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NOTICE:
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CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED FOR
PORTIONS OF THIS DOCUMENT AS INDICATED HEREIN
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LICENSE AGREEMENT
(United States Version)
This License
Agreement ( " Agreement”) is made and entered into as of
the 28th day of January, 1993, by and between Martek
Biosciences Corporation, a Delaware corporation (
" Licensor”), and American Home Products
Corporation, a Delaware corporation, represented by its
Wyeth-Ayerst division ( " Licensee”).
WHEREAS, Licensor
has developed certain technology relating to the production by
microbial fermentation of Omega-3 and Omega-6 long-chain
polyunsaturated fatty acid-containing triglycerides for possible
incorporation into infant formula; and
WHEREAS, Licensee
and its affiliates are in the business of developing, manufacturing
and marketing infant nutritional products; and
WHEREAS, Licensee
desires to obtain a non-exclusive license from Licensor for the
Technology and Licensor is willing to grant such license subject to
the conditions and pursuant to the terms set forth in this
Agreement.
NOW, THEREFORE, in
consideration of the premises and of the mutual covenants of the
parties hereto, each party hereby agrees with the other as
follows:
Section 1.1.
“Affiliate” shall mean any person, corporation,
firm, partnership or other entity which directly or indirectly owns
Licensee, is owned by Licensee or is owned by a party which owns
Licensee to the extent of at least 50% of the equity having the
power to vote on or direct the affairs of the entity. Except as the
term "
Affiliate”
is used in Sections 6.4 and
8.4 of this Agreement, the term “Affiliate”
shall exclude (i) Genetics Institute, (ii) Sherwood
Medical Company, a Division of Licensee and (iii) Fort Dodge
Laboratories (collectively, the “Other
Entities”).
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Section 1.2.
“Infant Formula Product” shall mean a breast
milk substitute formulated industrially in accordance with
applicable Codex Alimentarius and United States Food and Drug
Administration standards to satisfy the total normal
nutritional , requirements of infants from birth up to between
four and six months’ of age and adapted to their
physiological characteristics and fed in addition to other foods to
infants up to approximately one year of age.
Section 1.3.
“Licensed Patents” shall mean the patent
applications attached hereto as Exhibit III and all
patents and patent applications in the Territory which cover the
Technology, including all patents and patent applications covering
inventions, improvements or modifications conceived or developed by
Licensor during the term of this Agreement and included in the
Technology.
Section 1.4.
“Martek Product” shall mean triglycerides
containing Omega-3 and/or Omega-6 long-chain polyunsaturated fatty
acids produced by microbial fermentation according to the
Technology and Licensed Patents.
Section 1.5.
“AHPC Formulaid Product” shall mean a product
(i) which is an Infant Formula Product, (ii) which is in
a form for utilization by consumers, (iii) which is developed
by Licensee or its Affiliates, (iv) which bears
Licensee’s label or the label of an Affiliate, and (v) into
which the Martek Product is incorporated.
Section 1.6.
“Technology” shall mean the organisms,
microorganisms, specifications, biological materials, designs,
formulae, processes, standards, data, trade secrets, knowhow and
technology relating to the development and production of the Martek
Product which are proprietary to Licensor and any modifications,
improvements and enhancements to any of the foregoing made by
Licensor, which, in Licensor’s and Licensee’s mutual
opinion expressed in writing, is or are necessary in the production
and development of the Martek Product.
Section 1.7.
“Territory” shall mean the [ *
]
Section 1.8.
“Third Party” shall mean any party other than
Licensor, Licensee and Affiliates.
Section 1.9
“Trademark” shall mean the trademark
“FORMULAID”, which is the subject of U.S. Trademark
Application Serial No. 74-141195, a copy of which is attached
hereto as Exhibit I.
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GRANT OF LICENSE AND OTHER
RIGHTS
Section 2.1.
License. Licensor hereby grants to Licensee for the term of
this Agreement and subject to the conditions of this Agreement, a
non-exclusive, non-transferable right and license, in the
Territory, directly or through sublicense to an Affiliate,
(i) to use the Technology for the production of the AHPC
Formulaid Product, (ii) to use and make the Martek Product for
purposes of producing the AHPC Formulaid Product and (iii) to
use, market and distribute by sale the AHPC Formulaid Product
itself or through its Affiliates.
Section 2.2.
Licenses to Third Parties.
(i)
Licenses to Third Parties Generally. Licensor shall be
entitled to grant any license to any Third Party relating to the
Technology, the Martek Product or the Licensed Patents upon any
terms whatsoever; provided, however, that Licensor shall not grant
any license to any Third Party for the incorporation of the Martek
Product into, or for the use of the Technology for the production
of, an Infant Formula Product with payment terms, including payment
terms under subsections 4(i) and (ii) of this Agreement, which
are more favorable to such Third Party than the payment terms
provided in this Agreement with respect to the Licensee, without
the prior written consent of Licensee or unless such more favorable
payment terms prospectively are extended to Licensee.
Notwithstanding the preceding sentence, Licensor shall be entitled
to charge lesser non-Royalty lump sum payments to a Third Party
licensee (similar to those provided in subsections 4.1(i) and
(ii) of this Agreement) without the prior consent of Licensee
and without being obligated prospectively to extend such a payment
term to Licensee, if the license to such a Third Party is territory
restricted and if the amount of the reduction in the lump sum
charged reasonably is related to the reduced marketing
opportunities available to such Third Party licensee due to the
territorial restrictions applicable to use of the Technology and
the Martek Product.
(ii)
Licenses to Third Party Suppliers. Licensor shall be
obligated to license the Technology, the Licensed Patents and the
Martek Product to Third Parties as follows:
(A) Licensor
shall use reasonable efforts further to license the Technology or
the Licensed Patents or otherwise to produce the Martek Product,
itself or through a Third Party whether
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or not pursuant
to another licensing arrangement, for the purpose of creating a
sufficient supply of the Martek Product at a commercially
reasonable price to satisfy Licensee’s and its
Affiliates’ requirements with respect to their marketing and
sale of the AHPC Formulaid Product; provided, however, that such
requirements and any increases or decreases thereof shall be
communicated in writing by Licensee to Licensor not less than
12 months prior to Licensor’s obligation to satisfy such
requirements or increases or decreases thereof.
(B) If
Licensor licenses the Martek Product, the Licensed Patents and the
Technology to a Third Party for the purposes of manufacturing and
creating a supply of the Martek Product pursuant to subsection
(ii)(A) of this Section 2.2, Licensor shall permit Licensee to
negotiate the terms of the purchase and supply arrangements between
the Licensee and such Third Party directly with such Third Party;
provided, however, that such direct negotiations or arrangements
shall not affect Licensor’s rights to royalties or other fees
from Licensee or such Third Party.
(C) If
the Third Parties to whom the Martek Product and the Technology are
licensed and Martek in the aggregate are unable to satisfy
Licensee’s and its Affiliates’ requirements for the
Martek Product (as established and communicated pursuant to
subsection (ii)(A) of this Section 2.2), Licensor shall
appoint one or more additional licensed suppliers who are
reasonably acceptable to Licensee and who can satisfy the excess
demands of Licensee and its Affiliates at a commercially reasonable
price.
(D) Licensor
and Licensee acknowledge and agree that, at the time of the
execution of this Agreement, the production cost of the Martek
Product in gross quantities, the fair market value thereof and the
commercial volumes thereof necessary to meet Licensee’s
demands are not ascertainable, and Licensor and Licensee covenant
and agree that, prior to the first sale of a AHPC Formulaid
Product, Licensor and Licensee shall negotiate in good faith and
strive to agree upon reasonable terms relating to the consideration
to be payable by Licensee or its Affiliates to Licensor or Third
Parties for amounts of the Martek Product produced by or on behalf
of Licensor and delivered to Licensee or its Affiliates.
(iii)
Transfer of Martek Product. Nothing in this Section 2.2
or in this Agreement shall be construed to permit Licensee or its
Affiliates to sub-license the Martek Product or the Technology or
otherwise unilaterally to transfer to any Third Party the Martek
Product or the Technology except as the same are incorporated into
the AHPC Formulaid Product.
(iv)
Licensee’s Patents. Nothing in this Section 2.2
shall be construed so as to permit Licensors to grant rights to any
Third Party under U.S. Patent No. 4,670,285 and Canadian
Patent No. 1,244,708.
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Section 2.3.
Sublicensing. The grants to Licensee under this
Article II shall not include the right to grant sublicenses,
except sublicenses to Affiliates.
Section 2.4.
Trademarks. In addition to the license granted hereunder
relating to the Martek Product and the Technology, Licensor hereby
grants to Licensee the non-exclusive, non-transferable right and
license to use the Trademark solely on, and in connection with the
manufacture and sale of, the AHPC Formulaid Product, subject to the
following terms and conditions:
(i) Licensee
shall not use the Trademark as or part of its corporate or business
name or the name of any business entity which is controlled by it,
whether an Affiliate or otherwise.
(ii) Licensee
and its Affiliates shall have no right to sublicense to Third
Parties any of the rights in the Trademark conveyed
hereunder.
(iii) Licensee
and its Affiliates shall not affix or use the Trademark on any
product other than the AHPC Formulaid Product.
(iv) Licensee
recognizes and acknowledges Licensor’s ownership of the
Trademark and Licensor’s intent to protect the Trademark in
the Territory. Licensee covenants and agrees that it and its
Affiliates shall not challenge, or cause a Third Party to
challenge, Licensor’s right, title or interest in and to the
Trademark. All use by Licensee or its Affiliates of the Trademark
in the Territory shall inure to the benefit of Licensor, and
Licensee and its Affiliates shall make no use or apply for any
registration thereof except as permitted by this Agreement. Nothing
in this Agreement shall be construed so as to require Licensor to
take any actions or measures to protect or secure any rights in or
obtain or apply for registration of the Trademark.
(v) Licensee
covenants that, upon notification from Licensor that Licensor has
obtained a U.S. Federal Registration on the Trademark, Licensee
will use the trademark registration symbol® each time it or
its Affiliates uses the Trademark on the AHPC Formulaid Product or
on the labels, labeling or packaging thereof and on all material
originating with Licensee or its Affiliates and used to promote the
sale of AHPC Formulaid Products, and the following legend
prominently shall appear at least once in each such AHPC Formulaid
Product or material: “Formulaid ® is a registered
trademark of Martek Biosciences Corporation.” Until such time
as
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Licensor
obtains a U.S. Federal Registration on the Trademark, Licensee
shall substitute the symbol “ ™ ” in place of the
symbol ® as specified herein.
(vi) Licensee
covenants that AHPC Formulaid Products manufactured for and by it
and sold by it shall be of a high standard and quality so as to
reflect favorably upon the business of both Licensor and Licensee
and the goodwill associated therewith. To effectuate the
foregoing:
(A) Prior
to the time that Licensee or its Affiliates shall sell or offer for
sale, in the regular course of business, any AHPC Formulaid Product
bearing the Trademark, Licensee shall submit to Licensor, for its
approval, samples of the AHPC Formulaid Product as well as samples
of all materials used to sell or to promote the sale of AHPC
Formulaid Products, including, but not limited to, labels,
labeling, packaging materials, advertising and other promotional
materials. Thereafter, Licensee and its Affiliates shall not make
any material change to the way in which the Trademark is used or
depicted in connection with the AHPC Formulaid Product without
first submitting such proposed change to Licensor and obtaining its
approval.
(B) Licensor
and Licensee hereby acknowledge that Licensee has given Licensor
the opportunity to inspect the manufacturing operations of Licensee
and its Affiliates where AHPC Formulaid Products depicting the
Trademark, if any, will be made and to evaluate the quality control
standards and practices of Licensee and its Affiliates relating to
such operations. Licensor hereby acknowledges that Licensee’s
and its Affiliates’ quality control standards and practices
are acceptable and sufficiently protective of Licensor’s
interests in the Trademark. Licensee hereby covenants and agrees to
notify Licensor prior to any material changes in Licensee’s
or its Affiliates’ quality control standards or practices as
such standards and practices relate to the manufacturing operations
of AHPC Formulaid Products depicting the Trademark. Licensee shall
submit to Licensor, without charge, at Licensor’s request at
reasonable intervals throughout the term of this Agreement, a
reasonable number of samples of AHPC Formulaid Products and other
materials that depict the Trademark.
(C) No
approval required of Licensor under this subsection (vi) shall
be unreasonably withheld or delayed.
(D) Licensee
shall advise Licensor of any infringement of the Trademark of which
it or its Affiliates becomes aware, but Licensee and its Affiliates
shall not bring any action with respect to any such infringement
without Licensor’s prior written consent. Licensee and its
Affiliates shall cooperate with Licensor, at Licensor’s
request, with respect to any of Licensor’s efforts to protect
its interests in the Trademark. Nothing in this Agreement shall be
construed so as to require Licensor to take any actions or measures
with respect to any alleged, suspected or known infringement of the
Trademark.
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(E) Licensee
shall notify Licensor in writing prior to any material alterations
to the formula of the AHPC Formulaid Product.
(vii) Nothing
in this Section 2.4 or in this Agreement shall be construed to
require Licensee or its Affiliates to use the Trademark on the AHPC
Formulaid Product or on the labels, labeling or packaging thereof
or on materials used to promote the sale of the AHPC Formulaid
Product.
(viii) The
term of the Trademark license of this Section 2.4 shall be
coterminous with that of the license granted in Section 2.1,
which term is defined in Article III of this Agreement.
Notwithstanding the preceding, upon the expiration of the
twenty-five (25) year period described in Section 3.1 of
this Agreement, this Agreement shall continue as to
Licensee’s and its Affiliates’ rights and obligations
relating to the Trademark; provided, however, that the Royalty due
hereunder after the expiration of the period described in paragraph
(v)(B) of Section 4.1 of this Agreement relating to sales of
AHPC Formulaid Products depicting the Trademark or sales of AHPC
Formulaid Products to which advertising or other promotional
materials depicting the Trademark relate shall be in an amount
equal to [ * ] of the greater of (A) the Cost of Goods
Sold applicable to each such AHPC Formulaid Product or (B) the
Sales Price of each such AHPC Formulaid Product sold to Third
Parties.
Section 2.5.
Services. Licensor shall make its officers and other
employees available at reasonable times to provide technical and
other consultation services relating to the use of the Technology,
the production of the Martek Product and/or the incorporation of
the Martek Product into the AHPC Formulaid Product to the extent of
[ * ] hours in the aggregate by all such officers and
employees over the term of this Agreement; provided, however, that
any services which are mutually agreed in advance of the
performance thereof to be mutually beneficial to the businesses of
Licensor and Licensee shall not be considered in determining the
number of hours of technical or other consultation services
performed by Licensor’s officers and other employees under
this Section 2.5. If greater than [ * ] hours of such
technical or other consultation services in the aggregate are
required and requested by Licensee or its Affiliates, Licensor and
Licensee hereby agree that, prior to the provision of additional
technical or other consultation services, they shall enter into
good faith negotiations relating to compensation and other terms
for such additional technical or other consultation services, which
compensation and other terms shall be commensurate with industry
standards.
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ARTICLE III.
TERM AND CANCELLATION
Section 3.1.
Term. This Agreement shall commence on the date of this
Agreement and, unless earlier terminated pursuant to another
Section of this Article III, shall terminate; as to each
country in which the AHPC Formulaid Product is sold for consumer
use, on the date which is twenty five (25) years after the
first commercial introduction of the AHPC Formulaid Product in the
Territory. Upon expiration under this Section, Licensee shall have
a fully paid, royalty free license to continue in perpetuity to
utilize the Martek Product and the Technology as provided for in
Section 2.1.
Section 3.2.
Material Breach; Opportunity to Cure . Either party to this
Agreement may immediately terminate this Agreement by written
notice and without judicial intervention if the other party shall
materially fail to comply with or shall materially breach any of
its obligations and covenants hereunder and shall not remedy and
make good such breach or failure, or have undertaken to cure the
same, within sixty (60) days from the receipt of a written
notice of failure of compliance or breach.
Section 3.3.
Termination in case of Infringement. Licensee shall have the
right to terminate this Agreement with respect to the manufacture,
use or sale of the Technology or the Martek Product if a court of
competent jurisdiction determines by final order that the
Technology or the Martek Product infringes upon the patent of any
Third Party; provided, however, that Licensor and Licensee hereby
covenant and agree that, prior to any such termination, Licensor
and Licensee shall engage in reasonable, good faith efforts to
develop, and shall cooperate with the other in developing, a lawful
method of using, selling or manufacturing, as applicable, the AHPC
Formulaid Product in the Territory, including, but not limited to,
efforts to procure a license from such Third Party or efforts to
alter the design or offending composition of the Martek Product,
the Technology or. the AHPC Formulaid Product, as applicable, so as
to eliminate the infringement.
Section 3.4.
Termination by Licensee. At any time after the first
anniversary date of this Agreement, Licensee shall have the right
to terminate this Agreement of its own volition upon ninety
(90) days prior written notice to Licensor.
Section 3.5.
Payments Due Upon Termination or Cancellation. Upon
expiration or termination of this Agreement, pursuant to any of the
foregoing Sections, all amounts due pursuant to Article IV
shall be immediately payable as of the date of termination or
cancellation.
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Section 3.6.
Sale of Inventory Upon Termination. Effective upon the date
of termination of this Agreement, Licensee and its Affiliates shall
cease manufacturing the Martek Product and the AHPC Formulaid
Product; provided, however, that, Licensee and its Affiliates may
continue to distribute the Martek Product or the AHPC Formulaid
Products manufactured prior to such date if, to the extent lawful,
Licensee continues to make payments under Section 4.1 with
respect to such AHPC Formulaid Products and otherwise continues to
comply with the terms and conditions of this Agreement.
Notwithstanding the preceding, upon the earlier to occur of
(i) the sale by Licensee and its Affiliates of all of their
inventory of AHPC Formulaid Products manufactured prior to the date
of the termination of this Agreement or (ii) the date which is
six months after the date of the termination of this Agreement,
Licensee and its Affiliates shall cease all use of the Technology,
sale of the Martek Product or AHPC Formulaid Product and use of the
Trademark and Licensee and its Affiliates shall have no further
rights under this Agreement. This Section 3.6 shall not apply
in the event this Agreement expires pursuant to Section 3.1 of
this Agreement.
Section 3.7.
Other Rights and Remedies. Unless another provision of this
Agreement specifically provides to the contrary, the rights of
termination as herein provided shall be in addition to all other
rights and remedies which either party may have to enforce this
Agreement or to secure damages for the breach hereof, and the
exercise of any right of termination as herein provided by either
party shall not relieve the other of any of its obligations under
this Agreement accruing prior to the effective date of termination,
including, but not limited to, the obligation to pay fees and
Royalties pursuant to Section 4.1 or to render reports with
respect thereto.
Section 4.1.
Fees and Royalties. Licensee shall pay Licensor:
(i) As
compensation for Licensor’s performance of its obligation
under Section 7.1 of this Agreement to make reasonable efforts
during the period beginning on the date of this Agreement and
ending March 31, 1993 to refine the
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development
process of the Technology, One Million Five Hundred Thousand
Dollars ($1,500,000) payable upon execution of this Agreement,
reduced by any advances made prior to the date hereof pursuant to
the Letter of Intent executed by Licensor and Licensee on or about
April 1, 1992 (the “Letter of Intent”);
(ii) As
compensation for Licensor’s performance of its obligation
under Section 7.1 of this Agreement to make reasonable efforts
during the period beginning April 1, 1993 and ending on the
first anniversary date of this Agreement to refine the development
process of the Technology, One Million Dollars ($1,000,000) payable
on or before the first anniversary date of this Agreement;
and
(iii) During the term described in
Section 4.1(v)(A) below, a royalty payment (the
“Royalty”) in an amount equal to [ * ] of the
greater of (A) the cost of goods sold applicable to the AHPC
Formulaid Product, as determined using generally acceptable
accounting principals and methodologies reflected on
Licensee’s audited annual financial; statements and as
mutually agreed to by Licensor and Licensee (the “Cost of
Goods Sold”), or (B) the amount received by Licensee or its
Affiliates from the sale for value of each AHPC Formulaid Product
to Third Parties, which amount received by Licensee or its
Affiliates shall not be reduced by taxes assessed on income from
such sales but shall not include: normal returns and allowances
actually paid or allowed by Licensee or its Affiliates; customary
discounts, whether cash or trade; rebates; and sales and other
taxes based on the sales prices of the AHPC Formulaid Product
whether or not absorbed by Licensee or its Affiliates (the
“Sales Price”).
(iv) During the term described in
Section 4.1(v)(B) below, a Royalty in an amount equal to [
* ] of the greater of (A) the Cost of Goods Sold
applicable to the AHPC Formulaid Product, or (B) the Sales
Price of each AHPC Formulaid Product to Third Parties.
(v)(A) For a
term of ten (10) years after the first commercial introduction
of the AHPC Formulaid Product in the Territory; provided, however,
that if a patent is obtained with respect to the Technology or the
Martek Product in the Territory prior to the twenty-fifth (25th)
anniversary of the date of first commercial introduction of the
AHPC Formulaid Product therein, for a term of longer than ten
(10) years, which term shall begin on the date of the issuance
of such patent and end on the earlier of (A) the date of the
expiration, lapse or invalidation of any such patents and
(B) the twenty-fifth (25th) anniversary of the date of the
first commercial introduction of the AHPC Formulaid Product in such
country.
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(v)(B) For such
additional period of time following the period described in Section
4.l(v)(A) above, if any, and ending on the twenty-fifth (25th)
anniversary after the first commercial introduction of the AHPC
Formulaid Product in the Territory.
Licensor shall be
responsible for all taxes levied on account of any payment accruing
under this Agreement that constitutes income taxable to Licensor.
If provision is made in law or regulation for withholding, such tax
shall be deducted from any royalty payment then due, paid to the
proper taxing authority and receipt for payment of the tax secured
and promptly sent to Licensor.
Section 4.2.
Manner of Royalty Payment. All Royalty payments with respect
to each AHPC Formulaid Product sold shall be made quarterly, within
sixty days of the close of each of Licensee’s three month and
annual accounting periods, based on Licensee’s fiscal year,
with respect to Licensee’s and its Affiliates’ sales
occurring during such quarters, at Licensor’s office as set
forth below.
Section 4.3.
Reimbursement of Expenses. Licensee agrees to pay to
Licensor, in addition to the amounts specified in Section 4.1
above, all reasonable traveling, living and out-of-pocket expenses
for services rendered by Licensor pursuant to Section 2.5 of
this Agreement which are considered in determining whether
Licensor’s officers and other employees have performed [ *
] hours of service under such Section.
Section 4.4.
Commercialization and Other Expenses. Licensee and its
Affiliates shall pay all expenses for the commercialization of the
AHPC Formulaid Product. Licensee shall compensate Licensor for any
samples of the Martek Product reasonably requested by Licensee at a
reasonable price to be agreed upon by Licensor and Licensee
pursuant to good faith negotiation. For purposes of the preceding
sentence, “samples” shall mean quantities which are
requested by Licensee or its Affiliates for research, development
or testing purposes and not requested for the purpose of
incorporation thereof into a AHPC Formulaid Product which is to be
distributed to Third Parties.
REPRESENTATIONS AND
WARRANTIES
Section 5.1.
Licensor’s Representations and Warranties. Licensor
represents and warrants to the Licensee as follows:
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(i)
Exhibit II sets forth a complete and accurate list of
the Licensed Patents as of the date of this Agreement.
(ii) Licensor
has all necessary corporate . power and authority to enter into this
Agreement, perform its obligations hereunder and license the
Technology and the Martek Product pursuant to the terms of this
Agreement. Licensor’s performance under this Agreement does
not conflict with any other contract to which Licensor is
bound.
(iii) Licensor
has, prior to the date of this Agreement, informed Licensee of all
Third Party patents relevant to the Technology or the Licensed
Patents and known to Licensor.
(iv) At
the time of this Agreement, Licensor has no actual knowledge of the
existence of other patents which would be infringed by the
commercial exploitation in the Territory, by Licensee or its
Affiliates, of the Technology, the Martek Product or the Licensed
Patents.
(v) Licensor
believes that it has disclosed to all relevant patent authorities
in the Territory and to Licensee all information within its
knowledge material to patentability of the Licensed Patents within
the Territory.
SECTION 5.2.
DISCLAIMERS . (I) LICENSOR HEREBY DISCLAIMS ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
RELATING TO THE MARTEK PRODUCT OR THE TECHNOLOGY AND ANY OTHER
WARRANTY OR WARRANTIES RELATING THERETO AND NOT EXPRESSLY SET FORTH
IN THIS AGREEMENT, AND LICENSOR DISCLAIMS ANY LIABILITY FOR
CONSEQUENTIAL DAMAGES RELATING TO THE USE, MANUFACTURE,
DISTRIBUTION, MARKETING, OR SALE OF THE TECHNOLOGY, THE MARTEK
PRODUCT OR THE AHPC FORMULAID PRODUCT. LICENSOR MAKES NO
REPRESENTATIONS OR WARRANTIES THAT THE TECHNOLOGY OR THE MARTEK
PRODUCT IS USABLE WITH THE AHPC FORMULAID PRODUCT OR THAT THE
TECHNOLOGY OR THE MARTEK PRODUCT CAN BE INCORPORATED SAFELY INTO
THE AHPC FORMULAID PRODUCT. LICENSOR SHALL NOT BE LIABLE FOR
DAMAGES RESULTING FROM ANY IMPROVEMENTS OR MODIFICATIONS TO THE
TECHNOLOGY OR THE MARTEK PRODUCT WHICH ARE NOT APPROVED AND
ACKNOWLEDGED SPECIFICALLY BY LICENSOR AS BEING PROPRIETARY TO
LICENSOR OR RESULTING FROM ANY SALE, MANUFACTURE OR USE OF THE AHPC
FORMULAID PRODUCT.
(II) LICENSOR HEREBY DISCLAIMS ANY WARRANTY THAT THE
TECHNOLOGY, THE MARTEK PRODUCT OR THE LICENSED PATENTS ARE FREE
FROM INFRINGEMENT BY THIRD PARTIES, EXCEPT AS SET FORTH IN
SUBSECTION 5.1(IV). LICENSOR FURTHER DISCLAIMS ANY WARRANTY
RELATING TO THE
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PATENTABILITY OF, OR THE VALIDITY OF ANY PATENTS
RELATING TO, THE TECHNOLOGY OR THE MARTEK PRODUCT AND MAKES NO
REPRESENTATIONS WHATSOEVER WITH REGARD TO THE SCOPE OF ANY SUCH
PATENTS OR EXCEPT AS SET FORTH IN SUBSECTION 5.1(IV), THAT SUCH
PATENTS MAY BE COMMERCIALLY EXPLOITED WITHOUT INFRINGING OTHER
PATENTS.
IT IS HEREBY
ACKNOWLEDGED AND AGREED THAT IT SHALL BE LICENSEE’S, AND NOT
LICENSORS, OBLIGATION TO DETERMINE THE SAFETY AND UTILITY OF THE
MARTEK PRODUCT AS IT RELATES TO INFANT FORMULA
PRODUCTS.
Section 5.3.
Manufacturing Standards. During the course of this
Agreement, in the event Licensor elects to manufacture the Martek
Product hereunder, Licensor shall advise Licensee of any proposed
change contemplated by Licensor associated with the manufacturing
processes, including the source of supply of all materials utilized
by Licensor in the manufacture of the Martek Product and the
specifications and controls utilized in the manufacturing process
therefor. In the event Licensor elects to manufacture the Martek
Product hereunder, Licensor shall manufacture the Martek Product in
accordance with applicable Technology meeting all agreed upon
specifications in accordance with good manufacturing practices and
such manufacturing, quality control, safety and handling procedures
and standards as may be mutually agreed upon in writing by the
parties or required by applicable governmental regulation. In order
to ascertain compliance with the provisions of this
Section 5.3, Licensee may inspect and/or audit the facilities,
processes records and other facets employed by Licensor in the
manufacturing, processing, testing and storage of the Martek
Product. Such inspection/audit will be conducted to ensure
compliance with all pertinent acts, regulations, and guidelines
promulgated by the federal Food and Drug Administration and other
relevant regulatory bodies. Any such inspection by Licensee shall
not relieve Licensor of its obligations to manufacture according to
the agreed upon requirements and specifications. Licensor hereby
undertakes to use reasonable efforts to have a provision containing
covenants similar to those made by Licensor in this
Section 5.3 included in any agreement between Licensor and a
Third Party relative to the manufacture of the Martek Product by
such Third Party for Licensee and Licensee shall be a third party
beneficiary of any such promise by any such Third Party; provided,
however, that a failure by such Third Party to discharge its
obligations under such an agreement shall not constitute a breach
by Licensor of this Agreement and shall not otherwise, in and of
itself, give Licensee a right to receive damages from Licensor.
Nothing in this Section 5.3 shall be construed as a warranty
concerning the merchantability, fitness for a particular purpose or
safety of the Technology, the Martek Product or the AHPC Formulaid
Product.
Section 5.4.
Licensee’s_ Representations and Warranties.
Licensee represents and warrants to the Licensor as
follows:
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(i) The
execution and delivery of this Agreement and the performance by
Licensee of the transactions contemplated hereby have been duly
authorized by all necessary corporate actions.
(ii) The
performance by Licensee of any of the terms and conditions of this
Agreement will not constitute a breach or violation of any other
agreement or understanding, written or oral, to which it or its
Affiliates is a party.
Section 6.1.
Compliance with Law, Regulatory Approval and Commercial
Introduction. Licensee covenants and agrees that it and its
Affiliates shall conduct all of their operations dealing with the
Technology, the Martek Product and the AHPC Formulaid Product in
material compliance with all applicable laws, regulations and other
requirements which may be in effect from time to time, of all
national governmental authorities, and of all states,
municipalities and other political subdivisions and agencies
thereof, including, without limiting the generality of the
foregoing, the Infant Formula Act of 1980, the Federal Food, Drug,
and Cosmetic Act, the regulations and other requirements of the
United States Food and Drug Administration, similar state laws and
regulations and similar laws and other requirements as may be
applicable in any jurisdiction in which the AHPC Formulaid Product
is sold. Licensee further covenants and agrees that it shall use
its diligent efforts to obtain, at its expense and as soon as
practicable, all necessary regulatory approvals with respect to the
use, manufacture and sale of the AHPC Formulaid Product in the
United States and Licensee shall be responsible for performing all
acts reasonably required for obtaining such approvals, including,
but not limited to, the preparation of all necessary petitions or
pre-market approval applications with regulatory agencies and the
performance of all reasonably required tests and data preparation.
Licensee promptly shall communicate to Licensor the details of all
regulatory approvals and to obtain such approvals in the United
States. If Licensee reasonably concludes that it and its Affiliates
cannot, after diligent efforts, lawfully distribute for sale the
AHPC Formulaid Product in the United States, Licensee further
covenants and agrees that it shall use its diligent efforts to
register and market the AHPC Formulaid Product (if it has not
already done so) in one or more jurisdictions which are not subject
to the jurisdiction of the applicable regulatory agencies of the
United States and which, alone or in the aggregate, offer
comparable marketing opportunities for the AHPC Formulaid Product
to the marketing opportunities available thereto in the United
States. Licensee further covenants and agrees that it shall use its
diligent efforts to distribute for sale in the United States the
AHPC Formulaid Product if such distribution would be lawful in the
absence of affirmative regulatory approval. Notwithstanding the
preceding sentence, Licensee’s. obligation to use its
diligent efforts to
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obtain
regulatory approvals for the AHPC Formulaid Product and to perform
those actions reasonably required to obtain such approvals shall
continue during the term of this Agreement and such obligation
shall not be relieved in the event Licensee or its Affiliates first
distribute the AHPC Formulaid Product for sale in the United States
and later determine that affirmative regulatory approval will be
necessary in order to continue to distribute for sale the AHPC
Formulaid Product in the United States.
Section 6.2.
Performance and Product Quality. Licensee covenants and
agrees that it and its Affiliates shall exercise a reasonable
standard of care in the testing, manufacturing, marketing,
packaging, distribution and sale of the AHPC Formulaid Product.
Licensee further covenants and agrees that it and its Affiliates
shall maintain quality control, provide adequate tests of
materials, provide quality workmanship, and do such other things as
are reasonably required to assure high quality production of the
AHPC Formulaid Product and, if Licensee elects to manufacture the
Martek Product, to assure high quality development of the Martek
Product. In this regard, and without limiting the applicability of
the general indemnification provisions applicable to the
representations, warranties and covenants made by the parties to
this Agreement as provided in Article XI of this Agreement,
Licensee hereby covenants and agrees to indemnify, defend and hold
harmless Licensor and Licensor’s directors, officers,
employees and agents from and against all claims, actions or causes
of action (whether sounding in contract, negligence or strict
liability), suits and proceedings and all loss, assessments,
liability, damages, and expenses incurred in connection therewith
(including reasonable attorneys’ fees) for which Licensor or
its directors, officers, employees or agents may become liable or
incur with respect to any product liability claim asserted against
Licensee, its Affiliates, Third Parties or Licensor relating to the
manufacturing, marketing, storage, packaging, distribution, sale or
use of the AHPC Formulaid Product, unless such claim, damage or
loss results from the negligent failure of Licensor to manufacture
the Martek Product in accordance with specifications provided or
approved by Licensee or results from any intentional wrongdoing of
Licensor.
Section 6.3.
Licensee’s Records. Licensee covenants and agrees
that, for as long as Royalties are due under this Agreement,
Licensee will keep true and accurate records adequate to permit
Royalties due to Licensor to be computed and verified, which
records shall be made available upon prior written request by
Licensor, during business hours, for inspection by an independent
accountant who is reasonably acceptable to Licensee and who shall
be bound by a confidentiality agreement with the Licensee, to the
extent necessary for the determination of the accuracy of the
reports made
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hereunder. For
purposes of this Section 6.3, any of the six largest
accounting firms in the United States shall be deemed reasonably
acceptable to Licensee. Licensor shall bear the full cost of such
inspection unless a discrepancy of five percent or greater of
Royalties due hereunder is discovered by the accountant, in which
case Licensee shall bear the full cost of the
inspection.
Section 6.4.
Protection of Licensor’s Proprietary Interest.
Licensee acknowledges and agrees that the Licensed Patents and the
Martek Product are proprietary to Licensor, and Licensee hereby
covenants and agrees that Licensee and its Affiliates shall not use
the Technology or the Martek Product for any purpose not provided
for hereunder, shall not challenge or cause any Affiliate or Third
Party to challenge Licensor’s rights to the Technology, the
Licensed Patents or the Martek Product or the rights therein of
Third Parties who are licensees of the Technology, the Licensed
Patents and/or the Martek Product, and Licensee and its Affiliates
shall cooperate with Licensor in protecting Licensor’s rights
to the Technology, the Licensed Patents and the Martek Product. The
provisions of this Section 6.4 shall survive the termination
or expiration of this Agreement, whether the termination is
occasioned by the Agreement’s natural expiration pursuant to
Section 3.1 of this Agreement or is earlier terminated
pursuant to the other Sections of Article III of this
Agreement.
Section 6.5.
United States Export Regulation. Licensee covenants
and agrees that it and its Affiliates shall not knowingly export or
re-export, directly or indirectly, the Technology, the Martek
Product, or the AHPC Formulaid Product or any part or direct
product thereof, to any country in violation of the United States
Export Administration Regulations.
Section 6.6.
Product Development and Use. Licensee covenants and
agrees that it and its Affiliates shall, throughout the term of
this Agreement, use their diligent efforts to use and develop the
Martek Product and/or the Technology with respect to the AHPC
Formulaid Product in a way which is consistent with the
parties’ objective of developing a final marketed product
which has a polyunsaturated fatty acid composition effectively
equivalent to that of human breast milk. This Section 6.6
shall not be construed to require all AHPC Formulaid Products to
incorporate the identical quantities of the Martek Product or to
incorporate the identical quantities of the Market Product as is
contained in similar products sold by Third Parties under license
from Licensor.
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Section 7.1.
Improvements to Products. During the first year of
this Agreement, Licensor covenants and agrees to use reasonable
efforts to refine the development process for the Technology and
the Martek Product and timely to notify Licensee (in accordance
with its obligations to supply quarterly written reports to
Licensee under Section 13.1 of this Agreement) of any
improvements or modifications thereto and to make the relevant
information and technology available as promptly as possible for
use by Licensee in accordance with this Agreement. In the event
that Licensee terminates this Agreement on or before the first
anniversary date of this Agreement due to Licensor’s failure
to comply with its obligations described in the preceding sentence,
Licensee shall be relieved of its obligation to pay to Licensor the
fee described in Section 4.1 (ii) of this Agreement, and
such relief from such obligation shall be Licensee’s sole and
exclusive remedy with respect to Licensor’s failure to comply
with its obligations described in the preceding sentence. Licensee
shall have the right to make improvements or modifications to the
Technology or the Martek Product during the term of this Agreement,
and, in the event Licensee makes any improvements or modifications
to the Technology or the Martek Product, (i) Licensor shall
during the term of this Agreement have a royalty free right to use
such improvements or modifications, (ii) the Technology or the
Martek Product as so improved or modified shall be subject
, to the terms of this Agreement, and
(iii) Licensee shall give Licensor prompt written notice of
any such improvement or modification.
PATENT PROSECUTION AND
ENFORCEMNT
Section 8.1.
Patent Applications. Exhibit III of this
Agreement sets forth the complete texts of all United States patent
applications filed by Licensor which reasonably relate to the
Licensed Patents. The responsibility for the prosecution of, and
the exclusive right to prosecute, such patent applications and the
exclusive right to apply for patent applications in any and all
jurisdictions shall be and remain with Licensor except as provided
below. Licensor shall exercise all reasonable efforts in this
regard. Licensor agrees to keep Licensee informed of the course of
such patent prosecution.
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Section 8.2.
Infringement Notice. Licensee shall notify Licensor promptly
in writing of any infringement of any issued Licensed Patent or
other interference with Licensor’s proprietary interests
relating to the Technology or the Martek Product which becomes
known to Licensee. If Licensor determines that a material
infringement exists, Licensor shall communicate such determination
to Licensee in writing and take prompt action to attempt to
eliminate that infringement.
Section 8.3.
Infringement Actions. If Licensor receives Licensee’s
infringement notice under Section 8.2 of this Agreement and
within a reasonable time thereafter Licensor is unsuccessful in
eliminating the infringement, Licensor shall have the first right
to bring, at its own expense, an infringement action against any
Third Party within a reasonable time no longer than three
(3) months from the date of Licensee’s notice of an
infringement under Section 8.2 of this Agreement. If the
infringement materially and adversely affects Licensee’s and
its Affiliates’ market share relating to the AHPC Formulaid
Product and Licensor waives its right to bring such an infringement
action in writing to Licensee or has not eliminated such
infringement or initiated an infringement suit within five
(5) months from the date of Licensee’s notice of
infringement, Licensee, after notifying Licensor in writing, shall
be entitled to bring such infringement action at its own expense.
In the latter event, any sums recovered by Licensee in any such
infringement action or in its settlement shall belong to Licensee;
provided, however, that, for purposes of Section 4.1 of this
Agreement, any damages attributable to loss of sales of the AHPC
Formulaid Product shall be considered an amount received by
Licensee or an Affiliate from the sale for value of the AHPC
Formulaid Product in the period(s) to which such damages relate and
Royalties thereon shall be deemed timely remitted by Licensee to
Licensor hereunder if remitted to Licensor within sixty
(60) days of the date on which such damages are received by
Licensee and, in the case of settlement, Licensee shall reasonably
and in good faith determine the portion of the settlement that
represents compensation for loss of sales of the AHPC Formulaid
Product and such portion shall be treated as if such portion were
damages attributable to loss of sales of the AHPC Formulaid
Product. The party conducting such action shall. have full control
over its conduct, including settlement thereof. Regardless of which
party brings the suit, Licensor and Licensee shall assist one
another and cooperate in any such litigation at the other’s
request.
Section 8.4.
Defense of Infringement Actions. Licensor and Licensee
hereby acknowledge and agree that each party shall be responsible
for defending, at its own expense, any infringement action brought
against such party by any Third Party, and Licensor and Licensee
agree reasonably to cooperate with the other in any such defense
and in responding to any threatened infringement action; provided,
however, that, if Licensee is obligated to pay a royalty to a Third
Party relative to use or sale of the AHPC Formulaid Product in
excess of [ * ] of the Sales Price of the AHPC
Formulaid
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Product (based
upon an opinion of counsel reasonably acceptable to Licensor that
Licensee would infringe a patent or other proprietary interest of
such Third Party in the absence of such a royalty payment), then
the Royalty payable to Licensor under Section 4.1
(iii) of this Agreement shall be reduced with respect to sales
of the AHPC Formulaid Product in the Territory with respect to
which such royalties to such Third Party relate from [ * ]
or, if applicable, the Royalty payable to Licensor under
Section 4.1 (iv) of this Agreement shall be reduced with
respect to sales of the AHPC Formulaid Product in the Territory
with respect to which such royalties to such Third Party relate
from [ * ] , during any period such a royalty to such a
Third Party is paid.
Section 9.1.
Assignment. This Agreement and the rights granted hereunder
shall not be assignable, in whole or in part, by Licensee, nor
shall its obligations hereunder be delegated, without the prior
written consent of Licensor; provided, however, that this,
prohibition against assignment shall not apply to an assignment to
an Affiliate of Licensee or an assignment in connection with the
transfer of a substantial portion of Licensee’s business or
its merger or consolidation with another company if Licensee
promptly notifies Licensor of any such assignment, merger or
consolidation. Licensor may assign its rights under this Agreement
freely and without Licensee’s. consent. Licensor shall be
entitled to delegate its obligations hereunder only with the prior
written consent of Licensee, which consent may not unreasonably be
withheld, until the date on which the Martek Product can be
produced at commercial volumes and costs, which date will be deemed
to have occurred upon the first commercial introduction of the AHPC
Formulaid Product anywhere in the world. After the Martek Product
can be produced at commercial volumes and costs, Licensor shall be
entitled to delegate any or all of its obligations, if any,
hereunder without the consent of Licensee.
Section 10.1.
Relationship Between Parties. Neither party to this
Agreement shall have the power to bind the other by any guarantee
or representation that either party may give, or in any other
respect whatsoever, or to incur any debts or liabilities in the
name of or
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