Exhibit 10.2
 
EXECUTION COPY
 
FROZEN SHOULDER LICENSE AGREEMENT

This FROZEN SHOULDER LICENSE AGREEMENT (the “Agreement”), effective as of
November 21, 2006 (the “Effective Date”), is entered into by and between
BioSpecifics Technologies Corp., a corporation organized and existing under the
laws of Delaware (“BTC”), and the Research Foundation of the State University of
New York for and on behalf of Stony Brook University, a nonprofit, educational
corporation organized and existing under the laws of New York (the “Research
Foundation”). BTC and the Research Foundation shall sometimes be referred to
herein individually as a “Party” and collectively as “Parties.”

RECITALS

WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION> 

WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION>

WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION>

WHEREAS <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION>

WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION>

WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION>
 
WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION>
 
WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION>
 
WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION>
 
WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION>
 
WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION>
 

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WHEREAS, the Research Foundation now wishes to license the University Know-How
and the University Patents in respect of Frozen Shoulder to BTC, and BTC wishes
to license the University Know-How and the University Patents in respect of
Frozen Shoulder from the Research Foundation, on the terms and conditions set
forth in this Agreement.
 
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth below, the Parties agree as follows:

ARTICLE I.
DEFINITIONS

For the purposes of this Agreement, the following capitalized words and phrases,
whether used in the singular or plural, shall have the following meanings:

1.1   “Affiliate” means any corporation or other business entity controlled by,
controlling, or under common control with another entity, with “control” meaning
direct or indirect beneficial ownership of more than 50% (or such lesser percent
provided that ownership is accompanied by the power to direct the management or
policies of the entity) of (a) the voting stock in the case of a corporation, or
(b) the profits interest or decision-making authority in the case of an
unincorporated business entity.
 
1.2   “Auxilium” means Auxilium Pharmaceuticals, Inc., a corporation organized
and existing under the laws of Delaware.
 
1.3   “Auxilium License Agreement” means the agreement dated as of June 3, 2004
by and between BTC and Auxilium, as amended on May 6, 2005 and as may be
subsequently amended from time to time, by which BTC granted to Auxilium certain
licenses, as defined therein.
 
1.4   “Combination Product” means any product containing both an agent or
ingredient which constitutes a Licensed Product and one or more other active
agents or ingredients which do not constitute Licensed Products.
 
1.5   “Development Program” means the clinical studies previously performed by
B&W with injectable collagenase pertaining to Frozen Shoulder, as described more
fully in Article II hereof.
 
1.6   “EMEA” means the European Medicines Evaluation Agency, which coordinates
the scientific review of human pharmaceutical products under the centralized
licensing procedure of the European Community, and includes any successor
agency.
 
1.7   “Enzyme” means an enzyme constituted of collagenase obtained by
fermentation of Clostridium histolyticum, purified by chromatography,
lyophilized and substantially free from other proteinases, and any variants or
derivatives thereof.
 
1.8   “European Union“ or “EU” means the countries of the European Union (or its
successor) as constituted on the Effective Date and future members of the
 
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European Union upon their admission for full membership with commercial rights
and privileges.
 
1.9   “FDA” has the meaning set forth above in the recitals.
 
1.10  “Field” means the prevention or treatment of Frozen Shoulder.
 
1.11  “First Commercial Sale” means the first commercial sale of a Licensed
Product by BTC under the terms of a Supply Agreement or by a Sublicensee to a
Third Party.
 
1.12  “Frozen Shoulder” means the condition or syndrome of shoulder adhesive
capsulitis or other conditions or syndromes of the shoulder.
 
1.13  “Indication” shall mean a pharmaceutical application of injectable
collagenase.
 
1.14  “Information” means (a) techniques, technology, practices, methods,
procedures, inventions, discoveries, knowledge, know-how, trade secrets, skill,
experience, gene or protein sequences, technical data, test data, analytical and
quality control data, formulas or software programs, and (b) all compounds,
compositions of matter, cells, cell lines, assays, and all other biological or
chemical materials and samples.
 
1.15  “Joint Inventions” means any inventions in the Field, whether patentable
or not, which are jointly conceived, discovered, developed or otherwise made,
during the Development Program by at least one BTC employee or person
contractually required to assign or license the intellectual property rights
covering such inventions to BTC and at least one Stony Brook employee or person
contractually required by virtue of New York state law to assign or license the
intellectual property rights covering such inventions to the Research
Foundation.
 
1.16  “Licensed Products” means pharmaceutical products containing Enzyme as an
active ingredient and any reformulation, improvement, enhancement, combination,
refinement, or modification thereof, which are made, used and sold in the Field
and the development, manufacture, use or sale of which would, in the absence of
this Agreement, infringe one or more Valid Claims; provided however, the
Licensed Products shall specifically exclude dermal formulations labeled for
topical administration.
 
1.17  “MAA” means a Marketing Authorization Application filed with the EMEA.
 
1.18  “NDA” means a New Drug Application, Biologics License Application or a
Product License Application filed with the FDA.
 
1.19  “Net Sales” means

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(a)  with respect to sales of Licensed Products by BTC or its Affiliates, the
gross sales price actually received less the following items to the extent they
are paid and included in the invoice price:
 

(i)
customary trade discounts actually allowed;

(ii)
packing, freight, and insurance costs;

(iii)
sales, use, value-added and excise taxes;

(iv)
import, export and customs duties and taxes;

(v)
credit for returns, allowances or trades actually allowed; and

(vi)
government mandated rebates, if any; and

 
(b)  with respect to sales of Licensed Products by a Sublicensee (as defined
below) where BTC has elected not to supply the Licensed Product, the net sales
price as required to be reported to BTC by the Sublicensee pursuant to the
written sublicense agreement between them. For purposes of clarification, if
Auxilium acquires BTC, then notwithstanding any termination of the Auxilium
License Agreement, the Net Sales price shall be the price that would have been
reported by Auxilium to BTC under the Auxilium License Agreement as if the
Auxilium License Agreement had remained in effect.
 
(c)  with respect to sales of Licensed Products by a Sublicensee (as defined
below) where BTC has elected to supply the Licensed Product, the net sales price
as required to be reported to BTC under the Supply Agreement entered into
between them.

In the case of (a) and (b) above, sales by BTC, its Affiliates and Sublicensees
to resellers or others for further formulation, processing, repackaging or
relabeling shall be excluded, and only the subsequent resale to independent
customers shall be deemed Net Sales.

In the case of Combination Products for which the agent or ingredient
constituting a Licensed Product and each of the other active agents or
ingredients not constituting a Licensed Product have established market prices
when sold separately, Net Sales shall be determined by multiplying the Net Sales
for each such Combination Product by a fraction, the numerator of which shall be
the established market price for the Licensed Products contained in the
Combination Product and the denominator of which shall be the sum of the
established market prices for the Licensed Products plus the other active agents
or ingredients contained in the Combination Product. When separate market prices
are not established, then the Parties shall negotiate in good faith to determine
a fair and equitable method of calculating Net Sales for the Combination Product
in question, taking into account factors such as relative cost and relative
therapeutic or diagnostic contribution.
 
1.20  “Patent” means any patent issued with respect to the Patent Applications,
and any reissues or extensions thereof.
 
1.21  “Sublicensee” means Auxilium or any person or entity who receives in the
future a sublicense from BTC pursuant to Article III hereof.
 
1.22  “Sublicense Income” means the upfront payments and milestone payments
actually received by BTC from (i) Auxilium and included within the definition of
Sublicense Income as defined in the Auxilium License Agreement, or (ii) any
other Sublicensee pursuant to Article III hereof.
 
1.23  “Supply Agreement” shall mean any commercial supply agreement related to
the manufacturing and/or supply of the Licensed Product between BTC and a
Sublicensee or any Third Party.
 
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1.24  “Territory” means all countries of the world.
 
1.25  “Third Party” shall mean any person or other entity other than BTC or its
Affiliates.
 
1.26  “University Know-How” means (i) any proprietary Information or materials
related to the manufacture, preparation, formulation, use or development of the
Enzyme and the Licensed Products and shall include formulations, processes,
techniques, formulas, biological, chemical, assay control and manufacturing,
technical, pre-clinical, clinical or other data, methods, and know-how, and
trade secrets; (ii) all Information, not generally known, which is owned by the
Research Foundation or is rightfully held with right to sublicense as of the
Effective Date, or which was developed, discovered, conceived, reduced to
practice, or acquired by the Research Foundation or by Stony Brook inventors and
assigned by Stony Brook inventors to the Research Foundation as a result of the
Development Program and which (a) relates to the Licensed Products or (b)
relates to the methods, processes or techniques for the manufacture or use of
the Licensed Products and (iii) any Joint Inventions.
 
1.27  “University Patents” means the patent applications in respect of Frozen
Shoulder that is covered by the assignment agreement attached hereto as Exhibit
A, and any divisions, continuations and continuations-in-part thereof, any
foreign patent applications corresponding thereto, and any patent issued with
respect to such patent applications, and any reissues or extensions thereof.
 
1.28  “Valid Claim” means a claim of an issued and unexpired patent included
within the University Patents, which has not been held permanently revoked,
unenforceable or invalid by a decision of a governmental agency or court of
competent jurisdiction, unappealable or unappealed within the time allowed for
appeal, and which has not been admitted to be invalid or unenforceable through
reissue or disclaimer or otherwise.
 
ARTICLE II.
DEVELOPMENT PROGRAM

2.1   Frozen Shoulder Development Program. Pursuant to certain protocols, B&W,
individually or collectively, together with other Stony Brook employees,
performed certain pre-clinical, clinical, regulatory, process development and
manufacturing work related to injectable collagenase pertaining to Frozen
Shoulder.
 
ARTICLE III.
LICENSE GRANT

3.1   License Grant. The Research Foundation hereby grants to BTC and its
Affiliates a worldwide exclusive license for the University Know-How in the
Field and the University Patents in the Field. The Research Foundation hereby
reserves all rights to any University Know How and University Patents outside of
the Field. The Research Foundation further grants to BTC a worldwide exclusive
license to use the University
 
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Know-How and the University Patents to develop, manufacture, use and sell in any
manner Licensed Products in the Field, except to the extent that BTC, its
Affiliates or Sublicensees enters into a material transfer agreement, clinical
trial agreement or any similar agreement that allows the Research Foundation to
do research or clinical development. This grant is subject to the payment by BTC
to Research Foundation of any consideration required to be paid by Article IV of
this Agreement.
 
3.2   Government Rights. BTC acknowledges that the license granted to it
hereunder are subject to a certain license granted to the United States
government by the Research Foundation, as described in a letter dated as of
October 6, 2006, a copy of which is attached hereto as Exhibit C.
 
3.3   Sublicenses. 
 
(a)  BTC shall be entitled to grant sublicenses of its rights hereunder,
provided that any Net Sales of Licensed Products by a BTC Sublicensee shall be
deemed to be Net Sales of a Sublicensee for purposes of royalty payments due
hereunder, and BTC shall remain obligated to pay all royalties due with respect
to Licensed Products sold by BTC and any Sublicensee. If BTC shall grant any
sublicenses in addition to the Auxilium License Agreement under this Agreement,
then it shall obtain the written commitment of such additional Sublicensees to
abide by all applicable terms and conditions of this Agreement and BTC shall
remain fully responsible to the Research Foundation for the performance of all
such terms by such additional Sublicensees. Upon the termination of this
Agreement, each Sublicensee shall have the option to convert its sublicense to a
direct license with the Research Foundation on the same terms as in the
sublicense agreement.
 
(b)  The Research Foundation hereby acknowledges and consents to the sublicense
that BTC has previously granted to Auxilium pursuant to the Auxilium License
Agreement in respect of the Licensed Products.
 
3.4   Subagents. It is agreed that BTC has the right to take the following
actions, none of which shall constitute a sublicense hereunder and none of which
shall be subject to Section 3.3 herein:
 
(a)  appointing an agent or distributor to market, sell or otherwise dispose of
Licensed Products; and
 
(b)  subcontracting the development, manufacture or packaging of Licensed
Products.
 
3.5   Term. The term of said license will continue in effect for as long as the
Licensed Products are sold.
 
ARTICLE IV.
ROYALTIES AND MILESTONE PAYMENTS
 
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4.1   Royalties. <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION>
 
4.2   Royalty Period. The royalty obligations of BTC shall commence on the date
of the First Commercial Sale and continue for the longer of (i) the last to
expire Valid Claim of a Patent covering the Licensed Product or (ii) June 3,
2016.
 
4.3   Currency; Conversion; Taxes. Royalty payments shall be paid in U.S.
Dollars at the address of the Research Foundation set forth in Section 11.6
below, or such other place as the Research Foundation may reasonably designate
in writing, consistent with applicable laws and regulations. Any taxes which BTC
or its Affiliates or Sublicensees shall be required by law to withhold or pay
upon remittance of the royalty payments shall be deducted from the royalty
payable to the Research Foundation and paid on its behalf as required. BTC shall
furnish the original of any official receipts for such taxes. If any currency
conversion shall be required in connection with the payment of royalties
hereunder, such conversion shall be made by using the average of the daily
exchange rates for such currency quoted by the Wall Street Journal’s (New York
edition) foreign exchange desk for each of the last three (3) banking days of
each calendar quarter, or, in the case of sales by Sublicensees, using the
exchange rates provided for in the written agreements between BTC and such
Sublicensees.
 
4.4   Currency Transfer Restrictions. If in any country in the Territory the
payment or transfer of royalties on Net Sales in such country is prohibited by
law or regulation, BTC shall notify the Research Foundation of the conditions
preventing such transfer, and shall deposit the blocked payments in local
currency in a recognized banking institution in the relevant country for the
credit of the Research Foundation.
 
4.5   Payments by Others. With respect to any sales of Licensed Products by BTC,
its Affiliates or Sublicensees, BTC shall have the right to cause any Affiliate,
Sublicensee or other designee to make direct payment to the Research Foundation
of the royalties otherwise due for such sales. The Research Foundation shall
accept such payments and the amount of royalties to be paid by BTC shall be
reduced by the amount of such payments actually received by Research Foundation.
 
4.6   Offsets for Third Party Licenses. If the Parties agree in writing that
BTC, its Affiliates or Sublicensees must obtain a license from an independent
Third Party in order for BTC to manufacture, use or sell a Licensed Product and
if BTC and the Research Foundation agree on the terms of such license (a “Third
Party License”), then the Parties shall share the cost of that license as
defined herein. Such cost includes license fees, royalties and other fixed costs
associated with the Third Party License minus the costs apportioned to any
Sublicensee. <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION> 
 
4.7   Milestone Payments. <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION>.
 
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4.8   Payments Related to Sublicense Income. <OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION>
 
ARTICLE V.
REPORTS, PAYMENTS AND ACCOUNTING

5.1   Royalty Reports and Payments. BTC agrees to make written reports and
royalty payments to the Research Foundation within ninety (90) days after the
close of each calendar quarter during the term of this Agreement, beginning with
the quarter in which the First Commercial Sale occurs. These reports shall show
for the calendar quarter in question all Net Sales of Licensed Products and the
royalty due thereon, together with the same information for Licensed Products
sold by Affiliates and Sublicensees (if applicable). With respect to sales of
Licensed Products by Sublicensees, reports need only include information
reflected in the reports required by Section 5.4 below which are actually
received during the calendar quarter in question. Concurrently with the making
of each report, BTC shall remit any royalty payment due for the period covered
by the report. BTC will make a good faith attempt, using commercially reasonable
biotech industry practices, to differentiate between Net Sales of Licensed
Products and sales of similar products outside of the Field in calculating the
amount of the royalty due hereunder to the Research Foundation. Absent manifest
error, BTC’s good faith differentiation shall be binding and conclusive on the
Parties.

5.2   Termination Report. Within ninety (90) days after the date on which BTC
and its Affiliates and Sublicensees last sell any Licensed Products, BTC shall
make a final termination report containing the same quarterly information
required above.

5.3   Accounting. BTC agrees to keep written or digitally stored records for a
period of three (3) years from the end of each reporting period in sufficient
detail to enable the royalties payable to be determined, and further agrees to
permit its books and records to be examined during normal business hours by an
independent accounting firm, selected by the Research Foundation and reasonably
satisfactory to BTC, from time-to-time on reasonable notice, but not more often
than once per year. Such examination must be made confidentially and the
auditing firm shall be required to enter into reasonable confidentiality
agreements. The expense of such examination shall be borne by the Research
Foundation except that in the event the results of the audit reveal a
discrepancy in the Research Foundation’s favor of 10% or more, then reasonable
out-of-pocket audit fees shall be paid by BTC. Any discrepancy will be promptly
corrected by a payment or refund, as appropriate.
 
5.4   Third Party Reports. BTC agrees to require, as a term of any sublicense
agreement, that the Sublicensee shall render written reports to BTC of Net Sales
of Licensed Products no less frequently than twice per year and in sufficient
detail to enable the royalties payable by BTC hereunder to be determined (“Third
Party Reports”). BTC shall also require Sublicensees to keep records concerning
Net Sales for a period of at least three (3) years, and to permit reasonable
examination of such records by an independent accounting firm selected by BTC.
Notwithstanding the foregoing, nothing in this Agreement shall be construed as
enlarging, or requiring BTC to modify,
 
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Auxilium’s, its Affiliate’s or its Sublicensee’s existing reporting and record
keeping obligations pursuant to the Auxilium License Agreement.
 
5.5   Confidentiality of Reports. The Research Foundation agrees that the
information set forth in (a) the reports required by Sections 5.1 and 5.2, (b)
the records subject to examination under Section 5.3, and (c) all Third Party
Reports, shall be maintained in confidence by the Research Foundation and any
independent accounting firm selected under Section 5.3, shall not be used for
any purpose other than verification of the performance by BTC of its obligations
hereunder, and shall not be disclosed by the Research Foundation or such
accounting firm to any other person.
 
ARTICLE VI.
WARRANTIES; DISCLAIMED WARRANTIES; INDEMNIFICATION
 
6.1   Title; Authority. The Research Foundation represents and warrants that
B&W, by virtue of New York state law, have assigned to the Research Foundation
all of the rights pertaining to the University Know-How and the University
Patents licensed to BTC hereunder and that therefore the Research Foundation has
the full unrestricted legal right to enter into this Agreement and to grant the
licenses granted hereunder.
 
6.2   No Other Licenses Granted. The Research Foundation represents and warrants
that it has not granted any license pertaining to the University Know-How or the
University Patents to any party other than to BTC pursuant to this Agreement. In
addition, after reasonable investigation, the Research Foundation to the best of
its knowledge is not aware that B&W, individually or collectively, have granted
any license pertaining to the University Know-How or the University Patents to
any Third Party, other than the United States government, as set forth in
Section 3.2 of this Agreement.
 
6.3   No Known Infringement. As of the Effective Date, the Research Foundation
has not received any notice of infringement of or conflict with any patent,
trade secret, copyright, trademark or other intellectual property right of any
other person with respect to the University Know-How.
 
6.4   No Warranty of Non-Infringement. Nothing in this Agreement shall be
construed as a warranty or representation that any Licensed Products made, used
or sold pursuant to any license granted hereunder is or will be free from
infringement of patents, copyrights, trademarks, trade secrets or other
intellectual property rights of Third Parties.
 
6.5   Indemnification by Research Foundation. Notwithstanding the absence of any
warranty of non-infringement, the Research Foundation shall, during the term of
this Agreement and thereafter, indemnify and hold harmless BTC, its Affiliates,
Sublicensees and its and their directors, officers, agents and employees, from
any losses, damages, expenses and liabilities of any kind (including legal
expenses and reasonable attorneys’ fees and costs ) resulting from the Research
Foundation’s gross negligence or willful misconduct in connection with:
 
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(a)  the action or inaction of the Research Foundation, its Affiliates or B&W;
or
 
(b)  any breach of this Agreement by the Research Foundation or its Affiliates.
 
6.6    Indemnification by BTC. BTC shall, during the term of this Agreement and
thereafter, indemnify and hold harmless the Research Foundation and its
Affiliates and its and their directors, officers, agents and employees, from any
losses, damages, expenses, and liability of any kind whatsoever (including legal
expenses and reasonable attorneys’ fees and costs) resulting from BTC’s (and its
Affiliates’ and Sublicensees’) gross negligence or willful misconduct in
connection with the manufacture, use, testing, sale or advertisement of Licensed
Products; provided, however, that in no case will the foregoing indemnity
obligation apply to the extent that such claim, proceeding, loss, expense, or
liability is the result of:
 
(a)  any action or inaction of the Research Foundation or its Affiliates, or its
or their agents; or
 
(b)  any alleged or actual infringement by the University Know-How of any
patents, copyrights, trademarks, trade secrets or other intellectual property
rights of Third Parties; or
 
(c)  any breach of this Agreement by the Research Foundation.
 
ARTICLE VII.
TERM AND TERMINATION

7.1   Term. Unless earlier terminated in accordance with this Article VII, this
Agreement and the licenses granted hereunder shall continue in effect until the
termination of BTC’s royalty obligations. Thereafter, all licenses granted shall
become fully paid-up, irrevocable exclusive licenses.
 
7.2   Termination by the Research Foundation for Default. The Research
Foundation may terminate this Agreement if BTC commits any material default of
any of BTC’s material obligations, by notice to BTC specifying in reasonable
detail the nature of the default, provided that such default has not been
remedied within ninety (90) days of such notice.
 
7.3   Termination by BTC. BTC may terminate this Agreement (a) on 30 days’
notice to the Research Foundation if BTC elects to cease utilizing all license
rights granted hereunder or (b) if the Research Foundation or any of its
Affiliates is in material default of any of the Research Foundation’s material
obligations or covenants, which default has not been remedied within ninety (90)
days of notice to the Research Foundation specifying in reasonable detail the
nature of the default.
 
7.4   Termination for Bankruptcy. If voluntary or involuntary proceedings in
bankruptcy by or against a Party are instituted under any insolvency law, or a
receiver or
 
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custodian is appointed for a Party, or proceedings are instituted by or against
a Party for corporate reorganization or dissolution, which proceedings shall not
have been dismissed within sixty (60) days after the date of filing, or if a
Party makes an assignment for the benefit of creditors, or substantially all of
the assets of a Party are seized or attached and not released within sixty (60)
days thereafter (that Party, a “Bankruptcy Party”), then the other Party may
immediately terminate this Agreement by notice to the Bankruptcy Party. However,
in the event that the other Party elects not to terminate the Agreement, the
Parties intend that the rights and licenses granted under this Agreement shall
be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code (or
any equivalent provision of applicable foreign law), licenses or rights to
“intellectual property” as defined under Section 101(52) of the U.S. Bankruptcy
Code.
 
7.5   Rights and Obligations Upon Termination. Following termination of this
Agreement for any reason, nothing herein shall be construed to release either
Party from any obligation that arose prior to the date of such termination.
After termination, BTC and its Affiliates and Sublicensees may complete Licensed
Products in the process of manufacture at the date of termination and sell them
along with any other Licensed Products in inventory, provided that BTC shall pay
royalties as required by Article IV and shall submit the reports required by
Article V for such Licensed Products.
 
7.6   Return of Confidential Information. Upon termination of this Agreement,
BTC shall return or destroy all University Know-How that is written, to the
Research Foundation, provided that BTC may retain one copy of all written
materials for legal and archival purposes only.
 
7.7   Third Party Beneficiary Status of Auxilium. In the event of BTC’s
bankruptcy and inability to perform its obligations hereunder, Auxilium shall
have the right to cure any default by BTC and perform BTC’s obligations, and
enforce BTC’s rights, hereunder, as a third party beneficiary.
 
ARTICLE VIII.
CONFIDENTIALITY, DISCLOSURE, AND PUBLICATIONS

8.1   Confidentiality.
 
(a)  During the term of this Agreement and for a period of five (5) years
following its expiration or termination, each Party shall maintain in confidence
all Information disclosed by the other Party which is marked or identified as
confidential or which the receiving Party has reason to know is confidential or
proprietary (referred to herein as “Confidential Information“), and shall not
disclose Confidential Information to anyone except those Affiliates,
Sublicensees, employees, subagents, consultants, or subcontractors having a
“need to know” in order to carry out the receiving Party‘s activities as
contemplated by this Agreement. Each receiving Party shall obtain written
agreements from its Affiliates, Sublicensees, employees, subagents, consultants
or subcontractors, prior to disclosure to them of Confidential Information,
obligating them to hold in confidence and not use any Confidential Information
except as permitted by this Agreement. Notwithstanding the foregoing sentence,
if employees or consultants of
 
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a receiving Party have previously signed general confidentiality agreements in
favor the receiving Party as employer, and if those agreements bind the
employees or consultants to protect Information disclosed hereunder to at least
the same extent required by this Section , then it shall be sufficient for the
employing Party to (i) notify the employees or consultants of the fact that
Information disclosed hereunder is governed by such confidentiality agreements
and (ii) identify to such employees or consultants the specific Information so
governed. Each Party shall use the same degree of effort used to protect its own
most valuable proprietary Information from unauthorized use or disclosure, and
shall be responsible for ensuring compliance with these obligations by its
Affiliates, Sublicensees, employees, subagents, consultants and subcontractors.
Each Party shall promptly notify the other upon discovery of any unauthorized
use or disclosure of the other’s Confidential Information.
 
(b)  The receiving Party shall not use Confidential Information for any purpose,
including for the development of products in the Field, except as specifically
permitted by this Agreement.
 
8.2   Exceptions. The obligation of confidentiality and non-use in this Article
shall not apply to the extent that:
 
(a)  either Party (the “Recipient”) is required to disclose Confidential
Information by law, order or regulation of a governmental agency or a court of
competent jurisdiction, or
 
(b)  the Recipient can demonstrate that (i) the disclosed Information was, at
the time of disclosure to the Recipient, already in the public domain or which,
after disclosure, becomes part of the public domain other than as a result of
action of the Recipient, its Affiliates, Sublicensees, employees, subagents,
consultants or subcontractors in violation hereof; (ii) the Recipient can
demonstrate that the disclosed Information was rightfully known or independently
developed by the Recipient or its Affiliates prior to the date of disclosure to
the Recipient, or (iii) the disclosed Information was received by the Recipient
or its Affiliates on an unrestricted basis from a source unrelated to any Party
to this Agreement and not under a duty of confidentiality to the other Party or
 
(c)  the disclosure is made to the FDA, EMEA or other regulatory agency as part
of a product approval process.
 
8.3   Legally Compelled Information. In the event that either Party becomes
legally compelled to disclose any Confidential Information belonging to the
other Party, it shall notify the other Party prior to disclosure so that the
other Party can seek a protective order or other appropriate remedy.
 
8.4   Publications. Prior to public disclosure of or submission for publication
of an abstract, manuscript or oral presentation describing the results of any
aspect of the Development Program or other scientific activity between BTC and
the Research Foundation, the Party disclosing or submitting such abstract,
manuscript or oral
 
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presentation (“Disclosing Party”) shall send the other Party (“Responding
Party”) by a recognized delivery service for next day delivery a copy of the
abstract, manuscript or oral presentation materials to be submitted. The
Responding Party shall have 30 days, in the case of an abstract or oral
presentation materials, or 60 days, in the case of a manuscript, from the date
of receipt of the abstract, manuscript or oral presentation materials. If the
Responding Party believes the subject matter of such abstract, manuscript or
oral presentation contains Confidential Information or a patentable invention of
significant commercial value to the Responding Party, then prior to the
expiration of the relevant period, the Responding Party shall notify the
Disclosing Party in writing of its determination and the basis for its
conclusion. Upon receipt of such notice, the Disclosing Party shall delay public
disclosure of or submission of abstract, manuscript or oral presentation for an
additional period of 60 days to permit preparation and filing of a patent
application on the disclosed subject matter. No publication or presentation
shall be made by the Disclosing Party unless and until the Responding Party’s
comments have been addressed and any information determined by the Responding
Party to be Confidential Information of the Responding Party has been removed.
Determination of authorship for any paper or inventorship for any patent shall
be in accordance with accepted scientific practice or patent law, as
appropriate. Should any questions of authorship or inventorship arise, they will
be determined by good faith consultation between the senior management of the
respective Parties.
 
ARTICLE IX.
PATENT MATTERS

9.1   Filing and Prosecution of Patents.

(a)  During the term of the Agreement, BTC or any Sublicensee, pursuant to any
sublicense agreement, shall have the right to, and in the reasonable exercise of
its commercial discretion, prepare, file, prosecute, maintain, renew and defend
all of the patents and applications included within the University Patents in
the countries where such University Patents are filed as of the Effective Date.
In the event that neither BTC nor any of its Sublicensees intend to file for
patent protection or wish to continue preparation, prosecution, or maintenance
of the patents and applications included within the University Patents, then BTC
shall give at least thirty (30) days advance notice to the Research Foundation,
and in no event less than a reasonable period of time for the Research
Foundation to act. In such case, the Research Foundation shall have the right to
prepare, file, prosecute, maintain, renew and defend all of the patents and
applications included within the University Patents in the countries where such
University Patents are filed as of the Effective Date.

(b)  BTC or its Sublicensee shall be responsible for all costs and expenses
incurred for such prosecution and maintenance. At BTC’s or any of its
Sublicensee’s request, the Research Foundation shall cooperate and provide BTC
or such Sublicensee with all necessary assistance and documentation in
connection with the filing, prosecution and maintenance of all applications
included within the University Patents. At the request of the Research
Foundation, BTC or its Sublicensee will provide
 
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the Research Foundation with reports relating to the filing, prosecution and
maintenance of the University Patents and copies of any intended filings.

9.2   Enforcement of University Patents.

(a)  In the event that either Party becomes aware of a suspected infringement of
a University Patent, or of the institution by a Third Party of any proceedings
alleging the invalidity or unenforceability of any University Patent, such Party
shall promptly notify the other Party, and, following such notification, the
Parties shall confer. BTC or any Sublicensee, pursuant to any sublicense
agreement, shall have the right, but shall not be obligated, to prosecute an
infringement action or to defend such proceedings at its own expense, in its own
name and entirely under its own direction and control. BTC may deduct any
unreimbursed litigation expenses and legal fees from any recovery of damages or
settlement received by BTC from any such suit, and twenty percent (20%) of the
balance of the proceeds shall be paid to Research Foundation. The Research
Foundation will reasonably assist BTC or its Sublicensee in such actions or
proceedings if so requested, and will lend its name to such actions or
proceedings if requested by BTC or its Sublicensee or if required by law,
provided that BTC shall pay or reimburse the Research Foundation for all costs
which the Research Foundation may incur in providing such asssistance. If BTC or
its Sublicensee elect not to bring any action for infringement or defend any
proceeding challenging any claims in an issued patent included within the
University Patents within 90 days of being requested to do so, the Research
Foundation may bring such action or defend such proceeding at its own expense,
in its own name and entirely under its own direction and control. BTC or its
Sublicensee will reasonably assist the Research Foundation in any action or
proceeding if so requested by the Research Foundation or required by law,
provided that the Research Foundation shall pay or reimburse BTC or its
Sublicensee for all costs which BTC or its Sublicensee may incur in affording
such assistance. No settlement of any action or proceeding may be entered into
by either Party without the prior written consent of the other, which consent,
in the case of the Research Foundation shall not be unreasonably withheld, and
in the case of BTC or any Sublicensee may be withheld in BTC’s or any
Sublicensee’s sole and absolute discretion.

(b)  If either Party brings such an action or defends such a proceeding and
subsequently ceases to pursue it or withdraws therefrom, that Party shall
promptly notify the other Party who may then substitute itself for the
withdrawing Party under the terms of this Section.

ARTICLE X.
DISPUTE RESOLUTION; ARBITRATION

10.1   Exclusive Remedy. The Parties agree that the terms of this Article shall
be the exclusive means of resolving any dispute, controversy or claim (a
“Dispute”) arising out of or relating to this Agreement, except that either
Party may seek injunctive relief or other provisional remedies from a court of
competent jurisdiction if necessary to protect such Party’s name, intellectual
property rights, or to prevent irreparable harm.
 
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10.2   Good Faith Negotiations. In the event of any Dispute arising out of or
relating to or in connection with any provision of the Agreement, or the rights
or obligations hereunder, the Parties shall try to settle their differences
amicably between themselves. Either Party may initiate such informal dispute
resolution by sending written notice of the dispute to the other Party, and
within ten (10) business days after such notice appropriate representatives of
the Parties shall meet for attempted resolutions by good faith negotiations. If
such representatives are unable to resolve such disputed matters, they shall be
referred to the senior management of the respective Parties, for discussion and
resolution. If they are unable to resolve the dispute within thirty (30) days
(or such longer period of time as the Parties may agree to in writing) of
initiating such negotiations, then the Parties must resort to binding
arbitration, as set forth in Section 10.3 below.
 
10.3   Binding Arbitration. Any Dispute not so resolved shall be submitted, by a
written notice of request to arbitrate given by either Party, to final and
binding arbitration under the Commercial Arbitration Rules of the American
Arbitration Association (“AAA”) then in force except as modified in accordance
with the provisions of this Section. The arbitration proceedings shall be held
in the City of New York in New York State.
 
10.4   Arbitrators. The arbitral tribunal shall be composed of three
arbitrators, one appointed by each Party within 15 days, and the two arbitrators
so appointed shall, within 15 days of their appointment, appoint a third
arbitrator who shall act as Chairman of the tribunal. If the Dispute involves
scientific or technical matters, at least 2 of the 3 arbitrators chosen shall
have educational training and/or experience sufficient to demonstrate a
reasonable level of knowledge in the field of biotechnology.
 
10.5   Procedures.
 
(a)  Prompt resolution of any Dispute is important to both Parties; and the
Parties agree that the arbitration of any Dispute shall be conducted
expeditiously. The arbitrators shall be instructed and directed to assume
management initiative and control over the arbitration process (including
scheduling of events, pre-hearing discovery and activities, and the conduct of
the hearing), in order to complete the arbitration as expeditiously as is
reasonably practical for obtaining a just resolution of the Dispute. The
arbitrators shall be directed that any arbitration shall be completed within 1
year from the filing of notice of a request for such arbitration.
 
(b)  The arbitrators shall determine what discovery shall be permitted,
consistent with the goal of limiting the cost and time which the Parties must
expend for discovery; provided that the arbitrators shall permit such discovery
as they deem necessary to permit an equitable resolution of the Dispute.
 
(c)  In arriving at decisions, the arbitrators shall apply the terms and
conditions of this Agreement in accordance with the rules of law governing it in
accordance with Section 11.4. The arbitrators are empowered to render the
following awards in accordance with any provision of this Agreement: (i)
enjoining a Party from
 
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performing any act prohibited, or compelling a Party to perform any act
required, by the terms of this Agreement or any related agreement, and (ii)
ordering such other legal or equitable relief, including any provisional legal
or equitable relief, or specifying such procedures as the arbitrator deems
appropriate, to resolve any Dispute submitted for arbitration. Any monetary
award made and shall be payable in U.S. Dollars free of any tax or any
deduction. The arbitrators shall issue to both Parties a written explanation in
English of the reasons for the award and a full statement of the facts as found
and the rules of law applied in reaching the decision. An award rendered in
connection with an arbitration pursuant to this Article shall be the sole,
exclusive, final and binding remedy between the Parties regarding the Dispute
and any counterclaims made, and judgment upon any award may be entered and
enforced in any court of competent jurisdiction.
 
10.6   Expenses. The award rendered by the arbitrators shall include the costs
of arbitration, arbitrator fees, reasonable attorneys’ fees and reasonable costs
for expert and other witnesses.
 
10.7   Confidentiality of Proceedings. The arbitration proceedings shall not be
made public without the joint consent of the Parties, and each Party shall
maintain the confidentiality of such proceedings and decision unless otherwise
required by law or permitted in writing by the other Party.
 
ARTICLE XI.
MISCELLANEOUS PROVISIONS

11.1   Indemnification Procedures. In the event either Party seeks
indemnification under any provision for indemnification afforded by this
Agreement, the following procedures shall be followed:
 
(a)  Notice of Claim. The Party seeking indemnification (the “Indemnitee”) shall
give the other Party (the “Indemnifying Party”) prompt notice of any losses or
of the discovery of facts upon which a request for indemnification may be made.
The Indemnifying Party shall not be liable for any losses that it can show
resulted from any delay in providing such notice. The notice must contain a
description of the claim and the nature and amount of the loss (to the extent
known), and shall include copies of all papers and official documents received
in respect of any losses.
 
(b)  Control of Defense. At its option, the Indemnifying Party may assume the
defense of any Third Party claim by giving written notice to the Indemnitee
within thirty (30) days of the Indemnitee’s notice. The assumption of the
defense of a Third Party claim by the Indemnifying Party shall not be construed
as an acknowledgment that the Indemnifying Party is liable to the Indemnitee.
Upon assuming the defense of a Third Party claim, the Indemnifying Party shall
have the right to choose legal counsel and direct and control the defense in its
sole discretion. In the event that it is ultimately determined that the
Indemnifying Party is not obligated to indemnify the Indemnitee from the claim,
the Indemnitee shall reimburse the Indemnifying Party for all costs and expenses
incurred.
 
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(c)  Right to Participate in Defense. The Indemnitee shall be entitled to
participate in, but not control, the defense of a Third Party claim and to
employ counsel of its choice for such purpose; provided, however, that such
participation shall be at the Indemnitee's own expense unless the indemnifying
Party has failed to assume the defense, in which case the Indemnitee shall
control the defense.
 
(d)  Settlement. If the Indemnifying Party has acknowledged in writing the
obligation to indemnify the Indemnitee for losses requiring only the payment of
money damages in connection with a Third Party claim, and that will not result
in the Indemnitee's becoming subject to injunctive or other, the Indemnifying
Party shall have the sole right to consent to the entry of any judgment, enter
into any settlement or otherwise dispose of such claim on such terms as the
Indemnifying Party deems appropriate in its sole discretion. With respect to all
other claims or losses, the Indemnifying Party shall have authority to consent
to the entry of any judgment, enter into any settlement or otherwise dispose of
such claim or loss provided it obtains the prior written consent of the
Indemnitee (which consent shall not be unreasonably withheld or delayed).
Regardless of whether the Indemnifying Party chooses to defend or prosecute any
Third Party claim, no Indemnitee shall admit any liability with respect to, or
settle, compromise or discharge, any such claim without the prior written
consent of the Indemnifying Party.
 
(e)  Cooperation of Indemnitee. Regardless of whether the Indemnifying Party
chooses to defend or prosecute any Third Party claim, the Indemnitee shall
cooperate in the defense or prosecution thereof and shall furnish such records,
information and testimony, provide such witnesses and attend such conferences,
discovery proceedings, hearings, trials and appeals as may be reasonably
requested. Such cooperation shall include access to and reasonable retention by
the Indemnified Party of, records and information that are reasonably relevant
to such Third Party claim, and making the Indemnitee’s employees and agents
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Indemnifying Party shall
reimburse the Indemnitee for all its costs incurred in providing such
cooperation.
 
(f)  Reimbursement of Expenses. The verifiable costs and expenses, including
fees and disbursements of counsel, incurred by the Indemnitee in connection with
any claim shall be reimbursed quarterly by the Indemnifying Party, without
prejudice to the Indemnifying Party's right to contest its indemnification
obligations, and such reimbursements shall be subject to refund in the event the
Indemnifying Party is ultimately held not to be obligated to indemnify the
Indemnitee.
 
11.2   Assignment. This Agreement may not be assigned by either Party without
the prior written consent of the other, except that BTC may assign this
Agreement to a party which acquires (whether by merger, sale of assets or
otherwise) all or substantially all of that portion of BTC’s business to which
this Agreement pertains.
 
11.3   Entire Agreement. This Agreement constitutes the entire Agreement between
the Parties with respect to the subject matter hereof, and supersedes all
previous
 
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agreements, whether written or oral. This Agreement may not be modified orally,
but only by an instrument in writing signed by both Parties.
 
11.4   Choice of Law. The validity, performance, construction and effect of the
Agreement shall be governed by the substantive laws of the state of New York
without reference to conflicts of laws provisions.
 
11.5   Severability. If any provision of this Agreement is declared invalid or
unenforceable by an arbitrator pursuant to Section 10.5 (or by a court whose
decision is final and binding pursuant to subsection 10.1) that provision shall
be deemed fully severable. The remaining provisions of this Agreement shall
remain in full force and effect and will be construed as if the invalid or
unenforceable provision had been deleted.
 
11.6   Notices. Any notice or report required or permitted to be given shall be
in writing and delivered personally, sent by facsimile (and promptly confirmed
by personal delivery, registered or certified mail or overnight courier as
provided herein), sent by nationally-recognized overnight courier, or sent by
registered or certified mail, postage prepaid, return receipt requested. Such
notices and reports shall be sent to the following addresses and persons (or
such other address or person as a Party may provide by a communication complying
with this section), and shall be effective upon personal delivery or 5 days
after dispatch by mail or courier, whichever is applicable:
 
If to BTC,

BioSpecifics Technologies Corp.
35 Wilbur Street
Lynbrook, New York 11563
Tel: (516) 593-7000
Fax: (516) 593-7039
Attn: President

with a copy to:

Carl A. Valenstein
Thelen Reid & Priest LLP
701 8th Street NW
Washington, DC 20001
Tel: (202) 508-4195
Fax: (202) 654-1836

If to the Research Foundation,  
 
Office of Technology Licensing and Industry Relations
N5002 Melville
Memorial Library
Stony Brook, New York
11794-3369
 
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Tel: (631) 632-9009
Fax: (631) 632-1505
Attn: Director

11.7   Waiver. The delay or failure of any Party to require performance of any
provision in any one instance shall not be deemed a waiver and shall not affect
the right to enforce the provision later or in any other instance. The
observance of any term or condition may be waived, either generally or in a
particular instance by the Party entitled to enforce such term or condition, but
shall only be effective if in writing and signed by such Party.
 
11.8   Force Majeure. If either Party shall be delayed, interrupted in or
prevented from the performance of any obligation hereunder (other than an
obligation to make a payment) by reason of force majeure, including an act of
God, fire, flood, earthquake, war (declared or undeclared), acts of terrorism,
public disaster, strike or labor unrest, governmental act, rule or regulation,
or any other cause beyond such Party’s control, such Party shall not be liable
to the other therefore and the time for performance of such obligation shall be
extended for a period equal to the duration of the contingency which occasioned
the delay, interruption or prevention. The Party invoking such force majeure
rights must notify the other Party within a period of 15 days from the first and
last day of the force majeure unless it renders such notification impossible, in
which case, notification shall be made as soon as possible. If the resulting
delay exceeds 4 months, both Parties shall consult in good faith to determine an
appropriate course of action.
 
11.9   Independent Contractors. It is expressly agreed that the Parties shall be
independent contractors and that the relationship shall not constitute a
partnership or agency of any kind. Neither Party may bind the other or make
statements on behalf of the other without prior written consent.
 
11.10   Publicity. Neither Party shall use the name of the other Party in any
publicity release without the prior written permission of the other, which shall
not be unreasonably withheld. Except as required by law, neither Party shall
publicly disclose the terms and conditions of the Agreement without the prior
written consent of the other Party.
 
11.11   Headings. The captions used in this Agreement are inserted for
convenience of reference only and shall not be construed to create obligations,
benefits or limitations.
 
11.12   Counterparts. This Agreement may be executed in counterparts, each of
which shall constitute an original and all of which taken together shall
constitute one and the same instrument.
 
[Signature Page Follows]
 
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IN WITNESS WHEREOF, the Parties have executed this Agreement on the dates set
forth below.
 

BIOSPECIFICS TECHNOLOGIES CORP.
 
THE RESEARCH FOUNDATION OF THE STATE UNIVERSITY NEW YORK AT STONY BROOK
                   
By:
/s/ Thomas L. Wegman
 
By:
/s/ Donna L. Tumminello
Name:
Thomas L. Wegman
 
Name:
Donna L. Tumminello
Title:
President
 
Title:
Assistant Director of Business Development
Date:
November 21, 2006
 
Date:
November 21, 2006

 
 
 
 
 
Signature Page to Frozen Shoulder License Agreement
 

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EXHIBIT A

<OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>

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EXHIBIT B

<OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>

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EXHIBIT C

<OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>