Exhibit 10.01

 

SUBLICENSE AND LICENSE AGREEMENT

BETWEEN

NIPPON KAYAKU CO., LTD.

AND

NEOPHARM, INC.

 

SUBLICENSE AND LICENSE AGREEMENT (this “Agreement”) dated as of December 28,
2004 by and between Nippon Kayaku Co., Ltd., a corporation organized under the
laws of Japan with principal offices located at Tokyo Fujimi Building, 11-2,
Fujimi 1-chome, Chiyoda-ku, Tokyo 102-8172, Japan (“NK”) and NeoPharm, Inc., a
Delaware corporation with principal offices located at 150 Field Drive, Suite
195, Lake Forest, Illinois 60045 (“NeoPharm”).

 

WITNESSETH:

 

WHEREAS, NK is engaged in the research, development, manufacture and
commercialization of pharmaceuticals for the treatment of diseases in humans;
and

 

WHEREAS, NeoPharm is engaged in the research and development of proprietary drug
products, including, but not limited to, IL13-PE38QQR (“IL13”), for the
treatment of cancer, and in connection therewith has obtained the rights to such
products and has developed and licensed know-how, technology and other
intellectual property relating thereto; and

 

WHEREAS, NK would like to obtain a sublicense and a license to the technology,
patents, know-how and certain other intellectual property owned or controlled by
NeoPharm to research, develop and commercialize products containing IL13 (as
defined below) in the Territory (as defined below); and

 

WHEREAS, NeoPharm has agreed to exclusively sublicense and license to NK the
Licensed Technology (as defined below) in the Territory.

 

NOW, THEREFORE, in consideration of the foregoing and of the payments,
representations, covenants and promises contained in this Agreement, the Parties
agree as follows:

 

ARTICLE 1
DEFINITIONS

 

1.1 “AFFILIATE” SHALL MEAN ANY PERSON THAT, DIRECTLY OR INDIRECTLY THROUGH ONE
OR MORE INTERMEDIATES, CONTROLS, IS CONTROLLED BY, OR IS UNDER COMMON CONTROL
WITH THE PERSON SPECIFIED.  FOR THE PURPOSES OF THIS DEFINITION, CONTROL SHALL
MEAN WITH RESPECT TO A PERSON, THE DIRECT OR INDIRECT OWNERSHIP OF (I) GREATER
THAN FIFTY PERCENT (50%) OF THE VOTING CAPITAL OR SHARES ENTITLED TO VOTE FOR
THE ELECTION OF DIRECTORS OF THE PERSON OR (II) GREATER THAN FIFTY PERCENT (50%)
OF OWNERSHIP INTEREST OF THE PERSON, OR (III) THE ABILITY TO DIRECT THE
MANAGEMENT AND OPERATIONS OF THE PERSON.

 

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1.2 “AGREEMENT” SHALL MEAN THIS AGREEMENT.

 

1.3 “APPLICABLE LAWS” SHALL MEAN ALL APPLICABLE LAWS, STATUTES, RULES,
REGULATIONS, ORDINANCES, ORDERS, DECREES, WRITS, JUDICIAL OR ADMINISTRATIVE
DECISIONS AND THE LIKE OF ANY NATION OR GOVERNMENT, ANY STATE OR OTHER POLITICAL
SUBDIVISION THEREOF, ANY ENTITY EXERCISING EXECUTIVE, JUDICIAL, REGULATORY OR
ADMINISTRATIVE FUNCTIONS OF OR PERTAINING TO GOVERNMENT (INCLUDING, WITHOUT
LIMITATION, ANY GOVERNMENTAL AUTHORITY, AGENCY, DEPARTMENT, BOARD, COMMISSION OR
INSTRUMENTALITY OF ANY GOVERNMENTAL UNIT OR ANY POLITICAL SUBDIVISION THEREOF),
ANY TRIBUNAL OR ARBITRATOR OF COMPETENT JURISDICTION, AND ANY SELF-REGULATORY
ORGANIZATION.

 

1.4 “BLA” SHALL MEAN A BIOLOGICS LICENSE APPLICATION FILED WITH THE FDA.

 

1.5 “CGMP” SHALL MEAN CURRENT GOOD MANUFACTURING PRACTICES OF THE FDA, INCLUDING
COMPLIANCE WITH THE FD&C ACT, 21 C.F.R. PARTS 210 AND 211 AND ALL APPLICABLE FDA
RULES, REGULATIONS, POLICIES AND GUIDELINES IN EFFECT AT A GIVEN TIME.

 

1.6 “CLAIMS” SHALL MEAN ANY AND ALL CLAIMS, SUITS, PROCEEDINGS, LIABILITIES,
LOSSES, DAMAGES, PENALTIES, FINES, ASSESSMENTS, EXPENSES AND COSTS OF ANY KIND
OR NATURE, PRIMARY OR SECONDARY, DIRECT OR INDIRECT, ABSOLUTE OR CONTINGENT,
KNOWN OR UNKNOWN, INCLUDING, WITHOUT LIMITATION, COSTS OF SETTLEMENT, REASONABLE
ATTORNEYS’ FEES AND RELATED COSTS AND EXPENSES AND ANY LIABILITIES FOR CLAIMS OF
PERSONAL INJURY, ILLNESS, DEATH OR PROPERTY DAMAGE SUFFERED OR INCURRED BY AN
INDEMNIFIED PARTY HEREUNDER.

 

1.7 “COMMERCIALIZE” OR “COMMERCIALIZATION” SHALL MEAN THOSE ACTIVITIES RELATING
TO THE PROMOTION, MARKETING AND SALE OF PRODUCTS FOLLOWING GOVERNMENTAL APPROVAL
TO MARKET PRODUCTS, BUT WITH RESPECT TO NK SHALL NOT INCLUDE MANUFACTURING OF
IL13 OR ANY PRODUCT.

 

1.8 “COMMERCIALLY REASONABLE EFFORTS” SHALL MEAN REASONABLE BEST EFFORTS AND
RESOURCES COMMONLY USED IN THE RESEARCH-BASED PHARMACEUTICAL INDUSTRY FOR A
PRODUCT AT A SIMILAR STAGE IN ITS PRODUCT LIFE OF SIMILAR MARKET POTENTIAL
TAKING INTO ACCOUNT THE COMPETITIVENESS OF ALTERNATIVE PRODUCTS IN THE
MARKETPLACE, THE PATENT AND OTHER PROPRIETARY POSITION OF THE PRODUCT, THE
LIKELIHOOD OF REGULATORY APPROVAL GIVEN THE REGULATORY STRUCTURE INVOLVED, THE
PROFITABILITY OF THE PRODUCT AND ALTERNATIVE PRODUCTS AND OTHER RELEVANT
FACTORS. COMMERCIALLY REASONABLE EFFORTS SHALL BE DETERMINED ON A MARKET BY
MARKET BASIS FOR A PARTICULAR PRODUCT, AND IT IS ANTICIPATED THAT THE LEVEL OF
EFFORT WILL CHANGE OVER TIME REFLECTING CHANGES IN THE STATUS OF THE PRODUCT AND
THE MARKET INVOLVED.

 

1.9 “CONFIDENTIAL INFORMATION” SHALL MEAN ANY AND ALL DATA AND INFORMATION OF A
PROPRIETARY OR CONFIDENTIAL NATURE THAT ARE OWNED OR CONTROLLED BY ANY PARTY OR
THEIR RESPECTIVE AFFILIATES AND ARE MADE AVAILABLE BY ONE PARTY OR ITS
AFFILIATES TO THE OTHER PARTY OR ITS AFFILIATES PRIOR TO THE TERM OR DURING THE
TERM AND THE ADDITIONAL TERM AND THAT ARE DIRECTLY OR INDIRECTLY RELATED TO THE
IL13 AND/OR PRODUCTS OR THE DEVELOPMENT, USE OR SALE THEREOF, INCLUDING, BUT
WITHOUT LIMITATION, CLINICAL OR NON-CLINICAL DATA, FORMULATIONS, CUSTOMER LISTS,
SUPPLIER LISTS AND PRICING INFORMATION.  CONFIDENTIAL INFORMATION SHALL NOT
INCLUDE INFORMATION WHICH:

 

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(a)           was known or used by the receiving Party or its Affiliates prior
to its date of disclosure to the receiving Party, as evidenced by the prior
written records of the receiving Party or its Affiliates; or

 

(b)           either before or after the date of the disclosure to the receiving
Party, is lawfully disclosed without restriction on disclosure to the receiving
Party or its Affiliates by an independent, unaffiliated Third Party whose
disclosure of such information does not violate any obligation to, or right of,
the Party owning or controlling the Confidential Information; or

 

(c)           either before or after the date of the disclosure to the receiving
Party, becomes published or generally known in the industry through no fault or
admission on the part of the receiving Party or its Affiliates or their
employees or agents; or

 

(d)           can be shown by written documents to have been independently
developed by the receiving Party or its Affiliates without breach of any of the
provisions of this Agreement; or

 

(e)           is disclosed by the receiving Party pursuant to oral questions,
interrogatories, requests for information or documents, subpoena, or a civil
investigative demand of a court or governmental agency; provided that the
receiving Party notifies the other Party immediately upon receipt thereof (and
provided that the disclosing Party furnishes only that portion of the
information which it is advised by counsel is legally required and impose such
obligations of secrecy as are possible in that regard); or

 

(f)            is required to be disclosed by a Party under any statutory,
regulatory or similar legislative requirement or any rule of any stock exchange
to which it or any Affiliate is subject; provided, that the disclosing Party
uses reasonable efforts to obtain confidential treatment of the Confidential
Information.

 

1.10         “CONTROLS” OR “CONTROLLED” SHALL MEAN, WITH RESPECT TO ANY KNOW-HOW
OR INTELLECTUAL PROPERTY RIGHT, THAT A PARTY CONTROLLING SUCH OWNS OR HAS A
LICENSE TO USE SUCH KNOW-HOW OR RIGHT AND HAS THE ABILITY TO GRANT LICENSES OR
SUBLICENSES TO SUCH KNOW-HOW OR RIGHT WITHOUT VIOLATING THE TERMS OF ANY
AGREEMENT OR OTHER ARRANGEMENT WITH, OR THE RIGHTS OF, ANY THIRD PARTY.

 

1.11         “DEFAULT” SHALL MEAN WITH RESPECT TO EITHER PARTY THAT (I) ANY
REPRESENTATION OR WARRANTY OF SUCH PARTY SET FORTH IN THIS AGREEMENT SHALL HAVE
BEEN UNTRUE IN ANY MATERIAL RESPECT WHEN MADE OR (II) SUCH PARTY SHALL HAVE
FAILED IN THE PERFORMANCE OF ANY MATERIAL OBLIGATION OF SUCH PARTY SET FORTH
HEREIN.

 

1.12         “DEVELOP” OR “DEVELOPMENT” SHALL MEAN THOSE ACTIVITIES RELATED TO
THE PRECLINICAL OR CLINICAL DEVELOPMENT OF IL13 AND/OR PRODUCTS AND OBTAINMENT
AND PRESERVATION OF GOVERNMENTAL APPROVALS FOR PRODUCTS.

 

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1.13         “DEVELOPMENT DATA” SHALL MEAN PRECLINICAL AND CLINICAL DATA
POSSESSED AS OF THE EFFECTIVE DATE AND GENERATED AFTER THE EFFECTIVE DATE BY OR
ON BEHALF OF EITHER PARTY, ITS AFFILIATES OR SUBLICENSEES IN THE DEVELOPMENT OF
IL13 AND/OR PRODUCTS.

 

1.14         “DEVELOPMENT PLAN” SHALL MEAN THE PLAN ATTACHED HERETO AS EXHIBIT B
PROVIDING FOR THE DEVELOPMENT OF IL13 AND/OR PRODUCTS BY NK, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME BY THE JSC.

 

1.15         “EFFECTIVE DATE” SHALL MEAN THE DATE OF THIS AGREEMENT.

 

1.16         “FDA” SHALL MEAN THE UNITED STATES FOOD AND DRUG ADMINISTRATION AND
ANY SUCCESSOR AGENCY.

 

1.17         “FIELD OF USE” SHALL MEAN, FOR EACH PATENT OR APPLICATION INCLUDED
IN THE LICENSED PATENT RIGHTS LISTED ON EXHIBIT A HERETO, THE FIELD OF USE
DESIGNATED ON EXHIBIT A FOR SUCH PATENT ESTATE, AND FOR ANY OTHER LICENSED
TECHNOLOGY, THE “FIELD OF USE” SHALL MEAN THE FIELD OF USE FOR TREATING HUMAN
CANCER.

 

1.18         “FIRST COMMERCIAL SALE” SHALL MEAN THE INITIAL TRANSFER BY OR ON
BEHALF OF NK OR ITS AFFILIATES IN EXCHANGE FOR CASH OR SOME EQUIVALENT TO WHICH
VALUE CAN BE ASSIGNED FOR THE PURPOSE OF DETERMINING NET SALES.

 

1.19         “FORCE MAJEURE” SHALL MEAN ACTS OF GOD; ACTS, REGULATIONS, ORDERS,
DECREES OR LAWS OF ANY GOVERNMENT OR AGENCY THEREOF THAT ARE NOT DUE TO OR
CAUSED BY ANY ACTION OR INACTION OF THE PARTY CLAIMING THE BENEFIT OF FORCE
MAJEURE WHERE SUCH ACTION OR INACTION IS IN VIOLATION OF SUCH PARTY’S
OBLIGATIONS UNDER THIS AGREEMENT OR APPLICABLE LAWS; WAR; TERRORIST ACTS, DAMAGE
TO OR DESTRUCTION OF FACILITIES; LABOR DISTURBANCES (WHETHER OR NOT ANY SUCH
LABOR DISTURBANCE IS WITHIN THE POWER OF THE AFFECTED PARTY TO SETTLE);
EPIDEMIC; CIVIL COMMOTION; AND FAILURE OF SUPPLIERS, PUBLIC UTILITIES OR COMMON
CARRIERS; PROVIDED, HOWEVER, THAT NOTWITHSTANDING THE EXISTENCE OF SUCH A FORCE
MAJEURE EVENT, THE PARTY AFFECTED SHALL HAVE USED, AND SHALL CONTINUE TO USE
THROUGHOUT THE DURATION OF THE EVENT, ALL REASONABLE EFFORTS TO AVOID THE
OCCURRENCE OF THE EVENT AND TO REMEDY IT PROMPTLY ONCE IT SHALL HAVE OCCURRED.

 

1.20         “GOVERNMENTAL APPROVALS” SHALL MEAN ANY APPROVALS, LICENSES,
REGISTRATIONS, AUTHORIZATIONS, OR EQUIVALENTS, OF ANY UNITED STATES OR JAPANESE,
AS APPLICABLE, GOVERNMENTAL AUTHORITIES THAT ARE NECESSARY FOR THE MANUFACTURE,
USE, STORAGE, TRANSPORT, EXPORT, IMPORT, CLINICAL TESTING AND/OR SALE OF THE
PRODUCT IN THE TERRITORY OR THE UNITED STATES, AS APPLICABLE.

 

1.21         “GOVERNMENTAL AUTHORITIES” SHALL MEAN ALL FEDERAL OR LOCAL
GOVERNMENTAL ENTITIES, AGENCIES, DEPARTMENTS, BUREAUS OR OTHER GOVERNMENTAL
AUTHORITIES.

 

1.22         “IL13” SHALL MEAN HIL13-PE38QQR AND/OR CPHIL13-PE38QQR.

 

1.23         “JAPANESE NHI REIMBURSEMENT PRICE” SHALL MEAN THE PUBLIC DRUG PRICE
DETERMINED BY THE MHLW.

 

1.24         “JSC” SHALL MEAN THE JOINT STEERING COMMITTEE HAVING THE
RESPONSIBILITIES SET FORTH IN ARTICLE 3.

 

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1.25         “JOINT INVENTION” SHALL MEAN EACH INVENTION OR DISCOVERY RELATED TO
IL13 AND/OR THE PRODUCT ACQUIRED OR DEVELOPED JOINTLY (AS DETERMINED BY U.S. LAW
OF INVENTORSHIP) BY THE PARTIES (TOGETHER WITH THEIR EMPLOYEES, CONSULTANTS AND
RESEARCHERS).

 

1.26         “LICENSE FEES” SHALL MEAN THE PAYMENTS TO BE MADE BY NK TO NEOPHARM
AS DETAILED IN SECTION 4.1.

 

1.27         “LICENSED PATENT RIGHTS” SHALL MEAN:

 

(a)           Rights in the Territory to the patent applications and Japanese
patents NeoPharm has licensed from Licensors, as stated in Exhibit A as such and
all patents issuing from such applications, in each case within the Field of Use
identified for each such patent estate.  NeoPharm shall not amend Exhibit A
without the prior written consent of NK, which consent shall not be unreasonably
withheld; provided, however, that NeoPharm may amend Exhibit A from time to time
if NeoPharm acquires rights to additional patents and patent applications within
the respective Field of Use and in the Territory or PHS exercises the right to
modify NeoPharm’s license to the Licensed Patent Rights according to 35 U.S.C.
§209(f)(4).

 

(b)           To the extent that the following contain one or more claims
directed to the invention or inventions disclosed in (a) above that also relate
to IL13 and/or Product within the respective Field of Use:  (i) all divisions
and continuations-in-part of (a) above; (ii) all divisions and continuations of
these continuations-in-part; (iii) all patents issuing from such
continuations-in-part, divisions and continuations; and (iv) any reissues,
reexaminations and extensions of such patents; in each case only to the extent
NeoPharm has or obtains rights thereto in the Territory.

 

1.28         “LICENSED TECHNOLOGY” SHALL MEAN ANY TECHNOLOGY, KNOW-HOW AND OTHER
INTELLECTUAL PROPERTY (OTHER THAN TRADEMARKS) DIRECTED TO IL13 AND/OR PRODUCTS,
FORMULATIONS AND/OR METHODS CONTROLLED ON THE EFFECTIVE DATE OR TO BE CONTROLLED
DURING THE TERM AND THE ADDITIONAL TERM BY NEOPHARM OR ITS AFFILIATES WHICH ARE
NECESSARY OR USEFUL TO RESEARCH, DEVELOP, USE OR COMMERCIALIZE IL13 AND/OR THE
PRODUCT IN THE TERRITORY IN THE FIELD OF USE AND SHALL INCLUDE THE LICENSED
PATENT RIGHTS AND ANY NEOPHARM DATA.

 

1.29         “LICENSOR” SHALL MEAN, FOR EACH PATENT OR APPLICATION INCLUDED IN
THE LICENSED PATENT RIGHTS LISTED ON EXHIBIT A HERETO, THE LICENSOR TO NEOPHARM
DESIGNATED ON EXHIBIT A FOR SUCH PATENT ESTATE.

 

1.30         “MHLW” SHALL MEAN THE JAPANESE MINISTRY OF HEALTH, LABOR AND
WELFARE, AND ANY SUCCESSOR AGENCY.

 

1.31         “MILESTONE PAYMENTS” SHALL MEAN THE PAYMENTS TO BE MADE BY NK TO
NEOPHARM UPON OCCURRENCE OF CERTAIN EVENTS AS SET FORTH IN SECTION 4.2.

 

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1.32         “NEOPHARM DATA” SHALL MEAN CLINICAL, TECHNICAL, SCIENTIFIC AND
MEDICAL INFORMATION, KNOWLEDGE, KNOW-HOW, METHODS, AND PRACTICES INCLUDING, BUT
WITHOUT LIMITATION, PHARMACOLOGICAL, TOXICOLOGICAL AND CLINICAL TEST DATA AND
RESULTS HAVING APPLICATION TO IL13 AND/OR THE PRODUCTS IN THE FIELD OF USE.

 

1.33         “NEOPHARM TERRITORY” SHALL MEAN THE ENTIRE WORLD EXCLUDING THE
TERRITORY.

 

1.34         “NET SALES” SHALL MEAN [*] PERCENT [*]% OF THE JAPANESE NHI
REIMBURSEMENT PRICE FOR THE PRODUCT SOLD BY NK AND ITS AFFILIATES TO THIRD
PARTIES (OTHER THAN FOR THE PURPOSE OF CLINICAL STUDIES); PROVIDED, HOWEVER,
THAT IN CASE THE JAPANESE PRICING SYSTEM CHANGES FROM THE JAPANESE NHI
REIMBURSEMENT PRICE TO ANOTHER SYSTEM, THE PARTIES SHALL NEGOTIATE WITH EACH
OTHER ABOUT HOW TO EQUITABLY DETERMINE NET SALES OF PRODUCT.

 

1.35         “NEW DRUG APPLICATION” OR “NDA” SHALL MEAN (A) THE SINGLE
APPLICATION OR SET OF APPLICATIONS FOR APPROVAL AND/OR PRE-MARKET APPROVAL TO
MAKE AND SELL COMMERCIALLY A PHARMACEUTICAL OR BIOLOGICAL THERAPEUTIC PRODUCTS
OR DELIVERY SYSTEMS OR DEVICE FILED WITH THE FDA OR GOVERNMENTAL AUTHORITIES IN
THE TERRITORY, AS APPLICABLE, OR ANY SUCCESSOR AGENCY HAVING THE ADMINISTRATIVE
AUTHORITY TO REGULATE THE APPROVAL FOR MARKETING OF NEW HUMAN PHARMACEUTICAL OR
BIOLOGICAL THERAPEUTIC PRODUCTS, DELIVERY SYSTEMS AND DEVICES IN THE UNITED
STATES OR THE TERRITORY, AS APPLICABLE, INCLUDING ALL INFORMATION IN DRUG MASTER
FILES RELATED TO SUCH APPLICATION(S), AND (B) ANY RELATED REGISTRATIONS WITH OR
NOTIFICATIONS TO THE FDA OR GOVERNMENTAL AUTHORITIES IN THE TERRITORY, AS
APPLICABLE.

 

1.36         “NHI” SHALL MEAN THE JAPANESE NATIONAL HEALTH INSURANCE.

 

1.37         “NK DATA” SHALL MEAN ANY INFORMATION, INCLUDING, BUT NOT LIMITED
TO, PRE-CLINICAL AND CLINICAL DATA, OBTAINED BY NK OR ITS AFFILIATES IN SUPPORT
OF THE DEVELOPMENT AND COMMERCIALIZATION.

 

1.38         “NK TECHNOLOGY” SHALL MEAN ANY TECHNOLOGY, TRADE SECRETS, KNOW-HOW
AND OTHER INTELLECTUAL PROPERTY (OTHER THAN TRADEMARKS) DIRECTED TO IL13 AND/OR
PRODUCTS, FORMULATIONS AND/OR METHODS AND ANY BIOLOGICAL MATERIALS CONTROLLED ON
THE EFFECTIVE DATE OR TO BE CONTROLLED THEREAFTER BY NK OR ITS AFFILIATES WHICH
ARE NECESSARY OR USEFUL TO RESEARCH, DEVELOP, USE AND COMMERCIALIZE THE PRODUCT
AND/OR IL13 AND SHALL INCLUDE ANY NK DATA.

 

1.39         “PARTY” SHALL MEAN NEOPHARM OR NK, AS THE CASE MAY BE, AND
“PARTIES” SHALL MEAN NEOPHARM AND NK.

 

1.40         “PERSON” SHALL MEAN AN INDIVIDUAL, A PARTNERSHIP, A JOINT VENTURE,
A CORPORATION, A TRUST, AN ESTATE, AN UNINCORPORATED ORGANIZATION, OR ANY OTHER
ENTITY, OR A GOVERNMENT OR ANY DEPARTMENT OR AGENCY THEREOF.

 

1.41         “PHASE I STUDY” SHALL MEAN A PHASE I CLINICAL TRIAL TO BE CONDUCTED
BY NK THE PRIMARY OBJECTIVE OF WHICH IS TO ASSESS HISTOLOGICAL EVIDENCE OF
ANTITUMOR ACTIVITY AND

 

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* Certain information on this page has been omitted and filed separately with
the Commission.  Confidential treatment has been requested with respect to the
omitted portion.

 

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CORRESPONDING DRUG TOXICITIES IN PATIENTS WITH RECURRENT RESECTABLE MALIGNANT
GLIOMA, AS MORE FULLY DESCRIBED IN THE DEVELOPMENT PLAN.

 

1.42         “PHASE II STUDY” SHALL MEAN A PHASE II STUDY TO BE CONDUCTED BY NK
OF JAPANESE PATIENTS WITH RECURRENT RESECTABLE MALIGNANT GLIOMA TO CONFIRM THE
EFFICACY AND SAFETY WITH THE OPTIMAL ADMINISTRATION SCHEDULE OF IL13 DETERMINED
IN THE PHASE I STUDY, AS MORE FULLY DESCRIBED IN THE DEVELOPMENT PLAN.

 

1.43         “PHS” SHALL MEAN THE UNITED STATES PUBLIC HEALTH SERVICE.

 

1.44         “PRECISE” SHALL MEAN NEOPHARM’S PHASE III RANDOMIZED EVALUATION OF
CONVECTION ENHANCED DELIVERY OF IL13-PE38QQR WITH SURVIVAL ENDPOINT.

 

1.45         “PRODUCT(S)” SHALL MEAN ANY PHARMACEUTICAL PRODUCT CONTAINING IL13
AS THE ACTIVE COMPONENT, IN ANY FORMULATION OR DOSAGE.

 

1.46         “REGULATORY FILINGS” SHALL MEAN, COLLECTIVELY, NEW DRUG
APPLICATIONS, BIOLOGICS LICENSE APPLICATIONS, DRUG MASTER FILES, NEW DRUG
APPROVALS AND/OR ANY OTHER COMPARABLE FILINGS AS MAY BE REQUIRED BY GOVERNMENTAL
AUTHORITIES TO OBTAIN GOVERNMENTAL APPROVALS IN THE UNITED STATES OR THE
TERRITORY, AS APPLICABLE.

 

1.47         “ROYALTY” SHALL MEAN THE ROYALTY PAYMENTS DESCRIBED IN SECTION 4.3.

 

1.48         “SPECIFICATIONS” SHALL MEAN SPECIFICATIONS FOR OR CONCERNING THE
QUALITY, MANUFACTURING, TESTING, AND PACKAGING OF PRODUCTS AS SET FORTH IN THE
GOVERNMENTAL APPROVALS IN THE TERRITORY FOR THE PRODUCT, OR AS MAY BE AGREED
UPON BY THE PARTIES IN WRITING FROM TIME TO TIME.

 

1.49         “SUPPLY AGREEMENT” SHALL MEAN THE SUPPLY AGREEMENT RELATING TO
SUPPLY FROM NEOPHARM TO NK OF PRODUCTS FOR SALE BY NK IN THE TERRITORY, TO BE
ENTERED INTO BY THE PARTIES.

 

1.50         “TERM” AND “ADDITIONAL TERM” SHALL HAVE THE MEANING SET FORTH IN
SECTION 11.1.

 

1.51         “TERRITORY” SHALL MEAN JAPAN.

 

1.52         “THIRD PARTY(IES)” SHALL MEAN ANY PERSON OTHER THAN NK AND/OR
NEOPHARM OR THEIR RESPECTIVE AFFILIATES.

 

1.53         “TRADEMARK” SHALL MEAN ANY TRADE NAME, LOGO OR TRADEMARK (WHETHER
OR NOT REGISTERED) TOGETHER WITH ALL GOODWILL ASSOCIATED THEREWITH.

 

1.54         “VALID CLAIM” SHALL MEAN A CLAIM OF A PATENT OR PATENT APPLICATION
WHICH HAS NOT LAPSED, BEEN CANCELED, WITHDRAWN, ABANDONED OR DECLARED INVALID BY
A COURT OR OTHER APPROPRIATE BODY OF COMPETENT JURISDICTION, AND WHICH HAS NOT
BEEN ADMITTED TO BE INVALID OR UNENFORCEABLE THROUGH REISSUE OR DISCLAIMER AND
WHICH WOULD, BUT FOR THIS AGREEMENT, BE INFRINGED BY THE USE, SALE, OFFER FOR
SALE AND/OR IMPORTATION OF IL13 AND/OR PRODUCTS IN THE TERRITORY DURING THE TERM
AND THE ADDITIONAL TERM.

 

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ARTICLE 2
SUBLICENSE AND LICENSE GRANT; TECHNOLOGY TRANSFER

 

2.1 RESERVED NEOPHARM RIGHTS.  NEOPHARM SHALL RETAIN ALL ITS LICENSE RIGHTS,
SUBJECT ONLY TO THE SUBLICENSES AND LICENSES AND ANY OTHER RIGHTS EXPRESSLY
GRANTED TO NK HEREUNDER, WITH RESPECT TO THE LICENSED TECHNOLOGY.

 

2.2 Sublicense and License Grants.  In consideration of the payment of the
License Fee, Milestone Payments, Royalties and the other considerations
described in this Agreement, and subject to Section 2.6 of this Agreement with
respect to those Licensed Patent Rights for which the PHS is the Licensor,
NeoPharm hereby grants to NK with respect to NeoPharm’s rights in and to the
Licensed Technology, an exclusive sublicense, to the extent that such Licensed
Technology is Controlled by NeoPharm with NeoPharm having obtained such Control,
directly or indirectly, from a Third Party, and an exclusive license, to the
extent that such Licensed Technology is Controlled by NeoPharm without NeoPharm
having obtained such Control, directly or indirectly, from a Third Party, in
each case within the Field of Use, and solely within the Territory, to research,
develop, use, sell, offer for sale, promote and/or import IL13 and/or Products
during the Term and the Additional Term. Such sublicense and license shall
include rights to NK to designate its employees and the employees of its
Affiliates to promote Products and to use Third Parties to inspect Products for
receipt of shipment of Products.  NK acknowledges that the exclusive sublicense
granted herein is subject to certain retained rights of the Licensors in some of
the Licensed Patent Rights.

 

2.3 NO SUBLICENSES.  EXCEPT TO THE EXTENT EXPRESSLY AUTHORIZED BY THIS
AGREEMENT, THE SUBLICENSES AND LICENSES GRANTED TO NK BY NEOPHARM DO NOT INCLUDE
ANY RIGHT TO SUBLICENSE ANY OF THE LICENSED TECHNOLOGY TO ANY THIRD PARTY FOR
ANY REASON.

 

2.4 TRANSFER OF LICENSED TECHNOLOGY.  NEOPHARM SHALL TRANSFER TO NK THE LICENSED
TECHNOLOGY WITHIN FORTY-FIVE (45) DAYS AFTER THE EFFECTIVE DATE, AND TO ASSIST
NK IN SUCH TRANSFER BY INSTRUCTING AND/OR ASSISTING NK’S SUPERVISORY EMPLOYEES
IN THE USE AND UNDERSTANDING OF SUCH TECHNOLOGY AND DATA AT NEOPHARM’S
FACILITIES IN WAUKEGAN, ILLINOIS, USA, OR SUCH OTHER LOCATION AS SHALL BE
MUTUALLY AGREED UPON BETWEEN THE PARTIES.  SUCH TRANSFER SHALL BE FREE OF
CHARGE, PROVIDED, HOWEVER, NK WILL PAY TO NEOPHARM PER DIEM FEES BASED UPON
NEOPHARM’S STANDARD COST RECOVERY PER NEOPHARM PERSON, PER DAY, PLUS TRAVEL AND
RELATED EXPENSES INCURRED IN CONNECTION WITH THE TRANSFER OF THE LICENSED
TECHNOLOGY FOR ANY SUCH ASSISTANCE GIVEN TO NK BY NEOPHARM AT NK’S REQUEST.

 

2.5 EARLY TERMINATION.  IN THE EVENT THAT THIS AGREEMENT SHALL BE TERMINATED
PRIOR TO THE EXPIRATION OF THE TERM, NK’S SUBLICENSES AND LICENSES PURSUANT TO
THIS ARTICLE 2 SHALL TERMINATE AND ALL RIGHTS SHALL REVERT TO NEOPHARM AS
PROVIDED IN THIS AGREEMENT.  FOR LICENSED PATENT RIGHTS FOR WHICH THE PHS IS THE
LICENSOR, IF NEOPHARM’S LICENSE TO ANY SUCH PATENT ESTATE IS TERMINATED, NK MAY
TERMINATE THIS AGREEMENT ENTIRELY OR AS TO SUCH SUBLICENSE OF SUCH PHS PATENT
ESTATE, AND NK MAY, AT NK’S OPTION, SEEK TO CONVERT SUCH SUBLICENSE TO A DIRECT
LICENSE BETWEEN NK AND PHS UPON TERMINATION OF NEOPHARM’S LICENSE WITH PHS.  IF
NK ELECTS TO CONVERT THE SUBLICENSE, SUCH CONVERSION WILL BE SUBJECT TO PHS
APPROVAL AND CONTINGENT UPON ACCEPTANCE BY NK OF THE REMAINING PROVISIONS OF
NEOPHARM’S LICENSE WITH PHS.

 

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2.6 RESERVED GOVERNMENT RIGHTS.

 

(A)           AS TO LICENSED PATENT RIGHTS FOR WHICH PHS IS THE LICENSOR TO
NEOPHARM, PHS HAS RESERVED ON BEHALF OF THE UNITED STATES GOVERNMENT AN
IRREVOCABLE, NONEXCLUSIVE, NONTRANSFERABLE, ROYALTY-FREE LICENSE FOR THE
PRACTICE OF ALL INVENTIONS LICENSED UNDER THE LICENSED PATENT RIGHTS THROUGHOUT
THE WORLD BY OR ON BEHALF OF THE UNITED STATES GOVERNMENT AND ON BEHALF OF ANY
FOREIGN GOVERNMENT OR INTERNATIONAL ORGANIZATION PURSUANT TO ANY EXISTING OR
FUTURE TREATY OR AGREEMENT TO WHICH THE UNITED STATES GOVERNMENT IS A
SIGNATORY.  PRIOR TO THE FIRST COMMERCIAL SALE, NK AGREES TO PROVIDE TO NEOPHARM
THE REASONABLE QUANTITIES OF PRODUCTS OR MATERIALS MADE PURSUANT TO THE LICENSED
TECHNOLOGY THAT NEOPHARM IS REQUIRED TO PROVIDE TO PHS FOR PHS RESEARCH USE
INCLUDING FOR HUMAN CLINICAL TRIALS, BUT NOT FOR PURPOSES OF COMMERCIAL
DEVELOPMENT, MANUFACTURE OR DISTRIBUTION.

 

(b)           In the event that Licensed Patent Rights are Subject Inventions
(as defined in the PHS License Agreement) made under a Cooperative Research and
Development Agreement (CRADA), NK grants to the United States government,
pursuant to 15 U.S.C. §3710a(b)(2), a nonexclusive, nontransferable,
irrevocable, paid-up license to practice such Licensed Patent Rights or have
such Licensed Patent Rights practiced throughout the world by or on behalf of
the United States government.  In the exercise of such license, the United
States government shall not publicly disclose trade secrets or commercial or
financial information that is privileged or confidential within the meaning of 5
U.S.C §552(b)(4) or which would be considered as such if it had been obtained
from a non-Federal party.  Prior to the First Commercial Sale, NK agrees to
provide PHS reasonable quantities of Product(s) or materials made through the
Licensed Technology for PHS research use.

 

(C)           PHS MAY ENTER INTO FUTURE COOPERATIVE RESEARCH AND DEVELOPMENT
AGREEMENTS (CRADAS) UNDER THE FEDERAL TECHNOLOGY TRANSFER ACT OF 1986 THAT
RELATE TO THE LICENSED PATENT RIGHTS.  NEOPHARM MAY NOT UNREASONABLY DENY PHS
REQUESTS FOR A RESEARCH LICENSE (AS DEFINED IN THE PHS LICENSE AGREEMENT) FROM
SUCH FUTURE COLLABORATORS WITH PHS WHEN ACQUIRING SUCH RIGHTS IS NECESSARY IN
ORDER TO MAKE A COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT (CRADA) PROJECT
FEASIBLE.  IF REQUESTED BY NK, NEOPHARM, ON BEHALF OF NK, WILL REQUEST AN
OPPORTUNITY FOR NK TO JOIN AS A PARTY TO THE PROPOSED COOPERATIVE RESEARCH AND
DEVELOPMENT AGREEMENT (CRADA).

 

(D)           IN ADDITION TO THE RESERVATIONS IN SECTION 2.6(A) ABOVE, PHS HAS
RESERVED THE RIGHT TO GRANT NONEXCLUSIVE RESEARCH LICENSES (AS DEFINED IN
NEOPHARM’S LICENSES WITH PHS) DIRECTLY OR TO REQUIRE NEOPHARM TO GRANT
NONEXCLUSIVE RESEARCH LICENSES ON REASONABLE TERMS.  THE PURPOSE OF A RESEARCH
LICENSE IS TO ENCOURAGE BASIC RESEARCH, WHETHER CONDUCTED AT AN ACADEMIC OR
CORPORATE FACILITY.  IN ORDER TO SAFEGUARD THE LICENSED PATENT RIGHTS, HOWEVER,
PHS SHALL CONSULT WITH NEOPHARM, AND NEOPHARM AGREES TO ADVISE NK AND PERMIT NK
TO COMMENT, BEFORE GRANTING TO COMMERCIAL ENTITIES A RESEARCH LICENSE OR
PROVIDING TO THEM RESEARCH SAMPLES OF MATERIALS MADE PURSUANT TO THE LICENSED
PATENT RIGHTS.

 

2.7 COOPERATION WITH NEOPHARM; CONFLICT.

 

(a)           NK agrees that it will provide such cooperation to NeoPharm as
NeoPharm shall reasonably determine is required for NeoPharm to perform
NeoPharm’s obligations to its Licensors under its respective license
agreements.  To the extent there is a

 

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conflict between this Agreement and the terms of the agreements attached hereto
as Exhibit E NeoPharm’s two agreements L-162-02/0 and L-226-96/0 with PHS (the
“PHS Licenses”), the terms of the PHS Licenses shall control.

 

(b)           NK agrees that the obligations of NeoPharm to PHS under paragraphs
5.01-5.04, 8.01, 10.01-10.04, 12.05, and 13.07-13.09 of NeoPharm’s agreement
L-162-02/0 with PHS (copies of which are attached as Exhibit C) shall be binding
upon NK as if NK were a party to NeoPharm’s agreement L-162-02/0 with PHS.

 

(c)           NK agrees that the obligations of NeoPharm to PHS under paragraphs
5.01-5.04, 8.01, 10.01, 10.02, 12.05, and 13.07-13.09 of NeoPharm’s agreement
L-226-96/0 with PHS (copies of which are attached as Exhibit D) shall be binding
upon NK as if NK were a party to NeoPharm’s agreement L-226-96/0 with PHS.

 

ARTICLE 3
DEVELOPMENT AND COMMERCIALIZATION

 

3.1 JOINT STEERING COMMITTEE.  THE PARTIES SHALL FORM A JOINT STEERING COMMITTEE
(THE “JSC”) CONSISTING OF THREE (3) MEMBERS FROM EACH OF NEOPHARM AND NK (WITH
NEOPHARM AND NK HAVING EQUAL REPRESENTATION).  THE JSC SHALL HAVE THE FOLLOWING
RESPONSIBILITIES: (I) TO ESTABLISH POLICIES FOR THE DEVELOPMENT AND
COMMERCIALIZATION OF IL13 AND/OR PRODUCTS IN THE TERRITORY, (II) TO REVIEW,
APPROVE AND MONITOR THE DEVELOPMENT PLAN, (III) TO CO-ORDINATE DATA EXCHANGE AND
PREPARATION OF REGULATORY FILINGS, (IV) TO MONITOR THE COMMERCIALIZATION OF
PRODUCTS IN THE TERRITORY, AND (V) SUCH OTHER ACTIVITIES AS THE PARTIES SHALL
AGREE ARE APPROPRIATELY DECIDED BY THE JSC.

 

3.2 MEETINGS AND DECISIONS OF THE JOINT STEERING COMMITTEE.  THE CHAIRPERSON OF
THE JSC SHALL BE DESIGNATED ANNUALLY BY NK FROM ONE OF ITS REPRESENTATIVES ON
THE JSC.  EACH PARTY SHALL DESIGNATE ONE OF ITS JSC REPRESENTATIVES AS ITS “KEY
CONTACT” AND ALL COMMUNICATIONS BETWEEN THE PARTIES WILL BE DIRECTED THROUGH THE
KEY CONTACTS.  A SECRETARY WILL BE APPOINTED BY THE JSC FOR EACH MEETING AND
SHALL BE RESPONSIBLE FOR THE MINUTES OF THE MEETING.  THE JSC SHALL MEET NO LESS
FREQUENTLY THAN ONCE PER YEAR.  THE MEETING MAY BE HELD BY VIDEO OR AUDIO
CONFERENCE WITH THE CONSENT OF THE PARTIES.  DECISIONS OF THE JSC SHALL BE MADE
BY VOTE OF A MAJORITY OF THE REPRESENTATIVES OF EACH PARTY.  IN THE EVENT THE
JSC IS UNABLE TO REACH AGREEMENT ON ANY ISSUE, THE ISSUE SHALL BE REFERRED TO
THE CHIEF EXECUTIVE OFFICER OF NEOPHARM AND THE HEAD OF PHARMACEUTICALS GROUP OF
NK FOR RESOLUTION.  ALL DECISIONS OF THE JSC SHALL BE CONSISTENT WITH THE
DEVELOPMENT PLAN AND SHALL BE REACHED IN GOOD FAITH.  NEOPHARM SHALL NOT HAVE
ANY RIGHT TO COMPEL NK TO CONDUCT ANY DEVELOPMENT WHICH HAS NOT BEEN APPROVED BY
THE JSC.

 

3.3 DEVELOPMENT PLAN.  PRIOR TO THE EFFECTIVE DATE, NK HAS PREPARED AND NEOPHARM
HAS APPROVED, THE DEVELOPMENT PLAN FOR THE TERRITORY (AS SET FORTH AS EXHIBIT
B).  THE GOAL OF THE DEVELOPMENT PLAN IS TO MAXIMIZE PRODUCT POTENTIAL IN THE
TERRITORY THROUGH COORDINATED, EFFICIENT AND COST EFFECTIVE DEVELOPMENT AND
COMMERCIALIZATION.  THE DEVELOPMENT PLAN

 

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INCLUDES [*].  THE DEVELOPMENT PLAN WILL BE UPDATED ON AN ANNUAL BASIS AND, WHEN
NECESSARY IN CONSIDERATION OF THE PROGRESS OF THE DEVELOPMENT, FROM TIME TO TIME
BY MUTUAL AGREEMENT OF THE PARTIES.  ON OR BEFORE [*]OF EACH YEAR, NK WILL
SUBMIT TO THE JSC AN UPDATED SCHEDULE FOR THE DEVELOPMENT OF IL13 AND/OR
PRODUCTS IN THE TERRITORY FOR THE FOLLOWING YEAR, WHICH UPDATED DEVELOPMENT PLAN
SHALL BE SUBJECT TO THE REVIEW AND APPROVAL OF THE JSC.

 

3.4 DATA.  AT EACH MEETING OF THE JSC, AND UPON WRITTEN REQUEST AT ANY OTHER
TIME, THE PARTIES SHALL EXCHANGE WRITTEN SUMMARIES OF ALL DEVELOPMENT DATA
OBTAINED TO DATE. UPON REQUEST, EACH PARTY SHALL PROVIDE THE OTHER PARTY WITH
ACCESS TO DEVELOPMENT DATA IN SUCH DETAIL AS SHALL BE REASONABLY NECESSARY TO
ALLOW THE OTHER PARTY TO USE THE DEVELOPMENT DATA IN SUPPORT OF ITS DEVELOPMENT
AND COMMERCIALIZATION OF IL13 AND/OR PRODUCTS IN ITS RESPECTIVE TERRITORY.  ALL
DEVELOPMENT DATA SHALL BE CONSIDERED CONFIDENTIAL INFORMATION OF THE DISCLOSING
PARTY.  THE PARTIES SHALL MAINTAIN ALL DEVELOPMENT DATA, RELATED RECORDS,
DOCUMENTS AND RAW DATA IN SUFFICIENT DETAIL AND IN GOOD SCIENTIFIC MANNER AS
WILL PROPERLY REFLECT ALL WORKS DONE AND RESULTS ACHIEVED IN THE PERFORMANCE OF
THE DEVELOPMENT.

 

3.5 COOPERATION; COMBINING STUDY RESULTS.

 

(a)           NK shall conduct Development of IL13 and/or Products in the
Territory and NeoPharm shall conduct Development of IL13 and/or Products in the
NeoPharm Territory.  In their Development of IL13 and/or Products, each Party
may collaborate or consult with researchers and investigators and contract for
clinical studies without regard to territory restrictions, but in no event will
NK conduct clinical trials outside of the Territory, without the prior written
approval of NeoPharm.

 

(b)           It is the intention of the Parties that upon NK’s completion of
the Phase I Study and the Phase II Study, and upon NeoPharm’s completion of the
PRECISE trial, NeoPharm shall provide NK with the PRECISE trial results so that,
on the basis of the combined Phase I Study, Phase II Study and PRECISE trial
results, NK shall be able to apply to the applicable Governmental Authorities to
obtain all necessary Governmental Approvals to Commercialize the Product in the
Territory.

 

3.6 DEVELOPMENT ASSISTANCE.  NK MAY REQUEST THAT NEOPHARM CONDUCTS, ON NK’S
BEHALF, CERTAIN RESEARCH AND/OR PRE-CLINICAL STUDIES ON IL13 AND/OR PRODUCTS SET
FORTH IN THE DEVELOPMENT PLAN.  IN THE EVENT NEOPHARM HAS ADEQUATE PERSONNEL
AVAILABLE, NEOPHARM SHALL UNDERTAKE TO CONDUCT SUCH RESEARCH AND/OR PRE-CLINICAL
STUDIES ON NK’S BEHALF.  NK WILL COMPENSATE NEOPHARM IN ACCORDANCE WITH
NEOPHARM’S STANDARD PER DIEM FEES WHICH WILL BE CALCULATED ON THE BASIS OF THE
AMOUNT OF TIME PER NEOPHARM PERSONNEL FULL-TIME EQUIVALENT IS DEVOTED TO SUCH
RESEARCH AND/OR PRE-CLINICAL STUDIES.

 

3.7 COMMERCIALIZATION.  THE JSC SHALL MONITOR, REVIEW AND, IF FOUND ACCEPTABLE,
APPROVE THE COMMERCIALIZATION OF PRODUCTS IN THE TERRITORY, INCLUDING, BUT NOT
LIMITED TO, ALL MEDICAL CLAIMS RELATING TO THE PRODUCTS.  ALL MATTERS RELATING
SOLELY TO LOCAL ISSUES OF PROMOTION,

 

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ADVERTISING, OR OTHER ISSUES RELATING SOLELY TO THE SALES PROCESS FOR PRODUCTS
IN THE TERRITORY, MAY BE DECIDED BY NK IN NK’S SOLE BUSINESS JUDGMENT.

 

3.8 REPORTING.  NEOPHARM AND NK SHALL EACH PROMPTLY NOTIFY THE OTHER PARTY OF
ANY EVENTS THAT OCCUR IN THEIR RESPECTIVE TERRITORIES WHICH ARE REQUIRED TO BE
REPORTED TO ANY GOVERNMENTAL AUTHORITIES IN THE RESPECTIVE PARTIES’ TERRITORIES
UNDER ANY APPLICABLE LAWS, INCLUDING, BUT NOT LIMITED TO, 21 CFR 314.80, 600.14
AND 600.80 OF THE UNITED STATES (AS SUCH REQUIREMENTS MAY BE AMENDED FROM TIME
TO TIME) AND ANY SIMILAR OR EQUIVALENT REPORTING REQUIREMENTS TO GOVERNMENTAL
AUTHORITIES IN THE TERRITORY.

 

3.9 DEVELOPMENT COST.  NK SHALL BE SOLELY RESPONSIBLE FOR ALL COSTS FOR
DEVELOPMENT AND COMMERCIALIZATION OF IL13 AND/OR PRODUCT IN THE TERRITORY,
INCLUDING, BUT NOT LIMITED TO, ANY COSTS ASSOCIATED WITH PRE-CLINICAL STUDIES
AND CLINICAL STUDIES, ANY OTHER STUDIES OR RESEARCH PROJECTS AND ALL IN-HOUSE
STUDIES WITH THE EXCEPTION, HOWEVER, THAT ANY IL13 (IF REQUESTED BY NK, IN THE
FORM OF A PHARMACEUTICAL PREPARATION IN VIALS AND WITH LABELS, WHICH LABELS
SHALL BE FURNISHED BY NK TO NEOPHARM) REASONABLY REQUIRED BY NK TO CONDUCT ITS
PRE-CLINICAL STUDIES, IF ANY, PHASE I STUDY AND PHASE II STUDY SHALL BE PROVIDED
BY NEOPHARM AT NEOPHARM’S COST.

 

ARTICLE 4
LICENSE FEES, MILESTONE PAYMENTS AND ROYALTIES

 

4.1 LICENSE FEES.

 

(a)           Upon execution of this Agreement, NK shall pay to NeoPharm a
one-time, nonrefundable license fee payment of Two Million U.S. Dollars (US
$2,000,000).  The above payment shall be made within fifteen (15) days of
execution of this Agreement.

 

(b)           Upon NK’s filing for registration of any Product with the MHLW or
other appropriate Governmental Authority for the first time, NK shall, within
fifteen (15) days of such filing, pay to NeoPharm an additional one-time,
non-refundable license fee payment of Two Million U.S. Dollars (U.S.
$2,000,000).

 

(c)           Upon first publication of the Japanese NHI Reimbursement Price by
the MHLW, NK shall, within fifteen (15) days of such publication, pay to
NeoPharm an additional one-time, non-refundable license fee payment of Four
Million U.S. Dollars (U.S. $4,000,000).

 

4.2 MILESTONE PAYMENTS.  WITHIN THIRTY (30) DAYS AFTER THE FIRST OCCURRENCE OF
EACH OF THE APPLICABLE MILESTONES SET FORTH BELOW, NK SHALL PAY TO NEOPHARM THE
CORRESPONDING PAYMENTS (THE “MILESTONE PAYMENTS”):

 

 

EVENT

 

PAYMENT

 

•      Upon cumulative Net Sales of the Products in the Territory reaching $[*]
within [*]

 

$[*]

 

•      If cumulative Net Sales of Products in the

 

$[*]

 

Territory fail to reach $[*] within [*] then, upon cumulative Net Sales reaching
$[*]

 

 

 

•      In the event cumulative Net Sales of Products in the Territory fail to
reach $[*] within [*], but do reach such level thereafter, then upon annual Net
Sales of Products in the Territory reaching $[*]

 

$[*]

 

 

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Each Milestone Payment shall be paid only once and then only upon the first
occurrence of the event requiring such payment, and shall not be payable again
upon subsequent occurrences of such event.

 

4.3 ROYALTIES TO NEOPHARM.

 

(a)           In consideration for NK’s sublicensing and licensing of the
Licensed Technology in the Territory, NK shall pay to NeoPharm a royalty (the
“Royalty”) on all Net Sales of Products in the Territory at the rate of [*]
percent [*]% commencing with the First Commercial Sale of a Product in the
Territory and continuing for the balance of the Term, as defined in
Section 11.1.  During any Additional Term, as defined in Section 11.1, NK shall
pay a Royalty on all its Net Sales of Products in the Territory at the rate of
[*] percent [*]%; provided, however, that, if any Valid Claim of Licensed Patent
Rights in the Territory exists during the Additional Term, the rate shall be [*]
percent [*]%until all of the Valid Claim of Licensed Patent Rights in the
Territory cease to exist.  Following the expiration of NK’s obligations to pay
Royalties to NeoPharm, NK shall have no further rights under this Agreement or
otherwise to research, develop, use, sell, offer for sale, promote or import
IL13 and/or Product in the Territory and all such rights shall immediately
revert exclusively to NeoPharm.

 

(b)           In the event any of the Products are packaged or combined with any
other products for sale in the Territory, the Royalties payable with respect to
sales of such Product shall be calculated on the price of the Product as if such
Product had continued to be sold alone.

 

(c)           Royalties payable hereunder will be paid to NeoPharm not later
than fifteen (15) days following the date when IMS JAPAN K.K. having its head
office at Aobadai Hills, 7-7, Aobadai 4-chome, Meguro-ku, Tokyo 153-0042, Japan
issues IMS which sets forth the quantities of Products sold by NK for each
calendar quarter, but in no event more than forty-five (45) calendar days
following the end of each calendar quarter and each such payment shall be
accompanied by a report in writing showing the period to which such payment
applies, the quantities of Products sold by NK during such calendar quarter, the
total Net Sales for the period and the Royalties due on such Net Sales to
NeoPharm.

 

4.4 TAXES.  ALL AMOUNTS OWING TO NEOPHARM ON ACCOUNT OF LICENSE FEES, MILESTONE
PAYMENTS AND ROYALTIES AS SPECIFIED IN THIS AGREEMENT SHALL BE PAID NET OF ALL
APPLICABLE TAXES,

 

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FEES AND SIMILAR CHARGES, IF ANY, OWED BY NEOPHARM AND THAT ARE REQUIRED TO BE
WITHHELD BY NK UNDER APPLICABLE LAWS.  IF APPLICABLE LAWS REQUIRE THAT NK
WITHHOLDS TAXES, FEES, OR SIMILAR CHARGES OWED BY NEOPHARM, NK SHALL (I) DEDUCT
THOSE AMOUNTS FROM THE LICENSE FEES, MILESTONE PAYMENTS AND ROYALTIES, (II)
TIMELY PAY THE AMOUNTS TO THE PROPER AUTHORITY(IES), AND (III) SEND PROOF OF
PAYMENT TO NEOPHARM AND CERTIFY ITS RECEIPT BY THE PROPER AUTHORITY(IES) WITHIN
SIXTY (60) DAYS FOLLOWING THAT PAYMENT.  NK SHALL USE ITS REASONABLE BEST
EFFORTS TO ENSURE THAT NEOPHARM IS CREDITED, AND CAN USE SAID CREDIT, FOR ANY
AMOUNTS PAID OR WITHHELD BY NK ON BEHALF OF NEOPHARM.

 

4.5 CURRENCY OF PAYMENT.  ALL PAYMENTS TO BE MADE BY NK TO NEOPHARM HEREUNDER
SHALL BE MADE IN U.S. DOLLARS.  NET SALES SHALL BE FIRST DETERMINED IN JAPANESE
YEN AND SHALL BE CONVERTED QUARTERLY INTO AN AMOUNT IN U.S. DOLLARS BASED ON THE
EXCHANGE RATE OF THE YEN TO THE DOLLAR AS PUBLISHED BY THE WALL STREET JOURNAL,
ASIAN WALL STREET JOURNAL EDITION, ON THE DAY PRECEDING PAYMENT IN THE CASE OF
LICENSE FEES AND MILESTONE PAYMENTS, AND AS OF THE LAST DAY OF THE CALENDAR
QUARTER FOR WHICH ROYALTIES ARE BEING PAID.

 

ARTICLE 5
SUPPLY

 

5.1 PRE-CLINICAL AND CLINICAL SUPPLY.  NEOPHARM SHALL, FREE OF CHARGE, SUPPLY
IL13 (IF REQUESTED BY NK, IN THE FORM OF A PHARMACEUTICAL PREPARATION IN VIALS
AND WITH LABELS, WHICH LABELS SHALL BE FURNISHED BY NK TO NEOPHARM) TO NK FOR
NK’S PRE-CLINICAL, PHASE I STUDY AND PHASE II STUDY AS SET FORTH IN THE
DEVELOPMENT PLAN IN THE VIAL SIZES AND QUANTITIES SET FORTH IN THE DEVELOPMENT
PLAN.  NEOPHARM MAY ELECT TO CONTRACT WITH ANY QUALIFIED FDA APPROVED THIRD
PARTY FOR SUCH MANUFACTURE AND SUPPLY.  SUCH PHARMACEUTICAL PREPARATION TO BE
SUPPLIED TO NK SHALL HAVE THE SPECIFICATIONS STIPULATED BY NEOPHARM AND MEETING
THE STANDARD OF THE JAPANESE APPLICABLE REGULATIONS.

 

5.2 SUPPLY FOLLOWING APPROVAL; LIMITATION ON COST.  AFTER NK SHALL OBTAIN
GOVERNMENTAL APPROVAL FOR THE SALE OF PRODUCT, NEOPHARM SHALL, OR SHALL CAUSE
THE QUALIFIED FDA THIRD PARTY MANUFACTURER DESIGNATED BY NEOPHARM (THE “PRIMARY
MANUFACTURER”) TO, SUPPLY PRODUCTS (IN THE FORM OF A FINISHED PHARMACEUTICAL
PREPARATION IN VIALS AND WITH LABELS, WHICH LABELS SHALL BE FURNISHED BY NK TO
NEOPHARM) TO NK AT A PRICE OF [*]; THE PRICE TO BE ADJUSTED [*]), IN ACCORDANCE
WITH THE TERMS SET FORTH IN THE SUPPLY AGREEMENT; PROVIDED, HOWEVER, THAT IF NK
HAS OBTAINED ADDITIONAL GOVERNMENTAL APPROVAL FOR THE SALE OF THE ADDITIONAL
PRODUCT THE FORMULATION OF WHICH IS DIFFERENT FROM SUCH PRODUCT, THE PRICE TO BE
CHARGED BY NEOPHARM PER VIAL FOR SUPPLYING SUCH ADDITIONAL PRODUCT SHALL BE AS
AGREED BY THE PARTIES AFTER GOOD FAITH NEGOTIATIONS, UNLESS OTHERWISE PROVIDED
FOR HEREIN.  PRIOR TO COMMERCIALIZATION OF PRODUCT AND THEREAFTER, NK WILL
SUBMIT TO NEOPHARM ROLLING FORECASTS OF ITS REQUIREMENTS FOR THE PRODUCTS
FOLLOWED BY FIRM ORDERS IN ACCORDANCE WITH THE TERMS SET FORTH IN THE SUPPLY
AGREEMENT AT SUCH TIMES AND FREQUENCIES AS THE PARTIES SHALL MUTUALLY AGREE
SHALL BE NECESSARY TO ENABLE NEOPHARM, OR ITS SUBCONTRACTOR, TO PLAN ITS
MANUFACTURING ACTIVITIES IN ORDER TO MAXIMIZE EFFICIENCY AND REDUCE COSTS AND
SUPPLY NK WITH ITS REASONABLE REQUIREMENTS

 

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FOR PRODUCT.  THE PRICE CHARGED TO NK FOR PRODUCTS BY NEOPHARM SHALL BE ON A
DELIVERED DUTY UNPAID NARITA AIRPORT, JAPAN BASIS (DDU: INCOTERMS 2000).
NOTWITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT, IN NO EVENT SHALL THE
PRICE CHARGED TO NK FOR PRODUCTS BY NEOPHARM, WHEN ADDED TO THE ROYALTY (OR THE
SUM OF THE ROYALTY AND THE ROYALTY OR OTHER PAYMENTS PAID BY NK TO THE THIRD
PARTY SET FORTH IN SECTION 8.4(D), IF APPLICABLE), EXCEED [*] PERCENT [*]% OF
NK’S NET SALES.  SHIPMENT OF PRODUCTS FROM NEOPHARM TO NK SHALL BE MADE ON A
DELIVERED DUTY UNPAID NARITA AIRPORT, JAPAN BASIS (DDU: INCOTERMS 2000) BY
NEOPHARM.  NEOPHARM SHALL, OR SHALL CAUSE THE PRIMARY MANUFACTURER AND THE
BACK-UP MANUFACTURER (AS DEFINED IN SECTION 5.6) TO, MANUFACTURE AND SUPPLY THE
PRODUCTS IN ACCORDANCE WITH (I) THE SPECIFICATIONS, (II) THE APPLICABLE
GOVERNMENTAL APPROVALS, AS MAY BE AMENDED FROM TIME TO TIME, (III) CGMP
REQUIREMENTS AND (IV) ALL OTHER APPLICABLE LAWS.  WITH RESPECT TO SPECIFICATIONS
FOR OR CONCERNING THE QUALITY, MANUFACTURING AND TESTING OF PRODUCT, NK WILL
ENDEAVOR TO DEVELOP PRODUCT MEETING SPECIFICATIONS SET FORTH IN THE GOVERNMENTAL
APPROVALS IN THE UNITED STATES FOR THE PRODUCT.

 

5.3 PAYMENTS.  NK SHALL PAY ALL AMOUNTS OWING TO NEOPHARM FOR SUPPLY OF PRODUCTS
WITHIN FORTY-FIVE (45) DAYS FROM RECEIPT OF THE PRODUCTS AND THE ACCOMPANYING
INVOICE.

 

5.4 NO MANUFACTURING BY NK.  THE SUBLICENSE AND LICENSE GRANTED TO NK BY
NEOPHARM UNDER THIS AGREEMENT SHALL NOT INCLUDE OR BE DEEMED OR CONSIDERED TO
INCLUDE ANY RIGHT TO MANUFACTURE OR CONTRACT WITH ANY ENTITY OTHER THAN NEOPHARM
FOR THE MANUFACTURE OF IL13 AND/OR ANY PRODUCT; PROVIDED, HOWEVER, THAT IN THE
EVENT NEOPHARM, FOR ANY REASON, OTHER THAN A FORCE MAJEURE EVENT, IS UNABLE TO
SUPPLY AT LEAST [*] PERCENT [*]% OF NK’S TOTAL ORDER REQUIREMENT OF THE PRODUCTS
FOR A PERIOD OF [*] CONSECUTIVE MONTHS OR [*] PERCENT [*]% OF NK’S TOTAL ORDER
REQUIREMENTS OF THE PRODUCTS FOR A PERIOD OF [*], NK SHALL HAVE THE RIGHT TO
PLACE ITS ORDERS FOR PRODUCT DIRECTLY WITH THE PRIMARY MANUFACTURER OR, IF THE
PRIMARY MANUFACTURER SHALL BE UNABLE OR UNWILLING TO SUPPLY NK WITH PRODUCT, NK
MAY PLACE ORDERS WITH ANY BACK-UP MANUFACTURER (AS HEREINAFTER DEFINED) IN ORDER
TO FULFILL ITS REQUIREMENTS FOR PRODUCTS; PROVIDED, HOWEVER, THAT, UPON NEOPHARM
CERTIFYING TO NK THAT IT AGAIN HAS THE ABILITY TO SUPPLY NK’S REQUIREMENTS FOR
PRODUCTS, NK SHALL, WITHIN THREE (3) MONTHS OF RECEIPT OF SUCH NOTIFICATION,
AGAIN OBTAIN ITS REQUIREMENTS FOR PRODUCTS EXCLUSIVELY THROUGH NEOPHARM.  IF
NEOPHARM IS UNABLE TO SUPPLY THE ABOVE MENTIONED AMOUNT OF THE PRODUCT FOR THE
ABOVE MENTIONED PERIOD FOR THE REASON OF A FORCE MAJEURE EVENT, OTHER THAN A
FORCE MAJEURE EVENT RELATING TO THE PRIMARY MANUFACTURER AND THE BACK-UP
MANUFACTURER, NEOPHARM SHALL PROCURE THE PRODUCT FROM THE PRIMARY MANUFACTURER
OR THE BACK-UP MANUFACTURER AND SUPPLY IT TO NK IN THE AMOUNT NECESSARY TO AVOID
INTERRUPTION, DELAY OR FAILURE OF SALES OF THE PRODUCT BY NK IN THE TERRITORY.

 

5.5 SUPPLY AGREEMENT.  THE PARTIES SHALL NEGOTIATE WITH EACH OTHER IN GOOD FAITH
ABOUT THE TERMS OF THE SUPPLY AGREEMENT AND ENTER INTO THE SUPPLY AGREEMENT
WITHIN ONE (1) YEAR FROM THE EFFECTIVE DATE. SPECIFIC DETAILS REGARDING
NEOPHARM’S OBLIGATION TO SUPPLY PRODUCTS SHALL BE SET FORTH IN THE SUPPLY
AGREEMENT.

 

5.6 BACK-UP MANUFACTURER.  PRIOR TO NK’S FIRST REGULATORY FILING OF A NEW DRUG
APPLICATION FOR PRODUCTS IN THE TERRITORY, NEOPHARM SHALL HAVE COMPLETED THE
PROCESS WHEREBY A SECOND FDA APPROVED THIRD PARTY SHALL BECOME QUALIFIED TO
PRODUCE PRODUCTS (THE “BACK-UP

 

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MANUFACTURER”) IN THE EVENT THAT THE PRIMARY MANUFACTURER IS, FOR ANY REASON,
UNABLE OR UNWILLING TO SUPPLY NEOPHARM OR NK WITH PRODUCT.

 

ARTICLE 6
REPRESENTATIONS, WARRANTIES AND COVENANTS

 

6.1 REPRESENTATIONS AND WARRANTIES OF THE PARTIES.

 

Each of NeoPharm and NK represents and warrants to the other, as of the
Effective Date, as follows:

 

(a)           It is duly organized and validly existing under the laws of its
place of organization and has all requisite power and authority, corporate or
otherwise, to enter into this Agreement and to carry out its responsibilities
hereunder.

 

(b)           The execution, delivery, consummation and performance of this
Agreement and the transactions contemplated hereby have been duly authorized by
all necessary corporate action and will not (i) require any consent or approval
of its stockholders or partners, (ii) violate any Applicable Laws or (iii)
result in a breach of or constitute a default under any material agreement,
mortgage, lease, license, permit or other instrument or obligation to which it
is a party or by which it or its properties may be bound or affected.

 

(c)           This Agreement is a legal, valid and binding obligation of such
Party and is enforceable in accordance with its terms. The execution, delivery
and performance of this Agreement by it does not conflict with any agreement,
instrument or understanding, oral or written, to which it is a party or by which
it may be bound, nor violate any material law or regulation of any court,
governmental body or administrative or other agency having jurisdiction over it.

 

(d)           No consent, approval, order or authorization of, or registration,
declaration or filing with, any governmental agency is required to be obtained
or made by or with respect to such Party in connection with its execution,
delivery and performance of this Agreement.

 

6.2 REPRESENTATIONS AND WARRANTIES OF NEOPHARM.

 

NeoPharm represents ant warrants that:

 

(a)            NeoPharm Controls (with the right to grant sublicenses consistent
with those granted NK hereunder) the Licensed Technology, including, but not
limited to, the Licensed Patent Rights, and has obtained the written approval of
any applicable Licensor to the sublicense of any Licensed Patent Rights
hereunder.

 

(b)           NeoPharm has not granted, and during the Term and the Additional
Term will not grant, any right to a Third Party under the Licensed Technology in
the Territory within the Field of Use that would conflict with any of the rights
granted to NK under this Agreement.

 

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(c)           To NeoPharm’s knowledge, it has not received any material
communication or assertion from or by any Third Party relating to the validity,
enforceability or infringement of any of the Licensed Patent Rights and/or that
the practice in the Territory in the Field of Use of the inventions claimed in
the Licensed Patent Rights and/or comprising the Licensed Technology infringes
the rights of any Third Party.

 

(d)           To NeoPharm’s knowledge, there are no actions currently asserted
or, to NeoPharm’s knowledge, threatened by any Third Party involving,
questioning and/or relative to:  (i) NK’s right to use and/or receive from
NeoPharm the exclusive sublicense under this Agreement; and/or (ii) NeoPharm’s
ability to enter into this Agreement and perform its obligations hereunder.

 

(e)           NeoPharm has conducted all studies for IL13 and/or the Products
(“NeoPharm’s Clinical Studies”) in substantial compliance with Good Laboratory
Practices and all applicable Federal, state and local laws, rules, regulations
and guidelines governing the conduct of clinical studies.  To NeoPharm’s
knowledge, neither NeoPharm nor any of the investigators, institutions,
laboratories, clinical research organizations or other individuals or entities
participating in NeoPharm’s Clinical Studies have been or are “debarred” as such
disclosures have been obtained in accordance with 21 CFR Part 54 from the
investigators and/or institutions participating in NeoPharm’s Clinical Studies,
to the extent applicable.

 

(f)            Notwithstanding anything appearing in this Agreement, NeoPharm
does not: (i) warrant the validity or enforceability of the Licensed Patent
Rights, (ii) make any representations whatsoever with respect to the scope of
the Licensed Patent Rights, or (iii) represent or warrant either (A) that the
practice of the Licensed Patent Rights within the Field of Use in the Territory,
or (B) that the manufacture, importation, use, sale, or Commercialization of a
Product and/or of IL13, will not infringe other patent rights or other
intellectual property of Third Parties.

 

6.3 COVENANTS OF NK.

 

(a)           NK covenants to use Commercially Reasonable Efforts to
expeditiously Develop and Commercialize IL13 and/or Products in the Territory in
the Field of Use, in accordance with the Development Plan.

 

(b)           NK will use Commercially Reasonable Efforts to expeditiously
obtain Governmental Approvals to Develop and Commercialize IL13 and/or Products
in the Territory in the Field of Use as set forth in the Development Plan and
for such additional indications as shall be determined by the JSC, for which NK
will Develop and Commercialize IL13 and/or Products in the Territory.

 

(c)           NK covenants to comply with all Applicable Laws relating to the
Development and/or Commercialization of IL13 and/or Products in the Territory.

 

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6.4 COVENANTS OF NEOPHARM.

 

(a)           NeoPharm covenants to use Commercially Reasonable Efforts to
expeditiously Develop and Commercialize IL13 and/or Products in the United
States.

 

(b)           NeoPharm will use Commercially Reasonable Efforts to expeditiously
obtain Governmental Approvals to Develop and Commercialize IL13 and/or Products
in the United States.

 

(c)           NeoPharm covenants to comply with all Applicable Laws relating to
the Development and/or Commercialization of IL13 and/or Products in the United
States.

 

6.5 WARRANTY DISCLAIMER.  EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET
FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY OTHER REPRESENTATION OR
WARRANTY, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO IL13 OR ANY PRODUCT. 
NEOPHARM MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR ANY PARTICULAR PURPOSE OR THAT THE USE OF THE PRODUCT(S) WILL NOT INFRINGE
ANY PATENT, COPYRIGHT, TRADEMARK, OR OTHER PROPRIETARY RIGHTS OF ANY THIRD
PARTY. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS
AGREEMENT, NEOPHARM MAKES NO ANY OTHER EXPRESS OR IMPLIED WARRANTIES.

 

6.6 LIMITATION OF LIABILITY.  IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE
OTHER FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, INCURRED
BY EITHER PARTY AND ARISING FROM PERFORMANCE OR NON-PERFORMANCE UNDER THIS
AGREEMENT, EVEN IF ADVISED OF THE PROBABILITY OF SUCH DAMAGES, WHETHER BASED ON
AN ACTION IN CONTRACT OR TORT OR BASED ON A WARRANTY, OR REPRESENTATION OR OTHER
THEORY.

 

ARTICLE 7
RECORDS; AUDIT

 

7.1 RECORD RETENTION. NK SHALL KEEP COMPLETE, ACCURATE AND CORRECT RECORDS IN
SUFFICIENT DETAIL TO PERMIT NEOPHARM TO CONFIRM THE ACCURACY OF THE CALCULATION
OF NET SALES AND ROYALTIES PROVIDED FOR IN THIS AGREEMENT.  SUCH RECORDS SHALL
BE RETAINED FOR NO LESS THAN A FIVE (5) YEAR PERIOD FOLLOWING THE YEAR IN WHICH
ANY SUCH PAYMENTS WERE MADE HEREUNDER.

 

7.2 AUDIT.  NEOPHARM AND ANY LICENSOR SHALL EACH HAVE THE RIGHT FOR A PERIOD OF
FIVE (5) YEARS AFTER RECEIVING ANY REPORT, STATEMENT OR PAYMENT WITH RESPECT TO
NET SALES OR ROYALTIES, TO OBTAIN, AT ITS EXPENSE, FROM AN ACCOUNTANT OR AUDITOR
SELECTED BY NEOPHARM AND AGREED BY NK AN AUDIT OF ALL RELEVANT RECORDS OF NK TO
VERIFY SUCH REPORT, STATEMENT OR PAYMENT.  NK SHALL MAKE ITS RECORDS AVAILABLE
FOR INSPECTION BY SUCH ACCOUNTANT OR AUDITOR DURING REGULAR BUSINESS HOURS AT
SUCH PLACE OR PLACES WHERE SUCH RECORDS ARE CUSTOMARILY KEPT, UPON REASONABLE
NOTICE FROM

 

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NEOPHARM OR ANY LICENSOR, TO THE EXTENT REASONABLY NECESSARY TO VERIFY THE
ACCURACY OF THE REPORTS AND PAYMENTS.  NEITHER NEOPHARM NOR ANY LICENSOR MAY
EXERCISE ITS INSPECTION RIGHT MORE THAN ONCE IN ANY CALENDAR YEAR, NOR MORE THAN
ONCE WITH RESPECT TO SALES IN ANY GIVEN PERIOD, UNLESS A SUBSEQUENT INSPECTION
REVEALS DISCREPANCIES WHICH MAY HAVE ALSO OCCURRED DURING SUCH PERIOD.  SUCH
ACCOUNTANT OR AUDITOR SHALL REPORT TO NEOPHARM, OR A LICENSOR, AS THE CASE MAY
BE, ONLY AS TO THE ACCURACY OF THE NET SALES COMPUTATION AND ROYALTY PAYMENTS. 
IF THE AUDIT SHOWS THAT NK HAS UNDERPAID ANY ROYALTIES BY FIVE PERCENT (5%) OR
MORE, FOR ANY PERIOD COVERED BY THE AUDIT, NK SHALL, IN ADDITION TO PROMPTLY
REMITTING TO NEOPHARM THE AMOUNT OF UNDERPAYMENT, (I) PAY FOR THE COST OF SUCH
AUDIT AND (II) PAY INTEREST TO NEOPHARM AT A PER ANNUM RATE EQUAL TO THREE
PERCENT (3%) ABOVE LONDON INTER BANK, OFFERED RATE (LIBOR), AS IN EFFECT ON THE
DATE OF SUCH DETERMINATION, ON SUCH UNDERPAYMENT FROM THE DATE SUCH AMOUNTS WERE
ACCRUED UNTIL THE DATE SUCH AMOUNTS ARE PAID.  IN THE EVENT THE AUDIT SHOWS THAT
NK HAS OVERPAID ANY ROYALTIES DUE TO NEOPHARM HEREUNDER, NK SHALL BE ALLOWED TO
DEDUCT THE AMOUNT OF SUCH OVERPAYMENT FROM THE NEXT ROYALTY PAYMENT DUE TO
NEOPHARM.  SUCH ACCOUNTANT OR AUDITOR MUST AGREE TO HOLD IN STRICT CONFIDENCE
ALL INFORMATION CONCERNING ROYALTY PAYMENTS AND REPORTS, AND ALL INFORMATION
LEARNED IN THE COURSE OF ANY AUDIT OR INSPECTION, EXCEPT TO THE EXTENT NECESSARY
FOR SUCH ENTITY TO REVEAL SUCH INFORMATION IN ORDER TO ALLOW NEOPHARM TO ENFORCE
ITS RIGHTS UNDER THIS AGREEMENT, PERFORM ITS OBLIGATIONS TO ANY LICENSOR(S), OR
DISCLOSURE IS REQUIRED BY LAW.  THE FAILURE OF NEOPHARM TO REQUEST VERIFICATION
OF ANY REPORT, STATEMENT OR PAYMENT DURING THE FIVE (5) YEAR PERIOD SHALL BE
CONSIDERED ACCEPTANCE OF THE ACCURACY OF SUCH REPORT, AND NK SHALL HAVE NO
OBLIGATION TO MAINTAIN RECORDS PERTAINING TO SUCH REPORT, STATEMENT OR PAYMENT
BEYOND THE FIVE (5) YEAR PERIOD.  THE RESULTS OF THE INSPECTION SHALL BE BINDING
ON BOTH PARTIES.

 

ARTICLE 8
INTELLECTUAL PROPERTY

 

8.1 TRADEMARKS.  EACH PARTY SHALL MARKET PRODUCTS UNDER ITS OWN TRADEMARKS AND
THE OTHER PARTY SHALL HAVE NO RIGHT OR INTEREST IN ANY SUCH TRADEMARKS.

 

8.2 PATENT PROSECUTION OF THE LICENSED PATENT RIGHTS.  PURSUANT TO THE LICENSING
AGREEMENTS BETWEEN NEOPHARM AND ITS LICENSORS, EITHER NEOPHARM OR ITS LICENSORS
HAVE RESPONSIBILITY FOR THE PREPARATION, FILING, PROSECUTION AND MAINTENANCE OF
ANY AND ALL PATENT APPLICATIONS OR PATENTS INCLUDED IN THE LICENSED PATENT
RIGHTS.

 

8.3 PATENT ENFORCEMENT OF THE LICENSED PATENT RIGHTS.

 

(A)           EACH PARTY SHALL PROMPTLY NOTIFY THE OTHER PARTY UPON BECOMING
AWARE OF ANY THIRD PARTY INFRINGEMENT OF THE LICENSED PATENT RIGHTS.

 

(B)           NEOPHARM OR ITS APPLICABLE LICENSORS MAY, BUT SHALL NOT BE
OBLIGATED TO, ELECT TO ENFORCE THE LICENSED PATENT RIGHTS AGAINST THIRD PARTIES
AND TO DEFEND THE LICENSED PATENT RIGHTS AGAINST ANY CHALLENGES WORLDWIDE,
INCLUDING CHALLENGES IN THE TERRITORY, AND NK SHALL ASSIST AND COOPERATE WITH
NEOPHARM OR ITS APPLICABLE LICENSORS IN ANY SUCH ENFORCEMENT OR DEFENSE WITHIN
THE TERRITORY.  NEOPHARM OR ITS APPLICABLE LICENSORS SHALL BEAR ALL ASSOCIATED
COSTS AND EXPENSES (INCLUDING ATTORNEYS’ FEES) AND RETAIN ANY DAMAGES OR
RECOVERIES WITH RESPECT TO ANY SUCH ACTIONS OUTSIDE THE TERRITORY.  NK SHALL
REIMBURSE NEOPHARM OR ITS APPLICABLE LICENSORS

 

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FOR ALL COSTS AND EXPENSES (INCLUDING ATTORNEYS’ FEES) INCURRED BY NEOPHARM OR
ITS APPLICABLE LICENSORS AFTER THE EXECUTION OF THIS AGREEMENT IN THE
ENFORCEMENT AND/OR DEFENSE OF SUCH ACTION WITH RESPECT TO THE TERRITORY, AND
SHALL RETAIN ANY DAMAGES OR RECOVERIES WITH RESPECT TO THE TERRITORY SUBJECT TO
THE PAYMENT TO NEOPHARM OR ITS APPLICABLE LICENSORS OF 40% IN TOTAL OF ANY SUCH
DAMAGES OR RECOVERIES AFTER DEDUCTING AN AMOUNT EQUAL TO THE ABOVE REIMBURSEMENT
MADE BY NK TO NEOPHARM OR ITS APPLICABLE LICENSORS.

 

(C)           DECLARATORY JUDGMENTS RELATING TO LICENSED PATENT RIGHTS.  IF A
DECLARATORY JUDGMENT ACTION ALLEGING INVALIDITY OR NONINFRINGEMENT OF ANY OF THE
LICENSED PATENT RIGHTS SHALL BE BROUGHT AGAINST NK OR RAISED BY WAY OF
COUNTERCLAIM OR AFFIRMATIVE DEFENSE IN AN INFRINGEMENT SUIT BROUGHT BY NK
PURSUANT TO THIS AGREEMENT, NK MAY (I) DEFEND THE SUIT IN ITS OWN NAME, AT ITS
OWN EXPENSE, AND ON ITS OWN BEHALF FOR PRESUMABLY VALID CLAIMS IN THE LICENSED
PATENT RIGHTS; (II) IN ANY SUCH SUIT, ULTIMATELY ENJOIN INFRINGEMENT AND COLLECT
FOR ITS USE, DAMAGES, PROFITS, AND AWARDS OF WHATEVER NATURE RECOVERABLE FOR
SUCH INFRINGEMENT; AND (III) SETTLE ANY CLAIM OR SUIT FOR DECLARATORY JUDGMENT
INVOLVING THE LICENSED PATENT RIGHTS; PROVIDED, HOWEVER, THAT NEOPHARM AND ITS
APPLICABLE LICENSORS SHALL HAVE THE FIRST RIGHT TO TAKE SUCH ACTIONS AND SHALL
HAVE A CONTINUING RIGHT TO INTERVENE IN SUCH SUIT.  IF NEOPHARM OR ITS
APPLICABLE LICENSORS DO NOT NOTIFY NK OF THEIR INTENT TO RESPOND TO THE LEGAL
ACTION WITHIN A REASONABLE TIME, NK WILL BE FREE TO DO SO.  NK SHALL TAKE NO
ACTION TO COMPEL NEOPHARM OR ITS APPLICABLE LICENSORS EITHER TO INITIATE OR TO
JOIN IN ANY SUCH DECLARATORY JUDGMENT ACTION.  NK MAY REQUEST THAT NEOPHARM OR
ITS APPLICABLE LICENSORS INITIATE OR JOIN ANY SUCH SUIT IF NECESSARY TO AVOID
DISMISSAL OF THE SUIT.  SHOULD NEOPHARM OR ITS APPLICABLE LICENSORS BE MADE A
PARTY TO ANY SUCH SUIT BY MOTION OR ANY OTHER ACTION OF NK, NK SHALL REIMBURSE
THEM FOR ANY COSTS, EXPENSES, OR FEES THAT THEY INCUR AS A RESULT OF SUCH MOTION
OR OTHER ACTION.  NK SHALL DIRECTLY PAY THE ATTORNEYS OR AGENTS ENGAGED TO
DEFEND NEOPHARM OR ITS APPLICABLE LICENSORS IN SAID ACTION.  IF NK ELECTS NOT TO
DEFEND AGAINST SUCH DECLARATORY JUDGMENT ACTION, NEOPHARM OR ITS APPLICABLE
LICENSORS, AT THEIR OPTION, MAY DO SO AT THEIR OWN EXPENSE.  IN ALL CASES, NK
AGREES TO KEEP NEOPHARM AND ITS APPLICABLE LICENSORS REASONABLY APPRISED OF THE
STATUS AND PROGRESS OF ANY LITIGATION.  BEFORE NK COMMENCES AN INFRINGEMENT
ACTION, NK SHALL NOTIFY NEOPHARM AND ITS APPLICABLE LICENSORS AND GIVE CAREFUL
CONSIDERATION TO THE VIEWS OF NEOPHARM AND ITS APPLICABLE LICENSORS AND TO ANY
POTENTIAL EFFECTS OF THE LITIGATION ON THE PUBLIC HEALTH IN DECIDING WHETHER TO
BRING SUIT.

 

(D)           IN THE EVENT THAT NEITHER NEOPHARM NOR ITS APPLICABLE LICENSORS
SHALL ELECT TO UNDERTAKE SUCH ENFORCEMENT AND/OR DEFENSE IN THE TERRITORY, NK
MAY, BUT SHALL NOT BE OBLIGATED TO, DO SO AT ITS OWN EXPENSE. IF NK DECIDES TO
INITIATE SUIT TO ENFORCE THE LICENSED PATENT RIGHTS, NK MUST NOTIFY NEOPHARM IN
WRITING.  NEOPHARM OR ITS APPLICABLE LICENSORS SHALL HAVE A CONTINUING RIGHT TO
INTERVENE IN SUCH SUIT.  NK WILL TAKE NO ACTION TO COMPEL NEOPHARM OR ANY
APPLICABLE LICENSOR TO JOIN IN ANY SUCH SUIT FOR PATENT INFRINGEMENT.  IF
NEOPHARM OR ANY LICENSOR IS MADE PARTY TO SUCH A SUIT, NK AGREES TO REIMBURSE
THEM FOR ANY COSTS, EXPENSES, OR FEES WHICH THEY INCUR AS A RESULT OF SUCH SUIT,
INCLUDING ANY AND ALL COSTS INCURRED BY THEM IN OPPOSING JOINDER AS A PARTY TO
SUCH SUIT.  IN ALL CASES, NK AGREES TO KEEP NEOPHARM AND ITS LICENSORS (AS
APPLICABLE) REASONABLY APPRISED OF THE STATUS AND PROGRESS OF ANY LITIGATION. 
NK SHALL RETAIN ANY DAMAGES OR RECOVERIES OBTAINED FROM SUCH ACTION.

 

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8.4 THIRD PARTY ACTIONS.

 

(A)           NOTICE.  EACH PARTY SHALL PROMPTLY NOTIFY THE OTHER PARTY UPON
BECOMING AWARE OF ANY THIRD PARTY CLAIM OR ACTION AGAINST NK AND/OR NEOPHARM FOR
INFRINGEMENT OF THIRD PARTY PATENT RIGHTS THROUGH THE MAKING, HAVING MADE,
USING, SELLING, OR HAVING SOLD PRODUCTS.

 

(b)           NeoPharm as Named Party or NeoPharm and NK as Named Parties. 
NeoPharm shall defend, or settle any action in the Territory naming NeoPharm or
NeoPharm and NK and claiming the infringement of any Third Party Patent Right
through the making, having made, using, selling or having sold any Products;
provided, however, NeoPharm shall not settle any action in which NK shall be
responsible for such settlement costs, as hereinafter provided, without NK’s
prior written consent.  The Parties shall confer with each other and cooperate
during the defense of any such action.  NK shall assist and co-operate with
NeoPharm in the defense of any such action where only NeoPharm is named and, if
NeoPharm finds it necessary to have NK join as a party, NK shall execute all
papers or perform such other acts as may reasonably be requested by NeoPharm. 
NK shall, at its own expense, be entitled to participate in and have counsel
selected by it participate in any action in which NK is a named party along with
NeoPharm. NeoPharm shall bear all associated costs and expenses (including
attorneys’ fees) and pay all damages and settlement amounts with respect to the
importation, making, having made, using, selling, offering to sell or having
sold Products within the NeoPharm Territory.  NK shall bear all associated costs
and expenses (including attorneys’ fees) incurred after the execution of this
Agreement and pay all damages and settlement amounts with respect to the
developing, using, selling or having sold Products in the Territory.

 

(c)           NK as Named Party.  NK shall defend any action which names NK but
does not name NeoPharm and which claims the infringement of any Third Party
Patent Right through the having made, using, selling or having sold Products in
the Territory.  If necessary, and at NK’s expense, NeoPharm will assist and
co-operate with NK in any such defense.  NK shall bear all costs and expenses
(including attorneys’ fees) and all damages and settlement amounts arising out
of or in connection with any such action other than those arising solely out of
or in connection with any action with respect to the manufacture of IL13 and/or
a Product, which shall be NeoPharm’s responsibility.

 

(d)           Notwithstanding the provisions of Sections 8.4(b) and 8.4(c)
hereof, NK may deduct from Royalty due pursuant to Section 4.3(a) the amount of
royalty or other payments paid by NK to the Third Party caused by the claim of
the infringement of the Third Party Patent Right; provided, however, that such
deduction by NK shall not reduce the amount of Royalty due to NeoPharm under
Section 4.3(a) by more than [*]% in any year.  In the event that the deduction
by NK would exceed [*]% of the Royalty payable to NeoPharm in any year, the
unreimbursed royalty or other payments in excess of [*]% may be carried over as
a credit, on the same basis, into succeeding calendar years.

 

8.5 NEW INVENTIONS.

 

Subject to the retained rights of NeoPharm’s Licensors delineated in Section 2.6
of this Agreement, NK and NeoPharm agree that:

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the Commission.  Confidential treatment has been requested with respect to the
omitted portion.

 

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(a)           Intellectual property rights regarding any invention conceived
solely by either Party during the Term and the Additional Term shall be solely
owned by such Party, and the other Party shall have no rights in or to such
invention other than those rights specifically granted to such other Party
hereunder.  The Party who conceived the invention shall have the right to
prosecute and maintain, in its sole discretion and at its own expenses, all
patent application or patent regarding such invention in any country in the
world;

 

(b)           Intellectual property rights regarding any Joint Invention shall
be jointly owned by the Parties and

 

(i)            NeoPharm agrees to take responsibility for, but to consult with
NK, the preparation, filing, prosecution and maintenance of any and all Joint
Invention patent applications and patents in the NeoPharm Territory.

 

(ii)           NK agrees to take responsibility for, but to consult with
NeoPharm, the preparation, filing, prosecution and maintenance of any and all
Joint Invention patent applications and patents in the Territory.

 

(iii)          Expenses in the NeoPharm Territory for the preparation, filing,
prosecution and maintenance of Joint Invention patent applications and patents
shall be borne by NeoPharm, and expenses in the Territory for the preparation,
filing, prosecution and maintenance of Joint Invention patent applications and
patents shall be borne by NK.

 

(iv)          With respect to Joint Inventions, except as provided in paragraph
(c) of this Section, NK shall be deemed to have an exclusive license (even as to
NeoPharm) to such Joint Inventions within the Territory and NeoPharm shall be
deemed to have an exclusive license (even as to NK) to such Joint Inventions
within the NeoPharm Territory, which exclusive license shall be royalty-free,
irrevocable and extend until the expiry of the jointly owned patent(s); and

 

(c)           Each Party may, at its discretion, determine not to maintain its
intellectual property rights set forth in this Section 8.5, and in such case the
discontinuing Party shall notify the other Party in writing of the discontinuing
Party’s determination not to maintain such intellectual property rights at least
3 months in advance of any deadlines for maintaining such intellectual property
rights.  After such notice, the discontinuing Party shall be exempted from
obligations to bear any and all expenses regarding such intellectual property
rights.  After such notice, the other Party shall have the right to maintain
such intellectual property rights at its expense and without any consideration
to the discontinuing Party.  After such notice and if the other Party maintains
such intellectual property rights, the discontinuing Party shall have no right
to such intellectual property rights and the other Party who maintains such
intellectual property rights shall have exclusive rights to such intellectual
property rights, regardless of whether the intellectual property rights are in
the Territory.

 

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ARTICLE 9
CONFIDENTIALITY

 

9.1 CONFIDENTIALITY.  EXCEPT TO THE EXTENT EXPRESSLY AUTHORIZED BY THIS
AGREEMENT OR OTHERWISE AGREED IN WRITING BY THE PARTIES, THE PARTIES AGREE THAT,
FOR THE TERM AND THE ADDITIONAL TERM AND FOR FIVE (5) YEARS THEREAFTER, THE
RECEIVING PARTY SHALL KEEP CONFIDENTIAL AND SHALL NOT PUBLISH OR OTHERWISE
DISCLOSE TO ANY THIRD PARTIES OTHER THAN ITS OFFICERS, EMPLOYEES, DIRECTORS,
SUBLICENSEES OR AFFILIATES WHO ARE UNDER A CONFIDENTIALITY OBLIGATION EQUIVALENT
TO THAT OF THE RECEIVING PARTY AND SHALL NOT USE FOR ANY PURPOSE OTHER THAN AS
PROVIDED FOR IN THIS AGREEMENT ANY CONFIDENTIAL INFORMATION FURNISHED TO IT BY
THE OTHER PARTY PURSUANT TO THIS AGREEMENT.  WITH RESPECT TO ANY INFORMATION
THAT A DISCLOSING PARTY HAS IDENTIFIED IN WRITING AS ITS TRADE SECRET, THE OTHER
PARTY SHALL KEEP SUCH INFORMATION CONFIDENTIAL FOR THE TERM AND THE ADDITIONAL
TERM AND FOR TEN (10) YEARS THEREAFTER AND SHALL, UPON REQUEST OF THE DISCLOSING
PARTY, DESTROY ALL SUCH INFORMATION AFTER THE EXPIRATION OF THE TERM AND THE
ADDITIONAL TERM AND CERTIFY ITS DESTRUCTION.

 

9.2 THE AGREEMENT.

 

(a)           The Parties agree that the material terms of this Agreement shall
be considered Confidential Information of both Parties.  Each Party shall have
the right to disclose in confidence the material terms of this Agreement to
parties retained by such Party to perform legal, accounting or similar services
and who have a need to know such terms in order to provide such services, or for
bona fide purposes of entering into a merger, acquisition or sale of the entire
business of a Party or the entire line of business relating to the Licensed
Technology.

 

(b)           The Parties will consult with one another and agree on the
provisions of this Agreement to be redacted in any filings made by either Party
with the United States Securities and Exchange Commission or as otherwise
required by law or regulation. Notwithstanding the foregoing, each Party may
disclose the terms of this Agreement to the extent necessary to comply with the
United States Securities and Exchange Commission requirements or those required
by Applicable Laws.

 

9.3 AUTHORIZED DISCLOSURE.  EACH PARTY MAY DISCLOSE CONFIDENTIAL INFORMATION
BELONGING TO THE OTHER PARTY TO THE EXTENT SUCH DISCLOSURE IS REASONABLY
NECESSARY IN THE FOLLOWING:

 

(i)            filing, prosecuting or maintaining Patent Rights included in the
Licensed Patent Rights or other Patent Rights to be acquired hereunder;

 

(ii)           regulatory filings;

 

(iii)          prosecuting or defending litigation set forth in Article 8;

 

(iv)          complying with applicable regulations of Governmental Authorities;
and

 

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(v)           researching and developing IL13 and/or Products pursuant to this
Agreement under conditions which are designed to maintain the non-public nature
of the Confidential Information to the extent practicable.

 

Notwithstanding the foregoing, in the event a Party intends or is required to
make a disclosure of the other Party’s Confidential Information pursuant to this
Section 9.3, it shall, except where impracticable, give reasonable advance
notice to the other Party of such disclosure, use Commercially Reasonable
Efforts to secure confidential treatment of such information, and use
Commercially Reasonable Efforts to assist the other Party’s efforts to intervene
or secure confidential treatment of such information; provided, however, that
with respect to a disclosure pursuant to this Section 9.3 (v), such a Party
shall be exempted from the obligation to give advance notice to the other Party
of such disclosure.

 

9.4 PUBLIC ANNOUNCEMENTS AND STATEMENTS.  NEITHER NEOPHARM NOR NK, NOR ANY
AFFILIATE THEREOF, SHALL ISSUE OR CAUSE PUBLICATION OF ANY PRESS RELEASE OR
OTHER PUBLIC ANNOUNCEMENT OR PUBLIC COMMUNICATION WITH RESPECT TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY WITHOUT THE PRIOR WRITTEN CONSENT OF THE
OTHER PARTY, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD, DELAYED OR
CONDITIONED.  NEITHER PARTY SHALL USE THE NAME OF THE OTHER PARTY IN ANY PUBLIC
STATEMENT OR PRESS RELEASE WITHOUT THE PRIOR WRITTEN APPROVAL OF THE OTHER
PARTY, WHICH APPROVAL MAY NOT BE UNREASONABLY WITHHELD, DELAYED OR CONDITIONED;
PROVIDED, HOWEVER, THAT BOTH PARTIES SHALL GIVE THE OTHER PARTY A MINIMUM OF
THREE (3) BUSINESS DAYS TO REVIEW ANY SUCH PRESS RELEASE OR OTHER PUBLIC
STATEMENT.  NOTWITHSTANDING THE FOREGOING, EACH PARTY MAY MAKE ANY DISCLOSURE
WHICH SUCH PARTY, IN THE OPINION OF ITS COUNSEL, IS OBLIGATED TO MAKE PURSUANT
TO APPLICABLE LAWS, IN WHICH CASE SUCH PARTY SHALL STILL ENDEAVOR TO GIVE THE
OTHER PARTY AN OPPORTUNITY TO REVIEW SUCH DISCLOSURE BUT SHALL NOT BE OBLIGATED
TO DO SO IF SUCH DISCLOSURE MUST, IN THE OPINION OF ITS COUNSEL, BE MADE WITHOUT
TIME FOR REVIEW.  THE FAILURE OF A PARTY TO DRAFT SUCH DISCLOSURE IN A TIMELY
FASHION SHALL NOT BE DEEMED A REASON TO AVOID SUBMITTING SUCH DISCLOSURE TO THE
OTHER PARTY.

 

9.5 PUBLICATIONS OR PRESENTATIONS.  NOTWITHSTANDING ANYTHING SET FORTH IN THIS
AGREEMENT TO THE CONTRARY, WITH RESPECT TO RESEARCH AND DEVELOPMENT ACTIVITIES
CONDUCTED OR SPONSORED BY NK, WHETHER THROUGH ITS EMPLOYEES, SUBCONTRACTORS,
AGENTS, OR ANY ACADEMIC, GOVERNMENTAL, OR OTHER INDEPENDENT CONTRACTORS, NK
AGREES THAT PRIOR TO MAKING, ALLOWING OR AUTHORIZING ANY PRESENTATIONS OR
PUBLICATIONS RELATING TO THE RESULTS OF SUCH ACTIVITIES (EACH INDIVIDUALLY A
“PUBLICATION”) IN THE TERRITORY OR THE NEOPHARM TERRITORY, NK SHALL PROVIDE
NEOPHARM WITH A COPY OF ANY PROPOSED PUBLICATION AT LEAST THIRTY (30) DAYS PRIOR
TO SUCH SUBMISSION, PRESENTATION OR PUBLICATION THEREOF.  NK WILL NOT SUBMIT,
PERMIT OR AUTHORIZE SUCH A PUBLICATION WITHOUT PRIOR WRITTEN CONSENT OF
NEOPHARM, WHICH CONSENT, HOWEVER, SHALL NOT BE UNREASONABLY WITHHELD.  IF
NEOPHARM FAILS TO OBJECT TO A PROPOSED PUBLICATION WITHIN SUCH THIRTY (30) DAY
TIME PERIOD, NEOPHARM SHALL BE DEEMED TO HAVE CONSENTED TO THE SUBMISSION,
PRESENTATION OR PUBLICATION OF SUCH PUBLICATION.

 

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ARTICLE 10
INDEMNIFICATION; INSURANCE

 

10.1         INDEMNIFICATION.

 

(a)           Subject to Article 8, each Party shall indemnify and hold the
other Party and the Licensors, and their employees, student researchers,
fellows, agents and consultants, harmless from and against any and all Claims
arising out of its or its Affiliates’ development, design, distribution, use or
sale of IL13 and/or Products, other than those arising out of (i) the
infringement of a Patent Right of a Third Party through the making, using or
selling of IL13 and/or Products by the Party, its Affiliates and/or its
sublicensees or (ii) the design, manufacture, distribution or use of any IL13
and/or Products or materials, or any other products or processes developed in
connection with or arising out of the Licensed Technology.  Notwithstanding the
foregoing, the other Party shall not be entitled to indemnification under this
subsection (a), against any Claim to the extent such Claim arises from such
other Party’s negligence or misconduct.

 

(b)           Subject to Article 8, each Party shall indemnify the other Party
and hold the other Party and the Licensors harmless from and against any and all
Claims arising out of any allegation of infringement of a patent right of a
Third Party through the importation, making, having made, using, selling,
offering to sell or having sold IL13 and/or Products by or on behalf of the
Party which is brought by a Third Party.

 

(c)           For purposes of this Article 10, an indemnified Party shall be
deemed to include the officers, directors, employees, students, fellows, agents,
representatives, attorneys and consultants, shareholders, and contractors of
such Party and its Affiliates.

 

10.2         INDEMNIFICATION PROCEDURE.  PROMPTLY AFTER AN INDEMNIFIED PARTY
BECOMES AWARE OF ANY ACTUAL OR POTENTIAL CLAIM HEREUNDER, SUCH PARTY SHALL
PROMPTLY DELIVER WRITTEN NOTICE TO THE INDEMNIFYING PARTY STATING THE NATURE OF
THE CLAIM; PROVIDED, HOWEVER, THAT THE FAILURE TO GIVE SUCH NOTIFICATION SHALL
NOT AFFECT THE INDEMNIFICATION PROVIDED HEREUNDER EXCEPT TO THE EXTENT THE
INDEMNIFYING PARTY IS ACTUALLY PREJUDICED AS A RESULT OF SUCH FAILURE.  THE
INDEMNIFIED PARTY SHALL GIVE THE INDEMNIFYING PARTY SUCH INFORMATION WITH
RESPECT TO THE CLAIM AS THE INDEMNIFYING PARTY MAY FROM TIME TO TIME REASONABLY
REQUEST.  NEOPHARM OR ANY LICENSOR SHALL HAVE THE FIRST RIGHT TO (A) BRING SUIT
IN THEIR OWN RESPECTIVE NAMES, AT THEIR OWN EXPENSE, AND ON THEIR OWN BEHALF FOR
INFRINGEMENT OF PRESUMABLY VALID CLAIMS IN THE LICENSED PATENT RIGHTS; (B) IN
ANY SUCH SUIT, ENJOIN INFRINGEMENT AND COLLECT FOR THEIR USE, DAMAGES, PROFITS,
AND AWARDS OF WHATEVER NATURE RECOVERABLE FOR SUCH INFRINGEMENT; AND (C) SETTLE
ANY CLAIM OR SUIT FOR INFRINGEMENT OF THE LICENSED PATENT RIGHTS; IF NEOPHARM OR
ANY LICENSOR DO NOT NOTIFY NK WITHIN NINETY (90) DAYS OF THEIR INTENT TO PURSUE
LEGAL ACTION, NK WILL BE FREE TO INITIATE SUCH ACTION, PROVIDED THAT NEOPHARM
AND ANY LICENSOR SHALL HAVE A CONTINUING RIGHT TO INTERVENE IN SUCH ACTION. 
SUBJECT TO THE FOREGOING, THE INDEMNIFYING PARTY SHALL HAVE THE RIGHT TO CONDUCT
THE DEFENSE OF ANY SUIT OR ACTION RELATED TO THE CLAIM IF IT HAS ASSUMED
RESPONSIBILITY FOR THE SUIT, ACTION OR OTHER PROCEEDING IN WRITING; PROVIDED,
HOWEVER, THAT IF IN THE REASONABLE JUDGMENT OF THE INDEMNIFIED PARTY SUCH SUIT,
ACTION OR OTHER PROCEEDING INVOLVES AN ISSUE OR MATTER WHICH

 

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COULD HAVE A MATERIAL ADVERSE EFFECT ON THE BUSINESS, OPERATIONS OR ASSETS OF
THE INDEMNIFIED PARTY, THE INDEMNIFIED PARTY MAY ELECT, AT ITS OWN EXPENSE, TO
CONDUCT A SEPARATE DEFENSE THEREOF, BUT IN NO EVENT SHALL SUCH ELECTION BE
CONSTRUED AS A WAIVER OF ANY INDEMNIFICATION RIGHTS SUCH INDEMNIFIED PARTY MAY
HAVE UNDER THIS ARTICLE 10, AT LAW OR IN EQUITY, OR OTHERWISE.  IF THE
INDEMNIFYING PARTY DEFENDS THE SUIT OR ACTION, THE INDEMNIFIED PARTY MAY
PARTICIPATE IN (BUT NOT CONTROL) THE DEFENSE THEREOF AT ITS SOLE COST AND
EXPENSE; PROVIDED, HOWEVER, THAT THE INDEMNIFYING PARTY SHALL PAY THE REASONABLE
FEES AND COSTS OF ANY SEPARATE COUNSEL REQUIRED FOR THE INDEMNIFIED PARTY TO THE
EXTENT SUCH REPRESENTATION IS DUE TO A CONFLICT OF INTEREST BETWEEN THE PARTIES.

 

10.3         SETTLEMENTS.  NEITHER PARTY MAY SETTLE ANY CLAIM, OR ANY ACTION OR
SUIT RELATED TO A CLAIM TO A THIRD PARTY WITHOUT THE CONSENT OF THE OTHER PARTY,
WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD, DELAYED OR CONDITIONED, IF
SUCH SETTLEMENT WOULD IMPOSE ANY MONETARY OBLIGATION ON THE OTHER PARTY OR
REQUIRE THE OTHER PARTY TO SUBMIT TO AN INJUNCTION OR OTHERWISE MATERIALLY LIMIT
THE OTHER PARTY’S RIGHTS TO CONDUCT ITS BUSINESS AS THEN CONDUCTED OR LIMIT A
PARTY’S RIGHTS UNDER THIS AGREEMENT, AND ANY PAYMENT MADE BY A PARTY IN SUCH A
SETTLEMENT WITHOUT OBTAINING SUCH CONSENT SHALL BE AT ITS OWN COST AND EXPENSE. 
NOTWITHSTANDING THE FOREGOING, THE INDEMNIFYING PARTY WILL BE LIABLE UNDER THIS
ARTICLE 10 FOR ANY SETTLEMENT EFFECTED WITHOUT ITS CONSENT IF THE INDEMNIFYING
PARTY HAS REFUSED TO ACKNOWLEDGE LIABILITY FOR INDEMNIFICATION HEREUNDER AND/OR
DECLINES TO DEFEND THE INDEMNIFIED PARTY AGAINST ANY SUCH CLAIM, OR IN ANY
ACTION OR PROCEEDING RELATING TO A CLAIM AND IT IS DETERMINED BY DISPUTE
RESOLUTION PURSUANT TO ARTICLE 13 HEREOF THAT THE INDEMNIFYING PARTY WAS LIABLE
TO THE INDEMNIFIED PARTY FOR INDEMNIFICATION RELATED TO SUCH SETTLEMENT.

 

10.4         INSURANCE.  EACH PARTY SHALL MAINTAIN SUITABLE AMOUNTS OF INSURANCE
COVERAGE FOR CLINICAL TRIALS AND COMMERCIAL PRODUCT LIABILITY PROPORTIONATE TO
THE RISKS AND EXPOSURES AND STANDARD FOR THE INDUSTRY AND THE RESPECTIVE
TERRITORIES IN WHICH PRODUCTS ARE DEVELOPED AND COMMERCIALIZED.  THE PARTIES
SHALL WORK WITH ONE ANOTHER TO COORDINATE SUCH APPROPRIATE INSURANCE COVERAGE
FOR THE ACTIVITIES CONTEMPLATED BY THE PARTIES UNDER THIS AGREEMENT.

 

ARTICLE 11
TERM AND TERMINATION

 

11.1         TERM OF AGREEMENT.  THIS AGREEMENT SHALL BECOME EFFECTIVE AS OF THE
EFFECTIVE DATE AND, UNLESS EARLIER TERMINATED PURSUANT TO OTHER PROVISIONS OF
THIS ARTICLE 11, SHALL CONTINUE IN FULL FORCE AND EFFECT UNTIL THE DATE WHICH IS
THE TENTH ANNIVERSARY DATE OF THE FIRST COMMERCIAL SALE OF THE PRODUCT IN THE
TERRITORY; PROVIDED, HOWEVER, THAT IN THE EVENT NK HAS OBTAINED BY SUCH TENTH
ANNIVERSARY DATE GOVERNMENTAL APPROVAL FOR THE SALE OF PRODUCT FOR AN ADDITIONAL
INDICATION OR NEW FORMULATION OR DOSAGE OR ACTIVE COMPONENT BASED ON THE
DEVELOPMENT CONDUCTED BY NK ACCORDING TO THE DECISION OF THE JSC, THIS AGREEMENT
SHALL CONTINUE IN FULL FORCE AND EFFECT UNTIL THE DATE WHICH IS THE TENTH
ANNIVERSARY DATE OF THE DATE OF SUCH GOVERNMENTAL APPROVAL (THE “TERM”).  NK
SHALL HAVE THE RIGHT, AT ITS OPTION, TO EXTEND THE TERM FOR SUCH ADDITIONAL TERM
(THE “ADDITIONAL TERM”) AS THE PARTIES SHALL MUTUALLY AGREE IN GOOD FAITH, BY
GIVING NEOPHARM THE NOTICE TO THAT EFFECT BY [*] PRIOR TO THE EXPIRATION OF THE
TERM OR

 

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EACH ADDITIONAL TERM.  AFTER EXPIRATION OF THIS AGREEMENT, INCLUDING AN
ADDITIONAL TERM, IF ANY, ANY AND ALL RIGHTS AND LICENSES GRANTED HEREUNDER
REGARDING IL13, THE PRODUCTS AND/OR THE LICENSED TECHNOLOGY SHALL CEASE AND
TERMINATE AND SHALL REVERT BACK TO NEOPHARM.

 

11.2         TERMINATION OF PRODUCT DEVELOPMENT.  SHOULD NK FAIL TO ACTIVELY
PURSUE ITS EFFORTS TOWARDS DEVELOPMENT FOR A PERIOD OF MORE THAN [*] FOR ANY
REASON OTHER THAN FORCE MAJEURE AND A REASONABLE REASON, SUCH AS A REQUEST BY
GOVERNMENTAL AUTHORITIES OF THE TERRITORY, AS DETERMINED IN THE REASONABLE
JUDGMENT OF THE JSC, OR SHOULD NK TERMINATE AT ITS DISCRETION DEVELOPMENT OF
IL13 AND/OR PRODUCTS IN THE TERRITORY BY GIVING NEOPHARM [*] PRIOR WRITTEN
NOTICE, THIS AGREEMENT SHALL TERMINATE AT THE END OF SUCH APPLICABLE PERIOD AND
ALL RIGHTS OF NK TO THE LICENSED TECHNOLOGY OR IL13 AND/OR THE PRODUCTS
(INCLUDING ALL DATA, INFORMATION, PHYSICAL MANIFESTATIONS AND REGULATORY
FILINGS) IN THE TERRITORY SHALL REVERT AND BE DELIVERED TO NEOPHARM, AND NK
SHALL BE FREE FROM ANY AND ALL MONETARY OR DEVELOPMENTAL OBLIGATIONS OTHERWISE
ACCRUING THEREAFTER.  IN ADDITION, NEOPHARM SHALL BE GRANTED A ROYALTY-FREE
WORLDWIDE EXCLUSIVE LICENSE WITH SUBLICENSING RIGHTS UNDER THE NK TECHNOLOGY AND
ANY JOINT INVENTIONS.

 

11.3         DEFAULT BY NK.  UPON ANY DEFAULT BY NK UNDER THIS AGREEMENT,
NEOPHARM SHALL NOTIFY NK OF SUCH DEFAULT AND, IN THE EVENT SUCH DEFAULT SHALL BE
A PAYMENT DEFAULT, REQUIRE THAT NK CURES SUCH DEFAULT WITHIN FIFTEEN (15) DAYS
OR IN THE EVENT SUCH DEFAULT SHALL BE A DEFAULT OTHER THAN A PAYMENT DEFAULT,
REQUIRE THAT NK CURES SUCH DEFAULT WITHIN THIRTY (30) DAYS.  IN THE EVENT NK
SHALL NOT HAVE CURED THE DEFAULT AT THE END OF THE APPLICABLE GRACE PERIOD,
NEOPHARM MAY TERMINATE THIS AGREEMENT.  UPON TERMINATION OF THIS AGREEMENT
PURSUANT TO THIS SECTION 11.3, ALL RIGHTS OF NK TO THE LICENSED TECHNOLOGY, IL13
AND THE PRODUCTS (INCLUDING ALL DATA, INFORMATION, PHYSICAL MANIFESTATIONS AND
REGULATORY FILINGS) IN THE TERRITORY SHALL IMMEDIATELY REVERT TO NEOPHARM AND NK
WILL PROMPTLY RETURN TO NEOPHARM ALL PHYSICAL MANIFESTATIONS OF THE LICENSED
TECHNOLOGY.  IN ADDITION, IF NEOPHARM TERMINATES THIS AGREEMENT PURSUANT TO THIS
SECTION 11.3, NK SHALL, FREE OF CHARGE, FURNISH PROMPTLY NEOPHARM WITH NK DATA
WHICH NK HAS AT THE TIME OF SUCH TERMINATION.

 

11.4         DEFAULT BY NEOPHARM.  UPON THE DEFAULT BY NEOPHARM UNDER THIS
AGREEMENT, NK SHALL NOTIFY NEOPHARM OF SUCH DEFAULT AND REQUIRE THAT NEOPHARM
CURES SUCH DEFAULT WITHIN THIRTY (30) DAYS.  IN THE EVENT NEOPHARM SHALL NOT
HAVE CURED THE DEFAULT AT THE END OF THE THIRTY (30) DAY GRACE PERIOD, AT NK’S
OPTION, NK MAY TERMINATE THIS AGREEMENT OR BE RELIEVED, WITHOUT LOSING THE
LICENSE AND SUBLICENSE TO THE LICENSED TECHNOLOGY OR ANY OTHER RIGHT GRANTED TO
NK UNDER OR PURSUANT TO THIS AGREEMENT (EXCEPT TO THE EXTENT NEOPHARM’S LICENSE
FROM ANY OF ITS LICENSORS HAS BEEN SO TERMINATED AS TO SUCH LICENSED TECHNOLOGY
OR OTHER RIGHT), OF ANY AND ALL PAYMENT OBLIGATIONS OTHER THAN THOSE FOR SUPPLY
OF IL13 AND/OR PRODUCTS BY NEOPHARM OR ANY THIRD PARTY MANUFACTURER TO NK
HEREUNDER, UNTIL SUCH TIME AS NEOPHARM HAS CURED SUCH DEFAULT.  IN ADDITION, IF
NK HAS SELECTED NOT TO TERMINATE THIS AGREEMENT PURSUANT TO THIS SECTION 11.4,
NEOPHARM SHALL, FREE OF CHARGE, FURNISH PROMPTLY NK WITH NEOPHARM DATA WHICH
NEOPHARM HAS AT THE TIME OF SUCH SELECTION.  FOR LICENSED PATENT RIGHTS FOR
WHICH THE PHS IS THE LICENSOR, IF NEOPHARM’S LICENSE TO ANY SUCH PATENT ESTATE
IS TERMINATED, NK MAY EITHER TERMINATE THIS AGREEMENT (WITH RESPECT TO THE
SUBLICENSE OF SUCH PATENT ESTATE) OR, AT NK’S OPTION, SEEK TO CONVERT SUCH
SUBLICENSE TO A DIRECT LICENSE BETWEEN NK AND PHS AS SPECIFIED IN SECTION 2.5.

 

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11.5         INSOLVENCY OR BANKRUPTCY.

 

(a)           To the extent permitted by Applicable Laws, either Party may, in
addition to any other remedies available to it by law or in equity, terminate
this Agreement, in whole or in part, by written notice to the other Party in the
event the other Party shall have become insolvent or bankrupt, or shall have
made an assignment for the benefit of its creditors, or there shall have been
appointed a trustee or receiver of the other Party or for all or a substantial
part of its property, or any case or proceeding shall have been commenced or
other action taken by or against the other Party in bankruptcy or seeking
reorganization, liquidation, dissolution, winding-up arrangement, composition or
readjustment of its debts or any other relief under any bankruptcy, insolvency,
reorganization or other similar act or law of any jurisdiction now or hereafter
in effect, or there shall have been issued a warrant of attachment, execution,
distraint or similar process against any substantial part of the property of the
other Party, and any such event shall have continued for ninety (90) days
undismissed, unbonded and undischarged.

 

(b)           All rights and licenses granted under or pursuant to this
Agreement, are, and shall otherwise be deemed to be, for purposes of Section 365
(n) of the U.S. Bankruptcy Code, licenses of rights to “intellectual property”
as defined under Section 101 of the U.S. Bankruptcy Code. The Parties agree that
the Parties as licensees of such rights under this Agreement, shall retain and
may fully exercise all of their rights and elections under the U.S. Bankruptcy
Code or other Applicable Laws.  The Parties further agree that, in the event of
the commencement of a bankruptcy proceeding by or against NK under the U.S.
Bankruptcy Code or other Applicable Laws, NeoPharm shall to the extent legally
possible be entitled to a complete duplicate of (or complete access to, as
appropriate) any such intellectual property and all embodiments of such
intellectual property, and same, if not already in its possession, shall be
promptly delivered to it (i) upon any such commencement of a bankruptcy
proceeding upon its written request therefor, unless NK elects to continue to
perform all of its obligations under this Agreement or (ii) if not delivered
under (i) above, upon the rejection of this Agreement by or on behalf of NK upon
written request therefor by NeoPharm.

 

(c)           Upon the termination of this Agreement by NeoPharm pursuant to
this Section 11.5, all licenses to the Licensed Technology will revert to
NeoPharm.

 

(d)           In case of a commencement of bankruptcy proceeding by or against
NeoPharm under the U.S. Bankruptcy Code or other Applicable Laws, NeoPharm
shall, free of charge, immediately furnish NK with NeoPharm Data which NeoPharm
has at the time of such commencement and NK shall be entitled to the rights
permitted by Applicable Laws.

 

11.6         ACCRUED RIGHTS, SURVIVING OBLIGATIONS.  WITH THE EXCEPTIONS
EXPLICITLY PROVIDED OTHERWISE HEREIN, TERMINATION, RELINQUISHMENT OR EXPIRATION
OF THIS AGREEMENT FOR ANY REASON SHALL BE WITHOUT PREJUDICE TO ANY RIGHTS AND
OBLIGATIONS WHICH SHALL HAVE ACCRUED TO THE BENEFIT OF EITHER PARTY PRIOR TO
SUCH TERMINATION, RELINQUISHMENT OR EXPIRATION.

 

11.7         TERMINATION OR MODIFICATION BY PHS.  PHS HAS RESERVED THE RIGHT
ACCORDING TO 35 U.S.C. §209(F)(4) TO TERMINATE OR MODIFY NEOPHARM’S LICENSE TO
THE LICENSED PATENT RIGHTS FOR WHICH PHS IS THE LICENSOR IF PHS DETERMINES THAT
SUCH ACTION IS NECESSARY TO MEET REQUIREMENTS FOR PUBLIC USE SPECIFIED BY
FEDERAL REGULATIONS ISSUED AFTER THE DATE OF THE LICENSE AND SUCH REQUIREMENTS
ARE NOT REASONABLY SATISFIED BY NEOPHARM.  IN THE EVENT NEOPHARM

 

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RECEIVES A NOTICE RELATING TO SUCH TERMINATION OR MODIFICATION FROM PHS,
NEOPHARM SHALL IMMEDIATELY FURNISH TO NK WITH A COPY OF SUCH NOTICE.  IN THE
EVENT ANY LICENSE FROM PHS TO NEOPHARM RELATING TO PHS’S LICENSED PATENT RIGHTS
IS TERMINATED, THIS AGREEMENT SHALL TERMINATE AS TO PHS’S LICENSED PATENT
RIGHTS, AND WITHIN NINETY (90) DAYS OF SUCH TERMINATION, A FINAL REPORT SHALL BE
SUBMITTED BY NK.  ANY ROYALTY PAYMENTS, INCLUDING THOSE INCURRED BUT NOT YET
PAID, AND THOSE RELATED TO PATENT EXPENSE, DUE TO NEOPHARM SHALL BECOME
IMMEDIATELY DUE AND PAYABLE.  IF TERMINATED UNDER THIS SECTION 11.7, NK MAY
ELECT TO SEEK TO CONVERT ITS SUBLICENSE TO A DIRECT LICENSE WITH PHS.  IF NK
ELECTS TO CONVERT THE SUBLICENSE, SUCH CONVERSION WILL BE SUBJECT TO PHS
APPROVAL AND CONTINGENT UPON ACCEPTANCE BY THE SUBLICENSE OF THE REMAINING
PROVISIONS OF NEOPHARM’S LICENSE WITH PHS, AND IF NK OBTAINED SUCH DIRECT
LICENSE FROM PHS, NK SHALL HAVE THE RIGHT TO DEDUCT THE AMOUNT PAYABLE TO PHS
FOR SUCH DIRECT LICENSE FROM THE LICENSE FEES, MILESTONE PAYMENTS AND ROYALTIES
DUE PURSUANT TO ARTICLE 4.  UNLESS OTHERWISE SPECIFICALLY PROVIDED FOR UNDER
THIS AGREEMENT, UPON SUCH TERMINATION, NK SHALL RETURN ALL MATERIALS INCLUDED
WITHIN THE TERMINATED LICENSED PATENT RIGHTS TO PHS OR PROVIDE PHS WITH
CERTIFICATION OF THE DESTRUCTION THEREOF.  IF AND TO THE EXTENT PHS, OR ANY
OTHER LICENSOR, SHALL MODIFY NEOPHARM’S LICENSE TO THE LICENSED PATENT RIGHTS,
THE SUBLICENSE TO NK GRANTED HEREUNDER SHALL BE MODIFIED TO THE SAME EXTENT,
MUTATIS MUTANDIS.

 

ARTICLE 12
RIGHTS AND DUTIES UPON
TERMINATION OR EXPIRATION; REMEDIES

 

12.1         MONIES PAID OR DUE.  UPON THE TERMINATION OF THIS AGREEMENT, EACH
PARTY SHALL HAVE THE RIGHT TO RETAIN ALL PAYMENTS ALREADY RECEIVED FROM THE
OTHER PARTY PURSUANT TO THIS AGREEMENT, AND EACH PARTY SHALL PAY TO THE OTHER
ALL SUMS ACCRUED HEREUNDER WHICH ARE THEN DUE.  FURTHER, WITHIN SIXTY (60) DAYS
OF ANY TERMINATION, NK SHALL PROVIDE AN ACCOUNTING FROM AN INDEPENDENT
ACCOUNTANT OR AUDITOR TO NEOPHARM OF ALL NET SALES BY NK OR NK’S AFFILIATES.

 

12.2         SURVIVAL OF RIGHTS.  THE TERMINATION OR EXPIRATION OF THIS
AGREEMENT SHALL NOT AFFECT THE ACCRUED RIGHTS AND OBLIGATIONS OF NEOPHARM OR NK
ARISING UNDER OR OUT OF THIS AGREEMENT OR CLAIMS ARISING DURING THE TERM AND THE
ADDITIONAL TERM, AND THE OBLIGATIONS RELATING TO SUCH CLAIMS.  IN ADDITION, ANY
PROVISION REQUIRED TO INTERPRET AND ENFORCE THE PARTIES’ RIGHTS AND OBLIGATIONS
UNDER THIS AGREEMENT SHALL SURVIVE TO THE EXTENT REQUIRED FOR THE FULL
OBSERVATION AND PERFORMANCE OF THIS AGREEMENT BY THE PARTIES.  NOTWITHSTANDING
ANY PROVISION HEREIN TO THE CONTRARY, THE PROVISIONS OF SECTIONS 2.5, 6.5, 6.6,
8.4, 8.5, 14.5 AND 14.10 AND THE PROVISIONS OF ARTICLES 9, 10, 11, 12 AND 13
SHALL SURVIVE THE EXPIRATION OR TERMINATION OF THIS AGREEMENT AS LONG AS
NECESSARY.

 

12.3         TRANSITION UPON TERMINATION.  (A) IF THIS AGREEMENT IS TERMINATED
BY NEOPHARM DUE TO REASONS ATTRIBUTABLE TO NK AS PROVIDED HEREIN, NK SHALL UPON
TERMINATION COOPERATE WITH NEOPHARM AND/OR ITS AFFILIATES TO TRANSFER BACK TO
NEOPHARM ALL TITLE AND INTEREST IN AND TO THE LICENSED TECHNOLOGY TO USE SOLELY
WITH THE PRODUCTS.  WITH RESPECT TO ANY CONFIDENTIAL INFORMATION OF NEOPHARM, NK
SHALL, UPON NEOPHARM’S REQUEST, RETURN TO NEOPHARM OR DESTROY ALL SUCH
CONFIDENTIAL INFORMATION AFTER THE EXPIRATION OF THE TERM AND THE ADDITIONAL
TERM AND CERTIFY ITS DESTRUCTION.  (B) IF THIS AGREEMENT IS TERMINATED BY NK DUE
TO REASONS ATTRIBUTABLE TO NEOPHARM AS PROVIDED HEREIN, NEOPHARM SHALL, UPON
NK’S REQUEST, RETURN

 

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TO NK OR DESTROY ALL CONFIDENTIAL INFORMATION OF NK AFTER THE EXPIRATION OF THE
TERM AND THE ADDITIONAL TERM AND CERTIFY ITS DESTRUCTION.

 

12.4         DAMAGES.  IN NO EVENT SHALL EITHER PARTY BE RESPONSIBLE FOR ANY
CONSEQUENTIAL DAMAGES INCURRED BY THE OTHER PARTY IN CONNECTION WITH THIS
AGREEMENT, INCLUDING, WITHOUT LIMITATION, LOST PROFITS OR OPPORTUNITIES OR
INJURY TO PERSON OR PROPERTY RESULTING FROM THE TERMINATION OF THIS AGREEMENT.

 

12.5         TERMINATION NOT SOLE REMEDY.  TERMINATION IS NOT THE SOLE REMEDY
UNDER THIS AGREEMENT AND, WHETHER OR NOT TERMINATION IS EFFECTED, ALL OTHER
REMEDIES SHALL REMAIN AVAILABLE EXCEPT AS SPECIFICALLY AGREED TO OTHERWISE
HEREIN.

 

ARTICLE 13
DISPUTE RESOLUTION

 

13.1         DISPUTES.  THE PARTIES RECOGNIZE THAT DISPUTES AS TO CERTAIN
MATTERS MAY FROM TIME TO TIME ARISE WHICH RELATE TO EITHER PARTY’S OR ITS
AFFILIATES’ RIGHTS AND/OR OBLIGATIONS HEREUNDER.  IT IS THE OBJECTIVE OF THE
PARTIES TO ESTABLISH PROCEDURES TO FACILITATE THE RESOLUTION OF SUCH DISPUTES IN
AN EXPEDIENT MANNER BY MUTUAL COOPERATION AND WITHOUT RESORT TO LITIGATION.  TO
ACCOMPLISH THIS OBJECTIVE, THE PARTIES AGREE TO FOLLOW THE PROCEDURES SET FORTH
IN THIS ARTICLE 13 IF AND WHEN SUCH A DISPUTE ARISES BETWEEN THE PARTIES.

 

13.2         DISPUTE RESOLUTION PROCEDURES.  IF THE PARTIES OR THE JSC CANNOT
RESOLVE A DISPUTE WITHIN TWENTY (20) DAYS OF FORMAL REQUEST BY EITHER PARTY TO
THE OTHER, ANY PARTY MAY, BY WRITTEN NOTICE TO THE OTHER (THE “DISPUTE NOTICE”),
HAVE SUCH DISPUTE REFERRED TO THEIR RESPECTIVE OFFICERS DESIGNATED BELOW OR
THEIR SUCCESSORS, FOR ATTEMPTED RESOLUTION BY GOOD FAITH NEGOTIATIONS WITHIN
THIRTY (30) DAYS AFTER SUCH NOTICE IS RECEIVED.  SAID DESIGNATED OFFICERS ARE AS
FOLLOWS:

 

For Nippon Kayaku:                            Head of Pharmaceuticals Group

 

For NeoPharm:                                      Chief Executive Officer

 

Any such dispute arising out of or relating to this Agreement which is not
satisfactorily resolved between the Parties or the designated officers of the
Parties pursuant to the foregoing shall be resolved by final and binding
arbitration conducted in Honolulu, Hawaii, USA, under the current Licensing
Agreement Arbitration Rules of the American Arbitration Association (“AAA”);
provided, however, that depositions shall be permitted as follows:  Each Party
may take no more than seven (7) depositions with a maximum of six (6) hours of
examination time per deposition, and each such deposition shall take place in
Chicago, Illinois, USA if NeoPharm is a defendant and in Tokyo, Japan if NK is a
defendant.  The arbitration shall be conducted by three (3) arbitrators who are
generally recognized as knowledgeable in the subject matter which is at issue in
the dispute and who are selected by mutual agreement of the Parties or, failing
such agreement, shall be selected according to the AAA rules.  In conducting the
arbitration, the arbitrators shall be able to decree any and all relief of an
equitable nature, including, but not limited to, such relief as a temporary
restraining order, a preliminary injunction, a permanent injunction or replevin
of property.  The arbitrators shall also be able to award actual or general
damages, but shall not award any other form of damages (i.e., punitive or
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damages).  The Parties shall share equally the arbitrators’ fees and expenses
pending the resolution of the arbitration unless the arbitrators, pursuant to
their right but not their obligations, require the nonprevailing Party to bear
all or any portion of the costs of the prevailing Party.  The decision of the
arbitrators shall be final and may be sued on or enforced by the Party in whose
favor it runs in any court of competent jurisdiction at the option of such
Party, and the Parties hereby consent to the jurisdiction of such court.

 

ARTICLE 14
MISCELLANEOUS PROVISIONS

 

14.1         ASSIGNMENT; CHANGE OF CONTROL.  NEITHER THIS AGREEMENT NOR ANY
INTEREST HEREUNDER SHALL BE ASSIGNABLE BY EITHER PARTY WITHOUT THE PRIOR WRITTEN
CONSENT OF THE OTHER PARTY UNLESS SUCH ASSIGNMENT IS ACCOMPANIED BY OR PURSUANT
TO THE SALE OF ALL OR SUBSTANTIALLY ALL OF THE ASSIGNING PARTY’S ASSETS, A
MERGER, OR OTHER CHANGE OF CONTROL OF A PARTY.  THIS AGREEMENT SHALL BE BINDING
UPON THE SUCCESSORS AND PERMITTED ASSIGNS OF THE PARTIES AND THE NAME OF A PARTY
APPEARING HEREIN SHALL BE DEEMED TO INCLUDE THE NAMES OF SUCH PARTY’S SUCCESSORS
AND PERMITTED ASSIGNS TO THE EXTENT NECESSARY TO CARRY OUT THE INTENT OF THIS
AGREEMENT.  ANY ASSIGNMENT NOT IN ACCORDANCE WITH THIS SECTION 14.1 SHALL BE
VOID.  IN THE EVENT OF THE SALE OF ALL OR SUBSTANTIALLY ALL OF A PARTY’S ASSETS,
A MERGER OR OTHER CHANGE OF CONTROL, THE OTHER PARTY SHALL NOT HAVE A RIGHT OF
FIRST REFUSAL TO ACQUIRE ANY OF THE SELLING PARTY’S RIGHTS UNDER THIS AGREEMENT.

 

14.2         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 IN ORDER TO CARRY OUT THE PURPOSES AND INTENT OF THIS
AGREEMENT.

 

14.3         FORCE MAJEURE.  NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR LOSS
OR DAMAGES OR SHALL HAVE ANY RIGHT TO TERMINATE THIS AGREEMENT FOR ANY DEFAULT
OR DELAY ATTRIBUTABLE TO ANY FORCE MAJEURE, IF THE PARTY AFFECTED SHALL GIVE
PROMPT NOTICE OF ANY SUCH CAUSE TO THE OTHER PARTY.  THE PARTY GIVING SUCH
NOTICE SHALL THEREUPON BE EXCUSED FROM SUCH OF ITS OBLIGATIONS HEREUNDER AS IT
IS THEREBY DISABLED FROM PERFORMING FOR SO LONG AS IT IS SO DISABLED, PROVIDED,
HOWEVER, THAT SUCH AFFECTED PARTY COMMENCES AND CONTINUES TO TAKE REASONABLE AND
DILIGENT ACTIONS TO CURE SUCH CAUSE.

 

14.4         NO TRADEMARK RIGHTS.  EXCEPT AS OTHERWISE PROVIDED HEREIN, NO
RIGHT, EXPRESS OR IMPLIED, IS GRANTED BY THIS AGREEMENT TO USE IN ANY MANNER THE
NAME “NEOPHARM” OR “NIPPON KAYAKU” OR ANY OTHER TRADEMARK, SERVICE MARK OR TRADE
NAME OF THE OTHER PARTY IN CONNECTION WITH THE PERFORMANCE OR TERMINATION OF
THIS AGREEMENT WITHOUT THE PRIOR WRITTEN CONSENT OF THE OTHER PARTY, WHICH
CONSENT SHALL NOT BE UNREASONABLY WITHHELD.

 

14.5         NOTICES.  ALL NOTICES AND OTHER COMMUNICATIONS HEREUNDER SHALL BE
IN WRITING AND SHALL BE DEEMED GIVEN IF DELIVERED PERSONALLY OR BY FACSIMILE
TRANSMISSION (RECEIPT VERIFIED), TELEXED, MAILED BY REGISTERED OR CERTIFIED AIR
MAIL (RETURN RECEIPT REQUESTED), POSTAGE PREPAID, OR SENT BY EXPRESS COURIER
SERVICE, TO THE PARTIES AT THE FOLLOWING ADDRESSES (OR AT SUCH OTHER ADDRESS FOR
A PARTY AS SHALL BE SPECIFIED BY LIKE NOTICE, PROVIDED, HOWEVER, THAT NOTICES OF
A CHANGE OF ADDRESS SHALL BE EFFECTIVE ONLY UPON RECEIPT THEREOF):

 

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If to NeoPharm, addressed to:

 

NeoPharm, Inc.

150 Field Drive, Suite 195

Lake Forest, Illinois USA 60045

Attention: Chief Executive Officer

Facsimile:  847-295-8854

 

If to NK, addressed to:

 

Nippon Kayaku Co., Ltd.

Tokyo Fujimi Building

11-2, Fujimi 1-chome, Chiyoda-Ku

Tokyo 102-8172, Japan

Attention:  Head of Pharmaceuticals Group

Facsimile:  +81-3237-5081

 

14.6         AMENDMENT.  NO AMENDMENT, MODIFICATION OR SUPPLEMENT OF ANY
PROVISION OF THIS AGREEMENT SHALL BE VALID OR EFFECTIVE UNLESS MADE IN WRITING
AND SIGNED BY A DULY AUTHORIZED OFFICER OF EACH PARTY.

 

14.7         WAIVER.  NO PROVISION OF THIS AGREEMENT SHALL BE WAIVED BY ANY ACT,
OMISSION OR KNOWLEDGE OF ANY PARTY OR ITS AGENTS OR EMPLOYEES EXCEPT BY AN
INSTRUMENT IN WRITING EXPRESSLY WAIVING SUCH PROVISION AND SIGNED BY A DULY
AUTHORIZED OFFICER OF THE WAIVING PARTY.

 

14.8         COUNTERPARTS.  THIS AGREEMENT SHALL BE EXECUTED IN TWO
COUNTERPARTS, EACH OF WHICH SHALL CONTAIN THE SIGNATURE OF THE PARTIES AND ALL
SUCH COUNTERPARTS SHALL CONSTITUTE ONE AND THE SAME AGREEMENT.

 

14.9         DESCRIPTIVE HEADINGS. THE DESCRIPTIVE HEADINGS OF THIS AGREEMENT
ARE FOR CONVENIENCE ONLY, AND SHALL BE OF NO FORCE OR EFFECT IN CONSTRUING OR
INTERPRETING ANY OF THE PROVISIONS OF THIS AGREEMENT.

 

14.10       GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF ILLINOIS, USA.

 

14.11       SEVERABILITY.  WHENEVER POSSIBLE, EACH PROVISION OF THIS AGREEMENT
WILL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE
LAWS, BUT IF ANY PROVISION OF THIS AGREEMENT IS HELD TO BE PROHIBITED BY OR
INVALID UNDER APPLICABLE LAWS, SUCH PROVISION WILL BE INEFFECTIVE ONLY TO THE
EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF
THIS AGREEMENT.

 

14.12       ENTIRE AGREEMENT OF THE PARTIES.  THIS AGREEMENT WILL CONSTITUTE AND
CONTAIN THE COMPLETE, FINAL AND EXCLUSIVE UNDERSTANDING AND AGREEMENT OF THE
PARTIES AND CANCELS AND SUPERSEDES ANY AND ALL PRIOR NEGOTIATIONS,
CORRESPONDENCE, UNDERSTANDINGS AND AGREEMENTS, WHETHER ORAL OR WRITTEN, BETWEEN
THE PARTIES RESPECTING THE SUBJECT MATTER HEREOF.

 

32

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14.13       INDEPENDENT CONTRACTORS.  THE RELATIONSHIP BETWEEN NEOPHARM AND NK
CREATED BY THIS AGREEMENT IS ONE OF INDEPENDENT CONTRACTORS AND NEITHER PARTY
SHALL HAVE THE POWER OR AUTHORITY TO BIND OR OBLIGATE THE OTHER EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT.

 

 

[SIGNATURE PAGE FOLLOWS]

 

33

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first above written.

 

 

NEOPHARM, INC.

 

 

/s/ Gregory P. Young

 

 

By:

Gregory P. Young

 

 

Title:

President and Chief Executive Officer

 

 

NIPPON KAYAKU CO., LTD.

 

/s/ Haruo Inose

 

 

 

By:

Haruo INOSE

 

 

Title:

Senior Managing Director, Head of Pharmaceuticals Group

 

34

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EXHIBIT A

 

LICENSED PATENT RIGHTS

 

Patent or Patent
Application

 

Licensor

 

Field of Use

[*]

 

[*]

 

[*]

[*]

 

[*]

 

[*]

[*]

 

[*]

 

[*]

App. No. JP 528499/96

 

United States PHS  (License No. L-226-96/0)

 

Use of the chimeric molecule hIL-13-PE38QQR or cphIL-13-PE38QQR to treat cancer

App. No. PCT/US00/31044

 

United States PHS  (License No. L-162-02/0)

 

Use of the Product in gene therapy applications to treat human cancers.
Specifically, transfection of cancer cells with the IL-13 Receptor-alpha-2
(IL-13aR2) chain in order to sensitize such cells to the therapeutic effects of
the IL-13 receptor-targeted immunoconjugates, hIL13-PE38QQR or cphIL-13-PE38QQR,
which were exclusively licensed to NeoPharm under DHHS exclusive patent license
L-226-96/0

App. No. PCT/US01/25663

 

United States PHS  (License No. L-162-02/0)

 

Use of the Product in gene therapy applications to treat human cancers.
Specifically, transfection of cancer cells with the IL-13 Receptor-alpha-2
(IL-13aR2) chain in order to sensitize such cells to the therapeutic effects of
the IL-13 receptor-targeted immunoconjugates, hIL13-PE38QQR or cphIL-13-PE38QQR,
which were exclusively licensed to NeoPharm under DHHS exclusive patent license
L-226-96/0

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the Commission.  Confidential treatment has been requested with respect to the
omitted portion.

 

A-1

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EXHIBIT B

 

DEVELOPMENT PLAN

 

[*]

 

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the Commission.  Confidential treatment has been requested with respect to the
omitted portion.

 

B-1

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EXHIBIT C

 

Copies of Paragraphs 5.01-5.04, 8.01, 10.01-10.04, 12.05, and 13.07-13.09 of
NeoPharm’s Agreement L-162-02/0 with PHS are binding upon NK will be attached
hereto.

 

5.01

(a)

PHS reserves on behalf of the Government an irrevocable, nonexclusive,
nontransferable, royalty-free license for the practice of all inventions
licensed under the Licensed Patent Rights throughout the world by or on behalf
of the Government and on behalf of any foreign government or international
organization pursuant to any existing or future treaty or agreement to which the
Government is a signatory.

 

 

 

 

(b)

In the event that Licensed Patent Rights are Subject Inventions made under a
Cooperative Research and Development Agreement (CRADA), Licensee grants to the
Government, pursuant to 15 U.S.C. §3710a(b)(1)(A), a nonexclusive,
nontransferable, irrevocable, paid-up license to practice Licensed Patent Rights
or have Licensed Patent Rights practiced throughout the world by or on behalf of
the Government. In the exercise of such license, the Government shall not
publicly disclose trade secrets or commercial or financial information that is
privileged or confidential within the meaning of 5 U.S.C. §552(b)(4) or which
would be considered as such if it had been obtained from a non-Federal party.

 

 

 

5.02

 

Licensee agrees that products used or sold in the United States embodying
Licensed Product(s) or produced through use of Licensed Process(es) shall be
manufactured substantially in the United States, unless a written waiver is
obtained in advance from PHS.

 

 

 

5.03

 

Licensee acknowledges that PHS may enter into future CRADAs under the Federal
Technology Transfer Act of 1986 that relate to the subject matter of this
Agreement. Licensee agrees not to unreasonably deny requests for a Research
License fro such future collaborators with PHS when acquiring such rights ins
necessary in order to make a CRADA project feasible. Licensee may request an
opportunity to join as a party to the CRADA.

 

 

 

5.04

(a)

In addition to the reserved license of Paragraph 5.01 above, PHS reserves the
right to grant nonexclusive Research Licenses directly or to require Licensee to
grant nonexclusive Research Licenses on reasonable terms. The purpose of this
Research License is to encourage basic research, whether conducted at an
academics or corporate facility. In order to safeguard the Licensed Patent
Rights, however, PHS shall consult with Licensee before granting to commercial
entities a Research License or providing to them research samples of materials
made through the Licensed Process(es).

 

 

 

 

(b)

In exceptional circumstances, and in the event that Licensed Patent Rights are
Subject Inventions made under a CRADA, the Government, pursuant to 15 U.S.C.
§3710a(b)(1)(B), retains the right to require the Licensee to grant to a
responsible applicant a nonexclusive, partially exclusive, or exclusive
sublicense to use Licensed Patent Rights in Licensee’s field of use on terms
that are reasonable under the circumstances; or if Licensee fails to grant such
a license, the Government retains the right to grant the license itself. The
exercise of such rights by the Government shall

 

C-1

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only be in exceptional circumstances and only if the Government determines (i)
the action is necessary to meet health or safety needs that are not reasonably
satisfied by Licensee; (ii) the action is necessary to meet requirements for
public use specified by Federal regulations, and such requirements are not
reasonably satisfied by the Licensee; or (iii) the Licensee has failed to comply
with an agreement containing provisions described in 15 U.S.C. §3710a(c)(4)(B).
The determination made by the Government under this Article is subject to
administrative appeal and judicial review under 35 U.S.C. §203(2).

 

 

 

8.01

 

Licensee agrees to keep accurate and correct records of Licensed Products(s)
made, used, sold, or imported and Licensed Process(es) practiced under this
Agreement appropriate to determine the amount of royalties due PHS. Such records
shall be retained for at least five (5) years following a given reporting period
and shall be available during normal business hours for inspection at the
expense of PHS by an accountant or other designated auditor selected by PHS for
the sole purpose of verifying reports and payments hereunder. The accountant or
auditor shall only disclose to PHS information relating to the accuracy of
reports and payments made under this Agreement. If an inspection shows an
underreporting or underpayment in excess of five percent (5%) for any twelve
(12) month period, then Licensee shall reimburse PHS for the cost of the
inspection at the time Licensee pays the unreported royalties, including any
late charges as required by Paragraph 9.08 of this Agreement. All payments
required under this Paragraph shall be due within thirty (30) days of the date
PHS provides Licensee notice of the payment due.

 

 

 

10.01

 

Licensee shall use its reasonable commercial efforts to bring the License
Product(s) and Licensed Process(es) to Practical Application. “Reasonable
commercial efforts” for the purposes of this provision shall include adherence
to the Commercial Development Plan at Appendix F and performance of the
Benchmarks at Appendix E. The efforts of a sublicensee shall be considered the
efforts of Licensee.

 

 

 

10.02

 

Upon the First Commercial Sale, until the expiration of this Agreement, Licensee
shall use its reasonable commercial efforts to make Licensed Product(s) and
Licensed Process(es) reasonably accessible to the United States public.

 

 

 

10.03

 

Licensee agrees, after its First Commercial Sale, to make reasonable quantities
of Licensed Product(s) or materials produced through the use of Licensed
Process(es) available on a compassionate use basis to patients, either through
the patient’s physician(s) and/or the medical center treating the patient.

 

 

 

10.04

 

Licensee further agrees, after its First Commercial Sale and as part of its
marketing and product promotion, to develop written educational materials (e.g.,
brochures, advertisements, etc.) directed to patients and physicians detailing
the License Product(s) and its use to treat cancer.

 

 

 

12.05

 

Licensee shall indemnify and hold PHS, its employees, students, fellows, agents,
and consultants harmless from and against all liability, demands, damages,
expenses, and losses, including but not limited to death, personal injury,
illness, or property damage in connection with or arising out of: a) the use by
or on behalf of Licensee, its sublicensees, directors, employees, or third
parties of any Licensed Patent Rights; or b) the design, manufacture,
distribution, or use of any Licensed product(s), Licensed

 

C-2

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Processes(es) or materials by Licensee, or other products or processed developed
in connection with or arising out of the Licensed Patent Rights. Licensee agrees
to maintain a liability insurance program consistent with sound business
practice.

 

 

 

13.07

 

When the public health and safety so require, and after written notice to
Licensee providing Licensee a sixty (60) day opportunity to respond, PHS shall
have the right to require Licensee to grant sublicenses to responsible
applicants, on reasonable terms, in any Licensed Fields of Use under the
Licensed Patent Rights, unless Licensee can reasonably demonstrate that the
grating of the sublicense would not materially increase the availability to the
public of the subject matter of the Licensed Patent Rights. PHS shall not
require the granting of a sublicense unless the responsible applicant has first
negotiated in good faith with Licensee.

 

 

 

13.08

 

PHS reserves the right according to 35 U.S.C. §209(f)(4) to terminate or modify
this Agreement if it is determined that such action is necessary to meet
requirements for public use specified by federal regulations issued after the
date of the license and such requirements are not reasonably satisfied by
Licensee.

 

 

 

13.09

 

Within thirty (30) days of receipt of written notice of PHS’s unilateral
decision to modify or terminate this Agreement, Licensee may, consistent with
the provisions of 37 CFR Part 404.11, appeal the decision by written submission
to the designated PHS official. The decision of the designated PHS official
shall be the final agency decision. Licensee may thereafter exercise any and all
administrative or judicial remedies that may be available.

 

C-3

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EXHIBIT D

 

Copies of Paragraphs 5.01-5.04, 8.01, 10.01-10.02, 12.05, and 13.07-13.09 of
NeoPharm’s Agreement L-226-96/0 with PHS are binding upon NK will be attached
hereto.

 

5.01

PHS reserves on behalf of the Government an irrevocable, nonexclusive,
nontransferable, royalty-free license for the practice of all inventions
licensed under the Licensed Patent Rights throughout the world by or on behalf
of the Government and on behalf of any foreign government or international
organization pursuant to any existing or future treaty or agreement to which the
Government is a signatory. Prior to the First Commercial Sale, Licensee agrees
to provide PHS reasonable quantities of Licensed Products or materials made
through the Licensed Processes for PHS research use including for human clinical
trials but not for purposes of commercial development, manufacture or
distribution.

 

 

5.02

Licensee agrees that products used or sold in the United States embodying
Licensed Products or produced through use of Licensed Processes shall be
manufactured substantially in the United States, unless a written waiver is
obtained in advance from PHS.

 

 

5.03

Licensee acknowledges that PHS may enter into future Cooperative Research and
Development Agreements (CRADAs) under the Federal Technology Transfer Act of
1986 that relate to the subject matter of this Agreement. Licensee agrees not to
unreasonably deny requests for a Research License from such future collaborators
with PHS when acquiring such rights is necessary in order to make a CRADA
project feasible. Licensee may request an opportunity to join as a party to the
proposed CRADA.

 

 

5.04

In addition to the reserved license of Paragraph 5.01 above, PHS reserves the
right to grant such nonexclusive Research Licenses directly or to require
Licensee to grant nonexclusive Research Licenses on reasonable terms. The
purpose of this Research License is to encourage basic research, whether
conducted at an academic or corporate facility. In order to safeguard the
Licensed Patent Rights, however, PHS shall consult with Licensee before granting
to commercial entities a Research License or providing to them research samples
of the materials.

 

 

8.01

Licensee agrees to keep accurate and correct records of Licensed Products made,
used, or sold and Licensed Processes practiced under this Agreement appropriate
to determine the amount of royalties due PHS. Such records shall be retained for
at least five (5) years following a given reporting period. They shall be
available during normal business hours for inspection at the expense of PHS by
an accountant or other designated auditor selected by PSH for the sole purpose
of verifying reports and payments hereunder. The accountant or auditor shall
only disclose to PHS information relating to the accuracy of reports and
payments made under this Agreement. If an inspection shows an underreporting or
underpayment in excess of five percent (5%) for any twelve (12) month period,
then Licensee shall reimburse PHS for the cost of the inspection at the time
Licensee pays the unreported royalties, including any late charges as required
by Paragraph 9.08 of this Agreement. All

 

D-1

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payments required under this Paragraph shall be due within thirty (30) days of
the date PHS provides Licensee notice of the payment due.

 

 

10.01

Licensee shall use its reasonable best efforts to bring the License Products and
Licensed Processes to Practical Application. “Reasonable best efforts” for the
purposes of this provision shall include adherence to the Commercial Development
Plan at Appendix F and performance of the Benchmarks at Appendix D. The efforts
of a sublicensee shall be considered the efforts of Licensee.

 

 

10.02

Upon the First Commercial Sale, until the expiration of this Agreement, Licensee
shall use its reasonable best efforts to make Licensed Products and Licensed
Processes reasonably accessible to the United States public.

 

 

12.05

Licensee shall indemnify and hold PHS, its employees, students, fellows, agents
and consultants harmless from and against all liability, demands, damages,
expenses, and losses, including but not limited to death, personal injury,
illness, or property damage in connection with or arising out of a) the use by
or on behalf of Licensee, its sublicensees, directors, employees, or third
parties of any Licensed Patent Rights, or b) the design, manufacture,
distribution, or use of any License Products, Licensed Processes or materials by
Licensee, or other products or processes developed in connection with or arising
out of the Licensed Patent Rights. Licensee agrees to maintain a liability
insurance program consistent with sound business practice.

 

 

13.07

PHS reserves the right according to 35 U.S.C. §209(f)(4) to terminate or modify
this Agreement if it is determined that such action is necessary to meet
requirements for public use specified by federal regulations issued after the
date of the license and such requirements are not reasonably satisfied by
Licensee.

 

 

13.08

Within thirty (30) days of receipt of written notice of PHS’s unilateral
decision to modify or terminate this Agreement, Licensee may, consistent with
the provisions of 37CFR 404.11, appeal the decision by written submission to the
designated PHS official. The decision of the designated PHS official shall be
the final agency decision. Licensee may thereafter exercise any and all
administrative or judicial remedies that may be available.

 

 

13.09

Within ninety (90) days of termination of this Agreement under this Article 13
or expiration under Paragraph 3.02, a final report shall be submitted by
Licensee. Any royalty payments, including those related to patent expense, due
to PHS shall become immediately due and payable upon termination or expiration.
If terminated under this Article 13, sublicensees may elect to convert their
sublicenses to direct licenses with PHS pursuant to Paragraph 4.03.

 

D-2

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EXHIBIT E

 

Copies of forms of PHS Licenses (NeoPharm’s two agreements L-162-02/0 and
L-226-96/0 with PHS)

 

PHS PATENT LICENSE AGREEMENT—EXCLVSIVE

 

PHS and Licensee agree as follows:

 

1.             BACKGROUND

 

1.01         In the course of conducting biomedical and behavioral research, PHS
investigators made inventions that may have commercial applicability.

 

1.02         By assignment of rights from PHS employees and other inventors,
DHHS, on behalf of the United States Government, owns intellectual property
rights claimed in any United States and foreign patent applications or patents
corresponding to the assigned inventions. DUBS also owns any tangible
embodiments of these inventions actually reduced to practice by PBS.

 

1.03         The Assistant Secretary for Health of DHHS has delegated to PHS the
authority to enter into this Agreement for the licensing of rights to these
inventions under 35 U.S.C. §§ 200-212, the Federal Technology Transfer Act of
1986, 15 U.S.C. § 37103, and/or the regulations governing the licensing of
Government-owned inventions, 37 CFR Part 404.

 

1.04         PHS desires to transfer these inventions to the private sector
through commercialization licenses to facilitate the commercial development of
products and processes for public use and benefit.

 

1.05         Licensee desires to acquire commercialization rights to certain of
these inventions in order to develop processes, methods, or marketable products
for public use and benefit.

 

2.             DEFINITIONS

 

2.01         “Background Patent Rights” shall mean U.S. Patent No. 4,892,827.

 

2.02         “Benchmarks” mean the performance milestones that are set forth in
Appendix D.

 

2.03         “Commercial Development Plan” means the written commercialization
plan attached as Appendix E.

 

2.04         “First Commercial Sale” means the initial transfer by or on behalf
of Licensee or its sublicensees of Licensed Products or the initial practice of
a Licensed Process by or on behalf of Licensee or its sublicensees in exchange
for cash or some equivalent to which value can be assigned for the purpose of
determining Net Sales.

 

2.05         “Government” means the Government of the United States of America.

 

2.06         “Licensed Fields of Use” means the fields of use identified in
Appendix B.

 

E-1

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2.07         “LICENSED PATENT RIGHTS” SHALL MEAN:

 

(A)           U.S. PATENT APPLICATIONS AND PATENTS LISTED IN APPENDIX A AS SUCH,
ALL DIVISIONS AND CONTINUATIONS OF THESE APPLICATIONS, ALL PATENTS ISSUING FROM
SUCH APPLICATIONS, DIVISIONS, AND CONTINUATIONS, AND ANY REISSUES,
REEXAMINATIONS, AND EXTENSIONS OF ALL SUCH PATENTS;

 

(B)           TO THE EXTENT THAT THE FOLLOWING CONTAIN ONE OR MORE CLAIMS
DIRECTED TO THE INVENTION OR INVENTIONS DISCLOSED IN A) ABOVE: I)
CONTINUATIONS-IN-PART OF A) ABOVE; II) ALL DIVISIONS AND CONTINUATIONS OF THESE
CONTINUATIONS-IN-PART; III) ALL PATENTS ISSUING FROM SUCH CONTINUATIONS-IN-PART,
DIVISIONS, AND CONTINUATIONS; AND IV) ANY REISSUES, REEXAMINATIONS, AND
EXTENSIONS OF ALL SUCH PATENTS;

 

(C)           TO THE EXTENT THAT THE FOLLOWING CONTAIN ONE OR MORE CLAIMS
DIRECTED TO THE INVENTION OR INVENTIONS DISCLOSED IN A) ABOVE: ALL COUNTERPART
FOREIGN APPLICATIONS AND PATENTS TO A) AND B) ABOVE, INCLUDING THOSE LISTED IN
APPENDIX A.

 

Licensed Patent Rights shall not include b) or c) above to the extent that they
contain one or more claims directed to new matter which is not the subject
matter disclosed in a) above.

 

2.08         “LICENSED PROCESS(ES)” MEANS PROCESSES WHICH, IN THE COURSE OF
BEING PRACTICED WOULD, IN THE ABSENCE OF THIS AGREEMENT, INFRINGE ONE OR MORE
CLAIMS OF THE LICENSED PATENT RIGHTS THAT HAVE NOT BEEN HELD INVALID OR
UNENFORCEABLE BY AN UNAPPEALED OR UNAPPEALABLE JUDGMENT OF A COURT OF COMPETENT
JURISDICTION.

 

2.09         “LICENSED PRODUCT(S)” MEANS TANGIBLE MATERIALS WHICH, IN THE COURSE
OF MANUFACTURE, USE, OR SALE WOULD, IN THE ABSENCE OF THIS AGREEMENT, INFRINGE
ONE OR MORE CLAIMS OF THE LICENSED PATENT RIGHTS THAT HAVE NOT BEEN HELD INVALID
OR UNENFORCEABLE BY AN UNAPPEA1ED OR UNAPPEALABLE JUDGMENT OF A COURT OF
COMPETENT JURISDICTION.

 

2.10         “LICENSED TERRITORY” MEANS THE GEOGRAPHICAL AREA IDENTIFIED IN
APPENDIX B.

 

2.11         “NET SALES” MEANS THE TOTAL GROSS RECEIPTS FOR SALES OF LICENSED
PRODUCTS OR PRACTICE OF LICENSED PROCESSES BY OR ON BEHALF OF LICENSEE OR ITS
SUBLICENSEES, AND FROM LEASING, RENTING, OR OTHERWISE MAKING LICENSED PRODUCTS
AVAILABLE TO OTHERS WITHOUT SALE OR OTHER DISPOSITIONS, WHETHER INVOICED OR NOT,
LESS RETURNS AND ALLOWANCES ACTUALLY GRANTED, PACKING COSTS, INSURANCE COSTS,
FREIGHT OUT, TAXES OR EXCISE DUTIES IMPOSED ON THE TRANSACTION (IF SEPARATELY
INVOICED), AND WHOLESALER AND CASH DISCOUNTS IN AMOUNTS CUSTOMARY IN THE TRADE.
NO DEDUCTIONS SHALL BE MADE FOR COMMISSIONS PAID TO INDIVIDUALS, WHETHER THEY BE
WITH INDEPENDENT SALES AGENCIES OR REGULARLY EMPLOYED BY LICENSEE, OR
SUBLICENSEES, AND ON ITS PAYROLL, OR FOR THE COST OF COLLECTIONS.

 

2.12         “PRACTICAL APPLICATION” MEANS TO MANUFACTURE IN THE CASE OF A
COMPOSITION OR PRODUCT, TO PRACTICE IN THE CASE OF A PROCESS OR METHOD, OR TO
OPERATE IN THE CASE OF

 

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A MACHINE OR SYSTEM; AND IN EACH CASE, UNDER SUCH CONDITIONS AS TO ESTABLISH
THAT THE INVENTION IS BEING UTILIZED AND THAT ITS BENEFITS ARE TO THE EXTENT
BENEFITS ARE TO TLLE EXTENT PERMITTED BY LAW OR GOVERNMENT REGULATIONS AVAILABLE
TO THE PUBLIC ON REASONABLE TERMS.

 

2.13         “RESEARCH LICENSE” MEANS A NONTRANSFERABLE, NONEXCLUSIVE LICENSE TO
MAKE AND TO USE THE LICENSED PRODUCTS OR LICENSED PROCESSES AS DEFINED BY THE
LICENSED PATENT RIGHTS FOR PURPOSES OF RESEARCH INCLUDING HUMAN CLINICAL TRIALS
AND NOT FOR PURPOSES OF COMMERCIAL MANUFACTURE OR DISTRIBUTION OR IN LIEU OF
PURCHASE IF LICENSED PRODUCTS OR LICENSED PROCESSES ARE MARKETED BY LICENSEE.

 

3.             GRANT OF RIGHTS

 

3.01         PHS HEREBY GRANTS AND LICENSEE ACCEPTS, SUBJECT TO THE TERMS AND
CONDITIONS OF THIS AGREEMENT, AN EXCLUSIVE LICENSE UNDER THE LICENSED PATENT
RIGHTS IN THE LICENSED TERRITORY TO MAKE AND HAVE MADE, TO USE AND HAVE USED,
AND TO SELL AND HAVE SOLD ANY LICENSED PRODUCTS IN THE LICENSED FIELDS OF USE
AND TO PRACTICE AND HAVE PRACTICED ANY LICENSED PROCESSES IN THE LICENSED FIELDS
OF USE.

 

3.02         PHS HEREBY GRANTS AND LICENSEE ACCEPTS, SUBJECT TO THE TERMS AND
CONDITIONS OF THIS AGREEMENT, A NON-EXCLUSIVE LICENSE UNDER THE BACKGROUND
PATENT RIGHTS IN THE LICENSED TERRITORY TO MAKE AND HAVE MADE. TO USE AND HAVE
USED. AND TO SELL AND HAVE SOLD ANY LICENSED PRODUCTS IN THE LICENSED FIELDS OF
USE AND TO PRACTICE AND HAVE PRACTICED ANY LICENSED PROCESSES IN THE LICENSED
FIELDS OF USE.

 

3.03         THIS AGREEMENT CONFERS NO LICENSE OR RIGHTS BY IMPLICATION.
ESTOPPEL, OR OTHERWISE UNDER ANY PATENT APPLICATIONS OR PATENTS OF PHS OTHER
THAN LICENSED PATENT RIGHTS AND BACKGROUND PATENT RIGHTS REGARDLESS OF WHETHER
SUCH PATENTS ARE DOMINANT OR SUBORDINATE TO LICENSED PATENT RIGHTS OR BACKGROUND
PATENT RIGHTS.

 

4.             SUBLICENSING

 

4.01         UPON WRITTEN APPROVAL BY PHS WHICH WILL BE GIVEN WITHIN THIRTY (30)
DAYS OF A WRITTEN REQUEST BY LICENSEE, SAID APPROVAL NOT TO BE UNREASONABLY
WITHHELD, LICENSEE MAY ENTER INTO SUBLICENSING AGREEMENTS UNDER THE LICENSED
PATENT RIGHTS.

 

4.02         LICENSEE AGREES THAT ANY SUBLICENSES GRANTED BY IT SHALL PROVIDE
THAT THE OBLIGATIONS TO PHS OF PARAGRAPHS 5.01-5.04, 8.01, 10.01, 10.02, 12.05
AND 13.07-13.09 OF THIS AGREEMENT SHALL BE BINDING UPON THE SUBLICENSEE AS IF IT
WERE A PARTY TO THIS AGREEMENT. LICENSEE FURTHER AGREES TO ATTACH COPIES OF
THESE PARAGRAPHS TO ALL SUBLICENSE AGREEMENTS.

 

4.03         ANY SUBLICENSES GRANTED BY LICENSEE SHALL PROVIDE FOR THE
TERMINATION OF THE SUBLICENSE, OR THE CONVERSION TO A LICENSE DIRECTLY BETWEEN
SUCH SUBLICENSEES AND PHS, AT THE OPTION OF THE SUBLICENSEE, UPON TERMINATION OF
THIS AGREEMENT UNDER ARTICLE 13. SUCH CONVERSION IS SUBJECT TO PHS APPROVAL AND
CONTINGENT UPON ACCEPTANCE BY THE SUBLICENSEE OF THE REMAINING PROVISIONS OF
THIS AGREEMENT.

 

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4.04         LICENSEE AGREES TO FORWARD TO PHS A COPY OF EACH FULLY EXECUTED
SUBLICENSE AGREEMENT POSTMARKED WITHIN THIRTY (30) DAYS OF THE EXECUTION OF SUCH
AGREEMENT. TO THE EXTENT PERMITTED BY LAW, PHS AGREES TO MAINTAIN EACH SUCH
SUBLICENSE AGREEMENT IN CONFIDENCE.

 

5.             STATUTORY AND PHS REQUIREMENTS AND RESERVED GOVERNMENT RIGHTS

 

5.01         PHS RESERVES ON BEHALF OF THE GOVERNMENT AN IRREVOCABLE,
NONEXCLUSIVE, NONTRANSFERABLE, ROYALTY-FREE LICENSE FOR THE PRACTICE OF ALL
INVENTIONS LICENSED UNDER THE LICENSED PATENT RIGHTS THROUGHOUT THE WORLD BY OR
ON BEHALF OF THE GOVERNMENT AND ON BEHALF OF ANY FOREIGN GOVERNMENT OR
INTERNATIONAL ORGANIZATION PURSUANT TO ANY EXISTING OR FUTURE TREATY OR
AGREEMENT TO WHICH THE GOVERNMENT IS A SIGNATORY. PRIOR TO THE FIRST COMMERCIAL
SALE, LICENSEE AGREES TO PROVIDE PHS REASONABLE QUANTITIES OF LICENSED PRODUCTS
OR MATERIALS MADE THROUGH THE LICENSED PROCESSES FOR PHS RESEARCH USE INCLUDING
FOR HUMAN CLINICAL TRIALS BUT NOT FOR PURPOSES OF COMMERCIAL DEVELOPMENT,
MANUFACTURE OR DISTRIBUTION.

 

5.02         LICENSEE AGREES THAT PRODUCTS USED OR SOLD IN THE UNITED STATES
EMBODYING LICENSED PRODUCTS OR PRODUCED THROUGH USE OF LICENSED PROCESSES SHALL
BE MANUFACTURED SUBSTANTIALLY IN THE UNITED STATES, UNLESS A WRITTEN WAIVER IS
OBTAINED IN ADVANCE FROM PHS.

 

5.03         LICENSEE ACKNOWLEDGES THAT PHS MAY ENTER INTO FUTURE COOPERATIVE
RESEARCH AND DEVELOPMENT AGREEMENTS (CRADAS) UNDER THE FEDERAL TECHNOLOGY
TRANSFER ACT OF 1986 THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT.
LICENSEE AGREES NOT TO UNREASONABLY DENY REQUESTS FOR A RESEARCH LICENSE FROM
SUCH FUTURE COLLABORATORS WITH PHS WHEN ACQUIRING SUCH RIGHTS IS NECESSARY IN
ORDER TO MAKE A CRADA PROJECT FEASIBLE. LICENSEE MAY REQUEST AN OPPORTUNITY TO
JOIN AS A PARTY TO THE PROPOSED CRADA.

 

5.04         IN ADDITION TO THE RESERVED LICENSE OF PARAGRAPH 5.0 I ABOVE, PHS
RESERVES THE RIGHT TO GRANT SUCH NONEXCLUSIVE RESEARCH LICENSES DIRECTLY OR TO
REQUIRE LICENSEE TO GRANT NONEXCLUSIVE RESEARCH LICENSES ON REASONABLE TERMS. 
THE PURPOSE OF THIS RESEARCH LICENSE IS TO ENCOURAGE BASIC RESEARCH, WHETHER
CONDUCTED AT AN ACADEMIC OR CORPORATE FACILITY.  IN ORDER TO SAFEGUARD THE
LICENSED PATENT RIGHTS, HOWEVER, PHS SHALL CONSULT WITH LICENSEE BEFORE GRANTING
TO COMMERCIAL ENTITIES A RESEARCH LICENSE OR PROVIDING TO THEM RESEARCH SAMPLES
OF THE MATERIALS.

 

6.             ROYALTIES AND REIMBURSEMENT

 

6.01         LICENSEE AGREES TO PAY TO PHS A NONCREDITABLE, NONREFUNDABLE
LICENSE ISSUE ROYALTY AS SET FORTH IN APPENDIX C WITHIN THIRTY (30) DAYS FROM
THE DATE THAT THIS AGREEMENT BECOMES EFFECTIVE.

 

6.02         LICENSEE AGREES TO PAY TO PHS A NONREFUNDABLE MINIMUM ANNUAL
ROYALTY AS SET FORTH IN APPENDIX C. THE MINIMUM ANNUAL ROYALTY IS DUE AND
PAYABLE ON JANUARY

 

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1 OF EACH CALENDAR YEAR AND MAY BE CREDITED AGAINST ANY EARNED ROYALTIES DUE FOR
SALES MADE IN THAT YEAR. THE MINIMUM ANNUAL ROYALTY DUE FOR THE FIRST CALENDAR
YEAR OF THIS AGREEMENT MAY BE PRORATED ACCORDING TO THE FRACTION OF THE CALENDAR
YEAR REMAINING BETWEEN THE EFFECTIVE DATE OF THIS AGREEMENT AND THE NEXT
SUBSEQUENT JANUARY 1.

 

6.03         LICENSEE AGREES TO PAY PHS EARNED ROYALTIES AS SET FORTH IN
APPENDIX C. LICENSEE AGREES TO PAY PHS BENCHMARK ROYALTIES AS SET FORTH IN
APPENDIX C.

 

6.04         LICENSEE AGREES TO PAY PHS SUBLICENSING ROYALTIES AS SET FORTH IN
APPENDIX C.

 

6.05         LICENSEE AGREES TO PAY PHS ASSIGNMENT ROYALTIES AS SET FORTH IN
APPENDIX C.

 

6.06         A CLAIM OF A PATENT OR PATENT APPLICATION LICENSED UNDER THIS
AGREEMENT SHALL CEASE TO FALL WITHIN THE LICENSED PATENT RIGHTS OR BACKGROUND
PATENT RIGHTS FOR THE PURPOSE OF COMPUTING THE MINIMUM ANNUAL ROYALTY AND EARNED
ROYALTY PAYMENTS IN ANY GIVEN COUNTRY ON THE EARLIEST OF THE DATES THAT A) THE
CLAIM HAS BEEN ABANDONED BUT NOT CONTINUED, B) THE PATENT EXPIRES OR IRREVOCABLY
LAPSES, OR C) THE CLAIM HAS BEEN HELD TO BE INVALID OR UNENFORCEABLE BY AN
UNAPPEALED OR UNAPPEALABLE DECISION OF A COURT OF COMPETENT JURISDICTION OR
ADMINISTRATIVE AGENCY.

 

6.07         NO MULTIPLE ROYALTIES SHALL BE PAYABLE BECAUSE ANY LICENSED
PRODUCTS OR LICENSED PROCESSES ARE COVERED BY MORE THAN ONE OF THE LICENSED
PATENT RIGHTS.

 

6.08         (A) TRANSFER OF LICENSED PRODUCTS BY LICENSEE TO SUBLICENSEES OR AN
AFFILIATED PARTY MADE IN OTHER THAN AN ARM’S-LENGTH TRANSACTION FOR NO FURTHER
RESALE SHALL BE ATTRIBUTED A VALUE WHICH WOULD HAVE BEEN RECEIVED IN AN
ARM’S-LENGTH TRANSACTION OF LIKE QUANTITY AND QUALITY OF PRODUCTS SOLD ON OR
ABOUT THE TIME OF THE TRANSFER OF LICENSED PRODUCTS FOR THE PURPOSE OF
CALCULATING NET SALES.

 

6.08          (b) Transfer of Licensed Products by Licensee to sublicensees or
affiliated party for further resale shall have attributed either a value which
would have been received in arm’s-length transaction based on sales of like
quantity and quality of products transferred on or about the time of such
transfer of Licensed Products or the actual value received in a later
arm’s-length transaction, whichever is greater, for purposes of calculating Net
Sales.

 

6.09         (A) WITH REGARD TO EXPENSES ASSOCIATED WITH THE PREPARATION,
FILING, PROSECUTION, AND MAINTENANCE OF ALL PATENT APPLICATIONS AND PATENTS
INCLUDED WITHIN THE LICENSED PATENT RIGHTS INCURRED BY PHS PRIOR TO THE
EFFECTIVE DATE OF THIS AGREEMENT, LICENSEE SHALL PAY TO PHS, AS AN ADDITIONAL
ROYALTY, WITHIN SIXTY (60) DAYS OF PHS’S SUBMISSION OF A STATEMENT AND REQUEST
FOR PAYMENT TO LICENSEE, AN AMOUNT EQUIVALENT TO SUCH PATENT EXPENSES PREVIOUSLY
INCURRED BY PHS.

 

6.09         (B) WITH REGARD TO EXPENSES ASSOCIATED WITH THE PREPARATION,
FILING, PROSECUTION, AND MAINTENANCE OF ALL PATENTS INCLUDED WITHIN THE
BACKGROUND PATENT RIGHTS INCURRED BY PHS PRIOR TO THE EFFECTIVE DATE OF THIS
AGREEMENT, LICENSEE SHALL PAY

 

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TO PHS, AS AN ADDITIONAL ROYALTY, WITHIN (60) DAYS OF PHS’S SUBMISSION OF A
STATEMENT AND REQUEST FOR PAYMENT AN AMOUNT EQUIVALENT TO THREE THOUSAND
THREE-HUNDRED DOLLARS ($3,300.00).

 

6.10         WITH REGARD TO EXPENSES ASSOCIATED WITH THE PREPARATION, FILING,
PROSECUTION, AND MAINTENANCE OF ALL PATENT APPLICATIONS AND PATENTS INCLUDED
WITHIN THE LICENSED PATENT RIGHTS INCURRED BY PHS ON OR AFTER THE EFFECTIVE DATE
OF THIS AGREEMENT. PHS, AT ITS SOLE OPTION, MAY REQUIRE LICENSEE:

 

(a) to pay PHS on an annual basis, within sixty (60) days of PHS’s submission of
a statement and request for payment, a royalty amount equivalent to all such
patent expenses incurred during the previous calendar year(s); or

 

(b) to pay such expenses directly to the law firm employed by PHS to handle such
functions.  However, in such event, PHS and not Licensee shall be the client of
such law firm.

 

Under exceptional circumstances, Licensee may be given the right to assume
responsibility for the preparation, filing, prosecution, or maintenance of any
patent application or patent included with the Licensed Patent Rights. In that
event, Licensee shall directly pay the attorneys or agents engaged to prepare,
file, prosecute or maintain such patent applications or patents and shall
provide to PHS copies of each invoice associated with such services as well as
documentation that such invoices have been paid.

 

6.11         LICENSEE MAY ELECT TO SURRENDER ITS RIGHTS IN ANY COUNTRY OF THE
LICENSED TERRITORY UNDER ANY LICENSED PATENT RIGHTS UPON SIXTY (60) DAYS WRITTEN
NOTICE TO PHS AND OWE NO PAYMENT OBLIGATION UNDER ARTICLE 6.10 (A) FOR
PATENT-RELATED EXPENSES INCURRED IN THAT COUNTRY AFTER THE EFFECTIVE DATE OF
SUCH WRITTEN NOTICE.

 

7.             PATENT FILING. PROSECUTION. AND MAINTENANCE

 

7.01         EXCEPT AS OTHERWISE PROVIDED IN THIS ARTICLE 7, PHS AGREES TO TAKE
RESPONSIBILITY FOR, BUT TO CONSULT WITH, THE LICENSEE IN THE PREPARATION,
FILING, PROSECUTION, AND MAINTENANCE OF ANY AND ALL PATENT APPLICATIONS OR
PATENTS INCLUDED IN THE LICENSED PATENT RIGHTS AND SHALL FURNISH COPIES OF
RELEVANT PATENT-RELATED DOCUMENTS TO LICENSEE.

 

7.02         UPON PHS’S WRITTEN REQUEST, LICENSEE SHALL ASSUME THE
RESPONSIBILITY FOR THE PREPARATION, FILING, PROSECUTION, AND MAINTENANCE OF ANY
AND ALL PATENT APPLICATIONS OR PATENTS INCLUDED IN THE LICENSED PATENT RIGHTS
AND SHALL ON AN ONGOING BASIS PROMPTLY FURNISH COPIES OF ALL PATENT-RELATED
DOCUMENTS TO PHS. IN SUCH EVENT, LICENSEE SHALL, SUBJECT TO THE PRIOR APPROVAL
OF PHS, SELECT REGISTERED PATENT ATTORNEYS OR PATENT AGENTS TO PROVIDE SUCH
SERVICES ON BEHALF OF LICENSEE AND PHS. PHS SHALL PROVIDE APPROPRIATE POWERS OF
ATTORNEY AND OTHER DOCUMENTS NECESSARY TO UNDERTAKE SUCH ACTIONS TO THE PATENT
ATTORNEYS OR PATENT AGENTS PROVIDING SUCH SERVICES. LICENSEE AND ITS ATTORNEYS
OR AGENTS SHALL CONSULT WITH PHS IN ALL ASPECTS OF THE PREPARATION, FILING,
PROSECUTION AND MAINTENANCE OF PATENT APPLICATIONS AND PATENTS INCLUDED WITHIN
THE LICENSED PATENT RIGHTS AND

 

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SHALL PROVIDE PHS SUFFICIENT OPPORTUNITY TO COMMENT ON ANY DOCUMENT THAT
LICENSEE INTENDS TO FILE OR TO CAUSE TO BE FILED WITH THE RELEVANT INTELLECTUAL
PROPERTY OR PATENT OFFICE.

 

7.03         AT ANY TIME, PHS MAY PROVIDE LICENSEE WITH WRITTEN NOTICE THAT PHS
WISHES TO ASSUME CONTROL OF THE PREPARATION, FILING, PROSECUTION, AND
MAINTENANCE OF ANY AND ALL PATENT APPLICATIONS OR PATENTS INCLUDED IN THE
LICENSED PATENT RIGHTS. IF PHS ELECTS TO ASSUME SUCH RESPONSIBILITIES, LICENSEE
AGREES TO COOPERATE FULLY WITH PHS, ITS ATTORNEYS AND AGENTS IN THE PREPARATION,
FILING, PROSECUTION, AND MAINTENANCE OF ANY AND ALL PATENT APPLICATIONS OR
PATENTS INCLUDED IN THE LICENSED PATENT RIGHTS AND TO PROVIDE PHS WITH COMPLETE
COPIES OF ANY AND ALL DOCUMENTS OR OTHER MATERIALS THAT PHS DEEMS NECESSARY TO
UNDERTAKE SUCH RESPONSIBILITIES. IF PHS ELECTS TO ASSUME CONTROL OF THE
PREPARATION, FILING, PROSECUTION, AND MAINTENANCE OF ANY AND ALL PATENT
APPLICATIONS OR PATENTS INCLUDED IN THE LICENSED PATENT RIGHTS FOR A REASON
OTHER THAN LICENSEE’S FAILURE TO PERFORM UNDER THIS AGREEMENT, PHS SHALL BE
RESPONSIBLE FOR ALL COSTS ASSOCIATED WITH TRANSFERRING PATENT PROSECUTION
RESPONSIBILITIES TO AN ATTORNEY OR AGENT OF PHS’S CHOICE.

 

7.04         EACH PARTY SHALL PROMPTLY INFORM THE OTHER AS 10 ALL MATTERS THAT
COME TO ITS ATTENTION THAT MAY AFFECT THE PREPARATION, FILING. PROSECUTION, OR
MAINTENANCE OF THE LICENSED PATENT RIGHTS AND PERMIT EACH OTHER TO PROVIDE
COMMENTS AND SUGGESTIONS WITH RESPECT TO THE PREPARATION, FILING, AND
PROSECUTION OF LICENSED PATENT RIGHTS, WHICH COMMENTS AND SUGGESTIONS SHALL BE
CONSIDERED BY THE OTHER PARTY.

 

8.             RECORD KEEPING

 

8.01         LICENSEE AGREES TO KEEP ACCURATE AND CORRECT RECORDS OF LICENSED
PRODUCTS MADE, USED, OR SOLD AND LICENSED PROCESSES PRACTICED UNDER THIS
AGREEMENT APPROPRIATE TO DETERMINE THE AMOUNT OF ROYALTIES DUE PHS. SUCH RECORDS
SHALL BE RETAINED FOR AT LEAST FIVE (5) YEARS FOLLOWING A GIVEN REPORTING
PERIOD. THEY SHALL BE AVAILABLE DURING NORMAL BUSINESS HOURS FOR INSPECTION AT
THE EXPENSE OF PHS BY AN ACCOUNTANT OR OTHER DESIGNATED AUDITOR SELECTED BY PHS
FOR THE SOLE PURPOSE OF VERIFYING REPORTS AND PAYMENTS HEREUNDER. THE ACCOUNTANT
OR AUDITOR SHALL ONLY DISCLOSE TO PHS INFORMATION RELATING TO THE ACCURACY OF
REPORTS AND PAYMENTS MADE UNDER THIS AGREEMENT. IF AN INSPECTION SHOWS AN
UNDERREPORTING OR UNDERPAYMENT IN EXCESS OF FIVE PERCENT (5%) FOR ANY TWELVE
(12) MONTH PERIOD, THEN LICENSEE SHALL REIMBURSE PHS FOR THE COST OF THE
INSPECTION AT THE TIME LICENSEE PAYS THE UNREPORTED ROYALTIES, INCLUDING ANY
LATE CHARGES AS REQUIRED BY PARAGRAPH 9.08 OF THIS AGREEMENT. ALL PAYMENTS
REQUIRED UNDER THIS PARAGRAPH SHALL BE DUE WITHIN THIRTY (30) DAYS OF THE DATE
PHS PROVIDES LICENSEE NOTICE OF THE PAYMENT DUE.

 

8.02         LICENSEE AGREES TO CONDUCT AN INDEPENDENT AUDIT OF SALES AND
ROYALTIES AT LEAST EVERY TWO YEARS IF ANNUAL SALES OF THE LICENSED PRODUCT OR
LICENSED PROCESSES ARE OVER TWO (2) MILLION DOLLARS.  THE AUDIT MAY BE CONDUCTED
IN CONJUNCTION WITH THE ANNUAL AUDIT PERFORMED ON BEHALF OF LICENSEE. THE AUDIT
SHALL ADDRESS, AT A

 

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MINIMUM, THE AMOUNT OF GROSS SALES BY OR ON BEHALF OF LICENSEE DURING THE AUDIT
PERIOD, THE AMOUNT OF FUNDS OWED TO THE GOVERNMENT UNDER THIS AGREEMENT, AND
WHETHER THE AMOUNT OWED HAS BEEN PAID TO THE GOVERNMENT AND IS REFLECTED IN THE
RECORDS OF THE LICENSEE. A REPORT BY THE AUDITOR SHALL BE SUBMITTED PROMPTLY TO
PHS ON COMPLETION. LICENSEE SHALL PAY FOR THE ENTIRE COST OF THE AUDIT.

 

9.             REPORTS ON PROGRESS. BENCHMARKS. SALES. AND PAYMENTS

 

9.01         PRIOR TO SIGNING THIS AGREEMENT, LICENSEE HAS PROVIDED TO PHS THE
COMMERCIAL DEVELOPMENT PLAN AT APPENDIX F, UNDER WHICH LICENSEE INTENDS TO BRING
THE SUBJECT MATTER OF THE LICENSED PATENT RIGHTS TO THE POINT OF PRACTICAL
APPLICATION. THIS COMMERCIAL DEVELOPMENT PLAN IS HEREBY INCORPORATED BY
REFERENCE INTO THIS AGREEMENT. BASED ON THIS PLAN, PERFORMANCE BENCHMARKS ARE
DETERMINED AS SPECIFIED IN APPENDIX D.

 

9.02         LICENSEE SHALL PROVIDE WRITTEN ANNUAL REPORTS ON ITS PRODUCT
DEVELOPMENT PROGRESS OR EFFORTS TO COMMERCIALIZE UNDER THE COMMERCIAL
DEVELOPMENT PLAN FOR EACH OF THE LICENSED FIELDS OF USE WITHIN SIXTY (60) DAYS
AFTER DECEMBER 31 OF EACH CALENDAR YEAR. THESE PROGRESS REPORTS SHALL INCLUDE,
BUT NOT BE LIMITED TO: PROGRESS ON RESEARCH AND DEVELOPMENT, STATUS OF
APPLICATIONS FOR REGULATORY APPROVALS, MANUFACTURING, SUBLICENSING, MARKETING,
AND SALES DURING THE PRECEDING CALENDAR YEAR, AS WELL AS PLANS FOR THE PRESENT
CALENDAR YEAR. PHS ALSO ENCOURAGES THESE REPORTS TO INCLUDE INFORMATION ON ANY
OF LICENSEE’S PUBLIC SERVICE ACTIVITIES THAT RELATE TO THE LICENSED PATENT
RIGHTS. IF REPORTED PROGRESS DIFFERS FROM THAT PROJECTED IN THE COMMERCIAL
DEVELOPMENT PLAN AND BENCHMARKS, LICENSEE SHALL EXPLAIN THE REASONS FOR SUCH
DIFFERENCES. IN ANY SUCH ANNUAL REPORT, LICENSEE MAY PROPOSE AMENDMENTS TO THE
COMMERCIAL DEVELOPMENT PLAN, ACCEPTANCE OF WHICH BY PHS MAY NOT BE DENIED
UNREASONABLY. LICENSEE AGREES TO PROVIDE ANY ADDITIONAL INFORMATION REASONABLY
REQUIRED BY PHS TO EVALUATE LICENSEE’S PERFORMANCE UNDER THIS AGREEMENT.
LICENSEE MAY AMEND THE BENCHMARKS AT ANY LIME UPON WRITTEN CONSENT BY PHS. PHS
SHALL NOT UNREASONABLY WITHHOLD APPROVAL OF ANY REQUEST OF LICENSEE TO EXTEND
THE TIME PERIODS OF THIS SCHEDULE IF SUCH REQUEST IS SUPPORTED BY A REASONABLE
SHOWING BY LICENSEE OF DILIGENCE IN ITS PERFORMANCE UNDER THE COMMERCIAL
DEVELOPMENT PLAN AND TOWARD BRINGING THE LICENSED PRODUCTS TO THE POINT OF
PRACTICAL APPLICATION AS DEFINED IN 37 CFR 404.3(D). LICENSEE SHALL AMEND THE
COMMERCIAL DEVELOPMENT PLAN AND BENCHMARKS AT THE REQUEST OF PHS TO ADDRESS ANY
LICENSED FIELDS OF USE NOT SPECIFICALLY ADDRESSED IN THE PLAN ORIGINALLY
SUBMITTED.

 

9.03         LICENSEE SHALL REPORT TO PHS THE DATE OF THE FIRST COMMERCIAL SALE
IN EACH COUNTRY IN THE LICENSED TERRITORY WITHIN THIRTY (30) DAYS OF SUCH
OCCURRENCE.

 

9.04         LICENSEE SHALL SUBMIT TO PHS WITHIN SIXTY (60) DAYS AFTER EACH
CALENDAR HALF-YEAR ENDING JUNE 30 AND DECEMBER 31 A ROYALTY REPORT SETTING FORTH
FOR THE PRECEDING HALF-YEAR PERIOD THE AMOUNT OF THE LICENSED PRODUCTS SOLD OR
LICENSED PROCESSES PRACTICED BY OR ON BEHALF OF LICENSEE IN EACH COUNTRY WITHIN
THE LICENSED TERRITORY, THE NET SALES, AND THE AMOUNT OF ROYALTY ACCORDINGLY
DUE. WITH EACH

 

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SUCH ROYALTY REPORT, LICENSEE SHALL SUBMIT PAYMENT OF THE EARNED ROYALTIES DUE.
IF NO EARNED ROYALTIES ARE DUE TO PHS FOR ANY REPORTING PERIOD, THE WRITTEN
REPORT SHALL SO STATE. THE ROYALTY REPORT SHALL BE CERTIFIED AS CORRECT BY AN
AUTHORIZED OFFICER OF LICENSEE AND SHALL INCLUDE A DETAILED LISTING OF ALL
DEDUCTIONS MADE UNDER PARAGRAPH 2.11 TO DETERMINE NET SALES MADE UNDER ARTICLE 6
TO DETERMINE ROYALTIES DUE.

 

9.05         LICENSEE AGREES TO FORWARD SEMI-ANNUALLY TO PHS A COPY OF SUCH
REPORTS RECEIVED BY LICENSEE FROM ITS SUBLICENSEES DURING THE PRECEDING
HALF-YEAR PERIOD AS SHALL BE PERTINENT TO A ROYALTY ACCOUNTING TO PHS BY
LICENSEE FOR ACTIVITIES UNDER THE SUBLICENSE.

 

9.06         ROYALTIES DUE UNDER ARTICLE 6 SHALL BE PAID IN U.S. DOLLARS. FOR
CONVERSION OF FOREIGN CURRENCY TO U.S. DOLLARS, THE CONVERSION RATE SHALL BE THE
NEW YORK FOREIGN EXCHANGE RATE QUOTED IN THE WALL STREET JOURNAL ON THE DAY THAT
THE PAYMENT IS DUE. ALL CHECKS AND BANK DRAFTS SHALL BE DRAWN ON UNITED STATES
BANKS AND SHALL BE PAYABLE, AS APPROPRIATE, FOR FDA OR NIH LICENSES TO THE
NATIONAL INSTITUTES OF HEALTH, P.O. BOX 360120, PITTSBURGH, PENNSYLVANIA
15251-6120. ANY LOSS OF EXCHANGE, VALUE, TAXES, OR OTHER EXPENSES INCURRED IN
THE TRANSFER OR CONVERSION TO U.S. DOLLARS SHALL BE PAID ENTIRELY BY LICENSEE.
THE ROYALTY REPORT REQUIRED BY PARAGRAPH 9.04 OF THIS AGREEMENT SHALL ACCOMPANY
EACH SUCH PAYMENT AND A COPY OF SUCH REPORT SHALL ALSO BE MAILED TO PHS AT ITS
ADDRESS FOR NOTICES INDICATED ON THE SIGNATURE PAGE OF THIS AGREEMENT.

 

9.07         LICENSEE SHALL BE SOLELY RESPONSIBLE FOR DETERMINING IF ANY TAX ON
ROYALTY INCOME IS OWED OUTSIDE THE UNITED STATES AND SHALL PAY ANY SUCH TAX AND
BE RESPONSIBLE FOR ALL FILINGS WITH APPROPRIATE AGENCIES OF FOREIGN GOVERNMENTS.
THE TAXES PAID BY LICENSEE ON BEHALF OF PHS MAY BE DEDUCTED FROM THE EARNED
ROYALTY DUE UNDER PARAGRAPH 6.03.

 

9.08         LATE CHARGES WILL BE ASSESSED BY PHS AS ADDITIONAL ROYALTIES ON ANY
OVERDUE PAYMENTS AT A RATE OF ONE (I) PERCENT PER MONTH COMPOUNDED MONTHLY. THE
PAYMENT OF SUCH LATE CHARGES SHALL NOT PREVENT PHS FROM EXERCISING ANY OTHER
RIGHTS IT MAY HAVE AS A CONSEQUENCE OF THE LATENESS OF ANY PAYMENT.

 

9.09         ALL PLANS AND REPORTS REQUIRED BY THIS ARTICLE 9 AND MARKED
“CONFIDENTIAL” BY LICENSEE SHALL, TO THE EXTENT PERMITTED BY LAW, BE TREATED BY
PHS AS COMMERCIAL AND FINANCIAL INFORMATION OBTAINED FROM A PERSON AND AS
PRIVILEGED AND CONFIDENTIAL AND ANY PROPOSED DISCLOSURE OF SUCH RECORDS BY THE
PHS UNDER THE FREEDOM OF INFORMATION ACT, 5 U.S.C. § 552 SHALL BE SUBJECT TO THE
PREDISCLOSURE NOTIFICATION REQUIREMENTS OF 45 CFR § 5.65(D).

 

10.           PERFORMANCE

 

10.01       LICENSEE SHALL USE ITS REASONABLE BEST EFFORTS TO BRING THE LICENSE
PRODUCTS AND LICENSED PROCESSES TO PRACTICAL APPLICATION. “REASONABLE BEST
EFFORTS” FOR THE PURPOSES OF THIS PROVISION SHALL INCLUDE ADHERENCE TO THE
COMMERCIAL

 

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DEVELOPMENT PLAN AT APPENDIX F AND PERFORMANCE OF THE BENCHMARKS AT APPENDIX D.
THE EFFORTS OF A SUBLICENSEE SHALL BE CONSIDERED THE EFFORTS OF LICENSEE.

 

10.02       UPON THE FIRST COMMERCIAL SALE. UNTIL THE EXPIRATION OF THIS
AGREEMENT, LICENSEE SHALL USE ITS REASONABLE BEST EFFORTS TO MAKE LICENSED
PRODUCTS AND LICENSED PROCESSES REASONABLY ACCESSIBLE TO THE UNITED STATES
PUBLIC.

 

11.           INFRINGEMENT AND PATENT ENFORCEMENT

 

11.01       PHS AND LICENSEE AGREE TO NOTIFY EACH OTHER PROMPTLY OF EACH
INFRINGEMENT OR POSSIBLE INFRINGEMENT OF THE LICENSED PATENT RIGHTS, AS WELL AS
ANY FACTS WHICH MAY AFFECT THE VALIDITY, SCOPE, OR ENFORCEABILITY OF THE
LICENSED PATENT RIGHTS OF WHICH EITHER PARTY BECOMES AWARE.

 

11.02       PURSUANT TO THIS AGREEMENT AND THE PROVISIONS OF CHAPTER 29 OF TITLE
35, UNITED STATES CODE, LICENSEE MAY A) BRING SUIT IN ITS OWN NAME, AT ITS OWN
EXPENSE, AND ON ITS OWN BEHALF FOR INFRINGEMENT OF PRESUMABLY VALID CLAIMS IN
THE LICENSED PATENT RIGHTS; B) IN ANY SUCH SUIT, ENJOIN INFRINGEMENT AND COLLECT
FOR ITS USE, DAMAGES, PROFITS, AND AWARDS OF WHATEVER NATURE RECOVERABLE FOR
SUCH INFRINGEMENT; AND C) SETTLE ANY CLAIM OR SUIT FOR INFRINGEMENT OF THE
LICENSED PATENT RIGHTS PROVIDED, HOWEVER, THAT PHS AND APPROPRIATE GOVERNMENT
AUTHORITIES SHALL HAVE THE FIRST RIGHT TO TAKE SUCH ACTIONS. IF LICENSEE DESIRES
TO INITIATE A SUIT FOR PATENT INFRINGEMENT, LICENSEE SHALL NOTIFY PHS IN
WRITING. IF PHS DOES NOT NOTIFY LICENSEE OF ITS INTENT TO PURSUE LEGAL ACTION
WITHIN NINETY (90) DAYS, LICENSEE WILL BE FREE TO INITIATE SUIT. PHS SHALL HAVE
A CONTINUING RIGHT TO INTERVENE IN SUCH SUIT. LICENSEE SHALL TAKE NO ACTION TO
COMPEL THE GOVERNMENT EITHER TO INITIATE OR TO JOIN IN ANY SUCH SUIT FOR PATENT
INFRINGEMENT. LICENSEE MAY REQUEST THE GOVERNMENT TO INITIATE OR JOIN IN ANY
SUCH SUIT IF NECESSARY TO AVOID DISMISSAL OF THE SUIT. SHOULD THE GOVERNMENT BE
MADE A PARTY TO ANY SUCH SUIT, LICENSEE SHALL REIMBURSE THE GOVERNMENT FOR ANY
COSTS, EXPENSES, OR FEES WHICH THE GOVERNMENT INCURS AS A RESULT OF SUCH MOTION
OR OTHER ACTION, INCLUDING ANY AND ALL COSTS INCURRED BY THE GOVERNMENT IN
OPPOSING ANY SUCH MOTION OR OTHER ACTION. IN ALL CASES, LICENSEE AGREES TO KEEP
PHS REASONABLY APPRISED OF THE STATUS AND PROGRESS OF ANY LITIGATION. BEFORE
LICENSEE COMMENCES AN INFRINGEMENT ACTION, LICENSEE SHALL NOTIFY PHS AND GIVE
CAREFUL CONSIDERATION TO THE VIEWS OF PHS AND TO ANY POTENTIAL EFFECTS OF THE
LITIGATION ON THE PUBLIC HEALTH IN DECIDING WHETHER TO BRING SUIT.

 

11.03       IN THE EVENT THAT A DECLARATORY JUDGMENT ACTION ALLEGING INVALIDITY
OR NON-INFRINGEMENT OF ANY OF THE LICENSED PATENT RIGHTS SHALL BE BROUGHT
AGAINST LICENSEE OR RAISED BY WAY OF COUNTERCLAIM OR AFFIRMATIVE DEFENSE IN AN
INFRINGEMENT SUIT BROUGHT BY LICENSEE UNDER PARAGRAPH 11.02, PURSUANT TO THIS
AGREEMENT AND THE PROVISIONS OF CHAPTER 29 OF TITLE 35, UNITED STATES CODE OR
OTHER STATUTES, LICENSEE MAY A) DEFEND THE SUIT IN ITS OWN NAME, AT ITS OWN
EXPENSE, AND ON ITS OWN BEHALF FOR PRESUMABLY VALID CLAIMS IN THE LICENSED
PATENT RIGHTS; B) IN ANY SUCH SUIT, ULTIMATELY TO ENJOIN INFRINGEMENT AND TO
COLLECT FOR ITS

 

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USE, DAMAGES, PROFITS, AND AWARDS OF WHATEVER NATURE RECOVERABLE FOR SUCH
INFRINGEMENT; AND C) SETTLE ANY CLAIM OR SUIT FOR DECLARATORY JUDGMENT INVOLVING
THE LICENSED PATENT RIGHTS-PROVIDED, HOWEVER, THAT PHS AND APPROPRIATE
GOVERNMENT AUTHORITIES SHALL HAVE THE FIRST RIGHT TO TAKE SUCH ACTIONS AND SHALL
HAVE A CONTINUING RIGHT TO INTERVENE IN SUCH SUIT. H PHS DOES NOT NOTIFY
LICENSEE OF ITS INTENT TO RESPOND TO THE LEGAL ACTION WITHIN A REASONABLE TIME,
LICENSEE WILL BE FREE TO DO SO. LICENSEE SHALL TAKE NO ACTION TO COMPEL THE
GOVERNMENT EITHER TO INITIATE OR TO JOIN IN ANY SUCH DECLARATORY JUDGMENT
ACTION. LICENSEE MAY REQUEST THE GOVERNMENT TO INITIATE OR TO JOIN ANY SUCH SUIT
IF NECESSARY TO AVOID DISMISSAL OF THE SUIT. SHOULD THE GOVERNMENT BE MADE A
PARTY TO ANY SUCH SUIT BY MOTION OR ANY OTHER ACTION OF LICENSEE, LICENSEE SHALL
REIMBURSE THE GOVERNMENT FOR ANY COSTS, EXPENSES, OR FEES WHICH THE GOVERNMENT
INCURS AS A RESULT OF SUCH MOTION OR OTHER ACTION. IF LICENSEE ELECTS NOT TO
DEFEND AGAINST SUCH DECLARATORY JUDGMENT ACTION, PHS, AT ITS OPTION, MAY DO SO
AT ITS OWN EXPENSE. IN ALL CASES, LICENSEE AGREES TO KEEP PHS REASONABLY
APPRISED OF THE STATUS AND PROGRESS OF ANY LITIGATION. BEFORE LICENSEE COMMENCES
AN INFRINGEMENT ACTION, LICENSEE SHALL NOTIFY PHS AND GIVE CAREFUL CONSIDERATION
TO THE VIEWS OF PHS AND TO ANY POTENTIAL EFFECTS OF THE LITIGATION ON THE PUBLIC
HEALTH IN DECIDING WHETHER TO BRING SUIT.

 

11.04       IN ANY ACTION UNDER PARAGRAPHS 11.02 OR 11.03, THE EXPENSES
INCLUDING COSTS, FEES, ATTORNEY FEES, AND DISBURSEMENTS, SHALL BE PAID BY
LICENSEE. UP TO TWENTY-FIVE PERCENT (25%) OF SUCH EXPENSES MAY BE CREDITED
AGAINST THE ROYALTIES PAYABLE TO PHS UNDER PARAGRAPH 6.03 UNDER THE LICENSED
PATENT RIGHTS IN THE COUNTRY IN WHICH SUCH A SUIT IS FILED. IN THE EVENT THAT
TWENTY-FIVE PERCENT (25%) OF SUCH EXPENSES EXCEED THE AMOUNT OF ROYALTIES
PAYABLE BY LICENSEE IN ANY CALENDAR YEAR, THE EXPENSES IN EXCESS MAY BE CARRIED
OVER AS A CREDIT ON THE SAME BASIS INTO SUCCEEDING CALENDAR YEARS. A CREDIT
AGAINST LITIGATION EXPENSES, HOWEVER, MAY NOT REDUCE THE ROYAL TIES DUE IN ANY
CALENDAR YEAR TO LESS THAN THE MINIMUM ANNUAL ROYALTY. ANY RECOVERY MADE BY
LICENSEE, THROUGH COURT JUDGMENT OR SETTLEMENT, FIRST SHALL BE APPLIED TO
REIMBURSE PHS FOR ROYALTIES WITHHELD AS A CREDIT AGAINST LITIGATION EXPENSES AND
THEN TO REIMBURSE LICENSEE FOR ITS LITIGATION EXPENSE. ANY REMAINING RECOVERIES
SHALL BE SPLIT WITH SEVENTY-FIVE (75%) GOING TO LICENSEE AND TWENTY-FIVE PERCENT
(25%) GOING TO PHS.

 

11.05       PHS SHALL COOPERATE FULLY WITH LICENSEE IN CONNECTION WITH ANY
ACTION UNDER PARAGRAPHS 11.02 OR 11.03.  PHS AGREES PROMPTLY TO PROVIDE ACCESS
TO ALL NECESSARY DOCUMENTS AND TO RENDER REASONABLE ASSISTANCE IN RESPONSE TO A
REQUEST BY LICENSEE.

 

12.           NEGATION OF WARRANTIES AND INDEMNIFICATION

 

12.01       PHS OFFERS NO WARRANTIES OTHER THAN THOSE SPECIFIED IN ARTICLE 1.

 

12.02       PHS DOES NOT WARRANT THE VALIDITY OF THE LICENSED PATENT RIGHTS AND
MAKES NO REPRESENTATIONS WHATSOEVER WITH REGARD TO THE SCOPE OF THE LICENSED
PATENT RIGHTS,

 

E-11

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OR THAT THE LICENSED PATENT RIGHTS MAY BE EXPLOITED WITHOUT INFRINGING OTHER
PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

 

12.03       PHS MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OF ANY SUBJECT MATTER DEFINED BY THE CLAIMS OF
THE LICENSED PATENT RIGHTS.

 

12.04       PHS DOES NOT REPRESENT THAT IT WILL COMMENCE LEGAL ACTIONS AGAINST
THIRD PARTIES INFRINGING THE LICENSED PATENT RIGHTS.

 

12.05       LICENSEE SHALL INDEMNIFY AND HOLD PHS, ITS EMPLOYEES, STUDENTS,
FELLOWS, AGENTS, AND CONSULTANTS HARMLESS FROM AND AGAINST ALL LIABILITY,
DEMANDS, DAMAGES, EXPENSES, AND LOSSES, INCLUDING BUT NOT LIMITED TO DEATH,
PERSONAL INJURY, ILLNESS, OR PROPERTY DAMAGE IN CONNECTION WITH OR ARISING OUT
OF A) THE USE BY OR ON BEHALF OF LICENSEE, ITS SUBLICENSEES, DIRECTORS,
EMPLOYEES, OR THIRD PARTIES OF ANY LICENSED PATENT RIGHTS, OR B) THE DESIGN,
MANUFACTURE, DISTRIBUTION, OR USE OF ANY LICENSED PRODUCTS, LICENSED PROCESSES
OR MATERIALS BY LICENSEE, OR OTHER PRODUCTS OR PROCESSES DEVELOPED IN CONNECTION
WITH OR ARISING OUT OF THE LICENSED PATENT RIGHTS. LICENSEE AGREES TO MAINTAIN A
LIABILITY INSURANCE PROGRAM CONSISTENT WITH SOUND BUSINESS PRACTICE.

 

13.           TERM, TERMINATION, AND MODIFICATION OF RIGHTS

 

13.01       THIS AGREEMENT IS EFFECTIVE WHEN SIGNED BY ALL PARTIES AND SHALL
EXTEND TO THE EXPIRATION OF THE LAST TO EXPIRE OF THE LICENSED PATENT RIGHTS
UNLESS SOONER TERMINATED AS PROVIDED IN THIS ARTICLE 13.

 

13.02       IN THE EVENT THAT LICENSEE IS IN DEFAULT IN THE PERFORMANCE OF ANY
MATERIAL OBLIGATIONS UNDER THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO THE
OBLIGATIONS LISTED IN ARTICLE 13.05, AND IF THE DEFAULT HAS NOT BEEN REMEDIED
WITHIN NINETY (90) DAYS AFTER THE DATE OF NOTICE IN WRITING OF SUCH DEFAULT, PHS
MAY TERMINATE THIS AGREEMENT BY WRITTEN NOTICE.

 

13.03       IN THE EVENT THAT LICENSEE BECOMES INSOLVENT, FILES A PETITION IN
BANKRUPTCY, HAS SUCH A PETITION FILED AGAINST IT, DETERMINES TO FILE A PETITION
IN BANKRUPTCY, OR RECEIVES NOTICE OF A THIRD PARTY’S INTENTION TO FILE AN
INVOLUNTARY PETITION IN BANKRUPTCY, LICENSEE SHALL IMMEDIATELY NOTIFY PHS IN
WRITING. .

 

13.04       LICENSEE SHALL HAVE A UNILATERAL RIGHT TO TERMINATE THIS AGREEMENT
AND/OR ANY LICENSES IN ANY COUNTRY BY GIVING PHS SIXTY (60) DAYS WRITTEN NOTICE
TO THAT EFFECT.

 

13.05       PHS SHALL SPECIFICALLY HAVE THE RIGHT TO TERMINATE OR MODIFY, AT ITS
OPTION. THIS AGREEMENT, IF PHS DETERMINES THAT THE LICENSEE: 1) IS NOT EXECUTING
THE COMMERCIAL DEVELOPMENT PLAN SUBMITTED WITH ITS REQUEST FOR A LICENSE AND THE
LICENSEE CANNOT OTHERWISE DEMONSTRATE TO PHS’S SATISFACTION THAT THE LICENSEE
HAS TAKEN, OR CAN BE EXPECTED TO TAKE WITHIN A REASONABLE TIME, EFFECTIVE STEPS
TO ACHIEVE PRACTICAL APPLICATION OF THE LICENSED PRODUCTS OR LICENSED PROCESSES;
2)

 

E-12

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HAS NOT ACHIEVED THE BENCHMARKS AS MAY BE MODIFIED UNDER PARAGRAPH 9.02; 3) HAS
WILLFULLY MADE A FALSE STATEMENT OF, OR WILLFULLY OMITTED, A MATERIAL FACT IN
THE LICENSE APPLICATION OR IN ANY REPORT REQUIRED BY THE LICENSE AGREEMENT; 4)
HAS COMMITTED A MATERIAL BREACH OF A COVENANT OR AGREEMENT CONTAINED IN THE
LICENSE; 5) IS NOT KEEPING LICENSED PRODUCTS OR LICENSED PROCESSES REASONABLY
AVAILABLE TO THE PUBLIC AFTER COMMERCIAL USE COMMENCES; 6) CANNOT REASONABLY
SATISFY UNMET HEALTH AND SAFETY NEEDS; OR 7) CANNOT REASONABLY JUSTIFY A FAILURE
TO COMPLY WITH THE DOMESTIC PRODUCTION REQUIREMENT OF PARAGRAPH 5.02 UNLESS
WAIVED. IN MAKING THIS DETERMINATION, PHS WILL TAKE INTO ACCOUNT THE NORMAL
COURSE OF SUCH COMMERCIAL DEVELOPMENT PROGRAMS CONDUCTED WITH SOUND AND
REASONABLE BUSINESS PRACTICES AND JUDGMENT AND THE ANIMAL REPORTS SUBMITTED BY
LICENSEE UNDER PARAGRAPH 9.02. PRIOR TO INVOKING THIS RIGHT, PHS SHALL GIVE
WRITTEN NOTICE TO LICENSEE PROVIDING LICENSEE SPECIFIC NOTICE OF, AND A NINETY
(90) DAY OPPORTUNITY TO RESPOND TO, PHS’S CONCERNS AS TO THE PREVIOUS ITEMS 1)
TO 7). IF LICENSEE FAILS TO ALLEVIATE PHS’S CONCERNS AS TO THE PREVIOUS ITEMS 1)
TO 7) OR FAILS TO INITIATE CORRECTIVE ACTION TO PHS’S SATISFACTION, PHS MAY
TERMINATE THIS AGREEMENT.

 

13.06       WHEN THE PUBLIC HEALTH AND SAFETY SO REQUIRE, AND AFTER WRITTEN
NOTICE TO LICENSEE PROVIDING LICENSEE A SIXTY (60) DAY OPPORTUNITY TO RESPOND,
PHS SHALL HAVE THE RIGHT TO REQUIRE LICENSEE TO GRANT SUBLICENSES TO RESPONSIBLE
APPLICANTS, ON REASONABLE TERMS, IN ANY LICENSED FIELDS OF USE UNDER THE
LICENSED PATENT RIGHTS, UNLESS LICENSEE CAN REASONABLY DEMONSTRATE THAT THE
GRANTING OF THE SUBLICENSE WOULD NOT MATERIALLY INCREASE THE AVAILABILITY TO THE
PUBLIC OF THE SUBJECT MATTER OF THE LICENSED PATENT RIGHTS. PHS WILL NOT REQUIRE
THE GRANTING OF A SUBLICENSE UNLESS THE RESPONSIBLE APPLICANT HAS FIRST
NEGOTIATED IN GOOD FAITH WITH LICENSEE.

 

13.07       PHS RESERVES THE RIGHT ACCORDING TO 35 U.S.C. § 209(F)(4) TO
TERMINATE OR MODIFY THIS AGREEMENT IF IT IS DETERMINED THAT SUCH ACTION IS
NECESSARY TO MEET REQUIREMENTS FOR PUBLIC USE SPECIFIED BY FEDERAL REGULATIONS
ISSUED AFTER THE DATE OF THE LICENSE AND SUCH REQUIREMENTS ARE NOT REASONABLY
SATISFIED BY LICENSEE.

 

13.08       WITHIN THIRTY (30) DAYS OF RECEIPT OF WRITTEN NOTICE OF PHS’S
UNILATERAL DECISION TO MODIFY OR TERMINATE THIS AGREEMENT, LICENSEE MAY,
CONSISTENT WITH THE PROVISIONS OF 37 CFR 404.11, APPEAL THE DECISION BY WRITTEN
SUBMISSION TO THE DESIGNATED PHS OFFICIAL. THE DECISION OF THE DESIGNATED PHS
OFFICIAL SHALL BE THE FINAL AGENCY DECISION. LICENSEE MAY THEREAFTER EXERCISE
ANY AND ALL ADMINISTRATIVE OR JUDICIAL REMEDIES THAT MAY BE AVAILABLE.

 

13.09       WITHIN NINETY (90) DAYS OF TERMINATION OF THIS AGREEMENT UNDER THIS
ARTICLE 13 OR EXPIRATION UNDER PARAGRAPH 3.02, A FINAL REPORT SHALL BE SUBMITTED
BY LICENSEE. ANY ROYALTY PAYMENTS, INCLUDING THOSE RELATED TO PATENT EXPENSE,
DUE TO PHS SHALL BECOME IMMEDIATELY DUE AND PAYABLE UPON TERMINATION OR
EXPIRATION. IF TERMINATED UNDER THIS ARTICLE 13, SUBLICENSEES MAY ELECT TO
CONVERT THEIR SUBLICENSES TO DIRECT LICENSES WITH PHS PURSUANT TO PARAGRAPH
4.03.

 

E-13

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14.           GENERAL PROVISIONS

 

14.01       NEITHER PARTY MAY WAIVE OR RELEASE ANY OF ITS RIGHTS OR INTERESTS IN
THIS AGREEMENT EXCEPT IN WRITING. THE FAILURE OF THE GOVERNMENT TO ASSERT A
RIGHT HEREUNDER OR TO INSIST UPON COMPLIANCE WITH ANY TERM OR CONDITION OF THIS
AGREEMENT SHALL NOT CONSTITUTE A WAIVER OF THAT RIGHT BY THE GOVERNMENT OR
EXCUSE A SIMILAR SUBSEQUENT FAILURE TO PERFORM ANY SUCH TERM OR CONDITION BY
LICENSEE.

 

14.02       THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE PARTIES
RELATING TO THE SUBJECT MATTER OF THE LICENSED PATENT RIGHTS. AND ALL PRIOR
NEGOTIATIONS. REPRESENTATIONS, AGREEMENTS, AND UNDERSTANDINGS ARC MERGED INTO.
EXTINGUISHED BY, AND COMPLETELY EXPRESSED BY THIS AGREEMENT.

 

14.03       THE PROVISIONS OF THIS AGREEMENT ARE SEVERABLE, AND IN THE EVENT
THAT ANY PROVISION OF THIS AGREEMENT SHALL BE DETERMINED TO BE INVALID OR
UNENFORCEABLE UNDER ANY CONTROLLING BODY OF LAW SUCH DETERMINATION SHALL NOT IN
ANY WAY AFFECT THE VALIDITY OR ENFORCEABILITY OF THE REMAINING PROVISIONS OF
THIS AGREEMENT.

 

14.04       IF EITHER PARTY DESIRES A MODIFICATION TO THIS AGREEMENT, THE
PARTIES SHALL, UPON REASONABLE NOTICE OF THE PROPOSED MODIFICATION BY THE PARTY
DESIRING THE CHANGE, CONFER IN GOOD FAITH TO DETERMINE THE DESIRABILITY OF SUCH
MODIFICATION. NO MODIFICATION WILL BE EFFECTIVE UNTIL A WRITTEN AMENDMENT IS
SIGNED BY THE SIGNATORIES TO THIS AGREEMENT OR THEIR DESIGNEES.

 

14.05       THE CONSTRUCTION, VALIDITY, PERFORMANCE, AND EFFECT OF THIS
AGREEMENT SHALL BE GOVERNED BY FEDERAL LAW AS APPLIED BY THE FEDERAL COURTS IN
THE DISTRICT OF COLUMBIA.

 

14.06       ALL NOTICES REQUIRED OR PERMITTED BY THIS AGREEMENT SHALL BE GIVEN
BY PREPAID, FIRST CLASS, REGISTERED OR CERTIFIED MAIL PROPERLY ADDRESSED TO THE
OTHER PARTY AT THE ADDRESS DESIGNATED ON THE FOLLOWING SIGNATURE PAGE, OR TO
SUCH OTHER ADDRESS AS MAY BE DESIGNATED IN WRITING BY SUCH OTHER PARTY, AND
SHALL BE EFFECTIVE AS OF THE DATE OF THE POSTMARK OF SUCH NOTICE.

 

14.07       THIS AGREEMENT SHALL NOT BE ASSIGNED BY LICENSEE EXCEPT A) WITH THE
PRIOR WRITTEN CONSENT OF PHS, SUCH CONSENT NOT TO BE WITHHELD UNREASONABLY; OR
B) AS PART OF A SALE OR TRANSFER OF SUBSTANTIALLY THE ENTIRE BUSINESS OF
LICENSEE RELATING TO OPERATIONS WHICH CONCERN THIS AGREEMENT. LICENSEE SHALL
NOTIFY PHS WITHIN TEN (10) DAYS OF ANY ASSIGNMENT OF THIS AGREEMENT BY LICENSEE.

 

14.08       LICENSEE AGREES IN ITS USE OF ANY PHS-SUPPLIED MATERIALS TO COMPLY
WITH ALL APPLICABLE STATUTES, REGULATIONS, AND GUIDELINES, INCLUDING PUBLIC
HEALTH SERVICE AND NATIONAL INSTITUTES OF HEALTH REGULATIONS AND GUIDELINES.
LICENSEE AGREES NOT TO USE THE MATERIALS FOR RESEARCH INVOLVING HUMAN SUBJECTS
OR CLINICAL TRIALS IN THE UNITED STATES WITHOUT COMPLYING WITH 21 CFR PART 50
AND 45 CFR PART 46. LICENSEE AGREES NOT TO USE THE MATERIALS FOR RESEARCH
INVOLVING HUMAN SUBJECTS OR CLINICAL TRIALS OUTSIDE OF THE UNITED STATES WITHOUT
NOTIFYING PHS, IN WRITING, OF SUCH RESEARCH OR TRIALS AND COMPLYING WITH THE
APPLICABLE REGULATIONS OF THE

 

E-14

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APPROPRIATE NATIONAL CONTROL AUTHORITIES. WRITTEN NOTIFICATION TO PHS OF
RESEARCH INVOLVING HUMAN SUBJECTS OR CLINICAL TRIALS OUTSIDE OF THE UNITED
STATES SHALL BE GIVEN NO LATER THAN SIXTY (60) DAYS PRIOR TO COMMENCEMENT OF
SUCH RESEARCH OR TRIALS.

 

14.09       LICENSEE ACKNOWLEDGES THAT IT IS SUBJECT TO AND AGREES TO ABIDE BY
THE UNITED STATES LAWS AND REGULATIONS (INCLUDING THE EXPORT ADMINISTRATION ACT
OF 1979 AND ARMS EXPORT CONTROL ACT) CONTROLLING THE EXPORT OF TECHNICAL DATA,
COMPUTER SOFTWARE, LABORATORY PROTOTYPES, BIOLOGICAL MATERIAL, AND OTHER
COMMODITIES. THE TRANSFER OF SUCH ITEMS MAY REQUIRE A LICENSE FROM THE COGNIZANT
AGENCY OF THE U.S. GOVERNMENT OR WRITTEN ASSURANCES BY LICENSEE THAT IT SHALL
NOT EXPORT SUCH ITEMS TO CERTAIN FOREIGN COUNTRIES WITHOUT PRIOR APPROVAL OF
SUCH AGENCY. PHS NEITHER REPRESENTS THAT A LICENSE IS OR IS NOT REQUIRED OR
THAT, IF REQUIRED, IT SHALL BE ISSUED.

 

14.10       LICENSEE AGREES TO MARK THE LICENSED PRODUCTS OR THEIR PACKAGING
SOLD IN THE UNITED STATES WITH ALL APPLICABLE U.S. PATENT NUMBERS AND SIMILARLY
TO INDICATE “PATENT PENDING” STATUS. ALL LICENSED PRODUCTS MANUFACTURED IN,
SHIPPED TO, OR SOLD IN OTHER COUNTRIES SHALL BE MARKED IN SUCH A MANNER AS TO
PRESERVE PHS PATENT RIGHTS IN SUCH COUNTRIES.

 

14.11       BY ENTERING INTO THIS AGREEMENT, PHS DOES NOT DIRECTLY OR INDIRECTLY
ENDORSE ANY PRODUCT OR SERVICE PROVIDED. OR TO BE PROVIDED, BY LICENSEE WHETHER
DIRECTLY OR INDIRECTLY RELATED TO THIS AGREEMENT. LICENSEE SHALL NOT STATE OR
IMPLY THAT THIS AGREEMENT IS AN ENDORSEMENT BY THE GOVERNMENT, PHS, ANY OTHER
GOVERNMENT ORGANIZATIONAL UNIT, OR ANY GOVERNMENT EMPLOYEE.  ADDITIONALLY,
LICENSEE SHALL NOT USE THE NAMES OF NIH, CDC, PHS, OR DHHS OR THE GOVERNMENT OR
THEIR EMPLOYEES IN ANY ADVERTISING, PROMOTIONAL, OR SALES LITERATURE WITHOUT THE
PRIOR WRITTEN CONSENT OF PHS.

 

14.12       THE PARTIES AGREE TO ATTEMPT TO SETTLE AMICABLY ANY CONTROVERSY OR
CLAIM ARISING UNDER THIS AGREEMENT OR A BREACH OF THIS AGREEMENT. EXCEPT FOR
APPEALS OF MODIFICATIONS OR TERMINATION DECISIONS PROVIDED FOR IN ARTICLE 13.
LICENSEE AGREES FIRST TO APPEAL ANY SUCH UNSETTLED CLAIMS OR CONTROVERSIES TO
THE DESIGNATED PHS OFFICIAL, OR DESIGNEE, WHOSE DECISION SHALL BE CONSIDERED THE
FINAL AGENCY DECISION. THEREAFTER, LICENSEE MAY EXERCISE ANY ADMINISTRATIVE OR
JUDICIAL REMEDIES THAT MAY BE AVAILABLE.

 

14.13       NOTHING RELATING TO THE GRANT OF A LICENSE, NOR THE GRANT ITSELF,
SHALL BE CONSTRUED TO CONFER UPON ANY PERSON ANY IMMUNITY FROM OR DEFENSES UNDER
THE ANTITRUST LAWS OR FROM A CHARGE OF PATENT MISUSE, AND THE ACQUISITION AND
USE OF RIGHTS PURSUANT TO 37 CFR PART 404 SHALL NOT BE IMMUNIZED FROM THE
OPERATION OF STATE OR FEDERAL LAW BY REASON OF THE SOURCE OF THE GRANT.

 

14.14       PARAGRAPHS 4.03, 8.01, 9.06-9.08, 12.01-12.05, 13.08, 13.09, AND
14.12 OF THIS AGREEMENT SHALL SURVIVE TERMINATION OF THIS AGREEMENT.

 

E-15

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SIGNATURES BEGIN ON NEXT PAGE

 

E-16

--------------------------------------------------------------------------------

 

PHS PATENT LICENSE AGREEMENT—EXCLUSIVE

 

SIGNATURE PAGE

 

For PHS:

 

 

 

 

 

  s/ Barbara McGay

 

9/23/97

 

Signature of Authorized PHS Official

 

Date

 

 

 

 

 

 

 

Printed Name

 

 

 

 

 

 

 

 

Title

 

 

 

 

 

 

 

 

Mailing Address for Notices:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For Licensee (Upon information and belief, the undersigned expressly certifies
or affirms that the contents of any statements of Licensee made or referred to
in this document are truthful and accurate.):

 

 

by:

 

 

Signature of Authorized Official

 

 

 

 

 

  s/ John N.Kapoor

 

 

 

Signature of Authorized PHS Official

 

Date

 

 

 

 

    John N.Kapoor

 

 

Printed Name

 

 

 

 

 

   Chairman

 

 

Title

 

 

 

 

 

 

 

 

Mailing Address for Notices:

 

 

 

 

 

225 East Deerpath

 

 

Suite 250

 

 

Lake Forest, IL. 60045

 

 

 

E-17

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APPENDIX A—Patent(s) or Patent Application(s)

 

Patent(s) or Patent Application(s) that are Licensed Patent Rights:

U.S. Patent 5,614,191 issued March 25, 1997

USSN 08/821,840 (div of 08/404,685) filed March 21, 1997

 

Patent(s) or Patent Application(s) that are Background Patent Rights:

U.S. Patent No. 4,892,827 issued January 9,1990

 

E-18

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APPENDIX B—Licensed Fields of Use and Territory

 

Licensed Fields of Use: Use of the chimeric molecule hIL-13-PE38QQR or
cphIL.-13-PE38QQR to treat cancer.

 

Licensed Territory:  World-wide

 

E-19

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APPENDIX C—Royalties

 

Royalties:

 

1.             Licensee agrees to pay to PHS a noncreditable, nonrefundable
license issue royalty in the amount of seventy five thousand dollars ($75,000).

 

2.             Licensee agrees to pay to PHS a nonrefundable minimum annual
royalty in the amount of ten thousand dollars ($10,000) prior to the First
Commercial Sale or twenty-five thousand dollars ($25,000.00) after the First
Commercial Sale.

 

3.             Licensee agrees to pay PHS an earned royalty of four percent (4%)
on Net Sales; provided however that Licensee shall be entitled to a credit of
one-half percent (0.5%) against the earned royalty rate for each percent point
in excess of two percent (2.0%) that Licensee must pay to an unaffiliated
licensor for the manufacture and sale of Licensed Products. Said credit,
however, shall not reduce the earned royalty due to PHS for Licensed Products
below two percent (2.0%).

 

4.             Licensee agrees to pay PHS benchmark royalties as follows:

 

 

1.

Submission of first IND

 

$

25,000

 

2.

Completion of first Phase I Clinical Trial

 

$

50,000

 

3.

Completion of first Phase II Clinical Trial

 

$

75,000

 

4.

Completion of each additional Phase II Clinical Trial

 

$

35,000

 

5.

5. Completion of first Phase III Clinical Trial

 

$

100,000

 

6.

Completion of each additional Phase III Clinical Trial

 

$

50,000

 

7.

Approval of first BLN/ELA/PLA/NDA

 

$

300,000

 

8.

Approval of each additional BLA/PLA/ELA/NDA

 

$

150,000

 

 

5.             Licensee agrees to pay PHS sublicensing royalties as follows:

 

(a)           Twenty-five percent (25%) of earned royalties paid by a
sublicensee on Net Sales or two percent of the Net Sales of a sublicensee,
whichever is greater; and

 

(b)           Twenty percent (20%) of all non-creditable and non-refundable
consideration received for granting a sublicense, if the technology is
sublicensed on or before the one year anniversary of this Agreement; or ten
percent (10%) of all non-creditable and non-refundable consideration received in
granting a sublicense, if the technology is sublicensed after the one year
anniversary of this Agreement. Fees paid expressly for research and development
of Licensed Product and Licensed Processes, such as clinical trial support,
shall be excluded.

 

6.             In the event that Licensee shall transfer, in a separate and
distinct transaction, that aspect of its business involving this Agreement,
Licensee agrees to pay PHS an assignment royalty of fifteen-percent (15%) of any
cash consideration received as part of such sale or transfer; provided, however,
that no such royalty shall be owed to PHS in the event that the foregoing
transfer is part of or results from a merger, consolidation or other
reorganization of the Licensee or from a sale, exchange or other transfer of all
or substantially all of its assets.

 

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APPENDIX D — Benchmarks and Performance

 

Licensee agrees to the following Benchmarks for its performance under this
Agreement and, within ten (10) days of achieving a Benchmark, shall notify PHS
that the Benchmark has been achieved.

 

Not Done

 

Benchmark

 

Deadline

 

 

 

 

1.

Pilot Scale Up Production

 

within one year of executing this Agreement but not later than August 1, 1998

2.

Initiation of In Vivo Efficacy Studies

 

December 1, 1998

3.

Completion of In Vivo Efficacy Studies

 

October 1, 1999

4.

Initiation of Toxicological and Pharmacological Studies

 

April 1, 2000

5.

Completion of Toxicological and Pharmacological Studies

 

April 1, 2001

6.

IND Submission

 

November 1, 2001

7.

Initiation of Phase I Clinical Trial

 

March 1, 2002

8.

Completion of Phase I Clinical Trial

 

March 1, 2003

9.

Initiation of Small Phase II Clinical Trials for Renal Cell Carcinoma (use 20
patients)

 

September 1, 2003

10.

Completion of Small Phase II Clinical Trial in patients with Renal Cell
Carcinoma

 

March 1, 2004

11.

Initiation of Large Phase II Clinical Trials in Renal Cell Carcinoma (use at
least 150 patients)

 

September, 2004

12.

Election of 2nd cancer type- for development 13. Initiation of Small Phase II
Clinical Trial on 2nd cancer type to be developed

 

March, 2005

14.

Completion of Large Phase II in patients with Renal Cell Carcinoma.

 

September, 2005

15.

Completion of Small Phase II Clinical Trial on 2nd cancer to be developed

 

June, 2006

16.

Initiation of Phase III Clinical Trial for Renal Cell Cancer

 

September, 2006

17.

Initiation of Large Phase II Clinical Trial for 2nd Cancer type to be developed

 

January, 2007

18.

Submission of a Revised Development Plan which includes election of 3rd
indication to be developed and benchmarks for development

 

June, 2007

 

 

 

 

19.

Completion of Large Phase II Clinical Trial for 2nd Cancer type to be developed

 

June, 2008

 

E-21

--------------------------------------------------------------------------------

 

20.

Completion of Phase III Clinical Trial Renal Cell Cancer

 

September, 2008

21.

Initiation of Phase III Clinical Trial for 2nd Cancer type to be developed

 

January, 2009

22.

BLA Submission for Renal Cell Cancer

 

March, 2009

23.

Product Launch for Renal Cell Cancer

 

March, 2010

24.

Completion of Phase III Clinical Trial for 2nd Cancer type in development

 

January, 2011

25.

BLA Submission for 2nd Cancer Type Developed

 

June, 2011

26.

Product Launch for 2nd Cancer Type Developed

 

June, 2012

 

The next therapy to be developed will treat either brain, pancreatic, ovarian,
prostate, breast or colon cancer or Karposi’s sarcoma.

 

E-22

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APPENDIX E—Commercial Development Plan

 

See Attached

 

E-23

--------------------------------------------------------------------------------

 

See Attached

 

E-24

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REVISED PROPOSAL FOR THE CLINICAL AND

 

COMMERCIAL

 

DEVELOPMENT OF hIL13-PE38QQR AS ANTICANCER AGENT.

 

(U.s. Patent 5,614,191)

 

 

NeoPharm, Inc.

225 E. Deerpath Road

Suite 250

Lake Forest, IL 60045

 

E-25

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NeoPharm’s Action Plan

 

The studies performed by Dr. Puri et al described the expression of
interleukin-13 receptor on solid human tumor cells. The technology describes the
fusion of receptor binding ligand, IL-13, to mutant form of a bacterial toxin,
Pseudomonas exotoxin (PE38QQR).  The chimeric protein known as hIL13-PE38QQR is
expressed in Escherichia coli.  The resulting fusion protein is obtained from
the inclusion bodies in E. coli, from where they are isolated and purified.
Based on this technology, the fusion protein has been extracted in sufficient
quantities to perform the in vitro experiments in several human cell lines to
derme the therapeutic potential of this technology. It has been demonstrated
that the chimeric human protein hIL13-PE38QQR is cytotoxic in picomole
concentration to human glioblastomas cells and renal cancer cells. These are
highly exciting observations since IL-13 receptors are very exclusively
expressed by the human solid tumors and not by the normal cells of the body so
far examined. Hence, specific targeting to tumor sites with this chimeric
protein should be more effective while avoiding the toxicities to the normal
cells. This modality of treatment in cancer chemotherapy will be potentially
preferred since treatment limiting toxicities of anticancer drugs are the major
obstacles for the successful management of the disease. At present the
technology describes the in vitro application, however, some preliminary in vivo
efficacy data recently became available. Hence, a major thrust of our
Development Plan will be to a) obtain large quantities of this chimeric protein
and to derme whether b) chimeric protein is as effective in vivo as in vitro, c)
to identify other tumor types which express IL-13 receptors such as pancreatic
cancers, Kaposi’s sarcoma, prostate cancer and colon cancers, etc., d) to
identify the toxicities of this chimeric protein in at least two animal species
by administering it through i.v., or i.p., and to define the

 

E-26

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LD10, LD50 and LD100 doses in animals and e) to perform the clinical trials of
this chimeric protein in various indications leading to the approval and
marketing of this product.

 

1.         Implement Plans to Independently Secure future Continuing Supplies of
hIL13-PE38QQR for Preclinical and Clinical Development:

 

The chimeric protein hIL13-PE38QQR is extracted from Escherichia Coli from the
inclusion bodies. The process which is developed by Dr. Puri, Dr. Pas tan and
Dr. Debinski provides quantities which are sufficient for in vitro and in a
limited scale for in vivo studies.  However, for enlarged preclinical evaluation
and for Phase I clinical use, the chimeric fusion protein has to be produced in
larger quantities under Good Laboratory Practice (GLP) and Good Manufacturing
Practice (GMP). NeoPharm believes that this task can be easily achieved by
contracting out the scale-up production. With that consideration, NeoPharm has
already identified three places where this chimeric protein can potentially be
scaled-up. One of these is Inland Laboratories of Houston, Texas (contact
person: Dr. Jerry Fulton), the second is Advanced Biosciences Laboratory,
Kensington, MD (contact person:  Dr. Phil Markhum) and the third is Biological
Response Modifier Programs of NCI, Frederick, MD, where fee-for-service
contracts are now accepted (contact person: Dr. Steve Creekmore).  NeoPharm will
select one of these sites for scale-up production after the formal approval of
this licensing application.  The scale-up production of this chimeric protein
will be achieved with the full cooperation and participation of the inventors of
this technology.  The exact methodology of transfecting the E. Coli with the
combined gene of IL-13R binding domain and the exotoxin gene expressing PE38QQR
will be provided to contract manufacturer.  The manufacturer will perform this
transfection, the E. Coli are grown in controlled media and from the inclusion
bodies, IL13-PE38QQR is extracted, purified by gel chromatography and HPLC
method and analyzed by Western Blot for biological

 

E-27

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characterization and cytotoxic characterization in Renal Cells Carcinoma (RCC
cells). The scale-up chimeric protein has to meet all the criteria which are
established by Dr. Puri’s laboratory at FDA. It is expected that the production
of hIL13-PE38QQR in either of the places mentioned above would be sufficient for
preclinical and Phase I studies with this protein. We expect that this chimeric
protein should be available to us in sufficient quantity within one year of
signing agreement. However, a major challenge would be to have enlarged
quantities for Phase II trial leading to commercialization. This will involve
identifying a pharmaceutical manufacturer with large fermentation capacity and
resources to biologically characterize the chimeric protein production with full
compliance of GLP and GMP requirements. We will undertake this task while the
Phase I trials are in progress and the data supports the biological activity of
hIL13-PE38QQR in a particular cancer type. In any situation, the investigators
at FDA and NCI have to interact closely with the pharmaceutical manufacturer to
validate the method and biologic activity of this chimeric protein with the
established laboratory methods.

 

2.             To further enhance the in vitro and in vivo studies of
hIL13-PE38QQR:

 

Within four months following the availability of sufficiently large quantities
of this chimeric protein hIL13-PE38QQR, further studies will be performed to
evaluate its cytotoxicity in Kaposi’s sarcoma cells, prostate cancer and
pancreatic cancer established cell lines. These cell lines will be maintained at
Dr. Puri’s laboratory and necessary experiments will be performed there.

 

The in vivo therapeutic evaluation of the chimeric protein hIL13-PE38QQR will be
performed in nude mice implanted with renal carcinoma cells and Kaposi’s sarcoma
cells. These tumor cells will be implemented S.C. and when the tumor mass
becomes about 50 mm3, mice will be randomly divided in a group of ten and will
be injected i. v. with this chimeric protein. The

 

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chimeric protein doses will range from 5 jlg/kg to 50 jlg/kg and will be
administered three times at alternate days. The tumor volume will be calculated
based on the formula, volume = (length) x (width)2 x (0.4). These doses will
give a determination of minimal effective dose, most optimal dose as well as
toxic therapeutic dose. The mice will be observed till day 60. The dose range
employed in this study will determine the effectiveness of this modality of
treatment in delaying the growth of the tumor, in completely curing the mice
with tumor and also the cure rate of tumor with associated toxicities. It is
expected that it will take about six months to complete these studies with
necessary reporting to the company by the contractor.

 

3.             In Vivo Toxicity Evaluation

 

It is possible that the chimeric protein hIL13-PE38QQR would bind and
internalize non-specifically into normal tissues, particularly the liver, thus
adversely compromising the therapeutic potential of this modality of treatment.
Further, a safe starting dose for clinical trial in humans will be derived by
the LDIO doses in mice and rats. Hence, nude mice will be injected i.v. with
this chimeric protein at doses of 50 p.g - 250 p.g/kg on day 1, 3 and 5, having
10 mice at each dose level. Three days after the last dose, half of the mice in
each group will be bled by orbital sinus, blood will be collected and
chemistries will be performed. Mice will then be sacrificed by cervical
dislocation and tissues will be fixed in formalin for histopathologic
evaluation. The blood chemistry determination will define the alterations in
liver function tests as well as any abnormalities in metabolic processes. The
tissues such as liver and spleen with abnormalities will identify the possible
non-specific binding of this chimeric protein to these organs and pathological
lesions observed therein.  All these studies will be performed in a GLP
laboratory which is approved by FDA such as Hazelton Labs of Virginia.

 

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A major concern with this chimeric protein is the manifestation of Vasculature
Leakage Syndrome, VLS.  This phenomenon has been observed with other
immunotoxins such as LMB-l. Though the chimeric protein LMB-l is much bigger
than the chimeric protein hIL13-PE38QQR, it is hoped that manifestations of VLS
will be minimal with this agent.  However, it will be highly prudent to evaluate
the occurrence of this syndrome in mice and rats by histopathologic
determinations established in Dr. Puri’s laboratory.  This methodology will be
established in the contract laboratory of NeoPharm to perform the VLS studies.
In addition, the dose range we have selected with this chimeric protein hIL13
PE38QQR will define the LD10 and LD50 doses in nude mice. The understanding of
these doses will define the safe starting dose of this chimeric protein in
humans. The same studies will be performed in rats at equivalent doses of mice.

 

We expect these studies to be completed within six months.

 

Pharmacokinetic Studies

 

The phannacokinetic studies of the chimeric protein hIL13-PE38QQR will be
performed in nude mice at a dose of 25 jLg/kg Lv. For this study, thirty mice
will be used and three mice at specified time will be bled from orbital sinus
and 100-200 jLl of blood will be collected at 5, 10, 15, 20, 30, 60 and 120
minutes and at 4, 6 and 24 hours. The serum will be separated and stored at
-70°C before the determination of toxin levels. Levels of recombinant toxin will
be determined by their cytotoxic activity toward renal cell carcinoma (RCC)
cells using a standard curve generated by the cytotoxic activity of purified
toxin toward RCC cells. (These methods are well established in Dr. Puri’s
laboratory).  The levels of toxin in the serum will be assayed by the contract
laboratory as identified by NeoPharm.  In addition, the tissues will be
homogenized in saline, centrifuged and supernatant will be assayed for the toxin
levels by the established

 

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methods. These studies will provide the plasma half-life, area under the plasma
concentration curve, clearance, and volume of distribution as well as tissue
distribution of this toxin.  The attached chart describes the major activities
which NeoPharm will be supporting for hIL13-PE38QQR.  We expect that this
portion of studies will be completed within six months.

 

4.             Clinical Evaluation of hIL13-PE38QQR Chimeric Protein:

 

Within six months of having performed the in vivo toxicity and therapeutic
evaluation of this chimeric protein, NeoPharm will submit an IND for the
initiation of Phase I clinical trial.  This Phase I trial will be designed by
NeoPharm and Dr. Puri and other collaborators at FDA and NCI. A major thrust of
this Phase I protocol would be to identify the toxicities and if possible,
efficacy of this chimeric protein at various dose levels. The starting Phase I
dose of this chimeric protein will be 1/10h of the LD10 dose in mice. Assuming
the LD10 dose of hIL13-PE38QQR to be 500 fJ.g/kg, the starting dose of Phase I
in patients will be 50 fLg/kg. Three patients will receive this dose level and
will be evaluated fully for the next three weeks for any toxicities. If no
toxicities are observed, a cohort of three patients will be started with 50 %
higher dose level of the initial dose and will be observed similarly for three
weeks. If no grade 3 or 4 toxicities are observed, then the dose will be
escalated to 100% i.e. 100 fJ.g/kg in the next cohort of 3 patients. This scheme
of dose escalation will be continued in patients till grade 3 or 4 toxicities
are encountered. If that happens, then the dose will be reduced to half the
previous dose to describe in more detail the toxicities in 3 more patients. This
will then be defined as the maximum tolerated dose (MTD). It is expected that
the whole Phase I trial will enroll about 25 patients. It is executed that this
Phase I trial will take about one year to be completed with full clinical
evaluation of the data.

 

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Patients eligible for this study will have a histologic diagnosis of a malignant
solid tumor and have exhausted the available chemotherapeutic protocols for
their disease, or have a malignant disease for which no palliable therapy is
available. Where possible, biopsy samples of the tumor will be obtained to
determine the IL-13 receptor sites. To enroll in the study, patients must be
over 18 years of age and a KPS of at least 70%, with adequate bone marrow
reserves and no organ function abnormality. All patients must provide an
informed, written consent in accordance with Federal and Institutional
guidelines. Though patients with any kind of malignancies will be enrolled, the
investigators will give preference to enroll kidney cancer patients with distant
metastasis to have some feeling about the performance of the chimeric protein
hIL13-PE38QQR in the planned Phase II setting. In this Phase I trial all the
patients, before therapy, will be required to have a medical history, physical
examination, complete blood counts, biochemical profile analysis,
electrocardiograms, chest x-rays and CAT scans as required for establishing the
index of lesions. Patients will be monitored weekly for most of the above tests
to define the occurrence of any toxicities as well as for the appearance of any
antibodies either related to the recombinant protein receptor or recombinant
exotoxin. Toxicities will be documented according to the Common Toxicity
Criteria, Clinical Trials Evaluation Program, National Cancer Institute.
Patients will be very carefully evaluated for Vascular Leakage Syndrome, fluid
retention, hypotension, pulmonary edema and dyspnea.

 

NeoPharm’s Plan and Support for Clinical Development Leading to FDA Approval for
Marketing.

 

After the completion of Phase I trial of hIL13-PE38QQR, NeoPharm will start a
Phase II trial with the MTD doses of this chimeric protein in kidney cancer
patients with metastasis.  This trial will enroll 20 patients to defme the
efficacy of this chimeric protein for this indication.  The

 

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enrollment criteria will include histologic diagnosis of a malignant tumor which
has not responded to conventional chemotherapy. Those patients should not have
been treated with any immune modulator and do not express any antibodies for any
known immune modulator.  This exclusion criteria ensures that overlapping
toxicities are not manifested to mask any effect of this therapy. This Phase II
trial will take six to nine months to be completed. If there are two responders
in this limited Phase II trial, then NeoPharm, in concurrence with FDA, will
start an enlarged Phase II trial at various cancer centers.  This enlarged Phase
II trial will enroll at least 150 patients who have been newly diagnosed with
the cancer. It is estimated that this Phase II trial will take about 18 months
to be completed.  Since there is no approved drug for kidney cancer patients, a
randomized Phase II trial would possibly be not required under the present
guidelines of Cancer Drug Approval of FDA as initiated by Clinton
Administration.  Though IL-2 is indicated for kidney cancer patients with KPS
0-1, however, patients with KPS 2-4 are contraindicated and therapy does not
appear to have any clinical activity rather appears to be more toxic to those
patient population.  Hence, it is expected that this enlarged Phase II trial
will serve as a pivotal trial leading to the approval of drug from FDA depending
on the clinical outcome and eventual approval for commercialization of this
chimeric protein. NeoPharm expects to submit a BLA application six months after
the enlarged Phase II trial is completed.  However, if the FDA feels that we
have to perform a Phase II trial to justify the approval of this agent for
commercialization, NeoPharm will undertake the trial which will enroll 300
patients to establish the efficacy of this agent for renal cell carcinoma and
will take a minimum of two years to complete it.

 

To seek further indications for this chimeric protein as cancer therapeutic
agent, NeoPharm will support Phase II trials of hIL13-PE38QQR in Kaposi’s
sarcoma and brain cancer patients. The

 

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preliminary data which is gathered in the laboratory of Dr. Puri provides the
justification for the initiation of these trials. Depending on the clinical
outcome of these trials and the clinical efficacy of this chimeric protein for
these neoplasms, decisions will be made by NeoPharm and FDA and NCI
investigators to either up-scale the efforts or downsize the efforts. In any
situation, it will be prudent for the company to seek one indication
aggressively and dedicate most of the resources for that clinical indication.

 

NeoPharm will collect all the clinical data, perform the statistical analysis,
compile the clinical efficacy and for each patient list the adverse reactions
observed. The company will compile the whole CMC relating to the commercial
production of this chimeric protein. All this work will be done independently by
the Company to avoid any perceived or factual appearance of the conflict of
interest with FDA due to the association of the inventors. As has been described
in the various action plan of the company, NeoPharm will become a major partner
with FDA and NCI investigators in promoting efforts and clinical trials for this
chimeric protein hIL13-PE38QQR. However, when the approval application for
marketing of this chimeric protein is prepared, there will be an arms length
relationship between the company and FDA, NCI investigators. The eventual
marketing of this compound at reasonable cost will have a major impact on
overall well being of the cancer patients. It is hoped that these efforts by
NeoPharm will provide access for this compound to community oncologist for a
wider spectrum of needy patients and will eventually improve their quality of
life, and as well as extend the survival rates of those patients.

 

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ADDENDUM TO PROTOCOL

 

The following is the addendum for the quality control testing of the IL-13
chimeric protein.  This addendum becomes an integral part of the attached
protocol.

 

The homogeneity of the chimeric protein will be performed by:

 

1.             SDS - polyacrylamide gel filtration

2.             Reverse- phase HPLC

 

In addition, the final product will also be tested for endotoxin levels.  If the
desired levels are not achieved, the endotoxin will be removed by
chromatographic methods until satisfactory levels are achieved.

 

340893

 

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PUBLIC HEALTH SERVICE

 

PATENT LICENSE AGREEMENT - EXCLUSIVE

 

 

COVER PAGE

 

 

For PHS internal use only:

 

Patent License Number:

 

L 162 02/0

 

Serial Number(s) of Licensed Patent(s) and/or Patent Application(s):

 

U.S. Provisional Patent Application, S/N 60/229,842 [DHHS Ref. E-032-00/1],
filed on August 31,2001; and

 

PCT Patent Application, S/N PCT/US00/31044 [DHHS Ref. E-032-00/3], filed on
August 15, 2001.

 

Licensee:

 

NeoPharm, Inc.

150 Fields Drive

Suite 195

Lake Forest, Illinois 60045

 

Phone: (847)295 8678

Fax: (847) 295 8854

 

Cooperative Research and Development Agreement (CRADA) Number (if applicable):

 

No. 26 97 with the Food and Drug Administration

 

Additional Remarks: N/A

 

 

Public Benefit(s):

 

NeoPharm, Inc. agrees, after its First Commercial Sale, to make reasonable
quantities of Licensed Product(s) or materials produced through the use of
Licensed Process(es) available on a compassionate use basis to patients, either
through the patient’s physician(s) and/or the medical center treating the
patient; and

 

NeoPharm, Inc. further agrees, after its First Commercial Sale and as part of
its marketing and product promotion, to develop written educational materials
(e.g., brochures, advertisements, etc.) directed to patients and physicians
detailing the Licensed Products) and its use to treat cancer.

 

E-36

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This Patent License Agreement, hereinafter referred to as the “Agreement”,
consists of this Cover Page, an attached Agreement, a Signature Page, Appendix A
(List of Patent(s) and/or Patent Application(s)), Appendix B (Fields of Use and
Territory), Appendix C (Royalties), Appendix D (Modifications), Appendix E
(Benchmarks), and Appendix F (Commercial Development Plan). The Parties to this
Agreement are:

 

1)             The National Institutes of Health (“NIH”), the Centers for
Disease Control and Prevention (“CDC”), or the Food and Drug Administration
(“FDA”), hereinafter singly or collectively referred to as “PHS”, agencies of
the United States Public Health Service within the Department of Health and
Human Services (“DHHS”); and

 

2)             The person, corporation, or institution identified above and/or
on the Signature Page, having offices at the address indicated on the Signature
Page, hereinafter referred to as “Licensee”.

 

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PHS PATENT LICENSE AGREEMENT - EXCLUSIVE

 

PHS and Licensee agree as follows:

 

1.             BACKGROUND

 

1.01         IN THE COURSE OF CONDUCTING BIOMEDICAL AND BEHAVIORAL RESEARCH, PUS
INVESTIGATORS MADE INVENTIONS THAT MAY HAVE COMMERCIAL APPLICABILITY.

 

1.02         BY ASSIGNMENT OF RIGHTS FROM PHS EMPLOYEES AND OTHER INVENTORS,
DHHS, ON BEHALF OF THE UNITED STATES GOVERNMENT, OWNS INTELLECTUAL PROPERTY
RIGHTS CLAIMED IN ANY UNITED STATES AND/OR FOREIGN PATENT APPLICATIONS OR
PATENTS CORRESPONDING TO THE ASSIGNED INVENTIONS. ALL RIGHTS, TITLES AND
INTERESTS IN THE LICENSED PATENT RIGHTS HAVE BEEN TRANSFERRED TO PUS. DHHS ALSO
OWNS ANY TANGIBLE EMBODIMENTS OF THESE INVENTIONS ACTUALLY REDUCED TO PRACTICE
BY PUS.

 

1.03         THE SECRETARY OF DHHS HAS DELEGATED TO PUS THE AUTHORITY TO MITER
INTO THIS AGREEMENT FOR THE LICENSING OF RIGHTS TO THESE INVENTIONS UNDER 35
U.S.C. §§200 212, THE FEDERAL TECHNOLOGY TRANSFER ACT OF 1986, 15 U.S.C. §3710A,
AND/OR REGULATIONS GOVERNING THE LICENSING OF GOVERNMENT OWNED INVENTIONS, 37
CFR PART 404.

 

1.04         PUS DESIRES TO TRANSFER THESE INVENTIONS TO THE PRIVATE SECTOR
THROUGH COMMERCIALIZATION LICENSES TO FACILITATE THE COMMERCIAL DEVELOPMENT OF
PRODUCTS AND PROCESSES FOR PUBLIC USE AND BENEFIT.

 

1.05         LICENSEE DESIRES TO ACQUIRE RIGHTS TO CERTAIN OF THESE INVENTIONS
IN ORDER TO DEVELOP PROCESSES, METHODS, AND/OR MARKETABLE PRODUCTS FOR PUBLIC
USE AND BENEFIT.

 

2.             DEFINITIONS

 

2.01         “BENCHMARKS” MEAN THE PERFORMANCE MILESTONES THAT ARE SET FORTH IN
APPENDIX E.

 

2.02         “COMMERCIAL DEVELOPMENT PLAN” MEANS THE WRITTEN COMMERCIALIZATION
PLAN ATTACHED AS APPENDIX F.

 

2.03         “FIRST COMMERCIAL SALE” MEANS THE INITIAL TRANSFER BY OR ON BEHALF
OF LICENSEE OR ITS SUBLICENSEES OF LICENSED PRODUCT(S) OR THE INITIAL PRACTICE
OF A LICENSED PROCESS(ES) BY OR ON BEHALF OF LICENSEE OR ITS SUBLICENSEES IN
EXCHANGE FOR CASH OR SOME EQUIVALENT TO WHICH VALUE CAN BE ASSIGNED FOR THE
PURPOSE OF DETERMINING NET SALES.

 

2.04         “GOVERNMENT” MEANS THE GOVERNMENT OF THE UNITED STATES OF AMERICA.

 

2.05         “LICENSED FIELDS OF USE” MEANS THE FIELDS OF USE IDENTIFIED IN
APPENDIX B.

 

2.06         “LICENSED PATENT RIGHTS” SHALL MEAN:

 

E-38

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A)             PATENT APPLICATIONS (INCLUDING PROVISIONAL PATENT APPLICATIONS
AND PCT PATENT APPLICATIONS) AND/OR PATENTS LISTED IN APPENDIX A, ALL DIVISIONS
AND CONTINUATIONS OF THESE APPLICATIONS, ALL PATENTS ISSUING FROM SUCH
APPLICATIONS, DIVISIONS, AND CONTINUATIONS, AND ANY REISSUES, REEXAMINATIONS,
AND EXTENSIONS OF ALL SUCH PATENTS;

 

B)            TO THE EXTENT THAT THE FOLLOWING CONTAIN ONE OR MORE CLAIMS
DIRECTED TO THE INVENTION OR INVENTIONS DISCLOSED IN A) ABOVE: I)
CONTINUATIONS-IN-PART OF A) ABOVE; II) ALL DIVISIONS AND CONTINUATIONS OF THESE
CONTINUATIONS IN PART; III) ALL PATENTS ISSUING FROM SUCH CONTINUATIONS IN PART,
DIVISIONS, AND CONTINUATIONS; IV) PRIORITY PATENT APPLICATIONS) OF A) ABOVE; AND
V) ANY REISSUES, REEXAMINATIONS, AND EXTENSIONS OF ALL SUCH PATENTS;

 

C)             TO THE EXTENT THAT THE FOLLOWING CONTAIN ONE OR MORE CLAIMS
DIRECTED TO THE INVENTION OR INVENTIONS DISCLOSED IN A) ABOVE: ALL COUNTERPART
FOREIGN AND U.S. PATENT APPLICATIONS AND PATENTS TO A) AND B) ABOVE, INCLUDING
THOSE LISTED IN APPENDIX A.

 

Licensed Patent Rights shall not include b) or c) above to the extent that they
contain one or more claims directed to new matter which is not the subject
matter disclosed in a) above.

 

2.07         “LICENSED PROCESS(ES)” MEANS PROCESSES WHICH, IN THE COURSE OF
BEING PRACTICED WOULD BE WITHIN THE SCOPE OF ONE OR MORE CLAIMS OF THE LICENSED
PATENT RIGHTS THAT HAVE NOT BEEN HELD UNPATENTABLE, INVALID OR UNENFORCEABLE BY
AN UNAPPEALED OR UNAPPEALABLE JUDGMENT OF A COURT OF COMPETENT JURISDICTION.

 

2.08         “LICENSED PRODUCT(S)” MEANS TANGIBLE MATERIALS, WHICH, IN THE
COURSE OF MANUFACTURE, USE, SALE, OR IMPORTATION WOULD BE WITHIN THE SCOPE OF
ONE OR MORE CLAIMS OF THE LICENSED PATENT RIGHTS THAT HAVE NOT BEEN HELD
UNPATENTABLE, INVALID OR UNENFORCEABLE BY AN UNAPPEALED OR UNAPPEALABLE JUDGMENT
OF A COURT OF COMPETENT JURISDICTION.

 

2.09         “LICENSED TERRITORY” MEANS THE GEOGRAPHICAL AREA IDENTIFIED IN
APPENDIX B.

 

2.10         “NET SALES” MEANS THE TOTAL GROSS RECEIPTS FOR SALES OF LICENSED
PRODUCT(S) OR PRACTICE OF LICENSED PROCESS(ES) BY OR ON BEHALF OF LICENSEE OR
ITS SUBLICENSEES, AND FROM LEASING, RENTING, OR OTHERWISE MAKING LICENSED
PRODUCT(S) AVAILABLE TO OTHERS WITHOUT SALE OR OTHER DISPOSITIONS, WHETHER
INVOICED OR NOT, LESS RETURNS AND ALLOWANCES, PACKING COSTS, INSURANCE COSTS,
FREIGHT OUT, TAXES OR EXCISE DUTIES IMPOSED ON THE TRANSACTION (IF SEPARATELY
INVOICED), AND WHOLESALER AND CASH DISCOUNTS IN AMOUNTS CUSTOMARY IN THE TRADE
TO THE EXTENT ACTUALLY GRANTED. NO DEDUCTIONS SHALL BE MADE FOR COMMISSIONS PAID
TO INDIVIDUALS, WHETHER THEY BE WITH INDEPENDENT SALES AGENCIES OR REGULARLY
EMPLOYED BY LICENSEE, OR SUBLICENSEES, AND ON ITS PAYROLL, OR FOR THE COST OF
COLLECTIONS.

 

2.11         “PRACTICAL APPLICATION” MEANS TO MANUFACTURE IN THE CASE OF A
COMPOSITION OR PRODUCT, TO PRACTICE IN THE CASE OF A PROCESS OR METHOD, OR TO
OPERATE IN THE CASE OF

 

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A MACHINE OR SYSTEM; AND IN EACH CASE, UNDER SUCH CONDITIONS AS TO ESTABLISH
THAT THE INVENTION IS BEING UTILIZED AND THAT ITS BENEFITS ARE TO THE EXTENT
PERMITTED BY LAW OR GOVERNMENT REGULATIONS AVAILABLE TO THE PUBLIC ON REASONABLE
TERMS.

 

2.12         “RESEARCH LICENSE” MEANS A NONTRANSFERABLE, NONEXCLUSIVE LICENSE TO
MAKE AND TO USE THE LICENSED PRODUCT(S) OR LICENSED PROCESS(ES) AS DEFINED BY
THE LICENSED PATENT RIGHTS FOR PURPOSES OF RESEARCH AND NOT FOR PURPOSES OF
COMMERCIAL MANUFACTURE OR DISTRIBUTION OR IN LIEU OF PURCHASE.

 

3.             GRANT OF RIGHTS

 

3.01         PHS HEREBY GRANTS AND LICENSEE ACCEPTS, SUBJECT TO THE TERMS AND
CONDITIONS OF THIS AGREEMENT, AN EXCLUSIVE LICENSE UNDER THE LICENSED PATENT
RIGHTS IN THE LICENSED TERRITORY TO MAKE AND HAVE MADE, TO USE AND HAVE USED, TO
SELL AND HAVE SOLD, TO OFFER TO SELL, AND TO IMPORT ANY LICENSED PRODUCT(S) IN
THE LICENSED FIELDS OF USE AND TO PRACTICE AND HAVE PRACTICED ANY LICENSED
PROCESS(ES) IN THE LICENSED FIELDS OF USE.

 

3.02         THIS AGREEMENT CONFERS NO LICENSE OR RIGHTS BY IMPLICATION,
ESTOPPEL, OR OTHERWISE UNDER ANY PATENT APPLICATIONS OR PATENTS OF PHS OTHER
THAN LICENSED PATENT RIGHTS REGARDLESS OF WHETHER SUCH PATENTS ARE DOMINANT OR
SUBORDINATE TO LICENSED PATENT RIGHTS.

 

4.             SUBLICENSING

 

4.01         UPON WRITTEN APPROVAL BY PHS, WHICH APPROVAL SHALL NOT BE
UNREASONABLY WITHHELD, LICENSEE MAY ENTER INTO SUBLICENSING AGREEMENTS UNDER THE
LICENSED PATENT RIGHTS.

 

4.02         LICENSEE AGREES THAT ANY SUBLICENSES GRANTED BY IT SHALL PROVIDE
THAT THE OBLIGATIONS TO PHS OF PARAGRAPHS 5.01 5.04, 8.01, 10.01 10.04, 12.05,
AND 13.07 13.09 OF THIS AGREEMENT SHALL BE BINDING UPON THE SUBLICENSEE AS IF IT
WERE A PARTY TO THIS AGREEMENT. LICENSEE FURTHER AGREES TO ATTACH COPIES OF
THESE PARAGRAPHS TO ALL SUBLICENSE AGREEMENTS.

 

4.03         ANY SUBLICENSES GRANTED BY LICENSEE SHALL PROVIDE FOR THE
TERMINATION OF THE SUBLICENSE, OR THE CONVERSION TO A LICENSE DIRECTLY BETWEEN
SUCH SUBLICENSEES AND PHS, AT THE OPTION OF THE SUBLICENSEE, UPON TERMINATION OF
THIS AGREEMENT UNDER ARTICLE 13. SUCH CONVERSION IS SUBJECT TO PHS APPROVAL AND
CONTINGENT UPON ACCEPTANCE BY THE SUBLICENSEE OF THE REMAINING PROVISIONS OF
THIS AGREEMENT.

 

4.04         LICENSEE AGREES TO FORWARD TO PHS A COPY OF EACH FULLY EXECUTED
SUBLICENSE AGREEMENT POSTMARKED WITHIN THIRTY (30) DAYS OF THE EXECUTION OF SUCH
AGREEMENT. TO THE EXTENT PERMITTED BY LAW, PHS AGREES TO MAINTAIN EACH SUCH
SUBLICENSE AGREEMENT IN CONFIDENCE.

 

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5.             STATUTORY AND PHS REQUIREMENTS AND RESERVED GOVERNMENT RIGHTS

 

5.01         (A)           PHS RESERVES ON BEHALF OF THE GOVERNMENT AN
IRREVOCABLE, NONEXCLUSIVE, NONTRANSFERABLE, ROYALTY FREE LICENSE FOR THE
PRACTICE OF ALL INVENTIONS LICENSED UNDER THE LICENSED PATENT RIGHTS THROUGHOUT
THE WORLD BY OR ON BEHALF OF THE GOVERNMENT AND ON BEHALF OF ANY FOREIGN
GOVERNMENT OR INTERNATIONAL ORGANIZATION PURSUANT TO ANY EXISTING OR FUTURE
TREATY OR AGREEMENT TO WHICH THE GOVERNMENT IS A SIGNATORY.

 

(b)           In the event that Licensed Patent Rights are Subject Inventions
made under a Cooperative Research and Development Agreement (CRADA), Licensee
grants to the Government, pursuant to 15 U.S.C. §3710a(b)(1)(A), a nonexclusive,
nontransferable, irrevocable, paid up license to practice Licensed Patent Rights
or have Licensed Patent Rights practiced throughout the world by or on behalf of
the Government. In the exercise of such license, the Government shall not
publicly disclose trade secrets or commercial or financial information that is
privileged or confidential within the meaning of 5 U.S.C. §552(b)(4) or which
would be considered as such if it had been obtained from a non Federal party.

 

5.02         LICENSEE AGREES THAT PRODUCTS USED OR SOLD IN THE UNITED STATES
EMBODYING LICENSED PRODUCT(S) OR PRODUCED THROUGH USE OF LICENSED PROCESS(ES)
SHALL BE MANUFACTURED SUBSTANTIALLY IN THE UNITED STATES, UNLESS A WRITTEN
WAIVER IS OBTAINED IN ADVANCE FROM PHS.

 

5.03         LICENSEE ACKNOWLEDGES THAT PHS MAY ENTER INTO FUTURE CRADAS UNDER
THE FEDERAL TECHNOLOGY TRANSFER ACT OF 1986 THAT RELATE TO THE SUBJECT MATTER OF
THIS AGREEMENT. LICENSEE AGREES NOT TO UNREASONABLY DENY REQUESTS FOR A RESEARCH
LICENSE FROM SUCH FUTURE COLLABORATORS WITH PHS WHEN ACQUIRING SUCH RIGHTS IS
NECESSARY IN ORDER TO MAKE A CRADA PROJECT FEASIBLE. LICENSEE MAY REQUEST AN
OPPORTUNITY TO JOIN AS A PARTY TO THE CRADA.

 

5.04         (A)           IN ADDITION TO THE RESERVED LICENSE OF PARAGRAPH 5.01
ABOVE, PHS RESERVES THE RIGHT TO GRANT NONEXCLUSIVE RESEARCH LICENSES DIRECTLY
OR TO REQUIRE LICENSEE TO GRANT NONEXCLUSIVE RESEARCH LICENSES ON REASONABLE
TERMS. THE PURPOSE OF THIS RESEARCH LICENSE IS TO ENCOURAGE BASIC RESEARCH,
WHETHER CONDUCTED AT AN ACADEMIC OR CORPORATE FACILITY. IN ORDER TO SAFEGUARD
THE LICENSED PATENT RIGHTS, HOWEVER, PHS SHALL CONSULT WITH LICENSEE BEFORE
GRANTING TO COMMERCIAL ENTITIES A RESEARCH LICENSE OR PROVIDING TO THEM RESEARCH
SAMPLES OF MATERIALS MADE THROUGH THE LICENSED PROCESS(ES).

 

(b)          In exceptional circumstances, and in the event that Licensed Patent
Rights are Subject Inventions made under a CRADA, the Government, pursuant to 15
U.S.C. §3710a(b)(1)(B), retains the right to require the Licensee to grant to a
responsible applicant a nonexclusive, partially exclusive, or exclusive
sublicense to use Licensed Patent Rights in Licensee’s field of use on terms
that are reasonable under the circumstances; or if Licensee fails to grant such
a license,

 

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the Government retains the right to grant the license itself. The exercise of
such rights by the Government shall only be in exceptional circumstances and
only if the Government determines (i) the action is necessary to meet health or
safety needs that are not reasonably satisfied by Licensee; (ii) the action is
necessary to meet requirements for public use specified by Federal regulations,
and such requirements are not reasonably satisfied by the Licensee; or (iii) the
Licensee has failed to comply with an agreement containing provisions described
in 15 U.S.C. §3710a(c)(4)(B). The determination made by the Government under
this Article is subject to administrative appeal and judicial review under 35
U.S.C. §203(2).

 

6.             ROYALTIES AND REIMBURSEMENT

 

6.01         LICENSEE AGREES TO PAY TO PHS A NONCREDITABLE, NONREFUNDABLE
LICENSE ISSUE ROYALTY AS SET FORTH IN APPENDIX C WITHIN THIRTY (30) DAYS FROM
THE DATE THAT THIS AGREEMENT BECOMES EFFECTIVE.

 

6.02         LICENSEE AGREES TO PAY TO PHS A NONREFUNDABLE MINIMUM ANNUAL
ROYALTY AS SET FORTH IN APPENDIX C. THE MINIMUM ANNUAL ROYALTY IS DUE AND
PAYABLE ON JANUARY 1 OF EACH CALENDAR YEAR, AND THE MINIMUM ANNUAL ROYALTY DUE
FOR THE FIRST CALENDAR YEAR OF THIS AGREEMENT MAY BE PRORATED ACCORDING TO THE
FRACTION OF THE CALENDAR YEAR REMAINING BETWEEN THE EFFECTIVE DATE OF THIS
AGREEMENT AND THE NEXT SUBSEQUENT JANUARY 1;

 

a)           PHS agrees to waive the minimum annual royalty as long as
Licensee’s CRADA, No. 26 97, with the Food and Drug Administration is in effect.
Licensee agrees to start paying the minimum annual royalty once the CICADA has
expired or been terminated.  Upon said expiration or termination, the first
minimum annual royalty will be due on the following January 1.

 

6.03         LICENSEE AGREES TO PAY PHS EARNED ROYALTIES AS SET FORTH IN
APPENDIX C.

 

6.04         LICENSEE AGREES TO PAY PHS BENCHMARK ROYALTIES AS SET FORTH IN
APPENDIX C.

 

6.05         LICENSEE AGREES TO PAY PHS SUBLICENSING ROYALTIES AS SET FORTH IN
APPENDIX C.

 

6.06         A CLAIM OF A PATENT OR PATENT APPLICATION LICENSED UNDER THIS
AGREEMENT SHALL CEASE TO FALL WITHIN THE LICENSED PATENT RIGHTS FOR THE PURPOSE
OF COMPUTING THE MINIMUM ANNUAL ROYALTY OR THE EARNED ROYALTY PAYMENTS IN ANY
GIVEN COUNTRY ON THE EARLIEST OF THE DATES THAT A) THE CLAIM OR APPLICATION HAS
BEEN ABANDONED AND NOT CONTINUED, B) THE PATENT EXPIRES OR IRREVOCABLY LAPSES,
OR C) THE CLAIM HAS BEEN HELD TO BE INVALID OR UNENFORCEABLE BY AN UNAPPEALED OR
UNAPPEALABLE DECISION OF A COURT OF COMPETENT JURISDICTION OR ADMINISTRATIVE
AGENCY.

 

6.07         NO MULTIPLE ROYALTIES SHALL BE PAYABLE BECAUSE ANY LICENSED
PRODUCT(S) OR LICENSED PROCESS(ES) ARE COVERED BY MORE THAN ONE OF THE LICENSED
PATENT RIGHTS.

 

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6.08         ON SALES OF LICENSED PRODUCT(S) BY LICENSEE TO SUBLICENSEES OR ON
SALES MADE IN OTHER THAN AN ARM’S LENGTH TRANSACTION, THE VALUE OF THE NET SALES
ATTRIBUTED UNDER THIS ARTICLE 6 TO SUCH A TRANSACTION SHALL BE THAT WHICH WOULD
HAVE BEEN RECEIVED IN AN ARM’S LENGTH TRANSACTION, BASED ON SALES OF LIKE
QUANTITY AND QUALITY PRODUCTS ON OR ABOUT THE TIME OF SUCH TRANSACTION.

 

6.09         WITH REGARD TO EXPENSES ASSOCIATED WITH THE PREPARATION, FILING,
PROSECUTION, AND MAINTENANCE OF ALL PATENT APPLICATIONS AND PATENTS INCLUDED
WITHIN THE LICENSED PATENT RIGHTS INCURRED BY PHS PRIOR TO THE EFFECTIVE DATE OF
THIS AGREEMENT, LICENSEE SHALL PAY TO PHS, AS AN ADDITIONAL ROYALTY, WITHIN
SIXTY (60) DAYS OF PHS’S SUBMISSION OF A STATEMENT AND REQUEST FOR PAYMENT TO
LICENSEE, AN AMOUNT EQUIVALENT TO SUCH PATENT EXPENSES PREVIOUSLY INCURRED BY
PHS.

 

6.10         WITH REGARD TO EXPENSES ASSOCIATED WITH THE PREPARATION, FILING,
PROSECUTION, AND MAINTENANCE OF ALL PATENT APPLICATIONS AND PATENTS INCLUDED
WITHIN THE LICENSED PATENT RIGHTS INCURRED BY PHS ON OR AFTER THE EFFECTIVE DATE
OF THIS AGREEMENT, PHS, AT ITS SOLE OPTION, MAY REQUIRE LICENSEE:

 

A)             TO PAY PHS ON AN ANNUAL BASIS, WITHIN SIXTY (60) DAYS OF PHS’S
SUBMISSION OF A STATEMENT AND REQUEST FOR PAYMENT, A ROYALTY AMOUNT EQUIVALENT
TO ALL SUCH PATENT EXPENSES INCURRED DURING THE PREVIOUS CALENDAR YEAR(S); OR

 

B)            TO PAY SUCH EXPENSES DIRECTLY TO THE LAW FIRM EMPLOYED BY PHS TO
HANDLE SUCH FUNCTIONS. HOWEVER, IN SUCH EVENT, PHS AND NOT LICENSEE SHALL BE THE
CLIENT OF SUCH LAW FIRM.

 

In limited circumstances, Licensee may be given the right to assume
responsibility for the preparation, filing, prosecution, or maintenance of any
patent application or patent included with the Licensed Patent Rights. In that
event, Licensee shall directly pay the attorneys or agents engaged to prepare,
file, prosecute, or maintain such patent applications or patents and shall
provide to PHS copies of each invoice associated with such services as well as
documentation that such invoices have been paid.

 

6.11         LICENSEE MAY ELECT TO SURRENDER ITS RIGHTS IN ANY COUNTRY OF THE
LICENSED TERRITORY UNDER ANY LICENSED PATENT RIGHTS UPON NINETY (90) DAYS
WRITTEN NOTICE TO PHS AND OWE NO PAYMENT OBLIGATION UNDER ARTICLE 6.10 FOR
PATENT RELATED EXPENSES INCURRED IN THAT COUNTRY AFTER NINETY (90) DAYS OF THE
EFFECTIVE DATE OF SUCH WRITTEN NOTICE.

 

7.             PATENT FILING, PROSECUTION, AND MAINTENANCE

 

7.01         EXCEPT AS OTHERWISE PROVIDED IN THIS ARTICLE 7, PHS AGREES TO TAKE
RESPONSIBILITY FOR, BUT TO CONSULT WITH, THE LICENSEE IN THE PREPARATION,
FILING, PROSECUTION, AND MAINTENANCE OF ANY AND ALL PATENT APPLICATIONS OR
PATENTS INCLUDED IN THE LICENSED PATENT RIGHTS AND SHALL FURNISH COPIES OF
RELEVANT PATENT RELATED DOCUMENTS TO LICENSEE.

 

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7.02         UPON PHS’S WRITTEN REQUEST, LICENSEE SHALL ASSUME THE
RESPONSIBILITY FOR THE PREPARATION, FILING, PROSECUTION, AND MAINTENANCE OF ANY
AND ALL PATENT APPLICATIONS OR PATENTS INCLUDED IN THE LICENSED PATENT RIGHTS
AND SHALL ON AN ONGOING BASIS PROMPTLY FURNISH COPIES OF ALL PATENT RELATED
DOCUMENTS TO PHS. IN SUCH EVENT, LICENSEE SHALL, SUBJECT TO THE PRIOR APPROVAL
OF PHS, SELECT REGISTERED PATENT ATTORNEYS OR PATENT AGENTS TO PROVIDE SUCH
SERVICES ON BEHALF OF LICENSEE AND PHS. PHS SHALL PROVIDE APPROPRIATE POWERS OF
ATTORNEY AND OTHER DOCUMENTS NECESSARY TO UNDERTAKE SUCH ACTIONS TO THE PATENT
ATTORNEYS OR PATENT AGENTS PROVIDING SUCH SERVICES. LICENSEE AND ITS ATTORNEYS
OR AGENTS SHALL CONSULT WITH PHS IN ALL ASPECTS OF THE PREPARATION, FILING,
PROSECUTION AND MAINTENANCE OF PATENT APPLICATIONS AND PATENTS INCLUDED WITHIN
THE LICENSED PATENT RIGHTS AND SHALL PROVIDE PHS SUFFICIENT OPPORTUNITY TO
COMMENT ON ANY DOCUMENT THAT LICENSEE INTENDS TO FILE OR TO CAUSE TO BE FILED
WITH THE RELEVANT INTELLECTUAL PROPERTY OR PATENT OFFICE.

 

7.03         AT ANY TIME, PHS MAY PROVIDE LICENSEE WITH WRITTEN NOTICE THAT PHS
WISHES TO ASSUME CONTROL OF THE PREPARATION, FILING, PROSECUTION, AND
MAINTENANCE OF ANY AND ALL PATENT APPLICATIONS OR PATENTS INCLUDED IN THE
LICENSED PATENT RIGHTS. IF PHS ELECTS TO ASSUME SUCH RESPONSIBILITIES, LICENSEE
AGREES TO COOPERATE FULLY WITH PHS, ITS ATTORNEYS, AND AGENTS IN THE
PREPARATION, FILING, PROSECUTION, AND MAINTENANCE OF ANY AND ALL PATENT
APPLICATIONS OR PATENTS INCLUDED IN THE LICENSED PATENT RIGHTS AND TO PROVIDE
PHS WITH COMPLETE COPIES OF ANY AND ALL DOCUMENTS OR OTHER MATERIALS THAT VHS
DEEMS NECESSARY TO UNDERTAKE SUCH RESPONSIBILITIES. IF PHS ELECTS TO ASSUME
CONTROL OF THE PREPARATION, FILING, PROSECUTION AND MAINTENANCE OF ANY AND ALL
PATENT APPLICATIONS OR PATENTS INCLUDED IN THE LICENSED PATENT RIGHTS FOR A
REASON OTHER THAN LICENSEE’S FAILURE TO PERFORM UNDER THIS AGREEMENT, PHS SHALL
BE RESPONSIBLE FOR ALL COSTS ASSOCIATED WITH TRANSFERRING PATENT PROSECUTION
RESPONSIBILITIES TO AN ATTORNEY OR AGENT OF PHS’S CHOICE.

 

7.04         EACH PARTY SHALL PROMPTLY INFORM THE OTHER AS TO ALL MATTERS THAT
COME TO ITS ATTENTION THAT MAY AFFECT THE PREPARATION, FILING, PROSECUTION, OR
MAINTENANCE OF THE LICENSED PATENT RIGHTS AND PERMIT EACH OTHER TO PROVIDE
COMMENTS AND SUGGESTIONS WITH RESPECT TO THE PREPARATION, FILING, PROSECUTION,
AND MAINTENANCE OF LICENSED PATENT RIGHTS, WHICH COMMENTS AND SUGGESTIONS SHALL
BE CONSIDERED BY THE OTHER PARTY.

 

8.             RECORD KEEPING

 

8.01         LICENSEE AGREES TO KEEP ACCURATE AND CORRECT RECORDS OF LICENSED
PRODUCT(S) MADE, USED, SOLD, OR IMPORTED AND LICENSED PROCESS(ES) PRACTICED
UNDER THIS AGREEMENT APPROPRIATE TO DETERMINE THE AMOUNT OF ROYALTIES DUE PHS.
SUCH RECORDS SHALL BE RETAINED FOR AT LEAST FIVE (5) YEARS FOLLOWING A GIVEN
REPORTING PERIOD AND SHALL BE AVAILABLE DURING NORMAL BUSINESS HOURS FOR
INSPECTION AT THE EXPENSE OF PHS BY AN ACCOUNTANT OR OTHER DESIGNATED AUDITOR
SELECTED BY PHS FOR THE SOLE PURPOSE OF VERIFYING REPORTS AND PAYMENTS
HEREUNDER. THE ACCOUNTANT OR AUDITOR SHALL ONLY DISCLOSE TO PHS INFORMATION
RELATING TO THE ACCURACY OF REPORTS AND PAYMENTS MADE UNDER THIS AGREEMENT. IF
AN INSPECTION SHOWS AN

 

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UNDERREPORTING OR UNDERPAYMENT IN EXCESS OF FIVE PERCENT (5%) FOR ANY TWELVE
(12) MONTH PERIOD, THEN LICENSEE SHALL REIMBURSE PHS FOR THE COST OF THE
INSPECTION AT THE TIME LICENSEE PAYS THE UNREPORTED ROYALTIES, INCLUDING ANY
LATE CHARGES AS REQUIRED BY PARAGRAPH 9.08 OF THIS AGREEMENT. ALL PAYMENTS
REQUIRED UNDER THIS PARAGRAPH SHALL BE DUE WITHIN THIRTY (30) DAYS OF THE DATE
PHS PROVIDES LICENSEE NOTICE OF THE PAYMENT DUE.

 

8.02         LICENSEE AGREES TO HAVE AN AUDIT OF SALES AND ROYALTIES CONDUCTED
BY AN INDEPENDENT AUDITOR AT LEAST EVERY TWO (2) YEARS IF ANNUAL SALES OF THE
LICENSED PRODUCT OR LICENSED PROCESS(ES) ARE OVER TWO (2) MILLION DOLLARS. THE
AUDIT MAY BE CONDUCTED IN CONJUNCTION WITH THE ANNUAL AUDIT PERFORMED ON BEHALF
OF LICENSEE. THE AUDIT SHALL ADDRESS, AT A MINIMUM, THE AMOUNT OF GROSS SALES BY
OR ON BEHALF OF LICENSEE DURING THE AUDIT PERIOD, TERMS OF THE LICENSE AS TO
PERCENTAGE OR FIXED ROYALTY TO BE REMITTED TO THE GOVERNMENT, THE AMOUNT OF
ROYALTY FUNDS OWED TO THE GOVERNMENT UNDER THIS AGREEMENT, AND WHETHER THE
ROYALTY AMOUNT OWED HAS BEEN PAID TO THE GOVERNMENT AND IS REFLECTED IN THE
RECORDS OF THE LICENSEE. THE AUDIT SHALL ALSO INDICATE THE PHS LICENSE NUMBER,
PRODUCT, AND THE TIME PERIOD BEING AUDITED. A REPORT CERTIFIED BY THE AUDITOR
SHALL BE SUBMITTED PROMPTLY BY THE AUDITOR DIRECTLY TO PHS ON COMPLETION.
LICENSEE SHALL PAY FOR THE ENTIRE COST OF THE AUDIT.

 

9.             REPORTS ON PROGRESS, BENCHMARKS, SALES, AND PAYMENTS

 

9.01         PRIOR TO SIGNING THIS AGREEMENT, LICENSEE HAS PROVIDED TO PHS THE
COMMERCIAL DEVELOPMENT PLAN AT APPENDIX F, UNDER WHICH LICENSEE INTENDS TO BRING
THE SUBJECT MATTER OF THE LICENSED PATENT RIGHTS TO THE POINT OF PRACTICAL
APPLICATION. THIS COMMERCIAL DEVELOPMENT PLAN IS HEREBY INCORPORATED BY
REFERENCE INTO THIS AGREEMENT. BASED ON THIS PLAN, PERFORMANCE BENCHMARKS ARE
DETERMINED AS SPECIFIED IN APPENDIX E.

 

9.02         LICENSEE SHALL PROVIDE WRITTEN ANNUAL REPORTS ON ITS PRODUCT
DEVELOPMENT PROGRESS OR EFFORTS TO COMMERCIALIZE UNDER THE COMMERCIAL
DEVELOPMENT PLAN FOR EACH OF THE LICENSED FIELDS OF USE WITHIN SIXTY (60) DAYS
AFTER DECEMBER 31 OF EACH CALENDAR YEAR. THESE PROGRESS REPORTS SHALL INCLUDE,
BUT NOT BE LIMITED TO: PROGRESS ON RESEARCH AND DEVELOPMENT, STATUS OF
APPLICATIONS FOR REGULATORY APPROVALS, MANUFACTURING, SUBLICENSING, MARKETING,
IMPORTING, AND SALES DURING THE PRECEDING CALENDAR YEAR, AS WELL AS PLANS FOR
THE PRESENT CALENDAR YEAR. PHS ALSO ENCOURAGES THESE REPORTS TO INCLUDE
INFORMATION ON ANY OF LICENSEE’S PUBLIC SERVICE ACTIVITIES THAT RELATE TO THE
LICENSED PATENT RIGHTS. IF REPORTED PROGRESS DIFFERS FROM THAT PROJECTED IN THE
COMMERCIAL DEVELOPMENT PLAN AND BENCHMARKS, LICENSEE SHALL EXPLAIN THE REASONS
FOR SUCH DIFFERENCES. IN ANY SUCH ANNUAL REPORT, LICENSEE MAY PROPOSE AMENDMENTS
TO THE COMMERCIAL DEVELOPMENT PLAN, ACCEPTANCE OF WHICH BY PHS MAY NOT BE DENIED
UNREASONABLY. LICENSEE AGREES TO PROVIDE ANY ADDITIONAL INFORMATION REASONABLY
REQUIRED BY PHS TO EVALUATE LICENSEE’S PERFORMANCE UNDER THIS AGREEMENT.
LICENSEE MAY AMEND THE BENCHMARKS AT ANY TIME UPON WRITTEN CONSENT BY PHS. PHS
SHALL NOT UNREASONABLY WITHHOLD APPROVAL OF ANY REQUEST OF LICENSEE TO EXTEND
THE TIME PERIODS OF THIS SCHEDULE IF SUCH

 

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REQUEST IS SUPPORTED BY A REASONABLE SHOWING BY LICENSEE OF DILIGENCE IN ITS
PERFORMANCE UNDER THE COMMERCIAL DEVELOPMENT PLAN AND TOWARD BRINGING THE
LICENSED PRODUCT(S) TO THE POINT OF PRACTICAL APPLICATION AS DEFINED IN 37 CFR
PART 404.3(D). LICENSEE SHALL AMEND THE COMMERCIAL DEVELOPMENT PLAN AND
BENCHMARKS AT THE REQUEST OF PHS TO ADDRESS ANY LICENSED FIELDS OF USE NOT
SPECIFICALLY ADDRESSED IN THE PLAN ORIGINALLY SUBMITTED.

 

9.03         LICENSEE SHALL REPORT TO PHS THE DATES FOR ACHIEVING BENCHMARKS
SPECIFIED IN APPENDIX E AND THE FIRST COMMERCIAL SALE IN EACH COUNTRY IN THE
LICENSED TERRITORY WITHIN THIRTY (30) DAYS OF SUCH OCCURRENCES.

 

9.04         LICENSEE SHALL SUBMIT TO PHS WITHIN SIXTY (60) DAYS AFTER EACH
CALENDAR HALF YEAR ENDING JUNE 30 AND DECEMBER 31 A ROYALTY REPORT SETTING FORTH
FOR THE PRECEDING HALF YEAR PERIOD THE AMOUNT OF THE LICENSED PRODUCT(S) SOLD OR
LICENSED PROCESS(ES) PRACTICED BY OR ON BEHALF OF LICENSEE IN EACH COUNTRY
WITHIN THE LICENSED TERRITORY, THE NET SALES, AND THE AMOUNT OF ROYALTY
ACCORDINGLY DUE. WITH EACH SUCH ROYALTY REPORT, LICENSEE SHALL SUBMIT PAYMENT OF
THE EARNED ROYALTIES DUE. IF NO EARNED ROYALTIES ARE DUE TO PHS FOR ANY
REPORTING PERIOD, THE WRITTEN REPORT SHALL SO STATE. THE ROYALTY REPORT SHALL BE
CERTIFIED AS CORRECT BY AN AUTHORIZED OFFICER OF LICENSEE AND SHALL INCLUDE A
DETAILED LISTING OF ALL DEDUCTIONS MADE UNDER PARAGRAPH 2.10 TO DETERMINE NET
SALES MADE UNDER ARTICLE 6 TO DETERMINE ROYALTIES DUE.

 

9.05         LICENSEE AGREES TO FORWARD SEMI ANNUALLY TO PHS A COPY OF SUCH
REPORTS RECEIVED BY LICENSEE FROM ITS SUBLICENSEES DURING THE PRECEDING HALF
YEAR PERIOD AS SHALL BE PERTINENT TO A ROYALTY ACCOUNTING TO PUS BY LICENSEE FOR
ACTIVITIES UNDER THE SUBLICENSE.

 

9.06         ROYALTIES DUE UNDER ARTICLE 6 SHALL BE PAID IN U.S. DOLLARS. FOR
CONVERSION OF FOREIGN CURRENCY TO U.S. DOLLARS, THE CONVERSION RATE SHALL BE THE
NEW YORK FOREIGN EXCHANGE RATE QUOTED IN THE WALL STREET JOURNAL ON THE DAY THAT
THE PAYMENT IS DUE. ALL CHECKS AND BANK DRAFTS SHALL BE DRAWN ON UNITED STATES
BANKS AND SHALL BE PAYABLE, AS APPROPRIATE, TO “NIH/PATENT LICENSING.” ALL SUCH
PAYMENTS SHALL BE SENT TO THE FOLLOWING ADDRESS: NIH, P.O. BOX 360120,
PITTSBURGH, PA 15251-6120. ANY LOSS OF EXCHANGE, VALUE, TAXES, OR OTHER EXPENSES
INCURRED IN THE TRANSFER OR CONVERSION TO U.S. DOLLARS SHALL BE PAID ENTIRELY BY
LICENSEE. THE ROYALTY REPORT REQUIRED BY PARAGRAPH 9.04 OF THIS AGREEMENT SHALL
ACCOMPANY EACH SUCH PAYMENT, AND A COPY OF SUCH REPORT SHALL ALSO BE MAILED TO
PHS AT ITS ADDRESS FOR NOTICES INDICATED ON THE SIGNATURE PAGE OF THIS
AGREEMENT.

 

9.07         LICENSEE SHALL BE SOLELY RESPONSIBLE FOR DETERMINING IF ANY TAX ON
ROYALTY INCOME IS OWED OUTSIDE THE UNITED STATES AND SHALL PAY ANY SUCH TAX AND
BE RESPONSIBLE FOR ALL FILINGS WITH APPROPRIATE AGENCIES OF FOREIGN GOVERNMENTS.
THE TAXES PAID BY LICENSEE ON BEHALF OF PHS MAYBE DEDUCTED FROM THE EARNED
ROYALTY DUE UNDER PARAGRAPH 6.03.

 

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9.08         INTEREST AND PENALTIES MAY BE ASSESSED BY PHS ON ANY OVERDUE
PAYMENTS IN ACCORDANCE WITH THE FEDERAL DEBT COLLECTION ACT. THE PAYMENT OF SUCH
LATE CHARGES SHALL NOT PREVENT PHS FROM EXERCISING ANY OTHER RIGHTS IT MAY HAVE
AS A CONSEQUENCE OF THE LATENESS OF ANY PAYMENT.

 

9.09         ALL PLANS AND REPORTS REQUIRED BY THIS ARTICLE 9 AND MARKED
“CONFIDENTIAL” BY LICENSEE SHALL, TO THE EXTENT PERMITTED BY LAW, BE TREATED BY
PHS AS COMMERCIAL AND FINANCIAL INFORMATION OBTAINED FRONT A PERSON AND AS
PRIVILEGED AND CONFIDENTIAL, AND ANY PROPOSED DISCLOSURE OF SUCH RECORDS BY THE
PHS UNDER THE FREEDOM OF INFORMATION ACT (FOIA), 5 U.S.C: §552 SHALL BE SUBJECT
TO THE PREDISCLOSURE NOTIFICATION REQUIREMENTS OF 45 CFR PART 5.65(D).

 

10.           PERFORMANCE

 

10.01       LICENSEE SHALL USE ITS REASONABLE COMMERCIAL EFFORTS TO BRING THE
LICENSED PRODUCT(S) AND LICENSED PROCESS(ES) TO PRACTICAL APPLICATION.
“REASONABLE COMMERCIAL EFFORTS” FOR THE PURPOSES OF THIS PROVISION SHALL INCLUDE
ADHERENCE TO THE COMMERCIAL DEVELOPMENT PLAN AT APPENDIX F AND PERFORMANCE OF
THE BENCHMARKS AT APPENDIX E. THE EFFORTS OF A SUBLICENSEE SHALL BE CONSIDERED
THE EFFORTS OF LICENSEE.

 

10.02       UPON THE FIRST COMMERCIAL SALE, UNTIL THE EXPIRATION OF THIS
AGREEMENT, LICENSEE SHALL USE ITS REASONABLE COMMERCIAL EFFORTS TO MAKE LICENSED
PRODUCT(S) AND LICENSED PROCESS(ES) REASONABLY ACCESSIBLE TO THE UNITED STATES
PUBLIC.

 

10.03       LICENSEE AGREES, AFTER ITS FIRST COMMERCIAL SALE, TO MAKE REASONABLE
QUANTITIES OF LICENSED PRODUCT(S) OR MATERIALS PRODUCED THROUGH THE USE OF
LICENSED PROCESS(ES) AVAILABLE ON A COMPASSIONATE USE BASIS TO PATIENTS, EITHER
THROUGH THE PATIENT’S PHYSICIAN(S) AND/OR THE MEDICAL CENTER TREATING THE
PATIENT.

 

10.04       LICENSEE FURTHER AGREES, AFTER ITS FIRST COMMERCIAL SALE AND AS PART
OF ITS MARKETING ARID PRODUCT PROMOTION, TO DEVELOP WRITTEN EDUCATIONAL
MATERIALS (E.G., BROCHURES, ADVERTISEMENTS, ETC.) DIRECTED TO PATIENTS AND
PHYSICIANS DETAILING THE LICENSED PRODUCT(S) AND ITS USE TO TREAT CANCER.

 

10.05       PHS ACKNOWLEDGES THAT INFORMATION AND MATERIALS RELATED TO THE
LICENSED PATENT RIGHTS MAY BE OF ASSISTANCE TO LICENSEE IN ITS COMMERCIALIZATION
EFFORTS. ACCORDINGLY, PHS, AT ITS DISCRETION, WILL CONSIDER REASONABLE REQUESTS
BY LICENSEE FOR ACCESS TO THE INVENTORS OF THE LICENSED PATENT RIGHTS WITH
REGARD TO THIS INFORMATION AND MATERIALS. MORE SPECIFICALLY, PHS AGREES TO
PROVIDE LICENSEE WITH INFORMATION AND MATERIALS, IF AVAILABLE, RELATED TO THE
CDNA, MRNA, SEQUENCE DATA. ETC., THAT MIGHT BE NECESSARY FOR THE DEVELOPMENT AND
COMMERCIALIZATION OF THE LICENSED PRODUCT(S) AND/OR THE LICENSED PROCESS(ES) IN
THE LICENSED FIELDS OF USE.

 

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11.           INFRINGEMENT AND PATENT ENFORCEMENT

 

11.01       PHS AND LICENSEE AGREE TO NOTIFY EACH OTHER PROMPTLY OF EACH
INFRINGEMENT OR POSSIBLE INFRINGEMENT OF THE LICENSED PATENT RIGHTS, AS WELL AS
ANY FACTS WHICH MAY AFFECT THE VALIDITY, SCOPE, OR ENFORCEABILITY OF THE
LICENSED PATENT RIGHTS OF WHICH EITHER PARTY BECOMES AWARE.

 

11.02       PURSUANT TO THIS AGREEMENT AND THE PROVISIONS OF CHAPTER 29 OF TITLE
35, UNITED STATES CODE, LICENSEE MAY: A) BRING SUIT IN ITS OWN NAME, AT ITS OWN
EXPENSE, AND ON ITS OWN BEHALF FOR INFRINGEMENT OF PRESUMABLY VALID CLAIMS IN
THE LICENSED PATENT RIGHTS; B) IN ANY SUCH SUIT, ENJOIN INFRINGEMENT AND COLLECT
FOR ITS USE, DAMAGES, PROFITS, AND AWARDS OF WHATEVER NATURE RECOVERABLE FOR
SUCH INFRINGEMENT; AND C) SETTLE ANY CLAIM OR SUIT FOR INFRINGEMENT OF THE
LICENSED PATENT RIGHTS PROVIDED, HOWEVER, THAT PHS AND APPROPRIATE GOVERNMENT
AUTHORITIES SHALL HAVE THE FIRST RIGHT TO TAKE SUCH ACTIONS. IF LICENSEE DESIRES
TO INITIATE A SUIT FOR PATENT INFRINGEMENT, LICENSEE SHALL NOTIFY PHS IN
WRITING. IF PHS DOES NOT NOTIFY LICENSEE OF ITS INTENT TO PURSUE LEGAL ACTION
WITHIN NINETY (90) DAYS, LICENSEE SHALL BE FREE TO INITIATE SUIT. PHS SHALL HAVE
A CONTINUING RIGHT TO INTERVENE IN SUCH SUIT. LICENSEE SHALL TAKE NO ACTION TO
COMPEL THE GOVERNMENT EITHER TO INITIATE OR TO JOIN IN ANY SUCH SUIT FOR PATENT
INFRINGEMENT. LICENSEE MAY REQUEST THE GOVERNMENT TO INITIATE OR JOIN IN ANY
SUCH SUIT IF NECESSARY TO AVOID DISMISSAL OF THE SUIT. SHOULD THE GOVERNMENT BE
MADE A PARTY TO ANY SUCH SUIT, LICENSEE SHALL REIMBURSE THE GOVERNMENT FOR ANY
COSTS, EXPENSES, OR FEES WHICH THE GOVERNMENT INCURS AS A RESULT OF SUCH MOTION
OR OTHER ACTION, INCLUDING ANY AND ALL COSTS INCURRED BY THE GOVERNMENT IN
OPPOSING ANY SUCH MOTION OR OTHER ACTION. IN ALL CASES, LICENSEE AGREES TO KEEP
PHS REASONABLY APPRISED OF THE STATUS AND PROGRESS OF ANY LITIGATION. BEFORE
LICENSEE COMMENCES AN INFRINGEMENT ACTION, LICENSEE SHALL NOTIFY PHS AND GIVE
CAREFUL CONSIDERATION TO THE VIEWS OF PHS AND TO ANY POTENTIAL EFFECTS OF THE
LITIGATION ON THE PUBLIC HEALTH IN DECIDING WHETHER TO BRING SUIT.

 

11.03       IN THE EVENT THAT A DECLARATORY JUDGMENT ACTION ALLEGING INVALIDITY
OR NON INFRINGEMENT OF ANY OF THE LICENSED PATENT RIGHTS SHALL BE BROUGHT
AGAINST LICENSEE OR RAISED BY WAY OF COUNTERCLAIM OR AFFIRMATIVE DEFENSE IN AN
INFRINGEMENT SUIT BROUGHT BY LICENSEE UNDER PARAGRAPH 11.02, PURSUANT TO THIS
AGREEMENT AND THE PROVISIONS OF CHAPTER 29 OF TITLE 35, UNITED STATES CODE OR
OTHER STATUTES, LICENSEE MAY: A) DEFEND THE SUIT IN ITS OWN NAME, AT ITS OWN
EXPENSE, AND ON ITS OWN BEHALF FOR PRESUMABLY VALID CLAIMS IN THE LICENSED
PATENT RIGHTS; B) IN ANY SUCH SUIT, ULTIMATELY TO ENJOIN INFRINGEMENT AND TO
COLLECT FOR ITS USE, DAMAGES, PROFITS, AND AWARDS OF WHATEVER NATURE RECOVERABLE
FOR SUCH INFRINGEMENT; AND C) SETTLE ANY CLAIM OR SUIT FOR DECLARATORY JUDGMENT
INVOLVING THE LICENSED PATENT RIGHTS PROVIDED, HOWEVER, THAT PHS AND APPROPRIATE
GOVERNMENT AUTHORITIES SHALL HAVE THE FIRST RIGHT TO TAKE SUCH ACTIONS AND SHALL
HAVE A CONTINUING RIGHT TO INTERVENE IN SUCH SUIT. IF PHS DOES NOT NOTIFY
LICENSEE OF ITS INTENT TO RESPOND TO THE LEGAL ACTION WITHIN A REASONABLE TIME,
LICENSEE SHALL BE FREE TO DO SO. LICENSEE SHALL TAKE NO ACTION TO COMPEL THE
GOVERNMENT EITHER TO

 

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INITIATE OR TO JOIN IN ANY SUCH DECLARATORY JUDGMENT ACTION. LICENSEE MAY
REQUEST THE GOVERNMENT TO INITIATE OR TO JOIN ANY SUCH SUIT IF NECESSARY TO
AVOID DISMISSAL OF THE SUIT. SHOULD THE GOVERNMENT BE MADE A PARTY TO ANY SUCH
SUIT BY MOTION OR ANY OTHER ACTION OF LICENSEE, LICENSEE SHALL REIMBURSE THE
GOVERNMENT FOR ANY COSTS, EXPENSES, OR FEES, WHICH THE GOVERNMENT INCURS AS A
RESULT OF SUCH MOTION OR OTHER ACTION. PHS AGREES TO SUBMIT A REPORT TO LICENSEE
DETAILING THESE COSTS, EXPENSES OR FEES WITHIN SIXTY (60) DAYS OF THEIR
VERIFICATION AND APPROVAL BY PHS. IF LICENSEE ELECTS NOT TO DEFEND AGAINST SUCH
DECLARATORY JUDGMENT ACTION, PHS, AT ITS OPTION, MAY DO SO AT ITS OWN EXPENSE.
IN ALL CASES, LICENSEE AGREES TO KEEP PHS REASONABLY APPRISED OF THE STATUS AND
PROGRESS OF ANY LITIGATION. BEFORE LICENSEE COMMENCES AN INFRINGEMENT ACTION,
LICENSEE SHALL NOTIFY PHS AND GIVE CAREFUL CONSIDERATION TO THE VIEWS OF PHS AND
TO ANY POTENTIAL EFFECTS OF THE LITIGATION ON THE PUBLIC HEALTH IN DECIDING
WHETHER TO BRING SUIT.

 

11.04       IN ANY ACTION UNDER PARAGRAPHS 11.02 OR 11.03, THE EXPENSES
INCLUDING COSTS, FEES, ATTORNEY FEES, AND DISBURSEMENTS, SHALL BE PAID BY
LICENSEE. THE VALUE OF ANY RECOVERY MADE BY LICENSEE THROUGH COURT JUDGMENT OR
SETTLEMENT SHALL BE TREATED AS NET SALES AND SUBJECT TO EARNED ROYALTIES.

 

11.05       PHS SHALL COOPERATE FULLY WITH LICENSEE IN CONNECTION WITH ANY
ACTION UNDER PARAGRAPHS 11.02 OR 11.03. PHS AGREES PROMPTLY TO PROVIDE ACCESS TO
ALL NECESSARY DOCUMENTS AND TO RENDER REASONABLE ASSISTANCE IN RESPONSE TO A
REQUEST BY LICENSEE.

 

12.           NEGATION OF WARRANTIES AND INDEMNIFICATION

 

12.01       PHS OFFERS NO WARRANTIES OTHER THAN THOSE SPECIFIED IN ARTICLE 1.

 

12.02       PHS DOES NOT WARRANT THE VALIDITY OF THE LICENSED PATENT RIGHTS AND
MAKES NO REPRESENTATIONS WHATSOEVER WITH REGARD TO THE SCOPE OF THE LICENSED
PATENT RIGHTS, OR THAT THE LICENSED PATENT RIGHTS MAY BE EXPLOITED WITHOUT
INFRINGING OTHER PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

 

12.03       PHS MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OF ANY SUBJECT MATTER DEFINED BY THE CLAIMS OF
THE LICENSED PATENT RIGHTS OR TANGIBLE MATERIALS RELATED THERETO.

 

12.04       PHS DOES NOT REPRESENT THAT IT SHALL COMMENCE LEGAL ACTIONS AGAINST
THIRD PARTIES INFRINGING THE LICENSED PATENT RIGHTS.

 

12.05       LICENSEE SHALL INDEMNIFY AND HOLD PHS, ITS EMPLOYEES, STUDENTS,
FELLOWS, AGENTS, AND CONSULTANTS HARMLESS FROM AND AGAINST ALL LIABILITY,
DEMANDS, DAMAGES, EXPENSES, AND LOSSES, INCLUDING BUT NOT LIMITED TO DEATH,
PERSONAL INJURY, ILLNESS, OR PROPERTY DAMAGE IN CONNECTION WITH OR ARISING OUT
OF: A) THE USE BY OR ON BEHALF OF LICENSEE, ITS SUBLICENSEES, DIRECTORS,
EMPLOYEES, OR THIRD PARTIES OF ANY LICENSED PATENT RIGHTS; OR B) THE DESIGN,
MANUFACTURE, DISTRIBUTION, OR USE OF ANY LICENSED PRODUCT(S), LICENSED
PROCESS(ES) OR MATERIALS BY LICENSEE, OR OTHER PRODUCTS OR

 

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PROCESSES DEVELOPED IN CONNECTION WITH OR ARISING OUT OF THE LICENSED PATENT
RIGHTS. LICENSEE AGREES TO MAINTAIN A LIABILITY INSURANCE PROGRAM CONSISTENT
WITH SOUND BUSINESS PRACTICE.

 

13.           TERM TERMINATION, AND MODIFICATION OF RIGHTS

 

13.01       THIS AGREEMENT IS EFFECTIVE WHEN SIGNED BY ALL PARTIES AND SHALL
EXTEND TO THE EXPIRATION OF THE LAST TO EXPIRE OF THE LICENSED PATENT RIGHTS
UNLESS SOONER TERMINATED AS PROVIDED IN THIS ARTICLE 13.

 

13.02       THE TERMS AND CONDITIONS OF THIS AGREEMENT SHALL BE CONSIDERED BY
PHS TO BE WITHDRAWN FROM LICENSEE’S CONSIDERATION AND THE TERMS AND CONDITIONS
OF THIS AGREEMENT AND THE AGREEMENT ITSELF TO BE NULL AND VOID, UNLESS THIS
AGREEMENT IS EXECUTED WITHIN THIRTY (30) DAYS FROM THE DATE OF PRINTING
INDICATED AT THE BOTTOM OF EACH PAGE.

 

13.03       IN THE EVENT THAT LICENSEE IS IN DEFAULT IN THE PERFORMANCE OF ANY
MATERIAL OBLIGATIONS UNDER THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO THE
OBLIGATIONS LISTED IN PARAGRAPH 13.06, AND IF THE DEFAULT HAS NOT BEEN REMEDIED
WITHIN NINETY (90) DAYS AFTER THE DATE OF NOTICE IN WRITING OF SUCH DEFAULT, PHS
MAY TERMINATE THIS AGREEMENT BY WRITTEN NOTICE AND PURSUE OUTSTANDING AMOUNTS
OWED THROUGH PROCEDURES PROVIDED BY THE FEDERAL DEBT COLLECTION ACT.

 

13.04       IN THE EVENT THAT LICENSEE BECOMES INSOLVENT, FILES A PETITION IN
BANKRUPTCY, HAS SUCH A PETITION FILED AGAINST IT, DETERMINES TO FILE A PETITION
IN BANKRUPTCY, OR RECEIVES NOTICE OF A THIRD PARTY’S INTENTION TO FILE AN
INVOLUNTARY PETITION IN BANKRUPTCY, LICENSEE SHALL IMMEDIATELY NOTIFY PHS IN
WRITING. FURTHERMORE, PHS SHALL HAVE THE RIGHT TO TERMINATE THIS AGREEMENT
IMMEDIATELY UPON LICENSEE’S RECEIPT OF WRITTEN NOTICE.

 

13.05       LICENSEE SHALL HAVE A UNILATERAL RIGHT TO TERMINATE THIS AGREEMENT
AND/OR ANY LICENSES IN ANY COUNTRY OR TERRITORY BY GIVING PHS THIRTY (30) DAYS
WRITTEN NOTICE TO THAT EFFECT.

 

13.06       PHS SHALL SPECIFICALLY HAVE THE RIGHT TO TERMINATE OR MODIFY, AT ITS
OPTION, THIS AGREEMENT, IF PHS DETERMINES THAT THE LICENSEE: 1) IS NOT EXECUTING
THE COMMERCIAL DEVELOPMENT PLAN SUBMITTED WITH ITS REQUEST FOR A LICENSE AND THE
LICENSEE CANNOT OTHERWISE DEMONSTRATE TO PHS’S SATISFACTION THAT THE LICENSEE
HAS TAKEN, OR CAN BE EXPECTED TO TAKE WITHIN A REASONABLE TIME, EFFECTIVE STEPS
TO ACHIEVE PRACTICAL APPLICATION OF THE LICENSED PRODUCT(S) OR LICENSED
PROCESS(ES); 2) HAS NOT ACHIEVED THE BENCHMARKS AS MAY BE MODIFIED UNDER
PARAGRAPH 9.02; 3) HAS WILLFULLY MADE A FALSE STATEMENT OF, OR WILLFULLY
OMITTED, A MATERIAL FACT IN THE LICENSE APPLICATION OR IN ANY REPORT REQUIRED BY
THE LICENSE AGREEMENT; 4) HAS COMMITTED A MATERIAL BREACH OF A COVENANT OR
AGREEMENT CONTAINED IN THE LICENSE; 5) IS NOT KEEPING LICENSED PRODUCT(S) OR
LICENSED PROCESS(ES) REASONABLY AVAILABLE TO THE PUBLIC AFTER COMMERCIAL USE
COMMENCES; 6) CANNOT REASONABLY SATISFY UNMET HEALTH AND SAFETY NEEDS; OR 7)
CANNOT REASONABLY JUSTIFY A FAILURE TO

 

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COMPLY WITH THE DOMESTIC PRODUCTION REQUIREMENT OF PARAGRAPH 5.02 UNLESS WAIVED.
IN MAKING THIS DETERMINATION, PUS SHALL TAKE INTO ACCOUNT THE NORMAL COURSE OF
SUCH COMMERCIAL DEVELOPMENT PROGRAMS CONDUCTED WITH SOUND AND REASONABLE
BUSINESS PRACTICES AND JUDGMENT AND THE ANNUAL REPORTS SUBMITTED BY LICENSEE
UNDER PARAGRAPH 9.02. PRIOR TO INVOKING THIS RIGHT, PHS SHALL GIVE WRITTEN
NOTICE TO LICENSEE PROVIDING LICENSEE SPECIFIC NOTICE OF, AND A NINETY (90) DAY
OPPORTUNITY TO RESPOND TO, PHS’S CONCERNS AS TO THE PREVIOUS ITEMS 1) TO 7). IF
LICENSEE FAILS TO ALLEVIATE PHS’S CONCERNS AS TO THE PREVIOUS ITEMS 1) TO 7) OR
FAILS TO INITIATE CORRECTIVE ACTION TO PHS’S SATISFACTION, PHS MAY TERMINATE
THIS AGREEMENT.

 

13.07       WHEN THE PUBLIC HEALTH AND SAFETY SO REQUIRE, AND AFTER WRITTEN
NOTICE TO LICENSEE PROVIDING LICENSEE A SIXTY (60) DAY OPPORTUNITY TO RESPOND,
PHS SHALL HAVE THE RIGHT TO REQUIRE LICENSEE TO GRANT SUBLICENSES TO RESPONSIBLE
APPLICANTS, ON REASONABLE TERMS, IN ANY LICENSED FIELDS OF USE UNDER THE
LICENSED PATENT RIGHTS, UNLESS LICENSEE CAN REASONABLY DEMONSTRATE THAT THE
GRANTING OF THE SUBLICENSE WOULD NOT MATERIALLY INCREASE THE AVAILABILITY TO THE
PUBLIC OF THE SUBJECT MATTER OF THE LICENSED PATENT RIGHTS. PHS SHALL NOT
REQUIRE THE GRANTING OF A SUBLICENSE UNLESS THE RESPONSIBLE APPLICANT HAS FIRST
NEGOTIATED IN GOOD FAITH WITH LICENSEE.

 

13.08       PHS RESERVES THE RIGHT ACCORDING TO 35 U.S.C., §209(F)(4) TO
TERMINATE OR MODIFY THIS AGREEMENT IF IT IS DETERMINED THAT SUCH ACTION IS
NECESSARY TO MEET REQUIREMENTS FOR PUBLIC USE SPECIFIED BY FEDERAL REGULATIONS
ISSUED AFTER THE DATE OF THE LICENSE AND SUCH REQUIREMENTS ARE NOT REASONABLY
SATISFIED BY LICENSEE.

 

13.09       WITHIN THIRTY (30) DAYS OF RECEIPT OF WRITTEN NOTICE OF PHS’S
UNILATERAL DECISION TO MODIFY OR TERMINATE THIS AGREEMENT, LICENSEE MAY,
CONSISTENT WITH THE PROVISIONS OF 37 CFR PART 404.11, APPEAL THE DECISION BY
WRITTEN SUBMISSION TO THE DESIGNATED PHS OFFICIAL. THE DECISION OF THE
DESIGNATED PHS OFFICIAL SHALL BE THE FINAL AGENCY DECISION. LICENSEE MAY
THEREAFTER EXERCISE ANY AND ALL ADMINISTRATIVE OR JUDICIAL REMEDIES THAT MAY BE
AVAILABLE.

 

13.10       WITHIN NINETY (90) DAYS OF EXPIRATION OR TERMINATION OF THIS
AGREEMENT UNDER THIS ARTICLE 13, A FINAL REPORT SHALL BE SUBMITTED BY LICENSEE.
ANY ROYALTY PAYMENTS, INCLUDING THOSE INCURRED BUT NOT YET PAID (SUCH AS THE
FULL MINIMUM ANNUAL ROYALTY), AND THOSE RELATED TO PATENT EXPENSE, DUE TO PHS
SHALL BECOME IMMEDIATELY DUE AND PAYABLE UPON TERMINATION OR EXPIRATION. IF
TERMINATED UNDER THIS ARTICLE 13, SUBLICENSEES MAY ELECT TO CONVERT THEIR
SUBLICENSES TO DIRECT LICENSES WITH PHS PURSUANT TO PARAGRAPH 4.03. UNLESS
OTHERWISE SPECIFICALLY PROVIDED FOR UNDER THIS AGREEMENT, UPON TERMINATION OR
EXPIRATION OF THIS AGREEMENT, LICENSEE SHALL RETURN ALL LICENSED PRODUCT(S) OR
OTHER MATERIALS INCLUDED WITHIN THE LICENSED PATENT RIGHTS TO PHS OR PROVIDE PHS
WITH CERTIFICATION OF THE DESTRUCTION THEREOF.

 

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14.           GENERAL PROVISIONS

 

14.01       NEITHER PARTY MAY WAIVE OR RELEASE ANY OF ITS RIGHTS OR INTERESTS IN
THIS AGREEMENT EXCEPT IN WRITING. THE FAILURE OF THE GOVERNMENT TO ASSERT A
RIGHT HEREUNDER OR TO INSIST UPON COMPLIANCE WITH ANY TERM OR CONDITION OF THIS
AGREEMENT SHALL NOT CONSTITUTE A WAIVER OF THAT RIGHT BY THE GOVERNMENT OR
EXCUSE A SIMILAR SUBSEQUENT FAILURE TO PERFORM ANY SUCH TERM OR CONDITION BY
LICENSEE.

 

14.02       THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE PARTIES
RELATING TO THE SUBJECT MATTER OF THE LICENSED PATENT RIGHTS, AND ALL PRIOR
NEGOTIATIONS, REPRESENTATIONS, AGREEMENTS, AND UNDERSTANDINGS ARE MERGED INTO,
EXTINGUISHED BY, AND COMPLETELY EXPRESSED BY THIS AGREEMENT.

 

14.03       THE PROVISIONS OF THIS AGREEMENT ARE SEVERABLE, AND IN THE EVENT
THAT ANY PROVISION OF THIS AGREEMENT SHALL BE DETERMINED TO BE INVALID OR
UNENFORCEABLE UNDER ANY CONTROLLING BODY OF LAW, SUCH DETERMINATION SHALL NOT IN
ANY WAY AFFECT THE VALIDITY OR ENFORCEABILITY OF THE REMAINING PROVISIONS OF
THIS AGREEMENT.

 

14.04       IF EITHER PARTY DESIRES A MODIFICATION TO THIS AGREEMENT, THE
PARTIES SHALL, UPON REASONABLE NOTICE OF THE PROPOSED MODIFICATION BY THE PARTY
DESIRING THE CHANGE, CONFER IN GOOD FAITH TO DETERMINE THE DESIRABILITY OF SUCH
MODIFICATION, NO MODIFICATION SHALL BE EFFECTIVE UNTIL A WRITTEN AMENDMENT IS
SIGNED BY THE SIGNATORIES TO THIS AGREEMENT OR THEIR DESIGNEES.

 

14.05       THE CONSTRUCTION, VALIDITY, PERFORMANCE, AND EFFECT OF THIS
AGREEMENT SHALL BE GOVERNED BY FEDERAL LAW AS APPLIED BY THE FEDERAL COURTS IN
THE DISTRICT OF COLUMBIA.

 

14.06       ALL NOTICES REQUIRED OR PERMITTED BY THIS AGREEMENT SHALL BE GIVEN
BY PREPAID, FIRST CLASS, REGISTERED OR CERTIFIED MAIL OR BY AN EXPRESS/OVERNIGHT
DELIVERY SERVICE PROVIDED BY A COMMERCIAL CARRIER, PROPERLY ADDRESSED TO THE
OTHER PARTY AT THE ADDRESS DESIGNATED ON THE FOLLOWING SIGNATURE PAGE, OR TO
SUCH OTHER ADDRESS AS MAY BE DESIGNATED IN WRITING BY SUCH OTHER PARTY. NOTICES
SHALL BE CONSIDERED TIMELY IF SUCH NOTICES ARE RECEIVED ON OR BEFORE THE
ESTABLISHED DEADLINE DATE OR SENT ON OR BEFORE THE DEADLINE DATE AS VERIFIABLE
BY U.S. POSTAL SERVICE POSTMARK OR DATED RECEIPT FROM A COMMERCIAL CARRIER.
PARTIES SHOULD REQUEST A LEGIBLY DATED U.S. POSTAL SERVICE POSTMARK OR OBTAIN A
DATED RECEIPT FROM A COMMERCIAL CARRIER OR THE U.S. POSTAL SERVICE. PRIVATE
METERED POSTMARKS SHALL NOT BE ACCEPTABLE AS PROOF OF TIMELY MAILING.

 

14.07       THIS AGREEMENT SHALL NOT BE ASSIGNED BY LICENSEE EXCEPT: A) WITH THE
PRIOR WRITTEN CONSENT OF PHS, SUCH CONSENT NOT TO BE WITHHELD UNREASONABLY; OR
B) AS PART OF A SALE OR TRANSFER OF SUBSTANTIALLY THE ENTIRE BUSINESS OF
LICENSEE RELATING TO OPERATIONS WHICH CONCERN THIS AGREEMENT. LICENSEE SHALL
NOTIFY PHS WITHIN TEN (10) DAYS OF ANY ASSIGNMENT OF THIS AGREEMENT BY LICENSEE.

 

14.08       LICENSEE AGREES IN ITS USE OF ANY PHS SUPPLIED MATERIALS TO COMPLY
WITH ALL APPLICABLE STATUTES, REGULATIONS, AND GUIDELINES, INCLUDING PHS AND
DHHS REGULATIONS AND GUIDELINES. LICENSEE AGREES NOT TO USE THE MATERIALS FOR
RESEARCH INVOLVING HUMAN SUBJECTS OR CLINICAL TRIALS IN THE UNITED STATES
WITHOUT COMPLYING WITH 21 CFR PART 50 AND 45 CFR PART 46. LICENSEE AGREES NOT TO
USE THE MATERIALS, FOR RESEARCH

 

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INVOLVING HUMAN SUBJECTS OR CLINICAL TRIALS OUTSIDE OF THE UNITED STATES WITHOUT
NOTIFYING PHS, IN WRITING, OF SUCH RESEARCH OR TRIALS AND COMPLYING WITH THE
APPLICABLE REGULATIONS OF THE APPROPRIATE NATIONAL CONTROL AUTHORITIES. WRITTEN
NOTIFICATION TO PHS OF RESEARCH INVOLVING HUMAN SUBJECTS OR CLINICAL TRIALS
OUTSIDE OF THE UNITED STATES SHALL BE GIVEN NO LATER THAN SIXTY (60) DAYS PRIOR
TO COMMENCEMENT OF SUCH RESEARCH OR TRIALS.

 

14.09       LICENSEE ACKNOWLEDGES THAT IT IS SUBJECT TO AND AGREES TO ABIDE BY
THE UNITED STATES LAWS AND REGULATIONS (INCLUDING THE EXPORT ADMINISTRATION ACT
OF 1979 AND ARMS EXPORT CONTROL ACT) CONTROLLING THE EXPORT OF TECHNICAL DATA,
COMPUTER SOFTWARE, LABORATORY PROTOTYPES, BIOLOGICAL MATERIAL, AND OTHER
COMMODITIES. THE TRANSFER OF SUCH ITEMS MAY REQUIRE A LICENSE FROM THE COGNIZANT
AGENCY OF THE U.S. GOVERNMENT OR WRITTEN ASSURANCES BY LICENSEE THAT IT SHALL
NOT EXPORT SUCH ITEMS TO CERTAIN FOREIGN COUNTRIES WITHOUT PRIOR APPROVAL OF
SUCH AGENCY. PHS NEITHER REPRESENTS THAT A LICENSE IS OR IS NOT REQUIRED OR
THAT, IF REQUIRED, IT SHALL BE ISSUED.

 

14.10       LICENSEE AGREES TO MARK THE LICENSED PRODUCT(S) OR THEIR PACKAGING
SOLD IN THE UNITED STATES WITH ALL APPLICABLE U.S. PATENT NUMBERS AND SIMILARLY
TO INDICATE “PATENT PENDING” STATUS. ALL LICENSED PRODUCT(S) MANUFACTURED IN,
SHIPPED TO, OR SOLD IN OTHER COUNTRIES SHALL BE MARKED IN SUCH A MANNER AS TO
PRESERVE PHS PATENT RIGHTS IN SUCH COUNTRIES.

 

14.11       BY ENTERING INTO THIS AGREEMENT, PHS DOES NOT DIRECTLY OR INDIRECTLY
ENDORSE ANY PRODUCT OR SERVICE PROVIDED, OR TO BE PROVIDED, BY LICENSEE WHETHER
DIRECTLY OR INDIRECTLY RELATED TO THIS AGREEMENT. LICENSEE SHALL NOT STATE OR
IMPLY THAT THIS AGREEMENT IS AN ENDORSEMENT BY THE GOVERNMENT, PHS, ANY OTHER
GOVERNMENT ORGANIZATIONAL UNIT, OR ANY GOVERNMENT EMPLOYEE. ADDITIONALLY,
LICENSEE SHALL NOT USE THE NAMES OF NIH, CDC, PHS, OR DHHS OR THE GOVERNMENT OR
THEIR EMPLOYEES IN ANY ADVERTISING, PROMOTIONAL, OR SALES LITERATURE WITHOUT THE
PRIOR WRITTEN CONSENT OF PHS.

 

14.12       THE PARTIES AGREE TO ATTEMPT TO SETTLE AMICABLY ANY CONTROVERSY OR
CLAIM ARISING UNDER THIS AGREEMENT OR A BREACH OF THIS AGREEMENT, EXCEPT FOR
APPEALS OF MODIFICATIONS OR TERMINATION DECISIONS PROVIDED FOR IN ARTICLE 13.
LICENSEE AGREES FIRST TO APPEAL ANY SUCH UNSETTLED CLAIMS OR CONTROVERSIES TO
THE DESIGNATED PHS OFFICIAL, OR DESIGNEE, WHOSE DECISION SHALL BE CONSIDERED THE
FINAL AGENCY DECISION. THEREAFTER, LICENSEE MAY EXERCISE ANY ADMINISTRATIVE OR
JUDICIAL REMEDIES THAT MAY BE AVAILABLE.

 

14.13       NOTHING RELATING TO THE GRANT OF A LICENSE, NOR THE GRANT ITSELF,
SHALL BE CONSTRUED TO CONFER UPON ANY PERSON ANY IMMUNITY FROM OR DEFENSES UNDER
THE ANTITRUST LAWS OR FROM A CHARGE OF PATENT MISUSE, AND THE ACQUISITION AND
USE OF RIGHTS PURSUANT TO 37 CFR PART 404 SHALL NOT BE IMMUNIZED FROM THE
OPERATION OF STATE OR FEDERAL LAW BY REASON OF THE SOURCE OF THE GRANT.

 

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14.14       PARAGRAPHS 4.03, 8.01, 9.05 9.07, 12.01 12.05, 13.09, 13.10, AND
14.12 OF THIS AGREEMENT SHALL SURVIVE TERMINATION OF THIS AGREEMENT.

 

 

SIGNATURES BEGIN ON NEXT PAGE

 

PHS PATENT LICENSE AGREEMENT - EXCLUSIVE

 

SIGNATURE PAGE

 

For PHS:

 

 

  s/ Jack Spiegel

 

  4-29-02

 

Jack Spiegel, Ph.D.

Date

Director, Division of Technology Development and Transfer

 

Office of Technology Transfer

 

National Institutes of Health

 

 

Mailing Address for Notices:

Office of Technology Transfer

National Institutes of Health

6011 Executive Boulevard, Suite 325

Rockville, Maryland 20852 3804 U.S.A.

 

For Licensee (Upon, information and belief, the undersigned expressly certifies
or affirms that the contents of any statements of Licensee made or referred to
in this document are truthful and accurate.):

 

by:

 

  s/ James M. Hussey

 

     7-1-02

 

Signature of Authorized Official

Date

 

 

     James M. Hussey

 

Printed Name

 

 

     President

 

Title

 

Official and Mailing Address for Notices:

 

NeoPharm, Inc.

150 Fields Drive

Suite 195

Lake Forest, Illinois 60045

Phone: (847) 295 8678

Fax:(847)295 8854a

 

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Any false or misleading statements made, presented, or submitted to the
Government, including any relevant omissions, under this Agreement and during
the course of negotiation of this Agreement are subject to all applicable civil
and criminal statutes including Federal statutes 31 U.S.C. §§3801 3812 (civil
liability) and 18 U.S.C. § 1001 (criminal liability including fines) and/or
imprisonment).

 

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APPENDIX A Patents) or Patent Application(s)

 

Patent(s) or Patent Application(s):

 

U.S. Provisional Patent Application, S/N 60/229,842 [DHHS Ref. E-032-00/1],
filed on August 31, 2001; and

 

PCT Patent Application, S/N PCT/US00/31044 [DHHS Ref. E-032-00/3], filed on
August 15, 2001.

 

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APPENDIX B - Licensed Fields of Use and Territory

 

Licensed Fields of Use:

 

Use of the Licensed Product(s) and/or the Licensed Process(es) in gene therapy
applications to treat human cancers. Specifically, transfection of cancer cells
with the IL-13 Receptor-alpha-2 (IL-13Ra2) claim in order to sensitize such
cells to the therapeutic effects of the IL-13 Receptor targeted
immunoconjugates, hIL-13-PE38QQR or cphIL-13-PE38QQR, which were exclusively
licensed to Licensee under DHHS exclusive patent license L-226-96/0.

 

Licensed Territory:

 

Worldwide

 

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APPENDIX C - Royalties

 

Royalties:

 

I.              LICENSEE AGREES TO PAY TO PHS A NONCREDITABLE, NONREFUNDABLE
LICENSE ISSUE ROYALTY IN THE AMOUNT OF ONE HUNDRED THOUSAND DOLLARS
($100,000.00);

 

II.            LICENSEE AGREES TO PAY TO PHS A NONREFUNDABLE MINIMUM ANNUAL
ROYALTY IN THE AMOUNT OF;

 

a.              Ten Thousand Dollars ($10,000.00) prior to the First Commercial
Sale; and

 

b.             Twenty Five Thousand Dollars ($25,000.00) after the First
Commercial Sale, said Twenty Five Thousand Dollars ($25,000.00) being creditable
against the earned royalty on Net Sales due for sales made in that year. .

 

III.           LICENSEE AGREES TO PAY PHS EARNED ROYALTIES ON NET SALES BY OR ON
BEHALF OF LICENSEE AND ITS SUBLICENSEES AS FOLLOWS:

 

a.              Four (4.0) percent on Net Sales; provided however that Licensee
shall be entitled to a credit of one half percent (0.5%) against the earned
royalty rate for each percent point in excess of two percent (2.0%) that
Licensee must pay to an unaffiliated licensor for the manufacture and sale of
Licensed Product(s). Said credit, however, shall not reduce the earned royalty
due to PHS for Licensed Product(s) below two percent (2.0%).

 

IV.           LICENSEE AGREES TO PAY PHS BENCHMARK ROYALTIES AS FOLLOWS:

 

a.

Submission of first IND

$  10,000.00;

b.

Completion of first Phase I Clinical Trial

$  50,000.00;

c.

Completion of first Phase 11 Clinical Trial

$  75,000.00;

d.

Completion of first Phase III Clinical Trial

$100,000.00;

e.

Approval of first BLA/ELA/PLA/NDA

$250,000.00; and

f.

First Commercial Sale

$300,000;

 

V.            LICENSEE AGREES TO PAY PHS ADDITIONAL SUBLICENSING ROYALTIES AS
FOLLOWS:

 

a.              Twenty (20.0) percent of all non creditable and non refundable
consideration received for granting a sublicense, if the technology is
sublicensed on or before the one year anniversary of this Agreement; or ten
(10.0) percent of all non creditable and non refundable consideration received
in granting a sublicense, if the technology is sublicensed after the one year
anniversary of this Agreement. Fees paid expressly for research and development,
after the effective date of this Agreement, of Licensed Product(s) and Licensed
Process(es), such as clinical trial support, shall be excluded.

 

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APPENDIX D - Modifications

 

PHS and Licensee agree to the following modifications to the Articles and
Paragraphs of this Agreement:

 

Modifications made to the model language have been incorporated into the body of
this Agreement.

 

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APPENDIX E - Benchmarks and Performance

 

Licensee agrees to the following Benchmarks for its performance under this
Agreement and, within thirty (30) days of achieving a Benchmark, shall notify
PHS that the Benchmark has been achieved.

 

The deadlines provided herein extend from the date of receipt by Licensee of the
cDNA for IL-13Ra2 from the PHS and are cumulative:

 

1. Scale up of the Licensed Product(s):

Two (2) years;

2. Comparative Study of viral and liposomal based vector systems:

One (1) year;

3. Pre clinical studies and data review:

One (1) year;

4. GMP production of cDNA/vector delivery system for use in clinical trials:

One (1) year;

5. Completion of first Phase I clinical trials:

Eighteen (18) months;

6. Completion of first Phase II clinical trials:

Two (2) years;

7. Completion of first Phase III clinical trials:

Three (3) years;

8. First Commercial Sale

One (1) year after submission of BLA Application

 

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APPENDIX F - Commercial Development Plan

 

The technology described in the Licensed Patent Rights will be used as gene
therapy for various types of cancers. Several years ago Dr. Raj Puri at FDA
identified the receptors for Interleukin 13 (IL-13) on various human tumors.
Subsequently, he showed that a chimeric protein IL-13 PE38QQR is highly
cytotoxic to those cancers, which express high levels of IL-13 receptors, such
as renal cell carcinoma, glioblastoma and Kaposi’s sarcoma. In addition, it was
demonstrated that the primary IL-13 binding protein, IL-13 Ra2 chain, plays a
dominant role in ligand binding and internalization. This chain is expressed on
a variety of cancer cell lines; however, some cancer cell types express low
levels of this receptor chain. Because of this low level expression of IL-13-Ra2
chain, these cells show very little sensitivity to the targeted toxin
IL-13-PE38QQR. It was proposed that gene transfer of this chain with cancer
cells might increase their sensitivity to IL-13 toxin. Hence, IL-13-Ra2-chain
gene was cloned from human glioma cell lines and inserted into expression vector
for gene transfer. It has been demonstrated that head and neck cancer cells that
are not sensitive to IL-13 PE38QQR acquired pronounced sensitivity as a result
of gene transfer of IL-13-Ra2. In addition, remarkable antitumor activity was
observed in two tumor models of head and neck cancer cells transfected with
IL-13-Ra2 gene in vivo.

 

The field of use for this gene transfer modality could be quite important in
cancer chemotherapy for localized tumors such as head and neck cancers, prostate
cancers and brain cancers. It is possible to sensitize these cancers by
intratumoral or systemic transfer of IL-13-Ra2 gene.

 

A major thrust of the Licensee’s Commercial Development plan will be a) to
obtain large quantities of this cDNA and identify the most effective vector for
the plasmid; b) to evaluate the in vivo efficacy of this gene therapy in various
tumor models by systemic administration; c) to identify the toxicities of this
plasmid and the vector in at least two animal species by administering it
through i.v. and s.c. administration; to define LD10, LD50 and LD100 doses in
animals and d) to perform the clinical trials of this plasmid with the
appropriate vector in various indications leading to the regulatory approval and
marketing of this technology.

 

The various steps of drug development outlined above are defined more
elaborately as benchmarks mutually agreed upon between Licensee and PHS and are
listed in Appendix E of this Agreement. The Licensee will perform quite
diligently to achieve these defined benchmarks leading to the marketing of this
product, The Licensee is already performing Phase Il/III trials with
IL-13-PE38QQQR in brain cancer, glioblastoma. The Licensee intends to expedite
the commercial development of this immunotoxin with the concurrent development
of this gene therapy technology for cancer cells to overexpress high levels of
IL-13 receptors. The Licensee is willing to commit the necessary financial
resources for the successful development of this technology.

 

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