Document:

exv10w12

 

Exhibit
10.12

EMPLOYMENT AGREEMENT

          THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of December 14, 2007 (the “Effective
Date”), is entered into among Altra Holdings, Inc., a Delaware corporation, (“Holdings”) Altra
Industrial Motion, Inc., a Deleware owned subsidiary of Holdings (the “Company”), and Christian
Storch (“Executive”). Certain capitalized terms used in this Agreement are defined in Section
12 hereof.

          Holdings, the Company and Executive desire to enter into this agreement relating to
Executive’s employment by the Company.

          The parties hereto agree as follows:

     1. Employment. The Company shall employ Executive, and Executive hereby agrees to be
employed by the Company, upon the terms and conditions set forth in this Agreement for the period
beginning on the Effective Date and ending as provided in Section 3 hereof (the “Employment
Period”).

     2. Position and Duties.

          (a) Position. During the Employment Period, Executive shall serve as the Chief
Financial Officer and Treasurer of the Company and in such capacity shall have the duties,
responsibilities and authority that are normally associated with such office, subject to the
direction and supervision of the Board. Executive shall report directly to the Michael L. Hurt,
Chairman and Chief Executive Officer.

          (b) Duties. Executive shall devote substantially all of his business time and
attention (except for permitted vacation periods and periods of illness or incapacity and other
activities approved by the Board from time to time) to the business and affairs of the Company and
its Subsidiaries.

     3. Termination. The Employment Period shall terminate on the fifth (5th)
anniversary of the Effective Date (the “Expiration Date”). Notwithstanding the foregoing, the
Company and Executive agree that Executive is an “at-will” employee, subject only to the
contractual rights upon termination set forth herein, and that the Employment Period (a) shall
terminate automatically at any time upon Executive’s death, (b) shall terminate automatically at
any time upon the Board’s determination of Executive’s Disability, (c) may be terminated by the
Board or by the Chief Executive Officer (after consultation with the Board) at any time for any
reason or no reason (whether for Cause or without Cause) by giving Executive written notice of the
termination and (d) may be terminated by Executive for any reason or no reason (including for Good
Reason) by giving the Company written notice at least 30 days in advance of his termination date.
Notwithstanding anything herein to the contrary, if the Expiration Date occurs and this Agreement
terminates automatically pursuant to this Section 3 because the Company and Executive have
not extended the Expiration Date beyond the initial five-year period by means of an amendment to
this Agreement, the obligations of the Executive under Section 8 (Noncompetition) shall
terminate on the Expiration Date; provided, however, that the obligations

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of Executive under Section 8 (Noncompetition) shall survive the Expiration Date and be
enforceable thereafter during the Noncompete Period (as defined in Section 8) in the event
the Company elects, in its sole and absolute discretion, to pay Executive the severance benefits
described in Section 5(a) of this Agreement (in which event the Executive shall execute and
deliver the release contemplated therein). The Company undertakes to advise Executive at least six
months prior to the Expiration Date whether it intends to enter into discussions with Executive
with respect to an extension, renegotiation or amendment of this Agreement beyond the Expiration
Date. The date that the Employment Period is terminated for any reason is referred to herein as the
“Termination Date.”

     4. Base Salary and Benefits.

          (a) Base Salary. During the Employment Period, Executive’s base salary shall be
$340,000 per year (the “Base Salary”). The Base Salary shall be reviewed annually. The Base Salary
shall not be reduced prior to the Expiration Date, and after any increase of such Base Salary
approved by the Board, the term “Base Salary” in this Agreement shall refer to the Base Salary as
so increased. The Base Salary shall be payable in regular installments in accordance with the
Company’s general payroll practices.

          (b) Performance Bonus. In addition to the Base Salary, Executive shall be eligible for
a maximum annual incentive target bonus payment of 50% of his Base Salary (a “Performance Bonus”),
in accordance with the Company’s bonus performance plan approved by the Board in its sole
discretion.

          (c) Special Signing Bonus. Included in your first paycheck upon joining Altra, the
Company shall pay to Executive a special one-time signing bonus of $25,000. If you were to
voluntarily leave employment with the Company, except for Good Reason, within the first year after
your start date, you would be required to pay this amount back in its entirety before your
termination date.

          (d) Expenses. The Company will reimburse Executive for all reasonable travel and other
business expenses incurred by Executive during the Employment Period in connection with the
performance of his duties and obligations under this Agreement, subject to Executive’s compliance
with such limitations and reporting requirements with respect to expenses as may be established by
the Company from time to time.

          (e) Other Benefits. During the Employment Period, Executive will be entitled to
participate in all compensation or employment benefit plans or programs and receive all benefits
and perquisites for which salaried employees of the Company generally are eligible under any plan
or program now or established later by the Company on the same basis as other senior executives of
the Company. Nothing in this Agreement will preclude the Company from amending or terminating any
of the plans or programs applicable to salaried employees or senior executives as long as such
amendment or termination is applicable to all salaried employees or all senior executives, as the
case may be. Executive shall be entitled to four (4) weeks of paid vacation each year, which may be
taken in accordance with the Company’s vacation policy.

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          (f) Indemnification. To the fullest extent permitted by law and the certificate of
incorporation of the Company, the Executive (and his heirs, executors and administrators) shall be
indemnified by the Company and its successors and assigns. The obligations of the Company pursuant
to this Section shall survive the termination of the Employment Period.

     5. Severance.

          (a) Termination without Cause or for Good Reason. If, prior to the Expiration Date,
the Employment Period is terminated by the Company without Cause or by the Executive for Good
Reason, (i) Executive (or his estate) shall be entitled to receive for the Severance Period (A) his
annual Base Salary as in effect immediately prior to the Termination Date paid in the same manner
and in the same installments as previously paid and (B) to the extent permitted by such plans as in
effect on the Termination Date, at the Company’s expense the continuation of medical and dental
benefits through the Severance Period and (ii) Executive (or his estate) shall be entitled to
receive (A) all earned or accrued but unpaid Base Salary, reimbursement of expenses and any other
benefits to which Executive is entitled through the Termination Date, (B) any Performance Bonus
that was earned, but not paid, as of, and pro rated through, the Termination Date, and (C) all
amounts or benefits to which Executive is entitled under any applicable employee-benefit plan or
arrangement of the Company in which Executive was a participant during his employment with the
Company, in accordance with the terms of such plan or arrangement. When used herein, the “Severance
Period” means the 12-month period from and after the Termination Date. The Company’s obligations
under this Section 5(a) shall be subject to the condition that Executive deliver a complete
release in favor of Holdings and the Company and their respective Subsidiaries, affiliates,
officers, directors, employees, principals, and attorneys, in form and substance satisfactory to
Holdings and Company.

          (b) Death or Disability. In the event of the death or Disability of Executive during
the Employment Period, the Company’s obligation to make payments or provide any other benefits
under this Agreement shall cease as of the date of the death or Disability of Executive;
provided that Executive (or his estate) shall be entitled to receive (i) all earned or
accrued but unpaid Base Salary, reimbursement of expenses and any other benefits to which Executive
is entitled through the Termination Date, (ii) any Performance Bonus that was earned, but not paid,
as of, and pro rated through, the Termination Date, and (iii) all amounts or benefits to which
Executive is entitled under any applicable employee-benefit plan or arrangement of the Company in
which Executive was a participant during his employment with the Company, in accordance with the
terms of such plan or arrangement.

          (c) Other Termination. If the Employment Period is terminated by the Company for Cause
or by Executive for any reason other than Good Reason, Executive shall not be entitled to any
severance payments and all of Executive’s benefits shall cease to be effective immediately as of
the Termination Date (except as required by law). All of Executive’s rights to fringe benefits and
bonuses (if any) which accrue or become payable after the termination of the Employment Period
shall cease upon such termination; provided that Executive (or his estate) shall be
entitled to receive (x) all earned or accrued but unpaid Base Salary, reimbursement of expenses and
any other benefits to which Executive is entitled through the Termination Date,

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(y) any Performance Bonus that was earned, but not paid, as of, and pro-rated through, the
Termination Date, and (z) all amounts or benefits to which Executive is entitled under any
applicable employee-benefit plan or arrangement of the Company in which Executive was a participant
during his employment with the Company, in accordance with the terms of such plan or arrangement.

          (d) Other Benefits. Except as required by law or as specifically provided in this
Section 5, the Company’s obligation to make any payments or provide any other benefits
hereunder shall terminate automatically as of the Termination Date.

          (e) Termination of Severance. If Executive breaches any of the provisions of
Section 6 through 9 hereof, the Company shall no longer be obligated to make any
additional payments or provide any other benefits pursuant to this Section 5.

          (f) Pro Rated Performance Bonus. If Executive shall be entitled to any pro rated
Performance Bonus pursuant to Section 5 (a), (b) or (c), the Company shall not be required
to make payment to Executive of such pro rated Performance Bonus until such time that the Company
makes payment of similar bonuses to other participants in the Company’s bonus performance plan
after the completion of the fiscal year in which the bonuses were earned.

     6. Confidential Information. Executive acknowledges that the information, observations
and data (including without limitation trade secrets, know-how, research plans, business,
accounting, distribution and sales methods and systems, sales and profit figures and margins and
other technical or business information, business, marketing and sales plans and strategies, cost
and pricing structures, and information concerning acquisition opportunities and targets nationwide
in or reasonably related to any business or industry in which any of Holdings or the Company or
their respective Subsidiaries is engaged) disclosed or otherwise revealed to him, or discovered or
otherwise obtained by him or of which he becomes aware, directly or indirectly, while employed by
the Company or its Subsidiaries (including, in each case, those obtained prior to the date of this
Agreement) concerning the business or affairs of Holdings or the Company or any of their respective
Subsidiaries (collectively, “Confidential Information”) are the property of Holdings or the Company
or their respective Subsidiaries, as the case may be, and agrees that Holdings and Company have a
protectable interest in such Confidential Information. Therefore, Executive agrees that he shall
not (during his employment with the Company or at any time thereafter) disclose to any unauthorized
person or use for his own purposes the Confidential Information without the prior written consent
of the Board, unless and to the extent that the aforementioned matters: (a) become or are generally
known to and available for use by the public other than as a result of Executive’s acts or
omissions or (b) are required to be disclosed by judicial process or law (provided that Executive
shall give prompt advance written notice of such requirement to the Company to enable the Company
to seek an appropriate protective order or confidential treatment). Executive shall deliver to the
Company at the termination of the Employment Period, or at any other time the Company may request,
all memoranda, notes, plans, records, reports, computer tapes, printouts and software and other
documents and data (and copies thereof) which constitute Confidential Information or Work Product
(as defined below) which he may then possess or have under his control.

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     7. Work Product. Executive hereby assigns to the Company all right, title and
interest in and to all inventions, developments, methods, process, designs, analyses, reports and
all similar or related information (in each case whether or not patentable), all copyrightable
works, all trade secrets, confidential information and know-how, and all other intellectual
property rights that both (a) are conceived, reduced to practice, developed or made by Executive
while employed by the Company and its Subsidiaries and (b) either (i) relate to the Company’s or
any of its Subsidiaries’ actual or anticipated business, research and development or existing or
future products or services, or (ii) are conceived, reduced to practice, developed or made using
any of equipment, supplies, facilities, assets or resources of the Company or any of its
Subsidiaries (including but not limited to, any intellectual property rights) (“Work Product”).
Executive shall promptly disclose such Work Product to the Board and perform all actions reasonably
requested by the Board (whether during or after the Employment Period) to establish and confirm the
Company’s ownership of the Work Product (including, without limitation, executing and delivering
assignments, consents, powers of attorney, applications and other instruments).

     8. Noncompetition. In further consideration of the compensation to be paid to
Executive hereunder, Executive acknowledges that in the course of his employment with the Company
and its Subsidiaries he has become and shall become familiar with the Company’s trade secrets and
with other Confidential Information concerning the Company and its Subsidiaries and that his
services have been and shall be of special, unique and extraordinary value to the Company and its
Subsidiaries. Therefore, Executive agrees that, during the period of Executive’s employment with
the Company and for 12 months thereafter (the “Noncompete Period”), he shall not, without prior
written approval by the Board, directly or indirectly (whether for compensation or otherwise) own
or hold any interest in, manage, operate, control, consult with, render services for, or in any
manner participate in any business which competes in any material respect with the business of the
Company or its Subsidiaries conducted or proposed to be conducted during the Employment Period
(collectively, the “Business”), either as a general or limited partner, proprietor, common or
preferred shareholder officer, director, agent, employee, consultant, trustee, affiliate or
otherwise. Executive acknowledges that the Company’s and its Subsidiaries’ businesses are planned
to be conducted nationally and internationally and agrees that the provisions in this Section
8 shall operate in the market areas of the United States and outside the United States in which
the Company conducts or plans to conduct business on and prior to the Termination Date. Nothing in
this Section 8 shall prohibit Executive from being a passive owner of not more then 2% of
the outstanding securities of any publicly traded company engaged in the Business, so long as
Executive has no active participation in the business of such company.

     9. Non-Solicitation. During the Noncompete Period, Executive shall not directly or
indirectly through another entity (i) induce or attempt to induce any employee of the Company or
any Subsidiary to leave the employ of the Company or such Subsidiary, or in any way interfere with
the relationship between the Company and any Subsidiary and any employee thereof, (ii) solicit to
hire any person who was an employee of the Company or any Subsidiary at any time during the 12
months preceding the termination of the Employment Period or (iii) induce or attempt to induce any
customer, client, member, supplier, licensee, licensor, franchisee or other business relation of
the Company or any Subsidiary to cease doing business with the Company

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or such Subsidiary, or in any way interfere with the relationship between any such customer,
developer, client, member, supplier, licensee, licensor, franchisee or business relation and the
Company or any Subsidiary (including, without limitation, making any negative statements or
communications about the Company or its Subsidiaries).

     10. Enforcement. If, at the time of enforcement of any sections 6 through
9, a court of competent jurisdiction shall hold that the period, scope or area restrictions
stated herein are unreasonable under circumstances then existing, the parties hereto agree that the
maximum period, scope or area reasonable under such circumstances shall be substituted for the
stated period, scope or area and that the court shall be allowed and directed to revise the
restrictions contained herein to cover the maximum period, scope and area permitted by applicable
law. The parties hereto acknowledge and agree that Executive’s services are unique and he has
access to Confidential Information and Work Product, that the provisions of Section 6
through 9 are necessary, reasonable and appropriate for the protection of the legitimate
business interests of Holdings and the Company and their respective Subsidiaries, that irreparable
injury will result to Holdings and the Company and their respective Subsidiaries if Executive
breaches any of the provisions of Section 6 through 9 and that money damages would
not be an adequate remedy for ay breach by Executive of this Agreement and that neither Holdings
nor the Company will have any adequate remedy at law for any such breach. Therefore, in the event
of a breach or threatened breach of this Agreement, Holdings or the Company or any of their
successors or assigns, in addition to other rights and remedies existing in their favor, shall be
entitled to specific performance and/or immediate injunctive or other equitable relief from any
court of competent jurisdiction in order to enforce or prevent any violations of the provisions
hereof (without the necessity of showing actual money damages, or posting a bond or other
security). Nothing contained herein shall be construed as prohibiting Holdings or the Company or
any of their successors or assigns from pursuing any other remedies available to it for such breach
or threatened breach, including the recovery of damages.

     11. Executive’s Representations and Acknowledgements. Executive hereby represents and
warrants to Holdings and the Company that (i) the execution, delivery and performance of this
Agreement by Executive do not and shall not conflict with, breach, violate or cause a default under
any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by
which he is bound, (ii) Executive is not a party to or bound by any employment agreement,
noncompete agreement or confidentiality agreement with any other Person that would interfere with
Executive’s compliance with the terms and conditions of this Agreement (iii) Executive shall not
use any confidential information or trade secrets of any third party in connection with the
performance of his duties hereunder, and (iv) this Agreement constitutes the valid and binding
obligation of Executive, enforceable against Executive in accordance with its terms. Executive
hereby acknowledges and represents that he has consulted with independent legal counsel regarding
his rights and obligations under this Agreement and that he fully understands the terms and
conditions contained herein and intends for such terms and conditions to be binding on and
enforceable against Executive. Executive acknowledges and agrees that the provisions of Section
6 through 9 are in consideration of: (i) Executive’s employment by the Company; and
(ii) additional good and valuable consideration as set forth in the Agreement, the receipt and
sufficiency of which are hereby acknowledged. Executive expressly agrees and acknowledges that the
restrictions contained in Section 6 through 9 do not

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preclude Executive from earning a livelihood, nor do they unreasonably impose limitations on
Executive’s ability to earn a living. In Addition, Executive agrees and acknowledges that the
potential harm to the Company and its non-enforcement outweighs any harm to Executive of its
enforcement by injunction or otherwise. Executive acknowledges that he has carefully read this
Agreement and has given careful consideration to the restraints imposed upon Executive by this
Agreement, and is in full accord as to their necessity for the reasonable and proper protection of
the Confidential Information. Executive expressly acknowledges and agrees that each and every
restraint imposed by this Agreement is reasonable with respect to subject matter, time period and
geographical area.

     12. Definitions.

          “Affiliate” means, with respect to any Person, any Person controlling, controlled by or under
common control with such Person.

          “Board” means the Board of Directors of the Company.

          “Cause” means (i) Executive’s material breach of the terms of any agreement between Executive
and Holdings or the Company; (ii) Executive’s willful failure or refusal to perform material duties
as Chief Financial Officer; (iii) Executive’s willful insubordination or disregard of the legal
directives of the Board or the Chief Executive Officer which are not inconsistent with the scope,
ethics and nature of Executive’s duties and responsibilities; (iv) Executive’s engaging in
misconduct which has a material adverse impact on the reputation, business, business relationships
or financial condition of Holdings or the Company; (v) Executive’s commission of an act of fraud or
embezzlement against Holdings or the Company or any of their Subsidiaries; or (vi) any conviction
of, or plea of guilty or nolo contendere by, Executive with respect to a felony (other than a
traffic violation), a crime involving moral turpitude, fraud or misrepresentation; provided,
however, that Cause shall not be deemed to exist under any of the clauses (i), (ii), or (iii)
unless Executive has been given reasonably detailed written notice of the grounds for such Cause
and Executive has not effected a cure within twenty (20) days of the date of receipt of such
notice.

          “Disability” means a determination by independent competent medical authority (selected by the
Board) that Executive is unable to perform his duties under this Agreement and in all reasonable
medical likelihood such inability will continue for a period in excess of 120 days (whether or not
consecutive) in any 365 day period.

          “Good Reason” means any of the following: (i) without Executive’s express written consent, any
change in Executives job title, any change in Executive’s reporting relationships or a significant
reduction of Executive’s duties, position or responsibilities relative to Executive’s duties,
position or responsibilities in effect immediately prior to such reduction, or Executive’s removal
from such position, duties and responsibilities, unless he is provided with comparable duties,
position and responsibilities; (ii) a material reduction by the Company in the kind or level of
employee benefits to which he is entitled immediately prior to such reduction with the result that
Executive’s overall benefits package is significantly reduced; or (iii) the

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Company’s failure to cause Executive’s employment agreement and its obligations thereunder to be
expressly assumed by the Company’s successor.

          “Person” means an individual, a partnership, a limited liability company, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated organization and a
governmental entity or any department, agency or political subdivision thereof.

          “Subsidiary” means, with respect to any Person, any corporation, limited liability company,
partnership, association or business entity of which (i) if a corporation, a majority of the total
voting power of shares of stock entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by the Person or one or more of the other Subsidiaries of the Person or a
combination thereof or (ii) if a limited liability company, partnership, association or other
business entity (other then a corporation), a majority of partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one
or more Subsidiaries of the Person or a combination thereof. For purposes hereof, a Person or
Persons shall be deemed to have a majority ownership interest in a limited liability company,
partnership, association or other business entity (other than a corporation) if such Person or
Persons shall be allocated a majority of limited liability company, partnership, association or
other business entity gains or losses or shall be or control any managing director or general
partner of such limited company, partnership, association or other business entity. For purposes
hereof, references to a “Subsidiary” of any Person shall be given effect only as such times that
such Person has one or more Subsidiaries, and, unless otherwise indicated, the term “Subsidiary”
refers to a Subsidiary of the Company.

     13. Notices. Any notice provided for in this Agreement must be in writing and must be
either personally delivered, mailed by first class mail (postage prepaid and return receipt
requested), sent by reputable overnight courier service (charges prepaid), or faxed to the
recipient at the address below indicated:

Altra Holdings Inc./Altra Industrial Motion, Inc.

14 Hayward Street

Quincy, MA 02171

Attention: Michael L. Hurt, Chief Executive Officer

Telecopy No.: ( 617 – 689 — 6202 )

With a copy to:

Weil, Gotshal & Manges LLP

201 Redwood Shores Parkway

Redwood Shores, CA 94065

Attention: Craig W. Adas

Telecopy No.: (650) 802-3100

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To Executive:

Christian Storch

c/o Elizabeth Ewing

Heidrick & Struggles

One Logan Square

18th & Cherry Streets, Suite 3075

Philadelphia, PA. 19103

Or such other address or to the attention of such other person as the recipient party shall have
specified by prior written notice to the sending party. Any notice under this Agreement shall be
deemed to have been given when personally delivered, one business day after sent by reputable
overnight courier service, five days after deposit in the U.S. mail (or when actually received, if
earlier), or at such time as it is transmitted via facsimile, with receipt confirmed.

     14. General Provisions.

          (a) Expenses. The Company, Holdings and Executive will each pay their own costs and
expenses incurred in connection with the negotiation and execution of this Agreement and the
agreements contemplated hereby.

          (b) Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be invalid, illegal or unenforceable in any respect under any
applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision or any other jurisdiction, but this Agreement shall be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision
had never been contained herein.

          (c) Complete Agreement. This Agreement, those documents expressly referred to herein
and other documents of even date herewith, embody the complete agreement and understanding among
the parties and supersede and preempt any prior understandings, agreements or representations by or
among the parties, written or oral, which may have related to the subject matter hereof in any way.

          (d) Counterparts. This Agreement may be executed in separate counterparts, each of
which is deemed to be an original and all of which taken together constitute one and the same
agreement.

          (e) Successors and Assigns. Except as otherwise provided herein, this Agreement shall
bind and inure to the benefit of and be enforceable by Executive, Holdings, the Company, and their
respective successors and assigns, including any entity with which the Company may merge or
consolidate or to which all or substantially all of its assets may be

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transferred; provided, however, that any such assignment by the Company shall include all
rights and obligations hereunder, including the severance obligations provided in Section
5; and, provided further, that Executive shall not be entitled to assign his rights or
obligations under this Agreement without the prior written consent of Holdings and the Company.

          (f) Governing Law. All issues and questions concerning the construction, validity,
enforcement and interpretation of this Agreement and the exhibits and schedules hereto shall be
governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts,
without giving effect to any choice of law or conflict of law rules or provisions (whether of the
Commonwealth of Massachusetts or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the Commonwealth of Massachusetts.

          (g) Remedies. The parties hereto agree and acknowledge that money damages would not be
an adequate remedy for any breach of the provisions of this Agreement and that any party may in its
sole discretion apply to any court of law or equity of competent jurisdiction (without posting any
bond or deposit) for specific performance and/or other injunctive relief in order to enforce or
prevent any violations of the provisions of this Agreement.

          (h) Amendment and Waiver. The provisions of this Agreement may be amended and waived
only with the prior written consent of the Company, Holdings and Executive.

          (i) Business Days. If any time period for giving notice or taking action hereunder
expires on a day which is a Saturday, Sunday or legal holiday in the state in which the Company’s
chief executive office is located, the time period shall be automatically extended to the business
day immediately following such Saturday, Sunday or holiday.

          (j) No Strict Construction. The language used in this Agreement shall be deemed to be
the language chosen by the parties hereto to express their mutual intent, and no rule of strict
construction shall be applied against any party.

*      *      *      *

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     IN WITNESS WHEREOF, the parties hereto have executed the Agreement on the date first written
above.

	 	 	 	 	 	 	 
	 	 	ALTRA INDUSTRIAL MOTION, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Michael L. Hurt
	 	 
	 

	 	 	 	Chairman & Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	ALTRA HOLDINGS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Michael L. Hurt
	 	 
	 

	 	 	 	Chairman & Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	EXECUTIVE	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Christian
	 	Storch	 	 

(SIGNATURE PAGE TO EMPLOYMENT AGREEMENT)

11exv10w6

 

Exhibit 10.6

[CERTAIN INFORMATION CONTAINED HEREIN HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES AND EXCHANGE ACT OF
1934. THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION.]

AMENDED AND RESTATED

STRATEGIC COLLABORATION AGREEMENT

AMONG

EPIX MEDICAL, INC.

MALLINCKRODT INC.

(a Delaware corporation)

AND

MALLINCKRODT INC.

(a New York corporation)

DATED AS OF JUNE 9, 2000

[EXHIBITS AND OTHER SCHEDULES REFERENCED HEREIN HAVE BEEN OMITTED AND WILL BE
FURNISHED SUPPLEMENTALLY TO THE COMMISSION UPON REQUEST.]

 

 

AMENDED AND RESTATED

STRATEGIC COLLABORATION AGREEMENT

     THIS AMENDED AND RESTATED STRATEGIC COLLABORATION AGREEMENT dated as of
June 9, 2000 (the “Agreement”) is made by and among EPIX MEDICAL, INC. (formerly
known as Metasyn, Inc.), a Delaware corporation having its principal place of
business at 71 Rogers Street, Cambridge, Massachusetts 02142-1118 U.S.A.
(“EPIX”), MALLINCKRODT INC. (formerly known as Mallinckrodt Medical, Inc.), a
Delaware corporation having its principal place of business at 675 McDonnell
Boulevard, Hazelwood, Missouri 63042 and MALLLNCKRODT INC. (formerly known as
Mallinckrodt Group Inc.), a New York corporation having its principal place of
business at 675 McDonnell Boulevard, Hazelwood, Missouri 63042 (both
MALLINCKRODT entities referred to collectively herein as “MKG”), and amends and
restates, from and after the date hereof, the Strategic Collaboration Agreement
dated as of August 30, 1996 (as twice amended on September 10, 1998 and July 9,
1999) between MKG and METASYN (the predecessor in interest of EPIX).

RECITALS

     WHEREAS, EPIX has obtained certain rights under certain patents and
patent applications owned by The General Hospital Corporation, doing business as
Massachusetts General Hospital (“MGH”), pursuant to an Amended and Restated
License Agreement dated July 10, 1995 between EPIX and MGH (the “MGH License”),
a copy of which is attached as APPENDIX I

     WHEREAS, EPIX is developing a proprietary compound coded as MS-325
(“Compound MS-325” as hereinafter defined) which is intended for use as an
enhancer for magnetic resonance imaging, which compound is covered by said MGH
patents and patent applications as well as by EPIX patent applications;

     WHEREAS, EPIX and MKG wish to modify their existing relationship and
the existing collaboration agreement (as heretofore amended) between them (i) to
permit EPIX to enter into that certain Strategic Collaboration Agreement of even
date herewith (the “Collaboration Agreement”) by and between EPIX and Schering
Aktiengesellschaft, a German corporation having its principal place of business
at 13342, Berlin, Germany (“Schering”); and (ii) to permit MKG to enter into
that certain Manufacturing and Supply Agreement of even date herewith by and
between MKG and Schering (the “Manufacturing Agreement”); and

     WHEREAS, MKG has provided to EPIX all necessary written consents so as
to permit EPIX to enter into the Collaboration Agreement and the Manufacturing
Agreement, and EPIX and MKG therefore desire to enter into this Amended and
Restated Strategic Collaboration Agreement.

     NOW THEREFORE, in consideration of the premises and of the covenants
herein contained, the Parties hereto mutually agree as follows:

 

 

ARTICLE 1. DEFINITIONS

     For purposes of this Agreement, the terms defined in this Article shall
have the meanings specified below:

     1.1. “AFFILIATE” shall mean any corporation or other entity which
directly or indirectly controls, is controlled by or is under common control
with a Party to this Agreement. A corporation or other entity shall be regarded
as in control of another corporation or entity if it owns or directly or
indirectly controls more than fifty percent (50%) of the voting stock or other
ownership interest of the other corporation or entity, or if it possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of the corporation or other entity or the power to elect
or appoint fifty percent (50%) or more of the members of the governing body of
the corporation or other entity.

     1.2. “BLOOD POOL MAGNETIC RESONANCE CONTRAST AGENTS” shall mean agents
injected in the cardiovascular system which satisfy both of the following two
criteria: (i) with respect to any Region: (a) the agent has an approved
indication for magnetic resonance angiography; or (b) [ * ]. The types of agents
include, but are not limited to, albumin-binding agents, iron particles, or
polymeric/cascade molecules with attached chelates.

     1.3. “CMC COSTS” shall mean external Costs and direct and indirect
internal Costs associated with meeting the chemistry manufacturing and control
requirements of the FDA and corresponding requirements in the EU and other
countries of the world.

     1.4. “COLLABORATION AGREEMENT” shall have the meaning set forth in the
recitals. A true and accurate copy of the Collaboration Agreement is attached
hereto as EXHIBIT A.

     1.5. “COMPOUND MS-325” means EPIX’s proprietary Blood Pool Magnetic
Contrast Agent, having the following chemical name: Trisodium — [(2-(R) — [(4,4
- diphenylcyclonexyl) phosphonooxymethyl] — diethylenetriaminepentacetato)
(aquo), gadolinium (III)], together with any fragments, sub-units,
modifications, formulations or derivatives thereof.

     1.6. “COST” or “COSTS” shall mean expenses incurred by the Parties,
determined in a reasonable manner in accordance with GAAP. The Parties recognize
that financial records of Schering are and shall continue to be maintained in
accordance with international accounting standards rather than GAAP. The
Collaboration Agreement provides that Schering will use reasonable commercial
efforts to identify for EPIX material differences in the recognition of expenses
under GAAP and international accounting standards, and in cases where there are
material differences to use the GAAP method of recognition. The Collaboration
Agreement does not require Schering to produce financial reports in accordance
with GAAP if Schering does not keep such reports in accordance with GAAP as part
of its normal accounting and financial reporting practices.

 

			
	*	 	Confidential information omitted and filed with the Commission.

2

 

     1.7. “COSTS OF GOODS SOLD” shall mean the aggregate of the following,
determined in a reasonable manner in accordance with GAAP: (i) Costs incurred by
Schering and EPIX relating to Compound MS-325 and Licensed Products for
commercial distribution under the Manufacturing Agreement, and (ii) all direct
and indirect manufacturing, packaging and labeling Costs incurred by Schering
and EPIX, not included in (i) above, but specifically allowable to the
production of Licensed Products including overhead Costs directly related to the
manufacturing, packaging and labeling functions, and (iii) manufacturing
variances attributable to charges of MKG only as more fully described below, but
not including General and Administrative Expenses or any Costs related to idle
capacity. Costs of Goods Sold shall not include royalties payable to MGH and
other Third Parties in connection with Licensed Products or CMC Costs.

     The Collaboration Agreement provides that Schering’s Costs of Goods
Sold shall be based on Schering’s Planned Costs calculated on a per unit basis,
once per year. Schering’s “Planned Costs” is defined in the Collaboration
Agreement to mean the standard Costs established by Schering for its internal
accounting system which is intended to materially comply with GAAP, consistently
applied. The Collaboration Agreement provides that such Planned Costs shall be
provided to EPIX at least thirty(30) days before the beginning of the calendar
year in sufficient detail so as to enable EPIX to reasonably review them. The
Collaboration Agreement also provides that except for Costs attributable to
charges of MKG under the Manufacturing Agreement, Planned Costs shall not be
reconciled with and adjusted to actual Costs, and any such variances from plan,
shall be considered by Schering in setting the Planned Costs for the next
calendar year.

     The Collaboration Agreement also provides that Schering shall reconcile
and adjust Planned Costs to actual Costs for Costs of Goods Sold attributable
only to charges of MKG under the Manufacturing Agreement as of the end of each
calendar year, with the resulting variance being applied to the first Profit
Payment and Royalty Payment due after the end of first quarter of the calendar
year following the completion of the applicable calendar year. For the purpose
of calculating Profit Payments pursuant to Section 7.6 of the Collaboration
Agreement and Royalty Payments under Sections 7.7 and 7.8 of the Collaboration
Agreement, reconciliation of Cost variances attributable to charges of MKG shall
be allocated to the United States, EU, Japan, and elsewhere based on the number
of units of the applicable Licensed Product sold in each respective portion of
the Territory.

     The Collaboration Agreement further provides that in the event that
Schering or an Affiliate of Schering becomes the manufacturer of Compound MS-325
and Licensed Products, EPIX and Schering shall negotiate in good faith Costs of
Goods Sold allowable under a new manufacturing agreement between EPIX and
Schering. EPIX and Schering have further agreed pursuant to the Collaboration
Agreement that: (i) Schering will not manufacture Compound MS-325 and Licensed
Products on terms less favorable than those provided by MKG; PROVIDED, THAT, if
Schering becomes the manufacturer of Compound MS-325 and Licensed Products
because MKG is unwilling or unable to manufacture Compound MS-325 and Licensed
Products under the terms of the Manufacturing Agreement and Schering’s Costs of
manufacturing are higher than those of MKG, then the price to be charged by
Schering shall reflect such higher Costs; and (ii) that the terms of the new
agreement will take into consideration any CMC Costs paid or required to be paid
by EPIX.

3

 

     The Collaboration Agreement also provides that CMC Costs incurred by
Schering or a Schering Affiliate shall not be included in Costs of Goods Sold or
Development Costs, and shall be borne solely by Schering or such Schering
Affiliate, unless, to the extent permitted under the Manufacturing Agreement,
Schering or such Schering Affiliate takes over manufacturing responsibilities
due to the inability or unwillingness of MKG to manufacture all or part of the
requirements of Schering of Compound MS-325 and related Licensed Products, in
which case: (x) pursuant to the Collaboration Agreement, Schering has agreed to
pursue all available legal remedies against MKG as a result of MKG’s inability
or unwillingness to perform under the Manufacturing Agreement; and (y) CMC Costs
incurred by Schering or a Schering Affiliate shall be included in Development
Costs (net of any recovery relating to CMC Costs from MKG pursuant to the
Manufacturing Agreement).

     1.8. “DAIICHI RADIOISOTOPE LABORATORIES, LTD.” or “DRL” means the
Japanese corporation having its principal place of business at 17-10, Kyobashi
1-chome Chuo-Ku, Tokyo, 104 Japan.

     1.9. “DEVELOPMENT COSTS” shall mean all internal (direct and indirect)
and Third Party expenses incurred by EPIX and Schering in the United States and
the EU in connection with the Development Program, determined in a reasonable
manner in accordance with GAAP. Such expenses include, but are not limited to
(i) direct labor (salaries, wages, incentive program Costs, awards and employee
benefits but excluding any employee benefits associated with equity incentive
plans); (ii) materials and supplies; (iii) allocated Costs for building space
directly dedicated to the development of the Licensed Products (including rent,
depreciation, amortization and maintenance) but excluding expenses relating to
unused capacity, development of other products, and amortization of property,
plant and equipment not directly related to development of Licensed Products in
accordance with the Development Plan; (iv) Third Party contracts and consulting
expenses incurred for services in connection with the Development Program; (v)
allocated Costs for information technology directly dedicated to the development
of the Licensed Products and (vi) travel and entertainment, telephone,
recruiting, training (both internal and external), clinical trial insurance,
software, personal computer equipment and support Costs and freight and delivery
expenses. Such Costs shall not include General and Administrative Expenses or
expenses incurred from departments that are not directly engaged in the
development of the Licensed Products, including but not limited to, finance and
procurement, corporate administration, legal (both external and internal
expenses), human resources, business development and licensing, Sales and
Marketing (as hereinafter defined in Section 1.38) except for Costs of
pre-launch marketing activities incurred prior to the Launch Preparation Date as
more fully described in Section 5.1.2 of the Collaboration Agreement, and
investor relations.

     Development activities for which Development Costs are incurred include
but are not limited to pre-clinical and clinical work (Phase I-IV trials (such
Phase IV trials to be intended to support approval of an NDA, MAA or a
supplement or amendment thereto, required as a condition of approval of an NDA,
MAA or a supplement or amendment thereto, or required to support continued
approval of an NDA, MAA or a supplement or amendment thereto)),

4

 

regulatory filings, Cost of compound for pre-clinical and clinical work (Phase
I-IV trials, as described above in this sentence), Costs of pre-launch marketing
activities incurred prior to the Launch Preparation Date, and all Costs of
Compound MS-325 related to regulatory filings in the United States and the EU.
Development Costs shall not include CMC Costs unless EPIX or Schering is forced
to take over such function from MKG at which time such Costs will be included by
EPIX or Schering, as the case may be, in Development Costs. In the event that
Schering or a Schering Affiliate becomes the manufacturer of Compound MS-325 and
Licensed Products, CMC Costs incurred by Schering or a Schering Affiliate
relating to Compound MS-325 and Licensed Products for use in the Development
Program shall not be included in Development Costs, and shall be borne by
Schering or such Schering Affiliate, unless Schering or such Schering Affiliate,
in accordance with the terms of the Manufacturing Agreement, takes over
manufacturing responsibilities due to the inability or unwillingness of MKG to
manufacture all or part of the requirements of Schering of Compound MS-325 and
Licensed Products, in which case: (x) pursuant to the Collaboration Agreement
Schering has agreed to pursue all available legal remedies against MKG as a
result of MKG’s inability or unwillingness to perform under the Manufacturing
Agreement; and (y) CMC Costs of Schering or a Schering Affiliate relating to
Compound MS-325 and Licensed Products for use in the Development Program shall
be included in Development Costs (net of any recovery from MKG relating to CMC
Costs).

     1.10. “DEVELOPMENT PHASE” shall have the meaning set forth in the
Collaboration Agreement.

     1.11. “DEVELOPMENT PROGRAM” shall have the meaning set forth in the
Collaboration Agreement.

     1.12. “EFFECTIVE DATE” shall mean the date first written above.

     1.13. “EPIX PATENT RIGHTS” shall have the meaning set forth in the
Collaboration Agreement.

     1.14. “EPIX TECHNOLOGY” shall have the meaning set forth in the
Collaboration Agreement.

     1.15. “EU” shall mean the European Union, as it may be constituted from
time to time.

     1.16. “EUROPE” shall mean the EU, all countries located wholly or
partly on the continent of Europe that are not member states of the EU,
Australia, New Zealand, South Africa, and Turkey.

     1.17. “FDA” shall mean the United States Food and Drug Administration.

     1.18. “FIELD” shall mean all indications comprehended by the definition
of the term “Blood Pool Magnetic Resonance Contrast Agents” and magnetic
resonance imaging.

     1.19. “FIRST COMMERCIAL SALE” of any Licensed Product shall mean the
first sale for use or consumption by the general public of such Licensed Product
in a country when such sale has

5

 

been made with the required marketing and pricing approval granted by the
governing health authority of such country.

     1.20. “GAAP” shall mean United States Generally Accepted Accounting
Principles.

     1.21. “GENERAL AND ADMINISTRATIVE EXPENSES” shall mean all direct and
indirect expenses incurred by Schering and EPIX in connection with departmental
units that are not directly engaged in the development, manufacturing, or sales
and marketing of Compound MS-325 and Licensed Products. General and
Administrative Expenses shall include, but not be limited to, charges falling
within the following groups, to the extent such charges are not related to the
determination of Costs of Goods Sold based on the historical accounting
practices of the party (i.e., either EPIX or Schering) seeking to claim the
charge, consistently applied: finance, procurement, order entry, corporate
administration, legal (both external and internal expenses), human resources,
business development and licensing and investor relations. General and
Administrative Expenses shall exclude the following groups of charges: clinical
trial insurance Costs, facilities and information technology. Such expenses
shall be determined in accordance with GAAP, consistently applied.

     1.22. “GROSS PROFITS” with respect to any Licensed Product shall mean
Net Sales minus Costs of Goods Sold.

     1.23. “IND” shall mean an investigational new drug application or its
equivalent filed with the FDA and necessary for beginning clinical trials in
humans, or any comparable application filed with the regulatory authorities of a
country other than the United States prior to beginning clinical trials in
humans in such country, with respect to the Licensed Products.

     1.24. “INDEMNITEE” shall have the meaning set forth in Section 7.5.

     1.25. “INDEMNITOR” shall have the meaning set forth in Section 7.5.

     1.26. “LICENSED PRODUCT” shall mean any product comprising Compound
MS-325.

     1.27. “MAA” shall mean a marketing approval application filed with the
appropriate regulatory authority in a country other than the United States,
after completion of human clinical trials to obtain marketing approval for a
Licensed Product in such country.

     1.28. “MAGNEVISt” shall mean the extracellular magnetic resonance
product gadopentatate dimeglumine sold by Schering, for the United States market
pursuant to NDA # NDA # 19-596.

     1.29. “MANUFACTURING AGREEMENT” shall have the meaning set forth in the
recitals. A true and accurate copy of the Manufacturing Agreement is attached
hereto as EXHIBIT B.

     1.30. “MGH LICENSE” shall have the meaning set forth in the recitals.

     1.31. “MGH PATENT RIGHTS” shall have the meaning set forth in the
Collaboration Agreement.

6

 

     1.32. “MKG PATENT RIGHTS” shall mean any patent rights of MKG
identified in EXHIBIT C, and such other patent rights of MKG that the Parties
may mutually agree from time to time are necessary for or useful in the making,
using or selling of Licensed Products in the Territory.

     1.33. “NDA” shall mean a new drug application filed with the FDA to
obtain marketing approval for a Licensed Product in the United States.

     1.34. “NET SALE” shall mean the invoiced sales price per unit for each
of the Licensed Products billed by a EPIX or Schering or their respective
Affiliates, or any distributor of either who is not an Affiliate, or, to the
extent permitted in Section 3.1.2 of the Collaboration Agreement, by permitted
sublicensees of Schering to independent customers, less actual (a) credited
allowances to such independent customers for such Licensed Products which were
spoiled, damaged, out-dated or returned; (b) freight and insurance Costs charged
to such customers; (c) quantity and promotional discounts actually allowed and
taken; (d) sales, use, value added, and other taxes or governmental charges
(such as customs duties) incurred in connection with the sale, exportation or
importation of the Licensed Products in finished packaged form; (e) charge back
payments and/or rebates or other fees provided to distributors, wholesalers, or
other purchasers and managed health care organizations or federal, state and
local governments, their agencies, purchasers and reimbursers, including
reimbursements to social security organizations; and (f) volume-related customer
program Costs which are required by the customer and which are independent of
Schering marketing initiatives. The transfer of any Licensed Product by Schering
or EPIX or one of their respective Affiliates to another of their respective
Affiliates shall not be considered a sale; in such cases, Net Sales shall be
determined based on the invoiced sales price by the Affiliate to its customer,
less the deductions allowed under this Section.

     EPIX and MKG recognize that (a) Schering’s customers may include
persons in the chain of commerce who enter into agreements with Schering as to
price even though title to the Licensed Product does not pass directly from
Schering to such customers, and even though payment for such Licensed Product is
not made by such customers directly to Schering; and (b) in such cases, the
Collaboration Agreement provides that chargebacks paid by Schering to or through
a Third Party (such as a wholesaler) can be deducted by Schering from gross
revenue in order to calculate Net Sales. Any deductions listed above which
involve a payment by Schering shall be taken as a deduction against aggregate
sales for the quarter in which the payment is made.

     The Collaboration Agreement provides that Net Sales will be accounted
for in accordance with international accounting standards consistently applied.
Pursuant to the Collaboration Agreement, Schering has agreed that in any
instance where the calculation of Net Sales according to international
accounting standards differs materially from GAAP such that the result of such
calculation under international accounting standards would cause EPIX to
improperly account for such revenue under GAAP, Schering will provide EPIX with
any and all information requested by EPIX regarding the calculation of Net Sales
to enable EPIX to comply with GAAP in recognizing revenue from such Net Sales.

7

 

     The Collaboration Agreement provides that, without obtaining the prior
approval of EPIX (which approval shall not be unreasonably withheld), Schering
will not sell a combination of products and/or services which include one or
more Licensed Products, (i) for a single price, or (ii) on other terms of
purchase not separately identifying a price per product. Schering has also
agreed, under the Collaboration Agreement, that records of the deductions
referred to above for each Licensed Product shall be maintained in a manner that
allows audit of such deductions pursuant to Section 7.11 of the Collaboration
Agreement.

     The Collaboration Agreement also provides that Schering will not offer
customers discounted prices for any Licensed Product (i) for the purpose of
inducing the customer to purchase other products or services of Schering without
obtaining the prior approval of EPIX (such approval not to be unreasonably
withheld) as to the fair apportionment of sales value to Licensed Product and
any related Costs; or (ii) for reasons other than the good faith sale of a
Licensed Product at a reasonable, mutually beneficial profit margin in view of
the circumstances applicable to the relevant market.

     1.35. “OPERATING MARGIN” shall mean for a particular quarter, the
aggregate Net Sales of, and any other revenues relating to, Licensed Products
for such quarter including, without limitation, royalties and any other payments
from sublicensees, less (i) Costs of Goods Sold, and (ii) Sales and Marketing
Costs.

     1.36. “PARTY” shall mean EPIX or MKG.

     1.37. “PATENT RIGHTS” shall mean MGH Patent Rights and EPIX Patent
Rights, collectively.

     1.38. “PROGRAM” shall mean the collaboration between EPIX and MKG
contemplated by this Agreement.

     1.39. “PROFIT PAYMENT” shall have the meaning set forth in Section
3.5.1(a).

     1.40. “PROMISSORY NOTE” shall have the meaning set forth in Section
2.7.

     1.41. “REGION” shall mean any one of the United States, Europe (as
defined herein), Japan (if applicable) and the Rest of World.

     1.42. “REST OF WORLD” shall mean all countries of the world other than
the United States, Europe (as defined herein) and Japan (if applicable).

     1.43. “ROYALTY PAYMENT” shall have the meaning set forth in Section
3.6.1.

     1.44. “SALES AND MARKETING COSTS” shall mean all direct and indirect
Costs incurred by Schering and EPIX in connection with the sale and marketing of
the Licensed Products, including but not limited to Costs charged to detailing
and selling, advertising, and marketing and distribution, reasonably determined
in accordance with GAAP. Such expenses include, but are not limited to: (i)
direct labor (salaries, wages, commissions, incentive program Costs,

8

 

awards and employee benefits but excluding any employee benefits associated with
equity incentive plans); (ii) materials and supplies; (iii) allocated Costs for
building space directly dedicated to the sales and marketing of the Licensed
Products (including rent, depreciation, amortization and maintenance) but
excluding expenses relating to unused capacity, sales and marketing of other
products, and amortization of property, plant and equipment not directly related
to sales and marketing of Licensed Products in accordance with the Annual
Marketing Plan; (iv) allocated Costs for information technology directly
dedicated to the sales and marketing of the Licensed Products; (v) Third Party
consulting and contract service Costs, (vi) advertising, promotion, physician
training Costs and Cost of grants, use taxes associated with distribution of
samples and marketing materials; (vii) Costs of Phase IV trials not included in
Development Costs (including product Costs), (viii) professional education
programs and meeting Costs (POA, national sales meetings, etc.), (ix) samples of
Licensed Products, travel and entertainment, fleet vehicle Costs, telephone,
recruiting, training (both internal and external Costs), rental fieldforce
Costs, software, personal computer equipment and support Costs, freight and
delivery expenses, Costs of inventory management , billing (as included in
distribution), drug safety, drug regulatory affairs, and inventory and accounts
receivable carrying Costs specifically related to Licensed Products, provided,
that, when the calculation of such carrying Costs (as more fully described in
EXHIBIT E of the Collaboration Agreement) results in EPIX incurring the net
carrying Costs Schering shall apply such net credit as a deduction from Sales
and Marketing Costs; and (x) actual bad debts written off in connection with
sales of each Licensed Product (net of any recoveries of amounts previously
written off as bad debts for such Licensed Product). Such Costs shall not
include General and Administrative Expenses or expenses incurred from
departments that are not directly engaged in or supporting the efforts of the
sales and marketing of the Licensed Products including but not limited to
finance and procurement (including order entry), corporate administration, legal
(both external and internal expenses), human resources, business development and
licensing, research and development, and investor relations.

     Sales and Marketing Costs shall include the Costs of pre-launch
promotional and educational programs expended after the Launch Preparation Date
as described in Section 5.1.2 of the Collaboration Agreement, which shall be
deducted from Operating Margin for the first calendar quarter following First
Commercial Sale of the relevant Licensed Product. Sales and Marketing Costs
chargeable by either Schering or EPIX shall be in accordance with the Annual
Marketing Plan as more fully described in Section 5.1 of the Collaboration
Agreement.

     Notwithstanding the above, pursuant to the Collaboration Agreement,
Schering has agreed that with respect to charges directly related to sales
volume (including but not limited to freight, billing, shipping and warehousing
charges), the ratio of total Sales and Marketing Costs derived from such charges
allowable under the Collaboration Agreement to Net Sales of Licensed Products by
Schering shall not exceed the ratio of such Sales and Marketing Costs derived
from such charges to Net Sales (when calculated using the definitions for Net
Sales and Marketing Costs herein as applied to the Magnevist product) for
Schering’s Magnevist product. The relevant cost driver of each cost component
(i.e. per unit Costs) will be used when considering this comparison, and may
vary by Cost type. The Collaboration Agreement further provides that when Costs
comparisons of Licensed Products are not equivalent to or less than

9

 

those for Schering’s Magnevist product for bona fide business reasons, EPIX and
Schering shall agree on the proper ratio to be used.

     1.45. “SCHERING” shall have the meaning set forth in the recitals.

     1.46. [ * ] shall mean that certain [ * ]dated as of [ * ] between MKG
and [ * ].

     1.47. “TERRITORY” shall mean the United States, Europe, and the Rest of
World, but shall exclude Japan (subject to Section 2.2).

     1.48. “THIRD PARTY” shall mean any entity other than EPIX or Schering
and their respective Affiliates.

     ARTICLE 2. LICENSE GRANTS; MANUFACTURING AND MARKETING RIGHTS

     2.1. GRANT OF LICENSE RIGHTS BY EPIX TO MKG.

          2.1.1 LICENSE GRANTS. EPIX hereby grants MKG a non-exclusive,
worldwide, fully paid-up right and license under the Patent Rights and EPIX
Technology for the sole purpose of permitting MKG to manufacture and supply
Compound MS-325 and corresponding Licensed Products in accordance with the terms
and conditions of the Manufacturing Agreement.

          2.1.2. SUBLICENSES. MKG shall have the right to grant

sublicenses under the licenses set forth in Section 2.1.1 hereof to Affiliates
of MKG or, with the prior approval of EPIX (which shall not be unreasonably
withheld), to such third party manufacturers as are fully qualified, have been
approved by Schering and whose services are necessary for the performance by MKG
of its obligations under the terms of the Manufacturing Agreement.

          2.1.3. RESERVED RIGHTS OF MGH AND THE U.S. GOVERNMENT. MKG

acknowledges that the license granted herein to the Patent Rights is dependent
upon the rights and licenses obtained by EPIX under the MGH License and are
subject to certain rights reserved to MGH and the United States Government in
the MGH License, as set forth in the MGH License attached hereto as APPENDIX I.
In the event that the MGH License is terminated due to EPIX’s failure to comply
with the due diligence obligations imposed on EPIX pursuant to Paragraph 3.1(b)
of the MGH License or any other obligation therein, such failure shall
constitute a material breach by EPIX and MKG may terminate this Agreement in
accordance with Section 8.3.1 hereof.

          2.1.4. RESERVED RIGHTS OF EPIX. Notwithstanding the rights

granted to MKG pursuant to this Section 2.1, EPIX at all times reserves the
right under the Patent Rights and the EPIX Technology to use Compound MS-325 or
any other compound deriving in any manner therefrom for all research,
development and commercial purposes throughout the world, and to make, use,
offer for sale, sell, distribute for sale and import Compound MS-325 or any
other compound deriving in any manner therefrom, subject only to the license
rights granted to MKG

 

			
	*	 	Confidential information omitted and filed separately with the Commission.

10

 

pursuant to Section 2.1.1 and 2.1.2 above, and MKG’s rights under and pursuant
to the Manufacturing Agreement.

          2.1.5. THIRD PARTY PATENT RIGHTS. In the event that MKG or
EPIX, with MKG’s consent (such consent not to be unreasonably withheld or
delayed), determines that a license under a Third Party patent or other
intellectual property right is necessary for the manufacture of Compound MS-325
by MKG as contemplated by this Agreement and the Manufacturing Agreement, and
provided that EPIX is not in breach of any of its representations and warranties
set forth in Section 6.1, the costs of obtaining such license will be the sole
responsibility of MKG.

     2.2. GRANT OF LICENSE RIGHTS BY MKG TO EPIX. In the event that the
rights under the MKG Patent Rights [ * ] granted by [ * ] to EPIX under the
Collaboration Agreement terminate (in their entirety or in any particular
Region) for any reason, then MKG shall hereby be deemed to grant to EPIX a
non-exclusive, world-wide, fully paid-up right and license, including the right
to grant sublicenses, under the MKG Patent Rights, and any know-how or
technology developed by MKG and related thereto, for the sole purpose of
permitting EPIX or a sublicensee of EPIX to research, develop, use, manufacture,
offer for sale, sell, distribute and import Licensed Products; PROVIDED, THAT,
if, [ * ].

     2.3 MKG THIRD PARTY AGREEMENT STEP-IN RIGHTS. The license granted under
Section 2.1.1 includes sublicenses of MGH technology existing on the Effective
Date and licensed to EPIX under the MGH License. Any royalties payable to MGH
pertaining to such MGH technology shall be paid by EPIX, and, if not so paid,
may be paid by MKG and offset or deducted from any payments due (if any) from
MKG to EPIX pursuant to this Agreement. If EPIX is notified of a breach or
default under the MGH License that if uncured would enable MGH to render
non-exclusive or terminate the license granted to EPIX under the MGH License,
EPIX shall (i) give reasonable written notice thereof to MKG, (ii) shall
immediately cure such default or breach within the cure period set forth in the
MGH License and shall provide MKG with written confirmation thereof, and (iii)
if EPIX is unable to cure such breach or default within the relevant cure period
shall provide MKG with prompt written notice thereof and an opportunity to cure
such default or breach within the relevant cure period. Any out-of-pocket sums
expended by MKG in the exercise of its rights under this Section 2.3 may be
deducted by MKG from any future sums due (if any) from MKG to EPIX pursuant to
this Agreement.

     2.4. MANUFACTURING AND SUPPLY OF COMPOUND MS-325 AND LICENSED PRODUCTS.

          2.4.1. MANUFACTURE AND SUPPLY BY MKG. Promptly after execution
of this Agreement, MKG shall begin making preparations necessary to meet its
obligations under the Manufacturing Agreement and shall comply with its
obligations thereunder during the term of this Agreement.

 

			
	*	 	Confidential information omitted and filed with the Commission.

11

 

          2.4.2. ASSISTANCE BY EPIX TO MKG FOR MANUFACTURING LICENSE.
EPIX shall disclose to MKG, free of charge, all information related to the
manufacture of any Licensed Products, and EPIX will cooperate with MKG to
provide such technical assistance and characterization work as may be necessary
in connection with the manufacture and production of any Licensed Products.

     2.5. COOPERATION BY MKG. MKG shall cooperate, and shall cause its
employees, consultants and agents to cooperate, with EPIX and Schering to enable
an orderly transition to EPIX of the clinical development responsibilities for
Compound MS-325, such cooperation to include, to the extent legally permissible
(i) the assignment of all of MKG’s right, title and interest in and transfer of
possession and control to EPIX of the regulatory filings or approvals prepared,
filed or received by MKG, (ii) transfer and delivery to EPIX of any and all
documents containing data relating to preclinical or clinical trials of Compound
MS-325, and its corresponding Licensed Products, and (iii) such additional
activities as the Parties may agree. Within thirty (30) days after the execution
of this Agreement, MKG and EPIX shall agree on the activities to be performed by
MKG pursuant to this Section 2.5, together with a budget and timeline with
respect to such activities.

     2.6. NO OTHER TECHNOLOGY RIGHTS. Except as otherwise expressly provided
in this Agreement, under no circumstances shall a Party hereto, as a result of
this Agreement, obtain any ownership interest in or other right to any
technology, know-how, patents, pending patent applications, products or
biological materials of the other Party, including items owned controlled or
developed by the other Party, or transferred by the other Party to said Party,
at any time pursuant to this Agreement.

     2.7. MKG CONSENT TO GRANT OF RIGHTS. MKG hereby acknowledges that the
Collaboration Agreement is being executed and delivered on the date hereof and,
in accordance with the terms of that certain letter agreement dated January 31,
2000 between EPIX and MKG, hereby consents to the terms and conditions of the
Collaboration Agreement, and in particular, consents to the grant by EPIX to
Schering of the rights in the intellectual property assets owned, controlled by
or licensed to EPIX and described in the Collaboration Agreement for any and all
purposes, including for purposes of the promissory note executed by EPIX in
favor of MKG (the “Promissory Note”) and that certain Security Agreement between
EPIX and MKG, both dated October 31, 1999. MKG agrees to execute and deliver
such additional agreements and documents, and to take such further actions as
may be reasonably requested by EPIX to effect the foregoing consent.

ARTICLE 3. PAYMENTS

     3.1. FEE. EPIX shall pay to MKG an up-front fee of ten million and
00/100 U.S. dollars (U.S. $10,000,000.00). Such amount shall be due and payable
by EPIX within ten (10) business days of the execution hereof, but in no event
later than June 30, 2000 even if the foregoing date occurs less than ten (10)
business days after the execution hereof. EPIX will not defer payment by
Schering of the up-front license fee owed by Schering pursuant to Section 7.1

12

 

of the Collaboration Agreement or take any other voluntary action that prevents
MKG from receiving the foregoing fee when such fee otherwise would have been
received hereunder.

     3.2. MILESTONE PAYMENTS. EPIX shall make a payment of [ * ] or up to a
total of [ * ], to MKG in connection with the achievement of each of the
following milestones with respect to Compound MS-325: (i) [ * ] ; and (ii) [ *
]. Such amounts shall be due and payable by EPIX within thirty (30) days of the
achievement of each milestone.

     3.3. DEVELOPMENT COSTS FOR THE PERIOD JANUARY 1, 2000 THROUGH
EFFECTIVE DATE.

          3.3.1. PROMISSORY NOTE. EPIX shall prepay to MKG that portion
of the outstanding Promissory Note that is equal to the increase in the
Promissory Note attributable to EPIX’s share of the Development Costs (as
defined in this Agreement prior to its amendment and restatement) incurred on or
after January 1, 2000 except that any costs included in the Promissory Note
attributable to CMC Costs and other manufacturing costs incurred after January
1, 2000 shall be deducted from such prepayment and forgiven by MKG. MKG will
submit to EPIX, within thirty (30) days of the Effective Date an accounting with
all supporting detail of such CMC Costs and other manufacturing costs incurred
after January 1, 2000 necessary to enable EPIX to accurately calculate the
amount of prepayment and forgiveness of the Promissory Note. Such prepayment
shall be due and payable within thirty (30) days after EPIX’s receipt of such
detailed accounting, subject to review and verification by EPIX. MKG also agrees
that, notwithstanding anything to the contrary contained in Section 5(a) of the
Note, or any other provision set forth herein, the outstanding principal balance
and accrued interest under the Note shall be due and payable on October 1, 2002,
and the Promissory Note shall remain enforceable otherwise in accordance with
its existing terms and conditions.

          3.3.2. MKG SHARE OF DEVELOPMENT COSTS. EPIX shall pay to MKG
MKG’s share of development costs (as defined in this Agreement prior to its
amendment and restatement) incurred by MKG between January 1, 2000 and the
effective date of this Agreement, except that MKG’s share of such development
costs shall exclude all CMC Costs and all Costs incurred by MKG for other
manufacturing activities. Within thirty (30) days of the Effective Date, MKG
will provide EPIX an accounting with all supporting detail of such development
costs incurred necessary to enable EPIX to submit such development costs to
Schering for reimbursement under the Collaboration Agreement. Such amounts shall
be due and payable by EPIX within thirty (30) days of EPIX’s receipt from MKG of
such detailed development cost information, subject to review and verification
by EPIX of such development costs.

          3.4. DEVELOPMENT COSTS INCURRED BY MKG AFTER THE EFFECTIVE DATE.

          Pursuant to Section 2.5, MKG and EPIX shall agree on the activities to be
performed by MKG during the transition period to EPIX of the clinical
development responsibilities for Compound MS-325. MKG will provide EPIX with a
detailed budget for such activities as agreed to by the parties

 

			
	*	 	Confidential information omitted and filed separately with the Commission.

13

 

within thirty (30) days of the Effective Date of this Agreement. Within thirty
(30) days after the end of each month that MKG continues to incur development
expenses pursuant to the transition period, MKG will submit an invoice to EPIX
for such costs incurred during the prior month. Each invoice shall include all
detailed support for the charges included on the invoice, including but not
limited to copies of Third Party invoices paid by MKG and the respective MKG
checks, time records and other documents supporting the costs incurred by MKG.
EPIX will pay such invoices within thirty (30) days of receipt of invoices with
complete supporting documentation, subject to review and verification by EPIX of
such invoices.

     3.5. SHARE OF OPERATING MARGIN IN THE UNITED STATES.

          3.5.1 SHARE OF OPERATING MARGIN IN THE UNITED STATES.

     (a) Commencing upon the First Commercial Sale of a Licensed
Product in the United States and continuing until the expiration or
termination of Schering’s payment obligations under the Collaboration
Agreement with respect to Licensed Products (or, if the Collaboration
Agreement is terminated and EPIX enters into a strategic collaboration
agreement with a Third Party for the commercialization of the Licensed
Product, then upon the expiration or termination of such Third Party’s
payment obligations), EPIX agrees to pay MKG [ * ] of the Operating
Margin derived from sales of Licensed Product in the United States. It
is also the intent of EPIX and MKG that, should there be no
distributable Operating Margin in any given quarter but instead losses
for that quarter, no amounts shall be paid to MKG for such quarter. The
payments to MKG by EPIX (each such payment hereinafter referred to as a
“Profit Payment”) shall be payable quarterly in United States dollars
upon the later of: (i) thirty (30) days after the close of each

calendar quarter, or (ii) fifteen (15) days from EPIX’s receipt from
Schering of the Operating Margin distribution, for payment to MKG,
pursuant to Section 7.6.1 of the Collaboration Agreement. Such Profit
Payment shall be made on the basis of actual results for the first two
months of such calendar quarter and forecasted results for the third
month of such calendar quarter, subject to adjustment in accordance
with the reconciliation and audit provisions set forth below.

     (b) At the time of the Profit Payment, EPIX shall provide MKG
with a report containing the following information (as provided to EPIX
by Schering under Section 7.6.1 of the Collaboration Agreement), on a
monthly basis, for the applicable quarter for the United States: (i)
Net Sales and units of Licensed Products sold; (ii) any other revenues
relating to the Licensed Products in the United States, including but
not limited to royalties and any other payments from sublicensees;
(iii) the Costs of Goods Sold for the reporting period for sales of
Licensed Products relating to the United States; (iv) the Sales and
Marketing Costs for the United States for the reporting period; and (v)
the Profit Payment payable for such period. EPIX shall make adjustments
in Profit Payments previously made resulting from variations between
forecasted results and actual results

 

			
	*	 	Confidential information omitted and filed with the Commission.

14

 

for the third month of such quarter (as calculated by Schering and
reported to EPIX under the Collaboration Agreement) as part of the
determination of the Profit Payment due to EPIX for the subsequent
quarter. Under the Collaboration Agreement, Schering has agreed to
keep complete and accurate records in sufficient detail to properly
reflect all Net Sales, Costs of Goods Sold and Sales and Marketing
Costs (as set forth in Section 7.6.1 of the Collaboration Agreement),
and to enable the Profit Payments payable hereunder to be determined
by EPIX. EPIX shall keep such records as they relate to the
determination of Profit Payments that it receives from Schering
(pursuant to Section 7.6.1 of the Collaboration Agreement), and,
except for Sales and Marketing Costs incurred by EPIX and included in
the determination of Profit Payments, EPIX shall not be responsible
for maintaining any other records that relate to such Profit Payments
payable to MKG hereunder.

          3.5.2 FORECASTS. Upon the reasonable request of MKG during the term of
this Agreement, EPIX will provide MKG with forecasts of sales of Licensed
Products for the United States as provided to EPIX by Schering in accordance
with the routine budget and forecasting cycle of Schering’s United States
Affiliate Berlex Laboratories, Inc.

3.6. SHARE OF GROSS PROFITS OUTSIDE THE UNITED STATES; PAYMENTS AND REPORTS.

          3.6.1 Commencing upon the First Commercial Sale of a Licensed Product
in any country of the Territory other than the United States and continuing
until the expiration or termination of Schering’s payment obligations under the
Collaboration Agreement with respect to Licensed Products (or, if the
Collaboration Agreement is terminated and EPIX enters into a strategic
collaboration agreement with a Third Party for the commercialization of the
Licensed Product, then upon the expiration or termination of such Third Party’s
payment obligations), EPIX agrees to pay MKG [ * ] of the royalties on annual
Gross Profits received by EPIX from Schering pursuant to Sections 7.7 and 7.8 of
the Collaboration Agreement (each such payment hereinafter referred to as a
“Royalty Payment”).

          3.6.2 Upon the later of: (i) seventy-five (75) days after the close of
each calendar quarter, or (ii) fifteen (15) days from EPIX’s receipt from
Schering of the royalty on annual Gross Profits pursuant to Sections 7.7 and 7.8
of the Collaboration Agreement, EPIX shall pay to MKG the Royalty Payment. At
the time of the Royalty Payment, EPIX shall provide MKG with a report containing
the following information (as provided to EPIX by Schering under Sections 7.7.3
and 7.8.1 of the Collaboration Agreement), on a monthly basis, for the
applicable quarter: (i) Net Sales and units of Licensed Products sold; (ii) the
Costs of Goods Sold for the reporting period for sales of Licensed Products;
(iii) the applicable royalty rate; and (iv) the Royalty Payment payable for such
period. Pursuant to the Collaboration Agreement, Schering has agreed to keep
complete and accurate records in sufficient detail to enable the Royalty
Payments payable hereunder to be determined by EPIX pursuant to Sections 7.7.3
and 7.8.1 of the Collaboration Agreement. EPIX shall keep such records as they
relate to the determination of

 

			
	*	 	Confidential information omitted and filed with the Commission.

15

 

Royalty Payments that it receives from Schering (pursuant to Sections 7.7.3 and
7.8.1 of the Collaboration Agreement), and shall not be responsible for
maintaining any other records that relate to such Royalty Payments payable to
MKG hereunder. Upon the reasonable request of MKG during the term of this
Agreement, EPIX shall provide MKG with forecasts of sales of Licensed Product
outside the United States as provided to EPIX by Schering, in accordance with
Schering’s routine budget and forecasting schedule.

     3.7. CURRENCY CONVERSION.

          3.7.1. Payments by EPIX to MKG under this Agreement shall be
made in United States dollars.

          3.7.2. Currency conversion for payments from Schering to EPIX
under the Collaboration Agreement shall be conducted as provided in this Section
3.7.2. The calculation of payments which refer to Net Sales in countries other
than United States shall be based upon EURO and converted into United States
dollars. Therefore, where payments are based upon Net Sales in countries other
than the United States and the member states of the European Currency Union, the
amount of such Net Sales expressed in the currency of such country shall be
converted into EURO at the exchange rate in effect on the last business day of
the applicable calendar quarter. The applicable exchange rate shall be the EURO
Foreign Exchange Reference Rate published by the European Central Bank,
Frankfurt / Main. If no EURO Foreign Exchange Reference Rate is determined for
the relevant currency, the Parties shall agree upon another reference rate.
Finally, the payable EURO amount shall be converted into US dollars at the EURO
Foreign Exchange Reference Rate published by the European Central Bank,
Frankfurt / Main, on the last business day of the applicable calendar quarter.

     3.8. RECORDS; AUDIT RIGHTS; DISPUTES.

          3.8.1. RECORDS OF REVENUES AND EXPENSES; AUDIT RIGHTS.

     (a) Pursuant to Section 7.11.1 of the Collaboration
Agreement, Schering has agreed to maintain complete and
accurate records which are relevant to revenues, costs,
expenses and payments on a country-by-country basis, and such
records shall be open during reasonable business hours for a
period of two (2) years from creation of individual records
for examination by EPIX, as further described in the
Collaboration Agreement. EPIX agrees, that upon the reasonable
request of MKG, EPIX will exercise its right to audit
Schering’s records in accordance with and subject to the terms
and conditions of the Collaboration Agreement. In the event
that the Collaboration Agreement is terminated and EPIX enters
into a strategic collaboration agreement with a Third Party
for the commercialization of the Licensed Product, EPIX agrees
to use reasonable commercial efforts to negotiate audit rights
with such third party which are substantially similar to the
audit rights described herein.

     (b) Upon the written request of MKG, EPIX shall
permit an independent public accountant selected by MKG and
acceptable to EPIX, which

16

 

acceptance shall not be unreasonably withheld or delayed, to
have access during normal business hours to such records of
EPIX as may be reasonably necessary to verify EPIX’s
compliance with the requirements of Sections 3.5 and 3.6
hereof in respect of any calendar year ending not more than
twelve (12) months prior to the date of such request. In that
regard, EPIX shall obtain and make available for inspection by
such independent public accountant such records of EPIX
(including those records provided by Schering pursuant to the
Collaboration Agreement) as may be reasonably necessary to
determine that EPIX is making the proper Profit Payment and/or
Royalty Payment to MKG pursuant to Sections 3.5 and 3.6
hereof. All such verifications shall be conducted at MKG’s
expense and not more than once in each calendar year. In the
event that the independent public accountant concludes that
adjustments should be made in MKG’s favor with respect to such
period, then any appropriate payments shall be paid by EPIX
within thirty (30) days of the date MKG delivers to EPIX the
written conclusions of such independent public account so
concluding, unless EPIX shall provide written notice to MKG
within such thirty (30) day period of the nature of its
disagreement with such written report. The fees charged by
such independent accountant shall be paid by MKG unless the
audit discloses that adjustments for the period are greater
than ten percent (10%) in which case EPIX shall pay the
reasonable fees and expenses charged by such representative.

(c) MKG agrees that all information subject to review
under this Section 3.8.1 is confidential and that it shall
cause its employees and representatives and the independent
public accountant to retain all such information in confidence
in accordance with the requirements of Article 5 below.

          3.8.2. RESOLUTIONS OF PAYMENT DISPUTES. Except as set forth in
this Section 3.8.2, the provisions of Section 9.6 shall not be applicable to
disputes described in this Section 3.8.2. If there is a dispute between the
Parties following any audit performed pursuant to Section 3.8.1 (an “Audit
Disagreement”) (i) within thirty (30) business days of the identification of the
Audit Dispute and notice thereof to the other Party, the Parties shall jointly
select a recognized international accounting firm to act as an independent
expert to resolve such Audit Disagreement; (ii) the Audit Disagreement submitted
for resolution shall be described by the Parties to the independent expert,
which description may be in written or oral form, within ten (10) business days
of the selection of such independent expert; (iii) the independent expert shall
render a decision on the matter as soon as practicable; (iv) the decision of the
independent expert shall be final and binding unless such Audit Disagreement
involves alleged fraud, material breach of this Agreement or construction or
interpretation of any of the terms and conditions thereof, which Audit
Disagreements shall be resolved as set forth in Section 9.6.; and (v) all fees
and expenses of the independent expert, including any Third Party support staff
or other costs incurred with respect to carrying out the procedures specified at
the direction of the independent expert in connection with such Audit
Disagreement, shall be borne by the Party initiating the audit, unless an
underpayment of ten percent (10%) or more is identified by such auditor, in
which case such costs shall be borne by the Party that was the subject of the
audit.

17

 

ARTICLE 4. INTELLECTUAL PROPERTY

     4.1. FILING, PROSECUTION AND MAINTENANCE OF MGH PATENT RIGHTS.

          4.1.1. RESPONSIBILITY AND COSTS. EPIX shall, in coordination
with MGH, be responsible for the preparation, filing, prosecution and
maintenance of all patent applications and patents included in MGH Patent Rights
in the Territory, keeping MKG informed. All Costs incurred by EPIX for the
preparation, filing, prosecution and maintenance of all patents and patent
applications included in MGH Patent Rights in the Territory shall be the
responsibility of EPIX. EPIX shall keep MKG reasonably apprised of actions taken
by EPIX and MGH pursuant to this Section 4.1.1 and related decisions of
government agencies.

          4.1.2. ABANDONMENT. If MGH notifies EPIX of its intention to
abandon the prosecution of any patent applications under the MGH Patent Rights
or of its intention to refrain from making any payment or taking any other
action necessary to obtain or maintain a patent under the MGH Patent Rights,
EPIX will thereafter, at its expense, take all action necessary or appropriate
to prosecute and/or maintain such MGH Patent Rights in the Territory.

     4.2. FILING, PROSECUTION AND MAINTENANCE OF EPIX PATENT RIGHTS.

          4.2.1. PROSECUTION AND MAINTENANCE. EPIX shall be responsible
for filing, prosecution and maintenance of the EPIX Patent Rights in the
Territory in its own name and at its own expense, keeping MKG informed.

          4.2.2. ABANDONMENT; FAILURE TO PAY. EPIX agrees that it will
not abandon the prosecution of any commercially viable patent application
included within the EPIX Patent Rights except in favor of another patent filing
of EPIX which has substantially the same coverage, nor shall it fail to make any
payment or fail to take any other action necessary to maintain a commercially
viable patent under the EPIX Patent Rights.

     4.3. NOTICE OF INFRINGEMENT. MKG shall inform EPIX promptly in writing
of any alleged infringement by a Third Party of the Patent Rights licensed
hereunder to MKG in the Territory of which it shall have knowledge and provide
any available evidence of such infringement to EPIX. In any infringement action
instituted by EPIX, Schering, MGH or any other permitted party to enforce the
Patent Rights, MKG shall cooperate in all respects and, to the extent possible,
have its employees testify when requested and make available relevant records,
papers, information, samples and the like. In such event, the costs of
prosecuting such infringement will be considered Development Costs under the
Collaboration Agreement if incurred during the Development Phase and Costs of
Goods Sold if incurred thereafter. Any damages or recoveries derived from such
action will, after sharing with MGH as provided in the MGH License, be treated
as Net Sales.

     4.4. DECLARATORY ACTIONS. In the event that a declaratory judgment
action alleging invalidity or non-infringement of any of the Patent Rights in
the Territory shall be brought

18

 

against either Party, the Party against which such action is brought shall
notify the other Party. In any declaratory judgment action described in this
Section 4.4, MKG and EPIX shall cooperate in all respects at the request of the
other Party and, to the extent possible, have its employees testify when
requested and make available relevant records, papers, information, samples and
the like.

     4.5. FILING, PROSECUTION AND MAINTENANCE OF THE MKG PATENT RIGHTS.

          4.5.1. MAINTENANCE OF MKG PATENT RIGHTS. MKG shall be
responsible for maintenance of the MKG Patent Rights at its own
expense, keeping EPIX informed.

          4.5.2. ABANDONMENT; FAILURE TO PAY. MKG agrees that it will
not abandon the prosecution of any patent application included within the MKG
Patent Rights nor shall it fail to make any payment or fail to take any other
action necessary to maintain any patent under the MKG Patent Rights. Further,
MKG covenants to make all payments with respect to and to perform all
obligations under the [ * ] to the extent necessary to ensure that the [ * ] and
all of MKG’s rights thereunder will remain in full force and effect.

          4.5.3. INFRINGEMENT BY OTHERS. EPIX and MKG shall each
promptly notify the other in writing of any alleged or threatened infringement
of patents or patent applications included in the MKG Patent Rights of which
they become aware, and shall consider the action to be taken. In the event that
the Parties determine to prosecute the said infringement, the Parties will
mutually agree which Party shall do so using counsel approved by the other
Party, such consent not to be unreasonably withheld or delayed. No settlement,
consent judgment or other voluntary final disposition of the suit may be entered
into by either of the Parties without the consent of the other Party, such
consent not to be unreasonably withheld or delayed. In such event, the costs of
prosecuting such infringement will be considered Development Costs under the
Collaboration Agreement if incurred during the Development Phase and Costs of
Goods Sold if incurred thereafter. Any damages or recoveries derived from such
action will be treated as Net Sales.

          4.5.4. COOPERATION IN INFRINGEMENT ACTIONS. In any
infringement suit instituted to enforce the MKG Patent Rights pursuant to this
Agreement, each Party shall cooperate in all respects and, to the extent
possible, have its employees testify when requested and make available relevant
records, papers, information, samples and the like.

          4.5.5. DECLARATORY ACTIONS. In the event that a declaratory
judgment action alleging invalidity or non-infringement of any of the MKG Patent
Rights in the Territory shall be brought against either Party, the Party against
which such action is brought shall notify the other Party in writing. The
Parties shall mutually determine which Party will defend said action using
counsel approved by the other Party, such approval not to be unreasonably
withheld or delayed. No settlement, consent judgment or other voluntary final
disposition of the action may be entered

 

* Confidential information omitted and filed with the Commission.

19

 

into by
either of the Parties without the consent of the other Party, such consent not to be unreasonably withheld or delayed.

     4.6. COOPERATION. Each Party shall make available to the other Party
(or to the other Party’s authorized attorneys, agents or representatives), its
employees, agents or consultants (at the former Party’s reasonable expense) to
the extent reasonably necessary or appropriate to enable the appropriate Party
to file, prosecute, maintain and enforce patent applications and resulting
patents as set forth in this Article 4 for periods of time reasonably sufficient
for such Party to obtain the assistance it needs from such personnel. Where
appropriate, each Party shall sign or cause to have signed all documents
relating to said patent applications or patents at no charge to the other Party.

ARTICLE 5. CONFIDENTIALITY

     5.1. NONDISCLOSURE OBLIGATIONS.

          5.1.1. GENERAL. Except as otherwise provided in this Article
5, during the term of this Agreement and for a period of ten (10) years
thereafter, both Parties shall maintain in confidence and use only for purposes
specifically authorized under this Agreement (i) information and data received
from the other Party resulting from or related to the development of Compound
MS-325 and the Licensed Product and (ii) all information and data not described
in clause (i) but supplied by the other Party under this Agreement marked
“Confidential.” For purposes of this Article 5,
information and data described in clause (i) or (ii) shall be referred to as “Information.”

          5.1.2. LIMITATIONS. To the extent it is reasonably necessary
or appropriate to fulfil its obligations or exercise its rights under this
Agreement, a Party may disclose Information it is otherwise obligated under this
Section 5.1 not to disclose to its Affiliates, sublicensees, consultants,
outside contractors and clinical investigators, on a need-to-know basis on
condition that such entities or persons agree to keep the Information
confidential for the same time periods and to the same extent as such Party is
required to keep the Information confidential. By way of example but not
limitation, MKG hereby agrees that EPIX may disclose Information to Schering on
the condition that Schering agrees to keep the Information confidential for the
same time periods and to the same extent as EPIX is required to keep the
Information confidential hereunder. In addition a Party or its Affiliates or
sublicensees may disclose such Information to government or other regulatory
authorities to the extent that such disclosure is reasonably necessary to obtain
patents or authorizations to conduct clinical trials of, and to commercially
market, Compound MS-325 and corresponding Licensed Products. The obligation not
to disclose Information shall not apply to any part of such Information that:
(i) is or becomes part of the public domain other than by unauthorized acts of
the Party obligated not to disclose such Information or those of its Affiliates
or sublicensees; (ii) can be shown by written documents to have been disclosed
to the receiving Party or its Affiliates or sublicensees by a Third Party,
PROVIDED such Information was not obtained by such Third Party directly or
indirectly from the other Party under this Agreement pursuant to a
confidentiality agreement; (iii) can be shown by competent evidence, prior to
disclosure under this Agreement, to already have been in the

20

 

possession of the receiving Party or its Affiliates or sublicensees, provided
such Information was not obtained directly or indirectly from the other Party
under this Agreement pursuant to a confidentiality agreement; (iv) can be shown
by written documents to have been independently developed by the receiving Party
or its Affiliates without breach of any of the provisions of this Agreement; or
(v) is disclosed by the receiving Party pursuant to interrogatories, requests
for information or documents, subpoena, civil investigative demand issued by a
court or governmental agency or as otherwise required by law, provided that the
receiving Party notifies the other Party immediately upon receipt thereof so
that such other Party (with the cooperation of the receiving Party) can seek a
protective order or other order limiting or preventing disclosure and provided
further that the disclosing Party furnishes only that portion of the Information
which it is advised by counsel is legally required under the circumstances.

     5.2. SAMPLES. Samples of Compound MS-325 or its corresponding Licensed
Products provided by either Party pursuant to this Agreement shall not be
supplied or sent by either Party to any Third Party, other than to regulatory
agencies, except pursuant to a written agreement between the Parties.

     5.3. TERMS OF THIS AGREEMENT. Except as provided in Section 5.4 hereof,
EPIX and MKG each agree not to disclose any terms or conditions of this
Agreement to any Third Party without the prior consent of the other Party,
except as required by applicable law; provided, that, MKG hereby agrees that
EPIX may share the terms and conditions of this Agreement with Schering. If
either Party determines that it is required to file this Agreement with the
Securities and Exchange Commission or other governmental agency for any reason,
such Party shall request confidential treatment of such portions of this
Agreement as the Parties shall together determine is appropriate.
Notwithstanding the foregoing, prior to execution of this Agreement, EPIX and
MKG have agreed upon the substance of information that can be used as a routine
reference in the usual course of business to describe the terms of this
transaction, and EPIX and MKG may disclose such information, as modified by
mutual agreement from time to time, without the other Party’s consent as may be
necessary from time to time.

     5.4. PUBLICATIONS.

          5.4.1. PROCEDURE. Each Party recognizes the mutual interest in
obtaining patent protection for inventions which arise under this Agreement. In
the event that either Party, its employees or consultants or any other Third
Party under contract to such Party wishes to make a publication (including any
oral disclosure made without obligation of confidentiality) relating to work
performed under this Agreement (the “Publishing Party”), such Party shall
transmit to the other Party (the “Reviewing Party”) a copy of the proposed
written publication at least forty-five (45) days prior to submission for
publication, or an abstract of such oral disclosure at least thirty (30) days
prior to submission of the abstract or the oral disclosure, whichever is
earlier. The Reviewing Party shall have the right (a) to propose modifications
to the publication for patent reasons, (b) to request a delay in publication or
presentation in order to protect patentable information, or (c) to request that
the information be maintained as a trade secret and, in such case, the
Publishing Party shall not make such publication.

21

 

          5.4.2. DELAY. If the Reviewing Party requests a delay as
described in Section 5.4.1(b), the proposed publication shall not be submitted
until the Parties have agreed to appropriate modification. In such instance, the
Publishing Party shall delay submission or presentation of the publication for a
period of ninety (90) days to enable patent applications protecting each Party’s
rights in such information to be filed. If the Reviewing Party requests that
information be maintained as a trade secret, the proposed publication shall not
be disclosed until such information is deleted therefrom.

          5.4.3. RESOLUTION. Upon the receipt of written approval of the
Reviewing Party, the Publishing Party may proceed with the written publication
or the oral presentation.

     5.5. INJUNCTIVE RELIEF. The Parties hereto understand and agree that
remedies at law may be inadequate to protect against any breach of any of the
provisions of this Article 5 by either Party or their employees, agents,
officers or directors or any other person acting in concert with it or on its
behalf. Accordingly, each Party shall be entitled to the granting of injunctive
relief or other equitable relief by a court of competent jurisdiction against
any action that constitutes any such breach of this Article 5, in addition to
any monetary damages to which a Party may be entitled.

ARTICLE 6. REPRESENTATIONS AND WARRANTIES

     6.1 EPIX represents and warrants to MKG that:

     (i) as of the Effective Date the MGH License is in full force
and effect; prior to the Effective Date EPIX has provided MKG with an
accurate and complete copy of the MGH License, including all amendments
thereto and documents incorporated therein by reference;

     (ii) as of the Effective Date, EPIX has not received any
notice from MGH that EPIX is in breach of the MGH License;

     (iii) during the term of the Agreement, EPIX will not amend
the MGH License in a manner that materially and adversely affects MKG’s
rights or obligations under this Agreement without the prior written
consent of MKG, such consent not to be unreasonably withheld or
delayed;

     (iv) during the term of this Agreement, EPIX will make all
payments and perform all obligations required by the MGH License when

due;

     (v) nothing in this Agreement shall be construed as a warranty
or representation by EPIX as to the validity or scope of any EPIX
Technology or Patent Rights or that the exercise of the Patent Rights
will not infringe upon the rights of any Third Party;

     (vi) EXHIBITS B and D of the Collaboration Agreement list all
Patent Rights owned or controlled by EPIX which are relevant to the

manufacture of Compound MS-325

22

 

and its corresponding Licensed Products in the Territory as of the
Effective Date. To EPIX’s actual knowledge, each of the Patent Rights
set forth on EXHIBIT B and D of the Collaboration Agreement is properly
issued and is not invalid for reasons of fraud or inequitable conduct
and EPIX is not aware of any facts or circumstances that would form the
basis for a determination that any of such patents are invalid due to
obviousness, overbreadth or for any other reason;

     (vii) to its actual knowledge, EPIX has all Third Party
licenses or other rights to patents or intellectual property that are

required to perform its obligations as contemplated hereunder;

     (viii) as of the Effective Date, EPIX has not received any
notices of infringement of Third Party patent rights by the
manufacture, use or sale of Compound MS-325 or its corresponding
Licensed Products;

     (ix) as of the Effective Date, EPIX has made available to MKG
all information in EPIX’s possession, under EPIX’s control, or of which
it is aware, concerning safety, efficacy, side effects, or toxicity of
Compound MS-325 and its corresponding Licensed Products, associated
with any clinical use, studies, investigations, or tests of Compound
MS-325 and its corresponding Licensed Products (animal or human),
whether or not determined to be attributable to Compound MS-325 or its
corresponding Licensed Products;

     (x) EPIX has conducted or has caused its contractors or
consultants to conduct and will in the future conduct, the preclinical
and clinical studies of Compound MS-325 and its corresponding Licensed
Products, in all material respects in accordance with applicable United
States law, published standards of the FDA and EMEA, and regulatory
standards applicable to the conduct of studies in the United States and
the EU, including without limitation, for the United States, good
laboratories practices regulations, good manufacturing practices
regulations, and good clinical practices guidelines; and

     (xi) EPIX has not employed (and, to its actual knowledge, has
not used a contractor or consultant that has employed) and in the
future, to its actual knowledge, will not employ (or, to the best of
its knowledge, use any contractor or consultant that employs) any
individual or entity debarred by the FDA (or subject to a similar
sanction of EMEA), or, to the actual knowledge of EPIX, any individual
who or entity which is the subject of an FDA debarment investigation or
proceeding (or similar proceeding of EMEA), in the conduct of the
preclinical or clinical studies of Compound MS-325 or its corresponding
Licensed Products.

     6.2. MKG represents and warrants to EPIX that:

23

 

     (i) The [ * ] is in full force and effect as of the effective
date of this Agreement and, to its actual knowledge and not based on

any investigation or inquiry, the [ * ] is valid and enforceable;

     (ii) EXHIBIT C lists all of the MKG Patent Rights owned or
controlled by MKG which are relevant to the manufacture, use and sale
of Compound MS-325 and its corresponding Licensed Products in the
Territory as of the Effective Date. To MKG’s actual knowledge, each of
the MKG Patent Rights set forth on EXHIBIT C is properly issued and is
not invalid for reasons of fraud or inequitable conduct and MKG is not
aware of any facts or circumstances that would form the basis for a
determination that any of such patents are invalid due to obviousness,
overbreadth or for any other reason; and

     (iii) to its actual knowledge, MKG has all Third Party
licenses or other rights to patents or intellectual property that are

required to perform its obligations under the Manufacturing Agreement.

ARTICLE 7. INDEMNITY

     7.1. MKG INDEMNITY OBLIGATIONS. Subject to the provisions of Section
7.3, MKG agrees to defend, indemnify and hold EPIX, its Affiliates and their
respective directors, officers, employees and agents harmless from all costs,
judgments, liabilities and damages arising from claims asserted by a Third Party
against EPIX, its Affiliates or their respective directors, officers, employees
or agents arising in connection with or as a result of: (a) actual or asserted
violations of any applicable law or regulation by MKG, its Affiliates,
sublicensees, Third Party manufacturers or agents by virtue of which the
Licensed Products manufactured by or on behalf of MKG shall be alleged or
determined to be adulterated, misbranded, mislabeled or otherwise not in
compliance with such applicable law or regulation; (b) claims for bodily injury,
death or property damage attributable to a recall ordered by a governmental
agency, or required by a confirmed failure, of Licensed Products to the extent
caused by any act or omission to act by MKG, its Affiliates, sublicensees, Third
Party manufacturers or agents in connection with the manufacture of Licensed
Products; or (c) any negligent or willful or intentional act or omission to act
by MKG, its Affiliates, sublicensees, Third Party manufacturers or agents in any
manner in connection with performance hereunder.

     7.2. EPIX INDEMNITY OBLIGATIONS. Subject to the provisions of Section
7.3, EPIX agrees to defend, indemnify and hold MKG, its Affiliates and their
respective directors, officers, employees and agents harmless from all costs,
judgments, liabilities and damages arising from claims asserted by a Third Party
against MKG, its Affiliates or their respective directors, officers, employees
or agents arising in connection with or as a result of: (a) actual or asserted
violations of any applicable law or regulation by EPIX, its Affiliates,
licensees, sublicensees or Third Party manufacturers, if any, by virtue of which
the Licensed Products manufactured, distributed or sold by EPIX shall be alleged
or determined to be adulterated, misbranded, mislabeled or otherwise

 

* Confidential information omitted and filed with the Commission.

24

 

not in compliance with such applicable law or regulation; (b) claims for bodily
injury, death or property damage attributable to a recall ordered by a
governmental agency, or required by a confirmed failure, or Licensed Products to
the extent caused by any act or omission to act by EPIX or its Affiliates,
licensees, sublicensees, Third Party manufacturers or agents in connection with
the manufacture, distribution or sale of Licensed Products, or (c) any negligent
or willful or intentional act or omission to act by EPIX, its Affiliates,
licensees, sublicensees, Third Party manufacturers or agents in any manner in
connection with performance hereunder.

     7.3. PRODUCT LIABILITY. MKG and EPIX understand and agree that, because
of the nature of the collaborative effort set forth in this
Agreement, should any Third Party claims be asserted against either or both of them or any of
their Affiliates that are in the nature of product liability claims, the Parties
will cooperate to ensure that such claims are defended, settled and compromised
in a manner that best protects the interests of both Parties hereunder. Unless
and until the other Party can demonstrate otherwise (which it may do by a
preponderance of competent evidence), it shall be presumed that as between EPIX
and MKG any Third Party claims relating to toxicology shall primarily be the
responsibility and liability of EPIX to defend and any Third Party claims
relating to the manufacture of Licensed Products shall primarily be the
responsibility and liability of MKG to defend. The Party presumed responsible
for defending such claim shall select counsel to defend any such claim, subject
to the approval of the other Party (such approval not to be unreasonably
withheld or delayed), and will have the daily responsibility for managing the
defense of such claim, keeping the other Party informed of any developments,
issues or decisions that arise as a consequence of such claim. The Parties shall
procure and maintain product liability insurance with responsible carriers in
such amounts and with such coverages and deductibles as the Parties may deem
appropriate under the circumstances.

     7.4. CONTRIBUTION. Notwithstanding any other provision of this Article
7, to the extent it is possible to determine with accuracy, each Party shall
only be responsible hereunder for and shall only have the duty to indemnify and
hold harmless the other Party hereunder (as applicable) for that portion of any
loss, cost, damages or expense attributable to its acts or omissions to act. In
the event there is any dispute between the Parties concerning their relative
proportion of responsibility with respect to any Third Party claim the Parties
shall attempt to resolve such dispute within sixty (60) days of the date it
arises but, if they are unable to do so, the matter shall be referred to
arbitration for resolution pursuant to Section 9.6.2.

     7.5. PROCEDURE. A Party or any of its Affiliates (the “Indemnitee”)
that intends to claim indemnification under this Article 7 shall promptly notify
the other Party (the “Indemnitor”) of any loss, claim, damage, liability or
action in respect of which the Indemnitee intends to claim such indemnification,
and in connection therewith shall provide the Indemnitor with all available
documents and other information relating to the claim for indemnification, and
the Indemnitor shall assume the defense thereof with counsel mutually
satisfactory to the Parties; PROVIDED, HOWEVER, that an Indemnitee shall have
the right to retain its own counsel, with the fees and expenses to be paid by
the Indemnitor, if representation of such Indemnitee by the counsel retained by
the Indemnitor, in the opinion of an independent counsel chosen by the Parties,
which counsel has not represented either Party, would be inappropriate due to
actual or potential

25

 

differing interests between such Indemnitee and any other Party represented by
such counsel in such proceedings. An Indemnitee shall not be entitled to
indemnification under this Article 7 if any settlement or compromise of a claim
is effected by the Indemnitee without the consent of the Indenmitor, which
consent shall not be unreasonably withheld or delayed. The failure to deliver
notice to the Indenmitor within a reasonable time after the commencement of any
such action, if prejudicial to its ability to defend such action, shall relieve
such Indemnitor of any liability to the Indemnitee under this Article 7. The
Indemnitee under this Article 7, its employees and agents, shall cooperate fully
with the Indemnitor and its legal representatives in the investigation of any
action, claim or liability covered by this indemnification. Any Costs paid by an
Indemnitor shall be without prejudice to the Indemnitor’s right to contest the
Indemnitee’s right to be indemnified, and subject to refund in the event that
the Indemnitor is ultimately held not to be obligated to indemnify the
Indemnitee.

ARTICLE 8. EXPIRATION AND TERMINATION

     8.1. THE RESEARCH PHASE AND THE DEVELOPMENT PHASE.

          8.1.1. TERMINATION OF THE RESEARCH PHASE AND THE DEVELOPMENT
PHASE. As of the Effective Date of this Agreement, as between MKG and EPIX, the
Research Phase and the Development Phase (each as defined in the Strategic
Collaboration Agreement prior to its amendment and restatement) are terminated.
The notice dated February 28, 2000 and provided to MKG pursuant to Section 2.2.
of the Strategic Collaboration Agreement (prior to its amendment and
restatement) is void and of no further effect.

          8.1.2. EXISTING OBLIGATIONS. The expiration or termination of
the Development Phase or the Research Phase or the Research Program (each as
defined in the Strategic Collaboration Agreement prior to its amendment and
restatement) with respect to any compound shall not relieve the Parties of any
obligation that accrued with respect thereto prior to such expiration or
termination.

     8.2. EXPIRATION OF THIS AGREEMENT. Unless this Agreement is sooner
terminated in accordance with the provisions of this Article 8, this Agreement
shall remain in effect for so long as Licensed Products are being sold anywhere
in the Territory.

     8.3. TERMINATION OF THIS AGREEMENT.

          8.3.1. TERMINATION BY EITHER PARTY. This Agreement may be
terminated by either Party upon thirty (30) days notice (i) by reason of a
material breach (other than as provided in clauses (ii) or (iii) below) if the
breaching Party fails to remedy such breach within ninety (90) days after
written notice thereof by the non-breaching Party, (ii) if the other Party fails
to make any payment of any kind as and when due in accordance with the terms and
procedures set forth herein and such failure is not remedied within thirty (30)
days after written notice thereof by the nonbreaching party, or (iii) upon
bankruptcy, insolvency, dissolution or winding up of the other Party, except, in
the case of a petition in bankruptcy filed involuntarily against a Party, if
such petition is dismissed within sixty (60) days of the date of its filing.

26

 

          8.3.2. TERMINATION OF MANUFACTURING AGREEMENT. This Agreement
shall terminate automatically upon the termination of the Manufacturing
Agreement if such termination occurs prior to receipt of the approval for
marketing and sale of Compound MS-325 and/or its corresponding Licensed Products
in the United States and if such termination is a result of MKG’s breach of its
obligations thereunder.

     8.4. EFFECT OF EXPIRATION OR TERMINATION OF THIS AGREEMENT.

          8.4.1. EXISTING OBLIGATIONS. The expiration or termination of
this Agreement for any reason shall not relieve the Parties of any
obligation that accrued prior to such expiration or termination.

          8.4.2. EFFECT OF TERMINATION BY EPIX. Upon the termination of
this Agreement by EPIX pursuant to Section 8.3.1 or pursuant to Section 8.3.2
above (i) all licenses and rights granted to MKG hereunder shall terminate, but
all licenses granted or deemed to be granted to EPIX hereunder shall survive and
(ii) except as otherwise expressly provided in the Manufacturing Agreement, MKG
will immediately cease to manufacture Compound MS-325 and/or any corresponding
Licensed Products.

          8.4.3. EFFECT OF TERMINATION BY MKG. Upon the termination of
this Agreement by MKG pursuant to Section 8.3.1 above, all licenses and rights
granted to EPIX hereunder shall terminate, but the licenses granted hereunder to
MKG shall survive.

          8.5. SURVIVAL. The provisions of Section 2.1 (if and to the
extent Section 8.4.3 applies), Section 2.3 (if and to the extent Section 8.4.3

applies), Articles 3 (with respect only to payments accrued at the time of
expiration or termination but not yet paid and any audit rights or dispute
resolution procedures applicable thereto and as set forth in Sections 3.8.1 and
3.8.2), 4, 5, 6 (only with respect to representations and warranties of EPIX in
the event of termination by MKG pursuant to Section 8.3.1, and only with respect
to representations and warranties of MKG in the event of termination by EPIX
pursuant to Section 8.3.1) and 7, Sections 8.1.2, 8.4.1, 8.4.2, 8.4.3, this
Section 8.5 and Section 9.10 shall survive the expiration or termination of this
Agreement.

ARTICLE 9. MISCELLANEOUS

     9.1. FORCE MAJEURE. Neither Party shall be held liable or responsible
to the other Party nor be deemed to have defaulted under or breached this
Agreement for failure or delay in fulfilling or performing any term of this
Agreement when such failure or delay is caused by or results from causes beyond
the reasonable control of the affected Party, including but not limited to fire,
floods, embargoes, war, acts of war (whether war is declared or not),
insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority or the other Party; PROVIDED, HOWEVER, that the Party so
affected shall use reasonable commercial efforts to avoid or remove such causes
of nonperformance, and shall continue performance hereunder with reasonable
dispatch whenever such causes are removed. Either Party shall provide the other
Party with prompt written notice of

27

 

any delay or failure to perform that occurs by reason of force majeure. The
Parties shall mutually seek a resolution of the delay or the failure to perform
as noted above.

     9.2. ASSIGNMENT. This Agreement may not be assigned or otherwise
transferred by either Party without the prior written consent of the other
Party; PROVIDED, HOWEVER, that either EPIX or MKG may, without such consent,
assign its rights and obligations under this Agreement (i) in connection with a
corporate reorganization, to any Affiliate, all or substantially all of the
equity interest of which is owned and controlled by such Party or its direct or
indirect parent corporation, or (ii) in connection with a merger, consolidation
or sale of substantially all of such Party’s assets to an unrelated Third Party
(which shall include, in the case of MKG, a sale of substantially all of the
assets of MKG’s Medical Imaging division); PROVIDED, HOWEVER, that such Party’s
rights and obligations under this Agreement shall be assumed in writing by its
successor in interest in any such transaction and shall not be transferred
separate from all or substantially all of its other business assets, including
those business assets that are the subject of this Agreement. Any purported
assignment in violation of the preceding sentence shall be void. Any permitted
assignee shall assume all obligations of its assignor under this Agreement.

     9.3. SEVERABILITY. Each Party hereby agrees that it does not intend, by
its execution hereof, to violate any public policy, statutory or common laws,
rules, regulations, treaty or decision of any government agency or executive
body thereof of any country or community or association of countries. Should one
or more provisions of this Agreement be or become invalid, the Parties hereto
shall substitute, by mutual consent, valid provisions for such invalid
provisions which valid provisions in their economic and other effects are
sufficiently similar to the invalid provisions that it can be reasonably assumed
that the Parties would have entered into this Agreement with such valid
provisions. In case such valid provisions cannot be agreed upon, the invalidity
of one or several provisions of this Agreement shall not affect the validity of
this Agreement as a whole or the validity of any portions hereof, unless the
invalid provisions are of such essential importance to this Agreement that it is
to be reasonably assumed that the Parties would not have entered into this
Agreement without the invalid provisions.

     9.4. NOTICES. Any consent, notice or report required or permitted to be
given or made under this Agreement by one of the Parties hereto to the other
shall be in writing, delivered personally or by facsimile (and promptly
confirmed by telephone, personal delivery or courier) or courier, postage
prepaid (where applicable), addressed to such other Party at its address
indicated below, or to such other address as the addressee shall have last
furnished in writing to the addressor and shall be effective upon receipt by the
addressee.

	 	 	 
	If to EPIX:

	 	     EPIX Medical, Inc.
	 

	 	71 Rogers Street
	 

	 	Cambridge, Massachusetts 02142-1118
	 

	 	Attention:     President
	 

	 	Telephone:     1-617-250-6000
	 

	 	Facsimile:     1-617-250-6031
	 
	 	 
	with a copy to:

	 	     Mintz, Levin, Cohn, Ferris, Glovsky and Popeo P.C.

28

 

	 	 	 
	 

	 	One Financial Center
	 

	 	Boston, Massachusetts 02111
	 

	 	Attention:     William T. Whelan, Esq.
	 

	 	Telephone:     1-617-542-6000
	 

	 	Facsimile:     1-617-542-2241
	 
	 	 

	 	 	 
	If to MKG:

	 	     Mallinckrodt Inc.
	 

	 	675 McDonnell Boulevard
	 

	 	Hazelwood, Missouri 63042
	 

	 	Attention:     President, Imaging Group
	 

	 	Telephone:     1-314-654-8221
	 

	 	Facsimile:     1-314-654-3107
	 
	 	 
	with a copy to:

	 	     Mallinckrodt Inc.
	 

	 	675 McDonnell Boulevard
	 

	 	Hazelwood, Missouri 63042
	 

	 	Attention:     Vice President and General Counsel
	 

	 	Telephone:     1-314-654-5240
	 

	 	Facsimile:     1-314-654-5366

     9.5. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving
effect to the choice of laws provisions thereof.

     9.6. DISPUTE RESOLUTION.

          9.6.1. The Parties hereby agree that they will attempt in good
faith to resolve any controversy or claim arising out of or relating to this
Agreement promptly by negotiations. If a controversy or claim should arise
hereunder, the representatives of the Parties will confer at least once and will
attempt to resolve the matter. Except as provided in Sections 3.8.2, 5.5 and
9.6.2 hereof, if the matter has not been resolved within fourteen (14) days of
their first meeting, the representatives shall refer the matter to the Chief
Executive Officer of EPIX and the President of MKG’s Imaging Group. If the
matter has not been resolved within thirty (30) days of the first meeting of the
Chief Executive Officer of EPIX and the President of MKG’s Imaging Group (which
period may be extended by mutual agreement), subject to rights to injunctive
relief and specific performance, and unless otherwise specifically provided for
herein, any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, will be settled as set forth in Section 9.6.2.

          9.6.2. All disputes, controversies or differences which may
arise between the Parties out of or in relation to this Agreement or any default
or breach thereof may be resolved by arbitration in accordance with the American
Arbitration Association by one or more arbitrators appointed in accordance with
the said Rules. The arbitration shall take place in Chicago, Illinois. Any
decision or award resulting from the arbitration provided for herein shall be
final and binding on the Parties hereto. Notwithstanding the above, without
resort to arbitration in the first instance, either Party has the
right to bring suit in a court of

29

 

competent jurisdiction against the other Party for (i) any breach of such other
Party’s duties of confidentiality pursuant to Article 5 of this Agreement and
(ii) any infringement of its own proprietary rights by the other Party. Judgment
upon the arbitrator’s award may be entered in any court of competent
jurisdiction. The award of the arbitrator may include compensatory damages
against either Party, but under no circumstances will the arbitrator be
authorized to, nor shall he, award punitive damages or multiple damages against
either Party. The Parties agree not to institute any litigation or proceedings
against each other in connection with this Agreement unless they have complied
with the provisions of this Section 9.6.2, as they may be applicable, unless
otherwise provided herein.

     9.7. PUBLIC ANNOUNCEMENTS. The Parties agree that press releases and
other announcements to be made by either of them in relation to this Agreement
shall be subject to the written consent of the other Party, which consent shall
not be unreasonably withheld or delayed, except to the extent that any such
press release is required to be made by law and the consent of the other Party
is not obtained after reasonable efforts to do so. The Parties will agree to
issue a joint press release immediately following the execution of this
Agreement, the form and content of which shall be reasonably satisfactory to
both Parties.

     9.8. ENTIRE AGREEMENT. This Agreement, together with the exhibits and
appendices hereto, contains the entire understanding of the Parties with respect
to the subject matter hereof. All express or implied agreements and
understandings, either oral or written, heretofore made are expressly merged in
and made a part of this Agreement. This Agreement may be amended, or any term
hereof modified, only by a written instrument duly executed by both Parties
hereto.

     9.9. HEADINGS. The captions to the several Articles and Sections hereof
are not a part of this Agreement, but are merely guides or labels to
assist in locating and reading the several Articles and Sections hereof.

     9.10. AGREEMENT NOT TO SOLICIT EMPLOYEES. During the term of this
Agreement and for a period of two (2) years following the expiration pursuant to
Section 8.2 or termination pursuant to Section 8.3 of this Agreement, EPIX and
MKG agree not to seek to persuade or induce any employee of the other company to
discontinue his or her employment with that company in order to become employed
by or associated with any business, enterprise or effort that is associated with
its own business.

     9.11. EXPORTS. The Parties acknowledge that the export of technical
data, materials or products is subject to the exporting Party receiving any
necessary export licenses and that the Parties cannot be responsible for any
delays attributable to export controls which are beyond the reasonable control
of either Party. EPIX and MKG agree not to export or reexport, directly or
indirectly, any information, technical data, the direct product of such data,
samples or equipment received or generated under this Agreement in violation of
any applicable export control laws or governmental regulations. EPIX and MKG
agree to obtain similar covenants from their licensees, sublicensees and
contractors with respect to the subject matter of this Section 9.11.

     9.12. WAIVER. The waiver by either Party hereto of any right hereunder
or the failure to perform or of a breach by the other Party shall not
be deemed a waiver of any other right

30

 

hereunder
or of any other breach or failure by said other Party whether of a similar nature or otherwise.

     9.13. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

[Remainder of page intentionally left blank.]

31

 

     IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first set forth above.

	 	 	 	 	 
	 

	 	 	 	 
	EPIX MEDICAL, INC.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Michael D. Webb	 	 
	 

	 	 	 	 
	Name:

	 	Michael D. Webb	 	 
	Title:

	 	Chief Executive Officer	 	 
	 
	 	 	 	 
	MALLINCKRODT INC.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Bradley J. Fercho	 	 
	 

	 	 	 	 
	Name:

	 	Bradley J. Fercho	 	 
	Title:

	 	President, Medical Imaging Group	 	 
	 
	 	 	 	 
	MALLINCKRODT INC.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Richard T. Higgons	 	 
	 

	 	 	 	 
	Name:

	 	Richard T. Higgons	 	 
	Title:

	 	Vice President Strategic Development	 	 

32

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