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Exhibit 10.3
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote
omissions.
CONFIDENTIAL
LICENSE AND SUPPLY AGREEMENT
THIS LICENSE AND SUPPLY AGREEMENT (this "AGREEMENT") is made as
of May 16, 2007
(the "EFFECTIVE DATE"), by and between CYDEX, INC., a Delaware
corporation with
offices at 10513 W. 84th Terrace, Lenexa, Kansas 66214
("CYDEX"), and CRITICAL
THERAPEUTICS, INC., a Delaware corporation with offices at 60
Westview Street,
Lexington, MA 02421 ("COMPANY").
RECITALS
WHEREAS, CyDex is engaged in the business of developing and
commercializing
novel drug delivery technologies designed to enhance the
solubility and
effectiveness of existing and development-stage drugs;
WHEREAS, CyDex is the exclusive worldwide licensee of
CAPTISOL(R), a
patented drug formulation system designed to enhance the
solubility and
stability of drugs;
WHEREAS, CyDex and Company are parties to a Limited Clinical Use
Agreement,
effective as of May 12, 2005 ("LIMITED CLINICAL USE AGREEMENT")
which governed
the terms of Company's evaluation of a drug formulation
containing the Compound
(as hereinafter defined) and CAPTISOL(R), the terms of which
agreement CyDex and
Company intend to replace and supersede with the terms of this
Agreement;
WHEREAS, Company desires to obtain a license to use CyDex's
patented drug
formulation system in connection with its development and
commercialization of
the Compound and CyDex is willing to grant such license to
Company under the
terms and conditions set forth herein;
WHEREAS, CyDex desires to sell CAPTISOL(R) to Company, and
Company desires
to purchase CAPTISOL(R) from CyDex, in accordance with the terms
and conditions
contained herein; and
NOW, THEREFORE, in consideration of the following mutual
promises and other
good and valuable consideration, the receipt and sufficiency of
which is
acknowledged, the parties, intending to be legally bound, agree
as follows:
1. DEFINITIONS.
For the purposes of this Agreement, the terms hereunder shall
have the
meanings as defined below:
1.1 "AFFILIATE" means, with respect to any party, any entity
controlling,
controlled by, or under common control with such party, during
and for such time
as such control exists. For these purposes, "control" shall
refer to the
ownership, directly or indirectly, of at least fifty percent
(50%) of the voting
securities or other ownership interest of the relevant
entity.
1.2 "ALTERNATE SUPPLIER" has the meaning specified in SECTION
3.7(C).
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1.3 "CAPTISOL" means the drug formulation technology marketed by
CyDex as
CAPTISOL(R), also known scientifically as sulfobutylether
(beta)(beta)
cyclodextrin, sodium salt.
1.4 "CAPTISOL DATA PACKAGE" means (a) all toxicology/safety and
other
relevant scientific safety data owned, licensed or developed by
CyDex and its
Affiliates; (b) all toxicology/safety and other relevant
scientific data owned,
licensed or developed by the licensees or sublicensees of CyDex
or its
Affiliates or other third parties (to the extent permitted in
the applicable
license or other agreements between CyDex and/or its Affiliates
and such
licensees, sublicensees or other third parties) on CAPTISOL
alone (and not in
conjunction with a product formulation); and (c) all CMC and
manufacturing
process data relating to the preparation of CAPTISOL, in each
case to the extent
necessary or useful for the formulation of the Licensed Product.
For purposes of
clarity, "CAPTISOL Data Package" shall include all dossier of
data and
information on CAPTISOL provided by CyDex under the Limited
Clinical Use
Agreement, including without limitation Material Safety Data
Sheets,
certificates of analysis, information on material stability and
storage
conditions, packaging, specifications, test methods, reference
standards, and
re-evaluation dates for CAPTISOL as well as known or expected
adverse events
related to the use of CAPTISOL.
1.5 "CAPTISOL IMPROVEMENT" means any technology or improvement
related to
CAPTISOL, whether or not patentable, that is developed by
Company or its
Affiliates or Sublicensees, solely or jointly with a third
party, during the
Term in the course of exercising its rights or performing its
obligations under
this Agreement. "CAPTISOL Improvement" shall in no event include
(i) any
improvements to the composition of matter of the Licensed
Product, (ii) a method
of making or using the Licensed Product that does not relate to
CAPTISOL or
(iii) any improvements in the composition of matter of the
Compound.
1.6 "CLAIM" has the meaning specified in SECTION 10.1.
1.7 "CLINICAL GRADE CAPTISOL" means CAPTISOL which (a) has
been
manufactured under conditions of current good manufacturing
practices for bulk
excipients as set forth in U.S. Pharmacopoeia (1078) as of the
Effective Date or
any successor thereto, (b) is intended for use in humans, and
(c) is intended
for clinical trials for the Licensed Product.
1.8 "PHASE II CLINICAL TRIAL" means a human clinical trial that
is intended
to initially evaluate the effectiveness of a Licensed Product in
the targeted
patient population for a particular indication or indications in
human subjects
with the disease or indication under study, as more fully
defined in 21 C.F.R.
312.21(b).
1.9 "PHASE III CLINICAL TRIAL" means a pivotal efficacy trial
whose primary
objective is to obtain a definitive evaluation of the
therapeutic efficacy and
safety of a Licensed Product in patients for the particular
indication in
question that is needed to evaluate the overall risk-benefit
profile of a
Licensed Product and to provide adequate basis for obtaining
requisite Marketing
Approval(s) and product labeling, as more fully defined in 21
C.F.R. 312.21(c).
1.10 "COMMERCIAL GRADE CAPTISOL" means CAPTISOL which (a) has
been
manufactured under conditions of current good manufacturing
practices for bulk
excipients as set
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forth in U.S. Pharmacopoeia (1078) as of the Effective Date or
any successor
thereto, (b) is intended for use in humans, and (c) is intended
for commercial
sale of the Licensed Product.
1.11 "COMMERCIAL LAUNCH DATE" means, in any particular country,
the first
sale of Licensed Product for commercial purposes for value by
Company, its
Affiliates or Sublicensees to a third party, but excluding the
sale, transfer or
disposition of any Licensed Product for (a) pre-clinical or
animal studies
and/or (b) for clinical use or for non-clinical testing required
for clinical
trials in preparation for submission or approval of a regulatory
filing.
1.12 "COMPOUND" means that certain pharmaceutical compound known
as
Zileuton, owned by or licensed to Company and developed and
manufactured by or
on behalf of Company.
1.13 "CONFIDENTIAL INFORMATION" has the meaning specified in
SECTION 8.1.
1.14 "DETAILED FORECAST" has the meaning specified in SECTION
3.2(B).
1.15 "DISCLOSING PARTY" has the meaning specified in SECTION 8.1
hereof.
1.16 "DMF" means a Drug Master File for CAPTISOL, as currently
filed, or as
hereafter updated from time to time, by CyDex with the FDA.
1.17 "FDA" means the United States Food and Drug Administration,
or any
successor thereto.
1.18 "GENERIC COMPETITION" has the meaning specified in SECTION
4.1(D)(II).
1.19 "IND" means an Investigational New Drug application, as
defined in the
United States Federal Food, Drug and Cosmetics Act and the
regulations
promulgated thereunder, or similar application filed with an
equivalent
regulatory body in another country.
1.20 "INDEMNITEE" has the meaning specified in SECTION 10.4.
1.21 "INDEMNITOR" has the meaning specified in SECTION 10.4.
1.22 "LICENSED PATENTS" means all patents and patent
applications in the
Territory which claim CAPTISOL and which now or at any time
during the Term are
owned by or licensed to CyDex or any CyDex Affiliate with the
right to
sublicense, including any and all extensions, renewals,
continuations,
substitutions, continuations-in-part, divisions,
patents-of-addition, reissues,
reexaminations and/or supplementary protection certificates to
any such patents.
Set forth in EXHIBIT A attached hereto is a list of the Licensed
Patents as of
the Effective Date. Such Exhibit shall be updated by CyDex from
time to time.
Notwithstanding the foregoing, Licensed Patents expressly
exclude patents and
patent applications not applicable to the Licensed Product or
the particular
indication(s) for which the Licensed Product is being
developed.
1.23 "LICENSED PRODUCT" means the Compound combined with or
formulated
using CAPTISOL in an injectable dosage form/formulation for
ultimate use in
humans.
1.24 "LOSSES" has the meaning set forth in SECTION 10.1.
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1.25 "MARKETING APPROVAL" means final approval of an NDA by the
FDA, or
final approval of a comparable document filed with an equivalent
health
regulatory authority in any other country or in the European
Union (using the
centralized process or mutual recognition), including all
required marketing,
pricing or reimbursement approvals.
1.26 "NDA" means a New Drug Application, as defined in the
United States
Federal Food, Drug and Cosmetics Act and the regulations
promulgated thereunder,
or similar application filed with an equivalent regulatory body
in another
country.
1.27 "NET SALES" means gross amounts invoiced by Company, its
Affiliates
and Sublicensees for sales of the Licensed Product(s), less the
following: (a)
normal and customary trade, quantity and/or cash discounts,
allowances and
rebates actually allowed or given; (b) returns and credits
actually allowed for
rejections, defects or recalls of Licensed Product, outdated or
returned
Licensed Product, or because of rebates or retroactive price
reductions; (c)
freight, postage, shipping insurance and other transportation
expenses (if
separately identified on the invoice); and (d) sales,
value-added, excise or use
taxes, tariffs, duties and customs fees and other taxes imposed
with respect to
specific sales.
1.28 "NOTICE OF DEFAULT" has the meaning specified in SECTION
13.2.
1.29 "NOTICE OF TERMINATION" has the meaning specified in
SECTION 13.2.
1.30 "PFIZER" has the meaning specified in SECTION 8.5.
1.31 "PURCHASE VOLUME LIMITATIONS" has the meaning specified in
SECTION
3.2(C).
1.32 "Q1", "Q2, "Q3", and "Q4" have the meanings specified in
SECTION
3.2(B).
1.33 "RECEIVING PARTY" has the meaning specified in SECTION
8.1.
1.34 "RESEARCH GRADE CAPTISOL" means CAPTISOL which has not
been
manufactured under required conditions of current good
manufacturing practices
and is not suitable for use in humans, but which meets CyDex's
specifications
for Research Grade CAPTISOL.
1.35 "SEC" has the meaning specified in SECTION 8.3.
1.36 "SPECIFICATIONS" means the specifications for CAPTISOL set
forth in
EXHIBIT B hereto, as such may be amended from time to time
pursuant to SECTION
3.4.
1.37 "SUBLICENSEES" has the meaning specified in SECTION
2.3.
1.38 "SUPPLY FAILURE" means a failure by CyDex to supply at
least [**]
percent ([**]%) of the quantities of CAPTISOL ordered by Company
(provided such
purchase order was within the limits of the Purchase Volume
Limitations) in each
of [**] consecutive calendar quarters, and CyDex does not cure
such deficiency
within [**] days after Company notifies CyDex in writing that
the quantity of
CAPTISOL due for delivery has not been delivered.
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1.39 "TERM" has the meaning specified in SECTION 13.1.
1.40 "TESTING METHODS" has the meaning specified in SECTION
3.5(A).
1.41 "THIRD-PARTY MANUFACTURER" has the meaning specified in
SECTION 3.6.
1.42 "TERRITORY" means the entire world.
1.43 "VOLUME THRESHOLD" has the meaning specified in SECTION
3.1.
2. GRANT OF RIGHTS.
2.1 LICENSE GRANTS FROM CYDEX TO COMPANY.
(A) Licensed Patents. Subject to the terms and conditions of
this
Agreement, including but not limited to payment of the amounts
set forth in
SECTION 4.1 below, CyDex hereby grants to Company an exclusive,
nontransferable
(except as permitted under SECTION 14.15) license during the
Term under the
Licensed Patents, solely to develop, make, have made, use,
market, distribute,
import, offer to sell and sell the Licensed Product in the
Territory.
Notwithstanding the foregoing, to the extent that any Licensed
Patents are
licensed to CyDex or its Affiliates by a third party on a
non-exclusive basis,
the license granted to Company in the foregoing sentence shall
be exclusive as
to CyDex and non-exclusive as to any third party. Company may
not use, market or
distribute the Licensed Product for any other purposes nor
sublicense the
Licensed Patents, except as expressly set forth in SECTIONS 2.3
and 2.4 below.
Without limiting the generality of the foregoing, CyDex grants
no rights to
Company to manufacture, import, sell or offer to sell bulk
CAPTISOL.
(B) CAPTISOL Data Package. Subject to the terms and conditions
of this
Agreement, including but not limited to payment of the amounts
set forth in
SECTION 4.1 below, CyDex hereby grants to Company a
non-exclusive,
nontransferable (except as permitted under SECTION 14.15)
license during the
Term under CyDex's right in and to the CAPTISOL Data Package,
solely to develop,
make, have made, use, market, distribute, import, offer to sell
and sell the
Licensed Product in the Territory. Company may not sublicense
its rights to the
CAPTISOL Data Package, except as expressly set forth in SECTIONS
2.3 and 2.4
below.
2.2 GRANT OF LICENSE FROM COMPANY TO CYDEX. Subject to the terms
and
conditions of this Agreement, Company hereby grants to CyDex a
nonexclusive,
nontransferable (except as permitted under SECTION 14.15),
perpetual (other than
in the event of a termination of this Agreement), world-wide and
royalty-free
license, with the right to grant sublicenses, under Company's,
its Affiliates'
and Sublicensees' rights in and to CAPTISOL Improvements to
develop, make, have
made, use, market, distribute, import, offer to sell and sell
any CAPTISOL
Improvement and products formulated with any CAPTISOL
Improvement (other than
the Licensed Product during the Term and other than the Compound
after the
Term). If Company or its Affiliates or Sublicensees file any
patent application
claiming CAPTISOL anywhere in the world, CyDex shall be deemed
automatically to
have a nonexclusive, transferable, perpetual (other than in the
event of a
termination of this Agreement), world-wide and royalty-free
license, with the
right to grant sublicenses through multiple tiers, under the
claims relating
specifically to CAPTISOL to make, have made, use, market,
distribute, import,
offer to sell and sell
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CAPTISOL and all products formulated with CAPTISOL (in each
case, other than the
Licensed Product during the Term and other than the Compound
after the Term).
Company shall provide prompt notice of any such CAPTISOL
Improvement, and shall
notify and consult with CyDex at least [**] days prior to the
filing of any such
patent application claiming a CAPTISOL Improvement or claiming
CAPTISOL.
Notwithstanding any provision of this Agreement, Company does
not grant CyDex
any right to manufacture, import, sell or offer to sell any
product containing
the Compound.
2.3 SUBLICENSING. Company shall have the right to grant
sublicenses to its
Affiliates and licensees of the Licensed Product (collectively
"SUBLICENSEES")
under the licenses granted to Company pursuant to SECTION 2.1;
provided that
each such sublicense shall be subject to, and consistent with,
the terms and
conditions of this Agreement, and shall provide that any such
Sublicensee shall
not further sublicense the rights granted to Company in this
Agreement except on
terms consistent with this SECTION 2.3. Other than as
specifically provided in
and this SECTION 2.3 and SECTION 2.4, Company shall not have the
right to grant
sublicenses to any third party under the licenses granted
pursuant to SECTION
2.1.
2.4 CONTRACTING. Company may manufacture the Licensed Product
(but not the
bulk CAPTISOL, except as set forth in SECTION 3.7) or contract
the manufacture
of the Licensed Product (but not the manufacture of bulk
CAPTISOL, except as set
forth in SECTION 3.7) with third party manufacturers. Company
shall notify CyDex
in writing of Company's intent to do so (such notice to include
the identity and
location of the proposed third party manufacturers). To the
extent necessary to
engage a third party manufacturer for the Licensed Product,
Company shall be
permitted under this Agreement to grant any such third party
manufacturer a
sublicense under the licenses granted to Company pursuant to
SECTION 2.1 solely
for such purposes; provided that each such sublicense shall be
subject to, and
consistent with, the terms and conditions of this Agreement, and
shall provide
that any such sublicense may not be further sublicensed by the
third party
manufacturer.
3. MANUFACTURE AND SUPPLY OF CAPTISOL.
3.1 PURCHASE OF CAPTISOL. Except as set forth in SECTION 3.7,
Company
agrees that Company and its Affiliates and Sublicensees shall
purchase CAPTISOL
exclusively from CyDex during the Term, and that they shall not
manufacture (or
have manufactured on their behalf) CAPTISOL without CyDex's
prior written
consent. CyDex agrees that CyDex shall produce (or have produced
for it by a
Third-Party Manufacturer in accordance with SECTION 3.6) and
sell and deliver to
Company one hundred percent (100%) of Company's and its
Affiliates' and
Sublicensees' requirements for CAPTISOL, during the Term and
subject to the
provisions of this Agreement and provided that in no event shall
CyDex be
obligated to supply to Company or its Affiliates or Sublicensees
more than an
aggregate quantity of [**] kilograms of CAPTISOL per year (the
"VOLUME
THRESHOLD"). Purchases of CAPTISOL may include Research Grade
CAPTISOL, Clinical
Grade CAPTISOL and/or Commercial Grade CAPTISOL. Company may
place orders for
CAPTISOL on behalf of its Affiliates and Sublicensees; provided,
however that:
(a) Company shall instruct CyDex as to the location for the
shipment thereof;
(b) Company shall guarantee payment to CyDex of all amounts
payable with respect
to all binding orders; and (c) if Company requests that CyDex
deliver such
orders to Company for re-delivery thereof by Company to its
Affiliates or
Sublicensees, Company shall comply with all applicable laws,
rules
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and regulations applicable to the transportation of CAPTISOL
from Company to its
Affiliates and Sublicensees.
3.2 SUPPLY TERMS.
(A) LONG-TERM FORECAST. No later than [**] months prior to
the
anticipated Commercial Launch Date by Company or its Affiliates
or Sublicensees
of a Licensed Product in any particular country, Company shall
provide CyDex
with a non-binding forecast setting forth Company's estimate of
the required
quantities of Commercial Grade CAPTISOL for each of the
following [**] years.
Such long-term forecast shall thereafter be updated by Company
at least [**]
every quarter.
(B) BINDING DETAILED FORECAST. At least [**] calendar quarters
prior
to the first order of Commercial Grade CAPTISOL, Company shall
deliver to CyDex
a detailed rolling forecast setting forth Company's requirements
and anticipated
delivery schedules for Commercial Grade CAPTISOL for each
calendar quarter
during the succeeding [**] month period (the "DETAILED
FORECAST"). For purposes
of this Agreement, a calendar quarter means the consecutive
three (3) month
period ending March 31, June 30, September 30, and December 31,
respectively.
The parties acknowledge and agree that the first calendar
quarter covered in the
Detailed Forecast may be for a period less than the full three
(3) month period
but that each subsequent calendar quarter shall be for a full
three (3) month
period. The Detailed Forecast shall thereafter be updated by
Company quarterly
on a rolling basis, no later than the first day of each calendar
quarter, so
that each calendar quarter CyDex shall have been provided with a
rolling
Detailed Forecast for each calendar quarter during the twelve
(12) month period
commencing on the first day of the next calendar quarter
following the date on
which such Detailed Forecast is submitted. The Detailed Forecast
shall be firm
and binding on Company, subject to permissible variances set
forth in SECTION
3.2(C) below, with respect to the first, second, and third
calendar quarters
covered by such updated Detailed Forecast ("Q1", "Q2", "Q3",
respectively, and
where the fourth calendar quarter shall be " Q4"). If Company
fails to provide
any updated Detailed Forecast in accordance with this SECTION
3.2(B), the
Detailed Forecast last provided by Company shall be deemed to be
Company's
binding Detailed Forecast for the next succeeding twelve (12)
month period.
(C) DETAILED FORECAST VARIANCES.
(I) FOR THE FIRST YEAR. During the first year in which
Company
orders Commercial Grade Captisol, each Detailed Forecast may
modify the amount
of Commercial Grade CAPTISOL estimated in the previous Detailed
Forecast in
accordance with the following limitations (the "PURCHASE VOLUME
LIMITATIONS"):
(1) for the Q1 covered by such updated Detailed Forecast,
and regardless of the quantity of Commercial Grade CAPTISOL
forecasted in the
Detailed Forecast provided that it does not exceed the Volume
Threshold, then no
change in excess of a [**] percent ([**]%) volume increase or
decrease may be
made to the forecast provided for the Q2 in the immediately
preceding Detailed
Forecast without the prior express written consent of CyDex;
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(2) for the Q2 covered by such updated Detailed Forecast,
and regardless of the quantity of Commercial Grade CAPTISOL
forecasted in the
Detailed Forecast provided that it does not exceed the Volume
Threshold, then no
change in excess of a [**] percent ([**]%) volume increase or
decrease may be
made to the forecast provided for the Q3 in the immediately
preceding Detailed
Forecast without the prior express written consent of CyDex;
and
(3) for the Q3 covered by such updated Detailed Forecast,
and regardless of the quantity of Commercial Grade CAPTISOL
forecasted in the
Detailed Forecast provided that it does not exceed the Volume
Threshold, then no
change in excess of a [**] percent ([**]%) volume increase or
decrease may be
made to the forecast provided for the Q4 in the immediately
preceding Detailed
Forecast without the prior express written consent of CyDex.
(II) FOR SUBSEQUENT YEARS. After the first year in which
Company
orders Commercial Grade CAPTISOL, the Purchase Volume
Limitations shall be
determined in accordance with the following:
(1) for the Q1 covered by such updated Detailed Forecast,
and regardless of the quantity of Commercial Grade CAPTISOL
forecasted in the
Detailed Forecast provided that it does not exceed the Volume
Threshold, no
change may be made to the forecast provided for the Q2 in the
immediately
preceding Detailed Forecast without the prior express written
consent of CyDex;
(2) for Q2 covered by such updated Detailed Forecast:
A. if the quantity of Commercial Grade CAPTISOL
forecasted in the Detailed Forecast is less than [**] kilograms
per calendar
quarter, then no change in excess of a [**] percent ([**]%)
volume increase or
decrease may be made to the forecast provided for the Q3 in the
immediately
preceding Detailed Forecast without the prior express written
consent of CyDex;
and
B. if the quantity of Commercial Grade CAPTISOL
forecasted in the Detailed Forecast is equal to or greater than
[**] kilograms
per calendar quarter but less than the Volume Threshold, then no
change in
excess of a [**] percent ([**]%) volume increase or decrease may
be made to the
forecast provided for the Q3 in the immediately preceding
Detailed Forecast
without the prior express written consent of CyDex.
(3) for Q3 covered by such updated Detailed Forecast:
A. if the quantity of Commercial Grade CAPTISOL
forecasted in the Detailed Forecast is less than [**] kilograms
per calendar
quarter, then no change in excess of a [**] percent ([**]%)
volume increase or
decrease may be made to the forecast provided for the Q4 in the
immediately
preceding Detailed Forecast without the prior express written
consent of CyDex;
and
B. if the quantity of Commercial Grade CAPTISOL
forecasted in the Detailed Forecast is equal to or greater than
[**] kilograms
per calendar quarter but less than the Volume Threshold, then no
change in
excess of a [**] percent ([**]%) volume
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increase or decrease may be made to the forecast provided for
the Q4 in the
immediately preceding Detailed Forecast without the prior
express written
consent of CyDex.
(D) PURCHASE ORDERS. Together with each Detailed Forecast
provided
under SECTION 3.2(B) above, Company shall place a firm purchase
order with CyDex
in a form mutually agreed upon by the parties, for Company's
order of Commercial
Grade CAPTISOL for Q1 delivery consistent with the Detailed
Forecast. Each
purchase order, for all grades of CAPTISOL, shall specify: (i)
the grade of
CAPTISOL ordered (i.e., Commercial Grade CAPTISOL, Clinical
Grade CAPTISOL or
Research Grade CAPTISOL); (ii) quantities; (iii) delivery dates;
and (iv)
reasonable shipping instructions. CyDex shall use commercially
reasonable
efforts to comply with Company's requested delivery dates;
provided, however,
that the purchase order is received by CyDex at least [**] days
prior to the
stipulated delivery date. No purchase order shall be binding
upon CyDex until
accepted by CyDex in writing. CyDex shall accept such orders for
Commercial
Grade CAPTISOL from Company to the extent that the quantities of
CAPTISOL
ordered do not exceed the Purchase Volume Limitations. CyDex
shall not be
obligated to accept such orders to the extent that the
quantities of Commercial
Grade CAPTISOL ordered exceed the Purchase Volume Limitations,
but CyDex shall
use good faith efforts to fill such orders for such excess
quantities from
available supplies. If CyDex, despite the use of good faith
efforts, is unable
to supply such quantities that exceed the Purchase Volume
Limitations to
Company, such inability to supply shall not be deemed to be a
breach of this
Agreement by CyDex or a failure (including a Supply Failure) by
CyDex to supply
for any purpose. CyDex shall notify Company within [**] business
days after its
receipt of Company's purchase order of its ability to fill any
amounts of such
order, whether in excess of the Purchase Volume Limitations or
not, which notice
shall include an explanation in reasonable detail of the reason
for CyDex's
inability to comply with a particular order that does not exceed
the Purchase
Volume Limitations and CyDex's proposed course of action for
remedying such
failure. If any purchase order or other document submitted by
Company hereunder
or any other document passing between the parties contains terms
or conditions
in addition to or inconsistent with the terms of this Agreement,
the terms of
this Agreement shall control and prevail and such additional or
inconsistent
terms are hereby expressly rejected.
3.3 DELIVERY. CyDex shall deliver to Company or Company's
designee each
order of CAPTISOL, packed for shipment in accordance with
CyDex's customary
practices and the Specifications, EXW (Incoterms 2000) CyDex's
production point
or storage facilities. Title and risk of loss and/or damage to
CAPTISOL shall
pass to Company upon delivery of CAPTISOL to Company or
Company's designee at
CyDex's production point or storage facilities. If any
quantities actually
delivered to Company or Company's designee pursuant to an
accepted purchase
order may vary from the quantities reflected in such purchase
order by up to
[**] percent ([**]%) and still be deemed to be in compliance
with such purchase
order; provided, however, that Company shall only be invoiced
and required to
pay for the quantities of CAPTISOL that CyDex actually delivers
to Company or
Company's designee. Subject to the Company's rights to use an
Alternate Supplier
in the event of a Supply Failure as provided in SECTION 3.7,
CyDex will use
commercially reasonable efforts to include, in the next shipment
of CAPTISOL to
Company, any quantities ordered pursuant to an accepted purchase
order but not
delivered.
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3.4 MODIFIED SPECIFICATIONS. CyDex shall have the right to
change the
Specifications from time to time during the Term. In such event,
CyDex shall
give Company at least [**] days notice of such change and, if
requested by
Company, shall provide to Company the right to purchase an
amount of CAPTISOL
not greater than a [**]-year supply prior to such change in
Specifications if
such change impacts the Company's regulatory efforts related to
the Licensed
Product or commercial sale of the Licensed Product. Company
shall cooperate with
CyDex to have such change approved by all regulatory agencies
having
jurisdiction. In addition, if any regulatory agency having
jurisdiction or cGMP
requires CyDex to implement any changes to the Specifications,
CyDex shall use
all reasonable efforts to make such changes. In each case, CyDex
shall promptly
(but in all cases within a reasonable period of time in advance
of the
anticipated implementation of such change to reasonably allow
Company to
evaluate the consequences of such change) advise Company as to
any lead-time
changes or other terms that may result from a change to the
Specifications.
CyDex shall be responsible for all costs incurred by CyDex
arising from any
change requested by CyDex and not otherwise required by cGMP or
any regulatory
authority (other than Company's cost to purchase any additional
supply of
CAPTISOL). Company shall be responsible for all costs incurred
by CyDex
(including without limitation costs incurred for materials
already purchased by
CyDex or its Third-Party Manufacturer expressly for Company, its
Affiliates or
Sublicensees, in each case solely to the extent that such
materials can not be
redeployed or sold to other customers at or above their actual
cost) related to
implementing any change in Specifications that is (a) requested
by Company or
(b) required by cGMP or any regulatory authority specifically to
the Licensed
Product (i.e., is not a change made generally with respect to
CAPTISOL for all
products using CAPTISOL as a component).
3.5 QUALITY CONTROL; ACCEPTANCE AND REJECTION.
(A) QUALITY CONTROL. CyDex shall conduct or have conducted
quality
control testing of CAPTISOL prior to shipment in accordance with
the
Specifications and other CyDex-approved quality control testing
procedures (the
"TESTING METHODS"). CyDex shall retain or have retained accurate
and complete
records pertaining to such testing. Each shipment of CAPTISOL
hereunder shall be
accompanied by a certificate of analysis and a statement of cGMP
compliance for
bulk excipients for each lot of CAPTISOL therein.
(B) TEST METHODS. CyDex shall provide to Company copies of
all
CAPTISOL Testing Methods to allow the Company to conduct
incoming testing in
accordance with CyDex's quality control requirements.
(C) ACCEPTANCE TESTING. Company shall have a period of [**] days
from
the date of receipt to test or cause to be tested CAPTISOL
supplied under this
Agreement. Company or its designee shall have the right to
reject any shipment
of CAPTISOL that does not conform with the Specifications at the
time of
delivery pursuant to SECTION 3.3 hereof when tested in
accordance with the
Testing Methods. All shipments of CAPTISOL shall be deemed
accepted by Company
unless CyDex receives written notice of rejection from Company
within such [**]
day period describing the reasons for the rejection in
reasonable detail. Once a
delivery of CAPTISOL is accepted or deemed accepted hereunder,
Company shall
have no recourse against CyDex in the event CAPTISOL is
subsequently deemed
unsuitable for use for any reason, except as provided in SECTION
3.5(E) and
SECTION 10.1 below.
10
<PAGE>
(D) CONFIRMATION. After its receipt of a notice of rejection
from
Company pursuant to SECTION 3.5(C) above, CyDex shall notify
Company as soon as
reasonably practical whether it accepts Company's basis for
rejection and
Company shall cooperate with CyDex in determining whether such
rejection was
necessary or justified. If the parties are unable to agree as to
whether a
shipment of CAPTISOL supplied by CyDex or its Third-Party
Manufacturer hereunder
meets the Specifications, such question shall be submitted to an
independent
quality control laboratory mutually agreed upon by the parties.
The findings of
such independent laboratory shall be binding upon the parties.
The cost of the
independent quality control laboratory shall be borne by the
party whose results
are shown by such laboratory to have been incorrect.
(E) LATENT DEFECTS. As soon as either party becomes aware of a
Latent
Defect in any shipment of CAPTISOL, but in any case within [**]
days of learning
of such Latent Defect, it shall immediately notify the other
party, and such
shipment of CAPTISOL shall be deemed rejected as of the date of
such notice,
subject to the provisions of SECTION 3.5(D) above relating to
testing by an
independent quality control laboratory in cases of disputes.
Notwithstanding the
foregoing, Company shall have no right to reject or return, and
CyDex shall have
no obligation to refund or replace, any CAPTISOL that has a
Latent Defect if
such Latent Defect was identified by Company later than [**]
months after the
date of delivery of such CAPTISOL. For purposes of this SECTION
3.5(E), "Latent
Defect" means a failure of the shipment of CAPTISOL to conform
in all material
respects with the Specifications, which non-conformities were
not discovered
upon reasonable and customary physical inspection and incoming
quality assurance
testing carried out by Company or its designee on samples of
such shipment of
CAPTISOL.
(F) RETURN OR DESTRUCTION OF REJECTED SHIPMENTS. Company may
not
return or destroy any batch of CAPTISOL until it receives
written notification
from CyDex that CyDex does not dispute that the batch fails to
meet the
Specifications. CyDex will indicate in its notice either that
Company is
authorized to destroy the rejected batch of CAPTISOL or that
CyDex requires
return of the rejected CAPTISOL. Upon written authorization from
CyDex to do so,
Company shall promptly destroy the rejected batch of CAPTISOL
and provide CyDex
with written certification of such destruction. Upon receipt of
CyDex's request
for return, Company shall promptly return the rejected batch of
CAPTISOL to
CyDex. In each case, CyDex will be responsible for all
documented, reasonable
costs incurred by Company for the destruction or return of the
rejected
CAPTISOL.
(G) REFUND OR REPLACEMENT. Company shall not be required to pay
any
invoice with respect to any shipment of CAPTISOL properly
rejected pursuant to
this SECTION 3.5. Notwithstanding the foregoing, Company shall
be obligated to
pay in full for any rejected shipment of CAPTISOL that is
subsequently
determined by an independent quality control laboratory mutually
agreed by the
parties under SECTION 3.5(D) above to meet the Specifications,
irrespective of
whether Company has already paid CyDex for a replacement
shipment. If Company
pays in full for a shipment of CAPTISOL and subsequently
properly rejects such
shipment in accordance with this SECTION 3.5, Company shall be
entitled, upon
confirmation that such shipment failed to meet the
Specifications in all
material respects, at Company's option, either: (i) to a refund
or credit equal
to the purchase price paid with respect to such rejected
shipment; or (ii) to
require CyDex to replace such rejected shipment at no
11
<PAGE>
additional cost to Company. Company acknowledges and agrees
that, except for the
indemnification obligations set forth in SECTION 10.1 below,
Company's rights to
a payment or replacement as described in this SECTION 3.5(G)
shall be Company's
sole and exclusive remedy, and CyDex's sole liability, with
respect to
non-conforming CAPTISOL delivered hereunder.
(H) EXCEPTIONS. Company's rights of rejection, return, refund
and
replacement set forth in this SECTION 3.5 shall not apply to any
CAPTISOL that
is non-conforming due to damage (i) caused by Company, its
Affiliates or
Sublicensees or their respective employees or agents, including
but not limited
to, misuse, neglect, improper storage, transportation or use
beyond any dating
provided or (ii) that occurs subsequent to delivery of such
CAPTISOL to the
carrier at the point of origin, including but not limited to any
damage caused
thereafter by accident, fire or other hazard (unless such damage
is attributable
to CyDex's or its Third Party Manufacturer's negligence or
willful misconduct),
and CyDex shall have no liability or responsibility to Company
with respect
thereto.
3.6 FACILITIES AND INSPECTIONS. Without limiting CyDex's
responsibility
under this Agreement, CyDex shall have the right at any time to
satisfy its
supply obligations to Company hereunder either in whole or in
part through
arrangements with third parties engaged to perform services or
supply facilities
or goods in connection with the manufacture or testing of
CAPTISOL (each, a
"THIRD-PARTY MANUFACTURER"). CyDex shall give Company prior
written notice of
any such arrangement, provided, the parties hereby acknowledge
and agree that,
as of the Effective Date, The Hovione Group is a Third-Party
Manufacturer. CyDex
shall permit no more than [**] of Company's authorized
representatives, during
normal working hours and upon reasonable prior notice to CyDex
but in no event
less than [**] days prior notice, to inspect that portion of all
CyDex
facilities utilized for the manufacture, preparation,
processing, storage or
quality control of CAPTISOL or such facilities of any
Third-Party Manufacturer,
no more frequently than [**] per calendar year (unless the
inspection reveals
material deficiencies or concerns which require additional
follow-up
inspections, including without limitation, noncompliance with
Specifications or
any applicable law). If such inspection is of the facilities of
a Third-Party
Manufacturer, Company shall pay CyDex's cost of inspection (as
of the Effective
Date, [**] Dollars ($[**]) per person per day). Company's
authorized
representatives shall be accompanied by CyDex personnel at all
times, shall be
qualified to conduct such manufacturing audits, and shall comply
with all
applicable rules and regulations relating to facility security,
health and
safety. The results of such inspection shall be deemed
Confidential Information
of CyDex, which shall be governed by the terms of SECTION 8
(Confidentiality)
hereof. In no event shall any such manufacturing audit exceed
[**] days in
duration. Company shall ensure that its authorized
representatives conduct each
manufacturing audit in such a manner as to not interfere with
the normal and
ordinary operation of CyDex or its Third-Party Manufacturer.
Except as expressly
set forth in this SECTION 3.6, neither Company nor its
Affiliates, Sublicensees
or their respective employees or representatives shall have
access to CyDex's
facilities or the facilities of any Third-Party Manufacturer.
CyDex shall inform
Company of any regulatory inspection that may impact CAPTISOL or
the Licensed
Product and shall provide Company with a summary of the outcome
of such
inspection or a copy of any Form 483 or other letter of
deficiency received from
a regulatory agency inspection.
12
<PAGE>
3.7 INABILITY TO SUPPLY.
(A) NOTICE. CyDex shall notify Company if CyDex is unable to
supply
the quantity of (i) Commercial Grade CAPTISOL ordered by Company
in accordance
with the Purchase Volume Limitations set forth in SECTION 3.2(C)
or (ii)
Research Grade CAPTISOL or Clinical Grade CAPTISOL ordered by
Company as set
forth in SECTION 3.2(D) above: (1) within [**] business days
after CyDex's
receipt of a purchase order from Company as provided in SECTION
3.2(D); or (2)
immediately upon becoming aware of an event of force majeure or
any other event
that would render CyDex unable to supply to Company the quantity
of CAPTISOL
that CyDex is required to supply hereunder.
(B) ALLOCATION. Subject to SECTION 3.7(C), If CyDex is unable
to
supply to Company the quantity of CAPTISOL that CyDex is
required to supply
hereunder, CyDex (i) shall allocate its available CAPTISOL among
Company and any
other purchasers of CAPTISOL with which CyDex then has an
on-going contractual
relationship, in proportion to the quantity of CAPTISOL for
which each of them
has orders pending at such time and (ii) shall take all
reasonable steps
necessary to minimize supply delays. The supply allocation
provided in this
SECTION 3.7(B) shall be CyDex's sole obligation and Company's
sole and exclusive
remedy for any supply shortage.
(C) ALTERNATE SUPPLIERS. Notwithstanding anything in the
foregoing to
the contrary, in the event of a Supply Failure, Company shall
have the right to
purchase from one or more alternate suppliers ("ALTERNATE
SUPPLIERS") its
requirements for sulfobutylether (beta)(beta) cyclodextrin,
sodium salt, to the
extent necessary to replace CAPTISOL not provided by CyDex due
to the Supply
Failure, until such time as CyDex reasonably demonstrates that
CyDex is able to
resume manufacture and supply of CAPTISOL hereunder, provided,
that Company
shall not be obligated to purchase any of its requirements from
CyDex until
Company has fulfilled all obligations or commitments, if any,
undertaken by
Company in connection with Company's arrangements with the
Alternate Suppliers.
4. COMPENSATION.
4.1 PAYMENTS AND ROYALTIES FOR LICENSES.
(A) ONE-TIME FEE. Company shall pay to CyDex a
non-refundable,
non-creditable, one-time fee of FIFTY THOUSAND U.S. DOLLARS
($50,000) in partial
consideration of the rights granted Company under this
Agreement, which amount
shall be due and payable in full upon the Effective Date.
(B) MILESTONE PAYMENTS ASSOCIATED WITH DEVELOPMENT AND
REGULATORY
APPROVAL. Within [**] days following the occurrence of each of
the milestone
events listed below with respect to the Licensed Product,
Company shall provide
written notice to CyDex of the achievement of such milestone
event, and within
[**] days of the occurrence of each of the milestone events, pay
to CyDex the
applicable non-refundable milestone fee listed next to each such
event in
further consideration of the rights granted Company hereunder.
The milestone
payments are as follows:
13
<PAGE>
<TABLE>
<CAPTION>
MILESTONE MILESTONE PAYMENT IN US DOLLARS
--------- -------------------------------
<S> <C>
First dosing of the first patient in the first
Phase III Clinical Trial $[**]
Filing NDA for Licensed Product with the
FDA in the United States $[**]
FDA's Approval of NDA for Licensed Product $[**]
</TABLE>
(C) MILESTONE PAYMENTS ASSOCIATED WITH SALES PERFORMANCE OF
LICENSED
PRODUCT Within [**] days following the occurrence of each of the
milestone
events listed below with respect to the Licensed Product,
Company shall provide
written notice to CyDex of the achievement of such milestone
event, and within
[**] days of the occurrence of each of the milestone events, pay
to CyDex the
applicable non-refundable milestone fee listed next to each such
event in
further consideration of the rights granted Company hereunder.
The milestone
payments are as follows:
<TABLE>
<CAPTION>
MILESTONE MILESTONE PAYMENT IN US DOLLARS
--------- -------------------------------
<S> <C>
One-time, Non-refundable Payment upon
aggregate Sales for Licensed Product on a
Worldwide Basis of US$[**] in a 12-month
period $[**]
One-time, Non-refundable Payment upon
aggregate Sales for Licensed Product on a
Worldwide Basis of US$[**] in a 12-month
period $[**]
</TABLE>
All Milestones associated with SECTIONS 4.1(A), 4.1(B) and
4.1(C), shall be
payable upon the occurrence of the triggering event (provided
such triggering
event occurs during the term of this Agreement), regardless of
the date at which
each of these events takes place. For purposes of clarity, each
milestone
payment under SECTION 4.1(A), 4.1(B) and 4.1(C) is a one-time
payment (i.e., not
a one time per-Licensed Product payment) so that the total fees
payable by
Company pursuant to SECTIONS 4.1(A), 4.1(B) and 4.1(C) shall not
exceed
$2,975,000. It is explicitly agreed and understood that all
milestone payment
obligations shall survive the expiration of this Agreement, and
shall be payable
in full and within the timeframe stated above if the Licensed
Product achieves
such milestones regardless of the expiration of any of the
Licensed Patents.
Further, it is explicitly agreed and understood that Company
shall be
responsible for any payments related to achievement of any
milestones which have
accrued prior to the effective date of termination or expiration
of this
Agreement. It is explicitly agreed and understood that if the
Agreement is
terminated, the Company shall have no milestone payment
obligations at all other
than for any milestones that were achieved prior to termination
of the
Agreement.
(D) ROYALTIES.
(I) In addition to amounts payable pursuant to SECTIONS
4.1(A)
and 4.1(B) and 4.1(C) above, and subject to the reduction set
forth in SECTION
4.1(D)(III) below,
14
<PAGE>
Company shall pay to CyDex a royalty on Net Sales on the
Licensed Product at the
rate(s) specified below, payable on a quarterly basis:
<TABLE>
<CAPTION>
ANNUAL NET SALES TIER OF LICENSED PRODUCT ON ROYALTY RATE BEFORE
ROYALTY RATE AFTER
A WORLDWIDE BASIS IN US DOLLARS GENERIC COMPETITION GENERIC
COMPETITION
-------------------------------------------- -------------------
-------------------
<S> <C> <C>
Net Sales < $[**] [**]% [**]%
$[**] < or = Net Sales < $[**] [**]% [**]%
$[**] < or = Net Sales [**]% [**]%
</TABLE>
For purposes of clarity, royalties on Net Sales of Licensed
Product in a
calendar year shall be determined by applying the applicable
tiered royalty rate
corresponding to incremental Net Sales. For example, if, during
a calendar year,
worldwide Net Sales with respect to Licensed Product were equal
to $[**],
royalties payable pursuant to clause (d)(i) above (assuming no
Generic
Competition) would, subject to the other provisions of this
Agreement, equal
$[**] (calculated as $[**] multiplied by [**]%, $[**] multiplied
by [**]%, and
$[**] multiplied by [**]%).
(II) "GENERIC COMPETITION " will be defined as the earlier of
:
(a) a bona fide generic version of CAPTISOL available for
purchase in the United
States, which the FDA accepts as a straight substitute for
branded CAPTISOL; (b)
a bona fide generic version of the Licensed Product within the
Territory on a
country-by-country basis; and (c) the fifth anniversary of the
Commercial Launch
Date of Licensed Product within the Territory on a
country-by-country basis.
(III) The royalty payments owed by Company to CyDex will
reduce
to zero for sales in each country where Licensed Product is
commercialized at
the later of: (a) the expiry of the last relevant patent in the
Licensed Patents
that claims CAPTISOL in the country, or (b) the tenth
anniversary of the
Commercial Launch Date of Licensed Product in that country. Upon
expiration of
Company's royalty obligations hereunder, the licenses granted to
Company under
SECTION 2.1 shall become fully paid-up, perpetual and
irrevocable.
(IV) In establishing the royalty structure hereunder, the
parties
recognize, and Company acknowledges, the substantial value of
the various
obligations being undertaken by CyDex under this Agreement, in
addition to the
grant of the licenses under the Licensed Patents and CAPTISOL
Data Package, to
enable the rapid and effective market introduction of the
Licensed Product in
the Territory. The parties have agreed to the payment structure,
including
without limitation the royalty payments, set forth herein as a
convenient and
fair mechanism to compensate CyDex for these obligations.
4.2 PRICING FOR CAPTISOL.
(A) PRICING. The purchase prices for CAPTISOL are as specified
in
EXHIBIT C attached hereto. CyDex reserves the right to increase
the purchase
prices set forth on EXHIBIT C on each January 1 during the Term,
by written
notice to Company, by a percentage equal to the aggregate
percentage increase,
if any, in the Producer Price Index PCU325412 (Pharmaceutical
preparations) as
reported by the Bureau of Labor Statistics, U.S. Department of
Labor ("Price
15
<PAGE>
Index"), for the 12-month period ending December 31 of the prior
year, using the
year 2007 as the initial base year from which to apply price
changes based on
the Price Index. The minimum order for Commercial Grade CAPTISOL
shall be [**]
kilograms prior to the Commercial Launch Date and [**] kilograms
after the
Commercial Launch Date. Notwithstanding the foregoing, if
Company fails to place
a firm purchase order in any Q1 for a quantity of Commercial
Grade CAPTISOL
equal to or greater than the quantity of Commercial Grade
CAPTISOL that Company
is obligated to purchase pursuant to the applicable Detailed
Forecast, then
CyDex shall invoice, and Company shall be obligated to pay, the
difference in
the amount of CAPTISOL that Company did purchase in such quarter
and the amount
of CAPTISOL that Company was obligated to purchase pursuant to
the Detailed
Forecast for such Q1.
(B) INVOICING; PAYMENT. CyDex shall invoice Company upon
shipment of
each order of CAPTISOL. All invoices shall be sent to the
address specified in
the applicable purchase order, and each invoice shall state the
purchase price
for CAPTISOL in such shipment, plus any insurance, taxes,
shipping costs or
other costs incidental to such purchase or shipment initially
paid by CyDex but
to be borne by Company hereunder; provided, however, that if
such insurance,
taxes, shipping costs or other costs incidental to such purchase
or shipment
initially paid by CyDex but to be borne by Company are not known
at the time
CyDex invoices Company for the purchase price for the CAPTISOL
ordered by
Company, CyDex may invoice such costs at a later date. Payment
of such invoices
shall be made within [**] days after the date of receipt
thereof.
4.3 CURRENCY. All amounts due hereunder are stated in, and shall
be paid
in, U.S. dollars. Net Sales based on foreign revenue will be
converted to U.S.
dollars at the rate of exchange published in Reuters Daily Rate
Report or The
Wall Street Journal, Eastern U.S. Edition on the last day of
each calendar
quarter. Company shall provide CyDex, together with each royalty
payment owed
pursuant to SECTION 4.1(D) above, a schedule detailing the
calculation of Net
Sales resulting from the conversion of foreign revenue to U.S.
dollars as set
forth herein.
4.4 TAXES. All amounts due hereunder exclude all applicable
sales, use, and
other taxes, and Company will be responsible for payment of all
such taxes
(other than taxes based on CyDex's income), fees, duties, and
charges, and any
related penalties and interest, arising from the payment of
amounts due
hereunder or the sublicense or license, as the case may be,
under the Licensed
Patents hereunder. Company shall make all payments to CyDex
hereunder free and
clear of, and without reduction for, any withholding taxes; any
such taxes
imposed on payments of amounts to CyDex hereunder will be
Company's sole
responsibility, and Company will provide CyDex reasonable
documentation, or such
other evidence as CyDex may reasonably request, to establish
that such taxes
have been paid. Company shall indemnify and hold CyDex harmless
from any and all
such taxes and any actions brought against CyDex by any taxing
authority with
respect Company's failure to pay any such taxes which Company is
obligated to
pay hereunder.
4.5 LATE PAYMENTS. Unpaid balances not subject to a reasonable,
good-faith
dispute by Company shall accrue interest, from due date until
paid, at a rate
equal to the lesser of (i) the prime rate, as reported in The
Wall Street
Journal, Eastern U.S. Edition, on the date such payment is due,
plus an
additional two percent (2%) or (ii) the maximum rate permitted
under
16
<PAGE>
applicable law. If any amount due hereunder and not subject to a
reasonable,
good-faith dispute by Company remains outstanding for more than
[**] days after
its due date, CyDex may, in addition to any other rights or
remedies it may
have, refuse to ship CAPTISOL hereunder except upon payment by
Company in
advance.
5. RECORDS; REPORTS; AUDIT.
5.1 RECORDS. During the Term and for a period of [**] years
thereafter,
Company shall, and shall require its Affiliates and Sublicensees
to maintain
complete and accurate records relating to Net Sales of Licensed
Product.
5.2 REPORTS. Within [**] calendar days following the conclusion
of each
calendar quarter during the Term, Company shall provide CyDex
with written
reports with respect to such calendar quarter that set forth in
reasonable
detail information regarding Company's, its Affiliates' and
Sublicensees' Net
Sales of the Licensed Product in the Territory during such
calendar quarter so
as to enable the calculation of the royalty payments due
hereunder.
5.3 AUDIT. During the Term and for a period of [**] years
thereafter, CyDex
shall have the right, during normal business hours and upon
reasonable notice,
to inspect and audit Company's, its Affiliates' and
Sublicensees' records
relevant to Net Sales, but no more often than [**] per year. The
costs of such
audits shall be borne solely by CyDex; provided, however, that
in the event such
an audit reveals either a failure by Company to pay any
applicable milestone
payment due or an underpayment by Company of royalties owed
hereunder of more
than five percent (5%), Company shall immediately (i) pay CyDex
all amounts by
which Company has underpaid CyDex as revealed by the audit, plus
interest
accrued thereon (from the applicable original due date) at the
rate set forth in
SECTION 4.5 above and (ii) reimburse CyDex for the costs of such
audit. In the
event that an audit reveals that Company's payments are in
excess of those
required under this Agreement, CyDex shall credit the amount of
such overpayment
plus interest accrued thereon (from the applicable original
payment date)
towards any amounts payable by Company to CyDex under this
Agreement within [**]
days of such audit, and shall promptly remit to Company any
portion of such
overpayment which has not been credited within such [**] day
period. All
information concerning royalty payments and reports, and any
information learned
in the course of any audit or inspection under this SECTION 5.3,
shall be deemed
to be Confidential Information of Company, subject to the terms
and provisions
of SECTION 8 (Confidentiality) below, except to the extent
necessary for CyDex
to enforce its rights under this Agreement.
6. DEVELOPMENT AND COMMERCIALIZATION BY COMPANY
6.1 DILIGENCE. Company agrees that, during the Term, it will use
(whether
directly or through Affiliates or Sublicensees) commercially
reasonable efforts
to develop and commercialize Licensed Product in the Territory.
For purposes of
this SECTION 6.1, "COMMERCIALLY REASONABLE EFFORTS" shall mean
efforts that are
at least as great as those efforts and
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