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Exhibit 10.5
RESIDUAL LICENSE AGREEMENT
dated as of
February 21,
2008
between
AZITHROMYCIN ROYALTY SUB LLC
and
INSITE VISION INCORPORATED
RESIDUAL LICENSE AGREEMENT
This
Residual License Agreement (this “
Residual License Agreement ”),
dated as of February 21, 2008 (the “
Execution Date ”),
is between AZITHROMYCIN ROYALTY SUB LLC, a Delaware limited
liability company (the “
Issuer ”),
and INSITE VISION INCORPORATED, a Delaware corporation (the
“
Parent ”).
W I T N E S S E T H :
WHEREAS,
the Parent owns or controls certain intellectual property
rights that have been exclusively and non-exclusively licensed
to Inspire pursuant to the Counterparty License Agreement for
the development and commercialization of Subject Products in
the Field in the Territory;
WHEREAS,
upon a partial or entire termination of the Counterparty
License Agreement, such rights will partially or entirely
revert back to the Parent subject to the terms and conditions
of the Counterparty License Agreement;
WHEREAS,
the Parent and the Issuer have entered into the Purchase and
Sale Agreement, pursuant to which the Parent has agreed to
execute and deliver this Residual License
Agreement;
NOW,
THEREFORE, in consideration of the premises and the mutual
agreements set forth herein and of other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto covenant and agree as
follows:
ARTICLE
I
RULES OF CONSTRUCTION AND DEFINED TERMS
Section
1.1
Rules of Construction and Defined Terms .
The rules of construction set forth in
Annex A shall
apply to this Residual License Agreement and are hereby
incorporated by reference into this Residual License Agreement as
if set forth fully in this Residual License Agreement.
Capitalized
terms used but not otherwise defined in this Residual License
Agreement shall have the respective meanings given to such terms
in
Annex A ,
which is hereby incorporated by reference into this Residual
License Agreement as if set forth fully in this Residual License
Agreement.
Section
1.2
Pfizer Patent Rights .
Each of the Parent and the Issuer acknowledges and agrees that the
Residual License does not initially, and may not in the future,
include any rights to the Pfizer Patent Rights. After the Execution
Date, the Parent shall use commercially reasonable efforts to
obtain Pfizer’s written consent pursuant to the Pfizer
License Agreement to grant the Issuer a sublicense described
in Section
2.2(e) .
The Issuer understands and agrees that such consent may not be
obtained despite the Parent’s commercially reasonable
efforts. If the Parent is able to obtain such consent and the
License Effective Date occurs, then the Pfizer Patent Rights shall
be automatically sublicensed to the Issuer as of the License
Effective Date (or such other date as provided in such consent)
under the terms and conditions of Section 2.2(e) (or such other
terms as provided in such consent);
provided ,
that (a) such sublicense will be of no greater scope than the
rights and licenses granted to the Parent under the Pfizer Patent
Rights pursuant to the Pfizer License Agreement, or as otherwise
provided in such consent, and (b) such sublicense shall be subject
to the applicable terms and conditions of the Pfizer License
Agreement and such consent. If
the Parent is not able to obtain such consent pursuant to
this Section
1.2 and
the Issuer sublicenses the Residual License to any Person other
than Parent without such sublicense under the Pfizer Patent Rights,
the Issuer shall indemnify, and cause such Person to indemnify, the
Parent for any liability that the Parent may have to Pfizer for
commercialization of the Subject Products.
ARTICLE
II
RESIDUAL LICENSE MATTERS
Section
2.1
Effectiveness .
Each of the Issuer and the Parent acknowledges and agrees that the
Residual License shall only become effective if and only if the
Counterparty License Agreement partially or entirely terminates
under the terms thereof and the Reverted IP reverts back to the
Parent in respect of such partial or entire termination for the
Terminated Territory prior to the earliest of the events described
in the definition of the Expiration Date. Subject to the foregoing,
the Residual License shall become automatically effective upon such
termination for the Terminated Territory with no further action by
either the Parent or the Issuer (the “
License Effective Date ”).
The Issuer understands and agrees that the Residual License shall
be at all times subject to any Surviving Rights. The Issuer
understands and agrees that the Parent may only grant rights under
the Reverted IP after the reversion of such rights back to the
Parent under the terms and conditions of the Counterparty License
Agreement and that no rights of Inspire may be granted by the
Parent.
Section
2.2
Residual License Grant .
Upon the License Effective Date and subject to the terms and
conditions of this Residual License Agreement, the Parent
automatically grants to the Issuer the following licenses during
the License Term (collectively, the “
Residual License ”):
(a)
an
exclusive license, under the AzaSite Patent Rights and the
Licensed Know-How (excluding any Formulation Know-How), with
the right to grant sublicenses, to develop, have developed,
make, have made, use, have used, market, have marketed,
commercialize, have commercialized, offer for sale, sell, have
sold, import and have imported Subject Products in the Field
in the Terminated Territory ;
(b)
a
non-exclusive license, under the DuraSite Patent Rights, the
Container Patent Rights and the Formulation Know-How
,
with the right to grant sublicenses, to
develop, have developed, make, have made, use, have used,
market, have marketed, commercialize, have commercialized,
offer for sale, sell, have sold, import and have imported
Subject Products in the Field in the Terminated
Territory;
(c)
an
exclusive license, with the right to grant sublicenses, to use
the AzaSite Trademark and Licensed Domain Names in connection
with the marketing, commercialization and sale of Subject
Products in the Field in the Terminated
Territory;
(d)
a
non-exclusive license, with the right to grant sublicenses, to
use the DuraSite Trademark in connection with the marketing,
commercialization and sale of Subject Products in the Field in
the Terminated Territory; and
(e)
if
and only if Pfizer grants its written consent under the terms
and conditions of Section 1.2 and only to the extent no
greater in scope than the rights and licenses granted to the
Parent for the Pfizer Patent Rights pursuant to the Pfizer
License Agreement (or as otherwise provided in the consent
from Pfizer as provided under Section 1.2), an exclusive
sublicense, with the right to grant sublicenses, to develop,
have developed, make, have made, use, have used, market, have
marketed, commercialize, have commercialized, offer for sale,
sell, have sold, import and have imported Subject Products in
the Field in the Terminated Territory.
Section
2.3
Interim Sublicense to the Parent .
(a)
Upon
the License Effective Date and subject to the terms and
conditions of this Residual License Agreement, the Issuer
grants the Parent, under the terms and conditions of
this Section
2.3 ,
all the rights licensed to the Issuer under the Residual
License without any retained rights (“
Interim Sublicense ”)
for a three month period after the License Effective Date, or such
longer period as requested by the Parent and consented to in
writing by the Issuer and the Trustee in accordance with
Section
9.6 (“
Interim Period ”);
provided that
the terms of any such sub-sublicense shall not be inconsistent with
the terms of this Residual License Agreement.
(b)
Except
as the Issuer otherwise expressly agrees in writing, the
Interim Sublicense shall terminate, automatically and without
further action by either the Parent or the Issuer if, at the
end of the Interim Period or at any time thereafter, (a) the
Parent is not actively engaged in commercially reasonable
efforts to commercialize in the Field any Subject Product
being commercialized by Inspire in the Terminated Territory
immediately prior to the applicable Termination Date for such
Terminated Territory or (b) the Parent is not a party to a
definitive sub-sublicense agreement with a third party
designated by the Parent (x) where the Parent used
commercially reasonable efforts to procure commercially
reasonable royalties and other payments as consideration for
such sub-license and (y) that includes an obligation by such
third party as sub-sublicensee to use commercially reasonable
efforts to commercialize in the Field any Subject Product
being commercialized by Inspire in the Terminated Territory
immediately prior to the applicable Termination Date for such
Terminated Territory (the “
Parent Sublicense ”).
The Interim Sublicense will continue for the License Term for as
long as the Parent performs either of the foregoing; provided that
the Parent is not obligated to perform either of the foregoing. The
Issuer shall not exercise the Residual License or grant any rights
thereunder until the termination of the Interim Sublicense as
provided herein.
Section
2.4
Sublicenses by the Issuer .
If the Interim Sublicense terminates in accordance with
Section
2.3 ,
the Issuer may grant a sublicense under the Residual License during
the License Term subject to this Section
2.4 .
In any such sublicense, the Issuer shall use commercially
reasonable efforts to procure commercially reasonable royalties and
other payments for the commercialization of the Subject Products
under the Residual License and any such sublicense shall (i) be
solely within the scope of the Residual License; (ii) be in writing
and contain provisions that are not inconsistent with this Residual
License Agreement and (iii) contain other customary provisions
as protective of the Reverted IP as customary in the industry in an
arm’s length transaction of this nature, including
appropriate indemnity and other risk allocation coverage in favor
of the Parent. The Issuer shall furnish to the Parent a complete
copy (including any annexes, appendices, exhibits or schedules
thereto) of any sublicense granted by the Issuer to any Person
under the Residual License (other than the Interim Sublicense)
within five Business Days of the effective date of such sublicense.
Except as the parties otherwise expressly agree in writing, any
sublicense granted by the Issuer under this Section
2.4 shall
(A) be subject and subordinate to the terms of this Residual
License Agreement and (B) provide that the sublicense will be
assignable to the Parent at the end of the License Term under the
same terms and the Parent shall accept such assignment as a direct
license between the Parent and the sublicensee (provided that the
Parent shall not be required to assume any liability incurred by
the Issuer under such sublicense prior to that time). Each such
sublicense granted by the Issuer under this Section
2.4 shall
be herein referred to as the “
Issuer Sublicense ”.
Section
2.5
Reservation of Rights .
Except as the Parent otherwise expressly agrees in writing and
subject to Article
VII ,
the Residual License shall terminate at the end of the License
Term, and all
rights to the Reverted IP shall then revert back to the Parent
automatically and without further action by either the Parent or
the Issuer. The
Parent does not grant to the Issuer any technology or intellectual
property rights of the Parent other than as expressly granted under
this Residual License Agreement, whether by implication, estoppel
or otherwise. Without limiting the foregoing, (a) the licenses and
rights granted to the Issuer under this Residual License Agreement
shall not include a right to offer for sale, sell or have sold
Subject Products, and the Issuer expressly covenants that it shall
not sell any Subject Products, in the Terminated Territory in
circumstances in which the Issuer knows or reasonably should know
such Subject Products will be distributed or sold outside the
Terminated Territory, (b) the Parent shall retain the rights under
the Reverted IP and the Pfizer Patent Rights (if granted under the
terms of Section
1.2 )
to develop, have developed, make, have made, use and have used
Subject Products in the Field in the Territory solely for the
purposes of distribution, sale or other commercial pursuit of
Subject Products outside the Territory, (c) the Parent shall retain
the exclusive rights to develop, have developed, make, have made,
use, have used, market, have marketed, commercialize, have
commercialized, offer for sale, sell, have sold, import and have
imported Subject Products outside the Field and/or outside the
Territory and (d) the Parent retains all rights to pursue any of
its reserved interests under the Counterparty License
Agreement.
ARTICLE
III
PAYMENTS
Section
3.1
Payment of Royalties .
The consideration for the Residual License consists of the amounts
paid by the Issuer to the Parent pursuant to the Purchase and Sale
Agreement, and no further royalty payments are due from the Issuer
to the Parent for the Residual License.
(a)
Interim Sublicense .
The Issuer acknowledges and agrees that any
royalties and other payments described in (i)
and
(ii)
below
(“
License Royalties ”)
will
be considered Replacement Royalty Payments and shall be deposited
in the Collection Account when paid by the Parent to the Issuer as
provided below.
(i)
In
the event that the Parent directly commercializes under the
Interim Sublicense, the Parent will pay the Issuer only the
royalties or any other payments received by the Parent in such
commercialization efforts equal to the amount of royalties and
other payments that would have been payable by Inspire in each
such Terminated Territory, at the time such amounts would have
been payable, net of all deductions and adjustments as if the
Counterparty License Agreement (as of the Termination Date)
were still in effect and such commercialization was effected
by Inspire as if the Subject Products were Inspire Licensed
Products (as defined in the Counterparty License
Agreement).
(ii)
In
any sublicense under the Interim Sublicense, the Parent will
use commercially reasonable efforts to procure commercially
reasonable royalties and other payments for the
commercialization of the Subject Products under such
sublicense, provided that the Issuer understands and agrees
that such royalties and other payments may not be equivalent
to the royalties and other payments due from Inspire to the
Parent under the Counterparty License Agreement had such
agreement not terminated in the Terminated Territory. The
Parent will pay the Issuer any and all royalties and any other
payments received by the Parent from such sublicense under the
terms of such sublicense.
(b)
Other than Interim Sublicense .
The Issuer shall deposit, or shall cause to be deposited, in the
Collection Account any and all royalties and other payments arising
from the exercise of the Residual License after the termination of
the Interim Sublicense, whether received by the Issuer in its own
direct commercialization efforts or received by the Issuer from its
sublicensees under the terms of the agreements with such
sublicensees (“
Issuer Royalties ”).
Section
3.2
Pfizer and Other Royalties .
For as long as the Issuer receives the License Royalties or the
Issuer Royalties as provided under this Residual License Agreement,
regardless of the party commercializing under the terms of this
Residual License Agreement, the Issuer shall pay, or cause to be
paid, either to the Parent for the Parent to pay the applicable
third party or directly to the applicable third party, any
royalties or other payments that may be due from the Parent to
Pfizer and any other third parties for any commercialization of the
Subject Products within the timeframes required by the Pfizer
License Agreement and the agreements with such third parties, but
in no event shall such royalties exceed, in the aggregate, 3.5% of
Net Sales (as defined in the Counterparty License Agreement) for
the applicable payment period.
ARTICLE
IV
BOOKS AND RECORDS
Section
4.1
Reports .
For as long as there are License Royalties, the Parent shall
provide to the Issuer, within 25 days after the end of each
calendar quarter, a report setting forth for such calendar quarter
the following information for each Subject Product: (a) net sales
of such Subject Product by the Parent or its sublicensees on a
country-by-country basis; (b) License Royalties due for such net
sales; and (c) a description of how the License Royalties are
calculated. For as long as there are Issuer Royalties during the
License Term, the Issuer shall provide to the Parent, within 25
days after the end of each calendar quarter, a report setting forth
for such calendar quarter the following information for each
Subject Product: (a) net sales of such Subject Product by the
Issuer or its sublicensees on a country-by-country basis; (b)
Issuer Royalties paid to the Issuer for such net sales; and (c) a
description of how the Issuer Royalties are
calculated.
Section
4.2
Books and Records .
Each party shall keep and maintain, or shall cause to be kept and
maintained, and shall require any sublicensee to keep and maintain,
complete and accurate records and books of account in sufficient
detail and form so as to enable determination and verification of
any License Royalties or Issuer Royalties. Such records and books
of account shall be maintained for a period of no less than two
years following the calendar quarter to which they pertain. Each
party shall permit such records and books of account to be examined
by the other party or the other party’s duly appointed agent
to the extent necessary for the other party to verify the amount of
any License Royalties or Issuer Royalties payable hereunder. Such
examination shall be at the expense of the examining party, during
normal business hours, and upon ten days’ prior written
notice to the other party.
ARTICLE
V
REVERTED IP
Section
5.1
Reverted IP .
To the extent owned or controlled by the Parent, any and all
Reverted IP (including any inventions arising or resulting
hereunder) shall remain the sole property of the Parent. Any Taxes,
annuities, working fees, maintenance fees, renewal charges,
extension charges or other fees or payments that are due during the
License Term with respect to the prosecution or maintenance of any
patents or patent applications (or reissues, extensions,
substitutions, confirmations, registrations, revalidations,
additions, continuations, continuations-in-part or divisions
thereof or thereto or any additional protection certificate granted
with respect thereto) in respect of any Reverted IP (other than due
to their use or practice) shall be paid by the Parent. During the
License Term, if a reissue, reexamination, interference, opposition
or other proceeding before any Governmental Authority is initiated
relating to any rights exclusively licensed under the Residual
License, the Parent shall provide to the Issuer, to the extent it
is able without any additional consent and without any adverse
impact on the Parent, for its reasonable review and comment prior
to filing or other submission, copies of all substantive legal
documents (including any patent applications) relating to such
proceeding that are owned or controlled by the Parent. The Issuer
shall provide any comments within 30 days of receipt thereof (or
such shorter time as may be appropriate in the circumstances), but
such comments shall be advisory in nature and not binding on the
Parent. Upon the Issuer’s written request, the Parent shall
provide to the Issuer copies of all such documents as filed or
otherwise submitted, to the extent it is able without any
additional consent and without any adverse impact on the
Parent.
ARTICLE
VI
INFRINGEMENT AND LITIGATION
Section
6.1
Infringement and Litigation .
During the License Term, each party hereto shall promptly notify
the other party hereto in writing if such party hereto reasonably
believes that a third party is engaging in one or more activities
that infringes one or more claims of the Reverted IP in the Field
in the applicable Terminated Territory. During the License Term,
the Parent at its own expense shall have the first right, but not
the obligation, to bring and prosecute to conclusion (or otherwise
settle) any legal action for infringement of the Reverted IP in the
applicable Terminated Territory or to defend any counterclaim of
invalidity or action of a third party for declaratory judgment of
non-infringement or interference (and the Issuer shall have the
right to do the foregoing with respect to any rights exclusively
owned by the Parent and exclusively licensed to the Issuer under
the Residual License at its own expense if the Parent has not taken
commercially reasonable steps to do so within 90 days of the notice
referred to above). Any recovery or proceeds of settlement or
judgment in any action brought or defended by the Parent under
this Section
6.1 shall
be equitably allocated between the Parent and the
Issuer.
ARTICLE
VII
TERM AND TERMINATION
Section
7.1
Term and Termination .
This Residual License Agreement shall be a legally binding
agreement between the parties hereto as of the Execution Date and
shall terminate without further notice on the Expi
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