Exhibit 10.28
*** TEXT OMITTED AND FILED SEPARATELY
CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. SECTIONS 200.80(B)(4),
200.83 AND 240.24B-2
DEVELOPMENT AND OPTION AGREEMENT
BETWEEN
SCHERING CORPORATION
AND
CIMA LABS, INC.
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 "Affiliate". . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 "Basic License Terms". . . . . . . . . . . . . . . . . . . . . . 1
1.3 "CIMA Know-How". . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 "CIMA Patent Rights" . . . . . . . . . . . . . . . . . . . . . . 2
1.5 "Confidential Information" . . . . . . . . . . . . . . . . . . . 2
1.6 "Delivery System". . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 "Field". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 "Final Prototype". . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 "Initial Prototype". . . . . . . . . . . . . . . . . . . . . . . 2
1.10 "Invention". . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 "License Agreement" . . . . . . . . . . . . . . . . . . . . . . 2
1.12 "Option" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.13 "Option Period". . . . . . . . . . . . . . . . . . . . . . . . . 3
1.14 "Patent Rights". . . . . . . . . . . . . . . . . . . . . . . . . 3
1.15 "Product". . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.16 "Prototype Development Plan" . . . . . . . . . . . . . . . . . . 3
1.17 "Schering Confidential Information". . . . . . . . . . . . . . . 3
2. Grant of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Option Grant. . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Option Exercise. . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 License Agreement. . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Exclusivity. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Research Licenses. . . . . . . . . . . . . . . . . . . . . . . . 4
3. Prototype Development. . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Development Schedule.. . . . . . . . . . . . . . . . . . . . . . 5
3.3 Facilities Visits. . . . . . . . . . . . . . . . . . . . . . . . 5
4. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 Option Fee.. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 Development and Milestone Fees. . . . . . . . . . . . . . . . . 5
4.3 Other Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.4 Manner of Payment. . . . . . . . . . . . . . . . . . . . . . . . 6
5. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.1 Secrecy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.2 Publications.. . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.3 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6. Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1 Inventions Arising Under This Agreement; License.. . . . . . . . 7
6.2 Filing of Patent Applications. . . . . . . . . . . . . . . . . . 8
6.3 Status of Patent Applications. . . . . . . . . . . . . . . . . . 8
6.4 Abandonment. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7. Representations and Warranties . . . . . . . . . . . . . . . . . . . . 8
7.1 Representations and Warranties of Each Party.. . . . . . . . . . 8
7.2 CIMA's Representations.. . . . . . . . . . . . . . . . . . . . . 9
7.3 Disclosure of Technology . . . . . . . . . . . . . . . . . . . . 10
7.4 No Inconsistent Agreements . . . . . . . . . . . . . . . . . . . 10
7.5 Warranty Disclaimer. . . . . . . . . . . . . . . . . . . . . . . 10
8. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.1 Indemnification by Schering. . . . . . . . . . . . . . . . . . . 10
8.2 Indemnification by CIMA. . . . . . . . . . . . . . . . . . . . . 11
8.3 Conditions to Indemnification. . . . . . . . . . . . . . . . . . 11
8.4 Settlements. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.5 Limitation of Liability. . . . . . . . . . . . . . . . . . . . . 12
8.6 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9. Term/Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.1 Term and Expiration. . . . . . . . . . . . . . . . . . . . . . . 12
9.2 Termination by Schering. . . . . . . . . . . . . . . . . . . . . 12
9.3 Termination for Cause. . . . . . . . . . . . . . . . . . . . . . 12
9.4 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . 13
9.5 Accrued Rights.. . . . . . . . . . . . . . . . . . . . . . . . . 13
11. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.1 Assignability. . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.2 Independent Contractors. . . . . . . . . . . . . . . . . . . . . 13
11.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 14
11.5 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . 14
11.6 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 15
11.7 Descriptive Headings.. . . . . . . . . . . . . . . . . . . . . . 15
11.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 15
11.9 Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . . . 15
11.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 15
11.11 Further Actions. . . . . . . . . . . . . . . . . . . . . . . . . 15
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*CONFIDENTIAL TREATMENT REQUESTED
EXHIBITS AND ATTACHMENTS
Exhibit 1.2 Basic License Terms
Attachment 3.3 Development, Scale-Up and Commercialization
Activities for a [. . . *** . . .]
Attachment 4.3 Preliminary Cost of Goods Estimate
Exhibit 1.4 CIMA Patent Rights
Exhibit 1.8 Final Prototype - General Specifications
Exhibit 1.16 Prototype Development Plan
Exhibit 5.3 Press Release
Exhibit 11.5 Arbitration Provisions
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*CONFIDENTIAL TREATMENT REQUESTED
2 DEVELOPMENT AND OPTION AGREEMENT
THIS DEVELOPMENT AND OPTION AGREEMENT ("Agreement") is made effective as
of the last date on the signature page hereof (the "Effective Date") by and
between SCHERING CORPORATION, a New Jersey corporation having its principal
place of business at 2000 Galloping Hill Road, Kenilworth, New Jersey 07033
(hereinafter "Schering") and CIMA LABS, INC., a Delaware corporation having
its principal place of business at 10,000 Valley View Road, Eden Prairie,
Minnesota 55344 (hereinafter "CIMA"). References to Schering and CIMA shall
include their respective Affiliates (as hereinafter defined).
WHEREAS, CIMA owns or has rights to certain patented oral drug-delivery
technology referred to as ORASOLV, which has applications in the field of
pharmaceutical product formulation; and
WHEREAS, Schering wishes to sponsor the development by CIMA of a
prototype of a certain pharmaceutical product formulation for Schering's
evaluation, subject to the granting by CIMA to Schering of an option to enter
into a license agreement with CIMA on terms further described herein;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, the parties hereto agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following capitalized terms, whether used
in the singular or plural, shall have the respective meanings set forth below:
1.1 "AFFILIATE" shall mean any individual or entity directly or
indirectly controlling, controlled by or under common control with, a party
to this Agreement. For purposes of this Agreement, the direct or indirect
ownership of fifty percent (50%) or more of the outstanding voting securities
of an entity, or the right to receive fifty percent (50%) or more of the
profits or earnings of an entity shall be deemed to constitute control. Such
other relationship as in fact results in actual control over the management,
business and affairs of an entity shall also be deemed to constitute control.
1.2 "BASIC LICENSE TERMS" shall mean the terms set forth in Exhibit 1.2
of this Agreement.
1.3 "CIMA KNOW-HOW" shall mean any and all Confidential Information of
CIMA's necessary or useful to the development, registration, manufacture, use
or sale of the Product and which is owned, controlled or licensed to CIMA,
prior to or during the term of this Agreement.
1
1.4 "CIMA PATENT RIGHTS" shall mean all Patent Rights necessary or
useful for the development, registration, manufacture, use or sale of the
Product (including, without limitation, all Patent Rights covering the
Delivery System) and which are owned or controlled by CIMA prior to or during
the term of this Agreement or licensed to CIMA with rights to sublicense as
of the Effective Date of this Agreement or during the term of this Agreement,
including, without limitation, the Patent Rights on Exhibit 1.4.
1.E "CONFIDENTIAL INFORMATION" shall mean all Inventions, research
materials, information relating to Patent Rights, copyrights, and any other
developments, techniques, methods, materials, reagents, processes,
procedures, data, results, conclusions, apparatus, products, trade secrets or
other proprietary information or materials, improvements thereto,
modifications thereof and know-how, whether patentable or not, which is
disclosed by a party or arises under this Agreement (i) during discussions or
negotiations in connection with this Agreement (including, without
limitation, the terms of this Agreement), (ii) during the term of this
Agreement, or (iii) which is developed by or becomes known by either party as
a result of the receipt and use of the other party's Confidential
Information, including, without limitation, by use of the other party's
materials.
1.F "DELIVERY SYSTEM" shall mean CIMA's effervescent, fast-dissolving,
oral drug-delivery tablet technology including that technology known as
ORASOLV-REGISTERED TRADEMARK- which includes, to the extent applicable to the
formulation of a product, an active ingredient of which is [. . . *** . . .]
(i) the inventions disclosed in the Patents Rights owned, controlled or
licensed (with the right to sublicense) by CIMA during the term of this
Agreement, and (ii) all CIMA Know-How.
1.G "FIELD" shall mean over-the-counter and prescription pharmaceutical
products incorporating the Delivery System with a [. . . *** . . .] as an
active ingredient intended [. . . *** . . .].
1.H "FINAL PROTOTYPE" shall mean the prototype of the Product to be
developed by CIMA pursuant to the Prototype Development Plan (Exhibit 1.16)
and in accordance with the general specifications set forth in Exhibit 1.8
and any further specifications agreed by the parties.
1.I "INITIAL PROTOTYPE" shall mean the Product which meets the
description under Section B of the Prototype Development Plan.
1.J "INVENTION" shall mean any new invention, development, derivative
material, biological material, discovery or innovation, whether patentable or
not, arising during and as a result of the performance of the Prototype
Development Plan or arising from the use of materials and/or Confidential
Information of the other party.
1.K "LICENSE AGREEMENT" shall mean an agreement negotiated and executed
by CIMA and Schering pursuant to the exercise of the Option and containing
the Basic License Terms.
2
1.L "OPTION" shall mean the exclusive right to enter into the License
Agreement.
1.M "OPTION PERIOD" shall mean the period beginning on the Effective
Date and expiring (unless extended in accordance with this Agreement) on the
earlier of (i) the [. . . *** . . .], or (ii) the date on which
[. . . *** . . .]. In the event that the Final Prototype is not delivered by
CIMA to Schering within [. . . *** . . .] from the date of initiation of
phase B of the Prototype Development Plan, then the Option Period shall be
automatically extended for a period of time equal to the time elapsed between
the date of the delivery of the Final Prototype and [. . . *** . . .] from
the date of initiation of phase B of the Prototype Development Plan.
1.N "PATENT RIGHTS" shall mean any patents and/or patent applications
which are owned, controlled or, if applicable under this Agreement, licensed,
with rights to sublicense, by a party to this Agreement, including any
substitutions, divisions, continuations, continuations-in-part, reissues,
renewals, registrations, confirmations, re-examinations, extensions,
supplementary protection certificates or the like, or provisional
applications of any such patents and patent applications.
1.O "PRODUCT" shall mean the pharmaceutical dosage form which is
formulated using the Delivery System and which contains [. . . *** . . .].
1.P "PROTOTYPE DEVELOPMENT PLAN" shall mean the plan set forth on
Exhibit 1.16 for the development of the Final Prototype.
1.Q "SCHERING CONFIDENTIAL INFORMATION" shall mean any and all
Confidential Information relating to [. . . *** . . .] and which is owned,
controlled or licensed to Schering prior to or during the term of this
Agreement or which arises out of this Agreement and relates to the
[. . . *** . . .]provided to CIMA by Schering. Nothing in this definition
shall be construed to cover the existing Delivery System and any improvements
specifically and solely to the Delivery System.
2. GRANT OF RIGHTS.
2.A OPTION GRANT. Effective upon the Effective Date and subject to the
terms and conditions set forth herein, CIMA hereby grants to Schering the
Option to enter into the License Agreement to utilize the Delivery System for
the development, marketing, distribution and sale of Products in the Field in
the Territory (as defined in the Basic License Terms). The term of such
Option shall be the Option Period. The Option Period may be extended by
mutual written agreement of the parties.
2.B OPTION EXERCISE. Schering, in its sole discretion, may exercise the
Option by (i) providing CIMA with written notice thereof and (ii) negotiating
and executing the License
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*CONFIDENTIAL TREATMENT REQUESTED 3
Agreement prior to the end of the Option Period. After the expiration of the
Option Period and if Schering does not exercise its Option and execute the
License Agreement, CIMA's obligations under Article 2 hereof shall terminate
and CIMA shall be free to enter into any license agreement with respect to
Products in the Field with any third party, on any terms CIMA may, in its
sole discretion, deem appropriate.
2.C LICENSE AGREEMENT.
(I) FINALIZATION. In the event that Schering elects to exercise the
Option, Schering and CIMA shall use good faith efforts to finalize the
License Agreement and enter into such License Agreement. The License
Agreement shall include the Basic License Terms and include such other terms
and conditions, consistent with the Basic License Terms as are reasonable and
customary in the industry for such agreements.
(II) UNRESOLVED TERMS. In the event that Schering and CIMA are
unable, after exercising good faith efforts, to reach agreement on all of the
terms and conditions of the License Agreement during the Option Period, then
the Vice President, Marketing & Sales, Key Pharmaceuticals of Schering and
the Vice President, Business Development of CIMA shall have a
[. . . *** . . .] to meet and use good faith efforts to reach agreement on
the unresolved terms and conditions.
(III) In the event that a party gives notice of arbitration
under Section 11.5 hereof regarding unresolved terms or conditions of the
License Agreement, the parties hereby agree that the arbitration mechanism
set forth in Section 11.5 shall be utilized as a mediation mechanism with the
objective of resolving the unresolved terms or conditions.
2.D EXCLUSIVITY. In consideration for the Option Fee, CIMA hereby
agrees that from the Effective Date until the expiration or termination of
the Option Period, CIMA shall not enter into any negotiations or agreements
with any third party relating to the development or commercialization of
Products in the Field.
2.E RESEARCH LICENSES.
(I) LICENSE TO SCHERING. CIMA hereby grants to Schering a
[. . . *** . . .], under the CIMA Patent Rights and CIMA Know-How for the
sole purpose of performing the Prototype Development Plan and evaluating the
Initial Prototype and Final Prototype.
(II) LICENSE TO CIMA. Schering hereby grants to CIMA a
[. . . *** . . .], under the Schering Know-How and Patent Rights of
Schering's relating to [. . . *** . . .] for the sole purpose of performing
the Prototype Development Plan.
3. PROTOTYPE DEVELOPMENT.
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*CONFIDENTIAL TREATMENT REQUESTED 4
3.A GENERAL. In consideration for certain development fees set forth
below, CIMA will use [. . . *** . . .] to perform the Prototype Development
Plan and to develop and deliver to Schering a Final Prototype, subject to the
terms of this Agreement and in accordance with the specifications set forth
on Exhibit 1.9. CIMA shall keep Schering informed as to the progress related
to the performance of the Prototype Development Plan and will provide results
and supporting data from time to time relating to the performance of the
Prototype Development Plan and the development of the Initial Prototype and
Final Prototype. Upon receipt of the Final Prototype, Schering will conduct
or have conducted [. . . *** . . .] within [. . . *** . . .].
3.B DEVELOPMENT SCHEDULE.
(I) Following the Effective Date and receipt of the materials from
Schering delineated under phase A of the Prototype Development Plan, CIMA
shall initiate development of the Initial Prototype.
(II) CIMA and Schering each acknowledge and agree that the Prototype
Development Plan is expected to be completed within approximately
[. . . *** . . .] from the date of initiation of phase B of the Prototype
Development Plan. To that end, during the implementation of the Prototype
Development Plan, Schering agrees [. . . *** . . .] of the Initial Prototype
and/or [. . . *** . . .] and respond to CIMA within [. . . *** . . .] of
receipt thereof. Schering's response will indicate the acceptability of such
proposed Initial Prototype and/or the need, if any, for modification of the
specifications in light of the results of Schering's evaluation.
(III) CIMA will develop the Final Prototype in [. . . *** . . .]
to be determined by mutual agreement.
3.C FACILITIES VISITS. During the term of this Agreement, CIMA shall
allow personnel of Schering, at Schering's expense, to visit the
manufacturing and research facilities of CIMA and to consult with CIMA
personnel, [. . . *** . . .], to discuss and review the development of the
Initial Prototype, Final Prototype and Product.
4. PAYMENTS.
4.A OPTION FEE. In consideration for the exclusivity obligations set
forth in Section 3.2 and the Option granted in Section 3.1, Schering shall
pay to CIMA the sum of [. . . *** . . .] (the "Option Fee") within
[. . . *** . . .]of the Effective Date.
4.B DEVELOPMENT AND MILESTONE FEES. (i) In consideration for CIMA's
development and production of the Initial Prototype and Final Prototype in
accordance with this Agreement, Schering shall make the following
non-refundable payments to CIMA:
(1) [. . . *** . . .] within [. . . *** . . .] of the
Effective Date;
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*CONFIDENTIAL TREATMENT REQUESTED 5
(2) [. . . *** . . .] upon [. . . *** . . .] by CIMA under
[. . . *** . . .] of the Prototype Development Plan, including
[. . . *** . . .], and delivery to Schering of [. . . *** . . .] in
accordance with [. . . *** . . .]of the Prototype Development Plan;
(3) [. . . *** . . .] upon written request by Schering for up
to [. . . *** . . .] of the approved formulation of the Product; and
(4) [. . . *** . . .] after shipment by CIMA to Schering of up
to [. . . *** . . .] of the approved formulation of the Product.
(II) PAYMENT OF MILESTONE FEES. Schering shall pay to CIMA the
appropriate milestone payment due under Subsections 4.2(a)(ii), (iii) and
(iv) within [. . . *** . . .] after receipt by Schering of an invoice from
CIMA for such milestone payment. The applicable milestone payment shall be
payable only once upon the completion of each such milestone and no amounts
shall be due hereunder for subsequent or repeated achievement of such
milestone.
4.C OTHER COSTS. Except as expressly set forth in this Agreement, each
of Schering and CIMA shall be solely responsible for its own out-of-pocket
costs and disbursements incurred, and for providing the necessary facilities,
supplies, personnel and other resources necessary, in the performance of its
obligations under this Agreement.
4.D MANNER OF PAYMENT. All payments due hereunder shall be paid in U.S.
dollars via wire transfer to Northwest Bank Minnesota, N.A., Northwest
Center, Sixth and Marquette, Minneapolis, Minnesota 55479, Account Number:
[. . . *** . . .], and with confirmation to CIMA when such wire transfer has
been made. Alternatively, payments may be made to such other bank account as
otherwise instructed in writing by CIMA.
5. CONFIDENTIALITY.
5.A SECRECY. Except as provided in Section 5.2, each of CIMA and
Schering shall use only in accordance with this Agreement and shall not
disclose to any third party any Confidential Information, without the prior
written consent of the other party. The foregoing obligations shall survive
the expiration or termination of this Agreement for a period of
[. . . *** . . .]. These obligations shall not apply to Confidential
Information that:
(1) is known by the receiving party at the time of its receipt, and
not through a prior disclosure by the disclosing party, as documented by the
receiving party's business records;
(2) is at the time of disclosure, or thereafter becomes, published
or otherwise part of the public domain without breach of this Agreement by
the receiving party;
(3) is obtained from a third party who has the legal right to make
such disclosure and without any confidentiality obligation to the disclosing
party;
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*CONFIDENTIAL TREATMENT REQUESTED 6
(4) is independently developed by the receiving party without the
use of Confidential Information received from the disclosing party and such
independent development can be documented by the receiving party;
(5) is disclosed to governmental or other regulatory agencies in
order to obtain patents, PROVIDED that such disclosure may be made only to
the extent reasonably necessary to obtain such patents or authorizations and
PROVIDED FURTHER that any patent application filings shall only be made in
accordance with this Agreement and the License Agreement; or
(6) is required by law, regulation, rule, act or order of any
governmental authority or agency to be disclosed, PROVIDED that notice of
such impending required disclosure by the receiving party is promptly
delivered by the receiving party to the disclosing party in order to provide
the disclosing party with an opportunity to seek a protective order or other
similar order with respect to such Confidential Information and thereafter
that the receiving party discloses only the minimum Confidential Information
required to be disclosed in order to comply with the request or order,
whether or not a protective order or other similar order is obtained by the
disclosing party.
5.B PUBLICATIONS. [. . . *** . . .] of the work carried out pursuant to
this Agreement [. . . *** . . .] and only [. . . *** . . .] of the Public
Presentation (as defined below) prior to submission for publication. CIMA and
Schering each acknowledges and agree that, during the term of this Agreement,
no Public Presentation shall contain any Confidential Information of the
other party without the prior written consent of such party, which consent
[. . . *** . . .]. For purposes of this Article 5, the term "Public
Presentation" shall mean any manuscript, abstracts or other forms of public
presentation, including, without limitation, slides and texts of oral or
other public presentations, and texts of any transmission through any
electronic media, e.g., any computer access system such as the Internet,
World Wide Web, etc. Nothing in this Section 5.2 shall limit the disclosures
permitted by Section 5.3.
5.C PUBLICITY. A party may not use the name of the other party, or its
Affiliates, in any publicity or advertising and may not issue a press release
or otherwise publicize or disclose any information related to the existence
of this Agreement or the terms or conditions hereof, without the prior
written consent of the other party. Nothing in the foregoing, however, shall
prohibit a party from making such disclosures to the extent deemed necessary
under applicable federal or state securities laws or any rule or regulation
of any nationally recognized securities exchange. In such event, however,
such party shall use good faith efforts to consult with the other party prior
to such disclosure and, where applicable, shall request confidential
treatment to the extent available. Notwithstanding the foregoing, the parties
consent to a press release announcing this Agreement in substantially the
form attached hereto as Exhibit 5.3. In addition, the parties agree to
consult regarding any disclosures of the terms of this Agreement to potential
investors, acquirers or financial advisors, it being understood no disclosure
shall be made without the written consent of the other party.
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*CONFIDENTIAL TREATMENT REQUESTED 7
6. INTELLECTUAL PROPERTY.
6.A INVENTIONS ARISING UNDER THIS AGREEMENT; LICENSE.
(I) Each of Schering and CIMA shall promptly notify the other party
of any Invention arising in connection with the Prototype Development Plan or
arising from the use of the other party's Confidential Information. Such
notice shall provide sufficient detail regarding the Invention, and upon
request of the notifying party shall provide the other party with any
underlying background data and information, so as to enable the party
receiving such notice to properly evaluate the inventorship of such Invention
in accordance with U.S. Patent Laws. Ownership of such Inventions shall be
determined based on the scope of the claims and in accordance with the
following guidelines:
(1) Inventions conceived and reduced to practice
[. . . *** . . .];
(2) Inventions conceived and reduced to practice
[. . . *** . . .]; and
(3) Inventions conceived and reduced to practice
[. . . *** . . .].
(II) Notwithstanding anything contained herein to the contrary, with
respect to all Inventions arising hereunder, both parties may only use such
Inventions [. . . *** . . .] and each party [. . . *** . . .]; PROVIDED,
HOWEVER, the above limitation on [. . . *** . . .].
6.B FILING OF PATENT APPLICATIONS. Inventions by a party shall be
promptly and fully disclosed in writing to the other party. With regard to
Inventions which are solely owned by a party to this Agreement, any patent
applications considered necessary in the reasonable legal and business
judgment of the owning party shall be prepared and filed by such owning party
at such party's sole expense. Each of CIMA and Schering agree, at the other
party's request and expense, to provide the other party with reasonable
assistance in preparing, filing, prosecuting and maintaining patent
applications covering Inventions owned by such other party, including causing
the execution and delivery of any assignments or other related documents.
With regard to Inventions which are jointly owned, each party will cooperate
fully with the other party to prepare and file jointly owned patent
applications and the expenses therefore shall be shared equally.
6.C STATUS OF PATENT APPLICATIONS. CIMA shall keep Schering advised of
the status of patent applications filed in accordance with Section 6.2. CIMA
further agrees that with respect to any such patent applications it shall
provide to Schering, upon request and at Schering's expense, copies of any
substantive papers, including, without limitation, copies of such patent
applications and copies of any substantive communications with any national
Patent Office related to the filing, prosecution and maintenance of such
patent applications.
6.D ABANDONMENT. Each party shall provide written notice to the other
at least [. . . *** . . .] prior to the lapse, revocation, surrender,
invalidation or abandonment of any Patent
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*CONFIDENTIAL TREATMENT REQUESTED 8
Rights which are subject to the Option, and shall promptly give written
notice to the other party of the grant of any such Patent Rights.
7. REPRESENTATIONS AND WARRANTIES.
7.A REPRESENTATIONS AND WARRANTIES OF EACH PARTY. Each of CIMA and
Schering hereby represents, warrants and covenants to the other party hereto
as follows:
(I) it is a corporation duly organized and validly existing under
the laws of the state or other jurisdiction of its incorporation or formation;
(II) the execution, delivery and performance of this Agreement by
such party has been duly authorized by all requisite corporate action;
(III) it has the power and authority to execute and deliver this
Agreement and to perform its obligations hereunder;
(IV) the execution, delivery and performance by such party of this
Agreement and its compliance with the terms and provisions hereof does not
and will not conflict with or result in a breach of any of the terms and
provisions of, or constitute a default under, (i) a loan agreement, guaranty,
financing agreement, agreement affecting a product, or other agreement or
instrument binding or affecting it or its property; (ii) the provisions of
its charter documents or bylaws; or (iii) any order, writ, injunction or
decree of any court or governmental authority entered against it or by which
any of its property is bound;
(V) the execution, delivery and performance of this Agreement by
such party does not require the consent, approval, or authorization of, or
notice, declaration, filing or registration with, any governmental or
regulatory authority, and the execution, delivery or performance of this
Agreement will not violate any law, rule or regulation applicable to such
party;
(VI) this Agreement has been duly authorized, executed and delivered
and constitutes such party's legal, valid and binding obligation enforceable
against it in accordance with its terms subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to the
availability of particular remedies under general equity principles; and
(VII) it shall comply with all applicable material laws and
regulations relating to its activities under this Agreement.
7.B CIMA'S REPRESENTATIONS. CIMA hereby represents, warrants and
covenants to Schering as follows:
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*CONFIDENTIAL TREATMENT REQUESTED 9
(I) to the best of CIMA's knowledge, the CIMA Patent Rights and CIMA
Know-How are subsisting and are not invalid or unenforceable, in whole or in
part (it being understood that CIMA has a license to U.S. Patent No. 5,252,197);
(II) CIMA has the full right, power and authority to grant all of the
right, title and interest in the Option granted under Article 2 hereof, and in
the licenses granted under the License Agreement;
(III) it has not previously assigned, transferred, conveyed or
otherwise encumbered (nor will it do so with any third party during the Option
Period) its right, title and interest in the CIMA Patent Rights or the CIMA
Know-How in any way that would encumber the use thereof with the Product as
contemplated by this Agreement;
(IV) to the best of CIMA's knowledge, CIMA is the sole and exclusive
owner of the CIMA Patent Rights (except U.S. Patent No. 5,225,197) and CIMA
Know-How, which are free and clear of any liens, charges and encumbrances, and
no other person, corporate or other private entity, or governmental entity or
subdivision thereof, has or shall have any claim of ownership with respect to
the CIMA Patent Rights or CIMA Know-How, whatsoever;
(V) to the best of CIMA's knowledge, the practice of the CIMA Patent
Rights does not interfere or infringe the claims of any third party patent nor
are there any such third party claims that would provide any basis for such an
allegation of infringement;
(VI) to the best of CIMA's knowledge, there are no third party
pending patent applications having claims which, if issued, may cover the
development, manufacture, use or sale of the CIMA Patent Rights; and
(VII) to the best of CIMA's knowledge, there are no claims,
judgments or settlements against or owed by CIMA, or any pending or threatened
claims or litigation relating to the CIMA Patent Rights or CIMA Know-How.
7.C DISCLOSURE OF TECHNOLOGY. During the term of this Agreement, CIMA
will use reasonable efforts to disclose (i) all relevant CIMA Patent Rights and
CIMA Know-How to Schering which are necessary or useful to Schering's
performance of the Prototype Development Plan and/or the development,
manufacture, use or sale of the Products.
7.D NO INCONSISTENT AGREEMENTS. As of the Effective Date neither party has
in effect, and after the Effective Date neither party shall enter into, any oral
or written agreement or arrangement that would be inconsistent with its
obligations under this Agreement.
7.E WARRANTY DISCLAIMER. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT,
NEITHER PARTY MAKES ANY WARRANTY WITH RESPECT TO ANY PATENT RIGHTS OR KNOW-HOW,
SERVICES, GOODS OR OTHER SUBJECT MATTER
10
OF THIS AGREEMENT AND HEREBY DISCLAIMS WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
8. INDEMNIFICATION.
8.A INDEMNIFICATION BY SCHERING. Except to the extent caused by CIMA's
negligence or willful misconduct, and subject to the limitations set forth in
Section 8.5, Schering shall indemnify, defend and hold harmless CIMA and each of
its employees, officers, directors and agents (each, a "CIMA Indemnified Party")
from and against any and all liability, loss, damage, cost, and expense
(including reasonable attorneys' fees) (collectively, a "Liability") which the
CIMA Indemnified Party may incur, suffer or be required to pay resulting from or
arising in connection with (i) the breach by Schering of any covenant,
representation or warranty contained in this Agreement, (ii) any third party
claim of infringement relating to CIMA's use of the Schering Confidential
Information arising under the Prototype Development Plan or in the performance
of this Agreement, (iii) any negligent act or omission, or willful misconduct of
Schering in the performance of the Prototype Development Plan which is the
proximate cause of injury, death or property damage to a third party, or (iv)
the successful enforcement by a CIMA Indemnified Party of any of the foregoing.
8.B INDEMNIFICATION BY CIMA. Except to the extent caused by Schering's
negligence or willful misconduct and subject to the limitations set forth in
Section 8.5, CIMA shall indemnify, defend and hold harmless Schering and each of
its employees, officers, directors and agents (each, a "Schering Indemnified
Party") from and against any Liability which the Schering Indemnified Party may
incur, suffer or be required to pay resulting from or arising in connection with
(i) the breach by CIMA of any covenant, representation or warranty contained in
this Agreement, (ii) any third party claim of infringement relating to
Schering's use of the CIMA Know-How arising under the Prototype Development Plan
or in the performance of this Agreement, (iii) any negligent act or omission, or
willful misconduct of CIMA in performance of the Prototype Development Plan
which is the proximate cause of injury, death or property damage to a third
party, or (iv) the successful enforcement by a Schering Indemnified Party of any
of the foregoing.
8.C CONDITIONS TO INDEMNIFICATION. The obligations of the indemnifying
party under Sections 8.1 and 8.2 are conditioned upon the delivery of written
notice to the indemnifying party of any potential Liability promptly after the
indemnified party becomes aware of such potential Liability. The indemnified
party, its employees and agents shall cooperate fully with the indemnifying
party and its legal representatives in the investigation of any action, claim or
liability covered by this indemnification. The indemnifying party shall have the
right to assume the defense of any suit or claim related to the Liability if it
has assumed responsibility for the suit or claim in writing. Notwithstanding the
foregoing, if in the reasonable judgment of the indemnified party, such suit or
claim involves an issue or matter which could have a materially adverse effect
on the business operations or assets of the indemnified party, the indemnified
party may waive its rights to indemnity under this Agreement and control the
defense or settlement thereof, but in no event shall any such waiver be
construed as a waiver of any indemnification rights such party may have
11
at law or in equity. If the indemnifying party defends the suit or claim, the
indemnified party may participate in (but not control) the defense thereof at
its sole cost and expense.
8.D SETTLEMENTS. Neither party may settle a claim or action related to a
Liability without the consent of the other party, if such settlement would
impose any monetary obligation on the other party or require the other party to
submit to an injunction or otherwise limit the other party's rights under this
Agreement, which consent shall not be unreasonably withheld. Any payment made by
a party to settle any such claim or action shall be at its own cost and expense.
8.E LIMITATION OF LIABILITY. With respect to any claim by one party
against the other arising out of the performance or failure of performance of
the other party under this Agreement, the parties expressly agree that the
liability of such party to the other party for such breach shall be limited
under this Agreement or otherwise at law or equity to direct damages only and in
no event shall a party be liable for: (i) punitive, exemplary or consequential
damages, or (ii) the cost of procurement of substitute goods, technology or
services.
8.F INSURANCE. Each party acknowledges that they each maintain and
shall, during the term of this Agreement, maintain adequate insurance and/or
a self-insurance program for liability insurance, including products
liability and contractual liability insurance, adequately covering such
party's obligations under this Agreement. Each party shall provide the other
party with evidence of such insurance and/or self-insurance program, upon
request.
9. TERM/TERMINATION.
9.A TERM AND EXPIRATION. The term of this Agreement shall commence on the
Effective Date and, unless terminated earlier pursuant to Section 9.2 or 9.3,
shall continue in full force and effect until [. . . *** . . .].
9.B TERMINATION BY SCHERING. Notwithstanding anything contained herein to
the contrary, Schering shall have the unilateral right to terminate this
Agreement, with or without cause, at any time by giving [. . . *** . . .]
advance written notice to CIMA.
9.C TERMINATION FOR CAUSE. This Agreement may be terminated by written
notice by either party at any time during the term of this Agreement as follows:
(I) TERMINATION FOR BREACH. If the other party is in breach of its
material obligations hereunder by causes and reasons within its control and has
not cured such breach within [. . . *** . . .] after notice of the breach; or
(II) TERMINATION FOR INSOLVENCY. Upon the filing or institution of
bankruptcy, reorganization, liquidation or receivership proceedings, or upon an
assignment of a substantial portion of the assets for the benefit of creditors
by the other party or in the event a receiver or custodian is appointed for such
party's business, or if a substantial portion of such party's business is
subject to attachment or similar process; PROVIDED, HOWEVER, in the case of any
involuntary
12
bankruptcy proceeding such right to terminate shall only become effective if
such proceeding is not dismissed within [. . . *** . . .] after the filing
thereof. The Option and related rights to licenses granted thereunder or
pursuant to this Agreement by CIMA to Schering are, and shall otherwise be
deemed to be, for purposes of Section 365(n) of the Bankruptcy Code, licenses
of rights to "intellectual property" as defined under Section 101(52) of the
Bankruptcy Code. The parties agree that Schering, as a licensee of such
rights under this Agreement, shall retain and may fully exercise all of its
rights and elections under the Bankruptcy Code. The parties further agree
that, in the event of the commencement of a bankruptcy proceeding by or
against CIMA under the Bankruptcy Code, Schering shall be entitled to a
complete duplicate of (or complete access to, as appropriate) any such
intellectual property and all embodiments of such intellectual property upon
written request therefore by Schering. Such intellectual property and all
embodiments thereof shall be promptly delivered to Schering (i) upon any such
commencement of a bankruptcy proceeding upon written request therefor by
Schering, unless CIMA elects to continue to perform all of its obligations
under this Agreement or (ii) if not delivered under (i) above, upon the
rejection of this Agreement by or on behalf of CIMA upon written request
therefor by Schering.
9.D EFFECT OF TERMINATION. In the event this Agreement is terminated,
Schering shall pay to CIMA [. . . *** . . .] as of the date of notice [. . . ***
. . .] of notice of termination.
9.E ACCRUED RIGHTS. Expiration or termination of this Agreement shall not
release either party from any obligation accruing prior to or upon such
expiration or termination. Accordingly, the following provisions shall survive
expiration or termination of this Agreement: Article 4, Article 5, Article 6,
Article 7, Article 8, Section 9.4 and Section 11.5.
11. MISCELLANEOUS.
11.1 ASSIGNABILITY. This Agreement may not be assigned or otherwise
transferred by either party without the consent of the other party. The
foregoing notwithstanding, either CIMA or Schering may, without the other
party's consent, assign its rights and obligations under this Agreement (i) to
any Affiliate, or (ii) in connection with a merger, consolidation or sale of all
or substantially all of such party's assets pertaining to this Agreement to an
unrelated third party, PROVIDED, HOWEVER,, that the assigning party's rights and
obligations under this Agreement shall be assumed by its successor in interest
in any such transaction. Any purported assignment in violation of the preceding
sentence shall be void. Any permitted assignee shall assume all obligations of
its assignor under this Agreement.
11.2 INDEPENDENT CONTRACTORS. It is expressly agreed that CIMA and
Schering shall be independent contractors and that the relationship between the
two parties shall not constitute a partnership, joint venture or agency. Neither
CIMA nor Schering shall have the authority to make any statements,
representations or commitments of any kind, or to take any action, which shall
be binding on the other, without the prior consent of the other party to do so.
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*CONFIDENTIAL TREATMENT REQUESTED 13
11.3 NOTICES. Notices, invoices and communications hereunder shall be
deemed made (i) five (5) days after having been sent by registered or certified
mall, postage prepaid, or (ii) on the day of hand delivery, or (iii) on the day
of facsimile transmission, upon confirmation of receipt, if addressed to the
party to receive such notice, invoice or communication at the addresses given
below, or such other address as may hereafter be designated by notice in
writing.
If to CIMA:
CIMA Labs, Inc.
10,000 Valley View Road
Eden Prairie, Minnesota 55344
Attention: Vice President, Business Development
Fax- (612)947-8770
cc: Cooley Godward llp
5 Palo Alto Square
5000 El Camino Real
Palo Alto, CA 94306
Attention: Barbara Kosacz, Esq.
If to Schering:
Schering-Plough Corporation
2000 Galloping Hill Road
Kenilworth, New Jersey 07032
Attention: Vice President, Business Development
Fax- (908) 298-5379
cc: Law Department -- Senior Director, Licensing
Fax - (908) 298-2739
11.4 ENTIRE AGREEMENT. This Agreement, together with the exhibits hereto,
contains the entire understanding of the parties with respect to the subject
matter hereof. All previous agreements are superseded hereby and all express or
implied agreements and understandings, either oral or written, heretofore made
are expressly merged in and made a part of this Agreement. This Agreement may be
amended, or any term hereof modified, only by a written instrument duly executed
by authorized representatives of both parties hereto.
11.5 DISPUTE RESOLUTION.
(a) COOPERATION. In the event that Schering and CIMA are unable,
after exercising good faith efforts, to reach agreement on an issue relating to
this Agreement, then upon written notice to the other party, the issue shall be
referred to the Vice President, Marketing &
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*CONFIDENTIAL TREATMENT REQUESTED 14
Sales, Key Pharmaceuticals of Schering and the Vice President, Business
Development of CIMA, who shall meet and use good faith efforts to reach
agreement on the issue ("Dispute"). In the event that such representatives of
Schering and CIMA are unable to reach agreement on the Dispute in such
meeting, then either party shall have the right to submit the Dispute to
arbitration in accordance with the provisions of Section 11.5(b) by providing
written notice to the other party within [. . . *** . . .] after such meeting.
(b) ARBITRATION. All Disputes arising in connection with this
Agreement shall be finally settled under the Commercial Arbitration Rules of the
American Arbitration Association then in effect, except as modified by the
provisions set forth in Exhibit 11.5.
11.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of New Jersey, without giving effect to the choice of
laws provisions thereof.
11.7 DESCRIPTIVE HEADINGS. The captions to the several Articles and
Sections hereof are not a part of this Agreement, and are merely guides or
labels to assist in locating and reading the several Articles and Sections
hereof.
11.8 COUNTERPARTS. This Agreement shall become binding when any one or
more counterparts hereof, individually or taken together, shall bear the
signatures of each of the parties hereto. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
11.9 FORCE MAJEURE. Failure of any party to perform its obligations under
this Agreement (except the obligation to make payments when properly due) shall
not subject such party to any liability or place them in breach of any term or
condition of this Agreement if such failure is caused by any cause beyond the
reasonable control of such non-performing party, including without limitation,
acts of God, fire, explosion, flood, drought, war, riot, sabotage, embargo,
strikes or other labor trouble, failure in whole or in part of suppliers to
deliver on schedule materials, equipment or machinery, interruption of or delay
in transportation, a national health emergency or compliance with any order or
regulation of any government entity acting with color of right, PROVIDED,
HOWEVER, that the party affected shall promptly notify, the other party of the
condition constituting force majeure as defined herein and shall exert
reasonable efforts to eliminate, cure and overcome any such causes and to resume
performance of its obligations with all possible speed. If a condition
constituting force majeure as defined herein exists for more than [. . . *** . .
.], the parties shall meet to negotiate a mutually satisfactory solution to the
problem, if practicable.
11.10 SEVERABILITY. If any provision of this Agreement is declared
illegal, invalid or unenforceable by a court having competent jurisdiction, it
is mutually agreed that this Agreement shall endure except for the part declared
invalid or unenforceable by order of such court, PROVIDED, HOWEVER,, that in the
event that the terms and conditions of this Agreement are materially
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*CONFIDENTIAL TREATMENT REQUESTED 15
altered, the parties shall, in good faith, renegotiate the terms and
conditions of this Agreement to reasonably substitute such invalid or
unenforceable provision in light of the intent of this Agreement.
11.11 FURTHER ACTIONS. Each party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute and deliver this Agreement as of the last date set forth below.
SCHERING CORPORATION CIMA LABS, INC.
By: /s/ Marty Driscoll By:/s/ Jack Khattar
--------------------------------- -------------------------------------
Title: V.P. Marketing & Sales Title: V.P. Business Development
Date: 8/8/97 Date: 8/11/97
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*CONFIDENTIAL TREATMENT REQUESTED 16
EXHIBIT 1.2
BASIC LICENSE TERMS
1. DEFINITIONS.
1.1 As used in the License Agreement, the following capitalized terms,
whether used in the singular or plural, shall have the respective meanings set
forth in this Article 1. In addition to the definitions set forth below and
herein, this Article 1 shall include those definitions from Article 1 of the
Development and Option Agreement that relate to the License Agreement and such
definitions are incorporated herein by reference.
1.2 "CIMA PATENT RIGHTS" as defined in Article 1 of the Development and
Option Agreement shall also include any patents or patent applications covering
any CIMA Inventions arising thereunder.
1.3 "COMPETITIVE PRODUCT" shall mean a product in the Field with a quick
dissolving formulation substantially equivalent or similar to the Delivery
System.
1.4 "EFFECTIVE DATE" shall mean, for purposes of this License Agreement,
the date on which the License Agreement has been signed by duly authorized
representatives of each of the parties to said License Agreement.
1.5 "FDA" shall mean the United States Food and Drug Administration or any
successor agency thereto.
1.6 "NET SALES" shall mean, in the Territory, the [. . . *** . . .] in the
Territory, less the [. . . *** . . .] from such gross amounts including:
(i) [. . . *** . . .];
(ii) credits or allowances actually granted for damaged goods, returns
or rejections of Product and retroactive price reductions;
(iii) [. . . *** . . .]; and
(iv) freight, postage, shipping, customs (i.e. import or export)
duties and insurance charges.
1.7 "TERRITORY" shall mean [. . . *** . . .].
1.8 "VALID CLAIM" means a claim of an issued and unexpired patent included
within the Patent Rights, which has not been revoked or held unenforceable or
invalid by a decision of a court of other governmental agency of competent
jurisdiction, unappealable or unappealed with
1
the time allowed for appeal, and which has not been disclaimed, denied or
admitted to be invalid or unenforceable through reissued or disclaimer or
otherwise.
2. LICENSES.
2.1 LICENSE GRANT TO SCHERING.
(a) CIMA shall grant to Schering an exclusive (even as
to CIMA) [. . . *** . . .] in the Territory under the CIMA Patent Rights and
the CIMA Know-How to make, use, offer for sale, sell and have made, used,
offered for sale and sold, Products.
(b) The license granted in Section 2. l(a) above includes the right
to sublicense to third parties and Affiliates the right to sell, make, offer to
sell, and have sold, made and offered for sale, Products.
2.2 DUE DILIGENCE BY SCHERING.
(a) DILIGENT EFFORTS. Schering shall, [. . . *** . . .], consistent
with [. . . *** . . .] in pursuing the [. . . *** . . .] a Product in the
Territory where [. . . *** . . .] to do so.
(b) The diligence obligations of Schering under Section 2.2(a) are
expressly conditioned upon the continuing absence of any adverse condition or
event which warrants a delay in development, clinical testing or
commercialization of the Product, including, without limitation, (i) failure of
CIMA to perform its obligations under the License Agreement, including, without
limitation, its obligation to provide Schering with adequate supplies of
materials needed for such development, testing or commercialization, and/or (ii)
unanticipated negative toxicological or pharmacological test results, and/or
(iii) an adverse condition or event relating to the safety or efficacy of the
Product, and/or (iv) delays arising due to action or inaction by the United
States Food and Drug Administration once the application has been filed, and/or
(v) unfavorable labeling, and/or (vi) the issuance of a dominating third party
patent required for Licensed Product. In the event of such event or condition,
the parties agree to discuss such event or condition and appropriate mechanisms
to address it. The obligation of Schering to develop, test or market such
Product shall be delayed or suspended so long as in Schering's opinion any such
condition or event exists; PROVIDED, HOWEVER,, there must be [. . . *** . . .]
and Schering must use [. . . *** . . .] consistent with [. . . *** . . .], to
address such adverse condition or event.
3. PAYMENTS AND ROYALTIES.
3.1 LICENSE ISSUANCE FEE. In consideration for the licenses granted
hereunder, Schering shall pay to CIMA a one time license fee of [. . . *** . .
.] for the grant of license to the CIMA Patent Rights and CIMA Know-How for a
Product.
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*CONFIDENTIAL TREATMENT REQUESTED 2
3.2 MILESTONE PAYMENTS. Subject to the terms and conditions contained in
the License Agreement, Schering shall pay to CIMA the following milestone
payments:
(i) [. . . *** . . .] upon the successful [. . . *** . . .] of
Product;
(ii) [. . . *** . . .] upon successful [. . . *** . . .] of Product;
(iii) [. . . *** . . .] upon successful [. . . *** . . .] of Product;
(iv) [. . . *** . . .] upon the submission [. . . *** . . .] of the
Product; and
(v) [. . . *** . . .] upon [. . . *** . . .] for the Product.
3.3 DEVELOPMENT COSTS. Subject to the terms and conditions in the License
Agreement, Schering shall pay to CIMA the costs set forth on Attachment 3.3 for
actual work performed for the development, scale-up and commercialization of the
Product. Such amounts shall be payable within [. . . *** . . .] after invoice
therefore. In the event additional activities other than those set forth on
Attachment 3.3 are necessary for the development, scale-up and commercialization
of the Product, then the parties shall confer and agree on such activities, and
Schering shall reimburse CIMA for the costs therefore as agreed between the
parties and in an amount consistent with the applicable costs for similar
activities set forth on Attachment 3.3.
3.4 ROYALTIES.
(a) Scherings hall pay to CIMA earned royalties on a Product-by-
Product basis in an amount equal to:
(i) [. . . *** . . .] of Products where such Product is covered
by a Valid Claim of a CIMA Patent Right; or
(ii) [. . . *** . . .] of Product if such Product is not covered
by a Valid Claim of a CIMA Patent Right and [. . . *** . . .] in the Territory.
(iii) [. . . *** . . .] of Product if such Product is not
covered by a Valid Claim of a CIMA Patent Right and [. . . *** . . .] in the
Territory.
(b) Notwithstanding Subsection 3.4(a) above, Schering shall pay to
CIMA minimum royalties in an amount equal to the following:
(i) [. . . *** . . .] for the [. . . *** . . .] of the Product;
(ii) [. . . *** . . .] for the [. . . *** . . .] of the Product;
and
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*CONFIDENTIAL TREATMENT REQUESTED 3
(iii) [. . . *** . . .] for the [. . . *** . . .] of the
Product and for [. . . *** . . .] thereafter.
In the event that earned royalties payable in a year do not equal or exceed
the minimum royalties due during such year, then Schering shall pay
[. . . *** . . .] with such payment being made with the [. . . *** . . .] in
such year. For purposes of this subsection, a year shall be calculated based
on a twelve month period beginning on the [. . . *** . . .] of the Product
and each subsequent year shall begin on the anniversary of such date in such
[. . . *** . . .].
3.5 TERM OF ROYALTY OBLIGATION; CERTAIN CONDITIONS. Royalties on each
Product at the rate set forth in Section 3.4 shall be effective as of the date
of first commercial sale of Product and shall continue until either: (i) the
expiration of the last applicable CIMA Patent Right in the case of sales for
which there is a Valid Claim; or (ii) in the case of sales of Product for which
there is not a Valid Claim (or if the patent application did not issue), until
[. . . *** . . .] after the first commercial sale of the Product.
3.6 THIRD PARTY PATENT LICENSES. In the event that patent licenses from
third parties relating to the Delivery System being utilized in the Product
are required by Schering, its Affiliates and sublicensees in order to
develop, make, have made, use or sell Product (hereinafter "Third Party
Patent Licenses"), up to [. . . *** . . .] of royalties and/or payments
actually paid under such Third Party Patent Licenses by Schering for sale of
such Product for such calendar quarter shall be creditable against the
royalty payments due CIMA by Schering, PROVIDED, HOWEVER, that in no event
shall the royalty payments due CIMA under Sections 3.3(i) or 3.3(ii) be
[. . . *** . . .].
4. MANUFACTURING RIGHTS AND ACTIVITIES.
4.1 SUPPLY OF SCHERING'S REQUIREMENTS. CIMA shall manufacture and
supply to Schering, and Schering shall purchase from CIMA, Schering's
Requirements of the Product. The term "Requirements" shall mean all
quantities of the Product that shall be required by Schering, its Affiliates
and its sublicensees for clinical trial materials and for distribution,
marketing and sale of the Product in the Territory during the term hereof.
4.2 SELF-sUPPLY BY SCHERING AND ITS AFFILIATES. At any time after the
[. . . *** . . .] after the [. . . *** . . .] of the Product, Schering and
its Affiliates shall have the right at their sole discretion, from time to
time during the term of the Agreement, to self-supply any portion of, or all
of, its Requirements of the Product. The License Agreement shall contain the
terms and conditions for notice and for the transfer of technology and
know-how to Schering to enable it to self-supply the Product. In addition,
Schering shall pay [. . . *** . . .] the Product. The License Agreement shall
set forth the calculation for such amount, which shall be based upon
[. . . *** . . .] (it being understood that nothing contained herein shall be
construed to obligate CIMA to disclose its profit margins for supplied
Product).
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*CONFIDENTIAL TREATMENT REQUESTED 4
4.3 SUPPLY PRICE. The parties hereto agree that the supply price for
the Product shall be calculated and consistent with Attachment 4.3. The
License Agreement shall include the terms and conditions for price adjustment
and maximum price increase of Product.
4.4 DEVELOPMENT PROGRAM. Subject to Section 3.3, CIMA shall perform the
development, scale-up and validation activities as necessary for the
regulatory approval of the Product in the Territory, including, without
limitation, the activities set forth in Attachment 3.3 hereto.
5. PATENTS.
5.1 INVENTIONS. The License Agreement shall set forth the provisions for
determining the ownership of Inventions arising during the performance of the
development program during the License Agreement. It is agreed that such
terms and provisions shall be substantially in accordance with the
corresponding terms and provisions of the Development and Option Agreement.
5.2 FILING, PROSECUTION AND MAINTENANCE. CIMA shall diligently file,
prosecute and maintain in the Territory, at its expense, the CIMA Patent
Rights licensed to Schering under the License Agreement.
5.3 SCHERING'S OPTION TO PROSECUTE AND MAINTAIN PATENTS. CIMA shall
notify Schering of any decision to cease prosecution and/or maintenance of
CIMA Patent Rights, and Schering shall have the right, in its sole
discretion, to take over responsibility for the prosecution and maintenance
of such CIMA Patent Rights, at Schering's expense. The License Agreement
shall set forth in detail the specific rights and responsibilities of the
parties with respect to CIMA Patent Rights for which Schering assumes
responsibility under this Section 5.3.
5.4 ENFORCEMENT.
(A) NOTICE AND DISCONTINUANCE OF INFRINGEMENT. Each of CIMA and
Schering shall promptly notify the other party in writing in the event that
it becomes aware of any infringement by a third party in the Territory of any
issued patent within the Patent Rights. Any such notification shall include
evidence to support an allegation of infringement by such third party. Each
of Schering and CIMA shall have primary responsibility for obtaining a
discontinuance of such infringement or bringing suit against such third party
infringer with respect to Patent Rights for which it has responsibility under
the License Agreement. The License Agreement shall set forth additional
provisions, to be negotiated by the parties, detailing the parties'
responsibilities and obligations with regard to resolution of any alleged
third party infringement and for apportionment between the parties of any
recovery or damages awarded from a suit or action brought by CIMA and/or
Schering.
(b) CONTINUANCE OF INFRINGEMENT. The License Agreement shall set
forth provisions, to be negotiated by the parties, whereby each party shall have
the right, but not the
5
obligation, to assume responsibility and control of the resolution of any
third party infringement matter relating to the Patent Rights in the event
that party having responsibility under Section 5.4(a) fails to take
appropriate enforcement action against such third party infringer within a
reasonable time period to be established by the parties.
5.5 INFRINGEMENT - THIRD PARTY LICENSES. The License Agreement shall
set forth terms, to be negotiated by the parties, defining the rights and
responsibilities of each party in the event that Schering's making, having
made, using, distributing, marketing, promoting, offering for sale or selling
of Products will infringe or is alleged to infringe any third party patents.
6. TERM AND TERMINATION.
6.1 TERM AND EXPIRATION. The License Agreement shall be effective as of
the Effective Date and unless terminated earlier pursuant to Sections 6.2 below,
the term of the License Agreement shall continue in effect until the later of
the expiration of the last to expire CIMA Patent Right or [. . . *** . . .] from
[. . . *** . . .] of the Product. Upon expiration of the License Agreement,
Schering's licenses shall become fully paid-up, perpetual licenses.
6.2 TERMINATION BY SCHERING. Notwithstanding anything herein to the
contrary, Schering shall have the unilateral right to terminate the License
Agreement, with or without cause, at any time by giving [. . . *** . . .]
advance written notice to CIMA. In the event of such termination, the rights
and obligations thereunder, including any payment obligations not due and
owing as of the termination date, shall terminate and the licenses granted to
Schering shall revert back to CIMA. In the event Schering terminates this
Agreement without cause, Schering shall pay CIMA a termination fee in an
amount equal to (i) [. . . *** . . .], plus (ii) [. . . *** . . .] in order
to perform its obligations under this Agreement.
6.3 TERMINATION.
(A) TERMINATION FOR CAUSE. The License Agreement may be terminated
by written notice by either party at any time during the term of this
Agreement:
(I) if the other party is in breach of its material
obligations thereunder by causes and reasons within its control and has not
cured such breach or taken steps to substantially cure such breach within
[. . . *** . . .], after notice requesting cure of the breach; or
(II) upon the filing or institution of bankruptcy,
reorganization, liquidation or receivership proceedings, or upon an
assignment of a substantial portion of the assets for the benefit of
creditors by the other party or in the event a receiver or custodian is
appointed for such party's business, or if a substantial portion of such
party's business is subject to attachment or similar process, PROVIDED,
HOWEVER, in the case of any involuntary bankruptcy
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*CONFIDENTIAL TREATMENT REQUESTED 6
proceeding such right to terminate shall only become effective if the
proceeding is not dismissed within [. . . *** . . .] after the filing thereof.
The License Agreement shall provide that in the event that there is a dispute
as to whether a party can terminate under Subsections 6.3(a)(i) or (ii), the
issue shall be referred to arbitration which shall be conducted under the
terms and conditions set forth in Exhibit 11.5 and such issue shall be
decided by the arbitrator in order for the rights and remedies in Section
(b)(i) and (ii) to take effect.
(B) EFFECT OF TERMINATION FOR CAUSE ON LICENSE.
(I) In the event Schering properly terminates the License
Agreement under Section 6.3(a)(i) under circumstances where Schering suffers
material harm or where such breach causes a competitive disadvantage to
Schering, then Schering's license under the License Agreement shall continue
to be royalty-bearing but at a royalty rate reduced by [. . . *** . . .] of
the applicable royalty rate for period not to exceed [. . . *** . . .].
(II) In the event CIMA properly terminates the License
Agreement under Section 6.3(a)(i), Schering shall pay CIMA a termination fee
in an amount equal to (i) [. . . *** . . .], plus (ii) [. . . *** . . .] in
order to perform its obligations under this Agreement.
(III) With respect to termination of the License Agreement
under Section 6.3(a)(ii), the licenses granted under or pursuant to the
License Agreement by CIMA to Schering are, and shall otherwise be deemed to
be, for purposes of Section 365(n) of the Bankruptcy Code, licenses of rights
to "intellectual property" as defined under Section 101(52) of the Bankruptcy
Code. The parties agree that Schering, as a licensee of such rights under
this Agreement, shall retain and may fully exercise all of its rights and
elections under the Bankruptcy Code. The parties further agree that, in the
event of the commencement of a bankruptcy proceeding by or against CIMA under
the Bankruptcy Code, Schering shall be entitled to a complete duplicate of
(or complete access to, as appropriate) any such intellectual property and
all embodiments of such intellectual property upon written request therefore
by Schering. Such intellectual property and all embodiments thereof shall be
promptly delivered to Schering (i) upon any such commencement of a bankruptcy
proceeding upon written request therefore by Schering, unless CIMA elects to
continue to perform all of its obligations under this Agreement or (ii) if
not delivered under (i) above, upon the rejection of this Agreement by or on
behalf of CIMA upon written request therefore by Schering.
7. OTHER PROVISIONS
The License Agreement will have additional customary terms and provisions
including, without limitation, those relating to royalty reports, maintenance of
royalty records, audit rights of CIMA, confidentiality and publication, patent
prosecution, maintenance and enforcement, representations and warranties of each
party, indemnification provisions, dispute resolution
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*CONFIDENTIAL TREATMENT REQUESTED 7
mechanisms and miscellaneous provisions relating to assignment, governing
law, export control, force majeure and notices.
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*CONFIDENTIAL TREATMENT REQUESTED 8
ATTACHMENT 3.3
Development, Scale-Up and Commercialization Activities for a
[. . . *** . . .]
Estimated
Estimated* Time to
Cost/(000's) Completion
--------------- ----------------
I Prototype Development (per Exhibit 1.16 and Section 3
of Development Agreement) $[. . . *** . . .] [. . . *** . . .]
II Initial Scale-Up at R&D Facility [. . . *** . . .]
A. [. . . *** . . .]. $[. . . *** . . .]
B. Manufacture [. . . *** . . .] for use in [. . . *** $[. . . *** . . .]
. . .].
C. Stability for [. . . *** . . .] under [. . . *** . . .] $[. . . *** . . .]
(SEE ATTACHED TABLE)
III Full-Scale Manufacturing/Optimization [. . . *** . . .]
A. Manufacture up to [. . . *** . . .] $[. . . *** . . .]
B. Manufacture [. . . *** . . .] follow-up $[. . . *** . . .]
C. Stability on [. . . *** . . .] (SEE ATTACHED TABLE) $[. . . *** . . .]
D. Preparation of CMC, in Schering's approved format. $[. . . *** . . .]
IV. Validation/Commercialization [. . . *** . . .]
A. Manufacture [. . . *** . . .]
1. If Saleable $[. . . *** . . .]
2. If Not Saleable $[. . . *** . . .]
B. Stability studies on above [. . . *** . . .] (SEE $[. . . *** . . .]
ATTACHED TABLE)
C. Validation labor costs $[. . . *** . . .]
Tooling lead time** [. . . *** . . .]
* Cost estimate does not include capital and tooling costs that may be
needed to accommodate the [. . . *** . . .]. These are estimated at
$[. . . *** . . .] for tooling and $[. . . *** . . .] for needed
modifications to the packaging line.
** If tooling for tablet size/packaging configuration is ordered upon the
completion of Phase I above; i.e., upon Schering's approval of final
formulation, CIMA expects the addition of [. . . *** . . .] to the
timeline due to tooling lead times. If the decision to order tooling is
pushed back to wait for the results from [. . . *** . . .], the timeline
will be further extended by the waiting period.
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*CONFIDENTIAL TREATMENT REQUESTED 1
ATTACHMENT 3.3 (cont.)
STABILITY STUDIES SUMMARY
Item II C
- ------------------------------------------------------------
- ------------------------------------------------------------
Storage Conditions
- ------------------------------------------------------------
- ------------------------------------------------------------
[. . . *** . . .]
- ------------------------------------------------------------
- ------------------------------------------------------------
[. . . *** . . .]
- ------------------------------------------------------------
[. . . *** . . .] X X X
- ------------------------------------------------------------
[. . . *** . . .]
- ------------------------------------------------------------
[. . . *** . . .] X X X
- ------------------------------------------------------------
- ------------------------------------------------------------
Item III C; Item IV B
- ------------------------------------------------------------
- ------------------------------------------------------------
Storage Conditions
- ------------------------------------------------------------
- ------------------------------------------------------------
[. . . *** . . .]
- ------------------------------------------------------------
- ------------------------------------------------------------
[. . . *** . . .]
- ------------------------------------------------------------
[. . . *** . . .] X X X X X X X X
- ------------------------------------------------------------
[. . . *** . . .]
- ------------------------------------------------------------
[. . . *** . . .] X X X X
- ------------------------------------------------------------
- ------------------------------------------------------------
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*CONFIDENTIAL TREATMENT REQUESTED 2
ATTACHMENT 4.3
PRELIMINARY COST OF GOODS ESTIMATE
3/12/97
Product Cost per Tablet (cents)
- ------- -----------------------
[. . . *** . . .]
- - Cost does not include cost of [. . . *** . . .].
- - Volumes of [. . . *** . . .].
- - Pricing assumes finished product to ship FOB point of manufacture.
- - Packages of [. . . *** . . .], packed [. . . *** . . .].
- - Quality Control procedures normal to CIMA which include:
a) Testing and release of raw materials, packaging components, and
finished product.
b) In-process sampling and testing.
- - Released finished product not to be stored at CIMA.
- - [. . . *** . . .] as mandated by regulatory revisions (i.e., plate and die
charges due to label changes and product identification requirements, etc.)
- - [. . . *** . . .].
- - Cost does not include [. . . *** . . .].
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*CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 1.4
CIMA PATENT RIGHTS
Country Patent/Application No. Filing/Issue Date
- ------- ---------------------- -----------------
US [. . . *** . . .](1) [. . . *** . . .]
US [. . . *** . . .](1) [. . . *** . . .]
US [. . . *** . . .](1) [. . . *** . . .]
US [. . . *** . . .](2) [. . . *** . . .]
US [. . . *** . . .](2) [. . . *** . . .]
US [. . . *** . . .](2) [. . . *** . . .]
- --------------------
(1) Issued Patents
(2) Pending Patent Applications
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*CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 1.8
FINAL PROTOTYPE - GENERAL SPECIFICATIONS
- - TABLET SIZE/SHAPE
[. . . *** . . .]
- - FLAVOR
Tablet flavor(s) to be determined mutually by the parties based upon (i)
optimum taste-masking characteristics and (ii) market appeal.
- - COLOR
Tablet color(s) will be determined mutually by the parties.
- - TABLET DISINTEGRATION
Targeted tablet disintegration time [. . . *** . . .].
- - PACKAGING
The tablet will be [. . . *** . . .].
- - STABILITY
Prototype development (implementation of the Development Plan) will include
[. . . *** . . .].
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*CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 1.16
PROTOTYPE DEVELOPMENT PLAN
REVISED 7/17/97
A. Schering to provide CIMA within [. . . *** . . .] from Effective Date with:
1) [. . . *** . . .] of the [. . . *** . . .] form of [. . . *** . . .]
for development work at [. . . *** . . .].
2) Safety handling data (MSDS) for [. . . *** . . .].
3) Analytical methods and reference standard for [. . . *** . . .].
4) Clean-up procedures for active [. . . *** . . .].
5) Any other technical information deemed by Schering to be
beneficial.
B. CIMA to develop [. . . *** . . .] formulations of OraSolv-Registered
Trademark- tablets for [. . . *** . . .] by Schering [. . . *** . . .].
NOTE: Multiple formulations with no more than [. . . *** . . .] will
be produced and evaluated by CIMA and Schering. The best formulations
will be provided to Schering. Up to [. . . *** . . .] may be undertaken
if necessary in the judgment of Schering. Further formulation cycles
may be undertaken on terms to be mutually agreed by the parties.
C. Schering approves [. . . *** . . .].
D. CIMA develops the analytical method(s) for testing, release and stability
assessment of the Prototype.
E. CIMA to manufacture [. . . *** . . .] and set up sufficient samples for
conducting [. . . *** . . .].
F. CIMA to deliver to Schering [. . . *** . . .] of the approved prototype
formulation together with the results of the [. . . *** . . .].
G. CIMA to continue the [. . . *** . . .] at [. . . *** . . .] and provide
results to Schering. (SEE ATTACHED TABLE)
H. CIMA to produce [. . . *** . . .] of the approved formulation of the
Product, as requested by Schering.
Duration of prototype development activities at CIMA is estimated at
[. . . *** . . .] from receipt by CIMA of the [. . . *** . . .] from Schering.
This does not include timing of Schering's activities.
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*CONFIDENTIAL TREATMENT REQUESTED 1
EXHIBIT 1.16 (cont.)
STABILITY STUDIES SUMMARY
Item E-G
- ------------------------------------------------------------
- ------------------------------------------------------------
Storage Conditions
- ------------------------------------------------------------
- ------------------------------------------------------------
[. . . *** . . .]
- ------------------------------------------------------------
- ------------------------------------------------------------
[. . . *** . . .]
- ------------------------------------------------------------
[. . . *** . . .] X X X
- ------------------------------------------------------------
[. . . *** . . .]
- ------------------------------------------------------------
[. . . *** . . .] X X X
- ------------------------------------------------------------
- ------------------------------------------------------------
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*CONFIDENTIAL TREATMENT REQUESTED 2
EXHIBIT 5.3
PROPOSED PRESS RELEASE
CIMA LABS INC. ANNOUNCES AGREEMENT WITH SCHERING
CORPORATION
SUSTAINED RELEASE PRESCRIPTION PRODUCT TO BE COMBINED WITH
ORASOLV-Registered Trademark-
Minneapolis, MN, xxxx xx, 199x - CIMA LABS INC. (NASDAQ: CIMA) today
announced an exclusive development and license option agreement with Schering
Corporation, a wholly-owned subsidiary of Schering-Plough Corporation (NYSE:
SGP). The agreement pertains to one of Schering-Plough's currently marketed
prescription products and represents CIMA's first collaboration on developing
a fast dissolve formulation of a sustained release product. In exchange for
its development work and license option, CIMA will receive an option fee and
development fees.
"We are excited to announce our first corporate partner for the combination
of a sustained release prescription drug with our fast dissolve technology,"
commented John M. Siebert, Ph.D., President and Chief Executive Officer of
CIMA LABS INC. "This agreement tracks our corporate goal to develop
relationships in the prescription marketplace and we look forward to working
with the Schering-Plough team."
OraSolv-Registered Trademark- is a patented oral dosage form which
incorporates microencapsulated drug ingredients into tablets that dissolve
quickly in the mouth. OraSolv-Registered Trademark- is designed to improve
taste acceptance, address difficulty of swallowing traditional tablets and
capsules, while offering a convenient oral dosage form that can be taken
anywhere and anytime, therefore increasing compliance.
CIMA LABS INC. is a drug delivery company that develops and manufactures
product based upon its OraSolv-Registered Trademark- technology for marketing
by multinational pharmaceutical companies to improve patient compliance and
drug efficacy. CIMA was founded in 1986 and has been publicly held since
July 1994. The Company's corporate headquarters and manufacturing facility
are located in Eden Prairie, MN and its Research & Development facility is
located in Brooklyn Park, MN.
EXHIBIT 11.5
ARBITRATION PROVISIONS
l) Within [. . . *** . . .] after the receipt of the notice provided
for in Section 11.5(a) of this Agreement, each party shall appoint an
independent expert, knowledgeable in the field concerning the Dispute, to
serve on the special arbitration panel (the "Panel"). The two independent
experts so appointed by the parties, shall, within [. . . *** . . .]
thereafter, appoint a neutral third independent expert, knowledgeable in the
field concerning the Dispute. Such neutral third independent expert shall
serve as the chairperson of the Panel. Each of the members of the Panel shall
be required to sign a secrecy agreement, acceptable in form to both parties,
with respect to any information provided by either party during the
arbitration procedure.
2) Within [. . . *** . . .] after the chairperson of the Panel is
appointed, each party shall submit to each member of the Panel, and to the
other party, a written statement setting forth the relevant facts with
respect to the Dispute and arguments supporting such party's position with
respect to the resolution of the Dispute.
3) Within [. . . *** . . .] after such written statements are
provided to the Panel, the Panel and appropriate representatives of each
party shall meet so that the parties can present oral arguments to the Panel,
and the Panel can have the opportunity to ask questions of the parties. The
location of such meeting shall be at Schering's facility in Kenilworth, New
Jersey if CIMA requests the arbitration and at CIMA's facility in Eden
Prairie, Minnesota if Schering requests the arbitration. Each party shall
have [. . . *** . . .] to present its arguments to the Panel and
[. . . *** . . .] to rebut the arguments made by the other party. The party
requesting the arbitration shall be the first to present its oral argument to
the Panel.
4) Within [. . . *** . . .] after such meeting, the Panel shall
render a decision on the Dispute, which decision shall be reduced to writing
by the chairperson of the Panel and signed by each member of the Panel. The
chairperson of the Panel shall be responsible for immediately providing a
copy of the written decision to each party. Such decision shall be binding
with respect to any Disputes under this Agreement.
5) Each party shall be responsible for its own costs incurred in such
arbitration procedures and the cost of the Panel shall be shared equally by
the parties.
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*CONFIDENTIAL TREATMENT REQUESTED