

Vancouver,
B.C., V6H 3Z6

Attention:
Scott D. Cormack, President

Facsimile:
604-736-3687

 

with a
copy to:

 

Doug
Seppala

McCullough O’Connor Irwin, Solicitors

1100 - 888 Dunsmuir Street

Vancouver, B.C., Canada

V6C 3K4

fax: 604-687-7099

 

If to Isis, to:

 

Isis
Pharmaceuticals, Inc.

2292
Faraday Avenue

Carlsbad,
California 92008

Attention:
Executive Vice President

Facsimile:
(760) 603-4650

 

with a
copy to:

 

Attention:  General Counsel

Facsimile:
(760) 268-4922

 

or to such other address
as the Party to whom notice is to be given may have furnished to the other
Party in writing in accordance herewith. Any such communication will be deemed
to have been given (i) when delivered, if personally delivered or sent by
facsimile on a Business Day, (ii) on the Business Day after dispatch, if sent
by nationally-recognized overnight courier, and (iii) on the third business day
following the date of mailing, if sent by mail. It is understood and agreed
that this Section 12.6 is not intended

 

22

to govern the day-to-day
business communications necessary between the Parties in performing their
duties, in due course, under the terms of this Agreement.

 

Section 12.7                            Entire
Agreement; Modifications. This Agreement sets forth and constitutes
the entire agreement and understanding between the Parties with respect to the
subject matter hereof and all prior agreements, understanding, promises and
representations, whether written or oral, with respect thereto are superseded
hereby. Each Party confirms that it is not relying on any representations or
warranties of the other Party except as specifically set forth herein. No
amendment, modification, release or discharge will be binding upon the Parties
unless in writing and duly executed by authorized representatives of both
Parties.

 

Section 12.8                            Relationship
of the Parties. It is expressly agreed that the Parties will be
independent contractors of one another and that the relationship between the
Parties will not constitute a partnership, joint venture or agency. Neither
Party will have the authority to make any statements, representations or
commitments of any kind, or to take any action, which will be binding on the
other, without the prior written consent of the other to do so. All persons
employed by a Party will be employees of such Party and not of the other Party
and all costs and obligations incurred by reason of any such employment will be
for the account and expense of such Party.

 

Section 12.9                            Waiver. Any
term or condition of this Agreement may be waived at any time by the Party that
is entitled to the benefit thereof, but no such waiver will be effective unless
set forth in a written instrument duly executed by or on behalf of the Party
waiving such term or condition. The waiver by either Party hereto of any right
hereunder or of the failure to perform or of a breach by the other Party will
not be deemed a waiver of any other right hereunder or of any other breach or
failure by said other Party whether of a similar nature or otherwise.

 

Section 12.10                     Counterparts. This
Agreement may be executed in two (2) or more counterparts, each of which will
be deemed an original, but all of which together will constitute one and the
same instrument.

 

Section 12.11                     No
Benefit to Third Parties. The representations, warranties, covenants and
agreements set forth in this Agreement are for the sole benefit of the Parties
hereto and their successors and permitted assigns, and they will not be
construed as conferring any rights on any other parties.

 

Section 12.12                     Further
Assurance. Each Party will duly execute and deliver, or cause to be
duly executed and delivered, such further instruments and do and cause to be
done such further acts and things, including the filing of such assignments,
agreements, documents and instruments, as may be necessary or as the other
Party may reasonably request in connection with this Agreement or to carry out
more effectively the provisions and purposes, or to better assure and confirm
unto such other Party its rights and remedies under this Agreement.

 

23

Section 12.13                     References. Unless
otherwise specified, (a) references in this Agreement to any Article, Section,
Schedule or Exhibit will mean references to such Article, Section, Schedule or
Exhibit of this Agreement, (b) references in any section to any clause are
references to such clause of such section, and (c) references to any agreement,
instrument or other document in this Agreement refer to such agreement, instrument
or other document as originally executed or, if subsequently varied, replaced
or supplemented from time to time, as so varied, replaced or supplemented and
in effect at the relevant time of reference thereto.

 

Section 12.14                     Construction.
Except where the context otherwise requires, wherever used, the singular
will include the plural, the plural the singular, the use of any gender will be
applicable to all genders and the word “or” is used in the inclusive sense
(and/or). The captions of this Agreement are for convenience of reference only
and in no way define, describe, extend or limit the scope or intent of this
Agreement or the intent of any provision contained in this Agreement. The term
“including” as used herein will mean including, without limiting the generality
of any description preceding such term. The language of this Agreement will be
deemed to be the language mutually chosen by the Parties and no rule of strict
construction will be applied against either Party hereto. Appendices to this
Agreement, or added hereto according to the terms of this Agreement, are made
part of this Agreement.

 

24

IN
WITNESS WHEREOF, the Parties hereto have caused this
Agreement to be executed by their duly authorized representatives as of the
date first above written.

 

	
  ONCOGENEX TECHNOLOGIES INC.

  	
  ISIS PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
  Per:

  	
  /s/ Scott Cormack

  	
   

  	
  Per:

  	
   /s/ B. Lynne Parshall

  	
   

  	
   

  
	
   

  	
   

  
	
  Scott D. Cormack,

  	
  B. Lynne Parshall

  
	
  President & CEO

  	
  Executive Vice
  President and

  
	
   

  	
  CFO

  
							

 

25

APPENDIX
1

 

Definitions

 

“Affiliate” of
a party means any other party that, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with
such first party. For purposes of this definition only, “control” and, with
correlative meanings, the terms “controlled by” and “under common control with”
will mean (a) the possession, directly or indirectly, of the power to direct
the management or policies of a party, whether through the ownership of voting
securities or by contract relating to voting rights or corporate governance,
and (b) the ownership, directly or indirectly, of more than fifty percent (50%)
of the voting securities or other ownership interest of a party; provided that, if local law restricts foreign ownership,
control will be established by direct or indirect ownership of the maximum
ownership percentage that may, under such local law, be owned by foreign
interests.

 

“Applicable Law”
means the applicable laws, rules, and regulations, including any rules,
regulations, guidelines, or other requirements of the Regulatory Authorities,
that may be in effect from time to time.

 

“Business Day” means any day,
other than Saturday, Sunday or any statutory holiday in the Province of British
Columbia or the United States.

 

“Calendar Year” means
each successive period of 12 months commencing on January 1 and ending on
December 31.

 

“Collaboration” has the meaning
set forth in Section 2.1.

 

“Collaboration Expenses”
has the meaning set forth in Section 4.10.2.

 

“Commercially Reasonable Efforts”
means, with respect to the research, development, manufacture or
commercialization of the Product, efforts and resources commonly used in the
biotechnology industry for products of similar commercial potential at a
similar stage in its lifecycle, taking into consideration their safety and
efficacy, cost to develop, priority in relation to other products under
development by the other Party, the competitiveness of alternative products,
proprietary position, the likelihood of regulatory approval, profitability, and
all other relevant factors.

 

“Confidential
Information” means all information and know-how and any
tangible embodiments thereof provided by or on behalf of one Party to the other
Party either in connection with the discussions and negotiations pertaining to
this Agreement or in the course of performing this Agreement, including data;
knowledge; practices; processes; ideas; research plans; engineering designs and
drawings; research data; manufacturing processes and techniques; scientific,
manufacturing, marketing and business plans; and financial and personnel
matters relating to the disclosing Party or to

 

its present or
future products, sales, suppliers, customers, employees, investors or business.
For purposes of this Agreement, notwithstanding the Party that disclosed such
information or know-how, all information or know-how of OncoGenex shall be
Confidential Information of OncoGenex, and all information and know-how of Isis
shall be Confidential Information of Isis.

 

Notwithstanding
the foregoing, information or know-how of a Party shall not be deemed
Confidential Information for purposes of this Agreement if such information or
know-how:

 

(a)                                  was
already known to the receiving Party, other than under an obligation of
confidentiality or non-use, at the time of disclosure to such receiving Party;

 

(b)                                  was
generally available or known to parties reasonably skilled in the field to
which such information or know-how pertains, or was otherwise part of the
public domain, at the time of its disclosure to, or, with respect to know-how,
discovery or development by, such receiving Party;

 

(c)                                  became
generally available or known to parties reasonably skilled in the field to
which such information or know-how pertains, or otherwise became part of the
public domain, after its disclosure to such receiving Party through no fault of
the receiving Party;

 

(d)                                  was
disclosed to such receiving Party, other than under an obligation of
confidentiality or non-use, by a Third Party who had no obligation to the
disclosing Party not to disclose such information or know-how to others; or

 

(e)                                  was
independently discovered or developed prior to disclosure by such receiving
Party, as evidenced by their written records, without the use of Confidential
Information belonging to the disclosing Party.

 

Specific aspects or details of Confidential
Information shall not be deemed to be within the public domain or in the
possession of a Party merely because the Confidential Information is embraced
by more general information in the public domain or in the possession of such
Party. Further, any combination of Confidential Information shall not be
considered to be in the public domain or in the possession of a Party merely
because individual elements of such Confidential Information are in the public
domain or in the possession of such Party unless the combination and its
principles are in the public domain or in the possession of such Party.

 

 “Control” means, with
respect to any Patent or other intellectual property right, possession of the
right (whether by ownership, license or otherwise), to assign, or grant a
license, sublicense or other right to or under, such Patent or right as
provided for herein without violating the terms of any agreement or other
arrangement with any Third Party.

 

“Discontinuance Notice” has
the meaning set forth in Section 9.1

 

“Election Notice”
has the meaning set forth in Section 9.2.

 

A-2

“FDA” means the
United States Food and Drug Administration and any successor agency thereto.

 

“Fully
Diluted Basis” means that
all options, warrants or other rights of any kind to acquire shares and all
securities convertible or exchangeable into shares outstanding at that time
shall be deemed to have been fully exercised, converted or exchanged, as the
case may be, and the shares issuable as a result thereof shall be deemed to
have been fully issued and to form part of the holdings of the persons entitled
to receive such shares.

 

“GAAP” means
generally accepted accounting principles of the United States consistently
applied.

 

“IGFBP-2” means
the gene target Insulin-like Growth Factor Binding Protein 2.

 

“IGFBP-5” means
the gene target Insulin-like Growth Factor Binding Protein 5.

 

“Improvement”
means any patented invention within the
scope of inventions claimed in the Isis Core Technology Patents and
necessary for the development or commercialization of a Product, that is made or Controlled by Isis after the
Effective Date of this Agreement, but not including any Isis Product-Specific
Technology Patents.

 

“IND” means an
investigational new drug application filed with the FDA or TPD for
authorization to commence human clinical trials, and its equivalent in other
countries or regulatory jurisdictions.

 

“Indemnification Claim Notice,
Indemnified Party and Indemnitee” have the meanings set forth
in Section 10.3.1.

 

“Isis
Core Technology Patents” means Patents Controlled by Isis on
the Effective Date that are necessary for the development and commercialization
of the Product, but not including the Isis Product-Specific Technology Patents,
or Patents Controlled by Isis that claim, and only to the extent that they
claim, methods of drug delivery or encapsulation.

 

“Isis Patent
Rights” means any Patents owned or Controlled by Isis.

 

“Joint
Patents” means all Patents that claim, and only to the extent
that they claim, Joint Technology.

 

“Joint Technology”
has the meaning set forth in Section 6.1.1.

 

“Losses” has
the meaning set forth in Section 10.1.

 

“Major Market”
means the United States, Canada, Japan, the Federal Republic of Germany,
France, Italy or the United Kingdom.

 

A-3

“NDA” means a
New Drug Application filed with the FDA after completion of clinical trials to
obtain marketing approval for commercial product in the United States or
equivalent application for regulatory approval in other Major Market countries.

 

“Net Sales”
means the gross invoice price of the Product sold by the Party having the right
to sell or have sold the Product pursuant to this Agreement, and/or
sublicensees of such Party, to a Third Party which is not a sublicensee of the
selling party (unless such sublicensee is the end user of the Product, in which
case the amount billed therefor shall be deemed to be the amount that would be
billed to a Third Party in an arm’s-length transaction) for sales of such
Product to such end users less the following items, as allocable to such Product
(if not previously deducted from the amount invoiced): (i) trade
discounts, credits or allowances, (ii) credits or allowances additionally
granted upon returns, rejections or recalls, (iii) freight, shipping and
insurance charges, (iv) taxes, duties or other governmental tariffs (other
than income taxes), and (v) government mandated rebates.

 

“Patents” shall
include (x) all U.S. patents and patent applications, (y) any substitutions,
divisions, continuations, continuations-in-part, reissues, renewals, registrations,
confirmations, re-examinations, extensions, supplementary protection
certificates and the like, and any provisional applications, of any such
patents or patent applications, and (z) any foreign or international equivalent
of any of the foregoing.

 

“Phase I Clinical Trial”
means the initial clinical testing of the Product in humans (first-in-humans
study) with the intention of gaining a preliminary assessment of the safety of
the Product.

 

“Phase II Clinical Trial”
means the clinical testing of the Product in humans who are patients with a
disease for which the Product is being tested, involving not more than three
dose escalation levels and occurring after at least one Phase I Clinical Trial
has been completed, with the intention of (i) determining the optimal dose to
use in a Pivotal Quality Clinical Trial, and (ii) gaining a preliminary
assessment of the efficacy of the Product in treating such disease.

 

“Pivotal Quality Clinical Trial” means a human clinical trial of the Product
designed to be of a size and statistical power to support an NDA filing alone
or in combination with other studies. If it is unclear whether or not a study
design will be sufficient to support an NDA filing (other than by virtue of the
uncertainty of efficacy data from that trial) the study will be deemed to be a
Pivotal Quality Clinical Trial on the initiation of activities to support an
NDA filing. Initiation of a Phase III clinical study will be deemed to be
initiation of a Pivotal Quality Clinical Trial.

 

“Product” means
a pharmaceutical preparation comprising any
single antisense inhibitor generated under the Project Plan which down
regulates IGFBP-5 and/or IGFBP-2.After the
Project Plan has been completed, the Parties will append to this Agreement the
specific sequence and chemistry of each antisense inhibitor which constitutes
the active pharmaceutical ingredient in each Product.

 

A-4

“Product-Specific Technology”
means any discovery, device, process, method of use, composition, or
formulation, whether or not patented or patentable, which is made or Controlled
solely by Isis or OncoGenex, or jointly by Isis and OncoGenex, prior to the
Effective Date or during the Term of this Agreement, and which relates only to
the gene targets down regulated by a Product.

 

“Product-Specific Technology
Patents” means all Patents that claim, and only to the extent
that they claim, Product-Specific Technology.

 

“Project Plan”
means the Parties’ initial development plan for Collaboration Activities, as
set forth in Section 2.3.

 

“Regulatory Approval”
means (a) in the United States, approval by the FDA of an NDA, or similar
application for marketing approval, and satisfaction of any related applicable
FDA registration and notification requirements (if any), and (b) in a Major
Market other than the United States, approval by regulatory authorities having
jurisdiction over such country of a single application or set of applications
comparable to an NDA and satisfaction of any related applicable regulatory and
notification requirements (if any).

 

“Regulatory Authority”
means any applicable government entities regulating or otherwise exercising
authority with respect to the development and commercialization of the Product.

 

“Regulatory Documentation”
means all applications, registrations, licenses, authorizations and approvals
(including all Regulatory Approvals), all correspondence submitted to or
received from Regulatory Authorities (including minutes and official contact
reports relating to any communications with any Regulatory Authority), all
supporting documents and all clinical studies and tests, including the
manufacturing batch records, relating to the Product, and all data contained in
any of the foregoing, including all regulatory drug lists, advertising and
promotion documents, adverse event files and complaint files.

 

“Royalty Due Dates”
means the last working days of March, June, September and December of each and
every year during which this Agreement remains in full force and effect.

 

“Technology”means
Isis Patent Rights, OncoGenex Product-Specific Technology Patents, Joint
Patents and/or the Joint Technology (including any Joint Product-Specific
Technology), as applicable.

 

“Term” has
the meaning set forth in Section 7.1.

 

“Third Party”
means any party other than Isis or OncoGenex.

 

“Third Party Claims”
has the meaning set forth in Section 10.3.2.

 

A-5

“TPD” means the
Therapeutics Products Directorate, Health Products and Food Branch, Health
Canada, and any successor agency thereto.

 

“Valid Claim”
means a claim which (i) in the case of any unexpired United States or foreign
patent, shall not have been donated to the public, disclaimed or held invalid
or unenforceable by a court of competent jurisdiction in an unappealed or
unappealable decision, or (ii) in the case of any United States or foreign
patent application, shall not have been permanently cancelled, withdrawn, or
abandoned.

 

“Withholding Taxes” has the meaning set forth in Section 4.9.

 

A-6

 

APPENDIX
2.3.1

 

PROJECT
PLAN

 

The Project Plan
encompasses the design, generation and testing of various antisense
oligonucleotides with a view to identifying and selecting optimal drug
development candidates  targeted to
inhibit IGFBP-5 and/or IGFBP-2. The Project Plan consists of and includes all
work required to allow for a decision on whether or not to proceed with a
Product to IND-enabling toxicology studies.

 

Isis Project Plan
Responsibilities.

 

Isis
will design and generate various mouse and human antisense oligonucleotides
incorporating Isis’ proprietary MOE chemistry and targeted to IGFBP-5 and/or
IGFBP-2, for use in animal and human studies.

 

Isis
will supply up to [***] grams each of mouse and human oligonucleotide for
research purposes. Isis will supply additional oligonucleotide to OncoGenex for
research purposes for [***].

 

If requested by OncoGenex
within one year of the Effective Date, Isis will provide OncoGenex, at Isis’
cost, with up to [***] man hours of
consulting related to pharmacology and toxicology and to assist OncoGenex in
pre-IND meetings and completing the IND package.

 

OncoGenex will pay Isis
for any additional hours of consulting at a rate of [***].

 

OncoGenex Project Plan
Responsibilities.

 

OncoGenex will assist
Isis in designing antisense
oligonucleotides targeted to IGFBP-5 and/or IGFBP-2.

 

OncoGenex will perform in vitro and in vivo
analyses as needed to identify a lead antisense oligonucleotide.

 

Funding For Project Plan.

 

OncoGenex is responsible
for all costs associated with completing OncoGenex’s responsibilities as set
forth above.

 

Isis is responsible for
all costs associated with Isis’s responsibilities as set forth above.

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