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EXHIBIT 10.24
ASSIGNMENT AND OPTION AGREEMENT
BY AND BETWEEN
INTERMUNE PHARMACEUTICALS, INC.
AND
CONNETICS CORPORATION
JUNE 23, 2000
(SUPERSEDING AND REPLACING THE AMENDED AND RESTATED EXCLUSIVE SUBLICENSE
AGREEMENT OF APRIL 27, 1999)
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ASSIGNMENT AND OPTION AGREEMENT
THIS ASSIGNMENT AND OPTION AGREEMENT (the "Agreement") is made
effective and entered into as of June 23, 2000 (the "Effective Date") by and
between CONNETICS CORPORATION, a Delaware corporation, with a principal place of
business at 3400 West Bayshore Road, Palo Alto, CA 94303 ("Connetics"), and
INTERMUNE PHARMACEUTICALS, INC., a Delaware corporation, with a principal place
of business at 1710 Gilbreth Road, Suite 301, Burlingame, CA 94010
("InterMune"). Connetics and InterMune may be referred to herein as a "Party" or
collectively as the "Parties."
RECITALS
A. WHEREAS, InterMune is a corporation formed for the purpose of research
and development of biopharmaceutical products for the treatment of infectious
and autoimmune diseases; and
B. WHEREAS, Connetics has licensed the rights to certain immunology-based
products and to the technology relating thereto from Genentech, Inc.
("Genentech") pursuant to that certain License Agreement for Interferon Gamma by
and between Connetics and Genentech, dated May 5, 1998, as amended (the
"Genentech License"); and
C. WHEREAS, InterMune and Connetics have entered into that certain Amended
and Restated Exclusive Sublicense Agreement, dated April 27, 1999 (the "Original
Agreement"), pursuant to which (a) Connetics granted an exclusive sublicense to
InterMune under the Genentech License to develop, make, have made, import, offer
for sale and sell therapeutic products containing or derived from such
immunology-based products and technology for use for certain specific
indications, and (b) InterMune granted to Connetics the exclusive option to
practice such sublicensed rights in the dermatology field; and
D. WHEREAS, InterMune and Connetics now desire to supersede and replace
the Original Agreement as further set forth herein in order to assign to
InterMune Connetics' entire right, title and interest in, to and under the
Genentech License.
NOW, THEREFORE, the Parties agree as follows:
1. DEFINITIONS
1.1 "Affiliate" means any company or entity controlled by,
controlling or under common control with a Party. As used in
this Section, "control" means (a) that an entity or company
owns, directly or indirectly, fifty percent (50%) or more of
the voting stock of another entity, or (b) that an entity,
person or group has the actual ability to control and direct
the management of the entity, whether by contract or
otherwise, but excluding, for all purposes of this Agreement,
Connetics, as to InterMune, and InterMune, as to Connetics.
1.2 "Amendment No. 3" means that certain Amendment No. Three to
License Agreement entered into between Connetics and
Genentech, effective April 27, 1999. For clarity, the phrase
"as amended by Amendment No. 3" as used herein is intended
only for ease of reference and not as a limitation.
1.3 "Best Efforts" means every necessary and prudent effort of a
Party applied in a prompt, commercially reasonable manner, to
the maximum extent reasonably allowed by such Party's
available financial resources, taking into account all of such
Party's business commitments for such financial resources.
1.4 "BLA" means a Biologics License Application.
1.5 "Connetics Know-How" means all Know-How in the areas of
quality assurance/ quality control (QA/QC), pharmaceutical
science, process development or regulatory affairs that (a) is
Controlled by Connetics during the term of this Agreement, and
(b) is necessary or useful to the discovery, development, use
or
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manufacture of Products, but excluding all Know-How that is
part of the Genentech License Rights.
1.6 "Controlled" means with respect to any material, Know-How or
intellectual property right, that the Party owns or has a
license to such material, Know-How or intellectual property
right and has the ability to grant access, a license, or a
sublicense to such material, Know-How or intellectual property
right to the other Party as provided for herein without
violating an agreement with a Third Party as of the time the
Party would be first required hereunder to grant the other
Party such access, license or sublicense.
1.7 "Dermatology Field" means the administration to humans of
therapeutic products for the treatment, prevention or
diagnosis of any dermatological disease or condition,
including, without limitation, atopic dermatitis,
keloids/hypertrophic scars, pustular psoriasis and
scleroderma, but excluding (a) any cancer disease or
condition, (b) any infectious disease or condition, and (c)
any indication outside of the IG Field.
1.8 "Dermatology Sublicensee" means a Third Party to which
Connetics has granted a sublicense under the sublicense rights
to be granted by InterMune to Connetics following Connetics'
exercise of its option pursuant to Section 4.1.
1.9 "FDA" means the U.S. Food and Drug Administration, or any
successor agency.
1.10 "Gene Therapy" means the therapeutic or prophylactic
treatment of a human being with: (a) one or more
oligonucleotides or nucleotide sequences, in native form or
chemically modified, which are introduced into the body in
free form, bound to a carrier molecule, contained in any
molecular vesicle (e.g. a liposome), incorporated into or
attached to a vector of any type, contained in any cellular
construct and/or contained in any mechanical device or (b)
cells which have been manipulated EX VIVO using one or more
oligonucleotides or nucleotide sequences.
1.11 "Gene Therapy Field" means the administration to
humans of Licensed Gene Product for Gene Therapy for the
treatment or prevention of any human disease or condition,
provided however, that "Gene Therapy Field" shall not include
any treatment or prevention of any type of cardiac or
cardiovascular disease or condition.
1.12 "Genentech" means Genentech, Inc., a Delaware
corporation, with its principal office at 1 DNA Way, South San
Francisco, CA 94080.
1.13 "Genentech License" means the License Agreement for
Interferon Gamma between Genentech and Connetics, dated May 4,
1998; as amended by: Amendment No. 1 to License Agreement,
effective December 28, 1998; Amendment No. 2 to License
Agreement, effective January 15, 1999; Amendment No. 3; and
that certain Consent to Assignment Agreement, dated as of the
date hereof.
1.14 "Genentech License Rights" means all rights under
Patents, Know-How and trademarks granted to Connetics by
Genentech under the Genentech License, but only to the extent
the Genentech License permits the practice of such rights
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for the uses set forth in Article 3 herein. "Genentech License
Rights" shall not include any Third Party Product Rights.
1.15 "Genentech Patents" means all the Patent rights which
are granted to Connetics under the Genentech License.
1.16 "Genentech Supply Agreement" means the Supply
Agreement entered into between Genentech and Connetics dated
May 4, 1998.
1.17 "IG Field" means the administration to humans of
Licensed Protein Product for the treatment or prevention of
any human disease or condition, provided however, that "IG
Field" shall not include: (a) the administration to humans of
Licensed Protein Product for the treatment or prevention of
any type of arthritis or cardiac or cardiovascular disease or
condition or (b) use of Licensed Protein Product for Gene
Therapy.
1.18
"Interferon Gamma" or "IG" means the polypeptide described as
"Interferon Gamma" in Section 1.20 of the Genentech License.
1.19 "InterMune Net Sales" means "Net Sales" of Licensed
Protein Products in the Territory for use in the IG Field by
InterMune and its sublicensees hereunder other than Connetics
and its Affiliates and Dermatology Sublicensees.
1.20 "Know-How" means all information, data, know-how,
trade secrets, inventions, developments, results, techniques
and materials, whether or not patentable.
1.21 "Licensed Product," "Licensed Gene Product" and
"Licensed Protein Product" shall each have the same meaning as
defined in Section 1.22 of the Genentech License.
1.22 "Licensed Technology" means the Genentech License
Rights and the Connetics Know-How.
1.23 "Net Sales" means "Net Sales" (as defined in Section
1.25 of the Genentech License) of Licensed Protein Products in
the Territory for use in the IG Field by InterMune and any of
its sublicensees hereunder (including without limitation
Connetics, its Affiliates and its Dermatology Sublicensees).
1.24 "Original Agreement Effective Date" means April 27,
1999.
1.25 "Patents" means any and all issued or pending patents
and patent applications, both foreign and domestic, and
including without limitation (a) all divisionals,
continuations and continuations-in-part of any such
applications, (b) any patents that issue from any of the
foregoing, and (c) all substitutions, extensions, reissues,
renewals, supplementary protection certificates and inventors'
certificates with respect to any of the foregoing issued
patents.
1.26 "Territory" shall have the meaning set forth in
Section 1.28 of the Genentech License.
1.27 "Third Party" means any party besides the Parties and
their respective Affiliates.
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1.28 "Third Party Product Rights" shall have the meaning
set forth in Section 1.37 of the Genentech License.
1.29 United States" means the United States and its
territories and possessions.
2. ORIGINAL AGREEMENT SUPERSEDED
The Parties agree that the Original Agreement is hereby replaced and
superseded in all respects by this Agreement as of the Effective Date, except as
expressly set forth in Section 3.3.
3. ASSIGNMENT OF RIGHTS; LICENSE GRANT; RELATED COVENANTS
3.1 Assignment of Rights. Connetics agrees to assign and hereby
does assign to InterMune Connetics' entire right, title and
interest in, to and under the Genentech License. Upon each
request by InterMune, without additional consideration,
Connetics agrees to promptly execute all documents and take
all such acts as InterMune deems necessary or desirable to
procure, maintain, perfect, and enforce the full benefits,
enjoyment, rights, title and interest in, to and under the
Genentech License assigned hereunder. In the event InterMune
is unable for any reason, after reasonable effort, to secure
Connetics' signature on any document needed in connection with
the actions specified herein, Connetics hereby irrevocably
designates and appoints InterMune and its duly authorized
officers and agents as its agent and attorney in fact, which
appointment is coupled with an interest, to act for and on its
behalf to execute, verify and file any such documents and to
do all other lawfully permitted acts to further the purposes
of this Section 3.1 with the same legal force and effect as if
executed by Connetics. Connetics agrees that as of the
Effective Date, InterMune shall be deemed a party to and sole
licensee under the Genentech License, and that Connetics shall
have no further rights nor obligations thereunder, except as
set forth in Section 4.1 of this Agreement and those
obligations that accrued prior to the Effective Date,
including without limitation, Connetics' remaining
obligations, if any, under Section 8.1 of the Genentech
License. Connetics hereby covenants that it shall take no
action inconsistent with InterMune's rights as party to and
licensee under the Genentech License.
3.2 Connetics Know-How. Connetics hereby grants to InterMune a
non-exclusive license under the Connetics Know-How to develop,
use, make, have made, import, offer for sale and sell (a)
Licensed Products in the Territory, and (b) any products
covered by Third Party Product Rights to which Connetics or
InterMune acquires rights under the Genentech License in the
applicable territory.
3.3 Genentech Supply Agreement. Pursuant to the Original
Agreement, Connetics assigned to InterMune Connetics' entire
right, title and interest to the Genentech Supply Agreement,
which assignment shall remain in full force and effect.
InterMune hereby covenants that it shall maintain the
Genentech Supply Agreement effective and in good standing. To
the extent Connetics exercises its option pursuant to Section
4.1 below, InterMune shall procure for and supply to Connetics
(and its Dermatology Sublicensees, if any) its requirements
for Bulk Product and Finished Product (as such terms are
defined in the Genentech Supply Agreement) for use in the
Dermatology Field from Genentech pursuant to the Genentech
Supply Agreement or from any Third Party manufacturer(s)
contracted by InterMune to manufacture Finished Product and
Bulk Product, provided that
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Connetics shall pay to InterMune InterMune's cost, without
markup, for procuring and supplying such Finished Product and
Bulk Product to Connetics.
3.4 Transfer of Data and Materials. Promptly following the
Effective Date, Connetics and InterMune shall work
cooperatively together to transfer to InterMune all documents
or materials in Connetics' possession comprising or containing
the Licensed Technology, including without limitation,
biological and chemical materials, regulatory filings, and
data, and Connetics shall transfer any and all additions or
improvements to the Licensed Technology to InterMune as soon
as is reasonably practicable after the creation, development
or acquisition of such addition or improvements.
4. OPTION TO DERMATOLOGY RIGHTS
4.1 Option Grant. InterMune hereby grants to Connetics the
exclusive option to obtain the exclusive sublicense under the
Genentech License Rights to develop, use, make, have made,
import, offer for sale and sell Licensed Protein Products for
use solely in the Dermatology Field in the United States,
subject to Genentech's rights under the Genentech License.
Connetics may exercise such option at any time prior to the
fifth anniversary of the Original Agreement Effective Date by
providing InterMune written notice of its desire to exercise
such option. Upon InterMune's receipt of such notice,
InterMune shall be deemed to have granted to Connetics the
exclusive, royalty-free (with respect to InterMune only),
sublicense under the Genentech License Rights to use, make,
have made, import, offer for sale and sell Licensed Protein
Products in the Dermatology Field in the United States for the
term of this Agreement, subject to the terms of the Genentech
License and of this Agreement, and Connetics shall be subject
to all terms and conditions of the Genentech License relating
to its development and commercialization of Licensed Protein
Products in the Dermatology Field in the United States,
including without limitation those obligations described in
Sections 4.2 and 4.5 below. Such sublicense shall be further
sublicenseable by Connetics to the extent permitted by the
Genentech License. If not exercised by the fifth anniversary
of the Original Agreement Effective Date, the option granted
in this Section 4.1 shall expire.
4.2 MILESTONE PAYMENTS. If Connetics exercises its option under
Section 4.1 then:
(a) In the event that Connetics or a Dermatology
Sublicensee achieves one of the milestones set forth
in Sections 8.2(a) or (b) of the Genentech License
with respect to a Licensed Protein Product, Connetics
or such Dermatology Sublicensee shall inform
InterMune thereof and provide such milestone payment
due under the Genentech License to InterMune.
(b) In the event that milestone payments to
Genentech as set forth in Sections 8.2(c) and (d) of
the Genentech License are triggered by the sale of
Licensed Protein Products by both Connetics and
InterMune (and/or their sublicensees) in the
Territory, the Parties shall promptly meet and in
good faith determine a fair apportionment between the
Parties of the payment to be made to Genentech for
such milestone based upon the relative Net Sales of
each Party for such calendar year or other agreed
upon method of apportionment. Connetics shall then
submit to InterMune its portion of such milestone
payment in accordance with the terms of the Genentech
License.
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4.3 ROYALTIES. If Connetics exercises its option under Section
4.1 then:
(a) Connetics shall pay royalties to InterMune
on all Net Sales of Licensed Protein Products by
Connetics, its Affiliates and its Dermatology
Sublicensees at the applicable royalty rate set forth
in Section 8.3 of the Genentech License (as may be
reduced pursuant to Section 8.4 of the Genentech
License).
(b) Royalty payments shall be made to InterMune
quarterly within sixty (60) days following the end of
each calendar quarter for which royalties are due.
Each royalty payment shall be accompanied by a report
summarizing the total Net Sales by Connetics, its
Affiliates and its Dermatology Sublicensees during
the relevant three-month period, and the calculation
of royalties, if any, due thereon pursuant to
subsection (a) above.
(c) Connetics, its Affiliates and its
Dermatology Sublicensees hereunder shall keep full,
true and accurate books of account containing all
particulars which may be necessary for the purpose of
showing Net Sales. Said books of account shall be
kept at the principal place of business of Connetics,
its Affiliates or its Dermatology Sublicensees, as
the case may be. Said books and the supporting data
shall be open at all reasonable times, for three (3)
years following the end of the calendar year to which
they pertain (and access shall not be denied
thereafter, if reasonably available), to the
inspection of an independent public accountant
retained by InterMune or Genentech and reasonably
acceptable to Connetics (or its Affiliate or
Dermatology Sublicensee) for the purpose of verifying
Net Sales under this Agreement; subject to the
provisions of subsection (e) below.
(d) Connetics shall, within sixty (60) days
after the end of each calendar quarter beginning with
the quarter of the first commercial sale of a
Licensed Protein Product in the Dermatology Field in
the Territory by Connetics, its Affiliates or its
Dermatology Sublicensees, deliver to InterMune a true
and accurate report, setting forth such particulars
of the business conducted by Connetics, its
Affiliates and its Dermatology Sublicensees during
the preceding quarter as are pertinent to an
accounting for Net Sales and deductible expenses as
permitted under the Genentech License. Such reports
shall include at least the following: (i) the total
gross sales of Licensed Protein Products occurring
during that calendar quarter, (ii) the allowable
deductions therefrom, (iii) the total Net Sales of
Licensed Protein Products occurring during that
calendar quarter and (iv) the calculation of
royalties, if any, due thereon pursuant to subsection
(a) above.
(d) At InterMune's or Genentech's request and
expense, Connetics shall permit a certified public
accountant selected by InterMune or Genentech and
reasonably acceptable to Connetics to examine, not
more than once in any four consecutive calendar
quarters during the term of this Agreement, but
including one (1) post-termination audit, Connetics'
books of account and records of all sales of Licensed
Protein Products by Connetics, its Affiliates and its
Dermatology Sublicensees for the sole purpose of
determining the correctness of the reports provided
by Connetics under subsection (a) above. If such
accountant reasonably
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determines that the royalties owed by Connetics to
InterMune under subsection (a) above have been, for
any calendar year in total, understated by Connetics,
Connetics shall immediately pay to InterMune all
understated royalties, together with interest on such
royalties from the date accrued at a rate of prime
plus 2% and shall pay the reasonable costs of the
examination if Connetics has understated such
royalties by more than 5%.
4.4 OFF-LABEL SALES. If Connetics exercises the option set forth
in Section 4.1 then:
(a) Each Party agrees and shall require its
sublicensees, if any, to use commercially reasonable
efforts to formulate all Licensed Protein Products
developed by such Party or sublicensee thereof in a
manner to reduce, to the extent reasonably
practicable, the possibility that such Licensed
Protein Product can be used in the other Party's
field of use as provided hereunder. If a Party cannot
so formulate a particular Licensed Protein Product,
then such Party agrees to use its Best Efforts to
prevent sales of such Licensed Protein Product for
use in the other Party's field of use, including
without limitation instructing its sales forces, and
requiring all sublicensees to instruct their sales
forces, that such Licensed Protein Product is not to
be promoted, marketed or sold for use in the other
Party's field of use.
(b) In the event that either Party determines
that a Licensed Protein Product sold by a Party or
its sublicensees hereunder is being used in a field
of use other than one for which such Party has the
right to sell such Licensed Protein Product
hereunder, the Party making such determination shall
immediately inform the other Party. The Parties shall
then promptly meet and diligently and in good faith
determine a fair and reasonable mechanism for
equitable allocation of the sales of such Licensed
Protein Product that are used outside the field of
use for which the selling Party had the right to
sell.
4.5 PATENT COSTS. If Connetics exercises the option set forth in
Section 4.1, then Connetics agrees to reimburse InterMune all
costs paid by InterMune to Genentech under Section 5.2 of the
Genentech License which relate to any patent or patent
application the claims of which: (a) are specifically directed
to a Licensed Protein Product for use in the Dermatology Field
and (b) do not relate to a Licensed Protein Product for use in
any area of the IG Field other than the Dermatology Field.
4.6 MILESTONE PAYMENTS. If Connetics exercises its option under
Section 4.1, then Connetics shall make the following cash
milestone payments to InterMune:
(a) One million two hundred thousand dollars
($1,200,000) within thirty (30) days following the
date on which the first NDA or BLA for a Licensed
Protein Product is filed with the FDA by Connetics,
its Affiliate or its Dermatology Sublicensee for an
indication in the Dermatology Field; and
(b) Two million dollars ($2,000,000) within
thirty (30) days following the date Connetics, its
Affiliate or its Dermatology Sublicensee receives FDA
clearance for each new indication in the Dermatology
Field of a Licensed Protein Product for commercial
sale in the United States.
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4.7 DERMATOLOGICAL INDICATIONS OUTSIDE OF THE DERMATOLOGY FIELD.
(a) It is the intention of the Parties that
Connetics shall be InterMune's preferred marketing
partner for sales of Licensed Protein Product to
dermatologists in the United States during the term
of this Agreement. Therefore, during the term of this
Agreement, if either Party desires to sell Licensed
Protein Product to dermatologists in the United
States for use for indications that are outside of
the Dermatology Field but within the IG Field (an
"Outside Indication"), the provisions of this Section
4.7 shall apply.
(b) In the event that either Party desires to
sell a Licensed Protein Product for an Outside
Indication to dermatologists in the United States
during the term of this Agreement, such Party shall
give the other Party written notice of such interest,
which notice shall specify the indication of
interest. If InterMune notifies Connetics that
InterMune itself desires to sell such Licensed
Protein Product for an Outside Indication directly to
dermatologists in the United States, then the
procedures of subsection (d) shall apply. Otherwise,
for ninety (90) days following receipt of such
notice, the Parties shall exclusively negotiate in
good faith for the reasonable commercial terms under
which Connetics shall exclusively sell such Licensed
Protein Product for such Outside Indication to
dermatologists in the United States. In the event
that, at the end of such ninety (90) day period, the
Parties have failed to enter into a written agreement
on such commercially reasonable terms, Connetics'
rights with respect to the sale of such Licensed
Protein Product for such Outside Indication shall
terminate and InterMune shall have no further
obligations to Connetics under this Section 4.7 with
respect to such Licensed Protein Product for such
Outside Indication except as set forth is subsections
(c) and (d) below.
(c) If the Parties have failed to enter into an
agreement by the end of such ninety (90) day period,
as described in subsection (b) above, InterMune shall
then have the right during the following one hundred
eighty (180) day period to enter into an agreement
with a Third Party for the sale to dermatologists of
such Licensed Protein Product for such Outside
Indication on economic terms that, taken as a whole,
are substantially the same as, or more favorable to
InterMune than, those last offered in writing by
Connetics for such rights pursuant to subsection (b)
above. If at the end of such one hundred eighty (180)
day period InterMune has not entered into an
agreement with a Third Party to sell such Licensed
Protein Product for such Outside Indication to
dermatologists in the United States, then the
procedures set forth in subsection (b) above shall
again apply, provided that InterMune may proceed
alternatively under subsection (d) below.
(d) If InterMune itself desires to sell such
Licensed Protein Product to dermatologists in the
United States for Outside Indications, then upon
written notice from InterMune, Connetics and
InterMune shall enter into good faith negotiations,
for a period of ninety (90) days from Connetics'
receipt of such notice, for the reasonable commercial
terms upon which InterMune shall grant to Connetics
the rights to co-promote such Licensed Protein
Product for such Outside Indication to dermatologists
in the United States. InterMune agrees that it shall
not unreasonably withhold its
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agreement to such commercially reasonable terms. In
the event that, at the end of such ninety (90) day
period, the Parties have failed to enter into a
written agreement for such co-promotion rights,
InterMune shall have no further obligations to
Connetics under this Section 4.7 with respect to such
Licensed Protein Product for such Outside Indication,
PROVIDED THAT InterMune may not enter into an
agreement with a Third Party for the rights to
co-promote Licensed Protein Product for such Outside
Indication to dermatologists in the United States on
economic terms that, taken as a whole, are less
favorable to InterMune than those last offered in
writing by Connetics for such rights. In the event
that InterMune does not enter into such a
co-promotion agreement with a Third Party and instead
solely promotes and sells such Licensed Protein
Product for such Outside Indication to dermatologists
in the United States itself, if at any time following
such sole promotion and sale InterMune determines in
its sole discretion that it desires to grant a
license to the rights to promote and sell, or to
co-promote, such Licensed Protein Product for such
Outside Indication to dermatologists in the United
States to a Third Party, then the procedures set
forth in subsection (b) above shall apply.
5. CONSIDERATION
5.1 ROYALTIES.
(a) Beginning on January 1, 2002, InterMune
shall pay to Connetics a royalty of one-quarter of
one percent (0.25%) of InterMune Net Sales in the
United States. InterMune shall continue to pay such
royalties to Connetics until such time as the
cumulative InterMune Net Sales in United States,
beginning on January 1, 2000, are equal to one
billion dollars ($1,000,000,000). Thereafter,
InterMune shall pay to Connetics a royalty of
one-half of one percent (0.5%) of InterMune Net Sales
in the United States for the remainder of the term of
the Agreement.
(b) All royalties due under this Section 5.1
shall be due and payable quarterly within thirty (30)
days following the last day of each quarter in which
royalties are incurred beginning with first calendar
quarter of 2002.
5.2 MILESTONE PAYMENT. InterMune shall pay to Connetics a
milestone payment of one million five hundred thousand dollars
($1,500,000), (the "Milestone Payment"), payable in a lump sum
or in installments based on the level of InterMune Net Sales,
as follows:
(a) If annualized InterMune Net Sales in the
United States for 2001, based on InterMune Net Sales
in the United States for the third and fourth
calendar quarters of 2001, ("2001 Net Sales") are
equal to or greater than twenty million dollars
($20,000,000), then on March 31, 2002, InterMune
shall, at its election, either (i) pay the full
Milestone Payment to Connetics, or (ii) pay to
Connetics three hundred seventy five thousand dollars
($375,000) of the Milestone Payment and furnish to
Connetics a promissory note for the balance of the
Milestone Payment, which promissory note shall
provide for three (3) principal payments to Connetics
of three hundred seventy five thousand dollars
($375,000) each due upon June 30, 2002, September 30,
2002 and December 31, 2002, respectively.
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(b) If 2001 Net Sales are equal to or greater
than fifteen million dollars ($15,000,000) but less
than twenty million dollars ($20,000,000), then on
March 31, 2002, InterMune shall pay to Connetics
three hundred thousand dollars ($300,000) of the
Milestone Payment, and furnish to Connetics a
promissory note for the balance of the Milestone
Payment (the "Remaining Payment"), which promissory
note shall provide for full payment of the balance of
such note to Connetics on the earlier to occur of (i)
March 31, 2004, or (ii) the last day of the month
following the consecutive twelve (12) month period
that InterMune Net Sales in the United States are
equal to or greater than twenty million dollars
($20,000,000), subject to subsection (d) below.
(c) If 2001 Net Sales are less than fifteen
million dollars ($15,000,000), then on March 31,
2002, InterMune shall pay to Connetics a portion of
the Milestone Payment equal to three hundred thousand
dollars ($300,000) multiplied by a fraction, the
numerator of which is 2001 Net Sales and the
denominator of which is twenty million dollars
($20,000,000). InterMune shall furnish to Connetics a
promissory note for the balance of the Milestone
Payment (the "Remaining Payment"), which promissory
note shall provide for full payment of the balance of
such note to Connetics on the earlier to occur of (i)
March 31, 2004, or (ii) the last day of the month
following the consecutive twelve (12) month period
that InterMune Net Sales in the United States are
equal to or greater than twenty million dollars
($20,000,000), subject to subsection (d) below.
(d) With respect to the promissory note for the
Remaining Payment described in subsection (b) or (c)
above, if InterMune is to pay the balance of such
note on March 31, 2004, and InterMune Net Sales in
the United States for the twelve (12) month period
preceding March 31, 2004 are equal to or greater than
ten million dollars ($10,000,000) but less than
twenty million dollars ($20,000,000), then:
(i) InterMune may, at its election, pay fifty
percent (50%) of the Remaining Payment
either in cash or in Preferred Shares of
InterMune stock at the fair market value of
such shares, determined as the average
closing price of such shares over the
previous thirty (30) day period; and
(ii) With respect to the other fifty percent
(50%) of the Remaining Payment, Connetics
may, at its election, receive such fifty
percent either in cash or in Preferred
Shares of InterMune stock at the fair market
value of such shares, determined as the
average closing price of such shares over
the previous thirty (30) day period,
provided that Connetics shall notify
InterMune of its election in writing at
least thirty (30) days prior to the date
that such payment is due.
(e) With respect to the Remaining Payment
described in subsection (b) or (c) above, if
InterMune is to pay the balance of such note on March
31, 2004, and InterMune Net Sales in the United
States for the twelve (12) month period preceding
March 31, 2004 are less than ten million dollars
($10,000,000), then InterMune may, at its election,
either:
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(1) Pay such Remaining Payment in cash
or in Preferred Shares of InterMune
stock at the fair market value of
such shares, determined as the
average closing price of such shares
over the previous thirty (30) day
period; or
(2) Grant to Connetics the license to
the Accounting and Revenue Rights to
CGD Units (as defined below), on
commercially reasonable terms to be
agreed upon by the Parties, in which
event InterMune shall thereafter
have no further obligation to
Connetics with respect to such
Remaining Payment. Such license
shall be fully paid-up solely with
respect to InterMune but not with
respect to Genentech or any other
Third Party, and shall expire upon
the date of expiration of the last
to expire Genentech Patent covering
the manufacture, use or sale of
Licensed Products for the treatment
of CGD in the United States and its
territories and possessions. As used
herein, "Accounting and Revenue
Rights to CGD Units" means the right
to book net revenues, expenses and
net profits for the sales of
Licensed Products for the treatment
of chronic granulomatous disease by
InterMune and its sublicensees in
the United States.
(f) All promissory notes referred to in this
Section 5.2 shall bear interest at the rate of the
prime rate plus two percentage points (2%).
5.3 REPORTS; AUDIT RIGHTS. InterMune shall provide to Connetics a
copy of all reports submitted to Genentech by InterMune
pursuant to Section 8.8 of the Genentech License when
InterMune submits such report to Genentech. Following January
1, 2002, Connetics shall have the same audit rights as
Genentech pursuant to Section 8.8 of the Genentech License.
5.4 THIRD PARTY ROYALTIES. Each Party shall be responsible for
paying all royalties due to Third Parties other than Genentech
under Section 8.4 of the Genentech License with respect to
such Party's and its sublicensees' activities hereunder.
6. INTELLECTUAL PROPERTY
6.1 Ownership of Inventions. Each Party shall remain the sole
owner of its respective technology and other intellectual
property that it owned as of the Effective Date. A Party shall
not have or acquire any rights in any inventions, Know-How or
intellectual property rights of the other Party, except as
specifically granted herein.
6.2 Infringement of Third Party Patents. In the event that a Third
Party files an action against a Party alleging that such
Party's activities under this Agreement infringe such Third
Party's patent rights, such Party shall give written notice to
the other Party, and the Parties will consult and cooperate on
the best course of action. The Party that was sued shall have
the right to defend itself against such action, and the other
Party shall provide all reasonable assistance in such defense.
6.3 Infringement of Licensed Patents. In the event that either
Party becomes aware that a Third Party is infringing any
rights in the Genentech Patents, such Party shall promptly
notify the other. InterMune shall have the right to enforce
the
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Genentech Patents to the full extent permitted under the
Genentech License, and Connetics will reasonably cooperate
with InterMune in such enforcement actions and take all
reasonably necessary steps to facilitate InterMune's
enforcement of the Genentech Patents.
6.4 Cooperation. Each Party agrees to cooperate with the other and
take all reasonable additional actions as may be reasonably
required to achieve the intent of this Article 6, including,
without limitation, the execution of all necessary and
appropriate instruments and documents.
7. REPRESENTATIONS AND WARRANTIES
7.1 Mutual Representations and Warranties. Each Party hereby
represents and warrants to the other Party as follows:
(a) Such Party (i) is duly organized, validly
existing and in good standing under the laws of the
state in which it is organized; (ii) has the power
and authority and the legal right to own and operate
its property and assets, to lease the property and
assets it operates under lease, and to carry on its
business as it is now being conducted; and (iii) is
in compliance with all requirements of applicable
law, except to the extent that any noncompliance
would not materially adversely affect such Party's
ability to perform its obligations under the
Agreement.
(b) Such Party (i) has the power and authority
and the legal right to enter into the Agreement and
to perform its obligations hereunder, and (ii) has
taken all necessary action on its part to authorize
the execution and delivery of the Agreement and the
performance of its obligations hereunder. The
Agreement has been duly executed and delivered on
behalf of such Party, and constitutes a legal, valid,
binding obligation, enforceable against such Party in
accordance with its terms.
(c) All necessary consents, approvals and
authorizations of all governmental authorities and
other persons required to be obtained by such Party
in connection with the Agreement have been obtained.
(d) The execution and delivery of the Agreement
and the performance of such Party's obligations
hereunder (i) do not conflict with or violate any
requirement of applicable laws or regulations or any
material contractual obligation of such Party, and
(ii) do not materially conflict with, or constitute a
material default or require any consent under any
material contractual obligation of such Party.
7.2 Connetics Representations and Warranties. Connetics hereby
represents and warrants that:
(a) To Connetics' knowledge as of the Effective
Date, the Licensed Technology practiced as permitted
herein does not infringe on any intellectual property
rights owned by any Third Party.
(b) Connetics possesses the necessary interest,
title and right to the Licensed Technology to grant
the licenses and to make the assignments to InterMune
hereunder.
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8. INDEMNIFICATION
8.1 Indemnification by Connetics. Connetics agrees to indemnify,
hold harmless and defend InterMune and InterMune's directors,
officers, employees and agents, and the directors, officers,
employees and agents of any InterMune Affiliate from and
against any and all claims, suits, losses, damages, costs,
fees and expenses resulting from or arising out of any
negligent or wrongful act or omission by Connetics, its
Affiliates or its Dermatology Sublicensees, or any breach by
Connetics of its obligations under this Agreement or under the
Genentech License, except to the extent that such claims,
suits, losses, damages, costs, fees or expenses arises or
results from any negligent or wrongful act or omission of
InterMune or its Affiliates.
8.2 Indemnification by InterMune. InterMune agrees to indemnify,
hold harmless and defend Connetics and its directors,
officers, employees and agents, and the directors, officers,
employees and agents of any Connetics Affiliates or its
Dermatology Sublicensees from and against any and all claims,
suits, losses, damages, costs, fees and expenses resulting
from or arising out of damage or injury caused by a negligent
or wrongful act or omission of InterMune, its Affiliates or
its Sublicensees, or any breach by InterMune of its
obligations under this Agreement or under the Genentech
License, except to the extent that such claims, suits, losses,
damages, costs, fees or expenses arises or results from any
negligent or wrongful act or omission of Connetics, its
Affiliates or its Dermatology Sublicensees.
8.3 Indemnification Procedure. In all cases where one Party seeks
indemnification by the other under this Article 8, the Party
seeking indemnification shall promptly notify the indemnifying
Party of receipt of any claim or lawsuit covered by such
indemnification obligation and shall cooperate fully with the
indemnifying Party in connection with the investigation and
defense of such claim or lawsuit. The indemnifying Party shall
have the right to control the defense, with counsel of its
choice, provided that the non-indemnifying Party shall have
the right to be represented by advisory counsel at its own
expense. The indemnifying Party shall not settle or dispose of
the matter in any manner which could negatively and materially
affect the rights or liability of the non-indemnifying Party
without the non-indemnifying Party's prior written consent,
which shall not be unreasonably withheld.
9. CONFIDENTIALITY
9.1 Confidential Information Obligations. As used herein,
"Confidential Information" means all information that a Party
discloses to the other Party under this Agreement or had
disclosed to the other Party under the Original Agreement,
provided that Confidential Information shall not include such
information excluded under Section 9.2. Except to the extent
expressly authorized by this Agreement or otherwise agreed in
writing by the Parties, each Party agrees that, during the
term of this Agreement and for five (5) years after the
expiration or termination of this Agreement, it shall keep
confidential and shall not publish or otherwise disclose and
shall not use for any purpose other than as provided for in
this Agreement any Confidential Information furnished to it by
the other Party pursuant to this Agreement.
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<PAGE>
9.2 Exceptions. The obligations set forth in Section 9.1 shall not
apply to any Information that the receiving Party can
demonstrate by competent evidence:
(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 generally 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 generally available to the public or
otherwise part of the public domain after its
disclosure and 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 to a
Third Party, by a Third Party who had no obligation
to the disclosing Party not to disclose such
information to others; or
(e) is independently developed by the receiving
Party without using any of the other Party's
Confidential Information.
9.3 Terms of the Agreement. The Parties agree that the terms of
this Agreement will be considered Confidential Information of
both Parties. Notwithstanding the foregoing, a Party shall
have the right to disclose the material financial terms of the
Agreement to any bona fide potential investor, investment
banker, acquiror, merger partner or other potential financial
partner, subject to such Party obtaining the agreement of such
party receiving such Confidential Information to keep such
information confidential.
9.4 Permitted Disclosure. Notwithstanding the limitations in this
Article 9, each Party may disclose Confidential Information
belonging to the other Party (or otherwise subject to this
Article 9), to the extent such disclosure is reasonably
necessary in the following instances, but solely for the
limited purpose of such necessity:
(a) filing or prosecuting Patents;
(b) regulatory and tax filings;
(c) prosecuting or defending litigation;
(d) complying with applicable governmental laws
or regulations or valid court orders;
(e) conducting preclinical or clinical trials of
Licensed Products; and
(f) disclosure to Affiliates, licensees,
sublicensees, employees, consultants or agents who
agree to be bound by similar terms of confidentiality
and non-use at least equivalent in scope to those set
forth in this Article 9.
Notwithstanding the foregoing, in the event a Party is required to make
a disclosure of the other Party's Confidential Information pursuant to Section
9.4, it will give reasonable advance notice to the other Party of such
disclosure and endeavor in good faith to secure confidential treatment of such
information. In any event, the Parties
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<PAGE>
agree to take all reasonable action to avoid disclosure of Confidential
Information hereunder. Further, the Parties agree to consult with one another
on the provisions of this Agreement to be redacted in any filings made by a
Party with the United States Securities and Exchange Commission or as
otherwise required by law.
10. TERMINATION
10.1 Term of Agreement. The term of this Agreement shall
expire, unless earlier terminated as provided by Section 10.2
below, upon expiration or termination of the Genentech
License.
10.2 Termination for Material Breach. If either Party
shall default in a material manner with respect to any
material provision of this Agreement and the other Party shall
have given the defaulting Party written notice of such
default, the defaulting Party shall have thirty (30) days to
cure such default. If such default is not cured within such
thirty (30) day period, the non-defaulting Party shall have
the right, upon notice to the defaulting Party and without
prejudice to any other rights the non-defaulting Party may
have, to terminate this Agreement unless the defaulting Party
is in the process of attempting in good faith to remedy such
default, in which case, the thirty (30) day cure period shall
be extended by an additional thirty (30) days.
10.3 Effect of Termination. Upon termination or expiration
of the Agreement, (a) all licenses granted by Connetics to
InterMune under Article 3 will terminate; (b) any and all
claims and payment obligations that accrued prior to the date
of such termination or expiration shall survive such
termination; and (c) each Party shall return all of the other
Party's Confidential Information.
10.4 Surviving Rights. The obligations and rights of the
Parties under Sections 4.3(c), 5.3, 6.1, and Articles 8, 9, 10
and 11 shall survive any termination or expiration of the
Agreement.
10.5 Accrued Rights and Surviving Obligations. The
termination or expiration of the Agreement for any reason
shall be without prejudice to any rights, which shall have
accrued to the benefit of either Party prior to such
termination or expiration, including any damages arising from
any breach hereunder. Such termination or expiration shall not
relieve either Party from obligations which are expressly
indicated to survive termination or expiration of the
Agreement.
10.6 Bankruptcy Rights. In the event that this Agreement
is terminated or rejected by a Party or its receiver or
trustee under applicable bankruptcy laws due to such Party's
bankruptcy, then all rights and licenses granted under or
pursuant to this Agreement by such Party to the other Party
are, and shall otherwise be deemed to be, for purposes of
Section 365(n) of the Bankruptcy Code and any similar law or
regulation in any other country, licenses of rights to
"intellectual property" as defined under Section 101(52) of
the Bankruptcy Code. The Parties agree that all intellectual
property rights licensed hereunder, including without
limitation any patents or patent applications in any country
of a Party covered by the license grants under this Agreement,
are part of the "intellectual property" as defined under
Section 101(52) of the Bankruptcy Code subject to the
protections afforded the non-terminating Party under Section
365(n) of the Bankruptcy Code, and any similar law or
regulation in any other country.
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11. MISCELLANEOUS
11.1 Waiver. No waiver by either Party hereto of any
breach or default of any of the covenants or agreements herein
set forth shall be deemed a waiver as to any subsequent or
similar breach or default.
11.2 Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties hereto and their permitted
successors and assigns; provided, however, that neither Party
shall assign any of its rights and obligations hereunder
without the prior written consent of the other Party, except
as incident to the merger, consolidation, reorganization or
acquisition of stock or assets affecting substantially all of
the assets or actual voting control of the assigning Party.
Any assignment or attempted assignment by either Party in
violation of the terms of this Section 11.2 shall be null and
void and of no legal effect.
11.3 Notices. Any notice or other communication required
or permitted to be given to either Party hereto shall be in
writing and shall be deemed to have been properly given and to
be effective on the date of delivery if delivered in person or
by facsimile or five (5) days after mailing by registered or
certified mail, postage paid, to the other Party at the
following address:
<TABLE>
<S> <C>
In the case of InterMune: InterMune Pharmaceuticals, Inc.
1710 Gilbreth Road,
Suite 301
Burlingame, CA 94010
Fax: (650) 259-0774
Attention: General Counsel
with a copy to: Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Fax: (650) 849-7400
Attention: Barclay James Kamb, Esq.
In the case of Connetics: Connetics Corporation
3400 West Bayshore Road
Palo Alto, CA 94303
Fax: (650) 843-2899
Attention: Chief Executive Officer
</TABLE>
Either Party may change its address for communications by a notice to the other
Party in accordance with this Section.
11.4 Headings. The headings of the several sections are
inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or
interpretation of this Agreement.
11.5 Amendment. No amendment or modification hereof shall
be valid or binding upon the Parties unless made in writing
and signed by both Parties.
11.6 Governing Law. This Agreement shall be governed
exclusively by the laws of the State of California, U.S.A., as
such law applies to contracts entered
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into between and to be performed by California residents
entirely in the State of California.
11.7 DISPUTE RESOLUTION.
(a) In the event of any controversy or claim
arising out of, relating to or in connection with any
provision of this Agreement, or the rights or
obligations of the Parties hereunder, the Parties
shall try to settle their differences amicably
between themselves by referring the disputed matter
to the President of InterMune and the Chief Executive
Officer of Connetics for discussion and resolution.
Either Party may initiate such informal dispute
resolution by sending written notice of the dispute
to the other Party, and within ten (10) days after
such notice such representatives of the Parties shall
meet for attempted resolution by good faith
negotiations. If such personnel are unable to resolve
such dispute within thirty (30) days of initiating
such negotiations, either Party may seek to have such
dispute resolved by binding arbitration under this
Section 11.7. The arbitration shall be held in Palo
Alto, California according to the Commercial
Arbitration Rules of the American Arbitration
Association (the "Rules"). The arbitration will be
conducted by a panel of three (3) arbitrators who are
knowledgeable in the subject matter that is at issue
in the dispute, are not affiliated directly or
indirectly with either Party, and are selected by
mutual agreement of the Parties. Failing such
agreement, the arbitrators shall be selected
appointed as provided in the Rules. During the
arbitration, the Parties shall have such discovery
rights as the arbitrators may allow, consistent with
the discovery permitted by the Federal Code of Civil
Procedure. In conducting the arbitration, the
arbitrators shall apply the rules of evidence
applicable in California, and shall be able to decree
any and all relief of an equitable nature, including
but not limited to such relief as a temporary
restraining order, a preliminary injunction, a
permanent injunction, or replevin of property, as
well as specific performance. The arbitrators shall
also be able to award direct and indirect damages,
but shall not award any other form of damage (e.g.,
punitive or exemplary damages). The reasonable fees
and expenses, of the arbitrators, along with the
reasonable legal fees and expenses of the prevailing
Party (including all expert witness fees and
expenses), the fees and expenses of a court reporter,
and any expenses for a hearing room, shall be paid as
follows: If the arbitrators rule in favor of one
Party on all disputed issues in the arbitration, the
losing Party shall pay one hundred percent (100%) of
such fees and expenses; if the arbitrators rule in
favor of one Party on some issues and the other Party
on other issues, the arbitrators shall issue with the
rulings a written determination as to how such fees
and expenses shall be allocated between the Parties.
The arbitrators shall allocate fees and expenses in a
way that bears a reasonable relationship to the
outcome of the arbitration, with the Party prevailing
on more issues, or on issues of greater value or
gravity, recovering a relatively larger share of its
legal fees and expenses. The decision of the
arbitrators shall be final and may be entered, sued
on or enforced by the Party in whose favor it runs in
any court of competent jurisdiction at the option of
such Party. Whether a claim, dispute or other matter
in question would be barred by the applicable statute
of limitations, which statute of limitations also
shall apply to any claim or disputes subject to
arbitration
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under this Section, shall be determined by binding
arbitration pursuant to this Section.
(b) Notwithstanding anything to the contrary in
this Agreement, either Party may seek immediate
injunctive or other interim relief without resort to
arbitration from any court of competent jurisdiction
with respect to any breach of Article 9 hereof, or as
necessary to enforce and prevent infringement of the
patent rights, copyright rights, trademarks, trade
secrets, or other intellectual property rights owned
or controlled by a Party or its Affiliates.
11.8 Force Majeure. Any delays in performance by any Party
under this Agreement shall not be considered a breach of this
Agreement if and to the extent caused by occurrences beyond
the reasonable control of the Party affected, including but
not limited to acts of God, embargoes, governmental
restrictions, fire, flood, explosion, riots, wars, civil
disorder, rebellion or sabotage. The Party suffering such
occurrence shall immediately notify the other Party as soon as
practicable, and any time for performance hereunder shall be
extended by the actual time of delay caused by the occurrence.
11.9 Independent Contractors. In making and performing
this Agreement, InterMune and Connetics act and shall act at
all times as independent contractors and nothing contained in
this Agreement shall be construed or implied to create an
agency, partnership or employer and employee relationship
between InterMune and Connetics. At no time shall one Party
make commitments or incur any charges or expenses for or in
the name of the other Party.
11.10 Severability. If any part of this Agreement is
declared invalid by any legally governing authority having
jurisdiction over either Party, then such declaration shall
not affect the remainder of the Agreement and the Parties
shall revise the invalidated part in a manner that will render
such provision valid without impairing the Parties' original
interest.
11.11 Cumulative Rights. The rights, powers and remedies
hereunder shall be in addition to, and not in limitation of,
all rights, powers and remedies provided at law or in equity,
or under any other agreement between the Parties. All of such
rights, powers and remedies shall be cumulative, and may be
exercised successively or cumulatively.
11.12 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be an original and
all of which shall constitute together the same document.
11.13 Entire Agreement. This Agreement and any and all
Exhibits referred to herein, in conjunction with the other
"Intercompany Agreements" (as defined in that certain
Collaboration Agreement by and between the Parties dated April
27, 1999 excluding the "Amended and Restated Service
Agreement"), embodies the entire understanding of the Parties
with respect to the subject matter hereof and of the
"Intercompany Agreements," and supersedes and terminates all
previous communications, representations or understandings,
either oral or written, between the Parties relating to the
subject matter hereof and of the "Intercompany Agreements."
The Amended and Restated Service Agreement is hereby
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terminated in its entirety, except for the provisions of the
sections set forth in Section 14 therein.
IN WITNESS WHEREOF, both InterMune and Connetics have executed this
Agreement, as of the day and year first written above.
INTERMUNE PHARMACEUTICALS, INC. CONNETICS CORPORATION
By: /s/ W. SCOTT HARKONEN By: /s/ THOMAS G. WIGGANS
--------------------------------- ---------------------------------
Print Name: W. Scott Harkonen Print Name: Thomas G. Wiggans
------------------------- -------------------------
Title: Pres./CEO Title: Pres. & CEO
------------------------------ ------------------------------
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