Document:

EXHIBIT 10.7

 

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OMEGA INTERFERON

 

LICENSE AGREEMENT

 

EXECUTED

 

 

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AMENDED.

 

 

LICENSE AGREEMENT

 

This
agreement (“Agreement”) is made and entered into this July 17, 1998
by and between BOEHRINGER INGELHEIM INTERNATIONAL GMBH, a
corporation with offices at D 55216 Ingelheim/Rhein, Germany (“BII”), and BIOMEDICINES, INC., a Delaware corporation, with an address
for purposes of the Agreement at 909 Marina Village Parkway #583 Alameda,
California, United States of America (U.S.A.) 94501 (“BMI”).

 

WHEREAS, BII
is the owner of certain Patent Rights, Know-How, and the Manufacturing Process
(each as hereinafter defined) and has the right to grant the license (“License”)
set forth herein and, moreover, BII has developed certain pharmaceutical
formulations containing Omega Interferon (“Licensed Product” as defined below)
and has conducted Phase I clinical trials; and

 

WHEREAS, BMI
desires to establish whether the Licensed Product is useful in treating
patients with various diseases and, if so, to complete the development of
Licensed Product in order to commercialise Licensed Product; and

 

WHEREAS, BMI
desires to obtain an exclusive License in the Territory (as hereinafter
defined) under the Patent Rights and Know-How;

 

NOW,
THEREFORE, in consideration of the promises and mutual
covenants contained herein, and other good and valuable consideration, BII and
BMI agree as follows:

 

1.                                      DEFINITIONS

 

1.1                               Affiliate
shall mean any corporation or business entity controlled by, controlling
or under common control with either BII or BMI, as the case may be. For this
purpose, control shall mean any of the following:

 

(a)                                  direct
or indirect beneficial ownership of more than fifty percent (50%) of the voting
stock of such entity;

 

(b)                                  fifty
percent (50%) or greater interest in the income of such entity;

 

(c)                                  a
fifty percent (50%) or greater management control over a joint venture; or

 

(d)                                  any
other relationship that, in fact, constitutes actual control.

 

1.2                               Effective
Date shall mean the date of execution of the Agreement as shown
above.

 

1.3                               Field
shall mean the treatment of humans for diseases, disorders, conditions, and the
like by the administration of Licensed Product.

 

1.4                               Non-Manufacturing
Know-How shall mean any and all technical data or non-technical
information, expertise, knowledge and the like which relates to the Licensed Product
or to the Patent Rights but excluding Manufacturing Know-How. Such data or
information shall

 

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include, without limitation, all pharmacological, toxicological,
clinical, and marketing or sales-related information as well as any other data,
information or designs used or specifically useful for the development or
commercialisation of the Licensed Product. Furthermore, Non-Manufacturing
Know-How includes similar data or information as described herein that may now be
known to, or is now in the possession of BII or its Affiliate(s) or which may
become known to or may come into the possession of BII or its Affiliate(s)
after the Effective Date provided that, in the event such data or information
is received from a third party, BII shall be entitled to pass on such data and
information to BMI.

 

1.5                               Manufacturing
Know-How shall mean any and all assay, chemical, control, and
manufacturing information or data useful or necessary for the successful
development, registration, and commercialisation of the Licensed Product.

 

1.6                               Licensed
Product(s) shall mean one or more pharmaceutical products initially
developed by BII and containing Omega Interferon (which is described more fully
in Appendix A) and for use in the Field including new formulations, if any,
developed by BII or BMI after the Effective Date.

 

1.7                               Manufacturing
Process shall mean:

 

(a)                                  any
process for manufacturing Licensed Product which is covered in whole or in part
by any claim contained in the Patent Rights or by Manufacturing Know-How;

 

(b)                                  any
information or description of any process for manufacturing the Licensed
Product contained in a Drug Master File or similar document; or

 

(c)                                  any
modification or improvement thereto suggested, developed or introduced by BII,
BMI or Affiliates thereof during the course of either development or
commercialisation of the Licensed Product, provided, however, that any
modifications by BMI necessary to permit administration of Omega Interferon by
other than subcutaneous injection shall not necessarily become a part of the
Manufacturing Process as defined herein but shall be the subject of good faith
negotiations between BII and BMI.

 

1.8                               Net
Sales shall mean the actual gross amount invoiced by BMI, or by its
Affiliates or Sublicensees as the case may be, for sales of the Licensed
Product in the Territory to a third party during a calendar year after
deduction of:

 

(a)                                  direct
transportation charges, including insurance therefor;

 

(b)                                  any
sales, use, value-added taxes, excise taxes and/or other similar duties or
allowances based on the selling price of the Licensed Product which become due
and are paid by BMI or paid by its Affiliates or Sublicensees as a consequence
of such sales;

 

(c)                                  trade,
quantity or cash discounts or rebates actually allowed or taken to the extent
customary in the trade, including (without limitation) governmental rebates;
and

 

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AMENDED.

 

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(d)                                  allowances
or credits, including but not limited to, allowances or credits to customers on
account of rejection or return of the Licensed Product.

 

The
sale or transfer by BMI to an Affiliate or Sublicensee for ultimate re-sale by
such Affiliate or Sublicensee shall not be considered a sale by BMI for the
purpose of this provision. (However, the actual resale by such Affiliate or
Sublicensee shall be a sale for purposes of calculating Net Sales.)

 

Any
transfers or dispositions of Licensed Product by BMI or its Affiliate(s) or its
Sublicensee(s) solely for pre-clinical, clinical, regulatory, or governmental purposes,
whether prior to or after a marketing approval may be granted in any country,
shall not be considered a sale by BMI for the purposes of this provision.

 

1.9                               Patent
Rights shall mean all of the following intellectual property of BII:

 

(a)                                  the
patents and patent applications listed in Appendix B;

 

(b)                                  the
patents issued from the applications listed in Appendix B and from divisionals
and continuations of these applications;

 

(c)                                  any
reissue or extension of patents in Appendix B; and

 

(d)                                  any
improvement patent dominated by the claims of the Patent Rights.

 

1.10                        Phase
II shall mean

 

(a)                                  those
clinical studies performed in patients rather than normal volunteers; and

 

(b)                                  utilizing
drug supplies manufactured by the BII’s Affiliate Bender + Co., GmbH and/or BII’s
Affiliate Boehringer Ingelheim Pharma KG.

 

1.11                        Phase
III shall mean

 

(a)                                  those
clinical studies performed in patients rather than normal volunteers where the
purpose of said studies is specifically to obtain clinical data in support of
registration and subsequent commercialisation; and

 

(b)                                  utilizing
drug supplies manufactured by BII’s Affiliate Boehringer Ingelheim Pharma KG.

 

1.12                        R&D Agreement shall mean an agreement between BMI and
Boehringer Ingelheim Pharma KG of even date with the Agreement for the
manufacture of Licensed Product.

 

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1.13                        Settlement
Agreement between BII and Genentech
shall mean the agreement between BII and the United States corporation
Genentech, Inc. dated [*] (the
Settlement Agreement).

 

1.14                        Sublicensee
shall mean a person or legal entity to which BMI grants a sublicense of some or
all of the rights granted to BMI under Section 2.1.

 

1.15                        Territory  The territory (“Territory) shall be worldwide
with the exception of the United States of America. Asia (“Asia”) shall mean
those countries of the Territory shown in Appendix C. The European Union (“European
Union”) shall be those countries of the Territory officially recognised as
members by the European Parliament as of the Effective Date. In addition, BMI
territorial rights as described in the Agreement shall not be abridged because
of a change in the official country name or a change in geographic boundaries.

 

2.                                      GRANT

 

2.1                               Grant.  Subject to the terms and conditions of the
Agreement, BII hereby grants to BMI, and BMI hereby accepts from BII, under the
Patent Rights and Non-Manufacturing Know-How an exclusive royalty-bearing right
and license (the “License”), even as to BII, to use, develop, market, and sell
Licensed Product in the Territory for uses within the Field and to use the
Manufacturing Know-How to the extent necessary to develop, register and
commercialise Licensed Product under the Agreement. BMI shall have no rights to
use the Manufacturing Know-How to manufacture Licensed Product or to have it
manufactured except by BII or by a BII Affiliate, as provided herein and in the
R&D Agreement, or unless otherwise approved by BII.

 

2.2                               Sublicense.  BII also grants to BMI the right to
sublicense Licensed Product as provided for in this and in other Sections of
the Agreement.

 

2.3                               BII
Obligations for the United States.  BII will utilise its best reasonable efforts
pursuant to Clause 11.3 to grant BMI a sublicense under the Settlement
Agreement.

 

3.                                      DUE
DILIGENCE BY BMI

 

3.1                               Development
Planning.  Prior to initiating
clinical testing with the Licensed Product, BMI has provided BII a copy of the
first clinical protocol for a Phase II clinical trial for the indication of
treating viral hepatitis. Such protocol is attached to this Agreement as
Appendix D. Both BII and BMI acknowledge that such protocol is subject to
regulatory approval and to agreement with clinical investigators.

 

Prior
to initiating additional clinical trials for viral hepatitis or clinical
testing for any other indication, BMI will also provide to BII a suitably
detailed protocol or protocol outline for any other said clinical trial. BII
will have the right but not the obligation to provide comments on each protocol
or protocol outline to BMI. BMI may, at BMI’s discretion, modify any protocol
in response to the comments or suggestions made by BII.

 

3.2                               Exercise
of Diligence.  BMI agrees to
exercise due diligence, consistent with good business judgment, to develop
Licensed Product in the Territory, in particular in the

 

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AMENDED.

 

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European Union and in Japan. In this regard, BMI shall use its good
faith efforts to further develop, obtain regulatory approvals and commercialise
the Licensed Product in the Territory. It is understood, however, that not all
of the countries in the Territory outside the European Union and Japan will
necessarily be subject to initial development or commercialisation.

 

BMI
shall bear the responsibility for ensuring regulatory compliance, development,
and commercialisation when such activities are undertaken by BMI, BMI’s
Affiliates or Sublicensees.

 

3.3                               Commercialisation
Plans in Certain Countries. 
Within twelve (12) months after the first filing for marketing approval
of Licensed Product for the European Union or Japan, whichever is earlier, BMI
must disclose in writing to BII its plans to develop, register and
commercialise Licensed Product in countries outside the European Union and
Japan. Within sixty (60) days after receipt of said plans by BII, BMI and BII
agree to discuss said plans and to discuss in good faith any reasonable
modification thereof.

 

3.4                               Potential
Abandonment of Rights by BMI. 
In the event that registration and commercialisation of Licensed Product
under Section 3.2 is not consistent with good business judgment in any country
of the Territory, then such country shall be deleted from the Territory and BII
shall be entitled to make use in such country of any data generated by BMI
under such terms as are agreed by BII and BMI taking into account the costs
incurred by BMI generating such data and the sales potential in such country.

 

3.5                               Periodic
Reporting.  BMI will provide
periodic reports to BII during the course of development in sufficient detail
for BII to assess whether BMI is in compliance with the diligence obligations
in Section 3.2. BII may make reasonable requests for additional
information and BMI will make reasonable efforts to comply with said requests
for additional information consistent with good business judgment.

 

3.6                               Need
for Approval of Regulatory Authorities.  BII acknowledges that approval by regulatory
authorities may be necessary prior to the commencement of any clinical
development activities by BMI or BMI Sublicensees. No guarantee can be provided
that such regulatory approval will be obtained. Accordingly, while development
plans, protocols, protocol outlines, and the like will be provided in good
faith to BII by BMI, such plans or proposals must be viewed as tentative and
subject to regulatory approval.

 

4.                                      SUBLICENSING

 

4.1                               Characteristics
of Potential Sublicensees.  In
granting a sublicense, BMI agrees to consider whether past or present
activities by the potential Sublicensee would substantially prejudice the
relationship of either BMI or BII with recognised health authorities in the
United States, Europe, or Japan and to determine whether the potential
Sublicensee is engaged in substantive litigation involving BII.

 

4.2                               BMI
Duty to Inform.  If BMI
intends to grant a sublicense, BMI must inform BII in writing as soon as
commercial terms have been substantively agreed but in any event at least
thirty (30) days in advance of the granting of each sublicense in order that
BMI can consider possible objections by BII under Section 4.1.

 

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EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

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5.                                      BII
REVIEW RIGHTS AND TERRITORIAL REVERSION RIGHTS

 

5.1                               BII
Clinical Data Review Rights.  Within thirty (30) days of the availability
within or to BMI of a clinical trial report for any completed trial, BMI shall
provide a copy of the report to BII.

 

5.2                               BII
Reversion Rights

 

5.2.1                     Interests
of the parties.  BII has a possible interest in the
reversion of some or all of the rights granted under this Agreement in the
event BMI can demonstrate to BII’s satisfaction clinical benefits of Licensed
Product. BMI has a possible interest in granting a sublicense in Asia before
such clinical benefits have been demonstrated.

 

5.2.2                     For
Asia.  Notwithstanding
Section 5.2.3, BII agrees that BMI shall be free to conclude a
sublicensing agreement with a third party for Japan and/or other countries in
Asia at any time after the Effective Date and on any terms acceptable to BMI
provided, however, that such terms must also be in compliance with the terms of
the Agreement.

 

In the
event, BMI sends to a prospective Asian Sublicensee any preclinical or clinical
data concerning Licensed Product that did not originate from or within BII or a
BII Affiliate (“New Data”), then BMI will send such New Data to BII on or
before the date such New Data is sent to such prospective Sublicensee and BII
shall have the opportunity to negotiate for the reversion of the rights granted
under this Agreement.

 

5.2.3                     Rights
of First Refusal.  Within thirty (30) days after
receiving from BMI the final clinical trial report for the clinical study
described in Appendix D, BII shall inform BMI in writing whether it wishes to
negotiate the reversion of some or all of the rights granted to BMI under this
Agreement in the countries of the Territory except for countries where BMI has
granted a Sublicense under Clause 5.2.2. If BII does so wish, then both BMI and
BII agree to negotiate in good faith for no more than an additional sixty (60)
days the potential terms of such reversion (“Reversion Terms”). Until the
expiration of this sixty (60) day period, BMI may not conclude a Sublicense
agreement with any third party except for countries in Asia pursuant to Section 3.2.

 

In the
event that BMI rejects said Reversion Terms, then BMI shall be free thereafter
to conclude one or more new sublicensing agreements with a third party for any
country provided that the sublicense terms agreed with the third party for any
such country must be on terms no more favorable to the third party than were
the Reversion Terms previously offered by BII to BMI.

 

If
both BII and BMI agree to Reversion Terms, however, then BII and BMI shall
conclude a new agreement embodying said Reversion Terms as soon as practicable.
Due diligence by BII will be determined by the terms of the new agreement
embodying said Reversion Terms.

 

BII
may decline, however, to review such clinical trial report. If BII declines,
then BII waives its rights under this Section 5.2.3.

 

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EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

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5.3                               One-Time
Rights.  Both BII and BMI
agree that the reversion rights described in this Section 5 shall be “one-time”
rights only and shall expire following the earliest of the following
independent and mutually exclusive events:

 

(a)                                  the
decision by BII to decline to review the report regarding the clinical study of
Appendix D; or

 

(b)                                  the
end of the thirty(30)-day review period referred to in Section 5.2.3 but
then if, and only if, BII has not yet informed BMI in writing of BII’s wish to
negotiate Reversion Terms; or

 

(c)                                  the
end of sixty-day negotiation period referred to in Section 5.2.3 but then
if, and only if, BII and BMI have not yet agreed on said Reversion Terms.

 

6.                                      DATA

 

6.1                               Preclinical
and Clinical Data, Non-Manufacturing Know-How.  BII shall make available to BMI, in English
where available in English, and in German where unavailable in English,
Non-Manufacturing Know-How, any and all preclinical and clinical data, or other
data or information generated by BII or its Affiliate(s) from preclinical or
clinical research with regard to the development of the Licensed Product.

 

BII
shall deliver to BMI such Non-Manufacturing Know-How, data, information or
documents reasonably requested by BMI from time to time during the term of the
Agreement. Such delivery will occur within sixty (60) days of such request by
BMI.

 

BMI
acknowledges, however, that BII shall be obliged to make available only those
data or documents already in the possession of BII or an Affiliate as of the
Effective Date or which come into the possession of BII or an Affiliate as a
result of BII’s own development activities or those of said BII Affiliate.

 

6.2                               Additional
Reports

 

In
addition to reports provided by BMI pursuant to Section 3.5, BMI shall
during the term of the Agreement provide BII with such written reports and
analyses as BII shall reasonably request regarding the development, regulatory
approval and/or commercialisation of Licensed Product. BI acknowledges,
however, that BMI shall be obliged to make available only those data or
documents already in the possession of BMI or a BMI Affiliate or Sublicensee.

 

7.                                      MANUFACTURING:
PHASE II

 

7.1                               Responsibility
for Phase II Manufacturing. 
Bender + Co. GmbH (an Affiliate of BII located in Vienna, Austria) will
be responsible for manufacturing Licensed Product for the Phase II clinical
trial described in Appendix D and possibly for additional Phase II clinical
trials. Such manufacturing will be performed according to the currently
established Manufacturing Process. Bender + Co. will manufacture Licensed
Product exclusively for BMI in the Territory.

 

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EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

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7.2                               Manufacturing
Standards for Phase II Manufacturing.  Manufacturing of Licensed Product for the
Phase II clinical trial described in Appendix D will be performed according to
manufacturing standards set by the currently applicable regulations,
directives, or decisions of the European Union (as now published in the
Official Journal of the European Community or its successor publication).

 

7.3                               Supplies
for Phase II Clinical Trial described in Appendix D.  Utilising the services of BII’s Affiliate
Bender + Co. GmbH, BII shall, upon BMI’s reasonable request, deliver to BMI
(and otherwise free of charge to BMI) [*] of Licensed
Product and [*] of placebo. The Licensed
Product shall be [*] in bulk unlabelled [*], without final packaging, having undergone successful
release testing, ex works.  Each [*] shall contain a withdrawable amount of [*] of Omega Interferon in addition to the standard
excipients. The placebo [*] will be
identical except that there shall be no Omega Interferon contained therein.

 

Temporary
storage of undelivered [*] for up to [*] months will be provided for BMI as reasonably required
by BMI, also without additional charge. Costs for labeling, final packaging,
insurance, and shipping, however, will be the responsibility of BMI. The shelf
life, or time until expiry, of such [*] will be
sufficient to permit reasonable completion of the clinical trial described in
Appendix D.

 

These
supplies will be available for delivery at a time reasonably agreed by both BII
(or its Affiliate, as appropriate) and BMI.

 

7.4                               Additional
Phase II Clinical Supplies. 
While it is understood that BMI intends to perform the study described
in Appendix D, additional studies may be required in one or more indications
before Phase III studies can commence. BII, again through its Affiliate Bender
+ Co. GmbH, agrees to supply to BMI at mutually agreed intervals additional [*] of Licensed Product or matching placebo. The actual
supply price for up to [*]
manufactured by Bender and Co. will be:

 

	
  Quantity* (μg/[*])

  	
   

  	
  0 (Placebo)

  	
   

  	
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  Price**

  DM/[*]

  	
   

  	
   

  	
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* The
Quantity (mg/[*]) will be such that the withdrawable quantity of drug per
[*] will be at least [*] μg.

** The
price shown in DM will be converted to Euro at such time as the Euro replaces
the DM.

 

7.5                               Cooperation
During Manufacturing.  It is
understood by both BII and BMI that manufacturing activities require time and
appropriate planning and that, therefore, reasonable requests with regard to
timing, the number of [*], and the
quantity per [*] will be essential. BMI
specifically acknowledges this need for reasonableness. Similarly, BII
acknowledges that good faith efforts are essential in promoting efficient
development and commercialisation. BII agrees to obligate its Affiliate to
cooperate with BMI in managing all aspects of the Manufacturing Process.  Such cooperation will be based on the
principles of good faith negotiations and reasonableness in all matters.

 

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EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

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8.                                      MANUFACTURING:
PHASE III AND COMMERCIAL SUPPLY

 

8.1                               Responsibility
for Phase Ill Manufacturing and for Commercial Supply.  BMI shall be responsible for supply of
Licensed Product in support of Phase III clinical testing and subsequent
commercialisation. For this purpose, BMI has concluded the R & D
Agreement with BI Pharma KG, which addresses the basic issues of an intended
supply agreement.

 

8.2                               Price
for Commercial Supplies/Minimum Order.  BMI shall purchase its requirements of
Licensed Product at a price which will be the higher of

 

(i)                                    a
percentage of the [*] by BMI, BMI’s
Affiliate or Sublicensee in the Territory as laid down in Art. 9 below; or

 

(ii)                                the
floor price per [*] according to Section 8.3
below.  The minimum quantity per order
will be [*].

 

8.3                               Floor
Price.  Notwithstanding the
above Section 8.2, under no circumstances will BII be obliged to sell
commercial quantities of Licensed Product at a price below the following prices
in Deutsche Mark per [*] dependent
on the number of [*] ordered and bought and the
withdrawable quantity of drug per [*]:

 

	
   

  	
   

  	
  Quantity (μg/[*])

  	
   

  
	
   

  	
   

  	
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  ordered

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
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The
above floor prices per [*] shall
remain valid for a period up until [*] years after
first introduction of Licensed Product in the Territory. BII will be entitled
to increase the floor prices to apply after such period in the event BII’s
manufacturing costs specific to Licensed Product increase by more than [*] between the date of first supply under this Section 8
and the end of such period. Such increase in floor price will be equal to the [*] in BII’s manufacturing costs specific to Licensed
Product from the date of first supply to the end of such period. BMI shall be
entitled to have such increase verified by an independent accountant according
to international generally accepted accounting principles.

 

8.4                               Payment
Schedule and Cost Verification. 
BMI will pay to BII within 30 days of delivery of each batch of Licensed
Product the floor price as defined in Section 8.3 above. In the event such
price is calculated according to Section 8.3 i)
above (based on BII’s manufacturing cost), BII will at the request of BMI
permit an independent accountant to verify such manufacturing costs according
to generally accepted good accounting practices.

 

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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

9

 

8.5                               Supply
Agreement and Duration.  Approximately one (1) year
prior to launch of Licensed Product BMI and BII or a BII Affiliate will
conclude a detailed supply agreement based on the terms of the above Sections
8.1 to 8.4.

 

8.6                               Payments
for Supply in Deutsche Mark.  Payment for supplies of Licensed Product will
be in Deutsche Mark or Euro at such time as the Euro replaces the Deutsche
Mark. Any currency conversions shall be made using the average quarterly
exchange rates published regularly by Citibank, New York, or its successor. The
average will be calculated by summing the exchange rates for the final business
day of each of the three (3) months in the applicable calendar quarter and
dividing by three (3). All currency conversions will be calculated to an
accuracy of three (3) digits after the decimal point.

 

9.                                      PAYMENTS/ROYALTIES
AND RELATED MATTERS.

 

9.1                               All
Payments.  All payments under the following Sections 9.2
and 9.3 shall be made in United States (U.S.) dollars ($.)

 

9.2                               Initial
Fee. 
Within thirty (30) days of signing the Agreement, BMI shall pay to BII
the sum of [*]. This sum shall include
payment to BII for the drug supplies for the first Phase II clinical trial as
described in Section 7.3.

 

9.3                               Milestones.  BMI shall pay to
BII each of the following sums within forty-five (45) days of:

 

(a)                                  filing
an application to the health authorities for marketing approval:

 

	
  Location

  	
   

  	
  Amount ($U.S.)

  	
   

  
	
  European Union*

  	
   

  	
  [*]

  	
   

  
	
  Japan

  	
   

  	
  [*]

  	
   

  

 

* to
be adjusted pro rata on the basis of population in the event of national
filing(s)

 

(b)                                  receiving
the first approval for marketing from the health authorities in:

 

	
  Location

  	
   

  	
  Amount ($U.S.)

  	
   

  
	
  European Union*

  	
   

  	
  [*]

  	
   

  
	
  Japan

  	
   

  	
  [*]

  	
   

  

 

* to
be adjusted pro rata on the basis of population in the event of national
approval(s)

 

No milestone payments will be due in the event of
filing a marketing application or for the receipt of a regulatory approval
elsewhere in the Territory. The milestone amounts identified in a) and b) above
shall be payable to BII after the occurrence of the stated event(s) regardless
of whether BMI has signed a sublicensing agreement for the country in question.

 

9.4                               Royalty
Payments.  BMI shall pay to BII royalties on aggregate
Net Sales by BMI, BMI’s Affiliate or Sublicensee in the Territory as follows:

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

10

 

	
  Net Sales

  ($ millions U.S.)

  	
   

  	
  Royalty Rate

  (%)

  	
   

  
	
  [*]

  	
   

  	
   

  	
  [*]

  	
   

  
	
  [*]

  	
   

  	
   

  	
  [*]

  	
   

  
	
  [*]

  	
   

  	
   

  	
  [*]

  	
   

  

 

Such royalty shall be payable until the last to expire
of the Patent Rights in each country or for a period of twelve (12) years from
the date of market introduction of Licensed Product in such country, whichever
period is longer.

 

9.5                               When
Royalty Payments Are Not Due and Limitations Thereon.  Notwithstanding the
foregoing provisions of Section 9.4, royalty payments shall not be due to
BII for the sale of any [*] of Licensed
Product purchased and paid for by BMI under the R & D Agreement:

 

(a)                                  manufactured,
of necessity, as a condition of obtaining regulatory approval to market
Licensed Product (so-called “Qualifying Batches”); and

 

(b)                                  not
used in clinical testing.

 

In no event, however, will the total number of
royalty-free [*] exceed one and one-half (1.5)
times the number of [*] in any one
standard, commercial-sized batch manufactured at any time after the manufacture
of the Qualifying Batches.

 

It is
currently anticipated that the standard commercial-sized batch will be [*]. Therefore, it is anticipated that the maximal number of
royalty-free [*] may not exceed [*] in number.

 

9.6                               Not
Due Royalty Payments on Supplies for Clinical Trials.  In addition,
royalty payments shall not be due on supplies manufactured to support clinical
trials by BMI or by BMI Affiliates or Sublicensees including Phase IV clinical
trials carried out after market introduction. The Floor Price per [*] will be due to BII in lieu of the payments described in Section 9.5
for all of Licensed Product used in clinical trials.

 

9.7                               Other
Payments for Sales Within the United States.  In the event, BII grants BMI a sublicense in
the United States, BMI will pay BII the following:

 

(a)                                  any
royalty or other payment due according to the terms of Sections 8.2, 8.3, 9.4,
9.5, and 9.6 of the Agreement; and

 

(b)                                  plus
[*] of any similarly calculated compensation,
royalty or other similar payment due from BII to Genentech, Inc., if any,
and according to the terms of the Bll-Genentech Settlement Agreement (“Supplemental
U.S. Royalty”). Because the current royalty rate due to Genentech, Inc.
from BII is now [*] of Net Sales, the Supplemental
U.S. Royalty would be [*] of Net
Sales, provided, however, that the payment by BMI to BII in any calendar year
shall be no less than the compensation due from BII to Genentech.

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

11

 

9.8                               Sales
Reporting.  BMI will oblige any party marketing Licensed
Product in the Territory to deliver to BII periodic financial reports. These
reports will be consistent with generally accepted accounting principles and in
a format consistent with BII’s internal accounting policies. The reports will
be delivered to BII within sixty (60) days after the close of each calendar
quarter and will show separately for each Licensed Product:

 

(a)                                  gross
sales, categorised by units sold and by total revenue;

 

(b)                                  Net
Sales, detailing the deductions allowed under Section 1.8;

 

(c)                                  details
of the quantities sold in each country;

 

(d)                                  royalties
or other like compensation due pursuant to the Agreement; and

 

(e)                                  the
respective Floor Price already paid for the [*]
bought from BII or its Affiliates.

 

BII agrees to make available sufficient information
regarding its internal accounting policies to facilitate preparation of the
required reports.

 

9.9                               Timelines
of Payments.  Concurrently with the making of any such
financial reports as described above (i. e. within sixty (60) days of the
end of such calendar quarter), BMI shall pay the amount of royalties due on Net
Sales during the preceding calendar quarter. BMI shall be allowed to deduct all
payments already made in the respective quarter for the supply of Licensed
Product according to Section 8.3 above.

 

If BMI
shall fail to make said payment when due, such party shall have an additional
five (5) business days from the date such payment was due to cure such
non-payment.

 

9.10                        Financial
Records and Verification.  BMI, or its Affiliates or Sublicensees as
appropriate (each a “Selling Party” for purposes of this Section), shall keep
sufficiently complete and accurate records

 

a)                                      to
properly reflect all gross sales and deductions from Net Sales; and

 

b)                                      to
enable the amounts payable hereunder to be determined.

 

Upon
the written request of BII, the Selling Party shall permit an independent
certified public accounting firm to verify the accuracy of reports and amounts
paid to BII. This process of verification may apply to either or both of the
two most recent fiscal years of the Selling Party. The accounting firm will be
selected by BII, will be of international standing, and will be otherwise
reasonably acceptable to the Selling Party. The activities of the accounting
firm will be paid for solely by BII except as provided below.

 

Representatives
of the accounting firm will be permitted to have reasonable access, for
reasonable periods of time, to certain financial records of the Selling Party.
Such access will be limited to that reasonably necessary for the accounting
firm to verify the appropriateness of the payments made previously to BII. The
accounting firm shall disclose in writing all information

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

12

 

gathered to the Selling Party. In the form of a written report, the
accounting firm shall disclose to BII only whether or not payments made to BII
were reasonably correct and the specific details concerning any purported
discrepancies. No other information shall be shared with BII. The accounting
firm will provide its report simultaneously to BII and to BMI and to the BMI
Affiliate or Sublicensee as appropriate.

 

If,
and only if, the accounting firm concludes that additional royalties or other
compensation are definitely owed for the audited period, and the additional
amount owed exceeds, in aggregate, five percent (5%) of amount actually paid,
then the Selling Party shall take additional actions to remedy this
underpayment. BMI will then:

 

(a)                                  pay
all reasonable costs associated with the audit that demonstrated the
underpayment (or repay BII for said audit costs, as appropriate);

 

(b)                                  pay
the underpaid amount within thirty (30) days of the date the accounting firm
delivered the report to BII and BMI; and

 

(c)                                  pay
interest on the underpaid amount only 
(The interest rate will be the average prime rate of interest calculated
from end-of-quarter data reported by the Deutsche Bank, Frankfurt am Main,
utilising data from all quarters since the end of the audited period.)

 

Should, however, the accounting firm conclude that the
Selling Party has overpaid royalties or other compensation to BII, then BII
shall credit any such overpayment to BMI (or otherwise to a Selling Party as
appropriate). This credit will be applied during the next complete calendar
quarter for which payments are due to BII.

 

9.11                        Taxes.  BMI shall be
entitled to deduct any withholding taxes from the payments due under this
Agreement. BMI will then pay the withheld amount to the proper tax authorities
as required by the laws of the country in the Territory applicable at the date
of payment. BMI shall use reasonable best efforts to ensure that any
withholding taxes imposed and paid are reduced or eliminated as far as possible
under the terms of the current or any future “double-taxation” agreement
between the United States of America and Germany.

 

10.                               INTELLECTUAL
PROPERTY MATTERS.

 

10.1                        Maintenance

 

(a)                                  BII
shall, subject to good business judgment, at its sole cost and expense maintain
the Patent Rights in Appendix A.

 

(b)                                  If
BII shall elect not to maintain Patent Rights in any country within the
Territory, BMI shall have the right to assume, at BMI’s sole cost and expense,
the maintenance of any such Patent Rights and BMI shall be entitled to deduct
its expenses in maintaining such Patent Rights from any milestone or other
payments to BII for sales of Licensed Product in said country.

 

(c)                                  Maintenance
shall include the continuing effort, on the basis of good business judgment, to
obtain issued patents where patent applications are now pending.

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

13

 

(d)                                  BI
will provide BMI with annual reports regarding the status and maintenance of
Patent Rights and probable or actual changes thereto.

 

10.2                        Patent
Term Extension or Equivalent.

 

(a)                                  In
the event an extension of a patent is available, BII shall have the right to
designate the patent or patents for which such extension will be applied.

 

(b)                                  If
BII shall elect not to extend Patent Rights in any country within the
Territory, BMI shall have the right to extend, at BMI’s sole cost and expense,
any Patent Rights not otherwise extended by BII and BMI shall be entitled to
deduct such costs and expenses from any milestone or royalty payments due to
BII by BMI, its Affiliates or Sublicensees for sales of Licensed Product in
said country.

 

10.3                        Notification
Regarding Infringement.  Each of the Parties shall notify the other
promptly in the event that it becomes aware of any alleged infringement of the
Patent Rights by a third party and of any available evidence thereof.

 

10.4                        Litigation.

 

(a)                                  BII
agrees, subject to good business judgment, to prosecute and/or defend Patent
Rights against challenge or infringement by any third party or parties.

 

(b)                                  In
the event that BII shall elect not to defend Patent Rights against challenge or
infringement, BMI, its Affiliates or Sublicensees, may prosecute and/or defend
any infringement and/or challenge to the Patent Rights.

 

(c)                                  In
any infringement suit BMI, its Affiliates or Sublicensees may institute to
enforce the Patent Rights pursuant to the Agreement, or in any suit brought by
a third party in which BMI, its Affiliates or Sublicensees is defending the
Patent Rights, BII shall cooperate in all reasonable respects and, to the
extent practicable, have its employees and, if practicable, former employees,
testify when requested. BII will also make available relevant records, papers,
information, samples, specimens and the like. BII will obligate its own
Affiliates to cooperate in a similar manner.

 

(d)                                  If,
as a result of any such suit, the Patent Rights are held in any country to be
not enforceable or invalid pursuant to a judgment rendered by a court of final
determination and not subject to appeal, then, from and after the date of the
filing of the action which resulted in such judgment, the royalties or other
payments computed on the basis of Net Sales in that country, and payable
pursuant to the Agreement hereunder, shall be reduced by fifty percent (50%).
Notwithstanding the possible reduction of fifty percent, however, the royalties
or ether payments are still subject to the Floor Price of Section 8.3.

 

10.5                        Payments
and Patent Litigation.  If BMI, its Affiliates or Sublicensees, shall
undertake the enforcement or defense by litigation of the Patent Rights in any
country in the Territory, any royalties or other payments due to BII on Net
Sales in such country may be withheld. Such withholding may be applied only
toward the reimbursement of expenses, including attorney’s fees, related to
said litigation. Such withholding shall not, however, exceed

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

 

14

 

fifty percent (50%) of the amount that would otherwise have been due to
BII. If such withheld sums are specifically recovered, however, from an
offending third party, then the recovered sum will be remitted to BII. The
remission will occur within sixty days of the recovery. No interest shall be
paid on the sums withheld. Notwithstanding the foregoing in this Section 10.5,
however, the royalties or other payments are still subject to the Floor Price
of Section 8.3.

 

10.6                        Other
Intellectual Property.  Trademarks, service marks, and tradenames, or
any applications pertaining thereto, as shall be selected, chosen, created or
developed by BMI, its Affiliates or Sublicensees, pursuant to any effort to
develop and commercialise the Licensed Product shall be the exclusive property
of BMI, its Affiliates or Sublicensees, as appropriate.

 

10.7                        Improvements
to the Manufacturing Process.  Any improvements to the Manufacturing Process
proposed by BMI, paid for by BMI, whether in whole or in part, and implemented
by BII or a BII Affiliate to manufacture Licensed Product shall be licensed
exclusively but for BII or its Affiliates or Licensees to BMI for the duration
of this Agreement. However, such improvements may not be utilised to
manufacture any other product containing Omega Interferon without the written
consent of BMI.

 

11.                               REPRESENTATIONS
AND WARRANTIES.

 

11.1                        Freedom
to Execute Agreement. Each of BII
and BMI represent and warrant to the other party that:

 

(a)                                  it
is free to enter into the Agreement and has the full right and authority to do
so;

 

(b)                                  it
has taken all corporate action necessary to authorise the execution and
delivery of the Agreement and the performance of its obligations under the
Agreement;

 

(c)                                  it
is not aware of any impediment that would inhibit its ability to perform in all
material respects its obligations under the Agreement; and

 

(d)                                  the
execution, delivery and performance of the Agreement will not violate any
provision of, conflict with or result in any breach of any of the terms of, or
constitute a default under either party’s respective certificate of
incorporation, by-laws, or any material indenture, lease, any other agreement
(including specifically the Settlement Agreement) or other material instrument
to which it is a party, or any decree, judgment or order applicable to such
party or any law, statute, rule or regulation applicable to such party.

 

11.2                        Patent
Rights. 
BII hereby represents and warrants to BMI that:

 

(a)                                  it
is the legal assignee of the Patent Rights covered by the Agreement;

 

(b)                                  it
has the full legal power to convey the rights granted to BMI in the Agreement;

 

(c)                                  it
has no knowledge of any facts which would rebut the presumption of validity
accorded any issued patents within the Patent Rights;

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

15

 

(d)                                  it
has disclosed to the United States Patent and Trademark Office, or to other
similar offices in other countries, all information “material to patentability,”
as such is defined in 37 C.F.R. §1.56;

 

(e)                                  it
has no knowledge of any adverse claims to the Patent Rights;

 

(f)                                    all
patent applications included in the Patent Rights are pending and have not been
abandoned and are enforceable as of the Effective Date pursuant to a valid
assignment;

 

(g)                                 to
its best knowledge and belief, as of the Effective Date, there is no asserted
or unasserted claim or demand which may be enforced against any of the Patent
Rights;

 

(h)                                 to
its best knowledge and belief, on the Effective Date the practice of any
processes and/or products disclosed in the Patent Rights do not infringe upon
any third party patents; and, in addition, that

 

(i)                                    BII
has not entered into any agreement with any other party which is in conflict
with the rights granted to BMI pursuant to the Agreement.

 

11.3                        Genentech, Inc.  BII further hereby
represents that it will work diligently and in good faith with BMI in a
continuing effort to reduce, relieve, or (if possible) eliminate the [*] regarding [*] of Licensed
Product in the United States as set by the Settlement Agreement. If BII
concludes that such good faith efforts have failed or are not likely to
succeed, BII and BMI agree to discuss possible alternatives, and to implement
at the sole risk of BMI any mutually agreeable alternative, that will:

 

(a)                                  permit
BII to keep its prior binding commitments to Genentech, Inc.; and

 

(b)                                  notwithstanding
(a), will nonetheless permit the timely [*] by BMI or
its Affiliates or Sublicensees, of the Licensed Product in the United States.

 

11.4                        BII
Affiliate(s).  BII represents and warrants that it will
contractually obligate its Affiliate(s) to adhere substantially to the terms of
the Agreement regarding any responsibilities transferred by BII to said
Affiliate pursuant to the Agreement, if any. BII further warrants and
represents that it will indemnify BMI against financial losses, direct or
indirect, incurred by BMI because of breach of any contractual obligations of
any BII Affiliate to BMI or because of gross negligence by a BII Affiliate with
regard to its duties to BMI within the limitations in the R&D Agreement and
subsequent supply agreements.

 

11.5                        BMI
Sublicensee(s).  BMI represents and warrants that it will
contractually obligate its Affiliate(s) and Sublicensee(s) to adhere
substantially to the terms of the Agreement regarding any responsibilities
transferred by BMI to said Affiliate(s) or Sublicensee(s) pursuant to the
Agreement. BMI further warrants and represents that it will indemnify BII
against financial losses, direct or indirect, incurred by BII because of breach
of any contractual obligations of BMI to BII or because of gross negligence by
a BMI Affiliate or sublicensee with regard to duties to BII BMI has transferred
to its Affiliate or sublicensee.

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

16

 

12.                               ASSIGNMENT,
CHANGE IN CONTROL

 

12.1                        Ability of
BMI to Assign Agreement.  The Agreement shall be assignable by BMI with
the prior written consent of BII, which consent shall not be unreasonably
withheld.

 

12.2                        Waiver
of Consent.  BII agrees to waive its rights to withhold
consent for assignment by BMI if a sublicense has been granted for each country
and only in such country or if the Licensed Product has been approved for
marketing (whether or not Licensed Product has actually been sold) in the
European Union or Japan.

 

12.3                        Change
in Control.  A change in control in BMI (as evidenced by
the acquisition by one person or entity of more than fifty percent {50%} of
voting stock), except for that occasioned by the bankruptcy of BMI, shall not
affect the right of BMI to assign the Agreement. BMI agrees, however, to inform
BII promptly upon any such change in control. In addition, acquisition of
voting control of BMI by any or all of current BMI shareowners shall not, for
purposes of the Agreement, constitute a change in control.

 

13.                               TERM
AND TERMINATION

 

13.1                        Duration
of Agreement.  Except as otherwise specifically provided
herein, or unless sooner terminated pursuant to other provisions within the
Agreement, the Agreement and the licenses and rights granted to BMI hereunder
shall remain in full force and effect for as long royalties are payable on
sales in any country of the Territory pursuant to Section 9.4.

 

13.2                        Paid-Up
License.  Following expiration of the Agreement
pursuant to Section 13.1 hereof, BMI and/or its Sublicensee(s) as
applicable, shall have a perpetual, fully paid up non-exclusive license under
the rights granted.

 

13.3                        Termination
Because of Unremedied Breach.  Either BII or BMI shall have the right to
terminate the Agreement with thirty (30) days’ notice in written form to BMI or
BII, respectively, in the event that:

 

(a)                                  BMI
or BII, respectively, fails to remedy any material failure to fulfill its
obligations under the Agreement; or

 

(b)                                  a
material breach of the terms or conditions hereof is not cured within sixty
(60) days after receipt of notice in written form specifying the circumstances
giving rise to failure or breach.

 

13.4                        Termination
Because of Insolvency.  Either BII or BMI may terminate
the Agreement with immediate effect by notice in written form in the event that
BMI or BII, respectively, becomes insolvent, is declared bankrupt or adopts a
plan of liquidation and dissolution.

 

13.5                        Court-Awarded
Damages.  Any court-awarded damages granted to BMI
arising from material breach or bankruptcy, respectively, may be deducted from
milestone, royalty, or other like payments which may be subsequently due to
BII, respectively.

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

17

 

13.6                        Continuation
of Obligations.  Upon termination of the Agreement pursuant to
provisions contained herein, nothing herein shall be construed to release
either BII or BMI from any obligation that matured prior to the termination.

 

13.7                        Duties
of BMI After Breach.  Upon termination of the Agreement by BII
pursuant to Section 13.3 herein, BMI will transfer or have transferred to
BII any approvals for clinical trials or sale of Licensed Product granted to
and/or owned by BMI or its Affiliates or Sublicensees and will do so free of
charge to BII. BII may use such authorisations freely in its sole discretion.

 

13.8                        Duties of
BMI After Bankruptcy.  Upon termination of the Agreement by BII
pursuant to Section 13.4 herein, BMI will transfer or have transferred to
BII any authorisations for clinical trials or sale of Licensed Product granted
to and/or owned by BMI or by its Affiliates, but not by its Sublicensees, upon
payment to BMI by BII of an amount representing the fair market value of the
assets to be transferred. Following such transfer, BII may use such
authorisations freely in its sole discretion.

 

14.                               CONFIDENTIALITY

 

14.1                        Transmittal
of Information.  Any information which is transmitted by one
party to the other party in connection with the entering into or the
performance of the Agreement, shall be kept confidential by the receiving party
and its Affiliates and/or Sublicensees prior to the expiration or termination
of the Agreement and for a period of five (5) years thereafter its
expiration. The foregoing obligation shall not apply to:

 

(a)                                  any
information which at the time of disclosure or acquisition is part of the
public knowledge or literature, or thereafter becomes part of the public
knowledge or literature otherwise than by unauthorised disclosure by the
recipient;

 

(b)                                  any
disclosure of information to the United States Food and Drug Administration (“FDA”)
or other similar governmental authority for the purpose of complying with
regulatory requirements regarding Licensed Product;

 

(c)                                  any
information which at the time of disclosure or acquisition was in the recipient’s
possession as evidenced by its written records;

 

(d)                                  any
information which became available to the recipient from another source not
bound to secrecy to the disclosing party with respect to such information;

 

(e)                                  disclosure
by the recipient to third parties under provisions of confidentiality similar
to those contained in the Agreement for the purposes of development or
marketing of the Licensed Product or financing thereof; and

 

(f)                                    any
disclosure of information required by law; provided; however, that BII shall
have the right to review any press releases relating to the Agreement prior to
dissemination by BMI.

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

18

 

14.2                        Approval
of Public Disclosure.  Notwithstanding the provisions of Section 14.1
herein, in the event that either BII or BMI, its Affiliates and/or
Sublicensees, shall determine that it wishes to disclose publicly any
information regarding the Agreement, such party shall present to BMI or BII, as
appropriate, a written request for such disclosure. The recipient of the
request to permit disclosure shall have a period often (10) calendar days
to approve the requested disclosure. The requested approval shall not be
unreasonably withheld.

 

14.3                        Acknowledgment
of Private Disclosure.  Notwithstanding the provisions of Sections
14.1 and 14.2 herein, BMI may disclose to a third party or parties confidential
or nonconfidential information regarding the Licensed Product or the Agreement
in the pursuit of commercialisation of the Licensed Product.

 

15.                               COMMUNICATIONS

 

15.1                        Instructions
for Communications.  Any payment, notice or other communication
pursuant to the Agreement shall be sufficiently made or given on the date of
mailing if sent to such party by certified or registered first class mail,
postage prepaid, or by recognised public courier (for example,  “Federal Express”) addressed to it at its
address below or as it shall otherwise subsequently designate by written
notice:

 

In the
case of BII:

 

Boehringer
Ingelheim International GmbH

D-55216
Ingelheim/Rhein, Germany

Attention:
Corporate Licensing

with a
copy to: Legal Department

 

In the
case of BMI:

 

BioMedicines, Inc.

909
Marina Village Parkway #583

Alameda,
CA 94501

with a
copy to: Legal Department

 

16.                               MISCELLANEOUS
PROVISIONS

 

16.1                        Governance
of Agreement.  The Agreement shall be construed,
governed, interpreted and applied in accordance with the laws of Germany,
except that questions affecting the construction and effect of any patent shall
be determined by the law of the country in which the patent was granted; and
disputes arising out of the Agreement which cannot be settled between the
Parties will be brought before the courts of Germany.

 

16.2                        Entire
Agreement.  Both BII and BMI acknowledge that the
Agreement sets forth the entire agreement and understanding of both BII and BMI
as to the subject matter hereof. No other previous oral or previous written
communications between BII and BMI with respect to the License granted
hereunder shall be of any force or effect. In addition, the

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

19

 

Agreement may be modified only by the execution of a subsequent written
amendment approved by both BII and BMI.

 

16.3                        Severability.  The provisions of
the Agreement are severable, and in the event that any provision(s) of the
Agreement shall be determined to be invalid or unenforceable under any
controlling body of the law, such invalidity or unenforceability shall not in
any way affect the validity or enforceability of the remaining provisions
hereof.

 

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

 

16.5                        No
Waiver of Rights.  The failure of either BII or BMI to assert a
right hereunder or to insist upon compliance with any term or condition of the
Agreement shall not constitute a waiver of that right or excuse a subsequent
failure to perform any term or condition by BMI or BII, respectively.

 

16.6                        Section Titles.  The titles or
headings of various numbered or unnumbered Sections in the Agreement are for
reference only and do not limit or modify the substance of the Agreement in any
way.

 

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AMENDED.

 

20

 

IN
WITNESS WHEREOF, the BII and BMI have hereunto duly executed
the Agreement as of the day and year set forth above.

 

Boehringer Ingelheim International GmbH

 

 

	
  By:

  	
  /s/ C. Hauke       /a/ D. A. Mitchard

  
	
  Name:

  	
  Dr. C.
  Hauke       Dr. D. Mitchard

  
	
   

  	
  (Authorised Signatories)

  
	
   

  	
  28.6.1998

  
			

 

 

BioMedicines, Inc,

 

	
  By:

  	
  /s/ S. M. Moran

  
	
  Name:

  	
  S. M. Moran, M.D.

  
	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
  23 July, 1998

  
			

 

 

Appendices

 

A                                      Structure
of Omega Interferon

B                                        Patents
and Patent Applications

C                                        Countries
of Asia

D                                       Clinical
Trial Protocol

 

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21

 

Appendix A

 

Structure of Omega Interferon

 

The following figure shows the amino acid sequence of
human [*] (underlined).

 

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1

 

Appendix B

Patents and Patent Applications

 

[*]

 

The legal status of the patents or patent applications corresponding to
[*] in other countries is as follows:

 

[*]

 

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1

 

Appendix C

Countries of Asia

 

Afghanistan

Armenia

Azerbaijan

Bahrain

Bangladesh

Belorussia

Brunei

Cambodia

China

Georgia

Hong Kong

India

Indonesia

Iran

Iraq

Israel

Japan

Jordan

Kazakhstan

Kirghizia

Korea (North and South)

Kuwait

Laos

Lebanon

Malaysia

Mongolia

Myanmar

Nepal

Oman

Pakistan

Philippines

Qatar

Russia

Saudi Arabia

Singapore

Sri Lanka

Syria

Tadzhikistan

Taiwan

Thailand

Turkey

Turkmenistan

Ukraine

United Arab Emirates

 

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1

 

Uzbekistan

Viet Nam

Yemen

 

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2

 

Appendix D

Clinical Trial Description

 

(rest of page blank)

 

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1

 

BioMedicines, Inc.

909 Marina Village Parkway #583

Alameda, CA 94501 U.S.A.

 

Tel:    [*]

Fax:    [*]

 

CLINICAL PROTOCOL

 

Open-Label Phase II Study of

Omega Interferon in Patients with
Hepatitis C

 

Document No. [*]

 

Contract Research Organization:

to be named later

 

Confidential

 

22 June 1998

 

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1

 

SIGNATURES OF AGREEMENT FOR PROTOCOL

 

Investigator:

 

	
  signature

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  date

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
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  mailing address

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  telephone/fax

  	
   

  	
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  BioMedicines, Inc.

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  signature

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  date

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  name/title

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  mailing address

  	
   

  	
  BioMedicines, Inc.

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  909 Marina Village Parkway #583

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  Alameda, California

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  U.S.A. 94501

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  telephone/fax

  	
   

  	
  tel: [*]

  	
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1

 

ABSTRACT

 

Rationale: Alpha interferon is
useful in the treatment of hepatitis C. Omega interferon binds to the same
receptors and produces similar changes in plasma markers as does as does
interferon Alpha. Therefore, omega interferon may be useful in treating
patients with disorders that respond to alpha interferon.

 

Objectives: To determine the
preliminary safety and efficacy of omega interferon [*]
of [*] in patients with chronic hepatitis
C.

 

Design: Open-label, rising-dose

 

Setting: Outpatient

 

Population: [*] of [*], 18 years of age or older, [*]
patients per group with chronic hepatitis C.

 

Dosing Regimens: Subcutaneous
injections of [*]

 

Duration of Therapy: [*] weeks

 

Duration of Followup after Discontinuation of
Therapy: [*] weeks

 

Safety Assessments: Adverse
events, physical examinations, routine laboratory testing, liver function
testing

 

Efficacy Assessments: [*]

 

Unique
Aspects of This Study: This is the [*]
of omega interferon in patients with hepatitis C.

 

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1

 

Table of Contents

 

	
  1.

  	
  Introduction

  	
   

  
	
   

  	
  1.1 Hepatitis
  C

  	
   

  
	
   

  	
  1.2 The Role of Interferons in
  Treating Chronic Hepatitis C

  	
   

  
	
   

  	
  1.3 Omega Interferon

  	
   

  
	
  2.

  	
  Objectives

  	
   

  
	
   

  	
  2.1 Primary Objectives

  	
   

  
	
  3.

  	
  Investigator(s) and
  Study Site

  	
   

  
	
  4.

  	
  Ethics

  	
   

  
	
   

  	
  4.1
  Institutional Review Board Approval/Ethics Committee

  	
   

  
	
   

  	
  4.2 Informed Consent

  	
   

  
	
  5.

  	
  Study Design

  	
   

  
	
   

  	
  5.1 Characteristics

  	
   

  
	
   

  	
  5.2
  Enrollment, Inclusion and Exclusion Criteria

  	
   

  
	
   

  	
  5.3 Randomization
  Procedures

  	
   

  
	
   

  	
  5.4
  Investigational Drug Packaging and Labeling

  	
   

  
	
  6.

  	
  Procedures and
  Observations

  	
   

  
	
   

  	
  6.1
  Schedule of Procedures and Observations

  	
   

  
	
   

  	
  6.2 Pretreatment Period

  	
   

  
	
   

  	
  6.3 Treatment Period

  	
   

  
	
   

  	
  6.4 Withdrawal of Subjects

  	
   

  
	
   

  	
  6.5 Breaking the Code (or
  “Blind”)

  	
   

  
	
   

  	
  6.6 Post-Treatment Period

  	
   

  
	
  7.

  	
  Reporting and
  Documentation

  	
   

  
	
   

  	
  7.1 Adverse Events

  	
   

  
	
   

  	
  7.2
  Clinical Laboratory Tests and Normal
  Laboratory Vakues (NLV)

  	
   

  
	
   

  	
  7.3 Case Report Forms (CRFs)

  	
   

  
	
   

  	
  7.4 Handling and
  Documentation of Clinical Supplies

  	
   

  
	
   

  	
  7.5 Changes in the Protocol

  	
   

  
	
   

  	
  7.6 Monitoring

  	
   

  
	
   

  	
  7.7 Study Documentation

  	
   

  
	
  8.

  	
  Evaluation of Results

  	
   

  
	
   

  	
  8.1 Determination of
  Sample Size(s)

  	
   

  
	
   

  	
  8.2 Description of
  Statistical Methods

  	
   

  
	
   

  	
  8.3 Evaluation of Efficacy

  	
   

  
	
   

  	
  8.4 Evaluation of Safety

  	
   

  
	
   

  	
  8.5 Final Report

  	
   

  
	
  9.

  	
  References

  	
   

  

 

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1

 

List of Appendices

 

	
  Appendix 1. Ethical Issues

  	
   

  
	
  Appendix 2. Medical Guidelines for the
  Treatment of an Overdose

  	
   

  
	
  Appendix 3.
  instructions for the Handling and Shipping of Specimens

  	
   

  

 

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2

 

1.                                      INTRODUCTION

 

1.1                               Hepatitis C.  Chronic
hepatitis C may affect three hundred million persons worldwide.1 Of
these a significant number will progress to cirrhosis and thereafter to
hepatocellular carcinoma.2 No vaccine currently exists for hepatitis
C. Moreover, many individuals who become infected are not aware that they are
infected. As a result, some do not seek treatment until irreversible liver
damage has occurred. Accordingly, effective treatment remains essential.

 

1.2                               The
Role of Interferons in Treating
Chronic Hepatitis C.  Some
patients with either chronic hepatitis B or chronic hepatitis C are responsive
to the effects of recombinant alpha interferon.3 The dose required
to treat C, however, may be somewhat less than that needed to treat B. More
recently, recombinant consensus Interferon has also been shown to be active in
patients with hepatitis C.4 Among responsive patients, liver enzyme
concentrations typically decline by some 50%, and may even normalize, within 4
weeks. Liver histopathology improves more gradually, over a period of months.
Whether improvement is sustained after treatment ends is more variable.

 

Many
patients who initially respond to treatment relapse after discontinuing
therapy. Some relapse during treatment after an initial improvement although
this pattern is less common. The occurrence of “interferon resistance” in some
patients has been associated with the appearance of antibodies that neutralize
the interferon. This association, however, is not observed in all relapsing
patients, and some patients with detectable neutralizing antibodies are not
affected adversely.5,6,7

 

Perhaps
because of the genetic heterogeneity, among both patients and viruses, certain
patients may respond differently to the different forms of recombinant or
natural interferons. Resistance to one form (a recombinant alpha, for example)
may not herald resistance to another (leukocyte-derived “natural” interferon).8
Sensitivity to the “original” treatment may be restored during a treatment “holiday.”
Those patients who fail to respond to one interferon may respond to another,
whether during the primary treatment or during a relapse. Accordingly,
increasing the number and variety of effective interferons may be beneficial in
patients with chronic hepatitis.

 

1.3                               Omega
Interferon  Omega interferon
is a new recombinant interferon which is found to constitute some 15% of a
typical mixture of natural human leukocyte interferons.9 Moreover,
alpha and beta interferons bind to the same receptor10 and omega
interferon has significant structural homology with the other type I
interferons. Despite the homology, however, omega interferon is clearly
structurally distinct.

 

Omega
interferon is produced in Chinese Hamster Ovary Cells and appears to be fully
glycosylated. Omega interferon has been shown to produce greater antiviral
effects in the Sendai-virus transformed A549 cell line than does “alfa-2b
interferon.” Antibodies against alpha interferon produced by multiple species
do not cross-react with omega interferon. Since beta and gamma interferons are
not useful in treating hepatitis, the utility of the natural interferon mixture
in alpha-resistant patients may depend upon the presence of omega interferon.

 

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1

 

Most
importantly, omega interferon administered by injection to normal human
volunteers is well tolerated although it produces the characteristic physical
and biochemical responses of a biologically active interferon.

 

Taken
together, the relative potency of omega interferon, its potentially favorable
pharmacokinetic profile, and its lack of cross-reactivity with anti-alpha
antibodies suggest that further clinical evaluation of omega interferon is
warranted.11

 

Prior
to initiation of this study, the Investigator must become thoroughly familiar
with the information contained within the Investigational Brochure for omega
interferon.

 

2.                                      OBJECTIVES

 

2.1                               Primary
Objectives.  The primary objectives of this study are:

 

(a)                                  to
evaluate the safety and tolerability of omega interferon in patients with
chronic hepatitis C as judged by physical examination, adverse events, and
serial laboratory testing

 

(b)                                  to
evaluate the effect of different dosing regimens of omega interferon on [*] in patients with chronic hepatitis C.

 

3.                                      INVESTIGATOR(S)
AND STUDY SITE

 

The
Investigator responsible for the conduct of this study, identified by
name and ad-dress, appear(s) on page i (Signatures of Agreement).

 

4.                                      ETHICS

 

4.1                               Institutional
Review Board Approval/Ethics Committee.  Prior to initiating this study, the
Investigator must obtain either the approval of a valid Institutional Review
Board (IRB) or an acceptance by a valid Ethics Committee for both the clinical
protocol and the Informed Consent. (Please refer also to Appendix I for further
guidance.)

 

4.2                               Informed
Consent.  The Investigator must obtain informed consent
from the subject or from a guardian or legal representative before any other
action is taken pursuant to this study. The Investigator must comply with
either:

 

(1)                                 the
current version of the Declaration of Helsinki and the laws and regulations of [*] or;

 

(2)                                 the
U.S. Food and Drug Administration (FDA) regulations 21 CFR Parts 50.20 - 50.27;
or, for studies outside the United States, as appropriate.

 

The
IRB must approve or the Ethics Committee must accept the Informed Consent
document to be used by the Investigator. The process by which the Investigator
actually obtains informed consent, however, is a matter solely within the realm
of the Investigator-subject relationship.

 

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2

 

5.                                      STUDY
DESIGN

 

5.1                               Characteristics.  The study will be
open label and rising dose in design.

 

5.2                               Enrollment,
Inclusion and Exclusion Criteria.

 

5.2.1                     Enrollment of
Subjects.  An adequate number of
subjects will be enrolled to ensure that [*] evaluable
subjects complete the study, including at least [*]
in each of the [*] different treatment groups.

 

5.2.2                     Criteria for
Inclusion.

 

(a)                                  [*]

 

(b)                                  Age
18 years or older

 

(c)                                  Positive
enzyme-linked immunoassay for hepatitis C

 

(d)                                  A
liver biopsy within 18 months consistent with chronic hepatitis

 

(e)                                  Elevated
alanine aminotransferase levels for at least three months

 

(f)                                    Alanine
aminotransferase levels at least twice the upper limit of normal during the
four weeks prior to admission

 

(g)                                 Informed
consent obtained

 

5.2.3                     Criteria for
Exclusion.

 

(a)                                  Any
[*] for [*]

 

(b)                                  [*]
or other current evidence of [*]

 

(c)                                  Clinically
[*] or a [*]
exceeding [*]

 

(d)                                  [*]
more than [*] times [*]

 

(e)                                  A
[*] of less than [*]

 

(f)                                    A
[*] of less than [*]

 

(g)                                 A
history of [*] within the past [*] months

 

(h)                                 Prior
usage of [*]

 

(i)                                    Planned
or concurrent usage of any [*]

 

(j)                                    Any
concurrent [*] disease [*]

 

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3

 

(k)                                Positive
test for [*]

 

(l)                                    A
history of [*]

 

(m)                              Known
[*] to [*]

 

(n)                                 A
concurrent diagnosis of [*]

 

(o)                                  Usage
of an [*] within the [*]
prior to enrollment; or the planned usage of an [*]
other than [*] during the course of the
current study.

 

(p)                                  [*]

 

5.3                               Randomization
Procedures.  Not applicable. See enrollment
directions below in Section 6.2.3, Admission of Subjects.

 

5.4                               Investigational
Drug Packaging and Labeling.

 

Investigational drug name or number:
Omega interferon recombinant

Dosage form: Lyophilized powder
for injection

Route of administration: Subcutaneous
injection [*]

Container: [*]

Instructions for storage: [*]

Labeling:

 

All labels on the vials will contain the following
phrase taken from 21 CFR 312.60: “Caution: New Drug - Limited by Federal (or
U.S.) Law to Investigational Use.” In addition, all carton labels will also
contain the following information:  the
study number, the subject number, the storage conditions.

 

6.                                      PROCEDURES
AND OBSERVATIONS

 

6.1                               Schedule of
Procedures and Observations

 

6.2                               Pretreatment
Period

 

6.2.1                     Medical
History and Physical Examinations.  Four
(4) weeks +- one (1) week prior to the initiation of dosing, subjects
will provide a complete medical history and undergo physical examination and
laboratory screening.

 

6.2.2                     Clinical
Laboratory Tests and Other Specialized Tests and Procedures Laboratory Testing:

 

(a)                                  hematology:
complete blood count, platelet count

 

(b)                                  coagulation:
prothrombin time, activated partial thromboplastin time

 

(c)                                  chemistry:
sodium, potassium, chloride, bicarbonate, glucose, creatinine, calcium,
inorganic phosphorus, albumin, total protein, total cholesterol, triglycerides

 

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4

 

(d)                                  liver function tests: alanine
aminotransferase (ALT or “SPGT”) and aspartate amino-transferase (AST or “SGOT”);
total, direct and indirect bilirubin; alkaline phosphatase; 5’ nucleotidase

 

(e)                                  [*]
sample for [*]

 

(f)                                    liver biopsy: only if clinically
indicated for a reason other than participation in the current trial; to be
scored using the system of Knodell et al.12

 

6.2.3                     Admission of
Subjects.  After completion of
screening, each eligible subject will be assigned an enrollment number (subject
number) in the order of enrollment. Each subject will be identified by first,
middle and last initials only.  If the subject has no middle initial, a dash
is to be used instead. {To preserve confidentiality, the subject’s name should
not be recorded on the case report forms or in any other correspondence sent to
BioMedicines or to an affiliated BioMedicines Contract Research Organization.}

 

Subjects
will be admitted to the study [*] and
associated [*]:

 

[*]

 

At
least [*] subjects will be enrolled in each
group, and at least [*] subjects
will successfully complete [*] weeks of
dosing before [*]. Investigators are requested
to provide a telephone report to BioMedicines at the end of the four-week
evaluation time point for each subject.

 

6.3                               Treatment
Period

 

6.3.1                     Status of
Subjects

 

Inpatient  o  Outpatient  ý  Either  o

 

6.3.2                     Administration
of the investigational drug

 

(a)                                  Administration
of study drug should be performed by qualified study personnel at the study
site.

 

(b)                                  The
solution of omega interferon for injection will be prepared by [*] the [*] by the [*] of [*] of [*]. [*]

 

(c)                                  For
a dose of [*], withdraw [*]
of the final solution into a sterile syringe.

 

(d)                                  For
a dose of [*], withdraw [*]
of the final solution into a sterile syringe.

 

(e)                                  For
a dose of [*], withdraw [*]
of the final solution into a sterile syringe.

 

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5

 

(f)                                    Inject
the dose subcutaneously into an upper extremity. The site for each injections
should be recorded.

 

(g)                                 Extremities
should be alternated, if possible, and different injection sites on the upper
extremity should be selected for each subsequent administration.

 

6.3.3                     [*] in [*] at
the Same [*].  Principal
Investigators are [*], to [*] the [*]. Principal
Investigators may [*] the [*] and only once if it is medically prudent to do so as
follows:

 

(a)                                  If
the patient is initially in [*], adopt the [*] regimen.

 

(b)                                  If
the patient is initially in [*], adopt the [*] regimen.

 

(c)                                  If
the patient is initially in [*], adopt the [*] regimen.

 

(d)                                  If
the patient is initially in [*].

 

(e)                                  Once
the [*], a subject should continue to
receive the [*] until that subject has
completed the study. The [*] should not
be [*] once it has been [*] to achieve tolerability or to mitigate adverse events.

 

(f)                                    If
there is a need to [*] a [*], the subject should be discontinued from the study.

 

6.3.4                     No [*].  No [*] in
individual patients is permitted.

 

6.3.5                     Interval
Visits and Laboratory Testing.  At
the end of [*] weeks after dosing has begun,
the subject will return for a normal follow up visit. Information regarding
internal adverse events, if any, will be recorded. The Investigator is [*] to [*], if any,
and to perform chemistry, hematology, and liver function testing.

 

6.3.6                     Usage of
Concurrent Medications.  If other
medications are required, the Investigator will record the generic name of the
medication, the dates that the medication is started and is stopped, whether
use of the medication continues at the end of the study, and the reason the
medication was prescribed.

 

6.3.7                     Diet  Subjects should refrain from the use of alcohol
if possible.

 

6.4                               Withdrawal
of Subjects

 

6.4.1                     Reasons to
Withdraw a Subject  The Investigator
should withdraw a subject whenever continued participation is no longer in the
subject’s best interests. Reasons for withdrawing a subject include, but aren’t
limited to, the occurrence of an adverse event or an intercurrent illness, a
subject’s request to end participation, or simply significant uncertainty on
the part of the Investigator that continued participation is prudent. There may
also be [*] to terminate participation, such as
[*] about a [*]
with the [*].

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

6

 

In
addition, treatment with the investigational drug will cease if any of the
following treatments are initiated or procedures occur: initiation of therapy
with another interferon.

 

6.4.2                     Stopping
Rules.  [*]
in this study. However, because the study is open-label by design, [*] can be [*]. A decision
to [*] in any [*]
will be made by the [*]. A decision
to [*] will be made [*]
by the [*].

 

6.4.3                     Documentation
of Withdrawal.  If a [*] for any reason, or is determined after [*] to be [*] (based upon
the requirements of this protocol), that [*] will be [*] unless that [*] has already
[*]. In this event, the [*] need not be [*].

 

It is
requested that [*] be discussed with BioMedicines
(or an affiliated CRO) prior to [*]. If a [*], the Investigator will enter the [*]
on the [*] and will complete all other
required CRFs.

 

6.5                               Breaking
the Code (or “Blind”).  Not applicable: The study is open-label in
design.

 

6.6                               Post-Treatment
Period.

 

6.6.1                     Medical
History and Physical Examination.  As
soon as possible after the completion of dosing, subjects will undergo a
routine physical examination.

 

6.6.2                     Clinical
Laboratory Tests and Other Specialized Tests and Procedures.  Laboratory Testing: All tests will be
repeated [*] weeks after [*]
or [*], whichever is longer.

 

7.                                      REPORTING
AND DOCUMENTATION

 

7.1                               Adverse
Events.  The
Investigator must provide information to BioMedicines (or to an affiliated CRO)
concerning findings that suggest a significant hazard, contraindication, side
effect, or precaution pertinent to usage of the drug under investigation.

 

7.1.1                     Types of
Adverse Events.  The term “adverse
event” could refer to any of the following events which either develop,
increase in severity, or increase in frequency during the course of the study:

 

(a)                                  any
sign observed by the Investigator;

 

(b)                                  any
symptom reported by or elicited from the subject;

 

(c)                                  any
abnormality detected during physical examination;

 

(d)                                  any
clinically significant laboratory abnormality.

 

Data
about these events will be recorded on the appropriate CRFs, whether or not the
event is believed to be associated with use of the investigational drug.
BioMedicines will ask that the Investigator give an opinion about the possible
association of the event with usage of the investigational drug. (In this
regard, the phrase “associated with the use of the drug” means that

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

7

 

there
is a reasonable possibility that the event may have been caused by the
investigational drug. In other words, association means that it seems likely
that the drug contributed meaningfully to the occurrence of the event. Because
the Investigator cannot rule out a contribution by the drug, however, does
not imply that the adverse event is associated.)

 

Signs or
Symptoms will be graded and recorded by the Investigator as
mild, moderate or severe according to the following grades and definitions:

 

(e)                                  Mild:
Causing no limitation of usual activities.

 

(f)                                    Moderate:
Causing some limitation of usual activities.

 

(g)                                 Severe:
Causing inability to carry out usual activities.

 

7.1.2                     Serious
Adverse Drug Experiences.  A “serious”
adverse drug experience, as defined in the Code of Federal Regulations, is any
adverse drug experience occurring at
any dose that results in any of the following out-comes:

 

(a)                                  death;

 

(b)                                  a
life-threatening adverse drug experience (i.e., in the
view of the Investigator, the subject was at immediate risk of death from the
reaction as it occurred);

 

(c)                                  a
persistent or significant disability or incapacity;

 

(d)                                  inpatient
hospitalization or prolongation of existing hospitalization;

 

(e)                                  a
congenital anomaly or birth defect.

 

By way
of contrast, an “unexpected event” is any adverse event that is not identified
explicitly in nature, severity or frequency in the Investigational Brochure.

 

7.1.3                     Reporting
Obligations to BioMedicines.  Serious
events, whether or not unexpected and whether or not considered to be
associated with the use of the drug, must be communicated immediately by
telephone, fax, or telex to BioMedicines (or to an affiliated CRO). {If the
event is first reported to a CRO the CRO will then become responsible for first
communicating the event to BioMedicines.} An appropriate monitor (BioMedicines
or CRO) will then advise the Investigator regarding the nature of any further
information or documentation that may be required.

 

Please
note that an event qualifying as “serious” may occur quite commonly in certain
populations of patients, e.g., rehospitalization for treatment of an underlying
disease. Nevertheless, if the event satisfies any one of the listed criteria
for seriousness, the event must be reported as a serious event. There are no
exceptions to this rule.

 

Also
note that the Investigator must inform the IRB or Ethics Committee in writing
no later than [*]
after the discovery of any serious adverse event.

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

8

 

7.1.4                     Follow-up of
Adverse Events.  All adverse events
must be followed with appropriate medical management until resolved. For
selected adverse events, a [*] of the [*] with the [*] may be conducted if considered both [*]. Any [*], however, will be approved in advance by BioMedicines.

 

7.2                               Clinical
Laboratory Tests and Normal Laboratory Values
(NLV).  Throughout the study,
clinical laboratory tests should be performed in a single laboratory selected
jointly by the Investigator and BioMedicines (or CRO). The normal ranges for
required clinical laboratory tests will be transmitted to BioMedicines (or
CRO). The Investigator, a Sub-investigator, the study coordinator, the Clinical
Laboratory Supervisor, or the BioMedicines Monitor must verify in writing the
correctness of the NLV values.
Any change in normal laboratory values during this study will also be
transmitted to BioMedicines.

 

7.3                               Case
Report Forms (CRFs).  Examples of CRFs to be used in this study
will be provided under separate cover.

 

The
information collected on CRFs must be identical to that appearing in original
source documents.  There
are also no exceptions to this rule.

 

In
general, source documents will be found in a chart maintained by personnel in a
hospital or in a physician’s office. It is possible that a portion of the
source documents for a given subject may actually be the CRFs themselves. If
so, then copies (at least) of these CRFs should become a formal part of the
subject’s chart(s) and medical records.

 

As a
matter of regulations, the Investigator is responsible for the accuracy and
authenticity of all clinical and laboratory data entered onto CRFs. Each CRF
must be reviewed for accuracy by the investigator, corrected as necessary, and
then approved. [*] may
be used to [*] or
[*]. {The purpose
of this [*] is to [*] rather than
in [*] as such.}
Alternatively, [*] may
be [*] by the [*]. These [*] serve to
attest that the information contained on the CRFs is true and accurate.

 

If
certain data are not available, not done, or not applicable: “NAV,” “ND,” or “NAP,”
respectively, will be entered in the appropriate space. The Investigator, or
delegate (e,g., Sub-Investigator or study coordinator), may enter corrections
on original CRFs. The monitoring team may make changes to original CRFs based
on information supplied by the Investigator and documented in the study file.
Changes and/or additions to data entered on original CRFs must be made in the
following manner: The original entry will be lined out with a single line drawn
through the error (not erased or “whited out”). The original entry should
remain legible through the single line drawn through it. The correction will be
entered then initialed and dated by the person making the correction who should
use a ball-point pen containing black ink.

 

The
procedure for submitting the CRFs to BioMedicines (or CRO) will be described to
the study site personnel by the BioMedicines Monitor or a delegate.

 

The
CRFs should be completed by the Investigator as soon as possible after the data
are actually available. Case report forms may be returned by mail to
BioMedicines (or to the CRO) in “batches,” the nature of which will be
identified in advance. By prior agreement, however, CRFs may be collected from
the Investigator by an appropriate monitor at the next site visit.

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

9

 

Military
time (24-hour clock) should be used for all time entries.

 

All
data should be entered legibly using a ballpoint pen containing black ink.

 

If
CRFs are printed on NCR (“no carbon required”) paper, the bottom copy is to be
retained at the site for the Investigator’s study file. Alternatively, a
photocopy of the completed CRF’s should be retained at the site.

 

7.4                               Handling
and Documentation of Clinical Supplies.  The Investigator will maintain complete
records showing the receipt, dispensation, return, or other disposition of the
investigational drug. The date, quantity and batch or code number of the drug,
and the identification of subjects (subject number and initials) will be
included.

 

When
the investigation is discontinued or completed, unused supplies of drug will be
re-turned or disposed of at the site, as directed by BioMedicines.

 

Without
prior authorization from BioMedicines, the Investigator will not make available
the investigational drug to any other individuals. Furthermore, the
Investigator will not allow the investigational drug to be used in any manner
other than that specified in this protocol.

 

7.5                               Changes
in the Protocol.  Once the protocol has been formally approved
by both BioMedicines and the Investigator, any change that might affect the
subsequent approval of the IRB or Ethics Committee must be documented in the
form of an amendment. (For example, an amendment would be appropriate if the
proposed change would increase risk for participating subjects or would affect
the scientific validity of the study.) An amendment must be signed by the appropriate
BioMedicines personnel and the Investigator and then approved by the IRB or
Ethics Committee before implementation. If the amendment is minor, or clearly
reduces the risk to the subject without altering scientific validity, the
chairperson or vice-chairperson of the IRB or Ethics Committee may approve it.
Approval is unnecessary for corrections of typo-graphical errors, revisions
simply to improve clarity, notifications of changes in monitoring personnel, or
for other changes that do not materially affect the conduct of the study. These
minor changes will be documented, however.

 

If it
becomes necessary to alter the protocol to [*], an
amendment may be implemented [*]. In this
circumstance, however, the Investigator must then notify [*]
in writing within [*] working
days after implementation.

 

7.6                               Monitoring.  BioMedicines (or
CRO) monitors will conduct site visits to the investigational facilities for
the purpose of monitoring the study. The Investigator will arrange for access
to the area where the investigational drug is stored and dispensed and will
likewise provide access to all study documentation. To these ends, the
Investigator agrees as part of conducting this study: 1) to make source
documents available upon request; 2) to meet with the monitors during the site
visit to discuss the findings; and 3) to aid in making corrections to the CRFs
or other documents if needed.

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

10

 

Regulatory
agencies may also request to inspect study sites. The Investigator will allow
these inspectors to review records and is encouraged to assist them in their
duties if requested to do so.

 

7.7                               Study
Documentation.  The Investigator will retain a copy of all
study documents in accordance with local or FDA regulations, whichever are the
more stringent. For information, the regulations of the FDA state that the
Investigator will retain study documents:

 

(a)                                  for
a minimum of two years following the date a marketing application (New Drug
Application or NDA) is actually approved for the drug for the proposed clinical
indication; or

 

(b)                                  if
the FDA has been notified that no marketing application is to be filed by
BioMedicines, or if the marketing application has been filed but is not
approved by the FDA, then for a minimum of two years following the release date
of the final report; or

 

(c)                                  if
neither a) nor b) applies, then for a minimum of fifteen (15) years after the
completion or discontinuation of the study.

 

(d)                                  The
Investigator must obtain BioMedicines’s written permission before disposing of
any records.

 

If the
Investigator relocates, retires or for any reason withdraws from the study,
then the study records may be transferred to an acceptable person or
institution with the written approval of BioMedicines.

 

The
Investigator agrees to maintain a complete and current record of all
documentation associated with the study. All of the documents should be kept
together. Each should be available for ready review. These study documents
will include the:

 

(e)                                  protocol,
including the case report forms

 

(f)                                    protocol
approval page with all required signatures

 

(g)                                 protocol
amendments and approval pages

 

(h)                                 signed
FDA Form 1572 or similar local form as appropriate

 

(i)                                    Investigator’s
current curriculum vitae

 

(j)                                    documentation
of IRB or Ethics Committee approvals for the protocol, amendments, informed
consent, and advertisements used by the investigator to recruit patients

 

(k)                                current
clinical laboratory certification

 

(l)                                    range
of normal laboratory values

 

(m)                              Investigational
Brochure

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

11

 

(n)                                 site
visit log

 

(o)                                  correspondence
(all “to” and “from” of relevance)

 

(p)                                  drug
accountability records, drug shipment forms, and drug disposal records

 

(q)                                  case
report forms and informed consent documents for individual subjects

 

(r)                                  final
report for the study if available.

 

8.                                      EVALUATION
OF RESULTS

 

8.1                               Determination
of Sample Size(s).  The proportion of patients [*] will provide the initial estimate of drug efficacy to be
used in planning future [*] studies. No
[*] will be performed in the current
study. A sample size of [*] will give
95% confidence intervals of approximately [*] for
observed proportions of responders between [*].

 

8.2                               Description
of Statistical Methods.  All efficacy analyses will be performed both
with only those data available at a given time point and on an intention to
treat basis with the data carried forward from the last available data point.
Data will be summarized using descriptive statistics. Means and variances and
related parameters (standard deviations, standard errors of the mean) will be
calculated for continuous data. Categorical data will be summarized using
frequency and incidence rates. Confidence intervals will be calculated as
appropriate.

 

8.3                               Evaluation
of Efficacy.  The effect of each treatment on [*] will be evaluated by considering:

 

1.                                       the
proportion of subjects having normal [*] after [*] weeks of treatment; and

 

2.                                       the
mean in change from baseline of [*] where the [*] will be calculated as the [*].

 

The
proportion of subjects that normalize [*] in each
treatment group will be re-ported with 95% confidence intervals (normal
approximation). To assess dose-response for the proportion of patients who [*], a chi-square test on trend in bino-mial proportions
will be performed (Cochran-Armitage test) grouping patients by total weekly
dose. Multiple logistic regression analysis will be performed to assess the
relation-ship of [*] to probability of response.
For each pair of dosing regimens, the difference between groups in proportions
who [*], with two-sided 95% confidence
intervals (normal approximation), will be reported.

 

A test
for dose-response in change from baseline to end-of-dosing [*]
will be done by determining whether the linear contrast

 

L = -4/3 ·Y1 -1/3
·Y2 + 5/3 ·Y3

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

12

 

is significantly different from 0, where Y1,
Y2 and Y3 are the mean change from baseline in [*] in the groups of patients who receive [*] of [*] omega
interferon, respectively.

 

For
each group, the mean change from baseline to end-of-study [*]
will be reported with a two-sided 95% confidence interval. Changes in [*] from baseline to end of treatment will be compared using
a multivariate analysis of covariance, controlling for base-line values. For
each pair of dosing regimens, the difference between groups in mean change from
baseline [*], with two-sided 95% confidence
intervals, will be reported.

 

To
evaluate the time-course of effects for each dosing regimen, the mean value and
the mean change from baseline, with 95% confidence intervals will be reported
for 1, 2, 4, and 8 weeks after the start of dosing. These results will also be
plotted such that all [*] dosing
groups are shown in one figure.

 

8.4                               Evaluation
of Safety.  All changes in physical examinations, all
adverse events and any significant changes in laboratory parameters will be
compared between treatment groups. If patterns of change are evident by
inspection, further analysis within and between groups will also be per-formed.
All efficacy data will also be reviewed from the view point of judging safety.

 

8.5                               Final
Report. 
Following analysis of the data and upon request by the Investigator,
BioMedicines (or the CRO) will supply a [*], as
appropriate. A copy of the [*] will be
provided to each Investigator following [*]. The
Investigator will acknowledge receipt of the [*].
{Guidelines concerning publication of the results of this clinical study are
contained within the formal Letter of Agreement associated with the protocol.}

 

9.                                      REFERENCES

 

1.                                       World
Health Organization Web Site: http://www.who.org (statistics)

2.                                       Shedock
S. Chronic hepatitis C. Dis Mon 1994;40:122-96

3.                                       U.S.
Food and Drug Administration Web Site: http://www.fda.gov {Current U.S. product
labeling for INTRON® A (interferon alfa-2b)}

4.                                       Tong
M J, et al. Treatment of chronic Hepatitis C with consensus interferon.
Hepatology 1997;26:747-54

5.                                       Milella
M, et al. Neutralizing antibodies to recombinant alpha-interferon and response
to therapy in chronic hepatitis C infection. Liver 1993;13:146-50

6.                                       Giannelli
G, et al. Biological and clinical significance of neutralizing and binding
antibodies to interferon-alpha (IFN-a,) during therapy
for hepatitis C. Clin Exp Immunol 1994;94:4-9

7.                                       Antonelli
G. Antibodies to interferon in patients undergoing IFN therapy: an update. J
Biol Regul Homeost Agents 1995;9:123-31

8.                                       Milella
M, et al. Treatment with natural IFN of hepatitis C patients with or without
antibodies to re-combinant IFN. Hepatogastroentero11995;42:201-4

9.                                       Adolf
G. Monoclonal Antibodies and Enzyme Immunoassays Specific for Human Interferon
(IFN) m: Evidence that IFN-m1
is a component of Human Leukocyte IFN. Virology; 1990:175:410-17

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

13

 

10.                                 Uze
G, et al. Genetic Transfer of a Functional Human Interferon  a Receptor into
Mouse Cells. Cell 1990;60:225-34.

11.                                 Investigator’s
Brochure for Omega Interferon 1998.

12.                                 Knodell
RG et al. Formulation and Application of a Numerical Scoring System for
Assessing Histological Activity in Asmptomatic Chronic Active Hepatitis.
Hepatology 1981;5:431-5

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

14

 

Appendix 1. Ethical Issues

 

A
validly constituted Ethical Committee or Institutional Review Board (IRB) must
review and approve in writing this protocol. The Investigator will submit the
notification of approval to the BioMedicines (or to an affiliated clinical
research organization). The approval must include the identification of the
protocol, the date of the approval and the chairperson’s signature. The
Investigator must obtain and submit documentation of approval before involving
subjects in any manner in this study. The Ethical Committee or IRB or its
Chairman/Vice-Chairman, as appropriate, must also review and approve in writing
all amendments to the protocol. The Investigator must submit the approval to
BioMedicines (or to an affiliated CRO) prior to implementation of the
amendment.

 

Additional information regarding ethical requirements
can be obtained from BioMedicines at any time.

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

1

 

Appendix
2. Medical Guidelines for
the Treatment of an Overdose

 

Stop administering the investigational drug.
Hospitalize the subject if it is medically indicated to do so. Monitor vital
signs carefully and follow laboratory tests appropriately, especially
hematological parameters. Inform BioMedicines immediately.

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

1

 

Appendix
3. Instructions for the
Handling and Shipping of Specimens

 

1.                                       Instructions
for Collection and Storage of Samples - No plasma samples wilt be obtained in
this study.

 

2.                                       Instructions
for Handling and Shipping Samples- not applicable.

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

1

 

TABLE OF CONTENTS

 

	
  1.

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Affiliate

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.2

  	
  Effective Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.3

  	
  Field

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.4

  	
  Non-Manufacturing
  Know-How

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.5

  	
  Manufacturing Know-How

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.6

  	
  Licensed Product(s)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.7

  	
  Manufacturing Process

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.8

  	
  Net Sales

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.9

  	
  Patent Rights

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.10

  	
  Phase II

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.11

  	
  Phase III

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.12

  	
  R&D Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.13

  	
  Settlement
  Agreement between BII and Genentech

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.14

  	
  Sublicensee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.15

  	
  Territory

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  GRANT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Grant

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2

  	
  Sublicense

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3

  	
  BII Obligations
  for the United States

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  DUE DILIGENCE BY BMI

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Development Planning

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.2

  	
  Exercise of Diligence

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.3

  	
  Commercialisation
  Plans in Certain Countries

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.4

  	
  Potential
  Abandonment of Rights by BMI

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.5

  	
  Periodic Reporting

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.6

  	
  Need
  for Approval of Regulatory Authorities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  SUBLICENSING

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Characteristics
  of Potential Sublicensees

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.2

  	
  BMI Duty to Inform

  	
   

  

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

i

 

	
  5.

  	
  BII
  REVIEW RIGHTS AND TERRITORIAL REVERSION RIGHTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  BII Clinical Data
  Review Rights

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.2

  	
  BII Reversion Rights

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.3

  	
  One-Time Rights

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  DATA

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Preclinical
  and Clinical Data, Non-Manufacturing Know-How

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.2

  	
  Additional Reports

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  MANUFACTURING: PHASE II

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Responsibility
  for Phase II Manufacturing

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.2

  	
  Manufacturing
  Standards for Phase II Manufacturing

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.3

  	
  Supplies
  for Phase II Clinical Trial described in Appendix D

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.4

  	
  Additional
  Phase II Clinical Supplies

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.5

  	
  Cooperation During
  Manufacturing

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  MANUFACTURING:
  PHASE III AND COMMERCIAL SUPPLY

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Responsibility
  for Phase Ill Manufacturing and for Commercial Supply

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.2

  	
  Price
  for Commercial Supplies/Minimum Order

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.3

  	
  Floor Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.4

  	
  Payment
  Schedule and Cost Verification

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.5

  	
  Supply Agreement and
  Duration

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.6

  	
  Payments for
  Supply in Deutsche Mark

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  PAYMENTS/ROYALTIES
  AND RELATED MATTERS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  All Payments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.2

  	
  Initial Fee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.3

  	
  Milestones

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.4

  	
  Royalty
  Payments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.5

  	
  When
  Royalty Payments Are Not Due and Limitations Thereon

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.6

  	
  Not
  Due Royalty Payments on Supplies for Clinical Trials

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.7

  	
  Other
  Payments for Sales Within the United States

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.8

  	
  Sales Reporting

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.9

  	
  Timelines of Payments

  	
   

  

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

ii

 

	
   

  	
  9.10

  	
  Financial
  Records and Verification

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.11

  	
  Taxes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  INTELLECTUAL
  PROPERTY MATTERS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Maintenance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.2

  	
  Patent Term
  Extension or Equivalent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.3

  	
  Notification
  Regarding Infringement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.4

  	
  Litigation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.5

  	
  Payments and Patent
  Litigation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.6

  	
  Other Intellectual
  Property

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.7

  	
  Improvements
  to the Manufacturing Process

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  Freedom to Execute
  Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.2

  	
  Patent Rights

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.3

  	
  Genentech, Inc.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.4

  	
  BII Affiliate(s)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.5

  	
  BMI Sublicensee(s)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  ASSIGNMENT, CHANGE IN
  CONTROL

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1

  	
  Ability of BMI
  to Assign Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.2

  	
  Waiver of Consent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.3

  	
  Change in Control

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  TERM AND TERMINATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.1

  	
  Duration of Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.2

  	
  Paid-Up License

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.3

  	
  Termination
  Because of Unremedied Breach

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.4

  	
  Termination
  Because of Insolvency

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.5

  	
  Court-Awarded Damages

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.6

  	
  Continuation of
  Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.7

  	
  Duties of BMI After
  Breach

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.8

  	
  Duties of BMI After
  Bankruptcy

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  CONFIDENTIALITY

  	
   

  

 

[  * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

iii

 

	
   

  	
  14.1

  	
  Transmittal of
  Information

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14.2

  	
  Approval of Public
  Disclosure

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14.3

  	
  Acknowledgment
  of Private Disclosure

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
  COMMUNICATIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.1

  	
  Instructions for
  Communications

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
  MISCELLANEOUS PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.1

  	
  Governance of Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.2

  	
  Entire Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.3

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.4

  	
  Original
  Agreement and Counterparts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.5

  	
  No Waiver of Rights

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.6

  	
  Section Titles

  	
   

  

 

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iv

 

LETTER AMENDMENT TO THE OMEGA
INTERFERON LICENSE AGREEMENT

 

BioMedicines, Inc.

1301 Marina Village Parkway

Suite 200

Alameda, CA 
94501

U.S.A.

 

21 February 2000

 

Dear Sirs:

 

Under an Agreement dated July 17, 1998,
Boehringer Ingelheim International GmbH (“BII”) has granted BioMedicines, Inc.
(“BMI”) certain rights to formulations of Omega Interferon (the “Agreement”)
and BMI is commencing clinical trials with one such formulation.  This letter Amendment is to confirm the
agreement between BII and BMI to more specifically define the rights granted in
relation to new dosage forms and indications.

 

Therefore, BII and BMI hereby agree as follows:

 

A.                                    Definitions:  All capitalised items not otherwise defined
in this letter Amendment shall have the meaning given to them in the Agreement.

 

B.                                    Section 1.3
is amended to read as follows:  “1.3 “Field” shall mean the treatment of humans by the
administration of Licensed Product for diseases, disorders, conditions and the
like except multiple sclerosis.”

 

C.                                    Section 1.6
is amended to read as follows:  “1.6 “Licensed Product” shall mean one or more pharmaceutical
products initially developed by BII and containing Omega Interferon (which is
described more fully in Appendix A), including all such products suitable for
administration [*] whether or not initially
developed by BII, and for use in the Field, including new formulations, if any,
developed by BII or BMI after the Effective Date.”

 

D.                                    A
new Section 2.4 is added as follows: 
“2.4 BII agrees to inform BMI in advance before BII grants rights to any
[*] of Omega Interferon to any third
party and to discuss any possible conflict between BMI and such third party.
BII agrees to exclude the indications [*] from any
such rights granted to a third party. 
Any agreement between BII and such third party will provide for a fair
compensation to BMI in the event such third party benefits from [*] at BMI’s expense under the R&D Agreement.”

 

E.                                      The
beginning of the first sentence of Section 5.2.3 is amended to read as
follows:  “5.2.3 “Rights of
First Refusal”  Within thirty
(30) days after receiving from BMI the final clinical trial report for one of
the clinical studies described in Appendix D...”

 

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PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

2

 

 

The definition of “Reversion
Terms” in Section 5.2.3 is extended by adding a new sentence as
follows:  “Reversion Terms” shall also
apply to development of the oral dosage form referred to in Section 5.2.4
(new) and the sustained release dosage form referred to in Section 5.2.5
(new) as the case may be.”

 

F.                                      New
Sections 5.24. and 5.2.5 are added:

 

“5.2.4 “Oral Form”  If BMI
develops an oral form of Licensed Product, than within thirty (30) days after
receiving from BMI both the final preclinical report for a study reporting the
results of oral [*] testing in an animal model of
Omega Interferon and the results of one of the clinical trials pursuant to Section 5.2.3,
BII shall inform BMI in writing whether it wishes to negotiate the reversion of
some or all of the rights granted to BMI under this Agreement in the countries
of the Territory except for countries where BMI has granted a Sublicense under
Clause 5.2.2.  If BII does so wish, then
both BMI and BII agree to negotiate in good faith for no more than an
additional sixty (60) days the Reversion Terms. 
Until the expiration of this sixty (60) day period, BMI may not conclude
a Sublicense agreement with any third party except for countries in Asia
pursuant to Section 3.2.  Discussions
shall then continue as described in paragraphs 2 and 3 of Clause 5.2.3.”

 

“5.2.5 “[*]”  If BMI develops
a [*] for Licensed Product, then within
thirty (30) days after receiving from BMI both the final [*]
report referred to in Appendix F and the results of one of the clinical trials
pursuant to Section 5.2.3, BII shall inform BMI in writing whether it
wishes to negotiate the reversion of some or all of the rights granted to BMI
under this Agreement in the countries of the Territory except for countries where
BMI has granted a Sublicense under Clause 5.2.2.  If BII does so wish, then both BMI and BII
agree to negotiate in good faith for no more than an additional sixty (60) days
the Reversion Terms.  Until the
expiration of this sixty (60) day period, BMI may not conclude a Sublicense
agreement with any third party except for countries in Asia pursuant to Section 3.2.  Discussions shall then continue as described
in paragraphs 2 and 3 of Clause 5.2.3.”.

 

G.                                    Section 5.3
is revised as follows:  “5.3 “One-Time Rights”  Both
BII and BMI agree that the reversion rights described in Section 5.2.3,
5.2.4 and 5.2.5 shall be “one-time” rights only and shall expire following the
earliest of the following independent and mutually exclusive events:

 

a.                                       the
decision by BII to decline to review the report regarding one of the clinical
studies of Appendix D or the preclinical reports of Sections 5.2.4 or 5.2.5 as
the case may be; or

 

b.                                       the
end of the thirty (30)-day period referred to in Section 5.2.3, 5.2.4 or
5.2.5 as the case may be but then if, and only if, BII has not yet informed BMI
in writing of BII’s wish to negotiate Reversion Terms; or

 

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3

 

c.                                       the
end of the sixty (60)-day negotiation period referred to in Section 5.2.3,
5.2.4 or 5.2.5 as the case may be but then if, and only if, BII and BMI have
not yet agreed on said Reversion Terms.”

 

H.                                    A
new sentence is added at the end of Section 6.2:  “The obligation to provide such written
reports shall also apply to [*] of Omega
Interferon developed by BMI during the term of this Agreement.”

 

I.                                         Wherever
the word “trial” appears in Section 7.1., 7.2 and 7.3 it is replaced by
the word “trials.”

 

J.                                      The
second sentence of Section 7.4 is amended to read as follows:  “BII through its Affiliate BI Austria
(formerly Bender and Co. GmbH) or BI Pharma KG, agrees to supply BMI at
mutually agreed intervals, to be laid down in the R&D Agreement, additional
[*] of Licensed Product or matching
Placebo subject for each batch of [*] to the
stability and release for clinical trials of the Omega Interferon drug
substance batches which were available at BI Austria on the Effective Date.”

 

K.                                    New
Sections 7.6 and 7.7 are added:

 

“7.6  “Bulk Drug Substance”.  BII shall supply to BMI [*]
of Omega Interferon bulk substance.  BMI
agrees to use such bulk substance exclusively for [*]
as described in Appendix E and a [*] as
described in Appendix F.  BMI
acknowledges that this bulk drug substance has not been released for use in
humans.”

 

7.7 “Additional Supplies of Bulk Drug Substance”.  One completion of the [*]
studies described in Appendices E and F and the clinical trials in
Appendix D, BMI will inform BII in each case of its interest in proceeding
with the development of each [*] BMI shall
inform BII on the proposed changes with respect to bulk drug substance and
final [*] supply requirements, based on the
results from such studies.  Within sixty
days upon receiving such information BII or BI Pharma KG shall prepare a
proposal on further drug supply for the support of clinical trials.  If appropriate, BMI shall negotiate with BII
or BI Pharma KG in good faith the terms for BII or BI Pharma KG to supply BMI
with committed quantities of bulk drug substance and drug product for further
development.  BMI and BI Pharma KG will
also agree on a new project plan and on the conditions of supply in terms of
feasibility, time, costs and workscope to be laid down as an Amendment to the
R&D Agreement.  Notwithstanding the
second paragraph of Section L, BMI and BI Pharma KG will also agree to the
terms for the transfer of BI Pharma KG’s rights and obligations to manufacture
sustained release injectable drug product to BMI and/or a third party.

 

L.                                     A
new Section 7.8 is added as follows: 
“7.8 “[*]”.  Within sixty (60) days after BMI has provided
BII with all relevant information regarding its plans for development of a [*] including product requirements, expected market size and
manufacturing technology, the Parties will negotiate in good faith the basic
terms of a supply agreement including prices for commercial supplies, minimum
orders, reserved capacity at BII and commitments to

 

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
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4

 

purchase
by BMI.  A detailed supply agreement will
be concluded at the latest one (1) year prior to the launch of each
Licensed Product.

 

At its sole
discretion, BI Pharma KG may decide to exercise its rights to manufacture [*] under Section 9 of the R&D Agreement by
describing the CMC information for regulatory submissions in the form of a
master file.  BMI agrees to ensure that
such BI Pharma KG rights are acknowledged in any BMI agreements with third
parties on the development of new dosage forms.”

 

M.                                  Appendix
D is updated and consists of the 3 BMI protocols dated 19.04.1999, 15.09.1999
and 18.09.1999.

 

N.                                    Two
new Appendices are added:

 

“E.                                Development
of [*]

 

F.                                      Development
of [*]”

 

Best regards

Boehringer Ingelheim

International GmbH

pps.

 

	
  /s/ Dr. D. Mitchard

  	
   

  
	
   

  
	
  Dr. C. Hauke Dr. D. Mitchard

  

 

Please acknowledge your agreement to the above letter Amendment by
signing below where indicated.

 

BioMedicines, Inc.

 

	
  By:

  	
  /s/ S M Moran

  
	
   

  	
   

  
	
  Name:

  	
   SM Moran, M.D.

  
	
   

  	
   

  
	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  24 February 2000

  	
   

  
				

 

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AMENDED.

 

5

 

Appendix E

 

Oral Formulation Research Plan

 

BioMedicines, Inc. (BMI) and Protein Delivery, Inc. (PDI)
have executed an agreement to explore the feasibility of developing an oral
formulation of omega interferon.  PDI
will utilize patented technology to [*] to produce
one of two general structures:

 

[*]

 

After generating up to three different OFP or OPF structural classes
representative structures from each class will be examined with the BM8233
commercial assay for quantitating omega interferon.  BMI will supply the assay and methodology.
PDI will establish the assay in its facilities.

 

In addition, these representative structures will be assayed for
bioactivity.  Currently, the two
companies intend to develop the A549-EMCV bioassay utilizing cells and virus
obtained from the U.S. ATCC and methods to be developed by the two
companies.  It is anticipated, however,
that the assay system will be established in a Biohazard 3 capable laboratory
extrinsic to both companies.  The most
probable sites are the University of Utah and Duke University.  Final selection of a bioassay laboratory will
be made at a later date.

 

If a suitable OFP or OPF structure can be identified which is both
measurable and active, the molecule will be scaled up sufficiently to permit
testing of oral absorption.  Currently,
PDI is utilizing a rodent model developed collaboratively with Duke
University.  In addition, BMI is now
negotiating with XTL Biotherapeutics regarding the XTL Trimeris biosystem.

 

The overview described above is necessarily brief and will be expanded
during the course of detailed planning and execution.  Subsequent, more detailed plans can be made
available as they are developed. 
Currently, PDI and BMI expect to pursue the activity-timetable shown on
the following page.

 

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1

 

Oral Formulations Activity
Timetable

 

[*]

 

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AMENDED.

 

1

 

Appendix F

 

Sustained Release Formulation
Research Plan

 

Bio-Medicines, Inc. (BMI) and Durect, Inc. (DI) have a
non-binding agreement to explore the feasibility of developing a sustained
release formulation of omega interferon. 
DI will utilize patented technology to produce both a new formulation of
unmodified omega interferon suitable for inclusion in the Duros® technology.

 

DI has certain rights under license from the Alza Corporation.  Currently the rights to develop a [*] will need to be obtained from Alza.  BMI and DI have agreed upon a structure for
the feasibility, development and subsequent commercialization duties and
rewards, if any, for the successful development of a sustained release
formulation.

 

The two companies have agreed in principle that a formal proposal will
be made to Alza once it is established that the feasibility work can be
executed. BMI will provide omega interferon, assay reagents and methodologies
and conduct the appropriate quantitative and bioassay testing.  DI will be responsible for developing a
formulation containing omega that is compatible with Duros, will be responsible
for [*] will be conducted [*] to include a maximum of [*]
will be the responsibility of BMI.  The
principal goal will be to determine if omega [*].

 

The overview described above is necessarily brief and will be expanded
during the course of detailed planning and execution.  Subsequent, more detailed plans can be made
available as they are developed. 
Currently, DI and BMI expect to pursue the activity-timetable shown on
the following page.

 

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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

1

 

Sustained Release Formulation
Activity Timetable

 

[*]

 

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.

 

1

 

Amendment No. 2

 

to the Licence Agreement

on Interferon-Omega

dated July 17th, 1998

as amended on February 21, 2000

(hereinafter referred to as the “Agreement”)

 

between

 

Intarcia Therapeutics, Inc.

(formerly BioMedicines, Inc.)

 

2000
Powell Suite 1640

Emeryville, CA  94608

 

U.S.A.

 

(hereinafter referred to as “BMI”)

 

and

 

Boehringer Ingelheim International GmbH

Binger Strasse 173

55216 Ingelheim

 

Federal
Republic of Germany

 

(hereinafter referred to as “BII”)

 

(BMI and BII hereinafter individually and/or

collectively referred to as the “Party/Parties”).

 

Preamble

 

Under
the Agreement as amended BII has granted BMI certain rights to formulations of
Omega Interferon and uses thereof and BMI is conducting clinical trials with
one such formulation and conducting research and development activities on two
others.  The purpose of this Amendment No. 2
between BII and BMI is to redefine rights granted in relation to, and
obligations with respect to, new indications. 
Moreover, the Parties wish to redefine and specify their respective
obligations with respect to the supply of Omega Interferon.

 

Therefore,
BII and BMI hereby agree as follows:

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED
IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE  SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

 

1.                            BII and BMI hereby agree on the
following changes of the Agreement:

 

A.                          Definitions:

All capitalised items not
otherwise defined in this Amendment shall have the meaning given to them in the
Agreement.

 

B.                          Section 1.3

is modified as follows:

 

„1.3.”Field” shall mean the treatment of humans by the administration
of Licensed Product for diseases, disorders, conditions, and the like.”

 

C.                          Section 2.4

is deleted.

 

D.                          Section 3.1 paragraph 2

is deleted.

 

E.                            Section 5.2.2

paragraph 2 is 
replaced as follows:

 

„In the event, BMI sends to a prospective Asian Sublicensee any
preclinical or clinical data on the oral form of the Licensed Product referred
to in Section 5.2.4 and that did not originate from or within BII or a BII
Affiliate (“New Data”), then BMI will send such New Data to BII on or before
the date such New Data are sent to such prospective Sublicensee and BII shall
have the opportunity to negotiate for the reversion of the rights granted under
this Agreement.”

 

F.                            Section 7.8

is modified as follows by adding a new (and third)
paragraph:

 

“Notwithstanding the foregoing of this Section 7.8, BMI and BII
acknowledge that development and/or commercialisation of Omega Interferon using
the ALZA DUROSâ or similar implantable or
sustained release injectable drug delivery system, will require special
manufacturing expertise and consequently, BII and BMI agree that:

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN
THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES
ACT OF 1933, AS AMENDED.

 

2

 

(1)                     at is sole discretion, BMI itself
and/or a third party(-ies) on BMI’s behalf may conduct final formulation,
filling, packaging and labeling of the ALZA DUROSâ or similar system (see above);
and

(2)                     BII agrees to ensure that such
BMI rights are acknowledged within BII and by its Affiliates, subsidiaries, and
the like.”

 

G.                          New Section 7.9

A new Section 7.9 is added as follows:

 

“In the event of commercialisation by BMI of Omega Interferon using the
ALZA DUROSâ or similar implantable or
sustained release injectable drug delivery system, which will not be supplied
by BI Pharma GmbH & Co. KG (formerly BI Pharma KG), the Parties and
their respective Affiliates (as described in Section 7.8 above) will
reduce the royalty rate for Omega Interferon according to Section 8.2 (as
amended hereinafter) and supply the necessary Omega Interferon bulk drug
substance (“BDS”) under the intended supply agreement (for the latter see Section 9
of the R&D Agreement) at the Floor Price referenced in Section 8.3.  This intended supply agreement will be
negotiated in good faith between BMI and BI Pharma GmbH & Co. KG.”

 

H.                          Section 8.1

Shall be amended as follows:

 

“8.1                                Responsibility for Phase III
Manufacturing and Commercial Supply BMI shall be responsible for supply of
Licensed Product in support of Phase III clinical testing and subsequent
commercialization. For the purpose of Phase III manufacturing, BMI has
concluded the R&D Agreement with BI Pharma GmbH & Co. KG. For the
purpose of commercial supply, BII or an Affiliate of BII, and BMI intend to
negotiate in good faith a supply agreement in fair consideration of the terms
and conditions stipulated in this Section 8 and in Appendix G.”

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN
THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES
ACT OF 1933, AS AMENDED.

 

3

 

I.                               Section 8.2

Is modified as follows:

 

“8.2                                Price for Commercial Supplies

BMI shall purchase its requirements of Licensed Product at a price
which will be the higher of

 

(i)                                  a percentage of the [ * ] by BMI, BMI’s Affiliate or Sublicensee in the Territory as laid down
in Section 9, and - in case of supply of BDS - less

 

aa) a deduction of  [ * ] of the royalties BMI has to pay for the same period to third parties
for the ALZA DUROS® as laid out in Appendix H, and

 

bb) a deduction (for fill & finish activities of BDS not
performed), based on the number of annual treatments of ALZA DUROS® units sold, for the calculated
number of [ * ] equivalents multiplied by [ * ] per [ * ] equivalent taking into account a
standard yield loss of [ * ].  For purposes of this Agreement, an “annual
treatment” is defined herein as [ * ]
weeks of daily treatment and each day of treatment requires [ * ] equivalent.  Therefore, each
annual treatment is equal to [ * ]
equivalents.  The annual number of
calculated [ * ] equivalents is determined by
multiplying the number of annual treatments sold by [ * ].  E. g. taking the basic
assumption that each ALZA DUROS® unit is designed to deliver [ * ]
weeks of treatment, an annual treatment of [ * ] weeks would require [ * ]
units.  If for an example, [ * ] of such ALZA DUROS® units are sold in a given year, the number of
annual treatments for that year would be [ * ].  For illustration purposes an example
calculation is attached in Appendix J (see “Example Calculation of the
Royalties on Net Sales of the ALZA DUROS®);

 

“BDS Sold” shall be the cumulative amount of BDS, supplied by BII or a
BII Affiliate, contained in the respective units manufactured from BDS and sold
by BMI, BMI’s Affiliate or Sublicensee;

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN
THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES
ACT OF 1933, AS AMENDED.

 

4

 

 or

 

(ii)                              the Floor Price (for BDS and fill &
finish per [ * ] or for BDS solely) referenced in
Section 8.3 as paid by BMI to BII pursuant to Section 8.4.”

 

J.                            Section 8.3

is replaced in its entirety as follows:

 

“8.3                                Floor Price

Notwithstanding the above Section 8.2, under no circumstances will
BII be obliged to sell commercial quantities of Licensed Product at a price
below the following prices in Euro set per gram and/or [ * ] dependent on the number of     [ * ]
ordered and bought and the withdrawable quantity  of drug per [ * ]
(the “Floor Price”).

 

For supply of BDS:

 

	
  Annual Quantity

  	
   

  	
  BDS
  Price per g

  
	
   

  	
   

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ] €

  
	
  [ * ]

  	
   

  	
  [ * ] €

  
	
  [ * ]

  	
   

  	
  [ * ] €

  
	
  [ * ]

  	
   

  	
  [ * ] €

  
	
  [ * ]

  	
   

  	
  [ * ] €

  

 

For manufacturing of [ * ]
in addition to the BDS contained in each [ * ]:

 

	
  Annual Quantity

  	
   

  	
  Price
  per [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ] €

  
	
  [ * ]

  	
   

  	
  [ * ] €

  
	
  [ * ]

  	
   

  	
  [ * ] €

  

 

The Floor Prices are based on the assumptions as
outlined in Appendix G and are valid through the end of year [ * ] and will be
increased by [ * ] percent annually starting
with year [ * ] and the following years
to the extent justified by increases in BII costs.  In addition, beginning [ * ] years after commercialization commences, or with the expiry of Patent
Rights on a country-by-country basis, 

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN
THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES
ACT OF 1933, AS AMENDED.

 

5

 

whichever is longer, the Supply Price for [ * ] and BDS
shall be reduced by [ * ] percent ([ * ]%).”

 

K.                          Section 8.4

is replaced in its entirety as follows:

 

“8.4                                Payment Schedule

BMI will pay to BII within 30 days of delivery of each released batch
of Licensed Product, meeting all approved specifications, the Floor Price as
defined and referenced in Section 8.3 above.”

 

L.                           Section 8.5

is replaced as follows:

 

“8.5                                Commercial Supply, Supply
Agreement and Duration

The Parties shall respect the forecasting timelines stipulated in
Appendix G for ordering commercial quantities of Licensed Product
independently of a conclusion of the supply agreement. However, any supply
based on such forecasts shall be conditioned by the conclusion and subject to
the terms of such supply agreement within the timelines herein agreed.

 

The technical and forecasting provisions stipulated  in Appendix G shall be adequately
reflected in the terms of the supply agreement.

The Parties agree that the supply agreement shall be concluded and
signed no later than (i) [ * ]
months prior to the intended first launch of 
Licensed Product, or (ii) no later than the end of the fourth quarter of 2007, whichever date
occurs earlier, hereby setting a deadline for the negotiations and the
obligation to negotiate and conclude the same.

 

If the Parties are not able to conclude such supply agreement in good
faith negotiations by such deadline, BMI shall be free to proceed according to Section 9.3
of the R&D Agreement (i. e. production by BMI or third party) and BII
and BI Pharma GmbH & Co. KG shall have no further supply obligations
towards BMI under Section 8.5 of the License Agreement and the R&D 

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN
THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES
ACT OF 1933, AS AMENDED.

 

6

 

Agreement except for the supply of BDS or finished Licensed Product (in
bulk) for development activities.

 

Upon any failure to reach agreement on a supply agreement, BII shall,
upon request of BMI, transfer the manufacturing process for the Licensed
Product to BMI or its designee in accordance with the following provisions:

 

a)                                              As part of any manufacturing
process transfer made pursuant to this Section, BII will provide BMI with (i) a
list of materials and information to be transferred, consisting of technical
reports and materials reasonably required to perform the applicable process as
performed by BII at such time and for regulatory filings (including but not
limited to any master cell banks, working cell banks, media used including
recipes thereof, fermentation processes, recovery steps established, process
validation, product identity assays, in-process-control assays, standard
operating procedures, and information regarding equipment), as well as samples
of the working cell bank prepared at BII, adapted cell growth medium
formulation and technical methods for assays required for the applicable
process, and the design or layout of its facilities, and (ii) a list
specifically describing manufacturing know-how.

 

b)                                              BII will provide to BMI all
necessary CMC documentation required for international filings, including assay
methodology for product characterization, optimized media and buffer
compositions, optimized control parameters for the fermentation, recovery and
formulation processes developed by BII for the manufacture of the applicable
Licensed Product.

 

c)                                               BMI shall reimburse the
reasonable and documented out-of-pocket expenses incurred by BII in the course
of effecting such process transfer.  BII
shall submit an invoice providing information in reasonable detail regarding
such expenses, and BMI shall pay such invoice within 30 days of receipt.

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN
THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES
ACT OF 1933, AS AMENDED.

 

7

 

d)                                              In this case of such transfer of
the manufacturing process for the Licensed Product the Parties shall negotiate
in good faith a royalty consistent with industry practice in respect of any
transferred know-how for the transfer of the manufacturing documentation,
know-how, and the cell lines necessary for the manufacture of the bulk drug
substance, among other subjects of relevance to the manufacture of the BDS.  The use of the manufacturing documentation,
know-how, and of the cell lines shall be strictly limited to the production of
Omega Interferon for use under this Agreement. If the Parties are unable to
reach an agreement regarding the royalty to be paid by BMI to BII pursuant to
this Subsection (d), the Parties shall resolve the matter in accordance
with the dispute resolution mechanism set forth in Appendix I.

 

BII agrees to ensure that the foregoing provisions are acknowledged
within BII and by BI Pharma GmbH & Co. KG and possible other
Affiliates, subsidiaries, and the like.”

 

M.                        Section 9.8

lit. e) is modified as follows and a new lit. f) added:

 

“e) the respective Floor Price and the units already paid for supplies
of Licensed Product ([ * ]
and/or BDS) bought from BII or its Affiliates.

f) the third party royalties deductible according to Appendix H for the ALZA
DUROS®.”

 

N.                          To Section 9.9

the following sentence is added at the end:

 

Notwithstanding the foregoing, BMI shall not be allowed to deduct yield
losses above the average yield loss for manufacturing the ALZA DUROS® from the BDS (the “ALZA Yield
Loss”). The Parties shall agree in good faith on the ALZA Yield Loss twelve
(12) months prior to commercial launch of the ALZA DUROS®.

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN
THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES
ACT OF 1933, AS AMENDED.

 

8

 

2.                            As far as not amended herein, the
Agreement shall remain in full force and effect.

 

3.                            This Amendment No. 2 shall
take effect with the date of last signature hereto.

 

IN
WITNESS HEREOF, the parties hereto have executed this Amendment No. 2 as
of the date of last signature written below.

 

	
  Ingelheim,

  	
  April 20,

  	
  2005

  	
   

  	
  Emeryville, 

  	
  April
  26, 

  	
  2005

  
	
   

  	
   

  	
   

  
	
  BOEHRINGER INGELHEIM

  INTERNATIONAL GMBH

  	
   

  	
  INTARCIA THERAPEUTICS, INC.

  
	
   

  	
   

  	
   

  
	
  ppa.

  	
  ppa.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ K. Wilgenbus

  	
   

  	
  /s/ C. Hauke

  	
   

  	
  /s/ K.
  A. Leung

  	
   

  
	
  Dr. K. Wilgenbus

  	
   

  	
  Dr. C. Hauke

  	
   

  	
  K. Alice
  Leung, President & CEO

  	
   

  
										

 

 

Appendix G:                            “Basic Provisions for Commercial
Supply of IFN-Omega”

 

Appendix H:                            “Third Party Royalties for the ALZA
DUROS® formulation”

 

Appendix I:                                 “Dispute Resolution Process”

 

Appendix J:                              “Example Calculation of the
Royalties on Net Sales of the ALZA DUROS®”

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN
THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES
ACT OF 1933, AS AMENDED.

 

9

 

Appendix G

 

“Basic Provisions for
Commercial Supply of IFN-Omega”

 

(see next pages)

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN
THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES
ACT OF 1933, AS AMENDED.

 

10

 

Appendix G

to
Amendment No. 2

 

Basic Provisions for Commercial Supply IFN-Omega

 

1.                            Reserved Capacity

 

1.1                       For Bulk Drug Substance

(at an agreed production scale of [ * ], see Section 2
below)

 

Minimum Capacity   [ * ]runs [ * ]

Maximum Capacity  [ * ] commercial runs started

If the production assumptions are not achieved,
BII agrees to perform additional runs, at no additional cost to BMI, to deliver
the quantity of BDS that would have resulted from achieving the target
production assumptions.  The Parties
agree to review and revise the production assumptions as reasonably necessary.

 

1.2                       Reserved Capacity Bulk
Drug Product

(lyophilized [ * ] microgram (μg)/ [ * ])

 

Minimum Capacity   [ * ]

Maximum Capacity  [ * ]

 

2.                            Minimum Production Campaigns

The minimum production campaign conducted by
BII with respect to the manufacture of BDS will consist of [ * ] production
runs (the “Minimum Campaign”).  Any order
placed by BMI shall be for at least one Minimum Campaign and BMI commits to
purchase at least the greater of (a) the quantity ordered by BMI, or (b)

 

up to [ * ] resulting from [ * ] scale, or

up to [ * ] resulting from [ * ] scale or

up to [ * ] resulting from [ * ] scale

 

of the resulting BDS based on the appropriate
production scale as described in Section 3 and on the production
assumptions described in Section 4 below.

 

3.                            Manufacturing Scale Bulk Drug Substance

The commercial manufacturing scale has to be
decided [ * ] at the latest. The decision has to be made by mutual agreement of
the parties and shall be reasonably based on the forecasted Product quantities.

 

	
  Annually Product
  projections

  during contract timeframe

  	
   

  	
  Proposed
  manufacturing

  scale

  
	
   

  	
   

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  

 

If the annual quantity projection exceeds the
total amount of [ * ] the parties should start as soon as possible to evaluate
process improvements to increase productivity.

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED
IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE  SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

11

 

Basic
Provisions for Commercial Supply IFN-Omega

 

4.                            Floor Price for Product (IFN Omega):

The Floor Price is based on the following Basic
Production Assumptions

 

4.1                       For Bulk
Drug Substance

 

	
  Cycle time production fermenter

  	
   

  	
  [ * ]

  
	
  Cycle time purification

  	
   

  	
  [ * ]

  
	
  Minimum Titer prior to purification (in mg/l)

  	
   

  	
  [ * ]

  
	
  Minimum Yield (of purified BDS) in %

  	
   

  	
  [ * ]

  

 

4.2                       For Bulk
Drug Product [ * ] ([ * ] microgram (μg)/ [ * ])

 

	
  [ * ] size

  	
   

  	
  [ * ]

  
	
  fill volume

  	
   

  	
  [ * ]

  
	
  conc.

  	
   

  	
  [ * ] microgram (μg)/ml

  
	
  Lyo cycle time

  	
   

  	
  [ * ]

  
	
  batch size

  	
   

  	
  [ * ]

  

 

5.                            Rolling Forecast:

[ * ] months prior to the first delivery date
of commercial Product for market supply, and every quarter thereafter, BMI
shall provide BI Pharma GmbH & Co. KG with a rolling forecast for the
next [ * ] within the reserved capacity (the “Launch Forecast”). The Launch
Forecast thereafter shall provide the rolling demand of Product until the end
of the [ * ] after Launch of Finished Product.

 

[ * ] months prior to the first delivery date
of commercial Product and every quarter thereafter, BMI shall provide BI Pharma
GmbH & Co. KG with a rolling forecast for the next [ * ] within the
reserved capacity (the “Rolling Demand Forecast”).

 

The [ * ] of the Rolling Demand Forecast shall
contain firm orders and cannot be changed.

 

The [ * ] of the Rolling Demand Forecast and
the [ * ] of the Launch Forecast [ * ] months prior to Launch of the Finished
Product”, whichever begins earlier, is a partly binding forecast, which means
that the forecast can be increased or decreased within the reserved capacity as
follows:

 

	
  month

  	
   

  	
  possible
  change

  
	
  month [ * ]

  	
   

  	
   +/– [ * ]

  
	
  month [ * ]

  	
   

  	
   +/– [ * ]

  
	
  month [ * ]

  	
   

  	
   +/– [ * ]

  
	
  month [ * ]

  	
   

  	
   +/– [ * ]

  

 

The forecast for the [ * ] and thereafter is a
non-binding forecast. The forecasts for [ * ] shall contain quarterly demands,
the forecasts for [ * ] of the Launch Forecast shall contain annual demands.

 

The supply agreement will include a provision
pursuant to which firm orders can be cancelled subject to the payment to BI
Pharma GmbH & Co. KG of cancellation costs.

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED
IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE  SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

12

 

Appendix H

 

Third Party Royalties for
the ALZA DUROS® formulation

 

In addition to the supply price for the Product described below, BMI will make quarterly payments (“Product
Payments”) to ALZA in each calendar year based on “Net Sales” of the Product,
at a percentage rate, determined as provided below, of the aggregate worldwide “Net
Sales” of the Product for the immediately preceding calendar year:

 

	
  If worldwide Net Sales of
  the Product

  in Year X are ($U. & million):

  	
   

  	
  The
  Payment Rate for year X + 1 will

  be the following % of Net Sales:

  
	
   

  	
   

  	
   

  
	
  Less than [ * ]

  	
   

  	
  [ * ]

  
	
  [ * ]

  	
   

  	
  [ * ]

  
	
  > [ * ]

  	
   

  	
  [ * ]

  
	
  > [ * ]

  	
   

  	
  [ * ]

  
	
  > [ * ]

  	
   

  	
  [ * ]

  

 

For clarification, for the calendar year In
which the Product Is first sold commercially, the payment rate will be [ * ] of Net Sales.

 

Note:  BMI’s right to deduct the Third Party
Royalties is always limited to the actual percentage paid to ALZA and BMI is
obliged to notify BII in writing of a reduction of the Third Party Royalties,
if any, at soon as reasonably possible.  Section 9.10
(Financial Records and
Verification) shall apply to those Third Party Royalties).

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED
IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE  SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

13

 

Appendix I

 

DISPUTE RESOLUTION PROCEDURE

 

1.                                       If the Parties are unable to agree
on mutually acceptable royalty with respect to the process transfer effected by
BII, either Party may request in writing that the Parties select a mutually
agreeable arbitrator who has no affiliation or pre-existing relationship with
either Party and not less than 15 years of experience in the negotiation of
contract manufacturing agreements for pharmaceutical products. If the Parties
cannot agree on an arbitrator within 30 days after initiating the selection
procedure, either Party may request the AAA office in New York, NY, to appoint
an arbitrator with such experience on behalf of the Parties in accordance with
the commercial arbitration rules of AAA. The date on which such arbitrator
is selected and notified to the last of the Parties in writing will be the “Arbitration
Commencement Date.”

 

2.                                       Within 15 business days after the
Arbitration Commencement Date, each Party will prepare and deliver to both the
arbitrator and the other Party (a) a proposal for the royalty rate and
term due and payable on Licensed Product made using the manufacturing process
transferred by BII, and (b) a memorandum (the “Support Memorandum”) in
support thereof. The arbitrator will also be provided with a copy of this
License Agreement as in effect at that time. Within 10 business days after
receipt of the other Party’s Support Memorandum, each Party may submit to the
arbitrator (with a copy to the other Party) a rebuttal to the other Party’s
Support Memorandum (a “Rebuttal”) of either Party’s proposed terms. Neither
Party may have communications (either written or oral) with the arbitrator
other than for the sole purpose of engaging the arbitrator or as expressly
permitted in this paragraph 2.

 

3.                                       Within 30 days after the Arbitration
Commencement Date, the arbitrator will select from the two proposals provided
by the Parties the royalty proposal that he or she believes most accurately
reflects the industry customs taking into account all relevant circumstances,
including the relative costs borne by each Party in connection with the
development of the manufacturing process (the “Selected Proposal”). The
Selected Proposal will become a binding and enforceable agreement between the
Parties.

 

4.                                       The arbitrator will have reasonable
discretion to request additional information, hold a hearing, and extend the
time frame for reaching his or her decision. To the extent any further
arbitration rules or procedures are necessary for resolution of the
dispute, the arbitration rules of AAA will apply. Notwithstanding the
foregoing, the Parties are not required to select an arbitrator from AAA’s
panel of arbitrators.

 

5.                                       The arbitrator’s fees and expenses
will be paid by the Party whose draft is not selected by the arbitrator. If the
arbitrator revises any of the terms submitted by the Parties, the arbitrator
shall decide which Party shall bear the arbitration expenses or how such
expenses shall be allocated between the Parties. Each Party shall bear and pay
its own expenses incurred in connection with any dispute resolution procedure.

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED
IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE  SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

14

 

Appendix J

 

“Example Calculation of the
Royalties on Net Sales of the ALZA DUROS®”

 

Hypothetical Year #2
Royalty

(i.e. year #2 = second year of commercial sales and

year #1 = first year of commercial sales)

 

	
  Assumptions

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  omega DUROS net sales year #1

  	
   

  	
  [ * ]

  	
   

  	
  (represents the assumed net
  sales in the year prior to year “X”)

  
	
  Sales price per annual treatment ([ * ] devices) in Year #2

  	
   

  	
  [ * ]

  	
   

  	
   

  
	
  Number of treatments sold in year #2

  	
   

  	
  [ * ]

  	
   

  	
   

  
	
  [ * ] equivalents for a single annual therapy

  	
   

  	
  [ * ]

  	
   

  	
   

  
	
  Net deduction amount per [ * ] equivalent

  	
   

  	
  [ * ]

  	
   

  	
  (represents a deduction of [ * ], with an [ * ] yield loss adjustment)

  
	
  Floor Price Paid By BMI to BII for BDS in Year #2

  	
   

  	
  [ * ]

  	
   

  	
  (not based on calculation,
  purely for use in this example)

  

 

Calculation

 

Credit to BII:                      Base
Royalty

	
  Year # 2 Net Sales

  	
   

  	
  $

  	
  [ * ]

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
  [ * ]

  	
   

  	
  ([ * ]

  	
   

  	
  of net sales up to [ * ]
  million )

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  [ * ]

  	
   

  	
  ([ * ] of net sales from
  [ * ] million to [ * ] million )

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  [ * ]

  	
   

  	
  ([ * ] of net sales in
  excess of [ * ] million )

  	
   

  
	
  Total Base Royalty

  	
   

  	
   

  	
   

  	
  $

  	
  [ * ]

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Credit to BMI:[ * ] of
  Royalty to ALZA

  	
   

  	
   

  	
   

  
	
  Royalty to ALZA:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Year # 2 Net Sales

  	
   

  	
   

  	
   

  	
  $

  	
  [ * ]

  	
   

  	
   

  	
   

  
	
  Royalty Rate

  	
   

  	
   

  	
   

  	
  [ * ]

  	
   

  	
  (Year #2 Sales [ *] )

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  [ * ]

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  [ * ]

  	
   

  	
  (assumes [ * ] in [ * ]
  first exceeded[ * ], in Year #2 )

  	
   

  
	
  Total ALZA Royalty

  	
   

  	
   

  	
   

  	
  $

  	
  [ * ]

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  
	
  Net Credit

  	
   

  	
   

  	
   

  	
  $

  	
  [ * ]

  	
   

  	
   

  	
   

  

 

 

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED
IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE  SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

15

 

Credit to BMI:               [ * ] Equivalent Credit

	
  Number of treatments sold

  	
   

  	
  [ * ]

  
	
  [ * ] equivalents per
  treatment

  	
   

  	
  [ * ]

  
	
  Deduction per [ * ]equivalent

  	
   

  	
  €

  	
  [ * ]

  
	
  Net Credit

  	
   

  	
  €

  	
  [ * ]

  

 

Credit to BMI:               Floor
Price Paid for BDS

 

	
  Floor Price Paid By BMI to BII for BDS in Year #2

  	
   

  	
   

  	
  €

  	
   [ * ]

  
	
  Net Credit

  	
   

  	
  €

  	
   [ * ]

  

 

Summary of Credits (credits to
BMI will be listed as (debits))

	
  Base Royalty

  	
   

  	
  $[ * ]

  
	
  ALZA Royalty

  	
   

  	
  ($[ * ])

  
	
  [ * ] Equivalents

  	
   

  	
  (€ [ * ])

  
	
  Floor Price Paid
  By BMI to BII for BDS in Year #2

  	
   

  	
  (€ [ * ])

  

 

There will also be a credit / (debit) for variance from yield loss to
be agreed to per section 9.9.

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED
IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE  SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

 

16_

Exhibit 10

PLACEMENT AGENT AGREEMENT

This Placement Agent Agreement (“Agent Agreement”) is entered into this 25th day of February, 2005, by and between LITTLE SQUAW GOLD MINING COMPANY, an Alaska corporation (the “Company”) and STRATA PARTNERS, LLC, a Washington limited liability company (the “Agent”).  The Company and the Agent have signed a Term Sheet dated January 14, 2005, setting forth the general terms and conditions for a private placement of units by the Agent on a best efforts basis for the Company.  The Term Sheet is attached hereto as Exhibit A.  The purpose of this Agent Agreement is to set forth the terms and conditions of the agency relationship between the Company and the Agent.  

1.

Engagement of Agent.  The Company engages Strata Partners, LLC, a Washington limited liability company, as Placement Agent for the Company, with respect to the sale by the Company in a private placement transaction of 9,166,666 units of the Company to investors (the “Offering”).  

2.

Description of the Offering.  The Company intends to offer to prospective investors an aggregate of Two Million Seven Hundred Fifty Thousand Dollars (U.S. $2,750,000) of its shares of Common Stock and Warrants as a Unit at U.S. $0.30 per unit.  The Units will consist of one share of common stock of the Company (“Common Shares”) and one warrant (“Warrant”) entitling the holder of the Common Shares to acquire one additional share of common stock of the Company at U.S. $0.45 per share for the period of one year from the date of issue of the Common Shares to the holder.  The exercise price for the Warrants will increase to U.S. $0.55 for the period of the second year from the date of issue and further increase to U.S. $0.75 for the period of the third year from the date of issue.  The Company reserves the right to use the closing date for the Offering or date of last sale as the “Issue Date” for the exercise periods for the Warrants.

The minimum purchase for each investor is 150,000 Units (U.S. $45,000).

The Units to be issued, and the Common Shares and Warrants comprising the Units, and the Common Shares issuable upon exercise of the Warrants (collectively, with the Warrants issuable to the Agents under Section 3.2, the “Securities”) have not been registered with the Securities and Exchange Commission, pursuant to the provisions of the Securities Act of 1933, as amended (the “1933 Act”), or with state commissions or agencies pursuant to the securities laws of the states in which offerees for the Offering may receive the Memorandum.   The Units are being sold in reliance on exemptions from the state and federal registration requirements and, when acquired, will be considered restricted securities as that term is defined in Rule 144 promulgated pursuant to the provisions of the 1933 Act.  Any certificate issued for the Units will bear a legend stating, in substance, that the Units may not be sold, assigned or transferred for 

1

value in the absence of an effective registration statement or an opinion of counsel acceptable to the Company that such registration is not required.

The Company will grant each investor the registration rights set forth in the Registration Rights Declaration attached hereto as Exhibit C (the “Registration Rights Declaration”).

The Company has the right to terminate the Offering at any time and may accept subscriptions for less than all the Units in its discretion.  The Company also reserves the right to sell Units to any person at any time.  The Offering will be more fully described in a Private Placement Memorandum (the “Memorandum”); the Company expects to complete preparation of this Memorandum on or before March 15, 2005. 

3.

Agent’s Compensation.  In consideration for the services to be performed by the Agent, the Company shall pay to the Agent, or cause the Agent to be paid, compensation as provided in this section within five (5) business days of the Company’s receipt of funds from the purchasers of the Common Shares.  

3.1

Cash Compensation.  The Company shall pay to the Agent a cash compensation fee in U.S. dollars in an amount equal to five percent (5%) of the gross proceeds of the Offering received by the Company. 

3.2

 Warrants.  The Agent also will receive Warrants to purchase additional restricted shares of common stock of the Company equal to five percent (5%) of the total number of Common Shares sold by the Company in the Offering.  The terms, conditions and exercise price of the warrants to be issued to the Agent shall be identical to the terms, conditions and exercise price of the Warrants issued by the Company in the Offering.  The Company hereby agrees to grant the Agents the same registration rights granted to Investors under the Registration Rights Declaration.

4.

Representations and Warranties of the Company.  The Company represents and warrants that:

4.1

The Company is a corporation duly incorporated, validly existing, and in good standing under the laws of the State of Alaska with power and authority to own assets and to conduct its business as will be described in the Memorandum.   The Company does not have any subsidiaries.

4.2

The Company has an authorized and outstanding capitalization, including common shares, preferred stock, options, warrants and convertible securities, as set forth on Exhibit A.  The Memorandum will include a true, accurate and correct description of the Company’s Common Shares, preferred stock, options, warrants and convertible securities.  The Common Shares, when issued and delivered, shall be duly and validly issued, fully paid and non-assessable.

2

4.3

The Memorandum will not contain any untrue statement or material fact or omit to state any material fact required to be stated or necessary to make the statements in the Memorandum not misleading; provided, however, that this representation and warranty does not apply to statements or omissions made in reliance upon and in conformity with information furnished to the Company in connection with the Memorandum by Agent directly or through or by counsel on Agent’s behalf. The financial statements and schedules included in the Memorandum will present fairly the cost of the assets, the liabilities, and the capital stock of the Company as of the dates of such statements and schedules, all in conformity with generally accepted accounting principles.

4.4

Neither the execution and delivery of this Agent Agreement, nor the consummation of the transactions contemplated in this Agent Agreement (in compliance with the terms and provisions of this Agent Agreement), shall conflict with, or result in a breach of, the Articles of Incorporation of the Company, Bylaws of the Company, or any other agreement or instrument to which the Company is a party or by which it is bound.

4.5

This Agent Agreement has been duly authorized, executed, and delivered on behalf of the Company, and is the valid, binding, and enforceable obligation of the Company, except to the extent that obligations concerning indemnification under this Agent Agreement may be limited by applicable securities laws or federal bankruptcy provisions.

4.6

No authorization, approval, or consent of any regulatory body or authority will be required for the valid authorization, issuance, sale, and delivery of the Securities, or, if so required, all authorizations, approvals, and consents will be obtained and will be in full force and effect as of the issuance date for the Securities. 

4.7

The Company owns, possesses or has obtained, all governmental, administrative and third party licenses, permits, certificates, registrations, approvals, consents and other authorizations (collectively, “Permits”) necessary to own or lease (as the case may be) its properties, and to conduct its businesses as currently conducted, except such Permits the failure of which to obtain would not have a material adverse effect on the business, properties, operations, financial condition or results of operations of the Company; the Company has not received any notice of proceedings relating to the revocation, modification or suspension of any Permits which would have a material adverse effect on the Company, or notice of any circumstance which would lead it to believe that such proceedings are reasonably likely.

The Company will obtain such Permits as are necessary for the future operations, prior to commencement of any such operations.

4.8

The business and operations of the Company to its knowledge have been 

3

conducted in accordance with all applicable laws, rules and regulations of all governmental authorities, except for such violations which would not, individually or in the aggregate, have a material adverse effect on the financial condition or business of the Company.

4.9

The issuance of the Securities will not be subject to any pre-emptive right or other contractual right to purchase securities granted by the Company or to which the Company is bound. 

4.10

The Company has complied and will comply fully with the requirements of all applicable corporate and securities laws in all matters relating to the Offering.

4.11

There are no legal or governmental actions, suits, proceedings or investigations pending or, to the Company’s knowledge, threatened, to which the Company is or may be a party or of which property owned or leased by the Company is or may be the subject, or related to environmental, title, discrimination or other matters, which actions, suits, proceedings or investigations, individually or in the aggregate, could have a material adverse effect on the Company.

4.12

There are no judgments against the Company which are unsatisfied, nor is the Company subject to any injunction, judgment, decree or order of any court, regulatory body, administrative agency or other governmental body.

4.13

The Company is not in violation of its organizational or incorporating documents nor in violation of, or in default under, any lien, mortgage, lease, agreement or instrument, except for such defaults which would not, individually or in the aggregate, have a material adverse effect on the financial condition, properties or business of the Company.

4.14

Subject to the accuracy of the representations and warranties of the Agent contained in this Agent Agreement, and in the subscription agreements to be executed by investors in connection with the Offering, the offer, sale and issuance of the Securities as contemplated by this Agreement are exempt from the registration requirements of the 1933 Act and from the registration or qualifications requirements of the state securities or “blue sky” laws and regulations of any applicable state or other applicable jurisdiction.

4.15

The Company’ shares of common stock are quoted for trading on the National Association of Securities Dealers over-the-counter electronic bulletin board (the “OTCBB”).

4.16

No order ceasing, halting or suspending trading in securities of the Company nor prohibiting the sale of such securities has been issued to and is outstanding against the Company or its directors, officers or promoters, and, to the best of the Company knowledge, no investigations or proceedings for such purposes are pending or threatened.

4.17

Neither the Company nor any subsidiary thereof will have taken any action which would be reasonably expected to result in the delisting or suspension of 

4

quotation of the Common Shares on or from the OTCBB and the Company will have complied, in all material respects, with any rules and regulations of eligibility on the OTCBB.

4.18

The Company is a "reporting issuer" under section 12 of the Securities Exchange Act of 1934, as amended (the “1934 Act”) and is not in default of any of the requirements of the 1934 Act.

4.19

As of their respective filing dates, each report, schedule, registration statement and proxy filed by the Company with the United States Securities and Exchange Commission (“SEC”) after June 30, 2003 (each, an “SEC Report” and collectively, the “SEC Reports”) (and if any SEC Report filed prior to the date of this Agreement  but after June 30, 2003 was amended or superseded by a filing prior to the date of this Agreement, then also on the date of filing of such amendment or superseding filing), (i) where required, were prepared in all material respects in accordance with the requirements of the 1933 Act, or the 1934 Act, as the case may be, and the rules and regulations promulgated under such Acts applicable to such SEC Reports, (ii) did not contain any untrue statements of a material fact and did not omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and (iii) are all the forms, reports and documents required to be filed by the Company with the SEC since June 30, 2003.  Each set of audited consolidated financial statements and unaudited interim financial statements of the Company (including any notes thereto) for the fiscal years ended December 31, 2003 and December 31, 2004 included in the SEC Reports (i) complies as to form in all material respects with the published rules and regulations of the SEC with respect thereto, and (ii) have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis (except as may be indicated therein or in the notes thereto) and fairly present, in all material respects, the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended subject, in the case of the unaudited interim financial statements, to normal year-end adjustments which were not or are not expected to be material in amount.  To the Company’s knowledge, no events or other factual matters exist which would require the Company to file any amendments or modifications to any filed SEC Reports.

4.20

Each SEC Report containing financial statements that has been filed with or submitted to the SEC since June 30, 2003, was accompanied by the certifications required to be filed or submitted by the Company’s chief executive officer and chief financial officer pursuant to the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”); at the time of filing or submission of each such certification, to the best knowledge of the chief executive officer and chief financial officer, such certification was true and accurate and complied with the Sarbanes-Oxley Act and the rules and regulations promulgated thereunder; such certifications contain no qualifications or exceptions to the matters certified therein and have not been modified or withdrawn; and neither the Company nor any of its officers has received notice from any governmental entity questioning or 

5

challenging the accuracy, completeness, form or manner of filing or submission of such certification.

4.21

There is no fact known to the Company which the Company has not publicly disclosed which materially adversely affects, or so far as the Company can reasonably foresee, will materially adversely affect, the assets, liabilities (contingent or otherwise), capital, affairs, business, prospects, operations or condition (financial or otherwise) of the Company or the ability of the Company to perform its obligations under this Agreement.

4.22

Except as disclosed in the SEC Reports, the Company has filed all federal, state, local and foreign tax returns which, to the Company's knowledge, are required to be filed, or have requested extensions thereof, and have paid all taxes required to be paid by them and any other assessment, fine or penalty levied against them, to the extent that any of the foregoing is due and payable, except for such assessments, fines and penalties which are currently being contested in good faith.

4.23

There are no liens for taxes on the assets of the Company except for taxes not yet due, and there are no audits of any of the tax returns of the Company which are known by the Company’ management to be pending; there are no claims which have been or may be asserted relating to any such tax returns which, if determined adversely, would result in the assertion by any governmental agency of any deficiency which would have a material adverse effect on the properties, business or assets of the Company.

4.24

The Company is not an "investment company" within the meaning of the Investment Company Act of 1940.

4.25

Neither the Company nor any of its affiliates, nor any person acting on its or their behalf (i) has made or will make any “directed selling efforts” (as such term is defined in Regulation S of the 1933 Act) in the United States, or (ii) has engaged in or will engage in any form of “general solicitation” or “general advertising” (as such terms are defined in Rule 502 (c) under Regulation D of the 1933 Act) in the United States with respect to offers or sales of the Securities.

4.26

The Company has not, for a period of six months prior to the date hereof, sold, offered for sale or solicited, and will not for a period of six months after the Closing Date, offer, sell or solicit, any offer to buy any of its securities in a manner that would be integrated with the offer and sale of the Units and which would cause the exemption from registration set forth in Rule 506 of Regulation D or Rule 903 of Regulation S of the 1933 Act to become unavailable with respect to the offer and sale of the Securities.  “Closing Date” for the purposes of this Agent Agreement means the date on which the last closing of the Units are issued under the Offering.

4.27

The warranties and representations in this section are true and correct and will remain so as of the Closing Date.

6

5.

Representations and Warranties of the Agent.  The Agent represents and warrants that: 

(a)

The Agent is a limited liability company formed under the laws of the State of Washington, validly existing and in good standing, with all requisite power and authority to enter into this Agent Agreement and to carry out its obligations hereunder.

(b)

This Agent Agreement has been duly authorized, executed and delivered by the Agent and is a valid and binding agreement enforceable in accordance with its terms. 

(c) 

The Agent is duly registered pursuant to the provisions of the 1934 Act, as a broker-dealer and is a member in good standing of the National Association of Securities Dealers, Inc. (“NASD”) and duly registered as a broker-dealer in those states in which the Agent is required to be so registered in order to carry out the Offering contemplated by the Memorandum.

(d)

The Agent will use its best efforts to conduct the Offering in compliance with the requirements of Regulation D and in this regard the Agent will have:

(i)

During the course of the Offering, and to the extent any representations are made concerning the Offering or matters set forth in the Memorandum, not made any untrue statement of a material fact and not omitted to state a material fact required to be stated or necessary to make any statement not misleading;

(ii)

Not offered, offered for sale, or sold the Units, except to the extent permitted by Regulation D, by means of:

(A)

Any advertisement, article, notice, or other communication mentioning the Units published in any newspaper, magazine or similar medium or broadcast over television or radio;

(B)

Any seminar or meeting, the attendees of which have been invited by any general solicitation or general advertising; or

(iii)

Prior to the sale of any of the Units, reasonably believed that each subscriber and his or her purchaser representative, if any, met the suitability and other investor standards set forth in the Memorandum and the Blue Sky Survey prepared by Company Counsel pursuant to Section 9.(c) of this Agent Agreement; the Agent will prepare and maintain memoranda and other appropriate records substantiating the foregoing;

7

(iv)

Only used sales materials other than the Memorandum which have been approved for use in this Offering by the Company;

(v)

During the course of the Offering provided each offeree with a copy of the Memorandum;

(vi)

Until the last closing date, promptly distributed any supplement or amendment to the Memorandum received from the Company to persons who previously received a copy of the Memorandum and who the Agent believes continue to be interested in the Company and included such supplement or amendment in all deliveries of the Memorandum made after receipt of any such supplement or amendment; and

(vii)

Not made any representations on behalf of the Company other than those contained in the Memorandum, nor have acted as an agent of the Company in any other capacity except as expressly set forth herein.

6.

Covenants of the Company.  The Company covenants that:

6.1

Amendments and Supplements. The Company shall not at any time make any amendment or supplement to the Memorandum without previously providing Agent with (a) a copy of such amendment or supplement, and (b) a reasonable opportunity to comment regarding the same.

6.2

Copies of Memorandum. The Company shall deliver to Agent, without charge, from time to time during the term of this Agent Agreement, as many copies of the Memorandum as Agent reasonably may request, and the Company consents to the use of the Memorandum as permitted by applicable state and federal securities laws.

6.3

Compliance with Laws. The Company shall use best efforts to comply with, and to continue to comply with, applicable state and federal securities and other laws so as to permit the continuation of the Offering.

6.4

Stop Order. The Company promptly shall notify Agent in the event of (a) the issuance by any federal or state securities commission or authority of any stop order suspending the effectiveness of the Memorandum, or (b) the institution or notice of the intended institution of any action or proceeding for that purpose. The Company shall make every reasonable effort to prevent the issuance of a stop order, and, if a stop order is issued at any time, to obtain the withdrawal of the order at the earliest possible time.

6.5

Outstanding Capitalization.  On the Closing Date, the Company will deliver to the Agent a certificate of its Chief Executive Officer setting forth the authorized and outstanding capitalization, including common shares, preferred stock, 

8

options, warrants and convertible securities, on the Closing Date after giving effect to the Closing.

6.6

Exclusivity.  Until the later of March 1, 2005, or 21 days after the completion of the Memorandum, the Company will not, and will cause its directors, officers, employees, agents and representatives not to, directly or indirectly, solicit or entertain offers from, or in any manner encourage, accept, or consider any proposal of, any other person relating to the acquisition of the Company, shares of its capital stock, securities convertible into or exchangeable for shares of its capital stock, or the Company’s assets or businesses, in whole or in part, whether directly or indirectly, through purchase, merger, consolidation, original issuance, or otherwise, except in the case that the Company is negotiating to acquire properties or interests from other parties, to the extent that the Company may offer capital stock as part of the acquisition.  The Company will immediately notify Agent regarding any contact between the Company, any of its directors, officers, employees, representatives or any other person regarding any offer, proposal, or inquiry during this exclusivity period.

The Company, however, may borrow funds from affiliated persons pursuant to loan documents granting the affiliates the right to convert the loan into a purchase of shares and warrants upon the same terms as will set forth in the Memorandum. 

7.

Covenants of the Agent.  The Agent will use its best efforts to conduct the Offering in a manner intended to be in compliance with the offering procedures and the suitability standards set forth in the Memorandum and with the requirements of Regulation D of the 1933 Act, and the 1934 Act.  The Agent will:

(a)

During the course of the Offering, and to the extent any representations other than those set forth in the Memorandum are made, not make any untrue statement of a material fact or omit to state a material fact required to be stated or necessary to make any statement made not misleading concerning the Offering, or any matters set forth in or contemplated by the Memorandum; and

(b)

Take all actions necessary to fulfill its duties under Rule 15c2-4 under the 1934 Act, which duties relate to transmission or maintenance of funds received from potential participants.

8.

Expenses of Offering.  The Company will pay all expenses incurred by it in the performance of its obligations to be set forth in the Memorandum, including but not limited to the fees and expenses of the Company’s counsel and accountants and the cost of qualifying the Offering, and the sale of the Units, in various states or obtaining an exemption from state registration requirements.  The Company will reimburse the Agent for actual expenses, including but not limited to accounting, legal and professional fees, incurred by the Agent in connection with the Offering, not to exceed one-half percent (0.5%) of the gross offering proceeds.

9

The provisions of this Section shall survive any termination of this Agent Agreement.

9.

Conditions to Agent’s Obligations.  The obligations of the Agent in this Agent Agreement shall be subject to the accuracy of and compliance with, as of the date hereof, and on each closing date for the sale of the Common Shares, the representations, covenants, and warranties contained in Sections 4 and 6 hereof, the performance by the Company of its obligations hereunder, and to the following further conditions:

(a)

The Agent shall have received on or before the commencement date for the Offering an opinion from Paine, Hamblen, Coffin, Brooke & Miller LLP, Spokane, Washington (the “Company Counsel”) satisfactory in form and substance to the Agent and its counsel, to the effect that:

(i)

Upon the commencement date of the Offering, the Company will be a company in good standing and validly existing under the laws of the State of Alaska, fully authorized to transact the business in which it is engaged, and authorized to enter into this Agent Agreement;

(ii)

The Common Shares, Warrants and Common Shares issuable upon exercise of the Warrants when issued and sold will be validly and legally issued and the offering of the Common Shares, Warrants and Common Shares will be as described in the Memorandum have been duly authorized by the Company;

(iii)

The Offering will not result in the breach of any of the terms or conditions of, or constitute a default under any loan commitment, agreement, or other instrument of which such counsel has knowledge and to which the Company is a party or violate any order of any court or any federal or state regulatory body or administrative agency having jurisdiction over the Company or over the Company’s property;

(iv)

To the best knowledge of such Company Counsel, upon reasonable inquiry, there is not in existence, pending nor threatened any action, suit or proceeding to which the Company or any director thereof is a party, except as may be set forth in the Memorandum or any supplement thereto, before any court or governmental agency or body, which action, suit or proceeding might, if decided adversely, materially affect the subject matter of this Agent Agreement, the Offering or the financial condition, business or prospects of the Company;

(v)

The disclosures to be made in the Memorandum, together with the Company’s offer to each subscriber to provide access to additional information, are sufficient to satisfy the “information requirements” of Rule 502 of Regulation D assuming the receipt by each subscriber of a copy of the Memorandum;

10

(vi)

registration under the 1933 Act of the Securities is not required for the offer and sale thereof to the investors in accordance with the provisions of this Agreement

(vii)

In rendering the opinions to be set forth, the Company Counsel, as to factual matters, may rely upon certificates, statements, letters, representations or affidavits of the Company and its officers, any public records of the Company, certificates of public officials and letters of independent certified public accountants. 

(b)

The Agent will receive on the commencement of the Offering, a certificate from the Company stating that the representations and warranties made in this Agent Agreement are true and correct, as if made on the commencement date of the Offering; the certificate further will state that the Company has complied with all agreements and covenants and that the Memorandum does not include any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 

(c) 

The Agent will receive on the commencement date of the Offering a survey prepared by Company Counsel and addressed to the Company and to the Agent relating to the securities laws of the jurisdictions in which the Company and the Agent have agreed to make offers to potential investors.  This survey shall be referred to as the “Blue Sky Survey.”  Company Counsel and the Agent shall agree upon the form and statements to be made in the Blue Sky Survey.

10.

Conditions to Company’s Obligations.  The obligations of the Company shall be subject to the accuracy as of the date hereof and on the commencement date of the Offering of the representations and warranties made by the Agent in Sections 5 and 7 of this Agent Agreement. 

11.

Indemnification. 

(a) The Company agrees that it shall indemnify and hold harmless, Agent, its members, directors, officers, employees, agents, affiliates and controlling persons within the meaning of Section 20 of the 1934 Act and Section 15 of the 1933 Act (any and all of whom are referred to as an "Indemnified Party"), from and against any and all losses, claims, damages, liabilities, or expenses, and all actions in respect thereof (including, but not limited to, all legal or other expenses reasonably incurred by an Indemnified Party in connection with the investigation, preparation, defense or settlement of any claim, action or proceeding, whether or not resulting in any liability), incurred by an Indemnified Party:  (i) arising out of, or in connection with, any actions taken or omitted to be taken 

11

by the Company, its affiliates, employees or agents, or any untrue statement or alleged untrue statement of a material fact contained in any of the financial or other information furnished to the Agent by or on behalf of the Company or the omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; or (ii) with respect to, caused by, or otherwise arising out of any transaction contemplated by the Agreement or the Agent's performing the services contemplated hereunder; provided, however, the Company will not be liable under clause (ii) hereof to the extent, and only to the extent, that any loss, claim, damage, liability or expense is  finally judicially determined to have resulted primarily from the Agent's gross negligence or bad faith in performing such services.

(b)

The Agent will indemnify and hold harmless the Company, its stockholders, directors, officers, employers, agents, affiliates and controlling persons (any and all of whom are referred to as an "Indemnified Party") from and against any losses, claims, damages, or liabilities, joint or several, to which the Indemnified Party may become subject, under the 1933 Act, the 1934 Act, the various state securities acts or otherwise insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Memorandum, in any other offering documentation or state "blue sky" application prepared on behalf of the Company or any amendment or supplement thereto, or arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Memorandum, in any other offering documentation or in any state "blue sky" application prepared on behalf of the Company or such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by the Agent specifically for use in the preparation thereof.  The Agent also will reimburse the Indemnified Party for such legal or other expenses reasonably incurred in connection with investigating or defending any such loss, claim, damage, liability or action as to which the Agent is required to indemnify the Indemnified Party.  Notwithstanding the foregoing, in no event shall the Agent’s obligation to indemnify the Company exceed the net compensation actually received by the Agent under Section 3 of this Agent Agreement.

If the indemnification provided for herein is conclusively determined (by an entry of final judgment by a court of competent jurisdiction and the expiration of the time or denial of the right to appeal) to be unavailable or insufficient to hold any Indemnified Party harmless in respect to any losses, claims, damages, liabilities or expenses referred to therein, then the Company with respect to Section 11(a) or the Agent with respect to Section 11 (b) of this Agreement shall contribute to the amounts paid or payable by such Indemnified Party in such proportion as is appropriate and equitable under all circumstances taking into account the relative benefits received by the Company 

12

on the one hand and the Agent on the other, from the transaction or proposed transaction under the Agent Agreement or, if allocation on that basis is not permitted under applicable law, in such proportion as is appropriate to reflect not only the relative benefits received by the Company on the one hand and the Agent on the other, but also the relative fault of the Company and the Agent; provided, however, in no event shall the aggregate contribution of the Agent and/or any Indemnified Party be in excess of net compensation actually received by the Agent and/or such Indemnified Party pursuant to this Agreement.  

Neither the Company nor the Agent shall settle or compromise or consent to the entry of any judgment in or otherwise seek to terminate any pending or threatened action, claim, suit or proceeding in which any Indemnified Party is or could be a party and as to which indemnification or contribution could have been sought by such Indemnified Party hereunder (whether or not such Indemnified Party is a party thereto), unless such consent or termination includes an express unconditional release of such Indemnified Party, reasonably satisfactory in form and substance to such Indemnified Party, from all losses, claims, damages, liabilities or expenses arising out of such action, claim, suit or proceeding.

The foregoing indemnification and contribution provisions are not in lieu of, but in addition to, any rights which any Indemnified Party may have at common law hereunder or otherwise, and shall remain in full force and effect following the expiration or termination of the Agent’s engagement and shall be binding on any successors or assigns of the Company and successors or assigns to all or substantially all of the Company’s business or assets.

The provisions of this Section shall survive any termination of this Agent Agreement.

12.

Notices.  Any notice, consent, authorization or other communication to be given hereunder shall be in writing and shall be deemed duly given and received when delivered personally, when transmitted by fax, three days after being mailed by first class mail, or one day after being sent by a nationally recognized overnight delivery service, charges and postage prepaid, properly addressed to the party to receive such notice, at the following address or fax number for such party (or at such other address or fax number as shall hereafter be specified by such party by like notice):

(a)

If to the Company, to:

Little Squaw Gold Mining Company

ATTN: Richard R. Walters, President

3412 South Lincoln Drive

Spokane, WA 99203-1650

With copy to:

Paine, Hamblen, Coffin, Brooke & Miller LLP

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717 W. Sprague Ave., #1200

Spokane, WA   99201

Attn:  Lawrence R. Small, Esq.

(b) 

If to the Agent, to:

Strata Partners, LLC

ATTN: Rhett A. Gustafson, President

219 Lake Street South, Suite C

Kirkland, WA 98033

With copy to:

Dorsey & Whitney LLP

1420 Fifth Avenue, Suite 3400

Seattle, WA  98101

Attn:  Kenneth Sam, Esq.

The provisions of this Section shall survive any termination of this Agent Agreement.

13.

Company to Control Transactions.  The prices, terms and conditions under which  the Company shall offer or sell any Units [shall be/has been] determined by the Company in its sole discretion.  The Company shall have the authority to control all discussions and negotiations regarding any proposed or actual offering or sale of Units.  Nothing in this Agent Agreement shall obligate the Company to actually offer or sell any Units or consummate any transaction.  The Company may terminate any negotiations or discussions at any time and reserves the right not to proceed with any offering or sale of Units; provided, however, that the Company shall reimburse the Agent for actual expenses incurred by the Agent in connection with the Offering upon such termination without respect to the limitations set forth in Section 8.  The provisions of this Section shall survive any termination of this Agent Agreement.

14.

Confidentiality of Company Information. The Agent, and its officers, directors, employees and agents shall maintain in strict confidence and not copy, disclose or transfer to any other party (1) all confidential business and financial information   regarding the Company and its affiliates, including without limitation, projections, business plans, marketing plans, product development plans, pricing, costs, customer, vendor and supplier lists and identification, channels of distribution, and terms of identification of proposed or actual contracts and (2) all confidential technology of the Company. In furtherance of the foregoing, the Agent agrees that it shall not transfer, transmit, distribute, download or communicate, in any electronic, digitized or other form or media, any of the confidential technology of the Company. The foregoing is not intended to preclude the Agent from utilizing, subject to the terms and conditions of this Agent Agreement, the Memorandum and/or other documents prepared or approved by the Company for use in the Offering.

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All communications regarding any possible transactions, requests for due diligence or other information, requests for facility tours, product demonstrations or management meetings, will be submitted or directed to the Company, and the Agent shall not contact any employees, customers, suppliers or contractors of the Company or its affiliates without express permission.  Nothing in this Agent Agreement shall constitute a grant of authority to the Agent or any representatives thereof to remove, examine or copy any particular document or types of information regarding the Company, and the Company shall retain control over the particular documents or items to be provided, examined or copied. If the Offering is not consummated, or if at any time the Company so requests, the Agent and its representatives will return to the Company all copies of information regarding the Company in their possession.

The provisions of this Section shall survive any termination of this Agent Agreement.

15.

Press Releases and Announcements. The Company shall control all press releases or announcements to the public, the media or the industry regarding any offering, placement, transaction or business relationship involving the Company or its affiliates. Except for communication to Offerees in furtherance of this Agent Agreement and the provision of the Memorandum, the Agent will not disclose the fact that discussions or negotiations are taking place concerning a possible transaction involving the Company, or the status or terms and conditions thereof.

16.

Assignment Prohibited.  No assignment of this Agent Agreement shall be made without the prior written consent of the other party.

17.

Amendments.  Neither party may amend this Agent Agreement or rescind any of its existing provisions without the prior written consent of the other party.

18.

Governing Law.  This Agent Agreement has been made in the State of Washington  and shall be construed, and the rights and liabilities determined, in accordance with the law of the State of Washington, without regard to the conflicts of laws rules of such jurisdiction. 

19.

Waiver.  Neither Agent’s nor the Company’s failure to insist at any time upon strict compliance with this Agent Agreement or any of its terms nor any continued course of such conduct on their party shall constitute or be considered a waiver by Agent or the Company of any of their respective rights or privileges under this Agent Agreement. 

20.

Severability.  If any provision herein is or should become inconsistent with any  present or future law, rule or regulation of any sovereign government or regulatory body having jurisdiction over the subject matter of this Agent Agreement, such provision shall be deemed to be rescinded or modified in accordance with such law, rule or regulation.  In all other respects, this Agent Agreement shall continue to remain in full force and effect. 

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21.

Counterparts.  This Agent Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and will become effective and binding upon the parties at such time as all of the signatories hereto have signed a counterpart of this Agent Agreement.  All counterparts so executed shall constitute one Agent Agreement binding on all of the parties hereto, notwithstanding that all of the parties are not signatory to the same counterpart.  Each of the parties hereto shall sign a sufficient number of counterparts so that each party will receive a fully executed original of this Agent Agreement.

22.

Entire Agreement.  This Agent Agreement and all other agreements and documents referred herein constitutes the entire agreement between the Company and the Agent.  No other agreements, covenants, representations or warranties, express or implied, oral or written, have been made by any party hereto to any other party concerning the subject matter hereof.  All prior and contemporaneous conversations, negotiations, possible and alleged agreements, representations, covenants and warranties concerning the subject matter hereof are merged herein.  

23.

Arbitration.  The parties agree that this Agent Agreement and all controversies that may  arise between the Agent and the Company, whether occurring prior, on or subsequent to the date of this Agent Agreement, will be determined by arbitration in accordance with the rules and procedures of the NASD. The parties understand that:

(a)

Arbitration is final and binding on the parties.

(b)

The parties are waiving their right to seek remedies in court, including the   right to a jury trial.

(c) 

Pre-arbitration discovery is generally more limited than and different from  court proceedings.

(d)

The arbitrators’ award is not required to include factual findings or legal reasoning and any party’s right to appeal or to seek modification or rulings by the arbitrators is strictly limited.

(e)

The panel of arbitrators will typically include a minority of arbitrators who  were or are affiliated with the securities industry.

The parties agree that any arbitration under this Agent Agreement will be held at the facilities of and before an Arbitration Panel appointed by the NASD.  The award of the arbitrators, will be final, and judgments upon the award may be entered in any court, state or federal, having jurisdiction.  The parties hereby submit themselves to the jurisdiction of any state or federal court for the purpose of entering such judgment.

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Any forbearance to enforce an agreement to arbitrate will not constitute a waiver of any rights under this Agent Agreement except to the extent stated herein.

THIS AGREEMENT IS GOVERNED BY AN ARBITRATION CLAUSE CONTAINED IN SECTION 23 OF THIS AGENT AGREEMENT.

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Exhibit A

Term Sheet

18

Exhibit B

Capitalization Table

19

Exhibit C

Registration Rights Declaration

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