**Exhibit 10.2**

 

**CONFIDENTIAL INFORMATIONOMITTED AND FILED SEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

LICENSE, SUPPLY AND DISTRIBUTION AGREEMENT

 

THIS AGREEMENT is made the April 27, 2004 (the“Effective Date”) by and between PRAECIS PHARMACEUTICALS INCORPORATED, acorporation organized and existing under the laws of State of Delaware havingits principal place of business at 830 Winter Street, Waltham, MA 02451, USA(hereinafter referred to as “Praecis”) and SCHERING AG, a corporation organizedand existing under the laws of Germany having its principal place of businessat 13442 Berlin, Germany (hereinafter referred to as “Schering”).  Praecis and Schering are sometimes referredto herein individually as a “Party” and collectively as the “Parties”.

 

WITNESSETH:

 

WHEREAS, Praecis is engaged, among other things, inthe business of research, development, manufacturing and commercialization ofpharmaceutical products, including its proprietary drug PlenaxisTM;

 

WHEREAS, Schering is engaged, among other things,in the business of developing, marketing and selling pharmaceutical products inthe Territory;

 

WHEREAS, subject to the terms and conditions setforth in this Agreement, Praecis and Schering wish to collaborate in thedevelopment and commercialization of the Product in the Territory;

 

WHEREAS, subject to the terms and conditions setforth in this Agreement, Praecis wishes to license to Schering and Scheringwishes to license from Praecis certain rights relating to the Product in theTerritory;

 

WHEREAS, Praecis and Schering signed aConfidentiality Agreement on November 21, 2001, as amended, in order to governthe protection of confidential information made available by the Parties inconnection with the discussions concerning this transaction;

 

NOW, THEREFORE, in consideration of the foregoingrecitals and the mutual covenants and agreements contained herein, the Partieshereto, intending to be legally bound, do hereby agree as follows:

 

ARTICLEI

 

DEFINITIONS

 

1.1           Definitions.  The following terms, when capitalized, shallhave the following meanings (such meanings to be equally applicable to both thesingular and plural forms of the terms defined), when used in this Agreement.

 

“Affiliate” means any person, corporation,partnership, firm, joint venture, or other entity which, directly orindirectly, by itself or through one or more intermediaries, controls,

 

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is controlled by, or is under common control with,Praecis or Schering, as the case may be. As used in this definition, the term“control” means the possession of the power to direct or cause the direction ofthe management and policies of an entity, whether through the ownership of theoutstanding voting securities or by contract or otherwise.

 

“Agreement” means this License, Supply andDistribution Agreement.

 

“Approved Label” shall mean the therapeuticindication as defined in section 4.1 of the SmPC of the Marketing Authorizationfor the Current Product in the MRP-Countries.

 

“Average Net Sales Price” means, with respect toany country in the Territory in any specified time period, the total Net Salesof the Product in that country during such time period, divided by the numberof Product units sold in such time period.

 

“Bankruptcy Event” shall have the meaning set forthin Section 16.2(d).

 

“Bulk Product” means the Product in bulk form, inunlabeled vials.  For the CurrentProduct, “Bulk Product” means, as of the Effective Date, the Product inirradiated powder form, in 100mg unlabeled vials, in accordance with theSpecifications for the Current Product.

 

“Business Day” means a day which is not a Saturday,a Sunday or other day on which banks are required or authorized by law to beclosed in Boston, Massachusetts, USA or Berlin, Germany.

 

“CFR” means the US Code of Federal Regulations, asamended from time to time.

 

“Clinical Development” means all activities relatingto planning and execution of clinical studies in humans directed towardsobtaining Regulatory Approvals, including Marketing Authorizations for theProduct.

 

“Clinical Life Cycle Management” means any Phase IVor other post-marketing clinical development, studies or other post-MarketingApproval Development activities that may be required or advisable for theCurrent Product in the Territory.

 

“CMC/Process Development” means the development ofone or more processes for the manufacture and packaging of the Bulk Product forClinical Development and Commercialization, and shall include, withoutlimitation, formulation, production, fill/finish, sourcing of components, rawmaterials, and packaging supplies for the Bulk Product, development of methodsand controls appropriate for Regulatory Approval, including assays, qualitycontrol and quality assurance methodology and stability protocols.

 

“Commercialization” and “Commercialize” mean allactivities relating to the pre-marketing, importing for sale, marketing,distribution and sale, of the Product. “Commercialization” does not include Development or manufacture of theProduct.

 

“Competing Product” means [*].

 

“Confidential Information” shall have the meaningset forth in Section 12.1.

 

“Control” or “Controlled” means the right to grantan exclusive or non-exclusive license or sublicense, as applicable, of patentrights, know-how, Information or other intangible rights as provided for hereinwithout violating the terms of any agreement or other arrangement with anyThird Party.

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

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“Current Product” means the Product for the treatmentof the Indication of hormonally responsive advanced prostate cancer, as suchIndication may be limited or otherwise modified in each country in theTerritory pursuant to the Marketing Authorization in such country.

 

“Development” and “Develop” mean all activities andobligations relating to Existing Trials, Clinical Development, CMC/ProcessDevelopment, Clinical Life Cycle Management and pharmacovigilance, and anyother activities customarily undertaken or reasonably required to obtain andmaintain all Regulatory Approvals, including Marketing Authorizations, for theProduct.

 

“Domain Names” mean all Domain Names identical orsimilar with the Praecis and/ or Schering Trademarks, as set forth inAttachment [tbd], which may be supplemented from time to time in accordancewith Article XIV, to be used for the promotion of the Product.

 

“EMEA” means the European Medicines EvaluationAgency, or any successor agency with substantially the same responsibility forregulating the development, manufacture and sale of human pharmaceuticalproducts.

 

“End User Kit” means a kit for use of the Productby end users, as specified as of the Effective Date by Praecis, and as such kitmay be modified either (a) to comply with Regulatory Requirements or otherapplicable law or (b) as mutually agreed to by the Parties.  For the Current Product, the End User Kitconsists, as of the Effective Date, of the components and specifications setforth on Schedule 2.

 

“EU” means the countries listed under Item 1 ofSchedule 1.

 

“EU cGMP” means the current Good ManufacturingPractices as set out in Directive 2003/94 as effective of Nov. 2003, of theCommission of the European Communities and further elaborated in The RulesGoverning Medicinal Products in the European Community, Volume IV - Guide toGood Manufacturing Practice for Medicinal Products, Contract Manufacture andAnalysis, as such may be amended from time to time.

 

“Existing Development” means the Existing Trialsset out in Schedule 3 to this Agreement.

 

“Existing Trials” means the ongoing (as of theEffective Date) clinical studies of the Product.

 

“FDA” means the United States Food and DrugAdministration, or any successor agency.

 

“Field” means [*].

 

“Finished Product” shall mean the Product in afinally packaged form for distribution to end users, including the End UserKit, with all legally required and appropriate warnings, labeling andpackaging, and all outer distribution and transport packaging for theforegoing.

 

“Firm Order” shall have the meaning set forth inSection 10.3.1(a).

 

“First Commercial Sale” means the date Schering oran Affiliate or a sublicensee of Schering first sells commercially, pursuant toa Regulatory Approval, the Product in any country of the Territory; provided,however, that where such sale has occurred in a country for which pricing orreimbursement approval is necessary for widespread sale, then such sale shall

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

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not be deemed a First Commercial Sale until suchpricing or reimbursement approval has been obtained.

 

“First Forecast” shall have the meaning set forthin Section 10.3.1(b).

 

“Floor Price” shall have the meaning set forth inSection 11.1.

 

“GAAP” means the then-current applicable GenerallyAccepted Accounting Principles in the United States, consistently applied.

 

“GCP” shall mean the Tripartite Guideline on GoodClinical Practice (ICH-GCP) established by the International Conference onHarmonization in June 1996 as amended from time to time, and implemented andpublished by the EMEA and the FDA.

 

“GLP” means the Good Laboratory Practicesregulations promulgated by FDA and/or the GLP regulations required by the localauthorities of the countries where the studies will be performed or resultantdata submitted, as they may be amended from time to time.

 

“GMP” means EU cGMP and US cGMP.

 

“Gross Margin” means, for any country in theTerritory, the quotient expressed as a percentage, of (a) the positivedifference between (i) the Average Net Sales Price for the Finished Product insuch country minus (ii) the sum of Floor Price plus any government-mandatedprice reductions, divided by (b) the positive difference between (i) theAverage Net Sales Price for the Finished Product in such country minus (ii) anygovernment-mandated price reductions.

 

“Health Regulatory Authority” means EMEA, thenational competent authorities of the EU member states, FDA and any othergovernment entity that has jurisdiction to grant Regulatory Approvals,including, but not limited to, Marketing Authorizations, for the Product in theTerritory.

 

“Improvement” means with respect to the Product,any of the following: (i) any change to the formulation, dosage, mode ofadministration or packaging thereof that is not either (a) expressly includedin or reflective of the Product as initially approved by the BfArM of Germanyand in the initial round of Mutual Recognition Process by Concerned MemberStates, or (b) expressly set forth in the IND for a Product for any otherIndication in the Field when Clinical Development is initiated for suchProduct, or (ii) a method, process or apparatus for manufacture thereof, whichresults in an enhancement or alteration of any component of the Product withrespect to, without limitation, efficacy, safety, drug delivery profiles,stability, shelf-life, dosage, cost, ease of use, or styling.  Notwithstanding the foregoing, for purposesof Section 2.6, “Improvement” shall have the meaning set forth in Section 1.6of the IUF License Agreement.  For theavoidance of doubt, “Improvement” does not include any Indication.

 

“IND” means an Investigational New Drug Applicationfiled with the FDA pursuant to 21 CFR 312.1 et seq.

 

“IND Equivalent” means an application submitted ina country other than the United States for approval to conduct ClinicalDevelopment of a drug compound or drug composition.

 

“Indication” means any human medical indication inthe Field.

 

“Information” means: (i) techniques, data andinformation reasonably related to the Licensed Activities, including, but notlimited to, inventions, practices, methods, manufacturing

 

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processes, knowledge, know-how, skill, tradesecrets, experience, test data (including pharmacological, toxicological,preclinical and clinical test data); data, records and information derived fromDevelopment, regulatory submissions, adverse reactions, analytical and qualitycontrol data, and manufacturing data (to the extent related to ScheringManufacturing from and after such time as such activities are undertaken bySchering pursuant to this Agreement)**,**but excluding raw and source patient data as required to comply with the applicablelaw and excluding any data and information specific to the marketing, pricing,cost, sales and distribution information for the Product outside the Territoryor inside the Territory but outside of the Field.

 

“IU” means Indiana University.

 

“IUF” means shall mean Advanced Research TechnologyInstitute, as successor-in-interest to Indiana University Foundation. “IUFLicense Agreement” means that certain License Agreement dated as of October 17,1996 between IUF and Praecis, as amended.

 

“Licensed Activities” means Development (to theextent Schering may undertake such activities pursuant to this Agreement,including Sections 4.6 or Article V), regulatory prosecution pursuant toArticles IV and V, and Commercialization of the Product in the Territory, aswell as Schering Manufacturing and all obligations of Schering under thisAgreement.

 

“Losses” shall have the meaning set forth inSection 17.1.

 

“Marketing Authorization Application” means anapplication for Regulatory Approval which is required before commercial sale,use or placing on the market the Product as a proprietary medicinal product ina country in the Territory. This includes, for the purposes of RegulatoryApproval in the European Union, applications pursuant to the current version ofDirective 2001/83/EC or Council Regulation ECC/2309/81 as applicable.  Any successor legislation has to be followedaccordingly.

 

“Marketing Authorization” means the right to placea (proprietary) medicinal product on a market in the Territory for commercialexploitation.

 

“MRP Country” means any country in the EU or theEuropean Economic Area as set forth in Schedule 1 that participates in theMutual Recognition Procedure for Marketing Authorizations for the CurrentProduct.

 

“Net Sales” [*]

 

[*]

 

[*]

 

[*]

 

[*]

 

[*]

 

[*]

 

“Other Praecis Products” shall mean at any givenpoint in time, any pharmaceutical compounds or products containing PPI-149 asan active pharmaceutical ingredient, other than the Product within theTerritory.

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

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“Patents” means all existing patents and patentapplications and all patent applications hereinafter filed, including anycontinuation, continuation-in-part, division, provisional or any substituteapplications, any patent issued with respect to any such patent applications,any reissue, reexamination, renewal or extension (including any supplemental patentcertificate) of any such patent, and any confirmation patent or registrationpatent or patent of addition based on any such patent, and all foreigncounterparts of any of the foregoing. “Patents” also includes a Supplementary Certificate of Protection of amember state of the European Union and any other similar protective rights inany other country.

 

“Patent Expenses” means the fees, expenses anddisbursements and outside counsel and agent fees incurred in connection withthe preparation, filing, prosecution and maintenance of Praecis Patents,including costs of patent interference and opposition proceedings.

 

“PPI-149” shall mean the compound set forth onSchedule 4 of this Agreement.

 

“PPI Licensed Rights” shall mean the Patents andInformation licensed to Praecis pursuant to the IUF License Agreement.

 

“Praecis Improvement” means an ImprovementControlled by Praecis.

 

“Praecis Information” means Information within theControl of Praecis as of the Effective Date or which comes within the Controlof Praecis during the term of this Agreement and reasonably relates to theLicensed Activities in the Territory. “Praecis Information” includes Information Controlled by Praecis thatconstitute or are reasonably related to Praecis Improvements, subject to Section2.3.  Notwithstanding anything herein tothe contrary, Praecis Information shall exclude Praecis Patents.

 

“Praecis Name” means the “PRAECIS PHARMACEUTICALSINCORPORATED” trade name, or any successor name of Praecis, or the name of anysuccessor or acquiring entity of Praecis.

 

“Praecis Trademark” means the Trademark PLENAXISowned by Praecis.

 

“Praecis Patents” means any Patents owned orControlled by Praecis or its Affiliates as of the Effective Date or which comewithin the Control of Praecis or any of its Affiliates during the term of thisAgreement covering the manufacture, use, importation, sale or offer for sale ofthe Product in the Territory.  “PraecisPatents” includes Patents Controlled by Praecis that claim Improvements,subject to Section 2.3.

 

“Praecis Trademark” means “PLENAXIS.”

 

“Pricing and Reimbursement Authorization” means, inrespect of any country in the Territory, the Regulatory Approvals necessary forpricing and reimbursement of the Product in such country, but excluding anyMarketing Authorizations.

 

“Product” means a pharmaceutical product containingPPI-149 as an active ingredient: (i) for the Indication, formulation, dosageand mode of administration constituting the Current Product, (ii) for anyadditional Indications, in the formulations, dosages and modes ofadministration specified therefor, and (iii) in any other formulation, dosageand mode of administration licensed hereunder as a Praecis Improvement for anyIndication in accordance with Section 2.3.

 

“QAA” shall mean a Quality Assurance Agreementwhich will be in a form mutually agreed by the Parties and will be enteredwithin 90 days after execution of this

 

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Agreement, it being acknowledged by the Partiesthat the form of Quality Assurance Agreement attached hereto as Schedule 6 willform the basis for finalizing the Quality Assurance Agreement.

 

“Quality Specifications” are those specificationsfor release of the Finished Product as set forth in Appendix 2 of the QAA asamended from time to time.

 

“Registration Dossier” means any and allinformation, processes, techniques and data owned and prepared by Praecis orSchering relating to the Product and submitted to Health Regulatory Authoritiesin the format required by the regulations applicable in the particularjurisdiction to obtain Regulatory Approvals, including, but not limited toMarketing Authorizations.

 

“Regulatory Approval” means all approvals, productand establishment licenses, registrations or authorizations of any federal,state or local authority, department, bureau or other governmental entity,necessary for the manufacture, use, storage, importation, export, transport,sale, placing on the market, pricing or reimbursement of the Product in ajurisdiction.  “Regulatory Approval”includes Marketing Authorizations and Pricing and Reimbursement Authorizations.

 

“Regulatory Requirements” means, for the Product,(i) the Specifications, (ii) GMP, (iii) requirements under laws and regulationsof Health Regulatory Authorities in each jurisdiction that are applicable tothe manufacturing activities undertaken in that jurisdiction with respect tothe manufacture of Product and (iv) requirements under laws and regulations ofHealth Regulatory Authorities, and requirements in Marketing Authorizations forthe Territory, incorporated as Changes pursuant to the change managementprocess of Article VI.

 

“Risk Management Program” means a program for themonitoring of the use of the Product (as such phrase is used by the FDA), inaccordance with requirements of any Health Regulatory Authority.

 

“Schering Information” means Information generatedor obtained by Schering and reasonably related to the Licensed Activities(other than Information provided to Schering by Praecis) during the term ofthis Agreement and Controlled by Schering.

 

“Schering Manufacturing” means production of theFinished Product from the Bulk Product and, if and to the extent Scheringobtains and exercises its right to do so pursuant to Section 10.7, the manufactureof the Bulk Product.

 

“Schering Trademark” means any trademark to be used for the promotion, marketingand selling of the Product, other than the Praecis Trademark.

 

“Shipment Date” shall have the meaning set forth inSection 10.5.2.

 

“Second Forecast” shall have the meaning set forthin Section 10.3.1.c.

 

“Specifications” means (i) with respect to theCurrent Product, the specifications in the Marketing Authorization therefor inGermany, (ii) with respect to any other Indication and any other formulation,dosage or mode of application for the Product (other than the Current Product),the specifications in the Marketing Authorization therefor in the ReferenceMember State, in the case of (i) or (ii), as amended pursuant to the changemanagement process set forth in Article VI.

 

“Steering Committee” or “SC” means the coordinatingcommittee established by the Parties in Section 7.1.

 

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“Sublicensee” means (i) Schering Affiliates andcustomary members of Schering’s distribution chain for prostate cancerproducts, and (ii) any other Third Parties, if such other Third Parties areapproved in advance by Praecis in writing, in each case (i) and (ii) to whichSchering grants a sublicense, provided that Schering remains primarily liablefor the acts and omissions of such sublicensees.

 

“Supply Price” shall mean the price for BulkProduct, determined as set forth in Section 11.1.

 

“Territory” means the countries listed in Schedule1, except to the extent this Agreement is terminated with respect to any suchcountry pursuant to Sections 16.2(b) or 16.2(f).

 

“Third Party” means any entity other than Praecisor Schering and their respective Affiliates and, with respect to Schering forpurposes of the Net Sales definition, Sublicensees in their capacity asSublicensees.

 

“Trademark” means, with respect to each country inthe Territory, the trademark actually used for the promotion, marketing andselling of the Product in such country in the Territory.

 

“US cGMP” means the FDA’s current GoodManufacturing Practice regulations as promulgated under the Act at 21 CFR(chapters 210, 211, 600 and 610), and as further defined by FDA guidancedocuments, as such may be amended from time to time.

 

“Valid Claim” shall mean a claim in any unexpiredand issued Praecis Patent that has not been disclaimed, revoked or held invalidor unenforceable by a final unappealable decision of a court or governmentagency of competent jurisdiction.

 

ARTICLEII

 

LICENSES AND TRANSFER OF INFORMATION

 

2.1                                 Exclusive Patentand Information License to Schering

 

(a)                                  Praecis herebygrants to Schering a license, with a right to sublicense to Sublicensees inaccordance with Section 2.2, under the claims contained in the Praecis Patentsand under the Praecis Information, to use manufacture, have manufactured,market, sell, import for sale and distribute the Product in the Territory tothe extent the foregoing are within the scope of the Licensed Activities,subject to the terms and conditions hereof. The foregoing license grant is (i) exclusive with respect toCommercialization in the Territory and (ii) non-exclusive with respect to allother Licensed Activities.

 

(b)                                 Notwithstandingany of the foregoing in Section 2.1(a), Schering acknowledges that Praecis mayhold, sponsor and participate in conferences and symposia in the Territoryrelated to the Product subject to Schering’s prior written consent which shallnot be unreasonably withheld. Schering acknowledges that Praecis has undertakenvarious conference and symposia sponsorships and other premarketing activitiesrelating to the Product, and will reasonably cooperate with Praecis intransitioning responsibilities and costs for such activities to Schering.

 

(c)                                  A list of thePraecis Patents identified as of the Effective Date is attached hereto asSchedule 5.  If at any time during theterm of this Agreement any additional Patents come under the Control of Praecisas Praecis Patents, such shall be added periodically, at least quarterly,  to the list attached hereto as Schedule 5.

 

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(d)                                 Each Party shalldisclose and provide to the other Party all Praecis Information or ScheringInformation, as applicable, including but not limited to all PraecisInformation regarding the Existing Trials. If at any time during the term ofthis Agreement any additional Praecis Information is acquired by Praecis,Praecis shall periodically, at least quarterly, disclose and provide toSchering all such additional Praecis Information.  If at any time during the term of thisAgreement any additional Schering Information is acquired by Schering, Scheringshall periodically, at least quarterly, disclose and provide to Praecis allsuch additional Schering Information. Praecis may use such Schering Information in connection with thedevelopment, manufacture and commercialization of Other Praecis Products.

 

(e)                                  Scheringacknowledges and agrees that Praecis may disclose Schering Information(including Development-related Information) to Praecis’ other licensees andcontractors upon Schering’s prior written consent, such consent not to beunreasonably withheld.  Praecis shall usecommercially reasonable efforts to make available to Schering for use with theProduct in the Territory the Information of such other licensees andcontractors (“Additional Partner Data”). Schering shall use and disclose to Sublicensees and RegulatoryAuthorities Praecis Information, including such Information of other Praecis licenseesand contractors, only as required to obtain and maintain Regulatory Approvalsfor the Product in the Territory, or as otherwise reasonably necessary toexercise its rights and perform its obligations under this Agreement, subjectto Article XII.  In all agreementsentered into after the Effective Date with Third Parties or Affiliatesinvolving Information, Schering and Praecis, respectively, shall use reasonableefforts to include in such agreements a provision requiring that such ThirdParties and Affiliates provide the other Party with access to all suchInformation, to the extent reasonably necessary to exercise the rights andfulfill the obligations of the other Party under this Agreement.

 

2.2                                 Sublicensing.  Schering shall have the right to sublicensereasonable subportions of the licenses granted pursuant to Section 2.1 to anySublicensee; provided that Schering may not sublicense substantially allsupervisory control over any of the Licensed Activities in any part of theTerritory (other than to a wholly-owned Affiliate of Schering, or to customarymembers of the Schering distribution channel) without the prior written consentof Praecis, such consent not to be unreasonably withheld with respect to anycountry representing less than five percent (5%) of total Net Sales for theTerritory.

 

2.3                                 Improvements.  The license grant of Section 2.1(a) includesall Praecis Improvements, subject to Section 5.2.1.

 

2.4                                 Right of FirstNegotiation for Indications Outside the Field.

 

2.4.1                        Praecis herebygrants to Schering a right of first negotiation (the “Schering Right of FirstNegotiation”) for the development and commercialization in the Territory ofPPI-149 for any indication outside of the Field (each, an “AdditionalIndication”), upon the terms and subject to the conditions set forth in this Section2.4.

 

2.4.2                        [*]

 

2.4.3                        Schering may, [*]make a written proposal of key terms to Praecis for the development and/orcommercialization in the Territory of such Additional Indication (a “ScheringProposal”).  Praecis and Schering shallthen negotiate in good faith for up to [*] in an effort to reach a definitiveagreement for the development and commercialization in the Territory of suchAdditional Indication (the “ROFN Negotiation Period”).

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

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2.4.4                        [*]

 

2.5                                 Third Party Termsand Conditions.  The provisions of thisAgreement are expressly subject to the terms and conditions of the IUF LicenseAgreement with respect to Praecis Patents and Praecis Information that islicensed by Praecis under the IUF License Agreement.  The license grants under this Agreement withrespect to any Third Party intellectual property Controlled by Praecis (otherthan the PPI Licensed Rights) is expressly subject to any additional terms andconditions of applicable third party agreements.  To the extent that any fees or royalties arepayable to any such Third Party with respect to such Third Party intellectualproperty (other than the PPI Licensed Rights), Schering, as the sublicenseeunder this Agreement shall be responsible for such fees or royalties reasonablyallocable to Schering’s license grant under this Agreement, [*] Praecisrepresents and warrants to Schering that, as of the Effective Date, there areno royalties or other payments that Schering is obligated to pay to thirdparties under the license grant of Section 2.1.

 

2.6                                 License Back ofIUF Improvements.  Schering hereby grantsto Praecis a perpetual, irrevocable license under any Improvements made bySchering, solely for purposes of and to the extent necessary for Praecis togrant to IUF and IU a royalty-free, non-exclusive license to use the ScheringImprovements for research and educational purposes only, and without the rightto sublicense.

 

2.7                                 SavingsClause.  Except as expressly set forthherein or in Article XIV, no rights or licenses are granted to Praecis Patents,Praecis Information or Praecis Trademarks.

 

ARTICLEIII

 

DEVELOPMENT OF THE CURRENT PRODUCT

 

3.1                                 Development andClinical Life Cycle Management

 

(a)                                  Praecis shallsolely be responsible for and control all Development of the Current Productrelevant for obtaining Marketing Authorizations for the Current Product [*]

 

(b)                                 Development of theCurrent Product to obtain Marketing Authorizations in any country in theTerritory other than [*]

 

(c)                                  [*]

 

3.2                                 [*]

 

3.3                                 [*]

 

ARTICLEIV

 

REGISTRATION, PHARMACOVIGILANCE

 

4.1                                 Praecis shall besolely responsible for the preparation of Marketing Authorization Applications,including the corresponding Registration Dossiers, to seek MarketingAuthorizations for the Current Product in the MRP Countries.  For avoidance of doubt, the foregoing shallapply in the event the Mutual Recognition Procedure is repeated.

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

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4.2                                 A copy of eachsuch Marketing Authorization Application and the respective RegistrationDossier shall be promptly provided to Schering. In connection with all such Marketing Authorization Applications beingprosecuted by Praecis, Praecis agrees to provide Schering with a copy (whichmay be wholly or partly in electronic form) of all filings to Health RegulatoryAuthorities that it makes in connection with Section 4.1, such copy to beprovided at substantially the same time as Praecis files with the HealthRegulatory Authority.

 

[*]

 

4.3                                 Registration inthe MRP Countries

 

4.3.1                        Praecis shallconduct and be solely responsible for the Marketing Authorization Applicationfor the Current Product in the MRP Countries until Mutual Recognition of theCurrent Product is achieved.  All suchMarketing Authorization Applications shall be filed in the name of Praecis orits Affiliates and Schering shall be named as the distributor of the CurrentProduct.

 

4.3.2                        [*]

 

4.3.3                        [*]

 

4.3.4                        [*]

 

4.3.5                        [*]

 

4.4                                 Registration inall other Countries of the Territory

 

4.4.1                        [*]

 

[*]

 

4.4.2                        [*]

 

[*] 

 

4.5                                 [*]

 

4.6                                 [*]

 

4.7                                 [*]

 

4.8                                 Mutual ExchangeProduct Safety related Information. Praecis and Schering will regularly informeach other of any material information relating to the safety of the Product,including any serious unexpected and expected side effects of which the Partiesshall inform each other expeditiously and in accordance with the relevant andcurrent legislation of the countries of the Territory.  This information exchange also includesmaterial information and serious adverse reactions acquired from Third Parties,as set forth in the Pharmacovigilance Agreement.

 

4.9                                 Within 90 daysafter the execution of the Agreement, and before the First Commercial Sale inone of the countries of the Territory and before enrollment of the firstpatient in a Schering sponsored study, the Parties agree to enter into acustomary and reasonable

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

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Pharmacovigilance Agreement which should be set upby both Parties to govern safety information exchange including but not limitedto collection, investigation and reporting to Regulatory Authorities ofProduct-related adverse drug experience reports, such that each of the Partiescan comply with its legal obligations worldwide.  The standard operating procedure willencompass individual case safety reports from all sources as well as periodicreporting (e.g. periodic safety update reports). The standard operatingprocedure will be promptly amended as changes in international legalobligations require. Both Parties acknowledge that the form ofPharmacovigilance Agreement attached hereto as Schedule 7 will form the basisfor finalizing the Pharmacovigilance Agreement.

 

4.10                           Any capitalizedterm in this Article or elsewhere in this Agreement relating to the MutualRecognition Process which is not defined in this Agreement shall have themeaning accorded that term in EU directive 2001/83/EC or its succeedinglegislation.

 

ARTICLEV

 

ADDITIONAL DEVELOPMENT AND REGULATORYMATTERS

 

5.1                                 Development ofOther Indications Within the Field. ** **In the event that either Partywishes to initiate Development directed toward Marketing Authorization in anycountry in the Territory of either (i) any Product referred to in clause (ii)of the definition of Product for use in the Field, or (ii)  expansion of the Indication for the CurrentProduct, the Parties will negotiate in good faith the allocation ofresponsibilities and costs for Development and registration of such Product(including any such expansion) within the Field.  Schering would have the exclusiveCommercialization rights in the Territory for any such Product (including anysuch expansion) within the Field.

 

5.2                                 Development andRegulatory Prosecution of Improvements.

 

5.2.1                        [*]

 

5.2.2                        Record-Keeping andReporting.

 

(a)                                  Recordkeeping.  Schering and Praecis shallmaintain records of Development and regulatory activities with respect to theProduct (or cause such records to be maintained) in sufficient detail and ingood scientific manner as will properly reflect all Development and regulatorywork done and results achieved.

 

(b)                                 Reports.  Each Party shall periodically provide the SCwith a written report summarizing the progress of Development and regulatoryactivities performed by or under authority of such Party with respect to theProduct in the Territory during the preceding calendar half-year.  Unless otherwise agreed, such reports shallbe due semi-annually, by March 1 and September 1 of each calendar year for solong as the Party is undertaking such activities.

 

5.3                                 Compliance. To theextent a Party engages in additional Development activities with respect to theProduct in the Territory, such Party will comply in all material respects withapplicable laws and Regulatory Requirements of the European Commissionapplicable to such Development activities.

 

ARTICLEVI

 

CHANGE MANAGEMENT PROCESS

 

6.1                                 [*]

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

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6.2                                 [*]

 

[*]

 

6.3                                 [*]

 

6.4                                 Other Changes.

 

6.4.1                        [*]

 

6.4.2                        [*]  

 

6.5                                 [*]

 

6.6                                 [*]

 

6.7                                 [*]

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

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ARTICLEVII

 

STEERING COMMITTEE / WORKING TEAM

 

7.1                                 Establishment. TheParties hereby agree that promptly after execution of this Agreement, they willform a Steering Committee composed of four (4) members (the “SC Members”) withfunctions more fully described in Section 7.2 below. Each Party shall have the rightto appoint two (2) SC Members to serve on the Steering Committee each of whomshall be (i) a member of the respective Party’s senior management and (ii) dulyauthorized by such Party to transact the business of the Steering Committee.Upon written notice to the other, each Party shall be entitled to appointsubstitute SC Member(s), provided that, such substitute(s) belong to the seniormanagement of its respective Party. SC Members shall be allowed to berepresented by someone who has the appropriate mandate by that Party. TheParties hereby agree that the Steering Committee shall meet at leastsemi-annually at mutually agreeable dates and places (provided, that, alternatemeetings of the SC shall be held at Praecis’ headquarters in the United Statesor such other location reasonably agreed to by the Parties) and that, uponinvitation of either Party, other representatives of Schering, Praecis, orboth, shall be allowed to attend such meetings (provided such representativesare subject to reasonable confidentiality restrictions). The Parties furtheragree that each shall bear all expenses of its respective SC Members andrepresentatives with respect to their participation in the Steering Committee.

 

7.2                                 General Functionsof the Steering Committee. The Parties agree that the functions of the SteeringCommittee shall be to exchange information and to jointly plan activities withrespect to the Product in the Territory. The Steering Committee shall alsoappoint a Working Team, as more fully described in Section 7.4 below and aManufacturing and Supply Team, as more fully described in Section 10.2 below.

 

7.3                                 Decision-Making.The Parties hereby agree that all decisions and/or actions taken by theSteering Committee shall be taken exclusively by the unanimous express consentof all the SC Members. In the event the Steering Committee is unable to reachan agreement on any matter, then such matter shall be referred to the ChiefExecutive Officer of Praecis and to the Chief Executive Officer of Schering’sRegion Europe for their consideration and resolution.  The Parties however agree that, in the eventof any issue arising in connection with the marketing of the Product,Schering’s decision shall constitute the final decision, and that this decisionshall be binding upon both Parties, provided such decision is not inconsistentwith the express obligations of Schering under this Agreement.

 

7.4                                 The Parties herebyagree that the Steering Committee shall meet at least semi-annually at mutuallyagreeable dates and places (provided, that, alternate meetings of the SC shallbe held at Praecis’ headquarters in the United States or such other locationreasonably agreed to by the Parties) and that, upon invitation of either Party,other representatives of Schering, Praecis, or both, shall be allowed to attendsuch meetings (provided such representatives are subject to reasonableconfidentiality restrictions).

 

7.5                                 General Functionsof the Working Team. The Parties agree that the Working Team’s functions shallbe to set up a Life Cycle Management Plan and submit it for the approval of theSteering Committee. Without limitation of Section 3.1(b), the Working Teamshall be responsible for overseeing and guiding the implementation of the LifeCycle Management Plan and co-ordination of each Party’s respective activities.The Parties agree that the Working Team shall meet at least once every four (4)months at mutually agreeable dates and places, and that, upon invitation ofeither Party, other representatives of Schering, Praecis, or both, shall beallowed to attend such meetings (provided such representatives are subject toreasonable confidentiality restrictions). The

 

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Parties further agree that each Party shall bearall expenses of its WT Members and representatives with respect to theirparticipation in the Working Team.

 

7.6                                 Retention ofPowers. The Parties hereby agree that, notwithstanding the creation of theSteering Committee and/or the Working Team and/or Manufacturing and SupplyTeam, each Party to this Agreement shall (i) at all times retain the rights andpowers granted to it pursuant to the terms and conditions of this Agreement,and that (ii) except as otherwise expressly provided in this Agreement orexpressly agreed to by the Parties in writing to that effect, neither theSteering Committee nor the Working Team nor the Manufacturing and Supply Teamthereof shall be delegated or vested with any such rights or powers. Neitherthe Steering Committee nor the Working Team nor the Manufacturing and SupplyTeam shall have at any time the power to amend or modify this Agreement in anyway, as such may only be amended or modified as provided in Section 18.15 ofthis Agreement.

 

7.7                                 Global SteeringCommittee.  The Parties will establish aglobal steering committee (“Global Steering Committee”) for the purpose ofenabling Praecis, Schering and such additional Praecis licensees as maydesignate representatives to the Global Steering Committee as contemplated bythis Section 7.7, to consider, and as appropriate and subject to anycontractual restrictions or restrictions of Applicable Law, to inform oneanother, discuss and if appropriate, coordinate, global Development orCommercialization strategies for the Product. The Global Steering Committee shall consist of an equal number ofrepresentatives from each Party (but in no event less than two (2)).  Praecis may also invite to become members anequal number of representatives from each of Praecis’ additionallicensees.  The respective individualrepresentatives of Praecis and Schering to the Global Steering Committee may beremoved and replaced from time to time at the discretion of such Party bysending written notice of such action to the other parties which havedesignated a representative on the Global Steering Committee. Unless otherwiseunanimously agreed by the parties which have designated a representative on theGlobal Steering Committee, the Global Steering Committee shall meet at leastonce each calendar year.  The Parties agreeand acknowledge that the recommendations and determinations of the GlobalSteering Committee shall in no way be binding upon Praecis, Schering orPraecis’ other licensees.  No party whichhas designated a representative on Global Steering Committee shall bepersonally liable to any other party which has designated a representative onthe Global Steering Committee by reason of the actions of any suchrepresentative in the conduct of the business of the Global Steering Committee.  If no other licensees are participating inthe Global Steering Committee, the Global Steering Committee’s function willinstead be carried out by the SC.

 

ARTICLEVIII

 

MILESTONE PAYMENTS

 

8.1                                 MilestonePayments.  Schering shall make thefollowing payments (“Milestone Payments”) to Praecis within thirty (30)Business Days after the first achievement of each of the following milestones,except that payment of the Signing Milestone Payment shall be paid by Scheringwithin ten (10) Business Days after signature of this Agreement.  Each of these Milestone Payments shall bepaid only once regardless of the number of times the milestones are achieved bythe Product.  Each Milestone Payment isnonrefundable, except to the extent expressly set forth in Schedule 8.1.

 

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| **MILESTONES**                                                        | ** ** | **PAYMENT** | ** **   |
|-----------------------------------------------------------------------|------------|-------------|--------------|
| Signature of this Agreement (“Signing  Milestone Payment”). |       | US$         | 2,000,000.00 |   |
| [*]                                                                   |       | [*]         |         |
| [*]                                                                   |       | [*]         |         |
| [*]                                                                   |       | [*]         |         |
| [*]                                                                   |       | [*]         |         |
| [*]                                                                   |       | [*]         |         |
| [*]                                                                   |       | [*]         |         |
| [*]                                                                   |       | [*]         |         |
| [*]                                                                   |       | [*]         |         |
|                                                                       |            |             |              |  |

 

ARTICLEIX

 

COMMERCIALIZATION

 

9.1                                 Schering as SoleMarketing Party.  Subject to the termsand conditions of this Agreement (including, but not limited to, Article II),Schering shall have the exclusive right to Commercialize the Product, either byitself or through its Sublicensees, in the Territory.

 

9.2                                 CommercializationEfforts.  Subject to Section 9.2.1,Schering agrees to use commercially reasonable efforts with respect to theCommercialization of the Product in the Territory as provided hereunder.  Such commercially reasonable efforts will beconsistent with the efforts used by Schering in preparing commercializationplans and commercializing its own pharmaceutical products, and may includesub-licensing to the extent permitted hereunder.  [*]

 

9.2.1                        [*]

 

9.3                                 [*]

 

9.4                                 Schering shallconduct (or cause to be conducted) all of its Commercialization activities withrespect to the Product in accordance with all requirements of applicable law,and all other requirements of any applicable Health Regulatory Authorities.

 

9.5                                 [*]

 

9.6           Non-CompeteObligations.

 

9.6.1                        ScheringNon-Compete.

 

(a)                                  [*]

 

(b)                                 Without limitationof Section 9.6.1(a), if at any time during the term of this Agreement Scheringor its Affiliates:

 

[*]

 

[*]

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

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then Schering will immediately provide writtennotice thereof to Praecis and will provide Praecis with sufficient informationfor Praecis to evaluate the strategic and commercial implications of suchactivities.  Schering will provideupdates to such information on a quarterly basis.  [*]

 

[*]

 

[*]

 

[*]

 

[*]

 

[*]

 

[*]

 

9.6.2                        PraecisNon-Compete.

 

[*]

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

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ARTICLEX

 

MANUFACTURE AND SUPPLY

 

10.1                           Manufacture andSupply

 

10.1.1                  Subject to thefollowing terms and conditions, Praecis will manufacture the Product and shallsupply Schering with all of Schering’s requirements of the Product for sale inthe Territory and Schering shall purchase its requirements of the Productexclusively from Praecis. Product shall be supplied by Praecis as Bulk Productreleased for the EU subject to Section 10.5.1.

 

10.1.2                  Praecis willmanufacture the Bulk Product pursuant to the processes described in therelevant documents provided for in the Regulatory Requirements and as laid outin the QAA, which, upon execution thereof, will form an integral part of thisAgreement. Praecis will adhere strictly to these processes and instructions tothe extent legally required, and will otherwise materially comply therewith.

 

10.1.3                  Praecis representsand warrants that, prior to first delivery of the Bulk Product to Schering forthe sale in any country of the Territory, it will have obtained all materialapprovals of Regulatory Authorities necessary for the manufacture of theProduct to the extent set forth in the Regulatory Requirements.  Praecis covenants that during the term ofthis Agreement, it shall comply with the Regulatory Requirements in carryingout its obligations pursuant to this Agreement. Each Party will inform theother Party about any notification from the responsible Health RegulatoryAuthorities to such Party of any non compliance with applicable laws andregulations.

 

10.2                           Manufacturing andSupply Team

 

10.2.1                  The SteeringCommittee shall form as a sub-committee, the Manufacturing and Supply Team, toact as a forum for effectively addressing issues brought to the attention ofthe Steering Committee by either Party relating to the manufacture and supplyof the Product, the failure to supply Product in a timely manner, qualityissues or other logistical issues.

 

10.2.2                  The Manufacturingand Supply Team shall consist of 2 (two) representatives from each Party.Substitutes may be appointed at any time upon written notice. The Manufacturingand Supply Team shall meet at mutually agreed dates and places. Additionalrepresentatives of Schering and Praecis or both, in addition to members of theManufacturing and Supply Team, may attend such meetings at the invitation ofeither Party. Schering and Praecis shall bear all expenses of their respectivemembers related to the participation in meetings of the Manufacturing andSupply Team.

 

10.2.3                  The Manufacturingand Supply Team shall serve as an advisor to the Steering Committee withrespect to issues described in Section 10.2.1 and shall have no right toexercise the rights of the Parties under this Agreement. The Manufacturing andSupply Team shall not have the power to amend or modify this Agreement, whichmay be amended or modified only as provided in Section 18.15.

 

10.2.4                  Advice given bythe Manufacturing and Supply Team to the Steering Committee shall only be givenfollowing unanimous agreement of the members of the Manufacturing and SupplyTeam. Should it prove impossible to obtain such agreement then the disputedmatter will be referred to the Steering Committee for resolution in accordancewith Section 7.3.

 

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10.3                           Ordering andForecast

 

10.3.1                  [*]

 

(a)                                  [*]

 

(b)                                 [*]

 

(c)                                  [*]

 

[*]

 

10.3.2                  The operation ofthe foregoing provisions is illustrated in the following example:

 

[*]

 

10.3.3                  Within two (2)weeks upon receipt of the First Forecast Praecis will submit to Schering awritten confirmation of whether Praecis expects to be able to supply Scheringwith its requirements according to the First Forecast, such confirmation not tobe unreasonably withheld and is subject to Section 10.6. If no suchconfirmation is given by Praecis within the two (2) week period,  Praecis shall be deemed to have confirmedthat it expects to be able to supply Schering with its requirements accordingto the First Forecast.

 

10.3.4                  [*]

 

10.3.5                  The Firm Ordersshall specify the Shipment Dates for each month of the Firm Order. The ShipmentDates and quantities specified in Firm Orders will be confirmed by Praecis inwriting within two (2) weeks of receipt. If no confirmation is given by Praecis within the two (2) weeks period,the Firm Orders shall be deemed to have been accepted.  Praecis shall use commercially reasonableefforts to use the Schering item number and the purchase order system for alldeliveries.  All invoices, deliverydocumentation and delivery notes have to contain the corresponding purchaseorder number and P.O. position.  Allpurchase orders will be pursuant to a mutually agreeable, standard orderform.  In the event of any conflictbetween any such purchase order and this Agreement, this Agreement will govern.

 

10.3.6                  If Scheringdesires to alter any quantities set forth in a Firm Order or to accelerate theShipment Dates, then Praecis shall undertake reasonable efforts to comply withany changes of ordered quantities or acceleration of Shipment Dates, especiallywith regard to changes to prevent the interruption of market supply or to cutsin ordered quantities or cancellations where the non-fulfillment of changeswould require to destroy the Product, but Praecis will have no liability forfailing to meet such altered quantity requests or accelerated Shipment Dates(including, without limitation, no liability for late shipments under Section10.5.3), and no such failure will constitute or contribute to a failure ofsupply for purposes of Section 10.7.

 

10.3.7                  [*]

 

10.3.8                  [*]

 

10.3.9                  [*]

 

10.4                           Packaging

 

The packaging of the Bulk Product shall beconsistent with the Specifications.

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

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10.5                           Shipment

 

10.5.1                  [*]

 

10.5.2                  [*]

 

10.5.3                  [*]

 

(a)                                  [*]

 

(b)                                 [*]

 

10.5.4                  [*]

 

10.5.5                  Praecis representsand warrants to manufacture the Product in accordance with the Specificationsand will comply in all material respects with the QAA. Bulk Product which isfinally determined not to be manufactured materially in accordance with theSpecifications will not satisfy the obligations of Praecis as set forth in thisAgreement.

 

10.5.6                  Should anyquantities of Bulk Product supplied by Praecis, as demonstrated by Schering’squality control testing, not conform with the Specifications, Schering willnotify Praecis in writing within thirty (30) days from the date of delivery ofthe Bulk Product from Praecis to Schering. Schering will supply Praecis withdetails of the alleged non-conforming Bulk Product including samples thereofand will cooperate in any investigation Praecis should wish to carry out. Evenif such determination is disputed by Praecis, Praecis shall as soon as possibleand not later than thirty (30) days replace such non-conforming Bulk Productfree of charge pending analysis of the asserted nonconformance.

 

10.5.7                  Notwithstandingthe above, if a dispute arises between Praecis and Schering concerning thenon-conformity of the Bulk Product to the Specifications, and said dispute isnot resolved within thirty (30) days from the receipt by Praecis of thenotification mentioned in Section 10.5.5, the matter shall be submitted to anindependent laboratory chosen in common agreement between the Parties or,failing such agreement within ten (10) Business Days after the receipt of suchnotification by Praecis, by the SC, whose decision will be final. The costs forthe nonconforming Product and the expenses incurred for said determinationshall be paid by the Party whose position is found erroneous by the saiddecision.

 

10.5.8                  In the eventrejected Bulk Product can not be reworked and must be destroyed, alldestruction shall be performed by Praecis or, if mutually agreeable, bySchering.  The Party, which has causedthe defective or otherwise nonconforming Bulk Product will pay the costs ofsuch rework and destruction.  Followingdestruction, the applicable Party will send to the other a certificate ofdestruction indicating the following: name of the Bulk Product, batch number, quantity, and name of thecompany that destroyed the Bulk Product.

 

10.6                           Shortage of Supply

 

[*]

 

10.7.                        Supply FailureRemedies

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

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10.7.1                  Should Praecis beunable to supply (i) [*] in accordance with the terms of this Agreement, theParties shall discuss said inability and develop and implement commerciallyreasonable measures to minimize the risk of further supply disruptions.  Praecis will be responsible for implementing,at its sole cost, any such reasonable measures intended to address causes ofthe inability to supply within Praecis’ control.  If such measures do not resolve such issueswithin a reasonable period of time, then upon Schering’s written request,Praecis shall authorize Schering to manufacture or have manufactured quantitiesof the Product and shall provide Schering free of charge with all necessaryknow-how, technology, information and assistance for such manufacturing that isavailable to and Controlled by Praecis and will assist and cooperate withSchering in negotiating contracts (but will not assign any of Praecis’contracts) with Praecis’ contract manufacturers.  Schering will be responsible for its expensesin connection with the establishment of such supply chain.  Schering acknowledges that Praecis outsourcessubstantially all of its manufacturing process to several contractmanufacturers, and that Praecis does not Control those manufacturers’intellectual property.

 

10.7.2                  If Scheringassumes the manufacturing of the Bulk Product for the Territory in accordancewith the terms of Section 10.7.1 hereof, Schering shall as a subcontractorinvoice Praecis the subcontracted manufacturing at the cost of goods [*]

 

10.7.3                  In the event thatPraecis encounters capacity constraints with respect to Schering’s non-bindinglong-term requirement plan for the Bulk Product, Praecis shall develop acontingency plan to satisfy Schering’s long-term requirements.  If both Parties can not agree on such plan,[*]

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

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1.1                                 10.8         Finished Product.

 

10.8.1                  [*]

 

10.8.2                  Subject toapplicable law, Schering will identify Praecis as the supplier of the Productin a fair and reasonable manner, reasonably acceptable to Praecis, including byclearly and reasonably prominently identifying Praecis as the manufacturer/developerof the Product on all Finished Product packaging and packaging insert.  Schering may use the Praecis Name inpromoting, marketing and selling the Finished Product in the Territory.  All use of the Praecis Trademark and PraecisName under this Agreement shall be subject to the quality control provisionsset forth in Section 14.3.2 of the Agreement. All samples shall be clearly marked “for sample use only” or somesimilar phrasing suggested by Schering and approved by Praecis.

 

10.9                           Inspections.Praecis shall, upon reasonable advance notice, permit any inspection, duringnormal working hours, of premises and facilities where Praecis manufacturesand/or analyses or has manufactured and/or analyzed Bulk Product and/or itsintermediates, and of premises where it stores raw materials, auxiliarymaterials, intermediates, packing materials, and Bulk Product, and ofmanufacturing records pertaining to production of Bulk Product, by RegulatoryAuthorities in the Territory or by Schering, if called for by such RegulatoryAuthorities or by Schering.  Praecisshall be entitled to have its representatives present as part of any suchinspection.  Schering shall write areport after any such inspection by Schering and make this available toPraecis, who shall, in conjunction with the relevant contract manufacturer ifappropriate, respond in writing to any recommendations made by Schering.

 

10.10                     GMP Compliance.Any costs and expenses which need to be incurred by Praecis or its contractmanufacturers and suppliers to ensure compliance with GMP and other RegulatoryRequirements applicable in the Territory shall be borne solely by Praecis andits respective contract manufacturers and suppliers. Following any inspectionsby Schering, as described in Section 10.9, Schering may prepare a reportdetailing any deficiencies identified in Praecis’ or its contractmanufacturers’ progress towards achieving, or maintaining, GMP standards.Praecis will discuss with Schering any recommendations made by Schering andwill implement those with which it agrees. For the avoidance of doubt, anyofficial advice received from a relevant Health Regulatory Authority regardingthe requirements of GMP will be conclusive, unless Praecis can reasonablydemonstrate that such advice is erroneous, and, unless Praecis so demonstrates,Praecis will implement any such requirements. However, and for the further avoidance of doubt, Praecis shall not beobligated to implement official advice which is in the form of suggestions thatare not necessary for compliance with GMP. The Parties agree that Praecis shall ensure that Sterigenics shallcomply with the Regulatory Requirements in the Territory, including but notlimited to monitoring and storage conditions. Nothing contained in this Section 10.10 is intended to limit orotherwise affect the provisions of Article VI, and, to the extent suchprovisions are applicable in accordance with their terms, such provisions, andnot this Section 10.10, shall control.

 

ARTICLEXI

 

SUPPLY PRICE, PAYMENTS

 

11.1                           Supply Price.Praecis shall supply all of Schering’s Product requirements as Bulk Product ona country-by country basis at the price set forth in the table immediatelybelow, [*]

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

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| **Average Net Sales Price** | ** ** | **Supply Price in%** | ** ** | **Supply Price** | ** ** |
|-----------------------------|------------|----------------------|------------|------------------|------------|
| [*]                         |       | [*]                  |       |             |       |
| [*]                         |       |                 |       | [*]              |       |
| [*]                         |       | [*]                  |       |             |       |
| [*]                         |       |                 |       | [*]              |       |
| [*]                         |       | [*]                  |       |             |       |

 

11.2                           [*]

 

11.3                           [*]

 

11.4                           [*]

 

11.5                           Invoice; Payments.Praecis shall invoice to Schering upon shipment of the Product [*]

 

11.6                           [*]

 

11.7                           Payments;Interest. Payments due under this Agreement shall be due on such date asspecified in this Agreement and, in the event such date is not a Business Day,then the next succeeding Business Day, and shall be made by wire transfer ofimmediately available funds to a bank account designated by the receivingParty, at least ten (10) days before payment is due.  Any failure by a Party to make a paymentwithin ten (10) Business Days after the date when due shall obligate such Partyto pay computed interest to the receiving Party, the interest period commencingon the due date and ending on the payment day, to the other Party, at a rateper annum equal to the one month EURIBOR as quoted on the due date on REUTERSscreen EURIBOR01. The interest calculation shall be based onthe act/360 computation method.  Theinterest rate shall be adjusted and interest shall be compounded monthly inarrears.  Such interest shall be due andpayable on the tender of the underlying overdue payment.

 

11.8                           Taxes. Praecisshall pay any and all taxes levied on account of all payments it receives underthis Agreement.  If laws or regulationsrequire that taxes be withheld, Schering will (i) deduct those taxes from allremittable payments, (ii) timely pay the taxes to the proper taxing authority,and (iii) send proof of payment to Praecis within thirty (30) days of receiptof confirmation of payment from the relevant taxing authority.  Schering agrees to make all lawful andreasonable efforts to minimize such taxes to Praecis.

 

11.9                           Payment Currency.Payments by Schering under this Agreement shall be paid to Praecis in Euro(except for the signing fee, which is in United States dollars) by wiretransfer of immediately available funds.

 

11.10                     Conversion.

 

11.10.1            For purposes ofpaying the first installment or in any other circumstance where prices under this Agreement are expressed in US$, the amount of US$ shall beconverted into Euro at the Euro Foreign Exchange Reference Rates published bythe European Central Bank in Frankfurt / Main, Germany two (2) Business Daysprior to the date the payment is made.

 

11.10.2            Where payments arebased on Net Sales in countries other than member states of the EuropeanMonetary Union, the amount of such Net Sales expressed in the currency of eachcountry shall be converted into Euro at the Euro Foreign Exchange ReferenceRates published by the European Central Bank in Frankfurt / Main, Germany onthe last Business Day of the applicable calendar quarter.

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

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11.10.3            The Euro ForeignExchange Reference Rates are, as of the Effective Date, published on Reutersscreen <ECB37>. If no Euro Foreign Exchange Reference Rate is determinedfor United States dollars or such other relevant currency, the Parties shallagree upon another reference rate.

 

11.11                     Records ofRevenues and Expenses.

 

(a)                                  Schering willmaintain complete and accurate records relevant to the calculation of revenuesunder this Agreement at its principle place of business, or such other readilyaccessible single location as Schering may designate.  Not more often than once each year, Scheringshall make the said records available for inspection during normal businesshours for the period required by applicable laws, but not less than three (3)years from creation of individual records by a certified public accountant orchartered accountant selected by Praecis (subject to the consent of Scheringnot to be unreasonably withheld or delayed) or Praecis’ internal accountants,for the sole purpose of verifying for Praecis the correctness of calculationsand classifications of such revenues under this Agreement.  Praecis shall bear its own costs related tosuch audit; provided that, for any underpayments greater than five (5) percentby Schering, Schering shall pay Praecis the amount of underpayment, interest asprovided for in Section 11.6 from the time the amount was due and Praecis’out-of-pocket expenses.  For anyunderpayments of less than five (5) percent by Schering, Schering shall payPraecis the amount of underpayment.  Anyoverpayments by Schering will be refunded to Schering or credited to futureamounts payable hereunder by Praecis to Schering, at Schering’s discretion.  Any records or accounting informationreceived from Schering shall be Confidential Information for the purposes ofArticle XII.  Results of any such auditshall be provided to both Parties and shall also constitute ConfidentialInformation for the purposes of Article XII.

 

(b)                                 If there is adispute between the Parties following any audit performed pursuant to Section11.11(a), either Party may refer the issue (an “Audit Disagreement”) to anindependent certified public accountant or chartered accountant forresolution.  In the event an AuditDisagreement is submitted for resolution by either Party, the Parties shallcomply with the following procedures: (i) the Party submitting the AuditDisagreement for resolution shall provide written notice to the other Partythat it is invoking the procedures of this Section 11.11(b);  (ii) within thirty (30) Business Days of thegiving of such notice, the Parties shall jointly select a recognizedinternational accounting firm to act as an independent expert to resolve suchAudit Disagreement; (iii) The Audit Disagreement submitted for resolution shallbe described by the Parties to the independent expert, which description may bein written or oral form, within ten (10) Business Days of the selection of suchindependent expert; (iv) The independent expert shall render a decision on the matteras soon as practicable; (v) The decision of the independent expert shall befinal and binding unless such Audit Disagreement involves alleged fraud, breachof this Agreement or construction or interpretation of any of the terms andconditions thereof; (vi) All fees and expenses of the independent expert,including any Third Party support staff or other costs incurred with respect tocarrying out the procedures specified at the direction of the independentexpert in connection with such Audit Disagreement, shall be borne by each Partyin inverse proportion to the disputed amounts awarded to the Party by theindependent expert through such decision (e.g. Praecis disputes $100, theindependent expert awards Praecis $60, then Praecis pays forty (40%) percentand Schering pays sixty (60%) of the independent expert’s costs).

 

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ARTICLE XII

 

CONFIDENTIALITY

 

12.1                           Confidentiality;Exceptions.  Except to the extentexpressly authorized by this Agreement or otherwise agreed in writing, theParties agree that the receiving Party shall keep confidential and shall notpublish or otherwise disclose or use for any purpose other than as provided forin this Agreement any Information and other information and materials furnishedto it by the other Party pursuant to this Agreement or any Informationdeveloped during the course of the collaboration hereunder, or any provisionsof this Agreement that are the subject of an effective order of the SecuritiesExchange Commission granting confidential treatment pursuant to the SecuritiesAct of 1934 as amended (collectively “Confidential Information”), except to theextent that it can be established by the receiving Party that such ConfidentialInformation:

 

(a)                                  was already knownto the receiving Party, other than under an obligation of confidentiality, atthe time of disclosure by the other Party; or

 

(b)                                 was generallyavailable to the public or otherwise part of the public domain at the time ofits disclosure to the receiving Party; or

 

(c)                                  became generallyavailable to the public or otherwise part of the public domain after itsdisclosure and other than through any act or omission of the receiving Party inbreach of this Agreement.

 

(d)                                 was disclosed tothe receiving Party, other than under an obligation of confidentiality, by aThird Party who had no obligation to the disclosing Party not to disclose suchinformation to others; or

 

(e)                                  was independentlydiscovered or developed by the receiving Party as documented in its corporaterecords.

 

12.2                           AuthorizedDisclosure.  Each Party may discloseConfidential Information hereunder to the extent such disclosure is reasonablynecessary (a) in filing or prosecuting patent applications, prosecuting ordefending litigation, or conducting Development, in each case to the extentwithin the scope of the Licensed Activities, provided that the receiving Partyreceives the prior written consent of the disclosing Party, such consent not tobe unreasonably withheld or delayed, and (b) for filing or updating anyMarketing Authorization Application under this Agreement, or complying withapplicable governmental laws, rules and regulations, provided that, if a Partyis required by law or regulation to make any such disclosures under (a) or (b)of the other Party’s Confidential Information it will, except whereimpracticable for necessary disclosures (for example in the event of medicalemergency or where, in the good faith judgment of a Party after consultationwith outside securities law counsel, prompt disclosure is required underapplicable securities laws, regulations or under the rules of a trading marketapplicable to such Party and it is impracticable to provide the other Partywith such advanced notice of such disclosure), give reasonable advance noticeto the other Party of such disclosure requirement and, except to the extentimpracticable as described above, will use its reasonable efforts to secureconfidential treatment of such Confidential Information required to bedisclosed.  In addition, and with priorwritten notice to the other Party of each Third Party with whom a confidentialdisclosure agreement is being entered into, each Party shall be entitled todisclose, under a binder of confidentiality, Confidential Information to anyThird Party for the purpose of carrying out the purposes of thisAgreement.  Nothing in this Article XIIshall restrict any Party from using for any purpose any ConfidentialInformation independently developed by it during the course of thecollaboration hereunder, or from using Confidential Information that isspecifically derived

 

 

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from pre-clinical or clinical trials to carry outRegulatory Approval marketing, sales or professional services support functionsas is customary in the pharmaceutical industry. Where materiality of disclosure requires a press release or other disclosurepertaining to this Agreement by one Party, the disclosing Party shall give atleast three (3) Business Days’ advance notice to the other Party, except incases where, in the good faith judgment of a Party after consultation withcounsel outside securities law counsel, prompt disclosure is required and it isimpracticable to provide such advance notice of such disclosure.

 

12.3                           Nondisclosure ofTerms.  Each of the Parties hereto agreesnot to disclose the terms of this Agreement to any Third Party without theprior written consent of the other Party hereto, which consent shall not beunreasonably withheld, except to such Party’s attorneys, advisors and others ona need to know basis under circumstances that reasonably ensure theconfidentiality thereof, or to the extent a Party determines, afterconsultation with outside counsel, that such disclosure is or may be requiredby law or regulation.

 

12.4                           Publications.  A Party (the “Publishing Party”) may publishin accordance with scientific standards any such result or study generated orDeveloped under this Agreement after providing the other Party at least thirty(30) days prior to submission of an abstract or manuscript (a “Publication”),in English, a copy of such proposed Publication to determine whether suchproposed Publication contains subject matter for which Patent protection shouldbe sought prior to publication or to determine whether it should be modified ordeleted to avoid disclosure of Proprietary Information or to avoid regulatoryissues.  If such other Party informs thePublishing Party, within such thirty (30) day period, that such Publication, inits judgment, contains subject matter for which Patent protection should besought prior to publication or would disclose Confidential Information orpossibly result in regulatory issues, the Publishing Party shall delay orprevent such Publication as proposed.  Inthe case of any proposed Publication containing subject matter as to which suchother Party has advised the Publishing Party that Patent protection should besought prior to such publication, the delay shall be sufficiently long topermit the timely preparation and filing of a Patent application with respectto such subject matter.  It is understoodthat with respect to proposed Publications consisting of abstracts that timingis often critical; accordingly and without limiting the foregoing, with respectto abstracts submitted by a Party to the other for review pursuant to thisSection 12.4, the reviewing Party shall use good faith efforts to complete itsreview and notify the other Party of any issues as soon as practicable afterreceipt thereof.  Authorship for allpublications under this Section 12.4 shall be credited appropriately and inaccordance with standard scientific practice. Notwithstanding any of the foregoing, neither Party may file orprosecute a Patent application that contains or would disclose ConfidentialInformation of the other Party, without the prior written consent of the otherParty, such consent not to be unreasonably withheld or delayed.

 

12.5                           Survival. ThisArticle XII shall survive the termination or expiration of this Agreement.

 

ARTICLEXIII

 

OWNERSHIP OF INTELLECTUAL PROPERTY, PATENTRIGHTS AND USE OF NAME

 

13.1                           Ownership. EachParty shall solely own, and it alone shall have the right to apply for, Patentswithin and outside of the Territory for any inventions made solely by thatParty’s employees or consultants in the course of performing work under thisAgreement.  This Section 13.1 shallsurvive the termination or expiration of this Agreement.

 

 

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13.2                           Third Party PatentRights. Each Party agrees to bring to the attention of the other Party anyThird Party Patent it discovers, or has discovered, and which relates to thesubject matter of this Agreement.

 

13.3                           EnforcementRights.

 

(a)                                  Notification ofInfringement. If either Party learns of any infringement or threatenedinfringement by a Third Party of the Praecis Patents such Party shall promptlynotify the other Party and shall provide such other Party with all availableevidence of such infringement.

 

(b)                                 Enforcement in theTerritory. Subject to the next sentence, Praecis shall have the right, at itsown expense, to enforce Praecis Patents in the Territory. Schering shall havethe right, but not the obligation, to institute, prosecute and control at itsown expense any action or proceeding with respect to infringement of anyPraecis Patents covering solely the manufacture, use, importation, sale oroffer for sale of the Product being developed or marketed in the Territory thatis within the scope of the Licensed Activities, by counsel of its own choice,subject to Praecis’ consent to the bringing of such action or proceeding, suchconsent not to be unreasonably withheld. Praecis shall have the right, at its own expense, to be represented inany such action by counsel of its own choice. If Schering fails to bring an action or proceeding or otherwise takeappropriate action to abate such infringement within a period of one hundredeighty (180) days of notice by Praecis to Schering requesting action, or suchshorter time period if material rights otherwise would be waived or lost,Praecis will have the right to bring and control any such action or proceedingrelating to Praecis Patents by counsel of its own choice and Schering will havethe right to be represented in any such action by counsel of its own choice andat its own expense.  If one Party bringsany such action or proceeding, the other Party agrees to be joined as a partyplaintiff if necessary to prosecute the action or proceeding and to give thefirst Party commercially reasonable assistance and authority to file andprosecute the suit.  Any damages or othermonetary awards recovered pursuant to this Section 13.3(b) shall be allocatedfirst to the costs and expenses of the Party bringing suit, then to the costsand expenses, if any, of the other Party. [*]

 

(c)                                  Settlement with aThird Party. The Party that controls the prosecution of a given action shall alsohave the right to control settlement of such action, provided however, that ifone Party controls, no settlement shall be entered into without the writtenconsent of the other Party (which consent shall not be unreasonably withheld ordelayed) if such settlement would materially and adversely affect the interestsof such other Party.

 

13.4                           Defense andSettlement of Third Party Claims. If a Third Party asserts that a patent, tradesecret or copyright owned by it is infringed by any Product in the Territory,Praecis will be solely responsible for defending against any such assertions atits cost and expense (subject to the provisions of Section 13.3(b)).  Praecis will consult with Schering prior toentering into any settlement with any such defendant, but will have the soleright to make the final determination regarding any such settlement.  The costs of any such settlement (including,without limitation, damages, expense reimbursements, compliance, futureroyalties or other amounts) shall be paid by Praecis.  If any Third Party is successful in any suchclaim and Schering is ordered to make any payments to such Third Party inconnection therewith, any such payments may be offset or deducted from thepayment obligations of Schering under the Agreement.

 

13.5                           Licenses underThird Party Patents.

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

 

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13.5.1                  Determination.  Upon mutual agreement, the Parties may seekto obtain a license or right under one or more Third Party Patents covering anyProduct in the Territory in order to avoid infringement.  In the event that either Party determinesthat it is beneficial for the Parties to obtain a license or right under one ormore Third Party Patents covering any Product in the Territory and the otherParty objects to such determination within thirty (30) days after suchdetermination is made, the Parties shall suspend action for a period of one (1)month (the “Deferral Period”) to allow the objecting Party to present itsposition to and discuss its position with the other Party.  Such discussion shall involve seniormanagement of each Party.

 

13.5.2                  Each Party maypresent such facts, findings, conclusions and other information as it deemsnecessary during the Deferral Period. Upon the earlier of the end of the Deferral Period or both Parties’presentation of all of their information, Praecis shall evaluate suchinformation and make a final determination, in its reasonable judgment, as tothe desirability of obtaining a license or right under such Third PartyPatents.  The decision reached by Praecisshall thereafter be final and binding on the Parties.

 

13.5.3                  Licensing.  In the event that the Parties agree to seekto obtain a license or right under any Third Party Patents or in the event offinal determination by Praecis of the desirability to obtain a license or rightunder any Third Party Patents, Schering and Praecis will make reasonableefforts to obtain such license or right.

 

13.5.4                  Royalties.  Any royalties and fees to be paid to theThird Party in consideration of the license or right under the Third PartyPatents with respect to the Product sold by Schering, its Affiliates or itssublicensees shall be borne by Praecis.

 

13.6                           Patent Prosecutionand Expenses. Praecis shall have the right, at its expense, to control thepreparing, filing, prosecuting and maintaining of the Praecis Patents in theTerritory, and the conducting of any interferences, re-examinations, reissues,oppositions or requests for Patent term extensions relating to the PraecisPatents.  If Praecis determines in itssole discretion to abandon or not maintain any Praecis Patents in theTerritory, then Praecis, to the extent it may do so, shall use commerciallyreasonable efforts to provide Schering with at least sixty (60) days’ priorwritten notice of such determination.  Insuch event, Schering shall have the right, at its option (except with respectto unpublished Patent applications, in which case such right is only upon theprior written consent of Praecis, granted at Praecis’ sole discretion) tocontrol the filing, prosecution and/or maintenance of any such Patent at itsown expense, in Praecis’ name.  Notwithstandingthe foregoing, if the SC agrees that failure to obtain or maintain such Patentprotection would have a material adverse impact on the Development orCommercialization of the Product in the Territory, Schering shall have theright to credit against amounts due to Praecis hereunder all out-of-pocketcosts incurred by Schering in connection with the such filing, prosecution andmaintenance of the Praecis Patents pursuant to this Section 13.6. All PatentExpenses with respect to Praecis Patents incurred by Praecis, and by Scheringto the extent provided in this Section 13.6, shall be borne by Praecis.

 

13.7                           Praecis will haveno obligation whatsoever with respect to any claim that arises from, or licensethat is required due to (i) any Change requested by Schering, (ii) Schering’sfailure to use replacement Product that does not violate such third partyrights or (iii) the combination of the Product with any other non-Praecisintellectual property, hardware or processes.

 

13.8                           For avoidance ofdoubt, Schering acknowledges that Praecis Patents include Third Party Patents,and that Praecis may not have the right to control the bringing of claims toenforce such Patents or to defend such Patents, and that, in accordance withSection 2.5,

 

 

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the provisions of this Article XIII are subject toany limiting terms and conditions in the applicable third party licenses.

 

13.9                           Except asexpressly set forth otherwise in this Article XIII, each Party will be solelyresponsible for any intellectual property-related litigation in which it maybecome involved in connection with the Development or Commercialization of theProduct, or its exploitation of the Praecis Patents, Praecis Information andPraecis Trademarks, including any such litigation arising from (i) thecombination of any such intellectual property with any other intellectualproperty, hardware, processes or combination thereof, or (ii) any intellectualproperty other than the licensor Party’s intellectual property or (iii) anyclaim relating to the other Party’s intellectual property that could be avoidedby the use of a reasonable alternative provided by the other Party.

 

13.10                     Use of Names.Except as provided in Article XIV, neither Party shall use the name of theother Party in relation to this transaction in any public announcement, pressrelease or other public document without the written consent of such otherParty (unless such use is required by law or regulation), which consent shallnot be unreasonably withheld or delayed; provided however, that either Partymay use the name of the other Party in any document filed with any HealthRegulatory Authority, including the FDA, or with the Securities and ExchangeCommission, in which case Schering shall be referred to as “Schering AG,Germany”.

 

ARTICLEXIV

 

TRADE MARK RIGHTS AND INFRINGEMENT

 

14.1.1                  Each partyrecognizes the exclusive ownership by the other Party of any proprietary name,logotype or Trademark furnished by such Party (including Affiliates) for use inconnection with the marketing, sale or distribution of the Product.  Neither Party shall, either while thisAgreement is in effect, or at any time thereafter, register, use or challengeor assist others to challenge the Trademarks of the other Party or attempt toobtain any right in or to any such name, logotype or trademark or in and to anyname, logotype or trademarks confusingly similar to the Product or any othergoods and products, notwithstanding that such goods or products have adifferent use or are dissimilar to the Product.

 

14.1.2                  Schering may usethe Praecis Trademark or any other Schering Trademark in connection with themarketing, sale or distribution of the Product in the Territory.

 

14.2         ScheringTrademarks

 

14.2.1                  Schering shall beresponsible for the selection, registration, maintenance and defense of allSchering Trademarks, which are employed inconnection with the marketing and selling of the Product in the Territory, and shall ownand control such Schering Trademarks and pay any costs in connection therewith.

 

14.2.2                  Schering shall beresponsible for the selection and the registration, hosting, maintenance anddefense of the Schering Trademarks as Domain Names which are used in connection with the Product under all country code TopLevel Domains (ccTLD) and all current and future generic Top Level Domains(gTLD). For the avoidance of doubt Schering shall be allowed to register in itsown name, to host on its own servers, maintain and defend such Domain Names anduse them for websites.

 

14.3                           Praecis Trademark

 

 

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14.3.1                  In the case thatSchering decides to use the Praecis Trademark, Praecis hereby grants toSchering, subject to the terms and conditions herein, the exclusive right to usethe Praecis Trademark and the Praecis Name in the Territory for the term ofthis Agreement free of charge. Such license shall be exclusive for the PraecisTrademark and non-exclusive for the Praecis Name.

 

14.3.2                  Schering shall, atits costs and expenses, and whenever necessary for the performance of the termsof this Agreement, (i) file and undertake in good faith to obtain and thenmaintain the Praecis Trademarks’ registrations in the Territory, and (ii)inform Praecis of the status of such Praecis Trademarks.  A list on the legal status of the Trademarksfor all countries of the Territory is attached as of Effective Date as Schedule14.3.2.

 

(a)                                  In the case thatSchering decides to use the Praecis Trademark, Praecis shall transfer toSchering all Domain Names similar to the Praecis Trademark; provided, however,if Praecis is using, or plans to use, the Praecis Trademark outside of theTerritory, the Domain Names shall not be transferred to Schering.  Schering shall be responsible for theregistration, hosting, maintenance and defense of the Praecis Trademark asDomain Names in the Territory. For the avoidance of doubt, Schering is allowedto register in its own name, to host on its own servers, maintain and defendsuch Domain Names in the Territory and use them for websites. A list on thelegal status of the Domain Names for all countries of the Territory as ofEffective Date will be provided by Praecis by May 15, 2004. Schering agreesthat (i) any use of the Praecis Marks will be only in a proper trademark sense,shall identify the Praecis Marks as a trademark by including the appropriatetrademark symbol in association with the Praecis Marks and (ii) all goodwillresulting from its use of the Praecis Marks shall inure to the exclusivebenefit of Praecis.  Scheringacknowledges that Praecis makes no representation or warranty that trademarkregistrations can be obtained or maintained for the Praecis Trademark.  Schering recognizes Praecis’ exclusiveownership of and title in and to the Praecis Marks, and, notwithstanding anyother provision of this Agreement, shall not at any time do or authorize to bedone any act or thing which is likely to materially impair the rights ofPraecis in and to the Praecis Marks or in any trademark registration orapplication therefor, and Schering shall not at any time claim any right ofinterest in or to the Praecis Marks or the aforesaid trademark registrations orapplications therefor.The Parties acknowledge the importance of exercisingquality control over use of the Praecis Marks in order to preserve thecontinued integrity and validity of the Praecis Marks and to protect thegoodwill associated therewith.  Scheringagrees that the Product offered or sold under the Praecis Marks pursuant tothis Agreement must be of a standard and quality at least equal to or betterthan that required by Praecis for its own use thereof.  If no standard is expressly required byPraecis, then the Product offered or sold under the Praecis Marks will be of astandard at least reasonably comparable to that prevailing with respect toOther Praecis Products offered by Praecis that also use the Praecis Marks.  As required in each country in the Territoryto preserve proprietary rights in the Praecis Marks, or as otherwise requestedby Schering, Praecis shall provide Schering with reasonable usage guidelinesfor the Praecis Marks.

 

14.4                           Trademarkinfringement:

 

Each Party shall promptly notify the other of anyactual alleged or threatened infringement of the Trademark or of any unfairtrade practices, trade dress limitation, passing off of counterfeit goods, orsimilar offences of which it becomes aware. Except to the extent otherwise required by law or protect proprietaryrights in and to the Praecis Trademark, only Schering will be authorized to initiateat its own discretion legal proceedings against any infringement or threatenedinfringement of a Trademark

 

 

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applicable to the Product as defined in thisAgreement. Schering shall be responsible for all costs in connection with suchlegal proceedings.  Praecis shallco-operate reasonably in connection with Schering’s actions for the protectionof the Trademarks.

 

14.5                           In the event thatthis Agreement is terminated in accordance with Article XVI Schering shall,upon Praecis’ request, transfer the Praecis Trademark, and all applications andregistrations therefor, to Praecis, and for such transfer, other than in thecase of termination by Praecis for material breach by Schering, the Partieswill further negotiate in good faith a reasonable consideration, reflecting thevalue of the Trademark created by Schering, which shall be paid by Praecis toSchering. The value will be determined at that time of the assignment.

 

ARTICLEXV

 

REPRESENTATIONS AND WARRANTIES

 

15.1         Representationsand Warranties

 

(a)                                  Each of theParties represents and warrants to the other Party, as of the Effective Date,as follows:

 

(i)                                     The Agreement is alegal and valid obligation binding upon such Party and enforceable inaccordance with its terms.  Theexecution, delivery and performance of the Agreement by such Party does notconflict with any agreement, instrument or understanding, oral or written, towhich it is a party or by which it is bound, nor to such party’s knowledge,violate any law or regulation of any court, governmental body or administrativeor other agency having jurisdiction over it.

 

(ii)                                  Neither Party hasgranted, and during the term of this Agreement neither Party will grant, anyright to any Third Party relating to the Praecis Patents and/or PraecisInformation, or Schering Information, which would conflict with the rightsgranted to the other Party hereunder.

 

(iii)                               There are noactions, suits, proceedings or unsatisfied judgments outstanding, pending or,to the knowledge of such Party threatened, against or affecting such Party,which may impair the ability of such Party to perform its obligations underthis Agreement, and with respect to Praecis subject to the disclosure referedto in Section 15.1 (b) (iii) such Party is not aware of any existing ground onwhich any such action, suit or proceeding might be commenced with anyreasonable likelihood of success.

 

(b)                                 Praecis herebyrepresents and warrants to Schering, as of the Effective Date, that Praecis:

 

(i)                                     Has providedSchering with reasonable access to all material information in its possessionor control or of which it is aware as of the Effective Date, concerningefficacy, side effects, injury, toxicity, or sensitivity, reaction andincidents or severity thereof, associated with any clinical use, studies,investigations or tests with the Product (animal or human), whether or notdetermined to be attributable to the Product.

 

(ii)                                  To the best of itsknowledge, Praecis has not employed, or used a contractor or consultant thatemploys, any individual or entity debarred

 

 

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by the FDA (or subject to a similar sanction ofEMEA), or, to the best knowledge of Praecis, any individual who or entity whichis the subject of an FDA debarment investigation or proceeding (or similarproceeding of EMEA), in the conduct of the preclinical or clinical studies ofProducts.

 

(iii)                               As of theEffective Date, except as it may have previously disclosed to Schering inwriting, has not received any notices of infringement or any writtencommunications asserting a possible infringement with respect to the Product,and that it is not aware that the manufacture, use or sale of the Productinfringes any Third Party patent rights.

 

(iv)                              As of theEffective Date, Praecis is not aware of any prior act or any fact which causesit to conclude that any Praecis Patent owned by Praecis or licensed under thePPI Licensed Rights is invalid or unenforceable.

 

(v)                                 Praecis hasobtained all right, title and interest in and to all rights to the PraecisPatents and Praecis Information, free and clear of any liens, encumbrances orrights to repurchase; and

 

(vi)                              During the termhereof, Praecis will not take enter into any agreements with any Third Partywhich would adversely Schering’s rights under this Agreement.

 

(vii)                           Praecis hasconducted, or has caused its contractors or consultants to conduct, thepreclinical and clinical studies for the Product in the US, in all materialrespects in accordance with applicable laws and published standards of the FDA,****and regulatory standards applicable to theconduct of studies in the United States, including without limitation, GMPs,GLPs and GCPs.

 

(viii)                        Notwithstandingany term or condition to the contrary in this Agreement, Praecis makes norepresentation, warranty or covenant (i) as to the validity or scope of any ofthe Praecis Patents (except as set forth in Section 15.1(b)(iv) above), (ii)that the Praecis Patents or Praecis Information or the performance of any of theLicense Activities will not infringe any Third Parties’ intellectual property,except as expressly represented and warranted in Section 15.1(b)(iii) (andwithout limiting Praecis’ indemnification obligation pursuant to Article XVII),(iii) that the Praecis Patents include composition-of-matter claims that coverPPI-149 in any country in the Territory other than those listed in Schedule15.1(b), or (iv) that the PLENAXIS trademark is or can be registered in anycountry in the Territory other than those listed in Schedule 15.1(b) as havingbeen registered as of the Effective Date.

 

(c)                                  Schering herebyrepresents and warrants to Praecis, as of the Effective Date, that Schering:

 

(i)                                     During the termhereof, Schering will not enter into any agreements with any Third Party whichwould adversely affect Praecis’ rights under this Agreement.

 

 

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ARTICLEXVI

 

TERM AND TERMINATION

 

16.1                           Term. ThisAgreement shall commence as of the Effective Date and, unless sooner terminatedas provided herein, shall continue in effect until (i) the last Praecis Patentlicensed to Schering pursuant Section 2.1 expires or (ii) ten (10) years afterthe First Commercial Sale of the Product in the first of one of the followingcountries: Germany, United Kingdom, France, Spain or Italy, whichever of (i)and (ii) is longer. Schering will notify Praecis about the First CommercialSale of the Product. This Agreement will automatically extend for renewalperiods of one (1) year unless either Party gives written notice to the otherParty of its intention not to renew at least one (1) year prior to the expirydate.

 

16.2                           Termination

 

(a)                                  [*]

 

(b)                                 [*]

 

(c)                                  Failure ofSchering or Praecis to materially comply with any of their respective materialobligations and conditions contained in this Agreement shall entitle the otherParty to give the Party in default notice requiring it to cure suchdefault.  If such default is notsubstantially cured (or fully cured, in the case of a payment default) within[*] after receipt of such notice, the notifying Party shall be entitled(without prejudice to any of its other rights conferred on it by thisAgreement) to terminate this Agreement in its entirety only. Notwithstandingthe foregoing, in the event of a non-monetary default, if the default is notreasonably capable of being cured [*] by the defaulting Party and suchdefaulting Party is making a good faith effort to cure such default, thenotifying Party may not terminate this Agreement, provided however, that thenotifying Party may terminate this Agreement if such default is not cured[*]  The right of either Party toterminate this Agreement as hereinabove provided shall not be affected in anyway by its waiver of, or failure to take action with respect to any previousdefault.

 

(d)                                 In the event thatone of the Parties hereto shall go into liquidation, a receiver or a trustee beappointed for the property or estate of that Party and said receiver or trusteeis not removed within thirty (30) days, or the Party makes an assignment forthe benefit of creditors (collectively, a “Bankruptcy Event”), and whether anyof the aforesaid Bankruptcy Events be the outcome of the voluntary act of thatParty, or otherwise, the other Party shall be entitled to terminate thisAgreement in its entirety only by written notice to the Party that is subjectto a Bankruptcy Event.

 

(i)                                     If Praecis entersinto an arrangement for creditors and/or bankruptcy, one week prior to sucharrangement for creditors and/or bankruptcy, Schering shall have the right tobe notified by Praecis of such arrangement and/or bankruptcy, and any and alllicense fees owed directly to IUF by Praecis pursuant to this Agreement shallthereafter, upon notice to Schering, be paid by Schering directly to IUF, andSchering may offset such payments against amounts otherwise to be paid bySchering to Praecis under this Agreement.

 

(e)                                  Should Schering orPraecis consider the distribution of the Product dangerous or harmful, eitherParty shall immediately notify the other Party and provide in

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

 

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writing any and all reason and information whichprompted such decision. If both Parties consider that such decision iswell-founded, or a Health Regulatory Authority requires the cessation ofmarketing and sales of the Product, each Party will be entitled to terminatethis Agreement in its entirety only****bysending a termination notice to the other Party. Any Firm Orders issued bySchering for the term after the termination will be deemed to be cancelled withthe notification of termination according to this Section 16.2(e). For theavoidance of doubt, Praecis and Schering will each bear its own costs incurred.

 

(f)                                    [*]

 

(g)           [*]

 

[*]

 

[*]

 

[*]

 

[*]

 

(h)                                 Effect ofTermination

 

(a)**                                 **In the event thatthis Agreement is terminated in its entirety or in one or more countries bySchering in accordance with Section 16.2 (b) above, by Praecis in accordancewith Section 16.2 (f), by either Party in its entirety in accordance with thisArticle XVI or pursuant to any other provision of this Agreement entitling aParty to terminate this Agreement, Schering will, with respect to each countryfor which the termination applies (or all countries in the Territory in thecase of termination of this Agreement in its entirety): (i) not use the PraecisInformation as long as it has to be kept confidential pursuant to Article XIIhereof in such country; (ii) not infringe any of the Praecis Patents in suchcountry; (iii) make all payments accrued under this Agreement with respect tosuch country prior to the effective termination date; (vi) transfer allregulatory filings and approvals related to the applicable Product in suchcountry to Praecis, on Praecis’ written request for same; and (vii) sell toPraecis, at any time within ninety (90) days of such termination, at Praecis’election, all or any portion of the inventory of the Product owned by Scheringor its Affiliates which are intended for sale in such country at a price equalto Schering’s or its Affiliate’s fully burdened costs for such inventory.  Such election shall be made by Praecis inwriting and within thirty (30) days of such termination.  If Praecis elects to purchase such Scheringinventory, then Schering shall ship at Praecis’ cost and direction suchinventory to Praecis.  Praecis shall payfor such inventory upon receipt of such inventory.

 

(b)                                 Notwithstandingthe provisions of subparagraph (a) of this Section 16.2(h) or any otherprovision of this Agreement, unless this Agreement has been validly terminatedin its entirety (in which event Praecis shall be entitled to Commercialize theProduct in any and all countries in the Territory), Praecis shall not bepermitted to Commercialize the Product in any country in the EU.

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

 

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(i)                                     Upon termination,the right and obligations of the Parties cease, and all licenses terminate,except where expressly provided for otherwise in this Agreement, and providedthat termination of this Agreement shall not relieve the Parties hereto of anyliability, including any obligation to make payments hereunder, which accruedhereunder prior to the effective date of such termination, nor preclude eitherParty from pursuing all rights and remedies it may have hereunder or at law orin equity with respect to any breach of this Agreement nor prejudice anyParty’s right to obtain performance of any obligation which arose prior to theeffective date of such termination.

 

16.3                           SurvivingRights.  The rights and obligations setforth in this Agreement shall extend beyond the termination of the Agreementonly to the extent expressly provided in this Article XVI or expressly providedfor elsewhere in this Agreement.

 

ARTICLEXVII

 

INDEMNIFICATION

 

17.1                           Indemnification.Schering hereby agrees to save, defend and hold Praecis and its officers,directors, consultants, agents and employees harmless from and against any andall Third Party suits, claims, actions, demands, liabilities, expenses orlosses, including reasonable legal expenses and attorneys’ fees (collectively“Losses”) resulting from or arising out of the Commercialization of the Productexcept to the extent such Losses result from or arise out of breach by Praecisof this Agreement, including without limitation the inaccuracy of anyrepresentation of Praecis set forth in this Agreement or breach of any ofPraecis’ warranties set forth in Article XV, or resulting from Praecis’manufacture of the Product or the negligence or willful misconduct of Praecis, inwhich case Praecis hereby agrees to save, defend and hold Schering and itsdirectors, officers, agents and employees harmless from any and all suchLosses.

 

17.2                           Except as providedin Section 17.1, Schering and Praecis, (as applicable, the “First Party”) herebyagree to save, defend and hold the other Party and its directors, officers,agents and employees harmless from and against any and all Losses resultingfrom or arising out of the Development of any Product to the extent suchDevelopment was performed by or on behalf of the First Party, except to theextent such Losses result from or arise out of the negligence or willfulmisconduct of the other Party, in which case such other Party hereby agrees tosave, defend and hold the First Party and its directors, officers, agents andemployees harmless from any and all such Losses, provided that, for purposeshereof Development performed by Schering hereunder is deemed not to be onbehalf of Praecis.

 

17.3                           Each indemnifiedParty agrees to give the indemnifying Party prompt written notice of any Lossor discovery of fact upon which such indemnified Party intends to base arequest for indemnification under Sections 17.1 or 17.2.  Each Party shall furnish promptly to the othercopies of all papers and official documents received in respect of anyLoss.  With respect to any indemnifiableclaim hereunder that does not relate solely to the indemnified Party becomingsubject to injunctive or other equitable relief, and as to which theindemnifying Party shall have acknowledged in writing the obligation toindemnify the indemnified Party hereunder, the indemnifying Party shall havethe sole right to defend, settle or otherwise dispose of such Loss, on suchterms as the indemnifying Party, in its sole discretion, shall deemappropriate.  The indemnified Party willhave the right to control indemnifiable claims hereunder that relate solely toinjunctive or equitable relief brought solely against the indemnified Party.  The Party not controlling the litigation mayparticipate in the litigation, with counsel of its own choosing, at its ownexpense.**** The indemnifying Party shall obtain thewritten consent of the indemnified Party, which shall 

 

 

35

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not be unreasonably withheld or delayed, prior toceasing to defend, settling or otherwise disposing of any Loss if as a resultthereof the indemnified Party would become subject to injunctive or otherequitable relief, or any remedy other than the payment of money which is theresponsibility of the indemnifying Party. The indemnifying Party shall not be liable for any settlement or otherdisposition of a Loss by the indemnified Party which is reached without theconsent of the indemnifying Party.  Ifand to the extent that any litigation relating to a Loss is conducted by theindemnified Party as provided above, the reasonable costs and expenses,including reasonable fees and disbursements of counsel incurred by anyindemnified Party in connection with any such litigation, shall be reimbursed,once it is at least preliminarily determined that such Party is entitled toindemnification under this Article XVII, on a quarterly basis by theindemnifying Party, without prejudice to the indemnifying Party’s right tocontest the indemnified Party’s right to indemnification and subject to refundin the event the indemnifying Party is ultimately held not to be obligated toindemnify the indemnified Party.

 

17.4                           In the event anyParty becomes liable to pay any damages to a Third Party with respect to anymatter related to the Product not otherwise provided for in Section 17.1 orSection 17.2,, the Parties hereby agree that any such damages shall be borne bythe Party in whose sphere of responsibility lays the responsibility for thedamage, and, to that effect, the Parties further agree to define sphere ofresponsibilities with respect to the manufacture and quality control as laidout in Appendix 7 to the QAA from and after the time the QAA is executed anddelivered by the Parties. In the event either Party fails to fulfill itsobligations pursuant to this Article XVII, the other Party shall be entitled tonotify it and such failure shall, if material, be deemed a default as morefully described in Section 16.2(c) of this Agreement.

 

17.5                           Insurance. Praecisagrees and warrants that, during the term of this Agreement and for a period offive (5) years thereafter, it shall obtain and maintain at its own expenses,product liability insurance from a recognized insurance carrier providingliability coverage in the aggregate, per occurrence and per year, with coveragelimits of not less than fifteen million U.S. dollars ($15,000,000). Praeciswill prove this insurance cover by furnishing Schering with copies of therelevant insurance documentation.

 

17.6                           This Article XVIIshall survive the termination or expiration of this Agreement.

 

ARTICLEXVIII

 

MISCELLANEOUS

 

18.1                           Assignment.

 

(a)                                  Each Party mayassign this Agreement or any of its rights or obligations under this Agreementto any of its Affiliates; provided, however, that such assignment shall notrelieve the Party of its responsibilities for performance of its obligationsunder this Agreement.

 

(b)                                 The Parties maynot assign this Agreement to any Third Party without the prior written consentof the other Party, such consent not to be unreasonably withheld or undulydelayed, except that no prior written consent shall be required in the eventthat a Third Party acquires all or substantially all of the assets oroutstanding shares of, or merges with, Schering or Praecis, as the case may be;provided, that, the assignee shall agree in writing to assume all of theassignor’s rights and responsibilities hereunder, the assignee shall providenotice of such assignment to the other Party to this Agreement as soon aspracticable following such assignment, and such assignment shall not relievethe Party of its responsibilities for performance of its obligations under thisAgreement.

 

 

36

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(c)                                  This Agreementshall be binding upon and inure to the benefit of the permitted assigns of theParties.  Any purported assignment not inaccordance with this Agreement shall be null and void.

 

18.2                           ForceMajeure.  Neither Party shall lose anyrights hereunder or be liable to the other Party for damages or losses onaccount of failure of performance by the defaulting Party, other than forpayment obligations, if the failure is occasioned by government action(including, without limitation, laws, regulations or orders), war, fire, terrorism,  explosion, flood or other weather event,strike, lockout, embargo, act of God or any other cause beyond the control ofthe defaulting Party, provided that the Party claiming force majeure hasextended reasonable efforts normally followed in its industry to avoid orremedy any such force majeure, continues to employ such efforts and promptlynotifies the other Party of such force majeure event.

 

18.3                           FurtherActions.  Each Party agrees to execute,acknowledge and deliver such further instruments and to do all such other acts,as may be necessary or appropriate in order to carry out the purposes andintent of this Agreement.

 

18.4                           Survival ofRepresentations; Disclaimer.  EACH PARTYAGREES AND ACKNOWLEDGES THAT, EXCEPT AS SET FORTH IN ARTICLE XV, NEITHER PARTYMAKES ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, EXPRESS,IMPLIED OR STATUTORY, AND EACH PARTY HEREBY EXPRESSLY DISCLAIMS ALLREPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDINGWITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR APARTICULAR PURPOSE, AGAINST NON-INFRINGEMENT OR THE LIKE, OR ARISING FROMCOURSE OF PERFORMANCE, COURSE OF DEALING OR FROM TRADE PRACTICES, OR REGARDINGTHE VALUE, ADEQUACY, QUALITY, EFFICIENCY, STABILITY, CHARACTERISTICS ORUSEFULNESS OF ANY PRODUCTS.

 

18.5                           Exclusion ofLiability.  EXCEPT AS EXPRESSLY AGREED INTHIS AGREEMENT, TO THE MAXIMUM EXTENT PERMITTED BY LAW, NEITHER PARTY, ITSAFFILIATES NOR ANY OF THEIR LICENSEES OR REPRESENTATIVES SHALL BE LIABLE TO THEOTHER PARTY, ITS AFFILIATES OR ANY OF THEIR LICENSEES OR REPRESENTATIVES FORANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, RELIANCE OR PUNITIVE DAMAGESOR LOST OR IMPUTED PROFITS OR ROYALTIES, LOST DATA OR COST OF PROCUREMENT OFSUBSTITUTE GOODS OR SERVICES, WHETHER LIABILITY IS ASSERTED IN CONTRACT, TORT(INCLUDING, WITHOUT LIMITATION, NEGLIGENCE AND STRICT PRODUCT LIABILITY),INDEMNITY OR CONTRIBUTION, AND IRRESPECTIVE OF WHETHER THAT PARTY OR ANYREPRESENTATIVE OF THAT PARTY HAS BEEN ADVISED OF, OR OTHERWISE MIGHT HAVEANTICIPATED THE POSSIBILITY OF, ANY SUCH LOSS OR DAMAGE.

 

18.6                           No Third-PartyRights.  No provision of this Agreementshall be deemed or construed in any way to result in the creation of any rightsor obligation in any person not a Party to this Agreement.  To the extent that either Party’s directors,officers, employees, or Affiliates is entitled to indemnification under thisAgreement, Schering and Praecis, respectively will have the sole right to seeksuch indemnification on behalf of such indemnitee.

 

18.7                           No TrademarkRights.  Except as otherwise providedherein, no right, express or implied, is granted by this Agreement to use inany manner the names “Schering” or “Praecis” or any other trade name ortrademark of the other Party or its Affiliates in connection with theperformance of this Agreement.

 

 

37

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18.8                           Notices.  All notices hereunder shall be in writing,effective upon receipt, and shall be delivered personally, hand-delivered, mailedby registered or certified mail (return receipt requested, postage prepaid), orsent by express courier service, to the other Party at the following addresses(or at such other address for a Party as shall be specified by like notice):

 

(a)                                  If to Schering

 

Schering AktiengesellschaftD-13342 Berlin, Germany

Legal Department

 

(b)                                 If to Praecis

 

Praecis Pharmaceutical Inc.

830 Winter Street,

Waltham, MA 02451, USA

 

18.9                           Waiver.  Except as specifically provided herein, thewaiver from time to time by either of the Parties of any of their rights ortheir failure to exercise any right or remedy shall not operate or be construedas a continuing waiver of same or of any other of such Party’s rights orremedies provided in this Agreement.

 

18.10                     Severability.  Each Party hereby agrees that it does notintend, by its execution hereof, to violate any public policies, statutory orcommon laws, rules, regulations, treaties or decisions of any government agencyor executive body thereof of any country or community or association ofcountries.  Should one or more provisionsof this Agreement be or become invalid, the Parties hereto shall substitute, bymutual consent, valid provisions for such invalid provisions, which valid provisionsin their economic and other effects are sufficiently similar to the invalidprovisions that it can be reasonably assumed that the Parties would haveentered into this Agreement with such valid provisions.  In case such valid provisions cannot be agreedupon, the invalidity of one or several provisions of this Agreement shall notaffect the validity of this Agreement as a whole or the validity of anyportions hereof, unless the invalid provisions are of such essential importanceto this Agreement that it is to be reasonably assumed that the Parties wouldnot have entered into this Agreement without the invalid provision.

 

18.11                     Ambiguities.  The Parties acknowledge and agree that: (a)each Party and its counsel reviewed and negotiated the terms and provisions ofthis Agreement and have contributed to its revision; (b) the rule ofconstruction to the effect that any ambiguities are resolved against thedrafting Party shall not be employed in the interpretation of this Agreement;and (c) the terms and provisions of this Agreement shall be construed fairly asto the Parties hereto and not in favor of or against any Party, regardless ofwhich Party was generally responsible for the preparation of this Agreement.

 

18.12                     Governing Law;Jurisdiction. This Agreement shall be governed by and interpreted in accordancewith the laws of New York, without regard to conflict of laws principles ofsuch state. Each Party hereby irrevocably and unconditionally submits, foritself and its property, to the exclusive jurisdiction of any New York state orU.S. federal court located in the Southern District of New York and anyappellate court from such court, in any suit, action or proceeding arising outof this Agreement, and agrees that all claims in respect of any such suit,action or proceeding may be heard and determined in such court; 

 

 

38

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provided, that, each Party shall be entitled toenforce any judgment in any court having jurisdiction over the matter.

 

18.13                     Headings.  The section and paragraph headings containedherein are for the purposes of convenience only and are not intended to defineor limit the contents of said sections or paragraphs.

 

18.14                     Counterparts.  This Agreement may be executed by the Partiesin one or more counterparts.  Suchcounterparts may be exchanged by facsimile (provided that each executedcounterpart is transmitted in one complete transmission).  Where there is an exchange of executedcounterparts, each Party shall be bound by this Agreement notwithstanding thatoriginal copies of this Agreement may not be exchanged immediately.  The Parties shall cooperate after executionof this Agreement and exchange by facsimile to ensure that each Party obtainsan original, executed copy of this Agreement.

 

18.15                     Entire Agreement;Amendments.  This Agreement, includingall Schedules attached hereto, all documents and things incorporated herein byreference and all of the documents delivered concurrently herewith set forthall the covenants, promises, agreements, warranties, representations, conditionsand understandings between the Parties hereto and supersede and terminate allprior agreements and understandings between the Parties.   No subsequent alteration, amendment, changeor addition to this Agreement shall be binding upon the Parties hereto unlessreduced to writing and signed by the respective authorized officers of theParties.

 

18.16                     Expenses.  Except as otherwise specified in thisAgreement, all costs and expenses, including, without limitation, fees anddisbursements of counsel, financial advisers and accountants, incurred inconnection with this Agreement and the transactions contemplated hereby shallbe paid by the Party incurring such costs and expenses.

 

18.17                     IndependentContractors.  The status of the Partiesunder this Agreement shall be that of independent contractors.  Neither Party shall have the right to enterinto any agreements on behalf of the other Party, nor shall it represent to anyperson that it has any such right or authority. Nothing in this Agreement shall be construed as establishing apartnership or joint venture relationship between the Parties.

 

18.18                     ScheringStandstill.  Without the express priorwritten consent of Praecis, for a period of [*] after the Effective Date,neither Schering nor any of its Affiliates will, directly or indirectly, (i)purchase or otherwise acquire any securities, or rights or options to acquireany securities, of Praecis such that, after giving effect to such purchase orother acquisition, Schering, alone or together with its Affiliates, would“beneficially own” (determined as provided in Rule 13d-3 under the SecuritiesExchange Act of 1934, as amended) more than [*] of Praecis’ outstanding commonstock, (ii) make any “solicitation” of “proxies” (as such terms are used in theproxy rules of the United States Securities and Exchange Commission) or (iii)make any written offer or proposal, or any public announcement, concerning anybusiness combination, merger or consolidation, tender or exchange offer orequity investment involving, or sale of all or a significant portion of theassets of, Praecis, or (iv) instigate, join, act in concern with or assist(including but not limited to providing, or assisting in any way in obtaining,financing for, or acting as a joint or co-bidder with) any Third Party to takeany action referred to in clauses (i) through (iii) above.

 

IN WITNESS WHEREOF, Schering and Praecis havecaused this Agreement to be executed as of the Effective Date by theirrespective duly authorized representatives.

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

 

39

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| Berlin, April 27, 2004      | Waltham, April 27, 2004      |
|-----------------------------|------------------------------|
| SCHERING AKTIENGESELLSCHAFT | PRAECIS PHARMACEUTICALS INC. |
|                        |                         |   |
| /s/ Christian Nowak         |                         | /s/ Daniel Horn |   | /s/ Kevin F. McLaughlin |   |
| Christian Nowak             | Dr. Daniel Horn              |   |
|                             |                              |  |  |  |  |

 

 

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Schedule 1 - Countries of Territory

 

1.                                      European Union

 

Austria

Belgium

Czech Republic

Cyprus

Denmark

Estonia

Finland

France

Germany

Great Britain

Greece

Hungary

Ireland

Italy

Latvia

Lithuania

Luxemburg

Malta

Netherlands

Poland

Portugal

Slovakia

Slovenia

Spain

Sweden

 

2.             EuropeanUnion and European Economic Area

 

European Union

Iceland

Liechtenstein

Norway

Switzerland

 

3.             EasternEurope and Middle East

 

Albania

Armenien

Azerbaijan

Belarus

Bosnia-Herzog.

Bulgaria

Croatia

Georgia

Kazakhstan

Kirghizia

Macedonia

Mongolia

Moldavia

Montenegro

Romania

Russia

Serbia

Tadzhikistan

Turkey

Turkmenistan

Ukraine

Uzbekistan

Afghanistan

Bahrain

Bangladesh

Egypt

India

Iran

Iraq

Israel

Jordan

Kuwait

Lebanon

Libya

Oman

Qatar

Pakistan

Saudi Arabia

South Africa

Sri Lanka

Syria

United ArabEmirates

Yemen

 

4.             RegionAsia/Pacific

 

Australia

New Zealand

 

 

41

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Schedule 2 - End User Kit Contents andSpecifications

 

KitComponents as Designated in MAA section 3.2 P.7 Submitted to BfArM in June 2003andCurrent as of Effective Date

 
| **Component**                                                                | ** ** | **Supplier Name and Address** | ** ** |
|------------------------------------------------------------------------------|------------|-------------------------------|------------|
| Abarelix 100 mg powder for suspension for  injection vial                    |       | [*]                           |       |
|                                                                         |       | [*]                           |       |
| 0.9% Sodium  Chloride Injection, 5 mL ampoule                                |       | [*]                           |       |
| 3 cc Luer-LockTM syringe with 18 gauge  1-1/2” needle, CE certified |       | [*]                           |       |
| 22 gauge 1-1/2” Safety Glide Needle,  CE certified                 |       | [*]                           |       |
| Drug Product Label                                                           |       | [*]                           |       |
|                                                                         |       |                          |       |
| Technical Instructions                                                       |       | [*]                           |       |

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

 

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Specifications for Injection Vial, Stopperand Seal Components

 

As Designated in MAA Submitted to BfArM inJune 2003 and Current as of Effective Date

 
| **Component**     | ** ** | **Supplier** | ** ** | **Material** | ** ** | **Description** | ** ** |
|-------------------|------------|--------------|------------|--------------|------------|-----------------|------------|
| Vial              |       | [*]          |       | [*]          |       | [*]             |       |
|              |       |         |       |         |       |            |       |
| Stopper           |       | [*]          |       | [*]          |       | [*]             |       |
|              |       |         |       |         |       |            |       |
|              |       |         |       |         |       | [*]             |       |
|              |       |         |       |         |       |            |       |
|              |       |         |       |         |       | [*]             |       |
|              |       |         |       |         |       |            |       |
| Seal, Flip-off    |       | [*]          |       | [*]          |       | [*]             |       |
|              |       |         |       |         |       |            |       |
|              |       |         |       | [*]          |       |            |       |
|              |       |         |       |         |       |            |       |
| 360 Medical Fluid |       | [*]          |       | [*]          |       | [*]             |       |

 

----

(a)           [*]

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

 

43

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# Schedule 3 - ExistingDevelopment

#  

# Existing ClinicalTrials

#  

1.                                       Praecis iscurrently undertaking a dosing study (Praecis number 149-04-01) for Plenaxis inandrogen independent prostate cancer patients. That study will start to accrue patients in the United States beginningin April 2004.  As of the Effective Date,the clinical protocol has been commented upon by the FDA and resubmitted withfurther changes.

 

2.                                       There are alsoon-going evaluations of improved delivery devices and formulations for theCurrent Product.

 

 

44

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Schedule 4 - PPI-149

 

“PPI-149” shall mean a compound having thefollowing structure, as described in US Patents 5,843,901, 6,423,686, and6,455,499:

 

 

 

45

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Schedule 5 - Praecis Patents in theTerritory

 

Granted Patents(1)

 

AT 0794961

BE 0794961

CH 0794961

DE 0794961

DK 0794961

ES 0794961

FI 0794961

FR 0794961

GB 0794961

GR 0794961

IE 0794961

IT 0794961

LU 0794961

MC 0794961

NL 0794961

PT 0794961

SE 0794961

 

AU 715,399

AU 735,174

AU 782,801

AU 730,948

 

JR 1998

 

NZ 336269

 

RU 2202371

 

ZA 97/10994

 

----

(1) Indicated status reflects communicationsreceived by PRAECIS from foreign patent agents as of April 14, 2004.

 

 

Pending Applications

 

AU 31301/00

AU 54008/01

AU 39667/99

AU 37642/99

AU 41883/01

 

EP 01204149.7

EP 97953188.6

EP 96942812.7

EP 02078871.7

EP 99922735.8

EP 99920059.5

EP 01913197.8

 

CZ PV 2066-99

 

DZ 970221

 

HR P970674A

 

HU 22857/99

 

IL 130,309

 

NZ 511431

NZ 507498

NZ 507504

 

PL P-334076

 

SK PV0793-99

 

TR 1382

 

UA 99073900

 

 

46

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Schedule 8.1 - Approval Milestone Payment

 

[*]

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

 

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Schedule 14.3.2 Plenaxis TrademarkRegistrations and

Pending Applications in the Territory

 

 

I.                                         Registrations/applicationsowned by PRAECIS

 
| **Country**          | ** ** | **Filing date** | ** ** | **Application  number** | ** ** | **Reg. date** | ** ** | **Reg.  number** | ** ** | **Status**   | ** ** |
|----------------------|------------|-----------------|------------|-------------------------|------------|---------------|------------|------------------|------------|--------------|------------|
| COMMUNITY TRADE MARK |       | 15/7/02         |       | 2775674                 |       | 14/10/03      |       | 2775674          |       | REGISTRATION |       |
| EGYPT                |       | 26/4/00         |       | 132426                  |       |          |       |             |       | APPLICATION  |       |
| LEBANON              |       | 14/4/00         |       | 768863                  |       | 14/4/00       |       | 83292            |       | REGISTRATION |       |

 

II.                                     Registrations/applicationsto be assigned to PRAECIS by Sanofi-Synthelabo (information below as providedby Sanofi-Synthelabo)

 
| **Country**        | ** ** | **Filing date** | ** ** | **Application  number** | ** ** | **Reg. date** | ** ** | **Reg.  number** | ** ** | **Status**   | ** ** |
|--------------------|------------|-----------------|------------|-------------------------|------------|---------------|------------|------------------|------------|--------------|------------|
| ALBANIA            |       | 10/10/00        |       | 743725                  |       |          |       |             |       | APPLICATION  |       |
| ARMENIA            |       | 10/10/00        |       | 743725                  |       |          |       |             |       | APPLICATION  |       |
| AUSTRIA            |       | 10/10/00        |       | 743725                  |       |          |       |             |       | APPLICATION  |       |
| AZERBAIJAN         |       | 10/10/00        |       | 743725                  |       |          |       |             |       | APPLICATION  |       |
| BAHRAIN            |       | 16/05/01        |       | 2708/2000               |       |          |       |             |       | PUBLICATION  |       |
| BELARUS            |       | 10/10/00        |       | 743725                  |       |          |       |             |       | APPLICATION  |       |
| BENELUX            |       | 10/10/00        |       | 743725                  |       |          |       |             |       | APPLICATION  |       |
| BOSNIA-HERZEGOVINA |       | 10/10/00        |       | 743725                  |       |          |       |             |       | APPLICATION  |       |
| BULGARIA           |       | 10/10/00        |       | 743725                  |       |          |       |             |       | APPLICATION  |       |
| CROATIA            |       | 10/10/00        |       | 743725                  |       |          |       |             |       | APPLICATION  |       |
| CYPRUS             |       | 07/11/00        |       | 58326                   |       |          |       |             |       | APPLICATION  |       |
| CZECH REPUBLIC     |       | 10/10/00        |       | 743725                  |       |          |       |             |       | APPLICATION  |       |
| DENMARK            |       | 10/10/00        |       | 743725                  |       |          |       |             |       | APPLICATION  |       |
| ESTONIA            |       | 10/10/00        |       | 743725                  |       |          |       |             |       | APPLICATION  |       |
| FRANCE             |       | 06/08/99        |       | 99807338                |       | 06/08/99      |       | 99807338         |       | REGISTRATION |       |
| GEORGIA            |       | 10/10/00        |       | 743725                  |       | 10/10/00      |       | 743725           |       | REGISTRATION |       |
| GERMANY            |       | 10/10/00        |       | 743725                  |       |          |       |             |       | APPLICATION  |       |
| HUNGARY            |       | 10/10/00        |       | 743725                  |       |          |       |             |       | APPLICATION  |       |
| ICELAND            |       | 10/10/00        |       | 743725                  |       |          |       |             |       | APPLICATION  |       |
| IRAN               |       | 16/12/00        |       | 7909861                 |       | 28/04/01      |       | 93430            |       | REGISTRATION |       |
| ISRAEL             |       | 09/11/00        |       | 143751                  |       | 04/12/01      |       | 143751           |       | REGISTRATION |       |
| ITALY              |       | 10/10/00        |       | 743725                  |       |          |       |             |       | APPLICATION  |       |
| JORDAN             |       | 13/11/00        |       | 59905                   |       | 10/07/02      |       | 59905            |       | REGISTRATION |       |
| KAZAKHSTAN         |       | 10/10/00        |       | 743725                  |       |          |       |             |       | APPLICATION  |       |
| KUWAIT             |       | 13/05/01        |       | 50028                   |       |          |       |             |       | PUBLICATION  |       |

 

 

48

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| KYRGYZSTAN            |   | 10/10/00 |   | 743725   |   | 10/10/00 |   | 743725 |   | REGISTRATION |   |
|-----------------------|--------|----------|--------|----------|--------|----------|--------|--------|--------|--------------|--------|
| LATVIA                |   | 10/10/00 |   | 743725   |   |     |   |   |   | APPLICATION  |   |
| LEBANON               |   | 09/11/00 |   | 09/11/00 |   |     |   | 85380  |   | REGISTRATION |   |
| LITHUANIA             |   | 10/10/00 |   | 743725   |   |     |   |   |   | APPLICATION  |   |
| MACEDONIA             |   | 10/10/00 |   | 743725   |   |     |   |   |   | APPLICATION  |   |
| MALTA                 |   | 06/11/00 |   | 32525    |   | 10/11/00 |   | 32525  |   | REGISTRATION |   |
| MOLDOVA (REP)         |   | 10/10/00 |   | 743725   |   |     |   |   |   | APPLICATION  |   |
| NORWAY                |   | 10/10/00 |   | 743725   |   | 10/10/00 |   | 743725 |   | REGISTRATION |   |
| OMAN                  |   | 12/11/00 |   | 23971    |   |     |   |   |   | APPLICATION  |   |
| POLAND                |   | 10/10/00 |   | 743725   |   |     |   |   |   | APPLICATION  |   |
| PORTUGAL              |   | 10/10/00 |   | 743725   |   |     |   |   |   | APPLICATION  |   |
| QATAR                 |   | 26/11/00 |   | 24290    |   |     |   |   |   | APPLICATION  |   |
| ROMANIA               |   | 10/10/00 |   | 743725   |   |     |   |   |   | APPLICATION  |   |
| RUSSIAN FEDERATION    |   | 10/10/00 |   | 743725   |   |     |   |   |   | APPLICATION  |   |
| SAUDI ARABIA          |   | 28/11/00 |   | 68200    |   | 28/11/00 |   | 617/70 |   | REGISTRATION |   |
| SERBIA and MONTENEGRO |   | 10/10/00 |   | 743725   |   |     |   |   |   | APPLICATION  |   |
| SLOVAKIA              |   | 10/10/00 |   | 743725   |   |     |   |   |   | APPLICATION  |   |
| SLOVENIA              |   | 10/10/00 |   | 743725   |   |     |   |   |   | APPLICATION  |   |
| SWITZERLAND           |   | 10/10/00 |   | 743725   |   |     |   |   |   | APPLICATION  |   |
| SYRIA                 |   | 13/01/01 |   | 361890   |   | 05/02/01 |   | 75259  |   | REGISTRATION |   |
| TAJIKISTAN            |   | 10/10/00 |   | 743725   |   |     |   |   |   | APPLICATION  |   |
| TURKEY                |   | 10/10/00 |   | 743725   |   | 10/10/00 |   | 743725 |   | REGISTRATION |   |
| TURKMENISTAN          |   | 10/10/00 |   | 743725   |   |     |   |   |   | APPLICATION  |   |
| UKRAINE               |   | 10/10/00 |   | 743725   |   | 10/10/00 |   | 743725 |   | REGISTRATION |   |
| UNITED ARAB EMIRATES  |   | 17/12/00 |   | 39911    |   |     |   |   |   | PUBLICATION  |   |
| UZBEKISTAN            |   | 10/10/00 |   | 743725   |   |     |   |   |   | APPLICATION  |   |
| YEMEN (REPUBLIC OF)   |   | 26/11/00 |   | 19327    |   | 09/09/01 |   | 14046  |   | REGISTRATION |   |

 

 

49

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Draft

 

Quality Assurance Agreement

 

 

Schedule 6 to the Licence, Supply andDistribution Agreement between

 

 

Schering AG

 

(„Schering”)

 

and

 

 

Praecis Pharmaceuticals Inc.

 

(“Praecis”)

 

 

50

----

 

[*]

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

 

51

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DRAFT

 

Schedule7

 

PharmacovigilanceAgreement between Schering AG and Praecis for Plenaxis

 

[*]

 

**CONFIDENTIAL INFORMATION OMITTED AND FILEDSEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.ASTERISKS (*) DENOTE SUCH OMISSIONS.**

 

52

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