<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 6, 2000
REGISTRATION NO. 333-31140
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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ATHEROGENICS, INC.
(Exact name of Registrant as specified in its charter)
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GEORGIA 2834 58-2108232
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
8995 WESTSIDE PARKWAY
ALPHARETTA, GEORGIA 30004
(678) 336-2500
(Address, including zip code, and telephone number,including area code,
of Registrant's principal executive offices)
---------------------------
RUSSELL M. MEDFORD, M.D., PH.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ATHEROGENICS, INC.
8995 WESTSIDE PARKWAY
ALPHARETTA, GEORGIA 30004
(678) 336-2500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
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LEONARD A. SILVERSTEIN, ESQ. ALAN L. JAKIMO, ESQ.
LONG ALDRIDGE & NORMAN LLP BROWN & WOOD LLP
SUNTRUST PLAZA, SUITE 5300 ONE WORLD TRADE CENTER, 58TH FLOOR
303 PEACHTREE STREET NEW YORK, NEW YORK 10048
ATLANTA, GEORGIA 30308-3201 (212) 839-5300
(404) 527-4000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, check
the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF OFFERING REGISTRATION
SECURITIES TO BE REGISTERED PRICE(1)(2) FEE(3)
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Common Stock, no par value per share........................ $100,000,000 $26,400.00
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(1) Includes the dollar value of shares that the underwriters have the
option to purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act.
(3) This amount has been previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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EXPLANATORY NOTE
The purpose of this Amendment No. 1 to the Registration Statement is solely
to file certain exhibits to the Registration Statement, as set forth below in
Item 16(a) of Part II.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses in connection with the issuance
and distribution of the securities being registered hereby:
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<S> <C>
Securities and Exchange Commission registration fee......... $26,400
National Association of Securities Dealers, Inc. filing
fee....................................................... 10,500
Nasdaq National Market listing fee.......................... *
Printing fees............................................... *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue sky fees and expenses.................................. *
Transfer agent and registrar fees........................... *
Miscellaneous fees.......................................... *
-------
Total............................................. $
=======
</TABLE>
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* To be completed by amendment.
The foregoing, except for the Securities and Exchange Commission
registration fee, the National Association of Securities Dealers, Inc. filing
fee and the Nasdaq National Market listing fee, are estimates.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Fourth Amended and Restated Articles of Incorporation eliminate, as
permitted by Section 14-2-202(b)(4) of the Georgia Business Corporation Code,
the personal liability of directors and officers for monetary damages to the
corporation or its shareholders for breach of their duty of care and other
duties; provided, however, that our Articles of Incorporation and Section
14-2-202(b)(4) of the Georgia Code do not permit us to eliminate or limit
liability for (1) a breach of duty involving appropriation of a business
opportunity of ours; (2) an act or omission which involves intentional
misconduct or a knowing violation of law; (3) any transaction from which an
improper personal benefit is derived; or (4) any payments of a dividend or any
other type of distribution that is illegal under Section 14-2-832 of the Georgia
Code. In addition, if at any time the Georgia Code is amended to authorize
further elimination or limitation of personal liability, then the liability of
each of our directors and officers shall be eliminated or limited to the fullest
extent permitted by such provisions, as so amended, without further action by
the shareholders, unless the provisions of the Georgia Code require such action.
Sections 14-2-850 to 14-2-859, inclusive, of the Georgia Code govern the
indemnification of directors, officers, employees and agents. Section 14-2-851
of the Georgia Code provides for indemnification of any of our directors for
liability incurred by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative and whether formal or informal, in which he may
become involved by reason of being a member of our board of directors. Section
14-2-851 also provides such indemnity for directors who, at our request, act as
directors, officers, partners, trustees, employees or agents of another foreign
or domestic corporation, partnership, joint venture, trust, employee benefit
plan or another enterprise. Section 14-2-851 permits indemnification if the
director acted in a manner he believed in good faith to be in or not opposed to
our best interest and, in addition, in criminal proceedings, if he had no
reasonable cause to believe his conduct was unlawful. If the required standard
of conduct is met, indemnification may include judgments, settlements,
penalties, fines or reasonable expenses, including attorneys' fees, incurred
with respect to a proceeding. However, if the director is adjudged liable to us
in a derivative action or on the basis that personal benefit was
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<PAGE> 4
improperly received by him, the director will only be entitled to such
indemnification for reasonable expenses as a court finds to be proper in
accordance with the provisions of Section 14-2-854.
Section 14-2-852 of the Georgia Code provides that directors who are
successful with respect to any claim brought against them, which claim is
brought because they are or were directors, are entitled to indemnification
against reasonable expenses as of right. Conversely, if the charges made in any
action are sustained, the determination of whether the required standard of
conduct has been met will be made, in accordance with the provisions of Section
14-2-855 of the Georgia Code, as follows: (1) if there are two or more
disinterested members of the board of directors, by the majority vote of a
quorum of the disinterested members of the board of directors, (2) by a majority
of the members of a committee of two or more disinterested directors, (3) by
special legal counsel or (4) by the shareholders, but, in such event, the shares
owned by or voted under the control of directors seeking indemnification may not
be voted.
Section 14-2-857 of the Georgia Code provides that an officer who is not a
director has the mandatory right of indemnification granted to directors under
Section 14-2-852, as described above. In addition, we may, as provided by our
Articles, Bylaws, general or specific actions by our board of directors, or by
contract, indemnify and advance expenses to an officer, employee or agent who is
not a director to the extent that such indemnification is consistent with public
policy.
We plan to enter into indemnification agreements with each of our directors
and certain executive officers. The indemnification agreements set forth certain
procedural matters relating to indemnification, including the manner in which an
indemnified party may make a claim and the right of an indemnified party to
court adjudication of his or her claim if we deny such indemnification.
Our officers and directors are presently covered by insurance which (with
certain exceptions and within certain limitations) indemnifies them against any
losses or liabilities arising from any alleged "wrongful act," including any
alleged breach of duty, neglect, error, misstatement, misleading statement,
omissions or other act done or wrongfully attempted. We pay the cost of such
insurance as permitted by our Bylaws and the laws of the State of Georgia.
Reference is hereby made to Section of the underwriting agreement,
the form of which will be filed as Exhibit 1.01 hereto, in which the
underwriters agree to indemnify our directors and officers and certain other
persons against certain civil liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In the three years preceding the filing of this registration statement, we
have sold and issued the following securities:
1. In April, May and August 1999, we issued an aggregate of 5,899,999
shares of Series C convertible preferred stock to 21 investors for
a consideration of $3.00 per share, or an aggregate of $17,699,997
before expenses of the private placements of approximately
$164,000. In accordance with the terms of the Series C convertible
preferred stock, each share of Series C convertible preferred stock
will be converted into one share of our common stock immediately
prior to the consummation of the public offering.
2. In August and December 1998, we issued $6,150,000 principal amount
notes bearing interest at a rate per annum equal to the prime rate
as published in The Wall Street Journal plus 2%. At that time we
also issued warrants exercisable for 200,001 shares of our Series B
convertible preferred stock. In April 1999 we issued warrants
exercisable for 205,002 shares of our Series C convertible stock to
the noteholders as consideration for extending the maturity of the
notes. The notes and, at the option of the noteholders, the accrued
and unpaid interest on the notes were converted into 2,140,357
shares of our Series C convertible preferred stock in April 1999.
In accordance with the terms of the Series B convertible preferred
stock and the Series C convertible preferred stock, each share of
convertible preferred stock will be converted into one share of our
common stock immediately prior to the consummation of the public
offering.
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3. From January 1, 1997 through February 18, 2000, we granted
incentive stock options and nonqualified stock options to purchase
an aggregate of 3,097,000 shares of our common stock at exercise
prices ranging from $.30 to $.38 per share to employees and
directors under our 1995 Stock Option Plan and our 1997 Equity
Ownership Plan, and issued an aggregate of 254,597 shares upon the
exercise of these and previously granted options. Of these options
granted, options to purchase 408,328 shares of common stock have
been canceled.
4. In July 1998, we issued to Cousins Properties, Inc. a warrant to
purchase 50,000 shares of our Series B-1 convertible preferred
stock at an exercise price of $5.00 per share. This warrant will be
converted into a warrant to purchase 50,000 shares of our common
stock at an exercise price of $5.00 per share immediately prior to
the consummation of the public offering in accordance with the
terms of the Series B-1 convertible preferred stock.
5. In December 1998, we issued to Long Aldridge & Norman LLP 16,666
shares of Series B convertible stock for consideration of $3.00 per
share or an aggregate of $49,998 in legal fees incurred by
AtheroGenics in 1998. In accordance with the terms of the Series B
convertible preferred stock, each share of Series B convertible
preferred stock will be converted into one share of our common
stock prior to the consummation of the public offering.
6. In April 1999, we issued to Long Aldridge & Norman LLP 16,666
shares of Series C convertible stock for consideration of $3.00 per
share or an aggregate of $49,998 in legal fees incurred by
AtheroGenics in 1998. In accordance with the terms of the Series C
convertible preferred stock, each share of Series C convertible
preferred stock will be converted into one share of our common
stock prior to the consummation of the public offering.
7. In October 1997, we issued to Phoenix Leasing Incorporated a
warrant to purchase 2,200 shares of Series B convertible preferred
stock at an exercise price of $3.00 per share in connection with
the Master Lease Agreement between Phoenix Leasing and us dated
November 1, 1995. This warrant will be converted into a warrant to
purchase 2,200 shares of our common stock at an exercise price of
$3.00 per share immediately prior to the consummation of the public
offering in accordance with the terms of the Series B convertible
preferred stock.
No underwriters were involved in the foregoing sales of securities. The
issuance of the above securities were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of such Securities Act as
transactions by an issuer not involving any public offering, or, in the case of
some options to purchase common stock, Rule 701 of the Securities Act. The
recipients of securities in each such transaction represented their intentions
to acquire the securities for investment only and not with a view to or for sale
in connection with any distribution thereof and appropriate legends were affixed
to the share certificates and warrants issued in such transactions. All
recipients had adequate access, through their relationships with us, to
information about us.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following exhibits are filed herewith:
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EXHIBIT
NO. DESCRIPTION
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1.01* -- Form of Underwriting Agreement.
3.01* -- Form of Fourth Amended and Restated Articles of
Incorporation of AtheroGenics, Inc.
3.02* -- Form of Third Amended and Restated Bylaws of AtheroGenics,
Inc.
4.01* -- Form of Common Stock Certificate.
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EXHIBIT
NO. DESCRIPTION
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4.02** -- Amended and Restated Master Rights Agreement dated October
31, 1995, as amended by First Amendment dated November 1,
1995; Second Amendment dated July 30, 1996; Third Amendment
dated April 13, 1999; Fourth Amendment dated May 11, 1999;
and Fifth Amendment dated August 30, 1999.
4.03* -- Applicable provisions of Fourth Amended and Restated
Articles of Incorporation and Third Amended and Restated
Bylaws of AtheroGenics, Inc. (to be incorporated by
reference to Exhibits 3.01 and 3.02).
5.01* -- Opinion of Long Aldridge & Norman LLP (including consent).
10.01+ -- Exclusive License Agreements dated October 22, 1999 by and
between AtheroGenics, Inc. and each of Schering-Plough Ltd.
and Schering Corporation.
10.02+ -- Exclusive License Agreement dated July 17, 1998 between The
Regents of the University of California and AtheroGenics,
Inc.
10.03+ -- Exclusive License Agreement dated November 20, 1997 by and
between the University of Rochester and AtheroGenics, Inc.
10.04+ -- License Agreement dated January 11, 1995 between Emory
University and AtheroGenics, Inc.
10.05+ -- Patent Purchase Agreement dated April 26, 1995 between
AtheroGenics, Inc. and Sampath Parthasarathy, together with
Services Agreement dated April 26, 1995 between
AtheroGenics, Inc. and Sampath Parthasarathy.
10.06+ ++ -- Sponsored Research Agreement dated October 14, 1996 between
Emory University and AtheroGenics, Inc.
10.07** -- AtheroGenics, Inc. 1995 Stock Option Plan, together with
form of nonqualified stock option agreement.
10.08** -- AtheroGenics, Inc. 1997 Equity Ownership Plan, together with
form of nonqualified and incentive stock option agreements.
10.09** -- Preferred Shares Purchase Warrant dated August 24, 1998
between AtheroGenics, Inc. and certain Lenders named
therein.
10.10** -- Series C Convertible Preferred Stock Purchase Warrants of
AtheroGenics, Inc.
10.11** -- Promissory Note dated April 1, 1999 between Inhibitex, Inc.
and AtheroGenics, Inc.
10.12**++ -- Lease Agreement dated June 19, 1998 between Cousins
Properties, Inc. and AtheroGenics, Inc.
10.13**++ -- Master Equipment Lease dated November 1, 1995 between
Phoenix Leasing Incorporated and AtheroGenics, Inc.
23.01** -- Consent of Ernst & Young LLP.
23.02 -- Consent of Long Aldridge & Norman LLP (to be contained in
Exhibit 5.01).
23.03** -- Consent of King & Spalding.
24.01** -- Powers of Attorney.
27.01** -- Financial Data Schedule (for SEC use only).
</TABLE>
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* To be filed by amendment.
** Previously filed.
+ Certain confidential information contained in this document has been omitted
and filed separately with the Commission pursuant to a request for
confidential treatment under Rule 406 of the Securities Act of 1933, as
amended.
++ We agree to furnish supplementally to the Commission a copy of any omitted
schedule or exhibit to this agreement upon request by the Commission.
(b) Financial Statement Schedules
No financial statement schedules are provided, because the information
called for is not required or is shown either in the financial statements or the
notes thereto.
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ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information which may be omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form or prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Atlanta, State of Georgia, on March 6,
2000.
ATHEROGENICS, INC.
By:/s/ RUSSELL M. MEDFORD, M.D., PH.D.
---------------------------------------
RUSSELL M. MEDFORD, M.D., PH.D.
President and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES
INDICATED:
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NAME TITLE DATE
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PRINCIPAL EXECUTIVE OFFICER:
/s/ RUSSELL M. MEDFORD President and Chief Executive March 6, 2000
- ------------------------------------------------ Officer, Director
RUSSELL M. MEDFORD
PRINCIPAL FINANCIAL AND PRINCIPAL
ACCOUNTING OFFICER:
/s/ MARK P. COLONNESE Vice President of Finance and March 6, 2000
- ------------------------------------------------ Administration and Chief
MARK P. COLONNESE Financial Officer
ADDITIONAL DIRECTORS:
* Director March 6, 2000
- ------------------------------------------------
MICHAEL A. HENOS
* Director March 6, 2000
- ------------------------------------------------
R. WAYNE ALEXANDER
* Director March 6, 2000
- ------------------------------------------------
VAUGHN D. BRYSON
* Director March 6, 2000
- ------------------------------------------------
T. FORCHT DAGI
* Director March 6, 2000
- ------------------------------------------------
VIJAY K. LATHI
* Director March 6, 2000
- ------------------------------------------------
ARDA MINOCHERHOMJEE
* Director March 6, 2000
- ------------------------------------------------
ARTHUR M. PAPPAS
* Director March 6, 2000
- ------------------------------------------------
RICHARD S. SCHNEIDER
[Signatures continued on following page.]
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NAME TITLE DATE
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* Director March 6, 2000
- ------------------------------------------------
WILLIAM A. SCOTT
*By: /s/ MARK P. COLONNESE
------------------------------------------
Mark P. Colonnese
Attorney-in-fact
</TABLE>
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EXHIBIT 10.01
EXCLUSIVE LICENSE AGREEMENT
BY AND BETWEEN
ATHEROGENICS, INC.
AND
SCHERING-PLOUGH LTD.
[*] Certain confidential information contained in this document, marked by an
asterisk within brackets, has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 406 of the Securities Act of 1933, as amended.
<PAGE> 2
TABLE OF CONTENTS
EXCLUSIVE LICENSE AGREEMENT
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PAGE
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ARTICLE I - DEFINITIONS..................................................................................1
1.1 AFFILIATE.....................................................................................1
1.2 CALENDAR QUARTER..............................................................................1
1.3 CALENDAR YEAR.................................................................................2
1.4 COMBINATION PRODUCT...........................................................................2
1.5 COMPOUND LIBRARY..............................................................................2
1.6 COST OF GOODS.................................................................................2
1.7 EFFECTIVE DATE................................................................................2
1.9 FIRST COMMERCIAL SALE.........................................................................2
1.9 HRD...........................................................................................2
1.10 HSR ACT.......................................................................................2
1.11 "IMPROVEMENT".................................................................................2
1.13 LICENSED COMPOUND.............................................................................3
1.14 LICENSED PRODUCT(S)...........................................................................3
1.15 LICENSOR KNOW-HOW.............................................................................3
1.16 NDA...........................................................................................4
1.17 NET SALES.....................................................................................4
1.18 PATENT RIGHTS.................................................................................5
1.19 PRIMARY INDICATION............................................................................5
1.20 PROPRIETARY INFORMATION.......................................................................5
1.21 REGULATORY APPROVAL...........................................................................5
1.22 "SECONDARY INDICATION"........................................................................5
1.23 "SUBLICENSEE".................................................................................5
1.24 "TERRITORY"...................................................................................6
1.25 "TERM"........................................................................................6
1.26 US AGREEMENT..................................................................................6
1.27 VALID CLAIM...................................................................................6
ARTICLE II - LICENSE; DISCLOSURE OF INFORMATION; DEVELOPMENT AND COMMERCIALIZATION.......................6
2.1 EXCLUSIVE LICENSE GRANT.......................................................................6
(a) License.......................................................................................6
(a) Co-Exclusive License to Other Indications.....................................................6
(c) Right to Sublicense...........................................................................7
(d) Retained Rights...............................................................................7
(e) Third Party Agreements........................................................................7
2.2 NON-EXCLUSIVE LICENSE GRANT...................................................................7
2.3 DISCLOSURE OF INFORMATION.....................................................................8
</TABLE>
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<TABLE>
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2.4 HSR FILING AND APPROVALS......................................................................8
(a) HSR Filing....................................................................................8
(b) Licensor's Obligations........................................................................8
(c) Additional Approvals..........................................................................9
2.5 JOINT MANAGEMENT COMMITTEE....................................................................9
(a) Composition of the JMC........................................................................9
(b) JMC Meetings..................................................................................9
(c) JMC Responsibilities.........................................................................10
(d) Deadlock.....................................................................................10
2.6 SPL'S DEVELOPMENT OBLIGATIONS................................................................10
(a) SPL Diligence................................................................................10
(b) Opportunity to Cure..........................................................................10
(c) Research and Development Activities..........................................................11
(d) Licensed Product Registrations; Pricing Reimbursement Approvals..............................11
(e) Data.........................................................................................11
(f) Assistance by Licensor.......................................................................11
(g) Reimbursement of Costs by SPL................................................................12
(h) Licensor's Additional Development Obligations................................................12
(i) Adverse Event Reporting......................................................................13
2.7 INDEPENDENT DISCOVERIES BY SPL...............................................................13
2.8 EXCUSED PERFORMANCE..........................................................................13
2.9 SUPPLY OF LICENSED COMPOUND/LICENSED PRODUCT.................................................14
2.10 REPORTS......................................................................................14
2.11 NON-COMPETE PROVISION........................................................................14
ARTICLE III - PAYMENTS; ROYALTIES AND REPORTS...........................................................15
3.0 COORDINATION OF PAYMENTS UNDER THE US AGREEMENT..............................................15
3.1 LICENSE FEE..................................................................................15
(a) Development Milestones.......................................................................15
(b) Sales Milestones.............................................................................16
(c) Limitations..................................................................................16
3.3 ROYALTIES....................................................................................17
(a) Cap on Royalties Plus Cost of Goods..........................................................17
(b) Licensor's Option to Manufacture.............................................................18
(c) Royalty Reduction............................................................................18
3.4 THIRD PARTY LICENSES.........................................................................18
3.5 COMPULSORY LICENSES..........................................................................19
3.6 REPORTS AND PAYMENT OF ROYALTY; PAYMENT
EXCHANGE RATE AND CURRENCY CONVERSIONS.......................................................19
(a) Royalties Paid Quarterly.....................................................................19
(b) Method of Payment............................................................................19
3.7 MAINTENANCE OF RECORDS; AUDITS...............................................................20
(a) Record Keeping by SPL........................................................................20
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<TABLE>
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(b) Underpayments/Overpayments...................................................................20
(c) Record Keeping by Sublicensee................................................................20
(d) Confidentiality..............................................................................20
(e) Binding Records..............................................................................21
3.8 INCOME TAX WITHHOLDING.......................................................................21
3.9 DIRECT AFFILIATE LICENSES....................................................................21
ARTICLE IV - PATENTS....................................................................................21
4.1 FILING, PROSECUTION AND MAINTENANCE OF PATENTS...............................................21
4.2 OPTION OF SPL TO PROSECUTE AND MAINTAIN PATENTS..............................................22
4.3 ENFORCEMENT..................................................................................22
(a) Notice and Discontinuance of Infringement....................................................22
(b) Continuance of Infringement..................................................................23
4.4 THIRD PARTY INFRINGEMENT SUIT................................................................23
(a) Defense......................................................................................23
(b) Licensing....................................................................................23
4.5 CERTIFICATION UNDER DRUG PRICE COMPETITION
AND PATENT RESTORATION ACT...................................................................24
4.6 ABANDONMENT..................................................................................24
4.7 PATENT TERM RESTORATION......................................................................24
4.8 NOTICES REGARDING PATENTS....................................................................24
ARTICLE V - CONFIDENTIALITY AND PUBLICATION.............................................................25
5.1 CONFIDENTIALITY..............................................................................25
(a) Nondisclosure Obligation.....................................................................25
(b) Disclosure to Agents.........................................................................26
(c) Disclosure to a Third Party..................................................................26
5.2 PUBLICITY....................................................................................26
5.3 PUBLICATION..................................................................................27
ARTICLE VI - REPRESENTATIONS AND WARRANTIES.............................................................27
6.1 REPRESENTATIONS AND WARRANTIES OF EACH PARTY.................................................27
6.2 LICENSOR'S REPRESENTATIONS...................................................................28
6.3 CONTINUING REPRESENTATIONS...................................................................30
6.4 NO INCONSISTENT AGREEMENTS...................................................................30
6.5 REPRESENTATION BY LEGAL COUNSEL..............................................................30
6.6 ADDITIONAL OBLIGATIONS OF LICENSOR...........................................................30
ARTICLE VII - INDEMNIFICATION AND LIMITATION ON LIABILITY...............................................31
7.1 INDEMNIFICATION BY SPL.......................................................................32
7.2 INDEMNIFICATION BY LICENSOR..................................................................32
7.3 CONDITIONS TO INDEMNIFICATION................................................................32
7.4 SETTLEMENTS..................................................................................33
7.5 LIMITATION OF LIABILITY......................................................................33
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
7.6 INSURANCE....................................................................................33
ARTICLE VIII - TERM AND TERMINATION.....................................................................33
8.1 TERM AND EXPIRATION..........................................................................33
8.2 TERMINATION BY SPL WITHOUT CAUSE.............................................................33
8.3 TERMINATION UPON CESSATION OF DEVELOPMENT....................................................33
(a) Termination by Either Party..................................................................34
(b) Termination by Licensor......................................................................34
8.4 TERMINATION..................................................................................34
(a) Termination for Cause........................................................................34
(b) Effect of Termination for Cause on License...................................................35
(i) Termination by SPL.......................................................................35
(ii)Termination by Licensor..................................................................35
(iii)Effect of Bankruptcy....................................................................35
8.5 EFFECT OF TERMINATION........................................................................35
8.6 REMEDIES FOR BREACH..........................................................................36
8.7 LICENSOR'S RIGHTS ON TERMINATION.............................................................36
8.8 CONCURRENT TERMINATION WITH THE US AGREEMENT.................................................37
ARTICLE IX - MISCELLANEOUS..............................................................................37
9.1 ASSIGNMENT/CHANGE OF CONTROL.................................................................37
(a) Assignment...................................................................................37
(a) Change of Control............................................................................37
9.2 GOVERNING LAW................................................................................38
9.3 WAIVER.......................................................................................38
9.4 INDEPENDENT RELATIONSHIP.....................................................................38
9.5 EXPORT CONTROL...............................................................................38
9.6 COMPLETE AGREEMENT...........................................................................38
(a) Entire Agreement; Amendment..................................................................39
(b) Relationship to US Agreement; Controlling Provisions.........................................39
9.7 NOTICES......................................................................................39
9.8 PROVISIONS FOR INSOLVENCY....................................................................40
(a) Effect on Licenses...........................................................................40
(b) Rights to Intellectual Property..............................................................41
(c) SPL's Rights.................................................................................41
(d) Deemed Grant of Rights.......................................................................41
(e) Security Interests...........................................................................42
9.9 FORCE MAJEURE................................................................................42
9.10 SEVERABILITY.................................................................................42
9.11 COUNTERPARTS.................................................................................42
9.12 CAPTIONS.....................................................................................43
9.13 RECORDING....................................................................................43
9.14 FURTHER ACTIONS..............................................................................43
</TABLE>
iv
<PAGE> 6
SCHEDULES
SCHEDULE 1.6 COST OF GOODS
SCHEDULE 1.18 PATENT RIGHTS
SCHEDULE 2.1(E) THIRD PARTY AGREEMENTS
SCHEDULE 2.6(H) DEVELOPMENT WORK TO BE PERFORMED BY LICENSOR
SCHEDULE 2.6(I) ADVERSE EVENT REPORTING PROCEDURES
SCHEDULE 3.2 DEFINITION OF SUCCESSFUL COMPLETION
SCHEDULE 6.2(D) GOVERNMENT RIGHTS
SCHEDULE 6.2(K) OTHER VCAM-1 INHIBITORS
SCHEDULE 9.2 ARBITRATION PROVISIONS
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<PAGE> 7
EXCLUSIVE LICENSE AGREEMENT
THIS EXCLUSIVE LICENSE AGREEMENT (the "Agreement") is made as of
October 22, 1999 by and between ATHEROGENICS, INC., a Georgia corporation having
its principal place of business at 8995 Westside Parkway, Alpharetta, Georgia
30004 (hereinafter referred to as "Licensor") and SCHERING-PLOUGH LTD., a
corporation organized and existing under the laws of Switzerland and having its
principal place of business at Toepferstrasse 5, CH 6004 Lucerne Switzerland
(hereinafter referred to as "SPL"). Licensor and SPL are sometimes referred to
herein individually as a Party and collectively as the Parties. References to
"SPL" and "Licensor" shall include their respective Affiliates (as hereinafter
defined).
WHEREAS, Licensor has developed certain Licensor Know-How and has
rights to Patent Rights relating to soluble analogs of probucol, including
without limitation the Licensed Compound (each as hereinafter defined); and
WHEREAS, SPL, together with its Affiliates (as hereinafter defined)
possesses extensive capabilities in the development and commercialization of
pharmaceutical products on a worldwide basis; and
WHEREAS, SPL desires to obtain and Licensor is willing to grant to SPL,
an exclusive license under the Patent Rights and to use the Licensor Know-How,
upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants herein contained, SPL and Licensor hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following initially capitalized terms,
whether used in the singular or plural, shall have the respective meanings set
forth below:
1.1 "Affiliate" shall mean any individual or entity directly or
indirectly controlling, controlled by or under common control with, a Party to
this Agreement. For purposes of this Agreement, the direct or indirect ownership
of [*] or more of the outstanding voting securities of an entity, or the right
to receive [*] or more of the profits or earnings of an entity shall be deemed
to constitute control. Such other relationship as in fact results in actual
control over the management, business and affairs of an entity shall also be
deemed to constitute control.
1.2 "Calendar Quarter" shall mean the respective periods of three
(3) consecutive calendar months ending on March 31, June 30, September 30 or
December 31, for so long as this Agreement is in effect.
<PAGE> 8
1.3 "Calendar Year" shall mean each successive period of twelve
(12) months commencing on January 1 and ending on December 31, for so long as
this Agreement is in effect.
1.4 "Combination Product" shall mean any form or dosage of
pharmaceutical composition or preparation in final form for sale by
prescription, over-the-counter or any other method and which comprises two (2)
or more active ingredients within the same pharmaceutical formulation, at least
one (1) of which is Licensed Compound and/or any other compound from the
Compound Library.
1.5 "Compound Library" shall mean the collection of compounds
(including, without limitation, the Licensed Compound) which as of the Execution
Date is specifically and/or generically covered by one or more claims in U.S.
Patent No. 5,262,439, entitled "Soluble Monoesters of Probucol", or any
corresponding foreign patents or patent applications. The Compound Library shall
include such compounds in any form, including any salt, hydrate or crystalline
structure thereof.
1.6 "Cost of Goods" shall mean SPL's fully allocated manufacturing
cost of goods as determined in accordance with Schedule 1.6.
1.7 "Effective Date" shall mean the next business day following
the last to occur of (i) expiration or earlier termination of any notice and
waiting period under the HSR Act; or (ii) the date of delivery of fully executed
counterparts of this Agreement (the "Execution Date").
1.8 "First Commercial Sale" shall mean, with respect to any
Licensed Product, the first sale by SPL to any third party, not an Affiliate or
Sublicensee, of such Licensed Product for an indication for which SPL has
obtained Regulatory Approval.
1.9 "HRD" shall mean a health registration dossier or its
equivalent, submitted to a national government or a supranational governmental
authority, consisting of the chemical, pharmaceutical and biological
documentation; the toxicological and pharmacological documentation; and the
clinical documentation respectively, and covering a Licensed Product which is
filed in any country outside the United States and which is analogous to a new
drug application, product license application or its equivalent filed with the
United States Food and Drug Administration seeking approval to market and sell a
Licensed Product in the Territory and including, where applicable, applications
for pricing, pricing reimbursement approval, labeling and Regulatory Approval.
1.10 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
1.11 "Improvement" shall mean any enhancement in the formulation,
preparation, presentation, means of delivery, dosage, packaging of, manufacture,
or any new or expanded
<PAGE> 9
therapeutic indications(s) for, Licensed Product or Licensed Compound, in each
case which is developed prior to or during the Term of this Agreement by or on
behalf of Licensor.
1.12 [Section Reserved]
1.13 "Licensed Compound" shall mean the soluble analog of probucol
AGI-1067, having the chemical name butanedioic acid, mono[4-[[1-[3,5-bis(1,1-
dimethyethyl)-4-hydroxyphenyl]thio]-1-[methylethylthio]-2,6-bis(1,1-
dimethylethyl)-phenyl]ester, and any stereoisomers, salts, hydrates and/or
crystalline forms thereof.
1.14 "Licensed Product(s)" shall mean any form or dosage of
pharmaceutical composition or preparation in final form for sale by
prescription, over-the-counter or any other method, which contains as an active
ingredient the Licensed Compound and/or any other compound from the Compound
Library, including, without limitation, Combination Products; provided, however,
that Licensed Product shall not include topical dermatological products as
described in Section 2.11(c).
1.15 "Licensor Know-How" shall mean any of Licensor's information
and materials specifically relating to the research, development, registration,
manufacture, marketing, use or sale of Licensed Compound and/or Licensed Product
and/or the Compound Library, and which prior to or during the Term of this
Agreement are developed by or at the request of Licensor, or those of its
Affiliates involved in the performance of development of Licensed Product under
Article 2, or are in Licensor's or such Affiliates' possession or control
through license or otherwise (provided that Licensor is permitted to make
disclosure thereof to SPL without violating the terms of any third party
agreement), and which are not generally known. Licensor Know-How shall include,
without limitation, discoveries, practices, methods, knowledge, Improvements,
processes, formulas, data, ideas, skill, experience, inventions, know-how,
technology, trade secrets, manufacturing procedures, purification and isolation
techniques, instructions, test data and other intellectual property, patentable
or otherwise, relating to Licensed Compound, Licensed Product or any
Improvements. Licensor Know-How shall also include, without limitation:
(i) all biological, chemical, pharmacological, toxicological,
pharmaceutical, physical and analytical, clinical, safety,
manufacturing and quality control data and information related
thereto;
(ii) compositions of matter, assays and biological materials
specifically relating to development, manufacture, use or sale
of any Licensed Compound, Licensed Product or Improvement; and
(iii) all applications, registrations, licenses, authorizations,
approvals and correspondence submitted to or received from any
regulatory authorities with jurisdiction in the Territory over
an investigational drug containing Licensed
3
<PAGE> 10
Compound and/or Licensed Product (including, without
limitation, minutes and meeting notes relating to any
communications with any regulatory authority with jurisdiction
in the Territory over an investigational drug containing
Licensed Compound and/or Licensed Product).
1.16 "NDA" shall mean a New Drug Application or its equivalent
filed with the United States Food and Drug Administration seeking approval to
market and sell a Licensed Product in the United States.
1.17 "Net Sales" shall mean the amounts actually received on all
sales of Licensed Product by SPL, its Affiliates or Sublicensees to an
unaffiliated third party, and exclusive of intercompany transfers or
inter-company sales, less the following reasonable and customary deductions from
such gross amounts (to the extent actually taken):
(i) normal and customary trade, cash and quantity discounts,
allowances and credits;
(ii) credits or allowances actually granted for damaged goods,
returns or rejections of Licensed Product and retroactive
price reductions;
(iii) sales taxes, duties or other taxes with respect to such sales
(including duties or other governmental charges levied on,
absorbed or otherwise imposed on the sale of Licensed Product
including, without limitation, value added taxes or other
governmental charges otherwise measured by the billing amount,
when included in billing);
(iv) insurance, postage, customs duties and transportation costs,
when included in billing;
(v) charge back payments and rebates granted to managed health
care organizations or to federal, state and local governments,
their agencies, and purchasers and reimbursers or to trade
customers, including but not limited to, wholesalers and chain
and pharmacy buying groups; and
(vi) rebates (or equivalents thereof) granted to or charged by
national, state or local governmental authorities in countries
other than the United States.
In determining Net Sales of a Licensed Product any of the above discounts shall
be accounted for and apportioned based on the list price of each such Licensed
Product.
In the event that Licensed Product is sold in the form of a Combination
Product containing Licensed Compound and one or more other active ingredients
then Net Sales for such Combination Product will be calculated by multiplying
actual Net Sales of such Combination Product by the fraction A/(A+B) where: A is
the invoice price of the Licensed Compound
4
<PAGE> 11
contained in the Combination Product if sold separately by SPL, an Affiliate or
Sublicensee and B is the invoice price of any other active component or
components in the Combination Product if sold separately by SPL, an Affiliate or
Sublicensee. In the event that the Licensed Product is sold in the form of a
Combination Product containing one or more active ingredients other than
Licensed Compound and one or more such active ingredients of the Combination
Product are not sold separately, then the above formula shall be modified such
that A shall be the total cost to SPL, its Affiliate or Sublicensee(s) of the
Licensed Compound and B shall be the total cost to SPL, its Affiliate or
Sublicensee of any other active component or components in the combination.
1.18 "Patent Rights" shall mean all patents and patent applications
in the Territory which during the Term of this Agreement are owned or controlled
(with the right to grant sublicenses) by Licensor and which contain one or more
claims covering Licensed Compound(s), Licensed Product(s), one or more compounds
contained in Compound Library, or any uses, formulations, processes or methods
of preparing any of the foregoing, or any Improvements, including, but not
limited to, those set forth in Schedule 1.18, any and all substitutions,
divisions, continuations, continuations-in-part, reissues, renewals,
registrations, confirmations, re-examinations, extensions, supplementary
protection certificates or any like filing thereof, and provisional applications
of any such patents and patent applications and any international equivalent of
any of the foregoing.
1.19 "Primary Indication" shall mean the treatment and prevention
of [ * ].
1.20 "Proprietary Information" shall mean all other scientific,
clinical, regulatory, marketing, financial and commercial information or data,
whether communicated in writing, verbally or electronically, which is provided
by one Party to the other Party in connection with this Agreement including,
without limitation, Licensor Know-How. When Propriety Information is disclosed
in a manner other than in writing, it shall be reduced to written form, marked
"Confidential" and transmitted to the receiving Party within twenty (20)
business days of disclosure to the receiving Party.
1.21 "Regulatory Approval" shall mean any approvals, including any
NDA's, HRD's, supplements, amendments, pre- and post-approvals, marketing
authorizations based upon such approvals (including any prerequisite
manufacturing approvals or authorizations related thereto) and labeling
approval(s), technical, medical and scientific licenses, registrations or
authorizations of any national, regional, state or local regulatory agency,
department, bureau, commission, council or other governmental entity, necessary
for the development, manufacture, distribution, marketing, promotion, offer for
sale, use, import, export or sale of Licensed Product(s) and/or Licensed
Compound(s) in the Territory.
1.22 "Secondary Indication" shall mean [ * ]
1.23 "Sublicensee" shall mean any party not an Affiliate of SPL,
which party is
5
<PAGE> 12
authorized by SPL or its Affiliates through express or implied license or
consent to import, export, use, distribute, market, promote, offer for sale and
sell Licensed Product(s) under Section 2.1(b).
1.24 "Territory" shall mean the entire world, except for the United
States and its territories, possessions and commonwealths.
1.25 "Term" shall mean the period described in Section 8.1 of the
Agreement.
1.26 "US Agreement" shall mean that certain exclusive license
agreement by and between Licensor and Schering Corporation entered into
concurrently herewith.
1.27 "Valid Claim" shall mean a composition of matter claim, or
method of use claim (or its equivalent) for the Primary Indication and/or the
Secondary Indication, of an issued and unexpired patent in a country in the
Territory which covers the Licensed Compound and/or any other compound from the
Compound Library, which is included within the Patent Rights, and which (i) has
not been revoked or held unenforceable or invalid by a decision of a court or
other governmental agency of competent jurisdiction, unappealable or unappealed
within the time allowed for appeal; or (ii) has not been abandoned, disclaimed,
or admitted to be invalid or unenforceable through reissue or disclaimer or
otherwise.
ARTICLE II
LICENSE; DISCLOSURE OF INFORMATION; DEVELOPMENT AND
COMMERCIALIZATION
2.1 Exclusive License Grant.
(a) License. Subject to the terms and conditions of this
Agreement, Licensor hereby grants to SPL, as of the Effective Date, an
exclusive license (exclusive even as to Licensor) under the Patent
Rights and Licensor Know-How in the Territory to develop, make, have
made, import, export, use, distribute, market, promote, offer for sale
and sell: (i) Licensed Compound(s) and/or Licensed Product(s)
containing Licensed Compound; and (ii) compound(s) in the Compound
Library other than Licensed Compound, and/or Licensed Product(s)
containing such compound(s) for the Primary Indication and the
Secondary Indication.
(b) Co-Exclusive License to Other Indications Subject to the
terms and conditions of this Agreement, Licensor hereby grants to SPL,
as of the Effective Date, a co-exclusive license under the Patent
Rights and Licensor Know-How in the Territory to develop, make, have
made, import, export, use, distribute, market, promote, offer for sale
and sell compound(s) in the Compound Library other than Licensed
Compound, and/or Licensed Product(s) containing such compound(s), for
any and all indications other than
6
<PAGE> 13
the Primary Indication and Secondary Indication. The term "co-exclusive
license" shall mean that with respect to the rights granted to SPL
under this Section 2.1(b), Licensor retains the same rights as are
granted to SPL. With respect to a given compound, indication or
territory, each of Licensor and SPL may either directly exercise and
exploit its co-exclusive rights or grant a co-exclusive license under
such rights, either in whole or in part, to one (1) third party or
Affiliate.
(c) Right to Sublicense. The licenses granted to SPL
under Sections 2.1(a) and 2.1(b) shall include the right to grant
sublicenses to Affiliates and/or any third party (to the extent
provided therein), provided that SPL remains responsible to Licensor
under this Agreement for the performance of its Sublicensees.
(d) Retained Rights Subject to the restrictions set forth
in Section 2.11, Licensor retains all rights under the Patent Rights
not expressly granted to SPL by this Section 2.1, and the right to use
Licensor Know-How pursuant to Sections 2.6(h) and 5.1(c) below.
(e) Third Party Agreements. As of the Execution Date,
Licensor is a party to certain agreements (as listed in Schedule
2.1(e), redacted copies of which have been provided to SPL) with third
parties pursuant to which Licensor has acquired rights to certain
patent applications, patents and technology, which agreements are
relevant to the Patent Rights and/or Licensor Know-How. The parties
acknowledge that the licenses granted to SPL under this Agreement are,
or may be, subject to the specific rights retained by or granted to the
U.S. Government, and/or the rights for research use retained by such
third parties, under those agreements. In the event that on or after
the Execution Date and during the Term of this Agreement, Licensor
acquires any additional Patent Rights or Licensor Know-How from any
third parties, by assignment, license or otherwise, Licensor shall
promptly notify SPL in writing to that effect, and provide SPL with a
copy (which may be redacted) of the agreement(s) with such third party.
To the extent that the copies of the agreements listed in Schedule
2.1(e) which were provided to SPL, or any other agreements provided to
SPL under this Section 2.1(e), have been redacted, Licensor represents
and warrants that the redacted portions of such agreements have no
material effect on the scope of the licenses or other rights granted to
SPL under this Agreement. Nothing herein shall be construed as granting
to SPL any greater rights under the Patent Rights and/or Licensor
Know-How than those held by Licensor
2.2 Non-Exclusive License Grant. In the event that the
development, making, having made, importing, exporting, use, distribution,
marketing, promotion, offering for sale or sale by SPL, its Affiliates and/or
Sublicensees of Licensed Product in the Territory would infringe during the Term
of this Agreement a claim of an issued letters patent, and/or any patent rights
which Licensor owns or has the rights to license and which patents are not
covered by the grant in Section 2.1, Licensor hereby grants to SPL and its
Affiliates, to the extent Licensor is legally able to do so, a non-exclusive,
royalty-free license in the Territory under such issued letters patent
7
<PAGE> 14
solely for SPL, its Affiliates and/or Sublicensees to discover, develop, make,
have made, use, distribute, market, promote, offer for sale and sell Licensed
Compound and/or Licensed Product(s) in the Territory.
2.3 Disclosure of Information. Promptly after the Effective Date,
Licensor shall, at its own cost, disclose to SPL in writing, or via mutually
acceptable electronic media, copies or reproductions of all existing Licensor
Know-How not previously disclosed to SPL in order to enable SPL to exploit its
rights granted under Section 2.1 and, if applicable, Section 2.2 of this
Agreement. In addition, during the Term of this Agreement, Licensor shall
promptly disclose to SPL in writing, or via mutually acceptable electronic
media, on an ongoing basis copies or reproductions of all new Licensor Know-How
that is reasonably necessary for research, development, registration,
manufacture, marketing, use or sale of Licensed Compound and/or Licensed
Product. Such Licensor Know-How and other information shall be automatically
deemed to be within the scope of the licenses granted herein without payment of
any additional compensation. Upon SPL's request but reasonably subject to
Licensor's other business requirements, Licensor shall provide reasonable
technical assistance to enable SPL to utilize such additional Licensor Know-How,
provided, that SPL shall promptly reimburse Licensor for reasonable
out-of-pocket costs and expenses incurred by Licensor in providing such
technical assistance. Licensor shall invoice SPL for such costs and expenses,
and shall provide documentation for the invoice. The invoice shall be payable to
Licensor or its designee(s) [ * ] after receipt by SPL of the invoice provided,
however, that such cost and out-of-pocket expenses must be identified prior to
being committed to by Licensor and provided to SPL to determine whether SPL
agrees to have the technical assistance provided at such cost and the final
amount sought to be reimbursed shall not exceed [ * ] of the estimated cost
without SPL's prior written consent. SPL shall be under no obligation to
reimburse Licensor for out-of-pocket costs and expenses incurred by Licensor
without SPL's agreement. SPL shall have the right to use for all purposes in
connection with obtaining any Regulatory Approval for the Licensed Product(s)
all Licensor Know-How and other information, disclosed pursuant to this Section
and under this Agreement.
2.4 HSR Filing and Approvals.
(a) HSR Filing. To the extent necessary, each of Licensor
and SPL shall file, within ten (10) days after the date of this
Agreement, with the Federal Trade Commission (the "FTC") and the
Antitrust Division of the United States Department of Justice (the
"Antitrust Division") any notification and report form (the "Report")
required of it in the reasonable opinion of either or both Parties
under the HSR Act with respect to the transactions as contemplated
hereby and shall cooperate with the other Party to the extent necessary
to assist the other Party in the preparation of its Report and to
proceed to obtain necessary approvals under the HSR Act, including but
not limited to the expiration or earlier termination of any and all
applicable waiting periods required by the HSR Act.
(b) Licensor's Obligations. Licensor shall use good faith
reasonable efforts to
8
<PAGE> 15
assist SPL in eliminating any concern on the part of any court or
government authority regarding the legality of the proposed
transaction, including, if required by federal or state antitrust
authorities, SPL's promptly taking all reasonable steps to secure
government antitrust clearance. Licensor shall cooperate in good faith
at its own cost with any government investigation and promptly produce
documents and information demanded by a second request for documents
and of witnesses if requested.
(c) Additional Approvals. Each of Licensor and SPL will
cooperate and use all reasonable efforts to make all other
registrations, filings and applications, to give all notices and to
obtain as soon as practicable all governmental or other consents,
transfers, approvals, orders, qualifications authorizations, permits
and waivers, if any, and to do all other things reasonably necessary or
desirable in SPL's opinion for the consummation of the transactions as
contemplated hereby (including, without limitation, those acts required
to obtain necessary approvals under any foreign equivalent antitrust
statute to the HSR Act or regulation from any government or regulatory
authority having the requisite jurisdiction; provided, however, that
SPL shall promptly reimburse Licensor for reasonable out-of-pocket
costs and expenses incurred by Licensor in providing such cooperation.
Licensor shall invoice SPL for such costs and expenses, and shall
provide supporting documentation for the invoice. The invoice shall be
payable to Licensor or its designee(s) [ * ] days after receipt by SPL
of the invoice.
2.5 Joint Management Committee. The Parties shall establish a
Joint Management Committee (the "JMC") to oversee the development and
commercialization program for Licensed Product for the Primary Indication and
the Secondary Indication, and to facilitate the exchange of information between
the Parties. The JMC will generally serve in an advisory capacity with respect
to the development and commercialization activities to be performed by SPL under
this Agreement, with SPL retaining final decision making authority with respect
to all such matters.
(a) Composition of the JMC. The JMC shall be composed of
up to three (3) representatives from each of SPL and Licensor, and a
quorum shall consist of at least one (1) JMC representative from each
Party. In any matter before the JMC, each Party shall have one (1)
vote, with decisions being made by unanimous decision. SPL shall
seriously consider the recommendations and decisions of the JMC. A
Party's representatives to the JMC shall serve at the discretion of
such Party and may be substituted for or replaced at any time by such
Party. The JMC shall be chaired by a representative of SPL. The
Chairperson shall be responsible for calling meetings, preparing
agendas and preparing and issuing minutes of each meeting within
[ * ] thereafter.
(b) JMC Meetings. The JMC shall meet at least once each
Calendar Quarter during the Term of this Agreement, until such time as
the Parties agree to a more or less frequent meeting schedule. The site
of such meetings shall alternate between the offices of SPL and
Licensor (or any other site mutually agreed upon by the Parties) and
each
9
<PAGE> 16
Party shall bear its own costs of attending such meetings. All meetings
of the JMC shall be summarized in writing and sent to both Parties and
countersigned by both Parties.
(c) JMC Responsibilities. The JMC will be generally
responsible for monitoring the status of SPL's development and
commercialization activities with respect to Licensed Product and for
preparing recommendations for implementation by SPL with regard to: (i)
selection of Licensed Compounds for development by SPL as Licensed
Products for the Primary Indication; (ii) preclinical and clinical
development plans; (iii) development timelines and scheduling; (iv)
strategies for obtaining and maintaining Regulatory Approvals; (v)
marketing and sales strategies for Licensed Product.
(d) Deadlock. In the event that the JMC is unable to
reach a decision by unanimous vote with respect to any matter, then SPL
shall have final decision making authority with respect thereto.
2.6 SPL's Development Obligations.
(a) SPL Diligence. SPL shall, at SPL's expense, and
subject to Licensor's compliance with its obligations under Sections
2.3 and 2.4, use good faith reasonable efforts to develop, obtain
Regulatory Approval for, and commercialize the Licensed Product(s) in
the Territory for the Primary Indication. SPL shall have the option, in
its sole discretion, to seek Regulatory Approval for the Licensed
Product for any additional indications it determines are desirable, but
shall have no diligence obligations to Licensor with respect thereto
with the exception of those expressly set forth in Section 2.11(d). The
Parties acknowledge and agree that all business decisions including,
without limitation, decisions relating to SPL's research, development,
registration, manufacture, sale, commercialization, design, price,
distribution, marketing and promotion of Licensed Products covered
under this Agreement, shall be within the sole discretion of SPL.
Licensor acknowledges that SPL is in the business of developing,
manufacturing and selling pharmaceutical products and, subject to the
provisions of this Section, nothing in this Agreement shall be
construed as restricting such business or imposing on SPL the duty to
market and/or sell and exploit Licensed Compound or Licensed Product
for which royalties are payable hereunder to the exclusion of, or in
preference to, any other product, or in any way other than in
accordance with its normal commercial practices.
(b) Opportunity to Cure. If, in Licensor's reasonable
opinion, SPL fails to comply with any of its diligence obligations
under Sections 2.6(a) and (c), then Licensor shall have the right to
give SPL written notice thereof stating in reasonable detail the
particular failure(s). SPL shall have a period [ * ] days from the
receipt of such notice to correct the failure or, in the event that the
failure cannot be reasonably cured within a [ * ] day period, then SPL
shall initiate actions reasonably expected to cure the failure within
[ * ] days of receiving notice and shall thereafter diligently pursue
such actions to cure
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the failure (even if requiring longer than the [ * ] days specified in
Section 8.4(a)(i)). In the event of a dispute as to whether or not SPL
has failed to exercise due diligence under Sections 2.6(a) and 2.6(c),
or whether SPL is diligently pursuing actions reasonably expected to
cure such failure under this Section 2.6(b), such dispute shall be
resolved through binding arbitration in accordance with Section 9.2.
(c) Research and Development Activities. As of the
Effective Date, SPL shall be responsible, at its cost and expense, and
in its sole judgment, for all research and development activities which
are necessary to obtain Regulatory Approval for a Licensed Product in
the Territory for the Primary Indication and any post-approval studies
required as a condition of obtaining any Regulatory Approval for a
Licensed Product for the Primary Indication. The parties acknowledge
and agree that SPL's obligations under this Section 2.6(c) shall
include all of the costs of conducting the CART Study (whether incurred
before or after the Effective Date) which are estimated at [ * ]. In
addition, SPL shall be responsible for any other studies (or portions
of studies) necessary or desirable, in its sole judgment, for
maintaining any Regulatory Approval (for the Primary Indication or any
other indication for which SPL, in its sole discretion, may decide to
seek Regulatory Approval) in the Territory, as well as any
pre-marketing studies prior to such Regulatory Approval and
post-marketing studies conducted following a Regulatory Approval.
(d) Licensed Product Registrations; Pricing Reimbursement
Approvals. Subject to its diligence obligations set forth in Section
2.6(a), SPL shall be responsible, at its cost and expense, and in its
sole judgment, for determining the appropriate regulatory strategy, for
obtaining and maintaining all Regulatory Approvals and for obtaining
and maintaining any pricing and reimbursement approvals required for
the sale of Licensed Product in the Territory. Each Regulatory Approval
and each pricing and reimbursement approval shall be placed in SPL's
name or the name of a SPL Affiliate unless applicable law requires, or
Licensor and SPL otherwise agree, that an approval be solely or jointly
in the name of Licensor or a designated Licensor Affiliate. Licensor
agrees that notwithstanding such Regulatory Approval or pricing and
reimbursement approval in its name, SPL retains the exclusive rights to
make, have made, import, export, use, distribute, promote, offer for
sale and sell Licensed Compound and/or Licensed Product(s) as granted
SPL in Section 2.1.
(e) Data. SPL shall own all data arising out of studies
performed by or on behalf of SPL under this Article II.
(f) Assistance by Licensor. In connection with any NDA,
HRD or other application for Regulatory Approval relating to Licensed
Product, Licensor shall, at SPL's request, provide to SPL in a prompt
manner responses to questions which have been raised by any regulatory
authority in connection with such application for Regulatory Approval
and further provide to SPL estimates of Licensor's [ * ] costs for
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rendering such assistance. Licensor shall assist SPL from time to time,
at SPL's request, in the design and implementation of clinical studies.
Subject to Licensor's rights under Section 3.3(b), Licensor shall
assist SPL to enable SPL to self-source bulk material for the
manufacture of Licensed Compound and/or Licensed Product; provided,
however, that SPL shall have no obligation whatsoever to purchase any
bulk material or Licensed Compound from Licensor.
(g) Reimbursement of Costs by SPL
(i) SPL shall reimburse Licensor for its reasonable
[ * ] costs and expenses incurred in rendering assistance under Section
2.6(f) (but no more than [ * ] of those costs which Licensor estimated,
as provided above, that the work would cost unless SPL provides written
approval). Licensor shall invoice SPL for such costs and expenses, and
shall provide documentation for the invoice. The invoice shall be
payable to Licensor or its designee(s) [ * ] days after receipt by SPL
of the invoice, provided, however, that SPL shall be under no
obligation to reimburse Licensor for [ * ] costs and expenses incurred
by Licensor without SPL's agreement.
(ii) SPL shall reimburse Licensor for its reasonable
[ * ] costs and expenses incurred in performing research and
development activities under Section 2.6 (h) (but no more than [ * ] of
those costs which Licensor estimated, as provided below, that the work
would cost unless the JMC provides written approval). Licensor shall
invoice SPL for such costs and expenses, and shall provide
documentation for the invoice. The invoice shall be payable to Licensor
or its designee(s) [ * ] days after receipt by SPL of the invoice,
provided, however, that SPL shall be under no obligation to reimburse
Licensor for research and development costs and expenses incurred by
Licensor without the prior approval of the JMC.
(h) Licensor's Additional Development Obligations. In
addition to Licensor's obligations under Section 2.6(f), the JMC will
assign to Licensor the responsibility to conduct, on SPL's behalf and
at SPL's expense, certain of the research and development activities,
including clinical studies involving Licensed Product, for which SPL is
responsible under Section 2.6(c). The nature and extent of the research
and development activities to be conducted by Licensor is generally set
forth in Schedule 2.6(h). The JMC shall determine the specific aspects
of such activities, including the timing and costs of the work to be
performed by Licensor. Licensor agrees to use good faith reasonable
efforts to complete such activities in the manner determined by the
JMC, and shall have the right to utilize contract research
organizations and other third party contractors in the performance of
such activities, provided that Licensor shall remain responsible for
the performance of all such contractors. To the extent that Licensor
utilizes third party contractors to perform such activities, Licensor
shall enter into suitable agreements with
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such contractors, which agreements shall incorporate provisions
consistent with the terms and conditions of this Agreement, including,
without limitation, provisions governing confidentiality, ownership of
data, inventions and other intellectual property arising from such
activities, financial obligations and termination rights. Licensor
shall keep the JMC informed with regard to such third party contracts
and shall provide SPL with a copy of all such agreements. Any research
and development activities conducted by Licensor or its contractors
pursuant to this Section 2.6(h) shall be performed in accordance with
good laboratory practices and good clinical practices, and in
compliance with all applicable laws, rules and regulations in the U.S.
and the EU, and shall meet current regulatory standards. SPL shall
promptly notify Licensor in the event that SPL reasonably determines
that all or any part of the work performed by Licensor and/or its
contractors under this Section 2.6(h) fails to meet such standards. If
Licensor reasonably disagrees with such determination, the parties
shall refer the matter to an independent expert (selected by mutual
agreement of the parties) to determine whether or not the study must be
repeated to support Regulatory Approval for Licensed Product. In the
event that Licensor and/or the independent expert agrees with SPL's
determination and such studies are repeated, then SPL shall have the
right to deduct the [ * ] costs of repeating such work from [ * ]
payments due Licensor under this Agreement.
(i) Adverse Event Reporting Licensor shall promptly
report to SPL any information regarding adverse events related to the
use of the Licensed Product in accordance with the Adverse Event
Reporting Procedures (as may be amended from time to time upon mutual
agreement) set forth in Schedule 2.6(i) and incorporated herein by
reference. To the extent that Licensor holds any INDs or otherwise has
any adverse event reporting obligations with respect to Licensed
Product, SPL shall promptly report to Licensor any information
regarding adverse events related to the use of Licensed Product in
accordance with such Adverse Event Reporting Procedures.
2.7 Independent Discoveries by SPL. Licensor acknowledges that SPL
and/or its Affiliates have ongoing research programs which may now or in the
future independently discover, develop and/or acquire technologies and/or
products relating to treatment and prevention of any disease, disorder or
condition in humans or animals. Licensor agrees that such technologies and
products, to the extent discovered without use of Licensor Know-How, will not be
deemed to be Licensor Know-How and are outside the scope of this Agreement.
2.8 Excused Performance. In addition to the provisions of Article
VIII and Section 9.9, the obligations of SPL with respect to a Licensed Product
under Sections 2.6(a), 2.6(c), 2.6(d) and 2.11(d) are expressly conditioned upon
the continuing absence of any adverse condition or event which warrants a delay
in commercialization of a Licensed Product including, but not limited to, an
adverse condition or event relating to the safety or efficacy of a Licensed
Product or unfavorable labeling, pricing or pricing reimbursement approvals, or
lack of Regulatory Approval, and the obligation of SPL to develop or market any
such Licensed Product shall be delayed or suspended so long as in SPL's
reasonable opinion any such condition or event exists.
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2.9 Supply of Licensed Compound/Licensed Product. Licensor shall
be responsible, at Licensor's expense, for supplying SPL with Licensed Compound
(in the form of bulk active), from Licensor's existing inventory of Licensed
Compound, to enable SPL to perform [ * ]. In addition, Licensor has the limited
option to supply all of SPL's requirements of Licensed Products as set forth in
Section 3.3(b). All Licensed Compound to be supplied by Licensor hereunder shall
be delivered FCA (Kenilworth, New Jersey) (Incoterms 1990) via a carrier to be
specified by SPL. Licensor warrants and represents that all supplies of Licensed
Compound provided to SPL by Licensor shall conform to the applicable
specifications for such Licensed Compound and were prepared in accordance with
current Good Manufacturing Practices ("cGMPs") and other applicable federal,
national, state and local laws and regulations in effect at the time of
manufacture. SPL shall be responsible for the formulation and packaging of the
Licensed Compound provided by Licensor hereunder, and for manufacture and supply
of all Licensed Compound and/or Licensed Product necessary for the performance
of [ * ] and for supplying all commercial quantities of Licensed Compound and
Licensed Products. Licensor shall transfer to SPL all Licensor Know-How relating
to the manufacture of Licensed Compound, and at SPL's request and expense shall
provide reasonable technical support to facilitate the implementation of such
manufacturing technology at SPL.
2.10 Reports. SPL shall provide Licensor with quarterly reports of
the status of the research and development activities and progress of any
application for Regulatory Approval, as applicable, in connection with Licensed
Product in the Territory. Further, SPL shall inform Licensor of commencement,
completion, and results of the major phases of clinical development of Licensed
Product, including but not limited to Phase II and Phase III clinical trials,
NDA and HRD submissions, NDA and HRD filings, approvable and approval letters,
and launch.
2.11 Non-Compete Provision. Subject to the terms of Section 9.1(b),
Licensor and its Affiliates shall be subject to the non-compete obligations set
forth in this Section 2.11.
(a) During the Term of this Agreement, Licensor shall not
undertake a development program for, or commercialize, either on its
own or in collaboration with any third party:
[ * ]
(b) For the period extending from the Effective Date
until the earlier of [ * ] after the First Commercial Sale of Licensed
Product in the Territory or [ * ], Licensor shall not, either on its
own or in collaboration with any third party:
[ * ]
(c) The foregoing notwithstanding, Licensor shall at all
times retain the right to develop and commercialize topical products
containing any compound other than the
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Licensed Compound for the treatment or prevention of dermatological
conditions, diseases or disorders. In addition, Licensor shall have the
right at all times to enter into agreements with third parties relating
to the performance by Licensor of pre-clinical research activities with
respect to compounds owned or controlled by such third parties,
provided that such compounds do not compete through the same mechanism
of action with the Licensed Compound (as determined using the same
criteria as set forth in Section 6.2(k)) with respect to the Primary
Indication and/or the Secondary Indication.
(d) Licensor's non-compete obligations under Section
2.11(b)(ii) are expressly conditioned upon SPL's initiating a
development program for Licensed Product for the Secondary indication
within [ * ] years after the Effective Date, and thereafter using good
faith reasonable efforts to develop and commercialize one or more
Licensed Products for the Secondary Indication.
ARTICLE III
PAYMENTS; ROYALTIES AND REPORTS
3.0 Coordination of Payments under the US Agreement. The license
fee, milestone payments and royalties payable by SPL under this Article III are
in consideration for the rights and licenses granted to SPL under this Agreement
and are in addition to any amounts payable to Licensor under the US Agreement.
It is understood and agreed that, with respect to the development milestone
payable under Section 3.2(a)(i) and the sales milestones payable under Section
3.2(b) the occurrence of one or more of such milestone events will result in
milestone payment obligations under both this Agreement and the corresponding
provisions of the US Agreement. It is further understood that SPL's financial
obligations with respect to development costs under Article II shall be [ * ]
apportioned between SPL and the corresponding obligations of Schering
Corporation under the US Agreement.
3.1 License Fee. In partial consideration for the licenses and
other rights granted to SPL hereunder, SPL shall pay to Licensor a license fee
("License Fee") [ * ], which payment shall be due within [ * ] business days
following the Effective Date.
3.2 Milestone Payments. In partial consideration for the licenses
and other rights granted to SPL hereunder, SPL shall promptly notify Licensor in
writing upon the occurrence of an event triggering one of the milestone payments
set forth in this Section 3.2, and within [ * ] days after the occurrence of
such event pay to Licensor the applicable milestone payment.
(a) Development Milestones:
(i) [ * ]
(ii) [ * ]
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(iii) [ * ]
(iv) [ * ]
(v) [ * ]
(b) Sales Milestones:
(i) [ * ]
(ii) [ * ]
(iii) [ * ]
(iv) [ * ]
The foregoing sales milestone payments are in addition to any royalty
payments due Licensor under Section 3.3 with respect to sales of
Licensed Product. For purposes of clarity, the parties acknowledge that
(1) the first achievement of more than one of the above sales
milestones in the same Calendar Year shall not affect SPL's obligation
to make the relevant sales milestone payments to Licensor, and (2)
annual worldwide sales of the Licensed Product shall be determined
based upon the aggregate total of sales in the Territory under this
Agreement and sales in countries outside the Territory under the
International Agreement.
(c) Limitations. Except as expressly set forth below,
each development milestone payment under Section 3.2(a) and each sales
milestone payment under Section 3.2(b) shall be payable one (1) time
only on the first occurrence of the indicated event regardless of the
number of times the event triggering the payment of such milestone
occurs. If the triggering event for a given milestone payment does not
occur prior to the effective date of termination, or the expiration, of
this Agreement, SPL shall have no obligation to pay such milestone
payment to Licensor. The Parties acknowledge and agree that nothing
herein shall be construed as representing an estimate or projection of
anticipated sales or the actual value of Licensed Compounds or Licensed
Products, and the figures set forth in Section 3.2(b) are merely
intended to define SPL's obligations to Licensor in the event such
sales performance is achieved.
3.3 Royalties. In further consideration for the licenses granted
to SPL hereunder, for so long as the Licensed Product is covered by a Valid
Claim in the Territory at the time of sale by SPL, and subject to the provisions
of Section 3.3 (a)-(c), SPL shall pay to Licensor royalties on a
country-by-country basis of [ * ] of SPL's, its Affiliates' or its Sublicensees'
Net Sales of Licensed Product in the Territory. With respect to countries in the
Territory where no such Valid Claim exists, the royalty rate shall be [ * ], and
such royalties shall be paid for [ * ] years from
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the first commercial sale of Licensed Product in such country. No royalties
shall be due upon the sale or other transfer among SPL, its Affiliates or
Sublicensees, but in such cases the royalty shall be due and calculated upon
SPL's or its Affiliates' or its Sublicensees' Net Sales to the first independent
third party. No royalties shall accrue on the disposition of Licensed Product by
SPL, its Affiliates or Sublicensees as samples (promotion or otherwise) or as
donations (for example, to non-profit institutions or government agencies for a
non-commercial purpose) or for clinical studies. Such dispositions by SPL shall
not be included in the determination of Net Sales during the period of time in
which such third party sales are occurring.
(a) Cap on Royalties Plus Cost of Goods. The parties
acknowledge and agree that the total of (i) royalties payable by SPL to
Licensor under this Agreement, and (ii) the Cost of Goods of Licensed
Product manufactured by SPL and/or paid by SPL to third parties for the
manufacture of Licensed Product, shall not exceed [ * ] of Net Sales of
Licensed Product. SPL shall use good faith reasonable efforts to keep
the Cost of Goods of Licensed Product from exceeding [ * ] of Net
Sales. SPL shall determine the Cost of Goods for the Licensed Product
in a timely manner, and in no event later than the date of filing of
the first NDA for the Licensed Product in the United States. In the
event that notwithstanding such efforts by SPL the Cost of Goods for
Licensed Product does exceed [ * ] of Net Sales, then SPL shall notify
Licensor in writing to that effect. Following receipt of such notice,
Licensor shall have the right to have an independent auditor review
SPL's relevant records and make an independent determination of the
Cost of Goods for the Licensed Product. Any such audit shall be
conducted under terms and conditions essentially the same as those set
forth in Section 3.7.
(b) Licensor's Option to Manufacture. In the event that
SPL's Cost of Goods for the Licensed Product is correctly determined to
exceed [ * ] of Net Sales, Licensor shall have the right to manufacture
and supply, or to seek a third party supplier able to manufacture and
supply, SPL's requirements of Licensed Product at a Cost of Goods equal
to or less than [ * ] of Net Sales for Licensed Product. If Licensor is
able, or locates a third supplier able, to manufacture and supply
Licensed Product at a Cost of Goods equal to or less than [ * ] of Net
Sales, SPL shall in good faith negotiate and enter into a suitable
supply agreement with Licensor or such third party, as appropriate, for
the manufacture and supply of Licensed Product. Any such agreement
shall include terms obligating SPL to purchase, and Licensor or the
third party to manufacture and supply, all of SPL's requirements of
Licensed Product at a Cost of Goods to be agreed upon, not to exceed [
* ] of Net Sales of Licensed Product. All supplies of Licensed Product
to be provided to SPL by Licensor or such third party manufacturer
pursuant to this Section 3.3(b) shall be manufactured at a qualified
manufacturing site, shall conform to the applicable specifications for
Licensed Product and shall be prepared in accordance with cGMPs and all
applicable federal, national, state and local laws and regulations in
effect at the time of manufacture.
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(c) Royalty Reduction. In the event that SPL's Cost of
Goods for Licensed Product are correctly determined to exceed [ * ] of
Net Sales of Licensed Product and Licensor is unable to identify a
third party capable of supplying SPL's requirements of Licensed Product
at a price equal to or less than [ * ] of Net Sales of Licensed
Product, then SPL shall remain responsible for the manufacture and
supply of Licensed Product and the royalty rate to be paid by SPL under
this Section 3.3 shall be reduced so that the total of (i) royalties
payable by SPL to Licensor under this Agreement, and (ii) the Cost of
Goods of Licensed Product manufactured by SPL and/or paid by SPL to
third parties for the manufacture of Licensed Product, is equal to [ *
] of Net Sales of Licensed Product. Notwithstanding the foregoing, the
royalty payable to Licensor under this Agreement shall not be reduced
pursuant to this Section 3.3(c) to less then [ * ] where a Valid Claim
exists, or [ * ] where no Valid Claim exists.
3.4 Third Party Licenses. In the event that SPL's outside patent
counsel determines that patent licenses from third parties are required by SPL,
its Affiliates or its Sublicensees in order to discover, develop, make, have
made, import, export, use, distribute, promote, market, offer for sale or sell
Licensed Compound and/or Licensed Product (hereinafter "Third Party Licenses"),
SPL shall provide Licensor with written notice to that effect and shall be
solely responsible for acquiring such licenses at SPL's sole discretion. SPL may
reduce any royalty otherwise due Licensor hereunder to reimburse it for
royalties and or license fees actually paid to such third parties under any
Third Party Licenses of patent claims which would be infringed by the
manufacture, use, import, export or sale of Licensed Compound and/or Licensed
Product in the Territory. SPL shall have no right to reduce any royalty due
Licensor hereunder for any amounts paid to a third party under any Third Party
License to the extent it is a license to technology (other than Licensor
Know-How) or materials (other than Licensed Compound) selected by SPL for use in
connection with the Licensed Product. The amount of reduction of royalties due
Licensor and the amount of reimbursement to SPL shall be equal to [ * ] of the
royalties or license fees paid to such third parties in consideration for the
Third Party License but in no event shall the royalty due Licensor for any
Licensed Product in any country be thereby reduced to less than [ * ] of the
royalty rate otherwise due Licensor hereunder for such Licensed Product in such
country.
3.5 Compulsory Licenses. If a compulsory license is granted under
the Patent Rights to a third party with respect to Licensed Compound and/or
Licensed Product in any country in the Territory with a royalty rate lower than
the royalty rate provided for under Section 3.3, then the royalty rate to be
paid by SPL on Net Sales in that country under Section 3.3 shall be reduced to
the rate paid by the compulsory licensee for so long as such compulsory license
is in effect.
3.6 Reports; Payment of Royalty; Payment Exchange Rate and
Currency Conversions.
(a) Royalties Paid Quarterly. Within [ * ] calendar days
following the close of each Calendar Quarter, following the First
Commercial Sale of a Licensed Product, SPL shall furnish to Licensor a
written report for the Calendar Quarter showing the Net
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Sales of Licensed Product(s) sold by SPL, its Affiliates and its
Sublicensees in the Territory during such Calendar Quarter and the
royalties payable under this Agreement for such Calendar Quarter.
Simultaneously with the submission of the written report, SPL shall pay
to Licensor, for the account of SPL or the applicable Affiliate or
Sublicensee, as the case may be, a sum equal to the aggregate royalty
due for such Calendar Quarter calculated in accordance with this
Agreement (reconciled for any previous overpayments or underpayments).
(b) Method of Payment. Payments to be made by SPL to
Licensor under this Agreement shall be paid by bank wire transfer in
immediately available funds to such bank account as is designated in
writing by Licensor from time to time. Royalties shall be deemed
payable by the entity making the Net Sales from the country in which
earned in local currency and subject to foreign exchange regulations
then prevailing. Royalty payments shall be made in United States
dollars to the extent that free conversions to United States dollars is
permitted. The rate of exchange to be used in any such conversion from
the currency in the country where such Net Sales are made shall be the
rate of exchange used by Schering Corporation for reporting such sales
for United States financial statement purposes. If, due to restrictions
or prohibitions imposed by national or international authority,
payments cannot be made as aforesaid, the Parties shall consult with a
view to finding a prompt and acceptable solution, and SPL will deal
with such monies as Licensor may lawfully direct at no additional
out-of-pocket expense to SPL. Notwithstanding the foregoing, if
royalties in any country cannot be remitted to Licensor for any reason
within [ * ] after the end of the Calendar Quarter during which they
are earned, then SPL shall be obligated to deposit the royalties in a
bank account in such country in the name of Licensor.
3.7 Maintenance of Records; Audits.
(a) Record Keeping by SPL. SPL and its Affiliates shall
keep complete and accurate records in sufficient detail to enable the
royalties payable hereunder to be determined. Upon [ * ] days prior
written notice from Licensor, SPL shall permit an independent certified
public accounting firm of nationally recognized standing selected by
Licensor, at Licensor's expense, to have access during normal business
hours to examine pertinent books and records of SPL and/or its
Affiliates as may be reasonably necessary to verify the accuracy of the
royalty reports hereunder. The examination shall be limited to
pertinent books and records for any year ending not more than [ * ]
months prior to the date of such request. An examination under this
Section 3.7(a) shall not occur more than once in any Calendar Year. SPL
may designate competitively sensitive information, which such auditor
may not disclose to Licensor; provided, however, that such designation
shall not encompass the auditor's conclusions. The accounting firm
shall disclose to Licensor only whether the royalty reports are correct
or incorrect and the specific details concerning any discrepancies. No
other information shall be provided to Licensor. All such accounting
firms shall sign a confidentiality agreement (in form and
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substance reasonably acceptable to SPL) as to any of SPL's or its
Affiliate's confidential information which they are provided, or to
which they have access, while conducting any audit pursuant to this
Section 3.7(a).
(b) Underpayments/Overpayments. If such accounting firm
correctly concludes that additional royalties were owed during such
period, SPL shall pay the additional royalties within [ * ] days of the
date Licensor delivers to SPL such accounting firm's written report so
correctly concluding. If such underpayment exceeds [ * ] of the royalty
correctly due Licensor then the fees charged by such accounting firm
for the work associated with the underpayment audit shall be paid by
SPL. Any overpayments by SPL will be credited against future royalty
obligations. In the event that SPL disagrees with the audit report and
the chief financial officers of SPL and Licensor (or their designees)
fail to resolve such disagreement, the dispute will be resolved through
the dispute resolution mechanism set forth in Section 9.2.
(c) Record Keeping by Sublicensee. SPL shall include in
each sublicense granted by it pursuant to this Agreement a provision
requiring the Sublicensee to make reports to SPL, to keep and maintain
records of sales made pursuant to such sublicense and to grant access
to such records by Licensor's independent accountant to the same extent
required of SPL under this Agreement.
(d) Confidentiality. Licensor shall treat all financial
information subject to review under this Section 3.7, or under any
sublicense agreement, in accordance with the confidentiality provisions
of this Agreement, and shall cause its accounting firm to enter into an
acceptable confidentiality agreement with SPL obligating it to retain
all such financial information in confidence pursuant to such
confidentiality agreement.
(e) Binding Records. Upon the expiration of [ * ] months
following the end of any Calendar Year, the calculation of royalties
payable under this Agreement with respect to such year shall be binding
and conclusive upon the Parties, and SPL, its Affiliates and its
Sublicensees shall be released from any liability or accountability
with respect to royalties for such Calendar Year.
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3.8 Income Tax Withholding. If at any time, any jurisdiction
within the Territory requires the withholding of income taxes or other taxes
imposed upon payments set forth in this Article III, SPL shall make such
withholding payments as required and subtract such withholding payments from the
payments set forth in this Article III, or if applicable, Licensor will promptly
reimburse SPL or its designee(s) of the amount of such payments, it being
understood that such withholding taxes are the obligation of Licensor. SPL shall
provide Licensor with documentation of such withholding and payment in a manner
that is satisfactory for purposes of the U.S. Internal Revenue Service. Any
withholdings paid when due hereunder shall be for the account of Licensor and
shall not be included in the calculation of Net Sales. Payments of withholding
taxes made by SPL pursuant to this Section 3.8 will be made based upon financial
information to be provided to SPL by Licensor and, to the extent that such
information is incorrect or incomplete, Licensor shall be liable for any fine,
assessment or penalty, or any deficiency, imposed by any taxing authority in the
Territory for any deficiency in the amount of any such withholding or the
failure to make such withholding payment. If SPL is required to pay any such
deficiency, or any such fine, assessment or penalty for any such deficiency,
Licensor shall promptly reimburse SPL for such payments, which shall not be
included in the calculation of Net Sales.
3.9 Direct Affiliate Licenses. Whenever SPL shall reasonably
demonstrate to Licensor that, in order to facilitate direct royalty payments by
an Affiliate, it is desirable that a separate license agreement be entered into
between Licensor and such Affiliate, Licensor will grant such licenses directly
to such Affiliate by means of an agreement which shall be consistent with all of
the provisions hereof, provided that SPL guarantees the Affiliate's obligations
thereunder.
ARTICLE IV
PATENTS
4.1 Filing, Prosecution and Maintenance of Patents. Licensor
agrees to diligently file, prosecute and maintain in the Territory, at
Licensor's expense, all Patent Rights owned in whole or in part by Licensor and
licensed to SPL under this Agreement, including without limitation, any Patent
Rights covering any Improvement(s). SPL shall determine the country(ies) in the
Territory with respect to which SPL desires Licensor to perform such activities
and will promptly notify Licensor to that effect. All such determinations shall
be made by SPL in accordance with its standard practices with respect to the
filing, prosecution and maintenance of patents, and Licensor's obligation to
file, prosecute and maintain each patent application or patent within the Patent
Rights under this Section 4.1 shall be limited to those countries selected by
SPL for such patent application or patent. Licensor shall supply SPL with a copy
of the applications as filed, together with notice of its filing date and serial
number. Licensor shall keep SPL regularly advised of the status of pending
patent applications (including, without limitation, the grant of any Patent
Rights), and upon the written request of SPL shall provide copies of any
substantive papers provided to or received from government patent authorities
related to the filing, prosecution and maintenance of such patent filings. SPL
shall treat all information, papers, and
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other materials provided by Licensor pursuant to this Section 4.1 in accordance
with the confidentiality provisions of this Agreement.
4.2 Option of SPL to Prosecute and Maintain Patents. Licensor
shall give [ * ] days prior written notice to SPL of any desire to cease
prosecution and/or maintenance of a particular Patent Right and, in such case,
shall permit SPL, at its sole discretion, to continue prosecution or maintenance
at its own expense. If SPL elects to continue prosecution or maintenance,
Licensor shall execute such documents and perform such acts, at SPL's expense,
as may be reasonably necessary to effect an assignment of such Patent Rights to
SPL. Any such assignment shall be completed in a timely manner to allow SPL to
continue such prosecution or maintenance. Any patents or patent applications so
assigned shall not be considered Patent Rights.
4.3 Enforcement.
(a) Notice and Discontinuance of Infringement. In the
event that either SPL or Licensor becomes aware of any third party
infringement within the Territory of any Valid Claim, it will notify
the other Party in writing to that effect. Any such notice shall
include evidence to support an allegation of infringement by such third
party. Licensor shall have a period of [ * ] months from the date of
said notice to obtain a discontinuance of such infringement or bring
suit against the third party infringer. Licensor shall bear all the
expenses of any suit brought by it. SPL shall have the right, prior to
commencement of the trial, suit or action brought by Licensor, to join
any such suit or action, and in such event shall pay one-half of all
costs of such suit or action. In the event that SPL has joined in the
action and shared in the costs thereof as set forth above, no
settlement, consent judgment or other voluntary final disposition of
the suit may be entered into without the consent of SPL. In the event
that SPL has not joined the suit or action, SPL will reasonably
cooperate with Licensor in any such suit or action and shall have the
right to consult with Licensor and be represented by its own counsel,
provided that Licensor shall periodically reimburse SPL for its
out-of-pocket costs (excluding the costs of retaining its own outside
counsel) incurred in cooperating with Licensor. Any recovery or damages
derived from any suit under this Section 4.3(a) where SPL has joined
and shared costs shall be used first to reimburse each of Licensor and
SPL for its documented out-of-pocket legal expenses relating to the
suit, shall be used second to reimburse Licensor for royalties lost as
a result of reduced sales of Licensed Product, shall be used third to
reimburse SPL for amounts attributed to SPL's lost profits, with any
remaining amounts, including but not limited to punitive, exemplary, or
other enhanced damages, to be shared [ * ] by the Parties. Any recovery
or damages derived from a suit which SPL has not joined shall be
retained by Licensor.
(b) Continuance of Infringement. If Licensor has neither
obtained a discontinuance of such infringement nor brought suit against
such infringer after the expiration of the [ * ] period specified in
Subsection 4.3(a), SPL shall have the right, but not the obligation, to
bring suit against such infringer under the Patent Rights and join
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Licensor as a party plaintiff, provided that SPL shall bear all the
expenses of such suit. Licensor shall cooperate with SPL in any such
suit for infringement of a Patent Right brought by SPL against a third
party, and shall have the right to consult with SPL and to participate
in and be represented by independent counsel in such litigation at its
own expense. SPL shall periodically reimburse Licensor for its out of
pocket costs (excluding Licensor's costs of retaining independent
counsel) incurred in cooperating with SPL. SPL shall incur no liability
to Licensor as a consequence of such litigation or any unfavorable
decision resulting therefrom, including any decision holding any of the
Patent Rights invalid or unenforceable, except that SPL shall indemnify
and hold Licensor harmless for any monetary judgment or award against
or penalty levied upon either Licensor or SPL arising out of SPL's acts
in the enforcement of such Patent Rights. In the event that SPL
recovers any sums through litigation under this Section 4.3(b) by way
of damages or in settlement thereof, SPL shall retain all such sums.
4.4 Third Party Infringement Suit.
(a) Defense. In the event that a third party sues SPL
alleging that SPL's, its Affiliates' or its Sublicensees' making,
having made, importing, exporting, using, distributing, marketing,
promoting, offering for sale or selling Licensed Compound and/or
Licensed Product in one or more countries in the Territory infringes or
will infringe said third party's patent, then SPL may elect to defend
such suit at its sole expense and discretion. To the extent that the
alleged infringement is based upon the use of Licensed Compound,
another compound from the Compound Library or the Licensor Know-How,
SPL shall have no obligation to pay royalties to Licensor under Section
3.3 with respect to sales of Licensed Product in such country(ies)
during the pendency of any such suit. Upon SPL's request and in
connection with SPL's defense of any such third party infringement
suit, Licensor shall cooperate with SPL for such defense provided, that
SPL shall promptly reimburse Licensor for reasonable out-of-pocket
costs and expenses incurred by Licensor in providing such cooperation
(excluding Licensor's costs of retaining independent counsel). Licensor
shall invoice SPL for such costs and expenses, and shall provide
documentation for the invoice. The invoice shall be payable to Licensor
or its designee(s) [ * ] days after receipt by SPL of the invoice.
(b) Licensing. SPL shall have the right to negotiate with
said third party for a suitable license or assignment of rights under
the relevant patents. In the event that such negotiation results in a
consummated agreement, then any lump sum payment and/or royalty
payments to be made thereunder shall be paid by SPL and shall be offset
against any royalties due Licensor in accordance with the terms of
Article 3.4.
4.5 Certification Under Drug Price Competition and Patent
Restoration Act. Licensor and SPL each shall immediately give written notice to
the other of any certification of which they become aware filed pursuant to 21
U.S.C. ss.355(b)(2)(A)(iv) and 355(j)(2)(A)(vii), or any amendment or successor
statute thereto, claiming that Patent Rights covering Licensed
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Compound and/or Licensed Product(s) are invalid or that infringement will not
arise from the manufacture, use or sale of a product containing Licensed
Compound or otherwise equivalent to Licensed Product by a third party.
Notwithstanding any provision to the contrary, in the event that the Patent
Rights at issue are owned and/or controlled by Licensor and Licensor has failed
to bring an infringement action against such third party at least [ * ] business
days prior to expiration of the forty five (45) day period set forth in 21
U.S.C. ss.355(c)(3)(C) (or any amendment or successor statute thereto), SPL
shall have the right to bring such an infringement action, in its sole
discretion and at its own expense, in its own name and/or in the name of
Licensor. At SPL's request, Licensor shall, at its own expense, provide SPL
reasonable assistance to conduct such infringement action, including, without
limitation, causing the execution of such legal documents as SPL may deem
necessary for the prosecution of such action. SPL shall periodically reimburse
Licensor for its out-of-pocket costs (excluding any of Licensor's costs of
retaining independent counsel) incurred in assisting SPL. SPL shall incur no
liability to Licensor as a consequence of such litigation or any unfavorable
decision resulting therefrom, including any decision holding any of the Patent
Rights invalid or unenforceable, except that SPL shall indemnify and hold
Licensor harmless for any monetary judgment or award against or penalty levied
upon either Licensor or SPL arising out of SPL's acts in the enforcement of such
Patent Rights. In the event that SPL recovers any sums in such litigation by way
of damages or in settlement thereof, SPL shall have the right to retain all such
sums to offset its costs, losses and expenses.
4.6 Abandonment. Subject to SPL's rights pursuant to Section 4.2,
Licensor shall at the earliest known date give notice to SPL of the grant,
lapse, revocation, surrender, invalidation or abandonment of any Patent Rights
licensed to SPL for which Licensor is responsible for the filing, prosecution
and maintenance under this Agreement.
4.7 Patent Term Restoration. The Parties hereto shall cooperate
with each other in obtaining patent term restoration or its equivalent in the
Territory where applicable to Patent Rights. In the event that elections with
respect to obtaining such patent term restoration are to be made, SPL shall have
the right to make the election and Licensor agrees to abide by such election.
4.8 Notices Regarding Patents. All notices, inquiries and
communications in connection with this Article IV shall be sent in the manner
set forth in Section 9.7 to the Parties at the addresses and facsimile numbers
indicated below.
If to Licensor: AtheroGenics, Inc.
8995 Westside Parkway
Alpharetta, Georgia 30004
Attn.: Vice President, Business Development
(with a copy to: President)
Fax No.: (678) 336-2501
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If to SPL: Schering Corporation
2000 Galloping Hill Road
Kenilworth, New Jersey 07033
Attn.: Staff Vice President - Patents and Trademarks
Fax No.: (908) 298-5388
ARTICLE V
CONFIDENTIALITY AND PUBLICATION
5.1 Confidentiality.
(a) Nondisclosure Obligation. Each of Licensor and SPL
shall use only in accordance with this Agreement, and shall not
disclose to any third party, any of the other Party's Proprietary
Information received by it pursuant to this Agreement without the prior
written consent of the other Party. The foregoing obligations shall
survive the expiration or termination of this Agreement for a period of
[ * ] years. These obligations shall not apply when and to the extent
Proprietary Information :
(i) is known by the receiving Party at the time
of its receipt, and not through a prior disclosure by the
disclosing Party, as documented by business records;
(ii) is at the time of disclosure or thereafter
becomes published or otherwise part of the public domain
without breach of this Agreement by the receiving Party;
(iii) is subsequently disclosed to the receiving
Party by a third party that has the right to make such
disclosure;
(iv) is developed by the receiving Party
independently of Proprietary Information or other information
received from the disclosing Party and such independent
development can be documented by the receiving Party;
(v) is disclosed to any institutional review
board of any entity conducting clinical trials, or any
governmental or other regulatory agencies in order to obtain
patents, to gain approval to conduct clinical trials or to
market Licensed Compound and/or Licensed Product, but such
disclosure may be made only to the extent reasonably necessary
to obtain such patents or authorizations; or
(vi) is required by law, regulation, rule, act or
order of any governmental authority or agency to be disclosed
by a Party, provided that notice is promptly delivered to the
other Party in order to provide an opportunity to seek
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a protective order or other similar order with respect to such
Proprietary Information and thereafter the disclosing Party
discloses to the requesting entity only the minimum
Proprietary Information required to be disclosed in order to
comply with the request, whether or not a protective order or
other similar order is obtained by the other Party.
(b) Disclosure to Agents. Notwithstanding the provisions
of Section 5.1(a), SPL shall have the right to disclose Licensor's
Proprietary Information to its Sublicensees, agents, consultants,
Affiliates or other third parties (collectively "Agents") in accordance
with this Section 5.1(b). Such disclosure shall be limited only to
those Agents directly involved in the research, development,
manufacture, marketing or promotion of Licensed Compound or Licensed
Product (or for such Agents to determine their interest in performing
such activities) in accordance with this Agreement. Any such Agents
must agree in writing to be bound by confidentiality and non-use
obligations essentially the same as those contained in this Agreement.
The term of confidentiality and non-use obligations for such Agents
shall be no less than [ * ] years. SPL shall be jointly and severally
liable for any disclosure of Licensor Proprietary Information by
Agents.
(c) Disclosure to a Third Party. Licensor shall have the
right to use and disclose any Licensor Know-How at its sole option and
discretion for the limited purpose of filing, prosecuting, and
supporting Patent Rights. Subject to the terms of Section 5.2, either
Party may publish Licensor Know-How under the terms of Section 5.3
below. Licensor shall not otherwise disclose, provide or transfer any
Licensor Know-How to any third party without the prior written approval
of SPL.
5.2 Publicity. Except as provided in Section 5.1 and this Section
5.2, a Party may not use the name of the other Party in any publicity,
advertising or in any other public way and, may not issue press releases or
otherwise publicize or disclose any information related to the existence of this
Agreement, the terms or conditions of this Agreement, or any information
relating to the subject matter hereof, without the prior written consent of the
other Party. The Parties shall agree upon an initial press release to announce
the execution of this Agreement, together with a corresponding Q&A outline for
use in responding to inquiries about the Agreement. Following such initial press
release, Licensor may use the specific information contained therein, or in any
subsequent public announcements or publications made by SPL or by mutual
agreement of the Parties, in Licensor's investor relations and public relations
activities. Licensor shall make no public announcement, either written, oral or
in any medium relating to the safety of Licensed Compound and/or Licensed
Product, except for statements in official correspondence with government patent
authorities in support of Patent Rights as provided for in Section 5.1(c). [ * ]
5.4 Publication. SPL and Licensor each acknowledge the potential
benefit in
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publishing results of certain studies to obtain recognition within the
scientific community and to advance the state of scientific knowledge. Each
Party also recognizes the mutual interest in obtaining valid patent protection
and in protecting business interests and trade secret information. No
publication of Licensor Know-How or Patent Rights may be made without the prior
written consent of Licensor. The Parties agree that SPL, its Affiliates,
employees or consultants shall be free to make any publication which does not
disclose Licensor Know-How or Patent Rights. In the event that any proposed
publication (as defined below) discloses Licensor Know-How or Patent Rights, the
following procedure shall apply: Either Party, its Affiliates, employees or
consultants wishing to make a publication shall deliver to the other Party a
copy of the proposed written publication or an outline of an oral disclosure at
least [ * ] days prior to submission for publication or presentation. For
purposes of this Agreement, the term "publication" shall include, without
limitation, abstracts and manuscripts for publication, slides and texts of oral
or other public presentations, and texts of any transmission through any
electronic media, e.g. any computer access system such as the Internet,
including the World Wide Web. The reviewing Party shall have the right (i) to
propose modifications to the publication for patent reasons, trade secret
reasons or business reasons or (ii) to request delay of the publication or
presentation in order to protect patentable information. If the reviewing Party
requests a delay, the publishing Party shall delay submission or presentation
for a period of up to [ * ] from the filing date of the first patent application
in the Territory covering the information contained in the proposed publication
or presentation. If the reviewing Party requests modifications to the
publication, the publishing Party may edit such publication to prevent
disclosure of trade secret or proprietary business information prior to
submission of the publication or presentation.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties of Each Party. Each of Licensor
and SPL hereby represents, warrants and covenants to the other Party hereto that
as of the Execution date it has complied, and during the period extending from
the Execution Date until the expiration or termination of this Agreement it
shall comply, with all applicable material laws and regulations relating to its
activities under this Agreement. Each of Licensor and SPL further represents,
warrants and covenants to the other Party hereto that as of the Execution Date:
(a) it is a corporation or entity duly organized and
validly existing under the laws of the state or other jurisdiction of
its incorporation or formation;
(b) the execution, delivery and performance of this
Agreement by such Party has been duly authorized by all requisite
corporate action, subject only to receipt of requisite approval of its
board of directors;
(c) it has the power and authority to execute and deliver
this Agreement and to perform its obligations hereunder;
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(d) the execution, delivery and performance by such Party
of this Agreement and its compliance with the terms and provisions
hereof does not and will not conflict with or result in a breach of any
of the terms and provisions of or constitute a default under (i) a loan
agreement, guaranty, financing agreement, agreement affecting a product
or other agreement or instrument binding or affecting it or its
property; (ii) the provisions of its charter or operative documents or
bylaws; or (iii) any order, writ, injunction or decree of any court or
governmental authority entered against it or by which any of its
property is bound;
(e) except for the governmental and Regulatory Approvals
required to market Licensed Product in the Territory and any filings or
approvals referred to in Section 2.4, the execution, delivery and
performance of this Agreement by such Party does not require the
consent, approval or authorization of, or notice, declaration, filing
or registration with, any governmental or regulatory authority and the
execution, delivery or performance of this Agreement will not violate
any law, rule or regulation applicable to such Party;
(f) this Agreement has been duly authorized, executed and
delivered and constitutes such Party's legal, valid and binding
obligation enforceable against it in accordance with its terms subject,
as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors'
rights and to the availability of particular remedies under general
equity principles;
(g) to the best of its knowledge there are no third party
pending patent applications (excluding the Patent Rights) which, if
issued, may cover the development, manufacture, use or sale of any
Licensed Compound or Licensed Product.
6.2 Licensor's Representations. Licensor hereby represents,
warrants and covenants to SPL that as of the Execution Date:
(a) to the best of its knowledge, the Patent Rights and
Licensor Know-How are subsisting and are not invalid or unenforceable,
in whole or in part;
(b) it has the full right, power and authority to grant
all of the right, title and interest in the licenses granted to SPL
under Article II hereof;
(c) to the best of its knowledge, it has not previously
assigned, transferred, conveyed or otherwise encumbered its right,
title and interest in the Licensed Compound, Licensed Product, the
Patent Rights, or Licensor Know-How ;
(d) except as specifically set forth in Schedule 6.2(d),
it is the sole and exclusive owner and/or licensee of the Patent Rights
and Licensor Know-How, all of which are free and clear of any liens,
charges and encumbrances, and to the best of its knowledge no other
person, corporation or other private entity, or governmental entity or
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subdivision thereof, has or shall have any claim of ownership with
respect to the Patent Rights or Licensor Know-How, whatsoever;
(e) to the best of its knowledge, the Patent Rights and
Licensor Know-How, and the development, manufacture, use, distribution,
marketing, promotion and sale of Licensed Products do not interfere or
infringe (as applicable) on any intellectual property rights owned or
possessed by any third party;
(f) there are no claims, judgments or settlements against
or amounts with respect thereto owed by Licensor, and to the best of
its knowledge no pending or threatened claims or litigation against
Licensor relating to Licensed Compound, the Patent Rights and Licensor
Know-How;
(g) to the best of its knowledge, there are no
circumstances that would adversely affect the commercial utility or the
use of the Licensed Product;
(h) it has provided to Schering Corporation a summary of
all material adverse events known to it relating to the Licensed
Compound;
(i) there are no collaborative, licensing, material
transfer, supply, distributorship or marketing agreements or
arrangements or other similar agreements to which it or any of its
Affiliates are a party relating to Licensed Compound, Licensed Product
or Patent Rights which would materially limit the rights granted to SPL
under this Agreement with respect to the Licensed Compound, Licensed
Product or Patent Rights;
(j) there are no trademark(s) chosen, owned or controlled
by Licensor or its Affiliates specifically in connection with the
Licensed Compound and/or the Licensed Product in the Territory; and
(k) except as set forth in Schedule 6.2(k), it has not
identified any compounds outside of the Compound Library which exhibit
both (1) similar or better VCAM-1 inhibition than the Licensed Compound
as determined using Licensor's currently available in vitro screens for
VCAM-1 inhibitory activity (i.e., the human aortic endothelial cell
based screen) and (2) histologically or morphologically demonstrated
anti-atherosclerotic properties similar or better than Licensed
Compound in the Licensor's animal models (i.e., the
hypercholesterolemic rabbit).
Licensor further represents, warrants and covenants to SPL that:
(l) during the period extending from the Execution Date
until the expiration or termination of this Agreement it will use
reasonable efforts not to diminish the rights under the Patent Rights
and Licensor Know-How granted to SPL hereunder, including
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without limitation, by not committing or permitting any actions or
omissions which would cause the breach of any license or other
agreements between itself and third parties which provide for licenses,
assignments or other rights to any Patent Rights or Licensor Know-How,
that it will provide SPL promptly with notice of any such alleged
breach, and that as of the Execution Date, it is in compliance in all
material respects with any such licenses or other agreements with third
parties;
(m) as of the Execution Date, and to the best of its
knowledge, all data summaries provided in writing to SPL by Licensor
prior to the Execution Date relating to pre-clinical and clinical
studies of the Licensed Compound accurately represent the raw data
underlying such summaries; and
(n) Licensor shall not seek or file for any trademark for
use in connection with the Licensed Compound and/or the Licensed
Product in the Territory during the period extending from the Execution
Date until the expiration or termination of this Agreement.
6.3 Continuing Representations. The representations and warranties
of each Party contained in Sections 6.1 and 6.2 shall survive the execution of
this Agreement.
6.4 No Inconsistent Agreements. Neither Party has in effect and
after the Effective Date neither Party shall enter into any oral or written
agreement or arrangement that would be inconsistent with its obligations under
this Agreement.
6.5 Representation by Legal Counsel. Each Party hereto represents
that it has been represented by legal counsel in connection with this Agreement
and acknowledges that it has participated in the drafting hereof. In
interpreting and applying the terms and provisions of this Agreement, the
Parties agree that no presumption shall exist or be implied against the Party
which drafted such terms and provisions.
6.6 Additional Obligations of Licensor The Parties acknowledge and
agree that all data and information provided by Licensor to SPL arising out of
or relating to any preclinical and/or clinical studies involving the Licensed
Compound and/or Licensed Product conducted by or on behalf of Licensor (the
"Studies"), or relating to any patent applications or patents having claims
covering the Licensed Compound and/or Licensed Product, are of material
importance to the development and commercialization of the Licensed Compound
and/or Licensed Product and to SPL's decision to enter into this Agreement.
(a) Licensor represents and warrants that, to the best of
its knowledge and based upon Licensor's diligence in the performance of
the relevant activities, as of the Execution Date it (and its
subcontractors and/or collaborators, if any):
(i) has fully complied with all applicable laws, rules and
regulations, in the preparation, filing and prosecution of
patent applications or patents;
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(ii) has fully complied with all applicable laws, rules and
regulations, in the conduct and evaluation of the Studies and
with regard to all applications or submissions for Regulatory
Approval in the Territory, if any;
(iii) knows of no irregularities or information suggesting any
irregularities in connection with the preparation, filing or
prosecution of patent applications or patents which may have a
material adverse effect with respect thereto; and
(iv) knows of no irregularities or information suggesting any
irregularities in connection with the conduct and evaluation
of the Studies which may have a material adverse effect with
respect thereto.
(b) To the extent of Licensor's obligations under this
Agreement, Licensor shall undertake to perform the following in
accordance with all applicable laws, rules and regulations:
(i) to prepare, file, prosecute and maintain, or ensure that its
subcontractors, collaborators and/or agents prepare, file,
prosecute and maintain, any patent applications or patents
relating to the Licensed Compound and/or Licensed Product; and
(ii) to conduct, or ensure that its subcontractors and/or
collaborators, if any, shall conduct, any Studies.
(c) In the event Licensor becomes aware of any known or
suspected impropriety or misconduct relating to the preparation,
filing, prosecution or maintenance of patent applications or patents,
and/or the performance, analysis or reporting of any Studies, or any
application or submission for Regulatory Approval, Licensor shall,
within [ * ] hours notify SPL of such event in writing.
ARTICLE VII
INDEMNIFICATION AND LIMITATION ON LIABILITY
7.1 Indemnification by SPL. SPL shall indemnify, defend and hold
harmless Licensor and its Affiliates, and each of its and their respective
employees, officers, directors and agents (each, a "Licensor Indemnified Party")
from and against any and all third party claims, demands, lawsuits, proceedings,
settlement amounts, liability, loss, damage, cost, and expense (including
reasonable attorneys' fees), (collectively, a "Liability") which may be asserted
against the Licensor Indemnified Party or which the Licensor Indemnified Party
may incur, suffer or be required to pay resulting from or arising out of (i) the
discovery, development, manufacture, promotion, distribution, use, testing,
marketing, sale or other disposition of Licensed Compound
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and/or Licensed Product(s) by SPL, its Affiliates or Sublicensees (including
without limitation any personal injury, death, or other injuries suffered by
users of Licensed Compound or Licensed Product), or (ii) the breach by SPL of
any covenant, representation or warranty contained in this Agreement; or (iii)
the successful enforcement by a Licensor Indemnified Party of its rights under
this Section 7.1. Notwithstanding the foregoing, SPL shall have no obligation
under this Agreement to indemnify, defend or hold harmless any Licensor
Indemnified Party with respect to any Liability which results from the willful
misconduct or negligent acts or omissions of Licensor, its Affiliates, or any of
their respective employees, officers, directors or agents.
7.2 Indemnification by Licensor. Licensor shall indemnify, defend
and hold harmless SPL and its Affiliates, and each of its and their respective
employees, officers, directors and agents (each, a "SPL Indemnified Party") from
and against any Liability which the SPL Indemnified Party may incur, suffer or
be required to pay resulting from or arising out of (i) the breach by Licensor
of any covenant, representation or warranty contained in this Agreement; or (ii)
the successful enforcement by a SPL Indemnified Party of its rights under this
Section 7.2. Notwithstanding the foregoing, Licensor shall have no obligation
under this Agreement to indemnify, defend or hold harmless any SPL Indemnified
Party with respect to any Liability which results from willful misconduct or
negligent acts or omissions of SPL, its Affiliates, or any of their respective
employees, officers, directors or agents.
7.3 Conditions to Indemnification. Each Party agrees to promptly
give the other Party notice of any claim for which indemnification may be
sought. Failure of an indemnified Party to provide notice of a claim to the
indemnifying Party shall affect the indemnified Party's right to indemnification
only to the extent that such failure has a material adverse effect on the
indemnifying Party's ability to defend or the nature or the amount of the
Liability. Subject to the provisions of Article IV, the indemnifying Party shall
have the right to assume the defense of any suit or claim related to the
Liability if it has assumed responsibility for the suit or claim in writing;
provided, however, that if in the reasonable judgment of the indemnified Party,
such suit or claim involves an issue or matter which could have a materially
adverse effect on the business operations or assets of the indemnified Party,
the indemnified Party may waive its rights to indemnity under this Agreement and
control the defense or settlement thereof, but in no event shall any such waiver
be construed as a waiver of any indemnification rights such Party may have at
law or in equity. If the indemnifying Party defends the suit or claim, the
indemnified Party may participate in (but not control) the defense thereof at
its sole cost and expense.
7.4 Settlements. Subject to the provisions of Article IV, neither
Party may settle a claim or action related to a Liability without the consent of
the other Party if such settlement would impose any monetary obligation on the
other Party or require the other Party to submit to an injunction or otherwise
limit the other Party's rights under this Agreement, provided that such consent
shall not be unreasonably withheld or delayed. Any payment made by a Party to
settle any such claim or action shall be at its own cost and expense.
7.5 Limitation of Liability. With respect to any claim by one
Party against the other
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arising out of the performance or failure of performance of the other Party
under this Agreement, the Parties expressly agree that the liability of such
Party to the other Party for such breach shall be limited under this Agreement
or otherwise at law or equity to direct damages only and in no event shall a
Party be liable for, punitive, exemplary or consequential damages suffered or
incurred by the other Party.
7.6 Insurance. Each Party acknowledges and agrees that during the
Term of this Agreement it shall maintain adequate insurance and/or a
self-insurance program for contractual liability insurance to cover such Party's
obligations under this Agreement. Each Party shall provide the other Party with
evidence of such insurance and/or self-insurance program, upon request.
ARTICLE VIII
TERM AND TERMINATION
8.1 Term and Expiration. This Agreement shall be effective as of
the Effective Date and unless terminated earlier by mutual written agreement of
the Parties or pursuant to Sections 8.2, 8.3 or 8.4 below, the Term of this
Agreement shall continue in effect on a product-by-product and
country-by-country basis until the expiration of the last to expire Patent Right
incorporating a Valid Claim covering the Licensed Product, or in countries where
no such Patent Rights exist until the tenth anniversary of the First Commercial
Sales of Licensed Product in such country. Upon expiration of this Agreement,
SPL's licenses pursuant to Section 2.1 and 2.2 shall become fully paid-up,
perpetual licenses.
8.2 Termination by SPL Without Cause. SPL shall have the
unilateral right to terminate this Agreement on a product-by-product basis
(without cause) at any time by giving [ * ] days advance written notice to
Licensor. In the event of the exercise of such termination rights, the rights
and licenses granted to SPL under Sections 2.1 and 2.2 shall terminate and all
rights to Licensor Know-How, Licensed Compounds and Licensed Products with
respect to the applicable product which are granted pursuant to this Agreement
shall revert to Licensor.
8.3 Termination Upon Cessation of Development.
(a) Termination by Either Party Either Party shall have
the unilateral right to terminate this Agreement on a
product-by-product basis at any time by giving [ * ] advance written
notice to the other Party if SPL ceases development or
commercialization of Licensed Compound or Licensed Product pursuant to
Sections 2.6(a) and (c), subject to Section 2.6(b). In the event of the
exercise of such termination rights, the rights and licenses granted to
SPL under Sections 2.1 and 2.2 shall terminate and all rights to
Licensor Know-How, Licensed Compounds and Licensed Products with
respect to the applicable product which are granted pursuant to this
Agreement shall revert to Licensor.
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(b) Termination by Licensor Licensor shall have the
unilateral right to terminate this Agreement by giving [ * ] days
written notice to SPL in the event that:
(i) [ * ]
(ii) [ * ]
In the event of the exercise of such termination rights, the rights and
licenses granted to SPL under Sections 2.1 and 2.2 shall terminate and
all rights to Licensor Know-How, Licensed Compounds and Licensed
Products with respect to the applicable product which are granted
pursuant to this Agreement shall revert to Licensor.
8.4 Termination.
(a) Termination for Cause. This Agreement may be
terminated by written notice at any time during the Term of this
Agreement:
(i) by either Party, subject to Section 9.2, if
the other Party is in breach of its material obligations with
respect to such product hereunder and has not cured such
breach within [ * ] days ([ * ] days with respect to payment
obligations under Article III) after written notice requesting
cure of the breach with reasonable detail of the particulars
of the alleged breach, or within [ * ] days of receiving
notice initiated actions reasonably expected to cure the cited
failure and thereafter diligently pursued such actions to cure
the failure (even if requiring longer than the [ * ] days set
forth in this subsection); or
(ii) by either Party upon the filing or
institution of bankruptcy, reorganization (in connection with
any insolvency), liquidation or receivership proceedings, or
upon an assignment of a substantial portion of the assets for
the benefit of creditors by the other Party, or in the event a
receiver or custodian is appointed for such other Party's
business, or if a substantial portion of such other Party's
business is subject to attachment or similar process;
provided, however, that in the case of any involuntary
bankruptcy proceeding such right to terminate shall only
become effective if the proceeding is not dismissed within
[ * ] days after the filing thereof.
(b) Effect of Termination for Cause on License.
(i) Termination by SPL. In the event SPL
terminates this Agreement under Section 8.4(a)(i), due to a
breach by Licensor of its material obligations under Section
2.1(a), 2.1(b) or 2.11(a) of this Agreement, then SPL's
licenses pursuant to Sections 2.1 and 2.2 shall become fully
paid-up, perpetual licenses.
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<PAGE> 41
(ii) Termination by Licensor. In the event that
Licensor terminates this Agreement under Section 8.4(a)(i),
then the rights and licenses granted to SPL under Sections 2.1
and 2.2 shall terminate and all rights to Licensor Know-How,
Licensed Compounds and Licensed Products granted pursuant to
this Agreement shall revert to Licensor.
(iii) Effect of Bankruptcy. In the event SPL
terminates this Agreement under Section 8.4(a)(ii) or this
Agreement is otherwise terminated under Section 8.4(a)(ii),
the Parties agree that SPL, as a licensee of rights to
intellectual property under this Agreement, shall retain and
may fully exercise all of its rights and elections under the
Insolvency Statute including as set forth in Section 9.8
hereof.
8.5 Effect of Termination. Expiration or termination of the
Agreement shall not relieve the Parties of any obligation accruing prior to such
expiration or termination, and the provisions of Articles V and VII shall
survive the expiration of the Agreement. With regard to reimbursement for
development costs incurred by Licensor, including, without limitation, the costs
of clinical studies, SPL's obligations under Section 2.6 shall upon termination
be limited to the costs for actual work performed in accordance with the
relevant research plans or protocols up to the effective date of such
termination, or any irrevocable financial commitments made by Licensor prior to
the date of notice of termination. Any expiration or early termination of this
Agreement shall be without prejudice to the rights of either Party against the
other accrued or accruing under this Agreement prior to termination, including
the obligation to pay royalties for Licensed Product(s) or Licensed Compound
sold prior to such termination. In the event of termination of this Agreement,
SPL shall have the right to continue to sell its existing inventory of Licensed
Product during the [ * ] month period immediately following such termination,
provided that SPL shall continue to make royalty payments with respect to such
sales.
8.6 Remedies for Breach. In addition to any and all other
remedies that SPL may have under this Agreement, or otherwise under law and/or
equity, in the event that Licensor materially breaches its obligations under
Sections 6.6(a) or (b) of this Agreement and/or materially breaches its
representation, warranties and covenants under Section 6.2(m), then SPL shall
have the right, at SPL's sole discretion, upon written notice to Licensor to
either: (i) deduct [ * ] of the remaining unpaid milestone(s) in Section 3.2;
(ii) permanently reduce by [ * ] the royalty rates provided for in Section 3.3;
or (iii) immediately terminate the Agreement.
8.7 Licensor's Rights on Termination. In the event that Licensor
terminates this Agreement under Section 8.3 or 8.4(a)(i), or SPL terminates this
Agreement under Section 8.2 or 8.3, SPL shall provide to Licensor the following:
(i) all existing Regulatory Approvals and/or applications for
Regulatory Approval for the applicable Licensed Product(s) in
the Territory;
(ii) access, including the right to make copies, of all
preclinical, clinical,
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<PAGE> 42
pharmacokinetic, toxicology or other data owned or controlled
by SPL which is necessary to support any of the Regulatory
Approvals provided to Licensor under Section 8.7(i);
(iii) subject to the terms of Section 8.7 (iv), all preclinical and
clinical supplies of the applicable Licensed Product(s),
and/or Licensed Compound or other Compound Library compounds,
in SPL's possession or control;
(iv) access to all manufacturing information relating to the
Licensed Product, including assigning, sublicensing or
otherwise making available, as appropriate, any third party
manufacturing agreements relied upon by SPL for the
manufacture of Licensed Product, in each case to the extent
reasonably necessary for Licensor to manufacture the Licensed
Product following such termination;
(v) to the extent that termination occurs after the First
Commercial Sale of the applicable Licensed Product(s) and
subject to the terms of Section 8.5, Licensor shall have the
right to purchase SPL's remaining inventory of the applicable
Licensed Product(s) and/or Licensed Compound or other Compound
Library compounds for sale in the Territory at [ * ] of SPL's
fully absorbed manufacturing costs.
In addition, in the event of such termination, SPL shall grant to Licensor a
paid-up, non-exclusive, non-transferable license in the Territory under any
issued patents, or pending patent applications, owned or controlled by SPL which
would otherwise be infringed by the manufacture, use or sale of the applicable
Licensed Product(s) in the Territory, which license shall be restricted to the
sole purpose of making, having made, importing, exporting, using, distributing,
marketing, promoting, offering for sale and selling such Licensed Product(s).
8.8 Concurrent Termination with the US Agreement. In the event of
any termination of the US Agreement by either Licensor or Schering Corporation
under the provisions of Sections 8.2, 8.3 or 8.4 of the US Agreement, this
Agreement shall automatically terminate concurrently under the corresponding
Section 8.2, 8.3 or 8.4 of this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 Assignment/Change of Control.
(a) Assignment. Neither this Agreement nor any or all of
the rights and obligations of a Party hereunder shall be assigned,
delegated, sold, transferred, sublicensed (except as expressly
permitted hereunder) or otherwise disposed of, by operation of law or
otherwise, to any third party (other than an Affiliate of an assigning
Party under the condition that the assignor remain responsible to the
other Party under
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this Agreement), without the prior written consent of the other Party.
Any attempted assignment, delegation, sale, transfer, sublicense or
other disposition, by operation of law or otherwise, of this Agreement
or of any rights or obligations hereunder contrary to this Section 9.1
shall be a material breach of this Agreement by the attempting Party,
and shall be void and without force or effect; provided, however,
either Party may, without such consent, assign the Agreement and its
rights and obligations hereunder to an Affiliate or in connection with
the transfer or sale of all or substantially all of its assets related
to the division or the subject business, or in the event of its merger
or consolidation or change in control or similar transaction. This
Agreement shall be binding upon, and inure to the benefit of, each
Party, its Affiliates, and its permitted successors and assigns. Each
Party shall be responsible for the compliance by its Affiliates with
the terms and conditions of this Agreement.
(b) Change of Control. In the event the ownership or
control of Licensor is acquired by another pharmaceutical company that
has an ongoing development program or commercializes (directly or
through any Affiliate) any compound or product for the Primary
Indication and/or the Secondary Indication, Licensor shall promptly
notify SPL in writing to that effect. Licensor's obligations under
Section 2.11 shall not extend to any such compound or product.
Effective upon such notice, the JMC shall be disbanded and SPL will
assume and thereafter be responsible for all of the rights and
obligations of the JMC. Licensor, and following the change of control
the acquiring party, shall use best efforts to ensure that such
acquiring party does not have any access to any of SPL's Proprietary
Information or other proprietary information relating to the
development and commercialization of Licensed Product. Such best
efforts shall include, without limitation: (i) ensuring that the
acquiring party does not have access to any such information prior to
the change of control of Licensor; and (ii) promptly destroying or
returning to SPL all such information in Licensor's possession or
control upon completion of the change of control. The acquiring party
shall have no rights to use any Licensor Know-How relating to the
Primary Indication or the Secondary Indication in connection with the
development and commercialization of its own compound or product for
the Primary and/or Secondary Indication. All of SPL's obligations under
Article II to provide Licensor and/or the JMC with reports or to
otherwise keep Licensor informed with respect to the development and
commercialization of Licensed Compound, any other compound within the
Compound Library and/or Licensed Product shall immediately terminate;
provided, however, that SPL shall provide such acquiring party with an
annual summary of its activities in developing and commercializing
Licensed Product.
9.2 Governing Law. This Agreement shall be governed, interpreted
and construed in accordance with the laws of the State of New Jersey, without
giving effect to conflict of law principles. All disputes under this Agreement
shall be governed by binding arbitration pursuant to the mechanism set forth in
Schedule 9.2 attached hereto and incorporated hereby. The Parties expressly
exclude application of the United Nations Convention for the International Sale
of Goods.
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9.3 Waiver. Any delay or failure in enforcing a Party's rights
under this Agreement or any waiver as to a particular default or other matter
shall not constitute a waiver of such Party's rights to the future enforcement
of such rights under this Agreement, nor operate to bar the exercise or
enforcement thereof at any time or times thereafter, excepting only as to an
express written and signed waiver as to a particular matter for a particular
period of time.
9.4 Independent Relationship. Nothing in this Agreement shall be
deemed to create an employment, agency, joint venture or partnership
relationship between the Parties hereto or any of their respective Affiliates,
agents or employees, or any other legal arrangement that would impose liability
upon one Party for the act or failure to act of the other Party. Neither Party
shall have any power to enter into any contracts or commitments or to incur any
liabilities in the name of, or on behalf of, the other Party, or to bind the
other Party in any respect whatsoever.
9.5 Export Control. This Agreement is made subject to any
restrictions concerning the export of products or technical information from the
United States of America which may be imposed upon or related to Licensor or SPL
from time to time by the government of the United States of America.
Furthermore, SPL agrees that it will not export, directly or indirectly, any
technical information acquired from Licensor under this Agreement or any
products using such technical information to any country for which the United
States government or any agency thereof at the time of export requires an export
license or other governmental approval, without first obtaining the written
consent to do so from the Department of Commerce or other agency of the United
States government when required by an applicable statute or regulation.
9.6 Complete Agreement.
(a) Entire Agreement; Amendment. This Agreement,
including the Exhibits and Schedules hereto and all the covenants,
promises, agreements, warranties, representations, conditions and
understandings contained herein sets forth the complete, final and
exclusive agreement between the Parties with respect to the subject
matter hereof and supersedes and terminates all prior and
contemporaneous agreements and understandings between the Parties,
whether oral or in writing. There are no covenants, promises,
agreements, warranties, representations, conditions or understandings,
either oral or written, between the Parties other than as are set forth
herein. No subsequent alteration, amendment, change, waiver or addition
to this Agreement shall be binding upon the Parties unless reduced to
writing and signed by an authorized officer of each Party. Each Party
in deciding to execute this Agreement has not relied on any
understanding, agreement, representation or promise by the other Party
which is not explicitly set forth herein.
(b) Relationship to US Agreement; Controlling Provisions.
The parties acknowledge and agree that this Agreement together with the
US Agreement is intended to operate together as a single worldwide
agreement governing the rights and
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obligations of Licensor, SPL and Schering Corporation. For purposes of
clarity and avoidance of doubt, the parties agree that Sections 2.3 and
2.5 of this Agreement shall be subject to and governed by the
corresponding provisions of the US Agreement. The parties further agree
that SPL's rights and obligations with respect to the filing,
prosecution, maintenance and enforcement of patents and patent
applications under Article IV of this Agreement shall be exercised and
performed by the employees and/or agents of Schering Corporation having
responsibility for Schering Corporation's rights and obligations under
Article IV of the US Agreement, and that all such activities will be
performed in a coordinated manner.
9.7 Notices. Except as provided under Section 4.8 hereof, any
notice required or permitted to be given or sent under this Agreement shall be
hand delivered or sent by express delivery service or certified or registered
mail, postage prepaid, or by facsimile transmission (with written confirmation
copy by registered first-class mail) to the Parties at the addresses and
facsimile numbers indicated below.
If to Licensor, to: AtheroGenics, Inc.
8995 Westside Parkway
Alpharetta, Georgia 30004
Attn.: Vice President, Business Development
Fax No.: (678) 336-2501
If to SPL to: Schering-Plough Ltd.
Toeperstrasse 5
CH 6004 Lucerne, Switzerland
Attn.: President
Fax No.: 41-41-418-1626
with copies to: Schering Corporation
2000 Galloping Hill Road
Kenilworth, New Jersey 07033
Attn.: Vice President, Business Development
Fax No.: (908) 298-5379
and Attn.: Law Department - Staff Vice President,
Licensing
Fax No.: (908) 298-2739
Any such notice shall be deemed to have been received on the date
actually received. Either Party may change its address or its facsimile number
by giving the other Party written notice, delivered in accordance with this
Section.
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9.8 Provisions for Insolvency.
(a) Effect on Licenses. All rights and licenses granted
under or pursuant to this Agreement by Licensor to SPL are, for all
purposes of Section 365(n) of Title 11 of the United States Code
(together with its foreign equivalent, the "Insolvency Statute"),
licenses of rights to "intellectual property" as defined in the
Insolvency Statute. Licensor agrees that SPL, as licensee of such
rights under this Agreement shall retain and may fully exercise all of
its rights and elections under the Insolvency Statute provided that SPL
makes all royalty payments under this Agreement. Licensor agrees during
the Term of this Agreement to create and maintain current copies or, if
not amenable to copying, detailed descriptions or other appropriate
embodiments, to the extent feasible, of all such intellectual property.
If a case is commenced by or against Licensor under the Insolvency
Statute, Licensor (in any capacity, including debtor-in-possession) and
its successors and assigns (including, without limitation, an
Insolvency Statute trustee) shall,
(i) as SPL may elect in a written request,
immediately upon such request:
(A) perform all of the obligations
provided in this Agreement to be performed by
Licensor including, where applicable and without
limitation, providing to SPL portions of such
intellectual property (including embodiments thereof)
held by Licensor and such successors and assigns or
otherwise available to them; or
(B) provide to SPL all such
intellectual property (including all embodiments
thereof) held by Licensor and such successors and
assigns or otherwise available to them; and
(ii) not interfere with the rights of SPL under
this Agreement, or any agreement supplemental hereto, to such
intellectual property (including such embodiments), including
any right to obtain such intellectual property (or such
embodiments) from another entity.
(b) Rights to Intellectual Property. If an Insolvency
Statute case is commenced by or against Licensor, and this Agreement is
rejected as provided in the Insolvency Statute, and SPL elects to
retain its rights hereunder as provided in the Insolvency Statute, then
Licensor (in any capacity, including debtor-in-possession) and its
successors and assigns (including, without limitation, an Insolvency
Statute trustee) shall provide to SPL all such intellectual property
(including all embodiments thereof) held by Licensor and such
successors and assigns, or otherwise available to them, immediately
upon SPL's written request. Whenever Licensor or any of its successors
or assigns provides to SPL any of the intellectual property licensed
hereunder (or any embodiment thereof) pursuant to this Section 9.8, SPL
shall have the right to perform the obligations
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of Licensor hereunder with respect to such intellectual property, but
neither such provision nor such performance by SPL shall release
Licensor from any such obligation or liability for failing to perform
it.
(c) SPL's Rights. All rights, powers and remedies of SPL
provided herein are in addition to and not in substitution for any and
all other rights, powers and remedies now or hereafter existing at law
or in equity (including, without limitation, the Insolvency Statute) in
the event of the commencement of an Insolvency Statute case by or
against Licensor. SPL, in addition to the rights, power and remedies
expressly provided herein, shall be entitled to exercise all other such
rights and powers and resort to all other such remedies as may now or
hereafter exist at law or in equity (including, without limitation, the
Insolvency Statute) in such event. The Parties agree that they intend
the foregoing SPL rights to extend to the maximum extent permitted by
law, including, without limitation, for purposes of the Insolvency
Statute:
(i) the right of access to any intellectual
property (including all embodiments thereof) of Licensor, or
any third party with whom Licensor contracts to perform an
obligation of Licensor under this Agreement, and, in the case
of the third party, which is necessary for the development,
registration, manufacture and marketing of Licensed Compound
and/or Licensed Product(s); and
(ii) the right to contract directly with any
third party described in (i) to complete the contracted work.
(d) Deemed Grant of Rights. In the event of any
insolvency of Licensor and if any statute and/or regulation in any
country in the Territory requires that there be a specific grant or
specific clause(s) in order for SPL to obtain the rights and benefits
as licensee under this Agreement which are analogous to those rights
under Section 365(n) of Title 11 of the United States Code, then this
Agreement shall be deemed to include any and all such required
grant(s), clause(s) and/or requirements.
(e) Security Interests. In addition to any other rights
granted to SPL hereunder, with respect to any country in the Territory
in which SPL reasonably determines that its rights set forth in this
Section 9.8 are nonexistent or inadequate to protect SPL's interests in
the licenses granted hereunder, Licensor shall, upon SPL's request,
execute a security agreement, or any foreign equivalent, for each
country in the Territory, granting SPL a secured interest in all
intellectual property licensed to SPL under this Agreement.
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9.9 Force Majeure. Failure of any Party to perform its obligations
under this Agreement (except the obligation to make payments when properly due)
shall not subject such Party to any liability or place them in breach of any
term or condition of this Agreement to the other Party if such failure is due to
any cause beyond the reasonable control of such non-performing Party ("force
majeure"), unless conclusive evidence to the contrary is provided. Causes of
non-performance constituting force majeure shall include, without limitation,
acts of God, fire, explosion, flood, drought, war, riot, sabotage, embargo,
strikes or other labor trouble, failure in whole or in part of suppliers to
deliver on schedule materials, equipment or machinery, interruption of or delay
in transportation, a national health emergency or compliance with any order or
regulation of any government entity acting with color of right. The Party
affected shall promptly notify the other Party of the condition constituting
force majeure as defined herein and shall exert reasonable efforts to eliminate,
cure and overcome any such causes and to resume performance of its obligations
with all possible speed; provided, however, that nothing contained herein shall
require any Party to settle on terms unsatisfactory to such Party any strike,
lock-out or other labor difficulty, any investigation or proceeding by any
public authority, or any litigation by any third party. If a condition
constituting force majeure as defined herein exists for more than ninety (90)
consecutive days, the Parties shall meet to negotiate a mutually satisfactory
resolution to the problem, if practicable.
9.10 Severability. If any provision of this Agreement is declared
illegal, invalid or unenforceable by a court having competent jurisdiction, it
is mutually agreed that this Agreement shall endure except for the part declared
invalid or unenforceable by order of such court; provided, however, that in the
event that the terms and conditions of this Agreement are materially altered,
the Parties will, in good faith, renegotiate the terms and conditions of this
Agreement to reasonably substitute such invalid or unenforceable provisions in
light of the intent of this Agreement.
9.11 Counterparts. This Agreement shall become binding when any one
or more counterparts hereof, individually or taken together, shall bear the
signatures of each of the Parties hereto. This Agreement may be executed in any
number of counterparts, each of which shall be an original as against either
Party whose signature appears thereon, but all of which taken together shall
constitute but one and the same instrument.
9.12 Captions. The captions of this Agreement are solely for the
convenience of reference and shall not affect its interpretation.
9.13 Recording. Each Party shall have the right, at any time, to
record, register, or otherwise notify this Agreement in appropriate governmental
or regulatory offices anywhere in the world, and each Party shall provide
reasonable assistance to the other in effecting such recording, registering or
notifying. Notwithstanding the foregoing, prior to recording, registering, or
otherwise notifying this Agreement, the Party desiring to so record, register,
or notify shall provide a copy of all materials to be filed for review, comment,
and approval by the other Party, such approval not unreasonably to be withheld
or delayed.
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9.14 Further Actions. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all other acts, as may be necessary
or appropriate in order to carry out the purposes and intent of this Agreement
including, without limitation, any filings with any antitrust agency which may
be required.
IN WITNESS WHEREOF, this Agreement has been executed by the duly
authorized representatives of the Parties as of the date set forth below.
ATHEROGENICS, INC. SCHERING-PLOUGH LTD.
By: Russell Medford By: David Poorvin
------------------------ ---------------------------
Title: President & CEO Title: Prokurist
------------------------ ---------------------------
Date: 22 October 1999 Date: 21 October 1999
------------------------ ---------------------------
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SCHEDULE 1.6
Elements of Fully Absorbed Manufacturing Cost of Goods
The following expenses are included in manufacturing costs:
1. Direct Materials
Materials used in the manufacturing process that are traced directly to the
completed product, such as:
- Inert raw materials or excipients
- Active substances/ingredients
- Packaging components such as bottles, caps, labels, etc.
2. Direct Labor
The cost of employees engaged in production activities that are directly
identifiable with product costs. Excludes supervision, which is included in
indirect labor, and production support activities such as inspection, plant and
equipment maintenance labor, and material handling personnel. Direct Labor cost
includes:
- Base pay, overtime, vacation and holidays, illness, personal
time with pay and shift differential.
- Cost of employee fringe benefits such as health and life
insurance, payroll taxes, welfare, pension and profit sharing.
3. Indirect Manufacturing Costs
Costs which are ultimately allocated to product based on standard direct labor
hours of the operating departments. These costs include:
- Indirect Production Labor - salaries of employees engaged in
production activities who are not classified as direct labor,
including supervision, clerical, etc.
- Costs of Direct Labor - employees not utilized for the
manufacturing of product such as training, downtime and
general duties.
- Indirect Materials - supplies and chemicals which are used in
the manufacturing process and are not assigned to specific
products but are included in manufacturing overhead costs.
Includes supplies for which direct assignment to products is
not practical.
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- Utilities - expenses incurred for fuel, electricity and water
in providing power for production and other plant equipment.
- Maintenance and Repairs - amount of expense incurred in-house
or purchased to provide services for plant maintenance and
repairs of facilities and equipment.
- Other Services - purchased outside services and rentals such
as the cost of security, ground maintenance, etc.
- Depreciation - of plant and equipment utilizing the
straight-line method of calculation.
- Insurance - cost of comprehensive and other insurance
necessary for the safeguard of manufacturing plant and
equipment.
- Taxes - expense incurred for taxes on real and personal
property (manufacturing site, buildings and the fixed assets
of equipment, furniture and fixtures, etc.). If manufacturing
site includes other operations (marketing, R&D, etc.), taxes
are allocated to manufacturing on the basis of total real and
personal property.
- Cost of manufacturing, service departments - such as:
(where applicable)
- Packaging Engineering
- Manufacturing Maintenance
- Industrial Engineering
- Receiving and Warehousing
- Purchasing and Accounting
- Production Scheduling
- Inventory Management
- Plant Materials Management
- Central Weigh
- Manufacturing Administration
- Allocated costs of services provided to manufacturing
including: (where applicable)
- Cafeteria
- Personnel Operations
- Health and Safety Services
- Division Engineering and Operations Services
- Plant Services (housekeeping)
- Manufacturing Information Systems
- Plant Power
- Office of V.P. Manufacturing
Various bases are used for allocating these costs to manufacturing
operating departments including headcount, square feet, metered
utilities use, estimated
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services rendered, EDP computer hours, etc.
4. Quality Assurance Costs
Direct labor and indirect costs for Quality Assurance departments testing and
approving materials used in manufacturing and completed manufacturing batches
and finished products. This includes all manufacturing in-process testing and
testing of finished materials. Excluded from product costs are QA costs related
to research and development, stability testing, and other costs customarily
excluded from such Quality Assurance costs.
The following expenses are not included in manufacturing costs:
a) Inventory Carrying Costs
b) Regulatory Affairs Costs
c) Pilot plant costs, research batches and other similar costs
prior to turnover to manufacturing. These are handled as
development costs and expensed to R&D. This excludes
commercial goods produced by a research facility.
d) Costs incurred by Manufacturing for special projects (e.g.
requests by Schering-Plough Research Institute) to establish
and certify new production processes, batch sizes and product
line improvements, and new vendor certification of equipment
and primary materials components.
These costs are expensed to R&D.
e) Manufacturing start-up costs and initial one-time
extraordinary manufacturing costs incurred prior to plant
operation and achievement of a normal production activity
level. Includes costs of training, testing,
qualification/validation of new equipment and facilities and
initial, trial batches. These costs are deferred and then
amortized to Other Production Costs over five years.
f) Significant idle capacity is eliminated from factory overhead
and product cost. Idle or excess capacity costs are culled out
of the Manufacturing Budget and expensed as a period cost to
Other Production Costs.
g) Finished goods warehousing, shipping and other distribution
costs. These are included in distribution costs.
h) Product liability and/or business interruption insurance
expenses.
i) Intercompany profit.
5. Other Production Costs
Three major types of expense are included in the Other Production Costs
classification.
a) Variances from standard cost the difference between the actual
and standard cost of inventory purchased and produced during
the period less any portion applicable to on-hand inventory
which has been capitalized.
(i) Materials purchase price variance
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(ii) Materials usage/yield variances
(iii) Direct labor efficiency/inefficiency - reflects the
cost difference between the standard and actual
number of direct labor hours used for actual
production.
(iv) Overhead - reflects all other labor and overhead cost
variances including activity and spending production
related and support.
With the exception of overhead, all of the other variances can
be identified by product and can be added (if unfavorable) or
subtracted (if favorable) to determine actual manufacturing
costs of a product.
(b) Non-standard costs: Cost of miscellaneous production related
operations for which standards are not established due to the
nature of the function, such as manufacturing start-up
operations, stock conversions and reclaiming (processing and
returning to finished goods inventory) of products returned by
customers. Also includes miscellaneous expenses incurred in
connection with the production of inventory which for various
reasons (e.g., cyclical, non-recurring) are not included in
standard costs. Examples include excess/idle capacity not
included in standards, abnormal waste or rework, experiments,
unallocated production costs, tooling and package design
costs.
Some of the above costs may be incurred for specific products,
e.g., rework, experiments, tooling, but the majority are
general to all products produced.
(c) Inventory adjustments: Consists of charges or credits due to
adjustments to inventory concerning revaluation to new
standards, stock conversions, capitalized/amortized production
variances, shortages or overages, and damage or obsolescence
of regular on-hand inventory or products returned by
customers.
Each of these charges or credits can be identified to a specific product.
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Schedule 1.18
PATENT RIGHTS
[ * ]
<PAGE> 55
Schedule 2.1(e)
Third Party Agreements
License Agreement between Emory University and Atherogenics, Inc., dated January
11, 1995.
License to the United States Government dated March 27, 1995.
Patent Purchase Agreement between Sampath Parthasarathy, Ph.D. and Atherogenics,
Inc., dated April 26, 1995.
<PAGE> 56
Schedule 2.6(h)
Development Work to be Performed by Licensor
Pre-clinical:
[ * ]
<PAGE> 57
SCHEDULE 2.6(i)
ADVERSE EVENT REPORTING PROCEDURES FOR PRODUCTS
The Parties understand and agree that these procedures are intended to
comply with 21 CFR 314.80(b) and 21 CFR 310.305(a) concerning standard written
procedures for adverse event reporting in the United States. These procedures
may be amended by the Parties at any time, at the request of either Party, to
ensure that they fully and accurately reflect the procedures in place for
surveillance, receipt, evaluation and reporting of adverse drug experiences by
the pharmacovigilance departments of the Parties and comply with applicable laws
and regulations in the countries in which the product(s) is marketed and/or is
under investigation. In that regard, upon the written request of either Party,
the Parties shall meet to renegotiate in good faith, all or some of these
procedures. Each Party may request such a meeting no more often than once in any
twelve (12) month period.
1. Definitions:
(a) An Adverse Event ("AE") is defined as:
i) any experience which is adverse, including what are
commonly described as adverse or undesirable
experiences, adverse events, adverse reactions, side
effects, or death due to any cause associated with,
or observed in conjunction with the use of a drug,
biological product, or device in humans, whether or
not considered related to the use of that product:
- occurring in the course of the use of a
drug, biological product or device,
- associated with, or observed in conjunction
with product overdose, whether accidental or
intentional,
- associated with, or observed in conjunction
with product abuse,
- associated with, or observed in conjunction
with product withdrawal
ii) Any significant failure of expected pharmacological
or biologic therapeutical action (with the exception
of in clinical trials).
(b). Associated with or related to the use of the drug is defined
as: A
<PAGE> 58
reasonable possibility exists that the AE was caused by the drug.
(c) Expected or unexpected are defined as:
i) Expected ("labeled") AE - An AE which is included in
the Investigators' Brochure for clinical trials,
included in local labeling (e.g., summary of product
characteristics) for Marketed Drugs, or in countries
with no local labeling, in the Company Core Data
Sheet (CCDS).
ii) Unexpected ("unlabeled") AE - An AE that does not
meet the criteria for an expected AE or an AE which
is listed but differs from that event in terms of
severity or specificity.
(d) IND Holder is defined as: A "Sponsor" as defined in 21 CFR
Part 312.2(b) of an investigational new drug in any regulatory jurisdiction,
including a holder of a foreign equivalent thereto.
(e) Life-threatening is defined as: any adverse drug experience
that places the patient, in the view of the initial reporter, at immediate risk
of death from the adverse drug experience as it occurred, i.e., it does not
include an AE that, had it occurred in more severe form, might have caused
death.
(f) NDA Holder is defined as: An "Applicant" as defined in 21 CFR
Part 314.3(b), for regulatory approval of a Licensed Product in any regulatory
jurisdiction, including a holder of a foreign equivalent thereto.
(g) Serious or Non-Serious are defined as:
i) Any adverse drug experience occurring at any dose
that results in any of the following outcomes: Death,
a life-threatening adverse drug experience, inpatient
hospitalization or prolongation of existing
hospitalization, a persistent or significant
disability/incapacity, or a congenital anomaly/birth
defect. Important medical events that may not result
in death, be life-threatening, or require
hospitalization may be considered serious when, based
upon appropriate medical judgment, they may
jeopardize the patient or subject and may require
medical or surgical intervention to prevent one of
the outcomes listed in this definition. Examples of
such medical events include allergic bronchospasm
requiring intensive treatment in an emergency room or
at home, blood dyscrasias or convulsions that do not
result in inpatient hospitalization, or the
development of drug dependency or drug abuse.
<PAGE> 59
ii) A Non-serious AE is any AE which does not meet the
criteria for a serious AE.
(h) Not associated or unrelated to the use of the drug means it
does not meet the definition of "associated."
2. Capitalized terms not defined in this Appendix shall have the meaning
assigned thereto in the Agreement.
3. With respect to all Licensed Products:
All initial reports (oral or written) for any and all serious
AEs as defined above which become known to either Party (other
than from disclosure by or on behalf of the other Party) must
be communicated by telephone, telefax or electronically
directly to the other Party, NDA Holder, and/or IND Holder
(individually and collectively referred to as "Holders")
within five (5) calendar days of receipt of the information.
Written confirmation of the Serious AE received by the Party
should be sent to the other Party and the Holders as soon as
it becomes available, but in any event within two (2) business
days of initial report of the Serious AE by such Party.
All Parties and Holders should exchange Medwatch and/or CIOMS
forms and other health authority reports within two (2)
business days of submission to any regulatory agency.
All initial reports and follow-up information received for all
non-serious AEs for marketed Licensed Products which become
known to a Party (other than from disclosure by or on behalf
of the other Party) must be communicated in writing, by
telefax or electronically to the other Party and all Holders
on a monthly basis, on Medwatch or CIOMs forms (where
possible). All follow-up on any AE reports forwarded to either
Party by FDA must be submitted to FDA.
Each Party shall coordinate and cooperate with the other
whenever practicable to prepare a single written report
regarding all Serious AEs, provided, however, that neither
Party shall be obligated to delay reporting or any AE in
violation of applicable law or regulations regarding the
reporting of adverse events.
4. The Parties further agree that:
(a) a written report for AEs for animal studies which suggest a
potential significant risk for humans shall be forwarded to the other Party
within two (2) business days of receipt by the Party making the report,
<PAGE> 60
(b) each Party will give the other Party a print-out or computer disk of
all AEs reported to it relating to Products within the preceding 365
days/calendar year, within [ * ] days of receipt of a request from the other
Party;
(c) upon request of a Party, the other Party shall make available
its AE records relating to Licensed Products (including computer disks) for
viewing and copying by the other Party,
(d) disclosure of information hereunder by a Party to the other
Party shall continue as long as either Party continues to clinically test or
market product(s) containing Licensed Products or holds an open IND, NDA or
foreign equivalent thereto.
(e) all written regulatory reports, including periodic NDA, annual
IND, safety updates, or foreign equivalents thereto, etc. should be sent by a
Party to the other Party within 2 business days of submission to the appropriate
regulatory agency. The Parties shall agree on a procedure for preparing these
reports (e.g. electronic mail, facsimile transmission, overnight service, etc.).
5. Each Party shall diligently undertake the following further obligations
where both Parties are or will be commercializing products hereunder and/or
performing clinical trials with respect to Licensed Product:
(a) to immediately consult with the other Party, with respect to
the investigation and handling of any serious AE disclosed to it by the other
Party or by a third Party, including government agencies, and to allow the other
Party to review the serious AE and to participate in the follow-up
investigation;
(b) to immediately advise the other Party of any Product safety
communication received from a health authority and consult with the other Party
with respect to any proposed change to product warnings, labeling or an
Investigator's Brochure involving safety issues, including, but not limited to,
safety issues agreed to by the Parties;
(c) to diligently handle in a timely manner the investigation and
resolution of each AE reported to it; and
(d) to provide the other Party reasonable annual audit rights of
its AE reporting system and documentation, upon prior notice, during normal
business hours, at the expense of the auditing Party and under customary
confidentiality obligations.
(e) to meet in a timely fashion from time to time as may be
reasonably required to implement the adverse event reporting and consultation
procedures described in this Appendix, including identification of those
individuals in each Party's pharmacovigilance group who will be responsible for
reporting to and receiving AE information from the other Party, and the
development of a written standard operating
<PAGE> 61
procedure with respect to adverse event reporting responsibilities, including
reporting responsibilities to investigators;
(f) where possible, to transmit all data electronically;
(g) to report to each other any addenda, revisions or changes to
this Agreement (e.g., change in territories, local regulations, addition of new
licensors/licensees to the agreement, etc.) which might alter the adverse event
reporting responsibilities hereunder;
(h) to utilize English as the language of communication and data
exchange between the Parties;
(i) to develop a system of exchange of documents and information
in the event that the Agreement involves more than two Holders.
<PAGE> 62
Schedule 3.2
DEFINITION OF SUCCESSFUL COMPLETION
CART STUDY:
Schering recognizes that Licensor's Phase II Study 027, commonly
referred to as the CART Study, is pivotal to the determination of
proof-of-activity in man. Determination by the JMC of "successful completion" of
this study will be based upon the study achieving all of the following three
points, as reflected in the final study report:
[ * ]
<PAGE> 63
Schedule 6.2(d)
GOVERNMENT RIGHTS
Pursuant to that certain Assignment agreement between Licensor and
Sampath Parthasarathy dated May 2, 1995, U.S. Patent No. 5,262,439 is subject to
a license of rights to the United States Government, as specifically set forth
in the License to the United States Government attached hereto as Exhibit A.
<PAGE> 64
Schedule 6.2(k)
Other VCAM-1 Inhibitors
[ * ]
<PAGE> 65
Schedule 9.2
ARBITRATION PROVISIONS
(a) Scope. Subject to and in accordance with the terms of this
Agreement and this Schedule 9.2, all differences, disputes, claims or
controversies arising out of or in any way connected or related to this
Agreement, whether arising before or after the expiration of the Term of this
Agreement, and including, without limitation, its negotiation, execution,
delivery, enforceability, performance, breach, discharge, interpretation and
construction, existence, validity and any damages resulting therefrom or the
rights, privileges, duties and obligations of the Parties under or in relation
to this Agreement (including any dispute as to whether an issue is arbitrable)
shall be referred to binding arbitration in accordance with the rules of the
American Arbitration Association, as in effect at the time of the arbitration.
(b) Parties to Arbitration. For the purposes of each arbitration under
this Agreement, SPL shall constitute one party to the arbitration and Licensor
shall constitute the other party to the arbitration.
(c) Notice of Arbitration. A Party requesting arbitration hereunder
shall give a notice of arbitration to the other Party containing a concise
description of the matter submitted for arbitration, including references to the
relevant provisions of the Agreement and a proposed solution (a "Notice of
Arbitration"). Notice of Arbitration shall be delivered to the other Party in
accordance with Section 9.7 of the Agreement.
(d) Response. The non-requesting Party must respond in writing within
forty-five (45) days of receiving a Notice of Arbitration with an explanation,
including references to the relevant provisions of the Agreement and a response
to the proposed solution and suggested time frame for action. The non-requesting
Party may add additional issues to be resolved.
(e) Meeting. Within fifteen (15) days of receipt of the response from
the non-requesting Party pursuant to Paragraph (d), the Parties shall meet and
discuss in good faith options for resolving the dispute. The requesting Party
must initiate the scheduling of this resolution meeting. Each Party shall make
available appropriate personnel to meet and confer with the other Party during
such fifteen-(15) day period.
(f) Selection of Arbitrator. Any and all disputes that cannot be
resolved pursuant to Paragraphs (c), (d) and (e) shall be submitted to an
arbitrator (the "Arbitrator") to be selected by mutual agreement of the Parties.
The Arbitrator shall be a retired judge of a state or federal court, to be
chosen from a list of such retired judges to be prepared jointly by the Parties,
with each Party entitled to submit the names of three such retired judges for
inclusion in the list. No Arbitrator appointed or selected hereunder shall be an
employee, director or shareholder of, or otherwise have any current or previous
relationship with, any Party or its respective Affiliates. If the Parties fail
to
<PAGE> 66
agree on the selection of the Arbitrator, the Arbitrator shall be designated by
a judge of the Federal District Court in New York upon application by either
Party.
(g) Powers of Arbitrator. The Arbitrator may determine all questions of
law and jurisdiction (including questions as to whether a dispute is arbitrable)
and all matters of procedure relating to the arbitration. The Arbitrator shall
have the right to grant legal and equitable relief (including injunctive relief)
and to award costs (including reasonable legal fees and costs of arbitration)
and interest. Nothing contained herein shall be construed to permit the
Arbitrator to award punitive, exemplary or any similar damages.
(h) Arbitration Procedure. In the event that SPL is the Party
requesting arbitration, the arbitration shall take place in the State of
Georgia, unless otherwise agreed by the Parties, at such place and time as the
Arbitrator may fix for the purpose of hearing the evidence and representations
that the Parties may present. In the event that Licensor is the Party requesting
arbitration, the arbitration shall take place in the State of New Jersey, unless
otherwise agreed by the Parties, at such place and time as the Arbitrator may
fix for the purpose of hearing the evidence and representations that the Parties
may present. The arbitration proceedings shall be conducted in the English
language. The law applicable to the arbitration shall be the law of the State of
New Jersey. No later than twenty (20) business days after hearing the
representations and evidence of the Parties, the Arbitrator shall make its
determination in writing and deliver one copy to each of the Parties.
(i) Discovery and Hearing. During the meeting referred to in Paragraph
(e), the Parties shall negotiate in good faith the scope and schedule of
discovery, relating to depositions, document production and other discovery
devices, taking into account the nature of the dispute submitted for resolution.
If the Parties are unable to reach agreement as to the scope and schedule of
discovery, the Arbitrator may order such discovery as it deems necessary. To the
extent practicable taking into account the nature of the dispute submitted for
resolution, such discovery shall be completed within [ * ] days from the date of
the selection of the Arbitrator. At the hearing, which shall commence within
[ * ] days after completion of discovery unless the Arbitrator otherwise orders,
the Parties may present testimony (either live witness or deposition), subject
to cross-examination, and documentary evidence. To the extent practicable taking
into account the nature of the dispute submitted for resolution and the
availability of the Arbitrator, the hearing shall be conducted over a period not
to exceed [ * ] consecutive business days, with each Party entitled to
approximately half of the allotted time unless otherwise ordered by the
Arbitrator. Each Party shall have sole discretion with regard to the
admissibility of any evidence and all other matters relating to the conduct of
the hearing.
(j) Witness Lists. At least [ * ] business days prior to the date set
for the hearing, each Party shall submit to the other Party and the Arbitrator a
list of all documents on which such Party intends to rely in any oral or written
presentation to the Arbitrator and a list of all witnesses, if any, such Party
intends to call at such hearing and
<PAGE> 67
a brief summary of each witness' testimony. At least five (5) business days
prior to the hearing, each Party must submit to the Arbitrator and serve on each
other Party a proposed findings of fact and conclusions of law on each issue to
be resolved. Following the close of hearings, the Parties shall each submit such
post-hearing briefs to the Arbitrator addressing the evidence and issues to be
resolved as may be required or permitted by the Arbitrator.
(k) Confidentiality. The arbitration proceedings shall be confidential
and, except as required by law, no Party shall make, or instruct the Arbitrator
to make, any public announcement with respect to the proceedings or decision of
the Arbitrator without the prior written consent of the other Party. The
existence of any dispute submitted to arbitration and the award of the
Arbitrator shall be kept in confidence by the Parties and the Arbitrator, except
as required in connection with the enforcement of such award or as otherwise
required by law.
(l) Awards and Appeal. Subject to the provisions of this Schedule 9.2,
the decision of the Arbitrator shall be final and binding upon the Parties in
respect of all matters relating to the arbitration, the conduct of the Parties
during the proceedings, and the final determination of the issues in the
arbitration. There shall be no appeal from the final determination of the
Arbitrator to any court, except in the case of fraud or bad faith on the part of
the Arbitrator or any Party to the arbitration proceeding in connection with the
conduct of such proceedings. Judgment upon any award rendered by the Arbitrator
may be entered in any court having jurisdiction thereof.
(m) Costs of Arbitration. The costs of any arbitration hereunder shall
be borne by the Parties in the manner specified by the Arbitrator in its
determination.
(n) Performance of the Agreement. During the pendency of the
arbitration proceedings, the matter which is the subject of such arbitration
proceedings shall be performed by the Parties (A) in the manner determined by
SPL in its sole discretion if it is a matter relating to SPL's development of
Licensed Product, and (B) in the manner determined by Licensor in its sole
discretion if it is a matter involving payment of License Fees under Section 3.1
and royalty payments under Sections 3.2 or 3.3. Notwithstanding the foregoing,
in the event that SPL makes payments pursuant to Sections 3.1, 3.2 or 3.3 and it
is subsequently determined by the Arbitrator that SPL was not required to make
such payment(s) then Licensor shall promptly repay to SPL all such payments.
Further notwithstanding the foregoing, the time periods set forth in Section
2.6(b) of the Agreement shall be suspended during the pendency of the
arbitration proceedings. For purposes of this Paragraph (n) the term "pendency
of the arbitration proceeding" shall mean the period starting on the date on
which arbitration proceedings are commenced by a Party in accordance with
Paragraph (c) of this Schedule 9.2 and ending on the date on which the
Arbitrator delivers its final determination in writing to the Parties.
<PAGE> 68
EXCLUSIVE LICENSE AGREEMENT
BY AND BETWEEN
ATHEROGENICS, INC.
AND
SCHERING CORPORATION
[*] Certain confidential information contained in this document, marked by an
asterisk within brackets, has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 406 of the Securities Act of 1933, as amended.
<PAGE> 69
TABLE OF CONTENTS
EXCLUSIVE LICENSE AGREEMENT
<TABLE>
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<S> <C>
ARTICLE I - DEFINITIONS..................................................................................1
1.1 AFFILIATE.....................................................................................1
1.2 CALENDAR QUARTER..............................................................................1
1.3 CALENDAR YEAR.................................................................................2
1.4 COMBINATION PRODUCT...........................................................................2
1.5 COMPOUND LIBRARY..............................................................................2
1.6 COST OF GOODS.................................................................................2
1.7 EFFECTIVE DATE................................................................................2
1.9 FIRST COMMERCIAL SALE.........................................................................2
1.9 HRD...........................................................................................2
1.10 HSR ACT.......................................................................................2
1.11 "IMPROVEMENT\.................................................................................2
1.12 "INTERNATIONAL AGREEMENT\.....................................................................3
1.13 LICENSED COMPOUND.............................................................................3
1.14 LICENSED PRODUCT(S)...........................................................................3
1.15 LICENSOR KNOW-HOW.............................................................................3
1.16 NDA...........................................................................................4
1.17 NET SALES.....................................................................................4
1.18 PATENT RIGHTS.................................................................................5
1.19 PRIMARY INDICATION............................................................................5
1.20 PROPRIETARY INFORMATION.......................................................................5
1.21 REGULATORY APPROVAL...........................................................................5
1.22 SECONDARY INDICATION..........................................................................6
1.23 "SUBLICENSEE\.................................................................................6
1.24 TERRITORY.....................................................................................6
1.25 "TERM\........................................................................................6
1.26 VALID CLAIM...................................................................................6
ARTICLE II - LICENSE; DISCLOSURE OF INFORMATION; DEVELOPMENT AND COMMERCIALIZATION.......................6
2.1 EXCLUSIVE LICENSE GRANT.......................................................................6
(a) License.......................................................................................6
(a) Co-Exclusive License to Other Indications.....................................................6
(c) Right to Sublicense...........................................................................7
(d) Retained Rights...............................................................................7
(e) Third Party Agreements........................................................................7
2.2 NON-EXCLUSIVE LICENSE GRANT...................................................................7
2.3 DISCLOSURE OF INFORMATION.....................................................................8
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<TABLE>
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2.4 HSR FILING AND APPROVALS......................................................................8
(a) HSR Filing....................................................................................8
(b) Licensor's Obligations........................................................................9
(c) Additional Approvals..........................................................................9
2.5 JOINT MANAGEMENT COMMITTEE....................................................................9
(a) Composition of the JMC........................................................................9
(b) JMC Meetings.................................................................................10
(c) JMC Responsibilities.........................................................................10
(d) Deadlock.....................................................................................10
2.6 SCHERING'S DEVELOPMENT OBLIGATIONS...........................................................10
(a) Schering Diligence...........................................................................10
(b) Opportunity to Cure..........................................................................11
(c) Research and Development Activities..........................................................11
(d) Licensed Product Registrations; Pricing Reimbursement Approvals..............................11
(e) Data.........................................................................................12
(f) Assistance by Licensor.......................................................................12
(g) Reimbursement of Costs by Schering...........................................................12
(h) Licensor's Additional Development Obligations................................................13
(i) Adverse Event Reporting......................................................................13
2.7 INDEPENDENT DISCOVERIES BY SCHERING..........................................................14
2.8 EXCUSED PERFORMANCE..........................................................................14
2.9 SUPPLY OF LICENSED COMPOUND/LICENSED PRODUCT.................................................14
2.10 REPORTS......................................................................................14
2.11 NON-COMPETE PROVISION........................................................................15
ARTICLE III - PAYMENTS; ROYALTIES AND REPORTS...........................................................16
3.0 COORDINATION OF PAYMENTS UNDER THE INTERNATIONAL AGREEMENT...................................16
3.1 LICENSE FEE..................................................................................16
(a) Development Milestones.......................................................................16
(b) Sales Milestones.............................................................................16
(c) Limitations..................................................................................17
3.3 ROYALTIES....................................................................................17
(a) Cap on Royalties Plus Cost of Goods..........................................................18
(b) Licensor's Option to Manufacture.............................................................18
(c) Royalty Reduction............................................................................18
3.4 THIRD PARTY LICENSES.........................................................................19
3.5 COMPULSORY LICENSES..........................................................................19
3.6 REPORTS AND PAYMENT OF ROYALTY; PAYMENT EXCHANGE RATE AND CURRENCY CONVERSIONS...............19
(a) Royalties Paid Quarterly.....................................................................19
(b) Method of Payment............................................................................20
3.7 MAINTENANCE OF RECORDS; AUDITS...............................................................20
(a) Record Keeping by Schering...................................................................20
</TABLE>
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<TABLE>
<S> <C>
(b) Underpayments/Overpayments...................................................................21
(c) Record Keeping by Sublicensee................................................................21
(d) Confidentiality..............................................................................21
(e) Binding Records..............................................................................21
3.8 INCOME TAX WITHHOLDING.......................................................................21
3.9 DIRECT AFFILIATE LICENSES....................................................................22
ARTICLE IV - PATENTS....................................................................................22
4.1 FILING, PROSECUTION AND MAINTENANCE OF PATENTS...............................................22
4.2 OPTION OF SCHERING TO PROSECUTE AND MAINTAIN PATENTS.........................................22
4.3 ENFORCEMENT..................................................................................23
(a) Notice and Discontinuance of Infringement....................................................23
(b) Continuance of Infringement..................................................................23
4.4 THIRD PARTY INFRINGEMENT SUIT................................................................24
(a) Defense......................................................................................24
(b) Licensing....................................................................................24
4.5 CERTIFICATION UNDER DRUG PRICE COMPETITION AND PATENT RESTORATION ACT........................24
4.6 ABANDONMENT..................................................................................25
4.7 PATENT TERM RESTORATION......................................................................25
4.8 NOTICES REGARDING PATENTS....................................................................25
ARTICLE V - CONFIDENTIALITY AND PUBLICATION.............................................................26
5.1 CONFIDENTIALITY..............................................................................26
(a) Nondisclosure Obligation.....................................................................26
(b) Disclosure to Agents.........................................................................27
(c) Disclosure to a Third Party..................................................................27
5.2 PUBLICITY....................................................................................27
5.3 PUBLICATION..................................................................................28
ARTICLE VI - REPRESENTATIONS AND WARRANTIES.............................................................28
6.1 REPRESENTATIONS AND WARRANTIES OF EACH PARTY.................................................28
6.2 LICENSOR'S REPRESENTATIONS...................................................................29
6.3 CONTINUING REPRESENTATIONS...................................................................31
6.4 NO INCONSISTENT AGREEMENTS...................................................................31
6.5 REPRESENTATION BY LEGAL COUNSEL..............................................................31
6.6 ADDITIONAL OBLIGATIONS OF LICENSOR...........................................................31
ARTICLE VII - INDEMNIFICATION AND LIMITATION ON LIABILITY...............................................32
7.1 INDEMNIFICATION BY SCHERING..................................................................32
7.2 INDEMNIFICATION BY LICENSOR..................................................................33
7.3 CONDITIONS TO INDEMNIFICATION................................................................33
7.4 SETTLEMENTS..................................................................................34
7.5 LIMITATION OF LIABILITY......................................................................34
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<TABLE>
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7.6 INSURANCE....................................................................................34
ARTICLE VIII - TERM AND TERMINATION.....................................................................34
8.1 TERM AND EXPIRATION..........................................................................34
8.2 TERMINATION BY SCHERING WITHOUT CAUSE........................................................34
8.3 TERMINATION UPON CESSATION OF DEVELOPMENT....................................................35
(a) Termination by Either Party..................................................................35
(b) Termination by Licensor......................................................................35
8.4 TERMINATION..................................................................................35
(a) Termination for Cause........................................................................35
(b) Effect of Termination for Cause on License...................................................36
(i) Termination by Schering..................................................................36
(ii)Termination by Licensor..................................................................36
(iii)Effect of Bankruptcy....................................................................36
8.5 EFFECT OF TERMINATION........................................................................36
8.6 REMEDIES FOR BREACH..........................................................................37
8.7 LICENSOR'S RIGHTS ON TERMINATION.............................................................37
8.8 CONCURRENT TERMINATION WITH THE INTERNATIONAL AGREEMENT......................................38
ARTICLE IX - MISCELLANEOUS..............................................................................38
9.1 ASSIGNMENT/CHANGE OF CONTROL.................................................................38
(a) Assignment...................................................................................38
(a) Change of Control............................................................................38
9.2 GOVERNING LAW................................................................................39
9.3 WAIVER.......................................................................................39
9.4 INDEPENDENT RELATIONSHIP.....................................................................39
9.5 EXPORT CONTROL...............................................................................39
9.6 ENTIRE AGREEMENT; AMENDMENT..................................................................40
9.7 NOTICES......................................................................................40
9.8 PROVISIONS FOR INSOLVENCY....................................................................41
(a) Effect on Licenses...........................................................................41
(b) Rights to Intellectual Property..............................................................41
(c) Schering's Rights............................................................................42
(d) Deemed Grant of Rights.......................................................................42
(e) Security Interests...........................................................................42
9.9 FORCE MAJEURE................................................................................43
9.10 SEVERABILITY.................................................................................43
9.11 COUNTERPARTS.................................................................................43
9.12 CAPTIONS.....................................................................................43
9.13 RECORDING....................................................................................43
9.14 FURTHER ACTIONS..............................................................................44
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SCHEDULES
SCHEDULE 1.6 COST OF GOODS
SCHEDULE 1.18 PATENT RIGHTS
SCHEDULE 2.1(E) THIRD PARTY AGREEMENTS
SCHEDULE 2.6(H) DEVELOPMENT WORK TO BE PERFORMED BY LICENSOR
SCHEDULE 2.6(I) ADVERSE EVENT REPORTING PROCEDURES
SCHEDULE 3.2 DEFINITION OF SUCCESSFUL COMPLETION
SCHEDULE 6.2(D) GOVERNMENT RIGHTS
SCHEDULE 6.2(K) OTHER VCAM-1 INHIBITORS
SCHEDULE 9.2 ARBITRATION PROVISIONS
v
<PAGE> 74
EXCLUSIVE LICENSE AGREEMENT
THIS EXCLUSIVE LICENSE AGREEMENT (the "Agreement") is made as of
October 22, 1999 by and between ATHEROGENICS, INC., a Georgia corporation having
its principal place of business at 8995 Westside Parkway, Alpharetta, Georgia
30004 (hereinafter referred to as "Licensor") and SCHERING CORPORATION, a
corporation organized and existing under the laws of New Jersey and having its
principal place of business at 2000 Galloping Hill Road, Kenilworth, New Jersey
07033 (hereinafter referred to as "Schering"). Licensor and Schering are
sometimes referred to herein individually as a Party and collectively as the
Parties. References to "Schering" and "Licensor" shall include their respective
Affiliates (as hereinafter defined).
WHEREAS, Licensor has developed certain Licensor Know-How and has
rights to Patent Rights relating to soluble analogs of probucol, including
without limitation the Licensed Compound (each as hereinafter defined); and
WHEREAS, Schering, together with its Affiliates (as hereinafter
defined) possesses extensive capabilities in the development and
commercialization of pharmaceutical products on a worldwide basis; and
WHEREAS, Schering desires to obtain and Licensor is willing to grant to
Schering, an exclusive license under the Patent Rights and to use the Licensor
Know-How, upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants herein contained, Schering and Licensor hereby agree as
follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following initially capitalized terms,
whether used in the singular or plural, shall have the respective meanings set
forth below:
1.1 "Affiliate" shall mean any individual or entity directly or
indirectly controlling, controlled by or under common control with, a Party to
this Agreement. For purposes of this Agreement, the direct or indirect ownership
of [ * ] or more of the outstanding voting securities of an entity, or the right
to receive [ * ] or more of the profits or earnings of an entity shall be deemed
to constitute control. Such other relationship as in fact results in actual
control over the management, business and affairs of an entity shall also be
deemed to constitute control.
1.2 "Calendar Quarter" shall mean the respective periods of three (3)
consecutive calendar months ending on March 31, June 30, September 30 or
December 31, for so long as this Agreement is in effect.
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1.3 "Calendar Year" shall mean each successive period of twelve (12)
months commencing on January 1 and ending on December 31, for so long as this
Agreement is in effect.
1.4 "Combination Product" shall mean any form or dosage of
pharmaceutical composition or preparation in final form for sale by
prescription, over-the-counter or any other method and which comprises two (2)
or more active ingredients within the same pharmaceutical formulation, at least
one (1) of which is Licensed Compound and/or any other compound from the
Compound Library.
1.5 "Compound Library" shall mean the collection of compounds
(including, without limitation, the Licensed Compound) which as of the Execution
Date is specifically and/or generically covered by one or more claims in U.S.
Patent No. 5,262,439, entitled "Soluble Monoesters of Probucol", or any
corresponding foreign patents or patent applications. The Compound Library shall
include such compounds in any form, including any salt, hydrate or crystalline
structure thereof.
1.6 "Cost of Goods" shall mean Schering's fully allocated manufacturing
cost of goods as determined in accordance with Schedule 1.6.
1.7 "Effective Date" shall mean the next business day following the
last to occur of (i) expiration or earlier termination of any notice and waiting
period under the HSR Act; or (ii) the date of delivery of fully executed
counterparts of this Agreement (the "Execution Date").
1.8 "First Commercial Sale" shall mean, with respect to any Licensed
Product, the first sale by Schering to any third party, not an Affiliate or
Sublicensee, of such Licensed Product for an indication for which Schering has
obtained Regulatory Approval.
1.9 "HRD" shall mean a health registration dossier or its equivalent,
submitted to a national government or a supranational governmental authority,
consisting of the chemical, pharmaceutical and biological documentation; the
toxicological and pharmacological documentation; and the clinical documentation
respectively, and covering a Licensed Product which is filed in any country
outside the United States and which is analogous to a new drug application,
product license application or its equivalent filed with the United States Food
and Drug Administration seeking approval to market and sell a Licensed Product
in the Territory and including, where applicable, applications for pricing,
pricing reimbursement approval, labeling and Regulatory Approval.
1.10 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
1.11 "Improvement" shall mean any enhancement in the formulation,
preparation, presentation, means of delivery, dosage, packaging of, manufacture,
or any new or expanded therapeutic indications(s) for, Licensed Product or
Licensed Compound,
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in each case which is developed prior to or during the Term of this Agreement by
or on behalf of Licensor.
1.12 "International Agreement" shall mean that certain exclusive
license agreement by and between Licensor and Schering-Plough Ltd. entered into
concurrently herewith.
1.13 "Licensed Compound" shall mean the soluble analog of probucol
AGI-1067, having the chemical name butanedioic acid, mono[4-[[1-[3,5-bis
(1,1-dimethyethyl)-4-hydroxyphenyl]thio]-1-[methylethylthio]-2,6-bis
(1,1-dimethylethyl)-phenyl]ester, and any stereoisomers, salts, hydrates and/or
crystalline forms thereof.
1.14 "Licensed Product(s)" shall mean any form or dosage of
pharmaceutical composition or preparation in final form for sale by
prescription, over-the-counter or any other method, which contains as an active
ingredient the Licensed Compound and/or any other compound from the Compound
Library, including, without limitation, Combination Products; provided, however,
that Licensed Product shall not include topical dermatological products as
described in Section 2.11(c).
1.15 "Licensor Know-How" shall mean any of Licensor's information and
materials specifically relating to the research, development, registration,
manufacture, marketing, use or sale of Licensed Compound and/or Licensed Product
and/or the Compound Library, and which prior to or during the Term of this
Agreement are developed by or at the request of Licensor, or those of its
Affiliates involved in the performance of development of Licensed Product under
Article 2, or are in Licensor's or such Affiliates' possession or control
through license or otherwise (provided that Licensor is permitted to make
disclosure thereof to Schering without violating the terms of any third party
agreement), and which are not generally known. Licensor Know-How shall include,
without limitation, discoveries, practices, methods, knowledge, Improvements,
processes, formulas, data, ideas, skill, experience, inventions, know-how,
technology, trade secrets, manufacturing procedures, purification and isolation
techniques, instructions, test data and other intellectual property, patentable
or otherwise, relating to Licensed Compound, Licensed Product or any
Improvements. Licensor Know-How shall also include, without limitation:
(i) all biological, chemical, pharmacological, toxicological,
pharmaceutical, physical and analytical, clinical, safety,
manufacturing and quality control data and information related
thereto;
(ii) compositions of matter, assays and biological materials
specifically relating to development, manufacture, use or sale
of any Licensed Compound, Licensed Product or Improvement; and
(iii) all applications, registrations, licenses, authorizations,
approvals and correspondence submitted to or received from any
regulatory authorities
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with jurisdiction in the Territory over an investigational
drug containing Licensed Compound and/or Licensed Product
(including, without limitation, minutes and meeting notes
relating to any communications with any regulatory authority
with jurisdiction in the Territory over an investigational
drug containing Licensed Compound and/or Licensed Product).
1.16 "NDA" shall mean a New Drug Application or its equivalent filed
with the United States Food and Drug Administration seeking approval to market
and sell a Licensed Product in the United States.
1.17 "Net Sales" shall mean the amounts actually received on all sales
of Licensed Product by Schering, its Affiliates or Sublicensees to an
unaffiliated third party, and exclusive of intercompany transfers or
inter-company sales, less the following reasonable and customary deductions from
such gross amounts (to the extent actually taken):
(i) normal and customary trade, cash and quantity discounts,
allowances and credits;
(ii) credits or allowances actually granted for damaged goods,
returns or rejections of Licensed Product and retroactive
price reductions;
(iii) sales taxes, duties or other taxes with respect to such sales
(including duties or other governmental charges levied on,
absorbed or otherwise imposed on the sale of Licensed Product
including, without limitation, value added taxes or other
governmental charges otherwise measured by the billing amount,
when included in billing);
(iv) insurance, postage, customs duties and transportation costs,
when included in billing;
(v) charge back payments and rebates granted to managed health
care organizations or to federal, state and local governments,
their agencies, and purchasers and reimbursers or to trade
customers, including but not limited to, wholesalers and chain
and pharmacy buying groups; and
(vi) rebates (or equivalents thereof) granted to or charged by
national, state or local governmental authorities in countries
other than the United States.
In determining Net Sales of a Licensed Product any of the above discounts shall
be accounted for and apportioned based on the list price of each such Licensed
Product.
In the event that Licensed Product is sold in the form of a Combination
Product containing Licensed Compound and one or more other active ingredients
then Net Sales
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for such Combination Product will be calculated by multiplying actual Net Sales
of such Combination Product by the fraction A/(A+B) where: A is the invoice
price of the Licensed Compound contained in the Combination Product if sold
separately by Schering, an Affiliate or Sublicensee and B is the invoice price
of any other active component or components in the Combination Product if sold
separately by Schering, an Affiliate or Sublicensee. In the event that the
Licensed Product is sold in the form of a Combination Product containing one or
more active ingredients other than Licensed Compound and one or more such active
ingredients of the Combination Product are not sold separately, then the above
formula shall be modified such that A shall be the total cost to Schering, its
Affiliate or Sublicensee(s) of the Licensed Compound and B shall be the total
cost to Schering, its Affiliate or Sublicensee of any other active component or
components in the combination.
1.18 "Patent Rights" shall mean all patents and patent applications in
the Territory which during the Term of this Agreement are owned or controlled
(with the right to grant sublicenses) by Licensor and which contain one or more
claims covering Licensed Compound(s), Licensed Product(s), one or more compounds
contained in Compound Library, or any uses, formulations, processes or methods
of preparing any of the foregoing, or any Improvements, including, but not
limited to, those set forth in Schedule 1.18, any and all substitutions,
divisions, continuations, continuations-in-part, reissues, renewals,
registrations, confirmations, re-examinations, extensions, supplementary
protection certificates or any like filing thereof, and provisional applications
of any such patents and patent applications and any international equivalent of
any of the foregoing.
1.19 "Primary Indication" shall mean the treatment and prevention of
[ * ].
1.20 "Proprietary Information" shall mean all other scientific,
clinical, regulatory, marketing, financial and commercial information or data,
whether communicated in writing, verbally or electronically, which is provided
by one Party to the other Party in connection with this Agreement including,
without limitation, Licensor Know-How. When Propriety Information is disclosed
in a manner other than in writing, it shall be reduced to written form, marked
"Confidential" and transmitted to the receiving Party within [ * ] business days
of disclosure to the receiving Party.
1.21 "Regulatory Approval" shall mean any approvals, including any
NDA's, HRD's, supplements, amendments, pre- and post-approvals, marketing
authorizations based upon such approvals (including any prerequisite
manufacturing approvals or authorizations related thereto) and labeling
approval(s), technical, medical and scientific licenses, registrations or
authorizations of any national, regional, state or local regulatory agency,
department, bureau, commission, council or other governmental entity, necessary
for the development, manufacture, distribution, marketing, promotion, offer for
sale, use, import, export or sale of Licensed Product(s) and/or Licensed
Compound(s) in the Territory.
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1.22 "Secondary Indication" shall mean [ * ].
1.23 "Sublicensee" shall mean any party not an Affiliate of Schering,
which party is authorized by Schering or its Affiliates through express or
implied license or consent to import, export, use, distribute, market, promote,
offer for sale and sell Licensed Product(s) under Section 2.1(b).
1.24 "Territory" shall mean the United States, including its
territories, possessions and commonwealths.
1.25 "Term" shall mean the period described in Section 8.1 of the
Agreement.
1.26 "Valid Claim" shall mean a composition of matter claim, or method
of use claim (or its equivalent) for the Primary Indication and/or the Secondary
Indication, of an issued and unexpired patent in a country in the Territory
which covers the Licensed Compound and/or any other compound from the Compound
Library, which is included within the Patent Rights, and which (i) has not been
revoked or held unenforceable or invalid by a decision of a court or other
governmental agency of competent jurisdiction, unappealable or unappealed within
the time allowed for appeal; or (ii) has not been abandoned, disclaimed, or
admitted to be invalid or unenforceable through reissue or disclaimer or
otherwise.
ARTICLE II
LICENSE; DISCLOSURE OF INFORMATION; DEVELOPMENT AND
COMMERCIALIZATION
2.1 Exclusive License Grant.
(a) License. Subject to the terms and conditions of this
Agreement, Licensor hereby grants to Schering, as of the Effective
Date, an exclusive license (exclusive even as to Licensor) under the
Patent Rights and Licensor Know-How in the Territory to develop, make,
have made, import, export, use, distribute, market, promote, offer for
sale and sell: (i) Licensed Compound(s) and/or Licensed Product(s)
containing Licensed Compound; and (ii) compound(s) in the Compound
Library other than Licensed Compound, and/or Licensed Product(s)
containing such compound(s) for the Primary Indication and the
Secondary Indication.
(b) Co-Exclusive License to Other Indications Subject to the
terms and conditions of this Agreement, Licensor hereby grants to
Schering, as of the Effective Date, a co-exclusive license under the
Patent Rights and Licensor Know-How in the Territory to develop, make,
have made, import, export, use, distribute, market, promote, offer for
sale and sell compound(s) in the Compound Library other than Licensed
Compound, and/or Licensed Product(s) containing
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such compound(s), for any and all indications other than the Primary
Indication and Secondary Indication. The term "co-exclusive license"
shall mean that with respect to the rights granted to Schering under
this Section 2.1(b), Licensor retains the same rights as are granted to
Schering. With respect to a given compound, indication or territory,
each of Licensor and Schering may either directly exercise and exploit
its co-exclusive rights or grant a co-exclusive license under such
rights, either in whole or in part, to one (1) third party or
Affiliate.
(c) Right to Sublicense. The licenses granted to Schering
under Sections 2.1(a) and 2.1(b) shall include the right to grant
sublicenses to Affiliates and/or any third party (to the extent
provided therein), provided that Schering remains responsible to
Licensor under this Agreement for the performance of its Sublicensees.
(d) Retained Rights Subject to the restrictions set forth in
Section 2.11, Licensor retains all rights under the Patent Rights not
expressly granted to Schering by this Section 2.1, and the right to use
Licensor Know-How pursuant to Sections 2.6(h) and 5.1(c) below.
(e) Third Party Agreements. As of the Execution Date, Licensor
is a party to certain agreements (as listed in Schedule 2.1(e),
redacted copies of which have been provided to Schering) with third
parties pursuant to which Licensor has acquired rights to certain
patent applications, patents and technology, which agreements are
relevant to the Patent Rights and/or Licensor Know-How. The parties
acknowledge that the licenses granted to Schering under this Agreement
are subject to the specific rights retained by or granted to the U.S.
Government, and/or the rights for research use retained by such third
parties, under those agreements. In the event that on or after the
Execution Date and during the Term of this Agreement, Licensor acquires
any additional Patent Rights or Licensor Know-How from any third
parties, by assignment, license or otherwise, Licensor shall promptly
notify Schering in writing to that effect, and provide Schering with a
copy (which may be redacted) of the agreement(s) with such third party.
To the extent that the copies of the agreements listed in Schedule
2.1(e) which were provided to Schering, or any other agreements
provided to Schering under this Section 2.1(e), have been redacted,
Licensor represents and warrants that the redacted portions of such
agreements have no material effect on the scope of the licenses or
other rights granted to Schering under this Agreement. Nothing herein
shall be construed as granting to Schering any greater rights under the
Patent Rights and/or Licensor Know-How than those held by Licensor
2.2 Non-Exclusive License Grant. In the event that the development,
making, having made, importing, exporting, use, distribution, marketing,
promotion, offering for sale or sale by Schering, its Affiliates and/or
Sublicensees of Licensed Product in the Territory would infringe during the Term
of this Agreement a claim of an issued letters patent, and/or any patent rights
which Licensor owns or has the rights to license and
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which patents are not covered by the grant in Section 2.1, Licensor hereby
grants to Schering and its Affiliates, to the extent Licensor is legally able to
do so, a non-exclusive, royalty-free license in the Territory under such issued
letters patent solely for Schering, its Affiliates and/or Sublicensees to
discover, develop, make, have made, use, distribute, market, promote, offer for
sale and sell Licensed Compound and/or Licensed Product(s) in the Territory.
2.3 Disclosure of Information. Promptly after the Effective Date,
Licensor shall, at its own cost, disclose to Schering in writing, or via
mutually acceptable electronic media, copies or reproductions of all existing
Licensor Know-How not previously disclosed to Schering in order to enable
Schering to exploit its rights granted under Section 2.1 and, if applicable,
Section 2.2 of this Agreement. In addition, during the Term of this Agreement,
Licensor shall promptly disclose to Schering in writing, or via mutually
acceptable electronic media, on an ongoing basis copies or reproductions of all
new Licensor Know-How that is reasonably necessary for research, development,
registration, manufacture, marketing, use or sale of Licensed Compound and/or
Licensed Product. Such Licensor Know-How and other information shall be
automatically deemed to be within the scope of the licenses granted herein
without payment of any additional compensation. Upon Schering's request but
reasonably subject to Licensor's other business requirements, Licensor shall
provide reasonable technical assistance to enable Schering to utilize such
additional Licensor Know-How, provided, that Schering shall promptly reimburse
Licensor for reasonable out-of-pocket costs and expenses incurred by Licensor in
providing such technical assistance. Licensor shall invoice Schering for such
costs and expenses, and shall provide documentation for the invoice. The invoice
shall be payable to Licensor or its designee(s) [ * ] days after receipt by
Schering of the invoice provided, however, that such cost and out-of-pocket
expenses must be identified prior to being committed to by Licensor and provided
to Schering to determine whether Schering agrees to have the technical
assistance provided at such cost and the final amount sought to be reimbursed
shall not exceed [ * ] of the estimated cost without Schering's prior written
consent. Schering shall be under no obligation to reimburse Licensor for
out-of-pocket costs and expenses incurred by Licensor without Schering's
agreement. Schering shall have the right to use for all purposes in connection
with obtaining any Regulatory Approval for the Licensed Product(s) all Licensor
Know-How and other information, disclosed pursuant to this Section and under
this Agreement.
2.4 HSR Filing and Approvals.
(a) HSR Filing. To the extent necessary, each of Licensor and
Schering shall file, within ten (10) days after the date of this
Agreement, with the Federal Trade Commission (the "FTC") and the
Antitrust Division of the United States Department of Justice (the
"Antitrust Division") any notification and report form (the "Report")
required of it in the reasonable opinion of either or both Parties
under the HSR Act with respect to the transactions as contemplated
hereby and shall cooperate with the other Party to the extent necessary
to assist the other Party in the preparation of its Report and to
proceed to obtain necessary approvals
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under the HSR Act, including but not limited to the expiration or
earlier termination of any and all applicable waiting periods required
by the HSR Act.
(b) Licensor's Obligations. Licensor shall use good faith
reasonable efforts to assist Schering in eliminating any concern on the
part of any court or government authority regarding the legality of the
proposed transaction, including, if required by federal or state
antitrust authorities, Schering's promptly taking all reasonable steps
to secure government antitrust clearance. Licensor shall cooperate in
good faith at its own cost with any government investigation and
promptly produce documents and information demanded by a second request
for documents and of witnesses if requested.
(c) Additional Approvals. Each of Licensor and Schering will
cooperate and use all reasonable efforts to make all other
registrations, filings and applications, to give all notices and to
obtain as soon as practicable all governmental or other consents,
transfers, approvals, orders, qualifications authorizations, permits
and waivers, if any, and to do all other things reasonably necessary or
desirable in Schering's opinion for the consummation of the
transactions as contemplated hereby (including, without limitation,
those acts required to obtain necessary approvals under any foreign
equivalent antitrust statute to the HSR Act or regulation from any
government or regulatory authority having the requisite jurisdiction;
provided, however, that Schering shall promptly reimburse Licensor for
reasonable out-of-pocket costs and expenses incurred by Licensor in
providing such cooperation. Licensor shall invoice Schering for such
costs and expenses, and shall provide supporting documentation for the
invoice. The invoice shall be payable to Licensor or its designee(s)
[ * ] days after receipt by Schering of the invoice.
2.5 Joint Management Committee. The Parties shall establish a Joint
Management Committee (the "JMC") to oversee the development and
commercialization program for Licensed Product for the Primary Indication and
the Secondary Indication, and to facilitate the exchange of information between
the Parties. The JMC will generally serve in an advisory capacity with respect
to the development and commercialization activities to be performed by Schering
under this Agreement, with Schering retaining final decision making authority
with respect to all such matters.
(a) Composition of the JMC. The JMC shall be composed of up to
three (3) representatives from each of Schering and Licensor, and a
quorum shall consist of at least one (1) JMC representative from each
Party. In any matter before the JMC, each Party shall have one (1)
vote, with decisions being made by unanimous decision. Schering shall
seriously consider the recommendations and decisions of the JMC. A
Party's representatives to the JMC shall serve at the discretion of
such Party and may be substituted for or replaced at any time by such
Party. The JMC shall be chaired by a representative of Schering. The
Chairperson shall be responsible for calling meetings, preparing
agendas and
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preparing and issuing minutes of each meeting within [ * ] days
thereafter.
(b) JMC Meetings. The JMC shall meet at least once each
Calendar Quarter during the Term of this Agreement, until such time as
the Parties agree to a more or less frequent meeting schedule. The site
of such meetings shall alternate between the offices of Schering and
Licensor (or any other site mutually agreed upon by the Parties) and
each Party shall bear its own costs of attending such meetings. All
meetings of the JMC shall be summarized in writing and sent to both
Parties and countersigned by both Parties.
(c) JMC Responsibilities. The JMC will be generally
responsible for monitoring the status of Schering's development and
commercialization activities with respect to Licensed Product and for
preparing recommendations for implementation by Schering with regard
to: (i) selection of Licensed Compounds for development by Schering as
Licensed Products for the Primary Indication; (ii) preclinical and
clinical development plans; (iii) development timelines and scheduling;
(iv) strategies for obtaining and maintaining Regulatory Approvals; (v)
marketing and sales strategies for Licensed Product.
(d) Deadlock. In the event that the JMC is unable to reach a
decision by unanimous vote with respect to any matter, then Schering
shall have final decision making authority with respect thereto.
2.6 Schering's Development Obligations.
(a) Schering Diligence. Schering shall, at Schering's expense,
and subject to Licensor's compliance with its obligations under
Sections 2.3 and 2.4, use good faith reasonable efforts to develop,
obtain Regulatory Approval for, and commercialize the Licensed
Product(s) in the Territory for the Primary Indication. Schering shall
have the option, in its sole discretion, to seek Regulatory Approval
for the Licensed Product for any additional indications it determines
are desirable, but shall have no diligence obligations to Licensor with
respect thereto with the exception of those expressly set forth in
Section 2.11(d). The Parties acknowledge and agree that all business
decisions including, without limitation, decisions relating to
Schering's research, development, registration, manufacture, sale,
commercialization, design, price, distribution, marketing and promotion
of Licensed Products covered under this Agreement, shall be within the
sole discretion of Schering. Licensor acknowledges that Schering is in
the business of developing, manufacturing and selling pharmaceutical
products and, subject to the provisions of this Section, nothing in
this Agreement shall be construed as restricting such business or
imposing on Schering the duty to market and/or sell and exploit
Licensed Compound or Licensed Product for which royalties are payable
hereunder to the exclusion of, or in preference to, any other product,
or in any way other than in accordance with its normal commercial
practices.
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(b) Opportunity to Cure. If, in Licensor's reasonable opinion,
Schering fails to comply with any of its diligence obligations under
Sections 2.6(a) and (c), then Licensor shall have the right to give
Schering written notice thereof stating in reasonable detail the
particular failure(s). Schering shall have a period of [ * ] days from
the receipt of such notice to correct the failure or, in the event that
the failure cannot be reasonably cured within a [ * ] day period, then
Schering shall initiate actions reasonably expected to cure the failure
within [ * ] days of receiving notice and shall thereafter diligently
pursue such actions to cure the failure (even if requiring longer than
the [ * ] days specified in Section 8.4(a)(i)). In the event of a
dispute as to whether or not Schering has failed to exercise due
diligence under Sections 2.6(a) and 2.6(c), or whether Schering is
diligently pursuing actions reasonably expected to cure such failure
under this Section 2.6(b), such dispute shall be resolved through
binding arbitration in accordance with Section 9.2.
(c) Research and Development Activities. As of the Effective
Date, Schering shall be responsible, at its cost and expense, and in
its sole judgment, for all research and development activities which
are necessary to obtain Regulatory Approval for a Licensed Product in
the Territory for the Primary Indication and any post-approval studies
required as a condition of obtaining any Regulatory Approval for a
Licensed Product for the Primary Indication. The parties acknowledge
and agree that Schering's obligations under this Section 2.6(c) shall
include all of the costs of conducting the CART Study (whether incurred
before or after the Effective Date) which are estimated at [ * ]. In
addition, Schering shall be responsible for any other studies (or
portions of studies) necessary or desirable, in its sole judgment, for
maintaining any Regulatory Approval (for the Primary Indication or any
other indication for which Schering, in its sole discretion, may decide
to seek Regulatory Approval) in the Territory, as well as any
pre-marketing studies prior to such Regulatory Approval and
post-marketing studies conducted following a Regulatory Approval.
(d) Licensed Product Registrations; Pricing Reimbursement
Approvals. Subject to its diligence obligations set forth in Section
2.6(a), Schering shall be responsible, at its cost and expense, and in
its sole judgment, for determining the appropriate regulatory strategy,
for obtaining and maintaining all Regulatory Approvals and for
obtaining and maintaining any pricing and reimbursement approvals
required for the sale of Licensed Product in the Territory. Each
Regulatory Approval and each pricing and reimbursement approval shall
be placed in Schering's name or the name of a Schering Affiliate unless
applicable law requires, or Licensor and Schering otherwise agree, that
an approval be solely or jointly in the name of Licensor or a
designated Licensor Affiliate. Licensor agrees that notwithstanding
such Regulatory Approval or pricing and reimbursement approval in its
name, Schering retains the exclusive rights to make, have made, import,
export, use, distribute, promote, offer for sale
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and sell Licensed Compound and/or Licensed Product(s) as granted
Schering in Section 2.1.
(e) Data. Schering shall own all data arising out of studies
performed by or on behalf of Schering under this Article II.
(f) Assistance by Licensor. In connection with any NDA, HRD or
other application for Regulatory Approval relating to Licensed Product,
Licensor shall, at Schering's request, provide to Schering in a prompt
manner responses to questions which have been raised by any regulatory
authority in connection with such application for Regulatory Approval
and further provide to Schering estimates of Licensor's [ * ] costs for
rendering such assistance. Licensor shall assist Schering from time to
time, at Schering's request, in the design and implementation of
clinical studies. Subject to Licensor's rights under Section 3.3(b),
Licensor shall assist Schering to enable Schering to self-source bulk
material for the manufacture of Licensed Compound and/or Licensed
Product; provided, however, that Schering shall have no obligation
whatsoever to purchase any bulk material or Licensed Compound from
Licensor.
(g) Reimbursement of Costs by Schering
(i) Schering shall reimburse Licensor for its
reasonable [ * ] costs and expenses incurred in rendering
assistance under Section 2.6(f) (but no more than [ * ] of
those costs which Licensor estimated, as provided above, that
the work would cost unless Schering provides written
approval). Licensor shall invoice Schering for such costs and
expenses, and shall provide documentation for the invoice. The
invoice shall be payable to Licensor or its designee(s) [ * ]
days after receipt by Schering of the invoice, provided,
however, that Schering shall be under no obligation to
reimburse Licensor for [ * ] costs and expenses incurred by
Licensor without Schering's agreement.
(ii) Schering shall reimburse Licensor for its
reasonable [ * ] costs and expenses incurred in performing
research and development activities under Section 2.6 (h) (but
no more than [ * ] of those costs which Licensor estimated, as
provided below, that the work would cost unless the JMC
provides written approval). Licensor shall invoice Schering
for such costs and expenses, and shall provide documentation
for the invoice. The invoice shall be payable to Licensor or
its designee(s) [ * ] days after receipt by Schering of the
invoice, provided, however, that Schering shall be under no
obligation to reimburse Licensor for research and development
costs and expenses incurred by Licensor without the prior
approval of the JMC.
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(h) Licensor's Additional Development Obligations. In addition to
Licensor's obligations under Section 2.6(f), the JMC will assign to Licensor the
responsibility to conduct, on Schering's behalf and at Schering's expense,
certain of the research and development activities, including clinical studies
involving Licensed Product, for which Schering is responsible under Section
2.6(c). The nature and extent of the research and development activities to be
conducted by Licensor is generally set forth in Schedule 2.6(h). The JMC shall
determine the specific aspects of such activities, including the timing and
costs of the work to be performed by Licensor. Licensor agrees to use good faith
reasonable efforts to complete such activities in the manner determined by the
JMC, and shall have the right to utilize contract research organizations and
other third party contractors in the performance of such activities, provided
that Licensor shall remain responsible for the performance of all such
contractors. To the extent that Licensor utilizes third party contractors to
perform such activities, Licensor shall enter into suitable agreements with such
contractors, which agreements shall incorporate provisions consistent with the
terms and conditions of this Agreement, including, without limitation,
provisions governing confidentiality, ownership of data, inventions and other
intellectual property arising from such activities, financial obligations and
termination rights. Licensor shall keep the JMC informed with regard to such
third party contracts and shall provide Schering with a copy of all such
agreements. Any research and development activities conducted by Licensor or its
contractors pursuant to this Section 2.6(h) shall be performed in accordance
with good laboratory practices and good clinical practices, and in compliance
with all applicable laws, rules and regulations in the U.S. and the EU, and
shall meet current regulatory standards. Schering shall promptly notify Licensor
in the event that Schering reasonably determines that all or any part of the
work performed by Licensor and/or its contractors under this Section 2.6(h)
fails to meet such standards. If Licensor reasonably disagrees with such
determination, the parties shall refer the matter to an independent expert
(selected by mutual agreement of the parties) to determine whether or not the
study must be repeated to support Regulatory Approval for Licensed Product. In
the event that Licensor and/or the independent expert agrees with Schering's
determination and such studies are repeated, then Schering shall have the right
to deduct the [ * ] costs of repeating such work from the [ * ] payments due
Licensor under this Agreement.
(i) Adverse Event Reporting Licensor shall promptly report to Schering
any information regarding adverse events related to the use of the Licensed
Product in accordance with the Adverse Event Reporting Procedures (as may be
amended from time to time upon mutual agreement) set forth in Schedule 2.6(i)
and incorporated herein by reference. To the extent that Licensor holds any INDs
or otherwise has any adverse event reporting obligations with respect to
Licensed Product, Schering shall promptly report to Licensor any information
regarding adverse events related to the use of Licensed Product in accordance
with such Adverse Event Reporting Procedures.
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2.7 Independent Discoveries by Schering. Licensor acknowledges that
Schering and/or its Affiliates have ongoing research programs which may now or
in the future independently discover, develop and/or acquire technologies and/or
products relating to treatment and prevention of any disease, disorder or
condition in humans or animals. Licensor agrees that such technologies and
products, to the extent discovered without use of Licensor Know-How, will not be
deemed to be Licensor Know-How and are outside the scope of this Agreement.
2.8 Excused Performance. In addition to the provisions of Article
VIII and Section 9.9, the obligations of Schering with respect to a Licensed
Product under Sections 2.6(a), 2.6(c), 2.6(d) and 2.11(d) are expressly
conditioned upon the continuing absence of any adverse condition or event which
warrants a delay in commercialization of a Licensed Product including, but not
limited to, an adverse condition or event relating to the safety or efficacy of
a Licensed Product or unfavorable labeling, pricing or pricing reimbursement
approvals, or lack of Regulatory Approval, and the obligation of Schering to
develop or market any such Licensed Product shall be delayed or suspended so
long as in Schering's reasonable opinion any such condition or event exists.
2.9 Supply of Licensed Compound/Licensed Product. Licensor shall be
responsible, at Licensor's expense, for supplying Schering with Licensed
Compound (in the form of bulk active), from Licensor's existing inventory of
Licensed Compound, to enable Schering to perform [ * ], for such Licensed
Compound for the Primary Indication. In addition, Licensor has the limited
option to supply all of Schering's requirements of Licensed Products as set
forth in Section 3.3(b). All Licensed Compound to be supplied by Licensor
hereunder shall be delivered FCA (Kenilworth, New Jersey) (Incoterms 1990) via a
carrier to be specified by Schering. Licensor warrants and represents that all
supplies of Licensed Compound provided to Schering by Licensor shall conform to
the applicable specifications for such Licensed Compound and were prepared in
accordance with current Good Manufacturing Practices ("cGMPs") and other
applicable federal, national, state and local laws and regulations in effect at
the time of manufacture. Schering shall be responsible for the formulation and
packaging of the Licensed Compound provided by Licensor hereunder, and for
manufacture and supply of all Licensed Compound and/or Licensed Product
necessary for the performance of [ * ] and for supplying all commercial
quantities of Licensed Compound and Licensed Products. Licensor shall transfer
to Schering all Licensor Know-How relating to the manufacture of Licensed
Compound, and at Schering's request and expense shall provide reasonable
technical support to facilitate the implementation of such manufacturing
technology at Schering.
2.10 Reports. Schering shall provide Licensor with quarterly reports of
the status of the research and development activities and progress of any
application for Regulatory Approval, as applicable, in connection with Licensed
Product in the Territory. Further, Schering shall inform Licensor of
commencement, completion, and results of the major phases of clinical
development of Licensed Product, including but not limited to Phase II and Phase
III clinical trials, NDA and HRD submissions, NDA and HRD filings,
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approvable and approval letters, and launch.
2.11 Non-Compete Provision. Subject to the terms of Section 9.1(b),
Licensor and its Affiliates shall be subject to the non-compete obligations set
forth in this Section 2.11.
(a) During the Term of this Agreement, Licensor shall not
undertake a development program for, or commercialize, either on its
own or in collaboration with any third party:
[ * ]
[ * ]
[ * ]
(b) For the period extending from the Effective Date until the
earlier of [ * ] years after the First Commercial Sale of Licensed
Product in the Territory or [ * ], licensor shall not, either on its
own or in collaboration with any third party:
[ * ]
[ * ]
(c) The foregoing notwithstanding, Licensor shall at all times
retain the right to develop and commercialize topical products
containing any compound other than the Licensed Compound for the
treatment or prevention of dermatological conditions, diseases or
disorders. In addition, Licensor shall have the right at all times to
enter into agreements with third parties relating to the performance by
Licensor of pre-clinical research activities with respect to compounds
owned or controlled by such third parties, provided that such compounds
do not compete through the same mechanism of action with the Licensed
Compound (as determined using the same criteria as set forth in Section
6.2(k)) with respect to the Primary Indication and/or the Secondary
Indication.
(d) Licensor's non-compete obligations under Section
2.11(b)(ii) are expressly conditioned upon Schering's initiating a
development program for Licensed Product for the Secondary indication
within [ * ] years after the Effective Date, and thereafter using good
faith reasonable efforts to develop and commercialize one or more
Licensed Products for the Secondary Indication.
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ARTICLE III
PAYMENTS; ROYALTIES AND REPORTS
3.0 Coordination of Payments under the International Agreement. The
license fee, milestone payments and royalties payable by Schering under this
Article III are in consideration for the rights and licenses granted to Schering
under this Agreement and are in addition to any amounts payable to Licensor
under the International Agreement. It is understood and agreed that, with
respect to the development milestone payable under Section 3.2(a)(i) and the
sales milestones payable under Section 3.2(b) the occurrence of one or more of
such milestone events will result in milestone payment obligations under both
this Agreement and the corresponding provisions of the International Agreement.
It is further understood that Schering's financial obligations with respect to
development costs under Article II shall be [ * ] apportioned between Schering
and the corresponding obligations of Schering-Plough Ltd. under the
International Agreement.
3.1 License Fee. In partial consideration for the licenses and other
rights granted to Schering hereunder, Schering shall pay to Licensor a license
fee ("License Fee") of [ * ], which payment shall be due within [ * ] business
days following the Effective Date.
3.2 Milestone Payments. In partial consideration for the licenses and
other rights granted to Schering hereunder, Schering shall promptly notify
Licensor in writing upon the occurrence of an event triggering one of the
milestone payments set forth in this Section 3.2, and within [ * ] days after
the occurrence of such event pay to Licensor the applicable milestone payment.
(a) Development Milestones:
(i) [ * ]
(ii) [ * ]
(iii) [ * ]
(b) Sales Milestones:
(i) [ * ]
(ii) [ * ]
(iii) [ * ]
(iv) [ * ]
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The foregoing sales milestone payments are in addition to any royalty
payments due Licensor under Section 3.3 with respect to sales of
Licensed Product. For purposes of clarity, the parties acknowledge that
(1) the first achievement of more than one of the above sales
milestones in the same Calendar Year shall not affect Schering's
obligation to make the relevant sales milestone payments to Licensor,
and (2) annual worldwide sales of the Licensed Product shall be
determined based upon the aggregate total of sales in the Territory
under this Agreement and sales in countries outside the Territory under
the International Agreement.
(c) Limitations. Except as expressly set forth below, each
development milestone payment under Section 3.2(a) and each sales
milestone payment under Section 3.2(b) shall be payable one (1) time
only on the first occurrence of the indicated event regardless of the
number of times the event triggering the payment of such milestone
occurs. The development milestone payment set forth in Section
3.2(a)(iii) for U.S. Regulatory Approval of a Licensed Product shall be
payable for the first Licensed Product developed by Schering and
thereafter shall again be payable for each successive Licensed Product
successfully developed by Schering which contains as the active
ingredient a different compound from the Compound Library. For purposes
of clarity and avoidance of doubt, the parties acknowledge that
development milestone 3.2(a)(iii) will not be triggered by repeated
occurrences of that milestone event involving different Licensed
Products containing the same compound from the Compound Library. If the
triggering event for a given milestone payment does not occur prior to
the effective date of termination, or the expiration, of this
Agreement, Schering shall have no obligation to pay such milestone
payment to Licensor. The Parties acknowledge and agree that nothing
herein shall be construed as representing an estimate or projection of
anticipated sales or the actual value of Licensed Compounds or Licensed
Products, and the figures set forth in Section 3.2(b) are merely
intended to define Schering's obligations to Licensor in the event such
sales performance is achieved.
3.3 Royalties. In further consideration for the licenses granted to
Schering hereunder, for so long as the Licensed Product is covered by a Valid
Claim in the Territory at the time of sale by Schering, and subject to the
provisions of Section 3.3 (a)-(c), Schering shall pay to Licensor royalties on a
country-by-country basis of [ * ] of Schering's, its Affiliates' or its
Sublicensees' Net Sales of Licensed Product in the Territory. With respect to
countries in the Territory where no such Valid Claim exists, the royalty rate
shall be [ * ], and such royalties shall be paid for [ * ] years from the first
commercial sale of Licensed Product in such country. No royalties shall be due
upon the sale or other transfer among Schering, its Affiliates or Sublicensees,
but in such cases the royalty shall be due and calculated upon Schering's or its
Affiliates' or its Sublicensees' Net Sales to the first independent third party.
No royalties shall accrue on the disposition of Licensed Product by Schering,
its Affiliates or Sublicensees as samples (promotion or otherwise) or as
donations (for example, to non-profit institutions or government agencies for a
non-commercial purpose) or for clinical studies. Such
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dispositions by Schering shall not be included in the determination of Net Sales
during the period of time in which such third party sales are occurring.
(a) Cap on Royalties Plus Cost of Goods. The parties
acknowledge and agree that the total of (i) royalties payable by
Schering to Licensor under this Agreement, and (ii) the Cost of Goods
of Licensed Product manufactured by Schering and/or paid by Schering to
third parties for the manufacture of Licensed Product, shall not exceed
[ * ] of Net Sales of Licensed Product. Schering shall use good faith
reasonable efforts to keep the Cost of Goods of Licensed Product from
exceeding [ * ] of Net Sales. Schering shall determine the Cost of
Goods for the Licensed Product in a timely manner, and in no event
later than [ * ]. In the event that notwithstanding such efforts by
Schering the Cost of Goods for Licensed Product does exceed [ * ] of
Net Sales, then Schering shall notify Licensor in writing to that
effect. Following receipt of such notice, Licensor shall have the right
to have an independent auditor review Schering's relevant records and
make an independent determination of the Cost of Goods for the Licensed
Product. Any such audit shall be conducted under terms and conditions
essentially the same as those set forth in Section 3.7.
(b) Licensor's Option to Manufacture. In the event that
Schering's Cost of Goods for the Licensed Product is correctly
determined to exceed [ * ] of Net Sales, Licensor shall have the right
to manufacture and supply, or to seek a third party supplier able to
manufacture and supply, Schering's requirements of Licensed Product at
a Cost of Goods equal to or less than [ * ] of Net Sales for Licensed
Product. If Licensor is able, or locates a third supplier able, to
manufacture and supply Licensed Product at a Cost of Goods equal to or
less than [ * ] of Net Sales, Schering shall in good faith negotiate
and enter into a suitable supply agreement with Licensor or such third
party, as appropriate, for the manufacture and supply of Licensed
Product. Any such agreement shall include terms obligating Schering to
purchase, and Licensor or the third party to manufacture and supply,
all of Schering's requirements of Licensed Product at a Cost of Goods
to be agreed upon, not to exceed [ * ] of Net Sales of Licensed
Product. All supplies of Licensed Product to be provided to Schering by
Licensor or such third party manufacturer pursuant to this Section
3.3(b) shall be manufactured at a qualified manufacturing site, shall
conform to the applicable specifications for Licensed Product and shall
be prepared in accordance with cGMPs and all applicable federal,
national, state and local laws and regulations in effect at the time of
manufacture.
(c) Royalty Reduction. In the event that Schering's Cost of
Goods for Licensed Product are correctly determined to exceed [ * ] of
Net Sales of Licensed Product and Licensor is unable to identify a
third party capable of supplying Schering's requirements of Licensed
Product at a price equal to or less than [ * ] of Net Sales of Licensed
Product, then Schering shall remain responsible for the manufacture and
supply of Licensed Product and the royalty
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rate to be paid by Schering under this Section 3.3 shall be reduced so
that the total of (i) royalties payable by Schering to Licensor under
this Agreement, and (ii) the Cost of Goods of Licensed Product
manufactured by Schering and/or paid by Schering to third parties for
the manufacture of Licensed Product, is equal to [ * ] of Net Sales of
Licensed Product. Notwithstanding the foregoing, the royalty payable to
Licensor under this Agreement shall not be reduced pursuant to this
Section 3.3(c) to less then [ * ] where a Valid Claim exists, or [ * ]
where no Valid Claim exists.
3.4 Third Party Licenses. In the event that Schering's outside patent
counsel determines that patent licenses from third parties are required by
Schering, its Affiliates or its Sublicensees in order to discover, develop,
make, have made, import, export, use, distribute, promote, market, offer for
sale or sell Licensed Compound and/or Licensed Product (hereinafter "Third Party
Licenses"), Schering shall provide Licensor with written notice to that effect
and shall be solely responsible for acquiring such licenses at Schering's sole
discretion. Schering may reduce any royalty otherwise due Licensor hereunder to
reimburse it for royalties and or license fees actually paid to such third
parties under any Third Party Licenses of patent claims which would be infringed
by the manufacture, use, import, export or sale of Licensed Compound and/or
Licensed Product in the Territory. Schering shall have no right to reduce any
royalty due Licensor hereunder for any amounts paid to a third party under any
Third Party License to the extent it is a license to technology (other than
Licensor Know-How) or materials (other than Licensed Compound) selected by
Schering for use in connection with the Licensed Product. The amount of
reduction of royalties due Licensor and the amount of reimbursement to Schering
shall be equal to [ * ] of the royalties or license fees paid to such third
parties in consideration for the Third Party License but in no event shall the
royalty due Licensor for any Licensed Product in any country be thereby reduced
to less than [ * ] of the royalty rate otherwise due Licensor hereunder for such
Licensed Product in such country.
3.5 Compulsory Licenses. If a compulsory license is granted under the
Patent Rights to a third party with respect to Licensed Compound and/or Licensed
Product in any country in the Territory with a royalty rate lower than the
royalty rate provided for under Section 3.3, then the royalty rate to be paid by
Schering on Net Sales in that country under Section 3.3 shall be reduced to the
rate paid by the compulsory licensee for so long as such compulsory license is
in effect.
3.6 Reports; Payment of Royalty; Payment Exchange Rate and Currency
Conversions.
(a) Royalties Paid Quarterly. Within [ * ] calendar days
following the close of each Calendar Quarter, following the First
Commercial Sale of a Licensed Product, Schering shall furnish to
Licensor a written report for the Calendar Quarter showing the Net
Sales of Licensed Product(s) sold by Schering, its Affiliates and its
Sublicensees in the Territory during such Calendar
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Quarter and the royalties payable under this Agreement for such
Calendar Quarter. Simultaneously with the submission of the written
report, Schering shall pay to Licensor, for the account of Schering or
the applicable Affiliate or Sublicensee, as the case may be, a sum
equal to the aggregate royalty due for such Calendar Quarter calculated
in accordance with this Agreement (reconciled for any previous
overpayments or underpayments).
(b) Method of Payment. Payments to be made by Schering to
Licensor under this Agreement shall be paid by bank wire transfer in
immediately available funds to such bank account as is designated in
writing by Licensor from time to time. Royalties shall be deemed
payable by the entity making the Net Sales from the country in which
earned in local currency and subject to foreign exchange regulations
then prevailing. Royalty payments shall be made in United States
dollars to the extent that free conversions to United States dollars is
permitted. The rate of exchange to be used in any such conversion from
the currency in the country where such Net Sales are made shall be the
rate of exchange used by Schering Corporation for reporting such sales
for United States financial statement purposes. If, due to restrictions
or prohibitions imposed by national or international authority,
payments cannot be made as aforesaid, the Parties shall consult with a
view to finding a prompt and acceptable solution, and Schering will
deal with such monies as Licensor may lawfully direct at no additional
out-of-pocket expense to Schering. Notwithstanding the foregoing, if
royalties in any country cannot be remitted to Licensor for any reason
within [ * ] months after the end of the Calendar Quarter during which
they are earned, then Schering shall be obligated to deposit the
royalties in a bank account in such country in the name of Licensor.
3.7 Maintenance of Records; Audits.
(a) Record Keeping by Schering. Schering and its Affiliates
shall keep complete and accurate records in sufficient detail to enable
the royalties payable hereunder to be determined. Upon [ * ] days prior
written notice from Licensor, Schering shall permit an independent
certified public accounting firm of nationally recognized standing
selected by Licensor, at Licensor's expense, to have access during
normal business hours to examine pertinent books and records of
Schering and/or its Affiliates as may be reasonably necessary to verify
the accuracy of the royalty reports hereunder. The examination shall be
limited to pertinent books and records for any year ending not more
than [ * ] months prior to the date of such request. An examination
under this Section 3.7(a) shall not occur more than once in any
Calendar Year. Schering may designate competitively sensitive
information, which such auditor may not disclose to Licensor; provided,
however, that such designation shall not encompass the auditor's
conclusions. The accounting firm shall disclose to Licensor only
whether the royalty reports are correct or incorrect and the specific
details concerning any discrepancies. No other information shall be
provided to
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Licensor. All such accounting firms shall sign a confidentiality
agreement (in form and substance reasonably acceptable to Schering) as
to any of Schering's or its Affiliate's confidential information which
they are provided, or to which they have access, while conducting any
audit pursuant to this Section 3.7(a).
(b) Underpayments/Overpayments. If such accounting firm
correctly concludes that additional royalties were owed during such
period, Schering shall pay the additional royalties within [ * ] days
of the date Licensor delivers to Schering such accounting firm's
written report so correctly concluding. If such underpayment exceeds
[ * ] of the royalty correctly due Licensor then the fees charged by
such accounting firm for the work associated with the underpayment
audit shall be paid by Schering. Any overpayments by Schering will be
credited against future royalty obligations. In the event that
Schering disagrees with the audit report and the chief financial
officers of Schering and Licensor (or their designees) fail to resolve
such disagreement, the dispute will be resolved through the dispute
resolution mechanism set forth in Section 9.2.
(c) Record Keeping by Sublicensee. Schering shall include in
each sublicense granted by it pursuant to this Agreement a provision
requiring the Sublicensee to make reports to Schering, to keep and
maintain records of sales made pursuant to such sublicense and to grant
access to such records by Licensor's independent accountant to the same
extent required of Schering under this Agreement.
(d) Confidentiality. Licensor shall treat all financial
information subject to review under this Section 3.7, or under any
sublicense agreement, in accordance with the confidentiality provisions
of this Agreement, and shall cause its accounting firm to enter into an
acceptable confidentiality agreement with Schering obligating it to
retain all such financial information in confidence pursuant to such
confidentiality agreement.
(e) Binding Records. Upon the expiration of [ * ] months
following the end of any Calendar Year, the calculation of royalties
payable under this Agreement with respect to such year shall be binding
and conclusive upon the Parties, and Schering, its Affiliates and its
Sublicensees shall be released from any liability or accountability
with respect to royalties for such Calendar Year.
3.8 Income Tax Withholding. If at any time, any jurisdiction within the
Territory requires the withholding of income taxes or other taxes imposed upon
payments set forth in this Article III, Schering shall make such withholding
payments as required and subtract such withholding payments from the payments
set forth in this Article III, or if applicable, Licensor will promptly
reimburse Schering or its designee(s) of the amount of such payments, it being
understood that such withholding taxes are the obligation of Licensor. Schering
shall provide Licensor with documentation of such withholding and payment in a
manner that is satisfactory for purposes of the U.S. Internal Revenue
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Service. Any withholdings paid when due hereunder shall be for the account of
Licensor and shall not be included in the calculation of Net Sales. Payments of
withholding taxes made by Schering pursuant to this Section 3.8 will be made
based upon financial information to be provided to Schering by Licensor and, to
the extent that such information is incorrect or incomplete, Licensor shall be
liable for any fine, assessment or penalty, or any deficiency, imposed by any
taxing authority in the Territory for any deficiency in the amount of any such
withholding or the failure to make such withholding payment. If Schering is
required to pay any such deficiency, or any such fine, assessment or penalty for
any such deficiency, Licensor shall promptly reimburse Schering for such
payments, which shall not be included in the calculation of Net Sales.
3.9 Direct Affiliate Licenses. Whenever Schering shall reasonably
demonstrate to Licensor that, in order to facilitate direct royalty payments by
an Affiliate, it is desirable that a separate license agreement be entered into
between Licensor and such Affiliate, Licensor will grant such licenses directly
to such Affiliate by means of an agreement which shall be consistent with all of
the provisions hereof, provided that Schering guarantees the Affiliate's
obligations thereunder.
ARTICLE IV
PATENTS
4.1 Filing, Prosecution and Maintenance of Patents. Licensor agrees to
diligently file, prosecute and maintain in the Territory, at Licensor's expense,
all Patent Rights owned in whole or in part by Licensor and licensed to Schering
under this Agreement, including without limitation, any Patent Rights covering
any Improvement(s). Schering shall determine the country(ies) in the Territory
with respect to which Schering desires Licensor to perform such activities and
will promptly notify Licensor to that effect. All such determinations shall be
made by Schering in accordance with its standard practices with respect to the
filing, prosecution and maintenance of patents, and Licensor's obligation to
file, prosecute and maintain each patent application or patent within the Patent
Rights under this Section 4.1 shall be limited to those countries selected by
Schering for such patent application or patent. Licensor shall supply Schering
with a copy of the applications as filed, together with notice of its filing
date and serial number. Licensor shall keep Schering regularly advised of the
status of pending patent applications (including, without limitation, the grant
of any Patent Rights), and upon the written request of Schering shall provide
copies of any substantive papers provided to or received from government patent
authorities related to the filing, prosecution and maintenance of such patent
filings. Schering shall treat all information, papers, and other materials
provided by Licensor pursuant to this Section 4.1 in accordance with the
confidentiality provisions of this Agreement.
4.2 Option of Schering to Prosecute and Maintain Patents. Licensor
shall give [ * ] days prior written notice to Schering of any desire to cease
prosecution and/or maintenance of a particular Patent Right and, in such case,
shall permit Schering, at its sole discretion, to continue prosecution or
maintenance at its own expense. If Schering
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elects to continue prosecution or maintenance, Licensor shall execute such
documents and perform such acts, at Schering's expense, as may be reasonably
necessary to effect an assignment of such Patent Rights to Schering. Any such
assignment shall be completed in a timely manner to allow Schering to continue
such prosecution or maintenance. Any patents or patent applications so assigned
shall not be considered Patent Rights.
4.3 Enforcement.
(a) Notice and Discontinuance of Infringement. In the event
that either Schering or Licensor becomes aware of any third party
infringement within the Territory of any Valid Claim, it will notify
the other Party in writing to that effect. Any such notice shall
include evidence to support an allegation of infringement by such third
party. Licensor shall have a period of [ * ] months from the date of
said notice to obtain a discontinuance of such infringement or bring
suit against the third party infringer. Licensor shall bear all the
expenses of any suit brought by it. Schering shall have the right,
prior to commencement of the trial, suit or action brought by Licensor,
to join any such suit or action, and in such event shall pay one-half
of all costs of such suit or action. In the event that Schering has
joined in the action and shared in the costs thereof as set forth
above, no settlement, consent judgment or other voluntary final
disposition of the suit may be entered into without the consent of
Schering. In the event that Schering has not joined the suit or action,
Schering will reasonably cooperate with Licensor in any such suit or
action and shall have the right to consult with Licensor and be
represented by its own counsel, provided that Licensor shall
periodically reimburse Schering for its out-of-pocket costs (excluding
the costs of retaining its own outside counsel) incurred in cooperating
with Licensor. Any recovery or damages derived from any suit under this
Section 4.3(a) where Schering has joined and shared costs shall be used
first to reimburse each of Licensor and Schering for its documented
out-of-pocket legal expenses relating to the suit, shall be used second
to reimburse Licensor for royalties lost as a result of reduced sales
of Licensed Product, shall be used third to reimburse Schering for
amounts attributed to Schering's lost profits, with any remaining
amounts, including but not limited to punitive, exemplary, or other
enhanced damages, to be shared [ * ] by the Parties. Any recovery or
damages derived from a suit which Schering has not joined shall be
retained by Licensor.
(b) Continuance of Infringement. If Licensor has neither
obtained a discontinuance of such infringement nor brought suit against
such infringer after the expiration of the [ * ] period specified in
Subsection 4.3(a), Schering shall have the right, but not the
obligation, to bring suit against such infringer under the Patent
Rights and join Licensor as a party plaintiff, provided that Schering
shall bear all the expenses of such suit. Licensor shall cooperate with
Schering in any such suit for infringement of a Patent Right brought by
Schering against a third party, and shall have the right to consult
with Schering and to participate in and be represented by independent
counsel in such litigation at its own expense.
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Schering shall periodically reimburse Licensor for its out of pocket
costs (excluding Licensor's costs of retaining independent counsel)
incurred in cooperating with Schering. Schering shall incur no
liability to Licensor as a consequence of such litigation or any
unfavorable decision resulting therefrom, including any decision
holding any of the Patent Rights invalid or unenforceable, except that
Schering shall indemnify and hold Licensor harmless for any monetary
judgment or award against or penalty levied upon either Licensor or
Schering arising out of Schering's acts in the enforcement of such
Patent Rights. In the event that Schering recovers any sums through
litigation under this Section 4.3(b) by way of damages or in settlement
thereof, Schering shall retain all such sums.
4.4 Third Party Infringement Suit.
(a) Defense. In the event that a third party sues Schering
alleging that Schering's, its Affiliates' or its Sublicensees' making,
having made, importing, exporting, using, distributing, marketing,
promoting, offering for sale or selling Licensed Compound and/or
Licensed Product in one or more countries in the Territory infringes or
will infringe said third party's patent, then Schering may elect to
defend such suit at its sole expense and discretion. To the extent that
the alleged infringement is based upon the use of Licensed Compound,
another compound from the Compound Library or the Licensor Know-How,
Schering shall have no obligation to pay royalties to Licensor under
Section 3.3 with respect to sales of Licensed Product in such
country(ies) during the pendency of any such suit. Upon Schering's
request and in connection with Schering's defense of any such third
party infringement suit, Licensor shall cooperate with Schering for
such defense provided, that Schering shall promptly reimburse Licensor
for reasonable out-of-pocket costs and expenses incurred by Licensor in
providing such cooperation (excluding Licensor's costs of retaining
independent counsel). Licensor shall invoice Schering for such costs
and expenses, and shall provide documentation for the invoice. The
invoice shall be payable to Licensor or its designee(s) [ * ] days
after receipt by Schering of the invoice.
(b) Licensing. Schering shall have the right to negotiate with
said third party for a suitable license or assignment of rights under
the relevant patents. In the event that such negotiation results in a
consummated agreement, then any lump sum payment and/or royalty
payments to be made thereunder shall be paid by Schering and shall be
offset against any royalties due Licensor in accordance with the terms
of Article 3.4.
4.5 Certification Under Drug Price Competition and Patent Restoration
Act. Licensor and Schering each shall immediately give written notice to the
other of any certification of which they become aware filed pursuant to 21
U.S.C. ss.355(b)(2)(A)(iv) and 355(j)(2)(A)(vii), or any amendment or successor
statute thereto, claiming that Patent Rights covering Licensed Compound and/or
Licensed Product(s) are invalid or that infringement will not arise from the
manufacture, use or sale of a product containing
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Licensed Compound or otherwise equivalent to Licensed Product by a third party.
Notwithstanding any provision to the contrary, in the event that the Patent
Rights at issue are owned and/or controlled by Licensor and Licensor has failed
to bring an infringement action against such third party at least [ * ] business
days prior to expiration of the forty five (45) day period set forth in 21
U.S.C. ss.355(c)(3)(C) (or any amendment or successor statute thereto), Schering
shall have the right to bring such an infringement action, in its sole
discretion and at its own expense, in its own name and/or in the name of
Licensor. At Schering's request, Licensor shall, at its own expense, provide
Schering reasonable assistance to conduct such infringement action, including,
without limitation, causing the execution of such legal documents as Schering
may deem necessary for the prosecution of such action. Schering shall
periodically reimburse Licensor for its out-of-pocket costs (excluding any of
Licensor's costs of retaining independent counsel) incurred in assisting
Schering. Schering shall incur no liability to Licensor as a consequence of such
litigation or any unfavorable decision resulting therefrom, including any
decision holding any of the Patent Rights invalid or unenforceable, except that
Schering shall indemnify and hold Licensor harmless for any monetary judgment or
award against or penalty levied upon either Licensor or Schering arising out of
Schering's acts in the enforcement of such Patent Rights. In the event that
Schering recovers any sums in such litigation by way of damages or in settlement
thereof, Schering shall have the right to retain all such sums to offset its
costs, losses and expenses.
4.6 Abandonment. Subject to Schering's rights pursuant to Section 4.2,
Licensor shall at the earliest known date give notice to Schering of the grant,
lapse, revocation, surrender, invalidation or abandonment of any Patent Rights
licensed to Schering for which Licensor is responsible for the filing,
prosecution and maintenance under this Agreement.
4.7 Patent Term Restoration. The Parties hereto shall cooperate with
each other in obtaining patent term restoration or its equivalent in the
Territory where applicable to Patent Rights. In the event that elections with
respect to obtaining such patent term restoration are to be made, Schering shall
have the right to make the election and Licensor agrees to abide by such
election.
4.8 Notices Regarding Patents. All notices, inquiries and
communications in connection with this Article IV shall be sent in the manner
set forth in Section 9.7 to the Parties at the addresses and facsimile numbers
indicated below.
If to Licensor: AtheroGenics, Inc.
8995 Westside Parkway
Alpharetta, Georgia 30004
Attn.: Vice President, Business Development
(with a copy to: President)
Fax No.: (678) 336-2501
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If to Schering: Schering Corporation
2000 Galloping Hill Road
Kenilworth, New Jersey 07033
Attn.: Staff Vice President - Patents and Trademarks
Fax No.: (908) 298-5388
ARTICLE V
CONFIDENTIALITY AND PUBLICATION
5.1 Confidentiality.
(a) Nondisclosure Obligation. Each of Licensor and Schering
shall use only in accordance with this Agreement, and shall not
disclose to any third party, any of the other Party's Proprietary
Information received by it pursuant to this Agreement without the prior
written consent of the other Party. The foregoing obligations shall
survive the expiration or termination of this Agreement for a period of
[ * ] years. These obligations shall not apply when and to the extent
Proprietary Information:
(i) is known by the receiving Party at the time of
its receipt, and not through a prior disclosure by the
disclosing Party, as documented by business records;
(ii) is at the time of disclosure or thereafter
becomes published or otherwise part of the public domain
without breach of this Agreement by the receiving Party;
(iii) is subsequently disclosed to the receiving
Party by a third party that has the right to make such
disclosure;
(iv) is developed by the receiving Party
independently of Proprietary Information or other information
received from the disclosing Party and such independent
development can be documented by the receiving Party;
(v) is disclosed to any institutional review board of
any entity conducting clinical trials, or any governmental or
other regulatory agencies in order to obtain patents, to gain
approval to conduct clinical trials or to market Licensed
Compound and/or Licensed Product, but such disclosure may be
made only to the extent reasonably necessary to obtain such
patents or authorizations; or
(vi) is required by law, regulation, rule, act or
order of any governmental authority or agency to be disclosed
by a Party, provided that
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notice is promptly delivered to the other Party in order to
provide an opportunity to seek a protective order or other
similar order with respect to such Proprietary Information and
thereafter the disclosing Party discloses to the requesting
entity only the minimum Proprietary Information required to be
disclosed in order to comply with the request, whether or not
a protective order or other similar order is obtained by the
other Party.
(b) Disclosure to Agents. Notwithstanding the provisions of
Section 5.1(a), Schering shall have the right to disclose Licensor's
Proprietary Information to its Sublicensees, agents, consultants,
Affiliates or other third parties (collectively "Agents") in accordance
with this Section 5.1(b). Such disclosure shall be limited only to
those Agents directly involved in the research, development,
manufacture, marketing or promotion of Licensed Compound or Licensed
Product (or for such Agents to determine their interest in performing
such activities) in accordance with this Agreement. Any such Agents
must agree in writing to be bound by confidentiality and non-use
obligations essentially the same as those contained in this Agreement.
The term of confidentiality and non-use obligations for such Agents
shall be no less than [ * ] years. Schering shall be jointly and
severally liable for any disclosure of Licensor Proprietary Information
by Agents.
(c) Disclosure to a Third Party. Licensor shall have the right
to use and disclose any Licensor Know-How at its sole option and
discretion for the limited purpose of filing, prosecuting, and
supporting Patent Rights. Subject to the terms of Section 5.2, either
Party may publish Licensor Know-How under the terms of Section 5.3
below. Licensor shall not otherwise disclose, provide or transfer any
Licensor Know-How to any third party without the prior written approval
of Schering.
5.2 Publicity. Except as provided in Section 5.1 and this Section 5.2,
a Party may not use the name of the other Party in any publicity, advertising or
in any other public way and, may not issue press releases or otherwise publicize
or disclose any information related to the existence of this Agreement, the
terms or conditions of this Agreement, or any information relating to the
subject matter hereof, without the prior written consent of the other Party. The
Parties shall agree upon an initial press release to announce the execution of
this Agreement, together with a corresponding Q&A outline for use in responding
to inquiries about the Agreement. Following such initial press release, Licensor
may use the specific information contained therein, or in any subsequent public
announcements or publications made by Schering or by mutual agreement of the
Parties, in Licensor's investor relations and public relations activities.
Licensor shall make no public announcement, either written, oral or in any
medium relating to the safety of Licensed Compound and/or Licensed Product,
except for statements in official correspondence with government patent
authorities in support of Patent Rights as provided for in Section 5.1(c) [ * ].
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5.4 Publication. Schering and Licensor each acknowledge the potential
benefit in publishing results of certain studies to obtain recognition within
the scientific community and to advance the state of scientific knowledge. Each
Party also recognizes the mutual interest in obtaining valid patent protection
and in protecting business interests and trade secret information. No
publication of Licensor Know-How or Patent Rights may be made without the prior
written consent of Licensor. The Parties agree that Schering, its Affiliates,
employees or consultants shall be free to make any publication which does not
disclose Licensor Know-How or Patent Rights. In the event that any proposed
publication (as defined below) discloses Licensor Know-How or Patent Rights, the
following procedure shall apply: Either Party, its Affiliates, employees or
consultants wishing to make a publication shall deliver to the other Party a
copy of the proposed written publication or an outline of an oral disclosure at
least [ * ] days prior to submission for publication or presentation. For
purposes of this Agreement, the term "publication" shall include, without
limitation, abstracts and manuscripts for publication, slides and texts of oral
or other public presentations, and texts of any transmission through any
electronic media, e.g. any computer access system such as the Internet,
including the World Wide Web. The reviewing Party shall have the right (i) to
propose modifications to the publication for patent reasons, trade secret
reasons or business reasons or (ii) to request delay of the publication or
presentation in order to protect patentable information. If the reviewing Party
requests a delay, the publishing Party shall delay submission or presentation
for a period of up to [ * ] months from the filing date of the first patent
application in the Territory covering the information contained in the proposed
publication or presentation. If the reviewing Party requests modifications to
the publication, the publishing Party may edit such publication to prevent
disclosure of trade secret or proprietary business information prior to
submission of the publication or presentation.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties of Each Party. Each of Licensor and
Schering hereby represents, warrants and covenants to the other Party hereto
that as of the Execution date it has complied, and during the period extending
from the Execution Date until the expiration or termination of this Agreement it
shall comply, with all applicable material laws and regulations relating to its
activities under this Agreement. Each of Licensor and Schering further
represents, warrants and covenants to the other Party hereto that as of the
Execution Date:
(a) it is a corporation or entity duly organized and validly
existing under the laws of the state or other jurisdiction of its
incorporation or formation;
(b) the execution, delivery and performance of this Agreement
by such Party has been duly authorized by all requisite corporate
action, subject only to receipt of requisite approval of its board of
directors;
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(c) it has the power and authority to execute and deliver this
Agreement and to perform its obligations hereunder;
(d) the execution, delivery and performance by such Party of
this Agreement and its compliance with the terms and provisions hereof
does not and will not conflict with or result in a breach of any of the
terms and provisions of or constitute a default under (i) a loan
agreement, guaranty, financing agreement, agreement affecting a product
or other agreement or instrument binding or affecting it or its
property; (ii) the provisions of its charter or operative documents or
bylaws; or (iii) any order, writ, injunction or decree of any court or
governmental authority entered against it or by which any of its
property is bound;
(e) except for the governmental and Regulatory Approvals
required to market Licensed Product in the Territory and any filings or
approvals referred to in Section 2.4, the execution, delivery and
performance of this Agreement by such Party does not require the
consent, approval or authorization of, or notice, declaration, filing
or registration with, any governmental or regulatory authority and the
execution, delivery or performance of this Agreement will not violate
any law, rule or regulation applicable to such Party;
(f) this Agreement has been duly authorized, executed and
delivered and constitutes such Party's legal, valid and binding
obligation enforceable against it in accordance with its terms subject,
as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors'
rights and to the availability of particular remedies under general
equity principles;
(g) to the best of its knowledge there are no third party
pending patent applications (excluding the Patent Rights), which, if
issued, may cover the development, manufacture, use or sale of any
Licensed Compound or Licensed Product.
6.2 Licensor's Representations. Licensor hereby represents,
warrants and covenants to Schering that as of the Execution Date:
(a) to the best of its knowledge, the Patent Rights and
Licensor Know-How are subsisting and are not invalid or unenforceable,
in whole or in part;
(b) it has the full right, power and authority to grant all of
the right, title and interest in the licenses granted to Schering under
Article II hereof;
(c) to the best of its knowledge, it has not previously
assigned, transferred, conveyed or otherwise encumbered its right,
title and interest in the Licensed Compound, Licensed Product, the
Patent Rights, or Licensor Know-
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How;
(d) except as specifically set forth in Schedule 6.2(d), it is
the sole and exclusive owner and/or licensee of the Patent Rights and
Licensor Know-How, all of which are free and clear of any liens,
charges and encumbrances, and to the best of its knowledge no other
person, corporation or other private entity, or governmental entity or
subdivision thereof, has or shall have any claim of ownership with
respect to the Patent Rights or Licensor Know-How, whatsoever;
(e) to the best of its knowledge, the Patent Rights and
Licensor Know-How, and the development, manufacture, use, distribution,
marketing, promotion and sale of Licensed Products do not interfere or
infringe (as applicable) on any intellectual property rights owned or
possessed by any third party;
(f) there are no claims, judgments or settlements against or
amounts with respect thereto owed by Licensor, and to the best of its
knowledge no pending or threatened claims or litigation against
Licensor relating to Licensed Compound, the Patent Rights and Licensor
Know-How;
(g) to the best of its knowledge, there are no circumstances
that would adversely affect the commercial utility or the use of the
Licensed Product;
(h) it has provided to Schering a summary of all material
adverse events known to it relating to the Licensed Compound;
(i) there are no collaborative, licensing, material transfer,
supply, distributorship or marketing agreements or arrangements or
other similar agreements to which it or any of its Affiliates are a
party relating to Licensed Compound, Licensed Product or Patent Rights
which would materially limit the rights granted to Schering under this
Agreement with respect to the Licensed Compound, Licensed Product or
Patent Rights;
(j) there are no trademark(s) chosen, owned or controlled by
Licensor or its Affiliates specifically in connection with the Licensed
Compound and/or the Licensed Product in the Territory; and
(k) except as set forth in Schedule 6.2(k), it has not
identified any compounds outside of the Compound Library which exhibit
both (1) similar or better VCAM-1 inhibition than the Licensed Compound
as determined using Licensor's currently available in vitro screens for
VCAM-1 inhibitory activity (i.e., the human aortic endothelial cell
based screen) and (2) histologically or morphologically demonstrated
anti-atherosclerotic properties similar or better than Licensed
Compound in the Licensor's animal models (i.e., the
hypercholesterolemic rabbit).
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Licensor further represents, warrants and covenants to Schering that:
(l) during the period extending from the Execution Date until
the expiration or termination of this Agreement it will use reasonable
efforts not to diminish the rights under the Patent Rights and Licensor
Know-How granted to Schering hereunder, including without limitation,
by not committing or permitting any actions or omissions which would
cause the breach of any license or other agreements between itself and
third parties which provide for licenses, assignments or other rights
to any Patent Rights or Licensor Know-How, that it will provide
Schering promptly with notice of any such alleged breach, and that as
of the Execution Date, it is in compliance in all material respects
with any such licenses or other agreements with third parties;
(m) as of the Execution Date, and to the best of its
knowledge, all data summaries provided in writing to Schering by
Licensor prior to the Execution Date relating to pre-clinical and
clinical studies of the Licensed Compound accurately represent the raw
data underlying such summaries; and
(n) Licensor shall not seek or file for any trademark for use
in connection with the Licensed Compound and/or the Licensed Product in
the Territory during the period extending from the Execution Date until
the expiration or termination of this Agreement.
6.3 Continuing Representations. The representations and warranties of
each Party contained in Sections 6.1 and 6.2 shall survive the execution of this
Agreement.
6.4 No Inconsistent Agreements. Neither Party has in effect and after
the Effective Date neither Party shall enter into any oral or written agreement
or arrangement that would be inconsistent with its obligations under this
Agreement.
6.5 Representation by Legal Counsel. Each Party hereto represents that
it has been represented by legal counsel in connection with this Agreement and
acknowledges that it has participated in the drafting hereof. In interpreting
and applying the terms and provisions of this Agreement, the Parties agree that
no presumption shall exist or be implied against the Party which drafted such
terms and provisions.
6.6 Additional Obligations of Licensor The Parties acknowledge and
agree that all data and information provided by Licensor to Schering arising out
of or relating to any preclinical and/or clinical studies involving the Licensed
Compound and/or Licensed Product conducted by or on behalf of Licensor (the
"Studies"), or relating to any patent applications or patents having claims
covering the Licensed Compound and/or Licensed Product, are of material
importance to the development and commercialization of the Licensed Compound
and/or Licensed Product and to Schering's decision to enter into this Agreement.
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(a) Licensor represents and warrants that, to the best of its
knowledge and based upon Licensor's diligence in the performance of the
relevant activities, as of the Execution Date it (and its
subcontractors and/or collaborators, if any):
(i) has fully complied with all applicable laws, rules and
regulations, in the preparation, filing and prosecution of
patent applications or patents;
(ii) has fully complied with all applicable laws, rules and
regulations, in the conduct and evaluation of the Studies and
with regard to all applications or submissions for Regulatory
Approval in the Territory, if any;
(iii) knows of no irregularities or information suggesting any
irregularities in connection with the preparation, filing or
prosecution of patent applications or patents which may have a
material adverse effect with respect thereto; and
(iv) knows of no irregularities or information suggesting any
irregularities in connection with the conduct and evaluation
of the Studies which may have a material adverse effect with
respect thereto.
(b) To the extent of Licensor's obligations under this
Agreement, Licensor shall undertake to perform the following in
accordance with all applicable laws, rules and regulations:
(i) to prepare, file, prosecute and maintain, or ensure that its
subcontractors, collaborators and/or agents prepare, file,
prosecute and maintain, any patent applications or patents
relating to the Licensed Compound and/or Licensed Product; and
(ii) to conduct, or ensure that its subcontractors and/or
collaborators, if any, shall conduct, any Studies.
(c) In the event Licensor becomes aware of any known or
suspected impropriety or misconduct relating to the preparation,
filing, prosecution or maintenance of patent applications or patents,
and/or the performance, analysis or reporting of any Studies, or any
application or submission for Regulatory Approval, Licensor shall,
within [ * ] hours notify Schering of such event in writing.
ARTICLE VII
INDEMNIFICATION AND LIMITATION ON LIABILITY
7.1 Indemnification by Schering. Schering shall indemnify, defend and
hold harmless Licensor and its Affiliates, and each of its and their respective
employees,
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officers, directors and agents (each, a "Licensor Indemnified Party") from and
against any and all third party claims, demands, lawsuits, proceedings,
settlement amounts, liability, loss, damage, cost, and expense (including
reasonable attorneys' fees), (collectively, a "Liability") which may be asserted
against the Licensor Indemnified Party or which the Licensor Indemnified Party
may incur, suffer or be required to pay resulting from or arising out of (i) the
discovery, development, manufacture, promotion, distribution, use, testing,
marketing, sale or other disposition of Licensed Compound and/or Licensed
Product(s) by Schering, its Affiliates or Sublicensees (including without
limitation any personal injury, death, or other injuries suffered by users of
Licensed Compound or Licensed Product), or (ii) the breach by Schering of any
covenant, representation or warranty contained in this Agreement; or (iii) the
successful enforcement by a Licensor Indemnified Party of its rights under this
Section 7.1. Notwithstanding the foregoing, Schering shall have no obligation
under this Agreement to indemnify, defend or hold harmless any Licensor
Indemnified Party with respect to any Liability which results from the willful
misconduct or negligent acts or omissions of Licensor, its Affiliates, or any of
their respective employees, officers, directors or agents.
7.2 Indemnification by Licensor. Licensor shall indemnify, defend and
hold harmless Schering and its Affiliates, and each of its and their respective
employees, officers, directors and agents (each, a "Schering Indemnified Party")
from and against any Liability which the Schering Indemnified Party may incur,
suffer or be required to pay resulting from or arising out of (i) the breach by
Licensor of any covenant, representation or warranty contained in this
Agreement; or (ii) the successful enforcement by a Schering Indemnified Party of
its rights under this Section 7.2. Notwithstanding the foregoing, Licensor shall
have no obligation under this Agreement to indemnify, defend or hold harmless
any Schering Indemnified Party with respect to any Liability which results from
willful misconduct or negligent acts or omissions of Schering, its Affiliates,
or any of their respective employees, officers, directors or agents.
7.3 Conditions to Indemnification. Each Party agrees to promptly give
the other Party notice of any claim for which indemnification may be sought.
Failure of an indemnified Party to provide notice of a claim to the indemnifying
Party shall affect the indemnified Party's right to indemnification only to the
extent that such failure has a material adverse effect on the indemnifying
Party's ability to defend or the nature or the amount of the Liability. Subject
to the provisions of Article IV, the indemnifying Party shall have the right to
assume the defense of any suit or claim related to the Liability if it has
assumed responsibility for the suit or claim in writing; provided, however, that
if in the reasonable judgment of the indemnified Party, such suit or claim
involves an issue or matter which could have a materially adverse effect on the
business operations or assets of the indemnified Party, the indemnified Party
may waive its rights to indemnity under this Agreement and control the defense
or settlement thereof, but in no event shall any such waiver be construed as a
waiver of any indemnification rights such Party may have at law or in equity. If
the indemnifying Party defends the suit or claim, the indemnified Party may
participate in (but not control) the defense thereof at its sole cost and
expense.
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7.4 Settlements. Subject to the provisions of Article IV, neither Party
may settle a claim or action related to a Liability without the consent of the
other Party if such settlement would impose any monetary obligation on the other
Party or require the other Party to submit to an injunction or otherwise limit
the other Party's rights under this Agreement, provided that such consent shall
not be unreasonably withheld or delayed. Any payment made by a Party to settle
any such claim or action shall be at its own cost and expense.
7.5 Limitation of Liability. With respect to any claim by one Party
against the other arising out of the performance or failure of performance of
the other Party under this Agreement, the Parties expressly agree that the
liability of such Party to the other Party for such breach shall be limited
under this Agreement or otherwise at law or equity to direct damages only and in
no event shall a Party be liable for, punitive, exemplary or consequential
damages suffered or incurred by the other Party.
7.6 Insurance. Each Party acknowledges and agrees that during the Term
of this Agreement it shall maintain adequate insurance and/or a self-insurance
program for contractual liability insurance to cover such Party's obligations
under this Agreement. Each Party shall provide the other Party with evidence of
such insurance and/or self-insurance program, upon request.
ARTICLE VIII
TERM AND TERMINATION
8.1 Term and Expiration. This Agreement shall be effective as of the
Effective Date and unless terminated earlier by mutual written agreement of the
Parties or pursuant to Sections 8.2, 8.3 or 8.4 below, the Term of this
Agreement shall continue in effect on a product-by-product and
country-by-country basis until the expiration of the last to expire Patent Right
incorporating a Valid Claim covering the Licensed Product, or in countries where
no such Patent Rights exist until the tenth anniversary of the First Commercial
Sales of Licensed Product in such country. Upon expiration of this Agreement,
Schering's licenses pursuant to Section 2.1 and 2.2 shall become fully paid-up,
perpetual licenses.
8.2 Termination by Schering Without Cause. Schering shall have the
unilateral right to terminate this Agreement on a product-by-product basis
(without cause) at any time by giving [ * ] days advance written notice to
Licensor. In the event of the exercise of such termination rights, the rights
and licenses granted to Schering under Sections 2.1 and 2.2 shall terminate and
all rights to Licensor Know-How, Licensed Compounds and Licensed Products with
respect to the applicable product which are granted pursuant to this Agreement
shall revert to Licensor.
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8.3 Termination Upon Cessation of Development.
(a) Termination by Either Party Either Party shall have the
unilateral right to terminate this Agreement on a product-by-product
basis at any time by giving [ * ] days advance written notice to the
other Party if Schering ceases development or commercialization of
Licensed Compound or Licensed Product pursuant to Sections 2.6(a) and
(c), subject to Section 2.6(b). In the event of the exercise of such
termination rights, the rights and licenses granted to Schering under
Sections 2.1 and 2.2 shall terminate and all rights to Licensor
Know-How, Licensed Compounds and Licensed Products with respect to the
applicable product which are granted pursuant to this Agreement shall
revert to Licensor.
(b) Termination by Licensor Licensor shall have the unilateral
right to terminate this Agreement by giving [ * ] days written notice
to Schering in the event that:
(i) [ * ]; or
(ii) [ * ].
In the event of the exercise of such termination rights, the rights and
licenses granted to Schering under Sections 2.1 and 2.2 shall terminate
and all rights to Licensor Know-How, Licensed Compounds and Licensed
Products with respect to the applicable product which are granted
pursuant to this Agreement shall revert to Licensor.
8.4 Termination.
(a) Termination for Cause. This Agreement may be terminated by
written notice at any time during the Term of this Agreement:
(i) by either Party, subject to Section 9.2, if the
other Party is in breach of its material obligations with
respect to such product hereunder and has not cured such
breach within [ * ] days ([ * ] days with respect to payment
obligations under Article III) after written notice requesting
cure of the breach with reasonable detail of the particulars
of the alleged breach, or within [ * ] days of receiving
notice initiated actions reasonably expected to cure the cited
failure and thereafter diligently pursued such actions to cure
the failure (even if requiring longer than the [ * ] days set
forth in this subsection); or
(ii) by either Party upon the filing or institution
of bankruptcy, reorganization (in connection with any
insolvency), liquidation or receivership proceedings, or upon
an assignment of a substantial portion of the assets for the
benefit of creditors by the other Party, or in the event a
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receiver or custodian is appointed for such other Party's
business, or if a substantial portion of such other Party's
business is subject to attachment or similar process;
provided, however, that in the case of any involuntary
bankruptcy proceeding such right to terminate shall only
become effective if the proceeding is not dismissed within
[ * ] days after the filing thereof.
(b) Effect of Termination for Cause on License.
(i) Termination by Schering. In the event Schering
terminates this Agreement under Section 8.4(a)(i), due to a
breach by Licensor of its material obligations under Section
2.1(a), 2.1(b) or 2.11(a) of this Agreement, then Schering's
licenses pursuant to Sections 2.1 and 2.2 shall become fully
paid-up, perpetual licenses.
(ii) Termination by Licensor. In the event that
Licensor terminates this Agreement under Section 8.4(a)(i),
then the rights and licenses granted to Schering under
Sections 2.1 and 2.2 shall terminate and all rights to
Licensor Know-How, Licensed Compounds and Licensed Products
granted pursuant to this Agreement shall revert to Licensor.
(iii) Effect of Bankruptcy. In the event Schering
terminates this Agreement under Section 8.4(a)(ii) or this
Agreement is otherwise terminated under Section 8.4(a)(ii),
the Parties agree that Schering, as a licensee of rights to
intellectual property under this Agreement, shall retain and
may fully exercise all of its rights and elections under the
Insolvency Statute including as set forth in Section 9.8
hereof.
8.5 Effect of Termination. Expiration or termination of the Agreement
shall not relieve the Parties of any obligation accruing prior to such
expiration or termination, and the provisions of Articles V and VII shall
survive the expiration of the Agreement. With regard to reimbursement for
development costs incurred by Licensor, including, without limitation, the costs
of clinical studies, Schering's obligations under Section 2.6 shall upon
termination be limited to the costs for actual work performed in accordance with
the relevant research plans or protocols up to the effective date of such
termination, or any irrevocable financial commitments made by Licensor prior to
the date of notice of termination. Any expiration or early termination of this
Agreement shall be without prejudice to the rights of either Party against the
other accrued or accruing under this Agreement prior to termination, including
the obligation to pay royalties for Licensed Product(s) or Licensed Compound
sold prior to such termination. In the event of termination of this Agreement,
Schering shall have the right to continue to sell its existing inventory of
Licensed Product during the [ * ] month period immediately following such
termination, provided that Schering shall continue to make royalty payments with
respect to such sales.
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8.6 Remedies for Breach. In addition to any and all other remedies that
Schering may have under this Agreement, or otherwise under law and/or equity, in
the event that Licensor materially breaches its obligations under Sections
6.6(a) or (b) of this Agreement and/or materially breaches its representation,
warranties and covenants under Section 6.2(m), then Schering shall have the
right, at Schering's sole discretion, upon written notice to Licensor to either:
(i) deduct [ * ] of the remaining unpaid milestone(s) in Section 3.2; (ii)
permanently reduce by [ * ] the royalty rates provided for in Section 3.3; or
(iii) immediately terminate the Agreement.
8.7 Licensor's Rights on Termination. In the event that Licensor
terminates this Agreement under Section 8.3 or 8.4(a)(i), or Schering terminates
this Agreement under Section 8.2 or 8.3, Schering shall provide to Licensor the
following:
(i) all existing Regulatory Approvals and/or applications for
Regulatory Approval for the applicable Licensed Product(s) in
the Territory;
(ii) access, including the right to make copies, of all
preclinical, clinical, pharmacokinetic, toxicology or other
data owned or controlled by Schering which is necessary to
support any of the Regulatory Approvals provided to Licensor
under Section 8.7(i);
(iii) subject to the terms of Section 8.7 (iv), all preclinical and
clinical supplies of the applicable Licensed Product(s),
and/or Licensed Compound or other Compound Library compounds,
in Schering's possession or control;
(iv) access to all manufacturing information relating to the
Licensed Product, including assigning, sublicensing or
otherwise making available, as appropriate, any third party
manufacturing agreements relied upon by Schering for the
manufacture of Licensed Product, in each case to the extent
reasonably necessary for Licensor to manufacture the Licensed
Product following such termination;
(v) to the extent that termination occurs after the First
Commercial Sale of the applicable Licensed Product(s) and
subject to the terms of Section 8.5, Licensor shall have the
right to purchase Schering's remaining inventory of the
applicable Licensed Product(s) and/or Licensed Compound or
other Compound Library compounds for sale in the Territory at
[ * ] of Schering's fully absorbed manufacturing costs.
In addition, in the event of such termination, Schering shall grant to Licensor
a paid-up, non-exclusive, non-transferable license in the Territory under any
issued patents, or pending patent applications, owned or controlled by Schering
which would otherwise be infringed by the manufacture, use or sale of the
applicable Licensed Product(s) in the Territory, which license shall be
restricted to the sole purpose of making, having made, importing, exporting,
using, distributing, marketing, promoting, offering for sale
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and selling such Licensed Product(s).
8.8 Concurrent Termination with the International Agreement. In the
event of any termination of the International Agreement by either Licensor or
Schering-Plough Ltd. under the provisions of Sections 8.2, 8.3 or 8.4 of the
International Agreement, this Agreement shall automatically terminate
concurrently under the corresponding Section 8.2, 8.3 or 8.4 of this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 Assignment/Change of Control.
(a) Assignment. Neither this Agreement nor any or all of the
rights and obligations of a Party hereunder shall be assigned,
delegated, sold, transferred, sublicensed (except as expressly
permitted hereunder) or otherwise disposed of, by operation of law or
otherwise, to any third party (other than an Affiliate of an assigning
Party under the condition that the assignor remain responsible to the
other Party under this Agreement), without the prior written consent of
the other Party. Any attempted assignment, delegation, sale, transfer,
sublicense or other disposition, by operation of law or otherwise, of
this Agreement or of any rights or obligations hereunder contrary to
this Section 9.1 shall be a material breach of this Agreement by the
attempting Party, and shall be void and without force or effect;
provided, however, either Party may, without such consent, assign the
Agreement and its rights and obligations hereunder to an Affiliate or
in connection with the transfer or sale of all or substantially all of
its assets related to the division or the subject business, or in the
event of its merger or consolidation or change in control or similar
transaction. This Agreement shall be binding upon, and inure to the
benefit of, each Party, its Affiliates, and its permitted successors
and assigns. Each Party shall be responsible for the compliance by its
Affiliates with the terms and conditions of this Agreement.
(b) Change of Control. In the event the ownership or control
of Licensor is acquired by another pharmaceutical company that has an
ongoing development program or commercializes (directly or through any
Affiliate) any compound or product for the Primary Indication and/or
the Secondary Indication, Licensor shall promptly notify Schering in
writing to that effect. Licensor's obligations under Section 2.11 shall
not extend to any such compound or product. Effective upon such notice,
the JMC shall be disbanded and Schering will assume and thereafter be
responsible for all of the rights and obligations of the JMC. Licensor,
and following the change of control the acquiring party, shall use best
efforts to ensure that such acquiring party does not have any access to
any of Schering's Proprietary Information or other proprietary
information relating to the development and commercialization of
Licensed Product. Such best efforts shall
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include, without limitation: (i) ensuring that the acquiring party does
not have access to any such information prior to the change of control
of Licensor; and (ii) promptly destroying or returning to Schering all
such information in Licensor's possession or control upon completion of
the change of control. The acquiring party shall have no rights to use
any Licensor Know-How relating to the Primary Indication or the
Secondary Indication in connection with the development and
commercialization of its own compound or product for the Primary and/or
Secondary Indication. All of Schering's obligations under Article II to
provide Licensor and/or the JMC with reports or to otherwise keep
Licensor informed with respect to the development and commercialization
of Licensed Compound, any other compound within the Compound Library
and/or Licensed Product shall immediately terminate; provided, however,
that Schering shall provide such acquiring party with an annual summary
of its activities in developing and commercializing Licensed Product.
9.2 Governing Law. This Agreement shall be governed, interpreted and
construed in accordance with the laws of the State of New Jersey, without giving
effect to conflict of law principles. All disputes under this Agreement shall be
governed by binding arbitration pursuant to the mechanism set forth in Schedule
9.2 attached hereto and incorporated hereby.
9.3 Waiver. Any delay or failure in enforcing a Party's rights under
this Agreement or any waiver as to a particular default or other matter shall
not constitute a waiver of such Party's rights to the future enforcement of such
rights under this Agreement, nor operate to bar the exercise or enforcement
thereof at any time or times thereafter, excepting only as to an express written
and signed waiver as to a particular matter for a particular period of time.
9.4 Independent Relationship. Nothing in this Agreement shall be deemed
to create an employment, agency, joint venture or partnership relationship
between the Parties hereto or any of their respective Affiliates, agents or
employees, or any other legal arrangement that would impose liability upon one
Party for the act or failure to act of the other Party. Neither Party shall have
any power to enter into any contracts or commitments or to incur any liabilities
in the name of, or on behalf of, the other Party, or to bind the other Party in
any respect whatsoever.
9.5 Export Control. This Agreement is made subject to any restrictions
concerning the export of products or technical information from the United
States of America which may be imposed upon or related to Licensor or Schering
from time to time by the government of the United States of America.
Furthermore, Schering agrees that it will not export, directly or indirectly,
any technical information acquired from Licensor under this Agreement or any
products using such technical information to any country for which the United
States government or any agency thereof at the time of export requires an export
license or other governmental approval, without first obtaining the written
consent to do so from the Department of Commerce or other agency of the
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United States government when required by an applicable statute or regulation.
9.6 Entire Agreement; Amendment. This Agreement, including the Exhibits
and Schedules hereto and all the covenants, promises, agreements, warranties,
representations, conditions and understandings contained herein sets forth the
complete, final and exclusive agreement between the Parties with respect to the
subject matter hereof and supersedes and terminates all prior and
contemporaneous agreements and understandings between the Parties, whether oral
or in writing. There are no covenants, promises, agreements, warranties,
representations, conditions or understandings, either oral or written, between
the Parties other than as are set forth herein. No subsequent alteration,
amendment, change, waiver or addition to this Agreement shall be binding upon
the Parties unless reduced to writing and signed by an authorized officer of
each Party. Each Party in deciding to execute this Agreement has not relied on
any understanding, agreement, representation or promise by the other Party which
is not explicitly set forth herein.
9.7 Notices. Except as provided under Section 4.8 hereof, any notice
required or permitted to be given or sent under this Agreement shall be hand
delivered or sent by express delivery service or certified or registered mail,
postage prepaid, or by facsimile transmission (with written confirmation copy by
registered first-class mail) to the Parties at the addresses and facsimile
numbers indicated below.
If to Licensor, to: AtheroGenics, Inc.
8995 Westside Parkway
Alpharetta, Georgia 30004
Attn.: Vice President, Business Development
Fax No.: (678) 336-2501
If to Schering to: Schering Corporation
2000 Galloping Hill Road
Kenilworth, New Jersey 07033
Attn.: Vice President, Business Development
Fax No.: (908) 298-5379
with copies to: Schering Corporation
2000 Galloping Hill Road
Kenilworth, New Jersey 07033
Attn.: Law Department - Staff Vice President,
Licensing
Fax No.: (908) 298-2739
Any such notice shall be deemed to have been received on the date
actually received. Either Party may change its address or its facsimile number
by giving the other Party written notice, delivered in accordance with this
Section.
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9.8 Provisions for Insolvency.
(a) Effect on Licenses. All rights and licenses granted under
or pursuant to this Agreement by Licensor to Schering are, for all
purposes of Section 365(n) of Title 11 of the United States Code
(together with its foreign equivalent, the "Insolvency Statute"),
licenses of rights to "intellectual property" as defined in the
Insolvency Statute. Licensor agrees that Schering, as licensee of such
rights under this Agreement shall retain and may fully exercise all of
its rights and elections under the Insolvency Statute provided that
Schering makes all royalty payments under this Agreement. Licensor
agrees during the Term of this Agreement to create and maintain current
copies or, if not amenable to copying, detailed descriptions or other
appropriate embodiments, to the extent feasible, of all such
intellectual property. If a case is commenced by or against Licensor
under the Insolvency Statute, Licensor (in any capacity, including
debtor-in-possession) and its successors and assigns (including,
without limitation, an Insolvency Statute trustee) shall,
(i) as Schering may elect in a written request,
immediately upon such request:
(A) perform all of the obligations provided
in this Agreement to be performed by Licensor
including, where applicable and without limitation,
providing to Schering portions of such intellectual
property (including embodiments thereof) held by
Licensor and such successors and assigns or otherwise
available to them; or
(B) provide to Schering all such
intellectual property (including all embodiments
thereof) held by Licensor and such successors and
assigns or otherwise available to them; and
(ii) not interfere with the rights of Schering under
this Agreement, or any agreement supplemental hereto, to such
intellectual property (including such embodiments), including
any right to obtain such intellectual property (or such
embodiments) from another entity.
(b) Rights to Intellectual Property. If an Insolvency Statute
case is commenced by or against Licensor, and this Agreement is
rejected as provided in the Insolvency Statute, and Schering elects to
retain its rights hereunder as provided in the Insolvency Statute, then
Licensor (in any capacity, including debtor-in-possession) and its
successors and assigns (including, without limitation, an Insolvency
Statute trustee) shall provide to Schering all such intellectual
property (including all embodiments thereof) held by Licensor and such
successors and assigns, or otherwise available to them, immediately
upon
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Schering's written request. Whenever Licensor or any of its successors
or assigns provides to Schering any of the intellectual property
licensed hereunder (or any embodiment thereof) pursuant to this Section
9.8, Schering shall have the right to perform the obligations of
Licensor hereunder with respect to such intellectual property, but
neither such provision nor such performance by Schering shall release
Licensor from any such obligation or liability for failing to perform
it.
(c) Schering's Rights. All rights, powers and remedies of
Schering provided herein are in addition to and not in substitution for
any and all other rights, powers and remedies now or hereafter existing
at law or in equity (including, without limitation, the Insolvency
Statute) in the event of the commencement of an Insolvency Statute case
by or against Licensor. Schering, in addition to the rights, power and
remedies expressly provided herein, shall be entitled to exercise all
other such rights and powers and resort to all other such remedies as
may now or hereafter exist at law or in equity (including, without
limitation, the Insolvency Statute) in such event. The Parties agree
that they intend the foregoing Schering rights to extend to the maximum
extent permitted by law, including, without limitation, for purposes of
the Insolvency Statute:
(i) the right of access to any intellectual property
(including all embodiments thereof) of Licensor, or any third
party with whom Licensor contracts to perform an obligation of
Licensor under this Agreement, and, in the case of the third
party, which is necessary for the development, registration,
manufacture and marketing of Licensed Compound and/or Licensed
Product(s); and
(ii) the right to contract directly with any third
party described in (i) to complete the contracted work.
(d) Deemed Grant of Rights. In the event of any insolvency of
Licensor and if any statute and/or regulation in any country in the
Territory requires that there be a specific grant or specific clause(s)
in order for Schering to obtain the rights and benefits as licensee
under this Agreement which are analogous to those rights under Section
365(n) of Title 11 of the United States Code, then this Agreement shall
be deemed to include any and all such required grant(s), clause(s)
and/or requirements.
(e) Security Interests. In addition to any other rights
granted to Schering hereunder, with respect to any country in the
Territory in which Schering reasonably determines that its rights set
forth in this Section 9.8 are nonexistent or inadequate to protect
Schering's interests in the licenses granted hereunder, Licensor shall,
upon Schering's request, execute a security agreement, or any foreign
equivalent, for each country in the Territory, granting Schering a
secured interest in all intellectual property licensed to Schering
under this Agreement.
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9.9 Force Majeure. Failure of any Party to perform its obligations
under this Agreement (except the obligation to make payments when properly due)
shall not subject such Party to any liability or place them in breach of any
term or condition of this Agreement to the other Party if such failure is due to
any cause beyond the reasonable control of such non-performing Party ("force
majeure"), unless conclusive evidence to the contrary is provided. Causes of
non-performance constituting force majeure shall include, without limitation,
acts of God, fire, explosion, flood, drought, war, riot, sabotage, embargo,
strikes or other labor trouble, failure in whole or in part of suppliers to
deliver on schedule materials, equipment or machinery, interruption of or delay
in transportation, a national health emergency or compliance with any order or
regulation of any government entity acting with color of right. The Party
affected shall promptly notify the other Party of the condition constituting
force majeure as defined herein and shall exert reasonable efforts to eliminate,
cure and overcome any such causes and to resume performance of its obligations
with all possible speed; provided, however, that nothing contained herein shall
require any Party to settle on terms unsatisfactory to such Party any strike,
lock-out or other labor difficulty, any investigation or proceeding by any
public authority, or any litigation by any third party. If a condition
constituting force majeure as defined herein exists for more than ninety (90)
consecutive days, the Parties shall meet to negotiate a mutually satisfactory
resolution to the problem, if practicable.
9.10 Severability. If any provision of this Agreement is declared
illegal, invalid or unenforceable by a court having competent jurisdiction, it
is mutually agreed that this Agreement shall endure except for the part declared
invalid or unenforceable by order of such court; provided, however, that in the
event that the terms and conditions of this Agreement are materially altered,
the Parties will, in good faith, renegotiate the terms and conditions of this
Agreement to reasonably substitute such invalid or unenforceable provisions in
light of the intent of this Agreement.
9.11 Counterparts. This Agreement shall become binding when any one or
more counterparts hereof, individually or taken together, shall bear the
signatures of each of the Parties hereto. This Agreement may be executed in any
number of counterparts, each of which shall be an original as against either
Party whose signature appears thereon, but all of which taken together shall
constitute but one and the same instrument.
9.12 Captions. The captions of this Agreement are solely for the
convenience of reference and shall not affect its interpretation.
9.13 Recording. Each Party shall have the right, at any time, to
record, register, or otherwise notify this Agreement in appropriate governmental
or regulatory offices anywhere in the world, and each Party shall provide
reasonable assistance to the other in effecting such recording, registering or
notifying. Notwithstanding the foregoing, prior to recording, registering, or
otherwise notifying this Agreement, the Party desiring to so record, register,
or notify shall provide a copy of all materials to be filed for review, comment,
and approval by the other Party, such approval not unreasonably to be withheld
or delayed.
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9.14 Further Actions. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all other acts, as may be necessary
or appropriate in order to carry out the purposes and intent of this Agreement
including, without limitation, any filings with any antitrust agency which may
be required.
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IN WITNESS WHEREOF, this Agreement has been executed by the duly
authorized representatives of the Parties as of the date set forth below.
ATHEROGENICS, INC. SCHERING CORPORATION
By: Russell Medford By: David Poorvin
------------------------------ ------------------------------
Title: President & CEO Title: Vice President
------------------------------ ------------------------------
Date: 22 October 1999 Date: 21 October 1999
------------------------------ ------------------------------
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SCHEDULE 1.6
Elements of Fully Absorbed Manufacturing Cost of Goods
The following expenses are included in manufacturing costs:
1. Direct Materials
Materials used in the manufacturing process that are traced directly to the
completed product, such as:
- Inert raw materials or excipients
- Active substances/ingredients
- Packaging components such as bottles, caps, labels, etc.
2. Direct Labor
The cost of employees engaged in production activities that are directly
identifiable with product costs. Excludes supervision, which is included in
indirect labor, and production support activities such as inspection, plant and
equipment maintenance labor, and material handling personnel. Direct Labor cost
includes:
- Base pay, overtime, vacation and holidays, illness, personal
time with pay and shift differential.
- Cost of employee fringe benefits such as health and life
insurance, payroll taxes, welfare, pension and profit sharing.
3. Indirect Manufacturing Costs
Costs which are ultimately allocated to product based on standard direct labor
hours of the operating departments. These costs include:
- Indirect Production Labor - salaries of employees engaged in
production activities who are not classified as direct labor,
including supervision, clerical, etc.
- Costs of Direct Labor - employees not utilized for the
manufacturing of product such as training, downtime and
general duties.
- Indirect Materials - supplies and chemicals which are used in
the manufacturing process and are not assigned to specific
products but are included in manufacturing overhead costs.
Includes supplies for which direct assignment to products is
not practical.
- Utilities - expenses incurred for fuel, electricity and water
in providing
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power for production and other plant equipment.
- Maintenance and Repairs - amount of expense incurred in-house
or purchased to provide services for plant maintenance and
repairs of facilities and equipment.
- Other Services - purchased outside services and rentals such
as the cost of security, ground maintenance, etc.
- Depreciation - of plant and equipment utilizing the
straight-line method of calculation.
- Insurance - cost of comprehensive and other insurance
necessary for the safeguard of manufacturing plant and
equipment.
- Taxes - expense incurred for taxes on real and personal
property (manufacturing site, buildings and the fixed assets
of equipment, furniture and fixtures, etc.). If manufacturing
site includes other operations (marketing, R&D, etc.), taxes
are allocated to manufacturing on the basis of total real and
personal property.
- Cost of manufacturing, service departments - such as:
(where applicable)
- Packaging Engineering
- Manufacturing Maintenance
- Industrial Engineering
- Receiving and Warehousing
- Purchasing and Accounting
- Production Scheduling
- Inventory Management
- Plant Materials Management
- Central Weigh
- Manufacturing Administration
- Allocated costs of services provided to manufacturing
including: (where applicable)
- Cafeteria
- Personnel Operations
- Health and Safety Services
- Division Engineering and Operations Services
- Plant Services (housekeeping)
- Manufacturing Information Systems
- Plant Power
- Office of V.P. Manufacturing
Various bases are used for allocating these costs to manufacturing
operating departments including headcount, square feet, metered
utilities use, estimated services rendered, EDP computer hours, etc.
ii
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4. Quality Assurance Costs
Direct labor and indirect costs for Quality Assurance departments testing and
approving materials used in manufacturing and completed manufacturing batches
and finished products. This includes all manufacturing in-process testing and
testing of finished materials. Excluded from product costs are QA costs related
to research and development, stability testing, and other costs customarily
excluded from such Quality Assurance costs.
The following expenses are not included in manufacturing costs:
a) Inventory Carrying Costs
b) Regulatory Affairs Costs
c) Pilot plant costs, research batches and other similar costs
prior to turnover to manufacturing. These are handled as
development costs and expensed to R&D. This excludes
commercial goods produced by a research facility.
d) Costs incurred by Manufacturing for special projects (e.g.
requests by Schering-Plough Research Institute) to establish
and certify new production processes, batch sizes and product
line improvements, and new vendor certification of equipment
and primary materials components. These costs are expensed to
R&D.
e) Manufacturing start-up costs and initial one-time
extraordinary manufacturing costs incurred prior to plant
operation and achievement of a normal production activity
level. Includes costs of training, testing,
qualification/validation of new equipment and facilities and
initial, trial batches. These costs are deferred and then
amortized to Other Production Costs over five years.
f) Significant idle capacity is eliminated from factory overhead
and product cost. Idle or excess capacity costs are culled out
of the Manufacturing Budget and expensed as a period cost to
Other Production Costs.
g) Finished goods warehousing, shipping and other distribution
costs. These are included in distribution costs.
h) Product liability and/or business interruption insurance
expenses.
i) Intercompany profit.
5. Other Production Costs
Three major types of expense are included in the Other Production Costs
classification.
a) Variances from standard cost the difference between the actual
and standard cost of inventory purchased and produced during
the period less any portion applicable to on-hand inventory
which has been capitalized.
(i) Materials purchase price variance
(ii) Materials usage/yield variances
(iii) Direct labor efficiency/inefficiency - reflects the
cost difference between the standard and actual
number of direct labor
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hours used for actual production.
(iv) Overhead - reflects all other labor and overhead cost
variances including activity and spending production
related and support.
With the exception of overhead, all of the other variances can
be identified by product and can be added (if unfavorable) or
subtracted (if favorable) to determine actual manufacturing
costs of a product.
(b) Non-standard costs: Cost of miscellaneous production related
operations for which standards are not established due to the
nature of the function, such as manufacturing start-up
operations, stock conversions and reclaiming (processing and
returning to finished goods inventory) of products returned by
customers. Also includes miscellaneous expenses incurred in
connection with the production of inventory which for various
reasons (e.g., cyclical, non-recurring) are not included in
standard costs. Examples include excess/idle capacity not
included in standards, abnormal waste or rework, experiments,
unallocated production costs, tooling and package design
costs.
Some of the above costs may be incurred for specific products,
e.g., rework, experiments, tooling, but the majority are
general to all products produced.
(c) Inventory adjustments: Consists of charges or credits due to
adjustments to inventory concerning revaluation to new
standards, stock conversions, capitalized/amortized production
variances, shortages or overages, and damage or obsolescence
of regular on-hand inventory or products returned by
customers.
Each of these charges or credits can be identified to a specific product.
iv
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Schedule 1.18
PATENT RIGHTS
[*]
<PAGE> 124
Schedule 2.1(e)
Third Party Agreements
License Agreement between Emory University and Atherogenics, Inc., dated January
11, 1995.
License to the United States Government dated March 27, 1995.
Patent Purchase Agreement between Sampath Parthasarathy, Ph.D. and Atherogenics,
Inc., dated April 26, 1995.
<PAGE> 125
Schedule 2.6(h)
Development Work to be Performed by Licensor
Pre-clinical:
[ * ]
<PAGE> 126
SCHEDULE 2.6(i)
ADVERSE EVENT REPORTING PROCEDURES FOR PRODUCTS
The Parties understand and agree that these procedures are intended to
comply with 21 CFR 314.80(b) and 21 CFR 310.305(a) concerning standard written
procedures for adverse event reporting in the United States. These procedures
may be amended by the Parties at any time, at the request of either Party, to
ensure that they fully and accurately reflect the procedures in place for
surveillance, receipt, evaluation and reporting of adverse drug experiences by
the pharmacovigilance departments of the Parties and comply with applicable laws
and regulations in the countries in which the product(s) is marketed and/or is
under investigation. In that regard, upon the written request of either Party,
the Parties shall meet to renegotiate in good faith, all or some of these
procedures. Each Party may request such a meeting no more often than once in any
twelve (12) month period.
1. Definitions:
(a) An Adverse Event ("AE") is defined as:
i) any experience which is adverse, including what are
commonly described as adverse or undesirable
experiences, adverse events, adverse reactions, side
effects, or death due to any cause associated with,
or observed in conjunction with the use of a drug,
biological product, or device in humans, whether or
not considered related to the use of that product:
- occurring in the course of the use of a
drug, biological product or device,
- associated with, or observed in conjunction
with product overdose, whether accidental or
intentional,
- associated with, or observed in conjunction
with product abuse,
- associated with, or observed in conjunction
with product withdrawal
ii) Any significant failure of expected pharmacological
or biologic therapeutical action (with the exception
of in clinical trials).
(b) Associated with or related to the use of the drug is defined
as: A
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reasonable possibility exists that the AE was caused by the drug.
(c) Expected or unexpected are defined as:
i) Expected ("labeled") AE - An AE which is included in
the Investigators' Brochure for clinical trials,
included in local labeling (e.g., summary of product
characteristics) for Marketed Drugs, or in countries
with no local labeling, in the Company Core Data
Sheet (CCDS).
ii) Unexpected ("unlabeled") AE - An AE that does not
meet the criteria for an expected AE or an AE which
is listed but differs from that event in terms of
severity or specificity.
(d) IND Holder is defined as: A "Sponsor" as defined in 21 CFR
Part 312.2(b) of an investigational new drug in any regulatory jurisdiction,
including a holder of a foreign equivalent thereto.
(e) Life-threatening is defined as: any adverse drug experience
that places the patient, in the view of the initial reporter, at immediate risk
of death from the adverse drug experience as it occurred, i.e., it does not
include an AE that, had it occurred in more severe form, might have caused
death.
(f) NDA Holder is defined as: An "Applicant" as defined in 21 CFR
Part 314.3(b), for regulatory approval of a Licensed Product in any regulatory
jurisdiction, including a holder of a foreign equivalent thereto.
(g) Serious or Non-Serious are defined as:
i) Any adverse drug experience occurring at any dose
that results in any of the following outcomes: Death,
a life-threatening adverse drug experience, inpatient
hospitalization or prolongation of existing
hospitalization, a persistent or significant
disability/incapacity, or a congenital anomaly/birth
defect. Important medical events that may not result
in death, be life-threatening, or require
hospitalization may be considered serious when, based
upon appropriate medical judgment, they may
jeopardize the patient or subject and may require
medical or surgical intervention to prevent one of
the outcomes listed in this definition. Examples of
such medical events include allergic bronchospasm
requiring intensive treatment in an emergency room or
at home, blood dyscrasias or convulsions that do not
result in inpatient hospitalization, or the
development of drug dependency or drug abuse.
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ii) A Non-serious AE is any AE which does not meet the
criteria for a serious AE.
(h) Not associated or unrelated to the use of the drug means it
does not meet the definition of "associated."
2. Capitalized terms not defined in this Appendix shall have the meaning
assigned thereto in the Agreement.
3. With respect to all Licensed Products:
All initial reports (oral or written) for any and all serious
AEs as defined above which become known to either Party (other
than from disclosure by or on behalf of the other Party) must
be communicated by telephone, telefax or electronically
directly to the other Party, NDA Holder, and/or IND Holder
(individually and collectively referred to as "Holders")
within five (5) calendar days of receipt of the information.
Written confirmation of the Serious AE received by the Party
should be sent to the other Party and the Holders as soon as
it becomes available, but in any event within two (2) business
days of initial report of the Serious AE by such Party.
All Parties and Holders should exchange Medwatch and/or CIOMS
forms and other health authority reports within two (2)
business days of submission to any regulatory agency.
All initial reports and follow-up information received for all
non-serious AEs for marketed Licensed Products which become
known to a Party (other than from disclosure by or on behalf
of the other Party) must be communicated in writing, by
telefax or electronically to the other Party and all Holders
on a monthly basis, on Medwatch or CIOMs forms (where
possible). All follow-up on any AE reports forwarded to either
Party by FDA must be submitted to FDA.
Each Party shall coordinate and cooperate with the other
whenever practicable to prepare a single written report
regarding all Serious AEs, provided, however, that neither
Party shall be obligated to delay reporting or any AE in
violation of applicable law or regulations regarding the
reporting of adverse events.
4. The Parties further agree that:
(a) a written report for AEs for animal studies which suggest a
potential significant risk for humans shall be forwarded to the other Party
within two (2) business days of receipt by the Party making the report,
<PAGE> 129
(b) each Party will give the other Party a print-out or computer disk
of all AEs reported to it relating to Products within the preceding 365
days/calendar year, within thirty (30) days of receipt of a request from the
other Party;
(c) upon request of a Party, the other Party shall make available its
AE records relating to Licensed Products (including computer disks) for viewing
and copying by the other Party,
(d) disclosure of information hereunder by a Party to the other Party
shall continue as long as either Party continues to clinically test or market
product(s) containing Licensed Products or holds an open IND, NDA or foreign
equivalent thereto.
(e) all written regulatory reports, including periodic NDA, annual IND,
safety updates, or foreign equivalents thereto, etc. should be sent by a Party
to the other Party within 2 business days of submission to the appropriate
regulatory agency. The Parties shall agree on a procedure for preparing these
reports (e.g. electronic mail, facsimile transmission, overnight service, etc.).
5. Each Party shall diligently undertake the following further obligations
where both Parties are or will be commercializing products hereunder and/or
performing clinical trials with respect to Licensed Product:
(a) to immediately consult with the other Party, with respect to the
investigation and handling of any serious AE disclosed to it by the other Party
or by a third Party, including government agencies, and to allow the other Party
to review the serious AE and to participate in the follow-up investigation;
(b) to immediately advise the other Party of any Product safety
communication received from a health authority and consult with the other Party
with respect to any proposed change to product warnings, labeling or an
Investigator's Brochure involving safety issues, including, but not limited to,
safety issues agreed to by the Parties;
(c) to diligently handle in a timely manner the investigation and
resolution of each AE reported to it; and
(d) to provide the other Party reasonable annual audit rights of its AE
reporting system and documentation, upon prior notice, during normal business
hours, at the expense of the auditing Party and under customary confidentiality
obligations.
(e) to meet in a timely fashion from time to time as may be reasonably
required to implement the adverse event reporting and consultation procedures
described in this Appendix, including identification of those individuals in
each Party's pharmacovigilance group who will be responsible for reporting to
and receiving AE information from the other Party, and the development of a
written standard operating
<PAGE> 130
procedure with respect to adverse event reporting responsibilities, including
reporting responsibilities to investigators;
(f) where possible, to transmit all data electronically;
(g) to report to each other any addenda, revisions or changes to this
Agreement (e.g., change in territories, local regulations, addition of new
licensors/licensees to the agreement, etc.) which might alter the adverse event
reporting responsibilities hereunder;
(h) to utilize English as the language of communication and data
exchange between the Parties;
(i) to develop a system of exchange of documents and information in the
event that the Agreement involves more than two Holders.
<PAGE> 131
Schedule 3.2
DEFINITION OF SUCCESSFUL COMPLETION
CART STUDY:
Schering recognizes that Licensor's Phase II Study 027, commonly
referred to as the CART Study, is pivotal to the determination of
proof-of-activity in man. Determination by the JMC of "successful completion" of
this study will be based upon the study achieving all of the following three
points, as reflected in the final study report:
[ * ]
<PAGE> 132
Schedule 6.2(d)
GOVERNMENT RIGHTS
Pursuant to that certain Assignment agreement between Licensor and
Sampath Parthasarathy dated May 2, 1995, U.S. Patent No. 5,262,439 is subject to
a license of rights to the United States Government, as specifically set forth
in the License to the United States Government attached hereto as Exhibit A.
<PAGE> 133
Schedule 6.2(k)
Other VCAM-1 Inhibitors
[ * ]
<PAGE> 134
Schedule 9.2
ARBITRATION PROVISIONS
(a) Scope. Subject to and in accordance with the terms of this
Agreement and this Schedule 9.2, all differences, disputes, claims or
controversies arising out of or in any way connected or related to this
Agreement, whether arising before or after the expiration of the Term of this
Agreement, and including, without limitation, its negotiation, execution,
delivery, enforceability, performance, breach, discharge, interpretation and
construction, existence, validity and any damages resulting therefrom or the
rights, privileges, duties and obligations of the Parties under or in relation
to this Agreement (including any dispute as to whether an issue is arbitrable)
shall be referred to binding arbitration in accordance with the rules of the
American Arbitration Association, as in effect at the time of the arbitration.
(b) Parties to Arbitration. For the purposes of each arbitration under
this Agreement, Schering shall constitute one party to the arbitration and
Licensor shall constitute the other party to the arbitration.
(c) Notice of Arbitration. A Party requesting arbitration hereunder
shall give a notice of arbitration to the other Party containing a concise
description of the matter submitted for arbitration, including references to the
relevant provisions of the Agreement and a proposed solution (a "Notice of
Arbitration"). Notice of Arbitration shall be delivered to the other Party in
accordance with Section 9.7 of the Agreement.
(d) Response. The non-requesting Party must respond in writing within
forty-five (45) days of receiving a Notice of Arbitration with an explanation,
including references to the relevant provisions of the Agreement and a response
to the proposed solution and suggested time frame for action. The non-requesting
Party may add additional issues to be resolved.
(e) Meeting. Within fifteen (15) days of receipt of the response from
the non-requesting Party pursuant to Paragraph (d), the Parties shall meet and
discuss in good faith options for resolving the dispute. The requesting Party
must initiate the scheduling of this resolution meeting. Each Party shall make
available appropriate personnel to meet and confer with the other Party during
such fifteen-(15) day period.
(f) Selection of Arbitrator. Any and all disputes that cannot be
resolved pursuant to Paragraphs (c), (d) and (e) shall be submitted to an
arbitrator (the "Arbitrator") to be selected by mutual agreement of the Parties.
The Arbitrator shall be a retired judge of a state or federal court, to be
chosen from a list of such retired judges to be prepared jointly by the Parties,
with each Party entitled to submit the names of three such retired judges for
inclusion in the list. No Arbitrator appointed or selected hereunder shall be an
employee, director or shareholder of, or otherwise have any current or previous
relationship with, any Party or its respective Affiliates. If the Parties fail
to
<PAGE> 135
agree on the selection of the Arbitrator, the Arbitrator shall be designated by
a judge of the Federal District Court in New York upon application by either
Party.
(g) Powers of Arbitrator. The Arbitrator may determine all questions of
law and jurisdiction (including questions as to whether a dispute is arbitrable)
and all matters of procedure relating to the arbitration. The Arbitrator shall
have the right to grant legal and equitable relief (including injunctive relief)
and to award costs (including reasonable legal fees and costs of arbitration)
and interest. Nothing contained herein shall be construed to permit the
Arbitrator to award punitive, exemplary or any similar damages.
(h) Arbitration Procedure. In the event that Schering is the Party
requesting arbitration, the arbitration shall take place in the State of
Georgia, unless otherwise agreed by the Parties, at such place and time as the
Arbitrator may fix for the purpose of hearing the evidence and representations
that the Parties may present. In the event that Licensor is the Party requesting
arbitration, the arbitration shall take place in the State of New Jersey, unless
otherwise agreed by the Parties, at such place and time as the Arbitrator may
fix for the purpose of hearing the evidence and representations that the Parties
may present. The arbitration proceedings shall be conducted in the English
language. The law applicable to the arbitration shall be the law of the State of
New Jersey. No later than twenty (20) business days after hearing the
representations and evidence of the Parties, the Arbitrator shall make its
determination in writing and deliver one copy to each of the Parties.
(i) Discovery and Hearing. During the meeting referred to in Paragraph
(e), the Parties shall negotiate in good faith the scope and schedule of
discovery, relating to depositions, document production and other discovery
devices, taking into account the nature of the dispute submitted for resolution.
If the Parties are unable to reach agreement as to the scope and schedule of
discovery, the Arbitrator may order such discovery as it deems necessary. To the
extent practicable taking into account the nature of the dispute submitted for
resolution, such discovery shall be completed within [*] days from the date of
the selection of the Arbitrator. At the hearing, which shall commence within [*]
days after completion of discovery unless the Arbitrator otherwise orders, the
Parties may present testimony (either live witness or deposition), subject to
cross-examination, and documentary evidence. To the extent practicable taking
into account the nature of the dispute submitted for resolution and the
availability of the Arbitrator, the hearing shall be conducted over a period not
to exceed [*] consecutive business days, with each Party entitled to
approximately half of the allotted time unless otherwise ordered by the
Arbitrator. Each Party shall have sole discretion with regard to the
admissibility of any evidence and all other matters relating to the conduct of
the hearing.
(j) Witness Lists. At least [*] business days prior to the date
set for the hearing, each Party shall submit to the other Party and the
Arbitrator a list of all documents on which such Party intends to rely in any
oral or written presentation to the Arbitrator and a list of all witnesses, if
any, such Party intends to call at such hearing and
<PAGE> 136
a brief summary of each witness' testimony. At least five (5) business days
prior to the hearing, each Party must submit to the Arbitrator and serve on each
other Party a proposed findings of fact and conclusions of law on each issue to
be resolved. Following the close of hearings, the Parties shall each submit such
post-hearing briefs to the Arbitrator addressing the evidence and issues to be
resolved as may be required or permitted by the Arbitrator.
(k) Confidentiality. The arbitration proceedings shall be confidential
and, except as required by law, no Party shall make, or instruct the Arbitrator
to make, any public announcement with respect to the proceedings or decision of
the Arbitrator without the prior written consent of the other Party. The
existence of any dispute submitted to arbitration and the award of the
Arbitrator shall be kept in confidence by the Parties and the Arbitrator, except
as required in connection with the enforcement of such award or as otherwise
required by law.
(l) Awards and Appeal. Subject to the provisions of this Schedule 9.2,
the decision of the Arbitrator shall be final and binding upon the Parties in
respect of all matters relating to the arbitration, the conduct of the Parties
during the proceedings, and the final determination of the issues in the
arbitration. There shall be no appeal from the final determination of the
Arbitrator to any court, except in the case of fraud or bad faith on the part of
the Arbitrator or any Party to the arbitration proceeding in connection with the
conduct of such proceedings. Judgment upon any award rendered by the Arbitrator
may be entered in any court having jurisdiction thereof.
(m) Costs of Arbitration. The costs of any arbitration hereunder shall
be borne by the Parties in the manner specified by the Arbitrator in its
determination.
(n) Performance of the Agreement. During the pendency of the
arbitration proceedings, the matter which is the subject of such arbitration
proceedings shall be performed by the Parties (A) in the manner determined by
Schering in its sole discretion if it is a matter relating to Schering's
development of Licensed Product, and (B) in the manner determined by Licensor in
its sole discretion if it is a matter involving payment of License Fees under
Section 3.1 and royalty payments under Sections 3.2 or 3.3. Notwithstanding the
foregoing, in the event that Schering makes payments pursuant to Sections 3.1,
3.2 or 3.3 and it is subsequently determined by the Arbitrator that Schering was
not required to make such payment(s) then Licensor shall promptly repay to
Schering all such payments. Further notwithstanding the foregoing, the time
periods set forth in Section 2.6(b) of the Agreement shall be suspended during
the pendency of the arbitration proceedings. For purposes of this Paragraph (n)
the term "pendency of the arbitration proceeding" shall mean the period starting
on the date on which arbitration proceedings are commenced by a Party in
accordance with Paragraph (c) of this Schedule 9.2 and ending on the date on
which the Arbitrator delivers its final determination in writing to the Parties.
<PAGE> 1
Exhibit 10.02
EXCLUSIVE LICENSE AGREEMENT
between
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
and
ATHEROGENICS INC.
for
[*]
[*] Certain confidential information contained in this document, marked by an
asterisk within brackets, has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 406 of the Securities Act of 1933, as amended.
<PAGE> 2
TABLE OF CONTENTS
ARTICLE NO. PAGE
- ----------- ----
1. DEFINITIONS
2. PERIOD OF PATENT EXCLUSIVE GRANT
3. SUBLICENSES
4. PAYMENT TERMS
5. LICENSE-ISSUE FEE
6. MILESTONE PAYMENTS
7. EARNED ROYALTIES AND MINIMUM ANNUAL ROYALTIES
8. DUE DILIGENCE
9. PROGRESS AND ROYALTY REPORTS
10. BOOKS AND RECORDS
11. LIFE OF THE AGREEMENT
12. TERMINATION BY THE REGENTS
13. TERMINATION BY LICENSEE
14. DISPOSITION OF LICENSED PRODUCTS ON HAND UPON TERMINATION
15. USE OF NAMES AND TRADEMARKS
16. LIMITED WARRANTY
17. PATENT PROSECUTION AND MAINTENANCE
18. PATENT MARKING
19. PATENT INFRINGEMENT
i
<PAGE> 3
20. INDEMNIFICATION
21. NOTICES
22. ASSIGNABILITY
23. NO WAIVER
24. FAILURE TO PERFORM
25. GOVERNING LAWS
26. PREFERENCE FOR UNITED STATES INDUSTRY
27. GOVERNMENTAL APPROVAL OR REGISTRATION
28. EXPERT CONTROL LAWS
29. SECRECY
30. MISCELLANEOUS
ii
<PAGE> 4
EXCLUSIVE LICENSE AGREEMENT
This License Agreement (the "Agreement") is made effective this 17th
day of July, 1998 (the "Effective Date") between THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA, a California corporation having its statewide administrative
offices at 300 Lakeside Drive, 22nd Floor, Oakland, California 94612-3550, ("The
Regents") represented by the University of California, San Diego campus having
its offices at 9500 Gilman Drive, La Jolla, CA 92093-0910, and AtheroGenics
Inc. ("Licensee"), a Georgia corporation having offices at 3065 Northwoods
Circle, Norcross, GA 30071.
WHEREAS
1. Certain inventions, generally characterized as [*] and officially
recorded in[*] (collectively the "Invention"), were made in the course of
research at the University of California, San Diego by Dr. Joseph Witztum and
others and are covered by Regents' Patent Rights as defined herein;
2. The development of the Invention was sponsored in part by the
National Institutes of Health and as a consequence this license is subject to
overriding obligations to the Federal Government under 35 U.S.C. 200-212 and
applicable regulations;
3. Dr. Witztum and the other inventors are employees of The Regents.
The Regents have asked Dr. Witztum and his co-inventors to assign their rights
to The Regents;
4. Licensee has evaluated the Invention under a Secrecy Agreement with
The Regents [*], and has communicated its evaluation to The Regents;
5. Licensee and The Regents have executed a Letter of Intent dated June
27, 1997, that was amended on December 24, 1997 to extend the "Negotiation
Period," as defined therein, to March 1, 1998;
6. Licensee wishes to obtain rights from The Regents for the commercial
development, use, and sale of products from the Invention, and The Regents is
willing to grant those rights so that the Invention may be developed to its
fullest and the benefits enjoyed by the general public; and
7. Licensee is currently a "small business firm" as defined in 15
U.S.C. 632;
8. The parties recognize and agree that royalties due under this
Agreement will be paid on both pending patent applications and issued patents;
1
<PAGE> 5
In view of the foregoing, the parties agree:
1. DEFINITIONS
1.1 "Regents' Patent Rights" means any subject matter claimed in or
covered by any of the following: Issued or Pending U.S. Patent Applications,
Provisional Applications and applications in preparation related to inventions
and as disclosed to Licensee as entitled [*] and assigned to The Regents; and
continuing applications thereof including divisions and substitutions but
excluding continuation-in-part applications (except continuations-in-part
applications supported by the original application); and patents issuing on said
applications including reissues, reexaminations and extensions; and any
corresponding foreign applications or patents.
1.2 "Licensed Product" means any material that is either covered by
Regents' Patent Rights, that is produced by the Licensed Method, or that the use
of which would constitute, but for the license granted to Licensee under this
Agreement, an infringement of any pending or issued claim within Regents' Patent
Rights, including disease indications other than those set forth in the
Invention.
1.3 "Licensed Method" means any method that is covered by Regents'
Patent Rights, the use of which would constitute, but for the license granted to
Licensee under this Agreement, an infringement of any pending or issued claim
within Regents' Patent Rights.
1.4 "Net Sales" means the total of the gross invoice prices of Licensed
Products sold by Licensee, an affiliate, or a sublicensee, less the sum of the
following actual and customary deductions where applicable: cash, trade, or
quantity discounts; sales, use, tariff, import/export duties or other excise
taxes imposed on particular sales; transportation charges and allowances; or
credits to customers because of rejections or returns. For purposes of
calculating Net Sales, transfers to an affiliate or sublicensee for end use by
the affiliate or sublicensee will be treated as sales at list price.
1.5 "Affiliate" means any corporation or other business entity in which
Licensee owns or controls, directly or indirectly, at least fifty percent (50%)
of the outstanding stock or other voting rights entitled to elect directors, or
in which Licensee is owned or controlled directly or indirectly by at least 50%
of the outstanding stock or other voting rights entitled to elect directors, but
in any country where the local law does not permit foreign equity participation
of at least 50%, then an "Affiliate" includes any company in which Licensee owns
or controls or is owned or controlled by, directly or indirectly, the maximum
percentage of outstanding stock or voting rights permitted by local law.
1.6 "Field of Use" means all diagnostic and therapeutic use of the
Invention for human or veterinary application, including, but not limited to,
use in atherosclerosis and other cardiovascular and antiinflammatory diseases.
2
<PAGE> 6
1.7 "Know How" means all technical information and know-how, whether or
not patented, which is invented, developed, acquired and owned or licensed by
The Regents (other than from Licensee or its Affiliates or sublicensees) prior
to and during the term of this Agreement and which relate to the Invention;
excluding, however, any such item, information and data licensed by The Regents
with respect to which The Regents do not have a right to sublicense to third
parties.
2. PERIOD OF PATENT EXCLUSIVE GRANT
2.1 Subject to the limitations set forth in this Agreement, The Regents
grant to Licensee a world-wide license under Regents' Patent Rights and Know How
to make, have made, use, import and sell Licensed Products and to practice
Licensed Methods for the life of the longest-lived patent covering the Invention
described herein.
2.2 Except as otherwise provided in this Agreement, the license granted
in Paragraph 2.1 is exclusive for the life of the Agreement.
2.3 The license granted in Paragraphs 2.1 and 2.2 is subject to all the
applicable provisions of any license to the United States Government executed by
The Regents and is subject to the overriding obligations to the U.S. Government
under 35 U.S.C. 200-212 and applicable governmental implementing regulations.
2.4 The licenses granted in Paragraphs 2.1 and 2.2 are limited to
methods and products within the Field of Use. Licensee has no license under this
Agreement for other methods and products not described in Regents Patent Rights,
and know-how pertaining to the Invention.
2.5 The Regents reserves the right to use the Invention, know-how and
associated technology for educational and research purposes.
3. SUBLICENSES
3.1 The Regents also grant to Licensee the right to issue sublicenses
to third parties to make, have made, use, import and sell Licensed Products and
to practice Licensed Method, as long as Licensee has current exclusive rights
thereto under this Agreement. To the extent applicable, sublicenses must include
all of the rights of and obligations due to The Regents (and, if applicable, the
United States Government) and contained in this Agreement.
3.2 Licensee shall promptly provide The Regents with a copy of each
sublicense issued; use diligent efforts to collect and guarantee payment of all
payments due The Regents from sublicensees; and summarize and deliver all
reports due The Regents from sublicensees.
3
<PAGE> 7
3.3 Upon termination of this Agreement for any reason, The Regents, at
its sole discretion, shall determine whether Licensee shall cancel or assign to
The Regents any and all sublicenses.
3.4 Licensee shall pay The Regents [*] of each non-royalty payment
received by Licensee from each sublicensee of the Licensed Products, unless the
Licensed Product contains (i) any know-how added by Licensee, in which case the
foregoing percentage for non-royalty payments shall be [*] or (ii) any antibody
or a material component in addition to know-how added by Licensee, in which case
the foregoing percentage for non-royalty payment shall be [*] or (iii) more than
one antibody or material component in addition to know-how added by Licensee, in
which case the foregoing percentage for non-royalty payments shall be [*]
(collectively, Licensed Products meeting the conditions of (i) (ii) or (iii) are
referred to hereafter as a "Value Added Licensed Product").
3.5 Licensee shall pay The Regents [*] of each earned royalty payment
received by Licensee, unless the Licensed Product is determined to be a "Value
Added Licensed Product" as defined in this Section 3.4, in which case,
Licensee's royalty payment to The Regents shall be [*] of each royalty payment
received from each sublicensee. Licensee may at its sole discretion select the
alternative royalty payment schedule described in Section 7.5.
3.6 In the event that circumstances relating to the sublicensing of the
Licensed Products arise that make the sublicensing of the Licensed Product
unfeasible or otherwise require consultations between the parties, the parties
agree to discuss these circumstances and negotiate in good faith any amendments
to this Agreement that may be mutually agreeable to the parties hereto.
4. PAYMENT TERMS
4.1 Paragraphs 1.1, 1.2, and 1.3 define Regents' Patent Rights,
Licensed Products and Licensed Methods so that royalties are payable on products
and methods covered by both pending patent applications and issued patents.
Royalties will accrue in each country for the duration of Regents' Rights in
that country and are payable to The Regents when Licensee receives payment from
a third party.
4.2 Licensee shall pay earned royalties quarterly within ninety (90)
days after the end of the applicable quarter of each calendar year in which such
royalties are earned.
4.3 All monies due The Regents are payable in United States dollars.
When Licensed Products are sold for monies other than United States dollars,
Licensee shall first determine the earned royalty in the currency of the country
in which Licensed Products were sold and then convert the amount into equivalent
United States funds, using the exchange rate quoted in the Wall Street Journal
on the date payment was received by the licensee.
4
<PAGE> 8
4.4 Royalties earned on sales occurring in any country outside the
United States may not be reduced by any taxes, fees, or other charges imposed by
the government of such country on the payment of royalty income. Licensee is
also responsible for all bank transfer charges. Notwithstanding this, all
payments made by Licensee in fulfillment of The Regents' tax liability in any
particular country will be credited against earned royalties or fees due The
Regents for that county.
4.5 If at any time legal restrictions prevent the remittance of
royalties within 180 days by Licensee from any country where a Licensed Product
is, sold, Licensee shall convert the amount owed to The Regents into United
States funds and shall pay The Regents directly from its U.S. source of funds
for as long as the legal restrictions apply.
4.6 If any patent or patent claim conferring exclusive marketing or
manufacturing rights to License under this Agreement within The Regents' Patent
Rights is held invalid in a decision by any court of competent jurisdiction, all
royalty payments will be held in an interest-bearing escrow account established
by the parties until a final decision is made by a court of competent
jurisdiction and last resort and from which no appeal has or can be taken, all
obligation to pay royalties based on that patent or claim or any claim patently
indistinct therefrom will cease as of the date of final decision. Licensee will
not, however, be relieved from paying any royalties that accrued and where
received before the final decision or that are based on another patent or claim
not involved in the final decision, or that are based on The Regents' property
rights.
4.7 No royalties may be collected or paid on Licensed Products sold to
the account of the U.S. Government, any agency thereof, state or domestic
municipal government as provided for in the License to the Government.
4.8 In the event payments, rebilling or fees are not received by The
Regents when due, Licensee shall pay to The Regents interest charges at a rate
of [*] per annum. Interest is calculated from the date payment was due until
actually received by The Regents.
5. LICENSE-ISSUE FEE
5.1 Licensee shall pay to The Regents a license-issue fee equal to the
higher of [*] of the patent costs reimbursable to The Regents under the Letter
of Intent, said license-issue fee to be paid on the first anniversary of the
execution of this License Agreement. Patent costs reimbursed to The Regents
within 30 days after the signing of this License Agreement shall not be used in
the license-issue fee calculation. This fee is [*].
5
<PAGE> 9
6. MILESTONE PAYMENTS
Licensee shall pay to The Regents a one-time royalty in the form of milestone
payments in the following amounts within thirty (30) days following the
achievement of the specified events for therapeutic applications only:
Filing of the 1st IND (one time, any indication): [*]
Completing 1st Phase II, including Final Report submission (one time, any
indication): [*]
Filing of a PLA document (all indications each time): [*]
Licensee shall pay to The Regents a one-time royalty in the form of a milestone
payment in the following amount within thirty (30) days following the
achievement of the specified event for diagnostic applications only:
Filing of a 510(k) (or similar): [*] (each time)
All Milestone Payments made to The Regents prior to First Market Introduction
shall be charged against royalties on sales paid to The Regents. Thereafter,
milestone payments shall not be reimbursed to Licensee by The Regents.
7. EARNED ROYALTIES AND MINIMUM ANNUAL ROYALTIES
7.1 Unless provided to the contrary in Section 7.2 and 7.3, Licensee
shall pay to The Regents a royalty on worldwide Net Sales according to the
following schedule for therapeutic applications only:
[*] on sales of less than [*]
[*] on sales greater than [*], but less than [*]
[*] on sales greater than [*], but less than [*]
[*] on sales greater than [*], but less than [*]
[*] on sales greater than [*], but less than [*]
[*] on sales greater than [*], but less than [*]
[*] on sales greater than [*].
Unless provided to the contrary in Sections 7.2, Licensee shall pay to
The Regents a royalty of on worldwide Net Sales according to the following
schedule for diagnostic applications only:
- - [*] on sales of Licensed Product in which the Licensed Method is supplemented
by monoclonal antibodies which are not included in The Regents Patent Rights;
- - [*] on sales of Licensed Product in which the monoclonal antibodies of
Licensed Method are utilized without modification or supplementation by
Licensee;
6
<PAGE> 10
- - [*] on all other sales of Licensed Product.
7.2 If Licensee determines after consultation with The Regents that it
is required to pay royalties or other fees to any third party because the
manufacture, use, offer for sale, importation, or sale of a Licensed Method or a
Licensed Product would otherwise be likely to infringe any patent or other
intellectual property rights of such third party in a given country ("Third
Party Royalties"), Licensee may deduct from royalties thereafter due to The
Regents pursuant to this Agreement with respect to the Net Sales of such
Licensed Method or Licensed Product in such country up to [*] of the Third Party
Royalties. If the sum of the royalties paid hereunder and Third Party Royalties
for a given Licensed Product or a Licensed Method in a given country exceeds, at
any time, more than [*] on a therapeutic product or [*] on a diagnostic product
of the Net Sales, then upon Licensee's request, The Regents and Licensee agree
to negotiate in good faith in an effort to agree on a reduction in the royalties
payable hereunder to The Regents for such Licensed Product or Licensed Method in
such country. In the event the parties are unable to agree to such reduction
after a reasonable period of time, not to exceed thirty (30) days, either party
may request that the issue be arbitrated and the issue will be submitted to
final and binding arbitration in accordance with the rules of the American
Arbitration Association.
7.3 Licensee may credit solely against all payments to The Regents,
including, without limitation, the royalties, accruing under this Agreement all
reasonable costs incurred by Licensee after the date hereof in connection with
any litigation, interference, opposition, or other action pertaining to the
validity, enforceability, allowability or subsistence of the Regents' Patent
Rights or whether Licensee's practice of the Regents' Patent Rights infringes a
third party patent.
7.4 Licensee shall pay to The Regents a minimum annual royalty of [*]
for the life of Regents' Patent Rights, beginning with the year of the first
commercial sale of Licensed Product, but no later than the fifth-year
anniversary of the Effective Date. For the first year of commercial sales,
Licensee's obligation to pay the minimum annual royalty will be pro-rated for
the number of months remaining in that calendar year when commercial sales
commence and will be due the following March 31, to allow for crediting of the
pro-rated year's earned royalties. For subsequent years, the minimum annual
royalty will be paid to The Regents by March 31 of each year and will be
credited against the earned royalty due for the calendar year in which the
minimum payment was made.
7.5 Licensee shall have the right to diligently sublicense the
Invention, the Licensed Products and the Licensed Method, including alternate
indications thereof, without restriction. In the case of a sublicense, Licensee
shall pay The Regents either of the following sublicense schedule as determined
by Licensee at its sole discretion:
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i) [*] of each payment received from the sublicensee for Licensed
Products that are not Value Added Licensed Products and [*] of each payment
received from the sublicensee for Value Added Licensed Products, or
ii) Royalties on worldwide net sales in the amount set forth in
Sections 7.1.
In either schedule, payment shall be made to The Regents within ninety (90) days
of sublicense payment being received by Licensee, except as provided for in
Sections 3.1, 3.2 and 3.3.
8. DUE DILIGENCE
8.1 Licensee, on execution of this Agreement, shall diligently proceed
with the development, manufacture and sale of Licensed Products and shall
earnestly and diligently endeavor to market the same within a reasonable time
after execution of this Agreement and in quantities sufficient to meet market
demands. The Regents expect that the first sale of Licensed Products shall occur
within twelve (12) years of the execution date of this Agreement, or within
eleven (11) years of the payment of the License Issue Fee, whichever is the
sooner, unless the first sale of Licensed Products is delayed by the process of
regulatory approval by federal, state or foreign national agencies.
8.2 Licensee shall endeavor to obtain all necessary governmental
approvals for the manufacture, use and sale of Licensed Products, or shall
certify to The Regents in writing that none are needed.
8.3 Licensee shall:
8.3.1 submit a PMA (or 510(k)) covering Licensed Products to the
United States FDA within ten (10) years from the Effective
Date of this Agreement.
8.3.2 market Licensed Products in the United States within one year
of receiving approval of the PLA for such Licensed Products
from the FDA; and
8.3.4 reasonably fill the market demand for Licensed Products
following commencement of marketing at any time during the
exclusive period of this Agreement.
8.4 If the Licensee is unable to perform any of the above provisions,
then The Regents has the right and option to either terminate this Agreement or
reduce Licensee's exclusive license to a nonexclusive license. This right, if
exercised by The Regents, supersedes the rights granted in Article 2 (GRANT).
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8.5 In addition to the obligations set forth above, Licensee shall
spend directly or through partners an aggregate of not less than [*] for the
development of Licensed Products during the first [*] years of this Agreement.
9. PROGRESS AND ROYALTY REPORTS
9.1 Beginning December 31, 1998 and semi-annually thereafter, Licensee
shall submit to The Regents a progress report covering Licensee's (and any
Affiliate or sublicensee's) activities related to the development and testing of
all Licensed Products and the obtaining of the governmental approvals necessary
for marketing. Progress reports are required for each Licensed Product until the
first commercial sale of that Licensed Product occurs in the United States.
9.2 Progress reports submitted under section 9.1 should include, but
are not limited to, the following topics related to the Licensed Product and
Licensed Method:
- summary of work completed
- key scientific discoveries
- summary of work in progress
- current schedule of anticipated events or milestones
- market plans for introduction of Licensed Products, and
- a Summary of resources (dollar value) spent in the reporting
period.
9.3 Licensee has a continuing responsibility to keep The Regents
informed of the small business entity status (as defined by the United States
Patent and Trademark Office) of itself and its sublicensees and Affiliates.
9.4 Licensee shall report to The Regents in its immediately subsequent
progress and royalty report the date of first commercial sale of a Licensed
Product in each country.
9.5 After the first commercial sale of a Licensed Product anywhere in
the world, Licensee shall make quarterly royalty reports to The Regents on or
before the end of each calendar quarter of each calendar year for the preceding
calendar quarter. Each royalty report will cover Licensee's preceding calendar
quarter and will show (a) the gross sales and Net Annual Sales of Licensed
Products sold during the most recently completed calendar quarter; (b) the
number of each type of Licensed Product sold; (c) the royalties, in U.S.
dollars, payable with respect to sales of Licensed Products; (d) the method used
to calculate the royalty; and (e) the exchange rates used.
9.6 If no sales of Licensed Products have been made during any
reporting period occurring after the first commercial sale of a Licensed Product
anywhere in the world by Licensee, a statement to this effect is required.
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10. BOOKS AND RECORDS
10.1 Licensee shall keep accurate books and records showing all
Licensed Products manufactured, used, and/or sold under the terms of this
Agreement. Books and records must be preserved for at least five (5) years from
the date of the royalty payment to which they pertain.
10.2 Books and records must be open to inspection by representatives or
agents of The Regents at reasonable times. The Regents shall bear the fees and
expenses of examination but if an error in royalties of more than [*] of the
total royalties due for any year is discovered in any examination then Licensee
shall bear the fees and expenses of that examination.
11. LIFE OF THE AGREEMENT
11.1 Unless otherwise terminated by operation of law or by acts of the
parties in accordance with the terms of this Agreement, this Agreement will be
in force from the Effective Date until the last-to-expire patent licensed under
this Agreement; or for twenty (20) years from the date of this Agreement if no
patent issues; or until the last patent application licensed under this
Agreement is abandoned and no patent in Regent's Patent Rights ever issues,
whichever occurs first. By mutual agreement, the Agreement can be extended until
the expiration date of the last-to-expire patent licensed under this Agreement;
or until the last patent application licensed under this Agreement is abandoned
and no patent in Regents' Patent Rights ever issues. Upon expiration of this
Agreement, Licensee shall have a perpetual royalty free license to use Regents'
Patent Rights and Know How to make, have made, use, import and sell Licensed
Products and to practice Licensed Methods.
11.2 Any termination of this Agreement will not affect the rights and
obligations set forth in the following Articles:
Article 10 Books and Records
Article 14 Disposition of Licensed Products on Hand on Termination
Article 15 Use of Names and Trademarks
Article 20 Indemnification
Article 24 Failure to Perform
Article 29 Secrecy
12. TERMINATION BY THE REGENTS
If Licensee fails to perform or violates any material term of this
Agreement, then The Regents may give written notice of default (Notice of
Default) to Licensee. If Licensee fails to repair the default within sixty (60)
days of the effective date of Notice of Default, The Regents may terminate this
Agreement and its licenses by a second written notice (Notice of Termination).
If a Notice of Termination is sent to Licensee, this Agreement will
automatically terminate on the effective date of that notice. Termination will
not relieve Licensee of its
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obligation to pay any fees owing at the time of termination and will not impair
any accrued right of The Regents. These notices are subject to Article 19
(Notices).
13. TERMINATION BY LICENSEE
13.1 Licensee has the right at any time to terminate this Agreement in
whole or as to any portion of Regents' Patent Rights by given notice in writing
to The Regents. Notice of termination will be subject to Article 19 (Notices)
and termination of this Agreement will be effective sixty (60) days from the
effective date of notice.
13.2 Any termination under the above paragraph does not relieve
Licensee of any obligation or liability accrued under this Agreement prior to
termination or rescind any payment made to The Regents or anything done by
Licensee prior to the time termination becomes effective. Termination does not
affect in any manner any rights of The Regents arising under this Agreement
prior to termination.
14. DISPOSITION OF LICENSED PRODUCTS ON HAND UPON TERMINATION
15. USE OF NAMES AND TRADEMARKS
Nothing contained in this Agreement confers any right use in
advertising, publicity, or other promotional activities any name, trade name,
trademark, or other designation of either party hereto (including contraction,
abbreviation or simulation of any of the foregoing). Unless required by law, the
use by Licensee of the name, "The Regents" or the name of any campus of the
University of California is prohibited.
16. LIMITED WARRANTY
16.1 The Regents warrants to Licensee that it has the lawful right to
grant this license.
16.2 This license and the associated Invention are provided WITHOUT
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER
WARRANTY, EXPRESS OR IMPLIED. THE REGENTS MAKES NO REPRESENTATION OR WARRANTY
THAT THE LICENSED PRODUCTS OR LICENSED METHODS WILL NOT INFRINGE ANY PATENT OR
OTHER PROPRIETARY RIGHT.
16.3 IN NO EVENT MAY THE REGENTS BE LIABLE FOR ANY INCIDENTAL SPECIAL
OR CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF THIS LICENSE OR THE USE OF
THE INVENTION OR LICENSED PRODUCTS.
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16.4 Nothing in this agreement:
16.4.1 is a warranty or representation by The Regents as to the
validity or scope of any Regents' Patent Rights;
16.4.2 is a warranty or representation that anything made, used, sold
or otherwise disposed of under any license granted in this
Agreement is or will be free from infringement of patents of
third parties;
16.4.3 is an obligation to bring or prosecute actions or suits
against third parties for patent infringement except as
provided in Article 19;
16.4.4 confers by implication, estoppel or otherwise any license or
rights under any patents of The Regents other than Regents'
Patent Rights as defined in this Agreement, regardless of
whether those patents are dominant or subordinate to Regent's
Patent Rights; or
16.4.5 is an obligation to furnish any know-how not provided in
Regents' Patent Rights.
17. PATENT PROSECUTION AND MAINTENANCE
17.1 As long as Licensee has paid patent costs as provided for in
Paragraph 17.5, The Regents shall diligently endeavor to prosecute and maintain
the United States and foreign patents comprising Regents' Patent Rights using
counsel of its choice selected from those approved by Licensee from the list
approved by The Regents. The Regents agrees to keep Licensee fully informed of
any and all patent prosecution and other actions with respect to Regents' Patent
Rights including sending to Licensee copies of all correspondence with patent
offices and local associates, submitting to Licensee copies of all draft
responses to Office Actions and other substantive filings in sufficient time
prior to filing to provide Licensee with adequate time to review and comment on
such matters; provided, however, that Licensee shall be responsible for any of
its expenses including attorney's fees that Licensee incurs in reviewing and
commenting on the information received from The Regents. The Regents shall
consult with Licensee regarding any material actions concerning the Patent
Rights and shall use all reasonable efforts to take such actions requested by
Licensee. If The Regents decide to abandon or allow to lapse any patent or
patent application within the Patent Rights in any country, The Regents will
inform Licensee in a timely manner and Licensee shall have the right to
prosecute or maintain any such patent or patent application at its expense. The
Regents shall provide Licensee with copies of all relevant documentation so that
Licensee may be informed of the continuing prosecution and Licensee agrees to
keep this documentation confidential. The Regents' counsel will take
instructions only from The Regents, or from Licensee after these instructions
have been approved by The Regents, and all patents and patent applications under
this Agreement will be assigned solely to The Regents.
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17.2 The Regents shall use all reasonable efforts to amend any patent
application to include claims reasonably requested by Licensee to protect the
products contemplated to be sold under this Agreement.
17.3 Licensee shall apply for an extension of the term of any patent
related to the species of Fields of Use included within Regents' Patent Rights
if appropriate. Licensee shall prepare all documents, and The Regents agree to
execute the documents and to take additional action as Licensee reasonably
request in connection therewith.
17.4 If either party receives notice pertaining to infringement or
potential infringement of any issued Licensed patents or plant-specific patent
included within Regents' Patent Rights, that party shall notify the other party
within ten (10) days after receipt of notice of infringement, and the terms of
Section 19 of this agreement shall apply.
17.5 Licensee shall reimburse The Regents for all the costs of
preparing, filing, prosecuting and maintaining all United States and foreign
patent applications contemplated by this Agreement and requested by Licensee.
Relevant costs billed by The Regents' counsel will be rebilled to Licensee and
are due within 30 days of rebilling by The Regents. These costs include patent
prosecution costs for the Invention incurred by The Regents prior to the
execution of this Agreement and any patent prosecution costs that may be
incurred for patentability opinions, re-examination, re-issue, interferences, or
inventorship determinations. Prior costs relating to the filing of patents
requested by Licensee will be due on execution of this Agreement and billing by
The Regents.
17.6 The Regents will notify Licensee of any actions with respect to
obtaining patents or other protection on the Invention as it relates to the
Field of Use in foreign countries. Licensee may request The Regents to obtain
patent or other patent protection on the Invention as it relates to the Field of
Use in foreign countries, if available. The Regents shall notify Licensee of any
action required to obtain or maintain foreign patents not less than ninety (90)
days prior to the deadline for any payment, filing, or action to be taken in
connection therewith. This notice concerning foreign filing must be in writing
and must identify the countries desired. The absence of a response by Licensee
to such a notice from The Regents to Licensee within forty five days of such
notice will be considered an election not to obtain or maintain foreign rights.
17.7 Licensee's obligation to underwrite and to pay patent prosecution
costs will continue for so long as this Agreement remains in effect, but
Licensee may terminate its obligations with respect to any given patent
application or patent upon sixty (60) days written notice to The Regents. The
Regents will use its best efforts to curtail patent costs when a notice of
termination is received from Licensee. The Regents may prosecute and maintain
such application(s) or patent(s) at its sole discretion and expense, but
Licensee will have no further right or licenses thereunder. Non-payment of
patent costs may be deemed by The Regents as an election by Licensee not to
maintain application(s) or patent(s).
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17.8 The Regents may, after notification of Licensee, file, prosecute
or maintain patent applications at its own expense in any country in which
Licensee has not elected to have patent applications filed, prosecuted, or
maintained in accordance with this Article, and those applications and resultant
patents will not be subject to this Agreement.
18. PATENT MARKING
Licensee shall mark all Licensed Products made, used or sold under the
terms of this Agreement, or their containers, in accordance with the applicable
patent marking laws.
19. PATENT INFRINGEMENT
19.1 If Licensee learns of the substantial infringement of any patent
licensed under this Agreement, Licensee shall call The Regents' attention
thereto in writing and provide The Regents with reasonable evidence of
infringement. Neither party will notify a third party of the infringement of any
of Regents' Patent Rights without first obtaining consent of the other party,
which consent will not be unreasonably denied. Both parties shall use their best
efforts, including but not limited to arbitration, in cooperation with each
other to terminate infringement without litigation.
19.2 Licensee may request that The Regents take legal action against
the infringement of Regents' Patent Rights. Request must be in writing and must
include reasonable evidence of infringement and damages to Licensee. If the
infringing activity has not abated within ninety (90) days following the
effective date of request, The Regents then has the right to:
19.2.1 commence suit on its own account; or
19.2.2 refuse to participate in the suit,
and The Regents shall give notice of its election in writing to Licensee by the
end of the one-hundredth (100th) day after receiving notice of written request
from Licensee. Licensee may thereafter bring suit for patent infringement, at
its own expense, if an only if The Regents elects not to commence suit and if
the infringement occurred during the period and in a jurisdiction where Licensee
had exclusive rights under this Agreement. If, however, Licensee elects to bring
suit in accordance with this paragraph, The Regents may thereafter join that
suit at its own expense.
19.3 Legal action as is decided on will be at the expense or the party
bringing suit and all recoveries recovered thereby will belong to the party
bringing suit, but legal action brought jointly by The Regents and Licensee and
fully participated in by both will be at the joint expense of the parties and
all recoveries will be shared jointly by them in proportion to the share of
expense paid by each party.
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19.4 Each party shall cooperate with the other in litigation
proceedings instituted hereunder but at the expense of the party bringing suit.
Litigation will be controlled by the party bringing the suit, except that The
Regents may be represented by counsel of its choice and at its expense in any
suit brought by Licensee.
20. INDEMNIFICATION
20.1 Licensee shall indemnify, hold harmless and defend The Regents,
its officers, employees, and agents; the sponsors of the research that led to
the Invention; and the inventors of the parents and patent applications in
Regent's Patent Rights and their employers against any and all claims, suits
losses, damage, costs, fees, and expenses resulting from or arising out of
exercise of this license or any sublicense. This indemnification includes, but
is not limited to, any product liability.
20.2 Licensee at its sole cost and expense, shall insure its activities
in connection with the work under this Agreement and obtain, keep in force and
maintain insurance as follows, or an equivalent program of self insurance:
Comprehensive or commercial form general liability insurance
(contractual liability included) with limits as follows:
- Each occurrence [*]
- Products/Completed Operations Aggregate [*]
- Personal and Advertising injury [*]
- General Aggregate (commercial form only) [*]
The coverage and limits referred to under the above do not in any way
limit the liability of Licensee. Licensee shall furnish The Regents with
certificates of insurance showing compliance with all requirements. Certificates
must:
- Provide for thirty (30) day advance written notice to The
Regents of any modification.
- Indicate that The Regents has been endorsed as an additional
Insured under the coverage referred to under the above.
- Include a provision that the coverage will be primary and will
not participate with nor will be excess over any valid and
collectable insurance or program of self-insurance carried or
maintained by The Regents.
20.3 The Regents shall notify Licensee in writing of any claim or suit
brought against The Regents in respect of which The Regents intends to invoke
the provisions of this Article. Licensee shall keep The Regents informed on a
current basis of its defense of any claims under this Article.
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21. NOTICES
Any notice or payment required to be given to either party is properly
given and effective (a) on the date of delivery if delivered in person or (b)
five (5) days after mailing if mailed by first-class certified mail, postage
paid, to the respective addresses given below, or to another address as is
designated by written notice given to the party.
In the case of Licensee:
Licensee INC.
3065 Northwoods Circle
Norcross, GA 30071
Attention: Dr. Russell Medford, President and CEO
With a copy to:
Sherry M. Knowles
King & Spalding
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1763
In the case of The Regents:
THE UNIVERSITY OF CALIFORNIA, SAN DIEGO
Technology Transfer Office
9500 Gilman Drive
La Jolla, California 92093-0910
Attention: Director
Referring to: [*]
22. ASSIGNABILITY
This Agreement may be assigned by The Regents, but is personal to
Licensee and assignable by Licensee only with the written consent of The
Regents, which consent will not be unreasonably withheld.
23. NO WAIVER
No Waiver by either party or any default of this Agreement may be
deemed a waiver of any subsequent or similar default.
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24. FAILURE TO PERFORM
If either party finds it necessary to undertake legal action against
the other on account of failure of performance due under this Agreement, then
the prevailing party is entitled to reasonable attorney's fees in addition to
costs and necessary disbursements.
25. GOVERNING LAWS
THIS AGREEMENT WILL BE INTERPRETED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, UNITED STATES
OF AMERICA, WITH JURISDICTION IN COURTS OF THE STATE OF CALIFORNIA, but
the scope and validity of any patent or patent application will be governed by
the applicable laws of the country of the patent or patent application.
26. PREFERENCE FOR UNITED STATES INDUSTRY
Because this Agreement grants the exclusive right to use or sell the
Invention in the United States, Licensee agrees that any products sold in the
U.S. embodying this Invention or produced through the use thereof will be
manufactured substantially in the United States.
27. GOVERNMENT APPROVAL OR REGISTRATION
If this Agreement or any associated transaction is required by law of
any nation to be either approved or registered with any governmental agency,
Licensee shall assume all legal obligations to do so.
28. EXPORT CONTROL LAW
Licensee shall observe all applicable United States and foreign laws
with respect to the transfer of Licensed Products and related technical data to
foreign countries, including, without limitation, the International Traffic in
Arms Regulations (ITAR) and the Export Administration Regulations. This may
include a requirement that Licensee manufacture in the United States Licensed
Products that are to be sold in the United States.
29. SECRECY
29.1 With regard to confidential information ("Data"), with can be oral
or written or both, received from The Regents regarding this Invention, Licensee
agrees:
29.1.1 not to use the Data except for the sole purpose of performing
under the terms of this Agreement;
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29.1.2 to safeguard Data against disclosure to others with the same
degree of care as it exercises with its own data of a similar
nature;
29.1.3 not to disclose Data to others (except to its employees,
agents or consultants who are bound to Licensee by a like
obligation of confidentiality) without the express written
permission of The Regents, except that Licensee is not
prevented from using or disclosing any of the Data that:
29.1.3.1 Licensee can demonstrate by written records was
previously known to it;
29.1.3.2 is now, or becomes in the future, public knowledge
other than through acts or omissions of Licensee; or
29.1.3.3 is lawfully obtained by Licensee from sources
independent of The Regents; and
29.1.4 that the secrecy obligations of Licensee with respect to Data
will continue for a period ending five (5) years from the
termination date of this Agreement.
29.2 With regard to biological material received by Licensee from The
Regents, if any, including any cell lines, vectors, genetic material,
derivatives, products, progeny or material derived therefrom ("Biological
Material"), Licensee agrees:
29.2.1 not to use Biological Material except for the sole purpose of
performing under the terms of this Agreement;
29.2.2. not to transfer Biological Material to others (except to its
employees, agents or consultants who are bound to Licensee by
like obligations conditioning and restricting access, use and
continued use of Biological Material) without the express
written permission of The Regents, except that Licensee is not
prevented from transferring Biological Material that:
29.2.2.1 becomes publicly available other than through acts or
omissions of Licensee, or
29.2.2.2 is lawfully obtained by Licensee from sources
independent of The Regents;
29.2.3 to safeguard Biological Material against disclosure and
transmission to others with the same degree of care as it
exercises with its own biological materials of a similar
nature;
29.2.4 to destroy all copies of Biological Material at the
termination of this Agreement.
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30. MISCELLANEOUS
30.1 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.
30.2 This Agreement is not binding on the parties until it has been
signed below on behalf of each party. It is then effective as of the Effective
Date.
30.3 No amendment or modification of this Agreement is valid or binding
on the parties unless made in writing and signed on behalf of each party.
30.4 This Agreement embodies the entire understanding of the parties
and supersedes all previous communications, representations or understandings,
either oral or written, between the parties relating to the subject matter
hereof. The Secrecy Agreement between The Regents and Licensee dated June 27,
1997 is hereby terminated.
30.5 In case of any of the provisions contained in this Agreement is
held to be invalid, illegal, or unenforceable in any respect, that invalidity,
illegality or unenforceability will not affect any other provisions of this
Agreement and this Agreement will be construed as if the invalid, illegal, or
unenforceable provisions had never been contained in it.
IN WITNESS WHEREOF, both The Regents and Licensee have executed this
Agreement, in duplicate originals, by their respective and duly authorized
officers on the day and year written.
ATHEROGENICS, INC. THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA
By: Russell M. Meford By: Alan Paau
------------------------------ ------------------------------
(Signature) (Signature) 2/21/98
Name: Russell M. Medford MD PhD Name: Alan Paau, Ph.D
--------------------------- ------------------------------
(Please Print)
Title: President and CEO Title: Director, Technology Transfer
------------------------------ ------------------------------
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Exhibit 10.03
EXCLUSIVE LICENSE AGREEMENT
This Exclusive License Agreement (the "Agreement") is made effective as
of the 20th day of November, 1997 (the "Effective Date"), by and between the
UNIVERSITY OF ROCHESTER (the "University"), a New York nonprofit corporation,
having its principal place of business at 518 Hylan Building, Rochester, New
York 14627, and ATHEROGENICS, Inc. a for profit corporation organized under the
laws of Georgia and having a principal place of business at 3065 Northwoods
Circle, Norcross, Georgia 30071, and its Affiliates (collectively referred to as
"Licensee.")
WITNESSETH:
WHEREAS, the University is the owner of the Subject Technology, as
defined below; and
WHEREAS, the University is willing to grant a royalty bearing,
worldwide, exclusive license to the Subject Technology to Licensee on the terms
set forth herein; and
WHEREAS, Licensee desires to obtain said exclusive license to the
Subject Technology.
NOW, THEREFORE, for and in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereto expressly agree as follows:
1. CERTAIN DEFINITIONS
1.1 AFFILIATES. The term "Affiliates" shall mean any corporation,
partnership, joint venture or other entity of which the common stock or other
equity ownership thereof is twenty five percent (25%) or more owned by Licensee.
1.2 FIELD. The term "Field" shall mean all fields of use desired by
Licensee.
1.3 LICENSED PRODUCTS. The term "Licensed Products" shall mean all
products and methods that incorporate, utilize or are made with the use of the
Subject Technology.
1.4 NET SALES. The term "Net Sales" shall mean the gross amount of
monies or cash equivalent of other consideration which is paid by unrelated
third parties to Licensee for the Licensed Products by sale or other mode of
transfer, less all trade, quantity and cash discounts actually allowed, credits,
and allowances actually granted on account of rejections, returns or billing
errors, duties, transportation and insurance, taxes and other governmental
charges actually paid.
1.5 PARTIES. The term "Parties" or individually, a "Party," shall mean
the parties to this Agreement, namely, the University and Licensee.
[ * ] Certain confidential information contained in this document, marked by
an asterisk within brackets, has been omitted and filed separately with
the Securities and Exchange Commission pursuant to a request for
confidential treatment under Rule 406 of the Securities Act of 1933, as
amended.
<PAGE> 2
1.6 SUBJECT TECHNOLOGY. The term "Subject Technology" shall mean all
technology, methods, compounds, compositions, cell lines, biological materials,
know-how, documents, materials, tests, laboratory notebooks, computer data, all
improvements thereto, and all confidential information related to the subject
matter disclosed or claimed in the patents and patent applications listed in
Exhibit A, which were developed as of the Effective Date by Richard F. Borch and
Therese K. Schmalbach. The term "Subject Technology" shall also include all
patent filings listed in Exhibit A hereto, together with all applications for
patent or like protection on said inventions and all patents or like protection
that may in the future be granted on said inventions whether in the United
States of America or any other country and all substitutions for and divisions,
continuations, continuations in part, renewals, reissues, reexaminations,
extensions and the like on said applications and patents (collectively, the
"Patent Rights").
1.7 STRAIGHT SUBLICENSING REVENUE. The term "Straight Sublicensing
Revenue" shall mean all cash, sublicensing fees, royalties and all other
payments paid to Licensee by sublicensees of Licensee's rights hereunder if such
sublicense of the rights does not include the sublicense or other transfer of
any other technologies or rights owned or licensed by Licensee.
1.8 VALUE ADDED SUBLICENSING REVENUE. The term "Value Added
Sublicensing Revenue" shall mean all cash, sublicensing fees, royalties, and all
other payments paid to Licensee by sublicensees of Licensee's rights hereunder
if such sublicense of the rights includes the sublicense or other transfer of
any other technologies, know how, data, or rights owned or licensed by Licensee.
2. GRANT OF LICENSE
2.1 EXCLUSIVE LICENSE. Subject to Section 2.2, the University hereby
grants to Licensee an exclusive, worldwide, right and license, with the right to
sublicense, under the Subject Technology to make, have made, use, market,
import, export, sell and offer for sale Licensed Products in the Field.
2.2 RESERVED RIGHTS. The grant in Section 2.1 shall be further subject
to, restricted by and non-exclusive with respect to:
(i) the use of the Subject Technology by the University for
non-commercial research, patient care, teaching and other educationally related
purposes;
(ii) the use of the Subject Technology by the inventors
thereof for non-commercial research purposes at academic or research
institutions; and
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<PAGE> 3
(iii) any non-exclusive license of the Subject Technology that
the University is required by law or regulation to grant to the United States of
America or to a foreign state pursuant to an existing or future treaty with the
United States of America.
3. PAYMENTS AND REPORTS
3.1 ANNUAL FEE. As partial consideration for the rights conveyed by the
University under this Agreement, Licensee shall pay the University a minimum
annual license fee of [*] upon January 31 of each year that this Agreement is in
effect, beginning on January 31, 1998.
3.2 LICENSED PRODUCTS ROYALTY. As partial consideration for the rights
conveyed by the University under this Agreement, Licensee shall pay the
University a running royalty of (i) [*] of Net Sales made in countries in which
a Licensed Product sold falls within the claims of a patent listed in Exhibit A,
and (ii) [*] of Net Sales made in countries if the Product is approved in the
country for the indication described in the patent claims. Such running
royalties shall be payable as provided in Paragraph 3.6. For the purposes of
this Section, a Licensed Product is considered to fall within the claims of the
patent if a dithiocarbamate which is included in a claim is sold for use in
combination with an antineoplastic or antibiotic agent that is included in the
claim.
3.3 MILESTONE PAYMENTS. Licensee shall also pay the University the
following milestone payments: (a) [*] upon the submission of the first
Investigational New Drug Application for a Licensed Product to the FDA; and (b)
[*] upon the approval of the first New Drug Application for a Licensed Product
from the FDA.
3.4 VALUE ADDED SUBLICENSING ROYALTY. In place of the royalty provision
set out in Section 3.2, if the Subject Technology or any aspect of it is
sublicensed to a third party, Licensee agrees to pay to the University as
royalties hereunder, [*] of all Value Added Sublicensing Revenue arising from
sublicenses of the Subject Technology in countries in which the Subject
Technology is protected by patents owned by the University. If, however,
Licensee or Sublicensee is required to obtain third party rights to sell
Licensed Products which result in an actual reduction in the sublicense royalty
paid to Licensee, the [*] royalty to the University can be renegotiated to
reflect the required extra payments. If agreement cannot be reached on a
reasonable royalty under the circumstances, the parties agree to resolve the
dispute through arbitration conducted under the auspices of the American
Arbitration Association pursuant to the organization's rules for commercial
arbitration.
3.5 STRAIGHT SUBLICENSING ROYALTY. In place of the royalty provision
set out in Section 3.2, if the Subject Technology or any aspect of it is
sublicensed to a third party, Licensee agrees to pay to University as royalties
hereunder, [*] of all Straight Sublicensing Revenue arising from sublicenses of
the Subject Technology in countries in which the Subject Technology is protected
by patents listed in Exhibit A. If, however, Licensee or Sublicensee is required
to obtain third
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<PAGE> 4
party rights to sell Licensed Products which result in an actual reduction in
the sublicense royalty paid to Licensee, the [*] royalty to the University can
be renegotiated to reflect the required extra payments. If agreement cannot be
reached on a reasonable royalty under the circumstances, the parties agree to
resolve the dispute through arbitration conducted under the auspices of the
American Arbitration Association pursuant to the organization's rules for
commercial arbitration.
3.6 QUARTERLY PAYMENTS. Payment of the royalties specified in Paragraph
3.2 shall be made by Licensee to the University within forty-five (45) days
after March 31, June 30, September 30 and December 31 of each year during the
term of this Agreement covering the quantity of Licensed Products sold by
Licensee during the preceding calendar quarter. Payment of the royalties
specified in Paragraphs 3.4 and 3.5 shall be made by Licensee to the University
within forty-five (45) days after receipt of payment from the sublicensee. After
termination or expiration of this Agreement, a final payment shall be made by
Licensee covering the whole or partial calendar quarter. Each quarterly payment
shall be accompanied by a written statement of Net Sales of Licensed Products by
Licensee during such calendar quarter. Such written statements shall be duly
signed by an authorized signatory of Licensee on behalf of Licensee and shall
show the Net Sales of Licensed Products by Licensee during such calendar quarter
and the amount of royalties payable under this Agreement based thereon.
3.7 PAYMENTS IN DOLLARS. All payments due hereunder are expressed in
and shall be paid by check payable in United States of America currency, without
deduction of exchange, collection or other charges, to the University, or to the
account of the University at such other bank as the University may from time to
time designate by notice to Licensee. All currency conversion rates will be
calculated at the reported conversion rate in The Wall Street Journal on the
first day of the month in which the payment is due.
3.8 INTEREST ON LATE PAYMENTS. In the event that any payment due
hereunder is not made when due, the payment shall accrue interest beginning on
the tenth day following the due date thereof, calculated at the annual rate of
[*], the interest being compounded on the last day of each calendar quarter,
provided, however, that in no event shall said annual interest rate exceed the
maximum legal interest rate. Each such royalty payment when made shall be
accompanied by all interest so accrued. Said interest and the payment and
acceptance thereof shall not negate or waive the right of the University to seek
any other remedy, legal or equitable, to which it may be entitled because of the
delinquency of any payment.
4. RECORDS AND INSPECTION
Licensee shall maintain or cause to be maintained a true and correct
set of records pertaining to the Net Sales of Licensed Products by Licensee
under this Agreement. During the term of this Agreement and for a period of one
(1) year thereafter, Licensee agrees to permit, upon reasonable advance notice,
an accountant selected by the University and reasonably
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<PAGE> 5
acceptable to Licensee to have access during ordinary business hours to such
records as are maintained by Licensee as may be necessary, in the opinion of
such accountant, to determine the correctness of any report and/or payment made
under this Agreement. In the event that the audit reveals an underpayment of
royalty by more than [*], the cost of the audit shall be paid by Licensee. If
the underpayment is less than [*] but more than [*], Licensee and the University
shall each pay [*] of the cost of the independent audit. If the underpayment is
less than [*], the University shall bear the cost of the independent audit. Such
accountant shall maintain in confidence, and shall not disclose to the
University, any information concerning Licensee or its operations or properties
other than information directly relating to the correctness of such reports and
payments and such accountant shall be required to sign a confidentiality
agreement to effect the foregoing in such form as Licensee shall reasonably
require.
5. SUBLICENSES
All sublicenses granted by Licensee of its rights hereunder shall be
subject to the terms of this License Agreement and shall provide for the payment
of royalties hereunder at least to the levels specified for payments by Licensee
to the University in Section 3 hereof. Sublicense royalty fees to the University
shall not include development funds, equity investment in Licensee, payments for
past research expenditures, or the like. Sublicense fees will be paid to the
University for upfront payments and milestone payments received by Licensee in
an amount of [*] if at the time the payment is made, the product or anticipated
product falls under the terms of 3.2(i) and [*] if at the time the payment is
made, the product or anticipated product falls under the terms of 3.2(ii).
Licensee shall be responsible for its sublicensees and shall not grant any
rights which are inconsistent with the rights granted to and obligations of
Licensee hereunder. Licensee shall give the University prompt notification of
the identity and address of each sublicensee with whom it concludes a sublicense
agreement.
6. PATENTS AND INFRINGEMENT
6.1 PATENT COSTS. After the Effective Date, Licensee agrees, with
respect to the Subject Technology, to pay all costs incurred by the University,
incident to the United States and foreign applications, patents and like
protection, including all costs incurred for filing, prosecution, issuance and
maintenance fees as well as any costs incurred in filing continuations,
continuations-in-part, divisionals or related applications and any reexamination
or reissue proceedings. Licensee shall have no obligation for any costs related
to the protection of the Subject Technology that were incurred prior to the
Effective Date.
6.2 MAINTENANCE OF PATENTS. In the event that Licensee decides not to
continue any payments for prosecution of a patent application to issuance or
maintain any United States or foreign patent application or patent on the
Subject Technology, Licensee shall timely notify the University in writing in
order that the University may pay for such United States and said foreign
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<PAGE> 6
applications and continue said prosecution or maintenance of such patent
applications at its own expense, and the license rights as to such Subject
Technology covered by such patent application shall terminate with respect to
such country or countries as of the date of Licensee's notice.
6.3 PATENT PROSECUTIONS. The University agrees to keep Licensee fully
informed of any and all patent prosecution and other actions with respect to the
Subject Technology including sending to Licensee copies of all correspondence
with patent offices and local associates, submitting to Licensee copies of all
draft responses to Office Actions and other substantive filings in sufficient
time prior to filing to provide Licensee with adequate time to review and
comment on, however, Licensee shall be responsible for any of its expenses
including attorney's fees that Licensee incurs in reviewing and commenting on
the information received from the University. The University shall consult with
Licensee regarding any material actions concerning the Patent Rights. The
University will use patent counsel acceptable to Licensee.
6.4 COOPERATION. The University agrees to reasonably cooperate with
Licensee to whatever extent is reasonably necessary to procure and defend the
patent protection of any rights in the Subject Technology, including presenting
or amending any claims desired by Licensee, filing reissue or reexamination
applications or other documents desired by Licensee, and agreeing to execute any
and all documents to provide Licensee the full benefit of the licenses granted
herein.
6.5 INFRINGEMENTS. Each Party shall promptly inform the other of any
suspected infringement of any claims in the Patent Rights or misuse,
misappropriation, theft or breach of confidence of other proprietary rights in
the Subject Technology by a third party, and with respect to such activities as
are suspected, Licensee shall have the right, but not the obligation, to
institute an action for infringement, misuse, misappropriation, theft or breach
of confidence of the proprietary rights against such third party. If Licensee
fails to bring such an action or proceeding within a period of three (3) months
after receiving notice or otherwise having knowledge of such infringement, then
the University shall have the right, but not the obligation, to prosecute at its
own expense any such claim. Should either the University or Licensee commence
suit under the provisions of this Paragraph 6.5 and thereafter elect to abandon
the same, it shall give at least thirty days written notice to the other Party
who may, if it so desires, continue prosecution of such action or proceeding.
All recoveries, whether by judgment, award, decree or settlement, from
infringement or misuse of Subject Technology shall be apportioned as follows:
the Party bringing the action or proceeding shall first recover an amount equal
to two times the cost and expenses incurred by such Party directly related to
the prosecution of such action or proceeding and the remainder shall be
distributed pursuant to the terms of this agreement.
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<PAGE> 7
6.6 SETTLEMENTS. Neither the University nor Licensee shall settle any
action covered by Paragraph 6.5 without first obtaining the consent of the other
Party, which consent will not be unreasonably withheld.
7. TERM AND TERMINATION
7.1 TERM OF AGREEMENT. Unless earlier terminated as hereinafter
provided, this Agreement shall extend for the life of the last to expire patent
issued on the Subject Technology and shall then expire automatically. After such
expiration, Licensee shall have a perpetual, royalty-free license to make, use,
sell, offer to sell, and sublicense the Subject Technology.
7.2 BREACH OF AGREEMENT. In the event of default or failure by either
Party to perform any of the terms, covenants or provisions of this Agreement,
such Party shall have thirty (30) days after the giving of written notice of
such default by the other Party to correct such default. If such default is not
corrected within the said thirty (30) day period, the other Party shall have the
right, at its option, to cancel and terminate this Agreement. The failure of the
other Party to exercise such right of termination for non-payment of royalties
or otherwise shall not be deemed to be a waiver of any right the other Party
might have, nor shall such failure preclude the other Party from exercising or
enforcing said right upon any subsequent default.
7.3 BANKRUPTCY. The University shall have the right, at its option, to
cancel and terminate this Agreement in the event that Licensee shall (i) become
involved in insolvency, dissolution, bankruptcy or receivership proceedings
affecting the operation of its business or (ii) make an assignment of all or
substantially all of its assets for the benefit of creditors, or in the event
that (iii) a receiver or trustee is appointed for Licensee and Licensee, after
the expiration of thirty (30) days following any of the events enumerated above,
has been unable to secure a dismissal, stay or other suspension of such
proceedings.
7.4 EFFECT OF TERMINATION. At the date of any termination of this
Agreement pursuant to Paragraph 7.2 hereof for breach by Licensee, or pursuant
to Paragraph 7.3 hereof, as of the receipt by Licensee of notice of such
termination, all rights to the Subject Technology shall revert to the University
and Licensee shall immediately cease using any of the Subject Technology and
return all copies of the same to the University; provided, however, that
Licensee may dispose of any Licensed Products actually in the possession of
Licensee or its agents prior to the date of termination, subject to Licensee's
paying to the University running royalties in accordance with Paragraph 3.2 with
respect thereto and otherwise complying with the terms of this Agreement.
7.5 NO WAIVER. No termination of this Agreement shall constitute a
termination or a waiver of any rights of either Party against the other Party
accruing at or prior to the time of such termination. The University's waiver of
a single breach of any provision shall not be a waiver as to subsequent breaches
of the same provision.
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<PAGE> 8
8. ASSIGNABILITY
This Agreement shall be binding upon and shall inure to the benefit of
the University and its assigns and successors in interest, and shall be binding
upon and, shall inure to the benefit of Licensee and any successor to all or
substantially all of its assets or business to which this Agreement relates, but
shall not otherwise be assignable or assigned by Licensee without prior written
approval by the University being first obtained, which approval shall not be
unreasonably withheld.
9. GOVERNMENTAL COMPLIANCE
Licensee shall at all times during the term of this Agreement and for
so long as it shall sell Licensed Products comply and cause its sublicensees to
comply with all laws that may control the import, export, manufacture, use,
sale, marketing, distribution and other commercial exploitation of Licensed
Products or any other activity undertaken pursuant to this Agreement.
10. GOVERNING LAW
This Agreement is expressly acknowledged to be subject to all
applicable federal laws of the United States of America.
11. NOTICES
Any payment, notice or other communication pursuant to this Agreement
shall be considered given on the date of receipt by the other party, addressed
to it at its address below or as it shall designate by written notice given to
the other Party:
In the case of the University with a copy to:
Attn:
------------------------------
University of Rochester
518 Hylan Building
Rochester, New York 14627
In the case of Licensee with a copy to:
Attn: Russell M. Medford, M.D. Ph.D.
President and CEO
AtheroGenics, Inc.
3065 Northwoods Circle
Norcross, Georgia 30071
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<PAGE> 9
If written notice is given via facsimile, the original signed document
must be delivered promptly thereafter.
12. MISCELLANEOUS PROVISIONS
12.1 INDEPENDENT CONTRACTORS. The Parties hereby acknowledge and agree
that each is an independent contractor and that neither Party shall be
considered to be the agent, representative, master or servant of the other Party
for any purpose whatsoever, and that neither Party has any authority to enter
into a contract, to assume any obligation or to give warranties or
representations on behalf of the other Party. Nothing in this relationship shall
be construed to create a relationship of joint venture, partnership, fiduciary
or other similar relationship between the Parties.
12.2 THE UNIVERSITY'S DISCLAIMERS. Neither the University, nor any of
its faculty members, researchers, trustees, officers, employees, directors, or
agents assume any responsibility for the manufacture, product specifications,
sale or use of the Subject Technology or the Licensed Products which are
manufactured by or sold by Licensee.
12.3 DISCLAIMER OF WARRANTY. THE UNIVERSITY MAKES NO WARRANTIES OR
REPRESENTATIONS, EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES
OF FITNESS OR MERCHANTABILITY, REGARDING OR WITH RESPECT TO THE SUBJECT
TECHNOLOGY OR LICENSED PRODUCTS AND THE UNIVERSITY MAKES NO WARRANTIES OR
REPRESENTATIONS, EXPRESSED OR IMPLIED, OF THE PATENTABILITY OF THE SUBJECT
TECHNOLOGY OR LICENSED PRODUCTS OR OF THE ENFORCEABILITY OF ANY PATENTS ISSUING
THEREUPON, IF ANY, OR THAT THE SUBJECT TECHNOLOGY OR LICENSED PRODUCTS ARE OR
SHALL BE FREE FROM INFRINGEMENT OF ANY PATENT OR OTHER RIGHT'S OF THIRD PARTIES.
Licensee shall at all times during the term of this Agreement and
thereafter, indemnify, defend and hold University, its trustees, directors,
officers, employees and affiliates, harmless against all claims, proceedings,
demands and liabilities of any kind whatsoever, including legal expenses and
reasonable attorney fees, arising out of the death of or injury to any person or
persons or out of any damage to property, or resulting from the production,
manufacture, sale, use, lease, consumption or advertisement of the Licensed
Product(s) arising from an act or omission of Licensee, or arising from any
obligation of Licensee hereunder.
Prior to the sale of a Licensed Product, Licensee shall obtain and
carry in full force and effect commercial, general liability insurance which
shall protect Licensee and University with respect to events covered by
Paragraph 12 herein. Such insurance shall be written by a reputable insurance
company authorized to do business in the State of New York, shall list
University as an
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<PAGE> 10
additional named insured thereunder, shall be endorsed to include product
liability coverage and shall require thirty (30) days written notice to be given
to University prior to any cancellation or material change thereof. The limits
of such insurance shall not be less than [*] per occurrence with an aggregate of
[*] for personal injury or death, and [*] per occurrence with an aggregate of
[*] for property damage. Licensee shall provide University with Certificates of
Insurance evidencing the same.
12.4 REFORMATION. All Parties hereby agree that neither Party intends
to violate any public policy, statutory or common law, rule, regulation, treaty
or decision of any government agency or executive body thereof of any country or
community or association of countries; that if any word, sentence, paragraph or
clause or combination thereof of this Agreement is found, by a court or
executive body with judicial powers having jurisdiction over this Agreement or
any of its Parties hereto, in a final unappealed order to be in violation of any
such provision in any country or community or association of countries, such
words, sentences, paragraphs or clauses or combination shall be inoperative in
such country or community or association of countries, and the remainder of this
Agreement shall remain binding upon the Parties hereto.
12.5 FORCE MAJEURE. No liability hereunder shall result to a Party by
reason of delay in performance caused by force majeure, that is circumstances
beyond the reasonable control of the Party, including, without limitation, acts
of God, fire, flood, war, civil unrest, labor unrest, or shortage of or
inability to obtain material as equipment.
12.6 ENTIRE AGREEMENT. The terms and conditions herein constitute the
entire agreement between the Parties and shall supersede all previous
agreements, either oral or written, between the Parties hereto with respect to
the subject matter hereof. No agreement of understanding bearing on this
Agreement shall be binding upon either Party hereto unless it shall be in
writing and signed by the duly authorized officer or representative of each of
the Parties and shall expressly refer to this Agreement.
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IN WITNESS WHEREOF, the Parties hereto have executed and delivered this
Agreement in multiple originals by their duly authorized officers and
representatives on the respective dates shown below, but effective as of the
Effective Date.
ATHEROGENICS, INC. UNIVERSITY OF ROCHESTER
Russell M. Medford Robert Goodwin
- ------------------------------------- -------------------------------------
Name: Russell M. Medford Name:
-------------------------------- --------------------------------
Title: President and CEO Title:
-------------------------------- --------------------------------
Date: December 8, 1997 Date: December 3, 1997
-------------------------------- --------------------------------
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EXHIBIT A
PATENTS AND PATENT APPLICATIONS
TREATMENT OF DAMAGED BONE MARROW AND DOSAGE UNITS THEREFOR
Country: U.S.
Inventors: Richard F. Borch
Therese K. Schmalbach
Patent No. 4,938,949
Issued: 07/03/90
Appl. No. 243,405
Filed: 9/12/88
TREATMENT OF DAMAGED BONE MARROWLAND DOSAGE UNITS THEREFOR
Country: Australia
Inventors: Richard F. Borch
Therese K. Schmalbach
Patent No. 243,405
Issued. 9/12/88
Appl. No. WO 90/02550
METHOD FOR STIMULATING TRANSPLANTED BONE MARROW CELLS
Country: U.S.
Inventors: Richard F. Borch
Therese K. Schmalbach
Patent No. 5,187,193
Issued: 2/16/93
Appl. No. 673,089
Filed: 3/21/91
METHOD FOR STIMULATING PRODUCTION OF BONE MARROW CELL GROWTH FACTORS USING
DITHIOCARBAMATES
Country: U.S.
Inventors: Richard F. Borch
Therese K. Schmalbach
Patent No. 5,169,765
Issued: 12/8/92
Appl. No. 586,304
Filed: 9/21/90
USE OF DITHIOCARBAMATES TO TREAT MYELOSUPRESSION
Country: U.S.
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Inventors: Richard F. Borch
Therese K. Schmalbach
Patent No. 5,294,430
Issued: 3/15/94
Appl. No. 922,688
Filed: 7/30/92
USE OF DITHIOCARBAMATES TO COUNTERACT MYELOSUPRESSION
Country: U.S.
Inventors: Richard F. Borch
Therese K. Schmalbach
Patent No. 5,035,878
Issued: 7/30/91
Appl. No. 418,549
Filed: 10/10/89
2
<PAGE> 1
EXHIBIT 10.04
LICENSE AGREEMENT
BETWEEN
EMORY UNIVERSITY
AND
ATHEROGENICS
[*] Certain confidential information contained in this document, marked by an
asterisk within brackets has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 406 of the Securities Act of 1933, as amended.
<PAGE> 2
This LICENSE AGREEMENT ("Agreement") is made and entered into
by and between EMORY UNIVERSITY, a nonprofit Georgia corporation with offices
located at 1380 South Oxford Road, N.E., Atlanta, Georgia 30322 ("Emory") and
ATHEROGENICS, INC. , a for profit Georgia corporation organized and existing
under the laws of the State of Georgia with offices located at 3343 Peachtree
Road, N.E., Suite 1140, East Tower, Atlanta Financial Center, Atlanta, Georgia
30326 ("AtheroGenics").
WHEREAS, EMORY is the assignee of all right, title, and
interest in inventions developed by employees of EMORY and is responsible for
the protection and commercial development of such inventions; and
WHEREAS, Russell M. Medford, Ph.D., M.D., Margaret K.
Offerman, Ph.D., M.D., R. Wayne Alexander, Ph.D., M.D., Sampath Parthasarathy,
Ph.D. and Robert Khan, Ph.D., M.D. are employees of EMORY and are named as
inventors in certain patent United States patent applications identified in
Exhibits A and B attached hereto; and
WHEREAS, ATHEROGENICS represents that it has the necessary
expertise and will, as appropriate, acquire the necessary resources to fully
develop, obtain approval for, and market diagnostic and therapeutic products
based upon the inventions claimed in the above referenced patent applications
and additional patent applications which the parties anticipate will be filed
after the date of this Agreement and which shall be solely assigned to EMORY or
jointly assigned to EMORY and ATHEROGENICS as described herein; and
WHEREAS, EMORY wants to have such inventions developed,
commercialized, and made available for use by the public.
<PAGE> 3
NOW, THEREFORE, for and in consideration of the mutual covenants
and the premises herein contained, the parties, intending to be legally bound,
hereby agree as follows.
ARTICLE 1. EFFECTIVE DATE
This Agreement shall be effective as of January 11, 1995.
ARTICLE 2. DEFINITIONS
As used in this Agreement, the following terms shall have the
meanings indicated:
2.1 "Affiliate" shall mean any corporation or non-corporate
business entity which controls, is controlled by, or is under common control
with a party to this Agreement. A corporation or non-corporate business entity
shall be regarded as in control of another corporation if it owns, or directly
or indirectly controls at least forty percent (40%) of the voting stock of the
other corporation, or (i) in the absence of the ownership of at least forty
percent (40%) of the voting stock of a corporation or (ii) in the case of a
non-corporate business entity, or non-profit corporation, if it possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such corporation or non-corporate business entity, as
applicable.
2.2 "Dollars" shall mean United States dollars.
2.3 "FDA" shall mean the United States Food and Drug
Administration or successor entity.
2.4 "Field" shall mean the diagnosis, prevention and treatment of
human disease.
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2.5 "IND" shall mean an Investigational New Drug application or
its equivalent.
2.6 "Indemnitees" shall mean Emory, its directors, employees and
students, and their heirs, executors, administrators, successors and legal
representatives.
2.7 "Licensed Patents" shall mean the following subgroups: (i) the
patent applications identified in Exhibit "A" hereof and all patents which issue
thereon ("Subgroup (i)"), (ii) pending patent applications and issued patents
described in Exhibit B, Section I (which may be amended to add patent
applications filed after the date of this Agreement) and inventions and
technical approaches described in Section II of Exhibit B which may become the
subject of claims in patent applications filed after the effective date of this
Agreement, ("Subgroup (ii)"), (iii) patent applications to be filed on
inventions conceived and reduced to practice under the Sponsored Research
Agreement between Emory and AtheroGenics of even date ("Subgroup (iii)"), and
(iv) patent applications claiming inventions co-owned by AtheroGenics and Emory
which are exclusively licensed by Emory to AtheroGenics (see section 3.2 below).
Each subgroup of Licensed Patents shall include all United States and foreign
patents which issue thereon and any and all continuations, divisionals,
extensions, reissues and reexamination patents, all continuations-in-part, and
foreign counterparts thereof which issue anywhere in the world.
2.8 "Licensed Product" shall mean any process, service or product
comprising any composition of matter, design, discovery, improvement, invention,
process, method, structure or technique ("Invention") claimed in any Valid
Claim.
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<PAGE> 5
2.9 "Licensed Technology" shall mean all technical information and
data, whether or not patented, presently known or learned, invented or developed
by Russell M. Medford, Ph.D., M.D., Margaret K. Offerman, Ph.D., M.D., R. Wayne
Alexander, Ph.D., M.D., Sampath Parthasarathy, Ph.D., and Robert Khan, Ph.D.,
M.D. while an employee of Emory and obligated to assign rights in said technical
information and data to Emory, to the extent that (i) such technical information
and data is useful for the manufacture, use or sale of any Licensed Product and
(ii) Emory possesses the right to license the use of such information to
AtheroGenics for commercial purposes. Licensed Technology shall not include any
technical information or data invented or developed by any of the above named
persons when said person is acting as a consultant under Emory School of
Medicine Consulting Policies and is not obligated to assign technical
information or data invented or developed thereunder to Emory.
2.10 "Licensed Subject Matter" shall mean all Licensed Patents and
Licensed Technology.
2.11 "Licensed Territory" shall mean the world.
2.12 "NDA" shall mean a New Drug Application or its equivalent.
2.13 "Net Distributions" shall mean gross distributions for
products utilizing Licensed Patents and Licensed Technology from joint ventures
with AtheroGenics or an Affiliate of AtheroGenics, net of discounts, allowances,
sales or other similar taxes, rebates and returns, import and/or export duties,
and outbound transportation prepaid or allowed. Net Distributions shall be
calculated per product line incorporating Licensed Products and shall include
any funds or other valuable consideration received by AtheroGenics or an
Affiliate of AtheroGenics.
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<PAGE> 6
2.14 "Net Revenue" shall mean Net Distributions plus Sublicensee
Royalties on Licensed Products utilizing technology developed and/or
manufactured by AtheroGenics alone or through a joint venture with AtheroGenics
or an Affiliate of AtheroGenics.
2.15 "Net Selling Price" shall mean the gross selling price paid
by a purchaser of a Licensed Product to AtheroGenics, an Affiliate or
sublicensee of AtheroGenics, or any other party (other than a joint venture in
which AtheroGenics or an Affiliate of AtheroGenics is a participant) authorized
by AtheroGenics to sell Licensed Products (net of discounts, allowances, sales
or other similar taxes, rebates and returns, import and/or export duties, and
outbound transportation prepaid or allowed) and, if applicable, the value of all
properties, rights and services received in consideration of a Sale of a
Licensed Product. Where a Sale is deemed consummated by a gift, use or other
disposition of Licensed Products for other than a selling price stated in cash,
the term "Net Selling Price" shall mean the average Net Selling Price billed by
AtheroGenics (its Affiliates, sublicensees, joint venture partners or other
third parties authorized to Sell Licensed Products) in consideration of the Sale
of comparable Licensed Products during the three (3) months immediately
proceeding such Sale.
2.16 "Passthrough Royalties" shall mean Sublicensee Royalties
received by AtheroGenics from sublicensees wherein AtheroGenics does not develop
or manufacture the technology being sublicensed.
2.17 "Registration" shall mean in relation to any Licensed
Product, such approvals by United States authorities such as the FDA, as may be
legally required before such Licensed Product may be commercialized or Sold in
the United States.
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<PAGE> 7
2.18 "Sale" or "Sold" shall mean the transfer or disposition by
AtheroGenics, its Affiliates, sublicensees, joint venture partners or any third
party authorized by AtheroGenics to make such transfer or disposition, of a
Licensed Product, for a selling price or other consideration to a party other
than AtheroGenics, its Affiliates, sublicensees or joint venture partners. A
Sale shall occur upon transfer of funds for a Licensed Product. A Sale shall not
include transfer of product for research, development, clinical or promotional
purposes.
2.19 "Sublicensee Royalties" shall mean the Net Selling Price paid
by a purchaser of a Licensed Product to AtheroGenics, an Affiliate or
sublicensee of AtheroGenics, or any other party (other than a joint venture in
which AtheroGenics or an Affiliate of AtheroGenics is a participant) authorized
by AtheroGenics to sell Licensed Products.
2.20 "Valid Claim" shall mean an issued claim of any unexpired
patent which is a Licensed Patent or claim of any pending patent application
which is a Licensed Patent, which claim has not been held unenforceable,
unpatentable or invalid by a court or governmental body of competent
jurisdiction, unappealable or unappealed within the time allowed for appeal, or
which has not been rendered unenforceable through disclaimer or otherwise and
which has not been lost through an interference proceeding.
ARTICLE 3. GRANT OF LICENSE
3.1 License. Emory hereby grants AtheroGenics and its Affiliates
an exclusive right and license to make, use, sell and have sold Licensed
Products utilizing inventions claimed in Licensed Patents in Subgroup (i) , (ii)
or (iii) and to practice Licensed Technology in the Licensed Territory during
the term of this Agreement.
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3.2 Future Option. Emory hereby grants AtheroGenics and its
Affiliates an option for an exclusive license to all of Emory's rights to
Licensed Patents of Subgroup (iv) . AtheroGenics shall pay for and prosecute
patent applications for inventions in Subgroup (iv) in a manner consistent with
its obligations under Section 9.2 of this Agreement. AtheroGenics shall have
ninety (90) days after issuance of any Valid Claim for such a Licensed Patent
within which to exercise its option for that patent. Any license of a Subgroup
(iv) Licensed Patent shall contain terms substantially similar to those
contained in this Agreement, and shall bear a running royalty rate of [*] and a
sublicense royalty rate comparable to the applicable rate for Licensed Patents
in Subgroup (iii).
3.3 Government Rights. The license granted in Section 3.1 above is
conditional upon and subject to a nonexclusive, nontransferable, royalty free
license to the United States and other rights retained by the United States in
inventions developed by nonprofit institutions with the support of federal
funds. These rights are set forth in 35 U.S.C. ss. 201 et seq. and 37 C.F.R. ss.
401 et seq. which may be amended from time to time by the Congress of the United
States or through administrative procedures.
3.4 Retained Licenses. The license granted in Section 3.1 and any
license to be granted under Section 3.2 above are further conditional upon and
subject to a right and license retained by Emory on behalf of itself and Emory
research collaborators to make, use and transfer (not for value) Licensed
Products and practice Licensed Technology for research and educational purposes
only. Emory shall not undertake to make, use or transfer Licensed Products or
practice Licensed Technology under the sponsorship of any for profit entity,
other than AtheroGenics, without the express written approval of AtheroGenics.
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Emory shall have the right to publish the general scientific
findings from research related to Licensed Patents and Licensed Technology
subject to thirty (30) days prior review by AtheroGenics. Emory shall, upon
AtheroGenics' request, delete any AtheroGenics' confidential information
disclosed in such proposed publication. Emory shall also, upon the request of
AtheroGenics made within that thirty (30) day period, refrain from making such
publication for a period of time not to exceed ninety (90) days from the date of
the request, in order to afford Emory, or AtheroGenics, as applicable, an
opportunity to file a United States patent application to protect patentable
subject matter disclosed in such proposed publication.
3.5 Sublicenses. AtheroGenics may grant sublicenses under this
license. AtheroGenics shall provide Emory with copies of all sublicense
agreements within thirty (30) days of their execution date. AtheroGenics shall
remain responsible to Emory for the payment of all fees and royalties due under
this Agreement, whether or not such payments are made to AtheroGenics by its
sublicensees. AtheroGenics shall include in any sublicense granted pursuant to
this Agreement, a provision requiring the sublicensee to indemnify Emory and
maintain liability coverage to the same extent that AtheroGenics is so required
pursuant to Section 11.3 of this Agreement.
ARTICLE 4. OBLIGATIONS OF EMORY EMPLOYEES
AtheroGenics acknowledges that the founders of AtheroGenics, Drs.
R. Wayne Alexander and Russell Medford are full time employees of Emory and
their primary professional responsibilities are to Emory. Any contractual or
other relationship between AtheroGenics and Dr. Alexander and/or Dr. Medford,
for as long as they remain employees of Emory, or between,
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AtheroGenics and any other employee of Emory, whether said relationship is
created prior to or during the term of this Agreement, shall be subject to all
relevant policies of Emory, including, but not limited to, the Emory and Emory
School of Medicine Consulting Policies and the Emory Procedures for Faculty
Members involved in Sponsored Scientific Research and Technology Transfer, and
the Emory Patent and Copyright Policies as now exist, or as may be amended or
established from time to time.
ARTICLE 5. ROYALTIES AND OTHER PAYMENTS
AtheroGenics shall receive income under this license as well as
Passthrough Royalties. Running royalties on Net Revenue and on Passthrough
Royalties shall be calculated in the following manner:
5.1 Net Revenue.
AtheroGenics shall pay Emory the following running
royalties on Net Revenue:
(a) [*] of the Net Revenue for Licensed Products utilizing
Inventions claimed in any Valid Claim of Licensed Patents in Subgroup (i) Sold
in the Licensed Territory; or
(b) [*] of the Net Revenue for Licensed Products utilizing
Inventions claimed in any Valid Claim of Licensed Patents in Subgroup (ii) or
Subgroup (iii) Sold in the Licensed Territory.
(c) In the event that a Licensed Product utilizes Inventions
claimed by Valid Claims contained in more than one Licensed Patent subgroup,
AtheroGenics shall pay the higher
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of the applicable running royalty rate, but in no case shall pay Emory or its
assigns more than [*] of the Net Selling Price for any Licensed Product.
5.2 AtheroGenics shall pay Emory the following running royalties
on Passthrough Royalties:
(a) [*] of the Passthrough Royalties paid to AtheroGenics, up to a
maximum of [*] of Net Selling Price, and [*] of lump sum licensing fees paid to
AtheroGenics, by a Sublicensee for Licensed Products utilizing Inventions
claimed in any Valid Claim of Licensed Patents in Subgroup (i) Sold in the
Licensed Territory; or
(b) [*] of the Passthrough Royalties paid to AtheroGenics, up to a
maximum of [*] of Net Selling Price, and [*] of lump sum licensing fees paid to
AtheroGenics, by a Sublicensee for Licensed Products utilizing Inventions
claimed in any Valid Claim of Licensed Patents in Subgroup (ii) or Subgroup
(iii) Sold in the Licensed Territory.
(c) In the event that a Licensed Product subject to Passthrough
Royalties utilizes Inventions claimed by Valid Claims contained in more than one
Licensed Patent subgroup, AtheroGenics shall pay the higher of the applicable
running royalty rate, but in no case shall pay Emory or its assigns more than
[*] of the Net Selling Price for any Licensed Product.
(d) Emory shall have the right to approve any sublicense
arrangement, which approval shall not be unreasonably withheld, which
AtheroGenics or Emory reasonably anticipates will result in Passthrough
Royalties of less than [*] of the Net Selling Price for 5.2(a) or [*] of the Net
Selling Price for 5.2 (b).
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5.3 Signing Fee. AtheroGenics shall pay Emory a signing fee in the
amount of [*] upon the execution of this Agreement.
5.4 Milestone Payments. AtheroGenics shall pay Emory a Milestone
Payment in the amount specified below no later than thirty (30) days after the
occurrence of the corresponding event designated below.
Event Milestone Payment
----- -----------------
(a) The date of the first IND for a Licensed [*]
Product filed by AtheroGenics, its Affiliate, or
sublicensee becomes effective.
(b) Commencement Date of a Phase III Trial for [*]
any Licensed Product.
(c) Registration of any Licensed Product. [*]
ARTICLE 6. REPORTS AND ACCOUNTING
6.1 Royalty Reports and Records. During the term of this
Agreement, AtheroGenics shall furnish, or cause to be furnished to Emory,
written reports governing each of AtheroGenics', AtheroGenics' Affiliates and
sublicensees fiscal quarters showing:
(a) the gross selling price of all Licensed Products Sold by
AtheroGenics, its Affiliates and sublicensees, in each country of the Licensed
Territory during the reporting period, together with the calculations of Net
Selling Price in accordance with Section 2.15; and
(b) the royalties payable in Dollars, which shall have accrued
hereunder in respect to such Sales; and
(c) the exchange rates, if any, used in determining the amount of
Dollars; and
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(d) the amount of any consideration received by AtheroGenics from
sublicensees and an explanation of the contractual obligation satisfied by such
consideration; and
(e) the occurrence of any event triggering a Milestone Payment
obligation in accordance with Section 5.4.
Reports shall be made semiannually after the first Sale of a
Licensed Product. These royalty reports shall be due within ninety (90) days of
the close of every second and fourth AtheroGenics fiscal quarter. AtheroGenics
shall keep accurate records in sufficient detail to enable royalties and other
payments payable hereunder to be determined.
6.2 Right to Audit. Emory shall have the right, upon prior notice
to AtheroGenics, not more than once in each AtheroGenics fiscal year, for the
period not exceeding the previous twenty four (24) months, through an
independent public accountant selected by Emory and acceptable to AtheroGenics,
which acceptance shall not be unreasonably refused, to have access during normal
business hours of AtheroGenics as may be reasonably necessary to verify the
accuracy of the royalty reports required to be furnished by AtheroGenics
pursuant to Section 6.1 of the Agreement. AtheroGenics shall include in any
sublicenses granted pursuant to this Agreement, a provision requiring the
sublicensee to keep and maintain records of Sales made pursuant to such
sublicense and to grant reasonable access to such records by Emory's independent
public accountant for the purpose of verifying the accuracy of royalty reports.
If such independent public accountant's report shows any underpayment of
royalties by AtheroGenics, its Affiliates or sublicensees, within ninety (90)
days after AtheroGenics' receipt of such report, AtheroGenics shall remit or
shall cause its sublicensees to remit to Emory:
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(a) the amount of such underpayment; and
(b) if such underpayment exceeds [*] of the total royalties owed
for the fiscal year then being reviewed, the reasonably necessary fees and
expenses of such independent public accountant performing the audit. Otherwise,
Emory's accountant's fees and expenses shall be borne by Emory. Any overpayment
of royalties shall be fully refunded within ninety (90) days by Emory.
6.3 Confidentiality of Records. All information subject to review
under this Article 6 shall be confidential. Except where provided by law, Emory
and its accountant shall retain all such information in confidence.
ARTICLE 7. PAYMENTS
7.1 Payment Due Dates. Royalties and sublicense fees payable to
Emory as a result of activities occurring during the period covered by each
royalty report provided for under Article 6 of this Agreement shall be due and
payable on the date such royalty report is due. Payments of royalties in whole
or in part may be made in advance of such due date. Any payment in excess of [*]
shall be made by wire or transferred to an account of Emory designated by Emory
from time to time; provided, however, that in the event that Emory fails to
designate such account, AtheroGenics or its Affiliates and sublicensees may
remit payment to Emory to the address applicable for the receipt of notices
hereunder; providing, further, that any notice by Emory of such account or
change in such account, shall not be effective until fifteen (15) days after
receipt thereof by AtheroGenics.
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7.2 Currency Restrictions. Except as hereinafter provided in this
Section 7.2, all royalties shall be paid in Dollars. If, at any time, legal
restrictions prevent the prompt remittance of part of or all royalties with
respect to any country in the Licensed Territory where Licensed Products are
Sold, AtheroGenics or its sublicensee shall have the right and option to make
such payments by depositing the amount thereof in local currency to Emory's
account in a bank or depository in such country.
7.3 Interest. Royalties and other payments required to be paid by
AtheroGenics pursuant to this Agreement shall, if overdue, bear interest at the
lesser of the maximum applicable legal rate of interest on overdue commercial
accounts, or the LIBOR rate, calculated on an average daily basis over the
period of the delinquency. The payment of such interest shall not foreclose
Emory from exercising any other rights it may have because any payment is
overdue.
ARTICLE 8. DEVELOPMENT AND MARKETING PROGRAM
8.1 Diligence Obligations. AtheroGenics shall directly, or in
collaboration with Affiliates and sublicensees, use its best efforts:
(a) to conduct a research and development program relating to the
use of Licensed Products in the Field; and
(b) to promptly register Licensed Products with the FDA as
required by law.
For purposes of this Agreement, "best efforts" shall mean that
AtheroGenics shall use reasonable efforts consistent with those used by
comparable biotechnology companies in the United States, at the same stage of
corporate and scientific development, in research and
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development projects for diagnostic methods or kits and therapeutic methods or
compositions deemed to have commercial value comparable to the Licensed
Products.
8.2 Fulfillment; Conversion. AtheroGenics' best efforts
obligations set forth in this Article 8 shall be deemed to have been fulfilled
if AtheroGenics (a) files an IND for Registration of a Licensed Product in the
United States within three (3) years after the effective date of this Agreement;
and (b) diligently pursues such Registration by complying with all FDA
requirements and appealing, to the extent permissible by law, any decisions
taken by the FDA which would prohibit Registration; and (c) commences marketing
at least one Licensed Product within six (6) months following Registration.
If AtheroGenics fails to meet any deadline set forth in this
Section 8.2 or use best efforts as defined in Section 8.1 of this Agreement,
Emory may, upon at least ninety (90) days' prior written notice, convert this
license from an exclusive to non-exclusive license and grant third parties
rights in Licensed Patents and/or Licensed Technology equal to or lesser rights
than rights granted to AtheroGenics for the same Licensed Patents and/or
Licensed Technology, unless within such ninety (90) day period AtheroGenics
meets such deadline or demonstrates to the reasonable satisfaction of Emory that
it has resumed and will continue to use best efforts.
8.3 Progress Reports. AtheroGenics shall, no less frequently than
once every twelve (12) months until a Licensed Product has been Registered,
provide Emory with a written report detailing AtheroGenics', its Affiliates' and
sublicensees, activities related to developing Licensed Products and pursuing
Registration of Licensed Products.
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8.4 Development Outside United States. No later than AtheroGenics'
filing of an NDA for a Licensed Product in the United States, AtheroGenics shall
directly, or in collaboration with Affiliates and sublicensees, use its best
efforts:
(a) to obtain Registration for a Licensed Product in such other
countries of the Licensed Territory as AtheroGenics or AtheroGenics' Affiliates
and sublicensees deem appropriate; and
(b) upon Registration of a Licensed Product in a particular
country proceed with due diligence to market such Licensed Product in such
country.
8.5 Development of Indications.
(a) AtheroGenics and Emory acknowledge that the compositions and
methods claimed in the Licensed Patents may be useful for a myriad of
indications. AtheroGenics shall, in accordance with its diligence obligations,
attempt to develop the Licensed Patents and Licensed Technology for all such
indications. However, because of the burdens, both financial and practical,
which may be accompanied by this requirement, such development is intended to be
staggered. Accordingly, AtheroGenics shall begin diligence requirements for its
second indication within [*] of the date of this Agreement, and thereafter for
one new indication at least once every [*]. Dates wherein diligence requirements
commence for a new indication shall be termed "Diligence Commencement Dates."
(b) If AtheroGenics fails to begin using diligence to develop a
new potential indication an any Diligence Commencement Date in accordance with
Section 8.5 (a) of this Agreement, Emory may, commencing ninety (90) days after
that Diligence Commencement Date, request in writing that AtheroGenics enter
into good faith negotiations with prospective
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sublicensees which Emory believes are interested in developing an indication
which AtheroGenics is not developing, for the purpose of sublicensing one new
potential indication. Within sixty (60) days of receipt of such written
request, AtheroGenics shall (i) commence and diligently pursue good faith
negotiations with such prospective sublicensee or (ii) provide Emory with a
detailed development plan, including milestones, for such indication in
accordance with diligence requirements of this Agreement.
ARTICLE 9. PATENT PROSECUTION
9.1 Licensed Patents Assigned Solely to Emory. AtheroGenics shall
be primarily responsible for all patent prosecution activities pertaining to
Licensed Patents assigned solely to Emory. AtheroGenics, with the agreement of
Emory, which agreement shall not be unreasonably withheld, shall select patent
counsel to prosecute all such Licensed Patents and shall provide Emory with
copies of all communications from patent offices, filings and correspondence
pertaining to such patent prosecution activities, in a timely manner, so as to
give Emory an opportunity to comment thereon prior to any responsive filing.
Emory shall have the right to have claims which are supported by the
specification added to an application.
AtheroGenics shall pursue prosecution of such Licensed Patents in
at least the following countries: United States, EPO countries, Japan and
Canada. AtheroGenics shall, upon Emory's request, pursue prosecution of such
Licensed Patents in additional countries at Emory's expense.
If AtheroGenics chooses not to timely file or pursue patent
protection or patent maintenance for any patent application or issued patent
assigned solely to Emory, AtheroGenics
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shall notify Emory prior to abandonment in such a manner as would allow Emory a
reasonable period of time to take over prosecution or maintenance of said patent
application or issued patent. Such patent application or issued patent shall
then not be considered a Licensed Patent and Emory shall be free, at its
election, to abandon or maintain the prosecution of such patent application or
issued patent or grant rights to such patent application or issued patent to
third parties.
9.2 Licensed Patents Jointly Assigned to AtheroGenics and Emory.
AtheroGenics shall be primarily responsible for all patent prosecution
activities pertaining to Licensed Patents assigned jointly to AtheroGenics and
Emory. AtheroGenics shall select patent counsel to prosecute all such Licensed
Patents and shall provide Emory with copies of all communications from patent
offices, filings and correspondence pertaining to such patent prosecution
activities, in a timely manner, so as to give Emory an opportunity to comment
thereon prior to any responsive filing. Emory shall have the right to have
claims which are supported by the specification added to an application.
AtheroGenics shall pursue prosecution of such Licensed Patents in
at least the following countries: United States, EPO countries, Japan and
Canada. AtheroGenics shall, upon Emory's request, pursue prosecution of such
Licensed Patents in additional countries at Emory's expense.
If AtheroGenics chooses not to timely file or pursue patent
protection or patent maintenance for any patent application or issued patent
assigned jointly to AtheroGenics and Emory, AtheroGenics shall, upon Emory's
request, assign its interests in such patent application or issued patent to
Emory. After such assignment, such patent application or issued patent shall
then not be considered a Licensed Patent and Emory shall be free, at its
election, to abandon or
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maintain the prosecution of such patent application or issued patent or grant
rights to such patent application or issued patent to third parties.
ARTICLE 10. INFRINGEMENT
10.1 If either AtheroGenics or Emory becomes aware of a product
made, used or sold in the Licensed Territory, which it believes infringes a
Valid Claim, the party obtaining such knowledge shall promptly advise the other
party of all relevant facts and circumstances pertaining to the potential
infringement. AtheroGenics shall have the right to enforce any issued Licensed
Patent against such infringement, at its own expense. Emory shall cooperate with
AtheroGenics in such effort, including being joined as a party to such action,
if necessary. During the pendency of such an action, royalty rates owed by
AtheroGenics to Emory shall be reduced by [*] from those listed in Article 5 of
this Agreement.
10.2 Any damages or costs recovered by AtheroGenics in connection
with any action filed by AtheroGenics hereunder shall be applied first to
reimbursing AtheroGenics for costs and expenses of such litigation. Any damages
or costs recovered by AtheroGenics in excess of costs and expenses credited
shall be the sole property of AtheroGenics. Any such excess damages or costs
shall be treated as proceeds of Sales of Licensed Products in the fiscal quarter
received by AtheroGenics, and royalties shall be payable by AtheroGenics to
Emory thereon in accordance with the terms of this Agreement.
10.3 Any multiplication of damages for punitive purposes shall be
treated as proceeds of Sales of Licensed Products in the fiscal quarter received
by AtheroGenics, and
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royalties shall be payable by AtheroGenics to Emory thereon in accordance with
the terms of this Agreement, and AtheroGenics shall retain all attorney fees
awarded.
10.4 If AtheroGenics shall fail, within one hundred twenty (120)
days after receiving notice from Emory of a potential infringement, or providing
Emory with notice of such infringement, to either (a) terminate such
infringement, (b) institute sub-licensing negotiations, to be completed within a
reasonable period of time, or (c) institute an action to prevent continuation
thereof and, thereafter to prosecute such action diligently, or if AtheroGenics
notifies Emory that it does not plan to terminate the infringement, negotiate a
sub-license or institute such action, then Emory shall have the right to do so
at its own expense. AtheroGenics shall cooperate with Emory in such effort,
including being joined as a party to such action if necessary. Emory shall be
entitled to retain all damages or costs awarded to Emory in such action.
ARTICLE 11. REPRESENTATIONS AND WARRANTIES
11.1 Warranty of Ownership and Right to License. Emory represents
and warrants to AtheroGenics as follows:
(a) Right to Grant. Subject to Section 3.3 hereof, and certain
rights held by Isis Pharmaceuticals in patent application number [*], Emory
hereby represents that it has not granted to any third party, and no third party
holds, any option, license, sublicense or similar right relating to the use of
the Licensed Subject Matter within the Field. Emory further represents that it
has the right to grant the license granted hereunder to the Licensed Patents and
Licensed Technology.
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(b) Adversary Proceedings. There are no claims, disputes, actions,
proceedings, suits or appeals pending against Emory with respect to the Licensed
Subject Matter (other than those, if any, with respect to which service of
process or similar notice has not yet been made on Emory), and to the knowledge
of Emory, none has been threatened against Emory. To the knowledge of Emory, no
third party has infringed any of Emory's rights to use the Licensed Subject
matter in the Field.
11.2 Exclusion of Other Warranties. Emory disclaims any warranties
of merchantability or fitness for a particular purpose and any other implied
warranties with respect to the capabilities, safety, utility, or commercial
application of the Licensed Patents, Licensed Technology or Licensed Products.
ARTICLE 12. INDEMNIFICATION AND INSURANCE
12.1 No Liability. Emory shall not be liable to AtheroGenics or
AtheroGenics' Affiliates, customers or sublicensees for compensatory, special,
incidental, indirect, consequential or exemplary damages resulting from the
manufacture, testing, design, labeling, use or sale of Licensed Products.
12.2 Indemnification. AtheroGenics shall defend, indemnify, and
hold harmless the Indemnitees, from and against any and all claims, demands,
loss, liability, expense, or damage (including investigative costs, court costs
and attorneys, fees) Indemnitees may suffer, pay, or incur as a result of
claims, demands or actions against any of the Indemnitees arising or alleged to
arise by reason of, or in connection with, any and all personal injury
(including death) and property damage caused or contributed to, in whole or in
part, by
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AtheroGenics or AtheroGenics' Affiliates, contractors, agents, or sublicensees
manufacture, testing, design, use, Sale or labeling of any Licensed Product.
AtheroGenics' obligations under this Article shall survive the expiration or
termination of this Agreement for any reason. However, this section 12.2 shall
not obligate AtheroGenics to indemnify Emory for any claims, demands or actions
against any of the Indemnitees arising or alleged to arise by reason or, or in
connection with, any and all personal injury (including death) and property
damage caused or contributed to, in whole or in part, by Emory during any
participation by Emory in clinical testing of any Licensed Product.
12.3 Insurance. Without limiting AtheroGenics' indemnity
obligations under the preceding paragraph, AtheroGenics shall, prior to any
clinical trial or Sale of any Licensed Product, cause to be in force, an
"occurrence based type" liability insurance policy which:
(a) insures Indemnitees for all claims, damages, and actions
mentioned in Section 12.2 of this Agreement; and
(b) includes a contractual endorsement providing coverage for all
liability which may be incurred by Indemnitees in connection with this
Agreement; and
(c) requires the insurance carrier to provide Emory with no less
than thirty (30) days' written notice of any change in the terms or coverage of
the policy or its cancellation; and
(d) provides Indemnitees product liability coverage in an amount
appropriate and customary in the industry for bodily injury and for property
damage, subject to a reasonable aggregate amount.
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12.4 Occurrence Based Coverage Not Available. If AtheroGenics is
unable to obtain "occurrence based type" liability insurance for a reasonable
fee, AtheroGenics shall procure "claims made type" liability coverage to be
effective prior to any clinical trial or Sale of any Licensed Patent, and
throughout the term of this Agreement and "tail coverage," extending at least
ten (10) years after termination of this Agreement. AtheroGenics shall notify
Emory prior to its first clinical trial or commercial Sale of any Licensed
Product, or all insurance coverage AtheroGenics possesses to meet AtheroGenics'
obligations under Sections 12.2 and 12.3 of this Agreement.
12.5 Notice of claims. AtheroGenics shall promptly notify Emory of
all claims made to AtheroGenics involving the Indemnitees and shall advise Emory
of the policy amounts that might be needed to defend and pay any such claims.
ARTICLE 13. CONFIDENTIALITY
13.1 Treatment of Confidential Information. During the term of
this Agreement, AtheroGenics and Emory each may disclose certain information
which the disclosing party deems to be of a confidential, proprietary and trade
secret nature. For the term of this Agreement and for a period of seven (7)
years following termination of this Agreement, AtheroGenics and Emory each
agrees that it shall regard, maintain and preserve the secrecy and
confidentiality of any and all information and data, whether in oral or written
form, including but not limited to, products, processes, methods, concepts,
ideas, programs, formulas, apparatuses, chemicals, organisms, molecules,
prototypes, techniques, know-how, marketing plans, business plans, financial
information, data, strategies, forecasts, customer lists or technical
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requirements of customers, or other trade secrets (collectively referred to
herein as the "Proprietary Information") of the other party which may be
disclosed to or obtained by it pursuant to this Agreement.
Each party hereto shall take the same measures to preserve the
secrecy and confidentiality and avoid the unauthorized use or disclosure of the
other party's Proprietary Information as such party takes to protect its own
Proprietary Information.
13.2 Access. Each party hereto shall limit access to the
Proprietary Information to those of its employees and agents, Affiliates,
sublicensees, consultants, outside contractors, governmental regulatory
authorities and clinical investigators who have a reasonable need for access to
such information in connection with the operation of this Agreement. Further,
each party or its Affiliates or sublicensees may disclose Proprietary
Information to the United States government or other regulatory authorities to
the extent that such disclosure is necessary for the prosecution and/or
enforcement of patents or for authorizations to conduct clinical trials or
commercially market Licensed Products, provided that such party is otherwise
entitled to engage in such activities under this Agreement, or may disclose
Proprietary Information as is necessary to exercise any rights which survive
termination or expiration of this Agreement. All persons or entities to whom
Proprietary Information is disclosed under this Section 13.2 shall be subject to
the non-disclosure covenants contained herein.
Each party shall use its best efforts to disclose Proprietary
information to the other in writing and marked as proprietary. If it is
necessary to first disclose such information other than in written form, the
disclosing party shall, within thirty (30) days of such first disclosure,
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reduce the information to writing and provide the receiving party with a copy of
such information marked as proprietary.
13.3 Covenant Not to Use or Disclose. AtheroGenics and Emory each
agrees that it will not, at any time without the prior written consent of the
other party, use or disclose the Proprietary Information belonging to the other
party for any reason or in any manner whatsoever except as may be necessary for
the operation of this Agreement, as explicitly authorized under this Agreement,
or as required by law.
13.4 Return of Confidential Documents. Upon termination of this
Agreement, or forthwith upon the request of the other party, AtheroGenics and
Emory shall promptly return to the other party all such documents, drawings,
samples, specimens or reproductions thereof which may have come into its
possession.
13.5 Proprietary Rights. AtheroGenics and Emory each acknowledges
that the disclosure of Proprietary Information under this Agreement confers no
rights in the receiving party other than the right to use the Proprietary
Information of the disclosing party for the operation of this Agreement.
13.6 Exceptions. The obligations undertaken by AtheroGenics and
Emory hereunder shall not apply to any portion of the Proprietary Information
disclosed hereunder which:
(a) was known to the non-disclosing party prior to disclosure of
such Proprietary Information by the disclosing party;
(b) is, or shall become, other than by an act or omission of the
non-disclosing party, generally available to the public; or
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(c) shall, by lawful means, be made available to the
non-disclosing party by a third party with the right to disclose; or
(d) is required by law to be disclosed by the non-disclosing
party, provided the non-disclosing party uses its best efforts to notify the
disclosing party immediately upon learning of such requirement in order to give
the disclosing party reasonable opportunity to oppose such requirement; or
(e) results from research and development by the receiving party
or its Affiliates or sublicensees, independent of disclosures from the other
party of this Agreement, provided that the persons developing such information
have not had any exposure to the information received from the disclosing party;
or
(f) AtheroGenics and Emory agree in writing may be disclosed.
In claiming the benefit of any of the exceptions set forth in this
Section 13.5, the non-disclosing party shall have the burden of establishing
that a portion of the Proprietary Information is subject to such exception.
ARTICLE 14. TERM AND TERMINATION
14.1 Term. The term of this Agreement shall Commence on the
Effective Date and, unless sooner terminated as otherwise provided for in this
Agreement, shall continue in full force and effect until the expiration of the
last to expire Valid Claim. If no Valid Claim should issue within ten (10) years
of the date of this Agreement, this Agreement shall terminate on the tenth
(l0th) anniversary of its Effective Date. If such early termination occurs for
failure of a
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Valid Claim to issue, AtheroGenics shall be entitled to continue to utilize
within the Field all inventions, data or other information described and/or
claimed in Licensed Patents and all technical information and data comprising
Licensed Technology.
14.2 Termination. Emory shall have the right to terminate this
Agreement upon the occurrence of any one or more of the following events and
provided that Emory has given AtheroGenics the notice required in Section 14.3
of this Agreement and AtheroGenics has failed to cure the breach described in
such notice within the allotted time:
(a) failure of AtheroGenics to make any payment required pursuant
to this Agreement within five (5) days after receipt of notice that payment is
past due; or
(b) failure of AtheroGenics to timely issue AtheroGenics stock to
Emory in accordance with that certain Stock Purchase Agreement between Emory and
AtheroGenics of even date herewith, provided, however, that any regulatory
requirements that would prevent or delay such issuance of stock shall not be
grounds for termination; or
(c) failure of AtheroGenics to render royalty or progress reports
to Emory as required by this Agreement within ten (10) days after receipt of
notice that the report is past due or
(d) the institution of any proceeding by AtheroGenics under any
bankruptcy, insolvency, or moratorium law wherein AtheroGenics is the subject of
that proceeding; or
(e) any assignment by AtheroGenics of substantially all of its
assets for the benefit of creditors; or
(f) placement of AtheroGenics' assets in the hands of a trustee or
a receiver unless the receivership or trust is dissolved within thirty (30) days
thereafter and provided that
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in the case of an involuntary bankruptcy proceeding, which is contested by
AtheroGenics, such termination shall not become effective until the bankruptcy
court of jurisdiction has entered an order upholding the petition; or
(g) a decision by AtheroGenics or AtheroGenics' assignee of rights
under this Agreement to quit the business of developing or selling Licensed
Products; or
(h) the breach by AtheroGenics of any other material term of this
Agreement.
14.3 Exercise. Before Emory may exercise its right of termination
as defined in Section 14.2 of this Agreement, it must first provide
AtheroGenics, its trustees, receivers or assigns ("Recipients") with written
notice of default and of Emory's intent to terminate. Such notice shall include
the basis for such termination. Recipients shall have thirty (30) days after
actual receipt of such notice Within which to undertake to cure the default or
dispute the grounds for termination.
(a) If Recipients do not dispute the grounds for termination and
undertake to cure the default within that thirty (30) day period and (a) default
is cured within that thirty (30) day period, or (b) in the instance that the
breach cannot p reasonably be cured within thirty days, if default is cured
within a reasonable period of time, Emory's notice of intent to terminate shall
cease to be effective.
(b) If Recipients have a good faith dispute as to the grounds for
termination put forth by Emory in its notice, Recipients shall, within the
thirty (30) day period after actual receipt of notice, notify Emory that they
intend to demonstrate lack of grounds for termination. In such case, Recipients
shall have ninety (90) days following the date on which notice of breach is
actually received to either
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demonstrate such lack of grounds to Emory's satisfaction, and optionally to file
a petition for arbitration in accordance with Article 17 of this Agreement.
During this ninety (90) day period, cure of the deficiency shall render Emory's
notice of intent to terminate ineffective.
14.4 Termination by AtheroGenics. AtheroGenics shall have the
right to terminate this Agreement upon the occurrence of either of the following
events:
(a) the breach of a material term of this Agreement by Emory; or
(b) ninety (90) days after actual delivery by AtheroGenics to
Emory of written notice of AtheroGenics intent to terminate.
14.5 Exercise. Before AtheroGenics may exercise its right of
termination pursuant to Section 14.4(a) of this Agreement it must first provide
Emory with written notice of AtheroGenics' election to terminate. Such notice
shall include the basis for such termination. Emory shall have thirty (30) days
after actual receipt of such notice within which to undertake to cure the
default or dispute the grounds for termination.
(a) If Emory does not dispute the grounds for termination and
undertakes to cure the default within that thirty (30) day period and (a)
default is cured within that thirty (30) day period, or (b) in the instance that
the breach cannot reasonably be cured within thirty days, if default is cured
within a reasonable period of time, AtheroGenics' notice of intent to terminate
shall cease to be effective.
(b) If Emory has a good faith dispute to the grounds for
termination put forth by AtheroGenics in its notice, Emory shall, within the
thirty (30) day period after actual receipt of notice, notify AtheroGenics that
it intends to demonstrate lack of grounds for termination. In such case, Emory
shall have ninety (90) days following the date on which notice of breach is
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<PAGE> 31
actually received to either demonstrate such lack of grounds to AtheroGenics'
satisfaction, and optionally to file a petition for arbitration in accordance
with Article i7 of this Agreement. During this ninety (90) day period, cure of
the deficiency shall render AtheroGenics' notice of intent to terminate
ineffective.
14.6 Failure to Enforce. The failure of Emory or AtheroGenics At
any time, or for any period of time, to enforce any of the provisions of this
Agreement, shall not be construed as a waiver of such provisions or as a waiver
of the right of Emory or AtheroGenics thereafter to enforce each and every such
provision of this Agreement.
14.7 Effect.If this Agreement is terminated as a result of
AtheroGenics' breach pursuant to Section 14.2 or in accordance with Section 14.4
(b) , AtheroGenics shall return, or at Emory's direction, destroy, all data,
writings and other documents and tangible materials supplied to AtheroGenics by
Emory.
ARTICLE 15. ASSIGNMENT
AtheroGenics may grant, transfer, convey, or otherwise assign any
or all of its rights and obligations under this Agreement in conjunction with
the transfer of all, or substantially all, of the business interest of
AtheroGenics to which this Agreement relates. Emory's written consent, which
shall not be unreasonably withheld, shall be required prior to any other
assignment of AtheroGenics' rights or obligations under this Agreement.
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ARTICLE 16. MISCELLANEOUS
16.1 Legal Compliance. AtheroGenics shall comply with all
applicable federal, state and local laws and regulations relating to its
manufacture, use, Sale, labelling or distribution of Licensed Products.
16.2 Independent Contractor. AtheroGenics' relationship to Emory
shall be that of a licensee only. AtheroGenics shall not be the agent of Emory
and shall have no authority to act for, or on behalf of, Emory in any matter for
which AtheroGenics does not have express written permission. Persons retained by
AtheroGenics as employees or agents shall not, by reason thereof, be deemed to
be employees or agents of Emory. Emory's relationship to AtheroGenics shall be
that of a licensor only. Emory shall not be the agent of AtheroGenics and shall
have no authority to act for, or an behalf of, AtheroGenics in any matter for
which Emory does not have express written permission. Persons retained by Emory
as employees or agents shall not, by reason thereof, be deemed to be employees
or agents of AtheroGenics.
16.3 Patent Marking. AtheroGenics shall mark Licensed Products
Sold in the United States with United States patent numbers in compliance with
35 U.S.C. S 287. Licensed Products manufactured or Sold in other countries shall
be marked in compliance with the intellectual property laws in force in such
foreign countries.
16.4 Use of Names. AtheroGenics shall obtain the written approval
of Emory prior to making use of the name of any Emory employee not also employed
by AtheroGenics, or the name Emory, for any commercial purpose. This section
16.5 shall not be construed to prevent AtheroGenics from identifying
AtheroGenics employees also employed by Emory as being affiliated with Emory.
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Emory shall obtain the written approval of AtheroGenics prior to
making use of the name AtheroGenics.
16.5 Place of Execution. This Agreement and any subsequent
modifications or amendments hereto shall be deemed to have been executed in the
State of Georgia, U.S.A. This Agreement shall not become effective or binding
upon Emory until signed by its Executive Vice President in the State of Georgia,
U.S.A.
16.6 Governing Law. This Agreement and all amendments,
modifications, alterations, or supplements hereto, and the rights of the parties
hereunder, shall be construed under and governed by the laws of the State of
Georgia and the United States of America.
16.7 Entire Agreement. This Agreement constitutes the entire
agreement between Emory and AtheroGenics with respect to the subject matter
hereof and shall not be modified, amended or terminated except as herein
provided or except by another agreement in writing executed by the parties
hereto.
16.8 Survival. Any promises, duties and/or obligations herein
contained, such as Articles 12 and 13, which expressly or by implication subsist
after the termination of this Agreement, shall survive such termination.
16.9 Severability. All rights and restrictions contained herein
may be exercised and shall be binding only to the extent that they do not
violate any applicable laws and are intended to be limited to the extent
necessary so that they will not render this Agreement illegal, invalid or
unenforceable. If any provision or portion of any provision of this Agreement
shall be held to be illegal, invalid or unenforceable by a court of competent
jurisdiction, the same shall
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<PAGE> 34
be reformed to comply with applicable law or stricken if not so conformable, so
as not to affect the validity or enforceability of the remainder of this
Agreement.
16.10 Force Majeure. Any delays in or failure of performance of
any party to this Agreement shall not constitute a default hereunder, or give
rise to any claim for damages, if and to the extent caused by occurrences beyond
the control of the party affected, including, but not limited to, acts of God,
strikes or other concerted acts of workers, civil disturbances, fires, floods,
explosions, riots, war, rebellion, sabotage, acts of governmental authority or
failure of governmental authority to issue licenses or approvals which may be
required.
ARTICLE 17. ARBITRATION
Any and all disputes arising with respect to the interpretation of
this Agreement, or the parties' respective performance under or breach of the
Agreement, shall be resolved by binding arbitration at the request of either
party in Atlanta, Georgia before a panel of three (3) arbitrators in accordance
with the rules and procedures of the American Arbitration Association. The panel
shall provide the parties, in writing, findings of fact and conclusions of law
in support of any decision reached. Either party shall have the right to appeal
the decision on the grounds of gross error of law or absence of evidence to
support the facts. The foregoing arbitration provision shall not preclude either
AtheroGenics or Emory from seeking equitable relief from a court of competent
jurisdiction to protect its intellectual property from unlawful use or
disclosure.
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ARTICLE 18. NOTICES
All notices, statements and reports required to be given by one
party to the other shall be in writing and shall be deemed to have been given
upon delivery in person or, upon the expiration of five (5) days after deposit
in a lawful mail depositary in the country of residence of the party giving the
notice, registered or certified postage prepaid, and addressed as follows:
To Emory: Emory University
Attn: Vincent La Terza
Director of Licensing and Patent Counsel
1440 Clifton Road, N.E.
RM 116 WHSCAB
Atlanta, GA 30322
To AtheroGenics: AtheroGenics, Inc.
Attn: Michael Henos
3343 Peachtree Road, N.E.
Suite 1140, East Tower
Atlanta Financial Tower
Atlanta, GA 30326
with copies to: Lyon & Lyon
Attn: Carol A. Schneider, Ph.D.
First Interstate World Center
633 West Fifth Street, Suite 4700
Los Angeles, CA 90071-2066
Either party hereto may change the address to which notices to such party are to
be sent by giving notice to the other party at the address and in the manner
provided above. Any notice may be given, in addition to the manner set forth
above, by telex, facsimile or cable, provided that the party giving such notice
obtains acknowledgment by telex, facsimile or cable that such notice has been
received by the party to be notified. Notice made in this manner shall be deemed
to have been given when such acknowledgment has been transmitted.
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<PAGE> 36
IN WITNESS WHEREOF, Emory and AtheroGenics have caused this
Agreement to be signed by their duly authorized representatives as of the day
and year indicated below.
EMORY UNIVERSITY: ATHEROGENICS:
By: John L. Temple By: Michael Henos
------------------------------------ ------------------------------
Name: John Temple Name: Michael Henos
Title: Executive Vice President Title: Chairman of the Board
Date: 1/13/95 Date: 1-23-95
---------------------------------- ----------------------------
35
<PAGE> 37
EXHIBIT A
[*]
36
<PAGE> 38
EXHIBIT B
SECTION 1 - - PENDING APPLICATIONS
1. [*]
SECTION 2 - - INVENTIONS AND CONCEPTS
1. [*]
2. [*]
3. [*]
4. [*]
37
<PAGE> 1
Exhibit 10.05
PATENT PURCHASE AGREEMENT
THIS PATENT PURCHASE AGREEMENT (this "Agreement") is made this 26th day
of April, 1995, by and between Sampath Parthasarathy, Ph.D., a resident of
Georgia ("Seller") and AtheroGenics, Inc., a Georgia corporation ("Buyer").
WITNESSETH:
WHEREAS, Seller is the inventor of that certain United States Patent
No. 5,262,439 for "Soluble Analogs of Probucol" issued on November 16, 1993 (the
'439 patent) and corresponding foreign applications and patents (the "Patents").
WHEREAS, Seller previously granted all right, title and interest to the
Patents to The Regents of the University of California ("U.C.") and U.C. has
returned to Seller all of its right, title and interest to the Patents for
consideration in part of [*] (the "Return Price"); and
WHEREAS, the Patents are subject to a License to the United States
Government executed on March 27, 1995 (the Government License) by virtue of
funding provided by the Department of Health and Human Services for work
incorporated in the Patents; and
WHEREAS, Buyer wishes to obtain all right, title and interest, other
than rights conferred in the Government License, to the Patents and the
inventions covered by the Patents from Seller and Seller desires to transfer the
Patents to Buyer;
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto agree as follows:
1. BUYER'S ACQUISITION OF THE PATENT.
(a) Seller shall sell and assign all of its right, title and interest
to the Patents to Buyer pursuant to the Assignment of Patents attached hereto as
Exhibit "A".
(b) In full consideration of Seller's sale and transfer of the Patents
in accordance with Section 1(a), Buyer shall (i) pay Seller an amount equivalent
to the Return Price, (ii) make the payment set forth in Section 1(c) below, and
(iii) make the royalty payments to Seller set forth in Section 2.
(c) Upon consummation of the transactions contemplated herein, not
including periodic royalty payments, Buyer shall reimburse Seller (or pay on
behalf of Seller) up to [*] of any of the fees charged by Holtzmann, Wise &
Shepard for services performed for Seller in connection with the transactions
contemplated herein, including the reacquisition of Patents by Seller from U.C.
[*] Certain confidential information contained in this document, marked
by an asterisk within brackets, has been omitted and filed
separately with the Securities and Exchange Commission pursuant to
a request for confidential treatment under Rule 406 of the
Securities Act of 1933, as amended.
<PAGE> 2
2. ROYALTY PAYMENTS TO SELLER.
(a) In consideration of Seller's sale and assignment of the Patents to
Buyer, Buyer shall pay Seller for the period beginning on the Closing Date and
extending until the last to expire valid claim in the jurisdiction where the
patent is enforceable ("Term") a royalty of [*] of the gross selling price paid
to Buyer by a purchaser of any process, service or product in which any one of
claimed inventions of the Patents is utilized as a necessary component net of
any discounts, allowances, taxes, rebates, returns, import or export duties and
transportation prepaid or allowed.
(b) Royalty payments shall be made by Buyer to Seller on a semiannual
basis on January 1 and July 1 of each year during the Term and Buyer shall
provide Seller with an accounting of all sales of products in respect of the
Patents upon Seller's request. All records and books of account with respect to
the Patents shall be available at all reasonable times at the principal office
of Buyer for inspection by Seller not more than twice per year.
3. IMPROVEMENTS ON PATENT.
(a) Rights to all improvements made relating to inventions claimed in
the Patents ("Improvements"), which Improvements are made by Seller, shall be
covered by that certain Patent, Copyright and Noncompetition Agreement of even
date.
(b) All Improvements made by Buyer shall become the exclusive property
of Buyer, and Seller shall not be entitled to any royalty payments with respect
to such Improvements.
4. REPRESENTATIONS AND WARRANTIES OF SELLER.
The Representations and Warranties of Seller shall survive the
Assignment of the Patents.
(a) Seller represents that to the best of his knowledge he has full
power and authority to execute, deliver and perform this Agreement and that the
provisions of this Agreement do not conflict with any other agreement to which
Seller is a party or by which Seller is bound.
(b) Seller is the sole and exclusive owner of the Patents, subject to
the Government License, and has the unrestricted right to sell and assign the
Patents to Buyer.
(c) No claim has been asserted against Seller by any person which
challenges or questions the ownership or validity of the Patents or
effectiveness of any of the claimed inventions of the Patents and to the
knowledge of Seller the making, using or selling of any of the claimed
inventions of the Patents or the know-how in connection therewith does not
infringe in any respect on the rights of any person or entity.
2
<PAGE> 3
(d) Other than the Government License, Seller has not assigned any
interest or right to obtain an interest in the Patents to anyone other than
Holder.
(e) Seller is the true, sole inventor of the inventions claimed in the
Patents.
5. CONDITIONS TO BUYER'S OBLIGATIONS. Buyer's obligations hereunder
shall be subject to the satisfaction of the following conditions:
(a) The representations and warranties made by Seller herein shall be
true and correct as of the date hereof and as of the Closing Date with the same
force and effect as though said representations and warranties had been made on
and as of the Closing Date and Seller shall have complied with all of the
covenants and agreements required to be performed by Seller on or prior to the
Closing Date.
(b) Seller shall have executed and delivered to Buyer the Consulting
Agreement attached hereto as Exhibit "B" along with any other agreement required
thereby.
(c) All actions taken by Seller in connection with the transactions
contemplated by this Agreement and all documents and papers relating to such
transactions shall be satisfactory to Buyer, and Seller shall have delivered to
Buyer a certificate, dated as of the Closing Date, certifying that the
conditions set forth in Section 5(a) and Section 5(b) have been satisfied.
6. MISCELLANEOUS.
(a) The provisions of this Agreement shall be binding upon and inure to
the benefit of the heirs, personal representatives, successors and permitted
assigns of the parties hereto.
(b) This Agreement is not assignable by Seller without the prior
written consent of the other party. Any amendments to this Agreement shall be in
writing and shall be signed by both parties.
(c) Any notice or other communication required or permitted to be given
under this Agreement shall be in writing and shall be mailed by certified or
registered mail, return receipt requested, or sent by facsimile, or by overnight
courier or express mail service:
If to Seller:
Sampath Parthasarathy, Ph.D.
Emory University School of Medicine
Department of Gyn-Ob
P.O. Box 21246
Atlanta, GA 30322
3
<PAGE> 4
with a copy to:
Holtzmann, Wise & Shepard
3030 Hansen Way, Suite 100
Palo Alto, CA 94304-1006
Attention: Thomas Barton, Esq.
If to Buyer:
AtheroGenics, Inc.
3343 Peachtree Road, N.E.
Suite 1140, East Tower
Atlanta, Georgia 30326
Attention: President
with a copy to:
Lyon & Lyon
First Interstate World Center
633 West Fifth Street, Suite 4700
Los Angeles, CA 90071-2066
Attention: Carol A. Schneider, Ph.D
All notices given shall be deemed effective upon receipt or if mailed the
earlier of receipt or 5 days after mailing. A change of address is effective
when given by one party to the other party in writing pursuant to the notice
provisions of this Section 6(c).
(d) This Agreement is executed by Buyer in, and shall be construed in
accordance with and governed by the laws of, the State of Georgia without giving
effect to the principles of conflicts of law thereof.
(e) This Agreement may be executed in one or more counterparts, each of
which shall for all purposes be deemed to be an original, and all of which shall
constitute the same instrument.
(f) This Agreement (including the Exhibits hereto) constitutes the sole
understanding of the parties with respect to the subject matter hereof;
provided, however, that this provision is not intended to abrogate any other
written instrument or agreement between the parties executed with or after this
Agreement.
(g) Each party hereto agrees to do all acts and to make, execute and
deliver such written instruments as from time to time shall reasonably be
required to carry out the terms and provisions of this Agreement. Furthermore,
Seller shall, at any time after the date hereof, take all actions necessary to
apply for and to obtain Letters Patent or other comparable legal protection if
4
<PAGE> 5
before Closing, or assist Buyer in applying for and obtaining Letters Patent or
other legal protection if after Closing in any additional jurisdiction upon
Buyer's request and at Buyer's expense.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Sampath Parthasarathy
- ----------------------------------
Sampath Parthasarathy, Ph.D.
ATHEROGENICS, INC.
R Wayne Alexander
- ----------------------------------
By: R Wayne Alexander, M.D., Ph.D.
President
5
<PAGE> 6
ASSIGNMENT
WHEREAS THE REGENTS OF THE UNIVERSITY OF CALIFORNIA, a
corporation duly organized under and pursuant to the laws of CALIFORNIA, and
having its principal place of business at 300 Lakeside Drive, 22nd Floor,
Oakland, California 94612-3550 (hereinafter referred to as the assignor) is the
owner of the invention entitled "SOLUBLE ANALOGS OF PROBUCOL" set forth in
United States Patent Number 5,262,439 issued on November 16, 1993; and
WHEREAS SAMPATH PARTHASARATHY, Emory University Department of
GYN OB, P.O. Box 21246, Atlanta, GA 30322, (hereinafter referred to as the
assignee), desires to acquire the entire right, title and interest in and to
said inventions and said Letters Patent of the United States, and in and to any
Letters Patent or Patents, United States or foreign, to be obtained therefor and
thereon;
NOW THEREFORE, for good and valuable consideration, the
receipt of which is hereby acknowledged, said assignor does sell, assign,
transfer and set over to assignee, his successors, legal representatives and
assigns, its entire right, title and interest in and to the above mentioned
inventions, Letters Patent, and any and all Letters Patent or Patents in the
United States of America and all foreign countries which may be granted therefor
and thereon, and to any and all divisions, continuations, continuations-in-part,
reissues and extensions, and all its rights under the International Convention
for the Protection of Industrial Property, the same to be held and enjoyed by
said assignee to the full end of the term or terms for which Letters Patent or
Patents may be granted, as fully and entirely as the same would have been held
and enjoyed by the assignor, had this sale and assignment not been made.
<PAGE> 7
ASSIGNOR hereby covenants that no assignment, sale, agreement
or encumbrance has been or will be made or entered into which would conflict
with this Assignment.
ASSIGNOR hereby authorizes and requests the Commissioner of
Patents and Trademarks to record this Assignment for said Letters Patent or any
legal equivalent thereof in the name of ASSIGNEE, his successors and assigns, in
accordance with this Assignment.
WITNESS MY HAND AT Alameda California, this 25th day of
January, 1995.
THE REGENTS OF THE UNIVERSITY OF
CALIFORNIA
By: Linda S Stevenson
------------------------------
STATE OF CALIFORNIA )
) SS.
COUNTY OF ALAMEDA )
On this 25th day of January, 1995, before me, Jerina A. Labat a Notary
Public, personally appeared Linda S. Stevenson, proved to me on the basis of
satisfactory evidence to be the person whose name is subscribed to this
instrument, and acknowledged that he executed the same in his authorized
capacity, and that by his signature on the instrument the person, or the entity
upon behalf of which the person acted, executed the instrument. Witness my hand
and official seal.
Jerina A. Labat
--------------------------------
Notary Public in and for
said County and State
2
<PAGE> 8
LICENSE TO THE UNITED STATES GOVERNMENT
Invention Title: Soluble Analogs of Probucol
Inventor(s): Sampath Parthasarathy
Patent or Application Serial No: 5,262,439
U.S. Filing/Issue Date: Issued November 16, 1993
Grant/Contract Identification No: HL 14197
Foreign Applications filed/intended in (countries): Canada, EPO, Japan
The invention identified above is a Subject Invention under 35 U.S.C. 200, et
seq., and the Standard Patent Rights clause at 37 CRF 401.13 or FAR 52.227-11,
which are included among the terms of the above-identified grant/contract award
from the Public Health Service/National Institutes of Health. This document is
confirmatory of:
1. The nonexclusive, nontransferable, irrevocable, paid-up
license granted to the Federal Government in the invention
described in the patent application and in any of all
divisions, continuations, and continuations in part, and in
any and all patents and re-issues granted thereon; and
2. All other rights acquired by the Government by reason of the
above identified grant/contract award and the laws and
regulations which are applicable to the award.
The Government is hereby granted an irrevocable power to inspect and make copies
of the above-identified patent application.
Signed this 27 day of March, 1995.
By: /s/ Sampath Parthasarathy
---------------------------------
[Inventor(s) Name]
Street Address: 2958 North Brook Drive, Atlanta
--------------------------------
City, State, & Zip Code: Atlanta, GA 30340
-----------------
<PAGE> 9
April 26, 1995
Sampath Parthasarathy, Ph.D.
Emory University School of Medicine
Department of Gyn-Ob
P.O. Box 21246
Atlanta, GA 30322
Dear Dr. Parthasarathy:
AtheroGenics, Inc., a Georgia corporation (the "Company"), desires to
obtain your services as a consultant in the field of atherogenesis and the
chemistry and biology of oxidation reactions and their inhibitors, to assist and
advise the Company in connection with its efforts of researching, developing,
marketing and worldwide promotion of prescription pharmaceuticals for the
treatment of atherosclerosis and other inflammatory diseases through regulation
of intracellular redox pathways (the "Business"). As part of your services as a
consultant, the Company desires that you become a member of its Scientific
Advisory Board. Subject to the Assignment of Patents by you to the Company
pursuant to that certain Patent Purchase Agreement, dated as of April 26, 1995,
between you and the Company (the "Patent Purchase Agreement"), you agree to
provide such consulting services and to serve on the Company's scientific
Advisory Board in accordance with the following terms and conditions:
1. SERVICES:
a. CONSULTING SERVICES. You agree to devote up to eight (8) hours
per month providing services as a consultant to the Company in
connection with the Business. Such services shall be performed
during regular business hours at times reasonably agreeable to
you and the Company and shall consist of such duties and
responsibilities as are assigned to you by the Board of
Directors of the Company.
b. SCIENTIFIC-ADVISORY BOARD. As part of your services as a
consultant, you agree to serve on the Company's Scientific
Advisory Board. There is currently no formal schedule
established for meetings of the Scientific Advisory Board but
it is anticipated that the Scientific Advisory Board will meet
a minimum of six (6) days per year.
2. COMPENSATION.
a. CASH COMPENSATION AND EXPENSE REIMBURSEMENT.
i. As sole and exclusive compensation for your services
hereunder, the Company shall pay you Twelve Thousand
Dollars ($12,000) per year for your consulting
services and for serving on the Scientific Advisory
Board.
<PAGE> 10
Sampath Parthasarathy, Pd.D.
April 26, 1995
Page 2
For our respective conveniences, the compensation
shall be paid to you at the rate of $1000 per month.
ii. In addition, you shall be reimbursed for any air
travel (economy class) necessary and requested by the
Company, and all reasonable living expenses,
including, but not limited to, car rental, meals, and
lodging incurred by you when associated with the
rendering of your services at locations away from
your home or from Atlanta, Georgia. The Company shall
make all payments to you in accordance with this
paragraph within thirty (30) days of receipt of an
invoice from you itemizing your travel expenses,
including receipts for incidental expenses in excess
of $25.00. Your invoices shall be mailed to the
Company at 3343 Peachtree Road, N.E., Suite 1140,
East Tower, Atlanta, Georgia 30326, Attention:
President.
iii. All payments, including reimbursements for actual
expenditures, shall be, included in your gross income
as compensation for services rendered and accordingly
reported on your IRS Form 1099. You shall be
responsible for payment of all taxes including Social
Security taxes on income earned under this Agreement
as none will be withheld by the Company. You shall
indemnify AtheroGenics for any claims made by
federal, state or local tax agencies as a result of
your failure to pay taxes, fees, withholding, or the
like.
b. COMMON STOCK OF THE COMPANY.
i. As additional compensation for your services
performed under this Agreement, and as an incentive
to help make the Company successful, you will be
issued 40,000 shares of Common Stock of the Company
upon your execution and delivery of this Agreement
and the simultaneous closing of the sale of United
States Patent No. 5,262,439 and corresponding foreign
applications and patents pursuant to the Patent
Purchase Agreement. Simultaneous with your acceptance
of this Agreement, you will enter into a Stock
Restriction Agreement between you and the Company
(the "Stock Restriction Agreement") in the form
attached hereto as Exhibit "I". If this Agreement is
terminated by the Company for cause (which shall be
the willful breach by you of this Agreement) or by
you (other than for death or disability) pursuant to
Paragraph 4 prior to the end of the term provided
<PAGE> 11
Sampath Parthasarathy, Pd.D.
April 26, 1995
Page 3
herein, you shall be entitled only to the Vested
Shares as defined in the Stock Restriction Agreement.
ii. The Stock is being acquired by you solely for your
account, for investment, with no present intention of
making a public distribution thereof within the
meaning of the Securities Act. None of the Stock will
be sold or transferred by you in violation of the
Securities Act or any state securities law, and your
financial condition is such that this investment can
be made on a long-term basis and you can afford the
complete loss of the investment. You are aware that
none of the Stock has been registered under the
Securities Act or any state securities law, that the
Stock must be held indefinitely unless they are
subsequently registered or an exception from such
registration is available and that the Company is
under no obligation to register any of the Stock
under the Securities Act or any state securities law.
You are aware that an exception from registration
requirements of the Securities Act pursuant to Rule
144 thereunder is not presently available; that the
Company has not covenanted to make available an
exception from the registration requirements pursuant
to such Rule 144 or any successor rule for resale of
any of the Stock; and that even if any exemption
under Rule 144 were available, the Rule permits only
routine sales of securities in limited amounts in
accordance with the terms and conditions of such
Rule. You further acknowledge that there is presently
no market for the purchase and sale of any of the
Stock.
iii. You confirm that the Company has made available to
you, or to your representatives, the opportunity to
ask questions of its officers and directors and to
acquire such additional information about the
business and financial condition of the Company as
you request. You are not acquiring and will not
acquire the Stock based upon representations, oral or
written, by any person with respect to the future
value of, or income from, such Stock but rather upon
your independent examination and judgment as to the
prospects of the Company, You have all requisite
legal power to enter into this Agreement, to acquire
the Stock and carry out and perform your other
obligations under the terms of this Agreement.
3. INDEPENDENT CONTRACTOR.
It is agreed that you are to have complete freedom of action as to the
details, methods and means of performing these services. It is further
understood that you are retained and
<PAGE> 12
Sampath Parthasarathy, Pd.D.
April 26, 1995
Page 4
have contracted with the Company only for the purposes and to the
extent set forth in this Agreement, and your relation to the Company
and any of its affiliates shall, during the period of your retainer and
service, be that of an independent contractor. Except as otherwise
provided herein, you shall not be considered under the provisions of
this agreement or otherwise as having status as an employee of the
Company, nor shall you be entitled hereafter to participate in any
plans, arrangements, or distributions by the Company relating to any
pension, deferred compensation, bonds, stock bonus, stock option,
hospitalization, insurance, or other benefits extended to its employees
since you are performing services as an independent contractor.
4. CONTRACT PERIOD.
This Agreement becomes effective on the date set forth above your
signature and will continue in effect for four (4) years.
Notwithstanding the foregoing, either you or the Company may terminate
this Agreement at any time and for any reason during its term by giving
at least one (1) month's written notice. This Agreement shall
automatically extend for consecutive twelve (12) month periods subject
to the rights of the parties to terminate this Agreement as provided
herein.
5. INVENTIONS.
You agree that inventions made during the course of this Agreement
shall be subject to the terms of that certain Patent, Copyright and
Nondisclosure Agreement dated as of April 26, 1995 (the "Patent,
Copyright and Nondisclosure Agreement").
6. NON-DISCLOSURE: CONFLICT OF INTEREST.
Simultaneous with your acceptance of this Agreement, you will enter
into the Patent, Copyright and Nondisclosure Agreement in the form
attached hereto as Exhibit "2".
7. GENERAL CONDITIONS.
a. If any provision of this Agreement shall be declared invalid,
illegal or unenforceable, such provision shall be severed and
all remaining provisions shall continue in full force and
effect.
b. The term, the Company, as used herein, shall include any
subsidiary or affiliate of the Company.
<PAGE> 13
Sampath Parthasarathy, Pd.D.
April 26, 1995
Page 5
c. This Agreement shall be binding upon you, your heirs,
executors, assigns and administrators and shall inure to the
benefit of the Company, its successors and assigns.
d. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia.
8. PRIOR AGREEMENTS.
This Agreement shall replace all prior agreements between you and the
Company relative to your services as a consultant, and this Agreement
along with the Patent Purchase Agreement, the Stock Restriction
Agreement and the Nondisclosure Agreement, contain the entire
understanding between you and the Company regarding your relationship
with the Company. This Agreement shall be amended only in writing
agreed to by both parties and shall not be assignable by you or by
operation of law.
Please indicate your acceptance of the foregoing by signing in the
space provided below and returning one original letter to my attention.
Sincerely,
R. Wayne Alexander
---------------------------
R. Wayne Alexander, A.D., Ph.D.
President
AtheroGenics, Inc.
Accepted and agreed to this
26th day of April, 1995.
/s/ Sampath Parthasarathy, PH.D
- -------------------------------
Sampath Parthasarathy, Ph.D.
Social Security No.[*]
<PAGE> 14
ATHEROGENICS, INC.
STOCK RESTRICTION AGREEMENT
THIS STOCK RESTRICTION AGREEMENT (this "Agreement") is made
and entered into as of April 26, 1995 by and between ATHEROGENICS, INC. a
Georgia corporation (the "Company"), and Sampath Parthasarathy, Ph.D., a
resident of Georgia ("Stockholder").
R E C I T A L S:
A. Stockholder is being issued as of the date hereof forty thousand
(40,000) shares of the Common Stock of the Company (the "Shares") in connection
with that certain Patent Purchase Agreement of even date herewith (the "Patent
Purchase Agreement") and that certain Consulting Agreement dated of even date
herewith (the "Consulting Agreement"). As used herein, the term "Shares" refers
to all such shares presently held by the Stockholder and to all securities
purchased or otherwise received in addition thereto or in replacement thereof,
pursuant to or in consequence of any stock dividend, stock split,
recapitalization, merger, reorganization, exchange of shares or other similar
event.
B. The Company is party to Series A Convertible Preferred Stock
Agreement (the "Purchase Agreement") dated as of May 6, 1994 with Alliance
Technology Ventures, L.P. ("Alliance") pursuant to which the Company issued to
Alliance the Company's Series A Convertible Preferred Stock. All capitalized
terms in this Agreement shall have the meanings ascribed to such terms in the
Purchase Agreement unless otherwise defined herein.
In order to provide assurance to Alliance and other persons
who may purchase or otherwise require shares of the Series A Convertible
Preferred Stock (the "Preferred Stock") of the Company in the future
(collectively, the "Investors") and thereby to assist in future equity
financings of the Company, Stockholder is willing to enter into this Agreement
for the benefit of the Company, the Investors and any other person or entity who
holds stock of the Company from time to time.
THE PARTIES AGREE AS FOLLOWS:
1. THE COMPANY'S RIGHT TO REPURCHASE UPON TERMINATION OF EMPLOYMENT.
1.1. REPURCHASE RIGHT. The unvested Shares, regardless of
ownership, shall be subject to a right (but not obligation) of repurchase in
favor of the Company (the "Right of Repurchase") at the price set forth below
("Purchase Price"), if the Stockholder's consultancy with the Company is
terminated by Stockholder other than for death or disability or by the Company
for cause which shall be the wilfull breach of the Consulting Agreement (the
"Consultancy Termination") before the Right of Repurchase expires with respect
to such Shares in accordance with Schedule 1.1. The Purchase Price shall be ten
cents (10(cent)) per Share for those
<PAGE> 15
40,000 Shares transferred in connection with the Patent Purchase Agreement and
the Consulting Agreement. The Stockholder may not dispose of or transfer or
pledge or grant a security interest in any Shares which are subject to the Right
of Repurchase and any such attempted transfer shall be null and void. The
Company's rights under this Section 1.1 shall be freely assignable, in whole or
in part.
1.2. REPURCHASE PROCEDURE. The Company's Right of Repurchase
shall terminate if not exercised by written notice from the Company to the
Stockholder within sixty (60) days from the date on which the Company learns of
the Consultancy Termination. If the Company exercises its Right of Repurchase,
the Stockholder shall promptly endorse and deliver to the Company the stock
certificates representing the Shares being repurchased free and clear of any
liens, claims or encumbrances, and the Company shall then pay promptly (but in
no event later than sixty (60) days after the date of Consultancy Termination,
or five (5) days after return of the stock certificate, whichever is later,
pursuant to the provisions of Section 1.3 of this Agreement, the total Purchase
Price to the Stockholder.
1.3. REPURCHASE PAYMENT. If, at the time of the repurchase,
any notes are outstanding which represent any portion of the total Purchase
Price for Shares being so repurchased, the Purchase Price shall be paid first by
cancellation of any obligation for accrued but unpaid interest under such notes,
next by cancellation of principal under such notes, and finally by payment of
cash or check.
1.4. BINDING EFFECT. The Company's Right of Repurchase shall
inure to the benefit of the successors and assigns of the Company and shall be
binding upon any representative, executor, administrator, heir, successor,
assignee or legatee of the Stockholder.
1.5. For purposes of this Article I and Article 2 below, if
Stockholder is also a member of the Board of Directors of the Company, the
Stockholder shall abstain from voting in regard to Company's Right of Repurchase
or Right of First Refusal (as that term is defined below).
2. COMPANY'S RIGHT OF FIRST REFUSAL RESPECTING SHARES.
2.1. RIGHT OF FIRST REFUSAL. Without derogation of any
provisions of Section 1, and except as provided by Section 2.5 of this
Agreement, and if and to the extent Stockholder is allowed to sell under
applicable Securities laws which may restrict Stockholder's ability to sell,
pledge or otherwise transfer, in the event that the Stockholder proposes to
sell, pledge, or otherwise transfer any Shares or any interest in such Shares to
any person or entity, the Company shall have a right of first refusal (the
"Right of First Refusal") with respect to such Shares. Stockholder shall give a
written notice (the "Transfer Notice") to the Company describing fully any
proposed transfer of Shares, including the number of Shares proposed to be
transferred, the proposed transfer price, and the name and address of the
proposed transferee. The Transfer Notice shall be signed both by the Stockholder
and by the proposed transferee. The Company shall have the right to purchase
all, but not less than all, of the Shares subject to the Transfer
2
<PAGE> 16
Notice at the same price and on the same terms as those indicated in the
Transfer Notice by delivery of a notice of exercise of the Company's Right of
First Refusal within thirty (30) days after the date the Transfer Notice is
delivered to the Company (the "Repurchase Period"). The Company's rights under
this Section 2.1 shall be freely assignable, in whole or in part. For purposes
of this Agreement, a transfer of Shares or any interest in Shares to an inter
vivos revocable trust which does not allow for the disposition of these Shares
except upon Stockholder's death and then only to Stockholder's immediate family
members, or transfer of Shares or any interest in Shares via a testimentary
instrument to Stockholder's immediate family members, shall not be considered a
transfer. However, subsequent sales, pledges or other transfers of any Shares or
interest in Shares shall be subject to this Right of First Refusal.
Notwithstanding anything to the contrary, any Shares so transferred shall be
subject to all limitations and restrictions of Section 1.1.
2.2. TRANSFER OF SHARES. If the Company fails to exercise the
Right of First Refusal within the Repurchase Period, the Stockholder, may, not
later than ninety (90) days following delivery to the Company of the Transfer
Notice, conclude a transfer of the Shares subject to the Transfer Notice on the
terms and conditions described in the Transfer Notice. Any proposed transfer on
terms and conditions different from those described in the Transfer Notice, as
well as any subsequent proposed transfer by the Stockholder, shall again be
subject to the Right of First Refusal and shall require compliance by the
Stockholder with the procedure described in Section 2.1 of this Agreement. If
the Company exercises the Right of First Refusal, the parties shall consummate
the sale of shares on the terms set forth in the Transfer Notice; provided,
however, in the event the Transfer Notice provides for payment for the Shares
other than in cash, the Company shall have the option of paying for the Shares
by the discounted cash equivalent of the consideration described in the Transfer
Notice.
2.3. BINDING EFFECT OF RIGHT OF FIRST REFUSAL. The Company's
Right of First Refusal shall inure to the benefit of the successors and assigns
of the Company and shall be binding upon any transferee of Shares other than a
transferee acquiring Shares in a bona fide arms-length transaction where the
Company failed to exercise the Right of First Refusal (a "Free Transferee"), or
a transferee of a Free Transferee.
2.4. TERMINATION OF THE COMPANY'S RIGHT OF FIRST REFUSAL.
Notwithstanding anything in this Section 2, the Company shall have no Right of
First Refusal, and Stockholder shall have no obligation to comply with the
procedures in Sections 2.1 through 2.3 after the earlier to occur of (i) the
Company's initial registered public offering of Common Stock to the public, or
(ii) the date ten (10) years after the date of this Agreement.
2.5. LIMITATIONS TO RIGHTS. Without regard and not subject to
the provisions of Sections 2.1 and 3.1, the Stockholder may sell or otherwise
assign for consideration Shares to any or all of his ancestors, descendants,
spouse, or members of his immediate family, or to a custodian, trustee
(including a trustee of a voting trust), executor, or other fiduciary for the
account of his ancestors, descendants, spouse, or members of his immediate
family, provided that each such transferee or assignee, prior to the completion
of the sale, transfer, or assignment, shall
3
<PAGE> 17
have executed documents assuming the obligations of the Stockholder under this
Agreement with respect to the transferred securities.
3. RIGHTS OF CO-SALE.
3.1. THE RIGHTS OF INVESTORS. Following the Repurchase Period,
if at any time Stockholder proposes to sell any Shares to parties other than the
Investors in a transaction (the "Transaction") not registered under the Act in
reliance upon a claimed exemption thereunder, then to the extent the Company has
not exercised its Right of First Refusal as to any Shares being sold, any
Investor which notifies the Company in writing, within thirty (30) days after
receipt of the notification from the Stockholder referred to in Section 3.2 (a
"Selling Holder") shall have the opportunity to sell a pro rata portion of
Shares which the Stockholder proposes to sell to such third party in the
Transaction; whereupon the Stockholder shall assign so much of his interest in
the agreement of sale as the Selling Holder shall be entitled to and shall
request hereunder, and the Selling Holder shall assume such part of the
obligations of the Stockholder under such agreement as shall relate to the sale
of the Shares by the Selling Holder. For the purposes of this Section 3, the
"pro rata portion" which the Selling Holder shall be entitled to sell shall be
an amount of shares equal to the total amount of Shares proposed to be sold
multiplied by a fraction, the numerator of which is the number of shares of
Common Stock issuable upon conversion of the Preferred Stock and shares of
Common Stock owned by a Selling Holder, and the denominator of which is the
total number of such shares owned by all participating Selling Holders and the
Stockholder. Each Selling Holder shall notify the Stockholder whether it elects
to sell an amount equal to or less than its pro rata portion of the Shares so
offered. Each Selling Holder shall be entitled to apportion Shares to be sold
among its partners and affiliates, provided that such Selling Holder notifies
the Company of such allocation.
3.2. NOTICE. Following the Repurchase Period, prior to any
sale by the Stockholder of any Shares, the Stockholder shall notify each
Investor and the Company, in writing, of his intention to sell and issue such
securities, setting forth the general terms under which he proposes to make such
sale. Such notice shall be signed by the third parties, or a representative of
such third parties, or shall be accompanied by a letter of intent signed by the
third parties or representatives of such third parties, to whom the sale,
assignment or transfer is proposed and shall indicate the third parties'
concurrence with the description of the terms.
3.3. FAILURE TO NOTIFY. If, within thirty (30) days after the
Stockholder gives his notice to the Investors, the Investors do not notify the
Company that they desire to sell all of their pro rata portion of the Shares
described in such notice at the price and on the terms and conditions set forth
therein, then the Stockholder may, not later than ninety (90) days following
delivery of the notice under Section 3.2 as to the Shares to which the Investors
do not indicate a desire to sell, conclude a transfer on the terms and
conditions described in the notice. In the event the Stockholder has not
concluded such sale of shares within such ninety (90) days, the Stockholder
shall not thereafter sell any Shares without first notifying the Investors and
the Company in the manner provided above. The exercise or non-exercise of the
right to participate in one or more sales of Shares made by the Stockholder
shall not adversely affect an Eligible
4
<PAGE> 18
Holder's right to participate in subsequent sales of Shares by the Stockholder
pursuant to Section 3.1 hereof.
3.4. TERMINATION. The obligations of the Stockholder under
this Section 3 shall terminate and be of no further force and effect upon the
occurrence of either event described in subsection 2.4 of this Agreement.
4. MARKET STANDOFF. The Stockholder hereby agrees that if so requested
by the Company or any representative of the underwriters in connection with any
registration of the offering of any securities of the Company under the Act, the
Stockholder shall not sell or otherwise transfer any Shares for a period of one
hundred eighty (180) days following the effective date of a Registration
Statement filed under the Act; provided, however, that such restriction shall
apply to the first two (2) Registration Statements of the Company to become
effective under the Act which include securities to be sold on behalf of the
Company to the public in an underwritten public offering under the Act. The
Company may impose stop-transfer instructions in order to enforce the foregoing
restrictions.
5. TAXES. The Stockholder shall execute and deliver to the Company with
this executed Agreement a copy of the Acknowledgement and Statement of Decision
Regarding Election Pursuant to Section 83(b) of the Internal Revenue Code (the
"Acknowledgement") attached hereto as Schedule 5A. The Stockholder shall execute
and submit with the Acknowledgement a copy of the Election Pursuant to Section
83(b) of the Code, attached hereto as Schedule 5B, if the Stockholder has
indicated in the Acknowledgement his decision to make such an election. The
Stockholder should consult his tax advisor to determine if there is a comparable
election to file in the state of his residence and whether such filing is
desirable under the circumstances. The Company may withhold from the
Stockholder's wage, or require the Stockholder to pay to the Company, any
applicable withholding or employment taxes resulting from the lapse of any
restrictions imposed on the Shares.
6. STOCK RESTRICTIVE LEGENDS. Stock certificates evidencing Shares may
bear such restrictive legends as the Company and the Company's counsel deem
necessary or advisable under applicable law or pursuant to this Agreement,
including, without limitation, the following legends:
"The securities represented hereby are subject to a right of
first refusal by the Company and a right of co-sale on the part of
certain stockholders pursuant to provisions of the Stock Restriction
Agreement between the Company and Sampath Parthasarathy dated as of
April 26, 1995, and may not be sold or otherwise transferred except in
compliance with the terms of such agreement."
5
<PAGE> 19
"The securities represented hereby may be subject to a right
of repurchase by the Company, pursuant to the provisions of the Stock
Restriction Agreement between the Company and Sampath Parthasarathy
dated as of April 26, 1995, and such securities may not be sold or
otherwise transferred if such securities are subject to such right of
repurchase."
"The securities represented hereby are subject to restrictions
on transfer for a period of 180 days following the effective date of a
registration statement under the Securities Act of 1993, as amended,
for an offering of the Company's securities as more fully provided in a
Stock Restriction Agreement among the Company, Alliance Technology
Ventures, L.P., and the original purchaser of such securities."
7. BINDING EFFECT. Subject to the limitations set forth in this
Agreement, this Agreement shall be binding upon, and inure to the benefit of,
the executors, administrators, heirs, legal representatives, successors, and
assigns of the parties hereto.
8. DAMAGES. Stockholder shall be liable to the Company and Alliance for
all costs and damages, including incidental and consequential damages, resulting
from a disposition of Shares which is not in conformity with the provisions of
this Agreement.
9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia applicable to contracts entered
into and wholly to be performed within the State of Georgia residents. The
parties agree that the exclusive jurisdiction and venue of any action with
respect to this Agreement shall be in the Superior Court of Georgia for the
County of Fulton or the United States District Court for the Northern District
of Georgia, and each of the parties hereby submits itself to the exclusive
jurisdiction and venue of such courts for the purpose of such action. The
parties agree that service of process in any such action may be effected by
delivery of the summons to the parties in the manner provided for delivery of
notices set forth in Section 10.
10. NOTICES. All notices and other communications under this Agreement
shall be in writing. Unless and until Stockholder is notified in writing to the
contrary, all notices, communications and documents directed to the Company and
related to the Agreement, if not delivered by hand, shall be mailed, addressed
as follows:
ATHEROGENICS, INC.
3343 Peachtree Road, N.E.
Suite 1140
East Tower
Atlanta, Georgia 30326
Attention: President
6
<PAGE> 20
with a copy to:
Lyon & Lyon
633 West Fifth Street
Suite 4700
Los Angeles, CA 90071-2066
Attention: Carol A. Schneider, Ph.D.
Unless and until the Company is notified in writing to the contrary, all
notices, communications and documents intended for Stockholder and related to
this Agreement, if not delivered by hand, shall be mailed to Stockholder's last
known address as shown on the Company's books, with a copy to:
Holtzmann, Wise & Shepard
3030 Hansen Way
Suite 100
Palo Alto, CA 94304-1006
Attention: Thomas L. Barton
Notices and communications shall be mailed by registered or certified mail,
return receipt requested, postage prepaid. All notices related to this Agreement
shall be deemed received upon delivery or, if mailed, within five (5) days after
mailing in accordance with this Section 10.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ATHEROGENICS, INC.
R. Wayne Alexander
----------------------------------
By: R. Wayne Alexander, M.D., Ph.D.
Title: President
Stockholder hereby accepts and agrees to be bound by all of the terms
and conditions of this Agreement.
Stockholder Sampath Parthasarathy
--------------------------------------
Stockholder's spouse indicates by the execution of this Agreement his
or her consent to be bound by the terms herein as to his or her interests,
whether a community property or otherwise, if any, in the Shares.
Stockholder's Spouse Mrs. Dalyaui Parthasarathy
-----------------------------
7
<PAGE> 21
SCHEDULE 1.01 OF THE STOCK RESTRICTION AGREEMENT
The Right of Repurchase shall expire as follows:
Forty percent (40%) of the Shares issued to Stockholder shall vest upon
signing of the Stock Restriction Agreement, twenty percent (20%) shall vest each
year after the date of signing (collectively the "Vested Shares"), and the Right
of Repurchase shall no longer apply to any Vested Shares.
ATHEROGENICS, INC.
R. Wayne Alexander
----------------------------------
By: R. Wayne Alexander, M.D., Ph.D.
Title: President
Stockholder: Sampath Parthasarathy
-----------------------
<PAGE> 22
SCHEDULE 5A
ACKNOWLEDGEMENT AND STATEMENT
OF DECISION REGARDING ELECTION
PURSUANT TO SECTION 83(b) OF
THE INTERNAL REVENUE CODE
The undersigned (which term includes the undersigned's spouse), a holder
of 40,000 shares of common stock of ATHEROGENICS, INC., a Georgia corporation
(the "Company") hereby states as follows:
1. The undersigned acknowledges receipt of a copy of the Company's Stock
Restriction Agreement (the "Agreement"). The undersigned has carefully reviewed
the Agreement.
2. The undersigned either [check as applicable]:
____ (a) has consulted, and has been fully advised by, the undersigned's
own tax advisor, ______________________, whose business address is
______________________________, regarding the federal, state and local tax
consequences of entering into the Agreement, and particularly regarding the
advisability of making elections pursuant to Section 83(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), and pursuant to the
corresponding provisions, if any, of applicable state laws; or
X (b) has knowingly chosen not to consult such a tax advisor.
3. The undersigned hereby states that the undersigned has decided
[check as applicable]:
____ (a) to make an election pursuant to Section 83(b) of the Code, and is
submitting to the Company, together with the undersigned's executed Agreement,
an executed form which is attached as Schedule 5B to the Agreement; or
X (b) not to make an election pursuant to Section 83(b) of the Code.
4. Neither the Company nor any subsidiary or representative of the
Company has made any warranty or representation to the undersigned with respect
to the tax consequences of the Agreement or of the making or failure to make an
election pursuant to Section 83(b) of the Code or the corresponding provisions,
if any, of applicable state law.
<PAGE> 23
5. The undersigned is also submitting to the Company, together with the
Agreement, an executed original of an election, if any is made, of the
undersigned pursuant to provisions of state law corresponding to Section 83(b)
of the Code, if any, which are applicable to the undersigned's purchase of
shares under the Agreement.
Date: 5/25/95 /s/ Sampath Parthasarathy
----------------------------------------
Sampath Parthasarathy, Ph.D.
Date:
----------------------------------------
2
<PAGE> 24
SCHEDULE 5B
ELECTION PURSUANT TO SECTION 83(b) OF THE
INTERNAL REVENUE CODE
---------------------
The undersigned hereby elects pursuant to Section 83(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), to include in the undersigned's
gross income the excess (if any) of (x) the fair market value of the property
described below, over the amount the undersigned paid for such property plus, if
the shares to which this election relates were acquired by exercise of an
"incentive stock option" within the meaning of Section 422 of the Code, the
amount excluded from the undersigned's income pursuant to Sections 421 and 422
of the Code. This election is made to the same effect, and with the same
limitations, with respect to the analogous provisions of Sections 83(b) (and, if
applicable, Sections 412 and 422) of the Code under any applicable state
statute. Pursuant to applicable Treasury Regulations the following information
is provided:
1. The undersigned's name, address and taxpayer identification (social
security) number are
Name: Sampath Parthasarathy
----------------------------------------------------------------
Address 2958 Worthbrook Drive, Atlanta GA 30340
--------------------------------------------------------------
Social Security #: [ * ]
---------------------------------------------------
2. The property with respect to which the election is made consists of
24,000 shares of Common Stock of ATHEROGENICS, INC., a Georgia corporation (the
"Company").
3. The date on which the above property was transferred to the undersigned
was ____________________, 19__, and the taxable year to which this election
relates is 19__.
4. The above property is subject to the following restrictions: (a) a
right of repurchase by the Company of the initial purchase price, if the
undersigned ceases to be an employee of, or a consultant to, the Company or an
affiliate of the Company; and (b) a right of first refusal by the Company should
the undersigned wish to transfer the shares to a person or entity other than the
Company.
5. The fair market value of the above property at the time of transfer
(determined without regard to any restrictions other than those which by their
terms will never lapse) is $___________ per share.
6. The amount paid for the above property by the undersigned was $_______
per share.
7. A copy of this election has been furnished to the Company, and a copy
will be filed with the income tax return of the undersigned to which this
election relates.
<PAGE> 25
8. If the shares to which this election relates were acquired by
exercise of an "incentive stock option" within the meaning of Section 422 of
the Code, this election is protective only, is made solely to bar application
of Section 83(a) of the Code, and is not an election of the undersigned actually
to recognize income which apart from this election is protected from
recognition by Sections 421 and 422 of the Code.
If the shares to which this election relates were acquired by exercise of
an incentive stock option, the amount expressly excluded from income pursuant
to Sections 421 and 422 of the Code is $________ per share.
Dated: May 25, 1995.
/s/ Sampath Parthasarathy
------------------------------------
Sampath Parthasarathy, Ph.D.
2
<PAGE> 26
ATHEROGENICS, INC.
PATENT, COPYRIGHT AND
NONDISCLOSURE AGREEMENT
In partial consideration and as a condition of my engagement as a
consultant by AtheroGenics, Inc., a Georgia corporation (the "Company"), and
effective as of the date that the consultancy by the Company first commenced,
the undersigned agrees as follows:
1. NONCOMPETITION
(a) The Company acknowledges and agrees that during the term of my
consultancy by, or any subsequent consultancy with the Company (the
"Consultancy Period"), I may continue to be employed by the Emory University
School of Medicine ("Emory") or may be employed by or consult with other
academic or non-profit research institutions. In the course of my employment or
consultancy with Emory or another medical school, I will perform services
traditionally performed by members of the faculty of such school, including,
without limitation, (i) teaching, (ii) providing medical services to patients
or related or affiliated hospitals or clinics, (iii) conducting research on
behalf of Emory with respect to medical devices, procedures and pharmaceuticals
or other compounds which may relate to or be used as prescription
pharmaceuticals (including pharmaceuticals which are or may be competitive with
those marketed, promoted or researched by the Company), (iv) researching and
testing pharmaceuticals or compounds manufactured or developed by third parties
under circumstances that result in compensation to Emory (and possible indirect
compensation to me) or such other school for such services, and (v) receiving
honoraria for presentations at medical conferences or seminars, except that I
will not investigate or develop for any other commercial entity (a) the
relationship of oxidation reactions to transcriptional factors, including NFxB,
in cardiovascular disease and other inflammatory diseases, (b) antioxidants and
their anti-inflammatory role in the activation of transcriptional factors in
cardiovascular disease and other inflammatory diseases, or (c) the commercial
development of antioxidants as potential therapeutic mediators in cardiovascular
diseases and other inflammatory diseases. Subject to the foregoing duties which
I perform or may perform for Emory or other academic or research institutions
during the Consultancy Period, I will not, without the prior written approval of
an executive officer of the Company (i) engage in any other professional
employment or consulting or (ii) directly or indirectly participate in or assist
in any business which is a current or potential competitor of the Company.
(b) I understand and acknowledge that the Company is in the business of
researching, developing, marketing and worldwide promotion of prescription
pharmaceuticals, and that to assist in this business endeavor the Company will
be recruiting investors on a worldwide basis to furnish financial backing.
During the course of my consulting, I will be consulting in the foregoing areas,
i.e. researching, developing, investigating, producing, promoting, marketing
and sales of prescription pharmaceuticals, as well as recruiting investors. I
will acquire in-depth knowledge of certain of the Company's business practices
and confidential information.
<PAGE> 27
(c) In light of the foregoing, during the Consultancy Period, I agree that
I will not directly or indirectly, expressly or tacitly, for myself or on
behalf of any entity anywhere in the world, (i) act as an officer, manager,
advisor, executive, controlling shareholder, or consultant to any business in
which my duties at or for such business include oversight of or actual
involvement in the research, development, investigation, production, promotion,
marketing or sales or prescription pharmaceuticals which are competitive with
those being produced or developed by the Company, or are under investigation by
the Company at the expiration of the Consultancy Period, (ii) recruit investors
on behalf of an entity which engages in researching, developing, investigating,
producing, promoting, marketing and sales of prescription pharmaceuticals which
are competitive with those being produced or developed by the Company, or are
under investigation by the Company at the expiration of the Consultancy Period,
or (iii) become employed by such an entity in any capacity which would require
me to carry out, in whole or in part, the duties I have performed for the
Company with respect to prescription pharmaceuticals which are competitive with
those being produced or developed by the Company, or are under active
investigation by the Company at the expiration of the Consultancy Period). I
acknowledge that because of the worldwide nature of the Company's business,
this restriction will prevent me from acting in any of the foregoing capacities
for any competing entity wherever located and that this worldwide scope is
reasonable in light of the business of the Company.
(d) I further agree that during the Consultancy Period, and for a period
of two (2) years following the termination of the Consultancy Period, I will
not directly or indirectly, on my own behalf or in the service or on behalf of
others, solicit, suggest or direct others to solicit for hire any person
employed by the Company at the time of termination of the Consultancy Period.
(e) I agree that during the Consultancy Period, and for a period of two (2)
years following the termination of the Consultancy Period, I will not, without
the prior written approval of an executive officer of the Company, on my own
behalf or in the service of or on behalf of others, knowingly solicit, divert,
or attempt to appropriate, to any business which competes with the Company in
the fields of research, development, investigation, production, promotion,
marketing, and sales of prescription pharmaceuticals, any person or entity who
is a customer of the Company or an actively sought prospective customer of the
Company (who is known as such by me) during my Consultancy Period.
(f) I agree that the covenants contained in this Section 1 are reasonable
and necessary to protect the confidentiality of the trade secrets, and other
confidential information concerning the Company acquired by me. The provisions
of this Section 1 shall be interpreted so as to protect those trade secrets and
confidential information, and to secure for the Company the exclusive benefits
of the work performed on behalf of the Company by me under this Agreement, and
not to unreasonably limit my ability to engage in employment and consulting
activities in non-competitive areas which do not endanger the Company's
legitimate interests expressed in this Agreement.
2
<PAGE> 28
(g) In the event that any of the covenants contained herein in
subparagraphs (a) through (e) are deemed unenforceable by a court of competent
jurisdiction, I agree that each of the covenants herein is severable from each
of the others, and that a declaration of invalidity as to any one of the
covenants shall not effect the enforceability of the others. Further, in the
event one or more of the covenants herein is deemed unenforceable by a court of
competent jurisdiction, the parties hereby agree and request that the court
enforce the covenant(s) to the extent found reasonable by the court. I
acknowledge that I have had the assistance of counsel of my choice in
negotiation of this Agreement and of these covenants.
2. INVENTIONS
2.1 DISCLOSURE
The Company acknowledges and agrees that pursuant to my employment
relationship with Emory or such other academic or non-profit research
institution or commercial enterprise as I may be engaged by in the future
("Employer"), Emory has, and an Employer may have, all right, title and
interest in and to any patentable or unpatentable, copyrightable or
uncopyrightable, idea, invention, work of authorship (including, but not limited
to, computer programs, software and documentation), formula, device,
improvement, method, process or discovery (any of the foregoing items
hereinafter referred to as an "Invention") arising out of, related to or based
upon my work for or on behalf of my Employer. Except for Inventions which arise
out of my employment and belong to my Employer, I will disclose promptly to the
proper officers of the Company in writing any Invention which relates to the
Company's business that I conceive, make, develop, or work on, in whole or in
part, solely or jointly with others during the term of my consultancy with the
Company and for a period of six months thereafter regardless of whether (a)
such invention was conceived, made, developed or worked on during my regular
hours of employment of my time away from work; (b) the Invention was made at
the suggestion of the Company; or (c) the Invention was reduced to drawing,
written description, documentation, models or other tangible form.
2.2 ASSIGNMENT OF INVENTIONS TO COMPANY
I hereby assign to the Company without royalty or any other further
consideration my entire right, title and interest in and to any Invention I am
required to disclose under Section 2.1.
2.3 RECORDS
I will make and maintain adequate and current written records of
all Inventions covered by Section 2.1. These records shall be and remain the
property of the Company.
3
<PAGE> 29
2.4 PATENTS
Subject to Section 2.1, I will assist the Company in obtaining,
maintaining, and enforcing patents and other proprietary rights in connection
with any Invention covered by Section 2.2 for which the Company has or obtains
any right, title or interest. I farther agree that my obligations under this
Section 2.4 shall continue beyond the termination of the Consultancy Period, but
if I am called upon to render such assistance after the termination of the
Consultancy Period, I shall be entitled to a fair and reasonable rate of
compensation for such assistance. I shall, in addition, be entitled to
reimbursement of any out-of-pocket expenses incurred at the request of the
Company relating to such assistance.
2.5 PRIOR CONTRACTS AND INVENTIONS: INFORMATION BELONGING TO THIRD
PARTIES
I represent that, except as set forth on Schedule 2.5A hereto an
initiated by the Company and me, there are no other contracts to assign
inventions that are now in existence between any other person or entity and me.
I further represent that other than my employment obligations for Emory and the
NIH I have no other employments or undertakings which might restrict or impair
my performance of this Agreement I will not, in connection with my engagement
as a consultant by the Company, use or disclose to the Company any confidential
trade secret or other proprietary information or any previous employer or other
person to which I am not lawfully entitled. As a matter of record, I attach to
Schedule 2.5B of this Agreement a brief description of all Inventions made or
conceived by me prior to my engagement as a consultant with the Company which I
desire to be excluded from this Agreement.
3. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
(a) I agree that all confidential information which is forwarded to me by
the Company and which is marked Confidential if forwarded in written form or
which is reduced to writing and marked Confidential within thirty days of
forwarding if forwarded in oral form shall be received in strict confidence,
used only for the purposes of this Agreement, and not disclosed by me (except as
required by law or court order) without the prior written consent of the other
Company, unless such information (a) was in the public domain at the time of
disclosure, (b) later became part of the public domain through no act or
omission of the by me, (c) was lawfully disclosed to me by a third party
having the right to disclose it, or (d) was already known by me at the time of
disclosure, as evidenced by written documents in my possession at the time of
the disclosure.
(b) In order to fulfill my obligation of confidence hereunder, I shall use
at least the same degree of care with the Company's confidential information as
I use to protect my own confidential information. This obligation shall exist
while this Agreement is in force and for a period of four (4) years thereafter.
4
<PAGE> 30
4. PROPERTY OF THE COMPANY
All notes, memoranda, reports, drawings, blueprints, manuals, materials,
data and other papers and records of every kind which shall come into my
possession at any time after the commencement of my consultancy with the
Company, relating to any Inventions which I make while performing my duties as a
consultant or member of the Scientific Advisory Board for the Company or
relating to Confidential Information shall be the sole and exclusive property of
the Company. This property shall be surrendered to the Company upon termination
of the Consultancy Period, or upon request by the Company, at any other time
either during or after the termination of the Consultancy Period.
5. MISCELLANEOUS
5.1 GOVERNING LAW
This Agreement shall be construed and governed by the laws of the
State of Georgia applicable to contracts entered into and wholly to be
performed in Georgia by Georgia residents.
5.2 ENFORCEMENT
If any portion of this Agreement shall be determined to be invalid
or unenforceable, the remainder shall be valid and enforceable to the maximum
extent possible.
5.3 INJUNCTIVE RELIEF, CONSENT TO JURISDICTION
I acknowledge that the Company will suffer substantial damages not
readily ascertainable or fully compensable in terms of money in the event of
the breach of any of my obligations under this Agreement. I therefore agree
that the Company shall be entitled (without limitation of any other rights or
remedies otherwise available to the Company) to obtain an injunction from any
court of competent jurisdiction prohibiting the continuance or recurrence of
any breach of this Agreement. I hereby submit myself to the jurisdiction and
venue of the courts of the State of Georgia for purposes of any such action. I
further agree that service upon me in any such action or proceeding may be made
by first class mail, certified or registered, to my address as last appearing
on the records of the Company.
5.4 WAIVER
The waiver by the Company of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach of the same or any other provision hereof
5
<PAGE> 31
5.5 BINDING EFFECT
This Agreement shall be binding upon and shall inure to the benefit
of the successors, executors, administrators, heirs, representatives and
assigns of the parties.
5.6 HEADINGS
The Section headings herein are intended for reference and shall
not by themselves determine thee construction or interpretation of this
Agreement.
5.7 MODIFICATIONS
All modifications or amendments to this Agreement must be in
writing and signed by the party against whom enforcement of such modification
or amendment is sought.
IN WITNESS WHEREOF, I have executed this document as of the 26th day
of April, 1995.
/s/ Sampath Parthasarathy
---------------------------------
Sampath Parthasarathy, Ph.D.
RECEIPT ACKNOWLEDGED:
ATHEROGENICS, INC.
/s/ R. Wayne Alexander
- ------------------------------------
By: R. Wayne Alexander, M.D., Ph.D.
Title: President
6
<PAGE> 32
SCHEDULE 2.5A
(List here prior contracts to assign inventions that are now in existence
between any other person or entity and you.)
<PAGE> 33
SCHEDULE 2.5B
(List here previous Inventions which you desire to have specifically excluded
from the operation of this Agreement.)
<PAGE> 1
EXHIBIT 10.06
SPONSORED RESEARCH AGREEMENT
This Sponsored Research Agreement (the "Agreement") is made by and
between EMORY UNIVERSITY, a nonprofit Georgia corporation with offices located
at 1784 North Decatur Road, Suite 510, Atlanta, Georgia 30322 ("University") and
ATHEROGENICS, INC., a for profit Georgia corporation organized and existing
under the laws of the State of Georgia with offices located at 3065 Northwoods
Circle, Norcross, GA 30071 (hereinafter referred to as "Sponsor").
WHEREAS, Sponsor desires that University perform certain research work
in collaboration with Sponsor as hereinafter described and is willing to advance
funds to sponsor such research;
WHEREAS, Sponsor desires to obtain certain rights to patents and
technology developed during the course of such research with a view to
profitable commercialization of such patents and technology for the Sponsor's
benefit; and
WHEREAS, University is willing to perform such research and to grant
rights to such patents and technology;
NOW THEREFORE, in consideration of the mutual covenants and promises
herein contained, the University and the Sponsor agree as follows:
[ * ] Certain confidential information contained in this document, marked by
an asterisk within brackets has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment under Rule 406 of the Securities Act of 1933,
as amended.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
I. EFFECTIVE DATE.......................................................................................... 3
II. RESEARCH PROGRAM........................................................................................ 3
III. COMPENSATION............................................................................................ 3
IV. CONSULTATION AND REPORTS................................................................................ 4
V. PUBLICITY............................................................................................... 5
VI. PUBLICATION AND ACADEMIC RIGHTS......................................................................... 5
VII. CONFIDENTIAL INFORMATION................................................................................ 6
VIII. PATENTS, COPYRIGHTS, AND TECHNOLOGY RIGHTS.............................................................. 8
IX. LIABILITY............................................................................................... 8
X. INDEPENDENT CONTRACTOR.................................................................................. 9
XI. TERM AND TERMINATION.................................................................................... 9
XII. ATTACHMENTS............................................................................................. 9
XIII. GENERAL................................................................................................. 9
ATTACHMENTS
RESEARCH PROGRAM................................................................................................. 12
PAYMENT SCHEDULE................................................................................................. 13
PATENTS, COPYRIGHTS, AND TECHNOLOGY RIGHTS....................................................................... 14
CONFIDENTIALITY AGREEMENT........................................................................................ 18
LICENSE AGREEMENT OF JANUARY 1995................................................................................ 19
</TABLE>
i
<PAGE> 3
I. EFFECTIVE DATE
This Agreement shall be effective as of November 1, 1996.
II. RESEARCH PROGRAM
2.1 University will use its best efforts to conduct the Research
Program in collaboration with Sponsor as described in Attachment A, and will
furnish the facilities necessary to carry out its part of the Research Program.
The Research Program will be under the direction of Dr. Dennis Liotta, or his
successor as mutually agreed to by the parties hereto ("Principal
Investigator"), and will be conducted by the Department of Chemistry at the
University.
2.2 The Research Program shall be performed during the period from
________, 1996 through and including __________, 1997 ("the Performance
Period"). Sponsor shall have the option to extend the Performance Period in one
year increments for a total of five (5) years. Funding for each additional year
shall be mutually agreed upon by Sponsor and University at the beginning of each
extension year.
2.3 The Principal Investigator shall use his best efforts to
achieve the goals of the Research Program. The Principal Investigator shall work
with Sponsor to determine the means for performing the Research Program so as
best to achieve these goals.
2.4 University and Principal Investigator shall keep accurate
financial and scientific records relating to the Research Program and shall make
such records available to Sponsor or its authorized representative throughout
the Term of the Agreement during normal business hours upon reasonable notice.
III. COMPENSATION
3.1 As consideration for the performance by University of its
obligations under this Agreement, Sponsor shall pay the University an amount
equal to its expenditures and reasonable overhead in conducting the Research
Program subject to a maximum expenditure limitation of [*] for the initial one
year Performance Period as set forth in Attachment B hereto. An initial payment
of [*] shall be made within thirty (30) days after the time of execution of this
Agreement and subsequent payments shall be made as quarterly advance payments of
up to [*] at three (3) month intervals after the Effective Date. Payments for
any extensions of the Performance Period shall also be in equal quarterly
advance payments based on the specific budget to be agreed upon at the time of
renewal. Unexpended funds shall be reimbursed to Sponsor at the end of each year
unless agreed to otherwise by Sponsor and University.
3.2 Funds paid by Sponsor shall include indirect payments to the
University. Indirect payments shall be included at the rate of [*] of the total
payment for the initial one year Performance Period. For each extension year,
the indirect rate shall increase [*] of the total payment until it reaches a
maximum of [*] of the total payment, as follows:
<PAGE> 4
<TABLE>
<S> <C>
year 1 [*]
year 2 [*]
year 3 [*]
year 4 [*]
year 5 [*]
</TABLE>
3.3 University shall maintain all Research Program funds in a
separate account and shall expend such funds for wages, supplies, equipment,
travel, and other operation expenses in connection with the Research Program in
reasonable accordance with the Budget set forth in Attachment B hereto. It is
understood that funds of the Research Program may be transferred between
categories at the Principal Investigator's discretion, and funds which are not
used in a particular quarter may be used in subsequent quarters within each
Performance Period year.
3.4 University shall retain title to all equipment purchased
and/or fabricated by it with funds provided by Sponsor under this Agreement.
IV. CONSULTATION AND REPORTS
4.1 Sponsor's Designated Representative for consultation and
communications with the Principal Investigator shall be Dr. Patty Somers, or
such other persons as Sponsor may from time to time designate in writing to
University and the Principal Investigator.
4.2 During the Term of this Agreement, Sponsor's representatives
may consult informally with University's representatives regarding the project,
both personally and by telephone. Access to work carried on in University
Laboratories in the course of these investigations shall be made available to
Sponsor's Designated Representative on a reasonable basis. Clinical and other
data shall be made available as it is generated and analyzed.
4.3 The Principal Investigator and Sponsor's technical
representatives, including Sponsor's Designated Representative, shall meet on a
quarterly basis (every three (3) months) during the Performance Period to
discuss research results and set objectives for the next three (3) month period.
At the conclusion of each year, and within 120 days of termination of the
Agreement, the Principal Investigator and University's Office of Grant and
Contract Accounting (within thirty (30) days after the conclusion of each year)
shall also submit technical and financial reports, respectively, summarizing the
Research Program, and specifically containing:
a. A summary of income and expenses of the Research
Program for the prior year (Office of Grant and
Contract Accounting); and
3
<PAGE> 5
b. A report of all activities undertaken and
accomplishments achieved through the Research Program
during the prior year (Principal Investigator).
4.4 To facilitate the collaborative aspects of the Research
Program and to assist Sponsor's in-house research and development efforts,
Sponsor shall be provided any tangible technical materials which are produced by
the University in the course of the Research Program. In this regard, the
University agrees to provide Sponsor with research quantities of any tangible
technical material produced by the University in the course of the Research
Program and available in transferrable quantities upon written request of
Sponsor to do so. Any reasonable extra costs incurred by the University over and
above the costs set forth in Article III above in supplying such tangible
technical materials to Sponsor shall be paid by Sponsor on receipt of an
appropriate invoice from University.
V. PUBLICITY
No press release or any other written statements in connection with
work performed under this Agreement intended for use in the public media making
any reference to one party hereunder shall be made by the other party, except as
provided below. University, however, shall have the right to acknowledge
Sponsor's support of the investigations under this Agreement in scientific or
academic publications and other scientific or academic communications. In any
such statement, the parties shall describe the scope and nature of their
participation accurately and -appropriately. Any press release developed by
University regarding this Research Program will be submitted to Sponsor thirty
(30) days in advance of planned release, and Sponsor shall have the right to
review and comment upon such proposed press release to determine if
Sponsor-furnished Confidential Information or patentable information is included
therein. If so, the provisions regarding deferral of publications set forth in
Article VI below shall be applicable to such release.
VI. PUBLICATION AND ACADEMIC RIGHTS
6.1 University and the Principal Investigator have the right to
publish or otherwise publicly disclose information gained in the course of this
Agreement. In order to avoid loss of patent rights as a result of premature
public disclosure of patentable information and to provide Sponsor an
opportunity to review proposed publication materials to determine whether such
material contains Sponsor-furnished Confidential Information (as defined in
Article VII), University will submit any prepublication materials to Sponsor for
review and comment at least thirty (30) days prior to planned submission for
publication.
Sponsor shall notify University within this thirty (30) days period
whether Sponsor-furnished Confidential Information is contained therein and
whether it desires patent applications to be filed on any inventions contained
in the materials, in accord with the provisions of Attachment C. If requested by
Sponsor, University shall delay publication of any portion of the
4
<PAGE> 6
materials for an additional period not to exceed ninety (90) days, unless a
further extension is mutually agreed upon, in order to facilitate filing of a
patent application in the United States. University shall have final authority
to determine the scope and content of any publications; however if any such
publication discloses Sponsor's Confidential Information (as defined in Article
VII), University agrees to delete such information prior to publication.
6.2 It is understood that the University investigators may discuss
the research being performed under this Agreement with other investigators but
shall not reveal information which is Sponsor's Confidential Information under
Article VII hereof, nor shall a public disclosure of patentable information be
made except as set forth in Article V and in Paragraph 6.1 hereof. In the event
any joint inventions relating to the subject matter of the Research Program,
between the University investigators being funded by this Agreement and other
investigators, result from such discussions, University shall grant to Sponsor
the rights outlined in Attachment C to this Agreement, except that, in the event
there exist obligations, relating to the joint inventions, to another party as a
result of the involvement of the other investigators, University shall, in good
faith, exercise reasonable efforts to enable Sponsor to obtain full rights to
the joint invention.
VII. CONFIDENTIAL INFORMATION
7.1 The parties may wish, from time to time, in connection with
work contemplated under this Agreement, to disclose Confidential Information to
each other. For the term of this Agreement and for a period of four (4) years
following termination of this Agreement, Sponsor and University each agrees that
it shall regard, maintain and preserve the secrecy and confidentiality of any
and all information and data, whether in oral or written form, including but not
limited to, products, processes, methods, concepts, ideas, programs, formulas,
apparatuses, chemicals, organisms, molecules, prototypes, techniques, know-how,
marketing plans, business plans, financial information, data, strategies,
forecasts, customer lists or technical requirements of customers, or other trade
secrets (collectively referred to herein as the "Proprietary Information") of
the other party which may be disclosed to or obtained by it pursuant to this
Agreement. Sponsor and University each agrees that it will not, at any time
without the prior written consent of the other party, use or disclose the
Proprietary Information belonging to the other party for any reason or in any
manner whatsoever except as may be necessary for the operation of this
Agreement, as explicitly authorized under this Agreement, or as required by law.
7.2 Sponsor and University shall each take the same measures to
preserve the secrecy and confidentiality and avoid the unauthorized use or
disclosure of the other party's Proprietary Information as such party takes to
protect its own Proprietary Information.
7.3 Sponsor and University shall each limit access to the
Proprietary Information to those of its employees and agents, Affiliates,
sublicensees, consultants, outside contractors, governmental regulatory
authorities and clinical investigators who have a reasonable need for access to
such information in connection with the operation of this Agreement. The
University
5
<PAGE> 7
shall require all personnel assigned to the Research Program to comply with, and
to assist the University in complying with, the terms of the Agreement,
including maintaining the confidentiality of Sponsor's Confidential Information.
To this end the University shall require all personnel assigned to the Research
Program to individually sign a confidentiality agreement in the form attached as
Attachment D. Further, each party or its Affiliates or sublicensees may disclose
Proprietary Information to the United States government or other regulatory
authorities to the extent that such disclosure is necessary for the prosecution
and/or enforcement of patents or for authorizations to conduct clinical trials
or commercially market Licensed Products, provided that such party is otherwise
entitled to engage in such activities under this Agreement, or may disclose
Proprietary Information as is necessary to exercise any rights which survive
termination or expiration of this Agreement. All persons or entities to whom
Proprietary Information is disclosed shall be subject to the non-disclosure
covenants contained herein.
7.4 Sponsor and University shall each use its best efforts to
disclose Proprietary Information to the other in writing and marked as
proprietary. If it is necessary to first disclose such information other than in
written form, the disclosing party shall, within thirty (30) days of such first
disclosure, reduce the information to writing and provide the receiving party
with a copy of such information marked as proprietary.
7.5 Sponsor and University each acknowledges that the disclosure
of Proprietary Information under this Agreement confers no rights in the
receiving party other than the right to use the Proprietary Information of the
disclosing party for the operation of this Agreement. Upon termination of this
Agreement, or forthwith upon the request of the other party, Sponsor and
University shall promptly return to the other party all such documents,
drawings, samples, specimens or reproductions thereof which may have come into
its possession.
7.6 The obligations undertaken by Sponsor and University hereunder
shall not apply to any portion of the Proprietary Information disclosed
hereunder which:
a. was known to the non-disclosing party prior to
disclosure of such Proprietary Information by the
disclosing party; or
b. is, or shall become, other than by an act or omission
of the non-disclosing party, generally available to
the public; or
c. shall, by lawful means, be made available to the
non-disclosing party by a third party with the right
to disclose; or
d. is required by law to be disclosed by the
non-disclosing party, provided the non-disclosing
party uses its best efforts to notify the disclosing
party immediately upon learning of such requirement
in order to give the disclosing party reasonable
opportunity to oppose such requirement; or
6
<PAGE> 8
e. results from research and development by the
receiving party or its Affiliates or sublicensees,
independent of disclosures from the other party of
this Agreement, provided that the persons developing
such information have not had any exposure to the
information received from the disclosing party; or
f. Sponsor and University agree in writing may be
disclosed.
7.7 In claiming the benefit of any of these exceptions, the
non-disclosing party shall have the burden of establishing that a portion of the
Proprietary Information is subject to such exception.
VIII. PATENTS, COPYRIGHTS, AND TECHNOLOGY RIGHTS
As partial consideration for payments made by Sponsor hereunder,
Sponsor and University agree to the terms concerning patents, copyrights, and
technology rights set forth in Attachment C.
IX. LIABILITY
9.1 Sponsor agrees to hold harmless the University, its officers,
agents and employees from any liability, loss or damage Sponsor may suffer as a
result of claims, demands, costs or judgments against Sponsor arising out of the
activities to be carried out pursuant to the obligations of this Agreement, and
the use by Sponsor of the results obtained from the activities performed by
University under this Agreement; provided, however, that any such liability,
loss or damage resulting from the following Sub-sections "a" or "b" is excluded
from this Agreement to hold harmless:
a. the negligent or willful failure of University to
substantially comply with any applicable FDA or other
governmental requirement; or
b. the negligence or willful malfeasance of any officer,
agent or employee of University.
9.2 Both parties agree that upon receipt of a notice of claim or
action arising from activities to be carried out pursuant to the obligations of
this Agreement, the party receiving such notice will notify the other party
promptly.
X. INDEPENDENT CONTRACTOR
For the purposes of this Agreement and all services to be provided
hereunder, the parties shall be, and shall be deemed to be, independent
contractors and not agents or employees of the other party. Neither party shall
have authority to make any statements, representations or
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commitments of any kind, or to take any action which shall be binding on the
other party, except as may be expressly provided for herein or authorized in
writing.
XI. TERM AND TERMINATION
11.1 This Agreement shall commence with the Effective Date hereof
and extend until the end of the Research Program as described herein, unless
sooner terminated in accordance with the provisions of this Section ("Term").
11.2 This Agreement maybe terminated by the mutual agreement of the
parties or by either party upon thirty (30) days written notice, if the
Principal Investigator's tenured appointment with the University terminates and
a suitable replacement (reasonably acceptable to the Sponsor) is not identified.
11.3 In the event that either party shall be in default of its
material obligations under this Agreement and shall fail to remedy such default
within sixty (60) days after receipt of written notice thereof, the other party
may terminate this Agreement upon expiration of the sixty (60) day period.
11.4 Termination or cancellation of this Agreement shall not affect
the rights and obligations of the parties accrued prior to termination. As its
sole liability upon termination, Sponsor shall pay University for all reasonable
expenses incurred as of the effective termination date, including salaries for
appointees.
11.5 Any provisions of this Agreement which by their nature extend
beyond termination hereof shall survive such termination.
XII. ATTACHMENTS
Attachments A, B, C, D and E are incorporated herein and made a part
hereof for all purposes.
XIII. GENERAL
13.1 This Agreement may not be assigned by either party without the
prior written consent of the other party; provided, however, that subject to the
approval of University, which may not be unreasonably withheld, Sponsor may
assign this agreement to any purchaser or transferee of all or substantially all
of Sponsor's assets or stock upon prior written notice to University, and
University may assign its right to receive payments hereunder.
13.2 This Agreement constitutes the entire and only agreement
between the parties relating to the Research Program, and all prior
negotiations, representations, agreements and understandings are superseded
hereby. No agreements altering or supplementing the terms
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hereof may be made except by means of a written document signed by the duly
authorized representatives of the parties.
13.3 Any notice required by this Agreement by Articles VIII, IX,
or XI shall be given by prepaid, first class, certified mail, return receipt
requested, addressed in the case of the University to:
Emory University
Office of Sponsored Programs
1784 North Decatur Road, Suite 510
Atlanta, GA 30322
Attention: Nancy L. Wilkinson, M.P.H.
or in the case of Sponsor to:
AtheroGenics, Inc.
3065 Northwoods Circle
Norcross, GA 30071
Attention: Dr. Patty Somers
with a copy to:
Lyon and Lyon
633 West Fifth Street, Suite 4700
Los Angeles, California 90071-2066
Attention: Carol A. Schneider, Ph.D.
Notices and other communications regarding the day-to-day administration and
operations of this Agreement shall be mailed or delivered, addressed in the case
of University to:
Emory University
Office of Sponsored Projects
1784 North Decatur Road, Suite 510
Atlanta, GA 30322
Attention: Nancy L. Wilkinson, M.P.H.
with a copy to:
Dr. Dennis Liotta
Emory University
Department of Chemistry
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or in the case of the Sponsor to:
AtheroGenics, Inc.
3065 Northwoods Circle
Norcross, GA 30071
Attention: Dr. Patty Somers
or at such other addresses as may be given from time to time in accordance with
the terms of this notice provision.
13.4 This Agreement shall be governed by, construed, and enforced
in accordance with the internal laws of the State of Georgia.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives.
ATHEROGENICS, INC. EMORY UNIVERSITY
By: Patricia Somers By: Nancy L. Wilkinson
------------------------------- ----------------------------
Dr. Patty Somers Nancy L. Wilkinson
Title: Senior Scientist Title: Assistant Vice President for Research
Date: October 14, 1996 Date: September 30, 1996
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ATTACHMENT A
RESEARCH PROGRAM
The Principal Investigator, Dr. Dennis Liotta, will study [*].
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ATTACHMENT B
PAYMENT SCHEDULE
See COMPENSATION 3.1 of the Sponsored Research Agreement.
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ATTACHMENT C
PATENTS, COPYRIGHTS, AND TECHNOLOGY RIGHTS
I. Definitions: The following terms shall have the indicated
meanings when, used in this Attachment:
A. "Agreement" shall mean that certain Sponsored
Research Agreement to which this Attachment is affixed between Emory University
("University"), and AtheroGenics, Inc. ("Sponsor"), of even date herewith.
B. "License" shall mean that certain License Agreement
Between Emory University and AtheroGenics of January 1995, attached to the
Agreement as Attachment E.
C. "University Patent Rights" shall mean rights in any
patent application or patent covering any University Invention made by the
University and/or the Principal Investigator during the course of the Research
Program and arising directly from the performance of said Research Program,
including any continuations, continuations-in-part, divisional applications,
reexaminations, reissued patents, substitutions, extensions, or additions
thereto, and any corresponding foreign patent applications or patents based on
such applications or patents ("University Patent Application" or "University
Patent", respectively).
D. "University Technology Rights" shall mean University
rights under state and federal laws, including the laws of copyright, trade
secret, and unfair competition, in unpatented inventions, know-how, software and
other technology developed by the University and/or Principal Investigator
during the Research Program and arising directly from the performance of said
Research Program.
E. "University Invention" shall mean any discovery,
concept or idea, whether or not patentable, made by the University and/or the
Principal Investigator during the Research Program, and arising directly from
the performance of said Research Program, including but not limited to
processes, methods, software, tangible research products, formulas and
techniques, improvements thereto, and know-how related thereto.
F. "Joint Patent Rights" shall mean rights owned
jointly by University and Sponsor in any patent application or patent covering
any Joint Invention made by the University and/or the Principal Investigator
together with Sponsor and/or one or more employees of Sponsor during the course
of the Research Program and arising directly from the performance of said
Research Program, including any continuations, continuations-in-part, divisional
applications, reexaminations, reissue patents, substitutions, extensions, or
additions thereto and any corresponding foreign patent applications or patents
based on such applications or patents ("Joint Patent Application" or "Joint
Patent," respectively).
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G. "Joint Technology Rights" shall mean University and
Sponsor rights under state and federal laws, including the laws of copyright,
trade secret, and unfair competition, in unpatented inventions, know-how,
software and other technology developed by the University and/or Principal
Investigator together with Sponsor and/or one or more employees of Sponsor
during the Research Program and arising directly from the performance of said
Research Program.
H. "Joint Invention" shall mean any discovery, concept
or idea, whether or not patentable made by the University and/or the Principal
Investigator together with Sponsor and/or one or more employees of Sponsor
during the Research Program, and arising directly from the performance of said
Research Program, including, but not limited to processes, methods, software,
tangible research products, formulas and techniques, improvements thereto, and
know-how related thereto.
I. "Patent Expenses and Costs" shall mean any expenses,
including attorney's fees, incurred in searching, search opinions, preparing
application, filing, prosecuting or maintaining a patent or patent application
with respect to Patent Rights in any country in which said patentor patent
application is filed.
J. Capitalized terms used in this Attachment that are
not defined herein shall have the meanings ascribed to such terms in the
Agreement or the License.
II. Ownership: Any University Patent Rights and Technology Rights
and University Inventions, including copyrightable works (other than written
scholarly works which are the property of the author) made during the course of
the Research Program by University personnel (and not Sponsor and/or one or more
employees of Sponsor) shall be the property of University. All rights and title
to Joint Patent Rights and Technology Rights and Joint Inventions shall belong
to University and Sponsor as joint assignees and joint owners.
III. Patent Filing and Prosecution: University shall Promptly
notify Sponsor of any University and/or Joint Invention made during the Research
Program (which notice shall include, but is not limited to, the submission to
Sponsor of the pre-publication materials as described in Article VI of the
Agreement). In the event the University or Sponsor believes that such Invention
involves a patentable material, Sponsor shall have the first right to file the
United States Patent Application(s). Sponsor shall be primarily responsible for
all patent prosecution activities pertaining to Licensed Patents assigned solely
to University or assigned jointly to Sponsor and University. Sponsor shall, with
Emory's approval, which shall not be unreasonably withheld, select patent
counsel to prosecute all such Licensed Patents and shall provide University with
copies of all communications from patent offices, filings and correspondence
pertaining to such patent prosecution activities, in a timely manner, so as to
give University an opportunity to comment thereon prior to any responsive
filing. University shall have the right to have claims which are supported by
the specification added to an application.
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If Sponsor chooses not to timely file or pursue patent protection or
patent maintenance for any patent application or issued patent assigned solely
to University, Sponsor shall notify University prior to abandonment in such a
manner as would allow University a reasonable period of time to take over
prosecution or maintenance of said patent application or issued patent. Such
patent application or issued patent shall then not be considered a Licensed
Patent and University shall be free, at its election, to abandon or maintain the
prosecution of such patent application or issued patent or grant rights to such
patent application or issued patent to third parties.
If Sponsor chooses not to timely file or pursue patent protection or
patent maintenance for any patent application or issued patent assigned jointly
to Sponsor and University, Sponsor shall, upon University's request, assign its
interests in such patent application or issued patent to University. After such
assignment, such patent application or issued patent shall then not be
considered a Licensed Patent and University shall be free, at its election, to
abandon or maintain the prosecution of such patent application or issued patent
or grant rights to such patent application or issued patent to third parties.
IV. Cooperation: In any case given above, the non-filing party
shall use its best efforts to cooperate with the filing party in the preparation
and prosecution of any application filed, including the timely review and
execution of any papers or documents required in connection with the filing and
prosecution of the patent application.
V. Expenses and Costs: Sponsor shall bear all reasonable Patent
Expenses and Costs associated with the filing and prosecution of any United
States Patent Application which Sponsor files pursuant to the above.
VI. Foreign Filing and Prosecution: Within nine (9) months after
each United States Patent Application is filed pursuant to Paragraph 3 above,
Sponsor shall elect those foreign countries in which Sponsor, after consultation
with University, desires foreign patent protection and Sponsor shall timely file
patent applications in all foreign countries elected. If elected by University,
Sponsor shall file at least in the EPO, Canada and Japan. Sponsor shall, upon
University's request, pursue prosecution of such Licensed Patents in additional
countries at University's expense.
The Patent Expenses and Costs relating to obtaining, issuing and
maintaining any foreign patent in all foreign countries elected, as provided
above, shall be paid by Sponsor, with reimbursement rights as described above.
If the University so requests, Sponsor shall inform the University of any
significant prosecution events in the elected foreign countries by providing
copies of all prosecution papers and soliciting input into patent office
responses where appropriate.
VII. License: Sponsor shall have an exclusive license to University
Patent Rights and University Technology Rights and/or University's ownership
interest in any Joint Patent Rights and Joint Technology Rights to practice any
Invention and use any technology made in the course
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of the Research Program in the Licensed Field. This license shall be bound by
the terms of the License Agreement, which is attached as Attachment E.
University Patents shall be classed as Subgroup (iii) patents as defined in the
License Agreement, and Joint Patents shall be classed as Subgroup (iv) patents.
VIII. Copyright Use: Subject to confidential treatment by Sponsor of
University Confidential Information that may be disclosed thereunder, University
grants Sponsor a fully paid-up, non-exclusive license under its copyrights to
make a reasonable number of copies for its internal needs, including derivative
works thereof, from any written report prepared and delivered to Sponsor in
accordance with this Agreement.
ACCEPTED AND AGREED: Patricia K. Somers
------------------------------------------------
ATHEROGENICS, INC.
By: Dr. Patty Somers
Title: Sr. Scientist
ACCEPTED AND AGREED Nancy L. Wilkinson
------------------------------------------------
EMORY UNIVERSITY
By: Nancy L. Wilkinson
Title: Assistant Vice President for Research
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ATTACHMENT D
CONFIDENTIALITY AGREEMENT
The undersigned, Dennis Liota, an individual ("Individual") assigned
to the Research Program, declares that he/she has read and is familiar with
Sections V. (Publicity), VI. (Publication and Academic Rights), and VII.
(Confidential Information) of the Sponsored Research Agreement dated as of
November 1 ("Agreement") by and between Emory University and AtheroGenics,
Inc. ("Sponsor"), and hereby agrees to be bound by the terms and conditions
thereof. Individual further agrees to keep confidential any Confidential
Information received from Sponsor for the term of the Agreement and for a
period of four (4) years following the termination of the Agreement, provided
that this obligation shall not apply to any information which:
a. was known to Individual prior to disclosure by Sponsor, as
evidenced by individual's written records; or
b. is, or shall become, other than by an act or omission by
Individual, generally available to the public; or
c. shall, by lawful means, be made available to Individual by a
third party with the right to disclose; or
d. is required by law to be disclosed by Individual, provided
Individual uses his/her best efforts to notify Sponsor immediately upon learning
of such requirement in order to give Sponsor reasonable opportunity to oppose
such requirement; or
e. Sponsor agrees in writing that it may be disclosed.
Dennis C. Liota November 30, 1996
- ------------------------------------ -------------------------------
Individual Date
WITNESSED BY:
Nancy L. Wilkinson November 30, 1996
- ------------------------------------ -------------------------------
Witness Date
Nancy L. Wilkinson
- ------------------------------------
name of Witness
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ATTACHMENT E
LICENSE AGREEMENT OF JANUARY 1995
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