EXHIBIT
10.303


 


SECOND
AMENDMENT TO THE EXCLUSIVE LICENSE AGREEMENT

DATED JANUARY 31, 1995

between

THE REGENTS OF THE UNIVERSITY OF CALIFORNIA

and

CYGNUS, INC.

for

DEVICE FOR IONTOPHORETIC NON-INVASIVE SAMPLING

OR DELIVERY OF SUBSTANCES


 


UC Agreement Control
Number 1995-04-0565

UC Case No. 1987-162


 


This second amendment, (“Second Amendment”) is
effective this 19th day of September, 2002 (“Effective Date”), by and between
The Regents of the University of California, a California corporation, having
its administrative offices at 1111 Franklin Street, 12th Floor, Oakland,
California 94607-5200 (“The Regents”), and Cygnus, Inc., a Delaware corporation
having its principal place of business at 400 Penobscot Drive, Redwood City,
California 94063, formerly known as Cygnus Therapeutic Systems, a California
corporation (“Licensee”).


 


BACKGROUND


 


A.                                   The Regents and Licensee entered into an
Exclusive License Agreement with an effective date of January 31, 1995, UC
Control No. 1995-04-0565 (“Agreement”) and this Agreement was amended to extend
the diligence deadline for filing an application for regulatory approval for
the Licensed Product in an Amendment with an effective date of April 23, 1998,
UC control No. 1995-04-0565B (“First Amendment”).


 


B.                                     The Licensed Product that Licensee is
selling presently comprises two separate components:  a GlucoWatchâ Biographer or its functional equivalent
(hereafter referred to as the “GlucoWatchâ
Biographer”) and a GlucoWatchâ AutoSensor or its functional equivalent
(hereafter referred to as the “GlucoWatchâ
AutoSensor”), wherein GlucoWatchâ is a registered trademark of
Licensee.  Each of these two components
shall


 


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be deemed to be a Licensed Product whether sold
separately or in combination with each other.


 


C.                                     Licensee has entered into an expanded
Sales, Marketing and Distribution Agreement with Sankyo Pharma, Inc., dated
July 8, 2002, wherein Sankyo Pharma has the exclusive right to sell, market,
and distribute the Licensed Product in the United States until April 1, 2014,
and Sankyo Pharma, Inc., is thus Licensee’s U.S. Marketing Partner as
“Marketing Partner” is defined in Paragraph 1.7 of the Agreement; provided,
however, that if Sankyo Pharma exercises its right to manufacture under the
Anticipatory Breach section of the Sales, Marketing and Distribution Agreement,
then Sankyo Pharma, Inc., will be considered a Sublicensee and not a Marketing
Partner.


 


D.                                    The Regents and Licensee mutually desire
to further amend the Agreement in accordance with the terms set forth below;


 


NOW, THEREFORE, the parties agree to the following:


 


1.                   DEFINITIONS


 


A.                                   All definitions and
paragraph numbers referred to in this Second Amendment have the same meaning as
in the Agreement, unless modified herein.


 


B.                                     Paragraph 1.2 of the Agreement entitled
Licensed Product is deleted in its entirety and replaced with the following:


 


1.2                                 “Licensed Product(s)” means any Product,
including, without limitation, a Product for use or used in practicing a
Licensed Method and any Product made by practicing a Licensed Method, the
manufacture, use, sale, or import of which in or into a particular country,
would infringe, but for a license, a Valid Claim in the country where such
manufacture, use, sale, or import occurs. 
Without limiting the generality of the foregoing, any Product (including
any Combination Product) containing or using a Licensed Product shall be deemed
a Licensed Product in its entirety.


 


C.                                     Paragraph 1.3 of the Agreement entitled
Licensed Method is deleted in its entirety and replaced with the following:


 


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1.3                                 “Licensed Method” means any process, art
or method that is claimed in a Valid Claim, or the use of which would infringe,
but for a license, a Valid Claim in the country where such practice occurs.


 


D.                                    Paragraph 1.4 of the Agreement entitled
Net Sales is deleted in its entirety and replaced with the following:


 


1.4                                 “Net Sales” means the total of the gross
amount invoiced or otherwise charged (whether consisting of cash or any other
forms of consideration) for the Final Sale of Licensed Products or Licensed
Method by Licensee, any Affiliate or Sublicensee to Customers, less the
following deductions (to the extent included in and not already deducted from
the gross amount invoiced or otherwise charged) to the extent actual and
customary:  cash, trade or quantity
discounts actually granted to Customers; sales, use, tariff, import/export
duties or other excise taxes imposed on particular sales (excepting value added
taxes or income taxes); transportation charges, including insurance to the
extent actually paid by the Customer; and allowances or credits to customers
because of rejections or returns.  Where
Licensee, any Affiliate, or Sublicensee is the Customer, then Net Sales shall
be based on the gross amount normally invoiced or otherwise charged to other
Customers in an arms length transaction for such Licensed Product or Licensed
Method.  For the avoidance of doubt, if
Licensee, any Affiliate, or Sublicensee supplies (directly or indirectly) a
Product that constitutes a Licensed Product to any Affiliate or Sublicensee,
and such Affiliate or Sublicensee includes such Product in another Product
(including a Combination Product), then Net Sales shall be based on the total
gross amount invoiced or otherwise charged for such other Product in its
entirety.


 


For a Combination Product, however, Net Sales shall be
calculated as:


A/(A+B) X [Net Sales, calculated without regard to
this formula, of the Combination Product],


Where:


 


(i)                                     “A” is the total of the separately listed
sale price(s) of each Licensed Product contained within or used in the
Combination Product if sold separately; and


 


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(ii)                                  “B” is the total of the separately listed
sale price(s) of each Combination Product Component contained within or used in
the Combination Product when sold separately;


 


provided, however, that in no event shall Net Sales
for a Combination Product be less than *** of Net Sales, calculated without
regard to this formula, of the Licensed Product that is the Combination
Product.  Notwithstanding the foregoing,
if the Combination Product Component is an *** then Net Sales for such
Combination Product will not be less than *** of Net Sales, calculated without
regard to this formula, of the Licensed Product that is the Combination
Product. The parties agree that reduction of the royalty rate as provided for
in Paragraph 5.3 will not be available with respect to a Combination Product.


 


Notwithstanding the
foregoing, Licensed Products used solely in clinical trials and a reasonable
quantity of Licensed Products used as marketing samples to develop or promote
the Licensed Products shall not be included as sold under this definition of Net
Sales, provided no consideration (whether in cash or other consideration) is
provided therefor.


 


E.                                      New Paragraph 1.9 is added:


 


1.9                                 “Combination Product” means a combined
Product that contains or uses a Licensed Product and at least one other Product
or process (a “Combination Product Component”), where (i) such Combination
Product Component is not a Licensed Product, (ii) if such Combination Product
Component were removed from such combined Product, the manufacture, use, sale,
or import of the resulting Product in or into a particular country would
infringe, but for a license, the same Valid Claim in the country where such
manufacture, use, sale, or import occurs as such combined Product, (iii) such
Combination Product Component and such Licensed Product are sold separately
from such combined Product by Licensee, any Affiliate or Sublicensee, (iv) such
Combination Product Component does not function together with a Licensed
Product so as to achieve


 












*** Certain information on this page has been omitted and filed
separately with the Commission. 
Confidential treatment has been requested with respect to the omitted
portions.


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the purpose for which such Licensed Product is sold,
and (v) the market price of such combined Product is higher than the market
price for such Licensed Product (if sold separately) as a result of such
combined Product containing or using such Combination Product Component.


 


F.                                      New Paragraph 1.10 is added:


 


1.10                           “Final Sale” means any sale, transfer,
lease, exchange or other disposition or provision of a Licensed Product and/or
a Licensed Method to a Customer.  A
Final Sale shall be deemed to have occurred upon the earliest to occur of the
following (as applicable):  (a) the
transfer of title to such Licensed Product and/or Licensed Method to a
Customer, (b) the shipment of such Licensed Product to a Customer, (c) the
provision of an invoice for such Licensed Product or Licensed Method to a
Customer, or (d) payment by the Customer for Licensed Products or Licensed
Method.


 


G.                                     New Paragraph 1.11 is added:


 


1.11                           “Customer” means any individual or entity
that receives Licensed Products or Licensed Methods, provided however, that
Licensee, any Affiliate, or Sublicensee shall be deemed a Customer only if it
receives Licensed Products or Licensed Methods for its own end-use and not for
resale.


 


H.                                    New Paragraph 1.12 is added:


 


1.12                           “Product” means any kit, article of
manufacture, composition of matter, material, compound, component, or product.


 


I.                                         New Paragraph 1.13 is added:


 


1.13                           “Valid Claim” means any claim of (a) an
issued, unexpired patent within the Regents’ Patent Rights, but excluding any
claim that has been (i) withdrawn, cancelled, disclaimed or waived, or (ii)
held invalid or unenforceable by a court of competent jurisdiction in a
decision that can no longer be appealed; or (b) a pending patent application
within the Regents’ Patent Rights, which claim has not been abandoned or
finally rejected by the United States Patent and Trademark Office (USPTO), or
any analogous foreign administrative entity, in a decision that can no longer
be appealed or otherwise challenged.


 


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2.                                       SUBLICENSEES


 


A.                                   New Paragraph 3.4 is added:


 


3.4(a)                   If The Regents (as represented by the actual knowledge
of The Regents’ Office of Technology Transfer licensing professional
responsible for administration of this case) or a third party discovers and
notifies the licensing professional that Licensed Products or Licensed Methods
covered by Regents’ Patent Rights for which Licensee was granted an exclusive
license are useful for sampling analyte(s) other than glucose or administering
therapeutic agent(s) and such  Licensed
Products or Licensed Methods have not been developed or are not currently under
development by Licensee, then The Regents, as represented by the Office of
Technology Transfer, may give written notice to the Licensee of the third
party’s interest in developing Licensed Product and Licensed Method for such
purpose.


 


3.4(b)                  Licensee shall have ninety (90) days to give The
Regents written notice stating whether Licensee elects to develop Licensed
Products or Licensed Methods for such other analyte(s) or agent(s).


 


3.4(c)                   If Licensee elects to develop and commercialize the
proposed Licensed Products or Licensed Methods for such other analyte(s) or
agent(s), then Licensee shall negotiate with The Regents reasonable milestones
for the development of such other analyte(s) or agent(s) to be added to
Paragraph 6.4 of the Agreement, and submit a Progress Report every six (6)
months to The Regents outlining the Licensee’s development and
commercialization efforts for such other analyte(s) or agent(s).


 


3.4(d)                  If Licensee elects not to develop and commercialize
the proposed Licensed Products or Licensed Methods for such analyte(s) or
agent(s), then Licensee shall notify The Regents in writing of this election,
and The Regents may seek a third party(ies) to develop and commercialize the
proposed Licensed Products or Licensed Methods for the other analyte(s) or
agent(s).  If The Regents is successful
in finding such third party, it shall refer such third party to Licensee.  If the third party requests in writing a
sublicense under this Agreement, then the Licensee shall report in writing the
request to The


 


 


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Regents within thirty
(30) days from the date of such written request.  If the request results in a sublicense, then Licensee shall
report it in writing to The Regents pursuant to Paragraph 3.2 of the Agreement.


 


3.4(e)                   If the Licensee refuses to grant a sublicense to such
third party, then within thirty (30) days after such refusal, which shall be in
writing, the Licensee shall submit to The Regents a written report specifying
the license terms proposed by the third party and a written justification for
the Licensee’s refusal to grant the proposed sublicense.  This justification may be based on financial
terms as well as the competitive position of the third party in relationship to
Licensee.  The parties agree that the
Licensee is under no obligation to grant a sublicense to a third party that
would result in the Licensee receiving an earned royalty of less than *** of
Net Sales from such third party.  If
however, The Regents, at its sole reasonable discretion, determines that the
terms proposed by the third party are reasonable under the circumstances, then
The Regents shall have the right to grant to the third party a license to make,
have made, use, sell, offer for sale and import Licensed Products and practice
Licensed Method for other analyte(s) or agent(s) on terms no less favorable to
The Regents than the terms last proposed to Licensee by the third party
providing royalty rates are at least equal to those paid by Licensee.


 


3.4(f)                     For avoidance of doubt, The Regents’ right to grant a
license under Paragraph 3.4(e) shall not extend to any product, material, or
method developed independently by Licensee which is not covered by Regents’
Patent Rights.


 


3.4(g)                  Notwithstanding the letter dated August 25, 2000, by The Regents, the
Agreement has not been terminated for any analyte(s) or agent(s).  Licensee will work with The Regents to
ascertain whether any third party, including Inventors, are requesting
sublicenses.


 


3.                                       ROYALTIES


 


A.                                   Paragraph 5.1 is deleted in its entirety
and replaced with the following:


 


5.1                                 The Licensee shall also pay to The
Regents an earned royalty as follows: 
(a) *** of the Net Sales by the Licensee, its Sublicensee, or Affiliate
of Licensed Product or


 












*** Certain information on this page has been omitted and filed
separately with the Commission. 
Confidential treatment has been requested with respect to the omitted
portions.


 


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Licensed Method, except that for the GlucoWatchâ
AutoSensor, Licensee shall pay to The Regents an earned royalty of *** of Net
Sales when this product is sold separately; (b) in the case where Licensee
sells the Licensed Product to a U.S. Marketing Partner, *** of Net Sales,
except that for the GlucoWatchâ AutoSensor this amount shall be *** of
Net Sales, of either (i) the Licensee’s actual transfer (invoice) price of
Licensed Products to the Marketing Partner or (ii) sixty percent (60%) of the
U.S. Marketing Partner’s Net Sales of Licensed Product, whichever is
greater.  Notwithstanding the above, for
the first three (3) Sales Years the royalty rates above shall be reduced to ***
of Net Sales of Licensed Product or Licensed Method.  For purpose of clarity, it is understood that only one royalty
shall be due under this Paragraph 5.1 with respect to any particular Licensed
Product regardless of whether the Licensed Product can also be used in a
Licensed Method.


 


B.                                     Paragraph 5.2 of the Agreement is deleted
in its entirety and replaced with the following:


 


5.2                                 For Sales of Licensed Products to an
Affiliate or a non-U.S. Marketing Partner from the Licensee at a reduced price
from that customarily charged to an unrelated third party, the royalty paid to
The Regents shall be based on the Net Sales of Licensed Products of the
Affiliate or the non-U.S. Marketing Partner to the Affiliate’s or non-U.S.
Marketing Partner’s customers.  Where
the Licensee sells or transfers Licensed Products for end-use to itself or an
Affiliate or a non-U.S. Marketing Partner, such sale shall be considered a sale
at list price and The Regents shall be entitled to receive a royalty thereon in
accordance with this Article.  Each
reference to the Licensee herein shall be meant to include its Affiliates and
non-U.S. Marketing Partners.


 


C.                                     Paragraph 5.5 of the Agreement is deleted
in its entirety and replaced with the following:


 


5.5                                 Paragraph 1.1, amended Paragraph 1.2 and
amended Paragraph 1.3 define Regents’ Patent Rights, Licensed Product and
Licensed Method so that royalties shall be payable on Licensed Product and
Licensed Method covered by both pending applications and issued patents.  Royalties will accrue in each country for
the duration of Regents’


 












*** Certain information on this page has been omitted and filed
separately with the Commission. 
Confidential treatment has been requested with respect to the omitted
portions.


 


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Patent Rights in that country and are payable to The
Regents when Licensed Product is invoiced or if not invoiced, when delivered to
a third party.


 


D.                                    Paragraph 5.7 of the Agreement, setting
forth the minimum annual royalty, is deleted in its entirety and replaced
with  the following:


 


5.7                                 Licensee shall pay to The Regents a
minimum annual royalty for the life of Regents’ Patents Rights during the term
of this Agreement, beginning with the first Sales Year as follows:  *** for the first Sales Year; *** for the
second Sales Year; *** for the third Sales Year; *** for the fourth Sales Year;
and *** for the fifth and subsequent Sales Years.  This minimum annual royalty shall be paid to The Regents by
thirty (30) days after the close of each Sales Year and shall be credited
against the earned royalty due and owing for the calendar year in which the
minimum annual royalty payment was made.


 


4.                                       DUE DILIGENCE


 


A.                                   Paragraphs 6.4.6 and 6.4.7 of the
Agreement are deleted and replaced with the following:


 


6.4.6                    Submit an application for regulatory clearance of
commercial scale manufacturing process for Licensed Product to the FDA or
equivalent foreign regulatory authority within twelve (12) months of receiving
marketing approval from the FDA or such equivalent foreign regulatory authority
for such Licensed Product; or


 


6.4.7                        Reasonably fill the market demand for
Licensed Product within twenty-four (24) months of submitting the application
for regulatory clearance as provided for in Paragraph 6.4.6 above using
processes and equipment approved by the FDA or such equivalent foreign
regulatory authority; or


 


B.                                     New Paragraph 6.4.8 is added:


 


6.4.8                        Continue to reasonably fill the market demand for
Licensed Product by adding capacity as necessary and obtaining FDA approval for
such additional capacity processes and equipment or approval from equivalent
foreign regulatory authority.


 


C.                                     Paragraph 6.5 of the Agreement is deleted
in its entirety, as are all references to Paragraph 6.5 in the Agreement.


 












*** Certain information on this page has been omitted and filed
separately with the Commission.  Confidential
treatment has been requested with respect to the omitted portions.


 


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The Agreement shall remain in full force and effect in
accordance with its terms except as amended herein.


 


The Regents and Licensee have executed this Second
Amendment in duplicate originals, by their respective and duly authorized
officers, as evidenced by the signatures below.


 


 


	
  CYGNUS,
  INC.

  	
  THE
  REGENTS OF THE

  UNIVERSITY OF CALIFORNIA

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   /s/ John C
  Hodgman

  	
   

  	
  By:

  	
   /s/ Alan B.
  Bennett

  
	
   

  	
  (Signature)

  	
   

  	
   

  	
  (Signature)

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   John C
  Hodgman

  	
   

  	
  Name:

  	
  Alan B. Bennett

  
	
   

  	
  (Please print)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Chairman, President & CEO

  	
   

  	
  Title:

  	
  Executive Director

  
	
   

  	
   

  	
   

  	
  Research Administration and

  Technology Transfer

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   September 18, 2002

  	
   

  	
  Date:

  	
   September 19, 2002

  
									



 


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