SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(MARK ONE)
[X] Annual Report pursuant Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the fiscal year ended December 31, 1996
or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from to
Commission File Number 0-24760
ORPHAN MEDICAL, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1784594
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
13911 RIDGEDALE DRIVE, SUITE 475,
MINNETONKA, MN 55305 (612) 513-6900
(Address of principal executive offices (Registrant's telephone number,
and zip code) including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.01
PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of common stock held by non-affiliates of Registrant,
based upon the last sale price of the Common Stock reported on the Nasdaq
National Market tier of The Nasdaq Stock Market on March 10, 1997 was
$20,794,255. Common stock outstanding at February 28, 1997: 6,063,088 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Definitive Proxy Statement filed with the
Securities and Exchange Commission in connection with the solicitation of
proxies for the Registrant's Annual Meeting of Shareholders to be held on May 8,
1997 are incorporated by reference in Part III, Items 10, 11, 12 and 13 of this
Form 10-K.
<PAGE>
The purpose of this amendment is to re-file Exhibit 10.41 and Exhibit 10.42 to
the Form 10-K filed on March 17, 1997, with a redaction in Subsection 3.2.1 and
a redaction in Subsection 3.2.2 of Exhibit 10.41 removed and a redaction in
Section 9.3 of Exhibit 10.42 removed.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(3) Listing of Exhibits
Exhibit
Number Description
- ------ -----------
10.41 License Agreement regarding alpha galactosidase A between OMI and
Research Corporation Technologies, Inc. dated March 15, 1996(8) (NOTE:
PORTIONS OF THE EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT)
10.42 License Agreement regarding 5-fluorouracil between OMI and the
University of Miami and its Department of Opthalmology dated December
6, 1996(8) (NOTE: PORTIONS OF THE EXHIBIT HAVE BEEN OMITTED PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT)
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Orphan Medical, Inc.
Registrant
Date November 20, 1997 By /s/ John H. Bullion
John H. Bullion
Chief Executive Officer
(principal executive officer)
EXHIBIT 10.41
THE EXISTENCE OF THIS LICENSE IS TO BE KEPT CONFIDENTIAL
LICENSE AGREEMENT
Effective March 15, 1996, (the "Effective Date"), Research Corporation
Technologies, Inc., a Delaware nonprofit corporation, with offices at 101 N.
Wilmot Road, Suite 600, Tucson, AZ 85711-3335, ("RCT"), and Orphan Medical,
Inc., a Minnesota corporation, with offices at 13911 Ridgedale Drive,
Minnetonka, MN 55305 ("Orphan"), agree as follows (fully-capitalized terms are
defined in ARTICLE VIII):
ARTICLE I
LICENSE
SECTION 1.1. Grant of License. RCT hereby grants to Orphan a license
under the LICENSED PATENTS to make and have made LICENSED PRODUCTS, to USE
LICENSED PRODUCTS, to SELL LICENSED PRODUCTS, to offer to SELL LICENSED
PRODUCTS, and to import LICENSED PRODUCTS for USE or SALE, free from suit by RCT
for infringement of the PATENT CLAIMS in all countries of the world in which RCT
has LICENSED PATENTS. In addition, Orphan shall be free to make, use, sell, and
import LICENSED PRODUCTS in all countries of the world in which it so chooses.
Except as provided in the following sentence, this license is exclusive to
Orphan in that RCT agrees not to grant to a third party another concurrently
effective license under the LICENSED PATENTS to make, USE, SELL, offer to SELL,
or import LICENSED PRODUCTS during the term of this Agreement. The foregoing
exclusivity is expressly subject to RCT's reserved right to grant a
non-exclusive license under the LICENSED PATENTS to INSTITUTION and the
INVENTORS for noncommercial educational and research purposes. No license or
rights are granted or implied under any patent application or patent not a
LICENSED PATENT.
SECTION 1.2. Term of License Grant. The term of the license granted
under ARTICLE I shall end on the TERMINATION DATE unless sooner terminated.
SECTION 1.3. Extensions to AFFILIATES.
Subsection 1.3.1. GRANT OF RIGHT. RCT hereby grants to Orphan
the right to extend to Orphan's AFFILIATES the license granted under SECTION 1.1
of this Agreement. Orphan shall notify RCT in writing before any extension to an
AFFILIATE is made.
Subsection 1.3.2. ORPHAN RESPONSIBLE FOR PERFORMANCE. Orphan
shall be responsible for the performance of its AFFILIATES to which it extends
this license. For assessing, reporting and paying earned royalties under this
Agreement, the manufacture, SALE, USE or importation of LICENSED PRODUCTS by
Orphan's AFFILIATES shall be considered the manufacture, SALE, USE, or
importation of such LICENSED PRODUCT by Orphan.
Subsection 1.3.3. REPORTS AND PAYMENTS. Each AFFILIATE may
make the pertinent reports and royalty payments specified in ARTICLE II
("Financial Terms") directly to RCT on behalf of Orphan if Orphan provides RCT
prior written notice. Otherwise, Orphan shall make such payments and reports
separately showing the AFFILIATE's USE, SALE, and importation of LICENSED
PRODUCTS.
SECTION 1.4. Right and Power to Sublicense.
Subsection 1.4.1 GENERALLY. Orphan may grant to others
nonassignable, royalty-bearing sublicenses under the LICENSED PATENTS
commensurate in scope to the license granted under SECTION 1.1. Orphan's right
and power to grant sublicenses shall only be in effect for so long as: (a)
Orphan is not in uncured, material default under this Agreement (wherein
"uncured, material default" means the failure to cure, within the time specified
in Subsection 6.3.2, any material default under this Agreement after written
notice of such default); and (b) the license granted hereunder is in effect and
exclusive to Orphan.
<PAGE>
Subsection 1.4.2. NOTIFICATION REQUIREMENTS. Orphan shall
promptly provide RCT written notice of the issuance of all SUBLICENSES. Each
SUBLICENSE shall be in writing and shall include provisions similar in all
material respects to those of ARTICLE VI, and SECTIONS 2.4, 2.5, 7.5, 7.6, 7.12,
7.13, 7.14, 7.16, and 7.18 of this Agreement. On or before the date 30 days
after the execution of any SUBLICENSE, Orphan shall provide RCT with a true copy
of each SUBLICENSE (and an English translation, if appropriate).
Subsection 1.4.3. COMPLIANCE WITH LAW. Each SUBLICENSE must
comply with all applicable laws and governmental regulations. In particular,
Orphan shall neither grant (and shall have neither the right nor power to grant)
a SUBLICENSE, nor refuse to grant a SUBLICENSE, under any circumstance or
condition amounting to a misuse of any LICENSED PATENT.
SECTION 1.5. No Further Rights. Except as expressly provided in this
ARTICLE I, no further or different license or right is granted or implied.
ARTICLE II
FINANCIAL TERMS
SECTION 2.1. Fees. Orphan shall pay to RCT a non-refundable,
non-creditable license issue fee of *** payable as follows: (a) *** upon
execution and delivery of this Agreement; and (b) *** on or before the date
thirty days after the date on which Orphan has filed with the FDA an NDA for a
LICENSED PRODUCT. Orphan shall also pay to RCT*** of any issue fee paid to
Orphan under any SUBLICENSE, which fee is likewise non-refundable and
non-creditable.
SECTION 2.2. Earned Royalties.
Subsection 2.2.1. ACCRUAL AND PAYMENT. Orphan shall pay to RCT an
earned royalty on each LICENSED PRODUCT made, SOLD, or imported by or for
Orphan, its AFFILIATES or SUBLICENSEES during the term of this Agreement,
including any LICENSED PRODUCT made during the term of this Agreement but USED
or SOLD or imported after the termination of this Agreement.
Subsection 2.2.2. EARNED ROYALTY AMOUNT. The amount of earned royalties
Orphan shall pay to LICENSOR for LICENSED PRODUCTS SOLD or imported by LICENSEE,
its AFFILIATES or SUBLICENSEES shall be determined as follows:
(a) NET SALES VALUE NO GREATER THAN ***. If the cumulative,
aggregate NET SALES VALUE (from inception of this Agreement) of
LICENSED PRODUCT SOLD or imported under this Agreement (whether by or
for LICENSEE, its AFFILIATES, or SUBLICENSEES) is less than or equal to
*** the amount of the earned royalty shall be *** of the NET SALES
VALUE of all such LICENSED PRODUCTS SOLD or imported up to the point at
which such threshold is reached.
(b) NET SALES VALUE GREATER THAN *** BUT NO GREATER THAN ***.
If the cumulative, aggregate NET SALES VALUE (from inception of this
Agreement) of LICENSED PRODUCT SOLD or imported under this Agreement
(whether by or for LICENSEE, its AFFILIATES, or SUBLICENSEES) is
greater than *** but less than or equal to ***, the amount of the
earned royalty shall be *** of the NET SALES VALUE of all such LICENSED
PRODUCTS SOLD or imported after such lesser threshold is reached and up
to the point at which such higher threshold is reached.
(c) NET SALES VALUE GREATER THAN *** BUT NO GREATER THAN ***.
If the cumulative, aggregate NET SALES VALUE (from inception of this
Agreement) of LICENSED PRODUCT SOLD or
- ---------------------
*** DENOTES CONFIDENTIAL INFORMATION THAT HAS BEEN OMITTED FROM THE EXHIBIT
AND FILED SEPARATELY, ACCOMPANIED BY A CONFIDENTIAL TREATMENT REQUEST,
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF
THE SECURITIES EXCHANGE ACT OF 1934.
<PAGE>
imported under this Agreement (whether by or for LICENSEE, its
AFFILIATES, or SUBLICENSEES) is greater than *** but less than or equal
to *** the amount of the earned royalty shall be *** of the NET SALES
VALUE of all such LICENSED PRODUCTS SOLD or imported after such lesser
threshold is reached and up to the point at which such higher threshold
is reached.
(d) NET SALES VALUE GREATER THAN ***. If the cumulative,
aggregate NET SALES VALUE (from inception of this Agreement) of
LICENSED PRODUCT SOLD or imported under this Agreement (whether by or
for LICENSEE, its AFFILIATES, or SUBLICENSEES) is greater than ***, the
amount of the earned royalty shall be *** of the NET SALES VALUE of all
such LICENSED PRODUCTS SOLD or imported after such threshold is
reached.
Subsection 2.2.3. ONE ROYALTY. Only one earned royalty will
accrue and be paid on a given LICENSED PRODUCT, even if such LICENSED PRODUCT is
SOLD or transferred between SPECIAL PARTIES for subsequent RESALE or
importation, or if the manufacture of such LICENSED PRODUCT in one country is
covered by the LICENSED PATENTS and the SALE or importation in another country
is covered by the LICENSED PATENTS.
SECTION 2.3. Taxes. Orphan shall bear all taxes and charges assessed or
imposed by a governmental authority, including taxes imposed on the payment of
earned royalties, (collectively, "Non-deductible Taxes"). Non-deductible Taxes
do not include income tax imposed by the United States (or other country) or a
political or governmental subdivision thereof, taxes or duties permitted as
deductions in determining NET SALES VALUE, or maintenance fees or annuity
payments for keeping any LICENSED PATENT in force. All payments hereunder shall
be made undiminished by any Non-deductible Tax. Orphan shall cooperate with and
assist RCT in obtaining any exemption from Non-deductible Taxes imposed by any
government (or instrumentality) on royalty payments made by Orphan to RCT.
SECTION 2.4. Periodic Reports and Payments.
Subsection 2.4.1. FREQUENCY OF REPORTS. On or before January
30, April 30, July 30, and October 30 of each calendar year, Orphan shall
deliver to RCT a true and complete written report, showing the items specified
in Subsection 2.4.3 below as they pertain to the calendar quarter just ended.
Orphan's payment of the earned royalties based on Orphan's, its AFFILIATES', and
all SUBLICENSEES' SALE or USE of LICENSED PRODUCTS in the calendar quarter
covered by the written report shall accompany the report. If no earned royalties
are due, Orphan shall so report. Orphan shall pay all amounts due to RCT under
this Agreement in United States currency collectible at par. On or before the
date 90 days after the end of the calendar quarter in which this Agreement is
terminated, Orphan shall provide to RCT a written report that complies in all
respects with this SECTION 2.4. Orphan shall require each AFFILIATE and
SUBLICENSEE to make appropriate reports to Orphan to enable Orphan to comply
with this SECTION 2.4.
Subsection 2.4.2. CERTIFICATION. A responsible financial
officer of Orphan (or that officer's responsible designee), Orphan's independent
accounting firm, or the head of Orphan's internal audit committee shall certify
in writing that each such report is correct and complete.
Subsection 2.4.3. CONTENT OF QUARTERLY REPORTS. Each report
shall provide the following information as it pertains to the preceding calendar
quarter just ended:
(a) the quantities of LICENSED PRODUCTS billed for
any SALE or USE thereof by Orphan, its AFFILIATES, and
SUBLICENSEES during the previous calendar quarter in each
country in which such billing occurred (separately stated for
each entity and each country);
- ---------------------
*** DENOTES CONFIDENTIAL INFORMATION THAT HAS BEEN OMITTED FROM THE EXHIBIT
AND FILED SEPARATELY, ACCOMPANIED BY A CONFIDENTIAL TREATMENT REQUEST,
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF
THE SECURITIES EXCHANGE ACT OF 1934.
<PAGE>
(b) the United States dollar value of the billings on
such quantities in (a) above;
(c) the computation of the NET VALUE based on the
dollar value determined in (b) above including a detailed
accounting of any allowed deductions from the invoice amounts
to arrive at the NET SALES VALUE; and
(d) the computation of earned royalties based on the
NET SALES VALUE computed under Paragraph (c) above.
Failure to satisfy the terms and obligations of this SECTION 2.4 shall be a
material default under this Agreement.
SECTION 2.5. Books and Records. Orphan shall keep complete and accurate
books and reasonable supporting documentation to determine the accurateness of
the items reported under SECTION 2.4 and Orphan's compliance in other respects
with this Agreement. Orphan shall keep such books and documentation at its
principal place of business for three years following the end of the calendar
year to which they pertain (and access shall not be denied thereafter if
reasonably available). RCT may retain an independent certified public accountant
to inspect and copy such books and documentation to verify Orphan's earned
royalty statements or Orphan's compliance in other respects with this Agreement.
If any such inspection discloses an underpayment of earned royalties of 5% or
more of the amount of royalties actually due for any quarterly period, then
Orphan shall promptly pay the reasonable cost of such inspection after Orphan's
receipt of the bill/invoice for such inspection. Orphan shall require its
AFFILIATES and SUBLICENSEES to keep such books and documentation to enable
Orphan to comply with this SECTION 2.5. Failure to satisfy the terms and
obligations of this SECTION 2.5 shall be a material default under this
Agreement.
SECTION 2.6. Sales Outside The U.S. If Orphan, an AFFILIATE or a
SUBLICENSEE SELL any LICENSED PRODUCTS for currency other than United States
currency, Orphan shall determine the earned royalty payable for such LICENSED
PRODUCT in such currency and then convert the earned royalty into its equivalent
in United States currency at the New York foreign exchange selling rate for such
currency for the last business day of the calendar quarter for which payment is
made, as published by the Wall Street Journal. If such rate is not so published,
the conversion shall be at the selling rate for such currency for the last
business day of the calendar quarter for which payment is made, as published by
a leading New York, New York bank chosen by Orphan and reasonably acceptable to
RCT. If Orphan is late in making any payment, the applicable exchange rate
obtained from the sources described above shall be the greater of the rate on
the date payment was actually made or the rate on the date on which payment was
due.
SECTION 2.7. Late Payment. If Orphan fails to make any payment required
under this Agreement on or before the date ten days after Orphan's receipt of
RCT's written notice of such failure, Orphan shall pay interest on the unpaid
portion of such amount at an annual rate equal to the prime rate, as quoted by
First Interstate Bank, N.A., plus 5%, which shall accrue from the date the
payment not timely made became due until the date such payment is paid in full.
The interest shall be compounded on the last day of each calendar quarter. If
such rate exceeds the rate allowed by applicable law, then the highest rate
allowed by law shall apply. Any payments received shall be applied first to the
satisfaction of any unpaid, accrued interest and then to the satisfaction of any
unpaid principal.
ARTICLE III
OBLIGATIONS OF Orphan; DILIGENCE
SECTION 3.1. Obligation to Diligently Develop. Orphan shall exercise
its reasonable commercial efforts, consistent with its usual and customary
business practices, to commercially develop, promote and SELL LICENSED PRODUCTS
in the United States.
SECTION 3.2. Obtain Governmental Approvals and Registrations. Orphan
shall, either on its own part or through an AFFILIATE or a SUBLICENSEE,
diligently pursue the obtaining of governmental approvals and registrations for
LICENSED PRODUCTS in the United States. To that end:
<PAGE>
Subsection 3.2.1. CONDUCT IND PROGRAM. Promptly after the
Effective Date, Orphan shall diligently establish, maintain and fund a program
(the "IND Program"), or continue to conduct an existing program, reasonably
designed and funded to obtain information to enable Orphan to prepare and file
with the FDA, on or before January 31, 2001, an IND for a LICENSED PRODUCT. If
Orphan fails to timely file such IND, such failure shall be a material breach
under this Agreement.
Subsection 3.2.2. CONDUCT NDA PROGRAM. Promptly after filing
the IND, Orphan shall diligently establish, maintain and fund a program (the
"NDA Program"), or continue to conduct an existing program, reasonably designed
and funded to obtain information to enable Orphan to prepare and file with the
FDA, on or before January 31, 2005, an NDA for a LICENSED PRODUCT. If Orphan
fails to timely file such IND, such failure shall be a material breach under
this Agreement.
Subsection 3.2.3. PROSECUTE NDA. After a NDA for a LICENSED
PRODUCT is filed, Orphan shall exercise its reasonable efforts to prosecute such
NDA and file all necessary reports and respond to all reasonable requests from
the FDA for information, data, samples, tests and the like. Orphan shall exhaust
all administrative remedies reasonably available (it being understood that
litigation or other adversarial proceedings are not reasonably available
remedies) in instances of adverse action by the FDA.
SECTION 3.3. The Marketing Program. As approval of an NDA for a
LICENSED PRODUCT is obtained in the United States, Orphan shall proceed
diligently as follows (collectively, the "Marketing Program"):
(a) to market and SELL LICENSED PRODUCTS in the United States
on or before the date six months after approval is obtained;
(b) to advertise and promote the SALE of LICENSED PRODUCTS in
the United States in a manner reasonably designed to develop a public
demand for LICENSED PRODUCTS in the United States, and then to satisfy
such demand;
(c) upon reasonable written request of RCT, furnish RCT with
representative copies of advertising, sales and promotional material
relating to such LICENSED PRODUCTS.
SECTION 3.4. Periodic Reports. To keep RCT apprised of its diligence in
commercially developing, promoting and SELLING LICENSED PRODUCTS, Orphan shall
submit semiannual progress reports on its activities. Orphan shall submit the
first such report along with its first royalty report due under SECTION 2.4
("Periodic Reports and Payments"), and shall submit subsequent reports along
with subsequent, alternating royalty reports thereafter until LICENSED PRODUCTS
are being SOLD on a regular commercial basis in the United States.
SECTION 3.5. Default. Orphan's failure to timely perform any
requirement of this ARTICLE shall be a material breach of this Agreement. If
this Agreement is terminated, Orphan shall promptly prepare and deliver to RCT a
summary report regarding the status of its development and marketing efforts.
ARTICLE IV
LICENSED PATENTS
SECTION 4.1. Prosecution. At its sole cost and expense, RCT shall
maintain the issued patents of the LICENSED PATENTS. At its sole cost and
expense, RCT shall exercise its reasonable efforts to prosecute the patent
applications of the LICENSED PATENTS. RCT does not represent or warrant to
Orphan that any patent will issue or be granted based on such patent
applications. At its sole cost and expense, RCT shall maintain any patents that
may issue based on such patent applications.
<PAGE>
SECTION 4.2. Communication of Patent Prosecution Status. Upon
reasonable request of Orphan occurring not more frequently than monthly, RCT
shall keep Orphan apprised of the status of the patent prosecution of the
LICENSED PATENTS. From time to time, RCT may consult with Orphan on the
prosecution of any LICENSED PATENT and afford Orphan the opportunity to review
and comment on any responses or submissions to the USPTO, although it is
understood that RCT shall have final and sole authority to make any and all
decisions regarding the prosecution of any LICENSED PATENT.
SECTION 4.3. Abandonment. RCT may, in its sole discretion, abandon a
LICENSED PATENT. If RCT intends and elects to abandon a LICENSED PATENT, RCT
shall so advise Orphan in writing and give Orphan an opportunity to continue
such prosecution or maintenance at its own expense. RCT shall not have any
liability nor be subject to any claim for damages if it inadvertently or
unintentionally abandons any LICENSED PATENT.
SECTION 4.4. Patent Extensions. Orphan shall cooperate with RCT in
seeking any available extension of the term of any LICENSED PATENT. Orphan shall
advise RCT in a timely manner of approval by the FDA (or other pertinent foreign
regulatory authorities) to use or market any LICENSED PRODUCTS and any other
governmental approval that is pertinent to any such extension. Orphan shall
supply RCT with any information in its possession or control pertaining to, or
desirable for, the extension of any LICENSED PATENT. Orphan shall supply RCT in
a timely manner with any supporting affidavits or documents required in
connection with the extension of any LICENSED PATENT. Orphan shall require its
AFFILIATES and SUBLICENSEES to comply with this SECTION 5.2. None of Orphan, its
AFFILIATES, and SUBLICENSEES shall take any action the consequence of which is
to preclude RCT from obtaining any extension of the term of any LICENSED PATENT.
ARTICLE V
INFRINGEMENT
SECTION 5.1. Statement of Interests.
Subsection 5.1.1. RCT'S RIGHT. The parties recognize and agree
that the right to sue for infringement of the LICENSED PATENTS rests solely in
RCT, and that such right does not extend to any other party or PERSON, except to
the extent expressly granted in this ARTICLE V. The parties further recognize
and agree that RCT, as assignee of a LICENSED PATENT, has no duty to pursue
infringers.
Subsection 5.1.2. BOTH PARTIES' INTERESTS. RCT recognizes
that Orphan will make significant investment in commercializing LICENSED
PRODUCTS, that Orphan has an interest in protecting its market share of the USE
and SALE of LICENSED PRODUCTS in the United States, and that Orphan is licensing
the LICENSED PATENTS, in part, to protect such market share. Orphan recognizes
that RCT, as an assignee of the LICENSED PATENTS, has an interest in preventing
infringement of the LICENSED PATENTS, collecting royalties on the manufacture,
SALE, USE, or importation of products covered by the LICENSED PATENTS, and has
the concern of not exposing the LICENSED PATENTS to a third party's charge of
invalidity, where the nature or extent of infringement does not justify such
risk. The parties agree to take into account each party's interest in
formulating the response to infringement or threatened infringement of the
LICENSED PATENTS.
Subsection 5.1.3. COOPERATION AND COMMUNICATION. During the
preparation and pendency of any proceeding taken or instituted by a party under
this ARTICLE, the instituting party shall cooperate with the other party by: (a)
keeping the other party reasonably informed as to the status of such proceeding
including providing copies of all documents filed in, and written communications
relating to, such proceeding to the extent the interest of RCT and Orphan are
not adverse; (b) consulting with the other party regarding the strategy for, and
status of, such proceeding, including providing the other party with an
opportunity to make suggestions and comments regarding such proceeding. Any of
the foregoing obligations shall be subject to each party's desire or need to
preserve any attorney-client privilege, or work-product privilege, which shall
take precedence.
<PAGE>
SECTION 5.2. Notification and Meeting. If either party learns that a
third party (the "Infringer") is:
(a) filing with the United States Food and Drug Administration
("FDA"), or foreign counterpart, an Abbreviated New Drug Application
(or foreign equivalent) on a product that infringes a PATENT CLAIM,
which application contain the certification described in 21 U.S.C 355
(j)(2)(A)(vii)(IV);
(b) filing with the FDA an NDA seeking approval to market and
SELL a product that infringes a PATENT CLAIM;
(c) SELLING, offering to SELL, or importing into the United
States infringing products in competition with Orphan's, its
AFFILIATE'S, or a SUBLICENSEE'S SALE of LICENSED PRODUCTS in the United
States;
(d) inducing or contributing to any of the foregoing
infringing activities;
then, that party shall notify the other party, in writing, of such infringing
activity. As soon as possible thereafter, the parties shall convene a meeting at
which they shall discuss all available evidence of such infringement and the
manner of addressing such infringement, including possibly preventing and/or
stopping infringing activities (for example, by way of seeking a preliminary
injunction) and preserving the parties' rights to past and future damages (for
example, by way of sending a cease and desist letter). The parties may agree to
pursue the Infringer jointly, sharing attorneys and costs, or may decide to
designate either party as controlling party of any lawsuit. If the parties are
unable to expressly agree otherwise as to the manner of addressing such
infringement, the provisions of SECTIONS 5.3 through 5.6, inclusive, shall
govern the parties' respective rights and any legal proceedings taken in
connection with such infringement.
SECTION 5.3. Infringement Compelling Action by the Assignee.
Subsection 5.3.1. EVIDENCE OF INFRINGEMENT. If, at the meeting
described in SECTION 5.2, either party presents PRIMA FACIE evidence of the
Infringer conducting any of the infringing activities described above, and, in
the case of activities described in SECTION 5.2(c), evidence indicating that
such infringement involves significant quantities of infringing products, then
RCT shall have the right in the first instance to: (a) cause such infringement
to terminate; or (b) initiate legal proceedings (which for purposes of this
ARTICLE V include lawsuits, settlement discussions or negotiations, mediation,
and arbitration) against the Infringer. Evidence of such infringement may be in
the form of a written opinion from a party's outside legal counsel that such
activities of the Infringer constitute a PRIMA FACIE case of infringement of the
LICENSED PATENTS, which opinion is reasonably acceptable to RCT. If the
infringement involves significant quantities of infringing products, the
evidence shall be reasonably probative in demonstrating to the reasonable
satisfaction of RCT that the Infringer's level of SALES of infringing products
in the United States compete with Orphan's SALES of LICENSED PRODUCTS in such
country and constitute significant quantities of infringing products. Reasonably
probative evidence might include a showing of a comparable detrimental effect on
Orphan's SALES of LICENSED PRODUCTS, which detriment is reasonably attributable
to the third party's sales or trustworthy evidence of the amount of sales to
customers of prospective customers of Orphan concerning the amount of their
purchases from such third party.
Subsection 5.3.2. SIGNIFICANT QUANTITIES. "Significant
quantities" means sales of products by the Infringer in the country in which
such infringement is occurring within the immediately preceding twelve months
before the date of the written notice for a meeting under SECTION 5.2 above,
which sales have a NET SALES VALUE greater than 20% of the total, cumulative NET
SALES VALUE of LICENSED PRODUCTS SOLD by Orphan, its AFFILIATES or SUBLICENSEES
in the immediately preceding 12 month period in the United States, but in no
event less than $200,000.00.
SECTION 5.4. Orphan's Rights. If the conditions in Subsection 5.3.1
have been met but RCT does not undertake to perform the actions contemplated by
Subsection 5.3.1 on or before the date ninety days after the date
<PAGE>
of the SECTION 5.2 meeting, then Orphan shall have the right, at Orphan's sole
expense, to take any of the actions contemplated in Subsection 5.3.1 in its own
name, and the right to notify the Infringer that such activities are or may
constitute infringement of a PATENT CLAIM and that any such infringement should
be discontinued. Nothing in this ARTICLE V shall preclude RCT from exercising,
at any time, any right it may have as assignee. Any action taken by the other
party under this SECTION shall be further governed by SECTION 5.6 below. If the
infringement is the type described in Paragraph (a) of SECTION 5.2, the ninety
day period described above shall be reduced to ten days. For purposes of seeking
immediate injunctive relief, such as a temporary restraining order, to stop such
infringement, the ninety day period shall be reduced to five business days.
SECTION 5.5. Control of Suit Initiated by RCT.
Subsection 5.5.1. GENERALLY. If RCT institutes suit or other
legal proceedings to protect or enforce the LICENSED PATENTS, RCT shall have
sole control of such suit or other proceedings and shall pay all expenses of
such suit or proceeding, including without limitation, attorneys' fees and court
costs.
Subsection 5.5.2. ORPHAN'S RIGHT TO PARTICIPATE. Orphan shall
have the right to participate in such suit or proceeding at its own expense to
the extent it wishes to seek damages based on the infringement. Nonetheless, RCT
shall have sole control over any issues of validity or scope of any PATENT
CLAIM. If the other party hereunder participates in such suit, both parties
shall cooperate with each other as provided in Subsection 5.1.3 above but each
to bear its own expense.
Subsection 5.5.3. SHARING OF AWARDS. RCT shall be entitled to
keep all damages that it asserted and was awarded in such suit or proceeding. If
the other party hereunder participates in such suit or proceeding, the other
party shall have the right to keep any damages that it asserted and was awarded.
Punitive damages awarded shall be retained by the party to whom such damages are
awarded or, if the parties are jointly awarded punitive damages, such damages
shall be shared in the proportion that each party's normal damages bear to the
total damages awarded.
SECTION 5.6. Control of Suit Initiated by Orphan.
Subsection 5.6.1. RESPONSIBILITY AND LEGAL COUNSEL. If Orphan
takes any action under this ARTICLE V that results in legal proceedings relating
to the LICENSED PATENTS, Orphan shall assume the responsibility for such legal
proceedings at its sole expense. Orphan acknowledges that RCT, as assignee of
the LICENSED PATENTS, may be a necessary party to any suit or legal proceeding
brought by Orphan concerning the infringement of the LICENSED PATENTS. In light
of this fact, Orphan has the right to join RCT as a necessary party in any suit
or proceeding as a necessary party in any suit or proceeding RCT brings under
SECTION 5.1. In that event, and if RCT so requests, Orphan's legal counsel shall
represent RCT, at Orphan's expense, in any such legal proceedings. If Orphan's
legal counsel is unable to represent RCT because of a conflict of interest or
other bona fide reason, RCT may engage other competent legal counsel, reasonably
acceptable to Orphan and at Orphan's expense, to represent RCT in any such suit
or legal proceeding. If RCT does not wish to be represented by Orphan's legal
counsel for reasons other than a conflict of interest or other bona fide reason,
RCT may engage competent legal counsel of its own choosing to represent RCT at
RCT's own expense.
Subsection 5.6.2. DISCONTINUANCE OR Settlement. Orphan shall
not discontinue or settle any such proceedings brought by it without obtaining
the concurrence of RCT and giving RCT a timely opportunity to continue such
proceedings in its own name, under its sole control, and at its sole expense if
such discontinuation or settlement is not acceptable to RCT. Such concurrence
shall not be withheld unless the discontinuation or settlement will result in
the invalidity, unenforceability or reduction in scope of any PATENT CLAIM or
compromise RCT's right to receive reasonable compensation for such infringement
or any future infringement.
Subsection 5.6.3. SHARING OF AWARDS. After deducting from any
award or recovery in such suit or legal proceeding all out-of-pocket expenses
incurred by Orphan in such suit or legal proceedings, the other party shall then
pay to RCT out of any recovery and damages awarded, including without limitation
punitive damages, the reasonable royalties that were awarded in such suit or
proceeding. The other party shall then be entitled to
<PAGE>
retain for its own account the balance of such recovery awarded as damages.
Punitive damages awarded and remaining, if any, shall be retained by the party
to whom such damages are awarded or, if the parties are jointly awarded punitive
damages, such damages shall shared in the proportion that each party's normal
damages bear to each other.
Subsection 5.6.4. INDEMNITY. Orphan shall indemnify, defend
and hold RCT harmless from any and all claims, damages or other obligations
arising out of or resulting from any such claim or legal proceedings instituted
by Orphan. The foregoing indemnity shall not apply to the extent RCT incurs
claims, damages, or obligations because RCT elected to continue the proceedings
in its own name as contemplated under Subsection 5.6.2 above. The foregoing
indemnity shall not apply to the extent such claims, damages, or obligations are
based on the actions of RCT.
ARTICLE VI
TERMINATION
SECTION 6.1. Automatic Termination. The term of this Agreement shall
expire on the TERMINATION DATE unless sooner terminated.
SECTION 6.2. At Orphan's Election. Except as provided below, Orphan may
terminate this Agreement at any time by giving RCT three months' written notice
of Orphan's election to terminate.
SECTION 6.3. Orphan's Breach of Agreement.
Subsection 6.3.1. BREACH. Upon any breach of this Agreement by
Orphan, RCT, in addition to any other remedy available at law or equity, may
elect to terminate this Agreement by giving Orphan written notice of RCT's
election to terminate this Agreement. This Agreement shall terminate upon the
expiration of the period provided in Subsection 6.3.2 below unless Orphan has
cured such breach on or before the expiration of such period.
Subsection 6.3.2. NOTICE AND CURE PERIOD. If the breach is a
monetary breach (e.g., failure to timely pay amounts to RCT required to be paid
under this Agreement), the notice and cure period shall be thirty days. If the
breach is a nonmonetary breach (i.e., not involving the payment to Orphan of any
amounts required to be paid under this Agreement), the notice and cure period
shall be sixty days. If the nonmonetary breach is of a type that requires more
than sixty but less than ninety days to cure, the notice and cure period shall
be extended to ninety days so long as Orphan has, throughout the ninety day
period, diligently undertaken substantive and progressive efforts to cure such
breach on or before the date the ninety days expire.
Subsection 6.3.3. IMMEDIATE DEFAULT. The following shall be
breaches of this Agreement that Orphan may not cure: any voluntary or
involuntary dissolution, bankruptcy, insolvency of Orphan or assignment of
Orphan's assets for the benefit of creditors (collectively, a "Financial
Default"). Financial Defaults shall constitute immediate breaches of this
Agreement and, upon the occurrence of a Financial Default, this Agreement shall
immediately terminate. On or before the date 30 days before the occurrence of a
Financial Default or the filing of a bankruptcy petition concerning Orphan,
Orphan shall notify RCT in writing of Orphan's intention to file the petition or
of another's intention to file an involuntary petition in bankruptcy or the
impending Financial Default. Failure to provide such written notice shall be
deemed to be an immediate, pre-petition, incurable breach of this Agreement.
Subsection 6.3.4. DISPUTE OVER BASIS FOR TERMINATION. If
Orphan has a reasonable basis for disputing RCT's basis for terminating this
Agreement under this SECTION 6.3, RCT and Orphan shall submit such dispute to
the alternative dispute resolution procedures available provided under SECTION
7.4. This Agreement shall not be terminated until the dispute is resolved under
such proceedings and so long as Orphan has not otherwise defaulted under this
Agreement.
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SECTION 6.4. Effect of Termination of this Agreement on SUBLICENSES.
Termination of this Agreement shall effect the immediate and simultaneous
termination of any SUBLICENSE and of any right extended to Orphan's AFFILIATES
under SECTION 1.3.
SECTION 6.5. Surviving Obligations and Provisions. Orphan's obligations
to pay, and report to RCT on, the SALE or USE of any LICENSED PRODUCT made or
imported before termination of this Agreement or expiration of the pertinent
LICENSED PATENTS (even if such LICENSED PRODUCT is USED or SOLD after the
termination of this Agreement or expiration of the pertinent LICENSED PATENT),
shall survive such termination or expiration. In addition to any provision of
this Agreement that expressly survives the termination of this Agreement or
expiration of the LICENSED PATENTS, the provisions of SECTIONS 2.4 ("Periodic
Reports and Payments"), 2.5 ("Books and Records") and 6.5 and ARTICLE VII shall
survive the termination of this Agreement. After expiration or termination of
this Agreement, Orphan shall have the right, subject to its obligation to pay
earned royalties as provided in this Agreement, to SELL its remaining inventory
of LICENSED PRODUCTS free from suit by RCT for infringement of the LICENSED
PATENTS. Orphan shall have such right for the period expiring three months after
the effective date of such termination. The foregoing shall not apply to any
termination of this Agreement by RCT for Orphan's material default under this
Agreement.
SECTION 6.6. Reverter. Upon termination of this Agreement, all licenses
and right granted under this Agreement shall revert to RCT for the benefit of
RCT.
ARTICLE VII
GENERAL
SECTION 7.1. Integration. This Agreement, and any EXHIBITS, attached to
this Agreement, constitute the entire agreement between the parties as to the
subject matter of such documents. All prior and contemporaneous negotiations,
representations, warranties, agreements, statements, promises, and
understandings are superseded and merged into, extinguished by, and completely
expressed by such documents. No party shall be bound by or charged with any
written or oral agreements, representations, warranties, statements, promises,
or understandings not specifically set forth in such documents.
SECTION 7.2. Addresses and Notices. All notices, requests, reports, and
other communications provided in this Agreement shall be in writing and shall be
deemed to have been made or given: (a) when delivered, if delivered by hand or
sent by facsimile or the like; (b) on the day following deposit with an
overnight courier; or (c) on the date five days following deposit with the
United States Mail, certified or registered:
If to RCT: If to Orphan:
President President
Research Corporation Technologies, Inc. Orphan Medical, Inc.
101 N. Wilmot Rd., Suite 600 13911 Ridgedale Drive, Suite 475
Tucson, Arizona, 85711-3335 Minnetonka, MN 55305
Fax: 520-748-0025 Fax: 612-541-9209
Such addresses may be altered by notice so given. Payments by Orphan to RCT
under this Agreement shall be delivered to RCT at the foregoing address.
SECTION 7.3. Applicable Law. This Agreement and its effect are subject
to and shall be construed and enforced in accordance with the law of the State
of Delaware, U.S.A., without regard to the law of Delaware concerning the
conflicts of laws, except as to any issue which by the law of Delaware depends
upon the validity, scope or enforceability of any PATENT CLAIM, which issue
shall be determined in accordance with the applicable patent laws of the country
of such LICENSED PATENT.
SECTION 7.4. Mediation and Arbitration. Nothing in this SECTION 7.4
shall be construed to waive any rights or timely performance of any obligations
existing under this Agreement.
<PAGE>
Subsection 7.4.1. DISPUTE RESOLUTION. The parties shall make
all reasonable efforts to resolve any dispute concerning this Agreement, its
construction, or its actual or alleged breach, by face-to-face negotiations
between senior executives. Should such negotiation fail to resolve the matter,
the parties shall pursue mediation in accordance with the Center for Public
Resources' Model Procedure for Mediation of Business Disputes. Should such
mediation fail to resolve the matter, the matter shall be finally decided by
arbitration by and in accordance with the Rules then in effect of the American
Arbitration Association, and judgment upon the award rendered may be entered in
the highest court of the forum, state or federal, having jurisdiction. Any
arbitration will be conducted in the Tucson, Arizona metropolitan area.
Subsection 7.4.2. EXCEPTIONS. The provisions of this SECTION
7.4 relating to mediation and arbitration shall not apply to any issue of the
patentability, enforceability or infringement of any PATENT CLAIM. If, in
mediation or arbitration, any issue shall arise concerning validity, scope,
enforceability, or infringement of any PATENT CLAIM, the PATENT CLAIM shall be
deemed to be valid, enforceable and infringed. In any event, the mediators or
arbitrators shall not delay the proceeding to obtain or permit either party to
obtain judicial resolution of such issue, unless an order staying such
arbitration proceeding shall be entered by a court of competent jurisdiction.
Neither party shall raise any issue concerning the validity, construction,
enforceability, or effect of any LICENSED PATENT in any proceeding to enforce an
arbitration award hereunder or in any proceeding otherwise arising out of such
arbitration award.
SECTION 7.5. Compliance With Law: Severability. Nothing in this
Agreement shall be construed to require the commission of any act contrary to
law. If this Agreement conflicts with any statute, law, ordinance, or treaty
concerning the legal right of the parties to contract, the latter shall prevail.
In such event, the affected provisions of this Agreement shall be curtailed and
limited only to the extent necessary to bring it within the applicable legal
requirements and the validity, legality, and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
SECTION 7.6. Representations
Subsection 7.6.1 . AUTHORITY AND BINDING AGREEMENT;
INTERFERING PATENT RIGHTS. Each party represents and warrants to the other that
this Agreement constitutes a valid and binding agreement of the representing and
warranting party, that execution, delivery and performance of this Agreement by
the representing and warranting party are within such party's corporate power,
and have been duly authorized by all necessary corporate action. RCT represents
and warrants that it has the right to grant licenses under the LICENSED PATENTS.
Orphan represents and warrants that, as of the Execution Date, it has not filed,
and has no present plans to file, a patent application, and it is not
independently possessed of an invention on which it could file a patent
application, any of which patent applications do or may claim the same
invention(s) claimed in any of the PATENT CLAIMS (as constituted on the
Execution Date) or that otherwise may be a basis for the declaration of an
interference between any such patent application and any LICENSED PATENT.
Subsection 7.6.2. LIMITATIONS. Nothing contained in this
Agreement shall be construed as a representation or warranty by RCT: (a) that
the LICENSED PATENTS or any PATENT CLAIM can be or will be used to prevent the
importation, sale or use by a third party of a product in any country of the
LICENSED PATENTS where such product is placed in commerce under circumstances
which applicable laws or treaties preclude the use of the LICENSED PATENTS or
any PATENT CLAIM to prevent such importation, sale, or use; (b) as to the scope
or validity of any LICENSED PATENT or any PATENT CLAIM; or (c) that any
performance or practice under any LICENSED PATENT or any PATENT CLAIM is not an
infringement of any patent of others. However, RCT represents and warrants that,
as of the Effective Date: (d) it has no actual knowledge of any infringement of
the PATENT CLAIMS by a third party; (e) it has not received any written notice
from a third party stating that the practice of the INVENTION(s) as claimed in
the LICENSED PATENTS infringes the patents of such third party.
SECTION 7.7. Independent Contractor. In its performance under this
Agreement, each party shall be an independent contractor and neither party (nor
its employee or agent) shall be an agent or partner of the other party.
<PAGE>
SECTION 7.8. Headings. The headings of the various ARTICLES, SECTIONS
and Subsections of this Agreement are used solely for the convenience of the
parties, do not form a part of this Agreement, do not affect the interpretation
or meaning of this Agreement, and do not define, limit, extend, or describe its
scope or intent.
SECTION 7.9. No Third-Party Beneficiaries. Except for SECTIONS 7.13 and
7.18, which shall also be for the benefit of, and enforceable by, the
INSTITUTION and the INVENTORS, none of the provisions of this Agreement shall be
for the benefit of, or enforceable by, any third-party.
SECTION 7.10. Waiver. A party's express or implied consent or waiver of
the other party's breach hereunder shall not be deemed to be, or construed as, a
consent to, or waiver of, any other breach of the other party. A party's
failure, no matter how long, to: (a) complain of any act, or failure to act, by
the other party; (b) declare the other party in default; (c) insist upon the
strict performance of any obligation or condition of this Agreement; or (d)
exercise any right or remedy consequent upon a breach thereof; shall not
constitute a waiver by such party of its rights, such breach, or any other
obligation or condition. A party's consent in any one instance shall not limit
or waive the necessity to obtain such party's consent in any future instance. No
single or partial exercise of any right, power or privilege by a party hereunder
shall preclude any other or further exercise thereof or the exercise of any
other right, power or privilege by such party. In any event, no consent or
waiver shall be effective for any purpose hereunder unless such consent or
waiver is in writing and signed by the party granting such consent or waiver.
SECTION 7.11. Computation of Time. In computing any period of time
pursuant to this Agreement, the day or date of the act, notice, event, or
default from which the designated period of time begins to run will not be
included. The last day of the period so computed will be included, unless it is
a Saturday, Sunday, or federal holiday in which event the period runs until the
end of the next day which is not a Saturday, Sunday, or federal holiday.
SECTION 7.12. Disclaimer. It shall be the full and sole responsibility
of Orphan, its AFFILIATES and its SUBLICENSEES to use appropriate care in the
practice, manufacture or use of any product under any license granted under this
Agreement. RCT shall have no right to control the manner in which any product
licensed under this Agreement is made or practiced. RCT shall not be required to
provide any know-how or operating instructions or other information with respect
to any such product. RCT makes no representation or warranty whatsoever with
respect to any such product.
SECTION 7.13. Indemnity. Orphan AGREES TO INDEMNIFY, DEFEND AND HOLD
HARMLESS RCT, THE INVENTORS, THE INSTITUTION, AND ALL OFFICERS, DIRECTORS,
EMPLOYEES, AND AGENTS OF RCT AND INSTITUTION (COLLECTIVELY, THE "INDEMNITEES")
FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES AND LIABILITIES, INCLUDING LEGAL
COSTS AND FEES, OF OR ASSERTED BY Orphan, ITS AFFILIATES, SUBLICENSEES, ANY
SPECIAL PARTIES, AND/OR ANY THIRD PARTIES (WHETHER GOVERNMENTAL OR PRIVATE)
ARISING FROM THE MANUFACTURE, USE, SALE, OR IMPORTATION OF ANY LICENSED PRODUCT
BY OR FOR Orphan, ITS AFFILIATES, OR SUBLICENSEES, OR ARISING FROM THE USE OF
ANY SUCH LICENSED PRODUCT BY ANY THIRD PARTY INCLUDING ANY CONSUMER OR ANY
CUSTOMER OF Orphan, ITS AFFILIATES, OR SUBLICENSEES. IN NO EVENT SHALL RCT BE
LIABLE UNDER THIS AGREEMENT FOR ANY DIRECT (OTHER THAN FOR AMOUNTS PAID UNDER
THIS AGREEMENT), INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES
(INCLUDING BUT NOT LIMITED TO LOST REVENUE, LOST PROFITS, OR LOST SAVINGS), EVEN
IF RCT HAS NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. THE FOREGOING INDEMNITY
SHALL NOT BE AVAILABLE TO ANY INDEMNITEE TO THE EXTENT ANY CLAIM, DAMAGE, OR
LIABILITY ARISES SOLELY FROM GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH
INDEMNITEE IN THE MANUFACTURE, USE, SALE, OR IMPORTATION OF SUCH LICENSED
PRODUCT, ALTHOUGH ANY INDEMNITEE NOT GUILTY OF SUCH ACTS SHALL NOT BE SUBJECT TO
THIS LIMITATION AND SHALL CONTINUE TO BENEFIT FROM SUCH INDEMNITY.
SECTION 7.14. Insurance. On or before the date Orphan begins clinical
trials of any LICENSED PRODUCT, Orphan shall obtain and, thereafter throughout
the term of this Agreement, maintain in force products
<PAGE>
liability insurance and other insurance coverage typically carried by entities
engaged in Orphan's business in amounts not less than Two Million U.S. Dollars
(US$2,000,000). Such insurance policies shall name the Indemnitees as an
additional named insured or, if RCT is not so named, shall contain a provision
whereby the insurer waives any rights of subrogation against the Indemnitees.
The insurance policies required to be carried by Orphan under this Agreement
shall be with companies that have a Best's Financial Rating of A+ or better.
Orphan shall furnish RCT with a certificate of such policy upon request and,
whenever requested, shall satisfy RCT that such policy is in full force and
effect. Orphan shall maintain such insurance policies for a period expiring on
the date 10 years after the date of termination or expiration of this Agreement.
The requirements of the SECTION 7.14 shall survive termination of this
Agreement.
SECTION 7.15. Construction. The parties agree that each party has
reviewed this Agreement and that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not apply to the
interpretation of this Agreement.
SECTION 7.16. Patent Marking. Orphan shall mark all LICENSED PRODUCTS
with a legible notice indicating that the LICENSED PRODUCTS are covered by
claims in a pending patent application or an issued LICENSED PATENT, as the case
may be.
SECTION 7.17. Assignment. This Agreement, and the license, rights, and
duties contained in this Agreement, shall not be assigned by Orphan without the
prior written consent of RCT, which consent shall not be unreasonably withheld
or delayed. RCT's consent shall not be required if this Agreement is assigned as
part of a sale or transfer pursuant to other bona fide business arrangements of
all or substantially all of Orphan's business. Orphan shall give RCT prior
written notice of such assignment and obtain Orphan's assignee's agreement to
abide by the terms of this Agreement and assume all of Orphan's obligations
under this Agreement. Upon assignment, the term "Orphan" as used in this
Agreement shall thereafter mean the assignee of Orphan.
SECTION 7.18. Non-Use of Names. Orphan shall not use the name of any
INVENTOR, the INSTITUTION, RCT, or any adaptation of any of them, in any
advertising, promotional or sales literature, without prior written consent
obtained from the INVENTOR, the INSTITUTION, or RCT, as applicable. Orphan shall
require its AFFILIATES and SUBLICENSEES to comply with the foregoing. Likewise,
RCT shall not disclose the existence of this Agreement in any news release or
public announcement without the prior written approval of Orphan. RCT shall
obtain Orphan's prior written consent to the form and content of any news
release or public announcement concerning this Agreement. RCT and Orphan shall
each fully cooperate with the other in fashioning and distributing any new
release or public announcement concerning this Agreement.
ARTICLE VIII
DEFINITIONS
When fully capitalized in this Agreement, the following terms shall have the
meanings set forth below:
SECTION 8.1. "AFFILIATE" means any entity which directly or indirectly
controls, is controlled by, or is under common control with, a party to this
Agreement. "Control" shall constitute the right to cast, or the right to direct
the casting of, at least fifty percent (50%) of the votes at a meeting of such
owners, or at a meeting of the entity's directors or governing body, or the
right to designate a majority of the entity's directors or members of the
entity's governing body, or the power to direct or cause the direction of the
management or policies of an entity.
SECTION 8.2. "FDA" means the United States Food and Drug
Administration.
SECTION 8.3. "INSTITUTION" means the City University of New York.
SECTION 8.4. "INVENTION" means the certain invention entitled
"Recombinant Alpha-Galactosidase A Therapy for Fabry Disease," which is the
subject of RCT Project No. 0331-1523.
SECTION 8.5. "INVENTORS" means Drs. David Calhoun and George Coppola.
<PAGE>
SECTION 8.6. "LICENSED PATENTS" means:
(a) United States Patent No. 5,179,023 and United States
Patent Application No. 155,734 filed November 22, 1993;
(b) all U.S. divisional or continuation, in whole or in part,
applications based on any of the foregoing;
(c) any and all issued and unexpired patents resulting from
any of the applications described in Paragraph (a) or (b) above; and
(d) any and all U.S. issued and unexpired reissues,
reexaminations, renewals or extensions that may be based on any of the
patents described in Paragraphs (a) or (c) above.
SECTION 8.7. "LICENSED PRODUCT" means a product the manufacture, USE,
SALE, offer for SALE, or importation of which directly infringes, contributorily
infringes or induces the infringement of a PATENT CLAIM.
SECTION 8.8. "NDA" means a new drug application, a product license
application, or other similar application to the FDA seeking approval to market
and sell a new drug.
SECTION 8.9. "NET SALES VALUE" of any product means the actual billings
for the SALE or USE of a product less the deductions identified below.
Subsection 8.9.1. DETERMINING ACTUAL BILLINGS. The billings used for
calculating NET SALES VALUE of any LICENSED PRODUCT that Orphan, its AFFILIATE,
or a SUBLICENSEE SELLS:
(a) To a third party that is not a SPECIAL PARTY, actual
billings shall be Orphan's, its AFFILIATE's or SUBLICENSEE's billings,
as the case may be;
(b) To a SPECIAL PARTY for subsequent SALE by such SPECIAL
PARTY, actual billings shall be such SPECIAL PARTY's actual billings
for such subsequent SALE; or
(c) To a SPECIAL PARTY for USE by such SPECIAL PARTY, actual
billings shall be the billings that would result from a hypothetical
arm's length SALE to a third party (that is not a SPECIAL PARTY) by
Orphan, its AFFILIATE, or SUBLICENSEE as the case may be.
Subsection 8.9.2. ALLOWABLE DEDUCTIONS. When factually
applicable, the following deductions may be deducted from actual billings as
determined above:
(a) rebates, volume, quantity, trade or cash discounts,
allowed and taken, in amounts customary in the trade;
(b) sales taxes and/or use taxes and/or duties imposed upon,
and with specific reference to, particular SALES to the extent included
in the amount of actual billings;
(c) amounts allowed or credited on returns, rejections or
recalls, voluntary or otherwise (not exceeding the original billing);
and
(d) charges for freight, freight allowances, and outbound
transportation costs prepaid to the extent included in such actual
billings.
<PAGE>
No other allowance or deduction shall be made including without limitation
allowances or deductions for any commissions or sales fees by whatever name
known.
SECTION 8.10. "PATENT CLAIM" means a valid claim in an unexpired
LICENSED PATENT. A PATENT CLAIM shall be presumed to be valid unless and until
it has been held to be invalid by a final judgment of a court of competent
jurisdiction from which no appeal can be or is taken. For the purposes of this
Agreement, and especially for purposes of royalty determination and payment
under ARTICLE II ("Financial Terms"), any claim being presented in a pending
patent application shall be deemed to be the equivalent of a valid claim of an
issued, unexpired patent and in consideration of RCT's agreement to grant a
license under any patent issuing thereon earned royalties shall be payable in
respect thereto as though it were a valid patent claim. If RCT files an
amendment to the claims in any patent application within the LICENSED PATENTS
that broadens the scope of any PATENT CLAIM as constituted on the Effective
Date, or if RCT adds any new PATENT CLAIM to any LICENSED PATENT that is broader
in scope than any PATENT CLAIM as constituted on the Effective Date, RCT shall
promptly provide Orphan with a written copy of such amendment or new PATENT
CLAIM. On or before the date sixty days after receiving such written copy,
Orphan shall notify RCT if it elects not to extend the license granted under
this Agreement to such new or amended PATENT CLAIM. If Orphan so elects, the
license granted hereunder shall not include such PATENT CLAIM, even if the
patent or patent application containing such PATENT CLAIM is designated as a
LICENSED PATENT, and Orphan shall have no obligation to pay earned royalties on
products that infringe only such PATENT CLAIM. If Orphan does not timely notify
RCT of such election, Orphan shall be deemed to have elected to extend the
license granted under this Agreement to such new or amended PATENT CLAIM.
SECTION 8.11. "PERSON" means an individual or a corporation,
partnership, trust, unincorporated organization, association, or any other
entity, or a government, or any department or agency of a government.
SECTION 8.12. "SELL" (and any noun form and conjugated verb form
thereon shall mean to sell, or otherwise part with or dispose of, for value.
SECTION 8.13. "SPECIAL PARTY" shall mean any one of Orphan, AFFILIATES
of Orphan, SUBLICENSEES, AFFILIATES OF SUBLICENSEES, or any PERSON enjoying a
special course of dealing with Orphan, AFFILIATES of Orphan, SUBLICENSEES, or
AFFILIATES OF SUBLICENSEES. By way of example but not limitation, a "special
course of dealing" includes co-marketing arrangements between Orphan and a third
party wherein the third party may SELL LICENSED PRODUCTS, distribution
arrangements with third parties in which Orphan or its AFFILIATE shares,
directly or indirectly, in the proceeds from such distributor's SALES of
LICENSED PRODUCT, supply contracts in which Orphan agrees with a third party to
supply or manufacture LICENSED PRODUCTS for SALE by the third party under such
third party's name or mark, arrangements under which a third party will SELL
LICENSED PRODUCTS under a private labeling arrangement with Orphan, or barter
arrangements in which Orphan exchanges LICENSED PRODUCTS for other products in
kind. A distributor of LICENSED PRODUCTS under Orphan's name or mark shall not
be considered a SPECIAL PARTY if neither Orphan nor its AFFILIATE shares,
directly or indirectly, in the proceeds from such distributor's SALES of such
LICENSED PRODUCT.
SECTION 8.14. "SUBLICENSE" shall mean a sublicense under the LICENSED
PATENTS granted under SECTION 1.4. "SUBLICENSEE" shall mean an third party,
unrelated to Orphan, to which rights are granted under a SUBLICENSE. If Orphan
is related to a third party to which rights granted under this Agreement are
extended, such extension of rights shall not be considered a SUBLICENSE under
SECTION 1.4 but an extension to AFFILIATES under SECTION 1.3.
SECTION 8.15. "TERMINATION DATE" shall be the date on which the U.S.
LICENSED PATENT that has the latest expiration date expires, after accounting
for any extensions of any LICENSED PATENTS. A patent shall be understood to
expire at midnight of the date of its expiration.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused a duly
authorized officer to sign this Agreement to be effective the Effective Date.
ORPHAN MEDICAL INC. RESEARCH CORPORATION
By: /s/ Bert Spilker By: /s/ Gary M. Munsinger
---------------- ---------------------
Bertram Spilker, President Gary M. Munsinger, President
Date: March 20, 1996 Date: March 18, 1996
-------------- --------------
EXHIBIT 10.42
LICENSE AGREEMENT
This License Agreement (the "Agreement") is entered into and
made effective the 6th day of December, 1996, (the "Effective Date") between
UNIVERSITY OF MIAMI and its Department of Ophthalmology whose principal place of
business is at 1600 N.W. 10th Avenue, Miami Florida 33136 (hereinafter referred
to as "LICENSOR") and Orphan Medical, a Minnesota Corporation, whose principal
place of business is at 13911 Ridgedale Drive, Suite 475, Minnetonka, Minnesota
55305 (hereinafter referred to as "LICENSEE").
WITNESSETH
WHEREAS, LICENSOR is the sole owner of U.S. Patent No.
5,098,443, Japanese Patent Application Serial No. 330811/91 and Canadian Patent
Application No. 2,056,138 (the Japanese and Canadian patent applications
collectively referred to herein as the "Patent Applications"), as well as the
technology described therein and entitled Method of Implanting Intraocular and
Intraorbital Implantable Devices for the Controlled Release of Pharmacological
Agents; Parel/UM88--06; and
WHEREAS, LICENSOR wishes to maintain the United States Patent,
obtain and maintain patents from the Patent Applications, and commercially
market the Product; and
WHEREAS LICENSOR warrants that it possesses the right to
license the aforestated patent and Patent Applications and to license and market
the Product; and
WHEREAS, LICENSOR wishes the LICENSEE to maintain the subject
Patent in the United States, obtain and maintain Patents from the Patent
Applications in the respective Territories, and to market the Product and
Process included within the Patent Rights; and
WHEREAS, LICENSEE desires to acquire an exclusive license in
the Territory for the following use: Human and Animal Health, with the right to
sublicense, under the Patent Rights (as defined in Paragraph 1.3 below) for the
purposes of making, having made for its own use and sale, using and selling
products and practicing the invention disclosed and claimed in the Patent
Rights.
NOW THEREFORE, in consideration of the above premises and the
obligation and covenants set forth below, the parties agree as follows:
1. DEFINITIONS:
<PAGE>
1.1 "Affiliate" shall mean any corporation or other business entity
controlled by, controlling or under common control with LICENSOR or LICENSEE.
For this purpose, "control" shall mean direct or indirect beneficial ownership
of at least a fifty percent (50%) of the voting stock of, or at least a fifty
percent (50%) interest in the income of such corporation or other business
entity, or such other relationship as in fact, constitutes actual control.
1.2 "Sublicensee" as used in this Agreement shall mean any third party
to whom LICENSEE has granted a license to make, have made, use and/or sell the
Product or Process under the Patent Rights, provided said third party has agreed
in writing with LICENSEE to accept the conditions and restrictions agreed to by
LICENSEE in this Agreement.
1.3 "Patent Rights" shall mean U.S. Patent No. 5,098,443, Japanese
Patent Application Serial No. 330811/91 and Canadian Patent Application No.
2,056,138, and any continuations, divisional re-examinations, reissues,
improvements or extensions thereof and any patents issuing therefrom.
1.4 "Product" shall mean any product or part thereof (a) that is
covered in whole or in part by an issued, unexpired claim or a pending claim
contained in the Patent Rights in the country in which any Licensed Product is
made, used or sold; (b) that is manufactured by using a process which is covered
in whole or in part by an issued, unexpired claim or a pending claim contained
in the Patent Rights in the country in which any Licensed Process is used or in
which such product or part thereof is made, used or sold.
1.5 "Process" shall mean any process which is covered in whole or in
part by an issued, unexpired claim or pending claim contained in the Patent
Rights.
1.6 "Net Sales" shall mean the sum of all amounts invoiced on account
of sale or use of Products by LICENSEE and its Affiliates and any Sublicensees
to non-affiliated third party purchasers or users of Products, less (if invoiced
separately) (a) cash discounts to purchasers allowed in amounts customary in the
trade, (b) amounts for transportation or shipping charges to purchasers, (c)
credits for returns, allowances or trades, and (d) taxes and duties levied on
the sale of Products, whether absorbed by Licensee or paid by the purchaser.
1.7 "Territory" shall mean United States, Canada, and Japan.
1.8 "Field of Use" shall mean Human and Animal Health.
2. GRANT:
<PAGE>
2.1 In consideration for payment of royalties, LICENSOR hereby, grants
to LICENSEE an exclusive license in the Territory for the Field of Use, with the
right to sublicense, under the Patent Rights, to make, have made for its own use
and sale, use and sell the Product and to practice any Process claimed in the
Patent Rights.
2.2 LICENSOR grants to the LICENSEE the authority to make application
for Patents, in the name of the LICENSOR in the Territory; all expenses of
obtaining and maintaining said patents shall be paid by LICENSEE.
2.3 LICENSOR retains the right to practice such invention for its own
research and educational use, and will not intentionally use such invention for
a commercial purpose.
3. TERM:
The license granted by this Agreement shall be Exclusive in
the License Field of Use in each country in the Licensed Territory for a term
commencing as of the effective date of this Agreement and ending on the first to
occur of the following:
(a) Twenty (20) years from the effective date; or
(b) Seventeen (17) years from the date of first commercial
sale of a licensed Product(s) by LICENSEE in each country in the Licensed
Territory (LICENSEE agrees to promptly inform LICENSOR in writing of the date of
first commercial sale); or
(c) expiration of the last to expire Patent Right within the
respective country.
Thereafter, said license shall be nonexclusive until
expiration of the last to expire of the Licensed Patent(s) in each country
within the Territory.
4. UNITED STATES LAWS:
It is understood that LICENSOR is subject to United States
laws and regulations controlling the export of technical data, computer
software, laboratory prototypes and other commodities (including the Arms Export
Control Act, as amended and the Export Administration Act of 1979), and that its
obligations hereunder are contingent on compliance with applicable United States
export laws and regulations. The transfer of certain technical data and
commodities may require a license from the cognizant agency of the United States
Government and/or written assurances by LICENSEE that LICENSEE shall not export
data or commodities to certain foreign
<PAGE>
countries without prior approval of such agency. LICENSOR neither represents
that a license shall not be required nor that, if required, it shall be issued.
5. PATENT PROTECTION AND INFRINGEMENT:
5.1 LICENSEE, during the term of this Agreement, is responsible for the
maintenance of U.S. Patent No. 5,098,443 and for the prosecution of the Patent
Applications. LICENSEE shall be responsible for all costs associated with such
maintenance and prosecution and shall have the authority to change the attorneys
responsible for such maintenance and prosecution subject to the approval of the
LICENSOR. Such approval by LICENSOR shall not be unreasonably withheld. In the
event a patent or patent(s) issue from the foregoing patent applications,
Licensee shall be responsible for the maintenance of such patents and shall be
responsible for all costs associated with such maintenance. In the event
LICENSOR desires additional patent applications to be filed in the Territory on
the invention(s) disclosed in the Patent Applications, it shall inform LICENSEE
in writing. LICENSEE must promptly notify LICENSOR of its intention to not file
additional patent applications. In such event, LICENSOR shall have the
opportunity to file additional patent applications. Any such additional patent
applications filed by LICENSEE shall fall within the definition of "Patent
Rights". Any such additional patent applications filed by LICENSOR shall not
fall within the definition of "Patent Rights".
5.2 LICENSEE shall promptly notify LICENSOR in writing of any claim of
Patent Rights infringement that it becomes aware of and that is asserted against
LICENSEE or LICENSOR, its Affiliates or any sublicensees because of the
manufacture, use, promotion and sale of Products by LICENSEE, its Affiliates or
any sublicensees.
5.3 LICENSEE will defend, indemnify and hold harmless LICENSOR, its
Trustees, officers, directors, employees and its Affiliates against any and all
judgments and damages arising from any and all third party claims of Patent
Rights infringement which may be asserted against LICENSOR or ITS Affiliates
because of the manufacture, use, promotion and sale of Products or Processes by
LICENSEE or its Affiliates or sublicensees. LICENSEE will bear all costs and
expenses incurred in connection with the defense of any such claims or as a
result of any settlement made or judgment rendered on the basis of such claims.
LICENSOR will have the right, but not the obligation, to retain counsel at its
expense in connection with any such claim. LICENSOR at its option, shall have
the right within thirty (30) days after commencement of such action, to
intervene and participate in the
<PAGE>
defense of the action and shall be responsible for its own costs incurred in
connection therewith (including attorneys fees). LICENSEE shall not be
responsible for any judgments, damages or other costs arising from any and all
third party claims of Patent Rights infringement which may be asserted against
LICENSOR and its AFFILIATES because of the manufacture, use, promotion, and sale
of Products or Processes by LICENSOR, its Affiliates or any parties not licensed
by LICENSEE. Neither party shall have any liability to the other for any loss or
damages incurred as a result of the invalidity of LICENSOR'S Patent Rights.
5.4 Upon learning of any infringement of Patent Rights by third parties
in any country, LICENSEE and LICENSOR will promptly inform each other, as the
case may be, in writing of that fact and will supply the other with any
available evidence pertaining to the infringement. LICENSEE at its own expense
shall have the option to take whatever steps are necessary to stop the
infringement and recover damages therefor, and will be entitled to retain all
damages so recovered. In the event LICENSEE declines to bring suit, it shall so
inform LICENSOR in writing. Thereafter, LICENSOR shall have the right to take
any steps necessary (including commencement of suit) to stop the infringement.
LICENSOR shall bear all costs associated therewith and shall have the right to
recover damages therefore, and will be entitled to retain all damages so
recovered. In the event that LICENSOR and LICENSEE mutually agree to bring suit,
costs and expenses shall be shared equally and any recovery in excess of
expenses shall be shared equally. In any event, no settlement, consent, judgment
or other voluntary final disposition of the suit may be entered into without the
consent of LICENSOR, which shall not be unreasonably withheld.
5.5 LICENSOR shall have no responsibility with respect to LICENSEE'S
own trademarks and trade name, and LICENSEE in respect to the use thereof will
defend indemnify and hold harmless LICENSOR against any and all third party
claims related to such trademarks and trade names.
5.6 LICENSOR shall provide all reasonable assistance necessary for
LICENSEE to prosecute and maintain the patent(s) and patent applications
licensed hereunder.
6. INDEMNIFICATION:
6.1 LICENSEE agrees to release, indemnify and hold harmless LICENSOR,
its Affiliates, Trustees, officers, faculty, employees and students against any
and all losses, expenses, claims, actions, lawsuits and judgments thereon
(including attorney's fees through the appellate levels) which may be brought
against
<PAGE>
LICENSOR, its trustees, officers, faculty, employees or students as a result of
or arising out of any negligent act or omission of LICENSEE, its agents, or
employees, or arising out of use, production, manufacture, sale, lease or
advertisement by LICENSEE or its Affiliates or sublicensees of any licensed
Patent Right, Product or Process licensed under this Agreement.
6.2 This Agreement to reimburse and indemnify under the circumstances
set forth in Section 6.1 shall continue after the termination of this Agreement.
7. WARRANTIES AND DISCLAIMER:
7.1 LICENSOR represents and warrants to LICENSEE that:
(a) it is the sole owner of the Patent Rights licensed
hereunder;
(b) that is it unaware of any claim of third party ownership
of the Patent Rights;
(c) to the best of its knowledge, U.S. Patent No. 5,098,443 is
valid and enforceable;
(d) it is unaware of any claim, asserted or unasserted, that
the Product or Process infringe any third party intellectual property rights;
(e) neither the Japanese nor Canadian patent application
licensed hereunder have been abandoned and that each application is being
diligently prosecuted; and
(f) LICENSOR has the power and authority to grant the licenses
and rights set forth in Article 2.
7.2 SUBJECT TO SECTION 7.1, NEITHER PARTY MAKES ANY WARRANTIES, EXPRESS
OR IMPLIED, AND HEREBY DISCLAIMS ALL SUCH WARRANTIES, AS TO ANY MATTER
WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE CONDITION OF ANY INVENTION(S) OR
PRODUCT, WHETHER TANGIBLE OR INTANGIBLE, LICENSED UNDER THIS AGREEMENT; OR THE
MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OF THE INVENTION OR
PRODUCT; OR THAT THE USE OF THE LICENSED PRODUCT WILL NOT INFRINGE ANY PATENT,
COPYRIGHTS, TRADEMARKS, OR OTHER RIGHTS. LICENSOR SHALL NOT BE LIABLE FOR ANY
DIRECT, CONSEQUENTIAL, OR OTHER DAMAGES SUFFERED BY ANY OTHER PARTY OR ANY THIRD
PARTIES RESULTING FROM THE USE, PRODUCTION, MANUFACTURE, SALE, LEASE,
CONSUMPTION, OR ADVERTISEMENT OF THE PRODUCT.
<PAGE>
7.3 It is expressly acknowledged and understood by LICENSOR that
LICENSEE makes no warranty or representation that it is possible to obtain a
patent based on Japanese Patent Application Serial No. 330811/91 or Canadian
Patent Application Serial No. 2056138 or, assuming patents are to issue on such
applications, that the scope of claim coverage will be satisfactory to LICENSOR.
LICENSEE shall use commercially reasonable efforts to obtain a patent from each
of the foregoing applications, with a reasonable scope of claim coverage.
7.4 The provisions of this Article 7 shall continue beyond the
termination of this Agreement.
8. ROYALTIES:
8.1 In consideration of the license herein granted, LICENSEE shall pay
royalties to LICENSOR as follows:
(a) License Issue Fee of *** said License Issue Fee shall be
deemed earned and due within 15 days of the execution of this
Agreement.
(b) Running Royalty in an amount equal to *** of the Net Sales of
the Products or Processes used, leased or sold by LICENSEE;
provided, however, that such percent shall be decreased to ***
for Net Sales in the event a patent does not issue on the
licensed Japanese and/or Canadian applications within three
years of the Effective Date of this Agreement (despite
LICENSEE'S commercially reasonable efforts to obtain a
patent); provided, however, that such decrease shall only
apply to Net Sales in the country where the patent does not
issue. Royalties from any sublicensee that manufactures the
Product or purchases it from a third party will be divided
equally between the LICENSEE and LICENSOR, and will not in any
case be below *** for the LICENSOR.
(c) Minimum Royalty of *** per year, starting three years after
first commercial sale of a Product or Process in the
Territory; provided, however, that the Minimum Royalty for a
given year shall be creditable against any Running Royalties
subsequently due during said year under subparagraph 8.1 (b)
above.
- --------------------
*** DENOTES CONFIDENTIAL INFORMATION THAT HAS BEEN OMITTED FROM THE EXHIBIT
AND FILED SEPARATELY, ACCOMPANIED BY A CONFIDENTIAL TREATMENT REQUEST,
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF
THE SECURITIES EXCHANGE ACT OF 1934.
<PAGE>
8.2 All payments shall be made hereunder in U.S. dollars; provided
however, that if the proceeds of the sales upon which such royalty payments are
based are received by the LICENSEE in a foreign currency or other form that is
not convertible or exportable in dollars, and the LICENSEE does not have
on-going business operations or bank accounts in the country in which the
currency is not convertible or exportable, the LICENSEE shall pay such royalties
in the currency of the country in which such sales were made by depositing such
royalties in LICENSOR'S name in a bank designated by LICENSOR in such country.
Royalties in dollars shall be computed by converting the royalty in the currency
of the country in which the sales were made at the exchange rate for dollars
prevailing at the close of the business day of the LICENSEE'S quarter for which
royalties are being calculated as published the following day in the Wall Street
Journal (or, if it ceases to be published, a comparable publication to be agreed
upon from time to time by the parties), and with respect to those countries for
which rates are not published in the Wall Street Journal, the exchange rate
fixed for such date by the appropriate United States governmental agency.
8.3 In the event the royalties set forth herein are higher than the
maximum royalties permitted by the law or regulations of a particular country,
the royalty payable for sales in such country shall be equal to the maximum
permitted royalty under such law or regulation.
8.4 In the event that any taxes, withholding or otherwise, are levied
by any taxing authority in connection with accrual or payment of any royalties
payable to LICENSOR under this Agreement, the LICENSEE shall have the right to
pay such taxes to the local tax authorities on behalf of LICENSOR and the
payment to LICENSOR of the net amount due after reduction by the amount of such
taxes, shall fully satisfy the LICENSEE'S royalty obligations under this
Agreement.
9. COMMERCIALLY REASONABLE EFFORTS:
9.1 LICENSEE shall use its commercially reasonable efforts to
manufacture, market and sell the Products in the Territory and will exert
commercially reasonable efforts to create a demand for the Products.
9.2 LICENSEE agrees to submit reports, upon LICENSOR's request, of its
efforts to develop markets for the Products. Such reports shall include
assurance by LICENSEE of its intent to actively develop commercial
<PAGE>
embodiments of the inventions of Licensed Patents and a summary of its efforts
to commercialize the Product. Such reports may be requested by LICENSOR no more
than three (3) times per calendar year.
9.3 LICENSOR may terminate this Agreement in the event LICENSEE does
not have a Product available for commercial sale prior to January 1, 2002. In
the event LICENSEE discontinues sales for more than three (3) months, LICENSOR
may terminate this Agreement upon written notice.
10. REPORTS AND RECORDS:
10.1 Commencing one (1) year after the first commercial sale, the
LICENSEE shall furnish to LICENSOR a report in writing specifying during the
preceding calendar quarter (a) the number or amount of Products sold or
Processes used hereunder by LICENSEE, and/or its Affiliates or sublicensees, (b)
the total billings for all such Products and Processes, (c) deductions as
applicable in paragraph 1.6, (d) total royalties due, (e) names and addresses of
all sublicensees. Such reports shall be due within forty-five (45) days
following the last day of each calendar quarter in each year during the term of
this agreement. Each such report shall be accompanied by payment in full of the
amount due LICENSOR in United States dollars calculated in accordance with
Section 8.1 hereof .
10.2 For a period of three (3) years from the date of each report
pursuant to Paragraph 10.1, LICENSEE, shall keep records adequate to verify each
such report and accompanying payment made to LICENSOR under this Agreement, and
an independent Certified Public Accountant or Accounting Firm selected by
LICENSOR and acceptable to LICENSEE may have access, on reasonable notice during
regular business hours, not to exceed once per year, to such records to verify
such reports and payments. Such Accountant or Accounting Firm shall not disclose
to LICENSOR any information other than that information relating solely to the
accuracy of, or necessity for, the reports and payments made hereunder. The fees
and expense of the Certified Public Accountant or Accounting Firm performing
such verification shall be borne by LICENSOR unless in the event that the audit
reveals an underpayment of royalty by more than ten (10%) percent, the cost of
the audit shall be paid by LICENSEE.
<PAGE>
11. MARKING AND STANDARDS:
11.1 Prior to the issuance of patents on the Invention(s), LICENSEE
agrees to mark and have sublicensees mark Products (or their containers or
labels) made, sold, or otherwise disposed of by it under the license granted in
this Agreement with a proper patent notice as specified under the patent laws of
the United States.
11.2 LICENSEE further agrees to maintain satisfactory standards in
respect to the nature of the Product manufactured and/or sold by LICENSEE.
LICENSEE, agrees that all Product manufactured and/or sold by it shall be of a
quality which is appropriate to products of the type here involved. LICENSEE
agrees that similar provisions shall be included by sublicenses of all tiers.
12. ASSIGNMENT:
12.1 This Agreement is not assignable by LICENSEE or by operation of
law without the prior written consent of LICENSOR. Such consent shall not be
unreasonably withheld. In the event that substantially all of the assets of the
LICENSEE are acquired by another company, LICENSEE may assign this Agreement
without the prior consent of LICENSOR if the acquiring company agrees in
writing, prior to acquisition, to uphold all terms and conditions of this
Agreement.
12.2 This Agreement shall extend to and be binding upon the successors
and legal representatives and permitted assigns of LICENSOR and LICENSEE.
13. NOTICE:
Any notice, payment, report or other correspondence
(hereinafter collectively referred to as "correspondences') required or
permitted to be given hereunder shall be mailed by certified mail or delivered
by hand to the party to whom such correspondence is required or permitted to be
given hereunder. If mailed, any such notice shall be deemed to have been given
when mailed as evidenced by the postmark at point of mailing. If delivered by
hand, any such correspondence shall be deemed to have been given when received
by the party to whom such correspondence is given, as evidenced by written and
dated receipt of the receiving party.
<PAGE>
All correspondence to LICENSEE shall be addressed as follows:
FOR NOTICE:
President
Orphan Medical Inc.,
13911 Ridgedale Drive - Suite 475
Minnetonka, MN 55305
All correspondence to LICENSOR shall be addressed, in duplicate, as follows:
FOR NOTICE:
University of Miami School of Medicine Research
and Graduate Studies
P.O. Box 016960
1600 N.W. 10th Avenue
Miami, FL 33101
Attention: Vice Provost for Research
Assistant Vice President
Business Affairs
327 Max Orovitz Building
1507 Levante Avenue
Coral Gables, Florida 33124- 1432
Attention: Mr. Alan J. Fish
FOR NOTICE AND PAYMENT:
Director Office of Technology Transfer
P.O. Box 016960(M811)
Miami, FL 33101
Attention: Gary Margules, Sc.D.
Either party may change the address to which correspondence to it is to be
addressed by notification as provided herein.
14. TERMINATION
14.1 LICENSOR and LICENSEE shall have the right to terminate this
Agreement if the other party commits a material breach of an obligation under
this Agreement or provides a false report and continues in default for more than
sixty (60) days after receiving written notice of such default or false report.
Such termination shall be effective upon further written notice to the breaching
party after failure by the breaching party to cure such default. If LICENSOR
commits a material breach or defaults, then LICENSEE has no duty to continue the
payment of royalties as set forth in Section 8 of this Agreement.
14.2 LICENSOR may terminate this Agreement in accordance with Section
9.3 of this Agreement.
<PAGE>
14.3 The license and rights granted in this Agreement have been granted
on the basis of the special capability of LICENSEE to perform research and
development work leading to the manufacture and marketing of the Products.
Accordingly, LICENSEE covenants and agrees that in the event any proceedings
under the Bankruptcy Act or any amendment thereto, be commenced by or against
LICENSEE, and, if against LICENSEE, said proceedings shall not be dismissed with
prejudice before either an adjudication in bankruptcy or the confirmation of a
composition, arrangement, or plan of reorganization, or in the event LICENSEE
shall be adjudged insolvent or make an assignment for the benefit of its
creditors, or if a writ of attachment or execution be levied upon the license
hereby created and not be released or satisfied within ten (10) days thereafter,
or if a receiver be appointed in any proceeding or action to which LICENSEE is a
party with authority to exercise any of the rights or privileges granted
hereunder and such receiver be so discharged within a period of forty-five (45)
days after his appointment, any such event shall be deemed to constitute a
breach of this Agreement by LICENSEE and, LICENSOR, at the election of LICENSOR,
but not otherwise, ipso facto, and without notice or other action by LICENSOR,
shall terminate this Agreement and all rights of LICENSEE hereunder and all
rights of any and all persons claiming under LICENSEE.
14.4 LICENSEE shall have the right to terminate this Agreement upon
ninety (90) days notice.
14.5 Any termination of this Agreement shall be without prejudice to
LICENSOR's right to recover all amounts accruing to LICENSOR prior to such
termination and cancellation. Except as otherwise provided, should this
Agreement be terminated for any reason, LICENSEE shall have no rights, express
or implied, under any patent property which is the subject matter of this
Agreement, nor have the right to recover any royalties paid LICENSOR hereunder.
Upon termination, LICENSEE shall have the right to dispose of Products then in
its possession and to complete existing contracts for such Products, so long as
contracts are completed within six (6) months from the date of termination,
subject to the payment of royalties to LICENSOR as provided in Section 7 hereof.
15. CERTIFICATE OF INSURANCE:
15.1 SUBJECT TO SECTION 15.3, LICENSEE shall maintain liability
insurance coverage for the Product in the amount of three million dollars
($3,000,000) and at no expense to LICENSOR, LICENSEE shall
<PAGE>
name LICENSOR as an additional insured. Within 15 days of the execution of this
Agreement, LICENSEE shall provide a certificate of insurance to LICENSOR.
15.2 SUBJECT TO SECTION 15.3, LICENSEE agrees to carry and keep in
force, at its expense, general liability insurance with limits not less than
$1,000,000 per person and $1,000,000 aggregate to cover liability for damages on
account of bodily or personal injury or death to any person, or damage to
property of any person; such insurance shall not be canceled for any cause
without at least 30 days prior written notice to University of Miami. Such
insurance shall contain an endorsement naming the University as an additional
insured with respect to this Agreement. Insurance Certificates should be sent to
the University of Miami attention Mr. William Coombs, 333 Max Orovitz Building,
1507 Levante Avenue, Coral Gables, Florida 33124-1437.
15.3 In the event that the technology covered by the PATENT RIGHTS as
further defined as the LICENSED PRODUCT and PROCESS, provisions 1.3, 1.4, and
1.5 respectively, is marketed in the Territory, LICENSEE shall, at its expense,
maintain liability insurance coverage for the Product in the amount of five
million dollars ($5,000,000) and general liability insurance with limits not
less than $1,000,000 per person and $3,000,000 aggregate to cover liability for
damages on account of bodily or personal injury or death to any person, or
damage to property of any person. Such insurance shall not be canceled for any
cause without at least 30 days prior written notice to University of Miami. Such
insurance shall also contain an endorsement naming the University (LICENSOR) as
an additional insured with respect to this Agreement.
16. USE OF NAME:
LICENSEE shall not use the name of the University of Miami or
any of its employees, or any adaptation thereof, in any publication, including
advertising, promotional or sales literature without the prior written consent
of Mr. Alan J. Fish, Assistant Vice President of Business Services (or any
successor of Mr. Fish), 327 Max Orovitz Bldg., 1507 Levante Avenue, Coral
Gables, FL 33124-1432.
17. GOVERNING LAW:
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Florida.
<PAGE>
18. CAPTIONS:
The captions and paragraph heading of this Agreement are
solely for the convenience of reference and shall not affect its interpretation.
19. SEVERABILITY:
Should any part or provision of this Agreement be held
unenforceable or in conflict with the applicable laws or regulations of any
jurisdiction, the invalid or unenforceable part or provision shall be replaced
with a provision which accomplishes, to the extent possible, the original
business purpose of such part or provision in valid and enforceable manner, and
the remainder of the Agreement shall remain binding upon the parties hereto.
20. SURVIVAL:
20.1 The provisions of Articles 5, 6 and 7 shall survive the
termination or expiration of this Agreement and shall remain in full force and
effect. 20.2 The provisions of this Agreement which do not survive termination
or expiration hereof (as the case may be) shall, nonetheless, be controlling on,
and shall be used in construing and interpreting, the rights and obligations of
the parties hereto with regard to any dispute, controversy or claim which may
arise under, out of, in connection with, or relating to this Agreement.
21. AMENDMENT:
No amendment or modification of the terms of this Agreement
shall be binding on either party unless reduced to writing and signed by an
authorized officer of the party to be bound.
22. WAIVER:
<PAGE>
No failure or delay on the part of a party in exercising any
right hereunder will operate as a waiver of, or impair, any such right. No
single or partial exercise of any such right will preclude any other or further
exercise thereof or the exercise of any other right. No waiver of any such right
will be deemed a waiver of any other right hereunder.
23. CONFIDENTIALITY:
The Confidentiality Agreement signed by the parties and
executed on August 14, 1995 is hereby incorporated by reference. A copy of the
Agreement is attached hereto as Exhibit A. The term of Confidentiality Agreement
shall be extended to be coextensive with the term of this Agreement.
24. ENTIRE AGREEMENT:
This Agreement, and the Confidentiality Agreement referenced
in Section 23, constitutes the entire agreement between the parties hereto
respecting the subject matter hereof, and supersedes and terminates all prior
agreements respecting the subject matter hereof, whether written or oral, and
may be amended only by an instrument in writing executed by both parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized to be effective
as of the Effective Date.
ORPHAN MEDICAL
By: /s/ Bert Spilker
Name: Bert Spilker
Title: President
Date: 12-5-96
UNIVERSITY OF MIAMI
By: /s/ Alan J. Fish
Name: Mr. Alan J. Fish
Title: Assistant Vice President, Business Affairs
Date: 12-6-96
<PAGE>
EXHIBIT A - CONFIDENTIALITY AGREEMENT
CONFIDENTIAL DISCLOSURE AGREEMENT
FOR INFORMATION EXCHANGED BETWEEN ORPHAN MEDICAL INC.
AND AN EXTERNAL SOURCE
This Agreement is made and entered into this 14th day of August, 1995 by and
between ORPHAN MEDICAL INC. which is a Minnesota corporation, located at 13911
Ridgedale Drive; Minnetonka, MN 55305 ("ORPHAN MEDICAL") and Bascom Palmer Eye
Institute, a part of University of Miami (the "POTENTIAL-COLLABORATOR") located
in Miami, FL.
A. ORPHAN MEDICAL and the "POTENTIAL-COLLABORATOR" have entered into certain
discussions the purpose of which is to explore and consider the possibilities of
a business relationship between, or other transaction involving, ORPHAN MEDICAL
and the "POTENTIAL-COLLABORATOR".
B. In this connection with and in furtherance of this possible business
relationship, it is anticipated that both of the undersigned parties (i.e.
ORPHAN MEDICAL and the POTENTIAL-COLLABORATOR) at various times will disclose
(the "DISCLOSING PARTY") and receive (the "RECEIVING PARTY") certain information
with each other which the undersigned parties consider proprietary and
confidential.
The undersigned RECEIVING PARTY in consideration for the use of certain
information, knowledge, software, data and/or know-how (hereinafter called
"INFORMATION") related to drug delivery product for 5FU made available to it by
DISCLOSING PARTY hereby agrees as follows:
1. RECEIVING PARTY agrees to keep in confidence and not to use the
INFORMATION for its commercial benefit (except for technical and
economic evaluation) for a period of five (5) years from the date
hereof.
2. RECEIVING PARTY further agrees that it shall keep in confidence and
not disclose any part of INFORMATION to a third party for a period of
five (5) years from the date hereof.
3. Obligations of RECEIVING PARTY shall not apply to any information,
knowledge, software, data and/or know-how which:
(a) is or hereafter becomes a part of the public domain through no
fault of RECEIVING PARTY;
(b) RECEIVING PARTY can demonstrate was in its possession prior to
the time of disclosure by DISCLOSING PARTY or can demonstrate was
received by it from a third party who shall not have received
same from DISCLOSING PARTY
4. RECEIVING PARTY agrees to obligate its employees who shall have access
to any portion of INFORMATION to protect the confidential and
proprietary nature of INFORMATION.
5. This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Minnesota.
ACCEPTED AND AGREED BY BOTH PARTIES
QUALIFIED OFFICER OF THE POTENTIAL ORPHAN MEDICAL QUALIFIED OFFICER
COLLABORATOR'S ORGANIZATION
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<S> <C>
Authorized Signature: /s/ Jeannie L. McGuire Authorized Signature: /s/ Bert Spilker
Name (Print): Jeannie L. McGuire Name (Print): Bert Spilker
Title: Director Technology Transfer Title: President
Date: 8/14/95 Date: 7-31-95
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