ARTICLE I - Definitions

 

As used in this Agreement, the following terms when used with initial capital letters, shall have the following meanings, the singular shall include the plural and vice versa:

 

1.1       “AERES Invention” shall mean any discovery or invention to the extent (i) made or conceived or reduced to practice by or on behalf of AERES in the performance of the humanization of LPT’s Sphingomab™ antibody under this Agreement, whether or not patentable, and (ii) covering only generally applicable methods or techniques for humanizing antibody proteins or for constructing a vector or reagent used to humanize or express an antibody.

 

1.2       “AERES IP” shall mean (i) any AERES Invention and (ii) all patented and non-patented proprietary technology and information, in any form whatsoever, that is: (a) necessary or useful for making and using the Licensed Products, without regard to whether or not the technology or information is patentable; (b) owned, controlled, or developed by AERES, as of the Effective Date or hereafter during the term of this Agreement; and (c) provided by AERES to LPT hereunder, including, but not limited to discoveries, formulae, materials, practices, methods, knowledge, know-how, processes, trade secrets, ideas, concepts, manufacturing, engineering, standard operating procedures, flow diagrams and charts, quality assurance, quality control data, technical data, manufacturing technology, research data and records, and all other confidential or proprietary technical and business information relating to the humanization of murine antibodies, generation of chimeric antibodies, or any gene expression vectors used in such methods and all improvements or modifications thereto.  For purposes of clarity, AERES IP includes AERES Inventions that satisfy (a), (b) and (c), above, while AERES IP does not include Licensed Patent Rights as defined hereunder.

 

1.3       “Affiliate” shall mean any entity that directly or indirectly controls, is controlled by, or is under common control with a party, and for the purposes of this Paragraph 1.3, “control” shall mean ownership of more than fifty percent (50%) of the voting interest, or such lower maximum amount allowed by the law governing the ownership of said organization.

 

1.4       “Business Day” means any day, except Saturday and Sunday, on which commercial banking institutions are open for business (i) in New York, U.S.A., in the case of LPT and (ii) in London, U.K., in the case of AERES.  Any other reference in this Agreement to “day” whether or not capitalized shall refer to a calendar day, not a Business Day.

 

1.5       “Commercial Introduction” shall mean the date upon which LPT or one or more Affiliates or Licensees (as defined hereunder) first achieves Net Sales following the final issuance of all required licenses and approvals by the United States Food and Drug Administration (“FDA”) (or equivalent licenses and approvals in a country other than the United States) allowing for the manufacture and sale of a Licensed Product for human use.

 

1.6       “Commercial Sale” means, with respect to a Licensed Product in a particular country, the sale to a third party purchaser by LPT, its Affiliates, and/or its Licensees of Licensed Products in such country after all Regulatory Approvals have been obtained in such

 

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country and, if Regulatory Approval is not required in such country, any commercial sale of Licensed Products in such country.

 

1.7       “Confidential Information” means all secret, confidential, or proprietary information or data, whether provided in written, oral, video, computer, or other form or format, provided by one party (“the Disclosing Party”) to the other party (the “Receiving Party”) pursuant to this Agreement or generated pursuant to this Agreement, including, but not limited to, information relating to the Disclosing Party’s existing or proposed research and development efforts, patent applications, business or products, the terms of this Agreement, and any other materials that have not been made available by the Disclosing Party to the general public.  Notwithstanding the foregoing sentence, Confidential Information shall not include any information or materials that:

 

(i)        were already known to the Receiving Party (other than under obligation of confidentiality) at the time of disclosure by the Disclosing Party, to the extent the Receiving Party has documentary evidence to that effect;

 

(ii)       were generally available to the public or otherwise part of the public domain at the time of its disclosure to the Receiving Party;

 

(iii)      became generally available to the public or otherwise part of the public domain after its disclosure or development, as the case may be, and other than through any act or omission of a party in breach of such party’s confidentiality obligations under this Agreement;

 

(iv)      were subsequently lawfully disclosed to the Receiving Party by a third party who had no obligation to the Disclosing Party not to disclose such information to others;

 

(v)       were independently discovered or developed by or on behalf of the Receiving Party without the use of the Disclosing Party’s Confidential Information, to the extent the Receiving Party has documentary evidence to that effect;

 

(vi)      is approved for release by the Disclosing Party in writing; or

 

(vii)     were required by law to be disclosed.

 

1.8       “Designated Antibody” shall mean a Humanized Antibody for which LPT seeks regulatory approval through the conduct of human clinical trials, or a US BLA, or an equivalent regulatory approval in any country.

 

1.9       “Humanized Antibody” shall mean an antibody that binds to Sphingosine-1-phosphate and is made by AERES under this Agreement, the antibody comprising murine complementarity determining regions (‘CDRs’ as identified in Exhibit A 1. Winter Patent”) derived from Sphingomab™ together with human framework regions, and any modifications thereof.

 

1.10     “Licensed Patent Rights” shall mean the patents and patent applications licensed to AERES and with respect to which AERES has the right to authorize and grant sublicenses, as

 

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detailed in Exhibit A hereto, including any divisions, renewals, continuations, extensions, reexaminations, reissues, or continuations-in-part (to the extent that any such continuation-in-part claims subject matter as disclosed in the patents and applications listed in Exhibit A) thereof, as well as any patent that issues from any of the foregoing.

 

1.11     “Licensed Product” shall mean a product comprising a Humanized Antibody, the manufacture, use, offer for sale, sale, or importation of which by an unlicensed third party would infringe one or more Valid Claims of the Licensed Patent Rights, or which incorporates AERES IP or AERES Inventions.  The term “Licensed Product” does not include chimeric antibodies or murine antibodies.

 

1.12     “Licensee” shall mean any organization licensed by LPT to manufacture or sell Licensed Products.  For clarity, the term “Licensee” shall include any Sublicensee of LPT under the Licensed Patent Rights as herein defined.

 

1.13     “LPT Invention” shall mean any discovery or invention to the extent (i) made or conceived or reduced to practice by or on behalf of AERES, whether alone or jointly with LPT, in the performance of the humanization of LPT’s Sphingomab™ antibody, whether or not patentable, and (ii) not an AERES Invention.  For the purpose of clarity, LPT Inventions shall include without limitation all of the DNA sequences encoding Humanised Antibody genes included in the AERES Deliverables as defined in Paragraph 2.2 but otherwise excluding DNA sequences encoding for AERES’ proprietary expression vectors. .

 

1.14     “LPT IP” shall mean any and all patented and non-patented proprietary technology and information, in any form whatsoever, that is necessary or useful for making and using Humanized Antibodies, without regard to whether or not the technology or information is patentable, which is (i) owned with the right to disclose or otherwise controlled by LPT as of the Effective Date or hereafter during the term of this Agreement and is first disclosed by LPT to AERES, or (ii) is assigned, or is obliged hereunder to be assigned, to LPT by AERES, including, without limitation, processes, techniques, methods, products, transformed cells, other biological materials and compositions which are necessary or useful for making or using the Humanized Antibodies.  LPT IP shall not include AERES IP or AERES Inventions.

 

1.15     “Net Sales” shall mean the amount received in respect of gross sales by LPT, its Affiliates and/or its Licensees from the sale of Licensed Products to independent third parties, less the following amounts: (i) discounts or rebates actually allowed or granted; (ii) credits or allowances actually granted on rejections or returns (not exceeding the original billing), including for recalls or damaged goods; (iii) outbound freight, postage, shipping, and insurance charges prepaid or allowed; (iv) sales, tariff duties, surcharges, and/or use or excise taxes, levies, or other similar governmental charges included in the invoiced amount; and (v) any similar and customary deductions taken in accordance with U.S. generally accepted accounting principles (GAAP) consistently applied. Provision of Licensed Products for promotional, sampling, or educational purposes and for use in clinical trials contemplated under this Agreement shall not be considered in determining Net Sales, so long as no consideration (monetary or non-monetary other than incidental) is received in exchange therefor. No allowance or deduction shall be made for commissions or collections or overhead, by whatever name known.

 

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1.16     “Regulatory Approval” in a country means any and all approvals (including price and reimbursement approvals), licenses, registrations, or authorization of any governmental agency, necessary for the manufacture, use, storage, import, transport, and/or sale of a Licensed Product in such country.

 

1.17     “Research Collaboration” means the research activities undertaken by the parties in accordance with the Research Plan as set forth in Annex A hereto.

 

1.18     “Sublicense”, “Sublicense Agreement” and “Sublicensee” shall mean, and include, without limitation, any relationship in which LPT grants a third party a license, option, right of first refusal, or other such right under any of the licenses granted by AERES to LPT under this Agreement for the purpose of allowing such third party to develop and commercialize one or more Licensed Products.

 

1.19     “Valid Claim” shall mean a claim in any unexpired issued patent within the Licensed Patent Rights or AERES IP which has not been held invalid by a non-appealed or unappealable decision by a court or other appropriate body of competent jurisdiction.

 

ARTICLE II - Research Collaboration

 

2.1       Upon the execution of this Agreement and the receipt from LPT of the necessary materials and information as specified in Paragraph 2.2, below, AERES will undertake the humanization of LPT’s Sphingomab™ antibody in accordance with the Research set forth in Annex A hereto.  The Research Plan may be amended as mutually agreed to by the parties.  The parties agree to use commercially reasonable efforts to perform their respective responsibilities under the Research Collaboration.

 

2.2       Under the Research Plan, AERES shall provide the following biological materials, data, information, and reports to LPT (collectively, the “AERES Deliverables”):

 

(i)        [Gene expression vector inserts incorporating Sphingomab™ heavy chain and light chain CDRs, one or more (if more than one is made by AERES) of each of (a) and (b) below:]

 

(a)        [Sphingomab™ human heavy chain framework region gene insert (but not the heavy chain expression vector) made by replacing the original human CDRs in the human heavy chain framework region with the Sphingomab mouse CDRs;] and

 

(b)        [Sphingomab™ human light chain framework region gene insert (but not the light chain expression vector) made by replacing the original human CDRs in the human light chain framework region with the Sphingomab mouse CDRs;]

 

(ii)       All data and reports relevant to the humanization of Sphingomab™ including, but not limited to data on antigen binding and expression levels.

 

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(iii)      Final written reports setting forth in reasonable detail the results of AERES’s humanisation of LPT antibody Sphingomab™ including, without limitation, the structural and synthesis information (including, but not limited to, the DNA and amino acid sequence information) for all Humanised Antibodies.

 

2.3       After the Effective Date, LPT shall, at its expense and without charge to AERES, deliver to AERES at least one cell line that produces LPT’s Sphingomab™ antibody and such LPT know-how including related technical information as sufficient (in the reasonable judgment of both parties) to enable AERES to carry out its humanization obligations under this Agreement (the “LPT Deliverables”).   The LPT Deliverables shall be deemed to be Confidential Information of LPT; provided, however, that the obligations hereunder of non-use and non-disclosure related to any LPT Deliverable shall continue for so long as such LPT Deliverable remains Confidential Information.  The transfer from LPT to AERES of the cell line(s) producing LPT’s Sphingomab™ antibody is solely for the purpose of AERES conducting its humanization obligations under this Agreement, and for no other purpose, and AERES shall hold the LPT Deliverables in strict confidence.  AERES shall maintain within its sole possession and control the cell lines producing LPT’s Sphingomab™ antibody, Sphingomab™ antibody expressed from such cell line(s), and any vectors containing LPT’s Sphingomab™ antibody.  Notwithstanding anything to the contrary herein, except for the purpose of carrying out the activities specified in the Research Plan, AERES will not for its own account or for the benefit of a third party propagate, culture, express, produce, distribute, transfer, or sell any LPT Deliverable or any product or material derived therefrom for any purpose whatsoever without the prior written consent of LPT.

 

2.4       AERES shall maintain an appropriate, secure work site for conducting its activities under the Research Plan.  AERES shall cause its research teams performing the activities under the Research Plan to keep detailed contemporaneous records and data in connection with the Research Plan, and to prepare reports detailing work to date, which shall be furnished to LPT in a timely manner upon completion of each research milestone specified in the Research Plan or as otherwise agreed between the parties.  AERES shall permit duly authorized employees of LPT to have access to AERES’s laboratories from time to time at mutually agreeable times and upon reasonable notice.  Any AERES personnel performing work pursuant to the Research Plan shall be obligated under his/her terms and conditions of employment to (i) assign his/her entire worldwide right, title, and interest in and to any discovery, invention, improvement, or technological advance, including any AERES Invention, and any associated intellectual property, including any AERES IP, to AERES and (ii) comply at all times with the confidentiality obligations imposed on AERES under this Agreement.

 

2.5       Upon completion of its research activities hereunder or the earlier termination thereof in accordance with the terms hereof, AERES shall provide to LPT samples of all Humanised Antibodies and cell lines expressing the same, as agreed to by the parties, and AERES shall issue a final written report to LPT.  The final written report shall set forth in reasonable detail the results of AERES’ humanisation of LPT antibody [XYZ] including, without limitation, the structural and synthesis information (including, but not limited to, the DNA and amino acid sequence information) for all Humanised Antibodies.

 

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2.6       All worldwide right, title, and interest in Humanised Antibodies, LPT Inventions and LPT IP shall belong solely to LPT. At the request of LPT, AERES shall execute such documents as LPT may reasonably request in order to reflect LPT’s ownership of Humanized Antibodies, LPT Inventions and LPT IP , and to cooperate with and assist LPT in all material respects with regard to LPT’s efforts to register LPT’s rights in and to the Humanised Antibodies, LPT Inventions and LPT IP.  AERES shall maintain, within its sole possession and control, samples of Humanized Antibodies, samples of any vectors containing Humanized Antibodies, and samples of cell lines producing Humanized Antibodies, and AERES shall not distribute, transfer, or sell any such Humanized Antibodies, vectors, or cell lines (or any AERES Deliverable) to any third party for any purpose whatsoever without the prior written consent of LPT.

 

2.7       Notwithstanding anything to the contrary herein, AERES retains all worldwide right, title, and interest in the Licensed Patent Rights and AERES IP used or developed in the performance of AERES’s obligations under this Agreement.  LPT is granted (under Paragraph 4.1, below) a limited license to use any vectors and sequences included in the AERES IP only insofar as such vectors and sequences are used in conjunction with the expression of LPT’s Sphingomab™ antibody and Humanized Antibodies derived therefrom by AERES subject to the terms of this Agreement.  AERES shall not, except in the event of termination of this Agreement by AERES pursuant to Paragraphs 8.4, 8.5 or 8.6 hereof, exercise any of its proprietary rights arising hereunder or otherwise restrict LPT from commercializing any Humanized Antibody produced hereunder in any manner.  All AERES Inventions shall be owned by AERES and shall be deemed to be included in the AERES IP and the Licensed Patent Rights, as applicable.

 

ARTICLE III - Payments for the Research Collaboration

 

3.1       LPT shall pay to AERES for undertaking to perform the humanization work pursuant to the Research Collaboration the sum of [***                    ] United Kingdom Pounds [***                ] (the “Initial Payment”).  The Initial Payment is non-refundable and shall be made within thirty (30) days after the Effective Date.

 

3.2       LPT will pay AERES in United Kingdom Pounds for its research efforts carried out in accordance with the Research Plan the research milestone payments (the “Research Milestone Payments”) as set forth in the cost schedule attached as Annex B within thirty (30) days following the documented completion of, and delivery by AERES of the AERES Deliverables and LPT’s receipt of an invoice from AERES for, each research milestone specified in Annex A (whether the applicable milestone is achieved by AERES or any of its Affiliates or consultants).  The Initial Payment and the Research Milestone Payments shall be paid by wire transfer in United Kingdom Pounds (UK£) within thirty (30) days of the date of invoice by wire transfer to the account of AERES Biomedical Ltd. at [***                                                         ], or such other bank and/or account as may be notified to LPT by AERES from time to time, and the transaction identified as “Agreement dated [Effective Date] between AERES Biomedical Ltd. and LPT”.

 

***CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.

 

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3.3       In the event that LPT does not agree that any one of the Research Milestones has been met, LPT shall notify AERES within ten (10) Business Days from the date of delivery of the materials or written report required by said Milestone.  LPT shall be deemed to have accepted a particular AERES Deliverable unless it notifies AERES of any defect or non-conformity within ten (10) Business Days after it receives the particular AERES Deliverable.   On receipt of any such notification, LPT and AERES will each use best efforts to reach agreement on the clarification and redefinition of the Milestone(s) and (if applicable) corresponding cost schedule.  In the event of a dispute arising under this Paragraph 3.3, LPT shall pay the disputed amount to AERES and payment so made will be without prejudice to either party’s right to seek resolution of the dispute under Paragraph 11.13, below.

 

3.4       Except as otherwise expressly provided herein or agreed to by the parties in writing, all payments hereunder shall be made free and clear of and without deduction or deferment in respect of any demand, set-off, counterclaim, or other dispute, and so far as is legally possible, such payment shall be made free and clear of any taxes payable on said payments imposed by or under the authority of government or any public authority, and, in particular, but without limitation where any sums due to be paid to AERES hereunder are subject to any withholding or similar tax, LPT shall pay such additional amount as shall be required to ensure that the net amount received by AERES hereunder will equal the full amount which would have been due to AERES hereunder had no such tax been imposed or required by law to be withheld, unless said tax is withheld for the benefit of AERES.  LPT and, without prejudice to the foregoing, AERES shall use their best endeavours to do all such lawful acts and to sign all such lawful documents as will enable LPT to take advantage of any applicable legal provision or any double taxation treaty with the object of paying the sums due AERES without imposing or withholding any tax. However, as of the Effective Date, sales made outside the EU do not attract any UK sales tax (i.e., they are classified as “VAT Exempt” in respect of UK Value Added Tax) while, aside from UK Corporation Tax payable by AERES which, for the sake of clarity, is not rechargeable to LPT under this Paragraph 3.4, AERES is not aware of any prospective change to the VAT Exempt status or any withholding or other tax presently payable on sales to the USA.

 

ARTICLE IV - License Grant and Payments

 

4.1       AERES hereby grants to LPT (i) a non-exclusive worldwide sublicense, with the right to grant further Sublicenses, under the Licensed Patent Rights to make, have made, use, import, offer for sale, and/or sell Licensed Products; and (ii) an exclusive worldwide license, with the right to grant Sublicenses, under the AERES IP to make, have made, use, import, offer for sale, and/or sell Licensed Products.

 

4.2       Granting of Sublicenses

 

(i)        LPT, without being required to obtain the consent of AERES, shall be entitled to grant further non-exclusive Sublicenses to its Licensees to make, have made, use, import, offer for sale, and/or sell Licensed Products.

 

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(ii)       LPT undertakes upon the execution of any Sublicense Agreement under sub-clause 4.1 (i) above promptly to advise AERES of the identity of the Sublicensee and nature of the rights so licensed.

 

4.3       The following arrangements shall not require the prior consent of AERES:

 

(i)        The appointment of any person as agent or distributor to market, sell, use, or otherwise dispose of the Products in any part of the world.

 

(ii)       The subcontracting of manufacture of Products by Licensee.

 

4.4       The following arrangement shall require the prior written consent of AERES:

 

(i)        LPT may authorize a Licensee to grant further sublicenses under the Licensed Patent Rights in respect of Licensed Products only with the prior written consent of AERES such consent shall not unreasonably be withheld but shall be subject to said Licensee also obtaining the consent of MRC.

 

4.5       Regulatory Milestone Payments.  In consideration of the rights, privileges, and licenses granted herein, LPT shall pay to AERES in United States Dollars (US Dollars) each of the following regulatory milestone payments in respect of each Designated Antibody (“Regulatory Milestone Payments”):

 

(i)        AERES will receive either: (a) [***                        ] of LPT’s negotiated Regulatory Milestone Payment (if any) receivable from a development partner or Licensee, on first filing of a US IND or equivalent in any country; or [***                            ] US Dollars [***                                  ]; or: (b) [***                            ] US Dollars [***                              ], whichever is the greater of (a) or (b);

 

(ii)       AERES will receive either: (a) [***                          ] of LPT’s negotiated Regulatory Milestone Payment(s) (if any) receivable from a development partner or Licensee, subsequent to filing of a US IND or equivalent in any country and up to or on initiation of the first Phase II clinical trial in any country; or [***                                            ] US Dollars [***                          ]; or: (b) [***                                                      ] US Dollars [***                            ], whichever is the greater of (a) or (b);

 

(iii)      AERES will receive either: (a) [***                                                        ] of LPT’s negotiated Regulatory Milestone Payment(s) (if any) receivable from a development partner or Licensee, subsequent to the filing of a US BLA or equivalent in any country and up to or on initiation of the first Phase III clinical trial in any country; or [***                                        ] US Dollars [***                                                    ] or: (b) [***                                ] US Dollars [***                                            ], whichever is the greater of (a) or (b);

 

***CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.

 

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(iv)      AERES will receive either: (a) [***                                    ] of LPTs’ negotiated Regulatory Milestone Payment (if any) from a development partner or Licensee on the first approval of a US BLA or equivalent in any country; or [***                               ] US Dollars [***                                    ], or: (b) [***                                                        ] US Dollars [***                                      ], whichever is the greater of (a) or (b).

 

Each of the above Regulatory Milestone Payments shall become due and payable forthwith upon the corresponding payment becoming due and payable to LPT by a development partner or Licensee or, where no such payment is payable to LPT, on LPT first receiving notification from the relevant regulatory authority of the granting of the Regulatory Approval upon which it is contingent, as specified above in this Clause 4.2.  It is understood and agreed that each of the above Regulatory Milestone Payments shall be due only one time with respect to any Designated Antibody.

 

4.6       Royalties.  In consideration of the rights, privileges and license granted herein, LPT shall pay to AERES on a country-by-country, Licensed Product-by-Licensed Product basis an earned royalty of [***                       ] of the Net Sales of Licensed Products, provided that there is at least one Valid Claim within the Licensed Patent Rights in such country that covers the Licensed Product; if not, the earned royalty shall be to [***                        ] of Net Sales in such country. All royalties payable by LPT to AERES shall be paid on a country-by-country basis from the date of the first Commercial Sale by LPT, its Affiliates, and/or Licensees of each Licensed Product in each country until the date which is the later of: (i) the expiration of the last to expire Valid Claim within the Licensed Patent Rights, a which claim covers the manufacture, use, or sale of the applicable Licensed Product in said country; or (ii) [***          ] years after the first Commercial Sale of the applicable Licensed Product in said country if only covered by AERES IP (the “Royalty Period”); provided, however, during any portion of the Royalty Period that there is no Valid Claim in such country, the royalty rate shall be reduced to [***                  ].  On a country-by-country basis and on a Licensed Product-by-Licensed Product basis, upon the scheduled expiration of the obligation to pay royalties with respect to the sale of such Licensed Product in such country, LPT shall have a fully paid-up, royalty free, perpetual and irrevocable license, with the right to grant Sublicenses, under the AERES IP to make, have made, use, import, offer for sale and/or sell Licensed Products in said country.

 

4.7       Limitations.  The following limitations shall apply with respect to royalties payable by LPT to AERES pursuant Paragraph 4.3, above:

 

(i)        Sales between LPT and its Affliliates and/or Licensees shall not be subject to a royalty, but in such cases the royalty specified in Paragraph 4.3, above, shall be calculated upon LPT’s, its Affiliates and/or Licensees’ Net Sales to independent third parties in arm’s-length transactions. An agreement between LPT and an Affiliate shall not be a sublicSublicense under the Licensed Patent Rights. The obligation to pay a royalty to AERES under this Article is imposed only

 

***CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.

 

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once with respect to the same unit of Licensed Product regardless of the number of Valid Claims concerning the same.

 

(i)    [***].  In the event that [***] pays [***] as consideration for [***] or [***] where, [***], under Paragraph [***] will be (i) [***] or (ii) where the [***] is [***] shall apply country by country only where and to the extent that such [***].

 

(ii)   Notwithstanding anything to the contrary herein, it is understood and agreed that the [***] that is equal to [***] as specified in the following formula:

 

[***]

 

[Where [***] is the [***] or, if [***] generally shall apply.]

 

4.8       LPT agrees that any Sublicenses under the Licensed Patent Rights granted by it shall provide that the obligations owed by LPT to AERES under Articles IV, V, VII, VIII and X of this Agreement (save for Paragraphs 8.9 and 8.10, which apply only to LPT) shall be reflected in the wording of the Sublicense with obligations no less onerous for the Sublicensee than those set forth in this Agreement with respect to LPT which LPT shall use its best endeavours to enforce to the benefit of AERES in the event of any breach thereof. In particular LPT shall ensure that AERES can monitor and enforce payment of all royalties due to it in consequence of this Agreement.

 

4.9       If, during the Term (defined in Paragraph 7.1) of this agreement, MRC grants a license to a third party to the patents and patent applications set forth in Exhibit A (each a “Third-Party License Agreement”) at a lower royalty rate than is payable by AERES to MRC under the terms of the license for Winter Patents and Sub-license for Boss Patents, dated X, by and between the MRC (as licensor) and AERES (as licensee), or under another substantial term more favorable to such third party than the corresponding term of this Agreement, then at LPT’s

 

***CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.

 

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sole option, the parties hereto shall amend this Agreement so that the Royalty rate payable hereunder, or other corresponding term, is the same as the royalty rate or corresponding term set forth in the Third-Party License Agreement; provided, however, that if LPT opts to amend this Agreement, and if such Third-Party License Agreement imposes upon the licensee any other obligation (including any restriction as to product or territory) which is associated with the licensee’s operations as licensee and which is more onerous than any obligation of corresponding nature on the part of Licensee under this Agreement, then this Agreement shall be amended to require that LPT shall take on such obligation in order to obtain the amendment of this Agreement to include the more favorable term.

 

4.10     LPT agrees to forward to AERES in a timely manner a copy of any and all fully executed agreements entered into with any Licensee that constitute a Sublicense under this Agreement, and further to forward to AERES annually a copy of such reports (or the relevant portions thereof) received by LPT from its Licensees during the preceding twelve (12) month period under the Sublicenses as shall be pertinent to a royalty accounting under any such Sublicense agreements.

 

4.11     The above Regulatory Milestone Payments and royalties due shall be paid by LPT to AERES in US Dollars (USD) by wire transfer to the account of AERES at [***                                                                                                                    ], or such other bank and/or account as may be notified to LPT by AERES from time to time.

 

4.12     If a sum payable under this Agreement shall be overdue for thirty (30) days, LPT shall pay AERES interest on the sum outstanding at the rate of [***                      ] per annum above the base rate of the Royal Bank of Scotland plc applying and calculated on a daily basis from the date that payment became due in respect of said sum; provided however, that if such interest rate shall be in excess of that allowed by applicable law, then the highest rate permitted by law shall apply. The payment of such interest shall not foreclose AERES from exercising any other rights it may have as a consequence of the lateness of any payment.

 

4.13     The aggregate amount of the Net Sales used for computing the amounts payable hereunder shall be computed in U.S. Dollars, and all royalty payments shall be made in U.S. Dollars.  For purposes of determining the amount of payments due, the amount of the Net Sales of the Licensed Products in any foreign currency shall be computed by converting such amounts into U.S. Dollars at the prevailing commercial rate of exchange for purchasing same quoted in The Wall Street Journal, New York edition, on the last Business Day of the period with respect to which such payment is payable hereunder.

 

ARTICLE V - Reports and Records

 

5.1       LPT shall keep full, true and accurate books of account containing all particulars that may be necessary for the purpose of showing the amounts payable to AERES pursuant to Paragraphs 4.5, 4.6 and 4.7 above, and the accuracy of the reports made to AERES hereunder.

 

***CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.

 

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Such records shall be retained by LPT for five (5) years following the end of the calendar year to which they pertain.   Upon thirty (30) days advance notice to LPT, AERES shall have the right to direct an independent, certified public accountant selected by AERES and reasonably acceptable to LPT to inspect LPT’s books of account no more frequently than once per year during LPT’s normal business hours for the sole purpose of verifying the accuracy of the reports made to AERES pursuant to Paragraph 5.2, below. AERES shall be responsible for the costs of any such inspection, except in the event that the results of the inspection reveal a discrepancy to be corrected in AERES’s favour of [***                          ] or more for the period under inspection, then the entire costs of such inspection shall be paid by LPT.  Any such discrepancies will be promptly corrected by a payment or refund, as appropriate.

 

5.2       LPT, within ninety (90) days after June 30 and December 31 of each year after Commercial Introduction, shall deliver to AERES true and accurate reports, giving such particulars of the business conducted by LPT, its Affiliates and Licensees during the preceding half year as shall be pertinent to a royalty accounting hereunder.  These reports shall include at least the following:

 

(a)                        number of Licensed Products manufactured and sold;

 

(b)                       total billings for Licensed Products sold on a country-by-country basis;

 

(c)                        deductions applicable as provided in Paragraph 1.15, above;

 

(d)                       the total royalties due;

 

(e)                        the names and addresses of all Affiliates and Licensees of LPT under this Agreement.

 

5.3       With each such report submitted, LPT shall pay to AERES the royalties due and payable under this Agreement. If no royalties shall be due, LPT shall so report.

 

ARTICLE VI - Warranties and Representations

 

6.1       As of the Effective Date, each of LPT and AERES hereby represents and warrants to the other party hereto as follows:

 

(i)        it is a corporation or entity duly organized and validly existing under the laws of the state, country or other jurisdiction of its incorporation or formation;