LICENSE AGREEMENT WITNESSETH

 

1.6                                  “CONFIDENTIAL INFORMATION” means any and all information or data relating to either Compound A or Compound B and/or Product which, in the course of carrying out a provision of this Agreement, a party discloses to the other party, its employees or representatives, whether in writing, orally or by observation, including, without limitation, all scientific, clinical, technical, commercial, financial and business information and Know-How, and other information or data considered confidential in nature. Subject to SECTION 7.1 hereof, Abbott shall hold in confidence and shall not directly or indirectly disclose or provide to any third party Confidential Information pertaining to Compound A, Compound B or Abbott Technology without ALS’s prior written consent. Confidential Information shall not include information or any portion thereof which:

 

(a)                                   is known to the receiving party at the time of disclosure hereunder and documented by written records made prior to the date of such disclosure;

 

(b)                                  is subsequently disclosed to the receiving party by an unaffiliated third person who has the right to make such disclosure;

 

(c)                                   becomes patented, published or otherwise part of the public domain other than through the acts of the receiving party; or

 

(d)                                  is independently developed by or for the receiving party by person(s) having no knowledge of such information as evidenced by its written records.

 

1.7                                  “EFFECTIVE DATE” shall have the meaning ascribed to such term in the opening paragraph of this Agreement.

 

1.8                                  “EXCLUSIVE LICENSE” means a license that operates to exclude all others, including Abbott.

 

1.9                                  “FIRST COMMERCIAL SALE” means the first sale of Product in the Territory, after Regulatory Approval, by ALS or its Affiliates (or their sublicensee(s)) to any unaffiliated third party as evidenced by the selling party’s invoice or other relevant document provided to such third party. A sale to an unaffiliated third party shall not include quantities delivered solely for research purposes, for clinical trials or quantities distributed as free samples

or promotions.

 

1.10                            “KNOW-HOW” means any proprietary technology, information, methods of use, processes, techniques, ideas or inventions (other than the Patents) owned, possessed or used by Abbott as of the Effective Date which is directly related to or directly used in connection with Compound A or Compound B or the manufacture of Compound A, Compound B and/or Product, including all trade secrets and any other technical information relating to development, use or sale of Compound A, Compound B and/or Product, provided that Abbott has the right to license and/or sublicense to ALS. To the extent that any such Know-How relates to other compounds in addition to Compound A and/or Compound B, Know-How shall only include that portion of the Know-How exclusively relating to Compound A and/or Compound B.

 

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1.11                            “NDA” means an application (whether original, supplementary or abbreviated) to the applicable Regulatory Authority in a country of the Territory, for Regulatory Approval. An NDA, together with all supplemental filings referencing the initial NDA filing, shall be deemed one and the same NDA for all purposes of this Agreement.

 

1.12                            “NET SALES” means gross sales of Product by ALS, by any Affiliates of ALS, or by any sublicensees of ALS, to unrelated third parties, in arm’s length transactions, including, but not limited to, pharmaceutical wholesalers, managed healthcare organizations, pharmacies, hospitals or dispensing physicians, less any of the following charges or expenses that are incurred in connection with gross sales of the Product to such entities/persons

during the Term:

 

(a)                                   discounts, including cash discounts, customary trade allowances or rebates actually taken, governmental rebates, chargebacks, and group purchasing management fees of up to three percent (3%) for formulary access;

 

(b)                                  credits or allowances given or made for rejection, recall or return of previously sold Product actually taken;

 

(c)                                   any tax or government charge, duty or assessment (including any tax such as a value added or similar tax or government charge) levied on the sale, transportation or delivery of Product when included on the invoice or other written document between the parties as payable by the purchaser and collectable by ALS, its Affiliate or sub-licensee; and

 

(d)                                  freight, postage, transportation, insurance and duties on shipment of Product when included on the invoice or other written document between the parties as payable by the purchaser and collectable by ALS, its Affiliates or sublicensees.

 

With respect to any gross sales of Product by ALS, by any Affiliates of ALS, or by any sublicensees of ALS, to unrelated third parties in non-arm’s length transactions, “Net Sales” per unit of Product shall be determined by using the “Net Sales” per unit of Product in arm’s length transactions for the same reporting period.

 

1.13                            “PATENTS” means the patent applications and patents listed in EXHIBIT A hereto and any patents issuing upon such patent applications, any amendments thereto, foreign equivalents in the Territory, and any and all substitutions, extensions, additions, reissues, re-examinations, renewals, divisions, continuations, continuations-in-part or supplementary protection certificates derived from or relating thereto.

 

1.14                            “PHARMACEUTICAL USES” means any therapeutic use of Compound A, Compound B and/or Product in any formulation or dosage form for the management of a disease or condition of humans.

 

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1.15                            “PRODRUG” means any compounds which, following administration, are actively converted in the body to Compound A or Compound B.

 

1.16                            “PRODUCT” means any formulation containing either Compound A or Compound B.

 

1.17                            “REGULATORY APPROVAL” means all governmental approvals and authorizations necessary for the manufacture and commercial sale of a Product in a country of the Territory, including, but not limited to, marketing authorization, pricing approval and pricing reimbursement, as applicable.

 

1.18                            “REGULATORY AUTHORITY” means the United States Food and Drug Administration (“FDA”) or any successor entity and its equivalent in other countries of the Territory, including, but not limited to, EMEA.

 

1.19                            “TERM” means the period commencing on the Effective Date and ending as set forth in Section 9.1 below.

 

1.20                            “TERRITORY” means the entire world, except Japan.

 

1.21                            “VALID CLAIM” means a claim of an unexpired issued Patent that has not been withdrawn, canceled or disclaimed nor held invalid or unenforceable by a court or government agency of competent jurisdiction in an unappealed or unappealable decision.

 

2.                                        LICENSE GRANT. Subject to the terms and conditions of this Agreement, Abbott hereby grants to ALS an Exclusive License in the Territory, under Abbott Technology, for all Pharmaceutical Uses, with the right to grant sublicenses pursuant to SECTION 5.5 hereof, to (i) research, develop, make or have made, Compound A, Compound B and Product(s); (ii) apply for and obtain Regulatory Approvals, all as may be required to manufacture and commercialize Product(s); and (iii) register, use, import/export, market, offer to sell and sell, Product(s) and Compound A and Compound B.

 

3.                                        INFORMATION; EXCLUSIVITY.

 

3.1                                  DELIVERY OF INFORMATION/CONSULTATION WITH ABBOTT PERSONNEL.

 

(a)                                   On or before December 31, 2004, Abbott shall, to the extent it has not already done so, deliver to ALS the information under Abbott’s and its Affiliates’ control involving the Compounds constituting Patents and Know-How excluding any attorney-client privileged information. Abbott shall also, promptly after the Effective Date, transfer to ALS Abbott’s interests in Investigational New Drug application no. 57,836, such transfer being subject, in all respects, to applicable Regulatory Approvals.

 

(b)                                  From the Effective Date until the six (6) month anniversary of the Effective Date (the “CONSULTATION PERIOD”), Abbott shall make its

 

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technical personnel familiar with the development of Compound A and/or Compound B available to ALS upon its request for reasonable consultation at reasonable times and places. ; provided, however, that Abbott shall not be obligated to make any such personnel available at any particular time if in doing so it would interfere with Abbott’s business operations (the “CONSULTATION SERVICES”). During the Consultation Period, Abbott shall provide a maximum of one hundred twenty (120) man hours of Consultation Services (to the extent not utilized under that certain Option Agreement between Abbott and ALS dated as of October 29, 2004, as amended). The first one hundred and twenty (120) man hours of such Consultation Services shall be GRATIS to ALS and thereafter, ALS shall pay Abbott $275.00 per hour (the “CONSULTATION RATE”) for such Consultation Services. Abbott shall provide such Consultation Services on an “as is” basis, without any representation or warranty as to accuracy, completeness or quality. ALS shall have sole responsibility for its decision to take or not take any action based upon such Consultation Services, and for the effect and consequences of such actions or inactions. If, after the Consultation Period, ALS requires any additional Consulting Services, ALS shall make a request for such services in writing. Abbott shall not be obligated to provide such additional Consultation Services but it shall not unreasonably withhold such Consultation Services from ALS. Any such additional Consultation Services shall be billed at the Consultation Rate. ALS agrees to reimburse Abbott for all reasonable out-of-pocket expenses, if any, incurred by Abbott in providing the Consultation Services. Abbott shall invoice ALS for such expenses and ALS shall pay such invoices with thirty (30) days of its receipt thereof.

 

4.                                        PURCHASE OF ABBOTT INVENTORY OF CLINICAL SUPPLIES, BULK COMPOUND AND CHEMICAL INTERMEDIATES.

 

4.1                                  PURCHASE OF INVENTORY. ALS shall purchase approximately 1,125 kg. of bulk Compound A (the “Inventory”).

 

4.2                                  PURCHASE PRICE.

 

(a)                                   ALS shall pay to Abbott, as the purchase price for the Inventory to be purchased under this ARTICLE 4, the aggregate amount of Ten Million Dollars ($10,000,000), payable as follows: (a) Two Million Dollars ($2,000,000) upon the execution of this Agreement, (b) Seven Million Dollars ($7,000,000) on or before May 1, 2005 and (c) One Million Dollars ($1,000,000) on or before June 30, 2005. Abbott shall ship approximately a pro rata portion of the Inventory to ALS upon receipt of each of the foregoing payments (i.e. approximately twenty percent

 

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(20%) of the Inventory shall be shipped by Abbott upon receipt of the initial payment of Two Million Dollars ($2,000,000)) unless otherwise agreed by the parties in writing.

 

4.3                                  TESTING OF INVENTORY. At any time after the Effective Date, ALS shall have the right to have its personnel present to witness the removal and testing of samples of the Inventory. Abbott shall make reasonable efforts to provide ALS with advance notice of such testing and sampling. ALS shall have the right to review and take copies of the test records relating to such sampling and testing. Abbott shall use reasonable commercial efforts to complete the tests described in the Schedule of Release Specification Tests set forth in EXHIBIT B no later than the December 6, 2004. If, using the tests described in the Schedule of Release Specification Tests, it is determined that GREATER THAN OR EQUAL TO ninety percent (90%) of the Inventory meets the release specifications set forth in the Schedule of Release Specification Tests set forth in Exhibit B, ALS shall be deemed to have accepted the Inventory. If, in the alternative, it is determined that LESS THAN ninety percent (90%) of the Inventory meets the release specifications set forth in the Schedule of Release Specification Tests set forth in Exhibit B, ALS shall be deemed to have accepted the Inventory; provided, however, that ALS and Abbott shall thereafter negotiate in good faith a reduction in the purchase price for the Inventory that is commensurate with such shortfall in Inventory. ALS shall have the right to submit the results of the Release Specification Tests set forth in Exhibit B to a Regulatory Authority.

 

5.                                        DEVELOPMENT/MANUFACTURING/MARKETING/DISTRIBUTION BY ABBOTT/OTHER.

 

5.1                                  CLINICAL DEVELOPMENT. ALS shall use commercially reasonable and diligent efforts to develop the Compounds for one or more treatment indications. For purposes of this SECTION 5.1(a), development of an indication shall be deemed to have commenced upon enrollment of the first subject in the first clinical study for an indication using the formulation selected for clinical development. ALS shall have sole responsibility for designing, conducting and paying for the cost of the clinical development of Product and shall use commercially reasonable efforts to diligently conduct such clinical development.

 

5.2                                  COMMERCIALIZATION. ALS shall, assuming Regulatory Approval, use commercially reasonable efforts to commercialize Product in the United States and the European Union by itself or through its Affiliates and sublicensees, using at least that level of effort as a pharmaceutical company of comparable size and resources would use with similar compounds.

 

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5.3                                  MARKETING. ALS shall have sole responsibility for marketing Product, including entering into any co-marketing and/or co-promotion arrangements. ALS shall distribute all Product samples in the United States in accordance with the Prescription Drug Marketing Act.

 

5.4                                  MANUFACTURING. ALS and its Affiliates shall have sole responsibility for manufacturing Product.

 

5.5                                  SUBLICENSING. ALS may sublicense its rights under this Agreement at any time without obtaining Abbott’s consent.

 

5.6                                  DISTRIBUTION BY ABBOTT. If ALS determines that Product should be marketed or distributed by ALS and a co-marketer or a co-distributor in any country or countries of the Territory, it shall grant Abbott a “Right of First Negotiation” (as hereinafter defined) to become the co-marketer or co-distributor with ALS, in such countries. If ALS determines that Product should be marketed by a sole distributor in any country or countries of the Territory, it shall grant Abbott the “Right of First Negotiation” to become the exclusive distributor in such countries. “RIGHT OF FIRST NEGOTIATION” shall mean the exclusive right, for a period of ninety (90) days, to negotiate with ALS to agree upon and execute a definitive agreement to become the co-marketer, co-distributor or exclusive distributor, as the case may be. ALS and Abbott shall negotiate in good faith with each other during such period. Such period shall commence on the receipt of notice by Abbott from ALS that ALS has determined how a Product will be marketed in any one or more specified countries and specifying whether such marketing shall be done by co-marketing, co-distribution, or exclusive distribution. If such ninety (90) day period expires and a definitive agreement has not been executed with respect to the country or countries specified in such notice, ALS shall thereafter have no obligation to Abbott with respect to co-marketing, co-distribution or exclusive distribution in such country or countries.

 

6.                                        FINANCIALS.

 

6.1                                  MILESTONES. ALS shall make the following milestone payments to Abbott within twenty (20) business days of the following events:

 

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MILESTONE		PAYMENT
The earlier to occur of October 31, 2005 or the commencement of clinical trials (administration to first patient) of Compound A or Compound B by ALS		$	5,000,000
Submission of an NDA for Compound A or Compound B for the United States. In the event that ALS submits an NDA for Compound A or Compound B to the European Union prior to submission in the United States, ALS shall pay to Abbott one half (1/2) of the milestone due under this term upon submission to the European Union and the balance of this milestone shall become due upon submission of an NDA for Compound A or Compound B in the United States.		$	10,000,000
Receipt of Regulatory Approval of Compound A or Compound B in the United States. In the event that ALS receives Regulatory Approval of Compound A or Compound B in the European Union prior to receipt of Regulatory Approval in the United States, ALS shall pay to Abbott one half (1/2) of the milestone due under this term upon Regulatory Approval in the European Union and the balance of this milestone shall become due upon receipt of Regulatory Approval of Compound A or Compound B in the United States.		$	30,000,000

 

6.2                                  ROYALTY PAYMENTS.

 

(a)                                   RUNNING ROYALTY. Beginning with the First Commercial Sale by ALS, any Affiliates or sublicensees of ALS, ALS shall pay to Abbott, on a country-by-country basis, a royalty of (i) nineteen percent (19%) on Net Sales, with respect to which, but for the license granted hereunder, the manufacture, use or sale of Product would infringe a Valid Claim in such country. and (ii) nine and one-half percent (9.5%) on Net Sales for all other countries; provided, however, that ALS shall not be obligated to pay any royalties for countries in which all Valid Claims have expired; and provided further, however, that (A) ALS shall only be obligated to make payments under this Section 6.2(a)(ii), on a country-by-country basis for a period of seven (7) years from the date of the First Commercial Sale in each such country and (B) ALS shall not be obligated to pay the nine and one-half percent (9.5%) royalty established in Section 6.2 (a)(ii) in a given country in the event that all Covering Claims are deemed invalid by the judicial authority in such country effective as of the date that the last Covering Claim is finally deemed invalid. For purposes of this Section 6.2(a), the term “Covering Claim” shall mean a claim contained in any of the Patents that would be infringed but for the Exclusive License granted hereunder.

 

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(b)                                  ROYALTY REPORTS AND PAYMENTS. Beginning with the First Commercial Sale anywhere in the Territory, within forty-five (45) days after the end of each calendar quarter, ALS shall prepare and deliver to Abbott a report detailing the calculation of Net Sales in the Territory, on a country-by-country basis, for such just ended quarter along with the calculation of royalties due thereon pursuant to SECTION 6.2(a) above. Each report shall be accompanied by full payment in U.S. dollars of the royalties shown thereon to be due. In the event that conversion from foreign currency is required in calculating a royalty payment hereunder, the exchange rate used shall be the average of the bid and ask rates in effect at the end of the last business day of the applicable quarter for which royalties are calculated, as reported by THE WALL STREET JOURNAL (Midwest Edition), or a substantially similar global publication if THE WALL STREET JOURNAL (Midwest Edition) is no longer published.

 

(c)                                   BOOKS AND RECORDS/AUDIT RIGHTS. ALS shall keep, and shall cause its Affiliates and sublicensees to keep, books and records accurately showing all Products manufactured, used or sold under the terms of this Agreement. The relevant portions of such books and records shall be open to inspection by representatives of (i) Abbott and (ii) either or both of the two (2) third parties that Abbott certifies that had as of the Effective Date of the Option Agreement between Abbott and ALS a legitimate financial interest in either of the Compounds, at Abbott’s cost, solely for the purposes of determining the correctness of the royalties payable under this Agreement. Such audit, conducted no more than one time per calendar year, shall be during normal business hours after reasonable advance notice and subject to customary confidentiality provisions. In the event an audit shows a deficiency to be due, ALS shall immediately pay such deficiency along with the reasonable costs and expenses of the audit if the deficiency is more than five percent (5%) of the amount due during such audited period. If the audit shows that an excess was paid, ALS may deduct the amount of such excess from the next payment due. Such books and records shall be preserved for a period of at least three (3) years after the date of the royalty payment to which they pertain, and no audit may be conducted with respect to royalties due in any calendar year that is more than two (2) years preceding the calendar year in which the audit is being conducted. Books and records for a given calendar year may only be audited once. Any third party exercising its audit rights under this Section 6.2 shall enter into a confidentiality agreement with terms no less stringent than those contained in this Agreement.

 

(d)                                  WITHHOLDING TAXES ON ROYALTIES. Where any sum due to be paid to Abbott hereunder is subject to any withholding or similar tax,

 

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the parties shall use reasonable efforts to do such acts and things and to sign such documents as will enable them to take advantage of any applicable double taxation agreement or treaty. In the event there is no applicable double taxation agreement or treaty, or if an applicable double taxation agreement or treaty reduces but does not eliminate such withholding or similar tax, ALS shall pay such withholding or similar tax to the appropriate government authority, deduct the amount paid from the amount due Abbott and secure and send to Abbott the best available evidence of such payment sufficient to enable Abbott to obtain a deduction for such withheld taxes or obtain a refund thereof.

 

7.                                        REPRESENTATIONS, WARRANTIES AND COVENANTS.

 

7.1                                  REPRESENTATIONS AND WARRANTIES OF ABBOTT. Abbott represents and warrants that:

 

(a)                                   it is duly organized, validly existing and in good standing under the laws of Illinois, that it has full corporate power and authority to enter into this Agreement and to carry out its provisions, and that there are no outstanding agreements, assignments or encumbrances in existence to which Abbott is a party or otherwise bound that are inconsistent with the provisions of this Agreement.

 

(b)                                  the Patents have not been, and will not be, knowingly obtained by Abbott through any activity, omission or representation that would limit or destroy the validity of the Patents or cause the Patents to be deemed unenforceable;

 

(c)                                   there are no actions pending or, to the knowledge of Abbott, threatened against Abbott before any court, relating to the Abbott Technology;

 

(d)                                  Abbott has no knowledge of the Abbott Technology being infringed by others; and the Abbott Technology comprises all of the patents and patent applications owned by or licensed to Abbott or its Affiliates that claim either Compound A or Compound B, their use or manufacture;

 

(e)                                   all of the Inventory to be purchased in accordance with ARTICLE 4 hereof (i) was manufactured in accordance with Abbott’s internal specifications, (ii) when delivered hereunder to ALS will meet Abbott’s release specifications for use in human clinical trials, and (iii) was manufactured in accordance with FDA Current Good Manufacturing Practices as defined in 21 C.F.R. Part 210;

 

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(f)                                     it has authorized the execution and delivery this Agreement and the performance of its obligations hereunder and that the execution, delivery and performance of this Agreement by it does not require the consent, approval or authorization of or notice to, or filing or registration with, any governmental agency or Regulatory Authority;

 

(g)                                  except for the Compounds, it currently has not entered in any stage of human clinical trials, any compound that would fall in the ketolide antibiotic class as such term is commonly used;

 

(h)                                  it is the sole owner or exclusive licensee of all patent applications and patents within the Patents, provided that no representation is made under this Section 7.1(h) (i) regarding the content, scope, validity or enforceability of such applications or patents or any intellectual property rights relating thereto or (ii) that engagement in the activities described in such applications or patents does not or would not infringe the rights of any third party;

 

(i)                                      none of its patent counsel, commercial counsel or executive officers with responsibility for pharmaceutical matters have knowledge (without having conducted any investigation or inquiry) of any third party rights necessary to develop, make, use or sell Compound A or Compound B in the Territory; and

 

(j)                                      it has not received written notice from any third party that the manufacture or sale of the Compounds infringes the rights of any third party.

 

7.2                                  REPRESENTATIONS AND WARRANTIES OF ALS. ALS represents and warrants that:

 

(a)                                   it is duly organized, validly existing and in good standing under the laws of Delaware, that it has full corporate power and authority to enter into this Agreement and to carry out its provisions, and that there are no outstanding agreements, assignments or encumbrances in existence to which ALS is a party or otherwise bound that are inconsistent with the provisions of this Agreement;

 

(b)                                  it has authorized the execution and delivery of this Agreement and the performance of its obligations hereunder; and

 

(c)                                   the execution, delivery and performance of this Agreement by it does not require the consent, approval or authorization of or notice to, or filing or registration with, any governmental agency or Regulatory Authority.

 

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7.3                                  INDEMNIFICATION BY ALS. ALS shall indemnify and hold Abbott, its Affiliates and their respective directors, officers, employees and agents harmless from and against any and all liabilities, actions, suits, claims, demands, prosecutions, damages, costs, expenses or money judgments finally awarded (including reasonable legal fees and costs of investigation and litigation) (collectively, “LIABILITIES”) incurred by or instituted or rendered against or suffered by Abbott to the extent such Liabilities result from a third party claim arising from the sale, distribution, transportation, handling or use of Compound A or Compound B or Product(s) in the Territory by ALS, its Affiliates, agents or sublicensees or any health care professional, patient or other third party, or from the willful misconduct or the negligent acts or omissions of ALS, its Affiliates, their agents or sublicensees or ALS’s breach of this Agreement, except to the extent such third party claims arise out of the negligence or willful misconduct of Abbott, or any of its Affiliates or any of their respective directors, officers, employees and agents. Abbott shall give ALS prompt notice in writing of any such claim or lawsuit and permit ALS to undertake sole control of the defense and settlement thereof at ALS’s expense. In any such claim or lawsuit:

 

(a)                                   Abbott will cooperate in the defense by providing access to witnesses and evidence available to it. Abbott shall have the right to participate, at its expense, in any defense to the extent that in its judgment Abbott may be prejudiced by ALS’s sole defense thereof.

 

(b)                                  Any settlement for which Abbott intends to seek or has sought indemnification hereunder from ALS shall not be binding upon ALS without the written consent of ALS.

 

7.4                                  INDEMNIFICATION BY ABBOTT. Abbott shall indemnify and hold ALS, its Affiliates and their respective directors, officers, employees and agents harmless from and against any and all Liabilities incurred by or instituted or rendered against or suffered by ALS to the extent such Liabilities result from a third party claim arising from the willful misconduct or the negligent acts or omissions of Abbott, its Affiliates, their agents or sublicensees, or Abbott’s breach of this Agreement, except to the extent such third party claims arise out of the negligence or willful misconduct of ALS, or any of its Affiliates