NONEXCLUSIVE SUBLICENSE AGREEMENT
This Nonexclusive Sublicense Agreement (this "Agreement") is made as of
November 5, 1996, by and between Apollo Genetics, Inc., a corporation
organized and existing under the laws of Delaware ("Apollo"), and Cephalon,
Inc., a corporation organized and existing under the laws of Delaware
("Cephalon").
WHEREAS, pursuant to a certain Neuron Loss Protection Technology License
Agreement (the "University Agreement"), dated as of April 13, 1993, between
University of Kentucky Research Foundation (the "University") and Apollo, the
University granted Apollo the exclusive right and license to make, have made,
use, lease, and sell throughout the world (including the right to sublicense
worldwide any of the rights, privileges and licenses granted thereunder)
certain products, including inter alia, any Products (as defined below); and
WHEREAS, Cephalon desires to obtain a nonexclusive, worldwide, royalty
bearing sublicense to make, have made, use, sell, offer to sell and import
Products (as defined below);
NOW, THEREFORE, in consideration of the foregoing and of the mutual
undertakings hereinafter set forth, the parties hereto agree as follows:
1. DEFINITIONS.
1.1. "Apollo Patents" shall mean any of the patent applications listed
on EXHIBIT A hereto and all-patents issued in connection therewith, and all
divisionals, continuations, continuations-in-part, reissues and extensions
derived therefrom, as well as any additional foreign counterparts and foreign
patents issuing therefrom.
1.2. "Gross Sales" shall mean, during any applicable calculation period,
with respect to any Products during any applicable calculation period, the
aggregate invoiced amounts for Products shipped by Cephalon or any of its
affiliates to nonaffiliated third parties during such period.
1.3. "Net Sales" shall mean, during any applicable calculation period,
Gross Sales of all Products during such period, less [ * ]
1.4. "Products" shall mean any and all products made, developed, sold or
otherwise distributed by or on behalf of Cephalon or any of its affiliates
that are covered by one or more Valid Claims under this Agreement.
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1.5. "Valid Claims" shall mean the claims included in any of the issued
Apollo Patents that have not been challenged with any reasonable evidence of
invalidity and are, therefore, presumed valid solely for the purpose of
determining royalty obligations hereunder.
2. SUBLICENSE GRANT.
2.1. Subject to the provisions of this Sublicense Agreement, Apollo
hereby grants to Cephalon and Cephalon hereby accepts, during the term of
this agreement only, the nonexclusive, worldwide right and license to
practice under the Valid Claims.
2.2. Cephalon shall have the right to request that Apollo sublicense, on
a non-exclusive basis, its rights under Apollo Patents to one or more of
Cephalon's then current corporate collaborators. Apollo shall not
unreasonably withhold the grant of such sublicenses. Cephalon itself may not
grant any sublicenses under this Agreement.
3. ROYALTIES.
3.1. In consideration of the sublicense granted to Cephalon in Section
2, Cephalon agrees to pay royalties to Apollo as follows:
(a) on the date hereof and on each six-month anniversary of the
date hereof, Cephalon shall pay to Apollo $ [ * ], until such time
as an Apollo Patent is issued .
(b) Thereafter, on each six month anniversary of the date hereof,
beginning with the payment date next following the first issuance of
an Apollo Patent, Cephalon shall pay to Apollo $[ * ], until such
time as a New Drug Application is filed with the U.S. Federal Drug
Administration (the "FDA") or a foreign equivalent thereof is filed
with the appropriate authority for any Product (each such filing
being referred to herein as an "NDA");
(c) Thereafter, on each six month anniversary of the date hereof,
beginning with the payment date next following the first such
filing of an NDA, Cephalon shall pay to Apollo $[ * ], until
such time as an NDA for any Product is approved by the FDA or the
appropriate foreign authority therefor;
(d) Thereafter, Cephalon shall pay to Apollo royalties in an amount
equal to [ * ] percent ([ * ]%) of any and all Net Sales of Products
by Cephalon, any of its affiliates and any third parties acting on
behalf of any of the foregoing, subject to the provisions of
Section 3.4; and, FURTHER, PROVIDED that in any calendar year
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in which Cephalon must make payments to Apollo pursuant to this
Section 3.1(d), Cephalon must pay to Apollo no less than $[ * ]
in each such calendar year.
(e) All royalty payments owed by Cephalon to Apollo may be offset
by any payments made by Cephalon to Apollo pursuant to
Sections 3.1(a)-(c); provided; however, that in any calendar year
Cephalon's right to offset shall be limited to [ * ]% of the amount
of Cephalon's royalty obligation to Apollo pursuant to
Section 3.1(d) in the [ * ] year that such payments are owed,
[ * ]% in the second year and [ * ]% in all subsequent years.
(f) All royalty payments owed by Cephalon to Apollo pursuant to
subsections (a) through (d) of Section 3.1 shall be deemed timely if
paid within thirty (30) days of the date due therefor.
(g) If an additional sublicense is granted by Apollo to a third
party (including a Cephalon corporate collaborator) and such
sublicense provides for payment to Apollo by such third party of
a royalty based on net sales by such third party in an amount less
than [*]%, then Apollo hereby agrees to offer Cephalon the right to
convert the terms of its sublicense to match those of the
subsequently granted sublicense within one calendar quarter of
executing such sublicense agreement with such third party.
3.2 If Apollo is properly served with a legal complaint filed with a
court of competent jurisdiction, which complaint challenges with reasonable
evidence the validity of a claim within an Apollo Patents Cephalon's
obligation to pay to Apollo any subsequent royalty payments under Section
3.1(d) that are based on such claim shall be suspended until such time as
such complaint is finally adjudicated by a court of competent jurisdiction.
Upon such adjudication, all amounts owed by Cephalon to Apollo (plus interest
thereon accruing at an annual rate designated by Citibank, N. A. as its base
rate on the date that such royalty payments were first suspended) shall be
paid by Cephalon to Apollo within thirty (30) days thereof.
3.3. (a) The amount of royalties due under Section 3.1(d) shall be
computed quarterly. Within forty-five (45) days after the close
of each calendar quarter, Cephalon shall submit to Apollo
documentation of the Gross Sales and Net Sales of Products by
Cephalon, any of its affiliates and any third parties acting on
behalf of any of the foregoing. At such time, Cephalon shall pay
to Apollo in cash the royalties owed hereunder with respect to
such quarter. Each such payment shall be accompanied by a
certificate by an appropriate officer of Cephalon describing in
reasonable detail the calculation of the amount of the accompanying
royalty payment.
(b) Cephalon shall be responsible for monitoring Net Sales of
Products by
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itself or by any of its affiliates and any third parties
acting on behalf of any of the foregoing.
3.4. If Cephalon is required to enter into any royalty-bearing licensing
agreements with any third parties in order to make, use, sell, or import any
Product, any royalty payments owed to Apollo by Cephalon, pursuant to Section
3.1(d), with respect to such Product during any applicable period [ * ].
3.5. All royalty payments owed by Cephalon to Apollo under Section
3.1(d) shall be paid in full in the United States in United States dollars.
The amount, if any, of Net Sales invoiced in another currency shall be
converted, prior to computing the royalties due with respect to such sales,
from the invoice currency into United States dollars at the conversion rate
actually received by Cephalon or, in the absence of any actual conversion, at
a conversion rate which shall be the mean between Citibank, N.A.'s buying and
selling rate for the invoice currency at its principal offices in New York,
New York, on the last day of the quarter for which the royalties are being
determined.
4. DUE DILIGENCE. Cephalon agrees to use its best efforts to develop
and commercialize one or more Products under this Agreement consistent with
the prudent exercise of its business judgment.
5. PROSECUTION OF PATENTS. Apollo shall be solely responsible for the
preparation, filing, prosecution, issuance and maintenance of all Apollo
Patents, and shall bear all of the costs associated therewith. Apollo shall
provide Cephalon the right to review and comment on all documents in
connection with the prosecution of each Apollo Patent; provided, however,
that Cephalon shall have no obligation to review or comment on such documents
and, in the event that Cephalon does so comment, Apollo shall have no
obligation to incorporate the substance of any such comments into any such
documents.
6. INFRINGEMENT ACTIONS. Apollo shall have the sole right (but not
the obligation) to bring infringement, unfair competition or other
proceedings involving or relating to each Apollo Patent and to defend any
governmental action involving or relating to each Apollo Patent. At Apollo's
request and expense, Cephalon shall cooperate with Apollo in any such
proceedings or actions. Cephalon shall not itself take any action against
third parties relating to infringement, unfair competition or other matters
involving any Apollo Patent without
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Apollo's prior written approval and shall notify Apollo in writing of any
unauthorized use of any Apollo Patent promptly after becoming aware of any
such use or action.
Should Apollo receive from Cephalon formal written notice (the
"Formal Notice"), together with a professional, scientific explanation as to
the mechanism(s) of action, regarding an alleging infringement of any Apollo
Patent, in lieu of making full payment of any royalty payments owed under
Section 3.1(d) with respect to any Apollo Patents to which such alleged
infringement relates, Cephalon's obligation to pay Apollo any subsequent
royalty payments under Section 3.1(d) shall be reduced to [ * ]%, the
remaining [ * ]% owing under Section 3.1(d) to be withheld by Cephalon
pending resolution of such alleged infringement.. Cephalon shall place the
remaining [ * ]% royalty in an interest-bearing escrow account. If, at the
expiration of forty-eight (48) months from the receipt by Apollo of the
Formal Notice (the "Expiration Period"), Apollo has not resolved the issue of
such alleged infringement either by (1) obtaining a permanent injunction
prohibiting the alleged infringing party from continuing such alleged
infringement (an "Injunction") and/or (2) by final adjudication from which no
further appeal may be taken (including the settling of such alleged
infringement by agreement) resulting in (a) cessation of such alleged
infringement and/or (b) a determination of non-infringement (other than for
reasons of invalidity and/or unenforceability of any of the Apollo Patents)
(a "Final Adjudication"), Cephalon shall be entitled to retain the entire
amount of the withheld [ * ]%, including any interest thereon, within such
escrow account for its use and Apollo shall not be entitled to any monies
from such account. If, however, Apollo does resolve such issue by obtaining
an Injunction or a Final Injunction prior to the end of the Expiration
Period, then Cephalon shall promptly pay to Apollo the entire amount of the
withheld [ * ]%, including any interest thereon, within such escrow account
and any subsequent payments finder Section 3 1(d) shall resume to [ * ]% at
such time. Following the Expiration Period, any subsequent payments under
Section 3.1(d) shall continue to be reduced to [ * ]%, but shall resume to
[ * ]% at such time as Apollo thereafter obtains an Injunction and/or a Final
Adjudication. Notwithstanding anything in this paragraph to the contrary, in
the event that Apollo grants a license under Apollo Patents to any such
alleged infringer at any time after 180 days of receipt of the Formal Notice
(whether or not in connection with a Final Adjudication), Apollo shall not be
entitled to any portion of the withheld [ * ]%, including any interest
thereon.
7. CONFIDENTIAL INFORMATION; PUBLIC ANNOUNCEMENTS.
7.1. It is contemplated that, during the term of this Agreement, each
party (as such, a "Disclosing Party") will disclose to the other party (as
such, a "Receiving Party") proprietary or confidential information of the
Disclosing Party that is marked or otherwise reasonably identified as such
or, if disclosed orally, is followed by written notice within thirty (30)
days reasonably identifying it as such (collectively, "Confidential
Information"). A Receiving Party shall hold in confidence and shall not,
directly or indirectly, at any time during or subsequent to the term of this
Agreement, unless otherwise agreed to in writing by the Disclosing Party,
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disclose, publish, transfer or use (other than in accordance with the terms
of this Agreement) any Confidential Information of the Disclosing Party;
Provided, however, that the foregoing restrictions shall not apply to any
Confidential Information that:
(a) becomes part of the public domain through no wrongful act of the
Receiving Party;
(b) is lawfully received by the Receiving Party from a third party
without contravention of this Agreement or any similar nondisclosure
agreement (whether or not with the Receiving Party);
(c) prior to the time of receiving such Confidential Information from
the Disclosing Party, is known by the Receiving Party and may
lawfully be used by it without restriction; or
(d) is independently developed by the Receiving Party, provided that
the person or persons developing the same have not had any access to
the Confidential Information.
Confidential Information specific to the use of certain compounds,
methods, conditions or features shall not be deemed to be within the
foregoing exceptions merely because such Confidential Information is embraced
by general disclosures in the public domain or in the possession of the
Receiving Party; in addition, a combination of Confidential Information will
not be deemed to fall within the foregoing exceptions, even if all of the
components fall within an exception, unless the combination itself and its
significance are in the public domain or in the possession of the Receiving
Party prior to the disclosure thereof by the Disclosing Party.
All Confidential Information received hereunder shall be
immediately returned to tile Disclosing Party upon termination of this
Agreement, along with any copies, reproductions, digests, abstracts or the
like of all or any part thereof in the Receiving Party's possession or under
the Receiving Party's control, and upon such return any computer entries or
the like relating thereto shall, to the extent legally permissible, be
destroyed, and such return and/or destruction shall be certified in writing
by an appropriate officer of the Receiving Party. Such return (and
destruction) will not affect the Receiving Party's obligations hereunder
which shall survive indefinitely. Notwithstanding the foregoing, each party
may retain one copy of the Confidential Information received hereunder,
solely for archival purposes.
7.2. Except as shall be necessary to comply with applicable laws and
regulations, and except as otherwise agreed to by the parties hereto in
writing, the parties agree to keep the existence of this Agreement, and the
transactions contemplated hereby, strictly confidential. Any public
announcements regarding this Agreement or the transactions contemplated
herein shall
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be agreed upon in writing between the parties prior to any release thereof
8. REPRESENTATIONS OF APOLLO. Apollo represents, warrants and
covenants as follows:
8.1 It is a corporation duly organized and validly existing under the
laws of Delaware with the full power to conduct its affairs as currently
conducted and contemplated hereunder. All necessary action has been taken to
enable it to execute and deliver this Agreement and perform its obligations
hereunder.
8.2. This Agreement is a valid and binding obligation of Apollo
enforceable in accordance with its terms. Apollo has the right to enter into
this Agreement and to fulfill its duties hereunder. Apollo is not and will
not become a party to any agreement in conflict herewith. Accordingly, Apollo
has the right to grant the license set forth in Section 2 in accordance with
the terms of this Agreement and such grant will not constitute a breach of
any existing contractual or other arrangements between Apollo and any
affiliated or non-affiliated third party, nor shall it infringe the rights of
any affiliated or non-affiliated third party.
8.3 No approval, consent, order, authorization or license by, giving
notice to or taking any other action with respect to, any governmental or
regulatory authority is required in connection with the execution and
delivery of this Agreement by Apollo and the performance by Apollo of its
obligations hereunder.
9. REPRESENTATIONS OF CEPHALON. Cephalon represents, warrants and
covenants as follows:
9.1. It is a corporation duly organized and validly existing under the
laws of Delaware with full power to conduct its affairs as currently
conducted and contemplated hereunder. All necessary action has been taken to
enable it to execute and deliver this Agreement and perform its obligations
hereunder.
9.2. This Agreement is a valid and binding obligation of Cephalon
enforceable in accordance with its terms. Cephalon has the right to enter
into this Agreement and to fulfill its obligations hereunder.
9.3. No approval, consent, order, authorization or license by, giving
notice, to or taking any other action with respect to any governmental or
regulatory authority is required in connection with the execution and
delivery of this Agreement by Cephalon and the performance by Cephalon of its
obligations hereunder.
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10. INDEMNIFICATION AND INSURANCE.
10.1 Cephalon shall indemnify, defend and hold harmless Apollo and its
directors, officers, employees and affiliates (the "Indemnitees"), against
any liability, damage, loss or expense (including reasonable attorneys' fees
and expenses of litigation) incurred by or imposed upon the Indemnitees, or
any one of them, in connection with any claims, suits, actions, demands or
judgments arising out of the production, manufacture, sale, use in commerce,
or promotion by Cephalon or by an affiliate or agent of Cephalon, of any
product, process or service relating to, or developed pursuant to, this
Agreement.
10.2 Cephalon's indemnification under Section 10.1(a) shall apply to
any liability, damage, loss or expense whether or not it is attributable to
the negligent activities of the Indemnitees.
10.3 At such time as any Product is being used for obtaining regulatory
approvals or is being commercially distributed or sold by Cephalon or an
affiliate or agent of Cephalon, Cephalon shall, at its sole cost and expense,
procure and maintain policies of comprehensive general liability insurance in
amounts not less than One Million Dollars ($1,000,000) per person per
occurrence. At all times that any Product is being sold commercially,
Cephalon shall cause the Indemnitees to be named as additional insureds under
such policies. Such comprehensive general liability insurance shall provide
(a) product liability coverage; (b) broad form contractual liability coverage
for Licensee's indemnification under Sections 10.1 and 10.2 of this Agreement.
10.4 In thee event any such action is commenced or claim made or
threatened against Apollo or other Indemnitees as to which Cephalon is
obligated to indemnify it (them) or hold it (them) harmless, Apollo or the
other Indemnitees shall promptly notify Cephalon of such event and Cephalon
shall assume the defense of, and may settle, that part of any such claim or
action commenced or made against Apollo (or other Indemnitees) which relates
to Cephalon's indemnification and Cephalon may take such other steps as may
be necessary to protect itself. Cephalon shall not be liable to Apollo or
other Indemnitees on account of any settlement of any such claim or
litigation effected without Cephalon's consent. The right of Cephalon to
assume the defense of any action shall be limited to that part of the action
commenced against Apollo and/or Indemnitees which relates to Cephalon's
obligation of indemnification and holding harmless.
11. DISCLAIMER OF WARRANTIES.
11.1 APOLLO MAKES NO WARRANTY, EXPRESS OR IMPLIED, INCLUDING,
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WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR OF FITNESS
FOR A PARTICULAR PURPOSE WITH RESPECT TO ANY TECHNICAL INFORMATION LICENSED
OR OTHERWISE PROVIDED TO CEPHALON OR ITS AFFILIATES HEREUNDER AND HEREBY
DISCLAIMS THE SAME.
11.2 APOLLO DOES NOT WARRANT THE VALIDITY OF THE TECHNOLOGY LICENSED
HEREUNDER AND MAKES NO REPRESENTATION WHATSOEVER WITH REGARD TO THE SCOPE OF
SUCH TECHNOLOGY OR THAT SUCH TECHNOLOGY MAY BE EXPLOITED BY CEPHALON OR ITS
AFFILIATES WITHOUT INFRINGING ANY PATENTS OF ANY THIRD PARTY.
12. TERMINATION OF THE UNIVERSITY AGREEMENT. Apollo shall not
knowingly take any action or omit to take any action that would constitute
grounds for termination by the University of the University Agreement.
13. ACCOUNTS. Cephalon shall maintain accurate books of account with
respect to its Gross Sales and Net Sales of Products. Apollo or its duly
authorized representative shall be entitled to inspect such books of account
at its own cost and at such times and intervals (but not more than once per
calendar year) as Apollo may reasonably request, solely for the purpose of
verifying the correctness of Cephalon's payments under Section 3. Within one
hundred twenty (120) days after the close of each fiscal year of Cephalon
during the term of this Agreement, Cephalon shall furnish to Apollo a copy of
Cephalon's Annual Report on Form 10-K.
14. TERM AND TERMINATION. Unless earlier terminated pursuant to this
Section 14, this Agreement shall be effective until the last to expire of any
issued claims under any Apollo Patent. Notwithstanding the foregoing, this
Agreement may be terminated as follows:
(a) By Apollo or Cephalon, upon termination of the University
Agreement;
(b) By Cephalon, for any reason, after providing Apollo written
notice to such effect, such termination to occur at least six (6)
months after receipt by Apollo of such notice;
(c) By either party, after providing written notice to the other
party, upon the occurrence of any of the following with respect to
the other party:
(i) breach of any duty or obligation hereunder not cured
within thirty (30) days after receipt of written notice thereof;
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(ii) institution by of bankruptcy, insolvency, liquidation or
receivership proceedings, or proceedings for reorganization
under bankruptcy or comparable laws, the effectiveness of which
is not stayed or dismissed within sixty (60) days after such
institution; and
(iii) the making of a general assignment for the benefit of
creditors.
15. EFFECTS OF TERMINATION. Cephalon shall not have any claim for lost
profits or goodwill relating to the termination of this Agreement in
accordance with its terms. Upon the expiration or termination of this
Agreement, Cephalon's rights hereunder shall expire immediately. The
expiration or termination of this Agreement shall not affect any obligation
accruing prior to such expiration or termination.
16. SURVIVAL. The provisions of Sections 6, 7, 10, 11, 13 (for the
longer of (i) one year from the expiration or termination of the Agreement
and (ii) delivery by Cephalon to Apollo of Cephalon's Annual Report on Form
10-K containing audited financial statements for the latest year in which
there are Net Sales of Products) and 15 shall survive the expiration or
termination of this Agreement.
17. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. The rights, interests and obligations of Cephalon under this
Agreement may slot be transferred assigned or encumbered, in whole or in
part, without Apollo's express prior written consent. The rights and
obligations of Apollo under this Agreement malt be transferred or assigned,
in whole or in part, at Apollo's sole discretion.
18. SPECIFIC PERFORMANCE. Because a breach by either party of any of
its obligations hereunder may irreparably harm the other party, each party
agrees that if it breaches or threatens to breach any of its obligations
hereunder the other party stall, without limitation of its other rights and
remedies, be entitled to seek equitable relief to enforce the breaching
party's obligations hereunder.
19. NOTICES. All notices and other communications hereunder shall be
in writing or by confirmed facsimile transmission, and shall be deemed to
have been given on actual receipt or, if earlier, (a) one (1) day after
delivery to a nationally recognized overnight courier-or (b) four (4) days
after mailing by registered or certified mail, postage prepaid, addressed in
each case, as follows:
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If to Apollo:
Apollo Genetics, Inc.
222 Third Street, Suite 2110
Cambridge, MA 02142
(Fax: 617-492-0084)
Attn.: Katherine Gordon, Ph.D., President
with a copy to:
Roger D. Feldman, Esq.
Bingham, Dana & Gould LLP
150 Federal Street Boston, MA 02110
(Fax: 617-951-8736)
If to Cephalon:
Cephalon, Inc.
145 Brandywine Parkway
West Chester, PA 19380
(Fax: 610-344-0065)
Attn.: Senior Vice President, Business Development
with a copy to:
Cephalon, Inc.
145 Brandywine Parkway
West Chester, PA 19380
(Fax: 610-344-0065)
Attn.: General Counsel
Each of the parties shall be entitled to specify a different address by
giving notice as provided herein.
20. RELATIONSHIP OF PARTIES. Nothing contained herein shall be deemed
to create a joint venture, partnership, agency or similar endeavor between
the parties. Each party shall act solely as an independent contractor and
neither shall have any power or authority to directly or indirectly bind the
other.
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21. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the Commonwealth of Massachusetts.
22. MISCELLANEOUS. This Agreement supersedes any and all prior oral or
written understandings of the parties relating to the subject matter hereof,
and constitutes the entire agreement of the parties relating to the subject
matter hereof. Apollo and Cephalon may amend or modify this Agreement only by
a written document executed by each of them. This Agreement may be executed
in multiple counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same document. No waiver of
any of the provisions of this Agreement shall be deemed a waiver of any other
provision hereof, nor shall any such waiver constitute a continuing waiver
unless otherwise expressly provided. The headings contained herein are for
the convenience of the parties and shall not be deemed a part hereof
[Signature page to follow.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
APOLLO GENETICS, INC. CEPHALON, INC.
By: /s/ Katherine Gordon By: /s/ Joseph J. Day, Jr.
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Title: President & CEO Title: Senior Vice President
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Date: November 11, 1996 Date: November 6, 1996
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EXHIBIT A
PATENT APPLICATIONS
Application/
Country/Region Serial Number Filings Date Title
- -------------- ------------- ------------ -----
[ * ]
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