Exhibit 10.17


 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


TABLE OF
CONTENTS


 


	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  “AAA”

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.2

  	
  “Adverse Drug Experience”

  	
  2

  
	
   

  	
   

  	
   

  
	
  1.3

  	
  “Affiliate”

  	
  2

  
	
   

  	
   

  	
   

  
	
  1.4

  	
  “Applicable Law”

  	
  2

  
	
   

  	
   

  	
   

  
	
  1.5

  	
  “Approved Japanese Affiliate”

  	
  2

  
	
   

  	
   

  	
   

  
	
  1.6

  	
  “Arbitration Request”

  	
  2

  
	
   

  	
   

  	
   

  
	
  1.7

  	
  “ARYx Indemnitees”

  	
  2

  
	
   

  	
   

  	
   

  
	
  1.8

  	
  “ARYx Know-How”

  	
  2

  
	
   

  	
   

  	
   

  
	
  1.9

  	
  “ARYx Patents”

  	
  2

  
	
   

  	
   

  	
   

  
	
  1.10

  	
  “ARYx Technology”

  	
  3

  
	
   

  	
   

  	
   

  
	
  1.11

  	
  “Assigned Inventions”

  	
  3

  
	
   

  	
   

  	
   

  
	
  1.12

  	
  “Blocking Patents”

  	
  3

  
	
   

  	
   

  	
   

  
	
  1.13

  	
  “Change of Control”

  	
  3

  
	
   

  	
   

  	
   

  
	
  1.14

  	
  “Co-Developed Product”

  	
  4

  
	
   

  	
   

  	
   

  
	
  1.15

  	
  “Co-Development Agreement”

  	
  4

  
	
   

  	
   

  	
   

  
	
  1.16

  	
  “Co-Development Notice”

  	
  4

  
	
   

  	
   

  	
   

  
	
  1.17

  	
  “Co-Development Option”

  	
  4

  
	
   

  	
   

  	
   

  
	
  1.18

  	
  “Combination Product”

  	
  4

  
	
   

  	
   

  	
   

  
	
  1.19

  	
  “Commercialization”

  	
  4

  
	
   

  	
   

  	
   

  
	
  1.20

  	
  “Commercialization Plan”

  	
  4

  
	
   

  	
   

  	
   

  
	
  1.21

  	
  “Commercially Reasonable Efforts”

  	
  4

  
	
   

  	
   

  	
   

  
	
  1.22

  	
  “Confidential Information”

  	
  5

  
	
   

  	
   

  	
   

  
	
  1.23

  	
  “Controlled”

  	
  5

  
	
   

  	
   

  	
   

  
	
  1.24

  	
  “Co-Promotion Agreement”

  	
  6

  
	
   

  	
   

  	
   

  
	
  1.25

  	
  “Co-Promotion Notice”

  	
  6

  
	
   

  	
   

  	
   

  
	
  1.26

  	
  “Co-Promotion Option”

  	
  6

  



 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


i

















 


	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  
	
  1.27

  	
  “Definitive QTc Study”

  	
  6

  
	
   

  	
   

  	
   

  
	
  1.28

  	
  “Development”

  	
  6

  
	
   

  	
   

  	
   

  
	
  1.29

  	
  “Development Plan”

  	
  6

  
	
   

  	
   

  	
   

  
	
  1.30

  	
  “Dollars”

  	
  7

  
	
   

  	
   

  	
   

  
	
  1.31

  	
  “Drug Approval Application”

  	
  7

  
	
   

  	
   

  	
   

  
	
  1.32

  	
  “Effective Date”

  	
  7

  
	
   

  	
   

  	
   

  
	
  1.33

  	
  “EMEA”

  	
  7

  
	
   

  	
   

  	
   

  
	
  1.34

  	
  “Execution Date”

  	
  7

  
	
   

  	
   

  	
   

  
	
  1.35

  	
  “Executive Officer”

  	
  7

  
	
   

  	
   

  	
   

  
	
  1.36

  	
  “Exploitation”

  	
  7

  
	
   

  	
   

  	
   

  
	
  1.37

  	
  “FDA”

  	
  8

  
	
   

  	
   

  	
   

  
	
  1.38

  	
  “Field”

  	
  8

  
	
   

  	
   

  	
   

  
	
  1.39

  	
  “First Commercial Sale”

  	
  8

  
	
   

  	
   

  	
   

  
	
  1.40

  	
  “FTE”

  	
  8

  
	
   

  	
   

  	
   

  
	
  1.41

  	
  “FTE Rate”

  	
  8

  
	
   

  	
   

  	
   

  
	
  1.42

  	
  “GMP”

  	
  8

  
	
   

  	
   

  	
   

  
	
  1.43

  	
  “Good Practices”

  	
  8

  
	
   

  	
   

  	
   

  
	
  1.44

  	
  “IBS Indication”

  	
  8

  
	
   

  	
   

  	
   

  
	
  1.45

  	
  “IND”

  	
  9

  
	
   

  	
   

  	
   

  
	
  1.46

  	
  “Indemnified Party”

  	
  9

  
	
   

  	
   

  	
   

  
	
  1.47

  	
  “Indemnifying Party”

  	
  9

  
	
   

  	
   

  	
   

  
	
  1.48

  	
  “Infringement”

  	
  9

  
	
   

  	
   

  	
   

  
	
  1.49

  	
  “Japan Sublicensee”

  	
  9

  
	
   

  	
   

  	
   

  
	
  1.50

  	
  “JJSC”

  	
  9

  
	
   

  	
   

  	
   

  
	
  1.51

  	
  “JSC”

  	
  9

  
	
   

  	
   

  	
   

  
	
  1.52

  	
  “Know-How”

  	
  9

  
	
   

  	
   

  	
   

  
	
  1.53

  	
  “Knowledge”

  	
  9

  
	
   

  	
   

  	
   

  
	
  1.54

  	
  “Licensed Compound”

  	
  9

  



 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


ii

















 


	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  
	
  1.55

  	
  “Licensed Product”

  	
  9

  
	
   

  	
   

  	
   

  
	
  1.56

  	
  “Losses”

  	
  10

  
	
   

  	
   

  	
   

  
	
  1.57

  	
  “Major EU Country”

  	
  10

  
	
   

  	
   

  	
   

  
	
  1.58

  	
  “Major Japanese Pharmaceutical Company”

  	
  10

  
	
   

  	
   

  	
   

  
	
  1.59

  	
  “Manufacture” and “Manufacturing”

  	
  10

  
	
   

  	
   

  	
   

  
	
  1.60

  	
  “Material”

  	
  10

  
	
   

  	
   

  	
   

  
	
  1.61

  	
  “Net Sales”

  	
  10

  
	
   

  	
   

  	
   

  
	
  1.62

  	
  “New Drug Application”

  	
  13

  
	
   

  	
   

  	
   

  
	
  1.63

  	
  “Notice”

  	
  13

  
	
   

  	
   

  	
   

  
	
  1.64

  	
  “OTC Licensed Product”

  	
  13

  
	
   

  	
   

  	
   

  
	
  1.65

  	
  “OUSJ Territory”

  	
  13

  
	
   

  	
   

  	
   

  
	
  1.66

  	
  “P&G Fiscal Year”

  	
  13

  
	
   

  	
   

  	
   

  
	
  1.67

  	
  “P&G Indemnitees”

  	
  13

  
	
   

  	
   

  	
   

  
	
  1.68

  	
  “P&G Inventions”

  	
  13

  
	
   

  	
   

  	
   

  
	
  1.69

  	
  “P&G Know-How”

  	
  13

  
	
   

  	
   

  	
   

  
	
  1.70

  	
  “P&G Patents”

  	
  13

  
	
   

  	
   

  	
   

  
	
  1.71

  	
  “P&G Technology”

  	
  14

  
	
   

  	
   

  	
   

  
	
  1.72

  	
  “Party”

  	
  14

  
	
   

  	
   

  	
   

  
	
  1.73

  	
  “Patent Challenge”

  	
  14

  
	
   

  	
   

  	
   

  
	
  1.74

  	
  “Patents”

  	
  14

  
	
   

  	
   

  	
   

  
	
  1.75

  	
  “PDEs”

  	
  14

  
	
   

  	
   

  	
   

  
	
  1.76

  	
  “Person”

  	
  14

  
	
   

  	
   

  	
   

  
	
  1.77

  	
  “Phase II Trial”

  	
  14

  
	
   

  	
   

  	
   

  
	
  1.78

  	
  “Phase III Trial”

  	
  14

  
	
   

  	
   

  	
   

  
	
  1.79

  	
  “Prescription Licensed Product”

  	
  15

  
	
   

  	
   

  	
   

  
	
  1.80

  	
  “Pricing Approval”

  	
  15

  
	
   

  	
   

  	
   

  
	
  1.81

  	
  “QTc Milestone Date”

  	
  15

  
	
   

  	
   

  	
   

  
	
  1.82

  	
  “Recipient”

  	
  15

  



 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


iii

















 


	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  
	
  1.83

  	
  “Recovery”

  	
  15

  
	
   

  	
   

  	
   

  
	
  1.84

  	
  “Regulatory Approval”

  	
  15

  
	
   

  	
   

  	
   

  
	
  1.85

  	
  “Regulatory Authority”

  	
  15

  
	
   

  	
   

  	
   

  
	
  1.86

  	
  “Regulatory Submissions”

  	
  15

  
	
   

  	
   

  	
   

  
	
  1.87

  	
  “s-GERD Milestone Date”

  	
  16

  
	
   

  	
   

  	
   

  
	
  1.88

  	
  “s-GERD Trial”

  	
  16

  
	
   

  	
   

  	
   

  
	
  1.89

  	
  “Sublicense Agreement”

  	
  16

  
	
   

  	
   

  	
   

  
	
  1.90

  	
  “Sublicensee Revenue”

  	
  16

  
	
   

  	
   

  	
   

  
	
  1.91

  	
  “Subsequent NCE”

  	
  16

  
	
   

  	
   

  	
   

  
	
  1.92

  	
  “Supplemental New Drug Application”

  	
  16

  
	
   

  	
   

  	
   

  
	
  1.93

  	
  “Target Audience”

  	
  16

  
	
   

  	
   

  	
   

  
	
  1.94

  	
  “Territory”

  	
  16

  
	
   

  	
   

  	
   

  
	
  1.95

  	
  “Third Party”

  	
  16

  
	
   

  	
   

  	
   

  
	
  1.96

  	
  “Trademarks”

  	
  16

  
	
   

  	
   

  	
   

  
	
  1.97

  	
  “University of Toledo Agreement”

  	
  16

  
	
   

  	
   

  	
   

  
	
  1.98

  	
  “U.S.”

  	
  17

  
	
   

  	
   

  	
   

  
	
  1.99

  	
  “Valid Claim”

  	
  17

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
  LICENSES

  	
  17

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  License to P&G

  	
  17

  
	
   

  	
   

  	
   

  
	
  2.2

  	
  License to ARYx

  	
  17

  
	
   

  	
   

  	
   

  
	
  2.3

  	
  ARYx Reserved Rights

  	
  17

  
	
   

  	
   

  	
   

  
	
  2.4

  	
  No Non-Permitted Use

  	
  18

  
	
   

  	
   

  	
   

  
	
  2.5

  	
  No Other Licenses

  	
  18

  
	
   

  	
   

  	
   

  
	
  2.6

  	
  Sublicense Agreements

  	
  18

  
	
   

  	
   

  	
   

  
	
  2.7

  	
  Sublicensing in Japan

  	
  18

  
	
   

  	
   

  	
   

  
	
  2.8

  	
  Third Party Agreements

  	
  19

  
	
   

  	
   

  	
   

  
	
  2.9

  	
  Transition

  	
  19

  
	
   

  	
   

  	
   

  
	
  2.10

  	
  Subcontracting

  	
  20

  



 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


iv

















 


	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
  GOVERNANCE

  	
  20

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Joint Steering Committee

  	
  20

  
	
   

  	
   

  	
   

  
	
  3.2

  	
  Meetings of the JSC

  	
  20

  
	
   

  	
   

  	
   

  
	
  3.3

  	
  Responsibilities of the JSC

  	
  21

  
	
   

  	
   

  	
   

  
	
  3.4

  	
  Areas Outside the JSC’s Authority

  	
  22

  
	
   

  	
   

  	
   

  
	
  3.5

  	
  JSC Decisions

  	
  23

  
	
   

  	
   

  	
   

  
	
  3.6

  	
  Operating Principles

  	
  23

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
  DEVELOPMENT

  	
  24

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Overview

  	
  24

  
	
   

  	
   

  	
   

  
	
  4.2

  	
  Development Plan

  	
  24

  
	
   

  	
   

  	
   

  
	
  4.3

  	
  Specific Clinical Trials

  	
  25

  
	
   

  	
   

  	
   

  
	
  4.4

  	
  Materials Transfer

  	
  26

  
	
   

  	
   

  	
   

  
	
  4.5

  	
  Diligent Development

  	
  27

  
	
   

  	
   

  	
   

  
	
  4.6

  	
  Development Reports

  	
  28

  
	
   

  	
   

  	
   

  
	
  4.7

  	
  Standards of Conduct

  	
  28

  
	
   

  	
   

  	
   

  
	
  4.8

  	
  Development Limitations

  	
  28

  
	
   

  	
   

  	
   

  
	
  4.9

  	
  Development Expenses

  	
  29

  
	
   

  	
   

  	
   

  
	
  4.10

  	
  Option to Co-Develop

  	
  29

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
  REGULATORY

  	
  31

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Regulatory Submissions

  	
  31

  
	
   

  	
   

  	
   

  
	
  5.2

  	
  Complaints and Adverse Event Reporting

  	
  33

  
	
   

  	
   

  	
   

  
	
  5.3

  	
  Product Withdrawals and Recalls

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6

  	
  COMMERCIALIZATION

  	
  34

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  General

  	
  34

  
	
   

  	
   

  	
   

  
	
  6.2

  	
  Commercialization Plan.

  	
  34

  
	
   

  	
   

  	
   

  
	
  6.3

  	
  Diligent Commercialization

  	
  36

  
	
   

  	
   

  	
   

  
	
  6.4

  	
  Commercialization Reports

  	
  36

  
	
   

  	
   

  	
   

  
	
  6.5

  	
  Standards of Conduct

  	
  37

  



 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


v

















 


	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  
	
  6.6

  	
  Sales Force Training

  	
  37

  
	
   

  	
   

  	
   

  
	
  6.7

  	
  Launch of OTC Licensed Products

  	
  37

  
	
   

  	
   

  	
   

  
	
  6.8

  	
  Option to Co-Promote

  	
  38

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7

  	
  MANUFACTURE AND SUPPLY

  	
  39

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Manufacturing Responsibility

  	
  39

  
	
   

  	
   

  	
   

  
	
  7.2

  	
  Transfer of Manufacturing Technology

  	
  39

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8

  	
  PAYMENTS

  	
  40

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Upfront Payment

  	
  41

  
	
   

  	
   

  	
   

  
	
  8.2

  	
  Development Milestones

  	
  41

  
	
   

  	
   

  	
   

  
	
  8.3

  	
  [*] Milestones

  	
  46

  
	
   

  	
   

  	
   

  
	
  8.4

  	
  Commercialization Milestones

  	
  47

  
	
   

  	
   

  	
   

  
	
  8.5

  	
  Royalties.

  	
  47

  
	
   

  	
   

  	
   

  
	
  8.6

  	
  Royalty Term

  	
  49

  
	
   

  	
   

  	
   

  
	
  8.7

  	
  Royalty Adjustments

  	
  50

  
	
   

  	
   

  	
   

  
	
  8.8

  	
  Sublicensee Revenue

  	
  51

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9

  	
  PAYMENT; REPORTS; AUDITS

  	
  52

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  P&G Quarterly Royalty Payments and Reports

  	
  52

  
	
   

  	
   

  	
   

  
	
  9.2

  	
  Accounting

  	
  54

  
	
   

  	
   

  	
   

  
	
  9.3

  	
  Methods of Payments

  	
  55

  
	
   

  	
   

  	
   

  
	
  9.4

  	
  Blocked Payments

  	
  55

  
	
   

  	
   

  	
   

  
	
  9.5

  	
  Taxes

  	
  55

  
	
   

  	
   

  	
   

  
	
  9.6

  	
  Late Payments

  	
  55

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10

  	
  INTELLECTUAL PROPERTY

  	
  55

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  Disclosure and Ownership

  	
  56

  
	
   

  	
   

  	
   

  
	
  10.2

  	
  Patent Filings

  	
  56

  
	
   

  	
   

  	
   

  
	
  10.3

  	
  Enforcement and Defense of Patents

  	
  58

  
	
   

  	
   

  	
   

  
	
  10.4

  	
  Defense of Infringement Actions.

  	
  60

  
	
   

  	
   

  	
   

  
	
  10.5

  	
  Trademarks

  	
  61

  



 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


vi

















 


	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11

  	
  REPRESENTATIONS, WARRANTIES, AND
  COVENANTS

  	
  62

  
	
   

  	
   

  	
   

  
	
  11.1

  	
  Mutual Representations and Warranties

  	
  62

  
	
   

  	
   

  	
   

  
	
  11.2

  	
  ARYx Representations and Warranties

  	
  63

  
	
   

  	
   

  	
   

  
	
  11.3

  	
  Disclaimer

  	
  65

  
	
   

  	
   

  	
   

  
	
  11.4

  	
  Limitation of Liability

  	
  65

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12

  	
  CONFIDENTIALITY

  	
  65

  
	
   

  	
   

  	
   

  
	
  12.1

  	
  Confidentiality

  	
  65

  
	
   

  	
   

  	
   

  
	
  12.2

  	
  Exceptions

  	
  66

  
	
   

  	
   

  	
   

  
	
  12.3

  	
  Publications

  	
  67

  
	
   

  	
   

  	
   

  
	
  12.4

  	
  Publicity

  	
  68

  
	
   

  	
   

  	
   

  
	
  ARTICLE 13

  	
  INDEMNIFICATION

  	
  68

  
	
   

  	
   

  	
   

  
	
  13.1

  	
  Indemnification by ARYx

  	
  68

  
	
   

  	
   

  	
   

  
	
  13.2

  	
  Indemnification by P&G

  	
  69

  
	
   

  	
   

  	
   

  
	
  13.3

  	
  Procedure

  	
  69

  
	
   

  	
   

  	
   

  
	
  13.4

  	
  Insurance

  	
  69

  
	
   

  	
   

  	
   

  
	
  ARTICLE 14

  	
  TERM AND TERMINATION

  	
  70

  
	
   

  	
   

  	
   

  
	
  14.1

  	
  Term

  	
  70

  
	
   

  	
   

  	
   

  
	
  14.2

  	
  Termination for Breach

  	
  70

  
	
   

  	
   

  	
   

  
	
  14.3

  	
  Termination by P&G

  	
  70

  
	
   

  	
   

  	
   

  
	
  14.4

  	
  Termination for Bankruptcy

  	
  71

  
	
   

  	
   

  	
   

  
	
  14.5

  	
  Rights in Bankruptcy

  	
  71

  
	
   

  	
   

  	
   

  
	
  14.6

  	
  Effects of Termination or Expiration

  	
  71

  
	
   

  	
   

  	
   

  
	
  14.7

  	
  Survival; Accrued Rights

  	
  76

  
	
   

  	
   

  	
   

  
	
  ARTICLE 15

  	
  DISPUTE RESOLUTIONS; GOVERNING
  LAW

  	
  77

  
	
   

  	
   

  	
   

  
	
  15.1

  	
  Disputes

  	
  77

  
	
   

  	
   

  	
   

  
	
  15.2

  	
  Arbitration

  	
  77

  
	
   

  	
   

  	
   

  
	
  15.3

  	
  Interim Relief

  	
  79

  
	
   

  	
   

  	
   

  
	
  15.4

  	
  Waiver

  	
  79

  



 


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  PAGE

  
	
   

  	
   

  	
   

  
	
  15.5

  	
  Choice of Law

  	
  79

  
	
   

  	
   

  	
   

  
	
  ARTICLE 16

  	
  MISCELLANEOUS

  	
  79

  
	
   

  	
   

  	
   

  
	
  16.1

  	
  Assignment

  	
  79

  
	
   

  	
   

  	
   

  
	
  16.2

  	
  Force Majeure

  	
  80

  
	
   

  	
   

  	
   

  
	
  16.3

  	
  Entire Agreement

  	
  80

  
	
   

  	
   

  	
   

  
	
  16.4

  	
  Severability

  	
  80

  
	
   

  	
   

  	
   

  
	
  16.5

  	
  Notices

  	
  81

  
	
   

  	
   

  	
   

  
	
  16.6

  	
  Further Assurances

  	
  82

  
	
   

  	
   

  	
   

  
	
  16.7

  	
  Agency

  	
  82

  
	
   

  	
   

  	
   

  
	
  16.8

  	
  No Waiver

  	
  82

  
	
   

  	
   

  	
   

  
	
  16.9

  	
  No Strict Construction

  	
  82

  
	
   

  	
   

  	
   

  
	
  16.10

  	
  Construction

  	
  82

  
	
   

  	
   

  	
   

  
	
  16.11

  	
  References

  	
  83

  
	
   

  	
   

  	
   

  
	
  16.12

  	
  Counterparts

  	
  83

  



 


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EXECUTION VERSION


 


LICENSE, DEVELOPMENT, AND COMMERCIALIZATION
AGREEMENT


 


This License, Development, and Commercialization Agreement (the “Agreement”) is entered into this 30th day of
June, 2006, (the “Execution Date”)
by and between ARYx Therapeutics, Inc., a Delaware corporation having offices
at 6300 Dumbarton Circle, Fremont, CA 94555 (“ARYx”),
and Procter & Gamble Pharmaceuticals, Inc., an Ohio corporation having
offices at One Procter & Gamble Plaza, Cincinnati, Ohio 45202 (“P&G”).


 


RECITALS


 


WHEREAS, P&G is engaged in the research,
development, manufacture and commercialization of pharmaceuticals and other
health care products;


 


WHEREAS, ARYx possesses intellectual property
relating to a proprietary serotonin type 4 agonist compound known as ATI-7505;


 


WHEREAS, ARYx desires to maximize the commercial
potential of ATI-7505; and


 


WHEREAS, P&G and ARYx desire to enter into a
collaboration under which P&G will obtain a worldwide exclusive license to
develop, manufacture and commercialize products containing such compound or
certain structurally related compounds, and will have primary responsibility
for clinical development, regulatory matters, manufacturing, marketing and
sales of products containing such compounds, and ARYx will retain options to
co-develop such products and an option to co-promote such products in the
United States, all under the terms and conditions set forth below.


 


NOW THEREFORE,
the Parties agree as follows:


 


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ARTICLE 1


 


DEFINITIONS


 


1.1          “AAA” has
the meaning set forth in Section 15.2(d).


 


1.2          “Adverse Drug
Experience” has the meaning set forth in Section
5.2(b).


 


1.3          “Affiliate” means
any corporation or other business entity controlled by, controlling, or under
common control with another entity, with “control”
meaning (a) direct or indirect beneficial ownership of fifty percent (50%) or
more of the voting stock (or, in the case of a non-corporate entity, of the
equity interests with the power to direct the management and policies) of such
corporation or other business entity, or (b) possession, directly or
indirectly, of the power to direct, or cause the direction of, the management
and policies of such corporation or other business entity, whether through the
ownership of voting securities, by contract, or otherwise.


 


1.4          “Applicable Law” means applicable laws, rules and regulations,
including any applicable rules, regulations, guidelines or other requirements
of the Regulatory Authorities, that may be in effect from time to time.


 


1.5          “Approved Japanese
Affiliate” means an Affiliate of P&G that (a) immediately prior to its
acquisition by P&G, was a Major Japanese Pharmaceutical Company or (b) is a
joint venture between P&G and a Major Japanese Pharmaceutical Company,
wherein such Major Japanese Pharmaceutical Company owns at least [*] percent of
the joint venture.


 


1.6          “Arbitration Request” has
the meaning set forth in Section 15.2(a).


 


1.7          “ARYx Indemnitees” has
the meaning set forth in Section 13.2.


 


1.8          “ARYx Know-How”
means all Know-How (other than any Know-How licensed to ARYx under the University
of Toledo Agreement) that is (a) possessed as of the Effective Date by ARYx or
any Person that is an Affiliate of ARYx on the Effective Date, (b) Controlled
by ARYx or any Person that is an Affiliate of ARYx on the Effective Date, and
(c) reasonably required or useful for the Exploitation of Licensed
Products. For the avoidance of doubt, ARYx Know-How excludes any Know-How
comprising the P&G Inventions.


 


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1.9          “ARYx Patents” means
any and all Patents (other than any Patents licensed to ARYx under the University
of Toledo Agreement) (a) (i) that constitute or issue from patent applications
(1) that are filed in the U.S. or any foreign jurisdiction prior to the
Effective Date or (2) that claim priority to a patent application filed in the
U.S. or any foreign jurisdiction prior to the Effective Date (but excluding any
claims not entitled to a priority date prior to the Effective Date), (ii) that
are Controlled by ARYx or any Person that is an Affiliate of ARYx on the
Effective Date, and (iii) the practice of which is reasonably required or
useful for the Exploitation of Licensed Products, or (b) that are Blocking
Patents. For the avoidance of doubt, ARYx Patents include the Patents listed in
Exhibit A and exclude any Patents relating to the P&G Inventions.


 


1.10        “ARYx Technology”
means ARYx Know-How and ARYx Patents.


 


1.11        “Assigned Inventions” has
the meaning set forth in Section 10.1(b).


 


1.12        “Blocking Patents”
means any and all Patents (other than Patents described in Section 1.9(a) or
licensed to ARYx under the University of Toledo Agreement) (a) that constitute
or issue from patent applications that are filed in the U.S. or any foreign
jurisdiction during the term of this Agreement, (b) that are Controlled by ARYx
or its Affiliate, and (c) the practice of which [*].


 


1.13        “Change of Control” means
(a) a consolidation or merger of a Party with or into any other entity or
person, or any other corporate reorganization, in which the capital stock of
such Party immediately prior to such consolidation, merger or reorganization,
represents less than fifty percent (50%) of the voting power of the surviving
entity (or, if the surviving entity is a wholly owned subsidiary, its parent)
immediately after such consolidation, merger or reorganization; or (b) any
transaction or series of related transactions in which more than fifty percent
(50%) of a Party’s voting power is transferred to a single entity or person (or
affiliates thereof) (excluding transfers of Company stock to an underwriter in
connection with a public offering); or (c) the consummation of a sale of all or
substantially all of the assets of a Party in any transaction or series of
related transactions (other than a sale of all or substantially all of the


 


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assets of such Party to an
entity, more than fifty percent (50%) of the combined voting power of the
voting securities of which are owned by stockholders of such Party in
substantially the same proportions as their ownership of such Party immediately
prior to such sale). Notwithstanding the foregoing, a Change of Control shall not
be deemed to occur (i) on account of the acquisition of securities of a Party
by any institutional investor, or affiliate thereof, that acquires the Party’s
securities in a transaction or series of related transactions that are
primarily a private financing transaction for the Party or (ii) a sale of
assets, merger or other transaction effected exclusively for the purpose of
changing domicile of the Party.


 


1.14        “Co-Developed Product” means
a Licensed Product with respect to which ARYx has exercised its Co-Development
Option.


 


1.15        “Co-Development Agreement”
has the meaning set forth in Section 4.10(c).


 


1.16        “Co-Development Notice” has
the meaning set forth in Section 4.10(a).


 


1.17        “Co-Development Option” has
the meaning set forth in Section 4.10(b).


 


1.18        “Combination Product”
means any product that contains (a) one or more Licensed Compounds and (b) one
or more active pharmaceutical ingredients that are not Licensed Compounds and
that have a therapeutic effect independent of the therapeutic effect of the
Licensed Compound(s) in such Combination Product. For clarity, a product shall
not be considered to be a Combination Product merely because it consists of a
combination of a Licensed Compound with a delivery vehicle or an agent that
modifies the liberation, absorption, distribution, metabolism, or excretion of
such Licensed Compound.


 


1.19        “Commercialization” means
the marketing, promotion, sale or distribution of Licensed Product in the
Territory. “Commercialize” has a correlative
meaning.


 


1.20        “Commercialization Plan”
has the meaning set forth in Section 6.2(a).


 


1.21        “Commercially Reasonable
Efforts” means with respect to the research, development or
commercialization of a product, compound or process, efforts and resources that



 


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represent consistent success
models in the research-based multinational pharmaceutical industry for a
product, compound, or process at a similar stage of research, development or
commercialization, and having similar market potential, but no less than the
efforts and resources typically used by the applicable Party for an
internally-developed product, compound, or process at a similar stage of
research, development or commercialization, and having similar market potential.
Commercially Reasonable Efforts shall be determined by taking into account the
characteristics of the product, compound, or process, the technical risk and
stage of research, development, or commercialization of the product, compound,
or process, the cost-effectiveness of efforts or resources applied towards such
product, compound, or process, the competitiveness of alternative Third Party
products, compounds or processes that are in the relevant marketplace or for
which data from [*] have been publicly presented or published, the proprietary
position of the product, compound, or process, the regulatory and business
environment, the likelihood of regulatory approval and product reimbursement,
the profitability of the product, compound, or process, the relative potential
for product liability exposure, and all other relevant factors. Commercially
Reasonable Efforts shall be determined on a product, compound, or process,
indication, and market basis, and it is anticipated that the level of efforts
and resources will change over time reflecting changes in the status of the
product, compound, or process, indication, or the market involved. Commercially
Reasonable Efforts requires that the applicable Party (a) promptly assign
responsibility for the work required under this Agreement to specific
employee(s) or contractors who are held accountable for progress with respect
thereto and monitor such progress on an on-going basis, (b) set and
consistently seek to achieve specific and meaningful objectives for carrying
out such work, and (c) consistently make and implement decisions and allocate
resources designed to advance progress with respect to such objectives.


 


1.22        “Confidential Information” of a Party means all information
provided by or on behalf of such Party to another Party either in connection
with the discussions and negotiations pertaining to this Agreement prior to the
Effective Date or during the term of this Agreement or in the course of
performing this Agreement, including data; knowledge; practices; processes;
ideas; research plans; engineering designs and drawings; research data;
manufacturing processes and techniques; scientific, manufacturing, marketing
and business plans; and financial and


 


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personnel matters of the
disclosing Party or relating to its present or future products, sales,
suppliers, customers, employees, investors or business. Notwithstanding the
foregoing, (a) the terms of this Agreement and the ARYx Know-How shall be
deemed the Confidential Information of both Parties, and (b) any Assigned Inventions
shall be deemed the Confidential Information of P&G and not the
Confidential Information of ARYx.


 


1.23        “Controlled” means,
with respect to any intellectual property right, that the Party owns or has a
license to such intellectual property right and has the ability to grant to the
other Party a license, sublicense, or access (as appropriate) to, such
intellectual property right as provided for herein without violating the terms
of any written agreement or other binding arrangements with any Third Party
existing at the time such Party would be first required hereunder to grant the
other Party such license, sublicense, or access.


 


1.24        “Co-Promotion Agreement” has
the meaning set forth in Section 6.8(a).


 


1.25        “Co-Promotion Notice” has
the meaning set forth in Section 6.8(b).


 


1.26        “Co-Promotion Option” has
the meaning set forth in Section 6.8(a).


 


1.27        “Definitive QTc Study” has
the meaning set forth in Section 4.3(a).


 


1.28        “Development” means
all activities that relate to (a) obtaining, maintaining or expanding
Regulatory Approval or Pricing Approval of Licensed Product or (b) developing
the ability to Manufacture clinical and commercial quantities of Licensed
Product. Development includes (i) research, preclinical testing, toxicology,
formulation, Manufacturing-related technology development, product
characterization, analytical development, validation and transfer, and clinical
studies of Licensed Product; (ii) preparation, submission, review, and
development of data or information for the purpose of submission to a
governmental authority to obtain, maintain or expand Regulatory Approval or
Pricing Approval of Licensed Product, and outside counsel regulatory legal
services related thereto; (iii) Manufacturing process development, transfer and
scale-up, and validation, including for preclinical and non-clinical studies,
clinical studies and commercial supply; (iv) bulk production and fill/finish
work 


 


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associated with the supply of
Licensed Product for preclinical and non-clinical studies and clinical studies,
pivotal stability, and related quality assurance technical support activities;
(v) post-Regulatory Approval product support for Licensed Product (including
Manufacturing and quality assurance technical support, and laboratory and
clinical efforts directed toward the further understanding of the safety,
efficacy, patient preference, or provider preference of Licensed Product); and
(vi) Licensed Product-related medical affairs (including regulatory support
necessary for product maintenance). “Develop” has a
correlative meaning.


 


1.29        “Development Plan” has
the meaning set forth in Section 4.2.


 


1.30        “Dollars” or “$” means
the legal tender of the U.S.


 


1.31        “Drug Approval Application”
means (a) in the U.S., a New Drug Application a Supplemental New Drug
Application for a Licensed Product, and (b) in the rest of the Territory, an
equivalent application for regulatory approval required before commercial sale
or use of a Licensed Product in a regulatory jurisdiction.


 


1.32        “Effective Date” means
the second (2nd) business day immediately following the earliest to
occur of:


 


(a)           the date upon which
the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and including such Act’s enabling regulations (collectively “HSR”) expires or terminates early, provided that no
judicial or administrative proceeding opposing consummation of all or any part
of this Agreement is commenced during such waiting period;


 


(b)           the date of
completion of any judicial or administrative proceeding opposing consummation
of all or any part of this Agreement without (i) the issuance of an injunction
(whether temporary, preliminary or permanent) prohibiting consummation of the
transactions contemplated by this Agreement or any material portion thereof and
(ii) the imposition of requirements or conditions which are not reasonably
satisfactory to the Parties; and


 


(c)           the date of removal
of any and all injunctions (whether temporary, 


 


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preliminary or permanent) prohibiting
consummation of the transactions contemplated by this Agreement or any material
portion thereof shall be in effect.


 


1.33        “EMEA” means the
European Medicines Agency.


 


1.34        “Execution Date” has
the meaning set forth in the preamble hereto.


 


1.35        “Executive Officer” means, in the case of ARYx, the Chief
Executive Officer of ARYx, and in the case of P&G, the President of
P&G.


 


1.36        “Exploitation” means
the making, having made, importation, use, sale, offering for sale or
disposition of a product or process, including the research, Development,
registration, modification, enhancement, improvement, Manufacturing, storage,
formulation, optimization, export, transport, or Commercialization of a product
or process. When used as a verb, “Exploit” means
to engage in any of the foregoing activities.


 


1.37        “FDA” means the U.S.
Food and Drug Administration or any successor agency thereto.


 


1.38        “Field” means all
human and animal prophylactic and therapeutic uses.


 


1.39        “First Commercial Sale” means,
with respect to a country in the Territory, the first sale to a Third Party of
a Licensed Product in such country by P&G or its Affiliate or sublicensee
after the granting of Regulatory Approval with respect to such country.


 


1.40        “FTE” means the
equivalent of the work of one (1) employee full time for one (1) calendar year
(consisting of at least a total of eighteen hundred (1800) hours per calendar
year). Any person who works more than eighteen hundred (1800) hours per
calendar year shall be treated as a single FTE, and any person who works less
than eighteen hundred (1800) hours per calendar year shall be treated as a
partial FTE based upon the actual number of hours worked divided by eighteen
hundred (1800).


 


1.41        “FTE Rate” means [*] per FTE per year.


 


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1.42        “GMP” has the meaning
set forth in Section 1.43.


 


1.43        “Good Practices” means
compliance with the applicable standards contained in then-current “Good
Laboratory Practices,” “Good Manufacturing Practices” (“GMP”)
or “Good Clinical Practices,” in each case as promulgated by the FDA and all
analogous guidelines promulgated by the EMEA or the International Conference on
Harmonization of Technical Requirements for Registration of Pharmaceuticals for
Human Use.


 


1.44        “IBS Indication” means
treatment of (a) an irritable bowel syndrome indication or (b) a symptom
thereof, provided that the label indication that is approved or, prior to
approval of the relevant Drug Approval Application, the label indication that
is being sought, specifically refers to such symptom as being associated with
an irritable bowel syndrome indication.


 


1.45        “IND” means an
investigational new drug application in the U.S. or any equivalent Regulatory
Submission in the Territory.


 


1.46        “Indemnified Party” has
the meaning set forth in Section 13.3.


 


1.47        “Indemnifying Party” has
the meaning set forth in Section 13.3.


 


1.48        “Infringement” has the
meaning set forth in Section 10.3(a).


 


1.49        “Japan Sublicensee” means
any sublicensee of P&G with respect to Japan.


 


1.50        “JJSC” has the meaning
set forth in Section 2.7(b).


 


1.51        “JSC” has the meaning set forth in Section 3.1.


 


1.52        “Know-How” means
inventions, discoveries, trade secrets, information, experience, data,
formulas, procedures, processes, methods and results, including physical,
chemical, biological, toxicological, pharmacological, clinical, and veterinary
data, dosage regimens, control assays and product specifications, in each case
whether or not confidential or proprietary, but excluding any Patents.


 


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1.53        “Knowledge” means the collective good faith understanding of
each of the  vice presidents,
senior vice presidents, president and chief executive officer of a Party of the
facts and information then in their possession without any duty to conduct any
specific investigation with respect to such facts and information.


 


1.54        “Licensed Compound”
means (a) the ARYx compound known as ATI-7505; or (b) any other compound
included in a chemical genus claimed generally or specifically in U.S. Patent [*], as of or after the Execution Date.


 


1.55        “Licensed Product”
means any product that contains a Licensed Compound, and including all
formulations and modes of administration thereof. For the purpose of this
Agreement, two Licensed Products shall be considered the same Licensed Product
if and only if each active pharmaceutical ingredient in one such Licensed
Product (or an acid form, base form, metabolite, prodrug, ester, salt form,
crystalline polymorph, hydrate, solvate or optical isomer of such active
pharmaceutical ingredient) is also present in the other such Licensed Product
in more than trace amounts. Similarly, two Licensed Products shall be
considered different Licensed Products if and only if, for at least one active
pharmaceutical ingredient in one such Licensed Product, the other Licensed
Product does not contain (other than in trace amounts) such active
pharmaceutical ingredient or any acid form, base form, metabolite, prodrug,
ester, salt form, crystalline polymorph, hydrate, solvate or optical isomer of
such active pharmaceutical ingredient. For clarity, one active pharmaceutical
ingredient shall not be considered to be a metabolite or a prodrug of another
active pharmaceutical ingredient merely because such active pharmaceutical
ingredients generate the same intended metabolite [*] when administered to a
patient or as a break-down product. For further clarity, for the purpose of
this Section 1.55, [*]


 


1.56        “Losses” has the
meaning set forth in Section 13.1.


 


1.57        “Major EU Country” means
the United Kingdom, France, Germany, Italy, or Spain.


 


1.58        “Major Japanese
Pharmaceutical Company” means a research-based pharmaceutical company that,
based on annual pharmaceutical sales in Japan in the previous 


 


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year, is one of the [*] pharmaceutical
companies in Japan.


 


1.59        “Manufacture” and “Manufacturing”
means all activities related to the production, manufacture, processing,
filling, finishing, packaging, labeling, inspection, receiving, holding and
shipping of the Licensed Compound, the Licensed Product, or any raw materials
or packaging materials with respect thereto, or any intermediate of any of the
foregoing, including process and cost optimization, process qualification and
validation, commercial manufacture, stability and release testing, quality
assurance and quality control.


 


1.60        “Material” has the
meaning set forth in Section 4.4.


 


1.61        “Net Sales” means, for
any period, the gross invoice price of Licensed Product sold or otherwise
disposed of (other than for use as clinical supplies or free samples) for
consideration by P&G or its Affiliates to Third Parties other than
sublicensees, reduced by the following amounts (calculated in accordance with
generally accepted accounting principles consistently applied by P&G and
its Affiliates across its product lines), if not previously deducted from the
amount invoiced: (a) amounts actually allowed as trade, volume or quantity
discounts, including early pay cash discounts; (b) amounts repaid or credited
by reason of defects, recalls, accrued or actual returns, rebates and
allowances of goods or because of retroactive price reductions specifically
identifiable to the Licensed Product; (c) rebates and administrative fees paid
to medical health care organizations in line with approved contract terms; (d)
rebates resulting from government (or agency thereof) mandated rebate programs
or chargeback programs; (e) rebates paid to wholesalers for inventory
management programs or distribution management agreements, in accordance with
P&G practice reasonably consistently applied; (f) discounts pursuant to
indigent patient programs and patient discount programs to include coupons and
vouchers to the extent included in Net Sales; (g) retroactive and temporary
price reductions that are actually allowed or granted; (h) sales commissions
paid to Third Party distributors or selling agents (which shall not include
sales organizations, whether contract or internal to P&G); (i) sales or
excise taxes, custom duties, and other governmental charges (including payments
made to United Kingdom government departments under the UK Pharmaceutical
Pricing Regulatory Scheme (PPRS) or similar programs, and government taxes, 


 


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charges or penalties, such as
French Social Security rebates, which payments need not be calculated in
accordance with generally accepted accounting principles) imposed directly on
and actually paid by P&G or its Affiliates; and (j) transportation costs,
including insurance and shipping, freight, and handling charges, to the extent billed
separately to customers.


 


When calculating the Net Sales, the amount of such
sales in foreign currencies shall be converted into Dollars using the standard
methodologies employed by P&G for consolidation purposes. P&G shall
provide reasonable documentation of the calculation and reconciliation of the
conversion figures on a country-by-country basis as part of its report of Net
Sales for the period covered under the report.


 


If P&G or its Affiliates receive non-cash
consideration for Licensed Product sold or otherwise transferred to an
independent Third Party, Net Sales for such sale or transfer will be determined
based on the average of the gross invoice prices charged to other independent
Third Parties in respect of cash sales during the applicable reporting period.


 


With respect to sales of a Combination Product, the invoice price of
such Combination Product shall be set by P&G in good faith, and Net Sales
of the Combination Product shall be determined using the following formulae:


 


(1)           If
the Licensed Compound and the other active pharmaceutical ingredient(s)
contained in the Combination Product are marketed separately, the Net Sales for
purposes of calculating royalty payments will be the result obtained by
multiplying the Net Sales of the Combination Product by the fraction A/A+B,
where A is the invoiced price of the Licensed Compound in the Combination
Product, and B is the sum of the then-lowest invoiced price in the country for
each of the other active pharmaceutical ingredients in the Combination Product.
Notwithstanding the foregoing, if, with respect to any of the other active
pharmaceutical ingredients in the Combination Product, there is [*] of an [*]
that [*] the [*] of such other active pharmaceutical ingredient, the [*] of
such other active pharmaceutical ingredient [*], or the [*] of such other
active pharmaceutical ingredient that is included in the 


 


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Combination Product, then the
Net Sales for purposes of calculating royalty payments will be determined [*]


 


(2)           If
the Combination Product includes other active pharmaceutical ingredients which
are not sold separately (but the Licensed Compound contained in the Combination
Product is available separately), the Net Sales for purposes of calculating
royalty payments will be the result of multiplying the Net Sales of the
Combination Product by the fraction A/C, where A is as defined above and C is
the invoiced price of the Combination Product.


 


(3)           If
neither the Licensed Compound nor the other active pharmaceutical products
contained in the Combination Product are sold separately, or if only the
Licensed Compound is not sold separately, P&G shall in good faith propose
(after discussion with ARYx) the percentage of the revenue from such Combination
Product that is attributable to the Licensed Compound and shall notify ARYx in
writing of such proposal not less than 90 days prior to commencing sales of
such Combination Product. Unless P&G receives written objection from ARYx
to such proposal within 90 days following ARYx ‘s receipt of such proposal,
then such percentage of the revenues attributed to the Combination Product
shall be the Net Sales for the purposes of computing royalties under this
Agreement. In the event that ARYx objects to P&G’s proposal, ARYx and
P&G shall negotiate in good faith to reach a mutually acceptable
determination within 90 days. If no resolution is reached within such period,
then either Party may refer the dispute to arbitration pursuant to Section
15.2.


 


1.62        “New Drug Application” means
a New Drug Application as defined in the U.S. Federal Food, Drug and Cosmetic
Act, as amended, and regulations promulgated thereunder, or any successor
application or procedure required to market or sell a drug in the United
States.


 


1.63        “Notice” has the
meaning set forth in Section 16.5.


 


1.64        “OTC Licensed Product”
means a Licensed Product that can be legally purchased in the country of sale
without a prescription.


 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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1.65        “OUSJ Territory” means
all countries in Territory other than the U.S. and Japan.


 


1.66        “P&G Fiscal Year”
means the period from July 1 of a given calendar year to June 30 of the
succeeding calendar year.


 


1.67        “P&G Indemnitees” has
the meaning set forth in Section 13.1.


 


1.68        “P&G Inventions”
means all inventions (whether or not patentable) that arise from activities
conducted by or at the request of either Party under this Agreement.


 


1.69        “P&G Know-How”
means all Know-How that is (a) possessed as of the Effective Date by P&G or
its Affiliates or that is developed or acquired pursuant to activities
conducted by or at the request of either Party under this Agreement (including
Know-How licensed from Third Parties in furtherance of such activities), (b)
Controlled by P&G or its Affiliates, and (c) reasonably required or useful
for the Exploitation of Licensed Products.


 


1.70        “P&G Patents”
means any and all Patents that (a) that constitute or issue from patent
applications (i) that are filed in the U.S. or any foreign jurisdiction prior
to the Effective Date or during the term of this Agreement or (ii) that claim
priority to a patent application filed in the U.S. or any foreign jurisdiction
prior to the Effective Date or during the term of this Agreement (but excluding
any claims not entitled to a priority date prior to the end of the term of this
Agreement) (b) are Controlled by P&G or its Affiliates, and (c) are
reasonably required or useful for the Exploitation of Licensed Products.


 


1.71        “P&G Technology”
means P&G Know-How and P&G Patents.


 


1.72        “Party” means ARYx or
P&G individually, and “Parties” means
ARYx and P&G collectively.


 


1.73        “Patent Challenge” has
the meaning set forth in Section 10.3(a).


 


1.74        “Patents” means (a)
all patents and patent applications (including provisional applications), (b)
any substitutions, divisions, continuations, continuations-in-part, reissues,
renewals, registrations, confirmations, re-examinations, extensions,
supplementary protection


 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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certificates and the like of
the foregoing, and (c) any foreign or international equivalents of any of the
foregoing.


 


1.75        “PDEs” have the
meaning set forth in Section 6.8(c).


 


1.76        “Person” means an
individual, sole proprietorship, partnership, limited partnership, limited
liability partnership, corporation, limited liability company, business trust,
joint stock company, trust, unincorporated association, joint venture or other
similar entity or organization, including a government or political
subdivision, department or agency of a government.


 


1.77        “Phase II Trial” means that portion of the clinical
development program that provides for the well-controlled clinical trials of a
Licensed Product in human patient population to determine the safe and
effective dose range in the proposed therapeutic indication, as more fully
defined in 21 C.F.R. § 312.21(b), or its successor regulation, or the
equivalent in any foreign country.


 


1.78        “Phase III Trial” means any clinical study of any
Licensed Product that is initiated after the end of the Phase II
meeting with the FDA for such Licensed Product, and that is designated to
deliver the required statistical endpoints, to gather additional information
about effectiveness and safety necessary to evaluate the overall benefit-risk
profile of the drug, to satisfy regulatory requirements for drug approval, and
to provide an adequate basis for acceptable drug labeling, as more fully
defined in 21 C.F.R. § 312.21(c), or its successor regulation, or the
equivalent in any foreign country.


 


1.79        “Prescription Licensed
Product” means a Licensed Product that is not an OTC Licensed Product.


 


1.80        “Pricing Approval” means,
with respect to a particular regulatory jurisdiction, any approval with respect
to pricing or reimbursement of Licensed Product from any applicable Regulatory
Authority that is required to be obtained in order to market Licensed Product
in such regulatory jurisdiction or that is required to market Licensed Product
in such regulatory 


 


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INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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jurisdiction in a commercially
reasonable manner.


 


1.81        “QTc Milestone Date” means
the date of [*] of the Definitive QTc Study.


 


1.82        “Recipient” has the
meaning set forth in Section 12.2.


 


1.83        “Recovery” has the
meaning set forth in Section 10.3(d).


 


1.84        “Regulatory Approval”
means, with respect to a particular regulatory jurisdiction, the approval of a
Drug Approval Application by the applicable Regulatory Authority in such
regulatory jurisdiction and such other regulatory approvals, other than Pricing
Approvals, as are required in order to market the Licensed Product in such
regulatory jurisdiction.


 


1.85        “Regulatory
Authority” means
any supra-national, federal, national, regional, state, provincial or local
regulatory agencies, departments, bureaus, commissions, councils or other
government entities regulating or otherwise exercising authority with respect
to the Exploitation of the Licensed Product.


 


1.86        “Regulatory Submissions”
means all applications, filings, dossiers and the like submitted to a
Regulatory Authority in the Territory for the purpose of obtaining Regulatory
Approval from that Regulatory Authority in the Territory, including INDs and
Drug Approval Applications.


 


1.87        “s-GERD Milestone Date” means
the latest to occur of (a) the date on which P&G receives from ARYx those
results and analyses from the s-GERD Trial that are described in the statistical
analysis plan for such trial as of the Effective Date, (b) the date on which
P&G receives from ARYx those additional analyses described in Exhibit B,
and (c) the date on which P&G receives from ARYx the [*] with respect to
such trial with [*] sufficient to allow P&G to analyze the data contained
therein.


 


1.88        “s-GERD Trial” means
the s-GERD study being conducted by or on behalf of ARYx as of the Effective
Date (i.e., trial 709).


 


CERTAIN CONFIDENTIAL INFORMATION
CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF
THE SECURITIES ACT OF 1933, AS AMENDED.


 


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1.89        “Sublicense Agreement”
has the meaning set forth in Section 2.6.


 


1.90        “Sublicensee Revenue” has
the meaning set forth in Section 8.8.


 


1.91        “Subsequent NCE” means
a Licensed Product other than a Licensed Product for which an IND  was first filed in the U.S. or a Major EU Country prior to
the date of the earliest First Commercial Sale.


 


1.92        “Supplemental New Drug
Application” means a Supplemental New Drug Application, as defined in the
United States Federal Food, Drug and Cosmetic Act, as amended, and applicable
regulations promulgated thereunder.


 


1.93        “Target Audience” means
[*]


 


1.94        “Territory” means the entire world.


 


1.95        “Third Party” means
any person or entity other than a Party or its Affiliates.


 


1.96        “Trademarks” shall
have the meaning set forth in Section 10.5.


 


1.97        “University of Toledo
Agreement” means that certain License, Development, and Commercialization
Agreement by and between ARYx and the University of Toledo, dated February 21,
2005.


 


1.98        “U.S.” means the
United States of America.


 


1.99        “Valid Claim” means,
with respect to a particular country, (a) any claim of an issued and unexpired
Patent in such country that (i) has not been held permanently revoked,
unenforceable or invalid by a decision of a court or governmental agency of
competent jurisdiction, which decision is unappealable or unappealed within the
time allowed for appeal and (ii) has not been abandoned, disclaimed, denied or
admitted to be invalid or unenforceable through reissue or disclaimer or
otherwise in such country; or (b) a claim of a pending Patent application,
which claim (i) has not been abandoned or finally disallowed without the
possibility of appeal and (ii) has not been pending for more than [*] from the
date on which such claim was 


 


CERTAIN CONFIDENTIAL INFORMATION
CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF
THE SECURITIES ACT OF 1933, AS AMENDED.


 


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first filed.


 


ARTICLE 2


 


LICENSES


 


2.1          License to P&G. Subject
to the terms and conditions of this Agreement, ARYx hereby grants to P&G
and its Affiliates, under the ARYx Technology, an exclusive (even as to ARYx
and its Affiliates) royalty-bearing license (with the right to sublicense
through multiple tiers of sublicensees) to Exploit Licensed Products in the
Field in the Territory;  provided, however, that P&G and its Affiliates may grant
sublicenses only with the prior written consent of ARYx, which consent shall
not be unreasonably withheld. Exhibit C contains a list of countries
with respect to which, as of the Execution Date, P&G is considering
granting one or more sublicenses under the license granted in this Section 2.1.
Such list is provided for informational purposes only and shall not be binding
on either Party for any purpose.


 


2.2          License to ARYx. Subject
to the terms and conditions of this Agreement, P&G hereby grants to ARYx,
under the P&G Technology, a non-exclusive, royalty-free license solely to
the extent necessary to conduct those Development responsibilities assigned to
ARYx under the Development Plan. ARYx may grant sublicenses under such license
solely to subcontractors retained by ARYx in accordance with Section 2.10.


 


2.3          ARYx Reserved Rights. Notwithstanding
anything in this Agreement to the contrary, ARYx reserves the limited right
under the ARYx Technology to conduct those Development responsibilities
assigned to it under the Development Plan.


 


2.4          No Non-Permitted Use. Each
Party hereby covenants that it will not, nor will it cause or permit any of its
Affiliate or sublicensees to knowingly use or practice, directly or indirectly,
any ARYx Technology (in the case of P&G) or P&G Technology (in the case
of ARYx) for any purposes other than those expressly permitted by this
Agreement.


 


2.5          No Other Licenses. Neither Party grants to the other Party any
rights or licenses 


 


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INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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in or to any intellectual
property, whether by implication, estoppel, or otherwise, other than the
license rights that are expressly granted under this Agreement.


 


2.6          Sublicense Agreements. P&G
shall, in each agreement under which it grants a sublicense under the license
set forth in Section 2.1 (each, a “Sublicense Agreement”),
require the sublicensee, at P&G’s election, to assign to P&G if such
sublicense terminates, or grant to P&G in that event a freely sublicensable
exclusive license under, (a) all Regulatory Submissions and Regulatory
Approvals held or possessed by such sublicensee and (b) all Patents and
Know-How Controlled by such sublicensee relating to the Licensed Product or its
use, Manufacture, sale, or importation. Each Sublicense Agreement shall also
include (i) diligence obligations no less stringent than those set forth in
Sections 4.5 and 6.3; (ii) a direct indemnity by the sublicensee in favor of
ARYx similar in scope to that set forth in Section 13.2; and (iii) a provision
making ARYx an express third party beneficiary of such Sublicense Agreement. At
the election of P&G, each Sublicense Agreement may also include a provision
that terminates such Sublicense Agreement upon the termination of the license
set forth in Section 2.1.


 


2.7          Sublicensing in Japan.


 


(a)           P&G shall be
permitted to Exploit each Licensed Product in Japan under its own control
(i.e., by itself or an Affiliate or through a Third Party contractor that is
not a sublicensee under the license granted in Section 2.1) solely if (i) no
later than [*] after [*] with respect to such Licensed Product, P&G
delivers written notice to ARYx that it plans to Exploit such Licensed Product
in Japan under its own control and (ii) (1) P&G will conduct such
Exploitation through an Approved Japanese Affiliate or (2) P&G provides
ARYx with evidence that demonstrates, to ARYx’s reasonable satisfaction,
P&G’s capability to Exploit Licensed Products in Japan under its own
control. If the criteria in subsections (i) and (ii) are both satisfied, then
no JJSC shall be formed pursuant to Section 2.7(b) with respect to such
Licensed Product.


 


(b)           In the event that
P&G does not notify ARYx pursuant to Section 2.7(a)(i) that it intends to
Exploit a Licensed Product in Japan or if P&G is unable to satisfy the 


 


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INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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requirements set forth in
Section 2.7(a)(ii), the Parties shall form a Joint Japanese Sublicensee
Committee (“JJSC”) with respect to the
Exploitation in Japan of such Licensed Product. The JJSC shall be responsible
for managing the search for and selection of the Japan Sublicensee with respect
to such Licensed Product and for overseeing any negotiations with such Japan
Sublicensee. Any Japan Sublicensee and any Sublicense Agreement with any Japan
Sublicensee shall be subject to the prior approval of the JJSC. The JJSC shall
be a subcommittee of the JSC and shall decide all matters by consensus, with
each Party having one collective vote, and any disputes that cannot be resolved
by the JJSC in a reasonable time period shall be submitted to the JSC for
resolution in accordance with Section 3.5. For clarity, P&G shall have the
sole right and responsibility to enter into a Sublicense Agreement with any
Japan Sublicensee once such Sublicense Agreement and Japan Sublicensee are
approved by the JJSC.


 


2.8          Third Party Agreements. P&G
shall be solely responsible for obtaining, at its sole expense, any licenses
from Third Parties that P&G determines, in its sole discretion, are
required in order to lawfully Exploit Licensed Products in the Field in the
Territory. P&G shall use Commercially Reasonable Efforts to ensure that (a)
each Third Party clinical trial, contract manufacturing, or service agreement
entered into by P&G or its Affiliates with respect to the Licensed Products
contains provision(s) permitting such Third Party contract to be assigned in
accordance with Section 14.6(b)(v) and (b) any Third Party Know-How or Patents
that are licensed by P&G from a Third Party and that would be P&G
Technology if Controlled by P&G will be sublicensable to ARYx under the
license granted by P&G to ARYx pursuant to Section 14.6(b)(i).


 


2.9          Transition. ARYx
shall use Commercially Reasonable Efforts to perform promptly, to the
reasonable satisfaction of P&G, the activities set forth on Exhibit D,
at the sole expense of ARYx.  


 


2.10        Subcontracting. Either
Party may delegate to any of its Affiliates, or subcontract, the performance of
its respective activities hereunder without the consent of the other Party.
With respect to any such subcontracting arrangement, the subcontracting Party
shall oversee the performance by its subcontractors of such activities, in a
manner that would be


 


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INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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 reasonably expected to result in their timely
and successful completion. Each Party shall remain responsible for the
performance of its delegated or subcontracted activities in accordance with
this Agreement.  ARYx shall use Commercially Reasonable Efforts to cause
any Person performing any Development activities on ARYx’s behalf to assign any
P&G Inventions to ARYx, and P&G shall use Commercially Reasonable
Efforts to cause any Person performing any Development activities on P&G’s
behalf to assign any P&G Inventions to P&G. ARYx shall obtain P&G’s
written consent prior to entering into a subcontracting agreement under which
any Person performing any Development activities on ARYx’s behalf is not obligated
to assign to ARYx those P&G Inventions resulting from such activities.


 


ARTICLE 3


 


GOVERNANCE


 


3.1          Joint Steering Committee. Within twenty (20)  days after the Effective Date, ARYx and
P&G shall form a joint steering committee (“JSC”)  consisting of three  (3)  representatives from ARYx and three (3)
representatives from P&G. Each Party may replace its JSC representatives at
any time upon prior written notice to the other Party. Each Party shall designate one of its representatives as a co-chair of
the JSC, and such co-chairs shall serve as the primary points of contact
between the Parties with respect to matters relating to this Agreement and to
resolve issues or disagreements between the Parties, as needed. JSC membership
shall evolve from over time as the project progresses so that each Party’s
combined membership represents the key functions (such as Development or
Commercialization) that are the current focus of work on Licensed Products. Notwithstanding
the foregoing, JSC decisions will be made pursuant to Section 3.5.


 


3.2          Meetings of the JSC. The JSC shall meet at least four (4)
times every calendar year, alternating between ARYx’s facilities and P&G’s
facilities, or such other location mutually agreed by the Parties, on such
dates and at such times as agreed to by P&G and ARYx. JSC members may
attend meetings in person or, as long as each attendee is able to hear the
others, by telephone or by video conference; provided, however, that at least
two (2) JSC members from


 


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SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF
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each Party must be present in
person at one JSC meeting per calendar quarter and, subject to the last two (2)
sentences of this Section 3.2, at least one (1) representative of each Party
must participate in any other meeting of the JSC for such meeting to be effective.
No JSC member shall be permitted to send a designee in his or her place to a
JSC meeting. The co-chairs of the JSC shall be responsible for agreeing on an
agenda for each such meeting. Each Party may permit such visitors to attend
meetings of the JSC as the JSC determines. Each Party shall be responsible for
its own expenses for participating in the JSC and any subcommittee thereof. The
Parties acknowledge and agree that ARYx has the right, but not the obligation,
to participate in the JSC with respect to Commercialization activities, and
ARYx may waive its right to participate in any decision relating to
Commercialization activities at any time. Any such waiver shall be governed by
the terms of Section 16.8.


 


3.3          Responsibilities of the JSC. The JSC shall have the
responsibility and authority to:


 


(a)           Oversee the
Development, Regulatory Approval, and Commercialization of Licensed Products in
the Field in the Territory;


 


(b)           Review and approve
the overall strategy for Development in the Field in the Territory, including
the clinical trials contemplated by Section 4.3;


 


(c)           Review and approve
any proposed amendments or updates to the Development Plan;


 


(d)           Monitor the
Development of Licensed Product in the Field in the Territory in light of the
Development Plan;


 


(e)           Discuss the
requirements for Regulatory Approval in applicable countries in the Territory
and oversee regulatory matters with respect to Licensed Product in the
Territory;


 


(f)            Review the
Commercialization Plan and any proposed amendments or updates thereto;


 


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INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
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(g)           Monitor the
commercialization of Licensed Product in the Territory in light of the
Commercialization Plan;


 


(h)           Establish
subcommittees, oversee the activities of all subcommittees so established, and
address disputes or disagreements arising in all such subcommittees;


 


(i)            Regularly monitor
the overall health of the relationship between the Parties and recommend
corrective actions as needed;


 


(j)            Establish a
subcommittee to coordinate the initial transfers of various information,
documents and materials with respect to the Licensed Product from ARYx to
P&G hereunder;


 


(k)           Oversee the
activities of the JJSC;


 


(l)            Oversee decisions
by the Parties regarding the prosecution, maintenance, enforcement and defense
of the ARYx Patents hereunder and any other intellectual property matters
arising hereunder;


 


(m)          subject to Section
3.4, address disputes or disagreements between the Parties with respect to
scientific, technical or business issues concerning the Development or
Commercialization of Licensed Products; and


 


(n)           Perform such other
functions as the Parties may agree in writing.


 


3.4          Areas Outside the JSC’s Authority. The JSC shall have no
authority other than that expressly set forth in Section 3.3 and, specifically,
shall have no authority (a) to amend or interpret this Agreement, (b) to
determine whether or not a Party has met its diligence or other obligations
under the Agreement, (c) to determine whether or not a breach of this Agreement
has occurred, or (d) to address any disputes or disagreements between the
Parties with respect to any payment owed or alleged to be owed by one Party to
the other Party.


 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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3.5          JSC Decisions.


 


(a)           Consensus; Good Faith; Action Without Meeting. The JSC shall
decide all matters by consensus, with each Party having one collective vote. Consistent
with Section 3.6, the members of the JSC shall act in good faith to cooperate
with one another and to reach agreement with respect to issues to be decided by
the JSC. Action that may be taken at a meeting of the JSC also may be taken
without a meeting if a written consent setting forth the action so taken is
signed by the co-chairs of the JSC.


 


(b)           Failure to Reach
Consensus. In the event that the members of the JSC cannot come to
consensus within fifteen (15) days with respect to any matter over which the
JSC has authority and responsibility, the JSC shall submit the respective
positions of the Parties with respect to such matter for discussion in good
faith by the Parties’ respective Executive Officers. If such individuals are
not able to mutually agree upon the resolution to such matter within fifteen
(15) days after the JSC’s submission to them, then the Executive Officer of
P&G shall have the right to decide such matter; provided,
however, that no decision by the Executive Officer of P&G will
relieve P&G of its diligence obligations under Sections 4.5 and 6.3; and provided, further, that any dispute with respect to the
design of the Definitive QTc Study shall be submitted to [*] (or another
mutually agreed, independent Third Party expert) in the event that the
Executive Officers are unable to resolve such dispute within such period, and
such person’s resolution of such dispute shall be binding on each of the
Parties.


 


3.6          Operating Principles. The
Parties hereby acknowledge and agree that the deliberations and decision-making
of the JSC and any subcommittee thereof shall be in accordance with the
following operating principles:


 


(a)           Subject to
subsection (c) below, time is of the essence in addressing the market for the
Licensed Product.


 


(b)           Subject to
subsection (c) below, the Parties mutual objective is to maximize the
commercial success of the Licensed Product, consistent with sound and ethical
business and scientific practices.


 


(c)           The JSC, and any
subcommittee thereof, shall use commercially 


 


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reasonable
judgment in making its decisions, taking into account applicable costs, delays,
technical risks, potential liabilities, and other relevant factors.


 


ARTICLE 4



DEVELOPMENT


 


4.1          Overview. Subject to
Sections 4.3(c), 4.3(d), and 4.10, P&G shall be primarily responsible for
the Development of Licensed Product in the Field in the Territory. Each Party
shall use Commercially Reasonable Efforts to perform all Development activities
assigned to it in the Development Plan and shall perform such Development
activities in accordance with the Development Plan. P&G shall bear all
costs associated with Development of Licensed Product in the Field in the
Territory, as set forth in more detail in Section 4.9, except as otherwise
provided expressly herein or in any Co-Development Agreement. For the avoidance
of doubt, ARYx shall have no obligation to perform any Development activities
(other than the activities required by Section 2.9 or, with its prior written
consent, activities set forth in the initial Development Plan or any updates
thereto).


 


4.2          Development Plan.


 


(a)           Scope. The
Development of each Licensed Product under this Agreement shall be governed by
a worldwide development plan (each, a “Development Plan”).
Each Development Plan, as updated from time to time pursuant to Section 4.2(c),
shall (i) list key activities and dates for Development of the applicable
Licensed Product in key markets in the Territory from the date of such
Development Plan through Regulatory Approval and First Commercial Sale of such
Licensed Product in the intended indication(s) in such key markets and (ii)
describe in detail the proposed overall program of Development for the
applicable Licensed Product in the Territory for a rolling [*] period,
including preclinical studies, toxicology, formulation, process development,
clinical studies, regulatory plans and other elements of obtaining Regulatory
Approval(s) in each applicable country, as well as timelines for key Regulatory
Authority meetings, Drug Approval Applications and Regulatory Approvals. Each 


 


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Development
Plan shall include a summary of estimated Development expenses of the program
expected to be incurred during the Development process through obtaining
Regulatory Approval for each proposed indication and route of delivery, only to
the extent such expenses are to be incurred initially by ARYx (e.g., expenses
incurred by ARYx and reimbursed by P&G pursuant to Section 4.9). In the
event of any inconsistency between the Development Plan and this Agreement, the
terms of this Agreement shall prevail.


 


(b)           Initial Development
Plan. Promptly after the Effective Date, P&G shall prepare an initial
Development Plan in consultation with ARYx, and, no later than [*] after the
Effective Date, P&G shall submit such Development Plan to the JSC for
review and approval. Such initial Development Plan shall describe key
activities and dates for Development of Licensed Products in the Territory from
the date of such Development Plan through Regulatory Approval and First
Commercial Sale of such Licensed Product in key markets.


 


(c)           Updates to the Development Plans. Prior to the commencement of
each P&G Fiscal Year and at such other times as P&G deems appropriate,
P&G shall update the existing Development Plan for each Licensed Product to
cover the upcoming [*], to take into account completion or cessation of
Development activities or commencement of new Development activities not
contemplated by the then-current Development Plan. Such proposed Development
Plan shall be submitted to the JSC no later than [*] prior to the commencement of
the applicable P&G Fiscal Year, for review and approval.


 


4.3          Specific Clinical
Trials.


 


(a)           Definitive QTc Study. No
later than [*] after the Effective Date, the
JSC shall determine the design to be submitted to the FDA and the EMEA for a
human clinical trial using the approach outlined in the FDA ICH E14
guidance for industry entitled “E14 Clinical Evaluation of QT/QTc Interval
Prolongation and Proarrhythmic Potential for Non-Antiarrhythmic Drugs” in
order to test whether the drug causes a clinically significant
delay in ventricular repolarization  (the
“Definitive QTc Study”). The Parties
acknowledge that (i) it may be necessary to conduct additional Phase I testing
prior to the selection of doses to be tested 


 


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in
the Definitive QTc Study, (ii) after results from such Phase I testing are
available, it will be necessary to obtain agreement from the
FDA (and possibly the EMEA) with respect to the dose selection for the
Definitive QTc Study, and (iii) as a result, the approval of the design of the
Definitive QTc Study approved by the JSC by the deadline specified above may
not include complete information regarding dose selection (in which case, such
design shall include a description of how the appropriate dose selection will
be determined).


 


(b)           Additional Safety and
Efficacy Trial. If P&G pays the Tier 4 milestone payment pursuant to
Section 8.2(a)(i), then P&G shall (i) commence a clinical safety and
efficacy trial (other than the Definitive QTc Study) in a gastrointestinal
indication selected by the JSC with [*] within [*] after the s-GERD Milestone
Date, or (ii) if such additional clinical safety and efficacy trial is already
underway at the time of s-GERD Milestone Date, P&G shall complete such
study within a reasonable period. It is understood that the timing commitment
in subsection (i) is contingent on the availability of adequate clinical
supplies and the availability of enabling toxicology studies, and is subject to
P&G’s rights to terminate this Agreement pursuant to Section 14.3(b).


 


(c)           Exploratory
Gastroparesis Trial. P&G recognizes ARYx’s interest in the completion
of an exploratory clinical trial of ATI-7505 for gastroparesis during the [*]
after the Effective Date. The JSC shall consider such trial and its timetable
relative to drug availability and sequencing of other high priority studies,
and shall make a decision whether or not to conduct and fund such trial, not
later than [*] after the later to occur of (i) the QTc Milestone Date and (ii)
the achievement of a Tier 1 or Tier 2 s-GERD milestone (as described in Exhibit
B), or the subsequent completion of a successful Phase II Trial for s-GERD
in the event of the achievement of a Tier 3 or Tier 4 s-GERD milestone (as
described in Exhibit B).


 


(d)           Other Clinical Trials  From time to time, ARYx may propose to
the JSC that additional clinical trials be conducted for development of
indications relevant to those physicians in the Target Audience. The JSC shall
determine whether such trials are a sound investment and a sound technical and
liability risk and whether they should receive priority over other possible
Licensed Product investments. If a trial proposed by ARYx under this Section
4.3(d) 


 


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is
approved by the JSC, the JSC shall determine whether such trials should be
managed by P&G or ARYx.


 


4.4          Materials Transfer. ARYx
shall transfer to P&G, at a mutually agreed time and in a mutually agreed
manner, such quantities of ATI-7505 active pharmaceutical ingredient and
ATI-7505 drug product then in inventory, and such other materials on hand
related to ATI-7505 described in Exhibit E, in each case to the extent
Controlled by ARYx (collectively, “Material”). Notwithstanding
the foregoing, the Materials set forth under the heading [*] shall only be
transferred to P&G upon P&G’s request. P&G shall pay for all
transferred Material in accordance with Section 4.9 and Exhibit E.


 


4.5          Diligent Development. P&G shall use Commercially
Reasonable Efforts to Develop and Commercialize Licensed Products in each country
in the Territory for [*], and each additional indication for which there is
reasonable basis for efficacy.   
Without limiting the generality of the foregoing:


 


(a)           Definitive QTc
Study.  Subject to the availability of necessary
clinical supplies, the availability of enabling toxicology data and reports,
and timely agreement by the FDA and the EMEA with respect to the applicable
protocol (other than any lack of availability or delay caused by P&G’s
failure to use Commercially Reasonable Efforts), P&G agrees to commence the
Definitive QTc Study no later than [*] after the Effective Date; provided, however, that in the event additional Phase I
studies are required to be conducted prior to commencement of the Definitive
QTc Study in order to select and justify the doses for such study, P&G
shall have the right to delay the commencement of the Definitive QTc Study
until the conclusion of such Phase I studies, provided that P&G uses
Commercially Reasonable Efforts to complete such Phase I studies. The Parties anticipate
that the need for such Phase I studies would delay the commencement of the
Definitive QTc Study by approximately [*].


 


(b)           [*].  Subject
to the availability of necessary clinical supplies, the availability
of enabling toxicology data and reports, and timely agreement by the FDA
and the EMEA with respect to the applicable protocol (other than any lack of
availability or delay caused 


 


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by
P&G’s failure to use Commercially Reasonable Efforts), P&G shall
commence a [*] of a Licensed Product for a gastrointestinal indication no later
than [*] after the Effective Date.


 


(c)           [*]. Subject to
the availability of necessary clinical supplies (other than any lack
of availability caused by P&G’s failure to use Commercially Reasonable Efforts),
for each Licensed Product being Developed for a particular indication, P&G
shall commence a [*] for such Licensed Product in such indication not later
than [*] after the [*] in which
the [*] substantially the same in cost and structure as the [*] proposed by
P&G.


 


Any material failure by
P&G to comply with the obligations set forth in this Section 4.5 shall be
deemed to be a breach of a material obligation under this Agreement, for which
ARYx may exercise its termination rights under Article 14 or any other
available remedies at law or in equity.


 


4.6          Development Reports. Each
Party shall present to the JSC at each JSC meeting a written report that
summarizes, in reasonable detail, all Development activities performed by such
Party and its Affiliates, sublicensees, and Third Party contractors since the
last such report by such Party, and compares such performance with the goals
and timelines set forth in the Development Plan. For the purpose of this
Section 4.6, a hard copy or an electronic copy of a presentation, slides or
exhibits shall be deemed to be a “written report.”  In the event the costs and expenses with
respect to any Development activity described in any such report are
reimbursable, in whole or in part, by the non-reporting Party, the reporting
Party shall include in such report an analysis of the costs and expenses
incurred in connection with such activity in light of the amounts budgeted for
such activity in the Development Plan. Each Party shall also promptly provide
the JSC or the other Party with any additional information regarding its
Development of the Licensed Product reasonably requested thereby.


 


4.7          Standards of Conduct. Each Party shall perform, and shall
ensure that its Affiliates, sublicensees, and Third Party contractors perform,
the Development activities for which it is responsible under the Development
Plan in accordance with Good Practices and Applicable Law.


 


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4.8          Development Limitations. Neither Party may conduct or have
conducted on its behalf, or enable any Third Party to conduct (other than
investigator-initiated trials which would be approved through P&G’s grant
review team), any clinical activities on, or with respect to, any Licensed
Product that are not approved under the Development Plan or by the JSC (or, in
the event of a dispute, pursuant to Section 3.5(b) or Section 15.2, as the case
may be).


 


4.9          Development Expenses. ARYx
shall be responsible for all costs and expenses incurred by or on behalf of
ARYx prior to the Effective Date, except for those costs and expenses set forth
in Exhibit E that are listed as payable by P&G, which will be
reimbursed by P&G. To the extent that P&G and ARYx agree that ARYx will
perform Development activities after the Effective Date (other than those
listed in Exhibit D, the costs and expenses of which activities shall be
borne by ARYx), P&G shall be responsible for all pre-agreed costs and
expenses incurred by or on behalf of ARYx in connection with such Development
activities to the extent such expenses meet all of the following criteria:  (a) such activities are set forth in the
Development Plan as modified from time to time pursuant to Section 4.2(c) and
are listed in the budget set forth therein as expenses to be incurred by ARYx;
(b) the total costs and expenses incurred by ARYx for each such activity does
not exceed the corresponding budgeted amount for such activity by more than [*]
or are approved by the JSC; and (c) the costs and expenses for ARYx personnel
and administrative time are calculated based on the FTE Rate (or such other FTE
rate mutually agreed by the Parties in writing), without any markup, where the
FTE Rate is intended to cover the fully-loaded costs and expenses of ARYx with
respect to such FTEs, including any salary, benefits, retirement, occupancy,
travel, office supply, systems communications, depreciation and any other
overhead expenses incurred in connection with such FTEs. In no event shall ARYx
be obligated to perform any Development activities (other than those listed in Exhibit
D) that would cause it to incur expenses that will not be reimbursed by
P&G. Reimbursement of ARYx by P&G pursuant to this Section 4.9 shall be
made only with respect to amounts actually incurred by ARYx. Unless the Parties
agree otherwise, any payments due to ARYx pursuant to this Section 4.9 shall be
made on a quarterly basis, based on written invoices submitted by ARYx to
P&G, and shall be due [*] days after P&G’s receipt of the applicable
invoice. As between the Parties, except
as otherwise provided pursuant to a Co-


 


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Development Agreement, P&G shall be
responsible for all costs and expenses incurred by or on behalf of P&G, its
Affiliates, or its sublicensees in connection with Development of Licensed
Products.


 


4.10        Option to Co-Develop.


 


(a)           No later than [*]
after [*] of the first [*] for each different Licensed Product, P&G shall
provide written notice to ARYx of such [*] of a [*], which notice shall be
accompanied by an updated Development Plan for such Licensed Product and an estimated
budget with respect to the Development activities set forth therein (the “Co-Development Notice”). For the purpose of this Section
4.10, “Commencement of a Phase III Trial”
means first dosing of the first patient in a Phase III Trial.


 


(b)           ARYx shall have the
option with respect to each Licensed Product with respect to which ARYx has
received a Co-Development Notice (each, a “Co-Development Option”)
to co-develop such Licensed Product pursuant to a Co-Development Agreement (as
defined below), which option shall be exercisable by written notice to P&G
for [*] after ARYx’s receipt of the Co-Development Notice. In the event that
ARYx does not exercise its Co-Development Option with respect to a Licensed
Product within such period, ARYx shall have no further rights under this
Section 4.10 with respect to such Licensed Product.


 


(c)           Following exercise
of the Co-Development Option, P&G and ARYx shall enter into good faith
negotiations and use commercially reasonable efforts to agree on a definitive
co-development agreement (a “Co-Development Agreement”)
with respect to the relevant Licensed Product. The Co-Development Agreement for
such Co-Developed Product, which may take the form of a stand-alone agreement
or an amendment to this Agreement, shall outline the overall framework for the
Parties’ co-development effort in the U.S., including roles and
responsibilities of the Parties and the mechanism for sharing of the costs with
respect to the applicable Co-Developed Product and for sharing of the profit
generated by the applicable Co-Developed Product in the U.S. The Co-Development
Agreement shall include the terms set forth on Exhibit F (along with
additional terms and conditions customary in the industry for an 


 


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agreement
of this type). If, despite good faith efforts, the Parties are unable to reach
agreement on a mutually acceptable Co-Development Agreement for a particular
Licensed Product, then ARYx’s co-development right with respect to such
Licensed Product shall lapse and neither Party shall have the right to have the
terms of a Co-Development Agreement, to the extent not set forth in Exhibit
F, decided by arbitration pursuant to Section 15.2. For clarity, the terms
and conditions of this Agreement (other than as set forth in Exhibit F)
do not apply to any Co-Developed Product unless and until the terms of this
Agreement are amended or superseded by a mutually executed Co-Development
Agreement.


 


(d)           ARYx’s
Co-Development Option shall terminate as to all Licensed Products upon any
Change of Control of ARYx or upon the assignment of this Agreement by ARYx to
an entity of which ARYx owns, directly or indirectly, fifty percent (50%) or
less of the voting securities or the equity interests having the power to
direct the management and policies of such entity. For clarity, a Change of
Control of ARYx shall not affect any co-development rights possessed by ARYx as
a result of exercising a Co-Development Option prior the closing of the Change
of Control transaction.


 


ARTICLE 5



REGULATORY


 


5.1          Regulatory Submissions.


 


(a)           As between the
Parties, P&G shall have sole responsibility for preparing and filing all
Regulatory Submissions in the Field in the Territory, including preparing all
reports required in connection with the submission of any Drug Approval
Application in the Territory, and shall use Commercially Reasonable Efforts to
obtain Regulatory Approvals in the Territory and, where applicable, Pricing
Approvals. All Regulatory Submissions for Licensed Products in the Field in the
Territory shall be filed in the name of P&G or one of its Affiliates or
sublicensees, and, as between the Parties, P&G shall be responsible for all
communications and other dealings with the regulatory agencies relating to the
Licensed Products in the Field in the 


 


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Territory.
ARYx shall transfer to P&G ownership of ARYx’s Regulatory Submissions and
Regulatory Approvals for Licensed Products in the Field in the Territory as of
the Effective Date (including any INDs for Licensed Products in the Field
Controlled by ARYx as of the Effective Date) on a date mutually agreed by the
Parties, which date shall be as soon as reasonably practicable after the later
to occur of the following dates:


 


(i)        the [*] day after the
Effective Date; and


 


(ii)       the [*] after the
fulfillment by ARYx of the applicable [*] with respect to the s-GERD Trial (but
not later than the [*] after the last patient has completed all assessments
required by the protocol for the s-GERD Trial).


 


The Parties shall work together in good faith
to ensure that P&G receives the regulatory documents referenced in the
final section of Exhibit D at least [*] prior to the transfer of ownership of
Regulatory Submissions and Regulatory Approvals for Licensed Products in the
Field in the Territory pursuant to this Section 5.1(a). As between the Parties,
P&G shall be the legal and beneficial owner of all Regulatory Submissions
and Regulatory Approvals for Licensed Products in the Field in the Territory,
in each case that are assigned by ARYx to P&G hereunder or developed or
obtained, as applicable, by or on behalf of P&G, its Affiliates or
sublicensees.


 


(b)           The JSC shall
develop and implement procedures for drafting and review of any Drug Approval
Application with respect to the U.S., the European Union or any Major EU
Country for a Licensed Product in the Field, which shall provide ARYx not less
than [*] to provide substantive comments. P&G shall consider ARYx’s
comments on each such Drug Approval Application in good faith; provided,
however, that P&G shall have the right to make all final decisions relating
to the content of each such Drug Approval Application.


 


(c)           P&G shall
promptly notify ARYx of all Regulatory Submissions that it submits, and, at
ARYx’s request, shall promptly provide ARYx with a copy (which may be wholly or
partly in electronic form) of such Regulatory Submissions. P&G will provide
ARYx with reasonable advance notice of any scheduled meeting with any
Regulatory Authority relating to Development or any Drug Approval Application
in the Territory, and ARYx shall have a 


 


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limited
right to have one ARYx employee or contractor attend (without a speaking role
unless otherwise agreed by the Parties in advance) any such meeting, to the
extent permitted by Applicable Law. P&G also shall promptly furnish ARYx
with summaries of all material correspondence or material meetings with any
Regulatory Authority relating to Development, Regulatory Submissions or a
Regulatory Approval in the Territory, and P&G shall, at ARYx’s request,
promptly furnish ARYx with copies of such correspondence or copies of minutes
of such meetings.


 


(d)           Following approval
of a Drug Approval Application for a Licensed Product, P&G shall retain
primary responsibility for dealings with the applicable Regulatory Authority
with respect to such Licensed Product, including filing all supplements and
other documents with such Regulatory Authority with respect to such Drug
Approval Application.


 


5.2          Complaints and Adverse
Event Reporting.


 


(a)           Complaints.
Each Party shall maintain a record of any and all complaints it receives with
respect to the Licensed Product as required by Applicable Law. ARYx shall
notify P&G in reasonable detail of any complaint received by it relating to
any Licensed Product within forty-eight (48) hours after receiving the
complaint, and in any event in sufficient time to allow P&G to comply with
any and all regulatory and other requirements imposed upon it in any
jurisdiction in which the Licensed Product is being marketed.


 


(b)           Adverse Event
Reporting. Without limitation of Section 5.2(a),
P&G shall inform ARYx, in writing and with reasonable specificity, of the
types of information that P&G requires in order for P&G to comply with
its pharmacovigilance responsibilities under Applicable Law, including any
written notice of Adverse Drug Experiences received by ARYx from pre-clinical
or clinical laboratory, animal toxicology and pharmacology studies, clinical
trials and commercial experiences with the Licensed Product, and ARYx shall
provide P&G with all such information in ARYx’s possession and Control from
time to time. “Adverse Drug Experience” means
(i) any finding from tests in laboratory animals or in vitro that suggests a
significant risk for human subjects including reports of mutagenicity,
teratogenicity or 


 


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carcinogenicity
and (ii) any undesirable, untoward or noxious event or experience associated
with the clinical, commercial or other use, or occurring following
administration, of the Licensed Product in humans, occurring at any dose,
whether expected and whether considered related to or caused by the Licensed
Product, including such an event or experience as occurs in the course of the
use of the Licensed Product in professional practice, in a clinical trial, from
overdose, whether accidental or intentional, from abuse, from withdrawal or
from a failure of expected pharmacological or biological therapeutic action of
the Licensed Product, and including those events or experiences that are
required to be reported to the FDA under 21 C.F.R. Sections 312.32 or 314.80,
or to foreign Regulatory Authorities under corresponding Applicable Law outside
the United States.


 


5.3          Product Withdrawals and Recalls. In the event that any
regulatory agency (a) threatens in writing or initiates any action to
remove any Licensed Product from the market in any country in the Territory or
(b) requires P&G, its Affiliates, or its sublicensees to distribute a “Dear
Doctor” letter or its equivalent regarding use of a Licensed Product in the
Field, P&G shall notify ARYx of such event within one (1) business day
after P&G becomes aware of the action, threat or requirement (as
applicable). P&G shall notify, and shall use Commercially Reasonable
Efforts to consult with, ARYx prior to initiating a recall or withdrawal of a
Licensed Product in the U.S., Japan, or a Major EU Country; provided, however,
that the final decision as to whether to recall or withdraw a Licensed Product
in the Field in the Territory shall be made by P&G in its sole discretion. P&G
shall be responsible for conducting any recalls or taking such other necessary
remedial action with respect to the Licensed Product in the Field in the
Territory. P&G shall bear all costs and expenses with respect to any such
recall or remedial action.


 


ARTICLE 6



COMMERCIALIZATION


 


6.1          General. Subject to the remainder of this Article 6,
P&G shall have sole responsibility and decision-making authority for
Commercialization activities, all of which shall be carried out in accordance
with the Commercialization Plan. P&G shall be responsible for all 


 


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costs
and expenses associated with the Commercialization activities, except as
provided in Section 6.8.


 


6.2          Commercialization Plan.


 


(a)           The Parties
acknowledge and agree that a long-term commercialization plan is necessary to
guide Development of the Licensed Product in the Field toward the applicable
product profile and to achieve optimal labels and positioning for the Licensed
Product. No later than [*] after the [*] and further subject to Section 6.2(b),
P&G shall deliver to the JSC for its review and comment a draft written
commercialization plan setting forth all anticipated Commercialization
activities to be performed with respect to Licensed Products in the [*] by or
on behalf of P&G (including market studies, launch plans, detailing and
promotion), as well as projected timelines for such activities (the “Commercialization Plan”). P&G shall consider in good
faith all reasonable comments received from the JSC with respect thereto and
shall submit any revisions to such plan to the JSC for review.


 


(b)           It is understood
that the initial Commercialization Plan delivered pursuant to Section 6.2(a)
will likely include only a summary and timeline of the anticipated marketing
activities with respect to the indications and countries in and for which
Regulatory Approval is being sought. After approval of the initial Commercial
Plan, P&G shall provide updates to the JSC at each JSC meeting regarding
P&G’s then-current plans for Commercialization of Licensed Products in the
U.S., Japan, and each Major EU Country. Moreover, within sixty (60) days of
database lock for the first Phase III Trial, P&G shall deliver to the JSC a
more detailed version of the Commercialization Plan. Such Commercialization
Plan (and each update thereto) shall include (i) an outline of key activities
and dates for Commercialization of Licensed Products in the Territory over the
subsequent [*] and (ii) a more detailed description of the proposed Commercialization
activities to be performed with respect to Licensed Products in the [*] for a
rolling [*] period, which detailed description shall include at least the
following items: (A) a description of P&G’s anticipated marketing
activities (both pre- and post-launch), including the plans to use key opinion
leaders and focus groups; (B) sales projections, [*]; (C) any requirements for
additional marketing studies; (D) competitive analysis including specific 


 


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actions
to mitigate competitive threats; and (E) planned promotional material and
sales/detailing protocols (with the understanding that, prior to the applicable
Regulatory Approval, such material will be in concept form only based on the
target product profile). Without limiting the generality of the foregoing, no
later than the filing of Drug Approval Application for a particular Licensed
Product United States or a Major EU Country, P&G shall provide the JSC with
an updated Commercialization Plan that specifically addresses the marketing of
such Licensed Product in such country.


 


(c)           P&G shall
update the Commercialization Plan on an annual basis as follows:  P&G shall provide the JSC with a draft
update to the Commercialization Plan for the upcoming [*] no later than [*] of
each year. P&G shall consider in good faith all reasonable comments
received from the JSC with respect thereto and shall submit any revisions to
such update to the JSC for review. P&G may, at its election, update the
Commercialization Plan between annual updates by following the same procedure.


 


(d)           In the event of any
inconsistency between the Commercialization Plan and this Agreement, the terms
of this Agreement shall prevail.


 


6.3          Diligent
Commercialization. P&G shall use Commercially Reasonable Efforts to Commercialize
Licensed Products in each country in the Territory for each indication for
which it receives Regulatory Approval. Without limiting the generality of the
foregoing, P&G shall satisfy each of the following requirements, in each
case subject to the availability of necessary supplies of Licensed Product
(other than any lack of availability caused by P&G’s failure to use
Commercially Reasonable Efforts):


 


(a)           In the U.S. and
each other country in the Territory in which there is no Pricing Approval for a
particular Licensed Product, P&G shall undertake the commercial launch of
each Licensed Product promptly after, and in any case not later than [*] after,
the first date on which Regulatory Approval is granted with respect to such
Licensed Product in such country; and


 


(b)           In each other
country in the Territory, P&G shall undertake the 


 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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commercial
launch of each Licensed Product promptly after, and in any case not later than
[*] after, the first date as of which both Regulatory Approval and Pricing
Approval have been granted with respect to such country; provided, however,
that P&G shall not be obligated pursuant to this Section 6.3(b) to
undertake a commercial launch in any country in which such launch is not
commercially reasonable, considering either conditions in such country or the
effect such launch might have on the commercial prospects of such Licensed
Product in other countries.


 


Any material failure by
P&G to comply with the obligations set forth in this Section 6.3 shall be
deemed to be a breach of a material obligation under this Agreement, for which
ARYx may exercise its termination rights under Article 14 or any other
available remedies at law or in equity.


 


6.4          Commercialization
Reports. Commencing after the JSC’s review of the initial detailed
Commercialization Plan submitted by P&G pursuant to the third sentence of
Section 6.2(b), P&G shall present to the JSC at each JSC meeting a written
report that summarizes, in reasonable detail, all Commercialization activities
performed by P&G and its Affiliates, sublicensees, and Third Party
contractors since the last such report by P&G, and compares such
performance with the goals and timelines set forth in the Commercialization
Plan. For the purpose of this Section 6.4, a hard copy or an electronic copy of
a presentation, slides or exhibits shall be deemed to be a “written report.”  P&G shall also promptly provide the JSC
or ARYx with any additional information regarding Commercialization of the
Licensed Product reasonably requested thereby.


 


6.5          Standards of Conduct. P&G
shall perform, or shall ensure that its Affiliates, sublicensees and Third
Party contractors perform, all Commercialization activities in a good
scientific and ethical business manner and in compliance with Applicable Law.


 


6.6          Sales Force Training. P&G
shall develop and conduct training programs specifically relating to the
Licensed Products for its relevant sales representatives. P&G agrees to
utilize such training programs on an ongoing basis to assure a consistent,
focused promotional 


 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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strategy.


 


6.7          Launch of OTC Licensed
Products. Except to the extent that the FDA or EMEA (as appropriate)
requires P&G to do so, P&G shall not promote, market, or sell a
particular OTC Licensed Product in the U.S. or a Major EU Country earlier than
the first to occur of (a) the date of actual launch in the applicable country
of a generic product containing the same Licensed Compound as such OTC Licensed
Product (or an acid form, base form, metabolite, prodrug, ester, salt form,
crystalline polymorph, hydrate, or solvate of such Licensed Compound, or an
optical isomer of such Licensed Compound solely in the event that such optical
isomer is approved by the applicable Regulatory Authority as a generic version
of such Licensed Compound); (b) the date [*] before the expected launch in the
applicable country of a generic product containing the same Licensed Compound
as such OTC Licensed Product (or an acid form, base form, metabolite, prodrug,
ester, salt form, crystalline polymorph, hydrate, or solvate of such Licensed
Compound, or an optical isomer of such Licensed Compound solely in the event
that the applicable Regulatory Authority has been asked to approve such optical
isomer as a generic version of such Licensed Compound); (c) the date [*] before
expiration of the last-to-expire ARYx Patent in such country covering such OTC
Licensed Product or the manufacture, use, or sale of a such OTC Licensed
Product; and (d) a final, unappealable decision by a court or governmental
agency of competent jurisdiction within the applicable country that permanently
invalidates, revokes or renders unenforceable the last ARYx Patent in such
country covering such OTC Licensed Product or the manufacture, use, or sale of
such OTC Licensed Product. P&G shall keep ARYx reasonably apprised of any
efforts by the FDA or EMEA to require such earlier promotion, marketing or
selling of a particular OTC Licensed Product in the U.S. or a Major EU Country
and shall provide ARYx with copies of all written communications between
P&G (or P&G’s counsel or representative) and the FDA or EMEA regarding
such matter. P&G shall keep ARYx reasonably apprised of any efforts by
P&G to launch any OTC Licensed Product in the U.S. or a Major EU Country
and shall notify ARYx in writing of any Regulatory Submissions in connection
therewith.


 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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6.8          Option to Co-Promote.


 


(a)           P&G hereby
grants to ARYx an option (a “Co-Promotion Option”)
to co-promote each Licensed Product in the U.S. to the Target Audience in
accordance with a co-promotion agreement (a “Co-Promotion
Agreement”) to be negotiated in good faith and entered into by the
Parties promptly following ARYx’s exercise of the Co-Promotion Option with
respect to a particular Licensed Product.


 


(b)           P&G shall give
ARYx prompt written notice of the FDA’s first acceptance of filing of an Drug
Approval Application in the U.S. for a particular Licensed Product, and shall
provide with such notice a summary of its marketing plan for the launch and
estimated first year’s commercial sales of such Licensed Product (collectively,
the “Co-Promotion Notice”). Such summary
shall indicate the anticipated date of First Commercial Sale of the applicable
Licensed Product in the U.S. ARYx may exercise its Co-Promotion Option with
respect to a particular Licensed Product by written notice to P&G at any
time after ARYx receives a Co-Promotion Notice with respect thereto; provided,
however, that (i) if ARYx exercises its Co-Promotion Option for a particular
Licensed Product within [*] after its receipt of the Co-Promotion Notice for
such Licensed Product, ARYx’s co-promotion activities with respect to such
Licensed Product shall not commence until the First Commercial Sale of such
Licensed Product and (ii) if ARYx exercises its Co-Promotion Option with
respect to a particular Licensed Product more than [*] after its receipt of the
Co-Promotion Notice for such Licensed Product, ARYx’s co-promotion activities
with respect to such Licensed Product shall not commence until the first day of
the [*] that commences at least [*] after the date of such exercise of the
Co-Promotion Option.


 


(c)           The Co-Promotion
Agreement shall outline the overall framework for the co-promotion effort,
including the roles and responsibilities of the Parties and the number and
percentage of primary detail equivalents (“PDEs”) to the
Target Audience to be provided by ARYx. The Co-Promotion Agreement will include
the terms set forth in Exhibit G (along with additional terms and
conditions customary in the industry for an agreement of this type). If,
despite good faith efforts, the Parties are unable to reach agreement on a
mutually acceptable Co-Promotion Agreement for a particular Licensed Product,
then ARYx’s co-promotion right with respect to such Licensed Product shall
lapse and neither Party shall have the right to have the 


 


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INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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terms
of a Co-Promotion Agreement, to the extent not set forth in Exhibit G,
decided by arbitration pursuant to Section 15.2. For clarity, the terms and
conditions of this Agreement (other than as set forth in Exhibit G) do
not apply to any co-promoted Licensed Product unless and until the terms of
this Agreement are amended or superseded by a mutually executed Co-Promotion
Agreement.


 


ARTICLE 7



MANUFACTURE AND SUPPLY


 


7.1          Manufacturing Responsibility. As between the Parties, P&G
shall have the sole responsibility and decision-making authority with respect
to the Manufacturing of Licensed Products in bulk and finished form for use by
P&G, its Affiliates, and its sublicensees in the Field in the Territory,
and for use by ARYx pursuant to the Development Plan.


 


7.2          Transfer of
Manufacturing Technology.


 


(a)           As soon as
reasonably possible after the Effective Date, at ARYx’s expense, ARYx shall
transfer to P&G or a Third Party manufacturer designated by P&G, or at
P&G’s election, both P&G and such Third Party manufacturer (i) all
information Controlled by ARYx as of the Effective Date reasonably useful or
necessary to enable P&G or such Third Party manufacturer (as appropriate)
to Manufacture the Licensed Product, including such information as is
reasonably useful or necessary to replicate the processes employed by or on
behalf of ARYx as of the Effective Date to Manufacture Licensed Product for use
in the Field and (ii) an up-to-date development history with respect to the
Licensed Product. In addition, upon P&G’s request within [*] after the
Effective Date (which request shall be in P&G’s sole discretion), ARYx
shall use commercially reasonable efforts (which efforts shall not include the
payment of any consideration) to (1) obtain consent from SCI Pharma, Inc. to
assign to P&G that certain agreement between ARYx and SCI Pharma, Inc.,
dated June 20, 2005 and (2) obtain consent from Corum Inc. to assign to P&G
that certain agreement between ARYx and Corum Inc., dated August 15, 2005. Upon
receipt of such consent, ARYx shall assign such agreement(s) to P&G 


 


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INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
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and
P&G agrees to accept such assignment(s). In the event that, notwithstanding
such commercially reasonable efforts, ARYx is unable to obtain one or both of
such consents, the Parties shall cooperate in good faith in order to obtain for
P&G, for a reasonable time period, such supplies of materials as P&G
shall reasonably require in connection with its Development activities
hereunder.


 


(b)           P&G and its
Third Party manufacturer(s) shall use any information transferred pursuant to
Section 7.2(a) in accordance with the license granted in Section 2.1 and solely
for the licensed use and for no other purpose.


 


(c)           Prior to requesting
the transfer by ARYx of any information to a Third Party manufacturer pursuant
to this Section 7.2, P&G shall cause such Third Party manufacturer to enter
into a confidentiality agreement with ARYx that binds such Third Party
manufacturer to obligations with respect to such information that are
substantially equivalent to those of Article 12 of this Agreement.


 


ARTICLE 8



PAYMENTS


 


8.1          Upfront Payment. P&G
shall pay to ARYx a non-refundable, non-creditable payment of Twenty-Five
Million Dollars ($25,000,000) within [*] after the Effective Date.


 


8.2          Development Milestones. P&G
shall notify ARYx within [*] after the occurrence of an achievement of each
milestone event giving rise to a payment obligation under Sections 8.2(b)
through (f), and P&G shall pay ARYx the indicated amount no later than [*]
after receipt of a written invoice from ARYx with respect any payment
obligation under this Section 8.2.


 


(a)           Initial Milestones.


 


(i)        s-GERD Milestones. P&G
shall make one of the following milestone payments to ARYx based upon the tier
in which the results of the s-GERD study fall 


 


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INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
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(according
to the criteria set forth in Exhibit B), unless P&G timely exercises
its right to terminate this Agreement pursuant to Section 14.3(a): 


 


	
  Tier

  	
   

  	
  Payment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Tier 1

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Tier 2

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Tier 3

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Tier 4

  	
   

  	
  [*]

  	
   

  



 


For the avoidance of doubt, in no
circumstances shall P&G be obligated to pay more than one milestone with
respect to the s-GERD Trial.


 


(ii)       QTc Milestones. P&G
shall disclose to ARYx, in writing, the data from, and analysis of, the
Definitive QTc Study as soon as reasonably practicable after P&G receives
such data and analysis, and in any event no later than [*] after the QTc Milestone
Date with respect to the raw, analyzable data from the Definitive QTc Study and
[*] after the QTc Milestone Date with respect to the analysis of such data in
accordance with the agreed statistical analysis plan. P&G shall include
with such analysis written notification to ARYx of the milestone event arising
from such data and results. P&G shall make one of the following milestone
payments to ARYx based upon the tier in which the results of the Definitive QTc
Study fall (according to the criteria set forth in Exhibit H),
unless P&G timely exercises its right to terminate this Agreement pursuant
to Section 14.3(b):


 


	
  Tier

  	
   

  	
  Payment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Tier 1

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Tier 2

  	
   

  	
  [*]

  	
   

  



 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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At the same that P&G
pays a “Tier 1” milestone payment, P&G shall pay an additional, one-time
milestone payment of [*] (the “QTc Bonus”) to
ARYx if, in the Definitive QTc Study, [*]. Furthermore, P&G shall pay a
one-time milestone payment of [*] upon the first Regulatory Approval of a
Licensed Product in the U.S. if [*].


 


(b)           [*] Indication. P&G
shall make each of the following milestone payments to ARYx with respect to the
first occurrence of the corresponding milestone event with respect to a
Licensed Product (other than a [*]) for [*] indication (which may be the IBS
Indication).


 


	
  Event

  	
   

  	
  Payment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  



 


(c)           [*] Indication. P&G
shall make each of the following milestone payments to ARYx with respect to the
first occurrence of the corresponding milestone event with respect to a
Licensed Product (other than a [*]) for a [*] indication (calculated without
counting the IBS Indication, if applicable).


 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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  Event

  	
   

  	
  Payment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  



 


(d)           [*] Indication. P&G
shall make each of the following milestone payments to ARYx with respect to the
first occurrence of the corresponding milestone event with respect to a
Licensed Product (other than a [*]) for a [*] indication (calculated without
counting the IBS Indication, if applicable).


 


	
  Event

  	
   

  	
  Payment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  



 


(e)           IBS. P&G shall
make each of the following milestone payments to ARYx with respect to the first
occurrence of the corresponding milestone event with respect to a Licensed
Product (other than a [*]) for the IBS Indication. Notwithstanding the
foregoing, in the event that the IBS Indication is the [*] for which a Licensed
Product is Developed, P&G shall make the applicable milestone payment in
Section 8.2(b) in lieu of a payment under this Section 8.2(e), and shall make
payment under this Section 8.2(e) with respect to the first occurrence of the
corresponding milestone event with respect to a Licensed Product (other than a
[*]) for the [*] other than the IBS Indication. 


 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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  Event

  	
   

  	
  Payment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  



 


(f)            [*]  P&G shall make each of the following
milestone payments to ARYx with respect to the first occurrence of the
corresponding milestone event with respect to a Licensed Product (other than a
[*]) for a [*] indication:      


 


	
  Event

  	
   

  	
  Payment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  



 


(g)           Clarification. For
clarity, each of the milestone payments set forth in Sections 8.2(b) through
(e) shall be made only once, and each of the milestone payments set forth in
Section 8.2(f) shall be made once and only once for each [*] indication. [*]  For further clarity, in the event that
Regulatory Approval is granted for both daytime s-GERD and nocturnal s-GERD
based on a single Drug Approval Application that covers both daytime s-GERD and
nocturnal s-GERD, daytime s-GERD and nocturnal s-GERD shall be deemed a single
indication 


 


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INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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for
purposes of this Agreement, but in the event that Regulatory Approval is
granted for daytime s-GERD and nocturnal s-GERD based on separate
Drug Approval Applications for daytime s-GERD and nocturnal s-GERD, daytime
s-GERD and nocturnal s-GERD each shall be deemed a
distinct indication for purposes of this Agreement.


 


(h)           Reductions. The
milestone payments for approval of a Drug Approval Application listed in
Sections 8.2(b) through (f) will be reduced by [*] if the approved label for
the relevant Licensed Product triggering such milestone payment includes [*].


 


8.3          [*] Milestones. For
each [*], P&G shall make each of the milestone payments indicated below to
ARYx with respect to the first occurrence of the corresponding milestone event
with respect to such [*] for a particular indication. For clarity,
developmental milestone payments for [*] will be [*] governed by this Section
8.3 [*]. 


 


	
  Event

  	
   

  	
  Payment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  



 


P&G shall notify ARYx
within [*] after the occurrence of an achievement of each milestone event
giving rise to a payment obligation under this Section 8.3, and P&G shall
pay ARYx the indicated amount no later than [*] after receipt of a written
invoice from ARYx.


 


8.4          Commercialization
Milestones. P&G shall make each of the milestone payments indicated
below to ARYx after aggregate, cumulative Net Sales of all Prescription 


 


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INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
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Licensed
Products in the Territory first reach the corresponding dollar values. 


 


	
  Aggregate, Cumulative Net Sales (Worldwide)

  	
   

  	
  Payment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  



 


P&G shall notify ARYx
within [*] after the occurrence of an achievement of each milestone event
giving rise to a payment obligation under this Section 8.4, and P&G shall
pay ARYx the indicated amount no later than [*] after receipt of a written
invoice from ARYx.


 


8.5          Royalties.


 


(a)           Prescription Licensed
Products in U.S. Subject to Sections 8.6, 8.7 and 9.1, for each
Prescription Licensed Product, P&G shall pay to ARYx, in the manner set
forth in Section 9.1, incremental royalties on Net Sales of such Prescription
Licensed Product by P&G and its Affiliates in the U.S. at a royalty rate
determined by total Net Sales in the U.S. of such Prescription Licensed Product
in each calendar year as follows:


 


	
  Calendar Year U.S. Net Sales

  	
   

  	
  Royalty Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  



 


CERTAIN CONFIDENTIAL INFORMATION
CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF
THE SECURITIES ACT OF 1933, AS AMENDED.


 


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(b)           Prescription Licensed
Products outside U.S. and Japan. Subject to Sections 8.6, 8.7 and 9.1, for
each Prescription Licensed Product, P&G shall pay to ARYx, in the manner
set forth in Section 9.1, incremental royalties on Net Sales of such
Prescription Licensed Product by P&G and its Affiliates in the OUSJ
Territory at a royalty rate determined by total Net Sales in the OUSJ Territory
of such Prescription Licensed Product in each calendar year as follows:  


 


	
  Calendar Year Net Sales (ex-U.S., ex-Japan)

  	
   

  	
  Royalty Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  



 


(c)           Prescription Licensed
Products in Japan. Subject to Sections 8.6, 8.7 and 9.1, for each
Prescription Licensed Product, P&G shall pay to ARYx, in the manner set forth
in Section 9.1, incremental royalties on Net Sales of such Prescription
Licensed Product by P&G and its Affiliates in Japan at a royalty rate
determined by total Net Sales in Japan of such Prescription Licensed Product in
each calendar year as follows:  


 


	
  Calendar Year Net Sales in Japan

  	
   

  	
  Royalty Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  



 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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(d)           OTC Products. For
each OTC Licensed Product for which regulatory exclusivity has not expired,
subject to Sections 8.6, 8.7 and 9.1, P&G shall pay to ARYx, in the manner
set forth in Section 9.1, incremental royalties on aggregate Net Sales of such
OTC Licensed Product in the Territory at a royalty rate determined by total Net
Sales by P&G and its Affiliates in the Territory of such OTC Licensed
Product in each calendar year as follows: 



 


	
  Calendar Year Net Sales

  	
   

  	
  Royalty Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  



 


Commencing as of the date
on which a royalty is no longer due pursuant to the first sentence of this Section
8.5(d) with respect to a particular OTC Licensed Product and country and
continuing for an additional [*], P&G shall pay to ARYx, in the manner set
forth in Section 9.1, royalties equal to [*] of aggregate Net Sales of such OTC
Licensed Product in such country.


 


8.6          Royalty Term. Royalties
due under Sections 8.5(a), 8.5(b), and 8.5(c) will commence upon the First
Commercial Sale of a Licensed Product in a particular country in the Territory,
as applicable, and will expire on a country-by-country basis on the later of
(a) the expiration of the last-to-expire Valid Claim of an ARYx Patent in such
country or Valid Claim in such country claiming an Assigned Invention, where
the applicable Valid Claim claims such Licensed Product or the Manufacture,
use, or sale of such Licensed Product and (b) [*] after the First Commercial
Sale of such Licensed Product in such country. Royalties due under Section
8.5(d) will commence upon the First Commercial Sale of an OTC Licensed Product
in a particular country in the Territory and will continue for the period(s)
set forth in Section 8.5(d). Upon expiration of all royalty obligations with
respect to a particular country and all obligations pursuant to Section 8.8 to
share Sublicensee Revenue with respect to such country, the license granted by
ARYx pursuant to Section 2.1 shall be fully paid-up with respect to such
country and no further payments of any kind shall be due or payable to ARYx in
connection with the Exploitation of Licensed Products in such country; provided,
however, that the Net Sales of Prescription Licensed Products in such country
shall continue to be included in the calculation of 


 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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aggregate,
cumulative Net Sales of Prescription Licensed Products for the purposes of
determining when the milestone events giving rise to payment obligations
pursuant to Section 8.4 have been achieved; further provided that once all
royalty obligations with respect to all countries in the Territory have expired
and all payment obligations pursuant to Section 8.8 with respect to all
countries in the Territory have expired, P&G shall have no further
obligation to make payments pursuant to Section 8.4, except with respect to
milestones therein achieved prior to such date.


 


8.7          Royalty Adjustments.


 


(a)           In any country
where there is no Valid Claim of an ARYx Patent in such country that claims the
applicable Licensed Product or the Manufacture, use, or sale of such Licensed
Product, but there is a Valid Claim in such country of a P&G Patent that
names an employee, consultant or subcontractor of ARYx as an inventor and that
claims an Assigned Invention, which Valid Claim claims such Licensed Product or
the Manufacture, use, or sale of such Licensed Product, P&G shall pay to
ARYx, in the manner set forth in Section 9.1, royalties pursuant to Sections
8.5(a), 8.5(b), or 8.5(c), at rates that are [*] of the rates set forth in such
sections.


 


(b)           In any country
where there is no Valid Claim of an ARYx Patent in such country that claims the
applicable Licensed Product or the Manufacture, use, or sale of such Licensed
Product and where Section 8.7(a) does not apply, P&G shall pay to ARYx, in
the manner set forth in Section 9.1, royalties pursuant to Sections 8.5(a),
8.5(b), or 8.5(c), at rates that are [*] of the rates set forth in such
sections. The royalty adjustment in Section 8.7(c) shall not apply to any
royalties with respect to the OUSJ Territory that have been reduced pursuant to
this Section 8.7(b).


 


In the event that the
approved label for a Licensed Product provides for a [*], then the royalty rate
under Sections 8.5(a), 8.5(b), or 8.5(c) shall be adjusted according to the
following formula (but only for sales in the country to which such label
applies and only if such formula has the effect of lowering the royalty
rate):  [*]


 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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(c)           For clarity, if (i)
the royalty adjustments in this Section 8.7(a), (b), or (c) cause the schedule
of royalty rates in one or more countries in the OUSJ Territory to differ from
the schedule of royalty rates in one or more other countries in the OUSJ
Territory, and (ii) the level of Net Sales in the OUSJ Territory in a
particular calendar quarter causes two or more royalty tiers to be applicable
to such Net Sales, then Net Sales in each country in such quarter shall be
allocated to the applicable royalty tiers on a pro-rata basis. This methodology
is illustrated in Exhibit I, which describes a hypothetical royalty
calculation involving the royalty reduction in Section 8.7(b).


 


8.8          Sublicensee Revenue. Within
[*] after the end of each calendar quarter, P&G shall pay ARYx [*] of all
Sublicensee Revenue received by P&G during such calendar quarter. For the
purpose of this Section 8.8, “Sublicensee Revenue”
means all payments (including upfront payments, license fees, milestone
payments, and royalties) paid to P&G or its Affiliates from a Third Party
in consideration for a grant to or exercise by such Third Party of a license to
Develop or Commercialize any Licensed Product in the Field; provided, however,
that (a) Sublicensee Revenue shall exclude any payments to P&G for services
provided by P&G personnel or for materials (e.g., development services,
marketing services, or product supply or samples) provided by P&G, but only
to the extent such payments represent reimbursement of P&G’s costs
associated with providing such services or materials, as applicable and (b)
P&G shall have the right to deduct from Sublicensee Revenue any amounts,
including royalties and milestone payments, paid by P&G or any of its
Affiliates to any Third Party under any license agreement as a result of the
Exploitation of Licensed Products by P&G’s sublicensees, provided that such
deduction shall not include any amounts for which P&G or the applicable
Affiliate is entitled to be reimbursed. The payment obligations of P&G
under this Section 8.8 with respect to a particular country shall expire upon
the later of (a) the expiration of all payment obligations of the
sublicensee(s) under all Sublicense Agreements that include such country within
the geographic scope of such sublicense(s) (without any reasonable possibility
of future payment obligations under Sublicense Agreements with respect to such
country); and (b) P&G’s full payment to ARYx of ARYx’s percentage share,
pursuant to this Section 8.8, of all amounts paid to P&G by such
sublicensee(s) with respect to payment liabilities to P&G that accrued
prior to 


 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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the
expiration referenced in subsection (a). This Section 8.8 shall not apply to
payments received by P&G or its Affiliates from a Third Party acting solely
as a distributor or within a co-promotion arrangement where such Third Party
only assists P&G in promoting or detailing the Licensed Product.


 


ARTICLE 9


 


PAYMENT; REPORTS; AUDITS


 


9.1          P&G Quarterly
Royalty Payments and Reports.


 


(a)           From the First
Commercial Sale until the expiration of P&G’s royalty obligations under
Section 8.5, P&G agrees to make written reports to ARYx within [*] after
the end of each calendar quarter covering all sales of the Licensed Product in
the Territory by P&G and its Affiliates for which invoices were sent during
such calendar quarter, each such written report stating for the period in
question:


 


(i)        gross sales of
Licensed Product in the U.S. by P&G and its Affiliates during the applicable
calendar quarter;


 


(ii)       solely in the case of
the report for the last fiscal quarter in each P&G Fiscal Year, gross sales
of Licensed Product in each Major EU Country and Japan by P&G and its
Affiliates during such P&G Fiscal Year and an itemized calculation of Net
Sales arising from such gross sales (including those Net Sales previously
reported pursuant to subsection (iv) below without an itemized calculation);


 


(iii)     with respect to the U.S.,
an itemized calculation of Net Sales by P&G and its Affiliates for the
applicable calendar quarter;


 


(iv)      with respect to counties
other than the U.S., Net Sales of Licensed Product by P&G and its
Affiliates during the applicable calendar quarter, on a country-by-country
basis;


 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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(v)        cumulative Net Sales
for the then-current calendar year; and


 


(vi)      a calculation of the
amount of royalty payment due on Net Sales of Licensed Products pursuant to
Section 8.5.


 


(b)           For so long as
P&G receives any Sublicensee Revenue, P&G agrees to make written
reports to ARYx within [*] after the end of each calendar quarter stating for
the period in question the amount and description of any Sublicensee Revenue
received by P&G or its Affiliates during the applicable calendar quarter,
and a calculation of ARYx’s share of such Sublicensee Revenue pursuant to
Section 8.8.


 


(c)           The information
contained in each report under Sections 9.1(a) and (b) shall be considered
Confidential Information of P&G. Concurrent with the delivery of each
quarterly report, P&G shall make the payment due ARYx under Section 8.5 or
8.8 (as appropriate) for the calendar quarter covered by such report.


 


(d)           In the case of
transfers or sales of any Licensed Product between P&G and an Affiliate of
P&G, a royalty shall be payable only with respect to the sale of such
Licensed Product to (i) an independent Third Party not an Affiliate of the
seller or (ii) if the end user is an Affiliate of the seller, then such end
user. In the case of transfers or sales of any Licensed Product from P&G or
its Affiliates to a sublicensee, no royalty will be owed under Section 8.5, but
instead ARYx will be entitled to a share of any Sublicensee Revenue generated
as a result of the sale of such Licensed Product, pursuant to Section 8.8. In
the case of transfers or sales of any Licensed Product from a sublicensee to
P&G or its Affiliates, a royalty shall be payable with respect to the sale
of such Licensed Product by P&G or its Affiliates to an independent Third
Party not an Affiliate of the seller, unless P&G or one of its Affiliates
is the end user of such Licensed Product, in which case the original transfer
or sale of Licensed Product from the sublicensee shall be included in Net Sales
and treated as though it were a sale or transfer of Licensed Product from
P&G to an independent Third Party.


 


9.2          Accounting. P&G
agrees to keep full, clear and accurate records for a period of at least three
(3) years after the relevant payment is owed pursuant to this Agreement,
setting


 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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forth the sales and other
disposition of Licensed Product sold or otherwise disposed of in sufficient
detail to enable royalties and compensation payable to ARYx hereunder to be
determined. With respect to any Development and Commercialization costs and
expenses for any Licensed Product incurred by a Party that are subject to
reimbursement by the other Party, such Party agrees to keep full, clear, and
accurate records of such costs and expenses for a period of at least three (3)
years after the date on which such costs and expenses are incurred, or such
longer period required by Applicable Law. Each Party further agrees to permit
its books and records to be examined by an independent accounting firm selected
by the other Party and reasonably acceptable to such first Party to verify, in
the case of P&G, reports provided for in Section 9.1, and in the case of
each Party, any costs and expenses with respect to which records are required
to be kept pursuant to this Section 9.2. Such audit shall not be performed more
frequently than once per calendar year nor more frequently than once with
respect to records covering any specific period of time. Such examination is to
be made at the expense of the auditing Party, except in the event that the
results of the audit reveal an underpayment to the auditing Party, or an
overpayment by the auditing Party, of [*] or more for the period being audited,
in which case reasonable audit fees for such examination shall be paid by the
audited Party. Such independent accounting firm shall be bound by written
commercially reasonable confidentiality and non-use obligations to the Parties
and any information disclosed by the audited Party to such auditor in the
course of an audit pursuant to this Section 9.2 shall be the Confidential
Information of the audited Party.


 


9.3          Methods of
Payments. All payments due to either ARYx under this Agreement shall
be paid in Dollars by wire transfer to a bank in the U.S. designated in writing
by ARYx.


 


9.4          Blocked Payments. In
the event that, by reason of Applicable Law in any country, it becomes
impossible or illegal for P&G to transfer, or have transferred on its
behalf, royalties or other payments owed hereunder to ARYx, such royalties or
other payments shall be deposited in local currency in the relevant country in
an account in the name and control of ARYx in a recognized banking institution
designated by ARYx, or, if none is designated by ARYx within a period of thirty
(30) days after P&G’s written request therefor, in a recognized banking
institution selected by P&G and identified in a written notice given to
ARYx.


 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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9.5          Taxes. If a law or
regulation of any country of the Territory requires withholding of taxes of any
type, levies or other charges with respect to the any amounts payable hereunder
to ARYx, P&G shall promptly pay such tax, levy or charge for and on behalf
of ARYx to the proper governmental authority, and shall promptly furnish ARYx
with receipt of such payment. P&G shall have the right to deduct any such
tax, levy or charge actually paid from payment due ARYx or be promptly
reimbursed by ARYx if no further payments are due ARYx. P&G agrees to
assist the ARYx in claiming exemption from such deductions or withholdings
under double taxation or similar agreement or treaty from time to time in force
and shall use reasonable efforts to minimize the amount required to be so
withheld or deducted.


 


9.6          Late Payments. Interest
shall accrue on delinquent payments hereunder from the date such payments are
due at the lesser of (a) the prime rate of interest, as published in The Wall
Street Journal (Eastern United States Edition), plus [*] and (b) the maximum
rate of interest permissible under Applicable Law.


 


ARTICLE 10



INTELLECTUAL PROPERTY


 


10.1        Disclosure and Ownership.


 


(a)           Disclosure. ARYx
shall use diligent efforts to disclose to P&G all ARYx Know-How promptly
following the Effective Date, and in any event not more than sixty (60) days
after the Effective Date (except as set forth in Exhibit D), and from
time to time thereafter during the term of this Agreement to the extent that
ARYx subsequently determines that any ARYx Know-How has not been disclosed to
P&G, which disclosure shall include delivery to P&G of copies of all
data, studies and other written materials that are included in the ARYx
Know-How and were not provided by ARYx to P&G prior to the Effective Date. Further,
ARYx shall disclose promptly to P&G any P&G Invention made by or on
behalf of ARYx during the term of this Agreement.


 


(b)           Ownership. As
between the Parties, subject to the terms and conditions 


 


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INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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of
this Agreement, ARYx shall own all ARYx Technology. As between the Parties,
subject to the terms and conditions of this Agreement, P&G shall own all
P&G Technology, all P&G Inventions and intellectual property related
thereto.  ARYx hereby assigns all right, title and interest in and to any
P&G Inventions arising from any activity conducted by or at the request of
ARYx (the “Assigned Inventions”) and agrees to
execute any and all documents which P&G reasonably determines are necessary
or convenient to perfect P&G’s ownership of the P&G Inventions, in each
case without additional consideration. ARYx shall cooperate fully with P&G
in the prosecution of any Patents relating to the P&G Inventions, at
P&G’s expense. Subject to the terms and conditions of this Agreement,
P&G hereby grants to ARYx, under the Assigned Inventions and all Patents
claiming such inventions, a non-exclusive, royalty-free, fully paid license
(with the right to grant sublicenses through multiple tiers) solely to the
extent necessary to Exploit such inventions, and all products and processes
related thereto, in each case solely outside the Field.


 


10.2        Patent Filings.


 


(a)           Responsibilities. Subject
to this Section 10.2, ARYx shall have the first right to prepare, file,
prosecute and maintain each Patent within the ARYx Patents in accordance with
the direction of the JSC on matters specified below or a subcommittee thereof
to which the JSC has delegated the authority to oversee such matters, and
P&G shall reimburse ARYx for all costs and expenses incurred by ARYx in
connection with such prosecution and maintenance (including internal ARYx
personnel costs, which will be reimbursed at the FTE Rate). The JSC shall
determine (i) the advisability and timing of any applicable filings for
any ARYx Patent and (ii) any foreign filing strategies with respect thereto. ARYx
shall keep P&G informed of the status of each such ARYx Patent, including
providing P&G with copies of any official actions and submissions with
respect to any ARYx Patent. ARYx shall give reasonable consideration to any
suggestions or recommendations of P&G concerning the preparation, filing,
prosecution and maintenance thereof. If, during the term of this Agreement, ARYx
intends not to file or continue prosecuting or maintaining an ARYx Patent, ARYx
shall notify P&G of such intention at least sixty (60) days prior to any
applicable deadline, and P&G shall thereupon have the right, but not the
obligation, to assume responsibility for the prosecution or maintenance of such
ARYx Patent 


 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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in
the name of P&G, for which P&G shall bear all associated costs and
expenses. In the event P&G elects to prosecute or maintain any ARYx Patent
pursuant to the preceding sentence, ARYx shall promptly transfer and assign its
right, title and interest in and to such ARYx Patent to P&G, whereupon such
Patent shall cease to be an ARYx Patent for purposes of this Agreement.


 


(b)           Cooperation. The Parties agree to cooperate in the
preparation, filing, prosecution and maintenance of all Patents under this
Section 10.2, including obtaining and executing necessary powers of attorney
and assignments by the named inventors, providing relevant technical reports to
the filing Party concerning the invention disclosed in such Patent, obtaining
execution of such other documents which shall be needed in the filing and
prosecution of such Patent, and, as requested, updating each other regarding
the status of such Patent, and shall cooperate with the other Party so far as
reasonably necessary with respect to furnishing all information and data in its
possession reasonably necessary to obtain or maintain such Patents.


 


(c)           Patent Restoration. Without
limitation of Section 10.2(b), the Parties shall cooperate with each other in
seeking any patent term restoration or supplemental protection certificates or
their equivalent for the P&G Patents and the ARYx Patents. In the event
that elections with respect to any of the foregoing are to be made for any
P&G Patent or any ARYx Patent, P&G shall have the first right to make
the election. If P&G does not make any election within thirty (30) days of
ARYx’s written request therefor, ARYx shall have the right to make the
election.


 


10.3        Enforcement and Defense of
Patents.


 


(a)           Notice. If either Party becomes aware that a Third Party is
infringing or may be infringing any Patent within the ARYx Patents or the
P&G Patents (an “Infringement”)
or that any Third Party claims that any such ARYx Patent or P&G Patent is
invalid or unenforceable (a “Patent Challenge”),
it will promptly notify the other Party thereof including available evidence of
infringement or the claim of invalidity or unenforceability.


 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


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(b)           Enforcement and
Defense.


 


(i)           P&G shall have
the sole right (but not the obligation) to take appropriate steps to enforce
any P&G Patent at its sole cost. P&G may, in any such instance, take
steps including the initiation, prosecution and control of a suit, proceeding
or other legal action with respect thereto, by counsel of its own choice.


 


(ii)          To the extent any
Infringement with respect to any ARYx Patent involves activity outside the
Field, ARYx shall have the sole right (but not the obligation) to take the
appropriate steps to enforce any such Patent, at its sole cost. ARYx may, in
any such instance, take steps including the initiation, prosecution and control
of a suit, proceeding or other legal action with respect thereto, by counsel of
its own choice.


 


(iii)        To the extent any Infringement
with respect to any ARYx Patent involves activity inside the Field, P&G
shall have the first right (but not the obligation), at its sole expense, to
take the appropriate steps to enforce any such Patent including the initiation
of a suit, proceeding or other legal action with respect thereto, by counsel of
its own choice. ARYx shall have the right, at its own expense, to be
represented in any such suit, proceeding, or action by counsel of its own
choice.


 


(iv)         If P&G fails to
take the appropriate steps to enforce a Patent within the ARYx Patents within [*]
after the date on which one Party provided notice to the other Party of the
applicable Infringement, then ARYx shall have the right (but not the
obligation), at its sole expense, to take the appropriate steps to enforce such
Patent, including the initiation of a suit, proceeding or other legal action
with respect thereto, by counsel of its own choice. P&G shall have the
right, at its own expense, to be represented in any such suit, proceeding, or
action by counsel of its own choice.


 


(v)           The Party
controlling any Infringement suit, action or proceeding pursuant to this
Section 10.3 shall also have the sole right to control the response to any
Patent Challenge asserted by the alleged infringer(s) as a counterclaim or
affirmative defense in such suit, proceeding, or action. ARYx shall have the
sole right to control the response to any Patent Challenge with respect to any
ARYx Patent involving activity outside the Field. Except 


 


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CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF
THE SECURITIES ACT OF 1933, AS AMENDED.


 


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as
otherwise provided in the first two sentences of this Section 10.3(b)(v),
P&G shall have the first right (but not the obligation) to control the
response to any Patent Challenge with respect to any P&G Patent or ARYx
Patent. In the event P&G does not elect to control any such Patent
Challenge with respect to any ARYx Patent pursuant to the previous sentence,
P&G shall so notify ARYx at least a reasonable amount of time in advance of
all deadlines and ARYx shall have the right (but not the obligation) to control
such Patent Challenge.


 


(c)           Cooperation.


 


(i)           If one Party brings
any suit, action or proceeding under this Section 10.3, the other Party agrees
to be joined as party plaintiff if necessary to prosecute the suit, action or
proceeding and to give the first Party reasonable authority to file and
prosecute the suit, action or proceeding; provided, however, that neither Party
will be required to transfer any right, title or interest in or to any property
to the other Party or any other party to confer standing on a Party hereunder.


 


(ii)          The Party not
pursuing the suit, action or proceeding hereunder will provide reasonable
assistance to the other Party, including by providing access to relevant
documents and other evidence and making its employees available, subject to the
other Party’s reimbursement of any out-of-pocket expenses incurred by the
non-enforcing or defending Party in providing such assistance.


 


(iii)        Neither Party will
settle or otherwise compromise any such suit, action or proceeding in a way
that adversely affects the other Party’s intellectual property rights or its
rights or interests with respect to the Licensed Product without such Party’s
prior written consent, which consent shall not be unreasonably withheld.


 


(d)           Recovery. Except as
otherwise agreed to by the Parties as part of a cost-sharing arrangement, any
settlements, damages or other monetary awards (the “Recovery”)
recovered pursuant to a suit, proceeding, or action brought pursuant to Section
10.3 will be allocated first to the costs and expenses of the Party taking such
action, and second, to the costs and expenses (if any) of the other Party (to
the extent not otherwise reimbursed), and any 


 


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remaining
amounts will be shared by the Parties as follows:  P&G shall retain or obtain, as
applicable, [*] of such remaining amounts, and ARYx shall retain or obtain, as
applicable, [*] of such remaining amounts; 
provided, however, that P&G shall
retain or obtain, as applicable, [*] of the remaining amounts, and ARYx shall
retain or obtain, as applicable, [*] of the remaining amounts, recovered
pursuant to any suit, proceeding or action that ARYx initiates pursuant to
Section 10.3(b)(iv) or that ARYx controls pursuant to Section 10.3(b)(v); and provided, further, that ARYx shall retain the full recovery
from any suit, proceeding or action it initiates pursuant to Section
10.3(b)(ii).


 


10.4        Defense of Infringement
Actions.


 


(a)           During the term of
this Agreement, each Party shall bring to the attention of the other Party all
information regarding potential infringement of Third Party intellectual
property rights with respect to the development, manufacture, production, use,
importation, offer for sale, or sale of Licensed Product in the Territory. The
Parties shall discuss such information and decide how to handle such matter.


 


(b)           If P&G or ARYx
are named as defendant(s) in a patent infringement suit filed by a Third Party
concerning the Exploitation of any Licensed Product in the Field, then P&G
shall indemnify, hold harmless and defend ARYx against any such suit in
accordance with Sections 13.2 and 13.3.


 


(c)           Any and all
settlements that restrict the scope or enforceability of the ARYx Know-How or
ARYx Patents must be approved by ARYx, in its sole and absolute discretion,
before execution by P&G. ARYx shall not be required to approve any
settlement that does not include as a condition thereof the full and
unconditional release of claims against ARYx.


 


(d)           This Section 10.4
shall not be interpreted as placing on either Party a duty of inquiry regarding
Third Party intellectual property rights.


 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
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10.5        Trademarks.


 


(a)           P&G shall be
responsible for the selection, registration, maintenance, and defense of all
trademarks for use in connection with the sale or marketing of Licensed
Products in the Field in the Territory (the “Trademarks”),
as well as all expenses associated therewith. All uses of the Trademarks shall
be reviewed by the JSC and shall comply with Applicable Law (including those
laws and regulations particularly applying to the proper use and designation of
trademarks in the applicable countries). P&G shall not, without ARYx’s
prior written consent, use any trademarks or house marks of ARYx (including the
ARYx corporate name), or marks confusingly similar thereto, in connection with
P&G’s Commercialization of Licensed Products under this Agreement. As
between the Parties, P&G shall own all Trademarks. ARYx shall not use any
Trademarks or any other trademarks or house marks of P&G, including P&G’s
corporate name, or trademarks or trade names confusingly similar thereto, in
connection with a Licensed Product, except as authorized in writing by P&G.


 


(b)           Upon the prior
review and written consent of P&G (not to be unreasonably withheld), ARYx may
use P&G’s corporate name and associated logo in ARYx promotional or
informational materials in connection with any permitted discussion of this
Agreement or the relationship of the Parties hereunder. Upon the prior review
and written consent of ARYx (not to be unreasonably withheld), P&G may use
ARYx’s corporate name and associated logo in P&G promotional or
informational materials in connection with any permitted discussion of this
Agreement or the relationship of the Parties hereunder. Neither Party shall be
required to obtain the other Party’s prior review and written consent for any
use of the other Party’s corporate name and associated logo that is in
substantially the same form and context as a use for which it has already
received such review and consent. The Parties shall agree in writing upon
procedures for each Party to review the other Party’s proposed use of its
corporate name and associated logo and to provide consent for such use, which
procedures shall be designed to minimize the administrative burden of obtaining
such review and consent for recurring types of use while providing each Party
with a reasonable opportunity to approve the context and manner in which its
corporate name and associated logo is used by the other Party.


 


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INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
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ARTICLE 11



REPRESENTATIONS, WARRANTIES, AND COVENANTS


 


11.1        Mutual Representations and
Warranties. Each Party hereby represents, warrants and covenants to the
other Party:


 


(a)           Such Party 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 action.


 


(c)           Such Party has the
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder, and such performance does not conflict with
or constitute a breach of any agreement of such Party with a Third Party.


 


(d)           Such Party has the
right to grant the rights and licenses described in this Agreement and has not
granted any other rights or licenses inconsistent therewith.


 


(e)           Neither such Party
nor any of its Affiliates has been debarred or is subject to debarment and
neither it nor any of its Affiliates will use in any capacity, in connection
with the activities to be performed by or on behalf of such Party hereunder,
any person who has been debarred pursuant to Section 306 of the Federal Food,
Drug, and Cosmetic Act or who is the subject of a conviction described in such
section. Each Party will inform the
other Party in writing immediately if such Party becomes aware that any such
person or entity is so debarred or is the subject of such a conviction, or if
any action, suit, claim, investigation or legal or administrative proceeding is
pending or, to the best of such Party’s knowledge, is threatened, relating to
the debarment or conviction of it, its Affiliates or any such person or entity.


 


11.2        ARYx Representations and
Warranties. ARYx hereby represents and warrants to P&G as follows:


 


(a)           Prior to the
Execution Date, Lighthouse Capital Partners V, L.P. had a lien on certain ARYx
Patents. Such lien has been released in connection with the execution of this 


 


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Agreement
and, as of the Execution Date, all ARYx Patents listed in Exhibit A
(other than U.S. Patent Application Serial Nos. 60/696662, 60/713149, 60/805678, and
60/747762) are solely owned by ARYx free and clear of all liens, charges
and encumbrances, either written, oral, or implied. As of the Execution Date,
each individual named as an inventor on U.S. Patent Application Serial No. 60/696662, 60/713149, 60/805678, or 60/747762
is under a legally binding obligation to assign to ARYx his or her inventions
that are claimed therein.


 


(b)           As of the Execution
Date, except as it may have previously disclosed to P&G in writing, (i) it [*]
any [*] relating in any way to a [*] of any [*] in connection with the
Exploitation or the anticipated Exploitation of ATI-7505, and (ii) to the
Knowledge of ARYx, the anticipated Exploitation of ATI-7505, in the form and
formulation in clinical development by ARYx as of the Effective Date, for s-GERD,
gastroparesis, erosive esophagitis and the IBS Indication, does not [*] any [*]
owned by a Third Party, or [*] any [*] owned by a Third Party.


 


(c)           As of the Execution
Date, except as it may have previously disclosed to P&G in writing, there
are no interferences or oppositions pending or, to ARYx’s Knowledge, threatened
against ARYx before any court or administrative office or agency which relate
to the ARYx Patents.


 


(d)           As of the Execution
Date, each of the Patent applications listed in Exhibit A is currently
pending and in good standing, and except as disclosed to P&G, has not been
abandoned.


 


(e)           To the Knowledge of
ARYx as of the Execution Date, (i) none of the issued ARYx Patents is invalid
or unenforceable, (ii) the [*] of an [*] provide [*] for a claim directed to
the molecule ATI-7505 that satisfies [*], and (iii) the conception, development
and reduction to practice of the ARYx Technology have not constituted or
involved the misappropriation of trade secrets or other rights or property of
any Third Party.


 


(f)            To the Knowledge
of ARYx as of the Execution Date, no Patent listed on Exhibit A, or
known by ARYx as of the Execution Date to be an ARYx Patent, is being infringed
by any Third Party.


 


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(g)           To the Knowledge of
ARYx as of the Execution Date, all clinical development conducted by or on
behalf of ARYx with respect to the Licensed Compound or the Licensed Products
prior to the Execution Date has been conducted in accordance with those Good
Practices that are required by the FDA with respect to such Development.


 


(h)           To the Knowledge of
ARYx as of the Execution Date, there is no information with respect to the [*]
of ATI-7505 or any product in the Field containing ATI-7505, and there are not
any [*] that ARYx reasonably believes would [*] the [*] of ATI-7505 or any
product in the Field containing ATI-7505.


 


(i)            As of the
Execution Date, ARYx has prepared, maintained and retained all Regulatory
Submissions that are required to be maintained and reported pursuant to and in
accordance with those Good Practices that are required by the FDA with respect
thereto and Applicable Law, and, to the Knowledge of ARYx, all information
contained therein is true, complete and accurate in all material respects. ARYx
has not received any written notice which has, or reasonably should have, led
it to believe that any IND filed by or on behalf of ARYx with respect to a
Licensed Product is not currently in good standing with the FDA or any other
Regulatory Authority. To the Knowledge of ARYx as of the Execution Date, ARYx
has filed with the FDA all required notices, supplemental applications and
annual or other reports or documents, including adverse experience reports,
with respect to each IND with respect to the Licensed Product which are
material to the continued Development of the Licensed Product.


 


(j)            All manufacturing,
testing, labeling, packaging, storing, and shipping operations with respect to
any Material provided by or on behalf of ARYx to P&G pursuant to Section
4.4 has been performed in accordance with those Good Practices that are
required by the FDA with respect thereto.


 


11.3        Disclaimer. EXCEPT AS
PROVIDED IN SECTION 11.1 AND 11.2, THE TECHNOLOGY AND INTELLECTUAL PROPERTY
RIGHTS PROVIDED BY EACH PARTY ARE PROVIDED “AS IS” AND EACH PARTY EXPRESSLY
DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING THE



 


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WARRANTIES
OF DESIGN, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND
NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, ARISING
FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES, IN ALL CASES WITH RESPECT
THERETO.


 


11.4        Limitation of Liability. NEITHER
PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY SPECIAL,
INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION WITH THIS
AGREEMENT, EACH PARTY’S PERFORMANCE OR LACK OF PERFORMANCE HEREUNDER, OR ANY
LICENSE GRANTED HEREUNDER, EXCEPT FOR DAMAGES ARISING FROM A BREACH OF SECTION
2.4 OR 12.1. THE FOREGOING SHALL NOT LIMIT EITHER PARTY’S INDEMNIFICATION
OBLIGATIONS HEREUNDER.


 


ARTICLE 12



CONFIDENTIALITY


 


12.1        Confidentiality. Subject to this Article 12, during and after
the term of this Agreement, each Party (i) shall maintain in confidence all
Confidential Information of the other Party; (ii) shall not use such
Confidential Information for any purpose except as permitted by this Agreement
(including licenses granted pursuant to this Agreement); and (iii) shall not
disclose such Confidential Information to anyone other than those of its
Affiliates, sublicensees, prospective sublicensees, employees, consultants,
agents or subcontractors who are bound by written obligations of nondisclosure
and non-use no less stringent than those set forth in this Article 12 and to
whom such disclosure is reasonably necessary or useful in connection with such
Party’s activities as contemplated in this Agreement or the exercise of its
rights hereunder (whether under licenses granted herein or rights retained
hereunder). For clarity, P&G shall have the right to use and disclose
(subject to (iii) in the preceding sentence) the ARYx Know-How in connection
with the exercise of its rights under Section 2.1, and ARYx shall have the
right to use and disclose (subject to (iii) in the preceding sentence) the ARYx
Know-How in connection with the exercise of its retained rights outside the
scope of the exclusive license granted to P&G 


 


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pursuant
to Section 2.1. Each Party shall ensure that such Party’s Affiliates,
sublicensees, prospective sublicensees, employees, consultants, agents and
subcontractors comply with these obligations. In addition, each Party shall be
permitted to disclose the ARYx Know-How (other than such information which
pertains to a method of manufacturing a Licensed Compound) on a need-to-know
basis to investors, prospective investors, bankers, prospective acquirors, or
their respective employees or agents in connection with any potential financing
or acquisition of such Party. Each Party shall notify the other promptly on
discovery of any unauthorized use or disclosure of the other’s trade secrets or
proprietary information.


 


12.2        Exceptions. The obligations of confidentiality,
non-disclosure, and non-use set forth in Section 12.1 shall not apply to the
extent the receiving Party (the “Recipient”)
can demonstrate that the disclosed information (a) was in the public domain at
the time of disclosure to the Recipient by the other Party, or thereafter
entered the public domain, in each case other than as a result of actions of
the Recipient, its Affiliates, employees, licensees, agents or subcontractors,
in breach of this Agreement; (b) was rightfully known by the Recipient or its
Affiliates (as shown by its written records) prior to the date of disclosure to
the Recipient by the other Party; or (c) was received by the Recipient or its
Affiliates on an unrestricted basis from a Third Party rightfully in possession
of such information and not under a duty of confidentiality to the other Party.
In addition, in the case of information in the ARYx Know-How and the Assigned
Inventions, the obligations of confidentiality, non-disclosure, and non-use set
forth in Section 12.1 shall not apply to ARYx to the extent that ARYx can
demonstrate that such information (i) was in the public domain as of the
Execution Date, (ii) entered the public domain after the Execution Date, other
than as a result of actions of the ARYx, its Affiliates, employees, licensees,
agents or subcontractors, in breach of this Agreement; or (iii) was received by
ARYx or its Affiliates on an unrestricted basis from a Third Party that is
rightfully in possession of such information, that did not receive such
information from ARYx, and that is not under a duty of confidentiality to
P&G. The previous sentence shall not be interpreted as permitting ARYx to
use ARYx Know-How within the scope of the exclusive license granted to P&G
pursuant to Section 2.1 (subject to Section 2.3). Notwithstanding any other
provision of this Agreement, Recipient’s (and in the case of information in the
ARYx Know-How and the Assigned 


 


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Inventions,
ARYx’s) disclosure of Confidential Information shall not be prohibited if such
disclosure:  (i) is in response to a
valid order of a court or other governmental body, provided that Recipient (or
ARYx, as the case may be) provides the other Party with prior written notice of
such disclosure in order to permit the other Party to seek a protective order
or other confidential treatment of such Confidential Information; or (ii) is
otherwise required by Applicable Law.


 


12.3        Publications.


 


(a)           ARYx may not
publish or present any results of any scientific or clinical activity initiated
after the Effective Date that directly relates to any Licensed Compound or
Licensed Product without the consent of P&G.


 


(b)           ARYx may publish or
present any results of any scientific or clinical activity initiated prior to
the Effective Date that directly relates to any Licensed Compound or Licensed
Product, provided that ARYx provides P&G with a draft of such proposed
presentation or publication at least [*] prior to the contemplated date for
making such presentation or submitting such publication and, at P&G’s
reasonable request, ARYx shall remove any Confidential Information of P&G
(other than clinical results in the ARYx Know-How) from such publication and
shall delay such presentation or submission for a reasonably period of time
(not to exceed [*] to allow for the filing of a Patent application directed to
subject matter disclosed therein.


 


(c)           P&G may publish
or present any results of any scientific or clinical activity initiated after
the Effective Date that directly relates to any Licensed Compound or Licensed
Product, provided that P&G provides ARYx with a draft of such proposed
presentation or publication at least [*] prior to the contemplated date for
making such presentation or submitting such publication and, at ARYx’s
reasonable request, P&G shall remove any Confidential Information of ARYx
from such publication and shall delay such presentation or submission for a
reasonably period of time (not to exceed [*]) to allow for the filing of a
Patent application directed to subject matter disclosed therein.


 


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12.4        Publicity. The
Parties agree that the public announcement of the execution of this Agreement
shall be through the issuance of a joint press release. The Parties shall
mutually agree upon the content of such press release as soon as possible after
the Execution Date and shall issue such press release at a time to be mutually
agreed by the Parties. Any other publication, news release or other public
announcement by a Party, and any responses prepared by a Party for any
question-and-answer sessions that would constitute public disclosures, in each
case relating to this Agreement or to the performance hereunder (other than any
scientific publication, which shall be governed by Section 12.3) shall first be
submitted to the other Party for review and approval by such other Party, which
approval shall not be unreasonably withheld. In the event that a Party does not
notify the other Party that disapproves any such publication or other material
submitted by such other Party within [*] of receipt by such first Party of such
submission, such first Party shall be deemed to have approved such proposed
publication or other material for release. Notwithstanding the foregoing, any
disclosure which is required by Applicable Law (including any disclosure
required under securities laws in connection with a contemplated public
offering of securities by a Party) as advised by the disclosing Party’s counsel
may be made without the prior consent of the other Party, although the other
Party shall be given prompt notice of any such legally required disclosure and
to the extent practicable an opportunity to comment on the proposed disclosure,
and the disclosing Party shall take account of any timely, reasonable comments
received from such other Party.


 


ARTICLE 13



INDEMNIFICATION


 


13.1        Indemnification by ARYx. Unless
otherwise provided herein, ARYx agrees to indemnify, hold harmless and defend
P&G, its Affiliates, and their directors, officers, employees and agents
(the “P&G Indemnitees”) from and against
any and all Third Party suits, claims, actions, demands, liabilities, expenses
or losses (including attorneys’ fees, court costs, witness fees, damages,
judgments, fines and amounts paid in settlement) (“Losses”)
to the extent that such Losses arise out of (a) ARYx’s breach of this
Agreement, (b) the negligence or willful misconduct of ARYx or its Affiliates,
or (c) the performance of any Development activities by or 


 


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on
behalf of ARYx hereunder, except for those Losses as to which P&G has an
obligation to indemnity ARYx pursuant to Section 13.2, as to which Losses each
Party will indemnify the other to the extent of its respective liability.


 


13.2        Indemnification by
P&G. Unless otherwise provided herein, P&G shall indemnify, hold
harmless and defend ARYx, its Affiliates, and their directors, officers,
employees and agents (the “ARYx Indemnitees”)
from and against any and all Losses, to the extent that such Losses arise out
of (a) P&G’s breach of this Agreement, (b) the negligence or willful
misconduct of P&G or its Affiliates, or (c) the development, manufacture,
distribution, use, testing, promotion, marketing, or sale or other disposition
of a Licensed Product by or on behalf of P&G or its Affiliates, agents or
sublicensees, except for those Losses as to which ARYx has an obligation to
indemnity P&G pursuant to Section 13.1, as to which Losses each Party will
indemnify the other to the extent of its respective liability.


 


13.3        Procedure. In the
event of a claim by a Third Party against a Party entitled to indemnification
under this Agreement (“Indemnified Party”),
the Indemnified Party shall promptly notify the other Party (“Indemnifying Party”) in writing of the claim and the
Indemnifying Party shall undertake and solely manage and control, at its sole
expense, the defense of the claim and its settlement. The Indemnified Party
shall cooperate with the Indemnifying Party, including, as requested by the
Indemnifying Party entering into a joint defense agreement. The Indemnified
Party may, at its option and expense, be represented in any such action or
proceeding by counsel of its choice. The Indemnifying Party shall not be liable
for any litigation costs or expenses incurred by the Indemnified Party without
the Indemnifying Party’s written consent. The Indemnifying Party shall not
settle any such claim unless such settlement fully and unconditionally releases
the Indemnified Party from all liability relating thereto, unless the
Indemnified Party otherwise agrees in writing.


 


13.4        Insurance. As
applicable, each Party, at its own expense, shall maintain product liability
insurance, which in the case of P&G may be in the form of self-insurance,
in an amount consistent with industry standards for a company of similar
standing during the term of this Agreement. Each Party shall provide fifteen
(15) days prior written notice to any cancellation of 


 


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its
insurance program. Each Party shall designate the other as an additional insured
under their respective applicable insurance policies. Each Party shall provide
to the other Party, upon request of the other Party, certificates of insurance
with respect to any insurance (or self-insurance) required to be carried by
such first Party pursuant to this Section 13.4.


 


ARTICLE 14



TERM AND TERMINATION


 


14.1        Term. The term of this
Agreement shall begin on the Effective Date and, unless earlier terminated in
accordance with the terms of this Article 14, will expire on the date on which
neither Party has nor will have any additional payment obligations to the other
Party under this Agreement.


 


14.2        Termination for Breach. Subject
to the terms and conditions of this Section 14.2, a Party (the “non-breaching Party”) shall have the
right, in addition to any other rights and remedies, to terminate this
Agreement in the event the other Party (the “breaching
Party”) is in breach of any of its material obligations under this
Agreement. The non-breaching Party shall first provide written notice to the breaching
Party, which notice shall identify with particularity the alleged breach. The
breaching Party shall have a period of [*] after such written notice is
provided to cure such breach. If such breach is not cured within such period,
then this Agreement shall terminate immediately at end of such period on
written notice from the non-breaching Party.


 


14.3        Termination by P&G.


 


(a)           P&G shall have
the right to terminate this Agreement at any time during the [*] period
following the s-GERD Milestone Date, which termination will be effective
immediately upon written notice to ARYx within such period.


 


(b)           P&G shall have
the right to terminate this Agreement at any time during the [*] period
following the QTc Milestone Date, which termination will be effective 


 


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immediately
upon written notice to ARYx within such period.


 


(c)           P&G shall have
the right to terminate this Agreement at any time on [*] prior written notice
to ARYx, provided that the effective date of such termination shall in no event
be earlier than [*] after the Effective Date.


 


14.4        Termination for Bankruptcy.
Either Party may terminate this Agreement if, at any time, the other Party
shall file in any court or agency pursuant to any statute or regulation of any
state, country or jurisdiction, a petition in bankruptcy or insolvency or for
reorganization or for an arrangement or for the appointment of a receiver or
trustee of that Party or of its assets, or if the other Party proposes a
written agreement of composition or extension of its debts, or if the other
Party shall be served with an involuntary petition against it, filed in any
insolvency proceeding, and such petition shall not be dismissed within sixty
(60) days after the filing thereof, or if the other Party shall propose or be a
Party to any dissolution or liquidation, or if the other Party shall make an
assignment for the benefit of its creditors.


 


14.5        Rights in Bankruptcy. All
rights and licenses granted under or pursuant to this Agreement by either Party
are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the
U.S. Bankruptcy Code, licenses of right to “intellectual property” as defined
under Section 101 of the U.S. Bankruptcy Code. The Parties agree that the
Parties, as licensees of such rights under this Agreement, shall retain and may
fully exercise all of their rights and elections under the U.S. Bankruptcy Code.
The Parties further agree that, in the event of the commencement of a
bankruptcy proceeding by or against either Party under the U.S. Bankruptcy
Code, the Party hereto that is not a Party to such proceeding shall be entitled
to a complete duplicate of (or complete access to, as appropriate) any such
intellectual property and all embodiments of such intellectual property, which,
if not already in the non-subject Party’s possession, shall be promptly
delivered to it (a) upon any such commencement of a bankruptcy proceeding upon
the non-subject Party’s written request therefor, unless the Party subject to
such proceeding elects to continue to perform all of its obligations under this
Agreement or (b) if not delivered under (a) above, following the rejection of
this Agreement by or on behalf of the Party subject to such proceeding upon
written request therefor by the non-subject Party.


 


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14.6        Effects of Termination or
Expiration.


 


(a)           Termination for Any
Reason. Upon termination of this Agreement for any reason:


 


(i)           Subject to Sections
14.6(b)(vii) and 14.6(c), each Party shall promptly return to the other Party
all relevant records and materials in its possession or control containing or
comprising the other Party’s Confidential Information and to which the Party
does not retain rights hereunder. Notwithstanding the foregoing, ARYx shall not
have any obligation to return any ARYx Know-How to P&G and, in the event of
any termination of this Agreement other than for ARYx’s material breach, the
ARYx Know-How shall cease to be the Confidential Information of P&G and
shall revert to being the Confidential Information of ARYx alone.


 


(ii)          Subject to Sections
14.6(b)(vii) and 14.6(c), all licenses granted by each Party to the other in
Article 2 shall terminate, and all rights in any and all Licensed Products
shall revert to ARYx.


 


(iii)        Subject to Sections
14.6(b)(vii) and 14.6(c), P&G and its Affiliates shall discontinue making
any representation regarding its status as a licensee of or distributor for
ARYx, for all Licensed Products, and shall cause any sublicensees to do the
same. P&G and its Affiliates shall cease conducting any activities with
respect to the marketing, promotion, sale or distribution of the Licensed
Products, and shall cause any sublicensees to do the same.


 


(iv)         Subject to Section
14.6(c), ARYx shall have the right to Develop and Commercialize the Licensed
Products itself or with one or more Third Parties, and shall have the right,
without obligation to P&G, to take any such actions in connection with such
activities as ARYx (or its designee), at its discretion, deems appropriate.


 


(b)           Termination for other
than Material Breach of ARYx. Upon termination of this Agreement for any
reason other than in the case of termination by P&G 


 


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pursuant
to Section 14.2:


 


(i)           P&G shall grant
to ARYx a worldwide, exclusive (even as to P&G except to the extent of
P&G’s rights set forth in clause (vii) of this Section 14.6(b)),
irrevocable license (with full rights to sublicense) under the P&G Know-How
and P&G Patents, to make, have made, import, use, offer for sale and sell
Licensed Products. In the case of a termination by ARYx, (1) such license shall
be royalty-bearing at a rate equal to [*] of the applicable rate provided in
Sections 8.5-8.7 (with Party names reversed as appropriate and with “ARYx
Patents” being replaced by “P&G Patents”), and (2) ARYx shall pay P&G
an amount equal to [*] of any ARYx Sublicensee Payments (as defined below), in
each case ((1) and (2)) during such time as there is a Valid Claim of a P&G
Patent (other than a P&G Patent that (A) names an employee, consultant or
subcontractor of ARYx as an inventor, (B) does not name an employee, consultant
or subcontractor of P&G as an inventor, and (C) claims an Assigned
Invention) in the relevant country that claims the applicable Licensed Product
or the Manufacture, use or sale of such Licensed Product in such country. When
there is no longer any such Valid Claim in the relevant country that claims the
applicable Licensed Product or if this Section 14.6(b)(i) comes into effect on
account of a termination of this Agreement by P&G, such license shall be [*],
and ARYx shall [*] to P&G under Section 14.6(b)(i). In all cases, ARYx
shall [*] by P&G under Third Party agreements as a result of ARYx’s exercise
of the foregoing license, provided that ARYx elects in writing to take a
sublicense under such Third Party agreements after full and accurate written
disclosure by P&G of the relevant obligations. For the purpose of this
Section 14.6(b)(i), “ARYx Sublicensee Payments” means payments received by ARYx
from sublicensees relating to the Commercialization of Licensed Products,
including royalties and other payments based on sales volumes or revenues from
the sale of Licensed Products and Commercialization milestones. Notwithstanding
the foregoing, (A) ARYx Sublicensee Payments shall exclude any payments to ARYx
for services provided by ARYx personnel or for materials (e.g., detailing
services, marketing services, or product supply or samples) provided by ARYx,
but only to the extent such payments represent reimbursement of ARYx’s costs
associated with 


 


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providing such
services or materials, as applicable and (B) ARYx shall have the right to
deduct from ARYx Sublicensee Payments any amounts, including royalties and
milestone payments, paid by ARYx or any of its Affiliates to any Third Party
under any license agreement as a result of the Exploitation of Licensed
Products by ARYx’s sublicensees, provided that such deduction shall not include
any amounts for which ARYx or the applicable Affiliate is entitled to be
reimbursed.


 


(ii)          P&G shall assign
to ARYx, and will provide full copies of, all Regulatory Approvals and INDs,
NDAs and other similar regulatory applications owned by P&G, its
Affiliates, and its sublicensees that relate to Licensed Products. P&G
shall also take such actions and execute such other instruments, assignments
and documents as may be necessary to effect the transfer of rights thereunder
to ARYx.


 


(iii)        P&G shall provide
to ARYx copies of all material reports and data, including clinical and
non-clinical data and reports, obtained or generated by or on behalf of
P&G, its Affiliates, or its sublicensees pursuant to this Agreement that
relate to Licensed Products, within sixty (60) days of such termination, and
ARYx shall have the right to use any such Information in developing and
commercializing Licensed Products, and to license any Third Parties to do so.


 


(iv)         If P&G used one
or more Trademarks with regard to any Licensed Product in a country, subject to
P&G’s rights set forth in clause (vii) of this Section 14.6(b), P&G
shall grant to ARYx an exclusive (even as to P&G), worldwide, irrevocable
license, with the right to sublicense, to use such Trademark(s) solely in
connection with the Development and Commercialization of such Licensed Product;
provided, however, that with respect to
any Trademarks that are housemarks of P&G or any of its Affiliates or
contract manufacturers, such license shall extend solely to selling off
existing inventory of Licensed Product transferred by P&G to ARYx hereunder.
In the case of a termination by ARYx, if ARYx in its discretion sells Licensed
Product (other than inventory purchased by ARYx pursuant to Section
14.6(b)(vi)) in a particular country under a Trademark licensed to ARYx
pursuant to this Section 14.6(b)(iv) at a time when there is no Valid Claim of
a P&G Patent 


 


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(other than a
P&G Patent that (1) names an employee, consultant or subcontractor of ARYx
as an inventor, (2) does not name an employee, consultant or subcontractor of
P&G as an inventor, and (3) claims an Assigned Invention) in the relevant
country that claims the applicable Licensed Product, then such license shall be
royalty-bearing at a rate equal to [*] of Net Sales of such Licensed Product
sold in such country under such Trademark. When there is such a Valid Claim in
the relevant country that claims the applicable Licensed Product, such license
shall be royalty-free. If this Section 14.6(b)(iv) comes into effect on account
of a termination of this Agreement by P&G, such license shall be
royalty-free and fully paid-up.


 


(v)           At ARYx’s request,
P&G shall promptly provide to ARYx copies of all clinical trial, contract
manufacturing, or service agreements entered into by P&G or its Affiliates
with Third Parties with respect to the Licensed Products. At ARYx’s request,
P&G shall promptly assign (or cause to be assigned), such agreements to
ARYx, to the extent such assignment is permitted under such agreement. In the
event that such an assignment is not permitted under a particular clinical trial,
contract manufacturing, or service agreement, then P&G shall reasonably
cooperate (at ARYx’s request) to assist ARYx in obtaining similar terms in a
direct agreement between ARYx and the applicable counterparty.


 


(vi)         P&G shall
transfer to ARYx, at a price equal to P&G’s fully-loaded Manufacturing
costs for the Licensed Product (which shall not include any mark-up), all
quantities of Licensed Products in the possession of P&G or its Affiliates
(including clinical trial supplies and Licensed Products intended for
commercial sale) that ARYx request that P&G so transfer.


 


(vii)        Except in the case of
termination by ARYx pursuant to Section 14.2, P&G shall have the right for [*]
after the effective date of such termination to dispose of all Licensed Product
then in its inventory, solely to the extent that ARYx does not elect to
purchase such Licensed Product pursuant to Section 14.6(b)(vi), as though this
Agreement had not terminated. For the avoidance of doubt, Licensee shall
continue to make payments in connection with any such disposal as provided in
Article 8.


 


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(viii)       Promptly after the
effective date of such termination, P&G shall provide, at ARYx’s expense
calculated at the R&D FTE Rate, (A) if such termination occurs after the
First Commercial Sale of the Licensed Product in the Field in the Territory, technical
assistance of up to a total of [*] FTEs during the period from the effective
date of such termination until [*] thereafter, or (B) if such termination
occurs prior to the First Commercial Sale of the Licensed Product in the Field
in the Territory, technical assistance of up to a total of [*] FTEs during the
period from the effective date of such termination until [*] thereafter, to
provide technology transfer necessary for ARYx to commence or continue to
commercially manufacture Licensed Products, and a non-exclusive, royalty-free,
perpetual license under any Know-How disclosed by P&G to ARYx in the course
of such activities to manufacture Licensed Products.


 


(ix)         Without limitation of
any of the foregoing, the Parties shall cooperate in good faith to achieve an
orderly transition with respect to the Development and Commercialization of
Licensed Product, including setting timelines for the transfer of any data and
materials required to be transferred pursuant to this Section 14.6(b),
determining an appropriate strategy for communicating with investigators and
thought leaders regarding the termination of this Agreement, and ensuring that
the Parties comply with Applicable Law and any applicable industry guidelines
regarding the publication of any unpublished data from any clinical studies
conducted hereunder.


 


(c)           Termination for
Material Breach of ARYx. Upon termination of this Agreement by P&G
pursuant to Section 14.2:


 


(i)           in addition to
those provisions identified in Section 14.7, the rights and obligations of the
Parties under the following provisions of this Agreement shall survive, subject
to Section 14.6(c)(ii):  Sections 2.1,
2.4 (with respect to ARYx Technology), 2.6 (except for (i)), 2.7(a), 2.8 (first
sentence only), 4.7, 5.2, 6.5, 6.7, 10.2, 10.3, 10.4, 10.5, 12.3, and 14.3, and
Articles 8 and 9;


 


(ii)          in addition to those
provisions identified in Section 14.7 and in 


 


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Section 14.6(c)(i), if
the effective date of such termination is prior to the [*] of the [*], the
rights and obligations of the Parties under Sections 4.3 and 4.5 shall survive
until the [*] of the [*] and shall thereafter terminate; provided, however,
that (1) P&G shall not be considered to be in breach of Section 4.3 or 4.5
to the extent that P&G is unable to perform its obligations in Section 4.3
or 4.5 (as appropriate) as a result of ARYx’s breach of this Agreement; and (2)
the effects of any breach of this Agreement by ARYx shall be a relevant factor
in determining the level of effort by P&G that constitutes Commercially
Reasonable Efforts.


 


(iii)        if P&G is awarded,
pursuant to an arbitration conducted in accordance with Section 15.2, compensatory
damages [*] on account of the uncured, material breach of ARYx that was the
basis for P&G’s termination pursuant to Section 14.2 and such award is not eligible
for revocation as specified in Section 15.2, then:


 


(1)           P&G’s payment
obligations under Sections 8.5-8.8 shall be [*] the amounts specified therein;
and


 


(2)           the rights and
obligations of the Parties under the following provisions shall terminate:  Sections 2.7, 4.3, 4.5, and 6.7.


 


14.7        Survival; Accrued Rights. The
rights and obligations of the Parties under the following provisions of this
Agreement shall survive expiration or any termination of this Agreement:
Sections 2.5, 8.2 and 8.3 (in each case with respect to events occurring prior
to the termination effective date), 8.4-8.7 (in each case with respect to sales
made prior to the termination effective date or pursuant to Section
14.6(b)(vii)), 8.8 (with respect to amounts received by P&G on amounts owed
by sublicensees prior to the termination effective date), 9.1 (with respect to
sales made prior to the termination effective date or pursuant to Section
14.6(b)(vii)), 9.2, 9.6, 10.1(b), 11.4, 12.1, 12.2, 13.1, 13.2, 13.3, 14.5,
14.6, and 14.7, and Articles 15 and 16. In any event, expiration or termination
of this Agreement shall not relieve the Parties of any liability which accrued
hereunder prior to the effective date of such expiration or termination nor
preclude either Party from pursuing all rights and remedies it may have
hereunder or at law or in equity with respect to any breach of this Agreement,
nor prejudice 


 


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either
Party’s right to obtain performance of any obligation.


 


ARTICLE 15



DISPUTE RESOLUTIONS; GOVERNING LAW


 


15.1        Disputes. Unless
otherwise set forth in this Agreement and excluding in particular any disputes
over matters within the authority of the JSC pursuant to Article 3 (which will
be handled exclusively in accordance with Section 3.5(b)), in the event of a
dispute arising under this Agreement between the Parties, the Parties shall
refer such dispute to the respective Executive Officers, and such Executive
Officers shall attempt in good faith to resolve such dispute.


 


15.2        Arbitration. If the
Parties are unable resolve a given dispute pursuant to Section 15.1 within
sixty (60) days of referring such dispute to the Executive Officers, either
Party may have the given dispute settled by binding arbitration in the manner
described below:


 


(a)           Arbitration Request. If
a Party intends to begin an arbitration to resolve a dispute arising under this
Agreement, such Party shall provide written notice (the “Arbitration
Request”) to the other Party of such intention and the issues for
resolution. From the date of the Arbitration Request and until such time as the
dispute has become finally settled, the running of the time periods as to which
Party must cure a breach of this Agreement becomes suspended as to any breach
that is the subject matter of the dispute.


 


(b)           Additional Issues. Within
ten (10) business days after the receipt of the Arbitration Request, the other
Party may, by written notice, add additional issues for resolution, provided
that such issues are eligible for arbitration under this Section 15.2.


 


(c)           No Arbitration of
Patent/Confidentiality Issues. Unless otherwise agreed by the Parties,
disputes relating to the scope, validity, enforceability or infringement of
patents or the non-disclosure, non-use or maintenance of Confidential
Information shall not be subject to arbitration, and shall be submitted to a
court of competent jurisdiction.


 


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(d)           Arbitration Procedure. Discovery
shall be under the U.S. Federal Rules of Civil Procedure then in effect in the
District Court for District of Delaware. The Arbitration shall be held in the
continental U.S. under the Commercial Arbitration Rules of the American
Arbitration Association (“AAA”). The
arbitration shall be conducted by three (3) arbitrators who are knowledgeable
in the subject matter at issue in the dispute. One (1) arbitrator will be
selected by ARYx, one (1) arbitrator will be selected by P&G, and the third
arbitrator will be selected by mutual agreement of the two (2) arbitrators
selected by the Parties. Each Party shall submit to such arbitrators its
proposed ruling and remedy for each issue that is the subject of arbitration. The
arbitrators shall, within fifteen (15) days after the conclusion of the
arbitration hearing, issue a written award and statement of decision describing
the essential findings and conclusions on which the award is based, including
the calculation of any damages awarded. Any such award and decision shall
reflect the proposed ruling and remedy of one of the Parties as to each
disputed issue. The arbitrators shall be authorized to award compensatory
damages, but shall not be authorized to award non-economic damages or punitive
damages, or to reform, modify or materially change this Agreement or any other
agreements contemplated hereunder. The arbitrators also shall be authorized to
grant any temporary, preliminary or permanent equitable remedy or relief the
arbitrators deem just and equitable and within the scope of this Agreement,
including an injunction or order for specific performance. The award of the
arbitrators shall be the sole and exclusive remedy of the Parties (except for
any other remedies set forth in this Agreement). The arbitrators may proceed to
an award, notwithstanding the failure of either Party to participate in the
proceedings. Judgment on the award rendered by the arbitrators may be enforced
in any court having competent jurisdiction thereof, subject only to revocation
on grounds of fraud or clear bias on the part of the arbitrators.


 


(e)           Costs; Satisfaction. Each
Party shall bear its own attorneys’ fees, costs, and disbursements arising out
of the arbitration, and shall pay an equal share of the fees and costs of the
arbitrators; provided, however, that the
arbitrators shall be authorized to determine whether a Party is the prevailing
Party, and if so, to award to that prevailing Party reimbursement for its
reasonable attorneys’ fees, costs and disbursements (including, for example,
expert witness fees and expenses, photocopy charges and travel expenses), or
the fees and costs of the 


 


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arbitrators.
Absent the filing of an application to correct or vacate the arbitration award
as permitted by Applicable Law, each Party shall fully perform and satisfy the
arbitration award within fifteen (15) days of the service of the award.


 


15.3        Interim Relief. Notwithstanding
any other provision of this Agreement, either Party may seek interim or
provisional relief, including a temporary restraining order, preliminary
injunction or other interim equitable relief, in a court of competent
jurisdiction, concerning any dispute other than a dispute subject to
determination by the Executive Officer of P&G pursuant to Section 3.5(b),
if necessary to protect the interests of such Party. This Section shall be
specifically enforceable.


 


15.4        Waiver. By agreeing to this binding
arbitration provision, the Parties understand that they are waiving certain
rights and protections which may otherwise be available if a dispute between
the Parties were determined by litigation in court, including the right to seek
or obtain certain types of damages precluded by this provision, the right to a
jury trial, certain rights of appeal, and a right to invoke formal rules of
procedure and evidence.


 


15.5        Choice of Law. The
validity, performance, construction, and effect of this Agreement shall be
governed by the laws of the State of Delaware, without regard to conflicts of
law principles that would provide for application of the law of another
jurisdiction.


 


ARTICLE 16


 


MISCELLANEOUS


 


16.1        Assignment. Either
Party may assign this Agreement (a) to any Affiliate of such Party without the
prior written consent of the other Party, provided that such Party provides the
other Party with written notice of such assignment and remains fully liable for
the performance of such Party’s obligations hereunder by such Affiliate, (b)
without the prior written consent of the other Party, to its successor in interest
by way of merger, spin-off, acquisition, or sale of all or substantially all of
its assets to which this Agreement relates, provided that such Party provides
the other Party with written notice of such assignment; or (c) without the
prior written 


 


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consent
of the other Party, in connection with a Change of Control of such Party,
provided that such Party provides the other Party with written notice of such
assignment. Any other assignment of this Agreement by a Party requires the
prior written consent of the other Party. Any assignment in violation of this
Section 16.1 shall be null and void. This Agreement shall be binding on and
shall inure to the benefit of the permitted successors and assigns of the
Parties hereto. Notwithstanding the foregoing, in the event that a Party
assigns this Agreement to its successor in interest following a by way of
merger, acquisition or sale of all or substantially all of its assets to which
this Agreement relates, the intellectual property rights of such successor in
interest, and of any of its Affiliates as of the time immediately prior to such
assignment, as existing immediately prior to the closing of such transaction,
shall be automatically excluded from the rights licensed to the other Party under
this Agreement.


 


16.2        Force Majeure. If
either Party shall be delayed, interrupted in or prevented from the performance
of any obligation hereunder by reason of force majeure including an act of God,
fire, flood, earthquake, war (declared or undeclared), public disaster, act of
terrorism, strike or labor differences, governmental enactment, rule or
regulation, or any other cause beyond such Party’s reasonable control, such
Party shall not be liable to the other therefor; and the time for performance of
such obligation shall be extended for a period equal to the duration of the
force majeure which occasioned the delay, interruption or prevention. The Party
invoking such force majeure rights of this Section 16.2 must notify the other
Party in writing within a period of fifteen (15) days of both the first and
last day of the force majeure unless the force majeure renders such
notification impossible in which case notification will be made as soon as
possible. If the delay resulting from the force majeure exceeds [*], [*].


 


16.3        Entire Agreement. This
Agreement constitutes the entire agreement between the Parties with respect to
the subject matter herein and, effective on the Effective Date, supersedes all
previous agreements between the Parties with respect to the subject matter
herein, whether written or oral,
including the Mutual Non-disclosure Agreement entered into by the Parties on [*]
This Agreement shall not be changed or modified orally, but only by an
instrument in writing signed by both Parties.


 


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16.4        Severability. If any
provision of this Agreement is declared invalid by a court of last resort or by
any court or other governmental body from the decision of which an appeal is
not taken within the time provided by law, then and in such event, this
Agreement will be deemed to have been terminated only as to the portion thereof
that relates to the provision invalidated by that decision and only in the
relevant jurisdiction, but this Agreement, in all other respects and all other jurisdictions,
will remain in force; provided, however, that if the provision so invalidated
is essential to the Agreement as a whole, then the Parties shall negotiate in
good faith to amend the terms hereof as nearly as practical to carry out the
original intent of the Parties, and, failing such amendment, either Party may
submit the matter for resolution pursuant to Article 15.


 


16.5        Notices. Any notice,
request, demand, waiver, consent, approval or other communication permitted or
required under this Agreement (“Notice”) shall
be in writing, shall refer specifically to this Agreement and shall be deemed
given only if delivered by hand or sent by facsimile transmission (with
transmission confirmed) or by nationally recognized delivery service that
maintains records of delivery, addressed to the Parties at their respective
addresses specified in this Section 16.5 or to such other address as the Party
to whom notice is to be given may have provided to the other Party in
accordance with this Section 16.5. Such Notice shall be deemed to have been
given as of the date delivered by hand or transmitted by facsimile (with
transmission confirmed) or on the second business day (at the place of
delivery) after deposit with a nationally recognized overnight delivery service.
Any notice delivered by facsimile shall be confirmed by a hard copy delivered
as soon as practicable thereafter. This Section 16.5 is not intended to govern
the day-to-day business communications necessary between the Parties in
performing their obligations under the terms of this Agreement.


 


	
  If to ARYx:

  	
   

  	
  ARYx Therapeutics, Inc.

  
	
   

  	
   

  	
  6300 Dumbarton Circle

  
	
   

  	
   

  	
  Fremont, CA 94555

  
	
   

  	
   

  	
  Attention: Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
  If to P&G:

  	
   

  	
  Procter
  & Gamble Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  2
  P&G Plaza

  



 


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  Cincinnati,
  OH 45202

  
	
   

  	
   

  	
  Attention:
   President

  
	
   

  	
   

  	
   

  
	
   

  	
  and

  	
  Procter & Gamble
  Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  Mason Business Center

  
	
   

  	
   

  	
  8700 Mason-Montgomery
  Road

  
	
   

  	
   

  	
  Mason, OH 45040-9462

  
	
   

  	
   

  	
  Attention: Associate
  General Counsel,

  
	
   

  	
   

  	
  Pharmaceuticals

  



 


16.6        Further Assurances. The
Parties agree to reasonably cooperate with each other in connection with any
actions required to be taken as part of their respective obligations under this
Agreement, and shall (a) furnish to each other such further information; (b)
execute and deliver to each other such other documents; and (c) do such other
acts and things (including working collaboratively to correct any clerical,
typographical, or other similar errors in this Agreement), all as the other
Party may reasonably request for the purpose of carrying out the intent of this
Agreement.


 


16.7        Agency. Neither Party
is, nor will be deemed to be an employee, agent or representative of the other
Party for any purpose. Each Party is an independent contractor, not an employee
or partner of the other Party. Neither Party shall have the authority to speak
for, represent or obligate the other Party in any way without prior written
authority from the other Party. Nothing
in this Agreement shall be construed by either Party to establish that the
Parties are in a partnership or joint venture, including for tax
purposes.  If for any reason this Agreement were to be interpreted as
a partnership, although both Parties have explicitly agreed that it is not, for
tax purposes this Agreement shall be construed to recognize that any deduction
or amortization attributable to P&G’s upfront payment and milestones, if
any, are allocable to and deductible solely by P&G.


 


16.8        No Waiver. Any
omission or delay by either Party at any time to enforce any right or remedy
reserved to it, or to require performance of any of the terms, covenants or
provisions hereof, by the other Party, shall not constitute a waiver of such
Party’s rights to the future enforcement of its rights under this Agreement. Any
waiver by a Party of a particular breach or default by the other Party shall
not operate or be construed as a waiver of any 


 


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subsequent
breach or default by the other Party.


 


16.9        No Strict Construction. This
Agreement has been prepared jointly by the Parties and shall not be strictly
construed against either Party.


 


16.10      Construction. Except where the context otherwise requires,
wherever used, the singular shall include the plural, the plural the singular,
the use of any gender shall be applicable to all genders and the word “or” is
used in the inclusive sense. The captions of this Agreement are for convenience
of reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision contained in this
Agreement. The term “including” as used herein shall mean including, without
limiting the generality of any description preceding such term. The language of
this Agreement shall be deemed to be the language mutually chosen by the
Parties and no rule of strict construction shall be applied against either
Party hereto.


 


16.11      References. Unless
otherwise specified, (a) references in this Agreement to any Article, Section
or Exhibit shall mean references to such Article, Section or Exhibit of this
Agreement, (b) references in any section to any clause are references to such
clause of such section and (c) references to any agreement, instrument or other
document in this Agreement refer to such agreement, instrument or other
document as originally executed or, if subsequently varied, replaced or
supplemented from time to time, as so varied, replaced or supplemented and in
effect at the relevant time of reference thereto.


 


16.12      Counterparts. This
Agreement may be executed in counterparts, all of which taken together shall be
regarded as one and the same instrument.


 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


85

















 


IN WITNESS
WHEREOF, the Parties have executed this License, Development, and
Commercialization Agreement through their duly authorized representatives to be
effective as of the Effective Date.


 


 


	
  ARYX THERAPEUTICS, INC.

  	
   

  	
  PROCTER & GAMBLE 

  PHARMACEUTICALS, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Paul Goddard

  	
   

  	
  By:

  	
  /s/ Mark A. Collar

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Paul Goddard

  	
   

  	
  Name:

  	
  Mark A. Collar

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  CEO

  	
   

  	
  Title:

  	
  President

  



 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


 


86














 


EXHIBIT A


 


ARYX PATENTS


 


[*]


 


Certain
confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission
pursuant to Rule 406 of the Securities Act of 1933, as amended.


 


A-1

















EXHIBIT B


 


CRITERIA FOR S-GERD TIERS AND
REQUIRED S-GERD ANALYSES


 


[*]


 


Certain
confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission
pursuant to Rule 406 of the Securities Act of 1933, as amended.


 


B-1

















EXHIBIT C


 


POTENTIAL SUBLICENSING
COUNTRIES


 


The list of countries set forth in this Exhibit is for informational
purposes only and is not binding for any purpose.


 


[*]


 


Certain
confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission
pursuant to Rule 406 of the Securities Act of 1933, as amended.


 


C-1

















EXHIBIT D


 


TRANSITIONAL ACTIVITIES BY ARYX


 


Clinical and Toxicology Final Study Reports
(Per ARYx’s SOPs) Needed from ARYx


 


	
  REPORT

  	
   

  	
  TIME NEEDED

  
	
  PRECLINICAL/TOXICOLOGY STUDIES

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  [*]

  
	
  CLINICAL STUDIES

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  [*]

  



 


CMC Items Needed from ARYx


 


Items
needed within 30 days after the Effective Date unless waived by P&G


 


[*]


 


Items
needed within 90 days after the Effective Date unless waived by P&G


 


[*]


 


Items
needed to be archived and accessible in a manner approved by P&G within 180
days after the Effective Date


 


[*]


 


Regulatory
documents to be delivered to P&G in accordance with Section 5.1(a):


 


[*]


 


Certain
confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission
pursuant to Rule 406 of the Securities Act of 1933, as amended.


 


D-1

















 


For clarity, to the extent items listed on this Exhibit D are also
referenced in Exhibit E as Materials available to be transferred to P&G,
P&G shall pay a transfer price for such Materials in accordance with
Section 4.4.


 


Certain
confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission
pursuant to Rule 406 of the Securities Act of 1933, as amended.


 


D-2

















EXHIBIT E


 


MATERIALS AVAILABLE TO BE
TRANSFERRED AND ASSOCIATED TRANSFER PRICES


 


[*]


 


Certain
confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission
pursuant to Rule 406 of the Securities Act of 1933, as amended.


 


E-1

















EXHIBIT F


 


CO-DEVELOPMENT AGREEMENT TERMS


 


The capitalized terms
used in this Exhibit and not defined in this Exhibit shall have the meaning set
forth in the Agreement.


 


1.                                       Each
Party shall each bear [*] of any Co-Development Expenses. “Co-Development
Expenses” shall be defined in detail in the Co-Development Agreement and shall
generally mean all prelaunch expenses for the applicable Co-Developed Product
with respect to the current indication and future indications (a) incurred by [*]
in connection with the [*] that [*] the [*] even if these costs or expenses [*],
or (b) by [*] on or after the [*] of the [*] pursuant to a Development Plan and
[*].


 


2.                                       Co-Development
Expenses shall be subject to reimbursement, as follows. Within [*] after the
end of each quarter the Party that has paid less than its share of the
Co-Development Expenses for such calendar quarter shall make a reconciling
payment to the other Party to achieve the allocation of Co-Development Expenses
set forth in Section 1 of this Exhibit.


 


3.                                       In
exchange for co-funding a Co-Developed Product as set forth above, ARYx shall
be entitled to a share  of the Operating
Profit/Loss generated by sales of the applicable Co-Developed Product in the [*]
which share shall be some value between [*] and shall be specified in the
Co-Development Agreement. P&G shall be entitled to the remainder of such
Operating Profit/Loss. “Operating Profit/Loss”
shall mean Net Sales of the applicable Co-Developed Product in the [*], less
certain Co-Developed Product-related costs and expenses to be defined in the
Co-Development Agreement.


 


4.                                       Sales
of Co-Developed Products shall be excluded from aggregate sales calculations
for the purpose of determining commercialization milestones under Section 8.4
of the Agreement, and no royalties shall be owed under Section 8.5 of the
Agreement on sales of Co-Developed Products in the U.S.


 


5.                                       Co-development
of Co-Developed Products in the U.S. shall be overseen by a joint


 


Certain
confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission
pursuant to Rule 406 of the Securities Act of 1933, as amended.


 


F-1

















development committee composed of three (3) representatives from each
Party, which will be formed as a subcommittee of the JSC pursuant to the
Agreement. Disputes shall be subject to escalation and tie-break as set forth
in Section 3.5 of the Agreement.


 


Certain
confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission
pursuant to Rule 406 of the Securities Act of 1933, as amended.


 


F-2

















EXHIBIT G


 


CO-PROMOTION AGREEMENT TERMS


 


The capitalized terms used in this Exhibit and not defined in this
Exhibit shall have the meaning set forth in the Co-Promotion Agreement. Capitalized
terms not defined herein shall be defined in the Co-Promotion Agreement.


 


1.                                       P&G
shall compensate ARYx for co-promoting a Licensed Product through payments
based on PDEs to the Target Audience, the number and percentage of which to be
provided by each Party shall be agreed in the Co-Promotion Agreement. The
calculation of PDEs and the per-PDE payments shall be consistent with P&G’s
standard practices with respect to its own sales force(s) with respect to the
Target Audience. A PDE shall consist of a [*], the definitions of which shall
be provided in the Co-Promotion Agreement. The “Primary Detail Cost” for ARYx’s
employee or contract “Representatives” shall be the average of P&G’s “Primary
Detail Cost” as determined by the actual average cost per P&G
representative in the [*] with [*] responsibility for calling on the Target
Audience divided by the average number of “Calls” made by such representatives
in the U.S. during the previous [*] period, [*]. Calculation of the actual
average cost per Representative shall include the [*].


 


Calculation of the actual
average cost per representative shall not include the [*].


 


2.                                       The
Co-Promotion Agreement will include a minimum, renewable term of ARYx’s participation
in co-promotion, initially to be no less than [*] of effort, minimum levels of
participation relative to ARYx’s PDE commitment (i.e. the number of PDEs) to
the Target Audience where no less than [*] of the PDEs shall be in the [*]
position, performance standards, along with corresponding compliance
requirements and penalties, applicable to ARYx’s detailing of the applicable
Licensed Product to the Target Audience. ARYx shall use P&G approved
adverse event reporting (forms and process), sales materials and samples at
levels consistent with those used by P&G sales representatives calling on
similar health care professionals. Any contract sales force used by ARYx shall
be reasonably acceptable to P&G.


 


Certain
confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission
pursuant to Rule 406 of the Securities Act of 1933, as amended.


 


G-1

















 


3.                                       Any
changes to sales coverage on the part of ARYx requires the consent of P&G
at least [*] in advance of the effective date of such change, which consent
shall not be unreasonably withheld; provided, however, that P&G shall have
no obligation to consent to any change that would [*] the [*] of the Licensed
Product.


 


4.                                       Each
Party shall be responsible for training its relevant sales representatives and
managers thereof in the detailing and promotion of the Licensed Product, at its
sole expense; provided, however, that P&G shall, at its election, (a) allow
ARYx’s sales representatives to attend and participate, at ARYx’s expense
(including the cost of training material) in the training programs described in
the Section 6.6 of the Agreement or (b) permit ARYx to provide Licensed Product
training to ARYx’s sales personnel that is substantially equivalent to such
programs as provided by P&G to its sales personnel, provided that P&G
will provide initial Licensed Product training to ARYx’s training personnel
(e.g. train ARYx’s trainers). The training expenses paid by ARYx will not
exceed the amounts generally charged by P&G for training representatives
from external sales organizations.


 


5.                                       At
ARYx’s reasonable request, P&G will provide advice based on its experience
with contract sales support and services in creating a selling capability.


 


6.                                       Each
Party shall provide its own internal administrative and logistical support as
is usual and customary in the pharmaceutical industry, including with respect
to the distribution of samples and literature, administrative support services,
management of information and required sales technology (e.g. territory
management systems) and the setting, monitoring and executing incentive
programs, if any, for its sales representatives.


 


7.                                       P&G
shall control all Commercialization decisions, including pricing, marketing
strategy, development of marketing and sales materials, sampling and sales
tactics.


 


8.                                       Product
liability costs and expenses with respect to any co-promoted Licensed Product
shall be shared by the Parties based on their relative levels of participation,
except that if it is determined that a Party engaged in the promotion or
representation of a Licensed Product in violation of Applicable Law, then that
Party shall be solely responsible for any product liability, cost, or expense
related to such violation.


 


Certain
confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission
pursuant to Rule 406 of the Securities Act of 1933, as amended.


 


G-2

















EXHIBIT H


 


CRITERIA FOR QTC TIERS


 


[*]


 


Certain
confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission
pursuant to Rule 406 of the Securities Act of 1933, as amended.


 


H-1

















EXHIBIT I


 


SAMPLE ROYALTY CALCULATION


 


[*]


 


CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.