EXHIBIT 10.23
LICENSE AGREEMENT
-----------------
This Agreement made as of the -- day of ______, 1998 (the "Effective
Date") by and between the University System of Maryland, an agency of the State
of Maryland, acting through its constituent institution, University of Maryland,
Baltimore, having an address at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇ (hereinafter "UM"), and Phytera, Inc., a corporation of the State of
Delaware, U.S.A., with its principal place of business at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (hereinafter "Phytera"),
WITNESSETH:
WHEREAS, as a public research and education institution, UM is
interested in licensing Patent Rights (as hereinafter defined) in a manner that
will benefit the public by facilitating the distribution of useful products and
the utilization of new methods, and lacks capacity to commercially develop,
manufacture, and distribute such products or methods; and
WHEREAS, valuable inventions, comprised of Patent Rights, for the use
and development of human and animal veterinary therapeutics and agrochemicals
have been jointly developed at UM by UM employee ▇▇▇ ▇▇▇▇▇, Ph.D., and by
Phytera employee ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Ph.D. (the "Inventors `); and
WHEREAS, under UM policy UM owns all rights, title, and interest in and
to its joint interest in the inventions, which has been confirmed by the
execution of an assignment from ▇▇. ▇▇▇▇▇ to UM; and
WHEREAS, Phytera desires to obtain a worldwide, exclusive,
royalty-bearing license, with right to sublicense, to UM's joint interest in the
aforementioned inventions, to make, use, sell, have made, and have used products
produced through the use of the inventions.
NOW, THEREFORE, in consideration of the foregoing premises and the
following mutual agreements, and other good and valuable consideration, the
parties hereto agree as follows:
Article 1
DEFINITIONS
For the purpose of this Agreement, the following words and phrases
shall have the following meanings:
1.01 "Affiliate" means (a) any business entity which controls at least
fifty percent (50%) of the equity or voting stock of Phytera or (b) any business
entity fifty percent (50%) of whose equity or voting stock is owned or
controlled by Phytera or any entity defined in (a).
1.02 "Confidential Information" means information relating to the
subject matter of the Patent Rights and which is not generally known in the
industry and includes, without limitation, any documents, drawings, sketches,
models, designs, data, memoranda, tapes, records, formulae and algorithms which
Phytera receives from UM or UM receives from Phytera.
1.03 "Equity Transaction(s)" means the transfer of Phytera's stock to
a Partner (as defined in Section 1.09) in exchange for cash.
1.04 "FDA" means the United States Food and Drug Administration.
1.05 "First Commercial Sale" means the initial transfer of Identified
Products for compensation by Phytera, a Sublicensee, or a Partner to any Third
Party for the purpose of commercial use or resale and not for research,
development or testing purposes. Transfer of Identified Product for beta and
field testing occurring prior to the issuance of any required regulatory
approval for sale shall not constitute the First Commercial Sale.
1.06 "Identified Product" means any product or derivative thereof
sold, used, manufactured or distributed by Phytera or a Sublicensee or Partner
which product or derivative was identified, selected, or determined to have
utility in whole or in part through the use of Patent Rights.
1.07 "Licensed Field" means assays for the identification of human and
animal veterinary therapeutics and agrochemicals.
1.08 "Net Sales" means the gross sales revenues and fees billed by
Phytera or a Sublicensee or Partner for the sale of any Identified Products,
less the sum of the following:
(a) customary trade, quantity and cash discounts actually
allowed and taken;
(b) sales or use taxes, excise taxes and customs duties included
in the invoiced amount;
(c) outbound transportation prepared or allowed if separately
itemized on the invoice to the customer; and
(d) amounts actually allowed or credited on returns of
Identified Products.
"Net Sales" does not include any further downstream sales of an Identified
Product after the first sale thereof by Phytera or a Sublicensee or Partner to a
Third Party purchaser. No deductions will be made for commissions paid to
individuals, whether they be with independent sales agencies or regularly
employed by Phytera and on its payroll, or for cost of collections. Identified
Products will be considered sold when billed out or invoiced, whichever is
first.
1.09 "Partner" means a person or entity that executes a contract with
Phytera to work with Phytera to commercially exploit the technologies covered by
Patent Rights or compounds discovered by Phytera or by Phytera and the Partner
using the Patent Rights.
1.10 "Partnership Contract" means a written agreement between Phytera
and a Partner, involving Patent Rights or an Identified Product, which
explicitly sets forth, among other details, Phytera's proprietary drug discovery
technologies and capabilities to which the Partner is gaining access and the
consideration paid by the Partner for access to the technologies and
capabilities.
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1.11 "Patent Rights" means the United States Patent Application Serial
No. 08/724,540, titled "Identification and Use of Mutant Multidrug-Resistant
Cells" (Attachment A), which was filed on September 30, 1996; all corresponding
foreign patents and patent applications and Letters Patent issuing from any of
the above; and all continuations, continuations-in-part, divisionals, reissues,
reexaminations, and extensions of the foregoing.
1.12 "Sublicensee" means a sublicensee, including an Affiliate, of all
or some of the Patent Rights through a sublicense from Phytera.
1.13 "Third Party" means any entity or person other than Phytera, UM, a
Sublicensee, or a Partner.
Article 2
GRANT OF LICENSE AND TECHNOLOGY TRANSFER
2.01 Subject to the rights of the United States under its earlier grant
to UM and pursuant to 35 U.S.C. (S)2.01 et seq. and all implementing
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regulations, UM grants to Phytera, and Phytera accepts, a sole and exclusive
worldwide license under Patent Rights to make and use for internal research and
product identification and development purposes only, but not sell or otherwise
transfer except as specified below, Patent Rights within the Licensed Field.
This grant is royalty- free, subject to the payment by Phytera to UM of all
consideration as provided in this Agreement. Phytera may not sell Patent Rights,
but may make, use, have made and have used Identified Products, subject to
payment of the consideration set forth in Paragraphs 4.01 through 4.06. The
parties mutually agree that the form of consideration set forth in Paragraphs
4.01 through 4.06 is for convenience of accounting and expressly acknowledge
that such consideration is not to be deemed royalties payable for the Patent
Rights but is for access to and use of Patent Rights for purposes of research,
drug discovery, development, identification, testing, and marketing and to make,
use, have made and have used Identified Products within the Licensed Field.
2.02 UM specifically reserves the right:
(a) to practice under the Patent Rights to make and use the
Identified Products on a royalty-free basis solely for research and education;
(b) to license the Patent Rights to universities, colleges and
other research or educational institutions, but only for research and
educational purposes and uses and not for any commercial purposes or uses; and
(c) to publish the general scientific findings from research
related to Patent Rights, provided that Phytera has had the opportunity to
review copies of all drafts prior to submission for publication in accordance
with and subject to the other conditions in Section 5.05 below.
2.03 Phytera may sublicense to an Affiliate only if such Affiliate
consents to be bound by this Agreement to the same extent as Phytera.
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2.04 Phytera may grant sublicenses consistent with this Agreement or
enter into Partnership Contracts consistent with this Agreement, provided
Phytera shall be responsible for the operation of its Sublicensees and Partners
relevant to this Agreement as if such operations were carried out by Phytera,
including all required payments, whether or not paid to Phytera by a Sublicensee
or Partner.
2.05 Phytera agrees to identify its Sublicensees hereunder to UM by
name, address and field of sublicense (both as to geography and subject matter),
and further agrees to forward to UM a copy of each report received by Phytera
from a Sublicensee in accordance with Sections 7.01 and 7.02 promptly upon
receipt of such report. In no event will Sublicensee reports be due to Phytera
less often than quarterly.
2.06 Phytera agrees to identify its Partners to UM by name, address
and scope of responsibility and to provide UM a copy of any Partnership Contract
within 30 days after its execution.
2.07 The license granted hereunder shall not be construed to confer
any rights upon Phytera by implication, estoppel, or otherwise as to any
technology not specifically encompassed by the term "Patent Rights."
2.08 Phytera shall not receive from Sublicensees or Partners anything
of value in lieu of cash payments for any sublicense or Partnership Contract
under this Agreement, unless such is with the prior written permission of UM. UM
shall not withhold permission if Phytera proposes, in consideration for the
permission, a reasonable payment to UM in lieu of the royalty it would receive
were the transaction in question one involving a cash payment to Phytera.
Article 3
DUE DILIGENCE
3.01 Phytera must use commercially reasonable efforts to bring one or
more Identified Products to market in each country in which Patent Rights are
licensed hereunder through a thorough, vigorous and diligent program for
exploitation of the Patent Rights. In addition, Phytera must deliver to UM on or
before one hundred eighty (180) days after the Effective Date of this Agreement
a detailed business plan (the "Plan"), showing its plans to conduct a thorough
and diligent program to exploit Patent Rights. Further, Phytera shall provide
annual written reports to UM on progress against the Plan and must notify UM of
any changes in the Plan within one month after the occurrence of or recognition
of the need for such changes.
Article 4
PAYMENTS AND ROYALTIES
In consideration of rights regarding Patent Rights granted by UM to
Phytera under this Agreement, Phytera agrees to pay UM the following:
4.01 Milestone Payments
Phytera agrees to make milestone payments as described in this Section
4.01:
4
(a) [
]*
(b) [
]*
(c) [
]*
(d) [
]*
(e) [
]*
4.02 Phytera will pay UM [
]*. Running royalty payments hereunder
must be made within 60 days after the close of each calendar quarter, along with
a statement as set forth in Paragraph 7.02 hereof. If no royalties are due for
any quarter, Phytera must send a statement to such effect to UM.
4.03 Phytera will pay UM [
]*.
4.04 Phytera will pay UM [
]*. The following examples are
intended to illustrate how payments will be calculated under this section:
------------------------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as amended.
The complete Exhibit, including the portions for which confidential treatment
has been requested, has been filed separately with the Securities and Exchange
Commission.
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(a) Phytera signs a Partnership Contract whereby Phytera
screens the Partner's chemistry library for antibacterial activity using the
Patent Rights. Worldwide rights to drugs discovered by this collaboration rest
with the Partner. [
]* are payable to UM.
(b) Phytera signs a Partnership Contract whereby Phytera
screens its ExPAND(R) and uMARINE(R) extract libraries and the Partner's
extract and chemistry libraries for antifungal activity using the Patent Rights.
Phytera is responsible for carrying out natural product chemistry work on some
or all of the extracts to identify lead compounds. The Partner has worldwide
rights to drugs discovered by the collaboration. [
] * are payable to UM.
(c) Phytera signs a partnership contract whereby Phytera
screens its ExPAND(R) extract libraries for antibacterial activity using the
Patent Rights. Phytera is responsible for carrying out natural product chemistry
work on the extracts to identify lead compounds. Lead compounds are to be
optimized using Phytera's combinatorial chemistry technology to produce
candidates. Phytera retains North American marketing rights for the products and
the Partner markets in the rest of the world. [
] * are payable to UM.
In addition, UM will receive [
] *.
4.05 For Equity Transactions between Phytera and a Partner arising out
of a Partnership Contract involving Patent Rights or any Identified Product, UM
will receive [
] *. As used in this Section
4.05, "market price" is defined as the last recorded private transaction of
Phytera's preferred stock, or if Phytera is public, the average closing price of
Phytera' s stock over the last thirty (30) trading days on any securities
exchange prior to the date of the equity transaction being closed. The following
examples are intended to illustrate how payments are to be calculated under this
Section:
(a) Phytera signs a Partnership Contract whereby Phytera
screens the Partner's chemistry library for antifungal activity using the Patent
Rights. Rights to drugs discovered by this collaboration rest with the Partner.
In connection with the signing of the
------------------------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as amended.
The complete Exhibit, including the portions for which confidential treatment
has been requested, has been filed separately with the Securities and Exchange
Commission.
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Partnership, the Partner purchases equity in Phytera at a fifty percent (50%)
premium to the "market price" for Phytera's stock. [
]* is payable to UM.
(b) Phytera signs a Partnership Contract whereby Phytera screens
its ExPAND(R) and uMARINE(R) extract libraries for antifungal activity using the
Patent Rights. Phytera is responsible for carrying out natural product chemistry
work on some or all of the extracts to identify lead compounds. The partner has
worldwide right to drugs discovered by the collaboration. In connection with the
signing of this Partnership, two Equity Transactions are agreed:
(i) At signing the Partner purchases equity in Phytera at
the price of the last recorded private transaction involving
purchase of Phytera's preferred stock (the "market price").
(ii) On the attainment of a certain future milestone, the
Partner will purchase equity in Phytera at the
"market price."
[
] *.
[
] *.
(c) Phytera signs a Partnership contract whereby Phytera
screens its ExPAND(R) extract libraries for antibacterial activity using the
Patent Rights. Phytera is responsible for carrying out natural product chemistry
work on extracts to identify lead compounds. Lead compounds are to be optimized
using Phytera's combinatorial chemistry technology to produce drug candidates.
Phytera retains North American rights and the Partner markets in the rest of the
world. In connection with the signing of this Partnership, two Equity
Transactions are agreed:
(i) At signing the Partner purchases equity in Phytera at
a fifty percent (50%) premium to the price of the last
recorded private transaction involving purchase of Phytera's
preferred stock (the "market price").
(ii) On the attainment of a certain future milestone, the
Partner will purchase equity in Phytera at either a twenty-
five percent (25%) premium to the last recorded private
transaction price, or if Phytera's stock is publicly listed
at that time, at a ten percent (10%) premium to the thirty
----------------------------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as amended.
The complete Exhibit, including the portions for which confidential treatment
has been requested, has been filed separately with the Securities and Exchange
Commission.
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(30) day average trading closing price.
[
]*.
4.06 Phytera will pay UM [
] *
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[ ] * [ ] *
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[ ] * [ ] *
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[ ] * [ ] *
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[ ] * [ ] *
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[ ] * [ ] *
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If applicable, Phytera will pay [ ]* within 100 days
after the end of each year. The amount payable by Phytera to UM under this
Section 4.06 [
] *.
4.07 (a) Royalties are payable from the country in which they are
earned and are subject to foreign exchange regulations then prevailing in such
country. Royalty payments must be paid to UM in United States Dollars by check
or checks drawn to the order of UM or by electronic funds transfers to an
account designated by UM. To the extent sales may have been made by Phytera in a
foreign country, royalties will be first determined in the currency of the
country in which the royalties are earned and then converted to their equivalent
in United States Dollars. To determine the conversion, the buying rates of
exchange quoted by the ▇▇▇▇▇▇ Guaranty Trust of New York, New York, averaged on
the last business day of each of three (3) consecutive calendar months
constituting the calendar quarter in which the royalties were earned, will be
used.
(b) To the extent that statutes, laws, codes, or government
regulations (including currency exchange regulations) prevent or limit royalty
payments by Phytera, Phytera
-----------------------------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as amended.
The complete Exhibit, including the portions for which confidential treatment
has been requested, has been filed separately with the Securities and Exchange
Commission.
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will render to UM annual reports of sales of the Identified Product in such
country. All monies due and owing UM as provided in the annual reports at UM's
option (1) may promptly be deposited by Phytera, or its Sublicensees, or
Partners, as the case may be, in a local bank in such country in an account to
be designated by UM in writing or (2) may promptly be paid to UM or deposited in
its account, as directed in writing by UM in any other country where the payment
or deposit is lawful under the currency restrictions.
4.08 Interest will be due on any payments to UM required by any
Section of this Agreement that are more than thirty (30) days late. The interest
rate is ten percent (10%) simple interest per annum.
Article 5
PATENT PROSECUTION AND PUBLICATIONS
5.01 Phytera is responsible for the prosecution and maintenance of the
Patent Rights, including all costs associated with the preparation, filing,
prosecution, issuance, reissuance, reexamination, interference, and maintenance
of all United States applications, patents, divisionals, etc., included in
Patent Rights and those corresponding foreign applications and patents filed in
countries designated by Phytera as set forth below. Phytera shall designate
foreign countries in which patent applications are to be filed. These filings
will be made by Phytera and Phytera's choice of patent counsel, which must be
reasonably acceptable to UM. Phytera will bear all costs of filings and fees and
expenses of counsel. If UM desires to file at its own expense applications in
foreign countries not designated by Phytera, UM will give Phytera sixty (60)
days prior written notice of its intention to make any such filing. Within such
sixty (60) day period, Phytera may elect to file patent applications pursuant to
this Section 5.01 in any countries identified in UM's notice. If Phytera
indicates in writing that it does not intend to file patent applications in one
or more countries identified in UM's notice, or if the sixty (60) day period
expires without a response from Phytera, then UM may file patent applications in
those foreign countries where Phytera elects not to file, or where it fails to
elect to file, and Phytera's exclusive license of UM's Patent Rights shall not
extend to such countries unless agreed to separately. In any event, Phytera
shall retain non-exclusive Patent Rights under its joint ownership of the Patent
Rights.
5.02 Phytera and UM will cooperate to limit the expenditures described
in Section 5.01 while ensuring that the Patent Rights cover all items of
commercial interest and importance. Both Parties will use reasonable efforts to
ensure that the Inventors employed by the respective parties fully cooperate
with Phytera's prosecution and maintenance of the Patent Rights; provided,
however, that each party acknowledges that the other party cannot guarantee such
cooperation. Phytera is solely responsible for making decisions regarding scope,
content, and prosecution of applications to be filed under Patent Rights. UM
will cooperate with Phytera in the prosecution, filing, and maintenance of
patent applications and will have a reasonable
9
opportunity to advise Phytera regarding the scope of patent coverage within
Patent Rights. Phytera will reasonably consider UM's advice. UM may, from time
to time, reasonably request opinions and other documents from Phytera's patent
counsel, which material will be supplied to UM without cost to UM. Phytera will
promptly advise UM as to all developments with respect to such applications and
prosecution and copies of all papers received and filed in connection with the
prosecution will be provided promptly to enable UM to advise Phytera thereon.
5.03 In no event may the scope of patent coverage within Patent Rights
be significantly modified by Phytera without prior review by UM. Any such
modification will not, however, require the approval of UM, and UM will not
control the prosecution of Patent Rights. If Phytera wishes to relieve itself of
any obligation to pay for the future expenses of preparation, filing,
prosecution, issuance, reissuance, reexamination, interferences, or maintenance
of any Patent Rights in any country, Phytera may notify UM and UM may assume the
future costs. If UM assumes the future costs, Phytera's exclusive license will
terminate with respect to those Patent Rights in each country which Phytera has
elected not to support. Phytera is responsible for all expenses incurred prior
to, or as a result of irrevocable action taken prior to, its notification to UM.
5.04 All patent applications filed under Patent Rights and all patents
granted thereon will be owned jointly by Phytera and UM, subject to the license
herein granted to Phytera.
5.05 In order to safeguard Patent Rights, UM will not publish any
results or otherwise publicly disclose the results of its research relating to
the Patent Rights unless any materials containing such results are first
submitted to Phytera for review, comment, and consideration of appropriate
patent action. UM will submit such materials relating to a planned written
publication or other public disclosure to Phytera for review at least sixty (60)
days prior to the date of the planned submission for written publication.
Phytera will notify UM within thirty (30) days of receipt of the materials
whether it appears that any patent applications may need to be filed in
connection with obtaining or maintaining Patent Rights. Written publication or
public disclosure by UM will be deferred to permit Phytera to file any necessary
patent applications, but the deferral must not exceed ninety (90) days from the
date of receipt by Phytera of the materials.
5.06 Except as provided in Section 9.01, if a claim of any patent
comprising the Patent Rights is invalidated by a court of competent jurisdiction
from which no appeal is taken, or from which no further appeal can be taken,
notwithstanding any other provisions of this Agreement to the contrary, Phytera
may not terminate this Agreement, but may terminate all future obligations of
Phytera under Article 4 to pay royalties to UM with respect to the Identified
Product identified, selected, or determined to have utility in whole or in part,
through use of the invalidated claim(s) and without reference to other claims of
the Patent Rights.
Article 6
Confidentiality
6.01 (a) It is contemplated that it may be necessary for either party
to disclose to the other certain Confidential Information. Confidential
Information may be disclosed subject to the following provisions:
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Except as specifically authorized in writing by the other party hereto,
a party shall not, for a period of [ ]* from the date of receipt of
Confidential Information, disclose or use such Confidential Information. These
obligations of non-disclosure and nonuse shall not apply to any Confidential
Information which is:
(i) in the possession of the receiving party prior to receipt
thereof from the disclosing party, as shown by the receiving
party's written records, other than pursuant to a confidential
disclosure agreement with the disclosing party;
(ii) already available, or becomes available, to the public
through no fault of the receiving party;
(iii) received by or for the receiving party from a third party
having a right to disclose it; or
(iv) developed by or for the receiving party independent of any
disclosure hereunder, as shown by the receiving party's business
records.
(b) Each party will use that level of care to prevent the use or
disclosure of the other party's Confidential Information as it exercises in
protecting its own Confidential Information.
(c) All Confidential Information must be clearly marked as
confidential by the disclosing party and if not in written or tangible form when
disclosed, must be summarized in writing and so marked within thirty (30) days
of disclosure to the receiving party.
(d) Notwithstanding the foregoing, Phytera, Sublicensees, and
Partners are permitted to disclose and use such Confidential Information to the
extent reasonably necessary to exercise Phytera's license and/or sublicenses
and/or Partnership Contracts hereunder, provided that any disclosure is made
subject to confidentiality restrictions consistent with those accepted by
Phytera in this Agreement.
(e) Phytera recognizes that UM is an educational institution with
standards and practices for protection of Confidential Information which differ
from Phytera's commercial standards and practices. By this agreement UM
undertakes to use reasonable efforts to protect the confidentiality of Phytera's
Confidential Information. Phytera agrees that, provided such efforts are made,
it will not seek to hold UM or its personnel liable in the event of inadvertent
disclosure of Phytera's Confidential Information notwithstanding reasonable
efforts to prevent such occurrences.
(f) Phytera recognizes that the records of UM are subject to the
Maryland Access to Public Records Law. Phytera asserts that any Confidential
Information of Phytera and any annual reports of sales provided to UM under this
Agreement are confidential, proprietary,
-----------------------------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as amended.
The complete Exhibit, including the portions for which confidential treatment
has been requested, has been filed separately with the Securities and Exchange
Commission.
11
and trade secret information, not subject to disclosure under Maryland's Access
to Public Records Law. UM agrees to assert this position in response to any
request for public information applicable to such materials, and to promptly
notify Phytera upon receipt of any such request. The Maryland Access to Public
Records Law is at Title 10, Subtitle 6, Part II, State Government Article,
Annotated Code of Maryland.
(g) Upon termination of this Agreement for any reason other
than a material breach by UM, Phytera shall return to UM all material provided
to Phytera which is Confidential Information, together with all copies and other
forms of reproduction, except that a single archive copy may be kept in the
Phytera's legal files.
(h) Upon termination of this Agreement for any reason other
than a material breach by Phytera, UM shall return to Phytera all material
provided to UM which is Confidential Information, together with all copies and
other forms of reproduction, except that a single archive copy may be kept in
the UM's legal files.
(i) Each party agrees that a termination of this Agreement
shall not alter the five (5) year obligation of confidentiality set forth in
Paragraph 6.0 1(a).
Article 7
REPORTS AND ACCOUNTING
7.01 During the term of this Agreement and for five (5) years
thereafter, Phytera must keep, and require each Sublicensee or Partner to keep,
complete, true, and accurate records containing all the particulars that may be
necessary to enable royalties payable to Phytera and thereby to UM under the
Agreement to be determined. Phytera shall permit its relevant records to be
inspected at any time during regular business hours, upon reasonable notice, no
more frequently than once per calendar year by an independent auditor appointed
by UM for this purpose and acceptable to Phytera, who shall report to UM only
the amount of royalty payable hereunder. This audit will be at UM's expense
unless the audit shows an underpayment in amounts due to UM in relation to
amounts paid to UM by 5% or more for any three-month royalty period in the
periods subject to audit, in which case the audit expense will be borne by
Phytera.
Phytera must further require that each Sublicensee or Partner permit
its relevant records to be inspected by an independent auditor appointed by
Phytera as may be necessary to verify the accuracy and adequacy of said records
for purposes of calculating royalty amounts payable to Phytera and thereby to
UM. If UM requests that Phytera conduct such an audit (a joint audit), then
Phytera will select an auditor mutually acceptable to both UM and Phytera, who
will conduct the audit during normal business hours and upon reasonable notice
to the Sublicensee or Partner. The auditor will be required to report to UM only
the royalty amounts payable to UM and the audit will be at UM's expense, unless
the audit shows an underpayment in amounts due to UM in relation to amounts paid
to UM of 5% or more for any three-month royalty period in periods subject to
audit, in which case the audit expense will be borne by Phytera. A maximum audit
frequency of one Phytera-initiated or one jointly-initiated (UM/Phytera) audit
per calendar year will be allowed.
7.02 Beginning with the First Commercial Sale of an Identified
Product, within 60 days from each March 31, June 30, September 30 and December
31, Phytera must deliver to UM
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a true and accurate report, giving such particulars of the business conducted by
Phytera, Sublicensees, and Partners, if any, in the preceding three-month period
as are pertinent to any accounting for royalty payments hereunder. Such reports
will include at least the following information for the three- month royalty
period:
(a) number of each Identified Product manufactured and sold by
Phytera and by each Sublicensee or Partner;
(b) total ▇▇▇▇▇▇▇▇ for each Identified Product sold by Phytera
and by each Sublicensee or Partner;
(c) accounting for each Identified Product used or sold;
(d) deductions applicable as provided in paragraph 1.08; and
(e) names and addresses of all Sublicensees or Partners of
Phytera.
7.03 With each report submitted, Phytera will pay to UM the amounts
due and payable under this Agreement for the royalty period covered by the
report. If no amounts are due, Phytera will so report.
7.04 Any tax required to be withheld on royalties payable to UM by
Phytera or its Sublicensees or Partners under the laws of any country under this
Agreement will be promptly paid by Phytera or its Sublicensees or Partners for
and on behalf of UM to the appropriate governmental authority, and Phytera will
furnish UM with proof of payment of such tax together with official or other
appropriate evidence issued by the competent governmental authority sufficient
to enable UM to support a claim for tax credit with respect to any sum so
withheld. Any tax required to be withheld on payments by Phytera to UM shall be
an expense of and be borne solely by UM, and Phytera's royalty payment(s) to UM
following the withholding of such tax shall be decreased by the amount of such
tax withholding. Phytera will cooperate with UM in the event UM elects to
assert, at its own expense, exemption from any such tax.
7.05 During the product development phase described in Section 3.01,
Phytera will furnish to UM, upon UM's written request, copies of all of
Phytera's correspondence relating to an Identified Product to and from the FDA,
any other U.S. regulatory agency involved in the product development phase, and
any foreign equivalent promptly upon receipt thereof.
7.06 Upon the request of UM but not more than once per calendar year,
Phytera will deliver to UM a written report as to Phytera' s efforts and
accomplishments during the preceding year in the identification, selection, or
testing of agents through the use of Patent Rights in various parts of the world
and its commercialization plans for any Identified Products for the upcoming
year. This report will include (a) the approximate number of agents tested using
Patent Rights during the preceding year; (b) the approximate numbers of
compounds identified, selected or found to have utility through the application
of Patent Rights during the preceding year; and (c) whether an application to
market or investigate a compound or to obtain a patent or other marketing or
distribution exclusivity has been submitted to an appropriate agency.
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Article 8
ABATEMENT OF INFRINGEMENT
8.01 Phytera will enforce any patent within Patent Rights against any
infringement or alleged infringement, and will at all times keep UM informed as
to the status thereof. Phytera may, in its sole judgment and at its own expense,
institute suit against any infringer or alleged infringer and control, settle,
and defend the suit in a manner consistent with the terms and provisions of this
Agreement and recover any damages, awards, or settlements resulting from the
suit, subject to Section 8.03. This right to ▇▇▇ for infringement will not be
used in an arbitrary or capricious manner. UM will reasonably cooperate in an
infringement suit, at Phytera's expense.
8.02 Phytera will advise UM of any patent infringement of which it is
aware. If within ninety (90) days after providing such notice to UM Phytera does
not commence to enforce the patent within Patent Rights, UM in its sole judgment
and at its own expense may do so, and may control, settle, and defend the suit
in a manner consistent with the terms and provisions of this Agreement and
recover, for its own account, any damages, awards, or settlements resulting from
the suit. But, UM agrees to inform Phytera of the terms of any proposed
settlement prior to entering into the settlement. Phytera will reasonably
cooperate in the infringement suit.
8.03 [
]*.
8.04 Phytera will defend, indemnify and hold harmless UM with respect
to costs of defense and any and all liabilities resulting from any suits,
countersuits, or legal actions of any nature that may be asserted against UM in
response to or as a result of the filing of an action by Phytera in accordance
with Section 8.01.
Article 9
TERM AND TERMINATION
9.01 The term of this Agreement will extend to ten (10) years after the
date of the First Commercial Sale of any Identified Product. The parties
expressly agree that the term is not an extension of Patent Rights beyond their
term, but represents the parties' desire to compensate UM from revenues Phytera
may have in the future derived indirectly from Patent Rights and for convenience
of accounting.
--------------------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as amended.
The complete Exhibit, including the portions for which confidential treatment
has been requested, has been filed separately with the Securities and Exchange
Commission.
14
9.02 Except as otherwise set forth herein, if Phytera fails to pay UM
any undisputed sum due and payable hereunder, UM has the right to terminate this
Agreement on ninety (90) days written notice, unless Phytera pays UM within the
ninety (90) day period all delinquent sums together with interest determined as
provided in Section 4.08. Upon expiration of the ninety (90) day period, if
Phytera has not paid all undisputed sums and interest due and payable, the
rights, privileges, and license granted under this Agreement will terminate.
Notwithstanding the foregoing, if Phytera's failure to pay UM any sum payable
hereunder arises from the failure of any Sublicensee or Partner to make payments
required pursuant to the terms of its Sublicense or Partnership Agreement
from/with Phytera, UM shall not be entitled to terminate the rights, privileges
and license granted to Phytera under this Agreement, or any rights, privileges
or licenses granted to other Sublicensees/Partners not in breach. Instead, UM
may require Phytera to notify the breaching Sublicensee/Partner that unless such
beach is cured within forty-five (45) days the Sublicense/Partnership Agreement
from Phytera to the breaching Sublicensee/Partner shall be terminated. Upon
expiration of such forty-five (45) day period, if the breaching
Sublicensee/Partner has not paid all sums due and payable under the terms of its
Sublicense/Partnership Agreement, thereby enabling Phytera to pay all sums due
and payable to UM pursuant to this Agreement, Phytera shall immediately
terminate the Sublicense/Partnership Agreement to the breaching
Sublicensee/Partner.
9.03 Prior to the First Commercial Sale of an Identified Product to a
Third Party, Phytera will be considered diligent with regard to development of
the Identified Product so long as Phytera updates and reports progress against
the Plan described in Section 3.01 and so long as Phytera:
(a) Continues to provide the necessary financial and other
resources required to maintain progress in accomplishing the Plan, as it relates
to Identified Products; and,
(b) Conducts or enables others to conduct the activities required
to maintain scheduled progress in accomplishing the Plan, as it relates to
Identified Products.
9.04 For the first five years after the First Commercial Sale of an
Identified Product to a Third Party, Phytera will be considered diligent so long
as sufficient numbers of Identified Products are sold so that earned royalties
meet or exceed the applicable minimum payment set forth in Section 4.06. If
Phytera fails to meet this requirement, then UM may declare Phytera not
diligent.
9.05 If UM declares that Phytera is not diligent in development or
sales of and Identified Product based upon the criteria set forth in Sections
9.03 and 9.04 for any reason other than the withholding by a regulatory agency
of marketing approval in spite of Phytera's diligent effort to obtain such
approval, then UM may terminate this Agreement in accordance with Section 9.06;
provided, however, that any existing Sublicenses/Partnerships shall be subject
to continuation pursuant to Section 9.08 below.
9.06 Except as set forth in Section 9.02, and as qualified by Section
9.08, if any provision of this Agreement is breached by Phytera, UM, upon ninety
(90) days written notice to Phytera, may terminate this Agreement. But, if the
breach is corrected within the ninety (90) day period and UM is reimbursed for
all damages directly resulting from the breach, the Agreement and sublicenses
will continue in full force and effect and UM will so notify Phytera in writing.
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Phytera may terminate this Agreement at any time by giving UM ninety (90) days
written notice of termination and by paying UM all amounts owed through the
effective date of the termination.
9.07 Termination does not relieve either party of any obligation which
arises hereunder before termination including obligations under ARTICLE 4,
ARTICLE 5, ARTICLE 6, ARTICLE 7, ARTICLE 8, and ARTICLE 14. If this Agreement is
terminated at a time of the year other than the anniversary date, these
obligations are deemed to arise before termination and any payment obligations
must be paid upon termination in the amounts set forth in this Agreement.
9.08 In the event that any Sublicensee/Partner shall default on any
material term of its Sublicense/Partnership Agreement or engage in conduct that
would constitute a material breach under the terms of this Agreement, Phytera
shall notify such Sublicensee/Partner in writing of such breach and, if the
Sublicensee/Partner fails to cure such breach within forty-five (45) days after
receipt of written notice from Phytera, Phytera shall terminate the
Sublicensee/Partnership Agreement. Notwithstanding any other provisions of this
Article 9, in the event of any termination of this Agreement by UM, including
without limitation a termination due to breach by Phytera pursuant to Section
9.06, UM shall immediately furnish written notice of such termination to each
Sublicensee/Partner. Each Sublicensee/Partner shall have the right to elect to
continue the terms of its Sublicense/Partnership Agreement directly with UM.
Each Sublicensee/Partner may exercise such right by advising UM in writing,
within ninety (90) days after such Sublicensee's/Partner's receipt of UM's
termination notice, of such election and of its agreement to assume with respect
to UM all of the obligations (including all payment obligations) contained in
its Sublicense/Partnership Agreement with Phytera.
Article 10
ASSIGNABILITY
10.01 This Agreement cannot be assigned or transferred, in whole or in
part by Phytera without the prior written consent of UM, which will not be
unreasonably withheld.
10.02 This Agreement cannot be assigned or transferred in whole or in
part by UM without the prior written consent of Phytera, which will not be
unreasonably withheld.
Article 11
APPLICABLE LAW; SEVERABILITY
11.01 This Agreement is made and construed in accordance with the laws
of the State of Maryland without regard to choice of law issues, except that all
questions concerning the construction or effect of patents will be decided in
accordance with the laws of the country in which the particular patent was
granted.
11.02 Phytera submits itself to the jurisdiction of the State courts of
the State of Maryland and Federal courts within the State of Maryland for
purposes of any suit relating to this Agreement and agrees that the State and
Federal courts located in Baltimore City, Maryland provide a proper venue for
determining any legal action relating to this Agreement.
11.03 In the event that any condition or provision in any Article of
this Agreement shall be held by a court of competent jurisdiction from which
there is no appeal to be invalid or illegal
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or contrary to public policy, this Agreement shall be construed as though such
provision or condition did not appear therein and the remaining provisions of
this Agreement shall continue in full force and effect.
Article 12
INTEGRATION
12.01 This Agreement embodies the entire understanding between Phytera
and UM. There are no contracts, understandings, conditions, warranties or
representations, oral or written, express or implied, with reference to the
subject matter hereof which are not merged herein. Except as otherwise
specifically stated, no modification hereto shall be of any force or effect
unless (1) reduced to writing and signed by both parties hereto, and (2)
expressly referred to as being a modification of this Agreement.
Article 13
WARRANTY
13.01 UM hereby warrants and represents that to the best of its
knowledge, as of the Effective Date, (a) it has full right, title, and interest
in and to its joint interest in the Patent Rights (subject to the rights of the
United States under its earlier contract with UM and pursuant to 35 U.S.C.
(S)2.0 1 et seq. and all implementing regulations; (b) that the Patent Rights do
------
not constitute the subject matter of any currently pending litigation and UM is
not aware, as of the execution of this Agreement, of any related litigation
contemplated either by UM or any third party; and (c) UM is empowered to enter
into this Agreement without burdens, encumbrances, restraints, or limitations of
any kind which could adversely affect the rights of Phytera under this
Agreement.
UM EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING
WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY. FITNESS FOR A PARTICULAR
PURPOSE, NON-INFRINGEMENT, AND PATENT VALIDITY.
13.02 Phytera represents and warrants to UM that: (a) Phytera has full
legal right, power and authority to execute, deliver and perform its obligations
under this Agreement; (b) the execution, delivery and performance by Phytera of
this Agreement do not contravene or constitute a default under any provision of
applicable law or of any agreement, judgment, injunction, order, decree, or
other instrument binding upon Phytera.
Article 14
INDEMNIFICATION
14.01 Phytera will indemnify, defend and hold harmless UM, the
University System of Maryland, the State of Maryland, and the officers, agents,
servants and employees of the foregoing (collectively, the "Indemnitees")
against any and all claims of or liabilities to Sublicensees, Partners or Third
Parties, including expenses and costs of claims and suits for any such
Sublicensee's, Partner's or Third Party's loss, damage, injury, or loss of life,
if such claims
17
or liabilities (a) arise from the testing or commercial sale or other
distribution by Phytera, of any Identified Products manufactured by Phytera or
through a license or sublicense from Phytera; (b) arise from actions of Phytera
or its officers, servants or agents, or Sublicensees, Partners or Third Parties
acting on behalf of or under authorization from Phytera in the performance of
this Agreement; or (c) arise out of use by Phytera or its officers, servants or
agents or by any Sublicensee, Partner or Third Party acting on behalf of or
under authorization from Phytera of products or processes licensed under the
Patent Rights or developed or made by Phytera as a result of information or
materials received from UM.
14.02 UM will promptly notify Phytera in writing upon UM's receipt or
notification of any claims or liabilities described herein and will cooperate
fully with Phytera, at Phytera's expense, in the defense of such claims. In
defending the Indemnitees, Phytera may assert on behalf of the Indemnitees any
and all defenses available to such Indemnitees, including the defenses of
governmental, sovereign, and statutory immunity. Phytera will consult with UM
and the Office of the Maryland Attorney General prior to raising any such
defenses.
14.03 Paragraph 14.01 does not apply to: (i) claims or liabilities that
are attributable to the fault or negligence of UM or another Indemnitee; or (ii)
claims or liabilities arising from the use of Patent Rights or Technology Rights
by a licensee of UM pursuant to a license reserved by and permitted under
Section 2.03 above.
14.04 In no event, however, will Phytera be liable for damages caused
by UM's failure to perform UM's responsibilities under this Agreement unless
such failure is caused by Phytera.
Article 15
CONSENT FOR ADVERTISING
15.01 Neither Phytera nor UM will use the name of the other or any of
its employees, or any adaptation thereof, in any advertising, promotional, or
sales literature without prior written consent obtained from the other party in
each such case, except that either party may publicize the fact that the parties
have made this Agreement and the general nature of the project work. Any such
publicity by either party will be subject to the review and consent of the other
party, such consent not to be unreasonably withheld.
Article 16
TECHNOLOGY GRANTBACK
16.01 Phytera grants to UM a royalty-free, non-exclusive, worldwide
license to practice any invention or discovery of Phytera which constitutes an
improvement of the Patent Rights solely for research and educational purposes.
An improvement means any composition, reagent, device or method which practices,
is practiced with or modifies any invention or discovery covered by Patent
Rights, provided the improvement is both conceived and reduced to practice after
the Effective Date of this Agreement.
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Article 17
MISCELLANEOUS
17.01 The use and disclosure of technical information acquired pursuant
to this Agreement and the exercise of Patent Rights granted by this Agreement
are subject to the export, assets, and financial control regulations of the
United States of America, including, but without limitation, restrictions under
regulations of the United States that may be applicable to direct or indirect
reexportation of the technical information or of equipment, products, or
services directly produced by use of the technical information. Phytera is
responsible for taking any steps necessary to comply with such regulations.
17.02 No license or right is granted by implication or otherwise with
respect to any patent application or patent owned by either party except as
specifically set forth in this Agreement.
17.03 Phytera will not employ or compensate, directly or indirectly,
any person working in the Licensed Field while the person is employed by UM or
for two (2) years thereafter, unless UM provides Phytera with prior written
consent of the UM President to the employment or compensation by Phytera.
Compensation includes but is not limited to: stock option or stock purchase
agreements, consulting agreements, or any other form of agreement executed
between a UM employee and Phytera, and cash payments. Any approvals are subject
to the Maryland Public/Private Partnership Act.
17.04 Phytera will provide written notice to UM at least ninety (90)
days prior to the filing of a petition in bankruptcy of Phytera's intention to
file a voluntary petition in bankruptcy or, if known by Phytera through
statements or letters from a creditor or otherwise, of a Third Party's intention
to file an involuntary petition in bankruptcy against Phytera. Phytera's failure
to perform this obligation is deemed to be a material pre-petition incurable
default and breach under this Agreement.
17.05 Neither party is liable for failure or delay in performing any of
its obligations under this Agreement if the failure or delay is required in
order to comply with any governmental regulation, request or order, or
necessitated by other circumstances beyond the reasonable control of the party
so failing or delaying, including but not limited to Acts of God, war (declared
or undeclared), insurrection, fire, flood, accident, labor strikes, work
stoppage or slowdown (whether or not the labor event is within the reasonable
control of the parties), or inability to obtain raw materials, supplies, power
or equipment necessary to enable the party to perform its obligations hereunder.
Each party will: (a) promptly notify the other party in writing of any event of
force majeure, the expected duration and its anticipated effect on the ability
of the party to perform its obligations; and (b) make reasonable efforts to
remedy any event of force majeure.
17.06 All notices, consents and other communications required or which
may be given under this Agreement must be in writing and are effective upon
receipt: (a) when delivered by hand; or (b) when received by the addressee after
being mailed by registered or certified mail (air mail if mailed overseas),
return receipt requested; or (c) when received by the addressee from an express
delivery service (return receipt requested). The notice, consent, or other
communication
19
will be addressed to the party at its address set forth below (or to another
address as the designates by notice to the other party hereto):
If to UM: Associate Vice President, Research and Development
University of Maryland, Baltimore
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Copy to: University Counsel
University of Maryland, Baltimore
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
If to Phytera: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇. Ph.D. or Company President
Phytera, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ .01605
Copy to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ & Dodge
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
17.07 This Agreement may not be amended or modified, nor may any right
or remedy of either party be waived, unless the amendment, modification or
waiver is in writing and signed by a duly authorized representative of each
party. A waiver of the breach of any term or provision of this Agreement is not
a waiver of any other or subsequent breach.
17.08 No failure or delay by a party in exercising any of its rights or
remedies under this Agreement will operate as a waiver, nor will any single or
partial exercise of a right or remedy preclude any other or further exercise
thereof or the exercise of any other right or remedy. The rights and remedies of
the parties provided in this Agreement are cumulative and not exclusive of any
rights or remedies provided by law.
17.09 UM and Phytera are not (and nothing in this Agreement may be
construed to constitute them as) partners, joint venturers, agents,
representatives or employees of the other, nor is there any status or
relationship between them other than that of independent contractors. Neither
party has any responsibility or liability for the actions of the other party
except as specifically provided in this Agreement. Neither party has any right
or authority to bind or obligate the other party in any manner or make any
representation or warranty on behalf of the other party.
17.10 Unless otherwise provided, all costs and expenses incurred in
connection with this Agreement will be paid by the party incurring the cost or
expense, and the other party has no liability relating thereto.
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17.11 This Agreement is signed in duplicate originals. The headings
used in this Agreement are for convenience of reference only and do not affect
the meaning or construction of this Agreement.
17.12 The parties recognize that a bona fide dispute as to certain
matters may arise from time to time during the term of this Agreement which
relates to either party's rights or obligations hereunder. If a dispute occurs,
either party may, by notice to the other party, attempt to resolve the dispute
by good faith negotiations between the parties' respective officers designated
below or their successors within thirty (30) days after the notice is received.
The designated officers are as follows:
For Phytera: President, Phytera, Inc.
For UM: Vice President, Academic Affairs
If the designated officers are not able to resolve the dispute within the thirty
(30) day period, or any agreed upon extension, then each of the parties is free
to exercise any potential remedies for the resolution of the dispute as the
party deems appropriate.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date set forth
above.
University of Maryland Baltimore Phytera, Inc.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------- ---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇.▇., D.▇▇▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Ph.D.
President President
Date: 6/19/98 Date: July 1, 1998
-------------------------------- -------------------------------
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