Document:

Exhibit 10.1

 

***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.

 

CONFIDENTIAL

 

DEVELOPMENT AND LICENSE AGREEMENT

 

BETWEEN

 

NEUROGENETICS, INC.

 

AND

 

ELI LILLY AND COMPANY

 

EFFECTIVE AS OF APRIL 21, 2003

 

 

TABLE OF CONTENTS

 

Exhibit A               Licensed Patents

 

Exhibit B               Lilly Know-How

 

Exhibit C               Compound Supply

 

Exhibit D               Development Plan

 

 

DEVELOPMENT AND LICENSE AGREEMENT

 

THIS DEVELOPMENT AND LICENSE AGREEMENT (the “Agreement”) is entered into as of April
21, 2003 (the “Effective
Date”), by and between NEUROGENETICS,
INC. (“Neurogenetics”),
a corporation organized and existing under the laws of the State of Delaware,
having its principal place of business at 11805 North Torrey Pines Road, Suite
300, La Jolla, California 92037, and ELI
LILLY AND COMPANY (“Lilly”), a corporation organized and existing under the
laws of the State of Indiana, having its principal place of business at Lilly
Corporate Center, Indianapolis, Indiana 46285. Neurogenetics and Lilly are
sometimes referred to herein individually as a “Party” and collectively as “Parties.”  The Parties agree as follows:

 

BACKGROUND

 

Lilly
has certain intellectual property rights relating to its non-selective
AMPA/Kainate receptor antagonist known internally at Lilly as [***], and
Neurogenetics is interested in obtaining a license to such compound.
Neurogenetics is a biopharmaceutical company that is interested in further
developing and commercializing [***], including conducting clinical trials in
order to obtain product registration of [***]from regulatory authorities.
Subject to the terms and conditions set forth in this Agreement, Lilly and
Neurogenetics are interested in having Neurogenetics further develop and
commercialize, on a worldwide basis, pharmaceutical products containing [***].

 

NOW, THEREFORE, in consideration of the above premises and
the mutual covenants and agreements set forth below, the Parties hereto agree
as follows.

 

ARTICLE 1

 

DEFINITIONS

 

As
used in this Agreement, the following words and phrases shall have the
following meanings:

 

1.1          “Affiliate” means, with respect to a Party, any Person
directly or indirectly controlling, controlled by, or under common control
with, such Party. For purposes of this Agreement, the term “controlled”
(including the terms “controlled by” and “under common control with”) as used
in this context, means the direct or indirect ability or power to direct or
cause the direction of management policies of a Person or otherwise direct the
affairs of such Person, whether through ownership of equity, voting securities,
beneficial interest, by contract or otherwise.

 

1.2          “Applicable Laws” means all applicable laws, ordinances, rules
and regulations of any kind whatsoever of any governmental (including
international, foreign, federal, state and local) or regulatory authority,
including, without limitation, all laws, ordinances, rules and regulations
promulgated by the FDA.

 

1.3          “Application for Marketing
Authorization” means, with
respect to Product, (i) in the United States, a New Drug Application filed
with the FDA pursuant to 21 U.S.C.

 

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1

 

Section 357 and 21 C.F.R. Section 314 (“NDA”), and (ii) in
any country other than the United States, an application or set of applications
for marketing approval comparable to an NDA and necessary to make and sell
Product commercially in such country.

 

1.4          “Calendar Quarter” means the three (3) month period ending on
March 31, June 30, September 30 or December 31. The initial Calendar Quarter
will be deemed to begin on the Effective Date and end on the expiration of that
Calendar Quarter in which it falls.

 

1.5          “Change of Control” means, with regard to Neurogenetics, any of
the following events:  the acquisition by
any Person, other than a Person controlling Neurogenetics as of the Effective
Date, of “beneficial ownership” (as defined in Rule 13d-3 under the United
States Securities Exchange Act of 1934, as amended), directly or indirectly, of
more than fifty percent (50%) of the shares of Neurogenetics’ stock by way of
merger or sale of stock (excluding any bona fide financing transactions) or the
sale or other disposition of all or substantially all of the assets of
Neurogenetics to a Third Person. 

 

1.6          “Clinical Trial Protocol” means the Clinical Trial action plan used by
each research center in the Clinical Trial and describing the objectives,
design, methodology, statistical considerations and organization of the
Clinical Trial, including (1) how many people are in the trial, (2) who is
eligible to participate in the trial, (3) what drugs participants will take,
(4) what medical tests they will have and how often, and (5) what information
will be gathered during the trial.

 

1.7          “Clinical Trial(s)” means Phase I Clinical Trials, Phase II
Clinical Trials or Phase III Clinical Trials, as applicable.

 

1.8          “Compound” means the compound known internally at Lilly
as [***], and identified more specifically on Exhibit C ([***]). A
“derivative” as used in this Section 1.8 means a compound having [***], wherein
a modification is a [***] of [***].

 

1.10        “Compound Supply” shall have the meaning set forth in Section
5.1.

 

1.11        “Confidential Information” means information received (whether
disclosed in writing, electronically, orally or by observation) by one Party
(the “Receiving Party”)
from the other Party (the “Disclosing
Party”) that the Disclosing Party reasonably considers
proprietary and confidential unless in each case such information, as
shown by competent evidence:

 

(a)                                  was known to the Receiving Party or to the
public prior to the Disclosing Party’s disclosure, as demonstrated by
contemporaneous written records;

 

(b)                                  became known to the public, after the
Disclosing Party’s disclosure hereunder, other than through a breach of the
confidentiality provisions of this Agreement by the Receiving Party or any
Person to whom such Receiving Party disclosed such information;

 

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2

 

(c)                                  was subsequently disclosed to the Receiving
Party by a Person (other than the Disclosing Party) having a legal right to
disclose, without any restrictions, such information or data; or

 

(d)                                  was developed by the Receiving Party
independent of the Disclosing Party’s Confidential Information;

 

provided, however, that the Licensed Patents, the Lilly Know-How and any other
information that pertains to Compound or any Product disclosed to Neurogenetics
by Lilly hereunder shall be deemed the Confidential Information of
Neurogenetics as well as Lilly and subject to the confidentiality provisions
hereof during the term of this Agreement, and both Neurogenetics and Lilly
shall be deemed the Receiving Party with respect to such Confidential
Information.

 

1.12        “Control” means the possession of the ability to grant
a license without violating the terms of any agreement or other arrangement
with any Third Person.

 

1.13        “Damages” means any and all costs, losses, claims,
demands for payment, government enforcement actions, liabilities, fines,
penalties, expenses, court costs and reasonable fees and disbursements of
counsel, consultants and expert witnesses incurred by a party entitled to
indemnification under Section 9.1 (including any court-imposed interest in
connection therewith).

 

1.14        “Data Exclusivity Period” means the period during which the FDA (or,
in countries other than the United States, an equivalent regulatory agency)
prohibits reference, without the consent of the owner of an Application for
Marketing Authorization or Regulatory Approval package, to the clinical and
other data that is contained in such Application for Marketing Approval or
Regulatory Approval package, and that is not published or publicly available
outside of such Application for Marketing Authorization or Regulatory Approval
package.

 

1.16        “Development Plan” means a plan prepared by Neurogenetics for
developing Product in the Territory, up to and including filing of the
Application for Marketing Authorization for the Product, including all Clinical
Trials required to confirm the profile of Product, including but not limited
to, Clinical Trials required to confirm the clinical efficacy, tolerability and
dosing regimen of Product. Such Development Plan shall be in summary outline
form for all Clinical Trials up through and including filing of the Application
for Marketing Authorization for the Product. The initial Development Plan is
attached as Exhibit D; provided, however, that Neurogenetics
shall be entitled to amend, alter or change such Development Plan in its sole
discretion. Neurogenetics shall provide Lilly with a copy of any such amended,
altered or changed Development Plan.

 

1.17        “Diligence” means use of reasonable commercial efforts,
consistent with a biotechnology company’s normal business practices, based upon
the existing business situation, and use of efforts comparable with those used
by biotechnology companies for similar products at a comparable stage in development
and of a comparable commercial and development potential, with the objective of
launching the Product worldwide as soon as practicable. As used

 

3

 

in this Section 1.17, “biotechnology company”
and “biotechnology companies” mean companies of similar size and stage of
development in the biotechnology industry, including having human
pharmaceutical compounds in a similar stage of development to the Compound.

 

1.18        “Effective Date” shall have the meaning set forth in the
first paragraph hereof.

 

1.19        “FDA” means the United States Food and Drug
Administration, or any successor federal agency having responsibility over
Regulatory Approval. “FDA” shall also be deemed to include the applicable
governmental or regulatory authority having jurisdiction over the Product in
any particular country or region in the Territory (for example, the European
Medicines Evaluation Agency for the European Union).

 

1.20        “Field” means all human therapeutic indications
including, but not limited to, migraine, post-operative pain and epilepsy
(either mono therapy or as add on therapy).

 

1.21        “Final Study Report” means a report on a Clinical Trial compiling
the objectives, methods and results of the trial after the completion thereof,
prepared in compliance with the applicable laws and regulations, including
under GCPs.

 

1.22        “First Commercial Sale” means the first arms length sale of Product
in a country by Neurogenetics or a Permitted Seller to a Third Person following
Regulatory Approval in that country.

 

1.23        “Force Majeure” shall have the meaning set forth in Section
11.3.

 

1.24        “GAAP” means U.S. Generally Accepted Accounting
Principles, consistently applied.

 

1.25        “Generic Competition” means the entry of a generic product in a country
in the Territory having specifications essentially identical to the
specifications of the Product and taking more than a [***] percent ([***]%)
market share of the market for the Product in the concerned country (as
reported in sales by IMS or a similar tracking service) for at least [***]
([***]) consecutive Calendar Quarters.

 

1.26        “Licensed Patents” means those United States and foreign
patents and patent applications (including provisional applications) listed in Exhibit A to the extent, and only to the
extent, they cover making, using, selling, offering for sale or importing
Compound, as applicable, including, without limitation:

 

(a)                                  all divisions and continuations of these
applications, all patents issuing from such applications, divisions and continuations,
and any reissues, reexaminations and extensions of all such patents; and

 

(b)                                  any continuations-in-part, any divisions and
continuations of these continuations-in-part, any patents issuing from such
continuations-in-part, divisions and continuations, and any reissues,
reexaminations and extensions of all such patents, in each case to the extent
that they contain

 

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4

 

one
or more claims directed to the invention or inventions disclosed in the patent
applications listed in Exhibit A.

 

1.27        “Lilly Know-How” means any unpatented or unpatentable
inventions, information, data and/or materials relating to Compound or Product
that are owned or Controlled by Lilly as of the Effective Date and necessary to
manufacture, use, research, develop, sell or seek Regulatory Approval for the
Product, including, without limitation, any preclinical, clinical, toxicology
studies, Clinical Trial data and information, Clinical Trial databases and
manufacturing methods which Lilly has developed or acquired ownership or
Control of prior to the Effective Date, and which Lilly is not legally
prohibited from transferring to Neurogenetics (and including all information
and data generated pursuant to Section 2.2).

 

1.28        “Major Market” means [***].

 

1.29        “Net Sales” means with respect to Product, the gross
amount invoiced by Permitted Sellers to unrelated third parties for the Product
in the Territory less the following items consistent with GAAP:

 

(a)                                  Trade, quantity and cash discounts allowed;

 

(b)                                  Discounts, refunds, rebates, chargebacks,
retroactive price adjustments;

 

(c)                                  Actual Product returns and allowances; and

 

(d)                                  duties, sales taxes, excise taxes and
transportation charges to Third Persons actually paid by, or on behalf of the
Permitted Seller making the sale and separately set forth in the invoiced
amount.

 

In
the event the Product is sold as part of a combination product, the Net Sales
of the Product, for the purposes of determining royalty payments, shall be
determined by multiplying the Net Sales (as defined above in this section 1.28)
of the combination product by the fraction A/(A+B), where A is the weighted
average sale price of the Product when sold separately in finished form and B
is the weighted average sale price of the other product(s) sold separately in
finished form. In the event that such average sale price cannot be determined
for both the Product and the other product(s) in combination, Net Sales for
purposes of determining royalty payments shall be mutually agreed by the
Parties based on the relative value contributed by each component of such
Product, and such agreement shall not be unreasonably withheld.

 

Such
Net Sales amounts shall be determined from the books and records of the
Permitted Seller and maintained in accordance with GAAP. Further, in
determining such amounts, Neurogenetics will use Neurogenetics’ then current
standard procedures and methodology, including Neurogenetics’ then current
standard exchange rate methodology for the translation of foreign currency
sales into U.S. Dollars or, in the case of other Permitted Sellers, such
similar methodology, consistently applied.

 

Notwithstanding
the foregoing, Net Sales shall include sales made by Permitted Sellers to

 

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5

 

Third Persons, but shall not include sales of
Product between or among Permitted Sellers unless the Permitted Seller that
purchases Product is the end user of such Product. In addition, sales of
Product for use in clinical trials prior to receipt of Regulatory Approval for
such Product shall not be included in Net Sales, provided that such sales are
made without profit or with de minimus profits.

 

1.30        “Neurogenetics Technology” means any inventions, whether patentable or
not, information and data that are Controlled by Neurogenetics and necessary to
manufacture, use, research, develop, sell or seek Regulatory Approval for the
Compound or Product, including, without limitation, manufacturing processes,
formulations, modes of delivery and methods of use, toxicology studies,
Clinical Trial information and data, and post-registration Clinical Trial
information and data relating to the Compound or the Product, and which
Neurogenetics is not legally prohibited from transferring to Lilly.

 

1.31        “Permitted Seller” means Neurogenetics and its Affiliates and
any permitted assignee, licensee or sublicensee having the right to sell
Product hereunder.

 

1.32        “Person” means a natural person, a corporation, a
partnership, a trust, a joint venture, a limited liability company, any
governmental authority, or any other entity or organization.

 

1.33        “Phase I Clinical Trials” means human clinical trials conducted to
establish an initial safety profile and pharmacodynamics of Product in the
particular indication tested.

 

1.34        “Phase II Clinical Trials” means human clinical trials conducted to
achieve a level of efficacy and safety of Product as well as a preliminary
dosage in the particular indication tested.

 

1.35        “Phase III Clinical Trials” means human clinical trials conducted to
establish efficacy of Product and meet requirements to file Applications for
Marketing Authorization for Product with health regulatory authorities in the
particular indication tested.

 

1.36        “Primary Endpoint” means in Clinical Trials, the main parameter
used to compare the results in different arms of such trial. The Primary
Endpoint addresses the effect of an intervention variable, such as treatment,
on the outcome variables of interest, such as response or survival. A Primary
Endpoint may be directly related to the condition (e.g., reduction in symptom,
progression of the disease) or may be measurements of surrogate markers.

 

1.37        “Product” means a finished or semi-finished human
pharmaceutical product containing Compound and all dosage strengths and sizes
thereof, that may, pursuant to Applicable Laws and regulations be manufactured,
marketed and sold upon Regulatory Approval, together with all expansions and
improvements thereon which may be included in any supplement, modification or
addition to the Regulatory Approval.

 

1.38        “Regulatory Approval” means approval of an Application for
Marketing Authorization and satisfaction of any related applicable FDA
registration and notification

 

6

 

requirements (if any) and, with respect to
Europe, receipt of price approval (if any); provided that price approval will
be deemed to have been received at the time price approval is first received
for any country in Europe.

 

1.39        “Regulatory Documents” shall have the meaning as set forth in
Section 10.3(e).

 

1.40        “Royalty Term” means, with respect to each country in which
the Product is sold, on a Product-by-Product basis, that time period beginning
on the First Commercial Sale of Product in such country and expiring, on a
country-by-country basis, on the later of:

 

(i)                                    [***] ([***]) years from the date of First
Commercial Sale of Product in such country;

 

(ii)                                the expiration in such country of the last-to-expire Licensed Patent
with a Valid Claim; or

 

(iii)                                            the expiration of the applicable time period
of the Product’s Data Exclusivity Period in such country.

 

1.41        “Territory” means all countries of the world.

 

1.42        “Third Person” means Persons other than the Parties and
Affiliates thereof, and Permitted Sellers.

 

1.43        “Valid Claim” means a claim of an issued and unexpired
patent included within the Licensed Patents in a country which:  (i) but for this Agreement, would be infringed
by the manufacture, importation, use or sale or other disposition of Product by
or on behalf of Neurogenetics or another Permitted Seller, (ii) has not been
revoked or held unenforceable or invalid by a decision of a court or other
governmental agency of competent jurisdiction, unappealable or unappealed
within the time allowed for appeal, and (iii) has not been abandoned,
disclaimed or admitted to be invalid or unenforceable through reissue,
disclaimer or otherwise.

 

ARTICLE 2

 

GRANT OF LICENSE

 

2.1          License. Subject to the terms and conditions set forth
herein, during the term of this Agreement, Lilly grants Neurogenetics an
exclusive (except as to Lilly for internal research purposes as set forth in
Section 2.2 below) license (with the right to sublicense in accordance with
Section 2.3) under Lilly Know-How and Licensed Patents to make, have made,
use, sell, offer for sale, and import Compound and Product in the Field in the
Territory.

 

2.2          Reservation of Rights. Notwithstanding the license granted to
Neurogenetics under Section 2.1, Lilly reserves the right (without any
right to grant any right to any Third Person under such right) under the
license to conduct research on the Compound for internal non-human research
purposes only.

 

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7

 

2.3          Right of First Negotiation. If, during the term of this Agreement, (i)
Neurogenetics desires to sublicense to any Person (other than any Affiliate of
Neurogenetics) its commercialization rights under this Agreement in the United
States or sublicense or otherwise transfer (except as permitted under Section
11.10) all of its rights under this Agreement (including the Neurogenetics
Technology) worldwide, or (ii) a Third Person initiates such discussions with
Neurogenetics and Neurogenetics is interested in entertaining such discussions
(both (i) and (ii) are collectively referred to as a “Business Opportunity”),
then Neurogenetics will promptly notify Lilly in writing thereof, with such
notice containing all reasonable available information necessary for a
potential licensee or commercialization partner to evaluate the Business
Opportunity, including proposed terms of such transaction; provided that in no
event will Neurogenetics be required to disclose to Lilly the identity or
confidential information of any Third Person. Within [***] days of Lilly’s
receipt of the written notice, Lilly will respond to Neurogenetics in writing
regarding Lilly’s interest in the Business Opportunity. If Lilly indicates
interest in pursuing the Business Opportunity, the Parties will negotiate in
good faith to enter into a definitive agreement. If (i) Lilly indicates no
interest in the applicable Business Opportunity or does not respond to
Neurogenetics with respect to the applicable Business Opportunity within the
applicable [***] day period, or (ii) Lilly and Neurogenetics are unable, other
than through lack of good faith on the part of Neurogenetics, to enter into a
definitive agreement within [***] days after Lilly’s receipt of Neurogenetics’
initial notice or such additional time as is reasonably necessary to obtain any
required governmental consents or approval to enter into such agreement,
Neurogenetics will be free to enter into such Business Opportunity with another
Person on terms no less favorable to Neurogenetics than those last proposed by
Lilly. Notwithstanding anything in this Agreement to the contrary, any Business
Opportunity entered into by Neurogenetics with a Third Person will be subject to
Lilly’s rights under this Agreement, including, without limitation, Lilly’s
right to receive the milestone payments and royalty payments.

 

2.4          Sublicensing Rights -
Neurogenetics Sublicenses. The
license granted herein by Lilly to Neurogenetics pursuant to Section 2.1 will
not be sublicensed or otherwise transferred by Neurogenetics prior to
Neurogenetics’ compliance with Section 2.3 hereof, if applicable. If Section
2.3 applies to a proposed sublicense of rights granted to Neurogenetics
hereunder and Neurogenetics has complied with Section 2.3 but the Parties
did not enter into an agreement with respect to such rights pursuant to
Section 2.3, then Neurogenetics may sublicense such rights (with the right
to further sublicense subject to Lilly’s rights under this Agreement,
including, without limitation, Lilly’s right to receive the milestone payments
and royalty payments) without the prior consent of Lilly, subject to compliance
with Section 2.3. If Section 2.3 does not apply to a proposed sublicense
of rights granted to Neurogenetics hereunder, then Neurogenetics may sublicense
the rights granted to it hereunder (with the right to further sublicense
subject to Lilly’s rights under this Agreement, including, without limitation,
Lilly’s right to receive the milestone payments and royalty payments) only with
the prior consent of Lilly, not to be unreasonably withheld; provided, however,
such consent will be deemed to have been given if Lilly does not provide
written notice to Neurogenetics that it objects to the proposed sublicense
within thirty (30) days after the date that Neurogenetics requested consent to
such sublicense from Lilly; provided further that no such consent will be
required in connection with a sublicense of the rights granted to Neurogenetics
hereunder to an Affiliate of Neurogenetics. Neurogenetics will

 

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remain liable for milestone payments and
royalty payments hereunder as a result of Net Sales made by a Permitted Seller
pursuant to a sublicense permitted pursuant to this Section 2.4. Each
sublicense granted by Neurogenetics under this Agreement will contain
provisions that obligate sublicensees to Neurogenetics to at least the same
extent that Neurogenetics is obligated to Lilly under this Agreement (excluding
the specific obligations of Neurogenetics to Lilly under this Agreement that
are not applicable under the sublicense agreement between Neurogenetics and its
sublicensee). Additionally, promptly after execution, Neurogenetics shall
provide Lilly with a copy of all sublicense agreement(s), with confidential
information redacted as appropriate, provided, however, that no information
necessary to this Agreement and Lilly’s rights hereunder shall be redacted.

 

2.5          Lilly Covenant. During the term of this Agreement, Lilly
covenants that it will not make any claim against Neurogenetics or any other
Permitted Seller or commence or prosecute any suit or action against
Neurogenetics or any other Permitted Seller for making, using, selling,
offering for sale, and importing Compound or Product based upon an allegation
of infringement of any claim of an issued patent owned or Controlled by Lilly
covering any Compound or Product or their manufacture, use or sale, provided
that this provision will not apply to the extent such claim is based on
technology developed by or on behalf of Lilly after the Effective Date or not
included in the Licensed Patents and Lilly Know-How as licensed to
Neurogenetics hereunder or Controlled by Lilly as of the Effective Date but not
used in conjunction with the Compound or Product as of the Effective Date.

 

ARTICLE 3

 

CONSIDERATION

 

3.1          Payments from Neurogenetics
to Lilly.

 

(a)           Neurogenetics’ Initial
Payment. Neurogenetics will
pay to Lilly the non-refundable sum of six million and no/100 Dollars
($6,000,000.00) by Federal Reserve electronic wire transfer in immediately
available funds to an account designated by Lilly, payable as follows:  (i) [***] payable on the Effective Date;
and (ii) [***]  payable
within ninety (90) days after the Effective Date. Neurogenetics will ensure
that each such payment has priority designation and will provide Lilly with the
federal reference number for tracking purposes.

 

(b)           Milestone Payments from Neurogenetics
to Lilly. Within thirty (30)
days of Neurogenetics or its Permitted Sellers achieving a milestone event
listed below with respect to a non-oral form of the Compound or Product,
Neurogenetics will notify Lilly in writing thereof and pay the below-specified
non-creditable and non-refundable fees to Lilly by Federal Reserve electronic
wire transfer in immediately available funds to an account designated by Lilly.

 

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9

 

	
  Milestone Event

  	
   

  	
  Payment

  
	
  [***]

  	
   

  	
  [***]
  Dollars [***]

  
	
  [***]

  	
   

  	
  [***]
  Dollars [***]

  
	
  [***]

  	
   

  	
  [***]
  Dollars [***]

  
	
  [***]

  	
   

  	
  [***]
  Dollars [***]

  
	
  [***]

  	
   

  	
  [***]
  Dollars [***]

  
	
  [***]

  	
   

  	
  [***]
  Dollars [***]

  
	
  [***]

  	
   

  	
  [***]
  Dollars [***]

  
	
  [***]

  	
   

  	
  [***]
  Dollars [***]

  

 

Additionally,
Neurogenetics will pay the following non-refundable milestone payments in
dollar amounts payable according to the following schedule of events relating
to an oral form of Compound or Product. Neurogenetics will notify Lilly in
writing thereof and pay the below-specified non-creditable and non-refundable
fees to Lilly by Federal Reserve electronic wire transfer in immediately
available funds to an account designated by Lilly:

 

	
  Milestone Event

  	
   

  	
  Payment

  
	
  [***]

  	
   

  	
  [***]
  Dollars[***]

  
	
  [***]

  	
   

  	
  [***]
  Dollars[***]

  
	
  [***]

  	
   

  	
  [***]
  Dollars[***]

  
	
  [***]

  	
   

  	
  [***]
  Dollars[***]

  
	
  [***]

  	
   

  	
  [***]
  Dollars[***]

  
	
  [***]

  	
   

  	
  [***]
  Dollars[***]

  

 

If
any milestone event is achieved with respect to Compound or Product and at such
time any one or more of the milestone events previously listed has not been
achieved with respect to Compound or Product, then at the time of the milestone
payment for such achieved milestone event, Neurogenetics shall pay to Lilly the
previously listed and unpaid payments for such unmet milestone events, up to
and including filing of an NDA in the US or its equivalent in Europe or Japan.
Subsequent milestone event payments will be paid within thirty (30) days by
Neurogenetics to Lilly as such milestone events are achieved.

 

(c)           Royalty Payments from Neurogenetics
to Lilly. Neurogenetics
shall pay Lilly a royalty on worldwide Net Sales of Product by Permitted
Sellers during the Royalty Term as follows:

 

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10

 

	
  On that portion of Net Sales in a given Calendar Year that is:

  	
   

  	
  Royalty rate

  	
   

  
	
  [***] $[***] and [***] $[***]

  	
   

  	
  [***]%

  	
   

  
	
  [***] $[***] and [***] $[***]

  	
   

  	
  [***]%

  	
   

  
	
  [***] $[***] and [***] $[***]

  	
   

  	
  [***]%

  	
   

  

 

However,
if during the Royalty Term Generic Competition occurs in a country in the
Territory, then the royalty rates described above will each be decreased by
[***] percentage points on Net Sales in such country from the Calendar Quarter
where Generic Competition is first determined for so long as Generic
Competition remains in such country.

 

Neurogenetics
shall pay royalties due under Section 3.1(c) concurrently with the remittance
of the royalty report in accordance with Section 3.2. All amounts payable to
Lilly under Section 3.1 shall be paid in U.S. dollars by Federal Reserve
electronic wire transfer in immediately available funds to an account
designated in writing by Lilly (unless otherwise instructed by Lilly in
writing).

 

3.2          Record Retention, Royalty
Reports, and Royalty Payment Schedule. Neurogenetics shall keep (and shall cause its Affiliates and require
its sublicensees to keep) complete and accurate books and records that are
necessary to ascertain and verify royalty payments owed under Section 3.1(c).
Such records shall be kept in accordance with GAAP and Neurogenetics’ or its
sublicensees’ internal practices and procedures, consistently applied.
Neurogenetics shall furnish Lilly with a quarterly report on Net Sales of
Product within forty-five (45) days after the end of each Calendar Quarter.
Such report shall include a written report detailing: (i) the Net Sales of
Product for the previous Calendar Quarter, broken down by country and between
Neurogenetics and any Permitted Sellers, (ii) the royalty payment that is due
and payable, and (iii) the basis for calculating such royalty payment.
Neurogenetics will mail such reports to the attention of:  Eli Lilly and Company, Lilly Royalty
Administration in Finance, Drop Code 1064, Lilly Corporate Center,
Indianapolis, Indiana, 46285. The amount of royalty payment due to Lilly shall
be paid by Neurogenetics concurrently with the remittance of each royalty
report (that is, within forty-five (45) days of the end of each Calendar
Quarter).

 

3.3          Milestone Payments are not
Creditable. Neurogenetics’
milestone payments under this Article 3 are not creditable against
Neurogenetics’ royalty obligations to Lilly under this Article 3.

 

3.4          Audits. Lilly will have the right, during regular
business hours and upon reasonable advance notice, to have such books and
records of Neurogenetics described in Section 3.2 audited no more than[***]
time per calendar year so as to verify the accuracy of the information
previously reported to Lilly under Section 3.2. Lilly will, for purposes of
such audit, utilize only the services of an independent certified public
accounting firm selected by Lilly and approved by Neurogenetics, such approval
not to be unreasonably withheld. Such audit may cover the [***] calendar years
preceding the date of the request for such audit and may not cover any other calendar
year; provided, however that
Lilly may audit a given calendar year only once. Notwithstanding the foregoing,
no audit of Neurogenetics pursuant to this Section 3.4 will cover any period of
time preceding the Effective Date. Such audit right shall continue for [***]
calendar years following termination of the Agreement.

 

***   Confidential
Treatment Requested

 

11

 

Such
accountants will keep confidential any information obtained during such audit
and will report to Lilly only their conclusions. The cost of such audit will be
borne by Lilly; however, if as a result of such audit the Parties agree that
the amount of royalties owed to Lilly is greater than or equal to [***]percent
([***]%) or more than the amount of royalties paid for the calendar year that
is the subject of the audit, the cost of the audit will be borne by
Neurogenetics. Within thirty (30) days after both Parties have received a copy
of an audit report, Neurogenetics or Lilly, as appropriate, will compensate the
other Party for payment errors or omissions revealed by the audit.
Neurogenetics will include in all sublicenses granted in accordance herewith,
and any other agreements enabling a Third Person to be a Permitted Seller, an
audit provision substantially similar to the foregoing requiring such Permitted
Seller to keep full and accurate books and records relating to the Product and
granting Lilly the right to have an independent public accounting firm audit
the accuracy of the information reported by the sublicensee in connection
therewith.

 

3.5          Taxes And Currency. All payments made under this Agreement shall
be in United States dollars. Any and all taxes levied on any payments by
Neurogenetics under this Agreement shall be the liability of and paid by Lilly.
If laws or regulations require the withholding of such taxes, the taxes will be
deducted by Neurogenetics from the payment and remitted by Neurogenetics to the
proper tax authority, provided that Neurogenetics will furnish Lilly with a
copy of the official tax receipt on such withholdings as soon as practicable
after such withholding, and give Lilly such assistance as may be reasonably
necessary to enable or assist Lilly to claim exemption or take credit
therefrom. Proof of payment shall be provided to Lilly within sixty (60) days
after payment. Neurogenetics will cooperate in pursuing tax refunds, if such
refund is appropriate in Lilly’s determination.

 

3.6          Late Payment. Any amounts not paid by Neurogenetics when
due under this Agreement will be subject to interest from and including the
date payment is due through and including the date upon which Lilly has
collected the funds in accordance herewith at a rate equal to the lesser of (i)
the sum of [***] percent ([***]%) plus the prime rate of interest quoted in the
Money Rates (or equivalent) section of the Wall
Street Journal per annum, calculated daily on the basis of a three
hundred sixty (360) day year, or (ii) the maximum interest rate allowed by law.

 

ARTICLE 4

 

INITIATION AND CONDUCT OF DEVELOPMENT

AND COMMERCIALIZATION OF PRODUCT

 

4.1          Neurogenetics and Lilly
Representatives. Promptly
(and no later than thirty (30) days) after the Effective Date, Neurogenetics
shall designate in writing the Neurogenetics representative that shall have the
responsibility of communicating with Lilly personnel regarding transition
support, development and commercialization of Product under this Agreement
(including the provision of that individual’s name, job title, fax and phone
number). Neurogenetics may change such representative from time to time by
written notice to Lilly containing the name and contact information for the new
representative. Likewise, Lilly will promptly (and no later than thirty (30)
days) after the Effective Date, designate in writing the

 

***   Confidential
Treatment Requested

 

12

 

Lilly representative that shall have the
responsibility of communicating with Neurogenetics under this Agreement
(including the provision of that individual’s name, job title, fax and phone
number). Lilly may change such representative from time to time by written
notice to Neurogenetics containing the name and contact information for the new
representative.

 

4.2          Transfer of Lilly Know-How
and Transition Support.

 

(a)           Provision of Lilly Know-How.
Lilly shall use its
reasonable best efforts to supply Neurogenetics, as promptly as practicable
after the Effective Date, and in any event within ninety (90) days of the
Effective Date (“Transition
Period”), with all information, materials, data and documents
related to the Compound or Product and its development, use or manufacture as
set forth in Exhibit B, (all of which are deemed Lilly Know-How). As part of
such supply, Lilly shall transfer to Neurogenetics possession and ownership of
the investigational new drug application with respect to Compound or Product (“IND”) and take such
action as necessary or appropriate to effect the transfer of such IND with or
by the FDA. In addition, Lilly will cooperate with Neurogenetics and provide
assistance to Neurogenetics as reasonably requested to enable Neurogenetics to
obtain access to investigator INDs.

 

(b)           Transition Support. The Parties agree to work in good faith to
complete the provision of Lilly Know-How to Neurogenetics within the Transition
Period. In addition, during the Transition Period, Lilly will grant
Neurogenetics access, during normal business hours, to appropriate Lilly
personnel for reasonable consultation related to the Lilly Know-How. Except as
set forth in Section 4.2(d) below, such access to Lilly personnel during the
Transition Period is at no cost to Neurogenetics, and is estimated to take a
total of[***] Lilly Person hours. Neurogenetics, however, is responsible for,
and will pay for travel and associated expenses in accordance with Section
4.2(d). Lilly will consider any further requests by Neurogenetics to provide
assistance hereunder after the [***]hours or the end of the Transition Period,
whichever is sooner, and if Lilly agrees to provide such additional assistance,
Neurogenetics shall promptly pay Lilly (i) an amount equal to [***]dollars
($[***]) per hour for each such hour of services provided by Lilly, and (ii)
the expenses set forth in Section 4.2(d). Nothing contained in this Section 4.2(c)
or otherwise in this Agreement will be construed as a guarantee by Lilly that
Neurogenetics will obtain Regulatory Approval for the Product.

 

(c)           Payment of Expenses. Neurogenetics will reimburse Lilly, within
[***] days of receipt of a Lilly invoice (together with proper supporting
documentation), all of the [***] and [***] and [***] of Lilly personnel who
travel to Neurogenetics facilities, upon Neurogenetics’ request, to provide
manufacturing and regulatory transition support under this Section 4.2.

 

(d)           Further Assurances. Lilly covenants and agrees to execute and
deliver such documents and take such other actions after the Effective Date and
the Transition Period as Neurogenetics may reasonably request for the purpose
of providing Neurogenetics with the Lilly Know-How and Compound Supply as
set forth in this Agreement.

 

4.3          Development Plans. A copy of Neurogenetics’ initial Development
Plan shall be attached hereto as Exhibit D.
Lilly shall have the right, but not the obligation, to review and

 

***   Confidential
Treatment Requested

 

13

 

advise and comment on Clinical Trial
Protocols and Primary Endpoints to be pursued by Neurogenetics under the
Development Plan, including as amended, altered or changed by Neurogenetics
hereunder. Neurogenetics shall consider such comments in good faith when
finalizing such Clinical Trial Protocols and Primary Endpoints.

 

4.4          Neurogenetics’ Obligation to
Develop Compound and Product. As
of the Effective Date, Neurogenetics or its sublicensees shall be responsible
(financially and otherwise) for all further development (pre-clinical and
clinical) for Product conducted by or for Neurogenetics or any Permitted
Seller. Neurogenetics or its sublicensees shall have responsibility for seeking
all necessary Regulatory Approvals to develop the Product, and Neurogenetics or
its sublicensees, shall hold legal title to all Applications for Marketing
Authorizations within the Territory, and shall assume full responsibility for the
Clinical Trial Protocols developed in support of such Applications for
Marketing Authorization. Except in accordance with this Agreement, Lilly shall
have no financial obligation relating to Compound or Product. Neurogenetics
shall diligently commence development on the Compound and Product in accordance
with the Development Plan. Neurogenetics, itself or through its sublicensees,
shall use Diligence in researching and developing the Product and otherwise
carrying out its duties as contemplated under this Agreement. As part of its
Diligence requirement, Neurogenetics (itself or through its sublicensees) will
use commercially reasonable efforts to:

 

a)                                      [***],

 

b)                                      [***], and

 

c)                                      [***].

 

Neurogenetics
will be responsible for all regulatory requirements during development and
commercialization of the Compound and Product. Nothing contained in this
Section 4.4 or otherwise in this Agreement will be construed as a guarantee by
Neurogenetics that Regulatory Approval will be obtained for any Product or that
any Product will be commercialized.

 

4.5          Neurogenetics Obligation to
Update Lilly of Product Development Progress. At least once every six (6) months, the
Neurogenetics representative shall provide the Lilly representative with (1) a
summary midyear and (2) copy of the detailed end of year FDA written reports
describing the progress made in implementing the Development Plan. Each such
report shall include with respect to the applicable six (6) month period a
description of the research and development activities conducted both in the
United States and outside the United States with respect to the Product.
Neurogenetics shall provide the Lilly representative with regular telephonic
updates on the progress made in implementing the Development Plan and other
information as Lilly may reasonably request.

 

***   Confidential
Treatment Requested

 

14

 

4.6          Neurogenetics’
Commercialization Obligation.

 

(a)           Diligence. If the Product receives Regulatory Approval
in a given country, Neurogenetics (itself or through its sublicensees) shall
use Diligence to commercialize the Product in such country.

 

(b)           Neurogenetics Obligation to
Notify, and Lilly’s Right to Terminate for Failure of Neurogenetics to Market
Product. Neurogenetics shall
promptly notify Lilly if Neurogenetics (itself or through its sublicensees)
decides:

 

(i)                                    [***];

 

(ii)                                [***]; and/or

 

(iii)                            [***].

 

Such
notice or failure under Section 4.6(b)(i)-(iii) shall be deemed a material
breach under Section 10.2.

 

4.7          Adverse Event Reporting. Neurogenetics agrees to report adverse events
that occur during the development and marketing of Product to the relevant
regulatory authorities promptly according to the Applicable Laws.

 

4.8          Governmental Filings. Lilly and Neurogenetics each agree to prepare
and file whatever filings, requests or applications are required to be filed
with any governmental authority in connection with the transfer of rights in
Article 2 of this Agreement and to cooperate with one another as reasonably necessary
to accomplish the foregoing.

 

4.9          Compliance with Law. Neurogenetics will comply in all material
respects with all Applicable Laws relating to its development, manufacture,
distributing, marketing, promotion, selling, importing and exporting of the Product.
Neurogenetics agrees and acknowledges that as holder of the Regulatory
Documents with respect to Compound and Product, it will have sole
responsibility for, among other things, adverse event reporting and all other
regulatory reporting and regulatory document maintenance obligations.

 

4.10        Cooperation. If either Party becomes engaged in or
participates in any investigation, claim, litigation or other proceeding with
any Third Person, including the FDA, relating in any way to the Product, the
other Party will cooperate, at its own cost, in all reasonable respects with
such Party in connection therewith, including, without limitation, using its
reasonable efforts to make available to the other such employees who may be
reasonably necessary with respect to such investigation, claim, litigation or
other proceeding.

 

***   Confidential
Treatment Requested

 

15

 

ARTICLE 5

 

SUPPLIES OF COMPOUND

 

5.1          Transfer of Compound Supply.
As of the Effective Date,
Lilly hereby assigns, transfers, and conveys all of Lilly’s right, title, and
interest in and to the Lilly supply of Compound, including intermediates, as
described in Exhibit C (“Compound Supply”),
and promptly as practicable, and in any event within sixty (60) days, after the
Effective Date, will transfer Compound Supply as well as all existing
documentation, methods and standards related to the Compound Supply except that
such documentation, methods and standards shall be provided in accordance with
Section 4.2(a). Once possession of the Compound Supply is transferred to
Neurogenetics, Neurogenetics shall be responsible for performing, or having a
Third Person perform, all quality control, quality assurance, and analytical
assays (including developmental, release, related substances, stability,
toxicology dosage form and end of study assays). Neurogenetics shall not use
Compound Supply in human clinical trials. Neurogenetics acknowledges that Lilly
will not be able to supply any additional quantities of Compound other than
that set forth on Exhibit C.
Neurogenetics acknowledges that this material was made many years ago under
then-current GMP conditions and that Lilly makes no representations or
warranties that it meets current GMP conditions. Neurogenetics acknowledges
that Lilly will retain a small amount of this material.

 

5.2          Additional Supply of
Compound. Except as set
forth in Section 5.1, Neurogenetics shall, at its own expense, provide all
quantities of Compound that Neurogenetics needs to accommodate its development
and commercialization efforts under this Agreement. Lilly shall have no
obligation to further supply such quantities of Compound.

 

ARTICLE 6

 

INTELLECTUAL PROPERTY

 

6.1          Intellectual Property
Maintenance. Lilly shall
have the right to file, prosecute and maintain Licensed Patents worldwide, at
its own expense. Lilly shall have the ultimate responsibility for and control
over such matters. Lilly shall be responsible for all of its out-of-pocket
expenses incurred in filing, prosecuting and maintaining Licensed Patents.
Lilly shall keep Neurogenetics informed of the filing, prosecution and
maintenance of Licensed Patents, and shall furnish to Neurogenetics copies of
substantive documents (e.g.,
applications, office actions and responses) relevant to any such efforts in
advance with sufficient time for Neurogenetics to review and provide comments
on such documents, and shall in good faith take such comments into account. If
Lilly decides to allow any Licensed Patent to lapse or if Lilly wishes to abandon
any Licensed Patent, Lilly shall notify Neurogenetics in writing not less than
sixty (60) days prior to taking such action, and Neurogenetics shall have the
right to assume the responsibility for such Licensed Patents. If Neurogenetics
does so, then Neurogenetics may assume control of the same at Neurogenetics’
sole expense (it being understood that all other rights under the license to
such Licensed Patent in other countries and to all other Licensed Patents in
all countries under Article 2 continue).

 

6.2          Enforcement of Intellectual
Property Rights. Lilly and
Neurogenetics will promptly notify the other of any infringement or suspected
infringement that may come to its notice of any intellectual property rights
relating to the Product, including, without limitation, the Licensed Patents
and Lilly Know-How, and will provide the other Party with information with

 

16

 

respect thereto. If a Third Person infringes
any Licensed Patent or Lilly Know-How, Neurogenetics will have the first right
(but not the obligation), at its own expense, to pursue any and all injunctive
relief, and any or all compensatory and other remedies and relief, including
settlement thereof (collectively, “Remedies”), against such Third Person to the
extent that such infringement relates to subject matter licensed to
Neurogenetics under Section 2.1, and Lilly will have the right to participate
in such action at its own expense; provided, however that if the patents
included among the Licensed Patents contain subject matter not licensed to
Neurogenetics, then, as to such subject matter, Lilly shall have the first
right (but not the obligation), at its own expense, to pursue Remedies relating
to such infringement, and Neurogenetics will have the right to participate in
such action at its own expense. Should a Party determine not to pursue Remedies
with respect to any such infringement or misappropriation of Licensed Patents
or Lilly Know-How within ninety (90) days after receipt of written notice from
the other Party requesting the first Party to do so, then the other Party will
have the right (but not the obligation), at its own expense, to pursue Remedies
against such Third Person, and the first Party shall have the right to
participate in such action at its own expense.

 

6.3          Assistance and Cooperation. If a Party pursues Remedies hereunder with
respect to infringement or misappropriation of Licensed Patents or Lilly
Know-How, the other Party will use all reasonable efforts to assist and
cooperate with the Party pursuing such Remedies, including joining in any
action or providing a power of attorney if necessary. Each Party will bear its
own costs and expenses relating to such pursuit. Any damages or other amounts
collected will be distributed, first, to the Party that pursued Remedies to
cover its costs and expenses; and second, to the other Party to cover its costs
and expenses, if any, relating to the pursuit of such Remedies; and any
remaining amount will be distributed to the Party that pursued the Remedies,
provided that any such amount received by Neurogenetics that represents lost
sales of Products shall be deemed Net Sales hereunder.

 

6.4          Settlement of Litigation. Neither Party shall have the right to enter
into any settlement, consent judgment or other final disposition of an action
for infringement or validity as to any Licensed Patent or Lilly Know-How under
this Article 6 if such settlement, consent judgment or other final
disposition would diminish the rights or interests of the other Party, except
with the written consent of such other Party, which consent shall not be
unreasonably withheld.

 

6.5          Infringement of Third Person
Rights. If a Third Person
institutes a patent, trade secret or other infringement suit against
Neurogenetics or a Permitted Seller during the term of this Agreement, alleging
that the manufacture, marketing, sale, use or importation of the Product
infringes one or more patent or other intellectual property rights held by such
Third Person, then Neurogenetics will have the sole right (but not the
obligation), at its sole expense, to assume direction and control of the
defense of such claims. Neurogenetics will not have the right to settle or
otherwise dispose of any such claim in a manner that would diminish the rights
or interests of Lilly without the consent of Lilly, which consent will not be
unreasonably withheld.

 

6.6          Neurogenetics Technology. Neurogenetics will be the sole owner of the
Neurogenetics Technology. Neurogenetics shall bear all expenses incurred in preparing,
filing,

 

17

 

prosecuting and maintaining all patent
applications and patents that encompass any Neurogenetics Technology.

 

6.7          Trademarks. Neurogenetics will own and be responsible for
all trademarks related to its marketing of Product and will be responsible, in
its sole discretion, for registering, defending and maintaining such
trademarks.

 

6.8          Patent Cooperation. Each Party hereby agrees:

 

(a)                                  to make its employees, agents and consultants
reasonably available to the other Party (or the other Party’s authorized
attorneys, agents or representatives) at the other Party’s expense, to the
extent reasonably necessary to enable the Party responsible for prosecuting the
Licensed Patents to undertake preparation, filing, prosecution and maintenance
of the Licensed Patents; and

 

(b)                                  to cooperate, if necessary and appropriate,
with the other Party in gaining patent term extensions wherever applicable to
Licensed Patents.

 

6.8          Patent Term Extension. To the extent they cover Compound or Product,
Neurogenetics shall have the sole right to decide whether a request for patent
term extension with regard to each of the Licensed Patents should be made. If
Neurogenetics decides that one or more such requests should be made, such
request(s) shall be made at Neurogenetics’ own expense. Lilly agrees to abide
by the Neurogenetics decision, and reasonably cooperate with Neurogenetics in
connection with making such a request(s) and obtaining patent term
extension(s). At Neurogenetics’ request, and where possible, Lilly shall deem
Neurogenetics to be the agent of Lilly solely for purposes of filing and
obtaining such patent term extension.

 

ARTICLE 7

 

CONFIDENTIALITY

 

7.1          Confidential Information. The Parties agree that, unless the Receiving
Party obtains the prior written consent of the Disclosing Party, at all times
during the term of this Agreement and for a [***] ([***])-year period following
its expiration or earlier termination, the Receiving Party will keep completely
confidential, will not publish or otherwise disclose and will not use directly
or indirectly for any purpose other than as contemplated by this Agreement any
Confidential Information of the Disclosing Party, whether such Confidential
Information was received by the Receiving Party prior to, on or after the
Effective Date. Confidential Information exchanged under the Confidentiality
and Non-Use Agreement dated December 6, 2002 shall
also be included in this Section 7.1.

 

7.2          Limited Disclosure
Permitted. Each Party may
disclose Confidential Information to the extent that such disclosure is:

 

***   Confidential
Treatment Requested

 

18

 

(a)           made in response to a valid order or subpoena
of a court of competent jurisdiction or other governmental body of a country or
any political subdivision thereof of competent jurisdiction; provided, however,
that the Receiving Party will first have given reasonable notice to the
Disclosing Party (if practicable) and given the Disclosing Party a reasonable
opportunity to quash such order or subpoena and to obtain a protective order
requiring that the Confidential Information and documents that are the subject
of such order or subpoena be held in confidence by such court or governmental
body or, if disclosed, be used only for purposes for which the order or
subpoena was issued; provided further, however, that if a disclosure order or
subpoena is not quashed or a protective order is not obtained, the Confidential
Information disclosed in response to such court or governmental order or
subpoena will be limited to that information that is legally required to be
disclosed in such response to such court or governmental order or subpoena;

 

(b)           otherwise required by law, in the opinion of
legal counsel to the Receiving Party; provided, however, that the Receiving
Party will first have given reasonable notice to the Disclosing Party (if
practicable) and given the Disclosing Party a reasonable opportunity to obtain
a protective order or confidential treatment requiring that the Confidential
Information and documents that are the subject thereof be held in confidence by
the recipient or, if disclosed, be used only for purposes required by such law;
provided further, however, that if a protective order is not obtained, the
Confidential Information so disclosed will be limited to that information that
is legally required to be disclosed as required by applicable law.

 

(c)           made by the Receiving Party to the
governmental or regulatory authority, including FDA, as required to conduct
Clinical Trials or obtain or maintain marketing approval for the Product,
provided that reasonable effort will be taken to ensure confidential treatment
of such information;

 

(d)           made by the Receiving Party to a Third Person
as may be necessary or useful in connection with the manufacture, development
and commercialization of the Product, provided that the Receiving Party will in
each case obtain from the proposed Third Person recipient a written
confidentiality agreement containing confidentiality and non-use obligations no
less protective than those set forth in this Agreement;

 

(e)           made by the Receiving Party to a United
States or foreign tax authority;

 

(f)            made by a Receiving Party or any
representative of the Receiving Party in the filing or publication of patents
or patent applications relating to Licensed Patents, Lilly Know-How,
Neurogenetics Technology or any invention relating to the Compound or Product,
to the extent such disclosure in the filing or publication of the patent or
patent application is reasonably necessary for support of the patent or patent
application;

 

(g)           made by a Receiving Party in order to comply
with applicable securities law disclosure requirement or any disclosure
requirements of any applicable stock market or securities exchange; or

 

19

 

(h)           made by the Receiving Party to its
representatives or to Third Persons in connection with financing activities of
the Receiving Party; provided, however, that: (i) each such representative
or Third Person has a need to know such Confidential Information for purposes
of this Agreement and has an obligation to maintain the confidentiality of such
information, (ii) the Receiving Party informs each representative or Third
Person receiving Confidential Information of its confidential nature, and
(iii) the Receiving Party will be responsible for any breach of this
Article 7 by any of its representatives or such Third Persons to the same
extent as if the breach were by the Receiving Party.

 

7.3          Disclosure of Agreement. Except as contemplated herein, neither Party
shall disclose this Agreement (nor a redacted version thereof) to any Third
Person without the prior written consent of the other Party. Without
limitation, these prohibitions apply to press releases, annual reports,
prospectuses, public statements, educational and scientific conferences,
promotional materials, governmental filings and discussions with public
officials, securities analysts and the media. However, subject to the
requirements for review and approval that follow, this provision does not apply
to a disclosure regarding this Agreement which is within the scope of the
exceptions set forth in Section 7.2, including, without limitation,
disclosure which counsel to a Party has advised is required by Applicable Laws,
to regulatory agencies such as the FDA, Securities and Exchange Commission (“SEC”), Federal Trade
Commission or Department of Justice or any applicable stock market or
securities exchange. This includes requests for a copy of this Agreement or
related information by tax authorities.

 

If
any Party to this Agreement determines a release of information regarding the
existence or terms of this Agreement is required by Applicable Laws, prior to
any release of such information, that Party will notify the other Party in
writing as soon as practical and provide as much detail as possible in relation
to the disclosure required and, where possible under Applicable Laws, will
endeavor in good faith to provide the other Party with a minimum of [***]
business days to review the proposed public statement. The Parties will then
discuss what information, if any, will actually be released and that Party
shall obtain the other Party’s prior written consent or conduct any actions it
may reasonably take to prevent or limit the requested disclosure. In addition,
Lilly shall have the right to review and comment on a redaction of this
Agreement required by the SEC or other agencies and Neurogenetics shall use
good faith in taking Lilly’s comments into account prior to releasing the
redaction to the SEC or such agency.

 

7.4          Publications. During the term of this Agreement,
Neurogenetics and Lilly each acknowledge the other Party’s interest in
publishing certain information and results to obtain recognition within the
scientific community and to advance the state of scientific knowledge and each
has the right to publish information as set forth in this Section 7.4. Each
Party also recognizes the mutual interest in obtaining valid patent protection
and protecting business interests. Consequently, either Party, its employees or
consultants wishing to make a publication (including any oral disclosure made
without obligation of confidentiality) relating to work performed by such Party
either before or after the Effective Date and related to the Compound or
Product, the Lilly Know-How or other information or results relating thereto
(the “Publishing Party”) shall transmit to the other party (the “Reviewing
Party”) a copy of the proposed written publication at least forty-five (45)
days prior to the presentation. The Reviewing Party shall have

 

***   Confidential
Treatment Requested

 

20

 

the right (a) to propose modifications to the
publication for patent reasons, (b) to request a reasonable delay in
publication in order to protect patentable information and (c) to edit the
publication in a manner reasonably acceptable to the Publishing Party to
protect its Confidential Information. In the case of Lilly, the requirement for
prior review by Neurogenetics also shall apply to information received from
Third Persons, who have done studies on Compound, to the extent that such
review is allowed or required under agreements with such Third Persons.

 

7.5          Survival. The confidentiality and non-use obligations
of this Article 7 shall survive the termination or expiration of this
Agreement.

 

ARTICLE 8

 

REPRESENTATIONS, WARRANTIES, COVENANTS, AND
DISCLAIMERS

 

8.1          No Litigation, Infringement,
etc. Each Party represents
that, to the best of its knowledge as of the Effective Date, there is no
litigation or proceeding pending or threatened against or involving such Party
in any court or before any agency or regulatory body which could result in a
judgment or liability which could adversely affect such Party’s ability or
right to carry on its business as now conducted or to develop or commercialize
Product as intended under this Agreement. Lilly represents and warrants that
(i) there is no pending litigation which alleges that any of its activities
relating to the Compound have violated, and (ii) to the best of its knowledge,
no litigation has been otherwise threatened which alleges that any of its
activities relating to the Compound have violated, any of the intellectual
property rights of any other person. Lilly represents and warrants that it owns
all right, title and interest in and to the Lilly-Know-How and Compound Supply
and such Lilly Know-How and Compound Supply will be transferred to
Neurogenetics free and clear of any encumbrances. To the best of Lilly’s
knowledge as of the Effective Date, there is no unauthorized use, infringement
or misappropriation of any of its intellectual property rights licensed
hereunder to Neurogenetics. This Section 8.1 is qualified by information
specifically disclosed in writing by Lilly to Neurogenetics prior to the
Effective Date.

 

8.2          Licenses-Lilly. Lilly hereby represents that it has, and that
it shall maintain, the full right and power to grant the exclusive licenses set
forth in Section 2.1 in the manner and to the extent set forth, and to satisfy
its other commitments under this Agreement.

 

8.3          Licenses-Neurogenetics. Neurogenetics hereby warrants that it has and
shall maintain for the term of this Agreement, the full right and power to
satisfy its commitments and to grant the rights to Lilly in accordance with
Section 10.3.

 

8.4          No Debarment. Neurogenetics represents and warrants that it
will comply at all times with the provisions of the Generic Drug Enforcement
Act of 1992 and upon request Neurogenetics will certify in writing that neither
Neurogenetics, its employees, nor any Person providing services for
Neurogenetics under this Agreement has been debarred under the provisions of
such Act. Lilly represents and warrants that it has complied at all times with
the provisions of the Generic Drug Enforcement Act of 1992 with respect to its
activities relating to the Compound and upon request Lilly will certify in
writing that neither Lilly, its employees, nor

 

21

 

any Person providing services for Lilly with
respect to any activities relating to Compound, including, without limitation,
any Clinical Trials, was debarred under the provisions of such Act.

 

8.5          Corporate Existence. As of the Effective Date, each Party
represents and warrants to the other that it is a company duly organized,
validly existing, and, if relevant in its jurisdiction of formation, in good
standing under the laws of the jurisdiction in which it is formed.

 

8.6          Authority to Execute and
Perform. As of the Effective
Date, each Party represents and warrants to the other that it:

 

(a)                                  has the power and authority and the legal
right to enter into this Agreement and perform its obligations hereunder;

 

(b)                                  has taken all necessary company action on its
part required to authorize the execution and delivery of this Agreement; and

 

(c)                                  has duly executed and delivered the
Agreement, which constitutes a legal, valid, and binding obligation of it and
which is enforceable against it in accordance with the Agreement’s terms.

 

8.7          Compliance with Applicable
Law. Neurogenetics warrants
that all work carried out under this Agreement shall be carried out in
compliance with all Applicable Laws, including cGLPs, cGMPs, and cGCPs. Lilly
warrants that all work carried out with respect to Compound, including, without
limitation, Clinical Trials, was carried out in compliance with all Applicable
Laws, including cGLPs, cGMPs, and cGCPs in existence at that time. Nothing in
this Section 8.7 will derogate from Neurogenetics undertaking hereunder not to
use Compound Supply in human clinical trials.

 

8.8          DISCLAIMER OF IMPLIED
WARRANTIES. EXCEPT AS
EXPRESSLY PROVIDED IN THIS SECTION, LILLY MAKES NO REPRESENTATION OR WARRANTY
AS TO THE LICENSED PATENTS, LILLY KNOW-HOW, COMPOUND, COMPOUND SUPPLY OR
PRODUCT, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, STATUTE, OR
OTHERWISE, AND LILLY SPECIFICALLY DISCLAIMS ANY AND ALL IMPLIED OR STATUTORY
WARRANTIES INCLUDING WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A
PARTICULAR PURPOSE. FURTHER, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY UNDER THIS AGREEMENT,
EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, STATUTE, OR OTHERWISE,
AND EACH PARTY SPECIFICALLY DISCLAIMS ANY AND ALL IMPLIED OR STATUTORY
WARRANTIES INCLUDING WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A
PARTICULAR PURPOSE. Without limiting the foregoing, Neurogenetics acknowledges
that it has not and is not relying upon any implied warranty of merchantability
or of fitness for a particular purpose or otherwise, or upon any representation
or warranty whatsoever as to the prospects (financial, regulatory or
otherwise), validity, or likelihood of success of Compound or Product after the
Effective Date.

 

22

 

8.9          DISCLAIMER OF INCIDENTAL AND
CONSEQUENTIAL DAMAGES. EXCEPT
FOR LIABILITY FOR BREACH OF CONFIDENTIALITY OBLIGATIONS, NEITHER PARTY WILL BE
LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, OR SPECIAL
DAMAGES, INCLUDING BUT NOT LIMITED TO LOST PROFITS ARISING FROM OR RELATING TO
ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF
SUCH DAMAGES. NOTHING IN THIS SECTION IS INTENDED TO LIMIT OR RESTRICT THE
INDEMNIFICATION RIGHTS OR OBLIGATIONS OF ANY PARTY.

 

ARTICLE 9

INDEMNIFICATION

 

9.1          Indemnification.

 

(a)           Neurogenetics’ Obligation. Except to the extent such Damages are due to
gross negligence or willful misconduct by Lilly, its Affiliates or their
officers, directors, employees or agents, Neurogenetics shall defend, indemnify
and hold harmless Lilly and its Affiliates and their officers, directors,
employees and agents against any and all Damages incurred by any of them
resulting from or arising out of:

 

(i)                                    any material breach of any representation or
warranty made by Neurogenetics in this Agreement;

 

(ii)                                any third party claim or action regarding the handling, possession,
development, manufacturing, marketing, distribution, promotion, sale or use of
the Product by Neurogenetics or a Permitted Seller;

 

(iii)                            any third party claim or action regarding the
exercise of any right(s) under the Licensed Patents or Lilly Know-How by
Neurogenetics, its Affiliates, permitted sublicensees or any Permitted Seller;

 

(iv)                               Neurogenetics’ failure to comply in all material respects with
Applicable Laws in connection with the performance of its obligations
hereunder; or

 

(v)                                   any third party claim or action regarding any
other activities with respect to Compound conducted by Neurogenetics or any
Permitted Seller after the Effective Date.

 

(b)           Lilly’s Obligation. Except to the extent such Damages are due to
gross negligence or willful misconduct by Neurogenetics, its Affiliates or
their officers, directors, employees or agents, Lilly shall defend, indemnify
and hold harmless Neurogenetics, its Affiliates and their officers, directors,
employees and agents against any and all Damages incurred by any of them
resulting from or arising out of:

 

23

 

(i)                                    any material breach of any representation or
warranty made by Lilly in this Agreement;

 

(ii)                                any Third Person claim or action regarding any activities conducted by
or on behalf of Lilly with respect to rights reserved under Section 2.2 or any
practice or use of the Licensed Patents or Lilly Know-How outside of the scope
of the license granted to Neurogenetics under this Agreement by Lilly or its
Affiliates or sublicensees;

 

(iii)                            any Third Person claim or action regarding
the exercise of any right(s) under the Neurogenetics Technology by Lilly or its
Affiliates or sublicensees pursuant to Section 10.3(c); or

 

(iv)                               any Third Person claim or action regarding any activities with respect
to Compound conducted by Lilly and its Affiliates prior to the Effective Date.

 

9.2          Notice and Opportunity To
Defend.

 

(a)           Notice. Promptly after receipt by a party entitled to
indemnification under Section 9.1 (the “Indemnitee”) of notice of any claim
which could give rise to a right to indemnification pursuant to Section 9.1,
the Indemnitee will give the indemnifying Party (the “Indemnifying Party”)
written notice describing the claim in reasonable detail. The failure of an
Indemnitee to give notice in the manner provided herein will not relieve the
Indemnifying Party of its obligations under this Article 9, except to the
extent that such failure to give notice materially prejudices the Indemnifying
Party’s ability to defend such claim.

 

(b)           Defense of Action. In case any action that is subject to
indemnification under this Article 9 shall be brought against an Indemnitee and
it shall give written notice to the Indemnifying Party of the commencement
thereof, the Indemnifying Party shall be entitled to participate and, if it so
desires, to assume the defense with counsel reasonably satisfactory to such
Indemnitee. After notice from the Indemnifying Party to the Indemnitee of its
election to assume the defense, the Indemnifying Party shall not be liable to
such Indemnitee under this Article 9 for any fees of other counsel or any other
expenses, in each case subsequently incurred by such Indemnitee in connection
with the defense.

 

(c)           Indemnitee’s Separate
Counsel. Notwithstanding the
foregoing, the Indemnitee shall have the right to employ separate counsel and
to participate in the defense of such action, and the Indemnifying Party shall
bear the reasonable fees, costs and expenses of such separate counsel if:  (i) the use of counsel chosen by the
Indemnifying Party to represent the Indemnitee would present such counsel with
a conflict of interest, and the Indemnifying Party does not elect to engage new
counsel without such a conflict; (ii) the Indemnifying Party shall not
have employed counsel reasonably satisfactory to the Indemnitee to represent
the Indemnitee within a reasonable time after notice of the institution of such
action; or (iii) the Indemnifying

 

24

 

Party shall authorize the Indemnitee in
writing to employ separate counsel at the Indemnifying Party’s expense.

 

(d)           Settlement. If an Indemnifying Party assumes the defense
of such action, no compromise or settlement thereof may be effected by the
Indemnifying Party without the Indemnitee’s written consent, which consent
shall not be unreasonably withheld or delayed, unless there is no finding or
admission of any violation of law or any violation of the rights of the
Indemnitee and no effect on any other claims that may be made against the
Indemnitee. In any event, the Indemnitee and the Indemnifying Party may
participate, at their own expense, in the defense of such asserted claim.

 

(e)           Conduct of Defense. Notwithstanding anything to the contrary in
this Section 9.2, the Party conducting the defense of a claim will (1)
keep the other Party informed on a reasonable and timely basis as to the status
of the defense of such claim (but only to the extent such other Party is not
participating jointly in the defense of such claim), and (2) conduct the
defense of such claim in a prudent manner.

 

9.3          Survival. The provisions of this Article 9 will survive
any termination or expiration of this Agreement. Each Indemnitee’s rights under
this Article 9 will not be deemed to have been waived or otherwise affected by
such Indemnitee’s waiver of the breach of any representation, warranty, agreement
or covenant contained in or made pursuant this Agreement, unless such waiver
expressly and in writing also waives any or all of the Indemnitee’s right under
this Article 9.

 

ARTICLE 10

TERM AND TERMINATION

 

10.1        Term. The term of this Agreement will begin upon
the Effective Date and, unless sooner terminated under this Article 10,
will continue in full force and effect on a country-by-country basis in the
Territory until Neurogenetics and its Permitted Sellers have no remaining
royalty payment obligations in a specific country under Section 3.1(c). Upon
expiration in a given country, Neurogenetics shall have a non-exclusive,
perpetual, royalty free, fully paid right to
continue to use Lilly’s Know-How
and Licensed Patents which it was licensed under this Agreement in such
country.

 

10.2        Material Breach by
Neurogenetics. Upon (a) any
material breach of this Agreement by Neurogenetics, (b) material violation of
any warranty or covenant by Neurogenetics, or (c) breach of its Diligence
obligations, including specifically the provisions of Sections 4.4 and 4.6(b)
under this Agreement, Lilly may, at its option, terminate this Agreement upon
ninety (90) days written notice to Neurogenetics. Such termination shall become
effective at the end of such ninety (90) day period unless Neurogenetics cures
such breach or violation during such ninety (90) day period; provided, however,
in the case of a breach or violation that cannot be cured within such ninety
(90) day period, Lilly may terminate this Agreement following such ninety (90)
day period only if Neurogenetics shall have failed to commence

 

25

 

substantial remedial actions within such
ninety (90) day period and to use best efforts to pursue the same.

 

Notwithstanding
the foregoing, to the extent a material breach or material default of this
Agreement by Neurogenetics affects Neurogenetics’ performance and Lilly’s
rights under this Agreement as it relates to one or more countries, but not all
countries, Lilly may terminate this Agreement in accordance with this Section
10.2 as to the affected country or countries only, and in such case this
Agreement will remain in full force and effect in accordance with its terms
with respect to the countries that are not terminated.

 

10.3        Rights Upon Termination by
Lilly. If Lilly terminates
this Agreement under Section 10.2 or 10.5, then the following will take effect
upon the effective date of such termination (if such termination is related to
Section 4.6(b), the following effects will apply on a country-by-country basis
in the country to which such Section applies):

 

(a)           Reversion of Licensed
Patents and Lilly Know-How and Termination or Assignment of Sublicenses. All rights under the Licensed Patents and the
Lilly Know-How granted by Lilly to Neurogenetics pursuant to Article 2 will
terminate and all rights granted therein will immediately revert to Lilly with
no further notice or action required on Lilly’s behalf; provided, however, that
if the termination relates only to a specific country, then only the license
pertaining to such country will revert to Lilly hereunder. Notwithstanding the
foregoing, upon any such termination or any termination of this Agreement by
Lilly under Section 10.6 or 11.3, (i) with respect to [***]  sublicenses granted by Neurogenetics
hereunder, [***], such sublicenses (including all countries covered by such
sublicenses) shall survive any such termination and shall automatically be
assigned by Neurogenetics to Lilly such that such sublicense becomes a direct
license between Lilly and the applicable sublicensee if such sublicensee(s)
cures the breach that gave rise to the termination of this Agreement by Lilly,
as applicable; provided that, in the event this Agreement is terminated by
Lilly under Section 10.2 or 10.5, Neurogenetics and Lilly shall [***], and
if Neurogenetics and Lilly are unable to agree upon the [***]  within [***] ([***]) days after the effective
date of termination, then the Parties shall be deemed to have selected [***],
and (ii) any sublicenses granted by Neurogenetics hereunder [***]  shall, at Lilly’s sole discretion, [***],
assigned by Neurogenetics to Lilly such that such sublicense becomes a direct
license between Lilly and the applicable sublicensee.

 

(b)           Reversion of Patent
Maintenance Responsibilities. Upon
the effective date of the termination of this Agreement, the sole
responsibility for preparing, filing, prosecuting and maintaining the Licensed
Patents will revert back to Lilly with no further notice or action required on
Lilly’s behalf; provided, however, that if the termination relates only to a
specific country, then only the patent maintenance obligations pertaining to
such country will revert to Lilly hereunder. In such case, Neurogenetics will
maintain its patent responsibilities for all other Licensed Patents.

 

(c)           Non-Exclusive License and
Access to Neurogenetics Technology. Neurogenetics will grant to Lilly a non-exclusive, world-wide license,
with the right to sublicense (only in combination with a license under the
Licensed Patents and Lilly Know-How), under Neurogenetics Technology to make,
have made, use, offer to sell, sell and import Product

 

***   Confidential
Treatment Requested

 

26

 

solely in the country or countries in which
Neurogenetics’ rights to Product were so terminated; provided that if [***],
then Lilly shall pay to Neurogenetics a royalty of [***] percent ([***]%) of
its[***]  has been[***]  for the[***] of [***] to [***]  (for clarity,[***] made by [***] but do [***]
of [***] of [***] with [***]). As an example of the application of the
foregoing, if [***], for example, [***], then [***]. In addition to the license
granted under this Section 10.3(c), Neurogenetics will also promptly provide
Lilly with reasonable access and reference to, copies of, and use of
Neurogenetics Technology, including, but not limited to, any pre-clinical and
clinical trial results and regulatory files and filings related to the Product,
and if Lilly so requests, at Lilly’s expense, the [***], of [***] to the [***]
to [***]. Lilly shall have the right, but not the obligation, to take legal
action against Third Person infringement of Neurogenetics Technology, including
the right for Lilly to take legal action in Neurogenetics’ name, and
Neurogenetics consents to be a party and cooperate with Lilly in any such
action brought by Lilly pursuant to this Section 10.3(c). Further, following
the grant of a license to Neurogenetics Technology under this
Section 10.3(c), neither Party shall have the right to enter into any
settlement, consent judgment or other final disposition of an action for
infringement or validity as to any Neurogenetics Technology if such settlement,
consent judgment or other final disposition would diminish the rights or
interests of the other Party, except with the written consent of such other
Party, which consent shall not be unreasonably withheld.

 

(d)           Disposition of Inventory
Upon Termination. Neurogenetics
shall promptly transfer all quantities of any remaining Compound supplied by
Lilly to Neurogenetics. If Lilly terminates this Agreement after Neurogenetics
has obtained a Regulatory Approval for the Product, Neurogenetics will promptly
offer to sell to Lilly or its designee, at Neurogenetics’ actual cost
(determined in accordance with GAAP), Neurogenetics’ inventory of the Product
existing on the date of termination (“Neurogenetics Inventory”). Neurogenetics
will be entitled to finish manufacturing any work-in-process into the Product,
and such newly made Product will be considered Neurogenetics Inventory
hereunder. If termination of this Agreement relates only to a specific country,
the provisions of this Section 10.3(d) are applicable only to Neurogenetics’
Product inventories for the country (as determined by Neurogenetics’ records)
where such termination occurred; provided, however, that Neurogenetics may, at
its option, promptly ship any inventory of Product in such country to a country
in which it retains the right to market and sell such Product.

 

(e)           Transfer of Regulatory
Documents. If this Agreement
is terminated by Lilly under Sections 10.2 or 10.5, Neurogenetics shall
promptly transfer possession and ownership (and shall cause all contractors
used by Neurogenetics to provide services hereunder to transfer possession and
ownership) to Lilly (and in Lilly’s name where appropriate) of all Clinical
Trial data and information, all Clinical Trial databases, all data generated in
support of Applications for Marketing Authorization, Regulatory Approvals or
other regulatory commitments (e.g.,
toxicology and stability data) and regulatory documents (including, but not
limited to, Applications for Marketing Authorization, Regulatory Approvals and
any correspondence between Neurogenetics and any sublicensee or contractor of
Neurogenetics and any regulatory agency) that were created and/or developed
under the terms of this Agreement for Compound or Product (collectively, the “Regulatory Documents”).
Should Lilly elect to sublicense, or to co-market or co-promote Product with a
Third Person in the Territory, Lilly

 

***   Confidential
Treatment Requested

 

 

27

 

shall have the right to provide appropriate
access to such Clinical Trial data or information, Clinical Trial databases,
all data generated in support of any Application for Marketing Authorization,
Regulatory Approval other regulatory commitment, or Regulatory Document to such
Third Person.

 

(f)            Assignment of Trademarks. Neurogenetics shall assign to Lilly at no
cost its trademark rights for the Product, including, without limitation, any
back-up marks, registrations, or applications for such marks and the goodwill
associated with such marks.

 

(g)           Termination by Lilly Under
Sections 10.6 and 11.3. If
Lilly terminates this Agreement under Section 10.6 or 11.3, then the Parties
shall [***] for such [***], which are [***].

 

10.4        Termination by
Neurogenetics.

 

(a)           After Lilly has received the six million and
no/100 Dollars initial payment from Neurogenetics in accordance with Section
3.1(a), then Neurogenetics may terminate this Agreement at any time upon sixty
(60) days’ prior written notice to Lilly in the event that Neurogenetics
determines in good faith that continued development or commercialization of
Compound or Product is not consistent with Neurogenetics’ business objectives.

 

(b)           Upon (i) any material breach of this
Agreement by Lilly, or (ii) material violation of any warranty or covenant by
Lilly under this Agreement Neurogenetics may, at its option, terminate this
Agreement upon ninety (90) days written notice to Lilly. Such termination shall
become effective at the end of such ninety (90) day period unless Lilly cures
such breach or violation during such ninety (90) day period; provided, however,
in the case of a breach or violation that cannot be cured within such ninety
(90) day period, Neurogenetics may terminate this Agreement following such
ninety (90) day period only if Lilly shall have failed to commence substantial
remedial actions within such ninety (90) day period and to use best efforts to
pursue the same. Notwithstanding the foregoing, to the extent a material breach
or material default of this Agreement by Lilly affects Lilly’s performance and
Neurogenetics’ rights under this Agreement as it relates to one or more
countries, but not all countries, Neurogenetics may terminate this Agreement in
accordance with this Section 10.4(b) as to the affected country or
countries only, and in such case this Agreement will remain in full force and
effect in accordance with its terms with respect to the countries that are not
terminated.

 

(c)           If Neurogenetics terminates this Agreement
under Section 10.4(a), then the terms of Section 10.3 shall apply except
that [***] of the [***] as set forth therein and any sublicense granted by
Neurogenetics hereunder shall, at Lilly’s sole discretion, either be
terminated, or if agreed to by Lilly in writing, assigned by Neurogenetics to
Lilly such that such sublicense becomes a direct license between Lilly and the
applicable sublicensee; provided, however, that such sublicensee(s) cures the
breach that gave rise to the termination of this Agreement by Lilly, as
applicable. If Neurogenetics terminates this Agreement under
Section 10.4(b), 10.5, or 11.3, then Neurogenetics shall retain any and
all licenses granted to it by Lilly pursuant to Section 2.1 (unless otherwise
terminated pursuant to the terms of this Agreement), and Neurogenetics’ payment
obligations under Article 3 and other relevant

 

***   Confidential
Treatment Requested

 

28

 

provisions shall continue in full force and
effect; provided, however that Neurogenetics’ obligations under [***]  and, [***], the provisions of [***]  shall not apply.

 

10.5        Termination for Bankruptcy. Notwithstanding any other provision of this
Article 10, either Party may terminate this Agreement by providing written
notice to the other Party (with immediate effect) if the other Party:

 

(a)                                  makes a general assignment of substantially
all of its assets for the benefit of creditors;

 

(b)                                  petitions for or acquiesces in the
appointment of any receiver, trustee or similar officer to liquidate or
conserve its business or all or substantially all of its assets; or

 

(c)                                  voluntarily commences under the laws of any
jurisdiction any proceeding for relief under the Bankruptcy Code of 1986, as
amended, or similar bankruptcy laws in applicable jurisdictions, involving its
insolvency, reorganization, adjustment of debt, dissolution, liquidation or any
other similar proceeding for the release of financially distressed debtors.

 

10.6        Change in Neurogenetics’
Ownership. If Neurogenetics
undergoes a Change of Control, Neurogenetics will promptly notify Lilly in
writing thereof and Lilly may terminate this Agreement by providing written
notice to Neurogenetics within forty-five (45) days after the date of such
notice from Neurogenetics and such termination shall become effective upon
Neurogenetics’ receipt of such notice unless the new controlling Third Person
agrees in writing to be bound by the terms and conditions of this Agreement and
to undertake all of Neurogenetics’ obligations under this Agreement.

 

10.7        Residual Obligation Upon
Termination. Termination of
this Agreement for any reason will not relieve either Party of any obligation
or liability accruing prior thereto and will be without prejudice to the rights
and remedies of either Party with respect to any antecedent breach of the
provisions of this Agreement. Without limiting the generality of the foregoing
and in addition to the foregoing and the rights upon termination set forth in
Sections 10.2 and 10.4, no termination of this Agreement, whether by lapse
of time or otherwise, will serve to terminate the rights and obligations of the
Parties hereto with respect to this Agreement as it relates to the
jurisdiction(s) for which this Agreement has not been terminated. The
provisions of Article 1, Article 7, Sections 6.6, 8.8 and 8.9, Article 9,
Section 10.3, 10.4(c), 10.7, 10.8 and Article 11 are intended to and shall
survive termination or expiration of this Agreement in accordance with the
terms of such Articles or Sections.

 

10.8        Additional Remedies. The remedies set forth in this Article 10 or
elsewhere in this Agreement will be in addition to, and will not be to the
exclusion of, any other remedies available to the Parties at law, in equity or
under this Agreement.

 

10.9        Further Assurances. Neurogenetics covenants and agrees that if
this Agreement is terminated under Sections 10.2, 10.5 or 11.3, and if any
Regulatory Document(s) or any

 

***   Confidential
Treatment Requested

 

29

 

trademark described in Section 10.3(f)
cannot be transferred or assigned under Applicable Law, or is untransferable by
its nature, then Neurogenetics will cause the beneficial interest in and to the
same, in any event, to pass to Lilly, and Neurogenetics, covenants and agrees,
after such termination to hold such Regulatory Document(s) and trademark(s) in
trust for, and for the benefit of Lilly; provided, all payments owed to
Neurogenetics under this Agreement have been paid by Lilly.

 

ARTICLE 11

MISCELLANEOUS

 

11.1        Independent Contractor. It is understood and agreed that the Parties
shall have the status of an independent contractor under this Agreement and
that nothing in this Agreement shall be construed as creating any partnership,
joint venture or employer-employee relationship between the Parties or as
authorization for either Neurogenetics or Lilly to act as agent for the other.

 

11.2        No Benefit to Others. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
Parties and their legal representatives, successors and assigns, and they shall
not be construed as conferring any rights to any Third Person.

 

11.3        Force Majeure. If either Party is affected by any
extraordinary, unexpected and unavoidable event such as acts of God, floods,
fires, riots, war, labor disturbances, failures of sources of supply,
infectious diseases of animals, or by the reason of any law, order,
proclamation, regulation, ordinance, demand or requirement of the relevant
government or any authority or representative thereof, or by reason of any
other cause whatsoever (provided that in all such cases the Party claiming
relief on account of such event can demonstrate that such event was
extraordinary, unexpected and unavoidable by the exercise of reasonable care) (“Force Majeure”) it
shall notify the other Party within five (5) business days of the nature and
extent thereof and take all reasonable steps to overcome the Force Majeure and
to minimize the loss occasioned to that other Party. Such notice will be
provided within five (5) business days of the occurrence of such event and will
identify the requirements of this Agreement or such of its obligations as may
be affected, and, subject to the provisions below, to the extent so affected,
said obligations will be suspended during the period of such disability. The
Party prevented from performing hereunder will use reasonable efforts to remove
such disability and will continue performance whenever such causes are removed.
The Party so affected will give to the other Party a good faith estimate of the
continuing effect of the Force Majeure condition and the duration of the
affected Party’s nonperformance.

 

If
the period of any previous actual nonperformance of Lilly because of Lilly
Force Majeure conditions plus the anticipated future period of Lilly
nonperformance because of such conditions will exceed an aggregate of
[***]  days within any [***] period,
Neurogenetics may terminate this Agreement immediately by written notice to
Lilly.

 

If
the period of any previous actual nonperformance of Neurogenetics because of

 

***   Confidential
Treatment Requested

 

30

 

Neurogenetics Force Majeure conditions will
exceed [***] days, Lilly may terminate this Agreement immediately by written
notice to Neurogenetics; provided, however, that to the extent such
nonperformance by Neurogenetics affects Neurogenetics’ performance and Lilly’s
rights under this Agreement as it relates to one or more countries, but not all
countries, Lilly may terminate this Agreement after such [***]  day period as to the affected country or
countries only, and in such case this Agreement will remain in full force and
effect with respect to the countries that are not terminated.

 

Notwithstanding
the foregoing, when such circumstances as those contemplated herein arise, the
Parties will discuss in good faith, what, if any, modification of the terms set
forth herein may be required in order to arrive at an equitable solution.

 

11.4        Amendment. This Agreement may not be amended,
supplemented, or otherwise modified except by an instrument in writing signed
by authorized representatives of the Parties.

 

11.5        Entire Agreement. This Agreement constitutes the entire
agreement and understanding relating to the subject matter of this Agreement
and supersedes all previous communications, proposals, representations and
agreements, whether oral or written, relating to the subject matter of this
Agreement, except for the Confidentiality and Non-Use Agreement dated December
6, 2002 which provisions shall continue to apply with regard to information
exchanged thereunder.

 

11.6        Severability. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under present or future laws effective
while this Agreement remains in effect, the legality, validity and
enforceability of the remaining provisions will not be affected thereby.

 

11.7        Waiver. Any term or provision of this Agreement may
be waived at any time by the Party entitled to the benefit thereof only by a
written instrument executed by such Party. No delay on the part of Lilly or
Neurogenetics in exercising any right, power or privilege hereunder will
operate as a waiver thereof, nor will any waiver on the part of either Lilly or
Neurogenetics of any right, power or privilege hereunder operate as a waiver of
any other right, power or privilege hereunder nor will any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder.

 

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

 

For Neurogenetics:                                  Neurogenetics, Inc.

11805 North Torrey Pines Road

Suite
300

La
Jolla, California 92037

 

***   Confidential
Treatment Requested

 

31

 

Attention:  Chief Executive Officer

Fax:  858-623-5666

 

With a copy to:                                                             Cooley Godward LLP

4401 Eastgate Mall

San Diego, California 92121

Attention:  Kay Chandler

Fax:  858-550-6420

 

For Lilly:                                Eli Lilly and Company

Lilly Corporate Center

Indianapolis, Indiana 46285

United States of America

Attention:  General Counsel

Fax:  317-276-9152

 

With a copy to:                                                             Eli Lilly and Company

Lilly
Corporate Center

Indianapolis,
Indiana 46285

United
States of America

Attention:  Vice President, Neurosciences

 

11.9        Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Indiana, United States,
excluding any choice of law rules, which may direct the application of the law
of any other jurisdiction. However, the scope, validity and enforceability of
any patents encompassed within the scope of this Agreement shall be determined
in accordance with the applicable laws of the countries in which such patents
have issued.

 

11.10      Assignability. During the term of this Agreement, neither
Party shall assign any benefit or burden under this Agreement without prior
written consent of the other Party, which shall not be unreasonably withheld,
except that (i) either Party may assign its rights and obligations under
this Agreement to an Affiliate or to any company with which it may merge or consolidate
or to any company to whom it may transfer substantially all of its assets to
which this Agreement relates or to any company which may acquire such Party
(including, in each case, any company created as a new vehicle upon any such
merger, transfer or acquisition); provided that, in the event of such
transaction, no intellectual property rights of any acquiring party in such
transaction (if other than one of the Parties) will be included in the
technology licensed hereunder except to the extent that such technology
pertains only to Compound or Product, (ii) Neurogenetics may transfer any
and all of its rights to a sublicensee as provided by this Agreement and
(iii) Lilly may freely assign its royalty interest in whole or in part and
shall have the right to disclose this Agreement in connection therewith. This
Agreement shall be binding on and inure to the benefit of the parties hereto
and their respective permitted successors and assigns.

 

32

 

11.11      Jointly Prepared. This Agreement will be deemed to have been
drafted by both Lilly and Neurogenetics and will not be construed against
either Party as the draftsperson hereof.

 

11.12      Headings, Gender and Number.
All section and article
titles or captions contained in this Agreement and in any exhibit, schedule or
certificate referred to herein or annexed to this Agreement are for convenience
only, will not be deemed a part of this Agreement and will not affect the
meaning or interpretation of this Agreement. Words used herein, regardless of
the number and gender specifically used, shall be deemed and construed to
include any other number, singular or plural, and other gender, masculine,
feminine, or neuter, as the context requires.

 

11.13      Dispute Resolution. If any dispute arises relating to this
Agreement, prior to instituting any lawsuit or other dispute resolution process
on account of such dispute, the Parties will attempt in good faith to settle
such dispute first by negotiation and consultation between themselves,
including referral of such dispute to the Chief Executive Officer of
Neurogenetics and the Vice President, Neurosciences, of Lilly. If such
executives are unable to resolve such dispute or agree upon a mechanism to
resolve such dispute within sixty (60) days of the first written request for
dispute resolution under this Section 11.13, the Parties may then either
consider other forms of alternative dispute resolution as a means of resolving
any such dispute or institute litigation and seek such remedies as may be
available.

 

11.14      Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original, but all of which taken
together shall constitute one and the same agreement. It shall not be necessary
in making proof of this Agreement or any counterpart hereof to produce or
account for any of the other counterparts.

 

11.15      Schedules, Exhibits and
Attachments. All schedules,
exhibits and attachments (including, without limitation, the Development Plan)
referred to herein are intended to be and hereby are specifically made part of
this Agreement. However, if there is a conflict between a term or condition of
such schedules, exhibits and attachments and this Agreement, the terms and
conditions of this Agreement shall prevail.

 

33

 

IN WITNESS WHEREOF, the Parties by their respective authorized
representatives, have executed this Agreement.

 

	
   

  	
  ELI LILLY AND COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Signature
  illegible

  	
   

  
	
   

  	
   

  
	
   

  	
  Printed:

  	
  Signature
  illegible

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Executive
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
  NEUROGENETICS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Neil
  Kurtz

  	
   

  
	
   

  	
   

  
	
   

  	
  Printed:

  	
  Neil
  M. Kurtz, M.D.

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  President
  and CEO

  	
   

  
									

 

34

 

EXHIBIT A

 

Licensed Patents

 

Issued United States Patents:

[***]

 

Pending United States Applications:

[***]

 

Issued Foreign Patents:

[***]

 

Pending Foreign Applications:

[***]

 

*

 

***   Confidential
Treatment Requested

 

35

 

Exhibit B

 

Lilly Know How

 

Regulatory

 

1.               A copy of all documents and communications
between Lilly and the FDA contained in or pertaining to [***].

 

Medical

 

The
following medical data were never intended to be used to support registration
of the Product.

 

1.               [***]

2.               [***]

3.               [***]

4.               [***]|

5.               [***]

6.               [***]|

7.               [***]

 

Toxicology

 

Safety
Pharmacology Studies

 

	
  Pharm

  Report #

  	
   

  	
  Report Title

  	
   

  	
  Study Number

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  

 

***   Confidential
Treatment Requested

 

36

 

Genetic
Toxicity Studies

 

	
  Tox

  Report #

  	
   

  	
  Report Title

  	
   

  	
  Study Number

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  

 

Acute
Toxicity Studies

 

	
  Tox

  Report #

  	
   

  	
  Report Title

  	
   

  	
  Study Number

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  19

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  

 

***   Confidential
Treatment Requested

 

37

 

Repeat-Dose Toxicity Studies

 

	
  Tox

  Report #

  	
   

  	
  Report Title

  	
   

  	
  Study Number

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  

 

Neurotoxicity Studies

 

	
  Tox

  Report #

  	
   

  	
  Report Title

  	
   

  	
  Study Number

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  18

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  

 

***   Confidential
Treatment Requested

 

38

 

Other Toxicology Studies and Reports

 

	
  Tox

  Report #

  	
   

  	
  Report Title

  	
   

  	
  Study Number

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  20

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  

 

***   Confidential
Treatment Requested

 

39

 

ADME

 

	
  Report

  #

  	
   

  	
  Study

  #

  	
   

  	
  Author(s)

  	
   

  	
  Title of Report

  	
   

  	
  # of

  Pages

  	
   

  	
  Date

  Submitted

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6

  	
   

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7

  	
   

  	
   

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  

 

***   Confidential
Treatment Requested

 

40

 

Preclinical Documents

 

[***]

 

***   Confidential
Treatment Requested

 

41

 

CM&C

 

[***]

 

***   Confidential
Treatment Requested

 

42

 

EXHIBIT C

 

Compound Supply

 

[***]

 

***   Confidential
Treatment Requested

 

43

 

EXHIBIT D

 

Development Plan

 

To
be prepared by Neurogenetics and provided to Lilly within thirty (30) days
after the Effective Date.

 

44Exhibit 10.2

 

***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.

 

RESEARCH AND LICENSE AGREEMENT

 

THIS RESEARCH AND LICENSE AGREEMENT
(the “Agreement”)
is entered into as of May 10, 2004 (the “Effective Date”) by and between LIFE SCIENCE RESEARCH ISRAEL LTD., an Israeli corporation (“LSRI”), located at P.O. Box 139, Ness-Ziona 70451
and NEUROGENETICS, INC., a Delaware
corporation (“Neurogenetics”),
located at 11085 North Torrey Pines Road, Suite 300, La Jolla, California
92037.

 

RECITALS

 

WHEREAS, Israel Institute for
Biological Research (“IIBR”),
a governmental body, is a research institute engaging, inter alia, in the development of compounds
for patented drugs for treatment, prevention and/or diagnosis of nervous system
disorders;

 

WHEREAS, IIBR has, inter alia, certain intellectual property
rights related to the Licensed Compound and the Additional Compound (each as
defined below) as described below;

 

WHEREAS, LSRI is a governmental
company authorized to engage in the commercial exploitation of the Licensed
Technology and to administer research to be performed by IIBR for commercial
exploitation of the Licensed Technology;

 

WHEREAS, Neurogenetics
is a biopharmaceutical company that is interested in developing and
commercializing the Licensed Compound and/or the Additional Compound and is
interested in having LSRI conduct further research on the Licensed Compound
and/or the Additional Compound; and

 

WHEREAS, Neurogenetics
and LSRI desire to enter into a collaborative relationship for research and
development of the Licensed Compound and/or the Additional Compound on the
terms set forth herein.

 

NOW THEREFORE, in consideration
of the foregoing and the covenants and premises contained in this Agreement,
the parties agree as follows:

 

1.                                      DEFINITIONS

 

The
following capitalized terms shall have the meanings indicated for purposes of
this Agreement.

 

1.1          “Additional Compound” shall mean the compound known as
AF267 and its isomers, salts, esters and derivatives.

 

1

 

1.2          “Additional
Product” shall mean any product containing Additional
Compound, in any form or formulation.

 

1.3          “Affiliate” shall mean, as to any person or
entity, any other person or entity which directly or indirectly controls, is
controlled by, or is under common control with such person or entity. For
purposes of this definition, “control” shall mean the possession (directly or
indirectly) of power to effectively direct or cause the direction of the
management or policies of such person or entity.

 

1.4          “ANDA” shall mean an Abbreviated New Drug Application
filed pursuant to the requirements of the FDA, or the equivalent application in
any other country or jurisdiction, required before commercial sale of a drug
product.

 

1.5          “Confidential
Information” shall mean any confidential or
proprietary information, and any other information relating to any research
project, work in process, future development, scientific, engineering,
manufacturing, marketing, business plan, financial or personnel matter relating
to either party, its present or future products, sales, suppliers, customers,
employees, investors or business, whether in oral, written, graphic or
electronic form.

 

1.6          “Control” shall mean possession of the ability to grant
a license without violating the terms of any agreement or other arrangement
with any Third Party.

 

1.7          “Controlled Patents” shall mean Licensed Patents and Patents
included in the Research Technology.

 

1.8          “Data Exclusivity Period” shall mean the period during
which the FDA (or, in countries other than the U.S., an equivalent regulatory
agency) prohibits reference, without the consent of the owner of an NDA or
Regulatory Approval package, to the clinical and other data that is contained
in such NDA or Regulatory Approval package, and that is not published or
publicly available outside of such NDA or Regulatory Approval package.

 

1.9          “Disclosing Party” shall have the meaning provided in
Section 7.1.

 

1.10        “Disputes” shall have the meaning provided in
Section 10.4.

 

1.11        “EMEA” shall mean the
European Agency for the Evaluation of Medicinal Products or any successor
agency.

 

1.12        “Excess Fee” shall have the meaning provided in Section 4.6.

 

1.13        “FDA” shall mean the
United States Food and Drug Administration or any successor agency.

 

1.14        “Field” shall mean all therapeutic uses.

 

1.15        “Final Study Reports” shall mean the final approved
integrated clinical study reports including the protocol and amendments with
informed consent, case report forms and 

 

2

 

amendments, list of
investigators statistical plan, full statistical report with complete and
accurate tables, figures and listings including all raw data generated in the
study.

 

1.16        “First
Commercial Sale” shall mean, with respect to any
Licensed Product or Additional Product, the first sale on a commercial basis in
an arm’s length transaction for end use or consumption of such Licensed Product
or Additional Product in a country after the governing health regulatory
authority of such country has granted regulatory approval of such Licensed
Product or Additional Product, to the extent such regulatory approval is
required in such country.

 

1.17        “Generic Competition” shall mean on a country by
country basis the commercial sale of a generic product containing the same
compound as Licensed Compound or Additional Compound as an active ingredient.

 

1.18        “IND” shall mean an
Investigational New Drug Application filed with the FDA, or the equivalent
application or filing necessary to commence human clinical trials in another
country, as applicable.

 

1.19        “Indemnifying Party” shall have the meaning provided in
Section 10.1(c).

 

1.20        “JRC” shall have the meaning provided in
Section 2.2.

 

1.21        “Know-How” shall mean all know-how, trade secrets,
inventions, data, processes, techniques, procedures, compositions, materials,
devices, methods, formulas, protocols and information, whether or not patentable.

 

1.22        “Licensed Compound” shall mean the compound known as
AF292 and its isomers, salts, esters and derivatives.

 

1.23        “Licensed Know-How”
shall mean all Know-How which (a) is Controlled by LSRI as of the
Effective Date or, if specific to Licensed Compound or Additional Compound,
during the Term, (b) is not generally publicly known, and (c) is
required for, or specific to Licensed Compound or Additional Compound and
useful for, the practice of the Licensed Patents or the development, manufacture
or use of Licensed Compound, Licensed Product, Additional Compound or
Additional Product, but excluding the Licensed Patents.

 

1.24        “Licensed
Patents” shall mean all Patents which (a) are
Controlled by LSRI as of the Effective Date or during the Term, and
(b) claim the development, manufacture, use, sale, offer for sale or
import of Licensed Compound, Licensed Product, Additional Compound or
Additional Product. The Licensed Patents as of the Effective Date are listed on
Exhibit A.

 

1.25        “Licensed
Product” shall mean any product containing Licensed
Compound, in any form or formulation.

 

1.26        “Licensed Technology”
shall mean the Licensed Know-How and the Licensed Patents.

 

1.27        “Losses” shall have the meaning provided in
Section 10.1(a).

 

3

 

1.28        “LSRI Indemnitee” shall have the meaning provided in
Section 10.1(a).

 

1.29        “Major European Market” shall mean [***].

 

1.30        “NDA” shall mean a New
Drug Application filed pursuant to the requirements of the FDA, or the
equivalent application in any other country or jurisdiction.

 

1.31        “Net
Sales” shall mean the gross amount actually received
by Neurogenetics and its Affiliates or, if Neurogenetics or its Affiliate
sublicenses its rights with respect to Licensed Product or Additional Product
in a given jurisdiction, by the Sublicensee in such jurisdiction for sales of
Licensed Product or Additional Product to independent purchasers in arm’s
length transactions, less the following customary and reasonable items,
actually allowed or granted for such Licensed Product or Additional Product (if
not previously deducted from the amount invoiced): (i) trade discounts,
credits or allowances, (ii) credits or allowances additionally granted
upon returns, rejections or recalls, (iii) freight, shipping and insurance
charges, (iv) taxes, duties or other governmental tariffs (other than
income taxes) and (v) government mandated rebates.

 

If a Licensed
Product or an Additional Product is sold or provided as part of a system,
package, or combination product or service that contains one or more other
active ingredients or other parts that could be sold separately (each, a “Combination Product”),
Net Sales shall be calculated by multiplying the Net Sales from the sale of
Combination Products by the fraction A/B, where “A” is the fair market value of
the Licensed Product or Additional Product when supplied or priced separately
and “B” is the fair market value of the Combination Product. In the event that
no market price is available for the Licensed Product or Additional Product
when supplied or priced separately, fair market value shall be determined in
good faith by Neurogenetics and LSRI.

 

1.32        “Neurogenetics Indemnitee” shall have the meaning provided in
Section 10.1(b).

 

1.33        “Patents”
shall mean (a) patents and patent applications, existing as of the
Effective Date or filed during the Term in accordance with Section 5.2,
(b) any and all corresponding foreign patents and patent applications,
whether now existing or hereafter filed, (c) provisionals, substitutions,
divisionals, reexaminations, reissues, renewals, extensions, term restorations,
continuations, continuations-in-part, substitute applications and inventors’
certificates, arising from, or based upon, any of such patents or patent
applications, and (d) patents issuing from any such patent applications.

 

1.34        “Phase I Clinical Trial” shall mean a human
clinical trial in any country to initially evaluate the safety of Licensed
Product or Additional Product in human subjects or that would otherwise satisfy
the requirements of 21 CFR 312.21(a) or the equivalent laws, rules or
regulations in a regulatory jurisdiction outside the United States.

 

1.35        “Phase II Clinical Trial” shall mean a human
clinical trial in any country to initially evaluate the effectiveness of
Licensed Product or Additional Product for a particular indication or
indications in human subjects with the disease or indication under study or
that 

 

***   Confidential
Treatment Requested

 

4

 

would otherwise satisfy
the requirements of 21 CFR 312.21(b) or the equivalent laws, rules or
regulations in a regulatory jurisdiction outside the United States.

 

1.36        “Phase III Clinical Trial” shall mean a
pivotal human clinical trial in any country the results of which could be used
to establish safety and efficacy of the Licensed Product or Additional Product
as a basis for approval of an NDA for such Licensed Product or Additional
Product or that would otherwise satisfy the requirements of 21 CFR 312.21(c) or
the equivalent laws, rules or regulations in a regulatory jurisdiction outside
the United States.

 

1.37        “Receiving Party” shall have the meaning provided in
Section 7.1.

 

1.38        “Regulatory Approval” shall mean approval of an NDA and
satisfaction of any related applicable regulatory registration and notification
requirements (if any).

 

1.39        “Research Field” shall mean the discovery, synthesis,
identification and characterization of Licensed Compound or Additional Compound
and the development, use, manufacturing, marketing, distribution and sale of
Licensed Product or Additional Product.

 

1.40        “Research Plan” shall mean the plan for conducting the
Research Program attached hereto as Exhibit B,
as amended from time to time in accordance with Section 2.2.

 

1.41        “Research Program” shall mean the program for research
in the Research Field to be conducted by LSRI during the Research Term in
accordance with the Research Plan.

 

1.42        “Research Technology” shall mean (a) all Know-How
conceived or reduced to practice or generated by or on behalf of LSRI in the
course of the research conducted under the Research Program and (b) any
Patents and other intellectual property rights covering the Know-How described
in subsection (a).

 

1.43        “Research Term” shall mean the [***] ([***]) year
period following the Effective Date, which may be extended for an additional
[***] ([***]) year period by written agreement of the parties entered into
before the end of the period to be extended.

 

1.44        “Royalty Term” shall mean, with respect to each country
in which Licensed Product or Additional Product is sold, on a
product-by-product basis, that time period beginning on the First Commercial
Sale of such Licensed Product or Additional Product in such country and
expiring, on a country-by-country basis, on the later of:

 

(a)           [***] ([***]) years
from the date of First Commercial Sale of such Licensed Product or Additional
Product in such country;

 

(b)           the expiration in
such country of the last-to-expire Controlled Patent with a Valid Claim; or

 

(c)           the expiration of
the Data Exclusivity Period of such Licensed Product or Additional Product in
such country;

 

***   Confidential
Treatment Requested

 

5

 

provided, however, that in the event that
Generic Competition occurs in such country during the applicable Royalty Term
and results in a loss of more than [***]% of the market share of the market for
such Licensed Product or Additional Product, as applicable, in such country (as
reported in prescriptions by IMS or a similar tracking service), the Royalty
Term in such country shall automatically expire.

 

1.45        “Sublicense Fee” shall mean any cash upfront payment
received by Neurogenetics or its Affiliates from a Sublicensee. For
clarification, if Neurogenetics forms an Affiliate of Neurogenetics, which
Affiliate’s only asset is Neurogenetics’ rights in Licensed Compounds and
Licensed Products and/or Additional Compounds and Additional Products, then any
cash upfront payment received by such Affiliate of Neurogenetics from a
pharmaceutical company, biotechnology company or other similar life sciences
business entity (for clarification, any investment in such Affiliate by a
venture capital or private equity firm purely as a financial investment is excluded)
in order to acquire rights to Licensed Products and/or Additional Products or
to acquire an ownership interest in such Affiliate shall be deemed to be
Sublicense Fees. In addition, if Neurogenetics assigns to a Third Party only
its business or assets with respect to Licensed Compound and Licensed Product
or Additional Compound and Additional Product, but not any other business or
assets of Neurogenetics to a Third Party or the business and assets of
Neurogenetics as a whole, then any cash upfront payment received by
Neurogenetics from such Third Party in order to acquire such business or assets
with respect to Licensed Compound and Licensed Product or Additional Compound
and Additional Product shall be deemed to be Sublicense Fees. Notwithstanding
the foregoing, the term “Sublicense Fee” shall not include any monies (or
equivalent value) received by Neurogenetics or its Affiliates from a
Sublicensee which is a payment in the form of: (a) royalties on actual
sales to Third Parties, (b) milestone payments linked to attainment of
research, development and commercialization goals, (c) support, at fair
market value, of Neurogenetics’ or its Affiliates’ laboratory research and
development programs, (d) bona fide
loans, (e) equity investments in Neurogenetics or its Affiliates at fair
market value (except as expressly provided in the immediately preceding
sentence), or (f) payment to Neurogenetics or its Affiliates in connection
with the grant of rights to any other intellectual property of Neurogenetics or
its Affiliates.

 

1.46        “Sublicensee” shall mean any Third Party to which
Neurogenetics or its Affiliate has granted a sublicense under the Licensed
Technology or Research Technology pursuant to the terms of this Agreement.

 

1.47        “Term” shall have the meaning provided in
Section 9.1.

 

1.48        “Third Party” shall mean any entity other than LSRI or
Neurogenetics or an Affiliate of LSRI or Neurogenetics.

 

1.49        “U.S.” shall mean the United States.

 

1.50        “Valid Claim” shall
mean a claim of an issued patent included within the Controlled Patents, which
claim has not lapsed, been cancelled or become abandoned irrevocably and has
not been declared invalid or unenforceable by an unreversed and unappealable
decision 

 

6

 

or judgment of a court or
other appropriate body of competent jurisdiction, and which has not been
admitted to be invalid or unenforceable through reissue, disclaimer or
otherwise.

 

2.                                      RESEARCH
PROGRAM

 

2.1          Conduct; Supervision. During the Research Term, LSRI
shall conduct the Research Program in accordance with the Research Plan and
this Agreement. Any amendment or revisions to the Research Plan shall be in
writing and shall require unanimous approval of the JRC. LSRI shall regularly
inform Neurogenetics of any Research Technology discovered under the Research
Program. LSRI acknowledges the importance of distinguishing the Research
Program funded under Section 4.1 from other research conducted by LSRI. LSRI
agrees to distinguish the Research Program from all other work in all
experiments, records and materials.

 

2.2          Governance. Promptly after the Effective Date, the
parties will form a Joint Research Committee (“JRC”) comprised of an equal number of representatives of each
LSRI and Neurogenetics, with at least two (2) representatives of LSRI and at
least two (2) representatives of Neurogenetics. One (1) member of the JRC shall
be selected to act as chairperson of the JRC, with each chairperson acting for
a term of twelve (12) months. The chairperson shall be selected alternately by
Neurogenetics and LSRI, and Neurogenetics shall designate the first chairperson.
The JRC shall determine the specific goals of the Research Program, shall
monitor the progress and results of such work and shall facilitate ongoing
cooperation between the parties. All decisions of the JRC shall require
unanimous approval, with the LSRI representatives on the JRC having one vote
collectively and the Neurogenetics representatives on the JRC having one vote
collectively. The JRC shall meet on a quarterly basis or at such other
frequency as the JRC agrees. The parties shall agree upon the time and place of
meetings. Within thirty (30) days after each meeting, the JRC chairperson will
provide the parties with a written report describing, in reasonable detail, the
status of the Research Program, a summary of the results and progress to date,
the issues requiring resolution, and the agreed resolution of previously
reported issues. A reasonable number of additional representatives of each
party may attend meetings of the JRC in a non-voting capacity.

 

3.                                      LICENSE;
DISCLOSURE OF LICENSED KNOW-HOW

 

3.1          License Grant. Subject to the terms and conditions of
this Agreement, LSRI hereby grants to Neurogenetics and its Affiliates during
the Term an exclusive (even as to LSRI), worldwide, royalty bearing license,
with the right to sublicense through multiple tiers of sublicense, under the
Licensed Technology and Research Technology to research, develop, make, have
made, use, sell, offer for sale, have sold and import Licensed Products and
Additional Products in the Field; provided
however, that LSRI retains the right to conduct research using
Licensed Compounds and Additional Compounds to the extent provided in the
Research Plan, which may not be transferred. In the event that an Affiliate of
Neurogenetics is given access to the Licensed Technology by Neurogenetics,
Neurogenetics shall provide prompt notice to LSRI of the grant of such access. For
clarification, LSRI retains all rights under the Licensed Technology other than
the rights to research, develop, make, have made, use, sell, offer for sale,
have sold and import Licensed Products and Additional Products in the Field
licensed to Neurogenetics under this Section 3.1.

 

7

 

3.2          Sublicenses. In the event that Neurogenetics
sublicenses any of its rights to the Licensed Technology or Research Technology
to a Sublicensee pursuant to Section 3.1, such sublicense shall include
terms and conditions consistent with the terms and conditions of the license
granted under this Agreement. Sublicenses, if any, granted hereunder, will be
to Third Parties in an arm’s length transaction under written agreements,
copies of which will be provided to LSRI, and conditioned on (i) such Sublicensees’
agreement to accept and abide with the terms and obligations of this Agreement;
and (ii) Neurogenetics being in compliance with its payment obligations
hereunder at the time such sublicense is granted. In addition, if such
sublicense is granted after the [***]of the [***] of [***] or [***],
Neurogenetics shall provide to LSRI within [***] ([***]) days after execution
of such sublicense information regarding the Sublicense Fee payable with
respect to such sublicense in order to enable LSRI to make the decision
required under Section 4.5.

 

3.3          Disclosure of Licensed Know-How. LSRI shall use
commercially reasonable efforts to supply Neurogenetics, as promptly as
practicable after the Effective Date, and in any event within [***] ([***])
days of the Effective Date, with all Licensed Know-How. The parties agree to
work in good faith to complete the provision of Licensed Know-How to
Neurogenetics within the time period set forth above. In addition, during such
period, LSRI will grant Neurogenetics access, during normal business hours, to
appropriate LSRI personnel for reasonable consultation related to the Licensed
Know-How in accordance with LSRI’s regulations. Neurogenetics will pay LSRI for
the reasonable cost of such disclosure. LSRI will provide Neurogenetics with
reasonable documentation regarding such costs at the time it provides an
invoice for payment.

 

4.                                      PAYMENTS

 

4.1          Research Funding. During
the first [***] ([***]) years of the Research Term, Neurogenetics agrees to
make research funding payments to LSRI in the amount of [***] [***] U.S.
dollars (US$[***]) per year (to be paid in equal quarterly installments in
advance for the first [***] ([***]) [***]of the Research Term starting within
[***] ([***]) days of the Effective Date) for research performed by LSRI
pursuant to the Research Plan and the terms of this Agreement. Thereafter, such
payments will be [***]  of the Research
Term after the [***] by [***] percent ([***] %). All additional payments shall
be made on a quarterly basis.

 

4.2          Milestone Payments. Neurogenetics
will pay LSRI the amounts set forth below upon the first occurrence of each of
the milestone events set forth below, each such payment to be made within [***]
([***]) days after achievement of such milestone event. Neurogenetics will make
each of such milestone payments only once for the first occurrence of a
respective milestone event, regardless of how many times the milestone event
may subsequently be achieved.

 

	
  (1) [***]

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  (2) [***]

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  (3) [***]

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  (4) [***]

  	
   

  	
  $

  	
  [***]

  	
   

  

 

***   Confidential
Treatment Requested

 

8

 

	
  (5) [***]

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  (6) [***]

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  (7) [***]

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  (8) [***]

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  (9) [***]

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  (10) [***]

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  (11) [***]

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  (12) [***]

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  (13) [***]

  	
   

  	
  $

  	
  [***]

  	
   

  

 

***   Confidential
Treatment Requested

 

Notwithstanding
the above, (a) in the event that Neurogenetics [***]  milestone events ([***]), ([***]) and/or
([***])[***]  ([***])[***] of the
Effective Date, Neurogenetics shall pay to LSRI [***] percent ([***] %) of the
amounts owed under this Section 4.2 with respect to any such milestone
events that [***] by such date within [***] 
([***])[***]; and
(b) in the event that Neurogenetics [***] ([***]), ([***]) and/or ([***])
within [***] ([***])[***] of the Effective Date, Neurogenetics shall pay to
LSRI any remaining amounts owed under this Section 4.2 with respect to
such [***]  that[***]  by such date within [***] ([***])[***].

 

4.3          Royalties. Except as provided in Section 4.5 and
subject to Section 4.7(a), Neurogenetics shall pay to LSRI a royalty of
[***] percent ([***] %) of Net Sales of Licensed Product and Additional Product
during the Royalty Term.

 

4.4          Sublicense Fee. Except as provided in Section 4.5,
LSRI shall receive payments with respect to the Sublicense Fee received by
Neurogenetics or its Affiliates at the applicable percentage set forth below:

 

(a)           in the event that
Neurogenetics or its Affiliates sublicenses its rights with respect to Licensed
Product or Additional Product to a Sublicensee in a given jurisdiction
[***]  of the[***]  the [***], Neurogenetics shall pay to LSRI an
amount equal to [***]  percent ([***] %)
of the Sublicense Fee received from such Sublicensee; or

 

(b)           in the event that
Neurogenetics or its Affiliates sublicenses its rights with respect to Licensed
Product or Additional Product to a Sublicensee in a given jurisdiction [***] of
the[***]for [***] the [***] of the [***] for [***] the [***], Neurogenetics
shall pay to LSRI an amount equal to[***] percent ([***] %) of the Sublicense
Fee received from such Sublicensee.

 

4.5          Alternative Royalty and Sublicense Fee. Notwithstanding
anything to the contrary in Sections 4.3 and 4.4, in the event that
Neurogenetics or its Affiliates sublicenses its rights with respect to Licensed
Product or Additional Product to a Sublicensee in any given jurisdiction after
the initiation of the first Phase III Clinical Trial for Licensed Product or 

 

***   Confidential
Treatment Requested

 

9

 

Additional Product in the
U.S., LSRI shall receive royalties on Net Sales in such jurisdiction and
payment on Sublicense Fees received from such Sublicensee according to one (1)
of the following payment structures, as selected by LSRI upon written notice to
Neurogenetics within [***]  ([***]) days
of receipt of information with respect to the sublicense provided by
Neurogenetics pursuant to Section 3.2:

 

(a)           a royalty of [***]
percent ([***] %) of Net Sales of Licensed Product or Additional Product in
such jurisdiction (subject to Section 4.7(a)) and [***] percent ([***] %)
of the Sublicense Fee received from such Sublicensee;

 

(b)           a royalty of [***]
percent ([***] %) of Net Sales of Licensed Product or Additional Product in
such jurisdiction (subject to Section 4.7(a)) and [***] percent ([***] %)
of the Sublicense Fee received from such Sublicensee; or

 

(c)           [***] percent
([***] %) of the Sublicense Fee received from such Sublicensee.

 

In the
event [***] does not provide written notice of its selection under this
Section 4.5 within the required [***] ([***]) day period [***] will be
deemed to have selected the payment structure in Section 4.5(a). Royalties
payable under this Section 4.5 shall be payable during the Royalty Term.

 

4.6          Minimum Payment on Sublicense Fee. In the event LSRI
receives an amount of less than [***] 
U.S. dollars (US$[***]) as the payment due under Section 4.4 or
4.5, as applicable, based on the first Sublicense Fee, Neurogenetics will make
an additional payment to LSRI equal to the amount by which [***]  U.S. dollars (U.S.$ [***]) exceeds the total
amount paid to LSRI under Section 4.4 or 4.5 with respect to such first
Sublicense Fee (the “Excess
Fee”). Neurogenetics may credit the Excess Fee against any
future payments to LSRI under Sections 4.4 and 4.5 based on Sublicense
Fees.

 

4.7          Calculation and Payment of Royalties and Percentage of Sublicense Fees.

 

(a)           Notwithstanding
anything to the contrary in this Agreement, during the Royalty Term for a given
country, the applicable royalty payable on Net Sales of Licensed Product or
Additional Product, as applicable, in such country shall be (i) [***]  percent ([***] %) of the royalty rate payable
under Section 4.3 or 4.5, as applicable, for so long as there is a Valid
Claim covering such Licensed Product or Additional Product, as applicable, in
such country or the Data Exclusivity Period in such country for such Licensed
Product or Additional Product, as applicable, is in effect, or (ii) [***] percent
([***] %) of the royalty rate payable under Section 4.3 or 4.5, as
applicable, for any period that subsection (i) does not apply and Generic
Competition results in a loss of [***] % or less of the market share of the
market for such Licensed Product or Additional Product, as applicable, in such
country (as reported in prescriptions by IMS or a similar tracking service).

 

(b)           Payments pursuant
to Sections 4.3, 4.4, and 4.5 and reports for the sale of Licensed Product
and Additional Product shall be calculated and reported for each calendar
quarter. All payments due to LSRI pursuant to Sections 4.3, 4.4, and 4.5
shall be paid within 

 

***   Confidential
Treatment Requested

 

 

10

 

[***] ([***]) days of the
end of each calendar quarter, unless otherwise specifically provided herein. Each
such payment shall be accompanied by a report in sufficient detail to permit
confirmation of the accuracy of the payment made, including, without
limitation, the number of Licensed Products and Additional Products sold, the
gross sales and Net Sales of Licensed Products and Additional Products, the
Sublicense Fees received from Sublicensees, the applicable royalty payable
under Section 4.3 or 4.5, in U.S. dollars, the method used to calculate
such royalty and the exchange rates used, as applicable. Payments to LSRI with
respect to the Sublicense Fee will be paid within [***] ([***]) days of receipt
of payments from Sublicensee. The Chief Financial Officer of Neurogenetics
shall certify that each report remitted to LSRI is a fair and accurate report
of the royalty or other payment due and payable. In case Neurogenetics fails to
pay any payment on its due date, Neurogenetics shall pay interest pursuant to
Section 4.8.

 

4.8          Interest Rate. Any interest to be paid pursuant to this
Agreement shall be paid at the lesser of the U.S. Prime Rate effective for the
outstanding period (as published in The Wall
Street Journal, Western Edition) plus [***] percent ([***] %) or the
maximum rate allowed under New York state law.

 

4.9          Tax Withholding. Any tax required to be withheld by
Neurogenetics or any Affiliate or Sublicensee under the laws of any foreign
country for the account of LSRI under this Article 4 shall be deducted from the
applicable payment to LSRI and promptly paid by Neurogenetics or said Affiliate
or Sublicensee for and on behalf of LSRI to the appropriate governmental
authority (provided that, if Neurogenetics assigns its obligations under this
Agreement to a non-U.S. Affiliate, the amount of any withholding taxes deducted
from payments by such Affiliate to LSRI shall not exceed the amount of any
withholding taxes that would have been deducted by Neurogenetics had
Neurogenetics made such payment to LSRI), and Neurogenetics or the Affiliate
shall furnish LSRI with proof of payment of such tax together with official or
other appropriate evidence issued by the appropriate governmental authority
sufficient to enable LSRI to support a claim for income tax credit in respect
of any sum so withheld.

 

4.10        Exchange Rate; Manner and Place of Payment. All
payments hereunder shall be payable in U.S. dollars. For payments made on sales
of Licensed Product and Additional Product, with respect to each quarter, for
countries other than the U.S., whenever conversion of payments from any foreign
currency shall be required, such conversion shall be made at a rate of exchange
equal to the rate of exchange for the currency of the country from which
payments are payable as published in The Wall Street Journal,
Western Edition, on the last business day of the calendar quarter
for which a payment is due. All payments owed under this Agreement shall be
made by wire transfer to a bank and account designated in writing by LSRI,
unless otherwise specified in writing by LSRI.

 

4.11        Prohibited Payments.
Notwithstanding any other provision of this Agreement, if Neurogenetics is
prevented from making any such payment by virtue of the statutes, laws, codes
or governmental regulations of the country from which the payment is to be
made, then such royalty may be paid by depositing funds in the currency in
which accrued to LSRI’s account in a bank acceptable to LSRI in the country
whose currency is involved.

 

***   Confidential
Treatment Requested

 

11

 

4.12        Records; Audits. Neurogenetics shall, and shall cause
its Affiliates and Sublicensees to, keep complete and accurate records
pertaining to the sale of Licensed Product and Additional Product and payment
of Sublicense Fees in sufficient detail to permit LSRI to confirm the accuracy
of payments due hereunder. Upon written request to Neurogenetics by LSRI and no
more than once in any calendar year, LSRI shall have the right to cause an
independent, certified public accountant reasonably acceptable to Neurogenetics
to audit such records to confirm Net Sales and royalty payments and payments
with respect to Sublicense Fees for any calendar year ending not more than
three (3) years prior to the date LSRI requests such audit. LSRI agrees to
treat, and to cause such accountant to treat, all such information as
confidential and not to use or disclose any such information for any purpose
except to determine compliance with this Agreement. For the avoidance of doubt,
Neurogenetics, its Affiliates and Sublicensees shall not be obligated to
provide LSRI or such accountant with access to any records or information other
than that which is necessary to confirm Net Sales, royalty payments or payments
with respect to Sublicense Fees payable under this Agreement. Such audits may
be exercised during normal business hours upon reasonable prior written notice
to Neurogenetics. If any audit or examination shall reveal a deficiency of any
payment due, Neurogenetics shall make payment to LSRI of such deficiency plus
interest pursuant to Section 4.8. Payment shall be made within ten (10)
days following announcement of the results of the audit to Neurogenetics and
LSRI. The parties shall promptly make any adjustments necessary to reflect the
results of such audit. LSRI shall bear the full cost of such audit unless such
audit discloses a shortfall by more than five percent (5%) from the actual
amount of any payment due under this Agreement, in which case, Neurogenetics
shall bear the full cost of such audit.

 

5.                                      INTELLECTUAL
PROPERTY

 

5.1          Ownership of Inventions. Ownership
of inventions conceived through the use or practice of any Licensed Technology
or Research Technology shall be determined in accordance with U.S. laws of
inventorship. For the avoidance of doubt, Neurogenetics shall own all Know-How
conceived, reduced to practice or generated by its employees or consultants
through the use or practice of the Licensed Technology or the Research
Technology, including all intellectual property rights on or in any of the
foregoing, and LSRI shall own all Know-How conceived, reduced to practice or
generated by its employees or consultants through the use or practice of the
Research Technology, including all intellectual property rights on or in any of
the foregoing.

 

The parties shall obtain appropriate agreements from
all personnel or outside contractors participating in the development
hereunder, as necessary to assign to Neurogenetics and/or LSRI all right, title
and interest in and to any invention that may be developed as a result of the
work performed under this Agreement relating to Licensed Compound, Additional
Compound, Licensed Product and Additional Product.

 

5.2          Prosecution
and Maintenance of Controlled Patents. Neurogenetics shall have the
first right, but not the obligation, to file, prosecute and maintain all
Patents included in the Controlled Patents. Neurogenetics shall provide LSRI
with an opportunity to review and discuss with Neurogenetics prosecution
strategy and to consult with Neurogenetics on the content of patent filings
with respect to Controlled Patents. Neurogenetics shall be responsible for all
costs, fees and expenses incurred from and after the Effective Date in
connection with the filing, prosecution and maintenance of such Controlled Patents
by Neurogenetics. Neurogenetics 

 

12

 

undertakes to notify LSRI
in writing in a timely manner if it does not desire to support the continued
prosecution or appeals or maintenance of any of the Patents included in the
Controlled Patents. In the event Neurogenetics declines to pursue, or does not,
within sixty (60) days following written request from LSRI, take reasonably
requested action with respect to, the filing, prosecution or maintenance of any
Patents included in the Controlled Patents, LSRI may, at its own expense,
continue to prosecute or maintain such Controlled Patent, in which case
Neurogenetics’ license hereunder with respect to such Patent shall be
terminated forthwith and all rights with respect thereto shall revert to LSRI.

 

5.3          Enforcement
of Controlled Patents. Each party shall promptly notify the other in
writing of any alleged or threatened infringement of any Patent included in the
Controlled Patents of which such party becomes aware.

 

(a)           With respect to any
infringement of any Patent included in the Controlled Patents, Neurogenetics
shall have the first right, but not the obligation, to bring and control any
action or proceeding with respect to such infringement at its own expense and by
counsel of its own choice, and LSRI shall have the right, at its own expense,
to be represented in any such action by counsel of its own choice. If
Neurogenetics fails to bring such an action or proceeding within (i) sixty
(60) days following the notice of alleged infringement or (ii) ten (10)
days before the time limit, if any, set forth in the applicable laws and
regulations for the filing of such actions, whichever comes first, LSRI shall
have the right to bring and control any action or proceeding with respect to
such infringement at its own expense and by counsel of its own choice. If LSRI
actually brings such an action or proceeding within sixty (60) days after the
end of the period described in the preceding sentence and provides written
notice thereof to Neurogenetics, then Neurogenetics’ license hereunder with
respect to any such Patent within the Controlled Patents that is the subject of
such action or proceeding shall be terminated forthwith and all rights with
respect thereto shall revert to LSRI.

 

(b)           In the event a
party brings an infringement action in accordance with this Section 5.3,
the other party shall cooperate fully, including if required to bring such
action, the furnishing of a power of attorney. Neither party shall have the
right to settle any patent infringement litigation under this Section 5.3
in a manner that diminishes the rights or interests of the other party without
the consent of such other party (which shall not be unreasonably withheld). Except
as otherwise agreed to by the parties as part of a cost-sharing arrangement,
any recovery realized as a result of such litigation, after reimbursement of
any litigation expenses of Neurogenetics and LSRI, shall be retained by the
party that brought and controlled such litigation for purposes of this
Agreement, except that any recovery realized by Neurogenetics as a result of
such litigation, after reimbursement of the parties’ litigation expenses,
shall, to the extent attributable to lost sales of Licensed Product, be treated
as Net Sales of Licensed Product.

 

5.4          Third Party
Infringement Claims. Each party shall promptly notify the other in
writing of any allegation by a Third Party that the activity of either of the
parties pursuant to this Agreement infringes or may infringe the intellectual
property rights of such Third Party. A party shall have the sole right to
control any defense of any such claim involving alleged infringement of Third
Party rights by such party’s activities at its own expense and by counsel of
its own choice. If Neurogenetics fails to defend any such claim against
Neurogenetics within (i) sixty (60) days following the notice of alleged
infringement or (ii) ten (10) days before the time limit, 

 

13

 

if any, set forth in the
applicable laws and regulations for the filing of such actions, whichever comes
first, and the failure to so defend would have an adverse effect on any Patent
within the Controlled Patents, then LSRI shall have the right to assume the
defense against such claim at its own expense and by counsel of its own choice.
If LSRI actually defends against such claim within sixty (60) days after the
end of the period described in the preceding sentence and provides written
notice thereof to Neurogenetics, then Neurogenetics’ license hereunder with
respect to any such Patent within the Controlled Patents that would be
adversely affected if such claim were not defended against shall be terminated
forthwith and all rights with respect thereto shall revert to LSRI. Neither
party shall have the right to settle any patent infringement litigation under
this Section 5.4 relating to the Patents in a manner that diminishes the
rights or interests of the other party without the consent of such other party
(which shall not be unreasonably withheld).

 

5.5          Cooperation of the Parties. Each
party agrees to cooperate fully in the preparation, filing, and prosecution of
any Controlled Patents under this Agreement and in the obtaining and
maintenance of any patent extensions, supplementary protection certificates and
the like with respect to any Patent claiming a Licensed Product or Additional
Product being developed or commercialized by Neurogenetics or Sublicensees. Such
cooperation includes, but is not limited to, promptly informing the other party
of any matters coming to such party’s attention that may affect the
preparation, filing, prosecution or maintenance of any Patents.

 

6.                                      DUE
DILIGENCE; REVERSION RIGHTS

 

6.1          Due Diligence. Neurogenetics shall make all decisions
relating to development and commercialization activities with respect to any
Licensed Product or Additional Product in the Field; provided, however, that Neurogenetics shall exert
commercially reasonable efforts consistent with business practices in the
relevant market segment to carry out development of at least one Licensed
Product or Additional Product so as to meet the requirements to gain marketing
approval in the U.S. and, following Regulatory Approval, to sell at least one
Licensed Product or Additional Product for at least one indication and shall be
subject to the following diligence obligations with respect to Licensed Product
and Additional Product:

 

(a)           Neurogenetics shall
use commercially reasonable efforts to [***] within [***] ([***]) months of the
Effective Date;

 

(b)           Neurogenetics shall
use commercially reasonable efforts to [***] 
within [***]  ([***]) years of the
Effective Date; and

 

(c)           Neurogenetics shall
use commercially reasonable efforts to [***] within [***] ([***]) after [***]
of such[***], which [***] the [***] and was[***] to [***].

 

Neurogenetics
shall report to LSRI regularly on the development and commercialization
activities performed hereunder.

 

7.                                      CONFIDENTIALITY;
PUBLICATION

 

7.1          Confidentiality. The parties agree that, during the Term,
and for a period of [***] ([***]) years thereafter, each party (the “Receiving Party”) will maintain in
confidence, 

 

***   Confidential
Treatment Requested

 

 

14

 

and will not use, all
Confidential Information disclosed to it by the other party (the “Disclosing Party”) under this
Agreement or the Confidentiality Agreement dated March 16, 2003, except to the
extent expressly authorized by this Agreement or otherwise agreed in writing by
the parties. The parties agree that the financial terms of the Agreement will
be considered Confidential Information of both parties. The Receiving Party
shall use at least the same standard of care as it uses to protect proprietary
or confidential information of its own (but at least reasonable care) to ensure
that its employees, agents, consultants and other representatives do not
disclose or make any unauthorized use of the Disclosing Party’s Confidential
Information. Each party will promptly notify the other upon discovery of any
unauthorized use or disclosure of the other party’s Confidential Information.

 

7.2          Exceptions. The obligations of confidentiality
contained in Section 7.1 will not apply to the extent that it can be
established by the Receiving Party by competent written evidence that such
Confidential Information:

 

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

 

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

 

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

 

(d)           was independently
discovered or developed by the Receiving Party without the use of Confidential
Information of the Disclosing Party; or

 

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

 

7.3          Authorized Disclosure. The Receiving Party may disclose
the Confidential Information of the Disclosing Party to the extent such
disclosure is reasonably necessary in the following instances:

 

(a)           filing, prosecuting
or maintaining the Controlled Patents in accordance with this Agreement;

 

(b)           practicing the
licenses granted hereunder or preparing and submitting regulatory filings with
respect to Licensed Products or Additional Products;

 

(c)           prosecuting or
defending litigation or complying with applicable court orders or governmental
laws, rules or regulations including, but not limited to, disclosures required
by the FDA or the Securities and Exchange Commission; or

 

(d)           disclosure to
Affiliates, Sublicensees, employees, consultants, agents or other Third Parties
who have a need to know such information for purposes of this Agreement or 

 

15

 

in connection with due diligence
or similar investigations, and disclosure to potential Third Party investors in
confidential financing documents, provided, in each case, that any such
Affiliate, Sublicensee, employee, consultant, agent or Third Party is subject
to obligations of confidentiality and non-use comparable to those set forth in
this Section 7.

 

Notwithstanding the foregoing, in the event a party is
required to make a disclosure of the other party’s Confidential Information
pursuant to Section 7.3(c), it will, except where impracticable, give
reasonable advance notice to the other party of such disclosure and use efforts
to secure confidential treatment of such information at least as diligent as
such party would use to protect its own confidential information, but in no
event less than reasonable efforts. In any event, the parties agree to take all
reasonable action to avoid disclosure of Confidential Information hereunder. The
parties will consult with each other on the provisions of this Agreement to be
redacted in any filings made by the parties with the Securities and Exchange
Commission or as otherwise required by law and on any disclosure to Third
Parties.

 

7.4          Publications. The
parties recognize that the publication of papers regarding results of and other
information regarding the Research Program, including oral presentations and
abstracts, may be beneficial to both parties provided such publications are
subject to reasonable controls to protect Confidential Information. Accordingly,
each party shall have the right to review and approve any paper proposed for
publication by the other party, including oral presentations and abstracts,
which utilizes data generated from the Research Program and/or includes the
other party’s Confidential Information. Before any such paper is submitted for
publication, the publishing party shall deliver a complete copy to the
non-publishing party at least forty-five (45) days prior to submitting the
paper to a publisher. The non-publishing party shall review any such paper and
give its comments to the publishing party within thirty (30) days of its
receipt of such paper. With respect to oral presentation materials and
abstracts, the non-publishing party shall make reasonable efforts to expedite
review of such materials and abstracts, and shall return such items as soon as
practicable to the publishing party with appropriate comments, if any, but in
no event later than thirty (30) days from the date of receipt by the
non-publishing party. The publishing party shall comply with the non-publishing
party’s request to delete references to Confidential Information of the
non-publishing party in any such paper and agrees to withhold publication of
same for an additional ninety (90) days in order to permit the-non publishing
party to obtain patent protection, if the non-publishing party deems it
necessary, in accordance with the terms of this Agreement.

 

8.                                      REPRESENTATIONS
AND WARRANTIES

 

8.1          Representations and Warranties of LSRI. LSRI represents
and warrants to Neurogenetics that:

 

(a)           LSRI has as of the
Effective Date, and will have during the Term, sufficient rights and power to
grant the licenses to Neurogenetics which it purports to grant herein and, as
of the Effective Date, Controls the Licensed Patents set forth on Exhibit A;

 

(b)           there are, as of
the Effective Date, and during the Term shall be, no outstanding liens,
encumbrances, agreements or understandings of any kind, either written, oral 

 

16

 

or implied, regarding the
Licensed Technology to which LSRI is a party or which are binding upon LSRI
which are inconsistent or in conflict with any provision of this Agreement;

 

(c)           as of the Effective
Date, LSRI has received no written claim or accusation that the practice of the
Licensed Patents or the manufacture, use or sale of Licensed Compound or
Additional Compound infringes or may infringe any Third Party patent; and

 

(d)           to the best of LSRI’s
knowledge, as of the Effective Date, LSRI has not received a written
notification of any interference proceeding, opposition proceeding,
cancellation proceeding or other protest proceeding relating to the Licensed
Patents being instituted against LSRI.

 

8.2          Mutual Representations and Warranties. Each party
hereby represents and warrants to the other party that:

 

(a)           it is duly
authorized to execute and deliver this Agreement and to perform its obligations
hereunder;

 

(b)           this Agreement is a
legal and valid obligation binding upon it and enforceable in accordance with
its terms; and

 

(c)           the execution, delivery
and performance of this Agreement do not conflict with any agreement,
instrument or understanding, oral or written, to which it is a party or by
which it may be bound, nor violate any law or regulation of any court,
governmental body or administrative or other agency having jurisdiction over
it.

 

8.3          Disclaimer. Except as expressly set forth herein, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES OF
ANY KIND, EITHER EXPRESS OR IMPLIED, AND EXPRESSLY DISCLAIMS ALL IMPLIED
WARRANTIES OF TITLE, NON-INFRINGEMENT, MERCHANTIBILITY, AND FITNESS FOR A
PARTICULAR PURPOSE.

 

8.4          Performance by Affiliates. The parties recognize that
each may perform some or all of its obligations under this Agreement through
Affiliates and/or Sublicensees; provided,
however, that each party shall remain responsible and be guarantor
of the performance by its Affiliates and/or Sublicensees and shall cause its
Affiliates and/or Sublicensees to comply with the provisions of this Agreement
in connection with such performance, and that such performance through
Affiliates and/or Sublicensees shall not adversely affect the rights of the
other party.

 

9.                                      TERM;
TERMINATION

 

9.1          Term. The term of this Agreement will commence as of
the Effective Date of this Agreement and, unless sooner terminated as provided
hereunder, will terminate upon the expiration of the last Royalty Term (the “Term”). Upon
expiration of the Royalty Term in a given jurisdiction, Neurogenetics shall
continue to have a license on the terms described in Section 3.1, except
that such license shall be fully paid, perpetual, irrevocable and nonexclusive.

 

17

 

9.2          Termination by Neurogenetics. Neurogenetics shall have
the right to terminate this Agreement for any reason or for no reason upon
ninety (90) days’ written notice to LSRI. Any payment under Section 4.1
made after the date Neurogenetics notifies LSRI of termination under this
Section 9.2 shall be the pro rata amount due for the period prior to the
effective date of such termination.

 

9.3          Termination by LSRI. In the event that Neurogenetics
fails to timely make any payment and such failure continues for thirty (30)
days following the date of notice thereof by LSRI, LSRI shall have the right at
any time to terminate this Agreement forthwith upon written notice to
Neurogenetics. Notwithstanding anything in this Section 9.3 to the
contrary, to the extent Neurogenetics reasonably and in good faith disagrees
with any assertion by LSRI that Neurogenetics has failed to timely make any
royalty payment or payment based on any Sublicense Fee (but not any other
payment) due under this Agreement, and Neurogenetics provides written notice to
LSRI of its disagreement and the basis for its belief within fifteen (15) days
after Neurogenetics receives notice from LSRI of a failure to make payment
under this Section 9.3, this Agreement will remain in effect and any termination
of this Agreement under Section 9.3 will be suspended pending resolution
of such disagreement between the parties. The parties will attempt to resolve
such disagreement as expeditiously as possible and Neurogenetics will continue
to comply with the provisions of this Agreement, including the payment
provisions, to the extent that they are not the subject of the disagreement
between the parties.

 

9.4          Termination for Cause. Each party shall have the right
to terminate this Agreement upon sixty (60) days’ written notice to the other
upon the occurrence of any of the following:

 

(a)           Upon or after
bankruptcy, insolvency, dissolution or winding up or assignment for the benefit
of creditors of the other party (other than a dissolution or winding up for the
purpose of reconstruction or amalgamation) or a petition is filed for any of
the foregoing and is not removed within ninety (90) days; or

 

(b)           Upon or after the
breach of any material provision of this Agreement by the other party,
including, with respect to Neurogenetics, its Affiliates, (other than as
provided in Section 9.3) if the breaching party has not cured such breach
within the sixty (60) day period following written notice of termination by the
non-breaching party.

 

Notwithstanding
anything in this Section 9. 4 to the contrary, to the extent Neurogenetics
reasonably and in good faith disagrees with any assertion by LSRI that there
has been a material breach or material default of this Agreement by
Neurogenetics, and Neurogenetics provides written notice to LSRI of its
disagreement and the basis for its belief within fifteen (15) days after
Neurogenetics receives notice from LSRI of a breach under this
Section 9.4, this Agreement will remain in effect and any termination of
this Agreement under Section 9.4 will be suspended pending resolution of
such disagreement between the parties. The parties will attempt to resolve such
disagreement as expeditiously as possible and Neurogenetics will continue to
comply with the provisions of this Agreement, including the payment provisions,
to the extent that they are not the subject of the disagreement between the
parties.

 

18

 

9.5          Effect of Termination; Surviving
Obligations.

 

(a)           Upon termination of
this Agreement by LSRI pursuant to Section 9.3 or by either party pursuant
to Section 9.4, all rights and obligations of the parties under this
Agreement shall terminate (except that if LSRI terminates this Agreement only
as to a particular country or countries under Section 9.4(b) then the
rights and obligations of the parties under this Agreement shall terminate only
as to such country or countries), except as set forth in this Section 9.5.

 

(b)           Upon termination of
this Agreement by Neurogenetics pursuant to Section 9.2 (where
Neurogenetics has not committed a breach of this Agreement permitting
termination by LSRI under Section 9.3 or 9.4): (i) all rights to the
Licensed Technology and Research Technology shall revert to LSRI;
(ii) Neurogenetics shall provide to LSRI all data generated by
Neurogenetics in the course of development of Licensed Product and Additional
Product and hereby grants to LSRI a non-exclusive, worldwide, royalty-bearing
(as provided below) license, with the right to sublicense through multiple tiers
of sublicense, under any Know-How and Patents Controlled by Neurogenetics,
which are necessary to make, have made, use, sell, offer for sale and import
Licensed Product and Additional Product, solely to make, have made, use, sell,
offer for sale and import Licensed Product or Additional Product; and
(iii) all other rights and obligations of the parties under this Agreement
shall terminate, except as set forth in this Section 9.5. In the event
that the [***] and the [***] to [***] to [***] for [***] or [***], LSRI shall
pay to Neurogenetics a royalty of [***] percent ([***] %) of Net Sales of
Licensed Product or Additional Product ([***] percent ([***] %) [***] for [***]
of [***] or [***]) during the Royalty Term, and the provisions of
Sections 1.31, 4.7, 4.8. 4.9. 4.10, 4.11 and 4.12 shall apply with respect
to such royalty payments (with references therein to Neurogenetics instead
referring to LSRI and references therein to LSRI instead referring to
Neurogenetics for purposes of this provision).

 

(c)           In the event that
the license granted to Neurogenetics under Section 3.1 is terminated in
accordance with this Section 9, any existing sublicenses granted by
Neurogenetics shall remain in effect and shall be automatically assigned by
Neurogenetics to LSRI so that such sublicenses shall become direct licenses
between LSRI and the applicable Sublicensees on the terms set forth herein,
provided that Neurogenetics has paid any amounts due and owing to LSRI under
this Agreement as of such termination or any such sublicensee pays LSRI such
amounts due and owing to LSRI by Neurogenetics under this Agreement.

 

(d)           Expiration or
termination of this Agreement shall not relieve the parties of any obligation
accruing prior to such expiration or termination. Except as expressly set forth
elsewhere in this Agreement, the obligations and the rights of the parties
under Sections 2.1, 4.12,
5.1, 7, 8.3, 9, 10 and 11 shall survive expiration or termination of this
Agreement.

 

9.6          Rights in Bankruptcy. All rights and licenses granted under
or pursuant to this Agreement by either party to the other party are, and will
otherwise be deemed to be, for purposes of Section 365(n) of the U.S.
Bankruptcy Code, licenses of right to “intellectual property” as defined under
Section 101 of the U.S. Bankruptcy Code. The parties agree that the party
not subject to bankruptcy proceedings, as licensee of such rights under this
Agreement, will retain and may fully exercise all of its rights and elections
under the U.S. Bankruptcy Code. The 

 

***   Confidential
Treatment Requested

 

19

 

parties further agree
that, in the event of the commencement of a bankruptcy proceeding by or against
any party under the U.S. Bankruptcy Code, the other party will be entitled to a
complete duplicate of (or complete access to, as appropriate) any such
intellectual property and all embodiments of such intellectual property, and
same, if not already in its possession, will be promptly delivered to them
(a) upon any such commencement of a bankruptcy proceeding upon written
request therefor by the party not subject to bankruptcy proceedings, unless the
other party elects to continue to perform all of its obligations under this
Agreement, or (b) if not delivered under (a) above, following the
rejection of this Agreement by or on behalf of either party upon written
request therefor by the other party.

 

9.7          Remedies. In the event of any breach of any provision
of this Agreement, in addition to the termination rights set forth herein, each
party shall have all other rights and remedies at law or equity to enforce this
Agreement.

 

10.                               INDEMNIFICATION

 

10.1        Indemnification.

 

(a)           Neurogenetics
hereby agrees to save, defend, indemnify and hold harmless LSRI, its directors,
officers, employees, agents and Affiliates (and its directors, officers,
employees and agents) and, in the event of a grant by Neurogenetics of rights
to LSRI under Section 9.5(b), LSRI’s sublicensee of such rights (and its
directors, officers, employees and agents) (each, a “LSRI Indemnitee”) from and against any
and all losses, damages, liabilities, expenses and costs, including reasonable
legal expenses and attorneys’ fees (“Losses”),
to which a LSRI Indemnitee may become subject as a result of any claim, demand,
action or other proceeding by any Third Party to the extent such Losses arise
out of (a) the practice by Neurogenetics of the license granted under
Section 3.1, (b) the development, manufacture, handling, storage,
sale or other disposition of any Licensed Product or Additional Product by
Neurogenetics and its Affiliates and Sublicensees, or (c) the breach by
Neurogenetics of any of its obligations hereunder, except
to the extent such Losses are finally proven to result from the willful
misconduct of any LSRI Indemnitee.

 

(b)           LSRI hereby agrees
to save, defend, indemnify and hold harmless Neurogenetics, its directors,
officers, employees and agents, its Affiliates (and its directors, officers,
employees and agents) and its Sublicensees (and its directors, officers,
employees and agents) (each, a “Neurogenetics Indemnitee”)
from and against any and all Losses to which a Neurogenetics Indemnitee may
become subject as a result of any claim, demand, action or other proceeding by
any Third Party to the extent such Losses arise out of (a) the practice by
LSRI of any license or use of data provided under Section 9.5(b),
including, but not limited to, the development, manufacture, handling, storage,
sale or other disposition of any Licensed Product by LSRI, its Affiliates and
sublicensees, or (b) the breach by LSRI of any of its obligations
hereunder, except to the extent such Losses are
finally proven to result from the willful misconduct of any Neurogenetics
Indemnitee.

 

(c)           In the event a
party seeks indemnification under Section 10.1(a) or 10.1(b), it shall
inform the other party (the “Indemnifying Party”) of a claim as soon as reasonably
practicable after it receives notice of the claim, shall permit the
Indemnifying Party to 

 

20

 

assume direction and
control of the defense of the claim (including the right to settle the claim
solely for monetary consideration), and shall cooperate as requested (at the
expense of the Indemnifying Party) in the defense of the claim.

 

10.2        Limitation of Liability. EXCEPT FOR AMOUNTS PAYABLE
UNDER SECTIONS 4 AND 10.1, AND LIABILITY FOR BREACH OF CONFIDENTIALITY OR FOR
INFRINGEMENT OR MISAPPROPRIATION, NEITHER PARTY SHALL BE ENTITLED TO RECOVER
FROM THE OTHER PARTY ANY INDIRECT, SPECIAL, INCIDENTIAL, CONSEQUENTIAL OR
EXEMPLARY DAMAGES, INCLUDING BUT NOT LIMITED TO, LOST PROFITS, ARISING FROM OR
RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF THE
POSSIBILITY OF SUCH DAMAGES. IT IS SPECIFICALLY AGREED THAT EXCEPT AS
SPECIFICALLY ACKNOWLEDGED BY LSRI HEREUNDER, LSRI AND IIBR SHALL BEAR NO
LIABILITY WITH RESPECT TO LICENSED PATENTS, LICENSED KNOW-HOW OR RESEARCH
TECHNOLOGY OR OTHERWISE WITH RESPECT TO LICENSED COMPOUND, ADDITIONAL COMPOUND,
LICENSED PRODUCT OR ADDITIONAL PRODUCT.

 

10.3        Insurance. From and after such time as Neurogenetics or
any of its Sublicensees first commences human clinical trials of Licensed
Product or Additional Product, Neurogenetics shall, or shall cause each such
Sublicensee to, at its own expense, maintain product liability insurance in an
amount consistent with industry standards during the Term.

 

10.4        Dispute Resolution. All disputes arising out of or
related to this Agreement, including disputes that may involve the parent
companies, subsidiaries and Affiliates of any party performing hereunder (“Disputes”), shall be
resolved in accordance with this Section 10.4.

 

(a)           Any Dispute shall
be settled by binding arbitration under the rules of the International Chamber
of Commerce by one arbitrator appointed in accordance with said rules
immediately upon the request of either party, his decision to be final and
binding on the parties. The arbitration shall be conducted in the English
language in New York, New York. The arbitral tribunal shall exert its best efforts
to conduct the proceedings so as to issue an award within nine months of the
appointment of the arbitrator.

 

(b)           The merits of any
Dispute shall be decided in accordance with the law governing this Agreement,
without application of any principle of conflict of laws. Each party expressly
waives any right it may have to a trial by jury of any Dispute, and also
expressly waives any right it may have to seek or to be awarded special or
punitive damages on account of any matter that is the subject of a Dispute. Nothing
herein shall limit or restrict a party’s ability to seek injunctive or other
equitable relief in the event of a breach or anticipated breach of
Section 7.

 

(c)           The arbitral
tribunal may grant any relief appropriate under the applicable law, but may not
include any penalty or element of punitive or exemplary damages. The arbitral
tribunal may award the costs and expenses of the arbitration. Any party may
seek emergency, interim or provisional relief prior to the appointment of an
arbitrator from any court of competent jurisdiction, without prejudice to the
agreement to arbitrate herein contained. After appointment 

 

21

 

of an arbitrator, any
request for such relief shall be addressed to the arbitrator, who shall have
the power to enter an interim award granting any emergency, interim or
provisional relief to which a party may be entitled under applicable law.

 

(d)           Any award of money shall be in U.S. dollars and
bear interest pursuant to Section 4.8 if not paid within thirty (30) days
after such award. The award of the tribunal may be entered and enforced
in any court of competent jurisdiction. A court called upon to enforce such an
award may require a party resisting enforcement to pay the reasonable attorney
fees and costs of the party seeking enforcement.

 

(e)           Any duty to
arbitrate under this Agreement shall remain in effect and enforceable after
termination of this Agreement for any reason.

 

(f)            Each party has the
right before or during the arbitration to seek and obtain from the appropriate
court provisional remedies, such as attachment, preliminary injunction or
replevin, to avoid irreparable harm, maintain the status quo, or preserve the
subject matter of the arbitration. This Section 10.4 shall not apply to
any dispute, controversy or claim that concerns (i) the validity or
infringement of a patent, trademark or copyright; or (ii) any antitrust,
anti-monopoly or competition law or regulation, whether or not statutory.

 

11.                               MISCELLANEOUS
PROVISIONS

 

11.1        Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York,
excluding its conflicts of laws principles.

 

11.2        Entire Agreement; Modification. This
Agreement (including the Exhibits hereto) is both a final expression of the
parties’ agreement and a complete and exclusive statement with respect to all
of its terms. This Agreement supersedes all prior and contemporaneous
agreements and communications, whether oral, written or otherwise, concerning
any and all matters contained herein. No rights or licenses with respect to any
intellectual property of either party are granted or deemed granted hereunder
or in connection herewith, other than those rights expressly granted in this
Agreement. No trade customs, courses of dealing or courses of performance by
the parties shall be relevant to modify, supplement or explain any term(s) used
in this Agreement. This Agreement may not be modified or supplemented by any
purchase order, change order, acknowledgment, order acceptance, standard terms
of sale, invoice or the like. This Agreement may only be modified or
supplemented in a writing expressly stated for such purpose and signed by the
parties to this Agreement.

 

11.3        Relationship Between the Parties. The parties’
relationship, as established by this Agreement, is solely that of independent
contractors. This Agreement does not create any partnership, joint venture or
similar business relationship between the parties. Neither party is a legal
representative of the other party, and neither party can assume or create any
obligation, representation, warranty or guarantee, express or implied, on
behalf of the other party for any purpose whatsoever.

 

22

 

11.4        Non-Waiver. The failure of a party to insist upon
strict performance of any provision of this Agreement or to exercise any right
arising out of this Agreement shall neither impair that provision or right nor
constitute a waiver of that provision or right, in whole or in part, in that
instance or in any other instance. Any waiver by a party of a particular
provision or right shall be in writing, shall be as to a particular matter and,
if applicable, for a particular period of time and shall be signed by such
party.

 

11.5        Assignment. Except as expressly provided hereunder,
neither this Agreement nor any rights or obligations hereunder may be assigned
or otherwise transferred by either party without the prior written consent of
the other party (which consent shall not be unreasonably withheld); provided, however, that either party may assign this
Agreement and its rights and obligations hereunder without the other party’s
consent in connection with the transfer or sale of all or substantially all of
the business of such party to which this Agreement relates to an Affiliate or
Third Party, whether by merger, sale of stock, sale of assets or otherwise. In
the event of such transaction, however, intellectual property rights of the
acquiring party to such transaction (if other than one of the parties to this
Agreement), which are not specific to Licensed Compound, Licensed Product,
Additional Compound or Additional Product, shall not be included in the
technology licensed hereunder. The rights and obligations of the parties under
this Agreement shall be binding upon and inure to the benefit of the successors
and permitted assigns of the parties. Any assignment not in accordance with
this Agreement shall be void.

 

11.6        No Third Party Beneficiaries. This Agreement is neither
expressly nor impliedly made for the benefit of any party other than those
executing it.

 

11.7        Severability. If, for any reason, any part of this
Agreement is adjudicated invalid, unenforceable or illegal by a court of
competent jurisdiction, such adjudication shall not affect or impair, in whole
or in part, the validity, enforceability or legality of any remaining portions
of this Agreement. All remaining portions shall remain in full force and effect
as if the original Agreement had been executed without the invalidated,
unenforceable or illegal part.

 

11.8        Notices. Any notice to be given under this Agreement
must be in writing and delivered either in person, by any method of mail
(postage prepaid) requiring return receipt, or by overnight courier or
facsimile confirmed thereafter by any of the foregoing, to the party to be
notified at its address(es) given below, or at any address such party has
previously designated by prior written notice to the other. Notice shall be
deemed sufficiently given for all purposes upon the earlier of:  (a) the date of actual receipt;
(b) if mailed, five (5) business days after the date of postmark; or
(c) if delivered by overnight courier with guaranteed next day delivery,
the next business day the overnight courier regularly makes deliveries.

 

If to Neurogenetics, notices must be addressed to:

 

Neurogenetics, Inc.

11085 North Torrey Pines Road, Suite 300

La Jolla, CA 
92037

Attention: 
Chief Executive Officer

Telephone: 858-623-5665

Facsimile: 858-623-5666

 

23

 

If to LSRI, notices must be addressed to:

 

Life Science Research Israel Ltd.

PO Box 139, Ness-Ziona 70451

Israel

Attention: Chairman

Telephone: 972-8-9400987

Facsimile: 972-8-9401443

 

11.9        Force Majeure. Each party shall be excused from
liability for the failure or delay in performance of any obligation under this
Agreement other than failure to pay when due by reason of any event beyond such
party’s reasonable control including but not limited to Acts of God, fire,
flood, explosion, earthquake, or other natural forces, war, terrorism, civil
unrest, accident, destruction or other casualty, any lack or failure of
transportation facilities, any lack or failure of supply of raw materials, any
strike or labor disturbance, or any other event beyond reasonable control of
the parties similar to those enumerated above. Such excuse from liability shall
be effective only to the extent and duration of the event(s) causing the
failure or delay in performance and provided that the party has not caused such
event(s) to occur. Notice of a party’s failure or delay in performance due to
force majeure must be given to the other party within ten (10) calendar days
after its occurrence. All delivery dates under this Agreement that have been
affected by force majeure shall be tolled for the duration of such force
majeure. In no event shall any party be required to prevent or settle any labor
disturbance or dispute. Should the performance of obligations hereunder be
suspended in the U.S. for reasons not related to manufacturing or intentional
product contamination by a Third Party and the situation prevails for one
hundred and eighty (180) days, then the non-invoking party may at any time
thereafter terminate this Agreement forthwith and the provisions of Section 9.5
hereof shall apply. In the case where performance is suspended in the U.S. for
reasons related to manufacturing or intentional product contamination, then
within one hundred and twenty (120) days of such suspension, the party invoking
rights under this Section will start to remedy the suspension and adhere to a
stated workplan following start of the remedy, the workplan designed to address
the suspension in a expeditious manner.

 

11.10      Legal Fees. If any party
to this Agreement resorts to any legal action or arbitration in connection with
this Agreement, the prevailing party shall be entitled to recover reasonable
fees of attorneys and other professionals in addition to all court costs and
arbitrator’s fees which that party may incur as a result.

 

11.11      Headings. The headings
contained in this Agreement have been added for convenience only and shall not
be construed as limiting or used in the interpretation of this Agreement.

 

11.12      Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original document, and all of which, together with this writing,
shall be deemed one instrument.

 

24

 

11.13      Language. The parties hereto confirm their agreement
that this Agreement, as well as any amendment hereto and all other documents
related hereto (including legal notices) and all information disclosed
hereunder shall be in the English language only.

 

[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

25

 

IN
WITNESS WHEREOF, the parties hereto have duly executed this RESEARCH AND LICENSE AGREEMENT, including
the Exhibit attached hereto and incorporated herein by reference.

 

	
  LIFE SCIENCE RESEARCH ISRAEL LTD.

  	
  NEUROGENETICS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Avigdor Shafferman

  	
   

  	
  By:

  	
   

  	
  /s/ Neil Kurtz

  
	
   

  	
   

  
	
  Name:

  	
  Avigdor Shafferman

  	
   

  	
  Name:

  	
  Neil M. Kurtz, M.D.

  
	
   

  	
   

  
	
  Title:

  	
  Chairman

  	
   

  	
  Title:

  	
   

  	
  President and CEO

  
									

 

 

 

[SIGNATURE PAGE TO RESEARCH AND LICENSE AGREEMENT]

 

 

EXHIBIT A

 

Licensed
Patents as of the Effective Date

 

Table 1.[***]: Patent Status

 

[***]

 

 

***   Confidential
Treatment Requested

 

 

Table 2. [***]: Patent Status

 

[***]

 

 

***   Confidential
Treatment Requested

 

2

 

Table 3.
[***]: Patent Status

 

All patents below are
based on Priority Data: [***]

 

[***][

 

 

***   Confidential
Treatment Requested

 

3

 

EXHIBIT
B

 

Research
Plan

 

[***]

 

 

***   Confidential
Treatment Requested

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