Exhibit 10.8

 

THE REGISTRANT HAS APPLIED FOR CONFIDENTIAL TREATMENT OF CERTAIN PROVISIONS OF
THIS EXHIBIT WITH THE SECURITIES AND EXCHANGE COMMISSION. THE CONFIDENTIAL
PORTIONS OF THIS EXHIBIT ARE BRACKETED AND MARKED WITH ASTERISKS ([**]) AND HAVE
BEEN OMITTED. THE OMITTED PORTIONS OF THIS EXHIBIT WILL BE FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.

 

LICENSE AGREEMENT

 

THIS LICENSE AGREEMENT is made as of the 26th day of January, 2005 by and
between Formulation Technologies, L.L.C., a Texas limited liability company,
d/b/a PharmaForm with offices at 11400 Burnet Road, Building 4, Suite 4010,
Austin, Texas 78758 (hereinafter, “PharmaForm” or “Licensor”), and AUXILIUM
PHARMACEUTICALS, INC., a Delaware corporation having a principal place of
business at 160 W. Germantown Pike, East Norriton, Pennsylvania 19401
(hereinafter, “Auxilium” or” Licensee”). Licensor and Licensee may be referred
to as a “Party” or, collectively, as “Parties.”

 

RECITALS

 

WHEREAS, Licensee is engaged in the research, development, manufacture,
marketing and sale of pharmaceutical products;

 

WHEREAS, Licensor is engaged in the research and development of pharmaceutical
formulations and drug delivery systems including that under Licensor Technology
and Licensor Know-How;

 

WHEREAS, Michael A. Repka, Staci L. Repka, and James W. McGinity (the
“Inventors”) developed certain intellectual property claimed in U.S. Patent No.
6,375,963 issued on April 23, 2002;

 

WHEREAS, the Inventors assigned the Licensor Technology to The University of
Mississippi (the “Ole Miss”) pursuant to that certain Assignment of Patent
Rights, executed by and among the Inventors and Ole Miss dated as of August 25,
2002 and Ole Miss further assigned the Licensor Technology to itself and the
Board of Regents of the University of Texas System (“UT”) (collectively, Ole
Miss and UT are referred to as the “Universities”) pursuant to that certain
Assignment of Patent Rights dated January 23, 2004;

 

WHEREAS, Ole Miss granted to the Inventors a license to the Licensor Technology
in specified fields subject to the terms and conditions of that certain License
Agreement originally dated June 10, 2003, as amended by the Amendment to License
Agreement dated April 19, 2004, as amended by the Second Amendment to License
Agreement dated September 14, 2004 (the “Ole Miss License Agreement”);

 

WHEREAS, Inventors granted to the Licensor a sublicense to the Licensor
Technology in

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specified fields subject to the terms and conditions of that certain Sublicense
Agreement, executed by and among the Inventors and the Licensor originally dated
June 10, 2003, as amended by the Amendment to Sublicense Agreement dated April
19, 2004, as amended by the Second Amendment to Sublicense Agreement dated
September 14, 2004 (the “Sublicense Agreement”);

 

WHEREAS, Inventor James W. McGinity assigned to Licensor all his rights, title
and interest in license revenue pursuant to that certain Assignment Agreement
dated June 13, 2003;

 

WHEREAS, UT granted to Licensor a license to the Licensed Technology in
specified fields subject to the terms and conditions of a Patent License
Agreement originally dated June 10, 2003, as amended by that certain Amendment
to Patent License Agreement dated September 1, 2004 (the “UT License
Agreement”);

 

WHEREAS, Licensee wishes to license Licensor Technology and Licensor Know-How
from Licensor for use in the Therapeutic Areas for the manufacture and sale of
Products; and

 

WHEREAS, Licensor is willing to grant such a license under the terms and
conditions set forth herein.

 

NOW, THEREFORE, in consideration of the premises and mutual covenants contained
herein, and INTENDING TO BE LEGALLY BOUND HEREBY, the Parties agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.1 Definitions. The following terms, as used herein, shall have the following
meanings:

 

“Act” shall mean the United States Federal Food Drug and Cosmetic Act and
applicable regulations.

 

“Additional Know-How” means know-how owned and controlled by Licensor, which is
not related to United States Patent No. 6,375,963 that is or may be needed or
would be beneficial in connection with the development, manufacture, sale or use
of any Product within the Therapeutic Areas. Additional Know-How does not
include know how that constitutes (1) the confidential information of third
parties to whom Licensor has contractual obligations of confidentiality and
non-disclosure; or (2) Licensor is otherwise restricted from licensing or
disclosing such know-how.

 

“Additional Product” means any and all pharmaceutical products, combinations and
compositions in the Therapeutic Area which contain at least one compound other
than those set forth on Schedule 1 within the scope of any composition, method
or article claim of the Licensed Technology, excluding Combination Products.

 

“Affiliate” means, when used with reference to a Party, any person directly or
indirectly Controlling, Controlled by or under common Control with a Party.

 

2

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“Bankruptcy Event” means the person in question becomes insolvent, or voluntary
or involuntary proceedings by or against such person are instituted in
bankruptcy or under any insolvency law, or a receiver or custodian is appointed
for such person, or proceedings are instituted by or against such person for
corporate reorganization or the dissolution of such person, which proceedings,
if involuntary, shall not have been dismissed within one hundred eighty days
after the date or filing, or such person makes an assignment for the benefit of
creditors, or substantially all of the assets of such person are seized or
attached and not released within one hundred eighty days thereafter.

 

“Calendar Quarter” means each three-month period, or any portion thereof,
beginning on January 1, April 1, July 1 and October 1.

 

“Combination Products” means products that contain both 1) a compound set forth
on Schedule 1 and 2) a second compound not set forth on Schedule 1. For clarity,
Combination Products do not include products that contain, as a second compound,
inactive excipients, compounds whose primary purpose is not to prevent or treat
pain (e.g., excipients with local anti-inflammatory or anesthetic properties).

 

“Commercially Reasonable Efforts” means with respect to a Party, the efforts and
resources which would be used by that Party relating to a certain activity or
activities, consistent with its normal business practices, which are consistent
with the general level of effort and resources in the pharmaceutical industry
for a company similar in size and scope.

 

“Confidential Information” means (i) Licensor Know-How, (ii) any other
information or material in tangible form that is confidential or proprietary to
the furnishing Party at the time it is delivered to the receiving Party, (iii)
proprietary information of the furnishing party, (iv) information that is
furnished orally if the furnishing party identifies such information as
confidential or proprietary when it is disclosed, and (v) patent applications
not yet in the public domain.

 

“Control”, “Controlling,” and “Controlled by” mean the direct or indirect
ownership of over 50% of the outstanding voting securities of an entity, or the
right to receive over 50% of the profits or earnings of a person, or the right
to control the policy decisions of a person.

 

“Developments” shall mean any invention, modification, discovery, design,
development, improvement, process, software program, work of authorship,
documentation, formula or data, whether or not patentable or registrable under
any patent, copyright, trademark or similar statutes, made, conceived, created,
discovered, invented or reduced to practice, including any rights that Licensor
may have or acquire therein in any country in the Territory that (a) relate to
Licensor’s work with or the business of Licensee (including, without limitation,
any of the products or services being or to be developed, manufactured or sold
by Licensee) under this Agreement and/or the Development Agreement, (b) result
from the performance of the services under the Development Agreement, (c) result
from the use of premises or personal property (whether tangible or intangible)
owned, leased or contracted for by Licensee, or (d) result from or are based on
Confidential Information of Licensee.

 

3

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“Development Agreement” means that certain Research and Development Agreement by
and among Licensor and Licensee dated June 20, 2003, as amended by that certain
Amendment to Research and Development Agreement dated January 26, 2005.

 

“Effective Date” means the date of this Agreement.

 

“FDA” means the United States Food and Drug Administration or any successor
regulatory agency.

 

“Licensee Patents” has the meaning set forth in Section 9.1 (b)

 

“Licensor Know-How” shall mean any and all present and future information and
any materials, including, without limitation, inventions, formulations,
processes, techniques, formulas, biological, chemical, assay control and
manufacturing data, methods, software, equipment designs, know-how, and trade
secrets, patentable or otherwise, tangible or intangible, that are owned or
controlled by Licensor, that arise from practicing art described by United
States Patent No. 6,375,963 for the Products within the Therapeutic Areas, that
are necessary or useful in the development, commercialization, manufacture, use,
sale or import of Products in the Therapeutic Areas; provided, however, that
Licensor Know-How does not include Developments and/or know-how which was
conceived, reduced to practice, developed or made during and pursuant to the
Research and Development Agreement. In addition, Licensor Know-How does not
include Licensor Patent Rights.

 

“Licensor Technology” shall mean the Patent and any and all continuations,
continuations-in-part, additions, divisions, renewals, extensions,
re-examinations and reissues thereof and any and all foreign counterparts of the
foregoing and any other U.S. or foreign patent application that are owned or
controlled by Licensor and any U.S. or foreign patent issuing therefrom and any
renewal, extension, re-examination or reissue thereof that is owned or
controlled by Licensor, but for the licenses granted hereunder, would infringe a
Valid Claim thereof. Licensor Technology does not include Licensee Patents.

 

“NDA” means a New Drug Application submitted under the Act to permit commercial
sale of Product in the United States.

 

“Net Sales” shall mean, the gross amount invoiced for the Product in such period
by Auxilium or its sub-licensees to third parties, less deductions for the
following: (a) returned goods; (b) trade and quantity discounts; (c) rebates;
(d) payments in respect of any governmental subsidized program; (e)
reimbursement or similar payments given to wholesalers or other distributors,
buying groups, healthcare insurance carriers or other institutions; (f) sales or
other taxes actually paid by Auxilium or its sub-licensees, not including taxes
assessed on the income resulting from such sales; and (g) freight allowances,
insurance and customs duties to the extent any of the foregoing are identified
on the invoice for the Product. If a Product is sold for consideration other
than cash, the fair market value of such other consideration shall be included
in Net Sales.

 

4

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“Ole Miss License Agreement” is defined in the Recitals.

 

“Patent” means United States Patent No. 6,375,963.

 

“Penalty Payment” is defined in Section 6.3.

 

“Person” or “Persons” means any corporation, partnership, joint venture or
natural person.

 

“Products” means any and all pharmaceutical or veterinary products, combinations
and compositions which contain one or more of the compounds set forth on
Schedule 1, excluding Combination Products.

 

“Regulatory Approval” means regulatory authorizations required to sell the
Product in the Territory on a country basis

 

“Sale” or any variation thereof means the sale, assignment or other disposition
of a Product by Licensee to a non-Affiliate in exchange for payment to Licensee
or an obligation to pay Licensee.

 

“Sublicense Agreement” is defined in the Recitals.

 

“Term” has the meaning set forth in Article 12.1.

 

“Territory” shall mean all countries and territories of the world.

 

“Therapeutic Areas” shall mean the areas of oral mucosal delivery for prevention
and treatment of all forms of pain including acute and chronic pain for both
human and veterinary use.

 

“Universities’ License Agreements” means the Ole Miss License Agreement and the
UT License Agreement, each as defined in the Recitals.

 

“UT License Agreement” is defined in the Recitals.

 

“Valid Claim” shall mean a claim of an issued and unexpired patent right which
can be reasonably asserted against a party manufacturing, using, offering for
sale, selling or importing a Product absent a license and whose validity or
enforceability has not been adversely affected by any of the following: (i)
lapse, revocation, or abandonment, (ii) a determination by a court or other
governmental agency of competent jurisdiction, which is unappealable or has not
been appealed within the time allowed for appeal, that the patent is
unenforceable or invalid and/or (iii) a disclaimer or admission of invalidity or
unenforceability through reissue, re-examination, opposition, nullity action or
invalidation suit response, disclaimer or otherwise.

 

5

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ARTICLE II

GRANT OF LICENSE

 

2.1 Grant of License.

 

  (a) Subject to the terms and conditions contained in this Agreement, the
Licensor hereby grants to Licensee a sole and exclusive, even as to Licensor,
worldwide, royalty-bearing license in the Therapeutic Areas under Licensor
Technology and Licensor Know-How solely for the right to make, have made, use,
offer to sell, sell and import Products with the right to grant sublicenses as
more specifically set forth in Article IV below, in the Territory.

 

  (b) In addition, subject to the terms and conditions contained in this
Agreement, the Licensor hereby grants to Licensee a non-exclusive, royalty free
right under Additional Know-How to make, have made, use, offer to sell, sell and
import Products in the Therapeutic Areas, with the right to grant sublicenses,
in the Territory.

 

2.2 Transfer of Licensor Know How. Promptly following the Effective Date, and
quarterly, thereafter, Licensor shall make available to Licensee any and all
Licensor Know-How to enable Licensee to develop Products. Additional Know-How
shall be made available to Licensee promptly after it becomes known by Licensor
that it is or may be applicable to the Product in the Therapeutic Areas.

 

2.3 Right of First Refusal. Licensor hereby also grants to Licensee the right of
first refusal to license Licensor Technology and Licensor Know-How for
Additional Products. In the event that Licensor has a bona fide offer from a
third party, as reflected in a term sheet, letter of intent or similar document
signed by Licensor and the third party, for a license of or any other rights
under Licensor Technology and/or Licensor Know-How in connection an Additional
Product (“Bona-fide Term Sheet”), Licensor shall deliver to Licensee a notice
disclosing to Licensee the compounds contained in the Additional Product(s) that
are the subject of the Bona-fide Term Sheet; provided, however, Licensee shall
keep such notice confidential, not to disclose it to any third party, and use it
only for purposes of evaluating a transaction with Licensor. Licensee shall then
notify Licensor whether it is interested in exercising its right to license the
Licensor Technology and Licensor Know-How in the area covered by the notice
within 30 days after the date that the notice has been received by Licensee. If
Licensee is interested in such a license, the Licensor and Licensee will
negotiate in good faith to consummate such license. If Licensee notifies
Licensor that it chooses not to exercise its right to license the Licensor
Technology and Licensor Know-How in such area or does not respond 10 days after
receipt of the notice, Licensor will be free to consummate a license with the
third party on substantially the same terms of the Bona-Fide Term Sheet. If and
when Licensee elects not to license technology pursuant to this paragraph, to
the extent necessary to satisfy any third party licensee, Licensee will execute
a written release of this right of first refusal and waive any future right to
license the Licensor Technology and Licensor Know-How for use in the Additional
Product(s) covered by the Bona-fide Term Sheet. Nothing within this section
shall be construed as reserving or granting Licensor the right to grant a
license to a third party which incorporates or includes or is to be used in
conjunction with a compound set forth on Schedule 1.

 

6

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2.4 Restriction. During the Term, Licensor and its Affiliates may not grant a
license to any third party for the development, manufacture, use, sale or import
of a Combination Product and may not directly or indirectly develop,
manufacture, use, sell or import a Combination Product.

 

ARTICLE III

PAYMENTS IN CONSIDERATION FOR LICENSE

 

3.1 Milestone Payments. Auxilium will make the following milestone payments in
US Dollars:

 

  (a) Signing Fee. $500,000.00 delivered with the execution of this Agreement.

 

  (b) Event-based Payments (delivered promptly but in any event within twenty
(20) business days of the event triggering the payment)

 

  (i) $[**] upon administration of a first dose to a patient in the first human
Phase II or Phase III trials or upon the first NDA submission whichever is
earliest for each Product;

 

  (ii) $[**] upon the first NDA submission of each Product (in addition to the
payment referenced immediately above);

 

  (iii) $[**] upon the first Regulatory Approval of each Product; and

 

  (iv) $[**] one year after the first Regulatory Approval of each Product.

 

3.2 Royalties.

 

  (a) In consideration for the license rights granted under this Agreement,
Licensee shall pay to Licensor the following royalties calculated on Product by
Product and country by country basis:

 

  (i) [**] percent ([**]%) on annual Net Sales of Products in those countries in
the Territory in which there is an enforceable patent under the Licensor
Technology at the time of sale;

 

  (ii) [**] percent ([**]) on annual Net Sales of Products in those countries
outside of the European Union where the Product is not protected by a patent
under the Licensed Technology. There is no royalty payable on Net Sales in
European Union for non-patented Products

 

  (b) Royalties shall be payable on a Product-by-Product and country-by-country
basis until the later of (i) 10 years after first commercial sale or (ii) the
expiration of the last enforceable patent under Licensor Technology covering the
Product in the applicable country.

 

7

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  (c) In the event Licensee grants a permitted sublicense of the Licensor
Technology and/or Licensor Know How under this Agreement, Licensee shall have
royalty obligations based on all Net Sales of Products, whether by Licensee in
its own markets or Licensee’s sublicensee in other markets. Royalty payments may
be made to Licensor by Licensee, sublicensee or both.

 

3.3 Royalty Payments. Royalties under this Agreement shall be paid within thirty
(30) days in the case of no sublicense and sixty (60) days in the case of
royalties received from a sublicensee, following the last day of the Calendar
Quarter in which the royalties and other amounts accrue. The last such payment
shall be made within sixty (60) days after termination of this Agreement.
Payments shall be deemed paid as of the day on which they are received by
Licensor in the manner designated by Section 3.5.

 

3.4 Royalty Payments Based on Minimum Net Sales Performance. All sales of
Products will be subject to the payment by Licensee of royalties based on
minimum Net Sales performance for each Product. Minimum Net Sales performance
level for each Product will be agreed upon by Licensor and Licensee based upon
Licensee’s reasonable annual sales forecast for the Product. A provision for
minimum royalty payments based on minimum net sales shall be added to this
Agreement no later than the time of the NDA submission for each Product.
Licensor and Licensee will negotiate reasonably and in good faith to arrive at
all minimum net sales performance numbers required to be agreed upon by this
Agreement.

 

3.5 Currency, Place of Payment, Interest.

 

  (a) All dollar amounts referred to in this Agreement are in United States
dollars. All payments to the Licensor under this Agreement shall be made in
United States dollars, as directed by the Licensor, by wire transfer to the
Licensor or in such other manner as the Licensor may designate from time to
time.

 

  (b) If Licensee receives revenues from sales of Products in a currency other
than United States dollars, royalties shall be converted into United States
dollars at a quarterly conversion rate for each foreign currency calculated as
the daily average of the noon buying rate in New York City for cable transfers
in foreign currencies as certified for customs purposes by the Federal Reserve
Bank in New York as these exchange rates are published at
www.federalreserve.gov/releases/H10/hist.

 

  (c) Amounts that are not paid when due shall accrue interest from the due date
until paid, at an annual rate equal to the lesser of (i) Prime Rate plus 1.5% as
published at www.federalreserve.gov/releases/H15/update under the caption “Bank
Prime Loan” and (ii) the maximum rate allowed by applicable law. Historical
rates are published at www.federalreserve.gov/releases/H15/data.htm.

 

8

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ARTICLE IV

CONDITIONS TO SUBLICENSING

 

4.1 Grant of Sublicense. Licensee shall have the right to grant sublicenses
within the grant of license as set forth in Section 12.1 of this Agreement. No
sublicense granted by Licensee shall be in conflict with the terms and
conditions of this Agreement or with any other sublicense granted hereunder. No
sublicense shall relieve Licensee of any of Licensee’s obligations under this
Agreement.

 

4.2 Notice of Sublicense. At the time of granting any sublicense, Licensee shall
provide Licensor notice of the consummation of a written agreement with the
sublicensee, including a copy of the sublicense entered into, subject to
restrictions of confidentiality and non-disclosure.

 

4.3 Sublicense Income. In addition to any royalties payable pursuant to Section
3.2(a), above, in the event Auxilium has not commenced clinical development work
for a Product and grants a sublicense for such Product to a third party,
Auxilium will pay PharmaForm [**] percent ([**]%) of any and all upfront
milestone payments, collaboration fees or similar fees received by Auxilium from
such sublicense under the sublicense agreement. For purposes of this Agreement,
clinical development shall be deemed to have commenced when the first patient or
healthy volunteer has been dosed with Product. In the event Auxilium has
commenced clinical development work with respect to such Product, Auxilium will
retain [**] percent ([**]%) of all upfront milestone payments or collaboration
fees after deducting the out of pocket clinical, data management, biometrics and
analytical development costs Auxilium has incurred while developing the Product.
For purposes of this Agreement, out of pocket costs are all costs related to
clinical development of the relevant Product, payable to third parties, except
Auxilium’s personnel costs and overhead.

 

ARTICLE V

LICENSOR’S AUDIT RIGHTS

 

5.1 Upon first sale, lease or other disposition for consideration of Product(s)
by either Licensee or any sublicensee (whichever shall occur first), Licensee
shall promptly provide Licensor with written notice thereof. To enable Licensor
to verify royalty amounts due it pursuant to this Agreement, thereafter,
Licensee shall render to Licensor, with each royalty payment hereunder, a
reasonably detailed written report setting forth all royalty calculations for
the relevant period. All such reports shall be certified by a knowledgeable
officer of Licensee to be correct to the best of such officer’s knowledge and
information.

 

5.2 Licensee shall keep and maintain records in accordance with generally
accepted accounting principles sufficient to enable Licensor to verify the
monies payable to Licensor by Licensee under the terms of this Agreement.
Licensee shall make such records available to Licensor and/or individuals
authorized by Licensor with reasonable notice at any reasonable time during
normal business hours to the extent necessary for Licensor to inspect the
records and verify the payments due under the terms of this Agreement, but no
more than once during any calendar year.

 

9

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  (a) In the event such examination discloses a deficiency in the monies paid to
Licensor in excess of ten percent (10%), Licensor shall send Licensee a notice
specifying the amount of the deficiency and supporting documentation. Licensee
shall have thirty (30) days to examine the notice. If Licensee agrees with the
amount of the deficiency, Licensee immediately shall pay to Licensor such
deficiency, as provided in Section 3.3 of this Agreement, and, in addition,
shall reimburse Licensor for the reasonable cost of such examination. If
Licensee disagrees with the calculation of any deficiency by Licensor, it’ shall
notify Licensor in writing within thirty (30) days of receipt of the notice from
Licensor, and set forth the basis for such disagreement. If Licensor and
Licensee are unable to agree on the amount of any deficiency within thirty (30)
days, the amount of the deficiency will be determined by an independent
accounting firm selected by Licensor from a list of three (3) nationally
recognized independent accounting firms selected by Licensee. The determination
of such accounting firm shall be final and binding on the parties. If the
accounting firm determines the deficiency exceeds ten percent (10%), Licensee
immediately shall pay to Licensor the amount of such deficiency, together with
interest thereon as provided in Section 3.3(c), and shall reimburse Licensor for
the reasonable costs of such examination, including the fees of the accounting
firm. If the deficiency is less than ten percent (10%), Licensor shall pay the
fees of such accounting firm.

 

ARTICLE VI

CERTAIN OBLIGATIONS OF LICENSEE AND LICENSOR

 

6.1 Regulatory Approvals. Licensee will be responsible for obtaining, at its
cost and expense, all Regulatory Approvals required for marketing and sale of
Products in the Therapeutic Areas in the Territory.

 

6.2 Licensee Efforts.

 

  (a) Licensee shall use Commercially Reasonable Efforts to develop for
commercial sale and to market Products in the Territory, and to continue to
market Products as long as commercially viable, all in a manner consistent with
sound and reasonable business practices.

 

  (b) Except as set forth in subsection (e), below, any compound on Schedule 1
for which formulation development has not been initiated by the 4th anniversary
of the Effective Date of this Agreement, will be delisted from Schedule 1.

 

  (c)

In the event Licensee engages in no material development activities (at least
one of the following activities: formulation, analytical, clinical development
or regulatory activities) once the development has been started with respect to
a compound listed on Schedule 1 for a period of at least twelve (12) consecutive
months, Licensor may provide Licensee with three (3) months notice of its

 

10

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intention to delist the compound. If Licensee fails to institute material
development activities within such three (3) month period, Licensee shall have
the right to delist the compound. Development delays due to the actions by
regulatory authorities, IRBs and similar events beyond Auxilium’s control will
not lead to delisting of a compound.

 

  (d) Subject to Licensor rights under the Ole Miss License Agreement, the
Sublicense Agreement and the UT License Agreement, should development of any
compound in Schedule 1 be abandoned after development activities have been
initiated, due to technical, safety, intellectual property or commercial
reasons, Licensee shall have the right to add into Schedule 1 an additional
unlisted compound not released by Licensee under the provisions of Section 2.3
of this Agreement under the same terms and conditions applicable to the delisted
compound. In such event, Licensee shall have the right, at any time during the
Term, to add into Schedule 1 one additional compound not released by Licensee
under the provisions of Section 2.3 of this Agreement for each compound
abandoned. In the event Licensor does not have rights to sublicense a compound
Auxilium requests to add to Schedule 1 pursuant to this Section 6.2(d), Licensor
shall use Commercially Reasonable Efforts to obtain such rights from the
Inventors and/or the Universities.

 

  (e) In the event Licensee adds a compound to Schedule 1 pursuant to Section
6.2(d), above, Licensee shall have four (4) years from the date such compound is
added to Schedule 1, within which to initiate formulation development.

 

6.3 Penalty Payments. In the event that either the Ole Miss License Agreement,
the UT License Agreement or the Sublicense Agreement are terminated during the
term of this Agreement, Licensor shall pay to Licensee one half of all direct
expenses and costs Licensee has incurred on the research and development of the
compounds, technology or Products pursued under this Agreement which exceed the
cumulative gross profit earned by Licensee on such Products as of the date of
termination of such agreement.

 

ARTICLE VII

WARRANTIES AND REPRESENTATIONS

 

7.1. Mutual Representations. Each of the Parties hereto represents, warrants and
covenants:

 

  (a) It is a corporation or entity duly organized and validly existing under
the laws of the state or other jurisdiction of its incorporation or formation.

 

  (b) The execution, delivery and performance of this Agreement by such Party
has been duly authorized by all requisite corporate or entity action.

 

  (c) It has the power and authority to execute and deliver this Agreement and
perform its obligations hereunder.

 

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  (d) The execution, delivery and performance by such Party of this Agreement
does not and will not conflict with or result in breach of the terms and
provisions of any other agreement or constitute a default under (a) a loan
agreement, guaranty, financing agreement, affecting a product or other agreement
or instrument binding or affecting it or its property; (b) the provisions of its
charter or operative documents or bylaws; or (c) any order, writ, injunction or
decree of any court or governmental authority entered against it or by which any
of its property is bound.

 

  (e) The execution, delivery and performance of this Agreement by such Party
does not require the consent, approval or authorization of, or notice,
declaration, filing or registration with, any governmental or regulatory
authority in the Territory and the execution, delivery and performance of this
Agreement does not violate any law, rule or regulation applicable to such Party.

 

  (f) This Agreement has been duly authorized, executed and delivered and
constitutes such Party’s legal, valid, and binding obligation enforceable
against it in accordance with its terms subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors’ rights and to the availability of particular
remedies under general equity principles.

 

  (g) It shall comply with all applicable laws and regulations relating to its
activities under this Agreement.

 

  (h) It is not debarred and has not and will not use in any capacity the
services of any person debarred under subsections 306 (a) and (b), of the
Generic Drug Enforcement Act of 1992. If at any time during the term of this
Agreement this warranty is no longer accurate, the affected party shall
immediately notify the other.

 

7.2 Licensor Representations and Warranties.

 

  (a) Licensor Technology. Licensor represents and warrants that: (a) Licensor
is the owner, assignee and/or exclusive licensee of all right, title and
interest in and to the Licensor Know-How and Licensor Technology in the
Therapeutic Areas with respect to the Products; and (b) Licensor has not
received any written notice that the Licensor Know-How or Licensor Technology
with respect to the Products infringes the proprietary rights of any third
party; (c) Licensor is not aware of any third party proprietary rights that
would be infringed by the development and commercialization of the Licensor
Technology and Know-How with respect to the Products; and (d) there are no
claims, judgments or settlements against or owed by Licensor, or pending or
threatened claims, or litigation; relating to Licensor Technology.

 

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  (b) Universities’ License Agreements. Licensor represents and warrants that it
has no knowledge or belief, direct or indirect, that either the Universities or
the Inventors have any plan or intention to terminate the Universities’ License
Agreements and agrees to immediately notify Licensee in the event that it
becomes aware of any such plan or intention. Licensor further agrees to take all
reasonable steps to prevent termination of the Universities’ License Agreements.
Licensor acknowledges that if either such party does terminate the Universities’
License Agreements during the term of this Agreement then Licensor will be
subject to the Penalty Payment, as set forth in Section 6.3 of this Agreement.

 

  (c) Sublicense Agreement. Licensor represents and warrants that it has no
knowledge or belief, direct or indirect, that either the Inventors or the
Licensor has any plan or intention to terminate the Sublicense Agreement and
agrees to immediately notify Licensee in the event that it becomes aware of any
such plan or intention. Licensor further agrees to take all reasonable steps to
prevent termination of the Sublicense Agreement. Licensor acknowledges that if
either such party does terminate the Sublicense Agreement during the term of
this Agreement then Licensor will be subject to the Penalty Payment, as set
forth in Section 6.3 of this Agreement.

 

ARTICLE VIII

INDEMNIFICATION

 

8.1 Indemnification by Licensor. Licensor will indemnify and hold Auxilium, its
directors, officers, employees and agents harmless against any and all
liability, damage, loss, cost or expense (including reasonable attorney’s fees)
resulting from any third party claims made or suits brought against Auxilium
which arise from an act or failure to act by Licensor or Licensor’s breach of
its representations, warranties or agreements contained herein.

 

8.2 Indemnification by Auxilium. Auxilium will indemnify and hold Licensor, its
directors, officers, employees and agents harmless against any and all
liability, damage, loss, cost or expense (including reasonable attorney’s fees)
resulting from any third party claims made or suits brought against Licensor
which arise from the breach of any of Auxilium’s representations, warranties or
agreements contained herein, or which arise out of the development, manufacture,
promotion, distribution, use, testing, sale or other disposition of Product,
including, without limitation, any claims, express, implied or statutory, made
as to the efficacy, safety or use to be made of Product, and claims made by
reason of any Product labeling or any packaging containing Product. This
indemnification obligation shall not apply where the basis for the claim is the
negligence or willful malfeasance of Licensor or Licensor’s breach of its
representations, warranties and agreements contained herein.

 

8.3 Limitations on Indemnification Obligations. LICENSOR AND AUXILIUM EACH AGREE
THAT IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR INDIRECT,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES RESULTING FROM A DEFAULT OR BREACH
OF THIS AGREEMENT.

 

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8.4. Procedures. The indemnified Party shall notify the indemnifying Party of
any claim or action giving rise to a liability within fifteen (15) days after
receipt of knowledge of the claim. If notice is not given within fifteen (15)
days, the indemnifying Party shall maintain its obligation to indemnify unless
such failure to timely notify has a material, adverse effect on the outcome of
the claim. The indemnifying Party-shall control the defense or settlement of the
claim. However, the indemnifying Party shall not settle or compromise any such
claim or action in a manner that imposes any restrictions or obligations on the
indemnified Party without the indemnified Party’s written consent. The
indemnified Party shall cooperate reasonably, assist and give all necessary
authority and reasonably required information.

 

ARTICLE IX

INTELLECTUAL PROPERTY

 

9.1 Ownership.

 

  (a) Licensor Technology. The Licensor shall retain all right, title and
interest in and to the Licensor Technology, Licensor Know-How and Additional
Know-How subject to the express license granted to Licensee under this
Agreement.

 

  (i) In the event Licensor, the Universities or Inventors wish to abandon any
Licensor Technology, Licensor will offer to assign, or use Commercially
Reasonable Efforts to cause the Universities or Inventors to assign to Licensee,
free of charge, any such Patent prior to effectuating the abandonment. Licensee
will bear the costs connected to any assignment hereunder.

 

  (b) Developments/Licensee Patents. All Developments shall be the sole and
exclusive property of Licensee and Licensee shall retain all right, title and
interest in such Developments. In addition, Licensee shall be the sole and
exclusive owner of and retain all right title and interest in any patents
related to the Product obtained by Licensee pursuant to Section 10.1(b), below
(“Licensee Patents”). In the event Developments or Licensee Patents may assist
Licensor with respect to Licensor’s development of products involving Licensor
Technology and Licensor Know-How outside the Therapeutic Areas, Licensee will
grant Licensor a non-exclusive license to such Developments and/or Licensee
Patents for use outside the Therapeutic Areas on terms to be negotiated in good
faith by the Parties.

 

  (c) Trademarks. Licensee shall have the right, in its sole discretion and at
its expense, to select and register such trademarks as it wishes to employ in
connection with the sale of the Products throughout the Territory and Licensee
shall have legal and equitable ownership of the entire right, title and interest
in and to the trademarks and registrations Licensee elects to use.

 

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  (d) Ownership of Data. Except for any data relating to Additional Know-How,
Licensee shall be the owner of all information and results related to research
and development activities for the Products, including, without limitation, any
and all research data, pharmacology data, and control data, preclinical data,
clinical data, and information, obtained or generated and documentation
submitted, or required to be submitted, in association with regulatory filings
for the Products (including any Drug Master Files (DMFs), Chemistry,
Manufacturing and Control (“CMC”) data, or similar documentation).

 

  (e) Ownership of Regulatory Filings. All INDs, NDAs and other regulatory
filings made or filed by Licensee with respect to any Products shall be in the
name of, and be owned solely by Licensee.

 

ARTICLE X

PATENTS AND INFRINGEMENT

 

10.1 Prosecution of Patents.

 

  (a) Licensor. The Licensor shall be solely responsible for preparing,
prosecuting and maintaining the Licensor Technology.

 

  (b) Licensee. With the assistance and cooperation of Licensor in accordance
with the Development Agreement, Licensee in its sole discretion and at its cost
and expense, will reasonably pursue additional patent protection for the Product
in the Territory.

 

  (b) Cooperation. Licensor and Licensee will keep each other reasonably
informed of all matters relating to the filing, prosecution and maintenance of
Licensor Technology and Licensee Patents, respectively.

 

10.2 Infringement of Patents. If either Party has knowledge of any infringement
of Licensor Technology or Licensor Know-How, the Party having such knowledge
shall promptly inform the other of such infringement. The Parties shall
thereafter discuss what action should be taken, including whether any legal
proceeding should be instituted. If the Parties mutually agree on the course of
action to be taken in respect of any such infringement, they shall jointly
select counsel and equally share any expenses. Any settlement or recovery shall
be shared in the following manner: First, each party shall be reimbursed for all
attorneys’ fees and expenses associated with the legal proceedings, on a pro
rata basis, if the attorneys’ fees exceed the amount of the settlement or
recovery; Second, 90% of remaining amounts shall be distributed to Licensee and
10% of the remaining amounts shall be distributed to Licensor. If either party
determines to take action, but the other Party does not desire to do so, the
first Party may take action at its own expense and through counsel of its own
choice, and any settlement or recovery shall in such case belong solely to the
Party taking action. If one party institutes and carries on a legal

 

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proceeding to enforce Licensor Technology against an alleged infringing party,
the other Party shall fully cooperate with and supply all assistance reasonably
requested by the Party instituting and carrying or such proceeding. Licensee
shall be responsible at its sole cost and expense for enforcing Licensee Patents
against an alleged infringing party.

 

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10.3 Third Party Claims.

 

  (a) Notice. In the event that a Party becomes aware of any claim that the
practice by either Party of Licensor Technology or Licensor Know-How hereunder
infringes the intellectual property rights of any third party, such Party shall
promptly notify the other Party.

 

  (b) Action. As between the Parties, Licensor shall have the first right, but
not the obligation, to defend the Parties against any claim by a third party
that the development, manufacture, use, sale, offer for sale, export or import
of Product in the Territory infringes third party intellectual property rights.
Licensee shall have the right to participate in the defense of such claim but
shall not take any position inconsistent with Licensor’s position on such
issues. In the event that Licensor chooses, in its sole discretion not to defend
such suit, Licensee shall have the right but not the obligation to defend such
suit.

 

  (c) Third Party License. If Licensee would be prevented from using, selling or
importing Product in any country of the Territory on grounds that by doing so
Licensee would infringe a Valid Claim of patent rights held by a third party in
said country (the “Blocking Third Party IP”), Licensee shall notify Licensor and
give Licensor a reasonable opportunity to oppose or otherwise resolve such
claim. In the event that Licensor elects not to oppose the claim or does not
successfully obtain any necessary license, Licensee shall have the right to
negotiate directly with such third party for a license under the Blocking Third
Party IP. If Licensee licenses the Blocking Third Party IP, then [**] percent
([**]%) of any royalties on Product sales paid by Licensee to such third party
in such country with respect to Blocking Third Party IP shall be deducted from
any royalty payments payable to Licensor by Licensee under the applicable
provisions of Section 3.2, provided, however that no such deduction will be more
than [**] percent ([**]%) of any amount due Licensor in any Calendar Quarter.

 

ARTICLE XI

CONFIDENTIALITY

 

11.1 Confidentiality.

 

  (a)

Licensee and Licensor shall maintain in confidence and shall not disclose to any
third party the Confidential Information received pursuant to this Agreement,
without the prior written consent of the other Party except that the
Confidential Information may be disclosed only to those third parties (x) who
have a need to know the information in connection with the exercise of rights
and obligations under this Agreement and who agree in writing to keep the
information confidential to the same extent as is required of each Party under
this

 

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Section 11.1, or (y) to whom the Party is legally obligated to disclose the
Information. The foregoing obligation shall not apply to:

 

  (i) information that is known to the other Party or independently developed by
the other Party prior to the time of disclosure, in each case, to the extent
evidenced by written records promptly disclosed to the other Party upon receipt
of the Confidential Information; or

 

  (ii) information that becomes patented, published or otherwise part of the
public domain as a result of acts by a Party or a third person obtaining such
information lawfully as a matter of right; or

 

  (iii) information that becomes patented, published or otherwise part of the
public domain as a result of acts by the Licensor or a third person obtaining
such information lawfully as a matter of right; or

 

  (iv) information that is required by any law, rule, regulation, order,
decision, decree, or subpoena or other judicial, administrative or legal process
to be disclosed, provided, however that each Party, as applicable, gives the
other prompt written notice of such request/order to permit the other party to
seek a protective order or other similar order with respect to such Confidential
Information and thereafter discloses only the minimum Confidential Information
required to be disclosed in order to comply.

 

  (b) Each Party will take all reasonable steps to protect the Confidential
Information of the other Party with the same degree of care it uses to protect
its own confidential proprietary information. Without limiting the foregoing,
each party shall ensure that all of its employees having access to the
Confidential Information of the other Party are obligated in writing to keep
such information confidential to the same extent as is required of each Party
under this Section.

 

11.2 Injunctive Relief. Because damages at law may be an inadequate remedy for
breach of any of the covenants, promises and agreements contained in Section
11.1 hereof both the Licensor and Licensee shall be entitled to injunctive
relief in any state or federal court located within the District of Delaware,
including specific performance or an order enjoining the breaching Party from
any threatened or actual breach of such covenants, promises or agreements. Each
of the Licensee and the Licensor hereby waives any objection it may have to the
personal jurisdiction or venue of any such court with respect to any such
action. The rights set forth in this Section 11.2 shall be in addition to any
other rights which the Licensor and Licensee may have at law or in equity.

 

11.3 Survival. This Article XI shall survive the expiration or termination of
this Agreement.

 

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ARTICLE XII

PUBLICATION, FUNDING

 

12.1 Licensor and its employees shall be free to publish and/or make
presentations of the results of any past or future research not funded by, paid
for or performed on behalf of Licensee or related to the Therapeutic Areas
and/or to file grant applications at any time relating to Licensor Know-How and
Licensor Technology; provided, however. that Licensor shall give Licensee a copy
of any publication, presentation or grant application that it proposes to make
at least sixty (60) days prior to publication and presentation, and shall allow
Licensee an opportunity to comment on and approve the contents thereof. Licensor
shall further delay publication or presentation of such materials for an
additional sixty (60) days to allow the parties to apply for patents on any
inventions.

 

12.2 Licensor and its Affiliates shall not use any by a third party, including
the United States government, in developing Inventions or any Products that
would be covered by the license granted in Section 2.1 of this Agreement without
the written permission of Licensee.

 

ARTICLE XIII

TERM AND TERMINATION

 

13.1 Term. The Term of this Agreement shall commence on the Effective Date an
unless otherwise terminated in accordance with the Agreement, shall continue on
a Product-by-Product and country-by-country basis until the expiration of
Auxilium’s obligation to pay royalties pursuant to Article 3.2, after which
time, the licenses granted to Auxilium with respect to the applicable Product in
the applicable country subject to applicable patent laws shall become a
perpetual, exclusive license deemed fully paid-up.

 

13.2 Termination by the Licensor or Licensee.

 

  (a) Upon the occurrence of any of the events set forth below (“Events of
Default”), the Licensor shall have the right to terminate Licensee rights under
this Agreement with respect to the specific Product and relevant market (iii) at
issue only by giving written notice of termination, such termination effective
with the giving of such notice:

 

  (i) In the event of nonpayment of any amount payable to the Licensor after
completion of an audit provided for under this Agreement, which nonpayment is
continuing thirty (30) calendar days after the Licensor gives Licensee written
notice of a binding decision pursuant to Section 5.2 (a) of this Agreement.

 

  (ii) In the event that Licensee fails to initiate clinical trials within two
(2) years of availability of a suitable and final formulation of a Product in
quantities adequate for clinical testing and associated documentation for
clinical trials, unless such failure is outside of the control of Licensee.

 

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  (iii) In the event that Licensee does not launch Product in a major market
within twelve (12) months after marketing, pricing, reimbursement and any other
approvals necessary for launch

 

  (iv) In the event that Licensee becomes subject to a Bankruptcy Event;
provided, however, that so long as Licensor continues to receive all royalty
payments from Licensee under this Agreement, such Bankruptcy Event shall not, in
and of itself, be a basis for termination of this Agreement by Licensor.

 

  (b) Upon the occurrence of any of the events set forth below (“Events of
Default”), Licensee shall have the right to terminate this Agreement by giving
written notice of termination, such termination effective with the giving of
such notice:

 

  (i) breach by Licensor of any covenant or any representation or warranty
contained in this Agreement that is continuing thirty (30) calendar days after
Licensee gives written notice of such breach;

 

  (ii) Licensor fails to comply with the terms of the license granted hereunder
and such noncompliance is continuing thirty (30) calendar days after Licensee
gives notice of such noncompliance;

 

  (iii) Licensor becomes subject to a Bankruptcy Event; or

 

  (iv) the dissolution or cessation of operations by Licensor

 

  (c) No exercise by the Licensor or Licensee of any right of termination shall
constitute a waiver of any right of the Licensor or Licensee for recovery of any
monies then due to it hereunder or any other right or remedy the Licensor or
Licensee may have at law or under this Agreement.

 

ARTICLE XIV

FORCE MAJEURE

 

14.1 Either Party shall be relieved of its obligations under this Agreement to
the extent that fulfillment of such obligations shall be prevented by strikes,
embargoes, riots, fires, floods, war, hurricanes, windstorms, acts or defaults
of common carriers, governmental laws, acts or regulations, shortages of
materials or any other occurrence, whether or not similar to the foregoing,
beyond the reasonable control of the Party affected thereby.

 

14.2 If either Party is prevented from fulfilling its obligations under this
Agreement by reason of a circumstance covered by this Article XIV, the Party
unable to fulfill its obligations shall,

 

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upon the occurrence of any such circumstances, promptly notify the other Party
upon the cessation of such circumstance and of the likely duration thereof; and
shall promptly notify the other party upon the cessation of such circumstance.

 

ARTICLE XV

ADDITIONAL PROVISIONS

 

15.1 Arbitration. All disputes arising between the Licensor and Licensee under
this Agreement shall be settled by arbitration conducted in accordance with the
Rules of the American Arbitration Association. The Parties shall cooperate with
each other in causing the arbitration to be held in as efficient and expeditious
a manner as practicable. Any such arbitration shall be held in Wilmington,
Delaware. Notwithstanding the foregoing, the dispute resolution procedures set
forth herein shall not limit a court from granting a temporary restraining order
or a preliminary injunction in order to preserve the status quo of the parties
pending arbitration or to protect a Party’s trademark, other intellectual
property rights or confidential or proprietary information. Further, the
arbitrator shall have power to enter such orders by way of interim award, and
such orders shall be enforceable in court.

 

15.2 Assignment. No rights hereunder may be assigned by the Licensee, directly
or by merger or other operation of law, except assignment to an Affiliate,
without the express written consent of the other Party, such consent not to be
unreasonably withheld; provided, however, without such consent, either Party may
assign this Agreement in connection with the sale of all or substantially all of
its assets or business or its merger or consolidation with another company. Any
prohibited assignment of this Agreement or the rights hereunder shall be null
and void. No assignment shall relieve Licensee or Licensor of responsibility for
the performance of any accrued obligations which they have prior to such
assignment. This Agreement shall inure to the benefit of permitted assigns.

 

15.3 No Waiver. A waiver by either Party of a breach or violation of any
provision of this Agreement will not constitute or be construed as a waiver of
any subsequent breach or violation of that provision or as a waiver of any
breach or violation of any other provision of this Agreement.

 

15.4 Independent Contractor. Nothing herein shall be deemed to establish a
relationship of principal and agent between the Licensor and Licensee, nor any
of their agents or employees for any purpose whatsoever. This Agreement shall
not be construed as constituting the Licensor and Licensee as partners, or as
creating any other form of legal association or arrangement which could impose
liability upon one Party for the act of the other Party.

 

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15.5 Notices. Any notice under this Agreement shall be sufficiently given if
sent in writing by overnight courier, prepaid, first class, certified or
registered mail, return receipt requested, addressed as follows:

 

If to the Licensor, to:

 

FORMULATION TECHNOLOGIES, L.L.C., d/b/a PharmaForm

11400 Burnet Road

Building 4, Suite 4010

Austin, Texas 78758

Attention: Bill Williams or Jim McGinity

 

If to the Licensee, to

 

AUXILIUM PHARMACEUTICALS, INC.

160 W. Germantown Pike

Norristown, PA 19401

Attention: President

Copy to: General Counsel

 

or to such other addresses as may be designated from time to time by notice
given in accordance with the terms of this Section.

 

15.6 Severability. Any of the provisions of this Agreement which are determined
to be invalid or unenforceable in any jurisdiction shall be ineffective to the
extent of such invalidity or unenforceability in such jurisdiction, without
rendering invalid or unenforceable the remaining provisions hereof or affecting
the validity or unenforceability of any of the terms of this Agreement in any
other jurisdiction.

 

15.7 Headings and Titles. Any headings and titles used in this Agreement are for
convenience or reference only and shall not affect its construction or
interpretation.

 

15.8 No Third Party Benefits. Nothing in this Agreement, express or implied, is
intended to confer on any person other than the Parties hereto or their
permitted assigns, any benefits, rights or remedies.

 

15.9 Governing Law. This Agreement shall be construed, governed, interpreted and
applied in accordance with the laws of the State of Delaware, without giving
effect to conflict of law provisions.

 

15.10 Counterparts. This Agreement shall become binding when any one or more
counterparts hereof, individually or taken together, shall bear the signatures
of each of the parties hereto. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original as against the party
whose signature appears thereon, but all of which taken together shall
constitute but one and the same instrument.

 

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15.11 Entire Agreement. This Agreement is the entire agreement between the
parties regarding the subject matter herein, and supercedes all prior existing
understandings between the Parties relating to the subject matter hereof. This
Agreement may not be modified except in writing signed by both Parties.

 

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

 

FORMULATION TECHNOLOGIES, L.L.C.

d/b/a PharmaForm

     

AUXILIUM PHARMACEUTICALS, INC.

By:

 

/s/ Robert O. Williams, III

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

     

By:

 

/s/ Geraldine A. Henwood

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

Name:

 

Robert O. Williams, III

         

Geraldine A. Henwood

Title:

 

President

         

Chief Executive Officer

 

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SCHEDULE 1 TO LICENSE AGREEMENT DATED JANUARY 26, 2005

 

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