Exhibit 10.5

 

***Text Omitted and Filed Separately

with the Securities and Exchange Commission.

Confidential Treatment Requested

Under 17 C.F.R. Sections 200.80(b)(4)

and 240.24b-2.

 

LICENSE AGREEMENT

 

This License Agreement (the AGREEMENT) is made and entered into as of June 15,
2004 (the EFFECTIVE DATE) by and between the University of Iowa Research
Foundation (hereinafter UIRF) having offices at 214 Technology Innovation
Center, Iowa City, Iowa 52242-5000 and Neurogenetics, Inc., (hereinafter
LICENSEE), having offices at 11085 North Torrey Pines Road, Suite 300, La Jolla,
CA 92037.

 

WHEREAS, under the patent policy of The University of Iowa (UI), all inventions
and technology arising during the normal course of research and teaching at UI
are assigned and entrusted to UIRF to obtain patent or other appropriate
intellectual property protection and license said technology;

 

WHEREAS, UIRF is, therefore, owner by assignment from Timothy J. Brennan of his
entire right, title and interest in United States Patent Application Serial No.
10/033,632 filed December 26, 2001, titled “Drugs for Spinal Anesthesia”, (UIRF
#02028) and in the inventions described and claimed therein;

 

WHEREAS, LICENSEE wishes to obtain a world-wide license in order to practice the
above referenced invention covered by patent rights in the United States and in
certain foreign countries, and to manufacture, use and sell in the commercial
market the products made in accordance therewith; and

 

WHEREAS, UIRF wishes to grant such a license to LICENSEE in accordance with the
terms of this AGREEMENT.

 

NOW THEREFORE, in consideration of the foregoing premises, the parties agree as
follows:

 

ARTICLE 1 - DEFINITIONS

 

1.1                               PATENT RIGHTS shall mean the patents and
patent applications listed on Appendix A attached hereto, the inventions
described and claimed therein, and any divisions, substitutions, substitute
applications and inventors’ certificates, continuations, and
continuations-in-part to the extent the claims are directed to subject matter
specifically described in the patents and patent applications listed on
Appendix A, patents issuing thereon, extensions, term restorations,
re-examinations or reissues or renewals thereof; and any and all foreign patents
and patent applications corresponding thereto which will be automatically
incorporated in and added to this AGREEMENT and shall periodically be added to
Appendix A attached to this AGREEMENT and made part thereof.

 

1.2                               LICENSED PRODUCTS shall mean products and
methods the use of which would, but for a license granted under the PATENT
RIGHTS, infringe the PATENT RIGHTS, including, without limitation, the LICENSED
METHODS.

 

1.3                               LICENSED METHODS shall mean the methods and
uses claimed in the PATENT RIGHTS.

 

1.4                               NET SALES shall mean the gross amount invoiced
by LICENSEE and its AFFILIATES and its SUBLICENSEES on sales of LICENSED
PRODUCTS to independent purchasers less: (a) trade, quantity and cash discounts
allowed and taken; (b) refunds, rebates, chargebacks and retroactive price
adjustments actually paid; (c) actual LICENSED PRODUCT returns and allowances;
and (d) duties, sales taxes, excise taxes and transportation charges to third
parties  actually paid by or on behalf of LICENSEE and its AFFILIATES and its
SUBLICENSEES separately set forth in the invoiced amount.

 

1.5                               AFFILIATES shall mean any person, company,
corporation, business or other entity directly or indirectly controlling,
controlled by, or under common control with LICENSEE.  For purposes of this
definition, “control” shall mean beneficial ownership of more than 50% (fifty
percent) of the outstanding voting shares or securities or the ability otherwise
to elect a majority of the board of directors or other managing authority.

 

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1.6                               APPLICABLE LAWS shall mean all applicable
laws, ordinances, rules and regulations of any kind whatsoever of any
governmental (including international, foreign, federal, state and local) or
regulatory authority, including, without limitation, all laws, ordinances, rules
and regulations promulgated by any governmental REGULATORY AGENCY.

 

1.7                               CONFIDENTIAL INFORMATION shall mean
information related to PATENT RIGHTS and LICENSED PRODUCTS and information that
a party to this Agreement (the RECEIVING PARTY) receives (whether disclosed in
writing, electronically, orally or by observation) from the other party (the
DISCLOSING PARTY) that the DISCLOSING PARTY reasonably considers proprietary and
marks confidential (or if received orally or by observation, is confirmed in
writing as confidential by the DISCLOSING PARTY within 30 (thirty) days after
such disclosure is made) unless in each case such information, as shown by
competent evidence:

 

(a)                                  was known to the RECEIVING PARTY or to the
public prior to the DISCLOSING PARTY’s disclosure; or

 

(b)                                  became known to the public, after the
DISCLOSING PARTY’s disclosure hereunder, other than through a breach of the
confidentiality provisions of this AGREEMENT by the RECEIVING PARTY or any
person to whom such RECEIVING PARTY disclosed such information; or

 

(c)                                  was subsequently disclosed to the RECEIVING
PARTY by a third party having a legal right to disclose such information to the
extent not subject to an obligation of confidentiality to such third party; or

 

(d)                                  was developed by the RECEIVING PARTY
independent of the DISCLOSING PARTY’s CONFIDENTIAL INFORMATION.

 

For purposes of the treatment of CONFIDENTIAL INFORMATION, the UI and UIRF shall
be treated together as one party.

 

1.8                               FDA means the U.S. Food and Drug
Administration or any successor agency.

 

1.9                               FIRST COMMERCIAL SALE shall mean the first
sale for end use or consumption of the LICENSED PRODUCT after the FDA has
granted REGULATORY APPROVAL of such LICENSED PRODUCT. 

 

1.10                        REGULATORY AGENCY shall mean the FDA.

 

1.11                        REGULATORY APPROVAL shall mean any approvals
(including, but not limited to, labeling approvals), product and/or
establishment licenses, registrations or authorizations of any federal, state or
local REGULATORY AGENCY, department, bureau or other governmental entity,
necessary and sufficient for the commercial manufacture, use, storage,
importation, export, transport or sale of a LICENSED PRODUCT in a particular
regulatory jurisdiction.

 

1.12                        ROYALTY TERM shall have the meaning provided in
Section 3.1.

 

1.13                        SUBLICENSEE shall mean any third party that is not
an AFFILIATE of LICENSEE to whom LICENSEE, or an AFFILIATE of LICENSEE, grants a
sublicense or an option to sublicense, or any other grant of rights under the
PATENT RIGHTS to practice, make and have made, to use and have used, to import
and have imported, to offer for sale and have offered for sale, and/or to sell
and have sold the LICENSED PRODUCTS granted under Section 2.1 hereof. 

 

1.14                        SUBLICENSE REVENUES shall mean all revenues received
by LICENSEE or an AFFILIATE from a SUBLICENSEE pursuant to a sublicense under
the PATENT RIGHTS, an option for a sublicense under the PATENT RIGHTS, or a
similar agreement providing for a grant of rights under the PATENT RIGHTS, in
each case granted pursuant to Section 2.1 hereof.  SUBLICENSE REVENUES shall
include (a) license issue fees, (b) license maintenance fees, (c) sales and
marketing fees, and (d) non FDA/clinical trial milestones.  SUBLICENSE FEES
shall not include (a) FDA/clinical trial milestone fees, (b) equity investments
in Licensee at fair market value, (c) any funds received at fair

 

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market value by Licensee for the conduct of research and development, (d)
payments received for manufacturing, (e) royalties, (f) payment to LICENSEE or
its AFFILIATES in connection with the grant of rights to any other non-UI and
non-UIRF intellectual property (f) and any bona fide loan made to LICENSEE or
any of its AFFILIATES.

 

ARTICLE 2 - GRANT

 

2.1                               UIRF hereby grants to LICENSEE and LICENSEE
accepts, subject to the terms and conditions hereof, an exclusive (subject only
to Section 2.3), worldwide license to use the LICENSED PRODUCTS under the PATENT
RIGHTS.  Such license shall include the right to grant sublicenses (with the
right to grant further sublicenses) subject to UIRF’s approval which approval
shall not be unreasonably withheld.  LICENSEE agrees during the period of
exclusivity of this license in the United States that any LICENSED PRODUCT
produced for sale in the United States will be manufactured substantially in the
United States.

 

2.2                               The term of this AGREEMENT and the exclusive
license set forth in Section 2.1 shall be from the EFFECTIVE DATE until the
expiration of the last to expire ROYALTY TERM.

 

2.3                               The granting and acceptance of this license is
subject to the following conditions:

 

(a)                                  The terms of the UI Patent Policy approved
in 1983, Public Law 96-517, and Public Law 98-620 and UIRF’s obligations under
agreements with other sponsors of research.  Any right granted in this AGREEMENT
greater than that permitted under Public Law 96-517 or Public Law 98-620 shall
be subject to modification as may be required to conform to the provision of
that statute.

 

(b)                                  UIRF shall have the right to make and to
use and to grant non-exclusive licenses to make and to use, for research
purposes only and not for any commercial purpose, the subject matter described
and claimed in PATENT RIGHTS.

 

(c)                                  Eli Lilly and Company (LILLY) may have
non-exclusive rights to the LICENSED PRODUCTS as part of a Statement of
Investigation executed July 6, 1998.

 

(d)                                  LICENSEE shall pay all future costs
connected with the commercial development of the LICENSED  PRODUCTS, including
but not limited to the costs of complying with applicable governmental testing,
approvals and regulations. 

 

(e)                                  LICENSEE shall use reasonable efforts to
effect introduction of the LICENSED PRODUCTS into the commercial market as soon
as practicable, consistent with sound and reasonable business practices and
judgment; thereafter, until the termination or expiration of this AGREEMENT,
LICENSEE shall endeavor to keep LICENSED PRODUCTS reasonably available to the
public.

 

(f)                                    UIRF shall have the right to terminate
the license granted pursuant to Section 2.1 or render such license non-exclusive
at any time after [***] ([***]) years from the EFFECTIVE DATE if, in UIRF’s
reasonable judgment, LICENSEE:

 

(i)                                    fails to comply with Section 2.3(e), or

 

(ii)                                is not demonstrably engaged in a research,
development, manufacturing, marketing, or licensing program, as appropriate,
directed toward the commercial use of the LICENSED PRODUCT.

 

In making this determination UIRF shall take into account the normal course of
programs for research, development and commercialization conducted under sound
and reasonable business practices and judgment and shall take into account the
reports provided hereunder by LICENSEE.

 

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(g)                                 All sublicenses granted by LICENSEE
hereunder shall include a requirement that the SUBLICENSEE comply with
LICENSEE’s obligations to UIRF under this AGREEMENT, including, without
limitation, Section 2.3(e).  A copy of this AGREEMENT shall be attached to each
such sublicense agreement.  Royalties charged for sublicenses by LICENSEE shall
not be in excess of normal trade practice with respect to comparable licenses or
sublicenses.  A copy of each such sublicense agreement shall be provided to UIRF
within 45 (forty-five) days after the effective date of such sublicense
agreement.

 

2.4                               UIRF hereby grants to LICENSEE the right to
extend the licenses granted in Section 2.1 to an AFFILIATE subject to the terms
and conditions hereof.

 

2.5                               All rights reserved to the United States
Government and others under Public Law 96-517 and 98-620 shall remain and shall
in no way be affected by this AGREEMENT.

 

ARTICLE 3 - ROYALTIES, PAYMENTS

 

3.1                               LICENSEE shall pay to UIRF within [***]
([***]) days after the end of each calendar quarter, the applicable royalty set
forth below on NET SALES of LICENSED PRODUCTS sold by LICENSEE and its
AFFILIATES and SUBLICENSEES:

 

(a)                                  [***]% ([***] percent) of NET SALES of
LICENSED PRODUCTS sold by LICENSEE, its AFFILIATES or SUBLICENSEES if [***]; or

 

(b)                                  [***]% ([***]percent) of NET SALES of
LICENSED PRODUCTS sold by LICENSEE, its AFFILIATES or SUBLICENSEES if [***].

 

Royalties shall not apply to sales among LICENSEE, its AFFILIATES and their
respective SUBLICENSEES for resale. On sales between LICENSEE and its AFFILIATES
or SUBLICENSEES for resale, the royalty shall be paid on the resale.

 

The foregoing royalty shall be payable on a LICENSED PRODUCT-by- LICENSED
PRODUCT basis until the expiration of the last to expire of the PATENT RIGHTS
containing a valid claim of an issued patent (the ROYALTY TERM).

 

3.2                               LICENSEE shall pay to UIRF a percentage of any
SUBLICENSE REVENUES received within [***] ([***]) days after the end of each
calendar quarter during the ROYALTY TERM as set forth below.

 

(a)                                  LICENSEE will pay to UIRF [***]%
([***]percent) of SUBLICENSE REVENUES received under agreements executed with a
SUBLICENSEE within [***] ([***])[***]after the EFFECTIVE DATE.

 

(b)                                  LICENSEE will pay to UIRF the following
percentage of SUBLICENSE REVENUES received under agreements executed with a
SUBLICENSEE [***]: (i) [***]% ([***]percent) if [***]; and (ii) otherwise [***]%
([***]percent).

 

3.3                               LICENSEE shall pay to UIRF a one-time payment
of $[***] ([***] dollars) upon [***].  Such payment shall accrue upon receipt of
such REGULATORY APPROVAL for the LICENSED PRODUCT and shall be payable within
[***] ([***]) days of accrual.  If such milestone event has occurred and
associated payment has accrued prior to the EFFECTIVE DATE, LICENSEE shall pay
to UIRF $[***] ([***] dollars) within [***]days of the EFFECTIVE DATE.  Such
milestone payment shall be creditable against future royalties.

 

3.4                               LICENSEE shall pay to UIRF $[***] ([***]
dollars) [***].

 

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3.5                               On [***], and upon each subsequent [***]
during the term of this AGREEMENT, LICENSEE shall pay to UIRF an annual license
maintenance fee of $[***] ([***] dollars).  Each such annual license maintenance
fee shall be reduced by the total amount of any [***], and [***]on [***]accrued
and paid to UIRF by LICENSEE under this AGREEMENT during the calendar year prior
to such payment date, but shall not be reduced by (a) any [***]accruing in any
other calendar year during the term of this AGREEMENT or (b) any [***] payable
to UI pursuant to the terms of any sponsored research agreement between LICENSEE
and UI.

 

ARTICLE 4 - REPORTING

 

4.1                               Prior to signing this AGREEMENT, LICENSEE has
provided to UIRF a written summary of its proposed research and development plan
for the LICENSED PRODUCT.

 

4.2                               LICENSEE shall provide written annual reports
with respect to the LICENSED PRODUCT within 60 (sixty) days after June 30 of
each calendar year during the term of this AGREEMENT.  Each such report shall
include but not be limited to:  reports of progress on research and development,
REGULATORY APPROVALS, manufacturing, sublicensing, marketing and sales of the
LICENSED PRODUCT during the preceding 12 (twelve) months as well as plans for
the coming year.  If progress differs from that anticipated in the plan provided
under Section 4.1, LICENSEE shall explain the reasons for the difference and
provide a modified plan to UIRF.  LICENSEE shall also provide any reasonable
additional data UIRF requires to evaluate LICENSEE’s performance. 

 

4.3                               LICENSEE shall report to UIRF the date of
FIRST COMMERCIAL SALE of the LICENSED PRODUCT within 30 (thirty) days of
occurrence. 

 

4.4                              

 

(a)                                  LICENSEE agrees to submit to UIRF within
[***] ([***]) days after the calendar quarters ending March 31, June 30,
September 30, and December 31, reports setting forth for the preceding 3 (three)
month period at least the following information:

 

(i)                                    the number of LICENSED PRODUCTS sold by
LICENSEE, its AFFILIATES and SUBLICENSEES;

 

(ii)                                total billings for such LICENSED PRODUCTS;

 

(iii)                            the amount of royalty that is due and payable
to UIRF under Section 3.1;

 

(iv)                               total SUBLICENSE REVENUES received and the
amount of the payment that is due and payable to UIRF under Section 3.2; and

 

(v)                                   the basis for calculating such payments.

 

Such report shall be certified as correct by an officer of LICENSEE and shall
include a detailed listing of all deductions from NET SALES and royalties as
specified herein.  If no royalties or payments on SUBLICENSE REVENUES are due to
UIRF for any reporting period, the written report shall so state.

 

(b)                                  All payments due hereunder shall be payable
in United States dollars.  Whenever conversion of foreign currency to U.S.
dollars shall be required, such conversion shall be made using LICENSEE’s then
current standard exchange rate methodology for the translation of foreign
currency sales into U.S. Dollars or, in the case of other sales by AFFILIATES
and SUBLICENSEES, such similar methodology, consistently applied.  Any
withholding of taxes levied by tax authorities on payments hereunder shall be
borne by UIRF and deducted by LICENSEE from the sums otherwise payable by it
hereunder for payment to the proper tax authorities on behalf of UIRF.  LICENSEE
agrees to cooperate with UIRF in the event that UIRF claims

 

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exemption from such withholding or seeks credits or deductions under any double
taxation or similar treaty or agreement from time to time in force, such
cooperation to consist of providing receipts of payment of such withheld tax or
other documents reasonably available to LICENSEE.

 

(c)                                  All such reports shall be maintained in
confidence by UIRF, except as required by law, including Public Law 96-517 and
98-620.

 

(d)                                  Late payments shall be subject to an
interest charge of [***]% ([***] percent) per month.

 

ARTICLE 5 - RECORD KEEPING

 

5.1                               LICENSEE shall keep, and shall require its
AFFILIATES and SUBLICENSEES to keep, accurate and correct records of LICENSED
PRODUCTS made, used or sold under this AGREEMENT, appropriate to determine the
amount of royalties and payments on SUBLICENSE REVENUES due hereunder to UIRF. 
Such records shall be retained for at least [***] ([***]) years following a
given reporting period.  UIRF will have the right, during regular business hours
and upon reasonable advance notice, to have such books and records of LICENSEE
described above audited no more than [***] ([***]) time per calendar year so as
to verify the accuracy of the information previously reported to UIRF.  UIRF
will, for purposes of such audit, utilize the services of UIRF’s Internal Audit
Department or a certified public accountant selected by UIRF and approved by
LICENSEE, such approval not to be unreasonably withheld.  Such audit may cover
the [***] ([***]) [***]years preceding the date of the request for such audit
and may not cover any other calendar years.  Notwithstanding the foregoing, no
audit of LICENSEE pursuant to this Section 5.1 will cover any period of time
preceding the EFFECTIVE DATE.  Such audit right shall continue for [***] ([***])
[***]years following termination of this AGREEMENT.

 

5.2                               Such accountants and/or UIRF’s Internal Audit
Department and UIRF will keep confidential any information obtained during such
audit and will verify only reports and payments due, hereunder.  The cost of
such audit will be borne by UIRF; however, if such audit shows that the amount
of any royalties or any other payments owed to UIRF is greater than or equal to
[***]% ([***]percent) or more than the amount of royalties or any other payments
paid for the calendar year(s) that are the subject of the audit, the cost of the
audit will be borne by LICENSEE. Within [***] ([***]) days after both parties
have received a copy of an audit report, LICENSEE or UIRF, as appropriate, will
compensate the other party for payment errors or omissions revealed by the
audit.

 

ARTICLE 6 - FILING, PROSECUTION AND MAINTENANCE OF PATENTS

 

6.1                               LICENSEE shall reimburse UIRF for all
reasonable expenses UIRF has incurred through [***], for the preparation,
filing, prosecution and maintenance of the patent applications and patents
included in the PATENT RIGHTS, in the amount of $[***] and shall reimburse UIRF
for all reasonable out-of-pocket expenses incurred by UIRF after [***] for the
preparation, filing, prosecution and maintenance of the patent applications and
patents included in the PATENT RIGHTS within [***] ([***]) days after receipt of
an invoice from UIRF for such amounts.  Late payment of these invoices shall be
subject to interest charges of [***]% ([***] percent) per month.  UIRF shall
take responsibility for the preparation, filing, prosecution and maintenance of
any and all patent applications and patents included in the PATENT RIGHTS.  UIRF
shall promptly inform LICENSEE regarding all matters directly pertaining to
prosecution of the patent applications and patents included in the PATENT
RIGHTS, and shall seek LICENSEE’s counsel concerning all proposed courses of
action affecting the patent applications and patents included in the PATENT
RIGHTS, including but not limited to the geographic scope of patent protection
that LICENSEE wishes to obtain, and all proposed courses of action in any
interference proceedings.  If UIRF decides to allow any patent included in the
PATENT RIGHTS to lapse or if UIRF wishes to abandon any patent application or
patent included in the PATENT RIGHTS, UIRF shall notify LICENSEE in writing not
less than 60 (sixty) days prior to taking such action.  If UIRF allows to lapse,
or abandons, any patent or patent application included under the PATENT RIGHTS
for any reason except for UIRF’s legitimate belief that no valid, allowable
claim may legally issue or continue, then LICENSEE shall have the right to
assume the responsibility for such patent or patent application.  If such is the
case, UIRF may not be able to compel UI inventors to further

 

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contribute to the prosecution of such patent or patent application.  If LICENSEE
assumes the responsibility for any such patent, or patent application, the
patent or patent application shall still be considered part of the PATENT
RIGHTS, and shall still be treated under the prevailing terms of the License.

 

6.2                               UIRF and LICENSEE shall cooperate fully in the
preparation, filing, prosecution and maintenance of the patent applications and
patents included in the PATENT RIGHTS, executing all papers and instruments or
requiring members of UIRF to execute such papers and instruments as to enable
UIRF to apply for, to prosecute and to maintain the patent applications and
patents included in the PATENT RIGHTS in UIRF’s name.  Each party shall provide
to the other prompt notice as to all matters which come to its attention and
which may affect the preparation, filing, prosecution or maintenance of any such
patent applications or patents included in the PATENT RIGHTS. 

 

6.3                               If LICENSEE elects to no longer pay the
expenses of a patent application or patent included in the PATENT RIGHTS,
LICENSEE shall notify UIRF not less than 60 (sixty) days prior to such action
and shall thereby surrender its rights under such patent or patent application.

 

ARTICLE 7 - MARKING

 

7.1                               If a patent within the PATENT RIGHTS has been
or is subsequently issued to UIRF covering any feature or features of the
LICENSED PRODUCT, LICENSEE agrees to mark each and every package or container in
which the LICENSED PRODUCT is used or sold by or for LICENSEE with marking
complying with the provisions of Title 35, U.S. Code, Section 287, if required,
or any future equivalent provisions of the United States relating to the marking
of patented devices, or with marking complying with the law of the country where
the LICENSED PRODUCT is shipped, used or sold.

 

ARTICLE 8 - INFRINGEMENT

 

8.1                               With respect to any PATENT RIGHTS under which
LICENSEE is exclusively licensed pursuant to this AGREEMENT, LICENSEE, its
AFFILIATES or its SUBLICENSEES shall have the right (but not the obligation) to
prosecute in its own name and at its own expense any infringement of such
patent, so long as such license is exclusive at the time of the commencement of
such action.  UIRF agrees to notify LICENSEE promptly of each infringement of
such patents of which UIRF is or becomes aware.  Before LICENSEE, its AFFILIATES
or its SUBLICENSEES commences an action with respect to any infringement of such
patents LICENSEE shall give careful consideration to the views of UIRF and to
potential effects on the public interest in making its decision whether or not
to sue and in the case of a LICENSEE sublicense, shall report such views to the
SUBLICENSEE.

 

8.2                               If LICENSEE or its AFFILIATES elects to sue
for patent infringement, UIRF agrees to be named as nominal third party
plaintiff if necessary to the commencement of any such action, and further
agrees to provide any information available to UIRF and needed by LICENSEE in
prosecuting such action.  LICENSEE shall reimburse UIRF for any costs it incurs
as part of an action brought by LICENSEE its AFFILIATES, or its SUBLICENSEE,
irrespective of whether UIRF shall become a co-plaintiff.

 

8.3                               If LICENSEE, or its AFFILIATE or SUBLICENSEE,
if applicable pursuant to the applicable sublicense, elects to sue for patent
infringement as described above, LICENSEE may reduce, by up to [***]%
([***]percent), the royalty due to UIRF earned under the patent subject to suit
by [***]% ([***]percent) of the amount of the expenses and costs of pursuing
such action, including attorney fees. In the event that such [***]%
([***]percent) of such expenses and costs exceed the amount of royalties
withheld by LICENSEE for any calendar year, LICENSEE may to that extent reduce
the royalties due to UIRF from LICENSEE in succeeding calendar years, but never
by more than [***]% ([***]percent) of the royalty due in any one year.

 

8.4                               No settlement, consent judgment or other
voluntary final disposition of the suit may be entered into without the consent
of UIRF, which consent shall not be unreasonably withheld.

 

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8.5                               Recoveries or reimbursements from the pursuit
of such action shall first be applied to reimburse LICENSEE and UIRF for
expenses and costs of pursuing such action (including reimbursement of the
amount by which UIRF royalties were reduced pursuant to Section 8.3).  Any
remaining amount will be distributed to the party that brought the action,
provided that any such amount received by LICENSEE, or its AFFILIATES or
SUBLICENSEES that represents lost sales of LICENSED PRODUCT shall be deemed NET
SALES of LICENSED PRODUCT hereunder.

 

8.6                               In the event that LICENSEE, or its AFFILIATES
or SUBLICENSEES, if applicable, elect not to exercise their right to prosecute
an infringement of the PATENT RIGHTS pursuant to Sections 8.1 through 8.5, UIRF
may do so at its own expense, controlling such action and retaining all
recoveries there from.

 

8.7                               Except with respect to PATENT RIGHTS with
respect to which an infringement action has been brought by LICENSEE, its
AFFILIATES or SUBLICENSEES pursuant to Section 8.1, if a declaratory judgment
action alleging invalidity of any of the PATENT RIGHTS shall be brought against
LICENSEE, or its AFFILIATES or SUBLICENSEES, or UIRF, then UIRF, at its sole
option, shall have the right (but not the obligation) to intervene and take over
the sole defense of the action at its own expense.

 

8.8                               If a third party institutes a patent, trade
secret or other infringement suit against LICENSEE or its AFFILIATES or
SUBLICENSEES during the term of this AGREEMENT, alleging that the manufacture,
marketing, sale, use or importation of the LICENSED PRODUCT infringes one or
more patents or other intellectual property rights held by such third party,
then LICENSEE, or if applicable, its AFFILIATE or SUBLICENSEE will have the sole
right (but not the obligation), at its sole expense, to assume direction and
control of the defense of such claims.  LICENSEE will not have the right to
settle or otherwise dispose of any such claim in a manner that would diminish
the rights or interests of UIRF without the consent of UIRF, which consent will
not be unreasonably withheld.

 

8.9                               In the event LICENSEE is sued by a third
party, and as a result of the settlement of such suit is required to pay a
royalty to a third party on a LICENSED PRODUCT, the amount of royalty paid will
be deducted from the royalty payment due to the UIRF for that LICENSED PRODUCT. 
In the event the settlement prevents the LICENSEE from continuing sales of a
LICENSED PRODUCT, no additional royalties will apply for that LICENSED PRODUCT.

 

ARTICLE 9 - CONFIDENTIALITY

 

9.1                               The parties agree that, unless the RECEIVING
PARTY obtains the prior written consent of the DISCLOSING PARTY, at all times
during the term of this AGREEMENT and for a [***] year period following its
expiration or earlier termination of this AGREEMENT, the RECEIVING PARTY will
keep completely confidential, will not publish or otherwise disclose and will
not use directly or indirectly for any purpose other than as contemplated by
this AGREEMENT any CONFIDENTIAL INFORMATION of the DISCLOSING PARTY.

 

9.2                               During the Royalty Term, UIRF shall not
disclose unpublished PATENT RIGHTS without LICENSEE’S express written consent,
such consent not be unreasonably withheld.

 

9.3                               Each party may disclose CONFIDENTIAL
INFORMATION to the extent that such disclosure is:

 

(a)                                  made in response to a valid order or
subpoena of a court of competent jurisdiction or other governmental body of a
country or any political subdivision thereof of competent jurisdiction;
provided, however, that the RECEIVING PARTY will first have given reasonable
notice to the DISCLOSING PARTY (if practicable) and given the DISCLOSING PARTY a
reasonable opportunity to quash such order or subpoena and to obtain a
protective order covering the CONFIDENTIAL INFORMATION; provided further, that
if a disclosure order or subpoena is not quashed or a protective order is not
obtained, the CONFIDENTIAL INFORMATION disclosed in response to such court or
governmental order or subpoena will be limited to that information that is
legally required to be disclosed in such response to such court or governmental
order or subpoena;

 

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(b)                                  otherwise required by law, in the opinion
of legal counsel to the RECEIVING PARTY; provided, however, that the RECEIVING
PARTY will first have given reasonable notice to the DISCLOSING PARTY (if
practicable) and given the DISCLOSING PARTY a reasonable opportunity to obtain a
protective order or confidential treatment with respect to the CONFIDENTIAL
INFORMATION; provided further, that if a protective order is not obtained, the
CONFIDENTIAL INFORMATION so disclosed will be limited to that information that
is legally required to be disclosed as required by applicable law;

 

(c)                                  made by the RECEIVING PARTY to a
governmental or regulatory authority, including FDA, as required to conduct
clinical trials or obtain or maintain marketing approval for the LICENSED
PRODUCT, provided that reasonable effort will be taken to ensure confidential
treatment of such information;

 

(d)                                  made by the RECEIVING PARTY to a third
party as may be necessary or useful in connection with the manufacture,
development and commercialization of the LICENSED PRODUCT, provided that the
RECEIVING PARTY will in each case obtain from the proposed third party recipient
a written confidentiality agreement containing confidentiality and non-use
obligations no less protective than those set forth in this AGREEMENT;

 

(e)                                  made by the RECEIVING PARTY to a State,
United States or foreign tax authority;

 

(f)                                    made by a RECEIVING PARTY or any
representative of the RECEIVING PARTY in the filing or publication of patents or
patent applications relating to the PATENT RIGHTS, to the extent such disclosure
in the filing or publication of the patent or patent application is reasonably
necessary for support of the patent or patent application;

 

(g)                                 made by a RECEIVING PARTY in order to comply
with applicable securities law disclosure requirement or any disclosure
requirements of any applicable stock market or securities exchange; or

 

(h)                                 made by the RECEIVING PARTY to its
representatives or to third parties in connection with financing activities of
the RECEIVING PARTY; provided, however, that: (i) each such representative or
third party has a need to know such CONFIDENTIAL INFORMATION and has an
obligation to maintain the confidentiality of such information, (ii) the
RECEIVING PARTY informs each representative or third party receiving
CONFIDENTIAL INFORMATION of its confidential nature, and (iii) the RECEIVING
PARTY will be responsible for any breach of this Article 9 by any of its
representatives or such third parties to the same extent as if the breach were
by the RECEIVING PARTY.

 

ARTICLE 10 - TERMINATION OF AGREEMENT

 

10.1                        Upon any termination of this AGREEMENT, and except
as provided herein to the contrary, all rights and obligations of the parties
hereunder shall cease, except as follows:

 

(a)                                  UIRF’s right to receive or recover and
LICENSEE’s obligation to pay royalties, milestones and payments on SUBLICENSE
REVENUES accrued or accruable for payment at the time of any termination
pursuant to Articles 3 and 4;

 

(b)                                  LICENSEE’s obligation to maintain records
and UIRF’s right to conduct a final audit as provided in Article 5 of this
AGREEMENT;

 

(c)                                  The parties rights and obligations under
Sections 4, 7, 9, 10, 11, 12.3, 13, 14 and 15; and

 

(d)                                  Any cause of action or claim of UIRF,
accrued or to accrue because of any breach or default by LICENSEE.

 

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10.2                        In the event LICENSEE fails to make payments due
hereunder, UIRF shall have the right to terminate this AGREEMENT upon 45
(forty-five) days written notice, unless LICENSEE makes such payments plus
interest within the 45 (forty-five) day notice period.  If payments are not so
made, UIRF may immediately terminate this AGREEMENT.

 

10.3                        In the event that LICENSEE shall be in default in
the performance of any obligations under this AGREEMENT (other than as provided
in Section 10.2, which shall take precedence over any other default), and if the
default has not been remedied within 90 (ninety) days after the date of notice
in writing of such default, UIRF may terminate this AGREEMENT immediately by
written notice.

 

10.4                        This Agreement will automatically terminate if
Licensee becomes insolvent, makes an assignment for the benefit of creditors,
files or has filed against it a petition in bankruptcy or seeking
reorganization, has a receiver appointed, or institutes any proceedings for
liquidation or winding-up.  Upon any termination as defined herein, Licensee
shall cease all use of the PATENT RIGHTS and PATENT RIGHTS shall be
automatically returned to UIRF.

 

10.5                        In the event that UIRF shall be in default in the
performance of any obligations under this AGREEMENT, and if the default has not
been remedied within 60 (sixty) days after the date of notice in writing of such
default, LICENSEE may terminate this AGREEMENT immediately by written notice.

 

10.6                        LICENSEE shall have the right to terminate this
AGREEMENT by giving 90 (ninety) days advance written notice to UIRF to that
effect.  Upon termination, a final report shall be submitted and any payments
due pursuant to Articles 3 or 6 to UIRF become immediately payable.

 

10.7                        In the event that this AGREEMENT terminates for any
reason, any sublicenses granted by LICENSEE hereunder shall be automatically
assigned to UIRF, provided that such SUBLICENSEES continue to fulfill all
obligations to UIRF under this AGREEMENT.

 

10.8                        LICENSEE, its AFFILIATES and SUBLICENSEES shall have
the right during a period of 6 (six) months following the EFFECTIVE DATE of such
termination to sell or otherwise dispose of the current inventory of LICENSED
PRODUCT existing at the time of such termination, and shall make a final report
and payment of all royalties and payments on SUBLICENSE REVENUES related thereto
within 60 (sixty) days following the end of such period or the date of the final
disposition of such inventory, whichever first occurs.

 

ARTICLE 11 – ASSIGNMENT

 

11.1                        The rights and licenses granted to LICENSEE by UIRF
in this AGREEMENT are specific and may not be assigned or otherwise transferred
to any party, without the prior written approval of UIRF, except as provided in
Section 11.2.  Any attempted assignment or transfer without such approval shall
be void and shall automatically terminate all rights of LICENSEE under this
AGREEMENT.  This AGREEMENT shall be binding on and inure to the benefit of the
parties hereto and their respective permitted successors and assigns.

 

11.2                        LICENSEE may assign its rights and obligations under
this AGREEMENT, without the prior written approval of UIRF, to any entity with
which it may merge or consolidate or to any entity to whom it may transfer
substantially all of its assets to which this AGREEMENT relates or to any entity
which may acquire LICENSEE (including, in each case, any company created as a
new vehicle upon any such merger, transfer or acquisition).  If LICENSEE assigns
it rights and obligations as part of a merger, consolidation or asset transfer,
LICENSEE must notify UIRF of such transfer within [***] of such transfer, and
the new assignee must acknowledge and agree to assumption of the rights and
responsibilities of the License within the same period of time, or the UIRF may
immediately terminate the License.

 

ARTICLE 12 - REPRESENTATIONS AND WARRANTIES:  LIMITATIONS

 

12.1                        Nothing in this AGREEMENT shall be construed as:

 

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(a)                                  A warranty or representation by UIRF as to
the validity or scope of any patent or patent application included in the PATENT
RIGHTS; or

 

(b)                                  A warranty or representation that anything
made, used or sold under the license granted in this agreement is or will be
free from infringement of patents owned by third parties; or

 

(c)                                  Conferring a right to use in advertising,
publicity or otherwise the name of UI or UIRF, or the inventors, unless UIRF has
specifically approved the same in writing.

 

12.2                        EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL IMPLIED
OR EXPRESS WARRANTIES AND MAKES NO EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF THE PATENT RIGHTS,
LICENSED METHOD OR LICENSED PRODUCT.  UIRF assumes no responsibilities whatever
with respect to design, development, manufacture, use, sale or other disposition
by LICENSEE or AFFILIATES or SUBLICENSEES of LICENSED PRODUCT.  The entire risk
as to the design, development, manufacture, offering for sale, sale, or other
disposition and performance of LICENSED PRODUCT is assumed by LICENSEE, its
AFFILIATES and SUBLICENSEES.

 

ARTICLE 13 – INDEMNIFICATION

 

13.1                       

 

(a)                                  LICENSEE shall indemnify, defend and hold
harmless UIRF and UI and their current or former directors, governing board
members, trustees, officers, faculty, medical and professional staff, employees,
students, and agents and their respective successors, heirs and assigns (the
UIRF INDEMNITEES), against any liability, damage, loss or expenses (including
reasonable attorneys’ fees and expenses of litigation) incurred by or imposed
upon the UIRF INDEMNITEES or any one of them in connection with any claims,
suits, actions, demands or judgments by or of any third party arising out of any
theory of product liability (including, but not limited to, actions in the form
of tort, warranty or strict liability) concerning any product, process or
service made, used or sold pursuant to any right or license granted under this
Agreement.

 

(b)                                  LICENSEE agrees, at its own expense, to
provide attorneys reasonably acceptable to UIRF to defend against any actions
brought or filed against any party indemnified hereunder with respect to the
subject of indemnity contained herein, whether or not such actions are
rightfully brought.

 

ARTICLE 14 – INSURANCE

 

14.1                        Beginning at the time of the FIRST COMMERCIAL SALE
of the LICENSED PRODUCT by LICENSEE, its AFFILIATE, or SUBLICENSEE, LICENSEE
shall, at its sole cost and expense procure and maintain comprehensive general
liability insurance in amounts not less than $[***] per incident and $[***]
annual aggregate and naming the UIRF INDEMNITEES as additional insureds.  During
clinical trials of the LICENSED PRODUCT, LICENSEE shall, and shall ensure that
its AFFILIATES and SUBLICENSEES, at their sole cost and expense, procure and
maintain comprehensive general liability insurance in such equal or lesser
amounts as UIRF shall require, naming the UIRF INDEMNITEES as additional
insureds.  Such comprehensive general liability insurance shall provide (i)
product liability coverage and (ii) broad form contractual liability coverage
for LICENSEE’s, its AFFILIATES’ or SUBLICENSEES’, as applicable, indemnification
under this AGREEMENT.  If LICENSEE or its AFFILIATES or SUBLICENSEES elects to
self-insure all or part of the limits described above (including deductibles or
retentions which are in excess of $[***] annual aggregate) such self-insurance
program must be acceptable to UIRF.  The minimum amounts of insurance coverage
required shall not be construed to create a limit of LICENSEE’s liability with
respect to its indemnification under this AGREEMENT.

 

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14.2                        LICENSEE shall provide UIRF with written evidence of
such insurance upon request of UIRF.  LICENSEE shall provide UIRF with written
notice at least fifteen (15) days prior to the cancellation, non-renewal or
material change in such insurance; if LICENSEE does not obtain replacement
insurance providing comparable coverage within such 15 (fifteen) day period,
UIRF shall have the right to terminate this Agreement effective at the end of
such 15 (fifteen) day period without notice or any additional waiting periods.

 

14.3                        LICENSEE shall maintain such comprehensive general
liability insurance (i) beyond the expiration or termination of this AGREEMENT
during the period that the LICENSED PRODUCT is being commercially distributed or
sold by LICENSEE, its AFFILIATES or SUBLICENSEES and (ii) a reasonable period
thereafter.

 

ARTICLE 15 – MISCELLANEOUS

 

15.1                        In the event of any controversy or claim arising out
of or relating to any provision of this AGREEMENT or the breach thereof, the
parties shall try to settle such conflicts amicably between themselves.  Subject
to the limitation stated in the final sentence of this section, any such
conflict which the parties are unable to resolve may be settled through
arbitration conducted in accordance with the rules of the American Arbitration
Association.  In the event a dispute is arbitrated, the demand for arbitration
shall be filed within a reasonable time after the controversy or claim has
arisen, and in no event after the date upon which institution of legal
proceedings based on such controversy or claim would be barred by the applicable
statutes of limitation.  Such arbitration shall be held in Des Moines, Iowa. 
The arbitration shall be conducted by 3 (three) arbitrators who are
knowledgeable in the subject matter which is at issue in the dispute.  One
arbitrator will be selected by UIRF, 1 (one) arbitrator will be selected by
LICENSEE, and the 3rd (third) arbitrator will be selected by mutual agreement of
the 2 (two) arbitrators selected by the parties.  The arbitrators shall be
authorized to grant any temporary, preliminary or permanent equitable remedy or
relief they deem just and equitable and within the scope of this AGREEMENT,
including, without limitation, an injunction or order for specific performance. 
Notwithstanding anything in this AGREEMENT to the contrary, either party may
immediately pursue an action at law or equity in a court of competent
jurisdiction related to any breach or alleged breach of Article 10 or for patent
validity or infringement claims.  The award through arbitration shall be final
and binding. Either party may enter any such award in a court having
jurisdiction or may make application to such court for judicial acceptance of
the award and an order of enforcement, as the case may be. Notwithstanding the
foregoing, either party may, without recourse to arbitration, assert against the
other party a third-party claim or cross-claim in any action brought by a third
party, to which the subject matter of this AGREEMENT may be relevant.

 

15.2                        Should a court of competent jurisdiction later
consider any provision of this AGREEMENT to be invalid, illegal, or
unenforceable, it shall be considered severed from this AGREEMENT.  All other
provisions, rights and obligations shall continue without regard to the severed
provision, provided that the remaining provisions of this AGREEMENT are in
accordance with the intention of the parties.

 

15.3                        No waiver by a party of any breach of this
AGREEMENT, no matter how long continuing or how often repeated, shall be deemed
a waiver of any subsequent breach thereof, nor shall any delay or omission on
the part of a party to exercise any right, power or privilege hereunder be
deemed a waiver of such right, power or privilege.

 

15.4                        The relationship between the parties is that of
independent contractors. LICENSEE shall not be deemed to be an agent of UIRF in
connection with the exercise of any rights hereunder, and shall not have any
right or authority to assume or create any obligation or responsibility on
behalf of UIRF.

 

15.5                        No party hereto shall be deemed to be in default of
any provision of this AGREEMENT, or for any failure in performance, resulting
from acts or events beyond the reasonable control of such party, such acts of
God, acts of civil or military authority, civil disturbance, war, strikes,
fires, power failures, natural catastrophes, or any other event similar to those
enumerated above.  Such excuse from liability shall be effective only to the
extent and duration of the event(s) causing the failure or delay in performance
and provided that the party has not caused such event(s) to occur.  Notice of a
party’s failure or delay in performance due to force majeure must be given to
the other party within five (5) calendar days

 

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after its occurrence.  All delivery dates under this AGREEMENT that have been
affected by force majeure shall be tolled for the duration of such force
majeure.  In no event shall any party be required to prevent or settle any labor
disturbance or dispute.

 

15.6                        This AGREEMENT may be executed in multiple
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.

 

ARTICLE 16 - NOTICES; APPLICABLE LAW

 

16.1                        Any notice, report or payment provided for in this
AGREEMENT shall be deemed sufficiently given if in writing and when sent by
express courier, certified or registered mail addressed to the party for whom
intended at the address set forth below, or to such address as either party may
hereafter designate in writing to the other:

 

 

(a)

For UIRF:

University of Iowa Research Foundation

 

 

 

 

 

 

 

Attn: Executive Director

 

 

 

214 Technology Innovation Center

 

 

 

Iowa City, Iowa 52242-5000

 

 

 

 

 

(b)

For the LICENSEE:

Neurogenetics, Inc.

 

 

 

 

 

 

 

11085 North Torrey Pines Road

 

 

 

Suite 300

 

 

 

La Jolla, CA 92037

 

16.2                        This AGREEMENT shall be construed, interpreted, and
applied in accordance with the laws of the State of Iowa.

 

16.3                        LICENSEE agrees to comply with all APPLICABLE LAWS
and governmental regulations.  In particular, it is understood and acknowledged
that the transfer of certain commodities and technical data is subject to United
States laws and regulations controlling the export of such commodities and
technical data, including all Export Administration Regulations of the United
States Department of Commerce.  These laws and regulations among other things,
prohibit or require a license for the export of certain types of technical data
to certain specified countries.  LICENSEE hereby agrees and gives written
assurance that it will comply with all United States laws and regulations
controlling the export of commodities and technical data, that it will be solely
responsible for any violation of such by LICENSEE or its AFFILIATES or
SUBLICENSEES, and that it will defend and hold UIRF harmless in the event of any
legal action of any nature occasioned by such violation.

 

ARTICLE 17 – INTEGRATION

 

17.1                        This AGREEMENT constitutes the final and entire
agreement between the parties, and supersedes all prior written agreements and
any prior or contemporaneous oral understanding regarding the subject matter
hereof.  Any representation, promise or condition in connection with such
subject matter which is not incorporated in this AGREEMENT shall not be binding
on either party.  No modification, renewal, extension or termination of this
AGREEMENT or any of its provisions shall be binding upon the party against whom
enforcement of such modification, renewal, extension or termination is sought,
unless made in writing and signed on behalf of such party by a duly authorized
officer.

 

 

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IN WITNESS WHEREOF, each of the parties have caused this AGREEMENT to be
executed by its duly authorized representative.

 

 

UIRF

 

LICENSEE

The University of Iowa Research Foundation

 

Neurogenetics, Inc.

 

 

 

 

 

 

By

/s/ W. Bruce Wheaton

 

 

By:

/s/Neil Kurtz

Name:

W. Bruce Wheaton

 

 

Name:

Neil M Kurtz M.D.

Title:

Executive Director

 

 

Title:

Chief Executive Officer

 

 

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Appendix A

 

 

The following comprise PATENT RIGHTS:

United States Patent Application Serial No. 10/033,632; filed December 26, 2001;
titled “Drugs for Spinal Anesthesia”; Timothy J. Brennan, inventor.

 

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