Document:

Exhibit 10.10

 

COLLABORATION
AND CO-DEVELOPMENT AGREEMENT

 

THIS
COLLABORATION AND CO-DEVELOPMENT AGREEMENT (“Agreement”) is
made and entered into effective as of November 16, 2001 (the “Effective Date”),
by and among ONCOGENEX TECHNOLOGIES INC., having offices at Suite 400, 609 – 14th
Street N.W., Calgary, Alberta T2N 2A1 (“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 establish a relationship to co-develop and
commercialize an antisense compound targeted to Clusterin, 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 have entered into this collaboration (the “Collaboration”)
to jointly develop and commercialize the Product 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 Collaboration Activities in accordance with this Agreement, and in
accordance with the Initial Project Plan and any future Project Plans. Each
Party will perform, or cause to be performed, its Collaboration Activities in good
scientific manner, and in compliance in all material respects with all
Applicable Law and will use best efforts to (a) research, develop, manufacture,
file for Regulatory Approval and commercialize the Product,  (b) perform the work of each Project Plan
with the view to achieving the objectives of such Project Plan efficiently and
expeditiously by allocating sufficient time, effort, equipment and skilled
personnel to complete such activities successfully and promptly, and (c)
cooperate fully 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 Clusterin other than as provided in this Agreement.

 

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

 

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Section 2.3            Initial
Project Plan.

 

2.3.1       Goals
of Initial Project Plan. The Initial Project Plan will be directed to
completing Trial 1 and Trial 2, as set forth in Appendix 2.3.1. The Parties’
responsibilities for Collaboration Activities for the Initial Project Plan are
set forth in Appendix 2.3.1. Collaboration Activities for the Initial Project
Plan will be funded as set forth in Appendix 2.3.1.

 

2.3.2       Changes
to Initial Project Plan. Any changes to the Initial Project Plan requiring
the performance of additional activities will require the prior written
approval of both Parties and will be funded 65% by OncoGenex and 35% by Isis,
unless otherwise agreed by the Parties. Any such changes to the Initial Project
Plan will include a budget covering any additional activities.

 

2.3.3       Licensing
of Product. The Product will not be sublicensed to any Third Party prior to
completion of the Initial Project Plan, without mutual agreement of the Parties
in writing.

 

2.3.4       Discontinued
Performance by OncoGenex. If OncoGenex elects during performance of the
Initial Project Plan to discontinue its participation in the Collaboration,
Isis may continue the development and commercialization of the Product
independently of OncoGenex. Upon discontinuation of performance of the Initial
Project Plan by OncoGenex, Isis will retain any licenses granted in Section
4.1, including the right to sublicense as provided in that section. Isis will
pay OncoGenex a royalty equal to [***] of Net Sales of the Product for the life
of the Product. In addition, Isis will pay OncoGenex any applicable Third Party
Payments. OncoGenex will transfer to Isis all information relating to the
Product as may be necessary to enable Isis to practice the licenses granted in
Section 4.1, including, but not limited to, summaries of clinical trials,
rights to all foreign-equivalent INDs and NDAs filed with respect to the
Product in such country and all drug dossiers and master files with respect
thereto. OncoGenex will have no further expense obligations under this
Agreement.

 

2.3.5       Discontinued
Performance by Isis. If Isis elects during performance of the Initial
Project Plan to discontinue its participation in the Collaboration, OncoGenex
may continue the development and commercialization of the Product independently
of Isis. Upon discontinuation of performance of the Initial Project Plan by
Isis, OncoGenex will retain any licenses granted in Section 4.1, including the
right to sublicense as provided in that section. OncoGenex will pay Isis a royalty
equal to [***] of Net Sales of the Product for the life of the Product. In
addition, OncoGenex will pay Isis any applicable Third Party Payments. Isis
will transfer to OncoGenex all information relating to the Product as may be
necessary to enable OncoGenex to practice the licenses granted in Section 4.1,
including, but not limited to, summaries of clinical trials, rights to all
foreign-equivalent INDs and NDAs filed with respect to the Product in such
country and all drug dossiers and master files with respect thereto. Isis will
have no further expense obligations under this Agreement.

 

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Section 2.4            Future
Collaboration Activities.

 

2.4.1       Proportionate
Share. After completion of the Initial Project Plan, the Proportionate
Share of OncoGenex and Isis will be 65% and 35%, respectively.

 

2.4.2       Future
Project Plans. Ninety days prior to estimated completion of the Initial
Project Plan, and 90 days prior to estimated completion of each subsequent
Project Plan, the Operating Committee will establish a new Project Plan for the
next stage of development of the Product. Upon written acceptance of a new
Project Plan by each of the Parties, such Project Plan will be appended to this
Agreement. Each new Project Plan will include a budget for the Collaboration
Activities to complete such Project Plan, and provisions for the Parties to
fund the Collaboration Activities according to their Proportionate Share.

 

2.4.3       Third
Party or Unilateral Product Development. If the Parties cannot agree to the
terms of a new Project Plan, the Parties will negotiate in good faith for one
Party to unilaterally develop the Product, or will agree to jointly sub-license
the Product to a Third Party. If the Parties cannot reach agreement regarding
the principal terms for unilateral development or sub-licensing of the Product
within 120 days of beginning negotiations, the Parties will refer the matter to
dispute resolution according to the procedures set forth in Section 12.6.

 

2.4.4       Licensing
of Product.

 

(a) No Third Party negotiations
will be undertaken in respect of the Product by either Party unless agreed to
by each of the Parties. The Party that introduces the Third Party to such
negotiations will continue as the negotiating lead.

 

(b) Net Licensing Revenue
received as a result of a licensing or other collaboration agreement with a
Third Party will be shared by the Parties in accordance with Article 5.

 

2.4.5       Manufacturing
of the Product. With respect to clinical and commercial supplies of the
Product for the performance of future Project Plans, the Operating Committee
will use its best efforts to enter into a supply agreement with the supplier
that is best able to meet the Parties’ requirements, taking into consideration
such factors as price, timing, quality, capacity, quantity, reliability and
reputation. Such supplier may be either a Third Party or one of the Parties.

 

ARTICLE
3 - 

OPERATION OF THE COLLABORATION

 

Section 3.1            Operating
Committee.

 

3.1.1       Formation
of Operating  Committee. The Parties will
establish a joint committee (the “Operating Committee”),
which will oversee the Collaboration and development and commercialization
activities as described hereunder. Each of OncoGenex and Isis will appoint 2
representatives with the requisite experience and 

 

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seniority to enable them to fulfill the obligations of the Operating Committee with respect to the Collaboration. Additional
representatives of each Party will be free to attend the Operating Committee
meetings, but not to vote. From time to time, OncoGenex and Isis each may
substitute any of its representatives to the Operating Committee
with notice to the other Party and to the members of the Operating Committee. Each Party will ensure that each member of the
Operating Committee is bound by the obligations
of confidence in accordance with Article 6.

 

3.1.2       Operating
Committee Responsibilities. The Operating Committee
will, in addition to its other responsibilities described in this Agreement:
(a) periodically review the Project Plan from a strategic and scientific
perspective, and present opinions to the Parties; (b) make changes to Project
Plans as it deems necessary to accomplish the purpose of the Collaboration,
and, recommend to the Parties allocation of responsibilities for Collaboration
Activities between OncoGenex and Isis necessary to implement the Project Plans,
taking into consideration the Parties’ relevant expertise and available
resources and relevant Project Plans and budgets; (c) prioritize for the
Parties the research, development, manufacturing and commercialization
activities with respect to the Product; (d) attempt to resolve any
disagreements between the Parties with respect to the research conducted under
the Collaboration; (e) monitor, at least on a quarterly basis, Collaboration
Activities conducted and expenses incurred sufficient to insure that progress
and expense contribution are in accordance with Project Plan; and (f) take such
other actions as are set forth in this Agreement or as the Parties may mutually
agree.

 

3.1.3       Procedural
Rules for the Operating  Committee.

 

(a)  Generally.
Except as explicitly set forth in this Agreement, the
Operating Committee will establish its own procedural rules for its operation.

 

(b)  Voting.
The Operating Committee will take action by unanimous
agreement of the members of the Operating Committee. In the event that
unanimous agreement cannot be achieved within 20 days, the matter will be
resolved according to the procedures set forth in Section 3.2.

 

Section 3.2            Dispute
Resolution. Any dispute that may arise relating to the terms of this
Agreement or the activities of the Parties hereunder will be brought to the
attention of the Operating Committee, which will attempt in good faith to
achieve a resolution. Either Party may convene a special meeting of the
Operating Committee for the purpose of resolving disputes. If the Operating
Committee is unable to resolve such a dispute within 20 days of the first
presentation of such dispute to the Operating Committee, such dispute will be
referred to the Chief Executive Officers of each of the Parties (or their
respective designees) who will use their good faith efforts to mutually agree
upon the resolution of the dispute. If any dispute 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, with
respect to a Party’s interpretation of, or performance under, this Agreement,
to arbitrate such dispute in accordance with Section 12.6.

 

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ARTICLE 4 - 

GRANT OF RIGHTS

 

Section 4.1            License
Grants for Collaboration Activities.

 

4.1.1       Isis
Grant. Subject to the terms and conditions of this Agreement, Isis hereby
grants to OncoGenex (a) a co-exclusive (with Isis), worldwide, fully-paid,
royalty-free license, under the Joint Patents and Product-Specific Technology
Patents, and (b) a non-exclusive, worldwide, royalty-free license under the
Isis Core Technology Patents, both licenses solely to develop, make, have made,
use, sell, offer for sale, have sold and import the Product. The license
granted hereunder will be sublicensable only in connection with a license of
the Product to a Third Party in accordance with the terms of this Agreement.

 

4.1.2       OncoGenex
Grant. Subject to the terms and conditions of this Agreement, including
without limitation Section 4.2, OncoGenex hereby grants to Isis a co-exclusive
(with OncoGenex), worldwide, fully-paid, royalty-free license, or sub-license,
as the case may be, under the OncoGenex Product Patents, the Joint Patents, and
the Product-Specific Technology Patents, solely to develop, make, have made,
use, sell, offer for sale, have sold and import the Product. The license
granted hereunder will be sublicensable only in connection with a license of
the Product to a Third Party in accordance with the terms of this Agreement.

 

4.1.3       Isis
Manufacturing Patents. Isis will grant to OncoGenex or to a Third Party
manufacturer pursuant to Section 2.4.5 a non-exclusive, worldwide, fully-paid,
royalty-free license, under the Isis Manufacturing Patents to make or have made
the Product only upon a determination by the Operating Committee to have
OncoGenex or such Third Party manufacture the Product; or upon discontinuance
of performance by Isis and unilateral development of the Product by OncoGenex
under Section 2.3.5; or upon unilateral development of the Product by OncoGenex
or a Third Party sublicensee under Section 2.4.3; or upon unilateral
development of the Product by OncoGenex if Isis is found to be in breach of
this Agreement in accordance with Article 9 hereof.

 

4.1.4       Improvements.
If any Improvement that is not Product-Specific Technology is made during
the Collaboration, the Parties will negotiate in good faith regarding the use
of any such Improvement in the Collaboration. If the Parties agree to terms
under which such Improvement will be used in the Collaboration, the Party
owning the Improvement will grant to the other Party a license under the
Improvement solely to develop, make, have made, use, sell, offer for sale, have
sold and import the Product. The license granted hereunder will be
sublicensable only in connection with a license of the Product to a Third Party
in accordance with the terms of this Agreement.

 

Section 4.2            Pre-Existing
Grants.  The Parties further
acknowledge and agree that pursuant to the ARC Pharmaceuticals co-development
letter of intent, OncoGenex has or intends to grant an exclusive license under
the OncoGenex Product Patents to develop and commercialize a
topical/intratumoral antisense compound designed to interact with Clusterin and
the Parties acknowledge that OncoGenex is free to do so 

 

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without breach of this Agreement. No rights to Isis Patent Rights,
Joint Technology, or Product-Specific Technology may be granted, expressed or
implied, by OncoGenex to ARC Pharmaceuticals.

 

ARTICLE
5 -

FINANCIAL
PROVISIONS

 

Section 5.1            Payment
by OncoGenex. OncoGenex will pay $500,000 (US) to Isis within 30 days of
the Effective Date. Such payment will be for approximately [***] of Product to
support the IND-directed toxicology and PK studies. All other expenses incurred
by Isis in respect of Isis’ Collaboration Activities as set forth in the
Initial Project Plan shall be borne solely by Isis.

 

Section 5.2            Licenses
from Third Parties.

 

5.2.1       Third
Party Payments. OncoGenex acknowledges that Isis entered into a license
agreement with [***] and a license agreement with [***] under which Isis is
obligated to pay royalties and milestones on the Product. Isis acknowledges
that OncoGenex entered into a license agreement with University of British
Columbia dated November 1, 2001, under which OncoGenex is obligated to make
payments with respect to the Product. The Third Party Payments identified in
this Section 5.2.1 will be determined in accordance with the terms of the
referenced license agreements. In the event that either Party negotiates
reduced royalties or milestones with these Third Party licensors, the royalties
and milestones due under the original license agreements will still be paid to
Isis or OncoGenex as the case may be.

 

Section 5.3            Product
Licensing Revenue Allocation. Licensing Revenue will be allocated as
follows: first, each Party will receive any Third Party Payments owing to its
licensors in respect of the Product, then each Party will receive its
Proportionate Share of the Net Licensing Revenue. In the event that one Party
receives all Licensing Revenue, then such receiving Party will distribute the
Licensing Revenue to the non-receiving Party in accordance with the immediately
preceding sentence within 15 days after receipt of such Licensing Revenue.

 

Section 5.4            Sharing
of Third Party Payments. During the Initial Project Plan, each Party will
be responsible for any Third Party Payments owing to its licensors. Following completion of the Initial Project Plan, any Third
Party Payments owing in respect of the Product will be shared by the Parties
according to their Proportionate Share.

 

Section 5.5            Revenue
Sharing on Direct Sales. The Party marketing the Product will: first,
subtract expenses from Revenues received from the Product; second, pay or
distribute Third Party Payments; and third, distribute the remaining Revenue to
the Parties according to their Proportionate Shares. The Party marketing the
Product will distribute Revenue within 30 days after the end of each calendar
quarter. In the event that expenses from marketing the Product are greater than
Revenues received, the Parties will

 

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Section 5.6            divide
such expenses that are in excess of Revenues, according to their Proportionate
Shares.

 

Section 5.7            Payment
Method. Any amounts due to a Party hereunder will be paid in Canadian
dollars if paid to OncoGenex, and in U.S. dollars if paid to Isis, 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 5.8            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, or for the purchase of Canadian
dollars as published by the Royal Bank of Canada, 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 5.9            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 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 5.10         Records
Retention; Audit.

 

5.10.1     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.

 

5.10.2     Record
Retention. Each Party will maintain (and will ensure that its sublicensees
will maintain) complete and accurate books, records and accounts that 

 

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fairly reflect (a) their respective costs and expenses reimbursable or
otherwise shared by the Parties hereunder (collectively, the “Collaboration
Expenses”), and (b) Revenue 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.

 

5.10.3     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 (and its
sublicensees) as may be reasonably necessary to verify the accuracy of
Collaboration Expenses or Revenues, 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.

 

5.10.4     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 from the date originally due
at the rate of 1% per month, within 60 days after the date on which such
accounting firm’s written report is delivered to such Party.

 

5.10.5     Confidentiality.
The auditing Party will treat all information subject to review under this
Section 5.9 in accordance with the confidentiality provisions of Article 6 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
6 - 

CONFIDENTIALITY

 

Section 6.1            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.

 

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6.1.1       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 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 6; 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 6.

 

Section 6.2            Press
Releases. Press releases or other similar public communication by either
Party relating to this Agreement, 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.

 

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Section 6.3            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.

 

ARTICLE
7 - 

INTELLECTUAL PROPERTY

 

Section 7.1            Intellectual
Property Ownership.

 

7.1.1       Ownership
of Intellectual Property. Ownership of inventions conceived or reduced to
practice as part of the Collaboration will be determined in accordance with the
rules of inventorship under United States patent laws. Isis will own all
inventions conceived of and reduced to practice as part of the Collaboration
solely by its employees and agents, and all Patents claiming such inventions. OncoGenex
will own all inventions conceived of and reduced to practice as part of the
Collaboration solely by its employees and agents, and all Patents claiming such
inventions. All inventions conceived of and reduced to practice jointly by
employees or agents of Isis and employees or agents of OncoGenex, 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.

 

7.1.2       Ownership
of Regulatory Documentation. All Regulatory Approvals with respect to the
Product will be owned by OncoGenex for the duration of the Collaboration. If
the Collaboration terminates, or if one Party discontinues 

 

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performance
according to the terms of this Agreement, all Regulatory Approvals will remain
with the Party that has retained the rights to the Product.

 

Section 7.2            Prosecution
of Patents.

 

7.2.1       Isis
Rights. Isis will, subject to Section 7.2.3 and Section 7.2.5, have the
sole right, at its cost and expense and at its sole discretion, to obtain,
prosecute and maintain throughout the world the Isis Patent Rights. OncoGenex
shall reimburse Isis for its Proportionate Share of the reasonable
out-of-pocket costs incurred to obtain, prosecute and maintain throughout the
world, any Product-Specific Technology Patents Controlled by Isis. Isis will
keep OncoGenex informed of all Product-Specific Technology Patent applications
and registrations to be filed by Isis, and OncoGenex shall have the right to
comment on such applications within the timeframes of the patent filing process
and deadlines. Notwithstanding the foregoing, if OncoGenex is unilaterally
developing and commercializing the Product in accordance with Section 2.3.5,
Section 2.4.3, or Article 9, OncoGenex will have the first right to file,
prosecute and maintain any Product-Specific Technology Patents at its expense. If
OncoGenex elects not to (a) pursue the filing, prosecution or maintenance of a
Product-Specific Technology Patent in a particular country, (b) take any other
action with respect to Product-Specific Technology in a particular country that
is necessary or reasonably useful to establish or preserve rights thereto, then
in each such case OncoGenex will so notify Isis promptly in writing and in good
time to enable Isis to meet any deadlines by which an action must be taken to
establish or preserve any rights in such Product-Specific Technology in such
country, and Isis will have the right, but not the obligation, to pursue the
filing or registration, or support the continued prosecution or maintenance, of
such Product-Specific Technology Patents, at its expense in such country.

 

7.2.2       OncoGenex
Rights. OncoGenex will, subject to Section 7.2.3 and Section 7.2.5, have
the sole right and at its sole discretion, to obtain, prosecute and maintain
throughout the world the OncoGenex Patent Rights. Isis shall reimburse
OncoGenex for its Proportionate Share of the reasonable out-of-pocket costs
incurred to obtain, prosecute and maintain throughout the world, any OncoGenex
Product Patents and Product-Specific Technology Patents Controlled by
OncoGenex. OncoGenex will keep Isis informed of all OncoGenex Product Patent
and 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. Notwithstanding
the foregoing, if Isis is unilaterally developing and commercializing the
Product in accordance with Section 2.3.4, Section 2.4.3, or Article 9, Isis
will have the first right to file, prosecute and maintain any Product-Specific
Technology Patents at its expense. If Isis elects not to (a) pursue the filing,
prosecution or maintenance of a Product-Specific Technology Patents in a
particular country, (b) take any other action with respect to 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 Product-Specific Technology in such country, and OncoGenex
will have the right, but not the obligation, to pursue the filing or
registration,

 

11

 

or support the continued prosecution or maintenance, of such
Product-Specific Technology Patents, at its expense in such country. Upon unilateral
development and commercialization by Isis, the Parties will negotiate for Isis
to have the right to control the prosecution of the OncoGenex Product Patents. At
a minimum, Isis will have the right to comment on the prosecution of the
OncoGenex Product Patents, and to request countries for foreign filings related
thereto. OncoGenex will keep Isis informed of all prosecution matters regarding
OncoGenex Product Patents promptly to allow Isis sufficient time to comment
within the timeframes of the patent prosecution process and deadlines.

 

7.2.3       Filing
of Joint Patents. Subject to Section 7.2.5, 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 the responsible
Party’s expenses as follows:  i)
Proportionate Share of such expenses if the Joint Patent is a Product-Specific
Technology Patent, or ii) equal sharing of such expenses if the Joint Patent is
not a Product-Specific Technology Patent. 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. Not withstanding the
foregoing, if one Party is unilaterally developing and commercializing the
Product in accordance with Section 2.3.4, section 2.3.5, or Section 2.4.3, or
Article 9, the Party continuing with the development and commercialization of
the Product (for purposes of this Section only, the “Continuing Party”) will
have the first right to file, prosecute and maintain any Joint Patents to
Product-Specific Technology at its expense. If the Continuing Party elects not
(a) to pursue the filing, prosecution or maintenance of such a Joint Patent in
a particular country, (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 the Continuing
Party will so notify the other Party promptly in writing and in good time to
enable such Party 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
such Party will have the right, but not the obligation, to pursue the filing or
registration, or support the continued prosecution or maintenance, of such
Patent, at its expense in such country.

 

7.2.4       Cooperation.
Each Party will cooperate fully 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.

 

12

 

7.2.5       Patent
Filings. OncoGenex covenants not to file any patent application with
respect to the Product disclosing or claiming any information disclosed or
claimed in the Isis Patent Rights, without Isis’s prior written consent. Isis
covenants not to file any patent application disclosing or claiming any
information disclosed or claimed in the OncoGenex Patent Rights without
OncoGenex’s prior written consent.

 

Section 7.3            Enforcement
of Patents

 

7.3.1       Rights
and Procedures. If Isis or OncoGenex determines that any Technology 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, the Party responsible for filing,
prosecution and maintenance of such Joint Patent under Section 7.2.3 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 Right 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 Parties’
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 in the
reasonable costs incurred relating to the removal of any such infringement on a
Proportionate Share basis.

 

(b)           Product-Specific Technology
Patents. With respect to Product-Specific Technology Patents, the Party
owning such Patents will have the first right, but not the obligation, to
remove such infringement, provided, however, that the other Party will
reimburse the owner of such Patent for its Proportionate Share of the
reasonable costs incurred by such owner relating to the removal of any such
infringement. In the event the Party owning the Product-Specific Technology
Patent 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 the other Party in
writing of its intent not to take such steps, and such infringement is likely
to have a material adverse effect on the Product, the other Party will have the
right to do so at its expense, and the Party owning the Product-Specific
Technology Patent will have the right, at its own expense, to be represented in
any such action.

 

(c)           Isis Patent Rights and
OncoGenex Patent Rights. With respect to Isis Patent Rights or OncoGenex
Patent Rights, and subject to Section 7.3.1(b), the 

 

13

 

owner of such Patents will have the sole right, but not the obligation,
at its own expense, to remove such infringement using commercially appropriate
steps, including the filing of an infringement suit or taking other similar
action, and the other 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 Parties’
development or commercialization of the Product, the Parties will meet to
determine whether to defend against such infringement based on the Patents of
one Party, and if the Parties mutually agree to proceed in defending such
infringement based on the Patent rights of either Party, the Party owning the
Patent will remove the infringement using commercially appropriate steps, and
the Parties will share in the reasonable costs incurred relating to the removal
of any such infringement on a Proportionate Share basis. Upon unilateral
development and commercialization by Isis, the Parties will negotiate for Isis
to have the right, at Isis’ own expense, to remove infringement of the
OncoGenex Product Patents. At a minimum, OncoGenex will keep Isis informed
regarding infringement actions brought by OncoGenex on the OncoGenex Product
Patents, and Isis will have the right to comment on such infringement actions.

 

(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.

 

7.3.2       Recovery.
Any amounts recovered by either or both Parties in connection with or as a
result of any action contemplated by Section 7.3.1, whether by settlement or
judgment, will 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 divided
between the Parties according to their proportionate expenditures in the
litigation; provided, however, that to the extent that any award is
attributable to loss of sales of the Product, the award will first be used to
reimburse the Parties for their reasonable costs and expenses in making such
recovery, and any remainder will be allocated according to the Parties’
Proportionate Shares.

 

Section 7.4            Potential
Third Party Rights.

 

7.4.1       Third
Party Licenses. If the Parties determine that a license to a Third Party
Patent is necessary to develop, manufacture, and/or commercialize the Product,
the Parties will use Commercially Reasonable Efforts to obtain a license from
such Third Party; provided, however, that Isis will have the first right to
seek any such license necessary to practice the Isis Patent Rights and will use
Commercially Reasonable Efforts to obtain such a license in its own name from
such Third Party in such country, under which Isis will, to the extent
permissible under such license, grant a sublicense to OncoGenex as necessary
for OncoGenex to develop, make, have made, use, sell, offer for sale, have sold
and import the Product. If Isis declines to seek a license for which it has the
first right, OncoGenex may seek to obtain such a license, under which OncoGenex
will, to the extent permissible under such license, grant a sublicense to Isis
as necessary 

 

14

 

for Isis to develop, make, have made, use, sell, offer for sale, have
sold and import the Product.

 

7.4.2       Third
Party Litigation. In the event that a Third Party institutes a patent
infringement suit (including any suit alleging the invalidity or
unenforceability of the Patents of a Party) against either Party or both
Parties during the Term of this Agreement, alleging that any of the activities
hereunder infringes one or more patent or other intellectual property rights
held by such Third Party (an “Infringement Suit”), the Parties will cooperate
with one another in defending such suit. Isis will have the sole right to
control any defense of any such claim involving alleged infringement of Third
Party rights by Isis’ activities at its own expense and by counsel of its own
choice, and OncoGenex will have the right, at its own expense, to be represented
in any such action by counsel of its own choice. OncoGenex will have the sole
right to control any defense of any such claim involving alleged infringement
of Third Party rights by OncoGenex’s activities at its own expense and by
counsel of its own choice, and Isis will have the right, at its own expense, to
be represented in any such action by counsel of its own choice ; provided,
however, that, where such Infringement Suit relates to the development and
commercialization of the Product, the Party controlling such Infringement Suit
will keep the other Party reasonably informed of developments in any such
Infringement Suit.

 

Section 7.5            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.

 

ARTICLE
8 - 

TERM AND TERMINATION

 

Section 8.1            Term.
The term of this Agreement (the “Term”) will commence upon the Effective
Date and will continue in effect until such time as the Product is no longer
being developed or commercialized hereunder, or unless terminated at an earlier
date in accordance with the terms and conditions set forth in this Article 8.

 

Section 8.2            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.

 

Section 8.3            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 

 

15

 

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 8.4            Consequences
of Expiration or Termination.

 

8.4.1       Licenses.
Upon expiration of the Term of this Agreement in accordance with Section
8.1 and payment of all amounts owed pursuant to this Agreement, the licenses
granted by Isis to OncoGenex, and by OncoGenex to Isis, hereunder will
terminate.

 

8.4.2       Return
of Information and Materials. Upon expiration of this Agreement pursuant to
Section 8.1 or upon termination of this Agreement in its entirety by either
Party pursuant to this Article 8, 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 8.5            Accrued
Rights; Surviving Obligations.

 

8.5.1       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.

 

8.5.2       Survival.
Articles 5, 6, 10, 11 and 12 and Sections 7.1, 7.2.3, 7.3.1(a), 7.3.1(d), 7.2.4,
7.2.5, 7.3.2, and 7.5 of this Agreement and this Section 8.5 will survive
expiration or termination of this Agreement for any reason.

 

16

 

ARTICLE
9 -

MATERIAL
BREACH OF THIS AGREEMENT

 

Section 9.1            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 9.2 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 or if such default is
not otherwise cured within 90 days after the receipt of such notice), the Party
not in default will be entitled, without prejudice to any of its other rights
conferred on it by this Agreement, and in addition to any other remedies
available to it under Section 12.6 as remedy for the breach, to continue to
develop or commercialize the Product independently of the defaulting Party in
accordance with Section 9.2 hereof; 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 12.6 hereof.

 

Section 9.2            Consequences
of Material Breach. If a Party has not remedied the material breach within
the time period allowed in accordance with Section 9.1, then the Party not in
default may elect, by notice to the defaulting Party, to continue to develop or
commercialize the Product independently of the defaulting Party in accordance
with this section.

 

9.2.1       Material
Breach During Performance of Initial Project Plan. If an uncured material
breach has occurred on or before the completion of the Initial Project Plan,
and such material breach remains uncured under the terms of Section 9.1, the
defaulting Party will be deemed to have elected to discontinue its
participation in the Collaboration in accordance with the terms of Section
2.3.4, in the case of OncoGenex, or Section 2.3.5, in the case of Isis, and the
terms of such section will apply to the Parties.

 

9.2.2       Material
Breach After Performance of Initial Project Plan. If an uncured material breach
has occurred at any point after the Initial Project Plan has been completed,
the defaulting Party will be deemed to have elected to discontinue its
participation in the Collaboration, and the Party not in default may continue
development or commercialization of the Product independently of the defaulting
Party. Upon such discontinuation of performance by the defaulting Party, the
Party not in default shall retain any licenses granted to it in Section 4.1,
including the right to sublicense. The Party not in default will pay the
defaulting Party a royalty as agreed by the parties or as established by
arbitrator in accordance with Section 12.6.3. The defaulting Party will
transfer to the non-defaulting Party all information relating to the Product as
may be necessary to enable the non-defaulting Party to practice the licenses
granted in Section 4.1, including, but not limited to, summaries of clinical
trials, rights to all foreign-equivalent INDs and NDAs filed with respect to
the Product in such country and all drug dossiers and master files with respect
thereto. The defaulting Party will have no future expense obligations under
this Agreement.

 

17

 

ARTICLE
10 - 

INDEMNIFICATION AND INSURANCE

 

Section 10.1         Indemnification
of Isis. OncoGenex will indemnify Isis, and their 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, or (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, 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.

 

Section 10.2         Indemnification
of OncoGenex. Isis will indemnify OncoGenex,  and their 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, except
for those Losses for which OncoGenex has an obligation to indemnify Isis
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.

 

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:

 

18

 

(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).

 

(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 

 

19

 

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 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 

 

20

 

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 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 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. Isis further represents and
warrants to OncoGenex that any Product Isis provides to OncoGenex for
pre-clinical and clinical use will be in compliance with FDA regulatory
requirements for use in humans.

 

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 

 

21

 

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-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         Subcontractors.
Each Party will have the right, subject to the prior written consent of the
Operating Committee, such consent not to be unreasonably withheld or delayed,
to subcontract any of its research, development, manufacture and/or
commercialization activities to a Third Party, provided that it furnishes the
other Party with advanced written notice thereof, which notice will specify the
work to be subcontracted, and obtains a written undertaking from the
subcontractor that it will be subject to the applicable terms and conditions of
this Agreement, including the provisions of Article 6. If a Party wishes to
subcontract any of its research, development, manufacturing or
commercialization activities to a Third Party and the Operating Committee
consents, the other Party may submit a bid to the subcontracting Party to
perform such work. The subcontracting Party will use Commercially Reasonable
Efforts 

 

22

 

to enter into an agreement with the bidder that is best able to meet
the Collaboration’s requirements, taking into consideration such factors as
price, timing, quality, capacity, quantity, reliability and reputation,
provided that such bidder is reasonably acceptable to the Operating Committee. Unless
the Parties agree otherwise, the subcontracting Party will remain solely liable
for the performance of its research, development, manufacture or
commercialization activities by its subcontractor; and further, the
subcontracting Party will remain solely responsible for all costs and expenses
associated with its use of subcontractor(s).

 

Section 12.3         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 transfered 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 12.4         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 12.5         Governing
Law. This Agreement will be governed by and construed in accordance with
the laws of the Province of British Columbia without reference to any rules of conflicts
of laws.

 

Section 12.6         Dispute Resolution.

 

12.6.1     General. The Parties will negotiate in good faith and use reasonable efforts to
settle any dispute, controversy or claim arising from or related to this
Agreement or the breach thereof in accordance with Section 3.2 hereof. If the
Parties do not fully settle, and a Party wishes to pursue the matter, 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 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 

 

23

 

this Agreement unless he or she agrees in writing to be bound by the
provisions of this Section 12.6. 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.

 

12.6.2     Disputes Regarding Unilateral Development or
Sublicensing Terms. If the
Parties cannot agree on the terms under which one Party unilaterally, or a
Third Party sublicensee, can develop and commercialize the Product in
accordance with Section 2.4.3, the arbitrators will set a fair value for any
disputed terms, taking into consideration valuation factors including but not
limited to: the Proportionate Share of the Parties; stage of development
of the Product including the clinical trials which have been completed and
which would need to be completed before approval by the Regulatory Authority; the requirement for additional Third
Party licenses for the commercialization of the Product;  market potential for the Product including the size of the target market(s),
the availability, effectiveness and cost of alternative treatments, and the
life of the Patents relating to the Product; likelihood of the Product
receiving Regulatory Approval;  and, the time and resources required
to receive Regulatory Approval and begin marketing of the Product.

 

12.6.3     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 as part of
the same arbitration, determine a royalty to be paid by the non-defaulting
Party to the defaulting Party if the non-defaulting Party elects to
unilaterally develop and commercialize the Product, taking into consideration
the factors set forth in Section 12.6.2, and will award damages to the
non-defaulting Party, 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.

 

12.6.4     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.

 

12.6.5     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 Province of British Columbia statute of
limitations.

 

12.6.6     Speedy Resolution. The Parties intend, and shall take all reasonable action as is
necessary or desirable to ensure, that there be a speedy resolution 

 

24

 

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.

 

12.6.7     Awards.
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 12.7         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.

Suite
400, 609 – 14th Street N.W.

Calgary,
Alberta T2N 2A1

Attention:
Scott D. Cormack, President

Facsimile:
403-283-6753

 

with a
copy to:

 

Dr.
Martin Gleave

D-9
2733 Heather Street

Vancouver,
British Columbia V5Z 3J5

Facsimile:
604-875-5604

 

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) 603-2707

 

25

 

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 12.7 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 12.8         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 12.9         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 nor the
Operating Committee 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 12.10       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 12.11       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 12.12       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 12.13       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 

 

26

 

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 12.14       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 12.15       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.

 

The remainder of this page
intentionally left blank.

 

27

 

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
A

 

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.

 

“Clusterin” means the gene
target which is also referred to as Testosterone Repressed Prostatic Message -2
(TRPM-2), and Sulphated Glycoprotein-2 (SGP-2).

 

“Collaboration Activities”
means the responsibilities of the Parties under this Agreement to research,
develop, manufacture, and commercialize the Product.

 

“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
recieving 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 Party that Controls such
information and know-how 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 Party that Controls such information and know-how.

 

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.

 

A-2

 

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

 

“FTE” means the
equivalent of the work of one employee full time for one year (consisting of at
least a total of [***] per year (excluding vacations and holidays) of work on
or directly related to the Collaboration), carried out by an Isis employee or
Third Party mutually agreed upon by the Parties. For the purposes of Appendix
2.3.1, the FTE rate will be (i) [***] per FTE for any of the following
activities: drug substance manufacturing; analytical chemistry; process
chemistry; formulation; raw material ordering and handling; quality control; or
manufacturing technology transfer; and (ii) [***] per FTE for any of the following
activities:  toxicology;
pharmacokinetics/metabolism; regulatory; clinical development; or data
management. These FTE rates will be adjusted upward on a Calendar Year basis
commencing January 1, 2002 (and on January 1 of each year thereafter during the
Term of this Agreement) by a factor which reflects changes in the Consumer
Price Index for San Diego, California as reported on that date in each
applicable year during the Term of the Agreement when compared to the
comparable statistic for that date in the preceding year.

 

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

 

“Improvement”
means any enhancement or improvement
(whether or not patentable) to the Isis Core Technology Patents, Isis
Manufacturing Patents, or the OncoGenex Product Patents, that is made by either party during the Term of
this Agreement.

 

“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.

 

“Initial Project Plan”
means the first Project Plan of the Collaboration, as set forth in Section 2.3.

 

“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 Manufacturing Patents.

 

                “Isis
Manufacturing Patents” means Patents Controlled by Isis on the Effective
Date that claim the practice of the Isis Standard Chemistry Manufacturing
Process.

 

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

 

“Isis
Standard Chemistry” means “2 ́MOE Gapmers” or an 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

 

A-3

 

the remaining nucleotides
contain an O ́-methyl O ́-ethyl substitution at the 2 ́ position (MOE).

 

“Isis
Standard Chemistry Manufacturing Process” means the
manufacturing process used by Isis as of the Effective Date to manufacture
products comprising Isis Standard Chemistry, represented by the batch record
for [***]  Manufacturing for this purpose
includes synthesis, purification and analysis.

 

“Joint
Patents” means all Patents that claim or disclose Joint
Technology.

 

“Joint Technology”
means any and all (a) inventions conceived, discovered, developed or
otherwise made (as determined in accordance with the rules of inventorship
under United States patent laws to establish authorship, inventorship or
ownership), jointly by employees or agents of Isis and employees or agents of
OncoGenex or, to the extent permitted, by one Party and a sublicensee of the
other Party or both Parties (as the case may be), in connection with the work
conducted under this Agreement, whether or not patented or patentable.

 

 “Licensing Revenue” means
all revenues, receipts, monies, and the fair market value of all other
consideration directly or indirectly collected or received whether by way of
cash, or credit or any barter, benefit, advantage, or concession received by a
Party pursuant to each sublicense agreement relating to the Product including,
without limitation, license fees, royalties, milestone payments and the fair
market value of equities received, as determined on the date of receipt
thereof.

 

“Net Sales”
means the gross invoice price of the Product sold by either Party and
sublicensees 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 (except where any such recall arises out of
the Party or its sublicensee’s gross negligence, willful misconduct or fraud),
(iii) freight, shipping and insurance charges, (iv) taxes, duties or
other governmental tariffs (other than income taxes) and (v) government
mandated rebates.

 

“Net Licensing Revenue” means
the amount equal to any Licensing Revenue less Third Party Payments.

 

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

 

“OncoGenex Product Patents” means
Patents Controlled by OncoGenex on the Effective Date that claim an antisense
inhibitor of Clusterin or a method of using an antisense inhibitor of
Clusterin.

 

A-4

 

“OGX-011” means an antisense inhibitor of Clusterin
having the sequence [***] with
phosphorothioate linkages throughout and in which bases [***] and [***] contain
2’-O-methoxyethyl sugar modifications, also referred to as ISIS 112989.

 

“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.

 

“Product” means
an intravenous or subcutaneous pharmaceutical preparation, excluding
encapsulation technology controlled by Isis, containing as the sole active
pharmaceutical ingredient OGX-011. For
clarity, the product may be used in association with other products such as
chemotherapy, hormone ablation therapy and radiation therapy and the immediately preceding sentence does not limit such intended
use.

 

“Product-Specific Technology”
means any discovery, device, process, formulation, or Improvement, whether or
not patented or patentable, which is made solely by Isis or OncoGenex, or
jointly by Isis and OncoGenex, during the Term of this Agreement, and the
application of which has utility only with respect to the Product.

 

“Product-Specific Technology
Patents” means all Patents that disclose or claim
Product-Specific Technology.

 

“Project Plan”
means any development plan for Collaboration Activities subsequent to the
Initial Project Plan, including the costs associated with such development plan
and the proposed distribution of such costs between the Parties.

 

 “Proportionate
Share” means the relative ownership of the Product and
relative sharing of expenses and revenue with respect to the Product between
the Parties in relation to each other.

 

“Regulatory Approval”
means any and all approvals (including pricing and reimbursement approvals),
licenses, registrations or authorizations of any Regulatory Authority,
necessary for the development and commercialization of the Product in a
country, including any (a) approval for the Product (including any INDs, and
supplements and amendments thereto); (b) pre- and post-approval marketing
authorizations (including any prerequisite manufacturing approval or
authorization related thereto); (c) labeling approval; and (d) technical,
medical and scientific licenses.

 

“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 

 

A-5

 

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.

 

“Revenue” means
all revenues, receipts, monies, and the fair market value of all other
consideration directly or indirectly collected or received whether by way of
cash or credit or any barter, benefit, advantage, or concession received by any
Party relating to the sale or any other exploitation of the Product.

 

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

 

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

 

“Third Party Payments”
means royalties, milestones, and other payments owing to Third Parties,
including payments as set forth in Section 5.2.1.

 

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

 

A-6

 

APPENDIX
2.3.1

INITIAL
PROJECT PLAN

 

[***]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:

 

3

 

(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
MOE Gapmer 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

 

[***]

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