EXHIBIT
10.42
EXCLUSIVE
LICENSE AGREEMENT
This
Agreement is made effective the 24th day of November,
1998 (the “Effective Date”), by and between George B.
McDonald, M.D. (hereinafter called the “LICENSOR”),
located at 1815 102nd Place S.E., Bellevue, WA 98004, and Enteron
Pharmaceuticals, Inc. (hereinafter called “LICENSEE”),
located at 787 Seventh Avenue, 48th Floor, New York, NY
10019.
WHEREAS,
LICENSOR owns the “Licensed Patents” defined below and
is willing to grant a license to LICENSEE under the Licensed
Patents; and
WHEREAS,
LICENSEE desires to obtain a license to the Licensed Patents upon
the terms and conditions hereinafter set forth.
NOW,
THEREFORE, it is agreed as follows:
As
used in the Agreement, the following capitalized terms, whether
used in the singular or plural, shall have the following
meanings:
A.
“Affiliate” means any corporation or other business
entity controlled by, controlling, or under common control with
LICENSEE, but only for so long as such control
exists. For purposes of this definition,
“control” means (a) direct or indirect beneficial
ownership of at least fifty percent (50%) of the voting stock of
another corporation; or (b) the power, whether or not normally
exercised, to direct or cause the direction of the management,
affairs and policies of another corporation or other legal entity
by contract, resolution, or otherwise.
B.
“Clinical Trial” means the enrollment of patients with
graft-versus-host disease or patients who have had (or will have
had) a bone marrow transplant and, therefore, are susceptible to
graft-versus-host disease into a treatment protocol whose primary
endpoints are the safety and efficacy of the treatment.
C.
“Calendar Quarter” means each three-month period ending
March 31, June 30, September 30 and December 31.
D.
“Confidential Information” means all nonpublic
technical and commercial information, including all inventions,
inventor or laboratory notebooks and records, formulae, methods,
plans, processes, specifications, experience and trade secrets
relating to the Technology (a) disclosed by one party to the other
or (b) developed as a result of research development or other
activity conducted by either party prior to or during the term of
this Agreement,
E.
“Development Report” means a written account of
LICENSEE’s progress under a development plan identified in
Section 3A and Appendix C that contains the information specified
in Appendix B.
F.
“FDA” means the United States Food and Drug
Administration or any successor agency having the administrative
and regulatory authority to approve testing and marketing of human
pharmaceutical or biological prophylactic, therapeutic or
diagnostic products in the United States.
G.
“Know-how” means all tangible information and data that
is owned or controlled by either party at any time before or during
the term of the Agreement and that is related to the Licensed
Process(es) or is necessary or useful in the development,
registration, manufacture, use or sale of the Licensed Product(s),
including, but not limited to, items listed on Appendix D,
pharmacological, toxicological, clinical, analytical, and quality
control data, and formulations, materials, drawings and sketches,
designs, testing and test results, and other regulatory
information.
H.
“Licensed Field’’ means research and development
of products for the prevention and treatment of human
diseases.
I.
“Licensed Patents” shall mean (i) all U.S. and foreign
patents and patent applications set forth in Appendix I; (ii) any
later-filed United States and/or foreign patent applications based
on the patent applications and/or patents listed in Appendix I, or
corresponding thereto, including any continuations,
continuations-in-part, divisional, reissues, reexaminations, or
extensions thereof; and (iii) any United Stales and/or foreign
patents issuing from any of the foregoing-
J.
“Licensed Product” means (i) any product the relevant
manufacture, use, sale or importation of which would, in the
applicable country and in the absence of this License, infringe
upon a Valid Claim under the Licensed Patents; or (ii) any product
that is manufactured or used according to any Licensed
Process.
K.
“Licensed Process” means any method or process the
practice of which would, in the applicable country and in the
absence of this License, infringe upon a Valid Claim under the
Licensed Patents.
L.
“NDA” means a New Drug Application filed with the
FDA.
M.
“Net Sales” means the gross amounts actually received
for the sale of Licensed Product(s) less only the sum of the
following:
(i)
Trade
discounts actually allowed to customers on Licensed
Product(s);
(ii)
Sales, tariff duties and/or use taxes directly imposed and paid
with reference to sales of Licensed Product(s) (excluding what is
commonly known as income taxes);
(iii)
Freight, postage, and insurance charges and additional packaging
charges for Licensed Product(s);
(iv)
Amounts actually allowed or credited on returns of Licensed
Product(s);
(v)
Bad
debt deductions actually written off during the accounting period
that directly relate to Licensed Product(s); and
(vi)
Sales
commissions on sales of Licensed Product(s).
N.
“Orphan Drug” means a product that is used to treat
disease that affects relatively few people and for which U.S. and
foreign government authorities or agencies provide tax credits or
other incentives to make it possible to provide a safe and effect
medical product for the treatment of the disease.
O.
“Regulatory Approval” means the receipt of notice by a
party of approval by the FDA of a NDA that is effective to permit
the introduction of a Licensed Product into interstate commerce
pursuant to 21 U.S.C. 355. “Regulatory
Approval” also includes the equivalent approval or licensure
in a country other than the United States.
P.
“Technology” means the Know-how and the inventions
disclosed or claimed in the Licensed Patents.
Q.
‘Third Party” means any individual, corporation or
other legal entity other than LICENSOR, LICENSEE or an
Affiliate.
R.
“Valid Claim” means a claim of any pending patent
application or unexpired patent, or one whose expiration date has
been extended by law, so long as such claim shall withdrawn,
canceled, disclaimed, nor held invalid by a court of competent
jurisdiction in an unappealed or unappealable decision.
Section
2.
Grant of License .
Subject
to the terms and conditions of this Agreement, LICENSOR hereby
grants to LICENSEE and LICENSEE accepts the following:
(i)
an
exclusive license under the Licensed Patents, including the right
to grant sublicenses to both Affiliates and Third Parties, to
practice the Licensed Process(es) and to make, have made, use,
import and sell Licensed Product(s), in each case worldwide, for
use in the Licensed Field.
(ii)
an
exclusive license to the Know-how, including the right to grant
sublicenses to both Affiliates and Third Parties, to practice the
Licensed Process(es) and to make, have made, use, import and sell
Licensed Product(s), in each case worldwide, for use in the
Licensed Field.
The
grant in Section 2A shall be subject to, restricted by and
non-exclusive with respect to the following:
(i)
LICENSEE shall use reasonable effort to introduce the Licensed
Products for the prevention of graft-versus-host disease and
host-versus-graft disease into the commercial market as soon as
practicable, consistent with sound and reasonable business
practices and judgment, and thereafter endeavor to keep Licensed
Products reasonably available to the public.
(ii)
If
LICENSEE does not have to conduct any Clinical Trials prior to FDA
approval of the first LICENSEE-sponsored NDA for Licensed Product,
LICENSOR shall have the right to terminate or render this Agreement
nonexclusive at any time after eighteen (18) months from the
effective date of this Agreement if, in LICENSOR’s reasonable
judgment, LICENSEE:
a)
is
not demonstrably and actively engaged in a research, development,
manufacturing, marketing or licensing program, as appropriate, and
obtaining appropriate Regulatory Approvals that are directed toward
putting and keeping Licensed Product(s) into the commercial market,
or
b)
has
not, directly or through a sublicense, put Licensed Product(s) into
commercial use or kept Licensed Product(s) reasonably available to
the public in a country or countries where licensed.
In
making this determination, LICENSOR shall take into account the
normal course of such programs conducted with sound and reasonable
business practices and judgment and shall take into account the
reports provided hereunder by LICENSEE.
(iii)
If
LICENSEE does have to conduct Clinical Trials to obtain FDA
approval of the first LICENSEE-sponsored NDA for Licensed Product,
LICENSOR shall have the right to terminate or render this Agreement
nonexclusive at any time after five (5) years from the effective
date of this Agreement if, in LICENSOR’s reasonable judgment,
LICENSEE:
a)
is
not demonstrably and actively engaged in a research, development,
manufacturing, marketing or licensing program, as appropriate, and
obtaining appropriate Regulatory Approvals that are directed toward
putting and keeping Licensed Product(s) into the commercial market,
or
b)
has
not, directly or through a sublicense, put Licensed Product(s) into
commercial use or kept Licensed Product(s) reasonably available to
the public in a country or countries where licensed.
In
making this determination, LICENSOR shall take into account the
normal course of such programs conducted with sound and reasonable
business practices and judgment and shall take into account the
reports provided hereunder by LICENSEE.
(iv)
LICENSEE shall, at least thirty (30) days prior to granting any
sublicense to any Affiliate or Third Party, identify such Affiliate
or Third Party to LICENSOR. Concurrent with identifying
such Affiliate or Third Parry, LICENSEE shall provide to LICENSOR a
copy of the sublicense agreement. Any sublicense shall
be granted in a sublicense agreement that is consistent with the
terms of this Agreement and is in form and substance acceptable to
LICENSOR; provided, however, that a sublicense agreement that is
verified by Licensor to contain the relevant provisions of Sections
1, 2B, 3A, 3C, 4D, 4E, 5, 6, 7, 9, 10, 11, 12, 13, 14, 15, 16, 17,
18, 19, 20 and 21 shall not require the pre-approval of
LICENSOR. In a sublicense agreement, LICENSEE shall not
grant any sublicensee the right to sublicense the Licensed Patents
or Know-how licensed in this Agreement. LICENSEE shall
be liable to LICENSOR for performance by any sublicensee of such
sublicenseers obligations under the sublicense
agreement. Any sublicense agreement shall provide for
termination or assignment to LICENSOR, at the option of LICENSOR,
of LICENSEE’s interest therein upon the termination of this
Agreement.
(v)
If
LICENSEE is unable or unwilling to grant sublicenses, either as
suggested by LICENSOR or a potential sublicensee or otherwise,
LICENSOR has the right to directly license such potential
sublicensee unless LICENSEE reasonably satisfies LICENSOR that the
granting of such license or sublicense would result in direct or
indirect competition with Licensed Product(s) sold, marketed, or
under active research and development by LICENSEE or would not
materially increase the availability to the general public of
Licensed Products.
(vi)
A
nonexclusive, worldwide right to make and use the Technology by
LICENSOR solely for research purposes.
(vii)
It is
understood that if the United States Government (through any of its
agencies or otherwise) has funded research, during the course of or
under which any of the inventions of the Licensed Patents were
conceived or made, the United States Government is entitled, as a
right, under the provisions of 35 U.S.C. §§200-212 and
applicable regulations of Chapter 37 of the Code of Federal
Regulations, to a nonexclusive, nontransferable, irrevocable, paid
up license to practice or have practiced the invention of such
Licensed Patents for government purposes. Any license
granted to LICENSEE in this Agreement will be subject to such
right.
Section
3.
Consideration .
LICENSEE
agrees that it will (i) independently evaluate the Licensed
Patents; (ii) establish and actively pursue the development of the
Licensed Patents to enable Licensed Products to be sold and (iii)
supply LICENSOR with a written Development Report within one month
following the end of each semi-annual period ending on June 30 and
December 31 during the term of this Agreement until LICENSEE (a)
obtains Regulatory Approvals of Licensed Product(s) for the
treatment of graft-versus-host disease and host-versus-graft
disease and (b) begins international commercial sales of such
Licensed Product(s). All development activities and all
aspects of Licensed Product design and decisions to market are
entirely at the discretion of LICENSEE, and LICENSEE will rely
entirely on its own expertise. LICENSOR’s review
of LICENSEE’s development plan is solely to verify the
existence of LICENSEE’s commitment to Licensed Product
development activity.
In
partial consideration for the grant of licenses in this Agreement
to LICENSEE, LICENSEE agrees to pay to LICENSOR a nonrefundable
license fee of twenty thousand dollars ($20,000) within seven (7)
calendar days of the execution of this agreement.
In
partial consideration for the grant of licenses in this Agreement
to LICENSEE and during the term of this Agreement, LICENSEE agrees
to pay the following as running royalties, which shall not be
returnable in any event, to LICENSOR on a country-by-country
basis:
(i)
If
LICENSEE does have to conduct Clinical Trials to obtain FDA
approval of the first LICENSEE-sponsored NDA for Licensed Product,
then LICENSEE shall pay to LICENSOR within forty-five (45) days of
the end of each Calendar Quarter in an amount equal to twenty-five
percent (25%) of: (a) any non-recurring sublicense fees
(including, but not limited to, signing, up-front, and lump-sum
fees) and annual license maintenance fees, if any, received from
any Affiliate or Third Party for the right to practice the Licensed
Process(es) or make, use, sell, or import Licensed Product(s); and
(b) all royalties received by LICENSEE from the sale of Licensed
Product(s) by any sublicensed Third Party.
(ii)
If
LICENSEE does not have to conduct any Clinical Trials prior to FDA
approval of the first LICENSEE-sponsored NDA for Licensed Product,
then LICENSEE shall pay to LICENSOR within forty-five (45) days of
the end of each Calendar Quarter in an amount equal to thirty-three
percent (33%) of: (a) any non-recurring sublicense fees
(including, but not limited to, signing, up-front, and lump-sum
fees) and annual license maintenance fees, if any, received from
any Affiliate or Third Party for the right to practice the Licensed
Process(es) or make, use, sell, or import Licensed Product(s); and
(b) all royalties received by LICENSEE from the sale of Licensed
Product(s) by any sublicensed Third Party,
(iii)
If
LICENSEE does have to conduct Clinical Trials to obtain FDA
approval of the first LICENSEE-sponsored NDA for Licensed Product,
then LICENSEE shall pay LICENSOR within forty-five (45) days from
the end of each Calendar Quarter six percent (6%) of all Net Sales
of Licensed Products by LICENSEE or a sublicensed
Affiliate.
(iv)
If
LICENSEE does not have to conduct any Clinical Trials prior to FDA
approval of the first LICENSEE-sponsored NDA for Licensed Product,
then LICENSEE shall pay LICENSOR within forty-five (45) days from
the end of each Calendar Quarter eight percent (8%) of all Net
Sales of Licensed Products by LICENSEE or a sublicensed
Affiliate.
(v)
The
royalty rates in (i), (ii), (iii) and (iv) above shall be reduced
by fifty percent (50%) in any country where a competitor is selling
any oral formulation of the Licensed Product(s) for any
indication.
(vi)
No
royalty shall accrue on sales among LICENSEE, its sublicensed
Affiliates or sublicensed Third Parties. Royalties shall
only accrue on sales by LICENSEE, its sublicensed Affiliates or
sublicensed Third Parties to parties other than LICENSEE, its
sublicensed Affiliates or sublicensed Third Parties and shall be
payable only once for any given unit of Licensed Product
sold.
(vii)
To
the extent that LICENSEE or any Affiliate of LICENSEE is required,
by order or judgment of any court, to obtain in any country any
license from a Third Party in order to practice the rights
purported to be granted hereunder to LICENSEE by LICENSOR under the
Third Party’s issued patents in such country, then fifty
percent (50%) of the royalties payable under such license in such
jurisdiction may be deducted from royalties otherwise payable to
LICENSOR hereunder, provided that in no event shall the aggregate
royalties payable to LICENSOR in any Calendar Quarter in such
country be reduced by more than fifty per cent (50%) as a result of
any such deduction.
LICENSEE
agrees to pay to LICENSOR three hundred thousand dollars ($300,000)
within seven (7) calendar days of the FDA’s approval of the
first LICENSEE-sponsored NDA incorporating the
Technology.
E.
Equity Participation .
(i)
In
partial consideration for the grant of licenses in this Agreement
to LICENSEE, LICENSEE shall issue to LICENSOR a number of shares
(the “Initial Shares”) of common stock (the
“Common Stock”) of LICENSEE, par value $.001 per share,
representing eight percent (8%) of the outstanding Common Stock as
of the date of execution of the License Agreement, LICENSEE shall
issue the Initial Shares to LICENSOR pursuant to the exemption from
registration provided by Section 4(2) under the Securities Act of
1933, as amended (the “Securities Act”). The
Initial Shares shall be protected from dilution in connection with
any financing transaction by LICENSEE until such time as LICENSEE
has received at least two million dollars ($2,000,000) in gross
proceeds from the issuance of equity securities of
LICENSEE. LICENSOR shall be entitled to receive, in
partial consideration for the grant of licenses this Agreement to
LICENSEE, additional shares of Common Stock so as to maintain his
respective percentage ownership of LICENSEE immediately prior to
the applicable financing.
(ii)
If
LICENSEE does not have to conduct any Clinical Trials prior to FDA
approval of the first LICENSEE sponsored NDA for Licensed Product,
then LICENSEE also shall issue to LICENSOR, in partial
consideration for the grant of licenses in this Agreement to
LICENSEE, a number of new shares of Common Stock of LICENSEE equal
to the Initial Shares, which shall have the same dilution
protection as the Initial Shares set forth in E(i)
above.
In
the event LICENSEE has not (i) initiated recruitment of patients
for a Phase III Clinical Trial for the Licensed Products, or (ii)
initiated the filing of a NDA within six (6) months of signing this
Agreement, LICENSEE shall pay LICENSOR one hundred thousand dollars
($100,0,00) within seven (7) calendar days of the six (6) month
anniversary of the Effective Date of this Agreement.
(i)
Upon
the request of LICENSOR, LICENSEE shall have the obligation to
fulfill any of LICENSEE’s payment obligations due under this
Section 3 through the issuance of an amount of shares of Common
Stock equal to the cash value of any such payment
obligation. Any such issuances of Common Stock shall be
made only to the extent that an exemption from the registration
requirements of the Securities Act exists or the shares are duly
registered under the Securities Act.
(ii)
For
purposes of calculating the cash value of the Common Stock under
Section 3G(i), the then-current market price of the Common Stock
will be deemed to be the average closing price of the Common Stock
for the ten (10) consecutive trading days prior to the date on
which any payment pursuant to this Section 3 accrues, on the
principal national securities exchange on which the Common Stock is
admitted to trading or listed, or if not listed or admitted to
trading on any such national exchange, then the representative
average closing bid price of the Common Stock as reported by the
National Association of Securities Dealers, Inc. Automated
Quotations System (“Nasdaq”) or other similar
organization, or, if the Common Stock is not reported on Nasdaq or
by a similar organization, then the average per share bid price for
the Common Stock in the over-the-counter market as reported by the
National Quotation Bureau or similar organization, or if not so
available, then the fair market price of the Common Stock as
determined in good faith by the Board of Directors of
LICENSEE. In connection with this calculation, LICENSOR,
or his representative, shall have access to the books and records
of LICENSEE at any time upon twenty-four (24) hour notice to
LICENSEE. Such access shall occur during normal business
hours of LICENSEE.
(iii)
LICENSEE agrees that, at any time, and from time to time during the
period commencing two (2) years after the Effective Date hereof, or
one (1) year after LICENSEE’S initial public offering of
Common Stock registered under the Securities Act, whichever is
later, and ending on the date that is five (5) years after the
Effective Date hereof, if the Board of Directors of LICENSEE
authorizes the filing of a registration statement under the
Securities Act (other than the initial public offering of
LICENSEE’s Common Stock, or a registration statement on Form
S-8, Form S-4 or any other form that does not include substantially
the same information as would be required in a form for the general
registration of securities) in connection with the proposed offer
of any of its securities by it or any of its stockholders, then
LICENSEE shall (a) promptly notify LICENSOR that such registration
statement will be filed and that the Common Stock then held by
LICENSOR will be included in such registration statement at
LICENSOR’s request, (b) cause such registration statement to
cover all of such Common Stock issued to LICENSOR and requested for
inclusion, (c) use its reasonable best efforts to cause such
registration statement to become effective as soon as practicable
and (d) take all other action necessary under any federal or state
law or regulation of any governmental authority to permit all such
Common Stock that has been issued to LICENSOR and requested by
LICENSOR for inclusion in such proposed registration statement to
be sold or otherwise disposed of and shall maintain such compliance
with each such federal and state law and regulation of any
governmental authority for the period necessary to effect the
proposed sale or other disposition of any Common Stock that has
been issued to LICENSOR and requested by LICENSOR for inclusion in
the proposed registration statement.
To the
extent that officers or directors of LICENSEE are permitted to have
registered shares of Common Stock held by any of them included in
an initial public offering of LICENSEE’S Common Stock,
LICENSOR shall also have the right to include the Common Stock then
held by LICENSOR in the registration statement prepared in
connection with such an offering.
(iv)
In
the event that LICENSEE grants to any investor(s) the right to
require LICENSEE to effect a registration of Common Stock held by
such investors, LICENSOR shall have the right to require LICENSEE
to include the Common Stock held by LICENSOR in any such
registration on the same terms applicable to such
investor(s).
a)
If
the Common Stock owned by LICENSOR is or becomes freely tradable,
then LICENSOR shall have no right to the above described
registration rights.
b)
LICENSEE may at any time, abandon or delay any registration
commenced by LICENSEE.
c)
LICENSOR represents to LICENSEE that the Common Stock will be
acquired by LICENSOR for investment purposes only, for an
indefinite period of time, for its own account, not as a nominee or
agent for any other entity, and not with a view to the sale or
distribution of all or any part thereof, and LICENSOR has no
present intention of selling, granting any participation in, or
otherwise distributing, any or all of the Common
Stock. LICENSOR does not have any contract, undertaking,
agreement or arrangement with any entity to sell, transfer or grant
participation to such person, firm or corporation, with respect to
any or all of the Common Stock.
d)
LICENSEE represents to LICENSOR that LICENSEE shall rely on Section
4(2) under the Securities Act in connection with the issuance of
the Initial Shares to
