EXHIBIT 99.1
LICENSE AND DEVELOPMENT AGREEMENT
BETWEEN
PHARMACIA & UPJOHN COMPANY
AND
CONNETICS CORPORATION
DECEMBER 21, 2001
THIS DOCUMENT IS THE CONFIDENTIAL INFORMATION OF BOTH PARTIES. IT SHOULD BE
DISTRIBUTED ON A NEED-TO-KNOW BASIS AND KEPT IN A SECURE AREA.
TABLE OF CONTENTS
Page
Article 1 - Definitions....................................................................1
Section 1.1 "Act".......................................................................1
Section 1.2 "Affiliate".................................................................1
Section 1.3 "Agreement".................................................................1
Section 1.4 "Arbitrating Accountant"....................................................2
Section 1.5 "Business Day"..............................................................2
Section 1.6 "Claim".....................................................................2
Section 1.7 "Combination Product".......................................................2
Section 1.8 "[**]"......................................................................2
Section 1.9 "Competing Product".........................................................2
Section 1.10 "Confidential Information"..................................................2
Section 1.11 "Connetics Know-How"........................................................2
Section 1.12 "Connetics Patents".........................................................2
Section 1.13 "Connetics Technology"......................................................2
Section 1.14 "Control" or "Controlled"...................................................2
Section 1.15 "Country Term"..............................................................2
Section 1.16 "Development Committee".....................................................3
Section 1.17 "Dispute"...................................................................3
Section 1.18 "Effective Date"............................................................3
Section 1.19 "Event of Default"..........................................................3
Section 1.20 "Field".....................................................................3
Section 1.21 "First Commercial Sale".....................................................3
Section 1.22 "Force Majeure".............................................................3
Section 1.23 "Improvement"...............................................................3
Section 1.24 "IND".......................................................................3
Section 1.25 "Indemnitee"................................................................3
Section 1.26 "Indemnitor"................................................................3
Section 1.27 "Joint Invention"...........................................................3
Section 1.28 "Know-How"..................................................................3
Section 1.29 "Know-How Royalty"..........................................................3
Section 1.30 "Liabilities"...............................................................4
Section 1.31 "License Fee"...............................................................4
Section 1.32 "Net Sales".................................................................4
Section 1.33 "Patent Country Term".......................................................5
Section 1.34 "Patent Royalty"............................................................5
Section 1.35 "Payment Period"............................................................5
Section 1.36 "Payment Statement".........................................................5
Section 1.37 "Product"...................................................................5
Section 1.38 "Product Registration"......................................................5
Section 1.39 "Regulatory Authority"......................................................5
Section 1.40 "Representatives"...........................................................5
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Section 1.41 "Royalty"...................................................................5
Section 1.42 "Sublicensee"...............................................................5
Section 1.43 "Term"......................................................................5
Section 1.44 "Territory".................................................................5
Section 1.45 "Third Party"...............................................................5
Section 1.46 "Trademark".................................................................5
Article 2. - Grants, Rights, and Restrictions..............................................6
Section 2.1 Grant of License and Other Rights...........................................6
Section 2.2 Right to Sublicense.........................................................7
Section 2.3 No Encumbrances.............................................................7
Section 2.4 Non-compete.................................................................7
Section 2.5 Right of First Offer........................................................7
Article 3. - Payments, Reports and Audits..................................................8
Section 3.1 License Fee.................................................................8
Section 3.2 Development Expenses........................................................8
Section 3.3 Milestone Payments..........................................................9
Section 3.4 Royalty.....................................................................9
Section 3.5 Method and Manner of Royalty Payments......................................11
Section 3.6 Third-Party Royalties......................................................11
Section 3.7 Withholding................................................................12
Section 3.8 Audit......................................................................12
Section 3.9 Payment Adjustments........................................................12
Section 3.10 Accounting Dispute Resolution..............................................13
Article 4. - Development, Regulatory, Marketing and Manufacturing Obligations.............13
Section 4.1 Development Committee......................................................13
Section 4.2 Files......................................................................15
Section 4.3 Regulatory Approvals.......................................................15
Section 4.4 Obligations and Responsibilities of the Parties............................15
Section 4.5 Product Development........................................................15
Section 4.6 Research Efforts and Diligence.............................................15
Section 4.7 Government Contact.........................................................16
Section 4.8 Marketing Efforts..........................................................16
Section 4.9 Labeling and packaging.....................................................17
Section 4.10 Advertising and Promotional Materials......................................17
Section 4.11 Pricing....................................................................18
Section 4.12 Product Inquiries, Medical Events and Complaints...........................18
Section 4.13 Manufacturing..............................................................18
Article 5. - Rights in Technology, Improvements and Future Patents........................19
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Section 5.1 Patent Prosecution and Maintenance.........................................19
Section 5.2 Existing Connetics Patents.................................................19
Section 5.3 Future Inventions Developed Solely by Connetics and Certain Improvements...19
Section 5.4 Future Inventions Developed Solely by Pharmacia............................20
Section 5.5 Joint Inventions...........................................................20
Section 5.6 Patent Term Extensions.....................................................21
Section 5.7 Public Disclosure..........................................................21
Section 5.8 Ownership of Data, Product Registrations...................................21
Article 6. - Infringement.................................................................21
Section 6.1 Infringement of Third Party's Rights.......................................21
Section 6.2 Infringement Claims Against Third Party....................................22
Article 7. - Representations and Warranties...............................................23
Section 7.1 Connetics Representations and Warranties...................................23
Section 7.2 Pharmacia Representations and Warranties...................................24
Article 8. - Indemnification..............................................................25
Section 8.1 Indemnification by Connetics...............................................25
Section 8.2 Indemnification by Pharmacia ..............................................25
Section 8.3 Indemnification Procedures.................................................26
Section 8.4 Insurance..................................................................26
Section 8.5 Limitation of Liability....................................................27
Article 9. - Confidentiality..............................................................27
Section 9.1 Confidential Information...................................................27
Section 9.2 Confidentiality............................................................27
Section 9.3 Obligation to Obtain Agreements............................................28
Section 9.4 Return of Information......................................................28
Section 9.5 Public Disclosure..........................................................28
Section 9.6 Publication................................................................29
Article 10. - Term and Termination........................................................29
Section 10.1 Term.......................................................................29
Section 10.2 Early Termination..........................................................29
Section 10.3 Termination by Connetics...................................................30
Section 10.4 Rights and Obligations upon Termination....................................31
Article 11. - Dispute Resolution..........................................................31
Section 11.1 Disputes...................................................................31
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Section 11.2 Attempt to Resolve.........................................................31
Section 11.3 Binding Arbitration........................................................31
Section 11.4 Written Notice.............................................................32
Section 11.5 Selection of Arbitrators...................................................32
Section 11.6 Hearings...................................................................32
Section 11.7 Confidential...............................................................33
Section 11.8 Costs......................................................................33
Section 11.9 Decision...................................................................33
Section 11.10 Remedy.....................................................................33
Section 11.11 Provisional Remedies.......................................................33
Article 12. - Miscellaneous...............................................................33
Section 12.1 Record-keeping.............................................................33
Section 12.2 Notice.....................................................................33
Section 12.3 Entire Agreement; Amendment................................................35
Section 12.4 Force Majeure..............................................................35
Section 12.5 Assignment; Binding Effect.................................................35
Section 12.6 Headings, Interpretation...................................................35
Section 12.7 Independent Parties........................................................35
Section 12.8 Governing Law..............................................................36
Section 12.9 No Waiver..................................................................36
Section 12.10 Severability...............................................................36
Section 12.11 Interpretation.............................................................36
Section 12.12 Counterparts...............................................................36
Section 12.13 Third-Party Beneficiaries..................................................36
Section 12.14 Further Assurances.........................................................36
Schedule A - Connetics Patents
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LICENSE AND DEVELOPMENT AGREEMENT
This LICENSE AND DEVELOPMENT AGREEMENT is made as of December 21, 2001, by and
between PHARMACIA & UPJOHN COMPANY, a Delaware corporation ("Pharmacia") and
CONNETICS CORPORATION, a Delaware corporation ("Connetics"). Connetics and
Pharmacia may be referred to herein individually as a "Party" or collectively as
the "Parties." Terms not otherwise defined herein shall have the meanings set
forth in Article 1.
RECITALS
WHEREAS Connetics and Pharmacia are pharmaceutical companies engaged in the
research, development, manufacture and commercialization of pharmaceutical
products;
WHEREAS Connetics owns or Controls certain patents, patent applications,
know-how and/or other intellectual property related to the Product, and it has
the right to grant certain rights thereunder to Pharmacia as set forth in this
Agreement; and
WHEREAS Pharmacia desires to obtain an exclusive license from Connetics to
develop, manufacture, market, distribute, and sell the Product in the Territory,
and Connetics desires to grant such rights to Pharmacia, on the terms and
conditions contained in this Agreement.
NOW THEREFORE, in consideration of the covenants and promises in this Agreement,
Connetics and Pharmacia agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the following initially capitalized terms in
this Agreement, whether used in the singular or plural, shall have the following
meanings:
1.1 "ACT" means the Federal Food, Drug and Cosmetic Act, as it may be amended
or re-enacted from time to time.
1.2 "AFFILIATE" means any corporation, partnership, business joint venture or
other entity that directly or indirectly controls, is controlled by or is
under common control with a Party. For the purpose of this Section 1.2,
"control" means the power to direct or cause the direction of the
management and policies of such entity.
1.3 "AGREEMENT" means this License and Development Agreement, including
Schedule A appended hereto, as it may be amended from time to time.
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1.4 "ARBITRATING ACCOUNTANT" has the meaning set forth in Section 3.10(b).
1.5 "BUSINESS DAY" means a day, other than Saturday or Sunday, on which banks
are open for business in New York, New York.
1.6 "CLAIM" has the meaning set forth in Section 6.1(b).
1.7 "COMBINATION PRODUCT" means the packaging or bundling of a different
product or products together with the Product, where the sale of the
Product is contingent on the purchase of the other product (i.e., two or
more separate and individually packaged products, packaged together and
sold for a single price).
1.8 "[**]" has the meaning set forth in Section 4.9(b).
1.9 "COMPETING PRODUCT" means any pharmaceutical formulation or concentration
of minoxidil for use in the Field and that is marketed in a country of the
Territory for the same indications (or is otherwise used for the same
indications) as the Product.
1.10 "CONFIDENTIAL INFORMATION" has the meaning set forth in Section 9.1.
1.11 "CONNETICS KNOW-HOW" means any Know-How of Connetics or its Affiliates
relating to the Product or the Connetics Patents, whether or not covered
by the Connetics Patents, or any Know-How relating to topical products in
the Field containing minoxidil in which the minoxidil is solubilized using
methods proprietary to Connetics, and, in each case, which is necessary or
useful to the use, development, manufacture, marketing, promotion,
distribution, sale and/or commercialization of the Product in the
Territory for use in the Field, whether developed or owned by Connetics as
of the Effective Date or that comes under the Control of Connetics during
the Term.
1.12 "CONNETICS PATENTS" means those patent applications listed in Schedule A,
including all patents issued on any such patent applications, and all
counterparts, additions, divisions, continuations, continuations-in-part,
substitutions, extensions, patent term extensions and renewals thereof in
any country of the Territory, and in the case of any of the foregoing,
whether owned or Controlled by Connetics prior to the Effective Date or
during the Term.
1.13 "CONNETICS TECHNOLOGY" means the Connetics Know-How and Connetics Patents.
1.14 "CONTROL" OR "CONTROLLED," when used in connection with intellectual
property rights, means that the Party owns or has the rights or license to
such intellectual property rights and has legal authority, right and
ability to grant to the other Party access, a license, or a sublicense to
such intellectual property rights or to otherwise disclose proprietary or
trade secret information to such other Party, as provided for in this
Agreement, without violating any agreement with or the rights of a Third
Party.
1.15 "COUNTRY TERM" shall have the meaning set forth in Section 10.1.
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1.16 "DEVELOPMENT COMMITTEE" means those representatives of Pharmacia and
Connetics appointed to oversee the development of the Product pursuant to
this Agreement and with the responsibilities as described in Section 4.1.
1.17 "DISPUTE" has the meaning set forth in Section 3.10(a).
1.18 "EFFECTIVE DATE" means the date first written above.
1.19 "EVENT OF DEFAULT" has the meaning set forth in Section 10.2.
1.20 "FIELD" means the prevention or treatment of hair loss in humans.
1.21 "FIRST COMMERCIAL SALE" means the first commercial sale of the Product in
each country of the Territory after all required approvals have been
granted by the Regulatory Authority in each country of the Territory.
1.22 "FORCE MAJEURE" means any act of God, acts of government, war, fire,
explosion, flood, earthquake, embargo, or other act, event, non-happening,
omission or accident beyond the reasonable control of a Party.
1.23 "IMPROVEMENT" means any enhancement of the Product for use in the Field,
including without limitation, any enhancement of its use, dosage form,
presentation (including packaging, applicators and the like) and/or
formulation (including the addition of an active ingredient(s) along with
minoxidil) whether or not patentable, developed by or for, invented or
acquired by, or coming under the Control of Connetics or Pharmacia prior
to the expiration or termination of this Agreement. "Improvement" also
means the change in regulatory classification or status of a Product
(e.g., from prescription pharmaceutical to over-the-counter
pharmaceutical).
1.24 "IND" has the meaning set forth in Section 3.3(a).
1.25 "INDEMNITEE" has the meaning set forth in Section 8.3(a).
1.26 "INDEMNITOR" has the meaning set forth in Section 8.3(a).
1.27 "JOINT INVENTION" has the meaning set forth in Section 5.5(a).
1.28 "KNOW-HOW" means all information and materials, including, without
limitation, processes, techniques, formulas, data, methods, equipment
designs, and trade secrets, discoveries, practices, knowledge, ideas,
skill, experience, inventions, technology, manufacturing procedures, test
procedures, purification and isolation techniques, instructions, technical
and scientific data, preclinical and clinical data, test data and other
intellectual property, patentable or otherwise, tangible or intangible.
1.29 "KNOW-HOW ROYALTY" has the meaning set forth in Section 3.4(b).
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1.30 "LIABILITIES" has the meaning set forth in Section 8.1.
1.31 "LICENSE FEE" has the meaning set forth in Section 3.1.
1.32 "NET SALES" shall be determined using the accrual basis of accounting in
accordance with generally accepted accounting principles in the United
States, applied in a manner consistent with Pharmacia's customary
practices, and means the actual gross invoice sales of Product by
Pharmacia or its Affiliates, Sublicensees, distributors, or other agents
to Third Parties, less the following deductions from the price for the
Product to the extent they are actually paid or allowed and are not
reimbursed by customers or any Third Party:
(a) actual transportation charges, including insurance, paid by
the selling party;
(b) import, export, sales, use and excise taxes, tariffs and
duties paid or allowed by a selling Party and any other
governmental charges imposed upon the importation, use or sale
of a Product;
(c) normal and customary (A) quantity discounts [**], (B) cash
discounts (including discounts for prompt payment), and (C)
trade promotional allowances, credits, coupon redemptions and
other trade development funds, in each case of (A), (B), or
(C), in the ordinary course of a business;
(d) discounts [**] mandated by or granted in response to local,
state, provincial or federal law or regulation;
(e) allowances or credits to customers on account of recalls,
rejection or return (including for spoiled, damaged and
outdated goods) in the ordinary course of business;
(f) rebates paid or credited to any government or agency or any
Third Party payor, administrator or contractee; and
(g) wholesaler charge-backs allowed and taken in amounts customary
in the trade.
No deductions shall be made from Net Sales for commissions paid to
individuals whether they are with independent sales agencies or are
regularly employed by a Party or its Affiliates or Sublicensees and are on
its or their payroll, or for the cost of collections.
Net Sales shall not include the supply of Product as commercial samples or
for use in testing or clinical or marketing studies undertaken; nor shall
it include sales between or among Pharmacia and its Affiliates or
Sublicensees (except where such Affiliates or Sublicensees are end users),
but Net Sales shall include the subsequent final sales to Third Parties by
such Affiliates or Sublicensees.
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In the event a Party transfers Product to a Third Party in a bona fide
arm's length transaction for consideration in whole or in part other than
cash, or to a Third Party in other than a bona fide arm's length
transaction, the Net Sales price for such Product shall be deemed to be
the standard invoice price then being invoiced by a Party in an arm's
length transaction with similar customers.
In the event Connetics is entitled to royalties under this Agreement for
any Product sold in the form of a Combination Product, Net Sales for
determining such royalties will be calculated pursuant to Section 3.4(d).
1.33 "PATENT COUNTRY TERM" has the meaning set forth in Section 3.4(a).
1.34 "PATENT ROYALTY" has the meaning set forth in Section 3.4(a).
1.35 "PAYMENT PERIOD" means a calendar quarter ending on March 31st, June 30th,
September 30th, or December 31st.
1.36 "PAYMENT STATEMENT" has the meaning set forth in Section 3.5(a).
1.37 "PRODUCT" means any pharmaceutical formulation or concentration of
minoxidil that uses or incorporates the Connetics Technology, for use in
the Field, including any Improvement.
1.38 "PRODUCT REGISTRATION" in relation to the Product means a New Drug
Application submitted to the United States Food and Drug Administration
and/or its equivalent in other countries of the Territory submitted to a
Regulatory Authority, including any amendments or supplements.
1.39 "REGULATORY AUTHORITY" means the United States Food and Drug
Administration and/or its equivalent in other countries of the Territory,
or any successor entity thereto.
1.40 "REPRESENTATIVES" has the meaning set forth in Section 9.2.
1.41 "ROYALTY" means the Patent Royalty and the Know-How Royalty.
1.42 "SUBLICENSEE" means any person, corporation, unincorporated body, or other
entity to whom Pharmacia grants a sublicense of some or all of the rights
granted to Pharmacia as permitted by and in accordance with the terms and
conditions of this Agreement.
1.43 "TERM" shall have the meaning set forth in Section 10.1.
1.44 "TERRITORY" means all countries of the world except Japan.
1.45 "THIRD PARTY" means any person, corporation, unincorporated body, or other
entity other than Connetics and its Affiliates and Pharmacia and its
Affiliates.
1.46 "TRADEMARK" means those trademarks, trade names, brand names, logos and
designs whether registered or not, owned or Controlled by Pharmacia and
used in a country in the
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Territory during a Country Term in connection with the development,
manufacture, marketing, distribution and/or sale of the Product for use in
the Field in such country.
ARTICLE 2
GRANTS, RIGHTS, AND RESTRICTIONS
2.1 GRANT OF LICENSE AND OTHER RIGHTS.
(a) Subject to the terms and conditions of this Agreement, Connetics
grants to Pharmacia an exclusive royalty-bearing license (with
limited rights reserved to Connetics pursuant to Section 2.1(c))
under the Connetics Technology during the Term to use, develop,
manufacture, market, promote, distribute, sell, import, export and
otherwise commercialize the Product by Pharmacia in the Territory
for use in the Field.
(b) Connetics grants to Pharmacia an exclusive royalty-bearing
license (with limited rights reserved to Connetics pursuant to
Section 2.1(c)) under the Connetics Technology during the Term to
use, develop, manufacture, market, promote, distribute, sell,
import, export and otherwise commercialize the Product by Pharmacia
in Japan for use in the Field when and to the extent such rights
become available to Connetics. In the event [**] becomes aware of an
[**] to [**] rights to the [**] in [**], [**] will notify [**] of
such right and the costs therefore. If [**] requests [**] to [**]
such rights, [**] will do so, and [**] shall promptly reimburse [**]
for the cost to [**] the rights in the [**].
(c) Notwithstanding anything to the contrary in Sections 2.1(a) and
(b) and subject to Sections 4.8(b) and 4.13(d), Connetics shall
retain the right (without the right to sublicense or assign absent
Pharmacia's prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed) to use the Connetics
Technology in the Field only for Connetics' internal research and
development related to the Product and to perform its obligations
under this Agreement.
(d) Pharmacia acknowledges that it shall have no right, title, or
interest in or to the Connetics Technology except to the extent set
forth in the license granted to Pharmacia under this Section 2.1,
and Connetics reserves all rights to use the Connetics Technology
except as otherwise expressly granted to Pharmacia pursuant to this
Agreement. Nothing in this Agreement shall be construed to grant to
Pharmacia any license or other rights to any of Connetics'
intellectual property other than as expressly set forth in this
Agreement.
(e) Pharmacia shall not, at any time during the Term of this
Agreement, dispute or contest, directly or indirectly, Connetics'
ownership of the Connetics Patents or the validity of the Connetics
Patents. Nothing in this Section 2.1(e) is intended to change
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Connetics' obligations under Section 8.1, or the dispute resolution
process described in Article 11.
2.2 RIGHT TO SUBLICENSE.
(a) Pharmacia shall have the right to grant sublicenses of its
rights hereunder (i) to any of its Affiliates, without the consent
of, but with written notice to, Connetics, and (ii) to any Third
Party only upon Connetics' prior written consent, which consent
shall not be unreasonably withheld, conditioned, or delayed;
provided however, that in the case of either (i) or (ii) above, the
Affiliate or Third Party, as the case may be, assumes and agrees to
be bound by the provisions of this Agreement; provided, however,
that Connetics may withhold its consent, in its sole discretion, in
the event Pharmacia intends to grant a sublicense to a competitor.
No Confidential Information of Connetics shall be disclosed to a
Sublicensee or a potential Sublicensee without the express prior
written consent of Connetics. In the event that Pharmacia grants a
sublicense pursuant to this Section 2.1, such sublicense shall not
relieve Pharmacia of its obligations to Connetics under this
Agreement. Rather, notwithstanding the terms of any sublicense,
Pharmacia shall remain primarily liable to Connetics for all of
Pharmacia's obligations under this Agreement, and any act or
omission of a Sublicensee that would be a breach of this Agreement
if committed by Pharmacia shall be deemed to be a breach by
Pharmacia of this Agreement.
(b) Except with respect to sublicense agreements that do not require
the prior written consent of Connetics under Section 2.2(a), prior
to entering into any sublicense agreement, Pharmacia shall notify
Connetics of the name of the potential sublicensee and the field and
term of such sublicense.
2.3 NO ENCUMBRANCES. During the Term, Connetics shall not directly or
indirectly encumber any of the Connetics Technology or permit the
imposition of any lien (statutory or otherwise), encumbrance, security
interest, hypothecation, deposit, charge or priority of any type
whatsoever on this Agreement or any Connetics Technology, without the
prior written consent of Pharmacia, which consent shall not be
unreasonably withheld, conditioned or delayed; provided, however, that
Connetics shall have the right to assign any Royalty due to Connetics
hereunder; provided further that any assignee of such Royalty shall
expressly disclaim any rights in this Agreement and the Connetics
Technology.
2.4 NON-COMPETE. Subject to Sections 4.8(a) and 4.8(b), during each applicable
Country Term, Connetics and its Affiliates shall not, directly or
indirectly, co-develop, promote, license, distribute, co-promote, market
or sell a Competing Product in such country.
2.5 RIGHT OF FIRST OFFER.
(a) For a period of [**] days following the receipt of notice from
Connetics of its intention to [**] shall have the first right to negotiate
a definitive license agreement to use, market and sell the product in the
Field. In the event that the Parties are unable to
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conclude a binding definitive license agreement within such [**] day
period following the written notice from [**] (which period may be
extended upon the written agreement of both Parties), [**] shall have [**]
to [**] under this Section 2.4. Notwithstanding the foregoing, if
Connetics and Pharmacia do not conclude a binding definitive license
agreement, then Connetics may enter into a license agreement with a Third
Party provided that the terms of such agreement are no less favorable to
Connetics in any material respect than those last proposed by Pharmacia in
writing.
(b) Pharmacia acknowledges and agrees that Section 2.5(a) does not [**]
right to enter into a [**] or [**] or other similar relationship with a
[**] or require [**] to offer to [**] any product developed under such
agreement or relationship, whether or not in [**] (except for a [**]), or
(ii) [**] ability to enter into a [**] agreement with a [**] to promote
and/or distribute a product in [**] (other than a [**]). As of the
Effective Date, Connetics represents and warrants to Pharmacia that it
does not currently have any products in development for use in [**]. To
the extent [**] develops a product with a [**] for use in [**] under
clause [**] or enters into a [**] agreement with a [**] for a product in
[**] under clause [**] then (A) [**] shall lose its right of [**] under
[**], and [**] under [**] and (B) if Connetics intends to [**] a [**]
product in [**] after entering into a promotion agreement with [**], [**]
agrees not to market such [**] product until [**] months after the date
[**].
ARTICLE 3
PAYMENTS, REPORTS AND AUDITS
3.1 LICENSE FEE. In consideration of the licenses and rights granted by
Connetics to Pharmacia in this Agreement, Pharmacia shall pay to Connetics,
within five (5) Business Days after the Effective Date, the sum of [**]
("License Fee") by wire transfer to a Connetics bank account.
3.2 DEVELOPMENT EXPENSES.
(a) In further consideration of the licenses and rights granted by
Connetics to Pharmacia in this Agreement, and subject to the terms
and conditions of this Agreement, Pharmacia shall pay Connetics [**]
by wire transfer to a Connetics bank account (the "Development
Payment") on or before December 31, 2001 to cover development
expenses (which expenses shall include Connetics' reasonable
out-of-pocket costs and labor) incurred by Connetics at the
direction of the Development Committee and/or Pharmacia, as
applicable, including prosecution and maintenance of the Connetics
Patents set forth on Schedule A. At such time that Connetics incurs
[**] of such expenses, any further development work requested by the
Development Committee and/or Pharmacia shall be performed at the
[**]. [**], Pharmacia shall reimburse Connetics for its reasonable
development expenses incurred; provided, however, that Connetics
shall not be entitled to be reimbursed for the costs incurred in the
prosecution and maintenance of the Connetics Patents set forth on
Schedule A. Pharmacia shall reimburse Connetics for all development
expenses it incurs within thirty (30) days after Pharmacia's receipt
of a reasonably detailed invoice from
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Connetics setting forth such development expenses incurred by
Connetics at the request of Pharmacia and/or the Development
Committee, as applicable.
(b) Connetics shall devote and use the Development Payment received
under this Section 3.2 solely for the purpose of covering internal
and external costs associated with the development of the Product
after the Effective Date in accordance with Section 3.2(a).
3.3 MILESTONE PAYMENTS.
(a) Upon the earlier of the date (i) the Development Committee,
pursuant to Section 4.1, determines that a successful pre
Investigational New Drug meeting ("IND") is achieved in the United
States, or (ii) Pharmacia files an IND application for the Product
and the Regulatory Authority takes no action on it within thirty
(30) days, Pharmacia shall pay Connetics, within five (5) Business
Days after such date, a one-time payment of [**] by wire transfer to
a Connetics bank account. A successful pre-IND meeting is one in
which the Regulatory Authority in the United States does not present
significant regulatory requirements that, in the Development
Committee's judgment (consistent with the exercise of prudent
scientific and business judgment and in accordance with generally
accepted practices in the pharmaceutical industry), would render the
project unreasonable to pursue from a cost, time or risk
perspective.
(b) Upon the earlier of the date that (i) the Development Committee,
pursuant to Section 4.1, determines, consistent with the exercise of
prudent scientific and business judgment and in accordance with
generally accepted practices in the pharmaceutical industry, that a
successful pharmacokinetics study suitable to support a Product
Registration in the United States has been achieved, or (ii)
Pharmacia makes a determination to go forward with a Phase III study
on the Product, Pharmacia shall pay Connetics, within five (5)
Business Days after such date, a one-time payment of [**] by wire
transfer to a Connetics bank account.
3.4 ROYALTY.
(a) Patent Royalty. In further consideration of the licenses and
rights granted by Connetics to Pharmacia, Pharmacia shall pay to
Connetics a royalty equal to [**] on Net Sales of the Product (the
"Patent Royalty") in each country in the Territory wherein the
manufacture, importation, distribution, marketing, sale or use of
the Product would infringe any issued Connetics Patent.
Unless this Agreement is otherwise terminated earlier, Pharmacia's
Patent Royalty obligation will automatically expire on a
country-by-country basis on the expiration (or revocation) of the
last to expire (or to be revoked) Connetics Patents in each country,
such that the manufacture, importation, distribution, marketing,
sale or use of the Product in such country would not infringe any
issued Connetics Patent (the "Patent Country Term"). Upon the
expiration of the Patent Country Term, Pharmacia shall have a fully
paid, non-revocable, non-exclusive license under the Connetics
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Know-How in that country to develop, manufacture, market, distribute
and sell the Products.
(b) Know-How Royalty. In further consideration of the licenses and
rights granted by Connetics to Pharmacia, Pharmacia shall pay to
Connetics a royalty equal to [**] on Net Sales of the Product (the
"Know-How Royalty") in each country in the Territory wherein
Pharmacia is not subject to the Patent Royalty; provided, however,
that in no event shall Pharmacia be obligated to pay the Know-How
Royalty in any country of the Territory after [**] years from the
First Commercial Sale of the Product in such country. Upon issuance
of any Connetics Patent in any country wherein Pharmacia is paying
or previously paid a Know-How Royalty, Pharmacia shall cease paying
the Know-How Royalty and thereafter pay the Patent Royalty in
accordance with Section 3.4(a). Upon cessation of Pharmacia's
obligation to pay the Know-How Royalty under this Section 3.4(b)
(and the expiration of the Patent Country Term, if any) in any
country of the Territory, Pharmacia shall have a fully paid,
non-revocable, non-exclusive license under the Connetics Know-How in
that country to develop, manufacture, import, market, distribute and
sell the Products.
(c) Adjustments. In the event that: (i) compulsory licenses for a
Product are required to be granted by a governmental authority to a
Third Party (which compulsory licenses have a maximum royalty rate
lower than the Patent Royalty or the Know-How Royalty that would
otherwise apply to Net Sales of such Product) in a country located
in the Territory, and sales under such compulsory licenses exceed
[**] of the total dollar sales of all Competing Products (including
the Product) marketed in the Field in such country in any quarterly
calendar period; or (ii) a governmental authority in a country
imposes a maximum royalty rate lower than the Patent Royalty or the
Know-How Royalty that would otherwise apply to Net Sales of such
Product in such country, then the Patent Royalty rate or the
Know-How Royalty rate that would otherwise apply for such quarterly
period in such country shall be reduced to equal such lower rate.
(d) Combination Product.
(i) In the event the Product is sold as part of a
Combination Product, then for purposes of computing the
Royalty, Net Sales of such Product sold as part of a
Combination Product shall be deemed equal to the product
of (A) a fraction, the numerator of which is the [**]
and the denominator of which is the [**] times (B) the
established [**] in the United States of the Product.
(ii) If the foregoing computation cannot be made for any
reason, Net Sales of Product sold as a Combination
Product shall be the established selling price for such
Product [**].
(iii) If the foregoing computations cannot be made for any
reason, for purposes of this Section 3.4(d), the selling
price of a Product sold shall be equal to
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the product of (A) a fraction, the numerator of which is
[**] and the denominator of which is the sum of [**]
times (B) the established [**].
3.5 METHOD AND MANNER OF ROYALTY PAYMENTS.
(a) Payment Statement. Pharmacia shall deliver to Connetics within
thirty (30) days following the end of each Payment Period a written
report (the "Payment Statement") describing in reasonable detail (i)
the Net Sales of the Product sold by Pharmacia, its Affiliates and
Sublicensees during such Payment Period in each country wherein
Pharmacia is obligated to pay Connetics a Royalty hereunder; (ii)
the calculation of Net Sales from the gross revenues for the Product
in each such country, including without limitation, a breakdown of
each deduction from gross sales; and (iii) the Royalty due on the
sales of the Product for such Payment Period.
(b) Payment. Pharmacia shall pay to Connetics within thirty (30)
days following the end of each Payment Period any Royalty due and
payable to Connetics in accordance with this Article 3. Each such
payment shall be accompanied by the Payment Statement. All Royalty
payments to be made by Pharmacia to Connetics pursuant to this
Agreement shall be paid in United States Dollars and made by wire
transfer to such bank or account as Connetics may from time to time
designate in writing and shall be considered to be made as of the
day on which it is received in Connetics' designated bank account.
(c) Currency. Net Sales outside the United States shall be first
determined in the local currency of the country in which they are
earned and shall be converted quarterly into an amount in United
States Dollars based on the applicable exchange rates published in
The Wall Street Journal (Eastern edition) for the last Business Day
of the Payment Period in which such Net Sales occurred. All such
converted Net Sales shall be consolidated with United States Net
Sales for the corresponding period and the applicable Royalty
payable determined therefrom. Whenever any Royalty is due on a day
which is not a Business Day, such payment shall be made on the
immediately succeeding Business Day.
(d) Late Payments. In the event that any Royalty payments due
hereunder are not made when due, each such payment shall accrue
interest from the date due until paid at the prime rate of interest
as published in The Wall Street Journal (Eastern edition), provided
that such interest rate shall not exceed 1.5% per month.
3.6 THIRD-PARTY ROYALTIES. In the event that Pharmacia, its Affiliates and/or
its Sublicensees is or are required to obtain a license from a Third Party
in order to practice any rights granted under the Connetics Technology in
a country in the Territory (the "Third-Party License"), then, at
Connetics' option, (i) Connetics shall obtain and maintain such necessary
license at its sole expense and Pharmacia shall continue to pay the
Royalty to Connetics, or (ii) Pharmacia shall be entitled to reduce the
amount of the Royalty payable under Section 3.4 by the amount of any
consideration, including but not limited to
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royalties, actually paid to a Third Party under such Third-Party License
by Pharmacia, its Affiliates or Sublicensees.
3.7 WITHHOLDING. To the extent there is a statutory tax withholding obligation
on a payment (or other remittance) due Connetics, Pharmacia shall be
entitled to withhold from such payment the amount, if any, of any
withholding tax assessable to Connetics, provided evidence of payment of
any such tax is promptly provided to Connetics. If any taxes are imposed
on payments to Connetics and are required to be withheld therefrom, such
taxes shall be for the account of Connetics, and the payments shall be
reduced accordingly. Pharmacia shall advise Connetics and provide it with
copies of the tax receipts for all taxes deducted from the payment due
Connetics. Each Party agrees to assist the other Party in claiming
exemption from such deductions or withholdings under any double taxation
or similar agreement or treaty from time to time in force.
3.8 AUDIT.
(a) Connetics shall have the right to audit Pharmacia's records
using a mutually acceptable, nationally recognized firm of
independent certified accountants. Such accountants will have
access, on reasonable notice, to Pharmacia, its Affiliates' or its
Sublicensees' records, as the case may be, during reasonable
business hours for the purpose of verifying any royalty payable
under this Agreement for the two preceding years. Notwithstanding
the foregoing, this right may not be exercised more than once in any
calendar year. The accountant shall provide both Connetics and
Pharmacia with a copy of any report prepared as a result of the
audit. Connetics shall bear the full cost of such audit unless such
audit discloses an underpayment by more than five percent (5%) of
the amount due during such period. In such case, Pharmacia shall
bear the full cost of such audit.
(b) Connetics agrees to hold confidential all information learned in
the course of any examination of Pharmacia's, its Affiliates' or
Sublicensees' books and records hereunder, except when it is
necessary for Connetics to reveal such information in order to
enforce its rights under this Agreement or when otherwise compelled
by law.
(c) With respect to the Royalty calculations, all reports and
payments not disputed as to correctness within two (2) years after
receipt thereof shall thereafter conclusively be deemed correct for
all purposes unless an audit performed in accordance with Section
3.8(a) shows an underpayment by more than five percent (5%), in
which case Connetics shall be entitled to audit all periods
subsequent to the last audit, which periods shall not be deemed
conclusively correct.
3.9 PAYMENT ADJUSTMENTS. Any adjustment (whether payment or reimbursement, as
the case may be) required as a result of an audit conducted pursuant to
Section 3.8 shall be made within ten (10) Business Days after the date on
which the accountant conducting the audit issues a written report to
Connetics and Pharmacia containing the results of the audit.
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3.10 ACCOUNTING DISPUTE RESOLUTION
(a) Subject to Section 3.8(c), Connetics shall have two (2) years
after receipt of any Royalty pursuant to this Agreement to dispute
the amount of any such Royalty pursuant to this Agreement (a
"Dispute").
(b) If the Parties are unable to resolve any Dispute under this
Article 3 within the thirty (30) day period after receipt of a
written notice of the disputed amount or such other period as the
Parties may agree, the Parties shall select by mutual agreement a
nationally recognized certified public accounting firm (the
"Arbitrating Accountant") to settle such Dispute as soon as
practicable. In connection with the resolution of any Dispute, the
Arbitrating Accountant shall have access to all documents, records,
work papers, facilities and personnel necessary to perform its
function as arbitrator. Any arbitration before the Arbitrating
Accountant shall be conducted in accordance with the commercial
arbitration rules of the American Arbitration Association.
(c) The Arbitrating Accountant's award with respect to any Dispute
shall be final and binding upon the Parties and judgment may be
entered on the award.
(d) The fees and expenses of the Arbitrating Accountant with respect
to any Dispute shall be paid by the Party against whom the award is
issued. The Parties otherwise shall bear their own expenses of the
proceeding.
(e) Notwithstanding anything to the contrary in Article 11, all
accounting disputes will be handled under this Article.
ARTICLE 4
DEVELOPMENT, REGULATORY, MARKETING AND MANUFACTURING OBLIGATIONS
4.1 DEVELOPMENT COMMITTEE.
(a) Formation. Within ten (10) Business Days after the Effective
Date, Connetics and Pharmacia shall each select three (3)
representatives to serve on the Development Committee. Pharmacia
shall select one of its members on the Development Committee to
serve as chairperson. Either Party may appoint, substitute or
replace members of the Development Committee upon prior written
notice to the other Party.
(b) Function. The Development Committee shall, among other things,
(i) plan, coordinate and manage the research and development of the
Product, and (ii) determine whether and to what extent the Product
should be the subject of (A) any further assessment or testing, or
(B) any preclinical or clinical development.
(c) Decision-Making. All decisions of the Development Committee
shall be made by a majority vote of the members. In the event the
Development Committee is deadlocked on any matter to be decided by
the Development Committee, the chairperson shall have the right to
cast a second and deciding vote and render a decision on the matter.
Notwithstanding the foregoing, but subject to Section 3.2(a),
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the Development Committee shall not have the authority to make any
decision that materially increases the costs or obligations of
Connetics under this Agreement without Connetics' prior written
consent, which consent Connetics may withhold in its sole
discretion.
(d) Meetings. The Development Committee shall operate consistent
with the following procedures, which the Development Committee may,
by majority vote, modify from time to time:
(i) The chairperson shall be responsible for providing the
leadership for the Development Committee and for the timing,
agenda and minutes of each meeting;
(ii) The location of the meetings will alternate between
Pharmacia's and Connetics' facilities or an acceptable
off-site location or shall be conducted by video- or
teleconference as agreed to by the Development Committee;
(iii) The Development Committee will meet no fewer than three (3)
times annually or unless otherwise agreed by the Development
Committee;
(iv) Minutes of each Development Committee will be prepared and
summarized within two weeks after each meeting and shall not
be official until the chairperson has agreed to them; and
(v) Non-members of the Development Committee may attend the
Development Committee's meetings, provided reasonable notice
is given to and approved by the Development Committee's
chairperson.
(e) Costs. Each Party will bear its own costs and expenses
associated with participation in the Development Committee.
(f) Disbanded. The Development Committee shall be disbanded on the
second (2nd) anniversary of the Effective Date unless decided
otherwise by the Development Committee. In the event that the
Development Committee is disbanded, Pharmacia shall have all rights
of, and shall undertake all responsibilities of, the Development
Committee as set forth herein or as otherwise related to the
Product.
(g) Reports. Until disbanded, Pharmacia and Connetics each shall
furnish to the Development Committee (i) a summary written report
within fifteen (15) days after the end of each calendar quarter
describing the progress in the development of the Product under this
Agreement, including the status of any clinical studies and Product
Registrations; (ii) a written report within thirty (30) days after
the end of each year describing in detail the work accomplished by
each Party under this Agreement during the year and discussing and
evaluating the results of such work; and (iii) a written report
within fifteen (15) days after the end of each calendar quarter of
any development work undertaken with respect to an Improvement. In
lieu of such reports, the Parties may incorporate the specified
information into the minutes of the Development Committee meetings.
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After the Development Committee is disbanded, the Parties shall
continue to exchange the reports required by this Section 4.1(g).
4.2 FILES. As soon as practicable after the Effective Date, Connetics shall
provide to Pharmacia copies of all Connetics Technology reasonably
necessary for Pharmacia to exercise its rights and perform its obligations
under this Agreement.
4.3 REGULATORY APPROVALS. Subject to Section 4.4(a), Pharmacia shall be solely
responsible for preparing applications and for seeking and, if granted,
maintaining Product Registrations in the Territory, including performing
all studies required by the Regulatory Authorities from time to time to
obtain and maintain such registration and regulatory approval for the
Product. Pharmacia shall be responsible for the direct costs and expenses
(e.g., filing fees) solely associated with the filing and maintaining of
Product Registrations in the Territory. Upon Pharmacia's request, and at
its expense, Connetics will provide reasonable assistance to Pharmacia in
the preparation of any such Product Registrations and other regulatory
submissions.
4.4 OBLIGATIONS AND RESPONSIBILITIES OF THE PARTIES. In addition to those
tasks and responsibilities assigned to each Party by the Development
Committee, Connetics and Pharmacia will have the following obligations and
responsibilities:
(a) Connetics. Connetics will promptly transfer and otherwise
provide to Pharmacia copies of the Connetics Technology in
accordance with Section 4.2. In addition, Connetics shall, (i)
consistent with Section 3.2(a), continue formulation, packaging,
testing and clinical manufacturing development through an initial
technical transfer aimed to prepare a qualified cGMP manufacturing
site for production of Phase I clinical trial materials; (ii) assist
Pharmacia, at Pharmacia's expense, in developing the chemistry,
manufacturing, and quality control portion of any Product
Registration as requested by Pharmacia; and (iii) at Pharmacia's
expense, otherwise assist Pharmacia in preparation of any Product
Registrations and other regulatory submissions as reasonably
requested by Pharmacia.
(b) Pharmacia. Subject to Section 3.2(a), Pharmacia will be
responsible for determining, in its sole discretion, whether and to
what extent any Product should be the subject of (i) any Product
Registrations or continuations of such Product Registrations if
applicable, or (ii) any manufacturing, testing and/or
commercialization as a Product.
4.5 PRODUCT DEVELOPMENT. Product development shall be conducted in accordance
with the terms of this Agreement. The Parties acknowledge that their
objective is that Pharmacia will file an IND application on or prior to
[**] and shall initiate patient enrollment for a definitive Phase III
study on the Product on or prior to [**].
4.6 RESEARCH EFFORTS AND DILIGENCE. Each Party shall use commercially
reasonable efforts to perform its responsibilities under this Agreement
and shall comply with all applicable Good Laboratory Practices, Good
Clinical Practices, and applicable legal requirements.
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As used in this Agreement, the term "commercially reasonable efforts"
means, unless the Parties agree otherwise in writing, those efforts
consistent with the exercise of prudent scientific and business judgment
in accordance with industry standards, as applied to other products of
similar scientific and commercial potential.
4.7 GOVERNMENT CONTACT. Subject to Sections 4.4(a) and 4.4(b), Pharmacia shall
be responsible for communicating with all Regulatory Authorities and
satisfying all reasonable regulatory requirements necessary to seek and,
where approval is obtained, maintain Product Registrations in those
countries in the Territory in which the Pharmacia determines, in its
discretion, to commercialize the Product.
4.8 MARKETING EFFORTS.
(a) Pharmacia will use commercially reasonable "best efforts" to
commercialize the Product in the Territory, subject to prevailing
market conditions that exist in each country of Territory. Pharmacia
shall launch the Product for commercial sale in the United States
within six (6) months of receiving final approval from the
Regulatory Authority. In the event that Pharmacia fails to launch
the Product in the United States within such six (6) month period
(unless such failure to launch is associated with Product validation
or manufacturing issues beyond the control of Pharmacia), Pharmacia
shall pay Connetics [**] within five days after the expiration of
such six-month period. In the event Pharmacia has not launched the
Product for commercial sale in the United States within twelve
months after receiving final approval from the Regulatory Authority,
the license granted to Pharmacia under Section 2.1 shall become
non-exclusive with respect to the United States. In the event that
Connetics believes that Pharmacia has failed to commercialize the
Product in any other country of the Territory within a commercially
reasonable time, then the Parties shall promptly consult and agree
upon what actions, if any, the Parties should take in respect of
commercializing the Product in such country.
(b) Subject to Section 2.5(b), for a period of ninety (90) days
following the receipt of notice from Pharmacia of its intention to
promote the Product to dermatologists in the United States at any
time after the Effective Date using a new contract sales force,
Connetics shall have the first right to negotiate a definitive
promotion agreement to promote the Product to dermatologists
(Connetics first right to negotiate shall not affect Pharmacia's
relationship(s) with any contract sales force(s) existing as of the
launch of the Product in the United States). In the event that the
Parties are unable to conclude a binding definitive agreement within
such ninety (90) day period following the written notice from
Pharmacia (which period may be extended upon the written agreement
of both Parties), Pharmacia shall have no further obligation to
Connetics under this Section 4.8(b). Notwithstanding the foregoing,
if Pharmacia and Connetics do not conclude a binding definitive
promotion agreement, then Pharmacia may enter into a promotion
agreement with a Third Party provided that the terms of such
agreement are no less favorable to Pharmacia in any material respect
(including such
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factors as the size, training, and productivity of the sales force
available to Pharmacia) than those last proposed by Connetics to
Pharmacia in writing.
(c) Irrespective of whether a promotion agreement is entered into
between Pharmacia and Connetics under Section 4.8(b), upon launch of
the Product, Connetics shall have the right, at its expense, to (i)
discuss the characteristics of Connetics Technology as used in the
Product and (ii) state that the Product is licensed by Connetics to
Pharmacia, subject to Connetics compliance with applicable laws and
regulations.
4.9 LABELING AND PACKAGING.
(a) Pharmacia shall be responsible for labeling and packaging the
Product, which shall be consistent with the labeling and packaging
for the Product approved by the applicable Regulatory Authorities.
Pharmacia shall also be responsible for seeking and, where possible,
obtaining all necessary regulatory approvals for all labeling and
packaging of the Product, subject to Section 4.4(b).
(b) Subject to approval of the Regulatory Authorities if necessary,
Pharmacia shall include on the outside of the Product packaging
notification that the Product incorporates technology that is
licensed to Pharmacia by Connetics and include the relevant patent
number or state that the Product technology is the subject of a
pending patent application. In addition, at such time, if ever, that
Connetics develops or acquires a "[**]" (as defined below),
Pharmacia shall display (i.e., not sticker) such trademark on the
outside of the Product packaging and Connetics shall provide
Pharmacia with a royalty-free license to use such trademark. A [**]"
means a [**], in which at least [**] of the consumers surveyed have
an unaided awareness of the [**] and identify such [**]. The survey
shall consist of a representative sample of consumers or consumers
treated for hair loss and shall be conducted in accordance with
generally recognized industry standards.
4.10 ADVERTISING AND PROMOTIONAL MATERIALS.
(a) Pharmacia shall be responsible for (i) developing all
advertising and promotional materials relating to the Product, and
(ii) for assuring that all promotional material that it produces
relating to Product is in material compliance with applicable law
and regulations for each country in the Territory where such
materials are used. Pharmacia shall be responsible, at its own cost
and expense, for marketing the Product in the Territory during the
Term.
(b) Subject to applicable laws and regulations, all written
promotional and detail materials for the Product directed or
distributed to dermatologists or consumers shall state that the
Product incorporates technology that is licensed to Pharmacia by
Connetics and include the relevant patent number or state that the
Product technology is the subject of a pending patent application.
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4.11 PRICING. Pharmacia shall have sole discretion and authority for all
pricing decisions for Product.
4.12 PRODUCT INQUIRIES, MEDICAL EVENTS AND COMPLAINTS.
(a) Pharmacia shall be responsible for responding to all questions
or inquiries from health care professionals and consumers relating
to the Product in each country of the Territory.
(b) Pharmacia shall be responsible for providing (i) medical,
technical and scientific information concerning the Product to
health care professionals, managed care organizations, sales
representatives, medical publishers, consumers, patient assistance
programs and others that may request such information, and (ii)
after-hours coverage to address emergency requests for such medical,
technical and scientific information concerning the Product.
(c) In the case of either (a) or (b) above, upon Pharmacia's
request, Connetics shall assist Pharmacia by providing requested
information and data so as not to jeopardize the health and welfare
of any patients or consumers using the Product.
(d) Pharmacia shall have the authority and responsibility for
handling any adverse drug experience reporting involving the Product
in each country in the Territory. Connetics shall advise Pharmacia
promptly of any adverse drug experience reports received by
Connetics, but in any event not later than twenty-four (24) hours
after receiving any "serious" (as defined in 21 CFR Parts 312 and
314) adverse drug experience reports. Pharmacia shall respond to
Connetics' reasonable requests for information concerning
Pharmacia's adverse drug experience reports involving the Product.
4.13 MANUFACTURING
(a) Exclusive Manufacturer. Subject to the terms and conditions of
this Agreement, Pharmacia and its Sublicensees under Section 2.2 of
this Agreement shall be the exclusive manufacturer(s) of commercial
batches of the Product in the Territory after the Effective Date. In
addition, if Pharmacia requests Connetics to provide clinical
supplies of the Product, then Pharmacia shall reimburse Connetics
for Connetics' costs to manufacture and supply the Product to
Pharmacia for use in clinical trials.
(b) Approvals. Pharmacia, its Affiliates, Sublicensees or Third
Party contractors shall use commercially reasonable efforts to
obtain all necessary regulatory approvals of the facilities at which
it intends to manufacture the Product.
(c) GMPs. Pharmacia, its Affiliates, Sublicensees and Third Party
contractors shall manufacture the Product and/or have the Product
manufactured in compliance with GMPs and Product Registrations. For
purposes of this Section 4.13, "GMPs" shall means all laws,
guidelines and regulations applicable to the manufacture of the
Product within the Territory, including the current Good
Manufacturing Practices.
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(d) Connetics. In the event that Connetics develops its own approved
manufacturing capabilities relative to the Product, Connetics shall
have the right to bid on the manufacture of the Product; provided,
however, that Pharmacia shall be under no obligation to accept or
further negotiate with Connetics relative to such bid, but shall
consider such bid in good faith. Connetics may also recommend Third
Party manufacturers to Pharmacia, which Pharmacia may, but is not
obligated to, use relative to the manufacture of Product.
ARTICLE 5
RIGHTS IN TECHNOLOGY,
IMPROVEMENTS AND FUTURE PATENTS
5.1 PATENT PROSECUTION AND MAINTENANCE. Connetics shall use its commercially
reasonable efforts to prosecute and maintain the Connetics Patents.
Connetics shall bear all expenses associated with such prosecution and
maintenance. Prosecution and maintenance of Connetics Patents shall
include, but not be limited to, prosecuting pending patent applications
through final patent office appeal and any opposition proceedings or the
like, including re-issue applications and re-examination proceedings in
any country of the Territory.
5.2 EXISTING CONNETICS PATENTS. With respect to Connetics Patents relating to
any Product and/or Connetics Know-How existing as of the Effective Date,
(a) Connetics shall remain the owner of the Connetics Patents, (b)
Connetics shall continue to bear the full costs of and responsibility for
maintaining, preparing, filing and prosecuting the Connetics Patents, (c)
Connetics shall use commercially reasonably efforts to prosecute and
maintain any such Connetics Patents, and (d) Connetics will keep Pharmacia
reasonably informed of the status of any such existing Connetics Patents.
5.3 FUTURE INVENTIONS DEVELOPED SOLELY BY CONNETICS AND CERTAIN IMPROVEMENTS.
(a) Connetics shall be deemed the sole owner of all intellectual
property related to (i) the use, manufacture, form or delivery of
any invention acquired, developed or discovered solely by Connetics
or its Affiliates, or any of their respective employees,
consultants, or subcontractors and (ii) subject to Section 5.8, any
Improvement or other intellectual property right, to the extent such
Improvement or other intellectual property right utilizes,
incorporates or is based on the Connetics Technology or could not be
conceived, developed or reduced to practice but for the use of the
Connetics Technology (whether or not such Improvement or other
intellectual property right was developed or invented jointly or
individually by Connetics or Pharmacia), in each case invented after
the Effective Date (collectively, the "Connetics Future Sole
Inventions") and any patent application filed or patent issued
thereon. Pharmacia shall irrevocably assign, transfer and convey,
and shall cause its agents to assign, transfer and convey, to
Connetics without further consideration all of their right, title
and interest in and to such Connetics Future Sole Inventions.
Pharmacia shall, and shall cause its agents to, execute and deliver
all notices, applications, agreements or other documents reasonably
requested by Connetics to effectuate the above.
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(b) Connetics shall be solely responsible for electing, in its sole
discretion, whether to file a patent application for Connetics
Future Sole Inventions.
(c) If Connetics elects not to file any patent application for
Connetics Future Sole Inventions anywhere in the Territory, then the
following provisions shall apply: (i) the Connetics Future Sole
Invention will remain a trade secret to the extent Connetics so
desires, (ii) the Connetics Future Sole Invention shall be deemed to
be Confidential Information and (iii) Pharmacia will not have the
right to file any patent applications for the Connetics Future Sole
Invention anywhere in the world.
5.4 FUTURE INVENTIONS DEVELOPED SOLELY BY PHARMACIA.
(a) [**] shall be deemed the sole owner of all intellectual property
related to the use, manufacture, form or delivery of any invention
acquired, developed or discovered solely by [**], or any of their
respective employees, consultants, or subcontractors, provided such
inventions do not constitute [**] after the Effective Date, and any
patent application filed or patent issued thereon.
(b) [**] shall be solely responsible for electing, in its sole
discretion, whether to file a patent application for [**].
(c) If [**] elects not to file any patent application for [**]
anywhere in the Territory, then the following provisions shall
apply: (i) the [**] will remain a trade secret to the extent [**] so
desires, (ii) the [**] shall be deemed to be Confidential
Information and (iii) [**] will not have the right to file any
patent applications for the [**] anywhere in the world.
5.5 JOINT INVENTIONS.
(a) For purposes of this section, a "Joint Invention" means each
Improvement or discovery acquired or developed jointly (as
determined by United States law of inventorship) by the Parties
under this Agreement that is necessary or useful within the Field,
except for inventions or Improvements governed by Section 5.3.
(b) All Joint Inventions shall be jointly owned by the Parties.
(c) Each Party will cooperate with the other and will cause its
employees, consultants and subcontractors to also cooperate, in
completing any patent applications for Joint Inventions, and in
executing and delivering any instrument required to permit the
Parties to exercise their rights under this Article 5, including
where appropriate instruments assigning a Party's joint ownership
interest in any Joint Inventions.
(d) [**] shall have a perpetual, royalty-free exclusive license to
use Joint Inventions in the [**], and [**] shall have a perpetual,
royalty-free, exclusive license to use [**].
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5.6 PATENT TERM EXTENSIONS.
(a) Pharmacia shall have the right, upon consultation with Connetics
and election by Connetics not to take the actions described in (i)
and (ii) below, to file on behalf of and as agent for Connetics, all
applications and to take all actions necessary (i) to obtain the
benefits of the Drug Price Competition and Patent Term Restoration
Act of 1984 and any amendments thereto to the extent such benefits
relate to Products and (ii) to extend the lives of the Connetics
Patents relating to the Products, to the extent permitted by any
other law or regulation by, among other things, applying for
supplemental protection certificates. Connetics agrees to execute
and deliver, at Pharmacia's expense, such further authorizations and
instruments and to take such further actions as may be reasonably
requested by Pharmacia to implement the foregoing.
(b) To the extent the Connetics Patents are subject to regulations
or statutes comparable to those referred to in Section 5.6(a),
Connetics agrees to exercise its rights under such regulations and
statutes in a fair and equitable manner that takes into account the
legitimate commercial interests of Pharmacia, upon consultation with
Pharmacia.
5.7 PUBLIC DISCLOSURE. Subject to and in accordance with Section 9.6, [**]
agrees to [**] any public disclosure of the subject matter of any patent
application to which this Article 5 applies until [**].
5.8 OWNERSHIP OF DATA, PRODUCT REGISTRATIONS. Pharmacia will be the sole owner
of (a) all the data generated supporting development and registration of
the Product, (b) the database for such data, and (c) all Product
Registrations in any country of the Territory. For the avoidance of doubt,
any Improvements, Connetics Future Sole Inventions, or Joint Inventions
shall be governed by the terms of Sections 5.2 through 5.5.
ARTICLE 6
INFRINGEMENT
6.1 INFRINGEMENT OF THIRD PARTY'S RIGHTS.
(a) If the manufacture, importation, marketing, sale or use of the
Product in a country of the Territory results in a claim that such
activities using the Connetics Technology infringe a Third Party's
patent, the Party first having notice of such a claim of
infringement by a Third Party shall promptly notify the other Party
in writing. The notice shall set forth the facts of the claim (to
the extent known by the Party having notice) in reasonable detail.
(b) If the manufacture, importation, marketing, sale or use of the
Product in a country of the Territory results in a claim against a
Party for patent infringement or trade secret misappropriation
related to the Connetics Technology (the "Claim"), the
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Parties agree to respond to and/or defend against the Claim as
provided in this Section 6.1(b).
(i) [**] shall have the initial right to manage solely the defense of
the Parties against the Claim. If [**] elects to exercise such right
as to the Claim, [**] shall cooperate with [**] at [**] request and
shall have the right to be represented by counsel selected by [**].
If [**] elects not to exercise such right as to the Claim, [**]
shall have the right to manage solely the defense of the Parties
against the Claim, and [**] shall cooperate with [**] at [**]
request and shall have the right to be represented by counsel
selected by [**].
(ii) [**] shall have the right to negotiate a settlement provided,
however, that (a) [**] shall consult with [**] concerning the terms
of any settlement before entering into a settlement agreement, and
(b) [**] shall [**] any Claim without the prior written consent of
[**], which consent shall not be unreasonably withheld, conditioned
or delayed.
(iii) [**] shall be responsible for [**] fees and costs of attorneys and
consultants, together with the court costs, incurred in defending
against the Claim.
Neither this Article 6, nor any exercise of rights or fulfillment of
obligations under this Article 6, shall affect by itself any
indemnification or contribution rights of either Party against any Third
Party.
6.2 INFRINGEMENT CLAIMS AGAINST THIRD PARTY. Connetics and Pharmacia each
agree to take reasonable actions, consistent with efforts used by each
Party to protect its intellectual property, to protect the Connetics
Patents from infringement and the Connetics Know-How from unauthorized
disclosure, possession or use.
(a) If Connetics Patents are infringed or Connetics Know-How is
misappropriated, as the case may be, by a Third Party, the Party to
this Agreement first having knowledge of such infringement or
misappropriation, or knowledge of a reasonable probability of such
infringement or misappropriation, shall promptly notify the other
Party in writing. The notice shall set forth the facts of such
infringement or misappropriation in reasonable detail.
(b) [**] shall have the initial right to institute, prosecute, and
control, with its own counsel and at its own expense, any action or
proceeding with respect to infringement or misappropriation of such
Connetics Patents or Connetics Know-How, and [**] shall have the
right, at its own expense, to be represented in such action by its
own counsel.
(c) If [**] determines not to institute, prosecute or control any
action or proceeding with respect to infringement or
misappropriation of Connetics Patents or Connetics Know-How, then
[**], shall have the right, at its own expense, to institute,
prosecute and control such action or proceeding, provided that [**]
shall keep [**] reasonably informed of the status of such
proceeding. [**] shall not settle any such action or proceeding
without [**].
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(d) In the event that both Parties elect to join an action or
proceeding against a Third Party, the Parties shall cooperate with
each other and [**]. In the event that only one Party elects to join
an action or proceeding against a Third Party, [**]. In the event
that the litigating Party recovers damages from the Third Party,
[**].
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
7.1 CONNETICS REPRESENTATIONS AND WARRANTIES. Connetics represents and
warrants to Pharmacia that as of the Effective Date:
(a) Ownership of Connetics Technology: (i) Connetics is the sole
owner of all rights, title and interest in and to the Connetics
Patents and has the legal right to license the Connetics Technology
to Pharmacia under this Agreement; (ii) Connetics has not granted
and will not grant after the Effective Date any license under the
Connetics Technology for any Product in the Territory (other than
Japan) for use in the Field to any Third Party (iii) to Connetics'
knowledge, no person is infringing or misappropriating in a material
way any right of Connetics to the Connetics Technology; (iv) there
are no outstanding liens, encumbrances, agreements or understandings
of any kind, either written, oral, or implied, regarding the
Connetics Technology that are inconsistent or in conflict with this
Agreement; and (v) Connetics is not aware of any reasons why the
Connetics Patents will not issue. Pharmacia acknowledges that
Connetics has not conducted any freedom to operate studies with
respect to the Connetics Technology and the Product.
(b) Patent Proceedings. (i) No patent application within the
Connetics Patents is the subject of any interference, opposition,
cancellation or other protest proceeding; (ii) to Connetics'
knowledge, the Connetics Technology does not infringe the
intellectual property rights of any Third Party; and (iii) Connetics
has not received any notices or communications that the use,
development, manufacture, marketing, promotion, distribution, sale,
import, export and other commercialization of the Product would
infringe any intellectual property rights of any Third Party.
(c) No Litigation. No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator
or governmental or regulatory official, body or authority, is
pending or threatened against Connetics with respect to the
Connetics Technology or the transaction contemplated by this
Agreement, nor does Connetics know of any basis for any such
litigation, arbitration, investigation or proceeding.
(d) No Conflict. The execution, delivery and performance of this
Agreement by Connetics does not conflict with any agreement,
instrument or understanding, oral or written, to which it is a party
or by which it may be bound, and does not violate any law or
regulation of any court, governmental body or administrative or
other agency having authority over it. Connetics is not currently a
party to, and during the term of
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this Agreement will not enter into, any agreements, oral or written,
that would breach its obligations under this Agreement.
(e) Authority. Connetics is validly existing and in good standing
under the laws of the state of its incorporation and has the
corporate power and authority to enter into this Agreement. This
Agreement has been duly executed and delivered by Connetics and
constitutes the valid and binding obligation of Connetics,
enforceable against it in accordance with its terms except as
enforceability may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights generally and by general equitable
principles. The execution, delivery and performance of this
Agreement have been duly authorized by all necessary action on the
part of Connetics, its officers and directors.
(f) Debarment. To its knowledge, neither Connetics, nor any of its
employees, officers, subcontractors or consultants who has rendered
services relating to the Product (i) has ever been debarred or, to
its knowledge, convicted of a crime for which an entity or person
could be debarred under 21 USC Section 335a or (ii) is the subject
of a debarment proceeding or under indictment for a crime for which
a person or entity could be debarred under that Section. Connetics
agrees to amend this representation as appropriate during the Term
in light of new information.
(g) Limitation on Warranties. CONNETICS MAKES NO WARRANTY, EXPRESS
OR IMPLIED, CONCERNING THE SUCCESS OF THE DEVELOPMENT PLAN, THE
SUCCESS OF THE MARKETING AND COMMERCIALIZATION OF THE PRODUCT, OR
THE COMMERCIAL UTILITY OF THE PRODUCT.
7.2 PHARMACIA REPRESENTATIONS AND WARRANTIES. Pharmacia represents and
warrants to Connetics that:
(a) No Conflict. The execution, delivery and performance of this
Agreement and the agreements contemplated hereby by Pharmacia does
not conflict with any agreement, instrument or understanding, oral
or written, to which it is a party or by which it may be bound, and
does not violate any law or regulation of any court, governmental
body or administrative or other agency having authority over it.
Pharmacia is not currently a party to, and during the term of this
Agreement will not enter into, any agreements, oral or written, that
are inconsistent with its obligations under this Agreement.
(b) Authority. Pharmacia is validly existing and in good standing
under the laws of the state of its incorporation and has the
corporate power and authority to enter into this Agreement. This
Agreement has been duly executed and delivered by Pharmacia and
constitutes the valid and binding obligation of Pharmacia,
enforceable against it in accordance with its terms except as
enforceability may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights generally and by general equitable
principles. The execution, delivery and performance of this
Agreement have been duly authorized by all necessary action on the
part of Pharmacia, its officers and directors.
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(c) Debarment. To its knowledge, neither Pharmacia, nor any of its
employees, officers, subcontractors or consultants who has rendered
services relating to the Product (i) has ever been debarred or, to
its knowledge, convicted of a crime for which an entity or person
could be debarred under 21 USC Section 335a or (ii) is the subject
of a debarment proceeding or under indictment for a crime for which
a person or entity could be debarred under that Section. Pharmacia
agrees to amend this representation as appropriate during the Term
in light of new information.
(d) Limitation on Warranties. PHARMACIA MAKES NO WARRANTY, EXPRESS
OR IMPLIED, CONCERNING THE SUCCESS OF THE DEVELOPMENT PLAN, THE
SUCCESS OF THE MARKETING AND COMMERCIALIZATION OF THE PRODUCT, OR
THE COMMERCIAL UTILITY OF THE PRODUCT.
ARTICLE 8
INDEMNIFICATION
8.1 INDEMNIFICATION BY CONNETICS. Except as otherwise specifically provided
herein, Connetics shall indemnify and hold harmless Pharmacia and its
officers, directors, agents, employees, Affiliates, and Sublicensees
against all claims, actions, losses, damages, costs, expenses (including
court costs and reasonable legal fees) or other liabilities net of any tax
benefit ("Liabilities") whatsoever in respect of:
(a) the material breach by Connetics of its representations and
warranties under Article 7;
(b) the material default or breach of any of its obligations
contained in this Agreement;
(c) any gross negligence or willful misconduct by Connetics
committed in connection with a clinical trial involving any Product;
and
(d) any claim that a Connetics Patent or the development,
manufacture, importation, promotion, marketing, sale or use of any
Product in the Territory infringes a Third Party's patent or other
intellectual property right only to the extent such infringement was
caused by the use of the Connetics Technology in such Product.
8.2 INDEMNIFICATION BY PHARMACIA. Except as otherwise specifically provided
herein, Pharmacia shall indemnify and hold harmless Connetics and its
officers, directors, agents, employees and Affiliates from all Liabilities
whatsoever in respect of:
(a) the material breach by Pharmacia of its representations and
warranties under Article 7;
(b) the material default or breach of any of its obligations
contained in this Agreement;
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(c) any gross negligence or willful misconduct by Pharmacia in the
labeling of the Product or marketing and commercialization
activities undertaken to promote the Product, including the
manufacturing (to the extent not performed by Connetics), sale
(other than intellectual property claims), warehousing,
distributing, detailing, or promotion of the Product including any
Third Party product liability claims related to the Product not
primarily caused by the Connetics Technology in the Product.
(d) any gross negligence or willful misconduct by Pharmacia
committed in connection with a clinical trial involving any Product;
and
(e) any claim that the development, manufacture, importation,
promotion, marketing, sale or use of any Product in the Territory
infringes a Third Party's patent or other intellectual property
right to the extent such infringement was not caused by the use of
the Connetics Technology in such Product.
8.3 INDEMNIFICATION PROCEDURES.
(a) A party entitled to indemnification hereunder for Third Party
claims (the "Indemnitee") that intends to claim indemnification
under this Article 8 shall: (i) notify the other Party (the
"Indemnitor") of any Liability with respect to which the Indemnitee
intends to claim indemnification as soon as practicable after the
Indemnitee becomes aware of any such Liability; (ii) permit the
Indemnitor to assume the defense thereof with counsel mutually
satisfactory to the Indemnitee and Indemnitor; and (iii) cooperate
with the Indemnitor, at the Indemnitor's expense, in the defense
thereof.
(b) With respect to any matter for which the Indemnitor may have an
obligation to indemnify the Indemnitee under this Agreement, the
Indemnitee shall have the right to participate and be represented
(at the Indemnitor's expense) by legal counsel of the Indemnitee's
choice in all proceedings and negotiations, if representation by
counsel retained by Indemnitor would be inappropriate due to actual
or potential differing interests between the Indemnitee and the
Indemnitor represented by such counsel in such proceedings.
(c) The indemnity agreement in this Article 8 shall not apply to
amounts paid in settlement of any Liability if such settlement is
effected without the consent of the Indemnitor, which consent shall
not be unreasonably withheld.
(d) Failure of the Indemnitee to deliver notice to the Indemnitor
within a reasonable time after becoming aware of a Liability shall
not affect the indemnification provided for hereunder except to the
extent that the Indemnitor shall have been actually prejudiced as a
result of such failure.
8.4 INSURANCE. Each Party shall, at its sole cost and expense, obtain and keep
in force during the Term and for a period of not less than three (3) years
after termination, cancellation, or expiration of this Agreement the
following insurance: General liability insurance, including blanket
contractual liability coverage with bodily injury, death, and property
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damage limits of [**] per occurrence and [**] in the aggregate. Upon
execution of this Agreement, and upon the other Party's request
thereafter, each Party shall furnish the other Party with a certificate of
insurance signed by an authorized representative of such Party's insurance
underwriter evidencing the insurance coverage required by this Agreement
and providing for at least thirty (30) days prior written notice to the
other Party of any termination, cancellation, or reduction of such
insurance coverage.
8.5 LIMITATION OF LIABILITY. EXCEPT WITH RESPECT TO A BREACH OF THE
CONFIDENTIALITY PROVISIONS SET FORTH IN ARTICLE 9 OR BREACH OF SECTION
2.2(a) WITH RESPECT TO COMPETITORS, NEITHER PARTY SHALL BE ENTITLED TO
RECOVER FROM THE OTHER PARTY ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL, OR
PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT.
ARTICLE 9
CONFIDENTIALITY
9.1 CONFIDENTIAL INFORMATION. In this Agreement, "Confidential Information"
means any and all information (including information related to the
Connetics Technology) of a Party relating to any trade secret,
specifications, testing, packaging, labeling, development cost, books and
records, process, method, compound, research project, work in process,
future development, scientific, engineering, manufacturing, marketing
sales, business plan, financial or personnel matter relating to the
disclosing Party, its present or future products, sales, suppliers,
customers, employees, investors or business, whether in oral, written,
graphic or electronic form. Confidential Information shall not include any
information that the receiving Party can prove by competent evidence:
i. is now, or hereafter becomes, through no act or failure to act
on the part of the receiving Party, generally known or
available;
ii. is known by the receiving Party at the time of receiving such
information, as evidenced by its written records maintained in
the ordinary course of business;
iii. is hereafter furnished to the receiving Party by a Third
Party, as a matter of right and without restriction on
disclosure;
iv. is independently developed by the receiving Party, as
evidenced by its written records, without knowledge of, and
without the aid, application or use of, the disclosing Party's
Confidential Information; or
v. is the subject of a written permission to disclose provided by
the disclosing Party.
9.2 CONFIDENTIALITY. During the Term and for a period of five (5) years
thereafter (except with respect to (1) Confidential Information that
Connetics considers to be trade secrets
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of Connetics as notified to Pharmacia, which shall be subject to the terms
of this Article 9, and (2) the Pharmacia data, databases and Product
Registrations identified in Section 5.8, until such time as such
information is no longer considered Confidential Information under Section
9.1), each Party shall maintain all Confidential Information of the other
Party as confidential and shall not disclose any such Confidential
Information to any Third Party or use any such Confidential Information
for any purpose except (i) as expressly authorized by this Agreement, or
with the prior written consent of the other Party, which consent shall not
be unreasonably withheld; (ii) as required by applicable laws or court
order of a court of competent jurisdiction (provided that the disclosing
Party shall first notify the other Party to afford the other Party, for a
period of ten (10) Business Days, an opportunity to seek whatever
protective relief it deems appropriate, and the disclosing Party shall use
commercially reasonable efforts to obtain confidential treatment of any
such information required to be disclosed); or (iii) to its Affiliates and
its employees, agents, consultants and other representatives
("Representatives") to accomplish the purposes of this Agreement, provided
that when a Party does disclose such information as provided herein, it
will only be on a need to know basis, including, without limitation,
fulfillment of corporate reporting required by law or regulation, hospital
authorities, regulatory authorities and others who have agreed in writing
to observe the confidentiality of Confidential Information in the same
manner and to the same extent as provided in this Article 9. Each Party
may use such Confidential Information only to the extent required to
accomplish the purposes of this Agreement.
Each Party shall use at least the same standard of care as it uses to
protect its own Confidential Information to ensure that it and its
Affiliates and Representatives do not disclose or make any unauthorized
use of the other Party's Confidential Information. Each Party shall be
responsible for any breach of this Agreement by its Representatives. Each
Party shall promptly notify the other Party upon discovery of any
unauthorized disclosure or use of the other Party's Confidential
Information.
9.3 OBLIGATION TO OBTAIN AGREEMENTS. The obligations of the Parties regarding
the confidentiality and nondisclosure of Confidential Information shall
extend to and be binding upon all employees or agents of the Parties who
have access to Confidential Information pursuant to this Agreement as if
such employees or agents were parties hereto.
9.4 RETURN OF INFORMATION. Upon the early termination of this Agreement due to
a breach by a defaulting Party, the non-defaulting Party shall be entitled
to the prompt return of all of its Confidential Information in the
defaulting Party's possession, as well as all written information and
materials which incorporate Confidential Information.
9.5 PUBLIC DISCLOSURE. Neither Connetics nor Pharmacia shall issue a press
release or in any other way announce to the public the existence, terms,
conditions of, or performance under this Agreement without the prior
written consent of the other Party, which consent shall not be
unreasonably withheld, conditioned or delayed. Notwithstanding the
foregoing, the Parties agree that the public announcement of the execution
of this Agreement shall be in the form of a press release to be mutually
agreed upon by the Parties on or before the Effective Date and thereafter
each Party shall be entitled to make
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or publish any public statement substantially identical to the contents
thereof. The Parties further agree that Connetics shall have the right to
refer to Pharmacia by name and to refer to minoxidil and Rogaine(R) in
such press release. Each Party shall have the right to refer to this
Agreement in filings with the U.S. Securities and Exchange Commission,
national securities exchanges including the NASDAQ stock market or other
regulatory bodies but only if, and to the extent, required by law. If
either Party contemplates making any such filing, it shall provide to the
other Party, at least five (5) Business Days before making such filing, a
copy of such proposed filing. In the event of a public disclosure required
by applicable law prior to the end of such five Business Day period, the
Party required to make such disclosure, if it legally may, shall give the
other Party at least two Business Days to review and comment on such
disclosure. If a Party was not legally able to give notice under the
previous sentence, it will furnish the other Party with a copy of its
disclosure as soon as practicable after the making thereof.
9.6 PUBLICATION. In order to avoid loss of patent rights as a result of
premature disclosure of patentable information, each Party shall submit to
the other Party any proposed publication for review at least thirty (30)
Business Days prior to the planned publication. The Party reviewing the
proposed publication shall notify the other Party within fifteen (15)
Business Days of receipt: (a) whether it desires to file patent
applications on any of its inventions or Joint Inventions described in the
material and, in such case, the reviewing Party shall proceed to file a
patent application in accordance with Article 5; or (b) whether the
proposed publication contains any Confidential Information of the
reviewing Party. If the proposed publication does contain Confidential
Information of the reviewing Party, then the other Party shall, at the
reviewing Party's request, delete such Confidential Information from the
proposed publication. The reviewing Party shall further have the right to
review the proposed publication for scientific accuracy to ensure the
results are reasonably supported by scientific data and that no scientific
misconduct has occurred.
ARTICLE 10
TERM AND TERMINATION
10.1 TERM. The term of this Agreement shall begin on the Effective Date and end
on the first date on which all of Pharmacia's obligations to pay any
Royalty to Connetics on account of sales of the Product hereunder has
expired, unless earlier terminated as provided herein (the "Term"). With
respect to each specific country in the Territory, Pharmacia's obligation
to pay a Royalty to Connetics hereunder shall begin on the Effective Date
and end on the first date on which all of Pharmacia's obligations to pay
any Royalty to Connetics on account of sales of the Product in each such
country in the Territory has expired or been terminated (the "Country
Term").
10.2 EARLY TERMINATION. Notwithstanding Section 10.1, either Party may, in
addition to exercising any other available legal or equitable rights or
remedies, terminate this Agreement, effective immediately upon the
expiration of any applicable cure period, upon the occurrence of an Event
of Default (as defined below) with respect to the other Party. The term
"Event of Default" with respect to a Party means the occurrence of any of
the events set forth in Sections 10.2(a)-(c):
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(a) Except as provided in Section 10.2(b) or (c) below, the failure
of a Party to comply with or perform any material provision of this
Agreement, and such failure remains uncured for sixty (60) days
following written notice of such failure (if such default is cured
within the cure period, such written notice shall be null and void),
provided that, if the defaulting Party can establish to the
reasonable satisfaction of the other Party that it is diligently and
actively pursuing a cure at the expiration of the cure period, and
that the default is reasonably capable of being cured, then the cure
period shall be extended for so long as a cure is being diligently
and actively pursued, not to exceed 120 days in the aggregate.
(b) Any of the representations or warranties of a Party are
discovered to have been untrue when made, resulting in a material,
adverse impact on the other Party.
(c) A Party (i) becomes unable to pay its debts as they mature, (ii)
is the subject of a voluntary or involuntary petition in bankruptcy
or of any other proceeding under bankruptcy, insolvency or similar
laws which, if involuntary, is not dismissed within ninety (90) days
of the date filed, (iii) makes an assignment for the benefit of
creditors, (iv) is named in, or its property is subject to, a suit
for the appointment of a receiver which is not dismissed within
ninety (90) days of the date filed, or (v) is dissolved or
liquidated.
(d) Notwithstanding Section 10.1, either Party shall have the right,
in its sole discretion, to terminate this Agreement in the event the
milestone described in Schedule 3.3(a) has not been met by the
second (2nd) anniversary of the Effective Date, provided such
failure is not caused by the actions or inactions of the terminating
Party. The terminating Party shall make such election to terminate
this Agreement within thirty (30) days after the second (2nd)
anniversary of the Effective Date by sending written notice to the
other Party electing such termination.
(e) Notwithstanding Section 10.1, either Party shall have the right
to terminate this Agreement, in its sole discretion, in the event
that the milestone described in Section 3.3(b) has not been achieved
by the third (3rd) anniversary of the Effective Date. The
terminating Party shall make such election to terminate this
Agreement within sixty (60) days after the third (3rd) anniversary
of the Effective Date by sending written notice to the other Party
electing such termination.
10.3 TERMINATION BY CONNETICS. If [**] does not file [**] for the Product or
[**] on the Product within [**] of the target dates set forth in Section
4.5, and such failure to file or initiate enrollment was not caused by or
the result of a Force Majeure event (including, e.g., requirements of a
Regulatory Authority that resulted in such delay), delays caused by
Connetics, or otherwise agreed to by Connetics, then [**] may terminate
this Agreement prior to the expiration of the Term [**].
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10.4 RIGHTS AND OBLIGATIONS UPON TERMINATION.
(a) Other Penalties. Termination of this Agreement by either Party
shall not prejudice the rights of such Party under this Agreement,
at law or in equity or otherwise, to seek damages or injunctive
relief for any breach of this Agreement by the other Party and all
payment obligations accruing under this Agreement prior to the
effective date of termination.
(b) Reversion Rights. Upon the termination of this Agreement by
Connetics pursuant to Section 10.2 or Section 10.3 or by Pharmacia
pursuant to Section 10.2, all rights granted to Pharmacia under the
Connetics Technology shall terminate (including all rights held by
any Sublicensee under a sublicense agreement) and shall revert to
Connetics on a country-by-country basis in the Territory where
Connetics or Pharmacia, as the case may be, has terminated this
Agreement.
(c) Accrued Rights. Except as otherwise provided in this Agreement,
expiration or termination of this Agreement shall not relieve the
Parties of any obligation accruing prior to such expiration or
termination. Except as otherwise provided in this Agreement, the
rights and obligations of the Parties under Sections 3.8, 3.9, 3.10,
5.2, 5.3, 5.4, 5.5, 5.7, 5.8, 7.1(g) and 7.2(d) and under Articles
8, 9, 10, 11 and 12 shall survive expiration or termination of this
Agreement.
(d) Revision Rights. Within thirty (30) days following the
expiration or termination of this Agreement, each Party shall return
to the other Party, or destroy, upon the written request of the
other Party, any and all Confidential Information of the other Party
in its possession and upon a Party's request, such destruction (or
delivery) shall be confirmed in writing to such Party by a
responsible officer of the other Party, except for such Confidential
Information which the receiving Party is required to keep under
applicable laws, in which event such Confidential Information shall
be held subject to the terms and conditions of Article 9.
ARTICLE 11.
DISPUTE RESOLUTION
11.1 DISPUTES. The Parties recognize that disputes as to certain matters may
from time to time arise that relate to either Party's rights and/or
obligations under this Agreement. It is the objective of the Parties to
establish procedures to facilitate the resolution of such disputes in an
expedient manner by mutual cooperation and without resort to litigation.
11.2 ATTEMPT TO RESOLVE. The Parties agree to take all reasonable efforts to
resolve in an amicable manner any dispute between them concerning
diligence obligations and/or questions of material breach and default in
connection with this Agreement. If any material dispute between the
Parties cannot be resolved by the senior management of the Parties, either
Party may seek to have the issue resolved as otherwise provided herein.
11.3 BINDING ARBITRATION. Except in the event of alleged breach, default or
lack of diligence by a bankrupt or insolvent Party, the Parties agree that
any material dispute that arises
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from or is related to this Agreement or the interpretation, application,
breach, termination or validity thereof, and which cannot be amicably
resolved by the Parties, shall be resolved by binding arbitration (except
as provided for in Section 11.11) pursuant in this Article 11 conducted in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association (AAA) by three (3) arbitrators.
11.4 WRITTEN NOTICE. If a Party intends to begin an arbitration to resolve a
dispute, such Party shall provide written notice to the other Party,
informing the other Party of such intention and the issues to be resolved.
Within twenty (20) business days after its receipt of such notice, the
other Party may, by written notice to the Party initiating arbitration,
add additional issues to be resolved.
11.5 SELECTION OF ARBITRATORS. Within forty-five (45) days following the
receipt of the notice of arbitration, the Party referring the matter to
arbitration shall appoint an arbitrator and promptly notify the other
Party of such appointment. The other Party shall, upon receiving such
notice, appoint a second arbitrator within twenty one (21) days, and the
two (2) arbitrators shall, within fifteen (15) days of the appointment of
the second arbitrator, agree on the appointment of a third arbitrator who
will act with them and be chairperson of the arbitration panel. In the
event that either Party shall fail to appoint an arbitrator within thirty
(30) days after the commencement of the arbitration proceeding, the
arbitrator shall be appointed by the AAA in accordance with the AAA's
Rules. In the event of the failure of the two (2) arbitrators to agree
within sixty (60) days after the commencement of the arbitration
proceeding to appoint the chairperson, the chairperson shall also be
appointed by the AAA in accordance with its rules. The arbitrators shall
not be employees, directors or shareholders of either Party or of its
Affiliates. Where applicable, the arbitrators shall be independent experts
in pharmaceutical marketing and promotion in the U.S. Notwithstanding
anything to the contrary herein, in the event the aggregate damages sought
by the claimant are stated to be less than $500,000 and the aggregate
damages sought by the counterclaimant are stated to be less than $500,000
and neither side seeks equitable relief, then a single arbitrator shall be
chosen, having the same qualifications and experience specified above.
11.6 HEARINGS. The arbitrators shall conduct one or more hearings to allow the
Parties to present their positions regarding the dispute.
The arbitrators shall determine what discovery will be permitted,
consistent with the goal of limiting the cost and time that the
Parties must expend for discovery; provided the arbitrators shall
permit such discovery as they deem necessary to permit an equitable
resolution of the dispute. The arbitrators shall have sole
discretion with regard to the admissibility of any evidence.
(a) At least ten (10) business days prior to a hearing, each Party
must submit to the arbitrators and serve on the other Party a
proposed ruling on each issue to be resolved. Such writings shall be
limited to not more than fifty (50) pages.
(b) Each Party shall be entitled to no more than eight (8) days of
hearings to present testimony or documentary evidence. Such time
limitation shall include any direct,
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cross or rebuttal testimony, but such time limitation shall only be
charged against the Party conducting such direct, cross or rebuttal
testimony. It shall be the responsibility of the arbitrators to
determine whether the Parties have had the eight (8) days to which
each is entitled.
(c) Each Party shall have the right to be represented by counsel.
(d) The arbitration shall take place in New York, NY.
11.7 CONFIDENTIAL. To the extent possible, the arbitration hearings and award
will be maintained in confidence.
11.8 COSTS. The costs of the arbitration, including administrative and
arbitrators' fees, shall be shared equally by the Parties. Each Party
shall bear its own costs and attorneys' and witness' fees.
11.9 DECISION. In any arbitration pursuant to this Agreement, the award or
decision shall be rendered by a majority of the members of the panel
provided for herein, with each member having one (1) vote. The arbitrators
shall render a written decision with their resolution of the dispute. The
decision of the arbitrators shall be final and non-appealable and binding
on the Parties.
11.10 REMEDY. A disputed performance or suspended performances pending the
resolution of the arbitration must be completed within thirty (30) days
following the final decision of the arbitrators or such other reasonable
period as the arbitrators determine in a written opinion.
11.11 PROVISIONAL REMEDIES. Each Party has the right before or during the
arbitration to seek and obtain from the appropriate court provisional
remedies such as attachment, preliminary injunction, replevin, etc., to
avoid irreparable harm, maintain the status quo, or preserve the subject
matter of the arbitration.
ARTICLE 12
MISCELLANEOUS
12.1 RECORD-KEEPING. Connetics and Pharmacia shall keep complete and accurate
records pertaining to the development, manufacture, importations, and
commercialization of the Product in sufficient detail to permit the other
Party to confirm, as the case may be, development and commercialization
efforts, sale of Product, accuracy of calculations of Net Sales and
Royalties and all other payments required to be made under this Agreement.
All records and information required under this Agreement shall be
maintained for the longer of (a) three (3) years following the year in
which any such efforts or payments were made under this Agreement; or (b)
such longer period as may be required by law.
12.2 NOTICE. Except as otherwise specifically provided herein, any notice or
other documents to be given under this Agreement shall be in writing and
shall be deemed to have been
33
duly given if sent by registered post, nationally recognized overnight
courier or facsimile transmission to a Party or delivered in person to a
Party at the address or facsimile number set out below for such Party or
such other address as the Party may from time to time designate by written
notice to the other:
If to Pharmacia:
Pharmacia Consumer HealthCare
Pharmacia & Upjohn Company
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
Telefax: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
Pharmacia & Upjohn Company
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
Telefax: ▇▇▇-▇▇▇-▇▇▇▇
If to Connetics:
Connetics Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer and General Counsel
Telefax: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇
Telefax: ▇▇▇-▇▇▇-▇▇▇▇
Any such notice or other document shall be deemed to have been received by
the addressee three (3) Business Days following the date of dispatch of
the notice or other document by post or, where the notice or other
document is sent by overnight courier, by hand or is given by facsimile,
simultaneously with the transmission or delivery. To prove the giving of a
notice or other document it shall be sufficient to show that it was
dispatched.
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12.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement, including the attached
Schedules, embodies and sets forth the entire agreement and understanding
of the Parties with respect to the subject matter herein. There are no
promises, terms, conditions or obligations, oral or written, expressed or
implied, other than those contained in this Agreement with respect to the
subject matter herein. The terms of this Agreement shall supersede all
previous oral or written agreements which may exist or have existed
between the Parties, including the Term Sheet dated October 1, 2001,
relating to the subject matter of this Agreement. Neither Party shall be
entitled to rely on any agreement, understanding or arrangement which is
not expressly set forth in this Agreement with respect to the subject
matter herein. This Agreement shall not be amended, modified, varied or
supplemented except in writing signed by duly authorized representatives
of the Parties.
12.4 FORCE MAJEURE. Neither Party shall lose any rights hereunder or be liable
to the other Party for damages or losses on account of failure of
performance by the defaulting Party if the failure is caused by Force
Majeure; provided, however, that the Party claiming Force Majeure has
exerted all reasonable efforts to avoid such Force Majeure and has given
prompt notice to the other Party of any such Force Majeure. The Party
giving such notice shall be excused from such of its obligations hereunder
as it is disabled from performing for so long as it is disabled; provided,
however, that Party commences and continues to take reasonable and
diligent actions to cure such Force Majeure. In the event of any such
Force Majeure event, the Parties shall meet promptly to determine an
equitable solution to the effects of such event. The term of this
Agreement shall not be extended by any Force Majeure event.
12.5 ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either of the
Parties (whether by operation of applicable laws, change of control or
otherwise) without the prior written consent of the other Party, which
consent shall not be unreasonably withheld, conditioned or delayed.
Notwithstanding the foregoing, either Party may sell, transfer or assign
its rights under this Agreement to any Third Party as part of a sale or
transfer of substantially all of its assets; provided that such Third
Party agrees in writing to be bound by the terms and conditions of this
Agreement. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the Parties and their
respective permitted successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the
Parties or their respective heirs, successors, executors, administrators
and assigns any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
12.6 HEADINGS, INTERPRETATION. The headings used in this Agreement are for
convenience only and are not a part of this Agreement and shall not affect
the interpretation of any of its provisions.
12.7 INDEPENDENT PARTIES. This Agreement shall not be deemed to create any
partnership, joint venture, or agency relationship between the Parties.
Each Party shall act hereunder as an independent contractor.
35
12.8 GOVERNING LAW. This Agreement shall be governed by and construed under the
laws of New Jersey, excluding its conflict of laws principles. Subject to
the arbitration provisions hereof, the parties agree to submit to the [**]
jurisdiction of New Jersey courts to resolve any controversy.
12.9 NO WAIVER. Neither failure nor delay on the part of either Party to
require the strict performance of any term, covenant or condition of this
Agreement or to exercise any right or remedy available on a breach thereof
shall constitute a waiver of any such breach or of any such term or
condition. The consent to, or the waiver of, any breach, or the failure to
require on any single occasion the performance or timely performance of
any term, covenant, or condition of this Agreement shall not be construed
as authorizing any subsequent or additional breach and shall not prevent a
subsequent enforcement of such term, covenant, or condition.
12.10 SEVERABILITY. In the event that any provision of this Agreement or the
application thereof to any Party or circumstance shall be finally
determined by a court of proper jurisdiction to be invalid or
unenforceable to any extent, then (i) a suitable and equitable provision
shall be substituted therefore in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid and
unenforceable provision and (ii) the remainder of this Agreement and the
application of such provision to the Parties or circumstances other than
those to which it is held invalid or unenforceable shall not be affected
thereby.
12.11 INTERPRETATION. The Parties acknowledge and agree that (i) each Party and
its representatives has reviewed and negotiated the terms and provisions
of this Agreement and have contributed to its revision, (ii) the rule of
construction to the effect that any ambiguities are resolved against the
drafting Party shall not be employed in the interpretation of this
Agreement and (iii) the terms and provisions of this Agreement shall be
construed fairly as to each Party and not in favor of or against either
Party regardless of which Party was generally responsible for the
preparation of this Agreement.
12.12 COUNTERPARTS. 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 a single agreement.
12.13 THIRD-PARTY BENEFICIARIES. Except as specifically provided herein, this
Agreement is not intended to confer upon any non-Party rights or remedies
hereunder.
12.14 FURTHER ASSURANCES. Each Party shall execute and deliver such additional
instruments and other documents and shall use all commercially reasonable
efforts to take or cause to be taken all actions and to do, or cause to be
done, all things necessary under applicable law to consummate the
transactions contemplated hereby.
--------
** Confidential Treatment Requested
36
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement
to be duly executed as of the date first above written.
CONNETICS CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
PHARMACIA & UPJOHN COMPANY
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: President, CHC-Americas
37
SCHEDULE A
CONNETICS PATENTS
COUNTRY PATENT APPLICATION NO. STATUS
------- ---------------------- ------
[**] Pending
--------
** Confidential Treatment Requested
38
