“ Actual Cost ” means the cost of activities performed by AVI personnel pursuant to this Agreement, including direct labor and materials and allocated overhead costs.

 

“ Affiliate ” of a specified person (natural or juridical) means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. “Control” shall mean ownership of more than 50% of the shares of stock entitled to vote for the election of directors in the case of a corporation, and more than 50% of the voting power in the case of a business entity other than a corporation.

 

“ Agreement ” means this Agreement and all Exhibits and Schedules hereto.

 

“ AVI ” has the meaning set forth in the recitals hereto.

 

“ Company ” has the meaning set forth in the recitals hereto.

 

“ Drug ” means any phosphorodiamidate morpholino oligomers, with or without attachments to enhance efficacy, that inhibit translation of the human protein, c-myc. Included in this definition are the compounds known as AVI-4126 and AVI-5126.

 

“ Expiration ” or “ Expired ” means, with respect to a particular patent, the patent’s expiration, abandonment, cancellation, disclaimer, award to another party other than AVI in an interference proceeding, or declaration of invalidity or unenforceability by a court or other authority of competent jurisdiction (including final rejection in a re-examination or re-issue proceeding).

 

“ FDA ” means the U.S. Food and Drug Administration.

 

“ Field ” means the treatment of coronary artery and peripheral vascular diseases and conditions by administration of a drug or drug-containing device that inhibits the production or function of the human protein, c-myc. Specifically excluded from the Field are treatment of coronary artery bypass grafts, congestive heart failure, and malignancies.

 

“ Intellectual Property ” means U.S. and foreign patents and patent applications, trademarks, service marks and registrations thereof and applications therefor, copyrights and copyright registrations and applications, mask works and registrations thereof, know-how, trade secrets, inventions, discoveries, ideas, technology, data, information, processes, drawings, designs, licenses, computer programs and software, and technical information including but not limited to information embodied in material specifications, processing instructions, equipment specifications, product specifications, confidential data, electronic files, research notebooks, invention disclosures, research and development reports and the like related thereto, and all amendments, modifications, and improvements to any of the foregoing.

 

“ Invention ” means any invention, discovery, know-how, trade secret, data, information, technology, process or concept, whether or not patented or patentable, and whether or not memorialized in writing.

 

“ Investment Agreement ” means the Investment Agreement of even date herewith by

 

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and between AVI and Company.

 

“ Joint Inventions ” is defined in Section 6.3 .

 

“ Know-How ” means all know-how, trade secrets, expertise, Inventions, discoveries and technical information other than Patents (as defined below) now or hereafter owned by, licensed to, possessed by, or under the control of, AVI which are necessary, appropriate or useful for designing, developing, processing, manufacturing, using, selling or delivering the Drug within the Field, including but not limited to information embodied in drawings, designs, copyrights, copyright registrations and applications, trademarks, service marks and registrations thereof and applications therefor, material specifications, processing instructions, formulas, equipment specifications, product specifications, confidential data, computer software, electronic files, research notebooks, invention disclosures, research and development reports and the like related thereto, and all amendments, modifications, upgrades and improvements to any of the foregoing, occurring before or during the term of this Agreement.

 

“ Liens ” means liens, mortgages, charges, security interests, claims, voting trusts, pledges, encumbrances, options, assessments, restrictions, licenses, sublicenses, or third party or spousal interests of any nature.

 

“ Milestone Event ” has the meaning set forth in Section 3.2 .

 

“ Milestone Payment ” has the meaning set forth in Section 3.2 .

 

“ Net Sales ” of Products with respect to a particular period means the gross amount billed with respect to Products sold by Company, its Affiliates and sublicensees, less (to the extent included in the gross amount and to the extent not for promotional purposes):

 

(a)                                   cash discounts actually given;

 

(b)                                  credits or allowances actually given or made on account of price adjustments, rebates (including Medicaid or other government programs, chargebacks, and contractual agreements), or volume reimbursements;

 

(c)                                   separately stated (on customer invoice) taxes on sales (such as sales and use taxes); and

 

(d)                                  separately stated (on customer invoice) delivery charges actually paid to third party carriers (including transportation and insurance costs); all as determined in accordance with generally accepted accounting principles; provided, however, that bona fide sample units and clinical trial units of Products will not be included in any calculation of Net Sales.

 

“ NIH License ” means the exclusive license granted by the NIH Public Health Service to Lynx Therapeutics, Inc. on September 17, 1996 and assigned to AVI on May 18, 2001 to patents covering “Inhibition of Cell Proliferation Using Antisense Oligonucleotides.”

 

“ Patents ” means (a) the patents and patent applications, together with any patents that

 

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may issue based thereon, set forth on Exhibit A; (b) any other patents or patent applications now or hereafter owned by or licensed to AVI that are necessary, appropriate or useful for designing, developing, processing, manufacturing, using, selling or delivering the Drug within the Field; including but not limited to, any patents or patent applications covering any sole or joint Inventions of AVI made or conceived during the Term of this Agreement and any improvements thereof; (c) all continuation, divisional, re-issue, re-examination and substitution applications that may be filed, before or during the term of this Agreement, by or for the benefit of AVI based on the foregoing referenced patents or patent application, together with any patents that may issue based thereon; and (d) all foreign applications that may be filed, before or during the term of this Agreement, by or for the benefit of AVI based on the foregoing referenced patents and patent applications, together with all patents which may issue based thereon.

 

“ Performance Standards ” has the meaning set forth in Section 10.13.

 

“ Product ” means the Drug and any product or device sold by Company or its Affiliate that incorporates or includes the Drug. No more than one (1) payment calculated in accordance with Section 3.1 shall be paid on any single product covered by the Patents even though such product, including its manufacture, sale or use may be covered by Valid Claims of more than one patent included in the Patents.

 

“ Resten-MP™ ” means the product candidate currently in Phase II clinical development by AVI for prevention of coronary artery restenosis which consists of AVI-4126 formulated in a microbubble formulation for systemic administration to patients.

 

“ Summerton Agreement ” means the Technology Transfer Agreement between AVI and Dr. James Summerton (on behalf of Anti-Gene Development Group, an Oregon limited partnership) dated February 9, 1992, as amended.

 

“ Supply Agreement ” means the Supply Agreement of even date herewith by and between AVI and Company.

 

“ Technology ” means the Patents and the Know-How.

 

“ Term ” has the meaning set forth in Section 9.1 .

 

“ Unexpired ” shall mean a patent that has not Expired.

 

“ Valid Claim ” means a claim in an Unexpired patent included with the Patents which has not been held unenforceable, unpatentable or invalid by a decision of a court or other governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal and which has not been admitted to be invalid or unenforceable through reissue or disclaimer.

 

“ UNeMed License ” means the license obtained by AVI from UNeMed Corporation pursuant to an agreement dated June 1, 1998 to microbubble technology for use in the delivery of therapeutic compounds.

 

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1.2.                               Definitional Provisions .

 

(a)                                   The words “hereof,” “herein,” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provisions of this Agreement.

 

(b)                                  Terms defined in the singular shall have a comparable meaning when used in the plural, and vice-versa.

 

(c)                                   References to an “Exhibit” or to a “Schedule” are, unless otherwise specified, to one of the Exhibits or Schedules attached to or referenced in this Agreement, and references to an “Article” or a “Section” are, unless otherwise specified, to one of the Articles or Sections of this Agreement.

 

(d)                                  The term “person” includes any individual, partnership, joint venture, corporation, trust, unincorporated organization or government or any department or agency thereof.

 

(e)                                   The terms “including” and “includes” and words of similar import mean including, but not limited to.

 

ARTICLE 2.

LICENSE TO COMPANY

 

2.1.                               Grant of License.  In consideration for the payments set forth in the Investment Agreement and this Agreement and subject to the terms and conditions of this Agreement, AVI hereby grants to Company a worldwide, sublicensable, exclusive license to the Technology to use, import, export, sell, and offer to sell the Drug in the Field and to make, have made, use, import, sell and offer to sell Products incorporating or utilizing the Drug and/or the Technology in the Field, practice methods covered thereby, and otherwise to commercialize and exploit, the Drug and/or the Technology in the Field. For clarity, AVI grants the foregoing exclusive license to the fullest extent of AVI’s rights in the Technology within the Field, retaining only rights in the Technology outside the Field.

 

2.2.                               Technology Transfer .  AVI shall, upon Company’s reasonable request from time to time, provide to Company at AVI’s Actual Cost available drawings, specifications, processes, materials, and any manufacturing procedures and such other documentation and Know-How as is reasonably necessary or useful to enable Company to fully utilize the license granted to Company under this Agreement. In addition, AVI will make available personnel as requested by Company, to provide such individual training to Company technical and manufacturing personnel as is necessary to enable Company to fully utilize the license granted to Company under this Agreement, at such reasonable times and places as Company may request from time to time, including, without limitation, to complete any development of the Technology in the Field, and to assist in the transfer of any manufacturing and regulatory submissions (including raw and compiled clinical data), certificates or other documents or approvals.

 

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ARTICLE 3.

FEES, ROYALTIES AND REPORTS

 

3.1.                               Royalty Payments.

 

(a)                                   Subject to the terms of this Agreement, Company shall pay to AVI a royalty equal to *** of (i) Net Sales of Products by Company, Affiliates, and sublicensees; and (ii) any other payments or consideration paid to Company by sublicensees who are not Affiliates of the Company in consideration of the grant of such sublicense, including but not limited to upfront payments, stock payments, and milestone payments.

 

3.2.                               Milestone Payment .  Company shall pay AVI a one-time milestone payment of *** (the “ Milestone Payment ”) within thirty (30) days after the date upon which Company’s cumulative Net Sales of Products reaches *** (the “ Milestone Event ”).

 

3.3.                               Third Party Patent Rights .  Notwithstanding any other provision of this Agreement to the contrary, Company shall not be liable for any royalties, payments or other amount due or to become due to third parties under any license or other agreement with respect to the Drug or the Technology that is in effect as of the date of this Agreement (including any such royalties, payments or other amounts payable under the NIH License, the Summerton Agreement or the UNeMed License), all of which royalties, payments and other amounts shall be borne by AVI. After the date hereof, if the parties agree that AVI needs to obtain rights to a third party patent that it does not have rights to on the date hereof to commercialize the Drug within the Field, then the parties shall agree on the allocation between the parties of the cost of obtaining such rights (including any royalties that may be payable).

 

3.4.                               Reports and Payments.  Within thirty (30) days after the end of each calendar quarter, Company shall provide AVI with a written report indicating the amount of Net Sales of Products during such preceding period and the amount of the royalties due for such period. Simultaneous with making such report, Company shall pay to AVI the amount of royalties then due. With respect to sales of Products outside the United States on which any earned royalties are payable hereunder, conversions to U.S. dollars, shall be made by based on interbank (official) rates as reported on www.oanda.com as of the first Business Day of the month in which the payment is to be made. Notwithstanding anything to the contrary contained in this Agreement, Company shall be entitled to withhold, from earned royalties payable hereunder, all taxes thereon required, by competent governmental authorities, to be withheld.

 

3.5.                               Records.  Company agrees to keep accurate written records sufficient in detail to enable the royalties payable under this Agreement by Company to be determined and verified for a period of one (1) year after the delivery of any royalty report.

 

3.6.                               Audit of Records.  Upon reasonable notice and during regular business hours, Company shall from time to time, but no more frequently than once annually, make available the records referred to in Section 3.5 for audit at AVI’s expense by independent representatives selected by AVI and reasonably acceptable to Company to verify the accuracy of the reports provided to AVI. Such representatives shall execute a suitable confidentiality agreement

 

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reasonably acceptable to Company prior to conducting such audit. Such representatives may disclose to AVI only their conclusions regarding the accuracy of royalty payments and of records related thereto, and shall not disclose Company’s information to AVI without the prior written consent of Company. No claim may be asserted by AVI against Company for any errors unless made within thirty (30) days following completion of such examination or audit made pursuant to this Section 3.6 . The right to audit shall extend through one (1) year following the delivery of the last royalty report of a calendar year and thereafter any royalty report shall be deemed complete and accurate. Each royalty report shall be subject to only one such examination and audit. The party benefiting from any discrepancy will promptly pay the amount of such discrepancy to the other.

 

ARTICLE 4.

DEVELOPMENT PROJECT

 

4.1.                               Development Efforts .

 

(a)                                   During the Term of this Agreement, Company will control any regulatory and clinical programs for the Drug in the Field as Company deems appropriate (including the clinical trials set forth in the Article 4 ) and obtain in Company’s name any necessary device or medical regulatory approvals from the FDA, and any applicable regulatory agencies of such other countries as Company deems appropriate, prerequisite to the commercial sale of products for their intended uses. AVI will supply Company with all available documents, instruments, information and reports reasonably necessary or convenient as requested by Company in connection with such regulatory approval efforts and in connection with pre-clinical efforts. During the Term of this Agreement, AVI will assist and cooperate with the development of the Drug in the Field, including, without limitation, supplying the Drug to Company and advising and participating in product scientific research and development proceedings and all governmental actions, including filings, proceedings and meetings, as requested by Company. AVI will also assist and cooperate with Company in Company’s development of coating technology and processes necessary or convenient for the use of the Drug in the Field. In connection with the foregoing and at Company’s reasonable request, AVI shall make available senior AVI personnel responsible for and knowledgeable about the Drug and the Technology. AVI grants to Company the right of reference to AVI’s regulatory files with the FDA or other appropriate government agencies as necessary or helpful for support of Company’s regulatory submissions with respect to the Drug in the Field. All regulatory approvals funded by Company and all related studies, documents, instruments, information and reports, will be in Company name and owned by Company. Company grants to AVI the right of reference to Company’s regulatory files relating to the Drug with the FDA or other appropriate governmental agencies as necessary for support of AVI’s current or future regulatory submissions outside the Field; provided that AVI shall not be entitled to utilize such right in connection with any commercialization efforts involving a medical device company for use in the Field. AVI shall provide prior written notice to Company of any exercise of such right of reference specifying the time of such exercise, the type of filing, the regulatory files to be referenced and such other circumstances as may be appropriate for Company to determine AVI’s compliance with the exercise of such right. AVI’s sole remedy for any breach of Company’s obligations under this Section 4.1 shall be as set forth in Section 9.2 .

 

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(b)                                  Payments to AVI for Development Support .  Except for the supply of clinical and commercial supplies of Drug, the terms of which are included in the Supply Agreement, Company will reimburse AVI’s Actual Costs in providing all services and support provided by AVI pursuant to this Agreement. Within thirty (30) days of the end of each calendar quarter, AVI will send Company an invoice specifying the Actual Cost of services and support provided in the just-ended quarter and the payment due. Within thirty (30) days of receiving each such invoice, Company will make a payment to AVI for the full amount due.

 

(c)                                   AVI shall supply to Company on payment terms specified in the Supply Agreement such quantities of the Drug as are reasonably required by Company in connection with pre-clinical and clinical trials and in connection with obtaining regulatory approvals. AVI represents and warrants to Company that all Drugs supplied to Company hereunder will have been manufactured, labeled and packaged in accordance with all applicable laws and regulations, including (as applicable) FDA GMP requirements and all other manufacturing requirements that are applicable for the intended uses of Drug that have been communicated to AVI by Company.

 

4.2.                               Non-Compete .  AVI shall not directly or indirectly market or sell, or directly or indirectly encourage or solicit the submission of, or entertain inquiries, proposals or offers from any person or entity (other than Company or its Affiliates), or otherwise provide information to or engage in discussions with any other person or entity, in any way relating to the sale, licensing, distribution or other disposition of any compound for use or application in the Field or any Intellectual Property relating to the compound for use or application in the Field.

 

4.3.                               Resten-MP .  Company agrees to complete the multicenter Phase II clinical trial of Resten-MP currently underway in Germany to assess the safety and efficacy of Resten-MP in preventing coronary artery restenosis (“German Study”). Company may elect to have AVI complete the German Study and in such case will pay AVI’s Actual Costs incurred in doing so. Completion of the German Study is defined as completing 6-month follow-up assessments, per the study protocol, of at least thirty-five (35) evaluable patients. Within sixty (60) days of obtaining the final data from the German Study, Company will inform AVI of its decision whether or not to continue product development of Resten-MP. In the event that Company decides to continue development, it will share with AVI its plans for development of the final commercial formulation of drug and its Phase III clinical strategy for Resten-MP. If Company decides not to continue development of Resten-MP or a similar microparticle delivery Product (for example based on AVI-5126) following completion of the German study, AVI may on thirty (30) days written notice reacquire all rights specific to microparticle delivery Products. AVI may also reacquire all rights specific to microparticle delivery Products, on thirty (30) days written notice if at any time in the further development program for Resten MP or a similar microparticle delivery Product: a) Company informs AVI that it has decided to discontinue development of Resten-MP or a similar microparticle delivery Product; or b) six (6) months elapse during which no development work on Resten-MP or a similar microparticle delivery Product is ongoing by Company, in which case the development program will be deemed to be discontinued. In any such case, upon written notice by AVI to Company, the definition of Field will be amended to exclude all rights specific to microparticle delivery of Drugs.

 

4.4.                               Product Development Committee .  Company agrees to use commercially reasonable efforts to commercialize the Technology in the Field. AVI and Company

 

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acknowledge that the development process for new technologies is uncertain and that unforeseen issues may arise. In order to ensure that Company is pursuing the Technology and to accommodate the uncertainty of product development, the parties agree to the following:

 

(a)                                   Company and AVI shall each appoint a representative to a Product Development Committee. The Product Development Committee will be primarily responsible for monitoring Company’s efforts to develop and commercialize the Technology in the Field and for monitoring and promoting cooperation in those efforts between and among the parties and their representatives. The Product Development Committee shall meet no less frequently than every other month during the Term at times and places to be determined by agreement of the members thereof.

 

(b)                                  If either member of the Product Development Committee is dissatisfied with the nature or extent of the progress being made with respect to the commercialization of the Technology, that member may request a meeting of one or more members of senior management of each party to discuss and attempt to resolve the issue. The first such meeting of the parties’ representatives shall take place within thirty (30) days of the request. Each party shall cause its representatives to negotiate in good faith to attempt to reach a mutually acceptable resolution of any issue referred to its senior management.

 

ARTICLE 5.

AVI’S OBLIGATIONS

 

5.1.                               Maintain Licenses in Force .  AVI shall comply with all of the provisions of, and shall maintain in full force and effect (including the timely payment of all royalties, payments and other amounts due thereunder), all license agreements with third parties, including, specifically, the NIH License and UNeMed License, pursuant to which AVI is licensee of Intellectual Property included in the Technology. AVI shall promptly notify Company if any such third party alleges any breach, default, or event that, with the passage of time or giving of notice could become a default, by AVI of any such license agreement. Company shall be entitled, but not obligated, to cure any alleged breach or default by AVI of such license agreement and set-off the cost of such cure against amounts otherwise owed to AVI hereunder.

 

5.2.                               Company Exclusivity .  AVI will not, without the prior written consent of Company, supply, sell, transfer or otherwise dispose of the Drug or any products or components utilizing the Drug or the Technology or any Joint Invention to any third party if AVI should have known after making reasonable inquiry or has actual knowledge (including the actual knowledge of any of AVI’s executive officers) that such third party intends or is likely to use, sell, supply, transfer or otherwise dispose of the Drug or any such products, components, Technology or any Joint Inventions in the Field. Prior to any sale, supply, transfer or other disposition to any third party of the Drug or any products or components utilizing the Drug or any such products, components, Technology or any Joint Invention, AVI shall obtain the agreement of such third party that it will not use, sell, supply, transfer or otherwise dispose of the Drug or any such products, components, Technology or any Joint Inventions in the Field. AVI shall obtain the agreement of such third party that Company will be an express third party beneficiary of such agreement. The restrictions set forth in this Section 5.2 shall not apply to transfers of the Drug to

 

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consultants or agents of AVI who are performing research or consulting services on behalf of AVI in connection with such transfer.

 

5.3.                               No Amendments With Adverse Effects to Company .  AVI agrees not to modify, waive or amend any provision of any agreement in effect as of the date hereof that would adversely affect Company’s obligations under Article 3 without the prior written consent of Company, including any modification, waiver or amendment to any agreement in effect as of the date hereof that could have the effect of increasing the amount payable to the licensor.

 

ARTICLE 6.

INTELLECTUAL PROPERTY

 

6.1.                               Protect Know-How .  AVI and Company agree to maintain the conf