Document:

EX-10.13 Univ. of Penn. License Agreement

 

EXHIBIT 10.13

University of Pennsylvania

License Agreement

This Agreement (this “Agreement”) is between The Trustees of the University of Pennsylvania, a
Pennsylvania nonprofit corporation (“Penn”), and Acuity Pharmaceuticals, Inc., a Delaware
corporation (“Company”). This Agreement is being signed on March 31, 2003. This Agreement will
become effective on March 31, 2003 (the “Effective Date”).

BACKGROUND

Penn owns certain intellectual property developed by Dr. Michael J. Tolentino, Mr. Samuel J. Reich
and Mr. Enrico M. Surace of Penn’s School of Medicine, Department of Ophthalmology, relating to the
body of work known as RNA interference (the “RTS Intellectual Property”). Penn also owns certain
applications for United States letters patent relating to the RTS Intellectual Property. Company
desires to obtain an exclusive license under the patent rights to exploit the RTS Intellectual
Property. Company also desires to fund further research by Dr. Tolentino and Dr. Jean Bennett and
their respective groups under a separate agreement. Penn has determined that the exploitation of
the RTS Intellectual Property by Company is in the best interests of Penn and is consistent with
its educational and research missions and goal.

Simultaneously with the execution of this Agreement, Penn and Company are executing an exclusive
license agreement for certain intellectual property developed by Dr. Alan Gewirtz (together with
the RTS Intellectual Property, the “Intellectual Property”), also relating to the body of work
known as RNA interference (the “Gewirtz License Agreement”).

In consideration of the mutual obligations contained in this Agreement, and intending to be legally
bound, the parties agree as follows:

1. LICENSE

     1.1. License Grant. Penn grants to Company an exclusive, world-wide license (the
"License”) to make, have made, use, import, sell and offer for sale Licensed Products during the
Term (as such terms may be defined in Sections 1.2 and 6.1). The License includes the right to
sublicense as permitted by this Agreement. No other rights or licenses are granted by Penn.

     1.2. Related Definitions.

     The term “Licensed Products” means products that are made, made for, used, imported, sold or
offered for sale by Company or its Affiliates or sublicensees and that

 

 

either (i) in the absence of this Agreement, would infringe at least one claim of the Penn Patent
Rights or (ii) use a process or machine covered by a claim of Penn Patent Rights.

     The term “Sale” means any bona fide transaction for which consideration is received or
expected for the sale, use, lease, transfer or other disposition of a Licensed Product, and a Sale
is deemed completed at the time that Company or its Affiliate or sublicensee invoices, ships or
receives payment for a Licensed Product, whichever occurs first.

     The term “Penn Patent Rights” means all patent rights represented by or issuing from: (i) the
United States patent applications and/or Penn docket numbers listed in Exhibit A; (ii) any
continuation, divisional and re-issue applications of (i); and (ii) any foreign counterparts and
extensions of (i) or (ii).

     The term “Affiliate” means a legal entity that is controlling, controlled by or under common
control with Company and that has executed either this Agreement or a written Joinder Agreement
agreeing to be bound by all of the terms and conditions of this Agreement. For purposes of this
Section 1.2, the word “control” means (i) the direct or indirect ownership of more than fifty
percent (50%) of the outstanding voting securities of a legal entity, (ii) the right to receive
fifty percent (50%) or more of the profits or earnings of a legal entity or (iii) the right to
determine the policy decisions of a legal entity.

     The term “Significant Transaction” shall mean a single transaction or series of related
transactions consisting of or resulting in any of the following: (i) an assignment of the License,
(ii) an exclusive worldwide sublicense of all or substantially all of the intellectual property
rights granted to Company under this Agreement and a non-exclusive or exclusive, in either case,
worldwide sublicense of all or substantially all of the intellectual property rights granted to
Company under the Gewirtz License Agreement, (iii) an initial public offering of securities by
Company or other transaction resulting in either: (a) Company becoming a public company or (b) any
of Company’s securities being traded on a nationally recognized stock exchange or automated
quotation system, (iv) a sale, license or other disposition of all or substantially all of
Company’s assets, or (v) a reorganization, consolidation or merger of Company, or sale or transfer
of the securities of Company, where the holders of Company’s outstanding voting securities before
the transaction beneficially own less than fifty percent (50%) of the outstanding voting
securities, or hold less than fifty percent (50%) of the voting power of the voting securityholders
of the surviving entity after the transaction. Notwithstanding anything above to the contrary, a
Significant Transaction shall not be deemed to occur as a result of a bona fide, arms-length equity
financing for cash in which Company issues securities representing more than fifty percent (50%) of
the voting power of its securityholders to venture capital or other similar investors who do not
actively manage day-to-day operations of Company.

     1.3. Reservation of Rights by Penn. Penn reserves the right to use, and to permit
other non-commercial entities to use, the Penn Patent Rights for educational and research purposes
only.

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     1.4. U.S. Government Rights. The parties acknowledge that the United States
government retains rights in intellectual property funded under any grant or similar contract with
a Federal agency. The License is expressly subject to all applicable United States government
rights, including, but not limited to, any applicable requirement that products, which result from
such intellectual property and are sold in the United States, must be substantially manufactured in
the United States as conditioned by 37 CFR 401.

     1.5. Sublicense Conditions. The Company’s right to sublicense granted by Penn under
the License is subject to each of the following conditions:

          (a) In each sublicense agreement, Company will prohibit the sublicensee from further
sublicensing and require the sublicensee to comply with the terms and conditions of this Agreement.

          (b) Within thirty (30) days after Company enters into a sublicense agreement, Company will
deliver to Penn an executed copy of the entire sublicense agreement written in the English
language. Penn’s receipt of the sublicense agreement, however, will not constitute a waiver of
any right of Penn or obligation of Company under this Agreement.

          (c) In the event that Company causes or experiences a Trigger Event (as defined in Section
6.4), all payments due to Company and its Affiliates or sublicensees under the sublicense agreement
will, upon notice from Penn to such Affiliate or sublicensee, become payable directly to Penn for
the account of Company. Upon receipt of any such funds, Penn will remit to Company the amount by
which such payments exceed the amounts owed by Company to Penn.

          (d) Company’s execution of a sublicense agreement will not relieve Company of any of its
obligations under this Agreement. Company is primarily liable to Penn for any act or omission of
an Affiliate or sublicensee of Company that would be a breach of this Agreement if performed or
omitted by Company, and Company will be deemed to be in breach of this Agreement as a result of
such act or omission.

2. DILIGENCE

     2.1. Development Plan. Company will deliver to Penn, within ninety (90) days after
the Effective Date, a copy of an initial development plan for the Penn Patent Rights (the
"Development Plan”). The purpose of the Development Plan is (a) to demonstrate Company’s
capability to bring the Penn Patent Rights to commercialization, (b) to project the timeline for
completing the necessary tasks, and (c) to measure Company’s progress against the projections.
Thereafter, Company will deliver to Penn an annual updated Development Plan no later than December
1 of each year during the Term. The Development Plan will include, at a minimum, information to be
mutually agreed upon by the parties hereto.

     2.2. Company’s Efforts. Company will use commercially reasonable efforts to

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develop, commercialize, market and sell Licensed Products in a manner consistent with the
Development Plan.

     2.3. Diligence Events. The Company will use commercially reasonable efforts to
achieve each of the diligence events by the applicable completion date listed in the table below
for the first product to be commercialized by the Company pursuant to this Agreement or the Gewirtz
License Agreement.

	 	 	 
	DILIGENCE EVENT	 	COMPLETION DATE
	Delivery to Penn of a preliminary business plan

	 	June 30, 2003
	Raising at least an aggregate of $5 Million in equity investment
capital from qualified investors

	 	December 31, 2004
	Filing of IND for first Licensed Product

	 	January 31, 2005
	Initiation of Phase II clinical trials for first Licensed Product

	 	December 31, 2007
	Initiation of Phase III clinical trials for first Licensed Product

	 	December 31, 2010
	First commercial Sale of first Licensed Product

	 	December 31, 2013

3. FEES AND ROYALTIES

     3.1. Equity Issuance. In partial consideration of the License, Company will issue to
Penn on the Effective Date such number of shares of Common Stock of the Company as will cause Penn
to own at least twenty six and eight tenths percent (26.8%) of the capital stock of Company on a
fully diluted basis, assuming the exercise, conversion and exchange of all outstanding securities
of Company for or into shares of Common Stock. The issuance of equity to Penn will be pursuant to
a Stock Purchase Agreement and a Stockholders Agreement between Company and Penn, the forms of
which are attached as Exhibits C and D (the “Equity Documents”).

     3.2. Dilution Protection. In partial consideration of the License, through the
closing of the equity financing round at which Company has raised cumulatively at least an
aggregate of seven hundred and fifty thousand dollars ($750,000) in net proceeds to Company of
equity financing from qualified investors, Company will issue to Penn, from time to time and at no
additional consideration, such additional number of shares of Common Stock of Company as will cause
Penn to continue to hold in the aggregate twenty six and eight tenths percent (26.8%) of the
capital stock of Company on a fully diluted basis, assuming the exercise, conversion and exchange
of all outstanding securities of Company for or into shares of Common Stock.

     3.3. Milestone Payments. In partial consideration of the License, Company will pay to
Penn the applicable milestone payment listed in the table below after achievement of each milestone
event for the first product commercialized and sold by the Company or its Affiliates pursuant to
this Agreement or the Gewirtz License Agreement.

	 	 	 	 	 
	MILESTONE	 	PAYMENT	 
	Initiation of Phase II clinical trials for first Licensed Product
	 	$	50,000	 
	Initiation of Phase III clinical trials for first Licensed Product
	 	$	300,000	 
	First commercial Sale of first Licensed Product
	 	$	600,000	 

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     3.4. Earned Royalties. In partial consideration of the License, Company will pay
to Penn a royalty of two percent (2%) of Net Sales of a Licensed Product sold by Company or its
Affiliates (but not sublicensees) during each Quarter following the occurrence of a Significant
Transaction. In partial consideration of the License, Company will pay to Penn a royalty of one
percent (1%) of Net Sales of each Licensed Product sold by sublicensees of the Company (and not the
Company or its Affiliates) during each Quarter following the occurrence of a Significant
Transaction. The term “Quarter” means each three-month period beginning on January 1, April 1,
July 1 and October 1. The term “Net Sales” means the consideration received from, or fair market
value attributable to, each Sale of a Licensed Product, less Qualifying Costs directly attributable
to a Sale and borne by Company or its Affiliates or sublicensees. For purposes of determining Net
Sales, the words “fair market value” mean the cash consideration that Company or its Affiliates or
its sublicensees would realize from an unrelated buyer in an arms length sale of an identical item
sold in the same quantity and at the time and place of the transaction. The term “Qualifying Costs”
means: (a) customary discounts in the trade for quantity purchased, prompt payment or wholesalers
and distributors; (b) credits or refunds for claims or returns that do not exceed the original
invoice amount; (c) prepaid outbound transportation expenses and transportation insurance premiums;
and (d) sales and use taxes and other fees imposed by a governmental agency.

     3.5. Reduction of Royalty. If Company is required to pay royalties to Penn and third
parties that, in the aggregate, exceed four percent (4%) of Net Sales (the “Total Royalty”) to
commercialize a Licensed Product, the royalties due to Penn for such time, with respect to such a
Licensed Product shall be reduced by two tenths of one percent (0.2%) for every one percent (1%)
the aggregate royalty exceeds four percent (4%) of Net Sales. To clarify, Company shall pay to
Penn a royalty of 2% — (0.2*(Total Royalty — 4%)) of the Net Sales. In no event shall the
royalties due to Penn be reduced below one percent (1%) of Net Sales.

     3.6. Sublicense Fees. Except as otherwise provided below, in partial consideration of
the License, Company will pay to Penn a sublicense fee of two percent (2%) of all payments and the
fair value of all other consideration of any kind received by Company from sublicensees.

     Notwithstanding anything above to the contrary, no sublicense fee under this Section 3.6 will
be due to Penn with respect to any of the following consideration received by Company: (i)
consideration received by the Company from sublicensees before the earlier of (a) the third
anniversary of the Effective Date and (b) the occurrence of a Significant Transaction as long as
such fees are reinvested in the development of the Intellectual Property, (ii) royalties paid to
Company by a sublicensee based upon sales or net sales of Licensed Products by the sublicensee;
(iii) equity investments in Company by a sublicensee, up to the amount of the fair market value of
the equity purchased on the date of the investment as reasonably determined under the
circumstances; (iv) sponsored research funding paid to Company by a sublicensee in a bona fide
transaction for future

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research to be performed by Company; (v) payments for consulting services actually performed by
Company in a bona fide transaction at arms length rates; and (vi) intellectual property rights
received by Company from a sublicensee, including, but not limited to, licenses or sublicenses to
intellectual property rights, covenants not to compete against Company, or agreements not to assert
claims against Company.

     3.7. Non-Assertion and Non-Duplication. Net Sales of any Licensed Product, including,
but not limited to, Licensed Products pursuant to any other License Agreement executed by Company,
shall not be subject to more than one assessment of any scheduled royalty or fee payable to Penn
pursuant to this Agreement and the Gewirtz License Agreement; such assessment shall be the lowest
applicable royalty and/or fee payable to Penn. Penn shall not assert any right to royalties or
fees for any other Licensed Product other than the one with the lesser royalty.

     3.8. Transaction Fee. In partial consideration of the License, Company will pay to
Penn, within ninety (90) days after the execution of this Agreement, a one-time, non-refundable,
non-creditable transaction fee of up to $10,000 with respect to Penn’s licensing and legal expenses
in connection with this Agreement, the Gewirtz License Agreement and the Equity Documents.

4. REPORTS AND PAYMENTS

     4.1. Royalty Reports. Within forty-five (45) days after the end of each Quarter,
Company will deliver to Penn a report, certified by the chief financial officer of Company,
detailing the calculation of all royalties and fees due to Penn for such Quarter. Unless otherwise
included on a form provided to Company by Penn or otherwise agreed to by Penn, this report will
include, at a minimum: (a) the number of Licensed Products involved in Sales, listed by product,
by country; (b) gross consideration invoiced, billed or received for Sales in the Quarter; (c)
Qualifying Costs, listed by category of cost; (d) Net Sales, listed by product, by country; (e)
sublicense fees and other consideration received by Company from sublicensees, listed by product,
by country; and (f) royalties and fees owed to Penn, listed by category, by product, by country.

     4.2. Payments. Company will pay all royalties and fees due to Penn under Article 3,
that have not been paid in advance, within forty-five (45) days after the end of the Quarter in
which the royalties or fees accrue.

     4.3. Records. Company will maintain, and will cause its Affiliates and sublicensees
to maintain, adequate books and records to verify Sales, Net Sales, and all of the royalties, fees,
and other payments due under this Agreement. The records for each Quarter will be maintained for
at least four (4) years after submission of the applicable report required under Section 4.1.

     4.4. Audit Rights. Upon reasonable prior written notice to Company, Company and its
Affiliates and sublicensees will provide Penn and its accountants with access to all of the books
and records required by Section 4.3 to conduct a review or audit

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of Sales, Net Sales, and all of the royalties, fees, and other payments payable under this
Agreement. Access will be made available: (a) during normal business hours; (b) in a manner
reasonably designated to facilitate Penn’s review or audit without disruption to Company’s
business; and (c) no more than once each calendar year during the Term and for a period of four (4)
years thereafter. Company will promptly pay to Penn the amount of any underpayment, if undisputed,
determined by the review or audit plus accrued interest. If the review or audit determines that
Company has underpaid any royalty payment by five percent (5%) or more, then Company will also
promptly pay the costs and expenses of Penn and its accountants in connection with the review or
audit. In addition once annual Sales of Licensed Products exceed twenty five million dollars
($25,000,000), at the written request of Penn, Company will conduct, at least once every two (2)
years at its own expense, which expense shall not be reasonably expected to exceed fifteen thousand
dollars ($15,000), an independent audit of Sales, Net Sales, and all of the royalties, fees and
other payments payable under this Agreement. Promptly after completion of the audit, Company will
provide to Penn a copy of the report of the independent auditors.

     4.5. Information Rights. Until the closing of the Company’s initial public offering,
Company will provide to Penn, at least as frequently as they are distributed to the Board of
Directors or management of Company, copies of: (a) relevant portions of all Board and managerial
reports that relate to the Penn Patent Rights or the Licensed Products; and (b) relevant portions
of all business plans, projections and financial statements for Company that are distributed to the
Board of Directors or management of Company and which are related to the Penn Patent Rights or the
Licensed Products. After the closing of the Company’s IPO, Company will provide to Penn, promptly
after filing, a copy of each annual report, proxy statement, 10-K, 10-Q and other material report
filed with the U.S. Securities and Exchange Commission.

     4.6. Currency. All dollar amounts referred to in this Agreement are expressed in
United States dollars. All payments will be made in United States dollars. If Company receives
payment from a third party in a currency other than United States dollars for which a royalty or
fee is owed under this Agreement, then (a) the payment will be converted into United States dollars
at the conversion rate for the foreign currency as published in the eastern edition of The Wall
Street Journal as of the last business day of the Quarter in which the payment was received by
Company, and (b) the conversion computation will be documented by Company in the applicable report
delivered to Penn under Section 4.1.

     4.7. Place of Payment. All payments by Company are payable to “The Trustees of the
University of Pennsylvania” and will be made to the following addresses:

	 	 	 
	By Electronic Transfer:	 	By Check:
	Mellon Bank East

ABA #031000037

Account Number 2945020

C/o CTT/ T. Dunn

	 	The Trustees of the University of Pennsylvania

C/o Center for Technology Transfer

P.O. Box 7777-W3850

Philadelphia, PA 19175-3850

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     4.8. Interest. All amounts that are not paid by Company when due will accrue interest
from the due date until paid at a rate equal to one percent (1.0%) per month (or the maximum
allowed by law, if less).

5. CONFIDENTIALITY AND USE OF PENN’S NAME

     5.1. Confidential Disclosure Agreement. If Company and Penn entered into one or more
Confidential Disclosure Agreements prior to the Effective Date, then such agreements will continue
to govern the protection of confidential information under this Agreement, and each Affiliate and
sublicensee of Company will be bound to Company’s obligations under such agreements.

     5.2. Company’s Obligation. If, however, no Confidential Disclosure Agreement has been
entered into between Company and Penn prior to the Effective Date, then the terms of this Section
5.2 apply. The term “Confidential Information” includes all technical information, inventions,
developments, discoveries, software, know-how, methods, techniques, formulae, data, processes and
other proprietary ideas, whether or not patentable, that Penn identifies as confidential or
proprietary at the time it is delivered or communicated to Company. Company will maintain in
confidence and not disclose to any third party any Confidential Information. Company will use
Confidential Information only for purposes of this Agreement. Company will ensure that Company’s
Affiliates, sublicensees and employees have access to Confidential Information only on a need to
know basis and are obligated in writing to abide by Company’s obligations under this Agreement.
The obligations under this Section 5.2 will not apply to: (a) information that is known to Company
or independently developed by or for Company prior to the time of disclosure, in each case, to the
extent evidenced by written records; (b) information that is disclosed to Company by a third party
that has a right to make such disclosure; (c) information that becomes patented, published or
otherwise part of the public domain through no fault of the Company; or (d) information that is
required to be disclosed by order of United States governmental authority or a court of competent
jurisdiction, provided that Company shall use its reasonable best efforts to obtain confidential
treatment of such information by such agency or court.

     5.3. Disclaimer. Penn is not obligated to accept any confidential information from
Company, except for the reports required by Sections 2.1 and 4.1 Penn, acting through its Center
for Technology Transfer and finance offices, will use reasonable best efforts not to disclose to
any third party outside of Penn any confidential information of Company contained in those reports,
subject to exceptions analogous to those contained in Section 5.2(a) — (d) above. Penn bears no
institutional responsibility for maintaining the confidentiality of any other information of
Company. Company may elect to enter into confidentiality agreements with individual investigators
at Penn that comply with Penn’s internal policies.

     5.4. Use of Penn’s Name. Company and its Affiliates, sublicensees, employees, and
agents may not use the name, logo, seal, trademark, or service mark (including any adaptation of
them) of Penn or any Penn school, organization, employee,

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student or representative, without the prior written consent of Penn.

6. TERM AND TERMINATION

     6.1. Term. This Agreement will commence on Effective Date and terminate upon the
later of: (a) the expiration or abandonment of the last patent to expire or become abandoned of
the Penn Patent Rights; or (b) if no patent has yet issued from the Penn Patent Rights, ten (10)
years after the first commercial sale of the first Licensed Product (as the case may be, the
"Term”).

     6.2. Early Termination by Company. Company may terminate this Agreement at any time
upon sixty (60) days’ prior written notice to Penn after completing each of the following: (a)
ceasing to make, have made, use, import, sell and offer for sale all Licensed Products; (b)
terminating all sublicenses and causing all Affiliates and sublicensees to cease making, having
made, using, importing, selling and offering for sale all Licensed Products; and (c) paying all
amounts owed to Penn under this Agreement and any sponsored research agreement through the date of
termination.

     6.3. Early Termination by Penn. Penn may terminate this Agreement if: (a) Company is
more than ninety (90) days late in paying to Penn any amounts owed under this Agreement and does
not immediately pay Penn in full upon demand; (b) Company or its Affiliates breaches this Agreement
and does not cure the breach within ninety (90) days after written notice by Penn to Company of the
breach; or (c) Company experiences a Trigger Event.

     6.4. Trigger Event. The term “Trigger Event” means any of the following: (a) a
material default by Company under any sponsored research agreement between Penn and Company or any
of the Equity Documents that is not cured during any specified cure periods; (b) if Company (i)
becomes insolvent, bankrupt or generally fails to pay its debts as such debts become due; (ii) is
adjudicated insolvent or bankrupt; (iii) admits in writing its inability to pay its debts; (iv)
suffers the appointment of a custodian, receiver or trustee for it or its property and, if
appointed without its consent, not discharged within thirty (30) days; (v) makes an assignment for
the benefit of creditors; or (vi) suffers proceedings being instituted against it under any law
related to bankruptcy, insolvency, liquidation or the reorganization, readjustment or the release
of debtors and, if contested by it, not dismissed or stayed within ten (10) days; (c) the
institution or commencement by Company of any proceedings under any law related to bankruptcy,
insolvency, liquidation, or the reorganization, readjustment or release of debtors; (d) the
entering of any order for relief relating to any of the proceedings described in Section 6.4(b) or
(c) above; (e) the calling by Company of a meeting of its creditors with a view to arranging a
composition or adjustment of its debts; or (f) the act or failure to act by Company indicating its
consent to, approval of or acquiescence in any of the proceedings described in Section 6.4(b) —
(e) above. The events specified in this section 6.4 shall also apply to actions taken by
Affiliates of the Company if the taking of any action described in this

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section by an Affiliate of the Company causes a material adverse effect to Penn’s rights under
this Agreement.

     6.5. Effect of Termination. Upon termination of this Agreement for any reason: (a)
the License terminates; (b) Company and all its Affiliates and sublicensees will cease all making,
having made, using, importing, selling and offering for sale all Licensed Products; (c) Company
will pay to Penn all amounts owed to Penn through the date of termination under this Agreement and
any sponsored research agreement; (d) Company will, at Penn’s written request, return to Penn all
Confidential Information and provide to Penn copies of all data regarding the Intellectual Property
generated by Company during the Term that will facilitate the further development of the RTS
Intellectual Property that had been licensed under this Agreement; and (e) in the case of
termination under Section 6.3, all duties of Penn and all rights (but not duties) of Company under
this Agreement immediately terminate without further action required by either Penn or Company.

     6.6. Survival. Company’s obligation to pay all amounts owed to Penn under this
Agreement will survive the termination of this Agreement for any reason. Section 13.10 and
Articles 4, 5, 6, 9, 10, and 11 will survive the termination of this Agreement for any reason in
accordance with their respective terms.

7. PATENT MAINTENANCE AND REIMBURSEMENT

     7.1. Patent Maintenance. Penn controls the preparation, prosecution and maintenance
of the Penn Patent Rights and the selection of patent counsel, with input from Company. If,
however, Company decides to manage the preparation, prosecution and maintenance of the Penn Patent
Rights with input from Penn, then Company and Penn will enter into with patent counsel a Client and
Billing Agreement in the form attached as Exhibit E. As of the date of this Agreement, Company and
Penn have entered into a Client and Billing Agreement.

     7.2. Patent Reimbursement. Unless otherwise provided by any Client and Billing
Agreement, Company will reimburse Penn for all documented attorneys fees, expenses, official fees
and all other charges incident to the preparation, prosecution and maintenance of Penn Patent
Rights within thirty (30) days after the Company’s receipt of invoices for such fees, expenses, and
charges.

8. INFRINGEMENT

     8.1. Notice. Company and Penn will notify each other promptly of any infringement of
the Penn Patent Rights that may come to their attention. Company and Penn will consult each other
in a timely manner concerning any appropriate response to the infringement.

     8.2. Prosecution. Company may prosecute any infringement of the Penn Patent Rights
at Company’s expense. Company shall not settle or compromise any such

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litigation in a manner that imposes any obligations or restrictions on Penn or grants any
rights in the Penn Patent Rights without Penn’s prior written permission. Financial recoveries
from any such litigation will be: (a) first, applied to reimburse Company for its litigation
expenditures; and (b) second, as to any remainder, retained by Company, but treated as Net Sales
for the purpose of determining the royalties due to Penn under Section 3.4.

     8.3. Intervention. Penn reserves the right to intervene at Penn’s expense and join
Company in any litigation under Section 8.2 after first giving notice of such intention to
intervene to Company. If Penn elects to participate in any such litigation, then, in lieu of the
division of recoveries specified in Section 8.2, financial recoveries from any such litigation will
be shared between Company and Penn in proportion with their respective shares of the aggregate
litigation expenditures by Company and Penn or as otherwise agreed to by Penn and Company.

     8.4. Penn Prosecution. If Company does not prosecute any infringement of the Penn
Patent Rights, then Penn may elect to prosecute such infringement at Penn’s expense. If Penn
elects to prosecute such infringement, then financial recoveries will be retained by Penn in their
entirety.

     8.5. Cooperation. In any litigation under this Article 8, either party at the request
and expense of the party, will cooperate to the fullest extent reasonably possible. This Section
8.5 will not be construed to require either party to undertake any activities, including legal
discovery, at the request of any third party, except as may be required by lawful process of a
court of competent jurisdiction.

9. DISCLAIMER OF WARRANTIES

     9.1. Disclaimer. THE PENN PATENT RIGHTS, LICENSED PRODUCTS AND ANY OTHER TECHNOLOGY
LICENSED UNDER THIS AGREEMENT ARE PROVIDED ON AN “AS IS” BASIS. PENN MAKES NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF ACCURACY,
COMPLETENESS, PERFORMANCE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, COMMERCIAL UTILITY,
NON-INFRINGEMENT OR TITLE.

10. LIMITATION OF LIABILITY

     10.1. Limitation of Liability. PENN WILL NOT BE LIABLE TO COMPANY, ITS AFFILIATES, OR
SUBLICENSEES, ITS SUCCESSORS OR ASSIGNS, OR ANY THIRD PARTY WITH RESPECT TO ANY CLAIM: ARISING
FROM COMPANY’S USE OF THE PENN PATENT RIGHTS, LICENSED PRODUCTS OR ANY OTHER TECHNOLOGY LICENSED
UNDER THIS AGREEMENT; ARISING FROM THE DEVELOPMENT, TESTING, MANUFACTURE, USE OR SALE OF LICENSED
PRODUCTS; OR FOR LOST PROFITS, BUSINESS INTERRUPTION, OR INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES
OF ANY KIND.

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11. INDEMNIFICATION

     11.1. Indemnification. Company will defend, indemnify, and hold harmless Penn, and
its trustees, officers, faculty, agents, employees and students (each, an “Indemnified Party”),
from and against any and all liability, loss, damage, action, claim, or expense suffered or
incurred by the Indemnified Parties, including attorneys’ fees and expense (collectively,
"Liabilities”) arising out of or resulting from: (a) the development, testing, use, manufacture,
promotion, sale or other disposition of any Penn Patent Rights or Licensed Products by Company, its
Affiliates or sublicensees; (b) any material breach of this Agreement by Company or its Affiliates
or sublicensees; and (c) the enforcement of this Article 11 by any Indemnified Party. Liabilities
include, but are not limited to: (x) any product liability or other claim of any kind related to
use by a third party of a Licensed Product that was manufactured, sold or otherwise disposed of by
Company, its Affiliates, sublicensees, assignees or vendors or third parties; (y) a claim by a
third party that the Penn Patent Rights or the design, composition, manufacture, use, sale or other
disposition of any Licensed Product infringes or violates any patent, copyright, trade secret,
trademark or other intellectual property right of such third party; and (z) clinical trials or
studies conducted by or on behalf of Company, its Affiliates, sublicensees, assignees or vendors or
third parties relating to the Penn Patent Rights or the Licensed Products, such as claims by or on
behalf of a human subject of any such clinical trial or study.

     11.2. Other Provisions. Company shall not settle or compromise any claim or action
giving rise to Liabilities in any manner that imposes any restrictions on obligations on Penn or
grants any rights to the Penn Patent Rights or the Licensed Products without Penn’s prior written
consent. If Company fails or declines to assume the defense of any claim or action within thirty
(30) days after notice of the claim or action, then Penn may assume the defense of such claim or
action for the account and at the risk of Company, and any Liabilities related to such claim or
action will be conclusively deemed a liability of Company. The indemnification rights of the
Indemnified Parties under this Article 11 are in addition to all other rights that an Indemnified
Party may have at law, in equity or otherwise.

12. INSURANCE

     12.1. Coverages. Before any Licensed Product is to be tested on or administered to a
living human subject, Company will procure and maintain insurance policies for the following
coverages with respect to personal injury, bodily injury and property damage arising out of
Company’s performance under this Agreement: (a) during the Term, comprehensive general liability,
including broad form and contractual liability, in a minimum amount of $2,000,000 combined single
limit per occurrence and in the aggregate; (b) prior to the commencement of clinical trials
involving Licensed Products, clinical trials coverage in a minimum amount of $2,000,000 combined
single limit per occurrence and in the aggregate; and (c) prior to the sale of the first Licensed
Product, product liability coverage, in a minimum amount of $3,000,000 combined single limit per
occurrence and in the aggregate. Penn may review periodically the adequacy of the minimum amounts
of insurance for each coverage required by this Section 12.1, and

12

 

Penn reserves the right to require Company to adjust the limits accordingly in accordance with
customary industry standards. The required minimum amounts of insurance do not constitute a
limitation on Company’s liability or indemnification obligations to Penn under this Agreement.

     12.2. Other Requirements. The policies of insurance required by Section 12.1 will be
issued by an insurance carrier with an A.M. Best rating of “A” or better and will name Penn as an
additional insured with respect to Company’s performance under this Agreement. Company will
provide Penn with insurance certificates evidencing the required coverage within thirty (30) days
after commencement of each policy period and all renewal periods. Company will use its reasonable
best efforts to cause each certificate to provide that the insurance carrier will notify Penn in
writing at least thirty (30) days prior to the cancellation or material change in coverage.

13. ADDITIONAL PROVISIONS

     13.1. Independent Contractors. The parties are independent contractors. Nothing
contained in this Agreement is intended to create an agency, partnership or joint venture between
the parties. At no time will either party make commitments or incur any charges or expenses for or
on behalf of the other party.

     13.2. No Discrimination. Neither Penn nor Company will discriminate against any
employee or applicant for employment because of race, color, sex, sexual or affectional preference,
age, religion, national or ethnic origin, handicap, or veteran status.

     13.3. Compliance with Laws. Company shall comply with all prevailing laws, rules and
regulations that apply to its activities or obligations under this Agreement. Company will comply
with applicable United States export laws and regulations. The transfer of certain technical data
and commodities may require a license from the applicable agency of the United States government
and/or written assurances by Company that Company shall not export data or commodities to certain
foreign countries without prior approval of the agency. Penn does not represent that no license is
required, or that, if required, the license will issue.

     13.4. Modification, Waiver and Remedies. This Agreement may only be modified by a
written amendment that is executed by an authorized representative of each party. Any waiver must
be express and in writing. No waiver by either party of a breach by the other party will constitute
a waiver of any different or succeeding breach. Unless otherwise specified, all remedies are
cumulative.

     13.5. Assignment. Company may not assign this Agreement or any part of it, either
directly or by merger or other operation of law, without the prior written consent of Penn. Penn
will not unreasonably withhold or delay its consent, and will raise any objection to such
assignment within thirty (30) days of notice from Company, provided that: (a) at least thirty (30)
days before the proposed transaction, Company gives Penn written notice and such background
information as may be reasonably necessary to

13

 

enable Penn to give an informed consent; (b) the assignee agrees in writing to be legally
bound by this Agreement; and (c) the assignee agrees in writing to deliver to Penn an updated
Development Plan within forty-five (45) days after the closing of the proposed transaction. Any
permitted assignment will not relieve Company of responsibility for the performance of any
obligation of Company that has accrued at the time of the assignment. Any prohibited assignment
will be null and void. Notwithstanding anything above to the contrary, Company may assign this
Agreement at any time if the assignee had revenues equal to or greater than one billion dollars
($1,000,000,000) in the fiscal year prior to the assignment.

     13.6. Notices. Any notice or other required communications (each, a “Notice”) must be
in writing, addressed to the party’s respective Notice Address listed on the signature page, and
delivered: (a) personally; (b) by certified mail, postage prepaid return, receipt requested; (c)
by recognized overnight courier service, charges prepaid; or (d) by facsimile. A Notice will be
deemed received: if delivered personally, on the date of delivery; if mailed, five (5) days after
deposit in the United States mail; if sent via courier, one (1) business day after deposit with the
courier service; or if sent via facsimile, upon receipt of confirmation of transmission provided
that a confirming copy of such Notice is sent by certified mail, postage prepaid, return receipt
requested.

     13.7. Severability and Reformation. If any provision of this Agreement is held to be
invalid or unenforceable by a court of competent jurisdiction, then the remaining provisions of
this Agreement will remain in full force and effect. Such invalid or unenforceable provision will
be automatically revised to be a valid or enforceable provision that comes as close as permitted by
law to the parties original intent.

     13.8. Headings and Counterparts. The headings of the articles and sections included
in this Agreement are for convenience only and are not intended to affect the meaning or
interpretation of this Agreement. This Agreement may be executed in several counterparts, all of
which taken together will constitute the same instrument.

     13.9. Governing Law. This Agreement will be governed in accordance with the laws of
the Commonwealth of Pennsylvania, without giving effect to the conflict of law provisions of any
jurisdiction.

     13.10. Dispute Resolution. If a dispute arises between the parties concerning any
right or duty under this Agreement, then the parties will confer, as soon as practicable, in an
attempt to resolve the dispute. If the parties are unable to resolve the dispute amicably, then
the parties will submit to the exclusive jurisdiction of, and venue in, the state and Federal
courts located in the Eastern District of Pennsylvania with respect to all disputes arising under
this Agreement.

     13.11. Integration. This Agreement with its Exhibits and the Equity Documents, and
the Gewirtz License Agreement, contain the entire agreement between the parties with respect to the
Penn Patent Rights and the License and supersede all other oral or written representations,
statements or agreements with respect to such subject matter, including but not limited to any term sheet.

14

 

     Each party has caused this Agreement to be executed by its duly authorized representative.

	 	 	 	 	 	 	 	 
	THE TRUSTEES OF THE

UNIVERSITY OF PENNSYLVANIA

 	 	ACUITY PHARMACEUTICALS, INC.

 	 
	By:  	/s/ Louis P. Berneman
 	 	By:  	/s/ Dale R. Pfost
 	 
	 	Name:  	Louis P. Berneman	 	 	Name:  	Dale R. Pfost 	 
	 	Title:  	Managing Director,
Center for Technology Transfer	 	 	Title:  	President and Chief Executive
Officer 	 
	 

	 	 	 	 	 
	Address:

	 	Center for Technology Transfer
	 	Acuity Pharmaceuticals, Inc.
	 

	 	University of Pennsylvania
	 	C/O Center for Technology Transfer
	 

	 	3160 Chestnut Street, Suite 200
	 	University of Pennsylvania
	 

	 	Philadelphia, PA 19104-6283
	 	3160 Chestnut Street, Suite 200
	 

	 	Attention: Managing Director
	 	Philadelphia, PA 19104-6283
	 

	 	 	 	Attention: Dale R. Pfost
	 
	 	 	 	 
	Required

	 	Office of General Counsel
	 	Drinker Biddle & Reath LLP
	copy to:

	 	University of Pennsylvania
	 	One Logan Square
	 

	 	133 South 36th Street, Suite 300
	 	18th and Cherry Streets
	 

	 	Philadelphia, PA 19104-3246
	 	Philadelphia, PA 19103-6996
	 

	 	Attention: General Counsel
	 	Attention: Neil K. Haimm, Esq.EX-10.14 Univ. of Penn License Agreement

 

EXHIBIT 10.14

University of Pennsylvania

License Agreement

This Agreement (this “Agreement”) is between The Trustees of the University of Pennsylvania, a
Pennsylvania nonprofit corporation (“Penn”), and Acuity Pharmaceuticals, Inc., a Delaware
corporation (“Company”). This Agreement is being signed on March 31, 2003. This Agreement will
become effective on March 31, 2003 (the “Effective Date”).

BACKGROUND

Penn owns certain intellectual property developed by Dr. Alan Gewirtz of Penn’s School of Medicine,
Department of Medicine, relating to the body of work known as RNA interference (the “Gewirtz
Intellectual Property”). Penn also owns certain applications for United States letters patent
relating to the Gewirtz Intellectual Property. Company desires to obtain an exclusive license
under the patent rights to exploit the Gewirtz Intellectual Property. Penn has determined that
the exploitation of the Gewirtz Intellectual Property by Company is in the best interests of Penn
and is consistent with its educational and research missions and goal.

Simultaneously with the execution of this Agreement, Penn and Company are executing an exclusive
license agreement for certain intellectual property developed by Dr. Michael J. Tolentino, Mr.
Samuel J. Reich and Mr. Enrico M. Surace (together with the Gewirtz Intellectual Property, the
“Intellectual Property”), also relating to the body of work known as RNA interference (the “RTS
License Agreement”).

In consideration of the mutual obligations contained in this Agreement, and intending to be legally
bound, the parties agree as follows:

1. LICENSE

     1.1. License Grant. Penn grants to Company an exclusive, world-wide license (the
“License”) to make, have made, use, import, sell and offer for sale Licensed Products during the
Term (as such terms may be defined in Sections 1.2 and 6.1). The License includes the right to
sublicense as permitted by this Agreement. No other rights or licenses are granted by Penn.

     1.2. Related Definitions.

     The term “Licensed Products” means products that are made, made for, used, imported, sold or
offered for sale by Company or its Affiliates or sublicensees and that either (i) in the absence of
this Agreement, would infringe at least one claim of the Penn Patent Rights or (ii) use a process
or machine covered by a claim of Penn Patent Rights.

 

 

     The term “Sale” means any bona fide transaction for which consideration is received or
expected for the sale, use, lease, transfer or other disposition of a Licensed Product, and a Sale
is deemed completed at the time that Company or its Affiliate or sublicensee invoices, ships or
receives payment for a Licensed Product, whichever occurs first.

     The term “Penn Patent Rights” means all patent rights represented by or issuing from: (i) the
United States patent applications and/or Penn docket numbers listed in Exhibit A; (ii) any
continuation, divisional and re-issue applications of (i); and (ii) any foreign counterparts and
extensions of (i) or (ii).

     The term “Affiliate” means a legal entity that is controlling, controlled by or under common
control with Company and that has executed either this Agreement or a written Joinder Agreement
agreeing to be bound by all of the terms and conditions of this Agreement. For purposes of this
Section 1.2, the word “control” means (i) the direct or indirect ownership of more than fifty
percent (50%) of the outstanding voting securities of a legal entity, (ii) the right to receive
fifty percent (50%) or more of the profits or earnings of a legal entity or (iii) the right to
determine the policy decisions of a legal entity.

     The term “Significant Transaction” shall mean a single transaction or series of related
transactions consisting of or resulting in any of the following: (i) an assignment of the License,
(ii) an exclusive worldwide sublicense of all or substantially all of the intellectual property
rights granted to Company under the RTS License Agreement and a non-exclusive or exclusive, in
either case, worldwide sublicense of all or substantially all of the intellectual property rights
granted to Company under this Agreement, (iii) an initial public offering of securities by Company
or other transaction resulting in either: (a) Company becoming a public company or (b) any of
Company’s securities being traded on a nationally recognized stock exchange or automated quotation
system, (iv) a sale, license or other disposition of all or substantially all of Company’s assets,
or (v) a reorganization, consolidation or merger of Company, or sale or transfer of the securities
of Company, where the holders of Company’s outstanding voting securities before the transaction
beneficially own less than fifty percent (50%) of the outstanding voting securities, or hold less
than fifty percent (50%) of the voting power of the voting securityholders of the surviving entity
after the transaction. Notwithstanding anything above to the contrary, a Significant Transaction
shall not be deemed to occur as a result of a bona fide, arms-length equity financing for cash in
which Company issues securities representing more than fifty percent (50%) of the voting power of
its securityholders to venture capital or other similar investors who do not actively manage
day-to-day operations of Company.

     1.3. Reservation of Rights by Penn. Penn reserves the right to use, and to permit
other non-commercial entities to use, the Penn Patent Rights for educational and research purposes
only.

     1.4. U.S. Government Rights. The parties acknowledge that the United States
government retains rights in intellectual property funded under any grant or similar

2

 

contract with a Federal agency. The License is expressly subject to all applicable United
States government rights, including, but not limited to, any applicable requirement that products,
which result from such intellectual property and are sold in the United States, must be
substantially manufactured in the United States as conditioned by 37 CFR 401.

     1.5. Sublicense Conditions. The Company’s right to sublicense granted by Penn under
the License is subject to each of the following conditions:

          (a) In each sublicense agreement, Company will prohibit the sublicensee from further
sublicensing and require the sublicensee to comply with the terms and conditions of this Agreement.

          (b) Within thirty (30) days after Company enters into a sublicense agreement, Company will
deliver to Penn an executed copy of the entire sublicense agreement written in the English
language. Penn’s receipt of the sublicense agreement, however, will not constitute a waiver of
any right of Penn or obligation of Company under this Agreement.

          (c) In the event that Company causes or experiences a Trigger Event (as defined in Section
6.4), all payments due to Company and its Affiliates or sublicensees under the sublicense agreement
will, upon notice from Penn to such Affiliate or sublicensee, become payable directly to Penn for
the account of Company. Upon receipt of any such funds, Penn will remit to Company the amount by
which such payments exceed the amounts owed by Company to Penn.

          (d) Company’s execution of a sublicense agreement will not relieve Company of any of its
obligations under this Agreement. Company is primarily liable to Penn for any act or omission of
an Affiliate or sublicensee of Company that would be a breach of this Agreement if performed or
omitted by Company, and Company will be deemed to be in breach of this Agreement as a result of
such act or omission.

2. DILIGENCE

     2.1. Development Plan. Company will deliver to Penn, within ninety (90) days after
the Effective Date, a copy of an initial development plan for the Penn Patent Rights (the
“Development Plan”). The purpose of the Development Plan is (a) to demonstrate Company’s
capability to bring the Penn Patent Rights to commercialization, (b) to project the timeline for
completing the necessary tasks, and (c) to measure Company’s progress against the projections.
Thereafter, Company will deliver to Penn an annual updated Development Plan no later than December
1 of each year during the Term. The Development Plan will include, at a minimum, the information
listed in Exhibit B.

     2.2. Company’s Efforts. Company will use commercially reasonable efforts to develop,
commercialize, market and sell Licensed Products in a manner consistent with the Development Plan.

3

 

     2.3. Diligence Events. The Company will use commercially reasonable efforts to
achieve each of the diligence events by the applicable completion date listed in the table below
for the first product to be commercialized by the Company pursuant to this Agreement or the RTS
License Agreement.

	 	 	 
	DILIGENCE EVENT	 	COMPLETION DATE
	Delivery to Penn of a preliminary business plan

	 	June 30, 2003
	Raising at least an aggregate of $5 Million in equity investment
capital from qualified investors

	 	December 31, 2004
	Filing of IND for first Licensed Product

	 	January 31, 2005
	Initiation of Phase II clinical trials for first Licensed Product

	 	December 31, 2007
	Initiation of Phase III clinical trials for first Licensed Product

	 	December 31, 2010
	First commercial Sale of first Licensed Product

	 	December 31, 2013

3. FEES AND ROYALTIES

     3.1. Equity Issuance. In partial consideration of the License, Company will issue to
Penn on the Effective Date such number of shares of Common Stock of the Company as will cause Penn
to own at least six percent (6%) of the capital stock of Company on a fully diluted basis, assuming
the exercise, conversion and exchange of all outstanding securities of Company for or into shares
of Common Stock. The issuance of equity to Penn will be pursuant to a Stock Purchase Agreement and
a Stockholders Agreement between Company and Penn, the forms of which are attached as Exhibits C
and D (the “Equity Documents”).

     3.2. Dilution Protection. In partial consideration of the License, through the
closing of the equity financing round at which Company has raised cumulatively at least an
aggregate of seven hundred and fifty thousand dollars ($750,000) in net proceeds to Company of
equity financing from qualified investors, Company will issue to Penn, from time to time and at no
additional consideration, such additional number of shares of Common Stock of Company as will cause
Penn to continue to hold in the aggregate six percent (6%) of the capital stock of Company on a
fully diluted basis, assuming the exercise, conversion and exchange of all outstanding securities
of Company for or into shares of Common Stock.

     3.3. Milestone Payments. In partial consideration of the License, Company will pay to
Penn the applicable milestone payment listed in the table below after achievement of each milestone
event for the first product commercialized and sold by the Company or its Affiliates pursuant to
this Agreement or the RTS License Agreement.

	 	 	 	 	 
	MILESTONE	 	PAYMENT
	Initiation of Phase II clinical trials for first Licensed Product
	 	$	50,000	 
	Initiation of Phase III clinical trials for first Licensed Product
	 	$	300,000	 
	First commercial Sale of first Licensed Product
	 	$	600,000	 

     3.4. Earned Royalties. In partial consideration of the License, Company will

4

 

pay to Penn a royalty of eight percent (8%) of Net Sales of a Licensed Product sold by the
Company or its Affiliates (but not sublicensees of the Company) during each Quarter following the
occurrence of a Significant Transaction. The term “Quarter” means each three-month period
beginning on January 1, April 1, July 1 and October 1. The term “Net Sales” means the
consideration received from, or fair market value attributable to, each Sale, less Qualifying Costs
directly attributable to a Sale and borne by Company or its Affiliates For purposes of determining
Net Sales, the words “fair market value” mean the cash consideration that Company or its Affiliates
would realize from an unrelated buyer in an arms length sale of an identical item sold in the same
quantity and at the time and place of the transaction. The term “Qualifying Costs” means: (a)
customary discounts in the trade for quantity purchased, prompt payment or wholesalers and
distributors; (b) credits or refunds for claims or returns that do not exceed the original invoice
amount; (c) prepaid outbound transportation expenses and transportation insurance premiums; and (d)
sales and use taxes and other fees imposed by a governmental agency.

     3.5. Reduction of Royalty. If Company is required to pay royalties to Penn and third
parties that, in the aggregate, exceed eight percent (8%) of Net Sales (the “Total Royalty”) to
commercialize a Licensed Product, the royalties due to Penn for such time, with respect to such a
Licensed Product shall be reduced by two tenths of one percent (0.2%) for every one percent (1%)
the aggregate royalty exceeds eight percent (8%) of Net Sales. To clarify, Company shall pay to
Penn a royalty of 8% — (0.2*(Total Royalty — 8%)) of the Net Sales. In no event shall the
royalties due to Penn be reduced below four percent (4%) of Net Sales by Company or its Affiliates.

     3.6. Sublicense Fees. Except as otherwise provided below, in partial consideration
of the License, Company will pay to Penn a sublicense fee of six percent (6%) of all payments and
the fair value of all other consideration of any kind received by Company from sublicensees.

     Notwithstanding anything above to the contrary, no sublicense fee under this Section 3.6 will
be due to Penn with respect to any of the following consideration received by Company: (i)
consideration received by the Company from sublicensees before the earlier of (a) the third
anniversary of the Effective Date and (b) the occurrence of a Significant Transaction as long as
such fees are reinvested in the development of the Intellectual Property, (ii) equity investments
in Company by a sublicensee, up to the amount of the fair market value of the equity purchased on
the date of the investment as reasonably determined under the circumstances; (iii) sponsored
research funding paid to Company by a sublicensee in a bona fide transaction for future research to
be performed by Company; (iv) payments for consulting services actually performed by Company in a
bona fide transaction at arms length rates; and (v) intellectual property rights received by
Company from a sublicensee, including, but not limited to, licenses or sublicenses to intellectual
property rights, covenants not to compete against Company, or agreements not to assert claims
against Company.

     3.7. Non-Assertion and Non-Duplication. Net Sales of any Licensed Product, including,
but not limited to, Licensed Products pursuant to any other License Agreement

5

 

executed by Company, shall not be subject to more than one assessment of any scheduled royalty
or fee payable to Penn pursuant to this Agreement and the RTS License Agreement; such assessment
shall be the lowest applicable royalty and/or fee payable to Penn. Penn shall not assert any right
to royalties or fees for any other Licensed Product other than the one with the lesser royalty.

4. REPORTS AND PAYMENTS

     4.1. Royalty Reports. Within forty-five (45) days after the end of each Quarter,
Company will deliver to Penn a report, certified by the chief financial officer of Company,
detailing the calculation of all royalties and fees due to Penn for such Quarter. Unless otherwise
included on a form provided to Company by Penn or otherwise agreed to by Penn, this report will
include, at a minimum: (a) the number of Licensed Products involved in Sales, listed by product,
by country; (b) gross consideration invoiced, billed or received for Sales in the Quarter; (c)
Qualifying Costs, listed by category of cost; (d) Net Sales, listed by product, by country; (e)
sublicense fees and other consideration received by Company from sublicensees, listed by product,
by country; and (f) royalties and fees owed to Penn, listed by category, by product, by country.

     4.2. Payments. Company will pay all royalties and fees due to Penn under Article 3,
that have not been paid in advance, within forty-five (45) days after the end of the Quarter in
which the royalties or fees accrue.

     4.3. Records. Company will maintain, and will cause its Affiliates and sublicensees
to maintain, adequate books and records to verify Sales, Net Sales, and all of the royalties, fees,
and other payments due under this Agreement. The records for each Quarter will be maintained for
at least four (4) years after submission of the applicable report required under Section 4.1.

     4.4. Audit Rights. Upon reasonable prior written notice to Company, Company and its
Affiliates and sublicensees will provide Penn and its accountants with access to all of the books
and records required by Section 4.3 to conduct a review or audit of Sales, Net Sales, and all of
the royalties, fees, and other payments payable under this Agreement. Access will be made
available: (a) during normal business hours; (b) in a manner reasonably designated to facilitate
Penn’s review or audit without disruption to Company’s business; and (c) no more than once each
calendar year during the Term and for a period of four (4) years thereafter. Company will promptly
pay to Penn the amount of any underpayment, if undisputed, determined by the review or audit plus
accrued interest. If the review or audit determines that Company has underpaid any royalty payment
by five percent (5%) or more, then Company will also promptly pay the costs and expenses of Penn
and its accountants in connection with the review or audit. In addition once annual Sales of
Licensed Products exceed twenty five million dollars ($25,000,000), at the written request of Penn,
Company will conduct, at least once every two (2) years at its own expense, which expense shall not
be reasonably expected to exceed fifteen thousand dollars ($15,000), an independent audit of Sales,
Net Sales, and all of the royalties, fees and other payments payable under this Agreement.
Promptly

6

 

after completion of the audit, Company will provide to Penn a copy of the report of the
independent auditors.

     4.5. Information Rights. Until the closing of the Company’s initial public offering,
Company will provide to Penn, at least as frequently as they are distributed to the Board of
Directors or management of Company, copies of: (a) relevant portions of all Board and managerial
reports that relate to the Penn Patent Rights or the Licensed Products; and (b) relevant portions
of all business plans, projections and financial statements for Company that are distributed to the
Board of Directors or management of Company and which are related to the Penn Patent Rights or the
Licensed Products. After the closing of the Company’s IPO, Company will provide to Penn, promptly
after filing, a copy of each annual report, proxy statement, 10-K, 10-Q and other material report
filed with the U.S. Securities and Exchange Commission.

     4.6. Currency. All dollar amounts referred to in this Agreement are expressed in
United States dollars. All payments will be made in United States dollars. If Company receives
payment from a third party in a currency other than United States dollars for which a royalty or
fee is owed under this Agreement, then (a) the payment will be converted into United States dollars
at the conversion rate for the foreign currency as published in the eastern edition of The Wall
Street Journal as of the last business day of the Quarter in which the payment was received by
Company, and (b) the conversion computation will be documented by Company in the applicable report
delivered to Penn under Section 4.1.

     4.7. Place of Payment. All payments by Company are payable to “The Trustees of the
University of Pennsylvania” and will be made to the following addresses:

	 	 	 
	By Electronic Transfer:	 	By Check:
	Mellon Bank East
	 	The Trustees of the University of Pennsylvania
	ABA #031000037
	 	C/o Center for Technology Transfer
	Account Number 2945020
	 	P.O. Box 7777-W3850
	C/o CTT/ T. Dunn
	 	Philadelphia, PA 19175-3850

     4.8. Interest. All amounts that are not paid by Company when due will accrue interest
from the due date until paid at a rate equal to one percent (1.0%) per month (or the maximum
allowed by law, if less).

5. CONFIDENTIALITY AND USE OF PENN’S NAME

     5.1. Confidential Disclosure Agreement. If Company and Penn entered into one or more
Confidential Disclosure Agreements prior to the Effective Date, then such agreements will continue
to govern the protection of confidential information under this Agreement, and each Affiliate and
sublicensee of Company will be bound to Company’s obligations under such agreements.

     5.2. Company’s Obligation. If, however, no Confidential Disclosure

7

 

Agreement has been entered into between Company and Penn prior to the Effective Date, then the
terms of this Section 5.2 apply. The term “Confidential Information” includes all technical
information, inventions, developments, discoveries, software, know-how, methods, techniques,
formulae, data, processes and other proprietary ideas, whether or not patentable, that Penn
identifies as confidential or proprietary at the time it is delivered or communicated to Company.
Company will maintain in confidence and not disclose to any third party any Confidential
Information. Company will use Confidential Information only for purposes of this Agreement.
Company will ensure that Company’s Affiliates, sublicensees and employees have access to
Confidential Information only on a need to know basis and are obligated in writing to abide by
Company’s obligations under this Agreement. The obligations under this Section 5.2 will not apply
to: (a) information that is known to Company or independently developed by or for Company prior to
the time of disclosure, in each case, to the extent evidenced by written records; (b) information
that is disclosed to Company by a third party that has a right to make such disclosure; (c)
information that becomes patented, published or otherwise part of the public domain through no
fault of the Company; or (d) information that is required to be disclosed by order of United States
governmental authority or a court of competent jurisdiction, provided that Company shall use its
reasonable best efforts to obtain confidential treatment of such information by such agency or
court.

     5.3. Disclaimer. Penn is not obligated to accept any confidential information from
Company, except for the reports required by Sections 2.1 and 4.1 Penn, acting through its Center
for Technology Transfer and finance offices, will use reasonable best efforts not to disclose to
any third party outside of Penn any confidential information of Company contained in those reports,
subject to exceptions analogous to those contained in Section 5.2(a) — (d) above. Penn bears no
institutional responsibility for maintaining the confidentiality of any other information of
Company. Company may elect to enter into confidentiality agreements with individual investigators
at Penn that comply with Penn’s internal policies.

     5.4. Use of Penn’s Name. Company and its Affiliates, sublicensees, employees, and
agents may not use the name, logo, seal, trademark, or service mark (including any adaptation of
them) of Penn or any Penn school, organization, employee, student or representative, without the
prior written consent of Penn.

6. TERM AND TERMINATION

     6.1. Term. This Agreement will commence on Effective Date and terminate upon the
later of: (a) the expiration or abandonment of the last patent to expire or become abandoned of
the Penn Patent Rights; or (b) if no patent has yet issued from the Penn Patent Rights, ten (10)
years after the first commercial sale of the first Licensed Product (as the case may be, the
“Term”).

     6.2. Early Termination by Company. Company may terminate this Agreement at any time
upon sixty (60) days’ prior written notice to Penn after completing each of the following: (a)
ceasing to make, have made, use, import, sell and offer for sale all

8

 

Licensed Products; (b) terminating all sublicenses and causing all Affiliates and sublicensees
to cease making, having made, using, importing, selling and offering for sale all Licensed
Products; and (c) paying all amounts owed to Penn under this Agreement and any sponsored research
agreement through the date of termination.

     6.3. Early Termination by Penn. Penn may terminate this Agreement if: (a) Company is
more than ninety (90) days late in paying to Penn any amounts owed under this Agreement and does
not immediately pay Penn in full upon demand; (b) Company or its Affiliates breaches this Agreement
and does not cure the breach within ninety (90) days after written notice by Penn to Company of the
breach; or (c) Company experiences a Trigger Event.

     6.4. Trigger Event. The term “Trigger Event” means any of the following: (a) a
material default by Company under any sponsored research agreement between Penn and Company or any
of the Equity Documents that is not cured during any specified cure periods; (b) if Company (i)
becomes insolvent, bankrupt or generally fails to pay its debts as such debts become due; (ii) is
adjudicated insolvent or bankrupt; (iii) admits in writing its inability to pay its debts; (iv)
suffers the appointment of a custodian, receiver or trustee for it or its property and, if
appointed without its consent, not discharged within thirty (30) days; (v) makes an assignment for
the benefit of creditors; or (vi) suffers proceedings being instituted against it under any law
related to bankruptcy, insolvency, liquidation or the reorganization, readjustment or the release
of debtors and, if contested by it, not dismissed or stayed within ten (10) days; (c) the
institution or commencement by Company of any proceedings under any law related to bankruptcy,
insolvency, liquidation, or the reorganization, readjustment or release of debtors; (d) the
entering of any order for relief relating to any of the proceedings described in Section 6.4(b) or
(c) above; (e) the calling by Company of a meeting of its creditors with a view to arranging a
composition or adjustment of its debts; or (f) the act or failure to act by Company indicating its
consent to, approval of or acquiescence in any of the proceedings described in Section 6.4(b) —
(e) above. The events specified in this section 6.4 shall also apply to actions taken by
Affiliates of the Company if the taking of any action described in this section by an Affiliate of
the Company causes a material adverse effect to Penn’s rights under this Agreement.

     6.5. Effect of Termination. Upon termination of this Agreement for any reason: (a)
the License terminates; (b) Company and all its Affiliates and sublicensees will cease all making,
having made, using, importing, selling and offering for sale all Licensed Products; (c) Company
will pay to Penn all amounts owed to Penn through the date of termination under this Agreement and
any sponsored research agreement; (d) Company will, at Penn’s written request, return to Penn all
Confidential Information and provide to Penn copies of all data regarding the Intellectual Property
generated by Company during the Term that will facilitate the further development of the Gewirtz
Intellectual Property that had been licensed under this Agreement; and (e) in the case of
termination under Section 6.3, all duties of Penn and all rights (but not duties) of Company under
this Agreement immediately terminate without further action required by either Penn or Company.

9

 

     6.6. Survival. Company’s obligation to pay all amounts owed to Penn under this
Agreement will survive the termination of this Agreement for any reason. Section 13.10 and
Articles 4, 5, 6, 9, 10, and 11 will survive the termination of this Agreement for any reason in
accordance with their respective terms.

7. PATENT MAINTENANCE AND REIMBURSEMENT

     7.1. Patent Maintenance. Penn controls the preparation, prosecution and maintenance
of the Penn Patent Rights and the selection of patent counsel, with input from Company. If,
however, Company decides to manage the preparation, prosecution and maintenance of the Penn Patent
Rights with input from Penn, then Company and Penn will enter into with patent counsel a Client and
Billing Agreement in the form attached as Exhibit E. As of the date of this Agreement, Company and
Penn have entered into a Client and Billing Agreement.

     7.2. Patent Reimbursement. Unless otherwise provided by any Client and Billing
Agreement, Company will reimburse Penn for all documented attorneys fees, expenses, official fees
and all other charges incident to the preparation, prosecution and maintenance of Penn Patent
Rights within thirty (30) days after the Company’s receipt of invoices for such fees, expenses, and
charges.

8. INFRINGEMENT

     8.1. Notice. Company and Penn will notify each other promptly of any infringement of
the Penn Patent Rights that may come to their attention. Company and Penn will consult each other
in a timely manner concerning any appropriate response to the infringement.

     8.2. Prosecution. Company may prosecute any infringement of the Penn Patent Rights
at Company’s expense. Company shall not settle or compromise any such litigation in a manner that
imposes any obligations or restrictions on Penn or grants any rights in the Penn Patent Rights
without Penn’s prior written permission. Financial recoveries from any such litigation will be:
(a) first, applied to reimburse Company for its litigation expenditures; and (b) second, as to any
remainder, retained by Company, but treated as Net Sales for the purpose of determining the
royalties due to Penn under Section 3.4.

     8.3. Intervention. Penn reserves the right to intervene at Penn’s expense and join
Company in any litigation under Section 8.2 after first giving notice of such intention to
intervene to Company. If Penn elects to participate in any such litigation, then, in lieu of the
division of recoveries specified in Section 8.2, financial recoveries from any such litigation will
be shared between Company and Penn in proportion with their respective shares of the aggregate
litigation expenditures by Company and Penn or as otherwise agreed to by Penn and Company.

     8.4. Penn Prosecution. If Company does not prosecute any infringement of the

10

 

Penn Patent Rights, then Penn may elect to prosecute such infringement at Penn’s expense. If
Penn elects to prosecute such infringement, then financial recoveries will be retained by Penn in
their entirety.

     8.5. Cooperation. In any litigation under this Article 8, either party at the request
and expense of the party, will cooperate to the fullest extent reasonably possible. This Section
8.5 will not be construed to require either party to undertake any activities, including legal
discovery, at the request of any third party, except as may be required by lawful process of a
court of competent jurisdiction.

9. DISCLAIMER OF WARRANTIES

     9.1. Disclaimer. THE PENN PATENT RIGHTS, LICENSED PRODUCTS AND ANY OTHER TECHNOLOGY
LICENSED UNDER THIS AGREEMENT ARE PROVIDED ON AN “AS IS” BASIS. PENN MAKES NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF ACCURACY,
COMPLETENESS, PERFORMANCE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, COMMERCIAL UTILITY,
NON-INFRINGEMENT OR TITLE.

10. LIMITATION OF LIABILITY

     10.1. Limitation of Liability. PENN WILL NOT BE LIABLE TO COMPANY, ITS AFFILIATES, OR
SUBLICENSEES, ITS SUCCESSORS OR ASSIGNS, OR ANY THIRD PARTY WITH RESPECT TO ANY CLAIM: ARISING
FROM COMPANY’S USE OF THE PENN PATENT RIGHTS, LICENSED PRODUCTS OR ANY OTHER TECHNOLOGY LICENSED
UNDER THIS AGREEMENT; ARISING FROM THE DEVELOPMENT, TESTING, MANUFACTURE, USE OR SALE OF LICENSED
PRODUCTS; OR FOR LOST PROFITS, BUSINESS INTERRUPTION, OR INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES
OF ANY KIND.

11. INDEMNIFICATION

     11.1. Indemnification. Company will defend, indemnify, and hold harmless Penn, and
its trustees, officers, faculty, agents, employees and students (each, an “Indemnified Party”),
from and against any and all liability, loss, damage, action, claim, or expense suffered or
incurred by the Indemnified Parties, including attorneys’ fees and expense (collectively,
“Liabilities”) arising out of or resulting from: (a) the development, testing, use, manufacture,
promotion, sale or other disposition of any Penn Patent Rights or Licensed Products by Company, its
Affiliates or sublicensees; (b) any material breach of this Agreement by Company or its Affiliates
or sublicensees; and (c) the enforcement of this Article 11 by any Indemnified Party. Liabilities
include, but are not limited to: (x) any product liability or other claim of any kind related to
use by a third party of a Licensed Product that was manufactured, sold or otherwise disposed of by
Company, its Affiliates, sublicensees, assignees or vendors or third parties; (y) a claim by a
third party that the Penn Patent Rights or the design, composition, manufacture, use, sale or other
disposition of any Licensed Product infringes or violates any patent, copyright, trade

11

 

secret, trademark or other intellectual property right of such third party; and (z) clinical
trials or studies conducted by or on behalf of Company, its Affiliates, sublicensees, assignees or
vendors or third parties relating to the Penn Patent Rights or the Licensed Products, such as
claims by or on behalf of a human subject of any such clinical trial or study.

     11.2. Other Provisions. Company shall not settle or compromise any claim or action
giving rise to Liabilities in any manner that imposes any restrictions on obligations on Penn or
grants any rights to the Penn Patent Rights or the Licensed Products without Penn’s prior written
consent. If Company fails or declines to assume the defense of any claim or action within thirty
(30) days after notice of the claim or action, then Penn may assume the defense of such claim or
action for the account and at the risk of Company, and any Liabilities related to such claim or
action will be conclusively deemed a liability of Company. The indemnification rights of the
Indemnified Parties under this Article 11 are in addition to all other rights that an Indemnified
Party may have at law, in equity or otherwise.

12. INSURANCE

     12.1. Coverages. Before any Licensed Product is to be tested on or administered to a
living human subject, Company will procure and maintain insurance policies for the following
coverages with respect to personal injury, bodily injury and property damage arising out of
Company’s performance under this Agreement: (a) during the Term, comprehensive general liability,
including broad form and contractual liability, in a minimum amount of $2,000,000 combined single
limit per occurrence and in the aggregate; (b) prior to the commencement of clinical trials
involving Licensed Products, clinical trials coverage in a minimum amount of $2,000,000 combined
single limit per occurrence and in the aggregate; and (c) prior to the sale of the first Licensed
Product, product liability coverage, in a minimum amount of $3,000,000 combined single limit per
occurrence and in the aggregate. Penn may review periodically the adequacy of the minimum amounts
of insurance for each coverage required by this Section 12.1, and Penn reserves the right to
require Company to adjust the limits accordingly in accordance with customary industry standards.
The required minimum amounts of insurance do not constitute a limitation on Company’s liability or
indemnification obligations to Penn under this Agreement.

     12.2. Other Requirements. The policies of insurance required by Section 12.1 will be
issued by an insurance carrier with an A.M. Best rating of “A” or better and will name Penn as an
additional insured with respect to Company’s performance under this Agreement. Company will
provide Penn with insurance certificates evidencing the required coverage within thirty (30) days
after commencement of each policy period and all renewal periods. Company will use its reasonable
best efforts to cause each certificate to provide that the insurance carrier will notify Penn in
writing at least thirty (30) days prior to the cancellation or material change in coverage.

13. ADDITIONAL PROVISIONS

12

 

     13.1. Independent Contractors. The parties are independent contractors. Nothing
contained in this Agreement is intended to create an agency, partnership or joint venture between
the parties. At no time will either party make commitments or incur any charges or expenses for or
on behalf of the other party.

     13.2. No Discrimination. Neither Penn nor Company will discriminate against any
employee or applicant for employment because of race, color, sex, sexual or affectional preference,
age, religion, national or ethnic origin, handicap, or veteran status.

     13.3. Compliance with Laws. Company shall comply with all prevailing laws, rules and
regulations that apply to its activities or obligations under this Agreement. Company will comply
with applicable United States export laws and regulations. The transfer of certain technical data
and commodities may require a license from the applicable agency of the United States government
and/or written assurances by Company that Company shall not export data or commodities to certain
foreign countries without prior approval of the agency. Penn does not represent that no license is
required, or that, if required, the license will issue.

     13.4. Modification, Waiver and Remedies. This Agreement may only be modified by a
written amendment that is executed by an authorized representative of each party. Any waiver must
be express and in writing. No waiver by either party of a breach by the other party will constitute
a waiver of any different or succeeding breach. Unless otherwise specified, all remedies are
cumulative.

     13.5. Assignment. Company may not assign this Agreement or any part of it, either
directly or by merger or other operation of law, without the prior written consent of Penn. Penn
will not unreasonably withhold or delay its consent, and will raise any objection to such
assignment within thirty (30) days of notice from Company, provided that: (a) at least thirty (30)
days before the proposed transaction, Company gives Penn written notice and such background
information as may be reasonably necessary to enable Penn to give an informed consent; (b) the
assignee agrees in writing to be legally bound by this Agreement; and (c) the assignee agrees in
writing to deliver to Penn an updated Development Plan within forty-five (45) days after the
closing of the proposed transaction. Any permitted assignment will not relieve Company of
responsibility for the performance of any obligation of Company that has accrued at the time of the
assignment. Any prohibited assignment will be null and void. Notwithstanding anything above to
the contrary, Company may assign this Agreement at any time if the assignee had revenues equal to
or greater than one billion dollars ($1,000,000,000) in the fiscal year prior to the assignment.

     13.6. Notices. Any notice or other required communications (each, a “Notice”) must be
in writing, addressed to the party’s respective Notice Address listed on the signature page, and
delivered: (a) personally; (b) by certified mail, postage prepaid return, receipt requested; (c)
by recognized overnight courier service, charges prepaid; or (d) by facsimile. A Notice will be
deemed received: if delivered personally, on the date of delivery; if mailed, five (5) days after
deposit in the United States mail; if sent via

13

 

courier, one (1) business day after deposit with the courier service; or if sent via
facsimile, upon receipt of confirmation of transmission provided that a confirming copy of such
Notice is sent by certified mail, postage prepaid, return receipt requested.

     13.7. Severability and Reformation. If any provision of this Agreement is held to be
invalid or unenforceable by a court of competent jurisdiction, then the remaining provisions of
this Agreement will remain in full force and effect. Such invalid or unenforceable provision will
be automatically revised to be a valid or enforceable provision that comes as close as permitted by
law to the parties original intent.

     13.8. Headings and Counterparts. The headings of the articles and sections included
in this Agreement are for convenience only and are not intended to affect the meaning or
interpretation of this Agreement. This Agreement may be executed in several counterparts, all of
which taken together will constitute the same instrument.

     13.9. Governing Law. This Agreement will be governed in accordance with the laws of
the Commonwealth of Pennsylvania, without giving effect to the conflict of law provisions of any
jurisdiction.

     13.10. Dispute Resolution. If a dispute arises between the parties concerning any
right or duty under this Agreement, then the parties will confer, as soon as practicable, in an
attempt to resolve the dispute. If the parties are unable to resolve the dispute amicably, then
the parties will submit to the exclusive jurisdiction of, and venue in, the state and Federal
courts located in the Eastern District of Pennsylvania with respect to all disputes arising under
this Agreement.

     13.11. Integration. This Agreement with its Exhibits and the Equity Documents, and
the RTS License Agreement, contain the entire agreement between the parties with respect to the
Penn Patent Rights and the License and supersede all other oral or written representations,
statements or agreements with respect to such subject matter, including but not limited to any term
sheet.

14

 

     Each party has caused this Agreement to be executed by its duly authorized representative.

	 	 	 	 	 	 	 	 
	THE TRUSTEES OF THE

UNIVERSITY OF PENNSYLVANIA

 	 	ACUITY PHARMACEUTICALS, INC.

 	 
	By:  	/s/ Louis P. Berneman
 	 	By:  	/s/ Dale R. Pfost
 	 
	 	Name:  	Louis P. Berneman	 	 	Name:  	Dale R. Pfost 	 
	 	Title:  	Managing Director,
Center for Technology Transfer	 	 	Title:  	President and Chief Executive
Officer 	 
	 

	 	 	 	 	 
	Address:

	 	Center for Technology Transfer
	 	Acuity Pharmaceuticals, Inc.
	 

	 	University of Pennsylvania
	 	C/O Center for Technology Transfer
	 

	 	3160 Chestnut Street, Suite 200
	 	University of Pennsylvania
	 

	 	Philadelphia, PA 19104-6283
	 	3160 Chestnut Street, Suite 200
	 

	 	Attention: Managing Director
	 	Philadelphia, PA 19104-6283
	 

	 	 	 	Attention: Dale R. Pfost
	 
	 	 	 	 
	Required

	 	Office of General Counsel
	 	Drinker Biddle & Reath LLP
	copy to:

	 	University of Pennsylvania
	 	One Logan Square
	 

	 	133 South 36th Street, Suite 300
	 	18th and Cherry Streets
	 

	 	Philadelphia, PA 19104-3246
	 	Philadelphia, PA 19103-6996
	 

	 	Attention: General Counsel
	 	Attention: Neil K. Haimm, Esq.

 

 

EXHIBIT A

LIST OF APPLICATIONS/PENN DOCKET NUMBERS

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