EXHIBIT 10.6
SUBLICENSE AGREEMENT
This Sublicense Agreement ("Agreement"), effective as of October 13, 2000
(the "Effective Date") is entered into by and between AOI Pharmaceuticals Inc.,
a subsidiary of Access Oncology, Inc., a corporation having an office at 000
Xxxxx Xxxxxx, Xxxxx Xxxxx, Xxx Xxxx, XX 00000 ("AOI") and Procept, Inc.
(formerly Pacific Pharmaceuticals, Inc.), a Delaware corporation having an
office at 000 Xxxxxxxxx Xxxxxx, Xxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000
("Procept").
WHEREAS, Procept is party to a License Agreement with The Penn State
Research Foundation ("Penn") dated March __, 1998 (the "Penn License
Agreement"), a copy of which is attached hereto as Exhibit A, under which
Procept is granted an exclusive worldwide license to certain Patent Rights (as
defined therein) and Know-how (as defined therein) which are co-owned by Penn,
the National Institutes of Health, Case Western Reserve University and the
University of Chicago;
WHEREAS, Procept desires to sublicense to AOI, and AOI desires to obtain a
sublicense from Procept, of such Patent Rights and Know-how in order to
commercialize O6-Benzyl guanine ("O6BG") and related technologies for the
treatment of cancer.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Definitions.
For purposes of this Agreement, the following terms shall have the
following meanings. Any capitalized term used in this Agreement that is not
defined herein shall have the meaning set forth in the Penn License Agreement.
1.1 "Affiliate" means any corporation or other entity which controls, is
controlled by, or is under common control with a party to this Agreement. A
corporation or other entity shall be regarded as in control of another
corporation or entity if it directly or indirectly owns or controls more than
fifty percent (50%) of the voting stock or other ownership interest of the other
corporation or entity, or if it possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of the corporation
or other entity or the power to elect or appoint fifty percent (50%) or more of
the members of the governing body of the corporation or other entity.
1.2 "CRADA" means that certain Cooperative Research and Development
Agreement between the Public Health Service ("PHS") and Procept dated August 7,
1998, a copy of which is attached hereto as Exhibit B.
1.3 "IND" means an Investigational New Drug application for a Licensed
Product submitted to the FDA or a comparable application submitted to another
Regulatory Agency.
1.4 "NDA" means a New Drug Application for a Licensed Product submitted to
the FDA or a comparable application submitted to another Regulatory Agency.
1.5 "Net Sales" means the total gross receipts for sales of Licensed
Products or practice of Licensed Processes by or on behalf of AOI or any of its
Affiliates or sub-sublicensees to end-user customers, and from leasing, renting
or otherwise making Licensed Products available to others without sale or other
dispositions, whether invoiced or not, less only the sum of the following: (a)
usual trade discounts to customers; (b) sales, tariff duties and/or use taxes
directly imposed and with reference to particular sales; (c) outbound
transportation prepaid or allowed and transportation insurance; (d) amounts
allowed or credited on returns; (e) bad debt deductions actually written off
during the accounting period; (f) sales commissions; and (g) packaging and
freight charges.
1.6 "Phase III Clinical Trial" means any investigational use of a Licensed
Product in humans that triggers a payment by Procept to Penn under Section 4.8.3
of the Penn License Agreement.
1.7 "Regulatory Agency" means the United States Food and Drug
Administration ("FDA") or any successor agency with responsibilities comparable
to those of the FDA or any comparable agency in a country outside the United
States.
1.8 "Sublicense Revenue" means any payments that AOI receives from a
sub-sublicensee in consideration of the sub-sublicense of the rights granted AOI
under Section 2.1 including, without limitation, milestone payments,
sublicensing fees or other lump sum payments, but excluding (a) royalties on Net
Sales by the sub-sublicensee, (b) payments made in consideration for the
issuance of equity or debt securities of AOI at fair market value, and (c)
payments specifically committed to the development of Licensed Products or
Licensed Services.
2. Sublicense Grant.
2.1 Sublicense to AOI. Subject to the terms of the Penn License Agreement
and this Agreement, Procept hereby grants to AOI and its Affiliates a sole and
exclusive worldwide sublicense in all fields of use to practice under the Patent
Rights and to utilize the Know-how, and to make, have made, use, lease and/or
sell the Licensed Products and to practice the Licensed Processes, to the full
end of the term for which the Patent Rights are granted, unless sooner
terminated as hereinafter provided.
2.2 Right to Grant Sub-sublicenses. Procept grants AOI the right to grant
sub-sublicenses to third parties under the sublicense granted hereunder,
provided that AOI shall remain bound by the provisions of Article 3.
3. Payments.
3.1 Royalty. In consideration of the rights granted AOI under this
Agreement, AOI shall pay to Procept a royalty of eight percent (8%) of Net Sales
of Licensed Products or Licensed Processes by AOI or its Affiliates or
sub-sublicensees.
(a) On sales of Licensed Products by AOI to Affiliates or related
parties which are end users of such Licensed Products the value of Net Sales
attributed under this Article 3 shall be that which would have been received in
an arms-length transaction, based on sales of like quantity and quality products
at or about the time of such transaction.
(b) No multiple royalties shall be payable because the use, lease or
sale of any Licensed Product or Licensed Process is, or shall be, covered by
more than one valid and unexpired claim contained in the Patent Rights.
(c) In the event that a Licensed Product is sold in the form of a
combination product containing one or more products or technologies which are
themselves not a Licensed Product, the Net Sales for such combination product
shall be calculated by multiplying the sales price of such combination product
by the fraction A/(A+B) where A is the invoice price of the Licensed Product or
the fair market value of the Licensed Product if sold to an Affiliate and B is
the total invoice price of the other products or technologies or the fair market
value of the other products or technologies if purchased from an Affiliate. In
the case of a combination product which includes one or more Licensed Products,
the Net Sales for such combination product upon which the royalty due to Procept
is based shall not be less than the normal aggregate Net Sales for such Licensed
Product.
(d) To the extent that AOI or an Affiliate is required, by order or
judgement of any court to obtain any license from a third party in order to
practice the rights purported to be granted AOI by Procept hereunder under
issued patents in such jurisdiction, then up to fifty percent (50%) of the
royalties payable under such license in such jurisdiction may be deducted from
royalties otherwise payable to Procept hereunder, provided that in no event
shall the aggregate royalties payable to Procept in any semi-annual period in
such jurisdiction be reduced by more than fifty percent (50%) as a result of any
deduction, provided further that any excess deduction remaining as a result of
such limitation may be carried forward to subsequent periods.
3.2 Sublicense Revenue. AOI shall pay Procept a total of thirty-five
percent (35%) of all Sublicense Revenue received by AOI from any sub-sublicensee
listed on Exhibit C or any successor thereto. Such payments shall be due and
payable within thirty (30) days after AOI receives the relevant payment from the
sub-sublicensee.
3.3 Milestone Payments.
(a) Payments in Cash. AOI shall pay Procept the following payments
upon the achievement by AOI, an Affiliate or sub-sublicensee of each development
milestone for each Licensed Product or Licensed Process:
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Milestone Payment
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1. Approval of first IND with a Regulatory US $75,000
Agency
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2. Initiation of the first Phase III US $150,000
Clinical Trial for any disease indication in
the United States
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3. Filing of first NDA with a Regulatory US $250,000
Agency
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4. Final approval of an NDA with a US $1,500,000
Regulatory Agency in the United States,
France, Germany, Italy, the United Kingdom or
Japan
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All payments to be made by AOI to Procept pursuant to this Section 3.3(a)
shall be made within thirty (30) days after the achievement of the relevant
milestone. Eighty-five percent (85%) of each milestone payment made by AOI to
Procept under this Section 3.3(a) shall be credited against or deducted from
future royalty, Sublicense Revenue or minimum annual royalty payments otherwise
owed or which may in the future be owing by AOI to Procept under Section 3.1,
3.2 or 3.4(b).
(b) Payments in Equity.
(i) Procept has the right, but not the obligation, to fulfill
its payment obligations to Penn for the milestones set forth in Sections 4.8.2
and 4.8.5 of the Penn License Agreement through the issuance of common stock of
Procept. AOI has the right, but not the obligation, to fulfill a portion of its
payment obligation to Procept for each milestone pursuant to Section 3.3(a)
above through the issuance of a number of shares of common stock of AOI (the
"Common Stock") with a value equal to the cash value of the such payment;
provided, however, that in no event shall the cash portion of any such payments
be less than the lesser of (a) twenty-five percent (25%) of the amount due and
owing and (b) fifty thousand dollars ($50,000), and; provided further that, AOI
shall not have the right to fulfill a portion of its payment obligation to
Procept for any such milestone payment pursuant to Section 3.3(a) above through
the issuance of Common Stock of AOI if Procept, in order to provide payment to
Penn for such milestone under the Penn License Agreement through the issuance of
common stock of Procept, would be required to issue to Penn common stock of
Procept constituting twenty percent (20%) or more of the common stock
outstanding prior to such issuance to Penn.
(ii) For purposes of calculating the cash value of the Common
Stock under this Section 3.3(b), the current market price of the Common Stock
shall be deemed to be the average closing price of the Common Stock on the ten
(10) consecutive trading days prior to the date of achievement of any milestone
under Section 3.3(a) on the principal national securities exchange on which the
Common Stock is admitted to trading or listed, or if not listed or admitted to
trading on any such exchange, the representative average closing bid price of
the Common Stock as reported by the National Association of Securities Dealers,
Inc. Automated Quotations System ("NASDAQ"), or other similar organization if
NASDAQ is no longer reporting such information, or, if the Common Stock is not
reported on NASDAQ, the average per share bid
price for the Common Stock in the over-the-counter market as reported by the
National Quotation Bureau or similar organization, or if not so available, the
fair market price of the Common Stock as determined by an independent third
party accounting firm selected by AOI.
(iii) All certificates representing the Common Stock and,
until such time as the Common Stock is sold in an offering which is registered
under the Securities Act or AOI shall have received an opinion of counsel
(including counsel for any recipient of stock hereunder) that such registration
is not required in connection with a resale (or subsequent resale) of the Common
Stock under all applicable laws, regulations and rules, all certificates issued
in transfer thereof or substitution therefor, shall, where applicable, have
endorsed thereon the following (or substantially equivalent) legends:
(1) THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW. SUCH SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS AOI RECEIVES
AN OPINION OF COUNSEL STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT UNDER ALL
APPLICABLE LAWS, RULES AND REGULATIONS OR IS OTHERWISE IN COMPLIANCE WITH ALL
APPLICABLE LAWS AND REGULATIONS.
(2) Any legend required to be placed thereon by any
applicable state securities law.
(3) A legend to the effect that such shares of stock are
subject to a Sublicense Agreement that limits the transferability of the shares
under certain conditions and applies to any transferee of such shares.
(iv) With a view to making available to Procept the benefits
of certain rules and regulations of the SEC which at any time permit the sale of
the Common Stock to the public without registration, AOI shall use its
reasonable efforts to:
(1) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Act, at all times;
(2) file with the SEC in a timely manner all reports and
other documents required of AOI under the Securities Exchange Act of 0000 (xxx
"Xxxxxxxx Xxx"); and
(3) so long as Procept owns any unregistered Registrable
Securities, furnish to Procept upon any reasonable request a written statement
by AOI as to its compliance with Rule 144 under the Act, and of the Exchange
Act, a copy of the most recent annual or quarterly report of AOI, and such other
reports and documents of AOI as Procept may reasonably request in availing
itself of any rule or regulation of the Commission allowing Procept to sell any
such securities without registration.
(v) If the Common Stock is or becomes tradable pursuant to
Rule 144 or a similar exemption from registration then Procept shall have no
right to the registration rights described in Section 3.3(b)(vi).
(vi) AOI agrees that if, at any time, and from time to time,
during the period commencing two (2) years after the Effective Date hereof, or
one (1) year after AOI's next public offering of Common Stock registered under
the Securities Act of 1933 (the "Act), whichever is later, and ending on the
date which is five (5) years from the Effective Date hereof, the Board of
Directors of AOI shall authorize the filing of a registration statement under
the Act (other than the initial public offering of AOI's Common Stock, or other
than a registration statement on Form X-0, Xxxx X-0 or any other form which does
not include substantially the same information as would be required in a form
for the general registration of securities) in connection with the proposed
offer of any of its securities by it or any of its stockholders, AOI will,
subject to the limitations set forth in Section 3.3(b)(vii) below, (A) promptly
notify Procept that such registration statement will be filed and that the
Common Stock then held by Procept will be included in such registration
statement at Procept's request, (B) cause such registration statement to cover
all of such Common Stock issued to Procept requesting inclusion, (C) use its
reasonable best efforts to cause such registration statement to become effective
as soon as practicable and (D) take all other action necessary under any Federal
or state law or regulation of any governmental authority to permit all such
Common Stock which has been issued to Procept to be sold or otherwise disposed
of, and will maintain such compliance with each such Federal and state law and
regulation of any governmental authority for the period necessary for Procept to
effect the proposed sale or other disposition.
Procept shall only twice have the right to request inclusion
of any of their shares of Common Stock in a registration statement as described
above.
(vii) Notwithstanding Section 3.3(b)(vi) above, AOI may at any
time abandon or delay any registration commenced by AOI. In the event of such an
abandonment by AOI, AOI shall not be required to continue registration of shares
requested by Procept for inclusion and Procept shall retain the right to request
inclusion of shares pursuant to Section 3.3(b)(vi).
(viii) The Common Stock will be acquired by Procept and/or its
designees for investment purposes only, for an indefinite period of time, for
their own account, not as a nominee or agent for any other Entity and not with a
view to the sale or distribution of all or any part thereof, and Procept has no
present intention of selling, granting any participation in, or otherwise
distributing, any or all of the Common Stock.
Procept shall provide to AOI a list of names of individuals
and/or entities at least thirty (30) days prior to any sale, grant of
participation in or other distribution of any Common Stock by Procept. Any sale,
grant of participation in or other distribution of any Common Stock by Procept
shall comply in all respects with the Securities Act and the Exchange Act.
(ix) The parties agree to execute such further instruments and
to take such further action as may reasonably be necessary to carry out the
intent of this Section 3.3(b),
and Procept specifically agrees to cooperate affirmatively with AOI, to the
extent reasonably requested by AOI, to enforce the rights of AOI and its
successors and assignees.
(x) Procept agrees that, in connection with each underwritten
public offering registered under the Act of shares of Common Stock or other
equity securities of AOI by or on behalf of AOI, it shall not sell, transfer or
offer to sell or transfer, any equity securities of AOI for such period (the
"Lock-up Period") as the managing underwriter of such offering determines is
necessary to effect the underwritten public offering; provided, however, that
Procept shall not be subject to a Lock-up Period greater than that required of
AOI's officers and directors. Procept further agrees that it will sign an
agreement as requested by the managing underwriter of such offering to effect
the foregoing.
(xi) With respect to any registration statement pursuant to
which Procept participates as a selling shareholder, to the extent permitted by
law, AOI shall indemnify Procept and each person controlling Procept within the
meaning of Section 15 of the Act, with respect to which any registration,
qualification or compliance has been effected, against all claims, losses,
damages and liabilities (or action in respect thereof), including any of the
foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, prospectus or offering
circular, or any amendment of supplement thereof, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in light of the
circumstances in which they were made, and will reimburse Procept, and each
person controlling Procept, for legal and any other expenses reasonably incurred
in connection with investigating or defending any such claim, loss, damage,
liability or action as incurred; provided that AOI will not be liable in any
such case to the extent that any untrue statement or omission or allegation
thereof is made in reliance upon and in conformity with written information
furnished to AOI by or on behalf of Procept and stated to be specifically for
use in preparation of such registration statement, prospectus or offering
circular; provided AOI will not be liable in any such case where the claim,
loss, damage or liability arises out of or is related to the failure of Procept
to comply with the covenants and agreements contained in any agreement
respecting sales of securities of AOI, and except that the foregoing indemnity
agreement is subject to the condition that, insofar as it relates to any such
untrue statement or alleged untrue statement or omission or alleged omission
made in the preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the Commission at the time the registration statement
becomes effective or in the amended prospectus filed with the Commission
pursuant to Rule 424(b) or in the prospectus subject to completion and term
sheet under Rule 434 of the Act, which together meet the requirements of Section
10(a) of the Act (the "Final Prospectus"), such indemnity agreement shall not
inure to the benefit of Procept or person controlling Procept, if a copy of the
Final Prospectus furnished by AOI to Procept for delivery was not furnished to
the person or entity asserting the loss, liability, claim or damage at or prior
to the time such furnishing is required by the Act and the Final Prospectus
would have cured the defect giving rise to such loss, liability, claim or
damage.
(xii) Procept will severally, if the Common Stock held by
Procept are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify AOI, each of its
directors and officers, each underwriter and each person
who controls AOI within the meaning of Section 15 of the Securities Act, against
all claims, losses, damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus or offering circular, or any amendment or supplement
thereof, incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in light of the circumstances in which they were made, and will
reimburse AOI, such directors and officers, each underwriter and each person
controlling AOI for reasonable legal and any other expenses reasonably incurred
in connection with investigating or defending any such claim, loss, damage,
liability or action as incurred, in each case to the extent, but only to the
extent, that such untrue statement or omission or allegation thereof is made in
reliance upon and in conformity with written information furnished to AOI by or
on behalf of Procept and stated to be specifically for use in preparation of
such registration statement, prospectus or offering circular; provided that the
indemnity shall not apply to the extent that such claim, loss, damage or
liability results from the fact that a current copy of the prospectus was not
made available to Procept and such current copy of the prospectus would have
cured the defect giving rise to such loss, claim, damage or liability.
3.4 Other Expenses under Penn License Agreement and CRADA. Commencing with
the Effective Date of this Agreement, AOI shall assume all financial obligations
of Procept under the Penn License Agreement and CRADA including, without
limitation, the following:
(a) Patent Costs. AOI shall upon request provide payment to Procept
for all reasonable out-of-pocket expenses which are incurred by Penn in
connection with the preparation, filing, prosecution and maintenance of the
Patent Rights after the Effective Date of this Agreement and which Procept is
obligated to reimburse Penn pursuant to Section 7.1 of the Penn License
Agreement. In addition, AOI shall provide payment to Procept in the amount of
$85,858.54 for past patent expenses upon the achievement of the milestone of
Section 3.3(a)(4) above, which amount Procept is obligated to pay to Penn
pursuant to the Letter Agreement between Procept and Penn dated October 5, 1999.
AOI shall reimburse Procept for all of Procept's expenses, if any,
under Articles 6.4, 6.5 and 6.7 of the CRADA associated with filing and
prosecuting patent application(s) claiming Subject Inventions (as defined in the
CRADA) which the parties mutually agree to file and prosecute in accordance with
Section 4.1 hereof.
(b) Minimum Annual Royalty. In the event Procept is obligated to pay
the Minimum Annual Royalty to Penn under Section 4.7 of the Penn License
Agreement, AOI shall reimburse Procept for all of Procept's expenses under
Section 4.7 of the Penn License Agreement.
(c) CRADA Drug Requirements. Commencing with the Effective Date of
this Agreement, AOI shall reimburse Procept for all costs associated with
Procept's obligation to provide to the National Cancer Institute ("NCI"), free
of charge, formulated 06BG in sufficient quantities to complete the clinical
trials currently ongoing or anticipated or any other studies sponsored by the
NCI pursuant to the CRADA and with the materials required to be provided to NCI
under Section 3.6 of Appendix C to the CRADA.
(d) CRADA Research Funding. From and after the Effective Date of
this Agreement, AOI shall be obligated to reimburse Procept for the funding
provided to the PHS by Procept for the studies conducted under the CRADA in
accordance with Appendix B of the CRADA. Upon request from AOI, Procept shall
seek the consent of PHS to amend or revise Appendix B of the CRADA as directed
by AOI. Unless mutually agreed upon by AOI and Procept, Procept shall not incur
additional costs under the CRADA by requesting that PHS perform studies that are
not included as part of the Research Plan under the CRADA. In the event of
termination of the CRADA, AOI shall be responsible for any payments under
Articles 10.3 and 10.5 of the CRADA. Any excess funds returned by PHS to Procept
after termination or expiration of the CRADA, to the extent paid by AOI, shall
be returned to AOI.
(e) AOI shall make all payments under this Section 3.4 within thirty
(30) days of invoicing by Procept.
3.5 No Payment. Notwithstanding anything in this Agreement to the
contrary, no payment obligations shall be due with respect to the sale or
sub-sublicense covering any Licensed Product or Licensed Process in a country
if: (a) there are no issued Patent Rights underlying such Licensed Product in
such country; or (b) to the extent that a patent application is pending, there
is no claim within such patent application on which a royalty can reasonably be
based which has been pending for less than seven (7) years since the initial
filing date.
3.6 Payment by AOI. In the event Procept fails to make a payment due and
payable to Penn under the Penn License Agreement and receives notice of such
default from Penn under Section 8.2 or 8.3 of the Penn License Agreement, then
AOI shall have the right, but not the obligation, to pay directly to Penn the
amount due and payable and to seek reimbursement of such amount from Procept or
to set-off such amount against any amount AOI owes or may in the future be
obligated to pay to Procept.
3.7 Royalty Reports. Royalties payable to Procept shall be paid quarterly
within thirty (30) days after March 31, June 30, September 30 and December 31 of
each year during the term of this Agreement.
3.8 Payments in US Dollars. All payments due under this Article 3 shall be
payable in United States dollars. Conversion of foreign currency to U.S. dollars
shall be made at the conversion rate existing in the United States (as reported
in the Wall Street Journal) on the last working day of the calendar quarter to
which the payment relates. Such payments shall be without deduction of exchange,
collection or other charges. Any withholding taxes which AOI, its Affiliates or
any sub-sublicensee shall be required to law to withhold on remittance of the
royalty payments shall be deduced from such royalty payment to Procept. AOI
shall furnish Procept with the original copies of all official receipts for such
taxes.
3.9 Reports and Records. During the term of this Agreement, following the
First Commercial Sale, AOI shall deliver to Procept a report containing the
following information: (i) all Licensed Products or Licensed Processes used,
leased or sold by or for AOI or its Affiliates or sub-sublicensees; (ii) total
amounts invoiced for Licensed Product and Licensed Processes used, leased or
sold by or for AOI or its Affiliates or sub-sublicensees; (iii) deductions
applicable in computed "Net Sales" as defined in Section 1.5 hereof; (iv) total
royalties due based on Net
Sales by or for AOI or its Affiliates or sub-sublicensees; (v) names and
addresses of sublicensees and Affiliates of AOI; (vi) the amount of Sublicense
Revenue received by AOI from any sub-sublicensee listed on Exhibit C, and (vii)
on an annual basis, AOI's year-end financial statements.
AOI shall maintain, and shall cause its sub-sublicensees to
maintain, complete and accurate records of (i) Licensed Products or Licensed
Processes used, leased or sold and (ii) any royalties payable to Procept, which
records shall contain sufficient information to permit Procept to confirm the
accuracy of any reports delivered pursuant to this Section 3.9. AOI and its
sub-sublicensees shall retain such records relating to a given quarter for at
least three (3) years after the conclusion of that quarter, during which time
Procept shall have the right, at its expense, to cause an independent, certified
public accountant to inspect such records during normal business hours for the
sole purpose of verifying any reports and payments delivered under this
Agreement. The parties shall reconcile any underpayment or overpayment within
thirty (30) days after the accountant delivers the results of the audit. In the
event that any audit performed under this Section reveals an underpayment in
excess of the greater of (i) fifty thousand dollars ($50,000) and (ii) five
percent (5%) of royalties payable for any twelve (12) month period, AOI shall
bear the full cost of such audit. Procept may exercise its rights under this
Section only once every year and only with reasonable prior notice to AOI.
Procept agrees that all such records and audits are the confidential information
of AOI and Procept shall maintain the confidentiality of such records and
audits.
3.10 Late Payments. Any payments by AOI that are not paid on or before the
date such payments are due under this Agreement shall bear interest, to the
extent permitted by law, at two percentage points above the Prime Rate of
interest as reported in the Wall Street Journal on the date payment is due, with
interest calculated based on the number of days that payment is delinquent.
4. Inventions under the CRADA.
4.1 Notice to AOI. Procept shall promptly report to AOI any Subject
Invention (as defined in the CRADA) and shall discuss with AOI whether to retain
IP rights to such Subject Invention and whether to file patent application(s) on
such Subject Invention. AOI shall treat any Subject Invention (as defined in the
CRADA) as Confidential Information.
4.2 License to Subject Invention. In the event a Subject Invention (as
defined in the CRADA) is solely owned by Procept, Procept hereby agrees that
such Subject Invention shall automatically be added to the Patent Rights
licensed to AOI under Section 2.1 of this Agreement; provided that AOI shall be
responsible for reimbursing Procept for any and all fees paid by Procept to PHS
under the CRADA associated with such Subject Invention.
4.3 Sublicense to Subject Invention. In the event a Subject Invention (as
defined in the CRADA) is not solely owned by Procept, Procept shall discuss with
AOI whether to exercise its exclusive option to elect an exclusive or
nonexclusive commercialization license in accordance with Article 7 of the
CRADA. In the event that AOI is interested in obtaining a sublicense to any such
Subject Invention (as defined in the CRADA), Procept shall exercise its option
under Article 7 of the CRADA and Procept hereby agrees that such Subject
Invention
shall automatically be added to the Patent Rights licensed to AOI under Section
2.1 of this Agreement; provided that AOI shall be responsible for reimbursing
Procept for any and all fees paid by Procept to PHS under the CRADA associated
with such Subject Invention.
4.4 Assignment of CRADA. Procept shall use its reasonable best efforts
obtain the written consent of PHS under Section 13.7 of the CRADA to assign the
CRADA to AOI.
5. Obligations of AOI.
5.1 Diligence. AOI shall use its reasonable best efforts to bring Licensed
Products or Licensed Processes to market in accordance with Section 3.1 and
Section 6.6 of the Penn License Agreement.
5.2 Indemnification. AOI agrees to defend, indemnify and hold Penn and
Procept harmless from and against all liability, demands, damages, including
without limitation, expenses or losses including death, personal injury, illness
or property damage arising directly or indirectly (a) out of use by AOI or its
transferees of inventions licensed or information furnished under this Agreement
or (b) out of any use, sale or other disposition by AOI or its transferees of
Patent Rights, Licensed Product or Licensed Processes, in each case which are
not judicially determined to be the result of Penn's or Procept's negligence or
willful misconduct.
5.3 Insurance. Prior to the First Commercial Sale, AOI shall obtain and
maintain products liability insurance covering the risk of claims, liabilities,
expenses and judgments for which is has agreed to indemnify Penn and Procept
pursuant to Section 5.2 hereof. Coverage shall be in an amount which is not less
than one million dollars ($1,000,000) per occurrence.
5.4 Infringement. Each party shall promptly provide written notice to the
other party of any alleged infringement by a third party of the Patent Rights
and provide the other party with any available evidence of such infringement. In
the event of infringement of, or challenge to, the Patent Rights by a third
party, AOI and Procept shall discuss whether Procept should exercise its right
under Section 10.2 of the Penn License Agreement to prosecute and/or defend such
infringement and/or challenge. In the event AOI requests in writing that Procept
proceed with the prosecution and/or defense, Procept shall proceed as directed
by AOI and in accordance with the Penn License Agreement, at AOI's expense, and
AOI shall retain any recovery that would have been retained by Procept if
Procept had brought such suit under the Penn License Agreement. AOI shall
indemnify and hold Procept harmless against any costs, expenses or liability
that may be found or assessed against Procept in any such suit other than
resulting from Procept's negligence or wilful misconduct. AOI may credit up to
fifty percent (50%) of any litigation costs incurred by Procept at AOI's request
and reimbursed by AOI hereunder in any country pursuant to Article 10 of the
Penn License Agreement and up to 50% of all amounts paid in judgement or
settlement of litigation pursuant to Article 10 of the Penn License Agreement
against royalties thereafter payable to Procept hereunder in such country. If
one-half of such litigation costs in such country exceeds 50% of royalties
payable to Procept in any year in which such costs are incurred then the amount
of such costs, expenses and amounts paid in judgement or settlement in excess of
such 50% of the royalties payable shall be carried over and credited against
royalty payments in future years for such country.
6. Representations and Warranties.
6.1 Representations by Procept. Procept represents that it shall comply
with the terms and conditions of the Penn License Agreement including, without
limitation, Procept's obligation to provide certain payments to Penn under
Article 4 of the Penn License Agreement and to give Penn notices of sublicenses
under Section 2.7.1 of the Penn License Agreement.
6.2 Warranty Disclaimer. PROCEPT MAKES NO WARRANTY, EXPRESS OR IMPLIED,
WITH RESPECT TO THE PATENT RIGHTS, KNOW-HOW OR OTHER SUBJECT MATTER OF THIS
AGREEMENT AND HEREBY DISCLAIMS WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE AND NON-INFRINGEMENT WITH RESPECT TO ANY AND ALL OF THE
FOREGOING.
7. Termination.
7.1 Term. Unless terminated sooner in accordance with this Article 7, this
Agreement shall terminate on the date of the last to expire Valid Claim
contained in the Patent Rights.
7.2 Termination. This Agreement may be terminated in the following
circumstances:
(a) Material Breach. By either party, upon written notice of any
material breach or default by the other party that the breaching party fails to
remedy within sixty (60) days after the written notice thereof by the
non-breaching party.
(b) By AOI. By AOI, at its sole discretion, upon ninety (90) days
written notice to Procept.
7.3 Effect of Termination.
(a) Existing Obligations. Termination of this Agreement for any
reason shall not relieve the parties of any obligation that accrued prior to
such termination.
(b) Disposition of Inventory. AOI may, after the effective date of
termination and continuing for a period of six (6) months thereafter, sell all
completed Licensed Products, as well as any Licensed Products in the process of
manufacture at the time of such termination, provided that AOI shall pay to
Procept the fees thereon as required by Article 3 of this Agreement and shall
submit the reports required by Section 3.9 hereof on the sales of Licensed
Product.
(c) Survival. The provisions of Sections 3.3(b), 3.9, 5.2 and 5.3
and Articles 7, 8 and 9 shall survive any termination or expiration of this
Agreement.
(d) Sub-sublicenses. Upon termination of this Agreement by Procept
due to breach or default by AOI, any existing sub-sublicenses of AOI shall be
automatically assigned to Procept, and Procept shall be bound by the terms of
such sub-sublicenses provided that the sub-sublicensees continue to perform in
accordance with their respective sub-sublicense agreements. Notwithstanding the
foregoing, Procept's obligations to any such sub-sublicensee shall not be
interpreted to extend beyond any obligations to AOI hereunder with respect to
the subject matter of the sub-sublicense.
7.4 Effect of Termination of Penn License Agreement. Section 2.7.4 of the
Penn License Agreement provides that, in the event of the termination of the
Penn License Agreement for any reason other than termination upon the date of
the last to expire claim contained in the Patent Rights, this Agreement shall
survive.
8. Confidentiality.
8.1 Designation. Confidential Information that is disclosed in writing
shall be marked with a legend indicating its confidential status (such as
"Confidential" or "Proprietary"). Confidential Information that is disclosed by
one party (the "Disclosing Party") to the other party (the "Receiving Party")
orally or visually shall be documented in a written notice prepared by the
Disclosing Party and delivered to the Receiving Party within thirty (30) days of
the date of disclosure; such notice shall summarize the Confidential Information
disclosed to the Receiving Party and reference the time and place of disclosure.
8.2 Obligations. For a period of five (5) years after termination of this
Agreement, the Receiving Party shall (i) maintain such Confidential Information
in strict confidence, except that the Receiving Party may disclose or permit the
disclosure of any Confidential Information to its directors, officers,
employees, consultants, and advisors who are obligated to maintain the
confidential nature of such Confidential Information and who need to know such
Confidential Information for the purposes of this Agreement; and (ii) use such
Confidential Information solely for the purposes of this Agreement.
8.3 Exceptions. The obligations of the Receiving Party under Section 8.2
above shall not apply to the extent that the Receiving Party can demonstrate
that certain Confidential Information (i) was in the public domain prior to the
time of its disclosure under this Agreement; (ii) entered the public domain
after the time of its disclosure under this Agreement through means other than
an unauthorized disclosure resulting from an act or omission by the Receiving
Party; (iii) was independently developed or discovered by the Receiving Party
without use of the Confidential Information; (iv) is or was disclosed to the
Receiving Party at any time, whether prior to or after the time of its
disclosure under this Agreement, by a third party having no fiduciary
relationship with the Disclosing Party and having no obligation of
confidentiality with respect to such Confidential Information; or (v) is
required to be disclosed to comply with applicable laws or regulations, or with
a court or administrative order, provided that the Disclosing Party receives
reasonable prior written notice of such disclosure.
8.4 Ownership and Return. The Receiving Party acknowledges that the
Disclosing Party (or any third party entrusting its own information to the
Disclosing Party) claims ownership of its Confidential Information in the
possession of the Receiving Party. Upon the expiration or termination of this
Agreement, and at the request of the Disclosing Party, the Receiving Party shall
return to the Disclosing Party all originals, copies, and summaries of
documents, materials, and other tangible manifestations of Confidential
Information in the possession or control of the Receiving Party, except that the
Receiving Party may retain one
copy of the Confidential Information in the possession of its legal counsel
solely for the purpose of monitoring its obligations under this Agreement.
9. Miscellaneous.
9.1 Notice. Any notice required or permitted to be given or made under
this Agreement by one party to the other shall be in writing, delivered
personally or by facsimile (and promptly confirmed by personal delivery or
courier) or courier, postage prepaid (where applicable), addressed to the other
party at its address indicated below, or to such other address as the addressee
shall have last furnished in writing to the addressor and shall be effective
upon receipt by the addressee.
If to Procept: Procept, Inc.
000 Xxxxxxxxx Xxxxxx, Xxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: President
Facsimile: (000) 000-0000
If to AOI: AOI Pharmaceuticals Inc.
000 Xxxxx Xxxxxx, Xxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Chief Executive Officer
Facsimile: (000) 000-0000
9.2 Notice to Penn and PHS. Promptly after the Effective Date, Procept
will provide written notice to Penn under Article 15 of the Penn License
Agreement and to PHS under the CRADA requesting that Penn and PHS provide a copy
of all notices under Article 15 of the Penn License Agreement and Section 13.8
of the CRADA to AOI. In the event Procept receives a notice from Penn under
Article 15 of the Penn License Agreement or from PHS under Section 13.8 of the
CRADA, Procept shall promptly provide a copy of such notice to AOI and shall
copy AOI on any response thereto by Procept.
9.3 Governing Law. This Agreement shall be construed, governed,
interpreted and applied in accordance with the laws of the State of New York,
without regard to principles of conflicts of laws.
9.4 Force Majeure. Neither party will be responsible for delays resulting
from acts beyond the control of such party; provided, that the non-performing
party uses commercially reasonable efforts to avoid or remove such causes of
nonperformance and continues performance hereunder with reasonable dispatch
whenever such causes are removed.
9.5 No Agency. Nothing in this Agreement shall be construed as
authorization for either party to act as agent or representative of the other
party.
9.6 Assignment. This Agreement may not be assigned or otherwise
transferred by either party without the written consent of the other party,
except AOI and Procept may assign this Agreement without the consent of the
other party to its Affiliates or in connection with the
transfer or sale of all or substantially all of the portion of its business to
which this Agreement relates, or in the event of its merger or consolidation or
change in control or similar transaction. Any purported assignment in violation
of this Section shall be void. Any permitted assignee shall assume all
obligations of its assignor under this Agreement in writing.
9.7 Use of Names. Neither party shall use the name of the other party or
its Affiliates in any publicity or advertising without the prior written
approval of the other party; provided however that Procept acknowledges and
agrees that AOI may use the name of Procept in various documents used by AOI for
capital raising and financing without such written consent but only to the
extent that such use of name may be reasonably required by law.
9.8 Dispute Resolution. Except for the right of either party to apply to a
court of competent jurisdiction for a temporary restraining order, a preliminary
injunction or other equitable relief to preserve the status quo or prevent
irreparable harm, any and all claims, disputes or controversies arising under,
out of, or in connection with this Agreement, including any dispute relating to
patent validity or infringement, which the parties shall be unable to resolve
within sixty (60) days, shall be mediated in good faith. The party raising such
dispute shall promptly advise the other party of such claim, dispute or
controversy in a writing which describes in reasonable detail the nature of such
dispute. By not later than five (5) business days after the recipient has
received such notice of dispute, each party shall have selected for itself a
representative who shall have the authority to bind such party, and shall
additionally have advised the other party in writing of the name and title of
such representative. Such representatives shall schedule a date for a mediation
hearing with a mutually agreeable mediator in New York, New York on a date not
later than ten (10) business days after the date of such notice of dispute, or
if no dates are available in such period, then the first available date
thereafter. The parties shall enter into good faith mediation and shall share
the costs equally. If the representatives of the parties have not been able to
resolve the dispute within fifteen (15) business days after such mediation
hearing, then either party may refer the dispute for final and binding
resolution by arbitration to be conducted in New York, New York under the
Commercial Arbitration Rules of the American Arbitration Association. Judgment
upon the award rendered in such arbitration proceeding may be entered in, and
enforced by, any court of competent jurisdiction.
9.9 Export Controls. AOI acknowledges that it is subject to and agrees to
abide by the United States laws and regulations (including the Export
Administration Act of 1979 and Arms Export Control Act) controlling the export
of technical data, computer software, laboratory prototypes, biological material
and other commodities. The transfer of such items may require a license from the
cognizant agency of the U.S. government or written assurances by AOI that it
shall not export such items to certain foreign countries without the prior
approval of such agency. Procept neither represents that a license shall not be
required nor that, if required, it shall be issued.
9.10 Amendments. Any amendment of this Agreement shall be effective only
if in writing and signed by both parties.
9.11 Severability. In the event that any provision of this Agreement
shall, for any reason, be held to be invalid or unenforceable in any respect,
such invalidity or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid or unenforceable provision had not been included
herein.
9.12 Waiver. Any waiver of any rights or failure to act in a specific
instance shall relate only to such instance and shall not be construed as an
agreement to waive any rights or fail to act in any other instance, whether or
not similar.
9.13 Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
AOI PHARMACEUTICALS, INC. PROCEPT, INC.
By: /s/ Xxxxxxx X. Xxxxx By: /s/ Xxxx X. Xxx
----------------------------------------- ------------------------------
Name: Xxxxxxx X. Xxxxx Name: Xxxx X. Xxx
--------------------------------------- ----------------------------
Title: Chairman and Chief Executive Officer Title: Vice Chairman
-------------------------------------- ---------------------------
Exhibit A
Penn License Agreement
Exhibit B
CRADA
Exhibit C
List of Certain Sub-sublicensees
1. Cyclacel Limited
2. Therapeutic Developments Limited (TDL)
3. British Biotech Pharmaceuticals Limited
