Exhibit 10.23

 

Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

LICENSE AGREEMENT

 

by and among

 

ELAN PHARMACEUTICAL RESEARCH CORP.,

d/b/a

NANOSYSTEMS

 

and

 

ELAN PHARMA INTERNATIONAL LIMITED

 

and

 

JANSSEN PHARMACEUTICA N.V.

 

March 31, 1999

 

This document is the confidential information of both parties hereto.

It should be distributed on a need-to-know basis and kept in secure area.

 

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

TABLE OF CONTENTS

 

 

Page

 

 

ARTICLE 1 - Definitions

1

ARTICLE 2 - LICENSE GRANT

7

ARTICLE 3 - DEVELOPMENT ACTIVITIES

9

ARTICLE 4 - CLINICAL AND REGULATORY ACTIVITIES

10

ARTICLE 5 - PAYMENTS

12

ARTICLE 6 - ROYALTIES

13

ARTICLE 7 - ROYALTY PAYMENTS, REPORTS AND RECORDS

14

ARTICLE 8 - COMMERCIALIZATION

16

ARTICLE 9 - MANUFACTURING AND SUPPLY

17

ARTICLE 10 - RIGHTS IN TECHNOLOGY, INVENTIONS AND PATENTS

17

ARTICLE 11 - INFRINGEMENT

19

ARTICLE 12 - CONFIDENTIALITY

23

ARTICLE 13 - TERM

26

ARTICLE 14 - TERMINATION BY JANSSEN

27

ARTICLE 15 - TERMINATION FOR CAUSE

27

ARTICLE 16 - RIGHTS AND OBLIGATIONS UPON TERMINATION

27

ARTICLE 17 - REPRESENTATIONS AND WARRANTIES

28

ARTICLE 18 - INDEMNIFICATION

30

ARTICLE 19 - CHOICE OF LAW

32

ARTICLE 20 - FORCE MAJEURE

32

ARTICLE 21 - DISPUTE RESOLUTION

32

ARTICLE 22 - NOTICES

35

ARTICLE 23 - WAIVER

36

ARTICLE 24 - ENTIRE AGREEMENT

36

ARTICLE 25 - ASSIGNMENT

36

ARTICLE 26 - TITLES

38

ARTICLE 27 - PUBLICITY

38

ARTICLE 28 - UNENFORCEABLE PROVISIONS

38

ARTICLE 29 - CONSTRUCTION

38

ARTICLE 30 - EXECUTION

39

ARTICLE 31 - NON-SOLICITATION

39

 

 

 

Exhibit A

NANO PATENTS

 

Exhibit B

SELECTION PATENTS

 

Form 1

STATEMENT

 

 

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

This License Agreement is made as of this 31st day of  March, 1999 (the
“Effective Date”) by and among Elan Pharmaceutical Research Corp., a corporation
organized and existing under the laws of the State of Georgia and doing business
as NanoSystems (“EPRC”), and Elan Pharma International Limited, a corporation
organized and existing under the laws of Ireland (“EPIL”) (EPRC and EPIL
collectively referred to herein as “NANO”), and Janssen Pharmaceutica N.V., a
corporation organized and existing under the laws of Belgium (“JANSSEN”).

 

WITNESSETH THAT:

 

WHEREAS, NANO possesses, among other things, certain proprietary information in
connection with a technology for the formulation of crystalline drug substances
into pharmaceutically acceptable dosage forms; and

 

WHEREAS, NANO owns or controls patents and patent applications, as well as
know-how with respect to its technology and has the right to grant certain
rights and licenses thereunder as set forth herein; and

 

WHEREAS, JANSSEN possesses proprietary information, as well as patents and
patent applications in relation to a proprietary compound developed by it; and

 

WHEREAS, NANO and JANSSEN wish to engage in a development and license agreement
with a view towards developing certain crystalline forms of a proprietary
JANSSEN compound utilizing NANO’s proprietary technology; and

 

WHEREAS, NANO is willing to grant such rights and licenses to JANSSEN under the
terms and conditions hereinafter set forth;

 

NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereinafter set forth, the parties to this Agreement mutually agree
as follows:

 

ARTICLE 1 - DEFINITIONS

 

For purposes of this Agreement, the following capitalized terms in this
Agreement shall have the following meanings, unless the context clearly requires
otherwise:

 

1.1                               “Affiliate” shall mean, with respect to any
party hereto, any corporation, company, partnership, joint venture or any other
entity which directly or indirectly controls, is controlled by, or is under
common control with such party.  For purposes of this definition, “control”
shall mean direct or indirect ownership of fifty percent (50%) or more of the
stock or shares entitled to vote for the election of directors.  For the
purposes of this Agreement, EPRC and EPIL shall not be considered Affiliates of
JANSSEN and JANSSEN shall not be considered an Affiliate of EPRC or EPIL.

 

1

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

1.2                               “Agreement” shall mean this License Agreement.

 

1.3                               “Analogue” shall mean a structural analogue of
Compound falling under the claims of any Janssen Patent, which is developed and
commercialized under this Agreement as a substitute for, and for the same
indications as, 9 O-H risperidone palmitate (R 92670) or any salt or derivative
thereof.

 

1.4                               “Compound” shall mean (i) the active
ingredient 9 O-H risperidone palmitate (R 92670), or any salt or derivative
thereof, falling under the claims of any Janssen Patent, or (ii) in the event
that JANSSEN ceases development of R 92670 prior to commercialization, an
Analogue selected by JANSSEN, or (iii) in the event that JANSSEN ceases
development of an Analogue prior to commercialization, another Analogue selected
by JANSSEN.

 

1.5                               “Competition” shall mean a situation in which
one or more Persons in a country are marketing a product containing Compound
that competes with the Product and such Persons’ sales of such product for a
calendar quarter are at least fifteen percent (15%) of the total sales of all
Products in such country, as measured by comparing equivalent units of products
sold.  Sales of a competing product in a country during any calendar quarter
shall be conclusively deemed to be at least fifteen percent (15%) of the total
sales of Products in such country if IMS America or IMS International makes such
a determination based on its conduct of a market share study in such country
during such quarter.  Once a determination is made that Competition exists for
the Product in any country, such determination shall be made again each calendar
quarter for so long as the Product is marketed in that country.

 

1.6                               “Control, Controlled” shall mean the legal
authority or right of a party hereto to grant a license or sublicense of
intellectual property rights to another party hereto, or to otherwise disclose
proprietary or trade secret information to such other party, without breaching
the terms of any agreement with a Third Party, infringing upon the intellectual
property rights of a Third Party, or misappropriating the proprietary or trade
secret information of a Third Party.  Information that is generally known or
available to the public shall not be deemed Controlled by a party hereto.

 

1.7                               “Development Candidate” shall mean a Sterile,
injectable pharmaceutical formulation of the Compound selected by JANSSEN for
further development under the terms of this Agreement.

 

1.8                               “Development Plan” shall mean the plan
directed towards the development of a Development Candidate as more fully set
forth in Article 3.

 

2

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

1.9                               “Development Program” shall mean the program
of activities specified in the Development Plan for a Development Candidate as
further detailed in Article 3.

 

1.10                        “Development Team” shall mean a team comprised of
representatives of NANO and JANSSEN monitoring the Development Program.

 

1.11                        “Dollars” shall mean United States dollars.

 

1.12                        “Elan-Independent” shall mean incorporating,
embodying or derived from patent rights, know-how or technology owned, licensed
or developed by Elan Corporation, plc or any of its Affiliates (i) prior to the
date on which Elan Corporation, plc acquired NanoSystems, LLC, or (ii)
thereafter but wholly independent of any patent rights, know-how or technology
obtained by Elan Corporation, plc or any of its Affiliates as a result of such
acquisition.

 

1.13                        “EU” shall mean the member states of the European
Union.

 

1.14                        “FDA” shall mean the United States Food and Drug
Administration and, when appropriate herein, shall also mean any corresponding
regulatory agency in any other country in the Territory.

 

1.15                        “Feasibility Agreement” shall mean the Feasibility
Collaboration Agreement between JANSSEN and NanoSystems, LLC dated August 29,
1996.

 

1.16                        “First Commercial Sale” shall mean the first sale of
the Product by JANSSEN, its Affiliates or Licensees, or any of their
distributors in any country following receipt of all regulatory approvals,
including those relating to pricing and reimbursement, necessary to commence
commercial sales of the Product in such country.  Reasonably limited sales made
prior to the receipt of all approvals necessary to commence commercial sales,
such as so-called “named patient sales”, “compassionate use” sales and the like,
shall not be deemed First Commercial Sales.

 

1.17                        “Highly Confidential Information” shall mean
specific processing conditions and/or parameters included in NanoCrystal
Technology (excluding specific processing conditions and/or parameters
specifically described in any NANO Patent) that are reasonably necessary for
specialized JANSSEN or NANO employees to become skilled in the art of making
nanoparticles, including, but not limited to, information concerning (i) work-up
and composition of starting materials, size reduction, harvesting and sizing of
nanoparticles; (ii) stabilization of nanoparticles; and (iii) specific
downstream processing to make nanoparticle formulations.  “Highly Confidential
Information” shall not include information that is aimed at providing JANSSEN or
NANO employees with a general understanding of the methods, processes and
equipment used to manufacture or

 

3

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

formulate nanoparticles, but that is not intended to enable JANSSEN or NANO
employees to become skilled in the art of making or formulating nanoparticles. 
In addition, “Highly Confidential Information” shall include only information
that is (A) disclosed to JANSSEN in written or other tangible form clearly
labeled as “Highly Confidential” at the time of disclosure, or (B) initially
disclosed to JANSSEN in non-tangible form and identified as “Highly
Confidential” at the time of such disclosure and, within thirty (30) days
following the initial disclosure, summarized and designated as “Highly
Confidential” in written or other tangible form delivered to JANSSEN.

 

1.18                        “Improvement” shall mean any enhancement of or
improvement to NanoCrystal Technology developed, invented or acquired by, or
coming under the Control of, any party hereto (i) as a consequence of activities
conducted or information disclosed under this Agreement or the Feasibility
Agreement, or (ii) during the period between the Effective Date and the filing
of the IRF for the Product; provided, however, that “Improvements” shall not
include any enhancements of or improvements to NanoCrystal Technology that (A)
are made by Janssen and are useful solely with respect to Compound or Product;
(B) concern a commercial scale manufacturing process developed by JANSSEN for
Product, but do not utilize and are not derived from NanoCrystal Technology; or
(C) are Elan-Independent inventions, discoveries or findings.

 

1.19                        “IND” shall mean (i) an Investigational New Drug
Application filed by JANSSEN, its Affiliates or Licensees pursuant to the
requirements of the FDA, as more fully defined in 21 C.F.R. § 312.3, as well as
(ii) equivalent submissions with similar requirements to the appropriate health
authorities in other countries in the Territory as herein defined.

 

1.20                        “IRF” shall mean the International Registration File
owned by JANSSEN, compiled in such a way as is:

 

(a)           necessary to satisfy the requirements of an NDA in the United
States;

 

(b)           necessary to satisfy the requirements of the Notice to Applicants
for marketing authorization for Proprietary Medicinal Products for use in the
EU; and

 

(c)           satisfactory to be submitted as such to the national health
authorities in any country or to be used as a basis for a national application
for marketing authorization for the Product in the specific format required by
such national health authorities.

 

4

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

1.21                        “Janssen Patent” shall mean all patents (including
all additions, divisions, continuations, continuations-in-part, substitutions,
extensions, patent term extensions and renewals thereof) and patent applications
(including patents issued thereon) that are or become owned or Controlled by
JANSSEN.  For the purpose hereof, “Janssen Patents” shall also include JANSSEN’s
interests, if any, in Selection Patents.

 

1.22                        “Licensee” shall mean any person, corporation,
unincorporated body, or other entity that is not an Affiliate of JANSSEN and to
whom JANSSEN grants a sublicense of the rights granted to JANSSEN pursuant to
Article 2.

 

1.23                        “Major Markets” shall mean the United States, Japan,
the United Kingdom, France and Germany.

 

1.24                        “Nano Know-How” shall mean all information and
materials, including, without limitation, processes, techniques, formulas, data,
methods, equipment designs, know-how, show-how and trade secrets, patentable or
otherwise, tangible or intangible, that are owned or Controlled by NANO as of
the Effective Date and that relate to the preparation, purification,
characterization, stabilization, processing, formulation or delivery of small
particles of pharmaceutical compounds prepared using a wet milling process;
provided, however, that “Nano Know-How” shall not include any Elan-Independent
information or materials.

 

1.25                        “Nano Patents” shall mean all patents (including all
additions, divisions, continuations, continuations-in-part, substitutions,
extensions, patent term extensions and renewals thereof) and patent applications
(including patents issued thereon) that are owned or Controlled by NANO as of
the Effective Date or that claim or cover any Improvement; provided, however,
that “Nano Patents” shall not include any Elan-Independent patents or patent
applications.  A worldwide list of the current Nano Patents (including pending
patent applications) is attached hereto as Exhibit A.  This list will be updated
by NANO upon the reasonable request of JANSSEN.

 

1.26                        “NanoCrystal Technology” shall mean the Nano
Patents, the Nano Know-How and Improvements.

 

1.27                        “NDA” shall mean (i) a New Drug Application and all
supplements filed pursuant to the requirements  of the FDA, including all
documents, data and other information concerning the Product which are necessary
for or included in FDA approval to market a Product as more fully defined in 21.
C.F.R. §  314.50 et seq., or (ii) any other similar application for marketing
authorization filed with the appropriate regulatory authorities in any other
country of the Territory.

 

5

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

1.28                        “Net Sales” shall mean, commencing with the First
Commercial Sale of the Product in each country in the Territory, the aggregate
of the gross invoiced sales price for such Product sold or commercially disposed
of for value by JANSSEN, its Affiliates or the Licensees, or any of their
distributors, to Third Parties, after deduction of the following amounts:

 

(a)           all normal and customary trade and quantity discounts, allowances
and rebates, including government rebates actually taken or allowed except that
such discounts granted in consideration of a  Third Party  s agreement to
purchase other products shall not be deducted;

 

(b)           credits or allowances given or made for rejection, recall or
return of previously sold Product to the extent actually taken or allowed;

 

(c)           any tax or government charges, including any tax such as a value
added or similar tax or government charge other than an income tax levied on the
sale, transportation or delivery of the Product and borne by the seller thereof;
and

 

(d)           any charges for freight and insurance that are documented as
billed to the final customer.

 

1.29                        “Phase I” shall mean (i) that portion of the FDA
submission and approval process which provides for the first introduction into
humans of the Product with the purposes of determining human toxicity,
metabolism, absorption, elimination and other pharmacological actions, as more
fully defined in 21 C.F.R. §  312.21(a), as well as (ii) equivalent submissions
with similar requirements in other countries in the Territory.

 

1.30                        “Phase II” shall mean (i) that portion of the FDA
submission and approval process which provides for the initial trials of the
Product on a limited number of patients for the purposes of determining dose and
evaluating safety and efficacy in the proposed therapeutic indication as more
fully defined in 21 C.F.R. § 312.21(b), as well as (ii) equivalent submissions
with similar requirements in other countries in the Territory.

 

1.31                        “Phase III” shall mean (i) that portion of the FDA
submission and approval process which provides for the continued trials of
Product on sufficient numbers of patients to generate safety, efficacy and
pharmacoeconomic data to support regulatory approval in the proposed therapeutic
indication as more fully defined in 21 C.F.R. § 312.21(c), as well as (ii)
equivalent submissions with similar requirements in other countries in the
Territory.

 

6

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

1.32                        “Product” shall mean a Sterile, injectable
pharmaceutical product containing Compound that (i) utilizes or is prepared
using Nano Know-How or any Improvement , and/or (ii) is covered by a Selection
Patent and/or (iii) would infringe any of the Nano Patents but for the licenses
granted hereunder.

 

1.33                        “Selection Patents” shall mean all patents
(including all additions, divisions, continuations, continuations-in-part,
substitutions, extensions, patent term extensions and renewals thereof) and
patent applications (including patents issued thereon) that (i) claim findings
or inventions made or conceived by JANSSEN or NANO (or any of their Affiliates)
as a consequence of activities conducted or information disclosed under this
Agreement or the Feasibility Agreement; and (ii) are directed to methods of
preparing, purifying, characterizing, stabilizing, processing, formulating or
delivering small particles of Compound or Product.  A worldwide list of the
current Selection Patents (including pending patent applications) is attached
hereto as Exhibit B.  This list will be updated by JANSSEN at the reasonable
request of NANO.

 

1.34                        “Sterile” shall mean meeting the criteria of
sterility as defined in the current United States Pharmacopeia.

 

1.35        “Territory” shall mean all countries of the world.

 

1.36                        “Third Party” shall mean any person, corporation,
unincorporated body, or other entity other than JANSSEN, NANO and their
respective Affiliates and/or Licensees.

 

1.37                        “Valid Claim” shall mean a claim in a patent that
has not lapsed or become abandoned and that has not been declared invalid by an
unreversed or an unappealable decision of a court of competent jurisdiction.

 

ARTICLE 2 - LICENSE GRANT

 

2.1                               NANO grants to JANSSEN a worldwide, exclusive
license under the NanoCrystal Technology for the sole purpose of developing,
having developed, making, having made, using, marketing, selling, having sold
and distributing Product in the Territory, subject to the terms and conditions
set forth in this Agreement, including the provisions of Article 9.

 

2.2                               The rights and licenses granted hereunder
shall be sublicensable by JANSSEN to Licensees in any country in the Territory,
subject to the terms and conditions set forth in this Agreement, including the
provisions of Article 9; provided, however, that no Licensee shall be permitted
to sublicense any license granted to such sublicensee.

 

7

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

2.3                               JANSSEN may develop, make and/or sell Product
through its Affiliates in any country in the Territory or grant sublicenses to
its Affiliates in any country of the Territory, subject to the terms and
conditions set forth in this Agreement, including the provisions of Article 9.

 

2.4                               At the request of JANSSEN, NANO will extend
the rights and licenses granted herein to an Affiliate of JANSSEN on a direct
basis in any country of the Territory, subject to the terms and conditions set
forth in this Agreement, including the provisions of Article 9.

 

2.5                               Notwithstanding the granting of a sublicense
to a Licensee or an Affiliate, or a direct license to an Affiliate, JANSSEN
shall remain directly responsible to NANO for all obligations of JANSSEN, its
Affiliates and Licensees.

 

2.6                               Nothing herein shall preclude JANSSEN and/or
its Affiliates from utilizing distributors to promote and distribute the Product
in any country of the Territory.

 

2.7                              In the event the JANSSEN would consider
developing an oral formulation of the Product, the Parties will in good faith
discuss the possibility and the terms and conditions under which NANO would
grant JANSSEN a license under the NanoCrystal Technology to develop, make and
sell such oral formulation and/or whether NANO would manufacture such oral
formulation for JANSSEN.

 

2.8                               Notwithstanding anything else herein to the
contrary, in the event that JANSSEN’s development, manufacture, use, marketing,
sale or distribution of Product in the Territory would infringe any patent that
would be a Nano Patent but for the fact that it is an Elan-Independent patent
(an “Elan Patent”), NANO hereby grants to JANSSEN, to the extent NANO is legally
able to do so, a non-exclusive, royalty-free license under such Elan Patent for
the sole purpose of developing, having developed, making, having made, using,
marketing, selling, having sold and distributing such Product in the Territory,
which license shall be subject to the provisions of Article 9.  The provisions
of Article 11 shall not apply to any Elan Patents licensed hereunder, and NANO
shall have no obligation to transfer or disclose to JANSSEN any processes,
techniques, formulas, data, methods, equipment designs, know-how, show-how or
trade secrets associated with any Elan Patents licensed hereunder. 
Notwithstanding the above, in the event NANO is legally not able to grant such a
non-exclusive, royalty free license under any Elan Patent and is for similar
reasons not able to grant a commitment not to sue under such Elan Patent in
relation to the development, manufacture, use, marketing, sale or distribution
of Product, then JANSSEN shall be entitled to deduct all costs incurred or
payments made (including royalty payments) in relation to any alleged
infringement of such Elan Patent or settlement or other final disposition
thereof, in accordance with the provisions of Section 11.1

 

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

ARTICLE 3 - DEVELOPMENT ACTIVITIES

 

3.1                               The selection and development of Development
Candidate(s) that are suitable for development into a Product for
commercialization and approval of the development and final commercial
formulation and specifications for the Product will be the sole responsibility
of JANSSEN and JANSSEN will bear all costs and expenses related thereto.  At any
stage in the Development Program, it will be JANSSEN’s sole decision to evaluate
whether the results generated warrant the continuation of the Development
Program with respect to a Development Candidate.

 

3.2                               NANO will disclose to JANSSEN within a
reasonable period of time the Nano Know-How and any Improvements that NANO
believes are necessary or useful in connection with the Development Program,
based on the information, requests and reports provided to it by JANSSEN during
the term of this Agreement.  JANSSEN will disclose to NANO within a reasonable
period of time any Improvements developed or invented during the term of this
Agreement by JANSSEN or its Affiliates.

 

3.3                               From the Effective Date hereof, JANSSEN will
proceed with the development of the Development Candidate selected by JANSSEN,
such development already having been initiated under the terms of the
Feasibility Agreement.

 

3.4                               The activities to be undertaken in the course
of the Development Program will be monitored by the Development Team.  The
Development Team shall review and monitor the progress made during the
Development Program and will discuss important milestone events.  The
Development Team will be chaired by JANSSEN.

 

3.5                               Prior to NANO commencing supporting activities
in relation to the Development Program, JANSSEN and NANO will agree on the
specific activities to be undertaken by NANO, including timelines and related
budget and such timelines and budget will be attached to the Development Plan. 
JANSSEN acknowledges that in the event it requests additional support activities
from NANO that are not contemplated under this Agreement or in the Development
Plan, NANO may not be in a position to readily provide such support in view of
other commitments NANO may have to Third Parties.  In such event, JANSSEN and
NANO will in good faith discuss how and within what timeframe such additional
support activities may be performed by NANO.  In performing such support
activities in relation to the Development Program, NANO will use reasonable
efforts to comply with its commitments, including the commitment to dedicate
sufficient staff with adequate skills to such Development Program, as set forth
in the

 

9

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

Development Plan and as agreed upon prior to the start of the Development
Program.

 

3.6                               If NANO’s development efforts include the use
of a Third Party, NANO will, prior to appointing such Third Party, discuss with
JANSSEN the activities to be undertaken by such Third Party and the terms and
conditions thereof.  NANO will not proceed with such Third Party without the
prior written approval of JANSSEN, which approval shall not be unreasonably
withheld.

 

3.7                               NANO will provide JANSSEN with regular written
reports on the progress of the support activities to be undertaken by it under
the Development Program(s) and will create detailed descriptions of any
methodologies, development formulations or processes directed to Development
Candidates in order to enable JANSSEN to prepare and file any regulatory filings
in relation to the Product.

 

3.8                               JANSSEN will provide NANO on a quarterly basis
with written reports on the progress of activities undertaken by it relating to
the Development Program.  JANSSEN agrees to use reasonable efforts, consistent
with its normal business practices and in line with the efforts it devotes to
projects of similar sales and technical potential, to carry out the development
activities directed to a Development Candidate with the aim of developing the
Product that can be commercialized.

 

ARTICLE 4 - CLINICAL AND REGULATORY ACTIVITIES

 

4.1                               JANSSEN will be responsible for planning and
conducting, at its own cost and expense, Phase I, Phase II and Phase III
clinical trials in connection with a Development Candidate.  The protocols of
any Phase I, Phase II or Phase III clinical trial directed to the Development
Candidate will be solely determined by JANSSEN.  JANSSEN shall keep NANO
apprised on a quarterly basis of the progress of any such trials and any results
thereof.  It will be JANSSEN’s sole decision to evaluate whether the results of
any clinical trial warrant the continuance of the Development Program with
respect to a given Development Candidate.

 

4.2                               JANSSEN shall be responsible, at its own cost
and expense, for the preparation and filing of any IND or any other regulatory
approvals necessary to start clinical trials with respect to a Development
Candidate, and for compliance of such trials with the FDA’s IND and related
requirements.  NANO shall give JANSSEN such support as may be reasonably
requested by JANSSEN in relation thereto, provided such requests are restricted
to the activities undertaken by NANO in accordance with the provisions of
Section 3.5, or relate to requests raised by any regulatory

 

10

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

authorities in relation to the NanoCrystal Technology in general, as more fully
described in Sections 4.7 and 4.8.

 

4.3                               JANSSEN shall be responsible for and shall
have exclusive authority for compiling the IRF, including the indications
pursued therein, and for filing and obtaining NDA’s in any country in the
Territory where JANSSEN decides to commercialize the Product.

 

4.4                               Upon compilation of the IRF for the Product,
JANSSEN shall use reasonable efforts consistent with its normal business
practices and its overall business strategy to apply for the necessary
regulatory approvals in the Major Markets with respect to the Product, including
regulatory approvals pertaining to pricing and reimbursement.  JANSSEN will
inform NANO promptly upon the filing of any application for regulatory approval,
and any subsequent approval, in any Major Market and will furthermore keep NANO
apprised on a quarterly basis of the filings and approvals outside the Major
Markets.

 

4.5                               All regulatory data pertaining to the Product
and relating to any regulatory filing and/or approval, license or permit granted
by a regulatory authority in connection with the Product will be owned by
JANSSEN; provided, however, that all Drug Master Files and other submissions
filed by NANO with respect to NanoCrystal Technology shall be owned by NANO.

 

4.6                               NANO will provide JANSSEN with reasonable
regulatory support related to NanoCrystal Technology in connection with the
regulatory approvals to be filed by JANSSEN and the compilation of the IRF of
the Product.  Amongst other things , NANO will (i) prepare all necessary
supporting documentation related to NANO’s activities under the Development Plan
requested by JANSSEN, such as certificates or other administrative documents
required for reference in any regulatory filing, and (ii) issue a letter of
authorization to the FDA permitting the FDA to reference NANO’s relevant drug
master files in reviewing applications for regulatory approval of Product.  NANO
will further assist JANSSEN with the preparation of supporting data related to
the NanoCrystal Technology to allow JANSSEN to apply for and pursue the
regulatory approvals in any country where JANSSEN decides to register Product. 
JANSSEN will keep NANO informed in connection with questions raised by
regulatory authorities specifically related to the NanoCrystal Technology and
NANO will assist JANSSEN whenever such regulatory questions or issues arise
during the review process in any country.  JANSSEN may reasonably request NANO
to participate in critical meetings scheduled with the health authorities in
relation to requests raised by such authorities with respect to the NanoCrystal
Technology.

 

4.7                               During the term of this Agreement NANO will
promptly inform JANSSEN of any information or finding (including questions or
remarks raised by regulatory

 

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

authorities) in relation to the NanoCrystal Technology that NANO believes or has
reason to believe may have a regulatory bearing on the further making or
commercialization of the Product in accordance with the regulatory approvals in
any country in the Territory.  In addition, NANO will provide JANSSEN with
reasonable assistance whenever questions specifically related to the NanoCrystal
Technology are raised by regulatory authorities during the review process in any
country in the Territory, which assistance shall include participation in
critical meetings scheduled with health authorities in any such country.

 

4.8                               Each party shall promptly inform the other of
any actions, questions or remarks raised by regulatory authorities in relation
to the NanoCrystal Technology, or the use thereof with respect to the Product. 
In addition, JANSSEN will report and cause its Affiliates and Licensees to
report to NANO, and NANO will report and cause its Affiliates to report to
JANSSEN, all information concerning any known or suspected side effect, injury,
toxicity, sensitivity reaction, customer complaint, alleged defect or other
adverse experience (including the severity thereof) associated with exposure to
or use of Compound or Product that is alleged, believed or suspected to be
attributable to the application of NanoCrystal technology to Compound or
Product.  JANSSEN shall be responsible for reporting adverse experiences with
respect to Product to the FDA in conformity with applicable laws and
regulations.  Each party shall promptly inform the other of any threatened or
pending actions by the FDA or any other regulatory authority concerning Product
or NanoCrystal Technology.

 

4.9                               Any regulatory support provided by NANO under
this Article 4 shall be provided free of charge; provided, however, that JANSSEN
shall reimburse NANO for (i) all out-of-pocket expenses NANO or its Affiliates
incur in relation to any activities requested by JANSSEN, and (ii) any
extraordinary activities requested by JANSSEN, including, without limitation,
attending any meetings with regulatory authorities concerning the Product.

 

ARTICLE 5 - PAYMENTS

 

5.1                               In consideration of the rights and licenses
granted to JANSSEN under Article 2 of this Agreement, JANSSEN shall pay to NANO
the following amounts:

 

(a)                                 the non-refundable sum of [*] due and
payable upon the Effective Date of this Agreement;

 

(b)                                 in connection with Development Candidates
and Product the following sums:

 

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

(i)                                     the sum of [*] payable within thirty
(30) days of the date a Development Candidate is first administered to six
(6) human subjects;

 

(ii)                                  the sum of [*] payable within thirty (30)
days of the date the first IND for a Development Candidate is filed;

 

(iii)                               the sum of [*] payable within thirty (30)
days of JANSSEN’s commencement of the first Phase III clinical trial of a
Development Candidate;

 

(iv)                              the sum of [*] payable within thirty (30) days
of the date the first NDA for the Product is submitted in a Major Market; and

 

(v)                                 the sum of [*] payable within thirty (30)
days following the date the first NDA for the Product is approved in a Major
Market.

 

5.2                               The milestone payments due under
Section 5.1(b) shall only be paid once by JANSSEN.  NANO will send valid VAT
invoices to JANSSEN in relation to all milestone payments payable under this
Agreement.

 

ARTICLE 6 - ROYALTIES

 

6.1                               In consideration of the rights and licenses
granted under the NanoCrystal Technology, JANSSEN shall pay a royalty of one and
one-half percent (1 1/2%) on the Net Sales of Products in all countries of
Territory where Nano Patents or Selection Patents containing Valid Claims are
filed or subsist (hereinafter “Patent Royalty”).

 

6.2                               In further consideration of the rights and
licenses under the NanoCrystal Technology, JANSSEN shall pay on its annual Net
Sales in Territory a royalty in accordance with the following brackets
(hereinafter “Know How Royalty”):

 

(a) three and one-half percent (3 1/2%) on aggregate Net Sales below 250,000,000
Dollars;

 

(b) five and one-half percent (5 1/2%) on aggregate Net Sales between
250,000,000 Dollars and 500,000,000 Dollars; and

 

(c)  seven and one-half percent (7 1/2%) on aggregate Net Sales above
500,000,000 Dollars.

 

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

6.3                               With respect to each country in the Territory,
JANSSEN shall pay the Patent Royalties until expiration of the last to expire of
the Nano Patents and the Selection Patents that are applicable in such country;
provided, however, that any Nano Patent or Selection Patent consisting of a
patent application pending for more than five (5) years after the Effective Date
shall no longer be considered a Nano Patent or a Selection Patent, as
applicable, until such time as the patent on such application issues.

 

6.4                               With respect to each country in the Territory,
JANSSEN shall pay the Know-How Royalties until the later of (i) fifteen (15)
years following the First Commercial Sale in such country, or (ii) twenty (20)
years following the Effective Date.  The sales in any country where the Know-How
Royalties are no longer due in accordance with the above provisions shall not be
used in the computation of the aggregate Net Sales in accordance with
Section 6.2.

 

6.5                               If in a country a Third Party (other than a
Person acting on behalf of or through a license from JANSSEN or any of its
Affiliates) is selling a product in such a manner sufficient to achieve
Competition, the Know-How Royalties for sales of the Product with respect to
which Competition exists shall be reduced by fifty percent (50%) in such country
(i.e., only fifty percent (50%) of the sales of such Product in such country
shall be considered in calculating the aggregate Net Sales in accordance with
Section 6.2), until such time as there is a discontinuance of Competition. 
Notwithstanding the foregoing, no such reduction of the Know-How Royalties shall
apply in the event such Competition has caused any party hereto to take action
under Section 11.2 against such Third Party; provided, however, that the
reduction of the Know-How Royalties set forth in Section 11.2(g) shall be
applied if Competition is caused by an infringement of Product and such
infringement is not overcome within one hundred twenty (120) days following
NANO’s receipt of JANSSEN’s written notice evidencing a prima facie case of
infringement.

 

ARTICLE 7 - ROYALTY PAYMENTS, REPORTS AND RECORDS

 

7.1                               JANSSEN shall keep and shall cause its
Affiliates and Licensees to keep, and to maintain for at least two years, true
and accurate records of sales of Product and Net Sales and the royalties payable
to NANO under Article 6 hereof and shall deliver to NANO a written statement
thereof on or before the sixtieth (60th) day following the end of each calendar
quarter (or any part thereof in the first or last calendar quarter of this
Agreement) for such calendar quarter.  Said written statements shall set forth
on a country-by-country basis, a calculation of the Net Sales from gross
revenues for the Product during that calendar quarter, the applicable percentage
royalty rates, and a computation of the royalties due to

 

14

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

NANO (the “Royalty Statement”).  Upon NANO’s receipt of each Royalty Statement
from JANSSEN, NANO will send valid VAT invoices to JANSSEN confirming the
royalties due and payable by JANSSEN under this Agreement.

 

7.2                               All royalty payments to be made by JANSSEN to
NANO shall be converted into Dollars at the average rate of exchange for the
calendar quarter for which royalty payments are being remitted according to
JANSSEN’s normal procedures, as consistently applied by JANSSEN for its other
products (which procedures shall be subject to NANO’s review and approval, such
approval not to be unreasonably withheld), and shall be made by wire transfer to
a designated NANO account on or before the sixtieth (60th) day following the end
of each JANSSEN accounting quarter.  In the event that royalties are payable
with respect to Net Sales in a country whose currency cannot be freely converted
to Dollars, such currency shall be converted in accordance with the normal
procedures consistently applied by JANSSEN (which procedures shall be subject to
NANO’s review and approval, such approval not to be unreasonably withheld).

 

7.3                               Any income or other taxes which JANSSEN is
required by law to pay or withhold on behalf of NANO with respect to royalties
and any other monies payable to NANO under this Agreement shall be deducted from
the amount of such royalties and monies due.  JANSSEN shall furnish NANO with
proof of such payments.  Any such tax required to be paid or withheld shall be
an expense of and borne solely by NANO.  JANSSEN shall promptly provide NANO
with a certificate or other documentary evidence to enable NANO to support a
claim for a refund or a foreign tax credit with respect to any such tax so
withheld or deducted by JANSSEN.  The parties hereto will reasonably cooperate
in completing and filing documents required under the provisions of any
applicable tax treaty or under any other applicable law, in order to enable
JANSSEN to make such payments to NANO without any deduction or withholding.

 

7.4                               NANO shall have the right to nominate an
independent certified public accountant acceptable to and approved by JANSSEN
who shall have access, on reasonable notice, to JANSSEN and its Affiliates’ or
Licensees’ records during reasonable business hours for the purpose of verifying
the royalties payable as provided in this Agreement for the two preceding
years.  This right may not be exercised more than once in any calendar year, and
once a calendar year is audited it may not be reaudited, and said accountant
shall disclose to NANO only information relating solely to the accuracy of the
Royalty Statements provided to NANO and the royalty payments made to NANO under
this Agreement.

 

7.5                               Any adjustment required as a result of an
audit conducted under Section 7.4 shall be made within twenty-five (25) days
after the date on which the accountant conducting the audit issues a written
report to NANO and JANSSEN containing the results of the audit.   Any
underpayment by JANSSEN shall bear interest from

 

15

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

the date that such amount should have been paid to NANO as royalties to the date
that the underpayment is actually paid to NANO by JANSSEN.  The interest rate
shall be the prime interest rate published in the Wall Street Journal at the
close of business on the day prior to the date the underpayment is made, plus
two percent (2%).  In addition, if any underpayment by JANSSEN is greater than
five percent (5%) of the amount previously paid to NANO for the relevant period,
the costs and expenses of the audit shall be paid for by JANSSEN.

 

7.6                               All payments due hereunder shall be made to
the designated bank account of EPIL in accordance with such timely written
instructions as NANO shall from time to time provide.

 

7.7                               Each payment due from JANSSEN to NANO under
this Agreement shall bear interest from the due date of such payment at the
prime rate published in the Wall Street Journal on the due date for such payment
plus two percent (2%), provided JANSSEN does not make such payment within thirty
(30) days following the due date for such payment.

 

ARTICLE 8 - COMMERCIALIZATION

 

8.1                               All business decisions, including, but not
limited to, decisions concerning pricing, reimbursement, package design, sales
and promotional activities for the Product, and the decision to launch or
continue to market the Product in particular countries in the Territory, shall
be within the sole discretion of JANSSEN.  Notwithstanding the foregoing
sentence, JANSSEN agrees to make a First Commercial Sale of the Product in each
of the Major Markets within nine (9) months after obtaining the necessary
regulatory approvals, including approvals concerning acceptable pricing and
reimbursement, if applicable, in such Major Market.  Said nine (9) month period
will be extended, but not by more than six (6) months, upon JANSSEN’s reasonable
request for sound business reasons, including, but not limited to, the launch by
JANSSEN, its Affiliates or Licensees of other products that do not directly
compete with the Product in the Major Markets, or the intended simultaneous
launch of the Product in several countries.

 

8.2                               JANSSEN will promptly inform NANO of the First
Commercial Sale of the Product in each of the Major Markets and will provide
NANO with calendar quarterly updates on the First Commercial Sales of the
Product in other countries.

 

8.3                               All trademarks utilized by JANSSEN or its
Affiliates or Licensees on Product under this Agreement shall be chosen and
owned by JANSSEN or its Affiliates or Licensees.  Upon termination of this
Agreement under Article 14 or Article 15, all rights to said trademarks shall
remain with JANSSEN or its Affiliates or Licensees.  Notwithstanding the
foregoing, JANSSEN shall not use the terms

 

16

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

“nano”, “nanosystem” or “nanocrystal”, or any terms derived therefrom, in any
trademark used by JANSSEN for any purpose without the prior written approval of
NANO.

 

ARTICLE 9 - MANUFACTURING AND SUPPLY

 

9.1                               JANSSEN shall have the right to make or have
made Products, but the latter subject to the provisions herein concerning
JANSSEN’s obligations with respect to Highly Confidential Information.  In order
to enable JANSSEN to so manufacture or have manufactured Products, NANO will,
upon JANSSEN’s reasonable request and subject to the terms and conditions
herein, provide JANSSEN with all NanoCrystal Technology reasonably necessary in
order to enable JANSSEN to commercially manufacture Product in accordance with
the specifications for manufacture set forth in the IRF and as communicated by
JANSSEN to NANO.

 

9.2                               JANSSEN shall not sublicense or disclose any
Highly Confidential Information to any party, including without limitation its
Affiliates and Licensees, without the prior written consent of NANO, such
consent not to be unreasonably withheld.  Notwithstanding the foregoing, JANSSEN
may, without such prior written consent, sublicense and disclose Highly
Confidential Information (subject to the limitations set forth in Article 12) to
a maximum of two of its Affiliates for the sole purpose of enabling such
Affiliates to manufacture Product in accordance with the terms and conditions
set forth herein.

 

9.3                               In the event that, pursuant to the terms and
conditions of this Agreement, JANSSEN or one of its Affiliates seeks to
manufacture Product hereunder, NANO shall supply the polymeric grinding media,
if any, required for such manufacture, in accordance with reasonable commercial
terms to be negotiated in good faith between the parties.

 

9.4                               JANSSEN hereby agrees to manufacture Product,
and to cause all of its Affiliates permitted hereunder to manufacture Product,
in conformity with all applicable laws, regulations and regulatory filings and
in accordance with generally accepted standards and practices for such
activities in the pharmaceutical industry.

 

ARTICLE 10 - RIGHTS IN TECHNOLOGY, INVENTIONS AND PATENTS

 

10.1                        NANO agrees to use its good faith efforts to
continue, at its sole cost and expense, the prosecution and maintenance of the
Nano Patents listed in Exhibit A.  Prosecution of pending patent applications,
shall mean through final patent office appeal and any opposition proceedings or
the like, including but not limited to, re-

 

17

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

issue applications and re-examination proceedings in the United States and any
foreign counterparts thereto.  Upon either party’s request, but not more
frequently than once per year, the parties shall in good faith review the
patents and patent applications set forth in Exhibit A.  If both parties agree,
the prosecution of any patent applications and/or maintenance of any patents may
be abandoned.

 

10.2                        Whenever any findings or inventions made or
discovered during the course of the Development Program, or as a consequence of
activities conducted under this Agreement or the Feasibility Agreement, are
deemed patentable, both Parties will promptly inform each other thereof and
ownership and filing of any patent applications related thereto will be done in
accordance with the following principles:

 

(a)                                 NANO shall own and shall have the right to
apply for and maintain patents at its own cost with respect to findings or
inventions that are Improvements but that are not useful with respect to
Compound and/or Product, irrespective whether such inventions or findings were
made or discovered solely or jointly by employees of NANO and/or JANSSEN.

 

(b)                                 JANSSEN shall own and shall have the right
to apply for and maintain patents at its own cost with respect to findings or
inventions that are useful solely with respect to Compound and/or Product,
irrespective whether such inventions or findings were made or discovered solely
or jointly by employees of JANSSEN and/or NANO.  Each such patent shall be a
Janssen Patent or a Selection Patent as the case may be.

 

(c)                                  With respect to any finding or invention
not covered by (a) or (b) above, irrespective whether such inventions or
findings were made or discovered solely or jointly by employees of JANSSEN
and/or NANO, the parties shall in good faith evaluate the possibility of
simultaneously applying for separate patent applications and of separately
maintaining any patents issuing thereon.  Should the parties agree that separate
patent applications are feasible and appropriate, (i) the claims of any such
patent applications filed by JANSSEN shall be limited to Compound or Product,
and any patents issuing thereon shall be deemed Janssen Patents or Selection
Patents as the case may be; and (ii) the claims of any such patent applications
filed by NANO shall specifically exclude Compound or Product.

 

(d)                                 In the event either party is of the
reasonable opinion that the filing of separate applications is not feasible or
appropriate, (i) NANO shall own and have the right to apply for and maintain
patents with respect to findings or inventions that are Improvements (which
shall be included within NanoCrystal Technology and covered by the license grant
to

 

18

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

JANSSEN under Article 2); and (ii) JANSSEN shall own and have the right to apply
for and maintain patents with respect to other findings and inventions, and the
patents on such other findings and inventions shall be deemed Janssen Patents
and/or Selection Patents as the case may be.

 

10.3                        Each of JANSSEN and NANO shall provide prompt notice
to the other of all findings and inventions covered under Section 10.2, and
shall consult and cooperate with the other in good faith with respect to the
filing of patent applications for findings and inventions covered under
Section 10.2 and the maintenance of patents issued thereon including, without
limitation, by executing and obtaining from employees and other Persons all
assignments and other documents reasonably required in connection therewith.  In
addition, prior to filing any simultaneous patent applications under
Section 10.2(c), each of JANSSEN and NANO shall provide the other with
reasonable opportunity to comment on the proposed text of such applications and
shall give due consideration to any comments received from the other concerning
such applications; provided, however, that JANSSEN and its Affiliates shall not
include any Highly Confidential Information in any patent applications they file
hereunder without the prior written consent of NANO.

 

10.4                        The parties agree to cooperate in order to avoid
loss of any rights which may otherwise be available to the parties under the
U.S. Drug Price Competition and Patent Term Restoration Act of 1984, the
Supplementary Certificate of Protection of the Member States of the European
Community and other similar measures in any other country in the Territory. 
Without limiting the foregoing, each of JANSSEN and NANO agrees to provide the
other with reasonable information and assistance in order to permit the timely
filing of an application for patent term extension within the sixty (60) day
period following NDA approval to market Product in the United States. Upon
similar approvals by the health authorities in a country of the European
Community or in other countries in the Territory, each party shall provide the
other with reasonable information and assistance in order to permit the timely
filing of a Supplementary Certificate of Protection of the Member States of the
European Community and related filings.

 

ARTICLE 11 - INFRINGEMENT

 

11.1                        If, as a result of the use of the NanoCrystal
Technology in the manufacture, use or sale of the Product in any country of the
Territory, JANSSEN and/or its Affiliate or Licensee is sued for patent
infringement or threatened with such a lawsuit or other action by a Third Party,
JANSSEN and NANO shall meet to analyze the infringement claim and the avoidance
of same.  If it is necessary in the judgment of JANSSEN to obtain a license from
such Third Party with respect to such Product, and JANSSEN obtains an written
opinion from outside counsel

 

19

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

concurring with JANSSEN’s judgment that such a license is necessary, JANSSEN,
with NANO’s reasonable assistance, may negotiate for such a license and in such
negotiations shall make every effort to minimize any license fees and/or
royalties payable to such Third Party.

 

(a)                                 If the settlement or other resolution of a
lawsuit or threatened lawsuit or other action requires any payments for
pre-settlement or pre-litigation resolution damages to a Third Party, including
but not limited to royalty payments for past sales of an allegedly infringing
Product in a country, then JANSSEN, its Affiliates and Licensees on the one hand
and NANO on the other hand shall [*].

 

(b)                                 For any required royalty payments on
post-settlement or post-litigation sales of the allegedly infringing Product in
a country, JANSSEN and/or its Affiliates or Licensees, but not NANO, shall [*].

 

(c)                                  The [*] due and payable to NANO under this
Section 11.1 shall only apply to the extent that the infringement is due to the
use of NanoCrystal Technology in such Product and is not the result of (i) a
modification of the nanoparticle formulation or nanoparticle manufacturing
process of such Product, or (ii) refusal by JANSSEN to modify the Product to
avoid infringement, unless JANSSEN shows that its manufacturing and regulatory
costs to so avoid infringement would be commercially unreasonable.  In the event
that in connection with (ii) above, the parties fail to agree on whether such
costs are commercially unreasonable, such matter shall be resolved in accordance
with the provisions of Article 20.

 

(d)                                 In the event that JANSSEN manufactures
Product using a manufacturing process that does not utilize the NanoCrystal
Technology and such manufacturing process is alleged by a Third Party to
infringe certain patented technology of such Third Party, and JANSSEN
demonstrates to NANO’s reasonable satisfaction that JANSSEN is required to
obtain a royalty-bearing license from a Third Party to use such Third Party’s
patented technology to manufacture Product, [*].

 

11.2                        In the event that in any country in the Territory in
which JANSSEN, its Affiliates or Licensees are marketing the Product, there is
an infringement of a Nano Patent by a Third Party’s product, JANSSEN or its
Affiliates shall notify NANO in writing to that effect, including with said
written notice evidence establishing a prima facie case of infringement by such
Third Party.  In the event of a potential multicountry infringement by the same
Third Party with the same infringing product, the parties will promptly discuss
the possible strategies to deal with such infringement on a global basis prior
to deciding on a course of action in a single

 

20

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

country, taking into consideration the conditions set forth hereinafter as well
as the potential scope of the infringement and the countries involved.

 

(a)                                 NANO shall have the right at its sole
discretion to take action to stop such infringement, including without
limitation conducting patent infringement proceedings or starting settlement
discussions.  NANO shall bear all the costs and expenses of any suit brought by
it.  JANSSEN and/or its Affiliate or Licensee will cooperate with NANO in any
such suit and shall have the right to consult with NANO and be represented by
its own counsel at its own expense.  NANO’s failure to take action under this
Article shall not be considered a breach of this Agreement and JANSSEN’s sole
remedy shall be to bring suit itself, subject to the terms and conditions of
this Section 11.2.

 

(b)                                 If, within forty (40) days after NANO’s
receipt of JANSSEN’s written notice evidencing a prima facie case of
infringement, NANO has not overcome the case of infringement, obtained a
discontinuance of such infringement, brought suit against the Third Party
infringer, or taken steps to initiate such a suit, JANSSEN shall have the right,
in its sole discretion, but not the obligation to bring such suit against the
infringer, subject to the conditions set forth below, at its own expense and in
its own name, if legally permissible.  If necessary and legally permissible,
NANO will permit the suit to be brought in its name.  JANSSEN shall bear all the
costs and expenses of any suit brought by it.  NANO will cooperate with JANSSEN
in any such suit and shall have the right to consult with JANSSEN and be
represented by its own counsel at its own expense.

 

(c)                                  JANSSEN’s right to bring suit in a country
in accordance with the above provisions in connection with Nano Patents is
subject to [*].  If the parties disagree on whether the above conditions are
satisfied in any specific case of infringement, the matter will be submitted for
decision to an independent patent counsel selected in common agreement by
JANSSEN and NANO, and the parties agree to abide by the decision of such patent
counsel with respect to such conditions.

 

(d)                                 Notwithstanding the opinion of an
independent patent counsel that the conditions in (c) above are satisfied, NANO
shall have the right to withhold its consent to JANSSEN bringing suit against
the Third Party infringer.  [*]

 

(e)                                  [*]

 

(f)                                   Any damages, costs, awards, settlement
amounts or other sums received by the party bringing suit arising out of any
proceedings for infringement

 

21

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

of the Nano Patents shall be retained by such party.  Notwithstanding the
foregoing, whenever the party bringing suit is JANSSEN, the damages, costs,
awards, settlement amounts and other sums shall be divided as follows:

 

(i)            JANSSEN shall be entitled to its out of pocket expenses actually
incurred by JANSSEN or its designated Affiliate in respect of the proceedings
for infringement of the Nano Patents insofar as such expenses have not already
been deducted from the royalties payable to NANO pursuant to (e) above;

 

(ii)           NANO shall be entitled to a sum equal to any royalties withheld
pursuant to (e) above; and

 

(iii)          JANSSEN and NANO shall equally share the remainder.

 

(g)                                  If, within one hundred twenty (120) days
after NANO’s receipt of JANSSEN’s written notice [*], the infringement has not
been overcome by either JANSSEN or NANO, and a Third Party’s (other than a
Person acting on behalf of or through a license from JANSSEN or any of its
Affiliates) sales of the infringing product are or become sufficient to create
Competition, then the Patent Royalties and the Know-How Royalties for sales of
the Product being infringed shall each [*] in the country where the infringement
is occurring, irrespective of whether NANO or JANSSEN taking action against such
infringer in accordance with the provisions of this Section 11.2, until such
time as there is a discontinuance of such Competition.  The provisions of this
subsection (g) shall not apply whenever the royalties due to NANO [*] in
accordance with the conditions set forth in (d) above and the provisions of
(d) shall apply to such reduction.

 

11.3                        In the event of any infringement of a Janssen Patent
by a Third Party, JANSSEN shall have the right at its sole discretion to take
action to stop such infringement, including without limitation conducting patent
infringement proceedings or starting settlement discussions.  JANSSEN shall bear
all the costs and expenses in connection with any such proceedings and
discussions.

 

11.4                        As of the Effective Date of this Agreement NANO
declares that, according to the best of its current knowledge and belief, the
application of the Nano Patents and Nano Know-How to the Compound does not
infringe the patent rights of any Third Party in any country in the Territory.

 

22

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

ARTICLE 12 - CONFIDENTIALITY

 

12.1                        During the performance of this Agreement, either
party will disclose to the other party information which the disclosing party
considers to be confidential.  This information may include, without limitation,
any data, information, know-how and materials which in the case of JANSSEN
relates to Compound and/or Product and which in the case of NANO relates to
NanoCrystal Technology, including information which is discovered by or brought
to the attention of any party hereto during or as a result of, directly or
indirectly, the performance of the Agreement (“Information”).

 

12.2                        For purposes of this Agreement, each party hereto is
a “Submitter” as to Information or Highly Confidential Information disclosed or
provided by it under this Agreement and each is a “Recipient” as to Information
or Highly Confidential Information disclosed or provided to it under this
Agreement.

 

12.3                        The confidentiality obligations contained herein
shall not apply to any portion of the Information or Highly Confidential
Information which:

 

(a)           is or becomes public or available to the general public otherwise
than through the act or default of Recipient or any Authorized Party (as defined
below);

 

(b)           is obtained by Recipient from a Third Party who is lawfully in
possession of such Information and is not subject to an obligation of
confidentiality or non-use owed to Submitter;

 

(c)           is previously known to Recipient prior to disclosure to Recipient
by Submitter, as evidenced by the written records of Recipient;

 

(d)           is independently developed, discovered or arrived at by Recipient
without use of the Information, as evidenced by written records of Recipient; or

 

(e)           is disclosed by Recipient pursuant to a requirement of law,
including without limitation to governmental regulatory agencies, and is
thereafter publicly disclosed or made available to the public by operation of
law, provided that Recipient has complied with the provisions set forth in
Section 12.9.

 

The Recipient shall have the burden of proof as to the existence of any of the
conditions under (a) through (e) above.  In addition, independent development,
discovery or arrival at data, information, know-how or materials under (d) above
must be established by clear and convincing evidence .

 

23

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

12.4                        Recipient shall employ at least the same degree of
care to keep all Information confidential as it employs with respect to its own
information of like importance; and shall, in any event, take all steps
reasonably necessary to maintain and preserve the confidentiality of all
Information.

 

12.5                        Information will only be submitted to Recipient’s
employees or employees of Recipient’s Affiliates and Licensees on a need to know
basis.  Without the prior written consent of the Submitter, Recipient shall not
disclose any Information to any Third Party, Affiliate or Licensee, except to
those who need to know such Information to achieve the purpose of this
Agreement.  Each such Third Party, Affiliate and Licensee, being referred to
herein as an “Authorized Party,” and Recipient, including, without limitation,
its representatives, agents and employees, shall use the Information only in
accordance with the terms and conditions of this Agreement.

 

12.6                        Recipient warrants that each Authorized Party or
employee to whom any Information is revealed shall (i) previously have been
informed of the confidential nature of the Information and (ii) will prior to
any disclosure have agreed to be bound by terms and conditions of (A) a written
secrecy agreement with Recipient to protect Recipient’s information whenever it
concerns an employee, or (B) a written confidentiality agreement with Recipient
containing terms and conditions substantially equivalent to those in this
Article 12 applicable to Recipient whenever it concerns an Authorized Party. 
Recipient shall ensure that the Information is not used or disclosed by such
Authorized Party or employee except for the purposes of developing and
manufacturing Product in accordance with this Agreement, and shall be
responsible for any breach of this Agreement by such Authorized Party or
employee.

 

12.7                        All Information shall remain the property of
Submitter.  Upon termination of this Agreement and upon the written request of
Submitter (i) all tangible Information (including without limitation all copies
thereof and all unused samples), except for Information consisting of analyses,
studies and other documents prepared by or for the benefit of Recipient, shall
be promptly returned to Submitter, and (ii) all portions of such analyses,
studies and other documents prepared by or for the benefit of Recipient
(including all copies thereof) which are within the definition of Information
shall be destroyed; provided that Recipient may retain one copy of Information
in a secure location for purposes of identifying its obligations under this
Agreement and for no other purposes.

 

12.8                        The obligations of Recipient as to confidentiality
and non-use set forth in this Agreement, including, without limitation, the
provisions of Section 12.4, shall survive the expiration or termination of this
Agreement and shall continue for five

 

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

(5) years thereafter, but in no event shall such confidentiality obligations
terminate earlier than December 31, 2015.

 

12.9                        If Recipient becomes legally required to disclose
any Information, Recipient shall give Submitter prompt notice of such fact so
that Submitter may seek to obtain a protective order or other appropriate remedy
concerning any such disclosure and/or waive compliance with the non-disclosure
provisions of this Agreement.  Recipient shall fully cooperate with Submitter in
connection with Submitter’s efforts to obtain any such order or other remedy. 
If any such order or other remedy does not fully preclude disclosure, or if
Submitter waives compliance with the non-disclosure provisions of this
Agreement, Recipient shall make such disclosure only to the extent that such
disclosure is legally required.  Any Information required to be provided to
regulatory authorities or other governmental agencies in connection with a
regulatory filing in accordance with the terms of this Agreement in any country
in the Territory shall be permitted and shall be exempt from the provisions of
this Section 12.9; provided, however, that Recipient will use efforts to see to
it that such regulatory authorities or other governmental agencies treat such
Information as confidential, which efforts shall be no less diligent than those
Recipient uses to secure confidential treatment by regulatory authorities or
other governmental agencies of Recipient’s own, similarly confidential and/or
proprietary data, information, know-how and materials.  Notwithstanding anything
else contained herein, any disclosure by JANSSEN of NANO Information to
regulatory authorities or governmental agencies will be made in accordance with
JANSSEN’s normal business practices as consistently applied to its other
pharmaceutical products.

 

12.10                 With respect to data concerning Product, including data
contained in Information, NANO shall have the right to use and to disclose to
Third Parties, with no financial obligation to JANSSEN, data related to Nano
Crystal Technology; provided, however, that in any such disclosure NANO shall
not (i) disclose that such data is derived from Compound or Product, or
(ii) identify, directly or indirectly, JANSSEN or the Compound.

 

12.11                 The parties recognize the importance of publishing
Information developed in clinical studies undertaken by JANSSEN or on behalf of
JANSSEN under the provisions of this Agreement.  Therefore, subject to NANO’s
prior approval, which approval shall not be unreasonably withheld, JANSSEN shall
have the right to publish such studies in furtherance of the purposes of this
Agreement: provided however that such studies do not contain any Highly
Confidential Information.

 

12.12                 With respect to Highly Confidential Information, JANSSEN
and any Authorized Party to whom JANSSEN discloses Highly Confidential
Information, in addition to complying with the obligations set forth herein for
Information, shall:

 

25

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

(a)           disclose it only to employees on a need to know basis to the
extent permitted hereunder;

 

(b)           treat it as confidential information and safeguard it against
disclosure using strict standards and care as provided for in this Section 12.12
to protect it from disclosure to those not authorized to receive it hereunder;

 

(c)           use it only in developing and manufacturing Products in accordance
with the terms of this Agreement;

 

(d)           require any employee that will receive it to sign for receipt of a
numbered copy of it, acknowledging also such employee’s receipt of the Statement
attached hereto as Form 1;

 

(e)           not make copies of any documents embodying or containing it
without the prior written authorization from NANO unless all copies thereof are
numbered, a record is maintained of the recipient of each said numbered copy,
and such records are provided promptly to NANO upon request;

 

(f)            retain all documents embodying or containing it under lock,
separate from JANSSEN’s other records and information and in the personal
control of one employee of JANSSEN who shall be approved by NANO;

 

(g)           immediately notify NANO in writing in the event of any loss, theft
or disclosure thereof; and

 

(h)           treat any modifications, advances, extensions, enhancements, or
other changes to it made by JANSSEN or any Authorized Party to whom it is
disclosed by JANSSEN as Highly Confidential Information as provided hereunder in
the same manner as and in accordance with the provisions of this Agreement
relating to Highly Confidential Information.

 

ARTICLE 13 - TERM

 

This Agreement shall become effective from the Effective Date and unless sooner
terminated pursuant to any other provision of this Agreement continue in full
force until the last to expire of the Nano Patents or Selection Patents, or for
twenty (20) years from the Effective Date, whichever results in the longer
period of time.

 

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

ARTICLE 14 - TERMINATION BY JANSSEN

 

Notwithstanding any other provision herein, JANSSEN may terminate this Agreement
with respect to the entire Territory or with respect to one or more of the Major
Markets upon three (3) months prior written notice to NANO.

 

ARTICLE 15 - TERMINATION FOR CAUSE

 

15.1                        In the event JANSSEN or NANO or their respective
Affiliates and Licensees are in material breach of any of the respective
obligations and conditions contained in this Agreement, the other party shall be
entitled to give the party in breach notice requiring it to cure such material
breach.  If such material breach is not cured within ninety (90) days after
receipt of such notice, the notifying party shall be entitled (without prejudice
to any of its other rights conferred on it by this Agreement) to terminate this
Agreement by giving notice thereof to the party in breach, which notice shall
take effect immediately.

 

15.2                        If either party elects not to terminate this
Agreement under Section 15.1 in the event of a material breach by the other
party hereto, the non-breaching party may seek a determination of damages for
the breach from the breaching party by resorting to the dispute resolution
procedures set forth in Article 22.  Upon a determination of such damages under
Article 22, the non-breaching party may, to the extent possible, offset such
damages against such party’s payment obligations under this Agreement.  Nothing
herein shall prevent either party hereto from exercising such party’s right to
obtain temporary or permanent injunctive relief or other equitable relief
restraining the other party from engaging in conduct that would constitute a
breach of Article 12 or Article 31.

 

15.3                        In the event that one of the parties hereto becomes
bankrupt or insolvent, a receiver or a trustee is appointed for the property or
estate of such party and said receiver or trustee is not removed within sixty
(60) days, or the party makes an assignment for the benefit of its creditors,
and whether any of the aforesaid events be the outcome of the voluntary act of
that party, or otherwise, the other party shall be entitled to terminate this
Agreement forthwith by giving a written notice to the first party.

 

ARTICLE 16 - RIGHTS AND OBLIGATIONS UPON TERMINATION

 

16.1                        Upon the expiration of the term of this Agreement
under Article 13, but not upon its earlier termination, JANSSEN’s license rights
under Section 2.1 shall become fully paid-up and shall thereafter remain
royalty-free and irrevocable, but shall be non-exclusive.  In addition, the
provisions of Article 1, Sections 7.4, 7.5, 7.6 and

 

27

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

7.7, Sections 10.2, 10.3 and 10.4, Article 12 (as indicated in Section 12.8),
and Articles 16, 17, 18, 19, 20, 21, 22, 23, 24, 26, 27, 28, 29 and 30 shall
survive such expiration, and all payment obligations accruing under this
Agreement prior to its expiration, including without limitation all payment
obligations accruing under Articles 5 and 6, shall survive such expiration.

 

16.2                        In the event that this Agreement is terminated by
JANSSEN in the entire Territory or in all Major Markets in accordance with
Article 14, or by either party pursuant to Article 15, the provisions of
Article 1, Sections 7.4, 7.5, 7.6 and 7.7, Sections 10.2, 10.3 and 10.4,
Article 12 (as indicated in Section 12.8), and Articles 16, 17, 18, 19, 20, 21,
22, 23, 24, , 26, 27, 28, 29, 30 and 31 (as indicated therein) shall survive
such termination, and all payment obligations accruing under this Agreement
prior to the effective date of termination, including without limitation all
payment obligations accruing under Articles 5 and 6, shall survive such
termination.

 

16.3                        Subject to the parties’ obligations under Article 21
and to the limitation of liability in Section 18.4, termination of this
Agreement by either party shall not prejudice the rights of such party under
this Agreement to seek damages for any breach of this Agreement by the other
party hereto.

 

ARTICLE 17 - REPRESENTATIONS AND WARRANTIES

 

17.1                        NANO represents and warrants to JANSSEN that:

 

(a)           The execution, delivery and performance of this Agreement by NANO
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, and does not
violate any law or regulation of any court, governmental body or administrative
or other agency having authority over it;

 

(b)           NANO is not currently a party to, and during the term of this
Agreement will not enter into, any agreements, oral or written, that are
inconsistent with its obligations under this Agreement;

 

(c)           NANO is duly organized and validly existing under the laws of the
state of its incorporation and has full legal power and authority to enter into
this Agreement;

 

(d)           To the best of NANO’s knowledge, all of the Nano Patents are
subsisting and are valid and enforceable;

 

28

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

(e)           NANO has not previously assigned, transferred, conveyed or
otherwise encumbered its right, title and interest in Nano Patents or Nano
Know-How as they relate to Compound or Product;

 

(f)            NANO is the sole and exclusive owner or licensee of the Nano
Patents and the Nano Know-How, all of which, to the best of NANO’S knowledge,
are free and clear of any liens, charges and encumbrances, and, except for
NANO’s Affiliates, no other person, corporate or other private entity, or
governmental entity or subdivision thereof has, or shall have, any claim of
control with respect to the Nano Patents and the Nano Know-How as they relate to
Compound or Product; and

 

(g)           There are no claims, judgments or settlements against or owed by
NANO pending or, to the knowledge of NANO, threatened, with respect to the Nano
Patents and the Nano Know-How as they relate to Compound or Product.

 

17.2                        JANSSEN represents and warrants to NANO that:

 

(a)           The execution, delivery and performance of this Agreement by
JANSSEN 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, and does not
violate any law or regulation of any court, governmental body or administrative
or other agency having authority over it;

 

(b)           JANSSEN is not currently a party to, and during the term of this
Agreement will not enter into, any agreements, oral or written, that are
inconsistent with its obligations under this Agreement;

 

(c)           JANSSEN is duly organized and validly existing under the laws of
the state of its incorporation and has full legal power and authority to enter
into this Agreement;

 

(d)           JANSSEN will not bind or purport to bind NANO to any affirmation,
representation or warranty provided to any Third Party with respect to the
Compound or Product; and

 

(e)           To the best of JANSSEN’s actual knowledge on the Effective Date,
there is no reason to believe that the Selection Patent listed on the attached
Exhibit B will not issue or will not be valid.

 

29

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

17.3                        THE LIMITED WARRANTIES CONTAINED IN THIS SECTION 17
ARE THE SOLE WARRANTIES GIVEN BY THE PARTIES AND ARE MADE EXPRESSLY IN LIEU OF
AND EXCLUDE ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, TITLE, INFRINGEMENT OR OTHERWISE, AND ALL OTHER EXPRESS OR IMPLIED
REPRESENTATIONS AND WARRANTIES PROVIDED BY COMMON LAW, STATUTE OR OTHERWISE ARE
HEREBY DISCLAIMED BY BOTH PARTIES.

 

ARTICLE 18 - INDEMNIFICATION

 

18.1                        Each party (the “Indemnifying Party”) shall
indemnify, defend and hold the other party and its Affiliates, Licensees,
employees, officers, directors, agents and consultants (each an “Indemnified
Party”) harmless from, against and in respect of any damages, claims, losses,
liabilities, charges, actions, suits, proceedings, penalties and reasonable
costs and expenses (including without limitation reasonable attorneys’ fees)
(collectively, the “Losses”) imposed on, sustained, incurred or suffered by or
asserted against any Indemnified Party, to the extent such Losses are incurred
in the defense or settlement of a Third Party lawsuit or in a satisfaction of a
Third Party judgment arising out of :

 

(a)           any injuries to person and/or damage to property resulting from
negligent acts that the Indemnifying Party or its Affiliates, Licensees,
employees, officers, directors, agents or consultants, performed or failed to
perform in carrying out activities contemplated under this Agreement or any
Development Program conducted hereunder, including the negligent failure by the
Indemnifying Party to provide the Indemnified Party with any Information known
by Indemnifying Party that, if timely received, would have enabled the
Indemnified Party to avoid such injuries or damage; and

 

(b)           personal injury to the Indemnified Party or damage to the
Indemnified Party’s property resulting from negligence or intentional misconduct
on the part of the Indemnifying Party or its Affiliates, Licensees, employees,
officers, directors, agents and consultants in carrying out the activities
contemplated by this Agreement;

 

provided, however, that an Indemnified Party shall not be indemnified under this
Section 18.1 to the extent that such party’s own negligence or intentional
misconduct caused or contributed to the events giving rise to the claim for
indemnification.

 

30

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

18.2                        JANSSEN shall indemnify, defend and hold NANO and
its Affiliates, and each of their officers, directors, employees, agents and
consultants (each a “NANO Indemnitee”) harmless from and against all Losses
(other than those that are the subject of Section 18.1 hereof) arising out of or
resulting from the use by or administration to any person of any Product sold or
otherwise distributed by JANSSEN, its Affiliates or Licensees or any of their
distributors, except to the extent such Losses arose or resulted from negligence
or intentional misconduct on the part of NANO or its Affiliates, Licensees,
employees, officers, directors, agents or consultants in carrying out the
activities contemplated by this Agreement, so long as (i) the NANO Indemnitee
allows JANSSEN to participate in or, at JANSSEN’s sole option but without any
obligation, to conduct at JANSSEN’s expense the defense of the claim or action
for which indemnification is sought under this Section 18.2, and (ii) the NANO
Indemnitee does not compromise or settle such claim or action without JANSSEN’s
prior written consent, which shall not be unreasonably withheld.

 

18.3                        NANO shall indemnify, defend and hold JANSSEN, its
Affiliates and Licensees and each of their officers, directors, employees,
agents and consultants (each a “JANSSEN Indemnitee”) harmless from and against
all Losses (other than those that are the subject of Section 18.1 hereof)
arising out of or resulting from negligence or intentional misconduct on the
part of NANO or its Affiliates, Licensees, employees, officers, directors,
agents or consultants in carrying out the activities contemplated by this
Agreement, so long as (i) the JANSSEN Indemnitee allows NANO to participate in
or, at NANO’s sole option but without the obligation, to conduct at NANO’s
expense the defense of the claim or action for which indemnification is sought
under this Section 18.3, and (ii) the JANSSEN Indemnitee does not compromise or
settle such claim or action without NANO’s prior written consent, which shall
not be unreasonably withheld.

 

18.4                        IN NO EVENT SHALL ANY PARTY, OR SUCH PARTY’S
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR AFFILIATES, BE LIABLE TO THE OTHER
PARTY OR PARTIES HERETO FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL,
PUNITIVE OR EXEMPLARY DAMAGES, COSTS OR EXPENSES (INCLUDING, BUT NOT LIMITED TO,
LOST PROFITS, LOST REVENUES AND/OR LOST SAVINGS), WHETHER BASED UPON A CLAIM OR
ACTION OF CONTRACT, WARRANTY, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE, ARISING
FROM A BREACH OR ALLEGED BREACH OF THIS AGREEMENT, EVEN IF SUCH OTHER PARTY OR
PARTIES HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

 

31

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

ARTICLE 19 - CHOICE OF LAW

 

The construction, validity and performance of this Agreement shall be governed
in all respects by the laws of the State of New Jersey, without giving effect to
principles of conflict of laws.

 

ARTICLE 20 - FORCE MAJEURE

 

No failure or omission by the parties hereto in the performance of any
obligation of this Agreement shall be deemed a breach of this Agreement nor
create any liability if the same shall arise from any cause or causes beyond the
control of the parties, including but not limited to the following which, for
the purposes of this Agreement, shall be regarded as beyond the control of the
party in question; act of God, acts or omissions of any government or any rules,
regulations or orders of any governmental authority or any officer, department,
agency or instrument thereof; fire, storm, flood, earthquake, accident, acts of
the public enemy, war, rebellion, insurrection, riot, invasion, strikes or
lockouts.

 

ARTICLE 21 - DISPUTE RESOLUTION

 

21.1                       Any dispute, controversy or claim arising out of or
relating to the validity, construction, enforceability or performance of this
Agreement, including disputes relating to an alleged breach or to termination of
this Agreement (hereinafter “Disputes”), but excluding (i) any dispute,
controversy or claim arising out of or relating to the validity, enforceability,
or infringement of any Janssen Patent or any Nano Patent and (ii) other disputes
which are expressly prohibited herein from being resolved by this mechanism,
shall be settled by arbitration in the manner described below:

 

(a)           Before either party institutes arbitration proceedings in
accordance with Section 21.2 with respect to any Dispute, executive officers of
both parties shall meet in order to attempt to resolve such Dispute in a mutual
acceptable manner.

 

(b)           In the event the negotiations do not result in a mutually
acceptable resolution within a reasonably short period of time (not to exceed 30
days) or no meeting between the executive officers has occurred within 30 days
following the notification of such Dispute, either party shall have the right to
institute arbitration proceedings.

 

(c)           If a party intends to begin an arbitration procedure to resolve a
Dispute, such party shall provide written notice (the “Arbitration Request”) to
the other party informing the other party of such intention and the issues to be
resolved.  From the date of the Arbitration Request and

 

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

until such time as any matter has been finally settled by Arbitration, the time
periods provided for in Section 15.1 as to which a party must cure a breach of
this Agreement shall be suspended as to the subject matter of the Dispute.

 

(d)           Within fifteen (15) business days after receipt of the Arbitration
Request, the other party may, by written notice to the party initiating the
Arbitration, add additional issues to be resolved.

 

(e)           Nothing herein shall prohibit either party hereto from seeking or
obtaining temporary injunctive relief pending resolution of any Dispute in
accordance with the provisions of this Article 21.  In addition, nothing herein
shall prohibit (i) a party hereto that is sued by a third party from filing a
third party complaint against the other party hereto, or (ii) a party hereto
from preserving its rights as a creditor of the other party hereto in the event
that such other party becomes insolvent, voluntary or involuntary bankruptcy
proceedings are instituted by or against such other party, a receiver or
custodian is appointed for such other party, such other party makes an
assignment for the benefit of its creditors, substantially all of the assets of
such other party are seized or attached, such other party files for
reorganization or dissolution, or such other person otherwise generally ceases
to pay its debts when they become due.

 

21.2                       The Arbitration shall be conducted in accordance with
the Center For Public Resources Rules For Non-Administered Arbitration of
Business Disputes, the arbitration proceeding shall be conducted in New York,
New York.  Notwithstanding those rules, the following provisions shall in any
event apply to any issue submitted for arbitration hereunder.

 

(a)           The arbitration shall be conducted by a panel of three neutral
arbitrators (“Panel”).  One member shall be appointed by each party and the
third member shall be appointed by the two arbitrators appointed by the
parties.  The parties will select an arbitrator within fifteen (15) business
days following the Arbitration request.  The two arbitrators selected by the
parties will appoint the third member within ten (10) days following their
appointment.

 

Notwithstanding the above and in the interest of obtaining a judgment within the
shortest possible period in connection with (i) certain technical or
developmental matters that require referral to independent experts or
(ii) Disputes where the aggregate damages sought by the claimant are stated to
be less than [*] and neither party seeks equitable relief, the parties will
appoint only one single neutral selected in agreement by both parties and

 

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

the provisions hereof shall apply mutatis mutandis to such single arbitrator.

 

(b)           The language to be used in the arbitration shall be English.

 

(c)           Any arbitrator selected by the parties may be of any nationality,
and need not be a lawyer or hold any other professional status or membership but
will be selected on the basis of his or her qualifications and expertise with
respect to the matter under Dispute.

 

(d)           The Panel shall resolve the Dispute on the basis of a written
record consisting of an initial and rebuttal submission by each party (together
with documentary evidence (including affidavits) supporting the positions taken
in such submissions); provided that the Panel shall have the right to require
the parties to make or participate in such other written or oral submissions,
presentations, or examinations as the Panel shall deem necessary for the proper
resolution of the matter under arbitration, all of which shall be made or
submitted directly to the Panel and shall become part of the record in the
proceeding.

 

(e)           The specific pleading schedule for each proceeding shall be
determined by the parties in consultation with the Panel within fifteen (15)
business days following the selection of the arbitrators.

 

(f)            Unless the parties otherwise agree at the time a particular issue
is submitted for arbitration, the Panel shall be required as a condition to
their engagement to agree to render a decision within thirty (30) days of the
date on which the record in the proceeding is completed, but in no case more
than one hundred and twenty (120) days after the date of their engagement.

 

(g)           The parties shall use their best efforts to schedule and make
their submissions, and to take all other necessary actions in connection with
the proceeding, at a time and in a manner which will permit the Panel to render
their decision in accordance with the schedule set forth herein.

 

(h)           All communications with the arbitrator(s) during the proceeding
shall be made in writing, with a copy thereof delivered simultaneously to the
other party to the proceeding, or if made orally, made only in the presence of
the other party to the proceeding or its representative.

 

(i)            All decisions by the Panel shall be rendered by majority vote. 
The arbitration award or order shall be rendered in writing and shall be final
and binding upon the parties. The arbitrator(s) hereunder (i) shall have no
power or authority to grant or award punitive damages and (ii) shall

 

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

establish and enforce appropriate rules to ensure that the arbitration
proceedings, including the decisions, are kept confidential and that all
confidential and/or proprietary information of the parties is kept confidential
and is used for no purpose other than for such arbitration proceedings.

 

(j)            Judgment on any order or award shall be entered by any court of
competent jurisdiction.

 

(k)           Each party shall bear its own expenses and attorney’s fees in
connection with the arbitration. The fees and expenses of the
arbitrator(s) shall be equally shared except that if, in the opinion of the
arbitrators, any claim by a party hereto or any defense or objection thereto by
the other party was unreasonable and frivolous, the arbitrators may in their
discretion assess as part of the award all or any part of the arbitration
expenses of the other party (including reasonable attorney’s fees) and expenses
of the arbitrators against the party raising such unreasonable and frivolous
claim, defense or objection.

 

ARTICLE 22 - NOTICES

 

Any notice required or permitted to be given under this Agreement shall be
mailed by registered or certified air mail, postage prepaid, addressed to the
party to be notified at its address stated below, or at such other address as
may hereafter be furnished in writing to the notifying party or by telefax to
the numbers set forth below or to such changed telefax numbers as may thereafter
be furnished.

 

If to NANO, EPIL

 

and/or EPRC:

Elan Pharma International Limited

 

Lincoln House, Lincoln Place

 

Dublin 2, Ireland

 

Attention: Colin Sainsbury, Esq.

 

Telefax: 353-1-709-4124

 

 

With a copy to:

NanoSystems

 

3000 Horizon Drive

 

King of Prussia, PA 19406

 

Attention: President

 

Telefax: 610-313-5180

 

 

If to JANSSEN:

Janssen Pharmaceutica N.V.

 

Turnhoutseweg 30

 

B-2340 Beerse Belgium

 

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

 

Attention: Managing Director

 

Telefax: 32-14-60-2841

 

Any notice sent under this Article 22 shall be deemed to have been received on
the date actually received, or (i) five (5) business days after being mailed in
the case of a notice mailed by registered or certified mail, postage prepaid;
and (ii) one (1) business day after being transmitted in the case of a notice
transmitted via telefax.  The business days referred to in this Section 23.2
shall be business days of the recipient of the notice.

 

ARTICLE 23 - WAIVER

 

The failure on the part of NANO or JANSSEN to exercise or enforce any rights
conferred upon it hereunder (including any right to terminate this Agreement
under Article 15) shall not be deemed to be a waiver of any such rights nor
operate to bar the exercise or enforcement thereof at any time or times
thereafter.  The observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
by the party entitled to enforce such term, but any such waiver shall be
effective only if in a writing signed by the party against whom such waiver is
to be asserted.

 

ARTICLE 24 - ENTIRE AGREEMENT

 

24.1                        Agreement constitutes the entire agreement between
the parties hereto concerning the subject matter hereof and any representation,
promise or condition in connection therewith, not incorporated herein, shall not
be binding upon either party.  This Agreement, including without limitation the
exhibits attached hereto, are intended to define the full extent of the legally
enforceable undertakings of the parties hereto, and no promise or
representation, written or oral, which is not set forth explicitly herein is
intended by either party to be legally binding.

 

24.2                        This Agreement shall expressly supersede and replace
the Feasibility Agreement as the same is related to Compound and, as of the
Effective Date, the Feasibility Agreement as it relates to Compound shall be of
no further force or effect and shall hereby be replaced in its entirety with the
terms and conditions of this Agreement.

 

ARTICLE 25 - ASSIGNMENT

 

25.1                        Subject to the provisions of Section 9.2 in
connection with Highly Confidential Information, JANSSEN may assign any or part
of its rights under this Agreement

 

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

to any of its Affiliates.  Prior to any such assignment becoming effective, such
Affiliate will undertake in writing to abide by all terms and conditions of this
Agreement.

 

25.2                        JANSSEN and NANO will discuss any assignment by
JANSSEN to an Affiliate prior to its implementation in order to avoid or reduce
any additional tax liability to NANO resulting solely from different tax law
provisions applying after such assignment to an Affiliate.  For the purpose
hereof, an additional tax liability to NANO means that NANO would be subject to
a higher net tax on payments made hereunder after taking into account any
applicable tax treaty and available tax credits, than NANO was subject to before
the proposed assignment.  In case no reasonable solution can be found in order
to reduce or eliminate the above referred additional tax liability to NANO and
NANO can demonstrate by means of written documentation, certified by an
independent external auditor, that NANO cannot take a full credit against such
tax liability, then NANO shall be made whole by JANSSEN or the assignee as the
case may be, whenever JANSSEN wants to proceed with such assignment to such
Affiliate.  To the extent that NANO is not a taxable entity, any references to
NANO shall, solely for the purposes of this Article, deem to refer to its
members.

 

25.3                        JANSSEN and NANO will discuss any assignment by NANO
to an Affiliate prior to its implementation in order to avoid or reduce any
additional tax liability to JANSSEN resulting solely from different tax law
provisions applying after such assignment to an Affiliate.  For the purpose
hereof, an additional tax liability to JANSSEN means that JANSSEN would be
subject to a higher net tax on payments made hereunder after taking into account
any applicable tax treaty and available tax credits, than JANSSEN was subject to
before the proposed assignment.  In case no reasonable solution can be found in
order to reduce or eliminate the above referred additional tax liability to
JANSSEN and JANSSEN can demonstrate by means of written documentation, certified
by an independent external auditor, that JANSSEN cannot take a full credit
against such tax liability, then JANSSEN shall be made whole by NANO or the
assignee as the case may be, whenever NANO wants to proceed with such assignment
to such Affiliate.  To the extent that JANSSEN is not a taxable entity, any
references to JANSSEN shall, solely for the purposes of this Article, deem to
refer to its members.

 

25.4                        NANO will be entitled to assign all or a portion of
its rights and obligations under this Agreement to an Affiliate or to a Third
Party that acquires all or substantially all of NANO’s rights in the NanoCrystal
Technology from NANO.  Prior to any such assignment becoming effective, such
Affiliate or Third Party assignee will undertake in writing to abide by all
terms and conditions of this Agreement.

 

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

ARTICLE 26 - TITLES

 

It is agreed that the marginal headings appearing at the beginning of the
numbered Articles hereof have been inserted for convenience only and do not
constitute any part of this Agreement.

 

ARTICLE 27 - PUBLICITY

 

Neither party shall originate any publicity, news release or public
announcements, written or oral, whether to the public or press, stockholders or
otherwise, relating to this Agreement, including its existence, the subject
matter to which it relates, performance under it or any of its terms, to any
amendment hereto or performances hereunder without the prior written consent of
the other party, provided however, that this Article 27 shall not be applicable
where either party hereto is legally required to make public, a summary or
details of this Agreement, in any country.  If a party believes that it has a
legal requirement to make public the existence of or any details of or any
events related in any way to this Agreement, it shall provide a copy of any such
announcement to the other party for review and approval at least five (5) days
prior to making said announcement.  Nothing herein shall limit the parties’
obligations under Article 12 with respect to Information and Highly Confidential
Information.

 

ARTICLE 28 - UNENFORCEABLE PROVISIONS

 

The provisions of this Agreement shall be deemed severable and the invalidity or
unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.  If any provision of this
Agreement, or the application thereof to any person or entity or any
circumstance, is invalid or unenforceable, (i) a suitable and equitable
provision shall be substituted therefore in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid and unenforceable
provision and (ii) the remainder of this Agreement and the application of such
provision to other persons, entities or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect such provision, or the application thereof, in any other
jurisdiction.

 

ARTICLE 29 - CONSTRUCTION

 

As used in this Agreement, singular includes the plural and plural includes the
singular, wherever so required by fact or context.

 

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

ARTICLE 30 - EXECUTION

 

This Agreement shall be executed in two (2) counterparts, each of which shall
for all purposes be deemed an original.

 

ARTICLE 31 - NON-SOLICITATION

 

From the Effective Date until two (2) years following the First Commercial Sale
in any of the Major Markets, JANSSEN shall not, directly or indirectly, induce,
encourage, or solicit any technical personnel employed by EPRC to (i) leave such
employment or (ii) accept any other position or employment, nor shall JANSSEN
assist any other entity to induce, encourage, or solicit any technical personnel
employed by EPRC to (i) leave such employment or (ii) accept any other position
or employment.

 

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective duly authorized officers or representatives as of the day
and year first above written.

 

 

 

ELAN PHARMACEUTICAL

 

RESEARCH CORP., d/b/a

 

NANOSYSTEMS

 

 

 

 

 

By:

/s/ Seamus Mulligan

 

 

Name:

S. Mulligan

 

 

Title:

President

31/3/99

 

 

 

 

 

ELAN PHARMA INTERNATIONAL LIMITED

 

 

 

 

 

By:

/s/ Seamus Mulligan

 

 

Name:

S. Mulligan

 

 

Title:

President

31/3/99

 

 

 

 

 

JANSSEN PHARMACEUTICA N.V.

 

 

 

 

 

By:

/s/ G. Van Reet

 

 

Name:

Managing Director

 

 

Title:

 

 

 

 

By:

/s/ G. Vercauteren

 

 

Name:

International Vice President

 

 

 

Business Development

 

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

EXHIBIT A: NANO PATENTS

 

[*]

 

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

EXHIBIT B: SELECTION PATENTS

 

[*]

 

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Securities and Exchange
Commission.

 

FORM 1:  STATEMENT

 

The information contained in this document is strictly confidential information
and shall be treated accordingly by the receiver.  In no event shall any copies
be made or shall the information be disclosed to a third party.  Any disclosure
to an employee of JANSSEN or of a JANSSEN Affiliate shall be on a strict need to
know basis.  The receiver shall keep the document under lock in a safe place. 
The information shall be used only as authorized by JANSSEN in the development
and/or manufacturing of a nanoparticle product.

 

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