EXHIBIT 99
CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE
BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
LICENSE AGREEMENT
between
VICAL INCORPORATED
and
CYTRX CORPORATION
LICENSE AGREEMENT
THIS AGREEMENT (this "Agreement") effective as of December 7, 2001,
(the "Effective Date") between Vical Incorporated, a corporation organized and
existing under the laws of Delaware ("Vical") and CytRx Corporation, a
corporation organized and existing under the laws of Delaware ("CytRx")
collectively referred to hereinafter as the Parties.
WITNESSETH:
WHEREAS, CytRx has developed CytRx Know-How (as hereinafter defined)
and has rights to Patent Rights (as hereinafter defined), collectively referred
to as CytRx Poloxamer Intellectual Property (as hereinafter defined); and
WHEREAS, CytRx has exclusively licensed to Merck & Co. ("Merck") CytRx
Poloxamer Intellectual Property in a certain field ("Merck License"), a copy of
which is attached hereto as Addendum 1.0; and
WHEREAS, Vical desires to obtain a license under the CytRx Poloxamer
Intellectual Property, upon the terms and conditions set forth herein and CytRx
desires to grant such a license;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
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Unless specifically set forth to the contrary herein, the following
terms, whether used in the singular or plural, shall have the
respective meanings set forth below:
1.1 The term "Affiliate" shall mean (i) any corporation or business entity
of which fifty percent (50%) or more of the securities or other
ownership interests representing the equity, the voting stock or
general partnership interest are owned, controlled or held, directly or
indirectly, by Vical or CytRx; or (ii) any corporation or business
entity which, directly or indirectly, owns, controls or holds fifty
percent (50%) (or the maximum ownership interest permitted by law) or
more of the securities or other ownership interests representing the
equity, the voting stock or, if applicable, the general partnership
interest, of Vical or CytRx.
1.2 The term "Calendar Quarter" shall mean the respective periods of three
(3) consecutive calendar months ending on March 31, June 30,
September 30 and December 31.
1.3 The term "Calendar Year" shall mean each successive period of twelve
(12) consecutive calendar months commencing on January 1 and ending
on December 31.
1.4 The term "CytRx Know-How" shall mean information and materials,
including but not limited to, discoveries, Improvements, processes,
formulas, data, know-how and trade secrets, patentable or otherwise,
which during the term of this Agreement (i) are in
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CytRx's possession or control, (ii) are not generally known, (iii) are
necessary or useful to Vical in connection with the research,
development, manufacture, marketing, use or sale of TranzFect and/or
Licensed Products in the Field in the Territory including regulatory
filings and/or any information necessary or useful for regulatory
filings, and (iv) CytRx has the right to provide to Vical.
1.5 The term "CytRx Poloxamer Intellectual Property" shall mean (i) Patent
Rights; and (ii) CytRx Know-How.
1.6 The term "Field" shall mean the use of CytRx Poloxamer Intellectual
Property in polynucleotide-based therapeutics and prophylactics
(including DNA, RNA, viral, and all other biologically active natural
and synthetic polynucleotides such as antisense (including antisense
polynucleotides containing phosphothioester moieties) and CpG
materials) alone or in combination with a protein or peptide antigen as
part of a prime / boost regime, for all human and animal health
applications, except for the following:
a) those fields of use currently licensed to Merck, as described in
the Merck License,
b) DNA vaccines and / or therapeutics based on PSMA (as defined in
Section 1.17 hereof),
c) sale of a non-regulated product for use as a non-clinical research
reagent to increase transfection in vitro or in laboratory animals.
For the avoidance of any doubt, CytRx shall be free to license the
CytRx Poloxamer Intellectual Property in therapeutics and prophylactics
(including prime-boost regimes) that do not include polynucleotides.
1.7 The term "First Commercial Sale" shall mean, with respect to any
Licensed Product, the first sale for end use or consumption of such
Licensed Product in a country after all required approvals, including
marketing and pricing approvals, have been granted by the governing
health authority of such country.
1.8 The term "Improvement" shall mean any enhancement by CytRx in the
synthesis or manufacture of TranzFect.
1.9 The term "Licensed Product(s)" shall mean preparations in final form
(including all components used as part of a prime - boost regime) for
sale by prescription, over-the-counter or any other method, for use in
the Field, and which contain TranzFect.
1.10 The term "Major Pharmaceutical Markets" shall mean any of the
United States, Canada, France, Germany, Italy, Spain, the
United Kingdom or Japan.
1.11 The term "Net Sales" shall mean the gross invoice price of Licensed
Product sold by Vical, its Affiliates or sublicensees (which term does
not include distributors) to the first independent third party after
deducting, if not previously deducted, in the amount invoiced or
received:
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(a) trade and quantity discounts;
(b) returns, rebates and allowances;
(c) chargebacks and other amounts paid on sale or dispensing of
Licensed Product;
(d) retroactive price reductions that are actually allowed or
granted;
(e) sales commissions paid to distributors and/or selling agents
but not the actual sales force;
(f) a fixed amount equal to five percent (5%) of the gross invoice
price to cover bad debt, sales or excise taxes, transportation
and insurance charges and additional special transportation,
custom duties, and other governmental charges;
(g) standard inventory cost of devices or delivery systems other
than syringes used for dispensing or administering Licensed
Product which accompany Licensed Product as it is sold.
1.12 The term "Parties" shall mean CytRx, Vical, and all successors arising
from merger, consolidation, changes in control, reorganization, or
similar transaction.
1.13 The terms "Patent Rights" shall mean (i) all US and foreign patents and
patent applications owned by or licensed to CytRx during the term of
this Agreement which claim or cover polyoxypropylene/polyoxyethylene
copolymer compounds or compositions or preparations of such compounds
which may be added to a Substance to enhance the performance of such
Substance or the manufacture, purification, formulation and use of such
compounds and materials comprising such compounds; or (ii) divisions,
continuations, continuations-in-part, reissues, renewals, extensions,
supplementary protection certificates, utility models and the like of
any such patents and patent applications and foreign equivalents
thereof.
1.14 The term "Phase I Study", "Phase IIb Study" , "Phase III Study", and
Biologics or Product License Application (also referred to as a PLA)
shall mean these terms as described in the laws and regulations of the
U.S. Food and Drug Administration of the Department of Health and Human
Services.
1.15 The term "PLA Approval" shall mean notification from a regulatory
authority in a country that all approvals for the marketing of Licensed
Product, including pricing approvals, have been granted.
1.16 The term "Proprietary Information" shall mean all Vical Know-How, CytRx
Know-How, and all other scientific, clinical, regulatory, marketing,
financial and commercial information or data, whether communicated in
writing or orally or by sensory detection, which is provided by one
party to the other party in connection with this Agreement.
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1.17 The term "PSMA" shall mean any polypeptide derived from the
prostate-specific membrane antigen which is a type II integral membrane
glycoprotein that is highly expressed in prostate cancer.
1.18 The term "Substance" shall mean any polynucleotide-based therapeutic or
prophylactic alone or in combination with a protein antigen as part of
a prime / boost regime for use in the Field, wherein the Substance
includes TranzFect.
1.19 The term "TranzFect" shall mean any polyoxypropylene/polyoxyethelene
copolymer compound or compositions or preparations of such compounds
claimed in or covered by CytRx Poloxamer Intellectual Property and/or
CytRx Know-How which may be added to Substance to enhance performance
of such Substance relative to use of the Substance without TranzFect.
1.20 The term "Territory" shall mean all of the countries in the world.
1.21 The term "Valid Patent Claim" shall mean a claim of an issued and
unexpired patent included within the CytRx Poloxamer Intellectual
Property, which has not been revoked or held unenforceable or invalid
by a decision of a court or other governmental agency of competent
jurisdiction, unappealable or unappealed within the time allowed for
appeal, and which has not been disclaimed, denied or admitted to be
invalid or unenforceable through reissue or disclaimer or otherwise.
1.22 The term "Vical Know-How" shall mean any Vical information and
materials, including but not limited to, discoveries, improvements,
processes, formulas, data, inventions, know-how and trade secrets,
patentable or otherwise, which during the term of this Agreement are
not generally known.
ARTICLE II
LICENSE; DEVELOPMENT AND COMMERCIALIZATION
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2.1 License Grant - CytRx Poloxamer Intellectual Property. CytRx hereby
-----------------------------------------------------
grants to Vical an exclusive license in the Territory with the right to
sublicense under CytRx Poloxamer Intellectual Property to research,
develop, make, have made, use, sell, offer to sell or import: (i)
TranzFect as it relates to use with Substance in the Field; and (ii)
Licensed Product(s).
2.2 [*****]
2.3 Exchange of Information
-----------------------
a. Initial Data Transfer. Within 10 days of the Effective Date, (the
------------------------
"Data Transfer Period") CytRx agrees to transfer to Vical the CytRx
Know-How listed in Addendum 3.0 hereof. During the 10 day Data Transfer
Period, Vical, but not CytRx, shall have the option to terminate this
Agreement at its sole discretion. If Vical exercises this option to
terminate, Vical agrees to return to CytRx all copies of CytRx Know-How
and destroy all documents containing any part thereof, and
notwithstanding other terms in this
[*****] Confidential portions of this page have been redacted and filed
separately with the Commission.
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Agreement, Vical further agrees to maintain CytRx Know-How in
confidence and to treat such CytRx Know-How as proprietary information
as described in Section 3.1 hereof. CytRx agrees that it will not enter
into any third party discussions pertaining to the license of TranzFect
in the Field during the Data Transfer Period.
b. Additional Data Transfer. During the term of this Agreement and so
------------------------
long as Vical continues to have an obligation to pay royalties to CytRx
under this Agreement, CytRx shall promptly disclose to Vical in
English, and in writing on an ongoing basis all CytRx Know-How not
previously disclosed.
c. Reports. During the term of this Agreement, and upon written request
-------
from CytRx, but not more than once per Calendar Year, Vical agrees to
provide CytRx with a written report summarizing research and
development activities related to the use of TranzFect in the Field
over the previous Calendar Year.
d. Sublicense Agreements. Vical shall provide to CytRx a copy of all
-------------------------
sublicense agreements pertaining to CytRx Intellectual Property within
30 days of execution, with the financial terms redacted.
2.4 Development and Commercialization Vical shall use reasonable efforts,
---------------------------------
at its own expense, to develop and commercialize a Licensed Product on
a commercially reasonable basis in such countries in the Territory
where in Vical's opinion it is commercially viable to do so.
2.5 Excused Performance. In addition to the provisions of Article VI
-------------------
hereof, the obligation of Vical with respect to any Licensed Product
under Section 2.4 are expressly conditioned upon the continuing absence
of any adverse condition or event relating to the safety or efficacy of
the Licensed Product, and the obligation of Vical to develop or market
any such Licensed Product shall be delayed or suspended so long as in
Vical's opinion any such condition or event exists.
ARTICLE III
CONFIDENTIALITY AND PUBLICATION
-------------------------------
3.1 Nondisclosure Obligation. All Proprietary Information disclosed by one
------------------------
party to the other party hereunder shall be maintained in confidence by
the receiving party and shall not be disclosed to a non-party or used
for any purpose except as set forth herein without the prior written
consent of the other party, except to the extent that such Proprietary
Information:
(a) is known by recipient at the time of its receipt, and not
through a prior disclosure by the disclosing party, as
documented by business records;
(b) is properly in the public domain;
(c) is subsequently disclosed to a receiving party by a third
party who may lawfully do so and is not under an obligation
of confidentiality to the disclosing party;
(d) is developed by the receiving party independently of
Proprietary Information received from the other party as
documented by business records;
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(e) is disclosed to governmental or other regulatory agencies in
order to obtain patents or to gain approval to conduct
clinical trials or to market Licensed Product, but such
disclosure may be only to the extent reasonably necessary to
obtain patents or authorizations;
(f) is deemed necessary or useful by Vical to be disclosed to
sublicensees, agents, consultants, Affiliates and/or other
third parties for the research and development, manufacturing
and/or marketing of TranzFect, Substance, or Licensed Product
(or for such parties to determine their interest in performing
such activities) in accordance with this Agreement on the
condition that such third parties agree to be bound by the
confidentiality obligations contained this Agreement, provided
the term of confidentiality for such third parties shall be no
less than ten (10) years; or
(g) is required to be disclosed by law or court order, provided
that notice is promptly delivered to the other party in order
to provide an opportunity to challenge or limit the disclosure
obligations.
3.2 CytRx Know-How. CytRx agrees to keep all CytRx Know-How confidential
--------------
subject to exception (b), (e) and (g) in Section 3.1 above. In
addition, CytRx may disclose CytRx Know-How to the extent such
disclosure is deemed necessary or useful by CytRx to be disclosed to
prospective and actual licensees, sublicensees, agents, consultants,
Affiliates and/or other third parties for the research and development,
manufacturing and/or marketing of [products other than] the Licensed
Products.
ARTICLE IV
PAYMENTS; ROYALTIES AND REPORTS
-------------------------------
4.1 Consideration for License. In consideration for the license granted
-------------------------
herein under the CytRx Poloxamer Intellectual Property upon the terms
and conditions contained herein, Vical shall pay to CytRx the
following:
Upon completion of the Initial Data Transfer as described in
Section 2.2, Three million seven hundred fifty thousand
dollars cash ($3,750,000) with such payment to be made by wire
transfer to the following:
[*****]
If CytRx has not received confirmation of transfer of the full
$3,750,000 by 5:00 PM E.S.T. on December 17, 2001, this license
agreement will automatically terminate.
4.2 Milestone Payments. Vical shall pay CytRx the following milestone
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payments on Licensed Products for human health applications only.
(a) [*****] upon commencement of the first Phase I Study for each of
the first and second Licensed Products
(b) [*****] upon commencement of the first Phase IIb Study or
Phase III Study for each of the first and second Licensed
Products
[*****] Confidential portions of this page have been redacted and filed
separately with the Commission.
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(c) [*****] upon filing of the first Biologics or Product License
Application for each of the first and second Licensed Products
(d) [*****] upon approval of the first Biologics or
Product License Application for each of the first and second
Licensed Products
4.3 [*****]
4.4 Royalties. Subject to the terms and conditions of this Agreement, Vical
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shall pay CytRx the following royalties for each of the first two
Licensed Products and / or bulk Substance (as set forth in Section
4.4.4) for human health applications. In the event one or both of the
first two Licensed Products (or bulk Substance) are used in a prime -
boost regime, and such regime includes both polynucleotide and protein
vaccines incorporating TranzFect, royalties will be owed to CytRx on
sales of the combined regime, however, the complete prime - boost
regime would be counted as one Licensed Product (or bulk Substance) for
the purposed of royalties owed to CytRx. In the event one or both of
the first two Licensed Products (or bulk Substance) are used in a
prime-boost regime, and TranzFect is not incorporated into all
pharmaceutically active components of the regime, (a "Combination
Product"), the Net Sales of the Licensed Product shall be determined by
multiplying the Net Sales of the Combination Product by the fraction,
A/A+B where A is the average sale price of the Licensed Product when
sold separately in finished form and B is the average sale price of the
other pharmaceutically active product(s) sold separately in finished
form. In the event that such average sale price cannot be determined
for both the Licensed Product and other pharmaceutically active
product(s) in combination, Net Sales for purposes of determining
payments shall be calculated by multiplying the Net Sales of the
Combination Products by the fraction C/C+D where C is Vical's cost of
goods of the Licensed Product and D is Vical's cost of goods of the
other pharmaceutically active product(s) determined in accordance with
the method of accounting normally employed by Vical in computing cost
of goods.
4.4.1 Royalties Payable By Vical.
--------------------------
(a) For Net Sales by Vical, its Affiliates or sublicensees of
Licensed Products which would, but for the license hereunder,
infringe a Valid Patent Claim, royalties based on the
following annual Net Sales aggregated separately for each
Licensed Product:
(a) For that portion of annual Net Sales up to two hundred
fifty million dollars ($250,000,000) a royalty
of [*****];
(b) For that portion of annual Net Sales exceeding two
hundred fifty million dollars ($250,000,000) but less
than or equal to five hundred million dollars
($500,000,000) a royalty of [*****];
(c) For that portion of annual Net Sales exceeding five
hundred million dollars ($500,000,000) a royalty
of [*****].
(b) For Net Sales of Licensed Products by Vical, its Affiliates or
sublicensees other than those covered in Subsection 4.4.1 (a)
above, a royalty calculated as set forth
[*****] Confidential portions of this page have been redacted and filed
separately with the Commission.
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in Section 4.4.1 (a), but only for a period of [*****] from
First Commercial Sale of the respective Licensed Product in
each country of the Territory.
(c) Royalties on each Licensed Product at the rate set forth above
shall be effective as of the date of First Commercial Sale of
a Licensed Product in a country and shall continue until
either the longer of (i) the expiration of the last applicable
patent on such Licensed Product in such country in the case of
sales under Subsection 4.4.1(a) above or (ii) until the
[*****] anniversary of the First Commercial Sale in such
country in the case of sales of Licensed Product under
Subsection 4.4.1(b) above, subject to the following
conditions:
(x) that only one royalty shall be due with respect to the
same unit of Licensed Product;
(y) that no royalties shall be due upon the sale or other
transfer among Vical, its Affiliates or sublicensees,
but in such cases the royalty shall be due and
calculated upon Vical's or its Affiliate's or its
sublicensee's Net Sales to the first independent third
party; and
(z) no royalties shall accrue on the disposition of
icensed Product in reasonable quantities by Vical,
ts Affiliates or sublicenses as samples (promotion
r otherwise) or as donations (for example, to
on-profit institutions or government agencies for a
on-commercial purpose).
4.4.2 Royalty Payable Under Managed Pharmaceutical Contract. It is understood
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by the Parties that Vical may sell Licensed Product(s) to an
independent third party (such as a retailer or wholesaler) and may
subsequently perform services relating to Licensed Product(s) and other
products under a managed pharmaceutical benefits contract or other
similar contract. In such cases, it is agreed by the Parties that Net
Sales shall be based on the invoice price to an independent retailer or
wholesaler, provided that such invoice price represents a fair market
price for such Licensed Products, notwithstanding that Vical may
receive compensation arising from the performance of such services.
4.4.3 Change in Sales Practices. The Parties acknowledge that during the term
-------------------------
of this Agreement, Vical's sales practices for the marketing and
distribution of Licensed Product may change to the extent to which the
calculation of the payment for royalties on Net Sales may become
impractical or even impossible. In such event the Parties agree to meet
and discuss in good faith new ways of compensating CytRx to the extent
currently contemplated under Section 4.1.
4.4.4. Royalties for Bulk Substance. In those cases where Vical sells bulk
Substance rather than Licensed Product in packaged form to an
independent third party, the royalty obligations of this Article
IV shall be applicable to the bulk Substance, provided that such
independent third party does not, directly or indirectly, sell such
bulk Substance back to Vical.
4.4.5 Royalty Reduction. [*****]
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[*****] Confidential portions of this page have been redacted and filed
separately with the Commission.
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4.4.6 Reports; Payment of Royalty. During the term of the Agreement following
---------------------------
the First Commercial Sale of a Licensed Product, Vical shall furnish to
CytRx a quarterly written report for the Calendar Quarter showing the
sales of all Licensed Products subject to royalty payments sold by
Vical, its Affiliates and its sublicensees in the Territory during the
reporting period and the royalties payable under this Agreement.
Reports shall be due on the sixtieth (60th) day following the close of
each Calendar Quarter. Royalties shown to have accrued by each royalty
report shall be due and payable on the date such royalty report is due.
Vical shall keep complete and accurate records in sufficient detail to
enable the royalties payable hereunder to be determined.
4.5 Audits.
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(a) Upon the written request of CytRx and not more than once in
each Calendar Year, Vical shall permit an independent
certified public accounting firm of nationally recognized
standing selected by CytRx and reasonably acceptable to Vical,
at CytRx's expense, to have access during normal business
hours to such of the records of Vical as may be reasonably
necessary to verify the accuracy of the royalty reports
hereunder for any year ending not more than twenty-four (24)
months prior to the date of such request. The accounting firm
shall disclose to CytRx only whether the royalty reports are
correct or incorrect and the specific details concerning any
discrepancies. No other information shall be provided to
CytRx.
(b) If such accounting firm correctly concludes that additional
royalties were owed during such period, Vical shall pay the
additional royalties within thirty (30) days of the date CytRx
delivers to Vical such accounting firm's written report so
correctly concluding. The fees charged by such accounting firm
shall be paid by CytRx. In the event the additional royalties
owed by Vical for the period audited exceed[*****] of
royalties due for said period and are at least one million
dollars (U.S. $ 1,000,000) Vical will reimburse CytRx for the
reasonable fees charged by the accounting firm.
(c) Vical shall include in each sublicense granted by it pursuant to
this Agreement a provision requiring the sublicensee to make
reports to Vical, to keep and maintain records of sales made
pursuant to such sublicense and to grant access to such records by
CytRx's independent accountant to the same extent required of
Vical under this Agreement. Upon the expiration of twenty-four
(24) months following the end of any Calendar Year, the
calculation of royalties payable with respect to such year shall
be binding and conclusive upon CytRx, and Vical and its
sublicensees shall be released from any liability or
accountability with respect to royalties for such Calendar Year.
(d) CytRx shall treat all financial information subject to review
under this Section 4.5 or under any sublicense agreement in
accordance with the confidentiality provisions of this Agreement,
and shall cause its accounting firm to enter into an acceptable
confidentiality agreement with Vical obligating it to retain all
such financial information in confidence pursuant to such
confidentiality agreement.
[*****] Confidential portions of this page have been redacted and filed
separately with the Commission.
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4.6 Payment Exchange Rate. All payments to be made by Vical to CytRx under
---------------------
this Agreement shall be made in United States dollars and may be paid
by check made to the order of CytRx or bank wire transfer in
immediately available funds to such bank account in the United States
designated in writing by CytRx from time to time. In the case of sales
outside the United States, the rate of exchange to be used in computing
the amount of currency equivalent in United States dollars shall be
made at the rate of exchange for the country in which such sales
occurred as published in the Wall Street Journal on the last business
day of the month in which such sales are recorded by Vical.
4.7 Income Tax Withholding. If laws, rules or regulations require
----------------------
withholding of income taxes or other taxes imposed upon payments set
forth in this Article IV, Vical shall make such withholding payments as
required and subtract such withholding payments from the payments set
forth in this Article IV. Vical shall submit appropriate proof of
payment of the withholding taxes to CytRx within a reasonable period of
time.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
5.1 Representation and Warranty. Except as disclosed to Vical prior to the
---------------------------
date of this Agreement, CytRx represents and warrants to Vical that as
of the date of this Agreement:
(a) to the best of CytRx's knowledge, the CytRx Poloxamer
Intellectual Property is owned by or licensed to CytRx and is
not invalid or unenforceable, in whole or in part;
(b) it has the full right, power and authority to enter into this
Agreement, and to grant the licenses granted under Article II
hereof;
(c) it has not previously assigned, transferred, conveyed or
otherwise encumbered its right, title and interest in CytRx
Poloxamer Intellectual Property in the Field;
(d) to the best of CytRx's knowledge, it is the sole and exclusive
owner or licensee of CytRx Poloxamer Intellectual Property in
the Field, all of which is free and clear of any liens,
charges and encumbrances, and no other person, corporate or
other private entity, or governmental entity or subdivision
thereof, has or shall have any claim of ownership with respect
to the CytRx Poloxamer Intellectual Property in the Field,
whatsoever;
(e) to the best of CytRx's knowledge, the licensed CytRx Poloxamer
Intellectual Property and the research, development,
manufacture, use, sale and/or import of TranzFect, do not
interfere with or infringe any intellectual property rights
owned or possessed by any third party;
(f) there are no claims, judgments or settlements against or owed
by CytRx or pending or threatened claims or litigation
relating to the CytRx Poloxamer Intellectual Property; and
(g) CytRx has disclosed to Vical all reasonably relevant
information regarding the CytRx Poloxamer Intellectual
Property licensed under this Agreement, including all patent
opinions obtained by CytRx related thereto.
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ARTICLE VI
PATENT PROVISIONS
-----------------
6.1 Filing, Prosecution and Maintenance of Patents. CytRx agrees to file,
----------------------------------------------
prosecute and maintain in the Major Pharmaceutical Markets, upon
appropriate consultation with Vical, the Patent Rights owned in whole
or in part by CytRx and licensed to Vical under this Agreement. In
addition, and to the extent legally available CytRx shall, at Vical's
request, file, prosecute and maintain such Patent Rights in other
countries, which costs shall be reimbursed by Vical within sixty (60)
days of receipt of invoices thereof and shall be creditable toward any
future royalty payments owed by Vical pursuant to Section 4.4 hereof.
These terms shall include the additional patent rights requested and
agreed to by Vical as described in the November 16, 2001 agreement
between CytRx and Vical and shall be included in this Agreement as
Addendum 4.0. CytRx shall keep Vical advised of the status of the
actual and prospective patent filings and shall provide advance copies
of any papers related to the filing, prosecution and maintenance of
such patent filings. Vical shall have the right to review and propose
recommendations regarding any submission to be made by CytRx in
connection with the filing, prosecution, and maintenance of the Patent
Rights, wherein CytRx agrees to consider such recommendations and not
unreasonably decide not to implement same, and Vical agrees to bear any
additional expenses or fees resulting therefrom. With respect to all
filings hereunder in the Major Pharmaceutical Markets, CytRx shall be
responsible for payment for all costs and expenses related to such
filings.
6.2 Option of Vical to Prosecute and Maintain Patents. CytRx shall give
-------------------------------------------------
notice to Vical of any desire by CytRx and to the extent applicable
Merck to cease prosecution and/or maintenance of Patent Rights and, in
such case, shall permit Vical, at its sole discretion, to continue
prosecution or maintenance at its own expense. If Vical elects to
continue prosecution or maintenance or file based on Company's election
not to file pursuant to Section 6.1 above, CytRx shall execute such
documents and perform such acts at CytRx's expense as may be reasonably
necessary for Vical to perform such prosecution or maintenance or
filing. All of the expenses and costs incurred by Vical to continue
prosecution and maintenance of Patent Rights shall be fully creditable
against royalties due under Article IV of this Agreement; provided
however, no royalty payment when due, regardless of the number of such
credits available to Vical in accordance with the terms of this
Agreement, shall be reduced by more than fifty percent (50%). Unused
credits may be carried over into subsequent royalty periods.
6.3. Interference, Opposition, Reexamination and Reissue.
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(a) CytRx shall, within ten (10) days of learning of such event,
inform Vical of any request for, or filing or declaration of any
interference, opposition, or reexamination relating to Patent
Rights. Vical and CytRx and to the extent applicable Merck shall
thereafter consult and cooperate fully to determine a course of
action with respect to any such proceeding. To the extent
applicable to the Field and the rights licensed hereunder, Vical
shall have the right to review and approve any submission to be
made in connection with such proceeding.
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(b) CytRx shall not institute any reexamination, or reissue proceeding
relating to Patent Rights without the prior written consent to
Vical, which consent shall not be unreasonably withheld.
(c) In connection with any interference, opposition, reissue, or
reexamination proceeding relating to Patent Rights, Vical and
CytRx will cooperate fully and will provide each other with any
information or assistance that either may reasonably request.
CytRx shall keep Vical informed of developments in any such action
or proceeding, including, to the extent permissible, the status of
any settlement negotiations and the terms of any offer related
thereto.
(d) So long as Vical continues to have an obligation to pay royalties
under this Agreement, CytRx shall bear the expense of any
interference, opposition, reexamination, or reissue proceeding
relating to Patent Rights. Otherwise, such expenses shall be borne
by Vical.
6.4 Enforcement and Defense Rights. Subject to the Merck License and the
------------------------------
rights granted to Merck and the obligations of CytRx thereunder,
CytRx agrees as follows:
(a) CytRx shall give Vical notice of either (i) any infringement
of Patent Rights, or (ii) any misappropriation or misuse of CytRx
Know-How, that may come to CytRx's attention. Vical and CytRx
shall thereafter consult and cooperate fully to determine a course
of action, including but not limited to the commencement of legal
action by either or any combination of Vical, Merck, and CytRx, to
terminate any infringement of Patent Rights or any
misappropriation or misuse of CytRx Know-How. However, CytRx, and
/ or Merck upon notice by CytRx to Vical, shall have the first
right to initiate and prosecute such legal action at CytRx's and /
or Merck's own expense and in the name of CytRx and, if necessary,
Merck and / or Vical, or to control the defense of any declaratory
judgment action relating to Patent Rights or CytRx Know-How. CytRx
shall promptly inform Vical if both CytRx and Merck elect not to
exercise such first right and Vical shall thereafter have the
right to either initiate and prosecute such action or to control
the defense of such declaratory judgment action in the name of
Vical and, if necessary, CytRx.
(b) In the event that both CytRx and Merck elect not to initiate and
prosecute an action as provided in paragraph (a), and Vical elects
to do so, the costs of any course of action to terminate
infringement of Patent Rights or misappropriation or misuse of
CytRx Know-How, including the costs of any legal action commenced
or the defense of any declaratory judgment, shall be shared
equally by CytRx and Vical.
(c) For any action to terminate any infringement of Patent Rights or
any misappropriation or misuse of CytRx Know-How, in the event
that Vical is unable to initiate or prosecute such action solely
in its own name, CytRx will join such action voluntarily and will
execute and cause its Affiliates to execute all documents
necessary for Vical to initiate litigation to prosecute and
maintain such action. In connection with any action, Vical and
CytRx will cooperate fully and will provide each other with any
information or assistance that either may reasonably request. Each
party shall keep the other informed of developments in any action
or proceeding, including, to the extent permissible by law, the
status of any settlement negotiations and the terms of any offer
related thereto.
12
(d) Any recovery obtained by either or any combination of Vical,
Merck, and CytRx in connection with or as a result of any action
contemplated by this section, whether by settlement or otherwise,
shall be shared in order as follows:
i) the party which initiated and prosecuted the action shall
recoup all of its costs and expenses incurred in connection
with the action;
ii) the other party or parties shall then, to the extent possible,
recover its costs and expenses incurred in connection with the
action; and
the amount of any recovery remaining shall then be allocated
between the parties on a pro rata basis under which CytRx shall
receive a proportion based on the royalties it lost and Vical and
to the extent applicable Merck shall receive any remaining
amounts.
(e) CytRx shall immediately give notice to Vical of any certification
regarding any Patent Rights it has received pursuant to the United
States "Drug Price Competition and Patent Term Restoration Act of
1984" under either 21 U.S.C. ss.ss.355(b)(2)(A)(iv) or
(j)(2)(A)(vii)(IV) or equivalent foreign provision and shall
provide Vical with a copy of such certification within (5) days of
receipt. CytRx's and Vical's rights with respect to the initiation
and prosecution of any legal action as a result of such
certification or any recovery obtained as a result of such legal
action shall be defined in paragraphs (a)-(d) hereof, provided,
however, if both CytRx and Merck decide not to bring infringement
proceedings against the entity making such a certification, CytRx
shall give notice to Vical of such decision not to bring suit
within thirty (30) days after receipt of notice of such
certification. Vical may then, but is not required to, bring suit
against the party that filed the certification. Any such suit by
Vical, Merck, or CytRx shall either be in the name of Vical, in
the name of Merck, or in the name of CytRx, or jointly by any
combination of Vical, Merck and CytRx. For this purpose, the party
not bringing suit shall execute such legal papers necessary for
the prosecution of such suit as may be reasonably requested by the
party bringing suit.
6.5 Abandonment. CytRx shall promptly give notice to Vical of the grant,
-----------
lapse, revocation, surrender, invalidation or abandonment of any Patent
Rights licensed to Vical for which CytRx is responsible for the filing,
prosecution and maintenance.
6.6 Patent Term Restoration. The ability in this Agreement to obtain patent
-----------------------
term restoration or supplemental protection certificates is subject to
the Merck License, Merck's election and availability or eligibility for
the patent in question for patent term restoration or supplemental
protection certificates for the Licensed Product in question. The
Parties hereto shall cooperate with each other in obtaining patent term
restoration or supplemental protection certificates or their
equivalents in any country in the Territory where applicable to Patent
Rights. Vical shall have the opportunity to make any election with
respect to obtaining such patent term restoration to the extent
possible and shall bear the cost thereof which shall be fully
creditable toward any future royalty payments owed by Vical pursuant to
Section 4.4 hereof.
13
6.7 Patent Marking. Vical agrees to ▇▇▇▇ the Licensed Products and
--------------
Substances sold in the United States with all applicable United States
patent numbers. All Licensed Products and Substances shipped to or sold
in other countries shall be marked in such a manner as to conform with
the patent laws and practice of the country of manufacture or sale.
6.8 [*****]
ARTICLE VII
TERM AND TERMINATION
--------------------
7.1 Term and Expiration. This Agreement shall be effective as of the
-------------------
Effective Date and unless terminated earlier pursuant to Sections 2.2,
4.1, 7.2 or 7.3 below, the term of this Agreement shall continue in
effect until expiration of all royalty obligations hereunder. Upon
expiration of all royalty obligations hereunder, Vical's licenses
pursuant to Article II shall become fully paid-up, perpetual licenses
and CytRx's obligation to provide Improvements shall cease.
7.2 Termination by Vical. Notwithstanding anything contained herein to the
--------------------
contrary, Vical shall have the right to terminate this Agreement at any
time in its sole discretion by giving ninety (90) days advance written
notice to CytRx unless terminated pursuant to Section 2.2. In the event
of such termination under this Section 7.2, the rights and obligations
hereunder, including any licenses and any payment obligations not due
and owing as of the termination date shall terminate.
7.3 Termination.
-----------
7.3.1 Termination for Cause. This Agreement may be terminated by notice by
---------------------
either party at any time during the term of this Agreement:
(a) if the other party is in breach of its material obligations hereunder
by causes and reasons within its control and has not cured such breach
within ninety (90) days after notice requesting cure of the breach
provided, however, in the event of a good faith dispute with respect to
the existence of a material breach, the ninety (90) day cure period
shall be tolled until such time as the dispute is resolved pursuant to
Section 8.6 hereof; or
(b) upon the filing or institution of bankruptcy, reorganization,
liquidation, or receivership proceedings, or upon a general assignment
of a substantial portion of all of its assets for the benefit of
creditors, by the other party; provided, however, in the case of any
-----------------
involuntary bankruptcy proceeding such right to terminate shall only
become effective if the party consents to the involuntary bankruptcy or
such proceeding is not dismissed within ninety (90) days after the
filing thereof.
7.3.2 Effect of Termination for Cause on License.
------------------------------------------
(a) In the event that Vical terminates this Agreement under
Section 7.3.1(a), CytRx's obligation to provide Improvements
shall cease and Vical's license pursuant to Section 2.1 shall
become paid-up, perpetual license, except that Vical shall
make
[*****] Confidential portions of this page have been redacted and filed
separately with the Commission.
14
[*****] of the royalty payments set forth in Section 4.4
in such event. In the event that CytRx terminates this
Agreement under Section 7.3.1(a), or Vical terminates this
Agreement under Section 7.2, Vical's licenses pursuant to
Section 2.1 shall terminate as of such termination date.
(b) In the event this Agreement is terminated due to the rejection
of this Agreement by or on behalf of CytRx under Section 365
of the United States Bankruptcy Code (the "Code"), all
licenses and rights to licenses granted under or pursuant to
this Agreement by CytRx to Vical are, and shall otherwise be
deemed to be, for purposes of Section 365(n) of the Code,
licenses of rights to "intellectual property" as defined under
Section 101(35A) of the Code. In such a case, the rights of
the parties shall be determined by the Code.
7.4 Effect of Termination. Expiration or termination of the Agreement shall
---------------------
not relieve the Parties of any obligation accruing prior to such
expiration or termination, and the provisions of Article III shall
survive the expiration of the Agreement and shall continue in effect
for five (5) years. Any expiration or early termination of this
Agreement shall be without prejudice to the rights of either party
against the other accrued or accruing under this Agreement prior to
termination, including the obligation to pay royalties for Licensed
Product(s) or Substance(s) sold prior to such termination.
Notwithstanding the foregoing, any remedies set forth under this
Article VII shall not limit any claim for damages either party may have
against the other arising from material breach of the other party.
ARTICLE VIII
MISCELLANEOUS
-------------
8.1. Force Majeure. Neither party shall be held liable or responsible to the
-------------
other party nor be deemed to have defaulted under or breached the
Agreement for failure or delay in fulfilling or performing any term of
the Agreement when such failure or delay is caused by or results from
causes beyond the reasonable control of the affected party including,
but not limited to, fire, floods, embargoes, war, acts of war (whether
war be declared or not), insurrections, riots, civil commotions,
strikes, lockouts or other labor disturbances, acts of God or acts,
omissions or delays in acting by any governmental authority or the
other party. The affected party shall notify the other party of such
force majeure circumstances as soon as reasonably practical.
8.2. Assignment. The Agreement may not be assigned or otherwise transferred,
----------
nor, except as expressly provided hereunder, may any right or
obligations hereunder be assigned or transferred, by either party
without the consent of the other party; provided, however, that Vical
may, without such consent, assign the Agreement and its rights and
obligations hereunder to an Affiliate or in connection with the
transfer or sale of all or substantially all of its assets related to
the Licensed Product or the business, or in the event of its merger or
consolidation or change in control or similar transaction. Any
permitted assignee shall assume all obligations of its assignor under
the Agreement. An assignment by Vical permitted by this Section 8.2
shall not relieve Vical of any of its obligations set forth in this
Agreement.
[*****] Confidential portions of this page have been redacted and filed
separately with the Commission.
15
8.3. Severability. In the event any one or more of the provisions contained
------------
in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or
impaired thereby, unless the absence of the invalidated provision(s)
adversely affect the substantive rights of the Parties. The Parties
shall in such an instance use their best efforts to replace the
invalid, illegal or unenforceable provision(s) with valid, legal and
enforceable provision(s) which, insofar as practical, implement the
purposes of this Agreement.
8.4. Notices. All notices or other communications which are required or
-------
permitted hereunder shall be in writing and sufficient if delivered
personally, sent by telecopier (and promptly confirmed by personal
delivery, registered or certified mail or overnight courier), sent by
nationally-recognized overnight courier or sent by registered or
certified mail, postage prepaid, return receipt requested, addressed as
follows:
if to CytRx, to: CytRx Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇/▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention:
President & CEO
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
if to Vical, to: Vical Incorporated
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention:
President & CEO
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as the party to whom notice is to be given may
have furnished to the other party in writing in accordance herewith.
Any such communication shall be deemed to have been given when
delivered if personally delivered or sent by telecopier on a business
day, on the business day after dispatch if sent by
nationally-recognized overnight courier and on the third business day
following the date of mailing if sent by mail.
8.5 Applicable Law. The Agreement shall be governed by and construed in
--------------
accordance with the laws of the State of California and the United
States of America without reference to any rules of conflict of laws.
8.6. Dispute Resolution. The Parties shall negotiate in good faith and use
------------------
reasonable efforts to settle any dispute, controversy or claim arising
from or related to this Agreement or the breach thereof. If the Parties
do not fully settle, and a party wishes to pursue the matter,
16
each such dispute, controversy or claim that is not an "Excluded Claim"
shall be finally resolved by binding arbitration in accordance with the
Commercial Arbitration Rules and Supplementary Procedures for Large
Complex Disputes of the American Arbitration Association ("AAA"), and
judgment on the arbitration award may be entered in any court having
jurisdiction thereof. The arbitration shall be conducted by a panel of
three persons experienced in the pharmaceutical business. Within 30
days after initiation of arbitration, each party shall select one
person to act as arbitrator and the two party-selected arbitrators
shall select a third arbitrator within 30 days of their appointment. If
the arbitrators selected by the Parties are unable or fail to agree
upon the third arbitrator, the third arbitrator shall be appointed by
the AAA. The place of arbitration shall be San Diego, California.
Either party may apply to the arbitrators for interim injunctive relief
until the arbitration award is rendered or the controversy is otherwise
resolved. Either party also may, without waiving any remedy under this
Agreement, seek from any court having jurisdiction any injunctive or
provisional relief necessary to protect the rights or property of that
party pending the arbitration award. The arbitrators shall have no
authority to award punitive or any other type of damages not measured
by a party's compensatory damages. Each party shall bear its own costs
and expenses and attorneys' fees and an equal share of the arbitrators'
and any administrative fees of arbitration. Except to the extent
necessary to confirm an award or as may be required by law, neither a
party nor an arbitrator may disclose the existence, content, or results
of an arbitration without the prior written consent of both Parties. In
no event shall an arbitration be initiated after the date when
commencement of a legal or equitable proceeding based on the dispute,
controversy or claim would be barred by the applicable California
statute of limitations. As used in this Section, the term "Excluded
Claim" shall mean a dispute, controversy or claim that concerns (a) the
validity or infringement of a patent, trademark or copyright; or (b)
any antitrust, anti-monopoly or competition law or regulation, whether
or not statutory.
8.7. Entire Agreement. The Agreement contains the entire understanding of
----------------
the Parties with respect to the subject matter hereof. All express or
implied agreements and understandings, either oral or written,
heretofore made are expressly merged in and made a part of the
Agreement. The Agreement may be amended, or any term hereof modified,
only by a written instrument duly executed by both Parties hereto.
8.8. Headings. The captions to the several Articles and Sections hereof are
--------
not a part of the Agreement, but are merely guides or labels to assist
in locating and reading the several Articles and Sections hereof.
8.9. Independent Contractors. It is expressly agreed that CytRx and Vical
-----------------------
shall be independent contractors and that the relationship between the
two Parties shall not constitute a partnership, joint venture or
agency. Neither CytRx nor Vical shall have the authority to make any
statements, representations or commitments of any kind, or to take any
action, which shall be binding on the other, without the prior consent
of the other party.
17
8.10. Waiver. The waiver by either party hereto of any right hereunder or the
------
failure to perform or of a breach by the other party shall not be
deemed a waiver of any other right hereunder or of any other breach or
failure by said other party whether of a similar nature or otherwise.
8.11. Counterparts. The Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
8.12. Waiver of Rule of Construction. Each party has had the opportunity to
------------------------------
consult with counsel in connection with the review, drafting and
negotiation of this Agreement. Accordingly, the rule of construction
that any ambiguity in this Agreement shall be construed against the
drafting party shall not apply.
8.13. Anouncements; Public Disclosure. Except as otherwise provided herein or
-------------------------------
as required by law, neither party shall originate any publication, news
release or other public announcement, written or oral, whether in the
public press, or stockholders' reports (if applicable) or otherwise,
directly relating to the financial terms of this Agreement, without the
prior written approval of the other party, which approval shall not be
unreasonably withheld. In addition, there shall be no public
announcement of this agreement by either party until $3.75 million is
received by CytRx. Each party shall issue an initial press release each
of which contain the text as presented in Addendum 5.0 and Addendum 6.0
hereof.
18
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first set forth above.
Vical Incorporated CytRx Corporation
BY: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ BY:/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------------- ------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
TITLE: President and CEO TITLE: President and CEO
DATE: December 6, 2001 DATE: December 6, 2001
------------------------------------------- ---------------------
19
SCHEDULE 1.0.0
--------------
ROYALTY REDUCTION
-----------------
[*****] Confidential portions of this page have been redacted and filed
separately with the Commission.
1
ADDENDUM 1.0
------------
MERCK AGREEMENT
---------------
1
CONFIDENTIAL TREATMENT HAS BEEN GRANTED FOR THE REDACTED PORTIONS
OF THIS DOCUMENT.
LICENSE AGREEMENT
between
MERCK & CO., INC.
and
CYTRX CORPORATION
LICENSE AGREEMENT
THIS AGREEMENT (this "Agreement") effective as of November 1, 2000,
(the "Effective Date") between Merck & Co., Inc., a corporation organized and
existing under the laws of New Jersey ("Merck") and CytRx Corporation, a
corporation organized and existing under the laws of Delaware ("CytRx").
WITNESSETH:
WHEREAS, CytRx. has developed CytRx Know-How (as hereinafter defined)
and has rights to Patent Rights (as hereinafter defined); and
WHEREAS, Merck desires to obtain a license under the Patent Rights and
CytRx Know-How, upon the terms and conditions set forth herein and CytRx desires
to grant such a license;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Unless specifically set forth to the contrary herein, the following
terms, whether used in the singular or plural, shall have the respective
meanings set forth below:
1.1 The term "Adjuvant" shall mean (i) any
polyoxypropylene/polyoxyethelene copolymer compounds or
compositions claimed in or covered by Patent Rights, including
any Improvements thereto, which may be added to a [*****] to
enhance immunogenicity.
1.2 The term "Affiliate" shall mean (i) any corporation or
business entity of which fifty percent (50%) or more of the
securities or other ownership interests representing the
equity, the voting stock or general partnership interest are
owned, controlled or held, directly or indirectly, by Merck or
CytRx; or (ii) any corporation or business entity which,
directly or indirectly, owns, controls or holds fifty percent
(50%) (or the maximum ownership interest permitted by law)
[*****] Confidential treatment has been granted for the redacted portions of
this page.
1
or more of the securities or other ownership interests
representing the equity, the voting stock or, if applicable,
the general partnership interest, of Merck or CytRx.
1.3 The term "Calendar Quarter" shall mean the respective periods
of three (3) consecutive calendar months ending on March 31,
June 30, September 30 and December 31.
1.4 The term "Calendar Year" shall mean each successive period of
twelve (12) consecutive calendar months commencing on
January I and ending on December 31.
1.5 The term "Combination Product" shall mean a Licensed Product
containing Substance for use in the Target Field in
combination with Substance for use in the HIV Field.
1.6 The term "Competitive Product" shall mean a product with
safety and efficacy equivalent or materially similar to a
Licensed Product which has attained a unit market share of
fifteen percent (15%) or more in a country of sale as measured
by prescriptions or other similar information in such country
of sale.
1.7 The term "CytRx Know-How" shall mean all information and
materials, including but not limited to, discoveries,
Improvements, processes, formulas, data, inventions, know-how
and trade secrets, patentable or otherwise, which during the
term of this Agreement (i) are in CytRx's possession or
control, (ii) are not generally known and (iii) are necessary
or useful to Merck in connection with the research,
development, manufacture, marketing, use or sale of Adjuvants,
Substances or Licensed Product in the Field including but not
limited to any information in regulatory filings for the
manufacture and/or registration of Adjuvants.
1.8 The term "Field" shall mean the HIV Field and the Target
Field.
1.9 The term "First Commercial Sale" shall mean, with respect to
any Licensed Product, the first sale for end use or
consumption of such Licensed Product in a country after all
required approvals, including marketing and pricing approvals,
have been granted by the governing health authority of such
country.
1.10 The term "HIV Field" shall mean the prevention and/or
treatment of infection by Human Immunodeficiency Virus (HIV).
1.11 The term "Improvement" shall mean any enhancement by CytRx in
the synthesis or manufacture of Adjuvants, including but not
limited to any Adjuvants produced thereby.
1.12 The term "Licensed Product(s)" shall mean preparations in
final form for sale by prescription, over-the counter or any
other method for use in humans which
2
contain Substance(s), specifically Licensed Target Products
and Licensed HIV Products.
1.13 The term "Licensed HIV Product" shall mean a Licensed Product
for the HIV Field.
1.14 The term "Licensed Target Product" shall mean a Licensed
Product for the Target Field.
1.15 The term "Major Pharmaceutical Market" shall mean any of the
United States, Canada, France, Germany, Italy, Spain, the
United Kingdom or Japan.
1.16 The term "Merck Know-How" shall mean any Merck information and
materials, including but not limited to, discoveries,
improvements, processes, formulas, data, inventions, know-how
and trade secrets, patentable or otherwise, which during the
term of this Agreement are not generally known.
1.17 The term "Net Sales" shall mean the gross invoice price of
Licensed Product sold by Merck, its Affiliates or sublicensees
(which term does not include distributors) to the first
independent third party after deducting, if not previously
deducted, in the amount invoiced or received:
(a) trade and quantity discounts;
(b) returns, rebates and allowances;
(c) chargebacks and other amounts paid on sale
or dispensing of Licensed Product;
(d) retroactive price reductions that are
actually allowed or granted;
(e) sales commissions paid to third party
distributors and/or selling agents;
(f) a fixed amount equal to five percent (5%) of
the gross invoiced price to cover bad debt,
sales or excise taxes, transportation and
insurance charges and additional special
transportation, custom duties, and other
governmental charges; and
(g) the standard inventory cost of devices or
delivery systems other than syringes used
for dispensing or administering Licensed
Product which accompany Licensed Product as
it is sold.
1.18 The term " Target Field" shall mean the prevention of, and/or
treatment of infection by, [*****]
[*****] Confidential treatment has been granted for the redacted portions of
this page.
3
1.19 The terms "Patent Rights" shall mean (i) the patents and
patent applications listed on Schedule 1. 19 and (ii) patents
owned by or licensed to CytRx during the term of this
Agreement which claim or cover
polyoxypropylene/polyoxyethylene copolymer compounds or
compositions which may be added to a Substance to enhance the
immunogenicity of such Substance; or (iii) are divisions,
continuations, continuations- in-part, reissues, renewals,
extensions, supplementary protection certificates, utility
models and the like of any such patents and patent
applications and foreign equivalents thereof.
1.20 The term "Phase I Study", "Phase Ilb Study"(formal dose
ranging study) and "Phase III Study" shall mean these terms as
described in the laws and regulations of the U.S. Food and
Drug Administration of the Department of Health and Human
Services.
1.21 The term "PLA Approval" shall mean notification from a
regulatory authority in a country that all approvals for the
marketing of Licensed Product, including pricing approvals,
have been granted.
1.22 [*****]
1.23 The term "Proprietary Information" shall mean all Merck
Know-How, CytRx Know-How, and all other scientific, clinical,
regulatory, marketing, financial and commercial information or
data, whether communicated in writing or orally or by sensory
detection, which is provided by one party to the other party
in connection with this Agreement.
1.24 The term "Product License Application" shall mean a product
license application or biologics license application as
described in the laws and regulations of the U.S. Public
Health Service Act, 42 U.S.C. Section 262, et. seq.
1.24 The term "Substance" shall mean [*****] for use in the Field
which contains one or more Adjuvants.
1.25 The term "Target" shall mean [*****]
1.26 The term "Territory" shall mean all of the countries in the
world.
1.27 The term "Valid Patent Claim" shall mean a claim of an issued
and unexpired patent included within the Patent Rights, which
has not been revoked or held unenforceable or invalid by a
decision of a court or other governmental agency of competent
jurisdiction, unappealable or unappealed within the time
allowed for appeal, and which has not been disclaimed, denied
or admitted to be invalid or unenforceable through reissue or
disclaimer or otherwise.
ARTICLE II
[*****] Confidential treatment has been granted for the redacted portions of
this page.
4
LICENSE; DEVELOPMENT AND COMMERCIALIZATION
2.1 License Grant.
-------------
(a) CytRx hereby grants to Merck an exclusive license in
the Field in the Territory with the right to
sublicense under Patent Rights to research, develop,
make, have made, use, and/or import Adjuvant, to
[*****] research, develop, make, have made, use,
sell, offer to sell and/or import Substance and/or
Licensed Product(s).
(b) CytRx hereby grants to Merck an exclusive license in
the Field and in the Territory with the right to
sublicense under CytRx Know-How to research, develop,
make, have made, use, and/or import Adjuvant,to
research, develop, make, have made, use, sell, offer
to sell and/or import Substance and/or Licensed
Product(s) and (ii) otherwise carry out the
activities contemplated under this Agreement.
2.2 Exchange of Information. During the term of this Agreement,
-----------------------
CytRx shall promptly disclose to Merck in English and in
writing on an ongoing basis all CytRx Know-How not previously
disclosed. To the extent Merck, in its sole discretion,
provides CytRx with any information regarding Adjuvants, it is
understood that such information will be considered to be
Proprietary Information of Merck subject to Article III.
2.3 Development and Commercialization. Merck shall use reasonable
---------------------------------
efforts, consistent with the usual practice followed by Merck
in pursuing the commercialization and marketing of its other
similar pharmaceutical products, at its own expense, to
develop and commercialize a Licensed Product on a commercially
reasonable basis in such countries in the Territory where in
Merck's opinion it is commercially viable to do so.
2.4 Excused Performance. In addition to the provisions of Article
-------------------
VI hereof, the obligation of Merck with respect to any
Licensed Product under Section 2.3 are expressly conditioned
upon the continuing absence of any adverse condition or event
relating to the safety or efficacy of the Licensed Product,
and the obligation of Merck to develop or market any such
Licensed Product shall be delayed or suspended so long as in
Merck's opinion any such condition or event exists.
ARTICLE III
CONFIDENTIALITY AND PUBLICATION
3.1 Nondisclosure Obligation. All Proprietary Information
------------------------
Disclosed by one party to the other party hereunder shall be
maintained in confidence by the receiving party and shall not
be disclosed to a non-party or used for any purpose except as
set
[*****] Confidential treatment has been granted for the redacted portions of
this page.
5
forth herein without the prior written consent of the other
party, except to the extent that such Proprietary Information:
(a) is known by recipient at the time of its receipt, and
not through a prior disclosure by the disclosing
party, as documented by business records;
(b) is properly in the public domain;
(c) is subsequently disclosed to a receiving party by a
third party who may lawfully do so and is not under
an obligation of confidentiality to the disclosing
party;
(d) is developed by the receiving party independently of
Proprietary Information received from the other
party;
(e) is disclosed to governmental or other regulatory
agencies in order to obtain patents or to gain
approval to conduct clinical trials or to market
Licensed Product, but such disclosure may be only to
the extent reasonably necessary to obtain patents or
authorizations;
(f) is deemed necessary or useful by Merck to be
disclosed to sublicensees, agents, consultants,
Affiliates and/or other third parties for the
research and development, manufacturing and/or
marketing of the Adjuvant, Substances or Licensed
Product (or for such parties to determine their
interest in performing such activities) in accordance
with this Agreement on the condition that such third
parties agree to be bound by the confidentiality
obligations contained this Agreement, provided the
term of confidentiality for such third parties shall
be no less than ten (10) years; or
(g) is required to be disclosed by law or court order,
provided that notice is promptly delivered to the
other party in order to provide an opportunity to
challenge or limit the disclosure obligations.
3.2 CytRx Know-How. CytRx agrees to keep all CytRx Know-How
--------------
confidential subject to exception (b), (e) and (g) in Section
3.1 above. It is understood that CytRx may disclose CytRx
Know-How under confidentiality to prospective licensees,
sublicensees, agents, consultants, Affiliates and/or other
third parties for the research, development, manufacturing
and/or marketing of products.
ARTICLE IV
PAYMENTS; ROYALTIES AND REPORTS
4.1 Consideration for License. In partial consideration for the
-------------------------
licenses granted herein under the Patent Rights, upon the
terms and conditions contained herein, Merck shall pay to
CytRx the following amounts:
6
(a) due within thirty (30) days of the Effective Date, a
signature payment of two million dollars
($2,000,000);
(b) due within thirty (30) days of commencement of the
first Phase I Study for the first Licensed HIV
Product, a payment of one million dollars
($1,000,000);
(c) due within thirty (30) days of commencement of the
earlier of the first Phase II(b) Study or Phase III
for the first Licensed HIV Product, a payment of one
million dollars ($1,000,000);
(d) due within thirty (30) days of the filing of the
first Product License Application for the first
Licensed HIV Product in a Major Pharmaceutical
Market, a payment of one million dollars
($1,000,000);
(e) due within thirty (30) days of the first PLA Approval
in a Major Pharmaceutical Market for the first
Licensed HIV Product, a payment of one million
dollars ($1,000,000).
Merck shall notify CytRx in writing within thirty
(30) days upon the achievement of each milestone,
such notice to be accompanied by payment of the
appropriate milestone payment. The milestone payment
shall be payable only upon the initial achievement of
such milestone and no amounts shall be due hereunder
for subsequent or repeated achievement of such
milestone.
4.2 Target Maintenance Payments. Merck will pay CytRx the
---------------------------
following payments until the First PLA Approval for the first
Licensed Target Product, due within thirty days of the
Effective Date and thereafter within thirty (30) days of each
anniversary of the Effective Date:
(a) Fifty thousand dollars ($50,000) for the first year
of the Agreement;
(b) Seventy five thousand dollars ($75,000) for the
second year of the Agreement;
(c) One hundred thousand dollars ($100,000) for the third
and any additional years of the Agreement until the
First PLA Approval for the first Licensed Target
Product.
4.2.1 All payments made under this Article 4.2 shall be creditable
by Merck against any royalty payments made under Article 4.4,
provided, however that no royalties may be reduced as a result
of any such credit by more than fifty percent (50%). Unused
credits may be carried over into subsequent royalty periods.
7
4.3 Milestone Payments. Subject to the terms and conditions in
------------------
this Agreement, Merck shall pay to CytRx the following
milestone payments for the first Licensed Target Product for
each Target:
(a) One hundred thousand dollars ($100,000) for the
commencement of the first Phase I Study;
(b) Two hundred fifty thousand dollars ($250,000) for the
commencement of the earlier of the first Phase IIb
Study or the first Phase III Study;
(c) Five hundred thousand dollars ($500,000) upon the
first Product License Application filing in a Major
Pharmaceutical Market;
(d) Two million dollars ($2,000,000) upon the first PLA
Approval in a Major Pharmaceutical Market. Merck
shall notify CytRx in writing within thirty (30) days
upon the achievement of each milestone, such notice
to be accompanied by payment of the appropriate
milestone payment.
The milestone payment shall be payable only upon the initial
achievement of such milestone and no amounts shall be due
hereunder for subsequent or repeated achievement of such
milestone.
4.4 Royalties.
---------
4.4.1 Royalties Payable By Merck. Subject to the terms and
--------------------------
conditions of this Agreement, Merck shall pay to CytRx
royalties for Licensed Target Product(s) for each Target on a
country-by-country basis in an amount equal to:
(a) For Net Sales by Merck, its Affiliates or
sublicensees of Licensed Target Products which would,
but for the license hereunder, infringe a Valid
Patent Claim in the country of manufacture or sale,
royalties based on the following annual Net Sales
aggregated separately for each Licensed Target
Product:
(a) For annual Net Sales up to two hundred fifty
million dollars ($250,000,000) a royalty of
two percent (2%);
(b) For that portion of annual Net Sales
exceeding two hundred fifty million dollars
($250,000,000) but less than or equal to
five hundred million dollars ($500,000,000)
a royalty of three percent (3%);
(c) For that portion of annual Net Sales
exceeding five hundred million dollars
($500,000,000) a royalty of four percent
(4%).
8
(b) For Net Sales of Licensed Target Products by Merck,
its Affiliates or sublicensees other than those
covered in Subsection 4.4.1(a) above, a royalty
calculated as set forth in Article 4.4.1(a), for a
period of five (5) years from First Commercial Sale
in each country of the Territory.
(c) In addition to the patent royalty payments set forth
in Article 4.4.1, Merck shall pay a one percent (1%)
royalty on Net Sales by Merck, its Affiliates or
sublicensees on any Licensed Product which would, but
for the license hereunder, infringe a Valid Patent
Claim in the country of manufacture or sale in the
event (i) no other patents owned by or licensed to
Merck, its Affiliates or sublicensees are infringed
by such sale, including but not limited to any
composition of matter patent and (ii) there is no
Competitive Product in the country of sale.
(d) Royalties on each Licensed Product at the rate set
forth above shall be effective as of the date of
First Commercial Sale of a Licensed Product in a
country and shall continue until either (i) the
expiration of the last applicable patent on such
Licensed Product in such country in the case of sales
under Subsection 4.4.1(a) and 4.4.1(c) (if
applicable) above or (ii) until the fifth (5th)
anniversary of the First Commercial Sale in such
country in the case of sales of Licensed Product
under Subsection 4.4.1(b) above, subject to the
following conditions:
(x) that only one royalty shall be due with
respect to the same unit of Licensed
Product;
(y) that no royalties shall be due upon the sale
or other transfer among Merck, its
Affiliates or sublicensees, but in such
cases the royalty shall be due and
calculated upon Merck's or its Affiliate's
or its sublicensee's Net Sales to the first
independent third party; and
(z) no royalties shall accrue on the disposition
of Licensed Product in reasonable quantities
by Merck, its Affiliates or sublicenses as
samples (promotion or otherwise) or as
donations (for example, to non-profit
institutions or government agencies for a
non- commercial purpose).
4.4.2 Royalty Payable Under Managed Pharmaceutical Contract. It is
-----------------------------------------------------
understood by the parties that Merck may sell Licensed
Product(s) to an independent third party (such as a retailer
or wholesaler) and may subsequently perform services relating
to Licensed Product(s) and other products under a managed
pharmaceutical benefits contract or other similar contract. In
such cases, it is agreed by the parties that Net Sales shall
be based on the invoice price (negotiated at arms length and
not influenced by the provision of such services) to an
independent retailer or wholesaler, as set forth in Section
1.17, notwithstanding that Merck may receive compensation
arising from the performance of such services.
9
4.4.3 Change in Sales Practices. The parties acknowledge that during
-------------------------
the term of this Agreement, Merck's sales practices for the
marketing and distribution of Licensed Product may change to
the extent to which the calculation of the payment for
royalties on Net Sales may become impractical or even
impossible. In such event the parties agree to meet and
discuss in good faith new ways of compensating CytRx to the
extent currently contemplated under Section 4.4.1.
4.4.4 Royalties for Bulk Compound. In those cases where Merck sells
---------------------------
bulk Substance rather than Licensed Product in packaged form
to an independent third party, the royalty obligations of this
Article IV shall be applicable to the bulk Substance, except
in the event the third party, directly or indirectly, sells
such Substance back to Merck.
4.4.5 Royalty Reduction. If in any country Merck's or its
-----------------
Affiliates' or Sublicensees' total royalty payments on
Licensed Product (including royalties payable to CytRx) exceed
[*****], the royalty obligation to CytRx for such country
shall be reduced by the formula set forth in Schedule 4.4.5,
provided that in no event shall the royalty payable to CytRx
be reduced by more than [*****] on a country-by-country basis.
It is understood that royalty reductions are intended to be
equitably applied to Merck's licensors of technology related
to Licensed Products. If Merck concludes that a royalty
reduction formula is applicable, Merck shall inform CytRx of
the total amount of its royalty burden on Licensed Product.
Merck represents and warrants that, as of the Effective Date,
it has no reason to know that total royalty payments of
Licensed Products exceed [*****].
4.4.6 Reports; Payment of Royalty. During the term of the Agreement
---------------------------
following the First Commercial Sale of a Licensed Product,
Merck shall furnish to CytRx a quarterly written report for
the Calendar Quarter showing the sales of all Licensed
Products subject to royalty payments sold by Merck, its
Affiliates and its sublicensees in the Territory during the
reporting period and the royalties payable under this
Agreement. Reports shall be due on the sixtieth (60th) day
following the close of each Calendar Quarter. Royalties shown
to have accrued by each royalty report shall be due and
payable on the date such royalty report is due. Merck shall
keep complete and accurate records in sufficient detail to
enable the royalties payable hereunder to be determined.
4.7 Audits.
------
(a) Upon the written request of CytRx and not more than
once in each Calendar Year, Merck shall permit an
independent certified public accounting firm of
nationally recognized standing selected by CytRx and
reasonably acceptable to Merck, at the CytRx's
expense, to have access during normal business hours
to such of the records of Merck as may be reasonably
necessary to verify the accuracy of the royalty
reports hereunder for any year ending not more than
twenty-four (24) months
[*****] Confidential treatment has been granted for the redacted portions of
this page.
10
prior to the date of such request. The accounting
firm shall disclose to CytRx only whether the royalty
reports are correct or incorrect and the specific
details concerning any discrepancies. No other
information shall be provided to CytRx.
(b) If such accounting firm correctly concludes that
additional royalties were owed during such period,
Merck shall pay the additional royalties within
thirty (30) days of the date CytRx delivers to Merck
such accounting firm's written report so correctly
concluding. The fees charged by such accounting firm
shall be paid by CytRx. In the event the additional
royalties owed by Merck for the period audited exceed
ten percent (10%) of royalties due for said period
and are at least one million dollars (U.S.
$1,000,000) Merck will reimburse CytRx for the
reasonable fees charged by the accounting firm.
(c) Merck shall include in each sublicense granted by it
pursuant to this Agreement a provision requiring the
sublicensee to make reports to Merck, to keep and
maintain records of sales made pursuant to such
sublicense and to grant access to such records by
CytRx's independent accountant to the same extent
required of Merck under this Agreement. Upon the
expiration of twenty-four (24) months following the
end of any year, the calculation of royalties payable
with respect to such year shall be binding and
conclusive upon CytRx, and Merck and its sublicensees
shall be released from any liability or
accountability with respect to royalties for such
year.
(d) CytRx. shall treat all financial information subject
to review under this Section 4.6 or under any
sublicense agreement in accordance with the
confidentiality provisions of this Agreement, and
shall cause its accounting firm to enter into an
acceptable confidentiality agreement with Merck
obligating it to retain all such financial
information in confidence pursuant to such
confidentiality agreement.
4.8 Payment Exchange Rate. All payments to be made by Merck to
---------------------
CytRx under this Agreement shall be made in United States
dollars and may be paid by check made to the order of CytRx.
or bank wire transfer in immediately available funds to such
bank account in the United States designated in writing by
CytRx from time to time. In the case of sales outside the
United States, the rate of exchange to be used in computing
the amount of currency equivalent in United States dollars
shall be made at the monthly rate of exchange utilized by
Merck in its worldwide accounting system, prevailing on the
third to the last business day of the month preceding the
month in which such sales are recorded by Merck.
4.9 Income Tax Withholding. If laws, rules or regulations require
----------------------
withholding of income taxes or other taxes imposed upon
payments set forth in this Article IV, Merck shall make such
withholding payments as required and subtract such
11
withholding payments from the payments set forth in this
Article IV. Merck shall submit appropriate proof of payment of
the withholding taxes to CytRx within a reasonable period of
time.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representation and Warranty. CytRx. represents and warrants
---------------------------
to Merck that as of the date of this Agreement:
(a) to the best of CytRx's knowledge, the Patent Rights
and CytRx Know-How are subsisting and are not invalid
or unenforceable, in whole or in part;
(b) it has the full right, power and authority to enter
into this Agreement, and to grant the licenses
granted under Article Il hereof,
(c) it has not previously assigned, transferred, conveyed
or otherwise encumbered its right, title and interest
in Patent Rights or CytRx Know-How in the Field;
(d) to the best of CytRx's knowledge, it is the sole and
exclusive owner or licensee of the Patent Rights and
CytRx Know-How, all of which is free and clear of any
liens, charges and encumbrances, and no other person,
corporate or other private entity, or governmental
entity or subdivision thereof, has or shall have any
claim of ownership with respect to the Patent Rights
and CytRx. Know-How, whatsoever; that CytRX shall use
its best efforts to maintain any license related to
Patent Rights or CytRx Know-How in effect;
(e) to the best of CytRx's knowledge, the licensed Patent
Rights and CytRx Know-How and the research,
development, manufacture, use, sale and/or import of
Adjuvants, Substances and Licensed Products do not
interfere with or infringe any intellectual property
rights owned or possessed by any third party; and
(f) there are no claims, judgments or settlements against
or owed by the CytRx or pending or threatened claims
or litigation relating to the Patent Rights and
CytRx. Know-How.
(g) CytRx has disclosed to Merck all reasonably relevant
information regarding the Patent Rights and CytRx
Know-How licensed under this Agreement, including all
patent opinions obtained by CytRx related thereto.
12
ARTICLE VI
PATENT PROVISIONS
6.1 Filing, Prosecution and Maintenance of Patents. CytRx agrees
----------------------------------------------
to file, prosecute and maintain in the Major Markets, upon
appropriate consultation with Merck, the Patent Rights owned
in whole or in part by CytRx and licensed to Merck under this
Agreement. In addition, CytRx shall, at Merck's request, file,
prosecute and maintain such Patent Rights in other countries,
which costs shall be reimbursed by Merck within sixty (60)
days of receipt of invoices therefor. CytRx shall keep Merck
advised of the status of the actual and prospective patent
filings and upon the request of Merck, shall provide advance
copies of any papers related to the filing, prosecution and
maintenance of such patent filings. With respect to all
filings hereunder in Major Pharmaceutical Markets CytRx shall
be responsible for payment for all costs and expenses related
to such filings.
6.2 Option of Merck to Prosecute and Maintain Patents. CytRx shall
-------------------------------------------------
give notice to Merck of any desire to cease prosecution and/or
maintenance of Patent Rights and, in such case, shall permit
Merck, at its sole discretion, to continue prosecution or
maintenance at its own expense. If Merck elects to continue
prosecution or maintenance or file based on CytRx's election
not to file pursuant to Section 6.1 above, CytRx shall execute
such documents and perform such acts at CytRx's expense as may
be reasonably necessary for Merck to perform such prosecution
or maintenance or filing. All of the expenses and costs
incurred by Merck to continue prosecution and maintenance of
Patent Rights shall be fully creditable against royalties due
under Article IV of this Agreement; provided however, no
royalty payment when due, regardless of the number of such
credits available to Merck in accordance with the terms of
this Agreement, shall be reduced by more than fifty percent
(50%). Unused credits may be carried over into subsequent
royalty periods.
6.3. Interference, Opposition, Reexamination and Reissue.
---------------------------------------------------
(a) CytRx shall, within ten (10) days of learning of such
event, inform Merck of any request for, or filing or
declaration of any interference, opposition, or
reexamination relating to Patent Rights, Merck and
CytRx shall thereafter consult and cooperate fully to
determine a course of action with respect to any such
proceeding. Merck shall have the right to review and
approve any submission to be made in connection with
such proceeding.
(b) CytRx shall not institute any reexamination, or
reissue proceeding relating to Patent Rights without
the prior written consent to Merck, which consent
shall not be unreasonably withheld.
(c) In connection with any interference, opposition,
reissue, or reexamination proceeding relating to
Patent Rights, Merck and CytRx will cooperate
13
fully and will provide each other with any
information or assistance that either may reasonably
request. CytRx shall keep Merck informed of
developments in any such action or proceeding,
including, to the extent permissible, the status of
any settlement negotiations and the tenris of any
offer related thereto.
(d) CytRx shall bear the expense of any interference,
opposition, reexamination, or reissue proceeding
relating to Patent Rights.
6.4 Enforcement and Defense Rights.
------------------------------
(a) CytRx shall give Merck notice of either (i) any
infringement of Patent Rights, or (ii) any
misappropriation or misuse of CytRx Know-How, that
may come to CytRx's attention. Merck and CytRx shall
thereafter consult and cooperate fully to determine a
course of action, including but not limited to the
commencement of legal action by either or both Merck
and CytRx, to terminate any infringement of Patent
Rights or any misappropriation or misuse of CytRx
Know-How. However, CytRx, upon notice to Merck, shall
have the first right to initiate and prosecute such
legal action at its own expense and in the name of
CytRx and Merck, or to control the defense of any
declaratory judgment action relating to Patent Rights
or CytRx Know-How. CytRx shall promptly inform Merck
if it elects not to exercise such first right and
Merck shall thereafter have the right to either
initiate and prosecute such action or to control the
defense of such declaratory judgment action in the
name of Merck and, if necessary, CytRx.
(b) In the event that CytRx elects not to initiate and
prosecute an action as provided in paragraph (a), and
Merck elects to do so, the costs of any course of
action to terminate infringement of Patent Rights or
misappropriation or misuse of CytRx Know-How,
including the costs of any legal action commenced or
the defense of any declaratory judgment, shall be
shared equally by CytRx and Merck.
(c) For any action to terminate any infringement of
Patent Rights or any misappropriation or misuse of
CytRx Know-How, in the event that Merck is unable to
initiate or prosecute such action solely in its own
name, CytRx will join such action voluntarily and
will execute and cause its Affiliates to execute all
documents necessary for Merck to initiate litigation
to prosecute and maintain such action. In connection
with any action, Merck and CytRx will cooperate fully
and will provide each other with any information or
assistance that either may reasonably request. Each
party shall keep the other informed of developments
in any action or proceeding, including, to the extent
permissible by law, the status of any settlement
negotiations and the terms of any offer related
thereto.
14
(d) Any recovery obtained by either or both Merck and
CytRx in connection with or as a result of any action
contemplated by this section, whether by settlement
or otherwise, shall be shared in order as follows:
(i) the party which initiated and prosecuted the
action shall recoup all of its costs and
expenses incurred in connection with the
action;
(ii) the other party shall then, to the extent
possible, recover its costs and expenses
incurred in connection with the action; and
(iii) the amount of any recovery remaining shall
then be allocated between the parties on a
pro rata basis under which CytRx shall
receive a proportion based on the royalties
it lost and Merck shall receive a proportion
based on its lost profits.
6.5 Certification under Drug Price Competition and Patent
-----------------------------------------------------
Restoration Act. CytRx shall immediately give notice to Merck
---------------
of any certification of which it becomes aware filed under the
United States "Drug Price Competition and Patent Term
Restoration Act of 1984" claiming that Patent Rights covering
Substance(s) or Licensed Product(s) are invalid or that
infringement will not arise from the manufacture, use or sale
of Substance(s) or Licensed Product(s) by a third party. If
CytRx decides not to bring infringement proceedings against
the entity making such a certification, it shall give notice
to Merck of its decision not to bring suit within twenty-one
(21) days after receipt of notice of such certification. Merck
may then, but is not required to, bring suit against the party
that filed the certification. Any such suit by Merck or CytRx
shall either be in the name of Merck or in the name of CytRx,
or jointly by Merck and CytRx. For this purpose, the party not
bringing suit shall execute such legal papers necessary for
the prosecution of such suit as may be reasonably requested by
the party bringing suit.
6.6 Abandonment. CytRx shall promptly give notice to Merck of the
-----------
grant, lapse, revocation, surrender, invalidation or
abandonment of any Patent Rights licensed to Merck for which
CytRx is responsible for the filing, prosecution and
maintenance.
6.7 Patent Term Restoration. The parties hereto shall cooperate
-----------------------
with each other in obtaining patent term restoration or
supplemental protection certificates or their equivalents in
any country in the Territory where applicable to Patent
Rights. In the event that elections with respect to obtaining
such patent term restoration are to be made, Merck shall have
the right to make the election and CytRx agrees to abide by
such election; provided it is understood that Merck shall be
responsible for the costs required for any such elections.
ARTICLE VII
15
TERM AND TERMINATION
7.1 Term and Expiration. This Agreement shall be effective as of
-------------------
the Effective Date and unless terminated earlier pursuant to
Sections 7.2 or 7.3 below, the term of this Agreement shall
continue in effect until expiration of all royalty obligations
hereunder. Upon expiration of all royalty obligations
hereunder, Merck's licenses pursuant to Article 2 shall become
fully paid-up, perpetual licenses.
7.2 Termination by Merck. Notwithstanding anything contained
--------------------
herein to the contrary, Merck shall have the right to
terminate this Agreement at any time in its sole discretion by
giving ninety (90) days advance written notice to CytRx. In
the event of such termination, the rights and obligations
hereunder, including any licenses and any payment obligations
not due and owing as of the termination date shall terminate.
It is understood that Merck may terminate the Agreement for
one or more Targets or HIV while maintaining the Agreement in
effect for any Target not terminated (or HIV if not
terminated).
7.3 Termination.
-----------
7.3.1 Termination for Cause. This Agreement may be terminated by
---------------------
notice by either party at any time during the term of this
Agreement:
(a) if the other party is in breach of its material
obligations hereunder by causes and reasons within
its control and has not cured such breach within
ninety (90) days after notice requesting cure of the
breach provided, however, in the event of a good
faith dispute with respect to the existence of a
material breach, the ninety (90) day cure period
shall be followed until such time as the dispute is
resolved pursuant to Section 8.6 hereof, it is
understood, however, that any amounts not in dispute
between the parties will be paid during such tolled
period; or
(b) upon the filing or institution of bankruptcy,
reorganization, liquidation or receivership
proceedings, or upon a general assignment of a
substantial portion of its assets for the benefit of
creditors by the other party; provided, however, in
the case of any involuntary bankruptcy proceeding
such right to terminate shall only become effective
if the party consents to the involuntary bankruptcy
or such proceeding is not dismissed within ninety
(90) days after the filing thereof.
7.3.2 Effect of Termination for Cause on License.
------------------------------------------
(a) In the event Merck terminates this Agreement under
Section 7.3.1(a), Merck's license pursuant to Article
2.1 shall become paid- up, perpetual license, except
that Merck shall make fifty percent (50%) of the
royalty payments set forth in Article 4 in such
event. In the event that CytRx terminates this
Agreement under Section 7.3.1(a) or Merck terminates
this
16
Agreement under Article 7.2, Merck's licenses
pursuant to Section 2.1 shall terminate as of such
termination date.
(b) In the event this Agreement is terminated due to the
rejection of this Agreement by or on behalf of CytRx
under Section 365 of the United States Bankruptcy
Code (the "Code"), all licenses and rights to
licenses granted under or pursuant to this Agreement
by CytRx to Merck are, and shall otherwise be deemed
to be, for purposes of Section 365(n) of the Code,
licenses of rights to "intellectual property" as
defined under Section 101(35A) of the Code. In such
case, Merck's rights will be determined by the Code.
7.4 Effect of Termination. Expiration or termination of the
---------------------
Agreement shall not relieve the parties of any ligation
accruing prior to such expiration or termination, and the
provisions of Article III shall survive the expiration of the
Agreement and shall continue in effect for five (5) years. Any
expiration or early termination of this Agreement shall be
without prejudice to the rights of either party against the
other accrued or accruing under this Agreement prior to
termination, including the obligation to pay royalties for
Licensed Product(s) or(Substance) sold prior to such
termination. Notwithstanding the foregoing, any remedies set
forth under this Article 7 shall not limit any claim for
damages either party may have against the other arising from
material breach of the other party.
ARTICLE VIII
MISCELLANEOUS
8.1. Force Majeure. Neither party shall be held liable or
-------------
responsible to the other party nor be deemed to have defaulted
under or breached the Agreement for failure or delay in
fulfilling or performing any term of the agreement when such
failure or delay is caused by or results from causes beyond
the reasonable control of the affected party including, but
not limited to, fire, floods, embargoes, war, acts of war
(whether war be declared or not), insurrections, riots, civil
commotions, strikes, lockouts or other labor disturbances,
acts of God or acts, omissions or delays in acting by any
governmental authority or the other party. The affected party
shall notify the other party of such force majeure
circumstances as soon as reasonably practical.
8.2. Assignment. The Agreement may not be assigned or otherwise
----------
transferred, nor, except as expressly provided hereunder, may
any right or obligations hereunder be assigned or transferred,
by either party without the consent of the other party;
provided, however, that Merck may, without such consent,
assign the Agreement and its rights and obligations hereunder
to an Affiliate or in connection with the transfer or sale of
all or substantially all of its assets related to the Licensed
Product or the business, or in the event of its merger or
consolidation or change in control or similar transaction. Any
permitted assignee shall assume all obligations
17
of its assignor under the Agreement. Any permitted assignment
hereunder shall not relieve the Assignor of any obligations
arising prior to the assignment.
8.3. Severability. In the event any one or more of the provisions
------------
contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired thereby, unless
the absence of the invalidated provision(s) adversely affect
the substantive rights of the parties. The parties shall in
such an instance use their best efforts to replace the
invalid, illegal or unenforceable provision(s) with valid,
legal and enforceable provision(s) which, insofar as
practical, implement the purposes of this Agreement.
8.4. Notices. All notices or other communications which are
-------
required or permitted hereunder shall be in writing and
sufficient if delivered personally, sent by telecopier (and
promptly confirmed by personal delivery, registered or
certified mail or overnight courier), sent by
nationally-recognized overnight courier or sent by registered
or certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to CytRx, to:
CytRx Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇/▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President and CEO
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Attention: Office of Counsel
if to Merck, to:
Merck & Co., INC.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Vice President, Corporate Licensing
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Attention: Office of Counsel
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
18
or to such other address as the party to whom notice is to be
given may have furnished to the other party in writing in
accordance herewith. Any such communication shall be deemed to
have been given when delivered if personally delivered or sent
by telecopier on a business day, on the business day after
dispatch if sent by nationally-recognized overnight courier
and on the third business day following the date of mailing if
sent by mail.
8.5 Applicable Law. The Agreement shall be governed by and
--------------
construed in accordance with the laws of the State of New
Jersey and the United States without reference to any rules of
conflict of laws or renvoi.
8.6. Dispute Resolution. The parties shall negotiate in good faith
------------------
and use reasonable efforts to settle any dispute, controversy
or claim arising from or related to this Agreement or the
breach thereof. If the parties do not fully settle, and a
party wishes to pursue the matter, each such dispute,
controversy or claim that is not an "Excluded Claim" shall be
finally resolved by binding arbitration in accordance with the
Commercial Arbitration Rules and Supplementary Procedures for
Large Complex Disputes of the American Arbitration Association
("AAA"), and judgment on the arbitration award may be entered
in any court having jurisdiction thereof. The arbitration
shall be conducted by a panel of three persons experienced in
the pharmaceutical business. Within 30 days after initiation
of arbitration, each party shall select one person to act as
arbitrator and the two party-selected arbitrators shall select
a third arbitrator within 30 days of their appointment. If the
arbitrators selected by the parties are unable or fail to
agree upon the third arbitrator, the third arbitrator shall be
appointed by the AAA. The place of arbitration shall be New
York, New York. Either party may apply to the arbitrators for
interim injunctive relief until the arbitration award is
rendered or the controversy is other- wise resolved. Either
party also may, without waiving any remedy under this
Agreement, seek from any court having jurisdiction any
injunctive or provisional relief necessary to protect the
rights or property of that party pending the arbitration
award. The arbitrators shall have no authority to award
punitive or any other type of damages not measured by a
party's compensatory damages. Each party shall bear its own
costs and expenses and attorneys' fees and an equal share of
the arbitrators' and any administrative fees of arbitration.
Except to the extent necessary to confirm an award or as may
be required by law, neither a party nor an arbitrator may
disclose the existence, content, or results of an arbitration
without the prior written consent of both parties. In no event
shall an arbitration be initiated after the date when
commencement of a legal or equitable proceeding based on the
dispute, controversy or claim would be barred by the
applicable New Jersey statute of limitations. As used in this
Section, the term "Excluded Claim" shall mean a dispute,
controversy or claim that concerns (a) the validity or
infringement of a patent, trademark or copyright; or (b) any
antitrust, anti monopoly or competition law or regulation,
whether or not statutory.
19
8.7. Entire Agreement. The Agreement contains the entire
----------------
understanding of the parties with respect to the subject
matter hereof. All express or implied agreements and
understandings, either oral or written, heretofore made are
expressly merged in and made a part of the Agreement. The
Agreement may be amended, or any term hereof modified, only by
a written instrument duly executed by both parties hereto. It
is understood that the Evaluation Agreement between the
parties dated January 18, 2000 and the Fee for Service
Agreement between the parties dated August 10, 2000, as they
relate to the delivery of GMP material, will continue to
remain in effect.
8.8. Headings. The captions to the several Articles and Sections
--------
hereof are not a part of the Agreement, but are merely guides
or labels to assist in locating and reading the several
Articles and Sections hereof.
8.9. Independent Contractors. It is expressly agreed that CytRx and
-----------------------
Merck shall be independent contractors and that the
relationship between the two parties shall not constitute a
partnership, joint venture or agency. Neither CytRx nor Merck
shall have the authority to make any statements,
representations or commitments of any kind, or to take any
action, which shall be binding on the other, without the prior
consent of the other party.
8.10. Waiver. The waiver by either party hereto of any right
------
hereunder or the failure to perform or of a breach by the
other party shall not be deemed a waiver of any other right
hereunder or of any other breach or failure by said other
party whether of a similar nature or otherwise.
8.11. Counterparts. The Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
8.12. Waiver of Rule of Construction. Each party has had the
------------------------------
opportunity to consult with counsel in connection with the
review, drafting and negotiation of this Agreement.
Accordingly, the rule of construction that any ambiguity in
this Agreement shall be construed against the drafting party
shall not apply.
8.13 Announcements; Public Disclosure. Neither party may disclose
--------------------------------
the existence of or terms and conditions of this Agreement to
any third party, or in the public domain, without the prior
written approval of the other party, except as may be required
by law. In that case, the required party shall give the other
party an opportunity to comment on the disclosure and shall
limit disclosure to required information.
20
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
Merck & CO., INC. CytRx Corporation
BY: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ BY: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
TITLE: Chairman, President & TITLE: President and CEO
Chief Executive Officer
DATE: November 1, 2000 DATE: October 30, 2000
21
SCHEDULE 1.19
PATENTS
U.S. Patent
-----------
5,554,372 (subject to U.S. government regulations)
5,990,241
6,086,899
RE 36,665
5,567,859
5,696,298
5,824,322
Pending application 90/104,088
Foreign
-------
W096/04932
6,086,899
1
SCHEDULE 4.4.5
ROYALTY REDUCTION
[*****]
[*****] Confidential treatment has been granted for the redacted portions of
this page.
1
ADDENDUM 2.0
------------
ORGANICHEM AGREEMENT
--------------------
[*****]
[*****] Confidential portions of this page have been redacted and filed
separately with the Commission.
1
ADDENDUM 3.0
------------
CYTRX KNOW-HOW INCLUDED IN INITIAL DATA TRANSFER
------------------------------------------------
[*****]
[*****] Confidential portions of this page have been redacted and filed
separately with the Commission.
1
ADDENDUM 4.0
------------
PATENT REIMBURSEMENT LETTER
---------------------------
[*****]
[*****] Confidential portions of this page have been redacted and filed
separately with the Commission.
1
ADDENDUM 5.0
------------
CYTRX PRESS RELEASE
-------------------
FOR IMMEDIATE RELEASE
December XX, 2001
Contact: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Vice President, Finance
CytRx Corporation
(▇▇▇) ▇▇▇-▇▇▇▇
CYTRX LICENSES TRANZFECT POLOXAMER TECHNOLOGY TO VICAL
ATLANTA--December XX, 2001--CytRx Corporation (Nasdaq:CYTR) announced today an
exclusive, worldwide license agreement granting Vical Incorporated (Nasdaq:VICL)
rights to use or sublicense CytRx's TranzFect poloxamer technology to enhance
viral or non-viral delivery of polynucleotides (such as DNA and RNA) in all
preventive and therapeutic human and animal health applications, except for four
infectious disease vaccine targets already licensed to Merck & Co., Inc.
(NYSE:MRK) and prostate-specific membrane antigen (PSMA). In addition, the
license agreement permits Vical to use TranzFect poloxamer technology to enhance
the delivery of proteins in prime-boost vaccine applications that involve the
use of polynucleotides. As part of the agreement, CytRx will receive an up-front
payment, and potentially, future milestone and royalty payments.
▇▇▇▇ ▇▇▇▇▇▇▇, President and Chief Executive Officer of CytRx, said, "We are very
pleased to enter into our second major license for the TranzFect technology.
Vical is a leader in the field of gene therapy and well-positioned to apply our
TranzFect poloxamers in a broad range of product applications. We look forward
to continued development of this exciting combination of proprietary
technologies."
CytRx's patented TranzFect technology uses poloxamers (non-ionic block
co-polymers) to increase cellular uptake of genes and boost immunogenicity.
Vical's patented naked DNA technology is a biological method of delivering genes
into cells in the body to cause production of desired proteins.
1
About CytRx Corporation
CytRx Corporation is focused on the development and commercialization of
high-value human therapeutics. The Company's research and development activities
include CRL-5861, an intravenous agent for treatment of sickle cell disease and
other acute vaso-occlusive disorders, and TranzFect, a delivery enhancement
technology. CytRx has a research pipeline with opportunities in the areas of
muscular dystrophy, cancer, spinal cord injury, vaccine delivery, gene therapy
and food animal feed additives.
This press release may contain forward-looking statements that involve risks and
uncertainties. Actual results may differ materially from those discussed in this
release, due to, among other things, the research, development, and market risks
which could adversely affect the Company's timeline for clinical trials,
regulatory approval, and if such approval is received, time to market
thereafter. Additional uncertainties and risks are described in the Company's
most recently filed SEC documents, such as its Form 10-K and its most recent
10-Q.
2
ADDENDUM 6.0
------------
VICAL PRESS RELEASE
-------------------
FOR IMMEDIATE RELEASE
December XX, 2001
Contact: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Director, Investor Relations
Vical Incorporated
(▇▇▇) ▇▇▇-▇▇▇▇
VICAL LICENSES POLOXAMER TECHNOLOGY FROM CYTRX
SAN DIEGO--December XX, 2001--Vical Incorporated (Nasdaq:VICL) announced today
an exclusive, worldwide license agreement with CytRx Corporation (Nasdaq:CYTR)
granting Vical rights to use or sublicense CytRx's TranzFect poloxamer
technology to enhance viral or non-viral delivery of polynucleotides (such as
DNA and RNA) in all preventive and therapeutic human and animal health
applications, except for four infectious disease vaccine targets already
licensed to Merck & Co., Inc. (NYSE:MRK) and prostate-specific membrane antigen
(PSMA). In addition, the license agreement permits Vical to use TranzFect
poloxamer technology to enhance the delivery of proteins in prime-boost vaccine
applications that involve the use of polynucleotides. As part of the agreement,
Vical will make an up-front payment, and potentially, future milestone and
royalty payments.
The exclusive license grants Vical rights under CytRx's extensive intellectual
property to operate independently or through sublicensing. Vical also gains
access to CytRx's know-how and large library of poloxamers, including CRL-1005,
which has been tested extensively in Merck's HIV vaccine development program.
Several poloxamers also have been safely tested in humans. Poloxamers are
non-ionic block copolymers that have been found to increase expression (protein
production) and immunogenicity (immune response against foreign proteins) when
delivered with plasmid DNA.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vical's President and Chief Executive Officer, said, "We are
excited to add a complementary technology to leverage the potential of our gene
delivery technology. Preclinical safety and effectiveness of CRL-1005 has been
demonstrated as part of the Merck HIV vaccine program. Our own research with
other poloxamers, some showing even greater effect in animal models than
CRL-1005, has suggested a broad range of additional applications including DNA
1
vaccines for infectious diseases or cancer and gene-based delivery of
therapeutic proteins. Gaining exclusive access to the CytRx technology offers
Vical additional opportunities to advance research-stage programs into the
clinical product development pipeline." ▇▇. ▇▇▇▇▇▇ also noted, "We are now
projecting a net cash burn rate of between $14 million and $16 million for
2001."
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D., Vical's Chief Scientific Officer, added, "Poloxamers
increase expression and immunogenicity, with no compromise in safety, and could
make the difference between a marginal vaccine and an effective one. We expect
to continue our testing of these poloxamers in both vaccine and therapeutic
protein models, and we look forward to advancing into clinical testing at the
first opportunity."
Vical Incorporated, The Naked DNA Company(TM), is focused on the development of
pharmaceutical product candidates based on its patented gene delivery
technology. A number of therapeutic and vaccine product candidates are currently
under development for the prevention or treatment of cancer, infectious diseases
and metabolic disorders by Vical and its collaborative partners, including Merck
& Co., Pfizer Inc., Aventis S.A., Human Genome Sciences, Centocor Inc., Merial
and Boston Scientific Corporation. Allovectin-7(R), which uses a lipid-DNA
complex to help the immune system recognize and attack cancer cells, is in Phase
II and Phase III testing in certain patients with metastatic melanoma and in
Phase II testing in patients with head and neck cancer. Leuvectin(TM), which
uses a lipid-DNA complex to stimulate an immune response against cancer cells,
is in Phase II testing in patients with prostate cancer. If you are interested
in any of Vical's clinical trials, please see our website at ▇▇▇.▇▇▇▇▇.▇▇▇, or
-------------
contact ▇▇▇▇▇▇ ▇▇▇▇▇ by phone at (▇▇▇) ▇▇▇-▇▇▇▇ or by e-mail at
▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇.
----------------
This press release contains forward-looking statements subject to risks and
uncertainties that could cause actual results to differ materially from those
projected. Forward-looking statements include statements about the company's
focus, collaborative partners, product candidates, and developmental status.
Risks and uncertainties include whether any product candidates will be shown to
be safe and efficacious in clinical trials, the timing of clinical trials,
whether Vical or its collaborative partners will seek or gain approval to market
any product candidates, and additional risks set forth in the company's filings
with the Securities and Exchange Commission.
2
These forward-looking statements represent the company's judgment as of the date
of this release. The company disclaims, however, any intent or obligation to
update these forward-looking statements.
3