Document:

ex10_16.htm

Exhibit 10.16

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement") is made as of the 4th day of  May, 2012, by and between DISCOVERY LABORATORIES, INC., a Delaware corporation (the "Company"), and Mary B. Templeton (the "Executive"), subject to the terms and conditions defined in this Agreement.

WHEREAS, the Company and Executive desire that Executive be employed by the Company to act as the Company’s Senior Vice President, General Counsel and Corporate Secretary, subject to the terms and conditions set forth in this Agreement.  Executive’s employment shall also be subject to such policies and procedures as the Company may from time to time implement.

NOW, THEREFORE, in consideration of the covenants contained herein, and for other valuable consideration, the Company and the Executive hereby agree as follows:

1.             Certain Definitions.  Certain definitions used herein shall have the meanings set forth on Exhibit A attached hereto.

2.             Term of the Agreement.  The term (“Term”) of this Agreement shall commence on the date first above written and shall continue through May 3, 2013; provided, however, that commencing on May 4, 2013 and on each May 4th thereafter, the term of this Agreement shall automatically be extended for one additional year, unless at least 90 days prior to such May 4th date, neither the Company nor the Executive shall have given notice that it or she does not wish to extend this Agreement.  Upon the occurrence of a Change of Control during the term of this Agreement, including any extensions hereof, this Agreement shall automatically be extended until the end of the Effective Period if the end of the Effective Period is after the then current expiration date of the Term.  Notwithstanding the foregoing, this Agreement shall terminate prior to the scheduled expiration date of the Term on the Date of Termination.

3.             Executive's Duties and Obligations.

(a)           Duties.  The Executive shall serve as the Company's Senior Vice President, General Counsel and Corporate Secretary.  The Executive shall be responsible for all duties customarily associated with a Senior Vice President, General Counsel and Corporate Secretary in a publicly-traded company.  The Executive shall report directly to the Company’s Chief Executive Officer and shall be subject to policies established by the Board and any Executive Committee thereof (“Executive Committee”).

(b)           Location of Employment.  The Executive's principal place of business shall be at the Company's headquarters to be located within thirty (30) miles of Doylestown, Pennsylvania.  In addition, the Executive acknowledges and agrees that the performance by the Executive of her duties shall require frequent travel including, without limitation, overseas travel from time to time.

(c)           Proprietary Information and Inventions Matters.  In consideration of the covenants contained herein, the Executive has executed and agrees to be bound by the Company's standard form of Proprietary Information and Inventions Agreement (the "Confidentiality Agreement"), a form of which is attached to this Agreement as Exhibit B.  The Executive shall comply at all times with the terms and conditions of the Confidentiality Agreement and all other reasonable policies of the Company governing its confidential and proprietary information.

 

  

  

  

4.             Devotion of Time to Company's Business.

(a)           Full-Time Efforts.  During her employment with the Company, the Executive shall devote substantially all of her time, attention and efforts to the proper performance of her implicit and explicit duties and obligations hereunder to the reasonable satisfaction of the Company.

(b)           No Other Employment.  During her employment with the Company, the Executive shall not, except as otherwise provided herein, directly or indirectly, render any services of a commercial or professional nature to any other person or organization, whether for compensation or otherwise, without the prior written consent of the Executive Committee or the Board.

(c)           Non-Competition During and After Employment.  During the Term and for 12 months from the Date of Termination, the Executive shall not, directly or indirectly, without the prior written consent of the Company, either as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director, or in any other individual or representative capacity (X) compete with the Company in the business of developing or commercializing (i) pulmonary surfactants or any other category of compounds which forms the basis of the Company's material drug products, or (ii) any material medical device products under development by the Company, including without limitation the Company’s capillary aerosol generator, series of ventilator circuit / patient interface connectors and related componentry, and similar medical devices; in each case, as determined in good faith by the Board of Directors of the Company on the Date of Termination, or (Y) solicit, encourage, induce or endeavor to entice away from the Company, or otherwise interfere with the relationship of the Company with, any person who is employed or engaged by the Company as an employee, consultant or independent contractor or who was so employed or engaged at any time during the six (6) months preceding the Date of Termination; provided, that nothing herein shall prevent the Executive from engaging in discussions regarding employment, or employing, any such employee, consultant or independent contractor (i) if such person shall voluntarily initiate such discussions without any such solicitation, encouragement, enticement or inducement prior thereto on the part of the Executive or (ii) if such discussions shall be held as a result of, or any employment shall be the result of the response by any such person to a written employment advertisement placed in a publication of general circulation, general solicitation conducted by executive search firms, employment agencies or other general employment services, not directed specifically at any such employee, consultant or independent contractor.

(d)           Injunctive Relief.  In the event that the Executive breaches any provisions of Section 4(c) or of the Confidentiality Agreement or there is a threatened breach thereof, then, in addition to any other rights which the Company may have, the Company shall be entitled, without the posting of a bond or other security, to injunctive relief to enforce the restrictions contained therein.  In the event that an actual proceeding is brought in equity to enforce the provisions of Section 4(c) or the Confidentiality Agreement, the Executive shall not urge as a defense that there is an adequate remedy at law nor shall the Company be prevented from seeking any other remedies which may be available.

 

  

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(e)           Reformation.  To the extent that the restrictions imposed by Section 4(c) are interpreted by any court to be unreasonable in geographic and/or temporal scope, such restrictions shall be deemed automatically reduced to the extent necessary to coincide with the maximum geographic and/or temporal restrictions deemed by such court not to be unreasonable.

5.             Compensation and Benefits.

(a)           Base Compensation.  During the Term, the Company shall pay to the Executive (i) base annual compensation ("Base Salary"), effective as of May 1, 2012, of at least $260,000, payable in accordance with the Company's regular payroll practices and less all required withholdings and (ii) additional compensation, if any, and benefits as hereinafter set forth in this Section 5.  The Base Salary shall be reviewed at least annually for the purposes of determining increases, if any, based on the Executive's performance, the performance of the Company, inflation, the then prevailing salary scales for comparable positions and other relevant factors; provided, however, that any such increase in Base Salary shall be solely within the discretion of the Company.

(b)           Bonuses.  During the Term, the Executive shall be eligible for such year-end bonus, which may be paid in either cash or equity, or both, as is awarded solely at the discretion of the Compensation Committee of the Board  after consultation with the Company’s Chief Executive Officer, provided, that the Company shall be under no obligation whatsoever to pay such discretionary year-end bonus for any year.   Any such equity bonus shall contain such rights and features as are typically afforded to other Company employees of a similar level in connection with comparable equity bonuses awarded by the Company.

(c)           Benefits.  During the Term, the Executive shall be entitled to participate in all employee benefit plans, programs and arrangements made available generally to the Company's senior executives or to its employees on substantially the same basis that such benefits are provided to such executives of a similar level or to other employees (including, without limitation profit-sharing, savings and other retirement plans (e.g., a 401(k) plan) or programs, medical, dental, hospitalization, vision, short-term and long-term disability and life insurance plans or programs, accidental death and dismemberment protection, travel accident insurance, and any other employee welfare benefit plans or programs that may be sponsored by the Company from time to time, including any plans or programs that supplement the above-listed types of plans or programs, whether funded or unfunded); provided, however, that nothing in this Agreement shall be construed to require the Company to establish or maintain any such plans, programs or arrangements.  If a conflict should exist between similar benefits afforded under any Company policy and the benefits afforded under this Agreement, to the extent that this Agreement shall provide for greater benefits, the terms of this Agreement shall control.  Anything contained herein to the contrary notwithstanding, throughout the Term, Executive shall be entitled to receive life insurance on behalf of Executive’s named beneficiaries in the amount of Executive’s then current annual salary for the Term of this Agreement at no cost to the Executive, except the Company shall have no liability whatsoever for any taxes (whether based on income or otherwise) imposed upon or incurred by Executive in connection with any such insurance.

 

(d)           Vacations.  During the Term, the Executive shall be entitled to 20 days paid vacation per year, or such greater amount as may be earned under the Company’s standard vacation policy, to be earned ratably throughout the year, 5 days of which may be carried over from year to year (provided, that in no event shall the aggregate number of such vacation days carried over to any succeeding year exceed 10 days).

 

  

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(e)           Reimbursement of Business Expenses.  The Executive is authorized to incur reasonable expenses in carrying out her duties and responsibilities under this Agreement and the Company shall reimburse her for all such expenses, in accordance with reasonable policies of the Company.

6.           Change of Control Benefits.

(a)           Bonus.  The Executive shall be awarded an annual cash bonus for each fiscal year of the Company ending during the Effective Period that is at least equal to the Annual Bonus Amount; provided the Executive is employed on the last day of such fiscal year.  Such bonuses will be paid no later than the 15th day of the third month following the end of such fiscal year.

(b)           Options.  Notwithstanding any provision to the contrary in any of the Company’s Long-Term Incentive Plans or in any stock option or restricted stock agreement between the Company and the Executive, all shares of stock and all options to acquire Company stock held by the Executive shall accelerate and become fully vested and, with respect to restricted stock, all restrictions shall be lifted upon the Change of Control Date.  In the case of any Change of Control in which the Company’s common stockholders receive cash, securities or other consideration in exchange for, or in respect of, their Company common stock, (i) the Executive shall be permitted to exercise her options at a time and in a fashion that will entitle her to receive, in exchange for any shares acquired pursuant to any such exercise, the same per share consideration as is received by the other holders of the Company’s common stock, and (ii) if the Executive shall elect not to exercise all or any portion of such options, any such unexercised options shall terminate and cease to be outstanding following such Change of Control, except to the extent assumed by a successor corporation (or its parent) or otherwise expressly continued in full force and effect pursuant to the terms of such Change of Control.

7.             Termination of Employment.

(a)           Termination by the Company for Cause or Termination by the Executive without Good Reason, Death or Disability.

(i)                  In the event of a termination of the Executive’s employment by the Company for Cause, a termination by the Executive without Good Reason, or in the event this Agreement terminates by reason of the death or Disability of the Executive, the Executive shall be entitled to any unpaid compensation accrued through the last day of the Executive's employment, a lump sum payment in respect of all accrued but unused vacation days at her Base Salary in effect on the date such vacation was earned, and payment of any other amounts owing to the Executive but not yet paid.  The Executive shall not be entitled to receive any other compensation or benefits from the Company whatsoever (except as and to the extent the continuation of certain benefits is required by law).

(ii)                 In the case of a termination due to death or disability, notwithstanding any provision to the contrary in any stock option or restricted stock agreement between the Company and the Executive, all shares of stock and all options to acquire Company stock held by the Executive shall accelerate and become fully vested upon the Date of Termination (and all options shall thereupon become fully exercisable), and all stock options shall continue to be exercisable for the remainder of their stated terms.

 

  

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(b)           Termination by the Company without Cause or by the Executive for Good Reason.  If (x) the Executive’s employment is terminated by the Company other than for Cause, death or Disability (i.e., without Cause) or (y) the Executive terminates employment with Good Reason, then the Executive shall be entitled to receive the following from the Company:

(i)                  The amounts set forth in Section 7(a)(i);

(ii)                 Within 10 days after the Date of Termination, a lump sum cash payment equal to the Annual Bonus Amount multiplied by the fraction obtained by dividing the number of days in the year through the Date of Termination by 365;

(iii)                Within 10 days after the Date of Termination, a lump sum cash payment in an amount equal to the sum of (A) the Executive’s Base Salary then in effect (determined without regard to any reduction in such Base Salary constituting Good Reason) and (B) the Annual Bonus Amount;

(iv)                For one year from the Date of Termination, the Company shall pay to the Executive no less frequently than quarterly in advance an amount which, after taxes, is sufficient for the Executive to purchase medical and dental coverage for the Executive and her dependents (including through coverage provided under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)) that is substantially equivalent to the medical and dental coverage that the Executive and her dependents were receiving immediately prior to the Date of Termination and that is available to comparable active employees, reduced by the amount that would be paid  by comparable active employees for such coverage under the Company’s plans; provided, however, that the Company’s obligation under this Section 7(b)(iv) shall be reduced to the extent that substantially similar coverages (determined on a benefit-by-benefit basis) are provided by a subsequent employer;

(v)                 Any other additional benefits then due or earned in accordance with applicable plans and programs of the Company; and

(c)           Termination in connection with a Change of Control.  If the Executive’s employment is terminated by the Company other than for Cause or by the Executive for Good Reason during the Effective Period, then the Executive shall be entitled to receive the following from the Company:

(i)                  All amounts and benefits described in Section 7(a)(i) above;

(ii)                 Within 10 days after the Date of Termination, a lump sum cash payment equal to the Annual Bonus Amount multiplied by the fraction obtained by dividing the number of days in the year through the Date of Termination by 365;

(iii)                Within 10 days after the Date of Termination, a lump sum cash payment in an amount equal to 1.5 times the sum of (A) the Executive’s Base Salary then in effect (determined without regard to any reduction in such Base Salary constituting Good Reason) and (B) the Annual Bonus Amount;

 

  

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(iv)                For eighteen months from the Date of Termination, the Company shall pay to the Executive no less frequently than quarterly in advance an amount which, after taxes, is sufficient for the Executive to purchase medical and dental coverage for the Executive and her dependents (including through COBRA) that is substantially equivalent to the medical and dental coverage that the Executive and her dependents were receiving immediately prior to the Date of Termination and that is available to comparable active employees, reduced by the amount that would be paid  by comparable active employees for such coverage under the Company’s plans; provided, however, that the Company’s obligation under this Section 7(c)(iv) shall be reduced to the extent that substantially similar coverages (determined on a benefit-by-benefit basis) are provided by a subsequent employer;

(v)                 Notwithstanding any provision to the contrary in any stock option or restricted stock agreement between the Company and the Executive, all shares of stock and all options to acquire Company stock held by the Executive shall accelerate and become fully vested upon the Date of Termination (and all options shall thereupon become fully exercisable), and all stock options shall continue to be exercisable for the remainder of their stated terms;

(vi)                Any other additional benefits then due or earned in accordance with applicable plans and programs of the Company; and

8.             Notice of Termination.

(a)           Any termination of the Executive’s employment by the Company for Cause, or by the Executive for Good Reason shall be communicated by a Notice of Termination to the other party hereto given in accordance with Section 12.  For purposes of this Agreement, a “Notice of Termination” means a written notice which: (i) is given at least 10 days prior to the Date of Termination (at least 30 days in the case of Notice of Termination given by the Executive for Good Reason), (ii) indicates the specific termination provision in this Agreement relied upon, (iii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and (iv) specifies the employment termination date.  The failure to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause will not waive any right of the party giving the Notice of Termination hereunder or preclude such party from asserting such fact or circumstance in enforcing its rights hereunder.

(b)           A Termination of Employment of the Executive will not be deemed to be for Good Reason unless the Executive gives the Notice of Termination provided for herein within 12 months after the Executive has actual knowledge of the act or omission of the Company constituting such Good Reason and the Executive gives the Company a 30 day cure period to rectify or correct the condition or event that constitutes Good Reason.

9.             Mitigation of Damages.  The Executive will not be required to mitigate damages or the amount of any payment or benefit provided for under this Agreement by seeking other employment or otherwise.  Except as otherwise provided in Sections 7(b)(iv) and 7(c)(iv), the amount of any payment or benefit provided for under this Agreement will not be reduced by any compensation or benefits earned by the Executive as the result of self-employment or employment by another employer or otherwise.

 

  

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10.           Excise Tax Gross-Up.

(a)           Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment, award, benefit or distribution (including any acceleration) by the Company or any entity which effectuates a transaction described in Section 280G(b)(2)(A)(i) of the Code to or for the benefit of the Executive (whether pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 10) (a “Payment”) would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred with respect to such excise tax by the Executive (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by the Executive of all taxes, including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Taxes imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.  For purposes of this Section 10, the Executive shall be deemed to pay federal, state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross Up Payment is to be made, taking into account the maximum reduction in federal income taxes which could be obtained from the deduction of state and local income taxes.

(b)           All determinations required to be made under this Section 10, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the Company’s independent auditors or such other certified public accounting firm of national standing reasonably acceptable to the Executive as may be designated by the Company (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company.  All fees and expenses of the Accounting Firm shall be borne solely by the Company.  Any Gross-Up Payment, as determined pursuant to this Section 10, shall be paid by the Company to the Executive within five days of the later of (i) the due date for the payment of any Excise Tax, and (ii) the receipt of the Accounting Firm’s determination.  If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion to such effect, and to the effect that failure to report the Excise Tax, if any, on the Executive’s applicable federal income tax return will not result in the imposition of a negligence or similar penalty.  Any determination by the Accounting Firm shall be binding upon the Company and the Executive.  As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (“Underpayment”) or Gross-up Payments are made by the Company which should not have been made (“Overpayments”), consistent with the calculations required to be made hereunder.  In the event the Executive is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive.  In the event the amount of Gross-up Payment exceeds the amount necessary to reimburse the Executive for her Excise Tax, the Accounting Firm shall determine the amount of the Overpayment that has been made and any such Overpayment shall be promptly paid by the Executive (to the extent she has received a refund if the applicable Excise Tax has been paid to the Internal Revenue Service) to or for the benefit of the Company.  To the extent that her expenses are reimbursed by the Company, the Executive shall cooperate with any reasonable requests by the Company in connection with any contests or disputes with the Internal Revenue Service in connection with the Excise Tax.

 

  

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11.           Legal Fees.  All reasonable legal fees and related expenses (including costs of experts, evidence and counsel) paid or incurred by the Executive pursuant to any claim, dispute or question of interpretation relating to this Agreement shall be paid or reimbursed by the Company if the Executive is successful on the merits pursuant to a legal judgment or arbitration.  Except as provided in this Section 11, each party shall be responsible for its own legal fees and expenses in connection with any claim or dispute relating to this Agreement.

12.           Notices.  All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed within the continental United States by first class certified mail, return receipt requested, postage prepaid, addressed as follows:

(a)           if to the Board or the Company:

Discovery Laboratories, Inc.

2600 Kelly Road, Suite 100

Warrington, PA 18976

Attn:  General Counsel

(b)           if to the Executive:

Mary B. Templeton

The address on file with the records of the Company

Addresses may be changed by written notice sent to the other party at the last recorded address of that party.

13.           Withholding.  The Company shall be entitled to withhold from payments due hereunder any required federal, state or local withholding or other taxes.

14.           Entire Agreement.  This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supercedes the Employment Agreement and all other prior agreements, written or oral, with respect thereto.

15.           Arbitration.

(a)           If the parties are unable to resolve any dispute or claim relating directly or indirectly to this agreement (a “Dispute”), then either party may require the matter to be settled by final and binding arbitration by sending written notice of such election to the other party clearly marked "Arbitration Demand".  Thereupon such Dispute shall be arbitrated in accordance with the terms and conditions of this Section 15.  Notwithstanding the foregoing, either party may apply to a court of competent jurisdiction for a temporary restraining order, a preliminary injunction, or other equitable relief to preserve the status quo or prevent irreparable harm.

 

  

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(b)           The arbitration panel will be composed of three arbitrators, one of whom will be chosen by the Company, one by the Executive, and the third by the two so chosen.  If both or either of the Company or the Executive fails to choose an arbitrator or arbitrators within 14 days after receiving notice of commencement of arbitration, or if the two arbitrators fail to choose a third arbitrator within 14 days after their appointment, the American Arbitration Association shall, upon the request of both or either of the parties to the arbitration, appoint the arbitrator or arbitrators required to complete the panel. The arbitrators shall have reasonable experience in the matter under dispute. The decision of the arbitrators shall be final and binding on the parties, and specific performance giving effect to the decision of the arbitrators may be ordered by any court of competent jurisdiction.

(c)           Nothing contained herein shall operate to prevent either party from asserting counterclaim(s) in any arbitration commenced in accordance with this Agreement, and any such party need not comply with the procedural provisions of this Section 15 in order to assert such counterclaim(s).

(d)           The arbitration shall be filed with the office of the American Arbitration Association ("AAA") located in New York, New York or such other AAA office as the parties may agree upon (without any obligation to so agree).  The arbitration shall be conducted pursuant to the Commercial Arbitration Rules of AAA as in effect at the time of the arbitration hearing, such arbitration to be completed in a 60-day period. In addition, the following rules and procedures shall apply to the arbitration:

(i)                  The arbitrators shall have the sole authority to decide whether or not any Dispute between the parties is arbitrable and whether the party presenting the issues to be arbitrated has satisfied the conditions precedent to such party's right to commence arbitration as required by this Section 15.

(ii)                 The decision of the arbitrators, which shall be in writing and state the findings, the facts and conclusions of law upon which the decision is based, shall be final and binding upon the parties, who shall forthwith comply after receipt thereof.  Judgment upon the award rendered by the arbitrator may be entered by any competent court.  Each party submits itself to the jurisdiction of any such court, but only for the entry and enforcement to judgment with respect to the decision of the arbitrators hereunder.

(iii)                The arbitrators shall have the power to grant all legal and equitable remedies (including, without limitation, specific performance) and award compensatory damages provided by applicable law, but shall not have the power or authority to award punitive damages.  No party shall seek punitive damages in relation to any matter under, arising out of, or in connection with or relating to this Agreement in any other forum.

(iv)                Except as provided in Section 11, the parties shall bear their own costs in preparing for and participating in the resolution of any Dispute pursuant to this Section 15, and the costs of the arbitrator(s) shall be equally divided between the parties.

 

  

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(v)                 Except as provided in the last sentence of Section 15(a), the provisions of this Section 15 shall be a complete defense to any suit, action or proceeding instituted in any federal, state or local court or before any administrative tribunal with respect to any Dispute arising in connection with this Agreement.  Any party commencing a lawsuit in violation of this Section 15 shall pay the costs of the other party, including, without limitation, reasonable attorney’s fees and defense costs.

16.           Miscellaneous.

(a)           Governing Law.  This Agreement shall be interpreted, construed, governed and enforced according to the laws of the State of New York without regard to the application of choice of law rules.

(b)           Amendments.  No amendment or modification of the terms or conditions of this Agreement shall be valid unless in writing and signed by the parties hereto.

(c)           Severability.  If one or more provisions of this Agreement are held to be invalid or unenforceable under applicable law, such provisions shall be construed, if possible, so as to be enforceable under applicable law, or such provisions shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

(d)           Binding Effect.  This Agreement shall be binding upon and inure to the benefit of the beneficiaries, heirs and representatives of the Executive (including the Beneficiary) and the successors and assigns of the Company.  The Company shall require any successor (whether direct or indirect, by purchase, merger, reorganization, consolidation, acquisition of property or stock, liquidation, or otherwise) to all or substantially all of its assets, by agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform this Agreement if no such succession had taken place.  Regardless whether such agreement is executed, this Agreement shall be binding upon any successor of the Company in accordance with the operation of law and such successor shall be deemed the Company for purposes of this Agreement.

(e)           Successors and Assigns.  Except as provided in Section16(d) in the case of the Company, or to the Beneficiary in the case of the death of the Executive, this Agreement is not assignable by any party and no payment to be made hereunder shall be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or other charge.

(f)            Remedies Cumulative; No Waiver.  No remedy conferred upon either party by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity.  No delay or omission by either party in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by such party from time to time and as often as may be deemed expedient or necessary by such party in such party’s sole discretion.

 

  

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(g)           Survivorship.  Notwithstanding anything in this Agreement to the contrary, all terms and provisions of this Agreement that by their nature extend beyond the termination of this Agreement shall survive such termination.

(h)           Entire Agreement.  This Agreement sets forth the entire agreement of the parties hereto with respect to the subject matter contained herein and supersedes all prior agreements, promises, covenants or arrangements, whether oral or written, with respect thereto.

(i)           Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute one document.

17.           No Contract of Employment.  Nothing contained in this Agreement will be construed as a right of the Executive to be continued in the employment of the Company, or as a limitation of the right of the Company to discharge the Executive with or without Cause.

 

18.           Section 409A of the Code.  The intent of the parties is that payments and benefits under this Agreement comply with, or be exempt from, Section 409A of the Code and, accordingly, to the maximum extent permitted, this Agreement shall be construed and interpreted in accordance with such intent.  The Executive’s termination of employment (or words to similar effect) shall not be deemed to have occurred for purposes of this Agreement unless such termination of employment constitutes a “separation from service” within the meaning of Code Section 409A and the regulations and other guidance promulgated thereunder.

 

(a)           Notwithstanding any provision to the contrary in this Agreement, if the Executive is deemed on the date of her termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B) and using the identification methodology selected by the Company from time to time, or if none, the default methodology set forth in Code Section 409A, then with regard to any payment or the providing of any benefit that constitutes “non-qualified deferred compensation” pursuant to Code Section 409A and the regulations issued thereunder that is payable due to the Executive’s separation from service, to the extent required to be delayed in compliance with Code Section 409A(a)(2)(B), such payment or benefit shall not be made or provided to the Executive prior to the earlier of (i) the expiration of the six (6)-month period measured from the date of the Executive’s separation from service, and (ii) the date of the Executive’s death (the “Delay Period”).  On the first day of the seventh month following the date of the Executive’s separation from service or, if earlier, on the date of the Executive’s death, all payments delayed pursuant to this Section 18(a) shall be paid or reimbursed to the Executive in a lump sum, and any remaining payments and benefits due to the Executive under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

 

  

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(b)           To the extent any reimbursement of costs and expenses provided for under this Agreement constitutes taxable income to the Executive for Federal income tax purposes, such reimbursements shall be made no later than December 31 of the calendar year next following the calendar year in which the expenses to be reimbursed are incurred.  With regard to any provision herein that provides for reimbursement of expenses or in-kind benefits, except as permitted by Code Section 409A, (i) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year.  Any tax gross-ups provided for under this Agreement shall in no event be paid to Executive later than the December 31 of the calendar year following the calendar year in which the taxes subject to gross-up are incurred or paid by the Executive.

 

(c)           If under this Agreement, an amount is to be paid in two or more installments, for purposes of Code Section 409A, each installment shall be treated as a separate payment.

 

19.           Executive Acknowledgement.  The Executive hereby acknowledges that she has read and understands the provisions of this Agreement, that she has been given the opportunity for her legal counsel to review this Agreement, that the provisions of this Agreement are reasonable and that she has received a copy of this Agreement.

 

  

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IN WITNESS WHEREOF, the parties hereto have caused this Employment Agreement to be executed as of the date first above written.

DISCOVERY LABORATORIES, INC.

	
By:

	
/s/ Kathryn A. Cole

	  
	
 

	
Name:    Kathryn A. Cole

	  
	
 

	
Title:      Senior Vice President, Human Resources

	  

	
/s/ Mary B. Templeton

	  
	
Mary B. Templeton

	  

 

  

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EXHIBIT A

(a)           “Annual Bonus Amount” means an amount equal to the greater of either (i) the current year target annual bonus amount or (ii) the previous year’s actual bonus paid with respect to the fiscal year preceding the year containing the Change of Control Date or the Date of Termination, as applicable.

(b)           “Beneficiary” means any individual, trust or other entity named by the Executive to receive the payments and benefits payable hereunder in the event of the death of the Executive.  The Executive may designate a Beneficiary to receive such payments and benefits by completing a form provided by the Company and delivering it to the General Counsel of the Company.  The Executive may change her designated Beneficiary at any time (without the consent of any prior Beneficiary) by completing and delivering to the Company a new beneficiary designation form.  If a Beneficiary has not been designated by the Executive, or if no designated Beneficiary survives the Executive, then the payment and benefits provided under this Agreement, if any, will be paid to the Executive’s estate, which shall be deemed to be the Executive’s Beneficiary.

(c)           “Cause” means: (i) the Executive’s willful and continued neglect of the Executive’s duties with the Company (other than as a result of the Executive’s incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Company which specifically identifies the manner in which the Company believes that the Executive has neglected her duties; (ii) the final conviction of the Executive of, or an entering of a guilty plea or a plea of no contest by the Executive to, a felony; or (iii) the Executive’s willful engagement in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.

For purposes of this definition, no act or failure to act on the part of the Executive shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without a reasonable belief that the action or omission was in the best interests of the Company.  Any act, or failure to act, based on authority given pursuant to a resolution duly adopted by the Board of Directors of the Company (the “Board”), or the advice of counsel to the Company, will be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company.

(d)           “Change of Control” means the occurrence of any one of the following events:

(i)                 any “person” (as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the “Exchange Act”)), other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, an underwriter temporarily holding securities pursuant to an offering of such securities or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, directly or indirectly acquires “beneficial ownership” (as defined in Rule 13d-3 under the Exchange Act) of securities representing 35% of the combined voting power of the Company’s then outstanding securities;

 

  

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(ii)                 persons who, as of the date of this Agreement constitute the Board (the “Incumbent Directors”) cease for any reason, including without limitation, as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority thereof; provided, that any person becoming a director of the Company subsequent to the date of this Agreement shall be considered an Incumbent Director if such person’s election or nomination for election was approved by a vote of at least two-thirds (2/3) of the Incumbent Directors in an action taken by the Board or a Committee thereof; provided, further, that any such person whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of members of the Board or other actual or threatened solicitation of proxies or consents by or on behalf of a “person” (as defined in Section 13(d) and 14(d) of the Exchange Act) other than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation, shall not be considered an Incumbent Director;

(iii)                the consummation of a reorganization, merger, statutory share exchange, consolidation or similar corporate transaction (each, a “Business Combination”) other than a Business Combination in which all or substantially all of the individuals and entities who were the beneficial owners of the Company’s voting securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the voting securities of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of the Business Combination owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership of the Company’s voting securities immediately prior to such Business Combination; or

(iv)                the Company consummates a sale of all or substantially all of the assets of the Company or the stockholders of the Company approve a plan of complete liquidation of the Company.

(e)           “Change of Control Date” means any date after the date hereof on which a Change of Control occurs; provided, however, that if a Change of Control occurs and if the Executive’s employment with the Company is terminated or an event constituting Good Reason (as defined below) occurs prior to the Change of Control, and if it is reasonably demonstrated by the Executive that such termination or event (i) was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control, or (ii) otherwise arose in connection with or in anticipation of the Change of Control then, for all purposes of this Agreement, the Change of Control Date shall mean the date immediately prior to the date of such termination or event.

(f)           “Code” means the Internal Revenue Code of 1986, as amended and the regulations promulgated thereunder.

(g)           “Date of Termination” means the date specified in a Notice of Termination pursuant to Section 8 hereof, or the Executive’s last date as an active employee of the Company before a termination of employment due to death, Disability or other reason, as the case may be.

 

  

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(h)           “Disability” means a mental or physical condition that renders the Executive substantially incapable of performing her duties and obligations under this Agreement, after taking into account provisions for reasonable accommodation, as determined by a medical doctor (such doctor to be mutually determined in good faith by the parties) for three or more consecutive months or for a total of six months during any 12 consecutive months; provided, that during such period the Company shall give the Executive at least 30 days’ written notice that it considers the time period for disability to be running.

(i)           “Effective Period” means the period beginning on the Change of Control Date and ending 24 months after the date of the related Change of Control.

(j)           “Good Reason” means, unless the Executive has consented in writing thereto, the occurrence of any of the following:  (i) the assignment to the Executive of any duties inconsistent with the Executive’s position, including any change in status, title, authority, duties or responsibilities or any other action which results in a material diminution in such status, title, authority, duties or responsibilities; (ii) a material reduction in the Executive’s Base Salary by the Company; (iii) the relocation of the Executive’s office to a location more than 30 miles from Doylestown, Pennsylvania; (iv) the failure of the Company to comply with the provisions of Section 6(a); (v) during the Effective Period following a Change of Control, unless a plan providing a substantially similar compensation or benefit is substituted, (A) the failure by the Company to continue in effect any material fringe benefit or compensation plan, retirement plan, life insurance plan, health and accident plan or disability plan in which the Executive was participating prior to the Change of Control, or (B) the taking of any action by the Company which would adversely affect the Executive’s participation in or materially reduce her benefits under any of such plans or deprive her of any material fringe benefit; or (vi) the failure of the Company to obtain the assumption in writing of the Company’s obligation to perform this Agreement by any successor to all or substantially all of the assets of the Company within 15 days after a Business Combination or a sale or other disposition of all or substantially all of the assets of the Company.

 

 

16ex10_7.htm

Exhibit 10.7

	
Confidential treatment requested under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2.  The confidential portions of this exhibit have been omitted and are marked accordingly.  The confidential portions have been filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request.

 

CELLULITE LICENSE AGREEMENT

This CELLULITE LICENSE AGREEMENT (the “Agreement”), effective as of August 23, 2007 (the “Effective Date”), is entered into by and between BioSpecifics Technologies Corp., a corporation organized and existing under the laws of Delaware (“BTC”), and the Research Foundation of the State University of New York for and on behalf of Stony Brook University, a nonprofit, educational corporation organized and existing under the laws of New York (the “Research Foundation”).  BTC and the Research Foundation shall sometimes be referred to herein individually as a “Party” and collectively as “Parties.”

RECITALS

WHEREAS, BTC has developed an injectable form of collagenase that has been used in a number of clinical applications, including, among other things, the treatment and prevention of Dupuytren’s disease and Frozen Shoulder; and

WHEREAS, BTC and the Research Foundation entered into a Dupuytren’s Disease License Agreement dated November 21, 2006 (the “Dupuytren’s Disease License Agreement”) to compensate the Research Foundation for the prior development work performed by the State University of New York at Stony Brook (“Stony Brook”) in connection with Dupuytren’s disease; and

WHEREAS, BTC and the Research Foundation have entered into a Frozen Shoulder License Agreement dated November 21, 2006 (the “Frozen Shoulder License Agreement”) to compensate the Research Foundation for the prior development work performed by Stony Brook in connection with Frozen Shoulder; and

WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>; and

WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>; and

WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>; and

WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>; and

WHEREAS, contemporaneously herewith, the Research Foundation and BTC will execute an Research Agreement pursuant to which the Research Foundation will conduct a clinical trial for BTC in accordance with Clinical Research Protocol AA4500 for the treatment of Cellulite (the “Research Agreement”); and

 

  

  

  

WHEREAS, contemporaneously herewith, B&D shall execute the transfer of the Cellulite IND, pursuant to the form attached hereto as Exhibit A (the “IND Transfer of Ownership”), which transfer shall be held in escrow by the Research Foundation and not become effective until released by the Research Foundation in accordance with the terms of this Agreement; and

 

WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>; and

WHEREAS, the Research Foundation has the right to grant certain rights and licenses as set forth herein; and

 

WHEREAS, the Research Foundation now wishes to license the University Know-How and the University Patents in respect of Cellulite to BTC, and BTC wishes to license the University Know-How and the University Patents in respect of Cellulite from the Research Foundation, on the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements set forth below, the Parties agree as follows:

ARTICLE I.

DEFINITIONS

For the purposes of this Agreement, the following capitalized words and phrases, whether used in the singular or plural, shall have the following meanings:

1.1           “Affiliate” means any corporation or other business entity controlled by, controlling, or under common control with another entity, with “control” meaning direct or indirect beneficial ownership of more than 50% (or such lesser percent provided that ownership is accompanied by the power to direct the management or policies of the entity) of (a) the voting stock in the case of a corporation, or (b) the profits interest or decision-making authority in the case of an unincorporated business entity.

 

1.2           “Auxilium” means Auxilium Pharmaceuticals, Inc., a corporation organized and existing under the laws of Delaware.

 

1.3           “Auxilium License Agreement” means the agreement dated as of June 3, 2004 by and between BTC and Auxilium, as amended on May 10, 2005 and as may be subsequently amended from time to time, by which BTC granted to Auxilium certain licenses, as defined therein.

 

1.4           “Cellulite” means the dimpling of the skin or the "mattress phenomenon" of the thighs and buttocks.

 

1.5           “Combination Product” means any product containing both an agent or ingredient which constitutes a Licensed Product and one or more other active agents or ingredients which do not constitute Licensed Products.

 

  

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1.6           “Development Program” means the clinical studies previously performed by B&D with injectable collagenase pertaining to Cellulite, as described more fully in Article II hereof.

 

1.7           “EMEA” means the European Medicines Evaluation Agency, which coordinates the scientific review of human pharmaceutical products under the centralized licensing procedure of the European Community, and includes any successor agency.

 

1.8           “Enzyme” means an enzyme constituted of collagenase obtained by fermentation of Clostridium histolyticum, purified by chromatography, lyophilized and substantially free from other proteinases, and any variants or derivatives thereof.

 

1.9           “European Union“ or “EU” means the countries of the European Union (or its successor) as constituted on the Effective Date and future members of the European Union upon their admission for full membership with commercial rights and privileges.

 

1.10          “FDA” has the meaning set forth above in the recitals.

 

1.11          “Field” means the prevention or treatment of Cellulite.

 

1.12          “First Commercial Sale” means the first commercial sale of a Licensed Product by BTC under the terms of a Supply Agreement or by a Sublicensee to a Third Party.

 

1.13          “Indication” shall mean a pharmaceutical application of injectable collagenase.

 

1.14          “Information” means (a) techniques, technology, practices, methods, procedures, inventions, discoveries, knowledge, know-how, trade secrets, skill, experience, gene or protein sequences, technical data, test data, analytical and quality control data, formulas or software programs, and (b) all compounds, compositions of matter, cells, cell lines, assays, and all other biological or chemical materials and samples.

 

1.15          “Joint Inventions” means any inventions in the Field, whether patentable or not, which are jointly conceived, discovered, developed or otherwise made, during the Development Program by at least one BTC employee or person contractually required to assign or license the intellectual property rights covering such inventions to BTC and at least one Stony Brook employee or person contractually required by virtue of New York state law to assign or license the intellectual property rights covering such inventions to the Research Foundation.

 

1.16          “Licensed Products” means pharmaceutical products containing Enzyme as an active ingredient and any reformulation, improvement, enhancement, combination, refinement, or modification thereof, which are made, used and sold in the Field and the development, manufacture, use or sale of which would, in the absence of this Agreement, infringe one or more Valid Claims; provided however, the Licensed Products shall specifically exclude dermal formulations labeled for topical administration.

 

  

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1.17          “MAA” means a Marketing Authorization Application filed with the EMEA.

 

1.18          “NDA” means a New Drug Application, Biologics License Application or a Product License Application filed with the FDA.

 

1.19          “Net Sales” means

(a)       with respect to sales of Licensed Products by BTC or its Affiliates,  the gross sales price actually received less the following items to the extent they are paid and included in the invoice price:

	 	
(i) 

	
customary trade discounts actually allowed;

	 	
(ii) 

	
packing, freight, and insurance costs;

	 	
(iii) 

	
sales, use, value-added and excise taxes;

	 	
(iv) 

	
import, export and customs duties and taxes;

	 	
(v)

	
credit for returns, allowances or trades actually allowed; and

	 	
(vi) 

	
government mandated rebates, if any; and

(b)           with respect to sales of Licensed Products by a Sublicensee (as defined below) where BTC has elected not to supply the Licensed Product, the net sales price as required to be reported to BTC by the Sublicensee pursuant to the written sublicense agreement between them.  For purposes of clarification, if Auxilium acquires BTC, then notwithstanding any termination of the Auxilium License Agreement, the Net Sales price shall be the price that would have been reported by Auxilium to BTC under the Auxilium License Agreement as if the Auxilium License Agreement had remained in effect.

(c)           with respect to sales of Licensed Products by a Sublicensee (as defined below) where BTC has elected to supply the Licensed Product, the net sales price as required to be reported to BTC under the Supply Agreement entered into between them.

In the case of (a) and (b) above, sales by BTC, its Affiliates and Sublicensees to resellers or others for further formulation, processing, repackaging or relabeling shall be excluded, and only the subsequent resale to independent customers shall be deemed Net Sales.

In the case of Combination Products for which the agent or ingredient constituting a Licensed Product and each of the other active agents or ingredients not constituting a Licensed Product have established market prices when sold separately, Net Sales shall be determined by multiplying the Net Sales for each such Combination Product by a fraction, the numerator of which shall be the established market price for the Licensed Products contained in the Combination Product and the denominator of which shall be the sum of the established market prices for the Licensed Products plus the other active agents or ingredients contained in the Combination Product.  When separate market prices are not established, then the Parties shall negotiate in good faith to determine a fair and equitable method of calculating Net Sales for the Combination Product in question, taking into account factors such as relative cost and relative therapeutic or diagnostic contribution.

  

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1.20          “Sublicensee” means Auxilium or any person or entity who receives in the future a sublicense from BTC pursuant to Article III hereof.

 

1.21          “Sublicense Income” means the upfront payments and milestone payments actually received by BTC from (i) Auxilium and included within the definition of Sublicense Income as defined in the Auxilium License Agreement, or (ii) any other Sublicensee pursuant to Article III hereof.

 

1.22          “Supply Agreement” shall mean any commercial supply agreement related to the manufacturing and/or supply of the Licensed Product between BTC and a Sublicensee or any Third Party.

 

1.23          “Territory” means all countries of the world.

 

1.24          “Third Party” shall mean any person or other entity other than BTC or its Affiliates.

 

1.25          “University Know-How” means (i) any proprietary Information or materials related to the manufacture, preparation, formulation, use or development of the Enzyme and the Licensed Products and shall include formulations, processes, techniques, formulas, biological, chemical, assay control and manufacturing, technical, pre-clinical, clinical or other data, methods, and know-how, and trade secrets; (ii) all Information, not generally known, which is owned by the Research Foundation or is rightfully held with right to sublicense as of the Effective Date, or which was developed, discovered, conceived, reduced to practice, or acquired by the Research Foundation or by Stony Brook inventors and assigned by Stony Brook inventors to the Research Foundation as a result of the Development Program and which (a) relates to the Licensed Products or (b) relates to the methods, processes or techniques for the manufacture or use of the Licensed Products and (iii) any Joint Inventions.

 

1.26         “University Patents” means the patents and patent applications in respect of Cellulite identified in Exhibit B hereto and any divisions, continuations and continuations-in-part thereof, any foreign patent applications corresponding thereto, and any patent issued with respect to such patent applications, and any reissues or extensions thereof.

 

1.27          “Valid Claim” means a claim of an issued and unexpired patent included within the University Patents, which has not been held permanently revoked, unenforceable or invalid by a decision of a governmental agency or court of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and which has not been admitted to be invalid or unenforceable through reissue or disclaimer or otherwise.

 

  

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ARTICLE II.

DEVELOPMENT PROGRAM

2.1           Cellulite Development Program.  Pursuant to certain protocols, B&D, individually or collectively, together with other Stony Brook employees, performed certain pre-clinical, clinical, regulatory, process development and manufacturing work related to injectable collagenase pertaining to Cellulite.

 

ARTICLE III.

LICENSE GRANT

3.1           License Grant.  The Research Foundation hereby grants to BTC and its Affiliates a worldwide exclusive license for the University Know-How in the Field and the University Patents in the Field.  The Research Foundation hereby reserves all rights to any University Know How and University Patents outside of the Field.  The Research Foundation further grants to BTC a worldwide exclusive license with right to sublicense to use the University Know-How and the University Patents to develop, manufacture, use and sell in any manner Licensed Products in the Field, except to the extent that BTC, its Affiliates or Sublicensees enters into a material transfer agreement, clinical trial agreement or any similar agreement that allows the Research Foundation or any other entity to do research or clinical development.  This grant is subject to the payment by BTC to Research Foundation of any consideration required to be paid by Article IV of this Agreement.

 

3.2           Government Rights.  BTC acknowledges that the license granted to it hereunder are subject to a certain license granted to the United States (“U.S.”) government by the Research Foundation, as described in a letter dated as of October 6, 2006, a copy of which is attached hereto as Exhibit C.

 

3.3           Sublicenses.

 

(a)            BTC shall be entitled to grant sublicenses of its rights hereunder, with full rights to further sublicense, provided that any Net Sales of Licensed Products by a BTC Sublicensee shall be deemed to be Net Sales of a Sublicensee as defined in Section 1.19(b) or (c) for purposes of royalty payments due hereunder, and BTC shall remain obligated to pay all royalties due with respect to Licensed Products sold by BTC and any Sublicensee.  If BTC shall grant any sublicenses in addition to the Auxilium License Agreement under this Agreement, then it shall obtain the written commitment of such additional Sublicensees to abide by all applicable terms and conditions of this Agreement and BTC shall remain fully responsible to the Research Foundation for the performance of all such terms by such additional Sublicensees.  Upon the termination of this Agreement, each Sublicensee shall have the option to convert its sublicense to a direct license with the Research Foundation on the same terms as in the sublicense agreement.

 

  

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(b)           The Research Foundation hereby acknowledges and consents to the sublicense that BTC has previously granted to Auxilium pursuant to the Auxilium License Agreement in respect of the Licensed Products.

 

3.4           Subagents.  It is agreed that BTC has the right to take the following actions, none of which shall constitute a sublicense hereunder and none of which shall be subject to Section 3.3 herein:

 

(a)           appointing an agent or distributor to market, sell or otherwise dispose of Licensed Products;  and

 

(b)           subcontracting the development, manufacture or packaging of Licensed Products.

 

3.5           Term.  The term of said license will continue in effect in perpetuity.

 

ARTICLE IV.

ROYALTIES AND MILESTONE PAYMENTS

4.1            Royalties.  <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>.  Commencing with a First Commercial Sale BTC will pay running royalties on a specified percentage of Net Sales of Licensed Products on a country-by-country and product by product basis as follows:

 

(a)   in the event of a sale whereby BTC supplies License Product to Sublicensee under the terms of a Supply Agreement, the royalty rate shall be <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>.

 

(b)  in the event of a sale whereby BTC elects not to supply the Licensed Product to Sublicensee, the royalty rate shall be <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>.

 

(c) in the event of a sale by BTC of Licensed Product, the royalty rate shall be <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>.

 

4.2            Royalty Period.  The royalty obligations of BTC shall commence on the date of the First Commercial Sale and continue until the longer of (i) the expiration of the last to expire Valid Claim of a patent covering the Licensed Product or (ii) June 3, 2016.

 

4.3           Currency; Conversion; Taxes.  Royalty payments shall be paid in U.S. Dollars at the address of the Research Foundation set forth in Section 13.6 below, or such other place as the Research Foundation may reasonably designate in writing, consistent with applicable laws and regulations.  Any taxes which BTC or its Affiliates or Sublicensees shall be required by law to withhold or pay upon remittance of the royalty payments shall be deducted from the royalty payable to the Research Foundation and paid on its behalf as required.  BTC shall furnish the original of any official receipts for such taxes.  If any currency conversion shall be required in connection with the payment of royalties hereunder, such conversion shall be made by using the average of the daily exchange rates for such currency quoted by the Wall Street Journal’s (New York edition) foreign exchange desk for each of the last three (3) banking days of each calendar quarter, or, in the case of sales by Sublicensees, using the exchange rates provided for in the written agreements between BTC and such Sublicensees.

 

  

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4.4           Currency Transfer Restrictions.  If in any country in the Territory the payment or transfer of royalties on Net Sales in such country is prohibited by law or regulation, BTC shall notify the Research Foundation of the conditions preventing such transfer, and shall deposit the blocked payments in local currency in a recognized banking institution in the relevant country for the credit of the Research Foundation.

 

4.5           Payments by Others.  With respect to any sales of Licensed Products by BTC, its Affiliates or Sublicensees, BTC shall have the right to cause any Affiliate, Sublicensee or other designee to make direct payment to the Research Foundation of the royalties otherwise due for such sales.  The Research Foundation shall accept such payments and the amount of royalties to be paid by BTC shall be reduced by the amount of such payments actually received by Research Foundation.

 

4.6           Offsets for Third Party Licenses.  If the Parties agree in writing that BTC or its Affiliates must obtain a license from an independent Third Party in order for BTC to manufacture, use or sell a Licensed Product and if BTC and the Research Foundation agree on the terms of such license (a “Third Party License”), then the Parties shall share the cost of that license as defined herein.  Such cost includes license fees, royalties and other fixed costs associated with the Third Party License minus the costs apportioned to any Sublicensee.  The Parties shall, within thirty (30) days, reimburse each other as necessary to <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>.  At BTC’s option, it may deduct from royalties otherwise payable to the Research Foundation hereunder <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>.

 

4.7           Milestone Payments.  BTC shall pay to the Research Foundation <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>.

 

4.8           Payments Related to Sublicense Income and Damages or Settlements Received.  BTC shall pay to the Research Foundation <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>.

 

ARTICLE V.

CELLULITE IND TRANSFER OF OWNERSHIP

5.1           Transfer of IND.  Contemporaneously with the execution of this Agreement, B&D shall execute and deliver to the Reserarch Foundation to hold in escrow  (i) the IND Transfer of Ownership and (ii) a power of attorney, in the form attached hereto as Exhibit D, empowering the Research Foundation as their joint and several attorney-in-fact, with full authority, to date, finalize and deliver the executed IND Transfer of Ownership to the FDA for the benefit of BTC or its designee at BTC’s request provided that (i) BTC is not in default under this Agreement or the Research Agreement and (ii) BTC has complied with the utilization requirements set forth in Section 12.3 below. The Research Foundation shall deliver a copy of the finalized IND Transfer of Ownership to BTC and the B&D  for their records promptly after delivery of the same to the FDA.

 

  

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ARTICLE VI.

REPORTS, PAYMENTS AND ACCOUNTING

6.1           Royalty Reports and Payments.  BTC agrees to make written reports and royalty payments to the Research Foundation within ninety (90) days after the close of each calendar quarter during the term of this Agreement, beginning with the quarter in which the First Commercial Sale occurs.  These reports shall show for the calendar quarter in question all Net Sales of Licensed Products and the royalty due thereon, together with the same information for Licensed Products sold by Affiliates and Sublicensees (if applicable).  With respect to sales of Licensed Products by Sublicensees, reports need only include information reflected in the reports required by Section 5.4 below which are actually received during the calendar quarter in question.  Concurrently with the making of each report, BTC shall remit any royalty payment due for the period covered by the report.  BTC will make a good faith attempt, using commercially reasonable biotech industry practices, to differentiate between Net Sales of Licensed Products and sales of similar products outside of the Field in calculating the amount of the royalty due hereunder to the Research Foundation.  Absent manifest error, BTC’s good faith differentiation shall be binding and conclusive on the Parties.

6.2           Termination Report.  Within ninety (90) days after the date on which BTC and its Affiliates and Sublicensees last sell any Licensed Products, BTC shall make a final termination report containing the same quarterly information required above.

6.3           Accounting.  BTC agrees to keep written or digitally stored records for a period of three (3) years from the end of each reporting period in sufficient detail to enable the royalties payable to be determined, and further agrees to permit its books and records to be examined during normal business hours by an independent accounting firm, selected by the Research Foundation and reasonably satisfactory to BTC, from time-to-time on reasonable notice, but not more often than once per year.  Such examination must be made confidentially and the auditing firm shall be required to enter into reasonable confidentiality agreements.  The expense of such examination shall be borne by the Research Foundation except that in the event the results of the audit reveal a discrepancy in the Research Foundation’s favor of 10% or more, then reasonable out-of-pocket audit fees shall be paid by BTC.  Any discrepancy will be promptly corrected by a payment or refund, as appropriate.

 

  

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6.4           Third Party Reports.  BTC agrees to require, as a term of any sublicense agreement, that the Sublicensee shall render written reports to BTC of Net Sales of Licensed Products no less frequently than twice per year and in sufficient detail to enable the royalties payable by BTC hereunder to be determined (“Third Party Reports”).  BTC shall also require Sublicensees to keep records concerning Net Sales for a period of at least three (3) years, and to permit reasonable examination of such records by an independent accounting firm selected by BTC.  Notwithstanding the foregoing, nothing in this Agreement shall be construed as enlarging, or requiring BTC to modify, Auxilium’s, its Affiliate’s or its Sublicensee’s existing reporting and record keeping obligations pursuant to the Auxilium License Agreement.

 

6.5           Confidentiality of Reports.  The Research Foundation agrees that the information set forth in (a) the reports required by Sections 6.1 and 6.2, (b) the records subject to examination under Section 6.3, and (c) all Third Party Reports delivered under Section 6.4, shall be maintained in confidence by the Research Foundation and any independent accounting firm selected under Section 6.3, shall not be used for any purpose other than verification of the performance by BTC of its obligations hereunder, and shall not be disclosed by the Research Foundation or such accounting firm to any other person.

 

ARTICLE VII.

WARRANTIES; DISCLAIMED WARRANTIES; INDEMNIFICATION

 

7.1           Title; Authority.  The Research Foundation represents and warrants that B&D, by virtue of New York state law, have assigned to the Research Foundation all of the rights pertaining to the University Know-How and the University Patents licensed to BTC hereunder and that therefore the Research Foundation has the full unrestricted legal right to enter into this Agreement and to grant the licenses granted hereunder.

 

7.2           No Other Licenses Granted.  The Research Foundation represents and warrants that it has not granted any license pertaining to the University Know-How or the University Patents to any party other than to BTC pursuant to this Agreement.  In addition, after reasonable investigation, the Research Foundation to the best of its knowledge is not aware that B&D, individually or collectively, have granted any license pertaining to the University Know-How or the University Patents to any Third Party, other than the U.S. government, as set forth in Section 3.2 of this Agreement.

 

7.3           No Known Infringement.  As of the Effective Date, the Research Foundation has not received any notice of infringement of or conflict with any patent, trade secret, copyright, trademark or other intellectual property right of any other person with respect to the University Know-How.

 

7.4           No Warranty of Non-Infringement.  Nothing in this Agreement shall be construed as a warranty or representation that any Licensed Products made, used or sold pursuant to any license granted hereunder is or will be free from infringement of patents, copyrights, trademarks, trade secrets or other intellectual property rights of Third Parties.

 

  

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7.5           Indemnification by Research Foundation.  Notwithstanding the absence of any warranty of non-infringement, the Research Foundation shall, during the term of this Agreement and thereafter, indemnify and hold harmless BTC, its Affiliates, Sublicensees and its and their directors, officers, agents and employees, from any losses, damages, expenses and liabilities of any kind (including legal expenses and reasonable attorneys’ fees and costs ) resulting from the Research Foundation’s gross negligence or willful misconduct in connection with:

 

(a)    the action or inaction of the Research Foundation, its Affiliates or B&D; or

 

(b)   any breach of this Agreement by the Research Foundation or its Affiliates.

 

7.6            Indemnification by BTC.  BTC shall, during the term of this Agreement and thereafter, indemnify and hold harmless the Research Foundation and its Affiliates and its and their directors, officers, agents and employees, from any losses, damages, expenses, and liability of any kind whatsoever (including legal expenses and reasonable attorneys’ fees and costs) resulting from BTC’s (and its Affiliates’ and Sublicensees’) gross negligence or willful misconduct in connection with the manufacture, use, testing, sale or advertisement of Licensed Products; provided, however, that in no case will the foregoing indemnity obligation apply to the extent that such claim, proceeding, loss, expense, or liability is the result of:

 

(a)       any action or inaction of the Research Foundation or its Affiliates, or its or their agents; or

 

(b)      any alleged or actual infringement by the University Know-How of any patents, copyrights, trademarks, trade secrets or other intellectual property rights of Third Parties; or

 

(c)       any breach of this Agreement by the Research Foundation.

 

ARTICLE VIII.

TERM AND TERMINATION

8.1           Term.  Unless earlier terminated in accordance with this Article VIII, this Agreement and the licenses granted hereunder shall continue in effect until the termination of BTC’s royalty obligations.  Thereafter, all licenses granted shall become fully paid-up, irrevocable exclusive licenses.

 

8.2           Termination by the Research Foundation for Default.  The Research Foundation may terminate this Agreement if BTC commits any material default of any of BTC’s material obligations, by notice to BTC specifying in reasonable detail the nature of the default, provided that such default has not been remedied within ninety (90) days of such notice.

 

  

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8.3           Termination by BTC.  BTC may terminate this Agreement (a) on thirty (30) days’ notice to the Research Foundation if BTC elects to cease utilizing all license rights granted hereunder or (b) if the Research Foundation or any of its Affiliates is in material default of any of the Research Foundation’s material obligations or covenants, which default has not been remedied within ninety (90) days of notice to the Research Foundation specifying in reasonable detail the nature of the default.

 

8.4           Termination for Bankruptcy.  If voluntary or involuntary proceedings in bankruptcy by or against a Party are instituted under any insolvency law, or a receiver or custodian is appointed for a Party, or proceedings are instituted by or against a Party for corporate reorganization or dissolution, which proceedings shall not have been dismissed within sixty (60) days after the date of filing, or if a Party makes an assignment for the benefit of creditors, or substantially all of the assets of a Party are seized or attached and not released within sixty (60) days thereafter (that Party, a “Bankruptcy Party”), then the other Party may immediately terminate this Agreement by notice to the Bankruptcy Party.  However, in the event that the other Party elects not to terminate the Agreement, the Parties intend that the rights and licenses granted under this Agreement shall be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code (or any equivalent provision of applicable foreign law), licenses or rights to “intellectual property” as defined under Section 101(52) of the U.S. Bankruptcy Code.

 

8.5           Rights and Obligations Upon Termination.  Following termination of this Agreement for any reason and subject to the right to convert in accordance with Section 3.3(a), nothing herein shall be construed to release either Party from any obligation that arose prior to the date of such termination.  After termination, subject to the right to convert in accordance with Section 3.3(a), BTC and its Affiliates and Sublicensees may complete Licensed Products in the process of manufacture at the date of termination and sell them along with any other Licensed Products in inventory, provided that BTC shall pay royalties as required by Article IV and shall submit the reports required by Article VI for such Licensed Products.

 

8.6           Return of Confidential Information.  Upon termination of this Agreement, BTC shall return or destroy all University Know-How that is written, to the Research Foundation, provided that BTC and its sublicensees may retain one copy of all written materials for legal and archival purposes only.

 

8.7           Third Party Beneficiary Status of Auxilium.  In the event of BTC’s bankruptcy and inability to perform its obligations hereunder, Auxilium shall have the right to cure any default by BTC and perform BTC’s obligations, and enforce BTC’s rights, hereunder, as a third party beneficiary.

 

  

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ARTICLE IX.

CONFIDENTIALITY, DISCLOSURE, AND PUBLICATIONS

9.1           Confidentiality.

 

(a)              During the term of this Agreement and for a period of five (5) years following its expiration or termination, each Party shall maintain in confidence all Information disclosed by the other Party which is marked or identified as confidential or which the receiving Party has reason to know is confidential or proprietary (referred to herein as “Confidential Information“), and shall not disclose Confidential Information to anyone except those Affiliates, Sublicensees, further sublicensees, employees, subagents, consultants, or subcontractors having a “need to know” in order to carry out the receiving Party’s activities as contemplated by this Agreement.  Each receiving Party shall obtain written agreements from its Affiliates, Sublicensees, employees, subagents, consultants or subcontractors, prior to disclosure to them of Confidential Information, obligating them to hold in confidence and not use any Confidential Information except as permitted by this Agreement.  Notwithstanding the foregoing sentence, if employees or consultants of a receiving Party have previously signed general confidentiality agreements in favor the receiving Party as employer, and if those agreements bind the employees or consultants to protect Information disclosed hereunder to at least the same extent required by this Section, then it shall be sufficient for the employing Party to (i) notify the employees or consultants of the fact that Information disclosed hereunder is governed by such confidentiality agreements and (ii) identify to such  employees or consultants the specific Information so governed.  Each Party shall use the same degree of effort used to protect its own most valuable proprietary Information from unauthorized use or disclosure, and shall be responsible for ensuring compliance with these obligations by its Affiliates, Sublicensees, employees, subagents, consultants and subcontractors.  Each Party shall promptly notify the other upon discovery of any unauthorized use or disclosure of the other’s Confidential Information.

 

(b)              The receiving Party shall not use Confidential Information for any purpose, except as contemplated by this Agreement or the Research Agreement.

 

9.2           Exceptions.  The obligation of confidentiality and non-use in this Article shall not apply to the extent that:

 

(a)              either Party (the “Recipient”) is required to disclose Confidential Information by law, order or regulation of a governmental agency or a court of competent jurisdiction, or

 

(b)              the Recipient can demonstrate that (i) the disclosed Information was, at the time of disclosure to the Recipient, already in the public domain or which, after disclosure, becomes part of the public domain other than as a result of action of the Recipient, its Affiliates, Sublicensees, employees, subagents, consultants or subcontractors in violation hereof; (ii) the Recipient can demonstrate that the disclosed Information was rightfully known or independently developed by the Recipient or its Affiliates prior to the date of disclosure to the Recipient, or (iii) the disclosed Information was received by the Recipient or its Affiliates on an unrestricted basis from a source unrelated to any Party to this Agreement and not under a duty of confidentiality to the other Party or

 

  

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(c)              the disclosure is made to the FDA, EMEA or other regulatory agency as part of a product approval process.

 

9.3           Legally Compelled Information.  In the event that either Party becomes legally compelled to disclose any Confidential Information belonging to the other Party, it shall notify the other Party prior to disclosure so that the other Party can seek a protective order or other appropriate remedy.

 

9.4           Publications.  Prior to public disclosure of or submission for publication of an abstract, manuscript or oral presentation describing the results of any aspect of the Development Program or other scientific activity between BTC and the Research Foundation, the Party disclosing or submitting such abstract, manuscript or oral presentation (“Disclosing Party”) shall send the other Party (“Responding Party”) by a recognized delivery service for next day delivery a copy of the abstract, manuscript or oral presentation materials to be submitted.  The Responding Party shall have thirty (30) days, in the case of an abstract or oral presentation materials, or sixty (60) days, in the case of a manuscript, from the date of receipt of the abstract, manuscript or oral presentation materials.  If the Responding Party believes the subject matter of such abstract, manuscript or oral presentation contains Confidential Information or a patentable invention of significant commercial value to the Responding Party, then prior to the expiration of the relevant period, the Responding Party shall notify the Disclosing Party in writing of its determination and the basis for its conclusion.  Upon receipt of such notice, the Disclosing Party shall delay public disclosure of or submission of abstract, manuscript or oral presentation for an additional period of 60 days to permit preparation and filing of a patent application on the disclosed subject matter.  No publication or presentation shall be made by the Disclosing Party unless and until the Responding Party’s comments have been addressed and any information determined by the Responding Party to be Confidential Information of the Responding Party has been removed.  Determination of authorship for any paper or inventorship for any patent shall be in accordance with accepted scientific practice or patent law, as appropriate.  Should any questions of authorship or inventorship arise, they will be determined by good faith consultation between the senior management of the respective Parties.

 

ARTICLE X.

PATENT MATTERS

10.1         Filing and Prosecution of Patents.

(a)              During the term of the Agreement, BTC or any Sublicensee, pursuant to any sublicense agreement, shall have the right to, and in the reasonable exercise of its commercial discretion, prepare, file, prosecute, maintain, renew and defend all of the patents and applications included within the University Patents in the countries where such University Patents are filed as of the Effective Date.  In the event that neither BTC nor any of its Sublicensees intend to file for patent protection or wish to continue preparation, prosecution, or maintenance of the patents and applications included within the University Patents, then BTC shall give at least thirty (30) days advance notice to the Research Foundation, and in no event less than a reasonable period of time for the Research Foundation to act.  In such case, the Research Foundation shall have the right to prepare, file, prosecute, maintain, renew and defend all of the patents and applications included within the University Patents in the countries where such University Patents are filed as of the Effective Date.

 

  

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(b)              BTC shall be responsible for all costs and expenses incurred for such prosecution and maintenance.  At BTC’s or any of its Sublicensee’s request, the Research Foundation shall cooperate and provide BTC or such Sublicensee with all necessary assistance and documentation in connection with the filing, prosecution and maintenance of all applications included within the University Patents.  At the request of the Research Foundation, BTC or its Sublicensee will provide the Research Foundation with reports relating to the filing, prosecution and maintenance of the University Patents and copies of any intended filings.

10.2         Enforcement of University Patents.

(a)              In the event that either Party becomes aware of a suspected infringement of a University Patent, or of the institution by a Third Party of any proceedings alleging the invalidity or unenforceability of any University Patent, such Party shall promptly notify the other Party, and, following such notification, the Parties shall confer.  BTC or any Sublicensee, pursuant to any sublicense agreement, shall have the right, but shall not be obligated, to prosecute an infringement action or to defend such proceedings at its own expense, in its own name and entirely under its own direction and control. BTC may deduct any unreimbursed litigation expenses and legal fees from any recovery of damages or settlement received by BTC from any such suit, and twenty percent (20%) of the balance of the proceeds shall be paid to Research Foundation.  The Research Foundation will reasonably assist BTC or its Sublicensee in such actions or proceedings if so requested, and will lend its name to such actions or proceedings if requested by BTC or its Sublicensee or if required by law, provided that BTC shall pay or reimburse the Research Foundation for all costs which the Research Foundation may incur in providing such assistance.  If BTC or its Sublicensee elect not to bring any action for infringement or defend any proceeding challenging any claims in an issued patent included within the University Patents within ninety (90) days of being requested to do so, the Research Foundation may bring such action or defend such proceeding at its own expense, in its own name and entirely under its own direction and control.  BTC or its Sublicensee will reasonably assist the Research Foundation in any action or proceeding if so requested by the Research Foundation or required by law, provided that the Research Foundation shall pay or reimburse BTC or its Sublicensee for all costs which BTC or its Sublicensee may incur in affording such assistance.  No settlement of any action or proceeding may be entered into by either Party without the prior written consent of the other, which consent, in the case of the Research Foundation shall not be unreasonably withheld, and in the case of BTC or any Sublicensee may be withheld in BTC’s or any Sublicensee’s sole and absolute discretion.

(b)              If either Party brings such an action or defends such a proceeding and subsequently ceases to pursue it or withdraws therefrom, that Party shall promptly notify the other Party who may then substitute itself for the withdrawing Party under the terms of this Section.

 

  

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ARTICLE XI.

DISPUTE RESOLUTION; ARBITRATION

11.1          Exclusive Remedy.  The Parties agree that the terms of this Article shall be the exclusive means of resolving any dispute, controversy or claim (a “Dispute”) arising out of or relating to this Agreement, including but not limited to any claim relating to the validity or invalidity of any University Patent, except that either Party may seek injunctive relief or other provisional remedies from a court of competent jurisdiction if necessary to protect such Party’s name, intellectual property rights, or to prevent irreparable harm.

 

11.2          Good Faith Negotiations.  In the event of any Dispute arising out of or relating to or in connection with any provision of the Agreement, or the rights or obligations hereunder, the Parties shall try to settle their differences amicably between themselves.  Either Party may initiate such informal dispute resolution by sending written notice of the dispute to the other Party, and within ten (10) business days after such notice appropriate representatives of the Parties shall meet for attempted resolutions by good faith negotiations.  If such representatives are unable to resolve such disputed matters, they shall be referred to the senior management of the respective Parties, for discussion and resolution.  If they are unable to resolve the dispute within thirty (30) days (or such longer period of time as the Parties may agree to in writing) of initiating such negotiations, then the Parties must resort to binding arbitration, as set forth in Section 11.3 below.

 

11.3          Binding Arbitration.  Any Dispute not so resolved shall be submitted, by a written notice of request to arbitrate given by either Party, to final and binding arbitration under the Commercial Arbitration Rules of the American Arbitration Association (“AAA”) then in force except as modified in accordance with the provisions of this Section.  The arbitration proceedings shall be held in the City of New York in New York State.

 

11.4          Arbitrators.  The arbitral tribunal shall be composed of three arbitrators, one appointed by each Party within fifteen (15) days, and the two arbitrators so appointed shall, within fifteen (15) days of their appointment, appoint a third arbitrator who shall act as Chairman of the tribunal.  If the Dispute involves scientific or technical matters, at least two (2) of the three (3) arbitrators chosen shall have educational training and/or experience sufficient to demonstrate a reasonable level of knowledge in the field of biotechnology.

 

11.5          Procedures.

 

(a)              Prompt resolution of any Dispute is important to both Parties and the Parties agree that the arbitration of any Dispute shall be conducted expeditiously.  The arbitrators shall be instructed and directed to assume management initiative and control over the arbitration process (including scheduling of events, pre-hearing discovery and activities, and the conduct of the hearing), in order to complete the arbitration as expeditiously as is reasonably practical for obtaining a just resolution of the Dispute.  The arbitrators shall be directed that any arbitration shall be completed within 1 year from the filing of notice of a request for such arbitration.

 

  

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(b)              The arbitrators shall determine what discovery shall be permitted, consistent with the goal of limiting the cost and time which the Parties must expend for discovery; provided that the arbitrators shall permit such discovery as they deem necessary to permit an equitable resolution of the Dispute.

 

(c)              In arriving at decisions, the arbitrators shall apply the terms and conditions of this Agreement in accordance with the rules of law governing it in accordance with Section 11.4.  The arbitrators are empowered to render the following awards in accordance with any provision of this Agreement: (i) enjoining a Party from performing any act prohibited, or compelling a Party to perform any act required, by the terms of this Agreement or any related agreement, and (ii) ordering such other legal or equitable relief, including any provisional legal or equitable relief, or specifying such procedures as the arbitrator deems appropriate, to resolve any Dispute submitted for arbitration.  Any monetary award made and shall be payable in U.S. Dollars free of any tax or any deduction.  The arbitrators shall issue to both Parties a written explanation in English of the reasons for the award and a full statement of the facts as found and the rules of law applied in reaching the decision.  An award rendered in connection with an arbitration pursuant to this Article shall be the sole, exclusive, final and binding remedy between the Parties regarding the Dispute and any counterclaims made, and judgment upon any award may be entered and enforced in any court of competent jurisdiction.

 

11.6          Expenses.  The award rendered by the arbitrators shall include the costs of arbitration, arbitrator fees, reasonable attorneys’ fees and reasonable costs for expert and other witnesses.

 

11.7          Confidentiality of Proceedings.  The arbitration proceedings shall not be made public without the joint consent of the Parties, and each Party shall maintain the confidentiality of such proceedings and decision unless otherwise required by law or permitted in writing by the other Party.

 

ARTICLE XII.

COMMENCEMENT OF CLINICAL TRIAL; UTILIZATION

12.1          Commencement of Clinical Trial.  The clinical trial to be conducted pursuant to the Research Agreement shall not commence until BTC has received from Auxilium (or another mutually agreeable source) clinical trial material in sufficient amounts, in BTC’s sole determination, to undertake and complete the clinical trial contemplated hereunder. The date upon which BTC receives all necessary quantities of the above referenced clinical trial material shall be referred to herein as the “Material Receipt Date”.

 

  

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12.2          Termination of Agreement if No Clinical Trial Initiated.  If a clinical trial for the treatment of Cellulite is not initiated by BTC within two (2) years of the Material Receipt Date, then the Research Foundation shall have the right to terminate this Agreement in accordance with the provisions of Article VIII hereof.

 

12.3          Utilization Requirements.  If Auxilium exercises its option rights under the Auxilium License Agreement in respect of Cellulite, then BTC agrees to enforce its rights under the Auxilium License Agreement for the benefit of BTC and the Research Foundation hereunder.  If Auxilium does not exercise its option rights under the Sublicense Agreement in respect of Cellulite, then BTC agrees that, within two (2) years of the date on which Auxilium notifies BTC that it does not intend to exercise its option rights under the Auxilium License Agreement, BTC shall either (i) enter into a new sublicense agreement in respect of Cellulite or (ii) submit to the FDA a clinical trial protocol to initiate on its own a further clinical trial (whether Phase 2b or Phase 3) in respect of Cellulite and obtain a commitment from a reputable third-party of no less than $1 million dollars to fund such further clinical trial.

 

ARTICLE XIII.

MISCELLANEOUS PROVISIONS

13.1          Indemnification Procedures.  In the event either Party seeks indemnification under any provision for indemnification afforded by this Agreement, the following procedures shall be followed:

 

(a)               Notice of Claim. The Party seeking indemnification (the “Indemnitee”) shall give the other Party (the “Indemnifying Party”) prompt notice of any losses or of the discovery of facts upon which a request for indemnification may be made. The Indemnifying Party shall not be liable for any losses that it can show resulted from any delay in providing such notice.  The notice must contain a description of the claim and the nature and amount of the loss (to the extent known), and shall include copies of all papers and official documents received in respect of any losses.

 

(b)              Control of Defense.  At its option, the Indemnifying Party may assume the defense of any Third Party claim by giving written notice to the Indemnitee within thirty (30) days of the Indemnitee’s notice.  The assumption of the defense of a Third Party claim by the Indemnifying Party shall not be construed as an acknowledgment that the Indemnifying Party is liable to the Indemnitee.  Upon assuming the defense of a Third Party claim, the Indemnifying Party shall have the right to choose legal counsel and direct and control the defense in its sole discretion.  In the event that it is ultimately determined that the Indemnifying Party is not obligated to indemnify the Indemnitee from the claim, the Indemnitee shall reimburse the Indemnifying Party for all costs and expenses incurred.

 

(c)              Right to Participate in Defense.  The Indemnitee shall be entitled to participate in, but not control, the defense of a Third Party claim and to employ counsel of its choice for such purpose; provided, however, that such participation shall be at the Indemnitee's own expense unless the indemnifying Party has failed to assume the defense, in which case the Indemnitee shall control the defense.

 

  

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(d)              Settlement.  If the Indemnifying Party has acknowledged in writing the obligation to indemnify the Indemnitee for losses requiring only the payment of money damages in connection with a Third Party claim, and that will not result in the Indemnitee's becoming subject to injunctive or other, the Indemnifying Party shall have the sole right to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such claim on such terms as the Indemnifying Party deems appropriate in its sole discretion. With respect to all other claims or losses, the Indemnifying Party shall have authority to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such claim or loss provided it obtains the prior written consent of the Indemnitee (which consent shall not be unreasonably withheld or delayed).  Regardless of whether the Indemnifying Party chooses to defend or prosecute any Third Party claim, no Indemnitee shall admit any liability with respect to, or settle, compromise or discharge, any such claim without the prior written consent of the Indemnifying Party.

 

(e)              Cooperation of Indemnitee.  Regardless of whether the Indemnifying Party chooses to defend or prosecute any Third Party claim, the Indemnitee shall cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, provide such witnesses and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested.  Such cooperation shall include access to and reasonable retention by the Indemnified Party of, records and information that are reasonably relevant to such Third Party claim, and making the Indemnitee’s employees and agents available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Indemnifying Party shall reimburse the Indemnitee for all its costs incurred in providing such cooperation.

 

(f)               Reimbursement of Expenses.  The verifiable costs and expenses, including fees and disbursements of counsel, incurred by the Indemnitee in connection with any claim shall be reimbursed quarterly by the Indemnifying Party, without prejudice to the Indemnifying Party's right to contest its indemnification obligations, and such reimbursements shall be subject to refund in the event the Indemnifying Party is ultimately held not to be obligated to indemnify the Indemnitee.

 

13.2          Assignment.  This Agreement may not be assigned by either Party without the prior written consent of the other, except that BTC may assign this Agreement to a Third Party which acquires (whether by merger, sale of assets or otherwise) all or substantially all of that portion of BTC’s business to which this Agreement pertains.

 

13.3          Entire Agreement.  This Agreement constitutes the entire Agreement between the Parties with respect to the subject matter hereof, and supersedes all previous agreements, whether written or oral, including, but not limited to, the side letter, dated November 21, 2006, from Donna L. Tumminello to Thomas Wegman regarding the cost of prosecuting a Cellulite patent application.  This Agreement may not be modified orally, but only by an instrument in writing signed by both Parties.

 

  

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13.4          Choice of Law.  The validity, performance, construction and effect of the Agreement shall be governed by the substantive laws of the state of New York without reference to conflicts of laws provisions.

 

13.5          Severability.  If any provision of this Agreement is declared invalid or unenforceable by an arbitrator pursuant to Section 11.5 (or by a court whose decision is final and binding pursuant to Section 11.1) that provision shall be deemed fully severable.  The remaining provisions of this Agreement shall remain in full force and effect and will be construed as if the invalid or unenforceable provision had been deleted.

 

13.6          Notices.  Any notice or report required or permitted to be given shall be in writing and delivered personally, sent by facsimile (and promptly confirmed by personal delivery, registered or certified mail or overnight courier as provided herein), sent by nationally-recognized overnight courier, or sent by registered or certified mail, postage prepaid, return receipt requested.  Such notices and reports shall be sent to the following addresses and persons (or such other address or person as a Party may provide by a communication complying with this section), and shall be effective upon personal delivery or five (5) days after dispatch by mail or courier, whichever is applicable:

 

If to BTC,

BioSpecifics Technologies Corp.

35 Wilbur Street

Lynbrook, New York 11563

Tel: (516) 593-7000

Fax: (516) 593-7039

Attn: President

with a copy to:

Carl A. Valenstein

Thelen Reid Brown Raysman & Steiner LLP

701 8th Street NW

Washington, DC 20001

Tel: (202) 508-4195

Fax: (202) 654-1836

If to the Research Foundation,

Office of Technology Licensing and Industry Relations

N5002 Melville

Memorial Library

Stony Brook, New York

11794-3369

Tel: (631) 632-9009

Fax: (631) 632-1505

Attn: Director

 

  

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13.7          Waiver.  The delay or failure of any Party to require performance of any provision in any one instance shall not be deemed a waiver and shall not affect the right to enforce the provision later or in any other instance.  The observance of any term or condition may be waived, either generally or in a particular instance by the Party entitled to enforce such term or condition, but shall only be effective if in writing and signed by such Party.

 

13.8          Force Majeure.  If either Party shall be delayed, interrupted in or prevented from the performance of any obligation hereunder (other than an obligation to make a payment) by reason of force majeure, including an act of God, fire, flood, earthquake, war (declared or undeclared), acts of terrorism, public disaster, strike or labor unrest, governmental act, rule or regulation, or any other cause beyond such Party’s control, such Party shall not be liable to the other therefore and the time for performance of such obligation shall be extended for a period equal to the duration of the contingency which occasioned the delay, interruption or prevention.  The Party invoking such force majeure rights must notify the other Party within a period of fifteen (15) days from the first and last day of the force majeure unless it renders such notification impossible, in which case, notification shall be made as soon as possible.  If the resulting delay exceeds four (4) months, both Parties shall consult in good faith to determine an appropriate course of action.

 

13.9          Independent Contractors.  It is expressly agreed that the Parties shall be independent contractors and that the relationship shall not constitute a partnership or agency of any kind.  Neither Party may bind the other or make statements on behalf of the other without prior written consent.

 

13.10        Publicity.  Neither Party shall use the name of the other Party in any publicity release without the prior written permission of the other, which shall not be unreasonably withheld.  Except as required by law, neither Party shall publicly disclose the terms and conditions of the Agreement without the prior written consent of the other Party.

 

13.11        Headings.  The captions used in this Agreement are inserted for convenience of reference only and shall not be construed to create obligations, benefits or limitations.

 

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

 

[Signature Page Follows]

 

	
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

  

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IN WITNESS WHEREOF, the Parties have executed this Agreement on the dates set forth below.

 

	
BIOSPECIFICS TECHNOLOGIES CORP.

	 	
THE RESEARCH FOUNDATION OF THE STATE UNIVERSITY NEW YORK AT STONY BROOK

	  
	  	  	 	  	  	  
	
By:

	/s/ Thomas L. Wegman	 	
By:

	/s/ Donna L. Tumminello	  
	
Name: Thomas L. Wegman

	 	Name: Donna L. Tumminello	  
	
Title:   President

	 	Title: Assistant Director	  
	 	 	 	 
	
Date:  08/23/07

	 	
Date:  08/23/07

	  

Signature Page to Cellulite License Agreement

 

  

 

  

EXHIBIT A

<OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>

 

 

	
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

  

 

  

 

EXHIBIT B

<OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>

 

 

	
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

  

 

  

 

EXHIBIT C

<OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>

 

	
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

 

  

 

  

EXHIBIT D

<OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>

 

 

	
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.

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