Exhibit 10.1


 


BIOSEARCH ITALIA, S.P.A.


AND


GENOME THERAPEUTICS CORPORATION


 


LICENSE AND SUPPLY AGREEMENT


 


 


         THIS LICENSE AND SUPPLY AGREEMENT
(the “Agreement”) is made effective as of the 8th day of October, 2001 (the
“Effective Date”) by and between GENOME THERAPEUTICS CORPORATION a
Massachussetts corporation having its principal place of business at 100 Beaver
Street, Waltham, MA 02453, USA (“GENE”) and BIOSEARCH ITALIA, S.p.A. an Italian
corporation with its principal place of business at via R. Lepetit, 34, 21040
Gerenzano, Italy (“Biosearch”). GENE and Biosearch are sometimes referred to
herein individually as a “Party”and collectively as the “Parties.”


 


RECITALS


 


         A. Biosearch is a pharmaceutical
company interested in the identification and development of naturally produced
compounds for the treatment of infectious diseases, and the commercialization
of products based upon such compounds.


 


         B. Biosearch discovered and is
developing a proprietary compound, Ramoplanin, and is currently conducting
clinical trials in the U.S. of an oral formulation of Ramoplanin for the
prevention of infectious diseases in patients carrying Vancomycin-resistant
Enterococci (“VRE”) and at risk of infection following chemotherapy or
transplantation, with a view to registering a new pharmaceutical product for
worldwide marketing under its trademark(s) and trade name(s).


 


         C. On May 8, 1998 Biosearch had
entered into an agreement with IntraBiotics Pharmaceuticals, Inc., to permit
the latter to develop and commercialize in the United States and Canada,
formulations other than parenteral formulations of Ramoplanin.


 


         D. Following a decision by
IntraBiotics to discontinue the development activities of Licensed Products (as
defined herein), an amendment to the agreement mentioned under C. above was
entered into, effective June 1, 2001, whereby Biosearch agreed to reacquire
from IntraBiotics all rights in and to licensed Ramoplanin formulations (other
than, for a given period, [*] ), after a Transition Period ending August 31,
2001. From this date until the Effective Date, Biosearch has assumed
responsibility for the development of Licensed Products within the Territory.


 


         E. IntraBiotics subsequently gave
notice of termination of the agreements it had entered into with Clinical
Research Organizations (CROs) and Vendors engaged in the clinical trial
activity and transferred to Biosearch the IND application for Ramoplanin,
effective July 22, 2001.


 


         F. Pursuant to the above mentioned amendment,
all rights in and to the [*] of Ramoplanin shall revert to Biosearch effective
April 1, 2002 if IntraBiotics does not commence clinical development activity
with respect to at least one topical product by March 31, 2002.


 


         G. GENE is a biotechnology company
interested in the development of products useful for the treatment of
infectious diseases or conditions, and is interested in completing the
development activities mentioned above and commercializing oral formulations of
Ramoplanin for the treatment or prevention of infectious diseases and
conditions in the United States and Canada (including the territories and
possessions of each such country).


 


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[*]
Confidential Treatment has been requested for the marked portions.


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ARTICLE 1


 


DEFINITIONS


 


The
following terms shall have the following meanings as used in this Agreement:


 


         1.1 
“Affiliate” means an entity that, directly or indirectly, through one or
more intermediaries, controls, is controlled by or is under common control with
Biosearch or GENE.


 


         1.2 
“Biosearch Know-how” means Information which (i) Biosearch is required
to disclose to GENE under this Agreement and (ii) is within the Control of
Biosearch. Notwithstanding anything herein to the contrary, Biosearch Know-how
shall exclude Biosearch Patents.


 


         1.3 
“Biosearch Patent” means a Patent which covers, or is used or useful in,
the manufacture of Bulk Licensed Compound or the discovery, evaluation,
manufacture, use, sale, offer for sale and/or importation of Licensed Products
within the Field, which Patent is owned or Controlled by Biosearch, including,
without limitation, Biosearch’s interest in any Joint Patents.


 


         1.4 
“Bulk Licensed Compound” means the bulk form of the Licensed Compound
meeting the Specifications and used to manufacture Licensed Products under this
Agreement.


 


         1.5 
“Clinical Materials” shall mean supplies of Licensed Product as well as
supplies of placebo, packaged and labelled and in compliance with regulatory
requirements for purposes of completing clinical trials as part of Development
of the Licensed Product in the Territory.


 


         1.6 
“Commercialization” shall mean all activities undertaken by GENE
relating to the manufacture and sale of Licensed Product in the Territory,
including advertising, education, marketing, distribution and post-approval
product support clinical studies conducted after Regulatory Approval of a
Licensed Product for a particular indication.


 


         1.7 
“Convertible Note” means a convertible promissory note issued by GENE in
the form attached hereto as Exhibit I.


 


         1.8 
“Control” means possession of the ability to grant a license or
sublicense as provided for herein without violating the terms of any agreement
or other arrangement with any Third Party.


 


         1.9 
“Cost of Goods Sold” means the aggregate of the cost to Biosearch of
Bulk Licensed Compound, transportation of Bulk Licensed Compound between any
Biosearch supplier and Biosearch (including transit insurance), quality control
testing, material management, and storage and handling, including direct labor
(salaries, wages and employee benefits) and facilities expenses reasonably
incurred in connection with the above.


 


         1.10 “Development” means all
activities relating to obtaining Regulatory Approval of a Licensed Product,
Licensed Product delivery systems and new indications thereof and all
activities relating to developing the ability to manufacture the same.


 


         1.11 “Drug Approval Application”
means an application for Regulatory Approval required before commercial sale or
use of a Licensed Product as a drug in a regulatory jurisdiction.


 


         1.12 “Excluded Formulations” means,
except as it may be included as a formulation hereunder pursuant to Section 3.2
and 3.3 below, the formulations of the Licensed Compound suitable solely for
(i) [*] of the Licensed Compound, and (ii) [*] use.


 


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[*]
Confidential Treatment has been requested for the marked portions.


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         1.13 “Field” means the treatment or
prevention of any human disease.


 


         1.14 “GENE Know-how” means
Information which (i) GENE is required to disclose to Biosearch under this
Agreement and (ii) is within the Control of GENE. Notwithstanding anything
herein to the contrary, GENE Know-how shall exclude GENE Patents.


 


         1.15 “GENE Patent” means a Patent
which covers the manufacture, use, sale, offer for sale and/or import of
Licensed Products within the Field, which Patent is owned or Controlled by
GENE.


 


         1.16 “IND” (or “InvestigationaI New
Drug Application”) means an application as defined in the United States Food,
Drug and Cosmetic Act and applicable regulations promulgated thereunder to the
United States Food and Drug Administration (the “FDA”), or the equivalent
application to the equivalent agency in jurisdictions outside the United
States, the filing of which is necessary to commence clinical testing of
Licensed Products in humans.


 


         1.17 “Information” means (i) techniques
and data within the Field relating to Bulk Licensed Compound or Licensed
Products, including inventions, practices, methods, knowledge, know-how, skill,
experience, test data including pharmacological, toxicological and clinical
test data, analytical. and quality control data or descriptions and (ii)
compounds, compositions of matter, assays and biological materials within the
Field.


 


         1.18 “Joint Patent” shall have the
meaning set forth in Section 10.3.


 


         1.19 “Know-how” means Biosearch
Know-how and/or GENE Know-how.


 


         1.20 “Licensed Compound” means the
compound known as Ramoplanin, as described in IND No. 56341.


 


         1.21 “Licensed Product” means any
product including or incorporating any formulation of the Licensed Compound,
other than Excluded Formulations.


 


         1.22 “NDA” means an application as
defined in the United States Food, Drug and Cosmetic Act and applicable
regulations promulgated thereunder to the FDA, or the equivalent application to
the equivalent agency in jurisdictions outside the United States, the filing of
which is necessary to commence the commercial sale of Licensed Products.


 


         1.23 “Net Sales” means the amount (or
net selling price) invoiced for sales of a Licensed Product in final dosage
form by GENE, its Affiliates or its sublicensees to a Third Party end user,
based upon the approval received from the U.S. FDA, less (i) discounts,
including cash discounts, and/or rebates (including government-mandated
rebates), retroactive price reductions or allowances actually allowed or
granted from the billed amount, (ii) credits or allowances actually granted
upon claims, rejections or returns of such Licensed Products, including
recalls, (iii) freight, postage, shipping and insurance charges paid for
delivery of Licensed Product, to the extent billed, and (iv) taxes, duties or
other governmental charges levied on or measured by the billing amount when
included in billing, as adjusted for rebates and refunds.


 


         In the event a Party is receiving
royalties under this Agreement from any Licensed Product sold in the form of a
combination product containing one or more active ingredients in addition to
the Licensed Compound, Net Sales for such combination product will be
calculated by multiplying actual Net Sales by the fraction A/(A+B) where A is
the fair market value of the portion of the combination product that contains
the Licensed Compound and B is the fair market value of the other active
ingredients included in such combination product, as determined by market
prices of such portions if separately priced and sold, or if not so priced and
sold, as determined by mutual agreement of the parties. As used herein, the
term “active ingredient” does not include ingredients the


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primary
effect of which is the enhancement of drug delivery, even if such ingredients
have pharmacological activity.


 


         1.24 “Other Licensee” means any Third
Party to which Biosearch has granted a license under the Biosearch Patents and
Biosearch Know-how for the development or commercialization of Licensed
Products or other products containing the Licensed Compound.


 


         1.25 “Patent” means (i) valid and
enforceable patents, re-examinations, reissues, renewals, extensions, term
restorations and foreign counterparts thereof, and (ii) pending (at any time
during the term of this Agreement) patent applications and foreign counterparts
thereof.


 


         1.26 “Phase III Clinical Trials”
means those trials on sufficient numbers of patients that are designed to
establish that a drug is safe and efficacious for its intended use, and to
define warnings, precautions and adverse reactions that are associated with the
drug in the to be prescribed dosage range, and supporting Regulatory Approval
of such drug.


 


         1.27 “Regulatory Approval” means any approvals (including
pricing and reimbursement approvals, if appropriate), product and/or
establishment licenses, registrations or authorizations of any federal, state
or local regulatory agency, department, bureau or other governmental entity,
necessary for the manufacture, use, storage, import, export or sale of Licensed
Products in a regulatory jurisdiction.


 


         1.28 “Specifications” shall have the
meaning set forth in Section 7.4.


 


         1.29 “Supply Price” shall have the
meaning set forth in Section 8.2.


 


         1.30 “Territory” means the United
States and Canada and the territories and possessions of each of the foregoing
countries.


 


         1.31 “Third Party” means any entity
other than Biosearch or GENE or their Affiliates.


 


         1.32 “Transfer Price” shall have the
meaning set forth in Section 7.9.


 


         1.33 “Valid Claim” means a claim of
(a) an issued patent, which claim has not lapsed, been cancelled, or become
abandoned and which claim has not been declared invalid or unenforceable by a
court of competent jurisdiction in a decision from which no appeal has or can
be taken, or (b) a patent application, so long as such application is being
prosecuted and the claim in question has not been abandoned by the owner of the
application (with the period of presumed validity of a pending application not
to exceed five years in countries).


 


ARTICLE 2


 


DEVELOPMENT


 


         2.1 
General. GENE shall be responsible for the completion of the Development
of Licensed Products in the Field and in the Territory, with support from
Biosearch as provided in this Agreement. Development of products including the
Licensed Compound (including without limitation Licensed Products) outside of
the Territory, development of products other than Licensed Products including
the Licensed Compound in the Field and in the Territory, subject to the
provisions of Section 5.6 herein, shall be conducted by Biosearch and/or the
Other Licensees, if any, outside the scope of this Agreement. In the event GENE
desires to develop the Licensed Products for the treatment of [*] and any
additional payment is required in order to obtain a license to patent rights
from a Third Party for the treatment of such additional disease, GENE will contribute
to the costs relating to such patent rights in an amount proportional to its
involvement and interest as defined in good faith between the


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[*]
Confidential Treatment has been requested for the marked portions.


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Parties.
However, in order to avoid the duplication of cost and effort, and to optimize
the results of worldwide Development of Licensed Products, the Parties agree to
exchange information regarding their respective activities related to the
Development of Licensed Products as provided in this Agreement. In particular,
the Parties intend to exchange information regarding the clinical and
non-clinical testing of products including the Licensed Compound (including
without limitation Licensed Products) for indications in the Field.


 


         2.2 
Development of Licensed Products by GENE.


 


                  (a) GENE Commitment. GENE
shall have the right to utilize all relevant non-clinical and clinical data
received from Biosearch prior to the Effective Date and during the term of this
Agreement pursuant to Sections 2.3 and 2.4 for the sole purposes of obtaining
Regulatory Approval and Commercialization of Licensed Products in the Field and
in the Territory. GENE hereby agrees, subject to the terms hereof, to conduct or
have conducted, at its sole expense or at the expense of any Affiliate or
sublicensee as permitted under this Agreement, subsequent to the Effectve Date
all non-clinical and clinical Development necessary to obtain Regulatory
Approvals for Licensed Products in the Field and in the Territory. GENE shall
not have any obligation to develop Licensed Products for any particular
indication but may, at its option, develop Licensed Products for any indication
in the Field and shall, at all times during the term of this Agreement,
undertake Development of Licensed Product for at least [*].


 


                  (b) Diligence and
monitoring. GENE shall work [*], to develop Licensed Products in the Field and
in the Territory. The main parameters for the evaluation of GENE’s diligence
shall be the [*]. The progress of all Development activities and GENE’s
diligence shall be monitored by the Joint Management Committee referred to in
Section 2.4 below on a continuing basis, following a regular meeting schedule.
Any matter that should involve an assessment of GENE’s lack of diligence in
carrying out Development activities shall be examined by the Chief Executive
Officers of Biosearch and GENE, with a view to finding the most appropriate
solution without jeopardizing the progress of clinical trials in the agreed
time frame. If such matter cannot be resolved within sixty (60) days, it shall
be dealt with in accordance with the proceedures in Section 14.2(b).


 


                  (c) Delivery of Information.
GENE will provide to Biosearch its Information regarding the Development of
Licensed Products in the Field, as set forth in Section 2.4, for use in
development and commercialization of products by Biosearch and, subject to
Section 2.6, any Other Licensees outside of the Territory. Biosearch and,
subject to Section 2.6, any Other Licensees shall be permitted to use and
reference all such Information regarding Development of Licensed Products in
(i) any Drug Approval Application filed outside the Territory and (ii) any Drug
Approval Application filed within the Territory with respect to products other
than Licensed Products that contain the Licensed Compound within the Field.
Notwithstanding the foregoing, Biosearch agrees that it shall treat, and shall
use its best endeavors to cause the Other Licensees to treat, all Information
provided by GENE pursuant to this Section 2.2(c) as Confidential Information
subject to the terms of Article 9.


 


                  (d) Regulatory Matters.


 


                         (i)  Compliance with Regulations. GENE shall
conduct its efforts hereunder in compliance with all applicable regulatory
requirements.


 


                         (ii) Drug Approval
Applications. GENE shall, at its own expense, be responsible for preparing and
filing Drug Approval Applications and seeking Regulatory Approvals for Licensed
Products in the Field and in the Territory, including preparing all reports
necessary for filing a Drug Approval Application for Licensed Products in the
Territory. GENE shall be responsible for prosecuting all such Drug Approval
Applications, and Biosearch and, subject to Section 2.6, any Other Licensees
shall have the right of cross reference with respect thereto. In connection
with all Drug Approval Applications being prosecuted by GENE hereunder, GENE
agrees to provide Biosearch with a copy of all filings to regulatory agencies
that it makes hereunder. GENE shall provide to Biosearch reports regarding the
status of each pending and proposed Drug


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[*]
Confidential Treatment has been requested for the marked portions.


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Approval
Application in the Territory within thirty (30) days after each June 30th and
December 31st during the term of this Agreement, until such times as no Drug
Approval Applications are pending or unless otherwise agreed between the
parties. In the event that any regulatory agency threatens or initiates any
action to remove a Licensed Product from the market in the Territory, GENE
shall promptly notify Biosearch of such communication.


 


          (e) Human Use - GENE shall develop
or commercialize Licensed Products or Licensed Compound in the Territory only
for use in the Field.


 


     2.3 
Development Obligations of Biosearch.


 


          (a) Access to Biosearch and Other
Licensee Information.


 


               (i)   Biosearch will, as soon as possible after the Effective Date,
provide GENE with copies of all regulatory filings and the results of all
clinical and non-clinical testing of Licensed Products under the Control of or
performed by Biosearch or IntraBiotics prior to the Effective Date, to the
extent that Biosearch is not restricted from providing any such information
that is owned or Controlled by IntraBiotics and to the extent that such filings
or information has not already been provided to GENE and will take all steps
necessary to allow GENE to use such filings or information.


 


               (ii)  During the term of this Agreement, Biosearch will provide to GENE
all Information in its possession regarding Licensed Compounds in the Field
(including Information it receives from any Other Licensees), as such
Information becomes available, for use in GENE’s Development efforts. GENE
shall be permitted to use and reference all Biosearch and any Other Licensee
reports provided to GENE pursuant to this Agreement in any Drug Approval
Application for Licensed Products in the Territory. Notwithstanding the
foregoing, GENE agrees that it shall treat all Information provided by
Biosearch or any Other Licensee pursuant to this Section 2.3 as Confidential
Information, subject to the terms of Article 9.


 


               (iii) Following the transfer of
development responsibilites from IntraBiotics to Biosearch, but prior to the
Effective Date, Biosearch entered into a number of contractual relationships
with previous employees of IntraBiotics, as well as previous contractors of
clinical development services to IntraBiotics, including, but not limited to
Contract Research Organizations, Third-Party manufacturers, investigative
sites, microbiology and clinical laboratories. These relationships were
established in order to continue the development of Licensed Products within
the Territory. Biosearch shall provide copies of all contracts with these
consultants and contractors to GENE within five (5) days after the Effective
Date. GENE will promptly evaluate such contracts to determine, in its sole
discretion, which of such contracts it desires to have transferred or assigned
to it. Biosearch will thereafter use best efforts to work closely with GENE to
transfer or assign those relationships selected by GENE to GENE in an orderly
fashion as soon as possible after the Effective Date to permit a smooth
transition. Prior to such transfer or assignment, Biosearch will continue to
fulfill all of its obligations (including payment obligations) arising under
these agreements; provided that, upon the transfer or assignment of any such
agreement, GENE will reimburse Biosearch for that portion of all payments made
under any such transfer or assigned agreement by Biosearch from the Effective Date
to the date of such transfer or assignement that relate to work completed
subsequent to the Effective Date.


 


          (b) Development and Regulatory
Assistance. Biosearch shall (i) cooperate with GENE and applicable regulatory
authorities in obtaining and maintaining Regulatory Approval for Biosearch’s
maufacturing process(es) and/or facilities and any Third Party process(es)
and/or facilities established by Biosearch for the manufacture of Bulk Licensed
Compound and (ii) provide reasonable technical assistance to GENE for
Development of Licensed Products


 


          (c) Supply of Clinical Materials.
Biosearch shall use diligent efforts to supply, or cause to be supplied at its
expense, amounts of Bulk Licensed Compound sufficient for GENE to obtain Regulatory
Approval of Licensed Products in the Field and in the Territory as set forth in
Article 7.


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          (d) Manufacturing Process; Scale Up.
The Parties acknowledge that it is Biosearch’s intention to establish, or
howsoever have available through Third Parties, a manufacturing facility for
Bulk Licensed Compound. It is agreed accordingly that Biosearch shall at all
times manage the manufacturing processes of the Licensed Compound, and
manufacture, or have manufactured, all of GENE’s requirements for preclinical,
clinical and commercial quantities, subject to the provisions of Section 7.
Biosearch shall use diligent efforts to scale up its manufacturing process for
Bulk Licensed Compound, at Biosearch’s sole expense.


 


          (e) Human Use - Biosearch and any
Other Licensees shall develop or commercialize Licensed Products or Licensed
Compound only for use in the Field.


 


     2.4 
Reports; Joint Management Committee; Project Leaders.


 


          (a) Reports. Each Party shall
provide to the other Party reports summarizing such Party’s development and
commercialization of products containing the Licensed Compound. Such reports
will be provided by each Party within thirty (30) days after the end of each
calendar quarter and shall summarize such Party’s efforts during the previous
quarter.


 


          (b) Joint Management Committee. Each
Party shall, within thirty (30) days after the Effective Date, appoint three
(3) members from each Party to serve on the Joint Management Committee. Each
Party may send one or more additional representatives to each such meeting. The
role of the Joint Management Committee shall include, without limitation, the
overview of the global development of the Licensed Compound, strategic
decisions regarding, among other things, maximizing the value of the Licensed
Products through seeking [*], protection of trade secrets and/or other means,
and review of global clinical, regulatory, and commercial activities, and
management of the relationship between the Parties. The Joint Management
Committee shall meet at least twice per calendar year, alternating between
Biosearch’s facilities in Gerenzano Italy and GENE’s facilities in Waltham, MA,
USA, unless otherwise agreed between the parties. Each Party shall bear all
costs incurred by its representatives with respect to their attendance of such
meetings.


 


          (c) Project Leaders. Additionally,
each Party shall, within thirty (30) days after the Effective Date, appoint a
project leader to facilitate transfer of information regarding the Licensed
Compound and Licensed Products to the other Party. The project leaders shall
meet on a regular basis, at least quarterly. Each Party may send one or more
additional representatives to each such meeting. Each Party shall bear all
costs incurred by its project leader and other representative(s) with respect
to their attendance of such meetings. The site of the project leader meetings
shall alternate between Biosearch’s facilities in Gerenzano Italy and GENE’s
facilities in Waltham, MA, USA, unless otherwise agreed between the parties.


 


     2.5 
Adverse Event Reporting. Each Party agrees to report to the other, prior
to or coincident to reporting to regulatory authorities, any serious adverse
event which is reported to occur in connection with the use of a Licensed
Product or the Licensed Compound. Each Party agrees to provide to the other
copies of all reports that are made to regulatory authorities concerning
material safety, efficacy or quality matters with respect to any Licensed
Product or the Licensed Compound. Prior to the first Regulatory Approval for a
product containing a Licensed Compound anywhere in the world, the Parties shall
agree on a formal adverse event reporting protocol to conform with the
respective regulatory obligations of GENE, Biosearch, and any Other Licensees
throughout the world.


 


     2.6 
Other Licensees.


 


          (a) Biosearch agrees to use its best
endeavors in order to obtain from any Other Licensees permission for Biosearch
to provide to GENE any information that, if such information were owned or
Controlled by Biosearch, would be Information that Biosearch must provide to
GENE pursuant to Section 2.3, and shall obtain rights to Other Licensee
technology relating to Licensed Products as provided in Section 5.7. Biosearch
will


 


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require
the Other Licensees to provide to GENE, either directly or through Biosearch,
all information owned or Controlled by such Other Licensee that, if such
information were owned or Controlled by Biosearch, would be Information that
Biosearch must provide to GENE pursuant to Section 2.3. Biosearch may provide
any Information it receives from GENE pursuant to Section 2.5 to the Other
Licensees, if any, and may grant to Other Licensees a sublicense under the
license granted to Biosearch in Section 5.4 with respect to Information
Biosearch receives from GENE pursuant to Section 2.5.


 


          (b) Biosearch shall not provide any
Information it receives from GENE pursuant to this Article 2 (other than
Information relating to adverse events provided by GENE pursuant to Section
2.5) to any Other Licensee unless and until such Other Licensee permits
Biosearch to provide to GENE any and all information owned or Controlled by
such Other Licensee that, if such information were owned or Controlled by
Biosearch, would be Information that Biosearch must provide to GENE pursuant to
Section 2.3. Biosearch may not grant to any Other Licensee a sublicense under
the license granted to Biosearch in Section 5.4 with respect to Information
disclosed to it by GENE pursuant to this Article 2 (other than Information
relating to adverse events provided by GENE pursuant to Section 2.5) to any
Other Licensee that does not allow Biosearch to provide to GENE information of
such Other Licensee as provided in this Section 2.6, and any such Other
Licensee shall not have a right of reference as provided in 2.2.


 


ARTICLE 3


 


EXCLUSIVITY


 


     3.1 Development of Licensed Compounds By
Biosearch. The Parties recognize that the Licensed Compound may be useful for
[*] in addition to oral forms. In this regard, the Parties agree as follows:


 


          (a) Biosearch, its Affiliates and
other sublicensees shall not develop or commercialize the Licensed Compound in
any [*] in the Territory for use in the Field during the term of this
Agreement.


 


          (b) Biosearch, its Affiliates and
other sublicensees may develop and commercialize the Licensed Compound in any
formulation for any use in the Field outside of the Territory, and in any
Excluded Formulation for any use in the Field and in the Territory during the
term of this Agreement, subject to the provisions of Sections 3.2, 3.3 and 3.4.


 


     3.2 [*] formulation. It is agreed and
understood between the Parties that in the event IntraBiotics does not commence
clinical development activity with respect to at least [*] Ramoplanin product
by March 31, 2002, then Biosearch shall notify GENE in writing and GENE shall
have a [*] a license to Ramoplanin for use as a [*] formulation for infection
(prevention or treatment), once the rights to such formulations will have
finally reverted to Biosearch, pursuant to Section 5.6.


 


     3.3 [*] formulation. In the event that
Biosearch develops a [*] formulation containing Licensed Compound, then
Biosearch shall notify GENE in writing and GENE shall have a [*] a license to
Ramoplanin for use as a [*] formulation for infection (prevention or treatment)
in the Field, pursuant to Section 5.6.


 


     3.4 Follow-up products. In the event that
Biosearch discovers, develops, licenses and/or acquires rights to any products
for the same indications for which the formulations of the Licensed Compound
may be developed (other than Excluded Formulations) (“Follow-up Products”),
then Biosearch shall notify GENE in writing and GENE shall have a [*] a license
to such products in the Territory, pursuant to Section 5.6.


 


ARTICLE 4


 


LICENSING FEE; MILESTONE PAYMENTS


 


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Confidential Treatment has been requested for the marked portions.


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     4.1 Licensing Fee. As partial payment for
the patent licenses granted by Biosearch pursuant to Article 5 of this
Agreement, and the Development Obligations of Biosearch pursuant to Article
2.3, GENE shall pay to Biosearch, within ten (10) business days after the
Effective Date, two million Dollars (U.S.$2,000,0000), cash by wire transfer
(same value date).


 


     4.2 Milestone Payments. GENE or its
sublicensee shall make the following milestone payments to Biosearch within ten
(10) business days after the first achievement of each of the following milestones
with respect to Licensed Products in the Field and in the Territory:


 


     (i)  
[*] cash by wire transfer (same value date) when all of the


           following conditions are met:


 


                  1. Charter for the [*] has
been approved by FDA.


 


                  2. Submission and acceptance
by FDA of the [*].


 


                  3. [*] meeting at FDA has
occurred and report submitted and


                  accepted by FDA.


 


                  4. Completion by [*] of the
[*] of the first [*] of


                  patients enrolled in the
Ramoplanin Phase III Clinical Trial


                  (The “RAVE” Clinical Trial).
The Parties agree that in the


                  event [*] of the number
originally envisaged to be enrolled


                  in the RAVE clinical trial,
as a result of the analysis, then


                  this [*] will be deferred
until the date of the U.S. NDA


                  filing.


 


     (ii) 
Two million Dollars (U.S.$2,000,000) payable by the issuance of a


           Convertible Note in such original
principal amount to Bioseach


           effective on the same date of the
U.S. NDA filing with FDA.


 


     (iii) Five million Dollars
(U.S.$5,000,000) payable by the issuance of a


           Convertible Note in such original
principal amount to Biosearch on


           the same date the U.S. NDA is
approved by FDA.


 


     Any grant by GENE of a sublicense to a
Third Party as permitted in Section 5.5 shall not affect Biosearch’s right to
receive milestone payments as provided in this Section 4.2. GENE shall remain
responsible for the payments due to Biosearch pursuant to this Section 4.2 in
the event it grants any such sublicense. The payment amounts are nonrefundable
and noncreditable.


 


ARTICLE 5


 


LICENSES


 


     5.1 Patent Licenses to GENE. Biosearch
hereby grants to GENE an exclusive (even as to Biosearch and subject to Section
6.3) license under the Biosearch Patents to make, have made, use, import,
offer, sell, offer for sale and have sold Licensed Products in the Field and in
the Territory. Such license shall additionally include the right to make or
have made Bulk Licensed Compound in all instances hereunder, and to the extent
that, GENE acquires the right to make or have made Bulk Licensed Compound
hereunder. Such license shall be subject to the terms and conditions of this
Agreement, including payment of the amounts set forth in Articles 4, 7 and 8
hereof


 


     5.2 Patent Licenses to Biosearch. GENE
hereby grants to Biosearch an exclusive (even as to GENE), paid-up license
under GENE Patents to make, have made, use, import, offer, sell, offer for sale
and have sold (i) inside the Territory, products containing the Licensed
Compound in any Excluded Formulation for any and all uses within the Field, and
(ii) outside of the Territory, products containing the Licensed Compound
(including without limitation Licensed Products) for any and all uses within
the Field.


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     5.3 Know-How License to GENE. Subject to
Article 9, Biosearch grants to GENE a paid-up, nonexclusive license to use
Biosearch Know-how within the Territory for any purpose consistent with the
rights and obligations contained in this Agreement.


 


     5.4 Know-How License to Biosearch.
Subject to Article 9, GENE grants to Biosearch a paid-up, nonexclusive
worldwide license to use GENE Know-how for any purpose consistent with the
rights and obligations contained in this Agreement.


 


     5.5 Sublicensing. GENE may not, unless
with the prior written consent of Biosearch which consent shall not be
unreasonably withheld, grant sublicenses under this Article 5 to its Affiliates
or to Third Party agents and representatives to conduct development and
commercialization of Licensed Products until a first registration is obtained
for a Licensed Product. Thereafter, sublicenses may be granted for commercial
purposes only: GENE shall in any event give prior written notice to Biosearch
of any intention to grant any such sublicense and shall be responsible to
Biosearch for compliance by the sublicensee of GENE’s obligations hereunder.


 


     5.6 Right of Negotiation for [*]
Formulations of the Licensed Compound and Follow-up Products. If Biosearch
wishes to offer to any Third Party the opportunity to participate in the
research, development and commercialization of (i) products including [*]
formulation of the Licensed Compound for any indication in the Field and in the
Territory, and/or (ii) Follow-up Products which are [*], but which are being developed
for the same indications for which the formulations (other than Excluded
Formulations) of the Licensed Compound may be developed, Biosearch shall, prior
to the time it first makes any such offer to a Third Party, notify GENE of its
intention to enter into such discussions. If GENE requests within the [*]
period following its receipt of such notice to discuss with Biosearch the terms
upon which GENE may research, develop and commercialize in the Territory the
Licensed Compound in a [*] formulation or the Follow-up Products, (either
solely or jointly with Biosearch), then the Parties shall meet and negotiate in
good faith the potential terms of an agreement on such terms. If the Parties do
not enter into such an agreement within [*] after GENE so requests to negotiate
such opportunity with Biosearch, then Biosearch shall thereafter be free to
offer such opportunity to a Third Party with respect to such [*] formulation of
the Licensed Compound of Follow-up Products; provided, however, that Biosearch
(i) must provide to GENE any information that Biosearch provides to any Third
Party that materially differs from the information that Biosearch provided to
GENE with respect thereto, in which case GENE may again exercise [*] under this
Section 5.6. and (ii) shall not enter into any Agreement with any Third Party
with respect to such [*] formulation or Follow-up Product on terms that are [*]
during [*] referred to above. However, Biosearch shall not be obligated to
negotiate or enter into any agreement, either with a Third Party or with GENE,
with respect to the research, development and commercialization of any such
products.


 


     5.7 Third Party Technology.


 


          (a) Biosearch represents to GENE
that no Third Party technology is included in the Biosearch Patents or in the
Biosearch Know-how as of the Effective Date.


 


          (b) Biosearch will assist GENE in
obtaining access to, and licenses under, technology relating to Licensed
Products that is owned or Controlled by any Other Licensee which is developing
or commercializing products containing the Licensed Compound (including without
limitation Licensed Products) outside of the Territory, or products containing
the Licensed Compound (including without limitation Licensed Products) within
the Territory, in each case solely to the extent such technology is necessary
or useful for the Development or Commercialization of Licensed Products in the
Field.


 


 


ARTICLE 6


 


COMMERCIALIZATION


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         6.1 General. The Commercialization of
Licensed Products in the Field and in the Territory shall be conducted
independently by GENE, its Affiliates, its Sublicensees and its Third Party
agents and representatives.


 


         6.2 GENE Efforts. GENE will use
diligent efforts to promote, sell and distribute the Licensed Products in the
Territory after it obtains Regulatory Approval therefor, consistent with
accepted business practices for products of equivalent commercial value and opportunity,
and in any event shall commence efforts to promote Licensed Products within six
(6) months after obtaining Regulatory Approval therefor, subject to Force
Majeure or reasons beyond GENE’s reasonable control.


 


         6.3 Commercial. Within twenty (20)
days prior to the beginning of each year starting from the the [*] following
the [*] and until the [*] following [*], GENE shall provide an annual sale
forecast for the following year. If GENE’s [*] should be below [*] in any year
by [*] then GENE shall have an option of paying a [*] on the portion of sales
[*] of the [*] to maintain its exclusive position. Should GENE elect not to
[*], Biosearch shall have the right, but not the obligation, to [*], unless
such [*] is due to Force Majeure conditions or reasons beyond GENE’s reasonable
control. If the right is [*], then GENE shall be obligated to provide to [*]
access to its [*] of [*] in the Territory and cooperate with Biosearch in order
to enable the obtainment of the necessary [*] for [*]. Nothwithstanding the
foregoing, in the event that the [*], Biosearch will continue to supply Bulk
Licensed Compound as per Article 7.


 


         6.4 Formulation, Packaging and
Labeling. GENE will be responsible for formulating Bulk Licensed Compound into
final dosage form and packaging the Licensed Product for sale under this
Agreement, including, without limitation, designing and producing all packaging
materials and product inserts, all in forms consistent with the requirements of
the regulatory authorities in the Territory.


 


         6.5 Expenses. All expenses incurred
by GENE in connection with its obligations under this Article 6 will be borne
solely by GENE. GENE will be responsible for appointing its own employees,
agents and representatives, who will be compensated by GENE.


 


         6.6 Restrictions on Distributors and
Dealers. Subject to mandatory provisions of applicable laws, Biosearch shall
not, and shall also ensure that its distributors and dealers (including its
Affiliates and non-Affiliates) to whom Biosearch sells for resale products
containing the Licensed Compound (including without limitation Licensed
Products) for resale do not, sell the Licensed Product or any product
containing Licensed Compound for any use to any customer located in the Territory,
other than such sales of or for Excluded Formulations of the Licensed Compound,
or products containing the Licensed Compound, for use in the Field.


 


         6.7 Pricing. GENE shall determine, in
its sole discretion, the pricing, discounting policy and other commercial terms
relating to Licensed Products in the Field and in the Territory.


 


ARTICLE 7


 


MANUFACTURE AND SUPPLY; TRANSFER PRICE AND
SUPPLY PRICE


 


         7.1 Manufacture and Supply of Bulk
Licensed Compound by Biosearch. Subject to the terms and conditions of this
Article 7, Biosearch will manufacture, or arrange for manufacture of, GENE’s
requirements of Bulk Licensed Compounds for Development and Commercialization
of Licensed Products in the Field and in the Territory (unless GENE elects or is
permitted also to manufacture Bulk Licensed Compound as permitted under this
Article 7), subject to the payment of a Transfer Price for preclinical and
clinical supply pursuant to Section 7.9 and a Supply Price for commercial
supply as provided in Section 8.2. GENE, at its sole expense, will be


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responsible
for having the Bulk Licensed Compound that is manufactured by Biosearch
pursuant to this Article 7 processed into the final form.


 


         7.2 Biosearch’s Inability to Supply.
The Parties intend that Biosearch shall supply to GENE and GENE shall purchase
from Biosearch one hundred percent (100%) of GENE’s requirements of Bulk
Licensed Compound. Notwithstanding the foregoing, and in addition to the other
provisions of this Agreement, GENE shall have manufacturing rights as follows:


 


                  (i)   Biosearch shall provide prompt notice to
GENE if Biosearch anticipates that it will be unable to meet GENE’s forecasted
requirements for Bulk Licensed Compound by [*] or more for a period exceeding
[*]. In this event, or if Biosearch is actually unable to meet GENE’s
forecasted requirements for Bulk Licensed Compound by [*] or more for a period
exceeding [*], GENE shall have the right to produce or have produced through a
Third Party its requirements of Bulk Licensed Compound for use in the Field and
in the Territory and Biosearch shall license on a fully-paid basis and provide
to GENE or such Third Party all existing biological material, including without
limitation the most productive seed strains, and manufacturing know-how for
such manufacture.


 


                  (ii)  If Biosearch intends, any time during the
initial term of this agreement or any renewal period, to cease manufacturing
the Bulk Licensed Compound, it shall provide GENE with [*] written notice. In
this event GENE shall have the right to produce or have produced through a
Third Party its requirements of Bulk Licensed Compound for use in the Field and
in the Territory and Biosearch shall license on a fully-paid basis and provide
to GENE or such Third Party all existing biological material, including without
limitation the most productive seed strains, and manufacturing know-how for
such manufacture.


 


                  (iii) Upon the occurence of
the events described under clause (i) or (ii) above, Biosearch shall promptly,
and shall cause its manufacturing contractors to, cooperate with GENE to
transfer to GENE or its designee, and fully enable GENE or its designee with
the then most current version of all biological materials, know-how, and
expertise necessary to manufacture the Bulk Licensed Compound, including all
production and quality control specifications. GENE may use such materials to
manufacture Bulk Licensed Compounds only as provided in this Agreement. In
regard to the foregoing, the Parties agree to cooperate to obtain all necessary
assurances and cooperation from any of Biosearch’s Third Party contract
manufacturers to enable GENE to manufacture Bulk Licensed Compound. If GENE
elects to manufacture Bulk Licensed compounds, Biosearch shall promptly provide
to GENE all process and manufacturing technology, material and data and provide
access to regulatory filings sufficient to enable GENE to produce its
requirements of such Bulk Licensed Compound. In addition, Biosearch shall
provide a right of reference and access to appropriate regulatory filings for
the manufacture of such Bulk Licensed Compound to GENE. In all such events,
GENE shall not be released of its obligation to pay the Royalty provided for
under Section 8.2(b) below. In addition to the foregoing, Biosearch shall, as
soon as practicable upon GENE’s request, deliver to GENE, in accordance with
Section 7.6 and Section 7.7, the Retained Amount of Bulk Licensed Compound
retained by Biosearch pursuant to Section 7.11.


 


         7.3 Process Development,
Manufacturing Approvals. Biosearch will use diligent efforts to develop a
process for the manufacture of Bulk Licensed Compounds according to the
Specifications therefor and to scale up that process to a scale sufficient to
manufacture and supply GENE’s anticipated requirements for clinical and
commercial supply of Licensed Products. Biosearch will use diligent efforts to
make necessary filings to obtain, or to cause a Third Party manufacturer of
Bulk Licensed Compounds to make necessary filings to obtain, Regulatory
Approval for the manufacture of Bulk Licensed Compounds as part of the approval
of a Drug Approval Application for each Licensed Product in the Field and in
the Territory. Should Biosearch be unable to obtain Regulatory Approval for the
manufacturing process and facility of Bulk Licensed Compound, then GENE shall
have the right to contract with a Third Party for the Regulatory Approval of a
manufacturing process and facility and manufacture and supply of its
requirements of Bulk Licensed Compound under the terms and conditions of
Section 7.2.


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         7.4 Specifications. The current
specifications for Bulk Licensed Compound are attached to this Agreement as
Exhibit II (as such specifications may be modified pursuant to this Section,
the “Specifications”). Biosearch shall [*] during the term of this Agreement
make changes to the Specifications for Bulk Licensed Compound without good
reason and the prior approval of GENE. Biosearch may modify Specifications if
regulatory authorities within the Territory recommend or require changes thereto,
or if GENE submits a proposal for changing such Specifications. Notwithstanding
the previous sentence, both Parties shall use their [*] to implement changes in
the Specifications which are required by the regulatory authorities within the
Territory unless both Parties agree to the contrary in writing. At the request
of GENE, Biosearch shall arrange for GENE’s designated representatives to
inspect and visit from time to time the facilities at which Bulk Licensed
Compound is manufactured, stored or tested for the purpose of determining that
the manufacture of Bulk Licensed Compound complies with the requirements of
this Agreement. Such inspections shall occur during regular business hours upon
reasonable notice.


 


         7.5 Forecasting. [*] days before the
end of each [*] following the Effective Date, GENE will provide Biosearch with
a firm order for Bulk Licensed Compound for the subsequent [*] together with a
rolling forecast covering the [*] following the one for which the firm order
was issued. The order for the first [*] following the Effective Date will be
provided within [*] days of the Effective Date, and shall be subject to
Biosearch’s acceptance, not to be unreasonably withheld. In no event shall
Biosearch be required to deliver more Bulk Licensed Compound in any given [*]
than the firm order that was submitted by GENE for such [*] in the last
applicable forecast. Biosearch shall use commercially reasonable efforts to
supply any additional quantities requested by GENE in excess of the amounts previously
forecasted by GENE, it being recognized that substantial increases in
production levels may require significant advance notice.


 


         7.6 Shipment of Bulk Licensed
Compound. Biosearch shall deliver the Bulk Licensed Compound it manufactures for
GENE pursuant to this Article 7 to location(s) designated by GENE by such
method and carrier as GENE shall request. Unless otherwise agreed by the
Parties, all shipments of Bulk Licensed Compound by Biosearch shall be ex-works
Biosearch. Biosearch shall use best efforts to deliver Bulk Licensed Compound
on the dates specified by GENE. Biosearch will bear all transportation expenses
for the delivery of material to GENE, and shall bear all risk of loss of any
material following shipment from the place of manufacture until delivered to
GENE.


 


         7.7 Invoices. Biosearch will invoice
GENE for each shipment of material supplied to GENE under this Article 7. GENE
shall pay the relevant invoices within ninety (90) days after its receipt
thereof.


 


         7.8 Acceptance. Prior to shipment of
Bulk Licensed Compound, Biosearch will ship representative samples of each
batch to be shipped to GENE. Upon receipt of such sample and upon receipt of a
shipment of Bulk Licensed Compound, GENE may determine whether the sample and
such shipment, respectively, meet the Specifications. GENE shall notify
Biosearch in writing promptly if such sample or shipment of Bulk Licensed
Compound, as applicable, manufactured by Biosearch fails to meet the
Specifications, therefor. If Biosearch has not received such written notice
within thirty (30) days after such material has been received by GENE, then
such shall be deemed to have met the Specifications. Upon receipt of any such
written notice of non-conformance, Biosearch shall either acknowledge that the
subject Bulk Licensed Compound does not meet the Specifications, or resample
the sample, lot or batch in question and have said samples tested by an
independent laboratory of its choice, acceptable to GENE. If such independent
laboratory determines that such samples fail to meet the Specifications or
Biosearch acknowledges that Bulk Licensed Compound is non-conforming, then
Biosearch shall at GENE’s option either replace the non-conforming Bulk
Licensed Compound at no additional cost as soon as reasonably possible or
refund any payments made by GENE for such non-conforming materials.


 


         7.9 Transfer Price for Clinical
Supply and Validation Process. Prior to receipt of Regulatory Approval of the
Licensed Product in the Territory, and subject to Biosearch’s obligation under
Section 2.3(c) herein, GENE will purchase clinical supplies of Bulk Licensed
Compound at a price (the “Transfer Price”) equal to [*] of Bulk Licensed
Compound.


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         7.10 Manufacturing Reports. The
reports that Biosearch shall provide pursuant to Section 2.4(a) shall include
details of Biosearch’s efforts to scale up the manufacturing process for Bulk
Licensed Compound at alternate sites pursuant to Section 2.3.


 


         7.11 Retention of Back-up Supply of
Bulk Licensed Compound. To help protect against interruptions in supply of Bulk
Licensed Compounds pursuant to this Article 7, Biosearch shall retain under
appropriate conditions a supply of Bulk Licensed Compound at all times after
the parties commence production of Licensed Products for commercial launch in
an amount determined pursuant to this Section. GENE shall notify Biosearch at
least ninety (90) days prior to commencement of commercial scale manufacture of
Licensed Product of the amount of Bulk Licensed Compound that constitutes a
sufficient supply for the purpose of this Section 7.11 (the “Retained Amount”).
GENE may re-establish the Retained Amount from time to time as necessary or
desirable in view of its good faith estimate of its requirements for Bulk
Licensed Compounds during the remainder of the term of this Agreement.


 


         7.12 Discussions Regarding Long Term
Supply Capacity. The parties acknowledge that GENE will gain knowledge
regarding the potential market for Licensed Products in the Field and in the
Territory as the development of Licensed Products progresses. Accordingly, it
is possible that GENE’s full commercial requirements for Bulk Licensed
Compounds either upon commercial launch of Licensed Products or thereafter may
exceed the capacity at Biosearch’s manufacturing facility therefor. If at any
time GENE’s good faith estimate of the market for Licensed Products indicates
that Biosearch’s current manufacturing facility may not have sufficient
capacity for manufacturing GENE’s requirements for Bulk Licensed Compound over
the term of this Agreement, then GENE and Biosearch shall discuss in good faith
acceptable mechanisms for any such actual or potential inability of Biosearch
to supply GENE’ requirements, which may include without limitation for the
establishment of a second manufacturing site by Biosearch. If the parties do
not agree on such mechanisms for assuring sufficient supply of Bulk Licensed
Compound and appropriate amendments to this Agreement implementing such
mechanisms, then GENE may elect to establish a second manufacturing site.


 


ARTICLE 8


 


SUPPLY PRICE AND ROYALTY; PAYMENT
PROCEDURES AND RECORDS


 


         8.1 
Supply Obligation; Duration. During the term of this Agreement, GENE
shall purchase all of its requirements for Bulk Licensed Compound from
Biosearch, subject to Section 7. The price for commercial supply to GENE of all
Bulk Licensed Compound manufactured by Biosearch shall be as provided in
Section 8.2. Gene will be obligated to pay only for batches that meet all
commercial and regulatory specifications and are accepted pursuant to Section
7.8.


 


         8.2 
Supply Price and Royalty.


 


                  (a) In consideration of the
manufacture of Bulk Licensed Compound and the grant of licenses hereunder, GENE
will pay to Biosearch a supply price (the “Supply Price”) and a royalty (the
“Royalty”) as described in the table set forth below. The Supply Price will be
[*] of Bulk Licensed Compound. Except as otherwise set forth in this Section
8.2, the Royalty on GENE’s Net Sales will be equal to the [*] indicated in the
table set forth below and the [*].


 


 


 


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


                                                           Total
Payment Due


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


                                                                    Non-Exclusive;                  Non-Exclusive;


                           Exclusive                 TBP can be determined          TBP cannot be determined


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


 


[*]              Greater of [*] of Net     Greater of [*] of Net Sales or   [*] of Net Sales, but not


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


 


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     from                   Sales or [*] per gram        [*] per gram of Bulk Licensed          more than [*] per gram


 Effective Date        of Bulk Licensed          
Compound, but reduced to TBP if         
of Bulk Licensed


                                    Compound                     TBP is less than [*] per gram               Compound


 


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


 


       [*]          Greater of [*] of Net               Greater of [*] of Net Sale or          [*] of Net Sales, but not


                      Sales or [*] per
gram              [*] per gram, but
reduced              more than [*] per
gram


        from             of Bulk Licensed               to TBP if TBP
is less than [*]          of Bulk
Licensed


     Effective               Compound                              per gram                               Compound


       Date


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


 


 


As
used above, the following terms shall have the following meanings:


 


         “Exclusive” shall mean all times that
Third Party marketer(s) of Ramoplanin have not achieved, in the aggregate, sales
equal to or greater than [*] of GENE’s sales.


 


         “Non-Exclusive” shall mean all times
that Third Party marketer(s) of Ramoplanin have achieved, in the aggregate,
sales equal to or greater than [*] of GENE’s sales.


 


         “TBP” shall mean the price for bulk
Ramoplanin (defined as any product or intermediate from which aformulation of
ramoplanin, other than an Excluded Formulation could be manufactured), as
quoted by or sold by a Third Party manufacturer to distributor(s) and/or
marketer(s) of Ramoplanin. TBP shall be considered determinable if either Party
can determine such price to the reasonable satisfaction of the other Party.


 


         Notwithstanding the foregoing, the
Parties agree to the desirability of maintaining a competitive price and
competitive supply arrangements for Licensed Products in the face of increased
competition. In the event that the adjustments to the total payments described
in the table above are not able or are inadequate to meet GENE’s needs to
modify GENE’s costs for Licensed Products as reasonably determined by GENE, the
Parties hereby agree to negotiate in good faith to establish other mechanisms
as may be deemed necessary to maintain competitiveness in the marketplace.


 


                  (b)   The Royalty payable by GENE hereunder shall
be subject to adjustment as follows:


 


                           (i)  If, during the first [*] following the
Effective Date, Biosearch ceases to supply Bulk Licensed Compound to GENE
pursuant to Article 7, then, (x) if, at the time Biosearch ceases to supply
Bulk Licensed Compound, GENE’s sale of Licensed Products is Exclusive, GENE
shall pay Biosearch a Royalty equal to [*] and (y) if, at the time Biosearch
ceases to supply Bulk Licensed Compound, GENE’s sale of Licensed Products is
Non-Exclusive, no Royalty shall be due to Biosearch hereunder.


 


                           (ii) If, after [*]
following the Effective Date, Biosearch ceases to supply Bulk Licensed Compound
to GENE pursuant to Section 7.2, then no Royalty shall be due to Biosearch
hereunder.


 


         8.3 
Third Party Royalties.


 


                  (a) Any royalties due to
Third Parties with respect to the manufacture, use, sale, offer for sale or
import of Licensed Product in the Field and in the Territory shall be borne by
Biosearch.


 


                  (b) Biosearch has agreed to
pay IntraBiotics a royalty on Net Sales pursuant to the transfer of the rights
for Ramoplanin. Nothwithstanding the provisions of Section 8.3(a), GENE has
agreed to pay [*] of any royalty paid by Biosearch pursuant to the transfer of
Ramoplanin from IntraBiotics up to a maximum of [*] of Net Sales. GENE’s
obligation to pay its share of the IntraBiotics royalty will continue
throughout the term of the contract for so long as such an obligation exists.
GENE agrees to the principle of cooperating in obtaining a


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reduction
of the royalty to be paid to IntraBiotics in concert with Biosearch, and
subject to its express consent, sharing in possible costs to obtain such
reduction.


 


         8.4 Sales by Sublicensees. If GENE
grants a sublicense under the rights granted to it pursuant to Article 5, then
such sublicense shall include an obligation for the sublicensee to account for
and report its Net Sales of such Licensed Products on the same basis as if such
sales were Net Sales by GENE, and GENE shall pay the Supply Price to Biosearch
on such sales as if the Net Sales of the sublicensee were Net Sales of GENE.


 


         8.5 Promotional and Marketing
Contributions; Validation Material.


                  (a) Biosearch will provide
to GENE, free of charge and royalty free, promptly upon GENE’s request, up to
[*] of activity [*] of Bulk Licensed Compound, in any event not less than [*]
of activity [*] per year during the period from [*] pre-launch through [*] post
launch to contribute to support GENE’s promotional and marketing efforts.


 


                  (b) Biosearch has an
obligation to produce [*] of Bulk Licensed Compound for validation of the
Biosearch manufacturing process and facility. GENE has agreed to accept a
maximum of [*] of this material. GENE will accept [*] of this material as a
credit toward its entitlement to free goods allowance described in Section
8.5(a). GENE will pay for [*] of the material at a price of [*]. Payment will
be due one hundred twenty (120) days post launch a Licensed Product in the U.S.
This material will be stored at Biosearch until Gene needs to “run” the
finished product manufacturing campaign. GENE shall notify Biosearch when this
material must be manufactured and the material must meet the Specifications.
GENE shall use such material to validate its formulation and finishing process
pursuant to 2.2(a). In the event that all of the material is not required for
the validation of GENE’s formulation and finishing process and the remaining
shelf life of the unused material does not allow for its formulation and
finishing, then GENE shall not be obligated to pay for such unused material but
shall return it to Biosearch. The material will be manufactured at the time
indicated by GENE. In the event that the Licensed Product becomes non-exclusive
in the territory, prior to the time at which Biosearch has fulfilled its
obligations under this clause, the price to be paid for this material will be
reduced to the TBP if the TBP is less than [*].


 


         8.6 Supply Price Payments, Royalty
Payments and Sublicense Revenue Payments.


 


                  (a) Biosearch shall deliver
Bulk Licensed Product and shall invoice GENE at the Supply Price. GENE shall
notify Biosearch of its receipt thereof and pay such invoices within ninety
(90) days after receipt of such Bulk Licensed Compound.


 


                  (b) GENE will deliver to
Biosearch a report showing in detail its calculation of the Net Sales and
quantities of any Licensed Products sold during a given [*] within thirty (30)
days following the end of such [*] and sixty (60) days following the end of
each calendar year for which Royalty or other royalty payments are due from
GENE. GENE shall pay the Royalty or other royalty due on Net Sales or quantity
of Licensed Product sold during the [*] covered by a given report under this
Section 8.6(b) within thirty (30) days after GENE provides such report to
Biosearch.


 


                  (c) GENE will deliver a
report showing in detail its calculation of the Net Sales and quantities of any
Licensed Products sold by GENE’s sublicensees during a given [*] to Biosearch
within thirty (30) days following the end of each [*] and sixty (60) days
following the end of each calendar year for which payments are due from GENE to
Biosearch thereon. GENE shall pay the amounts due to Biosearch on Net Sales and
quantities of Licensed Product sold by GENE’s sublicensees pursuant to Section
8.2 and 8.3 for a given [*] covered by such reports within thirty (30) days
after GENE provides such report to Biosearch.


 


         8.7 Exchange Rate; Manner and Place
of Payment. All amounts paid to Biosearch hereunder shall be paid in United
States currency. Net Sales shall be accounted for on a [*] basis in U.S.
Dollars for each month


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on
the last banking day of such [*] . All payments due to Biosearch under this
Agreement shall be made by wire transfer at a bank and to an account designated
by Biosearch, unless otherwise specified by Biosearch.


 


         8.8 
Late Payments. In the event that any payment due hereunder is not made
when due, interest shall accrue on the late payment from the due date of such
payment at the [*] as then quoted in the Wall Street Journal. The payment of
such interest shall not limit any Party from exercising any other rights it may
have as a consequence of the lateness of the payment.


 


         8.9 
Record Keeping. During the term of this Agreement, GENE shall keep full
and accurate books and records setting forth, for the Licensed Product on which
payments are due, including gross sales, all deductions allowed in arriving at
Net Sales and any other information necessary and in sufficient detail to allow
the calculation of payments to be paid by GENE. During the term of this
Agreement and for a period of [*] thereafter, GENE shall permit Biosearch, at
Biosearch’s expense, by independent certified public accountants employed by
Biosearch and reasonably acceptable to GENE, to examine relevant books and
records at any reasonable time, not more often than once each calendar year,
within [*] of any such payment. If it is determined that there was an
underpayment due Biosearch of [*] or more, without prejudice to any other
rights Biosearch may have, GENE shall promptly pay to Biosearch the balance of
the amounts due and shall also reimburse Biosearch for the cost of such verification
examination.


 


         8.10 Tax and Withholdings. Any
withholding taxes levied by tax authorities in the Territory on the payments
hereunder, to the extent due by Biosearch and not transferable upon GENE, shall
be borne by Biosearch and deducted by GENE from the sums otherwise payable by
it hereunder for payment to the proper tax authorities on behalf of Biosearch.
In such event, GENE shall deliver to Biosearch evidence of the payment of such
taxes. GENE agrees to cooperate with Biosearch in the event Biosearch claims
exemption from such withholding or seeks deductions under any double taxation
or other similar treaty or agreement from time to time in force.


 


ARTICLE 9


 


CONFIDENTIALITY


 


         9.1 
Confidentiality; Exceptions. Except to the extent expressly authorized
by this Agreement or otherwise agreed in writing, the Parties agree that, the
receiving Party shall keep confidential and shall not publish or otherwise
disclose or use for any purpose other than as provided for in this Agreement
any Information and other information and materials furnished to it by the
other Party pursuant to this Agreement, or any provisions of this Agreement
that are the subject of an effective order of the Securities Exchange
Commission granting confidential treatment pursuant to the Securities Act of
1934, as amended (collectively, “Confidential Information”), except to the
extent that it can be established by the receiving Party that such Confidential
Information:


 


              (a) was already known to the
receiving Party, other than under an obligation of confidentiality, at the time
of disclosure by the other Party;


 


              (b) was generally available to
the public or otherwise part of the public domain at the time of its disclosure
to the receiving Party;


 


              (c) became generally available
to the public or otherwise part of the public domain after its disclosure and
other than through any act or omission of the receiving Party in breach of this
Agreement; or


 


              (d) was disclosed to the
receiving Party, other than under an obligation of confidentiality, by a Third
Party who had no obligation to the disclosing Party not to disclose such
information to others.


----------


[*]
Confidential Treatment has been requested for the marked portions.


Page
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        9.2 Authorized Disclosure. Each Party
may disclose Confidential Information hereunder to the extent such disclosure
is reasonably necessary in filing or prosecuting patent applications,
prosecuting or defending litigation, complying with applicable governmental
regulations or conducting preclinical or clinical trials, provided that if a
Party is required by law or regulation to make any such disclosure of the other
Party’s Confidential Information it will, except where impracticable for
necessary disclosures (for example in the event of medical emergency), give
reasonable advance notice to the other Party of such disclosure requirement
and, except to the extent inappropriate in the case of patent applications,
will use its reasonable efforts to secure confidential treatment of such
Confidential Information required to be disclosed. In addition, each Party
shall be entitled to disclose, under a binder of confidentiality containing
provisions as protective as those of this Article 9, Confidential Information
to any Third Party for the purpose of carrying out activities authorized under
this Agreement, including disclosures to authorized sublicensees, and subject
to Sections 2.5 and 2.6 disclosures by Biosearch for purposes of the development
and commercialization of products other than Licensed Products anywhere in the
world outside of the Field, and of Licensed Products either outside of the
Field and within the Territory, or within the Field and outside of the
Territory. Nothing in this Article 9 shall restrict any Party from using for
any purpose any Information developed by it during the course of the
collaboration hereunder. Biosearch acknowledges that if GENE files a required
Securities Exchange Commission filing or registration statement covering the
sale of its securities in the United States, it will be required to file a copy
of this Agreement with its public disclosure statement. GENE agrees to seek
confidential treatment of at least the economic terms of this Agreement with respect
to any such filing.


 


        9.3 
Publications. Except as required by law, each Party agrees that it shall
not publish or present Information relating to the Licensed Compound or to
products containing the Licensed Compound without providing to the other Party
the opportunity for prior review of such publication or presentation. The Party
desiring to publish or present such Information (the “Proposing Party”) shall
provide to the other Party the opportunity to review such proposed publication
or presentation (including information to be presented verbally) as early as
reasonably practical, but not later than twenty (20) days prior to the
anticipated date of submission or disclosure to a Third Party. The Party
reviewing such publication or presentation shall respond to the Proposing Party
with comments thereon within ten (10) days of receiving such materials from the
Proposing Party. The Proposing Party agrees, upon written request from the
other Party, not to submit such abstract or manuscript for publication or to
make such presentation until the other Party consents, which agreement shall
not be unreasonably withheld.


 


        This Article 9 shall survive
termination or expiration of this Agreement for a period of five (5) years
thereafter.


 


ARTICLE 10


 


OWNERSHIP OF INTELLECTUAL PROPERTY AND
PATENT RIGHTS


 


        10.1 Ownership. Each Party shall
solely own, and it alone shall have the right to apply for, Patents within and
outside of the Territory for any inventions made solely by that Party’s
employees or consultants in the course of performing work under this Agreement.
Inventions made jointly by personnel of Biosearch and GENE shall be jointly
owned by the Parties (“Joint Patents”), subject to the licenses granted to GENE
pursuant to Article 5.


 


        10.2 Disclosure of Patentable Inventions. Each Party shall
provide to the other any patent application disclosing an invention or jointly
conceived invention relating to Licensed Products within the Field arising
during the term of this Agreement reasonably in advance of the intended date
for submission of any patent application to a governmental patent authority.


 


        10.3 Patent Filings.


 


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18


 


 

















 


              (a) Biosearch Responsibilities.
Biosearch shall prepare, file, prosecute and maintain Patents to cover
inventions relating to the discovery, evaluation, manufacture, use or sale of
Licensed Products that are made solely by Biosearch personnel (all of which
shall be included in the Biosearch Patents) or that are made jointly by
personnel of Biosearch and GENE in the course of the collaboration (“Joint
Patents”, all of which shall be included in both the Biosearch Patents and GENE
Patents). Biosearch shall keep GENE informed of the status of each such
Biosearch Patent and Joint Patent and shall give reasonable consideration to
any suggestions or recommendations of GENE concerning the preparation, filing,
prosecution and maintenance thereof. The Parties shall cooperate reasonably in
the prosecution of all Biosearch Patents and Joint Patents under this Section
10.3(a) and shall share all material Information relating thereto promptly
after receipt of such Information. If, during the term of this Agreement,
Biosearch intends to allow any issued Biosearch Patent or Joint Patent to which
GENE has a license under this Agreement to expire for failure to make
maintenance fee payments, Biosearch shall notify GENE of such intention at
least sixty (60) days prior to the date upon which such issued Biosearch Patent
or Joint Patent shall expire, and GENE shall thereupon have the right, but not
the obligation, to assume responsibility for the maintenance thereof


 


              (b) GENE Responsibilities. GENE
shall file, prosecute and maintain Patents to cover inventions relating to the
discovery, evaluation, manufacture, use or sale of Licensed Products that are
made solely by GENE personnel (all of which shall be included in GENE Patents).
GENE shall keep Biosearch informed of the status of each GENE Patent and shall
give reasonable consideration to any suggestions or recommendations of
Biosearch concerning the preparation, filing, prosecution and maintenance
thereof. The Parties shall cooperate reasonably in the prosecution of all GENE
Patents under this Section 10.3(b) and shall share all material Information
relating thereto promptly after receipt of such Information. If, during the
term of this Agreement, GENE intends to allow any issued GENE Patent to which
Biosearch has a license under this Agreement to expire for failure to make
maintenance fee payments, GENE shall notify Biosearch of such intention at
least sixty (60) days prior to the date upon which such GENE Patent shall
expire, and Biosearch shall thereupon have the right, but not the obligation,
to assume responsibility for the maintenance thereof.


 


         10.4 Third Party Patent Rights. No
Party makes any warranty with respect to the validity, perfection or dominance
of any Patent or other proprietary right or with respect to the absence of
rights in Third Parties which may be infringed by the manufacture or sale of
the Licensed Product. Each Party agrees to bring to the attention of the other
Party any patent or patent application it discovers, or has discovered, and
which relates to the subject matter of this Agreement.


 


         10.5 Enforcement Rights.


 


              (a) Infringement by Third
Parties. If any Biosearch Patent or GENE Patent is infringed by a Third Party
in the Territory in connection with the manufacture, import, use, sale or offer
for sale of a product competitive with a Licensed Product (“Competitive Product
Infringement”), the Party to this Agreement first having knowledge of such
infringement shall promptly notify the other in writing. The notice shall set
forth the facts of that infringement in reasonable detail. GENE shall have the
primary right, but not the obligation, to institute, prosecute or control any
action or proceeding with respect to such infringement of a Biosearch Patent or
Joint Patent within the Field and within the Territory, or of a GENE Patent
anywhere in the world both within and outside of the Field, by counsel of its
own choice. Biosearch shall have the right to participate in such action and to
be represented by counsel of its own choice. Biosearch shall have the primary
right, but not the obligation, to institute, prosecute, and control any action
or proceeding with respect to such infringement of Biosearch Patents or Joint
Patent occurring within the Territory that is outside of the Field, or
occurring anywhere else in the world both within and outside of the Field, by
counsel of its own choice. Solely within the Territory with respect to
Biosearch Patents other than Joint Patents and anywhere in the World with
respect to Joint Patents, GENE shall have the right to participate in such
action brought by Biosearch pursuant to the foregoing sentence and to be


 


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represented
by counsel of its own choice therein. If the Party primarily responsible for
bringing suit under this Section 10.5(a) (the “Responsible Party”) fails to
bring an action or proceeding within a period of ninety (90) days after having
knowledge of that infringement, then, solely with respect to infringement
occurring inside the Field and inside the Territory with respect to
infringement of patents, the other Party shall have the right to bring and
control any such action by counsel of its own choice, and the Responsible Party
shall have the right to participate in such action and be represented by
counsel of its own choice. If a Responsible Party brings any such action or
proceeding hereunder, the other Party agrees to be joined as a party plaintiff
and to give the Responsible Party reasonable assistance and authority to
control, file and prosecute the suit as necessary. The costs and expenses of
the Party bringing suit under this Section (including the internal costs and
expenses specifically attributable to said suit) shall be reimbursed first out
of any damages or other monetary awards recovered in favor of the Parties. Any
remaining damages shall be split in accordance with each Party’s interest
therein. No settlement or consent judgment or other voluntary final disposition
of a suit under this Section 10.5(a) may be entered into without the joint
consent of Biosearch and GENE.


 


              (b) Defense and SettIement of
Third Party Claims against Licensed Products. If a Third Party asserts that a
patent or other right owned by it is infringed by the manufacture, import, use,
sale or offer for sale of any Licensed Product, the Party first obtaining
knowledge of such a claim shall immediately provide the other Party notice of
such claim and the related facts in reasonable detail. Defense of any such
claim in the Field and in the Territory shall be controlled by GENE; provided
that Biosearch shall have the right to participate in such defense and to be
represented in any such action by counsel of its selection at its sole
discretion. GENE shall also have the right to control settlement of such claim
with respect to a Licensed Product in the Field and in the Territory; provided,
however, that no settlement shall be entered into without the written consent
of Biosearch, which consent shall not be withheld unreasonably.


 


              (c) Allocation of Expenses
Incurred Pursuant to Section 10.5(b). The expenses of patent defense, settlement
and judgments pursuant to Section 10.5(b) with respect to the Licensed Products
shall be borne solely by GENE, except as provided in Section 10.5(d).


 


              (d) Settlement of Third Party
Claims for Infringement; Payment of Third Party Royalties. If a Third Party
asserts that a patent or other right owned by it is infringed by the
manufacture, use, sale, offer for sale or import of any Licensed Product, and
as a result of settlement procedures or litigation under this Section 10.5,
GENE is required to pay the Third Party a royalty or make any payment of any
kind for the right to sell a Licensed Product in a particular country, such
expense shall be borne by Biosearch as set forth in Section 8.3.


 


              (e) Agreement of Primarily
Responsible Party. Notwithstanding the provisions of Section 10.5(a), neither
Party shall file and prosecute an action for infringement of a Patent for which
the other Party has the primary responsibility to file and prosecute such
action, and pursuant to which that other Party having primary responsibility
has commenced and is prosecuting at least one such action for infringement of
said Patent, without the agreement of that other Party, which agreement shall
not be unreasonably withheld.


 


         10.6 Patent Marking. GENE shall mark
Licensed Products with appropriate patent numbers or indicia as necessary to
maintain the enforceability of Biosearch Patents, Joint Patents and GENE
Patents.


 


         10.7 Trademarks and Trade Names.


 


              (a) Product Trademarks and Trade
Names. The Parties agree to the principle and desirability of identifying and
registering with the appropriate trademark authorities global trademark(s)
(“Global Trademarks”) and global trade name(s) (“Global Trade Names”) for
Licensed Products and Bulk Licensed Compound. Such Global Trademarks and Global
Trade Names for Licensed Products and Licensed Compound shall at all times be
the exclusive property of Biosearch. Subject to the following paragraph,
Biosearch and GENE shall jointly select, prosecute applications for, register,
maintain and enforce the Global Trademarks and Global Trade Names for Licensed
Products in the Territory, at Biosearch’s expense. All uses of trademarks or
trade


 


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names
to identify a Licensed Product shall comply with all applicable laws and
regulations, including without limitation those laws and regulations
particularly applying to the proper use and designation of trademarks and trade
names.


 


       Should it be determined by GENE that a
Global Trademark or Global Trade Name is unavailable or becomes the subject of
an opposition in the Territory, or should the Parties be unable to reach
agreement on such Global Trademark or Global Trade Name, GENE shall have the
right to select, prosecute applications for, register, maintain and enforce
trademarks and trade names for Licensed Products in the Territory (“Territory
Trademarks” and “Territory Trade Names”, respectively) at its own expense. Such
Territory Trademarks and Territory Trade Names shall at all times be the
exclusive property of GENE.


 


       Notwithstanding the foregoing, without
limitation all branding, logos, indicia and trade dress, shall be developed by
GENE in its sole discretion for use in the Territory, whether for use with a
Territory Trademark or Territory Trade Name. Such branding, logos, indicia and
trade dress, without limitation, shall be the exclusive property of GENE and
may be licensed to Biosearch, at Biosearch’s request, for the exclusive use
with Licensed Products outside the Territory on a royalty-free basis.


 


              (b) Infringement. Each Party
shall notify the other Party promptly upon learning of any actual, alleged or
threatened infringement of the trademark for Licensed Product in the Field and
in the Territory or of any unfair trade practices, trade dress imitation,
passing off of counterfeit goods or like offenses. The parties shall confer
regarding the appropriate steps necessary or useful to protect, enforce and
maintain such trademark. GENE shall make the final decision of whether and how
to defend the trademark.


 


              (c) License. Biosearch hereby
grants to GENE a fully paid license to use all Global Trademarks and Global
Trade Names and any other Trademarks and Trade Names owned or Controlled by
Biosearch under which Biosearch sells and markets products containing the Bulk
Licensed Compound solely in connection with GENE’s Development and
Commercialization of Licensed Products in the Field and in the Territory
pursuant to this Agreement. GENE may sublicense any rights under the Biosearch
Global Trademarks and/or Global Trade Names persuant to Section 5.5 of this
Agreement. GENE hereby grants to Biosearch a fully paid license to use any
Territory Trademarks and Territory Trade Names solely in connection with
Biosearch’s Development and Commercialization of products containing Bulk
Licensed Compound in the Field outside of the Territory. Biosearch may not
sublicense any right under the Territory Trademark or Territory Trade Name with
out the prior written consent of GENE.


 


       10.8 Trade Secrets. The parties each
acknowledge that Biosearch maintains certain technology useful for the
manufacture of the Bulk Licensed Compound as a trade secret and that
accordingly Biosearch has chosen not to seek patent protection on such
technology. Biosearch hereby agrees that it shall use all commercially
reasonable efforts to maintain such technology as a trade secret (unless and
until Biosearch files a patent application claiming such technology), including
without limitation (i) disclosing such technology to third parties only under
an obligation of confidentiality and non-use with respect thereto comparable in
scope to the confidentiality and non-use obligations set forth in Article 9
with respect to Confidential Information, (ii) not disclosing any trade secrets
in any public presentation or publication and (iii) employing other mechanisms
typically used in the pharmaceutical industry to protect trade secrets of
similar nature.


 


ARTICLE 11


 


TERM AND TERMINATION


 


       11.1 Term. Except as otherwise provided
herein, the term of this Agreement shall commence on the Effective Date and,
unless earlier terminated as provided in this Agreement, shall expire ten (10)
years after first commercial sale of a Licensed Product by GENE in the Field
and in the Territory. In the event that at any time


 


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during
the term of this Agreement, Biosearch is merged into or acquired by a Third
Party or sells to a Third Party all or substantially all of the assets to which
this Agreement relates, GENE shall have an option, exercisable at any time
prior to the expiration of the term, to extend the agreement for an additional
five (5) years up to a total of fifteen (15) years under the same terms and
conditions stated herein, and at no additional economic terms. Except as
provided under Section 8.5, the terms and conditions of this Agreement will
automatically renew for subsequent periods of two (2) years at the end of the
initial ten year term, subject to either party’s right not to renew, to be
communicated in writing to the other party with at least one (1) year advance
notice; provided that Biosearch’s right to not renew the term of this Agreement
shall, in any event, be subject to Biosearch’s obligation to provide a minimum
of two (2) years notice to GENE if Biosearch should choose not to supply Bulk
Licensed Compound, pursuant to Section 7.2(ii). In this event, Biosearch will
supply GENE the manufacturing know-how and the most productive seed strain to
enable GENE to produce or have produced the Bulk Licensed Compound. Upon
termination of this Agreement pursuant to this Section 11.1, GENE’s license
under Article 5 shall continue in full force and effect and GENE may thereafter
continue to sell Licensed Products in the Field and in the Territory on a
royalty free basis.


 


       11.2 Termination for Cause. Either
Party may terminate this Agreement upon sixty (60) days written notice upon or
after the breach of any material provision of this Agreement by the other Party
if the breaching Party has not cured such breach within the sixty (60) day
period following written notice of termination by the other Party.


 


       11.3 Other Termination.


 


              (a) By GENE. GENE shall have the
right to terminate this Agreement upon ninety (90) days prior written notice to
Biosearch if the prospects for achieving Regulatory Approval for a Licensed
Product or commercially feasible Development or Commercialization of a Licensed
Product appear in GENE’s reasonable judgment not to justify further support of
the Licensed Product.


 


              (b) By Biosearch. If the NDA for
the US has not been filed by GENE by [*], unless due to force majeure
conditions or reasons beyond GENE’s reasonable control (with the agreement that
this date and clause shall at all times be kept confidential), Biosearch shall
have the right to terminate this Agreement, and will have the right to acquire
or have returned, in any event at no cost, all rights, authorizations,
approvals, materials and information concerning Ramoplanin developed by or
licensed to GENE.


 


       11.4 Effect of Termination.


 


              (a) Upon termination of this
Agreement by Biosearch for GENE’s material breach pursuant to Sections 11.2, or
by GENE pursuant to Section 11.3, all rights and licenses granted to GENE with
respect to the Licensed Product under Article 5 shall terminate. Furthermore,
GENE shall pay all sums accrued hereunder which are then due (except as
expressly otherwise provided in this Agreement), shall promptly assign to
Biosearch all right, title and interest in and to any regulatory filings in the
Territory pertaining to Licensed Products and shall deliver to Biosearch any
GENE Information necessary to obtain the Regulatory Approval of Licensed
Products in the Territory which has not been obtained as of the date of
termination. If this Agreement is terminated by Biosearch pursuant to Section
11.2 or 11.3(b), or by GENE pursuant to Section 11.3(a), GENE shall return to
Biosearch, or at Biosearch’s request destroy, all Biosearch Information and any
other Confidential Information relating to the Licensed Compound or Licensed
Products, and any Bulk Licensed Compound supplied by Biosearch for clinical
development or commercial distribution. Additionally, if Biosearch terminates
this Agreement pursuant to Section 11.2 or GENE terminates this Agreement
pursuant to Section 11.3, the license granted in Section 5.2 shall
automatically become, without any further action by GENE, an exclusive,
worldwide, royalty-free license under the GENE Patents to make, have made, use,
import, offer, sell, offer for sale and have sold the Licensed Compound and
pharmaceutical products containing the Licensed Compound (including without
limitation Licensed Products) for any and all uses.


 


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


[*]
Confidential Treatment has been requested for the marked portions.


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              (b) Upon termination of this
Agreement by GENE for Biosearch’s material breach pursuant to Section 11.2, all
licenses granted to GENE shall survive. If Biosearch is supplying Licensed Bulk
Compound at the time of any termination by GENE of this Agreement for
Biosearch’s material breach, Biosearch shall continue to provide for supply of
Bulk Licensed Compound to the extent provided prior to notice of such
termination until such time as GENE is able to secure an equivalent alternative
commercial supply source for the Territory, as requested by GENE; and Biosearch
shall take the actions described in and be obligated under Section 7.2(iii);
provided, however, that GENE shall pay to Biosearch its Cost of Goods Sold for
such Bulk Licensed Compound. Any additional payments for such supply shall be
negotiated between the Parties at such time of termination.


 


        11.5 
Accrued Rights, Surviving Obligations. Termination of this Agreement
shall not affect any accrued rights and remedies of either Party. Additionally,
the terms of Articles 7 (solely to the extent required to effect the intent of
Section 11.4, if applicable), 8 (solely to the extent required to effect the
intent of Section 11.4, if applicable), 9, 12, 13 and 14, as well as Sections
10.2 through 10.8, 11.4, 11.5, of this Agreement shall survive any termination
or expiration of this Agreement.


 


ARTICLE 12


 


REPRESENTATIONS AND WARRANTIES


 


        12.1 
Mutual Representations and Warranties. Each Party hereby represents and
warrants:


 


              (a) Corporate Power. Such Party
is duly organized and validly existing under the laws of the state or country
of its incorporation and has full corporate power and authority to enter into
this Agreement and to carry out the provisions, hereof.


 


              (b) Due Authorization. Such
Party is duly authorized to execute and deliver this Agreement and to perform
its obligations hereunder.


 


              (c) Binding Agreement. This
Agreement is a legal and valid obligation binding upon it and enforceable in
accordance with its terms. The execution, delivery and performance of this
Agreement by such Party does not conflict with any agreement, instrument or
understanding, oral or written, to which it is a Party or by which it may be
bound, nor violate any law or regulation of any court, governmental body or
administrative or other agency having jurisdiction over it. Such Party has not,
and during the term of the Agreement will not, grant any right to any Third
Party with respect to its Patents or Know-how that would conflict with the
rights granted to the other Party hereunder.


 


        12.2 
Representations by Biosearch Regarding Manufacture of Bulk Licensed
Compounds. Biosearch hereby warrants that the Bulk Licensed Compound supplied
hereunder will:


 


              (a) comply with the
Specifications then in effect for Bulk Licensed Compound;


 


              (b) be manufactured, stored and
shipped in compliance with all applicable regional, federal, state and local
laws and governmental regulations, including without limitation the applicable
current Good Manufacturing Practices regulations;


 


              (e) when shipped, will not be
adulterated or misbranded within the meaning of the Federal Food, Drug &
Cosmetic Act and the regulations promulgated thereunder; and


 


              (d) be manufactured in
accordance with all applicable laws and governmental rules and regulations.


 


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              (e) be manufactured in a manner
that does not involve any infringement or unauthorized use of any intellectual
property rights of any Third Party.


 


       12.3 Other Representations by
Biosearch. Biosearch further represents and warrants to GENE that:


 


              (a) to the best of Biosearch’s
knowledge on the Effective Date, there are no interferences or oppositions
pending before any court or administrative office or agency relating the
Biosearch Patents;


 


              (b) Biosearch has provided to
GENE access to all clinical records which describe all adverse event reports
relating to Licensed Products; and


 


              (c) Biosearch owns all right,
title and interest in and to IND No. 56341 and all subsequent filings
thereunder, and Biosearch owns or controls all rights necessary to grant the
rights Biosearch purports to grant to GENE pursuant to this Agreement; and


 


              (d) as of the Effective Date,
Biosearch has not received any notices of infringement or any written
communications relating in any way to a possible infringement with respect to
the Licensed Compound or Licensed Products in the Field, and is not aware that
the practice of the Biosearch Patents and Biosearch Know-how as contemplated by
this Agreement will involve any infringement or unauthorized use of any
intellectual property nights of any Third Party.


 


              (e) Biosearch has concluded an
agreement with IntraBiotics (the IntraBiotics Agreement) under which it is
obligated to pay a royalty on sales of Licensed Products in the Territory.


 


              (f) Biosearch has on-hand or will supply within sixty (60)
days of the Effective Date, such clinical supplies as are necessary to complete
Development of Licensed Product within the Territory.


 


              (g) Biosearch will be
responsible in full for all costs of Development prior to the Effective Date.
Biosearch warrants that it has entered into contractual relationships with
previous employees of IntraBiotics, as well as previous contractors of clinical
development services to IntraBiotics, including, but not limited to Contract
Research Organizations, Third-Party manufacturers, investigative sites,
microbiology and clinical laboratories, in order to continue the development of
Licensed Products within the Territory. Biosearch shall provide copies of all
contracts with these consultants and contractors to GENE, prior to the
Effective Date and will make best efforts to work closely with GENE to transfer
or assign these relationships to GENE in an orderly fashion to permit a smooth
transition in accordance with Section 2.3(a)(iii).


 


       12.4 Disclaimer of Warranties. The
Parties understand that the activities to be undertaken pursuant to this
Agreement will involve technologies and products that have not been approved by
any regulatory authority and that neither Party guarantees the safety or
usefulness of the Licensed Products. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY TO THE OTHER
PARTY OF ANY NATURE, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY
WARRANTY OF NONINFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.


 


ARTICLE 13


 


INDEMNIFICATION


 


       13.1 Indemnification by Biosearch.
Biosearch hereby agrees to indemnify, hold harmless and defend GENE against any
and all expenses, costs of defense (including without limitation attorneys’
fees, witness fees, damages, judgments, fines and amounts paid in settlement)
and any amounts GENE becomes legally obligated to


 


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pay
because of any Third Party claim or claims against it to the extent that such
claim or claims result from (i) Biosearch’s negligence, (ii) Biosearch’s breach
or alleged breach of any representation or warranty by Biosearch or of any
other provision of this Agreement; (iii) any claims of breach of the
IntraBiotics Agreement which may be brought against GENE; (iv) any claims from
third parties, consultants, employees and contractors concerning Development
activities prior to the Effective Date, whether conducted on behalf of
Biosearch, IntraBiotics or any other Third Party; or the possession,
manufacture, use, handling, storage, sale or other disposition of Bulk Licensed
Compound or of products containing the Licensed Compound by Biosearch, its
agents or licensees or sublicensees (other than GENE), except to the extent
such claim or claims arise from the negligence, recklessness or willful
misconduct of GENE or any breach of any representation or warranty of GENE made
pursuant to Section 12; provided that GENE provides Biosearch with prompt notice
of any such claim and the exclusive ability to defend (with the reasonable
cooperation of GENE) and settle any such claim. Any liability of Biosearch
shall in no event extend to consequential damages.


 


       13.2 Indemnification by GENE. GENE
hereby agrees to indemnify, hold harmless and defend Biosearch against any and
all expenses, costs of defense (including without limitation attorneys’ fees,
witness fees, damages, judgments, fines and amounts paid in settlement) and any
amounts Biosearch becomes legally obligated to pay because of any Third Party
claim or claims against it to the extent that such claim or claims arise out of
(i) GENE’s negligence, recklessness or willful misconduct, (ii) GENE’s breach
or alleged breach of any representation or warranty by GENE or of any other
provision of this Agreement, (iii) the possession, final manufacture, use, sale
or administration of Licensed Products by GENE or GENE’s Affiliates, licensees
or sublicensees, except to the extent such claim or claims arise from the
negligence, recklessness or willful misconduct of Biosearch or any breach of
any representation or warranty of Biosearch made pursuant to Section 12;
provided that Biosearch provides GENE with prompt notice of any such claim and
the exclusive ability to defend (with the reasonable cooperation of Biosearch)
or settle any such claim, and provided further that such indemnities shall not
apply to losses resulting from Biosearch matters covered under Section 13.1
above.


 


       13.3 Mechanics. In the event that the
parties cannot agree as to the application of Sections 13.1 and 13.2 above to
any particular loss or claim, the parties may conduct separate defenses of such
claim. Each Party further reserves the right to claim indemnity from the other
in accordance with Sections 13.1 and 13.2 above upon resolution of the
underlying claim, notwithstanding the provisions of Sections 13.1 and 13.2
above requiring the indemnified Party to tender to the indemnifying Party the
exclusive ability to defend such claim or suit.


 


Page
25


 


 

















 


 


ARTICLE 14


 


MISCELLANEOUS


 


       14.1 Assignment.


 


              (a) Either Party may assign any
of its rights or obligations under this Agreement to any Affiliates; provided,
however, that such assignment shall not relieve the assigning Party of its
responsibilities for performance of its obligations under this Agreement, and
further provided that if a proposed assignment would have an adverse financial
impact upon the other Party (e.g., by reason of changed tax treatment of
payments due under this Agreement), such assignment shall be subject to the
other Party’s prior written consent.


 


              (b) This Agreement shall survive
any such merger or reorganization of either Party with or into another party
and no consent for such merger or reorganization shall be required hereunder;
provided, that in the event of such merger or reorganization, no intellectual
property rights of the acquiring corporation shall be included in the
technology licensed hereunder.


 


              (c) Except as set forth in
subsections (a) and (b), this agreement may not be assigned by either Party
without the prior consent of the other Party. This Agreement shall be binding
upon and inure to the benefit of the successors and permitted assigns of the
Parties. Any assignment not in accordance with this Agreement shall be void.


 


       14.2 Dispute Resolution.


 


              (a) The Parties recognize that
disputes as to certain matters may from time to time arise during the term of
this Agreement which relate to either Party’s rights and/or obligations
hereunder or thereunder. It is the objective of the Parties to establish
procedures to facilitate the resolution of disputes arising under this
Agreement in an expedient manner by mutual cooperation. To accomplish this
objective, the Parties agree to follow the procedures set forth in this Articie
14 if and when a dispute arises under this Agreement.


 


       Unless otherwise specifically recited
in this Agreement, disputes among the Parties will be resolved by reference
first to their respective executive officers designated below or their
successors, for attempted resolution by good faith negotiations within fourteen
(14) days after such notice is received. Said designated officers are as
follows:


 


       For GENE:                     Chief
Executive Officer


       For Biosearch:                Chairman of the Board /
Managing Director


 


       In the event the designated executive
officers are not able to resolve such dispute, either Party may at anytime
after the fourteen (14) day period seek to resolve the dispute through the
means provided in Section 14.2(b).


 


              (b) Any claim or controversy
arising out of or related to this Agreement or any breach hereof that is not
resolved by the designated officers as provided in this Agreement shall be
resolved solely and exclusively by final and binding arbitration (i) if started
by Biosearch, in Boston, MA, USA by a panel of three arbitrators appointed and
acting according to the then existing rules of the JAMS/Endispute; and (ii) if
started by GENE, in Milan, Italy, by a panel of three arbitrators appointed and
acting according to the International Rules then in force of the National and
International Arbitration Chamber of Milan. The arbitrator(s) selected shall have
significant experience in the biotechnology or pharmaceutical industry, and
shall apply the rules of law. Any arbitration proceeding conducted pursuant to
this Section 14.2(b) shall be conducted in the English language. Any award made
by such arbitrator(s) shall be final and binding upon the parties and a
judgment of a court having jurisdiction


Page
26


 


 

















 


 


may
be entered on such award. Notwithstanding the foregoing, disputes regarding the
validity, scope or enforceability of patents shall be submitted to a court of
competent jurisdiction in the country where such patent has issued.


 


       14.3 Force Majeure. Save as provided in
Section 4.2 above, neither Party shall lose any rights hereunder or be liable
to the other Party for damages or losses on account of failure of performance
by the defaulting Party if the fallure is occasioned by government action, war,
fire, explosion, flood, strike, lockout, earthquake, embargo, act of God, or
any other similar cause beyond the control of the defaulting Party, provided
that the Party claiming force majeure has exerted all reasonable efforts to
avoid or remedy such Force Majeure.


 


       14.4 Compliance with Law. Each Party
hereto shall comply with all applicable laws, rules, ordinances, guidelines,
consent decrees and regulations of any applicable federal, state or other
governmental authority.


 


       14.5 Export Law Compliance. GENE
understands and recognizes that the Licensed Product and other materials made
available to it hereunder may be subject to the export administration
regulations of the United States Department of Commerce and other United States
government regulations related to the export of chemical compounds and medical
devices.


 


       14.6 Governing Law. This Agreement
shall be governed by and construed according to the laws of New York, NY, USA.


 


       14.7 Entire Agreement. This Agreement,
including all Exhibits attached hereto, and all documents delivered
concurrently herewith, set forth all the covenants, promises, agreements,
warranties, representations, conditions and understandings between the Parties
hereto and supersede and terminate all prior agreements and understanding
between the Parties. No subsequent alteration, amendment, change or addition to
this Agreement, shall be binding upon the Parties hereto unless reduced to
writing and signed by the respective authorized officers of the Parties.


 


       14.8 Relationship of the Parties.
Nothing hereunder shall be deemed to authorize either Party to act for,
represent or bind the other except as expressly provided in this Agreement.


 


       14.9 Notices. All notices hereunder
shall be in writing and shall be deemed given if delivered personally or by
facsimile transmission (receipt verified), telexed, mailed by registered or
certified mail (return receipt requested), postage prepaid, or sent by express
courier service, to the Parties at the following addresses (or at such other
address for a Party as shall be specified by like notice; provided, that
notices of a change of address shall be effective only upon receipt thereof.


 


 


	
  If
  to Biosearch,

  	
   

  	
   

  
	
  addressed
  to:

  	
  BIOSEARCH
  ITALIA S.p.A.

  	
   

  
	
   

  	
  Via
  Lepetit, 34

  	
   

  
	
   

  	
  21040
  Gerenzano, ltaly

  	
   

  
	
   

  	
  Attention:

  	
  Chairman of the Board

  
	
   

  	
  Telephone:

  	
  +39.02.96474.341

  
	
   

  	
  Telecopy:

  	
  +39.02.96474.400

  
	
   

  	
   

  	
   

  
	
  If
  to GENE,

  	
   

  	
   

  
	
  addressed
  to:

  	
  GENOME
  THERAPEUTICS CORPORATION

  	
   

  
	
   

  	
  100
  Beaver Street

  	
   

  
	
   

  	
  Waltham,
  MA 02453-8443, USA

  	
   

  
	
   

  	
  Attention:

  	
  Chief Executive Officer

  
	
   

  	
  Telephone:

  	
  +1.781.398.2300

  
	
   

  	
  Telecopy:

  	
  +1.781.398.8277

  



 


 


Page
27


 


 

















 


 


       14.10 Waiver. Except as specifically
provided for herein, the waiver from time to time by either of the Parties of
any of their rights or their failure to exercise any remedy shall not operate
or be construed as a continuing waiver of same or of any other of such Party’s
rights or remedies provided in this Agreement.


 


       14.11 Severability. If any term,
covenant or condition of this Agreement or the application thereof to any Party
or circumstance shall, to any extent, be held to be invalid or unenforceable,
then (i) the remainder of this Agreement, or the application of such term,
covenant or condition to Parties or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby and each
term, covenant or condition of this Agreement shall be valid and be enforced to
the fullest extent permitted by law; and (ii) the Parties hereto covenant and
agree to renegotiate any such term, covenant or application thereof in good
faith in order to provide a reasonably acceptable alternative to the term,
covenant or condition of this Agreement or the application thereof that is
invalid or unenforceable, it being the intent of the Parties that the basic
purposes of this Agreement are to be effectuated.


 


       14.12 Official Language. The official
text of this Agreement and any appendices, exhibits and schedules hereto, or
any notice given or accounts or statements required by this Agreement shall be
in English. In the event of any dispute concerning the construction or meaning
of this Agreement, reference shall be made only to this Agreement as written in
English and not to any other translation into any other language.


 


       14.13 Headings. The Section and
paragraph headings contained herein are for the purposes of convenience only
and are not intended to define or limit the contents of said sections or
paragraphs.


 


       14.14 Counterparts. This Agreement may
be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.


 


       IN WITNESS WHEREOF, the Parties have
executed this Agreement in duplicate originals by their proper officers as of
the Effective Date.


 


 


	
  GENOME
  THERAPEUTICS CORPORATION

  	
   

  	
  BIOSEARCH
  ITALIA, S.P.A.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Steven M. Rauscher

  	
   

  	
  By:

  	
  /s/
  Claudio Quarta

  
	
  Title:

  	
  CEO

  	
   

  	
  Title:

  	
  CEO

  



 


Page
28


 

















 


EXHIBIT I


CONVERTIBLE
NOTE


 


        THIS NOTE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS


        AMENDED (THE “ACT”) OR UNDER THE
SECURITIES LAWS OF ANY STATE, AND MAY


        NOT BE SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION


        OR AN EXEMPTION THEREFROM UNDER THE
ACT AND ANY SUCH APPLICABLE STATE


        LAWS.


 


        GENOME THERAPEUTICS CORP.


 


        CONVERTIBLE NOTE DUE [INSERT DATE 60
MONTHS AFTER DATE OF ISSUE]


 


	
  $[Amount]

  	
  [Date of Issue]

  



 


FOR
VALUE RECEIVED, the undersigned Genome Therapeutics Corp., a Massachusetts
corporation (the “Company”), hereby promises to pay to Biosearch Italia,
S.p.A., or registered assigns, at the address specified in Section 14.9 of the
License and Supply Agreement (as defined below), or at such other place as the
Holder of this Note shall from time to time have designated to the Company in
writing, on [insert date 60 months after Date of Issue] (the “Stated Maturity
Date”), [AMOUNT IN WORDS ($[Amount in numbers]) (the “Principal Amount”), with
interest as provided in Section 1 hereof.


 


1.
INTEREST. This Note shall accrue daily interest from the date hereof, computed
on the basis of a year of 365 or 366 (as applicable) days and actual days
elapsed, on the principal amount from time to time unpaid at a rate per annum
equal to five percent (5%) (the “Applicable Rate”), said interest being payable
in arrears on the last business day of the calendar month in which this Note
was issued in each year (each such day, and the day that is the Stated Maturity
Date, being a “Payment Date”), commencing on [insert date that is the last
business day of the month in which the Note is issued, one year following the
date of issue], and at the stated or any accelerated maturity hereof. All
interest shall be payable in cash in the lawful money of the United States.


 


2.   PAYMENT PROVISIONS. The Company covenants
that so long as this Note is outstanding:


 


        2.1. Payment at Maturity of Note. On
the Stated Maturity Date, and on any accelerated maturity of the Notes, the
Company will pay the entire principal amount of this Note then outstanding,
together with all accrued and unpaid interest thereon.


 


        2.2. Prepayments. Except as provided
in Section 4.2 hereof, the Company may not prepay all or any part of the
principal amount of the Notes.


 


3.      CONVERSION OF NOTE.


 


        3.1. Conversion by Holder. Subject to
Section 3.4, the Holder of this Note may at any time convert the principal
amount of this Note then outstanding into a number of shares of Common Stock
equal to (x) the aggregate amount of principal of this Note divided by (y) the
Conversion Price (as hereinafter defined). As used herein, the “Conversion
Price” shall initially be $15.00, shall be adjusted and readjusted from time to
time as provided in this Section 3 and, as so adjusted or readjusted, shall
remain in effect until a further adjustment or readjustment thereof is required
by Section 3 of this Note. Such conversion shall be effected by surrender of
this Note to the Company at its office specified in Section 14.9 of the License
and Supply Agreement, accompanied by a Conversion Notice in substantially the
form attached to this Note (or a reasonable facsimile thereof) executed by such
Holder, and such Holder shall thereupon be entitled to receive the number of
shares of Common Stock specified in the first sentence of this Section 3.1 or
the shares or other interests specified in Section 3.4 below. The conversion of
this Note shall be deemed to have been effected immediately prior to the close
of business on the business day on which this Note shall have been surrendered
to the Company as provided in the immediately preceding sentence, and at such
time the Holder shall be deemed to have become the holder of record of such
shares of Common Stock. As soon as practicable after conversion of the Note,
and in any event within five business days thereafter, the Company at its
expense will cause to be issued in the name of and delivered to the Holder of
this Note a certificate for the number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock to which such Holder shall
be entitled upon such conversion.


 


 


1

















 


3.2.
Automatic Conversion. In the event that the Common Stock trades at or in excess
of a price per share of $30.00 for a period of not less than twenty consecutive
Trading Days, this Note shall automatically be converted, without any action on
the part of the Holder or the Company, into a number of shares of Common Stock
equal to (x) the aggregate amount of principal of this Note then outstanding
divided by (y) the Conversion Price then in effect. If, pursuant to Section 3.4
below, this Note becomes convertible into other shares or other interests, this
Note shall automatically be converted into such shares or other interests if
the quotient obtained by dividing the aggregate fair market value of such
shares or other interests (as determined in good faith by the Company (or its
successor)), by the number of shares of Common Stock into which this Note was
convertible immediately before the Subsequent Event (as defined below) equals
or exceeds $30.00 for a period of not less than twenty consecutive Trading Days.


 


3.3.
Adjustments of Conversion Price for Subdivisions, Stock Dividends, Combinations
or Consolidation of Common Stock. In the event the outstanding shares of Common
Stock shall be increased by way of stock issued as a dividend for no
consideration or subdivided (by stock split or otherwise) into a greater number
of shares of Common Stock, the Conversion Price then in effect shall,
concurrently with the effectiveness of such increase or subdivision, be
proportionately decreased. In the event the outstanding shares of Common Stock
shall be combined or consolidated, by reclassification or otherwise, into a
lesser number of shares of Common Stock, the Conversion Price then in effect
shall, concurrently with the effectiveness of such combination or consolidation,
be proportionately increased.


 


3.4.
Subsequent Events. In the event of any recapitalization, consolidation, merger
or bankruptcy or declaration of insolvency of the Company or its successor
(each, a “Subsequent Event”), this Note shall thereafter be convertible into
the right to receive such shares or other interests (including, without
limitation, cash) as the Holder would have been entitled if this Note had been
converted immediately prior to such Subsequent Event.


 


3.5.
No Impairment. The Company will not, by amendment of its charter or through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in carrying out all such action as may be necessary or appropriate
in order to protect the conversion rights of the Holder of this Note.


 


3.6.
Reservation of Shares. So long as any portion of this Note shall remain
outstanding, the Company shall at all times reserve and keep available, free
from preemptive rights, out of its authorized capital stock, for the purpose of
issuance upon conversion of this Note, the full number of shares of Common
Stock then issuable upon conversion of this Note. If the Company’s Common Stock
shall be listed on any national stock exchange, the Company at its expense
shall include in its listing application all of the shares of Common Stock
reserved for issuance upon conversion of this Note (subject to issuance or
notice of issuance to the exchange) and will similarly procure the listing of
any further Common Stock reserved for issuance upon conversion of this Note at
any subsequent time as a result of adjustments in outstanding Common Stock or
otherwise.


 


3.7.
Validity of Shares. The Company will from time to time take all such action as
may be reasonably required to assure that all shares of Common Stock which may
be issued upon conversion of this Note will, upon issuance, be legally and
validly issued, fully paid and non-assessable and free from all taxes, liens
and charges with respect to the issuance thereof; and, without limiting the
generality of the foregoing, the Company agrees that it will from time to time
take all such action as may be reasonably required to assure that the par value
per share, if any, of the Common Stock is at all times equal to or less than
the lowest quotient obtained by dividing the then current principal amount of
this Note by the number of shares of Common Stock into which this Note can,
from time to time, be converted.


 


3.8.
Representations of the Holder. The Holder represents and warrants to the
Company that the Holder is acquiring this Note and the shares of Common Stock
issuable upon conversion of this Note for the Holder’s own account for
investment only and not with a view to distribution or resale of the Note or
shares of Common Stock issuable upon conversion of this Note. The Holder
represents that it is an “accredited investor” as such term is defined in Rule
501 under the Securities Act of 1933, as amended (the “Act”). The Holder
understands that this Note and the shares of Common Stock issuable upon
conversion of this Note are being issued to the Holder pursuant to an exemption
from the registration requirements of the Act and, accordingly, must be held
indefinitely by the Holder unless later transferred in transactions that are
either registered under the Act or exempt from registration. The Holder also
understands that the shares of Common Stock issuable upon conversion of this
Note will bear a legend similar to the legend set forth at the top of this
Note.


 


2

















 


 


4.       EVENTS OF DEFAULT.


 


         4.1. 
Events of Default. Each of the following events is herein referred to as
an “Event of Default”:


 


         4.1.1. Breach of Covenant. The
Company shall fail to perform or observe


any
other covenant, agreement or provision to be performed or observed by it under
this Note and such failure shall not be rectified or cured within 30 days after
actual knowledge of such failure by an executive officer of the Company.


 


         4.1.2. Bankruptcy, etc. The Company
shall:


 


       (a) commence a voluntary case under
Title 11 of the United States Code as


       from time to time in effect, or
authorize, by appropriate proceedings of


       its board of directors or other
governing body, the commencement of such


       a voluntary case;


 


       (b) have filed against it a petition
commencing an involuntary case under


       such Title 11, which petition is not
dismissed within 30 days after such


       filing;


 


       (c) seek relief as a debtor under any
applicable law, other than such


       Title 11, of any jurisdiction relating
to the liquidation or


       reorganization of debtors or to the
modification or alteration of the


       rights of creditors, or consent to or
acquiesce in such relief;


 


       (d) have entered against it any order
by a court of competent


       jurisdiction (i) finding it to be
bankrupt or insolvent, (ii) ordering or


       approving its liquidation,
reorganization or any modification or


       alteration of the rights of its
creditors, or (iii) assuming custody of,


       or appointing a receiver or other custodian for, all or a
substantial


       part of its property; or


 


       (e) make an assignment for the benefit
of, or enter into a composition


       with, its creditors, or appoint or
consent to the appointment of a


       receiver or other custodian for all or
a substantial part of its


       property.


 


       4.2. Remedies. Upon the occurrence and
during the continuance of any Event of Default, the Holder may accelerate the
maturity of this Note upon notice to the Company (and upon the occurrence of an
Event of Default under Section 4.1.3 above, such maturity shall be
automatically accelerated) and may exercise any remedies at law or in equity.


 


       4.3. Annulment of Defaults. An Event of
Default shall not be deemed to be in existence or to have occurred for any
purpose of this Note until the expiration of all grace periods under this note
or if the Holder shall have waived such event in writing or stated in writing
that the same has been cured to its reasonable satisfaction. No waiver or
statement of satisfactory cure pursuant to this Section 4.3 shall extend to or
affect any subsequent or other Event of Default not specifically identified in
such waiver or statement of satisfactory cure or impair any of the Holder’s
rights upon the occurrence thereof.


 


       4.4. Waivers. The Company hereby waives
to the extent not prohibited by applicable law which cannot be waived (a) all
presentments, demands for performance, notice of nonperformance (except to the
extent specifically required by the provisions hereof), (b) any requirement of
diligence or promptness on the part of the Holder in the enforcement of its
rights under this Note, (c) except to the extent required by other provisions
of this Note, any and all notices of every kind and description which may be
required to be given by any statute or rule of law, and (d) any defense of any
kind (other than indefeasible payment) which it may now or hereafter have with
respect to its liability under this Note.


 


3

















 


 


        4.5. Course of Dealing. No course of
dealing between the Company and its affiliates on the one hand, and the Holder,
on the other hand, shall operate as a waiver of any of the Holder’s rights
under this Note. No delay or omission in exercising any right under this Note
shall operate as a waiver of such right or any other right. A waiver on any one
occasion shall not be construed as a bar to or waiver of any right or remedy on
any other occasion. No waiver or statement of satisfactory cure or consent
shall be binding upon the Holder unless it is in writing and signed by the
Holder.


 


5.  DEFINITIONS. As used in this Note, the
following terms have the meanings set forth below:


 


        5.1 
“Common Stock” means the Company’s Common Stock, $.10 par value per


share,
any stock into which such Common Stock shall have been changed or any stock
resulting from any reclassification of such Common Stock.


 


        5.2. “Company” has the meaning set
forth in the first paragraph of this Note, such term to include any entity
which shall succeed to or assume the obligations of the Company hereunder.


 


        5.3 
“Holder” means each holder from time to time of this Note.


5.4.
“License and Supply Agreement” means the License and Supply Agreement dated as
of September, 2001 by and between the Company and Biosearch Italia, S.p.A., as
the same may be amended, restated, extended, renewed or otherwise modified from
time to time.


 


        5.5 
“Trading Day” means a day on which trades may be effected through the
Nasdaq National Market or any successor thereto.


 


6.
MISCELLANEOUS. This Note shall be governed by and construed in accordance with
the domestic substantive laws of The Commonwealth of Massachusetts without
giving effect to any choice or conflict of laws provision or rule that would
cause the application of the domestic substantive laws of any other
jurisdiction. This Note shall be binding on the Company and its successors and
assigns. The parties hereto, including the undersigned maker and all guarantors
and endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance
and enforcement of this Note, except as specifically otherwise provided herein,
and assent to extensions of the time of payment, or forbearance or other
indulgence, without notice.


 


GENOME
THERAPEUTICS CORP.


 


By:_____________________________


Title:


 


 


4

















 


 


FORM OF CONVERSION NOTICE


 


To
Genome Therapeutics Corp.,


 


The
undersigned registered holder of the within Note hereby irrevocably converts
the unpaid principal- amount of this Note, and requests that the certificates
for such shares be issued in the name of, and delivered to, whose address is


 


Dated:


 


                   (Signature must conform in
all respects to name of holder as


                   specified on the face of
Note)


 


(Street Address)


 


(City) (State) (Zip Code)


 


 


5

















 


 


EXHIBIT II


 


Bulk
Licensed Compound Specifications (forse sono da rivedere)


[*]


 


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


*
Confidential Treatment has been requested for the marked portions.


 


 


6