RESEARCH AND LICENSE AGREEMENT

RESEARCH AND LICENSE AGREEMENT

by and between

MERCK & CO., INC.

And

ZNOMICS, INC.

 

 

 

 

RESEARCH AND LICENSE AGREEMENT

THIS AGREEMENT, effective as of November 15, 2005 (the "Effective Date"), by and between MERCK & CO., INC., a corporation organized and existing under the laws of New Jersey ("MERCK") and ZNOMICS, INC., a corporation organized and existing under the laws of Delaware ("ZNOMICS").

RECITALS:

WHEREAS, MERCK desires to obtain a license under the Patent Rights and ZNOMICS Know-How, upon the terms and conditions set forth herein and ZNOMICS desires to grant such a license;

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, the Parties hereby agree as follows:

1.           DEFINITIONS

Unless specifically set forth to the contrary herein, the following terms, whether used in the singular or plural, shall have the respective meanings set forth below:

1.1             "Act" shall mean, as applicable, the United States Federal Food, Drug and Cosmetic Act, 21 U.S.C. §§ 301 et seq., and/or the Public Health Service Act, 42 U.S.C. §§ 262 et seq., as such may be amended from time to time.

1.2             "Affiliate" shall mean (i) any corporation or business entity of which fifty percent (50%) or more of the securities or other ownership interests representing the equity, the voting stock or general partnership interest are owned, controlled or held, directly or indirectly, by MERCK; or (ii) any corporation or business entity which, directly or indirectly, owns, controls or holds fifty percent (50%) (or the maximum ownership interest permitted by law) or more of the securities or other ownership interests representing the equity, the voting stock or, if applicable, the general partnership interest, of MERCK.

1.3             "Calendar Year" shall mean each successive period of twelve (12) months commencing on January 1 and ending on December 31.

1.4             "Control" 1 "Controls" or "Controlled by" - shall mean with respect to any item of

or right under Patent Rights or ZNOMICS Know-How or MERCK Know-How, the possession of (whether by ownership or license, other than pursuant to this Agreement),

1.5             "Directed" shall mean that a compound or biological modulates the activity of the Target.

1.6           "Druggable Genes" shall mean a Gene encoding for a cell surface receptor, nuclear receptor. ion channel or enzyme.

1.7             "Effective Date" shall mean the date of the last Party to sign this Agreement.

1.8             "Escrow Agent" shall mean a third party that is mutually agreed upon by the Parties and agrees, pursuant to a written agreement, to (a) abide by the confidentiality and non-use provisions of this Agreement; and (b) hold the list of Merck Pre-existing Programs, as updated from time to time, in escrow on behalf of the Parties.

1.9             "Final Report" shall mean the report as more fully described in Section 2.4.3.

1.10             "First Commercial Sale" shall mean, with respect to any Product, the first sale for end use or consumption of such Product in the Territory, excluding, however, any sale or other distribution for use in a Clinical Trial.

1.11             "Full Time Equivalent" or "FTE" shall mean the equivalent of a full-time scientist's work time over a twelve-month period (including normal vacations, sick days and holidays). The portion of an FTE year devoted by a scientist to the Research shall be determined by dividing the number of full days during any twelve-month period devoted by such employee to the Research by the total number of working days during such twelve­month period.

1.12             "Funded Patent Rights" shall have the meaning set forth in Section 7.1.1.

1.13             "Gene" shall mean a nucleotide sequence that ZNOMICS identifies using the Library. inclUding but not limited to, all expressed variants of such nucleotide sequences.

1.14             "Improvement" means any enhancement, whether or not patentable, made by ZNOMICS or others acting on behalf of ZNOMICS in the identification, use, manufacture or development of Novel Obesity--related Genes, Targets and/or Products.

1.15             "Information" shall mean any and all information and data, including without limitation all MERCK Know-How, ZNOMICS Know-How, and all other scientific, pre-clinical, clinical, regulatory, manufacturing, marketing, financial and commercial information or data, whether communicated in writing or orally or by any other method, which is provided by one Party to the other Party in connection with this Agreement.

1.16             "Initiates" shall mean, with respect to a Clinical Trial, the administration of the first dose to a patient in such Clinical Trial.

1.17             "Invention" shall mean any process, method, composition of matter, article of

 

manufacture, discovery or finding that is conceived and/or reduced to practice as a result of the Research.

1.18             "Joint Information and Inventions" shall mean all protocols, formulas, data, Inventions, know-how and trade secrets, patentable or otherwise, resulting from the Research developed or invented jointly by employees of MERCK and ZNOMICS or others acting on behalf of MERCK and ZNOMICS.

1.19             "Library" shall mean the proprietary ZNOMICS collection of zebrafish in which Genes are mutated by at least 350,000 viral insertions.

 

1.20             "Major Market Countries" shall mean the United States, Canada, Japan, and the following EP designated countries: France, Germany, Italy, Spain and the United Kingdom. Each individually, a "Major Market Country."

1.21             "MERCK Information and Inventions" shall mean all protocols, formulas, data, Inventions, know-how and trade secrets, patentable or otherwise, provided by MERCK to ZNOMICS or developed or invented solely by employees of MERCK or other persons not employed by ZNOMICS acting on behalf of MERCK, including but not limited to, all mammalian Druggable Genes identified in the Merck Pre-existing Program.

1.22             "MERCK Know-How" shall mean any information and materials, including but not limited to discoveries, improvements, processes, methods, protocols, formulas, data, inventions (including without limitation MERCK's Information and Inventions and MERCK's rights in Joint Information and Inventions), know-how and trade secrets, patentable or otherwise, which during the term of this Agreement, (i) are in MERCK's Control, (ii) are not generally known and (iii) are in MERCK's opinion necessary to ZNOMICS in the performance of its obligations under the Research.

1.23           "MERCK Pre-existing Program" shall mean a mammalian Druggable Gene that MERCK has identified in writing to the Escrow Agent as being the subject of an active MERCK program prior to receipt by MERCK of a Novel Obesity-related Gene Package from ZNOMICS.

1.24           "Novel Obesity-related Genes" shall mean mammalian Druggable Genes, for which teleostian homologs have been identified in the Library during the Research Term, wherein the disruption of said teleostian homologs in zebrafish results (based on statistical significance compared with wild-type zebrafish controls) in either (a) altered fat mass; and/or (b) altered agouti~related protein ("AGRP") expression; and which Druggable Genes' link to obesity has not been reported in the literature and which Druggable Genes are not a MERCK Pre-existing Program.

1.25           "Novel Obesity-related Gene Package" means the package of information relating to and identifying Novel Obesity-related Genes provided by ZNOMICS to MERCK as more fully described in Section 3.1.

 

1.26             "Party" shall mean MERCK and ZNOMICS, individually, and "Parties" shall mean MERCK and ZNOMICS, collectively.

1.27             "Patent Rights" shall mean any and all patents and patent applications in the Territory

1.28             "Phase I Clinical Trial" shall mean a human clinical trial in any country that would satisfy the requirements of 21 CFR 312.21(a).

1.29           "Positive Identity Genes" shall mean Genes whose insertional mutation leads to changed fat mass or altered AGRP expression.

1.30           "Product(s)" shall mean any pharmaceutical or biological preparation in final form which is Directed to a Target.

 

1.31             "Regulatory Authority" shall mean any applicable government regulatory authority involved in granting approvals for the manufacturing, marketing. reimbursement and/or pricing of a Product in the Territory, inclUding. in the United States, the United States Food and Drug Administration and any successor governmental authority having substantially the same function.

1.32             "Related Party" shall mean each of MERCK, its Affiliates, and their respective sublicensees (which term does not include distributors), as applicable.

1.33             "Research"  shall mean the activities undertaken by ZNOMICS to identify and characterize potential novel drug targets for obesity and type II diabetes using zebrafish intellectual property for and on behalf of MERCK as set forth in Article 2 and Schedule 2.1.

 

1.34           "Research Milestone" shall mean each of the milestones achieved by either ZNOMICS or MERCK as more fully described in, as applicable, Section 5.2 or 5.4, respectively.

1.35             "Research Term" shall mean the duration of the Research and "Extended Research Term" shall mean any period of the Research as it may be extended by mutual agreement of the Parties, as described more fully in Section 2.6.

1.36           "Target" shall mean the peptide and/or protein encoded by a Novel Obesity-related Gene that is selected by MERCK for further evaluation including all expressed variants thereof.

1.37             "Territory" shall mean all of the countries in the world, and their territories and possessions.

1.39             "Valid Patent Claim" shall mean a claim of an issued and unexpired patent included within the Patent Rights which claims a Product as a composition of matter, which claim has not been revoked or held unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction (which decision is not appealable or has not been appealed within the time allowed for appeal), and which claim has not been disclaimed, denied or admitted to be invalid or unenforceable through reissue, re­examination or disclaimer or otherwise.

1.40             "ZNOMICS Information and Inventions" shall mean all protocols, formulas, data, Inventions, know-how and trade secrets, patentable or otherwise, resulting from the Research developed or invented solely by employees of ZNOMICS or other persons not employed by MERCK acting on behalf of ZNOMICS.

1.41             "ZNOMICS Know-How" shall mean all information and materials, including but not limited to discoveries, improvements, processes, methods, protocols, formulas, data, inventions (including without limitation ZNOMICS Information and Inventions and ZNOMICS rights in Joint Information and Inventions), know-how and trade secrets, patentable or otherwise. which during the term of this Agreement (i) are in the Control of ZNOMICS, (ii) are not generally known and (iii) are necessary or useful to MERCK in connection with the Research, and the research, development, manufacture, use or sale of Products in the Territory; excluding, however, any MERCK Know-How and the Final Report.

2.           RESEARCH

2.1            General

ZNOMICS and MERCK shall engage in the Research upon the terms and conditions set forth in this Agreement. The activities to be undertaken in the course of the Research are set forth in Schedule 2.1, which may be amended from time to time upon mutual written agreement by authorized representatives of the Parties.

2.2            Conduct of Research

ZNOMICS shall conduct the Research in compliance with all applicable laws, rules and regulations. In addition, if animals are used in research hereunder, ZNOMICS will comply with the Animal Welfare Act or any other applicable local, state, national and international laws and regulations relating to the care and use of laboratory animals. MERCK encourages ZNOMICS to use the highest standards, such as those set forth in the Guide for the Care and Use of

Laboratory Animals (NRC, 1996), for the humane handling, care and treatment of such research animals. Any animals which are used in the course of the Research, or products derived from those animals, such as eggs or milk, will not be used for food purposes, nor will these animals be used for commercial breeding purposes; provided, however, that these restrictions do not apply to any Library that is not utilized for the Research. ZNOMICS shall notify MERCK in writing of any deviations from applicable regulatory or legal requirements. ZNOMICS hereby certifies that it has not employed or otherwise used in any capacity, and will not employ or otherwise use in any capacity, the services of any person debarred under United States law, including but not limited to Section 21 USC 335a, in performing any portion of the Research. ZNOMICS shall not use human tissue in the performance of the Research.

ZNOMICS shall be entitled to utilize the services of Third Parties to perform its Research activities only upon MERCK's prior written consent or as specifically set forth in Schedule 2.1" Notwithstanding any such consent, ZNOMICS shall remain at all times fully liable for its respective responsibilities under the Research.

2.3            Use of Research Funding

ZNOMICS shall apply the research funding it receives from MERCK under this Agreement solely to carry out its Research activities in accordance with Schedule 2.1 and the terms and conditions of this Agreement.

2.4            Records and Reports

2.4.1             Records. ZNOMICS shall maintain records, in sufficient detail and in good scientific manner appropriate for patent and regulatory purposes, which shall fully and properly reflect all work done and results achieved in the performance of the Research by ZNOMICS.

2.4.2             Copies and Inspection of Records. MERCK shall have the right, during normal business hours and upon reasonable notice, to inspect and copy all such records of ZNOMICS referred to in Section 2.4.1. MERCK shall maintain such records and the information disclosed therein in confidence in accordance with Section 4.1. MERCK shall have the right to arrange for its employees and/or consultants involved in the activities contemplated hereunder to visit the offices and laboratories of ZNOMICS and any of its Third Party contractors as permitted under Section 2.2 during normal business hours and upon reasonable notice, and to discuss the Research work and its results in detail with the technical personnel and consultants of ZNOMICS. Upon request, ZNOMICS shall provide copies of the records described in Section 2.4.1 above.

2.4.3             Final Report. Within thirty (30) days following the end of the Research Term, ZNOMICS shall proVide a written Final Report to MERCK. MERCK and its Affiliates shall be permitted to use information contained in such Final Report which use by MERCK shall be solely for the purpose of internal research, discovery and development, unless MERCK exercises the Non-Exclusive Option or Exclusive Option in accordance with Section 3.2. Such Final Report shall include the (a) nile red fat mass screen (or comparable screen approved by MERCK) validation data and assay description; (b) description of the AGRP in situ hybridization screen and data; and (c) a list of all Positive Identity Genes together with a list of all Novel Obesity-related Genes.

 

2.5            Research Information and Inventions

The entire right, title and interest in:

(a)           ZNOMICS Information and Inventions shall be owned solely by ZNOMICS;

(b)           MERCK Information and Inventions shall be owned solely by MERCK; and

2.6            Research Term

3.           EXCHANGE OF INFORMATION; LICENSE

3.1          Procedure for Novel Obesity-Related Gene Package

 

3.2            Exercise of Option .

 

3.3            Licenses

 

3.4            Rights of MERCK to an Exclusive License .

3.5            No Implied Licenses .

Except as specifically set forth in this Agreement, neither Party shall acquire any license or other intellectual property interest, by implication or otherwise, in any Information disclosed to

3.6            Bankruptcy

All licenses and rights to licenses granted under or pursuant to this Agreement by ZNOMICS to MERCK are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the' United States Bankruptcy Code, licenses of rights to "intellectual property" as defined under Section 101 (35A) of the Code. The Parties agree that MERCK. as a licensee of such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the Code, and that upon commencement of a bankruptcy proceeding by or against ZNOMICS under the Code, MERCK shall be entitled to a complete duplicate of, or complete access to (as MERCK deems appropriate), any such intellectual property and all embodiments of such intellectual property_ Such intellectual property and all embodiments thereof shall be promptly delivered to MERCK (i) upon any such commencement of a bankruptcy proceeding upon written request therefor by MERCK, unless ZNOMICS elects to continue to perform all of its obligations under this Agreement or (ii) if not delivered under (i) above, upon the rejection of this Agreement by or on behalf of ZNOMICS upon written request therefor by MERCK.

The foregoing provisions of this Section 3.6 are without prejudice to any rights MERCK may have arising under the Code or other applicable law.

4.           CONFIDENTIALITY AND PUBLICATION

4.1            Nondisclosure Obligation

All Information disclosed by one Party to the other Party hereunder shall be maintained in confidence by the receiving Party and shall not be disclosed to any Third Party or used for any purpose except as set forth herein without the prior written consent of the disclosing Party, except to the extent that such Information: