Exhibit 10.10
REVISED & RESTATED
ROYALTY AGREEMENT
This Royalty Agreement (this "Agreement"), dated as of July 16, 2003 (the
"Effective Date"), is entered into by and between EpiCept Corporation,
successor-in-interest of American Pharmed Labs, Inc., a corporation organized
under the laws of Delaware and having its principal place of business at 270
Sylvan Avenue, Englewood Cliffs, NJ 07632 ("EpiCept") and R. Douglas Cassel,
M.D., an individual with his principal place of business at 4401 Fargreen Road,
Harrisburg, PA 17110 ("Cassel").
WHEREAS:
EpiCept owns the entire right, title and interest in, to and under the
inventions described in U.S. patent application. Serial No. 09/425,925 (the
"'925 application"), entitled, "Local Prevention or Amelioration of Pain from
Surgically Closed Wounds," which issued as U.S. Patent No. 6,383,511 (the "'511
Patent") to Cassel, as the inventor.
For consideration as described herein, Cassel has assigned his entire right,
title and interest in, to and under the inventions described in the '925
application to EpiCept (Exhibit A).
EpiCept and Cassel originally entered into that certain Royalty Agreement, dated
October 6, 1999. EpiCept and Cassel intend and desire that this Agreement amends
and restates the Original Agreement in its entirety and in particular the
parties expressly acknowledge and agree that this Agreement contains a
consulting arrangement with Cassel and, among others, modified and amended
financial provisions and due diligence provisions.
IT IS HEREBY AGREED as follows:
1.0 Definitions
1.1 Affiliate: The term "Affiliate" means, with respect to any person,
entity, or any other person or entity that it directly or indirectly controls,
is under common control with, or is controlled by that person or entity. For
purposes of this definition, "control" (including with correlative meaning, the
terms "controlled by" and under "common control with"), as used with respect to
any person, or entity, means the possession, directly or indirectly, of the
power to direct or to cause the direction of the management and policies of such
person or entity, whether through the ownership of voting securities, by
contract, or otherwise.
1.2 Cassel Technology: The term "Cassel Technology" means all copyrightable
material, notes, records, inventions, improvements, developments, discoveries
and trade secrets conceived, made by or discovered by Cassel outside of the
performances of his services.
1.3 Effective Date: The term "Effective Date" means the date set forth in
the preamble to this Agreement.
-1-
1.4 First Commercial Sale: The term "First Commercial Sale" means, after
all necessary marketing approvals have been obtained in a relevant country, the
initial transfer of a Product in such country to a third party customer not
controlled by EpiCept in exchange for cash or some cash equivalent to which a
value can be assigned for the purpose of determining "Net Sales."
1.5 Patent: The term "Patent" means the '511 Patent and any other patent
issued by the U.S. Patent and Trademark Office or any comparable foreign
authority that results from the '925 application, including, without limitation
U.S. Patent application Serial No. 10/137,685, filed May 3, 2002..
1.6 Product: The term "Product" means any composition of matter, material,
device, apparatus, or system developed by EpiCept for the treatment of pain from
surgically closed wounds, which the making, using, offering for sale, sale or
importation by an unlicensed third party, would infringe one or more issued
claims of a Patent.
1.7 Net Sales: The term "Net Sales" means gross sales of the Products
invoiced by EpiCept or any of its Affiliates to a third party, but not to an
Affiliate, and accepted by the third party, less shipping costs, returns,
allowances, and taxes.
1.8 Territory: The term "Territory" means a territory consisting of the
entire world.
1.9 Royalty Year: The "Royalty Year" shall be a twelve-month calendar year
ending on December 31, except that the first Royalty Year, if the First
Commercial Sale of Product should occur during the year, may be less than twelve
months.
2.0 Royalty
2.1 Monthly Payment: Within *** business days after the end of each
calendar month, EpiCept shall pay to Cassel a payment of four thousand United
States Dollars ($4,000) for a period of three (3) years from the Effective Date.
Such monthly payments shall be fully creditable against future royalty payments
to Cassel, provided that no more than *** of the total annual payments shall be
credited to the royalties payable to Cassel in any one Royalty Year.
2.2 Amount of Royalty: EpiCept shall pay to Cassel, on a
country-by-country, Product-by-Product basis, a royalty of *** of Net Sales of
Product per Royalty Year.
2.3 No Multiple Royalties: No multiple royalties shall be payable in the
event that any Product or the manufacture, use or sale thereof is covered by
more than one patent included in the Patent.
2.4 Payment: EpiCept shall submit a payment to Cassel annually that is
equal to the royalties due for that Royalty Year, less applicable withholding
taxes and credits, except that EpiCept shall reserve and hold back *** of the
royalty payment each Royalty Year to account for returns, allowances, and
write-offs of customer accounts. The reserved royalty payment, adjusted for
returns, allowances, and write-offs of customer accounts, will be paid
-2-
with the following Royalty Year's royalty payments. The royalty payments to
Cassel shall be made within *** days of the end of each Royalty Year in which
Net Sales occurred. With each royalty payment, EpiCept shall submit to Cassel an
itemized statement setting forth the amount of Net Sales during the Royalty Year
and the royalties accrued.
2.5 Records: The books and records of EpiCept which relate to the royalties
under this Agreement shall be open for inspection by an independent accounting
firm appointed by Cassel (subject to the consent of EpiCept, such consent not to
be unreasonably withheld or delayed) for the sole purpose of verifying royalty
payments during regular business hours at such place or places where such books
and records are customarily kept and upon suitable written notice, but not more
frequently than once each year. The relevant records shall be maintained by
EpiCept for a period of three (3) years after the expiration or termination of
this Agreement. The cost of any such inspection shall be paid by Cassel. Any
books and/or records received from EpiCept during the course of any such
inspection shall be kept confidential.
3.0 Term and Termination
3.1 Term: The Term of this Agreement shall begin on the Effective Date, and
unless sooner terminated by the parties as herein provided, shall continue in
full force and effect, on a country-by-country and Product-by-Product basis,
until the date of expiration of expiration of the last to expire patent within
the Patent.
3.2 Termination:
(a) At Will: Three (3) years after the Effective Date, EpiCept may
terminate this Agreement and all of its obligations hereunder at any
time upon thirty (30) days advance written notice to Cassel, if a
patent within the Patent is determined to be invalid and/or
unenforceable.
(b) By Mutual Agreement: EpiCept and Cassel may terminate this Agreement
at any time by mutual written agreement.
(c) For Breach: Except as set forth in Section 5.6, if either party
breaches this Agreement, the non-breaching party, at its option, may
terminate this Agreement, provided that the non-breaching party has
provided written notice to the breaching party of the breach and the
non-breaching party's intention to terminate this Agreement, and the
breaching party has failed to cure its breach within ninety (90) days
following the date such notice was received by the breaching party.
4.0 Due Diligence
4.1 Due Diligence: EpiCept by itself, or through its Affiliates or
licensees, throughout the Term, shall use commercially reasonable efforts to
proceed with the development and commercialization of Product through a program
for exploiting the Patent, consistent with reasonable business practices and
judgments.
-3-
5.0 Consulting Arrangements
5.1 Services and Compensation:
(a) Cassel agrees to provide general scientific consulting services for
EpiCept and in particular, EpiCept expects such services to involve
the development and commercialization of Product ("Services") for a
period of three (3) years from the Effective Date ("Consulting Term as
defined herein below), with each twelvemonth (12) month period
designated a Consulting Year. EpiCept agrees to give Cassel three (3)
days advance notice of EpiCept's need for Cassel to perform the
Services, and Cassel agrees to perform such Services upon EpiCept's
request, unless Cassel has a valid excuse in which case the parties
shall agree to a mutually acceptable date for Cassel to perform such
Services.
(b) During the Consulting Term, EpiCept agrees to pay to Cassel *** per
day (each day being eight (8) hours) for the performance of the
Services. Such payment shall be made within *** business days after
receipt of a detailed invoice by EpiCept. Such invoice shall include a
description of the Services performed by Cassel and the number of
hours of Service. In any Consulting Year that EpiCept does not use
Cassel's Services for *** days, EpiCept shall, within *** days after
the end of such year, pay to Cassel the difference between the amount
paid to Cassel up to that date and the ***. For purposes of clarity,
EpiCept. shall pay to Cassel a minimum of *** per Consulting Year for
Services during the Consulting Term, regardless of whether or not
EpiCept has utilized Cassel's Services during any Consulting Year.
5.2 Confidentiality:
(a) "Confidential Information" means any and all proprietary information,
technical data, trade secrets or know-how provided by EpiCept to
Cassel, as well as any information, data, trade secrets or know-how
developed by Cassel in the course of providing the Services to EpiCept
whether provided in written, oral, graphic, visual, video, computer or
other form, including, but not limited to, research and product plans,
products, services, customer lists and customers (including, but not
limited to, customers of EpiCept on whom Cassel called or with whom
Cassel became acquainted during the Consulting Term), markets,
developments, inventions, processes, formulas, technology, marketing,
finances or other business information.
(b) Cassel shall not, during or subsequent to the Consulting Term, use
Confidential Information for any purpose whatsoever other than the
performance of the Services on behalf of EpiCept, or disclose
Confidential Information to any third party. It is understood and
agreed that
-4-
Confidential Information also includes such information received
during Cassel's initial consulting agreement with EpiCept. Cassel
agrees that Confidential Information shall remain the sole property of
EpiCept. Cassel further agrees to take all reasonable precautions to
prevent any unauthorized disclosure of Confidential Information.
Notwithstanding the above, Cassel's obligation under this Section 5.2
(b) relating to Confidential Information shall not apply to
information:
(i) which is already known to Cassel (other than under an
obligation of confidentiality), at the time of disclosure by EpiCept
to the extent that Cassel has documentary evidence to that effect;
(ii) which is generally available to the public or otherwise part
of the public domain at the time of its disclosure to Cassel;
(iii) which becomes generally available to the public or
otherwise part of the public domain after its disclosure or
development, as the case may be, and other than through any act or
omission of Cassel in breach of Cassel's confidentiality obligations
under this Agreement;
(iv) which is subsequently lawfully disclosed to Cassel by a
third party who had no obligation to EpiCept not to disclose such
information to others;
(v) which is approved for release by EpiCept in writing.
(c) Cassel shall not, during the Consulting Term, improperly use or
disclose any proprietary information or trade secrets of any former or
current employer or other person or entity with which Cassel has an
agreement or duty to keep in confidence information acquired by Cassel
in confidence and that Cassel shall not bring onto the premises of
EpiCept any unpublished document or proprietary information belonging
to such employer, person or entity unless consented to in writing by
such employer, person or entity.
(d) Cassel recognizes that EpiCept has received and in the future will
receive from third parties their confidential or proprietary
information subject to a duty on EpiCept's part to maintain the
confidentiality of such information and to use it only for certain
limited purposes. Cassel agrees that Cassel owes EpiCept and such
third parties, during the Consulting Term and thereafter, a duty to
hold all such confidential or proprietary information in the strictest
confidence and not to disclose it to any person, firm or corporation
or to use it except as necessary in carrying out the Services for
EpiCept consistent with EpiCept's agreement with such third party.
(e) Upon the termination of the Consulting Term, or upon EpiCept's earlier
request, Cassel shall deliver to EpiCept all of EpiCept's property
relating
-5-
to, and all tangible embodiments of, Confidential Information in
Cassel's possession or control.
(f) The obligations of Cassel under this Section 5.2 shall continue in
full force and effect for three (3) years after termination of
Cassel's performance of the Services.
5.3 Ownership:
(a) Cassel agrees that all copyrightable material, notes, records,
inventions, improvements, developments, discoveries and trade secrets
(collectively, "Inventions") conceived, made or discovered by Cassel
in performing the Services, solely or in collaboration with others,
during the Consulting Term relating to the business of EpiCept shall
be the sole property of EpiCept. In addition, to the extent allowed by
law, any Inventions which constitute copyrightable subject matter
shall be considered "works made for hire", as that term is defined in
the United States Copyright Act. Cassel further agrees to assign (or
cause to be assigned) and does hereby assign fully to EpiCept all such
Inventions and any copyrights, patents or other intellectual property
rights relating thereto.
(b) Upon termination of the Consulting Term, or upon EpiCept's earlier
request, Cassel shall deliver to EpiCept all of EpiCept's property
relating to, and all tangible embodiments of, Inventions in Cassel's
possession or control.
(c) Cassel agrees to assist EpiCept, or its designee, at EpiCept's
expense, to obtain and from time to time enforce and defend EpiCept's
rights in the Inventions and any copyrights, patents or other
intellectual property rights relating thereto in any and all
countries, and to execute all documents reasonably necessary for
EpiCept to do so.
(d) Cassel agrees that if in the course of performing the Services, Cassel
incorporates into any Inventions developed hereunder any invention,
improvement, development, concept, discovery or other proprietary
information owned by Cassel or in which Cassel has an interest
("Item"), EpiCept is hereby granted and shall have a non-exclusive,
royalty-free, perpetual, irrevocable, worldwide license to make, have
made, modify, reproduce, display. use and sell such Item as part or in
connection with such inventions.
5.4 Option to Cassel Technology: Cassel hereby grants to EpiCept an
exclusive option to obtain an exclusive, worldwide license to any Cassel
Technology. Cassel shall provide to EpiCept a written notice of any such Cassel
Technology and a summary detailing any such Cassel Technology. EpiCept shall
have the right to exercise its option under this Section 5.4 within *** months
of receipt of the written notification and summary by written notice to Cassel
indicating that EpiCept is exercising its option, whereupon the parties shall
-6-
negotiate in good faith the terms and conditions for an agreement for a ***
month negotiation period, extendible upon mutual agreement. If EpiCept does not
exercise its option(s) within the *** month option period or enter into a
definitive agreement with Cassel within the *** month negotiation period or any
agreed upon extension period, Cassel shall have no further obligation to EpiCept
regarding any such Cassel Technology, provided, however, that EpiCept's failure
to exercise its option or enter a definitive agreement with respect a particular
Cassel Technology shall not affect EpiCept' s exclusive option to obtain an
exclusive license for any other Cassel Technology. Cassel shall not enter into
any negotiations or agreement with a third party during the *** month option
period or any particular negotiation period, whichever is longer.
5.5 Reports: Cassel agrees that Cassel will from time to time during the
Consulting Term or any extension thereof (as mutually agreed upon by the parties
in writing) keep EpiCept advised as to Cassel's progress in performing the
Services hereunder and that Cassel shall, as requested by EpiCept, prepare
written reports with respect thereto. It is understood that the time required in
the preparation of such written reports shall be considered time devoted to the
performance of the Services by Cassel. Reports prepared by Cassel shall be the
sole property of Cassel.
5.6 Conflicting Obligations: Cassel certifies that Cassel has no
outstanding agreement or obligation that is in conflict with any of the
provisions of this Agreement, or that would preclude Cassel from complying with
the provisions hereof, and further certifies that Cassel shall not enter into
any such conflicting agreement during the Consulting Term or any extension
thereof.
5.7 Term and Termination for Consulting Arrangements:
(a) Cassel's obligation to perform the Services and EpiCept's obligation
to compensate Cassel for the Services shall commence on the Effective
Date and end three (3) years from the Effective Date ("Consulting
Term"). For purposes of clarity, the Consulting Term shall commence on
the Effective Date and end thirty-six (36) months after the Effective
Date.
(b) Cassel may terminate the consulting arrangement between Cassel and
EpiCept set forth in this Section 5 by giving thirty (30) days prior
written notice thereof.
(c) EpiCept and Cassel may terminate the consulting arrangement between
Cassel and EpiCept set forth in this Section 5 at anytime by mutual
written agreement.
(d) EpiCept may terminate the consulting arrangement between Cassel and
EpiCept set forth in this Section 5 immediately and without prior
written notice or opportunity to cure if Cassel refuses or is unable
to perform the Services or is in breach of any material provision of
this Section 5.
-7-
(e) Upon termination of the consulting arrangement between Cassel and
EpiCept set forth in this Section 5, all rights and duties of the
parties hereunder shall cease except:
(i) in the event that the consulting arrangement between Cassel
and EpiCept is terminated by EpiCept, EpiCept shall be obliged to pay,
within sixty (60) days after receipt of Cassel's final statement, all
undisputed amounts owing to Cassel for unpaid Services and related
expenses, if any, in accordance with Section 5.1 hereof; and
(ii) Sections 5.2, 5.3 and 6.7 shall survive termination of this
Section 5 of this Agreement.
6.0 Miscellaneous
6.1 Sports Medicine and Rehabilitation: EpiCept acknowledges that Cassel is
free to pursue with any interested third party sports medicine and/or
rehabilitation.
6.2 No Implied Licenses: No license rights to the Patent or any Inventions
shall be created hereunder by implication, estoppel or otherwise and nothing
herein shall be construed to grant to Cassel any rights or licenses under the
Patent or Inventions.
6.3 Notice: Any notices required or permitted to be given under this
Agreement shall be deemed given if communicated in the English language and
delivered to the party to be notified at its address shown below or at such
other address as may be furnished from time to time by the party to be notified
to the notifying party in writing either (a) by registered air mail, postage
prepaid, which notice shall be effective five (5) days after the date of mailing
or (b) in person, by telefax (with proof of transmission and confirmation by
first-class mail postage paid), or overnight courier, which notice shall be
effective on the business day immediately following the date of such delivery.
If to Cassel, addressed to: R. Douglas Cassel, M.D.
4401 Fargreen Road
Harrisburg, P0A 17110
With a copy to: Jered L. Hock
Metzger, Wickersham
3211 North Front Street
P.O. Box 5300
Harrisburg, PA 17110
If to EpiCept: EpiCept Corporation
270 Sylvan Avenue
Englewood Cliffs, NJ 07632
Attn.: Jack V. Talley,
Chief Executive Officer
-8-
6.4 Entire Agreement: This Agreement and exhibit hereto set forth the
entire agreement and understanding between the parties regarding the Patent, and
supercedes and replaces any and all prior arrangements and understandings
relating to such matters, including the Original Agreement. None of the terms of
this Agreement may be modified except as set forth in writing and signed by
Cassel and EpiCept.
6.5 Amendments: This Agreement may only be amended by a written agreement
signed by both parties.
6.6 Waiver: A waiver by either party of any term or condition of this
Agreement in any one instance shall not be deemed to be a waiver of such term or
condition for any similar instance in the future or any subsequent breach
thereof. No delay or failure by either party to exercise any right, power, or
remedy hereunder shall constitute a waiver thereof, nor shall any single or
partial exercise of any right, power, or remedy preclude other or further
exercise thereof or the exercise of any other right power, ore remedy.
6.7 Severability: The invalidity of any provision or part of this Agreement
shall not affect the validity of this Agreement in its entirety nor any
provision or part thereof. In the event any provisions of this Agreement are
judged legally invalid, they shall automatically be severed herefrom and the
remaining provisions shall continue in full force and effect, provided that
should such invalidity substantially alter the rights of either Party, the
Parties shall promptly renegotiate in good faith the severed provisions of this
Agreement.
6.8 Assignment: This Agreement may not be assigned by Cassel. This
Agreement may be assigned by EpiCept provided that such assignee agrees in
writing to be bound by the terms and provisions of this Agreement or is so bound
by operation of law. Any purported assignment in violation of the provisions of
this paragraph shall be null and void.
6.9 No Agency, Partnership, or Joint Venture: Nothing in this Agreement
shall be deemed to make the parties partners, joint venturers, or agents of one
another. No party to this agreement shall have the power to bind or obligate the
other. Cassel shall perform the Services hereunder as an independent contractor.
Cassel acknowledges and agrees that Cassel is obligated to report as income all
compensation received by Cassel pursuant to this Agreement, and Cassel agrees to
indemnify EpiCept and hold it harmless to the extent of any obligation imposed
on EpiCept (i) to pay withholding taxes or similar items or (ii) resulting from
Cassel's being determined not to be an independent contractor.
6.10 Survival. Sections 5.2, 5.3 and 6.7 shall survive termination of this
Agreement.
6.11 Governing Law: This Agreement shall be deemed to have been made in the
State of New Jersey, and shall be governed and construed in accordance with the
laws of New Jersey.
6.12 Counterparts. This Agreement may be executed in two (2) counterparts,
whereby each party may execute a duplicate original thereof, and each
counterpart shall have
-9-
the same force and effect as an original and shall constitute an effective,
binding agreement on the part of each of the undersigned.
[SIGNATURE PAGE TO FOLLOW]
-10-
IN WITNESS HEREOF, the parties have executed this Agreement as of the date first
written above.
EpiCept Corporation R. Douglas Cassel, M.D.
By: /s/ JACK V. TALLEY By: /s/ R. DOUGLAS CASSEL
--------------------------------- ------------------------------------
Jack V. Talley R. Douglas Cassel, M.D.
Chief Executive Officer 7/22/03
7/18/03
-11-