Exhibit 10.6[CERTAIN INFORMATION CONTAINED HEREIN HAS BEEN OMITTED PURSUANT TO A REQUEST FORCONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES AND EXCHANGE ACT OF1934. THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION.]AMENDED AND RESTATEDSTRATEGIC COLLABORATION AGREEMENTAMONGEPIX MEDICAL, INC.MALLINCKRODT INC.(a Delaware corporation)ANDMALLINCKRODT INC.(a New York corporation)DATED AS OF JUNE 9, 2000[EXHIBITS AND OTHER SCHEDULES REFERENCED HEREIN HAVE BEEN OMITTED AND WILL BEFURNISHED SUPPLEMENTALLY TO THE COMMISSION UPON REQUEST.]
 

 
AMENDED AND RESTATEDSTRATEGIC COLLABORATION AGREEMENT     THIS AMENDED AND RESTATED STRATEGIC COLLABORATION AGREEMENT dated as ofJune 9, 2000 (the “Agreement”) is made by and among EPIX MEDICAL, INC. (formerlyknown as Metasyn, Inc.), a Delaware corporation having its principal place ofbusiness at 71 Rogers Street, Cambridge, Massachusetts 02142-1118 U.S.A.(“EPIX”), MALLINCKRODT INC. (formerly known as Mallinckrodt Medical, Inc.), aDelaware corporation having its principal place of business at 675 McDonnellBoulevard, Hazelwood, Missouri 63042 and MALLLNCKRODT INC. (formerly known asMallinckrodt Group Inc.), a New York corporation having its principal place ofbusiness at 675 McDonnell Boulevard, Hazelwood, Missouri 63042 (bothMALLINCKRODT entities referred to collectively herein as “MKG”), and amends andrestates, from and after the date hereof, the Strategic Collaboration Agreementdated as of August 30, 1996 (as twice amended on September 10, 1998 and July 9,1999) between MKG and METASYN (the predecessor in interest of EPIX).RECITALS     WHEREAS, EPIX has obtained certain rights under certain patents andpatent applications owned by The General Hospital Corporation, doing business asMassachusetts General Hospital (“MGH”), pursuant to an Amended and RestatedLicense Agreement dated July 10, 1995 between EPIX and MGH (the “MGH License”),a copy of which is attached as APPENDIX I     WHEREAS, EPIX is developing a proprietary compound coded as MS-325(“Compound MS-325” as hereinafter defined) which is intended for use as anenhancer for magnetic resonance imaging, which compound is covered by said MGHpatents and patent applications as well as by EPIX patent applications;     WHEREAS, EPIX and MKG wish to modify their existing relationship andthe existing collaboration agreement (as heretofore amended) between them (i) topermit EPIX to enter into that certain Strategic Collaboration Agreement of evendate herewith (the “Collaboration Agreement”) by and between EPIX and ScheringAktiengesellschaft, a German corporation having its principal place of businessat 13342, Berlin, Germany (“Schering”); and (ii) to permit MKG to enter intothat certain Manufacturing and Supply Agreement of even date herewith by andbetween MKG and Schering (the “Manufacturing Agreement”); and     WHEREAS, MKG has provided to EPIX all necessary written consents so asto permit EPIX to enter into the Collaboration Agreement and the ManufacturingAgreement, and EPIX and MKG therefore desire to enter into this Amended andRestated Strategic Collaboration Agreement.     NOW THEREFORE, in consideration of the premises and of the covenantsherein contained, the Parties hereto mutually agree as follows:
 

 
ARTICLE 1. DEFINITIONS     For purposes of this Agreement, the terms defined in this Article shallhave the meanings specified below:     1.1. “AFFILIATE” shall mean any corporation or other entity whichdirectly or indirectly controls, is controlled by or is under common controlwith a Party to this Agreement. A corporation or other entity shall be regardedas in control of another corporation or entity if it owns or directly orindirectly controls more than fifty percent (50%) of the voting stock or otherownership interest of the other corporation or entity, or if it possesses,directly or indirectly, the power to direct or cause the direction of themanagement and policies of the corporation or other entity or the power to elector appoint fifty percent (50%) or more of the members of the governing body ofthe corporation or other entity.     1.2. “BLOOD POOL MAGNETIC RESONANCE CONTRAST AGENTS” shall mean agentsinjected in the cardiovascular system which satisfy both of the following twocriteria: (i) with respect to any Region: (a) the agent has an approvedindication for magnetic resonance angiography; or (b) [ * ]. The types of agentsinclude, but are not limited to, albumin-binding agents, iron particles, orpolymeric/cascade molecules with attached chelates.     1.3. “CMC COSTS” shall mean external Costs and direct and indirectinternal Costs associated with meeting the chemistry manufacturing and controlrequirements of the FDA and corresponding requirements in the EU and othercountries of the world.     1.4. “COLLABORATION AGREEMENT” shall have the meaning set forth in therecitals. A true and accurate copy of the Collaboration Agreement is attachedhereto as EXHIBIT A.     1.5. “COMPOUND MS-325” means EPIX’s proprietary Blood Pool MagneticContrast Agent, having the following chemical name: Trisodium — [(2-(R) — [(4,4- diphenylcyclonexyl) phosphonooxymethyl] — diethylenetriaminepentacetato)(aquo), gadolinium (III)], together with any fragments, sub-units,modifications, formulations or derivatives thereof.     1.6. “COST” or “COSTS” shall mean expenses incurred by the Parties,determined in a reasonable manner in accordance with GAAP. The Parties recognizethat financial records of Schering are and shall continue to be maintained inaccordance with international accounting standards rather than GAAP. TheCollaboration Agreement provides that Schering will use reasonable commercialefforts to identify for EPIX material differences in the recognition of expensesunder GAAP and international accounting standards, and in cases where there arematerial differences to use the GAAP method of recognition. The CollaborationAgreement does not require Schering to produce financial reports in accordancewith GAAP if Schering does not keep such reports in accordance with GAAP as partof its normal accounting and financial reporting practices. * Confidential information omitted and filed with the Commission.
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     1.7. “COSTS OF GOODS SOLD” shall mean the aggregate of the following,determined in a reasonable manner in accordance with GAAP: (i) Costs incurred bySchering and EPIX relating to Compound MS-325 and Licensed Products forcommercial distribution under the Manufacturing Agreement, and (ii) all directand indirect manufacturing, packaging and labeling Costs incurred by Scheringand EPIX, not included in (i) above, but specifically allowable to theproduction of Licensed Products including overhead Costs directly related to themanufacturing, packaging and labeling functions, and (iii) manufacturingvariances attributable to charges of MKG only as more fully described below, butnot including General and Administrative Expenses or any Costs related to idlecapacity. Costs of Goods Sold shall not include royalties payable to MGH andother Third Parties in connection with Licensed Products or CMC Costs.     The Collaboration Agreement provides that Schering’s Costs of GoodsSold shall be based on Schering’s Planned Costs calculated on a per unit basis,once per year. Schering’s “Planned Costs” is defined in the CollaborationAgreement to mean the standard Costs established by Schering for its internalaccounting system which is intended to materially comply with GAAP, consistentlyapplied. The Collaboration Agreement provides that such Planned Costs shall beprovided to EPIX at least thirty(30) days before the beginning of the calendaryear in sufficient detail so as to enable EPIX to reasonably review them. TheCollaboration Agreement also provides that except for Costs attributable tocharges of MKG under the Manufacturing Agreement, Planned Costs shall not bereconciled with and adjusted to actual Costs, and any such variances from plan,shall be considered by Schering in setting the Planned Costs for the nextcalendar year.     The Collaboration Agreement also provides that Schering shall reconcileand adjust Planned Costs to actual Costs for Costs of Goods Sold attributableonly to charges of MKG under the Manufacturing Agreement as of the end of eachcalendar year, with the resulting variance being applied to the first ProfitPayment and Royalty Payment due after the end of first quarter of the calendaryear following the completion of the applicable calendar year. For the purposeof calculating Profit Payments pursuant to Section 7.6 of the CollaborationAgreement and Royalty Payments under Sections 7.7 and 7.8 of the CollaborationAgreement, reconciliation of Cost variances attributable to charges of MKG shallbe allocated to the United States, EU, Japan, and elsewhere based on the numberof units of the applicable Licensed Product sold in each respective portion ofthe Territory.     The Collaboration Agreement further provides that in the event thatSchering or an Affiliate of Schering becomes the manufacturer of Compound MS-325and Licensed Products, EPIX and Schering shall negotiate in good faith Costs ofGoods Sold allowable under a new manufacturing agreement between EPIX andSchering. EPIX and Schering have further agreed pursuant to the CollaborationAgreement that: (i) Schering will not manufacture Compound MS-325 and LicensedProducts on terms less favorable than those provided by MKG; PROVIDED, THAT, ifSchering becomes the manufacturer of Compound MS-325 and Licensed Productsbecause MKG is unwilling or unable to manufacture Compound MS-325 and LicensedProducts under the terms of the Manufacturing Agreement and Schering’s Costs ofmanufacturing are higher than those of MKG, then the price to be charged bySchering shall reflect such higher Costs; and (ii) that the terms of the newagreement will take into consideration any CMC Costs paid or required to be paidby EPIX.
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     The Collaboration Agreement also provides that CMC Costs incurred bySchering or a Schering Affiliate shall not be included in Costs of Goods Sold orDevelopment Costs, and shall be borne solely by Schering or such ScheringAffiliate, unless, to the extent permitted under the Manufacturing Agreement,Schering or such Schering Affiliate takes over manufacturing responsibilitiesdue to the inability or unwillingness of MKG to manufacture all or part of therequirements of Schering of Compound MS-325 and related Licensed Products, inwhich case: (x) pursuant to the Collaboration Agreement, Schering has agreed topursue all available legal remedies against MKG as a result of MKG’s inabilityor unwillingness to perform under the Manufacturing Agreement; and (y) CMC Costsincurred by Schering or a Schering Affiliate shall be included in DevelopmentCosts (net of any recovery relating to CMC Costs from MKG pursuant to theManufacturing Agreement).     1.8. “DAIICHI RADIOISOTOPE LABORATORIES, LTD.” or “DRL” means theJapanese corporation having its principal place of business at 17-10, Kyobashi1-chome Chuo-Ku, Tokyo, 104 Japan.     1.9. “DEVELOPMENT COSTS” shall mean all internal (direct and indirect)and Third Party expenses incurred by EPIX and Schering in the United States andthe EU in connection with the Development Program, determined in a reasonablemanner in accordance with GAAP. Such expenses include, but are not limited to(i) direct labor (salaries, wages, incentive program Costs, awards and employeebenefits but excluding any employee benefits associated with equity incentiveplans); (ii) materials and supplies; (iii) allocated Costs for building spacedirectly dedicated to the development of the Licensed Products (including rent,depreciation, amortization and maintenance) but excluding expenses relating tounused capacity, development of other products, and amortization of property,plant and equipment not directly related to development of Licensed Products inaccordance with the Development Plan; (iv) Third Party contracts and consultingexpenses incurred for services in connection with the Development Program; (v)allocated Costs for information technology directly dedicated to the developmentof the Licensed Products and (vi) travel and entertainment, telephone,recruiting, training (both internal and external), clinical trial insurance,software, personal computer equipment and support Costs and freight and deliveryexpenses. Such Costs shall not include General and Administrative Expenses orexpenses incurred from departments that are not directly engaged in thedevelopment of the Licensed Products, including but not limited to, finance andprocurement, corporate administration, legal (both external and internalexpenses), human resources, business development and licensing, Sales andMarketing (as hereinafter defined in Section 1.38) except for Costs ofpre-launch marketing activities incurred prior to the Launch Preparation Date asmore fully described in Section 5.1.2 of the Collaboration Agreement, andinvestor relations.     Development activities for which Development Costs are incurred includebut are not limited to pre-clinical and clinical work (Phase I-IV trials (suchPhase IV trials to be intended to support approval of an NDA, MAA or asupplement or amendment thereto, required as a condition of approval of an NDA,MAA or a supplement or amendment thereto, or required to support continuedapproval of an NDA, MAA or a supplement or amendment thereto)),
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regulatory filings, Cost of compound for pre-clinical and clinical work (PhaseI-IV trials, as described above in this sentence), Costs of pre-launch marketingactivities incurred prior to the Launch Preparation Date, and all Costs ofCompound MS-325 related to regulatory filings in the United States and the EU.Development Costs shall not include CMC Costs unless EPIX or Schering is forcedto take over such function from MKG at which time such Costs will be included byEPIX or Schering, as the case may be, in Development Costs. In the event thatSchering or a Schering Affiliate becomes the manufacturer of Compound MS-325 andLicensed Products, CMC Costs incurred by Schering or a Schering Affiliaterelating to Compound MS-325 and Licensed Products for use in the DevelopmentProgram shall not be included in Development Costs, and shall be borne bySchering or such Schering Affiliate, unless Schering or such Schering Affiliate,in accordance with the terms of the Manufacturing Agreement, takes overmanufacturing responsibilities due to the inability or unwillingness of MKG tomanufacture all or part of the requirements of Schering of Compound MS-325 andLicensed Products, in which case: (x) pursuant to the Collaboration AgreementSchering has agreed to pursue all available legal remedies against MKG as aresult of MKG’s inability or unwillingness to perform under the ManufacturingAgreement; and (y) CMC Costs of Schering or a Schering Affiliate relating toCompound MS-325 and Licensed Products for use in the Development Program shallbe included in Development Costs (net of any recovery from MKG relating to CMCCosts).     1.10. “DEVELOPMENT PHASE” shall have the meaning set forth in theCollaboration Agreement.     1.11. “DEVELOPMENT PROGRAM” shall have the meaning set forth in theCollaboration Agreement.     1.12. “EFFECTIVE DATE” shall mean the date first written above.     1.13. “EPIX PATENT RIGHTS” shall have the meaning set forth in theCollaboration Agreement.     1.14. “EPIX TECHNOLOGY” shall have the meaning set forth in theCollaboration Agreement.     1.15. “EU” shall mean the European Union, as it may be constituted fromtime to time.     1.16. “EUROPE” shall mean the EU, all countries located wholly orpartly on the continent of Europe that are not member states of the EU,Australia, New Zealand, South Africa, and Turkey.     1.17. “FDA” shall mean the United States Food and Drug Administration.     1.18. “FIELD” shall mean all indications comprehended by the definitionof the term “Blood Pool Magnetic Resonance Contrast Agents” and magneticresonance imaging.     1.19. “FIRST COMMERCIAL SALE” of any Licensed Product shall mean thefirst sale for use or consumption by the general public of such Licensed Productin a country when such sale has
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been made with the required marketing and pricing approval granted by thegoverning health authority of such country.     1.20. “GAAP” shall mean United States Generally Accepted AccountingPrinciples.     1.21. “GENERAL AND ADMINISTRATIVE EXPENSES” shall mean all direct andindirect expenses incurred by Schering and EPIX in connection with departmentalunits that are not directly engaged in the development, manufacturing, or salesand marketing of Compound MS-325 and Licensed Products. General andAdministrative Expenses shall include, but not be limited to, charges fallingwithin the following groups, to the extent such charges are not related to thedetermination of Costs of Goods Sold based on the historical accountingpractices of the party (i.e., either EPIX or Schering) seeking to claim thecharge, consistently applied: finance, procurement, order entry, corporateadministration, legal (both external and internal expenses), human resources,business development and licensing and investor relations. General andAdministrative Expenses shall exclude the following groups of charges: clinicaltrial insurance Costs, facilities and information technology. Such expensesshall be determined in accordance with GAAP, consistently applied.     1.22. “GROSS PROFITS” with respect to any Licensed Product shall meanNet Sales minus Costs of Goods Sold.     1.23. “IND” shall mean an investigational new drug application or itsequivalent filed with the FDA and necessary for beginning clinical trials inhumans, or any comparable application filed with the regulatory authorities of acountry other than the United States prior to beginning clinical trials inhumans in such country, with respect to the Licensed Products.     1.24. “INDEMNITEE” shall have the meaning set forth in Section 7.5.     1.25. “INDEMNITOR” shall have the meaning set forth in Section 7.5.     1.26. “LICENSED PRODUCT” shall mean any product comprising CompoundMS-325.     1.27. “MAA” shall mean a marketing approval application filed with theappropriate regulatory authority in a country other than the United States,after completion of human clinical trials to obtain marketing approval for aLicensed Product in such country.     1.28. “MAGNEVISt” shall mean the extracellular magnetic resonanceproduct gadopentatate dimeglumine sold by Schering, for the United States marketpursuant to NDA # NDA # 19-596.     1.29. “MANUFACTURING AGREEMENT” shall have the meaning set forth in therecitals. A true and accurate copy of the Manufacturing Agreement is attachedhereto as EXHIBIT B.     1.30. “MGH LICENSE” shall have the meaning set forth in the recitals.     1.31. “MGH PATENT RIGHTS” shall have the meaning set forth in theCollaboration Agreement.
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     1.32. “MKG PATENT RIGHTS” shall mean any patent rights of MKGidentified in EXHIBIT C, and such other patent rights of MKG that the Partiesmay mutually agree from time to time are necessary for or useful in the making,using or selling of Licensed Products in the Territory.     1.33. “NDA” shall mean a new drug application filed with the FDA toobtain marketing approval for a Licensed Product in the United States.     1.34. “NET SALE” shall mean the invoiced sales price per unit for eachof the Licensed Products billed by a EPIX or Schering or their respectiveAffiliates, or any distributor of either who is not an Affiliate, or, to theextent permitted in Section 3.1.2 of the Collaboration Agreement, by permittedsublicensees of Schering to independent customers, less actual (a) creditedallowances to such independent customers for such Licensed Products which werespoiled, damaged, out-dated or returned; (b) freight and insurance Costs chargedto such customers; (c) quantity and promotional discounts actually allowed andtaken; (d) sales, use, value added, and other taxes or governmental charges(such as customs duties) incurred in connection with the sale, exportation orimportation of the Licensed Products in finished packaged form; (e) charge backpayments and/or rebates or other fees provided to distributors, wholesalers, orother purchasers and managed health care organizations or federal, state andlocal governments, their agencies, purchasers and reimbursers, includingreimbursements to social security organizations; and (f) volume-related customerprogram Costs which are required by the customer and which are independent ofSchering marketing initiatives. The transfer of any Licensed Product by Scheringor EPIX or one of their respective Affiliates to another of their respectiveAffiliates shall not be considered a sale; in such cases, Net Sales shall bedetermined based on the invoiced sales price by the Affiliate to its customer,less the deductions allowed under this Section.     EPIX and MKG recognize that (a) Schering’s customers may includepersons in the chain of commerce who enter into agreements with Schering as toprice even though title to the Licensed Product does not pass directly fromSchering to such customers, and even though payment for such Licensed Product isnot made by such customers directly to Schering; and (b) in such cases, theCollaboration Agreement provides that chargebacks paid by Schering to or througha Third Party (such as a wholesaler) can be deducted by Schering from grossrevenue in order to calculate Net Sales. Any deductions listed above whichinvolve a payment by Schering shall be taken as a deduction against aggregatesales for the quarter in which the payment is made.     The Collaboration Agreement provides that Net Sales will be accountedfor in accordance with international accounting standards consistently applied.Pursuant to the Collaboration Agreement, Schering has agreed that in anyinstance where the calculation of Net Sales according to internationalaccounting standards differs materially from GAAP such that the result of suchcalculation under international accounting standards would cause EPIX toimproperly account for such revenue under GAAP, Schering will provide EPIX withany and all information requested by EPIX regarding the calculation of Net Salesto enable EPIX to comply with GAAP in recognizing revenue from such Net Sales.
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     The Collaboration Agreement provides that, without obtaining the priorapproval of EPIX (which approval shall not be unreasonably withheld), Scheringwill not sell a combination of products and/or services which include one ormore Licensed Products, (i) for a single price, or (ii) on other terms ofpurchase not separately identifying a price per product. Schering has alsoagreed, under the Collaboration Agreement, that records of the deductionsreferred to above for each Licensed Product shall be maintained in a manner thatallows audit of such deductions pursuant to Section 7.11 of the CollaborationAgreement.     The Collaboration Agreement also provides that Schering will not offercustomers discounted prices for any Licensed Product (i) for the purpose ofinducing the customer to purchase other products or services of Schering withoutobtaining the prior approval of EPIX (such approval not to be unreasonablywithheld) as to the fair apportionment of sales value to Licensed Product andany related Costs; or (ii) for reasons other than the good faith sale of aLicensed Product at a reasonable, mutually beneficial profit margin in view ofthe circumstances applicable to the relevant market.     1.35. “OPERATING MARGIN” shall mean for a particular quarter, theaggregate Net Sales of, and any other revenues relating to, Licensed Productsfor such quarter including, without limitation, royalties and any other paymentsfrom sublicensees, less (i) Costs of Goods Sold, and (ii) Sales and MarketingCosts.     1.36. “PARTY” shall mean EPIX or MKG.     1.37. “PATENT RIGHTS” shall mean MGH Patent Rights and EPIX PatentRights, collectively.     1.38. “PROGRAM” shall mean the collaboration between EPIX and MKGcontemplated by this Agreement.     1.39. “PROFIT PAYMENT” shall have the meaning set forth in Section3.5.1(a).     1.40. “PROMISSORY NOTE” shall have the meaning set forth in Section2.7.     1.41. “REGION” shall mean any one of the United States, Europe (asdefined herein), Japan (if applicable) and the Rest of World.     1.42. “REST OF WORLD” shall mean all countries of the world other thanthe United States, Europe (as defined herein) and Japan (if applicable).     1.43. “ROYALTY PAYMENT” shall have the meaning set forth in Section3.6.1.     1.44. “SALES AND MARKETING COSTS” shall mean all direct and indirectCosts incurred by Schering and EPIX in connection with the sale and marketing ofthe Licensed Products, including but not limited to Costs charged to detailingand selling, advertising, and marketing and distribution, reasonably determinedin accordance with GAAP. Such expenses include, but are not limited to: (i)direct labor (salaries, wages, commissions, incentive program Costs,
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awards and employee benefits but excluding any employee benefits associated withequity incentive plans); (ii) materials and supplies; (iii) allocated Costs forbuilding space directly dedicated to the sales and marketing of the LicensedProducts (including rent, depreciation, amortization and maintenance) butexcluding expenses relating to unused capacity, sales and marketing of otherproducts, and amortization of property, plant and equipment not directly relatedto sales and marketing of Licensed Products in accordance with the AnnualMarketing Plan; (iv) allocated Costs for information technology directlydedicated to the sales and marketing of the Licensed Products; (v) Third Partyconsulting and contract service Costs, (vi) advertising, promotion, physiciantraining Costs and Cost of grants, use taxes associated with distribution ofsamples and marketing materials; (vii) Costs of Phase IV trials not included inDevelopment Costs (including product Costs), (viii) professional educationprograms and meeting Costs (POA, national sales meetings, etc.), (ix) samples ofLicensed Products, travel and entertainment, fleet vehicle Costs, telephone,recruiting, training (both internal and external Costs), rental fieldforceCosts, software, personal computer equipment and support Costs, freight anddelivery expenses, Costs of inventory management , billing (as included indistribution), drug safety, drug regulatory affairs, and inventory and accountsreceivable carrying Costs specifically related to Licensed Products, provided,that, when the calculation of such carrying Costs (as more fully described inEXHIBIT E of the Collaboration Agreement) results in EPIX incurring the netcarrying Costs Schering shall apply such net credit as a deduction from Salesand Marketing Costs; and (x) actual bad debts written off in connection withsales of each Licensed Product (net of any recoveries of amounts previouslywritten off as bad debts for such Licensed Product). Such Costs shall notinclude General and Administrative Expenses or expenses incurred fromdepartments that are not directly engaged in or supporting the efforts of thesales and marketing of the Licensed Products including but not limited tofinance and procurement (including order entry), corporate administration, legal(both external and internal expenses), human resources, business development andlicensing, research and development, and investor relations.     Sales and Marketing Costs shall include the Costs of pre-launchpromotional and educational programs expended after the Launch Preparation Dateas described in Section 5.1.2 of the Collaboration Agreement, which shall bededucted from Operating Margin for the first calendar quarter following FirstCommercial Sale of the relevant Licensed Product. Sales and Marketing Costschargeable by either Schering or EPIX shall be in accordance with the AnnualMarketing Plan as more fully described in Section 5.1 of the CollaborationAgreement.     Notwithstanding the above, pursuant to the Collaboration Agreement,Schering has agreed that with respect to charges directly related to salesvolume (including but not limited to freight, billing, shipping and warehousingcharges), the ratio of total Sales and Marketing Costs derived from such chargesallowable under the Collaboration Agreement to Net Sales of Licensed Products bySchering shall not exceed the ratio of such Sales and Marketing Costs derivedfrom such charges to Net Sales (when calculated using the definitions for NetSales and Marketing Costs herein as applied to the Magnevist product) forSchering’s Magnevist product. The relevant cost driver of each cost component(i.e. per unit Costs) will be used when considering this comparison, and mayvary by Cost type. The Collaboration Agreement further provides that when Costscomparisons of Licensed Products are not equivalent to or less than
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those for Schering’s Magnevist product for bona fide business reasons, EPIX andSchering shall agree on the proper ratio to be used.     1.45. “SCHERING” shall have the meaning set forth in the recitals.     1.46. [ * ] shall mean that certain [ * ]dated as of [ * ] between MKGand [ * ].     1.47. “TERRITORY” shall mean the United States, Europe, and the Rest ofWorld, but shall exclude Japan (subject to Section 2.2).     1.48. “THIRD PARTY” shall mean any entity other than EPIX or Scheringand their respective Affiliates.     ARTICLE 2. LICENSE GRANTS; MANUFACTURING AND MARKETING RIGHTS     2.1. GRANT OF LICENSE RIGHTS BY EPIX TO MKG.          2.1.1 LICENSE GRANTS. EPIX hereby grants MKG a non-exclusive,worldwide, fully paid-up right and license under the Patent Rights and EPIXTechnology for the sole purpose of permitting MKG to manufacture and supplyCompound MS-325 and corresponding Licensed Products in accordance with the termsand conditions of the Manufacturing Agreement.          2.1.2. SUBLICENSES. MKG shall have the right to grantsublicenses under the licenses set forth in Section 2.1.1 hereof to Affiliatesof MKG or, with the prior approval of EPIX (which shall not be unreasonablywithheld), to such third party manufacturers as are fully qualified, have beenapproved by Schering and whose services are necessary for the performance by MKGof its obligations under the terms of the Manufacturing Agreement.          2.1.3. RESERVED RIGHTS OF MGH AND THE U.S. GOVERNMENT. MKGacknowledges that the license granted herein to the Patent Rights is dependentupon the rights and licenses obtained by EPIX under the MGH License and aresubject to certain rights reserved to MGH and the United States Government inthe MGH License, as set forth in the MGH License attached hereto as APPENDIX I.In the event that the MGH License is terminated due to EPIX’s failure to complywith the due diligence obligations imposed on EPIX pursuant to Paragraph 3.1(b)of the MGH License or any other obligation therein, such failure shallconstitute a material breach by EPIX and MKG may terminate this Agreement inaccordance with Section 8.3.1 hereof.          2.1.4. RESERVED RIGHTS OF EPIX. Notwithstanding the rightsgranted to MKG pursuant to this Section 2.1, EPIX at all times reserves theright under the Patent Rights and the EPIX Technology to use Compound MS-325 orany other compound deriving in any manner therefrom for all research,development and commercial purposes throughout the world, and to make, use,offer for sale, sell, distribute for sale and import Compound MS-325 or anyother compound deriving in any manner therefrom, subject only to the licenserights granted to MKG * Confidential information omitted and filed separately with the Commission.
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pursuant to Section 2.1.1 and 2.1.2 above, and MKG’s rights under and pursuantto the Manufacturing Agreement.          2.1.5. THIRD PARTY PATENT RIGHTS. In the event that MKG orEPIX, with MKG’s consent (such consent not to be unreasonably withheld ordelayed), determines that a license under a Third Party patent or otherintellectual property right is necessary for the manufacture of Compound MS-325by MKG as contemplated by this Agreement and the Manufacturing Agreement, andprovided that EPIX is not in breach of any of its representations and warrantiesset forth in Section 6.1, the costs of obtaining such license will be the soleresponsibility of MKG.     2.2. GRANT OF LICENSE RIGHTS BY MKG TO EPIX. In the event that therights under the MKG Patent Rights [ * ] granted by [ * ] to EPIX under theCollaboration Agreement terminate (in their entirety or in any particularRegion) for any reason, then MKG shall hereby be deemed to grant to EPIX anon-exclusive, world-wide, fully paid-up right and license, including the rightto grant sublicenses, under the MKG Patent Rights, and any know-how ortechnology developed by MKG and related thereto, for the sole purpose ofpermitting EPIX or a sublicensee of EPIX to research, develop, use, manufacture,offer for sale, sell, distribute and import Licensed Products; PROVIDED, THAT,if, [ * ].     2.3 MKG THIRD PARTY AGREEMENT STEP-IN RIGHTS. The license granted underSection 2.1.1 includes sublicenses of MGH technology existing on the EffectiveDate and licensed to EPIX under the MGH License. Any royalties payable to MGHpertaining to such MGH technology shall be paid by EPIX, and, if not so paid,may be paid by MKG and offset or deducted from any payments due (if any) fromMKG to EPIX pursuant to this Agreement. If EPIX is notified of a breach ordefault under the MGH License that if uncured would enable MGH to rendernon-exclusive or terminate the license granted to EPIX under the MGH License,EPIX shall (i) give reasonable written notice thereof to MKG, (ii) shallimmediately cure such default or breach within the cure period set forth in theMGH License and shall provide MKG with written confirmation thereof, and (iii)if EPIX is unable to cure such breach or default within the relevant cure periodshall provide MKG with prompt written notice thereof and an opportunity to curesuch default or breach within the relevant cure period. Any out-of-pocket sumsexpended by MKG in the exercise of its rights under this Section 2.3 may bededucted by MKG from any future sums due (if any) from MKG to EPIX pursuant tothis Agreement.     2.4. MANUFACTURING AND SUPPLY OF COMPOUND MS-325 AND LICENSED PRODUCTS.          2.4.1. MANUFACTURE AND SUPPLY BY MKG. Promptly after executionof this Agreement, MKG shall begin making preparations necessary to meet itsobligations under the Manufacturing Agreement and shall comply with itsobligations thereunder during the term of this Agreement. * Confidential information omitted and filed with the Commission.
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          2.4.2. ASSISTANCE BY EPIX TO MKG FOR MANUFACTURING LICENSE.EPIX shall disclose to MKG, free of charge, all information related to themanufacture of any Licensed Products, and EPIX will cooperate with MKG toprovide such technical assistance and characterization work as may be necessaryin connection with the manufacture and production of any Licensed Products.     2.5. COOPERATION BY MKG. MKG shall cooperate, and shall cause itsemployees, consultants and agents to cooperate, with EPIX and Schering to enablean orderly transition to EPIX of the clinical development responsibilities forCompound MS-325, such cooperation to include, to the extent legally permissible(i) the assignment of all of MKG’s right, title and interest in and transfer ofpossession and control to EPIX of the regulatory filings or approvals prepared,filed or received by MKG, (ii) transfer and delivery to EPIX of any and alldocuments containing data relating to preclinical or clinical trials of CompoundMS-325, and its corresponding Licensed Products, and (iii) such additionalactivities as the Parties may agree. Within thirty (30) days after the executionof this Agreement, MKG and EPIX shall agree on the activities to be performed byMKG pursuant to this Section 2.5, together with a budget and timeline withrespect to such activities.     2.6. NO OTHER TECHNOLOGY RIGHTS. Except as otherwise expressly providedin this Agreement, under no circumstances shall a Party hereto, as a result ofthis Agreement, obtain any ownership interest in or other right to anytechnology, know-how, patents, pending patent applications, products orbiological materials of the other Party, including items owned controlled ordeveloped by the other Party, or transferred by the other Party to said Party,at any time pursuant to this Agreement.     2.7. MKG CONSENT TO GRANT OF RIGHTS. MKG hereby acknowledges that theCollaboration Agreement is being executed and delivered on the date hereof and,in accordance with the terms of that certain letter agreement dated January 31,2000 between EPIX and MKG, hereby consents to the terms and conditions of theCollaboration Agreement, and in particular, consents to the grant by EPIX toSchering of the rights in the intellectual property assets owned, controlled byor licensed to EPIX and described in the Collaboration Agreement for any and allpurposes, including for purposes of the promissory note executed by EPIX infavor of MKG (the “Promissory Note”) and that certain Security Agreement betweenEPIX and MKG, both dated October 31, 1999. MKG agrees to execute and deliversuch additional agreements and documents, and to take such further actions asmay be reasonably requested by EPIX to effect the foregoing consent.ARTICLE 3. PAYMENTS     3.1. FEE. EPIX shall pay to MKG an up-front fee of ten million and00/100 U.S. dollars (U.S. $10,000,000.00). Such amount shall be due and payableby EPIX within ten (10) business days of the execution hereof, but in no eventlater than June 30, 2000 even if the foregoing date occurs less than ten (10)business days after the execution hereof. EPIX will not defer payment bySchering of the up-front license fee owed by Schering pursuant to Section 7.1
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of the Collaboration Agreement or take any other voluntary action that preventsMKG from receiving the foregoing fee when such fee otherwise would have beenreceived hereunder.     3.2. MILESTONE PAYMENTS. EPIX shall make a payment of [ * ] or up to atotal of [ * ], to MKG in connection with the achievement of each of thefollowing milestones with respect to Compound MS-325: (i) [ * ] ; and (ii) [ *]. Such amounts shall be due and payable by EPIX within thirty (30) days of theachievement of each milestone.     3.3. DEVELOPMENT COSTS FOR THE PERIOD JANUARY 1, 2000 THROUGHEFFECTIVE DATE.          3.3.1. PROMISSORY NOTE. EPIX shall prepay to MKG that portionof the outstanding Promissory Note that is equal to the increase in thePromissory Note attributable to EPIX’s share of the Development Costs (asdefined in this Agreement prior to its amendment and restatement) incurred on orafter January 1, 2000 except that any costs included in the Promissory Noteattributable to CMC Costs and other manufacturing costs incurred after January1, 2000 shall be deducted from such prepayment and forgiven by MKG. MKG willsubmit to EPIX, within thirty (30) days of the Effective Date an accounting withall supporting detail of such CMC Costs and other manufacturing costs incurredafter January 1, 2000 necessary to enable EPIX to accurately calculate theamount of prepayment and forgiveness of the Promissory Note. Such prepaymentshall be due and payable within thirty (30) days after EPIX’s receipt of suchdetailed accounting, subject to review and verification by EPIX. MKG also agreesthat, notwithstanding anything to the contrary contained in Section 5(a) of theNote, or any other provision set forth herein, the outstanding principal balanceand accrued interest under the Note shall be due and payable on October 1, 2002,and the Promissory Note shall remain enforceable otherwise in accordance withits existing terms and conditions.          3.3.2. MKG SHARE OF DEVELOPMENT COSTS. EPIX shall pay to MKGMKG’s share of development costs (as defined in this Agreement prior to itsamendment and restatement) incurred by MKG between January 1, 2000 and theeffective date of this Agreement, except that MKG’s share of such developmentcosts shall exclude all CMC Costs and all Costs incurred by MKG for othermanufacturing activities. Within thirty (30) days of the Effective Date, MKGwill provide EPIX an accounting with all supporting detail of such developmentcosts incurred necessary to enable EPIX to submit such development costs toSchering for reimbursement under the Collaboration Agreement. Such amounts shallbe due and payable by EPIX within thirty (30) days of EPIX’s receipt from MKG ofsuch detailed development cost information, subject to review and verificationby EPIX of such development costs.          3.4. DEVELOPMENT COSTS INCURRED BY MKG AFTER THE EFFECTIVE DATE.          Pursuant to Section 2.5, MKG and EPIX shall agree on the activities to beperformed by MKG during the transition period to EPIX of the clinicaldevelopment responsibilities for Compound MS-325. MKG will provide EPIX with adetailed budget for such activities as agreed to by the parties * Confidential information omitted and filed separately with the Commission.
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within thirty (30) days of the Effective Date of this Agreement. Within thirty(30) days after the end of each month that MKG continues to incur developmentexpenses pursuant to the transition period, MKG will submit an invoice to EPIXfor such costs incurred during the prior month. Each invoice shall include alldetailed support for the charges included on the invoice, including but notlimited to copies of Third Party invoices paid by MKG and the respective MKGchecks, time records and other documents supporting the costs incurred by MKG.EPIX will pay such invoices within thirty (30) days of receipt of invoices withcomplete supporting documentation, subject to review and verification by EPIX ofsuch invoices.     3.5. SHARE OF OPERATING MARGIN IN THE UNITED STATES.          3.5.1 SHARE OF OPERATING MARGIN IN THE UNITED STATES.     (a) Commencing upon the First Commercial Sale of a LicensedProduct in the United States and continuing until the expiration ortermination of Schering’s payment obligations under the CollaborationAgreement with respect to Licensed Products (or, if the CollaborationAgreement is terminated and EPIX enters into a strategic collaborationagreement with a Third Party for the commercialization of the LicensedProduct, then upon the expiration or termination of such Third Party’spayment obligations), EPIX agrees to pay MKG [ * ] of the OperatingMargin derived from sales of Licensed Product in the United States. Itis also the intent of EPIX and MKG that, should there be nodistributable Operating Margin in any given quarter but instead lossesfor that quarter, no amounts shall be paid to MKG for such quarter. Thepayments to MKG by EPIX (each such payment hereinafter referred to as a“Profit Payment”) shall be payable quarterly in United States dollarsupon the later of: (i) thirty (30) days after the close of eachcalendar quarter, or (ii) fifteen (15) days from EPIX’s receipt fromSchering of the Operating Margin distribution, for payment to MKG,pursuant to Section 7.6.1 of the Collaboration Agreement. Such ProfitPayment shall be made on the basis of actual results for the first twomonths of such calendar quarter and forecasted results for the thirdmonth of such calendar quarter, subject to adjustment in accordancewith the reconciliation and audit provisions set forth below.     (b) At the time of the Profit Payment, EPIX shall provide MKGwith a report containing the following information (as provided to EPIXby Schering under Section 7.6.1 of the Collaboration Agreement), on amonthly basis, for the applicable quarter for the United States: (i)Net Sales and units of Licensed Products sold; (ii) any other revenuesrelating to the Licensed Products in the United States, including butnot limited to royalties and any other payments from sublicensees;(iii) the Costs of Goods Sold for the reporting period for sales ofLicensed Products relating to the United States; (iv) the Sales andMarketing Costs for the United States for the reporting period; and (v)the Profit Payment payable for such period. EPIX shall make adjustmentsin Profit Payments previously made resulting from variations betweenforecasted results and actual results * Confidential information omitted and filed with the Commission.
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for the third month of such quarter (as calculated by Schering andreported to EPIX under the Collaboration Agreement) as part of thedetermination of the Profit Payment due to EPIX for the subsequentquarter. Under the Collaboration Agreement, Schering has agreed tokeep complete and accurate records in sufficient detail to properlyreflect all Net Sales, Costs of Goods Sold and Sales and MarketingCosts (as set forth in Section 7.6.1 of the Collaboration Agreement),and to enable the Profit Payments payable hereunder to be determinedby EPIX. EPIX shall keep such records as they relate to thedetermination of Profit Payments that it receives from Schering(pursuant to Section 7.6.1 of the Collaboration Agreement), and,except for Sales and Marketing Costs incurred by EPIX and included inthe determination of Profit Payments, EPIX shall not be responsiblefor maintaining any other records that relate to such Profit Paymentspayable to MKG hereunder.          3.5.2 FORECASTS. Upon the reasonable request of MKG during the term ofthis Agreement, EPIX will provide MKG with forecasts of sales of LicensedProducts for the United States as provided to EPIX by Schering in accordancewith the routine budget and forecasting cycle of Schering’s United StatesAffiliate Berlex Laboratories, Inc.3.6. SHARE OF GROSS PROFITS OUTSIDE THE UNITED STATES; PAYMENTS AND REPORTS.          3.6.1 Commencing upon the First Commercial Sale of a Licensed Productin any country of the Territory other than the United States and continuinguntil the expiration or termination of Schering’s payment obligations under theCollaboration Agreement with respect to Licensed Products (or, if theCollaboration Agreement is terminated and EPIX enters into a strategiccollaboration agreement with a Third Party for the commercialization of theLicensed Product, then upon the expiration or termination of such Third Party’spayment obligations), EPIX agrees to pay MKG [ * ] of the royalties on annualGross Profits received by EPIX from Schering pursuant to Sections 7.7 and 7.8 ofthe Collaboration Agreement (each such payment hereinafter referred to as a“Royalty Payment”).          3.6.2 Upon the later of: (i) seventy-five (75) days after the close ofeach calendar quarter, or (ii) fifteen (15) days from EPIX’s receipt fromSchering of the royalty on annual Gross Profits pursuant to Sections 7.7 and 7.8of the Collaboration Agreement, EPIX shall pay to MKG the Royalty Payment. Atthe time of the Royalty Payment, EPIX shall provide MKG with a report containingthe following information (as provided to EPIX by Schering under Sections 7.7.3and 7.8.1 of the Collaboration Agreement), on a monthly basis, for theapplicable quarter: (i) Net Sales and units of Licensed Products sold; (ii) theCosts of Goods Sold for the reporting period for sales of Licensed Products;(iii) the applicable royalty rate; and (iv) the Royalty Payment payable for suchperiod. Pursuant to the Collaboration Agreement, Schering has agreed to keepcomplete and accurate records in sufficient detail to enable the RoyaltyPayments payable hereunder to be determined by EPIX pursuant to Sections 7.7.3and 7.8.1 of the Collaboration Agreement. EPIX shall keep such records as theyrelate to the determination of * Confidential information omitted and filed with the Commission.
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Royalty Payments that it receives from Schering (pursuant to Sections 7.7.3 and7.8.1 of the Collaboration Agreement), and shall not be responsible formaintaining any other records that relate to such Royalty Payments payable toMKG hereunder. Upon the reasonable request of MKG during the term of thisAgreement, EPIX shall provide MKG with forecasts of sales of Licensed Productoutside the United States as provided to EPIX by Schering, in accordance withSchering’s routine budget and forecasting schedule.     3.7. CURRENCY CONVERSION.          3.7.1. Payments by EPIX to MKG under this Agreement shall bemade in United States dollars.          3.7.2. Currency conversion for payments from Schering to EPIXunder the Collaboration Agreement shall be conducted as provided in this Section3.7.2. The calculation of payments which refer to Net Sales in countries otherthan United States shall be based upon EURO and converted into United Statesdollars. Therefore, where payments are based upon Net Sales in countries otherthan the United States and the member states of the European Currency Union, theamount of such Net Sales expressed in the currency of such country shall beconverted into EURO at the exchange rate in effect on the last business day ofthe applicable calendar quarter. The applicable exchange rate shall be the EUROForeign Exchange Reference Rate published by the European Central Bank,Frankfurt / Main. If no EURO Foreign Exchange Reference Rate is determined forthe relevant currency, the Parties shall agree upon another reference rate.Finally, the payable EURO amount shall be converted into US dollars at the EUROForeign Exchange Reference Rate published by the European Central Bank,Frankfurt / Main, on the last business day of the applicable calendar quarter.     3.8. RECORDS; AUDIT RIGHTS; DISPUTES.          3.8.1. RECORDS OF REVENUES AND EXPENSES; AUDIT RIGHTS.     (a) Pursuant to Section 7.11.1 of the CollaborationAgreement, Schering has agreed to maintain complete andaccurate records which are relevant to revenues, costs,expenses and payments on a country-by-country basis, and suchrecords shall be open during reasonable business hours for aperiod of two (2) years from creation of individual recordsfor examination by EPIX, as further described in theCollaboration Agreement. EPIX agrees, that upon the reasonablerequest of MKG, EPIX will exercise its right to auditSchering’s records in accordance with and subject to the termsand conditions of the Collaboration Agreement. In the eventthat the Collaboration Agreement is terminated and EPIX entersinto a strategic collaboration agreement with a Third Partyfor the commercialization of the Licensed Product, EPIX agreesto use reasonable commercial efforts to negotiate audit rightswith such third party which are substantially similar to theaudit rights described herein.     (b) Upon the written request of MKG, EPIX shallpermit an independent public accountant selected by MKG andacceptable to EPIX, which
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acceptance shall not be unreasonably withheld or delayed, tohave access during normal business hours to such records ofEPIX as may be reasonably necessary to verify EPIX’scompliance with the requirements of Sections 3.5 and 3.6hereof in respect of any calendar year ending not more thantwelve (12) months prior to the date of such request. In thatregard, EPIX shall obtain and make available for inspection bysuch independent public accountant such records of EPIX(including those records provided by Schering pursuant to theCollaboration Agreement) as may be reasonably necessary todetermine that EPIX is making the proper Profit Payment and/orRoyalty Payment to MKG pursuant to Sections 3.5 and 3.6hereof. All such verifications shall be conducted at MKG’sexpense and not more than once in each calendar year. In theevent that the independent public accountant concludes thatadjustments should be made in MKG’s favor with respect to suchperiod, then any appropriate payments shall be paid by EPIXwithin thirty (30) days of the date MKG delivers to EPIX thewritten conclusions of such independent public account soconcluding, unless EPIX shall provide written notice to MKGwithin such thirty (30) day period of the nature of itsdisagreement with such written report. The fees charged bysuch independent accountant shall be paid by MKG unless theaudit discloses that adjustments for the period are greaterthan ten percent (10%) in which case EPIX shall pay thereasonable fees and expenses charged by such representative.(c) MKG agrees that all information subject to reviewunder this Section 3.8.1 is confidential and that it shallcause its employees and representatives and the independentpublic accountant to retain all such information in confidencein accordance with the requirements of Article 5 below.          3.8.2. RESOLUTIONS OF PAYMENT DISPUTES. Except as set forth inthis Section 3.8.2, the provisions of Section 9.6 shall not be applicable todisputes described in this Section 3.8.2. If there is a dispute between theParties following any audit performed pursuant to Section 3.8.1 (an “AuditDisagreement”) (i) within thirty (30) business days of the identification of theAudit Dispute and notice thereof to the other Party, the Parties shall jointlyselect a recognized international accounting firm to act as an independentexpert to resolve such Audit Disagreement; (ii) the Audit Disagreement submittedfor resolution shall be described by the Parties to the independent expert,which description may be in written or oral form, within ten (10) business daysof the selection of such independent expert; (iii) the independent expert shallrender a decision on the matter as soon as practicable; (iv) the decision of theindependent expert shall be final and binding unless such Audit Disagreementinvolves alleged fraud, material breach of this Agreement or construction orinterpretation of any of the terms and conditions thereof, which AuditDisagreements shall be resolved as set forth in Section 9.6.; and (v) all feesand expenses of the independent expert, including any Third Party support staffor other costs incurred with respect to carrying out the procedures specified atthe direction of the independent expert in connection with such AuditDisagreement, shall be borne by the Party initiating the audit, unless anunderpayment of ten percent (10%) or more is identified by such auditor, inwhich case such costs shall be borne by the Party that was the subject of theaudit.
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ARTICLE 4. INTELLECTUAL PROPERTY     4.1. FILING, PROSECUTION AND MAINTENANCE OF MGH PATENT RIGHTS.          4.1.1. RESPONSIBILITY AND COSTS. EPIX shall, in coordinationwith MGH, be responsible for the preparation, filing, prosecution andmaintenance of all patent applications and patents included in MGH Patent Rightsin the Territory, keeping MKG informed. All Costs incurred by EPIX for thepreparation, filing, prosecution and maintenance of all patents and patentapplications included in MGH Patent Rights in the Territory shall be theresponsibility of EPIX. EPIX shall keep MKG reasonably apprised of actions takenby EPIX and MGH pursuant to this Section 4.1.1 and related decisions ofgovernment agencies.          4.1.2. ABANDONMENT. If MGH notifies EPIX of its intention toabandon the prosecution of any patent applications under the MGH Patent Rightsor of its intention to refrain from making any payment or taking any otheraction necessary to obtain or maintain a patent under the MGH Patent Rights,EPIX will thereafter, at its expense, take all action necessary or appropriateto prosecute and/or maintain such MGH Patent Rights in the Territory.     4.2. FILING, PROSECUTION AND MAINTENANCE OF EPIX PATENT RIGHTS.          4.2.1. PROSECUTION AND MAINTENANCE. EPIX shall be responsiblefor filing, prosecution and maintenance of the EPIX Patent Rights in theTerritory in its own name and at its own expense, keeping MKG informed.          4.2.2. ABANDONMENT; FAILURE TO PAY. EPIX agrees that it willnot abandon the prosecution of any commercially viable patent applicationincluded within the EPIX Patent Rights except in favor of another patent filingof EPIX which has substantially the same coverage, nor shall it fail to make anypayment or fail to take any other action necessary to maintain a commerciallyviable patent under the EPIX Patent Rights.     4.3. NOTICE OF INFRINGEMENT. MKG shall inform EPIX promptly in writingof any alleged infringement by a Third Party of the Patent Rights licensedhereunder to MKG in the Territory of which it shall have knowledge and provideany available evidence of such infringement to EPIX. In any infringement actioninstituted by EPIX, Schering, MGH or any other permitted party to enforce thePatent Rights, MKG shall cooperate in all respects and, to the extent possible,have its employees testify when requested and make available relevant records,papers, information, samples and the like. In such event, the costs ofprosecuting such infringement will be considered Development Costs under theCollaboration Agreement if incurred during the Development Phase and Costs ofGoods Sold if incurred thereafter. Any damages or recoveries derived from suchaction will, after sharing with MGH as provided in the MGH License, be treatedas Net Sales.     4.4. DECLARATORY ACTIONS. In the event that a declaratory judgmentaction alleging invalidity or non-infringement of any of the Patent Rights inthe Territory shall be brought
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against either Party, the Party against which such action is brought shallnotify the other Party. In any declaratory judgment action described in thisSection 4.4, MKG and EPIX shall cooperate in all respects at the request of theother Party and, to the extent possible, have its employees testify whenrequested and make available relevant records, papers, information, samples andthe like.     4.5. FILING, PROSECUTION AND MAINTENANCE OF THE MKG PATENT RIGHTS.          4.5.1. MAINTENANCE OF MKG PATENT RIGHTS. MKG shall beresponsible for maintenance of the MKG Patent Rights at its ownexpense, keeping EPIX informed.          4.5.2. ABANDONMENT; FAILURE TO PAY. MKG agrees that it willnot abandon the prosecution of any patent application included within the MKGPatent Rights nor shall it fail to make any payment or fail to take any otheraction necessary to maintain any patent under the MKG Patent Rights. Further,MKG covenants to make all payments with respect to and to perform allobligations under the [ * ] to the extent necessary to ensure that the [ * ] andall of MKG’s rights thereunder will remain in full force and effect.          4.5.3. INFRINGEMENT BY OTHERS. EPIX and MKG shall eachpromptly notify the other in writing of any alleged or threatened infringementof patents or patent applications included in the MKG Patent Rights of whichthey become aware, and shall consider the action to be taken. In the event thatthe Parties determine to prosecute the said infringement, the Parties willmutually agree which Party shall do so using counsel approved by the otherParty, such consent not to be unreasonably withheld or delayed. No settlement,consent judgment or other voluntary final disposition of the suit may be enteredinto by either of the Parties without the consent of the other Party, suchconsent not to be unreasonably withheld or delayed. In such event, the costs ofprosecuting such infringement will be considered Development Costs under theCollaboration Agreement if incurred during the Development Phase and Costs ofGoods Sold if incurred thereafter. Any damages or recoveries derived from suchaction will be treated as Net Sales.          4.5.4. COOPERATION IN INFRINGEMENT ACTIONS. In anyinfringement suit instituted to enforce the MKG Patent Rights pursuant to thisAgreement, each Party shall cooperate in all respects and, to the extentpossible, have its employees testify when requested and make available relevantrecords, papers, information, samples and the like.          4.5.5. DECLARATORY ACTIONS. In the event that a declaratoryjudgment action alleging invalidity or non-infringement of any of the MKG PatentRights in the Territory shall be brought against either Party, the Party againstwhich such action is brought shall notify the other Party in writing. TheParties shall mutually determine which Party will defend said action usingcounsel approved by the other Party, such approval not to be unreasonablywithheld or delayed. No settlement, consent judgment or other voluntary finaldisposition of the action may be entered * Confidential information omitted and filed with the Commission.
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into byeither of the Parties without the consent of the other Party, such consent not to be unreasonably withheld or delayed.     4.6. COOPERATION. Each Party shall make available to the other Party(or to the other Party’s authorized attorneys, agents or representatives), itsemployees, agents or consultants (at the former Party’s reasonable expense) tothe extent reasonably necessary or appropriate to enable the appropriate Partyto file, prosecute, maintain and enforce patent applications and resultingpatents as set forth in this Article 4 for periods of time reasonably sufficientfor such Party to obtain the assistance it needs from such personnel. Whereappropriate, each Party shall sign or cause to have signed all documentsrelating to said patent applications or patents at no charge to the other Party.ARTICLE 5. CONFIDENTIALITY     5.1. NONDISCLOSURE OBLIGATIONS.          5.1.1. GENERAL. Except as otherwise provided in this Article5, during the term of this Agreement and for a period of ten (10) yearsthereafter, both Parties shall maintain in confidence and use only for purposesspecifically authorized under this Agreement (i) information and data receivedfrom the other Party resulting from or related to the development of CompoundMS-325 and the Licensed Product and (ii) all information and data not describedin clause (i) but supplied by the other Party under this Agreement marked“Confidential.” For purposes of this Article 5,information and data described in clause (i) or (ii) shall be referred to as “Information.”          5.1.2. LIMITATIONS. To the extent it is reasonably necessaryor appropriate to fulfil its obligations or exercise its rights under thisAgreement, a Party may disclose Information it is otherwise obligated under thisSection 5.1 not to disclose to its Affiliates, sublicensees, consultants,outside contractors and clinical investigators, on a need-to-know basis oncondition that such entities or persons agree to keep the Informationconfidential for the same time periods and to the same extent as such Party isrequired to keep the Information confidential. By way of example but notlimitation, MKG hereby agrees that EPIX may disclose Information to Schering onthe condition that Schering agrees to keep the Information confidential for thesame time periods and to the same extent as EPIX is required to keep theInformation confidential hereunder. In addition a Party or its Affiliates orsublicensees may disclose such Information to government or other regulatoryauthorities to the extent that such disclosure is reasonably necessary to obtainpatents or authorizations to conduct clinical trials of, and to commerciallymarket, Compound MS-325 and corresponding Licensed Products. The obligation notto disclose Information shall not apply to any part of such Information that:(i) is or becomes part of the public domain other than by unauthorized acts ofthe Party obligated not to disclose such Information or those of its Affiliatesor sublicensees; (ii) can be shown by written documents to have been disclosedto the receiving Party or its Affiliates or sublicensees by a Third Party,PROVIDED such Information was not obtained by such Third Party directly orindirectly from the other Party under this Agreement pursuant to aconfidentiality agreement; (iii) can be shown by competent evidence, prior todisclosure under this Agreement, to already have been in the
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possession of the receiving Party or its Affiliates or sublicensees, providedsuch Information was not obtained directly or indirectly from the other Partyunder this Agreement pursuant to a confidentiality agreement; (iv) can be shownby written documents to have been independently developed by the receiving Partyor its Affiliates without breach of any of the provisions of this Agreement; or(v) is disclosed by the receiving Party pursuant to interrogatories, requestsfor information or documents, subpoena, civil investigative demand issued by acourt or governmental agency or as otherwise required by law, provided that thereceiving Party notifies the other Party immediately upon receipt thereof sothat such other Party (with the cooperation of the receiving Party) can seek aprotective order or other order limiting or preventing disclosure and providedfurther that the disclosing Party furnishes only that portion of the Informationwhich it is advised by counsel is legally required under the circumstances.     5.2. SAMPLES. Samples of Compound MS-325 or its corresponding LicensedProducts provided by either Party pursuant to this Agreement shall not besupplied or sent by either Party to any Third Party, other than to regulatoryagencies, except pursuant to a written agreement between the Parties.     5.3. TERMS OF THIS AGREEMENT. Except as provided in Section 5.4 hereof,EPIX and MKG each agree not to disclose any terms or conditions of thisAgreement to any Third Party without the prior consent of the other Party,except as required by applicable law; provided, that, MKG hereby agrees thatEPIX may share the terms and conditions of this Agreement with Schering. Ifeither Party determines that it is required to file this Agreement with theSecurities and Exchange Commission or other governmental agency for any reason,such Party shall request confidential treatment of such portions of thisAgreement as the Parties shall together determine is appropriate.Notwithstanding the foregoing, prior to execution of this Agreement, EPIX andMKG have agreed upon the substance of information that can be used as a routinereference in the usual course of business to describe the terms of thistransaction, and EPIX and MKG may disclose such information, as modified bymutual agreement from time to time, without the other Party’s consent as may benecessary from time to time.     5.4. PUBLICATIONS.          5.4.1. PROCEDURE. Each Party recognizes the mutual interest inobtaining patent protection for inventions which arise under this Agreement. Inthe event that either Party, its employees or consultants or any other ThirdParty under contract to such Party wishes to make a publication (including anyoral disclosure made without obligation of confidentiality) relating to workperformed under this Agreement (the “Publishing Party”), such Party shalltransmit to the other Party (the “Reviewing Party”) a copy of the proposedwritten publication at least forty-five (45) days prior to submission forpublication, or an abstract of such oral disclosure at least thirty (30) daysprior to submission of the abstract or the oral disclosure, whichever isearlier. The Reviewing Party shall have the right (a) to propose modificationsto the publication for patent reasons, (b) to request a delay in publication orpresentation in order to protect patentable information, or (c) to request thatthe information be maintained as a trade secret and, in such case, thePublishing Party shall not make such publication.
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          5.4.2. DELAY. If the Reviewing Party requests a delay asdescribed in Section 5.4.1(b), the proposed publication shall not be submitteduntil the Parties have agreed to appropriate modification. In such instance, thePublishing Party shall delay submission or presentation of the publication for aperiod of ninety (90) days to enable patent applications protecting each Party’srights in such information to be filed. If the Reviewing Party requests thatinformation be maintained as a trade secret, the proposed publication shall notbe disclosed until such information is deleted therefrom.          5.4.3. RESOLUTION. Upon the receipt of written approval of theReviewing Party, the Publishing Party may proceed with the written publicationor the oral presentation.     5.5. INJUNCTIVE RELIEF. The Parties hereto understand and agree thatremedies at law may be inadequate to protect against any breach of any of theprovisions of this Article 5 by either Party or their employees, agents,officers or directors or any other person acting in concert with it or on itsbehalf. Accordingly, each Party shall be entitled to the granting of injunctiverelief or other equitable relief by a court of competent jurisdiction againstany action that constitutes any such breach of this Article 5, in addition toany monetary damages to which a Party may be entitled.ARTICLE 6. REPRESENTATIONS AND WARRANTIES     6.1 EPIX represents and warrants to MKG that:     (i) as of the Effective Date the MGH License is in full forceand effect; prior to the Effective Date EPIX has provided MKG with anaccurate and complete copy of the MGH License, including all amendmentsthereto and documents incorporated therein by reference;     (ii) as of the Effective Date, EPIX has not received anynotice from MGH that EPIX is in breach of the MGH License;     (iii) during the term of the Agreement, EPIX will not amendthe MGH License in a manner that materially and adversely affects MKG’srights or obligations under this Agreement without the prior writtenconsent of MKG, such consent not to be unreasonably withheld ordelayed;     (iv) during the term of this Agreement, EPIX will make allpayments and perform all obligations required by the MGH License when