FROZEN SHOULDER LICENSE AGREEMENT

Exhibit 10.2

EXECUTION COPY

FROZEN SHOULDER LICENSE AGREEMENT

This FROZEN SHOULDER LICENSE AGREEMENT (the " Agreement "), effective as of November 21, 2006 (the " Effective Date "), is entered into by and between BioSpecifics Technologies Corp., a corporation organized and existing under the laws of Delaware (" BTC "), and the Research Foundation of the State University of New York for and on behalf of Stony Brook University, a nonprofit, educational corporation organized and existing under the laws of New York (the " Research Foundation "). BTC and the Research Foundation shall sometimes be referred to herein individually as a " Party " and collectively as " Parties ."

RECITALS

WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION> 

WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>

WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>

WHEREAS <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>

WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>

WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>

WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>

WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>

WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>

WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>

WHEREAS, <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>

WHEREAS, the Research Foundation now wishes to license the University Know-How and the University Patents in respect of Frozen Shoulder to BTC, and BTC wishes to license the University Know-How and the University Patents in respect of Frozen Shoulder from the Research Foundation, on the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements set forth below, the Parties agree as follows:

ARTICLE I.

DEFINITIONS

For the purposes of this Agreement, the following capitalized words and phrases, whether used in the singular or plural, shall have the following meanings:

1.1   " Affiliate " means any corporation or other business entity controlled by, controlling, or under common control with another entity, with "control" meaning direct or indirect beneficial ownership of more than 50% (or such lesser percent provided that ownership is accompanied by the power to direct the management or policies of the entity) of (a) the voting stock in the case of a corporation, or (b) the profits interest or decision-making authority in the case of an unincorporated business entity.

1.2   " Auxilium " means Auxilium Pharmaceuticals, Inc., a corporation organized and existing under the laws of Delaware.

1.3   " Auxilium License Agreement " means the agreement dated as of June 3, 2004 by and between BTC and Auxilium, as amended on May 6, 2005 and as may be subsequently amended from time to time, by which BTC granted to Auxilium certain licenses, as defined therein.

1.4   " Combination Product " means any product containing both an agent or ingredient which constitutes a Licensed Product and one or more other active agents or ingredients which do not constitute Licensed Products.

1.5   " Development Program " means the clinical studies previously performed by B&W with injectable collagenase pertaining to Frozen Shoulder, as described more fully in Article II hereof.

1.6   " EMEA " means the European Medicines Evaluation Agency, which coordinates the scientific review of human pharmaceutical products under the centralized licensing procedure of the European Community, and includes any successor agency.

1.7   " Enzyme " means an enzyme constituted of collagenase obtained by fermentation of Clostridium histolyticum, purified by chromatography, lyophilized and substantially free from other proteinases, and any variants or derivatives thereof.

1.8   " European Union " or "EU" means the countries of the European Union (or its successor) as constituted on the Effective Date and future members of the

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European Union upon their admission for full membership with commercial rights and privileges.

1.9   " FDA " has the meaning set forth above in the recitals.

1.10    " Field " means the prevention or treatment of Frozen Shoulder.

1.11    " First Commercial Sale " means the first commercial sale of a Licensed Product by BTC under the terms of a Supply Agreement or by a Sublicensee to a Third Party.

1.12    " Frozen Shoulder " means the condition or syndrome of shoulder adhesive capsulitis or other conditions or syndromes of the shoulder.

1.13    " Indication " shall mean a pharmaceutical application of injectable collagenase.

1.14    " Information " means (a) techniques, technology, practices, methods, procedures, inventions, discoveries, knowledge, know-how, trade secrets, skill, experience, gene or protein sequences, technical data, test data, analytical and quality control data, formulas or software programs, and (b) all compounds, compositions of matter, cells, cell lines, assays, and all other biological or chemical materials and samples.

1.15    " Joint Inventions " means any inventions in the Field, whether patentable or not, which are jointly conceived, discovered, developed or otherwise made, during the Development Program by at least one BTC employee or person contractually required to assign or license the intellectual property rights covering such inventions to BTC and at least one Stony Brook employee or person contractually required by virtue of New York state law to assign or license the intellectual property rights covering such inventions to the Research Foundation.

1.16    " Licensed Products " means pharmaceutical products containing Enzyme as an active ingredient and any reformulation, improvement, enhancement, combination, refinement, or modification thereof, which are made, used and sold in the Field and the development, manufacture, use or sale of which would, in the absence of this Agreement, infringe one or more Valid Claims; provided however, the Licensed Products shall specifically exclude dermal formulations labeled for topical administration.

1.17    " MAA " means a Marketing Authorization Application filed with the EMEA.

1.18    " NDA " means a New Drug Application, Biologics License Application or a Product License Application filed with the FDA.

1.19    " Net Sales " means

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(a)    with respect to sales of Licensed Products by BTC or its Affiliates, the gross sales price actually received less the following items to the extent they are paid and included in the invoice price:

(b)    with respect to sales of Licensed Products by a Sublicensee (as defined below) where BTC has elected not to supply the Licensed Product, the net sales price as required to be reported to BTC by the Sublicensee pursuant to the written sublicense agreement between them. For purposes of clarification, if Auxilium acquires BTC, then notwithstanding any termination of the Auxilium License Agreement, the Net Sales price shall be the price that would have been reported by Auxilium to BTC under the Auxilium License Agreement as if the Auxilium License Agreement had remained in effect.

(c)    with respect to sales of Licensed Products by a Sublicensee (as defined below) where BTC has elected to supply the Licensed Product, the net sales price as required to be reported to BTC under the Supply Agreement entered into between them.

In the case of (a) and (b) above, sales by BTC, its Affiliates and Sublicensees to resellers or others for further formulation, processing, repackaging or relabeling shall be excluded, and only the subsequent resale to independent customers shall be deemed Net Sales.

In the case of Combination Products for which the agent or ingredient constituting a Licensed Product and each of the other active agents or ingredients not constituting a Licensed Product have established market prices when sold separately, Net Sales shall be determined by multiplying the Net Sales for each such Combination Product by a fraction, the numerator of which shall be the established market price for the Licensed Products contained in the Combination Product and the denominator of which shall be the sum of the established market prices for the Licensed Products plus the other active agents or ingredients contained in the Combination Product. When separate market prices are not established, then the Parties shall negotiate in good faith to determine a fair and equitable method of calculating Net Sales for the Combination Product in question, taking into account factors such as relative cost and relative therapeutic or diagnostic contribution.

1.20    " Patent " means any patent issued with respect to the Patent Applications, and any reissues or extensions thereof.

1.21    " Sublicensee " means Auxilium or any person or entity who receives in the future a sublicense from BTC pursuant to Article III hereof.

1.22    " Sublicense Income " means the upfront payments and milestone payments actually received by BTC from (i) Auxilium and included within the definition of Sublicense Income as defined in the Auxilium License Agreement, or (ii) any other Sublicensee pursuant to Article III hereof.

1.23    " Supply Agreement " shall mean any commercial supply agreement related to the manufacturing and/or supply of the Licensed Product between BTC and a Sublicensee or any Third Party.

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1.24    " Territory " means all countries of the world.

1.25    " Third Party " shall mean any person or other entity other than BTC or its Affiliates.

1.26    " University Know-How " means (i) any proprietary Information or materials related to the manufacture, preparation, formulation, use or development of the Enzyme and the Licensed Products and shall include formulations, processes, techniques, formulas, biological, chemical, assay control and manufacturing, technical, pre-clinical, clinical or other data, methods, and know-how, and trade secrets; (ii) all Information, not generally known, which is owned by the Research Foundation or is rightfully held with right to sublicense as of the Effective Date, or which was developed, discovered, conceived, reduced to practice, or acquired by the Research Foundation or by Stony Brook inventors and assigned by Stony Brook inventors to the Research Foundation as a result of the Development Program and which (a) relates to the Licensed Products or (b) relates to the methods, processes or techniques for the manufacture or use of the Licensed Products and (iii) any Joint Inventions.

1.27    " University Patents " means the patent applications in respect of Frozen Shoulder that is covered by the assignment agreement attached hereto as Exhibit A , and any divisions, continuations and continuations-in-part thereof, any foreign patent applications corresponding thereto, and any patent issued with respect to such patent applications, and any reissues or extensions thereof.

1.28    " Valid Claim " means a claim of an issued and unexpired patent included within the University Patents, which has not been held permanently revoked, unenforceable or invalid by a decision of a governmental agency or court 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 or otherwise.

ARTICLE II.

DEVELOPMENT PROGRAM

2.1    Frozen Shoulder Development Program . Pursuant to certain protocols, B&W, individually or collectively, together with other Stony Brook employees, performed certain pre-clinical, clinical, regulatory, process development and manufacturing work related to injectable collagenase pertaining to Frozen Shoulder.

ARTICLE III.

LICENSE GRANT

3.1    License Grant. The Research Foundation hereby grants to BTC and its Affiliates a worldwide exclusive license for the University Know-How in the Field and the University Patents in the Field. The Research Foundation hereby reserves all rights to any University Know How and University Patents outside of the Field. The Research Foundation further grants to BTC a worldwide exclusive license to use the University

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Know-How and the University Patents to develop, manufacture, use and sell in any manner Licensed Products in the Field, except to the extent that BTC, its Affiliates or Sublicensees enters into a material transfer agreement, clinical trial agreement or any similar agreement that allows the Research Foundation to do research or clinical development. This grant is subject to the payment by BTC to Research Foundation of any consideration required to be paid by Article IV of this Agreement.

3.2    Government Rights. BTC acknowledges that the license granted to it hereunder are subject to a certain license granted to the United States government by the Research Foundation, as described in a letter dated as of October 6, 2006, a copy of which is attached hereto as Exhibit C .

3.3    Sublicenses.  

(a)    BTC shall be entitled to grant sublicenses of its rights hereunder, provided that any Net Sales of Licensed Products by a BTC Sublicensee shall be deemed to be Net Sales of a Sublicensee for purposes of royalty payments due hereunder, and BTC shall remain obligated to pay all royalties due with respect to Licensed Products sold by BTC and any Sublicensee. If BTC shall grant any sublicenses in addition to the Auxilium License Agreement under this Agreement, then it shall obtain the written commitment of such additional Sublicensees to abide by all applicable terms and conditions of this Agreement and BTC shall remain fully responsible to the Research Foundation for the performance of all such terms by such additional Sublicensees. Upon the termination of this Agreement, each Sublicensee shall have the option to convert its sublicense to a direct license with the Research Foundation on the same terms as in the sublicense agreement.

(b)    The Research Foundation hereby acknowledges and consents to the sublicense that BTC has previously granted to Auxilium pursuant to the Auxilium License Agreement in respect of the Licensed Products.

3.4    Subagents. It is agreed that BTC has the right to take the following actions, none of which shall constitute a sublicense hereunder and none of which shall be subject to Section 3.3 herein:

(a)    appointing an agent or distributor to market, sell or otherwise dispose of Licensed Products; and

(b)    subcontracting the development, manufacture or packaging of Licensed Products.

3.5    Term. The term of said license will continue in effect for as long as the Licensed Products are sold.

ARTICLE IV.

ROYALTIES AND MILESTONE PAYMENTS

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4.1    Royalties.   <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>

4.2    Royalty Period. The royalty obligations of BTC shall commence on the date of the First Commercial Sale and continue for the longer of (i) the last to expire Valid Claim of a Patent covering the Licensed Product or (ii) June 3, 2016.

4.3    Currency; Conversion; Taxes. Royalty payments shall be paid in U.S. Dollars at the address of the Research Foundation set forth in Section 11.6 below, or such other place as the Research Foundation may reasonably designate in writing, consistent with applicable laws and regulations. Any taxes which BTC or its Affiliates or Sublicensees shall be required by law to withhold or pay upon remittance of the royalty payments shall be deducted from the royalty payable to the Research Foundation and paid on its behalf as required. BTC shall furnish the original of any official receipts for such taxes. If any currency conversion shall be required in connection with the payment of royalties hereunder, such conversion shall be made by using the average of the daily exchange rates for such currency quoted by the Wall Street Journal’s (New York edition) foreign exchange desk for each of the last three (3) banking days of each calendar quarter, or, in the case of sales by Sublicensees, using the exchange rates provided for in the written agreements between BTC and such Sublicensees.

4.4    Currency Transfer Restrictions. If in any country in the Territory the payment or transfer of royalties on Net Sales in such country is prohibited by law or regulation, BTC shall notify the Research Foundation of the conditions preventing such transfer, and shall deposit the blocked payments in local currency in a recognized banking institution in the relevant country for the credit of the Research Foundation.

4.5    Payments by Others. With respect to any sales of Licensed Products by BTC, its Affiliates or Sublicensees, BTC shall have the right to cause any Affiliate, Sublicensee or other designee to make direct payment to the Research Foundation of the royalties otherwise due for such sales. The Research Foundation shall accept such payments and the amount of royalties to be paid by BTC shall be reduced by the amount of such payments actually received by Research Foundation.

4.6    Offsets for Third Party Licenses. If the Parties agree in writing that BTC, its Affiliates or Sublicensees must obtain a license from an independent Third Party in order for BTC to manufacture, use or sell a Licensed Product and if BTC and the Research Foundation agree on the terms of such license (a " Third Party License "), then the Parties shall share the cost of that license as defined herein. Such cost includes license fees, royalties and other fixed costs associated with the Third Party License minus the costs apportioned to any Sublicensee. <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION> 

4.7    Milestone Payments . <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION> .

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4.8    Payments Related to Sublicense Income . <OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION>

ARTICLE V.

REPORTS, PAYMENTS AND ACCOUNTING

5.1    Royalty Reports and Payments. BTC agrees to make written reports and royalty payments to the Research Foundation within ninety (90) days after the close of each calendar quarter during the term of this Agreement, beginning with the quarter in which the First Commercial Sale occurs. These reports shall show for the calendar quarter in question all Net Sales of Licensed Products and the royalty due thereon, together with the same information for Licensed Products sold by Affiliates and Sublicensees (if applicable). With respect to sales of Licensed Products by Sublicensees, reports need only include information reflected in the reports required by Section 5.4 below which are actually received during the calendar quarter in question. Concurrently with the making of each report, BTC shall remit any royalty payment due for the period covered by the report. BTC will make a good faith attempt, using commercially reasonable biotech industry practices, to differentiate between Net Sales of Licensed Products and sales of similar products outside of the Field in calculating the amount of the royalty due hereunder to the Research Foundation. Absent manifest error, BTC’s good faith differentiation shall be binding and conclusive on the Parties.

5.2    Termination Report. Within ninety (90) days after the date on which BTC and its Affiliates and Sublicensees last sell any Licensed Products, BTC shall make a final termination report containing the same quarterly information required above.

5.3    Accounting. BTC agrees to keep written or digitally stored records for a period of three (3) years from the end of each reporting period in sufficient detail to enable the royalties payable to be determined, and further agrees to permit its books and records to be examined during normal business hours by an independent accounting firm, selected by the Research Foundation and reasonably satisfactory to BTC, from time-to-time on reasonable notice, but not more often than once per year. Such examination must be made confidentially and the auditing firm shall be required to enter into reasonable confidentiality agreements. The expense of such examination shall be borne by the Research Foundation except that in the event the results of the audit reveal a discrepancy in the Research Foundation’s favor of 10% or more, then reasonable out-of-pocket audit fees shall be paid by BTC. Any discrepancy will be promptly corrected by a payment or refund, as appropriate.

5.4    Third Party Reports. BTC agrees to require, as a term of any sublicense agreement, that the Sublicensee shall render written reports to BTC of Net Sales of Licensed Products no less frequently than twice per year and in sufficient detail to enable the royalties payable by BTC hereunder to be determined (" Third Party Reports "). BTC shall also require Sublicensees to keep records concerning Net Sales for a period of at least three (3) years, and to permit reasonable examination of such records by an independent accounting firm selected by BTC. Notwithstanding the foregoing, nothing in this Agreement shall be construed as enlarging, or requiring BTC to modify,

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Auxilium’s, its Affiliate’s or its Sublicensee’s existing reporting and record keeping obligations pursuant to the Auxilium License Agreement.

5.5    Confidentiality of Reports. The Research Foundation agrees that the information set forth in (a) the reports required by Sections 5.1 and 5.2, (b) the records subject to examination under Section 5.3, and (c) all Third Party Reports, shall be maintained in confidence by the Research Foundation an