Exhibit 10.1

Execution Copy

 

  

 

Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions.

 

 

RESEARCH & LICENSE AGREEMENT

by and between

ACHILLION PHARMACEUTICALS, INC.

and

FOB SYNTHESIS, INC.

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TABLE OF CONTENTS

 

             Page Article I   Definitions; Construction    1

1.1

        Defined Terms    1   1.1.1  

“Achillion Technology”

   1   1.1.2  

“Affiliate”

   1   1.1.3  

“Bankruptcy Code”

   1   1.1.4  

“Clinical Candidate”

   1   1.1.5  

“Commercialization” or “Commercialize”

   2   1.1.6  

“Commercially Reasonable Efforts”

   2   1.1.7  

“Compound Modifications”

   2   1.1.8  

“Confidential Information”

   2   1.1.9  

“Controlled”

   2   1.1.10  

“Cover”, “Covering” or “Covered”

   2   1.1.11  

“Development” or “Develop”

   2   1.1.12  

“Field”

   3   1.1.13  

“FOB Technology”

   3   1.1.14  

“FTE”

   3   1.1.15  

“IND”

   3   1.1.16  

“Licensed Compound”

   3   1.1.17  

“Licensed Patent Rights”

   3   1.1.18  

“Licensed Product”

   3   1.1.19  

“Net Sales”

   3   1.1.20  

“Party”

   4   1.1.21  

“Patent Rights”

   4   1.1.22  

“Person”

   5   1.1.23  

“Phase I Clinical Study”

   5   1.1.24  

“Phase IIB Clinical Study”

   5   1.1.25  

“Phase III Clinical Study”

   5   1.1.26  

“Program Technology”

   5   1.1.27  

“Program Patent Rights”

   5   1.1.28  

“Regulatory Approval”

   5   1.1.29  

“Regulatory Authority”

   5   1.1.30  

“Research Plan”

   5   1.1.31  

“Research Program”

   5   1.1.32  

“Royalty Term”

   5   1.1.33  

“Technology”

   6   1.1.34  

“Territory”

   6   1.1.35  

“Third Party”

   6   1.1.36  

“Valid Claim”

   6

1.2

        Other Terms    6

1.3

        Captions; Certain Conventions; Construction    6 Article II   Grant of
License; Exclusivity    7

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2.1

        License Grants    7

2.2

        Exclusivity    7

2.3

        Technology Transfer    7

2.4

        Section 365(n) of the Bankruptcy Code    8 Article III   Research
Program    8

3.1

        Research Program    8

3.2

        Research Term    8

3.3

        Research Plan; Decision Making    8

3.4

        Research Materials    8

3.5

        Laboratory Facility and Personnel    9

3.6

        Research Funding    9

3.7

        Audits by Achillion    9 Article IV   Manufacturing and Supply    9

4.1

        Pre-Clinical Supply.    9

4.2

        Clinical Supply    10

4.3

        Commercial Supply    10

4.4

        Rights of First Negotiation    10 Article V   Reports and Diligence   
10

5.1

        Research Reports    10

5.2

        Development Reports    10

5.3

        Commercialization Reports    11

5.4

        Commercially Reasonable Efforts.    11

5.5

        Rejected Compounds    11 Article VI   Financial Provisions    11

6.1

        License Payment    11

6.2

        Research Payments    11

6.3

        Milestone Payments    12

6.4

        Royalties.    12

6.5

        Royalty Reports and Accounting.    13

6.6

        Currency and Method of Payments    13

6.7

        Late Payments    14

6.8

        Blocked Payments    14 Article VII   Intellectual Property Protection
and Related Matters    14

7.1

        Program Technology and Program Patent Rights.    14

7.2

        Prosecution and Maintenance of Licensed Patent Rights.    14

7.3

        Third Party Infringement.    15

7.4

        Claimed Infringement    16

7.5

        Patent Invalidity Claim    16

7.6

        Patent Marking    16 Article VIII       Confidentiality    16

8.1

        Confidential Information    16

 

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8.2

        Employee, Consultant and Advisor Obligations    17

8.3

        Term    17 Article IX   Representations and Warranties    17

9.1

        Representations of Authority    17

9.2

        Consents    18

9.3

        No Conflict    18

9.4

        Employee, Consultant and Advisor Obligations    18

9.5

        Intellectual Property    18

9.6

        No Warranties    19 Article X   Term and Termination    19

10.1

        Term    19

10.2

        Termination for Material Breach    19

10.3

        Termination for Convenience    19

10.4

        Survival    20 Article XI   Dispute Resolution    20

11.1

        Arbitration    20

11.2

        No Limitation    21 Article XII   Miscellaneous Provisions    21

12.1

        Indemnification.    21

12.2

        Governing Law    22

12.3

        Assignment    22

12.4

        Entire Agreement; Amendments    22

12.5

        Notices.    22

12.6

        Force Majeure    23

12.7

        Publicity    23

12.8

        Independent Contractors    24

12.9

        No Implied Waivers; Rights Cumulative    24

12.10

        Severability    24

12.11

        Execution in Counterparts    24

12.12

        No Third Party Beneficiaries    24

12.13

        No Consequential Damages    25 Exhibit A   Licensed Patent Rights   
Exhibit B   Objectives of Research Program    Exhibit C   Specifications for
Preclinical Supply of [**]    Exhibit D   Specifications for Preclinical Supply
of [**] or Other Second Licensed Compound   

 

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RESEARCH & LICENSE AGREEMENT

This agreement (the “Agreement”), dated the 4th day of April, 2008 (the
“Effective Date”), is by and between Achillion Pharmaceuticals, Inc., a Delaware
corporation (“Achillion”), and FOB Synthesis, Inc., a Georgia corporation
(“FOB”).

INTRODUCTION

1. FOB owns the Licensed Patent Rights and has identified certain Licensed
Compounds that are Covered by the Licensed Patent Rights.

2. Achillion is in the business of developing and marketing pharmaceutical
products.

3. FOB and Achillion wish to establish a relationship whereby Achillion shall
fund certain research activities by, and obtain supplies of certain Licensed
Compounds from, FOB and FOB shall grant Achillion certain rights and an
exclusive license under the Licensed Patent Rights to Develop and Commercialize
Licensed Compounds.

NOW, THEREFORE, Achillion and FOB agree as follows:

Article I

Definitions; Construction

1.1 Defined Terms. When used in this Agreement, each of the following terms
shall have the meanings set forth in this Section 1.1:

1.1.1 “Achillion Technology”. Achillion Technology means Technology Controlled
by Achillion that is useful for the Development of Licensed Compounds, including
Program Technology owned jointly or solely by Achillion.

1.1.2 “Affiliate”. Affiliate means, with respect to a Party, any Person that
controls, is controlled by, or is under common control with such Party. For
purposes of this Section 1.1.2, “control” shall refer to (a) in the case of a
Person that is a corporate entity, direct or indirect ownership of fifty percent
(50%) or more of the stock or shares having the right to vote for the election
of directors of such Person and (b) in the case of a Person that is not a
corporate entity, the possession, directly or indirectly, of the power to
direct, or cause the direction of, the management or policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.

1.1.3 “Bankruptcy Code”. Bankruptcy Code means 11 U.S.C. §§ 101-1330, as
amended.

1.1.4 “Clinical Candidate”. Clinical Candidate means each Licensed Compound,
together with all Compound Modifications relating thereto, that (a) Achillion
intends to use Commercially Reasonable Efforts to Develop or Commercialize, or
(b) Achillion reasonably intends to Develop as a backup to another Clinical
Candidate even if Achillion does not intend to Commercialize such Licensed
Compound other than as necessary to provide a backup to such Clinical Candidate,
in each case ((a) and (b)) upon notice of such intent to FOB.

 

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1.1.5 “Commercialization” or “Commercialize”. Commercialization or Commercialize
means activities specifically directed to producing, manufacturing, marketing,
promoting, distributing, importing or selling a product.

1.1.6 “Commercially Reasonable Efforts”. Commercially Reasonable Efforts means
the efforts, expertise and resources customarily used by a Party to develop,
manufacture and commercialize a product or compound owned by it or to which it
has rights, which is of similar market potential and at a similar stage in its
development or product life, taking into account issues of safety, and efficacy,
product profile, difficulty in developing the product or compound,
competitiveness of the marketplace for resulting products, the proprietary
position of the compound or product, the regulatory structure involved, the
potential total profitability of the applicable product(s) marketed or to be
marketed, the potential for commercializing alternative competing technologies
and other relevant factors affecting the cost, risk and timing of development
and the total potential reward to be obtained if a product is commercialized.

1.1.7 “Compound Modifications”. Compound Modifications mean derivatives or
analogues of Licensed Compounds, including salts, esters, amides, complexes,
chelates, solvates, stereoisomers, crystalline or amorphous forms, polymorphs,
prodrugs, fragments, racemates, tautomers, metabolites or metabolic precursors
of a Licensed Compound, that result from work conducted by FOB in the course of
the Research Program or that are created or Developed by Achillion.

1.1.8 “Confidential Information”. Confidential Information means all
confidential or proprietary information, materials or data (including Technology
and Patent Rights), whether provided in written, oral, graphic, video, computer,
or other form, provided or transmitted by or on behalf of the disclosing Party
to the other Party, including information relating to the disclosing Party’s
existing or proposed research, development efforts, Patent Rights, Technology,
business, finances (including all financial information subject to review under
or prepared by accountants pursuant to Section 3.7 or 6.5(b) or provided
pursuant to Section 6.5(a)) or products (including the Research Plan and
information provided pursuant to Section 5.1, 5.2 or 5.3), and the existence of
and terms of this Agreement.

1.1.9 “Controlled”. Controlled means the legal authority or right of a Party,
whether direct or through Affiliates controlled by such Party, to grant a
license or sublicense of intellectual property rights to the other Party, or to
provide compounds or biological material to or otherwise disclose proprietary or
trade secret information to such other Party, without breaching the terms of any
agreement with a Third Party.

1.1.10 “Cover”, “Covering” or “Covered”. Cover, Covering or Covered means, with
respect to a product, that, but for a license granted to a Party under a Valid
Claim, the Development or Commercialization of such product would infringe such
Valid Claim.

1.1.11 “Development” or “Develop”. Development or Develop means research,
discovery and preclinical and clinical drug development activities, including
test method

 

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development and stability testing, toxicology, formulation, quality
assurance/quality control development, statistical analysis, clinical studies,
regulatory affairs, product approval and registration.

1.1.12 “Field”. Field means the prevention, treatment or control of any disease
or condition in humans or animals.

1.1.13 “FOB Technology”. FOB Technology means Technology Controlled by FOB that
relates to the Development or Commercialization of Licensed Compounds and
Licensed Products, including Program Technology owned jointly or solely by FOB.

1.1.14 “FTE”. FTE means the efforts of one or more employees of FOB or its
Affiliates equivalent to the annual efforts (consisting of a total of 1840
hours) of one full-time employee.

1.1.15 “IND”. IND means an Investigational New Drug application filed with the
United States Food and Drug Administration.

1.1.16 “Licensed Compound”. Licensed Compound means any chemical compound that
is Covered by the Licensed Patent Rights or is a Compound Modification.

1.1.17 “Licensed Patent Rights”. Licensed Patent Rights means (a) the Patent
Rights set forth on Exhibit A, which may be amended from time to time by mutual
agreement of the Parties, (b) any Program Patent Rights jointly or solely owned
by FOB, and (c) all Patent Rights claiming priority from or otherwise based on
the Patent Rights or Program Patent Rights described in the foregoing clauses
(a) and (b), or counterparts thereto, in any country of the Territory.

1.1.18 “Licensed Product”. Licensed Product means a pharmaceutical product that
contains a Clinical Candidate.

1.1.19 “Net Sales”. Net Sales means, with respect to a Licensed Product in the
Field, the gross amounts received by Achillion, its Affiliates or sublicensees
in respect of sales of such Licensed Product by Achillion and its Affiliates or
sublicensees to unrelated Third Parties, in each case less the following
deductions:

(a) Trade, cash or quantity discounts actually allowed and taken with respect to
such sales;

(b) Tariffs, duties, excises, sales taxes or other taxes imposed upon and paid
with respect to the production, sale, delivery or use of the Licensed Product
(excluding national, state or local taxes based on income);

(c) Amounts repaid or credited by reason of rejections, defects, recalls or
returns or because of chargebacks, refunds, rebates or retroactive price
reductions and allowances for wastage replacement and bad debts;

 

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(d) Freight, insurance and other transportation charges incurred in shipping a
Licensed Product to Third Parties; and

(e) Gross amounts received in respect of sales for test marketing, sampling or
promotional use, clinical trial purposes or compassionate or similar use.

Such amounts shall be determined from the books and records of Achillion, its
Affiliates or sublicensees, maintained in accordance with generally accepted
accounting principles, consistently applied.

In the event the Licensed Product is sold as part of a Combination Product (as
defined below), the Net Sales from the Combination Product, for the purposes of
determining royalty payments, shall be determined by multiplying the Net Sales
(as determined above) of the Combination Product, during the applicable royalty
reporting period, by the fraction, A/A+B, where A is the average sale price of
the Licensed Product when sold separately in finished form and B is the average
sale price of the other active ingredient(s) included in the Combination Product
when sold separately in finished form, in each case during the applicable
royalty reporting period or, if sales of both the Licensed Product and the other
active ingredient(s) did not occur in such period, then in the most recent
royalty reporting period in which sales of both occurred. In the event that such
average sale price cannot be determined for both the Licensed Product and all
other active ingredient(s) included in such Combination Product, Net Sales for
the purposes of determining royalty payments shall be calculated by multiplying
the Net Sales of the Combination Product by the fraction of C/C+D where C is the
fair market value of the Licensed Product and D is the fair market value of all
other active ingredient(s) included in the Combination Product. In such event,
Achillion shall in good faith make a determination of the respective fair market
values of the Licensed Product and all other active ingredient(s) included in
the Combination Product, and shall notify FOB of such determination and provide
FOB with data to support such determination. FOB shall have the right to review
such determination of fair market values and, if FOB disagrees with such
determination, to notify Achillion of such disagreement within sixty (60) days
after Achillion notifies FOB of such determination. If FOB notifies Achillion
that FOB disagrees with such determination within such sixty (60) day period and
if thereafter the Parties are unable to agree in good faith as to such
respective fair market values, then such matter shall be resolved as provided in
Article XI. If FOB does not notify Achillion that FOB disagrees with such
determination within such sixty (60) day period, such determination shall be
conclusive and binding on the Parties.

As used above, the term “Combination Product” means any pharmaceutical product
that includes both (i) a Licensed Product and (ii) other active ingredient(s).

1.1.20 “Party”. Party means Achillion or FOB; “Parties” means Achillion and FOB.

1.1.21 “Patent Rights”. Patent Rights means United States and foreign patents
and patent applications (including provisional applications) and all
substitutions, divisionals, continuations, continuations-in-part, reissuances,
reexaminations, registrations, renewals, confirmations, supplementary protection
certificates and extensions thereof.

 

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1.1.22 “Person”. Person means any natural person or any corporation, company,
partnership, joint venture, firm or other entity, including a Party.

1.1.23 “Phase I Clinical Study”. Phase I Clinical Study means a human clinical
study designed to determine initial tolerance, toxicity, safety or
pharmacokinetic information of a Licensed Product.

1.1.24 “Phase IIB Clinical Study”. Phase IIB Clinical Study means a human
clinical study designed to evaluate further any preliminary efficacy observed
for, and the safety of, a Licensed Product in the target population or to
provide data that may be useful in the design of subsequent studies of the
Licensed Product such as Phase III Clinical Studies.

1.1.25 “Phase III Clinical Study”. Phase III Clinical Study means a human
clinical study designed to confirm with statistical significance the efficacy
and safety of a Licensed Product performed to obtain Regulatory Approval for the
Licensed Product.

1.1.26 “Program Technology”. Program Technology means any of the following
created or conceived in the course of the Research Program: (a) Compound
Modifications, (b) other Technology, and (c) improvements to any of the
foregoing.

1.1.27 “Program Patent Rights”. Program Patent Rights means any Patent Rights
that Cover any Program Technology.

1.1.28 “Regulatory Approval”. Regulatory Approval means the approvals (including
any applicable governmental price and reimbursement approvals), licenses,
registrations or authorizations of Regulatory Authorities necessary for the
Commercialization of a product in a country or territory.

1.1.29 “Regulatory Authority”. Regulatory Authority means a federal, national,
multinational, state, provincial or local regulatory agency, department, bureau
or other governmental entity with authority over the testing, manufacture, use,
storage, import, promotion, marketing or sale of a product in a country.

1.1.30 “Research Plan”. Research Plan means the written plan describing the
activities to be performed by the Parties in the Research Program, which plan
may be revised from time to time in accordance with Section 3.3.

1.1.31 “Research Program”. Research Program means the collaborative research
program conducted pursuant to this Agreement by the Parties.

1.1.32 “Royalty Term”. Royalty Term means, with respect to each Licensed Product
in each country of the Territory, on a Licensed Product-by-Licensed Product and
country-by-country basis, the period of time during which the Development or
Commercialization of such Licensed Product in the Field in such country is
Covered by a Valid Claim of Licensed Patent Rights.

 

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1.1.33 “Technology”. Technology means and includes all materials, compounds,
technology, technical information, intellectual property (other than Patent
Rights), know-how, expertise and trade secrets.

1.1.34 “Territory”. Territory means all countries of the world.

1.1.35 “Third Party”. Third Party means any Person other than a Party or any of
its Affiliates.

1.1.36 “Valid Claim”. Valid Claim means (a) a claim of any issued, unexpired
patent, which shall not have been donated to the public, disclaimed, nor held
invalid or unenforceable by a court of competent jurisdiction in an unappealed
or unappealable decision, or (b) a claim of any published patent application
filed by a Party in good faith that has not been cancelled, withdrawn or
abandoned, nor been pending for more than seven (7) years from the filing date
of the earliest patent application from which such patent application claims
priority.

1.2 Other Terms. The definition for each of the following terms is set forth in
the section of this Agreement indicated below:

 

Term

  

Section

     

Achillion

   Preamble   

Agreement

   Preamble   

Breaching Party

   10.2   

Combination Product

   1.1.19   

Effective Date

   Preamble   

FOB

   Preamble   

Indemnified Party

   12.1(c)   

Indemnifying Party

   12.1(c)   

Initial Party

   7.2(a)   

Invalidity Claim

   7.5   

Quarterly Amount

   6.2   

Rejected Compound

   5.5   

Research Term

   3.2   

Severed Clause

   12.10   

Step-In Party

   7.2(a)   

1.3 Captions; Certain Conventions; Construction. All captions herein are for
convenience only and shall not be interpreted as having any substantive meaning.
The Exhibits to this Agreement are incorporated herein by reference and shall be
deemed a part of this Agreement. Unless otherwise expressly provided herein or
the context of this Agreement otherwise requires, (a) words of any gender
include all other genders, (b) words such as “herein”, “hereof”, and “hereunder”
refer to this Agreement as a whole and not merely to the particular provision in
which such words appear, (c) words using the singular shall include the plural,
and vice versa, (d) the words “include”, “includes” and “including” shall be
deemed to be followed by the phrase “but not limited to”, “without limitation”,
“inter alia” or words of similar import,

 

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(e) all dollar ($) amounts specified in this Agreement are United States dollar
amounts, (f) the word “or” shall be deemed equivalent to the inclusive “and/or”,
and (g) references to “Article”, “Section”, “subsection”, “paragraph”, “clause”
or other subdivision, or to an Exhibit, without reference to a document are to
the specified provision or Exhibit of this Agreement. In the event of any
conflict between the operative terms of this Agreement and any Exhibit, the
operative terms of this Agreement shall prevail. This Agreement shall be
construed as if the Parties drafted it jointly.

Article II

Grant of License; Exclusivity

2.1 License Grants. Subject to the terms and conditions of this Agreement:

(a) FOB hereby grants to Achillion an exclusive (even as to FOB),
royalty-bearing right and license under the Licensed Patent Rights and FOB
Technology, with the right to grant sublicenses, to Develop and Commercialize
Licensed Compounds and Licensed Products in the Field in the Territory. For the
avoidance of doubt, and subject to Section 2.2 below, the foregoing exclusive
grant shall not restrict FOB from using FOB Technology to Develop and
Commercialize chemical compounds other than Licensed Compounds and Licensed
Products.

(b) Achillion hereby grants to FOB a non-exclusive, non-royalty-bearing right
and license under Achillion Technology and its grant pursuant to subsection
(a) above (i) to conduct Development activities under the Research Program in
accordance with the Research Plan and (ii) to make Licensed Compounds and
Licensed Products in accordance with Article IV and any related supply
agreements. FOB may sublicense its right and license under this Section 2.1(b)
only with Achillion’s prior written consent, which consent shall not be
unreasonably withheld.

2.2 Exclusivity. During the Research Term and for one (1) year thereafter,
except with respect to activities provided for in the Research Program, FOB
shall not, directly or indirectly (including through its Affiliates), Develop or
Commercialize, or grant any rights or options or provide assistance to any Third
Party to Develop or Commercialize, any chemical compounds (a) Covered by the
Licensed Patent Rights, (b) Developed in the course of the Research Program, or
(c) that are carbapenems which show activities predominantly against gram
positive bacteria.

2.3 Technology Transfer. Upon Achillion’s reasonable request, FOB shall effect a
transfer to Achillion (or its designee(s)) of FOB Technology to the extent
reasonably necessary for the exercise of Achillion’s rights granted under
Section 2.1(a), including to enable any Third Party to manufacture Licensed
Compounds and Licensed Products in accordance with Article IV, and shall make
available to Achillion (or its designee) technical personnel to answer any
questions or provide instruction as reasonably requested by Achillion relating
to the Licensed Patent Rights and FOB Technology; provided that such request
does not impose a financial burden on FOB or require dedicated technical
personnel.

 

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2.4 Section 365(n) of the Bankruptcy Code. All rights and licenses granted under
or pursuant to this Agreement are, and shall otherwise be, deemed to be, for
purposes of Section 365(n) of the Bankruptcy Code, licenses of rights to
“intellectual property” as defined under Section 101(35A) of the Bankruptcy
Code. Each Party shall retain and may fully exercise all of its rights and
elections under the Bankruptcy Code or equivalent legislation in any
jurisdiction other than the United States. Upon the bankruptcy of either Party
and the occurrence of the events described in 11 U.S.C. §§ 365(n)(3) or
365(n)(4), the other Party shall further be entitled to a complete duplicate of,
or complete access to, as appropriate, any such intellectual property, and such
intellectual property, if not already in its possession, shall be promptly
delivered to such other Party, unless the Party in bankruptcy elects to
continue, and continues, to perform all of its obligations under this Agreement.

Article III

Research Program

3.1 Research Program. During the Research Term, the Parties will conduct the
Research Program, the objective of which is to Develop Licensed Compounds for
possible selection as Clinical Candidates for further Development or
Commercialization by Achillion.

3.2 Research Term. Unless otherwise agreed by the Parties, the term of the
Research Program (the “Research Term”) will begin on the date set forth in the
Research Program objectives attached as Exhibit B and, unless sooner terminated
or extended, end one (1) year after the commencement of the Research Program.
The Research Term may be extended by Achillion for an additional one (1) year
period by written notice to FOB at least thirty (30) days before the end of the
first year of the Research Term.

3.3 Research Plan; Decision Making. The objectives for the Research Program are
set forth on Exhibit B. As soon as practicable following the Effective Date, the
Parties shall agree on a written Research Plan for meeting these objectives.
Three (3) months before the end of the first year of the Research Term, the
Parties will update the Research Plan, which will apply for the next year if
Achillion elects to extend the Research Term in accordance with Section 3.2. The
Research Plan shall describe: (a) goals for the Research Program for the
relevant year, (b) activities to be conducted by each Party during such year,
(c) estimated timeframes for each activity, and (d) expected level of FTE
support for each activity. The Parties shall work cooperatively to seek
consensus with respect to all decisions relating to the Research Program and the
contents of the Research Plan; provided, however, that if, despite good faith
efforts, the Parties are unable to reach consensus on any such decision within
ten (10) business days after discussions commence, Achillion shall have final
decision-making authority with respect to such decision; provided, further, that
FOB shall not be required to perform any work under the Research Plan in excess
of the work for which Achillion is providing funding under Section 3.6.

3.4 Research Materials. During the Research Term, FOB will supply to Achillion
samples of biochemical, biological or synthetic materials, including Licensed
Compounds, as required by the Research Plan or upon Achillion’s reasonable
request.

 

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3.5 Laboratory Facility and Personnel. FOB will provide suitable laboratory
facilities, equipment and personnel for the work to be done by it in the
Research Program.

3.6 Research Funding. Subject to Sections 5.4(b) and 10.2, during the Research
Term Achillion will fund [**] FTEs [**] at FOB’s site in Georgia to perform the
work to be conducted by FOB in the Research Program in accordance with the
Research Plan. Payment of such funding shall be determined and made in
accordance with Section 6.2.

3.7 Audits by Achillion. FOB shall keep, and shall cause its Affiliates to keep,
during and for at least three (3) years following the Research Term, complete
and accurate records, in accordance with its standard practices as of the
Effective Date, relating to work performed by FTEs on the Research Program. For
the sole purpose of verifying amounts payable by Achillion, Achillion shall have
the right no more than once each calendar year, at Achillion’s expense, to
review, together with Achillion’s accountants, such records in the location(s)
where such records are maintained by FOB and its Affiliates upon reasonable
notice and during regular business hours. Prior to any review conducted pursuant
to this Section 3.7, Achillion’s accountants shall have entered into a written
agreement with FOB limiting the use of such records to verification of the
accuracy of payments due under this Agreement and prohibiting the disclosure of
any information contained in such records to a Third Party and to Achillion for
a purpose other than as set forth in this Section 3.7. Results of such review
shall be made available to FOB. If the review reflects an overpayment to FOB,
such overpayment shall be promptly remitted to Achillion, together with interest
calculated in the manner provided in Section 6.7. If the overpayment is greater
than five percent (5%) of the amount that was otherwise due, Achillion shall be
entitled to have FOB pay all of the costs of such review and such review shall
not count as one of the reviews Achillion is entitled to conduct hereunder.

Article IV

Manufacturing and Supply

4.1 Pre-Clinical Supply.

(a) No later than thirty (30) days after the Effective Date, FOB shall ship to
Achillion a supply of [**] grams of the Licensed Compound designated by FOB as
[**], for which there shall be no cost to Achillion. FOB warrants that such
supply of [**] shall meet the specifications set forth on Exhibit C. If
Achillion reasonably determines that such supply fails to meet such
specifications, it shall provide written notice thereof to FOB within thirty
(30) days of receipt of such supply, and FOB shall as soon as reasonably
practicable thereafter replace such supply at FOB’s cost with a supply that
meets such specifications.

(b) FOB shall supply Achillion with [**] grams of the Licensed Compound
designated by FOB as [**], or another Licensed Compound as reasonably agreed by
the Parties, by the date that is four (4) months after the identity of such
Licensed Compound is agreed, or such other date as reasonably agreed by the
Parties, for which Achillion shall make an initial payment to FOB in the amount
of $[**] as soon as practicable after the identity of such Licensed Compound is
agreed. FOB warrants that such supply shall meet the specifications set forth on
Exhibit D. If Achillion reasonably determines that such supply fails to meet
such specifications, it shall provide written notice thereof to FOB within
thirty (30) days of receipt of such supply,

 

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and FOB shall as soon as reasonably practicable thereafter replace such supply
at FOB’s cost with a supply that meets such specifications. Achillion shall make
a final payment to FOB for such supply in the amount of $[**], which shall be
due thirty (30) days after Achillion’s receipt of the conforming supply.

(c) FOB shall have the right to supply Achillion with further pre-clinical
supply of quantities of Licensed Compound(s) pursuant to a separate supply
agreement regarding such supply, provided that FOB agrees to provide such supply
at prices and according to delivery schedules reasonably acceptable to
Achillion.

4.2 Clinical Supply. If FOB has provided pre-clinical supply of a Clinical
Candidate under Section 4.1 and performed its obligations under any applicable
supply agreement to Achillion’s reasonable satisfaction, FOB shall have a first
right of negotiation as described in Section 4.4 with respect to clinical supply
of such Clinical Candidate.

4.3 Commercial Supply. If FOB has provided clinical supply of a Clinical
Candidate under Section 4.2 and performed its obligations under the applicable
supply agreement to Achillion’s reasonable satisfaction, FOB shall have a first
right of negotiation as described in Section 4.4 with respect to commercial
supply of such Clinical Candidate.

4.4 Rights of First Negotiation. Pursuant to FOB’s rights of first negotiation
under Sections 4.2 and 4.3, as applicable, the Parties will in good faith
discuss and negotiate a supply agreement for the clinical or commercial supply,
as applicable, of each Clinical Candidate. If the Parties cannot reasonably
agree on the terms and conditions of any such supply agreement within sixty
(60) days after commencing such negotiations, then Achillion may negotiate the
terms and conditions of a supply agreement covering the applicable supply of
such Clinical Candidate with a Third Party. For the avoidance of doubt, if
Achillion enters into a supply agreement with FOB under this Section 4.4,
Achillion shall be free to engage Third Parties as additional suppliers on terms
and conditions that in the aggregate are no more favorable to such suppliers
than those offered to FOB.

Article V

Reports and Diligence

5.1 Research Reports. Within thirty (30) days after the end of each calendar
quarter during the Research Term, FOB will submit to Achillion a written report
summarizing its activities under the Research Plan, including status against the
Research Plan, activities undertaken under the Research Plan within such
calendar quarter, planned activities during the then current calendar quarter,
and any data that would be useful to Achillion in Developing and Commercializing
Licensed Compounds or Licensed Products hereunder.

5.2 Development Reports. Within thirty (30) days after June 30 and December 31
of each calendar year ending prior to the first commercial launch of a Licensed
Product by Achillion, an Achillion Affiliate or an Achillion sublicensee,
Achillion shall provide to FOB a written report (a) summarizing the activities
undertaken by Achillion, its Affiliates and sublicensees during the immediately
preceding six (6) months in connection with the Development of Licensed
Products, (b) identifying all Licensed Products being Developed by

 

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Achillion, its Affiliates and sublicensees, and (c) describing the activities
planned to be undertaken by Achillion, its Affiliates and sublicensees during
the subsequent six (6) month period.

5.3 Commercialization Reports. After the first commercial launch of a Licensed
Product by Achillion, an Achillion Affiliate or an Achillion sublicensee,
Achillion shall provide to FOB the reports set forth in Section 6.5(a).

5.4 Commercially Reasonable Efforts.

(a) Achillion shall use Commercially Reasonable Efforts to Develop and
Commercialize at least [**] and to Develop as a backup at least [**].

(b) FOB shall use Commercially Reasonable Efforts in the conduct of the Research
Program to achieve its objectives as set forth in the Research Plan. In addition
to any other remedy it may have under this Agreement, Achillion may terminate
funding of the Research Program for any breach by FOB of such obligation to
exercise Commercially Reasonable Efforts.

5.5 Rejected Compounds. If, within one (1) year following Achillion’s notice to
FOB of the designation of a Clinical Candidate, Achillion has not used
Commercially Reasonable Efforts to Develop or Commercialize such Clinical
Candidate or is not continuing to do so (each such compound, a “Rejected
Compound”), the license grants under Section 2.1 shall terminate with respect to
such Rejected Compound and Achillion shall thereafter have no further rights
with respect to such Rejected Compound. Notwithstanding the preceding sentence,
Achillion shall retain its rights hereunder with respect to all Licensed
Compounds other than Rejected Compounds, including any Compound Modification
relating to a Rejected Compound that is also a Compound Modification of a
Licensed Compound.

Article VI

Financial Provisions

6.1 License Payment. Within thirty (30) days after the Effective Date, Achillion
shall make an initial license payment to FOB of $500,000. Within thirty
(30) days after the first (1st) anniversary of the Effective Date, Achillion
shall make a final license payment to FOB of $500,000, subject to Section 10.3.

6.2 Research Payments. Achillion will provide funding for the FTEs described in
Section 3.6 during the Research Term by paying FOB at a rate of $[**] per
calendar quarter per FTE (which shall be pro rated for any period less than a
calendar quarter) during the Research Term (the “Quarterly Amount”). Achillion
shall make such payment to FOB for the first calendar quarter of the Research
Term (or portion thereof) within thirty (30) days after the start of the
Research Term. FOB shall invoice Achillion for the FTEs for each subsequent
calendar quarter of the Research Term no earlier than thirty (30) days prior to
the start of such calendar quarter and such invoices shall be payable within
thirty (30) days of invoice receipt. FOB shall provide to Achillion, along with
its invoice of pending quarterly FTEs, a report in a form acceptable to
Achillion outlining and supporting the work of the FTEs incurred in the previous
calendar quarter. Notwithstanding the right of Achillion to terminate this
Agreement pursuant to Section 10.3, Achillion shall pay to FOB, on the effective
date of such termination, the aggregate amount of all unpaid Quarterly Amounts
for the remainder of the Research Term.

 

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6.3 Milestone Payments. Achillion shall pay FOB the amount set forth below for
each Clinical Candidate (or Licensed Product containing such Clinical Candidate)
that achieves the corresponding milestone within thirty (30) days after such
milestone is achieved:

 

MILESTONE

   PAYMENT

Acceptable outcome from GLP toxicology studies in two species

   $ [**]

Filing of IND

   $ [**]

Completion of successful Phase I Clinical Trial

   $ [**]

Completion of successful Phase IIB Clinical Trial

   $ [**]

Regulatory Approval in the United States

   $ [**]

For the avoidance of doubt, each of the milestones above shall be paid only once
for each Clinical Candidate regardless of the number of Licensed Products that
contain such Clinical Candidate.

6.4 Royalties.

(a) Royalties on Net Sales of Licensed Products. During the Royalty Term
applicable to each Licensed Product, and subject to adjustment as set forth in
Section 6.4(c), Achillion shall to FOB royalties on a Licensed
Product-by-Licensed Product basis, with the amount of such royalties calculated
as a percentage of Net Sales in a calendar year for such Licensed Product as set
forth below:

 

ANNUAL NET SALES

(IN MILLIONS)

   ROYALTY
(AS A PERCENTAGE OF NET SALES)  

Up to and including $[**]

   [**] %

Above $[**] and up to and including $[**]

   [**] %

Above $[**]

   [**] %

By way of example, if Net Sales of a Licensed Product during its Royalty Term in
all countries is $[**], the royalty calculated according to the table above is
$[**] of which represents [**]% of the first $[**] of Net Sales and the
remaining $[**] of which represents [**]% of the remaining $[**] of Net Sales.

(b) Royalties Payable Only Once. The obligation to pay royalties is imposed only
once with respect to Net Sales of the same unit of a Licensed Product.

 

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(c) Royalty Reductions for Third Party Payments. If in Achillion’s reasonable
business judgment it is necessary or reasonable to seek a license or immunity
from suit from any Third Party in order for Achillion, its Affiliates, or a
sublicensee to exercise or use the rights granted to Achillion herein, or
Achillion, its Affiliates, or a sublicensee otherwise reasonably pays any Third
Party any up-front fee, milestone, royalty or other payment in connection with
the Development or Commercialization of a Licensed Product, Achillion shall have
the right to set off [**] percent ([**]%) of any amounts paid to such Third
Party against amounts payable to FOB under Section 6.4(a); provided that the
royalties payable to FOB shall not be reduced as a result of such offset below
[**] percent ([**]%) of the royalties otherwise payable to FOB under
Section 6.4(a).

(d) Duration of Payments. The amounts payable under Section 6.4(a) shall be paid
on a Licensed Product-by-Licensed Product and country-by-country basis until the
expiration of the Royalty Term applicable to each Licensed Product in each
country.

6.5 Royalty Reports and Accounting.

(a) Reports; Payments. Achillion shall deliver to FOB, within sixty (60) days
after the end of each calendar quarter, reasonably detailed written accountings
of Net Sales of the Licensed Products that are subject to payment obligations to
FOB for such calendar quarter. Such quarterly reports shall indicate (i) gross
sales and Net Sales on a Licensed Product-by-Licensed Product and
country-by-country basis, and (ii) the calculation of payment amounts owed to
FOB from such gross sales and Net Sales, including the basis for any reduction
made under Section 6.4(c). When Achillion delivers such accounting to FOB,
Achillion shall also deliver all amounts due under Section 6.4 to FOB for such
calendar quarter.

(b) Audits by FOB. Achillion shall keep, and shall require its Affiliates and
sublicensees to keep, records of the latest three (3) years relating to gross
sales, Net Sales and all information relevant under Sections 6.4(c), 6.6 and
6.7. For the sole purpose of verifying amounts payable to FOB, FOB shall have
the right no more than once each calendar year, at FOB’s expense, to review,
together with FOB’s accountants, such records in the location(s) where such
records are maintained by Achillion and its Affiliates and sublicensees upon
reasonable notice and during regular business hours. Prior to any review
conducted pursuant to this Section 6.5(b), FOB’s accountants shall have entered
into a written agreement with Achillion limiting the use of such records to
verification of the accuracy of payments due under this Agreement and
prohibiting the disclosure of any information contained in such records to a
Third Party and to FOB for a purpose other than as set forth in this
Section 6.5(b). Results of such review shall be made available to Achillion. If
the review reflects an underpayment to FOB, such underpayment shall be promptly
remitted to FOB, together with interest calculated in the manner provided in
Section 6.7. If the underpayment is greater than five percent (5%) of the amount
that was otherwise due, FOB shall be entitled to have Achillion pay all of the
costs of such review and such review shall not count as one of the reviews FOB
is entitled to conduct hereunder.

6.6 Currency and Method of Payments. All payments under this Agreement shall be
made in United States dollars by transfer to such bank account as FOB may
designate from time to time. Any royalties due hereunder with respect to amounts
in currencies other than United

 

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States dollars shall be payable in their United States dollar equivalents,
calculated using the average applicable interbank transfer rate determined by
reference to the currency trading rates published by The Wall Street Journal
(Eastern U.S. edition) over all business days of the calendar quarter to which
the report under Section 6.5(a) relates.

6.7 Late Payments. Achillion shall pay interest to FOB on the aggregate amount
of any payment that is not paid on or before the date such payment is due under
this Agreement at a rate per annum equal to the prime rate of interest of
Citibank, NA as announced on the date such payment is due plus two percent (2%),
for the period during which such payment remains overdue.

6.8 Blocked Payments. In the event that, by reason of applicable laws or
regulations in any country, it becomes impossible or illegal for Achillion or
its Affiliates to transfer, or have transferred on its behalf, royalties or
other payments to FOB, such royalties or other payments shall be deposited in
local currency in the relevant country to the credit of FOB in a recognized
banking institution designated by FOB or, if none is designated by FOB within a
period of thirty (30) days, in a recognized banking institution selected by
Achillion or its Affiliates.

Article VII

Intellectual Property Protection and Related Matters

7.1 Program Technology and Program Patent Rights.

(a) During the Research Term, FOB shall promptly inform Achillion about all
inventions made by its officers, employees (including FTEs), agents or
consultants that comprise Program Technology or Program Patent Rights.

(b) Each Party shall solely own any item of Program Technology or Program Patent
Rights conceived or created solely by its officers, employees, agents or
consultants or those of its Affiliates.

(c) The Parties shall jointly own any item of Program Technology or Program
Patent Rights conceived or created jointly on the one hand by Achillion’s
officers, employees, agents or consultants or those of Achillion’s Affiliates,
and on the other hand by FOB’s officers, employees, agents or consultants or
those of FOB’s Affiliates.

7.2 Prosecution and Maintenance of Licensed Patent Rights.

(a) Right to Prosecute and Maintain. Achillion shall have the first right and
option to file and prosecute any patent applications and to maintain any patents
included in the Licensed Patent Rights; provided, however, that, until the first
(1st) anniversary of the Effective Date, FOB shall have the first right and
option (i) to prosecute U.S. Patent Application [**], (ii) to file and prosecute
any counterpart applications thereof outside the United States, and (iii) to
maintain any patents issued pursuant to the applications set forth in clauses
(i) and (ii). If the Party with the first right and option to file and prosecute
any such patent applications or maintain any such patents (the “Initial Party”)
declines the option to do so, it shall give the other Party (the “Step-In
Party”) reasonable notice to this effect sufficiently in advance to permit the
Step-In Party to undertake such filing, prosecution or maintenance without a
loss of rights, and, upon written notice to the Initial Party, the Step-In Party
may thereafter file and prosecute such patent applications and maintain such
patents in the name of the Step-In Party.

 

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(b) Cooperation. Each Party agrees to cooperate with the other with respect to
the filing, prosecution and maintenance of patents and patent applications
pursuant to this Section 7.2, including by:

(i) executing all such documents and instruments and the performance of such
acts as may be reasonably necessary in order to permit the other Party to file,
prosecute or maintain patents and patent applications as provided for in
Section 7.2(a);

(ii) making its employees, agents and consultants reasonably available to the
other Party (or to the other Party’s authorized attorneys, agents or
representatives), to the extent reasonably necessary to enable the prosecuting
Party to file, prosecute or maintain patents and patent applications as provided
for in Section 7.2(a);

(iii) providing the non-prosecuting Party with copies of, and giving reasonable
consideration to written comments from the other Party regarding, all material
correspondence with the United States Patent and Trademark Office or its foreign
counterparts pertaining to the filing, prosecution or maintenance of patents and
patent applications as provided for in Section 7.2(a); and

(iv) not taking any action to limit the scope of or invalidate any FOB
Technology or Licensed Patent Rights without the other Party’s prior consent,
not to be unreasonably withheld, conditioned or delayed.

(c) Costs. Achillion shall bear its own costs and expenses, and all reasonable
costs and expenses incurred by FOB after the Effective Date, in preparing,
filing, prosecuting and maintaining Licensed Patent Rights; provided, however,
that FOB shall bear its own such costs and expenses with respect to any Licensed
Patent Rights (or specific claims therein) for which FOB is the Step-In Party
under Section 7.2(a).

7.3 Third Party Infringement.

(a) Notifications of Infringement. Each Party agrees to notify the other Party
when it becomes aware of the reasonable probability of infringement of the
Licensed Patent Rights arising from or relating to the making, using, offering
for sale, sale or importation of any product.

(b) Infringement Action. Within ninety (90) days of becoming aware of any such
infringement, Achillion shall decide whether to institute an infringement suit
or take other appropriate action that it believes is reasonably required to
protect the Licensed Patent Rights from such infringement, regardless of whether
such infringement occurred before or after the Effective Date. If Achillion
fails to institute such suit or take such action within such ninety (90) day
period, then FOB shall have the right at its sole discretion to institute such
suit or take other appropriate action in the name of either or both Parties.

 

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(c) Costs. Each Party shall assume and pay all of its own out-of-pocket costs
incurred in connection with any litigation or proceedings described in this
Section 7.3, including the fees and expenses of that Party’s counsel.

(d) Recoveries. Any recovery obtained by any Party as a result of any proceeding
described in this Section 7.3 or from any counterclaim or similar claim asserted
in a proceeding described in Section 7.4, by settlement or otherwise, shall be
applied in the following order of priority:

(i) first, to reimburse each Party for all litigation costs in connection with
such proceeding paid by that Party and not otherwise recovered (on a pro rata
basis based on each Party’s respective litigation costs, to the extent the
recovery was less than all such litigation costs); and

(ii) second, (A) if Achillion is the Party instituting such proceeding, the
remainder of the recovery shall be retained by Achillion and deemed to be Net
Sales for purposes of calculating royalties owed by Achillion to FOB pursuant to
Section 6.4(a) or (B) if FOB is the Party instituting such proceeding, the
remainder of the recovery shall be paid seventy-five percent (75%) to FOB and
twenty-five percent (25%) to Achillion.

(e) Cooperation. In the event that either Achillion or FOB takes action pursuant
to subsection (b) above, the other Party shall cooperate with the Party so
acting to the extent reasonably possible, including joining the suit if
necessary or desirable.

7.4 Claimed Infringement. In the event that a Party becomes aware of any claim
that the Development or Commercialization of Licensed Products infringes Patent
Rights of any Third Party, such Party shall promptly notify the other Party. In
any such instance, Achillion shall have the exclusive right to settle such
claim, provided that no such settlement shall impose a financial obligation upon
FOB (other than under Section 6.4(c)), or limit the scope of or invalidate any
FOB Technology or Licensed Patent Rights, unless Achillion has obtained FOB’s
prior written consent (such consent not to be unreasonably withheld, conditioned
or delayed).

7.5 Patent Invalidity Claim. If a Third Party at any time asserts a claim that
any Licensed Patent Right is invalid or otherwise unenforceable (an “Invalidity
Claim”), whether as a defense in an infringement action brought by Achillion or
FOB pursuant to Section 7.3 or in an action brought against Achillion or FOB
referred to in Section 7.4, the Parties shall cooperate with each other in
preparing and formulating a response to such Invalidity Claim. Neither Party
shall settle or compromise any Invalidity Claim without the consent of the other
Party, which consent shall not be unreasonably withheld, conditioned or delayed.

7.6 Patent Marking. Achillion agrees to comply with the patent marking statutes
in each country in which Licensed Products are sold by Achillion or its
Affiliates.

Article VIII

Confidentiality

8.1 Confidential Information. All Confidential Information disclosed by a Party
to the other Party during the term of this Agreement shall not be used by the
receiving Party except

 

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in connection with the activities contemplated by this Agreement, shall be
maintained in confidence by the receiving Party (except to the extent reasonably
necessary for Regulatory Approval of Licensed Products, for the filing,
prosecution and maintenance of Patent Rights or to Develop and Commercialize
Licensed Products in accordance with this Agreement), and shall not otherwise be
disclosed by the receiving Party to any other person, firm, or agency,
governmental or private (except consultants, advisors and Affiliates in
accordance with Section 8.2), without the prior written consent of the
disclosing Party, except to the extent that the Confidential Information:

(a) was known or used by the receiving Party prior to its date of disclosure to
the receiving Party; or

(b) either before or after the date of the disclosure to the receiving Party is
lawfully disclosed to the receiving Party by a Third Party rightfully in
possession of the Confidential Information; or

(c) either before or after the date of the disclosure to the receiving Party
becomes published or generally known to the public through no fault or omission
on the part of the receiving Party; or

(d) is independently developed by or for the receiving Party without reference
to or reliance upon the Confidential Information; or

(e) is required to be disclosed by the receiving Party to comply with applicable
laws or regulations, to defend or prosecute litigation or to comply with legal
process, provided that the receiving Party provides prior written notice of such
disclosure to the disclosing Party and only discloses Confidential Information
of the other Party to the extent necessary for such legal compliance or
litigation purpose.

8.2 Employee, Consultant and Advisor Obligations. Achillion and FOB each agrees
that it and its Affiliates shall provide Confidential Information received from
the other Party only to the receiving Party’s respective employees, consultants
and advisors, and to the employees, consultants and advisors of the receiving
Party’s Affiliates, who have a need to know such Confidential Information to
assist the receiving Party in fulfilling its obligations under this Agreement;
provided that Achillion and FOB shall each remain responsible for any failure by
its and its Affiliates’ respective employees, consultants and advisors to treat
such Confidential Information as required under Section 8.1.

8.3 Term. All obligations of confidentiality imposed under this Article VIII
shall expire five (5) years following termination or expiration of this
Agreement.

Article IX

Representations and Warranties

9.1 Representations of Authority. Achillion and FOB each represents and warrants
to the other that as of the Effective Date it has full right, power and
authority to enter into this Agreement and to perform its respective obligations
under this Agreement.

 

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9.2 Consents. Achillion and FOB each represents and warrants that as of the
Effective Date all necessary consents, approvals and authorizations of all
government authorities and other persons required to be obtained by such Party
in connection with execution, delivery and performance of this Agreement have
been obtained.

9.3 No Conflict. Achillion and FOB each represents and warrants that, as of the
Effective Date, the execution and delivery of this Agreement and the performance
of such Party’s obligations hereunder (a) do not conflict with or violate any
requirement of applicable laws or regulations and (b) do not conflict with,
violate or breach or constitute a default of, or require any consent under, any
contractual obligations of such Party, except such consents as have been
obtained as of the Effective Date.

9.4 Employee, Consultant and Advisor Obligations. Achillion and FOB each
represents and warrants that, as of the Effective Date, each of its and its
Affiliates’ employees, consultants and advisors has executed an agreement or has
an existing obligation under law obligating such employee, consultant or advisor
to maintain the confidentiality of Confidential Information to the extent
required under Article VIII.

9.5 Intellectual Property. FOB represents and warrants to Achillion that:

(a) FOB owns the entire right, title and interest in and to the Licensed Patent
Rights free and clear of any liens, charges, claims and encumbrances, and no
other Person, corporate or other private entity, or governmental or university
entity or subdivision thereof has any claim of ownership or right to obtain
compensation with respect to such Licensed Patent Rights;

(b) FOB has the right to grant to Achillion the rights and licenses under the
Licensed Patent Rights and FOB Technology granted in this Agreement;

(c) none of the Licensed Patent Rights was fraudulently procured from the
relevant governmental patent granting authority;

(d) to FOB’s actual knowledge as of the Effective Date, and except for
communications with the United States Patent and Trademark Office, copies of
which FOB has previously provided to Achillion, there is no claim or demand of
any Person pertaining to, or any proceeding which is pending or threatened, that
asserts the invalidity, misuse or unenforceability of the Licensed Patent Rights
or challenges FOB’s ownership of the Licensed Patent Rights or makes any adverse
claim with respect thereto and there is no basis for any such claim, demand or
proceeding;

(e) to FOB’s actual knowledge as of the Effective Date, the practice of the
Licensed Patent Rights as contemplated hereunder (including with respect to
Licensed Compounds) does not infringe the Patent Rights or other intellectual
property of any Third Party; and

(f) to FOB’s actual knowledge as of the Effective Date, the Licensed Patent
Rights are not being infringed by any Third Party.

 

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9.6 No Warranties. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN, THE PARTIES
MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR NONINFRINGEMENT.

Article X

Term and Termination

10.1 Term. This Agreement shall become effective as of the Effective Date, may
be terminated as set forth in this Article X, and otherwise remains in effect
until the expiration of all of the obligations to pay royalties set forth in
Section 6.4(a).

10.2 Termination for Material Breach. Upon any material breach of this Agreement
by either Party (in such capacity, the “Breaching Party”), the other Party may
terminate this Agreement by providing thirty (30) days written notice to the
Breaching Party, specifying the material breach. The termination shall become
effective at the end of the thirty (30) day period unless the Breaching Party
cures such breach during such thirty (30) day period.

10.3 Termination for Convenience. Achillion may terminate this Agreement with or
without cause upon sixty (60) days written notice to FOB; provided, however,
that Achillion shall be obligated to make the payment required by Section 6.2
and shall not be obligated to make any payment required by Section 6.1 that
becomes payable after the date of termination. In the event of termination
pursuant to this Section 10.3, Achillion shall:

(a) as soon as reasonably practicable, deliver to FOB a copy of any of the
following in Achillion’s Control relating to Licensed Compounds and Licensed
Products: (i) preclinical study reports and in vivo animal study data referenced
in such reports, (ii) clinical human experience databases, and (iii) any
regulatory submissions and correspondence with the FDA (and its foreign
equivalents);

(b) grant, and hereby does grant, to FOB, its Affiliates and sublicensees the
right to use all of the foregoing in connection with the Development and
Commercialization of Licensed Compounds and Licensed Products in the Field in
the Territory;

(c) grant, and hereby does grant, to FOB an exclusive (even as to Achillion),
royalty-free right and license under Achillion Technology and any Patent Rights
Controlled by Achillion, with the right to grant sublicenses, to Develop and
Commercialize Licensed Compounds and Licensed Products in the Field in the
Territory; provided that such right and license is limited to such Patent Rights
Covering the Development and Commercialization of, and to Achillion Technology
embodied in, Licensed Compounds or Licensed Products in active Development at
the time of termination, and Achillion shall retain all other rights under
Achillion Technology and Patent Rights Controlled by Achillion, including the
right to Develop and Commercialize compounds and products other than Licensed
Compounds and Licensed Products; and

(d) deliver to FOB any supply of Licensed Compounds or Licensed Products
Controlled by Achillion on terms to be agreed in good faith by the Parties.

 

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10.4 Survival. Upon expiration or termination of this Agreement for any reason,
nothing in this Agreement shall be construed to release either Party from any
obligations that matured prior to the effective date of expiration or
termination; and the following provisions shall expressly survive any such
expiration or termination: Sections 7.3, 7.4 and 7.6, Article VIII, Article X,
Article XI and Article XII. In addition, any sublicense granted by Achillion to
any Third Party under the license granted by FOB to Achillion in Section 2.1(a)
shall survive expiration or termination of this Agreement for any reason;
provided that such Third Party continues to comply in all material respects with
the terms and conditions of such sublicense.

Article XI

Dispute Resolution

11.1 Arbitration. Any dispute arising out of or relating to this Agreement not
otherwise resolved between the Parties shall be resolved through binding
arbitration as follows:

(a) A Party may submit such dispute to arbitration by notifying the other Party,
in writing, of such dispute. Within thirty (30) days after receipt of such
notice, the Parties shall designate in writing a single arbitrator to resolve
the dispute; provided, however, that if the Parties cannot agree on an
arbitrator within such 30-day period, the arbitrator shall be selected by the
New York, New York office of the American Arbitration Association (the “AAA”).
The arbitrator shall be a lawyer with biotechnology or pharmaceutical industry
legal experience, and shall not be an Affiliate, employee, consultant, officer,
director or stockholder of any Party.

(b) Within thirty (30) days after the designation of the arbitrator, the
arbitrator and the Parties shall meet, at which time the Parties shall be
required to set forth in writing all disputed issues and a proposed ruling on
the merits of each such issue.

(c) The arbitrator shall set a date for a hearing, which shall be no later than
forty-five (45) days after the submission of written proposals pursuant to
Section 11.1(b), to discuss each of the issues identified by the Parties. The
Parties shall have the right to be represented by counsel. Except as provided
herein, the arbitration shall be governed by the Commercial Arbitration Rules of
the AAA; provided, however, that the Federal Rules of Evidence shall apply with
regard to the admissibility of evidence and the arbitration shall be conducted
by a single arbitrator.

(d) The arbitrator shall use his or her best efforts to rule on each disputed
issue within thirty (30) days after the completion of the hearings described in
Section 11.1(c). The determination of the arbitrator as to the resolution of any
dispute shall be binding and conclusive upon all Parties. All rulings of the
arbitrator shall be in writing and shall be delivered to the Parties.

(e) The (i) attorneys’ fees of the Parties in any arbitration, (ii) fees of the
arbitrator and (iii) costs and expenses of the arbitration shall be borne by the
Parties as determined by the arbitrator.

(f) Any arbitration pursuant to this Section 11.1 shall be conducted in New
York, New York. Any arbitration award may be entered in and enforced by any
court of competent jurisdiction.

 

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11.2 No Limitation. Nothing in Section 11.1 shall be construed as limiting in
any way the right of a Party to seek an injunction or other equitable relief
with respect to any actual or threatened breach of this Agreement or to bring an
action in aid of arbitration. Should any Party seek an injunction or other
equitable relief, or bring an action in aid of arbitration, then for purposes of
determining whether to grant such injunction or other equitable relief, or
whether to issue any order in aid of arbitration, the dispute underlying the
request for such injunction or other equitable relief, or action in aid of
arbitration, may be heard by the court in which such action or proceeding is
brought.

Article XII

Miscellaneous Provisions

12.1 Indemnification.

(a) Achillion. Achillion agrees to defend FOB, its Affiliates and their
respective directors, officers, employees and agents at Achillion’s cost and
expense, and shall indemnify and hold harmless FOB and its Affiliates and their
respective directors, officers, employees and agents from and against any
liabilities, losses, costs, damages, fees or expenses arising out of any Third
Party claim relating to (i) any material breach by Achillion of any of its
representations, warranties or obligations pursuant to this Agreement or
(ii) personal injury, property damage or other damage resulting from the
Development or Commercialization of any Licensed Compound or Licensed Product by
Achillion or its Affiliates or sublicensees.

(b) FOB. FOB agrees to defend Achillion, its Affiliates and their respective
directors, officers, employees and agents at FOB’s cost and expense, and shall
indemnify and hold harmless Achillion and its Affiliates and their respective
directors, officers, employees and agents from and against any liabilities,
losses, costs, damages, fees or expenses arising out of any Third Party claim
relating to (i) any material breach by FOB of any of its representations,
warranties or obligations pursuant to this Agreement or (ii) personal injury,
property damage or other damage resulting from (A) the conduct of Research
Program activities or the manufacturing of any Licensed Compound or Licensed
Product or (B) the Development or Commercialization of any Licensed Compound or
Licensed Product pursuant to Section 10.3, in each case ((A) and (B)) by FOB,
its Affiliates or sublicensees.

(c) Claims for Indemnification. A Person entitled to indemnification under this
Section 12.1 (an “Indemnified Party”) shall give prompt written notification to
the Party from whom indemnification is sought (the “Indemnifying Party”) of the
commencement of any action, suit or proceeding relating to a Third Party claim
for which indemnification may be sought or, if earlier, upon the assertion of
any such claim by a Third Party (it being understood and agreed, however, that
the failure by an Indemnified Party to give notice of a Third Party claim as
provided in this Section 12.1(c) shall not relieve the Indemnifying Party of its
indemnification obligation under this Agreement except and only to the extent
that such Indemnifying Party is actually damaged as a result of such failure to
give notice). Within thirty (30) days after delivery of such notification, the
Indemnifying Party may, upon written notice thereof to the Indemnified Party,
assume control of the defense of such action, suit, proceeding or claim with
counsel reasonably satisfactory to the Indemnified Party. If the Indemnifying
Party does not assume control of such defense, the Indemnified Party shall
control such defense.

 

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The Party not controlling such defense may participate therein at its own
expense; provided that, if the Indemnifying Party assumes control of such
defense and the Indemnified Party reasonably concludes, based on advice from
counsel, that the Indemnifying Party and the Indemnified Party have conflicting
interests with respect to such action, suit, proceeding or claim, the
Indemnifying Party shall be responsible for the reasonable fees and expenses of
counsel to the Indemnified Party solely in connection therewith; provided,
however, that in no event shall the Indemnifying Party be responsible for the
fees and expenses of more than one counsel for all Indemnified Parties. The
Party controlling such defense shall keep the other Party advised of the status
of such action, suit, proceeding or claim and the defense thereof and shall
consider recommendations made by the other Party with respect thereto. The
Indemnified Party shall not agree to any settlement of such action, suit,
proceeding or claim without the prior written consent of the Indemnifying Party,
which shall not be unreasonably withheld, delayed or conditioned. The
Indemnifying Party shall not agree to any settlement of such action, suit,
proceeding or claim or consent to any judgment in respect thereof that does not
include a complete and unconditional release of the Indemnified Party from all
liability with respect thereto or that imposes any liability or obligation on
the Indemnified Party without the prior written consent of the Indemnified
Party.

12.2 Governing Law. This Agreement shall be construed and the respective rights
of the Parties determined (including the validity and applicability of the
arbitration provision set forth in Section 11.1, and the conduct of any
arbitration, enforcement of any arbitral award and any other questions of
arbitration law or procedure arising thereunder) according to the substantive
laws of the State of New York, notwithstanding the provisions governing conflict
of laws under such New York law to the contrary.

12.3 Assignment. Neither FOB nor Achillion may assign this Agreement in whole or
in part without the consent of the other, except if such assignment occurs in
connection with the sale or transfer of all or substantially all of the business
and assets of FOB, on the one hand, or Achillion, on the other, to which the
subject matter of this Agreement pertains. Notwithstanding the foregoing, any
Party may assign its rights (but not its obligations) pursuant to this Agreement
in whole or in part to an Affiliate of such Party.

12.4 Entire Agreement; Amendments. This Agreement constitutes the entire
agreement between the Parties with respect to the subject matter hereof, and
supersedes all previous arrangements with respect to the subject matter hereof,
whether written or oral. Any amendment or modification to this Agreement shall
be made in writing signed by both Parties.

12.5 Notices.

Notices to FOB shall be addressed to:

FOB Synthesis, Inc.

3400 Cobb International Blvd.

Kennesaw, GA 30152

Attention: Dr. W. B. Choi

Facsimile No.: (404) 601-1411

 

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with a copy to:

King & Spalding

1180 Peachtree Street

Atlanta, GA 30309

Attention: Lynn S. Scott, Esq.

Facsimile No.: (404) 572-5100

Notices to Achillion shall be addressed to:

Achillion Pharmaceuticals, Inc.

300 George Street

New Haven, CT 06511

Attention: President and Chief Executive Officer

Facsimile No.: (203) 624-7003

with a copy to:

Wilmer Cutler Pickering Hale and Dorr LLP

60 State Street

Boston, Massachusetts 02109

Attention: Steven D. Singer, Esq.

Facsimile No.: (617) 526-5000

Any Party may change its address by giving notice to the other Party in the
manner herein provided. Any notice required or provided for by the terms of this
Agreement shall be in writing and shall be (a) sent by registered or certified
mail, return receipt requested, postage prepaid, (b) sent via a reputable
overnight courier service, (c) sent by facsimile transmission, or (d) personally
delivered, in each case properly addressed in accordance with the paragraph
above. The effective date of notice shall be the actual date of receipt by the
Party receiving the same.

12.6 Force Majeure. No failure or omission by the Parties hereto in the
performance of any obligation of this Agreement shall be deemed a breach of this
Agreement or create any liability if the same shall arise from any cause or
causes beyond the control of the Parties, including the following: acts of God;
acts or omissions of any government; any rules, regulations or orders issued by
any governmental authority or by any officer, department, agency or
instrumentality thereof; fire; storm; flood; earthquake; accident; war;
rebellion; insurrection; riot; and invasion. The Party claiming force majeure
shall provide the other Party with notice of the force majeure event as soon as
practicable, but no later than ten (10) business days after its occurrence,
which notice shall reasonably identify such obligations under this Agreement and
the extent to which performance thereof will be affected.

12.7 Publicity. As soon as practicable following execution of this Agreement,
the Parties shall jointly issue a press release, in form and substance to be
mutually agreed by the Parties, announcing the execution of this Agreement.
During the term of this Agreement, the content of any press release or public
announcement relating to this Agreement, the Research Program, Licensed
Compounds or Licensed Products shall be mutually agreed by the Parties, which
agreement shall not be unreasonably withheld, delayed or conditioned, except
that a Party

 

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may, without the other Party’s consent, (a) issue such press release or public
announcement if the contents of such press release or public announcement have
previously been made public other than through a breach of this Agreement by the
issuing Party or its Affiliates, or (b) issue such press release or public
announcement if such Party reasonably determines, based on advice from its
counsel, that it is required to issue such a press release or public
announcement by applicable law, regulation or legal process, including by the
rules or regulations of the Securities and Exchange Commission or similar
regulatory agency in a country other than the United States or of any stock
exchange, in which event such Party shall provide prior notice of such intended
press release or public announcement to the other Party unless the disclosing
Party is prevented by law, regulation or legal process for providing such
advance notice and shall include in such press release or public announcement
only such information relating to this Agreement, Licensed Compounds or Licensed
Products as it reasonably determines is required by such applicable law,
regulation or legal process. The Party subject to the requirement to issue such
press release or public announcement shall, if reasonably practicable under the
circumstances, consider in good faith all comments provided by the other Party
prior to such press release or public announcement.

12.8 Independent Contractors. It is understood and agreed that the relationship
between the Parties hereunder is that of independent contractors and that
nothing in this Agreement shall be construed as authorization for either FOB or
Achillion to act as agent for the other.

12.9 No Implied Waivers; Rights Cumulative. No failure on the part of FOB or
Achillion to exercise, and no delay in exercising, any right, power, remedy or
privilege under this Agreement, or provided by statute or at law or in equity or
otherwise, shall impair, prejudice or constitute a waiver of any such right,
power, remedy or privilege or be construed as a waiver of any breach of this
Agreement or as an acquiescence thereto, nor shall any single or partial
exercise of any such right, power, remedy or privilege preclude any further or
other exercise thereof or the exercise of any other right, power, remedy or
privilege.

12.10 Severability. If, under applicable law or regulation, any provision of
this Agreement is invalid or unenforceable, or otherwise directly or indirectly
affects the validity of any other material provision of this Agreement (such
invalid or unenforceable provision, a “Severed Clause”), this Agreement shall
endure except for the Severed Clause. The Parties shall consult one another and
use reasonable efforts to agree upon a valid and enforceable provision that is a
reasonable substitute for the Severed Clause in view of the intent of this
Agreement.

12.11 Execution in Counterparts. This Agreement may be executed in counterparts,
each of which, when so executed and delivered, shall be deemed to be an
original, and all of which, taken together, shall constitute one and the same
instrument.

12.12 No Third Party Beneficiaries. No Person other than FOB, Achillion, their
respective Affiliates and permitted assignees hereunder, and the Indemnified
Parties as set forth in Section 12.1 shall be deemed an intended beneficiary
hereunder or have any right to enforce any obligation of this Agreement.

 

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12.13 No Consequential Damages. NEITHER PARTY HERETO WILL BE LIABLE FOR
INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES
ARISING OUT OF THIS AGREEMENT OR THE EXERCISE OF ITS RIGHTS HEREUNDER, OR FOR
LOST PROFITS ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT,
REGARDLESS OF ANY NOTICE OF SUCH DAMAGES. NOTHING IN THIS SECTION 12.13 IS
INTENDED TO LIMIT OR RESTRICT (A) THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF
EITHER PARTY WITH RESPECT TO THIRD PARTY CLAIMS OR (B) ANY LIABILITY ARISING
FROM THE BREACH OF A PARTY’S OBLIGATIONS WITH RESPECT TO THE OTHER PARTY’S
CONFIDENTIAL INFORMATION.

[Signature page follows]

 

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

 

ACHILLION PHARMACEUTICALS, INC. By:  

/s/ Michael D. Kishbauch

Title:   President and Chief Executive Officer FOB SYNTHESIS, INC. By:  

/s/ Woo-Baeg Choi

Title:   Chief Executive Officer

 

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Exhibit A

Licensed Patent Rights

[**]

 

A-1

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

Exhibit B

Objectives of the Research Program

Commencement of Research Term: April 4, 2008

First Year Goals - Chemistry:

[**]

Second Year Goals - Chemistry:

[**]

First and Second Year Goals - Biology:

[**]

 

B-1

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

Exhibit C

Specifications for the Preclinical Supply of [**]

[**]

 

C-1

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

Exhibit D

Specifications for the Preclinical Supply of [**] or Other Second Licensed

Compound

[**]

 

D-1