Exhibit 10.15
AMENDED AND RESTATED LICENSE AGREEMENT
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This Amended and
Restated License Agreement ("Agreement"), effective this
30th day of December, 2004 is
between the University of Chicago, an Illinois
not-for-profit corporation
("UNIVERSITY"), having its principal office at 5555
S. Woodlawn Avenue, Chicago,
IL 60637 USA and PharmaFrontiers Corp., a Texas
corporation ("PF") having its
principal office at 2408 Timberloch Place, Suite
B-7, The Woodlands, Texas
77380. Each hereunder may be referred to separately as
the ("Party"), or together as
the ("Parties"). The Parties agree:
1. Recitals.
A. To the best of the UNIVERSITY's
knowledge at the date of execution of
this Agreement, the inventions identified in Schedule A were
conceived
or first reduced to practice by the UNIVERSITY as Operator of
Argonne
National Laboratory (ANL) in the performance of work under its
U.S.
Department of Energy (DOE) Prime Contract No.
W-31-109-ENG-38.
Pursuant to the terms of the DOE Contract and 35 USC 200 et
seq.,
UNIVERSITY has acquired certain rights in and to said
inventions.
B. PF, a small business entity
specializing in the development of
therapeutic products, is interested in acquiring certain rights
to
said inventions.
C. UNIVERSITY is willing to
grant such rights so that said inventions may
be developed and used to the fullest extent for the benefit of
the
U.S. economy and the general public.
D. The Parties agree that this
Agreement is the entire understanding
between the Parties and supersedes all previous understandings
and
agreements, including the license agreement executed on February
20,
2004 (the "Original License Agreement") between the Parties.
The
License Agreement previously entered into by UNIVERSITY and PF
on
February 20, 2004 is hereby terminated upon the date of execution
of
this Agreement.
2. Definitions. The following
capitalized terms used in this Agreement shall
mean:
A. "Affiliate" means, as to any
person or entity, any other person or
entity, which directly or indirectly controls, is controlled by or
is
under common control with the Party. Control shall mean the right
to
control, or actual control of, management of such other
entity,
whether by ownership of voting securities, by agreement, or
otherwise,
or the direct or indirect ownership of the maximum percentage of
such
stock permitted under local laws or regulations in those
countries
where 50% ownership by a foreign entity is not
permitted.
B. "Calendar Quarter "means
each of the four, three-month periods ending
on March 31st, June 30th, September 30th, and December
31st.
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C. "Effective Date" means the
date appearing in line 1 of this Agreement.
D. "Field" means all fields of
use within diagnosis of, production of
therapeutics for, or treatment of diseases and/or disorders in
humans
and the use in animals only for the development of such products
or
applications in humans. The Field includes making stem cells
and
banking of stem cells for such purpose and diagnostics, drug
testing,
therapeutics and screening of small molecules, proteins,
and/or
peptides which may cause differentiation of stem cells in vitro
and/or
in vivo and the stem cells themselves.
E. "First Financing" means any
financing received by PF where total
cumulative proceeds received by PF equal or exceed ten
million
($10,000,000.00) US dollars as recorded by PF's SEC filing
records,
excluding the 15% Exchangeable Convertible Subordinated
Promissory
Notes (the first tranch of which were issued September 30, 2004) up
to
ten million ($10,000,000.00) US dollars.
F. "Licensed Patents," means
the patents and patent applications listed
on Schedule A and attached hereto, including all
continuations,
divisionals, and corresponding foreign patent applications and
any
patents which may issue therefrom and any reissues,
renewals,
reexaminations, substitutions, or extensions of or to any such
patents
or patent applications.
G. "Licensed Product(s)" means
any product covered by the scope of any
Valid Claim contained in any Licensed Patent or a product made by
a
process, method or technique covered by the scope of any Valid
Claim
in any Licensed Patent or methods of using any product covered by
the
scope of any Valid Claim contained in any Licensed
Patent.
H. "Licensed Method(s)" means
any method, procedure or process whose use
or practice is within the scope of any Valid Claim of any
Licensed
Patents including but not limited to any service or part of selling
a
service, licensing a method of use or other means of
deriving
commercial benefit from Licensed Products.
I. "Net Sales" means the gross
sales of Licensed Products and Licensed
Methods sold or otherwise distributed in the Territory, less
the
following amounts directly chargeable to such sales as indicated
on
individual invoices:
1) customary
trade, quantity or cash discounts and rebates actually
allowed and taken;
2) amounts
repaid or credited to customers on account of rejections
or returns; and
3) freight and
other transportation costs, including insurance
charges, and duties, tariffs, sales and excise taxes and
other
governmental charges based directly on Sales, turnover
or
delivery of such Licensed Products and actually paid or
allowed
by PF and its Affiliates.
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Net Sales shall be determined in accordance with generally
accepted
accounting principles consistently applied.
J. "Outstanding Number of
Shares" means all shares of PF's stock
outstanding on the relevant date, assuming the exercise of all
options
granted under any stock option plan of PF, the conversion of all
other
convertible securities then outstanding into Common Stock and
the
exercise, and conversion into Common Stock, of all other options
and
warrants of the Company that are then outstanding.
K. "Research and Development
Expenses" means all expenditures, in US
Dollars, by PF, its Sublicensees and any of their Affiliates on
the
following items dedicated to the research and development of
Licensed
Products(s) and/or Licensed Method(s): 1) materials, 2)
the
depreciation of equipment and facilities, 3) wages and benefits
of
employees, and 4) payments to third parties for conducting
research
and development of Licensed Product(s) and/or Licensed Method(s)
on
behalf of PF.
L. "Royalties" means all
amounts payable under Article 4 of this
Agreement.
M. "Sale" means any transaction
in which a Licensed Product(s) and/or
Licensed Method(s) is placed with a third party or used for
the
benefit of PF or a third party; provided "Sale" shall not include
any
placement or use of a Licensed Product(s) and/or Licensed
Method(s)
with or by a third party which is for testing or
experimental
purposes, including any animal or clinical trials so long as
such
placements are reported to the UNIVERSITY and for which
no
Compensation is received.
N. "Sublicensee" shall mean any
person, company or other entity granted a
Sublicense by PF, including Affiliates of the
Sublicensee.
O. "Sublicense" shall mean any
agreement entered into by PF with any
person, company or other entity pursuant to which any of the
rights
granted to PF to the Licensed Patents are exercised.
P. "Territory" means
worldwide.
Q. "Valid Claim" means an
issued claim of any unexpired patent or a claim
of any pending patent application which has not been
held
unenforceable, unpatentable or invalid by a decision of a court
or
governmental body of competent jurisdiction, in a ruling that
is
unappealable or unappealed within the time allowed for appeal;
which
has not been rendered unenforceable through disclaimer or
otherwise;
and which has not been lost through an interference proceeding
or
irrecoverable failure to pay a maintenance fee.
3. Grant.
A. Exclusive Patent Grant.
Subject to paragraphs 3.D and 3.E., UNIVERSITY
hereby grants to PF and its Affiliates, an exclusive,
non-transferable
license, to make, have made, use, have used, import, offer to
sell,
sell and/or have sold Licensed Products and/or Licensed
Method(s)
within the Field and within the Territory during the term of
this
Agreement.
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B. Sublicense. PF shall have
the exclusive right to grant Sublicenses to
and under the Licensed Patents to third parties limited to
and
consistent with the rights granted PF under Paragraph 3.A within
the
Field and within the Territory.
C. Sublicense to Former
Affiliates. For any Affiliates who have been
granted rights by UNIVERSITY under Paragraph 3.A and who
subsequently
do not qualify as an Affiliate under the definition in 2.A,
the
UNIVERSITY shall, upon PF's request, offer to such former
Affiliates a
license under substantially the same terms and conditions as
is
contained in this Agreement and shall agree to negotiate in good
faith
to execute such an agreement. If no agreement is reached within
six
months of the UNIVERSITY's offer to said former Affiliate,
the
UNIVERSITY shall not be obligated to continue negotiation with
such
former Affiliate and will have no further obligation to execute
any
license with such former Affiliate.
D. No Other Rights. No rights
in and to the Licensed Patents other than
those provided in Paragraphs 3.A. and 3.B., above, express or
implied,
are conveyed by UNIVERSITY.
E. Reservation of Rights.
UNIVERSITY reserves for itself, the worldwide
right to use the Licensed Patents and to practice the
inventions
claimed in the Licensed Patents for any educational
and/or
non-commercial research purpose it may choose at its own
discretion
and without any payment therefore. UNIVERSITY shall have the right
to
grant non-exclusive licenses to third parties to practice
the
inventions claimed in the Licensed Patents for non-commercial
research
purposes only. If tangible property is provided by UNIVERSITY to
PF,
UNIVERSITY reserves the right to make, use and provide
tangible
property and to grant non-exclusive licenses to make and use
such
tangible property to third parties for non-commercial
research
purposes only. In addition, the inventions claimed in the
Licensed
Patents were made with the use of funds from the United
States
government. Therefore, the U.S. Government has a
paid-up,
royalty-free, non-transferable, worldwide, irrevocable license
for
government use to practice or have practiced by or on behalf of
the
U.S. Government the Licensed Patents. The U.S. Government has
certain
other rights under 35 USC 200 et seq. and applicable
regulations.
4. License Fees, Royalties and
Other Payments.
A. License Fee. As partial
consideration for the license granted in
Article 3 of this Agreement, PF shall pay UNIVERSITY the sum of
one
hundred and seventy-five thousand U.S. dollars ($175,000) due
and
payable immediately upon execution of this Agreement. The sums due
and
payable under this Paragraph are nonrefundable and
noncreditable
against Royalties.
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B. Equity. As partial
consideration for the license granted in Article 3
of this Agreement, PF
shall issue to the UNIVERSITY two hundred
forty-two thousand six hundred and eighty-eight shares (242,688)
(the
"Shares") of capital stock representing one hundred
eighty-seven
thousand six hundred eighty-eight shares of capital stock
already
owned by the UNIVERSITY and an addition fifty-five thousand shares
of
capital stock. Such Shares shall be issued to University
immediately
upon execution of this Agreement. The consideration due and
payable
under this Paragraph is nonrefundable and non-creditable
against
Royalties. If certificate(s) representing such Shares are not
received
by UNIVERSITY within seven (7) days of the Effective Date,
this
Agreement
shall be deemed in default and this Agreement shall
automatically terminate effective immediately.
C. Milestones.
i. PF shall pay
to University one and one half million
($1,500,000.00) US dollars upon the occurrence of the
First
Financing or October 30, 2005 which ever occurs first. As of
the
date of execution of this Agreement, the First Financing
is
projected to take the form of a PIPE executed on or about
March
31, 2005 with expected total revenue of thirty to forty
million
$30-40,000,000.00) US dollars and shall be executed by
Sanders
Morris Harris. Should any other First Financing become
the
preferred method
of financing PF shall notify UNIVERSITY of its
intent and the proposed timing of such alternative First
Financing. If the required payment is not received within
seven
(7) days of the closing date of First Financing or on or
before
October 30, 2005 which ever occurs first, UNIVERSITY shall
have
the right, at its sole discretion, to terminate this
Agreement
effective immediately upon notice to PF or to accept
equity
through the issuance of Common Stock with piggyback
registration
rights valued at the Conversion Price, and all accrued
interest,
at 15% per annum, from the date of execution of this
Agreement
until October 30, 2005 computed on the basis of a three
hundred
and sixty (360) day year of twelve (12) thirty (30) day
months,
and paid within ten (10) days of notice to PF that
UNIVERSITY
elects to exercise its right to accept equity under this
paragraph.
ii. Upon the
occurrence of the later of First Financing or November
30, 2005, PF shall issue to UNIVERSITY shares of Common
Stock
such that the aggregate number of shares issued to
UNIVERSITY,
including the Shares issued pursuant to Paragraph 4.B,
shall
represent two and six-tenths of a percent (2.6%) of the
total
Outstanding Number of Shares after conversion of the 15%
Exchangeable Convertible Subordinated Promissory Notes, the
first
tranch of which was issued September 30, 2004, and after
issuance
of any and all equity in the form of stock at the close of
the
First Financing (the "Additional Shares").
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iii. Registration Rights. PF agrees to grant and grants to
UNIVERSITY
the registration rights, with respect to the Shares and
Additional Shares, set forth in Schedule B, and agrees to
execute
contemporaneously with the execution of this Agreement
the
Registration Rights Agreement included as Schedule B.
D. Capitalization. PF
represents and warrants to UNIVERSITY that the
capitalization table set forth in Schedule C attached
hereto
represents all of the issued and outstanding shares of stock,
options,
warrants and other securities of PF as of the date hereof, and
no
other warrants, options, stock rights or other securities of PF
have
been issued or are authorized to be issued by its Board of
Directors.
PF further represents and warrants that all Shares issued
to
UNIVERSITY pursuant to this Agreement shall be duly
authorized,
validly issued, deemed fully paid and non-assessable and not issued
in
violation of, and are not subject to, any preemptive
rights.
Non-payment or misrepresentation of information provided to
UNIVERSITY
by PF under this Agreement, is considered a material breach
and
UNIVERSITY may terminate the License pursuant to Paragraph 11.B.
PF
hereby agrees to promptly notify UNIVERSITY upon the close of
each
financing.
E. Royalties. As partial
consideration for the license granted in Article
3 of this Agreement, PF shall pay UNIVERSITY a Royalty of of Net
Sales
of Licensed Product(s) and/or Licensed Method(s) by PF,
its
Sublicensees and Affiliates of either. The Royalty obligation
under
this paragraph shall apply to the first Sale of a Licensed
Product(s)
and/or Licensed Method(s) whether by PF or a Sublicensee.
Royalty
payments shall be due quarterly and payable within thirty (30) days
of
the end of each Calendar Quarter beginning in the period in which
the
first Sale occurs.
F. Royalty Offset. In the event
that, with respect to Net Sales of
Licensed Products and/or Licensed Methods, PF is paying royalties
to
unaffiliated third parties for patent rights and the
unaffiliated
third party patent rights dominate the Licensed Patents such that
the
Licensed Patents cannot be practiced without infringing such
third
party rights in the absence of a license, the Royalties due
and
payable to UNIVERSITY hereunder shall be proportionally reduced by
of
the royalty rate due such third party, but in no event shall
the
Royalty payable to UNIVERSITY be less than of Net Sales. By
example,
if the royalty due other third parties equals of Net Sales,
the
Royalty due UNIVERSITY shall be ; if the royalties due other
third
parties equals or more, of Net Sales, the Royalty due UNIVERSITY
shall
be . A Sublicensee shall not be entitled to any Royalty Offset
under
this Paragraph 4.F for any third party license it requires.
However,
PF will be entitled to the Royalty Offset if it is required to take
a
third party license as described above and subsequently
sublicenses
the Licensed Patents and the third party patents to a
Sublicensee.
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G. No Multiple Royalties. One
royalty shall be payable for Licensed
Product(s) and/or Licensed Method(s) regardless of the number
of
Licensed Patents which cover such licensed Product(s) and/or
Licensed
Method(s).
H. Minimum Royalties. Beginning
in the calendar year that includes the
third anniversary of the Effective Date of this Agreement
Minimum
Royalties shall be due and payable according to the
following
schedule;
1) If the total
Royalties for the calendar year that includes the
third anniversary of the Effective Date of this Agreement
are
less than , PF shall pay UNIVERSITY the difference between
such
amount and the actual Royalties due. Such payment shall be
made
at the same time payment for Royalties for the fourth quarter
for
such year is due.
2) If the total
Royalties for the calendar year that includes the
fourth anniversary of the Effective Date of this Agreement
are
less than , PF shall pay UNIVERSITY the difference between
such
amount and the actual Royalties due. Such payment shall be
made
at the
same time payment for Royalties for the fourth quarter
for
such year is due.
3) If the total
Royalties for the calendar year that includes the
fifth anniversary of the Effective Date of this Agreement
are
less than , PF shall pay UNIVERSITY the difference between
such
amount and the actual Royalties due. Such payment shall be
made
at the same time payment for Royalties for the fourth quarter
for
such year is due.
4) If the total
Royalties for the calendar year that includes the
sixth anniversary of the Effective Date of this Agreement
are
less than , PF shall pay UNIVERSITY the difference between
such
amount and the actual Royalties due. Such payment shall be
made
at the same time payment for Royalties for the fourth quarter
for
such year is due.
5) If the total
Royalties for the calendar year that includes the
seventh anniversary of the Effective Date of this Agreement
are
less than , PF shall pay UNIVERSITY the difference between
such
amount and the actual Royalties due. Such payment shall be
made
at the same time payment for Royalties for the fourth quarter
for
such year is due.
6) If the total
Royalties for the calendar year that includes the
eighth anniversary of the Effective Date of this Agreement,
and
for every year thereafter are less than , PF shall pay
UNIVERSITY
the difference between such amount and the actual Royalties
due.
Such payment shall be made at the same time payment for
Royalties
for the fourth quarter for such year is due.
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I. Calculation of Royalties.
Royalties shall be payable in U.S. currency
within thirty days (30) days after the end of each Calendar
Quarter
for the Term of the Agreement, beginning with the Calendar Quarter
in
which the first Sale of a Licensed Product(s) and/or
Licensed
Method(s) occurs. A royalty statement showing Net Sales for
each
country and a calculation of the Royalties due shall accompany
each
payment. Any necessary conversion of currency into United
States
dollars shall be at the applicable rate of exchange of Citibank,
N.A.,
in New York, New York, on the last day of the Calendar Quarter
in
which such transaction occurred.
J. Sublicense flow
through.
i. For each
Sublicense granted by PF the following shall apply. PF
shall notify UNIVERSITY prior to the execution of any
Sublicense.
PF will disclose the identity of the potential Sublicensee
to
UNIVERSITY and shall provide UNIVERSITY with a copy of
all
executed Sublicenses. All Sublicenses shall provide that
the
Sublicensee may not grant further Sublicenses to third
parties.
If the aggregate of Average Annual Payments arising from
any
sublicense is not at least , then within sixty (60) days of
the
fifth anniversary of the execution of the Sublicense PF
shall
either terminate such Sublicense or pay UNIVERSITY times
the
difference between the Average Annual Payments and .
"Average
Annual Payments" shall mean the aggregate of all Royalties
and
flow through payments made in respect of a Sublicense over
each
of the five year periods ending on each of the fifth,
tenth,
fifteenth and twentieth anniversary of the date hereof divided
by
five.
ii. For each
Sublicense granted by PF, PF shall pay UNIVERSITY of all
Compensation. For this Section 4.J., "Compensation" means
all
fees, minimum royalties, milestone payments and other
cash
payments of any kind and in kind payments or equity amounts
paid
in lieu of cash, paid by a Sublicensee in consideration of
the
Sublicense. "Compensation" does not include (i) payments
that
constitute Net Sales that are subject to Royalties pursuant
to
Paragraph 4.E.; or (ii) payments or contributions of materials
or
services from a Sublicensee which PF is obligated to use
in
research and development and which qualify as Research
and
Development Expenses.
iii. If royalties paid by any Sublicensee to PF are not subject to
the
obligations under Paragraph 4.E because PF Sold Licensed
Product(s) and/or Licensed Method(s) to such Sublicensee
and
therefore paid a Royalty to the UNIVERSITY under Paragraph
4.E,
any such royalties paid to PF for Sublicensee's sales of
Licensed
Product(s) and/or Licensed Method(s) shall be subject to
the
sublicense flow through obligations of this paragraph.
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iv. In the event that,
with respect to the Sublicense of Licensed
Patents, PF is required to additionally sublicense other
intellectual property which has been licensed from a third
party
and to which third party sublicense flow through is owed,
and
that third party licensed intellectual property dominates
the
Licensed Patent such that Licensed Patents cannot be
practiced
without infringing the third party licensed intellectual
property
in the absence of a license, the amount due and payable
to
UNIVERSITY
hereunder shall be proportionally reduced by of the
sublicense flow through obligation due such third party, but
in
no event shall the sublicense flow through payable to
UNIVERSITY
be less than of all compensation received by PF from
Sublicensee.
Payments shall be made (or assigned as relevant) to
UNIVERSITY
within thirty (30) days of receipt by PF. For this
purpose
compensation includes all fees, minimum royalties,
milestone
payments and other cash payments of any kind and any in
kind
payments or equity amounts taken in lieu of cash. It is
the
intent and agreement of the parties that UNIVERSITY will be
paid
of any kind of Compensation paid by a Sublicensee for
rights
granted to such Sublicensee under this Agreement without
regard
to how the Compensation is structured, denominated or
paid.
K. Sublicense after R&D
expenditure of US dollars. At such time when PF
expends US dollars in Research and Development Expenses other
than
with Licensor, the sublicense flow through subject to 4.J.ii
above,
for all Sublicenses will be reduced from of Compensation from the
date
on which such expenditure is confirmed by UNIVERSITY. In the
event
that, with respect to the Sublicense of Licensed Patents
after
expenditure of US dollars as described above, PF is required
to
additionally sublicense other intellectual property which has
been
licensed from a third party and to which sublicense flow through
is
owed, and that third party licensed intellectual property
dominates
the Licensed Patents such that the Licensed Patents cannot
be
practiced without infringing the third party licensed
intellectual
property in the absence of a license, the amount due and payable
to
UNIVERSITY hereunder shall be proportionally reduced by of
the
sublicense flow through obligation due such third party, but in
no
event shall the sublicense flow through payable to UNIVERSITY be
less
than of all compensation received by PF from Sublicensee. All
other
Sublicense conditions remain as described in Paragraph J.,
above.
L. Overdue Payment. PF shall be
responsible for obtaining the full
compliance of its Affiliates with the terms and conditions of
this
Agreement. For purposes of payments, PF shall be fully responsible
for
any payments not made by its Affiliates according to the terms
and
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conditions of this Agreement. Payments due to UNIVERSITY under
this
Agreement shall, if not paid when due under the terms of
this
Agreement, bear simple interest at the prime rate of interest
(as
published by Citibank, N.A. on the date such payment is due)
plus
percent ( %), calculated on the basis of a 360 day year for the
number
of days actually elapsed, beginning on the due date and ending on
the
day prior to the day on which payment is made in full.
Interest
accruing under this Paragraph shall be due to UNIVERSITY on demand
or
upon payment of past due amounts, whichever is sooner. The accrual
or
receipt by UNIVERSITY of interest under this Paragraph shall
not
constitute a waiver by UNIVERSITY of any right it may otherwise
have
to declare a default under this Agreement or to terminate
this
Agreement.
M. Records. UNIVERSITY may from
time to time and at any reasonable time,
not exceeding once every twelve (12) months, through such firm
of
certified public accountant (auditor) as UNIVERSITY may
select,
inspect
