EXHIBIT 10.18
Redacted Version
LICENSE AGREEMENT
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This Agreement is by and between ProCyte Corporation, having an address at
0000-000xx Xxxxxx X.X., Xxxxxxx, Xxxxxxxxxx 00000 (hereinafter referred to as
"PROCYTE") and Neutrogena Corporation, having an address at 0000 Xxxx 00xx
Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000 (hereinafter referred to as
"NEUTROGENA").
W I T N E S S E T H
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WHEREAS, PROCYTE has developed and is the owner of patents, patent
applications and know-how relating to certain Metal-Peptide Compositions (as
hereinafter defined) and their use for skin care and/or the treatment of skin
disorders;
WHEREAS, NEUTROGENA wishes to acquire a license under such patents and
patent applications from PROCYTE and the right to use such know-how from PROCYTE
and PROCYTE is willing to grant such license and rights to NEUTROGENA under the
terms and conditions of this Agreement; and
WHEREAS, NEUTROGENA wishes to have PROCYTE supply NEUTROGENA and its
sublicensees with Metal-Peptide Compositions and PROCYTE is willing to supply
such Metal-Peptide Compositions under the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the above premises and the covenants
contained herein, the parties agree as follows:
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"[ * ]" = omitted, confidential material, which material has been separately
filed with the Securities and Exchange Commission pursuant to a request
for confidential treatment.
ARTICLE 1 - DEFINITIONS
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As used in this Agreement, the following terms, when used with initial
capital letters, shall have the following meanings, the singular shall include
the plural and vice-versa:
1.1 Affiliate shall mean any entity that directly or indirectly controls,
is controlled by or is under common control with a party to this Agreement, and
for such purpose "control" shall mean the possession, direct or indirect, of the
power to direct or cause the direction of the management or the policies of the
entity, whether through the ownership of voting securities, by contract or
otherwise. The direct of indirect ownership of at least thirty percent (30%)
or, if smaller, the maximum allowed by applicable law, of the voting securities
of a business entity or an interest in the assets, profits or earnings of a
business entity shall be deemed to constitute control of the business entity.
1.2 Effective Date of this Agreement shall mean the later of the two dates
appearing below the parties' signature lines at the end of this Agreement.
1.3 FDA shall mean the United States Food and Drug Administration and
successor bodies or corresponding foreign administrative bodies.
1.4 Field shall mean the use of a Metal-Peptide Composition for the
purpose of human cosmetic skin care [ * ].
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1.5 Fiscal Quarter shall mean each of the periods of time between January
and March; April and June; July and September; and October and December.
1.6 Fiscal Year shall mean the period of time commencing on the Monday
following the Sunday closest to the end of the calendar month of December and
terminating on the Sunday closest to the end of the immediately succeeding
December in accordance with the Xxxxxxx & Xxxxxxx fiscal year used in its
regular course of business.
1.7 Licensed Product shall mean any finished product in final packaged form
containing a Metal-Peptide Composition for use in the Field which either (i)
employs or is made through the use of PROCYTE Know-How or (ii) would infringe a
Valid Claim of any PROCYTE Patent Rights but for the licenses granted herein.
For clarification, Licensed Product shall not include a finished product in
final packaged form containing a Metal-Peptide Composition for use in the Field
sold by an Affiliate of NEUTROGENA which (i) does not employ or is not made
through the use of PROCYTE Know-How (i.e., such Affiliate did not acquire any
PROCYTE Know-How from NEUTROGENA, a sublicensee under this Agreement or any
other PROCYTE licensee) or (ii) would not infringe a Valid Claim of any PROCYTE
Patent Rights but for the licenses granted herein.
1.8 Mass Retail Market shall mean [ * ]
1.9 Metal-Peptide Composition shall mean a compound containing copper and a
peptide, including but without limitation Glycyl-L-histidyl-L-lysine: copper(II)
and L-alanyl-L-histidyl-L-lysine: copper(II).
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1.10 National Launch shall mean the time when the Licensed Product is
available for sale by a domestic sales force and notification in writing to
commence the selling effort has been made by management to the sales force.
1.11 NDA shall mean a New Drug Application or any other application or
procedure required to seek approval from the FDA to allow NEUTROGENA or its
sublicensees to market and/or sell Licensed Product in the United States or
other countries.
1.12 Net Sales shall mean the gross amount invoiced by NEUTROGENA, its
Affiliates, and its sublicensees for the sale or other disposition of Licensed
Product to independent third parties less the following amounts: (i) discounts,
including cash discounts or rebates actually allowed or granted; (ii) credits or
allowances actually granted upon claims or returns, regardless of the party
requesting the return; (iii) separately itemized freight charges paid for
delivery; and (iv) taxes or other governmental charges levied on or measured by
the invoiced amount, whether absorbed by the billing party or the billed party
and separately stated on the invoice.
In the event that Licensed Product is sold in the form of a combination
package or kit containing one or more other stand alone products that are
separately vialed or packaged and are sold separately("Combination Product"),
Net Sales for such Combination Product will be calculated by multiplying actual
Net Sales of such Combination Product by the fraction A/(A+B), where A is the
invoice price of the Licensed Product if sold separately by NEUTROGENA, its
Affiliates, or its sublicensees, and B is the total invoice price of the one or
more other products in the Combination Product, if sold separately by
NEUTROGENA, its
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Affiliates or its sublicensees, such invoice prices and Net Sales calculations
being on a country-by-country basis.
If, on a country-by-country basis, one or more of the other products in the
Combination Product are not sold separately in said country by NEUTROGENA, its
Affiliates, or its sublicensees, Net Sales for such Combination Product shall be
calculated by multiplying actual Net Sales of such Combination Product by the
fraction A/C, where A is the invoice price of the Licensed Product sold
separately by NEUTROGENA, its Affiliates, or its sublicensees, and C is the
invoice price of the Combination Product sold by NEUTROGENA, its Affiliates, or
its sublicensees; provided that the maximum value of such fraction shall be one.
If, on a country-by-country basis, the Licensed Product is not sold
separately in said country by NEUTROGENA, its Affiliates, or its sublicensees,
Net Sales for such Combination Product shall be calculated by multiplying actual
Net Sales of such Combination Product by the fraction X/Y, where X shall be
NEUTROGENA's, its Affiliate's, or its sublicensees' fully allocated cost of the
Licensed Product and Y shall be NEUTROGENA's, its Affiliate's, or its
sublicensees' fully allocated cost of the Combination Product.
Any Licensed Product sold or otherwise disposed of in other than an arm's
length transaction or for other property (e.g., barter) shall be deemed invoiced
at its fair market value in such country of sale or disposition.
1.13 Patented Neutrogena Product shall mean a Patented Product sold by
NEUTROGENA or its Affiliate.
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1.14 Patented Product shall mean any Licensed Product, the making, using or
selling of which in a country would infringe a Valid Claim of a patent within
the PROCYTE Patent Rights in that country but for the licenses granted herein.
1.15 Patented Sublicensee Product shall mean a Patented Product sold by a
sublicensee of NEUTROGENA that is not an Affiliate of NEUTROGENA.
1.16 Pharmaceutical Product shall mean [ * ]
1.17 PROCYTE Know-How shall mean all information, trade secrets, data,
inventions and know-how in the Field which is owned or controlled by or licensed
to PROCYTE at any time, prior to or during the term of this Agreement,
including, without limitation, processes, techniques, methods, reports,
protocols, improvements, products, apparatuses and other materials and
compositions which are related to the Field; provided, however, that PROCYTE
Know-How shall not include anything (i) related to the formulation of products
of PROCTYE, its Affiliates, or its sublicensees containing Metal-Peptide
Compositions and (ii) that is not as of the Effective Date owned or controlled
by or licensed to PROCYTE unless (a) PROCYTE has the right to license or
sublicense it at the time of acquisition and (b) NEUTROGENA promptly pays
PROCYTE and agrees to pay PROCYTE in the future (i) its pro-rata share of any
amounts PROCYTE has paid or is obligated to pay a third party for the
acquisition or license of such information, trade secrets, data, inventions or
know-how in the Field and (ii) any amounts PROCYTE has paid or is obligated to
pay a third party with respect to the use of such information, trade secrets,
data, inventions or know-how in the Field by NEUTROGENA or its sublicensees
(e.g. royalties or other payments
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tied to sales or introduction of Licensed Products). If NEUTROGENA does not pay
and does not agree to pay in the future such amounts, then such information,
trade secrets, data, invention or know-how shall not be considered part of
PROCYTE Know-How. PROCYTE Know-How does not include rights under any patents or
patent applications.
1.18 PROCYTE Patent Rights shall mean (a) all the patents and patent
applications in the Field which are owned or controlled by or licensed to
PROCYTE, prior to or during the term of this Agreement, a listing of those
presently known is identified in Schedule A, which is attached hereto and made a
part of this Agreement and which shall promptly be updated by PROCYTE, any
foreign counterparts thereof, as well as all continuations, continuations-in-
part, divisions and renewals thereof, all patents which may be granted thereon,
and all reissues, re-examinations, extensions, patents of additions and patents
of importation thereof; provided, however, that PROCYTE Patent Rights shall not
include any patents or patent applications that are not as of the Effective Date
owned or controlled by or licensed to PROCYTE unless (a) PROCYTE has the right
to license or sublicense it at the time of acquisition and (b) NEUTROGENA
promptly pays PROCYTE and agrees to pay PROCYTE in the future (i) its pro-rata
share of any amounts PROCYTE has paid or is obligated to pay a third party for
the acquisition or license of such patents or patent applications in the Field
and (ii) any amounts PROCYTE has paid or is obligated to pay a third party with
respect to the use of such patents or patent applications in the Field by
NEUTROGENA or its sublicensees (e.g. royalties or other payments tied to sales
or introduction of Licensed Products). If NEUTROGENA does not pay and does not
agree to pay in the future such amounts, then such patent and
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patent applications shall not be considered part of PROCYTE Patent Rights
and, consequently, will not be added to Schedule A.
1.19 PROCYTE Rights shall mean the PROCYTE Patent Rights and the PROCYTE
Know-How.
1.20 Professional Product shall mean [ * ]
1.21 Supply Agreement shall mean the agreement between NEUTROGENA and
PROCYTE that contemplates the terms set forth in Schedule D to this Agreement
and such other terms as the parties may mutually agree upon, and that shall be
executed by the parties by [ * ].
1.22 Territory shall mean the world.
1.23 U.S. shall mean the United States of America (including Puerto Rico)
and its territories and possessions.
1.24 Valid Claim shall mean a claim in any unexpired, issued patent within
the PROCYTE Patent Rights which has not been held invalid or unenforceable by a
non-appealed or unappealable decision by a court or other appropriate body of
competent jurisdiction, and which is not admitted to be invalid through
disclaimer or dedication to the public.
ARTICLE 2 - GRANT OF RIGHTS
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2.1 Subject to the terms of this Agreement, including Sections 2.5,
2.6 and 4.5, PROCYTE hereby grants to NEUTROGENA an exclusive license, with the
unrestricted right to grant sublicenses, under PROCYTE Rights to make, have
made, use, sell
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and have sold Licensed Products [ * ] solely in the Mass Retail Market in the
Field within the Territory.
2.2 Subject to the terms of this Agreement, including Sections 2.3, 2.5 and
2.6, PROCYTE hereby grants to NEUTROGENA a non-exclusive license, without the
right to grant sublicenses (except as provided in Section 2.4 and for the
manufacturing Licensed Products by third parties for its needs), under PROCYTE
Rights to make, have made, use, sell and have sold Licensed Products, including
Professional Products and Pharmaceutical Products, outside the Mass Retail
Market in the Field within the Territory, including Pharmaceutical Products in
the Mass Retail Market.
2.3 Notwithstanding the provisions of Section 2.2, NEUTROGENA shall not
have the right or license to make, have made, use, sell or have sold any
Licensed Products [ * ].
2.4 NEUTROGENA may sublicense its rights under Section 2.2 to its
Affiliates so long as they remain Affiliates of NEUTROGENA. NEUTROGENA shall
provide PROCYTE with notice of the identity of any sublicensee (whether under
the preceding sentence or under Section 2.1) and the term, territory and scope
of said sublicensee's sublicense. Any sublicense by NEUTROGENA shall be subject
to the terms and conditions of this Agreement. [ * ].
2.5 Notwithstanding the provisions of Sections 2.1 and 2.2, NEUTROGENA
shall not have the right or license under PROCYTE Rights to make or have made
Metal-Peptide Compositions for use in a Licensed Product during the term of this
Agreement except as set forth in Schedule D to this Agreement or the subsequent
Supply Agreement or with the written permission of PROCYTE.
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2.6 Notwithstanding the foregoing, NEUTROGENA and PROCYTE, including their
respective sublicensees, agree not to introduce and sell a Licensed Product
[ * ].
2.7 Notwithstanding the foregoing, NEUTROGENA and PROCYTE, including their
respective sublicensees, [ * ].
2.8 NEUTROGENA shall not, and shall require that its Affiliates (who
receive Licensed Product, directly or indirectly, from NEUTROGENA or its
licensees) and sublicensees not, market, sell or use Licensed Products [ * ].
NEUTROGENA shall not, and shall require its Affiliates (who receive Licensed
Product, directly or indirectly, from NEUTROGENA or its licensees) and
sublicensees not to, sell or transfer any Licensed Product to a party that
NEUTROGENA or sublicensee knows or has reason to know may, or intends to,
directly or indirectly, sell, transfer, use or market the Licensed Product[ * ].
2.9 Except as set forth in Section 4.5, PROCYTE shall not, and shall
require that its sublicensees not, market, sell or use Licensed Products in the
Field in the Mass Retail Market. Except as set forth in Section 4.5, PROCYTE
shall not, and shall require its sublicensees not, sell or transfer any Licensed
Product to a party that PROCYTE or sublicensee knows or has reason to know may,
or intends to, directly or indirectly, sell, transfer, use or market the
Licensed Product in the Field in the Mass Retail Market.
2.10 PROCYTE hereby grants NEUTROGENA an option to use hereunder in
Licensed Products, despite Section 2.6, its formulation and all its know-how
related thereto for [ * ].
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ARTICLE 3 - PAYMENTS
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3.1 NEUTROGENA shall make lump sum payments in U.S. Dollars to PROCYTE as
follows:
[ * ].
ARTICLE 4 - ROYALTIES
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4.1 (a) NEUTROGENA shall pay to PROCYTE a running royalty based on Net
Sales of a Patented Neutrogena Product sold in the Territory as follows: [ * ].
(b) NEUTROGENA shall pay to PROCYTE a running royalty based on Net Sales
of a Patented Sublicensee Product sold in the Territory as follows: [ * ].
4.2 (a) NEUTROGENA shall pay to PROCYTE a running royalty of [ * ] of Net
Sales of a Pharmaceutical Product sold in the Territory. This running royalty
shall be [ * ] of Net Sales of a Pharmaceutical Product that is not, or that
ceases to be, a Patented Product; provided, however, that the obligation to pay
such [ * ] royalty under this Section 4.2(a) shall terminate after [ * ] from
the first National Launch of a Licensed Product in such country of sale. For
example, [ * ].
(b) NEUTROGENA shall pay to PROCYTE a running royalty [ * ] of Net Sales
of a Professional Product sold in the Territory. This running royalty shall [ *
] of Net Sales of a Professional Product that is not, or that ceases to be, a
Patented Product; provided, however, that the obligation to pay such [ * ]
royalty
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under this Section 4.2(b) shall terminate after [ * ] from the first National
Launch of a Licensed Product in such country of sale. For example, [ * ].
4.3 NEUTROGENA shall pay to PROCYTE a running royalty of [ * ] Net Sales
of a Licensed Product sold in the Territory that (i) is not, or that ceases to
be, a Patented Product and (ii) is not a Professional Product or Pharmaceutical
Product in the country of sale; provided, however, that the obligation to pay a
royalty under this Section 4.3 shall terminate after [ ] from the first National
Launch of a Licensed Product in such country of sale. For example, [ * ]
4.4 No running royalties due under this Article shall be payable on sales
transactions as between NEUTROGENA, its Affiliates, and any sublicensee, the
final vendee sale to a third party alone being used for the purposes of
determining the running royalty payments due hereunder. A maximum of only one
running royalty payment shall be payable on the sale of each Licensed Product
and such running royalty will be provided in accordance with either Section 4.1,
4.2 or 4.3 thereof but not more than one; provided, however, that the section
with the highest royalty will be used in the event that more than one section
applies.
4.5 Net Sales of Licensed Product in any country where such Licensed
Product is not a Patented Product or where there is no obligation to pay a
running royalty under Section 4.2 or 4.3 shall incur no running royalties.
[ * ].
4.6 [ * ] minimum royalties shall be due and payable by NEUTROGENA for the
sale of all Licensed Products (including sales
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of Licensed Products by NEUTROGENA and its sublicensees) with the following
schedule:
Fiscal Year Minimum Royalty
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[ * ]
Furthermore, if NEUTROGENA is not able to launch or continue to sell any
Licensed Product due to (i) a substantiated safety issue or governmental action
associated directly with the Metal-Peptide Composition or (ii) PROCYTE'S failure
to supply Metal Peptide Compositions as set forth in the Supply Agreement,
NEUTROGENA will so notify PROCYTE in writing and any payments of minimum
royalties pursuant to this Section 4.6 during the period during which such
substantiated safety issues, supply failure, or government action continues,
despite the reasonable efforts of NEUTROGENA, shall cease. Issues concerning
safety include, but are not limited to, unacceptable chronic inflammation,
chronic irritation, photo-toxicity, or any systemic side effects that are
clinically significant and are associated directly with the Metal-Peptide
Composition. Governmental actions include, but are not limited to, notification
by the U.S. Food and Drug Administration (FDA) claims that there are
insufficient safety of efficacy data to justify the marketing of products
containing the Metal-Peptide Composition. NEUTROGENA agrees to provide a copy
of written documents relating to such governmental actions, if possible. If
such issues have not been resolved [ * ] of notification by NEUTROGENA, the
parties shall meet to discuss such issues and efforts to resolve them. If such
issues have not been resolved [ * ] of notification by NEUTROGENA, then
NEUTROGENA shall either resume paying minimum royalties under this Section 4.6
or terminate this Agreement pursuant to Section 10.3.
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4.7 All running royalties shall be calculated and payable on a Fiscal
Quarter basis and running royalties shall be paid within [ * ] following the end
of such Fiscal Quarter. Each such payment shall be accompanied by a written
report indicating the amount of Net Sales during such Fiscal Quarter by Licensed
Product (including by quantity of Licensed Product), by country and by party
(i.e., NEUTROGENA, its Affiliates, and its sublicensees) and a calculation of
the royalties due. In the event that the running royalties, as calculated in
accordance with Sections 4.1, 4.2 and 4.3, for a Fiscal Year in which a minimum
royalty applies are less than the applicable minimum royalty for such Fiscal
Year, NEUTROGENA shall pay to PROCYTE, together with its payment of running
royalties in accordance with Sections 4.1, 4.2 and 4.3 for the reporting period
ending with the close of the Fiscal Year, the shortfall between the minimum
royalty and the running royalty.
4.8 NEUTROGENA shall keep and require its Affiliates and sublicensees to
keep complete and accurate records of the sale or other disposition of Licensed
Products. PROCYTE shall have the right, at its own expense, for the period
during which a running royalty is due to PROCYTE and for [ * ] thereafter, to
have an independent certified public accountant, to whom NEUTROGENA has no
reasonable objection, examine the relevant books and records of account of
NEUTROGENA and its Affiliates and its sublicensees selling Licensed Products
during reasonable business hours and no more than once during each Fiscal Year,
to determine whether appropriate payment has been made by NEUTROGENA hereunder,
provided, however, that if such examination reveals a [ * ] or greater
discrepancy between the amount owing and the actual amount paid by NEUTROGENA to
PROCYTE, then NEUTROGENA shall be responsible for the costs associated with such
examination. The
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accountant shall disclose to PROCYTE only information relating to the accuracy
of the royalty report and the royalty payments made according to this Agreement.
The information received by the accountant shall be held confidential except for
information necessary for disclosure to PROCYTE to establish the accuracy of the
royalty reports.
4.9 The remittance of royalties payable on sales outside the U.S. will be
payable to PROCYTE in U.S. Dollars according to the official rate of exchange of
the currency of the country from which the royalties are payable as quoted by
The Wall Street Journal, New York edition, for the last day of the Fiscal
Quarter for which the royalty payment is made. NEUTROGENA shall make all
payments to PROCYTE under this Agreement in full, without deduction or
withholding on account of taxes withheld or deducted from any payment made by a
sublicensee to NEUTROGENA.
4.10 NEUTROGENA acknowledges that PROCYTE's assistance in the initial Field
and a supply of Metal-Peptide Compositions may be of substantial value and that
the PROCYTE Know-How may constitute valuable and substantial trade secrets of
PROCYTE. The parties acknowledge and agree that, for their mutual convenience
and after considering other alternatives, the payments to PROCYTE set forth in
this Agreement, including the structure and term of royalty payments, are an
appropriate and mutually convenient way of compensating PROCYTE.
ARTICLE 5- SUPPLY OF METAL-PEPTIDE COMPOSITIONS
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5.1 PROCYTE agrees to supply NEUTROGENA and its sublicensees with Metal-
Peptide Compositions, and NEUTROGENA agrees to purchase from PROCYTE the Metal-
Peptide Compositions on the terms set forth in the Supply Agreement.
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ARTICLE 6 - CONFIDENTIALITY AND PUBLICITY
-----------------------------------------
6.1 All information disclosed by one party to the other(s) or developed by
the parties pursuant to the terms of this Agreement shall be maintained
confidential and used only for the purposes of this Agreement in accordance with
this Article 6. Each party may also disclose the other's information to an
Affiliate, agent or consultant, who is under an obligation of confidentiality
and non-use at least substantially equivalent to the obligations of this Article
6. The term of maintaining confidentiality of all such information and the
limitations on use shall be for a period of [ * ] after the date of termination
of this Agreement. Each party shall guard such information as it normally
guards any of its confidential, proprietary information. Notwithstanding the
foregoing, each party shall be relieved of the confidentiality and limited use
obligations of this Agreement if:
(a) the information was previously known to the receiving party from
sources other than the disclosing party as evidenced by the prior written
records of such party;
(b) the information is or becomes generally available to the public
through no fault of the receiving party; or
(c) the information is acquired in good faith in the
future by the receiving party from a third party not under an obligation of
confidence to the disclosing party with respect to such information.
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6.2 Notwithstanding the above obligations of confidentiality and non-use a
party may:
(a) disclose information to a regulatory agency that is necessary to
obtain regulatory approval in a particular jurisdiction;
(b) disclose information to a government agency if the disclosure is
necessary to protect the health and safety of the party's workers or the public
or as required by law;
(c) disclose information reasonably required in connection with the
development, manufacture, use, sale, external testing or marketing trials of
products in accordance with the terms of this Agreement; or
(d) disclose information by filing patent applications, the filing of
which is contemplated by this Agreement, without violating the above secrecy
provision.
In making such disclosures, the disclosing party shall obligate the recipient to
secrecy, if possible.
6.3 Except for the filing of a copy of this Agreement with the Securities
& Exchange Commission to the extent required by law, the public announcement in
the form set forth in Schedule C, and such other public announcements as may
hereafter become required by law due to changes from the facts and circumstances
in existence as of the Effective Date, no party hereunder shall disclose this
Agreement or make any public announcement or filing concerning this Agreement or
the subject matter hereof without the prior written consent of the other;
provided, however, that NEUTROGENA shall be free to disclose the
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existence of this Agreement and the nature of the licenses granted hereunder to
its Affiliates and prospective sublicensees under a similar obligation of
confidentiality as set forth in this Article 6 and PROCYTE shall be free to
disclose the existence of this Agreement and its terms to its Affiliates,
consultants, investment bankers and prospective licensees under a similar
obligation of confidentiality as set forth in this Article 6, provided that
PROCYTE does not disclose the economic terms of this Agreement (e.g., royalty
rates, minimum royalties and lump sum payments) to such prospective licensees.
In the event that pursuant to the foregoing PROCYTE shall file a copy of this
Agreement with the Securities & Exchange Commission, it shall seek confidential
treatment for all portions thereof requested by NEUTROGENA within [ * ].
following receipt of PROCYTE'S proposed SEC submission.
6.4 With respect to information disclosed on or after the Effective Date
between NEUTROGENA and PROCYTE under the provisions of this Agreement, the
provisions of this Agreement shall govern and prevail. In the event of any
conflict between this Agreement and the Confidentiality Agreement of November
19, 1998 between NEUTROGENA and PROCYTE, which is attached hereto as Schedule B,
with respect to information disclosed on or after the Effective Date, the terms
of this Agreement shall govern and prevail.
6.5 The rights and obligations of this Article 6 shall survive termination
of this Agreement.
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ARTICLE 7 - PATENT PROSECUTION AND MAINTENANCE
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7.1 PROCYTE shall, at its discretion, be responsible to prosecute or cause
to prosecuted to allowance or final rejection in the United States and in
foreign countries the patent applications included in PROCYTE Patent Rights.
PROCYTE shall, at its discretion, be responsible to issue and maintain as a
patent each such application prosecuted to allowance and maintain the issued
patents included in PROCYTE Patent Rights. [ * ].
7.2 Upon the request of NEUTROGENA, PROCYTE agrees to promptly provide
NEUTROGENA:
(a) Copies of all patent applications included in PROCYTE Patent
Rights;
(b) Copies of all existing prior art searches related to such patent
applications and the subject matter of this Agreement; and
(c) Access to all correspondence to and from the U. S. Patent and
Trademark Office and foreign patent offices relating to such patent
applications.
7.3 NEUTROGENA shall have the right to consult with PROCYTE regarding the
content of the patent applications included in PROCYTE Patent Rights, prior art
searches and correspondence, and to comment thereon. PROCYTE shall consider all
such comments offered by NEUTROGENA, it being agreed, however, that all final
decisions respecting conduct of the prosecution of said patent applications
shall rest solely in the discretion of PROCYTE.
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7.4 PROCYTE shall promptly notify NEUTROGENA in the event PROCYTE decides
at any time to abandon or discontinue prosecution of any one or more of the
patent applications included in PROCYTE Patent Rights. Such notification will be
given as early as possible which in no event will be less than [ * ] prior to
the date on which said application(s) will become abandoned. [ * ], NEUTROGENA
shall have the option, exercisable upon written notification to PROCYTE, to
assume full responsibility, at its discretion, for the prosecution of the
affected patent application(s), in which event such affected patent
application(s) shall no longer be within the PROCYTE Patent Rights for the
purpose of determining Patented Products.
7.5 PROCYTE shall, at its discretion, be responsible for paying all
official taxes, annuities and fees required to keep in force patents included in
PROCYTE Patent Rights. In the event PROCYTE decides not to pay the maintenance
fee due on any one or more of said patents, PROCYTE will give NEUTROGENA written
notice of such decision at least [ * ] in advance of the payment date. [ * ],
NEUTROGENA shall thereupon have the option to pay, at its discretion, the
maintenance fees due on the affected patents, in which case the affected
patent(s) at NEUTROGENA's option shall no longer be within the PROCYTE Patent
Rights for the purpose of determining Patented Products.
7.6 Should a priority or opposition contest develop in any Patent Office
throughout the world relating to a patent or patent application within the
PROCYTE Patent Rights for which PROCYTE does not want to maintain, then
NEUTROGENA shall be given [ * ] notice in which to elect to continue maintaining
such patent or patent applications at NEUTROGENA's own [ * ] If NEUTROGENA has
elected to continue, NEUTROGENA shall bear the cost of such a
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contest and shall have control of such contest. PROCYTE shall provide NEUTROGENA
with all cooperation and available documents required by NEUTROGENA to prosecute
such priority or opposition contest including cooperation of any licensor or
consultants of PROCYTE, at NEUTROGENA's expense. PROCYTE shall have the right to
participate in such contest, or designate its own counsel to so participate, at
PROCYTE's own expense, throughout each step of such priority or opposition
contest. If such patent or patent application issues as a patent, it shall no
longer be within the PROCYTE Patent Rights for the purpose of determining
Patented Products.
ARTICLE 8 - COMPETING PRODUCTS AND INFRINGEMENT
-----------------------------------------------
8.1 If PROCYTE or NEUTROGENA become aware of substantial infringement of
any issued patent included in PROCYTE Patent Rights by a third party selling a
product in a country in the Field in the Mass Retail Market that is competitive
with NEUTROGENA's Patented Products sold under the license granted pursuant to
Section 2.1 [ * ]. If, prior to the expiration of [ * ] from said notice,
PROCYTE has not obtained a discontinuance of such infringement or brings suit in
such country against the third party infringer, then, subject to the rights of
any PROCYTE licensor, NEUTROGENA shall have the right to bring suit in such
country against such infringer in the Field in the Mass Retail Market. Each
party will cooperate with the other in any suit and will have the right to
consult with the other and be represented by its own counsel at its own expense.
All monies recovered by either party upon final judgment or settlement of any
infringement suit shall be retained by the party bringing the suit. No
settlement by a party bringing a suit shall diminish
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the rights or interests of the other party without the other party's consent.
8.2 In the event PROCYTE or NEUTROGENA learn that NEUTROGENA's making,
using or selling of Licensed Product pursuant to Section 2.1 [ * ] infringes,
will infringe or is alleged by a third party to infringe a third party patent
with respect to the Metal-Peptide Composition, the party becoming aware of same
shall promptly notify the other. PROCYTE and NEUTROGENA shall thereafter
attempt to agree upon a course of action which may include: (a) modifying of
the Licensed Product or its use and manufacture so as to be non-infringing; or
(b) obtaining a license or assignment from said third party.
8.3 In the event PROCYTE or NEUTROGENA cannot agree on modifying the
Licensed Product pursuant to Section 8.2, NEUTROGENA shall in the first instance
have the right to negotiate with said third party for such license or
assignment. In the event that such negotiation results in a consummated
agreement, then any lump sum payment and/or royalties to be paid thereunder
shall be paid by NEUTROGENA. [ * ] to be paid by NEUTROGENA and its sublicensees
under such NEUTROGENA negotiated agreement with respect to such patent and sales
of such Licensed Product in the country shall be credited against running
royalties due PROCYTE hereunder with respect to sales of such Licensed Product
in the country, but only to the extent of reducing running royalties due PROCYTE
with respect to sales of such Licensed Product in such country by [ * ] in any
Fiscal Quarter with the remainder being carried over to the next payment period.
The minimum royalty applicable in accordance with Section 4.6 for a Fiscal Year
shall be reduced by the amount credited against running royalties in such Fiscal
Year.
22
8.4 Under NEUTROGENA's license in Section 2.1 [ * ] to PROCYTE Know-How
under PROCYTE Rights, NEUTROGENA shall enjoy the benefit of any PROCYTE
contractual rights protecting the confidentiality and non-use of such PROCYTE
Know-How including enforcement of confidentiality and/or non-disclosure
agreements entered into between PROCYTE and any third parties and any
injunctions or damages which may be due from such enforcement with respect to
the Mass Retail Market in the Field.
ARTICLE 9 - WARRANTIES, REPRESENTATIONS AND ACKNOWLEDGEMENTS
------------------------------------------------------------
9.1 PROCYTE expressly warrants and represents as of the Effective Date
that it exclusively owns or controls by agreement or license all of the rights,
title and interest in and to the PROCYTE Rights as defined herein and that it
has the full right and authority to enter into this Agreement and to carry out
the transactions contemplated herein. PROCYTE further represents and warrants as
of the Effective Date that no academic institution, member of an academic
institution, corporation, local, state or federal government, or any other third
party holds any property rights in the PROCYTE Rights in the Mass Retail Market
in the Field. Further, PROCYTE represents that the patent applications and
patents of Schedule A are all existing PROCYTE Patent Rights in the Field, and
PROCYTE agrees that it will promptly update such Schedule A from time-to-time.
Further, PROCYTE warrants and represents, as of the Effective Date, that it
knows of no facts that would render any of the PROCYTE Patent Rights invalid or
unenforceable.
9.2 PROCYTE expressly warrants and represents, as of the Effective Date,
that it has no outstanding encumbrances or agreements, either written, oral, or
implied, in connection with
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the PROCYTE Rights in the Mass Retail Market in the Field, and that it has not
granted and will not grant during the term of this Agreement or any renewal
hereof, any similar rights, license, consent or privilege with respect to the
rights granted pursuant to Section 2.1 [ * ].
9.3 NEUTROGENA makes no representation or warranty that it will market
Licensed Products in the Field under this Agreement. Furthermore, all business
decisions including, without limitation, design, manufacture, sale, price and
promotion of products covered under this Agreement, seeking of regulatory
approval to market and selecting and conducting of clinical trials for
supporting an NDA, and the decision whether to sell a particular Licensed
Product shall be within the sole discretion of NEUTROGENA and/or its
sublicensees.
9.4 PROCYTE hereby acknowledges herein that NEUTROGENA and its Affiliates
already sell a large variety of products and acknowledges that NEUTROGENA and
its Affiliates may now or in the future develop or acquire cosmetic and
pharmaceutical products which may serve a similar cosmetic/therapeutic function
or compete with Licensed Products in the Field. Further, PROCYTE recognizes
that NEUTROGENA and its Affiliates have been actively involved in research and
development in the medical field and in the investigation of entries into the
cosmetic/pharmaceutical field for various uses and that NEUTROGENA and its
Affiliates intend to continue with such activities. These activities may result
in products that would compete with Licensed Products in the Field. Should any
such products be developed and/or marketed, they would not be subject to any
royalties or other obligations to PROCYTE hereunder if not a Patented Product or
Licensed Product that would infringe a Valid Claim of PROCYTE
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Patent Rights or that employs or is made through the use of any PROCYTE Know-
How. Moreover, PROCYTE realizes that some of the Licensed Products in the Field
are presently in early stages of development, and accordingly it is uncertain
whether or not any such Licensed Product(s) will be successfully developed and
marketed by NEUTROGENA.
9.5 PROCYTE hereby represents and acknowledges that NEUTROGENA is not
obligated under this Agreement to continue development of or market Licensed
Products in the Field and that the payments provided by NEUTROGENA to PROCYTE in
Article 3 and Article 4 are in complete satisfaction of any duty, express or
implied, imposed upon NEUTROGENA to commercially exploit any of the rights and
licenses granted hereunder, including without limitation, any obligation on the
part of NEUTROGENA and/or its sublicensees to exercise any specific level of
effort in developing and marketing Licensed Products(s) in the Field.
9.6 PROCYTE and NEUTROGENA each expressly warrants and represents that, at
the time of execution of this Agreement, it knows of no third party patents or
pending applications that would materially affect NEUTROGENA's ability to sell
Metal-Peptide Compositions in the Field nor PROCYTE's ability to obtain patent
protection for currently pending patent applications included in PROCYTE Patent
Rights.
9.7 Each party expressly warrants and represents that it has no agreement
nor any other obligation to any third party that would in any way interfere,
hamper or limit its ability to carry out and fulfill its obligations under this
Agreement.
9.8 NEUTROGENA hereby represents and warrants as of the Effective Date
that it has full right and authority to enter into
25
this Agreement and to carry out the transactions contemplated herein.
9.9 EXCEPT AS SET FORTH IN THIS AGREEMENT AND IN THE SUPPLY AGREEMENT,
PROCYTE MAKES NO OTHER WARRANTIES OR REPRESENTATIONS WITH RESPECT TO THE PROCYTE
RIGHTS OR LICENSED PRODUCTS, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, PATENTABILITY, VALIDITY AND
NON-INFRINGEMENT.
ARTICLE 10 - TERM AND TERMINATION
---------------------------------
10.1 This Agreement shall commence as of the Effective Date and shall
remain in force unless otherwise terminated in accordance with any of the
provisions herein, until the last to occur of the following events:
(a) NEUTROGENA is no longer obligated to pay a royalty under Sections
4.1, 4.2 or 4.3, or
(b) [ * ] after the Effective Date of this Agreement; provided,
however, that upon the expiration of this Agreement under either Section 10.1(a)
or Section 10.1(b), NEUTROGENA shall have a fully paid up, non-exclusive license
to PROCYTE Know-How disclosed under this Agreement.
10.2 Upon any breach of, or default under, any material provision of this
Agreement by a party, the other party may terminate this Agreement in whole or
in part by giving [ * ] written notice to the breaching party. Said notice shall
become effective at the end of such period, unless during said period the
breaching party shall cure such breach or default.
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10.3 NEUTROGENA shall have the right to terminate this entire Agreement
upon [ * ] written notice to PROCYTE; provided, however, that NEUTROGENA shall
not be obligated to make any payments pursuant to Article 3 that become due
after such written notice is sent from NEUTROGENA to PROCYTE.
10.4 PROCYTE or NEUTROGENA may terminate this Agreement should the other
party commit an act of bankruptcy, be declared bankrupt, voluntarily file or
have filed against it a petition for bankruptcy or reorganization unless such
petition is dismissed within [ * ] of filing, enter into a procedure of winding
up to dissolution or should a trustee or receiver be appointed for its business
assets or operations. All rights and licenses granted under or pursuant to this
Agreement are, and shall otherwise be deemed to be, for the purposes of Section
365(n)of Title 11, U.S. Code ("Bankruptcy Code") license rights to "intellectual
property" as defined under Section 101(60) of the Bankruptcy Code. The parties
agree that NEUTROGENA, as a licensee of such right, under this Agreement, shall
retain and may fully exercise all of its rights and elections under the
Bankruptcy Code.
10.5 Upon termination of this Agreement, NEUTROGENA shall have the right to
sell off over the next [ * ] any Licensed Product in its inventory provided
NEUTROGENA pays to PROCYTE the running royalties calculated in accordance with
Article 4. The rights and obligations of this Section 10.5 shall survive
termination of this Agreement.
10.6 Upon termination of this Agreement, NEUTROGENA and its sublicensees
shall cease using PROCYTE Rights and cease making,
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using and selling Licensed Products, except as provided in Section 10.5. Because
of the value of PROCYTE's assistance and know-how provided to NEUTROGENA, any
sales of products containing a Metal-Peptide Composition in the Field in a
country in the Territory by NEUTROGENA or its sublicensees following such
termination shall be presumed to be royalty bearing hereunder and NEUTROGENA
shall pay running royalties thereon to PROCYTE in accordance with Sections
4.2,4.3, 4.7, 4.8, and 4.9 until [ * ] whichever occurs first.
10.7 Termination or expiration of this Agreement shall not relieve the
parties of any obligation or liability accruing prior to such termination or
expiration. Any accrued obligation or liability (including a pro rata portion
of any minimum royalties due under Section 4.6 for the year of termination or
expiration) and the provisions of Sections 6, 10.1, 10.5, and 10.6 and Article
11 and shall survive termination or expiration of this Agreement. Upon
termination each party shall return all forms of Confidential Information
received from the other party (or the Confidential Information pertaining to the
terminated License), retaining only one copy of written or electronic
Confidential Information for archival purposes.
10.8 [ * ].
ARTICLE 11 - INDEMNIFICATION
----------------------------
11.1 NEUTROGENA shall defend, indemnify and hold PROCYTE, its directors,
officers and employees, harmless from and against any and all claims, suits or
demands for liability, damages, losses, costs and expenses (including the costs
and expenses of attorneys and other professionals) arising out of third party
claims or
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suits or demands based on bodily injury or property damage resulting from the
clinical testing, manufacture, use or sale of Licensed Product by NEUTROGENA or
its sublicensees or the exercise of its license rights hereunder, except for
claims, suits or demands arising from the supply of Metal-Peptide Compositions
by PROCYTE under the Supply Agreement.
11.2 Each party ("Indemnifying Party") shall defend, indemnify and hold the
other party and its directors, officers and employees, harmless from and against
any and all claims, suits, and demands for liability, damages, losses, costs and
expenses (including the costs and expenses of attorneys and other professionals)
arising out of or resulting from the inaccuracy of any representation or the
breach by the Indemnifying Party of any warranty, covenant or agreement
contained in this Agreement.
11.3 In the event that any party hereunder seeks indemnification under this
Article 11, such party shall: (a) promptly inform the indemnifying party of any
claim, suit or demand threatened or filed, (b) permit the indemnifying party to
assume direction and control of the defense of claims resulting therefrom
(including the right to settle such claims at the sole discretion of the
indemnifying party), and (c) cooperate as requested (at the expense of the
indemnifying party) in the defense of such claims.
11.4 An indemnifying party's (including sublicensees) obligations under
this Article 11 shall not extend to any claims, suits or demands for liability,
damages, losses, costs and expenses arising from the indemnified party's failure
to comply with the terms and conditions of this Agreement or arising from the
negligence or willful misconduct of the indemnified party, its agents or
employees.
29
ARTICLE 12- NEUTROGENA OPTION TO NEGOTIATE
------------------------------------------
12.1 PROCYTE hereby grants to NEUTROGENA, for a period beginning upon the
Effective Date and continuing [ * ] (the "Right Period"), a right of first
negotiation with respect to any type of transactions not involving an Affiliate
relating to the licensing, sale, or assignment of PROCYTE patents or patent
applications relating to the use of compositions or compounds containing a
metal, other than copper, and a peptide in the Field [ * ] (hereinafter "New
Technology License"). PROCYTE shall not negotiate, consummate or agree to
consummate a New Technology License with any party other than an Affiliate
without first giving written notice thereof to NEUTROGENA (the "Notice")
specifying the compositions/compounds. In the event that NEUTROGENA notifies
PROCYTE of its intention to enter into negotiations for the New Technology
License within [ * ] of its receipt of the Notice (the "Reply"), PROCYTE and
NEUTROGENA agree to negotiate the terms of the New Technology License in good
faith for a period not to exceed [ * ] after the date of such Reply (the
"Negotiation Period"). In the event that (i) NEUTROGENA fails to elect to
exercise this right of first negotiation within the above [ * ] period following
such Notice or (ii) following expiration of such [ * ] period, in the event that
NEUTROGENA and PROCYTE have not entered into a definitive, written agreement
such New Technology License, then PROCYTE may enter into an agreement with
respect to the New Technology License with any third party within the next
succeeding [ * ]. Following the expiration of such [ * ] period, in the event
that PROCYTE has not entered into a definitive, written agreement regarding such
New Technology License, and until the expiration
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of the Right Period, the New Technology License shall be subject to this right
of first negotiation.
12.2 Until the termination of the Right Period or, in the event that a
Notice is given, the failure of NEUTROGENA to give a timely Reply or the
termination of the Negotiation Period, PROCYTE shall not negotiate, license,
sell, assign or otherwise transfer to any third party that is not an Affiliate
any right, title and interest in its patents or patent applications necessary to
consummate the New Technology License or to enable the parties to conduct the
transactions contemplated thereby. The parties hereby acknowledge and agree
that neither NEUTROGENA nor PROCYTE shall have an obligation to enter into a
definitive agreement concerning the New Technology License.
ARTICLE 13 - MISCELLANEOUS
--------------------------
13.1 Any controversy or claim arising out of or relating to this Agreement
or the validity, inducement, or breach thereof, shall be settled by arbitration
before a single arbitrator in accordance with the Commercial Arbitration Rules
of the American Arbitration Association ("AAA") then pertaining, except where
those rules conflict with this provision, in which case this provision controls.
The parties hereby consent to the jurisdiction of the federal district court for
the district in which the arbitration is held for the enforcement of this
provision and the entry of judgment on any award rendered hereunder. Should
such court for any reason lack jurisdiction, any court with jurisdiction shall
enforce this clause and enter judgment on any award. The arbitrator shall be an
attorney who has at least 15 years of experience with a law firm or corporate
law department of over 25 lawyers or was a judge of a court of general
jurisdiction. The arbitration shall be held in Denver,
31
Colorado and in rendering the award the arbitrator must apply the substantive
law of New York (except where that law conflicts with this clause), except that
the interpretation and enforcement of this arbitration provision shall be
governed by the Federal Arbitration Act. The arbitrator shall be neutral,
independent, disinterested, impartial and shall abide by The Code of Ethics for
Arbitrators in Commercial Disputes approved by the AAA. Within 45 days of
initiation of arbitration, the parties shall reach agreement upon and thereafter
follow procedures assuring that the arbitration will be concluded and the award
rendered within no more than eight months from selection of the arbitrator.
Failing such agreement, the AAA will design and the parties will follow
procedures that meet such a time schedule. Each party has the right before or,
if the arbitrator cannot hear the matter within an acceptable period, during the
arbitration to seek and obtain from the appropriate court provisional remedies
such as attachment, preliminary injunction, replevin, etc., to avoid irreparable
harm, maintain the status quo or preserve the subject matter of the arbitration.
THE ARBITRATOR SHALL NOT AWARD ANY PARTY PUNITIVE, EXEMPLARY, MULTIPLIED OR
CONSEQUENTIAL DAMAGES, AND EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT TO
SEEK SUCH DAMAGES. NO PARTY MAY SEEK OR OBTAIN PREJUDGMENT INTEREST OR
ATTORNEYS' FEES OR COSTS.
13.2 Any delays in or failures of performance by a party under this
Agreement shall not be considered a breach of this Agreement if and to the
extent caused by occurrences beyond the reasonable control of the party
affected, including but not limited to: acts of God; acts, regulations or laws
of any government; strikes or other concerted acts of workers; fires; floods;
explosions; riots; wars; rebellions; and sabotage; and any time for performance
hereunder shall be extended by the actual time of delay caused by such
occurrence.
32
13.3 This Agreement, or any of the rights and obligations created herein,
shall not be assigned or transferred, in whole or in part, by either party
hereto without the prior written consent of the other party; provided, however,
that NEUTROGENA and PROCYTE each shall have the right to assign this Agreement
to any successor of all or substantially all of its business to which this
Agreement relates without such prior written consent. Any attempted assignment
or transfer of such rights or obligations without such consent, except as
provided herein, shall be void.
13.4 The waiver by a party, whether express or implied, of any provisions
of this Agreement, or of any breach or default of a party, shall not be
construed to be a continuing waiver of such provision, or of any succeeding
breach or default or of a waiver of any other provisions of this Agreement.
13.5 All matters affecting the interpretation, validity, and performance of
this Agreement shall be governed by the laws of the State of New York, U.S.A.,
without regard to its choice or conflict of law principles.
13.6 Any provision hereof which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction. The parties shall replace such ineffective provision
for such jurisdiction with a valid and enforceable provision which most closely
approaches the idea, intent, and purpose of this Agreement, and in particular,
the provision to be replaced.
33
13.7 PROCYTE and NEUTROGENA are independent contractors and shall not be
deemed to be partners, joint venturers or each other's agents, and neither shall
have the right to act on behalf of the other except as expressly provided
hereunder or otherwise expressly agreed to in writing.
13.8 NEUTROGENA shall have the right to promote and sell Licensed Product
under trademarks selected by NEUTROGENA, which trademarks shall be and remain
the property of NEUTROGENA. Nothing herein shall be deemed to give PROCYTE,
either during the term of this Agreement or thereafter, any right to NEUTROGENA
trademarks or their use.
13.9 It is the mutual desire and intent of the parties to provide certainty
as to their future rights and remedies against each other by defining the extent
of their mutual undertakings as provided herein. The parties have in this
Agreement incorporated all representations, warranties, covenants, commitments
and understandings on which they have relied in entering into this Agreement
and, except as provided for herein, neither party has made any covenant or other
commitment to the other concerning its future action. Accordingly, this
Agreement and the schedules attached hereto (i) constitutes the entire agreement
and understanding between the parties with respect to the matters contained
herein, and there are no promises, representations, conditions, provisions or
terms related thereto other than those set forth in this Agreement, and (ii)
supersedes all previous understandings, agreements and representations between
the parties, written or oral relating to the subject matter hereof. The parties
hereto may from time to time during the continuance of this Agreement modify,
vary or alter any of the provisions of this Agreement, but only by written
agreement of all parties hereto.
34
13.10 All communications, reports, payments and notices required by this
Agreement shall be addressed to the partie(s) at their respective address(s) set
forth below or to such other address as requested by a party by notice in
writing to the other parties.
If to PROCYTE: ProCyte Corporation
Attention: President
0000-000xx Xxxxxx X.X.
Xxxxxxx, Xxxxxxxxxx 00000
If to NEUTROGENA: Neutrogena Corporation
Attention: President
0000 Xxxx 00xx Xxxxxx
Xxx Xxxxxxx, XX 00000-0000
With a copy to: Chief Patent Counsel
Xxxxxxx & Xxxxxxx
Xxx Xxxxxxx & Xxxxxxx Xxxxx
Xxx Xxxxxxxxx, Xxx Xxxxxx 00000
All such notices, reports, payments and communications shall be made by
First Class mail, postage prepaid, and shall be considered made as of the date
of deposit with the United States Post Office.
13.11 NEUTROGENA shall cause all Licensed Products to be marked with the
applicable PROCYTE Patent Rights in accordance with applicable patent laws.
35
IN WITNESS WHEREOF, and intending to be legally bound, the parties hereto
have caused this Agreement to be executed by their duly authorized
representatives as of the Effective Date.
PROCYTE CORPORATION NEUTROGENA CORPORATION
By: /s/ Xxxx X. Xxxxxxxx By: /s/ Xxxxxxx X. Xxxxxxxxx
----------------------- --------------------------
Xxxx X. Xxxxxxxx Xxxxxxx X. XxXxxxxx
President & CEO President
Date: April 19, 2000 Date: April 19, 2000
--------------------- ------------------------
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SCHEDULE A
----------
PROCYTE PATENT RIGHTS
---------------------
UNITED STATES PATENTS
U.S. Patent No. 5,348,943 issued on September 20, 1994
U.S. Patent No. 5,135,913 issued on August 4, 1992.
U.S. Patent No. 5,550,183 issued on August 27, 1996
U.S. Patent No. 5,120,831 issued on June 9, 1992
INTERNATIONAL PATENTS
European Patent No. 420, 914 issued on March 9, 1994 in Germany, France,
United Kingdom, and Italy.
Australian Patent No. 633,005 issued on May 14, 1993.
Australian Patent No. 652,136 issued on December 6, 1994.
Canadian Patent No. 1,335,568 issued on May 16, 1995.
European Patent No. 500,745 issued on June 17, 1998 in Germany, France,
United Kingdom, and Italy
Korea Patent No. 195,550 issued on February 12, 1999
Taiwanese Patent No. NI 58,330 issued on January 4, 1993
Mexican Patent No. 170,285 issued on August 13, 1993
Japanese Patent No. 2,951,345 issued on July 9, 1999
INTERNATIONAL PATENT APPLICATIONS
[ * ]
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SCHEDULE B
----------
CONFIDENTIALITY AGREEMENT DATED NOVEMBER 16, 1998
-------------------------------------------------
[ * ]
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SCHEDULE C
----------
TEXT OF PROCYTE ANNOUNCEMENT OF THIS AGREEMENT
----------------------------------------------
PROCYTE IN LICENSE AGREEMENT WITH NEUTROGENA
--------------------------------------------
Deal Introduces ProCyte's Copper Peptide Technology to the
Worldwide Consumer Market
REDMOND, WA--April __, 2000 -- ProCyte Corporation (OTC BB: PRCY), a leading
skin care and tissue repair company, today announced a long term worldwide
license agreement with Neutrogena, a Xxxxxxx & Xxxxxxx company, for worldwide
use of its patented Copper Peptide Complexes in products for skin health. The
agreement provides ProCyte with milestone and royalty payments and includes
certain minimum payment levels.
The retail market for skin care products, including the food, drug and mass
market channels, was in excess of $3.5 Billion in the United States in 1999. It
is a rapidly growing market segment, as the aging baby boomer population demands
products that prolong and improve the quality of life. Clinical studies
indicate that the products sold by ProCyte in the medical marketplace
significantly improve skin tone and have high consumer appeal.
"We are excited to be able to make our proven Copper Peptide technology
available to a broader market base" said Xxxx Xxxxxxxx, ProCyte Chairman and
CEO. "ProCyte has established a growing position in the medical marketplace,
where demand for our Copper Peptide therapeutic and anti-aging products has
risen dramatically since their launch less than two years ago."
Neutrogena Corporation manufactures, develops and internationally markets
premium skin and hair care products.
About ProCyte:
ProCyte Corporation is a healthcare products company that develops,
manufactures, and markets products for tissue repair, skin health and hair care.
ProCyte's product portfolio includes comprehensive skin care lines for
therapeutic care, anti-aging products and products for thinning hair. The
Company's products incorporate its patented copper peptide technology and are
marketed both directly and through distribution partners.
39
This report may contain forward-looking statements that are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those projected. This report should be read in conjunction with
the Company's annual report on Form 10-K and it's quarterly reports on Form 10-
Q. The Company's results may vary significantly from quarter to quarter and
will depend, among other factors, on product launches and market acceptance,
manufacturing contracts, and distribution agreements.
40
SCHEDULE D
----------
TERMS OF PURCHASE AND SUPPLY OF METAL-PEPTIDE COMPOSITIONS
----------------------------------------------------------
PROCYTE and NEUTROGENA have entered into a License Agreement of which this
is an attached schedule. The following terms are intended to provide guidance
to the parties in drafting a definitive Supply Agreement. The parties shall
only be bound upon execution of such definitive Supply Agreement to be duly
negotiated in good faith by the parties. Terms used in this Schedule D not
otherwise defined shall have the meaning set forth in the License Agreement.
PROCYTE shall sell and supply to NEUTROGENA, and NEUTROGENA shall purchase
from PROCYTE, Metal-Peptide Compositions ("MPC") in the following quantities and
pursuant to the following terms:
1. Blanket Orders
1.1 Timing and Quantities
NEUTROGENA shall place blanket orders for MPC with PROCYTE by the following
dates and in the following quantities:
(a) Concurrently with the execution of the Supply Agreement, [ * ] to
be delivered by [ * ];
(b) By [ * ], [ * ] to be delivered by the dates specified by
NEUTROGENA during the year 2001 through the use of purchase orders;
(c) By [ * ] of each year during the period from [ * ] through [ * ],
at least [ * ] unless reduced pursuant to paragraph 4 below, to be delivered by
the dates specified by
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NEUTROGENA during the year following the year in which each order is placed
through the use of purchase orders. It is contemplated by the parties that if
NEUTROGENA's needs should substantially exceed [ * ] amounts produced in
accordance with this schedule then the schedule may be adjusted, by the mutual
agreement of the parties, for more frequent production of NEUTROGENA's
requirements as specified in forecasts provided in accordance with paragraph 4
below.
1.2 Deposit
[ * ].
2. Price
PROCYTE shall sell MPC to NEUTROGENA for an amount not to exceed [ * ]
F.O.B. PROCYTE's plant, Redmond, Washington, plus all applicable taxes and any
reasonable and customary freight charges actually paid by PROCYTE incident to
shipment. NEUTROGENA shall pay PROCYTE an amount equal to [ * ] PROCYTE shall
notify NEUTROGENA by [ * ] of each calendar year of (a) PROCYTE's projected
Actual Cost at various manufacturing quantities for the following year
("Projected Cost") and (b) PROCYTE's Actual Cost for the preceding year. The
purchase price for MPC purchased in the preceding year shall be reduced to the
extent the Actual Cost for the preceding year was less than the Projected Cost
for such year or increased to the extent that Actual Cost for the preceding year
exceeded the Projected Cost for such year. NEUTROGENA shall have the right to
have the Actual Cost audited by a mutually acceptable accounting firm. If the
audit results in an adjustment in favor of NEUTROGENA that is in excess of
[ * ], then PROCYTE shall pay the fees of the auditor.
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3. Payment
PROCYTE shall invoice NEUTROGENA at the time of shipment. NEUTROGENA shall
pay all such invoices within [ * ] of its receipt of MPC and the invoice after
deducting [ * ]. All validly invoiced amounts which are not paid when due shall
bear interest at the rate of [ * ] until paid in full. In the event NEUTROGENA
fails to pay any validly invoiced amount [ * ] days of its due date, PROCYTE
shall have the right to withhold future shipments of any MPC until such time as
such invoiced amount and interest are paid by NEUTROGENA.
4. Meeting Forecasts
NEUTROGENA shall provide to PROCYTE forecasts of its MPC requirements in
accordance with NEUTROGENA's standard supply policies and practices. NEUTROGENA
shall provide training to PROCYTE regarding its supply policies and practices.
PROCYTE shall supply NEUTROGENA with MPC according to NEUTROGENA's
forecasts and up to an additional [ * ] of each respective quantity set forth in
Sections 1.1 (b) and (c) above. To the extent NEUTROGENA's forecasted needs
exceed the quantities set forth in Sections 1.1 (b) and (c) and the previously
submitted forecasts by more than an additional [ * ] then PROCYTE shall use
commercially reasonable efforts, and negotiate in good faith with NEUTROGENA, to
supply such additional MPC to NEUTROGENA. NEUTROGENA shall provide PROCYTE with
valid purchase orders and deposits for such additional quantities. PROCYTE shall
have [ * ] to accept any such orders for additional quantities and inform
NEUTROGENA if the additional MPC can be supplied by NEUTROGENA's requested
delivery dates.
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PROCYTE shall deliver such additional quantities to NEUTROGENA within [ * ] of
its acceptance of any such purchase order for additional quantities. In the
event NEUTROGENA desires to reduce the amount of MPC it purchases pursuant to
Section 1.1 (c) above, NEUTROGENA shall give PROCYTE written notice no later
than [ * ] prior to the date NEUTROGENA is obligated to place an order under
Section 1.1 (c). If NEUTROGENA gives such valid notice, NEUTROGENA may reduce
its order to a quantity not less than [ * ] of the quantity it is then obligated
to order under Section 1.1 (c).
5. Quality
[ * ]
6. Failure to Supply
The parties contemplate that, to assure consistent supply to NEUTROGENA,
appropriate safeguards (including incentives and penalties) will be a necessary
component of any supply agreement between the parties.
In addition to such safeguards the parties contemplate that alternate
supply arrangements and mechanisms for implementing such arrangements need to be
included in any supply agreement. The following represents a starting point for
describing such a mechanism for seeking alternative supply. If, PROCYTE (a)
fails to meet the delivery dates specified in paragraph 1.1 above without giving
NEUTROGENA [ * ] advance written notice of delivery delay, or (b) fails to meet
the delivery dates specified in paragraph 1.1 above by [ * ] or (c) fails to
meet the specifications for the MPC, NEUTROGENA may request PROCYTE to make
alternative arrangements for manufacturing the MPC. PROCYTE shall participate in
the selection of the manufacturer to be hired in this connection but NEUTROGENA
shall have final approval of PROCYTE's manufacturing choice. PROCYTE shall
cooperate with
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NEUTROGENA in securing such alternate manufacturing arrangements. In the event
that within [ * ] of making such alternative arrangements at the request of
NEUTROGENA, PROCYTE again fails to meet the delivery dates or specifications for
the MPC, NEUTROGENA may request that PROCYTE license and provide all know-how
owned by PROCYTE that is in transferable form to a third party manufacturer
selected by NEUTROGENA to produce the MPC. Such license shall specify measures
to protect PROCYTE's trade secrets or other proprietary information through the
use of generally accepted methods satisfactory to PROCYTE. NEUTROGENA shall make
arrangements for PROCYTE to work directly with such manufacturer in order to
protect PROCYTE's trade secrets and other proprietary information. NEUTROGENA,
if necessary, shall retain PROCYTE to provide quality control services (at
NEUTROGENA's expense) with respect to such manufacturing. The expense of such
quality control services shall not exceed [ * ] of the cost of manufacturing the
MPC. No additional licensing fees shall be attributable to the license of such
manufacturing alternative. NEUTROGENA shall no longer be obligated to purchase
MPC from PROCYTE at such time. Notwithstanding anything in this Paragraph 6,
neither events of force majeure [ * ] nor events caused by NEUTROGENA shall
constitute occasions that trigger the requirement to make the alternative
arrangements stated in this Paragraph 6.
7. Term
These terms of Purchase and Supply shall continue for a period of [ * ] and
may renewed for [ * ] period upon mutual agreement in writing [ * ] thereafter
as it relates to extensions. Following the termination or expiration of the
Supply Agreement, NEUTROGENA shall have the right to make and have made MPC.
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