ASSET PURCHASE AGREEMENT

Exhibit 10.1

CONFIDENTIAL TREATMENT REQUESTED:  INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND IS NOTED WITH “[*].”  AN UNREDACTED VERSION OF THIS DOCUMENT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

ASSET PURCHASE AGREEMENT


Dated as of August 6, 2009


By and Between


NOVARTIS INSTITUTES FOR BIOMEDICAL RESEARCH, INC.

and

OPEXA THERAPEUTICS, INC.

ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT (this “ Agreement ”) is dated as of August 6, 2009 (the “ Effective Date ”), by and between Novartis Institutes for BioMedical Research, Inc., a Delaware corporation (“ Novartis ”) and Opexa Therapeutics, Inc., a Texas corporation (the “ Company ”).  

RECITALS

WHEREAS, the Company is engaged in the research and development of the MDSC Program (as defined below);

WHEREAS, upon the terms and conditions set forth herein, Novartis desires to purchase, and the Company desires to assign to Novartis all of the Company Intellectual Property (as defined below);

WHEREAS, the Company and the University of Chicago have entered into the Chicago License, whereby the University of Chicago has licensed to the Company certain exclusive rights as set forth in the Chicago License; and

WHEREAS , the Company wishes to assign the Chicago License to Novartis, and Novartis wishes to assume the Chicago License from the Company, on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:

Article I 

DEFINITIONS

1.1   Defined Terms .  Defined terms used in this Agreement shall have the meanings ascribed to them as follows:

“ Affiliate ” shall mean, with respect to a party, any Person that controls, is controlled by, or is under common control with that party.  For the purpose of this definition, “control” shall mean, direct or indirect, ownership of fifty percent (50%) or more of the shares of stock entitled to vote for the election of directors, in the case of a corporation, or fifty percent (50%) or more of the equity interest in the case of any other type of legal entity, status as a general partner in any partnership, or any other arrangement whereby the entity or Person controls or has the right to control the board of directors or equivalent governing body of a corporation or other entity, or the ability to cause the direction of the management or policies of a corporation or other entity.  In the case of entities organized under the Laws of certain countries, the maximum percentage ownership permitted by Law for a foreign investor may be less than fifty percent (50%), and in such case such lower percentage shall be substituted in the preceding sentence, provided, that such foreign investor has the power to direct the management and policies of such entity. In the case of Novartis, “Affiliates” shall also expressly be deemed to include the Novartis Institute for Functional Genomics, Inc., the Friedrich Miescher Institute for Biomedical Research and their respective Affiliates.

“ Allogeneic Generation Process ” shall mean an in vitro process to generate MDSCs from a person’s blood, multiplying such MDSCs in number ex vivo , and converting them to a therapeutic for transplantation into a different person.

“ Autologous Generation Process ” shall mean an in vitro process to generate MDSCs from a person’s blood, multiplying such MDSCs in number ex vivo , and converting them to a therapeutic for transplantation back into the same person.

“ Calendar Quarter ” shall mean the respective periods of three (3) consecutive calendar months ending on March 31, June 30, September 30 and December 31.

“ Calendar Year ” shall mean each successive period of twelve (12) months commencing on January 1 and ending on December 31.

“ Change in Control ” of the Company shall mean (i) the Company is involved in a merger, reorganization or consolidation in which its shareholders immediately prior to such transaction hold less than fifty percent (50%) of the voting securities or other voting interests representing the equity of the surviving entity immediately after such merger, reorganization or consolidation, where such surviving entity is or is an Affiliate of a Significant Pharmaceutical Company, (ii) there is a bona fide sale of all or substantially all of the Company’s assets or business relating to this Agreement to a Significant Pharmaceutical Company, or (iii) a Significant Pharmaceutical Company acquires effective control of the management and policies of the Company.

“ Chicago License ” shall mean that certain Second Amended and Restated License Agreement, dated July 31, 2007, between the Company and the University of Chicago, as amended as of August 5, 2009, attached hereto as Exhibit A.

“ Company Intellectual Property ” shall mean any Intellectual Property that is owned by or licensed to the Company in each case which is used in, held for use or intended for use in, or that arises out of or otherwise relates to the MDSC Program, excluding the Intellectual Property licensed to the Company under the Chicago License.  

“ Confidentiality Agreement ” shall mean the Confidential Disclosure Agreement effective as of December 11, 2008, by and between the Company and Novartis International AG.

“ dollars ” or “ $ ” shall mean United States dollars.

“ EMEA ” shall mean the European Medicines Evaluation Agency or any successor agency thereto.

“ EU Regulatory Approval ” shall mean (a) marketing authorization approval from the EMEA and pricing and reimbursement approval in any three Major EU Countries or (b) national marketing authorization approval and pricing and reimbursement approval in any three Major EU Countries.

CONFIDENTIAL TREATMENT REQUESTED

“ FDA ” shall mean the United States Food and Drug Administration, or any successor agency thereto.

“ First Commercial Sale ” shall mean the first sale of a Product or Method, by or under the authority of Novartis, an Affiliate of Novartis, or their licensees or sublicensees to a Third Party in a country following Regulatory Approval and reimbursement approval (if necessary) of such Product or Method in that country or, if no such Regulatory Approval or similar approval is required, the date upon which such Product or Method is first commercially launched in such country; provided that First Commercial Sale shall not include any distribution or other sale solely for so-called treatment investigational new drug sales, named patient sales, compassionate or emergency use sales or pre-license sales.

“ FPFV ” shall mean, with respect to a Product or Method, the administration of the first dose of such Product or first administration of such Method to the first patient at his first visit in a Phase III Clinical Study, as applicable.

“ FTE ” or “ Full Time Equivalent ” shall mean the equivalent of a full-time qualified employee’s work time (consisting of a total of [*] hours over a twelve-month period) for scientific work directly related to the technology transfer activities provided in the Technology Transfer Plan, excluding any managerial activities and travel time.

“ Generation Process ” shall mean, collectively, the Autologous Generation Process and the Allogeneic Generation Process.

“ Governmental Authority ” shall mean any federal, state, municipal, foreign or other governmental body, department, commission, board, bureau, agency, court or instrumentality, domestic or foreign, or other entity exercising any executive, legislative, judicial, quasi-judicial, regulatory or administrative function of government, including the FDA and all foreign equivalents thereof.

“ Intellectual Property ” shall mean any or all rights in, arising out of, or associated therewith:  (a) all United States, international and foreign Patent Rights; (b) all Know-How; (c) all copyrights, copyright registrations and applications therefor, and all other rights corresponding thereto throughout the world; (d) all industrial designs and any registration and applications therefor throughout the world; (e) all trade names, brand names, model names and other source indicators, logos, domain names, URLs, common law trademarks and service marks, including all good will associated therewith, and all registration and applications therefor throughout the world; (f) all mask works and all applications, registrations, and renewals in connection therewith and (g) all databases and data collections and all rights therein throughout the world.

“ Invoice ” shall mean an invoice substantially in the form attached as Exhibit D.

“ Know-How ” shall mean all ideas, inventions (whether patentable or not), discoveries, concepts, formulae, practices, procedures, processes, methods, knowledge, know-how, trade secrets, technology, technical information, designs, drawings, computer programs, skill, experience, documents, apparatus, results, data, specifications and materials, including all clinical and regulatory strategies, regulatory filings (and copies thereof), biological, chemical, biochemical, pharmacological, physical, toxicological and clinical data, analytical, safety, efficacy and quality control data, test data, manufacturing data  and descriptions, patents and legal data, market data, financial data or descriptions, devices, assays, chemical formulations, specifications, compositions of matter, product samples and other samples, physical, chemical and biological materials and compounds, and the like, in written, electronic or other form.

“ Law ” shall mean any federal, state, local or foreign law, statute, common law, rule, regulation, code, directive, ordinance or other requirement of general application of any Governmental Authority.

“ Liabilities ” shall mean any direct or indirect liability, indebtedness, claim, loss, damage, deficiency, obligation or responsibility, fixed or unfixed, liquidated or unliquidated, secured or unsecured, accrued, absolute or contingent.

“ Licensed Patents ” shall have the meaning set forth in the Chicago License.

“ LICENSEE ” shall have the meaning set forth in the Chicago License.

“ Lien ” shall mean any lien, claim, charge, option, mortgage, pledge or security interest, rights of first refusal or rights of first offer, encumbrance or other similar right, whether arising by contract, operation of law or otherwise.

“ Losses ” of any Person shall mean any and all demands, claims, suits, actions, causes of action, proceedings, assessments, losses, damages, Liabilities, Taxes, costs and expenses, incurred by such Person, including settlement costs, costs of collection, interest, penalties and attorneys’ fees, Third Party expert and consultant fees and expenses, fines, judgments and awards.

“ Major EU Country ” shall mean France, Germany, Italy, Spain or the United Kingdom.

“ MDSC ” shall mean a monocyte-derived stem cell.

“ MDSC Program ” shall mean, in each instance as conducted by or on behalf of the Company up to and including the Effective Date: (i) the Generation Process; and (ii) any other use of MDSCs for any purpose.

“ Method ” shall mean any method, procedure or process where use or practice of such is covered by the scope of any Valid Claim.

“ Net Sales ” shall mean with respect to any Product or Method the gross amount invoiced by or on behalf of Novartis, its Affiliates and any licensees or sublicensees for that Product or Method sold to Third Parties, in bona fide, arm’s length transactions, less customary deductions, determined in accordance with Novartis’ usual and customary accounting methods, which are in accordance with International Financial Reporting Standards (IFRS) as consistently applied at Novartis, to the extent included in the gross invoiced sales price of any Product or Method or otherwise directly paid or incurred by Novartis, its Affiliates or licensees or sublicensees with respect to the sale of such Product or Method, such as:

CONFIDENTIAL TREATMENT REQUESTED

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all as determined in accordance with Novartis’ usual and customary accounting methods, which are in accordance with International Financial Reporting Standards (IFRS) as consistently applied at Novartis.  Sales from Novartis to its Affiliates shall be disregarded for purposes of calculating Net Sales.  Any of the items set forth above that would otherwise be deducted from the invoice price in the calculation of Net Sales but which are separately charged to Third Parties shall not be deducted from the invoice price in the calculation of Net Sales.

(a)       In the case of any sale or other disposal of a Product or Method between or among Novartis, its Affiliates and licensees and sublicensees, for resale, Net Sales shall be calculated as above only on the value charged or invoiced on the first arm’s length sale thereafter to a Third Party;

(b)       In the case of any sale which is not invoiced or is delivered before invoice, Net Sales shall be calculated at the time of shipment or when the Product or Method is paid for, if paid for before shipment or invoice; and

(c)       In the case of any sale or other disposal for value, such as barter or counter-trade, of any Product or Method, or part thereof, other than in an arm’s length transaction exclusively for money, Net Sales shall be calculated as above on the value of the non-cash consideration received or the fair market price (if higher) of the Product or Method in the country of sale or disposal.

“ Order ” shall mean any order, writ, injunction, judgment, decree or ruling entered, issued, made or rendered by any court, administrative agency, arbitration tribunal or other Governmental Authority of competent jurisdiction.

“ Patent Rights ” shall mean all patents and patent applications, and any patents issuing therefrom, worldwide, including all divisionals, continuations, substitutions, continuations-in-part, re-examinations, reissues, additions, renewals, extensions (including patent term extensions and supplementary protection certificates), registrations, and the like of any of the foregoing.

“ Permits ” shall mean all licenses, permits, consents, applications, orders, waivers,  clearances, franchises, certificates, variances, approvals, filings, notifications and other authorizations of any Governmental Authorities under applicable Law.

“ Person ” shall mean any individual, corporation, partnership, firm, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization, Governmental Authority or other entity.

“ Phase III Clinical Study ” shall mean a pivotal human clinical study in any country that is conducted in accordance with cGCPs and is intended to establish efficacy and safety of a product for the purpose of preparing and submitting a Regulatory Filing to the competent Governmental Authority in such particular country.

“ Proceeding ” shall mean any action, suit, dispute, litigation, hearing, claim, grievance, arbitral action or other proceeding before any Governmental Authority, at law or in equity.

“ Product ” shall mean any product that is covered by the scope of any Valid Claim or made by a process, method or technique covered by the scope of any Valid Claim, or where a method of using such product is covered by the scope of any Valid Claim.

“ Regulatory Approval ” shall mean, with respect to a product in any country or jurisdiction, approval (including where required, pricing and reimbursement approvals), registration, license or authorization from a Governmental Authority in a country or other jurisdiction that is necessary to market and sell such product in such country or jurisdiction.

“ Regulatory Filing ” shall mean, with respect to a product, any submission to a Governmental Authority of any appropriate regulatory application to conduct clinical trials or market a product, and shall include any submission to a regulatory advisory board, marketing authorization application, and any supplement or amendment thereto.  For the avoidance of doubt, Regulatory Filings shall include any Investigational New Drug Application, New Drug Application (“NDA”), Biologics License Application or the corresponding application in any other country or group of countries.

“ Representative ” shall mean any attorney, accountant, financial advisor or other authorized representative of any Person. “ Sales Report ” shall mean a written report or reports showing [*] the royalties payable, in United States Dollars, which shall have accrued hereunder with respect to such Net Sales.

CONFIDENTIAL TREATMENT REQUESTED

“ SEC ” shall mean the United States Securities and Exchange Commission.

“ Significant Pharmaceutical Company ” shall mean a pharmaceutical company, biotechnology company, or group of such companies acting in concert which is a Third Party and with a market capitalization greater than [*] as of the effective date of a Change in Control.

“ Tax ” or “ Taxes ” shall mean any taxes of any kind, including those measured on, measured by or referred to as, income, alternative or add-on minimum, gross receipts, escheat, capital, capital gains, sales, use, ad valorem, franchise, profits, license, privilege, transfer, withholding, payroll, employment, social, excise, severance, stamp, occupation, premium, value added, property, environmental or windfall profits taxes, customs, duties or similar fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts (including any interest thereon) imposed by any Governmental Authority.

“ Third Party ” shall mean any Person other than a party to this Agreement or an Affiliate of such Party.

“ Valid Claim ” shall mean:  (i) an issued claim of any unexpired patent within the Acquired Patents or Licensed Patents which has not been (x) held unenforceable, unpatentable or invalid by a decision of a court or governmental body of competent jurisdiction, in a ruling that is unappealable or unappealed within the time allowed for appeal; (y) rendered unenforceable through disclaimer or otherwise; or (z) lost through an interference proceeding or irrecoverable failure, prior to the Effective Date, to pay a maintenance fee; or (ii) a claim of any patent application within the Acquired Patents or Licensed Patents so long as such patent application has not been pending for more than [*] following the filing date for such application.

1.2   Other Defined Terms .  The following capitalized terms are defined in this Agreement in the Section indicated below:

1.3   Rules of Construction .  References in this Agreement to gender include references to all genders, and references to the singular include references to the plural and vice versa.  The words “include,” “includes” and “including” when used in this Agreement shall be deemed to be followed by the phrase “without limitation.”  Unless the context otherwise requires, references in this Agreement to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement.  Unless the context otherwise requires, the words “hereof,” “hereby” and “herein” and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any particular Article, Section or provision of this Agreement.  The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

Article II

PURCHASE AND SALE OF THE COMPANY INTELLECTUAL PROPERTY;
TRANSFER OF LICENSE

2.1   Purchase and Sale of the Company Intellectual Property

 (a)  On the terms and conditions set forth in this Agreement, the Company shall (and shall cause its Affiliates to) and hereby does, as of the Effective Date, sell, transfer, convey, assign and deliver to Novartis, and Novartis shall and hereby does, as of the Effective Date, purchase and acquire all of the Company’s (and its Affiliates’) right, title and interest in, to and under all of the Company Intellectual Property, including but not limited to:

(i)  the patent applications set forth on Schedule 2.1(a)(i) attached hereto and all Patent Rights therein (the “ Acquired Patents ”);

(ii)  all data, results, research and development plans, experiments, laboratory notebooks, biological materials and other information relating to the research conducted by, or on behalf of, the Company and/or its Affiliates with respect to the MDSC Program, including those set forth on Schedule 2.1(a)(ii) attached hereto; and

(iii)  all Know-How not specifically described above that is used, held for use or intended for use in, or that arose out of, or is otherwise related to, the MDSC Program.

As of the Effective Date, all right, title and interest to and risk of loss as to the Company Intellectual Property shall pass from the Company and its Affiliates to Novartis free and clear of all Liens.

2.2   No Assumption of Liabilities .  Notwithstanding any other provision hereof, and except for Liabilities and obligations as LICENSEE under the Chicago License with respect to periods after the Effective Date (the “ Assumed Liabilities ”), Novartis and its Affiliates shall not assume or agree to, and shall not be obligated to pay, perform or discharge, any obligations, Liabilities, contracts, agreements or commitments of the Company or any of its Affiliates (including (i) any Liabilities, contracts, agreements or commitments relating to the MDSC Program or (ii) any Liabilities or obligations relating to the performance (or failure to perform) by the LICENSEE under the Chicago License on or prior to the Effective Date), all of which obligations, Liabilities, contracts, agreements and commitments shall remain the sole liability and responsibility of the Company and its Affiliates (the “ Retained Liabilities ”).    

2.3   Chicago License .  The Company hereby agrees to assign to Novartis (as the LICENSEE thereunder), and Novartis hereby agrees to accept and assume (as the LICENSEE thereunder), the Chicago License, on the Effective Date pursuant to the Assignment and Amendment Agreement in the form attached hereto as Exhibit F .

Article III

PAYMENTS

3.1   Up-Front Payment .  Novartis shall pay to the Company $3,000,000 (THREE MILLION DOLLARS) within thirty (30) days of Novartis’ receipt of an Invoice for such amount.

3.2   Additional Consideration .

(a)   Milestone Payments .  As additional consideration, Novartis shall, upon the achievement of the development milestones and sales milestones set forth below (each a “ Milestone ”), pay in accordance with subsection (b) the following cash payments (each a “ Milestone Payment ” and collectively, the “ Milestone Payments ”):

CONFIDENTIAL TREATMENT REQUESTED

 (i)   Development Milestones

(ii)   Sales Milestones

Each Milestone Payment shall be deemed earned as of the first achievement of the corresponding Milestone as reasonably determined by Novartis, and shall be notified by Novartis to the Company within thirty (30) days after achievement of the Milestone.  For the avoidance of doubt: (i) each Milestone Payment shall become payable only upon the first occurrence of the Milestone; (ii) none of the Milestone Payments shall be payable more than once and (iii) no additional Milestone Payments shall be due for Milestones completed for the development and commercialization of any or all of the Products and Methods for additional indications or otherwise.

(iii)   Payment of Milestone Payments .  Novartis shall pay to the Company an amount equal to the Milestone Payment no later than sixty (60) days after receipt of an Invoice therefor, which Invoice shall be issued by the Company no earlier than the receipt by the Company of the notice sent by Novartis relating to the achievement of the applicable Milestone.

(b)  RoyaltiesSubject to the terms and conditions of this Agreement, including but not limited to Section 3.3, as additional consideration Novartis shall pay to the Company a royalty of [*] percent ([*]%) on Net Sales of each Product and Method (on a Product-by-Product, Method-by-Method and country-by-country basis) by Novartis, its Affiliates and licensees and sublicensees.

CONFIDENTIAL TREATMENT REQUESTED

(ii)  In the event that, with respect to Net Sales of Products and/or Methods, Novartis pays royalties to Third Parties for patent rights to make, use or sell Product(s) and/or Method(s), the royalties due and payable by Novartis to the Company hereunder shall be reduced by [*] percent ([*]%) of the amounts paid by Novartis to such Third Party for such patent rights; provided, however, that in no event shall any royalty payment due to the Company under this Agreement be reduced through this Section by more than [*] percent ([*]%).

(iii)   Within sixty (60) days after each Calendar Quarter during the period of time during which a non-zero amount of royalties are payable under Section 3.2(b)(i) and following the First Commercial Sale of a Product or Method, until royalties are no longer payable under Section 3.2(b)(i), Novartis will provide or cause to be provided to the Company a Sales Report.  The Company shall submit an Invoice to Novartis with respect to the royalty amount set forth on such Sales Report.  Novartis shall pay such royalty amount within sixty (60) days after receipt of such Invoice.   

(c)   Technology Transfer Payment .  As additional consideration, upon the completion of the technology transfer activities set forth in the Technology Transfer Plan in accordance with Section 6.1, Novartis shall pay to the Company the amounts set forth in Section 6.1(c).

3.3   Deductibility of Amounts Payable under the Chicago License.   Notwithstanding any provision herein to the contrary:  (i) Novartis may offset the amount of any Royalties (as defined in the Chicago License) paid by Novartis under the Chicago License (net of any deductions or credits as provided in the Chicago License) against the royalties otherwise payable to the Company pursuant to Section 3.2(b)(i), but solely as to that portion of the royalties attributable to the Product(s) or Method(s) at issue and in respect of the country(ies) at issue; and (ii) Novartis may offset the amount of any milestone payments paid by Novartis under Section 4.C of the Chicago License (net of any deductions or credits as provided in the Chicago License) against the Milestone Payments otherwise payable to the Company pursuant to Section 3.2(a)(i).

3.4   Currency; Payment .  All payments under this Agreement shall be payable in United States dollars.  When conversion of payments from any foreign currency is required to be undertaken by Novartis, the United States dollar equivalent shall be calculated using Novartis’ then-current standard exchange rate methodology as applied in its external reporting.  All payments by Novartis to the Company shall be made by wire transfer of immediately available funds to an account designated by the Company prior to the Effective Date, or as may be designated by the Company from time to time upon written notice to Novartis.

3.5   Taxes .  The Company will pay any and all taxes levied on account of any payments made to it under this Agreement.  If any such taxes are required to be withheld by Novartis, Novartis will: (a) deduct such taxes from the payment made to the Company; (b) timely pay the taxes to the proper taxing authority; (c) send proof of payment to the Company; and (d) reasonably assist the Company in its efforts to obtain a credit for such tax payment.  Each party agrees to reasonably assist the other party in lawfully claiming exemptions from and/or minimizing such deductions or withholdings under double taxation Laws or similar circumstances.

CONFIDENTIAL TREATMENT REQUESTED

3.6   Records and Audit Rights .

(a)  Novartis shall (and shall cause any of its Affiliates, licensees or sublicensees to) keep complete, true and accurate books and records in accordance with IFRS in relation to this Agreement, including in relation to Net Sales and royalties.  Novartis will keep (or cause to be kept) such books and records for at least three (3) years following the Calendar Quarter to which they pertain.

(b)  The Company shall have the right for a period of [*] after receiving any Sales Report to appoint an internationally-recognized independent accounting firm (which is reasonably acceptable to Novartis) (the “ Auditor ”) to inspect the relevant records of Novartis or its Affiliates to verify such reports, statements, records or books of accounts, as applicable.  Before beginning its audit, the Auditor shall execute an undertaking acceptable to Novartis by which the Auditor shall keep confidential all information reviewed during such audit.  The Auditor shall have the right to disclose to the Company its conclusions regarding any payments owed under this Agreement.

(c)  Novartis and its Affiliates shall make their records available for inspection by such Auditor during regular business hours at such place or places where such records are customarily kept, upon receipt of reasonable advance notice from the Company, solely to verify the accuracy of the Sales Reports.  Such inspection right shall not be exercised more frequently than once in any calendar year and not more than once with respect to records covering any specific period of time.  The Company agrees to hold in strict confidence all information received and all information learned in the course of any audit or inspection, except to the extent necessary to enforce its rights under this Agreement or if disclosure is required by law, regulation or judicial order.

(d)  The Company shall pay for such audits, as well as its own expenses associated with enforcing its rights with respect to any payments hereunder, except that in the event there is any upward adjustment in aggregate amounts payable for any year shown by such audit of more than [*] percent ([*]%) of the amount paid, Novartis shall pay for such audit (as well as promptly paying to the Company the amount of any such adjustment).

Article IV

Intellectual