EXHIBIT 10.20
ANTIFUNGAL RESEARCH COLLABORATION
RESEARCH AGREEMENT
between
PHYTERA, INC.
and
▇▇▇ ▇▇▇▇▇ AND COMPANY
RESEARCH AGREEMENT
THIS RESEARCH AGREEMENT ("AGREEMENT") is entered into as of the 21st
day of July, 1998 ("EFFECTIVE DATE") between ▇▇▇ LILLY AND COMPANY, a
corporation of the State of Indiana, having its principal place of business at
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, hereinafter called,
together with its Affiliates, "LILLY."
AND
Phytera, Inc., a corporation of the State of Delaware, having its
principal place of business at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, hereinafter called, together with its Affiliates, "PHYTERA."
RECITALS
WHEREAS, Phytera is a natural products biopharmaceutical company that
has developed screening technologies for antifungal drugs involving multiple
drug resistance gene knockouts and natural product libraries; and
WHEREAS, Lilly is interested in collaborating with Phytera in the
further development and exploitation of Phytera technologies, including its
natural product libraries, in order to discover Compounds with Antifungal
Activity for development and commercialization by Lilly; and
WHEREAS, Phytera and Lilly believe that each Party can bring
significant and complementary strengths to a research collaboration and wish to
proceed in accordance with the terms of the following Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter recited, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
When used in this Agreement, each of the following terms shall have
the meanings as set forth below:
1.1 "AFFILIATE" shall mean any company or entity controlled by,
controlling, or under common control with a Party hereto and shall include
without limitation any company fifty percent (50%) or more of whose voting stock
(or other comparable ownership interest for an entity other than a corporation)
is owned or controlled, directly or indirectly, by a Party, and any company
which owns or controls, directly or indirectly, fifty percent (50%) or more of
the voting stock (or other comparable ownership interest for an entity other
than a corporation) of a Party.
Page 2
1.2 "ANALOGS" shall mean Compounds which are structurally related to
another compound. An analog is obtained by structural modification (either by a
chemist or by a microorganism or by a plant cell) pursuant to structure activity
relationship studies of a Compound.
1.3 "ANTIFUNGAL ACTIVITY" shall mean evidence that an Extract or
Compound tests positive in a Program Screen in accordance with the criteria for
"hits" as set forth and defined in the Research Plan.
1.4 "CALENDAR QUARTER" shall mean the three month period ending on
March 31, June 30, September 30, or December 31.
1.5 "CALENDAR YEAR" shall mean the twelve month period ending on
December 31.
1.6 "CLOSELY RELATED DERIVATIVE" shall mean a Compound that is
structurally related to and developed using a Research Compound as a lead
structure for SAR Studies.
1.7 "COMPOUND" shall mean a discrete chemical entity of known
structure.
1.8 "CONFIDENTIAL INFORMATION" shall mean each Party's confidential
information, inventions, know-how and data, and shall include, without
limitation, manufacturing, marketing, financial, regulatory, personnel and other
business information and plans, whether in oral, written, graphic or electronic
form and whether in existence as of the Effective Date or developed or acquired
in the future, except where such information (i) is public knowledge at the time
of disclosure by the disclosing Party, (ii) becomes public knowledge through no
fault of the receiving Party, (iii) was in the possession of the receiving Party
at the time of disclosure by the disclosing Party as evidenced by proper
business records or (iv) is disclosed to the disclosing Party by a Third Party,
to the extent such Third Party's disclosure was not in violation of any
obligation of confidentiality.
1.9 "COVER" (including variations of thereof such as "Covering",
"Covered", and "Coverage") shall mean that the identification, manufacture, use,
import, offer for sale or sale of Program Screens, Research Compounds, Closely
Related Derivatives or Products would infringe a Valid Claim; provided, with
respect to a process, screening or manufacturing patent, that such a Valid Claim
therein effectively precludes Third Parties from identifying, manufacturing,
using, importing, offering for sale, and selling Program Screens, Research
Compounds, Closely Related Derivatives or Products. The determination of
whether Program Screens, Research Compounds, Closely Related Derivatives or
Products are covered by a particular Valid Claim shall be made on a country by
country basis. A Valid Claim shall be deemed to provide effective preclusion
hereunder where (i) there is no competing product being marketed or (ii) if a
product is being marketed by a competitor, it infringes the Valid Claim
(including any period in which, and provided that, the Valid Claim is being
litigated).
1.10 "EFFECTIVE DATE" shall mean the date indicated at the beginning
of this Agreement.
1.11 "EXCLUDED COMPOUNDS" shall mean a Compound which (i) is in
development or is being marketed by Lilly or Phytera or a sublicensee of either
Party anywhere in the world prior to the Effective Date of this Agreement, or
(ii) is derived
Page 3
from the Lilly Compound Library and is subject to Third Party restrictions
preventing Lilly from using such Compound in the Program. Each Party shall
promptly notify the other Party upon determining that a Compound being
researched or developed in the Program is an Excluded Compound. Consistent with
the obligations of confidentiality under Section 5.1 and except as otherwise
provided in this Agreement, neither Lilly nor Phytera shall use Confidential
Information derived from the Program in connection with the development of
Excluded Compounds.
1.12 "EXTRACT" shall mean a subset of Compounds solubilized from a
culture by a defined solvent.
1.13 "FDA" shall mean the United States Food and Drug Administration.
1.14 "FIELD" shall mean the diagnosis, treatment or prevention of
fungal infectious diseases in humans and animals.
1.15 "FIRST COMMERCIAL SALE" shall mean, in any particular country,
the first sale for use by the general public of a particular Product after
receipt of Regulatory Approval in that country.
1.16 "FIRST RIGHT PRE-EXISTING ANTIFUNGAL PROGRAMS" shall mean the
two Pre-Existing Antifungal Programs which are designated in APPENDIX E as
----------
subject to a Lilly first right of negotiation under Section 2.23 of this
Agreement.
1.17. "FTE" shall mean the equivalent of the scientific work of one
scientific person full time for one year (consisting of a total of [
]* per year (excluding vacations and holidays) of scientific work on or directly
related to the Program), carried out by a Phytera employee or Third Party
mutually agreed upon by the Research Team, where at least [ ]* of all such
scientific persons have completed at least a doctorate of philosophy (Ph.D.) or
its equivalent in a relevant scientific field or having an equivalent level of
scientific training and/or experience.
1.18 "GAAP" shall mean U.S. Generally Accepted Accounting Principles,
consistently applied.
1.19 "GOOD CLINICAL PRACTICE" shall mean the regulations and
guidelines established by the FDA, the Declaration of Helsinki, and the
regulating bodies of countries and economic affiliations worldwide that relate
to the standard of Good Clinical Practice for trials of medicinal products in
human beings.
1.20 "IN-LICENSED THIRD PARTY COMPOUND" shall mean a defined Compound
which is at least at the stage of animal pre-clinical studies in preparation for
trials and licensed in or acquired from a Third Party by Phytera for further
development in the Field. For the avoidance of doubt, a Compound or Compound
series that requires SAR studies prior to identification of a development
candidate shall not qualify.
______________________
* 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.
Page 4
1.21 "LILLY COMPOUND LIBRARY" shall mean Compounds contained in the
Lilly research records libraries and individual Compounds or mixtures of small
numbers of Compounds, synthesized by combinatorial chemistry methods, contained
in Lilly's combinatorial chemistry libraries.
1.22 "LILLY NATURAL PRODUCTS LIBRARY" shall mean Extracts available
for screening at Lilly that have been prepared from cultures of organisms or
Extracts from plant materials.
1.23 "LILLY PATENTS" shall mean all patents, both foreign and
domestic (including without limitation, all substitutions, extensions, reissues,
renewals, reexaminations, patents of addition, supplementary protection
certificates and inventors' certificates thereof and pediatric data package
exclusivity extensions), and all pending patent applications (including
provisional applications, divisions, continuations and continuations-in-part)
which, as of the Effective Date, are owned, controlled, or licensed in (with the
right to disclose and sublicense), in whole or in part, by Lilly or any
Affiliate of Lilly and that contain or result in a Valid Claim which Covers the
identification, manufacture, use, import, offer for sale or sale of Program
Screens, Research Compound(s), Closely Related Derivatives, or Products
including but not limited to those patents and patent applications listed on
APPENDIX B attached hereto.
----------
1.24 "LILLY PROGRAM PATENTS" shall mean all patents, both foreign and
domestic (including without limitation, all substitutions, extensions, reissues,
renewals, reexaminations, patents of addition, supplementary protection
certificates and inventors' certificates thereof and pediatric data package
exclusivity extensions), and all pending patent applications (including
provisional applications, divisions, continuations and continuations-in-part)
owned, in whole or in part, by Lilly or licensed in by Lilly (with the right to
disclose and sublicense) that contain or result in a Valid Claim which Covers an
invention conceived during the Research Term and as a result of the Research
Program.
1.25 "LILLY PROGRAM TECHNOLOGY" shall mean all tangible or intangible
(whether or not patentable) know-how, trade secrets, inventions , data, clinical
and preclinical results, information, and any physical, chemical or biological
material, or any replication of any part of such material, which is developed or
acquired (with the right to disclose and sublicense) by Lilly after the
Effective Date and on or before the end of the Research Term, to the extent such
Technology relates to the identification, manufacture, use, import, offer for
sale or sale of Program Screens, Research Compound(s), Closely Related
Derivatives or Products in the Field.
1.26 "LILLY SCREEN" shall mean a high throughput screen developed by
Lilly independent of this Program for the identification of antifungal compound
leads.
1.27 "LILLY TECHNOLOGY" shall mean all tangible or intangible
(whether or not patentable) know-how, trade secrets, inventions, data, clinical
and preclinical results, information, and any physical, chemical or biological
material, or any replication of any part of such material reasonably necessary
for the development and manufacture of Program Screens, Research Compound(s),
Closely Related Derivatives or Products, that Lilly or any Affiliate of Lilly
owns, controls or has a license to (with the right to disclose and sublicense)
as of the Effective Date.
Page 5
1.28 "MAJOR EUROPE" shall mean the United Kingdom, France, Germany,
Italy and/or Spain.
1.29 "MDR KNOCKOUTS" shall mean fungal organisms in which multiple
drug resistance genes (one or more) that have the function of pumping toxins out
of the cell have been genetically disabled.
1.30 "NATURAL PRODUCT CHEMISTRY" shall mean the process of isolating
Compounds from Extracts, elucidating their structures, and obtaining these
Compounds in sufficient amounts and purity for chemical and biological
evaluation.
1.31 "NDA" shall mean with respect to any particular Product, the New
Drug Application filed with the FDA pursuant to 21 U.S.C. Section 357 and 21
C.F.R. Section 314 with respect to that Product, together with all additions,
deletions and supplements thereto.
1.32 "NET SALES" shall mean, with respect to a Product, [
Page 6
]*
1.33 "PHASE I CLINICAL TRIALS" shall mean human clinical trials
conducted anywhere in the world in accordance with Good Clinical Practice in a
small number of healthy volunteers or patients to establish an initial safety
profile and the pharmacokinetics/pharmacodynamics of a Research Compound,
Closely Related Derivative or Product.
1.34 "PHASE II CLINICAL TRIALS" shall mean human clinical trials
conducted in patients anywhere in the world in accordance with Good Clinical
Practice to achieve a statistically significant data regarding a Research
Compound, Closely Related Derivative or Product in the particular indication
tested, as well as to obtain a preliminary indication of the limit and/or daily
dosage regimen required.
1.35 "PHASE III CLINICAL TRIALS" shall mean large scale human
clinical trials conducted in patients anywhere in the world in accordance with
Good Clinical Practice and intended to generate data concerning the safety and
efficacy of a Research
____________________
* 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.
Page 7
Compound, Closely Related Derivative or Product in the particular indication
tested sufficient to support registration of the Product with health regulatory
authorities.
1.36 "PHYTERA BIODIVERSITY LIBRARIES" shall mean all natural product
Extracts that Phytera owns as of the Effective Date of this Agreement or
acquires or creates during the Research Term.
1.37 "PHYTERA PATENTS" shall mean all patents, both foreign and
domestic (including without limitation, all substitutions, extension, reissues,
renewals, reexaminations, patents of addition, supplementary protection
certificates and inventors' certificates thereof and pediatric data package
exclusivity extensions), and all pending patent applications (including
provisional applications, divisions, continuations and continuations-in-part)
which, as of the Effective Date, are owned, controlled, or licensed in (with the
right to disclose and sublicense), in whole or in part, by Phytera or any
Affiliate of Phytera and that contain or result in a Valid Claim which Covers
the identification, manufacture, use, import, offer for sale or sale of Program
Screens, Research Compound(s), Closely Related Derivatives or Products,
including but not limited to those patents and patent applications listed on
APPENDIX C attached hereto.
----------
1.38 "PHYTERA PROGRAM PATENTS" shall mean all patents, both foreign
and domestic (including without limitation, all substitutions, extensions,
reissues, renewals, reexaminations, patents of addition, supplementary
protection certificates and inventors' certificates thereof and pediatric data
package exclusivity extensions), and all pending patent applications (including
provisional applications, divisions, continuations and continuations-in-part)
owned, in whole or in part, by Phytera or licensed in by Phytera (with the right
to disclose and sublicense) that contain or result in a Valid Claim which Covers
an invention conceived during the Research Term and as a result of the Research
Program.
1.39 "PHYTERA PROGRAM TECHNOLOGY" shall mean all tangible or
intangible (whether or not patentable) know-how, trade secrets, inventions,
data, clinical and preclinical results, information, and any physical, chemical
or biological material, or any replication of any part of such material, which
is developed or acquired (with the right to disclose and sublicense) by Phytera
after the Effective Date and on or before the end of the Research Term, to the
extent such Technology relates to the identification, manufacture, use, import,
offer for sale or sale of Program Screens, Research Compound(s), Closely Related
Derivatives or Products in the Field.
1.40 "PHYTERA TECHNOLOGY" shall mean all tangible or intangible
(whether or not patentable) know-how, trade secrets, inventions, data, clinical
and preclinical results, information, and any physical, chemical or biological
material, or any replication of any part of such material, reasonably necessary
for the development and manufacture of Program Screens, Research Compound(s),
Closely Related Derivatives or Products, that Phytera or any Affiliate of
Phytera owns, controls or has a license to (with the right to disclose and
sublicense) as of the Effective Date.
1.41 "PRE-EXISTING ANTIFUNGAL PROGRAMS" shall mean Phytera's current
antifungal programs listed in APPENDIX E, including, without limitation, the
----------
First Right Pre-Existing Antifungal
Page 8
Programs, which programs are (i) in existence as of the Effective
Date, and (ii) directly related to research and development of specific leads
generated or identified by Phytera prior to the Effective Date. APPENDIX E
----------
attached hereto and incorporated herein by reference.
1.42 "PRODUCT" shall mean any product that contains a Research
Compound or a Closely Related Derivative that is ready for ultimate commercial
sale or use.
1.43 "PROGRAM" shall mean the program to be conducted jointly by
Phytera and Lilly to discover, evaluate and identify chemical entities and
biological materials which may be useful in the Field. A description of the
Program is provided in the Research Plan, which is incorporated herein by
reference and made a part of this Agreement. The Research Plan and the scope
and goals of the Program are subject to modification as provided herein.
1.44 "PROGRAM PATENTS" shall mean Lilly Program Patents and Phytera
Program Patents, collectively, whether or not developed solely or jointly by
Phytera and/or Lilly. For avoidance of doubt, Program Patents shall include any
patents Covering Closely Related Derivatives, notwithstanding when such patents
are filed.
1.45 "PROGRAM SCREENS" shall mean any screen or assay approved by the
Research Team for use in the Program.
1.46 "PROGRAM TECHNOLOGY" shall mean Lilly Program Technology and
Phytera Program Technology, collectively, whether or not developed solely or
jointly by Phytera and/or Lilly.
1.47 "QUARTERLY RESEARCH ACCOUNTING REPORT" shall have the meaning as
set forth in Section 2.9 of this Agreement.
1.48 "QUARTERLY RESEARCH ACTIVITY REPORT" shall have the meaning as
set forth in Section 2.6 of this Agreement.
1.49 "REGULATORY APPROVAL" shall mean all authorizations by the
appropriate governmental entity or entities necessary for commercial sale of
Product (including exports) in each jurisdiction in which Lilly elects to market
the Product including, without limitation, approval of labeling, price,
reimbursement and manufacturing.
1.50 "RESEARCH COMPOUND" shall mean any Compound which during the
Research Term and as a part of the Program, is identified, conceived,
synthesized, structurally characterized and/or demonstrated to have Antifungal
Activity in the Field. Research Compound shall also encompass any Extract which
during the Research Term and as a part of the Program is shown to have
Antifungal Activity and which is selected by the Research Team for Natural
Product Chemistry. For avoidance of any doubt, Research Compounds shall
include, but not be limited to, those Lilly Compounds designated as Research
Compounds under Section 2.11 of this Agreement. Research Compounds shall not
include Excluded Compounds or derivatives thereof.
1.51 "RESEARCH FUNDS" shall mean the FTE funding being paid by Lilly
to Phytera pursuant to Section 2.7 herein.
Page 9
1.52 "RESEARCH PLAN" shall have the meaning set forth in Section
2.2(b) of this Agreement.
1.53 "RESEARCH TEAM" shall have the meaning assigned in Section
2.2(a) of this Agreement.
1.54 "RESEARCH TERM" shall be the period commencing on the Effective
Date and ending two (2) years thereafter plus any extensions thereof, as
provided for in Section 2.14, unless earlier terminated by Lilly pursuant to
Section 2.18 or Article 10 hereof.
1.55 "RESEARCH YEAR" means a twelve-month period during the term of
the Program. The first Research Year shall be deemed to have commenced on the
Effective Date.
1.56 "SAR STUDIES" shall mean structure activity relationship studies
in which chemical modifications are made to Research Compounds in an attempt to
obtain or improve desirable feature or features such as activity against a
molecular target or target organism, efficacy in animal models of disease,
pharmacokinetic properties, or toxicity profile.
1.57 "TECHNOLOGY" shall mean all tangible or intangible know-how,
trade secrets, inventions (whether or not patentable), data, information,
including and without limitation any physical, chemical, or biological material.
1.58 "THIRD PARTY" shall mean any entity which is not a Party or an
Affiliate of either Party to this Agreement.
1.59 "VALID CLAIM" shall mean any claim issued in an unexpired patent
which has not been held unenforceable, unpatentable or invalid by a decision of
a court or other governmental agency of competent jurisdiction following
exhaustion of all possible appeal processes, and which has not been admitted to
be invalid or unenforceable through reissue, reexamination or disclaimer. If in
any country there should be two or more such decisions conflicting with respect
to the validity of the same claim, the decision of the higher or highest
tribunal shall thereafter control; however, should the tribunals be of equal
rank, then the decision or decisions upholding the claim shall prevail when the
decisions are equal in number, and the majority of decisions shall prevail when
the conflicting decisions are unequal in number.
ARTICLE 2
COLLABORATION SCOPE AND GOVERNANCE
2.1 PURPOSE AND SCOPE.
(A) Consistent with the terms described herein, the Parties intend
to collaborate in the research and discovery of Research Compounds or Closely
Related Derivatives for development and commercialization by Lilly. In
accordance with the Research Plan, Phytera shall develop, validate and use
Program Screens to screen Phytera Biodiversity Libraries and the Lilly Natural
Products Library for Extracts demonstrating Antifungal Activity. Additionally,
if requested, Phytera shall enable use by Lilly of the
Page 10
Program Screens to screen the Lilly Compound Library to identify Lilly Compounds
demonstrating Antifungal Activity.
(B) As more fully described below, Phytera and Lilly through the
Research Team will have joint responsibility for conducting the Program in
accordance with the Research Plan and the terms described herein. Lilly will
have sole responsibility for the development and commercialization of Research
Compounds and Closely Related Derivatives, as well as the filing and maintenance
of any and all regulatory documents necessary for applicable Regulatory
Approvals. Additionally, Lilly will have sole responsibility for distribution
and marketing of the Product. All pricing for Product shall be determined
solely by Lilly. Except as otherwise provided in this Agreement, it is expected
that any Product will be marketed by Lilly or its Affiliates (or in selected
territories, by Third Parties selected by Lilly) in each jurisdiction in which
it is determined by Lilly to be feasible and commercially attractive.
2.2 RESEARCH TEAM.
(A) Within thirty (30) days following signature of this Agreement by
both Parties, Phytera and Lilly shall each appoint three (3) representatives to
serve as members of the Research Team ("Research Team"). Phytera
representatives shall consist of a biologist, molecular biologist, and a natural
products chemist. Lilly representatives shall consist of a microbiologist, a
chemist, and a natural products chemist. The respective individual
representatives of each Party may be changed from time to time at the discretion
of Phytera or Lilly upon written notification by the Party making such change to
the other.
(B) Phytera and Lilly have agreed upon an initial Research Plan for
research under the Program which is set forth in APPENDIX A ("Research Plan").
----------
By execution of this Agreement, the initial Research Plan is hereby approved by
each Party and incorporated herein by reference.
(C) The Research Team shall provide general oversight and direction
for the Program. As part of providing such oversight and direction, the
Research Team specifically shall review (i) the personnel assigned to the
Program, (ii) all spending of Research Funds, (iii) all proposed modifications
or additions to the Research Plan, (iv) all proposed research collaborations
with a Third Party related to the Program and its cost, (v) all proposed
additions to APPENDIX B and APPENDIX C, (vi) quarterly additions to the list of
---------- ----------
Program Technology created in the Program, and (vii) all research results
related to the Program.
(D) Decisions of the Research Team shall be made by unanimous
consent; provided, however, that in the event the Research Team is unable to
arrive at a decision, Lilly's Vice President, Infectious Diseases Research, or
his/her successor shall confer with Phytera's Vice President of Research and
seek to resolve the disagreement. In the event the disagreement cannot be
resolved in this manner, Lilly's Vice President, Infectious Diseases Research
shall decide based on reasonable economic and scientific factors not
inconsistent with this Agreement. Notwithstanding the foregoing, decisions by
the Research Team with respect to inclusion of a Lilly Screen as Program Screen
shall be made by unanimous consent.
2.3 CONDUCT OF PROGRAM. Each Party agrees to conduct the Program
according to the Research Plan, as amended from time to time by the Research
Team. All
Page 11
research done in connection with the Program shall be carried out in strict
compliance with any federal, state, or local laws, regulations, or guidelines
governing the conduct of such research. The Parties do not intend Excluded
Compounds to be developed in the Program. Each Party shall advise the other
promptly upon becoming aware that a Compound being researched or developed in
the Program is an Excluded Compound, whereupon each Party shall cease to have
any obligation or right to work on such Excluded Compound as part of the
Program.
2.4 EFFORT. Both Phytera and Lilly shall use their best efforts to
conduct work on the Program so as to achieve the agreed-to-goals for the Program
as described in the Research Plan. During the first Research Year, Phytera
shall devote to the Program and Lilly shall fund [ ]* FTEs, unless
otherwise agreed by the Parties in writing. The number of FTEs to be dedicated
to the Program for subsequent Research Years shall be determined by Lilly in its
sole discretion; provided, however, that (i) the effort of Phytera funded by
Lilly for the second Research Year can be no less than [ ]* FTEs, and (ii)
Lilly's decision with respect to the number of FTEs to be dedicated to the
Program and to thereby be funded by Lilly for Research Years after the first
Research Year shall be communicated in writing to Phytera at least [ ]*
prior to the end of the preceding Research Year. The FTEs dedicated by Phytera
to the Program shall have an optimal combination of experience and training in
the Field. Lilly shall provide reasonable scientific effort as required by the
Research Team during the course of the Program. Such scientific effort shall be
consistent with sound scientific and business judgment as determined by Lilly.
2.5 KEY PERSONNEL. Phytera agrees that so long as the individuals
identified as key Phytera personnel in APPENDIX D continue to be employed by
----------
Phytera, Phytera shall maintain a level of direct involvement appropriate for
the successful conduct of the Program of such key personnel in the Program. In
the event any such individuals cease to be Phytera employees or to be directly
involved in the Program, Lilly shall have a right to terminate the Program
consistent with Section 2.18 herein. In the event a replacement of such Key
Personnel becomes necessary for any reason and Lilly does not exercise its right
to terminate under Section 2.18, Phytera shall consult with Lilly concerning
such replacements and Lilly shall have a right to approve replacement
candidates, which approval shall not be unreasonably withheld.
2.6 RESEARCH TEAM MEETINGS AND REPORTS. Except as the Research Team
may otherwise agree, during the Research Term, the Research Team shall meet
formally at least four (4) times each year to review the Program, to modify the
strategy and goals of the Program if deemed necessary by the Research Team, and
to prepare the reports required under Section 4.1(a). The times and places for
such meetings shall be mutually agreed upon by the Parties, alternating between
Indianapolis and Worcester, or such other location as members of the Research
Team shall agree. Each Party shall also bear its own costs associated with
holding and attending such meetings. Any modification to the strategy and goals
of the Program as described in the Research Plan shall require the approval of
the Research Team as reflected in written minutes, and an appropriate written
amendment to the Research Plan. The Research Team shall keep minutes of all
meetings at which a decision is made and shall circulate such minutes to all
members of the Research Team. Minutes shall be deemed approved unless any
member of the Research
___________
* 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.
Page 12
Team objects to the accuracy of such minutes within ten (10) days of receipt.
Additionally, Phytera and Lilly, to the extent each is involved in the Program,
shall each provide the Research Team with a written quarterly status report
regarding the quarterly research activity of each in connection with the Program
(the "Quarterly Research Activity Report"). The Quarterly Research Activity
Report shall be furnished to the Research Team within thirty (30) days following
the end of each Calendar Quarter.
2.7 RESEARCH FUNDING. During the Research Term and subject to the
fulfillment of all terms and conditions of this Agreement, Lilly shall fund the
Program at a rate of [ ] *per FTE. The relevant number of FTE's for any
Research Year shall be determined in accordance with Section 2.4 herein. It is
understood by the Parties that the Research Team shall have the right to
allocate an appropriate amount of FTE funding support to reasonable costs
associated with culture regrowth required in connection with the Program
2.8 SCHEDULING PAYMENT OF RESEARCH FUNDS. Research Funds during the
Research Term shall be paid to Phytera by Lilly in U.S. Dollars. The payment of
Research Funds due in each Research Year will be made in [ ]* installments
within [ ]*, provided that the first such payment
hereunder shall be made on a prorated basis and within [ ]* of the
Effective Date hereof.
2.9 ACCOUNTING.
(A) Phytera shall maintain complete and accurate books and records of
all monies expended by it for research under the Program and shall provide
Lilly, within sixty (60) days after the end of each Calendar Quarter during the
Research Term, with a report ("Quarterly Research Accounting Report")
accompanied by a certificate signed by the Chief Financial Officer of Phytera
stating (i) the dollar amount of Research Funds that were expended on research
activities during any Calendar Quarter for which the report is made; (ii) a
general description of the research activities conducted; (iii) the name of each
Phytera employee (with job title) who worked on the Program during that Calendar
Quarter, along with the functional department in which each employee worked and
the actual number of hours (including the source of such hourly data) each such
employee worked on the Program during that Calendar Quarter; and (iv) whether
Phytera provided the FTEs required under this Agreement or the Research Plan for
that Calendar Quarter of the Program. In the event Phytera has not provided the
required FTE's and there has consequently been an overpayment by Lilly, Phytera
shall remit the amount of such overpayment to Lilly with the Quarterly Research
Accounting Report or Lilly shall be entitled to apply such overpayment as a
credit against future Research Funds payments. Lilly shall be entitled to any
tax credits due on account of research and development expenses, to the extent
permitted by law, for the Research Funds paid by Lilly. Phytera shall cooperate
with Lilly to provide any information or documentation necessary or useful for
Lilly to claim such credits.
(B) Upon reasonable written notice to Phytera, Lilly shall have the
right, either itself or using Lilly's independent certified public accountant,
at its own expense and not more than annually in or in respect of any Calendar
Year, and during normal business hours, to audit those books and records as may
be reasonably necessary to verify 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.
Page 13
accuracy of the Quarterly Research Accounting Reports furnished by Phytera to
Lilly pursuant to this Section 2.9, in respect of any Calendar Year ending not
more than one (1) year prior to the date of such notice. If an independent
certified public accountant is used by Lilly for the conduct of such audits, the
report prepared by the independent public accountant, shall be provided to
Phytera at the same time it is sent or otherwise provided to Lilly and shall
contain the conclusions of the independent public accountant regarding the
audit. In the event an audit conducted by an independent public accountant
concludes there has been any overpayment by Lilly, Phytera shall remit to Lilly
within thirty (30) days after Phytera's receipt of the auditor's report, (i) the
amount of such overpayment and (ii) if such overpayment exceeds ten percent
(10%) of the total amount paid or payable for the Calendar Year then being
audited, the reasonable and necessary fees and expenses of the independent
public accountant performing the audit, subject to reasonable substantiation.
Any Phytera information received or obtained by Lilly in connection with an
audit under this Section 2.9 is Confidential Information and Lilly shall retain
and cause its auditors to retain all such information in confidence.
2.10 PROGRAM COSTS. After the Effective Date, Phytera shall pay all
costs incurred by it in the Program pursuant to the Research Plan. Phytera shall
not be entitled to any payment from Lilly in connection with the Program except
the Research Funds and the milestones and royalties provided under this
agreement. Lilly shall be responsible for its own costs in providing
consultation, advice and research efforts.
2.11 SCREENING LILLY COMPOUND LIBRARIES. The Program includes the
possibility of screening by Phytera of up to [ ]* Compounds from the Lilly
Compound Libraries using the Program Screens. If Lilly elects to have additional
screening performed by Phytera, there shall be either (i) an adjustment to the
FTE effort funded by Lilly sufficient to enable Phytera to conduct such
screening without adversely impacting Phytera's ability to satisfy its existing
obligations under the Program or (ii) Phytera's existing obligations under the
Program shall be evaluated and adjusted appropriately so that Phytera can
reasonably achieve all its obligations, including such new screening activities,
with the same FTE effort as existed prior to Lilly's election to request such
additional screening be done by Phytera. In the event that screening of Lilly
Compound Libraries by Lilly or Phytera results in the identification of a
Compound demonstrating Antifungal Activity, such Compound shall be included in
the Program for research consistent with the Research Plan and shall become and
be designated a Research Compound under the Agreement upon written designation
by the Research Team of such Compound as a Research Compound and appendage of
such written designation to this Agreement, such written designation not to be
unreasonably withheld or delayed. For avoidance of any doubt, in the event that
such written designation does not occur, a Compound from the Lilly Compound
Libraries shall not become a Research Compound. Additionally, notwithstanding
anything to the contrary in this Agreement, under no circumstance shall (a)
Phytera receive any license, rights, or other interest in the Lilly Compound
Libraries or Lilly owned Excluded Compounds; or (b) an Excluded Compound ever
become or be deemed a Research Compound.
2.12 EXCLUSIVITY. During the Research Term, Phytera shall work
exclusively with Lilly in the Field except to the extent that such work pertains
to Pre-Existing Antifungal Programs or In-Licensed Third Party Compounds.
Page 14
Furthermore, during the Research Term, Phytera agrees to provide Lilly with
exclusive (even as to Phytera) use of and access to the Phytera Biodiversity
Libraries, MDR Knockouts, and Program Screens for research and development in
the Field; provided that (1) Phytera shall have the right to use and access such
for purposes of complying with its obligations under this Agreement; and (2)
commencing on the third anniversary of the Effective Date and every anniversary
thereafter, Lilly's exclusivity with respect to individual Extracts in the
Phytera Biodiversity Libraries shall expire if (i) the Extract has not been
screened against a Program Screen at least once during the preceding twelve (12)
month period, and (ii) the Extract is not directly related to a Research
Compound. For the avoidance of doubt, it is understood that Pre-Existing
Antifungal Programs and In-Licensed Third Party Compounds shall be subject to
the limitations imposed in this Section 2.12 with respect to Phytera
Biodiversity Libraries, MDR knockouts, and Program Screens.
Additionally, Phytera shall not use Program Technology for In-Licensed Third
Party Compounds or in any other manner for the benefit of Third Parties.
Otherwise, Phytera shall be free to use other Phytera Technology in connection
with Pre-Existing Antifungal Programs and In-License Third Party Compounds. For
one (1) year following the end of the Research Term, Phytera shall not use or
access or permit Third Parties to use or access the Phytera Biodiversity
Libraries, MDR Knockouts, and/or Program Screens for research or development in
the Field.
2.13 THIRD PARTY TECHNOLOGY. Neither Lilly nor Phytera will bring
into or use in the Program any Technology in which a Third Party has ownership
rights unless specifically authorized to do so under a written agreement with
such Third Party. Unless the Parties specifically agree in a written document
signed by their respective authorized representatives to share the royalty or
other expenses associated with using any Technology of a Third Party, then any
royalties or other obligations associated with using the Third Party Technology
shall be borne solely by the Party who entered into the agreement with the Third
Party containing such obligations, or, if there is no such agreement, then all
expenses associated with using Third Party technology shall be borne solely by
the Party who brought the Third Party Technology into the Program.
2.14 EXTENSION OF PROGRAM. Lilly shall have the option to extend the
Research Term for up to three (3) additional years in one-year increments by
giving written notice not later than three (3) months prior to the end of the
initial Research Term and each one-year extension. Lilly shall specify in such
notice the level of Research Funding it will pay to Phytera during the extended
term, provided, however, such Research Funding shall at a minimum support [
]* FTEs.
2.15 STAFF AVAILABILITY. Each Party shall make its employees,
consultants, subcontractors engaged in the Program reasonably available upon
reasonable notice during normal business hours at their respective places of
employment to consult with the other Party on issues arising during the Program
and in connection with any request from any regulatory agency, including those
relating to regulatory, scientific, and technical issues.
2.16 LILLY OPTION REGARDING RESEARCH COMPOUNDS AND CLOSELY RELATED
DERIVATIVES. Lilly shall have the option to develop and commercialize, either
by itself or in conjunction with one or more sublicensees, on an exclusive basis
throughout the world
Page 15
any Research Compound or Closely Related Derivative. Lilly shall notify Phytera
promptly of its decision to develop any such Research Compound or Closely
Related Derivative. Upon such selection, Lilly shall be responsible for
undertaking, at Lilly's sole expense, all activities necessary for the
development, preclinical and clinical testing and the commercialization of the
Research Compound and/or Closely Related Derivative. After the expiration or
termination of the Program, Lilly shall provide an annual written report to
Phytera describing in reasonable detail and specificity (a) Lilly's development
activities during the prior calendar year on Research Compound(s), Closely
Related Derivatives and/or Products; and (b) the development activities for
Research Compounds, Closely Related Derivatives and/or Products planned by Lilly
for the current year.
2.17 FACILITY VISITS. Representatives of Lilly and Phytera may, upon
reasonable notice during normal business hours, (a) visit the facilities where
the Program is being conducted, (b) consult informally, during such visits and
by telephone, with personnel for the other Party performing work on the Program,
and (c) with the other Party's prior approval, which approval shall not be
unreasonably withheld, visit the sites of any experiments or tests being
conducted by such other Party in connection with the Program. On such visits,
an employee of the Party conducting the research shall accompany the employee(s)
of the visiting Party. If requested by the other Party, Phytera and Lilly shall
cause appropriate individuals working on the Program to be reasonably available
for meetings at times and places reasonably convenient to the Party responding
to such request.
2.18 TERMINATION OF PROGRAM.
(A) WITHOUT CAUSE. After the second anniversary of the Effective
Date, Lilly may terminate the Program and related Research Funding at any time
without cause upon sixty (60) days prior written notice to Phytera, which notice
may be provided prior to the second anniversary of the Effective Date.
(B) FOR MATERIAL BREACH. Lilly may terminate the Program and related
Research Funding at any time for material breach by Phytera, upon thirty (30)
days prior to written notice and opportunity to cure during the notice period.
Phytera may terminate the Program for material breach by Lilly upon thirty (30)
days prior written notice and opportunity to cure during the notice period.
(C) LOSS OF KEY PERSONNEL. Lilly may terminate the Program and
related Research Funding at any time upon thirty (30) days prior written notice
to Phytera, if any one or more of Phytera Key Personnel leave the employment of
Phytera for any reason and Phytera is unable to find replacements acceptable to
Lilly within six (6) months from the last day of such employment. Approval by
Lilly of replacement candidates shall not be unreasonably withheld.
(D) TERMINATION DUE TO CHANGE OF CONTROL. Lilly may terminate the
Program and related Research Funding at any time upon thirty (30) days prior
written notice if majority control of Phytera is acquired by any health care
company or any other party reasonably deemed by Lilly to be a competitor of
Lilly.
2.19 RIGHTS OF PARTIES FOLLOWING TERMINATION OR EXPIRATION OF THE
PROGRAM (EXCEPT FOR MATERIAL BREACH). Whenever the Program terminates for
reasons other than material breach or expires, each of the Parties shall have
the following rights and obligations:
Page 16
(A) CONTRIBUTED TECHNOLOGY. Each Party shall cease using and return
to the other Party and thereafter maintain in confidence pursuant to Article 5
all Technology that was contributed by the other Party that is reflected on the
form of APPENDIX B or APPENDIX C in effect as of the end of the Program, but
---------- ----------
only to the extent such Technology is not necessary or useful to Lilly for the
manufacture, use or development of Research Compounds, Closely Related
Derivatives or Products.
(B) PRE-EXISTING TECHNOLOGY. Each Party shall continue to have the
right to use and to disclose in any manner all Technology that it owned or had a
license under prior to the Program, except to the extent such Technology is
subject to the exclusivity requirements of Section 2.12.
(C) PROGRAM TECHNOLOGY.
(1) OWNERSHIP. Ownership of Program Technology shall continue to be
governed by Section 4.1(b) of this Agreement; provided, however, that Lilly
shall transfer and hereby does transfer all of its right, title and
interest in jointly owned Program Technology to Phytera, subject only to
the retention by Lilly of a license in accordance with Section 3.1(b).
(2) USE. With respect to Program Technology and Program Patents
which (i) are owned by Phytera solely or jointly with Lilly and (ii) are
not necessary or useful to Lilly for the manufacture, use, or development
of Research Compounds, Closely Related Derivatives or Products, Phytera
shall be free to use, transfer, commercialize or collaborate with Third
Parties in any manner that Phytera elects. With respect to all other
Program Technology or Program Patents, Lilly shall retain an exclusive
license in accordance with Section 3.1(b).
(D) PAYMENT OBLIGATIONS. Lilly shall continue to have the payment
obligations set forth in Section 2.7 for any accrued but unpaid FTE costs as of
the date of termination and in Article 6 with respect to any Research Compound,
Closely Related Derivative or Product that it develops or commercializes
pursuant to Section 2.16.
(E) OTHER TERMS OF THE AGREEMENT. All terms and conditions of this
Agreement unrelated specifically to Research Program activities shall otherwise
continue in full force and effect, including, without limitation,
confidentiality obligations and all rights and obligations concerning the
development and commercialization of Research Compounds, Closely Related
Derivatives and Products and any future Compounds arising therefrom.
2.20 RIGHTS OF PARTIES FOLLOWING TERMINATION OF THE PROGRAM FOR MATERIAL
BREACH. In the event of termination of the Program by Lilly for material breach
by Phytera, all licenses granted under this Agreement to Lilly shall not be
affected and shall continue in full force and effect, and Lilly shall have the
right to exercise all such licenses. All licenses granted under this Agreement
by Lilly to Phytera shall automatically terminate upon such termination by
Lilly. In the event of termination of the Program by Phytera for material breach
by Lilly, all licenses granted under this Agreement to Phytera shall not be
affected and shall continue in full force and effect, and Phytera shall have the
right to exercise all such licenses. In the event that termination by Phytera is
based upon a breach for non-payment, all licenses granted under this Agreement
by Phytera to Lilly shall automatically terminate upon such termination by
Page 17
Phytera. In the event that termination by Phytera under this Section 2.20 occurs
for any other reason, licenses granted under this Agreement by Phytera to Lilly
that are necessary for the continuing development or commercialization by Lilly
of Research Compounds, Closely Related Derivatives or Products pursuant to
Section 2.16 of this Agreement shall continue in full force and effect.
2.21 PUBLICATIONS. While it is understood that employees of Lilly and
Phytera at some point shall be free to publish the results of their studies
carried out under the Program, each Party agrees to provide the other the
opportunity to review any proposed manuscripts at least sixty (60) days prior to
their intended submission for publication and, upon request, shall delay
submission for a period sufficient to permit adequate steps to be taken to
secure patent protection for any patentable subject matter referred to therein.
The disclosing party shall avoid disclosure of any trade secret information of
the other Party. Each Party agrees to respond to requests for review within
sixty (60) days of receipt. In the event the Parties disagree with respect to
the nature of the disclosure to be made in a proposed publication, the Parties
shall refer such disagreement to the Research Team for resolution. All
publications shall give due credit to all individuals contributing to the
developments described in the publication.
2.22 PRE-EXISTING ANTIFUNGAL PROGRAMS. Lilly acknowledges that prior to
the Effective Date of this Agreement, Phytera had (and continues to have) Pre-
Existing Antifungal Programs. Phytera agrees that as of the Effective Date it
shall not screen Extracts from the Phytera Biodiversity Libraries in connection
with any antifungal target except those covered by the Program; provided,
however, Phytera shall be entitled to use its chemical libraries or libraries of
Third Parties in connection with the Pre-Existing Antifungal Programs.
2.23 RIGHT OF FIRST NEGOTIATION. In the event that Phytera seeks a
research, development or commercialization collaboration with a Third Party
relating to the First Right Pre-Existing Antifungal Programs or a Third Party
commences discussions with Phytera which Phytera intends to seriously consider
in connection with Compounds resulting from the First Right Pre-Existing
Antifungal Programs, Phytera hereby grants to Lilly a right of first negotiation
to (i) fund, in whole or in part, any research development, or commercialization
collaboration or program ("Relevant Program") to be undertaken by Phytera with a
Third Party with respect to a First Right Pre-Existing Antifungal Program
Compound and (ii) obtain certain license rights to any intellectual property
that results from such Relevant Program. This right shall be effective during
the Research Term and shall operate as follows:
(a) Phytera shall promptly send to Lilly a reasonably detailed written
notification of any Relevant Program contemplated by Phytera using a First Right
Pre-Existing Antifungal Program Compound;
(b) Lilly shall respond to Phytera within thirty (30) days of its
receipt of such notification indicating its interest in funding, in whole or in
part, the Relevant Program and in obtaining rights to any intellectual property
resulting therefrom.
Page 18
(c) For a period of up to sixty (60) days after Phytera receives notice
of Lilly's interest in funding, in whole or in part, the Relevant Program and
obtaining license rights to any intellectual property resulting therefrom, the
Parties shall negotiate in good faith a reasonable agreement based upon the
anticipated contributions of the Parties to the Relevant Program and any
products that result from such Relevant Program. If, after good faith
negotiations, an agreement cannot be reached between Lilly and Phytera on the
Relevant Program, Phytera shall be free to pursue such Relevant Program and
commercialize any products that result from such Relevant Program, either
independently or with one or more Third Parties.
(d) In the event that Lilly (i) fails to respond to Phytera within
thirty (30) days of notification by Phytera of the contemplated Relevant
Program, or (ii) indicates that it is not interested in funding such Relevant
Program and obtaining rights to any intellectual property resulting therefrom,
Phytera shall be free to pursue such Relevant Program and commercialize any
products that result from such Relevant Program, either independently or with
one or more Third Parties.
ARTICLE 3
---------
3.1 LICENSES TO LILLY.
(a) Except as otherwise provided in Sections 2.12 and 2.22 herein,
during the Research Term and the term of this Agreement and subject to the other
provisions of this Agreement, Phytera hereby grants to Lilly an exclusive,
worldwide license in the Field, with the right to sublicense, under the Phytera
Patents, Phytera Technology, Program Patents (to the extent Phytera has an
interest in such Patents) and Program Technology (to the extent Phytera has an
interest in such Technology) (i) to make, have made, use, import, offer for
sale, sell and have sold Research Compounds, Closely Related Derivatives and
Products; (ii) to conceive, discover, evaluate, identify, characterize,
research, develop, market and sell the Research Compounds, Closely Related
Derivatives and Products and (iii) to otherwise comply with its obligations
under this Agreement. Notwithstanding the foregoing grant, Phytera shall have
the right to practice under Phytera Patents, Phytera Technology, Phytera Program
Patents, and Phytera Program Technology as necessary to comply with its
obligations and exercise its rights under this Agreement. Phytera shall retain
all rights under Phytera Patents and Phytera Technology outside the Field.
(b) Upon termination or expiration of the Program, Phytera shall
grant and hereby does grant to Lilly a worldwide, perpetual, royalty-free (i)
exclusive license, with a right to sublicense, to make, have made, use, offer
for sale, sell, have sold and import any and all Phytera Patents, Phytera
Technology, and Program Technology (to the extent Phytera has an interest) and
Program Patents (to the extent Phytera has an interest) that is necessary or
useful for the manufacture, use or development of Research Compounds, Closely
Related Derivatives or Products; and (ii) non-exclusive license, with a right to
sublicense, to make, have made, use, offer for sale, sell, have sold and import
any and all other Program Technology (to the extent Phytera has an interest) and
Program Patents (to the extent Phytera has an interest).
Page 19
(C) Upon expiration or termination of the Agreement, except
termination by Phytera pursuant to sections 10.2 or 10.4, Phytera shall grant
and hereby does grant to Lilly a worldwide, perpetual, non-exclusive, royalty-
free license, with a right to sublicense, to make, have made, use, offer for
sale, sell, have sold and import any and all Program Technology (to the extent
Phytera has an interest) and Program Patents (to the extent Phytera has an
interest).
3.2 LICENSES TO PHYTERA. During the Research Term and subject to the
other provisions of this Agreement, Lilly hereby grants to Phytera a
nonexclusive, worldwide license in the Field during the Research Term under the
Lilly Patents, Lilly Technology, Program Patents (to the extent Lilly has an
interest) and Program Technology (to the extent Lilly has an interest) for the
sole purpose of conceiving, discovering, evaluating, identifying,
characterizing, and researching Research Compounds or Closely Related
Derivatives in connection with the Program and otherwise complying with its
obligations under this Agreement.
ARTICLE 4
---------
INTELLECTUAL PROPERTY
---------------------
4.1 PATENTABLE INVENTIONS AND KNOW-HOW
(A) DISCLOSURES AND REPORTS. Phytera and Lilly shall disclose to one
another promptly the results achieved in conducting the Program and all Program
Technology developed in the Program. Disclosure shall be in sufficient detail
to permit each Party to employ such results and Program Technology as provided
herein. Such disclosures may take the form of limited visits by Lilly and
Phytera personnel to the facilities being utilized for the Program to permit
observation of the procedures being employed pursuant to Section 2.17. While
the Program is being conducted, the Research Team shall submit to Phytera and
Lilly a detailed written quarterly report on the progress of the Program.
Within ninety (90) days after completion of the Program, the Research Team shall
provide Phytera and Lilly with a comprehensive final written report.
(B) OWNERSHIP. Any Program Technology made by either Party will be
disclosed to the other Party promptly after the disclosing Party recognizes the
significance thereof. All Program Patents and Program Technology, except
patents Covering Research Compounds, Closely Related Derivatives or Products,
shall be owned by the Party making the invention claimed or contained therein
or, if such invention is made jointly, shall be jointly owned all as determined
in accordance with U.S. laws of inventorship. Patents Covering Research
Compounds, Closely Related Derivatives and Products shall be, and hereby are,
assigned to and owned solely by Lilly.
(C) PATENT PROSECUTION. Phytera shall be responsible for preparing,
filing, prosecuting, maintaining and taking such other actions as are reasonably
necessary or appropriate with respect to the Phytera Patents and any patentable
inventions encompassed by Phytera Technology and Phytera Program Technology,
excluding jointly invented Program Technology. Lilly shall be responsible for
preparing, filing, prosecuting, maintaining and taking such other actions as are
reasonably necessary or
Page 20
appropriate with respect to the Lilly Patents and any patentable inventions
encompassed by Lilly Technology and Lilly Program Technology, which shall
include, without limitation, patents which Cover Research Compounds, Closely
Related Derivatives and Products and jointly invented Program Technology. The
Parties shall agree upon the countries for which patent coverage as described in
this Article 4 should be sought and the responsible Party shall prepare, file,
prosecute and maintain patents in accordance with that agreement, subject to the
provisions of Section 4.1(e) below; provided, however, that the responsible
Party shall at a minimum be required to seek patent coverage in the United
States, Japan and the European Economic Community. To the extent either Party
desires to engage external counsel in connection with activities described in
this Section 4.1(c), the engaging Party will consult the other Party with
respect to its choice of external patent counsel. Each Party shall also keep the
other Party continuously informed of all significant matters relating to the
preparation, filing, prosecution and maintenance of patents and patent
applications covered by this Agreement. Each Party shall provide the other Party
with copies of any substantial prosecution papers within thirty (30) days of
receipt. Each Party shall endeavor in good faith to coordinate its efforts with
those of the other Party to minimize or avoid interference with the prosecution
of the other Party's patent applications. To the extent practicable, each Party
shall provide the Research Team with a copy of any patent application which
first discloses any specific Program Technology, prior to filing the first of
such applications in any jurisdiction, for review and comment by the Research
Team. Each Party shall minimally provide the other Party with written notice
regarding the subject matter within Program Technology that such Party plans to
claim in a patent application or provisional.
(D) COSTS. Subject to the provisions of subsection (e) below, Lilly
shall bear all costs incurred in the preparation, filing, prosecution and
maintenance of Lilly Patents and Lilly Program Patents, and Phytera shall bear
all costs incurred in the preparation, filing, prosecution and maintenance of
Phytera Patents and Phytera Program Patents owned solely by Phytera; provided,
however, that Phytera shall pay [ ]* of all reasonable external expenses
incurred by Lilly while prosecuting and maintaining jointly invented Program
Patents. External expenses will include patent office fees and taxes in
connection with the filing, prosecution and maintenance of any patent or patent
application and the reasonable fees of any patent attorneys or agents external
to Lilly, in connection with the ex parte preparation, filing, prosecution and
-- -----
maintenance thereof. The allocation of such expenses will occur on an annual
basis at the end of the last quarter of each Calendar Year, at which time Lilly
will provide Phytera with an itemized list of external expenses denominated in
United States dollars incurred during the previous annual period in prosecuting
and maintaining jointly owned Program Patents. Phytera will then reimburse
Lilly's reasonable expenses within [ ]* of the date of receipt of this
itemized list. Notwithstanding the foregoing, upon written notice to Lilly,
Phytera may elect not to share in the prosecution or maintenance costs as
described in this Section 4.1(d) related to a patent or patent application in a
particular country and incurred by Lilly after receipt of that notice; and in
such event Phytera will grant to Lilly
____________________
* 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.
Page 21
all of its patent rights associated with such patent in such country.
(E) DISCONTINUANCE OF PATENT PROSECUTION. The Party initially
responsible for preparation, filing, prosecution and maintenance (including the
costs or reimbursement of costs related thereto) of a particular Program Patent,
Lilly Patent or Phytera Patent (the "Initial Responsible Party") shall give
thirty (30) days advance notice (the "Discontinuance Election") to the other
Party of any decision to cease preparation, filing, prosecution and maintenance
of that Patent (a "Discontinued Patent") provided, however, that abandonment of
a patent application in favor of a continuation or a continuation-in-part
thereof shall not constitute discontinuance of the patent application. In such
case, the other Party may elect at its sole discretion to continue preparation,
filing, prosecution or maintenance of the Discontinued Patent at its sole
expense. The Party so continuing shall own any such patent application and
patents maturing therefrom; and the Initial Responsible Party shall execute such
documents and perform such acts as may be reasonably necessary for the other
Party to file or to continue prosecution or maintenance, including assigning
ownership of such patents and inventions to such electing Party. Discontinuance
may be on a country-by-country basis or for a patent application or patent
series in total. In the event that Lilly exercises its Discontinuance Election
with respect to a Discontinued Patent in a particular country, Lilly's license
hereunder with respect to that Discontinued Patent shall terminate with respect
to such country.
4.2 SAMPLES. Phytera shall provide Lilly with samples of any
materials, including cell lines, animals, reagents, lead Compounds, Research
Compounds or Closely Related Derivatives which are produced or developed within
the scope of the Program.
4.3 INFRINGEMENT CLAIMS BY THIRD PARTIES.
(a) If the manufacture, use or sale of Research Compounds,
Closely Related Derivatives or Products or the execution of the Research Plan
results in a claim against a Party for patent infringement or for inducing or
contributing to patent infringement ("Infringement Claim"), the Party first
having notice of an Infringement Claim shall promptly notify the other in
writing. The notice shall set forth the facts of the Infringement Claim in
reasonable detail.
(b) In the event that the execution of the Research Plan
necessarily involves working within the scope of a Third Party's patent, then
Phytera will use diligent efforts to obtain a required license under the Third
Party's patents with a right to sublicense to Lilly, under terms reasonably
acceptable to both Lilly and Phytera. If the required license is either
unavailable or its terms are unacceptable, then Phytera and Lilly will agree
upon alternatives for proceeding with the Research Plan or to undertake the
defense of a patent infringement action with respect to the Third Party patents.
(c) In the event that the sale of a Product in any country
necessarily involves working within the scope of a Third Party's patent, then
Lilly will use diligent efforts to obtain a required license under the Third
Party's patents with a right to sublicense to Phytera, under terms reasonably
acceptable to Lilly and Lilly will bear any royalty obligation payable under
such license. If the required license is either unavailable or its terms are
unacceptable, then Lilly may elect in its sole discretion to discontinue sales
of the Product in such country or to undertake the defense of a patent
infringement action with respect to the Third Party patents.
Page 22
(d) Except as provided in subsection (e) below, the Parties shall
share all reasonable out-of-pocket costs and expenses (including reasonable
attorney fees) incurred in conducting the defense of such Infringement Claims,
including the investigation and settlement thereof, equally. To the extent
either Party desires to engage external counsel in connection with activities
described in this Section 4.3, the engaging Party will consult the other Party
with respect to its choice of external patent counsel. Each Party shall also
keep the other Party continuously informed of all significant matters relating
to infringement claims of Third Parties. Except as otherwise provided in this
Agreement, any and all royalties, amounts paid in settlement and damages
resulting from settlement or a final nonappealable judgment pursuant to
litigation relating to an Infringement Claim shall be shared equally by the
Parties, except as otherwise provided in subsection (e) below.
(e) Phytera shall bear all costs, expenses (including reasonable attorney
fees) and royalty obligations associated with obtaining a license under Section
4.3(b) and defending any related Infringement Claim, including the investigation
and settlement thereof; provided, however, Lilly shall bear royalty obligations
associated with any license that is required to settle or avoid an Infringement
Claim related to Technology contributed by Lilly to the Program.
4.4 INFRINGEMENT CLAIMS AGAINST THIRD PARTIES.
(a) Phytera and Lilly each agree to take reasonable actions to
protect their respective patents and technology from infringement and from
unauthorized possession or use.
(b) If any Phytera Technology, Lilly Technology, Program Patents or
Program Technology is infringed or misappropriated, as the case may be, by a
Third Party, the Party to this Agreement first having knowledge of such
infringement or misappropriation, shall promptly notify the other in writing.
The notice shall set forth the facts of such infringement or misappropriation in
reasonable detail. Subject to the rights of Third Parties, the owner of the
Patent or Technology shall have the primary right, but not the obligation, to
institute, prosecute, and control any action or proceeding with respect to
infringement or misappropriation of such Patent or Technology by its own counsel
and the other Party shall have the right, at its own expense, to be represented
in such action by its own counsel. The Research Team shall determine which
Party shall have the primary responsibility to institute, prosecute, and control
any action or proceeding with respect to infringement or misappropriation of
jointly owned Patents or Technology and the other Party shall have the right, at
its expense, to be represented by its counsel.
Page 23
(c) The costs and expenses of all infringement suits brought by a
Party under this Section 4.4 shall be reimbursed to such filing Party and the
participating Party, pro rata, out of any damages or other monetary awards
recovered therein in favor of Phytera or Lilly. Any remaining damages shall then
be split twenty-five percent (25%) to Phytera and seventy-five percent (75%) to
Lilly. If the Party having the primary right or responsibility to institute,
prosecute, and control such action or prosecution fails to do so within a period
of one hundred twenty (120) days after receiving notice of the infringement, the
other Party, subject to the prior rights of any Third Party, shall have the
right to bring and control any such action by counsel of its own choice, and the
other shall not have the right to participate in such action or proceeding,
except that such Party may be joined as a Party plaintiff and, in case of
joining, such Party agrees to give the other Party reasonable assistance and
authority to file and to prosecute such suit. All costs and expenses of any suit
brought by the Party not having the primary right or responsibility to
institute, prosecute, and control such action or prosecution (including the
costs and expenses incurred by the other Party in providing reasonable
assistance to the Party initiating the action or proceeding) shall be paid, and
all damages or other monetary rewards recovered therein shall be retained, by
the Party initiating, the action or proceeding. No settlement or consent
judgment or other voluntary final disposition of a suit under this Section 4.4
may be entered into without the joint consent of Phytera and Lilly (which
consent shall not be unreasonably withheld or delayed).
4.5 NOTICE OF CERTIFICATION. Phytera and Lilly each shall immediately
give notice to the other of any certification filed under the U.S. "Drug Price
Competition and Patent Term Restoration Act of 1984" claiming that a Program
Patent, Phytera Patent or Lilly Patent is invalid or that any infringement will
not arise from the manufacture, use or sale of any product by a Third Party. If
Phytera decides not to bring infringement proceedings against the entity making
such a certification with respect to a Phytera Patent or Program Patent, Phytera
shall give notice to Lilly of its decision not to bring suit within twenty-one
(21) days after receipt of notice of such certification. Lilly may then, but is
not required to, bring suit against the Party that filed the certification. If
Lilly decides not to bring infringement proceedings against the entity making
such a certification with respect to a Lilly Patent, Lilly shall give notice to
Phytera of its decision not to bring suit within twenty-one (21) days after
receipt of notice of such certification. Phytera may then, but is not required
to, bring suit against the Party that filed the certification. Any suit by Lilly
or Phytera shall either be in the name of Lilly or in the name of Phytera, or
jointly by Lilly and Phytera, as may be required by law. 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. Any costs incurred or benefits received as a result of proceeding under
this Section 4.5 shall be paid or received entirely by the Party who pursued the
action.
4.6 PATENT TERM EXTENSIONS. The Parties shall cooperate with each other
in gaining patent term extension wherever applicable to Phytera Patents, Lilly
Patents or Program Patents covering Research Compounds and Closely Related
Derivatives. Lilly shall determine which patents shall be extended. All filings
for such extension shall be made by the Party to whom the patent is assigned,
provided, however, that in the event that the Party to whom the patent is
assigned elects not to file for an extension, such Party
Page 24
shall (i) inform the other Party of its intention not to file, (ii) grant the
other Party the right to file for such extension, and (iii) cooperate as
necessary to assist the other Party in filing such extension.
4.7 AUDIT OF COSTS. Upon reasonable written notice to Phytera, Lilly
shall have the right at its own expense and not more than annually in or in
respect of any Calendar Year, and during normal business hours, to audit those
books and records as may be reasonably necessary to verify the accuracy and
reasonableness of any costs incurred by Phytera and for which Phytera is seeking
or has received partial reimbursement from Lilly pursuant to this Article 4, in
respect of any Calendar Year ending not more than one (1) year prior to the date
of such notice. Any Phytera information received or obtained by Lilly in
connection with an audit under this Section 4.7 is Confidential Information and
Lilly shall retain all such information in confidence.
ARTICLE 5
---------
CONFIDENTIALITY AND PUBLICATION
-------------------------------
5.1 CONFIDENTIALITY. Unless otherwise set forth in this Agreement,
for a period from the Effective Date until [ ]* following the later
of: (a) the expiration or termination of this Agreement or (b) if Lilly is
marketing a Product, the date on which Lilly ceases to market any Product, Lilly
and Phytera shall maintain in confidence all Confidential Information disclosed
by the other Party or generated during the Program, and shall not, except as
contemplated by this Agreement, use it for its benefit or the benefit of others,
without the written consent of the disclosing Party. Lilly and Phytera agree not
to disclose any trade secret information belonging to the other Party for so
long as the trade secret remains confidential, provided that any disclosure of
such trade secret is in no way through the fault of the of the other Party to
this Agreement. Documents made available to the receiving Party shall remain the
property of the disclosing Party and shall be returned upon written request,
except that one copy of all such information may be retained for legal archival
purposes by the receiving Party.
5.2 AUTHORIZED DISCLOSURE. Each Party may disclose Confidential
Information disclosed by the other Party or generated during the Program for the
purpose of making various regulatory filings and complying with applicable
governmental regulations, and to consultants and others having a need to know
for the purposes of development, manufacture or marketing of Research Compounds
or Product(s) pursuant to this Agreement, provided that such consultants and
others shall also agree to appropriate and comparable confidentiality and non-
use provisions. In addition, each Party shall be entitled to disclose
Confidential Information to the extent required by applicable law, orders of
court, regulatory authorities or similar bodies having jurisdiction over the
Party ("Legal Process"). The Receiving Party shall promptly notify the
Disclosing Party of any request or demand by Legal Process for disclosure of
Confidential Information. With respect to any disclosure of Confidential
Information, including the text of this Agreement, for the purpose of complying
with applicable government regulations, the Disclosing Party shall give the
other Party an opportunity to review and comment upon the extent of any such
disclosure of Confidential Information prior to disclosure.
_____________________
* 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.
Page 25
5.3 NONDISCLOSURE OF AGREEMENT. Neither Party shall disclose any
information about this Agreement without the prior written consent of the other.
Consent shall not be required, however, for (a) disclosures to tax authorities
or to bona fide potential sublicensees, to the extent required or contemplated
by this Agreement, provided, that in connection with such disclosure, each Party
agrees to use its commercially reasonable efforts to secure confidential
treatment of such information, (b) disclosures of information for which written
consent has previously been obtained, or (c) information which had previously
been publicly disclosed. Each Party shall have the further right to disclose the
terms of this Agreement as required by applicable law, including the rules and
regulations promulgated by the Securities and Exchange Commission and/or the
regulatory bodies/authorities governing securities issues in foreign
jurisdictions and to disclose such information to shareholders or potential
investors as is customary for privately or publicly-held companies (as the case
may be at the time of disclosure), provided the disclosing Party provides to the
other Party, to the extent practicable, a copy of the information to be
disclosed and an opportunity to comment thereon prior to such disclosure, and,
to the extent practicable, consults within a reasonable time in advance of the
proposed disclosure with the other on the necessity for the disclosure and the
text of the proposed release. Any copy of this Agreement to be filed with the
Securities and Exchange Commission shall be redacted to the satisfaction of both
Parties; provided, however, in the event that the Securities and Exchange
Commission objects to the redaction of any portion of the Agreement after the
initial submission, the filing Party shall inform the other Party of the
objections and shall in good faith respond to the objections in an effort to
limit the disclosure required by the Securities and Exchange Agreement, but in
any event the filing Party shall be free to include any portions of the
Agreement it deems necessary to respond to the objections in any future filings.
5.4 SURVIVAL. The confidentiality obligations of this Article 5 shall
survive the termination or expiration of the Agreement.
5.5 PRESS RELEASES. Attached hereto as APPENDIX F is a form of press
----------
release which Phytera intends to release upon the execution of this Agreement or
shortly thereafter, which is hereby approved by Lilly. All press releases or
other public communication by either Party relating to the collaboration
contemplated by this Agreement shall be approved in advance by each Party which
approval shall not be unreasonably withheld, except for those communications
required by law. To the extent a disclosure is required by law, each Party shall
provide the other with prior written notification of such disclosure.
5.6. INQUIRIES FROM MEDIA AND FINANCIAL ANALYSTS. During and after the
term of this Agreement, Phytera may receive inquiries from reporters or
financial analysts related to the Program or Products. Phytera shall confer
with Lilly's corporate communications department (317-276-3655) before
responding to such inquiries and shall receive approval from Lilly for its
planned response to such inquiries.
5.7 USE OF NAMES, LOGOS OR SYMBOLS. No Party hereto shall use the name,
trademarks, logos, physical likeness, employee names or owner symbol of any
other Party for any purpose, including, without limitation, private or public
securities placements, without the prior written consent of the affected Party,
such consent not to be unreasonably withheld or delayed so long as such use of
name is limited to objective statements of fact, rather than for endorsement
purposes. Nothing contained herein shall
Page 26
be construed as granting either Party any rights or license to use any of the
other Party's trademarks or tradenames without separate, express written
permission of the owner of such trademark or tradename.
ARTICLE 6
---------
EQUITY INVESTMENT, MILESTONES AND ROYALTIES
-------------------------------------------
6.1 UPFRONT EQUITY INVESTMENT. In consideration of Phytera entering into
this Agreement and allowing Lilly the use of the Phytera Technology, within
sixty (60) business days of Lilly receiving a fully executed original of this
Agreement, Lilly shall purchase and Phytera shall sell to Lilly for an
aggregate price of Five Hundred Thousand Dollars ($500,000) that number of
shares of Phytera Series E Preferred Stock referenced in the Stock Subscription
Agreement dated as of the same date hereof.
6.2. MILESTONE BASED FEES AND INVESTMENT. In further consideration of
Phytera entering into this Agreement and provided that Phytera is not then in
breach of any of its obligations under this Agreement, Lilly shall, upon the
achievement of one or more of the milestones listed below for a Research
Compound, Closely Related Derivative, or Product, (a) notify Phytera promptly of
such achievement and (b) pay a milestone fee as listed below to Phytera within [
]* of such achievement:
Milestone 1: $500,000
Written approval by the Research Team in Research
Team meeting minutes or otherwise of the First
Research Compound as a lead (as "lead" is defined
in the then current Research Plan) for which SAR
Studies should commence. This milestone shall be
triggered and paid only once during the term of
the Agreement and shall be made in the form of an
equity investment. The equity investment shall be
based then-prevailing market price of Phytera
stock or upon terms substantially similar to the
then-most recent placement of equity by Phytera.
The per recent private share price of Phytera
equity shall be based on the following: (1) if
Phytera stock is being publicly traded, the per
share price shall be based on the average of the
last sale prices of a share of common stock on the
relevant market for the 20 trading days immediately
preceding the date the milestone is achieved as
documented in Research Team minutes or (2) if
Phytera stock is not being publicly traded, the
per share price shall be based on the then-
prevailing market price of Phytera stock or the
price of issuance during Phytera's then most
recent private placement
______________________
* 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.
Page 27
or such other price as agreed upon by the
Parties in writing.
Milestone 2: [ ]*
[ ]*.
Milestone 3: [ ]*
[ ]*.
Milestone 4: [ ]*
[ ]*.
Milestone 5: [ ]*
[ ]*
Milestone 6: [ ]*
[ ]*.
Each milestone is independent, so that the achievement of any one milestone
with respect to a Research Compound or Product does not require payment of lower
numbered unachieved milestones with respect to that Compound or Product.
All milestone payments previously paid with respect to Research Compounds
or Products that later fail prior to First Commercial Sale in the United States,
Japan or Major Europe, whichever occurs first, shall be creditable against
future milestones payment(s) for the next Research Compound(s) or Product(s) to
trigger any milestone(s). "Failure" for purposes of this provision shall mean a
decision by Lilly to terminate further development of a Research Compound or
Product due to efficacy, safety or tolerance data or such other reasons that are
commercially reasonable, given the then current industry standards.
6.3 ROYALTIES.
____________________
* 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.
Page 28
(a) Subject to the terms and conditions of this Agreement, in
consideration for the licenses provided hereunder, Lilly shall pay Phytera
royalties ("Royalty Payments") for each Product based upon [
]*, as follows:
Annual Net Sales Royalty Rate (on that
---------------- ---------------------
portion of net sales)*
----------------------
[
]*
*subject to a reduction equal to [ ]* % of any royalties payable to Third
Parties, provided that the royalty rate shall never fall below [ ]* %.
**MM - million U.S. Dollars
(b) For the purposes of this Article, the annual Net Sales of Product
figures set out above shall be in 1998 U.S. Dollars. Such numbers shall then be
adjusted upward on a Calendar Year basis commencing January 1,1999 (and on
January 1 of each year thereafter) using the Consumer Price Index (as calculated
by the Bureau of Labor Statistics for all U.S. urban consumers) to account for
inflation. Royalties shall be calculated on a Product by Product basis, and
sales of various Products shall not be aggregated for purposes of determining
the applicable royalty rate. For this purpose, all formulations of a Compound
shall be regarded as one Product. Royalty rates shall be applied only to that
portion of sales in a given Calendar Year that fall within the triggering sales
tier.
6.4 ROYALTY PAYMENTS. Royalty payments under this Agreement shall be made
to the receiving Party within seventy-five (75) days following the end of each
Calandar Quarter for which royalties are due. Royalties shall be payable on a
country-by-country and Product-by-Product basis from the date of First
Commercial Sale of each Product in a particular country until the expiration of
the last to expire Phytera Patent or Program Patent in such country having a
valid claim covering such Product. All payments shall be made in U.S. Dollars.
If at any time legal restrictions prevent the prompt remittance of any payments
with respect to any country where Products are sold, Lilly shall have the right
and option to make such payments by depositing the amount thereof in local
currency to Phytera's account in a bank or depository in such country.
6.5 SINGLE ROYALTY. Royalties payable under this Article will be payable
only once with respect to a particular unit of Product and will be paid only
once regardless of there being more than one Patent applicable to such Product.
6.6 SALES REPORTS.
(a) During the term of this Agreement and after the First Commercial Sale
of a Product, Lilly shall furnish or cause to be furnished to Phytera on a
quarterly basis a written report or reports covering each Calendar Quarter (each
such Calendar Quarter being sometimes referred to herein as a "reporting
period") showing (i) the Net Sales of
___________________
* 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.
Page 29
each Product in each country during the Royalty Term by Lilly or its Affiliates,
and; (ii) the royalties, which shall have accrued under Section 6.3 hereof in
respect of such sales and the basis for calculating those royalties. With
respect to sales of Products invoiced in U.S. Dollars calculated by using
Lilly's then-current standard procedures and methodology, the Net Sales amounts
and the amounts due to Phytera hereunder shall be expressed in Dollars. With
respect to sales of Products invoiced in a currency other than Dollars, the Net
Sales and amounts due to Phytera hereunder shall be expressed in the Dollar
equivalent of the amount payable to Phytera, calculated using Lilly's then
current standard exchange rate methodology for the translation of foreign
currency sales into Dollars. In each report, the exchange rate methodology will
be identical to that employed by Lilly in its external financial reporting, as
reviewed and approved by its independent auditors and will be in conformity with
generally accepted accounting principles consistently applied. Lilly will at
Phytera's reasonable request, but not more frequently than once a year, inform
Phytera as to the specific exchange rate translation methodology used for a
particular country or countries. Each quarterly report shall be due seventy-five
(75) days following the close of each reporting period. Lilly shall keep
accurate records in sufficient detail to enable the amounts due hereunder to be
determined and to be verified by the independent auditors described hereunder.
Lilly shall furnish annually to Phytera appropriate evidence of payment of any
tax or other amount required by applicable laws or regulations to be deducted
from any royalty payment, including any tax or withholding levied by a foreign
taxing authority in respect of the payment or accrual of any royalty.
(b) Amounts shown to have accrued by each sales report provided for under
Section 6.6(a) of this Agreement shall be due and payable on the date such sales
report is due.
(c) Upon written notice to Lilly, Phytera shall have the right at its own
expense using Lilly's independent certified public accountant, and not more than
annually in or in respect of any Calendar Year, to audit Lilly's books and
records during normal business hours as may be reasonably necessary to verify
the accuracy of the sales reports furnished by Lilly pursuant to Section 6.6(a),
in respect of any Calendar Year ending not more than one (1) year prior to the
date of such notice. Such audit shall be conducted by staff of Lilly's
independent public accountant other than those staff responsible for or involved
in ongoing general audit activities at Lilly. Phytera shall have the right to
have the audit work papers prepared by Lilly's independent public accountant
pursuant to this audit reviewed by Phytera's own independent certified public
accountant. Upon the expiration of two (2) years following the end of any
Calendar Year, the calculation of amounts payable with respect to such fiscal
year shall be binding and conclusive upon Phytera, and Lilly shall be released
from any liability or accountability with respect to payments for such year.
The report prepared by the independent public accountant, a copy of which shall
be sent or otherwise provided to Lilly by such independent public accountant at
the same time it is sent or otherwise provided to Phytera, shall contain the
conclusions of the independent public accountant regarding the audit and will
specify that the amounts paid to Phytera pursuant thereto were correct or, if
incorrect, the amount of any underpayment or overpayment. If the independent
public accountant's report shows any underpayment, Lilly shall remit to Phytera
within thirty (30) days after Lilly's receipt of such report, (i) the amount of
such underpayment and (ii) if such underpayment
Page 30
exceeds ten percent (10%) of the total amount owed for the Calendar Year then
being audited, the reasonable and necessary fees and expenses of the independent
public accountant performing the audit, subject to reasonable substantiation
thereof. Any overpayments shall be refunded to Lilly by Phytera within thirty
(30) days of receipt of the audit report or may be creditable, at Lilly's
option, against amounts payable in subsequent payment periods. Phytera agrees
that all information subject to review under this Section 6.6(d) is Confidential
Information and that Phytera shall retain and cause the accountant to retain all
such information in confidence.
ARTICLE 7
INDEMNITY
SECTION 7.1
(a) CLAIMS. Each Party hereby agrees to indemnify, defend and hold
harmless the other Party and its Affiliates, and their respective officers,
directors, agents and employees from and against any and all suits, claims,
actions, demands, liabilities, expenses and/or losses, including reasonable
attorneys' fees and other costs of defense other than claims for infringement
(which shall be resolved pursuant to Sections 4.3 and 4.4) ("Claims"), (a)
resulting directly or indirectly from the manufacture, use, handling, storage,
sale or other disposition of Research Compounds or Product by the indemnifying
Party, its Affiliates, agents or sublicensees, but only to the extent such
Claims result from the negligence or intentional misconduct of the indemnifying
Party or its employees and agents and do not result from the negligence or
intentional misconduct of the Party seeking indemnification, or (b) resulting
directly from a breach of any representation or warranty of the indemnifying
Party contained in Article 8 of this Agreement.
(b) DEFENSE. Any entity entitled to indemnification under this Article
shall give prompt written notice to the indemnifying Party of any Claims with
respect to which it seeks indemnification, and the indemnifying Party shall have
the option to assume the defense of such Claims with counsel reasonably
satisfactory to the indemnified Party. If such defense is assumed by the
indemnifying Party with counsel so selected, the indemnifying Party will not be
obligated to pay the fees and expenses of any separate counsel retained by the
indemnified Party with respect to such Claims. Except with the prior consent of
the indemnified Party, which consent shall not be unreasonably withheld, the
indemnifying Party may not enter into any settlement of such litigation unless
such settlement includes an unqualified release of the indemnified Party.
(c) INSURANCE. Phytera and Lilly shall each have and maintain such type
and amounts of liability insurance covering the manufacture, supply, use and
sale of Research Compounds, Program Candidates, Rejected Candidates,
Discontinued Products and Products as is normal and customary in the
pharmaceutical industry generally for parties similarly situated, and will upon
request provide the other Party with a copy of relevant certificates of
insurance or self-insurance in that regard, along with any amendments and
revisions thereto.
Page 31
ARTICLE 8
REPRESENTATIONS AND WARRANTIES
8.1 CORPORATE EXISTENCE AND POWER. Each of Phytera and Lilly represents
and warrants to the other that as of the Effective Date it (a) is a corporation
duly organized, validly existing and in good standing under the laws of the
state in which it is incorporated, and (b) has full corporate power and
authority and the legal right to own and operate its property and assets and to
carry on its business as it is now being conducted and is contemplated in this
Agreement, including the right to grant the licenses granted hereunder.
8.2 AUTHORITY. As of the Effective Date, each Party (i) has the corporate
power and authority and the legal right to enter into this Agreement and perform
its obligations hereunder, and (ii) has taken all necessary corporate action on
its part required to authorize the execution and delivery of the Agreement and
the performance of its obligations hereunder. The Agreement has been duly
executed and delivered on behalf of such Party, and constitutes a legal, valid,
binding obligation of such Party and is enforceable against it in accordance
with its terms subject to the effects of bankruptcy, insolvency or other laws of
general application affecting the enforcement of creditor rights and judicial
principles affecting the availability of specific performance and general
principles of equity whether enforceability is considered a proceeding at law or
equity.
8.3 ABSENCE OF LITIGATION. As of the Effective Date, each Party
represents and warrants to the other that it is not aware of any pending or
threatened litigation (and has not received any communication) which alleges
that such Party's activities related to this Agreement have violated, or that by
conducting the activities as contemplated herein such Party would violate, any
of the intellectual property rights of any other person. To the best of
Phytera's and Lilly's knowledge, there is no material unauthorized use,
infringement or misappropriation of any of its intellectual property rights
licensed hereunder.
8.4 NO APPROVALS OR CONSENTS. Except as otherwise described in this
Agreement each Party represents and warrants to the other that all necessary
consents, approvals and authorizations of all governmental authorities and other
persons or entities required to be obtained by such Party in connection with
this Agreement have been obtained.
8.5 PATENTS; PRIOR ART. Except as each Party has otherwise advised the
other Party in writing, each of Phytera and Lilly represents and warrants to the
other that as of the Effective Date, to the best of its knowledge, it has
sufficient legal and/or beneficial title and ownership under its intellectual
property rights necessary for it to fulfill its obligations under this Agreement
and that it is not aware of any communication alleging that it has violated or
by conducting its business as contemplated by this Agreement would violate any
of the intellectual property rights of any other person, and that to the best of
its knowledge there is no material unauthorized use, infringement or
misappropriation of any of its intellectual property rights relevant to this
Agreement. As used herein, "intellectual property rights" means all patent
rights, copyrights, trademarks, trade secret rights, chemical and biological
material rights and know-how rights necessary or useful to make, use or sell
Research Compounds and Products. Phytera further warrants and represents that
prior to the date of this Agreement, no license or covenant not to ▇▇▇ under any
Phytera Patent in the Field has been granted to any Third
Page 32
Party.
8.6 NO CONFLICT. The execution and delivery of the Agreement and the
performance of each Party's obligations hereunder (i) do not conflict with or
violate any requirement of applicable law or regulation or any provision of
articles of incorporation or bylaws of such Party in any material way, and (ii)
do not conflict with, violate or breach or constitute a default or require any
consent under, any contractual obligation or court or administrative order by
which such Party is bound.
8.7 YEAR 2000 COMPLIANCE. Phytera represents and warrants that its
operations, including without limitation the provision of any services, products
and/or information to or on behalf of Lilly, will not be materially delayed,
interrupted or otherwise adversely affected to the detriment of Lilly due to the
failure of Phytera's business systems and/or computer systems to be "Year 2000
Compliant". For purposes of this paragraph, a system shall be considered "Year
2000 Compliant" only if (i) the occurrence in or use by that system of dates on
or after January 1, 2000 ("Millennial Dates") does not adversely affect that
system's performance, including without limitation performance with respect to
date-dependent data, computations, output, or other functions (including,
without limitation, calculating, comparing and sequencing), and (ii) that system
creates, stores, processes and outputs information (as applicable) related to or
including Millennial Dates without errors or omissions.
8.8 NO DEBARMENT. Each party represents and warrants to the other that it
will comply at all times with the provisions of the Generic Drug Enforcement Act
of 1992 and will upon request certify in writing to the other that none of it,
its employees, or any person providing services to such party in connection with
the collaboration contemplated by this Agreement have been debarred under the
provisions of such Act.
ARTICLE 9
GOVERNING LAW AND DISPUTE RESOLUTION
9.1 GOVERNING LAW. The Agreement shall be governed by the laws of the
State of Indiana, without regard to Indiana choice of law provisions.
9.2 DISPUTE RESOLUTION PROCESS. In the event of any dispute relating to
this Agreement, the Parties shall prior to instituting any lawsuit, arbitration
or other dispute resolution process on account of such dispute, follow the
procedures for dispute resolution set forth in Section 2.2(d) of this Agreement
if such dispute is within the jurisdiction of the Research Team, as contemplated
by Section 2.2(c). In the event of any dispute relating to or arising from this
Agreement which a Party does not believe is covered by Section 2.2(d), the
Parties shall attempt in good faith to settle such dispute first by negotiation
and consultation between themselves, including referral of such dispute to the
Chief Executive Officer of Phytera and the Vice President, Infectious Diseases
Research of Lilly. In the event said executives are unable to resolve such
dispute or agree upon a mechanism to resolve such dispute within sixty (60) days
of the first written request for dispute resolution under this Article 9, the
Parties shall then consider other forms of alternative dispute resolution as a
means of resolving any such dispute. Thereafter, either Party shall be free to
institute litigation and seek such remedies as may be available.
Notwithstanding anything in this Agreement to the contrary, either Party shall
be entitled to institute litigation immediately if the same shall
Page 33
be necessary to prevent irreparable harm to either Party.
ARTICLE 10
TERM AND TERMINATION OF AGREEMENT
10.1 TERM. This Agreement shall become effective on the Effective Date and
shall continue in effect, unless terminated earlier as described hereunder or by
mutual written agreement of the Parties, until the later of either: (1) the
expiration of the last to expire Phytera Patent or Program Patent having a Valid
Claim Covering a Research Compound or Product; or (2) in the event that Lily is
developing a Research or marketing a product in accordance with the terms of
this Agreement but there is no issued Phytera Patent or Program Patent having a
valid claim Covering such Research Compound or Product, then ten (10) years from
the date of the First Commercial Sale with respect to the Product, if any. Upon
expiration of the Agreeement under Section 10.1, Lily shall and hereby does
assign all right, title and interest that Lilly has in Program Technology and
Program Patents, excluding its interest in Research Compounds and Closely
Related Derivatives ( and any claims or know-how Covering such Research
Compounds and Lilly's prior ownership interest) and Phytera shall grant and
hereby does grant to Lilly (with respect to Phytera's prior ownership interest)
a worldwide, non-exclusive, royalty-free license (with the right to sublicense)
to all Program Technology and Program Patents in accordance with Section 3.1(c).
10.2 TERMINATION FOR MATERIAL BREACH. Either Party shall have the right to
terminate this Agreement after ninety (90) days written notice to the other in
the event the other is in material breach of this Agreement, unless the other
Party cures the breach before the expiration of such period of time. Such
notice shall set forth in reasonable detail the specifics of the breach. In the
event of termination hereunder by Lilly, all licenses granted under this
Agreement to Lilly and its Affiliates shall not be affected and shall continue
in full force and effect, and Lilly and its Affiliates shall have the right to
exercise all licenses provided under this Agreement. All licenses granted under
this Agreement to Phytera and its Affiliates shall automatically terminate upon
such termination by Lilly. In the event of termination hereunder by Phytera,
all licenses granted under this Agreement to Phytera and its Affiliates shall
not be affected and shall continue in full force and effect, and Phytera and its
Affiliates shall have the right to exercise all licenses provided under this
Agreement. All licenses granted under this Agreement to Lilly and its
Affiliates shall automatically terminate upon such termination by Phytera.
Notwithstanding the foregoing, Lilly shall be permitted to make, have made, use,
have used, import, offer for sale, sell, and have sold, all supplies of Product
in its inventory at the time of termination until such supplies are exhausted.
For purposes of this Agreement, insolvency as set forth in Section 10.4 shall be
deemed a material breach.
10.3 LILLY VOLUNTARY TERMINATION. Any time after the second anniversary
of the Effective Date, Lilly may terminate this Agreement by giving Phytera
three (3) months
Page 34
written notice of its intent to terminate, which notice may be
provided prior to the second anniversary of the Effective Date. Upon
termination by Lilly under this Section 10.3 and subject to the terms set
forth herein, (i) the licenses granted under this Agreement shall terminate,
except as otherwise provided in Section 3.1(c); (ii) Lilly shall and hereby
does transfer to Phytera all right, title and interest in the Research
Compounds and Closely Related Derivatives except those Research Compounds or
Closely Related Derivatives which shall have been derived from the Lilly
Natural Products Library or the Lilly Compound Library; and (iii) Lilly shall
transfer and hereby does transfer all of its right, title and interest in
jointly owned Program Patents and jointly owned Program Technology, subject to
the retention by Lilly of a non-exclusive license in accordance with Section
3.1(c). In consideration for the transfer of rights from Lilly to Phytera to
occur pursuant to this Section 10.3, Phytera shall pay Lilly a [ ]* royalty
on the annual Net Sales of any Products sold by Phytera or its Affiliates or
any sublicensee thereof until Lilly has received an amount equal to its
payments to Phytera hereunder (including, but not limited to, Research Funds,
milestone payments and patent costs) and to any unaffiliated Third Party
contractors retained by it in connection herewith, plus interest on any unpaid
balances as set forth below. Until Lilly is fully reimbursed, any balance not
reimbursed shall accrue interest from that date commencing four years after the
Effective Date until paid, at the prime rate as quoted in The Wall Street
Journal plus two percent (2%) as determined on the date that interest first
accrues, compounded quarterly.
10.4 TERMINATION UPON INSOLVENCY. This Agreement may be terminated by
either Party upon notice to the other should the other Party:
(a) become insolvent; or
(b) file or consent to the filing of a petition under any bankruptcy
or insolvency law or have any such petition filed against it which has not been
stayed within 60 days of such filing.
10.5 TERMINATION DUE TO ISSUANCE OF BLOCKING PATENTS. Lilly shall have the
right to terminate this Agreement upon thirty (30) days written notice at any
time in the event that the execution of the Research Plan necessarily involves
working within the scope of a Third Party's patent.
10.6 ACCRUED RIGHTS, SURVIVING OBLIGATIONS. Upon the expiration or early
termination of this Agreement and except as provided herein to the contrary, all
rights and obligations of the Parties shall cease, except as follows:
(a) obligations to pay costs accruing hereunder up to the effective
date of termination;
(b) the right to complete the manufacture and sale of Products which
qualify as "work in process" under GAAP or which are in stock at the date of
termination, and the obligation to pay royalties on Net Sales of such Products;
(c) obligations to pay milestones and royalties with respect to
___________________________
* 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.
Page 35
Research Compounds, Closely Related Derivatives and/or Products;
(d) obligations of confidentiality and non-use;
(e) obligations for record-keeping and accounting reports for so long
as Products are sold, plus one (1) year. At such time after termination of this
Agreement when sales or other dispositions of Products have ceased, Lilly or
Phytera, as the case may be, shall render a final report along with any royalty
payment due;
(f) the Parties' right to inspect books and records;
(g) the obligations of defense and indemnity;
(h) any cause of action or claim of a Party accrued or to accrue
because of any breach or default by the other Party hereunder (subject to
applicable statutes of limitations); and
(i) in the event of expiration of this Agreement under Section 10.1,
Lilly shall have a fully paid-up, perpetual license to the rights granted
pursuant to Section 3.1(c); and
(j) all other terms, provisions, representations, rights and
obligations contained in this Agreement that by their sense and content are
intended to survive.
10.7 ADDITIONAL RIGHTS UPON TERMINATION FOR BREACH. If a Party (the "Non-
Breaching Party") terminates this Agreement under Section 10.2 hereof following
material breach by the other Party (the "Breaching Party"), (a) the Breaching
Party shall return to the Non-Breaching Party all Confidential Information and
materials received from the Non-Breaching Party during the Agreement, except
that the Breaching Party may keep a copy of all documents for record keeping
purposes only, (b) the Breaching Party shall cease all use of the Confidential
Information and materials received from the Non-Breaching Party for any purpose,
and (c) the Breaching Party shall deliver to the Non-Breaching Party all data
and information developed by the Breaching Party prior to such termination as a
result of the activities under this Agreement which can reasonably be viewed as
necessary or useful to obtain governmental regulatory approvals.
ARTICLE 11
----------
MISCELLANEOUS PROVISIONS
11.1 NOTICES. All notices required or permitted to be given under this
Agreement shall be in writing and shall be deemed given, upon receipt, if mailed
by registered or certified mail (return receipt requested), postage prepaid, or
sent by overnight delivery (receipt verified) to the address below, or given
personally or transmitted by facsimile to the number indicated below (with
confirmation).
If to Phytera: Phytera Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Ph.D.
President and CEO
Page 36
If to Lilly: ▇▇▇ ▇▇▇▇▇ and Company
Lilly ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Patent Counsel
Either Party may, by written notice to the others, designate a new address or
fax number to which notices to the Party giving the notice shall thereafter be
mailed or faxed.
11.2 FOREIGN EXCHANGE. Except as otherwise specified herein, sales and
expenses of the Parties under this Agreement which are in currencies other than
U.S. Dollars shall be translated into U.S. Dollars in accordance with GAAP,
consistently applied.
11.3 FORCE MAJEURE. If the performance of either Party under this
Agreement is affected by any extraordinary, unexpected and unavoidable event
such as acts of God, floods, fires, riots, war, accidents, or by reason of any
law, order, proclamation, regulation, ordinance, demand or requirement of the
relevant government or any sub-division, authority or representative thereof, or
by reason of any other cause whatsoever (provided that in all such cases the
Party claiming relief on account of such event can demonstrate that such event
was extraordinary, unexpected and unavoidable by the exercise of reasonable
care) ("Force Majeure") it shall as soon as reasonably practicable notify the
other Party of the nature and extent thereof and take all reasonable steps to
overcome the Force Majeure and to minimize the loss occasioned to that other
Party. Neither Party shall be deemed to be in breach of this Agreement or
otherwise be liable to the other Party by reason of any delay in performance or
nonperformance of any of its obligations hereunder to the extent that such delay
and nonperformance is due to any Force Majeure of which it has notified the
other Party and the time for performance of that obligation shall be extended
accordingly.
11.4 WITHHOLDING TAXES. If either Party is required by the United States
government or other authorities to withhold any tax on the amounts payable by
that Party to the other Party under this Agreement, that Party shall be allowed
to do so, and shall in such case remit payments to the other Party net of such
withheld amount, provided that the withholding Party furnishes the other Party
with reasonable evidence of such withholding payment in electronic or written
form as soon as practicable after such withholding in order that the other Party
may use the withholding tax paid as a tax credit.
11.5 ENTIRETY OF AGREEMENT. This Agreement, its appendices and the Stock
Purchase Agreement of even date herewith, set forth the entire Agreement and
understanding of the Parties relating to the subject matter contained herein and
merges all prior discussions and agreements between them. No Party shall be
bound by any representation other than as expressly stated in this Agreement, or
by a written amendment to this Agreement signed by authorized representatives of
both Parties.
11.6 NON-WAIVER. The failure of a Party in any one or more instances to
insist upon strict performance of any of the terms and conditions of this
Agreement shall not be construed as a waiver or relinquishment, to any extent,
of the right to assert or rely upon any such terms or conditions on any future
occasion.
11.7 DISCLAIMER OF AGENCY. This Agreement shall not constitute either
Party
Page 37
the legal representative or agent of the other, nor shall either Party have the
right or authority to assume, create, or incur any Third Party liability or
obligation of any kind, express or implied, against or in the name of or on
behalf of the other except as expressly set forth in this Agreement.
11.8 SEVERABILITY. If any term, covenant or condition of this Agreement or
the application thereof to either Party or circumstance shall, to any extent, be
held to be invalid or unenforceable, then (i) the remainder of this Agreement,
or the application of such term, covenant or condition to Parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the fullest extent permitted by law;
and (ii) the Parties hereto covenant and agree to renegotiate any such term,
covenant or application thereof in good faith in order to provide a reasonably
acceptable alternative to the term, covenant or condition of this Agreement or
the application thereof that is invalid or unenforceable, it being the intent of
the Parties that the basic purposes of this Agreement are to be effectuated.
11.9 ASSIGNMENT. Either Party may discharge any obligations and exercise
any right hereunder through an Affiliate, although each Party shall remain
ultimately responsible for the proper discharge of all obligations hereunder
notwithstanding any assignment or delegation to any such Affiliate. References
to a Party shall include any Affiliate of a Party to whom such an assignment or
delegation has been made or ratified. Except as provided in this Section or
otherwise expressly provided in the Agreement, neither Lilly nor Phytera shall
delegate duties of performance, assign or transfer, in whole or in part, rights
or obligations under this Agreement without the prior written consent of the
other Party, not to be unreasonably withheld, and any attempted delegation,
assignment or transfer, without such written consent shall be of no force or
effect. Subject to the restrictions contained in the preceding sentence, this
Agreement shall be binding upon the successors and assigns of the Parties.
11.10 HEADINGS. The headings contained in this Agreement have been added
for convenience only and shall not be construed as limiting or defining the
content of said sections or paragraphs.
11.11 LIMITATION OF LIABILITY. No Party shall be liable to another for
indirect, incidental, consequential or special damages, including but not
limited to lost profits, arising from or relating to any breach of this
Agreement, regardless of any notice of the possibility of such damages. Nothing
in this Section is intended to limit or restrict the indemnification rights or
obligations of any Party.
11.12 INTERPRETATION. This Agreement has been jointly prepared by the
Parties and their respective legal counsel and shall not be strictly construed
against either Party.
11.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
11.14 COMPLIANCE WITH LAWS. Each Party shall, and shall cause its
respective Affiliates to, comply in all material respects with all federal,
state, local and foreign laws, statutes, rules and regulations applicable to the
Parties and their respective activities under this Agreement.
Page 38
11.15 FURTHER ACTIONS. Each Party agrees to execute, acknowledge, and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
11.16 PAYMENT IN U.S. DOLLARS. Unless otherwise provided in this
Agreement, all amounts due and payable hereunder shall be due and payable in
U.S. Dollars.
11.17 INTEREST ON LATE PAYMENTS. In case of any delay in a payment due by
a Party to the other Party, which delay is not occasioned by Force Majeure,
interest at the rate of one percent (1%) per month, assessed from the thirty-
first day after the due date of said payment, shall be due by the late paying
Party without any special notice.
IN WITNESS WHEREOF, the Parties have executed this Agreement, in duplicate
originals, by their respective officers thereunto duly authorized, the day and
year herein written.
▇▇▇ ▇▇▇▇▇ AND COMPANY PHYTERA, INC.
By: /s/ Dr. August ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------- --------------------
Dr. August ▇. ▇▇▇▇▇▇▇▇
Executive Vice President, Name: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------
Science and Technology
Title: President
---------
Page 39
Attachments:
------------
Appendix A - Research Plan
Appendix B - Lilly Patents
Appendix C - Phytera Patents
Appendix D - Key Personnel
Appendix E - Pre-Existing Antifungal Programs
Appendix F - Press Release
_____________________
* 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.
Page 40
APPENDIX A
RESEARCH PLAN FOR PHYTERA, INC. & ▇▇▇ ▇▇▇▇▇
AND COMPANY ANTIFUNGAL RESEARCH COLLABORATION
OVERALL OBJECTIVE:
------------------
The overall objective of the collaboration is to exploit the enhanced
sensitivity to antifungal agents of MDR-knockout strains of fungal pathogens.
Using these hypersensitive screening tools to probe biodiversity unique to the
industry, we will discover novel compounds which have the potential to be
developed into broad-spectrum, oral and/or i.v. antifungal agents with
properties superior to those of the market standards.
APPROACH:
--------
[
]*
[
]*
_________________
* 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.
Page 41
[
]*
__________________
* 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
Page 42
[
]*
___________________
* 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
Page 43
[
]*
___________________
* 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
Page 44
[
]*
__________________
* 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
Page 45
[
]*
__________________
* 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
Page 46
[
]*
__________________
* 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
Page 47
[
]*
__________________
* 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
Page 48
[
]*
__________________
* 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
Page 49
[
]*
_________________
* 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
Page 50
[
]*
__________________
* 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
Page ▇▇
▇▇▇▇▇▇▇▇ ▇
LILLY PATENTS
DKT# SHORT TITLE INV NAME FILED APP# ISSUED ▇▇▇#
------------------------------------------------------------------------------------------
X11765 MULTIPLE DRUG RESIST SKATRUD ▇▇▇▇ ▇▇▇▇▇▇ 23DEC97 08/996644 N/A N/A
ANCE GENE ATRC OF AS DE WAARD MAARTEN
PERGILLUS NIDULANS ▇▇▇▇▇▇▇ ▇▇▇▇ ▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
X11776 MULTIPLE DRUG RESIST SKATRUD ▇▇▇▇ ▇▇▇▇▇▇ 23DEC97 08/996545 N/A N/A
ANCE GENE ATRD OF AS DE WAARD MAARTEN
PERGILLUS NIDULANS ▇▇▇▇▇▇▇ ▇▇▇▇ ▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
X9212 MULTIPLE DRUG RESIST ▇▇▇▇▇ ▇▇▇▇▇▇ B 20APR94 08/232537 14MAY96 5516655
ANCE GENE OF AUREOBA ▇▇▇▇▇▇▇ ▇▇▇▇ L
SIDIUM PULLULANS
X9681 MULTIPLE DRUG RESIST ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ 08MAR96 08/612734 N/A N/A
ANCE GENE OF ASPERGI SKATRUD ▇▇▇▇ ▇▇▇▇▇▇
LLUS FUMIGATUS ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
X9682 MULTIPLE DRUG RESIST ▇▇▇▇▇ ▇▇▇▇▇▇ B 27FEB95 08/394880 06JAN98 5705352
ANCE GENE OF ASPERGI ▇▇▇▇▇▇▇ ▇▇▇▇ L
LLUS FUMIGATUS
X9683 MULTIPLE DRUG RESIST ▇▇▇▇▇ ▇▇▇▇▇▇ B 27FEB95 08/395246 30JUN98 5773214
ANCE GENE OF ASPERGI ▇▇▇▇▇▇▇ ▇▇▇▇ L
LLUS FLAVUS
X9693 MULTIPLE DRUG RESIST ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ 08MAR96 08/612521 28JUL98 5786463
ANCE GENE OF CRYPTOC ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ NEOFORMANS ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ Patent Application Serial No. 08/724,540 titled "Identification
and Use of Mutant Multidrug-Resistant Cells" filed September 30, 19996.
2. PCT and CIP filed September 30, 1997.
3. US Application refiled December 22, 1997.
Page 53
APPENDIX D
PHYTERA KEY PERSONNEL
1. ▇▇▇▇▇ ▇▇▇▇▇▇, Senior Scientist
2. ▇▇▇▇▇ Mc Alpine, Vice President, Natural Product Chemistry
Page ▇▇
▇▇▇▇▇▇▇▇ ▇
PRE-EXISTING ANTIFUNGAL PROGRAMS
(1) [
]*
(2) [
]*
(3) [
]*
__________________
* 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.
Page 55
APPENDIX F
----------
Press Release
July 21, 1998
PHYTERA AND LILLY SIGN RESEARCH COLLABORATION AGREEMENT TO DISCOVER AND DEVELOP
INFECTIOUS DISEASE PRODUCTS
Phytera, Inc. and ▇▇▇ ▇▇▇▇▇ and Company (NYSE:LLY) announced today that they
have entered into a research collaboration to discover novel agents for the
diagnosis, treatment and prevention of infectious fungal diseases. The alliance
encompasses human and animal veterinary diagnostics and therapeutics.
Phytera is contributing to the collaboration both novel antifungal screens based
on its genomics technologies as well as natural product extracts from its ExPAND
plant cell culture and uMARINE marine microbial libraries. Phytera will also
provide its natural product chemistry expertise for the bioassay-guided
fractionation, isolation and structural characterization of its proprietary
active extracts. Lilly will provide compounds for screening and will be
responsible for downstream profiling, lead optimization, development and
commercialization.
As part of the agreement, Phytera will receive an up-front equity investment and
funding for research activities, as well as future milestone payments and
royalties on sales of products discovered and developed through the
collaboration. Lilly, which will provide all funding for research and
development, receives worldwide rights to commercialize products emerging from
the collaboration.
"The agreement capitalizes on our capabilities in screening, molecular biology,
natural product chemistry, and marine and plant culture," said ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
Ph.D., president and chief executive officer of Phytera. "We are particularly
excited to collaborate with Lilly to address the problem of increasing
resistance of fungal pathogens to currently available drugs. Lilly brings to
this program broad chemistry assets in addition to enormous experience and a
strong track record as an innovator in the discovery and development of
antifungal drugs."
"Phytera's unique natural product libraries and screening systems will reinforce
our capabilities and strong commitment towards the discovery and development of
novel antifungal drugs," said ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Ph.D., vice president of
infectious diseases discovery research and clinical investigation for Lilly.
"Worldwide sales of antifungal agents exceeded an estimated $3 billion in 1996
and continue to grow rapidly. Fungal infections have emerged in recent years as
a major cause of disease and mortality, in part as a consequence of the increase
in immunosuppressive diseases and the use of immune system suppressing drugs
such as chemotherapy. In addition, resistance to the relatively few current
therapies is becoming an important clinical issue."
Phytera's proprietary techniques enable the Company to "manipulate" plant cells
and marine microbes in culture in order to modulate genomic expression and
change metabolic pathways. The range of manipulations employed optimizes
chemical diversity and often results in the production of chemicals not found in
the originating species. In addition, Phytera has developed strong capabilities
in the design and implementation of high-throughput screening systems for
infectious disease targets. Genetic and protein engineering technologies are
allied with bioinformatics and robotics to produce a portfolio of cellular and
molecular target-based screens.
Phytera, Inc. is a biotechnology company headquartered in Worcester,
Massachusetts with wholly owned subsidiaries in Sheffield, U.K, Copenhagen,
Denmark and Tastrup, Denmark. The company is focused on applying novel
technology platforms to the identification and optimization of new lead
structures and drug candidates for pharmaceutical application. Phytera has
allied its plant and marine microbial culture technologies with innovative high-
throughput screening and combinatorial chemistry capabilities to create an
integrated discovery platform. Infectious disease products from the program are
currently in preclinical development.
Lilly is a global research-based pharmaceutical corporation headquartered in
Indianapolis, Ind., that is dedicated to creating and delivering innovative
pharmaceutical-based health care solutions that enable people to live longer,
healthier and more active lives.