Exhibit 10.7
LICENSE AGREEMENT
LICENSE AGREEMENT (this "Agreement") dated as of the 14th day of December,
---------
1998 (the "Effective Date"), by and between Mucosal Therapeutics LLC, a
--------------
Massachusetts limited liability company with a principal place of business at
000 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxxxxxxx 00000 ("Mucosal"), and
-------
OraPharma, Inc., a Delaware corporation with a principal place of business at
000 Xxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxxxxxxx 00000 (the "Company").
-------
WITNESSETH:
----------
WHEREAS, Mucosal has been engaged in the development of technology relating
to methods and compositions for treating and/or preventing oral mucositis, and
owns certain patent rights and know-how with respect thereto; and
WHEREAS, the Company has as its principal business objective the
development of therapies in oral health care, and has an interest in acquiring
exclusive rights to the Mucosal Technology (as defined below); and
WHEREAS, the parties desire to enter into an agreement pursuant to which
Mucosal shall license to the Company the Mucosal Technology.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
For the purpose of this Agreement, the following words and phrases shall
have the meanings set forth below:
1.1 "Affiliate" means, with respect to any Person, any other Person that
---------
directly, or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with such Person. For purposes hereof,
the term "control" (including, with its correlative meanings, the terms
-------
"controlled by" and "under common control with"), with respect to any Person,
------------- -------------------------
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person (whether through the
ownership of voting securities, by contract or otherwise); provided , that in
--------
each event in which any Person owns directly or indirectly more than 50% of the
securities having ordinary voting power for the election of directors or other
governing body of a corporation or more than 50% of the ownership interest of
any other Person, such Person shall be deemed to control such corporation or
other Person.
1.2 "Biomodels Research Agreement" shall mean the Research and Consulting
----------------------------
Agreement dated as of the date hereof between Biomodels LLC and the Company.
1.3 "Common Stock FMV" means, with respect to the date of determination
----------------
thereof, the value of a share of the common stock of the Company, determined for
the purposes of this Agreement as follows:
(i) If the common stock of the Company is traded publicly on any
stock exchange or over-the-counter market on the date a milestone is
completed as provided in Section 3.2 hereof or a Royalty Credit Amount is
to be determined, then the Common Stock FMV shall be the last ask price at
which a share of such common stock may be purchased by a Person on the
principal stock exchange or over-the-counter market on which such common
stock may be purchased on such date.
(ii) If the common stock of the Company is not traded publicly on
any stock exchange or over-the-counter market on the date a milestone is
completed as provided in Section 3.2 hereof or a Royalty Credit Amount is
to be determined, then the Common Stock FMV shall be equal to the fair
market value of a share of the last series of preferred stock issued by the
Company and shall be determined as follows:
(a) If the Company consummates an equity financing during the
period commencing on the date that is ninety (90) days prior to, and ending
on the date that is ninety (90) days following, the completion of the
applicable milestone or determination of a Royalty Credit Amount, then the
Common Stock FMV shall be the purchase price of a share of preferred stock
of the Company issued in the last equity financing, if any, consummated
during such period.
(b) If no equity financing is consummated by the Company during
the period described in clause (a) above, then the Common Stock FMV shall
be determined by the Company's Board of Directors and Mucosal shall be
notified thereof in writing. Mucosal may, upon written notice to the
Company, appoint an independent certified public accountant or investment
banking firm (an "Independent Appraiser") reasonably acceptable to the
---------------------
Company to determine the Common Stock FMV (and the cost and expense of the
Independent Appraiser shall be shared equally by Mucosal and the Company).
If Mucosal fails to notify the Company of its election to exercise its
valuation right within thirty (30) days after its receipt of the initial
determination by the Company's Board of Directors, then the Common Stock
FMV shall be the amount as determined by the Company's Board of Directors.
If Mucosal exercises its valuation right, Mucosal shall cause the
Independent Appraiser appointed by Mucosal to provide its determination of
the Common Stock FMV in writing to the Company and Mucosal. Following
receipt of such determination, the parties shall, in good faith, attempt to
mutually agree upon the Common Stock FMV. If the parties are unable to so
agree within thirty (30) days following their receipt of such
determination, the parties shall appoint a mutually
2
acceptable Independent Appraiser to determine the Common Stock FMV. In such
case, the determinations made by the Company's Board of Directors, the
Independent Appraiser appointed by Mucosal and the Independent Appraiser
jointly appointed by the parties shall be compared, and the Common Stock
FMV shall be the middle determination (and not an average thereof). Any
Independent Appraiser appointed by Mucosal or appointed jointly by Mucosal
and the Company shall be subject to an obligation of confidentiality in
favor of the Company and shall disclose to Mucosal only its determination
of the Common Stock FMV.
1.4 "Common Stock Warrant" means a common stock warrant to acquire common
--------------------
stock of the Company, to be issued by the Company as provided herein,
substantially in the form set forth in Appendix A hereto.
1.5 "Confidential Information" means any and all information (in any and
------------------------
every form and media) not generally known in the relevant trade or industry,
which was obtained from any party or any Affiliate thereof in connection with
this Agreement or the respective rights and obligations of the parties
hereunder, including, without limitation, (a) information relating to trade
secrets of such party or any Affiliate thereof, (b) information relating to
existing or contemplated products, services, technology, designs, processes,
formulae, research and development (in any and all stages) of such party or any
Affiliate thereof, (c) information consisting of or relating to the Mucosal
Technology or the Licensed Products, and (d) information relating to business
plans, methods of doing business, sales or marketing methods, customer lists,
customer usages and/or requirements and supplier information of such party or
any Affiliate thereof, except that "Confidential Information" shall not include
------ ------------------------
any information which (i) at the time of disclosure, is generally known in the
relevant trade or industry, (ii) after disclosure, becomes part of the public
knowledge (by publication or otherwise) in the relevant trade or industry other
than by breach of this Agreement by the receiving party, (iii) the receiving
party can verify by written documentation was in its possession at the time of
disclosure and which was not obtained, directly or indirectly, from the other
party or any Affiliate thereof, (iv) the receiving party can verify by written
documentation results from research and development by the receiving party or
any Affiliate thereof independent of disclosures by the other party or any
Affiliate thereof or (v) the receiving party can prove was obtained from any
Person who had the legal right to disclose such information, provided that such
--------
information was not obtained to the knowledge of the receiving party or any
Affiliate thereof by such Person, directly or indirectly, from the other party
or any Affiliate thereof on a confidential basis.
1.6 "Control" means, with respect to any Mucosal Patent Rights or Mucosal
-------
Know-How, the possession of the ability to grant a license or sublicense with
respect thereto as provided for herein.
1.7 "FDA" means the United States Food and Drug Administration or any
---
successor agency thereof.
3
1.8 "Governmental Approval" means any and all approvals, licences,
---------------------
registrations or authorizations, including pricing approval, of any Federal,
State or local agency, department, bureau or other governmental entity, foreign
or domestic, necessary for the manufacture, use, storage, import, transport and
sale of the Licensed Products in any regulatory jurisdiction.
1.9 "Licensed Product" means any pharmaceutical product, or part thereof,
----------------
the manufacture, use, import, offer for sale or sale of which (i) would infringe
one of the issued, valid unexpired claims or one of the pending claims contained
in the Mucosal Patent Rights in any country or (ii) involves use of the Mucosal
Know-How.
1.10 "Mucosal Know-How" means any and all technology, manufacturing and
----------------
other know-how, technical information, inventions, discoveries, methods,
specifications and trade secrets owned at any time or Controlled by Mucosal
relating to the Mucosal Patent Rights or any research development, manufacture
or use of any Licensed Products, or any invention, discovery or development with
respect thereto (excluding any and all technology, manufacturing and other know-
how, technical information, inventions, discoveries, methods, specifications and
trade secrets owned or Controlled by any Person which becomes a successor or
permitted assignee of Mucosal hereunder and which are owned or Controlled by
such Person immediately prior to its becoming such successor or permitted
assignee).
1.11 "Mucosal Patent Rights" means all Patents (i) which have issued as of
---------------------
the date of this Agreement or which issue at any time from applications pending
as of the date of this Agreement, and which are listed in Appendix B hereto, or
(ii) which have issued or issue at any time in any foreign country and provide
corresponding or equivalent patent protection to the Patents described in the
foregoing clause (i), except for any such Patents which are not subject to this
Agreement pursuant to Section 5.1.6 hereof, (iii) which are improvements
containing one or more claims dominated by existing Patents described in the
foregoing clause (i) or (ii) which are owned or Controlled after the Effective
Date by Mucosal during the term of this Agreement, (iv) which are owned or
Controlled after the Effective Date by Mucosal during the term of this Agreement
claiming inventions necessary or useful to the development, manufacture, use or
sale of the Licensed Products (excluding all Patents owned or Controlled by any
Person which becomes a successor or permitted assignee of Mucosal hereunder and
which are owned or Controlled by such Person immediately prior to its becoming
such successor or permitted assignee), or (v) which are conceived or reduced to
practice in the course of the Biomodels Research Agreement.
1.12 "Mucosal Technology" means the Mucosal Know-How and Mucosal Patent
------------------
Rights.
1.13 "NDA" means a complete New Drug Application and all supplements
---
thereto filed with the FDA, including all documents, data and other information
concerning a Licensed Product which are necessary for, or included in, FDA
approval to market such Licensed Product as more fully defined in 21 C.F.R.
(S)314.5 et seq., as amended from time to time.
------
4
1.14 "Net Sales" means gross receipts received by the Company and/or the
---------
Company's Affiliates or sublicensees for sale of the Licensed Products, less the
sum of the following (collectively, "Permitted Deductions"):
--------------------
(i) discounts and rebates allowed in amounts customary in the
trade;
(ii) sales taxes, customs and tariff duties and/or use taxes
directly imposed and with reference to particular sales;
(iii) transportation and delivery charges (including insurance
premiums related to transportation and delivery) prepaid or allowed;
(iv) amounts repaid, allowed or credited on returns;
(v) reasonable and customary commissions paid or allowed to
brokers, distributors, dealers, sales representatives and agents which are
not employees or Affiliates of the Company; and
(vi) license and sublicense fees payable to other Persons which are
not Affiliates of the Company, as described in Article III hereof.
In the event of any sale of the Licensed Products by the Company to any
Affiliate thereof for resale to its customers, "Net Sales" shall be based on the
---------
greater of the amount actually received by the Company from its Affiliate or the
amount actually received by such Affiliate from its customers for the sale of
the Licensed Products, less (in either such case) the Permitted Deductions.
----
If the Company or any of its Affiliates or sublicensees sells any Licensed
Products in combination with other items which are not Licensed Products ("Other
-----
Items") at a single invoice price, "Net Sales" for purposes of computing royalty
----- ---------
payments on the combination shall be determined as follows (where "selling
price" shall mean the list price of the selling entity):
(a) if all Licensed Products and Other Items contained in the
combination are available separately, "Net Sales" for purposes of
---------
computing royalty payments shall be determined by multiplying Net
Sales of the combination of the fraction A/A+B, where A is the selling
price of all Licensed Products in the combination and B is the selling
price of all Other Items in the combination;
(b) if the combination includes Other Items which are not sold
separately (but all Licensed Products contained in the combination are
available
5
separately), "Net Sales" for purposes of computing royalty payments
---------
shall be determined by multiplying Net Sales of the combination by
A/C, where A is as defined above and C is the selling price of the
combination;
(c) if the combination includes Licensed Products which are
not sold separately (but all Other Items contained in the combination
are available separately), "Net Sales" for purposes of computing
---------
royalty payments shall be determined by multiplying Net Sales of the
combination by the fraction (C-B)/C, where B and C are as defined
above; and
(d) if neither the Licensed Products nor the Other Items
contained in the combination are sold separately, "Net Sales" for Purposes
---------
of computing royalty payments shall be determined by multiplying Net Sales
of the combination by the fraction D/D+E, where D is the selling entity's
cost of manufacture of all Licensed Products in the combination and E is
the selling entity's cost of manufacture of all Other Items in the
combination, all as reasonably determined by the Company using United
States generally accepted accounting principles.
1.15 "Oral Mucositis" means a condition involving the destruction of the
--------------
oral mucosa due to, among other things, the administration of cancer
chemotherapy and/or radiation therapy.
1.16 "Patent" means (i) unexpired letters patent (including inventor's
------
certificates) which have not been held invalid or unenforceable by a court of
competent jurisdiction from which no appeal can be taken or has been taken
within the required time period, including, without limitation, any
substitution, extension, registration, confirmation, reissued, re-examination,
renewal or any like filing thereof, and (ii) pending applications for letters
patent, including without limitation any continuation, division or continuation-
in-part thereof and any provisional applications, and any foreign counterparts
and all patents that issue therefrom.
1.17 "Person" means any individual, estate, trust, partnership, joint
------
venture, association, firm, corporation or company, or governmental body, agency
or official, or any other entity.
1.18 "Royalty Credit Amounts" means [the confidential material contained
------------------------
herein has been omitted and has been separately filed with the Commission] of
each of the following amounts:
(i) [the confidential material contained herein has been omitted and
has been separately filed with the Commission]
6
(ii) [the confidential material contained herein has been omitted and
has been separately filed with the Commission]
For the purpose of determining Royalty Credit Amounts hereunder [the
confidential material contained herein has been omitted and has been separately
filed with the Commission]
1.19 "U.S. Dollars" and the sign "$" each means lawful currency of the
------------ -
United States of America.
SECTION 2. GRANT
2.1 Grant of License. Upon the terms and subject to the conditions herein
----------------
stated, Mucosal hereby grants the Company an exclusive, worldwide license under
the Mucosal Patent Rights and Mucosal Know-How to develop, make, use, import,
offer for sale and sell, and to have developed, made, used, imported, exported,
offered for sale and sold, the Licensed Products, with the right to grant
sublicenses, subject to Section 2.3 hereof.
2.2 Delivery of Mucosal Know-How. Mucosal shall promptly deliver to the
-----------------------------
Company originals or copies of all its records, data and documentation relating
to the Mucosal Know-How, including, without limitation, scientific data and
regulatory submissions and documentation, manufacturing processes, reagents,
expression systems, formulations and other relevant information.
2.3 Sublicenses. The Company agrees to include terms and conditions in
-----------
each sublicense agreement sufficient to enable the Company to comply with this
Agreement. The Company may select sublicensees on a commercially reasonable
basis based on the Company's good faith analysis of such sublicensee's ability
to perform and financial capability. The Company shall promptly forward to
Mucosal a copy of each executed sublicense agreement. The Company may not grant
any such sublicenses during the first one (1) year period of the term of this
Agreement without the prior written consent of Mucosal, which shall not be
unreasonably withheld. Mucosal hereby consents to the license to Biomodels
contained in Section 7.3 of the Biomodels Research Agreement.
7
SECTION 3. ROYALTIES AND OTHER PAYMENTS
For the rights, privileges and licenses granted hereunder, the Company
shall pay the following amounts to Mucosal in the manner hereinafter provided
during the term of this Agreement:
3.1 Initial License Fee. The Company shall pay to Mucosal an initial
-------------------
license fee consisting of (a) $200,000 in cash, which shall be paid on the
Effective Date, and (b) Common Stock Warrants to purchase 55,000 shares of
common stock of the Company, at a price of $1.82 per share, which shall be
delivered to Mucosal within thirty (30) days following the Effective Date.
3.2 Milestone and Royalty Obligations.
---------------------------------
3.2.1 Upon completion of preclinical studies establishing, by
statistically significant data, the efficacy of Licensed Product in animals, the
Company shall pay to Mucosal $100,000 in cash and deliver Common Stock Warrants
for the purchase of 82,305 shares of the common stock of the Company at a price
of $2.43 per share.
3.2.2 Upon the completion of the Phase III clinical trials for the
initial Licensed Product, the Company shall pay to Mucosal a milestone payment,
a portion of which shall be as determined by the Company and a portion of which
shall be as determined by Mucosal, as follows:
(i) the entire portion of the milestone to be determined by the
Company shall be, at the option of the Company, either (a) $250,000 in cash
or (b) Common Stock Warrants to purchase common stock of the Company having
a Common Stock FMV at the time of completion of such milestone of $312,500,
at a price per share equal to the Common Stock FMV per share at the time of
completion of such milestone; and
(ii) the entire portion of the milestone to be determined by
Mucosal shall be, at the option of Mucosal, either (a) $250,000 in cash or
(b) Common Stock Warrants to purchase common stock of the Company having a
Common Stock FMV at the time of completion of such milestone of $250,000,
at a price per share equal to the Common Stock FMV per share at the time of
completion of such milestone.
3.2.3 Upon the final approval by the FDA of the first NDA for the
initial Licensed Product, the Company shall pay to Mucosal a milestone payment,
a portion of which shall be as determined by the Company and a portion of which
shall be as determined by Mucosal, as follows:
(i) the entire portion of the milestone to be determined by the
Company shall be, at the option of the Company, either (a) $750,000 in cash
or (b) Common Stock
8
Warrants to purchase common stock of the Company having a Common Stock FMV
at the time of completion of such milestone of $937,500, at a price per
share equal to the Common Stock FMV per share at the time of completion of
such milestone; and
(ii) the entire portion of the milestone to be determined by
Mucosal shall be, at the option of Mucosal, either (a) $750,000 in cash or
(b) Common Stock Warrants to purchase common stock of the Company having a
Common Stock FMV at the time of completion of such milestone of $750,000,
at a price per share equal to the Common Stock FMV per share at the time of
completion of such milestone.
3.2.4 The Company shall pay to Mucosal royalties in the amount of [the
confidential material contained herein has been omitted and has been separately
filed with the Commission], except that the Company shall pay Mucosal the
greater of: (a) [the confidential material contained herein has been omitted and
has been separately filed with the Commission] or (b) [the confidential material
contained herein has been omitted and has been separately filed with the
Commission]. The Company shall be entitled to a credit against future royalties
otherwise payable by the Company to Mucosal hereunder in an amount equal to (x)
[the confidential material contained herein has been omitted and has been
separately filed with the Commission], and (y) the [the confidential material
contained herein has been omitted and has been separately filed with the
Commission] for the Common Stock Warrants and Preferred Stock Warrants delivered
by the Company, in each case pursuant Section 3.2 hereof; provided that such
--------
credit shall in no event reduce the royalties payable hereunder with respect to
any quarterly period below [the confidential material contained herein has been
omitted and has been separately filed with the Commission].
3.3 Limitation on Royalties. Notwithstanding anything to the contrary
-----------------------
contained herein, (a) no royalties shall be payable by the Company hereunder
with respect to [the confidential material contained herein has been omitted and
has been separately filed with the Commission] and (b) no multiple royalties
shall be payable in the event that [the confidential material contained herein
has been omitted and has been separately filed with the Commission].
3.4 Royalties to Third Persons. If the Company obtains a license under
--------------------------
any patent or other rights with a third Person in order for the Company to
develop, make, use, import, offer for sale or sell, or to have developed, made,
used, imported, offered for sale or sold, the Licensed Products, then the
Company shall be entitled to a credit against the royalty payments otherwise due
to Mucosal hereunder in an amount equal to the royalty payments and/or other
amounts payable by the Company to such third Person, provided that (a) all such
--------
credits shall not exceed
9
in the aggregate [the confidential material contained herein has been omitted
and has been separately filed with the Commission] of the royalty payments
otherwise due to Mucosal hereunder and (b) the royalties payable hereunder with
respect to any quarterly period shall in no event be reduced by reason of such
credits to an amount which is less than [the confidential material contained
herein has been omitted and has been separately filed with the Commission] of
the Net Sales of the Licensed Products by the Company and its sublicensees
(other than Mucosal, its Affiliates and sublicensees) for such quarterly period.
3.5 Withholding Taxes. The parties acknowledge and agree that there may
-----------------
be deducted from any payments or royalties otherwise due and payable hereunder
any taxes or other payments required to be withheld under applicable law with
respect to such payments or royalties or otherwise relating to the Licensed
Products. The Company shall promptly submit to Mucosal any official receipt
received by the Company for such tax or other payments.
SECTION 4. PAYMENT OF ROYALTIES, ACCOUNTING FOR
ROYALTIES, RECORDS, ETC.
4.1 Payment. Royalties payable hereunder shall be paid within 30 days
-------
after the end of each calendar quarter, based on the Net Sales of the Licensed
Products by the Company and its Affiliates during the preceding calendar
quarter. Such payments shall be accompanied by a statement in reasonable detail
setting forth the number, description and calculation of Net Sales, Permitted
Deductions, royalties and applicable exchange rates of the Licensed Products.
Except as otherwise provided in Section 4.3 hereof, late payments shall be
subject to an interest charge of one and one-half percent (1 1/2%) per month
from the day such amounts were first due until paid.
4.2 Accounting; Foreign Currency. Net Sales of the Licensed Products
----------------------------
used for computing the royalties payable hereunder shall be computed in U.S.
Dollars, and all payments of such royalties shall be made in U.S. Dollars. For
purposes of determining the amount of royalties due, the amount of the Net Sales
of the Licensed Products and sublicensing revenue, if any, in any foreign
currency shall be computed by converting such amounts into U.S. Dollars at the
prevailing commercial rate of exchange for purchasing U.S. Dollars, as quoted
in The Wall Street Journal, on the last business day of the calender quarter
------------------------
with respect to which such royalty payment is payable hereunder.
4.3 Records. The Company shall keep, and shall require its Affiliates
-------
and sublicensees to keep, for five (5) years complete and accurate records of
the Net Sales of the Licensed Products sold by the Company and its Affiliates
and sublicensees in sufficient detail to allow the royalties payable by the
Company hereunder to be accurately determined. Mucosal shall have the right for
a period of five (5) years after receiving any report or statement with respect
to royalties due and payable hereunder by the Company to appoint an independent
accounting firm to inspect and audit the relevant records of the Company and its
Affiliates to verify such report or statement. The Company and its Affiliates
shall make their records available for inspection and audit by such independent
accounting firm during regular business hours at such place or places where such
records are customarily kept, upon reasonable notice to
10
the Company, to the extent reasonably necessary to verify the accuracy of the
reports and payments required hereunder. The Company shall promptly pay any
shortfall, plus interest at the prime rate, as quoted in The Wall Street
---------------
Journal, from the original due date(s) to the date of payment; provided that if
-------
it shall be determined that the Company intentionally underpaid any such
amounts, the Company shall pay interest on the portion of the shortfall which
was intentionally underpaid from the original due date(s) to the date of payment
at the rate provided in the last sentence of Section 4.1 hereof. The cost of any
such inspection and audit shall be paid by Mucosal, unless such inspection and
audit discloses for any calendar quarter examined that there shall have been a
discrepancy of greater than five percent (5%) between the royalties payable
hereunder by the relevant party and the royalties actually paid by the Company
with respect to such calendar quarter, in which case the Company shall be
responsible for the payment of the entire cost of such inspection and audit.
SECTION 5. PATENT PROSECUTION; DEVELOPMENT
5.1 Patent Prosecution and Maintenance.
----------------------------------
5.1.1 Mucosal shall diligently prosecute and maintain the Mucosal
Patent Rights listed on Appendix B in the United States using counsel of its own
choice, provided that the Company shall have no reasonable objection to such
counsel.
5.1.2 For the United States patent application listed on Appendix
B, after the Effective Date, Mucosal shall be responsible for attorneys' fees
and the Company shall be responsible for United States Patent Office fees and
other reasonable out-of-pocket expenses. After the Effective Date, the
reasonable cost of preparing, filing, prosecuting and maintaining all other
Mucosal Patent Rights including reasonable attorney's fees and out of pocket
expenses shall be borne by the Company, who shall reimburse Mucosal within
thirty (30) days of Mucosal's invoice. Mucosal shall provide the Company with
copies of all relevant documentation so that the Company may be informed and
appraised of the continuing prosecution, and the Company agrees to keep this
documentation confidential.
5.1.3 The Company shall have the right to obtain corresponding
patent protection on the U.S. Mucosal Patent Rights in foreign countries if
available and if it so desires. The Company must notify Mucosal within ten (10)
months of the filing date of the corresponding United States application of
those countries in which it desires to obtain foreign patents. The absence of
instructions in writing from the Company to Mucosal shall be considered an
election by the Company not to secure foreign patent rights.
5.1.4 The preparation, filing and prosecuting of all foreign
patent applications filed in accordance with Section 5.1.3 and the maintenance
of all resulting patents shall be at the sole expense of the Company, as
provided in Section 5.1.2. Such patents shall be held in the name of Mucosal
and shall be obtained using counsel of Mucosal's choice, provided that the
Company shall have no reasonable objection to such counsel.
11
5.1.5 The Company's obligation to pay such costs and expenses for
foreign patent rights filed at its request shall continue for so long as this
Agreement remains in effect; provided, however, that the Company may terminate
its obligations with respect to any foreign patent application or patent upon
three (3) months' written notice to Mucosal. Mucosal may continue prosecution
and/or maintenance of such application(s) or patent(s) at its sole discretion
and expense; provided, however, that the Company shall have no further right or
licenses thereunder.
5.1.6 Mucosal shall have the right to file patent applications at
its own expense in any country in which the Company has not elected to secure
such rights, and such application and resultant patents shall not be subject to
this Agreement.
5.2 Development.
-----------
The Company shall have full control and authority over research,
development, registration and commercialization of the Licensed Product and all
such activity shall be undertaken at the Company's expense. The Company shall
exercise its reasonable efforts and diligence in developing and commercializing
Licensed Product and in undertaking investigations and actions required to
obtain appropriate governmental approvals to market Licensed Product, and the
Company represents and warrants that it intends to promptly develop Licensed
Product, and thereafter to seek approval to sell and market a Licensed Product.
In addition: (i) the Company shall enter into the Biomodels Research Agreement
and shall remain in compliance with the Biomodels Research Agreement and make
all payments thereunder; (ii) should the Company fail to complete preclinical
trials, in a manner sufficient to trigger the milestone payment in Section
3.2.1, on or before December 31, 2000 due to the Company's failure to exercise
commercially reasonable efforts to accomplish such milestone by such date; or
(iii) should there fail to be an NDA approval of a Licensed Product in a manner
sufficient to trigger the milestone payment in Section 3.2.3 on or before
December 31, 2007 due to the Company's failure to exercise commercially
reasonable efforts to accomplish such milestone by such date; then Mucosal shall
have the right to terminate this Agreement under Section 12.2.
The Company shall keep Mucosal informed of progress of the Company's
efforts to develop and commercialize Licensed Product. Mucosal shall have the
right to contact a representative of the Company periodically by telephone to
discuss the Company's progress with the development of a Licensed Product and
sales of such Licensed Product once launched. The Company shall designate an
appropriate employee as a contact person for Mucosal, and such employee shall be
familiar with the details and progress of the Company's development and
marketing program relating to Licensed Product, and shall be instructed to
respond to reasonable inquiries made by Mucosal. In addition, on or before
March 1 of each year after the Effective Date until the Company launches a
Licensed Product, the Company shall make a written annual summary report to
Mucosal covering the preceding year ending December 31, regarding the progress
of the Company toward commercial use of Licensed Products. Such report shall
include, as a minimum, information sufficient to enable Mucosal to ascertain
progress by the
12
Company towards the development and commercial sale of Licensed Products. All
information disclosed by the Company to Mucosal under this provision shall be
deemed the Confidential Information of the Company.
SECTION 6. REPRESENTATIONS AND WARRANTIES
6.1 By the Company. The Company hereby represents and warrants to
--------------
Mucosal that, as of the Effective Date: (a) the Company has full legal right,
power and authority to execute, deliver and perform its obligations under this
Agreement, (b) the execution, delivery and performance by the Company of this
Agreement do not contravene or constitute a default under any provision of
applicable law or its certificate of incorporation or by-laws (or equivalent
documents) or of any agreement, judgment, injunction, order, decree or other
instrument binding upon the Company, except that as of the Effective Date the
Company has not authorized any shares of common stock of the Company which may
be covered by Common Stock Warrants which may be issued pursuant to Section
3.2.2 or 3.2.3 hereof, (c) all licenses, consents, authorizations and approvals,
if any, required for the execution, delivery and performance by the Company of
this Agreement have been obtained and are in full force and effect and all
conditions thereof have been complied with, and no other action by or with
respect to, or filing with, any governmental authority or any other Person is
required in connection with the execution, delivery and performance by the
Company of this Agreement, except that as of the Effective Date the Company has
not authorized any shares of common stock of the Company which may be covered by
Common Stock Warrants which may be issued pursuant to Section 3.2.2 or 3.2.3
hereof, and (d) this Agreement constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms. The
Company agrees that, if and when Common Stock Warrants are to be issued as a
part of a milestone payment pursuant to Section 3.2.2 or 3.2.3 hereof, the
Company will duly authorize the shares of common stock to be covered by such
Common Stock Warrants.
6.2 By Mucosal. Mucosal hereby represents and warrants to the Company
----------
that, as of the Effective Date: (a) Mucosal has full legal right, power and
authority to execute, deliver and perform its obligations under this Agreement,
(b) the execution, delivery and performance by Mucosal of this Agreement do not
contravene or constitute a default under any provision of applicable law or of
its articles of incorporation or by-laws (or equivalent documents) or of any
agreement, judgment, injunction, order, decree or other instrument binding upon
Mucosal, (c) all licenses, consents, authorizations and approvals, if any,
required for the execution, delivery and performance by Mucosal of this
Agreement have been obtained and are in full force and effect and all conditions
thereof have been complied with, and no other action by or with respect to, or
filing with, any governmental authority or any other Person is required in
connection with the execution, delivery and performance by Mucosal of this
Agreement, (d) Mucosal is the exclusive owner of all legal and beneficial right,
title and interest in and to the Mucosal Patent Rights and the Mucosal Know-How,
free and clear of any lien, claim or encumbrance or rights of any other Person,
(e) to the best knowledge of Mucosal, the practice of the Mucosal Patent Rights
and/or the Mucosal Know-How as contemplated by Section 2.1 hereof does not
infringe or violate any
13
United States patent or other right of any Person, and Mucosal has no actual
knowledge that such practice infringes or violates any foreign patent or other
foreign right of any other Person, and (f) this Agreement constitutes a valid
and binding agreement of Mucosal, enforceable against Mucosal in accordance with
its terms.
6.3 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties contained herein shall survive the execution, delivery and
performance of this Agreement by the parties, notwithstanding any investigation
at any time made by or on behalf of any party or parties.
SECTION 7. INFRINGEMENT AND INDEMNIFICATION
7.1 Infringement Claims.
-------------------
(a) In the event that Mucosal or the Company becomes aware of actual
or threatened infringement of a Mucosal Patent Right, that party shall promptly
notify the other party in writing. The Company shall have the first right, but
not the obligation, to bring, at its own expense, an infringement action against
any third Person infringing the Mucosal Patent Rights and to use Mucosal's name
in connection therewith and to name Mucosal as a party thereto, without expense
to Mucosal. In the event that the Company has exercised its right to bring an
action, the Company shall be responsible for defending against any counterclaims
alleging invalidity or unenforceability of a Mucosal Patent Right, and for
prosecuting the action through to settlement or other final disposition. If the
Company does not commence a particular infringement action within ninety (90)
days of receipt of the notice of infringement, then Mucosal, after notifying the
Company in writing, shall have the right, but not the obligation, to bring such
infringement action at its own expense, and at its option to join the Company as
a party plaintiff without expense to the Company, and Mucosal shall be
responsible for defending against any counterclaims alleging invalidity or
unenforceability of a Mucosal Patent Right. The party conducting such action
shall have full control over its conduct, including settlement thereof subject
to Section 7.1(d). In any event, Mucosal and the Company shall provide
reasonable assistance to one another and shall reasonably cooperate in any such
litigation at the expense of the requesting party. The Company shall reimburse
Mucosal for any out-of-pocket costs it incurs at the Company's request as part
of an action brought by the Company irrespective of whether Mucosal shall become
a co-party, excluding fees of independent counsel, if any, retained by Mucosal.
Mucosal shall reimburse the Company for any out-of-pocket costs it incurs at
Mucosal's request as part of an action brought by Mucosal irrespective of
whether the Company shall become a co-party, excluding fees of independent
counsel, if any, retained by the Company. Mucosal and the Company shall recover
their respective actual out-of-pocket expenses, or equitable proportions
thereof, associated with any litigation or settlement thereof from any recovery
made by any party. Any excess amount shall be shared [equally] between the
Company and Mucosal, provided if the Company brings such action at its own
expense, Mucosal's share of the excess amount shall not exceed the royalties
which would otherwise be due Mucosal for the
14
sales of Licensed Products that were the subject of the litigation had such
sales been made by the Company or its Affiliates under this Agreement.
(b) In the event of the institution of any suit by a third Person,
against Mucosal, the Company or their Affiliates or sublicensees for patent
infringement involving the Mucosal Patent Rights in the field of Oral Mucositis,
the party sued shall promptly notify the other party in writing. The Company
shall have the right, but not the obligation, to defend such suit at its own
expense. Mucosal shall provide reasonable assistance to the Company and
reasonably cooperate in any such litigation at the Company's request, and the
Company shall reimburse Mucosal for its reasonable out-of-pocket expenses
incurred with respect to the provision of such assistance, excluding fees of
independent counsel, if any, retained by Mucosal.
(c) In the event that any third Person (other than an Affiliate or
sublicensee) initiates any legal or administrative proceeding in any country
challenging the validity, scope or enforceability of a Mucosal Patent Right
which, if successful, would result in a loss of one or more claims of existing
Mucosal Patent Rights with respect to any Licensed Product in the field of Oral
Mucositis and, as a result of such loss, the Mucosal Patent Rights would no
longer offer substantial protection to such Licensed Products in such country,
and the Company exercises its rights pursuant to Section 7.1(a) or (b) to defend
or enforce the Mucosal Patent Rights, then [the confidential material contained
herein has been omitted and has been separately filed with the Commission] of
the Company's royalty obligation in Section 3.2.4 that shall be based on such
Patent during the pendency of defense or enforcement in the proceeding shall be
held in an interest bearing escrow account by the Company until a final decision
shall be rendered by a court or administrative tribunal of competent
jurisdiction from which no appeal can be or is taken, provided that:
(i) If the enforceability of all material claims in such Patent
claiming the Licensed Product is upheld by a court or other legal or
administrative tribunal from which no appeal is or can be taken, then the amount
of royalties owed under Section 3.2.4 but withheld during the period of escrow,
plus all accrued interest, shall be promptly paid to Mucosal; or
(ii) If one or more claims in such Patent covering Licensed
Product are held to be invalid or otherwise unenforceable by a court or other
legal or administrative tribunal in any country from which no appeal is or can
be taken or the scope thereof is modified and, as a result, such Patent no
longer offers substantial protection to Licensed Product in such country, then
the amount of royalties which would have been withheld during the period of
escrow shall not be owed to Mucosal; the Company shall be entitled to all
payments and accrued interest in the escrow account; and the royalties otherwise
payable to Mucosal hereunder shall be abated in their entirety with respect to
Net Sales of Licensed Product in the country in which such claims were so held
invalid or unenforceable or so modified.
15
(d) The parties shall keep one another informed of the status of and
of their respective activities regarding any litigation or settlement thereof
concerning the Mucosal Patent Rights or Licensed Product, provided however that
no settlement or consent judgment or other voluntary final disposition of any
suit defended or action brought by a party pursuant to this Section 7.1 may be
entered into without the consent of the other party, if such settlement would
require the other party to be subject to an injunction or to make a monetary
payment or would materially affect the scope of coverage of the claims of, or
the enforceability or validity of a Mucosal Patent Right, or would otherwise
adversely affect the other party's rights under this Agreement, such consent not
to be unreasonably withheld.
7.2 Indemnification.
---------------
7.2.1 Indemnification by the Company.
------------------------------
(a) The Company hereby agrees that it shall be responsible for,
indemnify, hold harmless and defend Mucosal and Mucosal's Affiliates, Xxxxxxx
and Women's Hospital Inc. and their respective directors, officers, managing
members, shareholders, partners, attorneys, accountants, agents, employees and
consultants, and their respective heirs, successors and assigns (collectively,
the "Mucosal Indemnitees"), from and against any and all claims, demands,
-------------------
losses, liabilities, damages, costs and expenses (including the cost of
settlement, reasonable legal and accounting fees and any other expenses for
investigating or defending any actions or threatened actions) (collectively,
"Losses") suffered or incurred by any Mucosal Indemnitee arising out of,
-------
relating to, resulting from or in connection with (a) the breach of any
representation or warranty made by the Company herein, (b) the default by the
Company in the performance or observance of any of its obligations to be
performed or observed hereunder, and (c) any action, suit or other proceeding,
or compromise, settlement or judgment, relating to any of the foregoing matters
with respect to which the Mucosal Indemnitees are entitled to indemnification
hereunder. The foregoing shall not apply to the extent that such Losses are due
to the willful misconduct or negligence of any Mucosal Indemnitee as finally
determined by a court of competent jurisdiction.
(b) The Company shall indemnify, defend and hold harmless the Mucosal
Indemnitees from and against any and all Losses suffered or incurred by any
Mucosal Indemnitee, arising out of, relating to, resulting from or in connection
with any claims, suits, actions, demands or judgments arising out of any theory
of product liability (including, but not limited to, actions in form of tort,
warranty, or strict liability) concerning any Licensed Product made, used or
sold pursuant to any right or license granted under this Agreement. The
Company's indemnification obligation under the preceding sentence shall not
apply to any Losses to the extent attributable to the negligence or willful
misconduct of the Indemnitees as finally determined by a court of competent
jurisdiction. The Company's liability for indemnification with respect to
Losses under this Section 7.2.1(b) shall in no event exceed the amount of
insurance coverage required to be maintained by the Company with respect
thereto. Beginning at the time any Licensed Product is being commercially
distributed or sold (other than
16
for the purpose of obtaining regulatory approvals) by the Company or by an
Affiliate, sublicensee or agent of the Company, the Company shall, at its sole
cost and expense, obtain and/or maintain, at its sole cost and expense, product
liability insurance and contractual liability coverage, in amounts,
respectively, which are reasonable and customary in the U.S. pharmaceutical
industry for companies of comparable size and activities, with a minimum of ten
million U.S. dollars (U.S. $10,000,000) per occurrence (or claim) and annual
aggregate limit of liability. Such product liability insurance shall insure
against personal injury, physical injury, or property damage arising out of the
manufacture, sale, distribution, or marketing of Licensed Product and shall name
Mucosal as an additional named insured. During clinical trials of any Licensed
Product, the Company, at its sole cost and expense, shall procure and maintain
product liability insurance in such equal or lesser amount as Mucosal shall
require, naming Mucosal as an additional insured.
(c) The Company shall provide Mucosal with written evidence of such
insurance or such self insurance program upon request of Mucosal. The Company
shall provide Mucosal with written notice at least fifteen (15) days prior to
the cancellation, non-renewal or material change in such insurance; if the
Company does not obtain replacement insurance providing reasonably comparable
coverage within such fifteen (15) day period, Mucosal shall have the right to
terminate this Agreement effective at the end of such fifteen (15) day period
without notice or any additional waiting periods.
(d) The Company shall maintain such comprehensive general liability
and product liability insurance, either through a commercial provider or a
comparable self insurance program, beyond the expiration or termination of this
Agreement during (i) the period that any product, process, or service, relating
to, or developed pursuant to, this Agreement is being commercially distributed
or sold by the Company or by the sublicensee, Affiliate or agent of the Company
and (ii) a reasonable period after the period referred to in (d)(i) above which
in no event shall be less than five (5) years.
7.2.2 Indemnification by Mucosal. Mucosal hereby agrees that it
--------------------------
shall be responsible for, indemnify, hold harmless and defend the Company and
the Company's Affiliates, and their respective directors, officers, managing
members, shareholders, partners, attorneys, accountants, agents, employees and
consultants, and their respective heirs, successors and assigns (collectively,
the "Company Indemnitees"), from and against any and all Losses suffered or
-------------------
incurred by any Company Indemnitee arising out of, relating to, resulting from
or in connection with (a) the breach of any representation or warranty made by
Mucosal herein, (b) the default by Mucosal in the performance or observance of
any of its obligations to be performed or observed hereunder, and (c) any
action, suit or other proceeding, or compromise, settlement or judgment,
relating to any of the foregoing matters with respect to which the Company
Indemnitees are entitled to indemnification hereunder. The foregoing shall not
apply to the extent that such Losses are due to the willful misconduct or
negligence of any Company Indemnitee as finally determined by a court of
competent jurisdiction.
7.2.3 Notice of Claims. In the event that a claim is made
----------------
pursuant to
17
Section 7.2.1 or 7.2.2 above against any party which seeks indemnification
hereunder (the "Indemnitee"), the Indemnitee agrees to promptly notify the other
----------
party (the "Indemnitor") of such claim or action and, in the case of any claim
----------
by a third Person against the Indemnitee, the Indemnitor may, at its option,
elect to assume control of the defense of such claim or action; provided,
however, that (a) the Indemnitee shall be entitled to participate therein
(through counsel of its own choosing) at the Indemnitee's sole cost and expense,
(b) the Indemnitor shall not settle or compromise any such claim or action
without the prior written consent of the Indemnitee, unless such settlement or
compromise includes a general release of the Indemnitee and all of the other
Mucosal Indemnitees or Company Indemnitees, as the case may be, from any and all
liability with respect thereto and (c) the Indemnitee shall cooperate with the
Indemnitor in the defense of such claim or action.
SECTION 8. CONFIDENTIALITY
8.1 The parties each recognize that the Confidential Information of the
party and any and all Affiliates thereof constitutes valuable confidential and
proprietary information. Accordingly, the parties each agree that they and their
respective Affiliates shall, during the term of this Agreement and for a period
of fifteen (15) years after the termination hereof for any reason, hold in
confidence all Confidential Information of the other party (including this
Agreement and the terms hereof) and not use the same for any purpose other than
as set forth in this Agreement nor disclose the same to any other Person except
------
to the extent that it is necessary for such party to enforce its rights under
this Agreement or if required by law or any governmental authority (including,
without limitation, any stock exchange upon which such party's shares or other
equity securities may be traded); provided, however, if any party shall be
-------- -------
required by law to disclose any such Confidential Information to any other
Person, such party shall give prompt written notice thereof to the other party
and shall minimize such disclosure to the amount required. Notwithstanding the
foregoing, either party may disclose Confidential Information of the other (a)
to such party's attorneys, accountants and other professional advisors under an
obligation of confidentiality to such party, (b) to such party's banks or other
financial institutions or venture capital sources for the purpose of raising
capital or borrowing money or maintaining compliance with agreements,
arrangements and understandings relating thereto, and (c) to any Person who
proposes to purchase or otherwise succeed (by merger, operation of law or
otherwise) to all of such party's right, title and interest in, to and under
this Agreement, if such Person agrees to maintain the confidentiality of such
Confidential Information pursuant to a written agreement in form and substance
reasonably satisfactory to the parties. The standard of care required to be
observed hereunder shall be not less than the degree of care which each party or
Affiliate thereof uses to protect its own information of a confidential nature.
SECTION 9. INTELLECTUAL PROPERTY; IMPROVEMENTS
9.1 Rights to Proprietary Technology. Neither party shall through this
--------------------------------
Agreement obtain any rights to the other party's proprietary technology except
for such rights as are expressly granted or allocated under this Agreement.
18
9.2 Improvements. Any improvement to the Mucosal Technology discovered
------------
or developed by any party during the term of this Agreement shall be owned
solely by Mucosal and shall be automatically included within the Mucosal
Technology licensed to the Company hereunder; provided that, in the event that
--------
the Company does not elect to practice or use such improvement by written notice
to Mucosal within [six (6)] months after receipt of notice of such improvement
from Mucosal, the Company shall have no further right or license to such
improvement hereunder. Mucosal agrees to give the Company prompt written notice
of any improvement to the Mucosal Technology discovered or developed by Mucosal
during the term of this Agreement.
SECTION 10. LIMITATIONS ON LIABILITY
10.1 No Warranties. Except as expressly set forth in Section 6 hereof,
-------------
neither party makes any representations or warranties as to any matter
whatsoever. EACH PARTY HEREBY DISCLAIMS ANY AND ALL OTHER REPRESENTATIONS AND
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE MUCOSAL TECHNOLOGY AND THE
LICENSED PRODUCTS, INCLUDING , WITHOUT LIMITATION, ANY WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE.
10.2 Limitations of Liability. EXCEPT FOR BREACH OF SECTION 8 HEREOF,
------------------------
UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR ANY
OTHER PERSON FOR ANY LOSS OF PROFITS OR SPECIAL, CONSEQUENTIAL OR INDIRECT
DAMAGES OF ANY KIND WHATSOEVER.
10.3 Force Majeure. No party shall be liable for failure or delay in
-------------
performing any of its obligations hereunder if such failure or delay is
occasioned by compliance with any governmental regulation, request or order, or
by circumstances beyond the reasonable control of the party so failing or
delaying, including, without limitation, Acts of God, war, insurrection, fire,
flood, accident, labor strikes, work stoppage or slowdown (whether or not such
labor event is within the reasonable control of the parties), or inability to
obtain raw materials, supplies, power or equipment necessary to enable such
party to perform its obligations hereunder. Each party shall (a) promptly
notify the other party in writing of any such event of force majeure, the
expected duration thereof and its anticipated effect on the ability of such
party to perform its obligations hereunder, and (b) make reasonable efforts to
remedy any such event of force majeure.
19
SECTION 11. NON -USE OF NAMES
Neither party shall use the name of the other party nor the name of any
Affiliates, managers, directors, officers, partners, shareholders, members,
consultants or employees of such other party, nor any adaptation thereof, in any
advertising, promotional or sales literature without prior written consent
obtained from such other party in each case (which consent shall not be
unreasonably withheld or delayed).
SECTION 12. TERM AND TERMINATION
12.1 Term. This Agreement shall be effective from the Effective Date
----
and, unless sooner terminated in accordance with the provisions of this Section
12, shall continue until the later to occur of (i) 20 years from the date of
this Agreement or (ii) the last to expire of any Patent included within the
Mucosal Patent Rights.
12.2 Events of Default. Each party shall have the right to terminate
-----------------
this Agreement upon the occurrence of any of the following events (each, an
"Event of Default") with respect to the other party (the "Defaulting Party"):
----------------- ----------------
(a) a decree or order shall have been entered by a court of competent
jurisdiction adjudging the Defaulting Party bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization, readjustment, arrangement,
composition or similar relief for the Defaulting Party under any bankruptcy law
or any other similar applicable statute, law or regulation, or a decree or order
of a court of competent jurisdiction shall have been entered for the appointment
of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency
of the Defaulting Party or a substantial part of its property, or for the
winding up or liquidation of its affairs; or (b) the Defaulting Party shall
institute proceedings to be adjudicated a voluntary bankrupt, or shall consent
to the filing of a bankruptcy petition against it, or shall file a petition or
answer or consent seeking reorganization, readjustment, arrangement,
composition, liquidation or similar relief under any bankruptcy law or any other
similar applicable statute, law or regulation, or shall consent to the
appointment of a receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of it or of a substantial part of its property, or shall make an
assignment for the benefit of creditors, or shall be unable to pay its debts
generally as they become due; or (c) the Defaulting Party shall commit a
material breach of the terms of this Agreement and the same and all of its
effects shall not be remedied within ninety (90) days after written notice
thereof is given by the other party to the Defaulting Party, except that the
remedial period shall be thirty (30) days for any monetary default. The failure
by the Company to pay Mucosal any royalties or other payments when due and
payable in accordance with the provisions of Section 3 hereof shall be deemed a
material breach of this Agreement.
12.3 Termination. Each party may terminate this Agreement upon the
-----------
occurrence of any Event of Default by giving written notice thereof to the other
party, which notice shall specifically identify the reason(s) for such
termination. If the Company shall terminate this Agreement by notice based on
an Event of Default by Mucosal, the Biomodels Research
20
Agreement will automatically terminate in accordance with the provisions
thereof, termination of both Agreements to be effective immediately on such
notice. In addition, (i) the Company may terminate this Agreement at any time by
giving at least ninety (90) days' prior written notice to Mucosal, (ii) if the
Company shall exercise its rights under the Biomodels Research Agreement to
terminate because of an event of default thereunder by Biomodels, the Company
shall also have the right to terminate this Agreement by notice to Mucosal at
the same time, and, if such notice is given, termination of both Agreements
shall be effective immediately on such notice; (iii) if the Company shall
exercise its rights under the Biomodels Research Agreement to terminate
unilaterally on ninety (90) days' notice, this Agreement shall automatically
terminate, termination of both Agreements to be effective as of ninety (90) days
after such notice by the Company; and (iv) if Biomodels shall exercise its
rights under the Biomodels Research Agreement to terminate because of an event
of default thereunder by the Company, this Agreement shall automatically
terminate as of the effective date of termination of the Biomodels Research
Agreement.
12.4 Consequences of Termination. Upon the termination of this Agreement
---------------------------
for any reason other than (a) an Event of Default with respect to Mucosal, or
(b) termination of one or both of the Other Agreements by reason of a default
by Biomodels LLC thereunder, all rights, privileges and licenses granted by
Mucosal to the Company hereunder, including the Mucosal Patent Rights, shall
revert to Mucosal. The termination of this Agreement for any reason shall be
without prejudice to (i) the right of each party to receive all amounts accrued
under Section 3 hereof prior to the effective date of such termination, (ii) the
rights and obligations of the parties pursuant to Sections 1, 4.3, 7.2, 8, 10,
12.4 and 13 hereof, and (iii) any other remedies as may now or hereafter be
available to any party, whether under this Agreement or otherwise. Upon the
termination of this Agreement (a) the Company and its Affiliates and
sublicensees shall immediately discontinue the manufacture, use and sale of the
Licensed Products, and (b) each party and its Affiliates shall immediately cease
the use of all Confidential Information obtained from the other party or any
Affiliate thereof.
SECTION 13. MISCELLANEOUS
13.1 Notices. All payments in the form of Warrants, notices, reports
-------
and/or other communications made in accordance with this Agreement, shall be
deemed to be duly made or given (i) when delivered by hand, (ii) three days
after being mailed by registered or certified mail (air mail if mailed
overseas), return receipt requested, or (iii) when received by the addressee, if
sent by facsimile transmission or by Express Mail, Federal Express or other
express delivery service (receipt requested), in each case addressed to such
party at its address set forth below (or to such other address as such party may
hereafter designate as to itself by notice to the other party hereto):
21
In the case of the Company:
OraPharma, Inc.
000 Xxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: President
Telecopier: (000) 000-0000
With a copy to:
Xxxxx Xxxxxx Xxxxxxxxx Radin
Tischman Xxxxxxx & Xxxxx, P.A.
Xxx Xxxxxxxxxx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: Xxx X. Xxxxxxxxx, Esq.
Telecopier: (000) 000-0000
In the case of Mucosal:
Mucosal Therapeutics LLC
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Manager
Telecopier: (000) 000-0000
With a copy to:
Xxxxx, Xxxxxxx & Xxxxxxxx LLP
High Street Tower
000 Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: B. Xxxx Xxxxxxxxx, Esq.
Telecopier: (000) 000-0000
13.2 Amendments, etc.. This Agreement may not be amended or modified,
----------------
nor may any right or remedy of any party be waived, unless the same is in
writing and signed by such party or a duly authorized representative of such
party. The waiver by any party of the breach of any term or provision hereof by
any other party shall not be construed as a waiver of any other subsequent
breach.
13.3 No Waiver; Remedies. No failure or delay by any party in
-------------------
exercising any of its rights or remedies hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or remedy
preclude any other or further exercise thereof or the exercise
22
of any other right or remedy. The rights and remedies of the parties provided in
this Agreement are cumulative and not exclusive of any rights or remedies
provided by law.
13.4 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties and their respective heirs, legal
representatives, successors and permitted assigns; provided that, except as
--------
expressly provided herein, neither party may assign or otherwise transfer this
Agreement or any of its rights, duties or obligations hereunder without the
prior written consent of the other party.
13.5 Relationship of Parties. The Company and Mucosal are not (and
-----------------------
nothing in this Agreement shall be construed to constitute them) partners, joint
venturers, agents, representatives or employees of the other party, nor to
create any relationships between them other than that of an independent
contractor. Neither party shall have any responsibility or liability for the
actions of the other party except as specifically provided herein. Neither
party shall have any right or authority to bind or obligate the other party in
any manner or make any representation or warranty on behalf of the other party.
13.6 Expenses. Unless otherwise provided herein, all costs and expenses
--------
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party which shall have incurred the same and the
other party shall have no liability relating thereto.
13.7 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes all prior proposals, communications,
representations and agreements, whether oral or written, with respect to the
subject matter hereof.
13.8 Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions hereof in any other jurisdiction.
13.9 Counterparts. This Agreement may be signed in any number of
------------
counterparts, each of which shall be deemed an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
13.10 Headings. The headings used in this Agreement are for convenience
--------
of reference only and shall not affect the meaning or construction of this
Agreement.
13.11 Governing Law. This Agreement, including the performance and
-------------
enforceability hereof, shall be governed by and construed in accordance with the
laws of the State of New York, without reference to choice of law doctrine.
Each party hereby submits itself for the sole purpose of this Agreement and any
controversy arising hereunder to the jurisdiction of the courts
23
located in the State of New York and any courts of appeal therefrom, and waives
any objection (on the grounds of lack of jurisdiction, or forum non conveniens
----- --- ----------
or otherwise) to the exercise of such jurisdiction over it by any such courts.
13.12 Arbitration. Except as expressly provided herein, any dispute,
-----------
controversy or claim arising out of or relating to this Agreement, its validity,
construction or enforceability or the breach of any of the terms or provisions
hereof shall be settled by arbitration under the American Arbitration
Association by a panel of three arbitrators, one selected by each party and the
third selected by the other two arbitrators. Any arbitration proceeding
commenced by either party shall be held in the New York City, New York
metropolitan area (including northern New Jersey). The decision of the
arbitrators shall be final and binding upon the parties and judgment upon the
decision by the arbitrators may be entered in any court of competent
jurisdiction, and execution may be had thereon. The expense of such
arbitration, including attorneys' fees, shall be allocated between the parties
as the arbitrators may decide and as the claims and interests of each party may
prevail. Notwithstanding anything to the contrary contained in this Section
13.12, any dispute, controversy or claim relating to actual or threatened
unauthorized use or disclosure of any Confidential Information, or the validity,
applicability, enforceability or infringement of any patent rights, shall not be
required to be submitted to arbitration hereunder and shall be resolved by a
court of competent jurisdiction and, in addition, each party shall retain the
right to seek injunctive or other temporary relief from a court of competent
jurisdiction.
13.13 Patent Marking. The Company agrees that all packaging containing
----- --------------
Licensed Product in the form sold by the Company, any Affiliate, or a
sublicensee shall be marked with the number of the applicable Mucosal Patent
Rights licensed hereunder in accordance with 35 U.S.C.(S)287.
13.14 Export Control. The Company acknowledges that it is subject to
--------------
United States laws and regulations controlling the export of technical data,
computer software and other commodities and agrees not to export or allow the
export or re-export of such data, software or other commodities in violation of
such laws and regulations.
13.15 Compliance with Laws. In performing this Agreement each party
--------------------
hereto agrees to comply with all applicable laws, rules, regulations and
policies and to obtain any governmental approvals, permits or licenses required
to perform its obligations under this Agreement.
24
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
MUCOSAL THERAPEUTICS LLC
By: [signature illegible]
-------------------------------
Manager
ORAPHARMA, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
-------------------------------
President/CEO
25
Appendix A
----------
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED PURSUANT TO SUCH ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
ORAPHARMA, INC.
STOCK WARRANT AGREEMENT
-----------------------
GRANTEE: Mucosal Therapeutics LLC
DATE OF GRANT:
NUMBER OF SHARES:
EXERCISE PRICE: $___ per share
EXPIRATION DATE: [____ years from issuance]
----------------- --------------------------
Pursuant to the License Agreement dated as of _________, 1998 (the "License
-------
Agreement") by and between Mucosal Therapeutics LLC ("Mucosal") and OraPharma,
--------- -------
Inc. (the "Company"), the Company has agreed to grant to Mucosal, as of the Date
-------
of Grant set forth above, a warrant (the "Warrant") to purchase up to the
-------
aggregate number of shares of Common Stock, par value $.001 per share (the
"Common Stock"), of the Company set forth herein at the price per share set
-------------
forth herein, all upon the terms and conditions hereof. This Stock Warrant
Agreement is hereinafter referred to as either the "Agreement" or this
"Warrant".
TERMS AND CONDITIONS
--------------------
1. Grant and Exercise of Warrant. (a) The Company hereby grants to
-----------------------------
Mucosal, and Mucosal is entitled, upon the terms and subject to the conditions
hereinafter set forth, to purchase, from the Company, _____ shares of the
Company's Common Stock (the "Warrant Shares") at a purchase price of $______ per
--------------
share (the "Exercise Price"). This Warrant shall be fully vested as of the date
--------------
hereof. This Warrant may not be exercised after the Expiration Date set forth
above.
26
(b) This Warrant may not be exercised at a time when the exercise
thereof or the issuance or transfer of shares upon such exercise would, in the
opinion of the Board of Directors of the Company, constitute a violation of any
law, federal, state, local or foreign, or any regulations thereunder, or the
requirements of the New York Stock Exchange or any other national securities
exchange or market.
2. Procedure for Exercise. (a) This Warrant may be exercised, in whole
----------------------
or part, by Mucosal by delivering a written notice (the "Notice") to the
------
Secretary of the Company. This Warrant may not be exercised for any fractional
share. The Notice shall (i) state that Mucosal elects to exercise the Warrant;
(ii) state the number of Warrant Shares with respect to which the Warrant is
being exercised; and (iii) include the reaffirmation of the representations and
warranties of Mucosal set forth in Section 3 below.
(b) Payment of the aggregate Exercise Price for such Warrant Shares
shall be made in cash or by certified check payable to the Company in an amount
equal to the aggregate Exercise Price of the Warrant Shares with respect to
which this Warrant is being exercised.
(c) The Company shall issue a stock certificate in the name of Mucosal
for such Warrant Shares as soon as practicable after receipt of the Notice and
payment of the aggregate Exercise Price for such Warrant Shares. Mucosal shall
not have any privileges as a stockholder of the Company with respect to any
Warrant Shares until such Warrant Shares shall be registered on the books of the
Company in the name of Mucosal.
3. Representations and Warranties. Mucosal acknowledges, represents and
------------------------------
warrants to the Company as follows:
(a) In connection with its exercise of the Warrant, it will consult
with such independent legal counsel or other advisors considered appropriate to
it to assist it in evaluating its proposed investment in the Company. Without
limiting the foregoing, Mucosal acknowledges that there may be certain adverse
tax consequences to it in connection with its exercise of the Warrant and the
Company has advised Mucosal to seek the advice of experts in such areas prior to
exercising the Warrant.
(b) Mucosal shall own the Warrant, and shall purchase the Warrant
Shares, for its own account for investment, and not with a view to or for resale
in connection with the distribution thereof, nor with any present intention of
selling or otherwise disposing of all or any part of the Warrant or Warrant
Shares. Mucosal agrees that it must bear the economic risk of its investment
for an indefinite period of time because, among other reasons, any Warrant
Shares purchased by it upon exercise of the Warrant may not be registered under
the Securities Act of 1933, as amended (the "Act") or under the securities laws
---
of certain states and, therefore, cannot be Transferred unless they are
subsequently registered under the Act and under applicable securities laws of
such states or an exemption from such registration is
27
available. Mucosal understands that the Company is under no obligation to
register this Warrant and/or the Warrant Shares on Mucosal's behalf or to assist
it in complying with any exemption from such registration under the Act or any
state securities laws. Furthermore, Mucosal hereby acknowledges and agrees that
it will not Transfer, either publicly or privately, the Warrant or the Warrant
Shares without registration thereof under the Act or an exemption therefrom. For
purposes of this Agreement, the term "Transfer" means to directly or indirectly
--------
sell, assign, transfer, pledge (other than a pledge to the Company), hypothecate
or to otherwise encumber or dispose of any record or beneficial ownership of the
Warrant or Warrant Shares (or contract to do any of the foregoing).
(c) Mucosal understands that the Warrant and the Warrant Shares are
speculative investments which involve a high degree of risk of loss of its
entire investment in the Company. Mucosal can afford (i) to hold unregistered
securities for an indefinite period of time; and (ii) to sustain a complete loss
of the entire amount of its investment in the Company and, at the same time,
bear any tax liability which may result if its investment in the Company is
lost. Mucosal has determined that the Warrant (and, upon exercise of the
Warrant, will determine with respect to the Warrant Shares) is a suitable
investment and it has the financial ability to bear the economic risk of its
investment in the Company (including its possible total loss), has adequate
means for providing for its current needs and personal contingencies and has no
need for liquidity with respect to its investment in the Company.
(d) Mucosal is an "accredited investor", as defined in Rule 501 under
the Act.
(e) Mucosal has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Warrant and the Warrant Shares and making an informed and
reasoned investment decision, and has obtained, in its judgment, sufficient
information from the Company to evaluate the merits and risks of an investment
in the Company.
(f) Mucosal has been given the opportunity to ask questions of, and
receive answers from, the Company concerning the Company and other matters
pertaining to this investment, and to obtain any additional information
necessary to verify the accuracy of any information provided, and has not been
furnished any offering literature or prospectus and has not received any general
solicitation or general advertising regarding the purchase of any Common Stock.
Mucosal has been furnished with all additional documents and information
requested by it.
(g) Mucosal is aware that there is no assurance as to the future
performance of the Company. No representations or warranties of any kind have
been made to Mucosal by the Company or any officer, employee, agent or affiliate
of the Company.
(h) Mucosal understands that the Warrant is, and the Warrant Shares
will be, issued pursuant to a specific exemption under the provisions of the Act
and exemptions under
28
various state securities laws, which exemptions may depend, among other things,
upon Mucosal's investment intent. Mucosal understands that the availability of
such exemptions is in part dependent upon the truthfulness and accuracy of the
representations made by it herein and that the Company will rely on such
representations in issuing the Warrant and the Warrant Shares to Mucosal.
Mucosal acknowledges and agrees that each time it exercises the Warrant and
purchases Warrant Shares, and as a condition to such purchase, it shall re-state
and reaffirm all of the representations and warranties set forth above, unless
the Warrant Shares shall then be subject to an effective registration statement
under the Act and applicable state securities laws. Notwithstanding the
foregoing, even if Mucosal does not so re-state and reaffirm as required, upon
each exercise of the Warrant it will automatically be deemed to have so re-
stated and reaffirmed.
4. Stock Dividends, Splits, Etc. In the event the Common Stock is
-----------------------------
changed by reason of a stock split, reverse stock split, stock dividend or
recapitalization (exclusive of any public or private sales of Capital Stock of
the Company), or is converted into or exchanged for other securities as a result
of a merger, consolidation or reorganization in which the Company is the
surviving corporation, appropriate adjustments shall be made in the terms of
this Warrant, or additional warrants shall be granted to Mucosal as shall be
equitable and appropriate, or an adjustment in the number and class of shares
allocated to, and the Exercise Price of, the Warrant shall be made.
5. Certain Extraordinary Transactions. In the event the Common Stock is
----------------------------------
exchanged for securities, cash or other property of any other corporation or
entity as the result of a reorganization, merger or consolidation in which the
Company is not the surviving corporation, the dissolution or liquidation of the
Company, or the sale of all or substantially all the assets of the Company, the
Board of Directors of the Company or the board of directors of any successor
corporation or entity shall, as to the unexercised portion of this Warrant, (a)
provide for payment of an amount equal to the excess of the fair market value of
the Warrant Shares, as determined by the Board of Directors of the Company or
such board, over the Exercise Price of such Warrant Shares as of the date of the
transaction, in exchange for the surrender of the right to exercise the Warrant,
or (b) provide for the assumption of the Warrant, or the substitution therefor
of new warrants, by the successor corporation or entity.
6. Restriction on Transfer of Warrant. The Warrant may not be
----------------------------------
Transferred in any way by Mucosal. The Warrant shall not be subject to
execution, attachment or similar process. Any attempted Transfer of the Warrant
contrary to the provisions hereof, and the levy of any execution, attachment or
similar process upon the Warrant, shall result in the immediate termination of
the Warrant. If requested in writing by the managing underwriters, if any, of
any public offering, Mucosal shall not offer, sell, contract to sell or
otherwise dispose of any of the Warrant Shares except as part of such public
offering within 30 days before or 180 days after the effective date of the
registration statement filed with respect to
29
said offering.
7. Right of First Offer. (a) If, prior to the date of the initial public
--------------------
offering of shares of the Common Stock, Mucosal desires to Transfer to any
third-party all or any part of the Warrant Shares pursuant to the terms of a
bona fide offer received from a third party, Mucosal shall first submit a
written offer (the "Offer") to sell such Warrant Shares (the "Offered Shares")
----- --------------
to the Company on terms and conditions, including price, not less favorable to
the Company then those on which Mucosal proposes to sell such Warrant Shares to
such third party. The Offer shall disclose the identity of the proposed
purchaser, specify the number of Offered Shares proposed to be sold, the total
number of Offered Shares owned by Mucosal, and the agreed terms and conditions
of the sale and any other material facts relating to the sale.
(b) The Company shall have the right to purchase all or any portion of
the Offered Shares on the same terms and conditions specified in the Offer.
(c) If the Company desires to purchase all or any portion of the
Offered Shares, the Company shall communicate in writing its election to
purchase (an "Acceptance") to Mucosal, which Acceptance shall be delivered to
----------
Mucosal within 30 days of the Company's receipt of the Offer.
(d) If the Company elects to purchase all or any of the Offered
Shares, sale of the Offered Shares to be so purchased pursuant to this Section
shall be made at the offices of the Company on the 30th day following the
expiration of the 30-day period applicable pursuant to paragraph (c) of this
Section (or if such 30th day is not a business day, then on the next succeeding
business day). Such sales shall be effected by Mucosal's delivery to the
Company of a certificate or certificates evidencing the Offered Shares to be
purchased by it, duly endorsed for Transfer to the Company, which Offered Shares
shall be delivered free and clear of all liens, charges, claims and encumbrances
of any nature whatsoever, against payment to Mucosal of the purchase price
therefor by the Company. Payment for the Offered Shares shall be made as
provided in the Offer or by wire transfer or certified check.
(e) If the Company does not elect to purchase all of the Offered
Shares, then the Offered Shares not so purchased may be sold by Mucosal at any
time within 150 days after the Company's receipt of the Offer. Any such sale
shall be upon terms and conditions, including price, not less favorable to
Mucosal than those specified in the Offer, and the purchaser or transferee (and
all subsequent purchasers or transferees) shall be subject to all the terms of
this Agreement. Any Offered Shares not sold within such 150-day period shall
continue to be subject to the requirements of a first offer by the Company
pursuant to this Section.
8. Restrictive Legends. Stock certificates representing the Warrant
-------------------
Shares shall bear such legend or legends as the Board of Directors of the
Company shall deem appropriate.
30
9 Miscellaneous.
-------------
(a) Jurisdiction. Each party hereby submits itself for the sole
------------
purpose of this Agreement and any controversy arising hereunder to the exclusive
jurisdiction of the courts located in the State of New York, and any courts of
appeal therefrom, and waives any objection (on the grounds of lack of
jurisdiction, or forum non conveniens or otherwise) to the exercise of such
jurisdiction over it by any such courts.
(b) Governing Law. This Agreement and all amendments, modifications,
-------------
alterations, or supplements hereto, and the rights of the parties hereunder,
shall be construed under and governed by the laws of the State of New York and
the United States of America, without regard to the principles of conflicts of
law thereof.
(c) Notices. All notices, consents and other communications required
-------
or which may be given under this Agreement shall be deemed to have been duly
given (i) when delivered by hand, (ii) three (3) days after being mailed by
registered or certified mail, return receipt requested, or (iii) when received
by the addressee, if sent by facsimile transmission (with acknowledgment of
complete transmission) or by Express Mail, Federal Express or other express
delivery service (receipt requested), in each case addressed to the Company at
its principal place of business and to Mucosal its address as listed on the
books and records of the Company (or in either case to such other address as
such party may hereafter designate as to itself by notice to the other party
hereto).
(d) Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective legal
representatives, successors and permitted assigns.
(e) Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the Company and Mucosal with respect to the subject matter hereof and
shall not be modified, amended or terminated except as herein provided or except
by another agreement in writing executed by the parties hereto.
(f) Headings. The Section headings are for convenience only and are
--------
not a part of this Agreement.
(g) Severability. All rights and restrictions contained herein may be
------------
exercised and shall be applicable and binding only to the extent that they do
not violate any applicable laws and are intended to be limited to the extent
necessary so that they will not render this Agreement illegal, invalid or
unenforceable. If any provision or portion of any provision of this Agreement
not essential to the commercial purpose of this Agreement shall be held to be
illegal, invalid or unenforceable by a court of competent jurisdiction, it is
the intention of the parties that the remaining provisions or portions thereof
shall constitute their agreement with respect to the subject matter hereof, and
all such remaining provisions or portions thereof shall
31
remain in full force and effect. To the extent legally permissible, any illegal,
invalid or unenforceable provision of this Agreement shall be replaced by a
valid provision agreeable to the parties hereto which will implement the
commercial purpose of the illegal, invalid or unenforceable provision. In the
event that any provision essential to the commercial purpose of this Agreement
is held to be illegal, invalid or unenforceable and is not replaced by a valid
provision which will implement the commercial purpose of this Agreement and
which is agreed to the parties hereto in writing within 30 days following such
holding, this Agreement and the rights granted herein shall terminate.
(h) Waiver; Remedies. The failure of any party hereto to require
----------------
performance hereunder, or the written waiver by any party hereto of any breach
of this Agreement, shall not prevent the subsequent enforcement thereof nor be
deemed a waiver of any subsequent breach.
(i) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original and both of which together shall
constitute one instrument.
(j) Expenses; Further Assurances. Unless otherwise provided herein,
----------------------------
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party which shall have
incurred the same, and the other party shall have no liability relating thereto.
Without limiting the generality of any provision of this Agreement, each party
agrees that upon request of any other party, it shall, from time to time, do any
and all other acts and things as may reasonably be required to carry out its
obligations hereunder, to consummate the transactions contemplated hereby, and
to effectuate the purposes hereof.
IN WITNESS WHEREOF, the parties have executed this Stock Warrant Agreement
as of the ___ day of ________, ____.
MUCOSAL THERAPEUTICS LLC
By:
-----------------------------------
Name:
Title:
ORAPHARMA, INC.
By:
-----------------------------------
Name:
Title:
32
