Document:

Exhibit 10.8

 

***Text Omitted and Filed Separately

with the Securities and Exchange Commission.

Confidential Treatment Requested

Under 17 C.F.R. Sections 200.80(b)(4)

and 240.24b-2.

 

EXECUTION COPY

 

RESEARCH COLLABORATION AND LICENSE AGREEMENT 

 

BY AND BETWEEN 

 

METHYLGENE INC. 

 

AND 

 

OTSUKA PHARMACEUTICAL CO., LTD.

 

DATED AS OF MARCH 25, 2008

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE I
    	
     DEFINITIONS
    	
 
    	
1
    
	
1.1
    	
“Act”
    	
 
    	
1
    
	
1.2
    	
“Affiliate”
    	
 
    	
1
    
	
1.3
    	
“Business   Day”
    	
 
    	
1
    
	
1.4
    	
“Calendar   Quarter”
    	
 
    	
2
    
	
1.5
    	
“Calendar   Year”
    	
 
    	
2
    
	
1.6
    	
“Change   of Control”
    	
 
    	
2
    
	
1.7
    	
“Collaboration   Intellectual Property”
    	
 
    	
2
    
	
1.8
    	
“Commercialization”   or “Commercialize”
    	
 
    	
2
    
	
1.9
    	
“Commercially   Reasonable Efforts”
    	
 
    	
2
    
	
1.10
    	
“Compound”
    	
 
    	
3
    
	
1.11
    	
“Control”   or “Controlled”
    	
 
    	
3
    
	
1.12
    	
“Cover”,   “Covering” or “Covered”
    	
 
    	
3
    
	
1.13
    	
“CRO”
    	
 
    	
3
    
	
1.14
    	
“Development”   or “Develop”
    	
 
    	
3
    
	
1.15
    	
“EMEA”
    	
 
    	
3
    
	
1.16
    	
“EU”
    	
 
    	
4
    
	
1.17
    	
“FDA”
    	
 
    	
4
    
	
1.18
    	
“Field”
    	
 
    	
4
    
	
1.19
    	
“First   Commercial Sale”
    	
 
    	
4
    
	
1.20
    	
“Formulation   Technology”
    	
 
    	
4
    
	
1.21
    	
“FTE”
    	
 
    	
4
    
	
1.22
    	
“FTE   Rate”
    	
 
    	
4
    
	
1.23
    	
“Generic   Competition”
    	
 
    	
5
    
	
1.24
    	
“Generic   Product”
    	
 
    	
5
    
	
1.25
    	
“Governmental   Authority”
    	
 
    	
5
    
	
1.26
    	
“IND”
    	
 
    	
5
    
	
1.27
    	
“Indication”
    	
 
    	
5
    
	
1.28
    	
“Initiation”
    	
 
    	
5
    
	
1.29
    	
“Japan   GAAP”
    	
 
    	
6
    
	
1.30
    	
“JRDC”
    	
 
    	
6
    
	
1.31
    	
“Know-How”
    	
 
    	
6
    
	
1.32
    	
“Lab   Quantity Samples”
    	
 
    	
6
    
	
1.33
    	
“Law”   or “Laws”
    	
 
    	
6
    
	
1.34
    	
“Licensed   Product”
    	
 
    	
6
    
	
1.35
    	
“Losses”
    	
 
    	
6
    
	
1.36
    	
“Major   Countries”
    	
 
    	
6
    
	
1.37
    	
“Manufacture”   or “Manufacturing”
    	
 
    	
6
    
	
1.38
    	
“MethylGene   Background Intellectual Property”
    	
 
    	
6
    
	
1.39
    	
“MethylGene   Collaboration Intellectual Property”
    	
 
    	
7
    
	
1.40
    	
“MethylGene   Intellectual Property”
    	
 
    	
7
    
	
1.41
    	
“MHLW”
    	
 
    	
7
    

 

i

 

TABLE OF CONTENTS

(continued)

 

	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    
	
1.42
    	
“MTA”
    	
 
    	
7
    
	
1.43
    	
“NDA”
    	
 
    	
7
    
	
1.44
    	
“Net   Sales”
    	
 
    	
7
    
	
1.45
    	
“Other   Ophthalmic Indication”
    	
 
    	
9
    
	
1.46
    	
“Otsuka   Background Intellectual Property”
    	
 
    	
9
    
	
1.47
    	
“Otsuka   Collaboration Intellectual Property”
    	
 
    	
9
    
	
1.48
    	
“Otsuka   Intellectual Property”
    	
 
    	
9
    
	
1.49
    	
“Party”
    	
 
    	
10
    
	
1.50
    	
“Patent   Rights”
    	
 
    	
10
    
	
1.51
    	
“Person”
    	
 
    	
10
    
	
1.52
    	
“Phase   I Clinical Trial”
    	
 
    	
10
    
	
1.53
    	
“Phase   I/IIa Clinical Trial”
    	
 
    	
10
    
	
1.54
    	
“Phase   II Clinical Trial”
    	
 
    	
10
    
	
1.55
    	
“Phase   IIa Clinical Trial”
    	
 
    	
10
    
	
1.56
    	
“Program   Compound”
    	
 
    	
10
    
	
1.57
    	
“Regulatory   Approval”
    	
 
    	
10
    
	
1.58
    	
“Regulatory   Authority”
    	
 
    	
10
    
	
1.59
    	
“Research   Plan”
    	
 
    	
10
    
	
1.60
    	
“Research   Program”
    	
 
    	
11
    
	
1.61
    	
“Research   Term”
    	
 
    	
11
    
	
1.62
    	
“SAR   Know-How”
    	
 
    	
11
    
	
1.63
    	
“Selected   Compound(s)”
    	
 
    	
11
    
	
1.64
    	
“Senior   Executive”
    	
 
    	
11
    
	
1.65
    	
“Sublicensee”
    	
 
    	
11
    
	
1.66
    	
“Sublicensee   Income”
    	
 
    	
11
    
	
1.67
    	
“Territory”
    	
 
    	
11
    
	
1.68
    	
“Third   Party”
    	
 
    	
11
    
	
1.69
    	
“Valid   Claim”
    	
 
    	
11
    
	
1.70
    	
Additional   Definitions
    	
 
    	
12
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE II
    	
     GRANTS   OF RIGHTS
    	
 
    	
13
    
	
 
    	
 
    	
 
    	
 
    
	
2.1
    	
MethylGene   Grants of Rights
    	
 
    	
13
    
	
2.2
    	
Otsuka   Grant of Rights
    	
 
    	
14
    
	
2.3
    	
Restriction   on Use of MethylGene Intellectual Property
    	
 
    	
14
    
	
2.4
    	
Right   of First Refusal on Other Ophthalmic Indications
    	
 
    	
14
    
	
2.5
    	
Rights   Retained by the Parties
    	
 
    	
15
    
	
2.6
    	
Exclusivity
    	
 
    	
16
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE III
    	
     RESEARCH   PROGRAM AND DEVELOPMENT
    	
 
    	
16
    
	
 
    	
 
    	
 
    	
 
    
	
3.1
    	
General
    	
 
    	
16
    
	
3.2
    	
Research   Program
    	
 
    	
17
    

 

ii

 

TABLE OF CONTENTS

(continued)

 

	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    
	
3.3
    	
Joint   Research and Development Committee
    	
 
    	
18
    
	
3.4
    	
Exchange   of Information During Research Term
    	
 
    	
19
    
	
3.5
    	
Selected   Compounds
    	
 
    	
20
    
	
3.6
    	
Expansion   of the Field
    	
 
    	
20
    
	
3.7
    	
Post-Selection   Activities
    	
 
    	
21
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE IV
    	
     COMMERCIALIZATION
    	
 
    	
21
    
	
 
    	
 
    	
 
    	
 
    
	
4.1
    	
General
    	
 
    	
21
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE V
    	
     DILIGENCE
    	
 
    	
21
    
	
 
    	
 
    	
 
    	
 
    
	
5.1
    	
Commercially   Reasonable Efforts; Otsuka Diligence Obligations
    	
 
    	
21
    
	
5.2
    	
MethylGene   Diligence Obligations
    	
 
    	
23
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VI
    	
     FINANCIAL   PROVISIONS
    	
 
    	
23
    
	
 
    	
 
    	
 
    	
 
    
	
6.1
    	
Equity
    	
 
    	
23
    
	
6.2
    	
Initial   License Payments
    	
 
    	
24
    
	
6.3
    	
Research   Program
    	
 
    	
24
    
	
6.4
    	
Event   Milestone Payments
    	
 
    	
24
    
	
6.5
    	
Sales   Milestone Payments
    	
 
    	
26
    
	
6.6
    	
Licensed   Product Royalties
    	
 
    	
26
    
	
6.7
    	
Sublicensee   Income
    	
 
    	
29
    
	
6.8
    	
Reports;   Payments
    	
 
    	
29
    
	
6.9
    	
Books   and Records; Audit Rights
    	
 
    	
29
    
	
6.10
    	
Taxes
    	
 
    	
30
    
	
6.11
    	
United   States Dollars
    	
 
    	
30
    
	
6.12
    	
Payment   Method and Currency Conversion
    	
 
    	
30
    
	
6.13
    	
Late   Payments
    	
 
    	
30
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VII
    	
     INTELLECTUAL   PROPERTY OWNERSHIP, PROTECTION AND RELATED MATTERS
    	
 
    	
30
    
	
 
    	
 
    	
 
    	
 
    
	
7.1
    	
Ownership   of Inventions
    	
 
    	
30
    
	
7.2
    	
Prosecution   and Maintenance of Patent Rights
    	
 
    	
31
    
	
7.3
    	
Third   Party Infringement
    	
 
    	
34
    
	
7.4
    	
Infringement   Claims Against Otsuka or MethylGene
    	
 
    	
35
    
	
7.5
    	
Patent   Invalidity Claim
    	
 
    	
36
    
	
7.6
    	
Patent   Term Extensions
    	
 
    	
36
    
	
7.7
    	
Patent   Marking
    	
 
    	
36
    
	
7.8
    	
Certification   under Drug Price Competition and Patent Restoration Act
    	
 
    	
36
    
	
7.9
    	
Exclusive   License Registration
    	
 
    	
37
    

 

iii

 

TABLE OF CONTENTS

(continued)

 

	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VIII
    	
     CONFIDENTIAL   INFORMATION
    	
 
    	
37
    
	
 
    	
 
    	
 
    	
 
    
	
8.1
    	
Treatment   of Confidential Information
    	
 
    	
37
    
	
8.2
    	
Confidential   Information
    	
 
    	
37
    
	
8.3
    	
Publication   Rights
    	
 
    	
38
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE IX
    	
     REPRESENTATIONS,   WARRANTIES AND COVENANTS
    	
 
    	
39
    
	
 
    	
 
    	
 
    	
 
    
	
9.1
    	
MethylGene’s   Representations, Warranties and Covenants
    	
 
    	
40
    
	
9.2
    	
Otsuka’s   Representations, Warranties and Covenants
    	
 
    	
40
    
	
9.3
    	
No   Warranty
    	
 
    	
41
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE X
    	
     INDEMNIFICATION
    	
 
    	
41
    
	
 
    	
 
    	
 
    	
 
    
	
10.1
    	
Indemnification   in Favor of MethylGene
    	
 
    	
41
    
	
10.2
    	
Indemnification   in Favor of Otsuka
    	
 
    	
41
    
	
10.3
    	
General   Indemnification Procedures
    	
 
    	
42
    
	
10.4
    	
Insurance
    	
 
    	
43
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE XI
    	
     TERM   AND TERMINATION
    	
 
    	
44
    
	
 
    	
 
    	
 
    	
 
    
	
11.1
    	
Term
    	
 
    	
44
    
	
11.2
    	
Termination   for Cause
    	
 
    	
44
    
	
11.3
    	
Termination   for Failure to Select
    	
 
    	
44
    
	
11.4
    	
Other   Termination by Otsuka
    	
 
    	
45
    
	
11.5
    	
Termination   of Otsuka’s Rights in One or More Regions
    	
 
    	
45
    
	
11.6
    	
Consequences   of Certain Terminations
    	
 
    	
45
    
	
11.7
    	
Effect   of Termination and Expiration; Accrued Rights and Obligations
    	
 
    	
46
    
	
11.8
    	
Survival
    	
 
    	
47
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE XII
    	
     DISPUTE   RESOLUTION
    	
 
    	
47
    
	
 
    	
 
    	
 
    	
 
    
	
12.1
    	
Resolution   of Disputes
    	
 
    	
47
    
	
12.2
    	
Arbitration
    	
 
    	
47
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE XIII
    	
     MISCELLANEOUS
    	
 
    	
48
    
	
 
    	
 
    	
 
    	
 
    
	
13.1
    	
Governing   Law
    	
 
    	
48
    
	
13.2
    	
Waiver
    	
 
    	
48
    
	
13.3
    	
Notices
    	
 
    	
49
    
	
13.4
    	
Entire   Agreement
    	
 
    	
50
    
	
13.5
    	
Headings
    	
 
    	
50
    
	
13.6
    	
Severability
    	
 
    	
50
    
	
13.7
    	
Registration   and Filing of the Agreement
    	
 
    	
51
    
	
13.8
    	
Assignment
    	
 
    	
51
    
	
13.9
    	
Counterparts
    	
 
    	
51
    
	
13.10
    	
Force   Majeure
    	
 
    	
51
    

 

iv

 

TABLE OF CONTENTS

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Page
    
	
 
    	
 
    	
 
    	
 
    
	
13.11
    	
Press   Releases and Other Disclosures
    	
 
    	
51
    
	
13.12
    	
Relationship   of the Parties
    	
 
    	
52
    
	
13.13
    	
Performance   by Affiliates
    	
 
    	
52
    
	
13.14
    	
No   Consequential or Punitive Damages
    	
 
    	
52
    
	
13.15
    	
Nonsolicitation
    	
 
    	
53
    

 

	
Schedule 1.38
    	
MethylGene   Background Patent Rights
    
	
Schedule 1.56
    	
Program   Compound
    
	
Schedule 3.2(b)
    	
Research   Plan
    
	
Schedule 7.2(e)(iii)
    	
Prosecution   Costs for National Phase filing for PCT/US2006/019364
    
	
Schedule 9.1(c)
    	
Disclosure   of Third Party Patents
    

 

v

 

RESEARCH COLLABORATION AND LICENSE AGREEMENT

 

THIS RESEARCH COLLABORATION AND LICENSE AGREEMENT is entered into this 25th day of March, 2008 (the “Effective Date”), by and between MethylGene Inc., a corporation organized under the laws of Quebec, Canada, having a business address at 7220 Frederick Banting, Montreal, QC H4S 2A1 (“MethylGene”), and Otsuka Pharmaceutical Co., Ltd., a company organized under the laws of Japan, having a business address at 2-9 Kanda-Tsukasamachi, Chiyoda-ku Tokyo 101-8535, Japan, acting through its Ophthalmology and Dermatology Division (“Otsuka”).

 

WHEREAS, MethylGene has developed or obtained rights to MethylGene Intellectual Property (as hereinafter defined);

 

WHEREAS, MethylGene has developed certain Compounds (as hereinafter defined), and Otsuka wishes to fund a research program for the development of additional Compounds by MethylGene; and

 

WHEREAS, Otsuka desires to obtain a license under the MethylGene Intellectual Property to make and use certain Selected Compounds (as hereinafter defined), and to develop and commercialize Licensed Products (as hereinafter defined), under the terms and conditions set forth herein, and MethylGene desires to grant such a license.

 

NOW, THEREFORE, the Parties agree as follows:

 

ARTICLE I
  DEFINITIONS

 

The following terms, whether used in the singular or plural, shall have the following meanings:

 

1.1                               “Act”.  Act means both the United States Federal Food, Drug, and Cosmetic Act (21 U.S.C. § 301 et seq.), as amended from time to time, and the regulations promulgated under the foregoing.

 

1.2                               “Affiliate”.  Affiliate means any Person directly or indirectly controlled by, controlling or under common control with, a Party, but only for so long as such control shall continue.  For purposes of this definition, “control” (including, with correlative meanings, “controlled by”, “controlling” and “under common control with”) means, with respect to a Person, possession, direct or indirect, of (a) the power to direct or cause direction of the management and policies of such Person (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise), or (b) at least 50% of the voting securities (whether directly or pursuant to any option, warrant or other similar arrangement) or other comparable equity interests.

 

1.3                               “Business Day”.  Business Day means a day that is not a Saturday or Sunday, or any other day on which banking institutions in New York, Tokyo or Montreal are authorized by Law to remain closed or on which a Party’s principal place of business is closed in connection

 

 

with a holiday.  For the avoidance of doubt, any “day” referenced in this Agreement that is not a “Business Day” is a calendar day.

 

1.4                               “Calendar Quarter”.  Calendar Quarter means each of the three-month periods ending on March 31, June 30, September 30 and December 31 of any year.

 

1.5                               “Calendar Year”.  Calendar Year means each period beginning on January 1 and ending on the following December 31 during the Term.

 

1.6                               “Change of Control”.  Change of Control means, with respect to a Party: (a) a sale, conveyance, or other disposition of all or substantially all of a Party’s assets, (b) any merger, consolidation or other business combination transaction of such Party with or into another Person, in which the holders of the shares of voting capital stock of such Party outstanding immediately prior to such transaction continue to hold (either by such shares remaining outstanding or by their being converted into shares of voting capital stock of the surviving entity) less than a majority of the total voting power represented by the shares of voting capital stock of such Party (or the surviving entity) outstanding immediately after such transaction, or (c) the direct or indirect acquisition (including by way of a tender or exchange offer) by any Person, or Persons acting as a group, excluding in either case any Person who was a shareholder of such Party as of the Effective Date, of beneficial ownership or a right to acquire beneficial ownership of shares representing a majority of the voting power of the then outstanding shares of capital stock of such Party; provided, however, that the acquisition of shares issued by such Party in an equity financing shall not be considered for purposes of determining whether there has been a Change of Control.

 

1.7                               “Collaboration Intellectual Property”.  Collaboration Intellectual Property means any Patent Rights or Know-How arising during the Term as a result of performing the Research Program under this Agreement, including, without limitation, all activities under this Agreement related to the discovery, research or Development of Program Compounds, Selected Compounds or Licensed Products, whether developed, conceived or created solely by or on behalf of a Party and/or its Affiliates or jointly by or on behalf of the Parties and/or their respective Affiliates, and whether or not required to be conducted hereunder.

 

1.8                               “Commercialization” or “Commercialize”.  Commercialization or Commercialize means activities directed to obtaining pricing and reimbursement approvals, marketing, promoting, distributing, importing or selling a product.

 

1.9                               “Commercially Reasonable Efforts”.  Commercially Reasonable Efforts means, with respect to a Program Compound, Selected Compound or Licensed Product, the carrying out of obligations under this Agreement with those efforts and resources that a similarly situated company within the pharmaceutical industry would reasonably use were it developing or commercializing its own pharmaceutical compounds or products that are of similar market and profit potential and of similar risk profile at a similar stage in their product life as the Program Compounds, Selected Compounds or Licensed Products, as applicable, taking into account anticipated product labeling, anticipated financial return, relevant medical and clinical considerations, anticipated regulatory environment and competitive market conditions, all as measured by the facts and circumstances at the time such efforts are due, but in no event less

 

2

 

than the type and scope of efforts that the applicable Party would devote to any of its other products of similar market and profit potential and similar risk profile at a similar stage of product life.

 

1.10                        “Compound”.  Compound means a molecule that is a small molecule that is a small molecule tyrosine kinase inhibitor as its main mechanism of action, and any (a) salts, hydrates, solvates, polymorphs, free base, isomers, prodrugs, metabolites and/or liposomal or other formulations thereof or (b) other compositions consisting of such molecule non-covalently bonded with other moieties, but excluding any derivative of such molecule in which the chemical structure of such molecule is altered.

 

1.11                        “Control” or “Controlled”.  Control or Controlled means, with respect to any intellectual property right or other intangible property or any tangible property, the possession (whether by ownership or license (other than pursuant to this Agreement)) by a Party of the legal authority or right to grant to the other Party access and/or a license or sublicense or other right as provided herein without violating the terms of any agreement with any Third Party.

 

1.12                        “Cover”, “Covering” or “Covered”.  Cover, Covering or Covered means, with respect to a product, technology, process or method that, in the absence of ownership of or a license granted under a Valid Claim, the manufacture, use, offer for sale, sale or importation of such product or the practice of such technology, process or method would infringe such Valid Claim (or, in the case of a Valid Claim that has not yet issued, would reasonably likely infringe such Valid Claim if it were to issue).

 

1.13                        “CRO”.  CRO means a Third Party vendor or service provider who is engaged to provide services on a fee-for-service basis on behalf of a Party pursuant to an agreement with such Party under which such vendor or service provider agrees to: (a) assign to the contracting Party ownership to at least those inventions resulting from the services to such Party and that would constitute Collaboration Intellectual Property; and (b) not to use or disclose (other than to such Party) such Collaboration Intellectual Property.

 

1.14                        “Development” or “Develop”.  Development or Develop means pre-clinical and clinical research and drug development activities, including, without limitation, toxicology and other pre-clinical development efforts, stability testing, process development, scale-up, formulation development, delivery system development, quality assurance and quality control development, statistical analysis, clinical pharmacology, clinical studies (including, without limitation, pre- and post-approval studies and investigator sponsored clinical studies), regulatory affairs, and all other activities relating to seeking, obtaining and/or maintaining any Regulatory Approvals and clinical study regulatory activities (excluding regulatory activities directed to obtaining pricing and reimbursement approvals).  For purposes of clarity, “Development” and “Develop” excludes basic research, screening and discovery activities and synthesis activities (other than scale-up of Program Compounds and Selected Compounds), including, without limitation, molecular biology, biochemistry and pre-clinical pharmacology, directed to the identification of Compounds.

 

1.15                        “EMEA”.  EMEA means The European Medicines Agency or any successor agency or authority thereto.

 

3

 

1.16                        “EU”.  EU means the European Union, as it may be redefined from time to time.

 

1.17                        “FDA”.  FDA means the United States Food and Drug Administration and any successor agency or authority thereto.

 

1.18                        “Field”.  Field means the prevention, treatment, control, mitigation or palliation in humans of (a) diseases, disorders and other medical conditions caused by choroidal angiogenesis, including, without limitation, age-related macular degeneration, and (b) diabetic retinopathy and retinal edema; in each case using local delivery of the active pharmaceutical agents to the eye.  For the avoidance of doubt, “local delivery” shall include, without limitation, topical, intravitreal, periorbital, intraocular and other local administration to the eye, the ocular and/or periocular tissues and spaces, including, without limitation, via delivery devices, but in any event, subject to Section 3.6, shall not include systemic delivery, including, without limitation, parenteral or sublingual delivery or delivery through a patch.  The Field shall expressly exclude the prevention, treatment, control, mitigation or palliation of any Indications other than (a) and (b) above (e.g., treatment of cancer, including, without limitation, neoplasia and other pre-cancerous conditions and ocular cancer, is excluded).

 

1.19                        “First Commercial Sale”.  First Commercial Sale means, with respect to a Licensed Product in a country, the first sale to a Third Party by Otsuka, its Affiliate or its Sublicensee for which payment has been received for use or consumption of such Licensed Product in such country after receipt of the first Regulatory Approval for such Licensed Product in such country.  For purposes of clarity, First Commercial Sale shall not include the sale of any Licensed Product for use in clinical trials, pre-clinical studies or other research or development purposes or for compassionate or similar use.

 

1.20                        “Formulation Technology”.  Formulation Technology means Patent Rights and Know-How related to: (a) the process of adding chemical additives to a Program Compound in order to provide such Program Compound with pharmaceutical properties (for example, stability, solubility, pH, etc.) acceptable for administration to the eye in humans; and (b) the composition of such chemical additives alone or when combined with a Program Compound.

 

1.21                        “FTE”.  FTE means a full-time equivalent person year (consisting of a total of [...***...] hours per year) of scientific, technical, project management and/or managerial work.  For the avoidance of doubt, an obligation to provide or dedicate FTE(s) under this Agreement does not require or imply any obligation to dedicate individual person(s) to matters set forth in this Agreement on a full-time basis; provided, however, that MethylGene uses Commercially Reasonable Efforts to (a) ensure that all such individuals have sufficient training, expertise and experience, and (b) promote reasonable continuity so as to avoid duplicative ramp-up time and other inefficiencies associated with personnel turnover and reassignment.

 

1.22                        “FTE Rate”.  FTE Rate means [...***...] per FTE per twelve (12) month period, increased by a rate of [...***...] percent [...***...] per year, with the first such increase occurring [...***...].  For

 

***Confidential Treatment Requested

 

4

 

clarity, the FTE Rate beginning in the [...***...] month of the Term as adjusted pursuant to the foregoing would be [...***...] per FTE per twelve (12) month period, and thereafter adjusted annually on the anniversary of the beginning of the [...***...] month of the Term.  The FTE Rate is inclusive of all direct and indirect costs of MethylGene, including, without limitation, overhead, consumables, salaries, benefits and the like.

 

1.23                        “Generic Competition”.  Generic Competition means, with respect to a Licensed Product in any country in the Territory in a given Calendar Quarter, if, during such Calendar Quarter, one or more Generic Products is or are commercially available in such country and such Generic Product(s) has or have a market share of [...***...] of the aggregate market share of Licensed Products and Generic Products(based on data provided by IMS International, or if such data is not available, such other reliable data source as reasonably determined by Otsuka and agreed by MethylGene (such agreement not to be unreasonably withheld or delayed)) as measured by volume of unit sales.

 

1.24                        “Generic Product”.  Generic Product means, with respect to any Licensed Product, any pharmaceutical product sold by a Third Party, not authorized by Otsuka or its Affiliates or Sublicensees, which is “therapeutically equivalent” as evidenced by the FDA’s issuance of a therapeutic equivalence code of “A” with respect to such Licensed Product (as such term is used in the Approved Drug Products with Therapeutic Equivalence Evaluations published by the FDA Center for Drug Evaluation and Research or any successor publication), or by the similar finding or designation by the Regulatory Authority in the country in which the pharmaceutical product is being sold, and which contains a Selected Compound as its active pharmaceutical ingredient and is approved in reliance on the prior approval of a Licensed Product as determined by the applicable Regulatory Authority.

 

1.25                        “Governmental Authority”.  Governmental Authority means any United States federal, state or local or any foreign government, or political subdivision thereof, or any multinational organization or authority or any authority, agency or commission entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power, any court or tribunal (or any department, bureau or division thereof), or any governmental arbitrator or arbitral body.

 

1.26                        “IND”.  IND means an investigational new drug application filed with the FDA under 21 C.F.R. Part 312 with respect to a Licensed Product prior to beginning human clinical trials, or equivalent application filed with the Regulatory Authority of a country in the Territory other than the United States

 

1.27                        “Indication”.  Indication means a separate and distinct disease, disorder or medical condition.

 

1.28                        “Initiation”.  Initiation means, with respect to any clinical trial, the date on which the first volunteer or patient in such trial has received his or her initial dose of the Licensed Product. 

 

***Confidential Treatment Requested

 

5

 

1.29                        “Japan GAAP”.  Japan GAAP means accounting principles generally accepted in Japan , as in effect from time to time.

 

1.30                        “JRDC”.  JRDC shall have the meaning set forth in Section 3.3.

 

1.31                        “Know-How”.  Know-How means proprietary or non-public information and materials, whether patentable or not, including, without limitation, (a) ideas, discoveries, inventions, improvements or trade secrets, (b) pharmaceutical, chemical and biological materials, products and compositions, (c) tests, assays, techniques, data, methods, procedures, formulas, and/or processes, (d) technical, medical, clinical, toxicological and other scientific data and other information relating to any of the foregoing, and (e) drawings, plans, designs, diagrams, sketches, specifications and/or other documents containing or relating to such information or materials.

 

1.32                        “Lab Quantity Samples”.  Lab Quantity Samples means samples of between [...***...] and [...***...] milligrams ([...***...] mg) of a Program Compound.

 

1.33                        “Law” or “Laws”.  Law or Laws means all laws, statutes, rules, regulations, orders, judgments and/or ordinances of any Governmental Authority.

 

1.34                        “Licensed Product”.  Licensed Product means any pharmaceutical preparation, in all dosage forms and formulations, containing a Selected Compound.

 

1.35                        “Losses”.  Losses means any and all (a) claims, losses, liabilities, damages, fines, royalties, governmental penalties or punitive damages, deficiencies, interest, awards, and judgments, (b) with respect to Third Parties, settlement amounts and all of the items referred to in clause (a), which include, Third Party special, indirect, incidental, and consequential damages (including, without limitation, lost profits) and Third Party punitive and multiple damages, and (c) in connection with all of the items referred to in clauses (a) and (b) above, any and all costs and expenses (including, without limitation, reasonable attorneys fees and all other expenses reasonably incurred in investigating, preparing or defending any litigation or proceeding, commenced or threatened).

 

1.36                        “Major Countries”.  Major Countries means, collectively, (a) the United States, Canada, Australia, France, Germany, Italy, Spain, the United Kingdom, Mexico, Brazil, Japan, China, Taiwan, India and Korea and (b) any other country the JRDC includes in the Patent Prosecution Plan.  For the avoidance of doubt, with respect to the inclusion of any such other country as contemplated under the preceding subsection (b), Otsuka’s casting vote under Section 3.3(d) shall apply.

 

1.37                        “Manufacture” or “Manufacturing”.  Manufacture or Manufacturing means activities directed to producing, manufacturing, processing, filling, finishing, packaging, labeling, quality assurance testing and release, shipping and storage of a product.

 

1.38                        “MethylGene Background Intellectual Property”.  MethylGene Background Intellectual Property means any and all: (a) Know-How (i) that is necessary or useful for the research, Development, Manufacture or Commercialization of any Program Compound, and (ii) 

 

***Confidential Treatment Requested

 

6

 

that MethylGene or any its Affiliates Controls as of the Effective Date, including, without limitation, such Know-How disclosed or provided by MethylGene to Otsuka prior to the Effective Date, including, without limitation, (A) the Program Compounds set forth on Schedule 1.56, (B) the Compounds set forth on Schedule 1.38-1 (“Research Compounds”), and (C) such Know-How resulting from Otsuka’s evaluation of the materials provided by MethylGene to Otsuka prior to the Effective Date and assigned by Otsuka to MethylGene; and (b) Patent Rights that claim or disclose any of the Know-How described in the preceding subparagraph (a) (“MethylGene Background Patent Rights”) including, without limitation, such Patent Rights listed on Schedule 1.38-2.

 

1.39                        “MethylGene Collaboration Intellectual Property”.  MethylGene Collaboration Intellectual Property means all Collaboration Intellectual Property constituting (a) Patent Rights that disclose or claim a composition of matter comprising a Compound and/or a use of a Compound (“MethylGene Collaboration Patent Rights”), together with any Know-How disclosed or claimed therein, (b) SAR Know-How or (c) Know-How other than SAR Know-How that directly relates to a composition of matter comprising a Compound and/or a use of a Compound, and any Patent Rights that disclose or claim such Know-How.  Notwithstanding the foregoing, MethylGene Collaboration Intellectual Property does not include any (i) Formulation Technology or (ii) Know-How that directly relates to the physicochemical property pharmacokinetics/pharmacodynamics relationship in ocular tissue that is, in the case of either (i) or (ii), developed, conceived or created by, or otherwise comes into the Control of, Otsuka and/or its Affiliates, either alone or together with a Third Party.

 

1.40                        “MethylGene Intellectual Property”.  MethylGene Intellectual Property means the MethylGene Background Intellectual Property and the MethylGene Collaboration Intellectual Property.

 

1.41                        “MHLW”.  MHLW means the Japanese Ministry of Health, Labour and Welfare and any successor agency or authority thereto.

 

1.42                        “MTA”.  MTA means that Materials Transfer Agreement between the Parties dated October 28, 2005.

 

1.43                        “NDA”.  NDA means a New Drug Application filed with the FDA pursuant to 21 U.S.C. § 355 with respect to a Licensed Product for authorization to market such product in the United States, or an equivalent application filed with the Regulatory Authority of a country in the Territory other than the United States for authorization to market a Licensed Product in such country.

 

1.44                        “Net Sales”.  Net Sales means the gross amounts billed or invoiced by Otsuka, its Affiliates or Sublicensees to non-Sublicensee Third Parties for Licensed Products in the Territory, less the following deductions taken reasonably in accordance with the customary practices of Otsuka, its Affiliates or Sublicensees, as applicable (provided that such practices are consistent with pharmaceutical industry standards):

 

(a)                                 actual bad debts written off as uncollectible by Otsuka, its Affiliates or Sublicensees; 

 

(b)                                 trade, quantity and cash discounts actually paid or granted;

 

7

 

(c)                                  refunds, chargebacks, allowances and other adjustments actually paid or granted that effectively reduce the net selling price;

 

(d)                                 rebates, product returns, credits, allowances, reimbursements and other adjustments actually paid or granted to customers in the ordinary course of business, including, without limitation, adjustments granted on account of price adjustments, billing errors, rejected goods, damaged or defective goods, and recalls;

 

(e)                                  rebates actually paid or granted to any Governmental Authority (or branch thereof) or to any Third Party payor, administrator or contractee;

 

(f)                                   rebates, credits, chargeback and prime vendor rebates, fees, reimbursements or similar payments or credits actually paid or granted to wholesalers and other distributors, buying groups, health care insurance carriers, pharmacy benefit management companies, health maintenance organizations or other institutions or health care organizations, and price reductions/adjustments required by law, regulations or contract;

 

(g)                                  transportation, freight and postage charges applicable to delivery of Licensed Products to a non-Sublicensee Third Party and other charges, such as insurance, relating thereto, in each case to the extent not reimbursed to Otsuka by a non-Sublicensee Third Party; and

 

(h)                                 taxes (including, without limitation, excise taxes, sales taxes and VAT), tariffs, customs duties, excises or other governmental charges upon or measured by the production, sale, transportation, delivery, import, export or use of goods, in each case to the extent not reimbursed to Otsuka by a non-Sublicensee Third Party, and excluding income taxes, withholding taxes and similar taxes.

 

Net Sales shall be determined from books and records maintained in accordance with Japan GAAP, consistently applied throughout the organization and across all products of the entity whose sales of Licensed Product are giving rise to Net Sales.

 

If a Licensed Product is sold as part of a Combination Product (as defined below) in a country, the Net Sales of the Licensed Product, for the purposes of determining payments based on Net Sales, shall be determined by multiplying the Net Sales of the Combination Product in such country, during the applicable Net Sales reporting period, by the fraction, A/(A+B), where:

 

A is the average sale price of the Licensed Product by Otsuka, its Affiliates or Sublicensees when sold separately in finished form in such country and B is the average sale price by Otsuka, its Affiliates or Sublicensees of the other product(s) included in the Combination Product when sold separately in finished form in such country, in each case during the applicable Net Sales reporting period or, if sales of both the Licensed Product and the other product(s) did not occur in such period, then in the most recent Net Sales reporting period in which sales of both occurred.

 

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In the event that such average sale price cannot be determined for both the Licensed Product and all other product(s) included in such Combination Product, Net Sales for the purposes of determining royalty payments shall be calculated by multiplying the Net Sales of the Combination Product by the fraction of C/C+D where C is the fair market value of the Licensed Product and D is the fair market value of all other product(s) included in the Combination Product.  In such event, Otsuka shall in good faith propose to MethylGene an allocation of relative fair market value of the Licensed Product and all other product(s) included in the Combination Product, MethylGene shall in good faith consider such proposal, and the Parties shall seek to reach agreement on such allocation.  If the Parties are unable to reach such agreement within sixty (60) days after Otsuka provides such proposal, the issue shall be referred for binding resolution to a mutually agreeable individual (not affiliated with either Party) with expertise in the marketing and sales of similar pharmaceutical products (including, without limitation, experience in pricing and reimbursement), such resolution to occur within thirty (30) days after such referral.

 

As used in this Agreement, the term “Combination Product” means any pharmaceutical product containing a Selected Compound and one or more other active pharmaceutical ingredients.

 

1.45                        “Other Ophthalmic Indication”.  Other Ophthalmic Indication means the prevention, treatment, control, mitigation or palliation in humans of an ophthalmic disease, disorder or other medical condition other than those diseases, disorders and other medical conditions included in the Field, but expressly excluding the prevention, treatment, control, mitigation or palliation of all cancer Indications (including, without limitation, ocular cancer Indications), in each case using local delivery (as defined under Section 1.18) of active pharmaceutical agents to the eye.

 

1.46                        “Otsuka Background Intellectual Property”.  Otsuka Background Intellectual Property means any and all: (a) Know-How (i) that is necessary or useful for the discovery, research, Development or Manufacture of any Program Compound, and (ii) that Otsuka or any of its Affiliates Controls as of the Effective Date; and (b) Patent Rights that claim or disclose any of the Know-How described in the preceding subparagraph (a).

 

1.47                        “Otsuka Collaboration Intellectual Property”.  Otsuka Collaboration Intellectual Property means all Collaboration Intellectual Property other than MethylGene Collaboration Intellectual Property.  For the avoidance of doubt, Otsuka Collaboration Intellectual Property includes, without limitation, all Collaboration Intellectual Property that is (a) Formulation Technology or (b) Know-How that directly relates to the physicochemical property pharmacokinetics/pharmacodynamics relationship in ocular tissue that is, in the case of either (a) or (b), developed, conceived or created by, or otherwise comes into the Control of, Otsuka and/or its Affiliates, either alone or together with a Third Party.

 

1.48                        “Otsuka Intellectual Property”.  Otsuka Intellectual Property means the Otsuka Background Intellectual Property and the Otsuka Collaboration Intellectual Property. 

 

1.49                        “Party”.  Party means either MethylGene or Otsuka; “Parties” means both MethylGene and Otsuka.

 

9

 

1.50                        “Patent Rights”.  Patent Rights means the rights and interest in and to all issued patents and pending patent applications in any country in the Territory, including, without limitation, all provisionals, divisionals, continuations, continuations-in-part, patents of addition, re-examinations, supplementary protection certificates, renewals, extensions, registrations or confirmation patents, restorations of patent terms, letters patent, and reissues thereof.

 

1.51                        “Person”.  Person means any natural person or any corporation, company, partnership, joint venture, firm, Governmental Authority or other entity, including, without limitation, a Party.

 

1.52                        “Phase I Clinical Trial”.  Phase I Clinical Trial means a human clinical trial in any country in the Territory that would satisfy the requirements of 21 C.F.R. § 312.21(a) (or its successor regulation) or the equivalent thereof in any jurisdiction outside the United States of America.

 

1.53                        “Phase I/IIa Clinical Trial”.  Phase I/IIa Clinical Trial means a single clinical study meeting the requirements of a Phase I Clinical Trial and a Phase IIa Clinical Trial.

 

1.54                        “Phase II Clinical Trial”.  Phase II Clinical Trial means a human clinical trial in any country in the Territory that would satisfy the requirements of 21 C.F.R. § 312.21(b) (or its successor regulation) or the equivalent thereof in any jurisdiction outside the United States of America.

 

1.55                        “Phase IIa Clinical Trial”.  Phase IIa Clinical Trial means a Phase II Clinical Trial conducted in patients with the primary endpoints of determining initial tolerance, safety and/or pharmacokinetic information in single dose, single ascending dose, multiple dose and/or multiple dose regimens.

 

1.56                        “Program Compound”.  Program Compound means a Compound either (a) set forth on Schedule 1.56, or (b) identified and synthesized by MethylGene and provided to Otsuka pursuant to Section 3.2(c).

 

1.57                        “Regulatory Approval”.  Regulatory Approval means the granting, whether through lapse of time or otherwise, by the FDA or by a comparable Regulatory Authority of approval to market a pharmaceutical product in a country in the Territory.

 

1.58                        “Regulatory Authority”.  Regulatory Authority means any Governmental Authority, including, without limitation, the FDA, EMEA or MHLW, with responsibility for granting licenses or approvals necessary for the marketing, manufacture and sale of pharmaceutical products in any country in the Territory.

 

1.59                        “Research Plan”.  Research Plan has the meaning set forth in Section 3.2(b). 

 

1.60                        “Research Program”.  Research Program means the Parties’ collaboration on the identification, synthesis, characterization, screening and selection of Program Compounds with potential applicability in the Field, as detailed in the Research Plan.

 

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1.61                        “Research Term”.  Research Term shall have the meaning set forth in Section 3.2(a).

 

1.62                        “SAR Know-How”.  SAR Know-How means all information, data and/or algorithms relating to the structural activity/toxicity relationship of a Research Compound or a Program Compound.

 

1.63                        “Selected Compound(s)”.  Selected Compound(s) means the Program Compound(s) selected by Otsuka pursuant to Section 3.5.

 

1.64                        “Senior Executive”.  Senior Executive means, with respect to MethylGene, the Chief Executive Officer of MethylGene, and with respect to Otsuka, the Director, Division of Dermatologicals & Ophthalmologicals of Otsuka.  “Senior Executives” means both of the foregoing officers of MethylGene and Otsuka.

 

1.65                        “Sublicensee”.  Sublicensee means a Third Party which has been granted a sublicense under the rights granted to Otsuka pursuant to Section 2.1(b) of this Agreement.

 

1.66                        “Sublicensee Income”.  Sublicensee Income means amounts received by Otsuka and its Affiliates from Sublicensees directly or indirectly in respect of rights granted to such Sublicensees pursuant to Section 2.1(b) of this Agreement, whether paid in cash, debt securities or otherwise including, without limitation: upfront payments, licensing fees, milestone payments, license maintenance fees, minimum annual royalties, commercialization payments, technology access fees, technology transfer fees, reimbursement for past expenditures incurred prior to the grant of the sublicense (including, without limitation, costs and expenses of patent prosecution but excluding legal costs to consummate a sublicense transaction), profit sharing payments, co-promotion fees, equity investments as consideration or inducement to enter into a sublicense and like payments.  Notwithstanding the foregoing, Sublicensee Income shall exclude royalties paid by such Sublicensee to Otsuka or its Affiliates with respect to Net Sales of Licensed Products.

 

1.67                        “Territory”.  Territory means all countries and territories of the world.

 

1.68                        “Third Party”.  Third Party means any Person other than MethylGene or Otsuka or any of their respective Affiliates.

 

1.69                        “Valid Claim”.  Valid Claim means any claim from (a) an issued and unexpired patent included within the MethylGene Background Patent Rights or the MethylGene Collaboration Patent Rights that has not been revoked or held unenforceable or invalid by a final decision of a court or other Governmental Authority of competent jurisdiction, or that has not been disclaimed, denied or admitted to be invalid or unenforceable through reissue or disclaimer or otherwise; or (b) a patent application included within the MethylGene Background Patent Rights or the MethylGene Collaboration Patent Rights; provided, however, that such a claim within a patent application has not been finally canceled, withdrawn, or abandoned or has been 

 

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pending for more than [...***...] years from the date of its first examination in the applicable country in the Territory.

 

1.70                        Additional Definitions.  Each of the following definitions is set forth in the section of this Agreement indicated below:

 

	
Definition:
    	
 
    	
Section:
    
	
Additional   Countries
    	
 
    	
Section   7.2(b)
    
	
Additional   MethylGene Collaboration Patent Rights
    	
 
    	
Section   7.2(b)
    
	
Agents
    	
 
    	
Section   8.1
    
	
Common   Shares
    	
 
    	
Section   6.1(a)
    
	
Confidential   Information
    	
 
    	
Section   8.2
    
	
Confidentiality   Agreements
    	
 
    	
Section   8.2
    
	
Effective   Date
    	
 
    	
preamble
    
	
Indemnified   Party
    	
 
    	
Section   10.3(a)
    
	
Indemnifying   Party
    	
 
    	
Section   10.3(a)
    
	
Infringement   Claim
    	
 
    	
Section   7.3(b)
    
	
MethylGene   Background Patent Rights
    	
 
    	
Section   1.38
    
	
MethylGene   Collaboration Patent Rights
    	
 
    	
Section   1.39
    
	
MethylGene   Parties
    	
 
    	
Section   10.1
    
	
Otsuka   Parties
    	
 
    	
Section   10.2
    
	
Paragraph   IV Claim
    	
 
    	
Section   7.8(a)
    
	
Patent   Prosecution Budget
    	
 
    	
Section   7.2(b)
    
	
Patent   Prosecution Plan
    	
 
    	
Section   7.2(b)
    
	
Primary   Third Party Patent Licenses
    	
 
    	
Section   6.6(d)(iii)(A)
    
	
Provisional   Closing Date
    	
 
    	
Section   6.1(b)
    
	
Public   Offering
    	
 
    	
Section   6.1(a)
    
	
Quarterly   Research Fee
    	
 
    	
Section   6.3
    
	
Rest   of World
    	
 
    	
Section   5.1(b)
    
	
Research   Compound
    	
 
    	
Section   1.38
    
	
Royalty   Term
    	
 
    	
Section   6.6(c)
    
	
Secondary   Third Party Patent Licenses
    	
 
    	
Section   6.6(d)(iii)(B)
    
	
Securities   Act
    	
 
    	
Section   6.1(a)
    
	
Selection   Period
    	
 
    	
Section   3.5
    
	
Target   Region
    	
 
    	
Section   5.1(a)
    
	
Term
    	
 
    	
Section   11.1
    
	
Third   Party Claims
    	
 
    	
Section   10.1
    
	
Unreasonable   Delay
    	
 
    	
Section   5.1(a)
    

 

ARTICLE II
  GRANTS OF RIGHTS

 

2.1                               MethylGene Grants of Rights.

 

(a)                                 License Grants. 

 

(i)                                     Research License.  Subject to Section 2.3, MethylGene hereby grants to Otsuka a co-exclusive (solely with respect to MethylGene), fully paid-up, royalty-free right and license, under the MethylGene Intellectual Property, to conduct Otsuka’s 

 

***Confidential Treatment Requested

 

12

 

responsibilities under the Research Program in the Field in the Territory during the Selection Period.

 

(ii)                                  Development and Commercialization License.  MethylGene hereby grants to Otsuka an exclusive (even as to MethylGene), royalty-bearing right and license, under the MethylGene Intellectual Property, to (A) Develop Selected Compounds into Licensed Products intended for use in the Field in the Territory, and (B) make and have made, use, offer for sale, sell, have sold and import Selected Compounds and Licensed Products in the Field in the Territory.

 

(iii)                               Grant of Certain Jointly Developed MethylGene Collaboration Intellectual Property for use Outside the Field.  MethylGene hereby grants to Otsuka a perpetual, irrevocable, non-exclusive, fully paid-up, royalty-free right and license to use, solely outside the Field, MethylGene Collaboration Intellectual Property that (A) is (1) Formulation Technology or (2) Know-How that directly relates to the physicochemical property pharmacokinetics/pharmacodynamics relationship in ocular tissue, and (B) is jointly developed, conceived or created by or on behalf of MethylGene and/or its Affiliates, on the one hand, and by or on behalf of Otsuka and/or its Affiliates, on the other hand.

 

(b)                                 Sublicenses.

 

(i)                                     Otsuka shall have the right to grant sublicenses under the licenses to MethylGene Intellectual Property granted to Otsuka under Section 2.1(a)(i) (only with respect to CROs acting on behalf of Otsuka) and Section 2.1(a)(ii) to its Affiliates or to Third Parties without MethylGene’s prior written approval but with written notice to MethylGene.  Any sublicense granted by Otsuka pursuant to this Section 2.1(b)(i) shall be granted pursuant to a written agreement that subjects the Sublicensee to all relevant restrictions, limitations and obligations in this Agreement, including, without limitation, Sections 2.3 and Section 2.6.  Otsuka shall use Commercially Reasonable Efforts to monitor and enforce any such sublicense agreement with respect to such restrictions, limitations and obligations, and shall terminate such sublicense in the event the sublicensee fails to cure a material breach thereof.  Otsuka shall remain primarily responsible for the compliance by each of its Sublicensees with, all relevant restrictions and limitations in this Agreement.  Otsuka shall provide MethylGene with a copy of each sublicense agreement that Otsuka enters into within ten (10) Business Days following execution of such sublicense agreement.

 

(ii)                                  Otsuka shall have the right to grant sublicenses under the license to MethylGene Collaboration Intellectual Property granted to Otsuka under Section 2.1(a)(iii) to any of its Affiliates or to Third Parties without MethylGene’s prior written approval.

 

(c)                                  Non-Suit Covenant.  MethylGene hereby covenants that neither MethylGene nor any of its Affiliates or sublicensees will sue under or assert against Otsuka or its Affiliates or Sublicensees any Patent Right or Know-How that MethylGene comes to Control after the Effective Date for any activities by Otsuka, its Affiliates or Sublicensees undertaken in connection with the exercise of the licenses granted under Section 2.1(a)(i) or 2.1(a)(ii).

 

13

 

2.2                               Otsuka Grant of Rights.

 

(a)                                 License Grants.

 

(i)                                     Research License.  Otsuka hereby grants to MethylGene a non-exclusive, fully paid-up, royalty-free right and license, under the Otsuka Intellectual Property, to conduct MethylGene’s responsibilities under the Research Program in the Field in the Territory during the Research Term.

 

(ii)                                  Grant Outside the Field.  Subject to Section 11.6(a)(iv), Otsuka hereby grants to MethylGene a perpetual, irrevocable non-exclusive, fully paid-up, royalty-free right and license to use Otsuka Collaboration Intellectual Property solely outside the Field; provided that such right and license shall expressly exclude any right to use Otsuka Collaboration Intellectual Property that is Formulation Technology.

 

(b)                                 Sublicenses.  MethylGene shall have the right to grant sublicenses under the licenses to Otsuka Collaboration Intellectual Property granted to MethylGene under Section 2.2(a)(ii) to any of its Affiliates or to Third Parties without Otsuka’s prior written approval.

 

(c)                                  Non-Suit Covenant.  Otsuka hereby covenants that neither Otsuka nor any of its Affiliates or sublicensees will sue under or assert against MethylGene or any of its Affiliates or sublicensees any Patent Right or Know-How that Otsuka comes to Control after the Effective Date for any activities by MethylGene, its Affiliates or sublicensees undertaken in connection with the exercise of the license granted under Section 2.2(a)(i).

 

2.3                               Restriction on Use of MethylGene Intellectual Property.  Neither Otsuka nor any of its Affiliates or Sublicensees shall, alone or in collaboration with a non-Sublicensee Third Party, use MethylGene Intellectual Property to (a) engage in the synthesis and/or identification of compounds (other than scale-up of Program Compounds and Selected Compounds), or (b) research, develop, make, have made, use, offer for sale, sell, have sold or import one or more Compounds or products containing one or more Compounds in the Territory outside the Field, except as provided in Section 2.1(a)(iii) or Section 2.4.

 

2.4                               Right of First Refusal on Other Ophthalmic Indications.

 

(a)                                 In addition to the rights and licenses granted pursuant to Section 2.1, Otsuka shall have a limited right and license to conduct research activity during the Selection Period using Program Compounds, and, for a period of [...***...], using Selected Compounds, to identify possible applications for such Program Compounds, or Selected Compounds, as applicable, in Other Ophthalmic Indications.  Otsuka shall regularly (and at least prior to each meeting of the JRDC) submit reasonably detailed reports on such research to MethylGene through the JRDC, and shall disclose with such reports material information and data arising out of such research.  MethylGene hereby grants to Otsuka a right of first refusal with respect to a worldwide, royalty-bearing license for the Development, Manufacture and Commercialization of Licensed Products for Other Ophthalmic Indications in the Territory (an “OOI License”).

 

***Confidential Treatment Requested

 

14

 

(b)                                 In the event that Otsuka desires to obtain an OOI License with respect to any Program Compound or Selected Compound, as applicable, Otsuka shall provide notice in writing to MethylGene of such desire together with a written offer for such OOI License.  The Parties shall then negotiate in good faith for [...***...] days a definitive agreement with respect to such OOI License.  If the Parties do not execute a definitive agreement with respect to such OOI License within the [...***...]day period described above or any extension thereof agreed upon by the Parties in writing, then MethylGene may offer to grant an OOI License with respect to such Program Compound or Selected Compound, as applicable, to any Third Party; provided, however, that MethylGene shall not offer such OOI License to any Third Party on terms or conditions that are more favorable to such Third Party than the terms and conditions last offered to Otsuka unless MethylGene first offers such more favorable terms and conditions to Otsuka as further contemplated below.

 

(c)                                  Subject to Section 2.4(b), in the event that MethylGene desires to grant an OOI License to Otsuka or to any Third Party, MethylGene shall first provide notice in writing to Otsuka of such desire together with a written offer for such OOI License.  The Parties shall then negotiate in good faith for [...***...] days a definitive agreement with respect to such OOI License.  If the Parties do not execute a definitive agreement with respect to such OOI License within the [...***...]-day period described above or any extension thereof agreed upon by the Parties in writing, then MethylGene may offer to grant an OOI License with respect to such Program Compound or Selected Compound, as applicable, to any Third Party; provided, however, that MethylGene shall not offer such OOI License to any Third Party on terms or conditions that are more favorable to such Third Party than the terms and conditions last offered to Otsuka unless MethylGene first offers such more favorable terms and conditions to Otsuka as contemplated in this Section 2.4(c).

 

(d)                                 Notwithstanding the foregoing, Otsuka’s right to request an OOI License under Section 2.4(b) and MethylGene’s obligation to offer Otsuka an OOI License under Section 2.4(c) shall terminate (i) with respect to Program Compounds, at the end of the six (6) month period (or longer than such period as mutually agreed to in writing by the Parties) following the Selection Period, and (ii) with respect to the Selected Compounds, at the end of the [...***...] period (or longer than such period as mutually agreed to in writing by the Parties) following the [...***...] period after the Selection Period.  Further notwithstanding the foregoing, MethylGene’s obligation to [...***...].

 

2.5                               Rights Retained by the Parties.  Any rights of MethylGene or Otsuka, as the case may be, not expressly granted to the other Party under the provisions of this Agreement shall be retained by such Party.  Without limiting the generality of the foregoing, no right or license is granted under the MethylGene Intellectual Property to any compound that is not a Program Compound or a Research Compound.  In the event MethylGene or its Affiliates, pursuant to its retained rights, Develops, Manufactures or Commercializes any Selected Compounds outside the 

 

***Confidential Treatment Requested

 

15

 

Field (directly or through sublicensees), MethylGene shall notify Otsuka thereof in writing, each Party shall thereafter promptly submit to the other Party, at no additional cost to such other Party, any preclinical and/or clinical data, related to safety of such Selected Compounds (as well as other post-clinical adverse event information) as may be necessary for such other Party to satisfy its safety reporting obligation to the Regulatory Authorities in the Territory.

 

2.6                               Exclusivity.

 

(a)                                 During the Term and, in the event this Agreement is terminated by MethylGene in accordance with Section 11.2, terminates in accordance with Section 11.3 or is terminated by Otsuka in accordance with Section 11.4 (unless such termination is made within thirty (30) days following Otsuka’s receipt of written notice of a Change of Control of MethylGene), for a [...***...] year period immediately following the Term, neither Otsuka nor any of its Affiliates shall, alone or in collaboration with a Third Party, discover, research, Develop, Manufacture or Commercialize any Compound in the Field in the Territory (other than a Licensed Product pursuant to this Agreement during the Term), or grant a license to, or otherwise assist or authorize, any Third Party to discover, research, Develop, Manufacture or Commercialize any Compound in the Field in the Territory (other than a Licensed Product pursuant to this Agreement during the Term).

 

(b)                                 Subject to Section 11.5, during the Term and, in the event this Agreement is terminated by Otsuka in accordance with Section 11.2, for a [...***...] year period immediately following the Term, neither MethylGene nor any of its Affiliates shall, alone or in collaboration with a Third Party, discover, research, Develop, Manufacture or Commercialize any Compound in the Field in the Territory, or grant a license to, or otherwise assist or authorize, any Third Party to discover, research, Develop, Manufacture or Commercialize any Compound in the Field in the Territory.

 

(c)                                  The restrictions set forth in this Section 2.6 shall not apply to the discovery, research, Development, Manufacture and/or Commercialization of a Compound in the Field in the Territory owned or controlled by an acquiror of MethylGene or Otsuka (or any affiliate of such acquiror that is not controlled by MethylGene or Otsuka), as the case may be; provided that, [...***...].

 

ARTICLE III
  RESEARCH PROGRAM AND DEVELOPMENT

 

3.1                               General.  Each of MethylGene and Otsuka shall use Commercially Reasonable Efforts to perform the Research Program in accordance with the Research Plan.  After the Research Term, Otsuka shall be solely responsible, at Otsuka’s sole discretion and expense, for the Development of Selected Compounds and Licensed Products in the Field. 

 

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3.2                               Research Program.

 

(a)                                 Research Term.  The initial term of the Research Program shall commence on the Effective Date and continue for a period of eighteen (18) months.  Otsuka shall have the right to extend such term for up to two (2) consecutive renewal periods of six (6) months each.  Each renewal extension right may only be exercised upon written notice at least sixty (60) days prior to the end of the initial term or renewal term, as applicable.  Thereafter, Otsuka may request additional six (6)-month - extensions on at least ninety (90) days written notice to MethylGene, and MethylGene may grant or refuse such extensions in its sole discretion.  The initial term and subsequent extension terms are collectively referred to in this Agreement as the “Research Term.”

 

(b)                                 Research Plan.  Within [...***...] days after the Effective Date, each of MethylGene and Otsuka shall prepare and submit to the JRDC a draft plan outlining such Party’s obligations under the Research Program.  The Parties shall review and consider such draft plans through the JRDC, and within thirty (30) days following such preliminary submissions the Parties shall agree on an initial Research Plan (including, without limitation, an identification and synthesis plan) which shall be attached as Schedule 3.2(b) hereto.  Thereafter, the Research Plan may be reviewed and amended by the JRDC in accordance with Section 3.3(c) and subject to Section 3.3(d).

 

(c)                                  MethylGene FTE Contributions.  During the Research Term, MethylGene shall provide [...***...] FTEs to work on the Research Program, and Otsuka shall pay a Quarterly Research Fee for such FTEs as provided in Section 6.3.  MethylGene shall be responsible for and shall provide sufficient resources to complete all aspects of the Research Plan assigned to MethylGene (using in-house technology available at MethylGene), including, without limitation, identifying, synthesizing and characterizing Compounds with the potential for clinical application in the Field, characterizing tyrosine kinase inhibitory activity, and providing to Otsuka purity analysis data.  MethylGene shall have sole discretion in selecting Compounds synthesized by MethylGene in accordance with the Research Plan to provide to Otsuka for further screening; provided that: (i) MethylGene shall use Commercially Reasonable Efforts to identify, select and provide to Otsuka at least [...***...] different Compounds (in addition to the Program Compounds set forth on Schedule 1.56 and Research Compounds set forth on Schedule 1.38-1) that may have clinical application in the Field, as set forth in Section 5.2; and (ii) the JRDC shall be the primary vehicle for discussing the selection of Compounds synthesized by MethylGene.  MethylGene shall require by written agreement that all personnel involved in the Research Program have entered into confidentiality and invention assignment agreements that are consistent with the provisions of this Agreement and shall be obligated to assign any rights they may have in any inventions resulting from such work to MethylGene.

 

(d)                                 Otsuka Contributions.  During the Research Term, Otsuka shall be responsible for and shall provide sufficient resources to complete all aspects of the Research Plan assigned to Otsuka, including, without limitation, the screening of Compounds and the conduct of efficacy and toxicology studies on Program Compounds identified by the JRDC and Otsuka for further study based on initial screening.  In addition, pursuant to the rights granted under Section 2.1(a)(i), Otsuka may use Research Compounds for the sole purpose of developing SAR Know-How for MethylGene’s use in identifying and synthesizing Program Compounds.  All 

 

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research and Development work by Otsuka pursuant to the Research Program shall be at Otsuka’s sole expense.  Otsuka shall require by written agreement that all personnel involved in the Research Program have entered into confidentiality and invention assignment agreements that are consistent with the provisions of this Agreement and shall be obligated to assign any rights they may have in any inventions resulting from such work to Otsuka.  Otsuka shall use Commercially Reasonable Efforts to perform its obligations under the Research Plan and to ensure that all Otsuka personnel involved in the Research Program have sufficient training, expertise and experience.

 

3.3                               Joint Research and Development Committee.  The Parties hereby establish a joint research and development committee (the “JRDC”) to facilitate performance of the Research Program and discussion regarding the Development of Selected Compounds and to coordinate patent prosecution strategy with respect to Collaboration Intellectual Property.  During the Research Term, each of Otsuka and MethylGene shall attend each meeting of and otherwise participate in the JRDC; thereafter, MethylGene shall have the right, but not the obligation, to attend meetings of and otherwise participate in such committee; provided, however, that, for the avoidance of doubt, MethylGene is not entitled to vote with respect to matters decided at meetings after the Research Term that it does not attend (and that, except as otherwise expressly provided in this Agreement, such matters may be decided by a majority of the JRDC representatives attending such meeting).

 

(a)                                 Composition.  The JRDC shall be comprised of three (3) representatives of each Otsuka and MethylGene, respectively.  Each Party may change its representatives to the JRDC from time to time in its sole discretion, effective upon notice to the other Party of such change.  These representatives shall have appropriate technical credentials, experience and knowledge, and ongoing familiarity with the Research Program.  Additional representatives or consultants may from time to time, by mutual consent of the Parties, be invited to attend JRDC meetings.  In the event any matter regarding patents will be considered at a meeting of the JRDC, written notice describing the matter will be provided to each Party at least [...***...] days in advance of such meeting, and each Party may, at its discretion, invite an additional representative or consultant of such Party with expertise in patent matters to attend such meeting.  The JRDC shall be chaired by a representative of MethylGene and a representative of Otsuka on an alternating basis.  (For the avoidance of doubt, the addition of any representative or consultant shall not otherwise alter the Parties’ respective voting right as set forth in Section 3.3(d)).

 

(b)                                 Meetings.  The JRDC shall meet in accordance with a schedule established by mutual written agreement of the Parties, but no less frequently than once every [...***...] months during the Research Term, with such meetings to take place one time at the facilities of each of MethylGene and Otsuka respectively during any single twelve (12) month period, and at agreed upon neutral locations for the remaining meetings during such twelve (12) month period.  Alternatively, the JRDC may meet by means of teleconference, videoconference or other similar communications equipment.  Without limiting the foregoing, either Party may also request that the JRDC meet within [...***...] Business Days following such request to discuss time-sensitive issues including, without limitation, [...***...], provided that such meetings may be by means of teleconference, videoconference or other similar communications equipment.  Each 

 

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Party shall bear its own expenses related to the attendance of such meetings by its representatives.  Minutes shall be taken by MethylGene and Otsuka in turn with respect to each such meeting.  Such minutes shall be recorded in English and shall be approved and initialed by each Party within thirty (30) days following the applicable meeting.

 

(c)                                  Scope of Oversight.  The JRDC’s oversight responsibilities shall include the Research Program activities specified in the Research Plan, the technology transfer to be provided by MethylGene to Otsuka pursuant to Section 3.7(a), and formulation of a Patent Prosecution Plan and Patent Prosecution Budget in accordance with Section 7.2(a).  Within such scope the JRDC shall: (i) confer regarding the status of the Research Program and review progress reports submitted by the Parties pursuant to Section 3.4; (ii) review and approve amendments to the Research Plan; (iii) review data and information provided by Otsuka through the JRDC relating to initial screening of Program Compounds; (iv) address such other matters relating to the activities of the Research Program as either Party may bring before the JRDC; (v) discuss the status of Development activities and the Development reports submitted by Otsuka in accordance with Section 3.7(b); (vi) discuss such other matters relating to the Development of Selected Compounds and Licensed Products in the Field as either Party may bring before the JRDC; (vii) address matters relating to licenses from Third Parties necessary to Develop, Manufacture or Commercialize a Licensed Product; (viii) address any other patent matters as specifically contemplated in this Agreement; and (ix) attempt to resolve any disputes within the JRDC on an informal basis.  For the avoidance of doubt, although the JRDC may discuss matters relating to the Development of Selected Compounds and Licensed Products, the JRDC shall have no oversight, decision-making power or other control or authority over or relating to Development of Selected Compounds and Licensed Products shall be made exclusively by Otsuka in its sole discretion.

 

(d)                                 Decision-Making.  Each Party shall have collectively one (1) vote in all decisions of the JRDC and the Parties shall attempt to make decisions by consensus.  If the JRDC cannot reach consensus on any matter within the scope of its oversight, then, except with respect to matters expressly subject to MethylGene’s discretion as provided elsewhere in this Agreement, Otsuka shall have the final decision making authority (not subject to dispute resolution procedures herein) with respect to such dispute; provided that Otsuka shall not exercise its final decision-making authority in any manner that (i) increases MethylGene’s costs or other resource commitments under the Research Plan or this Agreement, (ii) requires or permits Otsuka to enter into a license with a Third Party the result of which would be a reduction of royalties otherwise payable to MethylGene pursuant to this Agreement, (iii) modifies the synthesis plan contained in the Research Plan, (iv) imposes on MethylGene a decision regarding the selection of Compounds synthesized by MethylGene to be provided to Otsuka for further screening; or (v) modifies the terms of this Agreement.  Disputes with respect to items (i) through (v) above shall be subject to resolution by the Senior Executives pursuant to Section 12.1, provided that (except with respect to (ii) above) neither Party has the final vote and further that the dispute shall not be otherwise subject to arbitration if the Senior Executives are unable to resolve such dispute.  For the avoidance of doubt, any dispute with respect to (ii) is subject to dispute resolution, including arbitration, as set forth in Section 12.1.

 

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3.4                               Exchange of Information During Research Term.  During the Research Term, each Party shall regularly (and at least prior to each meeting of the JRDC) submit reasonably detailed written updates of such Party’s activities under the Research Plan to the other Party through the JRDC. Such written updates shall be in English.

 

3.5                               Selected Compounds.  During the Research Term, MethylGene shall use Commercially Reasonable Efforts to provide Otsuka with Lab Quantity Samples of at least [...***...] different Program Compounds synthesized by MethylGene in accordance with the identification and synthesis plan set forth in the Research Plan.  For the avoidance of doubt, such [...***...] Program Compounds are in addition to and do not include the Program Compounds or Research Compounds provided by MethylGene to Otsuka prior to the Effective Date.  At any time during the Research Term, Otsuka may request that MethylGene discontinue providing Lab Quality Samples of Program Compounds hereunder.  In the event Otsuka desires samples of Program Compounds that require larger scale synthesis than the scale necessary to produce Lab Quantity Samples, Otsuka shall notify MethylGene and the JRDC in writing.  The JRDC will determine, in consultation with MethylGene, whether such larger scale synthesis can be accomplished by MethylGene within the timeframe specified by Otsuka using the MethylGene FTEs allocated to the Research Program.  If the JRDC determines that such larger scale synthesis cannot be accomplished by MethylGene using the MethylGene FTEs allocated to the Research Program, then Otsuka will be permitted to conduct such larger scale synthesis at Otsuka’s manufacturing facilities, and MethylGene will engage in a technology transfer to enable such larger scale synthesis in accordance with Section 3.7(a).  Upon receipt of Lab Quantity Samples or larger samples produced through larger scale synthesis, Otsuka shall screen and evaluate such Program Compounds and determine in its sole discretion (after consultation with the JRDC) whether to pursue further Development, Manufacture and Commercialization of any Program Compounds.  If Otsuka desires to further Develop, Manufacture and Commercialize a Program Compound, Otsuka shall promptly notify MethylGene in writing and such Program Compound shall be deemed a “Selected Compound.” Otsuka may designate such Selected Compounds at any time during the Research Term or during the [...***...]-day period following expiration of the Research Term (the Research Term together with such [...***...]-day period, the “Selection Period”).  Otsuka shall have the right to select up to [...***...] Selected Compounds for further Development, Manufacture and Commercialization in the Field.  If, during the Selection Period, Otsuka determines that its Development strategy in the Field would be enhanced by expanding the number of Selected Compounds, then Otsuka may request by written notice to MethylGene permission to select up to [...***...] additional Selected Compounds out of the Program Compounds, which request MethylGene may grant or deny in its sole discretion, after giving such request reasonable consideration.  After the earlier of the date on which Otsuka has completed its selection of Selected Compounds or the expiration of the Selection Period, Otsuka shall return or destroy, at MethylGene’s direction, all samples of non-selected Program Compounds and all samples of Research Compounds.  Thereafter, such non-selected Program Compounds shall cease to be Program Compounds, and all Research Compounds shall cease to be Research Compounds, and with respect to all such former Program Compounds and Research Compounds Otsuka shall have no further rights.

 

3.6                               Expansion of the Field.  Upon at least [...***...] days written notice to MethylGene prior to the expiration of the Research Term, Otsuka may request that the Field be expanded, on a Selected Compound by Selected Compound basis, to include oral administration, 

 

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which request MethylGene may grant or deny in its sole discretion after considering such request.

 

3.7                               Post-Selection Activities.

 

(a)                                 Technology Transfer.  (i) During the Research Term, within [...***...] days after Otsuka selects a Selected Compound, and within [...***...] days after the earlier of the date on which Otsuka has completed its selection of all Selected Compounds or the expiration of the Selection Period; and (ii) otherwise at Otsuka’s request in the event the JRDC determines that Otsuka shall conduct larger scale synthesis of Program Compounds at Otsuka’s manufacturing facilities; MethylGene shall provide reasonable assistance to Otsuka, at [...***...] cost to Otsuka, to effect the timely and orderly transfer to Otsuka of any Know-How then contained within MethylGene Intellectual Property necessary to permit Otsuka to Manufacture the Selected Compounds or Program Compounds, as applicable.  The items to be included in such technology transfer shall be discussed and determined by the JRDC.

 

(b)                                 Development Reports.  Prior to each JRDC meeting during the Research Term and at least biannually during the period after the Research Term and before the First Commercial Sale of a Licensed Product in each of the United States, Japan, and the EU, Otsuka shall provide MethylGene and the JRDC with a reasonably detailed report describing (i) Otsuka’s proposed Development activities (including, without limitation, proposed submissions to Regulatory Authorities) and (ii) the results of prior Development activities with respect to all Selected Compounds and Licensed Products in the United States, Japan and the EU. MethylGene shall be permitted to comment on Otsuka’s planned Development activities and Otsuka shall reasonably consider such comments; provided, however, that Otsuka shall have sole discretion regarding Development activities relating to Selected Compounds and Licensed Products.  All written materials provided to MethylGene pursuant to this Section 3.7(b) shall be in English.

 

ARTICLE IV
  COMMERCIALIZATION

 

4.1                               General.  From and after the Effective Date, Otsuka shall be, subject to the provisions of Article V and MethylGene’s performance of its obligations under this Agreement including, without limitation, its post-selection obligations under Section 3.7, solely responsible for the Commercialization of Licensed Products in the Field in the Territory, including, without limitation, all costs and expenses relating thereto.

 

ARTICLE V
  DILIGENCE

 

5.1                               Commercially Reasonable Efforts; Otsuka Diligence Obligations.

 

(a)                                 During the Term, Otsuka shall use Commercially Reasonable Efforts to Develop, obtain Regulatory Approval for and Commercialize at least one (1) Licensed Product in each of the United States, Japan and the EU (each a “Target Region”).  If, subject to Section 5.1(c), Otsuka fails to exercise Commercially Reasonable Efforts to Develop, obtain Regulatory Approval for and Commercialize a Licensed Product in a Target Region, then MethylGene shall 

 

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have the right to terminate this Agreement pursuant to Section 11.2 with respect to all Selected Compounds and Licensed Products solely in such Target Region.  Notwithstanding the foregoing, the cessation of efforts by Otsuka to Develop, obtain Regulatory Approval for and Commercialize at least one (1) Licensed Product in a Target Region for a period of longer than [...***...] months because Otsuka has lost interest in or otherwise “shelved” all Licensed Products in such Target Region (an “Unreasonable Delay”) shall be deemed a failure to exercise Commercially Reasonable Efforts.  For the avoidance of doubt, Unreasonable Delay shall not include any cessation of such efforts pending any of the following:

 

(i)                                     the determination or response from any Regulatory Authority with respect to the Licensed Product anywhere in the Territory;

 

(ii)                                  the disposition or settlement of any litigation, administrative action or other claim or proceeding with respect to the Licensed Product anywhere in the Territory; or

 

(iii)                               the resolution of any Force Majeure event, including, without limitation, any Force Majeure Event concerning Otsuka’s current or prospective suppliers, manufactures or distributors.

 

(b)                                 MethylGene shall not have the right to terminate this Agreement in countries in the Territory outside the Target Regions (the “Rest of World”), unless and until MethylGene has terminated this Agreement pursuant to and in accordance with this Section 5.1 with respect to all of the Target Regions.

 

(c)                                  Notwithstanding the foregoing, MethylGene acknowledges and agrees that, to satisfy its obligations under this Section 5.1:

 

(i)                                     Otsuka need not Develop, obtain Regulatory Approval for and Commercialize the same Licensed Product (or the same Selected Compound), in each of the Target Regions;

 

(ii)                                  Otsuka need not Develop, obtain Regulatory Approval for and Commercialize a Licensed Product in each of the Target Regions concurrently and may proceed to address each Target Region serially in turn, in alternating fashion, concurrently or in any other manner as Otsuka may pursue in its sole discretion so long as it is using Commercially Reasonable Efforts to Develop, obtain Regulatory Approval for or Commercialize a Licensed Product in all of the Target Regions in which Otsuka has not then obtained marketing approval from the applicable Regulatory Authority for a Licensed Product; and

 

(iii)                               with respect to the EU, Otsuka may pursue any methods consistent with Otsuka’s practices with respect to the Development, seeking Regulatory Approval for, and Commercializing similar products in the EU, or which otherwise constitute Commercially Reasonable Efforts with respect thereto in the EU, including, without limitation, pursuing such efforts in the EU on a centralized basis (e.g., through the EMEA) or by pursuing Regulatory Approval on a country-by-country basis (e.g., using the approvals obtained in one EU country as a basis of application for approval in other EU countries). 

 

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5.2                               MethylGene Diligence Obligations.  MethylGene shall use Commercially Reasonable Efforts to identify, select and provide to Otsuka at least [...***...] different Compounds (in addition to the Program Compounds set forth on Schedule 1.56 and Research Compounds set forth on Schedule 1.38-1) that may have clinical application in the Field in accordance with the Research Plan (or fewer than [...***...] if Otsuka requests that MethylGene discontinue providing Compounds as provided in Section 3.5), as the same may be amended as provided in this Agreement, and to fulfill its obligations set forth in Section 3.2(c).  If MethylGene fails to exercise such Commercially Reasonable Efforts then Otsuka shall have the right to terminate this Agreement pursuant to Section 11.2.

 

ARTICLE VI
  FINANCIAL PROVISIONS

 

6.1                               Equity.

 

(a)                                 Upon the closing of (i) a firm commitment underwritten public offering (a “Public Offering”) by MethylGene of its common shares, without par value (“Common Shares”), pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”), or (ii) a private PIPE sale transaction of Common Shares providing contractual rights to the purchasers for the registration of such Common Shares under the Securities Act within [...***...] days following the closing thereof (a “PIPE Transaction”), MethylGene shall issue and sell to Otsuka, and Otsuka shall purchase from MethylGene, Common Shares for an aggregate purchase price of Three Million Dollars ($3,000,000) at a purchase price per share equal to either (x) the initial price per share to the public in such Public Offering or (y) the price per share paid by purchasers in such PIPE Transaction, as applicable.  For purposes hereof, the term “Offering” shall mean either a Public Offering or a PIPE Transaction, as applicable.  The foregoing sale and purchase of Common Shares is subject to the following additional conditions: (A) the aggregate gross proceeds to MethylGene in the Offering are at least Ten Million Dollars ($10,000,000) (excluding any purchase by Otsuka), (B) the Common Shares are listed on the New York Stock Exchange, a Nasdaq Stock Market or the American Stock Exchange in connection with the Offering, and (C) the Offering occurs within eighteen (18) months following the Effective Date.

 

(b)                                 If no such Offering occurs within eighteen (18) months following the Effective Date, then MethylGene shall issue and sell to Otsuka, and Otsuka shall purchase from MethylGene, on a date (the “Provisional Closing Date”) within [...***...] days days following the end of the eighteen (18) month period following the Effective Date, Common Shares listed on the Toronto Stock Exchange (the “TSX”) for an aggregate purchase price of One Million Five Hundred Thousand Dollars ($1,500,000) at a purchase price per share equal to one hundred twenty percent (120%) of the [...***...] trading price of the Common Shares on the TSX over the [...***...] trading day period ending on the trading day immediately preceding the Provisional Closing Date.

 

(c)                                  It is understood and agreed that only one issuance and sale of Common Shares shall be required pursuant to this Section 6.1 and that MethylGene shall bear its own costs associated with such documentation, issuance and sale. 

 

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6.2                               Initial License Payments.  Otsuka will make an initial non-refundable, non-creditable license payment to MethylGene of Two Million Dollars ($2,000,000) payable as follows: (a) One Million Dollars ($1,000,000) no later than ten (10) Business Days after the Effective Date; and (b) One Million Dollars ($1,000,000) on or before April 30, 2008.

 

6.3                               Research Program.  On or before the tenth (10th) day after the close of each Calendar Quarter of the Research Term or portion thereof, as applicable, MethylGene shall provide to Otsuka an invoice for the Quarterly Research Fee for such Calendar Quarter, together with a written report (which report shall also serve as or may be part of the report to be provided to the JRDC in accordance with Section 3.4) summarizing MethylGene’s activities under the Research Program during the preceding Calendar Quarter, [...***...] FTEs engaged and [...***...] allocated to each major activity.  Within ten (10) days of receiving such report, Otsuka shall pay MethylGene a Quarterly Research Fee for the applicable Calendar Quarter of the Research Term.  As used in this Agreement, “Quarterly Research Fee” means the amount determined by multiplying the FTE Rate by the [...***...] FTEs to be provided by MethylGene pursuant to Section 3.2(c) during the applicable Calendar Quarter or portion thereof of the Research Term.

 

6.4                               Event Milestone Payments.  Otsuka shall make non-refundable, non-creditable payments to MethylGene as set forth below not later than fifteen (15) Business Days after the earliest date on which the corresponding milestone event set forth below is achieved by Otsuka, its Affiliate or Sublicensee with respect to each Selected Compound or Licensed Product, as applicable:

 

	
Milestone Event
    	
 
    	
Payment
    
	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...][...***...][...***...][...***...][...***...]
    	
 
    	
[...***...][...***...][...***...][...***...][...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    

 

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Milestone Event
    	
 
    	
Payment
    
	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...][...***...][...***...][...***...][...***...]
    	
 
    	
[...***...][...***...][...***...][...***...][...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    

 

Notwithstanding the foregoing, no milestone set forth above shall be paid a second time, although a second Selected Compound has achieved such milestone, until [...***...].  Similarly, no milestone set forth above shall be paid with respect to a third Selected Compound to achieve said milestone until [...***...], and so on with respect to each additional Selected Compound such that milestones will be payable on each Selected Compound only after each previous Selected Compound to have achieved the same milestone has also achieved [...***...].

 

6.5                               Sales Milestone Payments.  In addition to all other amounts payable under this Agreement, Otsuka shall make non-refundable, non-creditable milestone payments to MethylGene upon the first achievement of each of the corresponding milestone events on a Selected Compound by Selected Compound basis by all Licensed Products containing the Selected Compound:

 

	
Milestone Event
    	
 
    	
Payment
    
	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    

 

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Each of the above milestone payments shall be due and payable by Otsuka simultaneously with the royalties for the Calendar Quarter immediately following the Calendar Quarter in which such milestone is achieved.

 

6.6                               Licensed Product Royalties.

 

(a)                                 Net Sales by Otsuka and Affiliates.  Otsuka shall pay to MethylGene royalties on Calendar Year Net Sales in the Territory as follows on a Licensed Product by Licensed Product basis:

 

	
Calendar Year Net Sales of the Licensed Product
   by Otsuka, its Affiliates and Sublicensees
    	
 
    	
Royalty Rate
    
	
Less than or equal to [...***...]
    	
 
    	
[...***...]
    
	
Greater than [...***...] and less than or equal to   [...***...]
    	
 
    	
[...***...]
    
	
Greater than [...***...] and less than or equal to   [...***...]
    	
 
    	
[...***...]
    
	
Greater than [...***...]
    	
 
    	
[...***...]
    

 

Royalties under this Section 6.6(a) on Net Sales of a Licensed Product in the Territory in a Calendar Year shall be paid at the rate applicable to the portion of Net Sales within each of the Net Sales levels during such Calendar Year.  For example, if, during a Calendar Year, worldwide Net Sales of a Licensed Product were equal to $[...***...], then the royalties payable by Otsuka would be calculated by adding (i) the royalties with respect to the first $[...***...] at the first-level percentage of [...***...], and (ii) the royalties with respect to the next $50,000,000 at the second-level percentage of [...***...], for a total royalty of [...***...].  For purposes of this Section 6.6(a) all Licensed Products containing the same Selected Compound shall be deemed to be the same Licensed Product.

 

(b)                                 Net Sales by Sublicensees.  Notwithstanding the foregoing, if in any given Calendar Quarter the amount equal to [...***...] of Otsuka’s royalty receipts from any Sublicensee is greater than the royalty amount otherwise payable on such Sublicensee’s Net Sales as calculated in accordance with Section 6.6(a) (after giving effect to any reductions in accordance with Section 6.6(d)), then, with respect to Net Sales of such Sublicensee, Otsuka shall pay to MethylGene an amount equal to [...***...] of Otsuka’s royalty receipts from such Sublicensee in lieu of royalties otherwise payable on such Sublicensee’s Net Sales as calculated in accordance with Section 6.6(a).  Notwithstanding the foregoing, Net Sales of Sublicensees shall be included in the total Net Sales of a Licensed Product for purposes of determining whether the sales milestones set forth in Section 6.5 have been achieved, and for purposes of determining royalty tiers under Section 6.6(a), regardless of whether Otsuka pays MethylGene [...***...] of Otsuka’s royalty receipts from such Sublicensee or royalties calculated in accordance with Section 6.6(a).

 

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(c)                                  Royalty Term.  Otsuka’s royalty obligations to MethylGene under this Section 6.6 shall commence on a country-by-country and Licensed Product-by-Licensed Product basis on the Effective Date and shall expire on a country-by-country basis and Licensed Product-by-Licensed Product basis on the later of: (i) the expiration of the last Valid Claim Covering such Licensed Product in such country, or (ii) the twelfth (12th) anniversary of the date of the First Commercial Sale by Otsuka or any of its Affiliates or Sublicensees to a non-Sublicensee Third Party of such Licensed Product in such country (the “Royalty Term”).

 

(d)                                 Royalty Adjustments.

 

(i)                                     Absence of Valid Claims.  During the Royalty Term, following the expiration in a particular country of the last to expire Valid Claim Covering a particular Licensed Product, or in countries where there is no Valid Claim Covering such Licensed Product, the royalties otherwise payable pursuant to Section 6.6(a) with respect to such Licensed Product in such country will be [...***...] of the applicable royalty rate under Section 6.6(a) for the applicable portion of the Royalty Term.

 

(ii)                                  Royalty Adjustment for Generic Products.  If, for [...***...] Calendar Quarters, there is Generic Competition in a particular country in which Otsuka, its Affiliate or Sublicensee is selling a Licensed Product, then for such country the royalties payable pursuant to Section 6.6(a) shall be reduced by [...***...] for the remainder of the Royalty Term. 

 

(iii)                               Third Party Royalties.

 

(A)                               On a Licensed Product by Licensed Product and country by country basis, if (1) the JRDC, subject to Section 3.3(d), reasonably determines that, in order to practice the subject matter of [...***...] or [...***...] in the Field and avoid infringement of any [...***...], it is necessary to obtain a license from a Third Party and to pay a royalty under such license (including, without limitation, in connection with settlement or avoidance of a patent infringement claim or dispute), or (2) Otsuka is subject to a final court or other binding order or ruling or a decision made or agreed to by MethylGene or pursuant to Article XII requiring the payment of a royalty to a Third Party patent holder in order to practice the subject matter of [...***...]or[...***...] in the Field (“Primary Third Party Patent Licenses”), [...***...] of any royalty paid under Primary Third Party Patent Licenses by [...***...] shall be [...***...] against [...***...] hereunder; provided, however, in no event shall such credit cause the royalties paid to MethylGene for any particular Calendar Quarter to be reduced by more than [...***...].

 

(B)                                                                                                                                                                               On a Licensed Product by Licensed Product and country by country basis, if (1) the JRDC, subject to Section 3.3(d), reasonably determines that, in order to [...***...] a Licensed Product in the Field (but not in order to practice the subject matter of [...***...] or[...***...]) and avoid infringement of any [...***...], it is necessary to obtain a license from a Third Party and to pay a royalty under such license 

 

***Confidential Treatment Requested

 

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(including, without limitation, in connection with settlement or avoidance of a patent infringement claim or dispute), or (2) Otsuka is subject to a final court or other binding order or ruling or a decision made or agreed to by MethylGene or pursuant to Article XII requiring the payment of a royalty to a Third Party patent holder in order to [...***...] a Licensed Product in the Field (but not in order to practice the subject matter of the [...***...] or[...***...]) (“Secondary Third Party Patent Licenses”), [...***...] of any royalty paid under Secondary Third Party Patent Licenses by [...***...] shall be [...***...] against [...***...] hereunder; provided, however, in no event shall such credit cause the royalties paid to MethylGene for any particular Calendar Quarter to be reduced by more than (x) [...***...] of Net Sales with respect to the first [...***...] in Net Sales in a Calendar Year, or (y) [...***...] of Net Sales with respect to Net Sales in excess of [...***...] in a Calendar Year.

 

(iv)                              Royalty Reduction for Patent Prosecution Costs.  [...***...] of any costs paid by Otsuka in respect of the preparation, filing, prosecution or maintenance by MethylGene of MethylGene Collaboration Patent Rights filed in Additional Countries in accordance with Section 7.2(e) shall be [...***...] creditable against royalties payable to MethylGene hereunder with respect to all Licensed Products Covered by such MethylGene Collaboration Patent Rights in such Additional Countries; provided, however, in no event shall such credit cause the royalties paid to MethylGene for any particular Calendar Quarter to be reduced by more than [...***...].

 

(v)                                 Aggregate Royalty Reductions.  Notwithstanding anything to the contrary in this Section 6.6(d), in no event shall the royalties otherwise payable under Section 6.6(a) with respect to any given Net Sales of a Licensed Product in a country in the Territory be reduced, as a result of the royalty reduction provisions of Sections 6.6(d)(i), 6.6(d)(ii), 6.6(d)(iii)(A), 6.6(d)(iii)(B) and 6.6(d)(iv), to be less than [...***...] of the royalties otherwise payable under Section 6.6(a).

 

6.7                               Sublicensee Income.  In addition to the milestones and royalties set forth above, Otsuka shall pay MethylGene [...***...] of all Sublicensee Income received by Otsuka and its Affiliates.

 

6.8                               Reports; Payments.  Within sixty (60) days after the end of each Calendar Quarter during which there are Net Sales or Sublicensee Income giving rise to a payment obligation under Section 6.6 or Section 6.7, Otsuka shall submit to MethylGene a report identifying, for each Licensed Product on a country-by-country basis, (a) gross sales for such Licensed Product for each country for such Calendar Quarter, the deductions from gross sales used in calculating Net Sales and the resulting calculation of royalties (including offsets or reductions pursuant to Section 6.6(d)) payable to MethylGene; (b) any sales milestones payable to MethylGene pursuant to Section 6.5, and (c) any Sublicensee Income received by Otsuka during such quarter, together with a calculation of that portion payable to MethylGene.  Concurrently with each such report, Otsuka shall pay to MethylGene all sales milestones, royalties and Sublicensee Income payable by it under Sections 6.5, 6.6 and 6.7.  In the event that there are any royalty rate adjustments to be made pursuant to this Article VI (including, without 

 

***Confidential Treatment Requested

 

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limitation, any volume based royalty rate increases under Section 6.6(a) and any royalty rate reductions under Section 6.6(d)), that cannot be reflected in the report and payment to be submitted within sixty (60) days after the end of the Calendar Quarter in which the triggering event has occurred (as contemplated in the first sentence to this Section 6.8), such adjustments shall be implemented within sixty (60) days after the end of the Calendar Year following the Calendar Year in which the triggering event occurs.

 

6.9                                                                               Books and Records; Audit Rights.  Otsuka shall keep reasonably complete and accurate records of the underlying revenue and expense data relating to the calculations of Net Sales, Sublicensee Income and payments required by Sections 6.5, 6.6 and 6.7.  MethylGene shall have the right, once annually at its own expense, to have an independent, certified public accounting firm, selected by MethylGene and reasonably acceptable to Otsuka, review any such records of Otsuka in the location(s) where such records are maintained by Otsuka upon reasonable notice (which shall be no less than fourteen (14) days prior notice) and during Otsuka’s regular business hours and under obligations of strict confidence, for the sole purpose of verifying the basis and accuracy of payments made under Sections 6.5, 6.6 and 6.7 within the three (3)-year period preceding the date of the request for review.  The report of such accounting firm shall be limited to a certificate stating whether any report made or payment submitted by Otsuka during such period is accurate or inaccurate and the actual amounts of Net Sales and Sublicensee Income and royalties and other payments due for such period.  Otsuka shall receive a copy of each such report concurrently with receipt by MethylGene.  Should such inspection lead to the discovery of a discrepancy to MethylGene’s detriment, Otsuka shall pay within ten (10) Business Days after its receipt from the accounting firm of the certificate the amount of the discrepancy.  [...***...] shall pay the full cost of the review unless the underpayment is greater than [...***...] of the amount due for any Calendar Year, in which case [...***...] shall pay the reasonable cost charged by such accounting firm for such review.

 

6.10                        Taxes.  MethylGene shall pay any and all taxes levied on account of payments it receives under this Agreement.  If laws or regulations require that taxes be withheld, Otsuka will (a) deduct those taxes from the remittable payment, (b) timely pay the taxes to the proper taxing authority, and (c) send proof of payment to MethylGene within thirty (30) days after receipt by Otsuka of confirmation of payment from the relevant taxing authority.  Otsuka will reasonably cooperate with MethylGene to obtain the benefit of any applicable tax law or treaty, including, without limitation, the pursuit of any refund or credit of such tax to MethylGene.  Notwithstanding the foregoing, payments made pursuant to Section 6.2 and payments with respect to milestones (a) and (b) under Section 6.4, and only such payments, shall be grossed up as necessary so that the amounts received by MethylGene, after any required withholding taxes payable to applicable taxing authorities, are the amounts shown in such Sections and, accordingly, Otsuka’s obligation set forth in subclause (c) above shall not apply with respect to such payments.

 

6.11                        United States Dollars.  All dollar ($) amounts specified in this Agreement are United States dollar amounts.

 

6.12                        Payment Method and Currency Conversion.  All payments to be made by Otsuka to MethylGene shall be in immediately available funds via either a bank wire transfer, an ACH (automated clearing house) mechanism, or any other means of electronic funds transfer, at 

 

***Confidential Treatment Requested

 

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Otsuka’s election, to a bank account designated by MethylGene in writing from time to time.  For the purposes of determining whether any sales milestone payment under Section 6.5 is payable or the amount of royalties due for the relevant Calendar Quarter under Section 6.6, the amount of Net Sales in any foreign currency shall be converted into United States dollars in a manner consistent with Otsuka’s normal practices used to prepare its audited financial reports; provided that such practices use a widely accepted source of published exchange rates.

 

6.13                        Late Payments.  If a Party shall fail to make a timely payment of any amounts that are not subject to a good-faith dispute pursuant to the terms of this Agreement, interest shall accrue on the past due amount at the rate of [...***...] over the prime rate of interest reported in The Wall Street Journal (U.S. East Coast Edition) for the date such amount was due, computed for the actual number of days the payment was past due.

 

ARTICLE VII
  INTELLECTUAL PROPERTY OWNERSHIP, PROTECTION
 AND RELATED MATTERS

 

7.1                               Ownership of Inventions.

 

(a)                                 Background Intellectual Property.  MethylGene shall be the sole and exclusive owner of the MethylGene Background Intellectual Property.  Otsuka shall be the sole and exclusive owner of the Otsuka Background Intellectual Property.

 

(b)                                 Collaboration Intellectual Property. 

 

(i)                                     MethylGene Collaboration Intellectual Property.  The Parties intend that MethylGene shall be the sole and exclusive owner of all MethylGene Collaboration Intellectual Property.  To this end, Otsuka hereby assigns and agrees to assign or, if applicable, cause its Affiliates to assign to MethylGene, for no additional consideration, all of Otsuka’s and its Affiliates’ right, title and interest to any such MethylGene Collaboration Intellectual Property.

 

(ii)                                  Otsuka Collaboration Intellectual Property.  The Parties intend that Otsuka shall be the sole and exclusive owner of all Otsuka Collaboration Intellectual Property.  To this end, MethylGene hereby assigns and agrees to assign or, if applicable, cause its Affiliates to assign to Otsuka, for no additional consideration, all of MethylGene’s and its Affiliates’ right, title and interest to such Otsuka Collaboration Intellectual Property.

 

(iii)                               In furtherance of the foregoing, each of the Parties assigning rights pursuant to this Section 7.1(b) agrees to execute such documents and provide such other reasonable assistance as the non-assigning Party may reasonably request in order to document, record and perfect such assignment and the non-assigning Party’s rights and interests in the rights so assigned including, without limitation, executing, and causing their Affiliates and their respective employees and agents to execute, patent assignment documents in connection with the filing of any patent application within the MethylGene Collaboration Patent Rights or the Patent Rights contained in the Otsuka Collaboration Intellectual Property, as applicable.

 

***Confidential Treatment Requested

 

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7.2                               Prosecution and Maintenance of Patent Rights.

 

(a)                                 Background Patent Rights.  MethylGene shall have the sole right, but not the obligation, to prepare, file, prosecute and maintain MethylGene Background Patent Rights; provided, however that MethylGene shall not, during the Term, abandon any MethylGene Background Patent Right that Covers a Program Compound, Selected Compound or Licensed Product.  Otsuka or its Affiliate, as applicable, shall have the sole right, but not the obligation, to prepare, file, prosecute and maintain Patent Rights contained in the Otsuka Background Intellectual Property.

 

(b)                                 Patent Prosecution Plan and Budget.  The JRDC shall discuss and formulate a strategy for prosecution and maintenance of Patent Rights with respect to patentable inventions contained in Collaboration Intellectual Property, which, if prosecuted, would disclose or claim a composition of matter comprising a Compound and/or a use of a Compound in the Field and would, therefore, constitute MethylGene Collaboration Patent Rights (the “Patent Prosecution Plan”).  The Patent Prosecution Plan shall include plans for the filing, prosecution and maintenance of MethylGene Collaboration Patent Rights in the Major Countries and in any countries other than the Major Countries as may be requested by Otsuka in writing (“Additional Countries”), together with a budget for such filing, prosecution and maintenance activities (the “Patent Prosecution Budget”).  The Patent Prosecution Plan shall in no way limit MethylGene’s right to file patent applications with respect to inventions contained in Collaboration Intellectual Property that are not contemplated by the Patent Prosecution Plan, so long as such patent applications would, when filed, constitute MethylGene Collaboration Patent Rights (“Additional MethylGene Collaboration Patent Rights”); provided, however, that MethylGene makes reasonable and timely reports and disclosures to the JRDC, and otherwise coordinates with the JRDC, with respect to matters concerning the Additional MethylGene Collaboration Patent Rights that may affect or impact the preparation, prosecution, maintenance, defense or enforcement of Patent Rights covered by the Patent Prosecution Plan including, without limitation, issues with respect to claim priority and the management of foreign counterparts within a patent family.  In no event shall Otsuka be responsible for costs associated with the filing, prosecution and maintenance of such Additional MethylGene Collaboration Patent Rights, notwithstanding anything in Section 7.2(e).

 

(c)                                  First Right to Prosecute.  MethylGene shall have the first right, but not the obligation, to prepare, file, prosecute and maintain MethylGene Collaboration Patent Rights in the Field in the Territory in accordance with the Patent Prosecution Plan, using counsel of MethylGene’s choice reasonably acceptable to Otsuka, including, without limitation, Keown and Zucchero, LLP. MethylGene promptly shall forward to Otsuka copies of any substantive correspondence and actions prepared for or received from the U.S. Patent and Trademark Office or any foreign patent office that may materially affect MethylGene Collaboration Patent Rights identified in the Patent Prosecution Plan.  MethylGene shall provide Otsuka with a reasonable opportunity to comment on all draft filings for the prosecution and maintenance of such MethylGene Collaboration Patent Rights, including, without limitation, all associated prosecution, patent application filings, interference, opposition, re-examination, re-issue, revocation and invalidity proceedings, prior to and sufficiently in advance of their submission to the relevant patent authority.  MethylGene shall in good faith consider all such comments by Otsuka.  On the reasonable request of MethylGene, Otsuka shall cooperate, in all reasonable 

 

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ways, in connection with the prosecution of all patent applications included within such MethylGene Collaboration Patent Rights.  With respect to the preparation, filing, prosecution and maintenance of MethylGene Collaboration Patent Rights included in the Patent Prosecution Plan, MethylGene shall not incur costs in excess of the Patent Prosecution Budget without the prior approval of the JRDC or Otsuka, which approval shall not be unreasonably withheld or delayed.

 

(d)                                 Step-In Right.  Should MethylGene decide that it is no longer interested in maintaining or prosecuting a particular MethylGene Collaboration Patent Right identified in the Patent Prosecution Plan or elects not to file a particular MethylGene Collaboration Patent Right identified in the Patent Prosecution Plan, it shall promptly notify Otsuka of such decision.  Such notification will be given as early as possible which in no event will be less than thirty (30) days prior to the date on which such patent application(s) would become abandoned.  Thereafter, if such MethylGene Collaboration Patent Right Covers a Program Compound, Selected Compound or Licensed Product and/or its use in the Field, Otsuka may assume such prosecution and maintenance at its sole expense by written notice to MethylGene, in which event such MethylGene Collaboration Patent Right shall be promptly assigned by MethylGene to Otsuka and MethylGene shall execute such documents, and provide such assistance, in documenting such assignment in accordance with Section 7.1(b)(iii).

 

(e)                                  Prosecution Costs.  That portion of costs and expenses for the preparation, filing, prosecution and maintenance of MethylGene Collaboration Patent Rights or MethylGene Background Patent Rights for which Otsuka is responsible in accordance with (i), (ii) or (iii) below shall be payable by Otsuka within thirty (30) days following receipt of an invoice therefor from MethylGene. 

 

(i)                                     Prior to Selection.  With respect to costs and expenses for the preparation, filing, prosecution and maintenance of MethylGene Collaboration Patent Rights identified in the Patent Prosecution Plan or MethylGene Background Patent Rights, in each case incurred after the Effective Date but prior to the identification of all Selected Compounds by Otsuka, Otsuka shall pay:

 

(A)                               [...***...] of MethylGene’s direct, out-of-pocket costs incurred in countries covered by the Patent Prosecution Plan with respect to MethylGene Background Patent Rights that, at the time such costs are incurred, Cover a Program Compound;

 

(B)                               [...***...] of such costs with respect to such MethylGene Collaboration Patent Rights in Major Countries that, at the time such costs are incurred, Cover a Program Compound and include any claim for any use outside the Field;

 

(C)                               [...***...] of such costs with respect to such MethylGene Collaboration Patent Rights in Major Countries that, at the time such costs are incurred, Cover a Program Compound and do not include any claim for any use outside the Field; and

 

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(D)                               [...***...] of such costs with respect to such MethylGene Collaboration Patent Rights in Additional Countries, subject to the right of offset against royalties in Section 6.6(d)(iv).

 

(ii)                                  After Selection.  With respect to costs and expenses for the preparation, filing, prosecution and maintenance of MethylGene Collaboration Patent Rights identified in the Patent Prosecution Plan or MethylGene Background Patent Rights in each case incurred after the identification of all Selected Compounds by Otsuka, Otsuka shall pay:

 

(A)                               [...***...] of MethylGene’s direct, out-of-pocket costs incurred in countries covered by the Patent Prosecution Plan with respect to MethylGene Background Patent Rights that, at the time such costs are incurred, Cover a Selected Compound;

 

(B)                               [...***...] of such costs with respect to such MethylGene Collaboration Patent Rights in Major Countries that, at the time such costs are incurred, Cover a Selected Compound and include any claim for any use outside the Field;

 

(C)                               [...***...] of such costs with respect to such MethylGene Collaboration Patent Rights in Major Countries that, at the time such costs are incurred, Cover a Selected Compound and do not include any claim for any use outside the Field; and

 

(D)                               [...***...] of such costs with respect to such MethylGene Collaboration Patent Rights in Additional Countries, subject to the right of offset against royalties in Section 6.6(d)(iv).

 

Notwithstanding anything in this Agreement to the contrary, after Otsuka selects all of the Selected Compounds, Otsuka shall have no further responsibility to pay any costs or expenses related to the preparation, filing, prosecution, or maintenance of Patent Rights within the MethylGene Background Patent Rights or MethylGene Collaboration Patent Rights that do not Cover any Selected Compounds, and any obligations of MethylGene or rights of Otsuka with respect to such Patent Rights shall cease.

 

(iii)                               Reimbursement of Costs Prior to Effective Date.  Otsuka shall, within ten (10) Business Days following the Effective Date, reimburse MethylGene the amounts set forth on Schedule 7.2(e)(iii), which MethylGene represents and warrants equal [...***...] of MethylGene’s out-of-pocket costs and expenses incurred prior to the Effective Date in connection with the National Phase filing for [...***...] in[...***...].

 

(iv)                              Sharing of Costs Post-MethylGene Product Launch.  Notwithstanding the foregoing Sections 7.2(e)(i) and (ii), with respect to any MethylGene Collaboration Patent Right for which Otsuka is otherwise responsible for [...***...] of the costs and expenses for the preparation, filing, prosecution and maintenance pursuant to Sections 7.2(e)(i) and (ii), in the event MethylGene launches a product Covered by such MethylGene Collaboration Patent Right in a particular country, then MethylGene shall pay [...***...] of all costs and expenses for prosecution and maintenance of such MethylGene Collaboration Patent Right in such country incurred after the first commercial sale 

 

***Confidential Treatment Requested

 

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by MethylGene of such Covered product.  MethylGene shall provide Otsuka with written notice of its intent to launch such a product at least thirty (30) days prior to the anticipated launch date.

 

7.3                               Third Party Infringement.

 

(a)                                 Background Patent Rights.  MethylGene shall have the sole right, but not the obligation, to initiate a suit or take other action to protect or otherwise enforce MethylGene Background Patent Rights against infringement by Third Parties.  Otsuka or its Affiliate, as applicable, shall have the sole right, but not the obligation, to initiate a suit or take other action to protect or otherwise enforce Patent Rights contained in the Otsuka Background Intellectual Property against infringement by Third Parties.

 

(b)                                 Notice of Infringement of MethylGene Collaboration Patent Rights.  Each Party shall promptly report in writing to the other Party during the Term any infringement of any of the MethylGene Collaboration Patent Rights in the Field (an “Infringement Claim”) of which such Party becomes aware, and shall provide the other Party with all available evidence supporting such infringement.

 

(c)                                  Initial Right to Enforce.  Subject to Section 7.3(d), MethylGene shall have in its sole discretion the first right, but not the obligation, to initiate a suit or take other appropriate action that it believes is reasonably required to protect (i.e., prevent or abate actual or threatened infringement of) or otherwise enforce the MethylGene Collaboration Patent Rights relating to a Selected Compound or Licensed Product in the Field in the Territory.  Otsuka shall execute such legal papers and cooperate in the prosecution of such suit as may be reasonably requested by MethylGene; provided that MethylGene shall promptly reimburse all out-of-pocket expenses (including, without limitation, reasonable counsel fees and expenses) actually incurred by Otsuka in connection with such cooperation. 

 

(d)                                 Step-In Right.  If MethylGene does not initiate a suit or take other appropriate action that it has the initial right to initiate or take pursuant to Section 7.3(c) within ninety (90) days following receipt of notice of an Infringement Claim pursuant to Section 7.3(b), then Otsuka shall have the right to initiate a suit or take other appropriate action that it believes is reasonably required to protect the MethylGene Collaboration Patent Rights relating to a Selected Compound or Licensed Product in the Field in the Territory.  MethylGene shall execute such legal papers and cooperate in the prosecution of such suit as may be reasonably requested by Otsuka; provided that Otsuka shall promptly reimburse all out-of-pocket expenses (including, without limitation, reasonable counsel fees and expenses) actually incurred by MethylGene in connection with such cooperation.

 

(e)                                  Conduct of Certain Actions; Costs.  At the request and expense of the Party bringing an infringement action under this Section 7.3, the other Party agrees to be joined as a party to the suit if necessary for the initiating Party to bring or maintain an infringement action hereunder and to provide reasonable assistance in any such action.  Neither Party may settle any action or proceeding brought under this Section 7.3 in a manner that materially adversely affects the other Party’s interest in the MethylGene Collaboration Patent Rights, without the written consent of such other Party, which consent shall not be unreasonably withheld or delayed.  Each Party shall always have the right to be represented by counsel of its 

 

***Confidential Treatment Requested

 

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own selection and its own expense in any suit or other action instituted by the other Party pursuant to this Section 7.3 for infringement in the Field.

 

(f)                                   Recoveries.  Any amounts recovered as a result of an action pursuant to this Section 7.3, whether by settlement or judgment, shall be allocated first to reimburse each Party for any costs and expenses incurred by such Party in connection with such action (and not otherwise reimbursed).  Any remaining recovery that is related to a Selected Compound or Licensed Product in the Field in the Territory shall be treated [...***...].  Recoveries not related to a Selected Compound or Licensed Product in the Field in the Territory shall be retained by the recovering Party.

 

7.4                               Infringement Claims Against Otsuka or MethylGene.  If a Third Party asserts that a Patent Right or other right owned or controlled by such Third Party is infringed by a Party’s or its Affiliate’s or sublicensee’s activities in the Field, the Party first obtaining knowledge of such a claim shall immediately provide the other Party with notice thereof and the related facts in reasonable detail.  The Party against whom (or against whose Affiliate or sublicensee) such infringement claim is brought shall control the defense of such claim, unless the Parties mutually agree to jointly defend against such claim.  Each Party shall, and each shall cause its Affiliates to, cooperate fully with the other Party in its efforts to defend against such claim and shall agree to be a party in any suit, if requested.  Any settlement of such a claim that would admit liability on the part of a non-defending Party or any of its Affiliates shall be subject to such non-defending Party’s prior written approval, such approval not to be unreasonably withheld or delayed.  Each Party shall control and bear the expense of its own defense of any Third Party claim of infringement. 

 

7.5                               Patent Invalidity Claim.  Each of the Parties shall promptly notify the other in the event of any legal or administrative action by any Third Party against a MethylGene Collaboration Patent Right of which it becomes aware, including, without limitation, any nullity, revocation, reexamination, invalidity, unenforceability or compulsory license proceeding.  MethylGene shall have the first right, but not the obligation, to defend against any such action involving a MethylGene Collaboration Patent Right Covering a Selected Compound, in its own name, and the costs of any such defense shall be shared equally by the Parties.  Otsuka, upon request of MethylGene, agrees to join in any such action and to cooperate reasonably with MethylGene.  If MethylGene does not defend against any such action involving such MethylGene Collaboration Patent Right Covering a Selected Compound, then Otsuka shall have the right, but not the obligation, to defend such action and the costs of any such defense shall be shared equally by the Parties.  MethylGene, upon request of Otsuka, agrees to join in any such action and to cooperate reasonably with Otsuka.

 

7.6                               Patent Term Extensions.  Otsuka shall have the exclusive right and obligation to seek patent term extensions under 35 U.S.C. § 156 and corresponding foreign Laws or supplemental patent protection, including, without limitation, supplementary protection certificates, in any country in the Territory in relation to the Licensed Products in the Field at Otsuka’s expense.  MethylGene and Otsuka shall cooperate in connection with all such activities, and Otsuka, its agents and attorneys will give due consideration to all timely suggestions 

 

***Confidential Treatment Requested

 

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and comments of MethylGene regarding any such activities; provided that all final decisions shall be made by Otsuka.

 

7.7                               Patent Marking.  Otsuka shall mark Licensed Products pursuant to the patent marking statutes in each country in which the Licensed Product is sold by Otsuka, its Affiliates and/or its Sublicensees.

 

7.8                               Certification under Drug Price Competition and Patent Restoration Act.

 

(a)                                 Notice.  If a Party becomes aware of any certification filed pursuant to 21 U.S.C. § 355(b)(2)(A) or 355(j)(2)(A)(vii)(IV), or any amendment or successor statute thereto, claiming that any MethylGene Collaboration Patent Rights Covering a Licensed Product in the Field are invalid or otherwise unenforceable, or that infringement will not arise from the manufacture, use, import or sale of a product by a Third Party (a “Paragraph IV Claim”), such Party shall promptly notify the other Party in writing within five (5) Business Days after its receipt thereof.

 

(b)                                 Control of Response.  MethylGene shall have the right, but not the obligation, to initiate patent infringement litigation for such Paragraph IV Claim, at its own expense.  If MethylGene elects not to assume control over enforcing any Paragraph IV Claim, MethylGene shall notify Otsuka as soon as practicable but in any event not later than thirty (30) days after the date of such Paragraph IV Claim so that Otsuka may, but shall not be required to, assume sole control over enforcing such Paragraph IV Claim using counsel of its own choice.  The Parties shall reasonably cooperate in the prosecution of any Paragraph IV Claim, and share any compensation recovered as a result of such prosecution, as set forth in Section 7.3(f) above. 

 

7.9                               Exclusive License Registration.  Without limiting anything in Section 13.7, upon request by Otsuka, MethylGene shall register “Senyo Jisshiken” (registered exclusive right) MethylGene’s exclusive license to Otsuka in Section 2.1(a)(ii) in Otsuka’s name at the Japan Patent Office and equivalent Patent Offices in other countries in the Territory which have similar exclusive license registration systems as that of Article 77 of Japan’s Patent Laws, provided that such registration specifies the territorial and field limitations of such license, and provided further that such registration shall have no effect on the allocation of prosecution and enforcement rights and obligations set forth in this Article VII. MethylGene and Otsuka shall cooperate as necessary to achieve such registration, and Otsuka shall bear all fees associated with such registration.  In the event this Agreement expires or is terminated, other than by Otsuka in accordance with Section 11.2, Otsuka shall cooperate with MethylGene and execute appropriate documents for filing with the Japan Patent Office and equivalent Patent Offices in other countries in the Territory to cancel Otsuka’s registered exclusive right.

 

ARTICLE VIII
  CONFIDENTIAL INFORMATION

 

8.1                               Treatment of Confidential Information.  During the Term and thereafter, each Party (the “Receiving Party”) shall maintain Confidential Information (as defined in Section 8.2) of the other Party (the “Disclosing Party”) in confidence, and shall not disclose, divulge or otherwise communicate such Confidential Information to others (except for agents, directors, 

 

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officers, employees, consultants, subcontractors, licensees, partners, Affiliates that are permitted sublicensees hereunder and advisors (collectively, “Agents”), in each case solely to the extent such Agents require such access to Confidential Information in order for the Receiving Party to fulfill its obligations or exercise its rights hereunder, and under obligations of confidentiality at least as protective of the Disclosing Party and its interest in its Confidential Information as the terms set forth in this Article VIII) and during such period the Receiving Party shall exercise reasonable efforts to prevent and restrain the unauthorized use and unauthorized disclosure of the Disclosing Party’s Confidential Information by any of the Receiving Party’s Agents, which reasonable efforts shall be at least as diligent as those generally used by the Receiving Party in protecting its own confidential and proprietary information of similar importance.  Each Party will be responsible for a breach of this Article VIII by its Agents.  Neither Party shall use Confidential Information of the other Party for any purpose other than the performance of its obligations and the exercise of its rights or licenses granted or permitted under this Agreement.  For clarity, either Party may disclose Confidential Information of the other Party to Governmental Authorities (a) to the extent necessary to exercise its rights and licenses hereunder and (b) in order to respond to inquiries, requests or investigations by Governmental Authorities.  For the avoidance of doubt, each member of the JRDC shall be required to execute a written confidentiality agreement in which each such member acknowledges the confidential nature of the reports, data and material obtained or generated by the JRDC and the obligation of such member to maintain such Confidential Information in strict confidence.

 

8.2                               Confidential Information.  “Confidential Information” means all trade secrets or other proprietary information, including, without limitation, any proprietary data and materials (whether or not patentable or protectable as a trade secret), regarding a Party’s or its licensor’s technology (including, without limitation, Research Compounds, Program Compounds, and Formulation Technology), products, business, financial status or prospects or objectives regarding the Research Compounds, Program Compounds, or Licensed Products, which is disclosed by a Party to the other Party.  All information disclosed prior to the Effective Date by MethylGene to Otsuka pursuant to the confidentiality agreement between the Parties dated as of October 28, 2005 and/or the confidentiality agreement between the Parties dated as of November 7, 2007 (collectively, the “Confidentiality Agreements”), shall be deemed “Confidential Information” of MethylGene to the extent otherwise constituting Confidential Information as defined thereunder or hereunder.  Further, for the avoidance of doubt, any proprietary information assigned to a Party under this Agreement or under the MTA shall become the Confidential Information of the Party to which such proprietary information has been assigned.  Notwithstanding the foregoing, there shall be excluded from the foregoing definition of Confidential Information any of the foregoing that:

 

(a)                                 either before or after the date of the disclosure to the Receiving Party is lawfully disclosed to the Receiving Party by Third Parties without any violation of any obligation to the Disclosing Party; or

 

(b)                                 either before or after the date of the disclosure to the Receiving Party, becomes published or generally known to the public through no fault or omission on the part of the Receiving Party or its Agents; or

 

 

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(c)                                  is independently developed by or for the Receiving Party without reference to or reliance upon the Confidential Information as demonstrated by contemporaneous written records of the Receiving Party.

 

In addition, the Receiving Party may disclose the Confidential Information of the Disclosing Party to the limited extent the Receiving Party is required to do so to comply with applicable Laws, to defend or prosecute litigation or to comply with governmental regulations or the regulations or requirements of any stock exchange, provided that the Receiving Party promptly provides prior notice of such disclosure to the Disclosing Party, cooperates with the Disclosing Party, and otherwise uses reasonable efforts to avoid or minimize the degree of such disclosure (including, without limitation, seeking a protective order or submitting a confidential treatment request, as applicable).

 

8.3                               Publication Rights.  Each Party shall submit to the other Party for review and approval all proposed academic, scientific and medical publications and public presentations relating to any activities under this Agreement for review in connection with preservation of Patent Rights and trade secrets or to determine whether Confidential Information should be modified or deleted from the proposed publication or public presentation.  Written copies of such proposed publications and presentations shall be submitted to the non-publishing or non-presenting Party no later than [...***...] days before the planned submission for publication or presentation and the non-publishing or non-presenting Party shall provide its comments with respect to such publications and presentations within [...***...] days after its receipt of such written copy.  The review period may be extended for an additional [...***...] days if the non-publishing or non-presenting Party can demonstrate a reasonable need for such extension including, without limitation, the preparation and filing of patent applications (which extension shall not be unreasonably withheld or delayed).  By written agreement, this period may be further extended (which extension shall not be unreasonably withheld or delayed).  Without limiting the foregoing, no publication or presentation shall be made unless and until the non-publishing or non-presenting Party ‘s reasonable comments on the proposed publication or presentation have been addressed and any information has been removed that is determined by the non-publishing or non-presenting Party to be its Confidential Information or that the non-publishing or non-presenting Party desires to maintain in secrecy to preserve the value of its rights under this Agreement.  The Parties will each comply with standard academic practice regarding authorship of scientific publications or presentations and recognition of contribution of other Persons in any publications or presentations relating to a Licensed Product and/or Selected Compound or any discovery, research or Development activities under this Agreement.

 

ARTICLE IX
  REPRESENTATIONS, WARRANTIES AND COVENANTS

 

9.1                               MethylGene’s Representations, Warranties and Covenants.  MethylGene warrants and represents to Otsuka that:

 

(a)                                 As of the Effective Date, MethylGene is a corporation duly organized, validly existing and in good standing under the laws of Quebec, Canada.  The execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of MethylGene.  No consent, approval or agreement of any Person is required to be 

 

***Confidential Treatment Requested

 

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obtained by MethylGene in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, which has not been obtained.

 

(b)                                 As of the Effective Date, MethylGene solely owns all right, title and interest in and to the MethylGene Background Intellectual Property, free of any liens or restrictions, and MethylGene has the right to grant to Otsuka all of the licenses and other rights with respect to the MethylGene Intellectual Property granted to Otsuka under this Agreement.  MethylGene has not and will not enter into any agreement nor grant any Third Party any rights with respect to the MethylGene Intellectual Property that are inconsistent with the rights granted to Otsuka under this Agreement or which would limit or encumber MethylGene’s ability to perform all of the obligations undertaken by MethylGene hereunder or limit or encumber Otsuka’s ability to exercise the rights and licenses granted to Otsuka under this Agreement.

 

(c)                                  As of the Effective Date, other than as set forth on Schedule 9.1(c), MethylGene is not aware of any Patent Rights not within the MethylGene Intellectual Property that cover Program Compounds or Research Compounds, or claim composition of matter or use in the Field of Program Compounds or Research Compounds and to MethylGene’s knowledge neither the discovery, research, Development, Manufacture, nor Commercialization of Program Compounds or Research Compounds in the Field does or would infringe or result in the misappropriation of any other intellectual property rights of any Third Party.  To MethylGene’s knowledge as of the Effective Date, none of the MethylGene Background Patent Rights are invalid or unenforceable, all fees required to be paid to applicable governmental patent offices in the Territory as of the Effective Date in order to prosecute or maintain such MethylGene Background Patent Rights have been paid on or before the due date for payment, and all such MethylGene Background Patent Rights have been filed and maintained in a manner consistent with standard practice in the Territory and consistent with MethylGene’s corporate practice.  As of the Effective Date, there are no existing actions, suits or proceedings against MethylGene, and MethylGene has not received any written claim or demand from a Third Party, that individually or together with any other, does or could have a material adverse effect on the ability of MethylGene to perform its obligations under this Agreement or challenges MethylGene’s rights with respect to the MethylGene Intellectual Property or Program Compounds or Research Compounds (including, without limitation, any invitation to license or other notice of Patent Rights relevant to the subject matter of this Agreement).

 

(d)                                 MethylGene shall conduct, and shall cause its Affiliates, sublicensees, contractors and consultants to agree to conduct, all of its activities contemplated under this Agreement in accordance with all applicable Laws of the country in which such activities are conducted.

 

(e)                                  MethylGene represents and warrants that Schedule 1.38 contains a full and complete list of MethylGene Background Patent Rights existing as of the Effective Date and that MethylGene shall promptly update Otsuka in writing with respect to the status of the Patent Rights set forth on such Schedule.

 

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9.2                               Otsuka’s Representations, Warranties and Covenants.

 

(a)                                 Otsuka hereby represents and warrants as of the Effective Date that: Otsuka is a company duly organized, validly existing and in good standing under the laws of Japan.  The execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of Otsuka.  No consent, approval or agreement of any person, party, court, government or entity is required to be obtained by Otsuka in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, which has not been obtained.

 

(b)                                 Otsuka shall conduct, and shall cause its Affiliates, Sublicensees, contractors and consultants to agree to conduct, all of its activities contemplated under this Agreement in accordance with all applicable Laws of the country in which such activities are conducted, including, but not limited to, current good manufacturing practices, good clinical practices and good laboratory practice standards, as applicable, and all other applicable rules, regulations and requirements of the FDA and other applicable Regulatory Authorities.

 

(c)                                  Otsuka hereby represents, warrants and covenants that: (i) neither Otsuka nor, to Otsuka’s actual knowledge, any employee, agent or subcontractor of Otsuka involved or to be involved in the Development of any Selected Compound or Licensed Product has been debarred under Subsection (a) or (b) of Section 306 of the Act (21 U.S.C. 335a); (ii) no Person who is known by Otsuka to have been debarred under Subsection (a) or (b) of Section 306 of said Act will be employed by Otsuka in the performance of any activities hereunder; and (iii) to the actual knowledge of Otsuka, no Person on any of the FDA clinical investigator enforcement lists (including, but not limited to, the (A) Disqualified/Totally Restricted List, (B) Restricted List and (C) Adequate Assurances List) will participate in the performance of any activities hereunder.

 

9.3                               No Warranty.  EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY HERETO MAKES ANY REPRESENTATION AND EXTENDS NO WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED. IN PARTICULAR, BUT WITHOUT LIMITATION, METHYLGENE MAKES NO REPRESENTATION AND EXTENDS NO WARRANTY CONCERNING WHETHER ANY PROGRAM COMPOUND OR RESEARCH COMPOUND IS FIT FOR ANY PARTICULAR PURPOSE OR SAFE FOR HUMAN CONSUMPTION.

 

ARTICLE X
  INDEMNIFICATION

 

10.1                        Indemnification in Favor of MethylGene.  Otsuka shall indemnify, defend and hold harmless the MethylGene Parties (as hereinafter defined) from and against any and all Losses incurred by any of the MethylGene Parties or to which any of the MethylGene Parties becomes subject to the extent resulting from any Third Party claim, action, suit, proceeding, liability or obligation (collectively, “Third Party Claims”)to the extent resulting from:

 

(a)                                 any misrepresentation or breach of any representation, warranty, covenant or agreement made by Otsuka in this Agreement; or

 

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(b)                                 any violation of the Act or any foreign similar Law by Otsuka; or

 

(c)                                  any exercise by Otsuka of any of its rights granted by MethylGene under Section 2.1 or pursuant to Otsuka’s retained rights, including, without limitation, the Development, Manufacture, use or Commercialization of a Licensed Product by Otsuka, its Affiliates or Sublicensees, including, without limitation, all Third Party Claims involving death or bodily injury caused or allegedly caused by the use of such Licensed Product; or

 

(d)                                 the gross negligence or willful misconduct of any of the Otsuka Parties (as hereinafter defined) in connection with Otsuka’s performance of its obligations under this Agreement.

 

For purposes of this Article X, “MethylGene Parties” means MethylGene, its Affiliates and their respective licensors, agents, consultants, directors, officers, employees and shareholders.

 

The indemnification obligations set forth in this Section 10.1 shall not apply to the extent that any Loss (i) is the result of a breach of this Agreement by MethylGene or the gross negligence or willful misconduct of any of the MethylGene Parties; or (ii) is otherwise within the scope of the indemnification obligations set forth in Section 10.2 below.

 

10.2                        Indemnification in Favor of Otsuka.  MethylGene shall indemnify, defend and hold harmless the Otsuka Parties (as hereinafter defined) from and against any and all Losses incurred by any of the Otsuka Parties or to which any of the Otsuka Parties becomes subject to the extent resulting from any Third Party Claim to the extent resulting from:

 

(a)                                 any misrepresentation or breach of any representation, warranty, covenant or agreement made by MethylGene in this Agreement;

 

(b)                                 any violation of the Act or any foreign similar Law by MethylGene; 

 

(c)                                  any exercise by MethylGene of any of its rights granted by Otsuka under Section 2.2 or pursuant to MethylGene’s retained rights, including, without limitation, the Development, Manufacture, use or Commercialization of any Selected Compound outside the Field by MethylGene, its Affiliates or sublicensees including, without limitation, all Third Party Claims involving death or bodily injury caused or allegedly caused by the use of such Selected Compound outside the Field; or

 

(d)                                 the gross negligence or willful misconduct of any of the MethylGene Parties in connection with MethylGene’s performance of its obligations under this Agreement.

 

For purposes of this Article X, “Otsuka Parties” means Otsuka, its Affiliates and their respective licensors, agents, consultants, directors, officers, employees and shareholders.

 

The indemnification obligations set forth in this Section 10.2 shall not apply to the extent that any Loss (i) is the result of a breach of this Agreement by Otsuka or the gross negligence or willful misconduct of any of the Otsuka Parties; or (ii) is otherwise within the scope of the indemnification obligations set forth in Section 10.1 above.

 

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10.3                        General Indemnification Procedures.

 

(a)                                 A Person seeking indemnification pursuant to this Article X (an “Indemnified Party”) shall give prompt notice to the Party from whom such indemnification is sought (the “Indemnifying Party”) of the commencement or assertion of any Third Party Claim in respect of which indemnity may be sought hereunder, shall give the Indemnifying Party such information with respect to any indemnified Third Party Claim as the Indemnifying Party may reasonably request, and shall not make any admission concerning any such Third Party Claim, unless such admission is required by applicable Law or legal process, including, without limitation, in response to questions presented in depositions or interrogatories.  Any admission made by the Indemnified Party with respect to any such Third Party Claim or the failure to give such notice shall relieve the Indemnifying Party of any liability hereunder only to the extent that the ability of the Indemnifying Party to defend a Third Party Claim is prejudiced thereby (and no admission required by applicable Law or legal process shall be deemed to result in prejudice).  The Indemnifying Party shall assume and conduct the defense of any Third Party Claim for which indemnification is sought, with counsel selected by the Indemnifying Party and reasonably acceptable to the Indemnified Party.  Subject to the initial and continuing satisfaction of the terms and conditions of this Article X, the Indemnifying Party shall have full control of such Third Party Claim, including, without limitation, settlement negotiations and any legal proceedings.  If the Indemnifying Party does not assume the defense of such Third Party Claim in accordance with this Section 10.3, the Indemnified Party may defend the Third Party Claim.  If both Parties are Indemnifying Parties with respect to the same Third Party Claim, the Parties shall determine by mutual agreement, within twenty (20) days following their receipt of notice of commencement or assertion of such Third Party Claim (or such lesser period of time as may be required to respond properly to such claim), which Party shall assume the lead role in the defense thereof.  Should the Indemnifying Parties be unable to mutually agree on which of them shall assume the lead role in the defense of such Third Party Claim, both Indemnifying Parties shall be entitled to participate in such defense through counsel of their respective choosing. 

 

(b)                                 Any Indemnified Party or Indemnifying Party not managing the defense of a Third Party Claim shall have the right to participate in (but not control), at its own expense (subject to the immediately succeeding sentence), the defense.  The Party managing the defense of an action or proceeding under its control shall not be liable for any litigation cost or expense incurred, without its consent, by the Party not managing the defense; provided, however, that if the Indemnifying Party managing the defense fails to take reasonable steps necessary to defend such Third Party Claim, the Indemnified Party may assume its own defense, and the Indemnifying Party managing the defense will be liable for all reasonable costs or expenses paid or incurred in connection therewith; and provided further that, if the Indemnifying Party assumes control of such defense and the Indemnified Party reasonably concludes, based on advice from counsel, that the Indemnifying Party and the Indemnified Party have conflicting interests with respect to such Third Party Claim, the Indemnifying Party shall be responsible for the reasonable fees and expenses of counsel to the Indemnified Party solely in connection therewith.

 

(c)                                  Without the prior written consent of the Indemnified Party, the Indemnifying Party shall not consent to a settlement of, or the entry of any judgment against an Indemnified Party arising from any such Third Party Claim to the extent such judgment or settlement involves (i) equitable or other non-monetary relief from the Indemnified Party, 

 

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(ii) any monetary relief from the Indemnified Party not fully indemnified under this Agreement, or (iii) the assumption by the Indemnified Party of any liability.  No Party shall, without the prior written consent of the other Party, enter into any compromise or settlement that commits the other Party to take, or to forbear to take, any action.

 

(d)                                 The Parties shall cooperate in the defense or prosecution of any Third Party Claim and shall furnish such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials and appeals, as may be reasonably requested in connection therewith.

 

(e)                                  Any indemnification hereunder shall be made net of any insurance proceeds actually recovered by the Indemnified Party from unaffiliated Third Parties; provided, however, that if, following the payment to the Indemnified Party of any amount under this Article X, such Indemnified Party recovers any such insurance proceeds in respect of the claim for which such indemnification payment was made, the Indemnified Party shall promptly pay an amount equal to the amount of such proceeds (but not exceeding the amount of such net indemnification payment) to the Indemnifying Party.  For the avoidance of doubt, the foregoing shall not be construed to require either Party to obtain any insurance not otherwise required under this Agreement or to first pursue an insurance recovery with respect to any matter for which the Indemnifying Party is otherwise obligated to indemnify the Indemnified Party under this Agreement.

 

(f)                                   The Parties agree and acknowledge that the provisions of this Article X represent the Indemnified Party’s exclusive recourse with respect to any Losses for which indemnification is provided to the Indemnified Party under this Article X.

 

10.4                        Insurance.  Otsuka and MethylGene (but only to the extent MethylGene Develops, Manufactures, or Commercializes any Selected Compounds outside the Field) shall secure and maintain in effect during the term of this Agreement and for a period of [...***...] years thereafter insurance policy(ies) underwritten by a reputable insurance company having an A.M. Best rating of [...***...] (or a comparable rating for its underwriters not doing business in the United States) and in a form and having limits standard and customary for entities in the biopharmaceutical industry for exposures related to the Selected Compounds and/or Licensed Products.  Such insurance shall include coverage of not less than U.S. $[...***...] for clinical trial liability, and products liability with respect to such Party’s exercise of its rights hereunder and Commercialization of Licensed Products hereunder and shall name the other Party as an additional insured under a customary and reasonable policy(ies) covering clinical trial liability.  Upon request by the other Party, certificates of insurance evidencing the coverage required above shall be provided to the other Party.

 

ARTICLE XI
  TERM AND TERMINATION

 

11.1                        Term.  The term of this Agreement (the “Term”) shall commence on the Effective Date and, unless earlier terminated as provided in this Article XI, shall continue in full force and effect, on a country-by-country and Licensed Product-by-Licensed Product basis until the expiration of the Royalty Term with respect to such Licensed Product in such country, at 

 

***Confidential Treatment Requested

 

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which time this Agreement shall expire in its entirety with respect to such Licensed Product in such country.  The Term shall expire on the date this Agreement has expired, as provided in the preceding sentence, with respect to all Licensed Products in all countries in the Territory.

 

11.2                        Termination for Cause.  In the event of a material breach of this Agreement by a Party, the other Party may give the Party in default notice requiring it to cure such default.  If such material breach is not cured within sixty (60) days after receipt of such notice (or within thirty (30) days in the case of a payment breach), or if such breach (other than a payment breach) is not reasonably subject to cure within such sixty (60) day period (and does not involve a material breach of Article VIII) the Party in default does not provide a reasonably detailed plan and statement as to its intent to promptly cure such breach and does not promptly cure such breach within one hundred twenty (120) days from the receipt of notice of the breach, the notifying Party shall be entitled (without prejudice to any of its other rights conferred on it by this Agreement or under applicable Law) to terminate this Agreement by giving written notice to the defaulting Party, with such termination to take effect immediately.  The right of either Party to terminate this Agreement as set forth in this Section 11.2 shall not be affected in any way by its waiver of, or failure to take action with respect to, any previous default.  If a Party disputes in good faith the existence or materiality of a material breach specified in a notice provided by the other Party pursuant to this Section 11.2 or any assertion by the other Party that such Party has failed to cure or diligently proceed to implement a plan to cure any such material breach, and, in each case, such Party provides notice to the other Party of such dispute within the applicable cure period, the other Party shall not have the right to terminate this Agreement unless and until the existence of such material breach or failure by such Party has been finally determined in accordance with Article XII. It is understood and acknowledged that during the pendency of such a dispute, all of the terms and conditions of this Agreement shall remain in effect and the Parties shall continue to perform all of their respective obligations hereunder.

 

11.3                        Termination for Failure to Select.  In the event Otsuka has not exercised its right to designate at least one Selected Compound during the Selection Period as provided in Section 3.5, as such term may be extended as set forth in Section 3.5, this Agreement shall terminate automatically at the end of the Selection Period.

 

11.4                        Other Termination by Otsuka.  Otsuka may at its option, terminate this Agreement by giving MethylGene ninety (90) days’ prior written notice; provided that no termination shall take place before Otsuka has (a) purchased Common Shares of MethylGene as set forth in Section 6.  1, (b) made license payments to MethylGene totaling Two Million Dollars ($2,000,000) as set forth in Section 6.2, and (c) paid Quarterly Research Fees as set forth in Section 6.3 totaling such Quarterly Research Fees as would be due for the full initial Research Term of eighteen (18) months.

 

11.5                        Termination of Otsuka’s Rights in One or More Regions.  If, at any time, MethylGene terminates this Agreement pursuant to Section 11.2 because of a breach of Section 5.1 with respect to one or more Target Regions, then such terminated Target Region(s) (and, if all Target Regions are terminated, the Rest of World region) shall thereafter be excluded from the Territory for all purposes under this Agreement, but this Agreement will remain in effect in the remaining Territory.  All of the consequences set forth in Section 11.6 shall apply solely with respect to Selected Compounds and Licensed Products in the terminated region(s).  

 

***Confidential Treatment Requested

 

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The termination rights set forth in this Section 11.5 shall constitute MethylGene’s sole and exclusive remedy for any breach by Otsuka of its obligations under Section 5.1.

 

11.6                        Consequences of Certain Terminations.

 

(a)                                 Termination by MethylGene for Cause, Termination for Failure to Select, Termination by Otsuka Without Cause.  If this Agreement is terminated by MethylGene under Section 11.2, terminates automatically pursuant to Section 11.3 or is terminated by Otsuka under Section 11.4, then, subject to Section 11.7 and Section 11.  8, the licenses granted to Otsuka in Section 2.1 shall terminate, and Otsuka shall grant MethylGene any combination of the following elected by MethylGene at MethylGene’s option, such option to be exercised by written notice to Otsuka given no later than thirty (30) days after the effective date of such termination, to the extent applicable:

 

(i)                                     Regulatory Matters.  Ownership of all regulatory filings and Regulatory Approvals relating to any Selected Compounds and Licensed Products, including, without limitation, related correspondence with Regulatory Authorities, and provide copies thereof;

 

(ii)                                  Pre-clinical and Clinical Matters.  All pre-clinical and clinical data, including, without limitation, pharmacology and biology data, in Otsuka’s possession or control relating to any Selected Compounds and Licensed Products;

 

(iii)                               Manufacturing Matters.  Any one or more of the following:

 

(A)                               assignment of each manufacturing agreement specific to any Selected Compounds or Licensed Products to MethylGene, if such agreement is then in effect and such assignment is permitted under such agreement or by the applicable Third Party; 

 

(B)                               cooperation with MethylGene in reasonable respects to transfer manufacturing documents and materials which are used and Controlled (at the time of the termination) by Otsuka in the Manufacture of Selected Compounds and Licensed Products to the extent such manufacturing documents and materials are not obtained by MethylGene pursuant to the assignment of agreements pursuant to paragraph (A) above;

 

(C)                               for a period of up to six (6) months following the effective date of termination, cooperation with MethylGene in reasonable respects to transfer Manufacturing technologies which are used and Controlled (at the time of the termination) by Otsuka in the Manufacture of Selected Compounds and Licensed Products, provided that MethylGene shall reimburse Otsuka for Otsuka’s reasonable out-of-pocket expenses to provide such requested assistance, to the extent such Manufacturing technologies are not obtained by MethylGene pursuant to the assignment of agreements pursuant to paragraph (A) above;

 

(D)                               sale of Otsuka’s then existing inventory of Selected Compounds and Licensed Products to MethylGene, at Otsuka’s fully-loaded cost of Manufacture;

 

(iv)                              License Grant.  Expansion of the license granted pursuant to Section 2.2(a)(ii) to include the Field, and to include the right to use Otsuka Collaboration Intellectual Property that is Formulation Technology, solely to make, have made, use, sell, offer 

 

45

 

for sale and import Compounds that were non-selected Program Compounds, Selected Compounds and Licensed Products in the Field in the Territory, which license shall remain sublicensable pursuant to Section 2.2(b), which Section 2.2(b) shall survive.  For the avoidance of doubt, the license above with respect to the Formulation Technology is only granted within the Field.

 

(v)                                 Assignment of Trademark.  Assignment to MethylGene all of Otsuka’s right, title and interest in any trademark used solely in connection with any Licensed Products.

 

(b)                                 Termination by Otsuka for Cause.  Termination of this Agreement by Otsuka pursuant to Section 11.2 will not terminate the license granted under Section 2.2(a)(ii) or the non-suit covenant with respect to the exercise of such license set forth in Section 2.1(c), subject to Otsuka’s diligence obligations described in Section 5.1 and its payment obligations in Article VI. Upon such termination of this Agreement by Otsuka pursuant to Section 11.2, Otsuka may, as its sole and exclusive remedy hereunder, off-set any direct damages resulting from MethylGene’s breach of this Agreement from any royalty payments due to MethylGene under Section 6.6 of this Agreement.

 

11.7                        Effect of Termination and Expiration; Accrued Rights and Obligations.  Termination of this Agreement for any reason shall not release either Party from any liability that, at the time of such termination, has already accrued or that is attributable to a period prior to such termination (including, without limitation, payment obligations accrued prior to the effective date of termination pursuant to Sections 6.3, 6.4, 6.5, 6.6 and 6.7) nor preclude either Party from pursuing any right or remedy it may have hereunder or at Law or in equity with respect to any breach of this Agreement.  It is understood and agreed that monetary damages may not be a sufficient remedy for any breach of this Agreement and that the non-breaching Party may be entitled to seek injunctive relief as a remedy for any such breach.

 

11.8                        Survival.  The rights and obligations set forth in this Agreement shall extend beyond the Term or termination of this Agreement only to the extent expressly provided for in this Agreement or to the extent required to give effect to a termination of this Agreement or the consequences of a termination of this Agreement as expressly provided for in this Agreement.  Without limiting the generality of the foregoing, it is agreed that the provisions of Article VIII (Confidential Information), Article IX (Representations, Warranties and Covenants) other than MethylGene’s update obligation under Section 9.1(e), Article X (Indemnification), Article XII (Dispute Resolution), Article XIII (Miscellaneous) and Sections 2.1(a)(iii) (Grant of Certain Jointly Developed MethylGene Collaboration Intellectual Property for Use Outside the Field), 2.1(b)(ii) (Sublicenses), 2.2(a)(ii) (Grant Outside the Field), 2.2(b) (Sublicenses), 2.5 (Rights Retained by the Parties), 2.6 (Exclusivity), 6.1 (Equity), 6.9 (Books and Records; Audit Rights); 6.10 (Taxes), 7.1 (Ownership of Inventions), 7.2(a) (Prosecution and Maintenance of Patent Rights/Background Patent Rights), 7.3(a) (Third Party Infringement/Background Patent Rights), the last sentence of 7.9 (Exclusive License Registration), 11.6 (Consequences of Certain Terminations), 11.7 (Effect of Termination and Expiration; Accrued Rights and Obligations), and this 11.8 (Survival), shall survive expiration or termination of this Agreement for any reason in accordance with their respective terms.

 

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ARTICLE XII
  DISPUTE RESOLUTION

 

12.1                        Resolution of Disputes.  Any dispute, controversy or claim related to matters within the powers and authority of the JRDC shall be resolved by the Parties in accordance with the procedures set forth in Section 3.3(d).  Any dispute, controversy or claim related to compliance with the terms of this Agreement, or the validity, breach, termination or interpretation of this Agreement, shall be referred to the JRDC for resolution (but without giving effect to Otsuka’s right to final decision-making authority).  If the JRDC is unable to resolve the matter within thirty (30) days after referral, such dispute, controversy or claim shall be referred to the Senior Executives for resolution.  Subject to Section 3.3(d), in the event the Senior Executives are unable to resolve the matter within thirty (30) days after referral, such dispute, controversy or claim shall be resolved through binding arbitration pursuant to Section 12.2.

 

12.2                        Arbitration.

 

(a)                                 In the event that the Senior Executives are unable to resolve any dispute, controversy or claim between the Parties referred to them pursuant to Section 12.  1, such dispute shall at the request of either Party, be finally settled by binding arbitration in accordance with the then current Rules of Arbitration of the International Centre for Dispute Resolution.

 

(b)                                 The arbitration panel shall consist of three (3) arbitrators, each of whom must have legal or business experience in pharmaceutical licensing matters.  The arbitrators are to be selected as follows, within thirty (30) days following receipt of notice from either Party of a request to arbitrate in accordance with Section 12.2(a): Otsuka shall nominate one (1) such qualified arbitrator; MethylGene shall nominate one (1) such qualified arbitrator; and the two arbitrators so nominated shall nominate a third such qualified arbitrator, who shall be the presiding arbitrator.

 

(c)                                  The arbitrators shall set a date for a hearing, which shall be no later than thirty (30) days after the appointment of the third arbitrator.  The arbitrators shall use their best efforts to rule on the dispute within thirty (30) days after the completion of such hearing.  Any award rendered by the arbitrators shall be final and binding upon the Parties.  Judgment upon any award rendered may be entered in any court having jurisdiction, or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be.

 

(d)                                 The place of arbitration shall be San Francisco, California and the language of the arbitration shall be English.

 

(e)                                  Each Party shall pay its own expenses of arbitration, and the expenses of the arbitrators shall be equally shared between the Parties unless the arbitrators assess as part of their award all or any part of the arbitration expenses of a Party or Parties (including, without limitation, reasonable attorneys’ fees) against the other Party or Parties, as the case may be.

 

(f)                                   Except as otherwise provided in this Agreement, the arbitration procedure set forth in this Section 12.2 shall be the sole and exclusive means of settling or resolving any dispute subject to resolution pursuant to this Section 12.2.  This Section 12.2 shall not prohibit a 

 

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Party from seeking injunctive or other equitable relief from a court of competent jurisdiction in the event of a breach or prospective breach of this Agreement by the other Party which would cause irreparable harm to the first Party, or from bringing any action in aid of arbitration.

 

(g)                                  Notwithstanding the foregoing, with respect to any dispute related to the necessity of a license to intellectual property from a Third Party, in the event the Senior Executives are unable to resolve the matter within thirty (30) days after referral, such dispute shall be submitted to arbitration in accordance with this Section 12.2; provided that, to expedite any such arbitration, the arbitral tribunal shall be composed of a single arbitrator mutually agreed by the Parties who will be authorized to determine the procedural rules of such arbitral tribunal with the intention that the tribunal be able to resolve the disputed matter within no more than sixty (60) days following the notice to arbitrate.

 

ARTICLE XIII
  MISCELLANEOUS

 

13.1                        Governing Law.  This Agreement shall be governed by and interpreted in accordance with the internal laws of the State of New York, without regard to its conflicts of laws rules.

 

13.2                        Waiver.  Waiver by a Party of a breach hereunder by the other Party shall not be construed as a waiver of any succeeding breach of the same or any other provision.  No delay or omission by a Party to exercise or avail itself of any right, power or privilege that it has or may have hereunder shall operate as a waiver of any right, power or privilege by such Party.  No waiver shall be effective unless made in writing with specific reference to the relevant provision(s) of this Agreement and signed by a duly authorized representative of the Party granting the waiver.

 

13.3                        Notices.  All notices, instructions and other communications hereunder or in connection herewith shall be in writing, shall be sent to the address specified in this Section 13.3 and shall be: (a) delivered personally; (b) sent by registered or certified mail, return receipt requested, postage prepaid; (c) sent via a reputable worldwide courier service; or (d) sent by facsimile transmission.  Any such notice, instruction or communication shall be deemed to have been delivered upon receipt if delivered by hand, three (3) Business Days after it is sent by registered or certified mail, return receipt requested, postage prepaid, two (2) Business Day after it is sent via a reputable worldwide courier service, or when transmitted with electronic confirmation of receipt, if transmitted by facsimile (if such transmission is on a Business Day; otherwise, on the next Business Day following such transmission).

 

Notices to Otsuka shall be addressed to:

 

Otsuka Pharmaceutical Co., Ltd.

Shinagawa Grand Central Tower

2-16-4 Konan, Minato-ku

Tokyo 108-8242

Japan

 

48

 

Attention: Director, Division of Dermatologicals & 
 Opthalmologicals

 

Telephone: 81-3-6717-1400

Fax: 81-3-6717-14801

 

with a copy to:

 

Otsuka Pharmaceutical Co., Ltd.

Shinagawa Grand Central Tower

2-16-4 Konan, Minato-ku

Tokyo 108-8242 Japan

Attention: Director, Legal Affairs Department

Telephone: 81-3-6717-1400

Fax: 81-3-6717-14801

 

Notices to MethylGene shall be addressed to:

 

MethylGene Inc.

7220 Frederick Banting

Montreal, Quebec H4S 2A1

Canada

Attention: Chief Executive Officer

Telephone: 514-337-3333

Fax: 514-337-4194

 

with a copy to:

 

MethylGene Inc.

7220 Frederick Banting

Montreal, Quebec H4S 2A1

Canada

Attention: Chief Financial Officer

Telephone: 514-337-3333

Fax: 514-337-4194

 

and

 

Wilmer Cutler Pickering Hale and Dorr LLP

60 State Street

Boston, MA 02109

USA

Attention: Alfred Server, Esq.

Telephone: 617-526-6000

Fax: 617-526-5000

 

and

 

49

 

Davies Ward Phillips & Vineberg LLP

1501 McGill College Avenue

26th Floor

Montreal, Quebec H3A3N9

Canada

Attention: Richard Cherney, Esq.

Telephone: 514 841 6457

Fax: 514 841 6499

 

Either Party may change its address by giving notice to the other Party in the manner provided above.

 

13.4                        Entire Agreement.  This Agreement (including, without limitation, Schedules) contains the complete understanding of the Parties with respect to the subject matter of this Agreement and supersedes all prior understandings and writings relating to such subject matter.  In particular, and without limitation, it supersedes and replaces the Confidentiality Agreements and any and all term sheets relating to the transactions contemplated by this Agreement and exchanged between the Parties prior to the Effective Date, including, without limitation, the term sheet between the Parties dated November 21, 2007.

 

13.5                        Headings.  Headings in this Agreement are for convenience of reference only and shall not be considered in construing this Agreement.

 

13.6                        Severability.  If any provision of this Agreement is held unenforceable by a court or tribunal of competent jurisdiction because it is invalid or conflicts with any Law of any

 

50

 

relevant jurisdiction, the validity of the remaining provisions shall not be affected.  In such event, the Parties shall negotiate a substitute provision that, to the extent possible, accomplishes the original business purpose.

 

13.7                        Registration and Filing of the Agreement.  To the extent a Party determines in good faith that it is required by applicable Law to publicly file or register this Agreement with a Governmental Authority, including, without limitation, public filings pursuant to securities Laws, it shall provide the proposed redacted form of the Agreement to the other Party a reasonable amount of time prior to filing for the other Party to review such draft and propose changes to such proposed redactions.  The Party making such filing, registration or notification shall incorporate any proposed changes timely requested by the other Party, absent a substantial reason to the contrary, and shall use commercially reasonable efforts to seek confidential treatment for any terms that the other Party timely requests be kept confidential, to the extent such confidential treatment is reasonably available consistent with applicable Law.  Each Party shall be responsible for its own legal and other external costs in connection with any such filing, registration or notification.

 

13.8                        Assignment.  Neither this Agreement nor any right or obligation hereunder may be assigned or otherwise transferred by any Party without the consent of the other Party; provided, however, that any Party may, without such consent, assign this Agreement, in whole or in part: (a) to any of its respective Affiliates; provided that such Party shall remain jointly and severally liable with such Affiliate in respect of all obligations so assigned and such Affiliate has acknowledged and confirmed in writing that effective as of such assignment or other transfer, such Affiliate shall be bound by this Agreement as if it were a party to it as and to the identical extent applicable to the transferor or (b) to any successor in interest by way of merger, acquisition or sale of all or substantially all of its assets provided that such successor agrees in writing to be bound by the terms of this Agreement as if it were the assigning party.  Any purported assignment in violation of this Section 13.8 shall be void.  Any permitted assignee shall assume all obligations of its assignor under this Agreement.

 

13.9                        Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

 

13.10                 Force Majeure.  No Party shall be liable for failure of or delay in performing obligations set forth in this Agreement, and no Party shall be deemed in breach of its obligations, if such failure or delay is due to a natural disaster, explosion, fire, flood, tornadoes, thunderstorms, earthquake, war, terrorism, riots, embargo, losses or shortages of power, labor stoppage, substance or material shortages, damage to or loss of product in transit, events caused by reason of Laws or by reason of any other instructions, guidance, act or failure to act of any Governmental Authority, events caused by acts or omissions of a Third Party, or any other cause reasonably beyond the control of such Party.

 

13.11                 Press Releases and Other Disclosures.  Otsuka acknowledges that MethylGene will issue a press release announcing this Agreement on or near the date of execution of this Agreement, and that Otsuka has received advance copies of MethylGene’s proposed press release, the publication and use of which remains subject to Otsuka’s approval.  The Parties also recognize that each Party may from time to time desire to issue additional press releases and make other public statements or disclosures regarding the subject matter of this Agreement.  In such event, the Party desiring to issue an additional press release or make a public statement or disclosure shall provide the other Party with a copy of the proposed press release, statement or disclosure for review and approval in advance, which advance approval shall not be unreasonably withheld, conditioned or delayed (except that neither Party shall have any obligation to disclose any of its Confidential Information except to the extent required or permitted pursuant to Article VIII).  No other public statement or disclosure concerning the existence or terms of this Agreement shall be made, either directly or indirectly, by either Party, without first obtaining the written approval of the other Party.  Once any public statement or disclosure has been approved in accordance with this Section, then either Party may appropriately communicate information contained in such permitted statement or disclosure.  Notwithstanding the foregoing provisions of this Section 13.11 or of Article VIII, a Party may (a) subject to the last sentence of Section 8.2 and Section 13.7, disclose the existence and terms of this Agreement (including, without limitation, disclosure of the Agreement itself) where required, as reasonably determined by the disclosing Party, by applicable Law, by applicable stock exchange regulation or by order or other ruling of a competent court, (b) disclose the existence and terms of this Agreement under obligations of confidentiality to agents, advisors, contractors, investors, licensees and sublicensees, and to potential agents, advisors, contractors, investors, licensees and sublicensees, in connection with such Party’s activities hereunder and in connection with such Party’s financing activities and (c) publicly announce any of the matters set forth in the press release described in the first sentence of this Section 13.11, provided that such 

 

51

 

announcements do not entail disclosure of Confidential Information of the other Party (which, for purposes of clarity, excludes clinical trial results) and the announcing Party provides the other Party with a copy of the proposed text of such announcement sufficiently in advance of the scheduled release or publication thereof to afford such other Party a reasonable opportunity to review and comment upon the proposed text.

 

13.12                 Relationship of the Parties.  Each Party shall bear its own costs incurred in the performance of its obligations hereunder without charge or expense to the other, except as expressly provided in this Agreement.  Neither Party shall have any responsibility for the hiring, termination or compensation of the other Party’s employees or for any employee compensation or benefits of the other Party’s employees, other than the Quarterly Research Fee to be paid as provided in Section 6.3.  No employee or representative of a Party shall have any authority to bind or obligate the other Party for any sum or in any manner whatsoever, or to create or impose any contractual or other liability on the other Party without said other Party’s approval.  For all purposes, and notwithstanding any other provision of this Agreement to the contrary, the legal relationship under this Agreement of each Party to the other Party shall be that of independent contractor.  Nothing in this Agreement shall be construed to establish a relationship of partners or joint venturers between the Parties.

 

13.13                 Performance by Affiliates.  To the extent that this Agreement imposes obligations on Affiliates of a Party, such Party agrees to cause its Affiliates to perform such obligations.

 

13.14                 No Consequential or Punitive Damages.  NEITHER PARTY HERETO WILL BE LIABLE FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES, INCLUDING, WITHOUT LIMITATION, LOST PROFITS, ARISING FROM OR RELATING TO THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF SUCH DAMAGES. NOTHING IN THIS SECTION 13.14 IS INTENDED TO LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF EITHER PARTY UNDER THIS AGREEMENT WITH RESPECT TO THIRD PARTY CLAIMS, OR EITHER PARTY’S LIABILITY WITH RESPECT TO THE INFRINGEMENT, MISAPPROPRIATION OR UNAUTHORIZED USE OR DISCLOSURE OF THE OTHER PARTY’S INTELLECTUAL PROPERTY RIGHTS OR CONFIDENTIAL INFORMATION.

 

13.15                 Nonsolicitation.  During the Research Term and for [...***...] thereafter, neither Party shall directly or indirectly through a Third Party solicit, recruit, or offer employment as an employee, independent contractor or consultant to, personnel of the other Party that performed work in connection with this Agreement without the written consent of the other Party.  The Parties agree that general, non-targeted job advertising shall not constitute a violation of this Section 13.15.

 

[Remainder of page intentionally left blank.]

 

***Confidential Treatment Requested

 

52

 

IN WITNESS WHEREOF, the Parties have signed this Agreement as of the Effective Date.

 

 

	
OTSUKA   PHARMACEUTICAL CO., LTD
    	
 
    	
METHYLGENE   INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Tatsuo Higuchi
    	
 
    	
By:
    	
/s/   Donald F. Corcoran
    
	
 
    	
 
    	
 
    
	
Name:  Tatsuo Higuchi
    	
 
    	
Name:  Donald F. Corcoran
    
	
 
    	
 
    	
 
    
	
Title:  President & Representative Director
    	
 
    	
Title:  President & Chief Executive Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Minoru Okada
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Name:
    	
Minoru   Okada
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Title:
    	
Operating   Officer & Director, Division of Dermatologicals & Opthalmologicals
    	
 
    	
 
    
						

 

 

Schedule 1.38-1
  Research Compounds

 

Group 1 [...***...]

 

	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
—
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
—
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
—
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
—
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
—
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
—
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
—
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
—
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
—
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
—
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
—
    

 

Group2 [...***...]

 

	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    

 

***Confidential Treatment Requested

 

 

Schedule 1.38-2
  MethylGene Background Patent Rights

 

	
Patent Application Title
    	
 
    	
Serial No.
    	
 
    	
Publication No.
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    

 

***Confidential Treatment Requested

 

 

Schedule 1.56
  Program Compounds

 

[...***...]

[...***...]

[...***...]

[...***...]

[...***...]

[...***...]

[...***...]

[...***...]

 

***Confidential Treatment Requested

 

 

Schedule 3.2(b)
  Research Plan

 

[To be added]

 

 

Schedule 7.2(e)(iii)
  Prosecution Costs for National Phase filing for [...***...]

 

[...***...]

 

[...***...]

 

[...***...]

 

[...***...]

 

***Confidential Treatment Requested

 

 

Schedule 9.1(c)
  Disclosure of Third Party Patents

 

[...***...]

[...***...]

 

[...***...]

 

[...***...]

          [...***...]

 

[...***...]

 

***Confidential Treatment RequestedExhibit 10.12

 

***Text Omitted and Filed Separately

with the Securities and Exchange Commission.

Confidential Treatment Requested

Under 17 C.F.R. Sections 200.80(b)(4)

and 240.24b-2.

 

COLLABORATION AND LICENSE AGREEMENT

 

This COLLABORATION AND LICENSE AGREEMENT (“Agreement”), effective as of this      day of October 16, 2003 (the “Effective Date”), is made by and between Taiho Pharmaceutical Co., Ltd., a corporation organized under the laws of Japan, with a principal place of business at 1-27 Kandanishiki-cho, Chiyoda-ku, Tokyo 101-8444, Japan (“Taiho”), and MethylGene Inc., a corporation organized under the laws of Quebec, Canada with its principal place of business at 7220 Frederick-Banting, Suite 200, Montreal, Quebec H4S 2A1, Canada (“MG”).  Each of Taiho and MG shall be referred to as a “Party,” and together as the “Parties.”

 

BACKGROUND

 

A.                                    MG has developed certain proprietary technology related to small molecule HDAC Inhibitors (as defined below), which may be useful for developing pharmaceutical products for the treatment and prophylaxis of cancer in humans.

 

B.                                    Taiho possesses pharmaceutical research, development, manufacturing and commercialization capabilities, as well as proprietary technology in a range of therapeutic fields, including cancer.

 

C.                                    MG has identified certain novel, proprietary HDAC Inhibitors, including the Compound designated as MGCD 0103, which MG is pursuing as potential development candidates for cancer and for which MG has commenced preclinical development activities.

 

D.                                    MG and Taiho desire to collaborate to pursue potential commercial development in the cancer field of one or more HDAC Inhibitors, discovered by MG prior to the Effective Date, and discover and potentially commercialize additional HDAC Inhibitors as potential development compounds for cancer, all on the terms and conditions set forth herein.

 

E.                                     In addition, MG desires to grant to Taiho, and Taiho desires to obtain, an exclusive license from MG of HDAC Inhibitors for use in the Territory (as defined below) in the Field (as defined below), on the terms and conditions set forth herein.

 

NOW THEREFORE, for and in consideration of the covenants, conditions, and undertakings hereinafter set forth, it is agreed by and between the Parties as follows:

 

ARTICLE 1
  DEFINITIONS

 

1.1                               “Additional Partner” shall mean each third party who is granted by MG, directly or indirectly, a right to market or commercialize Compounds and/or Products in any part of North America or Europe, other than a Non-Cancer Partner or an Opt-out Non-Cancer Partner.  As used herein, a “right to market or commercialize” shall include an option or other right to obtain such rights, provided (a) a right that is merely a right of first discussion, and which does not include

 

 

an enforceable right to obtain marketing or commercialization rights with respect to Compounds and/or Products in the Field, and (b) a traditional “right of first refusal,” in which the third party has the right to obtain marketing or commercialization rights from MG only in the event of, and on the same terms as reflected in, a bona fide offer made by another third party (and where the rights may be granted to such other third party on such terms, if the right of first refusal is not exercised), shall not in either case alone be deemed a “right to market or commercialize.”

 

1.2                               “Affiliate” shall mean, in the case of a subject entity, another entity which controls, is controlled by or is under common control with the subject entity.  For purposes of this definition only, “control” shall mean beneficial ownership (direct or indirect) of at least fifty percent (50%) of the shares of the subject entity entitled to vote in the election of directors (or, in the case of an entity that is not a corporation, in the election of the corresponding managing authority).  Notwithstanding the foregoing, the Parties acknowledge that a group of over forty (40) distributors collectively own approximately fifty percent (50%) of Taiho.  For the avoidance of doubt, it is agreed that the percentage ownership of Taiho by such distributors shall not be combined together for purposes of determining whether any such distributor is an Affiliate of Taiho.

 

1.3                               “Approved Clinical Studies” shall mean those certain clinical trials of a Compound and/or Product in North America in the Field, as set forth in the Clinical Development Plan and Budget established in accordance with Article 4 below.

 

1.4                               “Approved Preclinical Studies” shall mean those certain Preclinical Development studies in the Field, set forth in the Preclinical Plan and Budget established in accordance with Article 4 below.  Notwithstanding the foregoing, however, Approved Preclinical Studies shall not include any Territory-Specific Preclinical Studies.

 

1.5                               “Clinical Development Plan and Budget” shall mean the plan and budget for the Approved Clinical Studies, as described in Article 4 below.

 

1.6                               “Commercially Reasonable and Diligent Efforts” shall mean the carrying out of obligations in a diligent and sustained manner using efforts reasonably necessary or appropriate to actively develop a product for a large market application in an expeditious manner.  Without limiting the foregoing, Commercially Reasonable and Diligent Efforts requires that the applicable party: (a) promptly assign responsibility for such obligations to specific employee(s) who are held accountable for progress and monitor such progress on an on-going basis, (b) set and consistently seek to achieve specific meaningful objectives for carrying out such obligations, and (c) consistently make and implement decisions and allocate the full complement of resources necessary or appropriate to advance progress with respect to such objectives in accordance with the foregoing, in each case in a manner similar to other high priority drug development programs.

 

1.7                               “Compounds” shall mean all HDAC Inhibitors identified, synthesized, discovered or acquired (collectively, “Discovered”) by or under authority of MG or its Affiliates: (a) prior to the Effective Date, or (b) during the Research Term, or (c) any time during the term of this Agreement after the Research Term, if Discovered in connection with Cancer HDAC Research, or (d) any time during the term of this Agreement prior to [...***...] after completion of the last 

 

***Confidential Treatment Requested

 

2

 

Cancer HDAC Research, if Discovered pursuant to Non-Cancer HDAC Research; provided that in each case such HDAC Inhibitors are used or useful in the Field.  With respect to each Compound, such Compound shall include all salts, esters, hydrates, solvates, polymorphs, free base, isomers, prodrugs, metabolites, conjugated forms and/or liposomal or other formulations thereof, and other compositions consisting of such Compound non-covalently bounded with other moieties.  As used in this definition, “Non-Cancer HDAC Research” means Research conducted by or under authority of MG that is directed only to applications other than cancer and for which MG does not grant a third party rights to commercialize resulting compounds for cancer applications.  “Cancer HDAC Research” means Research conducted by or under authority of MG that is not conducted as part of Non-Cancer HDAC Research.  In the event that MG or its Affiliate enters into an agreement with a third party (including an Additional Partner or Non-Cancer Partner) in connection with the Research or prior to the end of the time periods, each as described in clauses (a) through (d) above, Compounds shall include HDAC Inhibitors Discovered by or under authority of such third party during the term of its right to conduct Research granted by MG, but shall exclude those compounds that were identified or being developed by such third party, as an inhibitor that directly inhibits the activity of HDAC enzymes or that has therapeutic effect through the inhibition of HDAC enzymes, prior to the time an agreement was first entered into with MG or its Affiliate.  For clarity, it is understood that as used herein, the term “Discovered” shall be deemed to include HDAC Inhibitors covered by a patent application filed during the particular period, it being understood that the set of HDAC Inhibitors covered by a patent or patent application shall not be deemed a single Compound for purposes of defining Selected Compounds and Non-Cancer Selected Compounds below, solely because they are covered by such patent application (i.e. the definition of a single Selected Compound or a Non-Cancer Selected Compound shall be as described in Section 5.2.1(b) and (c) below).

 

1.8                               “Cost of Goods” shall mean, with respect to units of a Compound or Product to be supplied to a Party hereunder:  (a) those costs of the supplying party associated with the manufacture of such units that would normally be included as inventoriable costs of such units in accordance with GAAP, and would include raw materials (including normal scrap) and actual direct labor costs and a proper allocation of overhead, subject to Section 11.2.1 below (i.e. with respect to third party royalties), and would exclude excess capacity, unusable raw materials, cost of capital and other costs not normally included as inventoriable costs as set forth above; or (b) if the units are purchased from a third party that is not an Affiliate, the purchase price thereof.  Notwithstanding the foregoing, royalties paid by the manufacturing party with respect to patent rights for generic manufacturing processes used in such manufacture, but that are not primarily used for nor primarily related to Compounds, Products and/or HDAC, shall not be treated as a third party royalties subject to Section 11.2.1 below, for purposes of Section 1.8(a).

 

1.9                               “Data” shall mean collectively, Research Data, Preclinical and Clinical Data and Manufacturing Data.

 

1.10                        “FDA” shall mean the U.S. Food and Drug Administration, or any successor agency.

 

3

 

1.11                        “Field” shall mean the therapeutic or prophylactic treatment of cancer (including neoplasia and other pre-cancerous conditions) using a Compound or Product.

 

1.12                        “First Approved Product” shall mean the first Product for which Marketing Approval in Japan for the Field is obtained by any of Taiho, its Affiliates or its Sublicensee.

 

1.13                        “Full Time Equivalent”, or “FTE” shall mean one (1) full-time person who qualifies as R&D Personnel, or in the case of less than a full-time dedicated person, a full-time, equivalent person year of activities under the Plans and Budgets performed by R&D Personnel.

 

1.14                        The “FTE Rate” for Research conducted by MG hereunder shall be [...***...] per FTE.  Each Party acknowledges that the foregoing FTE rate has been set to include all salary, employee benefits, materials and other expenses including support staff and overhead for or associated with an FTE.

 

1.15                        “Funded Work” shall mean the work conducted by or under authority of MG which is funded, in whole or in part, by Taiho under this Agreement, including without limitation all Research under the Research Plan and Budget, Approved Preclinical Studies, Territory-Specific Preclinical Studies and Approved Clinical Studies.

 

1.16                        “GAAP” shall mean United States generally accepted accounting principles, consistently applied.

 

1.17                        “HDAC” shall mean histone deacetylase and shall include without limitation any one of a family of enzymes that remove acetyl groups from amino groups of lysine residues at the N-terminus of a histone, including but not limited to [...***...], and any histone deacetylase as described or referenced in MG’s patent application [...***...], or the articles [...***...] or [...***...].

 

1.18                        “HDAC Inhibitors” shall mean small molecules that directly inhibit the activity of HDAC enzymes or which have therapeutic effect through the inhibition of HDAC enzymes, in each case which are used or useful in the Field.  As used herein, “small molecules” means compounds with molecular weight of less than 1500 daltons.

 

1.19                        “Initial Clinical Candidate” shall mean the Compound designated internally at MG as MGCD 0103, and specified as such to Taiho in writing prior to the Effective Date.

 

1.20                        “IND” shall mean an Investigational New Drug application, as defined in the U.S. Federal Food, Drug and Cosmetic Act and the regulations promulgated thereunder, or comparable filing in a foreign jurisdiction, in each case with respect to a Product for use within the Field.

 

1.21                        “Licensed Technology” shall mean the Licensed Patents and Licensed Technical Information.

 

***Confidential Treatment Requested

 

4

 

1.21.1              “Licensed Patents” shall mean all patents and all reissues, renewals, re-examinations, and extensions thereof, and patent applications therefor, and any divisions or continuations, in whole or in part, thereof, which claim or otherwise cover the composition, manufacture, sale or use of a Compound(s) or a Product(s), that are owned or acquired by MG or its Affiliates, or that cover inventions made by or under authority of MG or its Affiliates, prior to or during the term of this Agreement, including those patents and applications listed on Exhibit 1.21.1.  It is understood and agreed that for purposes of this Agreement, “acquired” when applied to patents, information, data, materials or other intellectual property shall include such items that are in-licensed, of or within the scope of the relevant licenses, rights or obligations herein.

 

1.21.2              “Licensed Technical Information” shall mean all material confidential information and tangible materials related to the development, manufacture, sale or use of a Compound or a Product, including, but not limited to: pharmaceutical, chemical, biological and biochemical compositions; and technical data and information; available descriptions, if any, of assays, methods and processes; the results of tests, including without limitation screening results, SAR data, optimization data, in vitro and in vivo data; preclinical, clinical and research, manufacturing processes and procedures; analytical and quality control data; and plans, specifications and/or other documents containing said information and data; in each case which are owned or acquired by MG prior to the Effective Date or discovered, developed or acquired by or under authority of MG or its Affiliates during the term of this Agreement.

 

1.22                        “Major Country” shall mean the United States, Canada, Australia, Japan, or any country of the European Union.

 

1.23                        “Manufacturing Data” shall mean all material information and data relating to or used in connection with the manufacturing of Compounds and/or Products by MG or its Affiliates, Additional Partners, or others working under authority of such entities, including without limitation, such information and data as generated or used during process development, stability studies, formulation development, scale-up of manufacturing, production of preclinical and clinical product batches, validation studies, development of quality assurance/quality control testing, and related regulatory affairs; and all information and data contained in the DMF or in the CMC section of an IND or NDA (or their counterparts in other countries) with respect to Compounds and/or Products.  Without limiting the foregoing, Manufacturing Data shall include information and data described in Exhibit 1.23.  Notwithstanding the foregoing, to the extent MG, Additional Partners and their Affiliates do not have rights to such know-how, the term “Manufacturing Data” shall exclude any proprietary manufacturing know-how described in a DMF that was disclosed by a contract manufacturer of MG, Additional Partners or their Affiliates directly to the Regulatory Authority (and not to MG, Additional Partners or their Affiliates), which know-how had been independently developed by such contract manufacturer outside of its relationship with MG, the Additional Partner or their Affiliates; provided that MG ensures that, upon the request of Taiho, such contract manufacturer shall file with Regulatory Authorities in the Territory a similar DMF containing such know-how in support of Taiho’s regulatory filings.

 

1.24                        “Marketing Approval” shall mean all approvals, registrations or authorizations of any governmental entity that are necessary for the manufacturing, use, storage, import, transport 

 

5

 

and sale of a Compound or Product in a regulatory jurisdiction.  For countries where governmental approval is required for pricing or reimbursement for the Product to be reimbursed by national health insurance, Marketing Approval shall not be deemed to occur until such pricing or reimbursement approval is obtained; provided, that Marketing Approval shall be deemed to have occurred in such country where government approval of pricing has not been obtained if, at any time, the party undertakes a full commercial launch of such Product in the country without obtaining pricing approval.

 

1.25                        “Net Sales” shall mean the gross invoice price for Product sold by Taiho or its Affiliates or their Sublicensees to a non-Affiliate third party customer less the reasonable and customary accrual-basis deductions from such gross amounts for:  (i) normal and customary trade, cash and other discounts, allowances and credits actually allowed and taken directly with respect to sales of Product; (ii) credits or allowances actually granted for damaged goods, returns or rejections of Product; (iii) sales taxes or similar taxes (including duties or other governmental charges levied on, absorbed or otherwise imposed directly on the sales of Product, including, without limitation, value added taxes or other governmental charges otherwise measured by the billing amount) which are included in billing amount, and excluding any taxes imposed on or measured by the net income or profits of the selling party; (iv) charge back payments and rebates granted to trade customers, including but not limited to, wholesalers; (v) packaging, handling fees, freight, insurance and the like, provided that amounts deducted under this subsection (v) shall not exceed [...***...] of Net Sales and (vi) actual uncollectible accounts, up to [...***...] of Net Sales.  Such amounts shall be determined from the books and records of Taiho, its Affiliates and their Sublicensees maintained in accordance with GAAP consistently applied, and such amounts shall be calculated using the same accounting principles used for other Taiho products.  Sales between or among Taiho, its Affiliates and Sublicensees shall be excluded from the computation of Net Sales if such Affiliates or Sublicensees are not end-users, but Net Sales shall include the subsequent final sales to non-Affiliate third parties by any such Affiliates or Sublicensees.  Where (a) Product is sold by Taiho, its Affiliates or Sublicensees other than in an arms-length sale or as one of a number of items without a separate invoiced price; or (b) consideration for Product shall include any [...***...], the Net Sales applicable to any such transaction shall be deemed to be Taiho’s average Net Sales for the applicable quantity of the Product at that time; provided, however, Net Sales shall not include Product sold or used for development of the Product hereunder (including for clinical trials) or as samples ([...***...]).

 

1.26                        “New Compound” shall mean a Compound which was not first synthesized by MG [...***...].  Compounds that were first synthesized by MG [...***...] shall be demonstrated upon [...***...] of MG made [...***...].  MG represents that Exhibit 1.26 is a partial list of Compounds synthesized by MG prior to the Effective Date.

 

1.27                        “North America” shall mean the United States of America and Canada.

 

1.28                        “Phase I” shall mean human clinical trials, the principal purpose of which is preliminary determination of safety in healthy individuals or patients (for example, as described in 21 C.F.R. §312.21, or similar clinical study in a country other than the United States).

 

***Confidential Treatment Requested

 

6

 

1.29                        “Phase II” shall mean human clinical trials conducted at multiple sites, for which the primary endpoints include a determination of dose ranges and a preliminary determination of efficacy in patients being studied (for example, as described in 21 C.F.R. §312.21, or similar clinical study in a country other than the United States).

 

1.30                        “Phase III” shall mean large scale pivotal human clinical trials conducted at multiple sites, which is sufficiently powered and designed to establish safety and efficacy of one or more particular doses in patients being studied and to provide the statistical basis for Marketing Approval for the respective drug (for example, as described in 21 C.F.R. § 312.21, or similar clinical study in a country other than the United States).

 

1.31                        “Plans and Budgets” shall mean collectively, the Research Plans and Budgets, the Preclinical Plans and Budgets and the Clinical Development Plans and Budgets.  As of the Effective Date, the preliminary Plans and Budgets regarding the Initial Clinical Candidate are set forth in Exhibit 1.31.

 

1.32                        “Preclinical and Clinical Data” shall mean all filings and supporting documents submitted or to be submitted to a Regulatory Authority in a Major Country relating to the Compound(s) or Product(s), and all data contained therein, including, without limitation, any INDs, NDAs and their counterparts in other countries, investigator’s brochures, correspondence to and from such Regulatory Authorities, minutes from teleconferences with Regulatory Authorities, registrations and licenses, regulatory drug lists, advertising and promotion documents shared with Regulatory Authorities, adverse event files and complaint files.  In addition, Preclinical and Clinical Data shall include all investigator reports (both preliminary and final), statistical analysis, expert opinions and reports, safety and other electronic databases and all other material documentation and information related to Preclinical Development or clinical development of a Compound or a Product.  Without limiting the foregoing, Preclinical and Clinical Data shall include all items described in Exhibit 1.32 that are generated from the Funded Work.

 

1.33                        “Preclinical Development” shall mean those preclinical studies with respect to the Compounds and/or Products that are specifically required for an IND, including without limitation ADME and GLP toxicology studies, or studies required for the CMC section of an IND or an NDA.  It is understood that “preclinical” testing will continue after the filing of an IND in support of the clinical development of a Compound or Product, including ongoing toxicology, metabolic, PK and other non-clinical testing of such Compound or Product, and that “Preclinical Development” as used herein shall include such ongoing non-clinical testing.

 

1.34                        “Preclinical Plan and Budget” shall mean the plan and budget for Preclinical Development, as described in Article 4 below.

 

1.35                        “Product(s)” shall mean product(s), in any formulation, containing a Compound(s) as an active ingredient(s).

 

7

 

1.36                        “Program Director” shall mean a development executive appointed by each Party pursuant to Section 3.1 to serve as such Party’s principal coordinator and liaison for the Funded Work.

 

1.37                        “R&D Personnel” shall mean employees of a Party assigned (full- or part-time) to conduct research, scientific and/or technical activities under the Plans and Budgets and having qualifications reasonably approved by the JSC, including scientists, clinical research staff, post-doctoral fellows and similarly qualified technicians, but excluding personnel performing non-scientific or non-technical activities such as project management personnel, patent counsel, business development personnel, secretarial staff or the like.  For purposes of the Research funded under Section 9.1.1 below, R&D Personnel will include [...***...] for MG’s [...***...].  For purposes of the Preclinical Development conducted hereunder, R&D personnel may include manufacturing personnel performing QA/QC and other GMP-related activities.  In addition, internal costs of the Approved Preclinical Studies may include approved actual costs of MG’s Program Director, on a percentage of time basis.

 

1.38                        “Regulatory Authority” shall mean any national (e.g., the FDA), supra-national (e.g., the European Commission, the Council of the European Union, or the EMEA), or other governmental entity in any jurisdiction of the world involved in the granting of Marketing Approval for pharmaceutical products.

 

1.39                        “Reimbursable Clinical Costs” shall mean all out-of-pocket clinical trial costs incurred by MG in conducting the Approved Clinical Studies, plus Cost of Goods for the clinical supplies of Compounds and/or Products used therein, and up to a maximum of [...***...] per year of mutually agreed internal costs of approved FTE’s of MG (at an agreed reimbursement rate) for the Approved Clinical Studies.  It is understood that such internal costs will include approved actual costs of [...***...].

 

1.40                        “Research” shall mean activities directed to the research, discovery, characterization, optimization, in vitro testing and/or in vivo evaluation of HDAC Inhibitors, conducted by or under authority of MG.

 

1.41                        “Research Data” shall mean all material screening results, SAR data, optimization information, in vitro and in vivo data, compositions, samples and other information generated in the course of research conducted by or under authority of MG or Taiho with respect to Compounds and/or Products, including without limitation all information and data described in part 1.41A of Exhibit 1.41.  In case of data that is generated by an entity with rights with respect to Compounds and/or Products both in and outside of the Field, Research Data shall mean the foregoing, but only to the extent it is not specific to non-cancer indications. With respect to such data generated by Non-Cancer Partners, Research Data shall mean only the items set forth in part 1.41B of Exhibit 1.41.

 

1.42                        “Research Plan and Budget” shall mean the plan and budget for Research, as described in Article 4 below.

 

***Confidential Treatment Requested

 

8

 

1.43                        “Research Term” shall mean the period beginning upon the Effective Date and, unless earlier terminated in accordance with Article 20, terminating two (2) years after the Effective Date, unless extended by the Parties in writing upon mutual agreement.

 

1.44                        “Royalty Term” shall mean, with respect to a particular Product in a country, the period commencing on the Effective Date and continuing until the later of (a) expiration or abandonment of the last Valid Claim within the Licensed Patents covering such Product in the particular country (on a Product-by-Product and country-by-country basis), or (b) ten (10) years after the first commercial sale in Japan of the first Product containing the same Compound as is contained in such Product.

 

1.45                        “Sublicensee” shall mean a non-Affiliate third party to whom Taiho has granted (i) the right to distribute a Product made in accordance with this Agreement, provided that such third party has primary responsibility for the marketing and promotion of such Product in its distribution territory and has the right to record sales of such Product for its account or (ii) the right to make and sell a Product, with respect to Products made and sold by such third party, within the scope of the license hereunder.  For clarity, Sublicensee shall exclude any wholesaler or reseller of Product which are not primarily responsible for marketing or promotion of the Product.  In addition, Taiho and MG shall not be deemed Sublicensees of the other, nor shall either Party be deemed to be acting “under authority” of the other Party.

 

1.46                        “Territory” shall mean Japan, South Korea (or both South and North Korea if unified), Taiwan and China.

 

1.47                        “Valid Claim” shall mean (a) a claim of an issued and unexpired patent, which has not been held unenforceable, unpatentable or invalid by a final decision of a court or other governmental agency of competent jurisdiction, and which has not been admitted to be invalid or unenforceable through reissue, disclaimer or otherwise, or (b) a claim in a pending patent application being prosecuted in good faith that has not been abandoned or finally rejected and which has been pending for less than [...***...].  In the event subsequent to such [...***...] period, such pending claim is issued as a claim of an issued and un-expired patent included within (a) above, such claim shall be reinstated thereafter as a “Valid Claim” in accordance with clause (a) above.

 

1.48                        Additional Definitions. In addition, the following terms shall have the meaning described in the corresponding section of this Agreement.  Other terms may be defined throughout the Agreement.

 

	
Term
    	
 
    	
Section Defined
    
	
“acquired”
    	
 
    	
1.21.1
    
	
“Approved   Product”
    	
 
    	
10.1.6(b)
    
	
“Agreement”
    	
 
    	
Preamble
    
	
“Annual   Net Sales”
    	
 
    	
11.1
    
	
“Approved   Preclinical Costs”
    	
 
    	
9.1.2
    
	
“Audited   Party,” “Auditing Party”
    	
 
    	
12.5.1
    

 

***Confidential Treatment Requested

 

9

 

	
“Back-up   Compound”
    	
 
    	
10.1.4(a)
    
	
“Base   Royalties”
    	
 
    	
9.4.1
    
	
“Bridging   Study”
    	
 
    	
10.1.4(b)
    
	
“Cancer   HDAC Research”
    	
 
    	
1.7
    
	
“Collaboration   Term”
    	
 
    	
20.1
    
	
“Combination   Therapy”
    	
 
    	
10.1.4(e)
    
	
“Confidential   Information”
    	
 
    	
16.1
    
	
“Cumulative   Net Sales”
    	
 
    	
10.2.3(a)
    
	
“Disclosed   Know-how”
    	
 
    	
8.4
    
	
“Discovered”
    	
 
    	
1.7
    
	
“Effective   Date”
    	
 
    	
Preamble
    
	
“Excluded   Third Party IP”
    	
 
    	
11.2.1
    
	
“First   Approval”
    	
 
    	
10.1.6
    
	
“Generic   Competition”
    	
 
    	
11.4.1
    
	
“Global   Development Committee”
    	
 
    	
3.4
    
	
“Indemnitor,”   “Indemnitee”
    	
 
    	
19.4
    
	
“JAMS”
    	
 
    	
21.1
    
	
“Joint   Intellectual Property”
    	
 
    	
17.2
    
	
“Joint   Development Team,” “JDT”
    	
 
    	
3.2
    
	
“Joint   Steering Committee,” “JSC”
    	
 
    	
3.3
    
	
“Large   Market Tumors”
    	
 
    	
10.1.4(d)
    
	
“Licensed   Product Use Diagnostics”
    	
 
    	
8.1.2
    
	
“Material   Non-Performance”
    	
 
    	
20.2.2
    
	
“MG”
    	
 
    	
Preamble
    
	
“MG   Indemnitees”
    	
 
    	
19.2
    
	
“Non-Cancer   HDAC Research”
    	
 
    	
1.7
    
	
“Non-Cancer   Partner”
    	
 
    	
5.2.1(a)
    
	
“Non-Cancer   Reserve Compounds”
    	
 
    	
5.2.1(e)
    
	
“Non-Cancer   Selected Compounds”
    	
 
    	
5.2.1(c)
    
	
“Opt-out   Non-Cancer Partner”
    	
 
    	
8.3.4
    
	
“Party”,   “Parties”
    	
 
    	
Preamble
    
	
“preclinical”
    	
 
    	
1.33
    
	
“Product   Use Diagnostics”
    	
 
    	
8.1.2
    
	
“Prosecution”
    	
 
    	
17.4.4
    
	
“R&D   Events”
    	
 
    	
10.1,   10.1.2(c)
    
	
“Recoupable   Costs”
    	
 
    	
9.4
    
	
“Resolution”
    	
 
    	
20.2.2(a)
    
	
“Selected   Compounds”
    	
 
    	
5.2.1(b)
    
	
“Set   of R&D Event Payments”
    	
 
    	
10.1.6
    
	
“small   molecules”
    	
 
    	
1.18
    
	
“Small   Market Tumors”
    	
 
    	
10.1.4(c)
    
	
“Subsequent   Approved Product”
    	
 
    	
10.2.2
    
	
“Taiho”
    	
 
    	
Preamble
    
	
“Taiho   Blocking Patents”
    	
 
    	
8.5
    

 

***Confidential Treatment Requested

 

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“Taiho   Budgeted Funds”
    	
 
    	
9.1
    
	
“Taiho   Indemnitees”
    	
 
    	
19.3
    
	
“Taiho   Reserve Compounds”
    	
 
    	
5.2.1(d)
    
	
“Territory-Specific   Preclinical Study”
    	
 
    	
5.1.2
    
	
“Third   Party IP”
    	
 
    	
11.2.1
    
	
“Transitioned   Product”
    	
 
    	
20.4.4(a)
    
	
“under   authority”
    	
 
    	
1.45
    
	
“US   Indication”
    	
 
    	
10.1.5(c)
    
	
“US   Product”
    	
 
    	
10.1.5(c)
    
	
“US   Product Data”
    	
 
    	
10.1.5(c)
    

 

ARTICLE 2
  COLLABORATION

 

2.1                               Scope of Collaboration.  Subject to the terms and conditions of this Agreement, the Parties shall collaborate: (a) to conduct Research to identify, characterize and discover Compounds useful in the Field; and (b) recognizing that Products will be developed both in North America and in the Territory and that regulatory and budget efficiencies can be achieved through the worldwide use of appropriate data and files, to cooperatively conduct the Approved Preclinical Studies and Approved Clinical Studies of Selected Compounds in North America.

 

2.2                               Conduct of the Collaboration.  Subject to the terms and conditions of this Agreement, each Party shall use Commercially Reasonable and Diligent Efforts to conduct Research in accordance with the Research Plan and Budget, Preclinical Development in accordance with the Preclinical Plan and Budget, and the Approved Clinical Studies in accordance with the Clinical Development Plan and Budget, in each case under the supervision of the JSC.  Each Party agrees to keep the JSC informed as to the progress of its activities under the Plans and Budgets.

 

ARTICLE 3
  GOVERNANCE

 

3.1                               Program Directors.  MG and Taiho shall each appoint a Program Director within thirty (30) days after the Effective Date.  Each Party shall have the right, after consulting with the other Party, to designate a different Program Director from time to time thereafter.  The Program Directors shall jointly oversee the conduct of the Funded Work, shall lead the Joint Development Team, and shall report to the Joint Steering Committee.

 

3.2                               Joint Development Teams.  Prior to commencing any Approved Preclinical Studies or Approved Clinical Studies, the Joint Steering Committee shall establish a “Joint Development Team,” or “JDT” in accordance with this Section 3.2 to oversee operational activities under the Preclinical Plan and Budget and Clinical Development Plan and Budget.

 

3.2.1                     Membership.  The JDT shall be comprised of an equal number of representatives from each of MG and Taiho as determined by the Program Directors, and shall 

 

11

 

include each Party’s Program Director.  The JDT shall be under the supervision of the Joint Steering Committee, and its members may be replaced at any time upon the determination of the JSC.

 

3.2.2                     Meetings.  During such time periods as Funded Work is ongoing under the Preclinical Plans and Budgets and/or the Clinical Development Plans and Budgets, the JDT shall meet or communicate no less frequently than monthly, or as otherwise agreed by the Parties, by phone, video conference, web-cast or at mutually agreed locations alternating between Japan and Canada, or at such other locations as the Parties agree.  Each Party shall bear its own personnel, travel and lodging expenses relating to JDT meetings.  It is understood that the JDT shall be disbanded and shall not have any further responsibilities or decision making powers after the end of the Funded Work.

 

3.2.3                     Responsibilities.  The JDT shall be responsible for (a) monitoring and coordinating operational activities of the Approved Preclinical Studies and Approved Clinical Studies, (b) reviewing and approving during the period of the Funded Work regulatory correspondence, final study reports and submissions to Regulatory Authorities in North America relating to Selected Compounds and/or Products, and (c) without limiting Section 5.2.2 below, proposing subsequent candidates for Preclinical Development or clinical trials to the JSC.

 

3.2.4                     Decisions of the JDT.  Decisions of the JDT shall be made by agreement of the Program Directors, with each Program Director having one vote.  Actions that may be taken at a meeting of the JDT also may be taken without a meeting if a written consent setting forth the action so taken is signed by the Program Directors.  It is understood that the decisions of the JDT, whether under this Section 3.2.4 or under any other section of this Agreement, shall not vary the terms of this Agreement.  In the event that the Program Directors are unable to reach agreement on an issue as set forth in this Section 3.2.4, the issue shall be finally decided by Joint Steering Committee.

 

3.3                               Joint Steering Committee.  Within thirty (30) days after the Effective Date, MG and Taiho shall establish a “Joint Steering Committee” or “JSC” in accordance with this Section 3.3 to provide oversight and management of certain activities, as further described in this Section 3.3.

 

3.3.1                     Membership.  The JSC shall be comprised of an equal number of representatives from each of MG and Taiho, selected by such Party.  The exact number of such representatives on each of the JSC shall be two (2) for each of MG and Taiho, or such other number as the Parties may agree.  Taiho and MG may replace its respective JSC representatives at any time, with prior written notice to the other Party.

 

3.3.2                     Meetings.  During such time periods as Funded Work is ongoing under the Plans and Budgets, the JSC shall meet no less frequently than once each calendar quarter, or as otherwise agreed by the Parties, at mutually agreed locations alternating between Japan and Canada, or if agreed, by phone, video conference, web-cast, or at such other locations as the Parties agree, and thereafter as the Parties agree.  Each Party shall bear its own personnel, travel and lodging 

 

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expenses relating to JSC meetings.  It is understood that the JSC shall be disbanded and shall not have any further responsibilities or decision making powers after the end of the Funded Work.

 

3.3.3                     Responsibilities.  At its meetings, the JSC shall, consistent with the terms and conditions of this Agreement, (i) formulate and review the objectives of the Parties’ collaboration hereunder, (ii) monitor the progress of the Parties toward those objectives, (iii) review and approve the Plans and Budgets, pursuant to Article 4 of this Agreement, (iv)  undertake and/or approve such other matters as are specifically provided for the JSC under this Agreement, and (v) serve as a forum for communication between the Parties and to resolve issues as mutually agreed.  Other representatives of Taiho or MG may attend JSC or subcommittee meetings as non-voting observers.

 

3.3.4                     Decisions of the JSC.  Decisions of the JSC shall be made by unanimous agreement of the members present in person or by other means (e.g., teleconference) at any meeting; provided that at least one (1) representative of each Party is present at such meeting.  It is understood that the decisions of the JSC, whether under this Section 3.3.4 or under any other section of this Agreement, shall not vary the terms of this Agreement.  In the event that the JSC is unable to reach unanimous agreement on an issue as set forth in this Section 3.3.4 (except with respect to approving the selection of a Selected Compound under Section 5.2.2 below or a Research Plan and Budget with fewer than [...***...] per year during the Research Term), Taiho shall have the right to cast a deciding vote, which shall be deemed the decision of the JSC.

 

3.4                               Global Development Committee.  At such time as any Preclinical Development or clinical trial is undertaken by or under authority of Taiho or MG (including by an Additional Partner) anywhere in the world within the Field with respect to a Compound and/or Product outside of the Funded Work, the Parties shall establish a joint committee among MG, Taiho and any Additional Partner(s) to discuss and coordinate such development of such Compound and/or Product (the “Global Development Committee”).  To the extent there are not Additional Partners, and if Funded Work is still ongoing at the time, the function of the Global Development Committee set forth in this Section 3.4 shall be handled by the JSC.  The primary role of such Global Development Committee shall be to provide a forum for communication between MG, Taiho and any Additional Partner(s) with respect to activities related to the ongoing Preclinical Development and clinical development of Compounds and/or Products in the Field, outside the Funded Work.  Taiho, MG and each Additional Partner having rights to such Compounds or Products shall each have at least two (2) representatives on such Global Development Committee.  Each member of the Global Development Committee shall keep the other members fully informed in English (subject to Section 6.6) as to the ongoing Preclinical Development and clinical development of, and regulatory activities with respect to, such Compounds or Products in the Field.  It is understood and agreed, however, that formal approval of such Global Development Committee shall not be required for any such activities.  The Global Development Committee shall meet no less frequently than twice each calendar year, or as otherwise agreed by the Parties, until the termination or expiration of this Agreement and each of Taiho, MG and any Additional Party shall give a full report in English (subject to Section 6.6) at each such meeting of activities relating to the particular Compounds and Products such Party or Additional Partner has rights to that is undergoing Preclinical Development or clinical development in the Field.  Additional Partners will participate in such meeting only with 

 

13

 

respect to Compounds and/or Products for which they have rights.  It is further understood that MG shall not be deemed in breach of this Section 3.4 in the event an Additional Partner fails to comply with this Section 3.4, provided that MG has obtained in its agreement with such Additional Partner the obligation to comply with this Section 3.4, and has used reasonable efforts to cause such Additional Partner to comply with such agreement.

 

ARTICLE 4
  PLANS AND BUDGETS

 

4.1                               Contents of the Plans and Budgets.  The Plans and Budgets shall specify the objectives and work plan activities of the Research to be conducted during the Research Term, Approved Preclinical Studies and Approved Clinical Studies, respectively, including the out-of-pocket costs budgeted to be incurred by MG therefor, and in the case of the Approved Preclinical Studies and Approved Clinical Studies the number and type of FTEs (including in each case by category(ies) of cost or activity, if so decided by the JSC).  Unless otherwise stated in the respective Plan and Budget, any monetary amounts budgeted therein shall refer to only the out-of-pocket costs of MG for the respective activity.  Likewise, unless otherwise stated in the respective Plan and Budget, any headcounts budgeted therein shall refer only to the number of a Party’s FTEs working on the respective activity.

 

4.1.1                     Initial and Renewal Plans and Budgets.  Promptly after the Effective Date, the JSC shall review and approve more complete, formal initial Plans and Budgets in accordance with this Section 4.1 and Section 4.2 below.  Until such approval of Plans and Budgets by the JSC in accordance with this Article 4, the preliminary Plans and Budgets set forth in Exhibit 1.31 shall be deemed the Plans and Budgets then in effect.  Thereafter, the JSC shall establish and approve in accordance with this Article 4 renewal Plans and Budgets, prior to the expiration of the Plans and Budgets then in effect, to the extent Funded Work is to be conducted after such expiration.

 

4.1.2                     Periodic Review.  JSC shall review the Plans and Budgets on an quarterly basis and may make any changes thereto as it deems necessary or appropriate, in accordance with Section 4.2 below.

 

4.1.3                     Taiho Participation.  The Plans and Budgets shall provide such reasonable detail as either Party may request.  Without limiting the foregoing, with respect to clinical trials, the Plans and Budgets shall include budgets, CROs, schedules, trial sites, investigators, protocols and the like, as requested by either Party.  It is understood and agreed that Taiho shall have the right to check, request changes to, participate in revisions of and finally approve all Plans and Budgets for the Funded Work.

 

4.2                               Approval of Plans and Budgets by the JSC.  Each Plan and Budget, including any changes thereto, must be reviewed and approved by the JSC and Taiho before it becomes effective.  Each such approval by the JSC and Taiho shall render such Plan and Budget effective for a period of twelve (12) months after such date of approval.  The JSC may forecast plans and budgets for longer periods, but such approvals shall not render a Plan and Budget effective for a period of more than twelve (12) months after the date of such approval, and the portions of each Plan 

 

***Confidential Treatment Requested

 

14

 

and Budget setting forth activities after its expiration shall be non-binding for either Party.  Upon request by Taiho, the Preclinical Plan and Budget and the Clinical Development Plan and Budget shall include separate plans and budgets for each Compound, Product, and clinical trial.

 

ARTICLE 5
  CONDUCT OF FUNDED WORK

 

5.1                               General.  MG shall conduct the Research, Approved Preclinical Studies and Approved Clinical Studies in accordance with the applicable Plans and Budgets, and shall use Commercially Reasonable and Diligent Efforts to achieve the objectives and timelines within such Plans and Budgets.  Without limiting the foregoing, unless otherwise agreed by the Parties and specified in the Research Plan and Budget, MG agrees to dedicate [...***...] FTEs per year during the Research Term to performing the Research Plan and Budget.  It is understood, however, that MG shall not be obligated to incur any costs in performing the Plans and Budgets that are not reimbursed by Taiho, except that it is understood that Taiho shall be obligated to reimburse only the Reimbursable Clinical Costs of the Approved Clinical Studies.  The Approved Preclinical Studies and the Approved Clinical Studies shall be designed in a manner to maximize the usefulness of the resulting Data for Taiho’s regulatory efforts for Products in the Territory, and to comply (to the extent practicable) with any clinical or regulatory requirements in the Territory, while at the same time providing data that is directed at obtaining Marketing Approval for the Products in North America.

 

5.1.1                     Activities to be Conducted by Taiho through the JSC.  In addition to Taiho’s participation as set forth in this Article 5 below, Taiho and MG may mutually agree from time to time on research and preclinical development activities with respect to Compounds and/or Products to be conducted by Taiho in connection with the Plans and Budgets.  The Parties acknowledge that Taiho expects to conduct some such activities, including as of the Effective Date, those Taiho activities set forth in the preliminary Plans and Budgets, but shall not be obligated to do so.  During the Research Term and for [...***...] thereafter, Taiho agrees not to conduct any [...***...] specifically directed to compounds that directly inhibit the activity of HDAC enzymes or have therapeutic effect through the inhibition of HDAC enzymes, [...***...], other than those to be conducted in connection with or in the exercise of rights granted under this Agreement, unless Taiho agrees to treat [...***...] under this Agreement.

 

5.1.2                     Territory-Specific Preclinical Studies.  In the event Taiho requests MG to perform preclinical studies with respect to Compounds and/or Products solely to satisfy particular requirements for preclinical data in the Territory beyond that which would be required or useful in North America or Europe (each, a “Territory-Specific Preclinical Study”), MG agrees to perform such study as approved and overseen by the JSC.  MG shall be compensated for such work to the extent set forth in Section 9.1.3 below.  Activities set forth in the Research Plan and Budget or the Preclinical Plan and Budget shall not be deemed part of Territory-Specific Preclinical Studies unless specifically labeled as such therein.

 

***Confidential Treatment Requested

 

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5.1.3                     Visiting Taiho Personnel.  The Parties agree that Taiho may designate certain employees reasonably acceptable to MG to visit MG’s facilities where the Plans and Budgets are being performed, for purposes of observing and participating in the performance of the Plans and Budgets.  The arrangements and duration of such visits shall be reasonably agreed by the Parties so as to minimize any disruption to MG’s business while providing Taiho meaningful participation in the performance the Plans and Budgets as requested by Taiho.  It is understood that such visits shall be on a temporary, short-term basis and shall not include longer-term residency unless agreed by the Parties.  While at MG, Taiho employees shall have full access at MG to Data and Licensed Technical Information pertaining to the Compounds and/or Products.

 

5.1.4                     Subcontracting.  Neither Party shall delegate or subcontract its performance of the Plans and Budgets, except as approved by the JSC.  In addition, any agreements to be entered into by either Party with a third party to perform any portion of the Plans and Budgets shall be approved by the JSC.  Such agreements shall contain provisions as materially protective of each Party’s rights, including without limitation with respect to access to Data, ownership and licenses of intellectual property rights and protection of confidential information, as set forth in this Agreement with respect to work performed by the other Party.  In the event MG engages a CRO(s) to perform part or all of the Approved Preclinical Studies or Approved Clinical Studies, the Data available to Taiho under Section 6.1 shall include all information and data communicated to and from such CRO(s) with respect to the Compounds and/or Products in the Field.

 

5.2                               Selection of Compounds.

 

5.2.1                     Certain Definitions.

 

(a)                                 “Non-Cancer Partner” shall mean a non-Affiliate third party who (i) is or will be granted by MG, directly or indirectly, a right to develop, market and/or commercialize Compounds and/or Products outside the Field, (ii) is not and will not be granted by MG, directly or indirectly, any rights with respect to Compounds or Products in the Field anywhere in the world, and (iii) who is not an Opt-out Non-Cancer Partner.  A Non-Cancer Partner and all of its Affiliates shall be deemed a single Non-Cancer Partner (for example, for purposes of Section 5.2.4(b)(ii) below).

 

(b)                                 “Selected Compounds” shall mean the Initial Clinical Candidate and (i) those other individual Compounds selected as a Selected Compound by the JSC under Section 5.2.2, (ii) those Compounds that are Selected Compounds under Section 5.2.3(b), (iii) Compounds for which an Additional Partner or third party has rights to develop, market or commercialize as described in Section 5.2.6, and (iv) all Taiho Reserve Compounds in compliance with such 5.2.3(a) below.  With respect to each such Compound, the Selected Compound shall include prodrugs, metabolites, salts, esters, hydrates, solvates, free base, polymorphs, isomers thereof, conjugated forms and/or liposomal or other formulations thereof and other compositions consisting of such Compound non-covalently bonded with other moieties, which together shall be deemed a single Selected Compound (and a single Taiho Reserve Compound) for purposes of Sections 5.2.2, 5.2.3(a)(ii) and 5.2.3(b) below.

 

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(c)                                  “Non-Cancer Selected Compounds” shall mean (i) those individual Compounds selected by Non-Cancer Partners under Section 5.2.4(d), (ii) those Compounds that are Non-Cancer Selected Compound in accordance with Section 5.2.4(c) below, and (iii)  Non-Cancer Reserve Compounds selected in accordance with Section 5.2.4(b) below, in each case subject to Section 5.2.5 and provided that MG has obtained all rights and covenants as set forth in Section 8.3.1(b) from the respective Non-Cancer Partner.  With respect to each such Compound, the Non-Cancer Selected Compound shall also include the prodrugs, metabolites, salts, esters, hydrates, solvates, free base, polymorphs, isomers thereof, conjugated forms and/or liposomal or other formulations thereof and other compositions consisting of such Compound non-covalently bonded with other moieties, which together shall be deemed a single Non-Cancer Selected Compound (and a single Non-Cancer Reserve Compound) for purposes of Sections 5.2.4(b)(ii), 5.2.4(c) and 5.2.4(d) below.

 

(d)                                 “Taiho Reserve Compounds” shall mean a list of up to [...***...] individual Compounds designated by Taiho as potential development candidates which Taiho desires to reserve in the Territory for the Field in accordance with Section 5.2.3(a) below.

 

(e)                                  “Non-Cancer Reserve Compounds” shall mean a list of up to [...***...] individual Compounds designated by a Non-Cancer Partner as potential development candidates which such Non-Cancer Partner desires to reserve in the Territory outside the Field in accordance with Section 5.2.4(b) below.

 

5.2.2                     Selection by the JSC.  From time to time, either Party or the JDT may suggest that the JSC consider a particular Compound (whether or not such Compound is then a Selected Compound) to be further advanced into Approved Preclinical Studies and/or Approved Clinical Studies.  Upon approval of the JSC of such Compound for such Approved Preclinical Studies or Approved Clinical Studies, the Parties shall proceed to establish the appropriate Plans and Budgets for such Compound (it being understood that, upon the approval of such Compound by the JSC, the same shall be deemed a Selected Compound).  In the event the Parties have not begun [...***...] or [...***...] of such Compound [...***...] within [...***...] after its [...***...] by the JSC under this Section 5.2.2, such Compound shall thereafter [...***...] (and cannot be [...***...] as [...***...] under this Section 5.2.2 for at least a period of [...***...]) but such Compound may be immediately re-selected or may remain as a Selected Compound pursuant to Sections 5.2.3(a) or 5.2.6 below.

 

5.2.3                     Designation by Taiho.

 

(a)                                 Taiho’s Designation of Reserve Compounds.  Taiho may designate a Compound as a Taiho Reserve Compound at any time upon notice to MG, provided at the time of such notice (i) such Compound is not then a Non-Cancer Selected Compound, and (ii) there are not then more than [...***...] Taiho Reserve Compounds.  In the event there are then-currently [...***...] Taiho Reserve Compounds, then Taiho shall not have the right to include any additional Compound(s) as Taiho Reserve Compounds, until Taiho has removed an equal number of Compounds from the list of Taiho Reserve Compounds, chosen at Taiho’s sole discretion.  For the foregoing purpose, it is understood and agreed that Taiho shall have the right to remove any 

 

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Compound from the list of Taiho Reserve Compounds at any time upon written notice to MG.  In the event a Compound is so removed from the list of Taiho Reserve Compounds, then such Compound shall thereafter cease to be a Selected Compound, unless re-designated in accordance with this Section 5.2.3(a), or such Compound becomes a Selected Compound in accordance with Section 5.2.2 above or 5.2.6 below.

 

(b)                                 Elevation of Taiho Reserved Compounds.  Upon commencement of (i) Phase I clinical studies by or under authority of Taiho with respect to a Compound(s) in the Field, and provided that (ii) such Compound(s) are Taiho Reserve Compound(s) at the time of Taiho’s notice to MG of such commencement under this Section 5.2.3(b), such Compound shall cease to be a Taiho Reserved Compound but shall remain a Selected Compound hereunder (i.e., such Compound will no longer count against the maximum number of [...***...] Taiho Reserve Compounds).  Taiho shall promptly notify MG of any Compounds for which Phase I studies have been commenced by or under its authority.

 

5.2.4                     Rights of Non-Cancer Partners; Designation by Non-Cancer Partners.

 

(a)                                 Rights granted to Non-Cancer Partners.  MG may grant each Non-Cancer Partner rights to develop, market and/or commercialize in the Territory outside the Field only a limited number of individual Compounds (and Products containing the same) which have been selected as Non-Cancer Selected Compounds in accordance with this Section 5.2.4.

 

(b)                                 Non-Cancer Partner’s Designation of Reserved Compounds.  A Non-Cancer Partner may designate a Compound as a Non-Cancer Reserve Compound at any time after the Effective Date upon notice to MG, provided at the time of such notice (i) such Compound is not then a Selected Compound, and (ii) there are not then more than [...***...] Non-Cancer Reserve Compounds for such Non-Cancer Partner.  In the event the Non-Cancer Partner then-currently has [...***...] Non-Cancer Reserve Compounds, then such Non-Cancer Partner shall not have the right to include any additional Compound(s) as Non-Cancer Reserve Compounds, until such Non-Cancer Partner has removed an equal number of Compounds from its list of Non-Cancer Reserve Compounds, chosen at such Non-Cancer Partner’s sole discretion.  For the foregoing purpose, it is understood and agreed that a Non-Cancer Partner shall have the right to remove any Compound from its list of Non-Cancer Reserve Compounds at any time upon written notice to MG.  In the event a Compound is so removed from the list of Non-Cancer Reserve Compounds, then such Compound shall thereafter cease to be a Non-Cancer Selected Compound (unless re-designated in accordance with this Section 5.2.4(b)), and the Non-Cancer Partner shall have no further rights to develop, market and/or commercialize such Compounds in the Territory outside the Field.

 

(c)                                  Elevation of Non-Cancer Reserve Compounds.  Upon commencement of (i) Phase I clinical studies by or under authority of a Non-Cancer Partner with respect to a Compound(s) outside the Field, and provided that (ii) such Compound(s) are Non-Cancer Reserve Compound(s) at the time of the Non-Cancer Partner’s notice to MG of such commencement under this Section 5.2.4(c) such Compound shall cease to be a Non-Cancer Reserved Compound but shall remain a Non-Cancer Selected Compound hereunder (i.e., such 

 

***Confidential Treatment Requested

 

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Compound will no longer count against the maximum number of [...***...] Non-Cancer Reserve Compounds for such Non-Cancer Partner).

 

(d)                                 Development Candidate Selection by a Non-Cancer Partner.  With respect to each Non-Cancer Partner, such Non-Cancer Partner may designate one (1) Compound at any time after the Effective Date (that is its development candidate outside the Field) to be a Non-Cancer Selected Compound, provided that such Compound is not-then currently a Selected Compound.  In the event MG and such Non-Cancer Partner have not begun Preclinical Development or clinical trials of such Compound [...***...] within [...***...] after such [...***...], such Compound shall thereafter [...***...] (and cannot be [...***...] as [...***...] under this Section 5.2.4(d) for at least a period of [...***...]) but such Compound may be immediately re-selected as or may remain a Selected Compound pursuant to Section 5.2.4(b) above.

 

5.2.5                     Coordination.

 

(a)                                 Designation by Non-Cancer Partner.  A Non-Cancer Partner’s designation, or removal, of a Compound as a Non-Cancer Selected Compound or Non-Cancer Reserve Compound shall be effective only upon notice to [...***...] of such designation or removal.

 

(b)                                 Designation by Taiho.  MG shall have a period of [...***...], to inform Taiho of any reasons under this Agreement why such Compound cannot be a Taiho Reserve Compound, including without limitation if such Compound is already a Non-Cancer Selected Compound prior to such notice (a “Rejection”).  In the event [...***...] does not notify Taiho in writing of a Rejection within such [...***...] period, or notifies Taiho during such [...***...] period that such Compound has been accepted as a Taiho Reserve Compound, then Taiho’s designation of such Compound as a Taiho Reserve Compound shall conclusively be deemed effective under Section 5.2.3(a) above.  In the event a Compound is Rejected as a Taiho Reserve Compound, then MG agrees to promptly notify Taiho if such Compound is thereafter removed from any list of Non-Cancer Selected Compounds, no later than MG notifies any other third party of such removal.

 

(c)                                  Disclosure.  [...***...] shall promptly disclose to Taiho the structures of all Non-Cancer Selected Compounds, to the extent MG has the right to do so under its agreement with the Non-Cancer Partner that designated such Non-Cancer Selected Compound.  To the extent that [...***...] has the right to disclose structures of such Non-Cancer Selected Compounds to Taiho, [...***...] may reciprocally disclose to such Non-Cancer Partner the structures of the Selected Compounds hereunder; but [...***...] shall not disclose the structures of Selected Compounds to a Non-Cancer Partner who does not permit [...***...] to disclose its Non-Cancer Selected Compounds to Taiho.

 

5.2.6                     Selection by Additional Partners.  At such time as [...***...] grants an Additional Partner or any other third party rights to develop, market and/or commercialize any Compounds in the Field, such Compounds that are selected or reserved for development by such Additional Partner or such third party shall thereafter be deemed Selected Compounds under this 

 

***Confidential Treatment Requested

 

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Agreement.  [...***...] shall promptly notify Taiho of any such Compounds.  It is understood that as used herein, a right to “market and/or commercialize” under this Section 5.2.6 shall include an option to acquire such rights, as defined in the last sentence of Section 1.1 (but excluding the rights described in Section 1.1(a) and (b)).  Compounds that are “selected or reserved for development” shall include any Compounds that are selected or reserved for development by the Additional Partner or third party in a manner similar to this Section 5.2 (i.e. Compounds that cannot become Non-Cancer Selected Compounds without such Additional Partner or third party’s consent) and all Compounds for which the Additional Partner or third party has actually commenced Preclinical Development or clinical studies in the Field.  [...***...] shall notify Taiho of all Selected Compounds under this Section 5.2.6.

 

5.2.7                     No Obligation to Develop Reserve Compounds.  It is understood that neither Taiho nor the Non-Cancer Partners shall have any obligation to advance any Reserve Compounds into Preclinical Development or clinical development, but each may do so in its discretion in accordance with its respective licenses and rights.

 

ARTICLE 6
  PRECLINICAL AND CLINICAL DATA; LICENSED TECHNICAL INFORMATION

 

6.1                               Taiho’s Access to Data.  MG shall provide Taiho with prompt and complete access and the right to use for any purposes relating to Compounds and/or Products in the Field and to file with Regulatory Authorities, all Data generated by or under authority of MG (whether or not generated under the Plans and Budgets or in the course of Funded Work) at [...***...].  Without limiting the foregoing, upon request by Taiho from time to time, MG shall promptly provide to Taiho copies of all Data in MG’s possession, and reasonable access to all originals of Data, such as original patient report forms, whether or not in MG’s possession.  With respect to Data that is in the possession of a third party only, MG shall secure Taiho the right to obtain copies of such Data from such third party, and shall cooperate fully with and assist Taiho in obtaining such copies.

 

6.2                               MG’s Access to Data.  Taiho shall provide MG with prompt and complete access and the right to use for any purposes relating to Products and/or Compounds in the Field and to file with Regulatory Authorities, all Research Data and Preclinical and Clinical Data generated by Taiho at [...***...].  Without limiting the foregoing, upon request by MG from time to time, Taiho shall promptly provide to MG copies of all such Research Data and Preclinical and Clinical Data generated by Taiho, and reasonable access to all originals of such Data, such as original patient report forms.  Notwithstanding the foregoing, Taiho shall be obligated to provide to MG Preclinical and Clinical Data with respect to a Compound only to the extent that MG, the Additional Partners and/or Non-Cancer Partners have provided Taiho with access to and use of Preclinical and Clinical Data for such Compound in the Field, generated outside of the Funded Work, at an equivalent stage of preclinical or clinical development.  In addition, MG shall not provide to any of its partners, contractors or others outside the Field any Data relating to Compounds and/or Products that is specific to cancer, and shall not provide to Non-Cancer Partners 

 

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any Data generated by Taiho or generated in connection with the Funded Work except those set forth on part 1.41B of Exhibit 1.41.

 

6.3                               Transfer of Technical InformationPromptly after the Effective Date, MG shall use Commercially Reasonable and Diligent Efforts to transfer to Taiho copies of all Licensed Technical Information that MG reasonably believes to be existing as of the Effective Date.  Thereafter during the term of this Agreement, upon request of Taiho, MG shall transfer to Taiho all previously undisclosed Licensed Technical Information, if any, including without limitation those developed or acquired after the Effective Date; and shall provide reasonable quantities of Compounds, for further evaluation by Taiho.  It is understood that MG’s efforts to provide Taiho with quantities of Compounds as requested under this Section 6.3 may be counted against the [...***...] FTE’s performing Research during the Research Term.

 

6.4                               AssistanceSubject to Section 6.6 below, each Party shall provide the other with such assistance as the other Party reasonably requests from time to time, to enable such other Party to fully understand and implement the Data and Licensed Technical Information to be provided hereunder.

 

6.5                               Coordination with Additional Partners, Non-Cancer Partner and Others6.5.1                        By MG.

 

(a)                                 Additional Partners. It is understood that MG shall be responsible to obtain for Taiho prompt access to, copies of (or the right to promptly obtain copies if the Data is not already in the possession of MG), and use rights with respect to Data generated by Additional Partners, or other third parties authorized by MG (but excluding Non-Cancer Partners, except as provided in Section 6.5.1(b) below), with respect to Compounds and/or Products that are used or useful in the Field, together with the same type of assistance by such Additional Partner or such third parties that MG would be obligated to provide under Section 6.4 with respect to such Data.  Without limiting Section 8.3 below, a failure to obtain such access, copies or assistance shall [...***...] of this Section 6.5.  MG shall not provide any Data to an Additional Partner that fails to provide any Data to Taiho; nor shall MG provide Taiho’s Data to any Additional Partner, directly or indirectly (including by way of cross-referencing for regulatory purposes), except as permitted under Section 6.5.2.

 

(b)                                 Non-Cancer Partners.  MG shall be responsible to obtain for Taiho prompt access to, copies of and use rights with respect to Research Data (as described in part 1.41B of Exhibit 1.41) generated by Non-Cancer Partners, together with the same type of assistance by such Non-Cancer Partner that MG would be obligated to provide under Section 6.4 with respect to such Research Data.  Without limiting Section 8.3 below, a failure to obtain such access, copies or assistance shall [...***...] of this Section 6.5.  MG shall not provide any Data to a Non-Cancer Partner that fails to provide any Data to Taiho; nor shall MG provide Taiho’s Data to any Non-Cancer Partner, directly or indirectly (including by way of cross-referencing for regulatory purposes), except as permitted under Section 6.5.2 and 6.2.

 

***Confidential Treatment Requested

 

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6.5.2                     By Taiho.

 

(a)                                 Taiho shall provide to Additional Partners the same access to, copies of and use rights with respect to Research Data and Preclinical and Clinical Data as set forth in Section 6.2 above, together with the same type of assistance as Taiho would be obligated to provide MG under Section 6.4 above with respect to such Data, but only to the extent such Additional Partners has provided Taiho with access and use of Data generated by or on behalf of such Additional Partners as provided for in Section 6.5.1 above, which is for the same Compound in the Field and at an equivalent stage of preclinical or clinical development.

 

(b)                                 Non-Cancer Partners.  Taiho shall provide to Non-Cancer Partners the same access to and copies of Research Data (as described in Part 1.41B of Exhibit 1.41) generated by Taiho, together with the same type of assistance as Taiho would be obligated to provide under Section 6.4 with respect to such Research Data, but only to the extent such Non-Cancer Partner has provided Taiho with access to and use of Research Data generated by or on behalf of such Non-Cancer Partner.

 

6.6                               No Obligation to Translate.  It is understood and agreed that any Data to be provided by MG, Taiho, an Additional Partner or a Non-Cancer Partner may be provided in the language in which such Data exists, and neither MG, Taiho, the Additional Partner nor the Non-Cancer Partner shall be obligated to provide translations of such Data (to the extent such translation has not already been prepared).

 

6.7                               Data to Conform with ICH Guidelines.  All Preclinical and Clinical Data and Manufacturing Data required to be provided to either Party under this Article 6 shall conform with ICH Guidelines, to the extent consistent with the laws, regulations and requirements of Regulatory Authorities of the country or jurisdiction for which such Data was generated by the supplying entity.

 

ARTICLE 7
  REPORTS; RECORDS; PUBLICATIONS

 

7.1                               Reports.  In addition to any other information required to be provided by each Party hereunder, prior to each JSC meeting under Section 3.3 above, each Party shall provide the JSC with a written report in English summarizing the progress of such Party’s activities under the Plans and Budgets during the preceding period.  MG also agrees to keep the JSC informed as to those Compounds for which any Preclinical Development or clinical development will be conducted outside of the Plans and Budgets in the Field.

 

7.2                               Records.  Taiho and MG shall use reasonable efforts to maintain records of work performed under the Plans and Budgets (or cause such records to be maintained) in sufficient detail and in good scientific manner as will properly reflect all work done and results achieved.  Upon reasonable advance notice, each Party shall allow the other to have reasonable access to all records, materials and data generated by or on behalf of such Party under the Plans and Budgets with 

 

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respect to each Product and/or Compound within the Field at reasonable times, in a reasonable manner and, upon request by either Party.

 

7.3                               Publications.  As soon as is practicable prior to the oral public disclosure, and prior to the submission to any outside person for publication of scientific or technical data relating to Compounds in each case to the extent the contents of the oral disclosure or publication have not been previously disclosed pursuant to this Section 7.3 before such proposed disclosure, Taiho or MG, as the case may be, shall disclose to the other Party a copy of the publication, or a written summary of any oral public disclosure, to be made or submitted, and shall allow the other Party at least [...***...] days, if feasible, to determine whether such disclosure or publication contains subject matter for which patent protection should be sought prior to publication or which either Party believes should be modified to avoid disclosure of Confidential Information or regulatory or other issues.  With respect to publications by investigators or other third parties, such disclosures and publications shall be subject to review by the reviewing Party under this Section 7.3 only to the extent that Taiho or MG (as the case may be) has the right to do so.  During such [...***...] day review period, the Parties may discuss the merits of making the particular publication at such time, and the Party proposing such publication shall consider in good faith the comments of the other Party, but the publishing Party shall have the final decision of whether or not to publish, so long as such publication does not disclose Confidential Information of the other party.

 

ARTICLE 8
  TAIHO’S LICENSE

 

8.1                               License and License Fee.

 

8.1.1                     General.  As consideration for the license fee set forth in Section 8.1.4 and the royalties set forth in Article 11, MG hereby grants to Taiho an exclusive right and license, with the right to grant and authorize sublicenses, under the Licensed Technology to research, develop, make, have made, use, sell, have sold, offer for sale, import and otherwise distribute Compounds and Products, for use in the Field.  Such license shall be limited to the Territory, except that such license shall include (a) the right to make and have made Compounds and Products outside the Territory, for use, import and/or sale in the Territory; and (b) the right to conduct Preclinical Development and/or clinical trials of Products and/or Compounds in the Field outside the Territory, for submission to Regulatory Authorities within the Territory as follows: [...***...]  Notwithstanding the foregoing, the license set forth in this Section 8.1 shall exclude the right to develop, import, sell or offer for sale Non-Cancer Selected Compounds, and Products containing Non-Cancer Selected Compounds, 

 

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provided such Non-Cancer Selected Compounds and Products containing the same are not used within the Field in the Territory.

 

8.1.2                     Diagnostics.  MG hereby grants to Taiho a non-exclusive right and license, with the right to grant and authorize sublicenses, under any patents owned or controlled by MG to make, have made, use, sell, have sold, offer for sale, import and otherwise distribute products and services, for use as Product Use Diagnostics.  Such license shall be limited to the Territory, except that such license shall include the right to make and have made such products and services outside the Territory, for use, import and/or sale as Product Use Diagnostics in the Territory.  As used herein, “Product Use Diagnostics” means [...***...]  The gross invoice price charged by Taiho for products or services sold by Taiho, its Affiliates or Sublicensees as Product Use Diagnostics under the foregoing license, the sale of which would infringe an issued patent of MG licensed under this Section 8.1.2 (“Licensed Product Use Diagnostics”), shall be deemed the gross invoice price of a Product for purposes of calculating “Net Sales” for which royalties will be due hereunder, subject to the deductions set forth in Section 1.25.  To the extent Taiho purchases a Licensed Product Use Diagnostics from a third party, and has rights to commercialize such Licensed Product Use Diagnostic worldwide, and has the right to sell such Licensed Product Use Diagnostic to MG and the Additional Partners, Taiho agrees to sell to MG reasonable quantities of such Licensed Product Use Diagnostics for use in the Field outside the Territory, at the same price at which Taiho purchases the same from such third party, pursuant to a mutually agreed, commercially reasonable supply agreement, and agrees to use reasonable efforts to obtain for MG the right to purchase such Licensed Product Use Diagnostics from such third party, on the same terms as Taiho, provided that it is agreed that failure to obtain such rights shall not be deemed a breach of this Section 8.1.2.

 

8.1.3                     Other HDAC Inhibitors.  MG covenants that it shall not, nor shall it assist, cooperate with, nor grant any rights to any third parties to, research, develop (including conducting clinical trials or filing for regulatory approval), market, sell, import, distribute or otherwise exploit any HDAC Inhibitors or products containing the same, in the Territory for use within the Field, whether or not the same are “Compounds.”

 

8.1.4                     License Fee.  Taiho agrees to pay MG within ten (10) days after the Effective Date, One Million Dollars (US $1,000,000) as a license fee.

 

8.2                               MG’s Retained Rights for Compounds in the Territory.  MG shall retain all of its rights in the Territory for uses outside of the Field of Compounds that are not Selected Compounds, subject to Section 5.2.4.  However, MG shall not, nor shall it assist or cooperate with, nor grant rights to any third party to, research, develop (including conducting clinical trials or filing for regulatory approval), market, sell, import or distribute (a) the Selected Compounds or any products containing Selected Compounds, in the Territory for uses in or outside of the Field or (b) any Compounds, other than the Selected Compounds, for uses within the Field in the Territory.

 

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8.3                               Agreement with Additional Partners and Other Third Parties; Exempt Patent Licensees; Opt-out Non-Cancer Partner.

 

8.3.1                     Coordination with this Agreement

 

(a)                                 Additional Partner.  MG shall ensure that its agreements with licensees of MG with rights in the Field (including Additional Partners) are in compliance with Section 5.2, and requires such third parties to abide by the provisions of this Article 8, as well as Sections 3.4, 13.2, 14.4, 14.5, 15.2, 15.3, and Article 6 hereof (including Sections 20.2.2, 20.4.2, 22.7 and Article 1, as they relate to such provisions), and with respect to patent rights of such third party sublicensed to Taiho hereunder, Sections 17.4.2 and 17.6; provided that this Section 8.3.1(a) shall not apply to Non-Cancer Partners (except as set forth in Section 8.3.1(b) below), Opt-out Non-Cancer Partners or Exempt Patent Licensees.  Without limiting the foregoing, MG shall retain and/or obtain the right from such licensees and third parties to license or sublicense all Compounds to Taiho in accordance with Section 8.1, including without limitation to so exclusively license or sublicense to Taiho in the Territory for the Field all patent rights owned or controlled by such licensee or third party that, in whole or in part, claim or otherwise cover the composition, manufacture, sale or use of Compounds and/or Products and all information, data and materials relating to the development, manufacture, sale or use of Compounds and/or Products.  In addition, MG shall obtain an express covenant from such licensee or third party, that such licensee or third party and its affiliates shall not develop or commercialize, or authorize any third party to develop or commercialize, a Compound or any other HDAC Inhibitor (or a product containing the same) in the Field in the Territory during the term of this Agreement, and shall ensure that such licensee or third party (and any affiliate of such licensee or third party) shall not develop or commercialize any Selected Compounds for any purpose, either inside or outside the Field, in the Territory during the term of this Agreement.  Further, without limitation, MG shall ensure that such licensees and others abide by the provisions of Article 6 and that Taiho is able to gain prompt access to and copies of the Data generated by or under authority of such licensees and other third parties.  It is understood that a failure by MG to ensure such rights, access and copies for Taiho shall be deemed a breach of this Agreement by MG, and if such failure is material, such breach shall be deemed a material breach of this Agreement.  For clarity purposes, the obligation in this Section 8.3.1 requiring third parties operating under authority of MG to abide by Sections 17.4.2, 17.6, 20.2.2, 20.4.2 and 22.7 means that such third party is required to abide by such Sections with respect to the Licensed Patents owned or controlled by such third party(ies), as if such third party(ies) were named in place of “MG” therein (including as a “Party”).

 

(b)                                 Non-Cancer Partner.  With respect to Non-Cancer Partners:

 

(i)                                     MG shall ensure that its agreements with Non-Cancer Partners are in compliance with Sections 5.2 and requires such Non-Cancer Partners abide by Section 6.5.1(b), and MG shall retain and/or obtain the right from Non-Cancer Partners to license or sublicense to Taiho the same rights with respect to patent rights and Research Data (as described in part 1.41B of Exhibit 1.41) owned or controlled by such Non-Cancer Partners, as are granted to Taiho under Article 8 with respect to patent rights and Research Data owned by MG.

 

25

 

(ii)                                  MG shall obtain an express covenant from Non-Cancer Partners, that neither they nor their affiliates shall develop or commercialize, or authorize any third party to develop or commercialize, a Compound or any other HDAC Inhibitor (or a product containing the same) in the Field in the Territory during the term of this Agreement, and shall ensure that Non-Cancer Partners and their affiliates shall not develop or commercialize any Selected Compounds for any purpose, either inside or outside the Field, during the term of this Agreement.

 

(iii)                               It is understood that a failure by MG to ensure such rights, access and copies for Taiho shall be deemed a breach of this Agreement.  It is understood and agreed that MG shall ensure that its agreements with Non-Cancer Partners require such Non-Cancer Partners to abide by Sections 17.4.2, 17.6, 20.2.2, 20.4.2 and Taiho’s right to assign under 22.7, as they relate to the foregoing rights obtained or retained for MG from the Non-Cancer Partners, as if named in place of “MG” therein (including as a “Party”).

 

8.3.2                     Certificate by Additional Partners.  At such time as MG enters into an agreement with an Additional Partner, the Additional Partner shall certify to Taiho in writing that the Additional Partner agrees to comply with those provisions referenced in Section 8.3.1(a) above.  Taiho’s receipt of such certificate shall be a condition to the Additional Partner’s obtaining any rights from MG.  Similarly, upon the request of the Additional Partner, Taiho shall certify to such Additional Partner in writing that Taiho agrees to comply with its obligations to such Additional Partners, under those provisions of this Agreement with which the Additional Partner is required to comply under Section 8.3.1(a) above.  MG agrees not to grant any such rights or enter into an agreement with such Additional Partner, and not to provide any Data to such Additional Partner (directly or indirectly, including by way of cross-referencing for purposes of regulatory filings) unless such Additional Partner provides the certificate set forth in this Section 8.3.2, provided that it is agreed that the foregoing shall not prevent MG from providing Data to a potential Additional Partner, for evaluation purposes only, as part of customary and reasonable due diligence by such potential partner prior to entering into an agreement with such potential Additional Partner, subject to reasonable obligations of confidentiality to MG with respect to such Data.

 

8.3.3                     Exempt Patent Licensees.

 

(a)                                 An “Exempt Patent Licensee” means a third party who (a) is not collaborating with MG, and is not provided or licensed any Licensed Technical Information or Data (nor provided any assistance, services or materials other than the patents and patent applications licensed or contemplated to be licensed by such third party and their file histories) directly or indirectly by MG relating to Compounds, Products, HDAC or HDAC Inhibitors; (b) is granted rights under the Licensed Patents only outside the Field, and such rights in the Territory extend only to Target Claims; and (c) agrees in writing not to research, develop (including conducting clinical trials or filing for regulatory approval), market, sell, import, distribute or otherwise exploit HDAC Inhibitors (and/or products containing the same) in the Field, whether in or outside the Territory.

 

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(b)                                 “Target Claims” means those claims of the Licensed Patents in the Territory that describe the function of inhibiting HDAC but do not include formulae or specifics as to structures or class(es) of structures useful for such function.

 

(c)                                  Exempted Requirements.  Sections 8.3.1 and 8.3.2 shall not apply to Exempt Patent Licensees.  In addition, Exempt Patent Licensees shall be deemed to be not acting “under authority” of MG for purposes of Sections 1.7 (Compounds), 1.21 (Licensed Technology), 1.23 (Manufacturing Data), 1.32 (Preclinical and Clinical Data), 1.41 (Research Data), 3.4 (Global Development Committee) and 10.1 (R&D Event Payments).  Exempt Patent Licensees shall not be deemed an “Additional Partner” for purposes of Section 1.1 nor a “Non-Cancer Partner” for purposes of Section 5.2, but shall be deemed “licensees” of MG for purposes of Sections 17.2.2 (Joint Intellectual Property).

 

8.3.4                     Opt-out Non-Cancer Partners.

 

(a)                                 An “Opt-out Non-Cancer Partner” means a third party who (a) is collaborating with MG with respect to HDAC Inhibitors solely outside the Field and has elected to opt out of participating in the pool of Compounds under this Agreement; (b) is not and has not been granted any rights with respect to Compounds and/or Products in any country, and is not and has not been provided any Data or Licensed Technical Information relating to Compounds and/or Products; and (c) agrees in writing not to research, develop (including conducting clinical trials or filing for regulatory approval), market, sell, import, distribute or otherwise exploit HDAC Inhibitors (and/or products containing the same) in the Field, whether in or outside the Territory.

 

(b)                                 Exempted Requirements.  Sections 8.3.1 and 8.3.2 shall not apply to Opt-out Non-Cancer Partners.  In addition, Opt-out Non-Cancer Partners shall be deemed to be not acting “under authority” of MG for purposes of Sections 1.7 (Compounds), 1.21 (Licensed Technology), 1.23 (Manufacturing Data), 1.32 (Preclinical and Clinical Data), 1.41 (Research Data), 3.4 (Global Development Committee) and 10.1 (R&D Event Payments).  Opt-out Non-Cancer Partners shall not be deemed an “Additional Partner” for purposes of Section 1.1 nor a “Non-Cancer Partner” for purposes of Section 5.2.

 

8.4                               Additional Know-how License.  Each Party grants to the other Party a world-wide perpetual, irrevocable, royalty-free, non-exclusive right and license under any information or data controlled by such Party and disclosed to the other Party hereunder (“Disclosed Know-how”), to use and disclose such information or data for any purposes or uses outside the scope of the collaboration hereunder, subject to the licenses granted under, and provisions of, this Article 8 and Section 6.5 above.  The rights and license granted in this Section 8.4 shall not extend to any patent rights in such Disclosed Know-how.  In addition, notwithstanding the foregoing, neither Party shall have the right to file with a Regulatory Authority any Preclinical and Clinical Data, except with respect to Compounds and Products within the Field as permitted under Sections 6.1, 6.2 and 6.5, nor shall MG have the right to provide any Data within the Disclosed Know-how that it receives from Taiho, except in compliance with Section 6.5 and 8.3 above.

 

27

 

8.5                               Taiho Blocking Patents.  Taiho hereby grants to MG a non-exclusive license, with the right to grant sublicenses (except to Exempt Patent Licensees and Opt-out Non-Cancer Partners), under the Taiho Blocking Patents to research, develop, make, have made, use, sell, have sold, offer for sale, import and otherwise distribute Compounds and Products, in the Field outside the Territory.  Notwithstanding the foregoing, MG shall not sublicense any of its rights under this Section 8.5 to an Additional Partner or any other third party, unless MG has obtained all rights and [...***...] required under Section 8.3 above to be obtained from such Additional Partner or third party.  As used herein, “Taiho Blocking Patents” shall mean [...***...].

 

ARTICLE 9
  RESEARCH AND DEVELOPMENT COLLABORATION FUNDING

 

9.1                               R&D Collaboration Funding by Taiho.  In accordance with Section 9.2 below, Taiho agrees to provide funding for MG’s performance of the following activities under the Plans and Budgets (the total amount of such funding and reimbursement, the “Taiho Budgeted Funds”):

 

9.1.1                     [...***...] FTE’s for Research.  Taiho agrees to fund [...***...] FTE’s of MG at the FTE Rate for the performance of the Research Plan and Budget in accordance with this Agreement, during each of the first two years after the Effective Date.

 

9.1.2                     Approved Pre-clinical Studies.  Subject to this Section 9.1.2, Taiho agrees to reimburse MG for [...***...] percent[...***...] of MG’s costs (including the Costs of Goods of Compounds used therein) for the Approved Preclinical Studies (“Approved Preclinical Costs”) for the Initial Clinical Candidate and certain other Compounds described in Section 9.1.2(c) below, incurred in accordance with the Preclinical Plan and Budget:

 

(a)                                 Additional Partner in North America.  At such time as MG enters into an agreement with an Additional Partner covering North America, Taiho’s obligation to reimburse the Approved Preclinical Costs under this Section 9.1.2 thereafter shall be reduced from [...***...] of such costs to [...***...]percent[...***...] of such costs.  MG shall promptly notify Taiho of such occurrence.

 

(b)                                 Other Additional Partners.  In the event MG enters into an agreement with an Additional Partner (other than of the type described in Section 9.1.2(a) above) or a third party, under which such Additional Partner or third party would provide funding for Preclinical Development of Compound(s) in the Field, Taiho’s [...***...] obligation of funding [...***...], as the case may be, of Approved Preclinical Studies for such Compound(s) under Section 9.1.2(c) below shall be [...***...] by the Additional Partner.  In the event Additional Partner or third party funds the costs of Approved Preclinical Studies, Taiho’s obligation to fund Approved Preclinical Studies shall be [...***...].  If such Additional Partner or third party is reimbursing costs of Approved Preclinical Studies already paid for by Taiho, Taiho shall receive a credit for such reimbursement, usable against any amounts owed by Taiho under this Agreement.  To the extent such credit is not 

 

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used by the end of the Funded Work, MG shall refund to Taiho within thirty (30) days thereafter the unused portion of such credit.

 

(c)                                  Total Funding for Approved Preclinical Studies.  Taiho shall not be obligated to reimburse MG in excess of [...***...]Dollars (US[...***...] in the aggregate with respect to the Initial Clinical Candidate under this Section 9.1.2.  In addition, (i) in the event the JSC terminates or postpones the Approved Preclinical Studies and Approved Clinical Studies with respect to the Initial Clinical Candidate, Taiho shall [...***...] for up to [...***...] Dollars (US $[...***...]) in the aggregate with respect to [...***...], subject to Sections 9.1.2(a) and 9.1.2(b) above; and (ii) at such time as Taiho desires MG to pursue a second generation Selected Compound, Taiho shall reimburse MG for up to [...***...] Dollars (US $[...***...]) in the aggregate with respect to Approved Preclinical Studies on a mutually-agreed second generation Selected Compound, subject to Sections 9.1.2(a) and 9.1.2(b) above.  For the avoidance of doubt, it is understood and agreed that in no event shall Taiho be obligated to reimburse MG in excess of [...***...] Dollars (US $[...***...]) under this Section 9.1.2, totaling the costs of all Approved Preclinical Studies reimbursed by Taiho during the term of this Agreement (and such limit shall reach [...***...] Dollars (US $[...***...]) only in the event both (i) and (ii) above apply).

 

9.1.3                     Territory-Specific Preclinical Studies.  If MG expects to incur material costs over the Approved Preclinical Costs in performing any Territory-Specific Preclinical Studies, MG shall notify Taiho prior to commencing such studies, specifying such costs.  If Taiho still requests MG to perform such studies, then the Parties shall establish a plan and budget for such work in accordance with Section 4.1.3 above, and Taiho agrees to [...***...] to generate the Territory-Specific preclinical data requested by Taiho.

 

9.1.4                     Approved Clinical Studies.  Subject to this Section 9.1.4, Taiho agrees to pay [...***...] percent ([...***...]) of the Reimbursable Clinical Costs of the Approved Clinical Studies that are Phase I and Phase II clinical trials:

 

(a)         Additional Partner in the Field in North America.  At such time as MG enters into an agreement with an Additional Partner in the Field covering North America, Taiho’s obligations to pay for the Approved Clinical Studies under this Section 9.1.4 shall thereafter terminate.  MG shall promptly notify Taiho of such occurrence.  It is understood, as used in this Section 9.1.4(a) and Section 9.1.2(a) above, that an agreement shall be deemed to “cover” North America, if it includes a right to market or commercialize a Product in North America, including an option to acquire such right as defined in Section 1.1 (but excluding rights described in Sections 1.1(a) and (b)).

 

(b)                                 Other Additional Partners.  In the event (i) MG enters into an agreement with an Additional Partner, other than of the type described in Section 9.1.4(a) above, under which such Additional Partner would provide funding for Approved Clinical Studies or (ii) MG is reimbursed for any costs of Approved Clinical Studies by any third party, Taiho’s 

 

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obligations thereafter to pay for the Approved Clinical Studies under this Section 9.1.4 shall be reduced by the amount to be so funded or reimbursed by the Additional Partner or third party.  In the event MG is reimbursed by an Additional Partner or third party for costs of Approved Clinical Studies which have been paid for by Taiho, Taiho shall receive a credit for such costs, usable against any amounts owed by Taiho under this Agreement.  To the extent such credit is not used by the end of the Funded Work, MG shall refund to Taiho within thirty (30) days thereafter the unused portion of such credit.

 

(c)                                  Total Funding for Approved Clinical Studies.  Notwithstanding anything to the contrary in this Section 9.1.4, Taiho shall not be obligated to pay MG: (i) in excess of [...***...] Dollars (US $[...***...]), totaling the Reimbursable Clinical Costs of all Approved Clinical Studies (including those described in (ii) below) funded by Taiho under this Section 9.1.4 over the term of this Agreement; nor (ii) in excess of [...***...] Dollars (US $[...***...]), totaling the Reimbursable Clinical Costs of all Approved Clinical Studies that are Phase I clinical trials, funded by Taiho under this Section 9.1.4 over the term of this Agreement.

 

9.1.5                     Budgets.  Notwithstanding anything to the contrary in this Article 9, Taiho shall not be obligated to fund or reimburse MG with respect to any category(ies) of Taiho Budgeted Funds (including via FTE’s) in excess of the budgeted amounts for the respective category (or in the case of FTE’s, the budgeted number of MG FTE’s for the category), as set forth in the Plans and Budgets in effect at the time.  In addition, MG shall ensure that [...***...] percent ([...***...]%) of Taiho’s funding of the cost of MG personnel for Research, including without limitation the MG FTE’s funded under Section 9.1.1 above shall be for personnel with [...***...].  It is understood that the qualifications for the MG FTEs performing Approved Preclinical Studies and Approved Clinical Studies shall be as reasonably approved by the JSC.

 

9.2                               Timing of the Funding.

 

9.2.1                     Research FTE Funding.  Within thirty (30) days prior to the beginning of each calendar quarter during the Research Term, MG shall invoice Taiho for the number of MG FTE’s who will be performing Research in such calendar quarter, as specified in the Research Plan and Budget.  In the event the Research Plan and Budget does not specify the number of MG FTE’s by quarter, then the [...***...] MG FTE’s specified for each year of the Research Term shall be deemed divided equally among each quarter in such year.  Taiho shall pay such invoice within thirty (30) days after receipt thereof, up to the total number of FTEs set forth in Section 9.1.1 above.

 

9.2.2                     Approved Preclinical and Clinical Studies.  Within thirty (30) days following the end of each calendar month in which Approved Preclinical Studies or Approved Clinical Studies was performed, MG shall provide Taiho a detailed invoice for the amount of Taiho Budgeted Funds actually incurred by MG during such calendar month for such Studies, classified by using the same categories as used in the Plans and Budgets.  Within thirty (30) days after receiving such invoice, Taiho shall pay MG the amount of Taiho Budgeted Funds for the costs of such studies actually incurred by MG in such month and owed under Section 9.1 above.

 

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9.3                               Performance of Funded Work.  MG agrees to perform Funded Work in a professional, quality and cost-effective manner, in close consultation with Taiho, and in accordance with all applicable laws and regulations in North America.  In addition, MG shall keep Taiho fully informed on a timely basis as to the Funded Work, and shall follow any reasonable suggestions by Taiho with respect thereto.

 

9.4                               Recoupable Costs.  As used herein, the “Recoupable Costs” of a Product(s) shall mean the Reimbursable Clinical Costs with respect to such Product(s) actually paid by Taiho under Section 9.1.4 (less any amounts repaid to Taiho under Section 9.1.4(b) above).  Taiho shall be entitled to recoup its Recoupable Costs using one or both of the methods set forth in this Section 9.4 below:

 

9.4.1                     Credit Against Royalties.  Subject to Section 9.4.3 below, Taiho shall be entitled to credit the Recoupable Costs against royalties owed under Article 11, provided that the Base Royalties shall not be so reduced under any circumstances, in any reporting period, to (a) less than [...***...] of Net Sales of Product(s) sold in the Territory by Taiho, its Affiliates and Sublicensees, with respect to Product(s) for which Section 11.2.2 does not apply, and (b) less than [...***...] of Net Sales of such Product(s) sold in the Territory by Taiho, its Affiliates and Sublicensees, with respect to Product(s) for which Section 11.2.2 applies.  Any amounts not able to be credited due to the foregoing proviso may be carried forward to [...***...].  As used herein, “Base Royalties” shall mean the royalties payable or reimbursed to MG calculated in accordance with Article 11, less any credits applied under this Section 9.4.1 and Section 17.4.3.  The calculation of Base Royalties shall include the effect of Section 11.2.1 as follows: royalties paid by MG (whether via a deduction by Taiho or a payment directly by MG) to a [...***...] with respect to [...***...] acquired by [...***...] shall be treated as a [...***...] of the Base Royalties; likewise, [...***...] paid by [...***...] to a third party with respect to [...***...] acquired by MG shall [...***...] on Base Royalties.  In addition, for the avoidance of doubt, the calculation of Base Royalties shall exclude the effect of any [...***...] accruing under Sections 9.1.2(b) and 9.1.4(b) which are applied by Taiho, and any adjustments to royalties hereunder under Sections 11.3 and 12.4.

 

9.4.2                     License Proceeds.

 

(a)                                 Subject to Section 9.4.3 below, in the event MG enters into an agreement with an Additional Partner covering rights to North America with respect to Compound(s) or Product(s), MG shall pay Taiho [...***...] percent ([...***...]%) of any payments received by MG in connection with the grant of rights to such Additional Partner with respect to such Compound(s) or Product(s), excluding any amounts received by MG as contemporaneous reimbursement (or payment in advance) for ongoing research and/or development expenses incurred by MG after such grant. MG shall pay Taiho such fifteen percent (15%) owed to Taiho, within thirty (30) days after receiving each respective payment, or the occurrence of Section 9.4.2(b)(ii) below, whichever is later.  In addition, MG shall promptly disclose to Taiho for its information a copy of all

 

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agreement(s) entered into with such Additional Partner(s); provided that MG may redact from such agreement provisions that are not relevant to determining compliance with this Section 9.4.2.

 

(b)                                 Notwithstanding the foregoing, in the event MG enters into such agreement with such Additional Partner prior to the initiation of [...***...], and MG and/or such Additional Partner funds the out-of-pocket costs of Phase I and/or Phase II clinical studies of the Product that was the subject of the Approved Clinical Studies at the time MG entered into such agreement (or such Additional Partner takes over out-of-pocket costs that had been budgeted in good faith to be incurred by MG in the course of performing such studies without the Additional Partner) in an amount exceeding [...***...] Dollars (US $[...***...]), provided that such [...***...] of expenses are incurred after entry into such agreement and prior to (i) Taiho’s funding more than [...***...] Dollars (US $[...***...]) of the Reimburseable Clinical Costs under Section 9.1.4 above and prior to (ii) the [...***...] for Compound(s) and/or Product(s), then this Section 9.4.2 shall not be applicable to amounts received from such Additional Partner under such agreement.

 

9.4.3                     Total Recoupment.  It is understood and agreed that the cumulative total amounts credited by Taiho under Section 9.4.1 and paid by MG under Section 9.4.2 shall not exceed [...***...] Dollars (US $[...***...]) and shall not in any event exceed the total Recoupable Costs.

 

9.5                               Preclinical Development Prior to the Effective Date.  Taiho agrees to pay MG [...***...] within ten (10) days after the Effective Date as reimbursement for MG’s costs of performing certain Preclinical Development activities with respect to the Initial Clinical Candidate in the Field prior to the Effective Date, as described in Exhibit 9.5, provided that supporting invoices for such costs have been received by Taiho.  It is understood and agreed that all such activities shall be deemed included within the Approved Preclinical Studies for the Initial Clinical Candidate and the Funded Work and performed under the Plans and Budgets, and the amounts paid under this Section 9.5 by Taiho shall be counted as part of the $1,500,000 maximum costs of the Approved Preclinical Studies for the Initial Clinical Candidate under Section 9.1.2(c) above.

 

9.6                               Reimbursement for Non-Cancer Compound Royalty.  As used herein, a “Non-Cancer Compound” shall mean a New Compound, the manufacture, use, or sale of which would infringe Non-Cancer Partner IP but not Joint Intellectual Property or Pre-existing IP.  “Non-Cancer Partner IP” means Valid Claims within the Licensed Patents, to the extent such Valid Claims consist of inventions made solely in the course of performing Non-Cancer HDAC Research under a material collaboration agreement with a Non-Cancer Partner.  “Pre-existing IP” means Valid Claims within the Licensed Patents that are owned or controlled by MG or its Affiliates prior to the Effective Date.  Taiho shall reimburse MG for the royalties owed by MG to the respective Non-Cancer Partner on the Net Sales of Products containing Non-Cancer Compounds by Taiho, its Affiliates or Sublicensees, up to a [...***...] percent ([...***...]%) of such Net Sales.  It is understood and agreed that amounts paid with respect to the Non-Cancer Partner IP shall not be subject to Section 11.2 below.

 

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ARTICLE 10
  R&D EVENTS AND COMMERCIALIZATION MILESTONES

 

10.1                        R&D Event Payments.  As reimbursement for past and future expenses with respect to the development of Compounds and/or Products, Taiho agrees to pay MG upon the occurrence of each of the following “R&D Events” (numbers 1 through 6) with respect to a Product in accordance with this Section 10.1.

 

	
R&D EVENTS 1 TO 6
    	
 
    	
PAYMENT
    	
 
    
	
[...***...]
    	
 
    	
US   $
    	
[...***...]
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
[...***...]
    	
 
    	
US   $
    	
[...***...]
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
[...***...]
    	
 
    	
US   $
    	
[...***...]
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
[...***...]
    	
 
    	
US   $
    	
[...***...]
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
[...***...]
    	
 
    	
US   $
    	
[...***...]
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
[...***...]
    	
 
    	
US   $
    	
[...***...]
    	
 
    

 

10.1.1              Timing and Amount of the R&D Event Payments.  The payment (if applicable) for each R&D Event shall be due within thirty (30) days after such R&D Event is achieved, subject to Section 10.1.6.  The amount due for each R&D Event shall be the corresponding 

 

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amounts set forth in the tables of this Section 10.1, subject to all applicable adjustments set forth in this Section 10.1.

 

10.1.2              Certain Reductions Based on Tumor Type and Treatment Type

 

(a)                                 In the event the Marketing Approval triggering R&D Event 5 is obtained for the treatment of a [...***...], or a treatment [...***...], then the payment otherwise due for R&D Event 5 (after other adjustments) shall be reduced by [...***...]%.

 

 

(b)                                 In the event the Marketing Approval triggering R&D Event 6 is obtained for the treatment of a [...***...], or a treatment [...***...], then the payment otherwise due for R&D Event 6 (after other adjustments) shall be reduced by [...***...]%.

 

(c)                                  In the event both Sections 10.1.2(a) and 10.1.2(b) above are applicable with respect to a Product that triggers a payment under this Section 10.1, and only in such event, then Taiho shall pay MG for the following additional “R&D Events” (numbers 7 and 8):

 

	
R&D EVENTS 7 AND 8
    	
 
    	
PAYMENT
    	
 
    
	
[...***...]
    	
 
    	
US   $
    	
[...***...]
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
[...***...]
    	
 
    	
US   $
    	
[...***...]
    	
 
    

 

10.1.3              Certain Reductions if no Bridging Studies.  In the event Taiho is required to conduct additional clinical studies in Japan beyond the Bridging Study to establish the safety and/or efficacy of a Product to obtain or to maintain Marketing Approval in Japan (even if required to be conducted after obtaining such Marketing Approval), then the payments (if any) otherwise due for R&D Events [...***...] and [...***...] (after other adjustments) with respect to such Product shall be reduced by [...***...] percent ([...***...]%).  It is understood and agreed that Taiho shall have the right, in its sole judgment, to determine whether such additional clinical studies would be “required” and if Taiho so determines, then such additional studies shall be deemed to have been required for purposes of this Section 10.1.3.

 

10.1.4              Certain Definitions Relating to the R&D Event Payments

 

(a)                                 “Back-up Compound” shall mean the first Compound other than the Initial Clinical Candidate selected by the JSC under Section 5.2.2 above for the conduct of Approved Preclinical Studies, and for which a Preclinical Plan and Budget is approved under Section 4.2 above.

 

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(b)                                 “Bridging Study” shall mean [...***...]  It is understood that a Bridging Study shall not include [...***...].

 

(c)                                  “Small Market Tumors” shall mean [...***...].

 

(d)                                 “Large Market Tumors” shall mean [...***...].  In the event the market size in the Territory for Products directed to [...***...]becomes as large as the market size in the Territory for Products directed to the Large Market Tumors, Taiho and MG will discuss adding [...***...] as a Large Market Tumor.  Notwithstanding, [...***...]shall not be included as a Large Market Tumor unless, and until, the Parties agree in writing to add prostate cancer as a Large Market Tumor.

 

(e)                                  “Combination Therapy” shall mean that the approved label for the Products specifies that the tumor is treated (or recommended to be treated) using a combination of the Compound with one or more other drug(s) or active ingredient(s) that are related to the treatment of cancer but are not Compound(s).  For clarity, it is understood that if the approved labeling for the Product specifies use as a single agent (i.e. not in such combination), the fact that physicians actually use the Product in combination will not caused such Product to be deemed a “Combination Therapy.”  In the event the market size for a specific Product marketed as a Combination Therapy for a specific tumor is as large as a market for Products marketed as a single-agent therapy for such tumor, then the Parties will discuss elimination of the [...***...] percent ([...***...]%) reduction set forth in Section 10.1.2 with respect to such specific Product and such tumor. Notwithstanding, the [...***...] percent ([...***...]%) reductions set forth in Section 10.1.2 shall continue to apply, unless and until, the Parties agree in writing on a change thereto.

 

10.1.5              Notice and Provision of Data

 

(a)                                 MG shall promptly notify Taiho upon the submission of each IND in North America with respect to Products in the Field by or under authority of MG, and upon commencement of each Phase I, Phase II and Phase III clinical trial with respect to the Products in the Field by or under authority of MG.

 

(b)                                 Payment for R&D Events [...***...] through [...***...] shall be conditioned upon Taiho having received a copy of all Data, including without limitation all Research Data, Preclinical and Clinical Data and Manufacturing Data, existing as of the date such R&D Events are 

 

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triggered, whether generated in or outside of the collaboration hereunder.  This paragraph shall not be deemed to limit Section 8.3 above.

 

(c)                                  With respect to R&D Events [...***...] through [...***...], in the event the Product and indication triggering such R&D Events (“[...***...] Product” and “[...***...] Indication,” respectively) is not a Product and/or indication that Taiho is then developing in Japan, Taiho may elect not to pay for the achievement of such R&D Event by such Product for such indication.  If Taiho so elects, then Taiho shall have no further access to the Data for such [...***...] Product with respect to the [...***...] Indication (but not including Data that is reasonably necessary for a Product and indication that Taiho is developing) (the “[...***...] Product Data”).  Thereafter, in the event Taiho desires to develop such US Product for the US Indication or desires access to such [...***...] Product Data, Taiho may notify MG and pay MG for the skipped R&D Events with respect to such [...***...] Product for the [...***...] Indication, in an amount equal to [...***...] the amount that would have been owed for each such skipped R&D Event under this Article 10 had Taiho not elected to skip such R&D Events.  Upon such notice and payment, Taiho shall have full access to, copies of and use of any and all [...***...] Product Data therefor.  For purposes of clarity, a “skipped” R&D Event shall mean only those R&D Events [...***...] through [...***...] which are otherwise payable under this Article 10 at the time Taiho elected to skip such R&D Event, and for which Taiho elected under this Section 10.1.5(c) not to pay, and provided Taiho did not subsequently pay for such R&D Event with respect to another Product as part of the same Set of R&D Event Payments.  In the event Taiho subsequently paid for such R&D Event with respect to another Product as part of the same Set of R&D Event Payments, then such R&D Event shall not be deemed a “skipped” R&D Event, and Taiho shall be entitled to receive all Data with respect to all [...***...] Products so skipped.  In such event, Taiho may owe a R&D Event payment with respect to such [...***...] Products as part of a subsequent Set of R&D Event Payments in accordance with Section 10.1.6 below, but the [...***...] set forth in this Section 10.1.5(c) shall not apply thereto.  In addition, it is understood that the [...***...] amounts paid due to the [...***...] set forth in this Section 10.1.5(c) (i.e. the [...***...]) shall [...***...] under Section 10.2 below.   Notwithstanding the foregoing, this Section 10.1.5 shall not apply to R&D Events [...***...] and [...***...] that are met under the Approved Clinical Studies or by the Initial Clinical Candidate.

 

10.1.6              Multiple Sets of R&D Event Payments.  Until R&D Event [...***...] is first achieved [...***...], each R&D Event shall be paid for only once, regardless of the number of times such R&D Event is achieved.  The amount of such payment shall be determined by the first Product to achieve and trigger payment on such R&D Event (i.e. any adjustment that applies to such first Product shall apply to the payment).  Thereafter, the R&D Events shall be paid for in sets, as described below.  Each set of payments for R&D Events under this Section 10.1.6 shall be referred to as a “Set of R&D Event Payments.”  For purposes of explanation, the effect of the provisions of this Section 10.1.6 is to ensure that, even if the R&D Events are not achieved serially with respect to a single Product at a time, each R&D Event is not paid for more than [...***...] until there is one Approved Product, and thereafter not more than a total of [...***...] (as [...***...] Sets of R&D Event Payments) until there are [...***...] Approved Products, and thereafter not more than a total of [...***...] times each (as three Sets of R&D Event Payments) until there are [...***...] Approved Products, and so on.

 

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(a)                                 The first Set of R&D Event Payments shall mean only payments for the first achievement of each of R&D Events [...***...] through [...***...] prior to [...***...].  In the event R&D Events [...***...],[...***...] and [...***...] are achieved thereafter, they shall be paid for in the first Set of R&D Event Payments only if they are triggered by the same Product that triggered [...***...].  The achievement of all other R&D Events, if triggering a payment obligation, shall be paid for in a subsequent Set of R&D Event Payments.

 

(b)                                 Each Set of R&D Event Payments after the first set (e.g. the second set, the third set, etc.) shall become payable, if ever, only upon the triggering of payment of R&D Event [...***...] within the immediately previous Set of R&D Event Payments.  With respect to each Set of R&D Event Payments, the Product triggering payment of R&D Event [...***...] therein shall be referred to as the “Approved Product” for such Set of R&D Event Payments.  In the event R&D Events [...***...],[...***...] and [...***...] are thereafter achieved with respect to a Product, such R&D Events shall be deemed part of that previous Set of R&D Event Payments for which the Approved Product is the same as such Product.

 

(c)                                  The second (and any subsequent) Sets of R&D Event Payments shall not include R&D Event [...***...] (i.e. R&D Event [...***...] can only be achieved and become payable as part of the first Set of R&D Event Payments).  In addition, with respect to the second (and any subsequent) Sets of R&D Event Payments, the following adjustments shall apply: (i) the payments for R&D Events [...***...] and [...***...] therein shall not be due unless and until R&D Event 4 therein is triggered, and (ii) the payments for all R&D Events within the second (and any subsequent) Sets of R&D Event Payments shall be reduced by [...***...] percent ([...***...]%) in addition to any applicable reductions set forth in Sections 10.1.2, 10.1.3, 10.1.4 and 10.1.5 above.

 

(d)                                 Within each Set of R&D Event Payments (whether the first set or any subsequent set), each R&D Event shall be paid for at most once, regardless of the number of times such R&D Event is achieved.  Payment for each R&D Event within a Set of R&D Event Payments shall be triggered upon its [...***...] achievement at any time by a Product that contains a Compound that was not present in any of the Products that triggered payment for the same R&D Event in the previous Sets of R&D Event Payments.  For the avoidance of doubt, in the event such [...***...] achievement of an R&D Event within a Set of R&D Event Payments occurred prior to the time such Set of R&D Event Payments becomes payable, the payment for such R&D Event shall be made at the time such Set of R&D Event Payments becomes payable, if ever.

 

10.1.7              Certain Reductions if New Compound.  With respect to the [...***...] Set of R&D Event Payments, in the event the Product triggering payment on the R&D Events therein contains a New Compound as an active ingredient, then the payments due for such R&D Events shall be reduced by [...***...] percent ([...***...]%) respectively.

 

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10.2                        Commercialization Milestones.

 

10.2.1              First Approved Product.

 

(a)                                 In the case where the First Approved Product does not contain a New Compound, to the extent the payments made by Taiho for the first Set of R&D Event Payments total less than [...***...] Dollars (US $[...***...]) in the aggregate, Taiho agrees to pay a set of commercialization milestones with respect to such First Approved Product, based on the cumulative sales thereof until the total payments to MG under this Section 10.2 with respect to such First Approved Product and the first Set of R&D Event Payments equal [...***...] Dollars (US $[...***...]), as follows.

 

	
COMMERCIALIZATION MILESTONES 
    	
 
    	
PAYMENT
    	
 
    
	
a.   Cumulative Net Sales of such Approved Product in the Territory first   exceeding [...***...] Dollars (US $[...***...])
    	
 
    	
US   $
    	
[...***...]
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
b.   Cumulative Net Sales of such Approved Product in the Territory first   exceeding [...***...] Dollars (US $[...***...])
    	
 
    	
US   $
    	
[...***...]
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
c.   Cumulative Net Sales of such Approved Product in the Territory first   exceeding [...***...] Dollars (US $[...***...])
    	
 
    	
US   $
    	
[...***...]
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
d.  Each time thereafter such Cumulative Net   Sales of the Approved Product in the Territory first exceeds the next [...***...]   Dollars (US $[...***...]) increment
    	
 
    	
US   $
    	
[...***...]
    	
 
    

 

(b)                                 In the case where the First Approved Product contains a [...***...], to the extent the payments made by Taiho for the first Set of R&D Event Payments total less than [...***...] Dollars (US $[...***...]) in the aggregate, Taiho agrees to pay commercialization milestones “a,” “b,” “c,” and “d” above at the time such First Approved Product achieves the corresponding Cumulative Net Sales until the total payments to MG under this Section 10.2 with respect to such First Approved Product and the [...***...] Set of R&D Event Payments equal [...***...] Dollars (US $[...***...]); provided that the amount of each such payment shall be reduced by [...***...] percent ([...***...]%) (i.e., each such payment shall equal US $[...***...] rather than US $[...***...]).

 

10.2.2              Subsequent Approved Products.  With respect to Approved Products other than the First Approved Product (each, a “Subsequent Approved Product”), regardless of whether such Product contains a [...***...], to the extent the payments made by Taiho for the Set of R&D Event Payments corresponding to such Subsequent Approved Product total less than 

 

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[...***...] Dollars (US $[...***...]), Taiho agrees to pay the commercialization milestones “a”, “b,” “c” and “d” above at the time such Subsequent Approved Product achieves the corresponding Cumulative Net Sales until the total payments to MG under this Section 10.2 with respect to each such Subsequent Approved Product and its corresponding Set of R&D Event Payments equal [...***...] Dollars (US $[...***...]), provided that the amount of each such payment shall be reduced by [...***...] percent ([...***...]%) (i.e., such payments shall each equal US $[...***...] rather than US $[...***...]).

 

10.2.3              Certain Terms

 

(a)                                 “Cumulative Net Sales” shall mean the cumulative total Net Sales of the respective Approved Product in the Territory by Taiho, its Affiliates and Sublicensees over the entire Royalty Term.

 

(b)                                 Subject to Section 10.2.3 below, Taiho shall pay the amount set forth in the table above with respect to an Approved Product within thirty (30) days after the occurrence of the Cumulative Net Sales thereof first exceeding the respective threshold set forth in the table above.

 

(c)                                  It is understood and agreed that the total amounts paid by Taiho with respect to each Set of R&D Event Payments plus the total amounts paid by Taiho in commercialization milestones for the Approved Product therein shall not exceed (i) [...***...] Dollars (US $[...***...]) in the aggregate in the case of the First Approved Product, where such First Approved Product does not contain a [...***...]; (ii) [...***...] Dollars (US $[...***...]) in the aggregate in the case of the First Approved Product, where such First Approved Product contains a [...***...]; and (iii) [...***...] Dollars (US $[...***...]) in the aggregate in the case of each Subsequent Approved Product, regardless of whether or not such Subsequent Approved Product contains a [...***...].

 

10.3                        [...***...].

 

10.3.1              Payment upon Marketing Approval in [...***...]. Within thirty (30) days after Taiho obtains the first Marketing Approval with respect to the first Product for the first indication in [...***...], Taiho agrees to pay MG [...***...] Dollars (US $[...***...]), provided that such Product contains a Compound the composition of which is covered by a Valid Claim of Licensed Patents in [...***...] or of patent rights owned by Taiho in [...***...].  Such payment shall not be subject to any of the adjustments set forth in Section 10.1.

 

10.3.2              Payment upon Marketing Approval in [...***...].  In the event R&D Event [...***...] becomes payable with respect to an Approved Product containing a Compound, the composition of which is covered by a Valid Claim of Licensed Patents in [...***...] or of patent rights owned by Taiho in [...***...], Taiho agrees to pay MG an additional [...***...] Dollars (US $[...***...]).  Such payment shall not be subject to any of the adjustments set forth in Section 10.1, except for the adjustment set forth in Section 10.1.6(c)(ii) if the triggering R&D Event [...***...] occurred in the second or any subsequent Sets of R&D Event Payments.  It is understood and agreed that any payment under

 

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this Section 10.3.2 shall [...***...] set forth in Section 10.2 above.

 

10.3.3              Parallel Imports.  Taiho agrees to use diligent efforts to prevent Products sold by Taiho or its Sublicensees for use in [...***...] from being resold or distributed outside the Territory.

 

ARTICLE 11
  ROYALTIES

 

11.1                        Payment of Royalties during the Royalty Term.  In consideration of the licenses granted to Taiho in Section 8.1 above, beginning with the first commercial sale of Products in a country of the Territory, Taiho shall pay MG a running royalty on the Net Sales of Products sold in such country by Taiho, its Affiliates and Sublicensees during the Royalty Term for such Product in such country, calculated in accordance with this Article 11 and paid in accordance with Article 12 below.  The applicable royalty rate shall be as set forth in the table below (subject to any applicable adjustments set forth in this Article 11 below) based on Annual Net Sales of such Product in the Territory.  As used herein, “Annual Net Sales” shall mean, with respect to a Product and a calendar year, the Net Sales of such Product sold in the Territory by Taiho, its Affiliates and Sublicensees during such calendar year during the applicable Royalty Term.

 

	
NET SALES
    	
 
    	
ROYALTY PERCENTAGE
    	
 
    
	
With   respect to that portion of Annual Net Sales of such Product less than or   equal to US $[...***...] Dollars (US $[...***...])
    	
 
    	
[...***...]
    	
%
    
	
 
    	
 
    	
 
    	
 
    
	
With   respect to that portion of Annual Net Sales of such Product, greater than US   $[...***...] Dollars (US $[...***...]) and less than or equal to US $[...***...] Dollars   (US $[...***...])
    	
 
    	
[...***...]
    	
%
    
	
 
    	
 
    	
 
    	
 
    
	
With   respect to that portion of Annual Net Sales of such Product, greater than US   $[...***...] Dollars (US $[...***...]) and less than or equal to US $[...***...] Dollars   (US $[...***...])
    	
 
    	
[...***...]
    	
%
    
	
 
    	
 
    	
 
    	
 
    
	
With   respect to that portion of Annual Net Sales of such Product, greater than US   $[...***...] Dollars (US $[...***...])
    	
 
    	
[...***...]
    	
%
    

 

11.1.1              Initial Clinical Candidate not First Approved.  In the event the First Approved Product does not contain the Initial Clinical Candidate, and Marketing Approval is obtained hereunder with respect to one or more Products containing [...***...], the applicable royalty percentage shall be reduced by [...***...] percent ([...***...]%) (i.e. multiplied by [...***...]) with respect to such Products containing [...***...].

 

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11.1.2              Initial Clinical Candidate First Approved.  In the event the First Approved Product contains the Initial Clinical Candidate, then the applicable royalty percentage shall be (a) decreased by [...***...] ([...***...]%) (i.e. subtract [...***...]%) with respect to all subsequent Products not containing a [...***...] and (b) reduced by [...***...] percent ([...***...]%) (i.e. multiplied by [...***...]) with respect to all subsequent Products containing [...***...].

 

11.2                        Third Party Royalties.

 

11.2.1              Sharing.  In the event Taiho, its Affiliates or Sublicensees pays royalties on their sales of Products in the Field in the Territory, which are in consideration for patent rights, trade secrets or other intellectual property or technology obtained from a non-Affiliate third party (“Third Party IP”), or in the event MG owes royalties to a Non-Affiliate third party who is neither an Additional Partner nor a Non-Cancer Partner on such sales of Products by Taiho, its Affiliates or Sublicensees in the Field in the Territory in consideration for Third Party IP acquired after the Effective Date covering such Products within the Licensed Technology (other than those Third Party IP required to be obtained by MG under Section 8.3), the Parties shall [...***...] in the payment of such royalties.  Each Party shall promptly notify the other Party of any applicable Third Party IP and the method of calculating royalties owed thereunder to the respective third party.  MG agrees not to incorporate into any Product being developed under this Agreement any Third Party IP, which MG has in-licensed or of which MG is otherwise aware, without Taiho’s prior written approval.  If after the Effective Date, MG acquires from a third party any Third Party IP within the Licensed Technology that is subject to a royalty to such third party which Taiho would be required to reimburse under this Section 11.2.1, then MG shall promptly notify Taiho, specifying the applicable royalty rate and the method of calculation.  Taiho may elect upon written notice at any time to exclude such Third Party IP from the Licensed Technology, and upon such notice, Taiho shall thereafter not be licensed under Section 8.1 with respect to such Third Party IP (“Excluded Third Party IP”) and shall not be obligated to share in the payment of royalties therefor under this Section 11.2.1.  The Parties shall discuss from time to time at the JSC whether any Third Party IP is necessary or desirable to obtain with respect to the Compounds and/or Products in the Field.

 

11.2.2              Adjustment to Running Royalty.  In addition to Section 11.2.1, in the event Taiho, its Affiliates or its Sublicensee pays (or reimburses MG for) third party royalties on the sales of a Product(s) in the Territory in consideration for Third Party IP under Section 11.2.1 above, the royalties payable under this Article 11 (after any adjustments under Sections 11.1.1 and 11.1.2) shall be: (i) decreased by the amount of Taiho’s share of such royalties, up to [...***...] percentage points ([...***...]%) (i.e. subtract up to [...***...]%), in case the Product does not contain a [...***...], or (ii) decreased by the amount of Taiho’s share of such royalties, up to [...***...] percentage point ([...***...]%) (i.e. subtract up to [...***...]%), in case the Product contains a [...***...].

 

11.3                        Combination Products.  In the event that a Product is sold for a single combined price in combination with other products, components (including active ingredients) or services for which no amounts would be payable to the other Party hereto if sold separately, amounts invoiced for such combination sales for purposes of calculating Net Sales on the sales of the Product in such combination shall be reasonably allocated between such amounts attributable for Product and amounts in consideration for such other products, components or services by the Party under whose 

 

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authority such sale was made.  Such allocation shall be based on the relative value(s) of such Product and of such other products, components or services, but in no event shall the Net Sales of the Product in such combination be less than the average arms-length price of such Product, if being sold separately.

 

11.4                        Generic Competition.

 

11.4.1              Generic Competition Defined.  “Generic Competition” shall occur when a product (a “Generic Version”) that contains the same Compound as an active ingredient as in a Product sold in the Field in any country within the Territory by Taiho, its Affiliates or Sublicensees (“Taiho Product”), is sold in such country in the Territory by a third party who is not under authority of Taiho, its Affiliates or Sublicensees, during a period of time within the Royalty Term when the Taiho Product does not have, or loses its marketing exclusivity in such country (whether due to failure to obtain patent protection, or expiration, invalidity of enforceability of Licensed Patents covering the Taiho Product in such country, loss or expiration of any marketing exclusivity conferred by the Regulatory Authority in such country or other cause).  The foregoing adjustment shall not apply, however, by reason of sale of a Generic Version that is used solely outside the Field, provided the introduction and sale of such Generic Version does not result in a lower price for the Product hereunder.

 

11.4.2              Adjustment to Royalties.  In the event of Generic Competition occurs with respect to a Taiho Product in any country in the Territory, the royalties payable thereafter under this Article 11 with respect to such Taiho Product sold in such country (after any adjustments under Sections 11.1.1, 11.1.2 and 11.2.2) shall be reduced by [...***...] percent ([...***...] %).  Notwithstanding the foregoing, this Section 11.4.2 shall not apply to Net Sales of Taiho Products in [...***...].

 

ARTICLE 12
  PAYMENTS; BOOKS AND RECORDS

 

12.1                        Quarterly Royalty Reports.  Commencing on the first commercial sale of Products in the Territory, Taiho shall make quarterly reports to MG within [...***...] days after the end of each calendar quarter, which reports shall include, in reasonable detail, a calculation of any Net Sales in such quarter and an itemization of any deductions or adjustments applicable to such Net Sales by the categories set forth in Section 1.25.  Concurrently with making such report, Taiho shall remit payment to MG for any royalty due under Article 11 above.

 

12.2                        Payment Method.  All payments under this Agreement shall be made by bank wire transfer in immediately available funds to an account designated by the payee.  All dollar amounts specified in this Agreement, and all payments made hereunder, are and shall be made in U.S. dollars.  Any payments due under this Agreement which are not paid by the date such payments are due under this Agreement shall bear interest to the extent permitted by applicable law at the U.S. prime rate per annum quoted by the Wall Street Journal (U.S., Eastern Edition), or its successor, on the first business day after such payment is due, plus an additional two percentage points (2%), calculated on the number of days such payment is delinquent.  This Section 12.2 shall in no way limit any other remedies available to either Party.

 

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12.3                        Currency Conversion.  If any currency conversion shall be required in connection with the calculation of amounts payable hereunder, such conversion shall be made using the TTS (Telegraphic Transfer Selling) rate for conversion of the foreign currency into U.S. dollars, quoted for current transactions reported by Bank of Tokyo-Mitsubishi, or its successor, for the last business day of the calendar quarter to which such payment pertains.

 

12.4                        Taxes.  Each Party shall bear and, except as otherwise expressly provided in this Section 12.4, pay any and all taxes, duties, levies, and other similar charges (and any related interest and penalties), however designated, imposed on that Party as a result of the existence or operation of this Agreement.  If in the paying Party’s judgment, laws or regulations require that taxes be withheld, the paying Party will (i) deduct those taxes from the remittable payment, (ii) timely pay the taxes to the proper taxing authority, and (iii) send proof of payment to the other Party within sixty (60) days following that payment.  It is understood that if the paying Party believes there is a likelihood that taxes must be withheld, then it may do so and shall not be deemed in breach of this Agreement by reason of such withholding.

 

12.5                        Records; Inspection.

 

12.5.1              General.  Each Party and its Affiliates shall keep complete, true and accurate books of accounts and records for the purpose of determining payments due pursuant to this Agreement.  Such books and records shall be kept for at least [...***...] years following the end of the calendar quarter to which they pertain.  Such records will be open, for such [...***...] year period, for inspection at the principal place of business of such Party or its Affiliates, as the case may be, (“Audited Party”) during such three (3) year period by an independent auditor chosen by the other Party (“Auditing Party”) and reasonably acceptable to the Audited Party for the purpose of verifying the amounts payable by Audited Party hereunder.  All such inspections may be made no more than once each calendar year, at reasonable times and on reasonable notice.  The independent auditor shall be obligated to execute a reasonable confidentiality agreement prior to commencing any such inspection.

 

12.5.2              Sublicensees.  Taiho shall either: (a) require each of its Sublicensees to maintain similar books and records and to open such records for inspection to an independent auditor chosen by MG and reasonably acceptable to such Sublicensee in the manner paralleling that set forth in Section 12.5.1, or (b) obtain such audit rights from the Sublicensee for itself and exercise such audit rights on behalf of MG upon MG’s request and disclose the results thereof to MG.  In either case MG shall be deemed the Auditing Party, and such Sublicensee the Audited Party for purposes of Section 12.5.3 below.

 

12.5.3              Costs.  Inspections conducted under this Section 12.5 shall be at the expense of the Auditing Party, unless a variation or error producing an underpayment in amounts payable exceeding [...***...] percent ([...***...]%) of the amount paid for the period covered by the inspection is established in the course of any such inspection, whereupon the Audited Party shall reimburse the Auditing Party for all reasonable out-of-pocket costs relating to the inspection for such period. The Parties will endeavor to minimize disruption of the Audited Party’s normal business activities to the extent reasonably practicable.

 

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ARTICLE 13
  DUE DILIGENCE

 

13.1                        Due Diligence by Taiho.  Taiho shall use Commercially Reasonable and Diligent Efforts to develop and commercialize at least [...***...] in Japan.  Notwithstanding the foregoing but subject to Section 13.3 below, it is understood and agreed that Taiho shall not be obligated to develop or commercialize any Compound and/or Product in Japan prior to Marketing Approval for such Compound or Product being obtained in the United States and all Data underlying or generated for purposes of obtaining such Marketing Approval has been provided to Taiho.

 

13.2                        Due Diligence by MG and Additional Partners.  MG shall use Commercially Reasonable and Diligent Efforts to obtain Marketing Approval within the Field for at least [...***...] containing a Selected Compound in the United States.  In the event MG grants rights to commercialize Products within the Field in the United States to an Additional Partner, MG shall ensure that such Additional Partner uses at least Commercially Reasonable and Diligent Efforts to obtain Marketing Approval within the Field for at least [...***...] Product containing a Selected Compound in the United States.

 

13.3                        Due Diligence in Pursuing the Collaboration.  Each Party shall use Commercially Reasonable and Diligent Efforts to establish Plans and Budgets to accomplish the purpose of this Agreement, consistent with the terms and conditions hereof, provided that such obligation shall in any event terminate after the Parties have progressed at least [...***...] in North America to the start of [...***...].  For clarity purposes, it is understood that Taiho’s agreement to fund [...***...] of the Approved Preclinical Studies and Approved Clinical Studies was conditioned upon Taiho having the right to check, request changes to and finally approve those studies; and without limiting such rights, Taiho shall have the final right to determine whether or not to continue development of a given Compound as part of the Approved Preclinical Studies and/or Approved Clinical Studies, provided that if Taiho elects not to continue development of a given Compound as part of the Approved Preclinical Studies and/or Approved Clinical Studies, Taiho will use Commercially Reasonable and Diligent Efforts to establish Plans and Budgets for Approved Preclinical Studies and/or Approved Clinical Studies for an [...***...].  In the event the Parties have a difference of opinion as to whether or not to continue development of a given Compound as part of the Approved Preclinical Studies and/or Approved Clinical Studies, or the design of such studies, the Parties agree to consult one or more mutually agreed independent scientific experts in the Field, and to consider in good faith their suggestions.

 

ARTICLE 14
  MANUFACTURING RIGHTS

 

14.1                        Taiho’s Manufacture.  Without limiting Section 8.1 above, it is understood that Taiho shall have the exclusive right to manufacture or have manufactured Compounds and Products for use, import and/or sale within the Territory in accordance with this Agreement, including the right to determine the methods and procedures for the manufacture and supply of all Products, whether in bulk or final form, including quantities to be used, for such supply.  In cases where Taiho is manufacturing clinical and/or commercial supplies of Products that are being

 

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developed in the Field both inside and outside the Territory, Taiho agrees to comply with ICH guidelines and cGMP (as defined by ICH guidelines) therefor, to the extent consistent with applicable laws, regulations, requirements of Regulatory Authorities and the Marketing Approval in the Territory.

 

14.2                        Right to Supply Products outside the Territory.  MG agrees to use reasonable efforts to secure for Taiho the exclusive right to supply [...***...] bulk active Compounds for use in the Field [...***...].  MG agrees to discuss such issue with all actual or potential Additional Partners, and shall keep Taiho informed and consult with Taiho with respect to such discussions.  For such purposes, MG shall promptly disclose to Taiho all of its Additional Partners in the Field outside the Territory.  In all cases, MG shall ensure that Taiho has full access to Manufacturing Data and manufacturing know-how used to produce such Compounds, and MG agrees to promptly provide the same to Taiho upon Taiho’s request.  In the event Taiho agrees to manufacture clinical and/or commercial supplies of Compounds for MG and/or Additional Partners, Taiho shall manufacture such Compounds in compliance with applicable laws, regulations and requirements of Regulatory Authorities and the Marketing Approval in the country or regulatory jurisdiction for which such Compounds being supplied.

 

14.3                        Taiho’s Right to Purchase Products from or through MG.  In the event MG purchases any bulk and/or final Compounds and/or Products from any third party, MG agrees to use diligent efforts to obtain for Taiho the right to purchase such materials from such third party, on the same terms as MG.  Upon Taiho’s request from time to time, MG agrees to disclose to Taiho all of its third party suppliers of such materials, and shall keep Taiho informed and consult with Taiho with respect to its discussions with such third party suppliers regarding supplying Taiho.  In the event MG purchases Compounds or Products from a third party and Taiho wishes to purchase such materials from MG rather than the third party, or in the event MG produces such materials itself, MG agrees to supply such materials to Taiho, as requested by Taiho, at MG’s Cost of Goods therefor.  Such supplies by MG shall be either cGMP or non-GMP, and shall comply with applicable specifications, as requested by Taiho.  Such specifications shall be reasonable and customary to meet ICH guidelines, to the extent consistent with applicable laws, regulations, requirements of Regulatory Authorities and the Marketing Approval in the Territory.  In addition, MG agrees to maintain or have maintained batch records and take such other actions as is necessary to comply with applicable laws and regulations, and to otherwise cooperate reasonably with Taiho to ensure consistent and adequate supply of such materials.

 

14.4                        Taiho’s Right to Purchase Certain Products from or through Additional Partners.  In the event MG grants any Additional Partner the right to make or have made Compounds and/or Products containing Compounds for such Additional Partner’s own requirements, MG shall obtain for Taiho the right to purchase Taiho’s requirements of such Compounds and/or Products in bulk or final form from such Additional Partner as follows.  Such Additional Partner shall supply such Compounds and/or Products in bulk or final form, as requested by Taiho: (a) at [...***...], with respect to Compounds and/or Products intended to be used for the conduct of Preclinical Development and/or human clinical trials, and (b) at [...***...] percent ([...***...]%) of such Additional Partner’s Cost of Goods, with respect to Compounds and/or Products intended for commercial sale and use, provided that [...***...].  

 

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Such supply of materials by the Additional Partner shall be either cGMP or non-GMP, as requested by Taiho, and shall comply with applicable specifications.  For purposes of the foregoing, the “applicable specifications” shall mean those specifications that the Additional Partner applies for its own purposes, modified as Taiho and such Additional Partner may agree.  Such specifications shall be reasonable and customary to meet ICH guidelines, to the extent consistent with applicable laws, regulations, requirements of Regulatory Authorities and the Marketing Approval in the Territory.  The Additional Partner shall maintain or have maintained batch records and take such other actions as is necessary to comply with applicable laws and regulations, and to otherwise cooperate reasonably with Taiho to ensure consistent and adequate supply of such materials.

 

14.5                        Terms of Supply by MG and the Additional Partners.  In supplying Compound and/or Product to Taiho in accordance with Section 14.3 or 14.4 above, MG and the Additional Partner shall supply the same in an expeditious manner and shall comply with standards of performance at least equivalent to those generally expected for the supply of bulk compounds and pharmaceutical products by top-tier toll manufacturers.  Upon the request of Taiho, the Additional Partner shall enter into a written agreement with Taiho with respect to such supply containing terms and conditions that are commercially reasonable (including without limitation reasonable and customary forecasting and ordering provisions) but in any case not less protective of Taiho than those set forth in this Agreement.  In the event there are not sufficient quantities of a particular Compound or Product, then Taiho shall be allocated a reasonable share of the available quantities.  In the event Taiho procures Compound or Product from an Additional Partner, and the Additional Partner thereafter ceases to have the right to manufacture such Compound or Product, the Additional Partner shall continue to supply the same to Taiho in accordance with Section 14.5 until Taiho is able, using Commercially Reasonable and Diligent Efforts, to procure adequate alternative supply.  In such event, the Additional Partner shall use Commercially Reasonable and Diligent Efforts to assist Taiho in obtaining such alternative supply, and in transitioning the manufacturing process to the alternative manufacturer.  All supplies of Compounds and Products to Taiho under this Article 14 by MG and/or Additional Partners shall be F.O.B. [...***...], unless otherwise agreed.

 

ARTICLE 15
  REGULATORY MATTERS

 

15.1                        Regulatory MattersTaiho shall be responsible, directly or through third parties, for the preparation, filing and maintenance of all regulatory documents in the Territory with respect to the Products, which shall be filed in the name of Taiho or its designee.  MG shall be responsible, directly or through third parties, for the preparation, filing and maintenance of all regulatory documents worldwide outside of the Territory with respect to the Products, which shall be filed in the name of MG or its designee; provided that while the Funded Work is still ongoing, Taiho shall have the right to have one or more of its representatives participate in any of MG’s substantive discussions and meetings with Regulatory Authorities in North America with respect to Selected Compounds and/or Products in the Field.

 

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15.2                        Reporting Adverse ExperiencesWith respect to any adverse drug experiences, including adverse events and serious adverse events, relating to any Product, the Parties shall promptly report such experiences to the appropriate regulatory authorities in the countries in which such Product is being developed or commercialized, in accordance with the appropriate laws and regulations of the relevant countries and authorities, and shall share any and all Data, including Manufacturing Data, required for such reporting.  Each Party shall ensure that its Affiliates and licensees comply with all such reporting obligations.  The Parties also agree to develop and implement such other procedures as may be necessary or appropriate to ensure that each Party remains in compliance with all reporting requirements imposed by any regulatory authority.  In addition, at the request of either Party, the Parties (or such Party and an Additional Partner(s) or other third party(ies) with rights to develop Compounds and/or Products) shall enter into a commercially reasonable and mutually agreeable “Agreement on Exchange Procedures for Safety Information and Adverse Events,” for the purposes of ensuring compliance with reporting requirements with regulatory authorities.

 

15.3                        Regulatory CooperationNotwithstanding any other provision of this Agreement, Taiho, MG and each Additional Partner (each, an “Enabling Party”) shall cooperate with the other (the “Filing Party”) to comply with specific requests of a Regulatory Authority (such as requests to inspect clinical trial sites or manufacturing facilities, or to provide Manufacturing Data), with respect to Data supplied or to be supplied by the Enabling Party to the Filing Party for filing with such Regulatory Authority, or with respect to quantities of Compound or Product supplied by the Enabling Party.  Each Enabling Party shall ensure that its contractors likewise comply with this Section 15.3.  In this regard, but without limiting any Enabling Party’s obligations under Article 6, each Enabling Party agrees to provide to a Filing Party solely for filing with Regulatory Authorities, or file itself and provide reference rights to the Filing Party, Manufacturing Data (including such information as is required for the CMC section of an IND or NDA, or a DMF) specifically requested by the Filing Party, as available, which is reasonably necessary for the Filing Party to obtain, proceed towards and/or maintain regulatory approval for the Products worldwide.

 

ARTICLE 16
  CONFIDENTIALITY

 

16.1                        Confidential Information.  Except as expressly provided herein, the Parties agree that the receiving Party shall not publish or otherwise disclose and shall not use for any purpose any information furnished to it by the other Party pursuant to this Agreement which if disclosed in tangible form is marked “Confidential” or with other similar designation to indicate its confidential or proprietary nature or if disclosed orally is indicated orally to be confidential or proprietary by the Party disclosing such information at the time its first disclosure and is confirmed in writing as confidential or proprietary by the disclosing Party within a reasonable time after such disclosure (collectively, “Confidential Information”).  Notwithstanding the foregoing, Confidential Information shall not include information that, in each case is demonstrated by written documentation:

 

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

 

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

 

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

 

(d)                                 was subsequently lawfully disclosed to the receiving Party by a person other than a Party or developed by the receiving Party without reference to any Confidential Information disclosed by the disclosing Party.

 

16.2                        Permitted DisclosuresNotwithstanding the provisions of Section 16.1 above, each Party hereto may disclose the other Party’s Confidential Information to the extent such disclosure is reasonably necessary to exercise the rights granted to it, or reserved by it, under this Agreement (including without limitation entering into and/or performing business or scientific relationships with respect to Compounds and Products for the Field in the Territory as permitted hereunder), in filing or prosecuting patent applications, prosecuting or defending litigation, complying with applicable governmental regulations, submitting information to tax or other governmental authorities (including regulatory authorities), or conducting clinical trials hereunder with respect to Compounds and/or Products, provided that if a Party is required by law to make any such disclosure of the other Party’s Confidential Information, to the extent it may legally do so, it will give reasonable advance notice to the latter Party of such disclosure and, except to the extent inappropriate in the case of patent applications or otherwise, will use its reasonable efforts to secure confidential treatment of such Confidential Information prior to its disclosure (whether through protective orders or otherwise).

 

ARTICLE 17
  INTELLECTUAL PROPERTY

 

17.1                        Ownership of Sole Inventions.Title to all inventions and other intellectual property made solely by Taiho personnel in connection with the research, development and commercialization of the Compounds and/or Products shall be owned by Taiho.  Title to all inventions and other intellectual property made solely by MG personnel in connection with the research, development and commercialization of the Compounds and/or Products (other than in the course of Funded Work) shall be owned by MG.

 

17.2                        Joint Intellectual Property.Subject to this Section 17.2 below, title to all patent rights in (a) inventions made jointly by Taiho personnel and MG personnel in connection with the collaboration herein and (b) inventions conceived or first actually reduced to practice by MG personnel in the course of Funded Work, shall be owned jointly by Taiho and MG (“Joint Intellectual Property”).  Each Party agrees to execute any and all assignments and other documents necessary to effectuate the foregoing.

 

17.2.1              Taiho.  As between the Parties, Taiho shall have exclusive rights with respect to the Joint Intellectual Property in the Territory in the Field.

 

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17.2.2              MG.  As between the Parties, MG shall have exclusive rights with respect to the Joint Intellectual Property outside the Territory.  In consideration for the exclusive rights granted to MG under this Section 17.2.2, MG shall pay Taiho a running royalty of [...***...] percent ([...***...]%) of net sales by MG, its Affiliates and/or its licensees of all products and services outside the Field that are covered by such Joint Intellectual Property, and after termination of this Agreement, in addition to the foregoing, [...***...] percent ([...***...]%) of net sales by MG, its Affiliates and/or its licensees of all products and services in the Field in the Territory that are covered by such Joint Intellectual Property.  With respect to such royalties paid by MG, the definition of MG’s net sales, the royalty term, the treatment of combination products, royalty reporting obligations and audit rights, shall be reciprocal to such terms that govern Taiho’s payment of royalties hereunder.  For such purposes (and for the purpose of defining Net Sales under Section 20.4.4 below), it is understood that clause (iv) of the definition of Section 1.25 may include charge back payments and rebates granted to managed health care organizations or to federal, state and local governments, their agencies, and purchasers and reimbursers or to chain and pharmacy buying groups and rebates charged by national, state, provincial or governmental authorities, to the extent such charge back payments and rebates are permitted under applicable law.

 

17.2.3              Shared.  Except as set forth in this Section 17.2, neither MG nor Taiho shall have any obligation to account to the other for profits with respect to, or to obtain any approval of the other to license, assign or exploit, any jointly owned intellectual property arising from this Agreement by reason of their joint ownership thereof, and each of Taiho and MG waives any such right it may have under the applicable laws in any country.

 

17.2.4              Upon Termination.  Upon the termination of this Agreement by Taiho under Section 20.3 or by MG upon a material breach of Taiho, Taiho shall assign to MG all of its right, title and interest to any patent rights within the Joint Intellectual Property.  However, such assignment shall not affect MG’s obligations under Section 17.2.2 above.

 

17.3                        Ownership of Collaboration Data.All Data generated in the performance of the Approved Preclinical Studies and the Approved Clinical Studies shall be jointly owned by Taiho and MG; provided that: (a) to the extent all of Taiho’s funding obligations terminates with respect to the Approved Clinical Studies under Section 9.1.4(a), then the Data generated in portions of such Approved Clinical Studies that are not funded by Taiho shall be owned by MG, and (b) to the extent an [...***...] takes over [...***...] percent ([...***...]%) or more of the ongoing funding obligations for the Approved Clinical Studies under Section 9.1.4(b)(i), then the Data generated in portions of such Approved Clinical Studies so funded shall be jointly owned by Taiho, MG and such Additional Partner.  Notwithstanding, all preclinical data generated from the Territory-Specific Preclinical Studies shall be solely owned by Taiho.  Each Party shall be provided a copy of, and shall have the right to use and disclose (subject to the limitations of Articles 6 and 8 above) for any purposes, any Data jointly owned under this Section 17.3.

 

17.4                        Patent Prosecution.17.4.1      MG.  MG shall control, and agrees to use Commercially Reasonable and Diligent Efforts to undertake, the Prosecution of the Licensed Patents in the Territory and Joint 

 

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Intellectual Property, using counsel of its choice and in such countries as MG deems appropriate (but including at least the Territory).  MG shall keep Taiho informed as to such Prosecution, including providing Taiho drafts of patent applications, responses and other filings in advance of their submission to the respective patent offices, and providing Taiho copies of any correspondence with or notices from the patent offices.  MG shall duly consider and follow any reasonable comments provided by Taiho with respect to Prosecution of the Licensed Patents in the Territory pertaining to the Compounds and/or Products in the Field, and the Joint Intellectual Property.  Taiho shall reimburse MG for [...***...] percent ([...***...]%) of MG’s reasonable out-of-pocket costs of Prosecution of the Licensed Patents in the Territory directed to Compounds in the Field, and Joint Intellectual Property in the Territory in accordance with this Section 17.4.1, subject to Section 17.4.3 below.  MG shall invoice Taiho for such costs within thirty (30) days after the end of each calendar quarter, itemizing such costs by patent or patent application within such Licensed Patents in the Territory and Joint Intellectual Property, and describing the Prosecution activities performed with respect to such patents and patent applications.  Taiho shall pay the amounts due under this Section 17.4.1 for each calendar quarter within thirty (30) days after receipt of such invoice.

 

17.4.2              Taiho.  In the event MG does not desire to undertake or continue the Prosecution of any item of the Licensed Patents in the Territory relevant to the Field or Joint Intellectual Property, MG shall notify Taiho at least [...***...] ([...***...]) days prior to any required action (or such shorter period as is reasonably practicable for non-extendable deadlines).  In such event, Taiho shall have the right, but not the obligation, to control the Prosecution of such item of Licensed Patents or Joint Intellectual Property, and MG shall cooperate with Taiho with respect thereto.  Taiho shall keep MG reasonably informed of such Prosecution as requested by MG.  It is understood that, in the event Taiho takes over Prosecution of a Licensed Patent or Joint Intellectual Property in accordance with this Section 17.4.2, Taiho shall have complete discretion with respect to any decisions regarding such Prosecution, and shall not owe any duties, express or implied, to MG with respect to such decisions.

 

17.4.3              Credits for Prosecution Costs.  Taiho may credit (a) its reimbursement of MG’s costs of Prosecution under Section 17.4.1 and (b) [...***...] percent ([...***...]%) of its costs of Prosecution of the Licensed Patents in the Territory or Joint Intellectual Property under Section 17.4.2 above, against [...***...]; provided that the Base Royalties shall not be [...***...].  Any amounts not able to be [...***...] due to the foregoing proviso may be carried forward to [...***...].

 

17.4.4              “Prosecution” shall mean the preparing, filing, prosecuting and maintenance of patent applications and patents and re-examinations, reissues and requests for patent term extensions therefor, together with the conduct of any interference, opposition or other similar proceeding pertaining to patent applications or patents.

 

17.5                        Defense of Third Party Infringement Claims.If the development, manufacture, sale or use of any Product within the Field results in a claim, suit or proceeding (collectively, “Actions”) alleging patent infringement against either Party (or its respective Affiliates 

 

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or Sublicensees), such Party shall promptly notify the other Party hereto in writing.  MG (if the Action is brought against Products made, sold or used outside the Territory) and Taiho (if the Action is brought against Products made, sold or used within the Territory) shall have the exclusive right to defend and control the defense of any such Action using counsel of its own choice (the “Controlling Party”); provided, however, that the other Party shall be kept informed of all material developments in connection with any such Action.  The Controlling Party shall not enter into any settlement relating to the Licensed Technology that admits the invalidity or unenforceability of any Licensed Patent within the Field without the other Party’s approval, which shall not be withheld or delayed unreasonably.  Any cost, liability or expense (including amounts paid in settlement) (together, “Liabilities”) shall be borne by the Controlling Party; provided that Taiho may treat its Liabilities as royalties paid to a third party under Article 11 in consideration for Third Party IP under Section 11.2.

 

17.6                        Enforcement.Subject to the provisions of this Section 17.6, in the event that Taiho or MG reasonably believes that any Licensed Technology or Joint Intellectual Property is infringed or misappropriated in the Territory by a third party within the Field, or with respect to a Selected Compound outside the Field or is subject to a declaratory judgment action arising from either of such type of infringement in the Territory (collectively, “Subject Infringements”), MG or Taiho (respectively) shall promptly notify the other Party.  Promptly after such notice the Parties shall meet to discuss the course of action to be taken with respect to an Enforcement Action (as defined below) with respect to such infringement or misappropriation, including the control thereof and sharing of costs and expenses related thereto, for the purposes of entering into a litigation agreement setting forth the same (“Litigation Agreement”).  If the Parties do not enter such Litigation Agreement, Taiho shall have the initial right (but not the obligation) to enforce the Licensed Technology and Joint Intellectual Property in the Territory with respect to the Subject Infringement, or defend any declaratory judgment action with respect thereto (for purposes of this Section 17.6, an “Enforcement Action”).  In the event Taiho does not notify MG that it intends to enforce or defend the Licensed Technology and Joint Intellectual Property against a Subject Infringement within one hundred and twenty (120) days after notice by either Party of an alleged Subject Infringement in the Territory, then MG shall have the right (but not the obligation) to enforce or defend against such alleged Subject Infringement.  Absent a Litigation Agreement, the Party controlling the enforcement shall keep the other Party reasonably informed of the progress of any Enforcement Action, and the other Party shall have the right to participate with counsel of its own choice at its own expense, and shall reasonably cooperate with the Party initiating the Enforcement Action (including joining as a party plaintiff to the extent necessary and requested by the other Party).  Unless otherwise agreed, all amounts recovered in the Enforcement Action, after reimbursing the Party initiating such Enforcement Action for its costs and expenses incurred in such Enforcement Action, shall be shared between the Parties as follows: (a) if such Enforcement Action is initiated by Taiho, [...***...]% to Taiho and [...***...]% to MG and (b) if such Enforcement Action is initiated by MG, [...***...]% to MG and [...***...]% to Taiho.

 

ARTICLE 18
  REPRESENTATIONS AND WARRANTIES

 

18.1                        Taiho Warranties.Taiho warrants and represents to MG that (i) it is a corporation duly organized, validly existing and in good standing under the laws of Japan; and 

 

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(ii) the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of Taiho; (iii) no consent, approval or agreement of any person, party, court, government or entity is required to be obtained by Taiho and/or any of its Affiliates in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, which has not been obtained; or (iv) as of the Effective Date, Taiho does not own any Taiho Blocking Patents.

 

18.2                        MG Warranties.MG warrants and represents to Taiho that

 

18.2.1              MG is a corporation duly organized, validly existing and in good standing under the laws of Quebec, Canada.  The execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of MG.  No consent, approval or agreement of any person, party, court, government or entity is required to be obtained by MG and/or any of its Affiliates in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, which has not been obtained.

 

18.2.2              As of the Effective Date, MG solely owns all right, title and interest in and to the Licensed Technology free of any liens or restrictions, and MG has the right to grant to Taiho all of the licenses and other rights with respect to the Licensed Technology granted to Taiho under this Agreement.  MG has not and will not enter into any agreement nor grant any third party any rights with respect to the Licensed Technology that is inconsistent with the rights granted to Taiho under this Agreement or which would limit MG’s ability to perform all of the obligations undertaken by MG hereunder.  MG is not a party to, nor otherwise bound by, any contract that will result in any person or entity obtaining any interest in, or which would give any third party any right to assert any claim in or with respect to, Taiho’s rights under this Agreement.  MG shall not suffer or permit any liens or restrictions to be imposed on the Licensed Technology without the prior written consent of Taiho unless the lien holder agrees to take the Licensed Technology subject to Taiho’s rights therein.

 

18.2.3              Exhibit 1.21.1 accurately and completely identifies all patents and patent applications that is within the Licensed Technology as of the Effective Date.  In addition, there are no Non-Cancer Selected Compounds as of the Effective Date.

 

18.2.4              As of the Effective Date, no item of Licensed Technology is in-licensed by MG from a third party.  With respect to each item of Licensed Technology in-licensed by MG from a third party after the Effective Date, MG shall maintain such in-licenses in full force and effect during the full terms thereof, and shall not terminate nor give such third party any cause to terminate such in-licenses.  MG shall notify Taiho in the event of any dispute between MG and any such in-licensor.

 

18.2.5              As of the Effective Date, MG is not aware of any patents or patent applications (including international and provisional applications) not within the Licensed Technology that cover or claim any current or contemplated Compounds (including without limitation the Initial Clinical Candidate) or their manufacture or use as part of Products in the Field.  

 

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To MG’s knowledge as of the Effective Date, none of the Licensed Patents are invalid unenforceable, nor have been misused.  As of the Effective Date, there are no existing actions, suits or proceedings, and MG has not received any written claim or demand from a third party, that challenges MG’s rights with respect to the Licensed Technology, Compounds and/or Products or MG’s rights to enter into this Agreement or that asserts that development, manufacture or sale of the Compounds and/or Products would infringe the intellectual property rights of a third party.

 

18.2.6              MG has not omitted to furnish Taiho any information requested by Taiho.  MG has not intentionally concealed from Taiho, any material information in its possession concerning the Licensed Technology, Compounds (including without limitation the Initial Clinical Candidate), Products or the transactions contemplated by this Agreement.  Nor has MG failed to disclose to Taiho any information which makes the information disclosed misleading.  Without limiting the foregoing, MG has disclosed to Taiho any information MG has that indicates a substantial likelihood that the Compounds (including without limitation the Initial Clinical Candidate) will not prove to be safe or efficacious.

 

18.3                        Disclaimer of Warranties.EXCEPT AS SET FORTH IN THIS ARTICLE 18, TAIHO AND MG EXPRESSLY DISCLAIM ANY WARRANTIES OR CONDITIONS, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, WITH RESPECT TO THE COLLABORATION, THE LICENSED TECHNOLOGY OR ANY OTHER SUBJECT MATTER RELATING TO THIS AGREEMENT INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, NONINFRINGEMENT, OR FITNESS FOR A PARTICULAR PURPOSE, AND NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

 

ARTICLE 19
  INSURANCE; INDEMNIFICATION

 

19.1                        Insurance.Each Party shall secure and maintain in effect during the term of this Agreement and for a period of [...***...] years thereafter insurance policy(ies) underwritten by a reputable insurance company having an A.M. Best rating of A:VIII or better (or a comparable rating for its underwriters not doing business in the United States) and in a form and having limits standard and customary for entities in the biopharmaceutical industry for exposures related to the Compounds and/or Products.  Such insurance shall include coverage for clinical trial liability and products liability with respect to such Party’s performance of the collaboration herein and commercialization of Products hereunder, and shall name the other Party as an additional insured under a customary and reasonable policy(ies) covering clinical trial liability.  Upon request by the other Party hereto, certificates of insurance evidencing the coverage required above shall be provided to the other Party.

 

19.2                        Indemnification of MG.Taiho shall indemnify each of MG and its Affiliates and the directors, officers, and employees of MG and such Affiliates and the successors and assigns of any of the foregoing (the “MG Indemnitees”), and hold each MG Indemnitee harmless from and against any and all liabilities, damages, settlements, claims, actions, suits, penalties, fines, costs or expenses (including, without limitation, reasonable attorneys’ fees and other expenses of litigation) incurred by any MG Indemnitee, arising from or occurring as a result of any claim, action, suit, or 

 

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other proceeding brought by third parties against a MG Indemnitee arising from or occurring as a result of: (i) product liability claims relating to any Products used, sold or otherwise distributed, or the conduct of clinical trials, by Taiho, its Affiliates or Sublicensees, or (ii) the supply by Taiho to MG of Compounds or Products that fail to comply with applicable specifications, or (iii) any infringement of Excluded Third Party IP by Taiho’s manufacture, sale or use of the Products after Taiho’s election to exclude such intellectual property under Section 11.2.1 above; except in each case to the extent such claim is caused by the gross negligence or willful misconduct of MG.

 

19.3                        Indemnification of Taiho.MG shall indemnify each of Taiho and its Affiliates and the directors, officers, and employees of Taiho and such Affiliates and the successors and assigns of any of the foregoing (the “Taiho Indemnitees”), and hold each Taiho Indemnitee harmless from and against any and all liabilities, damages, settlements, claims, actions, suits, penalties, fines, costs or expenses (including, without limitation, reasonable attorneys’ fees and other expenses of litigation) incurred by any Taiho Indemnitee arising from or occurring as a result of any claim, action, suit, or other proceeding brought by third parties against a Taiho Indemnitee arising from or occurring as a result of product liability claims relating to any Products used, sold or otherwise distributed, or the conduct of clinical trials, by MG, its Affiliates or Sublicensees, or by the supply by MG to Taiho of Compounds or Products that fail to comply with applicable specifications, except to the extent such claim is caused by the gross negligence or willful misconduct of Taiho.

 

19.4                        Procedure.A Party that intends to claim indemnification under any provision of this Agreement (for purposes of this Section 19.4, the “Indemnitee”) shall promptly notify the indemnifying Party (the “Indemnitor”) in writing of any claim, action, suit, or other proceeding brought by third parties in respect of which the Indemnitee or any of its Affiliates, or their directors, officers, employees, successors or assigns intend to claim such indemnification hereunder.  As between the Parties, the Indemnitor shall have the right to control the defense and settlement of such claim, action, suit, or other proceeding; provided, that the Indemnitee shall have the right to participate in such defense or settlement with counsel of its own choosing at its expense.  Notwithstanding the foregoing, the indemnity agreement in this Article 19 shall not apply to amounts paid in settlement of any loss, claim, damage, liability or action if such settlement is effected without the consent of the Indemnitor, to the extent such consent is not withheld unreasonably or delayed.  The failure to deliver written notice to the Indemnitor within a reasonable time after the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such Indemnitor of any liability to the Indemnitee under this Article 19 but the omission so to deliver written notice to the Indemnitor shall not relieve the Indemnitor of any liability that it may have to any Indemnitee otherwise than under this Article 19.  Without limiting the foregoing, the Indemnitor shall keep the Indemnitee fully informed of the progress of any claim, action, suit, or other proceeding for which it intends to claim indemnification under this Article 19.

 

ARTICLE 20
  TERM AND TERMINATION

 

20.1                        Term.This Agreement shall become effective as of the Effective Date and, unless earlier terminated pursuant to the other provisions of this Article 20, shall continue in full 

 

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force and effect until the date no further payments are due by either Party under this Agreement (the “Collaboration Term”).

 

20.2                        Termination for Cause. 20.2.1  Failure to Pay.  MG may terminate this Agreement upon written notice in the event Taiho fails to make any undisputed payment due under Articles 9, 10 or 11, and fails to cure such default within thirty (30) days following receipt of written notice specifying such default and MG’s intention to terminate.

 

20.2.2              Other Material Non-Performance/Misrepresentation.  Other than a breach as set forth in Section 20.2.1 in the event of (i) a Party’s default in any other material respect in the performance or observance of any other material term, covenant or provision of this Agreement (including payment obligations not covered by 20.2.1 above), or (ii) if any representation by a Party contained in this Agreement shall prove to have been incorrect in any material respect when made, resulting in material adverse consequences for the other Party (any such default or material incorrect representation a “Material Non-Performance”), such Material Non-Performance shall be remedied only as provided in this Section 20.2.2.

 

(a)                                 In the event of any Material Non-Performance by a Party, the other Party shall, without reasonable delay following discovery of such Material Non-Performance notify the defaulting Party in writing, and the Parties shall consult with each other in good faith to endeavor to agree upon the most effective means to cure such Material Non-Performance and, if necessary, to effect a remedy in favor of the non-defaulting Party for the consequences of such Material Non-Performance by the defaulting Party (collectively, the “Resolution”).  The Parties agree to initially discuss the dispute at the organizational level at which such dispute arises. If either Party believes there has been sufficient discussion of the matter at such level without reaching a Resolution, then such Party, by written notice to the other Party, may have such dispute referred to, in the case of MG, the Chief Executive Officer of MG, and in the case of Taiho, the head of the Taiho’s Discovery Center, or its successor (the “Senior Representatives”), who shall attempt to resolve such dispute by good faith negotiations within thirty (30) days of such referral.

 

(b)                                 In the event (i) the Parties are unable to agree upon Resolution within thirty (30) days after the notice of Material Non-Performance or thirty (30) days after being referred to the Senior Representatives, whichever occurs later, or (ii) the defaulting Party, in the exercise of reasonable diligence shall have been unable to remedy such Material Non-Performance within ninety (90) days, then in either such event the remedy of the non-defaulting Party with respect to the Material Non-Performance by the defaulting Party shall be determined by arbitration pursuant to Section 21.1 hereof, and the arbitrators shall be authorized to fashion such remedy, including equitable relief, which may include termination of this Agreement in whole or in part if the breaching Party fails to cure the breach after the arbitrators determine that a breach has occurred, except that termination of this Agreement in whole shall only be the remedy of last resort and shall apply only in such case.

 

55

 

20.3                        Termination Upon Notice.Taiho may terminate this Agreement upon thirty (30) days written notice to MG, provided that such termination is effective no earlier than two (2) years after the Effective Date.  In the event of termination of this Agreement under this Section 20.3, Taiho shall continue to pay MG the costs required to be paid by Taiho under Article 9 during the six (6)-month period after the notice of termination, to continue any Approved Preclinical Studies and Approved Clinical Studies that were initiated prior to such termination for such period.  For purposes of this Section 20.3. a human clinical trial shall be deemed “initiated” upon the initial dosing of the first patient in such trial in accordance with the protocol therefor.

 

20.4                        Effect of Termination. 20.4.1  Accrued Obligations.  Termination of this Agreement for any reason shall not release either Party hereto from any liability which, at the time of such termination, has already accrued to the other Party or which is attributable to a period prior to such termination nor preclude either Party from pursuing all rights and remedies it may have hereunder or at law or in equity with respect to any breach of this Agreement.

 

20.4.2              Survival.  Articles and Sections 1, 8.4, 15.2, 16 (for five (5) years thereafter), 17.1, 17.2, 17.3, 17.6 (with respect to infringement or alleged infringement prior to expiration or termination) 18, 19, 20, 21 and 22 shall survive any expiration or termination of this Agreement.  In addition, upon expiration (but not termination) of this Agreement, Taiho shall have a fully-paid up, royalty-free, perpetual, irrevocable license under Section 8.1.  Sections 9.1.2(b), 9.1.4(b) and 9.4 shall survive in the event of any expiration or termination of this Agreement, other than termination by MG under Section 20.2.  Notwithstanding, any credits that accrued under Sections 9.1.2(b) and 9.1.4(b) prior to expiration or termination of this Agreement shall be refunded to Taiho upon any termination or expiration hereof, subject to any justified offsets MG may have against Taiho.  Section 9.4.2 shall survive any expiration or termination of this Agreement by MG under Section 20.2 with respect to agreements entered into by MG prior to such expiration or termination.

 

20.4.3              Survival of Licenses to and from Additional Partners.  In the event of termination of this Agreement by MG under Section 20.2 or by Taiho under Section 20.3, Section 8.5 shall survive only with respect to those Additional Partners and/or others to whom MG has granted sublicenses thereunder prior to such termination, and only to the extent of such sublicenses.  Likewise, MG shall ensure that in the event MG’s agreement(s) with Additional Partners and/or others is terminated, any license or sublicense rights granted to Taiho under Article 8 from such Additional Partners, Non-Cancer Partners and others shall survive such termination.  In the event the license from MG to Taiho under Section 8.1 is terminated, then any rights sublicensed to Taiho thereunder from Additional Partners, Non-Cancer Partners and others shall likewise terminate.

 

20.4.4              Transitioning Products back to MG.  In the event of a termination of this Agreement other than for breach by MG, and only in such event, Taiho shall transition certain Products back to MG as follows:

 

56

 

(a)                                 Taiho shall assign or cause to be assigned to MG (or if not so assignable, Taiho shall take all reasonable actions to make available to MG) all regulatory filings and registrations (including Marketing Approvals and applications therefor) with respect to each Product for which an IND has been filed in the Territory by or on behalf of Taiho prior to the termination of this Agreement (each, a “Transitioned Product”).  In each case such assignment (or availability) shall be made within thirty (30) days after such termination.

 

(b)                                 In the event that a Transitioned Product is commercialized by MG, its Affiliates or licensees in the Field in the Territory, MG shall pay to Taiho a royalty on net sales of such Transitioned Product by MG, its Affiliates or licensees at the rates set forth below based on the last stage of development (i.e. the highest applicable percentage below) conducted in any regulatory jurisdiction worldwide by or under authority of Taiho or MG with respect to such Transitioned Product at the time of termination of this Agreement, as follows.

 

	
Stage of Development 
    	
 
    	
Royalty
    	
 
    
	
[...***...]
    	
 
    	
[...***...]
    	
%
    
	
[...***...]
    	
 
    	
[...***...]
    	
%
    
	
[...***...]
    	
 
    	
[...***...]
    	
%
    
	
[...***...]
    	
 
    	
[...***...]
    	
%
    

 

It is understood that, in connection with establishing the royalties under this Section 20.4.4(b), the ancillary terms of such royalty, such as the term for which such royalties are due, the definition of MG’s net sales, royalty reporting, audit rights, royalty offsets and the like will also be established, which terms will be no less favorable to Taiho than the corresponding terms of this Agreement for MG.

 

ARTICLE 21
  DISPUTE RESOLUTION

 

21.1                        Arbitration.Any dispute, controversy or claim with respect to the breach, interpretation or enforcement of this Agreement, including disputes relating to termination of this Agreement, shall be settled by binding arbitration in the manner described in this Section 21.1.  The arbitration shall be conducted by the Judicial Arbitration and Mediation Services, Inc. (“JAMS”) under its rules of arbitration then in effect.  Notwithstanding those rules, the following provisions shall apply to the arbitration hereunder:

 

21.1.1              Arbitrators.  The arbitration shall be conducted by a single JAMS arbitrator; provided that at the request of either Party, the arbitration shall be conducted by a panel of three (3) arbitrators, with one (1) JAMS arbitrator chosen by each of Taiho and MG and the third appointed by the other two (2) arbitrators.  If the Parties are unable to agree upon a single arbitrator, or the third arbitrator in case of a panel of three (3), such single or third arbitrator (as the case may be) shall be appointed in accordance with the rules of JAMS.  In any event, the arbitrator or arbitrators selected in accordance with this Section 21.1.1 are referred to herein as the “Panel” and 

 

***Confidential Treatment Requested

 

57

 

shall be comprised of arbitrators who are familiar with worldwide research and business development in the biotechnology industry, unless otherwise agreed.

 

21.1.2              Proceedings.  Except as otherwise provided herein, the Parties and the arbitrators shall use their best efforts to complete the arbitration within nine (9) months after the appointment of the Panel under Section 21.1.1 above, unless a Party can demonstrate to the Panel that the complexity of the issues or other reasons warrant the extension of one or more of the time tables.  In such case, the Panel may extend such time table as reasonably required.  The Panel shall, in rendering its decision, apply the substantive law of the State of New York, without regard to its conflicts of laws provisions, except that the interpretation of and enforcement of this Article 21 shall be governed by the U.S. Federal Arbitration Act.  The proceeding shall take place in San Francisco, California.  The decision and/or award rendered by the arbitrator(s) shall be written, final and non-appealable, and judgment on such decision and/or award may be entered in any court of competent jurisdiction.  The fees of the Panel shall be paid by the losing Party which Party shall be designated by the Panel.  If the Panel is unable to designate a losing Party, it shall so state and the fees shall be split equally between the Parties.  Each Party shall bear the costs of its own attorneys’ and experts’ fees; provided that the Panel may in its discretion award the prevailing Party all or part of the costs and expenses incurred by the prevailing Party in connection with the arbitration proceeding.

 

21.1.3              Interim Relief.  Notwithstanding anything in this Article 21 to the contrary, Taiho and MG shall each have the right to apply to any court of competent jurisdiction for a temporary restraining order, preliminary injunction, or other similar interim or conservatory relief, as necessary, pending resolution under the above described arbitration procedures.  Nothing in the preceding sentence shall be interpreted as limiting the powers of the arbitrators with respect to any dispute subject to arbitration under this Agreement.  The Panel may award injunctive relief.

 

ARTICLE 22
  MISCELLANEOUS

 

22.1                        Confidential Terms.Except as expressly provided herein, each Party agrees not to disclose any terms of this Agreement to any third Party without the consent of the other Party, except (i) as required by securities or other applicable laws or (ii) to prospective and actual investors, sublicensees, acquisition partners and such Party’s accountants, attorneys and other professional advisors, or (iii) to others under reasonable conditions of confidentiality.  Notwithstanding the foregoing, the Parties have agreed on a press release that can be used to describe this transaction and the terms and conditions of this Agreement, and each Party acknowledges and agrees that the other Party may disclose information from the mutually agreed press release at any time and from time to time without the consent of the other Party.

 

22.2                        Governing Law..  This Agreement and any dispute arising from the performance or breach hereof shall be governed by and construed and enforced in accordance with, the laws of the State of New York, without reference to conflicts of laws principles.

 

22.3                        Force Majeure.Nonperformance of any Party shall be excused to the extent that performance is rendered impossible by strike, fire, earthquake, flood, governmental acts or 

 

58

 

orders or restrictions, failure of suppliers, or any other reason where failure to perform is beyond the reasonable control of the nonperforming Party.  In such event Taiho or MG, as the case may be, shall promptly notify the other Party of such inability and of the period for which such inability is anticipated to continue.  Without limiting the foregoing, the Party subject to such inability shall use reasonable efforts to minimize the duration of any force majeure event.

 

22.4                        No Implied Waivers; Rights Cumulative.No failure on the part of Taiho or MG to exercise and no delay in exercising any right under this Agreement, or provided by statute or at law or in equity or otherwise, shall impair, prejudice or constitute a waiver of any such right, nor shall any partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right.

 

22.5                        Independent Contractors.Nothing contained in this Agreement is intended implicitly, or is to be construed, to constitute Taiho or MG as partners in the legal sense.  No Party shall have any express or implied right or authority to assume or create any obligations on behalf of or in the name of any other Party or to bind any other Party to any contract, agreement or undertaking with any third party.

 

22.6                        Notices.All notices, requests and other communications hereunder shall be in writing and shall be personally delivered or sent by registered or certified mail, return receipt requested, postage prepaid; facsimile transmission (receipt verified); or express courier service (signature required), in each case to the respective address specified below, or such other address or fax number as may be specified in writing to the other Parties:

 

MG:                                                                                                                       MethylGene Inc.

7220 Frederick-Banting,

Suite 200, St. Laurent

Montreal, Quebec H4S 2A1

Canada

Attn: Chief Executive Officer

Fax: (514) 337-4194

 

with a copy to:                                                               Attn: Chief Financial Officer

MethylGene, Inc.

[same address as above]

 

and a copy to:                                                                 Attn: Senior Vice President, Research and Development

MethylGene, Inc.

[same address as above]

 

59

 

 

and a copy to:                                                                 Davies Ward Phillips & Vineberg s.r.l.

1501 McGill College Ave., 26th Floor

Montreal, Quebec H3A 3N9

Canada

Attn:  Elias Benhamou

Fax:  (514) 841-6499

 

Taiho:                                                                                                            Taiho Pharmaceutical Co., Ltd.

1-27, Misugidai

Hanno-shi, Saitama, 357-8527, Japan

Attn: Director, Hanno Research Center

Fax: 81-429-72-8913

 

with a copy to:                                                               Attn: Director, Cancer Research Lab.

Taiho Pharmaceutical Co., Ltd.

[same address as above]

 

and a copy to:                                                                 Attn:  Kazuharu Noguchi, Ph.D.

Taiho Pharmaceutical Co., Ltd.

[same address as above]

 

and a copy to:                                                                 Wilson Sonsini Goodrich & Rosati

Professional Corporation

650 Page Mill Road

Palo Alto, California 94304-1050

Attn:  Kenneth A. Clark, Esq.

Fax:  (650) 493-6811

 

22.7                        Assignment.This Agreement shall not be assignable by either Party to any third party without the written consent of the other Party; except that each Party shall assign this Agreement, without the need to obtain the other Party’s consent, to an entity that acquires substantially all of the business or assets of such Party pertaining to this Agreement, in each case whether by merger, transfer of assets, purchase of all outstanding shares or otherwise.  Each Party shall notify the other Party at least [...***...] days prior to an assignment or attempted assignment of this Agreement.  Upon a permitted assignment of this Agreement, all references herein to the assigning party shall be deemed to include both the assigning party and the party to whom the Agreement is so assigned and its Affiliates, each of whom shall be bound by this Agreement.  Any assignment in contravention of the foregoing shall be void and of no effect.  Any change of control of a Party shall be deemed an assignment of this Agreement by such Party, and neither Party shall enter into or become the subject of a change of control, unless the party acquiring such control and its ultimate parent operating company agrees to be bound by this Agreement and to ensure that its Affiliates comply with the terms hereof.  Neither Party shall transfer nor assign any substantial asset relating to this Agreement, unless the acquiring Party agrees in writing to honor the other Party’s rights under this Agreement with respect to such asset.  Notwithstanding the foregoing, it is 

 

***Confidential Treatment Requested

 

60

 

understood that the purchase of shares by one or more purely financial investors shall not be deemed a change of control for purposes of this Section 22.7.

 

22.8                        Modification.No amendment or modification of any provision of this Agreement shall be effective unless in writing signed by all Parties.  No provision of this Agreement shall be varied, contradicted or explained by any oral agreement, course of dealing or performance or any other matter not set forth in an agreement in writing and signed by all Parties.

 

22.9                        Severability.If any provision hereof should be held invalid, illegal or unenforceable in any jurisdiction, the Parties shall negotiate in good faith a valid, legal and enforceable substitute provision that most nearly reflects the original intent of the Parties and all other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in order to carry out the intentions of the Parties as nearly as may be possible.  Such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of such provision in any other jurisdiction.

 

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

 

22.11                 Headings.Headings used herein are for convenience only and shall not in any way affect the construction of or be taken into consideration in interpreting this Agreement.

 

22.12                 Patent Marking.Taiho agrees to mark and have their Affiliates and permitted Sublicensees mark all patented Products they sell or distribute pursuant to this Agreement in accordance with the applicable patent statutes or regulations in the country or countries of manufacture and sale thereof.

 

22.13                 Export Laws.Notwithstanding anything to the contrary contained herein, all obligations of Taiho and MG are subject to prior compliance with United States and foreign export regulations and such other United States and foreign laws and regulations as may be applicable, and to obtaining all necessary approvals required by the applicable agencies of the governments of the United States and foreign jurisdictions.  Taiho and MG shall cooperate with each other and shall provide assistance to the other as reasonably necessary to obtain any required approvals.

 

22.14                 Security Interest.MG represents that it has not granted a security interest in any of its patent rights to any third party as of the Effective Date.  MG covenants that it shall not grant any security interest in its patent rights to any third party having rights with respect to the Licensed Patents, including any Additional Partners, unless prior to granting such security interest, MG grants Taiho a security interest in the Licensed Patents in the Territory, whether now owned or hereafter acquired, and all proceeds thereof, as security for Taiho’s rights and MG’s performance under this Agreement, including without limitation Taiho’s rights under Articles 6 and 8.  MG agrees to promptly execute any documents, make any filings and provide any other reasonable assistance to Taiho in order to record, complete and perfect in Taiho the foregoing security interest.  MG covenants that it shall not grant to any third party a security interest in the Licensed Patents in 

 

61

 

the Territory unless such third party agrees to take such interest subject to Taiho’s rights under this Agreement.

 

22.15                 Entire Agreement.This Agreement (including the Exhibits hereto) constitutes the entire agreement, both written or oral, with respect to the subject matter hereof, and supersedes all prior or contemporaneous understandings or agreements, whether written or oral, between Taiho and MG with respect to such subject matter.

 

[Signatures on next page]

 

62

 

IN WITNESS WHEREOF, the Parties have caused this Collaboration and License Agreement to be duly executed and delivered in duplicate originals as of the date first above written.

 

 

	
METHYLGENE   INC.
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Donald Corcoran
    	
 
    
	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    
	
 
    	
 
    
	
TAIHO   PHARMACEUTICAL CO., LTD.
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Toru Usami
    	
 
    
	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    

 

63

 

EXHIBIT 1.21.1

 

EXISTING LICENSED PATENTS

 

	
No.
    	
 
    	
Patent Name
    	
 
    	
Country
    	
 
    	
Filing Date/ Due Date
    	
 
    	
Application No./
   Patent No.
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...][...***...]
    	
 
    	
[...***...][...***...]
    	
 
    	
[...***...][...***...]
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...][...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...][...***...]
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...][...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...][...***...]
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...]
    	
 
    	
[...***...][...***...]
    	
 
    	
[...***...]
    

 

Note:                  1. PCT filing date and PCT application number 

                                                2. National filing number and Due date for National Entry

 

***Confidential Treatment Requested

 

64

 

EXHIBIT 1.23

 

MANUFACTURING DATA

 

[...***...]

 

1.              [...***...]

 

(a)         [...***...]

 

(i)             [...***...]

 

(ii)          [...***...]

 

(iii)       [...***...]

 

(iv)      [...***...]

 

(v)         [...***...]

 

(vi)      [...***...]

 

(vii)   [...***...]

 

(b)         [...***...]

 

(i)             [...***...]

 

(ii)          [...***...]

 

(iii)       [...***...]

 

(iv)      [...***...]

 

***Confidential Treatment Requested

 

65

 

(c)          [...***...]

 

(i)             [...***...]

 

(ii)          [...***...]

 

(iii)       [...***...]

 

(d)         [...***...]

 

(i)             [...***...]

 

(e)          [...***...]

 

(i)             [...***...]

 

(f)           [...***...]

 

(i)             [...***...]

 

(ii)          [...***...]

 

(iii)       [...***...]

 

(g)          [...***...]

 

(i)             [...***...]

 

(h)         [...***...]

 

(i)             [...***...]

 

***Confidential Treatment Requested

 

66

 

(ii)          [...***...]

 

(i)             [...***...]

 

(i)             [...***...]

 

(ii)          [...***...]

 

(j)            [...***...]

 

(i)             [...***...]

 

(ii)          [...***...]

 

2.              [...***...]

 

(a)         [...***...]

 

(i)             [...***...]

 

(1)         [...***...]

 

(2)         [...***...]

 

(3)         [...***...]

 

(4)         [...***...]

 

(5)         [...***...]

 

(6)         [...***...]

 

(7)         [...***...]

 

(8)         [...***...]

 

***Confidential Treatment Requested

 

67

 

(9)         [...***...]

 

(10)  [...***...]

 

(11)  [...***...]

 

(12)  [...***...]

 

(ii)          [...***...]

 

(1)         [...***...]

 

(2)         [...***...]

 

(3)         [...***...]

 

(4)         [...***...]

 

(5)         [...***...]

 

(b)         [...***...]

 

(i)             [...***...]

 

(1)         [...***...]

 

(2)         [...***...]

 

(3)         [...***...]

 

(4)         [...***...]

 

(5)         [...***...]

 

(6)         [...***...]

 

(7)         [...***...]

 

(8)         [...***...]

 

***Confidential Treatment Requested

 

68

 

(9)         [...***...]

 

(10)  [...***...]

 

(11)  [...***...]

 

(12)  [...***...]

 

(13)  [...***...]

 

(c)          [...***...]

 

(1)         [...***...]

 

(2)         [...***...]

 

(3)         [...***...]

 

(4)         [...***...]

 

(5)         [...***...]

 

(6)         [...***...]

 

(7)         [...***...]

 

(8)         [...***...]

 

(d)         [...***...]

 

(i)             [...***...]

 

(e)          [...***...]

 

[...***...]

 

***Confidential Treatment Requested

 

69

 

EXHIBIT 1.26

 

PARTIAL LIST OF EXISTING COMPOUNDS

 

	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    
	
[...***...]
    	
 
    	
[...***...]
    

 

***Confidential Treatment Requested

 

70

 

EXHIBIT 1.31

 

PRELIMINARY PLANS AND BUDGETS

 

Preliminary Research Plan and Budget

 

[...***...]

 

[...***...]

 

[...***...]

 

[...***...]

 

[...***...]

 

[...***...]

 

[...***...]

 

[...***...]

 

[...***...]

 

[...***...]

 

[...***...].

 

***Confidential Treatment Requested

 

71

 

Preliminary Preclinical Plan and Budget

 

[...***...]

 

***Confidential Treatment Requested

 

72

 

[...***...]

 

***Confidential Treatment Requested

 

73

 

Preliminary Clinical Plan and Budget

 

MGCD0103 Clinical Development Preliminary Plan and Budget

 

[...***...]

 

[...***...]

 

[...***...]

 

[...***...]

 

[...***...]

 

[...***...]

 

[...***...]

 

[...***...]

 

***Confidential Treatment Requested

 

74

 

[...***...]

 

[...***...]

 

	
[...***...]

[...***...]
    
	
[...***...]
    	
 
    
	
[...***...]
    	
[...***...]
    
	
[...***...]
    	
[...***...]
    
	
[...***...]
    	
[...***...]
    
	
 
    	
 
    
	
[...***...]
    	
 
    
	
[...***...]
    	
[...***...]
    
	
[...***...]
    	
 
    
	
[...***...]
    	
 
    
	
[...***...]
    	
[...***...]
    
	
[...***...]
    	
 
    
	
[...***...]
    	
 
    
	
[...***...]
    	
[...***...]
    
	
[...***...]
    	
[...***...]
    
	
[...***...]
    	
[...***...]
    
	
 
    	
 
    
	
 
    	
 
    
	
[...***...]
    	
 
    
	
[...***...]
    	
[...***...]
    
	
[...***...]
    	
 
    
	
[...***...]
    	
[...***...]
    
	
[...***...]
    	
[...***...]
    
	
 
    	
 
    

 

***Confidential Treatment Requested

 

75

 

EXHIBIT 1.32

 

PRECLINICAL AND CLINICAL DATA

 

1.              [...***...]

 

2.              [...***...]

 

3.              [...***...]

 

4.              [...***...]

 

(a)         [...***...]

 

(b)         [...***...]

 

(c)          [...***...]

 

(d)         [...***...]

 

5.              [...***...]

 

6.              [...***...]

 

***Confidential Treatment Requested

 

76

 

EXHIBIT 1.41

 

RESEARCH DATA

 

[...***...]

 

1.              [...***...]

 

(a)                                 [...***...]

 

(b)                                 [...***...]

 

(c)                                  [...***...]

 

(d)                                 [...***...]

 

2.              [...***...]

 

(a)         [...***...]

 

(b)                                 [...***...]

 

(c)                                  [...***...]

 

(d)                                 [...***...]

 

(e)                                  [...***...]

 

(f)                                   [...***...]

 

(g)                                  [...***...]

 

(h)                                 [...***...]

 

3.              [...***...]

 

(a)         [...***...]

 

(b)         [...***...]

 

4.              [...***...]

 

***Confidential Treatment Requested

 

77

 

(a)         [...***...]

 

(b)         [...***...]

 

(c)          [...***...]

 

(d)         [...***...]

 

5.              [...***...]

 

(a)         [...***...]

 

(b)         [...***...]

 

(c)          [...***...]

 

[...***...]

 

1.                                      [...***...]

 

2.                                      [...***...]

 

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***Confidential Treatment Requested

 

78

 

EXHIBIT 9.5

 

CERTAIN PRECLINICAL DEVELOPMENT ACTIVITIES BY MG PRIOR TO THE EFFECTIVE DATE

 

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***Confidential Treatment Requested

 

79

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00219-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00219-of-00352.parquet"}]]