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Exclusive License Agreement B/w Inspire & U.of Nc

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Sectors: Biotechnology / Pharmaceuticals
Governing Law: North Carolina, View North Carolina State Laws
Effective Date: September 01, 1998
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Exhibit 10.12



THIS LICENSE AGREEMENT is made and entered into this 1st day of September, 1998 (the "Effective Date" between THE UNIVERSITY of NORTH CAROLINA AT CHAPEL HILL, having an address at 308 Bynum Hall, Chapel Hill, N.C. (hereinafter referred to as "University") and Inspire Pharmaceuticals, Inc., a corporation organized and existing under the laws of Delaware and having an address at 4222 Emperor Boulevard, Suite 470, Durham, NC 27703 (hereinafter referred to as "Licensee").


WHEREAS, University owns and controls the inventions described in and encompassed by University invention disclosure number OTD 95-24 and U.S. Patent No. 5,635,160, corresponding foreign applications entering national phase from PCT/US96/09190 and U.S. Continuation-In-Part application 08/853,056, all entitled "Dinucleotides Useful for the Treatment of Cystic Fibrosis and for Hydrating Mucus Secretions", disclosure number OTD 96-83 and U.S. patent application No. 08/624,914 entitled "Method of Treating Bronchitis with Uridine Triphosphates and Related Compounds", and disclosure number OTD 99-13 and U.S. patent application No. 08/744,267 entitled "Method of Treating Ciliary Dyskinesia with Uridine Triphosphates and Related Compounds" (collectively, "Inventions");

WHEREAS, the Inventions were developed by Drs. M. Jackson Stutts and Richard C. Boucher, Eduardo R Lazarowski and Cara A. Geary (collectively, the "Inventors"), of the University; and

WHEREAS, Licensee is desirous of producing, using and selling products which include the use of the Inventions and is willing to expend best efforts to do so if it can obtain a license to use the Inventions under the terms and conditions set forth herein; and

WHEREAS, University desires to facilitate a timely transfer of its information and technology concerning the Inventions for the ultimate benefit of the public and this transfer is best accomplished by the grant of this license; and

WHEREAS, in the opinion of the University, this transfer can best be accomplished consistent with its mission by affiliation with Licensee;

NOW, THEREFORE, for and in consideration of the covenants, conditions, and undertakings hereinafter set forth, it is agreed by and between the parties as follows:

1. Definitions

1.1. "University Technology" means any unpublished research and development information, unpatented inventions, clinical data, and technical data developed by the Inventors while employees of the University and in the possession of the University prior to the Effective Date of this Agreement, which relates to and is necessary for the practice of the Inventions and which University has the right to provide to Licensee.

1.2. "Licensed Products" means any method, procedure, product, or component part thereof whose manufacture, sale, or use includes any use of University Technology that is covered by any Valid Claim included in the Patent Rights.

1.3. "Patent Rights" means any unexpired U.S. patents and/or pending patent applications covering the Inventions owned or controlled by University prior to or during the term of this Agreement and which University has the right to provide to Licensee, as well as any continuations, continuations in part, divisions, substitutions, continued patent applications, patents issued thereon, or reissues thereof, and any foreign counterpart of any of the foregoing. University's current U.S. and foreign patents and patent applications which are included in Patent Rights and which exist on the Effective Date of this Agreement are set forth on Exhibit A. Upon either party's request, the parties shall cooperate in reviewing and updating Exhibit A from time to time (but not more frequently than once during any twelve (12) month period).

1.4. "Net Sales" means the gross amount invoiced for all Licensed Products sold by or for Licensee and/or its sublicensees in arm's length sales to unrelated third parties (excluding sales by Licensee to its sublicensees for their resale) less deductions for (i) trade, quantity and cash discounts or rebates actually allowed, (ii) credits or allowances actually given for rejections or returns or because of rebates or retroactive reductions, (iii) sales, use and value added taxes, and (iv) freight, shipping or other costs of transportation charged to a customer. Such amounts shall be determined from the books and records of Licensee or its sublicensees, maintained in accordance with the accounting principles used by such entity, consistently applied. Licensed Products will be considered sold when billed out, or when delivered or paid for before delivery, whichever first occurs.

1.5. "Licensed Territory" means the entire world.

1.6. "Valid Claim" means a claim of an issued patent which has not lapsed or become abandoned or been declared invalid or unenforceable by a court of competent jurisdiction or an administrative agency for which there is no right of appeal or for which the right of appeal is waived.

2. Grant of License and Term

2.1. University grants to Licensee to the extent of the Licensed Territory, an exclusive license (with the right to grant sublicenses pursuant to Article 5) under the Patent Rights to make, have made, use and sell, and have sold Licensed Products, upon the terms and conditions set forth herein.

2.2 University grants to Licensee to the extent of the Licensed Territory a nonexclusive license with the right to grant non-exclusive sublicenses pursuant to Article 5) to use University Technology, subject to all the terms and conditions of this Agreement.

2.3. Any license granted herein is exclusive for a term beginning on the Effective Date of this Agreement and, unless terminated sooner as herein provided, ending at the expiration of the last to expire Valid Claim of any patent included in the Patent Rights.


2.4. Licensee shall not disclose any unpublished University Technology furnished by University pursuant to Article 2.2 above, nor shall University disclose any of Licensee's confidential information received under Articles 4.3, 5.2 or 18.1 below, to third parties during the term of this Agreement or any time thereafter, provided, however, that disclosure may be made by the receiving party of any such information it has received from the disclosing party at any time: (1) with the prior written consent of the disclosing party, (2) after the same shall have become public through no fault of the disclosing party, (3) as demonstrated by documentary evidence, if the same was independently developed or discovered by the disclosing party prior to the time of its disclosure, (4) the same is or was disclosed to the disclosing party at any time, whether prior to or after the time of its disclosure under this Agreement, by a third party having no fiduciary relationship with the disclosing party and having no obligation of confidentiality with respect to such University Technology, (5) the same is required to be disclosed to comply with applicable laws or governmental regulations, including disclosures made in connection with securities regulation filings, provided the disclosing party receives prior written notice of such disclosure and that Licensee takes all reasonable and lawful actions to minimize the extent of such disclosure and, if possible, to avoid such disclosure, or (6) where the same is provided by the receiving party to third parties under substantially the same terms and conditions, including confidentiality provisions to those in this Agreement, for consulting, process and formulation development, manufacturing, external testing and marketing trials; provided, further, that disclosure may be made when it is necessary to disclose information in order to conduct clinical trials as in the case of investigators' brochures, clinical protocols, other regulatory filings or documents and due diligence processes.

2.5. Notwithstanding the foregoing, any and all licenses granted hereunder are subject to the rights of the United States Government which arise out of its sponsorship of the research which led to the Inventions.

3. License Fee, Milestone Payments and Royalties

3.1 Licensee shall pay to University the following fees:

(a) Upon execution of this Agreement, a license issue fee of
described in U.S. Patent No. 5,635,160, entitled
"Dinucleotides Useful for the Treatment of Cystic
Fibrosis and for Hydrating Mucus Secretions", University
file OTD 95-24, U.S. patent applications No. 08/624,914
entitled "Method of Treating Bronchitis with Uridine
Triphosphates and Related Compounds", University File
OTD 96-83, and U.S. patent application No. 08/744,267
entitled "Method of Treating Ciliary Dyskinesia with
Uridine Triphosphates and Related Compounds", University
File OTD 99-13;

(b) Licensee will continue to reimburse the University
for properly documented costs (including attorney's
fees) arising out of the patenting of the Inventions
pursuant to Article 10 of this Agreement;

(c) Licensee shall pay to University the following
milestone payments within sixty (60) days after each
milestone is achieved:


Payment Milestone


(d) In partial consideration of the license granted under
Article 2.1 of this Agreement, Licensee shall issue
to the University a total of Fifty Thousand (50,000)
shares of Common Stock of the Company upon execution
of this Agreement;

(e) All fees and the reimbursement of patenting costs
shall be non-refundable and shall not be a credit
against any other amounts due hereunder except as may
be provided for elsewhere in this Agreement;

(f) Milestone payments are payable only one time
hereunder and for all milestones accomplished in
connection with this Agreement the aggregate cash
payments shall not exceed [CONFIDENTIAL TREATMENT


3.2. Beginning on the Effective Date of this Agreement and continuing for the term of this Agreement, Licensee will pay University a running royalty of [CONFIDENTIAL TREATMENT REQUESTED] of all Net Sales of the Licensed Products(s). The obligation to pay royalties to University under this Article 3.2 is imposed only once with respect to the same unit of Licensed Product regardless of the number of Patent Rights pertaining thereto.

3.3. After the first commercial sale of a Licensed Product, Licensee agrees to make quarterly written reports to University within sixty (60) days after the first days of each January, April, July, and October during the term of this Agreement and as of such dates, stating in each such report the amount, description, and aggregate Net Sales of Licensed Products sold or otherwise disposed of during the preceding three calendar months and upon which royalty is payable as provided in Article 3.2 hereof. The first such report shall include all such Licensed Products so sold or otherwise disposed of prior to the date of such report.

3.4. Concurrently with the making of each such report, Licensee shall pay to the University royalties at the rate specified in Article 3.2 of this Agreement on the Licensed Products included therein.





3.6. University may, by sixty (60) days advance written notice to Licensee, terminate this Agreement during any April subsequent to the second anniversary of the first commercial sale of a Licensed Product if Licensee, together with its sublicensees, have not practiced the Invention during each calendar year which precedes each such April to the extent of generating earned payments to University under Articles 3.2 of this Agreement in an amount no less than [CONFIDENTIAL TREATMENT REQUESTED] provided, however, any such termination shall not be effective if Licensee can demonstrate reasonable efforts by Licensee or Licensee's sublicensee(s) toward first commercial sale of Licensed Product during each such calendar year. Should there be a dispute as to whether Licensee has, during such sixty (60) day period, demonstrated such reasonable efforts, the parties shall conduct good faith discussions directed toward resolution of the dispute. If, following such sixty (60) day period, there is a dispute as to whether Licensee has demonstrated such reasonable efforts, then such sixty (60) day period automatically shall be extended for thirty (30) days, during which time the parties shall hold good faith discussions in order to resolve such dispute. If, following such thirty (30) day extension, such dispute has not been resolved, the original sixty (60) day period shall be extended for an additional thirty (30) days, during which time the Director of the Office of Technology Development at University and the Vice President and Chief Operating Officer of Licensee shall use good faith, reasonable efforts to resolve such dispute.

3.7. Should this Agreement become effective or terminate or expire during a calendar year, the minimum annual royalty or maintenance fee (whichever applicable) for such portion of a year shall be determined by multiplying the minimum annual royalty or maintenance fee (whichever applicable) set forth for the year in which this Agreement becomes effective, terminates or expires, by a fraction, the numerator of which shall be the number of days during such calendar year for which this Agreement shall be in effect and the denominator of which shall be 365.

3.8. In the event of default in payment of any payment owing to University under the terms of this Agreement, and if it becomes necessary for University to undertake legal action to collect said payment, Licensee shall pay all legal fees and costs incurred by University in connection therewith.


3.9. In the event that Licensee is legally required to pay royalties to one or more third parties for the license of technology other than the Patent Rights or University Technology in order to make, use or sell a Licensed Product, then Licensee shall be entitled to pay University a pro-rata share of total royalties due on Net Sales of that Licensed Product, where the reduction in royalties due to University under Article 3.2 above is [CONFIDENTIAL TREATMENT REQUESTED]. By example, and for purpose of clarity, if a Licensed Product requires Licensee to pay royalties of [CONFIDENTIAL TREATMENT REQUESTED] of Net Sales to third parties under license of technologies other than the Patent Rights or University Technology, the royalties payable to University by Licensee would be calculated as follows:


where: rthe royalty rate payable by Licnsee
for the ith third party license
N = total number of third party licenses
(N less than or equal to 4)


3.10. Licensee shall make all royalty payments required under this Agreement in the United States in United States Dollars. The royalty payments due shall be translated at the rate of exchange at which United States Dollars are listed in The Wall Street Journal for the currency of the country in which the royalty is accrued on the last business day of the calendar quarter in which such sales were made, or with respect to the sublicensees of the Licensee, at the rate of exchange used by such sublicensees.

3.11. Licensee shall pay interest on any payment under this Agreement that is not made by the date due hereunder at a rate equal to the prime rate plus 2% obtained from The Wall Street Journal, Eastern U.S. edition, on the business day next preceding the date such payment was due, from such date until payment in full has been made.

4. Diligence Requirements

4.1. Licensee shall use its best efforts to proceed diligently with the manufacture and sale of Licensed Products and shall earnestly and diligently offer and continue to offer for sale such Licensed Products, both under reasonable conditions and including the ability of the Licensee to exercise its discretion with respect to commercial, financial and regulatory variables affecting the commercialization of Licensed Products during the term of this Agreement. Licensee shall be deemed to have used its best efforts in a given country(ies) with respect to the foregoing


obligations if Licensee grants a sublicense to a pharmaceutical company with a market cap in excess of [CONFIDENTIAL TREATMENT REQUESTED] (a "Major Pharmaceutical Company") who has agreed to use reasonable commercial efforts to develop, market and sell Licensed Products in such country(ies), provided that any such sublicense contains, for each sublicensed Licensed Product, performance milestones analogous to those in Article 4.2 below.

4.2. In particular, Licensee shall use diligent efforts to meet the performance milestones set forth below:

Date Milestone


The parties acknowledge that the first milestone relating to the submission of the IND has been accomplished by Licensee.

4.3. On each anniversary date of the Effective Date of this Agreement, and until the time of first commercial sale of a Licensed Product, Licensee shall provide University with a report describing progress toward developmental milestones listed in Article 4.2 unless and until Licensee and/or its sublicensee are no longer developing additional Licensed Products.


(a) Following the first commercial sale of
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