Document:

Exhibit 10.2

 

RHYTHM PHARMACEUTICALS, INC.

 

2017 EQUITY INCENTIVE PLAN

 

 

TABLE OF CONTENTS

 

	
1.
    	
 
    	
Purpose
    	
 
    	
2
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.
    	
 
    	
Definitions
    	
 
    	
2
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
3.
    	
 
    	
Term of the Plan
    	
 
    	
5
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
4.
    	
 
    	
Stock Subject to the Plan
    	
 
    	
5
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.
    	
 
    	
Administration
    	
 
    	
6
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
6.
    	
 
    	
Authorization of Grants
    	
 
    	
7
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
7.
    	
 
    	
Specific Terms of Awards
    	
 
    	
8
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
8.
    	
 
    	
Adjustment Provisions
    	
 
    	
14
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
9.
    	
 
    	
Change of Control
    	
 
    	
17
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
10.
    	
 
    	
Settlement of Awards
    	
 
    	
17
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
11.
    	
 
    	
Reservation of Stock
    	
 
    	
20
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
12.
    	
 
    	
Limitation of Rights in Stock; No Special Service   Rights
    	
 
    	
20
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
13.
    	
 
    	
Unfunded Status of Plan
    	
 
    	
20
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
14.
    	
 
    	
Nonexclusivity of the Plan
    	
 
    	
21
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
15.
    	
 
    	
No Guarantee of Tax Consequences
    	
 
    	
21
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
16.
    	
 
    	
Termination and Amendment of the Plan
    	
 
    	
21
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
17.
    	
 
    	
Notices and Other Communications
    	
 
    	
22
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
18.
    	
 
    	
Governing Law
    	
 
    	
22
    

 

 

RHYTHM PHARMACEUTICALS, INC.

 

2017 EQUITY INCENTIVE PLAN

 

1.                                      Purpose

 

This Plan is intended to provide incentives that will attract, retain and motive highly competent officers, directors, employees, consultants and advisors to promote the success of the Company’s business and align employees’ interests with stockholders’ interests.  The Plan is intended to be an incentive stock option plan within the meaning of Section 422 of the Code, but not all Awards are required to be Incentive Options.

 

This Plan serves as the successor to the Company’s 2015 Equity Incentive Plan (the “Predecessor Plan”), and no further awards shall be made under the Predecessor Plan on or after the Effective Date.  All awards outstanding under the Predecessor Plan on the Effective Date shall be transferred to this Plan and shall be treated as outstanding under this Plan.  However, each outstanding award so transferred shall continue to be governed solely by the terms of the documents evidence such award, and no provision of the Plan shall be deemed to affect or modified the rights or obligations of the holders of such transferred awards.  This Plan and all definitions hereunder shall be interpreted consistent with the foregoing.

 

2.                                      Definitions

 

As used in this Plan, the following terms shall have the respective meanings set out below, unless the context clearly requires otherwise:

 

2.1.                            Accelerate, Accelerated, and Acceleration, means: (a) when used with respect to an Option or Stock Appreciation Right, that as of the time of reference such Option or Stock Appreciation Right will become exercisable with respect to some or all of the shares of Stock for which it was not then otherwise exercisable by its terms; (b) when used with respect to Restricted Stock or Restricted Stock Units, that the Risk of Forfeiture otherwise applicable to such Restricted Stock or Restricted Stock Units shall expire with respect to some or all of such shares of Restricted Stock or such Restricted Stock Units then still otherwise subject to the Risk of Forfeiture; and (c) when used with respect to Performance Units, that the applicable Performance Goals or other business objectives shall be deemed to have been met as to some or all of such Performance Units.

 

2.2.                            Affiliate means any parent or subsidiary corporation of the Company (within the meaning of Sections 424(e) and 424(f) of the Code, respectively).

 

2.3.                            Award means any grant or sale pursuant to the Plan or award outstanding under the Predecessor Plan as of the Effective Date of Options, Stock Appreciation Rights, Performance Units, Restricted Stock, Restricted Stock Units, Stock Grants or any of the foregoing intended to constitute Qualified Performance-Based Awards.

 

2.4.                            Award Agreement means an agreement between the Company and the recipient of an Award, or other notice of grant of an Award, setting forth the terms and conditions of the Award.

 

2.5.                            Board means the Company’s Board of Directors.

 

2.6.                            Change of Control means the occurrence of any of the following after the date of the approval of the Plan by the Board:

 

 

(a)                                 a Transaction (as defined in Section 8.4), unless securities possessing more than 50% of the total combined voting power of the survivor’s or acquiror’s outstanding securities (or the securities of any parent thereof) are held by a person or persons who held securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities immediately prior to that Transaction; or

 

(b)                                 any person or group of persons (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended and in effect from time to time) that, directly or indirectly, acquires, including but not limited to by means of a merger or consolidation, beneficial ownership (determined pursuant to Securities and Exchange Commission Rule 13d-3 promulgated under the said Exchange Act) of securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities unless pursuant to a tender or exchange offer made directly to the Company’s stockholders that the Board recommends such stockholders accept, other than (i) the Company or any of its Affiliates, (ii) an employee benefit plan of the Company or any of its Affiliates, (iii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, or (iv) an underwriter temporarily holding securities pursuant to an offering of such securities; or

 

(c)                                  over a period of thirty-six (36) consecutive months or less, there is a change in the composition of the Board such that a majority of the Board members (rounded up to the next whole number, if a fraction) ceases, by reason of one or more proxy contests for the election of Board members, to be composed of individuals who either (i) have been Board members continuously since the beginning of that period, or (ii) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in the preceding clause (i) who were still in office at the time that election or nomination was approved by the Board; or

 

(d)                                 a majority of the Board votes in favor of a decision that a Change of Control has occurred, which vote may adopted by the Board with the intention that such vote become effective subject to and contingent upon the occurrence of certain events, in which case such Change of Control shall not be deemed to have occurred unless and until such vote becomes effective in accordance with its terms.

 

2.7.                            Code means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto, and any regulations issued from time to time thereunder.

 

2.8.                            Committee means the Compensation Committee of the Board, which in general is responsible for the administration of the Plan, as provided in Section 5 of this Plan.  For any period during which no such committee is in existence “Committee” shall mean the Board and all authority and responsibility assigned to the Committee under the Plan shall be exercised, if at all, by the Board.

 

2.9.                            Company means Rhythm Pharmaceuticals, Inc., a corporation organized under the laws of the State of Delaware.

 

2.10.                     “Forfeiture,” “forfeit,” and derivations thereof, when used in respect of Restricted Stock purchased by a Participant, includes the Company’s repurchase of such Restricted Stock at less than its then Market Value as a means intended to effect a forfeiture of value.

 

2.11.                     Grant Date means the date as of which an Option is granted, as determined under Section 7.1(a).

 

2.12.                     Incentive Option means an Option which by its terms is to be treated as an “incentive stock option” within the meaning of Section 422 of the Code.

 

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2.13.                     Market Value means the value of a share of Stock on a particular date determined by such methods or procedures as may be established by the Committee.  Unless otherwise determined by the Committee, the Market Value of Stock as of any date is the closing price for the Stock as reported on the Nasdaq Stock Market (or on any other national securities exchange on which the Stock is then listed) for that date or, if no closing price is reported for that date, the closing price on the first following date for which a closing price is reported.  For purposes of Awards effective as of the effective date of the Company’s initial public offering, Market Value of Stock shall be the price at which the Company’s Stock is offered to the public in its initial public offering.

 

2.14.                     Nonstatutory Option means any Option that is not an Incentive Option.

 

2.15.                     Option means an option to purchase shares of Stock.

 

2.16.                     Optionee means an eligible individual to whom an Option shall have been granted under the Plan.

 

2.17.                     Participant means any holder of an outstanding Award under the Plan or the Predecessor Plan.

 

2.18.                     Performance Criteria and Performance Goals have the meanings given such terms in Section 7.7(f).

 

2.19.                     Performance Period means one or more periods of time, which may be of varying and overlapping durations, selected by the Committee, over which the attainment of one or more Performance Goals or other business objectives will be measured for purposes of determining a Participant’s right to, and the payment of, an Award.

 

2.20.                     Performance Unit means a right granted to a Participant under Section 7.5, to receive cash, Stock or other Awards, the payment of which is contingent on achieving Performance Goals or other business objectives established by the Committee.

 

2.21.                     Plan means this 2017 Equity Incentive Plan of the Company, as amended from time to time, and including any attachments or addenda hereto.

 

2.22.                     Qualified Performance-Based Awards means Awards intended to qualify as “performance-based compensation” under Section 162(m) of the Code.

 

2.23.                     Restricted Stock means a grant or sale of shares of Stock to a Participant subject to a Risk of Forfeiture.

 

2.24.                     Restricted Stock Units means rights to receive shares of Stock, cash or other Awards at the close of a Restriction Period, subject to a Risk of Forfeiture.

 

2.25.                     Restriction Period means the period of time, established by the Committee in connection with an Award of Restricted Stock or Restricted Stock Units, during which the shares of Restricted Stock or Restricted Stock Units are subject to a Risk of Forfeiture described in the applicable Award Agreement.

 

2.26.                     Risk of Forfeiture means a limitation on the right of the Participant to retain Restricted Stock or Restricted Stock Units, including a right of the Company to reacquire shares of Restricted Stock at less than their then Market Value, arising because of the occurrence or non-occurrence of specified

 

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events or conditions.

 

2.27.                     Stock means common stock, par value $0.001 per share, of the Company, and such other securities as may be substituted for such common stock pursuant to Section 8.

 

2.28.                     Stock Appreciation Right means a right to receive any excess in the Market Value of shares of Stock (except as otherwise provided in Section 7.2(c)) over a specified exercise price.

 

2.29.                     Stock Grant means the grant of shares of Stock not subject to restrictions or other forfeiture conditions.

 

2.30.                     Stockholders’ Agreement means any agreement by and among the holders of at least a majority of the outstanding voting securities of the Company and setting forth, among other provisions, restrictions upon the transfer of shares of Stock or on the exercise of rights appurtenant thereto (including but not limited to voting rights).

 

2.31.                     Ten Percent Owner means a person who owns, or is deemed within the meaning of Section 422(b)(6) of the Code to own, stock possessing more than 10% of the total combined voting power of all classes of stock of the Company (or any parent or subsidiary corporations of the Company, as defined in Sections 424(e) and (f), respectively, of the Code).  Whether a person is a Ten Percent Owner shall be determined with respect to an Option based on the facts existing immediately prior to the Grant Date of the Option.

 

3.                                      Term of the Plan

 

The Plan became effective on October    , 2017 upon consummation of the Company’s initial public offering (the “Effective Date”) and, unless earlier terminated by the Committee, shall terminate on October    , 2027.  Awards granted pursuant to the Predecessor Plan or to the Plan within that period shall not expire solely by reason of the termination of the Plan.

 

4.                                      Stock Subject to the Plan

 

4.1.                            Plan Share Limitations.

 

(a)                                 Limitation.  The maximum number of shares of Stock that may be issued pursuant to or subject to outstanding Awards granted under the Plan shall not exceed 4,018,538 shares of Stock.  Such share reserve includes 495,759 shares of Stock available for issuance under the Predecessor Plan as of the Effective Date, including the portion of those shares subject to Options outstanding under the Predecessor Plan as of the Effective Date, plus an additional 3,522,779 shares.  Notwithstanding the foregoing, however, beginning on the first January 1 following consummation of the Company’s initial public offering, the number of shares of Stock authorized under the first sentence of this Section 4.1(a) of the Plan will be increased each January 1 by an amount equal to four percent (4%) of outstanding shares of Stock as of the end of the immediately preceding fiscal year. Notwithstanding the foregoing, the Board may act prior to January 1 of a given year to provide that there will be no such January 1 increase in the number of shares of Stock authorized under this Section 4.1(a) of the Plan for such year or that the increase in the number of shares of Stock authorized under this Section 4.1(a) of the Plan for such year will be a lesser number than would otherwise occur pursuant to the preceding sentence.  Notwithstanding

 

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the preceding sentences, in no event shall the number of shares available for issuance pursuant to Incentive Options over the term of the Plan exceed 4,018,583 shares of Stock.

 

(b)                                 Application.  For purposes of applying the foregoing limitation of Section 4.1(a), (i) if any Option or Stock Appreciation Right expires, terminates, or is cancelled for any reason without having been exercised in full, or if any other Award is forfeited, the shares of Stock not purchased by the holder or subject to Awards which are forfeited, as the case may be, shall again be available for Awards to be granted under the Plan, (ii) if any Option is exercised by delivering previously owned shares of Stock or the withholding of a portion of the otherwise issuable shares of Stock subject to the Option in payment of the exercise price therefor, only the net number of shares, that is, the number of shares of Stock issued minus the number received by the Company in payment of the exercise price, shall be considered to have been issued pursuant to an Award granted under the Plan, and (iii) any shares of Stock either delivered to or withheld by the Company in satisfaction of tax withholding obligations of the Company or an Affiliate with respect to an Award shall again be available for Awards to be granted under the Plan.  In addition, settlement of any Award shall not count against the foregoing limitations except to the extent settled in the form of Stock.  For the avoidance of doubt, Awards outstanding under the Predecessor Plan shall be treated consistent with Awards granted under this Plan for all purposes, including for purposes of this Section 4.1(b).  Shares of Stock issued pursuant to the Plan may be either authorized but unissued shares or shares held by the Company in its treasury.

 

4.2.                            Per Person Limitations.  The maximum number of shares of Stock that may be subject to Options or Stock Appreciation Rights or any combination thereof granted to any one Participant during any single calendar year shall be 1,200,000.  The maximum number of shares of Stock that may be subject to all other Awards or any combination thereof granted to any one Participant during any single calendar year that are intended to be Qualified Performance-Based Awards shall be 1,200,000.  The maximum value of awards denominated in cash granted to any one person, other than a non-employee member of the Board, during any single calendar year and that are intended to be Qualified Performance-Based Awards shall be $30,000,000.  Each of the foregoing limitations shall be doubled with respect to awards granted to an individual during the first calendar year in which he or she commences employment.  The per Participant limits described in this Section 4.2 shall be construed and applied consistent with Section 162(m) of the Code.

 

4.3.                            Limitations on Grants to Non-Employee Board Members.  The maximum value of awards denominated in cash granted to any non-employee member of the Board, during any single calendar year shall be $1,000,000.  For purposes of this limitation, the value of an award shall be the grant date fair value of the award (as determined for the Company’s financial statements).

 

4.4.                            Adjustment of Limitations.  Each of the share limitations of this Section 4 shall be subject to adjustment pursuant to Section 8 of the Plan, but in the case of the limitations of Section 4.2, only if and to the extent consistent with Section 162(m) of the Code.

 

5.                                      Administration

 

The Plan shall be administered by the Committee; provided, however, that at any time and on any one or more occasions the Board may itself exercise any of the powers and responsibilities assigned the Committee under the Plan and when so acting shall have the benefit of all of the provisions of the Plan pertaining to the Committee’s exercise of its authorities hereunder; and provided further, however, that the Committee may delegate to an executive officer or officers the authority to grant Awards hereunder to employees who are not executive officers, and to consultants, up to such maximum number and in accordance with such other guidelines as the Committee shall specify by resolution at any time or from time to time.  To the extent required by applicable law, any such delegation may not include the authority

 

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to grant Restricted Stock, unless the delegate is a committee of the Board, including a committee consisting solely of an executive officer who is a Board member.  Subject to the provisions of the Plan, the Committee shall have complete authority, in its discretion, to make or to select the manner of making all determinations with respect to each Award to be granted by the Company under the Plan including the officer, employee, consultant, advisor or director to receive the Award and the form of Award.  In making such determinations, the Committee may take into account the nature of the services rendered by the respective officers, employees, consultants, advisors and directors, their present and potential contributions to the success of the Company and its Affiliates, and such other factors as the Committee in its discretion shall deem relevant.  Subject to the provisions of the Plan, the Committee shall also have complete authority to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, to determine the terms and provisions of the respective Award Agreements (which need not be identical), and to make all other determinations necessary or advisable for the administration of the Plan.  The Committee’s determinations made in good faith on matters referred to in the Plan shall be final, binding and conclusive on all participants, beneficiaries, heirs, assigns or other persons having or claiming any interest under the Plan or an Award made pursuant hereto.

 

6.                                      Authorization of Grants

 

6.1.                            Eligibility.  The Committee may grant from time to time and at any time prior to the termination of the Plan one or more Awards, either alone or in combination with any other Awards, to any officer or employee of or consultant or advisor to one or more of the Company and its Affiliates or to any non-employee member of the Board or of any board of directors (or similar governing authority) of any Affiliate. However, only employees of the Company and its Affiliates shall be eligible for the grant of an Incentive Option.

 

6.2.                            General Terms of Awards.  Each grant of an Award shall be subject to all applicable terms and conditions of the Plan (including but not limited to any specific terms and conditions applicable to that type of Award set out in the following Section), and such other terms and conditions, not inconsistent with the terms of the Plan, as the Committee may prescribe.  No prospective Participant shall have any rights with respect to an Award, unless and until such Participant shall have complied with the applicable terms and conditions of such Award (including if applicable delivering a fully executed copy of any agreement evidencing an Award to the Company).

 

6.3.                            Effect of Termination of Employment, Etc. Unless the Committee shall provide otherwise with respect to any Award (including, but not limited to, in a Participant’s Award Agreement), if the Participant’s employment or other association with the Company and its Affiliates ends for any reason, including because of the Participant’s employer ceasing to be an Affiliate, (a) any outstanding Option or Stock Appreciation Right of the Participant shall cease to be exercisable in any respect not later than ninety (90) days following that event and, for the period it remains exercisable following that event, shall be exercisable only to the extent exercisable at the date of that event, and (b) any other outstanding Award of the Participant to the extent that it is then still subject to Risk of Forfeiture shall be forfeited or otherwise subject to return to or repurchase by the Company on the terms specified in the applicable Award Agreement.  Cessation of the performance of services in one capacity, for example, as an employee, shall not result in termination of an Award while the Participant continues to perform services in another capacity, for example as a director.  Military or sick leave or other bona fide leave approved by the Company shall not be deemed a termination of employment or other association; provided, however, that should such leave exceed three (3) months, then for purposes of determining the period within which an Incentive Option may be exercised as such under the federal tax laws, the Participant’s service shall be deemed to cease on the first day immediately following the expiration of such three (3)-month period, unless the Participant is provided with the right to return to employment following such leave either by statute or by written contract. To the extent consistent with applicable law, the Committee may provide

 

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that Awards continue to vest for some or all of the period of any such leave, or that their vesting shall be tolled during any such leave and only recommence upon the Participant’s return from leave, if ever.

 

6.4.                            Non-Transferability of Awards.  Except as otherwise provided in this Section 6.4, Awards shall not be transferable, and no Award or interest therein may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.  The provisions of the immediately preceding sentence shall not be applicable to Stock Grants which shall not be subject to any transfer restrictions under this Section 6.4.  All of a Participant’s rights in any Award may be exercised during the life of the Participant only by the Participant or the Participant’s legal representative.  However, the Committee may, at or after the grant of an Award of a Nonstatutory Option, or shares of Restricted Stock, provide that such Award may be transferred by the recipient to a family member; provided, however, that any such transfer is without payment of any consideration whatsoever and that no transfer shall be valid unless first approved by the Committee, acting in its sole discretion.  For this purpose, “family member” means any child, stepchild, grandchild, parent, grandparent, stepparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the employee’s household (other than a tenant or employee), a trust in which the foregoing persons have more than fifty (50) percent of the beneficial interests, a foundation in which the foregoing persons (or the Participant) control the management of assets, and any other entity in which these persons (or the Participant) own more than fifty (50) percent of the voting interests.

 

7.                                      Specific Terms of Awards

 

7.1.                            Options.

 

(a)                                 Date of Grant.  The granting of an Option shall take place at the time specified in the Award Agreement.

 

(b)                                 Exercise Price.  The price at which shares of Stock may be acquired under each Option shall be not less than 100% of the Market Value of Stock on the Grant Date, or for an Incentive Option not less than 110% of the Market Value of Stock on the Grant Date if the Optionee is a Ten Percent Owner.

 

(c)                                  Option Period.  No Incentive Option may be exercised on or after the tenth (10th) anniversary of the Grant Date, or on or after the fifth (5th) anniversary of the Grant Date if the Optionee is a Ten Percent Owner.  The Option period under each Nonstatutory Option shall not be so limited solely by reason of this Section.

 

(d)                                 Exercisability.  An Option may be immediately exercisable or become exercisable in such installments, cumulative or non-cumulative, as the Committee may determine.  In the case of an Option not otherwise immediately exercisable in full, the Committee may Accelerate such Option in whole or in part at any time; provided, however, that in the case of an Incentive Option, any such Acceleration of the Option would not cause the Option to fail to comply with the provisions of Section 422 of the Code or the Optionee consents to the Acceleration.

 

(e)                                  Method of Exercise.  An Option may be exercised by the Optionee giving written notice, in the manner provided in Section 17, specifying the number of shares of Stock with respect to which the Option is then being exercised.  The notice shall be accompanied by payment in the form of cash or check payable to the order of the Company in an amount equal to the exercise price of the shares of Stock to be purchased or, subject in each instance to the Committee’s approval, acting in its sole discretion, and to such conditions, if any, as the Committee may deem necessary to avoid adverse

 

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accounting effects to the Company,

 

(i)                                     by delivery to the Company of shares of Stock having a Market Value equal to the exercise price of the shares to be purchased, or

 

(ii)                                  by the Company withholding shares of Stock otherwise issuable under the Option with such withheld shares having an aggregate Market Value equal to the aggregate exercise price of the shares to be purchased, or

 

(iii)                               unless prohibited by applicable law, by delivery to the Company of the Optionee’s executed promissory note in the principal amount equal to the exercise price of the shares of Stock to be purchased and otherwise in such form as the Committee shall have approved.

 

If the Stock is traded on an established market, payment of any exercise price may also be made through and under the terms and conditions of any formal cashless exercise program authorized by the Company entailing the sale of the Stock subject to an Option in a brokered transaction (other than to the Company).  Receipt by the Company of such notice and payment in any authorized or combination of authorized means shall constitute the exercise of the Option.  Within thirty (30) days thereafter but subject to the remaining provisions of the Plan, the Company shall deliver or cause to be delivered to the Optionee or his agent a certificate or certificates or shall cause the Stock to be held in book-entry position through the direct registration system of the Company’s transfer agent for the number of shares then being purchased.  Such shares of Stock shall be fully paid and nonassessable.

 

(f)                                   Limit on Incentive Option Characterization.  An Incentive Option shall be considered to be an Incentive Option only to the extent that the number of shares of Stock for which the Option first becomes exercisable in a calendar year do not have an aggregate Market Value (as of the date of the grant of the Option) in excess of the “current limit”.  Except to the extent otherwise provided under applicable law or regulation, the  current limit for any Optionee for any calendar year shall be $100,000 minus the aggregate Market Value at the date of grant of the number of shares of Stock available for purchase for the first time in the same year under each other Incentive Option previously granted to the Optionee under the Plan, and under each other incentive stock option previously granted to the Optionee under any other incentive stock option plan of the Company and its parent and subsidiary corporations (as defined in Sections 424(e) and (f) of the Code).  Any shares of Stock which would cause the foregoing limit to be violated shall be deemed to have been granted under a separate Nonstatutory Option, otherwise identical in its terms to those of the Incentive Option.

 

(g)                                  Notification of Disposition.  Each person exercising any Incentive Option granted under the Plan shall be deemed to have covenanted with the Company to report to the Company any disposition of the shares of Stock issued upon such exercise prior to the expiration of the holding periods specified by Section 422(a)(1) of the Code and, if and to the extent that the realization of income in such a disposition imposes upon the Company federal, state, local or other withholding tax requirements, or any such withholding is required to secure for the Company an otherwise available tax deduction, to remit to the Company an amount in cash sufficient to satisfy those requirements.

 

7.2.                            Stock Appreciation Rights.

 

(a)                                 Tandem or Stand-Alone.  Stock Appreciation Rights may be granted in tandem with an Option (at or, in the case of a Nonstatutory Option, after, the award of the Option), or alone and unrelated to an Option.  Stock Appreciation Rights in tandem with an Option shall terminate to the extent that the related Option is exercised, and the related Option shall terminate to the extent that the tandem

 

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Stock Appreciation Rights are exercised.

 

(b)                                 Exercise Price.  Stock Appreciation Rights shall have an exercise price of not less than one hundred percent (100%) of the Market Value of the Stock on the date of award, or in the case of Stock Appreciation Rights in tandem with Options, the exercise price of the related Option.

 

(c)                                  Other Terms.  Except as the Committee may deem inappropriate or inapplicable in the circumstances, Stock Appreciation Rights shall be subject to terms and conditions substantially similar to those applicable to a Nonstatutory Option.  In addition, a Stock Appreciation Right related to an Option which can only be exercised during limited periods following a Change of Control may entitle the Participant to receive an amount based upon the highest price paid or offered for Stock in any transaction relating to the Change of Control or paid during the thirty (30) day period immediately preceding the occurrence of the Change of Control in any transaction reported in the stock market in which the Stock is normally traded.

 

7.3.                            Restricted Stock.

 

(a)                                 Purchase Price.  Shares of Restricted Stock shall be issued under the Plan for such consideration, if any, in cash, other property or services, or any combination thereof, as is determined by the Committee.

 

(b)                                 Issuance of Stock.  Each Participant receiving a Restricted Stock Award, subject to subsection (c) below, shall be issued a stock certificate in respect of such shares of Restricted Stock or the shares shall be held in book-entry position through the direct registration system of the Company’s transfer agent.  If a certificate is issued, such certificate shall be registered in the name of such Participant, and, if applicable, shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award substantially in the following form:

 

“The shares evidenced by this certificate are subject to the terms and conditions of Rhythm Pharmaceuticals, Inc.’s 2017 Equity Incentive Plan and an Award Agreement entered into by the registered owner and Rhythm Pharmaceuticals, Inc., copies of which will be furnished by the Company to the holder of the shares evidenced by this certificate upon written request and without charge.”

 

If the Stock is in book-entry position through the direct registration system of the Company’s transfer agent, the restrictions will be appropriately noted.

 

(c)                                  Escrow of Shares.  The Committee may require that any stock certificates evidencing shares of Restricted Stock be held in custody by a designated escrow agent (which may but need not be the Company) until the restrictions thereon shall have lapsed, and that the Participant deliver a stock power, endorsed in blank, relating to the Stock covered by such Award.

 

(d)                                 Restrictions and Restriction Period.  During the Restriction Period applicable to shares of Restricted Stock, such shares shall be subject to limitations on transferability and a Risk of Forfeiture arising on the basis of such conditions related to the performance of services, Company or Affiliate performance or otherwise as the Committee may determine and provide for in the applicable Award Agreement.  Any such Risk of Forfeiture may be waived or terminated, or the Restriction Period shortened, at any time by the Committee on such basis as it deems appropriate.

 

(e)                                  Rights Pending Lapse of Risk of Forfeiture or Forfeiture of Award.  Except as otherwise provided in the Plan or the applicable Award Agreement, the Participant shall have all of the

 

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rights of a stockholder of the Company with respect to any outstanding shares of Restricted Stock, including the right to vote, and the right to receive any dividends with respect to, the shares of Restricted Stock (but any dividends or other distributions payable in shares of Stock or other securities of the Company shall constitute additional Restricted Stock, subject to the same Risk of Forfeiture as the shares of Restricted Stock in respect of which such shares of Stock or other securities are paid).  The Committee, as determined at the time of Award, may permit or require the payment of cash dividends to be deferred and, if the Committee so determines, reinvested in additional Restricted Stock to the extent shares of Stock are available under Section 4.

 

(f)                                   Lapse of Restrictions.  If and when the Restriction Period expires without a prior forfeiture, any certificates for such shares shall be delivered to the Participant promptly if not theretofore so delivered.

 

7.4.                            Restricted Stock Units.

 

(a)                                 Character.  Subject to Section 10, each Restricted Stock Unit shall entitle the recipient to a share of Stock at a close of such Restriction Period as the Committee may establish and subject to a Risk of Forfeiture arising on the basis of such conditions relating to the performance of services, Company or Affiliate performance or otherwise as the Committee may determine and provide for in the applicable Award Agreement.  Any such Risk of Forfeiture may be waived or terminated, or the Restriction Period shortened, at any time by the Committee on such basis as it deems appropriate.

 

(b)                                 Form and Timing of Payment.  Payment of earned Restricted Stock Units shall be made promptly following the close of the applicable Restriction Period.  At the discretion of the Committee, Participants may be entitled to receive payments equivalent to any dividends declared with respect to Stock referenced in grants of Restricted Stock Units but only following the close of the applicable Restriction Period and then only if the underlying Stock shall have been earned.  Unless the Committee shall provide otherwise, any such dividend equivalents shall be paid, if at all, without interest or other earnings.  The Committee may permit or, if it so provides at grant require, a Participant to defer such Participant’s receipt of the payment that would otherwise be due to such Participant with respect to Restricted Stock Units.  If any such deferral election is required or permitted, the Committee shall establish rules and procedures for such payment deferrals.

 

7.5.                            Performance Units.

 

(a)                                 Character. Each Performance Unit shall entitle the recipient to the value of a specified number of shares of Stock, over the initial value for such number of shares, if any, established by the Committee at the time of grant, at the close of a specified Performance Period to the extent specified business objectives, including but not limited to Performance Goals, shall have been achieved.

 

(b)                                 Earning of Performance Units. The Committee shall set Performance Goals or other business objectives in its discretion which, depending on the extent to which they are met within the applicable Performance Period, will determine the number and value of Performance Units that will be paid out to the Participant.  After the applicable Performance Period has ended, the holder of Performance Units shall be entitled to receive payout on the number and value of Performance Units earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding Performance Goals or other business objectives have been achieved.

 

(c)                                  Form and Timing of Payment.  Unless otherwise provided in the applicable Award Agreement, payment of earned Performance Units shall be made in a single lump sum following the close of the applicable Performance Period.  At the discretion of the Committee, Participants may be

 

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entitled to receive any dividends declared with respect to Stock which have been earned in connection with grants of Performance Units which have been earned, but not yet distributed to Participants.  The Committee may permit or, if it so provides at grant require, a Participant to defer such Participant’s receipt of the payment of cash or the delivery of Stock that would otherwise be due to such Participant by virtue of the satisfaction of any requirements or goals with respect to Performance Units.  If any such deferral election is required or permitted, the Committee shall establish rules and procedures for such payment deferrals.

 

7.6.                            Stock Grants. Stock Grants shall be awarded solely in recognition of significant prior or expected contributions to the success of the Company or its Affiliates, as an inducement to employment, in lieu of compensation otherwise already due and in such other limited circumstances as the Committee deems appropriate.  Stock Grants shall be made without forfeiture conditions of any kind.

 

7.7.                            Qualified Performance-Based Awards.

 

(a)                                 Purpose.  The purpose of this Section 7.7 is to provide the Committee the ability to qualify Awards as “performance-based compensation” under Section 162(m) of the Code.  If the Committee, in its discretion, decides to grant an Award as a Qualified Performance-Based Award, the provisions of this Section 7.7 will control over any contrary provision contained in the Plan.  In the course of granting any Award, the Committee may specifically designate the Award as intended to qualify as a Qualified Performance-Based Award.  However, no Award shall be considered to have failed to qualify as a Qualified Performance-Based Award solely because the Award is not expressly designated as a Qualified Performance-Based Award, if the Award otherwise satisfies the provisions of this Section 7.7 and the requirements of Section 162(m) of the Code applicable to “performance-based compensation.”

 

(b)                                 Authority.  All grants of Awards intended to qualify as Qualified Performance-Based Awards and the determination of the terms applicable thereto shall be made by the Committee.  If not all of the members thereof qualify as “outside directors” within the meaning of Section 162 of the Code, however, all grants of Awards intended to qualify as Qualified Performance-Based Awards and the determination of the terms applicable thereto shall be made by a subcommittee of the Committee consisting of such of the members of the Committee as do so qualify.  Any reference in this Section 7.7 to the Committee shall mean any such subcommittee if required under the preceding sentence, and any action by such a subcommittee shall be considered the action of the Committee for purposes of the Plan.

 

(c)                                  Discretion of Committee with Respect to Qualified Performance-Based Awards.  Any form of Award permitted under the Plan, other than a Stock Grant, may be granted as a Qualified Performance-Based Award.  Options and Stock Appreciation Rights may be granted as Qualified Performance-Based Awards in accordance with Section 7.1 and Section 7.2, respectively, except that the Option or Stock Appreciation Right may become exercisable based on continued service, on satisfaction of Performance Goals or other business objectives, or on a combination thereof.  Each other Award intended to qualify as a Qualified Performance-Based Award, such as Restricted Stock, Restricted Stock Units, or Performance Units, shall be subject to satisfaction of one or more Performance Goals except as otherwise provided in this Section 7.7.  The Committee will have full discretion to select the length of any applicable Restriction Period or Performance Period, the kind and/or level of the applicable Performance Goal, and whether the Performance Goal is to apply to the Company, a subsidiary of the Company or any division or business unit or to the individual.  Any Performance Goal or Goals applicable to Qualified Performance-Based Awards shall be objective, shall be established not later than ninety (90) days after the beginning of any applicable Performance Period (or at such other date as may be required or permitted for “performance-based compensation” under Section 162(m) of the Code) and shall otherwise meet the requirements of Section 162(m) of the Code, including the requirement that the outcome of the Performance Goal or Goals be substantially uncertain (as defined for purposes of Section 162(m) of the

 

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Code) at the time established.

 

(d)                                 Payment of Qualified Performance-Based Awards.  A Participant will be eligible to receive payment under a Qualified Performance-Based Award which is subject to achievement of a Performance Goal or Goals only if the applicable Performance Goal or Goals are achieved within the applicable Performance Period, as determined by the Committee, provided, that a Qualified Performance-Based Award may be deemed earned as a result of death, becoming disabled, or in connection with a change of control (within the meaning of Section 162(m) of the Code) if otherwise provided in the Plan or the applicable Award Agreement even if the Award would not constitute “performance-based compensation” under Section 162(m) of the Code following the occurrence of such an event.  In determining the actual size of an individual Qualified Performance-Based Award, the Committee may reduce or eliminate the amount of the Qualified Performance-Based Award earned for the Performance Period, if in its sole and absolute discretion, such reduction or elimination is appropriate.

 

(e)                                  Limitation on Adjustments for Certain Events.  No adjustment of any Qualified Performance-Based Award pursuant to Section 8 shall be made except on such basis, if any, as will not cause such Award to provide other than “performance-based compensation” within the meaning of Section 162(m) of the Code.

 

(f)                                   Definitions.  For purposes of the Plan

 

(i)                                     Performance Criteria means the criteria that the Committee selects for purposes of establishing the Performance Goal or Performance Goals for a Participant for a Performance Period.  The Performance Criteria used to establish Performance Goals are limited to:  (i) net earnings (either before or after one or more of (A) interest, (B) taxes, (C) depreciation and (D) amortization), (ii) gross or net sales or revenue, (iii) net income (either before or after taxes), (iv) adjusted net income, (v) operating earnings or profit, (vi) cash flow (including, but not limited to, operating cash flow and free cash flow, (vii) return on assets, (viii) return on capital, (ix) return on stockholders’ equity, (x) total stockholder return, (xi) return on sales, (xii) gross or net profit or operating margin, (xiii) costs, (xiv) expenses, (xv) working capital, (xvi) earnings per share, (xvii) adjusted earnings per share, (xviii) price per share, (xix) regulatory body approval for commercialization of a product, (xx) implementation, completion or attainment of objectives relating to research, development, regulatory, commercial, or strategic milestones or developments; (xxi) market share, (xxii) economic value, (xxiii) revenue, (xxiv) revenue growth and (xxv) operational and organizational metrics.

 

(ii)                                  Performance Goals means, for a Performance Period, the written goal or goals established by the Committee for the Performance Period based upon one or more of the Performance Criteria.  The Performance Goals may be expressed in terms of overall Company performance or the performance of a division, business unit, subsidiary, or an individual, either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit or Affiliate, either individually, alternatively or in any combination, and measured either quarterly, annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the Committee. The Committee will objectively define the manner of calculating the Performance Goal or Goals it selects to use for such Performance Period for such Participant, including whether or to what extent there shall not be taken into account any of the following events that occurs during a Performance Period: (i) asset

 

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write-downs, (ii) litigation, claims, judgments or settlements, (iii) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results, (iv) accruals for reorganization and restructuring programs and (v) any extraordinary, unusual, non-recurring or non-comparable items (A) as described in Accounting Standard Codification Section 225-20, (B) as described in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s Annual Report to stockholders for the applicable year, or (C) publicly announced by the Company in a press release or conference call relating to the Company’s results of operations or financial condition for a completed quarterly or annual fiscal period.

 

7.8.                            Awards to Participants Outside the United States.  The Committee may modify the terms of any Award under the Plan granted to a Participant who is, at the time of grant or during the term of the Award, resident or primarily employed outside of the United States in any manner deemed by the Committee to be necessary or appropriate in order that the Award shall conform to laws, regulations, procedures, and customs of the country in which the Participant is then resident or primarily employed, or so that the value and other benefits of the Award to the Participant, as affected by foreign tax laws and other restrictions applicable as a result of the Participant’s residence or employment abroad, shall be as comparable as practicable to the value of such an Award to a Participant who is resident or primarily employed in the United States.  The Committee may establish supplements or sub-plans to, or amendments, restatements, or alternative versions of, the Plan for the purpose of granting and administrating any such modified Award.  No such modification, supplement, sub-plan, amendment, restatement or alternative version may increase the share limit of Section 4.

 

8.                                      Adjustment Provisions

 

8.1.                            Adjustment for Corporate Actions. All of the share numbers set forth in the Plan reflect the capital structure of the Company as of the Effective Date.  If subsequent to that date the outstanding shares of Stock (or any other securities covered by the Plan by reason of the prior application of this Section) are increased, decreased, or exchanged for a different number or kind of shares or other securities, or if additional shares or new or different shares or other securities are distributed with respect to shares of Stock, as a result of a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar distribution with respect to such shares of Stock, an equitable adjustment will be made in (i) the maximum numbers and kinds of shares provided in Section 4, (ii) the numbers and kinds of shares or other securities subject to the then outstanding Awards, (iii) the exercise price for each share or other unit of any other securities subject to then outstanding Options and Stock Appreciation Rights (without change in the aggregate purchase price as to which such Options or Rights remain exercisable), and (iv) the repurchase price of each share of Restricted Stock then subject to a Risk of Forfeiture in the form of a Company repurchase right.

 

8.2.                            Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. In the event of any corporate action not specifically covered by the preceding Section, including but not limited to an extraordinary cash distribution on Stock, a corporate separation or other reorganization or liquidation, the Committee shall make such adjustment of outstanding Awards and their terms, if any, as it, in its sole discretion, may deem equitable in the circumstances.  The Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in this Section) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.

 

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8.3.                            Related Matters.  Any adjustment in Awards made pursuant to Section 8.1 or Section 8.2 shall be determined and made, if at all, by the Committee, acting in its sole discretion, and shall include any correlative modification of terms, including of Option exercise prices, rates of vesting or exercisability, Risks of Forfeiture, applicable repurchase prices for Restricted Stock, and Performance Goals and other business objectives which the Committee may deem necessary or appropriate so as to ensure the rights of the Participants in their respective Awards are not substantially diminished nor enlarged as a result of the adjustment and corporate action other than as expressly contemplated in this Section 8.  The Committee, in its discretion, may determine that no fraction of a share of Stock shall be purchasable or deliverable upon exercise, and in that event if any adjustment hereunder of the number of shares of Stock covered by an Award would cause such number to include a fraction of a share of Stock, such number of shares of Stock shall be adjusted to the nearest smaller whole number of shares.  No adjustment of an Option exercise price per share pursuant to Section 8.1 or Section 8.2 shall result in an exercise price which is less than the par value of the Stock.

 

8.4.                            Transactions.

 

(a)                                 Definition of Transaction. In this Section 8.4, “Transaction” means (1) any merger or consolidation of the Company with or into another entity as a result of which the Stock of the Company is converted into or exchanged for the right to receive cash, securities or other property or is cancelled, (2) any sale or exchange of all or substantially all of the outstanding Stock of the Company for cash, securities or other property, (3) any sale, transfer, or other disposition of all or substantially all of the Company’s assets to one or more other persons in a single transaction or series of related transactions or (4) any liquidation or dissolution of the Company.

 

(b)                                 Treatment of Awards. In a Transaction, the Committee may take any one or more of the following actions as to all or any (or any portion of) outstanding Awards, subject to the provisions of Section 9 of this Plan.

 

(1)                                 Provide that any Awards shall be assumed, or substantially equivalent rights shall be provided in substitution therefor, by the acquiring or succeeding entity (or an affiliate thereof).

 

(2)                                 Upon written notice to the holders, provide that all or any of the holders’ unexercised outstanding Options and Stock Appreciation Rights (collectively, “Rights”) will terminate immediately prior to the consummation of such Transaction unless exercised within a specified period following the date of such notice.

 

(3)                                 Provide that all or any Awards that are subject to Risk of Forfeiture will terminate immediately prior to the consummation of such Transaction.

 

(4)                                 Provide that all or any outstanding Rights shall Accelerate so as to become exercisable prior to or upon such Transaction with respect to some or all of the shares of Stock for which any such Rights would not then otherwise be exercisable by their terms.

 

(5)                                 Provide that all or any outstanding Awards that are subject to Risk of Forfeiture shall Accelerate so that the Risk of Forfeiture otherwise applicable to such Awards shall expire prior to or upon such Transaction with respect to any such Awards that would then still otherwise be subject to the Risk of Forfeiture.

 

(6)                                 Provide for cash payments, net of applicable tax withholdings,

 

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to be made to holders equal to the excess, if any, of (A) the acquisition price times the number of shares of Stock subject to an Option and Stock Appreciation Right (in each case, to the extent the exercise price does not exceed the acquisition price) over (B) the aggregate exercise price for all such shares of Stock subject to the Option or Stock Appreciation Right as applicable, in exchange for the termination of such Option and Stock Appreciation Right; provided, that if the acquisition price does not exceed the exercise price of any such Option or Stock Appreciation Right, the Committee may cancel that Option and Stock Appreciation Right without the payment of any consideration therefore prior to or upon the Transaction.  For purposes of this paragraph 6 and paragraph 7 below, “acquisition price” means the amount of cash, and market value of any other consideration, received in payment for a share of Stock surrendered in a Transaction but need not take into account any deferred consideration unless and until received.

 

(7)                                 Provide for cash payments, net of applicable tax withholdings, to be made to holder or holders of all or any Awards (other than Options and Stock Appreciation Rights) equal to the acquisition price times the number of shares of Stock subject to any such Awards, in exchange for the termination of any such Awards; provided, that the Committee may cancel, pursuant to paragraph 3 above, any such Award that is subject to a Risk of Forfeiture at the time of the consummation of such Transaction without the payment of any consideration therefor  prior to or upon the Transaction.

 

(8)                                 Provide that, in connection with a liquidation or dissolution of the Company, all or any Awards (other than Restricted Stock or Stock Grants) shall convert into the right to receive liquidation proceeds net of the exercise price thereof and any applicable tax withholdings.

 

(9)                                 Any combination of the foregoing.

 

In the event that the Committee determines in its discretion to take the actions contemplated under paragraph (1) above of this Section 8.4(b) with respect to all or any Awards, the Committee shall ensure that, upon consummation of the Transaction, any such Awards are assumed and/or exchanged or replaced with another similar award issued by the acquiring or succeeding entity (or an affiliate thereof) and that, as a result of such assumption and/or exchange or replacement, the holder of such assumed Award and/or such exchanged or replaced similar award has the right to purchase or receive the value of, for each share of Stock subject to such Award immediately prior to the consummation of the Transaction, the consideration (whether cash, securities or other property) received as a result of the Transaction by holders of Stock for each share of Stock held immediately prior to the consummation of the Transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Stock); provided, however, that if such consideration received as a result of the Transaction is not solely common stock (or its equivalent) of the acquiring or succeeding entity (or an affiliate thereof), the Committee may, with the consent of the acquiring or succeeding entity (or an affiliate thereof), provide for the consideration to be received with respect to such assumed Award and/or such exchanged or replaced similar award to consist of or be based solely on common stock (or its equivalent) of the acquiring or succeeding entity (or an affiliate thereof) equivalent in value to the per share consideration received by holders of outstanding shares of Stock as a result of the Transaction; and provided, further, that if  such Award is an Option, the holder of such Option must exercise the Option and make payment of the applicable exercise price in connection therewith in order to receive such consideration.

 

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(c)                                  Treatment of Other Awards. Upon the occurrence of a Transaction other than a liquidation or dissolution of the Company which is not part of another form of Transaction, then, subject to the provisions of Section 9 below, with respect to all outstanding Awards (other than Options and Stock Appreciation Rights) that are not terminated prior to or upon such Transaction, the repurchase and other rights of the Company under each such Award shall inure to the benefit of the Company’s successor and any forfeiture restrictions shall continue to apply and shall, unless the Committee determines otherwise, apply to the cash, securities or other property which the Stock was converted into or exchanged for pursuant to such Transaction in the same manner and to the same extent as they applied to the Award.

 

(d)                                 Related Matters. In taking any of the actions permitted under this Section 8.4, the Committee shall not be obligated to treat all Awards, all Awards held by a Participant, or all Awards of the same type, identically. Any determinations required to carry out the foregoing provisions of this Section 8.4, including but not limited to the market value of other consideration received by holders of Stock in a Transaction and whether substantially equivalent Rights have been substituted, shall be made by the Committee acting in its sole discretion.  In connection with any action or actions taken by the Committee in respect of Awards and in connection with a Transaction, the Committee may require such acknowledgements of satisfaction and releases from Participants as it may determine.

 

9.                                      Change of Control

 

Except as otherwise provided below, upon the occurrence of a Change of Control, to the extent that the surviving entity declines to continue, convert, assume or replace outstanding Awards, then, notwithstanding anything express or implied to the contrary in Section 8.4 above:

 

(a)                                 any and all Options and Stock Appreciation Rights not already exercisable in full shall Accelerate with respect to 100% of the shares for which such Options or Stock Appreciation Rights are not then exercisable;

 

(b)                                 any Risk of Forfeiture applicable to Restricted Stock and Restricted Stock Units which is not based on achievement of Performance Goals or other business objectives shall lapse with respect to 100% of the Restricted Stock and Restricted Stock Units still subject to such Risk of Forfeiture immediately prior to the Change of Control; and

 

(c)                                  all outstanding Awards of Restricted Stock and Restricted Stock Units conditioned on the achievement of Performance Goals or other business objectives and the payouts attainable under outstanding Performance Units shall be deemed to have been satisfied at target as of the effective date of the Change of Control, except if and to the extent otherwise determined by the Committee in its sole discretion at any time prior to, or upon, such Change of Control.

 

All such Awards of Performance Units and Restricted Stock Units shall be paid to the extent earned to Participants in accordance with their terms within thirty (30) days following the effective date of the Change of Control.  None of the foregoing shall apply, however, (i) in the case of any Award pursuant to an Award Agreement requiring other or additional terms upon a Change of Control (or similar event), (ii) if specifically prohibited under applicable laws, or by the rules and regulations of any governing governmental agencies or national securities exchanges, or (iii) as otherwise provided in Section 7.7, concerning Qualified Performance-Based Awards.

 

10.                               Settlement of Awards

 

10.1.                     In General.  Options and Restricted Stock shall be settled in accordance with their terms.  All other Awards may be settled in cash, Stock, or other Awards, or a combination thereof, as determined

 

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by the Committee at or after grant and subject to any contrary Award Agreement.  The Committee may not require settlement of any Award in Stock pursuant to the immediately preceding sentence to the extent issuance of such Stock would be prohibited or unreasonably delayed by reason of any other provision of the Plan.

 

10.2.                     Violation of Law.  Notwithstanding any other provision of the Plan or the relevant Award Agreement, if, at any time, in the reasonable opinion of the Company, the issuance of shares of Stock covered by an Award may constitute a violation of law, then the Company may delay such issuance until (i) approval shall have been obtained from such governmental agencies, other than the Securities and Exchange Commission, as may be required under any applicable law, rule, or regulation and (ii) in the case where such issuance would constitute a violation of a law administered by or a regulation of the Securities and Exchange Commission, one of the following conditions shall have been satisfied:

 

(a)                                 the shares of Stock are at the time of the issue of such shares effectively registered under the Securities Act of 1933, as amended; or

 

(b)                                 the Company shall have determined, on such basis as it deems appropriate (including an opinion of counsel in form and substance satisfactory to the Company) that the sale, transfer, assignment, pledge, encumbrance or other disposition of such shares does not require registration under the Securities Act of 1933, as amended or any applicable State securities laws.

 

Furthermore, the inability of the Company to obtain or maintain, or the impracticability of it obtaining or maintaining, authority from any governmental agency having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance of any Stock hereunder, shall relieve the Company of any liability in respect of the failure to issue such Stock as to which such requisite authority shall not have been obtained, and shall constitute circumstances in which the Committee may determine to amend or cancel Awards pertaining to such Stock, with or without consideration to the affected Participants.

 

10.3.                     Corporate Restrictions on Rights in Stock. Any Stock to be issued pursuant to Awards granted under the Plan shall be subject to all restrictions upon the transfer thereof which may be now or hereafter imposed by the certificate of incorporation, and bylaws.

 

10.4.                     Investment Representations.  The Company shall be under no obligation to issue any shares of Stock covered by any Award unless the shares to be issued pursuant to Awards granted under the Plan have been effectively registered under the Securities Act of 1933, as amended, or the Participant shall have made such written representations to the Company (upon which the Company believes it may reasonably rely) as the Company may deem necessary or appropriate for purposes of confirming that the issuance of such shares will be exempt from the registration requirements of that Act and any applicable state securities laws and otherwise in compliance with all applicable laws, rules and regulations of any jurisdiction in which Participants may reside or primarily work, including but not limited to that the Participant is acquiring the shares for his or her own account for the purpose of investment and not with a view to, or for sale in connection with, the distribution of any such shares.

 

10.5.                     Registration.  If the Company shall deem it necessary or desirable to register under the Securities Act of 1933, as amended, or other applicable statutes any shares of Stock issued or to be issued pursuant to Awards granted under the Plan, or to qualify any such shares of Stock for exemption from the Securities Act of 1933, as amended or other applicable statutes, then the Company shall take such action at its own expense.  The Company may require from each recipient of an Award, or each holder of shares of Stock acquired pursuant to the Plan, such information in writing for use in any registration statement, prospectus, preliminary prospectus or offering circular as is reasonably necessary for that purpose and

 

18

 

may require reasonable indemnity to the Company and its officers and directors from that holder against all losses, claims, damage and liabilities arising from use of the information so furnished and caused by any untrue statement of any material fact therein or caused by the omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made.  In addition, the Company may require of any such person that he or she agree that, without the prior written consent of the Company or the managing underwriter in any public offering of shares of Stock, he or she will not sell, make any short sale of, loan, grant any option for the purchase of, pledge or otherwise encumber, or otherwise dispose of, any shares of Stock during the 180 day period commencing on the effective date of the registration statement relating to the underwritten public offering of securities (or during such shorter or longer period of time as the Committee shall determine in its sole discretion, which period of time shall commence from and after such effective date of such registration statement). Without limiting the generality of the foregoing provisions of this Section 10.5, if in connection with any underwritten public offering of securities of the Company the managing underwriter of such offering requires that the Company’s directors and officers enter into a lock-up agreement containing provisions that are more restrictive than the provisions set forth in the preceding sentence, then (a) each holder of shares of Stock acquired pursuant to the Plan (regardless of whether such person has complied or complies with the provisions of clause (b) below) shall be bound by, and shall be deemed to have agreed to, the same lock-up terms as those to which the Company’s directors and officers are required to adhere; and (b) at the request of the Company or such managing underwriter, each such person shall execute and deliver a lock-up agreement in form and substance equivalent to that which is required to be executed by the Company’s directors and officers.

 

10.6.                     Placement of Legends; Stop Orders; etc.  Each share of Stock to be issued pursuant to Awards granted under the Plan may bear a reference to the investment representations made in accordance with Section 10.4 in addition to any other applicable restrictions under the Plan, and the terms of the Award and, if applicable, to the fact that no registration statement has been filed with the Securities and Exchange Commission in respect to such shares of Stock.  All shares of Stock or other securities issued under the Plan shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of any stock exchange upon which the Stock is then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions, or, if the Stock will be held in book-entry position through the direct registration system of the Company’s transfer agent, the restrictions will be appropriately noted.

 

10.7.                     Tax Withholding. Whenever shares of Stock are issued or to be issued pursuant to Awards granted under the Plan, the Company shall have the right to require the recipient to remit to the Company an amount sufficient to satisfy federal, state, local, foreign or other withholding tax requirements if, when, and to the extent required by law (whether so required to secure for the Company an otherwise available tax deduction or otherwise) prior to the delivery of any certificate or certificates, held in book-entry position through the direct registration system of the Company’s transfer agent, for such shares.  The obligations of the Company under the Plan shall be conditional on satisfaction of all such withholding obligations and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to a Participant or to utilize any other withholding method prescribed by the Committee from time to time.  However, in such cases Participants may elect, subject to the approval of the Committee, acting in its sole discretion, to satisfy an applicable withholding requirement, in whole or in part, by having the Company withhold shares of Stock to satisfy their tax obligations.  All elections shall be irrevocable, made in writing, signed by the Participant, and shall be subject to any restrictions or limitations that the Committee deems appropriate.  If shares of Stock are withheld to satisfy an applicable withholding requirement, the shares of Stock withheld shall have a Market Value on the date the tax is to be determined equal to the minimum statutory total tax (or tax calculated at such higher rates as determined by the Committee) which could be imposed on the

 

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transaction.

 

10.8.                     Company Certificate of Incorporation and Bylaws; Other Company Policies. This Plan and all Awards granted hereunder are subject to the certificate of incorporation and bylaws of the Company, as they may be amended from time to time, and all other Company policies duly adopted by the Board, the Committee or any other committee of the Board and as in effect from time to time regarding the acquisition, ownership or sale of Stock by officers, employees, directors, consultants, advisors and other service providers, including, without limitation, policies intended to limit the potential for insider trading and to avoid or recover compensation payable or paid on the basis of inaccurate financial results or statements, employee conduct, and other similar events.

 

11.                               Reservation of Stock

 

The Company shall at all times during the term of the Plan and any outstanding Awards granted hereunder reserve or otherwise keep available such number of shares of Stock as will be sufficient to satisfy the requirements of the Plan (if then in effect) and the Awards and shall pay all fees and expenses necessarily incurred by the Company in connection therewith.

 

12.                               Limitation of Rights in Stock; No Special Service Rights

 

A Participant shall not be deemed for any purpose to be a stockholder of the Company with respect to any of the shares of Stock subject to an Award, unless and until a certificate shall have been issued therefor and delivered to the Participant or his agent, or the Stock shall be issued through the direct registration system of the Company’s transfer agent.  Any Stock to be issued pursuant to Awards granted under the Plan shall be subject to all restrictions upon the transfer thereof which may be now or hereafter imposed by the certificate of incorporation and the bylaws of the Company.  Nothing contained in the Plan or in any Award Agreement shall confer upon any recipient of an Award any right with respect to the continuation of his or her employment or other association with the Company (or any Affiliate), or interfere in any way with the right of the Company (or any Affiliate), subject to the terms of any separate employment or consulting agreement or provision of law or certificate of incorporation or bylaws to the contrary, at any time to terminate such employment or consulting agreement or to increase or decrease, or otherwise adjust, the other terms and conditions of the recipient’s employment or other association with the Company and its Affiliates.

 

13.                               Unfunded Status of Plan

 

The Plan is intended to constitute an “unfunded” plan for incentive compensation, and the Plan is not intended to constitute a plan subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended.  With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company.  In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Stock or payments with respect to Awards hereunder, provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan.

 

20

 

14.                               Nonexclusivity of the Plan

 

Neither the adoption of the Plan by the Board nor any action taken in connection with the adoption or operation of the Plan shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including without limitation, the granting of stock options and restricted stock other than under the Plan, and such arrangements may be either applicable generally or only in specific cases.

 

15.                               No Guarantee of Tax Consequences

 

It is intended that all Awards shall be granted and maintained on a basis which ensures they are exempt from, or otherwise compliant with, the requirements of Section 409A of the Code, pertaining non-qualified plans of deferred compensation, and the Plan shall be governed, interpreted and enforced consistent with such intent.  However, neither the Company nor any Affiliate, nor any director, officer, agent, representative or employee of either, guarantees to the Participant or any other person any particular tax consequences as a result of the grant of, exercise of rights under, or payment in respect of an Award, including but not limited to that an Option granted as an Incentive Option has or will qualify as an “incentive stock option” within the meaning of Section 422 of the Code or that the provisions and penalties of Section 409A of the Code will or will not apply and no person shall have any liability to a Participant or any other party if a payment under an Award that is intended to benefit from favorable tax treatment or avoid adverse tax treatment fails to realize such intention or for any action taken by the Board or the Committee with respect to the Award.

 

16.                               Termination and Amendment of the Plan

 

16.1.                     Termination or Amendment of the Plan. Subject to the limitations contained in Section 16.3 below, including specifically the requirement of stockholder approval, if applicable, the Committee may at any time suspend or terminate the Plan or make such modifications of the Plan as it shall deem advisable.  Unless the Committee otherwise expressly provides, no amendment of the Plan shall affect the terms of any Award outstanding on the date of such amendment.

 

16.2.                     Termination or Amendment of Outstanding Awards; Assumptions. Subject to the limitations contained in Section 16.3 below, including specifically the requirement of stockholder approval, if applicable, the Committee may at any time:

 

(a)                                 amend the terms of any Award theretofore granted, prospectively or retroactively, provided that the Award as amended is consistent with the terms of the Plan;

 

(b)                                 within the limitations of the Plan, modify, extend or assume outstanding Awards or accept the cancellation of outstanding Awards or of outstanding stock options or other equity-based compensation awards granted by another issuer in return for the grant of new Awards for the same or a different number of shares of Stock and on the same or different terms and conditions (including but not limited to the exercise price of any Option); and

 

(c)                                  offer to buy out for a payment in cash or cash equivalents an Award previously granted or authorize the recipient of an Award to elect to cash out an Award previously granted, in either case at such time and based upon such terms and conditions as the Committee shall establish.

 

16.3.                     Limitations on Amendments, Etc.

 

(a)                                 Without the approval of the Company’s stockholders, no amendment or modification of the Plan by the Committee may (i) increase the number of shares of Stock which may be issued under the Plan, (ii) change the description of the persons eligible for Awards, or (iii) effect any

 

21

 

other change for which stockholder approval is required by law or the rules of any relevant stock exchange.  Awards may be made under the Plan that involve shares of Stock in excess of the number of shares then available for issuance under the Plan, provided no shares shall actually be issued pursuant to those Awards until the number of shares of Stock available for issuance under the Plan is sufficiently increased by stockholder approval of an amendment of the Plan authorizing such increase.  If such stockholder approval is not obtained within twelve (12) months after the date the first excess Award is made, then all Awards granted on the basis of such excess shares shall terminate and cease to be outstanding.

 

(b)                                 No action by the Board or the Committee pursuant to this Section 16 shall impair the rights of the recipient of any Award outstanding on the date of such amendment or modification of such Award, as the case may be, without the Participant’s consent; provided, however, that no such consent shall be required (A) in the case of any amendment or termination of any outstanding Award that is permitted by any provision of this Plan that is set forth in Section 8, Section 9 or in any other section of this Plan that is not Section 16.2 or (B) if the Board or Committee, as the case may be, (i)  determines in its sole discretion and prior to the date of any Change of Control that such amendment or alteration either is required or advisable in order for the Company, the Plan or the Award to satisfy any law or regulation, including without limitation the provisions of Section 409A of the Code, or to meet the requirements of or avoid adverse financial accounting consequences under any accounting standard, (ii) determines in its sole discretion and prior to the date of any Change of Control that such amendment or alteration is not reasonably likely to significantly diminish the benefits provided under the Award, or that any such diminution has been adequately compensated, or (iii) reasonably determines on or after the date of Change of Control that such amendment or alteration either is required or advisable in order for the Company, the Plan or the Award to satisfy any law or regulation, including without limitation the provisions of Section 409A of the Code.

 

17.                               Recoupment

 

Participants shall be subject to any clawback, recoupment or other similar policy adopted by the Board as in effect from time to time and Awards and any cash, shares of Stock or other property or amounts due, paid or issued to a Participant shall be subject to the terms of such policy, as in effect from time to time.

 

18.                               Notices and Other Communications

 

Any communication or notice required or permitted to be given under the Plan shall be in such form as the Committee may determine from time to time.  If a notice, demand, request or other communication is required or permitted to be given in writing, then any such notice, demand, request or other communication hereunder to any party shall be deemed to be sufficient if contained in a written instrument delivered in person or duly sent by first class registered, certified or overnight mail, postage prepaid, or by facsimile with a confirmation copy by regular, certified or overnight mail, addressed or by facsimile, as the case may be, (i) if to the recipient of an Award, at his or her residence address last filed with the Company and (ii) if to the Company, at its principal place of business, addressed to the attention of its Treasurer, or to such other address or facsimile number, as the case may be, as the addressee may have designated by notice to the addressor.  All such notices, requests, demands and other communications shall be deemed to have been received: (i) in the case of personal delivery, on the date of such delivery; (ii) in the case of mailing, when received by the addressee; and (iii) in the case of facsimile transmission, when confirmed by facsimile machine report.

 

22

 

19.                               Governing Law

 

The Plan and all Award Agreements and actions taken hereunder and thereunder shall be governed, interpreted and enforced in accordance with the laws of the State of Delaware, without regard to the conflict of laws principles thereof.

 

[End of document.]

 

23

 

RHYTHM PHARMACEUTICALS, INC. 
 2017 EQUITY INCENTIVE PLAN

 

STOCK OPTION AGREEMENT

 

THIS STOCK OPTION AGREEMENT, dated as of [              , 20  ] (this “Agreement”), is between Rhythm Pharmaceuticals, Inc., a corporation organized under the laws of the State of Delaware (the “Company”), and the individual identified in paragraph 1 below, currently residing at the address set out at the end of this Agreement (the “Optionee”).  Capitalized terms used in this Agreement without definition shall have the respective meaning ascribed to such capitalized terms in the Plan (as defined below).

 

1.                                      Grant of Option.  Pursuant and subject to the Company’s 2017 Equity Incentive Plan (as the same may be amended from time to time, the “Plan”), the Company grants to you, the Optionee identified in the table below, an option (the “Option”) to purchase from the Company all or any part of a total of the number of shares identified in the table below (the “Optioned Shares”) of the common stock, par value $0.001 per share, in the Company (the “Stock”), at the exercise price per share set out in the table below.

 

	
Optionee
    	
 
    
	
 
    	
 
    
	
Number of Shares
    	
 
    
	
 
    	
 
    
	
Exercise Price Per Share
    	
 
    
	
 
    	
 
    
	
Grant Date
    	
 
    
	
 
    	
 
    
	
Expiration Date(2)
    	
 
    

 

2.                                      Character of Option.  This Option [is/is not](3) intended to be treated as an “incentive stock option” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended.

 

3.                                      Expiration of Option.  This Option shall expire at 5:00 p.m. EST on the Expiration Date or, if earlier, the earliest of the dates specified in whichever of the following applies:

 

a)                                     If the termination of your employment or other association is on account of your death or disability, the first anniversary of the date your employment ends.

 

b)                                     If the termination of your employment or other association is due to any other reason, three (3) months after your employment or other association ends.

 

(2)  For ISOs, not later than the day immediately preceding the tenth anniversary of the Grant Date.

 

(3)  Either “is” or “is not”, as the Committee or the Board has determined.

 

24

 

4.                                      Exercise of Option.

 

a)                                     You may exercise this Option, in full or in part and at any time prior to the date this Option expires, as to the number of Optioned Shares for which this Option shall have become exercisable (the “Vested Shares”) pursuant Section 4(b) below.  However, during any period that this Option remains outstanding after the end of your association with the Company and its Affiliates in any and all capacities as an officer, director, employee and/or consultant of the Company and its Affiliates, you may exercise it only to the extent of any remaining Vested Shares determined as of the effective time of the end of such association.  The procedure for exercising this Option is described in Section 7.1(f) of the Plan; provided that in no event shall a fraction of a share of Stock be purchasable or deliverable upon exercise.

 

b)                                     [Vesting terms to be inserted]

 

c)

 

	
Number of Shares
   in Each Installment
    	
 
    	
Initial Exercise Date
   for Shares in Installment
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

5.                                      Transfer of Option.  You may not transfer this Option except by will or the laws of descent and distribution, and, during your lifetime, only you may exercise this Option.

 

6.                                      Incorporation of Plan Terms.  This Option is granted subject to all of the applicable terms and provisions of the Plan, including but not limited to the limitations on the Company’s obligation to deliver Optioned Shares upon exercise set forth in Section 9 therein.

 

7.                                      Tax Consequences.  The Company makes no representation or warranty as to the tax treatment to you of your receipt or exercise of this Option or upon your sale or other disposition of the Optioned Shares.  You should rely on your own tax advisors for such advice.

 

8.                                      Treatment as Wages or Compensation.  No amounts paid or payable in connection with this Option shall constitute wages or compensation for purposes of any applicable law, if ever, prior to the date on which such amount has been earned, vested and become payable in accordance with the terms of this Agreement and the Plan.  No such amount shall be treated as wages or compensation for purposes of any employee or other benefit plan of the Company and its Affiliates except to the extent and at the time provided in the respective employee or other benefit plan.

 

9.                                      Acknowledgements.  You acknowledge that you have reviewed and understand the Plan and this Agreement in their entirety, and have had an opportunity to obtain the advice of counsel prior to executing this Agreement.  You  hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Plan or this Agreement.

 

25

 

10.                               Further Assurances.  The parties agree to execute such further instruments and to take such action as may reasonably be necessary to carry out the intent of this Agreement.

 

[11.                           Community Property.  Without prejudice to the actual rights of the spouses as between each other, for all purposes of this Agreement, you shall be treated as agent and attorney-in-fact for that interest held or claimed by your spouse with respect to this Option and any Optioned Shares and the parties hereto shall act in all matters as if the Optionee was the sole owner of this Option and (following exercise) any such Optioned Shares.  This appointment is coupled with an interest and is irrevocable.](4)

 

12.                               Miscellaneous.  This Agreement shall be construed and enforced in accordance with the laws of the State of Delaware, without regard to the conflict of laws principles thereof and shall be binding upon and inure to the benefit of any successor or assign of the Company and any executor, administrator, trustee, guardian, or other legal representative of you.  Capitalized terms used but not defined herein shall have the meaning assigned under the Plan.  This Agreement may be executed in one or more counterparts all of which together shall constitute but one instrument. In making proof of this Agreement it shall not be necessary to produce or account for more than one such counterpart.

 

[The remainder of this page is intentionally left blank.  Signature page to follow.]

 

(4)  Consider for inclusion for grants to California residents (and residents of other states with community property rules).

 

26

 

RHYTHM PHARMACEUTICALS, INC.
 2017 EQUITY INCENTIVE PLAN

 

OPTION EXERCISE FORM

 

Rhythm Pharmaceuticals, Inc.

500 Boylston Street, 11th Floor

Boston, MA 02116

 

Attention:                                         Controller

 

Dear Sir:

 

In accordance with, and subject to the terms and conditions of, the Rhythm Pharmaceuticals, Inc. 2017 Equity Incentive Plan, as amended and in effect to date, I hereby elect to exercise my option granted under the agreement dated            , to purchase                 shares of the common stock, par value $0.001 per share, in Rhythm Pharmaceuticals, Inc. (the “Company”).

 

Enclosed herewith is payment to the Company in the amount of $              in full payment of the option price of $      per share, for said shares.  [To be revised as necessary for non-cash payment of exercise price.]

 

	
 
    	
Sincerely yours,
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Name:
    

 

27EXHIBIT 10.8

 

RHYTHM PHARMACEUTICALS, INC. REQUESTS THAT THE MARKED

PORTIONS OF THIS EXHIBIT BE GRANTED CONFIDENTIAL TREATMENT

UNDER RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED

 

EXECUTION VERSION

 

LICENSE AGREEMENT

 

BY AND BETWEEN

 

CAMURUS AB

 

AND

 

RHYTHM PHARMACEUTICALS, INC.

 

	
CONFIDENTIAL
    	
 
    	
 
    

 

* CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED

 

 

TABLE OF CONTENTS

 

	
1
    	
DEFINITIONS
    	
3
    
	
 
    	
 
    	
 
    
	
2
    	
LICENSE GRANT TO RHYTHM
    	
12
    
	
 
    	
 
    	
 
    
	
3
    	
DEVELOPMENT OF PRODUCT
    	
13
    
	
 
    	
 
    	
 
    
	
4
    	
COMMERCIALIZATION
    	
18
    
	
 
    	
 
    	
 
    
	
5
    	
PAYMENT OBLIGATIONS
    	
18
    
	
 
    	
 
    	
 
    
	
6
    	
MANUFACTURE
    	
23
    
	
 
    	
 
    	
 
    
	
7
    	
INTELLECTUAL PROPERTY
    	
24
    
	
 
    	
 
    	
 
    
	
8
    	
CONFIDENTIALITY
    	
31
    
	
 
    	
 
    	
 
    
	
9
    	
REPRESENTATIONS AND WARRANTIES
    	
35
    
	
 
    	
 
    	
 
    
	
10
    	
INDEMNIFICATION
    	
37
    
	
 
    	
 
    	
 
    
	
11
    	
TERM AND TERMINATION
    	
39
    
	
 
    	
 
    	
 
    
	
12
    	
MISCELLANEOUS PROVISIONS
    	
42
    
	
 
    	
 
    	
 
    
	
13
    	
RHYTHM AND CAMURUS ANNOUNCE   LICENSE AGREEMENT FOR EXTENDED RELEASE FLUIDCRYSTAL SETMELANOTIDE
    	
53
    

 

	
CONFIDENTIAL
    	
 
    	
 
    

 

* CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED

 

 

LICENSE AGREEMENT

 

This License Agreement is made as off the Effective Date (hereinafter defined) between Camurus AB, a limited liability company organized and existing under the laws of Sweden and having its principal place of business at Ideon Science Park, Sölvegatan 41, SE-223 70 Lund, Sweden (“Camurus”) and Rhythm Pharmaceuticals, Inc., a corporation organized and existing under the laws of Delaware and having its principal place of business at 855 Boylston Street, 11th Floor, Boston, MA 02116 USA (“Rhythm”) (each a “Party” and collectively, the “Parties”)

 

WITNESSETH

 

WHEREAS, Camurus is the owner of all right, title and interest in and to certain patents and know-how relating to the FC Technology (as defined below) which delivers therapeutic levels of drug substance over extended periods by offering a lipid based injectable liquid solution that, within minutes after injection, forms a controlled release liquid crystal gel matrix in situ on contact with body fluids at site of injection;

 

WHEREAS, Rhythm has capabilities in the development, manufacture, promotion, marketing, sales and life cycle management of pharmaceutical products and is the owner of all right, title and interest in and to a drug compound known as RM-493;

 

WHEREAS, Rhythm wishes to obtain an exclusive world-wide license to the FC technology to formulate RM-493 and to develop, manufacture, promote, market, distribute and sell the Product (as defined below) in the Territory (as defined below); and

 

WHEREAS, Camurus is willing to grant such world-wide exclusive rights to Rhythm in respect of the Product upon the terms and conditions hereinafter set forth.

 

NOW, THEREFORE, in consideration of the covenants and obligations expressed herein, and intending to be legally bound, the Parties agree as follows:

 

1                                                  DEFINITIONS

 

1.1                                        “Adverse Events” has the meaning ascribed to it in Section 3.8.

 

1.2                                        “Affiliate” means, with respect to a Party, any entity or person that controls, is controlled by, or is under common control with that Party. For the purpose of this definition, “control” or “controlled” means, direct or indirect, ownership of fifty percent (50%) or more of the shares of stock entitled to vote for the election of directors in the case of a corporation or fifty percent (50%) or more of the equity interest in the case of any other type of legal entity; status as a general partner in any partnership; or any other arrangement whereby the entity or person controls or has the right to control the board of directors or equivalent governing body of a corporation or other entity or the ability to cause the direction of the management or policies of a corporation or other entity. The Parties acknowledge that in the case of entities organized under the laws of certain countries where the maximum percentage ownership permitted by law for a foreign investor is less than fifty

 

	
CONFIDENTIAL
    	
 
    	
 
    

 

* CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED

 

 

percent (50%), such lower percentage shall be substituted in the preceding sentence, provided that such foreign investor has the power to direct the management and policies of such entity.

 

1.3                                        “Business Day” means Monday through Friday, other than holidays observed by Camurus or Rhythm.

 

1.4                                        “Camurus IP” means (a) the Camurus Platform IP and (b) Camurus’ interest in any Joint IP.

 

1.5                                        “Camurus Platform IP” means (a) all Patent Rights listed in Exhibit 1.5 and (b)  all other Intellectual Property Controlled by Camurus or any of its Affiliates during the Term hereof that covers the FC Technology.

 

1.6                                        “Camurus Platform Patents” has the meaning ascribed to it in Section 7.3.

 

1.7                                        “Camurus Trademark” means Trademarks Controlled by Camurus, including FluidCrystal® and other Trademarks described in Exhibit 1.7, that relate to the FC Technology.

 

1.8                                        “GCP” means Good Clinical Practices, as set forth in the ICH Harmonized Guidance on Good Clinical Practice (CPMP/ICH/135/95).

 

1.9                                        “GMP” means Good Manufacturing Practices, as set forth in the Rules Governing Medicinal Product in the European Union volume 4 and the equivalent requirements and/or applicable guidance in any other jurisdiction in the Territory.

 

1.10                                 “Clinical Trials” means human clinical trials conducted on healthy volunteers or patients to provide data supporting Regulatory Approval of such drug or label expansion of such drug,

 

1.11                                 CMO” means one or more Third Party contract manufacturing organization(s) that may be used to source ingredients, components, packaging materials and the like and to manufacture, package, label and quality release Rhythm’s requirements for Product for use and/or sale in the Territory, all pursuant to the Rhythm Supply Agreement.

 

1.12                                 “Collaboration Inventions” means all Intellectual Property conceived and reduced to practice by a Party or any of its Affiliates or by a Third Party on behalf of such Party in the course of performing activities under this Agreement or any of Rhythm’s licensees or Sub-licensees.

 

1.13                                 “Collaboration Product Patents” has the meaning ascribed to it in Section 7.3(b) hereof.

 

1.14                                 “Commercially Reasonable Efforts” means the level of effort and resources required to develop the Product in a sustained manner consistent with the efforts an international specialty pharmaceutical company of similar size and resources would typically devote to a product owned by such entity which is of similar market potential, at a similar stage in the development or life of such product, taking into account issues of safety, efficacy, product profile, the competitiveness of the

 

	
CONFIDENTIAL
    	
 
    	
 
    

 

* CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED

 

 

marketplace, the proprietary position of the product, the regulatory structure involved, profitability of the product and other relevant commercial factors.

 

1.15                                 “Competing Product” means any pharmaceutical product comprising [           ]*.

 

1.16                                 “Confidential Information” means the following, subject to the exceptions set forth in Section 8.1:

 

(i) the terms and conditions of this Agreement, for which each Party will be considered a Disclosing Party and a Recipient;

 

(ii) Know-How within Camurus IP for which Camurus will be considered the Disclosing Party and Rhythm shall be the Recipient;

 

(iii) Know-How within Rhythm IP for which Rhythm will be considered the Disclosing Party and Camurus shall be the Recipient; and

 

(iv) any other non-public information, whether or not patentable, disclosed or provided by one Party to the other Party in connection with this Agreement, including, without limitation, information regarding such Party’s strategy, business plans, objectives, research, technology, products, IP strategy, business affairs or finances including information of the type that is customarily considered to be confidential information by parties engaged in activities that are substantially similar to the activities being engaged in by the Parties under this Agreement, for which the Party making such disclosure will be considered the Disclosing Party and the receiver will be the Recipient.

 

1.17                                 “Control” or “Controlled” means possession by a Party of the right to grant to the other Party a license, sublicense or other right to use, of the scope provided for in this Agreement, to Intellectual Property and rights to access or cross-reference regulatory filings without violating the terms of any agreement or other arrangement with any Third Party.

 

1.18                                 “Development Data” means all chemistry, manufacturing and control, preclinical and clinical data including, without limitation, pharmacological, pharmacokinetic, pharmaceutical development and toxicological data, on the Product (including placebo), including any of the foregoing arising from post registration studies, that is generated at any time during the Term of this Agreement by or for either Party and their Affiliates or any of Rhythm’s licensees or sub-licensees.

 

1.19                                 “Development Plan” means Rhythm’s plan for pre-clinical and clinical development of the Product together with associated budget through the Ph1B PK/POC Study.  The Development Plan as in effect as of the Effective Date is attached hereto as Exhibit 1.19.  The Development Plan is subject to update in accordance with Section 3.1 hereof.

 

1.20                                 “Disclosing Party” means the Party which discloses Confidential Information to the other Party.

 

1.21                                 “Drug” means Setmelanotide (also known as RM-493) with the chemical structure described in Exhibit 1.19, and its salts.

 

	
CONFIDENTIAL
    	
 
    	
 
    

 

* CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED

 

 

1.22                                 “Effective Date” means the date of the signature of the last Party to execute this Agreement.

 

1.23                                 “EMA” means the European Medicines Agency and/or the Committee for Human Medicinal Product or any successor agency thereof or, to the extent the mutual recognition or decentralized procedure is used for a Product in the EU, any national governmental authority having the authority to regulate the sale of medicinal of pharmaceutical products in any country in the EU.

 

1.24                                 “FC Technology” means (i) Camurus’ proprietary formulation technology that is referred to as FluidCrystal® injection depot technology, comprising a lipid based injectable liquid solution that, within minutes after injection, forms a controlled release liquid crystal gel matrix in situ on contact with body fluids at the site of injection, including modifications and improvements to such proprietary formulation technology, and (ii) any other controlled release lipid formulation for injection that is conceived and reduced to practice by, or on behalf of, Camurus and that incorporates any active pharmaceutical ingredient without relating specifically to the Drug, Product or Competing Product excluding for the avoidance of doubt controlled release lipid formulations for injection that are developed by a Third Party and acquired by Camurus through licensing, acquisition, merger or otherwise..

 

1.25                                 “First Commercial Sale” means the date on which a Product is first sold following Regulatory Approval in the Territory by Rhythm or any of its Affiliates or Sublicensees to a Third Party (other than sales by Rhythm to its Affiliates or Sublicensees) in a commercial arm’s length transaction.

 

1.26                                 “First Product Patent Application” means a patent application filed by Rhythm with the United States Patent and Trademark Office pursuant to Section 7.3(d) hereof that specifically claims the Product.

 

1.27                                 “FTE” means a full time equivalent person year equal to at least 1,650 hours per year of work carried out by an employee.

 

1.28                                 “FTE Costs” means the cost of FTEs at the FTE Rate.

 

1.29                                 “FTE Rate” means the price of a single FTE per Calendar Year. The FTE Rate shall be US$[           ]* per hour for all staff. The FTE Rate reflects the fully burdened internal costs of an FTE including all employee-related compensation, including but not limited to, salaries, wages, bonuses, benefits, profit sharing, share option grants, and any other employment costs, including travel and associated subsistence costs (but excluding travel and subsistence costs incurred in any travel) and professional dues and allocable overhead.  On the 1 January each Calendar Year, commencing with 1 January 2016, the FTE Rate will be increased by the percentage (%) increase in inflation as measured by the Swedish Consumer Price Index published by the Statistiska Centralbyrån of Sweden on each 1 January of each Calendar Year. Camurus shall provide Rhythm with the revised FTE Rate by 1 February of each Calendar Year.

 

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

 

	
CONFIDENTIAL
    	
 
    	
 
    

 

* CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED

 

 

1.31                                 “Generic Product” means a product approved under an Abbreviated New Drug Application, or ANDA, or any non-United States equivalent filing, with the Product as the reference product, that is “therapeutically equivalent” as evidenced by the assignment of any ‘A’ level therapeutic equivalence rating by the FDA, or any non-United States equivalent rating, such that the product is therapeutically equivalent to the Product, or otherwise is generally substitutable by the pharmacist for the Product when filling a prescription written for the Product without having to seek authorization to do so from the physician writing such prescription.

 

1.32                                 “IND” means an Investigational New Drug application (together with all subsequent submissions, supplements and amendments thereto, and any materials, documents or information referred to or relied upon thereby) filed with the FDA in conformance with applicable laws and regulations, and the equivalent thereof (or other right to commence clinical testing in humans), as applicable, in jurisdictions outside the United States.

 

1.33                                 “Intellectual Property” or “IP” means any Patent Rights, Trademarks, Know-How, Confidential Information, and any other intellectual property rights.

 

1.34                                 “Joint Invention” shall have the meaning defined in Section 7.2(c).

 

1.35                                 “Joint IP” means any Joint Invention and any Patent Rights claiming any Joint Invention.

 

1.36                                 “Joint Patents” has the meaning ascribed to it in Section 7.3 (c).

 

1.37                                 “JDC” means the Joint Development Committee referred to in Section 3.3.

 

1.38                                 “Know-How” means technical and other information which is not in the public domain, including information comprising or relating to concepts, trade secrets, data, designs, discoveries, formulae, ideas, inventions, materials, methods, models, research plans, procedures, designs for experiments and tests and results of experimentation and testing (including results of research or development), processes (including manufacturing processes, specifications and techniques), laboratory records, chemical, pharmacological, toxicological, clinical, analytical and quality control data, clinical and non-clinical trial data, case report forms, data analyses, reports, manufacturing data or summaries and information contained in submissions to and information from ethical committees and regulatory authorities. Know-How includes documents containing Know-How, including any rights including trade secrets, copyright, database or design rights protecting such Know-How. The fact that an item is known to the public shall not be taken to preclude the possibility that a compilation including the item, and/or a development relating to the item, is not known to the public.

 

1.39                                 “LIBOR” has the meaning ascribed to it in Section 5.8.

 

1.40                                 “Licensed Field” means any and all uses including, but not limited to, the treatment, prevention or diagnosis of any disease, disorder or condition.

 

1.41                                 “Manufacturing Costs” means all [           ]*.

 

	
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1.42                                 “NDA” means a new drug, biologic or other application, health registration, marketing authorization application, common technical document, regulatory submission, notice of compliance or equivalent application to the FDA or other applicable Regulatory Authority (excluding local and general business licenses and permits) required to be approved before commercial sale or use of the Product as a pharmaceutical or medicinal product in any formulation or dosage form (excluding any pricing and reimbursement approvals), together with all subsequent submissions, supplements and amendments thereto.

 

1.43                                 “NDA Approval” means approval of an NDA by the FDA or other applicable Regulatory Authority.

 

1.44                                 “Net Sales” means, with respect to any Product, the gross amount invoiced by Rhythm, its Affiliates or Sublicensees to unrelated Third Party distributors or agents (in each case, who are not sublicensees), or end users in the Territory for the sale or transfer for value of the applicable Product, less deductions for: (i) trade, quantity and cash discounts and rebates actually given to and taken by customers; (ii) refunds, chargebacks and any other allowances actually paid to or taken by customers, including those granted to managed care entities; (iii) amounts separately and actually credited to customers for Product returns, credits or allowances; (iv) rebates actually paid or credited to any governmental agency (or branch thereof) or to any Third Party payor, administrator or contractee (such as those in respect of any state or federal Medicare, Medicaid or similar programs); (v) discounts mandated by, or granted to meet the requirements of, applicable state, provincial or federal law, paid or credited to a wholesaler, purchaser, Third Party or other contractee including required chargebacks and retroactive price reductions; (vi) special outbound packing, freight, shipping insurance and other transportation expenses that are separately billed to the customer or prepaid; (vii) sales, value-added, excise and turnover taxes, tariffs and duties, and other taxes directly related to the sale of the Product (but excluding net income taxes); and (viii) the actual amount of any write-offs for bad debt relating to such sales, provided when paid the amount shall be added to the Net Sales.

 

The amounts of any deductions taken pursuant to clauses (i)-(viii) shall be determined from books and records maintained in accordance with GAAP.  This definition of Net Sales shall be updated as needed from time to time as appropriate to reflect changes required by (i) the adoption by Rhythm, as part of its ordinary business practices, consistently applied, of accounting standards other than GAAP or as required by law, or (ii) GAAP so long as Rhythm is utilizing GAAP as its accounting standard.  Net Sales shall not include revenue received by Rhythm or any of its Affiliates from transactions with an Affiliate, where the Product in question will be resold to an independent third-party distributor or agent (in each case, who is not a Sublicensee) or end user by the Affiliate where such revenue received by the Affiliate from such resale is included in Net Sales.  Revenue received by Rhythm (or any of its Affiliates) from transactions with an Affiliate, where the Product in question is used by the Affiliate solely for such Affiliate’s internal purposes shall also be included in Net Sales at a price equal to the fair market value of such transfer(s).

 

	
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If the Product is sold in a bundled manner with other products or services of Rhythm then all such deductions shall be fairly and equitably allocated to the Product and other products or services of Rhythm, its Affiliates and Sublicensees, such that the Product does not bear a disproportionate portion of such deductions.  The transfer of Product by Rhythm to an Affiliate or Sublicensee shall not be deemed a sale.  Net Sales shall be calculated in accordance with generally accepted accounting principles in the United States (US GAAP), consistently applied.

 

1.45                                 “Patent Right” means (a) all national, regional and international patents and patent applications, including provisional patent applications; (b) all patent applications filed either from such patents, patent applications or provisional applications or from an application claiming priority from any of these, including utility applications, divisionals, continuations, continuations-in-part, provisionals, converted provisionals, and continued prosecution applications, and reissue applications; (c) any and all patents that have issued or in the future issue from the foregoing patent applications described in clauses (a) and (b), including author certificates, inventor certificates, utility models, petty patents and design patents and certificates of invention; (d) any and all extensions or restorations by existing or future extension or restoration mechanisms, including revalidations, reissues, re-examinations and extensions (including any supplementary protection certificates and the like) of the foregoing patents or patent applications described in clauses (a), (b) and (c); and (e) any similar rights, including so-called pipeline protection (where the subject matter previously disclosed was not previously patentable in a particular jurisdiction but subsequently becomes patentable subject matter in such jurisdiction), or any importation, revalidation, confirmation or introduction patent or registration patent or patent of additions to any such foregoing patent applications and patents.

 

1.46                                 “Payment Report” has the meaning ascribed to it in Section 5.7.

 

1.47                                 “Ph1B PK/POC Study” has the meaning ascribed to it in Section 3.6.

 

1.48                                 “Product(s)” means the Drug as sole active pharmaceutical ingredient formulated with the FC Technology for injection.  For clarity, Products comprised of the same active pharmaceutical ingredient and delivered by similar drug administration methods (e.g., injection, such as by pen, syringe and needle, or needle-free) for same or different duration, or different doses of the same or different formulations of the FC Technology, shall be considered the same Product.

 

1.49                                 “Prosecute” or “Prosecuting” means with regard to specified Patent Rights, preparing, filing, prosecuting, validating, maintaining and defending such Patent Rights, including with respect to any re-examination, reissue, revocation, interference or opposition proceedings including any appeal therefrom.  For the avoidance of doubt, “Prosecuting” excludes any infringement suits or other legal proceedings to enforce the specified Patent Rights, regardless of whether or not such proceedings involve the defense of the Patent Rights in suit.

 

1.50                                 “Recipient” means the Party, which receives Confidential Information from the other Party.

 

	
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1.51                                 “Regulatory Approvals” means any NDA Approvals and other approvals, licenses, registrations, or authorizations granted or issued by any Regulatory Authority necessary for the manufacture, packaging, labeling, use, storage, transport, export, import, clinical testing, promotion or sale of the Product in a country, including pricing and reimbursement approvals to the extent the applicable Regulatory Authority in such country require a pricing or reimbursement approval prior to commercialization of a Product in such country.

 

1.52                                 “Regulatory Authority” means any national, supranational, regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity, including the FDA, in any country involved in the granting or receipt as the case may be of INDs, NDAs or Regulatory Approvals.

 

1.53                                 “Rhythm Collaboration IP” means all Collaboration Inventions owned by Rhythm pursuant to Section 7.2, 7.3 (d) or Section 7.4, including Rhythm’s interest in any Joint IP.

 

1.54                                 “Rhythm IP” means the Rhythm Collaboration IP and the Rhythm Product IP.

 

1.55                                 “Rhythm Product IP” means (a) all Patent Rights; (b) all Know-How and all other Intellectual Property; in each of (a) and (b) that (1) are Controlled by Rhythm or any of its Affiliates as of the Effective Date or become Controlled by Rhythm or its Affiliates during the term hereof and (2) are necessary or useful to make or have made, use, offer to sell, sell, have sold, import, or otherwise exploit the Product.  Notwithstanding the foregoing, Rhythm Product IP shall not include any Rhythm Collaboration IP.

 

1.56                                 “Rhythm Product Patents” means all Patent Rights within Rhythm Product IP.

 

1.57                                 “Rhythm Supply Agreement” means supply agreement between Rhythm and CMO governing the supply of the Product to Rhythm by CMO for the Territory.

 

1.58                                 “Rhythm Trademarks” means any Trademark owned or registered by Rhythm or that may be granted to Rhythm in the Territory to be used on the Product in the Territory and excluding any Camurus Trademarks.

 

1.59                                 “Royalty Term” has the meaning ascribed to it in Section 5.3.

 

1.60                                 “Sublicensee” shall have the meaning defined in Section 2.3.

 

1.61                                 “Term” shall have the meaning defined in Section 11.1.

 

1.62                                 “Territory” means the entire world.

 

1.63                                 “Third Party” means any entity other than Camurus or Rhythm or their respective Affiliates.

 

1.64                                 “Trademarks” means registered trademarks and applications therefor, unregistered trade or service marks and company names in each case with any and all associated

 

	
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goodwill and all rights or forms of protection of a similar or analogous nature including rights which protect goodwill whether arising or granted under the laws of any jurisdiction and, for purposes of this definition, trade dress.

 

1.65                                 “Valid Claim” means a claim of a (i) granted patent which has not been revoked or held unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction, which is not appealable or has not been appealed within the time allowed for appeal, and which has not been abandoned, disclaimed or surrendered, or (ii) an unissued published patent application that has not been formally terminated, abandoned, denied or admitted to be invalid or unenforceable through reissue, re-examination or disclaimer and which claim has been pending no longer than the earlier of (a) the date that is ten (10) years after the earliest priority date of the earliest application in which the claim could have been presented or (b) the date that is ten (10) years after the Effective Date, wherein after such earlier date such claim is expired and not a Valid Claim until the date that such a claim is granted or accepted for grant; provided, however, that if the holding of such court or agency with respect to a patent application is later reversed by a court or agency with overriding authority, the claim shall be reinstated as a Valid Claim with respect to Net Sales made after the date of such reversal.

 

1.66                                 Interpretation.

 

·           Whenever any provision of this Agreement uses the term “including” (or “includes”), such term shall be deemed to mean “including without limitation” and “including but not limited to” (or “includes without limitations” and “includes but is not limited to”) regardless of whether the words “without limitation” or “but not limited to” actually follow the term “including” (or “includes”);

 

·           “Herein”, “hereby”, “hereunder”, “hereof” and other equivalent words shall refer to this Agreement in its entirety and not solely to the particular portion of this Agreement in which any such word I used;

 

·           All definitions set forth herein shall be deemed applicable whether the words defined are used herein in the singular or the plural;

 

·           Wherever used herein, any pronoun or pronouns shall be deemed to include both the singular and plural and to cover all genders;

 

·           The recitals set forth at the start of this Agreement, along with the Exhibits to this Agreement, and the terms and conditions incorporated in such recital, Exhibits shall be deemed integral parts of this Agreement and all references in this Agreement to this Agreement shall encompass such recitals, Exhibits and the terms and conditions incorporated in such recitals, Exhibits, provided, that in the event of any conflict between the terms and conditions of this Agreement and any terms and conditions set forth in the Exhibits the terms of this Agreement shall control;

 

·           In the event of any conflict between the terms and conditions of this Agreement and any terms and conditions that may be set forth on any order, invoice, verbal agreement or otherwise, the terms and conditions of this Agreement shall govern;

 

	
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·           The Agreement shall be construed as if both Parties drafted it jointly, and shall not be construed against either Party as principal drafter;

 

·           Unless otherwise provided, all references to Sections and Exhibits in this Agreement are to Sections and Exhibits of and to this Agreement;

 

·           Unless otherwise provided, all references to days, months, quarters or years are references to calendar days, calendar months, calendar quarters or calendar years;

 

·           Any reference to any federal, national, state, local or foreign statute or law shall be deemed to also refer to all rules and regulations promulgated thereunder, unless to context requires otherwise; and

 

·           Wherever used, the word “shall” and the word “will” are each understood to be imperative or mandatory in nature and are interchangeable with one another.

 

2                                                  LICENSE GRANT TO RHYTHM

 

2.1                                        License Grant.  Camurus hereby grants to Rhythm, and Rhythm hereby accepts, the exclusive royalty bearing license under the Camurus IP to develop, make or have made, use, sell, offer for sale, market and promote the Product in the Licensed Field in the Territory.  The exclusive rights of Rhythm granted herein are subject to the rights required for Camurus to perform its obligations and exercise its rights under this Agreement.

 

2.2                                        Subcontracting.  Subject to the terms of Section 2.3, Rhythm and its Affiliates shall have the right, without obtaining the written consent of Camurus, (i) to subcontract its development and manufacturing responsibilities under this Agreement (and grant any necessary sublicenses in connection therewith), and (ii) to engage contract sales organizations to supplement or complement Rhythm’s own sales force.  Rhythm shall at all times be liable for all such activities as if such activities had been undertaken by Rhythm hereunder.

 

2.3                                        Sublicenses.  Subject to Section 2.2 Rhythm may not grant sublicenses under the licenses granted under Section 2.1, except as follows.

 

(a)         Rhythm may grant sublicenses to Camurus IP as required to make and have made the Product;

 

(b)         Rhythm may grant sublicenses to the Camurus IP to any of its Affiliates or Third Parties to develop, make, have made, use, sell, offer for sale, market and promote the Product in the Licensed Field in the Territory,

 

provided, that in each such case, (i) Rhythm shall be liable to Camurus as if Rhythm is exercising such sublicensed rights itself under this Agreement, (ii) the Sublicensee shall be permitted to grant further sublicenses, (iii) Rhythm shall provide upon written request by Camurus reasonable assurance that its Sublicensees are required to comply with confidentiality, indemnity, reporting, audit rights, access to Development Data, and information obligations owed by such Sublicensees to Rhythm that correspond and are no less stringent than the confidentiality, indemnity,

 

	
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reporting, audit rights, access to Development Data, and information obligations owed by Rhythm to Camurus as set forth in this Agreement. Rhythm shall promptly provide notice to Camurus of any sublicense granted pursuant to this Section 2.3. Any person or entity that receives a sublicense or is otherwise granted the right to promote and sell the Product as permitted hereunder is a “Sublicensee”.

 

2.4                                        Grant Back to Camurus.  Subject to and upon the terms and conditions set forth in this Agreement, Rhythm hereby grants to Camurus, and Camurus hereby accepts, a world-wide, paid up, non-exclusive, perpetual license, with the right to sublicense, under Rhythm Collaboration IP (but excluding Rhythm’s Development Data and regulatory filings, including INDs, NDAs and Regulatory Approvals, which are addressed in Section 3.7), to develop, make or have made, use, sell, offer for sale, market and promote products that are not the Product or a Competing Product, in the Territory.  Notwithstanding anything express or implied in the foregoing provisions of this Section 2.4 to the contrary, such license by Rhythm to and/or under Rhythm Collaboration IP shall only include those portions of any Rhythm Collaboration IP that are directly related to the FC Technology and that do not include information concerning the Drug, the Product or any Competing Product or any method of making or using the same.  In the event that Camurus sublicenses any of its rights under this Section 2.4, (i) Camurus shall be liable to Rhythm as if Camurus were exercising such sublicensed rights itself under this Agreement and (ii) Camurus shall provide upon written request by Rhythm reasonable assurance that any sublicensee of Camurus’ rights under this Section 2.4 is required to comply with obligations with respect to confidentiality and indemnity owed by such sublicensee to Camurus that correspond and are no less stringent than the obligations owed by Camurus to Rhythm pursuant to this Agreement with respect to confidentiality and indemnity.

 

3                                                  DEVELOPMENT OF PRODUCT

 

3.1                                        Rhythm Development Responsibility and Diligence.  Rhythm shall have the responsibility for, and have final decision-making authority with respect to, development of the Product at its own cost and Rhythm shall in doing so at all times exercise Commercially Reasonable Efforts to develop the Product through completion of the Ph1B PK/POC Study.  If Rhythm elects to continue development of the Product following successful completion of the Ph1B PK/POC Study in accordance with Section 3.6, then Rhythm shall be deemed to have satisfied Rhythm’s obligation to use Commercially Reasonable Efforts to develop the Product.  Rhythm shall keep the JDC regularly apprised of the progress of the execution of the Development Plan(s).  Both parties recognize that, in general, the Development Plans represent projections only and may be subject to change during the development process.  Both Parties also recognize that the development of the Product is being undertaken as a bridge of Rhythm’s efforts to develop the Drug and secure its approval by Regulatory Authorities; accordingly, in the event and to the extent that the primary Drug development program suffers delays or set-backs, those events will have a corresponding effect on efforts under this Agreement with respect to the Product.  Rhythm may decide from time to time to update to the Development Plan(s) as necessary to reflect changes in the progress of development

 

	
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for the Product.  Any proposed change to the Development Plan shall set forth a summary anticipated development activities and timelines for the Product, and propose any responsibility of Rhythm or Camurus (if any) for carrying out any such activities.  Rhythm shall also provide to Camurus draft forms of Product protocols for the purpose of obtaining comments.  Rhythm shall consider in good faith all comments provided by Camurus within the thirty (30) day period following Camurus receipt of such protocols.  Any Clinical Trials shall be conducted by Rhythm in accordance with GCP.  If Rhythm elects to continue development of the Product following successful completion of the Ph1B PK/POC Study in accordance with Section 3.6, then Rhythm shall thereafter provide Camurus within sixty (60) days after the end of every second calendar quarter, a reasonably detailed report on progress made toward the development of the Product during such preceding 6-month period, including the status of applications for regulatory approvals until such time as Rhythm becomes obligated to provide Payment Reports pursuant to Section 5.7 in the U.S. or one or more countries within the EU.  Rhythm shall be deemed to have satisfied such obligation to provide such reasonably detailed in any calendar year if Rhythm complies with its obligations under Section 3.4(d) hereof with respect to any meeting of the JDC that takes place on any date during such calendar year that is on or prior to the 60th day after the end of the second calendar quarter of such calendar year.

 

3.2                                        Camurus Services.  Rhythm may utilize Camurus to perform certain agreed development activities as shall be specified in a separate written agreed addendum to the Development Plan.  Rhythm shall reimburse Camurus for its costs and expenses incurred in providing such services pursuant to a budget for such costs and expenses, including FTE Costs, which shall be set forth in the addendum to the Development Plan. Such costs and expenses incurred by Camurus may be invoiced to Rhythm on a monthly basis.  Rhythm shall effect payment of all invoices to Camurus’ designated bank account within thirty (30) days after the date of Camurus’ invoice.  Camurus shall together with such invoices provide reasonable available supporting documentation of such costs and expenses (including relevant Third Party invoice and specification of hours worked by Camurus and a summary of the work performed).  Rhythm agrees not to withhold payment in respect of any Third Party costs that are within an agreed budget, although Rhythm may dispute the same.  For clarity, Camurus shall not be obliged to carry out any activities unless Rhythm has agreed to reimburse Camurus the associated costs and expenses.

 

3.3                                        Joint Development Committee.  Within ten (10) days of the Effective Date, the Parties shall appoint a Joint Development Committee (the “JDC”) of four (4) members.  Subject to this Section 3.3 and Section 3.4 below, the JDC shall be the primary forum for exchange of information and review of Rhythm’s progress in the development and registration of the Product and the JDC shall have the following responsibilities;

 

(i)                           reviewing the progress and results of Rhythm’s development efforts;

 

(ii)                        reviewing material amendments or updates to the Development Plan;

 

(iii)                     agreeing procedure for filing of Joint Patents;

 

(iv)                    reviewing the progress of Camurus’ technology transfer activities in respect of the Product as detailed in Section 6.2,

 

	
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(v)                      discuss publications regarding Product (such as abstract presentations at conferences, symposiums), and

 

(vi)                   Camurus will advise the JDC of any material issues that it is observing with respect to the characteristics of its FC Technology that are of potential utility to Rhythm in its development efforts with respect to its clinical and regulatory approach for the Product all to the extent covered by Rhythm’s license rights in Section 2.1.

 

3.4                                        Meetings of the JDC:

 

(a)         The JDC shall consist of an equal number of representatives appointed by each of Camurus and Rhythm.  Each Party may, with notice to the other, substitute any of its members serving on the JDC and may invite ad hoc non-voting members as desired.  The Parties may also, by mutual agreement, increase or decrease the number of members serving on the JDC; provided that the number of members representing each Party remains equal.  Rhythm shall have the right to appoint one of its members to be the chairperson of the JDC, whose term shall run for so long as the JDC is in existence.

 

(b)         The JDC shall meet as necessary but in any event no less frequently than semi-annually. Meetings of the JDC may take place by telephonic or video conference unless otherwise agreed. Minutes from the meetings of the JDC shall be kept by the Chairman of the JDC and circulated to Camurus members within a reasonable time for comments and approval.  Minutes shall not become official until approved by both Parties in writing; minutes shall be presented for approval as the first order of business at the subsequent JDC meeting, or if it is necessary to approve the minutes prior to such subsequent meeting, then the Parties shall approve the minutes within thirty (30) days of receipt thereof.

 

(c)          Each Party shall bear its own costs, including travel and lodging for its personnel serving on the JDC or attending meeting of the JDC.

 

(d)         Each Party shall submit to the JDC members ten (10) days in advance of each JDC meeting reasonably detailed progress and other reports to keep the JDC informed of the current progress and status of the conduct of its respective activities.

 

(e)          The quorum for JDC meetings shall be two (2) members, provided there are at least one (1) member from each of Camurus and Rhythm present.

 

(f)           Information that otherwise falls under the definition of Confidential Information contained in reports made pursuant to Section 3.3 or Section 3.4 will be subject to the confidentiality provisions of Section 8.

 

(g)          The term for the JDC shall commence on the date it is established by the Parties and continue until the Product receives regulatory approval in the United States or the EU.

 

3.5                                        Regulatory Filings and Approvals in the Territory.  Rhythm shall have the responsibility for, and have final decision-making authority with respect to applying for and obtaining Regulatory Approvals for each Product in the Territory

 

	
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which applications and approvals shall be held by and in the name of Rhythm.  Camurus shall provide assistance as reasonably requested in (i) compiling an IND and NDA; (ii) providing support for meetings with Regulatory Authorities and (iii) responding to questions from the Regulatory Authorities on technical (as opposed to pricing) questions on the Product and Camurus shall be reimbursed for such work at Camurus FTE Costs and reimbursement of documented expenses.  Rhythm shall pay all user fees and other costs required to obtain and maintain such Regulatory Approvals.

 

3.6                                        Decision Not To Proceed After Ph1B PK/POC Clinical Trial.  Without limiting the generality of the foregoing, on a Product-by-Product basis, Rhythm shall use Commercially Reasonable Efforts to perform the development activities through the completion of the first Ph1B PK/POC Clinical Trial with the Product as set forth in the Development Plan (the “Ph1B PK/POC Study”).  Within ninety (90) days following receipt of the final report from the Ph1B PK/POC Study Rhythm shall make a determination whether or not to proceed with development.  If Rhythm elects to proceed with further development following a successful Ph1B PK/POC Study then Rhythm shall thereafter provide Camurus with the semi-annual reports described in Section 3.1 (last sentence).  If Rhythm elects to proceed with further development that constitutes re-performance of a Ph1B PK/POC Study on an alternative formulation of the Product that was the subject of an unsuccessful Ph1B PK/POC Study then Rhythm shall provide Camurus with an updated Development Plan covering subsequent development activities through the re-performance of such Ph1B PK/POC Study within sixty (60) days of the date it notifies Camurus of its decision to re-perform a Ph1B PK/POC Study.  If Rhythm elects not to proceed with any additional development then Rhythm shall notify Camurus of such decision and terminate this Agreement in accordance with Section 11.3(e).  If Rhythm fails to deliver notice to Camurus of Rhythm’s decision to proceed with development or to terminate development within the 90-day period specified above then Camurus may terminate this Agreement as set forth in Section 11.3(e). Notwithstanding anything to the contrary herein, if Rhythm has not initiated dosing in the first Phase III study with the Product within [           ]* from the completion of the Ph1B PK/POC Study then Rhythm shall be required to terminate the Agreement in accordance with Section 11.3(e) and if Rhythm fails to terminate the Agreement then Camurus may terminate this Agreement as set forth in Section 11.3(e); provided, however that where Rhythm’s failure to meet the foregoing [           ]* deadline results from any documented safety issues, manufacturing process issues, changes to legal requirements or requests from a Regulatory Authority, in each case to the extent outside Rhythm’s control, then as long as Rhythm uses commercially reasonable efforts to overcome such issues, Rhythm shall not be required to terminate the Agreement as provided above in this Section 3.6 and Camurus shall not have the right to terminate the Agreement as provided above in this Section 3.6.

 

3.7                                        Development Data.  To the extent permitted by law and subject to the terms and conditions set forth in this Section 3.7, Rhythm grants Camurus, its Affiliates and licensees the right to cross-reference those portions of any Development Data and regulatory filings, including INDs, NDAs and Regulatory Approvals, Controlled by Rhythm or its Affiliates that are directly related to safety and CMC aspects of the FC Technology and do not include information concerning the Drug and that have

 

	
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been submitted to the FDA or any other applicable Regulatory Authorities, in each case only to the extent that such right to cross-reference,  is necessary or useful for Camurus’, its Affiliates’ and licensees’ regulatory filings for other products that utilize the FC Technology, provided that such other products do not consist of a Product or a Competing Product. Camurus shall provide Rhythm with at least thirty (30) days advanced written notice of the regulatory agency and division which is receiving the cross-reference filing, before Camurus or any of its Affiliates or licensees exercises any right of cross-reference as contemplated under the foregoing provisions of this paragraph.  Rhythm shall give Camurus, its Affiliates and licensees reasonable access and right to use (including the right to copy where reasonably required) to a copy of those portions of the Development Data, IND, NDA or Regulatory Approvals Controlled by Rhythm, its Affiliates or its Sublicensees that are directly related to safety and CMC aspects of the FC Technology and do not include information concerning the Drug , in each case only to the extent that such right of reasonable access and use is necessary or useful for development or regulatory filings for products that utilize the FC Technology and do not consist of a Product or a Competing Product.  Camurus shall be responsible for reimbursement to Rhythm of any costs on an hourly fee basis incurred in connection with the provision of access to any data by Rhythm pursuant to this Section 3.7, including the costs of segregating data that relates solely to the FC Technology.  Such costs shall be calculated on an hourly fee basis.

 

Camurus shall provide Rhythm, its Affiliates, Sublicensees with a right of cross-reference, a right of reasonable access and a right to use the development data and regulatory filings and regulatory approvals that Camurus or its Affiliates Control that are directly related to the FC Technology and that do not include information concerning any active pharmaceutical ingredient under development by Camurus or its Affiliates or licensees or sublicensees, in each case only to the extent that such right to cross-reference, such right of reasonable access and such right of use is necessary or useful for regulatory filings for the Product made or to be made by Rhythm, its Affiliates or Sublicensees. Rhythm shall provide Camurus with at least thirty (30) days advanced written notice of the regulatory agency and division which is receiving the cross-reference filing, before Rhythm or any of its Affiliates or Sublicensees exercises any right of cross-reference as contemplated under the foregoing provisions of this paragraph.  Rhythm shall be responsible for reimbursement to Camurus of any costs incurred in connection with the provision of access to any data by Camurus pursuant to this Section 3.7, including the costs of segregating data that relates solely to the FC Technology.  Such costs shall be calculated on an hourly fee basis.  It is noted that Camurus is currently negotiating sublicensing rights under its license agreement with [           ]* to [           ]* generated know-how pertaining to the FC Technology and that do not include information concerning any active pharmaceutical ingredient under development by [           ]* or its Affiliates. The Parties agree that until Camurus succeeds in securing such sublicensing rights from [           ]* under such license agreement that would permit Camurus to grant to Rhythm rights to such know-how as provided in Section 3.7, Camurus shall not sublicense or otherwise grant or provide the rights granted by Rhythm to Camurus in this Section 3.7 or Section 2.4 to [           ]* or its Affiliates.

 

	
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3.8                                        Reporting Adverse Events: Rhythm shall be responsible for reporting all adverse events (as defined in the then current edition of ICH Guidelines and any other relevant regulations or regulatory guidelines or any other safety problem of any significance, hereafter “Adverse Events”) relating to the Product to the appropriate regulatory authorities in the countries in the Territory in accordance with the appropriate laws and regulations of the relevant countries and authorities.  Rhythm shall ensure that its Affiliates and Sublicensees comply with all such reporting obligations.  In the event that Rhythm knows or acquires knowledge that any Adverse Event relating to the Product is attributable to the FC Technology and is not attributable to the Drug, then Rhythm shall provide prompt written notice of such Adverse Event to Camurus.  In addition, at each meeting of the JDC, a representative of Rhythm shall present to the JDC, and the JDC shall review, all Adverse Event relating to the Product that have occurred since the last meeting of the JDC

 

4                                                  COMMERCIALIZATION

 

4.1                                        Responsibility.  Rhythm shall have responsibility for, and final decision-making authority with respect to, commercialization of Products in the Territory at its own cost.

 

4.2                                        Reserved.

 

4.3                                        Reserved.

 

4.4                                        Reserved.

 

4.5                                        Reserved.

 

5                                                  PAYMENT OBLIGATIONS

 

5.1                                        Signing Fee.  Within the later to occur of (i) five (5) Business Days of the Effective Date and (ii) five (5) Business Days after receipt of an invoice from Camurus, Rhythm shall pay Camurus a non-refundable and non-creditable signing fee of [           ]* US Dollars (US$[           ]* payable by wire transfer of immediately available funds to an account designated in writing by Camurus.

 

5.2                                        Milestone Payments.  On a Product-by-Product basis, Rhythm shall pay the following non-refundable, non-creditable amounts upon the achievement of the following events, within the later to occur of (i) sixty (60) calendar days after each such event and (ii) ten (10) Business Days after receipt of an invoice from Camurus for the milestone payment due with respect to each such event:

 

	
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MILESTONE EVENT
    	
 
    	
MILESTONE PAYMENT
    
	
 
    	
 
    	
 
    
	
Upon completion (i.e. release of first eGMP batch of   Product) of tech transfer and IND support for the filing of the first IND for   the Ph1B PK/POC Study but in no event later than upon filing of said IND.
    	
 
    	
US$ [           ]*.
    
	
 
    	
 
    	
 
    
	
Successful completion of the Ph1B PK/POC Study.

 

Successful completion shall be deemed to have   occurred if, after completion of the Ph1B PK/POC Study, Rhythm pursues   additional development activities in preparation for the commencement of a   Phase II Study. If, after completion of the Ph1B PK/POC Study, Rhythm does   not pursue development activities in preparation for the commencement of a   Phase II Study, Rhythm must within 90 days from completion of the Ph1B PK/POC   Study (i) treat the Ph1B PK/POC Study as successfully completed and pay   the associated $[           ]*   Milestone Payment to Camurus, (ii) renegotiate and agree with Camurus as   to the extent of Rhythm’s obligation, if any, to have to pay the   $[           ]*   Milestone Payment Milestone Payment associated with successful completion of   the Ph1B PK/POC Study or (iii) terminate this Agreement as set forth in   Section 11.3(e). Nothing in this paragraph shall be construed as   requiring that any Milestone Payment be paid or payable more than once upon   the first achievement of the applicable Milestone and any renegotiated   Milestone Payment under this paragraph shall be in lieu of the   $[           ]*   Milestone Payment payable by Rhythm to Camurus upon successful completion of   the Ph1B PK/POC Study with the Product.
    	
 
    	
US$ [           ]*.
    
	
 
    	
 
    	
 
    
	
First dosing of the Product in the first Phase III   Clinical Trial.
    	
 
    	
US$ [           ]*.
    
	
 
    	
 
    	
 
    
	
Filing of the first NDA for the Product in the   United States.
    	
 
    	
US$ [           ]*.
    
	
 
    	
 
    	
 
    
	
First NDA Approval for the Product in the United   States.
    	
 
    	
US$ [           ]*.
    

 

	
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Filing of the first NDA for the Product in the EU.
    	
 
    	
US$ [           ]*.
    
	
 
    	
 
    	
 
    
	
First NDA Approval for the Product in the EU.
    	
 
    	
US$ [           ]*.
    

 

In no event shall any development or approval milestone payment be payable more than once for each Product and in no event shall the aggregate amount of all development and approval milestone payments payable with respect to each Product exceed US$[           ]*.

 

5.3                                        Royalties.

 

On a Product-by-Product basis, Rhythm shall pay to Camurus royalties (“Royalties”) equal to the percentages on the below annual Net Sales of Product in the Territory as described below.

 

	
Product Net Sales Tier
    	
 
    	
Royalty
    
	
 
    	
 
    	
 
    
	
For the portion of aggregate annual Net Sales of   Product of less than   [           ]* in the   Territory
    	
 
    	
[           ]*%
    
	
 
    	
 
    	
 
    
	
For the portion of aggregate annual Net Sales of   Product equal to or greater than [           ]*   and less than   [           ]* in the   Territory
    	
 
    	
[           ]*%
    
	
 
    	
 
    	
 
    
	
For the portion of aggregate annual Net Sales of   Product equal to or greater than   [           ]* and   less than   [           ]* in the   Territory
    	
 
    	
[           ]*%
    
	
 
    	
 
    	
 
    
	
For the portion of aggregate annual Net Sales of   Product equal to or greater than   [           ]* in the   Territory
    	
 
    	
[           ]*%
    

 

Royalties shall be payable for a time period calculated on a Product-by-Product and country-by-country basis in respect of the licenses granted to Rhythm by Camurus hereunder beginning on the First Commercial Sale of such Product in such country and ending on the later of (a) ten (10) years after the date of such First Commercial Sale of such Product in such country and (b) the expiration of the last to expire Valid Claim covering such Product within (i) Camurus Platform Patents or (ii) Patent Rights claiming Collaboration Inventions, in such country. The period during which Royalties are payable in respect of a Product in any country is referred to as the “Royalty Term”. Notwithstanding the foregoing, royalty rates shall be reduced by [           ]*% with respect to sales of a Product in any country of the Territory during the Royalty Term if the sale, manufacture or use of the Product in such country is not covered by any Valid Claim within (1) the Camurus Platform Patents or (2) Patent Rights covering Collaboration Inventions and in each case there is a Generic

 

	
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Product sold in such country. In no event may the Royalties set forth first above in this Section 5.3 be reduced by more than [           ]*% by application of one or more royalty reduction provisions in this Agreement.

 

5.4                                        Sales Milestones.  Rhythm shall pay the following non-refundable, non-creditable sales milestones upon the achievement of the following sales levels for all Products in the Territory. Payment for any such milestones shall be made within the later to occur of (i) sixty (60) calendar days after the achievement of the applicable milestone and (ii) ten (10) Business Days of receipt of appropriate original invoice from Camurus. Sales milestones will be paid in accordance with the schedule below, with each milestone paid only once and on the first occurrence of the event, as set forth below. In the event more than one sales milestone is reached in the same year, then each such milestone shall be due that year.

 

	
Product Event
    	
 
    	
Amount
    
	
 
    	
 
    	
 
    
	
When Net Sales of a Product in the Territory first   exceed   US$[           ]* in a   calendar year
    	
 
    	
US$[           ]*
    
	
 
    	
 
    	
 
    
	
When Net Sales of a Product in the Territory first   exceed   US$[           ]* in a   calendar year
    	
 
    	
US$[           ]*
    
	
 
    	
 
    	
 
    
	
When Net Sales of a Product in the Territory first   exceed   US$[           ]* in a   calendar year
    	
 
    	
US$[           ]*
    
	
 
    	
 
    	
 
    
	
When Net Sales of a Product in the Territory first   exceed   US$[           ]* in a   calendar year
    	
 
    	
US$[           ]*
    

 

In no event shall sales milestone payments be payable in excess of US$[           ]*.

 

5.5                                        Third Party Licenses. If Rhythm, to avoid infringement of Third Party Patent Rights in connection with the Product, to the extent such infringement relates the use of Camurus IP, obtains a license under an issued patent(s) from such Third Party in any country in the Territory to make or have made, use, offer to sell, sell, have sold, import, or otherwise exploit a Product pursuant to the licenses granted hereunder, then Royalties calculated on Net Sales of such Product in such country shall, subject to Section 5.3, be offset by [           ]* of any royalties paid by Rhythm as and when paid to such Third Party under such Third Party license. For the avoidance of doubt, payments to such Third Party that may be offset shall be limited to such payments allocable to the license of such technology (excluding, for example, any payments in respect of development services or the supply of products) and allocable to the Product (excluding, for example, other uses of such technology by Rhythm).  Rhythm shall provide Camurus with copies of the relevant terms of such license agreement with such Third Party and other material information in its possession in respect of such technology subject to Camurus undertaking confidentiality in respect of such disclosures by Rhythm.  Rhythm shall consult with Camurus prior to entering into any such license agreement and provide Camurus a reasonable opportunity to provide its views on the need or benefit to obtain such license and the financial and other terms thereof. If Rhythm exercises

 

	
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its right in Section 5.6 to buy down Royalties, then Rhythm’s rights to offset future royalties paid to Third Parties as provided in this Section 5.5 shall cease.

 

5.6                                        Royalty Buy-Down. Rhythm shall have the right on a Product-by-Product basis, exercisable at any time during a period beginning on the First Commercial of the applicable Product and ending on the [           ]* anniversary thereof, to buy down the Royalties to a flat rate of [           ]* on Net Sales of such Product by making payment to Camurus of a one-time non-refundable and non-creditable amount of [           ]*. The reduced royalty rate shall apply to all Net Sales of such Product from the calendar quarter following the calendar quarter in which said lump-sum payment is received by Camurus. Any sales milestones that would otherwise become due pursuant to Section 5.4 after the calendar quarter in which said payment was received by Camurus, shall no longer be payable.

 

5.7                                        Royalty and Milestone Reports. Royalty payments shall be paid within sixty (60) calendar days after the first day of January, April, July and October of each year following the First Commercial Sale of a Product, and shall include a written report with respect to the preceding quarter (the “Payment Report”) stating: (a) the gross sales and number of units sold of each presentation of the Product sold by Rhythm, its Affiliates and Sublicensees in each country in the Territory; (b) Net Sales of the Product sold by Rhythm, its Affiliates and Sublicensees, during such quarter on a country-by-country basis; (c) the date of any First Commercial Sale of the Product in each country during such quarter, (d) currency exchange rates used in determining the Royalties and (e) a calculation of the amounts due to Camurus. Rhythm shall notify Camurus in writing within sixty (60) calendar days after the achievement of any milestone described in Section 5.2 or Section 5.4.

 

5.8                                        Payments.

 

(a)         All payments due under this Agreement shall be paid in immediately available funds in US Dollar to the bank account designated in writing by Camurus, as the case may be. To the extent Net Sales are accrued in currencies other than US Dollar, Net Sales shall be converted to US Dollar, as the case may be, at the average daily rate of exchange for the applicable calendar quarter as published by Financial Times (UK edition). The calculation of the average rate of exchange shall be stated in terms of US Dollar per foreign currency units.

 

(b)         All payments hereunder are exclusive of any taxes, fees or charges imposed by any local or national authority. In the event that Rhythm reasonably determines that any tax, duty or other levy is required to be paid or withheld on account of Royalties or other payments payable to Camurus under this Agreement, Rhythm shall make such withholding payments as required and subtract such withholding payments from the payments to be made to Camurus as set forth in this Section 5, or, if applicable, Camurus will reimburse Rhythm or its designee(s) for the amount of such required withholding payments that are not subtracted from the payments made to Camurus as set forth in this Section 5, within fifteen (15) days of notice to Camurus.  Rhythm shall provide Camurus with documentation of such withholding and payment in a manner that is satisfactory for purposes of reporting to the U.S. Internal Revenue Service.  Any withholdings paid by Rhythm shall be for the benefit of Camurus.

 

	
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(c)          Any payments that are not paid within the date such payments are due under this Agreement shall bear interest at an annual rate of interest equal to the London Interbank Offered Rate (“LIBOR”), plus five (5) percentage points, calculated on the number of days such payment is delinquent.

 

5.9                                        Books and Records; Audit Rights. Rhythm shall keep full and true books of accounts and other records in sufficient detail so that the Royalties payable hereunder can be properly ascertained. Rhythm shall, at the request of Camurus, permit a nationally recognized independent certified public accountant selected by Camurus and reasonably acceptable to Rhythm to have access during ordinary business hours, to such books and records as may be necessary to determine the correctness of any Payment Report or payment made under this Agreement or to obtain information as to Royalties and milestones payable in case of failure to report or pay pursuant to the terms of this Agreement. The auditor shall execute a written confidentiality agreement with Rhythm and shall disclose to Camurus only the amount and accuracy of payments reported and actually paid or otherwise payable under this Agreement. The auditor shall send a copy of the report to Rhythm at the same time it is sent to Camurus. Such examination shall be conducted (a) after at least thirty (30) days prior written notice from Camurus, (b) at the facility(ies) where such books and records are maintained, and (c) no more frequently than once in any calendar year or more than once with respect to a particular year. Camurus shall be responsible for expenses for the independent certified public accountant, except that Rhythm shall reimburse Camurus in full thereof if the independent accountant determines the Royalties and milestones paid by Rhythm to Camurus are less than ninety-five percent (95%) of the amount actually owed for the period of the audit.  As a condition to any sublicense granted by Rhythm hereunder, Rhythm shall ensure that Camurus has the same audit rights as those described in this Section 5.9 with respect to any such Rhythm Affiliate or Sublicensee.

 

6                                                  MANUFACTURE

 

6.1                                        Identification of CMO. Rhythm shall have responsibility for, and final decision-making authority with respect to, the manufacture of Product for non-clinical, clinical and commercial use and sale in the Territory. Rhythm, or its designated CMO as applicable, shall be EU and US GMP approved and able to manufacture according to the Regulatory Approvals in the applicable countries in the Territory.  Until the tech transfer process to Rhythm or its CMO has been successfully completed as set forth in Section 6.2, Camurus may procure such supply of Rhythm’s non-commercial requirements of Product from Camurus’ existing CMO at Camurus’ Manufacturing Cost.  In such case, the Parties shall enter into separate supply agreements governing the terms and conditions of such non-commercial supply from Camurus’ CMO to Rhythm and shall use good faith efforts to negotiate and enter into the foregoing within one hundred and twenty (120) days from the Effective Date.

 

6.2                                        Technology Transfer. Camurus shall use Commercially Reasonable Efforts to provide such of its manufacturing technology as may be reasonably necessary to enable Rhythm or its designated CMO to manufacture the Product for non-clinical, clinical and commercial use, and shall use Commercially Reasonable Efforts to

 

	
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provide technical assistance to enable the use of such manufacturing technology to manufacture the Product. Prior to such technology transfer, the Parties will agree upon a technology transfer plan and corresponding budget.  Rhythm shall reimburse Camurus it’s out of pocket costs and expenses as well as Camurus’ FTE Costs incurred in providing such technology transfer and technical assistance. Camurus shall be reimbursed by Rhythm on a monthly basis, within thirty (30) days of receipt of an invoice setting forth such costs and expenses.

 

6.3                                        Rhythm Supply Agreement. If Rhythm uses a CMO, as soon as commercially possible Rhythm shall enter into one or more Rhythm Supply Agreements with the CMO covering the tech transfer, process development, scale-up and manufacture of Product.

 

7                                                  INTELLECTUAL PROPERTY

 

7.1                                        Trademarks.

 

(a)         Rhythm shall have the right to select, and shall register and maintain, at its expense, such Product Trademarks as shall be used for the promotion, marketing and sale of the Product in the Territory. Rhythm shall own such Product Trademarks and all goodwill associated therewith.

 

(b)         Rhythm may use the Camurus Trademark for commercialization of Product in the Territory. If Rhythm opts to use the Camurus Trademark, save to the extent Rhythm may be required to do so by a Regulatory Authority or pursuant to the requirements of a Regulatory Approval, Rhythm shall not conceal or otherwise obscure, remove or otherwise interfere with the Camurus Trademark. Rhythm shall not register or use any Trademark confusingly similar to any Camurus Trademark or any other Trademarks used by Camurus with the FC Technology. Rhythm shall ensure that each reference to and use of the Camurus Trademark in any marketing material related to Product is accompanied by an acknowledgement that the Camurus Trademark is owned by Camurus and used by Rhythm under license. Rhythm shall adhere to any reasonable requests from Camurus relating to Rhythm’s use of the Camurus Trademark.

 

7.2                                        Ownership of Collaboration Inventions. Subject to the terms hereof, including the licenses and other rights granted hereunder, all Collaboration Inventions shall be owned as follows:

 

(a)         All Collaboration Inventions, including Joint Inventions, relating specifically to [           ]*, shall be exclusively owned by Camurus.

 

(b)         All Collaboration Inventions, including Joint Inventions, relating specifically to [           ]*, shall be exclusively owned by Rhythm.

 

(c)          The ownership of Collaboration Inventions not owned by Camurus or Rhythm in accordance with Section 7.2(a) or Section 7.2(b) shall be determined with reference to inventorship under U.S. patent law.  If the Parties fail to agree with respect to inventorship, the dispute will be referred to a Third Party U.S. patent attorney acceptable to each of the Parties for Expert Determination as provided in Exhibit 7.2(c).  The Parties shall jointly own all Collaboration Inventions that are

 

	
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Joint Inventions, other than those covered in Section 7.2(a) or Section 7.2(b), and, subject to the rights granted each Party under this Agreement, each Party may use, sell, keep, license or assign its interest in Joint Inventions and otherwise undertake all activities a sole owner might undertake with respect to such Joint Inventions, without the consent of and without accounting to the other Party. “Joint Inventions” means Collaboration Inventions for which it is determined, in accordance with the patent law of the United States, that both: (i) one or more employees, consultants or agents of Camurus or any other persons obligated to assign such Collaboration Invention to Camurus; and (ii) one or more employees, consultants or agents of Rhythm or any other persons obligated to assign such Collaboration Invention to Rhythm, are inventors of such Collaboration Invention. For any Joint IP that could be the subject of an application for a Patent Right, each Party, in conjunction with such Party’s patent counsel will make an initial determination of inventorship prior to filing the application therefor to confirm that it is Joint IP. Each Party will provide information and records relevant to such determination to the other Party and such patent counsel

 

(d)         Subject to appropriate confidentiality undertakings, each Party shall promptly notify the other Party when it learns a Collaboration Invention has been made and promptly after the completion of invention disclosure statements for such Collaboration Invention (or, if any provisional or other patent applications are filed claiming such invention, promptly after such filing), and, to the extent a Party is granted rights hereunder in such Collaboration Invention, shall provide a copy of the same to the other Party.

 

(e)          For the avoidance of doubt, neither Party is granted any license rights to any intellectual property rights of the other Party, which may be required for such Party to use a Collaboration Invention, unless otherwise expressly granted herein.

 

(f)           Each of the Parties shall do all such acts and things and execute all such deeds and documents as may be necessary or desirable for them to perfect their rights of ownership as specified in this Section 7.2 and otherwise implement the provisions of this Section 7. Each Party shall, and shall cause its applicable Affiliates, Third Party subcontractors, and their respective employees and agents to, perform at the requesting Party’s cost all reasonable acts reasonably requested, including the execution of confirmatory deeds and assignment documents of Patent Rights as may be necessary or desirable for them to perfect their title therein in accordance with the forgoing provisions of this Section.

 

7.3                                        Prosecution of Patents.

 

(a)         Patent Prosecution of Camurus IP. Camurus shall control the Prosecution of the Patent Rights within Camurus Platform IP (“Camurus Platform Patents”) at its own cost and expense using Commercially Reasonable Efforts to Prosecute all patent applications forming part of Camurus Platform Patents to grant with Valid Claims, including conducting any necessary or desirable oral or written proceedings. Camurus shall provide Rhythm with a copy of each new draft application and replies to substantive office actions within the Camurus Platform Patents (including, for clarity, divisional and continuation applications), and shall keep Rhythm informed of all material developments in relation to Camurus

 

	
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Platform Patents and shall provide Rhythm with copies of relevant documents related to the Prosecution of Camurus Platform Patents in the United States and EU and any PCT application. Camurus shall provide relevant documents related to the Prosecution of the Camurus Platform Patents in all other countries in the Territory upon request from Rhythm. In the event that, having filed, Camurus declines to further Prosecute any Camurus Platform Patents in any country of the Territory, Camurus shall provide Rhythm with written notice thereof. Such notice shall be given at least sixty (60) days prior to the expiration of any official substantive deadline relating to such activities. In any such circumstances and provided that no earlier licensee of Camurus has assumed the right to Prosecute such Camurus Platform Patents Rhythm shall have the right to decide that Rhythm should continue to Prosecute such Camurus Platform Patents owned by Camurus at Rhythm’s expense and in such case Rhythm shall give written notice to Camurus; provided that if Camurus’ decision to decline to further Prosecute any pending Camurus Platform Patents is as a result of the withdrawal of an unpublished patent application and the reason for such withdrawal was to enable the filing of another patent application claiming the same inventions, Rhythm shall not have the right to decide that Rhythm should continue to Prosecute the withdrawn unpublished patent application. Camurus shall upon receipt of any such notice from Rhythm transfer to Rhythm copies of all of its files relating to the relevant Camurus Platform Patents and at Rhythm’s reasonable cost and expense execute any documents to otherwise transfer control of such Prosecution to Rhythm. Camurus shall remain the owner of such Camurus Platform Patents and Rhythm shall provide Camurus the same information and rights required under this Section 7.3(a) to be provided Rhythm concerning the Prosecution of such Camurus Platform Patents. Rhythm may deduct the prosecution costs with respect to such Camurus Platform Patents from the royalties payable to Camurus under this Agreement. This Section 7.3 (a) shall apply mutatis mutandis to Patent Rights within Collaboration Inventions solely owned by Camurus pursuant to Section 7.4.

 

(b)         Patent Prosecution of Collaboration Product Patents and Rhythm Product Patents in the Territory. Rhythm shall control the Prosecution of (i) the Patent Rights to any and all Collaboration Inventions owned by Rhythm pursuant to Section 7.2(b), Section 7.2(c) if solely owned by Rhythm or Section 7.4 (jointly “Collaboration Product Patents”), and (ii) the Rhythm Product Patents, in the Territory at Rhythm’s expense using Commercially Reasonable Efforts to Prosecute all patent applications forming part of the Collaboration Product Patents to grant with Valid Claims, including conducting any necessary or desirable claims or oral or written proceedings. With respect to the Collaboration Product Patents, Rhythm shall provide Camurus the same information and rights required under Section 7.3(a) to be provided Rhythm concerning the Prosecution of the Camurus Platform Patents. In the event that, having filed, Rhythm declines to further Prosecute any Collaboration Product Patents in any country in the Territory, Rhythm shall provide Camurus with written notice thereof.  Such notice shall be given at least sixty (60) days prior to the expiration of any official substantive deadline relating to such activities. In any such circumstances Camurus shall have the right to decide that Camurus should continue to Prosecute such Collaboration Product Patents at Camurus’ expense and in such case Camurus shall give written notice to Rhythm. Rhythm shall upon receipt of any

 

	
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such notice from Camurus transfer to Camurus all of its files relating to the relevant Collaboration Product Patents and at Camurus’ reasonable cost and expense execute any documents to otherwise transfer control of such Prosecution to Camurus.  Rhythm shall remain the owner of such Collaboration Product Patents and Camurus shall provide Rhythm the same information and rights required to be provided Camurus under this Section 7.3(b) concerning the Prosecution of such Collaboration Product Patents.

 

(c)          Joint Patents. With respect to the Prosecution of patent applications claiming Joint Inventions subject to Section 7.2(c) (“Joint Patents”), Rhythm shall have the right to take such actions as are necessary or appropriate to Prosecute Joint Patents at its sole expense; provided, that all such patent applications and patents shall be owned jointly. Rhythm shall furnish Camurus with copies of such Joint Patents and other related correspondence relating to such Joint Inventions to and from patent offices throughout the Territory and permit Camurus to offer its comments thereon before Rhythm makes a submission to a patent office. Rhythm shall inform Camurus of the countries in which it intends to file patent applications. Camurus shall offer its comments promptly, including any request that the patents be filed in additional countries; provided, that Rhythm shall determine the appropriate action after considering in good faith any comments or requests from Camurus, and further provided that in the event that delay would jeopardize any potential patent right, Rhythm shall have the right to proceed without awaiting Camurus’ comments. If Rhythm determines in its sole discretion not to Prosecute any patent or patent application within the Joint Patents in any country, and provided that no other patent applications or patents claiming the same or similar subject matter are then pending or issued in that same country, then Rhythm shall provide Camurus with sixty (60) days prior written notice (or such shorter time period that would permit Camurus a reasonable opportunity to respond in a timely manner) of such determination and Camurus shall have the right and opportunity to Prosecute such patent application or patent on behalf of the Parties at Camurus’ sole cost and expense. Camurus shall provide Rhythm the same information and rights required under this Section 7.3(c) to be provided Camurus concerning the Prosecution of such Joint Patents.

 

(d)         As promptly as practicable after the Effective Date (but in no event later than one hundred and twenty (120) days after the Effective Date), Rhythm shall file a patent application with the United States Patent and Trademark Office [           ]*.  Camurus shall provide Rhythm with such information and/or invention disclosures reasonably requested by Rhythm, and shall otherwise cooperate with all reasonable requests made by Rhythm, in connection with the preparation, filing and prosecution of such patent application.  Notwithstanding anything express or implied anywhere else in this Agreement, all of the inventions claimed in such patent application (other than those of such inventions that are already owned solely by Rhythm as of the Effective Date) shall be deemed and treated, for all purposes of this Agreement, as Collaboration Inventions that are owned solely by Rhythm pursuant to Section 7.2(b) hereof.  For clarity, such patent application and all other Patent Rights related to those inventions that are deemed and treated, for all purposes of this Agreement, as Collaboration Inventions shall be deemed and treated as Collaboration Product Patents for all purposes of this Agreement and be subject inter alia to Section 7.3 (b).

 

	
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(e)          Each Party shall at the expense of the requesting Party execute such documents and take such other actions as may be reasonably requested by the other Party in conjunction with prosecution of patents pursuant to this Section 7.3.

 

7.4                                        Camurus Platform Patents and Collaboration Product Patents.  If, after the Effective Date, any Collaboration Invention relates both to [           ]*, on the one hand, and [           ]*, on the other hand, and patent claims can be made based on the same data, Patent Right or study result, where appropriate Camurus shall, in consultation with Rhythm, file separate patent applications on the same day to any aspect relating to [           ]*, on the one hand, and [           ]*, on the other hand, separately. Any such applications relating specifically to [           ]* shall become part of the Rhythm Collaboration IP and, therefore, shall be exclusively owned by Rhythm, and any such applications relating to [           ]* shall become part of Camurus Platform IP hereunder and, therefore, shall be exclusively owned by Camurus.  In the event that the provisions of this Section 7.4 are applicable to any Collaboration Invention, the provisions of this Section 7.4 shall be applied to such Collaboration Invention before the provisions of any of Section 7.2(a) or Section 7.2(b) are given effect with respect to such Collaboration Invention.

 

7.5                                        Employee Assignment. Each Party shall ensure that any employee of that Party involved in the performance of this Agreement shall be employed on legally binding written terms which require the assignment of all Patent Rights and Know-How resulting from work carried out by that employee to the employing Party. Each Party shall be responsible for all payments to its employees or others in respect of obtaining rights to any such Patent Rights and Know-How.

 

7.6                                        Patent Term Extensions. For all patents within any Patent Rights relating to or claiming a Product for which NDA Approval has been obtained, the Parties shall use reasonable efforts, in each country where NDA Approval for a Product has been obtained and the law of such country permits application for a patent term extension (or any supplementary certificate), to apply for a patent term extension (or any supplementary certificate) for one or more selected patent within such Patent Rights chosen at Rhythm’s reasonable discretion with respect to the Territory. Each Party agrees to cooperate with the other Party in the exercise of the authorizations granted under this Section, and to execute such documents and take such additional action as the other Party may reasonably request in connection therewith.

 

7.7                                        Third Party Intellectual Property. Each Party shall bring to the attention of the other Party all information regarding potential infringement or misappropriation of Third Party Patent Rights as a result of the manufacture, use, importation, offer for sale, or sale of Product in the Territory.  The Parties shall discuss such information and decide how to handle the matter.  This Section 7.7 shall not be interpreted as placing on either Party a duty of inquiry regarding Third Party Intellectual Property rights beyond what is customary for the industry.

 

7.8                                        Third Party Infringement.  In the case where either Party believes that the development, manufacture, use or sale of the Product or a Competing Product by a Third Party in the Licensed Field infringes any Camurus Platform Patents, any other Patent Rights licensed by Camurus to Rhythm pursuant to this Agreement,

 

	
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any other Collaboration Product Patents covering the Product (including any method of making or using the same) or the Joint Patents (each, an “Infringing Activity”), such Party shall disclose full details of the potential infringement to the other Party.  In addition, if either Party believes that development, manufacture, use or sale of the Product or a Competing Product by a Third Party in the Licensed Field infringes any other Patent Rights covering the Product, such Party shall disclose full details of the potential infringement to the other Party. The right to prosecute Infringing Activity pursuant to this Agreement is set out in either Section 7.9 or Section 7.10, as applicable.  If the Parties fail to agree with respect to whether an Infringing Activity is subject to Section 7.9 or Section 7.10, the dispute will be referred to a Third Party U.S. patent attorney acceptable to each of the Parties for Expert Determination as provided in Exhibit 7.2(c).  For the avoidance of doubt, it is understood and agreed that in this section 7.8 and in Section 7.9, Patent Rights claiming the Product do not include Rhythm Product Patents or any other Patent Rights owned or Controlled by Rhythm (other than Collaboration Product Patents).

 

7.9                                        Enforcement with respect to Collaboration Product Patents and Joint Patents.  Where an infringement of (x) any Patent Rights specifically claiming the Product (including any method of making or using the same) or (y) any Joint Patents by an Infringing Activity occurs in one or more countries of the Territory, Rhythm shall have the first right to, but shall not be obliged to, at its own cost and expense enforce the same in accordance with the below subparagraphs (i) to (iii).

 

(i) Rhythm shall have sole conduct of the claim and any proceedings including any counterclaim for invalidity or unenforceability or any declaratory judgment action and including the right to settle. Where Rhythm decides to commence proceedings in relation to any such Patent Rights claiming specifically the Product (including any method of making or using the same) or any Joint Patents it shall be entitled to require Camurus to join Rhythm as co-plaintiff and Camurus shall have the right to join as co-plaintiff.  In such case Camurus shall provide all necessary assistance to Rhythm in relation to any such proceeding and Rhythm shall on demand by Camurus pay or promptly reimburse Camurus for the costs of such activity unless Camurus elects to be separately represented (which shall be at Camurus’ discretion), in which case such separate representation shall be at Camurus’ cost and expense;

 

(ii) if Rhythm succeeds in any such infringement proceedings whether at trial or by way of settlement, the proceeds of any award or damages or settlement in respect of such infringement proceedings shall first be applied to reimburse (a) an amount equal to Rhythm’ costs of taking the proceedings and (b) an amount equal Camurus’ costs, with the remainder being retained by Rhythm less [           ]* per cent [           ]* thereof, which amount shall be paid to Camurus;

 

(iii) if Rhythm fails to take any such proceedings in respect of any such Patent Rights claiming specifically the Product (including any method of making or using the same) or any Joint Patents in the Territory, Camurus may give Rhythm written notice requesting Rhythm to take such proceedings within thirty (30) days of the date of notice and if Rhythm fails to take such action within said period, Camurus shall, subject to the prior written consent of Rhythm, be entitled to do so at its own cost and expense.  If Rhythm gives such consent then Camurus shall be entitled to

 

	
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require Rhythm to join Camurus as co-plaintiff and Rhythm shall have the right to join as co-plaintiff.  In such case, Rhythm shall provide all necessary assistance to Camurus in relation to such proceedings and Camurus shall on demand by Rhythm pay or promptly reimburse Rhythm for the costs of such activity, unless Rhythm elects to be separately represented (which shall be at Rhythm’ discretion), in which case such separate representation shall be at Rhythm’s cost and expense.  If Camurus succeeds in any such proceedings, the proceeds of any award or damages or settlement in respect of such proceedings shall first be applied to reimburse (a) an amount equal to Camurus’ costs of taking the proceedings and (b) an amount equal Rhythm’ costs referred to in this Section 7.9(iii), with the remainder being retained by Camurus, less [           ]* per cent [           ]* thereof, which amount shall be paid to Rhythm. Camurus shall not enter into a settlement, consent judgment or other voluntary final disposition of an action or claim or counterclaim under this Section 7.9 without the prior written approval of Rhythm, such consent not to be unreasonably withheld. For the avoidance of doubt, it is understood and agreed that in this Section 7.9, Patent Rights specifically claiming the Product (including any method of making or using the same) do not include Rhythm Product Patents or any other Patent Rights owned or Controlled by Rhythm (other than Collaboration Product Patents).

 

7.10                                 Enforcement with respect to Camurus Platform Patents.  Where an infringement of Camurus Platform Patents not specifically claiming the Product (including any method of making or using the same) by an Infringing Activity is occurring in one or more countries of the Territory, Camurus shall have the right, but shall not be obliged, at its own cost and expense to enforce the same.  Camurus shall be entitled to require Rhythm to join Camurus as co-plaintiff. In such case Rhythm shall provide all necessary assistance to Camurus in relation to any such proceeding and Camurus shall on demand by Rhythm pay or promptly reimburse Rhythm for the costs of such activity.  If Camurus succeeds in any such infringement proceedings whether at trial or by way of settlement, the proceeds of any award or damages or settlement in respect of such infringement proceedings shall first be applied to reimburse (a) an amount equal to Camurus’ costs of taking the proceedings and (b) an amount equal Rhythm’s costs, if any, with the remainder being retained by Camurus less [           ]* per cent [           ]* thereof, which amount shall be paid to Rhythm.  Camurus shall have the sole right to settle such proceedings, provided that such settlement does not include a license or covenant not to sue under the Camurus Platform IP or causes Rhythm to incur any losses in which case Rhythm’s consent to the terms of such license shall be required, such consent not to be unreasonably withheld, conditioned or delayed. If Camurus elects not to enforce any such Camurus Platform Patents, then Rhythm shall have the right, but shall not be obliged, at its own cost and expense to do so in accordance with the following, subject to the prior written consent of Camurus.  If Camurus gives such consent, then the following procedures shall apply in these circumstances:

 

(i) Where Rhythm has requested and been granted approval by Camurus to commence proceedings in relation to any such Camurus Platform Patents not specifically claiming the Product (including any method of making or using the same), Rhythm shall be entitled to require Camurus to join Rhythm as co-plaintiff and Camurus shall have the right to join as co-plaintiff.  In such case Camurus shall provide all necessary assistance to Rhythm in relation to any such proceeding and

 

	
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Rhythm shall on demand by Camurus pay or promptly reimburse Camurus for the costs of such activity unless Camurus elects to be separately represented (which shall be at Camurus’ discretion), in which case such separate representation shall be at Camurus’ cost and expense;

 

(ii) if Rhythm succeeds in any such infringement proceedings whether at trial or by way of settlement, the proceeds of any award or damages or settlement in respect of such infringement proceedings shall first be applied to reimburse (a) an amount equal to Rhythm’ costs of taking the proceedings and (b) an amount equal to Camurus’ costs referred in this Section 7.10, with the remainder being retained by Rhythm less [           ]* per cent [           ]* thereof, which amount shall be paid to Camurus;

 

(iii) Rhythm shall not enter into a settlement, consent judgment or other voluntary final disposition of an action or claim or counterclaim under this Section 7.10 without the prior written approval of Camurus, such consent not to be unreasonably withheld.

 

7.11                                 Hatch-Waxman Certifications.  If either Party (i) reasonably believes that a Third Party may be filing or preparing or seeking to file a generic or abridged NDA that refers to or relies on regulatory documentation for a Product that was submitted by Rhythm to any Regulatory Authority, (ii) receives any notice of certification regarding any Patent Rights included in Camurus Patent Rights (i.e., Patent Rights Controlled by Camurus) or Rhythm Patent Rights (i.e., Patent Rights Controlled by Rhythm) pursuant to the Hatch-Waxman Act claiming that any such Patent Rights are invalid or unenforceable or claiming that the any such Patent Rights will not be infringed by the manufacture, use, marketing or sale of a product for which an ANDA is filed, or (iii) receives any equivalent or similar certification or notice in any other jurisdiction, it shall notify the other Party in writing, identifying the alleged applicant or potential applicant and furnishing the information upon which such determination is based, and provide the other Party a copy of any such notice of certification within five (5) days of receipt and the Parties’ rights and obligations with respect to any legal action as a result of such certification shall be as set forth above in Sections 7.9 or 7.10.

 

8                                                  CONFIDENTIALITY

 

8.1                                        Except to the extent expressly authorized by this Agreement including in Sections 8.3 and 8.4 or otherwise agreed in writing, each Recipient and its Affiliates and its Sublicensees and licensees in possession of Confidential Information of the Disclosing Party shall maintain such Confidential Information as confidential and use it only for the purposes of this Agreement in accordance with this Section 8. This obligation shall continue during the term of this Agreement and for a period equal to ten (10) years after the date of expiration or termination of this Agreement; provided, however, that this obligation shall continue to apply after such ten (10) year period to any Know-How, development data, other data, regulatory filings and other information disclosed, provided, licensed, transferred or otherwise made available by either Party to the other Party under this Agreement, until such time as such Know-How, development data, other data, regulatory filings and other information becomes exempt pursuant to subparagraphs (i) through (v) below. Each

 

	
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Party shall guard such Confidential Information using the same degree of care as it normally uses to guard its own confidential, proprietary information of like importance, but in any event no less than reasonable care.  Notwithstanding the foregoing, the Recipient of the categories of Confidential Information identified in Sections 1.16 (i)-(iv) inclusive shall be relieved of the confidentiality and limited use obligations of this Agreement to the extent that the Recipient establishes by written evidence that:

 

(i)  the Confidential Information was previously known to the Recipient from sources other than the Disclosing Party at the time of disclosure and other than under an obligation of confidentiality and non-use;

 

(ii) the Confidential Information was generally available to the public or otherwise part of the public domain at the time of its disclosure; or

 

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

 

(iv) the Confidential Information is acquired in good faith in the future by the Recipient Party from a Third Party who has a lawful right to disclose such information and who is not under an obligation of confidence to the Disclosing Party with respect to such information; or

 

(v) the Confidential Information is subsequently developed by or on behalf of the Recipient Party without use of the Disclosing Party’s Confidential Information.

 

8.2                                        For clarity, specific aspects or details of Confidential Information shall not be deemed to be within the public domain or in the possession of the Recipient Party merely because the Confidential Information is embraced by more general information in the public domain or in the possession of the Recipient Party. Further, any combination of Confidential Information shall not be considered in the public domain or in the possession of the Recipient Party merely because individual elements of such Confidential Information are in the public domain or in the possession of the Recipient Party unless the combination is in the public domain or in the possession of the Recipient Party.

 

8.3                                        Notwithstanding the above obligations of confidentiality and non-use a Recipient may disclose Confidential Information:

 

(i) to a Regulatory Authority as reasonably necessary to obtain and maintain Regulatory Approval in a particular jurisdiction to the extent consistent with the licenses granted under terms of this Agreement, provided that reasonable effort will be taken to ensure confidential treatment of such information.

 

(ii) disclose Confidential Information: (a) to the extent such disclosure is reasonably necessary to comply with the order of a court; or (b) to the extent such disclosure is required to comply with a legal requirement, including to the extent such disclosure is required in publicly filed financial statements or other public statements or filings under rules governing a stock exchange or pursuant to

 

	
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applicable securities laws or regulations (e.g., the rules of the United States Securities and Exchange Commission, NASDAQ, NYSE, or any other stock exchange on which securities issued by either Party may be listed); provided, to the extent possible bearing in mind such legal requirements and subject to the next subsequent sentence of this Section 8.3.(ii), such Party shall provide the other Party with a copy of the proposed text of such statements or disclosure five (5) business days in advance of the date on which the disclosure is to be made to enable the other Party to review and provide comments, unless a shorter review time is agreed. If compliance with a legal requirement requires filing of this Agreement, the filing Party shall to the extent possible seek confidential treatment of portions of this Agreement from the relevant competent authority to the extent that such confidential treatment is available pursuant to applicable law and shall provide the other Party with a copy of the proposed filings at least five (5) business days prior to filing for the other Party to review any such proposed filing and provide comments. Each Party agrees that it will obtain its own legal advice with regard to its compliance with legal requirements and will not rely on any statements made by the other Party relating to such legal requirements; and

 

(iii) by filing or prosecuting Patent Rights, the filing or prosecution of which is contemplated by this Agreement, without violating Section 8.1; it being understood that publication of such filings occurs in some jurisdictions within eighteen (18) months of filing, and that such publication shall not violate the above secrecy provision.

 

(iv) to such Recipient’s employees, Affiliates, contractors (including clinical researchers and CMO’s), licensees, sublicensees, agents, consultants and potential business partners, as such Recipient reasonably determines is necessary to receive the benefit of the licenses and rights granted or available to it under this Agreement or to fulfill its obligations pursuant to this Agreement; provided, however, any such persons must be obligated to substantially the same extent as set forth in Section 8.1 to hold in confidence and not make use of such Confidential Information for any purpose other than those permitted by this Agreement and breach by such persons of their confidentiality obligations shall be deemed a breach by the Recipient of its confidentiality obligations hereunder.  For the avoidance of doubt, it is understood and agreed that Camurus may not disclose any Confidential Information relating to the Product to any licensee of the FC Technology without the prior written consent of Rhythm except when exercising its rights under Sections 2.4 and 3.7.

 

(v) (a) to its actual or potential investment bankers; (b) to existing and potential investors in connection with an offering or placement of securities for purposes of obtaining financing for its business and to actual and prospective lenders for the purpose of obtaining financing for its business and to potential licensees or sublicensees of the FC Technology or any other rights licensed to the Recipient pursuant to this Agreement; and (c) to a bona fide potential acquirer or merger partner for the purposes of evaluating entering into a merger or acquisition, provided, however, any such persons must be obligated to substantially the same extent as set forth in Section 8.1 to hold in confidence and not make use of such Confidential Information for any purpose other than those permitted by this Agreement; and

 

	
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(vi) disclose Confidential Information to its legal advisers for the purpose of seeking advice.

 

8.4                                        Nothing in this Section 8 restricts either Party from using or disclosing any of its own Confidential Information for any purpose whatsoever; provided that, to the extent Know-How is exclusively licensed by one Party to the other, the licensor may not continue to use and disclose such Know-How in a manner not consistent with the exclusivity of the license granted.

 

8.5                                        Other than the press release pertaining to this transaction that the Parties have agreed upon and attached as Exhibit 8.5 to this Agreement and save as permitted in Section 8.3:

 

(i) neither Party, as a Recipient, shall make any public announcement or statement to the public containing Confidential Information of the Disclosing Party without the prior written consent of the Disclosing Party.  No such public announcements or statements shall be made without the prior review and consent of the appropriate individual designated for the purpose by the other Party; and

 

(ii) save as may otherwise be provided herein neither Party shall mention or otherwise use the name or Trademark of the other Party or its Affiliates in any publication, press release, promotional material or other form of publicity without the prior written consent of the appropriate individual designated for the purpose by the other Party.

 

8.6                                        With respect to public disclosure required to be made pursuant to regulatory requirements or stock exchange rules applicable to a Party, each such Party will use reasonable efforts to submit to the other Party a draft of any public announcement (“Proposed Disclosure”) directly related to the Product at least three (3) business days prior to the date on which such Party plans to make such announcement, and in any event will submit such draft to the other Party at least twenty-four (24) hours prior to the release of such Proposed Disclosure. If a Party is unable to comply with the foregoing twenty-four (24)-hour notice requirement because of a legal obligation or stock or securities exchange requirement to make more rapid disclosure, such Party will not be in breach of this Agreement but will in that case give telephone and email notice to a senior executive of the other Party and provide a draft of the Proposed Disclosure with as much notice as possible prior to the release of such announcement.  A Party that receives a draft of any Proposed Disclosure that the other Party is planning to make may not make any disclosure or public announcement of the substance or content of such Proposed Disclosure until such time as such other Party has released such Proposed Disclosure to the public.  Any draft of any Proposed Disclosure provided by one Party to the other pursuant to this Section 8.6 shall be deemed and treated as Confidential Information of the Party that is proposing to make such Proposed Disclosure.

 

8.7                                        Notwithstanding the foregoing Camurus shall be entitled to include the name of Rhythm within a list of collaborators.

 

	
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9                                                  REPRESENTATIONS AND WARRANTIES

 

9.1                                        Mutual Representations and Warranties of Camurus and Rhythm.

 

Each of Camurus and Rhythm hereby represents and warrants to the other Party as of the Effective Date as follows

 

(a)         It is duly organized, validly existing and in good standing under the laws of the jurisdiction of incorporation. It has the requisite legal and company power and authority to conduct its business as presently being conducted and as proposed to be conducted by it and is duly qualified to do business in those jurisdictions where its ownership of property or the conduct of its business requires

 

(b)         It has all requisite legal and company power and authority to enter into this Agreement and to grant the rights described herein. All company actions on its part, its boards of directors or managers, or similar governing body and its equity holders necessary for (i) the authorization, execution, delivery and performance by it of this Agreement, and (ii) the consummation of the transactions contemplated hereby, have been duly taken.

 

(c)          This Agreement is a legally valid and binding obligation of it, enforceable against it in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court or other tribunal before which any proceeding may be brought).

 

(d)         Each Party has and shall continue to have written contracts with all Third Parties (including employees and subcontractors) performing services on its behalf under this Agreement where such services are intended to create inventions that may be Collaboration Inventions that assign to such Party all Collaboration Inventions and rights therein.

 

9.2                                        Additional Representations and Warranties of Camurus.

 

Camurus hereby further represents and warrants to Rhythm as of the Effective Date that:

 

(a)         Save with respect to [           ]* that have been disclosed in writing by Camurus to Rhythm prior to the Effective Date, Camurus is not aware of any pending actions, suits or other proceedings against it or any of its Affiliates that questions the validity of any issued Camurus Platform Patents, or that otherwise relate or pertain to, any Camurus Platform IP;

 

(b)         Camurus is not aware that any of the Camurus Platform Patents are invalid, and Camurus is not aware of any defect in Camurus’ right, title and interest in and to the Camurus Platform Patents;

 

	
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(c)          To the extent necessary to grant Rhythm the rights provided for in this Agreement, Camurus owns or Controls sufficient rights in the Camurus Platform IP.

 

(d)         Camurus, to its knowledge and belief, has supplied Rhythm with all material documentation and information, possessed by Camurus or any of its Affiliates which have been requested by Rhythm [           ]*, during the course of due diligence prior to execution of this Agreement.

 

(e)          Camurus is not aware of any use, infringement or misappropriation of the Camurus Platform IP in derogation of the rights granted to Rhythm in this Agreement.  To the knowledge of Camurus, the practice and use of the Camurus Platform IP by Rhythm, its Affiliates or Sublicensees in the manner permitted or contemplated in this Agreement will not infringe upon, or constitute misappropriation or unauthorized use of, the Intellectual Property of any Third Party.

 

(f)           To the knowledge of Camurus, Camurus and its Affiliates have complied with all the requirements of all United States and foreign patent offices with respect to the filing of applications for Patent Rights in respect of the Camurus Platform Patents, including the duty of disclosure under 37 C.F.R. 1.56 and comparable provisions of foreign patent offices.

 

(g)          (i) To the knowledge of Camurus, Camurus and its Affiliates have complied with all the requirements of all United States and foreign patent offices to maintain the Camurus Platform Patents in full force and effect and (ii) to Camurus’ knowledge, all necessary registration, maintenance and renewal fees have been paid and all necessary documents and certificates required to be filed in connection with the issued Camurus Platform Patents and pending applications for Patent Rights in respect of Camurus Platform Patents have been duly filed and the duty of disclosure under applicable patent laws have been fulfilled.

 

(h)         In each case in which Camurus or any of its Affiliates has acquired title to any inventions forming part of Camurus Platform Patents from any person, Camurus or any such Affiliate, as applicable, has obtained an assignment in form sufficient to transfer all rights in such inventions.

 

(i)             Exhibit 1.5 hereto lists all Patent Rights owned or Controlled by Camurus or any of its Affiliates on the Effective Date that cover the FC Technology.  Except for the Patent Rights listed on Exhibit 1.5 hereto, neither Camurus nor any of its Affiliates owns or Controls any Patent Rights on the Effective Date pertaining to the FC Technology.

 

(j)            [           ]*.

 

Notwithstanding anything to the contrary in this Agreement, a Party shall not be entitled to make any claims or bring any action against the other Party based on warranties or representations extended under this Agreement to the extent that the circumstances giving rise to such claim or action were known by or disclosed to the

 

	
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claiming Party prior to the Effective Date or could reasonably have been inferred from information disclosed by the other Party.

 

9.3                                        Disclaimer of Warranties.

 

EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN SECTION 9.1 AND SECTION 9.2 OF THIS AGREEMENT OR MANDATED BY APPLICABLE LAW (WITHOUT THE RIGHT TO WAIVE OR DISCLAIM), NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE LICENSED COMPOUNDS, PRODUCTS, ANY TECHNOLOGY, GOODS, SERVICES, RIGHTS, OR OTHER SUBJECT MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS ALL WARRANTIES, CONDITIONS OR REPRESENTATIONS OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING IMPLIED WARRANTIES OF PERFORMANCE, MERCHANTABILITY, SATISFACTORY QUALITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS

 

10                                           INDEMNIFICATION

 

10.1                                 Indemnification by Rhythm. Subject to Sections 10. 3, 10.4 and 10.5, Rhythm shall indemnify, defend and hold harmless Camurus, its Affiliates, and its and their respective, directors, officers, employees and agents (collectively, the “Camurus Indemnified Party”) against any and all claims, liabilities, losses, damages, costs or expenses, including reasonable attorneys’ fees, arising out of any claim or action brought by a Third Party (collectively, “Losses”) incurred or suffered by the Camurus Indemnified Party to the extent arising out of or caused by:

 

(i)                                           the development, use, manufacture distribution, marketing, promotion or sale of Product by or on behalf of Rhythm or its Affiliates or Sublicensees in the Territory (including without limitation any claims based upon product liability and any claims arising from Camurus or its Affiliates provision of services under the Agreement); or

 

(ii)                                        the breach by Rhythm of one or more of its representations, warranties or other obligations under this Agreement;

 

provided, however, that Rhythm shall not be required to indemnify, hold harmless or defend any Camurus Indemnified Party against any claim brought pursuant to Section 10.2(i)  or (ii) to the extent that Camurus has an obligation to indemnify the Rhythm Indemnified Parties under Section 10.2 (i) or (ii).

 

10.2                                 Indemnification by Camurus. Subject to Sections 10.3, 10.4 and 10.5, Camurus shall indemnify, defend and hold harmless Rhythm, its Affiliates, and its and their respective, directors, officers, employees and agents (collectively, the “Rhythm Indemnified Party”) against any and all Losses (as defined above) incurred or suffered by the Rhythm Indemnified Party to the extent arising out of or caused by

 

(i)                                           the practice or use by Camurus or its Affiliates, licensees or sublicensees of the Rhythm Collaboration IP or the Joint IP; or

 

	
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(ii)                                        the breach by Camurus of one or more of its representations, warranties or other obligations under this Agreement;

 

provided, however, that Camurus shall not be required to indemnify, hold harmless or defend any Rhythm Indemnified Party against any claim brought pursuant to Section 10.1(i) or (ii) to the extent that Rhythm has an obligation to indemnify the Camurus Indemnified Parties under Sections 10.1(i) or (ii).

 

10.3                                 Notification of Liabilities/Losses. In the event that either Party intends to seek indemnification for any claim under any of Sections 10.1 or 10.2, it shall inform the other Party of the claim promptly after receiving notice of the claim.

 

(i)                                       In the case of a claim for which Camurus seeks indemnification under Section 10.1, Camurus shall permit Rhythm to direct and control the defence of the claim and shall provide such reasonable assistance as is reasonably requested by Rhythm (at Rhythm’s cost) in the defence of the claim; provided that nothing in this Section 10.3 shall permit Rhythm to make any admission on behalf of Camurus, or to settle any claim or litigation which would impose any financial obligations on Camurus without the prior written consent of Camurus, such consent not to be unreasonably withheld or delayed.

 

(ii)                                    In the case of a claim for which Rhythm seeks indemnification under Section 10.2, Rhythm shall permit Camurus to direct and control the defence of the claim and shall provide such reasonable assistance as is reasonably requested by Camurus (at Camurus’ cost) in the defence of the claim, provided always that nothing in this Clause 10.3 shall permit Camurus to make any admission on behalf of Rhythm, or to settle any claim or litigation which would impose any financial obligations on Rhythm without the prior written consent of Rhythm, such consent not to be unreasonably withheld or delayed.

 

10.4                                 Right to Participate in Defense. Without limiting Section 10.3, any indemnitee will be entitled to participate in, but not control, the defense of a Third Party claim for which it has sought indemnification hereunder and to employ counsel of its choice for such purpose; provided, however, that such employment will be at the indemnitee’s own expense unless (a) the employment and reimbursement thereof has been specifically authorized by the indemnifying Party in writing, or (b) the indemnifying Party has failed to assume the defense and employ counsel in accordance with section 10.3 (in which case the indemnified Party will control the defense).

 

10.5                                 Cooperation. If the indemnifying Party chooses to defend or prosecute any Third Party claim, the indemnified Party will, and will cause each other indemnitee to, cooperate in the defense or prosecution thereof and will furnish such records, information and testimony, provide such witnesses and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested in connection with such Third Party claim. Such cooperation will include access during normal business hours afforded to the indemnifying Party to, and reasonable retention by the indemnified Party of, records and information that are reasonably relevant to such Third Party claim, and making indemnities and other employees and agents available on a mutually convenient basis to provide additional

 

	
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information and explanation of any material provided hereunder, and the indemnifying Party will reimburse the indemnified Party for all of its reasonable out-of-pocket expenses incurred in connection with such cooperation.

 

10.6                                 Reserved.

 

10.7                                 Exclusive Remedy.  Each Party agrees that its sole and exclusive remedy with respect to Losses shall be pursuant to the indemnification provisions of this Section 10.

 

10.8                                 Insurance.  Immediately upon the first administration of a Product to a human in the Territory by Rhythm, its Affiliates or its permitted Sublicensees, and for a period of [           ]* years after the expiration of this Agreement or the earlier termination thereof, Rhythm shall maintain Commercial General Liability Insurance and Product Liability Insurance, including contractual liability coverage, in an amount not less than [           ]* per occurrence bodily injury/property damage combined and [           ]* aggregate annually. Upon written request, the insuring Party shall provide the other Party with a certificate of insurance attesting to such coverage.  It is understood and agreed that this insurance shall not be construed to limit either Party’s liability with respect to its indemnification obligations hereunder.

 

11                                           TERM AND TERMINATION

 

11.1                                 Term of Agreement.

 

This Agreement shall become effective as of the Effective Date and, unless earlier terminated pursuant to other provisions of this Section 11, shall continue in full force and effect until the expiration of all Royalty Terms (the “Term”).  On a country-by-country and Product-by-Product basis, after expiration of the Royalty Term for the Product in each country in the Territory, Rhythm shall have a royalty-free, non-exclusive license to develop, make, have made, use, import, market, promote, distribute, sell, and offer for sale and otherwise exploit such Product in such country.

 

11.2                                 Rhythm may terminate this Agreement without cause on a Product-by-Product basis or in its entirety at any time by giving not less than three (3) months prior written notice.  Rhythm may terminate this Agreement on a Product-by-Product basis or in its entirety immediately following the withdrawal of Product from any market as a result of bona fide concerns based on specific and verifiable information that the applicable Product is unsafe for administration to humans (a “Valid Safety Issue”).  For the avoidance of doubt, the ninety (90) day notice period applicable to termination under the first sentence of this Section 11.2 shall not apply in the case of termination for a Valid Safety Issue.

 

11.3                                 Termination for Material Breach or Bankruptcy.

 

(a)         Upon the material breach by one Party under this Agreement, the other Party shall notify the breaching Party of such breach, and require that the breaching Party cure such breach within sixty (60) days (or, in the case of payment defaults, within thirty (30) days).

 

	
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(b)         In the event that a material breach by Rhythm is not cured within the applicable cure period and without limiting other available remedies, Camurus shall have the right to terminate this Agreement upon written notice within thirty (30) days thereafter and all licenses granted by Camurus to Rhythm hereunder shall terminate, subject to the terms of Section 11.4.

 

(c)          In the event that a material breach by Camurus is not cured within the applicable cure period and without limiting other available remedies, Rhythm shall have the right to terminate this Agreement upon written notice within thirty (30) days thereafter, and, at Rhythm’ option, all licenses granted by Camurus to Rhythm hereunder shall continue in full force and effect, subject to the continuing obligation to pay milestone payments, license fees, Royalties and sales milestones. Upon such termination by Rhythm for such Camurus material breach, (i) Camurus’ obligations hereunder to provide Know-How and other materials and information to enable the use of such licenses shall continue; (ii) Camurus’ right to use any Rhythm Development Data and Regulatory Approvals shall terminate, except in respect of rights which were previously granted by Camurus to a licensee in the Territory prior to date of such termination, and (iii) the following provisions shall also continue: Sections 2.1, 2.2, 2.3, 3.1, 3.5, 3.6, 3.8, 4, 5 and 7. Termination of this Agreement pursuant to this Section 11.3(c) will be without prejudice to any rights that will have accrued to the benefit of a Party prior to the effective date of such termination. Such termination will not relieve a Party from obligations that are expressly indicated to survive the termination of this Agreement.

 

(d)         Either Party may, without limiting other available remedies, terminate this Agreement, in whole by notice to the other Party in the event (i) the other Party shall have become bankrupt or shall have made an assignment for the benefit of its creditors; (ii) there shall have been appointed a trustee or receiver for the other Party or for all or a substantial part of its property; or (iii) any case or proceeding shall have been commenced or other action taken by or against the other Party in bankruptcy or seeking reorganization, liquidation, dissolution, winding-up, arrangement, composition or readjustment of its debts or any other relief under any bankruptcy, insolvency, reorganization or other similar act or law of any jurisdiction now or hereafter in effect, and any such event shall have continued for ninety (90) days undisputed, undismissed, unbonded and/or undischarged.

 

(e)          Rhythm may also terminate this Agreement in accordance with the provisions of Sections 3.6 and 5.2, and if Rhythm fails to deliver notice of termination or continuation to Camurus in accordance with the time periods specified in Sections 3.6 and 5.2 then Camurus may terminate this Agreement with immediate effect by giving written notice to Rhythm.

 

(f)           The Parties may terminate this Agreement, at any time upon mutual written agreement of the Parties.

 

11.4                                 Effect of Termination.  Upon termination of this Agreement by either Party for any reason (other than termination by Rhythm pursuant to Section 11.3(c) or termination pursuant to Section 11.3(d)):

 

	
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(a)         Subject to Section 11.4(e) below, all licenses granted by Camurus to Rhythm shall terminate (including all rights to use any Camurus Platform IP);

 

(b)         all licenses and other rights granted Camurus to use any of the Rhythm Collaboration IP, Rhythm Development Data, Regulatory Approvals in the Territory shall continue, subject to all indemnity and other obligations of Camurus hereunder in respect thereof;

 

(c)          Rhythm shall discontinue Prosecution and abandon any Patent Rights claiming the Product.

 

(d)         Termination of this Agreement for any reason will be without prejudice to any rights that will have accrued to the benefit of a Party prior to the effective date of such termination. Such termination will not relieve a Party from obligations that are expressly indicated to survive the termination of this Agreement.

 

(e)          In the event this Agreement terminates for Rhythm’s breach or bankruptcy, the license granted in Section 2.1 shall remain in force only to the extent required for each of Rhythm’s Sublicensees at such time to continue to exercise its sublicensed rights provided, that, upon Camurus’ written request, such Sublicensee agrees in writing with Camurus (within 30 days after such written request by Camurus) that Camurus is entitled to enforce all relevant obligations under the provisions of this Agreement directly against such Sublicensee and provided further, that Rhythm shall be jointly liable with such Sublicensee to Camurus for any action or inaction of the Sublicensees under this Agreement.

 

(f)           In case of termination without cause, neither party shall be liable to the other party for any compensation or damages by reason of such termination of this Agreement.

 

11.5                                 Termination for Patent Challenge.  In the event that Rhythm or any of its Affiliates or Sublicensees commences or otherwise pursues, directly or indirectly (or voluntarily assists Third Parties to do so, other than as required by law or legal process), any proceeding seeking to have any of the Patent Rights forming part of Camurus Platform IP revoked or declared invalid, unpatentable, or unenforceable, Camurus may declare a material breach hereunder that, if not cured within the thirty (30) days after Camurus gives written notice of such material breach to Rhythm and the applicable Affiliate or Sublicensee, shall give Camurus the right to terminate this Agreement with immediate effect .

 

11.6                                 Surviving Provisions.  Except as otherwise provided in Section 11.3(c) and Section 11.4 above, in addition to the Sections that are expressly stated to survive termination, the following Sections of this Agreement shall survive any expiration or termination of this Agreement for any reason: Sections 1, 7.3(c), 7.3(e), 8, 9.3, 10, 11.4, 11.6 and 12.

 

	
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12                                           MISCELLANEOUS PROVISIONS

 

12.1                                 Consequential Damages.  IN NO EVENT SHALL EITHER PARTY OR THEIR AFFILIATES BE LIABLE FOR SPECIAL, PUNITIVE, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES AS WELL AS LOST PROFITS, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER LEGAL THEORY AND IRRESPECTIVE OF WHETHER SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF ANY SUCH LOSS OR DAMAGE; PROVIDED, THAT THIS LIMITATION SHALL NOT LIMIT THE INDEMNIFICATION OBLIGATION OF SUCH PARTY UNDER THE PROVISIONS OF SECTION 10 FOR SUCH DAMAGES CLAIMED BY A THIRD PARTY AND NOTHING IN THIS SECTION 12.1 IS INTENDED TO LIMIT RHYTHM’S PAYMENT OBLIGATIONS UNDER SECTION 5 OR EITHER PARTY’S OBLIGATIONS UNDER SECTION 7 OR SECTION 8.

 

12.2                                 Assignment.  Neither Party shall have the right to assign this Agreement, nor any of its rights hereunder, nor delegate any of its obligations hereunder, without the prior written consent of the other Party, which shall not be unreasonably withheld or delayed.  Notwithstanding the foregoing, (i) Camurus and Rhythm may assign this Agreement to any purchaser of all or substantially all of its assets or to any successor entity resulting from any merger or consolidation of Camurus or Rhythm with or into such entity, or (ii) Camurus and Rhythm may assign this Agreement to any of its Affiliates but only for as long as such Affiliate remains an Affiliate of the assigning Party provided that such Affiliate agrees to be bound hereunder. Any attempt to assign this Agreement in breach of the foregoing shall be void. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and each of their successors and permitted assigns.

 

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

 

12.4                                 Compliance with Laws.  Each Party shall review in good faith and cooperate in taking actions to ensure compliance of this Agreement and the Parties’ activities hereunder with all applicable laws, rules, ordinances, regulations and guidelines.  Each Party shall provide the other Party such reasonable assistance as may be required for the Party requesting such assistance to comply with all such laws, rules, ordinances, regulations and guidelines of all governmental entities, bureaus, and agencies having jurisdiction pertaining to this Agreement, including obtaining all import, export and other permits, certificates, licenses or the like required by such laws, rules, ordinances, regulations and guidelines necessary to permit the Parties to perform hereunder and to exercise their respective rights hereunder.

 

12.5                                 Force Majeure.  Neither Party shall be responsible or liable in any way for failure or delay in carrying out the terms of this Agreement (other than any payment or confidentiality obligations) resulting from fire, flood, other natural disasters, war, labor difficulties, interruption of transit, accident, explosion, civil commotion, and acts of any governmental authority; provided, that the Party so affected shall give prompt notice thereof to the other.  If any such cause prevents either Party from performing any of its material obligations hereunder for more than ninety (90) days,

 

	
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the other Party may then terminate this Agreement upon thirty (30) days prior notice. Except as provided in the preceding sentence, no such failure or delay shall terminate this Agreement, and each Party shall complete its obligations hereunder as promptly as reasonably practicable following cessation of the cause or circumstances of such failure or delay

 

12.6                                 Notices.  All notices and other communications hereunder shall be in writing and shall be deemed given when delivered personally or by facsimile transmission (receipt verified), five (5) days after mailed by registered or certified air mail (return receipt requested), postage prepaid, or two (2) days after sent by express courier service, to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice; provided, that notices of a change of address shall be effective only upon receipt thereof):

 

If to Camurus, addressed to:

 

Camurus AB
 att: CEO 
 Ideon Science Park
 Sölvegatan 41
 SE_223 70 Lund
 Sweden
 Phone: +46 46286 5730
 Fax: +46 46 286 5739

 

If to Rhythm, addressed to:

 

Rhythm Pharmaceuticals, Inc.

855 Boylston Street, 11th Floor

Boston, MA  02116 USA

Attn: Chief Executive Officer

Phone:  857 264 4280

Fax:  857 264 4299

 

12.7                                 Amendment.  No amendment, modification or supplement of any provision of this Agreement shall be valid or effective unless made in a writing that explicitly refers to this Agreement and that is signed by a duly authorized officer of each Party.

 

12.8                                 Waiver.  Except to the extent otherwise expressly set forth in this Agreement, the rights and remedies of the Parties set forth herein or otherwise available at law or equity are cumulative and not alternative. No provision of this Agreement shall be waived by any act, omission or knowledge of any Party or its agents or employees except by an instrument in writing expressly waiving such provision and signed by a duly authorized officer of the waiving Party.

 

12.9                                 Counterparts.  This Agreement shall be executed in two or more counterparts, each of which shall contain the signature of the Parties and all such counterparts shall

 

	
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constitute one and the same agreement. Counterparts may be delivered via facsimile, electronic mail (including pdf) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

12.10                          Descriptive Headings.  The descriptive headings of this Agreement are for convenience only, and shall be of no force or effect in construing or interpreting any of the provisions of this Agreement.

 

12.11                          Severability.  Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement and the Parties shall in good faith seek to agree on an alternative provision reflecting the intent of the Parties that is enforceable.

 

12.12                          Entire Agreement.  This Agreement shall constitute and contain the complete, final and exclusive understanding and agreement of the Parties and cancels and supersedes any and all prior negotiations, correspondence, understandings and agreements, whether oral or written, between the Parties with respect to the subject matter hereof. The Confidentiality Agreement previously entered into between the Parties shall terminate as of the Effective Date and the Parties rights and obligations in respect of the Confidential Information disclosed under the Confidentiality Agreement shall thereafter be governed by this Agreement.

 

12.13                          Governing Law.  Except to the extent otherwise expressly provided elsewhere in this Agreement, this Agreement and all disputes arising out of it (including non-contractual disputes) shall be governed by and interpreted in accordance with the substantive laws of England, without regard to the choice of law provisions thereof. The United Nations Convention on Contracts for the International Sale of Goods shall not apply to the transactions contemplated by this Agreement.

 

12.14                          Dispute Resolution.

 

(a)         The Parties recognize that a bona fide dispute as to certain matters may from time to time arise during the Term of this Agreement that relate to any Party’s rights or obligations hereunder. In the event of the occurrence of any dispute arising out of or relating to this Agreement, including any question regarding its existence, validity or termination, either Party may, by written notice to the other, have such dispute referred to its respective officer designated below or their successors, for attempted resolution by good faith negotiations within sixty (60) days after such notice is received. If either Party desires to pursue arbitration under paragraph (b) below to resolve any such dispute, a referral to such executives under this paragraph (a) shall be a mandatory condition precedent. Said designated officers are as follows.

 

For Camurus: Chief Executive Officer

 

For Rhythm: Chief Executive Officer

 

	
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(b)         In the event that they shall be unable to resolve the dispute by executive mediation within such sixty (60) day period and do not mutually agree to extend the time for negotiation, then subject to Section 3.4 and Section 7.2(b), the dispute shall be submitted to and finally settled by binding arbitration in accordance with the procedure set forth in Sections 12.14(c)-(d).

 

(c)          Except with respect to actions by either Party seeking equitable or declaratory relief as described in Section 12.14(e), any claim or controversy arising in whole or in part under or in connection with this Agreement or the subject matter hereof that is not resolved pursuant to Section 12.14(b) or Section 3.4 or Section 7.2, as applicable, will be referred to and finally resolved by arbitration in accordance with the Rules of the International Chamber of Commerce (the “Rules”) as such Rules may be modified by this Agreement, by one arbitrator, who will be agreed upon by the Parties.  If the Parties are unable to agree upon a single arbitrator within thirty (30) days following the date arbitration is demanded, three arbitrators will be used, one selected by each Party within ten (10) days after the conclusion of the 30-day period and a third selected by the first two within ten (10) days thereafter.  The arbitrator(s) will resolve any discovery disputes.  Either Party may commence arbitration proceedings by notice to the other Party.  The Arbitration Institute of International Chamber of Commerce shall administer any arbitration proceeding. The place of arbitration shall be London, England. The arbitration shall be conducted in English. The award of arbitration shall be final and binding upon both Parties.

 

(d)         Except to the extent otherwise expressly provided in this Agreement, the arbitrator(s) will apply the laws of England.  Judgment on the award granted in any arbitration hereunder may be entered in any court having jurisdiction over the award or any of the Parties or any of their respective assets.  The Parties knowingly and voluntarily waive their rights to have their dispute tried and adjudicated by a judge and jury except as expressly provided herein.

 

(e)          Nothing in this Section 12.14 will prevent a Party from resorting to judicial proceedings if:  (i) interim relief from a court is necessary to prevent serious and irreparable injury to such Party; or (ii) litigation is required to be filed prior to the running of the applicable statute of limitations.  The use of any alternative dispute resolution procedure will not be construed under the doctrine of latches, waiver or estoppel to affect adversely the rights of either Party.  Despite such action the Parties shall continue to participate in good faith in the procedures specified in this Section 12.14.

 

12.15                          Independent Contractors.  Nothing herein shall be construed to create any relationship of employer and employee, agent and principal, partnership or joint venture between the Parties.  Each Party is an independent contractor.  Neither Party shall have authority to make any statements, representations, or commitments of any kind, or to take any action which shall be binding on the other Party, except as may be explicitly provided for herein or otherwise authorized in writing.

 

	
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[Remainder of Page Intentionally Left Blank - Signature Pages to Follow]

 

	
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This Agreement has been executed in two (2) original copies of which the (Parties) have taken one (1) each. The Agreement shall come into force on the date given at the beginning of this Agreement.

 

	
For and on   behalf of Camurus AB
    	
 
    
	
 
    	
 
    
	
Date:
    	
January 4, 2016
    	
 
    
	
 
    	
 
    	
 
    
	
Signed by:
    	
/s/ Fredrik Tiberg
    	
 
    
	
 
    	
 
    	
 
    
	
Full name:
    	
Fredrik Tiberg
    	
 
    
	
 
    	
 
    	
 
    
	
Position:
    	
President & CEO
    	
 
    
	
 
    	
 
    	
 
    
	
For and on   behalf of Rhythm Pharmaceuticals, Inc.
    	
 
    
	
 
    	
 
    	
 
    
	
Date:
    	
January 4, 2016
    	
 
    
	
 
    	
 
    	
 
    
	
Signed by :
    	
/s/ Bart Henderson
    	
 
    
	
 
    	
 
    	
 
    
	
Full name:
    	
Bart Henderson
    	
 
    
	
 
    	
 
    	
 
    
	
Position:
    	
President
    	
 
    

 

	
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EXHIBIT 1.5
 CAMURUS PLATFORM IP PATENT RIGHTS

 

	
Short title (ref no.)
    	
 
    	
Filed in (main
   jurisdictions)
    	
 
    	
Granted in
    	
 
    	
Patent #
    
	
[           ]*
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

	
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EXHIBIT 1.7
 CAMURUS TRADEMARKS

 

	
Trademarks
    	
 
    	
Country
    	
 
    	
Classes
    	
 
    	
Registration number
    
	
[           ]*
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

	
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EXHIBIT 1.19
 DEVELOPMENT PLAN

 

See Attachment

 

	
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[           ]*

 

	
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EXHIBIT 7.2 (c) 
 EXPERT’S DETERMINATION

 

1.                                               Any matter or dispute to be determined by an expert under Section 7.2(c) of this Agreement (“Expert”) shall be referred to a person suitably qualified to determine that particular matter or dispute who shall be nominated jointly by the Parties or, failing agreement between the Parties within twenty (20) Business Days of a written request by either Party to the other seeking to initiate the Expert’s decision procedure, either party may request the President for the time being of the Association of the British Pharmaceutical Industry or any successor body to it to nominate the Expert.

 

2.                                               The Parties shall, within fourteen (14) days of the appointment of the Expert, meet with him/her in order to agree a program for oral and written submissions.

 

3.                                               In all cases the terms of appointment of the Expert by whomsoever appointed shall include:

 

3.1                                        a commitment by the Parties to share equally the Expert’s fee;

 

3.2                                        a requirement on the Expert to act fairly as between the Parties and according to the principles of natural justice;

 

3.3                                        intentionally omitted;

 

3.4                                        a commitment by the Parties to supply to the Expert the submissions the subject of paragraph 2 and all such assistance, documents and information as he/she may require for the purpose of his or her determination.

 

3.5                                        a commitment by the Parties that all negotiations connected with the dispute shall be conducted in confidence and without prejudice to the rights of the parties in any future proceedings.

 

4.                                               The Expert shall, within forty-five (45) days of his/her appointment, give a written decision which shall contain a factual analysis, his/her conclusions and the reasons for his/her conclusions.

 

5.                                               The Expert’s decision shall be final and binding on the Parties (save in the case of manifest error).

 

6.                                               The Parties expressly acknowledge and agree that they do not intend the reference to the Expert to constitute an arbitration within the scope of any arbitration legislation, the Expert’s decision is not a quasi judicial procedure and the Parties shall have no right of appeal against the Expert’s decision except as provided in Paragraph 5.

 

	
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EXHIBIT 8.5
 PRESS RELEASE

 

13                                           Rhythm and Camurus Announce License Agreement for Extended Release FluidCrystal Setmelanotide

 

BOSTON and LUND, Sweden, January 5, 2016— Rhythm and Camurus announced today a license agreement for the use of Camurus’ drug delivery technology, FluidCrystal®, to formulate setmelanotide (RM-493), Rhythm’s novel melanocortin-4 receptor (MC4R) agonist. Under the terms of the agreement, Camurus has granted Rhythm a worldwide license to the FluidCrystal technology to formulate setmelanotide and to develop, manufacture, and commercialize this new formulation that has the potential for once-weekly dosing, administered as a subcutaneous injection. Rhythm plans to initiate a Phase I clinical trial with the setmelanotide FluidCrystal formulation after completing GMP manufacturing.

 

“We have developed a setmelanotide formulation with Camurus with an impressive sustained-duration profile,” said Bart Henderson, President of Rhythm. “We believe this new formulation will provide a significant benefit to patients, improving compliance and ease of use with once-weekly dosing.”

 

“The partnership with Rhythm follows the formulation development and preclinical assessment of this compelling drug candidate based on our FluidCrystal Injection depot technology,” said Fredrik Tiberg, President and CEO of Camurus. “Rhythm’s setmelanotide represents a novel approach to treating patients suffering from life-threatening obesity due to these rare and serious genetic disorders.”

 

The license granted to Rhythm is specific to the FluidCrystal technology incorporating setmelanotide. The formulation has been developed in a collaboration between the companies. Under the terms of the license agreement, Rhythm is responsible for manufacturing, development, and commercialization of the setmelanotide FluidCrystal formulation worldwide. Camurus is eligible to receive an upfront payment and progressive payments of approximately $65 million, of which the majority are sales milestones. In addition, Camurus is eligible to receive tiered, mid to mid-high, single digit royalties on future sales of the product.

 

About Setmelanotide (RM-493)

 

Setmelanotide is a potent, first-in-class MC4R agonist in development for the treatment of obesity caused by genetic deficiencies in the MC4 pathway, a key pathway in humans that regulates energy expenditure, homeostasis, and appetite. The critical role of the MC4 pathway in weight regulation was validated with the discovery that single genetic defects along this pathway result in early-onset and severe obesity. A Phase 2 setmelanotide trial is ongoing for the treatment of Prader-Willi syndrome (PWS), a rare genetic disorder that causes life-threatening obesity. Recent scientific evidence implicates defects in the MC4 pathway as the likely cause of the weight and appetite abnormalities in PWS. A second Phase 2 trial is ongoing for the treatment of pro-opiomelanocortin (POMC) deficiency obesity, a very rare, life-threatening genetic disorder of the MC4 pathway associated with unrelenting appetite and obesity.

 

	
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About FluidCrystal Injection Depot

 

The FluidCrystal Injection depot delivers therapeutic levels of drug substance over extended periods—tunable from days to months—from a single injection. While traditional depot therapeutics comprise complicated microsphere technology, Camurus’ depot offers a liquid solution that transforms into a controlled release liquid crystal gel matrix in situ on contact with minute quantities of aqueous fluid at site of injection. The FluidCrystal delivery system overcomes traditional side effects associated with high initial drug release on injection (drug burst) and poor drug stability by effectively encapsulating the drug compound in the nanopores of the depot matrix throughout the entire process from injection until final degradation. This, together with the ready-to-use product design, makes the system highly suitable for sustained parenteral delivery of peptides and proteins. FluidCrystal is a registered trademark of Camurus AB.

 

About Rhythm (www.rhythmtx.com)

 

Rhythm is a biopharmaceutical company focused on developing peptide therapeutics for the treatment of rare genetic deficiencies that result in life-threatening metabolic disorders. Rhythm’s lead peptide product candidate is setmelanotide, a first-in-class melanocortin 4 receptor (MC4R) agonist for the treatment of rare genetic disorders of obesity. The company is based in Boston, Massachusetts.

 

About Camurus

 

Camurus is a Swedish research-based pharmaceutical company committed to developing and commercializing innovative and differentiated medicines for the treatment of severe and chronic conditions. New drug products with best-in-class potential are conceived based on the proprietary FluidCrystal® drug delivery technologies and an extensive R&D expertise. Camurus’ clinical pipeline includes products for treatment of cancer, endocrine diseases, pain, and addiction, developed in-house and in collaboration with international pharmaceutical companies. The company’s share is listed on Nasdaq Stockholm under the ticker “CAMX.” For more information, visit www.camurus.com.

 

	
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