Exhibit 10.1
Portions of this Exhibit have been omitted pursuant to a Request for
Confidential Treatment
THE SYMBOL "[**]" IS USED TO INDICATE WHERE A PORTION OF THIS EXHIBIT HAS BEEN
OMITTED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTIONS. A COMPLETE COPY OF THIS EXHIBIT, CONTAINING ALL OF THE OMITTED
PORTIONS, HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
TOGETHER WITH THE REQUEST FOR CONFIDENTIAL TREATMENT.
GENEREX BIOTECHNOLOGY CORPORATION
AND
ELI LILLY AND COMPANY
DEVELOPMENT AND LICENSE AGREEMENT
September 5, 2000
DEVELOPMENT AND LICENSE AGREEMENT
This Development and License Agreement ("Agreement") is made and
entered into as of the 5th day of September, 2000 (the "Effective Date") by and
between GENEREX BIOTECHNOLOGY CORPORATION, a Delaware corporation, having its
principal place of business at 33 Harbour Square, Suite 202, Toronto, Canada M5J
2G2 ("Generex") and ELI LILLY AND COMPANY, an Indiana corporation, having its
principal place of business at Lilly Corporate Center, Indianapolis, Indiana
46285 ("Lilly"). Generex and Lilly are sometimes referred to herein individually
as a "Party" and collectively as "Parties," and references to "Generex" and
"Lilly" shall include their respective Affiliates.
Recitals
WHEREAS, Lilly is engaged in discovering, developing and marketing
pharmaceutical products.
WHEREAS, in pursuit of these objectives, Lilly has developed and is
commercializing insulin products for markets throughout the world.
WHEREAS, Generex is engaged in the research and development of
proprietary devices and formulations for buccal drug delivery.
WHEREAS, Lilly desires to pursue development of a Generex Formulation
(as defined below) of insulin together with a suitable Device (as defined below)
for buccal delivery of insulin and at Lilly's option certain other compounds.
WHEREAS, Lilly desires to obtain an exclusive, worldwide license to
commercialize Products (as defined below) based upon such Formulation of insulin
together with a suitable Device developed pursuant to the terms of this
Agreement.
WHEREAS, Generex desires to have Lilly pursue development of such
Formulation together with a suitable Device and to grant an exclusive license
thereto pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and promises contained in this Agreement, the Parties hereto agree as
follows and intending to be legally bound hereby:
-1-
ARTICLE 1
DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "Adverse Event" means any untoward happening in a patient or subject
during or after administration of Compound via Device, without regard
to a causal relationship between Compound, Device and the event.
"Serious Adverse Event" means any Adverse Event with the following
conditions: death, life-threatening, hospitalization, permanent
disability, or congenital anomaly.
1.2 "Affiliate" of a Party hereto means any corporation or business entity
of which such Party, at the time in question, is directly or indirectly
controlling, controlled by, under common control, owned by or owns an
amount of more than fifty percent (50%) of the stock having the right
to vote for directors thereof or demonstrates controlling management
presence (i.e., possesses the power to direct or cause the direction of
the management and policies of such entity) at fifty percent (50%) or
less of the aforementioned stock.
1.3 "Calendar Quarter" means the three-month period ending on March 31,
June 30, September 30, or December 31.
1.4 "Calendar Year" means the twelve-month period ending on December 31.
1.5 "cGCP" means the then current Good Clinical Practice Standards
promulgated or endorsed by the FDA (or in the case of foreign
jurisdictions, comparable regulatory standards), including those
regulations or guidelines expressed or implied in the regulatory
filings made with respect to the Product with the FDA or foreign
regulatory agents.
1.6 "cGLP" means the then current Good Laboratory Practices promulgated or
endorsed by the FDA (or in the case of foreign jurisdictions,
comparable regulatory standards), including those procedures expressed
or implied in the regulatory filings made with respect to the Product
with the FDA or foreign regulatory agents.
1.7 "cGMP" means current Good Manufacturing Practices as defined in the
U.S. regulations 21 CFRss.210 et seq., and the EEC Guide to Good
Manufacturing Practices for Medicinal Products (Vol. IV Rules Governing
Medicinal Products in the European Community 1992).
1.8 "Change of Control" means, with respect to either Party, any of the
following events: (i) the acquisition by any Person or Group, other
than a Person or Group controlling such Party as of the Effective Date,
of "beneficial ownership" (as defined in Rule 13d-3 under the United
States Securities Exchange Act of 1934, as amended), directly or
indirectly, of fifty percent (50%) or more of the shares of such
-2-
Party's capital stock the holders of which have general voting power
under ordinary circumstances to elect at least a majority of such
Party's Board of Directors or equivalent body (the "Board of
Directors") (the "Voting Stock"); (ii) the first day of which less than
two-thirds of the total membership of such Party's Board of Directors
shall be Continuing Directors (as such term is defined below); (iii)
the approval by the shareholders of such Party of a merger, share
exchange, reorganization, consolidation or similar transaction of such
Party (a "Transaction"), other than a Transaction which would result in
the Voting Stock of such Party outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than
fifty percent (50%) of the Voting Stock of such Party or such surviving
entity immediately after such Transaction; or (iv) approval by the
shareholders of such Party of a complete liquidation of such Party or a
sale or disposition of all or substantially all of the assets of such
Party. For purposes of this definition, "Continuing Directors" means
individuals serving as of the date hereof on such Party's Board of
Directors and any individuals elected after the date hereof whose
election or nomination was approved by at least a majority of the
Continuing Directors serving at the time.
1.9 "Compound" means insulin, its analogs, fragments, mimetics, peptides
and related proteins acting in a similar manner to insulin including,
without limitation, insulin, [**] .
1.10 "Compound Product" means a category of Product developed in the Field
that all contain the named Compound. For example, one category of
Compound Product will be "Insulin Product" where the term Insulin
Product shall include all Products that contain insulin. Other
categories of Compound Product could be [**] .
1.11 "Compulsory License" means a compulsory license under the Generex
Patents or Generex Know-How obtained by a Third Person through the
order, decree, or grant of a competent governmental authority,
authorizing such Third Person to manufacture, use, sell, offer for sale
or import a Product in a particular Territory.
1.12 "Confidential Information" means each Party's confidential information,
inventions, know-how (including Program Know-How) and data, and shall
include, without limitation, information relating to research and
development plans, experiments, results and plans, the existence of
compounds, therapeutic leads, candidates and products, clinical and
preclinical data, trade secrets and manufacturing, marketing,
financial, regulatory, personnel and other business information and
plans, whether in oral, written, graphic or electronic form and whether
in existence as of the Effective Date or developed or acquired later,
except where such information (i) is public knowledge at the time of
disclosure by the disclosing Party, (ii) becomes public knowledge
through no fault of the receiving Party, (iii) was in the possession of
the receiving Party at the time of disclosure by the disclosing Party
as evidenced by proper business records, or (iv) is disclosed to the
-3-
disclosing Party by a Third Person, to the extent such Third Person's
disclosure was not made on a confidential basis or in violation of any
obligation of confidentiality.
1.13 "Control" (including variations thereof such as "Controls,"
"Controlling" and "Controlled") means the ability to grant a license or
sublicense as provided for herein without violating the terms of any
agreement or other arrangement with any Third Person.
1.14 "Cover" (including variations thereof such as "Covering", "Covered",
and "Coverage") means that the manufacture, use, import, offer for sale
or sale of a Product would infringe a Valid Claim; provided, with
respect to a process or manufacturing patent, that such a Valid Claim
therein effectively precludes a Third Person from manufacturing, using,
importing, offering for sale, or selling the Product. The determination
of whether a Product is Covered by a particular Valid Claim shall be
made on a country-by-country basis. A Valid Claim shall be deemed to
provide effective preclusion hereunder where (i) there is no competing
buccal spray product being marketed, or (ii) if a buccal spray product
is being marketed by a competitor, it infringes a Valid Claim
(including any period in which, and provided that, the Valid Claim is
being litigated).
1.15 "Device" means any device for the buccal delivery of drugs designed
and/or manufactured by or for Generex or Lilly. "Standard Device" means
the preliminary device Generex is currently developing for use for
buccal delivery of drugs, which is substantially similar to that
represented by the prototype in existence as of the Effective Date, as
well as any improvements and/or changes (material or otherwise) to the
Device which occur as a result of development efforts hereunder after
the Effective Date. Specifications for the Standard Device represented
by the prototype in existence as of the Effective Date will be provided
by Generex as Exhibit F and which shall include updates and amendments
by the Parties thereto. Unless otherwise noted, the use of the term
"Device" in this Agreement is not intended to indicate the definition
of "device" in the Federal Food, Drug and Cosmetic Act, as amended or
to definitions by other regulatory authorities in the Territory.
1.16 "EMEA" means European Medicine Evaluation Agency or any successor
agency having the administrative authority to regulate the approval for
marketing of new human pharmaceutical or biological therapeutic
products in the European Union.
1.17 "FDA" means the United States Food and Drug Administration or any
successor agency having the administrative authority to regulate the
approval for marketing of new human pharmaceutical or biological
therapeutic products in the United States.
1.18 "Field" means the buccal delivery of Product.
-4-
1.19 "Generex Formulation" or "Formulation" means the formulation owned and
Controlled by Generex that Generex has been researching including
research carried out in Phase I and Phase II Clinical Trials prior to
the Effective Date. A description of the Formulation including the
quantity and identity of all ingredients and a general description of
how to make such Formulation have been provided by Generex to Lilly by
letter dated the Effective Date.
1.20 "Generex's Fully Burdened Manufacturing Costs" means the sum of the
following costs incurred by Generex to the extent allocable to Products
and components thereof sold to Lilly: Generex's cost of direct
materials, direct labor and manufacturing overhead. For avoidance of
any doubt, notwithstanding anything to the contrary in this Agreement,
Generex's Fully Burdened Manufacturing Cost shall specifically exclude:
(i) capacity costs not allocable to Products; (ii) any cost associated
with reimbursing Lilly with respect to Wasted Compound; (iii) any
royalties and/or indemnification that Generex is obligated to pay under
this Agreement (e.g., Sections 6.3(c), 6.3(d), 11.2 and 13.3); (iv) any
costs incurred by Generex in connection with improvements and changes
to the Standard Device as described in Section 3.1(a) of this
Agreement; (v) any item that Generex is financially responsible for
under this Agreement (except direct depreciation associated with
manufacturing as allowed for in Section 7.1(f)(2)); or (vi) any item
that Generex has already been compensated for by Lilly under this
Agreement. Generex's Fully Burdened Manufacturing Cost shall be
calculated in a manner consistent with Generally Accepted Accounting
Principles ("GAAP") consistently applied. Furthermore, the methodology
to be used in making the allocations referred to above shall be
disclosed by Generex to Lilly and shall be consistent with Generex's
methodology for other products and shall be consistent from
year-to-year.
1.21 "Generex Know-How" means all Know-How that is (a) owned and Controlled
by Generex or any of its Affiliates before the Effective Date of this
Agreement, and (b) useful or necessary in the Field. Generex Know-How
does not include Generex Patent Rights.
1.22 "Generex Patent Rights" means (a) all patent applications including any
provisionals, substitutes, renewals, registrations, confirmations,
re-examinations, extensions, reissues, divisionals, continuations,
continued prosecutions, continuation-in-part and any foreign
counterparts thereof; and (b) any patents that issue from such patent
applications that contain or result in a Valid Claim that Covers a
method, apparatus, composition, formulation, including the Generex
Formulation, or process necessary or useful in the Field, which patent
or patent application is owned or Controlled by Generex or any of its
Affiliates, as of the Effective Date. A list of Generex Patent Rights
will be provided by Generex to Lilly and attached to this Agreement as
Exhibit E and shall include updates and modifications provided
quarterly by Generex. Generex Patent Rights do not include Generex
Know-How.
-5-
1.23 "Generex Rights" means Generex Patent Rights and Generex Know-How.
1.24 "Group" means two (2) or more Persons acting in concert to acquire and
jointly exercise control of a Party.
1.25 "IND" means an Investigational New Drug application filed with FDA or
any equivalents of such items in countries within the Territory.
1.26 "Initiation of Phase III Clinical Trials" means the first
administration of a Compound Product in a patient pursuant to Phase III
Clinical Trials conducted by Lilly.
1.27 "Intellectual Property Rights" means all patents, copyrights,
trademarks, trade secrets and know-how necessary to make, use, sell,
offer for sale, and import Products and/or components thereof.
1.28 "Know-How" means any and all information, data, items, material and
knowledge in the Field including, without limitation, any and all
suggestions, descriptions, ideas, inventions that are not patented,
know-how, trade secrets, techniques, strategies, methods, syntheses,
processes, practices, skills, experience, documents, apparatus,
devices, chemical formulations, compounds, composition of matter,
chemical samples, assays, screens, databases, databases structures and
data analysis methods in the Field.
1.29 "Lilly Know-How" means all Know-How that is (a) owned and Controlled by
Lilly or any of its Affiliates before the Effective Date of this
Agreement, and (b) useful or necessary in the Field. Lilly Know-How
does not include Lilly Patent Rights.
1.30 "Lilly Patent Rights" means (a) all patent applications including any
provisionals, substitutes, renewals, registrations, confirmations,
re-examinations, extensions, reissues, divisionals, continuations,
continued prosecutions, continuation-in-part and any foreign
counterparts thereof; and (b) any patents that issue from such patent
applications that contain or result in a Valid Claim that Covers a
method, apparatus, composition, formulation, or process necessary or
useful in the Field, which patent or patent application is owned or
Controlled by Lilly or any of its Affiliates, as of the Effective Date.
1.31 "Lilly Rights" means Lilly Patent Rights and Lilly Know-How.
1.32 "Major Market" means the United States, Japan, and Major European
Countries. For purposes of this Agreement, "Major European Countries"
shall mean Germany, France or the United Kingdom.
-6-
1.33 "Manufacturing Agreement" means a manufacturing and supply agreement to
be negotiated by the Parties if Generex is selected to supply the
initial Product to Lilly as set forth in Article 7 of this Agreement.
1.34 "Manufacturing Responsibilities Document" or "MRD" means a document
that may contain certain specifications, procedures, logistics and
personal contacts relating to the manufacture for sale and supply of
the Product by Generex to Lilly that will be compiled and agreed upon
between the Parties. The MRD contains Product information such as
information related to Product quality and regulatory compliance. The
MRD shall include, as part of the MRD or as a separate document, a
Quality Responsibilities Document which defines quality activities and
responsibilities of each Party. The MRD also describes how Generex and
Lilly will work together in coordinating the forecasting,
manufacturing, packaging, ordering, storing and transporting of the
Product. The MRD may be modified from time to time through the issuance
of a revision signed on behalf of each of the Parties by authorized
representatives incorporating the modification and stating the
effective date of the revision. A non-exhaustive table of contents of
the MRD is attached hereto as Exhibit B of this Agreement.
1.35 "MHW" means the Japanese Ministry of Health and Welfare, or any
successor agency having the administrative authority to regulate the
approval for marketing of new human pharmaceutical or biological
therapeutic products in Japan.
1.36 "Net Sales" means, with respect to a Product, the gross amount invoiced
by Lilly (including an Affiliate and/or sublicensee of Lilly) to Third
Persons, for the Product in the Territory, less:
(a) Trade, quantity and cash discounts allowed;
(b) Commissions, discounts, refunds, rebates, chargebacks,
retroactive price adjustments, and any other customary
allowances paid to Third Persons which effectively reduce the
net selling price;
(c) Actual Product returns and allowances;
(d) That portion of the sales value associated with
non-pharmaceutical drug delivery devices other than Generex's
Standard Device;
(e) That portion of the invoice amount that represents any tax
imposed on the production, sale, delivery or use of the
Product, including, without limitation, sales, use, excise or
value added taxes;
(f) Allowance for actual distribution expenses not to exceed [**];
and
(g) Any other similar and customary deduction from Net Sales
provided that such deduction is in accordance with U.S. GAAP,
or mutually agreed to, in writing, by the Parties.
Such amounts shall be determined from the books and records of
Lilly maintained in accordance with GAAP consistently applied. Lilly
further agrees that in determining such amounts, it will use Lilly's
-7-
then current standard procedures and methodology, including Lilly's
then current standard exchange rate methodology for the translation of
foreign currency sales into United States Dollars ("U.S. Dollars").
In the event that the Product is sold in combination with any
other active compound(s) and/or ingredients ("Combination Product"),
the Net Sales of the Product, for the purposes of determining royalty
payments, shall be determined by multiplying the Net Sales (as defined
above) of the Combination Product by the fraction A / (A+B), where A is
the weighted average sale price of the Product when sold separately in
finished form, and B is the weighted average sale price of the other
product(s) sold separately in finished form.
In the event that the weighted average sale price of the
Product can be determined but the weighted average sale price of the
other product(s) cannot be determined, Net Sales for purposes of
determining royalty payments shall be calculated by multiplying the Net
Sales of the Combination Product by the fraction A / C, where A is the
weighted average sale price of the Product when sold separately in
finished form and C is the weighted average selling price of the
Combination Product.
In the event that the weighted average sale price of the other
product(s) can be determined but the weighted average sale price of the
Product cannot be determined, Net Sales for purposes of determining
royalty payments shall be calculated by multiplying the Net Sales of
the Combination Product by the following formula: one (1) minus (B /
C), where B is the weighted average sale price of the other product(s)
when sold separately in finished form and C is the weighted average
selling price of the Combination Product.
In the event that the weighted average sale price of both the
Product and the other product(s) in the Combination Product cannot be
determined, the Net Sales of the Product shall be deemed to be equal to
fifty percent (50%) of the Net Sales of the Combination Product.
The weighted average sale price for a Product, other
product(s), or Combination Product shall be calculated at the end of
each Calendar Year and such price shall be used during all applicable
royalty reporting periods for the entire following Calendar Year. When
determining the weighted average sale price of a Product, other
product(s), or Combination Product, the weighted average sale price
shall be calculated by dividing the sales dollars (translated into U.S.
Dollars) by the units of active ingredient sold during the twelve (12)
months (or the number of months sold in a partial Calendar Year) of the
preceding Calendar Year for the respective Product, other product(s),
or Combination Product. In the initial Calendar Year, a forecasted
weighted average sale price will be used for the Product, other
product(s), or Combination Product. Any over or under payment due to a
difference between forecasted and actual weighted average sale prices
-8-
will be paid or credited in the first royalty payment of the following
Calendar Year.
In general, the Parties agree to negotiate in good faith for an
equitable determination of Net Sales of Product, on a
country-by-country basis, in the event that Lilly sells Product in such
a manner that gross sales of Product are not readily identifiable
(e.g., where several products are sold together for one price, i.e.,
bundling).
1.37 "New Drug Application" or "NDA" means (a) the single application or set
of applications for Products and/or pre-market approval to make and
sell commercially both a formulation of Compound and a compatible
commercial Device to be marketed as Product, filed by Lilly with the
appropriate regulatory authority within the Territory, and (b) any
related registrations with or notifications to the appropriate
regulatory authority within the Territory. This term does not include
any of Lilly's Regulatory Approvals in the Territory for any insulin
products other than the Products contemplated in this Agreement.
1.38 "Option Compound" means [**] , for which Lilly has an option under this
Agreement to develop and commercialize a product containing such
compound together with any and all Devices and/or components thereof
for buccal delivery.
1.39 "Person" means a natural person, a corporation, a partnership, a trust,
a joint venture, a limited liability company, any governmental
authority or any other entity or organization.
1.40 "Phase I Clinical Trials" means small scale human clinical trials
conducted in normal volunteers and designed to evaluate the safety of
the Product.
1.41 "Phase II Clinical Trials" means small scale human clinical trials
conducted in patients and designed to indicate a statistically
significant level of efficacy for Product in the treatment of the
disease state being studied, as well as to obtain some indication of
the dosage regimen required.
1.42 "Phase III Clinical Trials" means large scale human clinical trials
conducted in patients and designed to establish Product efficacy in the
treatment of the disease state being studied and required to obtain
clinical registration of Product with health regulatory authorities
such as the FDA.
1.43 "Product(s)" means any and all formulations of Compound together with
any and all Devices and/or components thereof under development
pursuant to this Agreement or in final form for sale in the Field.
1.44 "Product Development Plan" means a plan as set forth in Section 2.5 of
this Agreement that fully addresses the key elements necessary for the
successful development of Product(s) under this Agreement.
-9-
1.45 "Product Development Program" means the development of the Product and
implementation of the Product Development Plan (as amended from time to
time by the Steering Committee), as set forth in Sections 2.1 and 3.1
of this Agreement.
1.46 "Program Know-How" means all Know-How that is discovered or developed
by either Party on or after the Effective Date pursuant to research
carried out under the Product Development Program and which is
reasonably useful or necessary in the Field. Program Know-How does not
include Program Patent Rights or Regulatory Material.
1.47 "Product Launch" means the first commercial sale of a particular
Product for use by the general public by Lilly or its sublicensees in
any particular country following final Regulatory Approval required for
marketing of the Product in such country.
1.48 "Program Patent Rights" means (a) all patent applications including any
provisionals, substitutes, renewals, registrations, confirmations,
re-examinations, extensions, reissues, divisionals, continuations,
continued prosecutions, continuation-in-part and any foreign
counterparts thereof; and (b) any patents that issue from such patent
applications that contain or result in a Valid Claim that Covers a
method, apparatus, composition, formulations excluding the Generex
Formulation or process necessary or useful in the Field which invention
is conceived or actually first reduced to practice after the Effective
Date pursuant to the joint research carried out by the Parties under
the Product Development Program.
1.49 "Program Rights" means Program Patent Rights and Program Know-How.
1.50 "Quality System Regulations (QSRs)" means current Quality System
Regulations as defined in the U.S. Code of Federal Regulations, 21 CFR
Part 820 and, in the case of foreign jurisdictions, comparable
regulatory standards.
1.51 "Regulatory Approval" means (a) in the United States, approval by the
FDA of an NDA, 510K, PMA or similar application for marketing approval,
and satisfaction of any related applicable FDA registration and
notification requirements (if any), and (b) in any country other than
the United States, approval by regulatory authorities having
jurisdiction over such country of a single application or set of
applications comparable to an NDA and satisfaction of any related
applicable regulatory and notification requirements, if any, together
with any other approval necessary to make and sell pharmaceuticals and
medical devices commercially in such country.
1.52 "Regulatory Material" means regulatory submissions and approvals
including, without limitation, clinical trial data, Toxicology and
-10-
Bioavailability Studies, IND, NDA, clinical trial exemption,
governmental pricing approvals, and any other foreign equivalents to
the extent such material is generated under this Agreement and is
solely related to the Field.
1.53 "Royalty Period" means the period commencing on Product Launch of a
particular Product in the particular country at issue until the later
of either: (i) the expiration date of the last-to-expire patent of any
relevant Generex Patent Rights or Program Patent Rights (a) existing in
such country at issue which Covers the use, sale, offer for sale or
importation of the Product at issue, or (b) existing in the country in
which the Product is manufactured which Covers such manufacture for
use, sale, or importation in the country at issue in such a manner that
the use, sale, offer for sale, or importation of such Product by Lilly
in the country at issue or the manufacture of the Product in the
country of manufacture would constitute infringement of such Generex
Patent Rights and Program Patent Rights but for the license granted to
Lilly under Section 5.1 and Section 5.2, hereof or (ii) [**] from
Product Launch. In addition to the foregoing, if the Royalty Period
expires in a particular country as to a particular Product and a
Generex Patent or Program Patent subsequently issues with the effect
that either Covers (x) the use, sale, offer for sale, or importation of
the Product in the country at issue or Covers (y) the manufacture of
such Product would constitute infringement of such subsequently issued
patent but for the license granted to Lilly under Sections 5.1 and 5.2
hereof, then the Royalty Period as to that particular Product in that
particular country shall include an additional period commencing on the
date such subsequent patent issues and ending at such time as such
subsequent patent (i) no longer Covers the Product at issue or (ii)
expires or is abandoned, whichever occurs first.
1.54 "Steering Committee" means a joint committee responsible for strategic
management of the Product Development Program, as set forth in Section
2.2 of this Agreement.
1.55 "Territory" means the world.
1.56 "Third Person" means any Person other than Lilly, Generex, or an
Affiliate or sublicensee of either of them.
1.57 "Toxicology and Bioavailability Studies" means all non-human toxicology
and absorption, distribution, metabolism and elimination (ADME) studies
which are needed to conduct Phase I, Phase II or Phase III Clinical
Trials and obtain Regulatory Approval for Product.
1.58 "Valid Claim" means any claim issued in an unexpired patent which has
not been held unenforceable, unpatentable or invalid by a decision of a
court or other governmental agency of competent jurisdiction following
exhaustion of all possible appeal processes, and which has not been
admitted to be invalid or unenforceable through reissue, reexamination
or disclaimer.
-11-
1.59 "Wasted Compound" means, to the extent that Generex performs any
research and development activities or manufactures Product under this
Agreement, unreasonable wastage, loss or other damage to Compound that
exceeds a certain wastage limit to be negotiated under the
Manufacturing Agreement or that is due to Generex's negligence,
misconduct or noncompliance with the Product Development Plan or
Manufacturing Agreement that renders the Compound unusable, as set
forth in Sections 3.5 and 7.1(f)(5) of this Agreement.
ARTICLE 2
PRODUCT DEVELOPMENT PROGRAM
SCOPE, GOVERNANCE AND ADMINISTRATIVE MATTERS
2.1 Purpose and Scope of Development. In accordance with, and subject to,
the terms described herein, the Parties agree to collaborate in the
research and development of Product(s) using the Generex Formulation
and Device for the ultimate purpose of commercialization by Lilly of
such Product(s). As more fully described in Article 3, Generex will
have principal responsibility for any modification to the Generex
Formulation until such time as the Generex Formulation is determined by
Lilly to be substantially suitable for development and
commercialization, any non-clinical research and development of the
Formulation (including its use in the Device), and any Device research
and development. Lilly will have principal responsibility for clinical
development and sole responsibility for commercialization of
Product(s).
Each Party agrees to pursue their respective development
obligations under the Product Development Program at least as
diligently as the Party develops its other products of similar
probabilities of technical success, commercial potential and at similar
stages of development, provided that failure by Lilly or Generex to
meet its diligence obligation due to reasons beyond Lilly's or
Generex's control, respectively, including lack of technical success of
the Product(s), will not constitute lack of diligence for purposes of
this Agreement.
2.2 Steering Committee. The Steering Committee shall be responsible for
overall direction and management of the Product Development Program.
The operation and authority of the Steering Committee shall be as
follows:
(a) Responsibilities. The Steering Committee shall have general
authority over the strategic direction and overall management
of the Product Development Program. The Steering Committee
shall periodically review such Plan from a strategic
perspective and make changes as it deems necessary to
accomplish the purpose of the Product Development Program. The
Steering Committee shall also consider any amendments to the
Product Development Plan proposed by the Working Team
described in Section 2.3, below. Additionally the Steering
-12-
Committee will have responsibility for articulation of the
strategy consistent with the agreement between the Parties,
for assuring clarity of roles and responsibilities in
implementation of the Product Development Program, for
assuring resources are allocated appropriately, and that
appropriate performance measures are in place. The Steering
Committee will also be responsible for ensuring that both
Parties are kept apprised of progress and any issues that may
lead to deviation from the Product Development Plan.
(b) Review of Activities. The Steering Committee shall
periodically review the results of the Product Development
Program to ensure, to the extent reasonably practical, that
the Parties are providing their commitments of both human and
financial support for the research and development of a
Product and the fulfillment of all contractual obligations
between the Parties. The Steering Committee shall resolve any
disputes referred to it by the Working Team in accordance with
paragraph (e) below.
(c) Representation. Generex and Lilly shall each appoint three (3)
representatives as their representatives to serve on the
Steering Committee. One member from each Party will be
designated as the Program Leader for their respective Party.
Such Program Leader shall serve as a contact person for their
respective Party. The initial members of the Steering
Committee are listed in Schedule 2.2. Either Party may change
its representation on the Steering Committee at any time upon
written notification to the other Party.
(d) Meetings. The Steering Committee shall meet from time to time
as determined by the Steering Committee members. It is
expected that the Steering Committee shall meet in person at
least four (4) times per Calendar Year. The location of
Steering Committee meetings shall alternate between Generex's
and Lilly's offices unless otherwise agreed by the Parties.
Each Party will bear all expenses associated with attendance
of its employees and consultants at such meetings. If the
Steering Committee members all agree, a meeting may be held by
telephone. Consultants and non-member employees of the Parties
may attend meetings of the Steering Committee as required to
further the Product Development Program.
(e) Minutes. Minutes of all such meetings setting forth decisions
of the Steering Committee relative to the Product Development
Program will be prepared by the Party hosting the meeting.
Minutes shall be deemed approved unless any member of the
Steering Committee objects to the accuracy of such minutes
within five (5) business days of receipt.
(f) Decisions. Decisions of the Steering Committee shall be made
by majority vote. If the Steering Committee is unable resolve
a dispute, then the issue shall be referred to the CEO of
Generex and the President of the Diabetes and Growth Disorders
-13-
Group of Lilly (or successor position) for further discussion
and resolution. These individuals shall, as soon as
practicable, attempt in good faith to resolve the dispute and,
thereby, make the decision on behalf of the Steering
Committee. These individuals may obtain the advice of other
employees as they deem necessary or advisable in order to make
the decision. If such issue is not resolved within thirty (30)
days after it has been referred to such persons for
resolution, the President of the Diabetes and Growth Disorders
Group (or successor position) at Lilly shall make the final
decision regarding such issue.
2.3 Working Team. The day-to-day management of the Product Development
Program for a particular Product shall be the responsibility of the
Working Team for that Product. The Working Team shall be subordinate to
the Steering Committee, which shall have the right upon timely appeal
as provided below to review, accept, reject or modify all actions of
the Working Team. A Working Team may have responsibility for the
development of more than one Product, if practical. The Steering
Committee will ensure that the Working Team has clarity as to its
responsibilities under the Product Development Program in accordance
with the expectations of the Steering Committee. The operation and
responsibility of the Working Team shall be as follows:
(a) Responsibilities of Working Team. The Working Team shall be
responsible for planning, managing, directing and overseeing
specific activities under this Agreement, including but not
limited to, non-clinical research and development of the
Generex Formulation for use in the Device, stability testing,
toxicology studies, bioavailability studies, activities
relating to manufacture of both clinical supplies and Product,
conduct of clinical trials and preparation of regulatory
submissions.
In order to accomplish these objectives, the Working
Team shall implement a Product Development Plan. Pursuant to
the Product Development Plan, the Working Team shall (1)
allocate tasks and coordinate activities required to carry out
the objectives of the Product Development Program, (2) monitor
progress of the Product Development Program, and (3) discharge
such other obligations as are assigned to the Working Team
under this Agreement or by the Steering Committee.
(b) Representation. Within thirty (30) days of the Effective Date,
the Steering Committee shall appoint a Working Team consisting
of Lilly representatives as needed from various functional
areas such as medical, ADME, Toxicology, CM&C and the like and
Generex representatives to consult on the research and
development activities carried out by the Working Team. Either
Party may change its representatives on the Working Team at
any time by written notification to the other Party.
-14-
(c) Meetings. The Working Team shall meet as frequently as
necessary to accomplish the objectives of the Product
Development Plan. The location of such meetings will alternate
between the offices of Generex and Lilly, unless the Parties
agree otherwise. Each Party will bear all expenses associated
with attendance of its employees and consultants at such
meetings.
(d) Decisions. Decisions of the Working Team shall be made by
unanimous consensus when possible, and otherwise by majority
vote, subject to the right of either Party to appeal any
decision of the Working Team to the Steering Committee. No
vote of the Working Team may be taken unless a majority of the
members of the Working Team are present, including at least
one (1) representative of each Party.
(e) Minutes. The Working Team shall keep minutes of any meeting at
which a decision is to be reached and shall circulate such
minutes to all members of the Working Team and the Steering
Committee. Responsibility for the preparation of the minutes
shall rest with the hosting Party. Minutes shall be deemed
approved unless any member of the Working Team or the Steering
Committee objects to the accuracy of such minutes within five
(5) business days of receipt.
(f) Disputes. Any Party desiring to appeal a decision of the
Working Team to the Steering Committee shall make its appeal
in writing to all Steering Committee members within five (5)
business days of receipt of the minutes for the meeting at
which the decision was made. Action pursuant to any decision
appealed to the Steering Committee shall be suspended pending
a determination by the Steering Committee to accept, reject or
modify the decision of the Working Team. Any Party may at any
time request reconsideration of any issue if such Party in
good faith believes that substantial changes in circumstances
have occurred that necessitates such reconsideration.
2.4 Sub-Teams. The Steering Committee and Working Team (with the approval
of the Steering Committee), may appoint one (1) or more Sub-Teams to
perform such functions as the Steering Committee or Working Team,
respectively, may determine necessary or useful. Unless a Party elects
not to participate on a particular Sub-Team, all such Sub-Teams shall
have at least one (1) representative of each Party. Such Sub-Teams may
provide advice and make written recommendations to the Steering
Committee or Working Team, but shall have no authority to bind the
Steering Committee, Working Team or either of the Parties.
2.5 Product Development Plan. As provided in Section 2.3, the Working Team
is responsible for the preparation, modification (if appropriate) and
implementation of a detailed development plan (the "Product Development
Plan") that fully addresses, consistent with the terms of this
Agreement and consistent with the roles of the Parties under the
-15-
Product Development Program as described in Section 3.1, the key
elements reasonably necessary for the research, development,
formulation, manufacture and clinical testing of Product through
Regulatory Approval. The Product Development Plan for the initial
Product shall include at a minimum a formulation that will meet the
needs of the Parties from a scientific and business perspective
including, but not limited to, the following critieria: the formulation
(a) is stable, (b) can deliver the required amount of insulin (i.e. an
average patient dose) in [**] , and (c) has been subject to appropriate
validation studies. The Product Development Plan shall establish
comprehensive and detailed plans designed to accomplish the goals of
the Product Development Program and fully address (1) the development
efforts necessary to be employed by Generex and Lilly, respectively, to
complete the development of Product(s) in the Field, (2) the
appropriate strategy for development of Product, and (3) the
responsibilities and procedures for handling any and all regulatory
issues related to Product, Generex Formulation including the Device
including any and all regulatory issues related to Compound resulting
from the use of such Compound in the Product and Device. The Parties
shall mutually agree upon an initial Product Development Plan within
thirty (30) days after the Effective Date of this Agreement or later if
mutually agreed upon by the Parties and such Product Development Plan
shall be attached to this Agreement as Exhibit D and including any
subsequent updates and modifications. Any Product Development Plan
developed following signing of this Agreement must be approved by the
Steering Committee. Modifications to the Product Development Plan may
be made by written agreement of the Working Team and shall be presented
to the Steering Committee for consideration. Such modifications shall
not be implemented unless approved by the Steering Committee.
2.6 Disagreements. Disputes not resolved by the Working Team shall be
referred to the Steering Committee. Disputes not resolved by the
Steering Committee shall be resolved in accordance with Section 2.2(e).
2.7 Governance Following Product Launch. As soon as practical following
launch of a Product in a Major Market, the Parties shall meet to review
whether it is appropriate to continue the Product Development Program
for that Product under the day-to-day management of the Working Team
for that Product, or whether the objectives of the Working Team have
been substantially achieved and it is appropriate to disband or
reorganize the Working Team. Regardless of whether the Parties elect to
disband or reorganize the Working Team, the Steering Committee shall
continue to provide overall direction to the Product Development
Program for that Product.
2.8 Quarterly Status Report. During the Product Development Program, each
Party shall provide the Steering Committee with a quarterly status
report within fifteen (15) days after the end of each Calendar Quarter
that generally summarizes research and development efforts conducted by
such Party under the Product Development Program or with regard to any
research on the Product during such Calendar Quarter. Such report shall
-16-
include, without limitation, a general summary of important events
and/or milestones achieved, personnel changes, learning points and
other matters that the Steering Committee may deem appropriate.
2.9 Subcontracting Permitted. The Parties acknowledge and agree that
portions of the work involved in the Product Development Program may be
performed on behalf of the Party responsible for work thereunder by
Third Persons provided that (a) the Working Team shall have previously
obtained approval to use such Third Person from the Steering Committee,
(b) the subcontracting Party shall first have obtained a written
confidentiality agreement with the subcontractor and written obligation
to assign all rights including any patent rights and Know-How that such
subcontractor may develop by reason of work performed under this
Agreement, and (c) the work which the subcontracting Party desires to
subcontract is required to be performed according to appropriate
quality standards (i.e., cGLPs, cGMPs or QSRs).
2.10 Miscellaneous.
(a) Meetings of the Working Team and any other team can be
conducted by telephone, if each Party so agrees.
(b) Each Party shall have reasonable access on an informal basis
to employees and agents of the other Party assigned to work on
the Product Development Program.
(c) The Steering Committee, at its discretion, may review the
qualifications of the employees and agents assigned to the
Product Development Program to determine whether such
personnel are reasonably qualified to perform the work
assigned to them.
2.11 Remaining Compound. Upon Lilly's written request, Generex will return
or immediately destroy (as designated by Lilly) any Compound remaining
upon completion of the Product Development Program.
ARTICLE 3
PRODUCT DEVELOPMENT PROGRAM
3.1 Commencement and Roles. Upon commencement of the Product Development
Program, the Parties shall have certain roles and responsibilities as
detailed in this Agreement. Although each of the Parties has been given
principal responsibility for certain activities, all significant
decisions with respect to such activities (other than those relating to
regulatory strategy and commercialization of Product which shall be the
sole responsibility of Lilly) shall be made under the purview of the
Working Team and Steering Committee. The Parties shall provide the
-17-
Steering Committee and the Working Team with quarterly status reports
summarizing their efforts under this Agreement, as described in Section
2.8.
(a) Generex's Role. As of the Effective Date and subject to the
terms herein, and in accordance with Lilly's role as described
in Section 3.1(b), Lilly shall commence and carry out all
aspects of research and development necessary to establish
that the Generex Formulation is substantially suitable to
develop and commercialize. In the event that Lilly decides (1)
that the Generex Formulation is not suitable to develop and
commericalize without making changes or improvements that are
necessary to obtain Regulatory Approval or to successfully
commercialize, and (2) that such changes or improvements are
due to reasons other than the characteristics of the Compound
(i.e., the changes or improvements relate to the Generex
Formulation including the Device used to administer the
Formulation), then Generex shall be solely responsible for
making such changes or improvements including all costs and
expenses and further compensation related thereto (excluding
reasonable quantities of insulin with reasonable notice) and,
therefore, shall not be entitled to any compensation or
reimbursement from Lilly for implementing such changes and
improvements under this Agreement until such time as the
changed or improved Generex Formulation is suitable to develop
and commercialize under this Agreement.
-18-
In addition and in accordance with the initial
Product Development Plan and Lilly's approval, Generex shall
assume full responsibility for the clinical protocols to be
developed pursuant to and in support of such applications for
the initial Product in Canada, including all aspects of
clinical development necessary to obtain Regulatory Approval
of the Generex Formulation in Canada and including any costs
associated with preclinical, pharmacology, ADME and
toxicology, CM&C and the clinical package in Canada (except
the cost of insulin provided to Generex pursuant to this
Agreement), with the understanding that such clinical
development shall be integrated with Lilly clinical
development in the rest of the world. Such development by
Generex in Canada shall be subject to approval and oversight
of the Steering Committee as well as Lilly's approval.
In addition, Generex shall be responsible for
obtaining the Device and components of the Device including,
but not limited to, entering into and abiding by any
agreements related thereto, any regulatory approvals necessary
specific to the Device, with the exception that any Regulatory
Approval necessary with respect to the Device or components
thereof shall be integrated into the Product Development Plan
and subject to the approval and oversight of the Steering
Committee.
(b) Lilly's Role. As of the Effective Date and subject to the
terms herein, Lilly shall be responsible for all aspects of
research and development necessary to establish that the
Generex Formulation is substantially suitable to develop and
commercialize and all aspects of Toxicological and
Bioavailability studies and clinical development for Product
in accordance with the Product Development Plan.
Further, Lilly shall be solely responsible for
developing and filing all Regulatory Material for obtaining
Regulatory Approval in the Territory with the exception that
Generex shall file Regulatory Material for obtaining
Regulatory Approval for the initial Product in Canada. For
avoidance of any doubt, Lilly shall have full responsibility
and ownership for any application or notice to the FDA for a
product that is directed at the Product. Lilly shall have
responsibility for conducting clinical trials, obtaining and
maintaining (including, without limitation, satisfying
regulatory reporting obligations) all necessary Regulatory
Approvals required to conduct the activities contemplated by
this Agreement and to commercialize Product. Lilly, or its
subcontractors, shall hold legal title to any and all
Regulatory Approvals, including any IND and NDA filed with
FDA, as well as any equivalents of such items in countries
within the Territory except in the instance of the initial
Product in Canada. Lilly shall assume full responsibility for
the clinical protocols to be developed pursuant to and in
support of such applications in the Territory except in the
instance of the initial Product in Canada.
-19-
3.2 Funding of Product Development Program. Subject to Section 3.1(a),
Lilly will fund and resource all activities with Third Persons and
within Lilly including, but not limited to, medical, regulatory
submissions, process and Product development, toxicology, and other
chemistry, manufacturing, and control work up to a cost and expense of
[**] U.S. Dollars (US$ [**] ) for the initial Product. Generex shall be
responsible for (a) any costs and expenses related to research and
development that Generex elects to perform on its own, and (b) any
costs and expenses in excess of [**] U.S. Dollars (US$ [**] ) related
to the research and development, including clinical development, of the
initial Product carried out under the Product Development Program to
the extent that such costs and expenses are approved by both Parties.
Lilly shall pay [**] US Dollars (US$ [**] ) to Generex as reimbursement
for Generex's activities under the Product Development Program in
Canada provided that Generex's activities in Canada satisfy the
following critieria: (1) Regulatory Approval of the initial Product
shall be achieved by June 30, 2003, (2) the initial Product can deliver
the required amount of insulin (i.e. an average patient dose) [**] ,
and (3) the Regulatory Material is sufficient to include in a global
submission package for the initial Product. In support of Generex's
activities in Canada, Lilly shall supply up to [**] of insulin. Lilly
shall supply insulin in excess of [**] at its sole discretion.
3.3 Funding of Subsequent Compound Product Development Programs. The cost
sharing arrangement as set forth in Section 3.2 shall apply with
respect to Lilly's development of any subsequent Compound Product
pursued by Lilly under this Agreement.
3.4 Transfer of Generex Know-How. As soon as reasonably practicable and to
the extent reasonably necessary or useful to facilitate Lilly's
furtherance of its responsibilities under the Product Development
Program, Generex shall furnish all Generex Know-How to Lilly that is
pertinent to the research and development of the Generex Formulation
including, without limitation, transferring possession and legal
ownership to all appropriate Regulatory Materials, if any, and shall
cause any subcontractor used by Generex to provide services hereunder
to transfer possession and legal ownership to all appropriate
Regulatory Materials, except for legal title to the DMFs (as defined in
Section 4.1), if any, which shall be handled in accordance with Section
4.1 of this Agreement.
3.5 Supply of Compound and Product.
(a) Compound Supply to Generex for Development of Product. To
assist Generex in carrying out its responsibilities (1) for
conducting clinical trials in Canada and (2) for establishing
Generex' capability of supplying Product to Lilly as
contemplated in Section 7.1, Lilly shall supply, at no cost,
to Generex such quantities of Compound as Generex reasonably
needs for such development under and in accordance with the
-20-
Product Development Plan up to a maximum of [**] of insulin.
Lilly shall not supply insulin in excess of [**] without prior
written approval from Lilly. Generex understands and
acknowledges that Lilly classifies Compound as a substance
that could be abused and that Lilly will require that Generex
meet appropriate drug security and accountability systems
requirements before any Compound will be supplied to guard
against material diversion. Lilly will have the right to audit
these systems. Generex shall be solely responsible for
unreasonable wastage, loss or other damage to Compound that
exceeds a certain wastage limit to be negotiated under the
Manufacturing Agreement or is due to Generex's negligence,
misconduct or noncompliance with the Product Development Plan
(i.e. Wasted Compound) that would render such Compound
unusable under the Product Development Plan. Generex shall
promptly reimburse Lilly in an amount equal to Lilly's
standard cost per gram of any such Wasted Compound. Wasted
Compound costs incurred by Generex shall be specifically
excluded from Generex Fully Burdened Manufacturing Cost.
(b) Product Supply to Lilly Prior to Product Launch. If requested
by Lilly and to assist Lilly in carrying out its
responsibilities for developing Product(s) under the Product
Development Plan or for commercializing such Products, Generex
will provide Lilly with such quantities of Generex Formulation
or Product as Lilly reasonably needs to conduct the
development efforts thereunder including Generex Formulation
and Product required for pre-clinical and clinical trials,
together with (a) any materials in Generex' possession
necessary to conduct such development efforts, and (b) any
information and documentation on such Products required by
regulatory authorities. All material supplied to Lilly under
this Section 3.5(b) shall be in compliance with all applicable
cGMP's, regulatory requirements and quality standards. Under
Article 7, Lilly may also be selected to supply itself with
such Product for development and/or commercialization. In the
event that Lilly is selected to supply such Product, Generex
shall provide Lilly with all information necessary to make and
use the Generex Formulation including the Device. Lilly hereby
agrees to compensate Generex for its costs, [**] , to produce
and supply such Product under this Section 3.5 in accordance
with Section 7.1 of this Agreement. For avoidance of any
doubt, except for the compensation set forth in this sentence
for the supply and production of such Product, Generex shall
not be entitled to any further compensation for such supply
and production prior to Product Launch.
(c) Compound Supply to Generex for Sale. In the event that Lilly
chooses Generex as the supplier of Product in accordance with
Section 7.1, Lilly shall supply to Generex such quantities of
Compound as Generex reasonably needs to meet its Product
supply obligation upon terms to be set forth in the
Manufacturing Agreement described in Article 7.
-21-
Notwithstanding the foregoing, Generex shall be solely
responsible for Wasted Compound that occurs while in Generex's
possession that would render such Compound unusable for
Product supply and, therefore, Generex shall promptly
reimburse Lilly an amount equal to Lilly's standard cost per
gram of any such Wasted Compound. Wasted Compound costs
incurred by Generex shall be specifically excluded from
Generex Fully Burdened Manufacturing Cost.
ARTICLE 4
REGULATORY
4.1 Regulatory Filings. All regulatory strategies and filings shall be
handled by Lilly, and Lilly shall be responsible for preparing, filing,
and maintaining, and shall own, the Regulatory Material relating to
Product as set forth below:
(a) Preparation, Maintenance and Ownership. Lilly, its
sub-licensees or Affiliates shall be responsible for the
registration strategies and preparation of any regulatory
filings and/or suitable applications required in order to
conduct clinical trials and achieve Regulatory Approval
(including, without limitation, achievement of marketing
approval) for Product and shall be the owner and party of
record for all such Regulatory Materials. Lilly shall have the
right to request that Generex take responsibility for
preparation of regulatory filing and/or suitable applications
required to conduct trials to obtain valid scientific evidence
to support a determination that there is reasonable assurance
that the Device is safe and effective for its conditions of
use and is approved for marketing. Lilly, its sub-licensees or
Affiliates shall, further, be responsible for managing all
interactions regarding such applications and/or regulatory
filings with all regulatory authorities in the Territory.
Generex shall cooperate with Lilly, as Lilly reasonably
requires in preparing such applications or in managing such
interactions with regulatory authorities. Lilly, its
sub-licensees or Affiliates shall determine those countries of
the Territory where marketing is intended. Upon reasonable
request to Lilly, Generex shall have a right of access to such
regulatory filings, as long as, Generex has contributed to
such filings and Lilly has a right to redact its Confidential
Information.
(b) Drug and Device Master Files. Generex shall own all of its
Device Master Files and Drug Master Files ("DMFs") and, for so
long as the licenses granted to Lilly hereunder remain in full
force and effect, hereby grants to Lilly a right of reference
to such DMFs. Furthermore, upon expiration of this Agreement,
Lilly shall retain its right of reference to such DMFs.
Generex also grants Lilly the right to obtain information
otherwise contained in Generex's DMFs for the sole purpose of
including such information in any Lilly regulatory submission
-22-
that is made to a regulatory authority in the Territory that
will not recognize or utilize Generex's DMFs, and which is
necessary to secure and/or maintain Regulatory Approval of the
Product in the particular country at issue.
In support of Generex's activities in Canada, Lilly
shall grant to Generex a right of reference to its NDA for
human insulin.
4.2 Quality Assurance Audit Request. Lilly, at its own expense, shall have
the right to conduct quality assurance audits with respect to all
facilities, operations, and laboratories where work under this
Agreement is conducted by Generex (including, without limitation, work
conducted by Generex related to the Product Development Plan) and to
verify Generex's conformance with applicable cGMP, cGLP, cGCP, QSRs and
other regulatory requirements including, without limitation, verifying
appropriate inventory control and material accountability systems with
respect to Compound. Such audits shall only be conducted upon
reasonable notice during reasonable business hours. Generex shall make
necessary changes as required by such audit based on an action plan
agreed to by the Parties
4.3 Adverse Event Reporting. During the Product Development Program and
thereafter, Lilly will report Adverse Events and Serious Adverse Events
that occur during the development of Product to Generex and the
relevant regulatory authorities promptly according to the applicable
regulations. In addition, Generex will report to Lilly Adverse Events
and Serious Adverse Events which occur during the development of the
Product and, after Product launch, Generex will report to Lilly Serious
Adverse Events and spontaneously reported Adverse Events of which it
becomes aware and has the right to disclose, as such events relate to
the use of Device for other products, within two (2) working days of
Generex's initial receipt of such information, in order that Lilly can
fulfill its obligations to the appropriate regulatory authorities.
Finally, Generex will supply specially formatted safety information
(Lilly will instruct Generex on the appropriate format) to Lilly upon
request, with reasonable notice, in order that Lilly can comply with
U.S. Food and Drug Administration requirements for annual reports and
safety updates. Specific details of the types of report information and
timing of event exchange will be identified in Exhibit G to this
Agreement, which will be developed as required using the then current
Lilly adverse reporting policies consistent with those policies of the
relevant regulatory authority.
ARTICLE 5
LICENSE AND OPTION
5.1 Exclusive License to Lilly Under Generex Rights. Generex hereby grants
Lilly a sole and exclusive license in the Territory, with a right to
sublicense consistent with the terms of this Agreement, under Generex
Rights to make (subject to the terms and conditions of this Agreement
-23-
and any agreement between the Parties for the supply of Products), use,
sell, offer for sale and import the Products in the Field. Upon
completion of the Royalty Period, Lilly shall have a fully paid up
exclusive license in the Territory to the Generex Rights to make, use,
sell, offer for sale and import Products in the Field. Lilly shall
notify Generex if any sublicenses are granted to Third Persons, and
upon Generex request, Lilly shall provide a copy of such agreement
which may be appropriately redacted to protect confidential
information.
5.2 Exclusive License to Lilly Under Program Rights. Generex shall grant to
Lilly a sole and exclusive license, with the right to sublicense
consistent with the terms of this Agreement, under Program Rights (to
the extent that Generex has an interest in such Program Rights) to make
(subject to the terms and conditions of this Agreement and any
agreement between the Parties for the supply of Products), use, sell,
offer for sale and import the Products in the Field.
5.3 Generex Rights under Generex Rights. Notwithstanding the foregoing
exclusive license grants to Lilly under Generex Rights under Section
5.1, Generex shall retain during the Product Development Program
nonexclusive rights to Generex Rights but only to the extent useful or
necessary to fulfill its obligations under the Product Development
Program or for uses other than the buccal delivery of Compound(s).
5.4 Generex Rights under Program Rights. Notwithstanding the foregoing
exclusive license grants to Lilly under Program Rights under Section
5.2, Generex shall retain during the Product Development Program
nonexclusive rights to Program Rights (to the extent that Generex has
as interest in such Program Rights) but only to the extent useful or
necessary to fulfill its obligations under the Product Development
Program or for uses other than the buccal delivery of Compound(s).
5.5 Generex Rights under Lilly Rights. Nothing in the present Agreement is
intended to give Generex any rights under any Lilly Rights.
5.6 Assistance. Generex shall promptly provide Lilly with all information
included in Generex Rights, reasonably useful or necessary for Lilly to
exploit the licenses granted in Section 5.1 and Section 5.2 of this
Agreement. Moreover, Generex shall provide Lilly with reasonable
technical assistance in connection with the disclosure and use of such
information.
5.7 No Prior License. Generex represents and warrants that as of and prior
to the Effective Date, it owns and Controls the Generex Rights it is
transferring herein and it has not granted any license under Generex
Rights to make, use, sell, offer to sell or import Product in the
Field.
-24-
5.8 Right to Intellectual Property. The Parties agree that all rights and
licenses granted under or pursuant to Section 5.1 and Section 5.2 of
this Agreement are, and shall be deemed to be, for purposes of Section
365(n) of the United States Bankruptcy Code, as such section may be
amended, licenses to rights to "intellectual property" as defined in
the Bankruptcy Code. The Parties agree that Lilly, as licensee of such
rights, shall retain and may exercise all of its rights and elections
under the Bankruptcy Code, including, without limitation, Section
365(n).
5.9 Subsequent Compound Products. Lilly and Generex agree to pursue a
minimum of three (3) additional Compound Products in the Field. The
Parties agree that the selection of which Compounds will be developed
shall be made solely at Lilly's discretion. In addition, the Parties
agree that Lilly is under no obligation to pursue such other Compound
Products until after (a) Initiation of Phase III Clinical Trials for
the initial Product under this Agreement, and (b) Generex's platform
technology is validated in terms of quality and standards (i.e. is
commercially viable).
5.10 Lilly Option. Generex herein grants Lilly an option to obtain the
exclusive right to research, develop and commercialize either one or
both of the Option Compounds. Generex and Lilly shall negotiate in good
faith an agreement to govern the development and commercialization of
any Product(s) containing such Option Compounds(s).
5.11 Term of Option. The option granted in Section 5.10 shall expire [**]
following the Initiation of Phase III Clinical Trials for the initial
Product unless, within such period, Lilly gives Generex notice that it
intends to exercise the option as to [**] Option Compounds. If Lilly
gives such notice, the option shall be extended for an additional six
(6) months from the original expiration date, and the Parties shall
negotiate in good faith to reach a definitive agreement covering the
research, development and/or commercialization of the Option
Compound(s) specified in Lilly's notice (an "Option Compound
Development Agreement"). If the parties do not enter into an Option
Compound Development Agreement within eighteen (18) months following
the initiation of Phase III Clinical Trials, then the option shall
terminate. Notwithstanding anything to the contrary herein, the option
shall terminate if and at such time as the Agreement is terminated.
ARTICLE 6
COMMERCIALIZATION
6.1 Marketing and Commercialization. Subject to the terms described in this
Agreement, Lilly shall have the sole right to obtain Regulatory
Approval, market, sell, distribute and otherwise commercialize the
Product in each country in the Territory as Lilly may deem appropriate.
Lilly will be as diligent in commercialization of Product as with other
-25-
Lilly products of similar probabilities of technical success and
commercial potential. Lilly shall at its expense, control the marketing
plans for Product in the Field, including but not limited to branding
of Device and packaging materials with Lilly trademarks and logos.
Lilly shall have the sole right to select the trademark(s) for the
Products developed and commercialized under this Agreement. Lilly
agrees to consider in good faith the usage of Oralin(TM)/Oralgen(TM)
and any other existing Generex trademarks. In addition, Lilly agrees
not to use the Generex trademarks with any product(s) without a written
license from Generex.
6.2 Signing Fee and Up-front Fees. Lilly shall pay Generex the amount of
one million U.S. Dollars (US$1,000,000.00) within thirty (30) days of
the Effective Date of this Agreement. In the event that Lilly elects to
develop more than one (1) Compound Product (the Parties have agreed
that the initial Compound Product to be developed under this Agreement
shall be Insulin Product), Lilly will pay an up-front fee of [**] U.S.
Dollars (US$ [**] ) for each subsequent Compound Product that Lilly
elects to develop in the Field under this Agreement, up to a total of
[**] U.S. Dollars (US$ [**] ) [**] . Such up-front fees for subsequent
Compound Products shall be paid within thirty (30) days after [**] on
each subsequent Compound Product.
6.3 Royalties.
(a) Royalties. Subject to the provisions of this Agreement, during the
Royalty Period, Lilly (except to the extent previously paid by a
sub-licensee thereof) shall pay Generex a royalty on Net Sales of
Compound Product in the Territory sold by Lilly and/or it's
sub-licensee, as applicable, as follows:
Annual Net Sales (USD/year) Royalty Rate
-------------------------------------------------
0 to [**] [**]
[**] to [**] [**]
[**] to [**] [**]
[**] to [**] [**]
[**] to [**] [**]
[**] to [**] [**]
[**] to [**] [**]
over [**] [**]
Royalties payable under this Section 6.3 will be
payable only once with respect to a particular sale of
Compound Product regardless of the number of patents that have
claims relating to such Compound Product. An example of
royalty calculation is set forth in Exhibit A.
Annual Net Sales are to be determined on a Compound
Product basis and sales of different Compound Products are not
to be aggregated.
-26-
Annual Net Sales tiers will be adjusted upward
annually on the anniversary date of this Agreement commencing
in the year after the Effective Date using the Consumer Price
Index for indexing [U.S. Bureau of Labor Statistics for all
urban consumers, U.S. city average (July 2000 equals 172.6 and
1982 to 1984 equals 100; Series CUUR0000SA0] to account for
inflation.
(b) Compulsory License. If, in any country, a Third Person obtains
a Compulsory License, then Lilly shall promptly notify
Generex. If the royalty rate payable by the grantee of the
Compulsory License is less than the then-current royalty rate
payable under this Agreement, then the royalty rate, payable
under this Agreement, shall be reduced to such lower rate in
the subject country for so long as sales are made pursuant to
the Compulsory License.
(c) Access to Third Person Rights. If, after the Effective Date,
access to a Third Person's intellectual property rights
becomes necessary or, in the mutual opinion of Generex and
Lilly, advantageous or reasonably useful to make, use, sell,
offer to sell and/or import a particular Product in the Field
in a particular country ("Third Person Rights"), Lilly shall
have the right to acquire access to the Third Person Rights
via license or otherwise. Upon such acquisition the following
circumstances shall apply provided that such Third Person
Rights relate to buccal delivery of Product and not to the
Compound, per se:
1. Acquisition Cost. [**] percent ( [**] %) of the
acquisition cost paid by Lilly (i.e., [**] % of all
consideration paid by Lilly in connection with such
acquisition including, without limitation up-front
payments, milestones payments and royalties) for
access to Third Person Rights via license or
otherwise shall be credited against future royalties
owed to Generex by Lilly in respect of activities in
the subject country or countries for that particular
Product under this Agreement.
2. Royalty Floor As a Result of Acquisitions. Except as
the Parties may otherwise agree in writing,
notwithstanding the foregoing, under no circumstance
shall Lilly acquisition of Third Person intellectual
property rights under the provisions of this Section
6.3(c) result in a reduction of royalties payable to
Generex under this Agreement by more than [**]
percent ( [**] %) of the then-current royalty rate.
3. Exception for Intellectual Property Rights [**] . If
access to Intellectual Property Rights of [**] become
necessary to make, use, sell, offer for sale, and/or
import the Product in the Field [**] , then Generex
-27-
agrees to be fully responsible for all costs and
expenses associated with the use or acquisition of
such Intellectual Property Rights.
(d) Current Royalty Obligations (as of Effective Date).
Notwithstanding anything to the contrary in this Agreement
(including, without limitation, Section 6.3(c)), both Parties
acknowledge and hereby agree that each is solely responsible
for any and all royalty obligations that have accrued or may
accrue in the future with respect to any agreements and/or
arrangement that such Party may have agreed to prior to the
Effective Date.
(e) Royalty Payments. Lilly shall pay royalties owed under this
Section 6.3 as follows:
1. Duration of Royalties Paid for Compound Products.
During the Royalty Period (such period being
determined for each Compound Product on an individual
Compound Product basis and country-by-country basis),
royalty payments hereunder shall be paid by Lilly to
Generex on Net Sales of each Compound Product for the
particular country and Compound Product at issue.
Upon expiration of the Royalty Period, with
respect to a particular Compound Product in a
particular country, Lilly shall have a fully paid-up,
exclusive license under the Generex Rights and
Program Rights in such country at issue to make, use,
sell, offer to sell and import such Compound Product.
2. Payment Terms. Annual Net Sales shall be calculated
on a Calendar Year basis. For partial years the
royalty tiers will be prorated based on the number of
days remaining in the year after initial launch that
the Product was actually sold divided by three
hundred sixty-five (365). Royalty payments due
Generex under this Section 6.3 will be paid by Lilly
for Net Sales made by Lilly not later than sixty (60)
days following the end of each Calendar Quarter
during the Royalty Period for Compound Product and
each such royalty payment shall be accompanied by a
report in writing showing the Calendar Quarter for
which such royalty payment applies on a
Product-by-Product basis, the amount of Net Sales
during such Calendar Quarter for which a royalty
payment is due on a country-by-country basis and the
total royalty payment due.
Notwithstanding the foregoing, with respect
to any sublicensee sales of Product, Lilly shall
report its sublicensee's Net Sales to Generex (and
pay any royalties on same to Generex not previously
paid by Lilly's sublicensee) as of the next Calendar
-28-
Quarter payment from the time when Lilly receives
such information from its sublicensee. Lilly shall
require such information from its sublicensees not
less frequently than quarterly. Generex or its
representatives shall have the right to audit Lilly's
records with respect to such reports in accordance
with Section 8.2 of this Agreement.
6.4 Milestones. In addition to the royalty payments provided in Section 6.3
and the signing fees in Section 6.2, Lilly shall make the following
non-refundable milestone payments to Generex within thirty (30) days
following the first occurrence of each of the following events:
[**] US$ [**]
[**] US$ [**]
[**] US$ [**]
[**] US$ [**]
[**] US$ [**]
------------------------------------------------------
Total Milestones per Compound Product US$ [**]
Such milestone payments shall be made by Lilly to Generex only
once per Compound Product regardless of how many times such
milestone(s) is/are reached by the Parties during the term of this
Agreement.
One hundred percent (100%) of all milestones paid for a
Compound Product are creditable against future royalties for that
Compound Product; however, such milestones shall not be credited
against more than [**] percent ( [**] %) of the royalties otherwise
payable to Generex in any Calendar Year, i.e., Lilly will continue to
make payments on a quarterly basis and such payments will be reduced by
[**] %. Milestones will apply to each Compound Product developed in the
Field subject to the Failure Credit as defined in Section 6.5.
In the event that Compound Product launch occurs after receipt
of marketing authorization by a regulatory authority in a Major Market
and (for whatever reason) a previous milestone event has not occurred
at such time (e.g., Phase III Clinical Trials are waived for
compassionate purposes and Compound Product launch in a Major Market is
approved immediately), then [**] notwithstanding anything to the
contrary in this Agreement. Under no circumstance shall Lilly make
aggregate milestone payments to Generex under this Agreement in excess
of [**] U.S. Dollars (US$ [**] ) for a Compound Product.
-29-
6.5 Failure Credit. In the event that after reaching any of the milestones
listed above, the development of a Compound Product is terminated, the
milestones that have already been paid will be credited against future
milestones (the "Failure Credit") that are applicable to a subsequent
Product.
6.6 Currency of Payment/Exchange Rates. All payments to be made under this
Agreement shall be made in U.S. Dollars. For those sales involving
Product which occur outside the United States, the royalty due on such
sales will be calculated on the basis of the local currency sales
figures translated into U.S. Dollars according to Lilly's standard
methodology. The methodology employed by Lilly shall be that
methodology used by Lilly in the translation of its foreign currency
operating results for external reporting and shall be consistent with
United States GAAP.
6.7 Taxes. Any and all income or similar taxes levied on account of
royalties or milestones accruing to Generex under this Article 6 shall
be paid by Generex. If laws or regulations require withholding of
taxes, such taxes will be deducted by Lilly or its sublicensee from
such remittable royalties or milestones and will be paid by Lilly or
its sublicensee to the proper taxing authority. Proof of each payment
shall be sent to Generex within ninety (90) days following December
31st of each reporting year.
6.8 Status of Generex Patent Rights. Within sixty (60) days (or a
reasonable time period as approved by Lilly) after each Calendar
Year-end, Generex shall provide Lilly with a report describing the
status of the Generex Patent Rights. Such report shall include, at a
minimum, the patent country, patent and application numbers, filing
date, issue date, expiration date and any other relevant information
title or an abstract of the patent or patent application. Such report
shall be mailed to:
Eli Lilly and Company
Attention: Royalty Administration, D.C. 1058
Lilly Corporate Center
Indianapolis, IN 46285
ARTICLE 7
SUPPLY OF FORMULATION AND DEVICES
7.1 Manufacturing Agreement. For purposes of this Article 7, the use of
Product shall refer specifically to initial Product. If Generex is
selected by the Parties to supply Product as set forth below, the
Parties agree to enter into a Manufacturing Agreement between Lilly and
Generex for Product. In order for Generex to be selected to manufacture
and supply Product to Lilly, Generex must establish to both Parties
that it can manufacture and supply Product having appropriate quality,
cost and on time delivery relative to the quality, cost and delivery
capability of Lilly or a Third Person to manufacture and supply the
-30-
Product. In addition, Generex must establish that it can supply initial
Product in compliance with all applicable cGMP's, regulatory
requirements and quality standards. The Manufacturing Agreement shall
include but not be limited to the terms and provisions as described in
this Article 7.
(a) General and Purchase Price. If Generex establishes to the
satisfaction of the Steering Committee that Generex is able to
supply Product with appropriate quality, cost and on time
delivery relative to the delivery capability of Lilly or any
Third Person, Generex will be considered to be the exclusive
manufacturer of Product(s) and/or components thereof and as
such shall exclusively manufacture or have manufactured and
supply the same as required by Lilly as part of this
Agreement, subject to Section 7.1(d) and subject to this
Section 7.1(b). Prior to the Lilly Initiation of Phase III
Clinical Trials (with respect to supply of Product for
clinical trials), or sooner if agreed by Lilly and Generex,
Generex and Lilly shall then draft and agree in good faith
upon a Manufacturing Responsibilities Document (Exhibit B). In
addition, upon commencement of Phase III Clinical Trials, or
sooner if agreed by Lilly and Generex, the Parties shall
negotiate in good faith and enter into a manufacturing and
supply agreement (the "Manufacturing Agreement") consistent
with the terms provided in this Article 7 and such other terms
to be mutually agreed upon, including but not limited to,
provisions dealing with forecasting of Lilly's requirements
for Product, Generex's Compound requirements, rejection of
Product, standard late delivery penalties, environmental
assessment, recall of Product, inspection of Generex's
manufacturing facilities (and Lilly's right to participate in
such inspections of regulatory authorities), indemnification,
debarment, Generex's manufacturing efficiency (including,
without limitation, Compound wastage), Generex's obligation to
not discriminate against Lilly when allocating Devices among
multiple collaborative partners, Generex's obligation to
assist Lilly in tracking Compound supplied to Generex pursuant
to the provisions of Section 7.1(e), Generex's responsibility
for losses of bulk Compound which occur at Generex facilities,
Lilly's and Generex's responsibilities with respect to
compliance with global governmental regulations (e.g.,
regulatory and environmental). Such agreement shall be
executed by the Parties no later than the earliest of [**] ,
whereby Generex will be appointed as Lilly's exclusive
supplier of Product and components thereof subject to Section
7.1(b). In addition to the foregoing, such Manufacturing
Agreement shall contain terms and conditions customarily found
in agreements of that nature. Moreover, subject to Section
7.1(d), the purchase price Lilly shall pay Generex for Product
(packaged in bulk, labeled to at least the minimal legal
requirements for individual capsules and devices and delivered
to Lilly in Indianapolis or such other single U.S. location
Lilly chooses) shall be as provided in the following
paragraph.
-31-
After Product has been sold for [**] , Lilly shall be
entitled to a reduction in Product purchase price in an amount
equal to a Cost Saving Adjustment, and Generex shall be
entitled to a Cost Savings Adjustment as an incentive for
reducing manufacturing costs. The Cost Savings Adjustment
shall be calculated as follows: after such [**] of sales,
Generex shall determine the Generex Fully Burdened
Manufacturing Cost for Product at that time. Generex shall
promptly (and in no event later than thirty (30) days after
the expiration for such [**] period) provide Lilly with a
written statement setting forth a detailed description of all
categories of cost and the amounts of such costs used to
calculate such Fully Burdened Manufacturing Cost. Such Fully
Burdened Manufacturing Cost will be used as a baseline against
which future cost savings will be calculated ("Baseline"). If
Generex reduces the Fully Burdened Manufacturing to an amount
less than the Baseline, the Parties agree to share such cost
savings difference equally. The "Cost Savings Adjustment" will
be [**] percent ( [**] %) of the difference between Generex
Fully Burdened Manufacturing Cost achieved from time to time
after the Baseline has been established, and the Baseline.
Accordingly, until the Baseline is established, Lilly's cost
for Product for all markets shall be Generex Fully Burdened
Manufacturing Cost plus [**] percent ( [**] %) subject to
Section 7.1(d) of this Agreement. Conversely, after the
Baseline is established, Lilly's cost for Product for all
markets shall be computed as follows:
[**]
See Exhibit H for Cost Savings Adjustment Example.
In the event that there are no Cost Savings Adjustments, Lilly
shall pay Generex the Generex Fully Burdened Manufacturing
Cost plus [**] percent ( [**] %).
(b) Parallel Manufacturing Facility. Lilly shall have the right to
have parallel manufacturing facilities in place to protect the
quality, integrity and supply of Compound Product(s).
(c) Profit Cap. Generex profits resulting from Generex's supply to
Lilly of Product under the Manufacturing Agreement will be
capped at US$ [**] per [**] , not to exceed [**] percent (
[**] %) of Net Sales. The US$ [**] profit cap will be adjusted
annually on the anniversary date of initial Product Launch
using the Producer Price Index for indexing (Producer Price
Index for finished goods less food and energy in July of 2000
= 147.5 (WPUSOP3500), base date 1982 = 100) to account for
inflation. For the avoidance of any doubt, the Producer Price
Index at the time of initial Product Launch will be the basis
-32-
for such adjustment in profit cap, and the US$ [**] profit cap
shall be held constant up to and including the initial Product
Launch.
(d) Most Favored Partner. If Generex is selected to supply
Product, the Product and or components thereof shall be sold
by Generex to Lilly at prices no less favorable to Lilly than
those Generex offers to Third Persons for the supply of
comparable products and/or components thereof for comparable
volumes and terms excluding any cost savings that Generex
achieves as described in Section 7.1(a) of this Agreement. As
part of the Manufacturing Agreement between Lilly and Generex,
Lilly and Generex shall agree upon a mechanism to allow Lilly,
through a Third Person, to monitor Generex's compliance with
this clause.
(e) Failure to Supply. Should Generex ever fail to supply all of
Lilly's (as well as any sublicensee of Lilly's) needs for
Products to the extent Lilly has forecasted such needs or if
there is a Change in Control of Generex, Lilly may then either
by itself, and/or by utilizing the services of a Third Person,
manufacture and supply Products and/or components thereof
without any payment obligation to Generex except payments
under Sections 6.3 and 6.4. In such event, the following terms
shall apply:
1. License Amendment. Lilly's license in Section 5.1 and
Section 5.2 shall be amended to include "make"
Product without restriction. Generex shall transfer
to Lilly all manufacturing documents, including,
without limitation, standard operating procedures,
manufacturing tickets, and quality control and
assurance documentation for manufacture of Product
and shall permit Lilly to have the right to reference
the DMFs and, if necessary, utilize any information
in the DMFs to manufacture, and obtain any regulatory
approval to manufacture Product.
2. Transfer of or Access to Generex Know-How. If Lilly
chooses to, either by itself or by utilizing the
services of a Third Person, manufacture and supply
Products (and/or components thereof), Generex shall
transfer to, or otherwise grant satisfactory access
to, Lilly or such Third Person, as appropriate, any
Generex Know-How required in order to enable Lilly or
such Third Person to manufacture and supply such
items to Lilly and shall provide Lilly or such Third
Person, as appropriate, all reasonable assistance
required in order to accomplish such Third Person or
Lilly manufacture and supply. Generex shall, to the
extent that it has not already done so under other
provisions of this Agreement, also grant Lilly or
such Third Person any, as appropriate and as
designated by Lilly, royalty-free licenses with no
costs to Lilly (i.e., no milestones, fees or other
consideration to be paid by Lilly other than as
provided in this Agreement) to Generex Rights
-33-
necessary for Lilly or such Third Person to
manufacture and supply any of such items to Lilly.
3. Fill Finish. Should Lilly (either by itself or by
utilizing the services of a Third Person) choose to
fill, package and supply Products to Lilly, Lilly may
choose to process such formulations required for such
Products itself, utilize services of a Third Person
in any processing required for such Products or may
use Generex for such processing (at a cost mutually
agreed upon by Generex and Lilly).
4. Limitations on use of Generex Rights to Manufacture.
Should Lilly or any Third Person manufacture Product
or any component thereof pursuant to this Section
7.1(e), such Third Person or Lilly shall only be
entitled to utilize Generex Rights for the
manufacture of Product for Lilly (or any sublicense
of Lilly) and for no other purpose.
5. Technology Transfer Costs. Should Lilly decide,
either by itself or by utilizing the services of a
Third Person, to manufacture Products and/or
components thereof pursuant to the provisions of this
section, Generex shall bear all reasonable costs
incurred by Generex related to any technology
transfer and manufacturing set-up by Generex
necessary to enable Lilly or such Third Person to
perform such manufacturing; however, Lilly shall bear
full responsibility for all costs incurred by Lilly
and all costs to the Third Person.
(f) Additional Manufacturing & Supply Agreement Terms. In addition
to negotiating the items described above in this Section 7.1,
as part of the Manufacturing Agreement between Lilly and
Generex, if Generex is selected to supply Product, the Parties
hereby agree to the following:
1. Compound Supply. Lilly shall supply the amounts of
Compound, at no cost, reasonably required by Generex
to meet Generex's obligation to supply Product to
Lilly.
2. Capital Expenditures. All capital expenditures
directly incurred in connection with Generex meeting
its supply obligation of Product to Lilly shall be
borne entirely by Generex. Such costs will be
capitalized and any portion thereof that is
specifically allocable to the manufacture of the
Product shall be ultimately incorporated into the
Generex Fully Burdened Manufacturing Cost through an
appropriate depreciation method consistent with
United States GAAP and Generex internal depreciation
methodology used for other products.
3. Product Recall. Lilly, after consultation with
Generex, shall have the right and responsibility to
determine whether Product must or should be recalled.
Lilly shall also be responsible for managing the
recall and Generex will cooperate with Lilly as Lilly
-34-
may reasonably request. Generex shall be responsible
for all costs incurred due to a recall that is the
result of the manufacture of the Product by Generex
(a "Manufacture Related Recall"). Notwithstanding the
foregoing, under no circumstance shall the obligation
of Generex under this Section 7.1(e)(3) exceed the
total payments made to Generex by Lilly in any given
twelve (12) month period from the date of such recall
including, without limitation, milestones, royalties
and manufacturing compensation. Further, it is
understood that Generex shall not be responsible for
the cost associated with the cost of Compound that is
recalled in a Manufacture Related Recall; however,
Generex will be responsible for the cost associated
with reprocessing any affected Compound or new
Compound to the extent of such recall at no cost to
Lilly. Product recall costs incurred by Generex in a
Manufacture Related Recall shall be specifically
excluded from Generex Fully Burdened Manufacturing
Cost. Lilly shall bear the costs of any Product
recall that is not a Manufacture Related Recall.
4. Disaster Recovery Plan. Generex shall have in place
an appropriate disaster recovery plan to handle in an
efficient and effective manner any unexpected events
that may occur in manufacturing Product.
5. Wasted Compound. Generex shall be solely responsible
for any wastage, loss or other damage to Compound
that would render such Compound unusable for
manufacturing into Product that either exceeds a
certain wastage limit to be negotiated under the
Manufacturing Agreement or that was caused due to
Generex's negligence, misconduct or noncompliance
with the Manufacturing Agreement (i.e. Wasted
Compound") and, therefore, Generex shall promptly
reimburse Lilly for any such Wasted Compound an
amount to be determined as part of the Manufacturing
Agreement. Wasted Compound costs incurred by Generex
shall be specifically excluded from Generex Fully
Burdened Manufacturing Cost. Notwithstanding any
other provision in this Section, Lilly shall be
solely responsible for any Wasted Compound cost
resulting from Lilly negligence, misconduct or
noncompliance with the Manufacturing Agreement.
6. Subcontracting by Generex. To ensure that the quality
of Product (and/or major components thereof) is
maintained, the Parties agree that any subcontracting
of the manufacture of Product (and/or major
components thereof) by Generex is only permissible
provided such subcontract and business terms related
thereto is first approved in writing by the Parties.
Furthermore, in connection with any subcontracting of
manufacturing rights by Generex to a Third Person,
such subcontractor shall be required to perform all
subcontracted work in accordance with, and in
-35-
facilities that meet, cGLPs, cGMPs or QSRs to the
extent applicable.
7.2 Packaging. Unless otherwise negotiated between Generex and Lilly
pursuant to the Manufacturing Agreement, if Generex is selected to
supply Product, Generex shall supply Lilly with Product, labeled to at
least the minimal legal requirements for individual Devices and
delivered to Lilly in Indianapolis or such other single United States
location Lilly chooses. Lilly may have Generex deliver Product and/or
components thereof to multiple sites, both in the United States and
countries outside the United States, or to sites located in countries
outside the United States so long as Lilly pays the cost of any
incremental shipping costs required to ship Products to sites other
than Indianapolis or the other single United States location selected
by Lilly. Lilly shall be responsible for developing any further
packaging and labeling required for such Products. If Generex so
requests, and to the extent allowable by law, Lilly will identify, in
packaging and package inserts for Products developed under this
Agreement, Generex as the licensor and/or manufacturer of such
Products.
ARTICLE 8
RECORD-KEEPING AND AUDITS
8.1 Records Retention. The Parties shall keep complete and accurate records
pertaining to the development, use and sale of Products in sufficient
detail to permit the other Party to confirm, in the case of Generex,
its research and development efforts hereunder, and in the case of
Lilly, its research, development and commercialization efforts and the
accuracy of calculations of all payments due hereunder. For those
records pertaining to Lilly's commercialization efforts or to the
accuracy of calculations for any payment due hereunder, such records
shall be maintained for a minimum of two (2) year period following the
year in which any such efforts or payments were made hereunder. For
those records pertaining to Generex's research and development efforts
hereunder or Lilly's development efforts, such records shall be
maintained for a period consistent with confidentiality in Article 14.
Notwithstanding the foregoing, for those records pertaining to
regulatory filings and other regulatory commitments (e.g.,
manufacturing tickets, manufacturing procedures, etc.), such records
shall be held for such period as is mutually agreed upon between the
Parties in writing that is reasonably necessary to comply with
regulatory requirements.
8.2 Audit Request. Each of the Parties shall have the right to request an
audit of such records, at its own expense and on an annual basis, to
determine, with respect to any of the two (2) preceding Calendar Years,
the correctness of any report or payment made under this Agreement. If
a Party desires to audit such records, it shall utilize an independent,
certified public accountant (including, if the Party so determines, the
accountant of the other Party), to examine financial records and may
utilize an independent scientist reasonably acceptable to the other
-36-
Party to audit scientific records. Such accountant/scientist shall be
instructed to provide the Party desiring the audit a report on the
findings of the agreed upon procedures which verifies any previous
report made, payment submitted, or work performed by the audited Party
during such period. The expense of such audit shall be borne by the
auditing Party; provided, however, that if an error in favor of the
auditing Party of more than ten percent (10%) is discovered, then such
expenses shall be paid by the audited Party. Any Information received
by a Party pursuant to this Section 8.2 shall be deemed to be
Confidential Information hereunder.
8.3 Survival. This Article 8 shall survive any termination of this
Agreement for a period of two (2) years.
ARTICLE 9
PROGRAM INTELLECTUAL PROPERTY
9.1 Ownership of Program Know-How. Any and all Program Know-How shall be
jointly owned by the Parties.
9.2 Notification of Program Know-How. Upon the discovery, generation or
development of any particular Program Know-How, the Party so
discovering, generating or developing such Program Know-How shall
promptly disclose to the other Party the particular Program Know-How at
issue. In addition, each Party shall inform the other Party promptly
upon any decision to file a patent application that discloses or claims
any invention directed at Program Know-How no later than the filing
date of such application. Inventorship shall be mutually determined by
the Parties after the Parties have had a reasonable opportunity to
review and discuss the particular invention.
9.3 Ownership of Program Patent Rights. Ownership of Program Patent Rights)
shall be assigned to the Parties in accordance with the United States
laws of inventorship. Specifically, patents that claim inventions that
were invented solely by one Party's employees including any persons
working on the Program under that Party's direction where such persons
have an obligation to assign inventions to that Party ("Sole
Invention") shall be assigned solely to that Party. Patents relating to
Program Know-How invented jointly by employees of both Parties,
including any persons working on the Program under a Party's direction
where such persons have an obligation to assign inventions to that
Party ("Joint Invention"), shall be assigned jointly to both Parties.
9.4 Patent Filing and Prosecution. Each Party will prepare, file, and
prosecute patent applications and maintain patents that Cover
inventions for its Sole Inventions and shall be responsible for related
interference proceedings and opposition proceedings. Each Party will
endeavor to file and prosecute patent applications that contain valid
claims which the Parties in good faith believe to be patentable, and
-37-
which, if issued would be Valid Claims that Cover the Product(s). In
addition, the Parties will ensure that such patent applications are
filed before any public use or public disclosure by either Party in
order to maintain the validity of patent applications filed outside of
the United States. The Parties will also ensure that any patent
applications filed in the United States are filed within one (1) year
after any publication, offer for sale or commercial use of such
invention. Each Party shall cooperate with the other in preparing,
filing and prosecuting any patent applications relating to Program
Patents. Each Party shall also cooperate with the other in executing
and delivering any instrument required to assign, convey or transfer to
such other Party its interest should such assignment, conveyance or
transfer be required by the terms of this Agreement. At least thirty
(30) days prior to the contemplated filing date, each Party shall
submit to the other a substantially complete draft of any patent
application for Sole Inventions arising under this Agreement and will
make every reasonable effort to adopt the other Party's suggestions
regarding such draft. Furthermore, each Party will confer with the
other, and make every reasonable effort to adopt the other Party's
suggestions regarding the prosecution of such patent applications of
Sole Inventions and will copy the other Party with any official actions
and submissions in such patent applications.
9.5 Patent Costs. Each Party shall bear [**] percent ( [**] %) of all costs
associated with the preparation, filing, prosecution and maintenance of
all their respective Sole Inventions including the costs associated
with related interference proceedings and opposition proceedings;
however, Lilly shall bear [**] percent ( [**] %) of all costs
associated with any Program Patent Rights that contain or result in a
claim that is necessary or useful in the Field.
9.6 Discontinuance of Patent Coverage. Should either Party not wish to file
or prosecute any patent application, or issue or maintain any patent
within (a) their Program Patent Rights as determined according to
Section 9.3, or (b) the Generex Patent Rights, in any particular
country, that Party will so notify the other Party of its intentions
("Discontinuance Election"). Upon receipt of such Discontinuance
Election, the other Party may elect to have the right to file,
prosecute, maintain or issue such patent application or patent at its
own expense by providing written notice of the same within thirty (30)
days of its receipt of the Discontinuance Election. Upon such election:
(i) the discontinuing Party shall grant the other Party any necessary
authority to file, prosecute, issue and maintain such patent
application and/or patent; and (ii) shall assign such patent
application or patent to the other Party. Until such assignment is
complete, the discontinuing Party shall take reasonable efforts to
maintain or otherwise ensure that patent protection will not be lost
with respect to such patent application and/or patent provided the
other Party does not unreasonably delay the assignment thereof.
Finally, upon any such assignment by Generex, the patent and/or patent
application at issue shall no longer be considered a Generex Patent
Right. Any such transfer shall be without charge by the transferor but
at the expense of the transferee.
-38-
9.7 Notice of Certification. Generex and Lilly each shall immediately give
notice to the other of any certification filed under the U.S. "Drug
Price Competition and Patent Term Restoration Act of 1984" claiming
that a patent under Generex Patent Rights or Lilly Patent Rights is
invalid or that an infringement will not arise from the manufacture,
use, import, offer for sale or sale of any Product by a Third Person.
If Generex decides not to bring infringement proceedings against the
entity making such a certification, Generex shall give notice to Lilly
of its decision not to bring suit within twenty-one (21) days after
receipt of notice of such certification. Lilly may then, but is not
required to, bring suit against the party that filed the certification.
Any suit by Lilly or Generex shall either be in the name of Lilly or in
the name of Generex, or jointly by Lilly and Generex, as may be
required by law. For this purpose, the Party not bringing suit shall
execute such legal papers necessary for the prosecution of such suit as
may be reasonably requested by the Party bringing suit.
9.8 Patent Term Extensions. The Parties shall cooperate with each other in
gaining patent term extension wherever applicable to any patents
including any Generex Patent Rights or Program Patents that contain a
Valid Claim that Covers Product. The Party first eligible to seek
extension of such patent shall have the right to do so; provided, the
first Party shall consult with the other Party before making the
election. If more than one patent is eligible for extension, the
Steering Committee (with advice from appropriate patent counsel) shall
agree upon a strategy that will maximize patent protection for the
Product. All filings for such extensions and certificates shall be made
by the Party to whom the patent is assigned, provided, however, that in
the event that the Party to whom the patent is assigned elects not to
file for an extension or supplementary protection certificate, such
Party shall (i) inform the other Party of its intention not to file and
(ii) grant the other Party the right to file for such extension or
certificate.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
10.1 Generex Representations. Generex hereby represents and warrants to
Lilly as follows:
(a) Patents, Prior Art. Generex represents and warrants that, to
the best of Generex's belief, it has sufficient legal and/or
beneficial title under Generex Patent Rights and Generex
Know-How including any and all rights to the Generex
Formulation, including the Device, as is necessary to grant
the licenses contained herein.
1. Third Persons. Generex represents and warrants that
it is not aware of any communications alleging that
it has violated or, by conducting its business as
currently proposed under this Agreement, would
violate any of the Intellectual Property Rights of
-39-
any Third Person other than [**] in carrying out its
responsibilities under this Agreement or in granting
the licenses under this Agreement.
2. [**]. Generex represents and warrants, to the best of
Generex's belief, that there is no material
unauthorized use, infringement or misappropriation by
Generex of Intellectual Property Rights of [**] .
Specifically, Generex represents and warrants that,
to the bests of its knowledge, the Generex Patent
Rights, Generex Know-How and Generex Formulation [**]
.
(b) Freedom to Operate. Generex further represents and warrants
that, to the best of Generex's belief, the Generex Patent
Rights and Generex Know-How are sufficient rights to enable
the Parties to achieve the purposes of this Agreement and that
there are no Intellectual Property Rights owned or Controlled
by any Third Person that would be necessary for such purposes.
(c) Full Disclosure. Generex represents and warrants that it
believes that it has provided Lilly with all information that
Lilly has requested for deciding the merits of entering into
this Agreement and all information reasonably useful or
necessary to enable Lilly to make an informed decision
regarding entering into this Agreement including, without
limitation, all material information that potentially could
have an impact on this Agreement and/or any rights granted
hereunder. Such information includes, but is not limited to,
information related to the Generex Formulation including the
Device, any material details of how to make the Generex
Formulation including the Device, the changes that have been
made to the Formulation since beginning clinical trials,
[**].
(d) Product Quality. If Generex is selected to supply Product,
Generex hereby represents and warrants that:
1. it will use diligent efforts to set in place any
applicable quality systems necessary for Lilly to
obtain appropriate ISO9000 series designation in the
U.S. and C.E. marking in Europe, for Devices, if
necessary, in accordance with the Product Development
Plan; and
2. any Product manufactured by Generex hereunder shall:
(i) conform to the specifications for the Product in
effect at the time of delivery; (ii) not be
adulterated or misbranded within the meaning of the
U.S. Food, Drug and Cosmetic Act of 1938, as amended
from time to time, nor constitute an article that may
not be introduced into interstate commerce under the
provisions of Section 505 of said Act; (iii) conform
to the certificates of analysis supplied with the
shipment of the Product; (iv) meet applicable cGLPs,
cGMPs and QSRs and be manufactured in facilities that
-40-
meet applicable cGMPs and QSRs; and (v) be packaged
and shipped in accordance with mutually agreed to
procedures.
(e) Employee Obligations. Generex hereby represents and warrants
that all of its employees, officers and consultants who will
work on the Product Development Program have legal obligations
requiring, in the case of employees and officers, assignment
to Generex of all inventions made during the course of and as
a result of their association with Generex and obligating the
individual to maintain as confidential the Confidential
Information of Generex, as well as the Confidential
Information of a Third Person which Generex may receive.
(f) Compliance with Laws. Generex hereby represents and warrants
that in carrying out its work under the Product Development
Program such work will be carried out in compliance with any
applicable laws including, without limitation, federal, state,
or local laws, regulations, or guidelines governing the work
at the site where such work is being conducted. Moreover,
Generex represents and warrants that in connection with
carrying out its work under the Product Development Program,
as applicable based on the specific work to be conducted, it
will carry out such work under the Product Development Program
in accordance with current cGLP, cGCP, cGMP and QSRs.
(g) No Debarment. Generex hereby represents and warrants that it
will comply at all times with the provisions of the Generic
Drug Enforcement Act of 1992 and will upon request certify in
writing to Lilly that none of it, its employees, or any person
providing services to Generex in connection with the
collaboration contemplated by this Agreement have been
debarred under the provisions of such Act.
10.2 Lilly Representations. Lilly hereby represents and warrants to Generex
as follows:
(a) Employee Obligations. Lilly hereby represents and warrants
that all of its employees, officers and consultants have legal
obligations requiring, in the case of employees and officers,
assignment to Lilly of all inventions made during the course
of and as a result of their association with Lilly and
obligating the individual to maintain as confidential the
confidential information of Lilly, as well as the confidential
information of a Third Person which Lilly may receive.
(b) Compliance with Laws. Lilly hereby represents and warrants
that in carrying out its work under the Product Development
Program such work shall be carried out in compliance with any
applicable laws including, without limitation, federal, state,
or local laws, regulations, or guidelines governing the work
at the site where such work is being conducted. Moreover,
-41-
Lilly represents and warrants that in connection with carrying
out its work under the Product Development Program, as
applicable based on the specific work to be conducted, it will
carry out such work under the Product Development Program in
accordance with current cGLP, cGCP, cGMP.
(c) No Debarment. Lilly hereby represents and warrants that it
will comply at all times with the provisions of the Generic
Drug Enforcement Act of 1992 and will upon request certify in
writing to Generex that none of it, its employees, or any
person providing services to Lilly in connection with the
collaboration contemplated by this Agreement have been
debarred under the provisions of such Act.
ARTICLE 11
INFRINGEMENT OF THIRD PERSON RIGHTS
11.1 Notice. If the research, development, manufacture, use, sale, offer for
sale or importation of a Product results in a claim for patent
infringement, the Party to this Agreement first having notice shall
promptly notify the other Party in writing. The notice shall set forth
the facts of the claim in reasonable detail.
11.2 Litigation Involving Product. Lilly shall defend against any such Third
Person claim of infringement involving the manufacture, use, sale,
offer for sale or importation of a Product. Generex shall cooperate
with Lilly at Lilly's request in such defense and shall have the right
to be represented by counsel of its own choice at Generex's expense. If
Lilly is required by a final court order or a settlement entered into
in good faith to make payments (including royalty payments on future
Net Sales of Products by Lilly) to a Third Person in connection with
the disposition of such claim, Lilly shall make all such payments,
which shall be deemed a cost associated with the acquisition of
intellectual property as described in Section 6.3(c) and, therefore
shall be creditable against royalties in accordance with and subject to
the provisions of Section 6.3(c) of this Agreement.
-42-
ARTICLE 12
INFRINGEMENT BY THIRD PERSONS
12.1 Notice. If any Generex Right that involves Product is infringed and/or
misappropriated by a Third Person, the Party first having knowledge of
such infringement/misappropriation shall promptly notify the other in
writing. The notice shall set forth the facts of such infringement
and/or misappropriation in reasonable detail.
12.2 Prosecution of Actions Involving Product.
(a) Lilly shall have the primary right, but not the obligation, to
institute, prosecute and control any action or proceeding with
respect to any infringement/misappropriation of any of the
Generex Rights arising from the use thereof and involving
Product, by counsel of its own choice. Generex shall cooperate
with Lilly at Lilly's request in the prosecution of such
action or proceeding. If Lilly reasonably determines that
Generex is an indispensable party to the action, Generex
hereby consents to be joined. In such event, Generex shall
have the right to be represented in that action by counsel of
its own choice and at Generex's expense.
(b) If Lilly fails to bring an action or proceeding within a
period of ninety (90) days after receiving written notice from
Generex or otherwise having knowledge of that
infringement/misappropriation of Generex Rights involving
Product, as described in Section 12.2(a) of this Agreement,
Generex shall have the right to bring and control any such
action by counsel of its own choice and expense. If Generex
reasonably determines that Lilly is an indispensable party to
the action, Lilly hereby consents to be joined. In such event,
Lilly shall have the right to be represented in that action by
counsel of its own choice and at Lilly's expense.
(c) No settlement, consent judgment or other voluntary final
disposition of a suit under this Section 12.2 may be entered
into without the joint consent of Lilly and Generex (which
consent shall not be unreasonably withheld).
(d) If Lilly brings action, any damages or other monetary awards
recovered by Lilly attributable to sales of Products, shall be
applied first to defray the reasonable costs and expenses
incurred in the action by both Parties. If any balance
remains, Lilly shall pay Generex an amount equal to [**] of
such remaining balance.
(e) If Lilly fails to bring action and Generex brings action, any
damages or other monetary awards recovered by Generex
attributable to sales of Product derived therefrom, shall be
applied first to defray the reasonable costs and expenses
incurred in the action by both Parties. If any balance
-43-
remains, Generex shall first retain an amount equal to [**] of
such balance, then any remaining balance would be paid to
Lilly.
12.3 Infringement of Generex Rights Outside Field. In the event that any
Generex Rights that have application outside the Field are infringed
and/or misappropriated outside the Field by a Third Person, the Party
first having knowledge of such infringement and/or misappropriation
shall notify the other as set forth above and the Parties shall consult
with each other as to how they should proceed, but each Party shall be
free to pursue or protect its own respective interests to the extent it
is legally entitled to do so. Generex hereby agrees to use commercially
reasonable efforts to diligently enforce such Generex Rights that have
application outside the Field provided that Generex shall not be
required to initiate litigation in connection with said efforts.
-44-
ARTICLE 13
MUTUAL INDEMNIFICATION
13.1 Responsibility and Control. Lilly and Generex shall each be solely
responsible for the safety of its own employees, agents, licensees or
sublicensees with respect to Product research and development,
marketing, selling and detailing the Products, and each shall hold the
other harmless with regard to any liability for damages or personal
injuries resulting from acts of its respective employees, agents or
Affiliates.
13.2 Generex's Right to Indemnification. Lilly shall indemnify each of
Generex, its successors and assigns, and the directors, officers,
employees, agents and counsel thereof (the "Generex Indemnitees"),
defend and hold each Generex Indemnitee harmless from and against any
and all liabilities, damages, losses, settlements, claims, actions,
suits, penalties, fines, costs or expenses (including, without
limitation reasonable attorneys' fees) (any of the foregoing,
"Damages") incurred by or asserted against any Generex Indemnitee of
whatever kind or nature, including, without limitation, any claim or
liability based upon negligence, warranty, strict liability, violation
of government regulation or infringement of patent or other proprietary
rights, but only to the extent arising from or occurring as a result of
a claim or demand made by a Third Person (a "Third Person Claim")
against any Generex Indemnitee because of
(a) breach of any warranty made by Lilly pursuant to Article 10;
(b) the safety or dosage of the Product, unless attributable to an
item identified in Section 13.3 below which is under the
responsibility of Generex;
(c) the manufacture, processing, testing, packaging, sale or
promotion of any Product, or the establishment of
specifications for the manufacture, processing, testing, sale
or packaging of a Product by or on behalf of Lilly or its
sublicensees (except activities undertaken by Generex);
(d) the failure of Lilly to disclose any material or drug safety
information in Lilly's possession to Generex regarding any
Product;
(e) the labeling, warehousing, distribution or detailing of any
Product by or on behalf of Lilly or its sublicensees; or
(f) any breach of this Agreement by Lilly, except, in each such
case, to the extent that such Damages are finally determined
to have resulted from the negligence or misconduct of Generex
or an Affiliate of Generex.
Generex shall promptly notify Lilly of any Third Person Claim,
upon becoming aware thereof, shall permit Lilly at Lilly's cost to
defend against such Third Person Claim and to control the defense and
disposition (including, without limitation, all decisions to litigate,
settle or appeal) of such claim and shall cooperate in the defense
thereof. Generex may, at its option and expense, have its own counsel
participate in any proceeding that is under the direction of Lilly and
shall cooperate with Lilly and its insurer in the disposition of any
such matter.
-45-
13.3 Lilly's Right to Indemnification. Generex shall indemnify each of
Lilly, its successors and assigns, and the directors, officers,
employees, agents and counsel thereof (the "Lilly Indemnitees"), defend
and hold each Lilly Indemnitee harmless from and against any and all
Damages incurred by or asserted against any Lilly Indemnitee of
whatever kind or nature, including, without limitation, any claim or
liability based upon negligence, warranty, strict liability, violation
of government regulation or infringement of patent or other proprietary
rights, but only to the extent arising from or occurring as a result of
a Third Person Claim against any Lilly Indemnitee because of
(a) breach of any warranty made by Generex pursuant to Article 10;
(b) the failure of Generex to manufacture, process, test or
package Product according to specifications, and the sale or
promotion of any Product by or on behalf of Generex (except
for activities undertaken by Lilly);
(c) the failure of Generex to disclose any material or drug safety
information in Generex's possession to Lilly regarding any
Product;
(d) the labeling, warehousing, distribution or detailing of a
Product by Generex; or
(e) any breach of this Agreement by Generex, except, in each such
case, to the extent that such Damages are finally determined
to have resulted from the negligence or misconduct of Lilly,
sublicensee of Lilly or an Affiliate of Lilly.
Lilly shall promptly notify Generex of any Third Person Claim,
upon becoming aware thereof, and permit Generex at Generex's cost to
defend against such Third Person Claim and to control the defense and
disposition (including, without limitation, all decisions to litigate,
settle or appeal) of such Third Person Claim and shall cooperate in the
defense thereof. Lilly may, at its option and expense, have its own
counsel participate in any proceeding that is under the direction of
Generex and will cooperate with Generex or its insurer in the
disposition of any such matter.
ARTICLE 14
CONFIDENTIALITY AND PUBLICATIONS
14.1 Confidentiality. Unless otherwise set forth in this Agreement, for a
period from the Effective Date until five (5) years following the later
of: (a) the expiration or termination of this Agreement, or (b) if
Lilly is marketing a Product, the date on which Lilly ceases to market
any Product, Lilly and Generex shall maintain in confidence all
Confidential Information disclosed by the other Party (the "Disclosing
Party") or generated pursuant to a Product Development Plan, and shall
not, except as contemplated by this Agreement, use such Confidential
Information for its benefit or the benefit of others, without the
written consent of the Disclosing Party. In addition, Lilly and Generex
agree not to disclose any trade secret information belonging to the
-46-
other Party for so long as the trade secret remains confidential.
Documents made available to the receiving Party shall remain the
property of the Disclosing Party and shall be returned upon written
request, except that one copy of all such information may be retained
for legal archival purposes by the receiving Party.
14.2 Publications. While it is understood that employees of Lilly and
Generex at some point shall be free to publish the results of their
studies carried out under this Agreement, each Party agrees that the
Steering Committee will review and approve a disclosure policy to
provide the Parties with guidance as to the content and timing of all
disclosures. In addition, each Party shall provide the other Party the
opportunity to review any proposed manuscripts that disclose research
carried out under the Product Development Program at least sixty (60)
days prior to their intended submission for disclosure and, upon
request, shall delay submission for a period sufficient to permit
adequate steps to be taken to seek patent protection for any patentable
subject matter referred to therein. The disclosing Party shall avoid
disclosure of any Confidential Information or trade secret information
of the other Party. Each Party agrees to respond to requests for review
within sixty (60) days of receipt. In the event the Parties disagree
with respect to the nature of the disclosure to be made in a proposed
disclosure, the Parties shall refer such disagreement to the Steering
Committee for resolution. All publications shall give due credit to all
individuals contributing to the developments described in the
publication.
Notwithstanding the provisions of Section 14.1 hereof, Generex
and Lilly may, to the extent necessary, disclose and use Confidential
Information to secure patent protection for an invention developed as a
result of the collaboration undertaken pursuant to this Agreement or to
obtain institutional or government approval to clinically test or
market any Product.
ARTICLE 15
PUBLICITY
15.1 Disclosure of Agreement. Neither Party to this Agreement may release
any Confidential Information to any Third Person regarding the terms or
existence of this Agreement without the prior written consent of the
other Party. Without limitation, this prohibition applies to press
releases, educational and scientific conferences, promotional
materials, governmental filings and discussions with public officials
and the media. However, this provision does not apply to any internal
publications, disclosures regarding this Agreement or related
information to regulatory agencies such as the FDA, Securities and
Exchange Commission or Federal Trade Commission and/or Department of
Justice which may be required by law, including requests for a copy of
this Agreement or related information by tax authorities. If either
Party to this Agreement determines a release of information regarding
the existence or terms of this Agreement is required by law, that Party
-47-
will notify the other Party as soon as practical and give as much
detail as possible in relation to the disclosure required. The Parties
will then cooperate with respect to determining what information will
actually be released; notwithstanding, Lilly shall have the right to
review and comment on all filings required by the SEC or other
agencies. The Parties hereby agree to issue a press release upon
complete execution of this Agreement. Such press release may reference
insulin products and may state that the Device may be used for other
products without specifically indicating which products. However, the
press release on this Agreement shall not identify the Option
Compounds. In addition, the press release shall not provide financial
information. A copy of such press release is attached hereto as Exhibit
C of this Agreement.
15.2 Cooperation on Hart-Scott-Rodino Filing and Approval. If in the
reasonable opinion of either or both Parties, filing under the HSR Act
is required, then as soon as reasonably practicable after the date that
both Parties have executed this Agreement, both Lilly and Generex will
file with the Federal Trade Commission ("FTC") and the Antitrust
Division of the United States Department of Justice ("DOJ") the
notification and report form (the "HSR Report") required of each of
them regarding the transactions described in this Agreement. After
submitting such HSR Report, each Party will use its reasonable efforts,
including promptly producing documents, witnesses, and information,
rightfully requested by the FTC or DOJ, to obtain HSR Act approval of
such transaction, whether pursuant to expiration or early termination
of applicable HSR Act waiting periods or court approval ("Required HSR
Approval"). Each Party will cooperate with the other to the extent
necessary in preparing the other Party's HSR Report and in obtaining
Required HSR Approval. Each Party will be responsible for its own
costs, expenses, and filing fees associated with any of its filings
under the HSR Act.
15.3 Termination. Both Parties agree that if this Agreement is terminated,
neither Party will disclose its reasons for not proceeding to any Third
Person without the express written consent of the other Party.
ARTICLE 16
TERM AND TERMINATION
16.1 Term. This Agreement shall commence as of the Effective Date and,
unless sooner terminated in whole or in part as specifically provided
in the Agreement, shall continue in effect with respect to a particular
Compound Product until the expiration of the Royalty Period applicable
to that Compound Product.
-48-
16.2 Termination By Lilly.
(a) Termination Right prior to Product Launch. Lilly may terminate
this Agreement for any reason at any time prior to Product
Launch provided Lilly furnishes Generex with ninety (90) days
written notice of the same.
(b) Termination Right after Product Launch. Lilly may terminate
this Agreement for any reason at any time after Product Launch
provided Lilly furnishes Generex with one hundred and eighty
(180) days written notice of the same.
(c) Consequences of Termination under this Section 16.2. In
addition to the provisions set forth in Sections 16.5 and
16.6, in the event that Lilly terminates this Agreement
pursuant to this Section 16.2 of this Agreement, Generex, upon
the effective date of such termination, shall be entitled to
the following:
1. License Termination. The following licenses shall
terminate after Lilly and Generex have negotiated the
cost to Generex of transferring Regulatory Material
from Lilly to Generex under this Section 16.2(c)(2):
(i) the license granted under Generex Rights
in Section 5.1 of this Agreement shall terminate and
revert in its entirety to Generex.
(ii) the license granted under Program
Patent Rights in Section 5.2 (that claim Sole
Inventions of Generex) shall terminate and revert in
its entirety to Generex.
(iii) the license granted under Program
Patent Rights in Section 5.2 (that claim Joint
Inventions of Lilly and Generex) shall terminate and
revert to Generex (to the extent that Generex has an
interest in such Patent Rights);
(iv) the license granted under Program
Know-How in Section 5.2 shall terminate and revert to
Generex (to the extent that Generex has an interest
in such Know-How).
For avoidance of doubt, any Program Patent
Rights that claim Joint Inventions shall remain
jointly owned.
2. Access to Regulatory Material. Lilly shall, to the
extent that it is legally entitled to do so,
immediately transfer possession and legal ownership
to all Regulatory Materials (and shall cause any
subcontractor used by Lilly to do the same) provided
that such transfer does not affect in any way Lilly's
rights under this Agreement. Subsequent to such
transfer, Generex may continue with the research and
-49-
development under this Agreement as long as Generex
continues to negotiate in good faith a price for
Generex's continued use of the Regulatory Material.
Such price shall take into account Lilly's fully
burdened costs incurred in developing such Regulatory
Material and may include the payment of a royalty to
Lilly on Net Sales of Product in the Territory for
the Royalty Period.
3. Supply Agreement. In the event that Generex elects to
continue to develop and commercialize a buccal
delivery system for insulin, and upon Generex's
request and subject to the transfer of Regulatory
Material in Section 16.2(c)(2), Lilly will negotiate
a price of no more than [**] per gram of insulin at
which it is willing to supply insulin to Generex and
thereafter the Parties shall discuss resourcing any
capital expenses if it is necessary for Lilly to
increase capacity for supplying insulin to Generex.
The price of no more than [**] per gram of
insulin will be adjusted upward annually on the
anniversary date of this Agreement commencing in the
year after the Effective Date using the Consumer
Price Index indexing [U.S. Bureau of Labor Statistics
for all urban consumers, U.S. city average (July 2000
equals 172.6 and -1982 to 1984 equals 100; Series
CUUR0000SA0] to account for inflation. This agreement
to supply is specific to insulin.
4. Sales of Product. If Lilly terminates this Agreement
under Section 16.2(b), Lilly may elect to continue to
sell Product until the Parties have negotiated the
transfer of Regulatory Material and a reasonable
royalty rate under Section 16.2(c)(2).
Notwithstanding the foregoing, if Lilly terminates this Agreement under
this Section 16.2 because of Product safety or health concerns Lilly
shall be under no obligation to transfer possession and legal ownership
to Regulatory Material to Generex under this Section 16.2 of this
Agreement. Further, if Lilly terminates this Agreement under Section
16.2 because of a Product's unacceptable clinical trial results or for
any other significant technical failure, Lilly shall retain
non-exclusive rights under any Program Patent Rights that claim Sole
Inventions of Generex and Program Know-How that relate to a Lilly
Compound.
16.3 Termination for Breach.
(a) Notification and Opportunity to Cure. If either Party believes
the other Party is in breach of any material obligations under
this Agreement or the Manufacturing Agreement, it may give
notice of such breach to the other Party, which Party shall
-50-
have ninety (90) days in which to remedy such breach. Such
ninety (90) day period shall be extended in the case of a
breach not capable of being remedied in such ninety (90) day
period so long as the defaulting Party uses diligent efforts
to remedy such breach and is pursuing a course of action that,
if successful, will effect such a remedy. If such breach is
not remedied in the time period set forth above or if the
Party alleged to be in breach disputes the existence of any
breach, the Party alleging breach shall refer the matter to
the President of Generex and to the Lilly President of
Diabetes and Growth Disorders Product Group (or successor
position) for business issues and the Lilly Executive Director
of BioPharma Science/Delivery Systems (or successor position)
for scientific issues who shall meet and confer within fifteen
(15) days after notice from the non-defaulting Party of its
desire for such a meeting.
(b) Generex Material Breach. In the case of any dispute relating
to a breach that Lilly claims is a Generex Material Breach (as
defined below) that is not resolved pursuant to (a) above,
Lilly may give written notice to Generex of termination of
this Agreement pursuant to this Section 16.3, which
termination shall be effective thirty (30) days after such
notice. Upon such termination, the following terms shall
apply:
(1) Lilly may, at its sole discretion, continue selling
or terminate in all countries any Product that has
received Regulatory Approval in any country,
provided, however, that Lilly shall continue to be
obligated to pay all financial obligations under this
Agreement subject to Section 16.3(b)(4) below;
(2) Lilly may, at its sole discretion, continue or
terminate independent development of any Product that
has not received Regulatory Approval contemplated by
this Agreement in which case all licenses granted to
Lilly by Generex under Article 5 shall survive
termination of the Agreement and Lilly shall continue
to be obligated to pay all financial obligations
under this Agreement subject to Section 16.3(b)(4)
below;
(3) In the event that Lilly elects to terminate sales or
development of any Product, Lilly is under no
obligation to supply insulin to Generex or to
transfer any Know-How or Regulatory Material to
Generex;
(4) If a Generex Material Breach relates to the supply of
Product, Lilly may, at its sole discretion, continue
to have Generex supply Product under the
Manufacturing Agreement in which case Lilly shall
place into escrow [**] of the then-current royalty on
Net Sales of Product during the time period in which
Generex is in Material Breach if such Breach is
related to the supply of Product to Lilly, and [**]
of the then current royalty on Net Sales of Product
during the time period in which Generex is in
-51-
Material Breach if such Breach is not related to the
supply of Product to Lilly.
(c) Generex Material Breach Defined. For purposes of this Section
16.3, the term Generex Material Breach shall mean a breach of
this Agreement by Generex that results in a substantial
reduction in the value of the licenses and other rights
granted to Lilly by Generex under this Agreement, taking into
account the value of such rights prior to and after such
breach and all other factors deemed relevant by the Court
adjudicating this dispute.
In addition, any breach of a representation or warranty by
Generex relating to intellectual property is deemed to be a
Generex Material Breach.
(d) Remedies Following Termination Under Section 16.3 Upon a final
judicial determination of whether Generex has breached this
Agreement, whether or not any such breach is a Generex
Material Breach, and the amount of damages that Lilly has
incurred as a result of any such breach, the following
provisions shall apply:
(1) If it is determined that Generex has breached the
Agreement, Lilly shall be entitled to all monetary
damages resulting from such breach, and such other
relief as the Court may award. To the extent that the
funds paid into escrow by Lilly pursuant to Section
16.3(b)(4) are sufficient for such purpose, such
damages shall be remitted to Lilly direct from the
escrowed funds.
(2) If it is determined that a Generex Material Breach
has occurred, in addition to the relief described in
16.3(b)(1) above, Lilly shall be entitled to recover
its litigation costs and interest at the rate
applicable to money judgments in the jurisdiction in
which such matter is determined on all funds paid
into escrow by Lilly pursuant to Section 16.3(b)(4)
up to the total amount of damages to which Lilly is
entitled.
(3) If it is determined that a Generex Material Breach
has not occurred, the Agreement shall be reinstated
in full, and Generex shall be entitled to monetary
damages resulting from Lilly's termination of the
Agreement and actions under Section 16.3(c), and such
other relief as the Court may award.
(4) If it is determined that Generex has not breached the
Agreement, in addition to the relief described in
Section 16.3(b)(3) above, Generex shall be entitled
to recover its litigation costs and interest at the
rate applicable to money judgments in the
jurisdiction in which such matter is determined on
all funds paid into escrow by Lilly up to the total
amount of damages to which Generex is entitled.
-52-
(e) Generex's Termination due to Lilly's breach. If Generex
terminates this Agreement because of Lilly's material breach,
the Parties agree to the following, subject to a court
determination that Lilly has materially breached the
Agreement:
(1) all license rights granted to Lilly under Article 5
shall terminate;
(2) Lilly shall transfer Know-How and Regulatory Material
to Generex;
(3) Lilly shall continue to supply insulin at a price
consistent with Section 16.2 to Generex for
subsequent development and commercialization of
Product.
16.4 Termination for Insolvency. Either Party may terminate this Agreement
upon notice to the other should the other Party become insolvent or
file or consent to the filing of a petition under any bankruptcy or
insolvency law or have any such petition filed against it which has not
been stayed within sixty (60) days of such filing.
16.5 Change of Control. In the event of a Change of Control, Generex shall
notify Lilly of such change specifying the effective date of the change
and the name(s) of the controlling party or parties. Lilly shall have
thirty (30) days from the date of such notice to notify Generex of
Lilly's decision to terminate any on-going Product Development
Program(s) and thereafter conduct all research, development and
manufacturing activities independently or terminate the Agreement. In
such event, all rights and obligations in the present Agreement shall
remain in force including Lilly's right to select Generex to supply
Product under a Manufacturing Agreement as provided herein. Lilly shall
be under no obligation to supply insulin or transfer Regulatory
Materials to Generex under a Change of Control.
16.6 Surviving Rights. Termination of this Agreement shall not terminate
Lilly's obligation to pay all milestone payments, royalties and other
payments which shall have accrued hereunder (including any milestone
payments then accrued but not yet due under Section 6.4). The
obligations of the Parties under Articles 8 (Record-Keeping and
Audits), 9 (Intellectual Property), 12 (Infringement by Third Persons),
13 (Mutual Indemnification), 14 (Confidentiality) and 16 (Termination)
of this Agreement will survive the termination or expiration of this
Agreement.
16.7 Accrued Rights, Surviving Obligations. Termination, relinquishment or
expiration of the Agreement for any reason shall be without prejudice
to any rights which shall have accrued to the benefit of either Party
prior to (or as a result of, including, without limitation, rights
available under law and equity) such termination, relinquishment or
-53-
expiration. Such termination, relinquishment or expiration shall not
relieve either Party from obligations that are expressly indicated to
survive termination or expiration of the Agreement.
16.8 Remedies Not Exclusive. The remedies provided in this Section 16 are
not exclusive and, therefore, shall neither preclude nor prejudice any
other rights or remedies available to the Parties including, without
limitation, any rights or remedies that may be available at law or in
equity.
ARTICLE 17
EXCLUSIVITY
17.1 Exclusivity. During the term of this Agreement, each Party agrees to
work exclusively with the other in the Field notwithstanding Lilly's
right to sublicense in accordance with Section 5.1 and Section 5.2,
herein, and Generex shall not license or collaborate with any Third
Person with regard to Compounds.
However, Lilly retains the right to enter into [**] agreements with
Third Persons related to [**] including for purposes of this Agreement.
Lilly also retains the right to enter into other agreements related to
[**] with Third Persons; provided that Lilly shall notify Generex prior
to entering any agreement relating to [**] .
In addition, both Parties agree that either Party may enter
into Third Person agreements related to the [**] .
Each Party hereby represents that as of the Effective Date,
such Party does not have any [**] .
ARTICLE 18
MISCELLANEOUS
18.1 Agency. Neither Party is, nor shall be deemed to be, an employee,
agent, co-venturer or legal representative of the other Party for any
purpose. Neither Party shall be entitled to enter into any contracts in
the name of, or on behalf of the other Party, nor shall either Party be
entitled to pledge the credit of the other Party in any way or hold
itself out as having the authority to do so.
18.2 Assignment. Except as otherwise provided herein, neither this Agreement
nor any interest hereunder shall be assignable by any Party without the
prior written consent of the other (which consent shall not be
unreasonably withheld; provided, however, that either Party may assign
this Agreement to any wholly-owned subsidiary or to any successor by
merger or sale of substantially all of its business unit to which this
Agreement relates in a manner such that the assignor (if it continues
as a separate entity) shall remain liable and responsible for the
performance and observance of all its duties and obligations hereunder.
-54-
This Agreement shall be binding upon the successors and permitted
assignees of the Parties and the name of a Party appearing herein shall
be deemed to include the names of such Party's successors and permitted
assigns. Any assignment not in accordance with this section shall be
void.
18.3 Further Actions. Each Party agrees to execute, acknowledge and deliver
such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent
of this Agreement.
18.4 Force Majeure. Neither Party shall be liable to the other for loss or
damages or shall have any right to terminate this Agreement for any
default or delay attributable to any force majeure event, including but
not limited to acts of God, acts of government, war, fire, flood,
earthquake, strike, labor dispute and the like, if the Party affected
shall give prompt notice of any such cause to the other Party. The
Party giving such notice shall thereupon be excused from such of its
obligations hereunder as it is thereby disabled from performing for so
long as it is so disabled and for sixty (60) days thereafter; provided,
however, that such affected Party commences and continues to take
reasonable and diligent actions to cure such cause.
18.5 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed effective upon actual receipt given if
delivered personally or by facsimile transmission (receipt verified),
telexed, mailed by registered or certified mail (return receipt
requested), postage prepaid, or sent by express courier service, to the
Parties at the following addresses (or at such other address for a
Party as shall be specified by like notice; provided, that notices of a
change of address shall be effective only upon receipt thereof):
If to Lilly, addressed to: Eli Lilly and Company
Lilly Corporate Center
Indianapolis, Indiana 46285
Attn: General Counsel
If to Generex, addressed to: Generex Biotechnology Corporation
33 Harbour Square, Suite 202
Toronto, Ontario
CANADA M5J 2G2
Attn: Anna Gluskin, CEO
18.6 Amendment. No amendment, modification or supplement of any provision of
the Agreement shall be valid or effective unless made in writing and
signed by a duly authorized officer of each Party.
18.7 Waiver. No provision of the Agreement shall be waived by any act,
omission or knowledge of a Party or its agents or employees except by
-55-
an instrument in writing expressly waiving such provision and signed by
a duly authorized officer of the waiving Party.
18.8 Counterparts. The Agreement may be executed simultaneously in two
counterparts, either one of which need not contain the signature of
more than one Party but both such counterparts taken together shall
constitute one and the same agreement.
18.9 Descriptive Headings. The descriptive headings of this Agreement are
for convenience only, and shall be of no force or effect in construing
or interpreting any of the provisions of this Agreement.
18.10 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the substantive laws of the State of New York, without
regard to its choice of law rules.
18.11 Severability. Whenever possible, each provision of the Agreement will
be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of the Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of the Agreement. In the event of
such invalidity, the Parties shall seek to agree on an alternative
enforceable provision that preserves the original purpose of this
Agreement.
18.12 Compliance with Law. Nothing in the Agreement shall be deemed to permit
Lilly to export, re-export or otherwise transfer any Information
transferred hereunder or Products manufactured therefrom without
compliance with applicable laws.
18.13 Entire Agreement of the Parties. This Agreement, including the Exhibits
attached hereto, constitutes and contains the complete, final and
exclusive understanding and agreement of the Parties hereto, and
cancels and supersedes any and all prior negotiations, correspondence,
understandings and agreements, whether oral or written, between the
Parties respecting the subject matter hereof. In the event there is a
discrepancy between the Exhibits and the Agreement the Agreement shall
control.
18.14 Jointly Prepared. This Agreement has been prepared jointly and shall
not be strictly construed against either party.
18.15 Dispute Resolution. Disputes arising under this Agreement regarding the
Product Development Program and/or Product Development Plan thereunder
shall be submitted in the first instance to the Chief Executive Officer
of Generex (or successor position) and the President of the Diabetes
Care and Growth Disorders Products Group at Lilly (or successor
position). The President of the Diabetes Care and Growth Disorders
-56-
Products Group at Lilly will make the ultimate determination as to how
a dispute will be resolved.
Any other disputes arising under this Agreement, including its
interpretation and the enforcement of any rights or obligations
hereunder, shall be resolved in a court of law. For avoidance of doubt,
disputes relating to ownership of patents are considered disputes
relating to enforcement of rights.
18.16 Non-Solicitation of Employees. While the Parties are conducting the
Product Development Program under this Agreement, and for a period of
one (1) year thereafter, each Party agrees that it will not directly
recruit, solicit or induce any employee of the other Party who is
directly associated with the Product Development Program to terminate
his or her employment with such other Party. However, nothing set forth
in this section shall prohibit a Party from indirectly recruiting,
soliciting or inducing such employees to leave the other Party through
the use of advertisements in trade journals and the like or from
discussing employment opportunities with such employees to the extent
such employees contact such Party first.
IN WITNESS WHEREOF, the Parties hereto have as of the Effective Date
duly executed this Agreement.
ELI LILLY AND COMPANY GENEREX BIOTECHNOLOGY CORPORATION
By: /s/August M. Watanabe By: /s/Anna E. Gluskin
------------------------------ -------------------------------
Name: August M. Watanabe Name: Anna E. Gluskin
Title: Executive Vice President -- Title: President
Science/Technology
-57-
Exhibit A
Royalty Calculation Example
In a particular year, Lilly Net Sales for a given year are equal to the
following:
Compound Product A: $ [**]
Compound Product B: $ [**]
For simplicity, CPI adjustments are excluded from this example:
For royalties due on Compound Product A with annual Net Sales of $ [**]
Annual Sales ($/yr) Royalty Royalty Due Generex
- -------------------------------------------------------------------------
0 to [**] [**] $[**]
[**] to [**] [**] $[**]
[**] to [**] [**] $[**]
[**] to [**] [**] $[**]
[**] to [**] [**] $[**]
[**] to [**] [**] [**]
[**] to [**] [**] [**]
over [**] [**] [**]
- --------------------------------------------------------------------------
Total $ [**]
For royalties due on Compound Product B with annual Net Sales of $ [**]
Annual Sales ($/yr) Royalty Royalty Due Generex
- -------------------------------------------------------------------------
0 to [**] [**] $[**]
[**] to [**] [**] $[**]
[**] to [**] [**] $[**]
[**] to [**] [**] $[**]
[**] to [**] [**] $[**]
[**] to [**] [**] $[**]
[**] to [**] [**] $[**]
Over [**] [**] $[**]
- -------------------------------------------------------------------------
Total $ [**]
-58-
Exhibit B
[** -- Five Pages Omitted]
-59-
Exhibit C
Example Press Release (Draft)
Lilly and Generex Sign Agreement To Develop
Buccal Form of Insulin
Eli Lilly and Company (NYSE: LLY) and Generex Biotechnology Corporation (NASDAQ:
GNBT) today announced that they have signed an agreement to develop a buccal
formulation of insulin that is administered as a fine spray into the oral cavity
using Generex proprietary technology.
Under the terms of the agreement, Generex will receive certain initial fees and
milestone payments. Generex will also receive royalty payments based on product
sales. In exchange, Lilly will receive exclusive worldwide rights to products
resulting from the collaboration. Lilly will be responsible for conducting
clinical trials, securing regulatory approvals and marketing on a worldwide
basis. Clinical trials of the first product candidate are under way in North
America and Europe. Lilly will also have the option to develop a number of
additional products depending on the success of the initial product.
"We look forward to working with Generex, whose buccal spray delivery technology
potentially represents a novel approach to drug delivery," said James A. Harper,
president, diabetes and growth disorders products for Lilly. "A buccal spray
formulation of insulin could provide an attractive alternative for people with
diabetes."
"The opportunity to partner with Lilly, the global leader in diabetes care, to
develop the world's first marketed buccal insulin spray represents very good
news for millions of patients with diabetes throughout the world," said Anna
Gluskin, chief executive officer of Generex. "We are pleased that Lilly has
recognized the potential of buccal delivery of insulin and Generex's
RapidMist(TM) technology for systemic delivery of proteins, peptides and other
large molecule drugs."
-64-
Today, worldwide costs for treating diabetes and its complications are estimated
to exceed $200 billion annually. It is also estimated that, over the next
decade, the number of people with this disease will more than double. Lilly has
been a leader in diabetes care for more than 70 years. The company continues to
aggressively pursue the goal of being a complete diabetes care company and
intends to provide innovative products to treat all types and stages of
diabetes.
Generex is engaged in the research and development of drug delivery systems and
technologies. To date, it has focused on developing a platform technology for
the buccal delivery (absorption through the inner cheek walls) of large molecule
drugs which, historically, have been administered only by injection. Additional
information about Generex can be found at www.generex.com.
Lilly, a leading innovation-driven corporation, is developing a growing
portfolio of best-in-class pharmaceutical products by applying the latest
research from its own worldwide laboratories and from collaborations with
eminent scientific organizations. Headquartered in Indianapolis, Ind., Lilly
provides answers - through medicines and information - for some of the world's
most urgent medical needs.
Certain statements set forth above may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Although Generex and Lilly believe that such statements are based on reasonable
assumptions within the bounds of their knowledge of their business and
operations, there can be no assurance that: (i) Lilly or Generex will not
terminate the collaboration, (ii) that any products will be developed,
manufactured or commercialized successfully, or (iii) that significant funding
will be received by Generex as a result of this collaboration.
Each company's business is subject to significant risks and there can be no
assurance that actual results of the companies' development activities and
results of their operations will not differ materially from expectations. For
information with respect to other factors, which could cause actual results to
differ from expectations, reference is made to the 10-K and 10-Q reports filed
by Generex and Lilly, respectively, with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended.
-65-
Exhibit D
Product Development Plan
[This page was blank in executed agreement]
-66-
Exhibit E
Generex Patents
[This page was blank in executed agreement]
-67-
Exhibit F
Description of Device
[This page was blank in executed agreement
-68-
Exhibit G
ADVERSE EVENT REPORTING PROCEDURES
The following are the procedures for handling the reporting of adverse drug
events with Product:
1. Definitions:
"Adverse Event" means any untoward happening in a patient or human
subject after the onset of administration of Product without regard to
a causal relationship between such Product and the event, and whether
or not such event is considered drug related.
2. If Generex or any employee, representative or agent thereof
(collectively, the `Receiving Party") is contacted with an Adverse
Event report, the Receiving Party will record the information set forth
in paragraphs 3 and 4, below, and immediately, but in no event later
than three (3) working days, FAX a report to Lilly at 317-277-0853.
3. The Receiving Party will provide the following information to Lilly:
o The Receiving Party employee's, representative's or agent's
name
o Reporter status (e.g., physician) with:
o Name
o Full address
o Telephone number
o Drug/medical device information
o Adverse experience
o Patient outcome
o Did the event result in any of the following
o Death
o Life-threatening
o Hospitalization or prolonged hospitalization
o Severe or permanent disability
o Cancer
o Overdose
o Congenital anomaly
o Require intervention
4. Secondary information:
o Patient's name or initials
o Sex/age
o Therapy dates
o Therapy duration
o Daily dosage
-69-
o Indication for use
o Concomitant medications
o Relevant medical history
o Drug continued or discontinued
o Did event abate
o Control (Lot #) if known
5. Lilly will be responsible for all regulatory reporting relating to
Product.
6. Lilly agrees to provide Generex, upon request, with information
relevant to the safety of the Product in the form of periodic reports.
Generex agrees to forward to Lilly all Adverse Event reports necessary
for Lilly to fulfill its regulatory requirements in the Territory. Both
parties agree to provide adequate and reasonable responses in a timely
manner to bring about the regulatory reporting required herein.
-70-
Exhibit H
Cost Savings Adjustment Example
End of Year 3 with 2/3 of Countries Launched per Section 7.1(a)
Generex Cost of Manufacturing Product (Baseline) 100
Lilly Pays Generex (Baseline plus 15%) 115*
End of Year 4 Example (Generex achieves 20% cost savings)
Generex Cost of Manufacturing Product 80
Cost Savings Adjustment (100-80) * 50% 10
Lilly Payment to Generex 102*
[(Baseline - 2 * Cost Savings Adjustment) * 1.15] + Cost Savings Adjustment
[(100 - 2 * 10) * 1.15] + 10 = 102
End of Year 4 Example (Generex cost exceeds Baseline)
Generex Cost of Manufacturing Product 102
Cost Savings Adjustment 0
Lilly Payment to Generex (102 * 15%) 117.3*
* Subject to Section 7.1 (c) cap.
Note: Cost savings / cost increases to be re-calculated annually. Generex must
maintain cost savings to continue to be eligible for such Cost Savings
Adjustment.
-71-