NOTICE: CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED FOR
PORTIONS OF THIS DOCUMENT AS INDICATED HEREIN
This License
Agreement (“Agreement”) is made and entered into as of
the 28th day of October, 1992, by and between Martek Biosciences
Corporation, a Delaware corporation (“Licensor”), and
Mead Johnson & Company, a Delaware corporation
(“Licensee”).
WHEREAS, Licensor
has developed certain technology (the “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
is 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.
Section 1.2.
For purposes of Section 1.3 of this Agreement, “
ARASCO ” shall mean a Martek Product containing no
less than 15% arachidonic acid by weight of fatty acids.
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Section 1.4.
“ Commercially Reasonable Volumes ” shall mean a
minimum of 1500 Kg. of ARASCO per year and 500 Kg. of DHASCO per
year.
Section 1.5.
For purposes of Section 1.3 of this Agreement, “
DHASCO ” shall mean a Martek Product containing no
less than 30% docosahexaenoic acid by weight of fatty
acids.
Section 1.6.
“ Infant Formula Product ” shall mean an enteral
product formulated for the nutritional support of premature infants
and/or 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 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 1.7.
“ Licensed Patents ” shall mean the patent
applications attached hereto as Exhibit III and all patents
and patent applications throughout the world 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 1.8.
“ Martek Product ” shall mean triglycerides
containing Omega-3 and/or. Omega-6 long-chain polyunsaturated fatty
acids produced by microbial fermentation using technology which is
proprietary to Licensor.
Section 1.9.
“ Mead Johnson 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 or label
licensed by Licensee or an Affiliate, and (v) into which the
Martek Product is incorporated.
Section 1.10.
“ Technology ” shall mean the organisms,
microorganisms, specifications, biological materials, designs,
formulae, processes, standards, data, trade secrets, knowhow,
copyrights and technology relating to the development and
production of the Martek Product and proprietary to Licensor and
any modifications, improvements and enhancements to any of the
foregoing made by Licensor, which, in Licensor’s opinion, is
or are necessary in the production and development of the Martek
Product.
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Section 1.11.
“ Territory ” [ * ]
Section 1.12.
“ Third Party ” shall mean any party other than
Licensor, Licensee and Affiliates.
GRANT OF LICENSE AND OTHER
RIGHTS
(i) 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 throughout the Territory,
directly or through an Affiliate, under Licensed Patents and the
Technology, (A) to produce the Mead Johnson Product,
(B) to use and make the Martek Product for purposes of making
and having made the Mead Johnson Product and (C) to use,
market and distribute directly or indirectly the Mead Johnson
Product.
(ii) Licensor
further grants to Licensee the option to add the territory of [
* ] to the license granted under Section 2.1.(i) so that
the Territory as defined herein will include all countries
throughout the world, such option to be exercisable at any time
during the term of this Agreement upon payment of an additional fee
as specified in Section 4.1(i) of this Agreement.
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 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
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 territorially restricted and if
the amount of the reduction in the lump sum charged
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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 or not pursuant to another
licensing arrangement, for the purpose of creating a sufficient
supply of the Martek Product to satisfy Licensee’s and its
Affiliates’ requirements with respect to their marketing and
sale of the Mead Johnson Product; provided, however, that such
requirements and any increases or decreases thereof, shall be
communicated in writing by Licensee to Licensor not less than nine
(9) 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 pursuant to subsection (i) 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.
(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 Mead Johnson Product,
Licensor and Licensee shall negotiate in good faith and agree upon
reasonable terms relating to the consideration to be payable by
Licensee or its
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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 and upon commercially reasonable volumes of Martek
Product required by Licensee.
(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 Mead Johnson Product.
Section 2.3.
Sublicensinq . The grants to Licensee under this
Article II shall not include the right to grant
sublicenses.
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 throughout the Territory the Trademark solely on,
and in connection with the manufacture and sale of, the Mead
Johnson 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 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 Mead Johnson Product.
(iv) Licensee
recognizes and acknowledges Licensor’s ownership of the
Trademark and Licensor’s intent to protect the Trademark in
such foreign countries as Licensor, in its sole discretion, deems
appropriate. 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 anywhere in the world. All use by Licensee or its
Affiliates of the Trademark anywhere in the world 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
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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 Mead Johnson 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 Mead Johnson Products, and the following legend prominently
shall appear at least once in each such Mead Johnson Product or
material: “Formulaid® is a registered trademark of
Martek Biosciences Corporation.” Until such time as Licensor
obtains a U.S. Federal Registration on the Trademark, Licensee
shall substitute the symbol “ TM ” in place of the symbol® as
specified herein. Licensee further agrees that it will comply with
the marking and registered user requirements of all foreign
countries in which the Trademark is used, including, but not
limited to, requirements relating to the execution of any
documentation needed in order to effectuate the purpose of this
provision.
(vi) Licensee
covenants that Mead Johnson 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 Mead Johnson Product
bearing the Trademark, Licensee shall submit to Licensor, for its
approval, samples of the Mead Johnson Product as well as samples of
all materials used to sell or to promote the sale of Mead Johnson
Products, including, but not limited to, labels, labeling,
packaging materials, advertising and other promotional materials.
Thereafter, Licensee and its Affiliates shall not make any change
to the Mead Johnson Product or to the way in which the Trademark is
used or depicted in connection with the Mead Johnson Product or
make any change in such materials used to sell or promote the sale
of the same without first submitting such proposed change to
Licensor and obtaining its approval.
(B) Licensor
shall have the right, at all times and upon reasonable advance
notice to Licensee, to request and receive without charge at
reasonable intervals throughout the term of this Agreement, a
reasonable number of samples of Mead Johnson Products and other
materials that depict the Trademark, in order that Licensor may
satisfy itself that such Mead Johnson Products and materials which
depict the Trademark conform to the samples thereof approved by
Licensor.
(C) No
approval required of Licensor under this
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subsection
(vi) shall be unreasonably withheld or delayed, and any sample
of a Mead Johnson Product bearing the Trademark or materials used
to sell or promote the sale of Mead Johnson Products bearing the
Trademark which have not been disapproved within fifteen business
days after receipt thereof shall be deemed to have been
approved.
(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.
(E) Licensee
shall notify Licensor in writing prior to any material alterations
to the formula of the Mead Johnson Product bearing the
Trademark.
(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 Mead
Johnson Product or on the labels, labeling or packaging thereof or
on materials used to promote the sale of the Mead Johnson
Product.
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 (i) the delivery of
the Technology as contemplated under this Agreement and
(ii) instructions pertaining to the production of the Martek
Product at commercial volumes and costs, but only to the extent
that such services are commercially reasonable. This obligation to
perform services shall terminate on the first to occur of
(i) the termination of this Agreement, (ii) the fifth
anniversary date of this Agreement, (iii) the second
anniversary of the date on which the Mead Johnson Product is first
commercially introduced anywhere in the world and (iv) the
performance by Licensor’s employees of
[ * ] hours of such
services.
Section 2.6.
Other Patents . Licensor shall not assert against Licensee
or its Affiliates any patent other than the Licensed Patents now or
later owned or controlled by Licensor which prevents Licensee or
its Affiliates from exploiting the Technology or the Martek
Product.
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Section 2.7.
Licensee’s Property . Nothing in this Article II
or any other provision of this Agreement shall be construed to
prevent Licensee or its Affiliates from exploiting any technology
which an Affiliate independently develops and which does not
infringe upon any Licensed Patents, whether or not such technology
is similar to the Technology or to the Martek Product; provided,
however, that (i) no technology shall be considered hereunder
to be independently developed by an Affiliate unless such Affiliate
develops such technology under circumstances where no individual
associated with the development of such technology has been exposed
to confidential information delivered to Licensee or its Affiliates
pursuant to Article XII hereof or has otherwise been exposed
directly or indirectly to the Technology or the Martek Product;
(ii) this Section shall not be construed to permit Licensee or
its Affiliates to exploit the Technology or the Martek Product, to
market the Mead Johnson Product or to disclose information which is
confidential under Article XII hereof except as otherwise
expressly permitted under this Agreement; (iii) in the case of
the exploitation by Licensee or its Affiliates of any technology or
the disclosure of any information which is or are challenged by
Licensor in a court of competent jurisdiction as constituting a
breach of this Agreement or an infringement of Licensor’s
proprietary rights in the Technology or the Martek Product,
Licensee or its Affiliates, as applicable, shall bear the burden of
proving that such technology was independently developed by an
Affiliate; and (iv) nothing in this Section shall be construed
to prohibit Licensor or Licensee from enforcing a valid patent
granted to it in any jurisdiction against the Licensee, Licensor,
its Affiliates or any Third Person.
Section 3.1.
Term . This Agreement shall commence on the date of this
Agreement and, unless earlier terminated pursuant to this
Article III, shall expire, as to each country in which the
Mead Johnson Product is sold or otherwise distributed for consumer
use, on the date which is twenty five (25) years after the
first commercial introduction of the Mead Johnson Product in such
country. Upon expiration, 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
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remedy and make
good such breach or failure, or have undertaken to cure the same,
within thirty (30) days from the receipt of a written notice
of failure of compliance or breach.
Section 3.3.
Termination in case of Infringement . Licensor or Licensee
shall have the right to terminate this Agreement with respect to
the manufacture, use or sale of the Technology or the Martek
Product in a particular jurisdiction within the Territory if a
court of competent jurisdiction therein 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 Mead Johnson Product in the applicable
jurisdiction, including, but not limited to, commercially
reasonable efforts to procure a license from such Third Party or to
alter the design or offending composition of the Martek Product,
the Technology or the Mead Johnson Product, as applicable, so as to
eliminate the infringement. Any costs incurred by Licensor for its
procurement of a license from such a Third Party shall be the
responsibility of Licensor.
Section 3.4.
Post-Termination Rights . Effective upon the date of
termination of this Agreement pursuant to Section 3.2 or 3.3
hereof, Licensee and its Affiliates shall cease manufacturing the
Martek Product and the Mead Johnson Product provided, however,
that, to the extent lawful, Licensee and its Affiliates may
continue to distribute the Mead Johnson Products manufactured prior
to such date if Licensee continues to make payments under
Section 4.1 with respect to such Mead Johnson 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 Mead Johnson Products manufactured prior to the date
of the termination of this Agreement pursuant to Section 3.2
or 3.3 hereof and (ii) the date which is six months after the
date of the termination of this Agreement pursuant to
Section 3.2 or 3.3 hereof, Licensee and its Affiliates shall
cease all use of the Technology, sale of the Mead Johnson Product
and use of the Trademark and Licensee and its Affiliates shall have
no further rights under this Agreement.
Section 3.5.
Inability to Market the Mead Johnson Product
(i)
Refund . If Licensee and its Affiliates are prevented by
applicable law (e.g., inability to obtain legally required
regulatory approval or the existence of a Third Party
patent
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which, upon
Licensee’s marketing of the Mead Johnson Product, would
subject Licensee to liability for infringement of such Third Party
patent, as concluded by a legal opinion issued by an independent
Third Party counsel mutually selected by Licensor and Licensee)
from marketing the Mead Johnson Product in the United States
despite its satisfaction of the refund - conditions set forth in subsection (ii) of
this Section by the third anniversary date of this Agreement, or if
Licensor is unable to refine the development process for the Martek
Product or supply the Martek Product (directly or through Third
Parties) in each case at Commercially Reasonable Volumes and
Commercially Reasonable Costs, in accordance with the
specifications set forth in Exhibit IV of this Agreement and
pursuant to representations and warranties substantially similar in
scope to those set forth in Exhibit V of this Agreement
by the third anniversary of date of this Agreement, or if Licensor
is incapable of producing the Martek Product or having the Martek
Product produced by a Third Party in compliance with all applicable
environmental laws, regulations and permits by the third
anniversary date of this Agreement, then in any such case Licensee
shall be entitled to elect, within sixty days after such date, to
terminate this Agreement. If Licensee elects to terminate this
Agreement pursuant to the previous sentence, all fees paid by
Licensee to Licensor by such date pursuant to subsection
(i) of Section 4.1 of this Agreement (and not as of such
date otherwise refunded to Licensee), including any advances paid
pursuant to the Letter of Intent between Licensor and Licensee
executed on or about March 24, 1992 (the “Letter of
Intent”), shall be refunded, without interest, to the
Licensee as follows:
(A) If
the stockholders of Licensor with a right of first refusal
respecting issuances of Licensor’s Common Stock, $.10 par
value per share (the “Common Stock”), fail to exercise
such right such that it is possible for the Licensor lawfully to
issue ,
shares of Common Stock to Licensee,
Licensor shall issue to Licensee Common Stock against such
refundable fees at a rate of one share of Common Stock per:
(1) in the event of a registered initial public offering by
Licensor of the Common Stock occurring subsequent to the execution
of this Agreement and prior to the third anniversary date of this
Agreement, the lesser of (x) $100 and (y) the last sale price
of the Common Stock on the national securities exchange on which
the Common Stock is traded, or, if the Common Stock is not traded
on a national securities exchange, the average of the bid and asked
prices for the Common Stock as reported by a recognized quotation
service, determined as of the date of Licensee’s election to
terminate this Agreement; or, (2) if a registered initial
public offering by Licensor of the Common Stock does not occur
prior to the third anniversary date of this Agreement, $100. The
$100 figure specified in clause (2) of this subparagraph
(A) shall be adjusted appropriately if, after the
date
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of this
Agreement, a change in the number of issued shares of Common Stock
occurs as the result of a subdivision or consolidation of then
outstanding shares of Common Stock or if then unissued authorized
stock (similarly adjusted for subdivision or consolidation) is
subsequently issued or for any other condition which materially
dilutes the Licensee’s potential ownership share of the
Licensor after the Agreement date.
(B) If
the stockholders of Licensor exercise their rights of first refusal
such that Licensor is unable lawfully to issue Common Stock to
Licensee in satisfaction of its refund obligations under this
Section 3.5, Licensor shall refund all refundable sums in
cash.
Licensee’s
right to terminate this Agreement and receive a refund of fees
under this Section 3.5 shall be Licensee’s exclusive remedy
for Licensor’s failure sufficiently to refine the development
process of the Martek Product or supply Martek Product (directly or
through Third Parties) and such right shall terminate at the
earliest to occur of the date which is sixty days after the third
anniversary of this Agreement, the date on which the Mead Johnson
Product is first commercially introduced anywhere in the world, or
the date on which Licensee materially breaches this
Agreement.
(ii)
Refund Conditions . Licensee’s rights to a refund of
amounts paid pursuant to subsection (i) of Section 4.1 of
this Agreement shall be contingent upon Licensee’s use of
reasonable efforts to obtain, at its expense and as soon as
practicable, all necessary regulatory approvals with respect to the
use, mannufacture and sale of the Mead Johnson Product in the
United States, Licensee being responsible for performing all acts
necessary 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 necessary tests and data preparation. Such refund is further
contingent upon Licensee promptly communicating to Licensor the
details of all regulatory approvals and efforts to obtain such
approvals in the United States and in any other jurisdiction in
which approval for the Mead Johnson Product is sought by
Lic
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