<PAGE> 1
SECURITIES EXCHANGE AND COMMISSION
Washington, D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
------------------------
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported): September 30, 1997
ARADIGM CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 0-28402 94-3133088
- ------------- ---------------- -------------------
State of (Commission File (IRS Employer
Incorporation Number) Identification No.)
26219 Eden Landing Road, Hayward, California 94545
--------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(510) 783-0100
----------------------------------------------------
(Registrant's telephone number, including area code)
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Item 5. Other Events.
------------
On September 30, 1997, the Registrant entered into a Product
Development and Commercialization Agreement (the "Agreement") with SmithKline
Beecham PLC ("SmithKline") for the purpose of developing and commercializing a
pulmonary drug delivery system for providing immediate pain relief using
opiates and opioids. In connection with the Agreement, the Registrant entered
into a Stock Purchase Agreement with SmithKline, pursuant to which the
Registrant sold and issued 405,064 shares of the Registrant's Common Stock to
SmithKline at an aggregate purchase price of $5,000,008.75.
Item 7. Exhibits.
--------
+10.1 Product Development and Commercialization Agreement between
the Registrant and SmithKline Beecham PLC.
+10.2 Stock Purchase Agreement between the Registrant and SmithKline
Beecham PLC.
- ----------------------------
+Confidential treatment requested.
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ARADIGM CORPORATION
/s/ Richard P. Thompson
-------------------------
Dated: November 6, 1997 Richard P. Thompson
President and Chief Executive Officer
<PAGE> 4
INDEX TO EXHIBITS
Page number in
sequentially
numbered version
----------------
+10.1 Product Development and Commercialization Agreement
between the Registrant and SmithKline Beecham PLC.
+10.2 Stock Purchase Agreement between the Registrant
and SmithKline Beecham PLC.
- ---------------------
+Confidential treatment requested.
<PAGE> 1
Exhibit 10.1
PRODUCT DEVELOPMENT AND
COMMERCIALIZATION AGREEMENT
BETWEEN
ARADIGM CORPORATION
AND
SMITHKLINE BEECHAM, PLC
DATED
SEPTEMBER 30, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. DEFINITIONS............................................................2
1.1 "Accessories"....................................................2
1.2 "AERx Device"....................................................2
1.3 "AERx System"....................................................2
1.4 "Affiliate"......................................................2
1.5 "Analgesic Drug".................................................2
1.6 "Approval Application"...........................................2
1.7 "Aradigm Patents"................................................2
1.8 "Budget".........................................................3
1.9 "Commercialization Committee"....................................3
1.10 "Confidential Information".......................................3
1.11 "Control"........................................................3
1.12 "Development"....................................................3
1.13 "Development Committee"..........................................4
1.14 "Development Costs"..............................................4
1.15 "Development Plan"...............................................4
1.16 "Diligent Efforts"...............................................4
1.17 "Drug Master File"...............................................4
1.18 "Drug Product"...................................................5
1.19 "FDA"............................................................5
1.20 "Field"..........................................................5
1.21 "Finished Form"..................................................5
1.22 "IND"............................................................5
1.23 "Information"....................................................5
1.24 "Initial Product"................................................5
1.25 "Initiation".....................................................5
1.26 "Invention"......................................................5
1.27 "Joint Invention"................................................5
1.28 "Joint Patents"..................................................6
1.29 "Major Market Country"...........................................6
1.30 "Manufacturing Costs"............................................6
1.31 "NDA"............................................................6
1.32 "Net Sales"......................................................6
1.33 "Patent".........................................................7
1.34 "Phase I Trial"..................................................8
1.35 "Phase II Trial".................................................8
1.36 "Phase III Trial"................................................8
1.37 "Product"........................................................8
1.38 "PSB"............................................................8
1.39 "Regulatory Approval"............................................8
1.40 "Sales Forecast".................................................9
1.41 "SB Patents".....................................................9
1.42 "SB Proprietary Drug"............................................9
1.43 "Specifications".................................................9
1.44 "Territory"......................................................9
</TABLE>
i.
<PAGE> 3
<TABLE>
<S> <C> <C>
1.45 "Third Party"....................................................9
1.46 "Third Party Payments"...........................................9
1.47 "U.S.A.".........................................................9
2. PRODUCT DEVELOPMENT...................................................10
2.1 Development Overview............................................10
2.2 Overall Management of Development Efforts.......................10
2.3 Development Plans...............................................11
2.4 Budgets.........................................................12
2.5 Reports.........................................................14
2.6 Development Diligence...........................................14
2.7 Specifications; Modifications to AERx Device....................16
2.8 Data Management Service.........................................17
2.9 Use of Analgesic Drug Outside Pain Management...................17
2.10 [*].............................................................18
3. REGULATORY FILINGS....................................................18
3.1 Approval Applications...........................................18
3.2 Adverse Events..................................................20
3.3 Assignment of Approval Applications and Royalty
Payment to SB...................................................20
4. MILESTONE PAYMENTS....................................................21
4.1 Initial Milestone Payments......................................21
4.2 Milestone Payments for Certain Development Events...............22
4.3 Milestone Payments for Additional Systems.......................22
4.4 Additional Payment Conditions...................................23
5. DISTRIBUTION LICENSE AND MARKETING....................................24
5.1 Distribution License............................................24
5.2 Grant Back License..............................................25
5.3 Overall Management of Commercialization Efforts.................25
5.4 Marketing Plans.................................................25
5.5 Marketing Diligence.............................................26
5.6 Reports.........................................................29
5.7 Packaging and Labeling..........................................29
5.8 Restrictive Covenants...........................................29
5.9 Restrictions on Distributors and Dealers........................30
6. MANUFACTURING AND SUPPLY..............................................30
6.1 Manufacturing Rights............................................30
6.2 Bulk Drug Substance.............................................30
6.3 Clinical Supply.................................................31
6.4 Commercial Product Supply.......................................31
6.5 Forecasting and Ordering Mechanisms.............................31
6.6 Resolution of Supply Problems...................................33
</TABLE>
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
ii.
<PAGE> 4
<TABLE>
<S> <C> <C>
6.7 Product Samples.................................................35
6.8 Delivery and Risk of Loss.......................................36
6.9 Quality of Manufacturing........................................36
6.10 Acceptance......................................................37
6.11 Manufacturing Facilities, Equipment and Licenses................38
6.13 Product Recall Procedures.......................................39
7. PRODUCT SUPPLY PAYMENTS...............................................41
7.1 Pricing of Clinical Materials...................................41
7.2 Purchase Price of Product.......................................42
7.3 Percentage of Sales.............................................42
7.4 Timing of Payments..............................................44
7.5 Withholding Taxes...............................................44
7.6 Compulsory Licenses.............................................45
7.7 Conversion of Net Sales.........................................45
7.8 Audit Rights....................................................45
8. WARRANTY AND PRODUCT SERVICE..........................................46
8.1 Warranty........................................................46
8.2 Disclaimer......................................................47
8.3 Product Help-Line...............................................47
8.4 Product Service.................................................47
9. INTELLECTUAL PROPERTY.................................................47
9.1 Ownership of Technology.........................................47
9.2 Prosecution and Maintenance of Patents; Abandonment.............48
9.3 Third Party Technology..........................................48
9.4 Intellectual Property Issues....................................49
9.5 Defense and Settlement of Third Party Patent Claims.............49
9.6 Third Party Claims Regarding Analgesic Drug.....................51
9.7 Payment for Third Party Licenses................................52
9.8 Enforcement of Aradigm Patent Rights............................53
9.9 Enforcement of Joint Patent Rights..............................54
9.10 Trademarks and Tradenames Generally.............................55
9.11 Trademark License...............................................55
9.12 Trademark Registration..........................................56
9.13 Goodwill and Use................................................56
9.14 Defense of Trademark Claim......................................56
9.15 Infringement of Product Mark....................................57
9.16 Trademark Litigation Indemnity..................................57
10. EXCHANGE OF INFORMATION, CONFIDENTIALITY AND PUBLICATION..............57
10.1 Exchange of Information.........................................57
10.2 Confidentiality.................................................58
10.3 Authorized Disclosure...........................................58
</TABLE>
iii.
<PAGE> 5
<TABLE>
<S> <C> <C>
10.4 Publication.....................................................58
10.5 Confidentiality Issues in Bankruptcy............................59
11. REPRESENTATIONS & WARRANTIES..........................................59
11.1 Representations and Warranties of Aradigm.......................59
11.2 Representations and Warranties of SB............................60
11.3 Certain Additional Covenants....................................61
12. INDEMNIFICATION.......................................................61
12.1 Indemnification by Aradigm......................................61
12.2 Indemnification by SB...........................................62
12.3 Indemnity Procedure.............................................63
12.4 Limitation of Liability.........................................63
12.5 Liability Insurance.............................................63
13. DISPUTE RESOLUTION; ARBITRATION.......................................63
13.1 Dispute Resolution Process......................................63
13.2 Governing Law...................................................64
14. TERM OF AGREEMENT AND TERMINATION.....................................64
14.1 Term............................................................64
14.2 Termination For Material Breach.................................65
14.3 Termination by SB...............................................65
14.4 Termination For Bankruptcy......................................66
14.5 Consequences of Termination.....................................66
14.6 Accrued Rights, Surviving Obligations...........................66
14.7 Rights in Event of Bankruptcy...................................66
15. MISCELLANEOUS.........................................................67
15.1 Hart-Scott-Rodino Compliance....................................67
15.2 Press Releases; Disclosure of Agreement.........................67
15.3 Recordation.....................................................68
15.4 Entire Agreement; Amendment.....................................68
15.5 Assignment......................................................68
15.6 Notices.........................................................68
15.7 Severability....................................................69
15.8 Force Majeure...................................................69
15.9 Expenses........................................................69
15.10 Non-Waiver......................................................70
15.11 Disclaimer of Agency/Relationship of the Parties................70
15.12 Performance by Affiliates.......................................70
15.13 Further Actions.................................................70
15.14 Counterparts....................................................70
15.15 Official Language...............................................70
15.16 No Intellectual Property Rights Granted.........................71
</TABLE>
iv.
<PAGE> 6
PRODUCT DEVELOPMENT AND
COMMERCIALIZATION AGREEMENT
THIS PRODUCT DEVELOPMENT AND COMMERCIALIZATION AGREEMENT (the "Agreement")
is made and entered into by and between ARADIGM CORPORATION, a California
corporation having its principal place of business at 26219 Eden Landing Road,
Hayward, California 94545 ("Aradigm"), and SMITHKLINE BEECHAM, PLC, a United
Kingdom corporation having a principal place of business at New Horizons Court,
Brentford, Middlesex, TW8 9EP England ("SB"), as of September 30, 1997 (the
"Effective Date"). Aradigm and SB may be referred to herein as a "Party" or,
collectively, as "Parties."
BACKGROUND
A. Aradigm has developed and owns the rights to a drug delivery system
known as the AERx(TM) Pain Management System. This system may be capablE of
delivering certain properly formulated analgesic drugs via inhalation to treat
pain. To date, Aradigm has committed its own resources to complete Phase I
testing of an AERx-morphine sulfate product and 28-day pre-clinical pulmonary
toxicology studies with respect to such product and has discussed the regulatory
requirements of such AERx system with the FDA.
B. Aradigm desires to enter into a collaborative relationship to support
the completion of human clinical development of such AERx system for its use in
the delivery of certain analgesic drugs for use in both inpatient and outpatient
pain management settings and to commercialize the AERx system, once appropriate
regulatory approval has been achieved, in conjunction with such analgesic drugs.
C. SB has substantial experience in the distribution, marketing and sale
of pharmaceuticals. SB is willing to support Aradigm's efforts to complete
development of the AERx system for its use in delivering certain analgesic drugs
and obtain worldwide regulatory approval to market Aradigm's AERx system in
conjunction with such analgesic drugs for pain management, in order to obtain
exclusive marketing rights to such AERx system.
D. The Parties desire to enter into an agreement establishing the
development and supply terms under which, at the direction of a development
committee and a commercialization committee to be formed by the Parties, (a)
Aradigm will be responsible (i) for completing development of the AERx device
and drug packet for use in the delivery of certain analgesic drugs for pain
management, (ii) for collaborating with SB on conducting the required clinical
trials and obtaining the necessary marketing approvals, with SB's cooperation
and certain financial support, and (iii) for manufacturing and supplying to SB
the approved AERx system and formulated analgesic drugs in finished form, and
(b) SB will collaborate with Aradigm in conducting such clinical trials and will
have exclusive, worldwide rights to market and sell such AERx system and drugs
for use in pain management. Contemporaneously with this Agreement, the Parties
are also entering into a Stock Purchase Agreement pursuant to which SB shall
purchase from Aradigm up to $10 million in Aradigm equity.
1
<PAGE> 7
NOW, THEREFORE, in consideration of the foregoing and the covenants and
promises contained in this Agreement, the Parties agree as follows:
1 DEFINITIONS.
As used herein, the following capitalized terms shall have the following
meanings when used in this Agreement, and all terms defined in the singular
shall have the same meanings when used in the plural (and vice versa, as
appropriate), unless otherwise specified:
1.1 "ACCESSORIES" means the removable mouthpiece for the AERx DEVICE,
constituting the airway and patient mouthpiece which can be removed from the
AERx DEVICE for cleaning or replacement, and other accessories for the AERx
DEVICE.
1.2 "AERX DEVICE" means the durable hand-held device developed by Aradigm
for the delivery of ANALGESIC DRUGS by inhalation and known as the "AERx
device", as such device may be modified pursuant to the Agreement.
1.3 "AERX SYSTEM" means an AERx DEVICE, a particular DRUG PRODUCT intended
for use with such AERx DEVICE, and related ACCESSORIES intended for use with
such AERx DEVICE, whether, in each case, in DEVELOPMENT and/or after REGULATORY
APPROVAL.
1.4 "AFFILIATE" means a corporation, partnership, entity, person, firm,
company, or joint venture, whether de jure or de facto, that controls, is
controlled by or is under the common control with the referenced Party. For the
purposes of this definition the word "control" (including, with correlative
meaning, the terms "controlled by" or "is under the common control with") means
(a) ownership directly or indirectly of at least fifty percent (50%) of the
voting stock of the applicable entity, or such lesser percentage that is the
maximum allowed to be owned by a foreign corporation in a particular
jurisdiction, or (b) the actual, demonstrated ability to control the management
and operations of the applicable entity.
1.5 "ANALGESIC DRUG" means morphine, fentanyl, hydromorphone, oxycodone
and methadone, and any other natural opiate or synthetic opioid compound or
opioid agonist, antagonist or mimetic compound that is or, based on testing in
appropriate models, is likely to be useful in the management of pain, except as
the foregoing definition may be modified to add certain compounds as provided in
Section 2.10 and/or to exclude certain compounds as provided in Section 2.9.
1.6 "APPROVAL APPLICATION" means the appropriate application(s), together
with all documents, data and information concerning an AERx SYSTEM or any part
thereof (including a specific DRUG PRODUCT) required to be included with such
application, that is necessary to obtain REGULATORY APPROVAL to use, import,
distribute, market and/or sell such AERx SYSTEM (or DRUG PRODUCT, as applicable)
in a particular country.
1.7 "ARADIGM PATENTS" means all PATENTS in the FIELD owned or CONTROLLED
during the term of the Agreement by Aradigm or an AFFILIATE of Aradigm
2
<PAGE> 8
that generically or specifically claim or cover the manufacture, import, use,
sale, or offer for sale of an AERx SYSTEM, AERx DEVICE, DRUG PRODUCT, ACCESSORY,
or ANALGESIC DRUG contained in a DRUG PRODUCT and any intermediate used in the
preparation thereof. Attached hereto as Exhibit A is a list of ARADIGM PATENTS
existing as of the Effective Date, which Exhibit A shall be updated by ARADIGM
on at least a semiannual basis during the term of the Agreement, provided,
however, that unintentional omission of PATENTS from such Exhibit A shall not
constitute a breach of the Agreement.
1.8 "BUDGET" shall have the meaning ascribed in Section 2.4(b) of the
Agreement.
1.9 "COMMERCIALIZATION COMMITTEE" means the committee formed pursuant to
Section 5.3.
1.10 "CONFIDENTIAL INFORMATION" means, with respect to a Party,
INFORMATION that is disclosed by such Party to the other Party pursuant to this
Agreement, and that is identified or acknowledged in writing to be confidential
at the time of disclosure if disclosed in tangible form or within thirty (30)
days after disclosure, to the extent practicable, if disclosed orally; provided,
however, that CONFIDENTIAL INFORMATION shall not include any INFORMATION that:
(A) was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure by the other Party;
(B) was available to the public or otherwise part of the public
domain at the time of its disclosure to the receiving Party by the other Party;
(C) became available to the public or otherwise part of the public
domain after its disclosure to the receiving Party by the other Party, other
than through any act or omission of the receiving Party in breach of this
Agreement;
(D) was disclosed to the receiving Party, other than under an
obligation of confidentiality, by a THIRD PARTY who had no obligation to the
other Party not to disclose such information to others; or
(E) was subsequently and independently developed by employees or
others on behalf of the receiving Party or its AFFILIATES without use of any
CONFIDENTIAL INFORMATION disclosed to the receiving Party or such others by the
other Party.
1.11 "CONTROL" means, with respect to a material, INFORMATION or
intellectual property right, possession by a Party of the ability to grant
access to or a license or sublicense as provided for herein under such material,
INFORMATION or right without violating the terms of any agreement or other
arrangements with any THIRD PARTY existing at the time such Party would be first
required hereunder to grant the other Party such access or license or
sublicense.
1.12 "DEVELOPMENT" means conducting, pursuant to the applicable
DEVELOPMENT PLAN, any needed work in completing the design and engineering
3
<PAGE> 9
development of an AERx SYSTEM, AERx DEVICE, DRUG PRODUCT or ACCESSORY including,
without limitation, modifications or changes made pursuant to Section 2.7, and
any necessary in vitro, in vivo and clinical studies on the AERx SYSTEM;
developing analytical methods, including acceptance test methods, relating to
the AERx SYSTEMS; and preparing, submitting and prosecuting, as set forth in
Section 3.1, all APPROVAL APPLICATIONS, as necessary to obtain REGULATORY
APPROVAL of each such AERx SYSTEM for sale in the selected countries throughout
the TERRITORY.
1.13 "DEVELOPMENT COMMITTEE" means the committee formed pursuant to
Section 2.2.
1.14 "DEVELOPMENT COSTS" means, with respect to DEVELOPMENT of any
PRODUCT, the [*] of conducting such DEVELOPMENT, including the costs of labor
[*] materials, outside consultants, and overhead amounts allocable to such
DEVELOPMENT efforts, and also including the costs incurred by SB under this
Agreement in obtaining or purchasing from Aradigm clinical trial supplies of the
AERx SYSTEM, AERx DEVICE, DRUG PRODUCT, placebos, and ACCESSORIES, but excluding
costs and expenses of [*] In no event shall DEVELOPMENT COSTS include THIRD
PARTY PAYMENTS.
1.15 "DEVELOPMENT PLAN" means the detailed written work plan prepared by
the DEVELOPMENT COMMITTEE and approved by each of the Parties, pursuant to
Section 2.3, for the DEVELOPMENT of a particular AERx SYSTEM with the goal of
achieving REGULATORY APPROVAL of such AERx SYSTEM and of optimizing marketing
and commercialization in accordance with the terms of this Agreement, as such
plan may be amended from time to time as provided in Section 2.3.
1.16 "DILIGENT EFFORTS" means efforts no less than the applicable Party
applies to the development, manufacture or commercialization of its own
compounds or products with similar regulatory requirements and market potential.
1.17 "DRUG MASTER FILE" means the submission (or the applicable part
thereof), together with all INFORMATION contained therein, submitted to the FDA
in the U.S.A., or to the appropriate governing health authority in another
country in the TERRITORY, providing information on the manufacturing facilities
and manufacturing processes for making an AERx SYSTEM (or component thereof),
including, without limitation, activities relating to manufacturing, processing,
formulating, packaging and storage to be conducted by or under the direction of
Aradigm or its AFFILIATES, which INFORMATION may be used to support REGULATORY
APPROVAL of the AERx SYSTEM (or component thereof) in the U.S.A. or such other
country. For purposes of this Agreement, the DRUG MASTER FILE shall include,
without limitation, chemistry, manufacturing and control information, as defined
in the FDA regulations at 21 CFR Section 314.50(d).
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
4.
<PAGE> 10
1.18 "DRUG PRODUCT" means an AERx unit packet containing one or more
ANALGESIC DRUGS appropriately formulated and packaged for delivery by the AERx
DEVICE, whether for use in clinical trials, for promotional sampling, or for
commercial purposes under this Agreement; "DRUG PRODUCT" also includes a
cassette or cartridge or any other configuration, if any, that contains multiple
unit dose packets of the formulated ANALGESIC DRUG.
1.19 "FDA" means the United States Food and Drug Administration, or the
successor thereto.
1.20 "FIELD" means patient-controlled pulmonary administration of
ANALGESIC DRUGS to humans.
1.21 "FINISHED FORM" means packaged and labeled and ready for sale to and
use by the ultimate end user.
1.22 "IND" means the appropriate Investigational New Drug application,
together with all documents, data and other information concerning the AERx
SYSTEM that are required to be included in such application, filed or submitted
with the FDA in the U.S.A., or the equivalent application to the appropriate
governing health authority of any other country in the TERRITORY, for the
purpose of obtaining approval or authority to commence or continue human
clinical trials in such country for the purpose of seeking general marketing
approval.
1.23 "INFORMATION" means information and data of any type whatsoever, in
any tangible or intangible form, including without limitation inventions,
practices, methods, techniques, specifications, formulations, formulae,
knowledge, know-how, skill, experience, test data including pharmacological,
biological, chemical, biochemical, toxicological and clinical test data,
analytical and quality control data, stability data, studies and procedures, and
patent and other legal information or descriptions, and including without
limitation any information or data related to PRODUCTS that is useful for the
DEVELOPMENT and/or commercialization of PRODUCTS in the FIELD.
1.24 "INITIAL PRODUCT" means the AERx SYSTEM for delivery of morphine
sulfate.
1.25 "INITIATION" means, with respect to a particular PHASE I TRIAL, PHASE
II TRIAL or PHASE III TRIAL, the date on which the first dose of ANALGESIC DRUG
or placebo is administered to a volunteer or patient in the first such PHASE I
TRIAL, PHASE II TRIAL or PHASE III TRIAL, as applicable, for an AERx SYSTEM
based on a particular ANALGESIC DRUG.
1.26 "INVENTION" means any invention, development, know-how or discovery
made, created or developed during the course of work done pursuant to this
Agreement.
1.27 "JOINT INVENTION" means an INVENTION made, conceived, reduced to
practice or generated jointly by employees, agents, or other persons acting
under the authority of
5
<PAGE> 11
Aradigm and by employees, agents or other persons acting under the authority of
SB in the course of or pursuant to this Agreement.
1.28 "JOINT PATENTS" means all PATENTS claiming JOINT INVENTIONS that are
filed by ARADIGM or SB in accordance with this Agreement.
1.29 "MAJOR MARKET COUNTRY" means the U.S.A., the United Kingdom, France,
Germany, Italy, Spain, Japan or China.
1.30 "MANUFACTURING COSTS" means, with respect to the manufacture of a
particular AERx DEVICE, DRUG PRODUCT, ACCESSORY, AERx SYSTEM, ANALGESIC DRUG, or
placebo used for clinical trials under this Agreement, Aradigm's [*] costs of
manufacturing the particular product, including without limitation the costs of
bulk drug substance and all other raw materials, labor [*] manufacturing and
packaging costs and expenses, overhead amounts allocable to such manufacturing
(including without limitation appropriately amortized capital equipment costs),
and all amounts related to [*] calculated in accordance with U.S.A. generally
accepted accounting principles consistently applied. In no event shall the term
"MANUFACTURING COSTS" include any THIRD PARTY PAYMENTS.
1.31 "NDA" means a New Drug Application, as defined in the U.S.A. Federal
Food, Drug and Cosmetic Act and applicable regulations promulgated thereunder as
amended from time to time, and any equivalent APPROVAL APPLICATION in a foreign
country.
1.32 "NET SALES" means the total amount invoiced or otherwise charged by
SB or its AFFILIATES or sublicensees on account of the sale of a PRODUCT, less
the following deductions to the extent actually incurred or allowed based upon
the sale of such PRODUCT: (a) credits, allowances, discounts and rebates to, and
chargebacks from the account of, such non-AFFILIATE for spoiled, damaged,
out-dated and returned PRODUCT; (b) freight and insurance costs for transporting
such PRODUCT, to the extent invoiced to the purchaser; (c) sales, value-added
and other direct taxes on the sale of the PRODUCT; (d) customs duties,
surcharges and other governmental charges incurred in connection with the
exportation or importation of such PRODUCT; (e) trade, cash, and quantity
discounts off the invoiced price and similar promotional discounts or rebates
(such as management fees required by hospital buying groups or granted to
managed care organizations) off the invoiced price, but excluding [*]; and (f)
amounts reflecting retroactive price adjustments on sale of products, to the
extent not previously deducted from net sales; all of the foregoing to the
extent consistent with the normal practice in the industry, and provided that
any and all of the foregoing are calculated in accordance with U.S.A. generally
accepted accounting principles consistently applied. The foregoing definition is
subject to the following:
(a) Sales or other transfers of PRODUCTS between SB, its AFFILIATES
and/or sublicensees shall not count as NET SALES provided that the PRODUCTS are
ultimately
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
6.
<PAGE> 12
sold by one of such entities to a THIRD PARTY and that NET SALES are calculated
for such sale of the PRODUCT to the THIRD PARTY.
(b) In the event that SB sells an AERx SYSTEM, AERx DEVICE, DRUG PRODUCT,
or ACCESSORY [*] group sale with other products not covered by this
Agreement, and SB provides a discount, allowance or rebate to the purchaser of
such products based on the invoiced prices for all products sold, such discount
must be allocated pro rata based on average wholesale prices ("AWP") across all
such products and may not be applied disproportionately to the AERx SYSTEM, AERx
DEVICE, DRUG PRODUCT, or ACCESSORY sold as part of such [*]
(c) Any transactions regarding PRODUCTS between SB or any of its
AFFILIATES and [*] will be deemed to be transactions with a non-AFFILIATE for
the purposes of computing NET SALES, provided that the conditions of such [*]
including any and all rebates and discounts allocated to transactions [*], are
on an arms length basis. Such arm's length rebates and discounts shall be
deductible, to the extent provided above, for computing NET SALES hereunder. In
the event that [*] is conducted with respect to a PRODUCT within SB or within
any of its AFFILIATES as only part of SB's or its AFFILIATE'S total activities
(rather than in a separate AFFILIATE that is [*] then a [*] for use in
calculating royalties owed based on such activity, will be calculated on an arms
length basis for such activities, provided that such [*] shall not in any event
be less, on a per unit basis with respect to each particular covered PRODUCT,
than the [*] for sales of such PRODUCT to THIRD PARTIES that are [*] in the
distribution channel during the same calendar period.
(d) In the event that a PRODUCT is sold or otherwise commercially
exploited in a manner such that the above means of calculating NET SALES is not
possible or otherwise is inappropriate (e.g., the PRODUCT is sold as part of a
capitated service or is used in a pain management service), the Parties agree to
negotiate in good faith a reasonable mechanism for fairly calculating the "NET
SALES" resulting from such sales or other commercial exploitation.
(e) If the Agreement remains in force, but SB's rights hereunder
have terminated with respect to a particular country, then any distribution or
sales of PRODUCTS in such country by SB, subsequent to such termination, on
behalf of or at the direction of a THIRD PARTY licensee or distributor of
Aradigm with respect to such PRODUCTS shall not be included as NET SALES
hereunder.
1.33 "PATENT" means (a) all patent applications heretofore or hereafter
filed or having legal force in any country; (b) all patents that have issued or
in the future issue therefrom, including without limitation utility, model and
design patents and certificates of invention; and (c) all divisionals,
continuations, continuations-in-part, reissues, renewals, extensions (including
supplemental protection certificates), additions, registrations or confirmations
to or of any such patent applications and patents.
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
7.
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1.34 "PHASE I TRIAL" means that portion of the clinical DEVELOPMENT
program that provides for initial assessment of safety of an AERx SYSTEM in
DEVELOPMENT under this Agreement with a particular ANALGESIC DRUG in human
volunteers or patients, which is intended to gather information to support
further investigation of particular dose levels using the AERx SYSTEM with such
ANALGESIC DRUG in subsequent human clinical trials, performed in accordance with
the U.S.A. Federal Food, Drug and Cosmetic Act and applicable regulations
promulgated thereunder (including without limitation 21 CFR Part 312), as
amended from time to time, or any comparable foreign laws and regulations.
1.35 "PHASE II TRIAL" means that portion of the clinical DEVELOPMENT
program that provides for additional assessment of safety and preliminary
assessment of efficacy at particular dosage levels of an AERx SYSTEM in
DEVELOPMENT under this Agreement with a particular ANALGESIC DRUG in human
volunteers or patients, which is intended to gather information to support the
pivotal human clinical trials using the AERx SYSTEM with such ANALGESIC DRUG,
performed in accordance with the U.S.A. Federal Food, Drug and Cosmetic Act and
applicable regulations promulgated thereunder (including without limitation 21
CFR Part 312), as amended from time to time, or any comparable foreign laws and
regulations.
1.36 "PHASE III TRIAL" means that portion of the clinical DEVELOPMENT
program that provides for the controlled human clinical trials, performed after
preliminary evidence suggesting dose and effectiveness of an AERx SYSTEM in
DEVELOPMENT under this Agreement with a particular ANALGESIC DRUG has been
obtained, which is intended to gather the additional information about the
effectiveness and safety that is needed to evaluate the overall benefit-risk
relationship of the AERx SYSTEM with such ANALGESIC DRUG and to provide adequate
basis for labeling, performed in accordance with the U.S.A. Federal Food, Drug
and Cosmetic Act and applicable regulations promulgated thereunder (including
without limitation 21 CFR Part 312), as amended from time to time, or any
comparable foreign laws and regulations.
1.37 "PRODUCT" means an AERx SYSTEM, AERx DEVICE, DRUG PRODUCT or
ACCESSORY.
1.38 [*] means any present or future [*] which conducts a [*] for or on
behalf of THIRD PARTIES, including [*] As of the Effective Date, an AFFILIATE of
SB which is [*] Diversified Pharmaceutical Services, a corporation of the state
of Minnesota and having a place of business at 3600 West 80th Street, Seventh
Floor, Bloomington, Minnesota 55431-1085, U.S.A.
1.39 "REGULATORY APPROVAL" means, with respect to a country, all approvals
(including price and reimbursement approvals), licenses, registrations, or
authorizations of any federal, state or local regulatory agency, department,
bureau or other government entity,
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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necessary for the use, storage, import, transport and sale of an AERx SYSTEM,
AERx DEVICE, DRUG PRODUCT, or ACCESSORY in such country for use in the FIELD.
1.40 "SALES FORECAST" means the annual sales forecast used internally by
SB and approved by SB's management for sales of AERx SYSTEMS, AERx DEVICES, DRUG
PRODUCTS, and ACCESSORIES developed and sold pursuant to this Agreement, as such
forecast exists at the beginning of the applicable annual period.
1.41 "SB PATENTS" means all PATENTS owned by SB or an AFFILIATE of SB that
claim or cover INVENTIONS that relate directly to pulmonary delivery of drugs or
devices for the pulmonary delivery of drugs, but excluding JOINT PATENTS.
1.42 "SB PROPRIETARY DRUG" means an ANALGESIC DRUG that is covered by a
PATENT that is owned by, or licensed by a THIRD PARTY to, SB or its AFFILIATE .
1.43 "SPECIFICATIONS" means the analytical and design specifications for
each AERx DEVICE, DRUG PRODUCT, or ACCESSORY, as determined by the DEVELOPMENT
COMMITTEE.
1.44 "TERRITORY" means all of the countries and territories of the world,
but excluding such countries and territories that have been removed from SB's
rights hereunder in accordance with Sections 2.6 or 5.5 of this Agreement.
1.45 "THIRD PARTY" means any entity or individual other than Aradigm, SB,
or AFFILIATES of either.
1.46 "THIRD PARTY PAYMENTS" means any payments made by ARADIGM:
(a) to any THIRD PARTY as a result of Aradigm's obtaining or
licensing, prior to or after the Effective Date, such THIRD PARTY'S patents or
technology;
(b) as reimbursement to SB for any payments made by SB in obtaining
or licensing a THIRD PARTY'S patents or technology in accordance with Section
9.7;
(c) as a result of repayment by Aradigm to any THIRD PARTY for
financing obtained by Aradigm from any THIRD PARTY; and
(d) to any THIRD PARTY as a result of any defense or settlement of
any THIRD PARTY claim or action against SB and/or ARADIGM alleging that the
manufacture, use or sale of the AERx SYSTEM, AERx DEVICE, DRUG PRODUCT or
ACCESSORY infringes a THIRD PARTY patent in any country of the TERRITORY.
1.47 "U.S.A." means the United States of America and all of its
territories and possessions, such as, but not limited to, Puerto Rico.
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2. PRODUCT DEVELOPMENT.
2.1 DEVELOPMENT OVERVIEW. The Parties intend to work cooperatively to
pursue DEVELOPMENT of the AERx SYSTEM in order to complete the design of the
AERx SYSTEM and to obtain REGULATORY APPROVAL for use in the management of pain
as soon as practicable using DILIGENT EFFORTS in accordance with the terms of
this Agreement. Unless otherwise agreed by the DEVELOPMENT COMMITTEE, Aradigm
will conduct the DEVELOPMENT work, as directed by the DEVELOPMENT COMMITTEE and
in conformance with the applicable BUDGET, needed to complete the final design
and engineering of the AERx SYSTEM. The Parties shall collaborate closely,
through the DEVELOPMENT COMMITTEE, to assign responsibility for conducting the
various aspects of the DEVELOPMENT work on the AERx SYSTEM. It is anticipated
that, unless otherwise determined by the DEVELOPMENT COMMITTEE, Aradigm will
conduct the toxicology, stability studies, and clinical DEVELOPMENT work, itself
or through its AFFILIATES or subcontractors, on the AERx SYSTEMS through the end
of PHASE II TRIALS for U.S.A. and the countries of the European Union using
DILIGENT EFFORTS and as directed by the DEVELOPMENT COMMITTEE and in conformance
with the applicable BUDGET, and that SB will conduct the clinical DEVELOPMENT
work after the end of PHASE II TRIALS, itself or through its AFFILIATES or
subcontractors, on each AERx SYSTEM as necessary to obtain and maintain
REGULATORY APPROVAL of the AERx SYSTEM, using DILIGENT EFFORTS and as directed
by the DEVELOPMENT COMMITTEE. In addition to Aradigm's other duties under the
Agreement, Aradigm agrees to provide SB reasonable assistance in the conduct of
SB's clinical DEVELOPMENT work and SB shall reimburse Aradigm for expenses
incurred by Aradigm in providing such assistance to SB, but only to the extent
that such efforts and funding are provided for in the BUDGET for the particular
AERx SYSTEM.
2.2 OVERALL MANAGEMENT OF DEVELOPMENT EFFORTS. As of the Effective Date,
the DEVELOPMENT COMMITTEE shall be formed and shall be constituted of an equal,
agreed-on number of representatives from each Party. The members of the
DEVELOPMENT COMMITTEE as of the Effective Date are as set forth on Exhibit E
attached hereto. The Chairperson of the DEVELOPMENT COMMITTEE for the first
twelve (12) months after the Effective Date shall be an SB member of the
DEVELOPMENT COMMITTEE and shall thereafter alternate between the Parties on an
annual basis. The Chairperson shall be responsible for issuing an agenda for the
meeting, conducting and chairing the meeting and preparing the minutes for the
meeting, and such other tasks as assigned by the committee. The DEVELOPMENT
COMMITTEE shall meet regularly, at least once each quarter during the period
when DEVELOPMENT is occurring, at mutually convenient sites designated on an
alternating basis by each Party, or by telephone, video conference or other
acceptable means if requested by a Party. The DEVELOPMENT COMMITTEE shall
oversee all DEVELOPMENT activities of the Parties under this Agreement,
including coordinating the overall strategy for DEVELOPMENT. The DEVELOPMENT
COMMITTEE shall have the responsibilities as set forth generally in Exhibit E.
Each Party may appoint its representatives to the DEVELOPMENT COMMITTEE and
other members of its project team at its discretion. The members of the project
teams shall meet and otherwise communicate as frequently as appropriate to carry
out the objectives of the DEVELOPMENT PLAN. It is the intent of the Parties to
work together to
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develop and commercialize the AERx SYSTEMS, AERx DEVICES, DRUG PRODUCTS and
ACCESSORIES as set forth herein, and to assign responsibilities for the various
operational aspects of the collaboration to those portions of their respective
organizations which have the appropriate resources, expertise and responsibility
for such functions, but subject to the overall requirements of Section 2.1. The
DEVELOPMENT COMMITTEE shall act only if a quorum, meaning at least four (4)
members of the committee from each Party, are participating in the meeting, and
shall operate only by unanimous decision of its members that are participating
in such meeting. The members of the DEVELOPMENT COMMITTEE shall make a DILIGENT
EFFORT in good faith to reach decisions on all matters before the committee. In
the event the DEVELOPMENT COMMITTEE cannot reach agreement on an issue requiring
a decision, senior management officers of the Parties will meet and discuss the
issue in good faith in an effort to resolve the issue.
2.3 DEVELOPMENT PLANS. DEVELOPMENT of each PRODUCT shall be conducted by
the Parties in conformance with a DEVELOPMENT PLAN for such PRODUCT prepared and
updated by the DEVELOPMENT COMMITTEE as provided herein.
(a) The Parties agree that the INITIAL PRODUCT shall be the first
AERx SYSTEM to be developed under this Agreement. The Parties' intent as of the
Effective Date is to obtain, as soon as practicable using DILIGENT EFFORTS, [*]
the INITIAL PRODUCT that [*] of the INITIAL PRODUCT in the management of both
post-operative (in-patient and outpatient) pain and acute exacerbations [*].
Attached as Exhibit B is a summary DEVELOPMENT PLAN for the INITIAL PRODUCT
which reflects the Parties' understanding of the DEVELOPMENT for the INITIAL
PRODUCT as of the Effective Date. Promptly after the Effective Date, the
DEVELOPMENT COMMITTEE shall prepare, review and submit to the Parties for
approval the detailed DEVELOPMENT PLAN for the DEVELOPMENT of the INITIAL
PRODUCT.
(b) Upon selection of each additional ANALGESIC DRUG for DEVELOPMENT
as a new DRUG PRODUCT, or selection of a new dosage form or indication to be
pursued for a DRUG PRODUCT, the DEVELOPMENT COMMITTEE shall prepare, review and
submit to the Parties for approval the initial detailed DEVELOPMENT PLAN for
such AERx SYSTEM.
(c) After reviewing the results of the DEVELOPMENT efforts to date
with respect to a particular AERx SYSTEM or PRODUCT, the DEVELOPMENT COMMITTEE
shall consider appropriate changes to and shall amend the applicable DEVELOPMENT
PLAN to reflect revised DEVELOPMENT and/or regulatory activities as the
DEVELOPMENT COMMITTEE reasonably determines to be necessary or useful for
achieving the Parties' goal of obtaining REGULATORY APPROVAL of such AERx SYSTEM
or PRODUCT as soon as practicable. Notwithstanding the above, no amendment to
any DEVELOPMENT PLAN shall be construed to be final until each Party has
reviewed and approved any changes to the applicable BUDGET required as a result
of such amendment to the DEVELOPMENT PLAN, in accordance with the provisions of
Section 2.4.
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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(d) SB and Aradigm will each use DILIGENT EFFORTS to perform their
respective obligations under each DEVELOPMENT PLAN.
2.4 BUDGETS.
(a) With respect to each DEVELOPMENT PLAN prepared under Section
2.3, the DEVELOPMENT COMMITTEE shall prepare a proposed budget (the "Proposed
Budget") to account for the DEVELOPMENT COSTS to be expended or incurred by each
Party in conducting the DEVELOPMENT tasks undertaken under such DEVELOPMENT PLAN
for the applicable AERx SYSTEM or PRODUCT. Such Proposed Budget shall be
prepared no more than thirty (30) days after completion of the applicable
DEVELOPMENT PLAN, and shall include, without limitation, the DEVELOPMENT COSTS
to be expended or incurred by each Party.
(b) Upon completion of each such Proposed Budget by the DEVELOPMENT
COMMITTEE, such Proposed Budget shall be submitted to each Party. Each Party
shall have the right to review and approve each such Proposed Budget. Any
changes to the Proposed Budget suggested by a Party shall be submitted in
writing to the other Party and the DEVELOPMENT COMMITTEE no more than thirty
(30) days after receipt of the Proposed Budget by the Party, and the DEVELOPMENT
COMMITTEE shall consider all such changes in good faith and shall prepare a
revised Proposed Budget reflecting the changes submitted by each Party. Such
revised Proposed Budget shall then be provided to each Party for the same review
and approval process provided above. Such review process shall continue until
each Party has approved such Proposed Budget, at which point such approved
Proposed Budget shall be deemed to be the binding budget for incurring or
expenditure of DEVELOPMENT COSTS by each of the Parties with respect to
DEVELOPMENT of the applicable AERx SYSTEM or PRODUCT (a "BUDGET"), subject to
amendment as provided in subsection (c) below.
(c) Aradigm shall use DILIGENT EFFORTS to comply with the applicable
BUDGET with respect to Aradigm's incurring of DEVELOPMENT COSTS for each
particular DEVELOPMENT activity and the other costs provided for in the BUDGET
for the relevant activity during the applicable calendar year. In the event that
Aradigm does incur any expenses for a particular activity that exceed the BUDGET
therefor, such event shall not be considered a breach of this Agreement by
Aradigm, but SB shall not be responsible for funding any such excess amount,
unless otherwise agreed by the Parties. If Aradigm believes that completion of
the assigned DEVELOPMENT tasks or other tasks for which costs are provided in
the BUDGET during such year will exceed the portion of the BUDGET that is to be
funded by SB and that is allocated for Aradigm's efforts, Aradigm will contact
the DEVELOPMENT COMMITTEE promptly after such determination in order to initiate
discussion by the DEVELOPMENT COMMITTEE of such matter and appropriate means of
resolving same. In addition, changes to the SPECIFICATIONS or other changes in
DEVELOPMENT PLANS may necessitate changes in the applicable BUDGET, due to
required changes in the Parties' respective DEVELOPMENT efforts. The DEVELOPMENT
COMMITTEE shall consider in good faith any needed adjustments to the BUDGET
resulting from any of the foregoing. The DEVELOPMENT COMMITTEE may agree, after
the approval of the BUDGET for DEVELOPMENT COSTS for
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<PAGE> 18
a particular AERx SYSTEM, to make a recommendation to SB management for an
increase in DEVELOPMENT funding BUDGET for such DEVELOPMENT, and such
recommendation shall be duly considered by SB. Any changes to the BUDGET
recommended by the DEVELOPMENT COMMITTEE and approved by SB shall be made in
writing and signed by each PARTY.
(d) Except as otherwise agreed by the Parties, SB shall provide
funding to Aradigm for the DEVELOPMENT COSTS incurred by Aradigm in accordance
with the agreed BUDGETS, but excluding any costs incurred with respect to the
efforts to be conducted by Aradigm at its expense as provided in subsection (e)
below. Such funding shall be paid in advance to Aradigm for each calendar
quarter, according to the DEVELOPMENT COSTS outlined in the relevant BUDGET to
be incurred by Aradigm during the coming calendar quarter during each year in
which Aradigm is conducting DEVELOPMENT, with the first installment to be paid
no later than thirty (30) days after the Effective Date, and each installment
thereafter to be paid by the first day of the respective calendar quarter. For
each calendar quarter after the Effective Date during which Aradigm conducts
DEVELOPMENT, Aradigm shall submit a report to SB no more than forty-five (45)
days after the beginning of such calendar quarter, which report shall set forth
Aradigm's determination of the actual DEVELOPMENT COSTS incurred by Aradigm in
conducting DEVELOPMENT work during the previous calendar quarter. If such report
indicates that Aradigm expended less than the amount funded by SB, as provided
herein, for such quarter in completing tasks assigned for such quarter under the
DEVELOPMENT PLAN (but excluding tasks Aradigm is to perform at its expense under
subsection (e)), such amounts that were not expended may be credited by SB
against the amounts to be paid by SB hereunder at the beginning of the next
quarter. If such report indicates that Aradigm expended less than the amount
funded by SB for such quarter because Aradigm was unable to conduct or to
complete certain tasks assigned for such quarter under the DEVELOPMENT PLAN, SB
shall bring such matter to the DEVELOPMENT COMMITTEE, which shall determine
whether to reallocate the unexpended funding provided to Aradigm with respect to
such tasks, in order to accomplish the tasks that were not conducted or
completed.
(e) Aradigm shall be responsible for providing all funding required
to support the conduct of all Aradigm's responsibilities as set forth in the
agreed summary DEVELOPMENT PLAN (attached hereto as Exhibit B) for work
performed by Aradigm for DEVELOPMENT of the INITIAL PRODUCT under this
Agreement, but excluding all efforts (the "Funded Work") of Aradigm relating to
(i) [*] (including all Aradigm's manpower and out-of-pocket expenses relating to
such work and the [*] (ii) [*] and (iii) [*]. All DEVELOPMENT COSTS
associated with conducting such Funded Work shall be funded by SB under
subsection (d) above, consistent with the applicable BUDGET. In the event that
the detailed DEVELOPMENT PLAN agreed to by the Parties as provided in Section
2.3 for the DEVELOPMENT of the INITIAL PRODUCT (as such plan may be amended or
modified by the Parties) requires that Aradigm expend or incur in excess of [*]
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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[*] in conducting such DEVELOPMENT pursuant to such DEVELOPMENT PLAN
(but excluding the Funded Work), then SB shall provide funding to Aradigm to
support such additional Aradigm efforts or work, provided that the extent of
such funding by SB shall be limited to the amount approved by SB management in
the relevant BUDGET, as originally approved or subsequently modified.
2.5 REPORTS. Each Party shall maintain accurate and complete records of
all DEVELOPMENT activities and all results of any trials, studies and other
investigations conducted by or on behalf of such Party hereunder. At least ten
(10) days prior to each meeting of the DEVELOPMENT COMMITTEE, each Party shall
prepare a written report for the DEVELOPMENT COMMITTEE summarizing the progress
of the work, successes, problems, and delays in that period. Based on
information in such reports and other information known to the DEVELOPMENT
COMMITTEE, the DEVELOPMENT COMMITTEE shall review the relevant DEVELOPMENT PLANS
for the remainder of the year to see if modification is required. The general
format of the reports shall be as agreed by the Parties from time to time, and
shall be delivered to the DEVELOPMENT COMMITTEE and the other Party. Such
reports shall include, without limitation, discussions related to any
significant deviations from the DEVELOPMENT PLAN and proposed actions to address
such significant deviations, but need not restate items specifically reported to
the regular meetings of the DEVELOPMENT COMMITTEE.
2.6 DEVELOPMENT DILIGENCE.
(a) SB and Aradigm agree that the Parties shall seek to obtain
REGULATORY APPROVAL of the INITIAL PRODUCT and any other AERx SYSTEM chosen for
DEVELOPMENT by the DEVELOPMENT COMMITTEE in all of the MAJOR MARKET COUNTRIES,
and that each Party shall use DILIGENT EFFORTS to conduct such DEVELOPMENT
efforts as are outlined in the relevant DEVELOPMENT PLAN to obtain such
REGULATORY APPROVALS as soon as practicable and subject to the regulatory and
other legal requirements in the relevant country. The Parties also shall use
DILIGENT EFFORTS to conduct such DEVELOPMENT efforts as are required to obtain
REGULATORY APPROVAL of the INITIAL PRODUCT and any other AERx SYSTEM chosen for
DEVELOPMENT by the DEVELOPMENT COMMITTEE in each additional country of the
TERRITORY selected by the COMMERCIALIZATION COMMITTEE, pursuant to Section 5.3,
for commercialization of such particular AERx SYSTEM.
(b) The Parties agree to use DILIGENT EFFORTS in accordance with the
applicable DEVELOPMENT PLAN in conducting the DEVELOPMENT of the INITIAL PRODUCT
with the goal of obtaining, if possible, REGULATORY APPROVAL in all MAJOR MARKET
COUNTRIES with respect to [*] the INITIAL PRODUCT in managing pain, which [*] in
the particular countries for use of the INITIAL PRODUCT for both post-operative
pain and alleviation of acute exacerbations of [*]. The Parties agree further
that if DEVELOPMENT of the INITIAL PRODUCT with the intention of [*] for
management of pain is not permitted in a particular country, the Parties will
proceed using DILIGENT EFFORTS with the
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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DEVELOPMENT of the INITIAL PRODUCT in such countries to [*] of the
INITIAL PRODUCT for both post-operative pain and alleviation of acute
exacerbations of [*] to the extent that such is permitted.
SB agrees to use DILIGENT EFFORTS to meet the schedule established in the
applicable DEVELOPMENT PLAN for achieving specific clinical DEVELOPMENT
milestones in the DEVELOPMENT of the INITIAL PRODUCT in the MAJOR MARKET
COUNTRIES. SB shall be deemed to have used DILIGENT EFFORTS if SB has achieved
specified DEVELOPMENT milestones with respect to the INITIAL PRODUCT no later
than the dates set forth in subsections (c) and (d) below, subject to any
adjustment of such dates as provided in subsection (e) below, with the
understanding that achievement of a specified DEVELOPMENT milestone with respect
to DEVELOPMENT for the general indication of management of pain shall be deemed
to satisfy the relevant milestones for each of subsections (c) and (d) below.
(c) [*] PAIN INDICATION. With respect to each of the
following MAJOR MARKET COUNTRIES - U.S.A., France, Germany, United Kingdom,
Japan and China - SB shall use DILIGENT EFFORTS to attempt to achieve the
following DEVELOPMENT milestones by the applicable date with respect to
DEVELOPMENT of the INITIAL PRODUCT for use in managing [*]
o INITIATION of PHASE III TRIAL for the INITIAL PRODUCT needed to
support the relevant APPROVAL APPLICATION for [*] within [*] of the
date specified for commencement of such trial in the applicable
DEVELOPMENT PLAN as such plan existed upon commencement of the first
PHASE II TRIAL on the INITIAL PRODUCT in a MAJOR MARKET COUNTRY.
o Filing of relevant APPROVAL APPLICATION for [*] within [*] of the
date specified for filing such application in the applicable
DEVELOPMENT PLAN as such plan existed upon commencement of the first
PHASE III TRIAL on the INITIAL PRODUCT in a MAJOR MARKET COUNTRY.
(d) [*] INDICATION. With respect to each of the following countries
- - U.S.A., France, Germany, United Kingdom, Japan and China - SB shall achieve
the following DEVELOPMENT milestones by the applicable date with respect to
DEVELOPMENT of the INITIAL PRODUCT for use in the alleviation of acute
exacerbations of [*] cancer patients, etc.):
o INITIATION of PHASE III TRIAL needed to support relevant APPROVAL
APPLICATION for acute exacerbations of [*] within [*] of the date
specified for commencement of such trial in the applicable
DEVELOPMENT PLAN as such plan existed upon commencement of the first
PHASE II TRIAL on the INITIAL PRODUCT in a MAJOR MARKET COUNTRY.
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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o Filing of relevant APPROVAL APPLICATION for acute exacerbations of
[*] within [*] of the date specified for filing such application in
the applicable DEVELOPMENT PLAN as such plan existed upon
commencement of the first PHASE III TRIAL on the INITIAL PRODUCT in
a MAJOR MARKET COUNTRY.
(e) ADJUSTMENTS OF DATES FOR ACHIEVING MILESTONES. The dates set
forth in subsection (c) or (d) above for achieving the specified DEVELOPMENT
milestones may be adjusted for a particular milestone only as provided herein,
or as otherwise agreed in writing. If any of the following events occur: (i) a
change in the SPECIFICATIONS of the applicable PRODUCT that requires additional
DEVELOPMENT effort beyond that set forth in the then-existing DEVELOPMENT PLAN;
(ii) a change relating to the medical, scientific, or regulatory criteria or
attributes of the applicable PRODUCT, which change is beyond SB's reasonable
control; (iii) delays in Aradigm's conduct of its responsibilities under the
applicable DEVELOPMENT PLAN; or (iv) Aradigm's delay in or failure to supply to
SB the quantities of the applicable PRODUCT or placebo for clinical trial use
within the amounts and time frame established by the applicable DEVELOPMENT
PLAN; and if the occurrence of one of the foregoing events causes a material
delay in SB's ability to conduct DEVELOPMENT on such PRODUCT with respect to
achievement of a particular DEVELOPMENT milestone required to be achieved under
subsection (c) or (d) above, then the required date for achieving such
DEVELOPMENT milestone shall be delayed by the amount of time that SB can
reasonably establish it was delayed, due to the occurrence of such event, in
conducting such DEVELOPMENT efforts.
(f) REMEDY FOR FAILURE TO MEET MILESTONE. In the event that SB fails
to meet a specified DEVELOPMENT milestone for the INITIAL PRODUCT in a
particular MAJOR MARKET COUNTRY by the applicable date, as required in
subsection (c) and (d) above, as such date may be adjusted under subsection (e)
above, Aradigm shall have the option, upon its written notice to SB delivered no
later than [*] after such failure, of [*] under this Agreement in such MAJOR
MARKET COUNTRY, and such [*] with respect to SB PROPRIETARY DRUGS, if any.
Notwithstanding the foregoing, however, it is agreed that if the [*] for the
indications of the management of pain, post-operative pain, and/or alleviation
of acute exacerbations of [*] is not legally permitted in a particular MAJOR
MARKET COUNTRY by the applicable governmental authorities, there shall be no
requirement for SB to achieve any DEVELOPMENT milestone in such country for such
indication that is not permitted, and this subsection (f) shall no longer be
applicable with respect to such DEVELOPMENT milestone for such indication in
such country.
2.7 SPECIFICATIONS; MODIFICATIONS TO AERX DEVICE. The DEVELOPMENT
COMMITTEE shall set the SPECIFICATIONS with respect to each AERx SYSTEM selected
for DEVELOPMENT and may modify such SPECIFICATIONS as appropriate, but subject
to the applicable BUDGET. The summary SPECIFICATIONS for the INITIAL PRODUCT are
attached hereto as Exhibit C, reflecting the Parties' agreement and
understanding as of the
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separately with the Commission. Confidential treatment has
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Effective Date of the performance and features of the INITIAL PRODUCT. Promptly
after the Effective Date, the DEVELOPMENT COMMITTEE shall prepare the agreed
detailed SPECIFICATIONS for the INITIAL PRODUCT. During the term of the
Agreement, Aradigm shall have the right to make modifications or changes to any
PRODUCT and will provide SB's V.P. and Director, WSO/QA with prior notice of
such modifications or changes; provided, however, that any such modifications or
changes that, in Aradigm's or SB's reasonable opinion, would: (i) result in a
change to the SPECIFICATIONS; (ii) adversely affect the related IND or APPROVAL
APPLICATION for the related PRODUCT; (iii) materially delay Aradigm's completion
of related tasks under the DEVELOPMENT PLAN for such PRODUCT; (iv) increase the
MANUFACTURING COSTS for the affected PRODUCT or (v) adversely affect market
receptivity to the PRODUCT; shall be subject to the prior approval of the
DEVELOPMENT COMMITTEE. SB's V.P. and Director, WSO/QA shall review any such
Aradigm notice of a proposed modification or change to determine if SB believes
such modification or change meets any of the criteria set forth in subsections
(i) through (v) above. If, based on such review, SB reasonably believes that
such proposed modification or change meets one (or more) of the criteria, SB
shall provide Aradigm, within twenty (20) days of receipt of Aradigm's notice,
written notice indicating such belief and the basis for such belief, and such
proposed change or modification shall then be referred to the DEVELOPMENT
COMMITTEE for review. At Aradigm's reasonable request for proposed modifications
or changes that may meet the criteria set forth above, the DEVELOPMENT COMMITTEE
will attempt to meet promptly in order to discuss the proposed modifications or
changes to determine whether to approve such proposals. For any such approved
changes in the SPECIFICATIONS, the DEVELOPMENT COMMITTEE shall agree on the
appropriate changes required to the applicable DEVELOPMENT PLAN, and the
following shall be applicable:
(a) If the approved changes or modifications are, in the judgment of
the DEVELOPMENT COMMITTEE, expected to be useful only in the FIELD, then SB
shall be obligated to pay the DEVELOPMENT COSTS to implement such changes.
(b) If the approved changes or modifications are, in the judgment of
the DEVELOPMENT COMMITTEE, expected to be used in products of Aradigm other than
the AERx SYSTEM in addition to use in the AERx SYSTEM, then the costs of making
such changes or modifications shall be borne by Aradigm.
2.8 DATA MANAGEMENT SERVICE. The Parties acknowledge that Aradigm intends
to explore the development and marketing of data management and related services
based on the data collection capabilities of the AERx DEVICE and reserves the
right to do so, provided that SB shall also have the right to do so. Aradigm and
SB each will report to the DEVELOPMENT COMMITTEE and COMMERCIALIZATION COMMITTEE
from time to time on its plans and efforts in this area. The manner in which any
such service based on the AERx SYSTEM is commercialized will be subject to the
approval of the DEVELOPMENT COMMITTEE and COMMERCIALIZATION COMMITTEE, not to be
unreasonably withheld.
2.9 USE OF ANALGESIC DRUG OUTSIDE PAIN MANAGEMENT. The Parties understand
that there may be particular ANALGESIC DRUGS that have utility for indications
outside the
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management of pain. For such an ANALGESIC DRUG that is not under DEVELOPMENT or
commercialization hereunder as a DRUG PRODUCT, Aradigm may bring a written
request to SB to be permitted to develop and market such ANALGESIC DRUG solely
for indication(s) other than pain management. Within [*] of receipt of such
request, SB shall either (a) agree that Aradigm may develop and market such
ANALGESIC DRUG for indications other than pain management, in which case such
ANALGESIC DRUG shall be deemed an "Excluded Drug" hereunder and shall no longer
be within the scope of the definition of ANALGESIC DRUG; or (b) reject Aradigm's
request in writing, in which case such ANALGESIC DRUG may not be developed
independent of this Agreement. For all Excluded Drugs, Aradigm shall use
DILIGENT EFFORTS to develop and commercialize such Excluded Drugs, subject to
the following: Aradigm may develop, market and promote such Excluded Drugs
solely for indications and uses outside of the management of pain, and Aradigm
covenants that it shall not knowingly develop, market, promote or sell products
containing such Excluded Drugs for use in management of pain via pulmonary
delivery of such products, and that it shall contractually require any THIRD
PARTY who develops, markets or otherwise promotes such Excluded Drug by or on
behalf of Aradigm or to Aradigm's benefit, to make the same covenant with
respect to the applicable Aradigm products.
2.10 [*] In the event that SB obtains data that any [*] substance is or,
based on testing in appropriate models, is likely to be useful in the management
of pain, and provided that such drug substance is not already in development by
Aradigm or its affiliate or licensee, SB may request in writing to the
DEVELOPMENT COMMITTEE that such [*] substance be selected for DEVELOPMENT
hereunder for use in the FIELD for use in the management of pain. Within [*] of
such request, the DEVELOPMENT COMMITTEE shall either (a) select such [*]
substance for DEVELOPMENT in the FIELD hereunder as an ANALGESIC DRUG for use in
the management of pain, in which case the Parties shall appropriately amend the
definition of "ANALGESIC DRUG" to include such [*] substance as an ANALGESIC
DRUG and amend the other terms of the Agreement as necessary to provide for the
DEVELOPMENT and commercialization of such drug hereunder as a DRUG PRODUCT; or
(b) reject SB's request in writing, in which case such [*] substance shall not
be developed under this Agreement unless the DEVELOPMENT COMMITTEE shall
subsequently decide to select such [*] substance for DEVELOPMENT in the FIELD
hereunder as an ANALGESIC DRUG.
3. REGULATORY FILINGS.
3.1 APPROVAL APPLICATIONS.
(a) Except as otherwise provided in this Section 3.1, SB will be
responsible for preparing, assembling and submitting all APPROVAL APPLICATIONS
needed to obtain REGULATORY APPROVAL of AERx SYSTEMS, AERx DEVICES, DRUG
PRODUCTS and ACCESSORIES throughout the TERRITORY, in consultation with and
under the supervision of the DEVELOPMENT COMMITTEE. Such APPROVAL APPLICATIONS
will be owned by and filed [*] Aradigm shall prepare and submit to SB for
inclusion in the APPROVAL APPLICATIONS the materials relating directly to the
AERx
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separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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DEVICE and the drug packaging for the DRUG PRODUCT. SB will be responsible for
using DILIGENT EFFORTS to cause such APPROVAL APPLICATIONS to progress through
the approval process throughout the TERRITORY, and Aradigm shall be responsible
for using DILIGENT EFFORTS to support this process.
(b) Except as otherwise provided below, Aradigm shall be responsible
for preparing and submitting the DRUG MASTER FILES for reference by such
APPROVAL APPLICATIONS, which shall reference the drug master file of the bulk
drug manufacturer of the particular ANALGESIC DRUG in DEVELOPMENT. Aradigm will
grant to SB the right of reference to such DRUG MASTER FILES by the APPROVAL
APPLICATIONS submitted by SB under this Section 3.1. Aradigm will retain
ownership of such DRUG MASTER FILES and all INFORMATION to the extent owned by
Aradigm contained therein. Notwithstanding the foregoing, SB will retain
ownership of all drug master files of SB (or its licensor) and all INFORMATION
contained therein related to the bulk manufacture of SB PROPRIETARY DRUGS, and
Aradigm shall have no right to own any drug master files or INFORMATION related
to any ANALGESIC DRUG that is supplied by or on behalf of SB in accordance with
this Agreement. Aradigm shall have the right to take all permitted measures to
protect the confidentiality of the INFORMATION in such DRUG MASTER FILES. With
respect to DRUG PRODUCTS containing SB PROPRIETARY DRUGS, or that SB is
supplying to Aradigm as permitted herein, SB shall prepare, or obtain a right of
reference to, the drug master file relating to the bulk manufacturing of such
ANALGESIC DRUGS, and shall deliver the same to Aradigm for inclusion in the DRUG
MASTER FILE.
(c) In the event that the regulatory approval process in any
particular jurisdiction requires a 510(k) application (or equivalent foreign
application) with respect to the AERx DEVICE and/or drug package aspects of the
DRUG PRODUCT of an AERx SYSTEM separate from the NDA applicable to the ANALGESIC
DRUG contained within the applicable DRUG PRODUCT, then Aradigm shall take
responsibility in such situations for preparing and submitting the 510(k) (or
equivalent) applications, and SB shall remain responsible for the related NDAs,
except that it is understood that in those countries in which Aradigm is not
legally permitted to take responsibility for the 510(k) (or equivalent)
applications (e.g., because Aradigm does not have an established office in such
country), then SB shall have responsibility in such countries for filing of such
510(k) (or equivalent) applications, and shall serve as the correspondent with
the FDA or equivalent, but Aradigm shall remain responsible for doing the work
that is required to prepare, pursue approval of and maintain such filing in
accordance with the relevant BUDGET. All such efforts of Aradigm under this
subsection (c) shall be DEVELOPMENT COSTS funded as provided by SB under the
applicable BUDGET.
(d) In the event SB has any communications or meetings with the FDA
or any other regulatory agency regarding such APPROVAL APPLICATIONS or the
process of seeking or obtaining REGULATORY APPROVAL of a particular PRODUCT, but
only to the extent such communications or meetings relate to approval or
performance of the PRODUCT, SB shall involve Aradigm in preparing for such
communication or meeting and shall give all consideration to Aradigm's concerns
relating thereto, and Aradigm shall be entitled to have one representative (or
such additional number of representatives as the DEVELOPMENT
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COMMITTEE deems appropriate and in accordance with the applicable BUDGET) attend
any such meetings with such agencies, to the extent permitted by such agencies.
SB shall be responsible for all costs and expenses of preparing, submitting and
prosecuting such APPROVAL APPLICATIONS and all fees associated with REGULATORY
APPROVAL of PRODUCTS.
3.2 ADVERSE EVENTS. The term "Adverse Event" as used in this Section shall
mean any noxious, pathological or unintended adverse change in anatomical,
physiological or metabolic function as indicated by physical signs, symptoms
and/or laboratory changes occurring in clinical trials, post-marketing
surveillance, or clinical practice during use of an AERx SYSTEM, AERx DEVICE,
DRUG PRODUCT or ACCESSORY or published in the medical literature, whether or not
considered causally related to the PRODUCT. The foregoing includes, without
limitation, an exacerbation of a pre-existing condition, intercurrent illness,
drug interaction, significant worsening of a disease under investigation or
treatment, and significant failure of expected pharmacological or biological
action. During the term of the Agreement, each Party shall notify the other of
any information of which such Party becomes aware concerning any Adverse Event
according to the procedure agreed by the Parties as provided below. With respect
to Adverse Events, the following shall apply:
(a) Promptly after the Effective Date, each Party shall appraise the
other Party of the standard operating procedures for the investigation and
reporting of Adverse Events regarding its products. The Parties shall then
promptly develop and agree upon procedures for the reporting to each other
Adverse Events concerning the PRODUCTS. The Parties shall immediately implement
such agreed procedures and shall provide each other on a regular basis with any
appropriate information which enables the other party to meet its regulatory
obligations in the territories in which it is commercializing or developing
PRODUCTS or which is relevant to the safe use of PRODUCTS. The agreed procedures
will be reviewed jointly on a regular basis or when there is a change in
regulations governing Adverse Events reporting.
(b) All Adverse Events reports and queries for SB should be
addressed to its central safety department, i.e., Associate Director, Worldwide
Clinical Safety, SmithKline Beecham Pharmaceuticals, New Frontiers Science
Park-South Site, Third Avenue, Harlow, Essex, CM19 5AW, England (facsimile
number 44 1279 644322; telephone number 44 1279 644693) and for Aradigm should
be addressed to its Director, Regulatory Affairs, Aradigm, 26219 Eden Landing
Road, Hayward, CA 94545 (facsimile number (510) 783-0410; telephone number (510)
783-0100), or such other safety representative as may be designated by SB for SB
or by Aradigm for Aradigm.
3.3 ASSIGNMENT OF APPROVAL APPLICATIONS AND ROYALTY PAYMENT TO SB. No
later than [*] after the expiration of the Agreement under Section 14.1 or the
termination of this Agreement (including termination with respect to particular
countries or a particular AERx SYSTEM) or the termination of SB's rights to a
particular AERx SYSTEM pursuant to Section 2.6, 2.9, 5.5, 14.2 (due to the
uncured breach by SB), or 14.3, SB shall, with respect to each country in which
SB's rights hereunder have terminated, either assign to Aradigm or its designee
or withdraw, at Aradigm's direction as provided in writing to SB, or withdraw
if
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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Aradigm has not provided SB with such direction or if such assignment is not
legally permissible, all APPROVAL APPLICATIONS submitted and REGULATORY
APPROVALS obtained with respect to the relevant AERx SYSTEMS, AERx DEVICES, DRUG
PRODUCTS and ACCESSORIES subject to such termination in such countries (but
excluding any DRUG PRODUCTS that contain SB PROPRIETARY DRUGS). Thereupon, SB
shall grant Aradigm the irrevocable right of reference with respect to all
clinical data and results owned by SB that arose as a result of work performed
under this Agreement with respect to such PRODUCTS in such countries (excluding
any DRUG PRODUCTS that contain SB PROPRIETARY DRUGS). In addition, promptly
after notice of such expiration or termination, but in any event within [*]
after the effective date of such expiration or termination, SB shall transfer to
Aradigm a copy of all written materials relating to all such APPROVAL
APPLICATIONS and REGULATORY APPROVALS to the extent requested by Aradigm,
including without limitation clinical data packages, application materials, and
Adverse Event reporting materials and databases. Aradigm shall pay SB, within
[*] after receipt of an invoice therefor, SB's actual, out-of-product expenses
in copying and transferring such copies of written materials to Aradigm. During
the period after notice of termination of the AGREEMENT and up to the date of
such termination, SB shall continue to use the same level of efforts SB used
prior to such notice in providing supply to consumers of PRODUCTS, subject to
amounts of the PRODUCT remaining in SB's inventory at the time of such notice
(and including amounts of PRODUCTS added to such inventory due to delivery by
Aradigm of PRODUCTS ordered by SB). In addition, if Aradigm, in a particular
country and with respect to a particular AERx SYSTEM, AERx DEVICE, DRUG PRODUCT
or ACCESSORY, relies on a REGULATORY APPROVAL of SB to continue marketing the
AERx SYSTEM, AERx DEVICE, DRUG PRODUCT or ACCESSORY (if already approved in the
country), or relies on the data and information in an APPROVAL APPLICATION
relating to such PRODUCT to obtain REGULATORY APPROVAL in such country to
commercialize the PRODUCT, then Aradigm will pay SB a royalty equal to [*] of
Aradigm's, its AFFILIATES' and its and their licensees' net sales of such AERx
SYSTEM, AERx DEVICE, DRUG PRODUCT or ACCESSORY in such country. Aradigm's and
its AFFILIATES' and licensees' "net sales" of such PRODUCTS shall be calculated
in a manner consistent with the calculation of NET SALES as provided herein.
4. MILESTONE PAYMENTS.
4.1 INITIAL MILESTONE PAYMENTS. In partial consideration for the licenses
granted to SB in the Agreement under PATENTS and INFORMATION, SB shall pay
Aradigm the following amounts in U.S. Dollars within the specified time period
after the occurrence of the specified events:
(a) $9.0 million due upon the Effective Date subject to expiration
of the waiting period under the Act as provided in Section 15.1, such payment to
be made within five (5) business days after the HSR Approval Date, as such term
is defined in Section 15.1;
(b) [*] within thirty (30) days after INITIATION of the first PHASE
II TRIAL under this Agreement of the INITIAL PRODUCT.
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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For clarity, no payment shall be owed under this Section 4.1 if the milestone
event is not achieved during the term of the Agreement prior to the receipt of
the notice of termination from the terminating Party by the receiving Party.
4.2 MILESTONE PAYMENTS FOR CERTAIN DEVELOPMENT EVENTS. As additional
consideration for the licenses granted to SB in the Agreement under PATENTS and
INFORMATION, SB shall pay Aradigm the following amounts in U.S. Dollars within
thirty (30) days after the occurrence of the specified events:
(a) [*] upon INITIATION of the first PHASE III TRIAL under this
Agreement of an AERx SYSTEM;
(b) [*] upon the filing of the first APPROVAL APPLICATION filed
under this Agreement with the FDA or its equivalent for an AERx SYSTEM in the
U.S.A., Japan, or any three of the five MAJOR MARKET COUNTRIES located in
Europe ; and
(c) [*] upon the first REGULATORY APPROVAL for an AERx SYSTEM in [*]
For avoidance of doubt, it is agreed that the above milestone payments shall be
made just once with respect to achievement of any particular milestone event by
the first AERx SYSTEM to achieve such milestone, regardless of the number of
times such milestone event may be achieved by such AERx SYSTEM or any other AERx
SYSTEM. For clarity, no payment shall be owed under this Section 4.2 if the
milestone event is not achieved during the term of the Agreement prior to the
receipt of the notice of termination from the terminating Party by the receiving
Party.
4.3 MILESTONE PAYMENTS FOR ADDITIONAL SYSTEMS. As used herein, the term
"Additional AERx SYSTEM" shall mean an AERx SYSTEM under DEVELOPMENT pursuant to
this Agreement that contains an ANALGESIC DRUG that is a different Active
Ingredient (as defined below) from that utilized in the DRUG PRODUCT in an AERx
SYSTEM for which the milestone payments under Section 4.2 or this Section 4.3
have been paid by SB. For purposes of this Section, the term "Active Ingredient"
shall mean the actual chemical compound that is the ANALGESIC DRUG in a DRUG
PRODUCT. A prodrug, metabolite, ester, salt, hydrate, solvate, polymorph or
isomer (each, a "Related Compound") of a particular Active Ingredient shall not
be considered a different "Active Ingredient" from such Active Ingredient with
respect to DEVELOPMENT of a DRUG PRODUCT containing such Related Compound,
provided that the DEVELOPMENT COMMITTEE agrees that the DEVELOPMENT efforts
needed to achieve REGULATORY APPROVAL of such DRUG PRODUCT and the related AERx
SYSTEM shall be substantially less than the typical DEVELOPMENT efforts required
for a DRUG PRODUCT containing an entirely different chemical entity. However,
notwithstanding the foregoing it is agreed that morphine acetate is a different
Active Ingredient from morphine sulfate. As additional consideration for the
licenses granted to SB in the Agreement under PATENTS and INFORMATION, for each
such Additional AERx SYSTEM, the following milestones payments
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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shall be paid in U.S. Dollars within thirty (30) days after the occurrence of
the specified events according to the following schedule, unless otherwise
agreed by the Parties:
(a) [*] upon INITIATION of the first PHASE I TRIAL under this
Agreement for such Additional AERx SYSTEM;
(b) [*] upon INITIATION of the first PHASE III TRIAL under this
Agreement for such Additional AERx SYSTEM;
(c) [*] upon filing of the first APPROVAL APPLICATION under this
Agreement with the FDA or its equivalent covering such Additional AERx
SYSTEM in [*] and
(d) [*] upon the first REGULATORY APPROVAL of such Additional
AERx SYSTEM in [*].
For avoidance of doubt, for any such Additional AERx SYSTEM, it is agreed that
the above milestone payments shall be made just once with respect to achievement
of any particular milestone event by such Additional AERx SYSTEM, regardless of
the number of times such milestone event may be achieved by such AERx SYSTEM.
For clarity, no payment shall be owed under this Section 4.3 if the milestone
event is not achieved during the term of the Agreement prior to the receipt of
the notice of termination from the terminating Party by the receiving Party.
Further, it is agreed that, with respect to any such Additional AERx SYSTEM for
which milestones hereunder are being or have been paid, a DRUG PRODUCT
containing a different dose or strength of the same ANALGESIC DRUG as is
contained in such Additional AERx SYSTEM, or that is in DEVELOPMENT for a
different labeled indication than that for which such Additional AERx SYSTEM was
in DEVELOPMENT, shall not constitute a separate "Additional AERx SYSTEM" for
which milestone payments hereunder must be made beyond the payments made for
milestone events achieved by such additional AERx SYSTEM.
4.4 ADDITIONAL PAYMENT CONDITIONS. With respect to milestone payments owed
under either Section 4.2 or 4.3, the following shall be applicable:
(a) In the event that a particular DRUG PRODUCT and the related AERx
DEVICE are subject to separate APPROVAL APPLICATIONS (e.g., because the AERx
DEVICE may be approved under a 510(k) application separate from the NDA for the
DRUG PRODUCT), the particular milestone payments owed under Section 4.1 or 4.2,
as applicable, in such situation for filing of APPROVAL APPLICATIONS and receipt
of REGULATORY APPROVALS shall be owed when the particular milestone event has
been achieved by both the DRUG PRODUCT and the AERx DEVICE in DEVELOPMENT.
(b) Upon the first REGULATORY APPROVAL for an AERx SYSTEM [*] at
such time as one of the following conditions has been met:
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with the Commission. Confidential treatment has been requested with respect to
the omitted portions.
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(i) [*] or
(ii) [*]
As used in this Section 4.4(b), the term [*] prepared by Aradigm and delivered
to SB for its review and approval, in good faith, which [*] at cleast equal to
[*] after commercial launch of the INITIAL PRODUCT. The [*] to enable SB to
understand the [*] under this Agreement sufficiently to determine, in SB's
judgment exercised in good faith and with commercial reasonableness, that [*]
for the first year after launch. If SB has any [*] SB shall provide those [*]
to Aradigm promptly, and shall work with Aradigm reasonably and in good faith to
agree on [*] If SB does not object to any [*] of the receipt thereof by SB's
V.P. and Director, WSO, such [*] SB and Aradigm each agrees to use DILIGENT
EFFORTS to achieve [*] prior to the first REGULATORY APPROVAL of an AERx SYSTEM.
5. DISTRIBUTION LICENSE AND MARKETING.
5.1 DISTRIBUTION LICENSE. Subject to compliance with the terms of this
Agreement, Aradigm hereby grants SB the exclusive license under the ARADIGM
PATENTS and the INFORMATION owned or CONTROLLED by Aradigm and provided to SB
under this Agreement to use, import, market, offer for sale and sell, solely in
the TERRITORY and solely for use in the FIELD, the AERx SYSTEMS, AERx DEVICES,
DRUG PRODUCTS and ACCESSORIES that were either (i) purchased from Aradigm
hereunder or (ii) manufactured pursuant to the permitted exercise of the Back-Up
License granted to SB under Section 6.6(c). SB may sublicense such license
rights to its AFFILIATES. SB may sublicense such license rights to THIRD PARTIES
in any MAJOR MARKET COUNTRY only to the extent permitted by Aradigm in writing,
which approval shall not be unreasonably withheld, and may freely sublicense
such rights to THIRD PARTIES in any other country in the TERRITORY. Aradigm
shall not develop the AERx SYSTEMS, AERx DEVICES, and DRUG PRODUCTS for any use
outside the FIELD; provided that the foregoing shall not be interpreted to
prevent Aradigm or its AFFILIATES or THIRD PARTY licensees from developing or
having developed its other AERx pulmonary drug delivery devices for any use
outside the FIELD. Unless otherwise agreed by the Parties in writing, SB is not
licensed hereunder to, and SB covenants that it shall not knowingly, develop,
market, use, import, market, offer for sale and sell the AERx SYSTEMS, AERx
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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DEVICES, DRUG PRODUCTS and ACCESSORIES for any use or utility outside the FIELD
or in any country outside the TERRITORY.
5.2 GRANT BACK LICENSE. SB hereby grants Aradigm a royalty-free,
worldwide, nonexclusive license under the SB PATENTS to manufacture, import,
use, market and sell pulmonary delivery products; provided, however that during
the term of this Agreement, the foregoing license shall not include or cover
pulmonary delivery or any other use of any SB PROPRIETARY DRUG except to the
extent that such drug is an ANALGESIC DRUG under DEVELOPMENT or being
commercialized as part of a DRUG PRODUCT under this Agreement, and that after
expiration or termination of this Agreement, the foregoing license shall not
include or cover the manufacture, import, use, marketing or sale of any SB
PROPRIETARY DRUG for pulmonary delivery or any other use.
5.3 OVERALL MANAGEMENT OF COMMERCIALIZATION EFFORTS. Promptly after the
INITIATION of PHASE III TRIALS on the first AERx SYSTEM, the Parties shall form
the COMMERCIALIZATION COMMITTEE constituted of an equal, agreed-on number of
representatives from each Party. The COMMERCIALIZATION COMMITTEE shall meet
regularly, at least once each quarter thereafter during the Agreement. Such
meetings shall take place at an SB location in the U.S.A. or, if requested by
either Party, via telephone or video teleconference. The COMMERCIALIZATION
COMMITTEE shall oversee all activities of the Parties under this Agreement
relating to commercialization and marketing of PRODUCTS, including coordinating
the overall strategy for the commercialization of PRODUCTS and preparing for the
launch of PRODUCTS. The COMMERCIALIZATION COMMITTEE shall: (i) review the
Marketing Plans and appropriate amendments thereto; (ii) be the primary contact
point between the Parties regarding the transfer of INFORMATION and the
discussion of efforts to conduct marketing of PRODUCTS; (iii) review PRODUCT
marketing success and formulate strategies to address issues with PRODUCT
commercialization; (iv) select the countries, in addition to the MAJOR MARKET
COUNTRIES, in which to conduct DEVELOPMENT and commercialization of the AERx
SYSTEMS; and (v) evaluate commercial opportunities for additional new PRODUCTS.
Each Party may appoint its representatives to the COMMERCIALIZATION COMMITTEE.
The members of the project teams shall meet and otherwise communicate as
frequently as appropriate to carry out the objectives of the Marketing Plans.
The COMMERCIALIZATION COMMITTEE shall operate by unanimous decision of its
members, and the members of the COMMERCIALIZATION COMMITTEE shall make a good
faith effort to reach decisions on all matters before the committee; provided,
however, that it is understood that [*] members on the COMMERCIALIZATION
COMMITTEE. All expenses of Aradigm in attending COMMERCIALIZATION COMMITTEE
meetings shall be borne by Aradigm.
5.4 MARKETING PLANS. At least [*] prior to the expected commercial launch
of an AERx SYSTEM in any country, SB shall provide Aradigm's representatives on
the COMMERCIALIZATION COMMITTEE with a copy of the SB's draft marketing plan for
such AERx SYSTEM and components thereof in such country for Aradigm's review and
comment.
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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Thereafter, on an annual basis, in accordance with the timing within SB's
internal practices and procedures for producing marketing plans, SB shall
provide Aradigm with its marketing plan for such PRODUCT for the following year,
for Aradigm's review and comment. Such marketing plans shall also include SB's
projected sampling of each AERx SYSTEM, AERx DEVICE, DRUG PRODUCT, and ACCESSORY
(if legally permissible) during the following year. Aradigm shall treat all such
marketing plans as SB's CONFIDENTIAL INFORMATION. SB shall consider in good
faith all Aradigm's reasonable suggestions or concerns regarding such SB
marketing plans. In connection with the development of a commercialization
strategy for the AERx SYSTEMS and components thereof, SB will give consideration
to making appropriate use of the distribution capabilities that Aradigm is
establishing for its other pulmonary delivery products for distribution of the
AERx DEVICE, provided that nothing herein shall be construed to mean that SB
shall be under any obligation to use such distribution capabilities. Subject to
the foregoing, and to compliance with Section 5.5, all decisions regarding
marketing, promotion and sales of each AERx SYSTEM, AERx DEVICE, DRUG PRODUCT,
and ACCESSORY throughout the TERRITORY by or on behalf of SB shall be at SB's
sole discretion.
5.5 MARKETING DILIGENCE.
(a) SB and its AFFILIATES shall use DILIGENT EFFORTS to market and
sell each AERx SYSTEM that has received REGULATORY APPROVAL in all countries in
the TERRITORY where such REGULATORY APPROVAL has been granted. Without limiting
the generality of the foregoing, SB agrees to launch sales of the AERx SYSTEM in
each such country within [*] of the date SB obtains REGULATORY APPROVAL in such
country which approval includes any required pricing approval that is granted at
a price that is, in SB's judgment, reasonably exercised, commercially viable. In
addition, there shall be a presumption that SB has failed to use DILIGENT
EFFORTS in conducting marketing of an AERx SYSTEM if for a continuous period of
[*] at any time following launch of commercial sales of such AERx SYSTEM in a
country, no sales of the AERx SYSTEM or its component AERx DEVICE, DRUG PRODUCT
or ACCESSORIES are made in such country; provided that such event is not
directly caused by an event of force majeure (but only for so long as SB uses
DILIGENT EFFORTS to end the effects of such event of force majeure). If SB
breaches the foregoing requirements in a particular country, and fails to cure
such breach within [*] days of written notice thereof from Aradigm, then Aradigm
may terminate SB's rights hereunder in such country with respect to such AERx
SYSTEM upon written notice provided to SB no later than ninety (90) days after
the end of such [*] day period, but provided that SB has not cured such breach
prior to Aradigm's giving such notice of termination.
(b) In addition to the obligations under subsection (a), SB shall,
in order to [*] according to the following schedule, which [*]
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separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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[*]
[*]
[*]
provided, however, that if [*] in the geographical areas of (i) the U.S.A., (ii)
Japan, or (iii) [*] in Europe, then the foregoing obligation [*] shall be
[*] for each of such geographical areas (i.e., as listed in (i), (ii)
or (iii)) in which such [*] In addition, the foregoing obligation to [*] shall
be [*], but only during the period of
time in which such circumstances continue to exist:
(1) an event of force majeure (as defined in Section 15.7) has
occurred that prevents or impedes SB from making sales of the INITIAL
PRODUCT or its related AERx DEVICES or DRUG PRODUCTS, but only so long as
the effects of such event continue and so long as SB continues to make
DILIGENT EFFORTS to end the effects of such event of force majeure; or
(2) Aradigm has committed a breach of its obligation to supply SB
with INITIAL PRODUCT or its related AERx DEVICES or DRUG PRODUCTS and such
breach has caused SB to be unable to meet a substantial amount of existing
orders for any such PRODUCTS, but only so long as the effects of such
breach continue such that SB's sales of such affected PRODUCTS, as
measured during any [*] of such PRODUCTS for the three month period
directly prior to the date of such breach; or
(3) SB is manufacturing PRODUCTS pursuant to the permitted exercise
of the Back-Up License under the provisions of Section 6.6(c), but only so
long as SB continues to have the right to exercise such manufacturing
license.
During any period in which [*] under this Section 5.5(b) is [*] as
provided above, the [*] shall also be [*], such that the aggregate length
of time for which SB shall have the obligation to [*] subject to earlier
termination of the Agreement. In the event that SB's right to commercialize
PRODUCTS is terminated in the U.S.A., the [*] shall be reduced as provided
above, and such [*] in Japan or at least [*] in Europe. In the event SB
[*] hereunder, Aradigm may give SB written notice of such [*], and if SB has
not cured such [*] within [*] of such notice, Aradigm may then [*] by
written notice provided no later than [*] after the end of such cure period.
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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(c) The COMMERCIALIZATION COMMITTEE shall use DILIGENT EFFORTS to
determine which countries (in addition to the MAJOR MARKET COUNTRIES) to select
pursuant to Section 5.3 for DEVELOPMENT and commercialization of the AERx
SYSTEMS. Countries in the world may be excluded from the TERRITORY as provided
below.
(i) If the COMMERCIALIZATION COMMITTEE determines that SB will
not commercialize any AERx SYSTEMS in a particular country, either itself or
through an AFFILIATE or sublicensee, the COMMERCIALIZATION COMMITTEE shall give
Aradigm written notice of such determination promptly after such determination,
and upon such notice all SB's right to distribute all PRODUCTS in such country
shall immediately terminate, except as otherwise provided in subsection (iii)
below, and thereafter such country shall be excluded from the definition of
"TERRITORY" and Aradigm shall have the right to distribute, market and sell the
PRODUCTS in such country and to license others to do so, except that Aradigm
shall have no such right with respect to a DRUG PRODUCT which contains an SB
PROPRIETARY DRUG.
(ii) If by the date that is [ * ] after the [ * ] in a MAJOR
MARKET COUNTRY, the COMMERCIALIZATION COMMITTEE has not selected a particular
country for commercialization of the AERx SYSTEMS, and the Parties have not
commenced DILIGENT EFFORTS [*] in such country, then immediately upon written
notice provided by Aradigm after such date (but subject to the dispute
resolution provisions of Section 13.1 in the event that SB contends that the
foregoing requirements are not met), and except as otherwise provided
in subsection (iii) below, all SB's right to distribute AERx SYSTEMS,
AERx DEVICES, ACCESSORIES and DRUG PRODUCTS in such country shall immediately
terminate, and thereafter such country shall be excluded from the definition
of "TERRITORY" and Aradigm shall have the right to distribute, market and sell
the AERx SYSTEMS and DRUG PRODUCTS in such countries and to license others to
do so, except that Aradigm shall have no such right with respect to a DRUG
PRODUCT which contains an SB PROPRIETARY DRUG.
(iii) Notwithstanding the provisions of subsections (i) and
(ii) above, if SB has launched PRODUCTS in at least [ * ] in Europe within [ * ]
after the first REGULATORY APPROVAL of an AERx SYSTEM in a MAJOR MARKET COUNTRY,
then the COMMERCIALIZATION COMMITTEE may elect not to launch the PRODUCTS, or to
cease commercialization of PRODUCTS, in any country of the European Union, so
long as SB continues to commercialize the PRODUCTS in at least [ * ] in Europe,
and such election shall not trigger the rights of Aradigm under subsection (ii)
above with respect to such other countries. Similarly, if SB has launched
PRODUCTS in the U.S.A. within [ * ] after the first REGULATORY APPROVAL of an
AERx SYSTEM in a MAJOR MARKET COUNTRY, then the COMMERCIALIZATION COMMITTEE may
elect not to launch the PRODUCTS, or to cease commercialization of PRODUCTS,
[ * ] and such election shall not trigger the rights of Aradigm under subsection
(ii) above with respect to [ * ] However, if SB has not launched the PRODUCTS
in at least [ * ]
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the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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[*] in Europe within [*] after the first REGULATORY APPROVAL of an
AERx SYSTEM in a MAJOR MARKET COUNTRY, then all countries in the European
Union shall be excluded from the definition of "TERRITORY" and Aradigm
shall have the right to distribute, market and sell the AERx SYSTEMS and
DRUG PRODUCTS in such countries and to license others to do so, except
that Aradigm shall have no such right with respect to a DRUG PRODUCT which
contains an SB PROPRIETARY DRUG.
5.6 REPORTS. Commencing after the first commercial sale of a PRODUCT in
any country, SB will provide to Aradigm a report on a quarterly basis within
forty-five (45) days of the end of such calendar quarter summarizing SB's, its
AFFILIATES' and sublicensees' marketing efforts and containing a true and
accurate accounting of quarterly sales, including calculations of NET SALES
itemized by PRODUCT and by country, with respect to the PRODUCTS sold during
such period, and the corresponding royalty payments due Aradigm pursuant to
Section 7.3.
5.7 PACKAGING AND LABELING. The PRODUCTS for commercial sale under this
Agreement shall be packaged by Aradigm and labeled consistent with the
requirements of the regulatory authorities in the country in which it will be
sold, and where legally permissible, shall identify any applicable ARADIGM
PATENTS consistent with marking requirements, and shall identify Aradigm as the
manufacturer of the PRODUCTS and SB as the distributor of such PRODUCTS. Subject
to the foregoing and to compliance with Section 9.10, SB shall in its reasonable
discretion determine the packaging and labeling for the PRODUCTS for resale
hereunder.
5.8 RESTRICTIVE COVENANTS.
(a) SB OBLIGATIONS. During the term of the Agreement, SB and its
AFFILIATES shall not market or sell any products [ * ] covered by this
Agreement in any countries of the TERRITORY. Notwithstanding the foregoing, SB
shall retain the right to develop, market and sell, or to have THIRD PARTIES
develop, market and sell in [ * ] all countries.
(b) ARADIGM OBLIGATIONS. During the term of this Agreement, except
as otherwise permitted in Section 2.9, Aradigm and its AFFILIATES shall not (i)
manufacture or sell any products, or license any THIRD PARTY to manufacture or
sell any products, [ * ] covered by this Agreement; or (ii) manufacture or sell,
or license any THIRD PARTY to manufacture or sell, in any countries in the
TERRITORY any pulmonary inhalation drug products that (1) are similar in
function and performance to the AERx SYSTEM, (2) are [ * ] Aradigm or such
licensee specifically for the treatment of cancer pain or post-operative pain,
and (3) have analgesic efficacy comparable to DRUG PRODUCTS for use in treating
cancer pain or post-operative pain. Except as expressly provided in subsection
(ii) in the foregoing, Aradigm and its AFFILIATES shall retain the right to
develop, market and sell, and/or to have THIRD PARTIES
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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develop, market and sell, any and all products (other than AERx DEVICES and DRUG
PRODUCTS) for use outside the FIELD in all countries, but subject to Section
5.1. For clarification, the foregoing shall not be interpreted to prevent
Aradigm from developing, using, making and selling other of its AERx pulmonary
drug delivery systems for use outside the FIELD, except to the extent expressly
provided in subsection (ii) in the foregoing.
5.9 RESTRICTIONS ON DISTRIBUTORS AND DEALERS. SB shall require that its
AFFILIATES, and all its non-AFFILIATE distributors or dealers to whom SB or its
AFFILIATES sell the PRODUCTS for resale, shall not knowingly market, promote,
advertise or sell the PRODUCTS for any use other than use in the FIELD or in any
country or territory outside the TERRITORY, subject to compliance with any
applicable laws or governmental regulations. Except as otherwise permitted in
Section 2.10, Aradigm shall require that its AFFILIATES, and all its
non-AFFILIATE distributors or dealers to whom Aradigm or its AFFILIATES sell any
pulmonary inhalation devices, packets containing drugs for use in such pulmonary
inhalation devices, or accessories therefor, including, but not limited to, any
AERx pulmonary drug delivery devices, for use outside the FIELD, shall not
knowingly market, promote or advertise use of such devices, packets or
accessories for use in the FIELD, and, to the extent the TERRITORY is less than
the entire world, shall not knowingly market or sell any PRODUCTS for use in the
TERRITORY, subject to compliance with any applicable laws or governmental
regulations.
6. MANUFACTURING AND SUPPLY.
6.1 MANUFACTURING RIGHTS. Subject to Section 6.6, Aradigm shall retain all
rights to manufacture or have manufactured the AERx SYSTEMS, AERx DEVICES, DRUG
PRODUCTS and ACCESSORIES. Aradigm agrees to supply the clinical trial
requirements for the AERx DEVICES, DRUG PRODUCTS, placebos (in AERx unit
packets), and ACCESSORIES used in clinical DEVELOPMENT and SB's, its AFFILIATES,
and its sublicensees' requirements in the TERRITORY for all PRODUCTS for
promotional use in the FIELD and for commercial sale for use in the FIELD,
pursuant to the supply terms provided below.
6.2 BULK DRUG SUBSTANCE. Subject to the following, Aradigm shall be
responsible for securing a supply of bulk ANALGESIC DRUGS for inclusion in DRUG
PRODUCTS. Such supply will be obtained from suppliers holding current drug
establishment registrations and DRUG MASTER FILES with FDA and similar foreign
regulatory agencies and appropriate current licenses from the U.S. Drug
Enforcement Administration and from similar foreign regulatory agencies. In the
event that SB can obtain the bulk supply of a particular ANALGESIC DRUG on terms
more favorable than Aradigm is able to obtain, then SB may contract to obtain
the bulk supply to be provided to Aradigm at SB's cost; provided that if SB
obtains such bulk supply pursuant to a contractual arrangement with the supplier
that grants SB exclusive rights to such supply, SB covenants that [ * ] in the
event of termination of this Agreement in its entirety pursuant to Section 2.6,
5.5, 14.2 (due to the uncured breach by SB), or 14.3, and provided further
that if the Agreement terminates as to
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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specific countries, pursuant to Sections 2.6 or 5.5, then [*] such bulk
ANALGESIC DRUGS as [*] in order to commercialize the AERx SYSTEMS in such
countries, except that, notwithstanding the above, [*] any ANALGESIC DRUG that
is covered by a PATENT owned or controlled by SB or its AFFILIATE.
6.3 CLINICAL SUPPLY. Aradigm agrees to provide for use by the Parties
such quantities of the AERx DEVICE, ACCESSORIES, DRUG PRODUCT and placebos (in
AERx unit packets), required for conducting preclinical and clinical
DEVELOPMENT, as the DEVELOPMENT COMMITTEE provides under the applicable
DEVELOPMENT PLAN. Clinical supplies of the DRUG PRODUCT under DEVELOPMENT (and
placebo if required) shall be formulated and packaged as determined by the
DEVELOPMENT COMMITTEE for use with AERx DEVICE in the clinical trials to be
conducted under this Agreement. The forecast of such DEVELOPMENT requirements
for such PRODUCTS shall be contained within the relevant DEVELOPMENT PLAN, as
updated in accordance with Section 2.3. Aradigm shall use such forecasts and
updates to prepare the manufacturing of such requirements of the PRODUCTS (and
placebo) for preclinical and clinical use for the next four (4) calendar
quarters. Aradigm shall supply the quantities of the AERx DEVICES, ACCESSORIES,
DRUG PRODUCTS and placebos for use in clinical trials at the delivery times
outlined in the relevant DEVELOPMENT PLAN; provided, however, that such delivery
times are not less than [*] days after the most recent update of such
requirements as outlined in the relevant DEVELOPMENT PLAN. To the extent
possible, the DEVELOPMENT COMMITTEE shall use good faith efforts to ensure that
each update of the DEVELOPMENT requirements in a particular DEVELOPMENT PLAN
shall not deviate, with respect to any particular item, by more than [*] from
the amount of such item forecasted to be required in the most recent previous
forecast. Notwithstanding the foregoing, if unanticipated changes arise that
result in an increase by more than [*] from the amount of such PRODUCT
previously forecasted to be required, in the quantity requirements of AERx
DEVICES, ACCESSORIES, DRUG PRODUCTS and/or placebos required for DEVELOPMENT
under the applicable trial protocol, Aradigm will use DILIGENT EFFORTS to
fulfill the requirements in excess of [*] of the forecasted requirements,
subject to its other business obligations. Shipment, delivery and acceptance of
AERx DEVICES, ACCESSORIES, DRUG PRODUCTS and placebos shall be in accordance
with Sections 6.8 and 6.10 of this Agreement. Reimbursement to Aradigm for
supplying PRODUCTS and placebos under this Section 6.3 shall be as provided in
Section 7.1.
6.4 COMMERCIAL PRODUCT SUPPLY. Aradigm agrees to provide SB with its
commercial requirements of the AERx SYSTEMS, AERx DEVICES, DRUG PRODUCTS and
ACCESSORIES for which REGULATORY APPROVAL has been obtained, in FINISHED FORM
pursuant to the following terms.
6.5 FORECASTING AND ORDERING MECHANISMS.
(a) At such time after the Effective Date that Aradigm [*] Aradigm
shall provide to SB such INFORMATION in Aradigm's CONTROL relating to Aradigm's
PRODUCT
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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manufacturing steps and timing, and in particular with respect to lead times
Aradigm requires to achieve manufacture of PRODUCTS on a commercial scale
hereunder, as SB reasonably requires in order to determine appropriate
procedures and mechanisms for providing to Aradigm forecasts of SB's (and its
AFFILIATES' and sublicensees') requirements for PRODUCTS to be ordered and
purchased hereunder, and for ordering such requirements. SB shall review such
INFORMATION promptly after receipt, and appropriate representatives from SB and
Aradigm shall then meet to determine the appropriate forecasting, ordering and
inventory mechanisms that will be used by the Parties for ordering and supplying
the commercial requirements of PRODUCTS hereunder. Such forecasting, ordering
and inventory mechanisms shall be set forth in a writing, and upon mutual
execution of such writing by the Parties, such mechanisms (the "Supply
Procedures") shall become part of this Agreement.
(b) With respect to the forecasting mechanism, such Supply Procedures
shall provide: (i) that within an agreed period of time prior to the first
expected REGULATORY APPROVAL of an AERx SYSTEM, SB shall provide a good faith
estimate of its expected requirements, on a per quarter basis, for each
particular PRODUCT in the AERx SYSTEM to be ordered for an agreed period before
and an agreed period after the AERx SYSTEM launch; (ii) as of an agreed time
before the first expected REGULATORY APPROVAL of a particular AERx SYSTEM, SB
shall provide Aradigm a rolling 12 month forecast for SB's expected orders for
each particular PRODUCT during each month during such 12 month period; (iii) SB
shall provide Aradigm updated forecasts for expected orders of PRODUCTS at
agreed intervals of time; (iv) that in each forecast provided, the forecasted
orders for an agreed time period for each forecasted PRODUCT shall constitute
binding orders by SB for such PRODUCTS, to be placed during such agreed time
period; and (v) that the amount by which the forecasted orders for each PRODUCT
in a particular forecast delivered to Aradigm may not deviate by more than [*]
from the forecast for orders for such PRODUCTS in the most recent previous
forecast submitted to Aradigm. Such forecasting mechanism in the Supply
Procedures shall also provide that SB may make a written request that Aradigm
permit the binding order to deviate from the limitations that are established in
the Supply Procedures, which request Aradigm will reasonably consider.
(c) With respect to the ordering mechanism, such Supply Procedures
shall provide: (i) that SB or its AFFILIATES shall place orders for the PRODUCTS
to be supplied under the Agreement on SB's standard purchase order form,
specifying the quantity of each specific PRODUCT ordered and the requested
delivery date, which shall not in any event be sooner or later than agreed time
period(s) from the date of such purchase order; (ii) that to the extent any
purchase order, invoice or acknowledgment form used by SB contains any
provisions additional or contrary to the provisions of this Agreement, such
additional or contrary provision shall have no force or effect and the terms of
this Agreement shall control; (iii) that Aradigm shall not be obligated to
supply any amounts of a particular PRODUCT in such order more than an agreed
percentage of the unit quantity of such PRODUCT specified in the binding
forecast for the applicable time period; (iv) that SB's orders for a PRODUCT may
not be less than an agreed percentage of the binding forecast for such PRODUCT
for the applicable time period; (v) that Aradigm agrees that it will use
DILIGENT EFFORTS to provide additional amounts of a particular PRODUCT, beyond
the foregoing limitation on Aradigm's obligation to supply, upon SB's reasonable
request, but consistent with Aradigm's other business obligations.
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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(d) The Supply Procedures shall also establish an inventory
mechanism for PRODUCTS, which shall provide that (i) within an agreed period of
time after the commercial launch of a particular AERx SYSTEM, Aradigm shall use
DILIGENT EFFORTS to maintain an inventory of the PRODUCT in such AERx SYSTEM at
least equal to the written forecast for purchases of such product to be made
during an agreed number months in the most recent forecast provided to Aradigm
by SB under the forecasting mechanism of the Supply Procedures, with the
understanding that such agreed number of months must take into account stability
considerations; (ii) SB shall maintain an inventory of all PRODUCTS in
accordance with SB's normal practices, and shall give Aradigm quarterly updates
of the extent of such inventory; (iii) each Party's inventory of PRODUCTS and/or
components maintained under such inventory mechanism shall only be permitted to
fall below the levels established in subsection (i) above in the event that SB
submits orders in excess of the forecasted amounts or Aradigm experiences
manufacturing or supply problems with respect to the PRODUCTS; (iv) Aradigm
shall use DILIGENT EFFORTS in accordance with Aradigm's normal practices to
promptly replenish any inventory of a PRODUCT that is depleted in satisfying
purchases of the PRODUCT by SB hereunder; and (v) Aradigm's inventory of
PRODUCTS as required under the Supply Procedures shall be maintained by Aradigm
at no charge to SB.
(e) The Parties further agree that if the foregoing forecasting,
ordering or inventory mechanisms established in the Supply Procedures are
determined by the Parties, in good faith cooperation and giving reasonable
consideration to each Party's economic and business needs, to be inappropriate
given the then-existing manufacturing and supply circumstances regarding
PRODUCTS hereunder, the Parties will discuss in good faith appropriate
amendments to the applicable mechanisms in the Supply Procedures.
6.6 RESOLUTION OF SUPPLY PROBLEMS. Problems with respect to inability of
Aradigm to supply on a timely basis PRODUCTS ordered by SB in compliance with
this Agreement shall be addressed as provided below.
(a) If [*] that Aradigm will not be able to supply to SB [*] most
recent orders and/or binding forecasts of orders for a particular PRODUCT
submitted by SB in accordance with the Supply Procedures, Aradigm shall
immediately notify SB in writing of such determination, which notice shall
provide SB with the details on the extent of the expected shortfall of supply,
the causes of such inability to supply, and Aradigm's proposed solution to the
problem. Upon such notice of a supply problem, or in any event upon Aradigm's
failure to satisfy, within the delivery time frame specified by SB consistent
with the Supply Procedures, a portion of the PRODUCTS ordered by SB in
compliance with this Agreement, but provided that such supply problem or failure
cannot be satisfied or addressed by SB's and Aradigm's existing inventories for
such PRODUCTS and will cause an interruption in the supply of such PRODUCTS by
SB or its AFFILIATES to the commercial market for [*] then SB and Aradigm will
immediately [*] an appropriate resolution to the supply problem. [*] resolving
the problem, including without limitation establishing an alternative source of
supply for the affected PRODUCTS, creating a back-up manufacturing facility, or
proceeding directly to permitting SB to exercise the back-up
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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license as provided under subsection (c) below so that SB can manufacture an
agreed amount of such PRODUCTS to cover the shortfall in supply, with Aradigm
continuing to supply an agreed amount of such PRODUCTS. [*] to the supply
problem will be [*].
(b) If the Parties cannot reach agreement on an appropriate
resolution to the supply problem within [*] of commencing such discussions under
subsection (a) above, senior management representatives of the Parties will
immediately meet to discuss in good faith the problem in an effort to reach
agreement on such resolution. As part of such discussions, Aradigm shall make
[*] during the period when such supply problem with respect to such PRODUCTS is
expected to continue. Any agreed resolution by the Parties to the supply problem
will be set forth in a writing executed by both Parties. If, despite good faith
efforts, the senior management officials are unable to reach agreement on such
resolution of the supply problem within [*] of their commencing such
discussions, then at SB's written request provided to Aradigm no more than [*]
thereafter, the Parties will proceed as provided in subsection (c) below.
(c) If there is a PRODUCT supply problem subject to the provisions
of subsections 6.6(a) and (b) above, and (1) the [*] resolution of such problem
within the time frames set forth above by the end of the [*] as provided under
subsection (b), or (2) Aradigm has failed to meet to discuss the problems as
required above, then at SB's written request provided to Aradigm no more than
[*] SB shall be permitted to exercise the license granted in the following
sentence. Subject to all other obligations of the Agreement, Aradigm hereby
grants to SB a co-exclusive license (the "Back-Up License"), under relevant
ARADIGM PATENTS and INFORMATION owned or CONTROLLED by Aradigm, as necessary to
permit SB to make or have made only the PRODUCT that is the subject of such
supply problem that was not resolved by the Parties, solely for sale in the
TERRITORY for use in the FIELD under this Agreement. However, SB covenants,
represents and warrants that SB shall not exercise the Back-Up License unless
and until the conditions specified in the first sentence of this Section 6.6(c)
have been completely satisfied. In the event that SB is permitted to exercise
the Back-Up License, then SB shall have the right to grant one sublicense under
the Back-Up License to a THIRD PARTY, solely for the period in which SB's right
to exercise the license hereunder exists, and provided further that [*]
Immediately upon SB's written request hereunder to exercise the Back-Up License,
Aradigm shall transfer to SB copies of all INFORMATION, including technical
information, that is owned or Controlled by Aradigm, relates to the manufacture
of the PRODUCT that is the subject of the Back-Up License and is reasonably
necessary to enable SB to manufacture such PRODUCT. Thereafter, but only during
the period when SB is permitted hereunder to exercise the Back-Up License, SB
shall be permitted access to and a right of reference to the DRUG MASTER FILES
and any APPROVAL APPLICATIONS held in Aradigm's name for the PRODUCTS that are
the subject of such Back-Up License. Aradigm shall provide SB reasonable
assistance, at SB's request and SB's expense, with respect to understanding such
manufacturing INFORMATION and practicing the Back-Up License.
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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Notwithstanding the grant of the Back-Up License, Aradigm shall continue to
utilize its DILIGENT EFFORTS to continue to supply to SB amounts of the affected
PRODUCT ordered by SB hereunder.
Any exercise of the Back-Up License by SB under this subsection (c) shall
be subject to compliance by SB with the following:
(i) With respect to the PRODUCT that was the subject of the
supply problem and is covered by the Back-Up License, [*] the amounts of such
PRODUCT that [*] as provided in subsection (b) above, during the Parties'
discussions, for the period of the supply problem, except that [*] for the
PRODUCT during the applicable period, and provided further that if [*] such
PRODUCT at any time during the period, [*] any amounts of such PRODUCT [*] under
this subsection (c)(i) shall immediately terminate;
(ii) At such time as Aradigm, according to [*] under
subsection (b) above, is able to meet all of SB's forecasted orders for the
PRODUCTS, and provided that Aradigm at that time [*] the Back-Up License granted
under this Section 6.6(c) shall no longer be exerciseable with respect to such
PRODUCT, and SB shall immediately cease to exercise and practice the Back-Up
License, provided that SB shall retain all rights under this Section 6.6 with
respect to any subsequent supply problem as to any PRODUCT.
(iii) If the Back-Up License is due to a supply problem caused
by an event of force majeure (as defined in Section 15.7) affecting Aradigm or
one of its suppliers of components for the affected PRODUCT, then SB's payment
obligations set forth in Section 7.3 with respect to the affected PRODUCT that
is the subject of such Back-Up License [*] manufactured under the Back-Up
License and sold by SB or its AFFILIATES or sublicensees. For any supply problem
that is not caused by an event of force majeure, SB's payment obligations set
forth in Section 7.3 [*] manufactured under the Back-Up License and sold by SB
or its AFFILIATES or sublicensees. Nothing in the foregoing shall limit or
affect in any way SB's obligations to make the payments outlined in Sections 7.2
and 7.3 to the full extent required on all PRODUCTS supplied to SB by Aradigm.
6.7 PRODUCT SAMPLES. The Parties agree that a program of providing samples
of AERx DEVICES, DRUG PRODUCTS and ACCESSORIES to doctors, hospitals and other
potential customers at no charge will be important to the successful marketing
and commercialization of the AERx SYSTEMS. The COMMERCIALIZATION COMMITTEE shall
discuss and establish a reasonable program for providing such samples to
appropriate entities, provided that Aradigm shall have the right to approve such
sampling rate with respect to any particular PRODUCT, which approval shall not
be unreasonably withheld or delayed.
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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Aradigm agrees that [*] to be used by SB in providing such samples, provided
that the numbers of such samples, with respect to any such PRODUCT, do not
exceed the agreed amounts for sampling for the applicable period, unless the
Parties otherwise agree. SB covenants that SB and its AFFILIATES shall not
resell any PRODUCTS [*] for sampling purposes. The COMMERCIALIZATION COMMITTEE
will establish a reasonable means for identifying the PRODUCTS that are [*] SB
shall include in the forecasts delivered under Section 6.5 the number of
PRODUCTS to be ordered for sampling purposes.
6.8 DELIVERY AND RISK OF LOSS. Delivery of PRODUCTS ordered hereunder
shall be FCA (i.e., "free carrier") at the Aradigm manufacturing site for the
PRODUCT. "FCA" shall be construed in accordance with INCOTERMS 1990 of the
International Chamber of Commerce, except as otherwise provided herein. Title to
and risk of loss of the PRODUCTS purchased hereunder shall transfer to SB upon
delivery to the carrier designated by SB (or if no carrier is designated, the
carrier selected by Aradigm) at that delivery site. PRODUCTS shall be in
FINISHED FORM at delivery, packaged by Aradigm for shipment in an appropriate
manner to be agreed upon by the Parties. At SB's request and cost, Aradigm shall
arrange shipping and/or insurance to specified SB locations, provided that SB
shall be responsible for obtaining all customs clearances required. All costs of
shipping and insurance shall be borne by SB. SB shall be responsible for
compliance with all exportation and importation laws, regulations and duties. To
the extent required by law or regulation, Aradigm agrees to obtain any necessary
export licenses for the export of the PRODUCTS to destinations outside the
U.S.A., and SB shall reimburse Aradigm for all reasonable costs and expenses of
obtaining such export licenses.
6.9 QUALITY OF MANUFACTURING.
(a) Aradigm shall manufacture or have manufactured and supply
PRODUCTS in accordance with the SPECIFICATIONS and with cGMP regulations and in
compliance with all applicable laws. Aradigm shall provide a Certificate of
Analysis and Conformance ("COA") to SB with each shipment of PRODUCTS ordered by
SB specifying that such PRODUCTS conform with the SPECIFICATIONS. Aradigm shall
provide the results of the QC analysis conducted by Aradigm along with any
supporting data. SB shall be under no obligation to accept any shipment of
PRODUCTS without an accompanying COA.
(b) As used in this subsection (b), the term "Remaining Shelf Life"
shall mean, with respect to particular DRUG PRODUCT ordered by SB, the amount of
time remaining from the date that such DRUG PRODUCTS are delivered to SB until
the expiration date of such DRUG PRODUCTS, which expiration date shall be
consistent with the expiration dating approved by the FDA or other relevant
regulatory authority. At least [six (6)] months prior to commencement of
shipment of DRUG PRODUCTS to SB for commercial sale, the DEVELOPMENT COMMITTEE
shall establish the minimum amount of Remaining Shelf Life (the "Minimum Shelf
Life") that must, on the date of delivery to SB under Section 6.8, remain with
respect to DRUG PRODUCTS delivered to SB. Over the term of the Agreement, the
DEVELOPMENT COMMITTEE may adjust the agreed Minimum Shelf Life period as
appropriate. SB shall be under no obligation to accept any shipment of such
DRUG
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separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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PRODUCTS that do not have at least the Minimum Shelf Life remaining on the date
of delivery. If SB elects to accept DRUG PRODUCTS which upon receipt from
Aradigm have less than the Minimum Shelf Life remaining, then SB may return any
such accepted DRUG PRODUCTS that expire while housed in SB's inventory or that
are returned by a customer for credit due to such expiration, and SB shall
receive a full credit for the purchase price that SB paid for such returned DRUG
PRODUCTS against future payments owed by SB to Aradigm under this Agreement.
(c) Aradigm shall be responsible for the safe handling, storage and
transportation of AERx DEVICES and DRUG PRODUCTS until delivery to SB as
provided in Section 6.8. All PRODUCTS sold and shipped pursuant to this
Agreement shall be manufactured in accordance with all applicable federal, state
and local environmental, health and safety laws and regulations in effect at the
time and place of manufacture of PRODUCTS, and all waste, including but not
limited to all hazardous waste, generated at the time of manufacture of PRODUCTS
shall be disposed of in accordance with all applicable federal, state and local
laws and regulations.
6.10 ACCEPTANCE. SB shall have the right to test at its expense, using
acceptance testing procedures to be agreed upon by the DEVELOPMENT COMMITTEE, a
portion of each shipment of PRODUCTS to confirm that such shipment meets the
SPECIFICATIONS. Where it is required by the local regulations, further testing
on importation in accordance with the SPECIFICATIONS shall be carried out by SB.
If SB rejects in whole or in part any nonconforming shipment of AERx DEVICES or
DRUG PRODUCTS, SB shall immediately provide Aradigm written notice of such
rejection. Aradigm shall use commercially reasonable efforts to replace the
nonconforming AERx DEVICES or DRUG PRODUCTS, at no additional cost to SB, as
soon as possible; provided, however, that if Aradigm reasonably disputes SB's
conclusion that such AERx DEVICES or DRUG PRODUCTS do not meet the applicable
SPECIFICATIONS, Aradigm shall not be obligated, in order to meet the foregoing
obligation to provide replacement product, to supply more than such amounts of
such products as are available in Aradigm's inventory and shall not be obligated
to maintain such inventory during such dispute, provided that the foregoing
shall not be interpreted to change in any way Aradigm's ongoing supply
obligations with respect to other PRODUCTS ordered by SB in conformance with the
Supply Procedures as provided in Section 6.5. If Aradigm disagrees with SB's
determination that the rejected shipment did not meet the SPECIFICATIONS, a
sample of the rejected shipment shall be submitted to an independent, qualified
third-party laboratory that is mutually acceptable and selected by the parties
promptly in good faith. Such laboratory shall determine whether the rejected
AERx DEVICES or DRUG PRODUCTS (as applicable) meet the SPECIFICATIONS, and such
laboratory's determination shall be final and determinative for purposes of this
Agreement. The Party against whom the laboratory rules shall bear all costs of
the laboratory testing. If the laboratory rules that the shipment failed to meet
SPECIFICATIONS, the replacement shipment shall be at no charge to SB (provided
SB paid for the initial shipment). If the laboratory rules the rejected shipment
met the SPECIFICATIONS, then SB shall accept such batch for use and shall
reimburse Aradigm for the replacement shipment (including all costs of shipping
and insurance). Shipments of AERx DEVICES or DRUG PRODUCTS not meeting the
SPECIFICATIONS may, at Aradigm's option and expense, be returned to Aradigm or
destroyed by SB.
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6.11 MANUFACTURING FACILITIES, EQUIPMENT AND LICENSES. Aradigm shall, at
Aradigm's expense, acquire or cause to be acquired all equipment and licenses,
including, without limitation, all necessary plant equipment and facilities
licenses, necessary to enable the manufacture and testing of the AERx DEVICES
and DRUG PRODUCTS as required hereunder. Aradigm shall use commercially
reasonable efforts to keep such equipment properly maintained and to reduce
risks of breakdown of critical machinery. Aradigm shall obtain and maintain all
necessary U.S.A. manufacturing licenses and approvals including but not limited
to FDA approval for the manufacturing facilities. SB, its AFFILIATES and its
sublicensees shall obtain any required export and importation licenses or
approvals for importation of PRODUCTS for sale in any given country in the
TERRITORY. Aradigm shall cooperate reasonably with SB to obtain such licenses or
approvals. Aradigm shall maintain all records as are necessary and appropriate
to demonstrate compliance with cGMPs. Aradigm shall manufacture PRODUCTS in a
facility maintaining a current drug establishment registration with FDA as set
forth in 21 C.F.R., Part 207 and registration as importer and/or manufacturer of
controlled substances with the Drug Enforcement Agency ("DEA") as set forth in
21 C.F.R., Part 1300, if applicable.
6.12 MANUFACTURING REGULATORY MATTERS.
(a) Aradigm will be responsible for any reporting of matters
regarding the manufacture of AERx DEVICES, DRUG PRODUCTS and ACCESSORIES to the
FDA and other relevant regulatory authorities, in accordance with pertinent laws
and regulations. Aradigm shall notify SB of any such matter if significant or
serious and promptly furnish complete copies of such reports to SB. Aradigm
shall also advise SB of any occurrence or information which arise out of
Aradigm's manufacturing activities, whether or not occurring with an AERx
DEVICE, DRUG PRODUCT or ACCESSORY, which have or could reasonably be expected to
have adverse regulatory compliance and/or reporting consequences concerning an
AERx DEVICE, DRUG PRODUCT or ACCESSORY.
(b) Aradigm shall be responsible for handling and responding to any
appropriate governmental agency inspections with respect to manufacturing of
AERx DEVICES, DRUG PRODUCTS and ACCESSORIES during the term of this Agreement.
Aradigm shall provide to SB any information reasonably requested by SB and all
information requested by any governmental agency in connection with any
governmental inspection related to AERx DEVICES, DRUG PRODUCTS and ACCESSORIES
manufacturing. Aradigm shall immediately advise SB of any requests by any
governmental agency for such inspections with respect to manufacturing of AERx
DEVICES, DRUG PRODUCTS and ACCESSORIES.
(c) Any changes by Aradigm to the manufacturing process for AERx
DEVICES, DRUG PRODUCTS or ACCESSORIES or any component thereof that may require
approval by the FDA or other authorities or amendment of existing REGULATORY
APPROVALS or APPROVAL APPLICATIONS shall require the prior written approval of
SB, not to be unreasonably withheld or delayed.
(d) In the event Aradigm (or any THIRD PARTY who supplies any
components to Aradigm for manufacture of AERx DEVICES, DRUG PRODUCTS or
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ACCESSORIES) is inspected by the FDA, DEA, or any similar or related state or
federal health authority with respect to activities relating to the manufacture
of AERx DEVICES, ACCESSORIES or DRUG PRODUCTS, Aradigm shall promptly notify SB
of any alleged violations or deficiencies relating to the manufacturing facility
at which the implicated product is manufactured, packaged or stored, and shall
promptly disclose to SB all relevant portions of any notice of observations or
potential violations (e.g. FDA Form-483) as well as a copy of Aradigm's response
thereto.
(e) Aradigm certifies it did not and will not use in any capacity
the services of any person, including any firm or individual, debarred or
subject to debarment under the Generic Drug Enforcement Act of 1992, amending
the Food Drug and Cosmetic Act at 21 USC 335a. Aradigm agrees to notify SB
immediately in the event any person providing services to Aradigm under the
scope of the work of this Agreement is debarred or becomes subject to debarment.
(f) For the limited purpose of permitting a quality and compliance
audit, Aradigm shall grant to authorized representatives of SB (or a THIRD PARTY
hired on behalf of SB who is reasonably acceptable to Aradigm and is subject to
confidentiality obligations to Aradigm), upon reasonable notice, access to areas
of Aradigm's plants and each of Aradigm's THIRD PARTY supply contractor's plants
at such times as AERx DEVICES, DRUG PRODUCTS and ACCESSORIES are being
manufactured, solely for the purpose of SB determining that such manufacture is
in compliance with regulatory requirements. SB shall provide Aradigm at least
[*] notice in writing of its desire to have such access. Aradigm shall promptly
respond to SB's request and the Parties shall agree on the time of and
procedures for the audit. All such inspections shall be subject to
confidentiality obligations.
(g) SB shall have the right, subject to prior advance notice of at
least [*] and approval by Aradigm, not to be unreasonably withheld, and during
normal business hours, to examine those techneical records made by Aradigm that
only relate to Quality Assurance testing and regulatory compliance monitoring
for manufacturing of AERx DEVICES, DRUG PRODUCTS and ACCESSORIES. SB shall not
have access to any proprietary information relating to manufacturing processes,
except to the extent necessary to complete the examination under this
subsection, or to any documents relating to Aradigm operations generally or in
whole or in part to any other product of Aradigm or of any other customer of
Aradigm.
(h) All INFORMATION disclosed by Aradigm pursuant to activities
under this Section 6.12 to SB or any of its employees, agents or designees shall
be deemed to be CONFIDENTIAL INFORMATION of Aradigm.
6.13 PRODUCT RECALL PROCEDURES. The Parties shall immediately inform each
other in writing of all INFORMATION relating to: (a) any incident relating to a
PRODUCT and/or any lot of a PRODUCT that is the subject of recall, market
withdrawal or correction, or (b) any PRODUCTS that may require, whether based on
manufacturing defect, tampering, or otherwise, a recall, field alert, product
withdrawal or field correction arising from any defect in any such PRODUCT
provided under this Agreement. The Parties then shall meet and discuss the
situation in good faith to determine if a recall, field alert, product
withdrawal, or field correction is
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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necessary. In the event that either SB or Aradigm decides that a recall, field
alert, product withdrawal, or field correction is necessary due to any defect or
other problem in any PRODUCT, the Parties shall cooperate and use DILIGENT
EFFORTS in effecting any such required recall, market withdrawal or correction.
Payment of costs and expenses associated with recalls, market withdrawals or
corrections of PRODUCTS shall be borne by the Parties as follows:
(A) All costs and expenses associated with conducting the recall or
market withdrawal of a PRODUCT shall, except to the extent otherwise provided in
subsections (b), (c) or (d) below, be shared by the Parties, with SB paying an
amount equal to [*] calculated for all sales of the PRODUCT during the four (4)
most recent calendar quarters for which the needed information is available, and
Aradigm paying an amount equal to such [*] calculated for the same period;
As used in this Agreement:
[*] means, with respect to sales of a particular PRODUCT sold under
the Agreement during a particular period:
[*]
and
[*] means, with respect to sales of a particular PRODUCT sold to
THIRD PARTIES under the Agreement during a particular period:
[*]
Where:
"MC" equals the [*] for such PRODUCTS sold during such period;
"NS" equals the [*] during such period;
"TAP" means the [*] the PRODUCTS that were sold by SB or its AFFILIATES or
sublicensees during such period;
"SH" means the [*] the applicable PRODUCTS from the FCA point (as
provided in Section 6.8) to the location designated by SB for shipment; the [*]
for the applicable PRODUCTS; and [*] for testing such PRODUCTS.
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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(b) [*] the MANUFACTURING COSTS of replacing the PRODUCTS that were
not defective but were recalled or withdrawn as part of the recall or market
withdrawal and the costs for shipment of such replaced PRODUCTS from Aradigm to
the location from which recalled or withdrawn;
(c) [*] MANUFACTURING COSTS for replacement of the recalled or
withdrawn PRODUCTS that were defective as a result of Aradigm's negligent or
defective manufacture and the costs for shipment of such replaced PRODUCTS from
Aradigm to the location from which recalled or withdrawn; and
(d) [*] MANUFACTURING COSTS for replacement of the recalled or
withdrawn PRODUCTS that were defective as a result of damage or other defects
caused by SB, its AFFILIATES or sublicensees and the costs for shipment of such
replaced PRODUCTS from Aradigm to the location from which recalled or withdrawn.
With respect to AERx DEVICES recalled or withdrawn hereunder, if such AERx
DEVICES were in SB's or its AFFILIATE'S inventory, such AERx DEVICES shall be
returned to Aradigm and, if commercially feasible, tested to determine which
such devices are not defective. Such AERx DEVICES determined not to be defective
shall be [*] and such procedure shall constitute "replacement" under subsection
(b) above, with the [*]. For AERx DEVICES that were recalled from customers,
such recalled AERx DEVICES shall be delivered to SB upon such recall, with
replacement under subsection (b) above, and SB may use such recalled devices as
it determines, provided that SB agrees not to resell any such recalled devices.
7. PRODUCT SUPPLY PAYMENTS.
7.1 PRICING OF CLINICAL MATERIALS. The AERx DEVICES, DRUG PRODUCTS,
placebos, and ACCESSORIES supplied by Aradigm under Section 6.3 for Aradigm's or
SB's use in clinical trials hereunder shall be paid for by SB, except as
otherwise provided in Section 2.4(e), at a per unit price equal [*] for the AERx
DEVICE, DRUG PRODUCT, placebo or ACCESSORY supplied, provided, however, that if
SB requires supply for use in clinical trials in excess of [*] the amount of
units of the AERx DEVICES, DRUG PRODUCTS or placebos as is specified in the
initial DEVELOPMENT PLAN for the applicable AERx SYSTEM, then Aradigm may charge
SB [*] of Aradigm's MANUFACTURING COSTS for such excess purchases. Aradigm shall
invoice SB for such supply prices at the time of shipment of the PRODUCTS to SB,
and such invoiced amounts, if not covered by DEVELOPMENT COST funding provided
to Aradigm by SB under Section 2.4, shall be paid by SB within thirty (30) days.
[*] for the AERx DEVICES, DRUG PRODUCTS, placebos, and ACCESSORIES manufactured
and used by Aradigm in the clinical DEVELOPMENT work conducted by Aradigm
consistent with the applicable DEVELOPMENT PLAN shall constitute [*].
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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7.2 PURCHASE PRICE OF PRODUCT. For the purchases of PRODUCTS for
commercial sale or use (i.e., not for clinical trial use) SB shall pay Aradigm a
transfer price as provided in subsection (a) below and an amount as calculated
under Section 7.3.
(a) The transfer price for purchase of a PRODUCT shall equal [*] of
the actual MANUFACTURING COSTS for such PRODUCT purchased, provided that with
respect to purchases of AERx DEVICES, the transfer price under this Section
7.2(a) shall not in any event exceed [*], as such amount may be adjusted
according to the following sentence. Effective on the first January 1 after the
first commercial launch, the [*] cap on the transfer price of AERx DEVICES shall
be [*] from the latest [*] the date of such first commercial launch to [*] such
January 1. Effective each January 1 thereafter, the cap on the transfer price of
AERx DEVICES shall be [*] available on the previous January 1 [*].
(b) The MANUFACTURING COSTS used in determining the transfer price
payable under subsection (a) for particular PRODUCTS sold to SB shall be the [*]
for which such costs can be calculated. The transfer prices for PRODUCTS set
forth in subsection (a) shall be paid by SB within thirty (30) days of receipt
of invoices from Aradigm setting forth the applicable prices due to PRODUCTS
purchased. Invoices shall be submitted upon delivery of the PRODUCTS to SB under
Section 6.8.
7.3 PERCENTAGE OF SALES. As part of the commercial purchase price for
PRODUCTS purchased by SB hereunder, SB shall pay Aradigm the following amounts
(if any) in addition to the transfer price paid pursuant to Section 7.2(a):
(a) For each DRUG PRODUCT purchased by SB, SB shall pay to Aradigm
an amount equal to [*] of the NET SALES of the DRUG PRODUCT during a particular
calendar year up to and including the [*] for the applicable calendar year, and
[*] of the amount of NET SALES of such DRUG PRODUCT during such calendar year
that are in excess of [*] for such calendar year.
(b) SB shall not pay Aradigm any percentage of the NET SALES of AERx
DEVICES or ACCESSORIES that are sold at prices that provide SB with a [*] (as
defined below) of less than or equal to [*]. For sales of AERx DEVICES or
ACCESSORIES sold at prices that provide SB with a [*] of more than [*], SB shall
pay Aradigm an amount equal to 0.5% of NET SALES of the AERx DEVICES or
ACCESSORIES, as applicable, for each one percentage point (1%) that the [*] for
the PRODUCT exceeds [*].
As used herein, [*] for sales of a particular AERx DEVICE or ACCESSORY shall be
calculated as follows:
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separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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[*]
For purposes of this Section 7.3(b), the following definitions apply:
"Net Sales" means the NET SALES (as defined in Article 1) from such
AERx DEVICES or ACCESSORIES, as applicable
"Transfer Price" means the amount paid by SB to Aradigm under Section 7.2
as the transfer price on purchase of the applicable AERx DEVICE or
ACCESSORY
"Device Royalties" means amounts paid by SB, either directly to a THIRD
PARTY or to Aradigm to reimburse Aradigm for such payments to a THIRD
PARTY, on account of royalties payable to THIRD PARTIES based on the
manufacture or sale of the AERx DEVICE or ACCESSORY, as calculated under
Section 9.7(b) hereof.
"Shipping" means the actual costs paid by SB for shipment of the
applicable AERx DEVICES or ACCESSORIES from the FCA point (as provided in
Section 6.8) to the location designated by SB for shipment.
"IDT" means the actual amounts of import duties and actual import testing
expenses paid by SB for the applicable AERx DEVICES or ACCESSORIES
(c) For sales of an AERx SYSTEM in a country where: (i) there are
sales of [*] such AERx SYSTEM in function and performance for use in the FIELD,
and (ii) there is [*] of PRODUCTS in such AERx SYSTEM , and (iii) the sales of
PRODUCTS in such AERx SYSTEM in such country for a [*] period after [*] the
sales of PRODUCTS in such AERx SYSTEM in such country for the [*] period
directly prior to the date of [*] in such country; then the amounts payable to
Aradigm under this Section 7.3 based on NET SALES in such country of the
PRODUCTS in such AERx SYSTEM that are subject to such payments shall be [*] of
the amounts that otherwise would be owed under subsection (a) or (b) above, as
applicable, but subject to the following: At such time as the sales [*] of
PRODUCTS in such AERx SYSTEM in such country during any [*] period [*] PRODUCTS
in such AERx SYSTEM in such country for the [*] period directly [*] in such
country, SB shall thereafter pay Aradigm 100% of the amounts owed under this
Section 7.3 for sales thereafter of the PRODUCTS in such AERx SYSTEM in such
country.
(d) For sales of the INITIAL PRODUCT, it is understood that Aradigm
shall owe the [*] a royalty of [*] of the NET SALES of the INITIAL PRODUCT. SB
agrees that, in addition to any other amounts owed to Aradigm under
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separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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the Agreement for the purchase and sale of the INITIAL PRODUCTS, SB shall pay
to Aradigm [*] of the NET SALES of all INITIAL PRODUCTS sold by SB, its
AFFILIATES or sublicensees where Aradigm owes [*] the above-stated royalty based
on such sales The amounts owing with respect to such sales made in a particular
calendar quarter are due and payable by SB within forty-five (45) days after the
end of such quarter.
7.4 TIMING OF PAYMENTS.
(a) The payment obligations under Section 7.3 shall accrue upon the
sale of the particular PRODUCT to the THIRD PARTY purchaser by SB, its AFFILIATE
or sublicensee, which is deemed to occur on the date of the invoice for such
sale. Such payment obligations that have accrued during a particular calendar
quarter shall be payable within forty-five (45) days of the end of such calendar
quarter. Such payments shall be accompanied by a report as provided in Section
5.6.
(b) The [*] shall be payable within forty-five (45) days after the
end of the applicable four calendar quarter period for which they are due,
provided that all amounts paid under Section 7.3 for such period shall be fully
[*].
(c) Within forty-five (45) days after the close of each calendar
quarter, Aradigm shall deliver to SB a true accounting of all net sales during
such quarter that are subject to the payment obligation under Section 3.3, and
shall at the same time pay all royalties due. Such accounting shall show sales
on a country-by-country basis and a PRODUCT-by-PRODUCT basis.
(d) All amounts due under this Agreement shall be payable in U.S.
Dollars. If governmental regulations in a particular foreign country prevent
remittances of such amounts to Aradigm in the U.S.A. with respect to sales of
PRODUCTS made in that country, SB shall pay the amounts due based on sales in
that country into a bank account in such country designated by Aradigm, which
amounts may be in the local currency. Aradigm shall have the reciprocal right
with respect to any amounts that are due to SB under Section 3.3.
7.5 WITHHOLDING TAXES. SB agrees to use good faith, DILIGENT EFFORTS to
eliminate (or, if that is not possible, to minimize) any withholding or other
taxes assessed by any foreign country on the amounts paid by SB to Aradigm
pursuant to Section 7.3 hereof (but excluding taxes assessed on Aradigm's net
income). In the event that a tax is assessed on Aradigm by a foreign country on
account of the amounts payable to Aradigm under Section 7.3 of this Agreement
based on sales of PRODUCTS in such country, and SB is required to withhold funds
on account of such assessment and pay such withheld amounts to such country, or
to pay such assessment, such funds paid or withheld (a) shall be deducted from
any amounts then payable by SB to Aradigm under Section 7.3, or (b) if such
amounts payable to Aradigm are insufficient, the difference shall be promptly
reimbursed by Aradigm to SB. SB shall secure and send to Aradigm proof of any
such withholding of taxes paid by SB, its AFFILIATES or its sublicensees for the
benefit of Aradigm. Aradigm shall have the reciprocal rights and obligations
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separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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with respect to any withholding taxes assessed on royalties which are due to SB
under Section 3.3.
7.6 COMPULSORY LICENSES. In the event that a governmental agency in any
country grants to a THIRD PARTY, or compels Aradigm to grant to a THIRD PARTY, a
license under the ARADIGM PATENTS which license permits such THIRD PARTY to
make, use and sell in such country any AERx SYSTEM, AERx DEVICE, DRUG PRODUCT or
ACCESSORY, then [*] such THIRD PARTY with respect to SB's use and sale of such
PRODUCT in such country to the [*] of this Agreement; but provided that if the
foregoing would result in [*] then at Aradigm's request senior management
officers of the Parties shall meet and discuss in good faith an appropriate
resolution to the problem.
7.7 CONVERSION OF NET SALES. NET SALES in a particular country outside the
U.S.A. during a particular calendar quarter shall be equal to the year-to-date
NET SALES converted into U.S.A. Dollars less year-to-date NET SALES for the
previous calendar quarter(s) converted into U.S.A. Dollars. NET SALES shall be
converted from the currency of the sale into U.S.A. Dollars at the average daily
rates of exchange for the year from January 1 to the end of such calendar
quarter, from such country's currency into U.S.A. Dollars as reported in the
Wall Street Journal or some other source agreeable to both Parties, and shall be
converted at such average year-to-date rate at the end of such quarter. Aradigm
shall use the same mechanism for converting net sales with respect to royalties
which are due to SB under Section 3.3.
7.8 AUDIT RIGHTS. SB shall keep and require its AFFILIATES and
sublicensees to keep complete and accurate records of all NET SALES and Third
Party Product Royalties and Third Party Device Royalties paid by SB, and SB
shall obtain and keep copies of such records sent by its AFFILIATES and
sublicensees. Upon twenty (20) days prior written notice to SB, Aradigm shall
have the right, at Aradigm's expense, to have a certified public accountant or
the equivalent reasonably acceptable to SB audit such records kept by SB to
confirm that all payments made hereunder are accurate and that the Third Party
Product Royalties and Third Party Device Royalties submitted by SB are accurate.
Any audit performed pursuant to this Section shall take place during the life of
this Agreement and for six (6) months after its termination or expiration;
provided, however, that such examination shall not take place more often than
once a year and shall not cover such records for more than the preceding two (2)
calendar years. In addition, any such audit shall take place during regular
business hours at SB's principal place of business or at any other location
where SB may make the applicable records available; provided, however that
access to such records shall be provided in such manner so as not to interfere
with the normal conduct of SB's business or operations. Access to such records
kept by SB shall be limited to such records (or the relevant portion thereof) as
are reasonably required to determine that payments made under this Agreement are
accurate (or if such payments are not accurate then to determine the proper
payment amount), and provided further that such accountant shall report to
Aradigm only as to the accuracy of the payments and Aradigm and/or its
accountant shall execute such confidentiality agreements with respect to such
access as SB may request. Any amounts showed to be owed to Aradigm shall be
immediately
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been requested with respect to the omitted portions.
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paid with interest at [ * ] per month (or the maximum amount allowed by law, if
less) from the day such amounts were first due until paid. In addition, if the
audit shows underpayment by [ * ] or more of the amounts due during the audited
period, SB shall pay Aradigm's reasonable expenses in having such audit
conducted. SB shall have a reciprocal right to audit Aradigm's records, under
similar provisions, including the right of collection of interest for any
overpayment by SB to Aradigm hereunder, and right to have its reasonable
expenses in conducting such audit paid by Aradigm if the audit shows overpayment
by [ * ] or more of the amounts paid by SB during the audited period, to
determine if the DEVELOPMENT COSTS, MANUFACTURING COSTS, and Third Party Product
Royalties and Third Party Device Royalties submitted by Aradigm hereunder are
accurate. Aradigm shall have the reciprocal obligation to keep complete and
accurate records of DEVELOPMENT COSTS, MANUFACTURING COSTS, Third Party Product
Royalties, Third Party Device Royalties and net sales which are subject to the
royalty payments owed to SB by Aradigm under Section 3.3, and SB shall have a
reciprocal right to audit Aradigm's records with respect to royalty payments
owed to SB by Aradigm under Section 3.3 to determine if the payments submitted
to SB are accurate, under similar provisions, including the right of collection
of interest for any underpayment by Aradigm to SB hereunder, and right to have
its reasonable expenses in conducting such audit paid by Aradigm if the audit
shows underpayment by [ * ] or more of the amounts paid by SB during the audited
period.
8. WARRANTY AND PRODUCT SERVICE.
8.1 WARRANTY.
(a) AERx DEVICE; ACCESSORIES. Aradigm warrants to SB, which warranty
SB may extend to all purchasers and end-users, at the time of any sale that, for
a period of [ * ] from the date of delivery to an end-user of an AERx DEVICE
or ACCESSORY, such AERx DEVICE or ACCESSORY shall conform in all material
respects to the SPECIFICATIONS, shall conform to any SPECIFICATIONS required by
the applicable REGULATORY APPROVALS, and shall be free from material defects in
materials and workmanship. The obligations of Aradigm with respect to breach of
the foregoing warranty are expressly limited to, at Aradigm's option, the repair
or replacement of the AERx DEVICE or ACCESSORY that fails to meet the warranty,
at Aradigm's cost. Aradigm's obligations hereunder apply with respect to a
particular AERx DEVICE or ACCESSORY only if such PRODUCT actually fails to meet
the above warranty and such failure was not caused by misuse, attempts to
repair, or by accident, fire or other hazard unless caused by Aradigm, its
AFFILIATES or their respective officers, directors, representatives, agents or
employees. For clarification, the foregoing limitation shall not be interpreted
to limit any rights under Section 12.1.
(b) DRUG PRODUCT. Aradigm warrants that DRUG PRODUCT delivered
hereunder will (i) be manufactured by Aradigm in accordance with cGMP and other
applicable FDA and other rules and regulations of the U.S.A. and MAJOR MARKET
COUNTRIES and (ii) conform to the SPECIFICATIONS at the time of delivery. SB's
exclusive remedies and Aradigm's entire liability with respect to the warranty
in this Section 8.1(b) are as set forth in
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the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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Section 6.10 with respect to acceptance of PRODUCTS, provided that the foregoing
does not limit any rights under Section 12.1.
8.2 DISCLAIMER. EXCEPT FOR THE EXPRESS WARRANTIES AND REPRESENTATIONS
CONTAINED IN THIS AGREEMENT, NEITHER SB NOR ARADIGM MAKES, AND EACH HEREBY
EXPRESSLY DISCLAIMS, ANY WARRANTIES OR REPRESENTATIONS, EITHER EXPRESS OR
IMPLIED, WHETHER IN FACT OR IN LAW, INCLUDING WITHOUT LIMITATION IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR
NON-INFRINGEMENT.
8.3 PRODUCT HELP-LINE. SB understands and agrees that SB shall be
responsible for providing first-line help-line service to purchasers or users of
the PRODUCTS, which means addressing and resolving all questions relating to use
or functionality of the PRODUCTS posed by end users of the PRODUCTS, to the
extent that SB's designated service personnel are capable. SB shall provide
help-line service to the end users of the PRODUCTS and shall provide adequate
training to the personnel staffing such help-line. With respect to any such
questions regarding the PRODUCTS that SB's designated service personnel are
unable to resolve after reasonable efforts, SB will refer such customers to
Aradigm for second-line customer support service hereunder to obtain resolution
of such questions. SB shall make all such requests for second-line customer
service by telephone or such other means of communication (such as e-mail) as
Aradigm may implement from time to time. Such second-line customer service shall
be available during such hours as Aradigm establishes.
8.4 PRODUCT SERVICE. Aradigm agrees to establish a service center for
receiving from end users any AERx DEVICES and ACCESSORIES that have experienced
malfunctions, in order to perform or arrange for service to correct such
malfunctions. Aradigm agrees to use DILIGENT EFFORTS to repair or replace
malfunctioning units promptly after receipt using mutually agreed upon criteria
to determine whether the unit is to be repaired or replaced. For any such
malfunctioning units that are covered by the warranty under Section 8.1, such
repair or replacement cost shall be at Aradigm's expense. Prior to launch of the
first PRODUCT, the Parties will agree to a policy regarding payment to Aradigm
for the costs of product service for units no longer covered by the warranty
provided in Section 8.1.
9. INTELLECTUAL PROPERTY.
9.1 OWNERSHIP OF TECHNOLOGY. Aradigm shall retain all right, title and
interest in and to the ARADIGM PATENTS and all INFORMATION owned or CONTROLLED
by Aradigm, and SB shall retain all right, title and interest in and to the SB
PATENTS and all INFORMATION owned or CONTROLLED by SB, subject to the rights
granted hereunder. Each Party shall have and retain sole and exclusive title to
all INVENTIONS that are made, conceived, reduced to practice or generated solely
by its or its AFFILIATE'S employees, agents, or other persons acting under its
authority, and to all PATENTS claiming such INVENTIONS. Each Party shall own a
fifty percent (50%) undivided interest in all JOINT INVENTIONS made, conceived,
reduced to practice or generated under the Agreement, and all JOINT PATENTS
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claiming such JOINT INVENTIONS. Except as expressly provided otherwise in this
Agreement, each joint owner may make, use, sell, keep, license, assign, or
mortgage such JOINT INVENTIONS and JOINT PATENTS, and otherwise undertake all
activities a sole owner might undertake with respect to the same, without the
consent of and without accounting to the other joint owner. Inventorship of
inventions shall be determined under U.S. patent law regarding inventorship.
9.2 PROSECUTION AND MAINTENANCE OF PATENTS; ABANDONMENT. Each Party shall
have the sole right and responsibility to file, prosecute and maintain its
independently owned PATENTS and shall bear all expenses associated therewith.
Aradigm shall use DILIGENT EFFORTS to file, prosecute and maintain the ARADIGM
PATENTS (or foreign equivalents thereof) in the countries listed in Exhibit F
(to the extent such prosecution is permitted under the applicable patent laws).
The Parties agree to discuss in good faith a mutually agreeable patent strategy
with respect to all JOINT INVENTIONS that may be patentable. With respect to all
JOINT INVENTIONS for which the Parties agree patent protection should be sought,
SB and Aradigm shall cooperate in good faith to file, prosecute and maintain the
JOINT PATENTS covering such JOINT INVENTIONS, and the Parties shall jointly bear
all expenses associated therewith. However, either Party may choose at any time
not to continue to pay any such prosecution and maintenance costs with respect
to a particular JOINT PATENT, and shall immediately thereafter assign all its
rights in such JOINT PATENT claiming a JOINT INVENTION to the Party that pays
all such costs. In the event that a Party elects not to prosecute a PATENT
application on a particular JOINT INVENTION, the other Party may do so at its
sole discretion and expense, and all rights in such JOINT INVENTION and the
JOINT PATENT claiming such invention shall be assigned to such other Party.
Aradigm shall have the right, but not the obligation, to seek extensions of the
terms of ARADIGM PATENTS and to seek to obtain Supplemental Protection
Certificates, and similar rights, based on ARADIGM PATENTS at its own expense.
Aradigm shall reasonably consider SB's requests with respect to such efforts
relating to the FIELD. At Aradigm's request, SB shall provide to Aradigm a copy
of any requested REGULATORY APPROVAL held by SB, and any information relating
thereto, to the extent necessary for the purpose of seeking such extensions of
ARADIGM PATENTS and/or obtaining such Supplemental Protection Certificates or
similar rights. If Aradigm decides to abandon prosecution or maintenance of a
particular ARADIGM PATENT whose claims relate directly to an AERx SYSTEM, AERx
DEVICE, ACCESSORY or DRUG PRODUCT, SB may request that SB have the right to
continue such prosecution and/or maintenance, which request Aradigm will
reasonably consider, provided that Aradigm need not in any event grant any such
request if Aradigm has a strategic reason, with respect to its prosecution
strategy for its PATENTS, for abandoning such PATENT (which reason may not
include simply cost savings). If Aradigm grants SB's request, SB may continue
the prosecution and maintenance of such ARADIGM PATENT, at SB's expense,
provided that SB keep Aradigm reasonably informed of the progress of any such
prosecution.
9.3 THIRD PARTY TECHNOLOGY. The Parties hereby agree that if either Party
becomes aware of any technology or intellectual property rights owned by a THIRD
PARTY which may be useful or necessary to the DEVELOPMENT, manufacture, use, or
sale of a particular PRODUCT or PRODUCTS, such Party shall bring such
information to the attention of the
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DEVELOPMENT COMMITTEE. The DEVELOPMENT COMMITTEE shall discuss and analyze the
information and situation, to determine whether to seek to acquire or obtain a
license to such technology or intellectual property rights. However, except as
otherwise provided in this Section and in Sections 9.5 or 9.6, neither the
DEVELOPMENT COMMITTEE nor any Party shall obtain or license such technology or
intellectual property rights for use under this Agreement without the [ * ] if
such acquisition or license would require payment of any amounts to the THIRD
PARTY owner with respect to the DEVELOPMENT, manufacture, use or sale of
PRODUCTS hereunder, which [ * ] shall include [ * ] such acquisition or license
shall be [ * ]. With respect to a proprietary ANALGESIC DRUG owned by a THIRD
PARTY, neither Party may license such ANALGESIC DRUG for use in a DRUG PRODUCT
hereunder without the written approval of both Parties, which approval shall [*]
of royalty or other payments owed to such THIRD PARTY for such license. For
clarity, nothing in the foregoing shall prevent a Party from obtaining or
licensing THIRD PARTY technology if such Party is entirely responsible for all
payments relating to such acquisition or licensing.
9.4 INTELLECTUAL PROPERTY ISSUES. In the event that either Party
reasonably believes that the manufacture or sale of a particular PRODUCT may
infringe a PATENT owned by a THIRD PARTY (whether before or after an action
based on such PATENT has been filed), then such Party will provide the other
Party all INFORMATION in its possession relating to such belief. Promptly
thereafter, the Parties shall meet to discuss in good faith the appropriate
steps to take to address such possible infringement, which may include, without
limitation: (a) negotiating and entering into a license agreement with such
THIRD PARTY that grants the Parties the right to continue making, using and
selling such PRODUCT, or (b) modifying the applicable PRODUCT so that the
Parties believe it no longer infringes, or (c) proceeding without any change
based on a reasonable analysis that such PRODUCT does not infringe and/or such
PATENT is not valid or enforceable. In the event that the Parties decide to
obtain a license from such THIRD PARTY, the consideration for such license shall
be paid as provided in Section 9.7 below. In the event one Party [ * ] during
the exercise of SB's rights under this AGREEMENT, but [ * ] the Parties shall
submit such issue promptly thereafter to an independent, mutually-acceptable,
THIRD PARTY patent attorney, who shall [ * ]. The expenses of engaging such
patent attorney for such [ * ]. If such attorney determines that [ * ] as
provided in Section 9.7. For clarity, nothing in the foregoing shall prevent a
Party from obtaining or licensing THIRD PARTY technology if such Party is
entirely responsible for all payments relating to such acquisition or licensing.
9.5 DEFENSE AND SETTLEMENT OF THIRD PARTY PATENT CLAIMS. PATENT
infringement claims by THIRD PARTIES against PRODUCTS shall be addressed as
follows:
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(a) If a THIRD PARTY brings any claim or action (a "3d Party Patent Action")
against SB or Aradigm that the manufacture, use, sale, offer for sale, or
importation of a PRODUCT infringes an issued PATENT that is owned or controlled
by such THIRD PARTY (but excluding from the definition of "3d Party Patent
Action" any claims or actions that the ANALGESIC DRUG in a PRODUCT is
infringing, which is provided for in Section 9.6 below), the Party subject to
such 3d Party Patent Action shall have the right to defend itself, at its
expense and using counsel of its choosing. Each Party agrees to notify the other
promptly in writing of any such 3d Party Patent Action against it. The Parties
agree to cooperate reasonably in the defense of 3d Party Patent Actions,
provided that each Party shall have the sole final discretion with respect to
its own defense, [ * ]. In the event that SB is subject to any 3d Party Patent
Action but Aradigm is not also subject to such 3d Party Patent Action, SB agrees
that Aradigm shall be permitted to join such 3d Party Patent Action to defend,
at its own expense, its interests in such action as a necessary party, whether
by interpleader or otherwise. SB agrees that SB will not object to any attempt
by Aradigm to become a party to any such dispute.
(b) In any 3d Party Patent Action against SB, SB shall have the
right to settle or compromise at SB's expense such 3d Party Patent Action
without Aradigm's prior written consent, provided that, subject to subsection
(c) below, in any such settlement or compromise (i) [*] by the manufacture, use,
sale, offer for sale, or importation of the accused PRODUCTS, (ii) [ * ], (iii)
if SB obtains a license from the THIRD PARTY under the applicable PATENTS to
continue to use, import, market, offer for sale or sell the PRODUCT, such
license [ * ] and (iv) Aradigm's [ * ]. In any 3d Party Patent Action against
Aradigm, Aradigm shall have the right to settle or compromise at Aradigm's
expense such 3d Party Patent Action without SB's prior written consent, provided
that, subject to subsection (c) below, in any such settlement or compromise (i)
if Aradigm obtains a license from the THIRD PARTY under the applicable PATENTS
to manufacture, supply and sell to SB the PRODUCT, such license [ * ] and (ii)
SB's right [ * ] Aradigm shall not settle or compromise such claim or action [ *
] if such settlement or compromise would [ * ] under this Agreement.
(c) In the event that: (1) a Party that is a defendant in a 3d Party
Patent Action [ * ] that is the subject of such 3d Party Patent Action [ * ] or
otherwise that such 3d Party Patent Action should [ * ] and (2) such Party is
[ * ] the other Party that allows the Parties to continue to make, import, use,
offer for sale and sell the accused PRODUCT as contemplated hereunder; then upon
notice to the other Party, the appropriate
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senior management officers of each Party shall immediately meet to discuss in
good faith and agree upon [*] to such 3d Party Patent Action, which may include,
without limitation: (i) modifying the applicable PRODUCT so that it no longer
infringes, or (ii) ceasing to manufacture and sell such PRODUCT and proceeding
promptly to develop a replacement PRODUCT therefor on terms commercially
acceptable to each Party. During such discussions [*] If the Parties do not
agree, within [*] days of the notice provided under this subsection (c)
with respect to such 3d Party Patent Action, on a resolution to the situation,
then such situation shall immediately be referred to binding arbitration under
Section 13.1 for resolution, with the following additional requirements for such
arbitration: The object of such arbitration shall be that the arbitration
establish an appropriate resolution to such 3d Party Patent Action with respect
to the affected PRODUCT, which resolution shall [*] If such arbitration is
required hereunder, the Parties hereby agree that immediately upon such referral
to arbitration, the Parties will agree on an arbitration procedure and mechanism
that assures achieving a decision under the arbitration on an expedited basis,
it being agreed that a resolution of the issue as soon as possible is critical
to the defendant in the underlying 3d Party Patent Action.
(d) Notwithstanding the foregoing, [*] in defending against any
claim or action under Section 9.5(a) to the extent such claim is based upon any
[*] or its AFFILIATE or a THIRD PARTY acting on behalf of [*] or its AFFILIATE
or a THIRD PARTY acting on behalf of [*] of the PRODUCT in combination with any
product or service not [*].
(e) Any royalty obligation that Aradigm or SB is obligated to pay
under a final judgment for future sales of the PRODUCT shall be [*] pursuant to
the provisions of Section 9.7 below.
9.6 THIRD PARTY CLAIMS REGARDING ANALGESIC DRUG. SB shall defend any claim
or action by a THIRD PARTY against SB and/or Aradigm based on a claim that the
ANALGESIC DRUG in a PRODUCT infringes a PATENT issued in the U.S.A. or a MAJOR
MARKET COUNTRY which is owned or controlled by such THIRD PARTY, provided that
Aradigm notifies SB promptly in writing of such action against Aradigm. Aradigm
shall give SB control of the defense thereof (and any negotiations for
settlement or compromise thereof) and will cooperate fully in the defense
thereof, provided that Aradigm shall have the right to participate in all
aspects of such defense relating to claims against Aradigm and to consult with
SB thereupon, and SB shall reasonably consider all Aradigm's suggestions
regarding defense of the claims against Aradigm. Subject to SB having such
control, Aradigm, at its own expense, may participate in such defense of Aradigm
using counsel of its choice, provided that such participation does not conflict
with SB's defense. SB shall not settle or compromise any such claim or action
without Aradigm's prior written consent, if such settlement or compromise would
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impose on Aradigm any obligation to pay or incur any costs or expenses. [*] to
the extent that such defense relates to claims against the ANALGESIC DRUG per
se. In the event that SB does not undertake the defense of an action against
ARADIGM hereunder within fifteen (15) days of notice to SB of such claim, then
ARADIGM shall have the full right to defend itself, using counsel of its own
choosing, against such claim, including any negotiations for settlement or
compromise thereof, and SB shall reimburse ARADIGM for all reasonable costs and
expenses of such defense.
9.7 PAYMENT FOR THIRD PARTY LICENSES. If the Parties agree to obtain a
license under THIRD PARTY PATENTS with respect to manufacture, use or sale of a
PRODUCT, as provided in Section 9.4 or if the Parties are required to pay
royalties to a THIRD PARTY to settle or otherwise resolve a PATENT infringement
suit alleging PATENT infringement by a PRODUCT, as provided in Section 9.5, the
Parties agree that all such royalties shall be paid as provided in this Section.
For royalties that are based on the manufacture, use, sale, offer for sale or
importation of DRUG PRODUCTS or the use of an AERx SYSTEM (the "Third Party
Product Royalties"), the payment shall be as provided in subsection (a) below.
For royalties that are based on the manufacture, use, sale, offer for sale or
importation of an AERx DEVICE or ACCESSORY (the "Third Party Device Royalties"),
the payment shall be as provided in subsection (b) below.
(a) Payment of all Third Party Product Royalties shall be as
follows:
(i) Subject to subsection 9.7(a)(ii), the Parties agree [*] in
the payment of all Third Party Product Royalties which must be paid. Each Party
that pays a Third Party Product Royalty shall be reimbursed by the other Party
[*] of the amounts of such Third Party Royalties within thirty (30) days after
delivery of an invoice therefor.
(ii) In the event that the total amount of Third Party Product
Royalties that the Parties are obligated to pay with respect to a particular
PRODUCT [*] then the Parties shall meet to address such situation by good faith
negotiation between senior management representatives of the Parties using
DILIGENT EFFORTS, to be commenced promptly, to seek to find [*] In the event
that such management representatives cannot reach such agreeable resolution to
the situation within sixty (60) days of that date such situation arose, then the
matter shall be resolved by binding arbitration under Section 13.1, with the
following additional requirement for such arbitration: The object of such
arbitration shall be that the arbitration establish a mechanism for [*]
(b) The Parties agree [*] Third Party Device Royalties subject to
the following limitations: [*] Third Party Device Royalties which payments would
cause the [*] (as defined in
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Section 6.9(b)), applicable to the particular AERx DEVICES or ACCESSORIES on
which such Third Party Device Royalties are (or would be) owed, to be less than
[*]. Any amounts of such Third Party Device Royalties that [*] limitation shall
[*], except that if the amount of such Third Party Device Royalties that [*] of
the NET SALES of such AERx DEVICE or ACCESSORIES, then Aradigm shall give SB
written notice, and the Parties shall meet to address such situation by good
faith negotiation between senior management representatives of the Parties using
DILIGENT EFFORTS, to be commenced promptly, to seek to find [*]. In the event
that such management representatives cannot reach such agreeable resolution to
the situation within sixty (60) days of that date such situation arose, then the
matter shall be resolved by binding arbitration under Section 13.1, with the
following additional requirement for such arbitration: The object of such
arbitration shall be that the arbitration establish a [*] such Third Party
Device Royalties with respect to the affected AERx DEVICES or ACCESSORY [*].
(c) For a license agreed to be entered into by the Parties, pursuant
to Section 9.3 or 9.4, under a PATENT claiming an ANALGESIC DRUG composition of
matter, which ANALGESIC DRUG is contained in a DRUG PRODUCT, the Parties shall
agree on the [*] entry into such license.
9.8 ENFORCEMENT OF ARADIGM PATENT RIGHTS.
(a) If any ARADIGM PATENT is infringed by a THIRD PARTY in any
country, the Party to this Agreement first having knowledge of such infringement
shall promptly notify the other in writing. The notice shall set forth the facts
of that infringement in reasonable detail. Aradigm shall have the primary right,
but not the obligation, to institute, prosecute, and control any action or
proceeding with respect to such infringement, by counsel of its own choice and
at its expense.
(b) If such suspected infringement involves the manufacture, use,
sale, or offer for sale in the TERRITORY of an AERx SYSTEM, AERx DEVICE, DRUG
PRODUCT or ACCESSORY that is intended for use in the FIELD, and the alleged
infringement is of an ARADIGM PATENT whose claims are primarily directed towards
the FIELD or products for use in the FIELD (a "Field Infringement"), SB shall
have the right, at its own expense, to be represented in any such action by
counsel of its own choice, provided that Aradigm shall control the action.
Further, if SB reasonably believes that a THIRD PARTY is infringing an ARADIGM
PATENT in a manner constituting a Field Infringement, and Aradigm fails to bring
an action or proceeding against such suspected infringer within a period of [*]
days after having knowledge of such Field Infringement, then, and only then,
SB shall have the right to bring and control an action against such infringer
by counsel of its own choice and at its expense, and Aradigm shall have the
right to be represented in any such action by counsel of its own choice at
its own expense. The Party controlling any such action involving a Field
Infringement shall
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consider in good faith the interests of the other Party in so doing, and in any
event shall not settle or consent to an adverse judgment in any such action that
would have a material adverse effect on the rights or interests of the other
Party without the prior express written consent of the other Party. If one Party
brings any such action or proceeding, the other Party agrees to be joined as a
Party plaintiff if necessary to prosecute the action and to give the first Party
reasonable assistance and authority to file and prosecute the suit
(c) Any damages or other monetary awards recovered in an action
against an infringer of a ARADIGM PATENT based on a Field Infringement shall be
allocated to the Parties in the following manner: first, to reimburse Aradigm
and SB for their respective out-of-pocket expenses (including reasonable
attorneys' fees and costs) incurred in prosecuting such infringement action (if
the recovery is less than both Party's costs, then on a pro rata basis based
upon their respective out-of-pocket expenses); and second, [*] of the remaining
balance from such recovery shall be allocated to the Party bringing suit, and
the remaining [*] of such balance shall be allocated as follows: [*], and such
amount shall be paid to [*]. Aradigm retains all other rights with respect to
enforcement of ARADIGM PATENTS.
(d) In the event a counterclaim is asserted against SB or Aradigm
during an action prosecuted under this Section 9.8, which counterclaim is not
otherwise addressed elsewhere in the Agreement, SB or Aradigm, as applicable,
shall have the rights to defend against such counterclaim according to the
procedures outlined in Sections 9.5(a), (b) and (c).
9.9 ENFORCEMENT OF JOINT PATENT RIGHTS. If any JOINT PATENT is infringed
by a THIRD PARTY in any country in the TERRITORY, the Party to this Agreement
first having knowledge of such infringement shall promptly notify the other in
writing. The notice shall set forth the facts of that infringement in reasonable
detail. Aradigm shall have the primary right, but not the obligation, to
institute, prosecute, and control any action or proceeding with respect to such
infringement, by counsel of its own choice, and SB shall have the right, at its
own expense, to be represented in any such action by counsel of its own choice.
If Aradigm fails to bring an action or proceeding against such suspected
infringer within a period of ninety (90) days after having knowledge of such
infringement, then SB shall have the right to bring and control an action
against such infringer by counsel of its own choice, and Aradigm shall have the
right to be represented in any such action by counsel of its own choice at its
own expense. The Party controlling any such action shall consider in good faith
the interests of the other Party in so doing, and shall not settle or consent to
an adverse judgment in any such action which would have a material adverse
effect on the rights or interests of the other Party without the prior express
written consent of the other Party, which consent shall not be unreasonably
withheld. If one Party brings any such action or proceeding with respect to a
JOINT PATENT, the other Party agrees to be joined as a Party plaintiff if
necessary to prosecute the action and to give the first Party reasonable
assistance and authority to file and prosecute the suit. Any damages or other
monetary awards recovered in an action against an infringer of a JOINT PATENT
shall be allocated to the Parties in the following manner: first, to the
reimbursement of Aradigm and SB
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for their respective out-of-pocket expenses (including reasonable attorneys'
fees and costs) incurred in prosecuting such infringement action (if the
recovery is less than both Party's costs, then on a pro rata basis based upon
their respective out-of-pocket expenses; and second [*] of the remaining
balance from such recovery shall be allocated to the Party bringing suit, and
the remaining [*] of such balance shall be allocated as follows: [*] and such
amount shall be paid to [*].
9.10 TRADEMARKS AND TRADENAMES GENERALLY. The DEVELOPMENT COMMITTEE will
select, after consultation and mutual agreement, trademarks or tradenames to be
owned by Aradigm and used by SB under license for each AERx SYSTEM and other
related PRODUCTS (the "Product Marks"). With respect to the selection of Product
Marks, it is agreed and understood that if a REGULATORY APPROVAL is achieved in
the European Union for an AERx SYSTEM, a single Product Mark may need to be
employed throughout the European Union with respect to such AERx SYSTEM,
depending on the regulations in existence at the time. If the DEVELOPMENT
COMMITTEE agrees, one of the Product Marks to be used on all PRODUCTS is
AERx(TM) Pain Management System; if such mark is not agreed to, then Aradigm may
specify an alternative mark to be used on all PRODUCTS, subject to SB's approval
to be withheld only if there is a substantial trademark infringement issue with
the proposed mark, or other issue (such as likelihood of confusion) identified
by SB reasonably and good faith that could interfere with use of such mark. Such
mark designated by Aradigm (whether AERx, if agreed, or the other acceptable
mark) shall be referred to herein as the "APMS Trademark". As provided in
Section 9.11 below, Aradigm agrees that SB shall have the exclusive right to use
the APMS Trademark, which right is solely for use in association with marketing
and sale of the PRODUCTS for use in the FIELD, but such right shall not prevent
Aradigm from using or licensing the AERx(TM) trademark (or such other
generally-applicable mark as selected by Aradigm as provided above) for any use
other than in the FIELD. SB, its AFFILIATES and/or sublicensees shall not adopt,
use, or register any acronym, trademark, tradename, service mark or other
marketing name of Aradigm or any confusingly similar mark or symbol as part of
SB's or its AFFILIATE'S own trademark or tradename for other products it
markets. Likewise, Aradigm, its AFFILIATES and/or sublicensees shall not adopt,
use, or register any acronym, trademark, trade name, service mark or other
marketing name of SB or any confusingly similar mark or symbol as part of
Aradigm's or its AFFILIATE'S own trademark or trade name for other products it
markets. For clarification, it is agreed that SB shall have the unilateral right
to select trademarks for any SB PROPRIETARY DRUG and Aradigm shall have no
ownership interest in such marks.
9.11 TRADEMARK LICENSE. Subject to the terms of this Agreement, Aradigm
hereby grants to SB a license in the TERRITORY, with the right to grant
sublicenses to SB's permitted sublicensees under Section 5.1, to use the Product
Marks, including the APMS Trademark, for the term of this Agreement in
connection with the marketing, promotion and sale of PRODUCTS for use in the
FIELD as contemplated in this Agreement. Such license shall be exclusive as to
all THIRD PARTIES, but Aradigm shall retain all its rights under such Product
Marks as necessary
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to perform its obligations under this Agreement, and Aradigm shall retain all
its rights to use the AERx(TM) trademarK (or such other generally-applicable
mark as selected by Aradigm as provided in Section 9.10 above) for any use
outside the FIELD. SB's right to use the Product Marks, shall terminate in each
country in which SB's rights under this Agreement to distribute, market and sell
the PRODUCTS are terminated in accordance with this Agreement.
9.12 TRADEMARK REGISTRATION. With respect to each Product Mark (as defined
in Section 9.10) selected by the Parties under Section 9.10, and for each
country in which SB intends to market a PRODUCT using such Product Mark, the
Parties determine which Party shall be responsible for searching, filing,
registering and maintaining a registration for such Product Mark in such
country. The Parties shall share equally all expenses incurred in obtaining and
maintaining such registrations of Product Marks in the TERRITORY. In case a
particular Product Mark is not available for use and registration in connection
with a PRODUCT for use in the FIELD in a particular country, due to a rejection
of the trademark by a government agency, actual or threatened opposition,
cancellation or litigation as to use and/or registration of the Product Mark by
a THIRD PARTY, and/or a decision by the DEVELOPMENT COMMITTEE that use of the
Product Mark is likely to cause confusion with a THIRD PARTY'S trademark, the
DEVELOPMENT COMMITTEE shall select, and the Parties shall approve, an alternate
mark as the Product Mark for such PRODUCT in such country. In those countries
where a trademark license must be recorded, Aradigm will provide and record a
separate trademark license for the Product Marks at Aradigm's expense.
9.13 GOODWILL AND USE. The ownership of all goodwill that arises or
accrues from the use of the Product Marks (as defined in Section 9.10) shall
vest in and inure to the benefit of Aradigm. SB shall submit to Aradigm copies
of all packaging, promotional materials, advertising and marketing literature
relating to a PRODUCT that contain any Product Mark for Aradigm's reasonable
approval prior to their first use and thereafter prior to implementing any
change or addition to such previously approved packaging, promotional materials,
advertising and marketing literature. If Aradigm has not responded within four
(4) weeks after any such submission, Aradigm's approval with respect to the
submission will be deemed to have been received.
9.14 DEFENSE OF TRADEMARK CLAIM. In the event that any THIRD PARTY
initiates any claim, complaint, suit, proceeding or cause of action (a
"Trademark Claim") against Aradigm, SB or any of their respective AFFILIATES,
officers, directors or employees alleging trademark infringement resulting from
the use and/or registration of a Product Mark (as defined in Section 9.10), the
Party first having knowledge of such Trademark Claim shall provide the other
Party immediately with all information relating to such Trademark Claim.
Promptly thereafter, the Parties shall meet and discuss in good faith the
appropriate actions to take in response to such Trademark Claim, provided that,
in any event the Party sued may defend itself against such claim if necessary.
Each Party agrees to cooperate fully with the other Party and its agents in
defense of any such Trademark Claim. [*] officers, directors, employees, agents,
successors and assigns from and against any loss, damage or liability, including
for attorney's fees and costs, that may result from any action brought by a
THIRD PARTY based on SB or its AFFILIATES'
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separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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use of the APMS Trademark. All expenses relating to the defense of any Trademark
Claim, any amounts payable to THIRD PARTIES to settle or otherwise resolve such
Trademark Claim with respect to the APMS Trademark, and all costs associated
with recall and replacement of PRODUCTS bearing the APMS Trademark, to the
extent required by an adverse judgment in favor of such THIRD PARTY, [*] by
Aradigm, and such recall shall not be subject to the provisions of Section 6.13.
Neither Party shall settle or otherwise resolve such Trademark Claim in a manner
that adversely affects the other Party's rights in the Product Mark without the
other Party's prior written consent.
9.15 INFRINGEMENT OF PRODUCT MARK. In the event that Aradigm or SB becomes
aware of actual or threatened infringement by a THIRD PARTY of a Product Mark
(as defined in Section 9.10) anywhere in the TERRITORY, that Party shall
promptly notify the Party in writing of all information relating to such
infringement. SB shall have the first right, but not the obligation, to bring,
at its own expense, an infringement and/or opposition or cancellation action
against the THIRD PARTY infringer and to use Aradigm's name in connection
therewith and to name Aradigm as a party thereto. If SB does not commence a
particular infringement and/or opposition or cancellation action within ninety
(90) days of receipt of the notice of infringement, then Aradigm, after
notifying SB in writing, shall have the right, but not the obligation, to bring
such infringement and/or opposition or cancellation action at its own expense.
The Party conducting such action shall have full control over its conduct,
including settlement thereof, provided, however, that SB shall not settle or
otherwise resolve any such action relating to the APMS Trademark (as defined in
Section 9.10) in a manner that adversely affects Aradigm's rights in the APMS
Trademark without Aradigm's prior written consent. The Parties shall keep each
other informed about the progress and status of all litigation or actions
brought under this Section 9.15, and SB and Aradigm shall reasonably assist one
another and cooperate in any such litigation or action at the other's request
without expense to the requesting Party. Aradigm and SB shall recover first
their respective actual out-of-pocket expenses, or pro rata proportions thereof,
associated with any litigation brought under this Section 9.15, or settlement
thereof, out of any damages, settlement payments or other recovery received by
either Party. Any amounts remaining from such damages, settlement payments or
other recovery shall [*]
9.16 TRADEMARK LITIGATION INDEMNITY. In any action brought pursuant to
Section 9.15, the Party bringing the action shall indemnify the other Party, its
AFFILIATES, and sublicensees, and their respective officers, directors,
shareholders, employees, agents, successors and assigns from any loss, damage or
liability, including for attorney's fees and costs, that may result from claims,
counterclaims or crossclaims asserted by the defendant in such action, except to
the extent that such losses, damages or liabilities result from negligence or
willful misconduct of the other Party.
10. EXCHANGE OF INFORMATION, CONFIDENTIALITY AND PUBLICATION.
10.1 EXCHANGE OF INFORMATION. Promptly after the Effective Date, Aradigm
shall disclose and supply to SB all INFORMATION relating to the FIELD, to the
extent known to Aradigm and Aradigm is legally able to disclose, that is
necessary to enable SB to fully carry out
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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all of its rights and obligations under this Agreement. Thereafter, during the
term of the Agreement, Aradigm shall promptly disclose and supply to SB any
further INFORMATION meeting the foregoing requirements that may have become
known to Aradigm during such time. For clarification, the foregoing obligation
shall not require Aradigm to disclose proprietary INFORMATION relating to
manufacturing of the PRODUCTS except if required as provided in Section 6.6.
10.2 CONFIDENTIALITY. Except as otherwise provided in this Article 9,
during the term of this Agreement and for a period of [*] thereafter, each Party
shall maintain in confidence and shall use only for purposes of this Agreement
all CONFIDENTIAL INFORMATION disclosed by the other Party under the Agreement,
except as may be otherwise provided herein. Notwithstanding the foregoing, a
Party may disclose the other Party's CONFIDENTIAL INFORMATION to those of its
AFFILIATES, permitted sublicensees, directors, officers, employees, agents,
consultants and clinical investigators that have a need to know such INFORMATION
in order to achieve the purposes of this Agreement, provided that such Party
will obtain prior agreement from its AFFILIATES, permitted sublicensees,
directors, officers, employees, agents, consultants or clinical investigators to
whom disclosure is to be made to hold in confidence and not make use of such
CONFIDENTIAL INFORMATION for any purpose other than those permitted by this
Agreement. Each Party will promptly notify the other upon discovery of any
unauthorized use or disclosure of the CONFIDENTIAL INFORMATION.
10.3 AUTHORIZED DISCLOSURE. Each Party may disclose CONFIDENTIAL
INFORMATION of the other Party to THIRD PARTIES solely to the extent such
disclosure is reasonably necessary in filing or prosecuting patent applications,
prosecuting or defending litigation or complying with applicable laws,
governmental regulations or court orders, provided that such Party will give
reasonable advance notice to the other Party of such disclosure requirement and
shall give the other Party sufficient opportunity to object to such disclosure
or to secure confidential treatment of such CONFIDENTIAL INFORMATION required to
be disclosed to the extent that such is available. Either Party may disclose
(subject to the confidentiality restrictions contained herein) CONFIDENTIAL
INFORMATION to THIRD PARTIES to the extent necessary to perform its obligations
under this Agreement, provided such THIRD PARTIES execute confidentiality
agreements containing terms no less strict than those contained herein. Further,
nothing in this Article 9 shall be construed as preventing or in any way
inhibiting either Party from complying with statutory and regulatory
requirements governing the development, manufacture, use and sale or other
distribution of any PRODUCT in any manner consistent with the terms of this
Agreement, provided that any such compliance that requires disclosing to
regulatory authorities confidential or other information received from the other
Party may be made only if such Party provides reasonable advance notice of such
disclosure to the other Party and makes reasonable efforts to obtain
confidential treatment of such confidential information if requested by the
other Party to the extent that such is available.
10.4 PUBLICATION. Aradigm shall not submit for written or oral publication
any manuscript, abstract or the like which includes data or other information
relating to any PRODUCT without first obtaining the prior written consent of SB,
which consent shall not be
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separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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unreasonably withheld. Aradigm shall send such publications to SB in the English
language if practicable. SB shall not submit for written or oral publication any
manuscript, abstract or the like which includes data or other information
relating to PRODUCT without first obtaining the prior written consent of
Aradigm, which consent shall not be unreasonably withheld. The Parties agree to
review and comment within thirty (30) working days on any such draft
publication. Each Party shall use its DILIGENT EFFORTS to bind the clinical
investigators and other agents it utilizes for the DEVELOPMENT of PRODUCT in its
particular territory to a provision similar to this Section, provided that it is
understood that a Party's inability to bind a clinical investigator to such a
similar provision shall not prohibit such party from utilizing such clinical
investigator. The contribution of each Party shall be noted in all publications
or presentations by acknowledgment or coauthorship, whichever is appropriate.
10.5 CONFIDENTIALITY ISSUES IN BANKRUPTCY. In the event that a court or
other legal or administrative tribunal, directly or through an appointed master,
trustee or receiver, assumes partial or complete control over the assets of a
Party to this Agreement based on the insolvency or bankruptcy of such Party, the
bankrupt or insolvent Party shall promptly notify the court or other tribunal
(a) that confidential information received from the other Party under this
Agreement remains the property of the other Party and (b) of the confidentiality
obligations under this Agreement with respect to such information. In addition,
the bankrupt or insolvent Party shall, to the extent permitted by law, take all
steps necessary or desirable to maintain the confidentiality of the other
Party's confidential information and to seek to ensure that the court, other
tribunal or appointee maintains such information in confidence in accordance
with the terms of this Agreement.
11. REPRESENTATIONS & WARRANTIES.
11.1 REPRESENTATIONS AND WARRANTIES OF ARADIGM.
(a) CORPORATE POWER. Aradigm is duly organized and validly existing
and in good standing under the laws of California and has full corporate power
and authority to enter into this Agreement and to carry out the provisions
hereof.
(b) DUE AUTHORIZATION. Aradigm is duly authorized to execute and
deliver this Agreement and to perform its obligations hereunder.
(c) BINDING AGREEMENT. This Agreement is a legal and valid
obligation binding upon Aradigm and enforceable in accordance with its terms,
except to the extent limited by applicable bankruptcy and creditor's rights
laws. The execution, delivery and performance of this Agreement by Aradigm does
not conflict with any agreement, instrument or understanding, oral or written,
to which it is a party or by which it may be bound, nor violate any material law
or regulation of any court, governmental body or administrative or other agency
having jurisdiction over it.
(d) THIRD PARTY CONSENTS. To Aradigm's knowledge, as of the
Effective Date, Aradigm has obtained all necessary consents, approvals and
authorizations of all
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governmental authorities and other entities and persons required to be obtained
by Aradigm in connection with entry into this Agreement.
(e) ARADIGM PATENTS. To Aradigm's knowledge, as of the Effective
Date, the manufacture, use or sale of the PRODUCTS in the FIELD will not violate
the intellectual property rights of any THIRD PARTY, and Aradigm has no present
knowledge from which it reasonably can be inferred that ARADIGM PATENTS are
invalid. However, nothing in this Agreement shall be construed as a
representation or warranty that the ARADIGM PATENTS are valid or enforceable, or
that they will be so during the term of this Agreement.
(f) NO CONFLICT. No agreement between Aradigm and a THIRD PARTY in
existence as of the Effective Date would prevent Aradigm from performing its
obligations under this Agreement or granting to SB the rights granted hereunder,
and Aradigm shall not enter into any such THIRD PARTY agreement that would
prevent Aradigm from performing its obligations under this Agreement or granting
to SB the rights granted hereunder.
(g) DATA REGARDING PRODUCTS. Aradigm has no present knowledge of the
existence of any pre-clinical or clinical data or information concerning a
PRODUCT that Aradigm has not provided to SB prior to the Effective Date that
suggests that there may exist quality, toxicity, safety and/or efficacy concerns
that may materially impair the utility and/or safety of the PRODUCT in the
FIELD.
11.2 REPRESENTATIONS AND WARRANTIES OF SB.
(a) CORPORATE POWER. SB is duly organized and validly existing under
the laws of the United Kingdom and has full corporate power and authority to
enter into this Agreement and to carry out the provisions hereof.
(b) DUE AUTHORIZATION. SB is duly authorized to execute and deliver
this Agreement and to perform its obligations hereunder.
(c) BINDING AGREEMENT. This Agreement is a legal and valid
obligation binding upon SB and enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement by SB does not conflict
with any agreement, instrument or understanding, oral or written, to which it is
a party or by which it may be bound, nor violate any material law or regulation
of any court, governmental body or administrative or other agency having
jurisdiction over it.
(d) NO CONFLICT. No agreement between SB and a THIRD PARTY in
existence as of the Effective Date would prevent SB from performing its
obligations under this Agreement or granting to Aradigm the rights granted
hereunder, and SB shall not enter into any such THIRD PARTY agreement that would
prevent SB from performing its obligations under this Agreement or granting to
Aradigm the rights granted hereunder.
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11.3 CERTAIN ADDITIONAL COVENANTS.
(a) Aradigm shall pay all royalties or other sums that Aradigm may
owe to any THIRD PARTY by virtue of its activities under this Agreement, and
shall perform and observe all of the other material obligations under all
present and future agreements between Aradigm and any THIRD PARTY that are in
any way related to Aradigm's ability to grant the rights Aradigm has granted to
SB under this Agreement or to Aradigm's ability to perform its obligations to SB
under this Agreement. In the event that Aradigm receives notice from any such
THIRD PARTY that Aradigm has committed a breach of its obligations under any
such agreement, or if Aradigm anticipates such breach, which breach may give
rise to a right by such THIRD PARTY to terminate or materially diminish
Aradigm's rights to PATENTS and/or INFORMATION in the FIELD licensed to Aradigm,
which PATENTS and/or INFORMATION are sublicensed to SB hereunder, or otherwise
to diminish materially Aradigm's ability to perform its obligations to SB under
this Agreement, Aradigm shall immediately notify SB of such situation, and
Aradigm shall promptly cure such breach. However, if Aradigm is unable to cure
such breach, Aradigm shall, to the extent possible, permit SB to cure such
breach on Aradigm's behalf.
(b) SB shall pay all royalties or other sums that SB may owe to any
THIRD PARTY by virtue of its activities under this Agreement, and shall perform
and observe all of the other material obligations under all present and future
agreements between SB and any THIRD PARTY that are in any way related to SB's
ability to perform its obligations to Aradigm under this Agreement. In the event
that SB receives notice from any such THIRD PARTY that SB has committed a breach
of its obligations under any such agreement, or if SB anticipates such breach,
which breach may give rise to a right by such THIRD PARTY to terminate or
materially diminish SB's rights under such agreement or otherwise to diminish
materially SB's ability to perform its obligations to SB under this Agreement,
SB shall immediately notify Aradigm of such situation, and SB shall promptly
cure such breach. However, if SB is unable to cure such breach, SB shall, to the
extent possible, permit Aradigm to cure such breach on SB's behalf.
(c) Aradigm agrees that Aradigm and its AFFILIATES shall not
knowingly conduct any development work, either themselves or in conjunction with
any other licensees or partners, on the AERx DEVICE or DRUG PRODUCTS for use
outside the FIELD; provided that the foregoing shall not be interpreted to
prevent Aradigm or its AFFILIATES or other licensees from developing other
Aradigm pulmonary drug delivery products, including products based on the AERx
design or technology, for use outside the FIELD and shall not limit Aradigm's
rights under Section 2.9.
12. INDEMNIFICATION.
12.1 INDEMNIFICATION BY ARADIGM. Subject to compliance with Section 12.3,
Aradigm agrees to indemnify, defend and hold harmless SB, its AFFILIATES, and
their respective officers, directors, shareholders, representatives, agents and
employees (the "SB Indemnitees"), from and against any and all losses,
liabilities, damages, costs, fees and expenses, including reasonable legal costs
and attorneys' fees ("Losses") resulting from a THIRD PARTY
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claim, suit or action based upon (a) death or injury to any person or damage to
any property to the extent caused by the defective or negligent manufacture of a
PRODUCT manufactured by or on behalf of Aradigm and sold to SB and its
AFFILIATES hereunder (the "Defective Manufacturing Claim"); (b) harm or damage
attributable to or caused by the acts or omissions of Aradigm or its AFFILIATES
or their respective officers, directors, representatives, agents or employees,
[*] or (c) breach of any representation or warranty of Aradigm in Section 11.1
hereof. For clarity, it is agreed that Aradigm shall have no obligation under
this Section 12.1 with respect to any Losses resulting from (1) the negligent or
intentionally wrongful act or omission of the SB, its AFFILIATES or their
respective officers, directors, representatives, agents or employees, (2) the
improper storage, transportation, marketing, training, or handling of a PRODUCT
by any person or entity other than Aradigm, its AFFILIATES or their respective
officers, directors, representatives, agents or employees, (3) the improper use
of a PRODUCT by any person or entity other than Aradigm, its AFFILIATES or their
respective officers, directors, agents or employees, or (4) a Defective
Marketing Claim (as defined in Section 12.2). With respect to any THIRD PARTY
claim, suit or action based upon death or injury to any person or damage to any
property based on use of an AERx SYSTEM, AERx DEVICE, DRUG PRODUCT or ACCESSORY,
Aradigm agrees to provide SB, at SB's expense, with reasonable assistance in
SB's defense of such claim, suit or action.
12.2 INDEMNIFICATION BY SB. Subject to compliance with Section 12.3, SB
agrees to indemnify and defend Aradigm, its AFFILIATES, and their respective
officers, directors, shareholders, representatives, agents and employees (the
"Aradigm Indemnitees"), from and against any and all Losses (as defined in
Section 12.1) resulting from a THIRD PARTY claim, suit or action based upon: (a)
death or injury to any person or damage to any property to the extent caused by
the defective or negligent marketing or promotion of a PRODUCT by SB or its
AFFILIATES hereunder (a "Defective Marketing Claim"); (b) harm or damage
attributable to or caused by the acts or omissions of SB or its AFFILIATES or
their respective officers, directors, representatives, agents or employees, [*]
or (b) breach or any representation or warranty of SB in Section 11.2 hereof.
For clarity, it is agreed that SB shall have no obligation under this Section
12.2 with respect to any Losses resulting from (1) the negligent or
intentionally wrongful act or omission of Aradigm, its AFFILIATES or their
respective officers, directors, representatives, agents or employees, (2) the
improper storage, transportation, marketing, training, or handling of a PRODUCT
by entities or persons other than SB or its sublicensees or their respective
AFFILIATES, or their respective officers, directors, representatives, agents or
employees, (3) the improper use of a PRODUCT, unless caused by SB or its
sublicensees or their respective AFFILIATES, or their respective officers,
directors, representatives, agents or employees, (4) a Defective Manufacturing
Claim (as defined in Section 12.1), or (5) any claims based upon death or injury
to any person or damage to any property caused by a PRODUCT that is not
attributable to or caused by acts or omissions of SB or its sublicensees or
their respective AFFILIATES or their respective officers, directors,
representatives, agents or employees. With respect to any
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separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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THIRD PARTY claim, suit or action based upon death or injury to any person or
damage to any property based on use of a PRODUCT, SB agrees to provide Aradigm,
at Aradigm's expense, with reasonable assistance in Aradigm's defense of such
claim, suit or action.
12.3 INDEMNITY PROCEDURE. In the event that a Party is seeking
indemnification under Section 12.1 or 12.2, it shall inform the other Party (the
"Indemnifying Party") of a claim as soon as reasonably practicable after it
receives notice of the claim, shall permit the Indemnifying Party to assume
direction and control of the defense of the claim (including the right to settle
the claim solely for monetary consideration), and, at the Indemnifying Party's
expense, shall cooperate as reasonably requested in the defense of the claim.
The Indemnified Party shall have the right to retain its own counsel, subject to
the approval of any such outside counsel by the Indemnifying Party, with the
fees and expenses to be paid by the Indemnifying Party if representation of such
Party by the counsel retained by Indemnifying Party would be inappropriate due
to actual or potential differing interests between such indemnitee and any other
party represented by such counsel in such proceedings. The Indemnifying Party
may not settle such action or claim, or otherwise consent to an adverse judgment
in such action or claim, without the express written consent of the Indemnified
Party if such settlement or adverse judgment diminishes the rights or interests
of the Indemnified Party.
12.4 LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY, ITS
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR AFFILIATES BE LIABLE TO THE OTHER
PARTY FOR ANY INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, WHETHER BASED UPON
A CLAIM OR ACTION OF CONTRACT, WARRANTY, NEGLIGENCE, STRICT LIABILITY OR OTHER
TORT, OR OTHERWISE, ARISING OUT OF THIS AGREEMENT.
12.5 LIABILITY INSURANCE. Immediately upon the launch of AERx SYSTEM in
the TERRITORY by SB, its AFFILIATES or its sublicensees, and for a period of [*]
after the expiration or earlier termination of this Agreement, each Party shall
obtain and/or maintain, respectively, at its sole cost and expense, and in the
case of ARADIGM, from insurance companies reasonably satisfactory to SB, product
liability insurance and contractual liability coverage, in amounts,
respectively, which are reasonable and customary in the U.S. pharmaceutical
industry for companies of comparable size and activities at the respective place
of business of each party. Such product liability insurance shall insure against
personal injury, physical injury, or property damage arising out of the
manufacture, sale, distribution, or marketing of AERx SYSTEM in the TERRITORY.
Each Party shall provide written proof of the existence of such insurance to the
other Party upon request. Notwithstanding the foregoing, during the period
specified above ARADIGM shall maintain product liability insurance with a
minimum of [*] per occurrence (or claim) and annual aggregate limit of
liability.
13. DISPUTE RESOLUTION; ARBITRATION.
13.1 DISPUTE RESOLUTION PROCESS. If a dispute or controversy regarding any
right or obligation under this Agreement arises between the Parties, the Parties
will seek to resolve such dispute or controversy or failure to agree by good
faith negotiation and DILIGENT EFFORTS
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separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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between senior management representatives of the Parties, to be commenced
promptly after such dispute or controversy or failure to agree arises. If such
dispute or controversy or failure to agree is not resolved by such negotiation
within thirty (30) days of notice by one Party to the other, and at least one
Party requires such resolution, then the Parties shall proceed as follows. Any
unresolved dispute, controversy, action, claim or proceeding initiated by either
Party (other than a THIRD PARTY action, claim or other proceeding in a bona fide
action, claim or other proceeding initiated by a THIRD PARTY against a Party)
relating to, arising out of or resulting from this Agreement, or the performance
by either Party of its obligations hereunder, or any alleged breach, termination
or invalidity of this Agreement, whether before or after termination or
expiration of this Agreement, shall be finally resolved by binding arbitration.
Whenever a Party shall decide to institute arbitration proceedings, it shall
give written notice to that effect to the other Party. The Parties agree that
the service of any notice in the course of such arbitration proceeding at their
respective addresses as provided for in Section 15.5 below shall be valid and
sufficient. Any arbitration hereunder shall be conducted under the then existent
Rules of Commercial Arbitration of the American Arbitration Association. Each
such arbitration shall be conducted in the English language by a panel of three
arbitrators appointed in accordance with such rules, and shall be held in San
Francisco, California if SB has initiated the arbitration, or in Philadelphia,
Pennsylvania if Aradigm has initiated the arbitration. The arbitrators shall
have the authority to grant specific performance, and to allocate between the
Parties the costs of arbitration in such equitable manner as they determine,
provided that no punitive damages will be recoverable by either Party in such a
proceeding. The decision of the Arbitration Tribunal in any such arbitration
shall be final and not appealable, and shall be enforceable in any court of
competent jurisdiction or application may be made to such court for judicial
acceptance of any award and an order of enforcement, as the case may be. Each
Party hereby consents to the jurisdiction of the federal courts of the United
States in New York, New York for the purposes of enforcing the decisions entered
pursuant to an arbitration hereunder and for enforcing the agreements between
the Parties reflected in this Section 13.1. In no event shall a demand for
arbitration be made after the date when institution of a legal or equitable
proceeding based upon such claim, dispute or other matter in question would be
barred by the applicable statute of limitations. Notwithstanding the foregoing,
either Party may at any time seek equitable relief before any court having
jurisdiction, pending resolution of the underlying issue or dispute pursuant to
the terms of this Section 13.1.
13.2 GOVERNING LAW. This Agreement will be governed by and interpreted
in accordance with the laws of the State of New York, without regard to
conflicts of laws principles.
14. TERM OF AGREEMENT AND TERMINATION.
14.1 TERM. Unless earlier terminated as provided in this Article 13 or
under Sections 2.6 or 5.5 or 15.1, this Agreement shall terminate in the
TERRITORY with respect to a particular AERx SYSTEM ten (10) years from the date
of commercial launch by or on behalf of SB of such AERx SYSTEM [*] provided
however that if such commercial launch of the AERx SYSTEM [*] occurs [*] years
or more after commercial launch of such AERx SYSTEM by or on behalf of SB in [*]
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separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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such termination will occur thirteen (13) years from the date of the commercial
launch of such AERx SYSTEM in the last of such [*] Upon such termination with
respect to a particular AERx SYSTEM, all SB's rights hereunder to purchase,
market, distribute, promote, offer for sale and sell such AERx SYSTEM in any
country in the TERRITORY shall terminate, unless otherwise agreed by the Parties
in writing. Unless terminated earlier in accordance with this Article 14 or
Sections 2.6 or 5.5, this Agreement shall expire in its entirety on the
termination of the Agreement with respect to all AERx SYSTEMS, as provided
above. The Parties agree that at least [*] with respect to a particular AERx
SYSTEM, or the expiration of the Agreement, the Parties will meet, discuss in
good faith and attempt to reach mutually acceptable agreement to provide for an
extension of the licenses granted hereunder and Aradigm's continuing supply to
SB of such AERx SYSTEM and commercially viable economic terms for such supply.
In the event that the Parties do not reach agreement on Aradigm's continuing
supply to SB of PRODUCTS by the date [*] the Parties will discuss in good faith
the amount of residual payments, if any, that Aradigm would pay to SB based on
sales of PRODUCTS by Aradigm, its AFFILIATES and licensees during [*] such
termination of the Agreement.
14.2 TERMINATION FOR MATERIAL BREACH. Each Party shall have the right to
terminate this Agreement after written notice to the other that the other is in
material breach of this Agreement, unless the other Party cures the breach
before the expiration of ninety (90) days, thirty (30) days in the case of a
delayed payment, after such written notice.
14.3 TERMINATION BY SB. Commencing on the first anniversary of the
Effective Date, SB may terminate this Agreement in its entirety, on written
notice to Aradigm as provided below, in the event that SB reasonably determines,
using the same standards SB uses in assessing whether or not to continue
development or marketing of its own internally-invented products, that the
patent, medical/scientific, technical, regulatory, or commercial profile of the
PRODUCTS do not justify continued development and/or marketing, as applicable,
of the PRODUCTS. If SB elects to terminate the Agreement under this Section 14.3
prior to launch of commercial marketing of any PRODUCTS, SB must give Aradigm
[*] advance written notice of its intention to terminate, and such termination
will be effective at the end of such [*] notice period. During such period,
[*] during such period by Aradigm within the agreed BUDGET for the DEVELOPMENT
work to be conducted in the period provided that in the event there is any [*]
as recorded in the report for such period to be provided to SB by Aradigm
under Section 2.4, [*] within thirty (30) days after [*] therefor. If SB elects
to terminate the Agreement under this Section 14.3 after commercial launch of
any PRODUCTS, SB must give Aradigm [*] advance written notice of its intention
to terminate, and such termination will be effective at the end of such [*]
notice period. SB may continue to sell any PRODUCTS remaining in its inventory
during such notice period, but such right to continue selling PRODUCTS shall
terminate upon termination of the Agreement at the end of such notice period.
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
65.
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14.4 TERMINATION FOR BANKRUPTCY. Either party may terminate this Agreement
if, at any time, the other party shall file in any court or agency pursuant to
any statute or regulation of any state or country, a petition in bankruptcy or
insolvency or for reorganization or for an arrangement or for the appointment of
a receiver or trustee of the party or of its assets, or if the other party
proposes a written agreement of composition or extension of its debts, or if the
other party shall be served with an involuntary petition against it, filed in
any insolvency proceeding, and such petition shall not be dismissed with sixty
(60) days after the filing thereof, or if the other party shall propose or be a
party to any dissolution or liquidation, or if the other party shall make an
assignment for the benefit of creditors.
14.5 CONSEQUENCES OF TERMINATION. Upon the expiration or any termination
of this Agreement, (i) [*] develop, make, use and sell PRODUCTS in the FIELD;
and (ii) SB shall destroy and shall not retain any copies of any CONFIDENTIAL
INFORMATION provided by Aradigm hereunder, except that SB's legal department may
retain one copy thereof solely for archival purposes. Further, if Aradigm
terminates the Agreement under Section 2.6, 5.5 or 14.2 or SB terminates the
Agreement under Section 14.3, then immediately upon such termination [*] the
PRODUCTS and any additional Aradigm products for use in the FIELD that comprise
modifications to existing products or are additional ANALGESIC DRUG products for
use in the FIELD.
14.6 ACCRUED RIGHTS, SURVIVING OBLIGATIONS. Termination of this Agreement
shall terminate all licenses granted hereunder (except as provided in this
Section 13.4), but shall not affect any rights to payment or other rights that
accrued prior to the date of termination. Additionally, the terms of Section 9.1
shall survive expiration of this Agreement pursuant to Section 13.1. The terms
of the following Sections shall survive any termination of this Agreement, to
the extent provided in the following: 3.2; 3.3; 5.2; 6.12(a), (b), (d), (f) and
(g) (but only with respect to Aradigm's manufacturing activities during the term
of the Agreement); 7.4; 7.5; 7.7; 7.8; 8.1; 8.2; 8.3; 9.1; 9.2 (first sentence
only); 9.5; 9.6; 9.8 (but only with respect to THIRD PARTY activities that
occurred during the term of the Agreement); 9.9; 9.10 (the last sentence only);
9.13 (first sentence only); 9.14 (but only with respect to THIRD PARTY
activities that occurred during the term of the Agreement); 9.15; 9.16; 10.2 (to
the extent provided therein); 10.3; 10.4; 11.1 (but only with respect to
activities occurring before the expiration or termination of the Agreement);
11.2 (but only with respect to activities occurring before the expiration or
termination of the Agreement); 14.5; and 14.6. The terms of Articles 12, 13, and
15 shall survive any termination of this Agreement.
14.7 RIGHTS IN EVENT OF BANKRUPTCY.
(a) Notwithstanding the bankruptcy of Aradigm, or the impairment of
performance by Aradigm of its obligations under this Agreement as a result of
bankruptcy or
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
66.
<PAGE> 72
insolvency of Aradigm, SB shall be entitled to retain the license rights and
licenses granted herein, subject to SB's performance of all its obligations
under the Agreement and to Aradigm's rights to terminate this Agreement for
reasons other than bankruptcy or insolvency as expressly provided in this
Agreement.
(b) All license rights and licenses granted under or pursuant to
this Agreement under PATENTS and INFORMATION, including know-how and trade
secrets, by one Party to the other Party are, and shall otherwise be deemed to
be, for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of
rights to "intellectual property" as defined under Section 101(52) of the U.S.
Bankruptcy Code. Each Party agrees that the other Party as a licensee of such
rights under this Agreement, shall retain and may fully exercise all of its
rights and elections under the U.S. Bankruptcy Code, subject to performance by
such electing Party of its preexisting obligations under this Agreement.
15. MISCELLANEOUS.
15.1 HART-SCOTT-RODINO COMPLIANCE. Upon the date that there is mutual
execution of the Agreement, SB and Aradigm shall simultaneously notify the
Agreement and the Stock Purchase Agreement (as described in Paragraph D of the
Recitals hereof) to the Federal Trade Commission in accordance with the
requirements of the Hart-Scott-Rodino Antitrust Improvements Act (the "Act"). SB
shall pay the forty five thousand U.S. dollar (U.S. $45,000) fee required for
such notification. The date of the expiration or earlier termination of the
applicable waiting period required by the Act after such notification shall be
referred to as the "HSR Approval Date". In the event that the FTC shall formally
request additional information which thereby extends the termination of the
applicable waiting period beyond thirty (30) days after the initial notification
under the Act, the parties shall promptly meet to determine, in good faith, the
appropriate response to such request. In the event the HSR Approval Date has not
occurred within ninety (90) days after the Parties' initial notification under
the Act, then either Party may elect to terminate this Agreement on written
notice to be provided no later than twenty (20) days after the end of such
ninety (90) day period, and no payment shall be due to Aradigm under this
Agreement or the Stock Purchase Agreement upon such termination.
15.2 PRESS RELEASES; DISCLOSURE OF AGREEMENT. Upon signing the Agreement,
Aradigm will issue the press release set forth in Exhibit D attached hereto. No
public announcement or other disclosure to THIRD PARTIES concerning the terms of
this Agreement shall be made, either directly or indirectly, by any Party to
this Agreement, except as may be legally required or as may be required for
recording purposes, without first obtaining the written approval of the other
Party and agreement upon the nature and text of such announcement or disclosure,
provided that this requirement shall not be applicable (a) to any public
announcement or other disclosure concerning the existence of or terms of this
Agreement to the extent that the information in such public announcement or
other disclosure was already the subject of a written approval under this
provision, or (b) to disclosure by [*] provided that, prior to any such
disclosure, such THIRD PARTY [*] with respect to such disclosure. The Party
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
67.
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desiring to make any such public announcement or other disclosure shall inform
the other Party of the proposed announcement or disclosure in reasonably
sufficient time prior to public release, and shall provide the other Party with
a written copy thereof, in order to allow such other Party to comment upon such
announcement or disclosure. Each Party agrees that it shall cooperate fully with
the other with respect to all disclosures regarding this Agreement to the
Securities Exchange Commission and any other governmental or regulatory
agencies, including requests for confidential treatment of proprietary
information of either Party included in any such disclosure.
15.3 RECORDATION. Subject to compliance with all confidentiality
obligations of SB under this Agreement, SB shall have the right, at any time, to
record or register this Agreement in appropriate governmental or regulatory
offices anywhere in the TERRITORY, and Aradigm shall provide reasonable
assistance to SB in effecting such recording or registration, provided that SB
shall take appropriate measures available to protect the confidentiality of the
terms of the Agreement.
15.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement, and the existing
Confidentiality Agreements between the Parties related to the subject matter of
this Agreement, and the Stock Purchase Agreement between the Parties which is
effective as of the Effective Date, sets forth the terms of the collaboration
agreement between the Parties hereto and, except as otherwise set forth herein,
supersedes and terminates all prior representations, agreements and
understandings between the Parties regarding the subject matter hereof. Any
modification of this Agreement shall be effective only when in writing and
signed by the Parties, and specifically stating that it is an amendment to this
Agreement.
15.5 ASSIGNMENT. This Agreement and the licenses and rights herein granted
shall be binding upon and inure to the benefit of the successors in interest of
the respective Parties. Neither Party may assign or transfer this Agreement or
any rights or obligations hereunder without the prior written consent of the
other Party, which consent shall not be unreasonably withheld, except that SB
may make such an assignment without Aradigm consent to AFFILIATES or to a
successor to all or substantially all of the related business assets of SB
relating to this Agreement, whether by way of a merger, sale of stock, sale of
assets or other similar transaction.
15.6 NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing, shall specifically refer to this Agreement and
shall be effective on receipt, as evidenced in writing, when given by registered
airmail or overnight courier and addressed, unless otherwise specified in
writing, to the addresses of the Parties described below.
For Aradigm: Aradigm Corporation
26219 Eden Landing Road
Hayward, California 94545
Attention: Chief Executive Officer
With a copy to: Cooley Godward llp
Five Palo Alto Square
68.
<PAGE> 74
3000 El Camino Real
Palo Alto, CA 94306
Attention: James C. Kitch, Esq.
For SB: SmithKline Beecham plc
New Horizons Court
Brentford, Middlesex, TW8 9EP
England
Attention: Senior Vice President,
Worldwide Business Development
With a copy to: SmithKline Beecham Corporation
One Franklin Plaza (Mail Code FP1930)
P.O. Box 7929
Philadelphia, Pennsylvania 19101
U.S.A.
Attention: Senior Vice President,
Worldwide Business Development
SmithKline Beecham Corporation
One Franklin Plaza (Mail Code FP2225)
P.O. Box 7929
Philadelphia, Pennsylvania 19101, U.S.A.
Attention: Corporate Law-U.S.
15.7 SEVERABILITY. If any Article or part thereof of this Agreement is
declared invalid by any court of competent jurisdiction, or any government or
other agency having jurisdiction over either Aradigm or SB deems any Article or
part thereof to be contrary to any anti-trust or competition laws then such
declaration shall not affect the remainder of the Article or other Articles. To
the extent possible the Parties shall revise such invalidated Article or part
thereof in a manner that will render such provision valid without impairing the
Parties' original intent. In the event a Party's rights are materially affected
as a result of a change in this Agreement under this Paragraph, the Parties will
renegotiate the terms and conditions of this Agreement to resolve any
inequities.
15.8 FORCE MAJEURE. Except as otherwise provided herein, no Party shall be
in breach of this Agreement, or liable to the other Party, for any delay or
failure of performance to the extent such delay or failure is caused by
circumstances beyond its reasonable control and that by the exercise of DILIGENT
EFFORTS it is unable to prevent, provided that the party claiming excuse uses
its DILIGENT EFFORTS to overcome the same.
15.9 EXPENSES. Except as otherwise provided in the Agreement, all expenses
incurred by SB in connection with its obligations under this Agreement will be
borne solely by SB and all expenses incurred by Aradigm in connection with its
obligations under this Agreement will be
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borne solely by Aradigm. Each Party will be responsible for appointing its own
employees, agents and representatives, who will be compensated by such Party.
Each Party will be responsible for paying any finder's or broker's fee owed to a
THIRD PARTY that such Party incurs based directly or indirectly on negotiating
and entering this Agreement, and shall indemnify the other Party against any
obligation to pay such fee.
15.10 NON-WAIVER. The failure of a Party in any one or more instances to
insist upon strict performance of any of the terms and conditions of this
Agreement shall not be construed as a waiver or relinquishment, to any extent,
of the right to assert or rely upon any such terms or conditions on any future
occasion.
15.11 DISCLAIMER OF AGENCY/RELATIONSHIP OF THE PARTIES. This Agreement
shall not constitute any Party the legal representative or agent of another, nor
shall any party have the right or authority to assume, create, or incur any
THIRD PARTY liability or obligation of any kind, express or implied, against or
in the name of or on behalf of another except as expressly set forth in this
Agreement. The relationship between Aradigm and SB under this Agreement is that
of independent contractors. Aradigm and SB are not joint venturers, partners,
principal and agent, master and servant, employer or employee, and have no
relationship other than as independent contracting Parties. Aradigm shall have
no power to bind or obligate SB in any manner. Likewise, SB shall have no power
to bind or obligate Aradigm in any manner. Neither Party shall have any
responsibility for the hiring, firing, compensation or employee benefits of the
other Party's employees.
15.12 PERFORMANCE BY AFFILIATES. SB hereby covenants that its AFFILIATES
shall comply with all obligations under this Agreement to the same extent as if
such AFFILIATES were SB hereunder. SB shall be responsible for any breach by its
AFFILIATES of the obligations set forth herein. Aradigm hereby covenants that
its AFFILIATES shall comply with all obligations under this Agreement to the
same extent as if such AFFILIATES were Aradigm hereunder. Aradigm shall be
responsible for any breach by its AFFILIATES of the obligations set forth
herein.
15.13 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of the
Agreement.
15.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
15.15 OFFICIAL LANGUAGE. The official text of this Agreement and any
appendices, exhibits and schedules hereto, shall be made, written and
interpreted in English. Any notices, accounts, reports, documents, disclosures
of information or statements required by or made under this Agreement, whether
during its term or upon expiration or termination thereof, shall be in English.
In the event of any dispute concerning the construction or meaning of this
Agreement, reference shall be made only to this Agreement as written in English
and not to any other translation into any other language.
70.
<PAGE> 76
15.16 NO INTELLECTUAL PROPERTY RIGHTS GRANTED. No rights or licenses with
respect to a Party's patents, trademarks, know-how, technical information, or
other proprietary rights are granted or deemed granted to the other Party
hereunder or in connection herewith, other than those rights expressly granted
in this Agreement.
IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement
as of the date first above written.
ARADIGM CORPORATION SMITHKLINE BEECHAM PLC
Signature: [SIG] Signature: [SIG]
-------------------- -------------------------
Name: [NAME] Name: Argeria N. Karabels
------------------------- -----------------------------
Title: [TITLE] Title: Executive Vice President
------------------------- -----------------------------
71.
<PAGE> 77
EXHIBIT A
ARADIGM PATENTS/APPLICATIONS
<TABLE>
<CAPTION>
PATENT NO. GRANT DATE
(PUBLICATION NO.) (PUBLICATION DATE) EXPIRATION
ID/TITLE COUNTRY (APPLICATION NO.) (APPLICATION DATE) DATE COMMENTS
-------- ------- ----------------- ----------------- ---------- --------
I. ISSUED ARADIGM PATENTS
<S> <C> <C> <C> <C> <C>
749: Patterning of Polyimide Films US 4,508,749 04/02/85 Assigned from IBM to ARDM
with Ultraviolet Light
011001: Delivery of Aerosol Medications US 5,404,871 04/11/95
for Inspiration
011002: Delivery of Aerosol Medications US 5,542,410 08/06/96 CON of 011001
for Inspiration
011004: Delivery of Aerosol Medications US 5,655,516 08/12/97 CON of 011001
for Inspiration
011001: Delivery of Aerosol Medications Canada 2,082,168 03/26/96
for Inspiration
011001: Delivery of Aerosol Medications Japan 261,347 02/27/97
for Inspiration
016001: Method for Correcting the Drift US 5,450,336 09/12/95 CIP of 011001
Offset of a Transducer
016002: Method for Releasing Controlled US 5,608,647 03/04/97 DIV of 016001
Amount of Aerosol Medication
</TABLE>
-1-
<PAGE> 78
<TABLE>
<CAPTION>
PATENT NO. GRANT DATE
(PUBLICATION NO.) (PUBLICATION DATE) EXPIRATION
ID/TITLE COUNTRY (APPLICATION NO.) (APPLICATION DATE) DATE COMMENTS
-------- ------- ----------------- ----------------- ---------- --------
<S> <C> <C> <C> <C> <C>
005001: Disposable Package US 5,497,763 03/12/96
for Intrapulmonary
Delivery of
Aerosolized
Formulations
019001: Lockout Device for US 5,507,277 04/16/96 (Foreign Counterpart
Controlled Release of see - 041001)
Drug from Patient-
Activated Dispenser
017001: Intrapulmonary Drug US 5,509,404 04/23/96
Delivery Within
Therapeutically
Relevant Inspiratory
Flow/Volume Values
018001: Dynamic Particle US 5,522,385 06/04/96 (Foreign Counterpart
Size Control for see - 034001)
Aerosolized Drug
Delivery
006001: Systems for the US 5,544,646 08/13/96 CIP of 005001
Intrapulmonary (Foreign Counterpart
Delivery of see - 005001)
Aerosolized Aqueous
Formulations
006003: Systems for the US 5,660,166 08/26/97 DIV of 006002
Intrapulmonary
Delivery of
Aerosolized Aqueous
Formulations
II. ALLOWED ARADIGM PATENT APPLICATIONS
[*]
</TABLE>
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
-2-
<PAGE> 79
<TABLE>
<CAPTION>
PATENT NO. GRANT DATE
(PUBLICATION NO.) (PUBLICATION DATE) EXPIRATION
ID/TITLE COUNTRY (APPLICATION NO.) (APPLICATION DATE) DATE COMMENTS
-------- ------- ----------------- ----------------- ---------- --------
<S> <C> <C> <C> <C> <C>
[*]
III. PENDING ARADIGM PATENT APPLICATIONS
[*]
</TABLE>
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
<PAGE> 80
<TABLE>
<CAPTION>
PATENT NO. GRANT DATE
(PUBLICATION NO.) (PUBLICATION DATE) EXPIRATION
ID/TITLE COUNTRY (APPLICATION NO.) (APPLICATION DATE) DATE COMMENTS
-------- ------- ----------------- ------------------ ---------- --------
<S> <C> <C> <C> <C> <C>
[*]
</TABLE>
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
<PAGE> 81
<TABLE>
<CAPTION>
PATENT NO. GRANT DATE
(PUBLICATION NO.) (PUBLICATION DATE) EXPIRATION
ID/TITLE COUNTRY (APPLICATION NO.) (APPLICATION DATE) DATE COMMENTS
-------- ------- ----------------- ------------------ ---------- --------
<S> <C> <C> <C> <C> <C>
[*]
</TABLE>
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
<PAGE> 82
EXHIBIT B
SUMMARY DEVELOPMENT PLAN - INITIAL PRODUCT
Aradigm shall be responsible for [*] listed below to the extent required to have
the FDA accept the filing of an NDA for the INITIAL PRODUCT, and the equivalent
occurrence in the other MAJOR MARKET COUNTRIES of Europe, except as may
otherwise be provided in the Agreement.
A [*]
B [*]
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
<PAGE> 83
C [*]
[*]
D [*]
The goals of the [*] for the INITIAL PRODUCT are as follows:
[*]
[*]
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
<PAGE> 84
E [*]
The goals of the [*] for the INITIAL PRODUCT are as follows:
[*]
[*]
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
<PAGE> 85
F [*]
[*]
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
<PAGE> 86
EXHIBIT C
SUMMARY SPECIFICATIONS
AERx(TM) PAIN MANAGEMENT SYSTEM
I. Introduction
[*]
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
<PAGE> 87
EXHIBIT C - PAGE 2
[*]
II. SUMMARY SPECIFICATIONS
A. Minimum Features
[*]
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
<PAGE> 88
EXHIBIT C - PAGE 3
[*]
B. Optional Features
[*]
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
<PAGE> 89
EXHIBIT C - PAGE 4
[*]
Dosage Form:
[*]
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
<PAGE> 90
EXHIBIT D
ARADIGM
ARADIGM CORPORATION BURNS MCCLELLAN
Richard P. Thompson Audra Nass (Media)
President and Chief Executive Officer (415) 352-6262
(510) 783-0100 Ruth Markowitz (Investors)
(212) 213-0006
ARADIGM AND SMITHKLINE BEECHAM SIGN WORLDWIDE
COMMERCIALIZATION AGREEMENT TO DEVELOP
AERx(TM) PAIN MANAGEMENT SYSTEM
HAYWARD, CALIFORNIA, SEPTEMBER 30, 1997. Aradigm Corporation (NASDAQ:
ARDM) announced today that it has signed an agreement with SmithKline Beecham
(SB) to develop and commercialize a pulmonary drug delivery system for
providing immediate pain relief using opiates and opioids. The hand-held
AERx(TM) Pain Management System, an "electronic inhaler," is being designed to
combine proprietary pulmonary delivery technology with disposable liquid drug
packets to deliver medication rapidly and reproducibly into the bloodstream via
the lung. The collaboration represents the first commercial application of
Aradign's AERx platform technology. Pivotal clinical trials with morphine
sulfate, the first product targeted for commercialization, are expected to
start in 1998. Aradigm and SB also executed a stock purchase agreement under
which SB has agreed to purchase newly issued Aradigm common stock in two
transactions, the first of which will occur once the agreements become
effective at a 25% premium to Aradigm's recent market price.
Under the terms of the agreements, by the time the first product is
commercialized, Aradigm could receive approximately $40 million in milestones,
development payments and equity investments. Aradigm will receive $9 million in
upfront payments and a $5 million equity investment once the agreements become
effective. Additional milestones and development costs would be paid if SB
decides to develop additional opiates and opioids for delivery with the AERx
Pain Management System. In exchange, SB will have exclusive worldwide
commercial rights to the AERx Pain Management System for use with such
analgesics. Aradigm will be the manufacturer of all the products covered by
this agreements and will also receive royalties on net sales. The agreements
between Aradigm and SB will become effective upon clearance of a filing under
the Hart-Scott-Rodino Antitrust Improvements Act.
Poorly treated pain is a major problem which is receiving increasing
attention from the medical community. Among cancer patients, over 4 million
people worldwide suffer from pain, a majority of whom experience multiple
"breakthrough" pain events each day. Breakthrough pain refers to acute
exacerbations of paid which "break through" the patient's normal baseline
1.
<PAGE> 91
level of pain medication. In the postoperative arena, 20 million patients each
year require treatment with narcotics after surgery. Many of these patients in
pain are underserved by currently available treatments. The limitations include
painful and costly intravenous (IV) administrations and injections, slow onset
of action even with the more "immediate release" oral products, as well as
misuse and safety concerns. The AERx Pain Management System is being
specifically designed to address these problems and improve patients' quality of
life. AERx technology has the potential to deliver pain relief as rapidly and
effectively as the current "gold standard" of care, intravenous
patient-controlled analgesia, without needles. In a Phase I trial in healthy
volunteers, the speed and reproductibility of morphine delivery using the AERx
technology was comparable to morphine delivered intravenously.
The non-invasive, self-administered nature of the AERx Pain Management
System, with confirmation from planned clinical studies, offers the possibility
that it may be usable in both hospital and outpatient settings. This may reduce
healthcare costs by allowing patients to leave the hospital earlier and treat
their postoperative pain at home. Unlike other pain management products, the
AERx Pain Management System is being designed in include patented electronic
"lock and key" technology for proper patient identification to prevent
overdosing and misuse, and will automatically record all dosage events.
"Aradigm is developing this product to provide a safe, self-administered
drug delivery system to treat patients that suffer from poorly treated chronic
or acute pain. We are delighted to be collaborating with one of the world's
leading pharmaceutical companies on this product," stated Richard P. Thompson,
president and CEO of Aradigm. "The agreement with SmithKline Beecham validates
Aradigm's approach to advanced pulmonary drug delivery, and is consistent with
our strategy of forming alliances with world-class corporate partners."
"There remains a tremendous need to improve upon current methods of
alleviating pain," said Dr. Jerry Karabelas, executive vice president,
SmithKline Beecham Pharmaceuticals. "We are eager to work as partners with
Aradigm in realizing the potential of a technology that may bring relief to so
many patients."
Located in Hayward, California, Aradigm is engaged in the development of
novel, pulmonary drug delivery systems designed to enhance the delivery and
effectiveness of a number of existing and development stage drugs and reduce the
need for injectable drug therapy. Aradigm plans to commercialize its proprietary
technologies on two product platforms; the SmartMist(TM) Respiratory Management
System, which is designed to improve the effectiveness of treatment provided by
metered dose inhalers; and the AERx(TM) Pulmonary Drug Delivery System, which
creates aerosols from liquid drug formulations for delivery locally to the lung
or into the bloodstream via the lung.
SmithKline Beecham - one of the world's leading healthcare companies -
discovers, develops, manufactures, and markets pharmaceuticals, vaccines,
over-the-counter medicines, and health-related consumer products, and
provides healthcare services, including clinical-laboratory
2.
<PAGE> 92
testing, disease management, and pharmaceutical-benefit management. For company
information, visit SB on the World Wide Web at http://www.sb.com.
Please note:
Except for the historical information contained herein, this news release
contains forward looking statements that involve risk and uncertainties,
including the timely availability and acceptance of new products, the impact of
competitive products and pricing, and the management of growth, as well as the
other risks detailed from time to time in Aradigm Corporation's Securities and
Exchange Commission (SEC) Registration Statements, including the Annual Report
on Form 10-K filed with the SEC on March 28, 1997.
3.
<PAGE> 93
EXHIBIT E
DEVELOPMENT COMMITTEE
The members of the DEVELOPMENT COMMITTEE as of the Effective Date are:
FOR SB:
VP & Director, WSO/QA [*]
VP & Director, ITRO Therapeutic Unit [*]
VP & Director, ITRO SPD [*]
VP & Director, U.S. NPD [*]
VP & Director, Transnational Regulatory Affairs [*]
Project Director [*]
FOR ARADIGM:
Project Coordinator [*]
VP, Engineering [*]
VP, Research and Development [*]
Director, Marketing [*]
VP, Clinical Affairs [*]
VP, Medical and Regulatory Affairs [*]
The DEVELOPMENT COMMITTEE shall have the following responsibilities:
(i) oversee all clinical investigations and efforts undertaken under the
Agreement in conducting DEVELOPMENT of the PRODUCTS for use in the FIELD;
(ii) review and approve the DEVELOPMENT PLANS and appropriate amendments
thereto;
(iii) establish working project teams at SB and Aradigm, respectively, to
conduct work under the DEVELOPMENT Plan;
(iv) allocate all needed DEVELOPMENT work appropriately between the
Parties, including providing for subcontractors to perform certain tasks if
desirable;
(v) be the primary contact point between the Parties regarding the transfer
of INFORMATION and the discussion of each Party's efforts to conduct
DEVELOPMENT;
(vi) implement mechanisms for review and approval of manufacturing process
control changes;
(vii) select particular ANALGESIC DRUGS to be developed as DRUG PRODUCTS;
and
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
<PAGE> 94
(vii) evaluate, in consultation with the COMMERCIALIZATION COMMITTEE,
commercial opportunities for additional new PRODUCTS in the FIELD.
<PAGE> 95
EXHIBIT F
[ * ]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 96
EXHIBIT G
CERTAIN CONFIDENTIALITY TERMS
1. The THIRD PARTY shall hold the information disclosed to it by Aradigm
("Information") in strict confidence and shall use diligent efforts, which shall
not in any event be less than the THIRD PARTY uses to prevent unauthorized use
or disclosure of its own valuable, confidential information, to prevent any
unauthorized use or disclosure of such Information.
2. The THIRD PARTY shall not, without the prior written consent of Aradigm, use
the Information disclosed to it for any purpose of other than the use for which
such Information was disclosed by Aradigm.
3. Upon completion of the authorized use by such THIRD PARTY and in the absence
of any further agreement between the parties, the THIRD PARTY shall cease all
use and make no further use of the Information and shall, upon written
request from Aradigm, promptly return all Information to Aradigm.
<PAGE> 1
Exhibit 10.2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into
as of September 30, 1997 (the "Effective Date"), by and between ARADIGM
CORPORATION, a California corporation ("Aradigm"), and SMITHKLINE BEECHAM PLC, a
corporation existing under the laws of the United Kingdom ("SB").
RECITALS
A. Aradigm and SB are entering into that certain Product Development and
Commercialization Agreement dated as of the Effective Date of this Agreement
(the "Development Agreement").
B. In connection with entry into the Development Agreement, Aradigm desires to
sell and issue to SB, and SB desires to buy, shares of Aradigm's common stock,
as provided herein.
NOW, THEREFORE, the Parties hereto agree as follows:
1. PURCHASE AND SALE.
Subject to the terms and conditions hereof, and in reliance upon the
representations, warranties and agreements contained herein, Aradigm hereby
agrees to issue and sell to SB, and SB hereby agrees to purchase from Aradigm,
the aggregate number of shares of Aradigm's Common Stock (the "Shares")
determined in accordance with Sections 1.1 and 1.4 hereof.
1.1 INITIAL SHARES. On the First Closing Date (as defined in Section
1.2), Aradigm shall issue and sell to SB, and SB shall purchase from Aradigm for
$5,000,000 (the "Initial Purchase Price"), the number of shares of Aradigm's
Common Stock (the "Initial Shares") equal to the quotient of $5,000,000 divided
by the First Market Price (as hereinafter defined). In the event the number of
Initial Shares includes a fraction of a share, the number of Initial Shares
shall be increased to the nearest whole number of shares and the Initial
Purchase Price shall be increased to equal the First Market Price times such
whole number of Initial Shares. The First Market Price shall be one hundred
twenty-five percent (125%) of the [*]
1.2 FIRST CLOSING DATE. The closing of the sale and purchase of the
Initial Shares (the "First Closing") shall take place on the date (the "First
Closing Date") that is five (5) business days after the expiration or earlier
termination of the applicable waiting period for the notification provided by SB
and Aradigm (as discussed further in Section 15.1 of the Development Agreement)
to the Federal Trade Commission under the Hart-Scott-Rodino Antitrust
Improvements Act (the "Act"). In the event the termination of such waiting
period has not occurred within ninety (90) days after the initial notification
under the Act, then either Party
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
1.
<PAGE> 2
may elect to terminate this Agreement on written notice to the other provided
within twenty (20) days after the end of such ninety (90) day period.
1.3 DELIVERY. At the First Closing, Aradigm will deliver to SB a
certificate registered in the name of SB, representing the Initial Shares to be
purchased by SB from Aradigm, dated the First Closing Date, against payment of
the Initial Purchase Price by wire transfer, a check made payable to the order
of Aradigm, or any combination thereof.
1.4 ADDITIONAL SHARES.
(a) Commencing on the Effective Date and continuing thereafter
until the date that is [*] (as such terms are defined in the Development
Agreement) (such period referred to herein as the "Sale Period"), Aradigm shall
have the right, but not the obligation, to sell to SB the Additional Shares, as
provided in subsection 1.4(b) below. Such right shall be effected by Aradigm's
delivery to SB of a written notice specifying its election to sell to SB such
Additional Shares (the "Shares Sale Notice"), which notice must be provided, if
at all, during the Sale Period.
(b) Provided that Aradigm has delivered to SB the Shares Sale
Notice in compliance with Subsection 1.4(a), on the Second Closing Date (as
defined in Section 1.5), Aradigm shall issue and sell to SB, and SB shall
purchase from Aradigm for an additional $5,000,000 (the "Additional Purchase
Price"), the number of shares of Aradigm's Common Stock (the "Additional
Shares") equal to the quotient of $5,000,000 divided by the Second Market Price
(as hereinafter defined). The Second Market Price shall be [*]. In the event the
number of Additional Shares issuable pursuant to this Section 1.4 includes a
fractional share, the number of Additional Shares shall be increased to the
nearest whole number of shares, and the Additional Purchase Price shall be
increased to equal the Second Market Price times such whole number of Additional
Shares.
(c) Aradigm shall not deliver the Shares Sale Notice at any time
when [*] are for dates prior to the ex-dividend date for any distribution with
respect to the Shares unless SB receives such distribution with respect to the
Additional Shares. SB shall not be entitled to any rights as holder of the
Additional Shares until completion of the Second Closing.
(d) Aradigm shall not deliver the Shares Sale Notice at any time
when [*] as of (i) the date of delivery of the Shares Sale Notice or (ii) any of
the ten (10) trading days preceding such delivery date.
1.5 SECOND CLOSING DATE. The closing of the sale and purchase of the
Additional Shares (the "Second Closing") shall take place on the business day
(the "Second Closing Date") that is twelve (12) trading days after the date of
delivery of the Shares Sale Notice.
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
2.
<PAGE> 3
1.6 DELIVERY. At the Second Closing, Aradigm will deliver to SB a
certificate registered in the name of SB, representing the Additional Shares to
be purchased by SB from Aradigm, dated the Second Closing Date, against payment
of the Additional Aggregate Purchase Price by wire transfer, a check made
payable to the order of Aradigm, or any combination of the above.
1.7 RULE 144 REPORTING. With a view to making available to SB the
benefits of certain rules and regulations of the Securities and Exchange
Commission (the "SEC") which may permit the sale of the shares Securities to the
public without registration, Aradigm agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 ("Rule 144") under the Securities Act of
1933, as amended (the 1933 Act") or any similar or analogous rule promulgated
under the 1933 Act, as long as the
Shares are outstanding;
(b) File with the SEC, in a timely manner, all reports and other
documents required of Aradigm under the 1933 Act and the Securities Act of 1934,
as amended (the "1934 Act");
(c) Take all such action (including without limitation the
furnishing of the information described in Rule 144(d)(4)) as may be necessary
to facilitate a sale of the shares by SB to a "qualified institutional buyer,"
as such term is defined in Rule 144A of the 1933 Act.
1.8 "MARKET STAND-OFF" AGREEMENTS. SB hereby agrees that prior to the
second anniversary of the Effective Date it shall not sell or otherwise transfer
or dispose of any of the Shares held by it. In addition, SB hereby agrees that
during the one hundred eighty (180) day period following the effective date of a
registration statement of Aradigm filed under the 1933 Act, it shall not, to the
extent requested by Aradigm or any underwriter, sell or otherwise transfer or
dispose of any Common Stock of Aradigm held by it at any time during such period
(except Common Stock included in such registration); provided, however, that:
(a) Such agreement shall be applicable only to registration
statements of Aradigm which cover Common Stock (or other securities) to be sold
on its behalf to the public;
(b) Such Agreement shall be applicable only if SB holds at least
one percent (1%) of the Common Stock of Aradigm then outstanding; and
(c) All officers and directors of Aradigm and any other
stockholders owning at least five percent (5%) of the Common Stock of Aradigm
then outstanding (excluding stockholders that acquired their positions in the
public market) enter into similar agreements.
Aradigm may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of the applicable periods.
The agreement of SB set forth in this Section 1.8 shall lapse on the second
anniversary of the Second Closing.
3.
<PAGE> 4
2. REPRESENTATIONS AND WARRANTIES OF ARADIGM.
Except as otherwise set forth on the Schedule of Exceptions attached
hereto as Exhibit A, which shall contain Section numbers specifically
corresponding to the Section numbers in this Agreement, or, with respect to the
Second Closing, the Second Schedule of Exceptions, which shall be provided to SB
at the Second Closing and shall be attached to Exhibit A hereto, Aradigm hereby
represents and warrants to SB as follows:
2.1 ORGANIZATION AND STANDING; ARTICLES AND BYLAWS. Aradigm is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California, and has full power and authority to own and operate
its properties and assets and to carry on its business as presently conducted
and as proposed to be conducted. Aradigm is qualified as a foreign corporation
to do business in each jurisdiction in the United States in which the ownership
of its property or the conduct of its business requires such qualification,
except where any statutory fines or penalties or any corporate disability
imposed for the failure to qualify would not materially adversely affect
Aradigm, its assets, financial condition or operations. True and correct copies
of Aradigm's Amended and Restated Articles of Incorporation and Bylaws currently
in effect have been delivered to SB.
2.2 AUTHORIZATION. All corporate action on the part of Aradigm, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement, the performance of all Aradigm's obligations
hereunder, and for the authorization, issuance, sale and delivery of the Initial
Shares and the Additional Shares has been taken or will be taken prior to each
of the First Closing and the Second Closing, respectively. This Agreement, when
executed and delivered, shall constitute a valid and legally binding obligation
of Aradigm in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors, and subject to
general equity principles.
2.3 VALIDITY OF SHARES. The sale of the Shares is not subject to any
preemptive rights or rights of first refusal that have not been waived and, when
issued, sold and delivered in compliance with the provisions of this Agreement,
the Shares will be validly issued, fully paid and nonassessable, and will be
free of any liens or encumbrances created by Aradigm; provided, however, that
the Shares may be subject to restrictions on transfer under state and/or federal
securities laws as set forth herein or as otherwise required by such laws at the
time a transfer is proposed.
2.4 OFFERING. Assuming the accuracy of the representations and
warranties of SB contained in Section 3 hereof, the offer, issue, and sale of
Shares are exempt from the registration and prospectus delivery requirements of
the 1933 Act, and the Initial Shares have been and the Additional Shares will be
registered or qualified (or are exempt from registration and qualification)
under the registration, permit, or qualification requirements of all applicable
state securities laws.
4.
<PAGE> 5
2.5 FULL DISCLOSURE.
(a) As of the First Closing, Aradigm has furnished to SB the
following documents, and the information contained in such documents, as of
their respective dates (or if amended, as of the date of such amendment), did
not contain any untrue statement of a material fact, and did not omit to state
any material fact necessary to make any statement, in light of the circumstances
under which such statement was made, not misleading:
Aradigm's annual report on Form 10-K as amended by Form 10-K/A
for the fiscal year ended December 31, 1996; and Aradigm's Quarterly Reports on
Form 10-Q for the quarters ended March 31 and June 30, 1997, and any additional
Quarterly Reports on Form 10-Q or Current Reports on Form 8-K filed after the
Effective Date but prior to the First Closing.
(b) As of the Second Closing, Aradigm shall have furnished to SB
the following documents, and the information contained in such documents, as of
their respective dates (or if amended, as of the date of such amendment), will
not contain any untrue statement of a material fact, or omit to state any
material fact necessary to make any statement, in light of the circumstances
under which such statement is made, not misleading:
Aradigm's annual report on Form 10-K as amended by Form 10-K/A
for the most recent fiscal year prior to the Second Closing Date for which such
document is publicly available; and Aradigm's Quarterly Reports on Form 10-Q for
the quarters after such fiscal year, to the extent publicly available.
2.6 NO CONFLICT; NO VIOLATION. The execution, delivery and performance
of this Agreement and consummation of the transactions contemplated hereby will
not (a) conflict with any provisions of the Amended and Restated Certificate of
Incorporation or Bylaws of Aradigm; (b) result in any material violation or
default of, or permit the acceleration of any obligation under (in each case,
upon the giving of notice, the passage of time, or both), any material mortgage,
indenture, lease, agreement or other instrument, permit, franchise, license,
judgment, order, decree, law, ordinance, rule or regulation applicable to
Aradigm or its properties.
2.7 CONSENTS AND APPROVALS. All consents, approvals, orders, or
authorizations of, or registrations, qualifications, designations, declarations,
or filings with, any governmental authority, required on the part of Aradigm in
connection with the valid execution and delivery of this Agreement, the offer,
sale or issuance of the Shares, or the consummation of any other transaction
contemplated hereby have been obtained, or will be effective at the First
Closing or the Second Closing, as applicable, except for notices required or
permitted to be filed with certain state and federal securities commissions
after the First Closing or the Second Closing, as the case may be, which notices
will be filed on a timely basis.
2.8 ABSENCE OF CERTAIN DEVELOPMENTS. With respect to the First Closing,
since June 30, 1997, and with respect to the Second Closing, since the end of
the last fiscal quarter prior to such Second Closing for which Aradigm's filing
on Form 10-Q is publicly available, Aradigm has not (a) incurred or become
subject to any material liabilities (absolute or contingent) except current
liabilities incurred, and liabilities under contracts entered into, in the
ordinary course of
5.
<PAGE> 6
business, consistent with past practices; (b) mortgaged, pledged or subjected to
lien, charge or any other encumbrance any of its assets, tangible or intangible;
(c) sold, assigned or transferred any of its assets or canceled any debts or
obligations except in the ordinary course of business, consistent with past
practices; (d) suffered any extraordinary losses, or waived any rights of
substantial value; (e) entered into any material transaction other than in the
ordinary course of business, consistent with past practices; or (f) otherwise
had any material change in its condition, financial or otherwise, except for
changes in the ordinary course of business, consistent with past practices, none
of which individually or in the aggregate has been materially adverse to
Aradigm.
3. REPRESENTATIONS AND WARRANTIES OF SB.
SB hereby represents and warrants to Aradigm as follows:
3.1 LEGAL POWER. It has the requisite legal power to enter into this
Agreement, to purchase the Shares hereunder, and to carry out and perform its
obligations under the terms of this Agreement.
3.2 DUE EXECUTION. This Agreement has been duly authorized, executed and
delivered by it, and, upon due execution and delivery by Aradigm, this Agreement
will be a valid and binding agreement of it.
3.3 INVESTMENT REPRESENTATIONS.
(a) It is acquiring the Shares for its own account, not as
nominee or agent, for investment and not with a view to, or for resale in
connection with, any distribution or public offering thereof within the meaning
of the 1933 Act.
(b) It understands that (i) the Shares have not been registered
under the 1933 Act by reason of a specific exemption therefrom, that they must
be held by it indefinitely, and that it must, therefore, bear the economic risk
of such investment indefinitely, unless a subsequent disposition thereof is
registered under the 1933 Act or is exempt from such registration; (ii) each
certificate representing the Initial Shares and the Additional Shares will be
endorsed with the following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS (A) PURSUANT TO SEC
RULE 144 OR (B) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
1933 ACT COVERING SUCH SECURITIES OR (C) ARADIGMRECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO
ARADIGM, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
THE 1933 ACT."
6.
<PAGE> 7
and (iii) Aradigm will instruct any transfer agent not to register the transfer
of any of the Shares unless the conditions specified in the foregoing legend are
satisfied.
SB shall have the right to demand removal of the foregoing legend with
respect to any or all of the Shares if, in the opinion of counsel to Aradigm,
removal of such legend is permitted by the rules and regulations of the SEC.
(c) It has been furnished with such materials and has been given
access to such information relating to Aradigm as it or its qualified
representative has requested and it has been afforded the opportunity to ask
questions regarding Aradigm and the Shares, all as it has found necessary to
make an informed investment decision.
(d) It is an "accredited investor" within the meaning of
Regulation D under the 1933 Act.
(e) It was not formed for the specific purpose of acquiring the
Shares offered hereunder.
4. CONDITIONS TO FIRST CLOSING.
4.1 CONDITIONS TO OBLIGATIONS OF SB. SB's obligation to purchase the
Initial Shares at the First Closing is subject to the fulfillment, at or prior
to the First Closing, of all of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by Aradigm in Section 2
hereof shall be true and correct in all material respects on the date of the
First Closing with the same force and effect as if they had been made on and as
of said date; and Aradigm shall have performed all obligations and conditions
herein required to be performed by it on or prior to the First Closing.
(b) OPINION OF ARADIGM'S COUNSEL. SB shall have received from
Cooley Godward LLP, counsel to Aradigm, an opinion letter substantially in the
form attached hereto as Exhibit B, addressed to it, dated the First Closing
Date.
(c) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the First
Closing hereby and all documents and instruments incident to such transactions
shall be reasonably satisfactory in substance and form to SB and its special
counsel, and SB and its special counsel shall have received all such counterpart
originals or certified or other copies of such documents as they may reasonably
request.
(d) QUALIFICATIONS, LEGAL INVESTMENT. All authorizations,
approvals, or permits, if any, of any governmental authority or regulatory body
of the United States or of any state that are required in connection with the
lawful sale and issuance of the Initial Shares pursuant to this Agreement shall
have been duly obtained and shall be effective on and as of the First Closing.
No stop order or other order enjoining the sale of the Initial Shares shall have
been
7.
<PAGE> 8
issued and no proceedings for such purpose shall be pending or, to the knowledge
of Aradigm, threatened by the SEC or any commissioner of corporations or similar
officer of any other state having jurisdiction over this transaction. At the
time of the First Closing, the sale and issuance of the Initial Shares shall be
legally permitted by all laws and regulations to which SB and Aradigm are
subject.
(e) COMPLIANCE CERTIFICATE. Aradigm shall have delivered to SB a
Certificate, executed by the President of Aradigm, dated the date of the First
Closing, certifying to the fulfillment of the conditions specified in
subparagraphs (a) and (d) of this Subsection 4.1.
4.2 CONDITIONS TO OBLIGATIONS OF ARADIGM. Aradigm's obligation to issue
and sell the Initial Shares at the First Closing is subject to the fulfillment
to Aradigm's satisfaction, on or prior to the First Closing, of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties made by SB in Section 3 hereof shall be true and correct at the date
of the First Closing, with the same force and effect as if they had been made on
and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. SB shall have performed and
complied with all agreements and conditions herein required to be performed or
complied with by it on or before the First Closing.
(c) QUALIFICATIONS, LEGAL INVESTMENT. All authorizations,
approvals, or permits, if any, of any governmental authority or regulatory body
of the United States or of any state that are required in connection with the
lawful sale and issuance of the Initial Shares pursuant to this Agreement shall
have been duly obtained and shall be effective on and as of the First Closing.
No stop order or other order enjoining the sale of the Initial Shares shall have
been issued and no proceedings for such purpose shall be pending or, to the
knowledge of Aradigm, threatened by the SEC or any commissioner of corporations
or similar officer of any state having jurisdiction over this transaction. At
the time of the First Closing, the sale and issuance of the Initial Shares shall
be legally permitted by all laws and regulations to which SB and Aradigm are
subject.
5. CONDITIONS TO SECOND CLOSING.
5.1 CONDITIONS TO OBLIGATIONS OF SB. SB's obligation to purchase the
Additional Shares at the Second Closing is subject to the fulfillment, at or
prior to the Second Closing, of all of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by Aradigm in Section 2
hereof shall be true and correct in all material respects on the date of the
Second Closing with the same force and effect as if they had been made on and as
of said date; and Aradigm shall have performed all obligations and conditions
herein required to be performed by it on or prior to the Second Closing.
8.
<PAGE> 9
(b) OPINION OF ARADIGM'S COUNSEL. SB shall have received from
Cooley Godward LLP, counsel to Aradigm, an opinion letter substantially in the
form attached hereto as Exhibit B, addressed to it, dated the Second Closing
Date.
(c) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Second
Closing hereby and all documents and instruments incident to such transactions
shall be reasonably satisfactory in substance and form to SB and its special
counsel, and SB and its special counsel shall have received all such counterpart
originals or certified or other copies of such documents as they may reasonably
request.
(d) QUALIFICATIONS, LEGAL INVESTMENT. All authorizations,
approvals, or permits, if any, of any governmental authority or regulatory body
of the United States or of any state that are required in connection with the
lawful sale and issuance of the Additional Shares pursuant to this Agreement
shall have been duly obtained and shall be effective on and as of the Second
Closing. No stop order or other order enjoining the sale of the Additional
Shares shall have been issued and no proceedings for such purpose shall be
pending or, to the knowledge of Aradigm, threatened by the SEC or any
commissioner of corporations or similar officer of any other state having
jurisdiction over this transaction. At the time of the Second Closing, the sale
and issuance of the Additional Shares shall be legally permitted by all laws and
regulations to which SB and Aradigm are subject.
(e) COMPLIANCE CERTIFICATE. Aradigm shall have delivered to SB a
Certificate, executed by the President of Aradigm, dated the date of the Second
Closing, certifying to the fulfillment of the conditions specified in
subparagraphs (a) and (d) of this Subsection 5.1.
(f) NO TERMINATION OF DEVELOPMENT AGREEMENT; NO BREACH. A
termination of the Development Agreement pursuant to Section 14.2 (by either
party) or Section 14.3 thereof (by SB) shall not have become effective. In
addition, Aradigm shall not have committed a material breach of the Development
Agreement as to which SB has provided Aradigm with written notice pursuant to
Section 14.2, unless such breach has been cured by Aradigm or waived by SB.
(g) NO CHANGE OF CONTROL OF ARADIGM. There shall have been no
Change of Control of Aradigm between the First Closing and the Second Closing.
For purposes of this Section 5(g) "Change of Control" means the occurrence of
any of the following events:
(i) all or substantially all of the assets of Aradigm
are sold, leased, exchanged or otherwise transferred to any other person or
group of persons acting in concert as a partnership or other group (a "Group")
other than an affiliate of Aradigm;
(ii) Aradigm is merged or consolidated with or into
another entity with the effect that the existing equity holders hold less than
50% of the combined voting power of the then outstanding securities ordinarily
(and apart from rights arising under special circumstances) having the right to
vote in the election of directors (or in the election of persons serving in a
9.
<PAGE> 10
similar capacity) of the surviving entity of such merger or the entity resulting
from such consolidation.
(iii) a change in the composition of the board of
directors of Aradigm as a result of which during any period of two consecutive
years after the First Closing, individuals who at the beginning of such period
constitute Aradigm's Board of Directors (together with any new director whose
election by Aradigm's Board of Directors or whose nomination for election by
Aradigm's shareholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the directors in
office at the end of such period; or
(iv) a person or Group shall, as a result of a tender or
exchange offer, open market purchases, merger, privately negotiated purchases or
otherwise, have become, directly or indirectly, the beneficial owner (within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of
the securities of Aradigm representing 50% or more of the combined voting power
of the then outstanding securities of Aradigm ordinarily (and apart from rights
arising under special circumstances) having the right to vote in the election of
directors.
(h) Aradigm shall not have (i) filed in any court or agency
pursuant to any statute or regulation of any state or country, a petition in
bankruptcy or insolvency or for reorganization or for an arrangement or for the
appointment of a receiver or trustee of the party or of its assets, or (ii) been
served with an involuntary petition against it, filed in any insolvency
proceeding, which petition has not been dismissed as of the Second Closing Date.
5.2 CONDITIONS TO OBLIGATIONS OF ARADIGM. Aradigm's obligation to issue
and sell the Additional Shares at the Second Closing is subject to the
fulfillment to Aradigm's satisfaction, on or prior to the Second Closing, of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties made by SB in Section 3 hereof shall be true and correct at the date
of the Second Closing, with the same force and effect as if they had been made
on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. SB shall have performed and
complied with all agreements and conditions herein required to be performed or
complied with by it on or before the Second Closing.
(c) QUALIFICATIONS, LEGAL INVESTMENT. All authorizations,
approvals, or permits, if any, of any governmental authority or regulatory body
of the United States or of any state that are required in connection with the
lawful sale and issuance of the Additional Shares pursuant to this Agreement
shall have been duly obtained and shall be effective on and as of the Second
Closing. No stop order or other order enjoining the sale of the Additional
Shares shall have been issued and no proceedings for such purpose shall be
pending or, to the knowledge of Aradigm, threatened by the SEC or any
commissioner of corporations or similar officer of any state having jurisdiction
over this transaction. At the time of the Second Closing, the sale and
10.
<PAGE> 11
issuance of the Additional Shares shall be legally permitted by all laws and
regulations to which SB and Aradigm are subject.
6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents, made and to be performed entirely within the State of
California.
6.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto.
6.3 ENTIRE AGREEMENT. This Agreement, the Development Agreement, and the
Exhibits hereto and thereto, and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement among the parties
with regard to the subjects hereof, and no party shall be liable or bound to any
other party in any manner by any representations, warranties, covenants, or
agreements except as specifically set forth herein or therein. Nothing in this
Agreement, express or implied, is intended to confer upon any party, other than
the parties hereto and their respective successors and assigns, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided herein.
6.4 SEPARABILITY. In case any provision of this Agreement shall be
invalid, illegal, or unenforceable, it shall, to the extent practicable, be
modified so as to make it valid, legal and enforceable and to retain as nearly
as practicable the intent of the parties, and the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
6.5 AMENDMENT AND WAIVER. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance, either retroactively or prospectively, and either for
a specified period of time or indefinitely), with the written consent of Aradigm
and SB. Any amendment or waiver effected in accordance with this Section shall
be binding upon SB, each future holder of the Shares, and Aradigm.
6.6 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power, or remedy accruing to SB or any subsequent holder of any Shares upon any
breach, default or noncompliance of Aradigm under this Agreement, shall impair
any such right, power, or remedy, nor shall it be construed to be a waiver of
any such breach, default or noncompliance, or any acquiescence therein, or of
any similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
SB's part of any breach, default or noncompliance under this Agreement or any
waiver on SB's part of any provisions or conditions of this Agreement must be in
writing and shall be effective only to the extent specifically set forth in such
writing, and that all remedies, either under this Agreement, by law, or
otherwise afforded to SB, shall be cumulative and not alternative.
11.
<PAGE> 12
6.7 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
(a) upon personal delivery, (b) on report of successful transmission by
facsimile machine that automatically generates a printed report indicating
whether transmission was completed successfully, at the conclusion of each
transmission, (c) on the first business day after receipted delivery to a
courier service which guarantees next business-day delivery, under circumstances
in which such guaranty is applicable, or (d) on the earlier of delivery or five
(5) business days after mailing by United States certified by mail, postage and
fees prepaid, to the appropriate party at the address set forth below or to such
other address as the part so notifies the other in writing:
(a) if to Aradigm, to:
ARADIGM CORPORATION
26219 Eden Landing Road
Hayward, CA 94545
Telecopier: (510) 783-0410
Attention: President and Chief Executive Officer
with a copy to:
COOLEY GODWARD LLP
5 Palo Alto Square, 4th Floor
3000 El Camino Real
Palo Alto, CA 94306-2155
Attention: James C. Kitch, Esq.
(b) if to SB, to:
SMITHKLINE BEECHAM PLC
c/o SmithKline Beecham Corporation
One Franklin Plaza (FP 1935)
Philadelphia, PA 19102
Telecopier: (215) 751-4253
Attention: Elizabeth Posner
with a copy to:
SMITHKLINE BEECHAM CORPORATION
One Franklin Plaza (FP 2225)
Philadelphia, PA 19102
Telecopier: (215) 751-5349
Attention: Donald F. Parman
Notwithstanding the foregoing, all notices and other communications to
an address outside of the United States shall be sent by telecopy and confirmed
in writing to be sent by first class mail.
12.
<PAGE> 13
6.8 FINDER'S FEES.
(a) Aradigm (i) represents and warrants that it has retained no
finder or broker in connection with the transactions contemplated by this
Agreement and (ii) hereby agrees to indemnify and to hold SB harmless of and
from any liability for any commission or compensation in the nature of a
finder's fee to any broker or other person or firm (and the costs and expenses
of defending against such liability or asserted liability) for which Aradigm or
any of its employees or representatives is responsible.
(b) SB (i) represents and warrants that it has retained no finder
or broker in connection with the transactions contemplated by this Agreement,
and (ii) hereby agrees to indemnify and to hold Aradigm harmless of and from any
liability for any commission or compensation in the nature of a finder's fee to
any broker or other person or firm (and the costs and expenses of defending
against such liability or asserted liability) for which SB or any of its
employees or representatives are responsible.
6.9 INFORMATION CONFIDENTIAL. SB acknowledges that any non public
information received by it pursuant hereto is confidential and for SB's use
only, and it will refrain from using such information or reproducing,
disclosing, or disseminating such information to any other person (other than
its employees, affiliates, agents, or partners having a need to know the
contents of such information and its attorneys, in each case who agree to be
bound by this Section 6.9), except in connection with the exercise of rights
under this Agreement, unless such information becomes available to the public
generally or it is required by a governmental body to disclose such information.
6.10 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
6.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
The foregoing Agreement is hereby executed as of the date first above
written.
ARADIGM CORPORATION SMITHKLINE BEECHAM PLC
By: [SIG] By: [SIG]
----------------------- ---------------------------
13.
<PAGE> 14
LIST OF EXHIBITS
EXHIBITS
Exhibit A - SCHEDULE OF EXCEPTIONS
Exhibit B - OPINION OF COMPANY'S COUNSEL
<PAGE> 15
EXHIBIT A
SCHEDULE OF EXCEPTIONS
<PAGE> 16
ARADIGM CORPORATION
SCHEDULE OF EXCEPTIONS
This is the Schedule of Exceptions to that certain Stock Purchase
Agreement, dated as of September 30, 1997 (the "Agreement"), by and between
Aradigm Corporation (the "Company") and SmithKline Beecham plc. Unless noted
otherwise, any capitalized terms used herein but not defined shall have the
meaning set forth in the Agreement. The paragraph numbers of this Schedule of
Exceptions correspond to the sections of the Agreement to which the disclosures
relate. However, all information disclosed herein shall be deemed disclosed
under and incorporated into any other section of the Agreement where such
disclosure would be appropriate. References to any document do not purport to be
complete and are qualified in their entirety by the document itself.
SECTION 2.1
The Company has sales representatives in [*]. The Company does not have any
offices in these states, and such sales representatives have not made any sales
of the Company's products.
SECTION 2.8
The Company has entered into a [*], dated August 25, 1997
(the "Loan Agreement").
Pursuant to the Loan Agreement, [*] the assets of the Company.
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
1.
<PAGE> 17
EXHIBIT B
OPINION OF COMPANY'S COUNSEL
2.
<PAGE> 18
COOLEY GODWARD LLP ATTORNEYS AT LAW San Francisco, CA
415 693-2000
Five Palo Alto Square Menlo Park, CA
3000 El Camino Real 650 843-5000
Palo Alto, CA
94306-2155 San Diego, CA
Main 650 843-5000 619 550-6000
Fax 650 857-0663
Boulder, CO
303 546-4000
Denver, CO
303 606-4800
www.cooley.com
JAMES C. KITCH
650 843-5027
[email protected]
October ___, 1997
SmithKline Beecham plc
c/o SmithKline Beecham Corporation
One Franklin Plaza (FP 1935)
Philadelphia, PA 19102
RE: ARADIGM CORPORATION
Ladies and Gentlemen:
We have acted as counsel to Aradigm Corporation, a California corporation (the
"Company"), in connection with the issuance and sale to you of the Initial
Shares (as defined in the Stock Purchase Agreement between you and the Company,
dated as of September ___, 1997 (the "Purchase Agreement")), such issuance and
sale to take place pursuant to the terms and conditions of the Purchase
Agreement. We are rendering this opinion pursuant to Section 5.1(b) of the
Purchase Agreement. Except as otherwise defined herein, capitalized terms used
but not defined herein have the respective meanings given to them in the
Purchase Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Agreement by the various parties and originals or copies
certified to our satisfaction, of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below. Where we render
an opinion "to the best of our knowledge" or concerning an item "known to us" or
our opinion otherwise refers to our knowledge, it is based solely upon (i) an
inquiry of attorneys within this firm who perform legal services for the
Company, (ii) receipt of a certificate executed by an officer of the Company
covering such matters, and (iii) such other investigation, if any, that we
specifically set forth herein.
In rendering this opinion, we have assumed the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Purchase Agreement) where authorization, execution and
delivery are prerequisites to the effectiveness of such documents. We have also
assumed that all individuals executing and delivering documents in their
individual capacities had the legal capacity to so execute and deliver; that you
have received all documents you were to receive under the Purchase Agreement;
that the Purchase Agreement is an obligation binding upon you; that you have
filed any required California franchise or income tax
<PAGE> 19
Page Two
returns and have paid any required California franchise or income taxes; and
that there are no extrinsic agreements or understandings among the parties to
the Purchase Agreement that would modify or interpret the terms of the Purchase
Agreement or the respective rights or obligations of the parties thereunder.
Our opinion is expressed only with respect to the federal laws of the United
States of America and the laws of the State of California. We express no opinion
as to whether the laws of any particular jurisdiction apply, and no opinion to
the extent that the laws of any jurisdiction other than those identified above
are applicable to the subject matter hereof. We are not rendering any opinion as
to compliance with any antifraud law, rule or regulation relating to securities,
or to the sale or issuance thereof.
With respect to the opinion in paragraph 3 hereof regarding issued and
outstanding capital stock of the Company, we have examined and have relied
solely on a certificate furnished by the Company's transfer agent, Bank of
Boston, a copy of which has been made available to you. We have undertaken no
independent verification with respect thereto.
With regard to our opinion in paragraph 4 below with respect to material
defaults under any of the Material Agreements (as defined below), we have relied
solely upon (i) inquiries of officers of the Company, (ii) a list supplied to us
by the Company of material agreements to which the Company is a party, or by
which it is bound (the "Material Agreements"), and (iii) an examination of the
items on the aforementioned list; we have made no further investigation.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of California. The
Company has the requisite corporate power to own its property and assets and to
conduct its business as it is currently being conducted and, to the best of our
knowledge, is qualified as a foreign corporation to do business and is in good
standing in each jurisdiction in the United States in which the ownership of its
property or the conduct of its business requires such qualification and where
any statutory fines or penalties or any corporate disability imposed for the
failure to disqualify would materially and adversely affect the Company, its
assets, financial condition or operations.
2. The Purchase Agreement has been duly and validly authorized, executed
and delivered by the Company and constitutes a legal, valid and binding
agreement of the Company enforceable against the Company in accordance with its
terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, arrangement with creditors,
<PAGE> 20
Page Three
moratorium or other similar laws affecting creditors' rights, and subject to
general equity principles and to limitations on availability of equitable
relief, including specific performance.
3. The Company's authorized capital stock consists of forty-five million
(45,000,000) shares of Common Stock, of which (excluding the Initial Shares to
be issued at Closing) ___________________________________________ (___________)
are issued and outstanding. The Initial Shares have been duly and validly
authorized, and upon issuance and delivery against payment therefor in
accordance with the Purchase Agreement will be validly issued, outstanding,
fully paid and nonassessable. To the best of our knowledge, there are no
options, warrants, conversion privileges, preemptive rights or other rights
outstanding to purchase any shares of the authorized but unissued capital stock
of the Company, other than rights granted under the Company's Equity Incentive
Plan, Non-Employee Directors Stock Option Plan and Employee Stock Purchase Plan,
for which the Company has reserved 2,355,000 shares of its Common Stock, a
warrant held by a lease financing entity to purchase 37,500 shares of Common
Stock, and the rights created in connection with the transactions contemplated
by the Purchase Agreement.
4. The execution, delivery and performance of the Purchase Agreement by
the Company and the offer, issuance and sale of the Initial Shares pursuant
thereto (a) do not constitute a material default under the provisions of any of
the Material Agreements, (b) do not violate any provision of the Company's
Certificate of Incorporation or Bylaws, and (c) do not violate or contravene (i)
any governmental statute, rule or regulation applicable to the Company or (ii)
any order, writ, judgment, injunction, decree, determination or award which has
been entered against the Company and of which we are aware, the violation or
contravention of which would materially and adversely affect the Company, its
assets, financial condition or operations.
5. To the best of our knowledge, there is no action, suit, proceeding or
investigation pending or overtly threatened against the Company before any
domestic or foreign court or administrative agency that questions the validity
of the Purchase Agreement or might result, either individually or in the
aggregate, in any material adverse change in the assets, financial condition or
operations of the Company.
6. All consents, approvals, authorizations or orders of, and filings,
registrations and qualifications with any regulatory authority or governmental
body in the United States required for the consummation by the Company of the
offer, issuance and sale of the Initial Shares contemplated by the Purchase
Agreement have been made or obtained.
7. The offer and sale of the Initial Shares is exempt from the
registration requirements of the Securities Act of 1933, as amended.
<PAGE> 21
Page Four
This opinion is intended solely for your benefit and is not to be made available
to or be relied upon by any other person, firm, or entity without our prior
written consent.
Very truly yours,
COOLEY GODWARD LLP
By:
------------------------------------
James C. Kitch
