EXHIBIT 10.22
RESEARCH AND LICENSE AGREEMENT
THIS RESEARCH AND LICENSE AGREEMENT ("Agreement"), effective as of the last
date signed ("Effective Date") by and between MEGABIOS CORP., a California
corporation having its principal place of business at 863A Mitten Road,
Burlingame, California 94010 ("MEGABIOS")
AND
ELI LILLY AND COMPANY, a corporation organized under the laws of the State
of Indiana having its principal place of business at the Lilly Corporate Center,
Indianapolis, Indiana, 46285 acting through its division Lilly Research
Laboratories ("LILLY").
Recitals
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1. LILLY is in the business of developing, manufacturing and marketing
pharmaceutical and animal health products.
2. LILLY has certain rights pertaining to the BRCA1 Gene.
3. MEGABIOS has expertise in lipid-based gene delivery and expression,
and in the production and pre-clinical development of gene-based therapeutics.
4. LILLY AND MEGABIOS desire to collaborate in research regarding
lipid-based gene delivery of the BRCA1 Gene.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter recited, the parties agree as follows:
Article I
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Definitions
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Section 1.1. General. When used in this Agreement, each of the following
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terms shall have the meaning set forth in this Article.
Section 1.2. "Affiliate" means (a) any corporation or business entity,
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other than Competitive Distributors, of which LILLY or MEGABIOS, at the time in
question, directly or indirectly owns or controls fifty percent (50%) or more of
the stock having the right to vote for directors thereof or otherwise controls
the management of the corporation or business entity, or (b) any corporation,
individual or business entity which now or hereafter directly or indirectly owns
or controls fifty percent (50%) or more of the stock of LILLY or MEGABIOS having
the right to vote for directors thereof. Competitive Distributors shall mean
entities, owned or directly or indirectly controlled by LILLY through ownership
of at least fifty percent (50%) of the stock normally entitled to vote for
election of directors, that purchase Products for resale and that also purchase
pharmaceutical products from entities unrelated to LILLY; provided such
purchases of Products are pursuant to arms' length transactions.
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Section 1.3. "BLA" means with respect to any particular Product, the
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Biological License Application, or equivalent, filed with the FDA pursuant
to the Food and Drug Cosmetic Act and the regulations thereunder and any
other authoritative material that interprets such Act with respect to that
Product, together with all additions, deletions and supplements thereto or
any similar filing necessary for marketing or commercialization.
Section 1.4. "BRCA1 Gene" means the nucleotide sequence [ * ].
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Section 1.5. "Delivery Technology" means technical information,
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inventions, materials, data and know-how that relate to Lipid-based gene
delivery systems.
Section 1.6. "Field" means the use of Lipid-based gene delivery systems
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for the delivery of BRCA1 Gene to human cells.
Section 1.7. "Formulation" means a specific formulation, developed in
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the course of the Project, of components containing at least the BRCA1 Gene and
a Lipid, characterized by [ * ] included in the formulation.
Section 1.8. "FTE" means a full time equivalent scientific person year or
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a total of forty-seven (47) weeks or one thousand eight hundred eighty (1,880)
hours per year of scientific work on or directly related to the Project (or,
for purposes of Section 4.3, the Manufacturing Transfer), carried out by a
MEGABIOS employee ("MEGABIOS FTE"), having at least a Bachelors Degree in a
science. Scientific work on or directly related to the Project to be
performed by MEGABIOS employees can include, but is not limited to,
experimental laboratory work, recording and writing of results, reviewing
literature and references, holding scientific discussions, managing and
leading scientific staff, and carrying out Project management duties. The
Research Plan lists the initial schedule of key employees that shall be
responsible for scientific work under the Project. The parties acknowledge
that, from time to time, such schedule may change to meet the needs of the
Project, however, under no circumstances shall less then [ * ] of the employees
assigned to the Project by MEGABIOS have an educational level less then [ * ]
level except, in the case where the Project's focus is primarily manufacturing
or as the Committee may otherwise deem appropriate.
Section 1.9. "GLP" shall mean the current Good Laboratory Practice
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Standards 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.
Section 1.10. "GMP" shall mean the current Good Manufacturing Practices
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Standards promulgated or endorsed by the FDA (or in the case of foreign
jurisdictions, comparable regulatory standards), and all additional procedures
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
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expressed or implied in the regulatory filings made with respect to the Product
with the FDA or foreign regulatory authorities.
Section 1.11. "LILLY Information" means all confidential and/or
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proprietary technical information, data, know-how, biological materials, and
chemical substances (i) relating to the BRCA1 Gene for use in the Field and
developed or acquired (with the right to disclose to third parties for their
use) by LILLY prior to the Effective Date or (ii) developed or acquired by LILLY
outside the scope of the Project after the Effective Date, but disclosed by
LILLY to MEGABIOS for use in connection with the Project during the term of the
Project. All information that is developed or acquired by LILLY during the term
of the Project in connection with the Project that relates to the BRCA1 Gene or
the Formulation, comprises Delivery Technology or is otherwise useful to the
Project shall be Project Information and not LILLY Information. Subject to
Section 11.1, MEGABIOS acknowledges that notwithstanding the foregoing LILLY may
acquire or develop information during the term of but outside the Project in
connection with the BRCA1 Gene and useful in connection with the Project that
LILLY may choose not to use in connection with the Project or that LILLY may be
unable to disclose to MEGABIOS for use in connection with the Project due to
present or future contractual arrangements with-third parties. MEGABIOS agrees
that such information is specifically excluded from the definitions of LILLY
Information or Project Information under this Agreement.
Section 1.12. "LILLY Patent Right" means a Patent Right that is owned or
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controlled by LILLY and a Patent Right as to which LILLY has the right to grant
licenses or sublicenses within the Field without violating the terms of any
agreement or other arrangement with a third party. LILLY Patent Rights are
specifically excluded from the definition of LILLY Information or Project
Information under this Agreement. LILLY Patent Rights include LILLY's interest
in Patent Rights claiming inventions included in Project Information, as
determined under Section 4.2.
Section 1.13. "Lipid" means [ * ] amphiphile having a hydrophilic headgroup
and one or more attached hydrophobic moieties, including naturally occurring
compounds, derivatives thereof, or compounds that do not occur in nature.
Section 1.14. "MEGABIOS Information" means all confidential and/or
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proprietary technical information, data, know-how, biological materials, and
chemical substances which are (i) useful for the development of the Formulation
or otherwise related to the Project and developed or acquired (with the right to
disclose to third parties for their use) by MEGABIOS prior to the Effective
Date, or (ii) developed or acquired by MEGABIOS outside the scope of the
Project after the Effective Date, but disclosed by MEGABIOS to LILLY for use in
connection with the Project during the term of the Project. All information that
is developed or acquired by MEGABIOS during the term of the Project in
connection with the Project that relates to the BRCA1 Gene or the Formulation,
comprises Delivery Technology or is otherwise useful to the Project shall be
Project Information and not MEGABIOS Information. Subject to Section 11.1,
LILLY acknowledges that notwithstanding the foregoing MEGABIOS may acquire or
develop information during the term of, but outside the Project related to
Delivery Technology and possibly useful in connection with the Project that
MEGABIOS may choose not to use in connection with the Project or that MEGABIOS
may be unable to disclose to
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
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LILLY for use in connection with the Project due to present or future
contractual arrangements with third parties. LILLY agrees that such information
is specifically excluded from the definitions of MEGABIOS Information or Project
Information under this Agreement.
Section 1.15. "MEGABIOS Patent Right" means a Patent Right that is owned or
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controlled by MEGABIOS and a Patent Right as to which MEGABIOS has the right to
grant licenses or sublicenses within the Field without violating the terms of
any agreement or other arrangement with a third party. MEGABIOS Patent Rights
are specifically excluded from the definitions of MEGABIOS Information or
Project Information under this Agreement. MEGABIOS Patent Rights include
MEGABIOS' interest in Patent Rights claiming invention included in Project
Information, as determined under Section 4.2. A non-exhaustive list of
potentially relevant MEBAGIOS Patent Rights in existence as of the Effective
date is attached hereto as Appendix I.
Section 1.16. "Net Sales" means, with respect to a product [ * ]by LILLY
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or a LILLY Affiliate or sublicensee to unrelated third parties for the Product
(or as the case may be under Section 6.4, gross amount invoiced by MEGABIOS or
MEGABIOS Affiliate or sublicensee), less the following [ * ].
a. Trade, quantity and cash discounts [ * ].
b. Discounts, refunds, rebates, chargebacks and retroactive price
adjustments [ * ].
c. Product returns and allowances for Product returns;
d. That portion of the sales value (determined by the same methods
described below for combination products) associated with [ * ].
e. Any tax [ * ]
f. Allowances for distribution expenses, [ * ]
g. Any other similar, reasonable and customary deductions which are: [ * ]
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
Such amounts shall be determined from the books and records of LILLY, its
Affiliates or sublicensees [ * ] In the event that LILLY, its Affiliate(s), or
sublicensee(s) distributes Products for commercial human therapeutic end use to
itself or to another Affiliate, or sublicensee for commercial human therapeutic
end use itself (e.g. an Affiliate hospital), then [ * ].
In the event the Product is sold as part of a combination products
including one or more active agents in addition to Product, the Net Sales of the
Product, for the purposes of determining royalty payments, shall be determined
by multiplying [ * ] In the event that such average sale price cannot be
determined for both the Product and the other product(s) separately, Net Sales
of Products shall be determined by multiplying [ * ] If neither the Product nor
the other product(s) are sold separately in finished form or the mechanics
provided above are otherwise inapplicable, Net Sales of Products shall be
determined [ * ].
Section 1.17. "Patent Right" means a patent or patent application and all
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divisions, continuations, continuations-in-part, reissues, extensions,
Supplementary Protection Certificates, foreign counterparts thereof, and any
similar intellectual property that is owned or controlled by MEGABIOS or by
LILLY, at least one claim of which covers the making, using or selling of the
BRCA1 Gene, Delivery Technology or a Product.
Section 1.18. "Phase I Clinical Trials" means human clinical trials
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conducted in subjects to establish the safety profile of a Product.
Section 1.19. "Phase II Clinical Trials" means human clinical trials
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conducted in patients to establish proof of concept in the particular indication
tested and clinical trials conducted in patients to establish proof of concept
in the particular indication tested and clinical trials conducted in patients to
achieve a statistically significant indication of efficacy in the particular
indication tested, as well as to obtain some indication of the dosage regimen
required.
Section 1.20. "Phase III Clinical Trials" means large scale human clinical
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trials conducted in patients to establish product efficacy in the particular
indication tested and required to obtain Product registration with health
regulatory authorities.
Section 1.21. "Product" means a product for use as a human therapeutic that
incorporates a Formulation, in any form or dosage, for delivery by any route of
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
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administration. Product shall also include any Product the formulation contained
in which has been modified or adjusted so as to be a "Modified Formulation"
pursuant to Section 5.1(a).
Section 1.22. "Project" means the collaborative research and development
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program to be conducted by MEGABIOS and LILLY in the Field in connection with
this Agreement. The Project is described more fully in a research plan (the
"Research Plan") that has been mutually agreed to and exchanged between the
parties concurrent with the execution of this Agreement. The Research Plan may
be modified by mutual agreement from time to time as provided in Section 2.4.
Section 1.23. "Project Information" means all confidential and/or
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proprietary technical information, data, know-how, biological materials,
chemical substances and inventions (patentable or unpatentable) (which, in the
case of patentable inventions shall include inventions conceived in the course
of and within the scope of the Project and reduced to practice during the
Project or within [ * ] after its expiration) that are developed,
discovered, invented or otherwise generated by MEGABIOS or LILLY in the course
of the Project or are acquired by MEGABIOS or LILLY pursuant to Section 11.1,
with the right to disclose to the other party for its use in connection with the
Project; provided the same either: (i) relates to the BRCA1 Gene, Delivery
Technology or the Formulation or (ii) is otherwise useful to the Project.
MEGABIOS acknowledges that LILLY may acquire or develop information during the
term of but outside the Project in connection with the BRCA1 Gene and useful in
connection with the Project that LILLY may be unable to use in connection with
the Project due to present or future contractual arrangements with third
parties. MEGABIOS agrees that such information is specifically excluded from the
definition of Project information under this Agreement. LILLY acknowledges that
MEGABIOS may acquire or develop information during the term of, but outside the
Project relating to Delivery Technology and possibly useful in connection with
the Project that MEGABIOS may be unable to disclose to LILLY for use in
connection with the Project due to present or future contractual arrangements
with third parties. LILLY agrees that such information is specifically excluded
from the definition of Project Information under this Agreement.
Section 1.24. "Project Team Status" means [ * ].
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Section 1.25. "Project Year" means a twelve-month period during the term of
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the Project. The first Project Year shall commence on the Effective Date.
Section 1.26. "Valid Claim" means an unexpired, issued claim which has not
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been found to be unpatentable, invalid or unenforceable by a court or other
authority in the subject country from which decision no appeal is taken or can
be taken.
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
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Article II
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Staffing, Planning and Execution of Project
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Section 2.1. Commencement and Reasonable Efforts. Upon the Effective Date,
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LILLY and MEGABIOS shall commence the work on the Project described in the
Research Plan. Both parties will carry out their respective roles and use
reasonable efforts in conducting work on the Project in order to achieve the
research goals set forth in the Research Plan.
Section 2.2. MEGABOIS Effort on the Project. During the first Project Year,
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MEGABOIS shall devote [ * ] MEGABIOS FTEs to the Project. During the second
Project year, MEGABIOS shall devote [ * ] MEGABIOS FTEs to the Project. If the
Committee requests that any specific individual scientist be assigned to the
Project, MEGABIOS will use reasonable efforts to assign such person to the team
for at least [ * ], of his or her time. The names of the MEGABIOS key employees
who are initially scheduled to work on the Project are set forth in the Research
Plan. MEGABIOS will designate a project manager to serve as a primary contact to
LILLY for day-to-day coordination of the Project. MEGABIOS' directors of each
functional group will diligently oversee such group's activities related to the
Project.
SECTION 2.3. Steering Committee Formation. MEGABIOS AND LILLY shall each
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have up to four (4) representatives serve as members of the Steering Committee
(the "Committee"). The respective individual representatives for each party may
be changed from time to time at the discretion of MEGABIOS or LILLY upon receipt
of written notification to the other party by the party making the change,
provided that any replacements shall be of the same general level of authority
and experience as the original members of the Committee. Each party may
designate advisory members to the Committee as each may reasonably deem
appropriate, however, such members shall only serve in an advisory capacity and
shall not have a vote in connection with decisions made by the Committee.
Section 2.4. Steering Committee Responsibilities. MEGABIOS and LILLY
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have agreed upon an initial plan for research tasks to be completed in the
first Project Year under the Project as set forth in the Research Plan. The
Committee shall: 1) review and approve all plans for research to be done
under the Project, and 2) review all results of work done under the Project.
The Committee shall meet at least once each calendar quarter, or from
time to time as agreed to by the Committee. At these meetings, the Committee
will. 1) review the Project, and 2) modify the scope and goals of the Project
if the Committee deems it necessary, and reallocate resources in accordance
with such modification, provided that the research program shall not be
reduced below the minimum number of MEGABIOS FTEs provided in Section 2.2 in
any Project Year unless the parties mutually agree otherwise. The Committee
must approve any modification to the scope and goals of the Project described in
the Research Plan (including any extra costs arising form work with third
parties) and prepare an appropriate written modification to the Research Plan
for signature by both parties' Committee representatives. Decisions with regards
to the Project shall require a unanimous approval of the Committee.
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
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Section 2.5. Conduct of Studies. All work done in connection with the
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Project shall be carried out in compliance with any federal, state, or local
laws, regulations, or guidelines governing the conduct of research at the site
where such work is being conducted. In addition, any laboratory animals covered
by this Agreement shall be provided humane care and treatment in accordance with
the most acceptable current veterinary practices.
Section 2.6. LILLY's Collaboration Work. LILLY will assign such personnel
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as it deems appropriate in connection with the Project.
Section 2.7. Treatment of Chemical and Biological Materials. Each party
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agrees that it will not transfer to any third party the other party's chemical
or biological materials, unless a duly authorized representative of the other
party agrees in writing. Subject to Sections 4.2 and 7.1, such a transfer may
be made to any biological material depository for patent or other purposes in
accordance with this Agreement, or as required by law to any government agency
or body.
Section 2.8. Safety Concerns. Each party agrees to provide the other with
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handling instructions, including all safety information known to such party
relating to chemical and biological material to be transferred to the other
party. This will include, but not to be limited to, all applicable Material
Safety Data Sheets (MSDS).
Section 2.9. Clinical Development and Marketing. Except as otherwise
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provided in this Agreement or as LILLY and MEGABIOS may agree in writing, LILLY,
at its sole discretion, shall have the exclusive right (and the funding and
other responsibilities related thereto) to handle either directly or through
third parties of its choice (subject to Sections 2.10 and 4.3 below) all matters
related to the Product after pre-clinical development including, but not limited
to, clinical development, regulatory registrations and filings, manufacturing
and commercialization of any Product under the terms of this Agreement. LILLY
may also, in its sole discretion, conduct further preclinical studies (including
toxicology studies) beyond those provided for in the Research Plan. LILLY agrees
to provide MEGABIOS with all data and information generated in such further
preclinical studies conducted by LILLY on Products, subject to the
confidentiality provisions of Article VII. For avoidance of any doubt, LILLY
may, in its sole discretion, discontinue clinical development and the
obligations related thereto if it deems it appropriate at anytime, subject to
the terms of this Agreement, including but not limited to Section 5.2(b) and
Articles III and VIII. LILLY shall notify MEGABIOS upon its decision to
discontinue development or commercialization efforts with respect to any
Product, [ * ]
Section 2.10. Manufacturing. Except as otherwise provided in this
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Agreement, the Research Plan or as LILLY and MEGABIOS may agree in writing,
MEGABIOS shall be responsible for the development, manufacture and supply of
Product material for preclinical testing and toxicology studies and material
suitable for use in Phase I Clinical Trials as contemplated under this
Agreement; [ * ] LILLY shall review, prior to Committee
approval, all protocols for toxicology studies conducted under the terms of the
Research Plan. All applicable manufacturing and toxicology facilities (and
materials made under this Agreement) shall comply with and be operated in
accordance with all applicable GMP, GLP, requirements specified in the IND, and
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
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other regulatory requirements. LILLY shall have the right to audit all
manufacturing and toxicology facilities described herein, including procedures
and practices, to verify their conformance with applicable GMP, GLP and other
regulatory requirements. MEGABIOS shall comply with all applicable governmental
requirements, and shall provide LILLY with all information pertinent to
regulatory approvals for manufacturing facilities. Additionally, a Manufacturing
Requirements Document will be developed and agreed to prior to the manufacture
and supply of the first Phase I Clinical Trial Product material. An outline of
the initial content for the Manufacturing Requirements Document is included in
Appendix II. MEGABIOS shall provide to LILLY, in the format reasonably specified
by LILLY, all information related to the chemistry manufacture and control of
the Product required for regulatory submissions. Notwithstanding the foregoing,
such manufacture and supply by MEGABIOS, together with other activities under
the Project, shall not require expenditure by MEGABIOS beyond the funding
provided in Section 3.1 below. MEGABIOS will operate under cGMP control which is
appropriate to its Phase I clinical trial manufacturing activity, as described
in the FDA Guideline on the Preparation of Investigational New Drug Products
(Human and Animal), March 1991, or any applicable successor thereto. MEGABIOS
will supply product manufactured in accordance with current GMP's and in
compliance with the requirements and specifications in LILLY's IND.
LILLY, at its discretion, shall have the sole right (and responsibility
related thereto) for the manufacture of all material, if any, related to the
Product(s) beyond Phase I Clinical Trials. LILLY may appoint any Affiliate or
third party to perform all or a portion of such manufacturing activities. Each
appointee shall be required to undertake in writing for the benefit of MEGABIOS
not to disclose any Manufacturing Information (as defined in Section 4.3) to any
third party or to use such Manufacturing Information outside the scope of the
license set forth in Section 5.1.
Article III
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Funding of Project
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Section 3.1. Duration and Amount of Funding. LILLY shall provide MEGABIOS
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with financial support for the Project for the period commencing on the
Effective Date and expiring two years thereafter, unless the Project is
terminated early under Article VIII or extended by LILLY under Section 8.3 or by
mutual agreement between MEGABIOS and LILLY (the "Funding Term"). During the
Funding Term, LILLY shall provide MEGABIOS with financial support for FTEs at a
rate of [ * ] per MEGABIOS FTE per Project Year. Furthermore, during the Funding
Term, LILLY shall provide funding support of [ * ]. Except for the Funding
described herein or as otherwise provided in this Agreement or approved in
writing by the Committee, LILLY shall not be responsible for funding any other
cost or expense incurred by MEGABIOS for MEGABIOS' effort on the Project.
Section 3.2. Manner of Payments. LILLY shall pay MEGABIOS all funding
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provided by LILLY during this Project in U.S. Dollars in four (4) quarterly
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
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payments during each Project Year. Payment shall be made quarterly (i.e., on or
before April 15th, July 15th, October 15th and January 15th of each Project
Year) by wire transfer in immediately available funds to the account designated
in writing by MEGABIOS. Unless MEGABIOS and LILLY otherwise agree in writing,
the amount of such installment payment shall be the amount budgeted for the
upcoming quarter. An initial payment will be made within thirty (30) days of the
Effective Date, pro-rated to cover the period ending June 30, 1997. The last
payment for the Project shall be pro-rated to the end of the Project.
Section 3.3. Accounting. MEGABIOS shall maintain complete records in
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accordance with GAAP of all monies LILLY pays MEGABIOS for research under the
Project and shall, within sixty (60) days after the end of each calendar year
during the Project and at the end of the Project, provide LILLY with a report,
stating: a) the dollar amount of funds LILLY supplied for that year; b) the
research and manufacturing activities on segregated basis conducted during the
year which account for such support, including the MEGABIOS FTEs devoted to the
Project, using MEGABIOS' standard project accounting procedures; and c) any
supporting details as are reasonably required by LILLY. To the extent permitted
by law, LILLY shall be entitled to any tax credits due on account of research
and development expenses for the funds paid by LILLY. To the extent an average
of 1,880 hours per FTE of Project work has not been completed by the MEGABIOS
FTEs in Section 3.1, MEGABIOS shall give credit to LILLY at the rate of [ * ]
per hour for each hour of shortfall. Such credit shall either be reimbursed to
LILLY by wire transfer in a bank account designated by LILLY and/or applied to
LILLY's next quarterly minimum payment. Such credit shall be made within thirty
(30) days after the report is due. During the Funding Term and within one (1)
year after its termination, LILLY shall not more than once each year have the
right at its expense to have MEGABIOS' independent certified accountants inspect
and audit MEGABIOS' records and accompanying reports for any of the two
preceding years for the purpose of determining the accuracy of the reports and
associated costs of the Project.
Article IV
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Results of Project
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Section 4.1. Reports. MEGABIOS and LILLY shall disclose any new Project
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Information to the Committee reasonably promptly following its discovery,
generation, or acquisition. At LILLY's or MEGABIOS' request the disclosing
party shall make such Project Information available to the requesting party.
Such disclosure may take the form of visits by MEGABIOS or LILLY personnel to
the facilities being used for the Project to permit observation of the
procedures comprising such Project Information. Those visits will take place at
reasonable times and upon reasonable prior notice at the visitor's expense.
MEGABIOS and LILLY shall submit a detailed written report on the progress
of the Project to the Committee within sixty (60) days following each
semi-annual period of the term of the Project. Within ninety (90) days after
completion of the Project, each party shall provide the Committee with a
comprehensive final written report.
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
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Section 4.2. Project Information; Patentable Inventions. If a
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patentable invention is conceived in the course of and within the scope of the
Project and is reduced to practice during the Project or within [ * ] after its
expiration or termination, such invention shall be deemed Project Information
and the party making such invention shall notify the other party of such
invention. LILLY and MEGABIOS shall then discuss that invention and the
desirability of filing a United States patent application covering the
invention, as well as any foreign counterparts. If the parties cannot reach an
agreement about the filing of a patent application within ninety (90) days after
the notification by the party making such invention to the other party, then the
party owning the invention as determined pursuant to the following paragraph
shall make the final decision with respect to any such filings. If an invention
is owned jointly, the Committee shall be notified of such invention and shall
determine: (a) which party shall file and prosecute the application, and (b) how
the expenses will be allocated.
Notwithstanding anything to the contrary in this Agreement, LILLY shall own
all Project Information, and any patent applications or patents claiming
inventions included in Project Information, that are either: (a) solely related
to the BRCA1 Gene or (b) made solely by its employees (except for those
inventions solely related to the Delivery Technology). Similarly, MEGABIOS shall
own all Project Information, and any patent applications or patents claiming
inventions included in Project Information, that are either: (a) solely related
to the Delivery Technology or (b) made solely by its employees (except for those
inventions solely related to the BRCA1 Gene). Except as otherwise provided in
this paragraph, all Project Information, and any patent applications and patents
claiming inventions included in Project Information, made jointly by employees
of LILLY and employees of MEGABIOS shall be jointly owned by MEGABIOS and LILLY
and shall be subject to the licensing provisions set forth in Article V.
Each party shall bear its own expenses incurred in filing, prosecuting and
maintaining its patents and patent applications under this Section, including
the expenses of any interference or opposition proceedings in connection with
such prosecution.
Each party shall provide the other party with a copy of any patent
application which claims Project Information prior to the first filing of that
application for review and comment by the other party. The receiving party shall
maintain any such patent application in confidence, pursuant to Section 7.1. The
employees of both parties will cooperate in the preparation of all such patent
applications, including execution of assignments and other documents, and in the
defense of any patents issued on such patent applications. The prosecuting party
shall periodically update the other party regarding significant developments
concerning the prosecution and maintenance of such applications and patents.
If a party decides not to file or maintain an application or patent on any
invention made solely or jointly by such party claiming Project Information in
any country, it shall give the other party reasonable notice to this effect;
after that notice, the other party may, at its expense, file or maintain the
application or patent and such other party shall own all rights related to such
patent or patent applications, including any inventions claimed thereunder. Any
assignment under this paragraph may result in the reduction and/or elimination
of royalties paid with respect to a particular country to the extent that such
assignment results in the
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
-12-
assignment of a Valid Claim with respect to such country as described in
Sections 6.5 and 6.6.
Section 4.3. Manufacturing Technology Transfer. Except as the Committee
------------ ---------------------------------
may otherwise agree in writing, in order to effectuate an orderly transition of
the uninterrupted availability of Product to LILLY for purposes contemplated
under this Agreement, MEGABIOS, at least ninety (90) days prior to completion of
the Project or completion of Phase I Clinical Trials, whichever is earlier,
shall transfer to LILLY all information and instructions concerning the
manufacturing process and related matters in MEGABIOS' possession which may be
necessary for LILLY to manufacture Product (including information regarding
obtaining necessary Lipids related thereto) for clinical trials and
commercialization as contemplated hereunder including, but not limited to,
analytical and manufacturing methods. MEGABIOS shall also provide assistance (in
the form of consultation) to LILLY with respect to manufacturing matters for a
period of [ * ] months after completion of the initial transfer of information
and instructions as provided below. Such transfer and assistance by MEGABIOS
will be referred to herein as the "Manufacturing Transfer." All such
information, methods and instructions transferred to LILLY under this Section
4.3 shall be referred to herein as the "Manufacturing Information," and shall be
maintained in confidence by LILLY pursuant to Section 7.1, except that LILLY's
obligation to maintain in confidence such Manufacturing Information shall
survive for ten (10) years following expiration or termination of this
Agreement. LILLY agrees that it will use all such transferred Manufacturing
Information only for the manufacture of the Products and shall not disclose or
transfer such Manufacturing Information to any third party manufacturer except
as provided in Section 2.10. MEGABIOS shall provide, and bear its costs for, up
to [ * ] FTEs for a period of up to [ * ] months [ * ] in aggregate) to
accomplish the Manufacturing Transfer. Such FTEs, at LILLY's request, shall
include visits to LILLY's facilities by MEGABIOS personnel including up to [ * ]
from MEGABIOS' head of manufacturing. MEGABIOS shall furnish any additional
reasonable assistance beyond the assistance described above regarding
manufacturing matters that LILLY may request and that MEGABIOS is able to
provide, for up to [ * ] after the initial transfer of Manufacturing
Information, providing that LILLY [ * ] incurred with respect to such additional
assistance.
Section 4.4. Publications. LILLY and MEGABIOS agree that, during the
------------ ------------
term of the Project and for one (1) year thereafter, neither party shall publish
the results of studies carried out under this Agreement without the opportunity
for prior review by the other party. During the term of the Project and for one
(1) year thereafter, each party agrees to provide the other party the
opportunity to review any proposed abstracts or manuscripts which relate to the
Project at least sixty (60) days prior to their intended submission for
publication and agrees, upon request, not to submit such an abstract or
manuscript for publication until the other party is given a reasonable period of
time to secure patent protection for any material in such publication which it
believes to be patentable. Upon request, confidential information of the non-
disclosing party shall be removed from such proposed publication. During the
term of the Project and for one (1) year thereafter, the parties agree that all
publications relating to the results of studies carried out under this Agreement
shall be submitted for review and approval by the Committee to ensure that, to
the extent appropriate, scientific credit is given to researchers at both LILLY
and MEGABIOS.
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
-13-
Article V
---------
Commercial Rights
-----------------
Section 5.1. License to LILLY.
------------ -----------------
(a) Subject to the terms and conditions set forth herein, MEGABIOS grants
LILLY an exclusive, worldwide license, with the right to sublicense, under
MEGABIOS Information, MEGABIOS Patent Rights, and MEGABIOS' interest in the
Project Information to discover, develop, make, have made (subject to Section
2.10), import, offer for sale, sell and have sold Products. MEGABIOS hereby
retains such rights under the MEGABIOS Information, MEGABIOS Patent Rights and
Project Information to discover, develop and make Products as are necessary for
it to fulfill its obligations under this Agreement. LILLY's right to develop
Products pursuant to the license in this Section 5.1(a) includes the right to
adjust or modify one or more components in the Formulation contained therein, as
necessary or desirable for the further development or commercialization of such
Products (a "Modified Formulation"); provided that any such Modified Formulation
shall nevertheless contain at least the BRCA1 Gene and a Lipid.
(b) Subject to the terms and conditions set forth in this paragraph and
the rest of this Agreement, MEGABIOS also grants to LILLY a non-exclusive,
worldwide, fully-paid license, with no right to sublicense, under MEGABIOS
Information and MEGABIOS' interest in Patent Rights (including, but not limited
to, MEGABIOS Patent Rights) and Project Information for LILLY's internal non-
commercial research purposes (the "Research License"). Such Research License
shall terminate [ * ] after the completion of the Project (including
extensions related thereto). Consistent with the terms of the Research License
granted herein, LILLY agrees that it shall not use the Research License to
commercialize a product except pursuant to a futher written agreement which may
be negotiated between LILLY and MEGABIOS. If LILLY requests and MEGABIOS agrees
to provide materials or assistance for use under the Research License and not in
the Project, then LILLY shall reimburse MEGABIOS for its reasonable costs of
providing such material or assistance.
Subject to the confidentiality provisions described herein and any
applicable confidentiality provisions set forth in agreements that LILLY may
have with third parties, LILLY shall disclose to MEGABIOS, [ * ]
(C) LILLY hereby covenants and agrees that it will not practice the
MEGABIOS Patent Rights, MEGABIOS Information or Project Information solely owned
by MEGABIOS except as licensed in this Section 5.1.
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
-14-
Section 5.2. License to MEGABIOS. Subject to the terms and conditions set
------------ --------------------
forth herein, LILLY grants MEGABIOS:
(a) During the term of the Project, a non-exclusive, worldwide license,
under the LILLY Information, LILLY Patent Rights, and LILLY's interest in
Project Information to discover, develop and make Products and otherwise to
comply with its obligations under this Agreement; and
(b) In the event of a "Trigger Event", as defined below in this Section
5.2(b), the licenses granted under Section 5.1 to LILLY shall terminate and
MEGABIOS shall have the right to retain from LILLY an exclusive, sublicensable,
worldwide license within the Field under LILLY's interest in the Project
Information, LILLY Information, and LILLY Patent Rights, to discover, develop,
make, have made, import, offer for sale, sell and have sold Products. A
"Trigger Event" shall occur upon the occurrence of either of the following
events:
1) the early termination of the Project by LILLY under Article VIII
and LILLY's, or LILLY's sublicensee's discontinuation of its research and
development, programs with respect to the BRCA1 Gene, including abandoning
its BRCA1 program related to [ * ] or
2) after the conclusion of the Project, LILLY's, or LILLY's
sublicensee's discontinuation of its research and development programs with
respect to the BRCA1 Gene, including abandoning its BRCA1 program related
to [ * ]
LILLY shall provide written notification to MEGABIOS of the occurrence of a
Trigger Event. MEGABIOS shall have ninety (90) days from the receipt of such
notification from LILLY to elect to retain the exclusive license referred to
above in this Section 5.2(b). Such election shall be made by written
notification to LILLY. If MEGABIOS elects to retain such an exclusive license,
such license shall be granted upon receipt by LILLY of MEGABIOS' written
election to retain such license. Such license shall be subject to the royalty
provisions of Section 6.4 together with milestone fees at [ * ] the amounts
described in Section 6.2, except that only [ * ] of the royalty rate shall apply
under circumstances where LILLY had discontinued development of the Product
prior to the initiation of Phase II Clinical Trials with respect to such Product
.
MEGABIOS covenants and agrees that it will not practice the LILLY Patent
Rights or LILLY Information except as licensed in this Section 5.2.
Section 5.3. Exclusivity. Except as provided for herein, during the term of
------------ ------------
the Project, neither party will participate with or fund any third party in any
research and/or development activity within the Field.
Section 5.4. Acknowledgement by MEGABIOS of Sublicensee Status.
------------ --------------------------------------------------
MEGABIOS acknowledges that the license granted to MEGABIOS by LILLY in Section
5.2 includes a limited sublicense of rights from [ * ] MEGABIOS acknowledges
receipt of a copy of an Agreement between LILLY and [ * ] and MEGABIOS agrees to
be bound by terms of this Agreement to the same extent that LILLY is bound.
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
-15-
MEGABIOS further acknowledges that [ * ] and LILLY own and control certain
information about the BRCA1 Gene which will not be shared with MEGABIOS.
Section 5.5. Acknowledgment by LILLY of Sublicensee Status. LILLY
------------ ----------------------------------------------
acknowledges that the license granted to LILLY by MEGABIOS in Section 5.1
includes a sublicense of the rights from the Regents of the University of
California ("UC"). LILLY acknowledges receipt of a copy of that certain License
Agreement dated May 9, 1996 between MEGABIOS and UC and LILLY agrees to be bound
by the terms of the UC License Agreement to the same extent that MEGABIOS is
bound, including provisions related to the reservation of certain rights in the
technology licensed thereunder, disclaimers of liability, indemnification of UC
by sublicensees, and provisions regarding the right to prosecute, maintain and
defend patent rights licensed thereunder. [ * ] Further, LILLY acknowledges and
understands that the license granted under Section 5.1 does not include a
sublicense of any rights granted to MEGABIOS pursuant to that certain Agreement
dated August 25, 1995 between MEGABIOS and Stanford University.
Article VI
----------
Equity Investments and Milestone Fees
-------------------------------------
Section 6.1. Equity Investment. Until December 31, 1997, MEGABIOS shall
------------ ------------------
have the right to require LILLY to purchase shares of MEGABIOS' capital stock in
one private transaction for an aggregate purchase price of three million dollars
($3,000,000), subject to the terms of this Section 6.1 and applicable securities
laws. Such equity purchase shall be concurrent with the first to occur of an
initial public offering ("IPO") or a Qualified Financing (defined below). If
MEGABIOS closes an initial public offering of MEGABIOS common stock under the
Securities Act of 1933, as amended, prior to such date, then LILLY shall
purchase shares of MEGABIOS common stock in a private transaction concurrently
with the closing of the IPO at the price at which shares are offered to the
public. Such purchase shall be made pursuant to a Stock Purchase Agreement
customary under such circumstances.
Alternatively, MEGABIOS may require LILLY, prior to December 31, 1997, to
purchase shares of MEGABIOS capital stock in a private equity financing raising
aggregate proceeds to MEGABIOS of at least $6.0 million ("Qualified
Financing"). The LILLY purchase shall take place pursuant to terms substantially
similar to those set forth in a Stock Purchase Agreement, Amended and Restated
Investors Rights Agreement and Fourth Amended and Restated Articles of Megabios
Corporation, all of which were furnished to LILLY on April 28, 1997, and May 7,
1997. The price paid by LILLY for such capital stock shall be [ * ] Any equity
investment made under this Section 6.1 shall be subject to applicable regulatory
requirements, including, if applicable, the notice provisions of the Hart Scott
Rodino Antitrust Improvements
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
-16-
Act, and the period for making such investments shall be adjusted as necessary
to permit the parties to comply with such regulatory requirements.
Section 6.2. Milestone Fees. Upon achievement of the respective milestone
------------ ---------------
events listed in paragraphs (a), (b) and (c) below, LILLY shall pay a milestone
fee to MEGABIOS as provided below. If MEGABIOS is in material breach of its
obligations under this Agreement at the time any such payment is due, LILLY may
notify MEGABIOS of such breach in writhing on or prior to such date in lieu of
making the payment. Such notice shall cite the breached section(s) of this
Agreement and the actions or omissions of MEGABIOS that constitute breach. If
and when MEGABIOS reasonably cures such breach, it shall notify LILLY in writing
of the cure and the milestone payment shall be due within thirty (30) days of
the date of such notice. For avoidance of any doubt, nothing in this paragraph
shall be construed as a wavier of any legal and/or equitable remedies available
to LILLY as a result of such breach.
(a) Ovarian Cancer. For each Product developed by LILLY for [ * ]
---------------
treatment of ovarian cancer LILLY shall pay to MEGABIOS:
(1) [ * ]
(2) [ * ]
(3) [ * ]
(4) [ * ]
(5) [ * ]
(b) Breast Cancer. For each Product developed by LILLY for [ * ]
--------------
treatment of breast cancer LILLY shall pay to MEGABIOS:
(1) [ * ]
(2) [ * ]
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
-17-
(3)[ * ]
(4)[ * ]
(c) Other Indications. Subject to the last paragraph of this Section
-----------------
6.2(c), in addition to the milestone fees described above, for each Product
developed by LILLY for an indication other than cancers of the ovary or breast
[ * ] (the "Other Indications"), LILLY shall pay to MEGABIOS
additional milestone fees as follows:
(1) [ * ]
(2) [ * ]
Notwithstanding the foregoing in this Section 6.2, no milestone payment as
described hereunder shall be due if such Product[ * ] from a Product for which
a milestone payment has previously been made. For purposes of this Section
6.2(c),[ * ] shall mean that [ * ] For avoidance of any doubt, under no
circumstance shall any additional milestone fees be due for any Product where
milestone fees had been previously paid for such Product irrespective of the
number of indications that such Product is ultimately developed or used for nor
shall milestone fees be paid with respect to [ * ] provided such development
[ * ] and where such in a Product for which all milestone payments associated
with said Product set forth above have been paid.
(d) If LILLY begins the development of a Product and later ceases
development of said Product for any reason including, but not limited to, lack
of efficacy, potency or adverse reactions found in the course of human clinical
trials or the Product is not registered after the filing of a BLA (or its
equivalent in the European Union), then any milestone payment made under this
Article with respect to such Product shall be credited against any milestone
payments which otherwise
-18-
would be payable if LILLY elects to develop another Product (including, but not
limited to, developing another Product derived from adjusting or modifying a
Formulation) for the same indication (i.e., ovarian cancer, breast cancer,
prostate cancer, et cetera).
(e) LILLY shall notify MEGABIOS upon the achievement of each milestone
event and make the applicable payment to MEGABIOS within thirty (30) days of the
achievement of such event.
Section 6.3. Royalty Payments To MEGABIOS on Products. In consideration for
the licenses granted and the services provided hereunder, with respect to each
calendar quarter, LILLY shall pay to MEGABIOS royalties equal to the following
[ * ] Net Sales of all Products on an annual basis: [ * ]
For example if during the fourth calendar quarter of a particular annual year
Net Sales were [ * ] which resulted in aggregate Net Sales for such year of
[ *] the royalty payment due MEGABIOS for such fourth calendar quarter would
equal [ * ] For purpose of this Agreement, annual year shall mean the 12 month
period commencing on January 1.
Section 6.4. Royalty Payments To LILLY on Products. In the event of a
Trigger Event and if MEGABIOS elects to retain an exclusive license from LILLY
under Section 5.2(b), and MEGABIOS thereafter develops and sells a Product or
Product(s), with respect to each calendar quarter, MEGABIOS shall pay to LILLY
royalties equal to the following [ * ] Net Sales of Products on
an annual basis: [ * ]
Only [ * ] of the royalty rates described above shall apply under circumstances
where LILLY has discontinued development of the Product prior to the initiation
of Phase II Clinical Trials with respect to such Product.
Section 6.5. Term of Royalty Payments by LILLY. Running royalties paid by
----------- ---------------------------------
LILLY pursuant to Sections 6.3 shall be paid [ * ] from the date of the first
commercial sale of each Product [ * ] until [ * ] Rights in that country for
which a Valid Claim thereof covers the manufacture, use [ * ] or (ii) [ * ] from
the first commercial sale of such Product [ * ] provided that in the [ * ] years
under (ii) above running royalties shall be due at [ * ] the percentage rates
set forth in Section 6.3. The parties recognize that there may be [ * ] in any
given royalty payment period. The parties
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
-19-
agree that [ * ] Attached as Appendix III, is an example of how royalties are to
be calculated under certain circumstances.
Section 6.6 Term of Royalty Payments by MEGABIOS. Running royalties paid
----------- ------------------------------------
by MEGABIOS pursuant to Section 6.4 shall be paid [ * ] from the date of the
first commercial sale of each Product [ * ] until [ * ] Patent Rights in that
country for which a Valid Claim thereof covers the [ * ] or (ii) [ * ] from the
first commercial sale of such Product [ * ] provided that in the [ * ] years
under (ii) above running royalties shall be due at [ * ] the percentage rates
set forth in Section 6.3 The parties recognize that there may be [ * ] in any
given royalty payment period. The parties agree that [ * ]
Section 6.7. MEGABIOS Obligations to [ * ]
------------ -----------------------------
In the event of a Trigger Event and if MEGABIOS elects to retain an exclusive
license from LILLY under Section 5.2(b), and MEGABIOS thereafter develops and
sells a Product or Product(s), in addition to the royalties owed to LILLY by
MEGABIOS under Section 6.4, MEGABIOS acknowledges its potential obligation to
pay a [ * ] royalty to [ * ] on the Net Sales of Products sold by MEGABIOS as
consideration for the sublicensed rights acquired from [ * ] through LILLY, as
set forth in Section 5.4. At LILLY's option, MEGABIOS shall pay such [ * ]
royalty directly to [ * ] or MEGABIOS shall pay such [ * ] royalty to LILLY in
addition to the royalty owed to LILLY under Section 6.4 and LILLY shall
thereafter be responsible for the royalty payment to [ * ] provided MEGABIOS, in
fact, makes and continues to make the payments to LILLY as described herein.
Section 6.8. Royalty Payment Reports. Royalty payments under this
------------ ------------------------
Agreement shall be made to the receiving party within sixty (60) days following
the end of each calendar quarter for which royalties are due. Each royalty
payment shall be accompanied by a statement detailing the Net Sales and royalty
calculations on a worldwide, country-by-country and Product-by-Product basis.
Section 6.9. Records. Within the term of this Agreement and within one (1)
------------ --------
year after its termination, the party receiving the royalty shall not more than
once each year have the right to have the royalty payor's independent certified
accountant inspect the royalty payer's records for any of the three (3)
preceding years for the purpose of determining the accuracy of royalty payments
including reviewing gross sales and the deductions described in Section 1.16 of
this Agreement. The independent certified accountant shall keep confidential any
information obtained during such inspection and shall report to the party
receiving the royalty only the information necessary to make an accurate
calculation of amounts of royalties due and payable. For avoidance of any doubt,
the parties acknowledge that the audit rights described under this Section 6.9
shall not require LILLY to obtain records from its Affiliates other than those
records that it regularly receives from such Affiliates, however, the
independent certified accountant may inspect the records that LILLY possesses
and the records that its Affiliates possess at their respective locations to the
extent described in this Section 6.9 of the Agreement. The receiving party shall
bear the expenses of such audit, provided that, in the event of material
underpayment (in excess of 5%) of any royalties owing hereunder, the paying
party shall bear the reasonable expenses of such audit, in addition to
reimbursement for such underpayment.
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
at their respective locations to the extent described in this Section 6.9 of the
Agreement. The receiving party shall bear the expenses of such audit, provided
that, in the event of material underpayment (in excess of 5%) of any royalties
owing hereunder, the paying party shall bear the reasonable expenses of such
audit, in addition to reimbursement for such underpayment.
Section 6.10. Withholding Taxes. If either party is required by the United
------------- -----------------
States government or other authorities to withhold any tax on the amounts
payable by that party to the other party under this Agreement, that party shall
be allowed to do so, and shall in such case remit royalty payments to the other
party net of such withheld amount, provided, that the withholding party
furnishes the other party with reasonable evidence of such withholding payment
in electronic or written form as soon as practicable after such withholding in
order that the other party may use the withholding tax paid as a tax credit.
Section 6.11. Exchange Rates. All payments to be made by one party to the
------------- --------------
other under this Agreement shall be made in United States dollars. In the case
of sales outside the United States, the rate of exchange to be used in computing
the amount of currency equivalent in United States dollars due to the other
party shall be made using payor's then current standard exchange rate
methodology consistently applied for payor's own internal accounting purposes,
which methodology shall be in conformity with generally accepted accounting
principles. Attached as Appendix IV is a general description of the exchange
rate methodology that is currently employed by LILLY any change to such
methodology would be applied to LILLY on a global basis.
Article VII
-----------
Confidentiality
---------------
Section 7.1. Except as otherwise provided in writing by the parties, both
------------
parties shall use their best efforts to retain in confidence and not use, except
as provided in this Agreement, all MEGABIOS Information or LILLY Information, as
the case may be, disclosed under this Agreement and all Project Information of
either party. Such information may, however, be disclosed insofar as such
disclosure is necessary (where possible, with adequate safeguards for
confidentiality) to allow either party to defend against litigation with a
third-party, to file and prosecute patent applications or to comply with
governmental regulations, provided neither party shall use the other party's
Information (i.e., for MEGABIOS the LILLY Information and Project Information
owned solely by LILLY under Section 4.2, and for LILLY the MEGABIOS Information
and Project Information owned solely by MEGABIOS under Section 4.2) in any
patent application without written approval from the other party.
This obligation of confidentiality and non-use shall not apply to
information which (i) is in the public domain, (ii) comes into the public domain
through no fault of the receiving party, (iii) was known by the receiving party
prior to disclosure under this Agreement or under the prior confidentiality
agreement between LILLY and MEGABIOS, (iv) is disclosed to the receiving party
without an obligation of confidentiality by a third party having a lawful right
to make the disclosure, or (v) is independently developed by either party
outside of the Project and without use of the other party's Information.
-21-
In furtherance of the objectives of the Project and with the approval of
the other party, either party may disclose Information of the other party or any
Project Information to a third party who has agreed in writing to be bound by
the same or similar obligations of confidence set forth in this Section,
provided the third party agrees not to use the Information without authorization
from the party owning the Information, except that such authorization shall not
be required in connection with the exercise of the rights granted under licenses
under Sections 5.1 and 5.2. This paragraph shall not apply to MEGABIOS
Information transferred to LILLY pursuant to Section 4.3 and disclosed by LILLY
to a third party, which such disclosure shall be governed by Section 2.10.
All obligations of confidentiality and non-use imposed upon the parties
under this Agreement shall expire on the later of (i) the date five (5) years
from the termination of the Project; or (ii) the expiration of all obligations
to pay royalties under Article VI, subject to Section 4.3 (ten (10) years for
Manufacturing Information).
LILLY agrees to mark all LILLY Information provided to MEGABIOS in
documentary form as "Confidential". If such LILLY Information is provided to
MEGABIOS in oral form, LILLY shall thereafter summarize the disclosure in
writing, mark it as "Confidential," and provide a copy to MEGABIOS within thirty
(30) days of the oral disclosure. In the same manner, MEGABIOS agrees to mark
all MEGABIOS Information provided to LILLY in documentary form as
"Confidential." If such MEGABIOS Information is provided to LILLY in oral form,
MEGABIOS shall thereafter summarize the disclosure in writing, mark it
"Confidential," and provide a copy to LILLY within thirty (30) days of the oral
discussion.
Article VIII
------------
Term and Termination
--------------------
Section 8.1 Term. This Agreement shall become effective on the Effective
----------- ----
Date and shall remain in effect until the expiration of all obligations of
Confidentiality under Article VII.
Section 8.2 Term and Extension of Project. Unless terminated early under
----------- -----------------------------
this Article VIII or extended by mutual agreement or extended in accordance with
Section 8.3, the obligation to fund and conduct research shall terminate after
two (2) years after the Effective Date (the "Initial Term").
Section 8.3 Project Extension. LILLY, at its sole discretion, may extend
----------- -----------------
the Initial Term for an additional term of at least one (1) year but not to
exceed two (2) years as it deems appropriate under the same terms and conditions
described herein, provided LILLY notifies MEGABIOS of its decision to extend the
Project (including the term of such extension) at least ninety (90) days prior
to expiration of the Initial Term of the Project. The activities to be
undertaken by the parties during any Project extension shall be as agreed by the
parties and the Research Plan will be amended to provide for such additional
activities.
-22-
Section 8.4. Voluntary Termination of Project. LILLY may voluntarily
------------ --------------------------------
terminate the Project at any time after [ * ] after the Effective Date, upon
providing ninety (90) days advance written notice to MEGABIOS of its intention
to terminate. In the event that LILLY terminates under this Section 8.4, LILLY's
license (including any royalty obligations related thereto) granted under
Section 5.1 shall terminate. The rights granted MEGABIOS under Section 5.2 shall
survive any voluntary termination of the Project by LILLY under this Section
8.4.
Section 8.5. Termination for Default. If either party is in material breach
------------ -----------------------
of its obligations under this Agreement and fails to remedy that breach within
ninety (90) days after the other party sends written notice of the breach
(thirty (30) days in the event of failure to pay monies when due) the party not
in breach may terminate the Project or this Agreement immediately by giving
written notice of the termination. The termination date shall be the date of the
notice of termination. If MEGABIOS has defaulted, the licenses to LILLY
specified in Section 5.1 shall survive (subject to all payment and other
applicable obligations as provided in Section 8.8) and the licenses to MEGABIOS
in Section 5.2 shall terminate upon termination for default. If LILLY has
defaulted, the licenses to MEGABIOS specified in Section 5.2 shall survive and
the licenses to LILLY in Section 5.1 shall terminate upon termination for
default.
Section 8.6. Termination Due to Assignment. In the event MEGABIOS assigns
------------ -----------------------------
this Agreement, pursuant to Section 14.6, to an acquiring third-party which is a
pharmaceutical or biotechnology company, LILLY may terminate the Project upon
thirty (30) days written notice. In the event LILLY terminates the Project under
this Section 8.6, LILLY's license under Section 5.1 shall remain in effect and
MEGABIOS' license under Section 5.2(b) shall remain in effect.
Section 8.7. Key Personnel. During the term of the Project, if [ * ]
------------ -------------
leaves the employ of MEGABIOS, for any reason, or is otherwise unavailable [ * ]
LILLY may voluntarily terminate the Project upon thirty (30) days' written
notice to MEGABIOS if within [ * ] following his departure MEGABIOS is unable to
select a replacement that is [ * ] If the Project is voluntarily terminated
under this Section 8.7, all rights and obligations under this Agreement
concerning the making, using or selling of Products already produced during the
Project, and any future Products arising therefrom, shall not be affected by the
termination of the Project, nor shall MEGABIOS' rights under Section 5.2(b).
Section 8.8. Residual Rights. Upon expiration or termination of the Project
------------ ---------------
or this Agreement, except as provided herein to the contrary, all rights and
obligations of the parties shall cease, except as follows:
a) Obligations to pay royalties and other sums accruing hereunder up to
the date of termination;
b) The right to complete the manufacture and sale of Products, which
qualify as "work in process" under generally accepted cost accounting standards
or which are in stock at the date of termination, and the obligation to pay
royalties on Net Sales of such Products;
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
-23-
c) The obligation to pay milestones as achieved and royalties with
respect to Products;
d) All provisions regarding confidentiality shall continue in full force
and effect;
e) Obligations for record keeping and accounting reports for so long as
Products are sold, plus three (3) years. At such time after termination of this
Agreement when sales or other dispositions of Products have ceased, LILLY or
MEGABIOS, as the case may be, shall render a final report along with any royalty
payment due;
f) The parties' rights to inspect books and records as described in
Article VI;
g) Obligations of defense and indemnity under Articles XI and XII;
h) Obligations set forth in Article XI, but only with respect to those
causes of action which accrued prior to such termination;
i) Any cause of action or claim of MEGABIOS or LILLY accrued or to accrue
because of any breach or default by the other party hereunder;
j) All other terms, provisions, representations, rights and obligations
contained in this Agreement that by their sense and context are intended to
survive until performance thereof by either or both parties.
Article IX
----------
Disclosure of Agreement
-----------------------
Section 9.1. Disclosure of Agreement. Except as provided below, neither
----------- -----------------------
MEGABIOS nor LILLY shall release any information to any third party with respect
to the terms of this Agreement without the prior written consent of the other,
which shall not be unreasonably withheld. This prohibition includes, but is not
limited to, press releases, educational and scientific conferences, promotional
materials, governmental filings, and discussions with public officials, and the
media. In connection with the execution of this Agreement, the parties shall
mutually agree on the text of a joint press release regarding this Agreement.
Notwithstanding the terms and provisions of this Article IX, each party
shall be allowed to disclose the terms, and provide a copy of this Agreement to
its respective tax authorities if so requested. Furthermore, MEGABIOS
acknowledges receipt of a redacted copy of the Agreement to Myriad.
Section 9.2. Releases Required by Law. If either party determines a release
----------- -----------------------
of further information is required by law or governmental regulation, it shall
notify the other in writing as soon as practical (where possible 30 days) before
the time of the proposed release. The notice shall include the exact text of the
proposed release and the time and manner of the release.
-24-
At the other party's request, and before the release, the party desiring to
release further information and its legal counsel shall consult with the other
party on the necessity for the disclosure and the text of the proposed further
release. In no event shall a release under this Section 9.2 include further
information regarding the existence or terms of this Agreement than is required
by law or governmental regulation. Promptly following the Effective Date the
parties shall prepare and mutually agree upon a redacted form of this Agreement
suitable for LILLY to provide to Myriad, Inc. and for MEGABIOS to file with the
Securities and Exchange Commission pursuant to federal securities laws. Once a
redacted version of the Agreement has been made publicly available, each party
shall be free to disclose any information that is not redacted in such agreement
without the consent of the other party.
Section 9.3. Other Releases. Notwithstanding these restrictions, LILLY
------------ --------------
recognizes MEGABIOS may need to disclose the terms of this Agreement to its
attorneys, bankers and their attorneys, accountants, and other MEGABOIS business
associates. LILLY hereby consents to such disclosures in accordance with this
Section 9.3. Furthermore, LILLY recognizes that MEGABIOS may need to disclose
previously undisclosed terms of this Agreement to prospective (sub) licensees or
other parties to commercial transactions. LILLY shall respond promptly to
requests from MEGABIOS to make such disclosures and shall not unreasonably
withhold its authorization. Any such disclosure under this Section 9.3 shall
include an obligation on the party receiving any confidential information to
maintain the same in confidence.
Article X
---------
Representations, Warranties and Acknowledgments
-----------------------------------------------
Section 10.1. Warranty of Title. MEGABIOS hereby warrants that it has the
------------- -----------------
unencumbered right to enter into this Agreement and to grant the license(s)
contained herein. LILLY hereby warrants that it has the unencumbered right to
enter into this Agreement and to grant the license(s) contained herein.
Section 10.2. Patents, Prior Art. Each party to this Agreement represents
------------- ------------------
and warrants that to the best of its knowledge, it has sufficient legal and/or
beneficial title, ownership or license rights under its intellectual property
rights necessary for its business as now conducted and as currently proposed to
be conducted under the Project contemplated herein. Each party is not aware of
any communications alleging that it has violated or, by conducting its business
as currently proposed under the Project contemplated herein, would violate any
of the intellectual property rights of any other person or entity relating to
the research to be carried out under the Agreement. To the best of each party's
knowledge, there is no material unauthorized use, infringement or
misappropriation of any of its intellectual property rights by any third party.
As used herein, the term "intellectual property rights" means all patent rights,
copyrights, trademarks, trade secret rights, chemical and biological material
rights, and know-how rights necessary or useful to make, use or sell any
Products.
Section 10.3. Employee Obligations. MEGABIOS represents and warrants that
------------- --------------------
all of its employees, officers, and consultants have executed agreements
requiring assignment to MEGABIOS of all inventions made during the course of
-25-
and as the result of their association with MEGABIOS and obligating the
individual to maintain as confidential MEGABIOS' confidential information as
well as confidential information of a third party which MEGABIOS may receive.
LILLY represents and warrants that all of its consultants have executed
agreements requiring assignment to LILLY of all inventions made during the
course of and as the result of their association with LILLY and obligating the
individual to maintain as confidential LILLY's confidential information as well
as confidential information of a third party which LILLY may receive.
LILLY also represents and warrants that all of its employees and officers
are under a legal obligation of assignment to LILLY of all inventions made
during the course of and as the result of their association with LILLY and
obligating the individual to maintain as confidential LILLY's confidential
information as well as confidential information of a third party which LILLY may
receive.
Section 10.4. Acknowledgment of Other Research. MEGABIOS acknowledges and
------------- ---------------------------------
agrees that LILLY has substantial existing technology relating to other types of
compounds that may or may not be reactive with the BRCA1 Gene and that LILLY,
subject to Section 5.3, will continue to: a) maintain an ongoing independent
research effort in those other areas; b) contract with other parties for
technology and biological materials; and c) develop drugs useful in treating
disease states relating to the BRCA1 Gene. LILLY acknowledges and agrees that
MEGABIOS has substantial technology relating to non-viral gene delivery systems
that may or may not be useful with genes other that BRCA1 and that MEGABIOS,
subject to Section 5.3, will continue to: a) maintain ongoing research and
development efforts in those areas independently and in collaboration with third
parties; and b) develop products incorporating genes other than BRCA1 for use in
any disease state, including potentially disease states relating to the BRCA1
gene.
Article XI
----------
Infringement of Third Party's Rights
------------------------------------
Section 11.1. Third Party Intellectual Property.
------------- ---------------------------------
(a) During the Project term, MEGABIOS and LILLY shall each promptly notify
each other of any and all third party technology, patents or information which
either may be valuable in connection with the Project or which may be infringed
by either party by the conduct of the Project or the use of MEGABIOS
Information, LILLY Information, LILLY Patent Rights, MEGABIOS Patent Rights, or
Project Information in the Project. LILLY and MEGABIOS shall decide if such
rights or technology should be acquired in connection with the Project and, if
so, whether by MEGABIOS, LILLY or both, and how the cost of acquiring such
technology should be borne by the parties.
(b) If third party patent or other proprietary rights are infringed or
misappropriated by the practice of the inventions claimed in the MEGABIOS Patent
Rights or the use of MEGABIOS Information or Project Information owned solely by
MEGABIOS, in the Field, and if LILLY acquires the rights necessary to practice
such technology in the Field, then LILLY may offset payments made in
-26-
consideration for such rights against royalties due to MEGABIOS pursuant to
Section 11.3.
If the parties agree to acquire such technology as part of the Project,
such technology or rights shall become part of the acquiring party's Information
or Patent Rights, whichever is appropriate, or, if jointly acquired, part of the
Project Information. If the parties do not agree on how to allocate the costs or
whether to acquire such technology or rights, either party may acquire such
technology or rights at its own expense and such technology or rights shall not
become part of the Information or Patent Rights of such party, or of the Project
Information.
Section 11.2. Litigation. If a third party asserts that a patent or other
------------- -----------
right owned by it is infringed or misappropriated by the practice of the
inventions claimed in the MEGABIOS Patent Rights or the use of MEGABIOS
Information or Project Information owned solely by MEGABIOS, in the Field, and
such assertion results in a claim against LILLY, the party to this Agreement
first having notice of that claim shall promptly notify the other party in
writing. The notice shall set forth the facts of the claim in reasonable detail
. MEGABIOS shall have the primary right, but not the obligation, to defend
against such claim. LILLY shall cooperate with MEGABIOS at MEGABIOS' request and
expense in such defense and shall have the right to be represented by counsel of
its own choice and at LILLY's expense. IF MEGABIOS shall fail to defend against
such claim within a period of one hundred twenty (120) days after receiving
written notice from LILLY or otherwise of such claim, LILLY shall have the right
to so defend by counsel of LILLY's own choice and MEGABIOS shall have the right,
at its own expense, to be represented by counsel of its own choice.
Section 11.3. Royalty Reduction. If, as a result of acquisition of third
------------- ------------------
party technology or rights under Section 11.1(b) or litigation (including
settlement thereof) under Section 11.2, LILLY is required to pay a third party a
royalty or make any payment of any kind as compensation for such rights, in a
particular country, then LILLY may deduct, from the amount of royalties owed to
MEGABIOS in connection with Net Sales in such country [ * ] of the amount of the
third party royalty or such other amount, including any initial payment, if any,
payable to the third party, up to, but no more than, [ * ] of the amounts
otherwise payable to MEGABIOS in connection with Net Sales in such country,
however the royalty payable to MEGABIOS shall not be less than [ * ]
Section 11.4. Third Party Infringement. If any patent in the MEGABIOS
------------- -------------------------
Patent Rights in the Field is infringed by a third party, the party to this
Agreement first having knowledge of such infringement shall promptly notify the
other in writing. The notice shall set forth the facts of that infringement in
reasonable detail. MEGABIOS shall have the primary right, but not the
obligation, to institute, prosecute, and control any action or proceeding with
respect to such infringement of the MEGABIOS Patent Rights, by counsel of its
own choice, and LILLY shall have the right, at its own expense, to be
represented in that action by counsel of its own choice. IF MEGABIOS fails to
bring an action or proceeding within a period of one hundred twenty (120) days
after receiving written notice from LILLY or otherwise having knowledge of that
infringement, LILLY shall have the right to bring and control any such action by
counsel of its own choice, and MEGABIOS shall have the right to be represented
in any such action by counsel of its own choice at its own expense.
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
-27-
If one party brings any such action or proceeding, the second party agrees
to be joined as a party plaintiff and to give the first party reasonable
assistance and authority to file and prosecute the suit. The costs and expenses
(including reasonable attorney's fees) of all suits brought by MEGABIOS or LILLY
under this Section shall be reimbursed on a pro-rata basis to both parties out
of any damages or other monetary awards recovered therein in favor of MEGABIOS
and/or LILLY. Any remaining damages shall split [ * ] to the party initiating
and prosecuting the action to completion and [ * ] to the other party.
No settlement or consent judgment or other voluntary final disposition of a
suit under this Section may be entered into without the joint consent of
MEGABIOS and LILLY (which consent shall not be withheld unreasonably).
Notwithstanding anything to the contrary herein, this Section 11.4 shall
not apply to the extent it is inconsistent with the License Agreement dated May
9, 1996 between MEGABIOS and UC.
Section 11.5. Warranty and Indemnification. MEGABIOS shall defend,
------------- ----------------------------
indemnify and hold harmless LILLY against any direct loss or injury by reason of
any third party action in which it is determined or alleged that LILLY's
practice of the inventions claimed in the MEGABIOS Patent Rights, or the use of
MEGABIOS Information, or Project Information generated or developed by MEGABIOS,
in the Field misappropriates that third party's rights arising out of any
contractual obligation on the part of MEGABIOS to such third party. If MEGABIOS
is required to pay any such third party a royalty or make any payment of any
kind for LILLY's right to use MEGABIOS Patent Rights, MEGABIOS Information, or
Project Information in the Field, in a particular country, MEGABIOS shall be
solely responsible for the payment of such royalty or other payment.
In the event that LILLY is seeking indemnification under this Section 11.5,
it shall inform MEGABIOS of a claim as soon as reasonably practicable after it
receives notice of the claim, shall permit MEGABIOS to assume direction and
control of the defense of the claim (including the right to settle the claim
solely for monetary consideration to be paid by or on behalf of MEGABIOS), and
shall cooperate as requested (at the expense of MEGABIOS) in the defense of the
claim. LILLY may elect at any time to acquire the third party rights and offset
payments due to the third party for such rights against royalties due to
MEGABIOS pursuant to Sections 11.1 and 11.3, in lieu of the indemnification
provided for in this Section 11.5.
If, prior to or during the pendency of any action described in the first
paragraph of this Section 11.5 LILLY reasonably believes the indemnification
provided by MEGABIOS under this Section 11.5 is inadequate due to bankruptcy,
insolvency or otherwise, LILLY may withhold payment to MEGABIOS of [ * ] of
royalties owed to MEGABIOS in connection with Net Sales in the country(ies)
where such third party claims misappropriated rights. Such royalties shall be
paid to MEGABIOS upon conclusion of such action, or offset against any
outstanding obligation of MEGABIOS to indemnify LILLY, at LILLY's election.
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
-28-
Article XII
-----------
Indemnification
---------------
Section 12.1. Product Liability Indemnification. LILLY hereby agrees to
------------- ---------------------------------
defend, indemnify and hold MEGABIOS and its agents and employees harmless from
and against any and all suits, claims, actions, demands, liabilities, expenses
and/or loss, including reasonable legal expense and attorneys' fees, other than
claims for infringement as provided in Section 11.2, claims as described in
Section 12.2 or otherwise due to MEGABIOS' negligence, resulting directly or
indirectly from the manufacture, use, handling, storage, sale or other
disposition of chemical agents or Products by LILLY, its Affiliates, agents or
sublicensees.
In the event that MEGABIOS is seeking indemnification under this Section
12.1, it shall inform LILLY of a claim as soon as reasonably practicable after
it receives notice of the claim, shall permit LILLY to assume direction and
control of the defense of the claim (including the right to settle the claim
solely for monetary consideration), and shall cooperate as requested (at the
expense of LILLY) in the defense of the claim.
Section 12.2. Indemnification of LILLY. MEGABIOS hereby agrees to defend,
------------- ------------------------
indemnify and hold LILLY and its agents and employees harmless from and against
any and all suits, claims, actions, demands, liabilities, expenses and/or loss,
including reasonable legal expense and attorneys' fees resulting directly or
indirectly from negligence by MEGABIOS, its employees or agents in the conduct
of preclinical toxicology studies pertaining to Products.
In the event that LILLY is seeking indemnification under this Section 12.2,
it shall inform MEGABIOS of a claim as soon as reasonably practicable after it
receives notice of the claim, shall permit MEGABIOS to assume direction and
control of the defense of the claim (including the right to settle the claim
solely for monetary consideration), and shall cooperate as requested (at the
expense of MEGABIOS) in the defense of the claim.
Article XIII
------------
Government Control
------------------
Section 13.1. Authority. This Agreement is made subject to any
------------- ---------
restrictions concerning the export of products or technical information from the
United States of America which may be imposed upon or related to MEGABIOS or
LILLY from time to time by the government of the United States of America.
Article XIV
-----------
Miscellaneous Provisions
------------------------
Section 14.1. No Agency. It is understood and agreed that MEGABIOS shall
------------- ---------
have the status of an independent contractor under this Agreement and that
nothing in this Agreement shall be construed as authorization for either LILLY
or MEGABIOS to act as agent for the other. Members of the Committee shall be,
and
-29-
shall remain, employees of MEGABIOS or LILLY, as the case may be. LILLY shall
not incur any liability for any act or failure to act by employees of MEGABIOS,
including members of the Committee who are employees of MEGABIOS. MEGABIOS shall
not incur any liability for any act or failure to act by employees of LILLY,
including members of the Committee who are employees of LILLY.
Section 14.2. Force Majeure. Both parties to the Agreement shall be
------------- -------------
excused from the performance of their obligations under this Agreement if such
performance is prevented by Force Majeure and the nonperforming party promptly
provides notice of the prevention to the other party. Such excuse shall be
continued so long as the condition constituting Force Majeure continues and the
nonperforming party takes reasonable efforts to remove the condition.
For purposes of this Agreement, Force Majeure shall include conditions
beyond the control of the parties, including without limitation, an act of God,
voluntary or involuntary compliance with any regulation, law or order of any
government, war, civil commotion, epidemic, failure or default of public
utilities or common carries, destruction of production facilities or materials
by fire, earthquake, storm or like catastrophe.
Section 14.3. Amendment. This Agreement may not be amended, supplemented,
------------ ---------
or otherwise modified except by an instrument in writing signed by both parties.
Section 14.4. Notices. Any notice required or permitted to be given under
------------- -------
this Agreement shall be in writing and shall be deemed to have been sufficiently
given for all purposes if mailed by first class certified or registered mail,
postage prepaid. Unless otherwise specified in writing, the mailing addresses of
the parties shall be as described below.
For MEGABIOS: Megabios Corp.
863A Mitten Road
Burlingame, California 94010
Attention: Chief Executive Officer
For LILLY: Eli Lilly and Company
Lilly Corporation Center
Indianapolis, Indiana 46285
Attention: Vice President, Oncology Discovery and
Clinical Development Research
Copy to: General Counsel
Section 14.5. Governing Law. This Agreement shall be governed by, and
------------- -------------
construed in accordance with, the laws of the State of Indiana, excluding any
choice of law rules which may direct the application of the law of any other
jurisdiction. Questions effecting the construction and effect of any Patent
Rights shall be determined by the laws of the country in which the Patent Right
has been applied for and granted.
-30-
Section 14.6. Assignment. Neither party may assign its rights and
------------- ----------
obligations under this Agreement without the prior written consent of the other,
except a party may make such an assignment without the other party's consent in
connection with any merger, reorganization or sale of all or substantially all
of its assets to which this Agreement relates. This Agreement shall be binding
upon and shall inure to the benefit of the successors and permitted assigns of
the parties.
Section 14.7. Consents Not Unreasonably Withheld. Whenever provision is
------------- ----------------------------------
made in this Agreement for either party to secure the consent or approval of the
other, that consent or approval shall not unreasonably be withheld, and whenever
in this Agreement provisions are made for one party to object to or disapprove a
matter, such objection or disapproval shall not unreasonably be exercised.
Section 14.8. No Strict Construction. This Agreement has been prepared
------------- ----------------------
jointly and shall not be strictly construed against either party.
Section 14.9. Headings. The captions or headings of the Sections or other
------------- --------
subdivisions hereof are inserted only as a matter of convenience or for
reference and shall have no effect on the meaning of the provisions hereof.
Section 14.10. Severance of Clauses/Insolvency. Each party agrees that
-------------- ------------------------------
should any provision of this Agreement be determined by a court of competent
jurisdiction to violate or contravene any applicable law or policy, such
provision will be severed or modified by the court to the extent necessary to
comply with the applicable law or policy, and such modified provision and the
remainder of the provisions hereof will continue in full force and effect. In
addition the parties hereto intend that the Agreement shall not be deemed an
executory contract under the Bankruptcy/Insolvency laws of the United States.
Section 14.11. No Waiver. The waiver of a breach hereunder may be
-------------- ---------
effected only by a writing signed by the waiving party and shall not constitute
a waiver of any other breach.
Section 14.12. Limitation of Liability. No party shall be liable to
-------------- -----------------------
another for indirect, incidental, consequential or special damages, including
but not limited to lost profits, arising from or relating to any breach of this
Agreement, regardless of any notice of the possibility of such damages. Nothing
in this Section is intended to limit or restrict the indemnification rights or
other obligations hereunder of any party.
Section 14.13. Entire Agreement. The Agreement institutes the entire
-------------- ----------------
agreement of the parties relating to the subject matter, and may not be amended,
modified or canceled except by written instrument executed by both MEGABIOS and
LILLY.
Section 14.14. Counterparts. This Agreement has been executed in two (2)
-------------- ------------
counterparts, all of which shall constitute and original, but which together
shall constitute are and the same instrument.
-31-
IN WITNESS WHEREOF, the parties by their respective authorized officers,
have executed this Agreement.
MEGABIOS CORP. ELI LILLY AND COMPANY
By: /s/ Benjamin F.McGraw III By: /s/ August M. Watanabe
--------------------------- -------------------------
Benjamin F.McGraw III August M. Watanabe
Title: President and CEO Title: Executive Vice President
Date: 23 May 1997 Date: May 23, 1997
APPENDIX I
Potentially relevant Megabios Patent Rights existing as of the Effective Date
include the following U.S. patent applications, related U.S. applications, and
foreign counterparts.
Title Serial Number Status
[ * ]
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
APPENDIX II
MANUFACTURING REQUIREMENTS DOCUMENT
ELI LILLY AND COMPANY/MEGABIOS PHARMACEUTICALS, INC.
1.0 INTRODUCTION
The Manufacturing Requirements Document (MRD) shall be a manual containing
certain specifications, procedures, assay methods and personnel contacts
relating to the manufacturing and supplying of Product (Attachment __) by
MEGABIOS CORP. (MEGABIOS) to Eli Lilly and Company (LILLY). The following
elements of an MRD (Section 3.0 below) will be developed and understood by
both MEGABIOS and LILLY prior to the first manufacture of Phase I Clinical
-------------------------------------
Trial material.
--------------
2.0 ADMINISTRATION
The MRD will be considered a "living document". Sections of the MRD may be
added, deleted, or otherwise modified from time to time through the
issuance of a revised section incorporating the modification and stating
the effective date of the modification. Initial development, as well as
periodic review and revision, should be coordinated by one LILLY
representative and one MEGABIOS representative, yet to be determined. Each
revision shall be signed on behalf of LILLY and MEGABIOS by their
respective representatives, or by an authorized representative of equal
or greater management level.
3.0 MANUFACTURING REQUIREMENTS DOCUMENT ELEMENTS
MEGABIOS and LILLY will mutually agree on responsibilities and procedures
for the following:
3.1 QUALITY ASSURANCE/REGULATORY REQUIREMENT
3.1.0 Product Specifications
3.1.1 Incoming Component Inspections/Testing
3.1.2 Stability
3.1.3 Batch Documentation and Quality Records
3.1.4 Change Control
3.1.5 Reserve Samples
3.1.6 Material Storage/Control/Accountability
3.1.7 Laboratory Analysis
3.1.8 Regulatory Responsibility
3.1.9 Batch Release Responsibility
3.2 SHIPMENT OF FINISHED GOODS
3.2.1 Packaging, Labeling
3.2.2 Transportation
3.3.3 Warehousing
3.3 KEY CONTACTS
3.3.1 Key Contact List
Example 2
- ---------
1. Assume two Products are marketed by Lilly, one in ovarian cancer ("Product
O"), one in breast cancer ("Product B"). Assume also that the calculation
relates to the [ * ] year of commercial sale of each Product. Assume further
that [ * ]
2. Calculate annual worldwide Net Sales for Product O, calculate annual
worldwide Net Sales for Product B. Assume that worldwide Net Sales of Product
O were $250 million, and worldwide Net Sales of Product B were $800 million.
3. Add together Net Sales for Product O and Net Sales of Product B to calculate
aggregate worldwide Product Net Sales ("Annual Net Sales"). In this case, Annual
Net Sales = $1050 million.
4.[ * ]
5. Determine aggregate royalty amounts due for the entire year as follows,
[ * ] In this instance, Lilly would owe:
(i) [ * ]
(ii) [ * ]
(iii) [ * ]
Accordingly, Lilly would owe to Megabios for the year a total of [ * ] on
aggregate worldwide Annual Net Sales of $1050 million during the [ * ] year of
commercial sale of the Products.
Example 3
- ---------
1. Assume one Product is marketed by Lilly, and that it was launched on a
worldwide basis [ * ]
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
2. [ * ] Assume Net Sales are reported on a monthly basis. Assume that worldwide
Net Sales of the Product in January were $45 million, in February were $50
million and in March were $55 million. [ * ]
3. [ * ] Assume that worldwide Net Sales of the Product for April
through December are $450 million. [ * ]
4. Determine aggregate royalty amounts due for the entire year as follows,
[ * ] In this instance, Lilly would owe:
(i) [ * ]
Accordingly, Lilly would owe to Megabios for the year a total of [ * ]
on aggregate worldwide Annual Net Sales of $600 million during the [ * ]
of commercial sale of the Product, where [ * ]
NOTE : MORE COMPLEXITY WOULD BE INTRODUCED WHERE THE PRODUCTS ARE APPROVED IN
DIFFERENT YEARS, AND, IN ADDITION, WHERE THE WORLDWIDE ROLL-OUT HAPPENS OVER
SEVERAL YEARS, RESULTING IN THE "FIRST YEAR FROM COMMERCIAL SALE" VARYING ON A
PRODUCT-BY PRODUCT [ * ] THE SAME LOGIC OF ALLOCATING NET SALES,
HOWEVER, WOULD APPLY, DEPENDING UPON [ * ]
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
Appendix III
MEGABIOS/LILLY ROYALTY SCHEME
Royalty Rates
[ * ]
Procedure:
Example 1
- ---------
1. Assume two Products are marketed by Lilly, one in ovarian cancer ("Product
O"), one in breast cancer ("Product B"). Assume further that the calculation
relates to the second year of commercial sale of each Product [ * ]
2. Calculate annual worldwide Net Sales for Product O, calculate annual
worldwide Net Sales for Product B. Assume that worldwide Net Sales of Product O
were $250 million, and worldwide Net Sales of Product B were $800 million.
3. Add together Net Sales for Product O and Net Sales of Product B to
calculate aggregate worldwide Product Net Sales ("Annual Net Sales"). In this
case, Annual Net Sales = $1050 million.
4. Determine marginal royalty rates. In this instance, Lilly would owe:
(i) [ * ]
Accordingly, Lilly would owe to Megabios for such year a total of [ * ]
on the Annual Net Sales of $1050 million.
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.
Appendix IV
METHODOLOGY FOR CONVERTING FOREIGN SALES TO US DOLLARS
------------------------------------------------------
The following is a description of how Eli Lilly and Company converts sales in
foreign countries to US dollars for external reporting:
Sales are transmitted directly to our corporate headquarters at the end of every
month. Our sales in several countries are made in US dollars, but most are made
in local currency. These sales are converted to US dollars [ * ]
[ * ] Certain information on this page has been omitted and filed separately
with the Commission. Confidential Treatment has been requested with
respect to the omitted portions.