EXHIBIT 10.9

 

CONFIDENTIAL TREATMENT

EPIX MEDICAL, INC. HAS REQUESTED THAT THE MARKED PORTIONS OF THIS DOCUMENT BE
ACCORDED CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934.

 

EXECUTION COPY

 

INTELLECTUAL PROPERTY AGREEMENT

 

This “Agreement” made this 17th day of November, 2003 by and between Dr. Martin
R. Prince (hereinafter, “Prince”), an individual residing at *****, and EPIX
Medical, Inc., a corporation duly organized under the laws of the State of
Delaware and having a principal place of business at 71 Rogers Street,
Cambridge, Massachusetts USA (hereinafter “EPIX”).

 

RECITALS

 

Prince is recognized for his expertise in clinical magnetic resonance imaging
and magnetic resonance angiography and as the inventor of contrast-enhanced
magnetic resonance angiography techniques.

 

Prince and Dr. James F.M. Meaney (hereinafter “Meaney”), an individual residing
at *****, are the inventors of certain inventions relating to bolus chase
magnetic resonance angiography.

 

Prince represents that he is the owner of, and has the right to grant the
discharges, releases, promises and covenants not to sue under intellectual
property pertaining to magnetic resonance imaging and magnetic resonance
angiography that is the subject of this Agreement.

 

EPIX, by itself and/or through its Affiliates, desires to obtain discharges,
releases, promises and covenants not to sue under the above-described
intellectual property rights to enable them to develop and commercialize
contrast agents used in magnetic resonance imaging and magnetic resonance
angiography on the terms set forth herein.

 

Prince desires to grant such discharges, releases, promises and covenants not to
sue on the terms set forth herein.

 

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AGREEMENT

 

NOW, THEREFORE, in consideration of the promises and mutual covenants set forth
herein, the parties agree as follows:

 

ARTICLE 1

DEFINITIONS

 

1.1                                 “Effective Date” means the date first set
forth above.

 

1.2                                 “Royalty Start Date” means the date of the
first Sale of an MR Contrast Agent Product.

 

1.3                                 “Affiliate(s)” means any entity which is or
becomes directly or indirectly controlled by EPIX, control being defined as (i)
the direct or indirect ownership of at least 50% of the stock entitled to vote
upon election of directors or persons performing similar functions, or (ii)
direct or indirect ownership of the maximum percentage of such stock permitted
by local laws or regulations in those countries where fifty percent (50%)
ownership by a foreign entity is not permitted.

 

1.4                                 “CE-MRA” means contrast-enhanced MR
angiography.

 

1.5                                 “MR” means magnetic resonance imaging and
magnetic resonance angiography.

 

1.6                                 “MR Contrast Agent(s)” means any contrast
agent used in, or capable of use in CE-MRA procedures.

 

1.7                                 “MR Imaging System(s)” means any magnetic
resonance transmission/receiving system, inclusive of all hardware (for example,
without limitation, imaging coils) and software components, that is capable of
performing CE-MRA procedures.

 

1.8                                 “MR Injection Product(s)” means any pump,
tubing set, or like apparatus that is designed for or advertised to be used in
CE-MRA procedures to administer, inject or infuse contrast agent(s) to a
patient.  Notwithstanding the foregoing, a syringe that is pre-filled with the
MR Contrast Agent Product is not an MR Injection Product.

 

1.9                                 “MR Contrast Agent Product” means a product
containing the MR Contrast Agent currently designated by EPIX as MS-325. 
Expressly excluded from this definition are all other MR Contrast Agents, and MR
Imaging Systems or any MR Injection Products, no matter how Sold, provided, used
or disposed of.

 

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1.10                           “Prince MR Intellectual Property” means any
invention, improvement, trade secret, patent, patent application, copyright and
other intellectual property rights to which Prince is able to grant the
discharge, release, promise and covenant not to sue herein as of the Effective
Date or thereafter during the term of this Agreement, which relate to the
manufacture, use, importation, advertisement, offer to Sell, or Sale of any MR
Contrast Agent Product.

 

1.11                           “Prince Patents” means the patents and patent
applications included within the Prince MR Intellectual Property, including,
without limitation, the patents and patent applications listed in Exhibit A and
any and all applications, continuation applications, continuation-in-part
applications, divisional applications, reissue applications, reexamination
applications, foreign counterparts or other statutory rights arising from or
based on such applications, anywhere in the world.

 

1.12                           “Third Party(ies)” means any entity which is
neither a party to this Agreement nor an Affiliate of such a party.

 

1.13                           “EPIX Licensee(s)” means any entity that is
authorized by EPIX to Sell the MR Contrast Agent Product to a customer/user in
any country of the world.  Currently, the only EPIX Licensees are Berlex
Laboratories, Inc. (hereinafter “Berlex”), a company having its principal place
of business at 340 Changebridge Road, Montville, New Jersey, and Schering AG
(hereinafter “Schering”), a company having its principal place of business at
Müllerstrasse 178, D-13342 Berlin, Germany.

 

1.14                           “Sell” means to sell, lease, or otherwise
transfer or convey an MR Contrast Agent Product.  A commercially reasonable
number of units of MR Contrast Agent Product that are provided, free of charge,
to Third Parties as samples for promotional purposes shall be deemed not to have
been Sold for purposes of determining the royalty payable hereunder.  “Sold”,
“Sale”, and other forms of “Sell” shall have the same meaning.

 

1.15                           “Net Sales” means the gross amount invoiced or
otherwise charged a customer by EPIX (or its Affiliates) or EPIX Licensees for a
MR Contrast Agent Product Sold by EPIX (or its Affiliates) or EPIX Licensees in
any country of the world, less the following amounts: (a) insurance,
transportation, taxes, customs brokers fees and customs duties provided such
deductions are paid by EPIX (or its Affiliates) or EPIX Licensees and listed on
the invoice; (b) allowances or credits to customers in the ordinary course of
business in connection with the sale of an MR Contrast Agent Product on account
of outdating, recall, market withdrawal, rejection, or return of such MR
Contrast Agent Product, (c) credited allowances to such independent

 

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customers for such MR Contrast Agent Product which were spoiled, damaged,
out-dated or returned; (d) freight and insurance costs charged to such
customers; (e) quantity and promotional discounts actually allowed and taken;
(f) sales, use, value added, and other taxes or governmental charges (such as
customs duties) incurred in connection with the sale, exportation or importation
of the MR Contrast Agent Product in finished packaged form; (g) charge back
payments and/or rebates or other fees provided to distributors, wholesalers, or
other purchasers and managed health care organizations or federal, state and
local governments, their agencies, purchasers and reimbursers, including
reimbursements to social security organizations; and (h) volume-related customer
program costs which are required by the customer and which are independent of
marketing initiatives.

 

The parties recognize that (a) customers may include persons in the chain of
commerce, who enter into agreements with a seller as to price even though title
to the MR Contrast Agent Product does not pass directly from the seller to such
customers, and even though payment for such MR Contrast Agent Product is not
made by such customers directly to the seller; and (b) in such cases chargebacks
paid by EPIX (or its Affiliates) or EPIX Licensees to or through a Third Party
(such as a wholesaler) can be deducted by EPIX (or its Affiliates) or EPIX
Licensees  from gross revenue in order to calculate Net Sales.  Any deductions
listed above which involve a payment by EPIX (or its Affiliates) or EPIX
Licensees shall be taken as a deduction against aggregate sales for the quarter
in which the payment is made.

 

Net Sales will be accounted for in accordance with international accounting
standards consistently applied. In any instance where the calculation of Net
Sales according to international accounting standards differs materially from
GAAP such that the result of such calculation under international accounting
standards would cause EPIX (or its Affiliates) or EPIX Licensees to improperly
account for such revenue under GAAP, EPIX will provide Prince with any and all
information requested by Prince regarding the calculation of Net Sales to enable
Prince to comply with GAAP in recognizing revenue from such Net Sales.

 

Where a MR Contrast Agent Product is transferred by EPIX (or its Affiliates),
through one or more Affiliates or EPIX Licensees for Sale to a customer/user,
only the Sale to such customer/user shall be included in the Net Sales.  For
example, where a MR Contrast Agent Product is transferred by (i) EPIX to Berlex
or Schering (whether through one or more Affiliates of EPIX) for Sale to a
customer/user, or (ii) Mallinckrodt to EPIX or Berlex or Schering for Sale to a
customer/user, only the Sale to such customer/user shall be included in the Net
Sales.

 

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Notwithstanding the foregoing, the Net Sales for any calendar quarter shall be
no less than the net sales of MR Contrast Agent Product by EPIX Licensees for
the corresponding calendar quarter as reported (i) by EPIX Licensees to EPIX (or
its Affiliates) or (ii) by EPIX in publicly available documentation (such as,
for example, the Quarterly and/or Annual Reports).

 

Given the worldwide scope of this Agreement, the impracticality of monitoring by
EPIX of the movement of the MR Contrast Agent Product through international
markets and the impracticality of establishing a value for pro-rata use in
CE-MRA (if any), it is agreed and recognized that paying royalties on all Sales
of MR Contrast Agent Product, as a whole, is fair and reasonable, representing a
balance between the concerns and interests of both parties and resulting in a
convenience for EPIX.

 

1.16                           “Third Party Price” means the average amount paid
by all Third Parties for the MR Contrast Agent Product in arms-length
transactions during the calendar quarter corresponding to the royalty period of
any royalty report, provided there are substantial Sales of such MR Contrast
Agent Product to Third Parties during the royalty period.  In the event of a
dispute regarding whether there have been such substantial Sales, the parties
agree to first meet and negotiate in good faith with the expectation of
determining a Third Party Price.

 

1.17                           “Confidential Information” means any information
disclosed by one party to the other, pursuant to this Agreement, which is in
written, graphic, machine readable or other tangible form and is marked
“Confidential”, “Proprietary” or in some other manner to indicate its
confidential nature.  Confidential Information may also include oral information
disclosed by one party to the other provided that such information is designated
as confidential at the time of disclosure and reduced to a written summary by
the disclosing party, within thirty (30) days after its oral disclosure, which
is marked in a manner to indicate its confidential nature and delivered to the
receiving party.  Notwithstanding the foregoing limitations, all sales and
similar reports and records provided by EPIX to Prince hereunder, or to which
Prince or its designee may gain access pursuant to Article 4, are hereby deemed
to be Confidential Information of EPIX.

 

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ARTICLE 2

DISCHARGE, RELEASE, AND COVENANT

 

2.1                                 Subject to the terms and conditions of this
Agreement, Prince hereby discharges, releases, promises and covenants not to
sue, threaten to sue or otherwise disturb EPIX, and its Affiliates, and any EPIX
Licensee, subcontractor, supplier, distributor, vendor, reseller, purchaser, or
user of the MR Contrast Agent Product, acquired directly or indirectly from EPIX
(or its Affiliates) or an EPIX Licensee in any country in the world, for any
claim or cause of action based upon (i) the Prince MR Intellectual Property and
(ii) the manufacture, use, Sale, advertisement, offer for Sale, importation,
lease, or otherwise transfer or disposition of the MR Contrast Agent Product,
whether such claim or cause of action is presently known or unknown.  This
covenant not to sue is personal in nature and limited to EPIX, its Affiliates,
any successor(s) to EPIX, and any EPIX Licensee, subcontractor, supplier,
distributor, vendor, reseller, purchaser, or user of the MR Contrast Agent
Product.

 

2.2                                 Prince hereby grants to EPIX, and its
Affiliates and any EPIX Licensee, a non-exclusive, license, without the right to
sublicense, under U.S. Patent ***** to make, have made, use, offer to Sell,
Sell, import, export and otherwise transfer the MR Contrast Agent Product during
the term of this Agreement.  Nothing in this Agreement shall be construed as
expressly, impliedly, or otherwise granting a license, of any kind or type,
under the Prince Patents other than U.S. Patent *****.

 

2.3                                 Nothing contained in this Agreement shall be
construed as:

 

(a)          a warranty or representation by Prince as to the validity,
enforceability, and/or scope of any one of the Prince Patents; or

 

(b)         imposing on Prince any obligation to institute legal action for
infringement of any one of the Prince Patents, or to defend a legal action
brought by a Third Party in relation to any one of the Prince Patents; or

 

(c)          imposing on Prince any obligation to file application(s) or other
intellectual property registration(s) related to the Prince MR Intellectual
Property, or to secure or maintain in force any one of the Prince Patents; or

 

(d)         imposing on Prince any obligation to furnish any technical
information or know-how.

 

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ARTICLE 3

COMPENSATION AND RELATED OBLIGATIONS

 

3.1                                 In consideration of the license, discharges,
releases, promises and covenants not to sue granted herein, EPIX agrees to pay
Prince:

 

(a)          ***** ($ *****), the payment being due and payable within two (2)
weeks of the Effective Date of the Agreement; and

 

(b)         commencing with the Royalty Start Date, a royalty equal to *****
percent (*****%) of Net Sales.

 

3.2                                 In the event that the MR Contrast Agent
Product is Sold during a calendar quarter under circumstances where the selling
price is not established on an arms-length basis, Net Sales shall be calculated
using the Third Party Price of such MR Contrast Agent Product.  If there is no
Third Party Price for such MR Contrast Agent Product, the parties shall
immediately determine an appropriate royalty base for such MR Contrast Agent
Product.  In the event that a resolution is not reached, the dispute shall be
resolved according to the resolution procedure of paragraph 13.2.

 

3.3                                 In further consideration of the license,
discharges, releases, promises and covenants granted herein, EPIX agrees to
provide to Prince, or another designated in writing by Prince, ***** Dollars
($*****) worth of MR Contrast Agent Product per year calendar commencing on the
earlier of (i) the day that the FDA issues final approval of the use of MR
Contrast Agent Product for a CE-MRA procedure or indication, or (ii) the day the
MR Contrast Agent Product becomes commercially available, and continuing each
calendar year thereafter until expiration or termination of the Agreement.  The
number of Doses to be provided for each calendar year will be determined by
dividing ***** by the Third Party Price per Dose as of the first day of such
year.  EPIX will provide Prince with an invoice promptly after the first day of
the year setting forth the number of Doses to be delivered to Prince during such
year and the method by which the number of doses was determined, including
without limitation, the Third Party Price per Dose.  Such Doses shall be deemed
not to have been Sold for purposes of determining the royalty payable under this
Agreement.  One (1) dose of MR Contrast Agent Product is equal to the largest
commercially available volume of MR Contrast Agent Product, within a container,
for administration to one (1) patient.  For example, where the largest
commercially available volume of MR Contrast Agent within a container for
administration to one (1) patient is a vial or syringe containing one hundred
milliliters

 

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(100ml) of MR Contrast Agent Product, one dose of MR Contrast Agent Product is
one hundred milliliters (100ml).

 

3.4                                 EPIX shall deliver the MR Contrast Agent
Product referenced in paragraph 3.3 of this Agreement to a place in North
America as designated by Prince within ninety (90) days of written notice.  Each
dose shall be delivered to Prince in accordance with industry “best practices”
and shall be packaged in a separate container in the same manner and material(s)
(for example, without limitation, vial or syringe) as commercially available to
bona fide customers/users.  In the event that the MR Contrast Agent Product is
available in more than one type or form of container, Prince shall have the
option, at his sole discretion, to designate the type or form of container.  To
facilitate storage of such MR Contrast Agent Product, Prince may, at his sole
discretion, specify delivery of the MR Contrast Agent Product of paragraph 3.3
in prorated amounts at monthly or quarterly intervals.

 

3.5                                 Notwithstanding paragraph 3.3, in the event
that Prince, in any calendar year, requests delivery of fewer Doses than were
indicated on the invoice provided to Prince by EPIX for such calendar year, then
the difference between the number of Doses indicated on the invoice and the
number of Doses actually requested in that calendar year shall be added to the
number of Doses available to be requested by Prince in a subsequent year under
the conditions of paragraph 3.4.  Further, in the event that the last year of
the term of this Agreement is not a full calendar year, EPIX shall deliver to
Prince, under the same terms and conditions as set forth in paragraphs 3.3 and
3.4, a pro-rated amount of MR Contrast Agent Product plus any increase based on
a carry over of a non-requested amount from previous year(s).

 

3.6                                 Prince shall not Sell directly or indirectly
(for example, through another) the MR Contrast Agent Product provided by EPIX to
Prince pursuant to paragraphs 3.3 - 3.5 of this Agreement.  Notwithstanding the
foregoing, MR Contrast Agent Product of paragraphs 3.3 - 3.7 that is used in a
CE-MRA procedure by Prince, or his employers or employees, which is invoiced
and/or charged to a Third Party, shall not be considered as Sold to such Third
Party for the purposes of this paragraph 3.6 nor for the purposes of determining
the royalty payable under this Agreement.

 

3.7                                 Prince agrees to comply with all applicable
laws and regulations pertaining to the use, handling, storage, disposal,
administration, billing, recordkeeping and sale of the MR Contrast Agent Product
provided by EPIX hereunder.  Without limiting the generality of the foregoing,
Prince will properly disclose accurate pricing information relating to the MR
Contrast Agent Product in any costs claimed or charges made to

 

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federal health care programs in accordance with the provisions of 42 USC
Section 1320a-7b and 42 CFR Section 1001.952(h) if and as may be appropriate
thereunder.

 

3.8                                 Notwithstanding anything contained in this
Agreement to the contrary, it shall not be a breach of this Agreement in the
event that Prince, or his employers or employees, use the MR Contrast Agent
Product of paragraphs 3.3 - 3.7 for CE-MRA procedures and/or to practice the
techniques covered by the Prince Patents.

 

ARTICLE 4

PAYMENTS & ACCOUNTING

 

4.1                                 EPIX and its Affiliates shall keep complete
and accurate records relating to the Sale of the MR Contrast Agent Product
during the term (as determined by paragraph 6.1).  These records shall be
retained for a period of at least three (3) years from the date of payment,
notwithstanding the expiration or other termination of this Agreement.  Prince,
through his designated independent accounting firm, shall have the right to
examine and audit, not more than once a year unless the preceding audit revealed
a discrepancy exceeding ***** percent (*****%) of the total royalties due for
the period under audit, and during normal business hours, all such records and
such other records and accounts as may contain, under recognized accounting
practices, information bearing upon the amount of royalties payable to Prince
under this Agreement.  In no event will Prince audit any given reporting period
more than once.  Prompt adjustment shall be made by EPIX to compensate for any
underpayment of royalties hereunder, together with interest thereon, calculated
in accordance with Paragraph 4.4.  Should the amount of any such underpayment
exceed ***** percent (*****%) of the total royalties due for the period under
audit, then upon request by Prince, EPIX shall pay for the cost of the audit. 
If any ***** (*****) consecutive audits reveal underpayments of royalties in
excess of ***** percent (*****%), Prince shall be entitled to immediately
terminate this Agreement on notice to EPIX at any time within ninety (90) days
after such ***** such audit.  Should such audit disclose an overpayment of
royalties hereunder, such overpayment shall be taken as a credit against future
royalties, and in the event that there are no future royalties, Prince shall
promptly issue a refund thereof.

 

4.2                                 Within forty-five (45) days after the end of
each calendar quarter, or, in the event there is/are EPIX Licensee(s), within
fifteen (15) days following the receipt of sales

 

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data from the EPIX Licensee of the Sales of the MR Contrast Agent Product by
such EPIX Licensee for such quarter, EPIX shall pay to Prince, by electronic
transfer, the royalties payable hereunder for such quarter.  Concurrently
therewith, EPIX shall furnish to Prince: (1) in the event there is/are EPIX
Licensee(s), a true and correct copy of each EPIX Licensee royalty report to
EPIX (or its Affiliates), including, without limitation, all sales data of the
MR Contrast Agent Product Sold by such EPIX Licensee, and (2) a statement, in
suitable form, showing (i) the volume of the MR Contrast Agent Product Sold,
(ii) the Sales in U.S. Dollars of the MR Contrast Agent Product Sold during such
quarter, (iii) the amount of royalty payable thereon, and (iv) the number of
units of MR Contrast Agent Product that are provided, free of charge, to Third
Parties as samples for promotional purposes, as described in paragraph 1.13 of
this Agreement.  It is agreed that a suitable form of the statement is attached
as Exhibit B.  If no MR Contrast Agent Product subject to royalty has been Sold,
that fact shall be shown on such statement.

 

4.3                                 All royalty and other payments to Prince
hereunder, including those of paragraphs 3.1(a) and 3.1(b), shall be made by
electronic transfer, in U.S. Dollars, directly to the following account or
another designated in writing by Prince:

 

Martin R. Prince

*****

 

4.4                                 All royalty and other payments to Prince
hereunder shall be in U.S. Dollars. The calculation of payments which refer to
Net Sales in countries other than United States shall be based upon EURO and
converted into U. S. Dollars. Therefore, where payments are based upon Net Sales
in countries other than the United States and the member states of the European
Currency Union, the amount of such Net Sales expressed in the currency of such
country shall be converted into EURO at the exchange rate of the last business
day of the applicable calendar quarter. The applicable exchange rate shall be
the EURO Foreign Exchange Reference Rate published by the European Central Bank,
Frankfurt / Main. If no EURO Foreign Exchange Reference Rate is determined for
the relevant currency, the Parties shall agree upon another reference rate.
Finally, the payable EURO amount shall be converted into US Dollars at the EURO
Foreign Exchange Reference Rate’ published by the European Central Bank,
Frankfurt / Main, on the last business day of the applicable calendar quarter. 
Late payment of royalties hereunder shall be subject to interest, ***** (or the
maximum allowed by applicable law, if less).  The amount of interest shall be
calculated from the royalty due date to the date of electronic transfer. 
Failure to make ***** (*****) consecutive royalty payments in a

 

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timely fashion shall be grounds for immediate termination.

 

4.5                                 All payments made by EPIX under this
Agreement shall be without deduction for taxes, assessments, currency exchange
fees or other charges of any kind or description.  Any payment made by EPIX to
Prince under this Agreement shall not be refunded or refundable to EPIX (or any
other entity) for any reason whatsoever, except in the case of administrative or
accounting errors, such as mistakes in typing, calculation or other clerical
oversight.

 

4.6                                 Payment of royalties due under this
Agreement to any person, firm or entity, other than Prince, including without
limitation, any escrow fund or escrow agent, unless requested or permitted by
Prince, or ordered by any court, administrative agency or other government body
of competent jurisdiction, shall constitute a material breach of this
Agreement.  In the event that, pursuant to an order by a court, administrative
agency or other government body of competent jurisdiction, EPIX pays such
royalties due under this Agreement to a person, firm or entity, other than
Prince, EPIX shall (a) provide notice to Prince no less than sixty (60) days
before such payment, (b) provide Prince with any and all materials from such
court, administrative agency or other government body ordering such payment, and
(c) demonstrate such court, administrative agency or other government body
ordering such payment is or has jurisdiction.  All royalties not subject to such
order, shall be paid to Prince and payment of such royalties to any person, firm
or entity, other than Prince, shall constitute a material breach of this
Agreement.

 

4.7                                 Prince agrees to provide to EPIX
documentation demonstrating that Prince pays taxes in the United States.  In the
event that, after the Effective Date of this Agreement, a country imposes any
withholding tax on account of applicable laws or regulations that require taxes
to be withheld on royalty payments made by EPIX under this Agreement, EPIX shall
deduct such taxes from the payment, provided EPIX notifies Prince, in writing,
sixty (60) days before any such deduction.  EPIX shall (a) timely pay the
deducted taxes to the competent tax authority and (b) notify Prince within
thirty (30) days of the payment made to the competent tax authority.  EPIX
agrees to assist Prince in any intervention necessary to exempt such fee and
royalty payments from tax, and EPIX agrees to make all necessary filings, and
take such other actions, as are necessary to minimize the tax rate.  EPIX shall
promptly send to Prince the official certificate of such payment to enable
Prince to support a claim for a foreign tax credit with respect to any such
taxes so withheld and paid against income taxes which may be levied by the
United States government.

 

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ARTICLE 5

EQUITY COMPONENT

 

5.1                                 In further consideration of the license,
discharges, releases, promises and covenants not to sue granted herein, EPIX
agrees to issue and deliver to Prince, on January 2, 2004, One Hundred
Thirty-Two Thousand (132,000) shares of its common stock, $0.01 par value per
share, pursuant to a Stock Purchase Agreement executed concurrently herewith.

 

ARTICLE 6

TERM AND TERMINATION

 

6.1                                 This Agreement shall commence on the
Effective Date and shall continue until the expiration of the last-to-expire
patent within the Prince Patents, unless earlier terminated as provided herein. 
Upon a termination of this Agreement, except as otherwise provided in Paragraph
6.3, all rights and obligations of the parties shall immediately terminate.

 

6.2                                 Either party shall have the right to
terminate this Agreement following any material breach or default in performance
under this Agreement by the other Party upon sixty (60) days prior written
notice by certified mail to the breaching party specifying the nature of the
breach or default.  Unless the breaching party has either cured or taken such
steps as may be reasonably expected to cure the breach or default prior to the
expiration of such sixty (60) day period, the non-breaching party, at its sole
option, may terminate this Agreement upon written notice to the breaching
party.  Termination of this Agreement shall become effective upon receipt of
such notice by the breaching party.  Notwithstanding the foregoing, the
discharges, releases, promises and covenants not to sue granted herein are
contingent upon payment by EPIX of the royalties set forth in Articles 3 and 4,
and the satisfaction of the product delivery and equity obligations of EPIX set
forth in Articles 3 and 5.  In the event that EPIX fails to satisfy its
obligation(s), or become(s) unable to satisfy its required obligation(s), for
reasons attributable to EPIX (excluding events such as, without limitation,
force majeure), Prince may, upon written notice to EPIX, and EPIX’s failure to
remedy within sixty (60) days of receiving such notice, terminate this Agreement
and revoke all discharges, releases, promises and covenants not to sue granted
herein.

 

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6.3                                 The provisions of paragraphs 2.3, and the
provisions of Articles 2, 4, 6, 8, 10, 11 and 13, with respect to any MR
Contrast Agent Product Sold prior to the date of expiration or termination,
shall survive any expiration or termination of this Agreement for any reason;
and all provisions, other than those specified immediately above, shall
immediately terminate upon any termination or expiration of this Agreement.

 

ARTICLE 7

NOTICE

 

7.1                                 All notices and other communications
required or permitted hereunder shall be in writing and shall be mailed by first
class air mail (registered, if available), postage prepaid, or otherwise
delivered by hand, by messenger or by telecommunication, addressed to the
addresses set forth below or at such other address furnished with a notice in
the manner set forth herein.  Such notices shall be deemed to have been
effective when delivered or, if delivery is not accomplished by reason of some
fault of the addressee, when tendered.  All notices shall be in English.

 

In the case of EPIX, notices and other communications shall be addressed to:

 

EPIX Medical, Inc.

71 Rogers Street

Cambridge, MA 02142-1118

ATTN: President

Telephone: 617-250-6000

Facsimile: 617-250-6031

 

In the case of Prince, notices and other communications shall be addressed to:

 

Dr. Martin R. Prince

*****

 

In the case of Meaney, notices and other communications shall be addressed to:

 

Dr. James F.M. Meaney

*****

 

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ARTICLE 8

WARRANTIES

 

8.1                                 Prince warrants and represents that:

 

(a)          he has full authority to enter into this Agreement and to grant the
discharges, releases, promises and covenants not to sue;

 

(b)         he owns all right title and interest in and to the Prince Patents
except as disclosed on Exhibit A; and

 

(c)          as of the effective date of the Agreement, Exhibit A contains a
complete list of all issued patents and pending patent applications relating to
MR, which Prince has authority to license and grant the discharges, releases,
promises and covenants as provided herein.

 

ARTICLE 9

TRANSFERABILITY

 

9.1                                 In the event of any change in ownership,
direction or control of EPIX, the terms of this Agreement shall be binding upon
and inure to the benefit of the respective successor(s) and assignee(s).

 

9.2                                 In the event Prince sells, assigns, licenses
or otherwise conveys the Prince MR Intellectual Property to a Third Party,
Prince agrees that, as a pre-condition to the validity of such sale, assignment,
license or conveyance, Prince will require that: (a) such Third Party discharge,
release, promise and covenant not to sue, threaten to sue or otherwise disturb
EPIX, and its Affiliates, and any EPIX Licensee, subcontractor, supplier,
distributor, vendor, reseller, purchaser, or user of the MR Contrast Agent
Product, acquired directly or indirectly from EPIX (or its Affiliates) or an
EPIX Licensee in any country in the world, for any claim or cause of action
based upon (i) the Prince MR Intellectual Property and (ii) the manufacture,
use, Sale, advertisement, offer for Sale, importation, lease, or otherwise
transfer or disposition of the MR Contrast Agent Product, whether such claim or
cause of action is presently known or unknown, (b) EPIX will receive advance
written notice of such sale, assignment, license or conveyance, and (c) EPIX
will be made an express third party beneficiary of the Third Party’s discharge,
release, promise and covenant

 

14

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not to sue described in this paragraph.  Prince agrees that any sale,
assignment, license or conveyance made in violation of this paragraph shall be
void ab initio.

 

ARTICLE 10

INDEMNITY

 

10.1                           EPIX shall defend, indemnify and hold Prince
harmless from and against all actions, claims, proceedings and demands
(including, without limitation, loss, death, injury, illness or damage, whether
personal or property, special, direct, indirect, or consequential, including
consequential financial loss) asserted by Third Parties that may be brought
against him and that arise out of the development, manufacture, use, sale,
importation or other commercialization efforts (including, without limitation,
advertisements and marketing) relating to the MR Contrast Agent Product by EPIX,
its Affiliates or EPIX Licensees.  If Prince, after learning of actions, such
claim, proceeding and demand from a Third Party, fails to provide prompt notice
to EPIX of any claims that are subject to this indemnity obligation after Prince
learns of such claims, then EPIX’s indemnity obligation shall be limited to the
extent such failure causes actual prejudice to the rights and defenses which
otherwise would have been available to EPIX.

 

10.2                           Prince shall defend, indemnify and hold EPIX
harmless from and against all successful actions, claims, proceedings and
demands (including, without limitation, loss, death, injury, illness or damage,
whether personal or property, special, direct, indirect, or consequential,
including consequential financial loss) asserted by a federal, state or local
governmental authority of competent jurisdiction that may be brought against
EPIX and that arise out of the breach by Prince of his obligations under
paragraph 3.7 hereof.  If EPIX, after learning of actions, such claim,
proceeding and demand from a Third Party, fails to provide prompt notice to
Prince of any claims that are subject to this indemnity obligation after EPIX
learns of such claims, then Prince’s indemnity obligation shall be limited to
the extent such failure causes actual prejudice to the rights and defenses which
otherwise would have been available to Prince.

 

10.3                           If a Party (the “Indemnitee”) seeks indemnity
from the other Party (the “Indemnitor”) for a claim under paragraphs 10.1 or
10.2, the Indemnitee shall: (i) fully and promptly notify the Indemnitor upon
learning of such claim or potential claim from a Third Party, (ii) permit the
Indemnitor to assume control of the defense of such

 

15

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claim, (iii) cooperate with the Indemnitor in such defense, (iv) not compromise
or settle any such claim and (v) take all reasonable steps to mitigate any loss
or liability in respect of such claim after learning of such claim or potential
claim from a Third Party.

 

10.4                           The obligation to defend and indemnify set forth
above in paragraphs 10.1 and 10.2 shall be a continuing obligation separate and
independent of other obligations, and shall survive the expiration or
termination of this Agreement.

 

10.5                           Except as provided in paragraphs 10.1 and 10.2,
neither party shall be liable to the other for any special, indirect, or
consequential damages, including consequential financial loss arising out of
this Agreement, or its performance.

 

10.6                           Prince disclaims and shall have no obligation of
defense, contribution, or indemnity with respect to any actual or alleged
infringement of any intellectual property right owned by a Third Party with
respect to the MR Contrast Agent Product.  Prince shall have no liability
arising out of any such actual or alleged intellectual property infringement.

 

ARTICLE 11

CONFIDENTIALITY

 

11.1                           The parties agree that the terms of this
Agreement are confidential and shall not be disclosed, except as required by the
rules of any stock exchange or applicable laws and regulations, or by operation
of law or a court, administrative agency, or other governmental body, or by EPIX
to its Affiliates and EPIX Licensee(s), without prior written permission from
the other party.  The parties may disclose the fact that they have entered into
an agreement regarding the Prince MR Intellectual Property, without more. 
However, neither party may represent that the Agreement is a license, but may
represent that it is a continuing discharge, release, promise and covenant not
to sue EPIX, its Affiliates, and any successor(s) to EPIX, and any EPIX
Licensee, distributor, vendor, reseller, purchaser or user of the MR Contrast
Agent Product.

 

11.2                           Notwithstanding paragraph 11.1, Prince may
provide a copy of the Agreement to: (a) Meaney, provided Meaney agrees to the
confidentiality terms set forth in the Agreement, and (b) the employer of Prince
and/or Meaney, if required to do so for purposes of determining potential
conflicts of interest.  Any copy of this Agreement

 

16

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provided to such employer shall have the financial terms of Articles 3 and 4
redacted therefrom.

 

11.3                           Notwithstanding paragraph 11.1, EPIX may provide
a copy of the Agreement to potential successor(s) and/or assign(s) of all or a
major part of the assets of EPIX.

 

ARTICLE 12
MEET AND CONFER REGARDING
ISSUES OR DISPUTES PERTAINING TO THIS AGREEMENT

 

12.1                           The parties agree to meet at least every eighteen
(18) months to discuss any issues that may arise regarding the Agreement.  Such
meeting shall be at a time mutually agreed upon by the parties, and may be via
telephone or video conference, or at a location to be mutually agreed upon by
the parties.

 

12.2                           In the event a dispute arises between the parties
regarding rights or obligations under this Agreement, the parties agree to first
meet to discuss the matter and seek resolution before undertaking litigation or
legal action of any kind.

 

ARTICLE 13

MISCELLANEOUS

 

13.1                           This Agreement shall be construed, and the legal
relations between the parties shall be determined in accordance with the law of
the State of New York, without regard to any principles of conflict laws.

 

13.2                           The parties agree to resolve any dispute or claim
that arises out of this Agreement in any competent federal or state court: (i)
located in the state where Prince then resides if initiated by EPIX (unless
Prince resides in Louisiana, in which event the case shall be brought in Texas)
and (ii) located in the Commonwealth of Massachusetts if initiated by Prince. 
The parties agree not to challenge or otherwise oppose the jurisdiction of the
applicable court over any such dispute or claim.

 

13.3                           If any paragraph, provision, or clause thereof in
this Agreement shall be found or be held to be invalid or unenforceable in any
jurisdiction in which this Agreement is being performed, the remainder of this
Agreement shall be valid and enforceable

 

17

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and the parties shall negotiate, in good faith, a substitute, valid and
enforceable provision which most nearly effects the parties’ intent in entering
into this Agreement.

 

13.4                           This Agreement contains the entire and only
agreements between the parties respecting the subject matter hereof and
supercedes and cancels all previous negotiations, agreements, commitments and
writings in respect thereto.  This Agreement may not be amended, supplemented,
released, discharged, abandoned, changed or modified in any manner, orally or
otherwise, except by an instrument in writing of concurrent or subsequent date
signed by a duly authorized officer or representative of the parties.

 

13.5                           EPIX represents that all corporate action
necessary for the authorization, execution and delivery of this Agreement by
such party and the performance of its obligations hereunder has been taken. 
EPIX further represents that the definition of “Net Sales” as set forth on
Exhibit C attached hereto is a true and complete copy of the definition of “Net
Sales” taken from the Strategic Collaboration Agreement between EPIX and
Schering AG dated June 9, 2000.

 

13.6                           This Agreement may be executed in two (2) or more
counterparts, all of which, taken together, shall be regarded as one and the
same instrument.  Execution may be completed through the exchange of executed
facsimile copies hereof.

 

13.7                           The parties hereto are independent contractors. 
Nothing contained herein or done in pursuance of this Agreement shall constitute
either party the agent of the other party for any purpose or in any sense
whatsoever, or constitute the parties as partners or joint ventures.

 

13.8                           The failure of either party to enforce at any
time the provisions of this Agreement, or the failure to require at any time
performance by the other party of any of the provisions of this Agreement, shall
in no way be construed to be a present or future waiver of such provisions, nor
in any way affect the right of either party to enforce each and every such
provision thereafter.  The express waiver by either party of any provision,
condition or requirement of this Agreement shall not constitute a waiver of any
future obligation to comply with such provision, condition or requirement.

 

[Signature page follows.]

 

18

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in duplicate by its duly authorized officer or representative.

 

 

EPIX MEDICAL, INC.

MARTIN R. PRINCE

 

 

By:

/s/ Peyton J. Marshall

 

By:

/s/ Martin R. Prince

 

 

 

 

 

 

Name:

Peyton J. Marshall

 

Date:

November 15, 2003

 

 

 

 

 

Title:

Chief Financial Officer

 

 

 

 

 

Date:

November 17, 2003

 

 

 

 

 

 

Read and understood:

 

 

 

James F. M. Meaney

 

 

 

By:

/s/ James F. M. Meaney

 

 

 

 

 

 

Date:

 November 15, 2003

 

 

 

19

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EXHIBIT A

 

U.S. Patents:

 

*****

*****

*****

*****

*****

*****

*****

*****

*****

***** **

*****

*****

*****

*****

 

U.S. Applications:

 

*****

*****

*****

*****

*****

*****

*****

*****

 

European Patents:

 

*****

*****

*****

*****

 

European Applications:

 

*****

*****

 

Canadian Application:

 

*****

 

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

** Prince does not own all right, title and interest in this patent

 

20

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EXHIBIT B

 

Product: MS-325

 

Period                   

 

Exchange Rate (end of calendar quarter)                               

 

Country

 

Sales

 

Amount

 

Royalty

 

Royalty Due

 

 

 

Volume (L)

 

Sold ($US)

 

Rate

 

($US)

 

 

 

 

 

 

 

 

 

 

 

United States:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asia:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Australia:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other countries:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total royalty payable
Amount to be remitted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Royalty Due:

 

 

 

 

 

 

 

($US)

 

 

21

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EXHIBIT C

 

“Net Sales“ means the invoiced sales price per unit for each of the Licensed
Products billed by a Party or its Affiliates or any distributor or either who is
not an Affiliate, or, to the extent permitted in Section 3.1.2 hereof, by
permitted sublicensees of Schering to independent customers, less actual (a)
credited allowances of such independent customers for such Licensed Products
which were spoiled, damaged, out-dated or returned; (b) freight and insurances
Costs charged to such customers, (b) freight and insurance costs charged to such
customers; (c) quantity and promotional discounts actually allowed and taken;
(d) sales, use, value added, and other taxes or governmental charges (such as
customs duties) incurred in connection with the sale, exportation or importation
of the Licensed Products in finished packaged form; (e) charge back payments
and/or rebates or other fees provided to distributors, wholesalers, or other
purchasers and managed health care organizations or federal, state and local
governments, their agencies, purchasers and reimbursers, including
reimbursements to social security organizations; and (f) volume-related customer
program costs which are required by the customer and which are independent of
marketing initiatives.  The transfer of any Licensed Product by a Party or one
of its Affiliates to another Affiliate of such Party shall not be considered a
sale; in such cases, Net Sales shall be determined based on the invoiced sales
price by the Affiliate to its customer, less the deductions allowed under this
Section.

 

The Parties recognize that (a) Scherings customers may include persons in the
chain of commerce, who enter into agreements with Schering as to price even
though title to the Licensed Product does not pass directly from Schering to
such customers, and even though payment for such Licensed Product is not made by
such customers directly to Schering; and (b) in such cases chargebacks paid by
Schering to or through a Third Party (such as a wholesaler) can be deducted by
Schering from gross revenue in order to calculate Net Sales. Any deductions
listed above which involve a payment by Schering shall be taken as a deduction
against aggregate sales for the quarter in which the payment is made.

 

Net Sales will be accounted for in accordance with international accounting
standards consistently applied. In any instance where the calculation of Net
Sales according to international accounting standards differs materially from
GAAP such that the result of such calculation under international accounting
standards would cause EPIX to improperly account for such revenue under GAAP,
Schering will provide EPIX with any and all

 

22

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information requested by EPIX regarding the calculation of Net Sales to enable
EPIX to comply with GAAP in recognizing revenue from such Net Sales.

 

Schering agrees that, without obtaining the prior approval of EPIX (which
approval shall not be unreasonably withheld), it will not sell a combination of
products and/or services which include one or more Licensed Products, (i) for a
single price, or (ii) on other terms of purchase not separately identifying a
price per product.  Schering agrees that records of the deductions referred to
above for each Licensed Product shall be maintained in a manner that allows
audit of such deductions pursuant to Section 7.11.

 

Schering agrees that it will not offer customers discounted prices for any
Licensed Product (i) for the purpose of inducing the customer to purchase other
products or services of Schering without obtaining the prior approval of EPIX
(such approval not to be unreasonably withheld) as to the fair apportionment of
sales value to Licensed Product and any related Costs; or (ii) for reasons other
than the good faith sale of Licensed Product at a reasonable, mutually
beneficial profit margin in view of the circumstances applicable to the relevant
market.

 

23