EXHIBIT 10.3
**Note:
Confidential Information has been omitted and filed
separately with the Securities and Exchange Commission
CO-DEVELOPMENT AGREEMENT
Dated as of November 21, 2004
By and Between
COGENCO INTERNATIONAL, INC.
a Colorado Corporation
and
DMI BIOSCIENCES, INC.
a Colorado Corporation
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CO-DEVELOPMENT AGREEMENT
This
Co-Development Agreement ("Agreement"), effective on November 21,
2004
("Effective Date"), is by and
between DMI BioSciences, Inc., having a place of
business at 3601 South
Clarkson Street, Suite 420, Englewood, Colorado
80113-3948 ("DMI") and
Cogenco International, Inc., having a place of business
at 4085 South Dexter Street,
Englewood, Colorado 80113 ("COGENCO").
WHEREAS, DMI
owns Intellectual Property relating to the use of [**see
cover
page note] for the treatment
of asthma in humans;
WHEREAS, DMI
wants to research, develop and commercialize product(s)
comprising or utilizing a
[**see cover page note] for the treatment of asthma in
humans;
WHEREAS, DMI
wants to screen [**see cover page note] to select the
[**see
cover page note] or [**see
cover page note] for the treatment of asthma in
humans;
WHEREAS, COGENCO
wants to fund DMI's screening of [**see cover page note]
and DMI's research,
development and commercialization of product(s)
comprising
or utilizing a [**see cover
page note] for the treatment of asthma in humans;
and
WHEREAS, DMI and
COGENCO signed a Term Sheet on August 23, 2004, setting
forth certain agreed terms to
be included in this Agreement.
NOW THEREFORE,
in consideration of the foregoing and the mutual
covenants,
terms, conditions and
agreements set forth below, the parties agree as
follows.
Article 1. Definitions
As used herein,
the following capitalized terms have the meanings set
forth
below:
1.1 "Affiliate" means any corporation,
firm, partnership or other entity
that, directly or indirectly, controls, is controlled by, or is
under
common control with, DMI or COGENCO. For the purposes of
this
Agreement, "control" or "controlled" means possession of the power
to
direct, or cause the
direction of, the management and policies of a
corporation, firm, partnership, or other entity, whether through
the
ownership of equity, status as a general partner, by contract
or
otherwise.
1.2 "Advisory Committee" means the
Advisory Committee described in Article
9.
1.3 "Backup Candidate" has the meaning
given in Section 3.2.
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1.4 "Calendar Quarter" means each
three (3)-month period ending on the
last day of March, June, September and December of a given
year.
1.5 "Clinical Trials" means all human
clinical trials conducted with a
Product, including Phase 1 through Phase 4 human clinical
trials.
1.6 "Clinical Trials Plan" means a
Clinical Trials Plan as adopted and
amended from time to time by the Advisory Committee as described
in
Article 9. Each Clinical Trials Plan will be a comprehensive plan
for
performing all Clinical Trials necessary to obtain Regulatory
Approval
of Product(s) in the Territory and will include a budget, a
schedule
of deadlines and time periods for accomplishing all
necessary
activities, procedures for ensuring compliance with all regulatory
and
quality guidelines and requirements, and all other
relevant
information.
1.7 "Commercially Reasonable And
Diligent Efforts" means, with respect to
research, development and commercialization of a Product, a
party's
use of best efforts and resources consistent with the exercise
of
prudent scientific and business judgment, as applied to
other
pharmaceutical products of similar potential, market size
and
competitive
environment.
1.8 "Commercialization Plan" means a
Commercialization Plan adopted and
amended from time to time by the Advisory Committee as described
in
Article 9. Each Commercialization Plan will be a comprehensive
plan
for the commercialization of Product(s) in the Territory and
will
include a budget, a schedule of deadlines and time periods
for
accomplishing all necessary activities (including a deadline for
the
First Commercial Sale of Product(s) that have received
Regulatory
Approval), marketing plans, descriptions of promotional
activities,
sales objectives, branding strategies, and all other
relevant
information.
1.9 "Deductible Expenses" for a
Product are (i) all of the costs of
manufacturing or purchasing the Product, (ii) all of the costs
of
**distributing, shipping and selling the Product, (iii) all of
the
costs of marketing, promoting and advertising the Product,
(iv)
returns and allowances, (v) all taxes, including income taxes,
and
insurance, and (vi) reasonable Overhead. "Deductible Expenses" do
not
include the costs of screening, research, development,
Preclinical
Studies,
Clinical Trials, obtaining Regulatory Approval of the
Product, legal expenses (attorneys fees, filing fees,
disbursements,
expert witness fees, etc.), amounts paid as a result of a
settlement
or order of court (judgments) in connection with a claim or
lawsuit,
or any portion of these costs.
1.10 "[**see
cover page note]" means an unsubstituted [**see cover
page
note], a substituted [**see cover page note] or a [**see cover
page
note] derivative. [**see cover page note] include substituted
and
unsubstituted 2,5-[**see cover page note] and derivatives
of
2,5-[**see cover page note]. Other names for 2,5-[**see cover
page
note] are 2,5-[**see cover page note], [**see cover page note],
[**see
cover page note] and [**see cover page note].
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1.11 "DMI" means
DMI BioSciences, Inc. DMI is also referred to herein as
a
"party". Collectively, DMI and COGENCO are sometimes referred as
the
"parties".
1.12 "Drug
Approval Application" means an application for
Regulatory
Approval required for commercial sales of a Product, such as an
NDA.
1.13 "Effective
Date" is the date first written above.
1.14 "COGENCO"
means Cogenco International, Inc. COGENCO is also
referred
to herein as a "party". Collectively, DMI and COGENCO are
sometimes
referred as the "parties".
1.15 "FDA" means
the United States Food and Drug Administration.
1.16 "Field"
means the use of Product(s) to treat asthma in humans.
1.17 "First
Commercial Sale" means the first sale of each Product in
a
country of the Territory following Regulatory Approval of the
Product
in that country, or if no such Regulatory Approval or
similar
marketing approval is required, the date upon which each Product
is
first commercially available in a country.
1.18 "GCP" means
the E6 Guideline for Good Clinical Practice of the ICH.
1.19 "GLP" means
the current Good Laboratory Practice regulations
promulgated by the FDA, published at Part 58 of Title 21 of the
United
States Code of Federal Regulations, as amended from time to time,
and
such equivalent regulations or standards of countries outside
the
United States as may be applicable to activities conducted
hereunder.
1.20 "GMP" means
the current Good Manufacturing Practice regulations
promulgated by the
FDA, published at Part 210 et seq. and Parts
600-610 of Title 21 of the United States Code of Federal
Regulations,
as amended from time to time, and such equivalent regulations
or
standards of countries outside the United States as may be
applicable
to activities conducted hereunder.
1.21 "Gross
Sales Amount" means all monies and the fair market value of
all
other consideration (including payment in kind, exchange or
other
form) received with
respect to Sales of a Product.
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1.22 "ICH" means
International Conference on Harmonisation of Technical
Requirements for Registration of Pharmaceuticals for Human
Use.
1.23 "IND" means an
Investigational New Drug Application satisfying the
requirements of Part 312 of Title 21 of the United States Code
of
Federal Regulations filed with the FDA to commence human
clinical
testing of any Product in the United States or any similar filing
with
a regulatory authority of another country to commence human
clinical
testing of any Product in that country.
1.24
"Indication" means a human disease or condition, an
important
manifestation of a human disease or condition, or a symptom
associated
with a human disease or condition for which use of a Product
is
indicated, as would be identified in the Product's label
under
applicable FDA regulations or the foreign equivalent
thereof.
1.25 "Indirect
Costs" means all of the costs incurred in performing
those
activities necessary for specific Preclinical Studies or
Clinical
Trial(s) to take place, such as procurement or manufacture
of
Product(s), formulation and analytical studies, safety
assessments,
and preparation of documentation required by regulatory
authorities.
1.26
"Intellectual Property" means: (i) inventions, know-how,
trade
secrets, other Proprietary Information, works of authorship,
and
trademarks and other designations of origin; (ii) all rights
and
privileges therein throughout the world; and (iii) all
physical
embodiments thereof.
1.27 "Lead
Candidate" has the meaning given in Section 3.2.
1.28 "Major
Market Countries" means [**see cover page note].
1.29 "NDA" means
a New Drug Application satisfying the requirements of
Title 21 of the United States Code of Federal Regulations filed
with
the FDA to obtain Regulatory Approval for a Product in the
United
States or any similar filing with a regulatory authority of
another
country to market any Product in that country.
1.30 "Overhead"
means costs incurred by a party, or for its account,
which
are attributable to a party's supervision, services, occupancy
costs,
corporate bonus, and its payroll, information systems, human
relations
or purchasing functions and which are allocated based on
space
occupied, headcount or other activity-based method
consistently
applied by the party.
1.31 "Phase 1
Trial" means a human clinical trial in any country that
is
conducted to initially evaluate the safety and/or
pharmacological
effect of a Product in human subjects or that would otherwise
satisfy
the requirements of Part 312 of Title 21 of the United States Code
of
Federal Regulations or its foreign equivalent.
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1.32 "Phase 2
Trial" means a human clinical trial in any country that
is
conducted to initially evaluate the effectiveness of a Product for
a
particular Indication in patients with the Indication or that
would
otherwise satisfy the requirements of Part 312 of Title 21 of
the
United States Code of Federal Regulations or its foreign
equivalent.
1.33 "Phase 2a
Trial" means a limited Phase 2 Trial typically conducted
in
up to 50 patients to demonstrate the effectiveness of a Product for
an
Indication.
1.34 "Phase 2b
Trial" means a Phase 2 Trial, the results of which, alone
or
in combination with the results of the Phase 2a Trial,
would
demonstrate the effectiveness of a Product for a particular
Indication
in patients with the Indication or that would otherwise satisfy
the
requirements of Part 312 of Title 21 of the United States Code
of
Federal Regulations or its foreign equivalent.
1.35 "Phase 3
Trial" means a controlled human clinical trial in any
country, the results of which could be used to establish safety
and
efficacy of a Product as a basis for a marketing approval
application
submitted to the FDA, or that would otherwise satisfy the
requirements
of Part 312 of Title 21 of the United States Code of
Federal
Regulations or its foreign equivalent.
1.36 "Phase 4
Trial" means a human clinical trial in any country
initiated
after Regulatory Approval in that country within the approved
product
labeling.
1.37
"Preclinical Studies" means, with respect to a Product, one or more
of
the following: (i) synthesis and formulation; (ii) physical
and
chemical properties, (iii) in vitro activity, (iv) in vivo activity
in
animals, (v) metabolism, absorption and pharmacokinetics data
from
animal studies, (vi) toxicology data, and (vii) similar studies
that
are typically performed before first administration of a Product
to
humans.
1.38 "Prime
Rate" means that prime interest rate specified in the
Wall
Street Journal, Colorado Edition, for the date
specified.
1.39
"Product(s)" means any pharmaceutical product(s) comprising
or
utilizing a Selected Candidate which is(are) used for treatment
of
asthma in humans.
1.40 "Profits"
means Gross Sales Amount for a Product less all
Deductible
Expenses for the Product.
1.41
"Proprietary Information" means all business and technical
information
of a confidential and proprietary nature, including ideas,
inventions,
discoveries, trade secrets, know-how, protocols, research
plans,
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development plans, compilations, methods, techniques, processes,
data,
test results, formulas, formulations, computer programs,
reports,
other works of authorship, business plans, sales forecasts,
marketing
information, pricing and financial information, customer
lists,
branding strategy, and planned or pending acquisitions
and
divestitures, and all physical embodiments thereof, including
disks,
computers, software, printouts, laboratory notebooks, writings,
notes,
documentation, records, reports, sketches, plans,
memoranda,
compilations, devices, prototypes, instruments, blueprints,
diagrams,
specifications, operating instructions, written
descriptions,
photographs, videos, chemicals, biological materials,
compositions,
lists, invention disclosures, and patent applications.
1.42 "Regulatory
Approval" means all approvals, licenses, registrations
and
authorizations by the appropriate government entity or entities in
a
country or region (such as the European Union) necessary for
the
commercial sale of a Product in that country or region,
including
where applicable, approval of labeling, pricing, reimbursements
and
manufacturing. "Regulatory Approval" in the United States
for
Product(s) shall mean final approval of an NDA pursuant to Part 314
of
Title 21 of the United States Code of Federal Regulations
permitting
marketing of the Product in interstate commerce of the United
States.
"Regulatory Approval" in the European Union for Product(s) shall
mean
final approval of a Marketing Authorization Application
pursuant
Council Directive 75/319/EEC, as amended, or Council
Regulation
2309/93/EEC, as amended.
1.43 "Research
And Development Plan" means a Research And Development
Plan
as adopted and amended from time to time by the Advisory Committee
as
described in Article 9. Each Research And Development Plan will be
a
comprehensive plan for the research, development and
Preclinical
Studies of Product(s) in the Territory and will include a listing
and
prioritization of projects, objectives and goals, a budget, a
schedule
of deadlines and time periods for accomplishing all
necessary
activities, procedures for ensuring compliance with all regulatory
and
quality guidelines and requirements, and all other
relevant
information.
1.44 "Revenues"
means (i) Profits and (ii) those payments received from
licensees and sublicensees of DMI and/or COGENCO, including
licensing
fees, sublicensing fees, milestone payments and
royalties.
1.45 "Sales"
means sales of each Product in the Territory by either
party
to Third Parties in bona fide arms-length transactions.
1.46 "Screening
Plan" means a Screening Plan adopted and amended from
time
to time by the Advisory Committee as described in Article 9.
Each
Screening Plan will be a comprehensive plan for the screening
of
[**see cover page note] to select the Selected Candidates for
the
treatment of asthma in humans and will include a listing
and
prioritization of projects, objectives and goals, a budget, a
schedule
of deadlines and time periods for accomplishing all
necessary
activities, procedures for ensuring compliance with all regulatory
and
quality guidelines and requirements, and all other
relevant
information.
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1.47 "Selected
Candidates" has the meaning given in Section 3.2.
1.48 "Term
Sheet" shall mean that term sheet setting forth certain
agreed
terms to be included in this Agreement which was executed by
the
parties on August 23, 2004.
1.49 "Territory"
means the world.
1.50 "Third
Party" means an entity other than DMI or COGENCO. A Third
Party
may be an individual, corporation, firm, partnership or other
entity.
Third Parties include Affiliates.
1.51 "USA" or
"United States" shall mean the United States Of America,
its
possessions, territories, and protectorates (including
the
Commonwealth of Puerto Rico), and the District Of
Columbia.
Article 2. Scope And Goals Of The Development
2.1 It is the intent of DMI and
COGENCO to screen [**see cover page note]
and to research, develop, obtain Regulatory Approval for,
and
commercialize Product(s) for the Field within the Territory, as
more
particularly set forth herein. Therefore, DMI and COGENCO
agree,
pursuant and subject to the terms of this Agreement, to
cooperate
with, and provide reasonable support for, each other in
developing
Product(s), with the goal of obtaining Regulatory Approval
for
Product(s) as soon as reasonably practicable for commercial
marketing
and sale in the Territory.
2.2 In particular, it is a high
priority, and shall be the first priority,
of the parties to develop and commercialize Product(s) for the
Field
in the Major Market Countries. Therefore, DMI and COGENCO
agree,
pursuant and subject to the terms of this Agreement, to
cooperate
with, and provide reasonable support for, each other in
developing
Product(s), with the goal of obtaining Regulatory Approval as soon
as
reasonably practicable for the commercial marketing and sale
of
Product(s) in the Major Market Countries and then in other
countries
of the Territory.
2.3 It is also the intent of DMI and
COGENCO to share the Revenues
obtained as a result of the commercialization, sales, licensing
and
sublicensing of Product(s) for the Field within the
Territory.
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Article 3. DMI's Responsibilities
3.1 Subject to the supervision of the
Advisory Committee as described in
Article 9, DMI shall be responsible for managing,
directing,
supervising and coordinating the screening of [**see cover page
note]
and the research, development, Clinical Trials and
commercialization
of Product(s) for the Field in the Territory.
3.2 DMI shall be responsible for
conducting the screening of the [**see
cover page note] in accordance with the Screening Plan as adopted
and
amended from time to time by the Advisory Committee. Based on
the
screening results, DMI will select the [**see cover page note]
which
shows the most promise for being a successful treatment for asthma
in
humans (referred to herein as the "Lead Candidate"). If the
screening
identifies more than one [**see cover page note] that would
be
suitable for the treatment of asthma in humans, DMI will select
a
second [**see cover page note] as a backup compound (referred
to
herein as the "Backup Candidate"). The Lead Candidate and the
Backup
Candidate are referred to herein collectively as the
Selected
Candidates. DMI shall also recommend to the Advisory Committee
whether
Product(s) containing the Backup Candidate should be developed for
the
Field in conjunction with, or separately from, Product(s)
containing
the Lead Candidate, or if development of Product(s) containing
the
Backup Candidate should be deferred.
3.3 DMI shall be responsible for
conducting research and development for
Products(s) in accordance with the Research And Development Plan
for
the Product(s) as adopted and amended from time to time by
the
Advisory Committee.
3.4 DMI shall be responsible for
conducting all Preclinical Studies for
Products(s) in accordance with the Research And Development Plan
for
the Product(s) as adopted and amended from time to time by
the
Advisory Committee, and any such Preclinical Studies shall be
designed
and conducted so that the results can be used in connection
with
efforts to obtain Regulatory Approval of the Product(s) in at
least
the Major Market Countries.
3.5 DMI shall be responsible for
conducting Phase 1 Trials for Products(s)
in accordance with the Clinical Trials Plan for the Product(s)
as
adopted and amended from time to time by the Advisory Committee,
and
any such Phase 1 Trials shall be designed and conducted so that
the
results can be used in connection with efforts to obtain
Regulatory
Approval of the Product(s) in at least the Major Market
Countries.
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3.6 DMI shall be responsible for
conducting Phase 2 Trials or Phase 2a and
Phase 2b Trials of Product(s). The Phase 2 Trials or Phase 2a
and
Phase 2b Trials shall be conducted in accordance with the
Clinical
Trials Plan for Product(s) as adopted and amended from time to time
by
the Advisory Committee, and the Phase 2 Trials or Phase 2a and
Phase
2b Trials shall be designed and conducted so that the results can
be
used in connection with efforts to obtain Regulatory Approval of
the
Product(s) in at least the Major Market Countries.
3.7 Upon successful completion of
Phase 2 Trials or Phase 2a and Phase 2b
Trials, DMI shall be responsible for conducting Phase 3 Trials
of
Product(s) and shall be responsible for taking the steps
necessary,
and performing the additional work required, to obtain
Regulatory
Approval to market Product(s) for the Field in at least the
Major
Market Countries in accordance with the Clinical Trials Plan
for
Product(s) as adopted and amended from time to time by the
Advisory
Committee.
3.8 After Regulatory Approval of
Product(s), DMI shall be responsible for
commercializing the Product(s) for the Field in at least the
Major
Market Countries in accordance with the Commercialization Plan for
the
Product(s) as adopted and amended from time to time by the
Advisory
Committee. DMI shall also be responsible for
commercializing
Product(s) for which no Regulatory Approval is required in
accordance
with the
Commercialization Plan for the Product(s) as adopted and
amended from time to time by the Advisory Committee.
3.9 DMI shall be responsible for
conducting Phase 4 Trials, if any, for
Product(s) in accordance with the Clinical Trials Plan for
the
Product(s) as adopted and amended from time to time by the
Advisory
Committee.
3.10 DMI shall
be responsible for the manufacture and supply of all
Selected Candidates and all Product(s).
3.11 DMI shall
report to Advisory Committee on the status of the
screening
of the [**see cover page note] and the research, development,
Clinical
Trials and commercialization of the Product(s) in such form,
manner
and frequency as the Advisory Committee may request from time to
time.
Article 4. COGENCO's Responsibilities
4.1 COGENCO agrees to purchase all of
its requirements, if any, of
Selected Candidates and Product(s) from DMI upon
commercially
reasonable terms and conditions to be negotiated in good faith by
the
parties.
4.2 COGENCO agrees to make the
payments provided for in Articles 6 and 7
in a timely manner.
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Article 5. Obligations And Responsibilities Of Both
Parties
5.1 Each party agrees to use
Commercially Reasonable And Diligent Efforts
to perform its obligations hereunder, including screening [**see
cover
page note], researching, developing, performing Clinical Trials
and
commercializing Product(s) for the Field within the Territory,
and
providing funding for all of the foregoing.
5.2 Each party shall be responsible
for adherence to, and compliance with,
all applicable laws, regulatory guidelines and requirements,
and
quality standards for the research, development,
manufacture,
Preclinical Studies, and Clinical Trials it performs and for Sales
of
Product(s) made by it.
5.3 Each party agrees to make
available to the other party all information
produced or obtained by it as a result of performing its
obligations
and responsibilities under this Agreement.
5.4 Each party shall mark all
Product(s) sold by it, and shall cause any
entity authorized by it to sell Product(s) to mark all Product(s)
sold
by that entity, with the applicable patent number(s) in
accordance
with the requirements of applicable laws and regulations in
the
country or countries of manufacture and sale.
Article 6. Upfront And Milestone Payments
6.1 COGENCO will pay DMI a
non-refundable payment of $500,000 no later
than five (5) days after the Effective Date. This payment
represents
reimbursement of some of the research costs incurred by DMI prior
to
the Effective Date.
6.2 COGENCO will also pay DMI a
non-refundable payment of $2,500,000 no
later than five (5) days after the Effective Date.
6.3 COGENCO will also pay DMI a
non-refundable payment of $1,000,000 no
later than five (5) days after the commencement of the first Phase
1
Clinical Trial of a Product suitable for a Major Market
Country.
6.4 COGENCO will also pay DMI a
non-refundable payment of $2,500,000 no
later than five (5) days after the commencement of the first Phase
2a
or Phase 2 Clinical Trial of a Product suitable for a Major
Market
Country.
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6.5 COGENCO will also pay DMI a
non-refundable payment of $5,000,000 no
later than five (5) days after the filing of the first NDA for
a
Product in a Major Market Country.
6.6 COGENCO will also pay DMI a
non-refundable payment of $10,000,000 no
later than five (5) days after the first Regulatory Approval of
a
Product in a Major Market Country.
Article 7. Costs Of Screening, Research, Development
Clinical
Trials And Commercialization Of Product(s)
7.1 COGENCO agrees to pay all of the
costs of the screening of the [**see
cover page note] and of the research, development, Clinical Trials
and
commercialization of all Product(s).
7.2 In particular, COGENCO agrees to
make the following payments to DMI:
(a) Payment of all the
costs for screening of [**see cover page
note], plus an overhead amount to be determined as set forth
in
Subsection (i) of this Section 7.2.
(b) Payment of all the
costs for research and development of
Product(s), plus an overhead amount to be determined as set
forth
in
Subsection (i) of this Section 7.2.
(c) Payment of all the
costs of conducting [**see cover page note],
Colorado, plus an overhead amount to be determined as set
forth
in Subsection (i) of this Section 7.2.
(d) Payment of all the
costs for all Preclinical Studies of
Product(s), including Indirect Costs, plus an overhead amount
to
be determined as set forth in Subsection (i) of this Section
7.2.
(e) Payment of all the
costs for Phase 1 Trials of Product(s),
including Indirect Costs, plus an overhead amount to be
determined as set forth in Subsection (i) of this Section
7.2.
(f) Payment of all the
costs for Phase 2 Trials or Phase 2a and Phase
2b Trials of Product(s), including Indirect Costs, plus
an
overhead amount to be determined as set forth in Subsection
(i)
of this Section 7.2.
(g) Payment of all the
costs for Phase 3 Trials of Product(s),
including Indirect Costs, plus an overhead amount to be
determined as set forth in Subsection (i) of this Section
7.2.
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(h) Payment of all the
costs for Phase 4 Trials, if any, of
Product(s), including Indirect Costs, plus an overhead amount
to
be determined as set forth in Subsection (i) of this Section
7.2.
(i) An overhead
amount, as a percentage of total costs, shall be
established by the Advisory Committee independently for
each
activity for each year during which the activity will be
performed. Factors to be considered by the Advisory Committee
in
establishing the overhead amount include the type of
activity,
the stage of the activity (e.g., whether the activity is
just
beginning or is near completion), whether it is the first
time
that DMI has performed the activity, a realistic and
reasonable
assessment of the commitment of personnel and facilities that
DMI
must make to the activity at each stage, etc. However, in
no
event will the overhead amount be less than DMI's actual
Overhead
plus [**see cover page note] % of [**see cover page note]. If
the
overhead amount established by the Advisory Committee and paid
to
DMI as provided in Subsection (j) of this Section 7.2 is
less
than DMI's actual Overhead plus [**see cover page note] %
of
[**see cover page note], the deficiency will be paid to DMI
as
also provided in Subsection (h) of this Section 7.2.
(j) Payments (a) through (f) shall be
made on a periodic basis to be
determined by the Advisory Committee, but no less than
quarterly.
Each such payment shall be that amount budgeted by the
Advisory
Committee for the upcoming period for activities (a) through
(e),
including the appropriate overhead amount, and each such
payment
shall be made at least fifteen (15) days prior to the
commencement of the upcoming period. Any overage will be
credited
toward the payment for the next period. Any deficiency shall
be
added to the payment for the next period or shall be paid
sooner
if requested by DMI, in which case the payment of the
deficiency
will be made within fifteen (15) days after being requested
by
DMI. Interest shall be paid with respect to any payment or
any
deficiency in any payment not paid within fifteen (15) days
after
being requested by DMI, with the interest rate being 10% over
the
Prime Rate and being assessed from the sixteenth day after
the
request by DMI for payment until the date the payment is
received.
(k)
DMI shall keep such
records, books and accounts showing its use
of the payments specified in Subsections (a) through (f) of
this
Section 7.2 as the Advisory Committee may require.
Article 8. Sharing Of Revenues; Reports And Records
8.1 COGENCO and DMI will share equally
all Profits on Sales of Product(s)
for the Field in the Territory made by either one of them. Payments
of
an equal share (i.e. 50%) of a selling party's Profits shall be
paid
by the selling party to the other party for each Calendar Quarter
in
which Profits are made. Payments shall be due on or before thirty
(30)
days after the last day of a Calendar Quarter in which Profits
are
made. In the case of any delay in the payment, interest at 2% over
the
Prime Rate, assessed from the thirty-first day after the last day
of
the Calendar Quarter until the date the payment is received, shall
be
due. Each party shall be responsible for paying any and all
taxes
levied on account of the payments it receives.
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<PAGE>
8.2 COGENCO and DMI will share equally
all payments received from
licensees and sublicensees for licenses and sublicenses of
their
rights as provided for in Articles 12 and 13, including
licensing
fees, sublicensing fees, milestone payments, royalties and any
other
payments, however characterized. Payments of an equal share (i.e.
50%)
of a payment received from licensees and sublicensees shall be made
no
later than thirty (30) days after its receipt. In the case of
any
delay in the payment, interest at 2% over the Prime Rate,
assessed
from the thirty-first day after the receipt of the payment from
a
licensee or sublicensee until the date the payment is received,
shall
be due. Each party shall be responsible for paying any and all
taxes
levied on
account of the payments it receives.
8.3 All payments shall be made by wire
transfer in United States dollars
to the credit of such bank account as may be designated by
the
receiving party to the paying party in writing. Any payment
which
falls due on a date which is a Saturday, Sunday or a legal holiday
in
the United States may be made on the next succeeding day which is
not
a Saturday, Sunday or legal holiday.
8.4 Each party shall furnish or cause
to be furnished to the other party
on a quarterly basis a written report or reports covering
each
Calendar Quarter (each such Calendar Quarter being sometimes
referred
to herein as a "reporting period") in which Profits are made and/or
in
which payments are received from licensees or sublicensees showing
(i)
Sales of each Product in the Territory during the reporting
period,
(ii) dispositions of Product(s) other than by sale for cash,
(iii)
calculation of Profits for each Product during the reporting
period,
(iv) payments received from licensees and sublicensees during
the
reporting period, including, for royalty payments and other
payments
based on sales
of Product(s), a report from the licensees and/or
sublicensees showing the calculation of the royalties or
other
payments based on sales of Product(s), (v) the exchange rates used
in
converting into dollars from the currencies in which Sales were
made
or payments from licensees and sublicensees were received, and
(vi)
any other information necessary to establish the accuracy
and
completeness of the payments. Reports shall be due thirty (30)
days
after the end of each Calendar Quarter in which Profits are
made
and/or in which payments are received from licensees or
sublicensees.
If a party does not make Profits or receive payments from licensees
or
sublicensees in a Calendar Quarter, then that party will so notify
the
other party.
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<PAGE>
8.5 Each party shall keep accurate and
consistent records and books of
account containing regular entries relating to Sales and to
the
manufacture or purchase of Product(s), which records shall contain
all
information necessary for the computation of Profits. Such
records
shall be available, including for a period of three (3) years
after
termination of this Agreement, for examination by representatives
of
the other party for the purpose of verifying the accuracy of
the
quarterly reports required by Subsection 8.4 and Profits
computations
for any year ending no more than 36 months prior to the date of
such
examination. Such examination shall be made no more than once in
each
Calendar Year during normal business hours with prior notice. Any
such
representative shall be entitled to make copies and extracts from
such
books and records, but only to the extent necessary to verify
the
accuracy of the quarterly reports required by Subsection 8.4
and
Profits computations. Each party shall fully cooperate with
such
examination and inspection and shall give any explanations
that
reasonably may be requested.
8.6 Upon the written request of a
party ("requesting party"), and not more
than once in each Calendar Year, the other party ("audited
party")
will permit an independent certified public accounting firm
of
recognized standing selected by the requesting party and
reasonably
acceptable to the audited party to have access during normal
business
hours to those records of the audited party that may be necessary
to
verify the accuracy of the quarterly reports required by
Subsection
8.4 and calculations of Profits for any year ending no more than
36
months prior to the date of such request.
(a) The accounting
firm will disclose to the requesting party only
whether the quarterly reports and Profits calculations
are
correct or incorrect, the specific details concerning
any
discrepancies, and the corrected amount of Sales and/or
Profits.
No other information will be provided to the requesting
party.
(b) If the requesting
party's independent accounting firm determines
that Profits have been overpaid, the requesting party will
repay
the audited party the overage on the same date that the
requesting party delivers to the audited party such
accounting
firm's written report.
If the requesting party's independent
accounting firm determines that Profits have been underpaid,
the
audited party will pay the amount of the additional Profits
plus
interest assessed at 2% over the Prime Rate from the time(s)
the
payment(s) was(were) originally due. The payment of the
additional Profits and interest will be due no later than
fifteen
(15) days after the date on which the requesting party
delivers
to the audited party such accounting firm's written
report.
(c) The fees charged
by the accounting firm will be paid by the
requesting party, provided that, if the audit determines that
the
additional Profits payable by the audited party to the
requesting
party for such period exceed 5% of the Profits actually
paid,
then the audited party will pay the reasonable fees and
expenses
charged by such accounting firm.
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<PAGE>
8.7 Each party will treat all
financial information of the other party
subject to review under this Article 8 as Proprietary Information
in
accordance with Article 16 hereof and will cause its
representatives
and accounting firm to enter into an acceptable
confidentiality
agreement obligating such representatives and accounting firm
to
retain all such financial information in confidence pursuant to
the
confidentiality and non-use provisions of Article 16.
Article 9. Advisory Commi
