ATHEROGENICS, INC.

AtheroGenics is a research-based pharmaceutical company incorporated in the State of Georgia in 1993. We are focused on the discovery, development and commercialization of novel drugs for the treatment of chronic inflammatory diseases, including coronary heart disease, organ transplant rejection, rheumatoid arthritis and asthma. We have developed a proprietary vascular protectant, or v-protectant^®, technology platform to discover drugs to treat these types of diseases. Based on our v-protectant^® platform, we have two drug development programs in clinical trials and are pursuing a number of other preclinical programs.

AGI-1067 is our v-protectant^® candidate that is most advanced in clinical development. AGI-1067 is designed to benefit patients with coronary heart disease (“CHD”), which is atherosclerosis of the blood vessels of the heart. Atherosclerosis is a common disease that results from inflammation and the buildup of plaque in arterial blood vessel walls. Nearly 13 million people in the United States currently have diagnosed CHD. There are no medications available for physicians to directly treat the underlying chronic inflammation associated with CHD. Instead, physicians treat risk factors, such as high cholesterol and high blood pressure, to slow the progression of the disease. The anti-inflammatory mechanism of AGI-1067 represents a novel, direct therapeutic approach that may be suitable as a chronic treatment for all patients with CHD, including those without traditional risk factors.

In 2004, we completed a Phase IIb clinical trial called CART-2, a 465-patient study that examined the effect of 12 months of AGI-1067 therapy on atherosclerosis and post-angioplasty Restenosis, which is the re-narrowing of the arteries following angioplasty. Two leading cardiac intravascular ultrasound laboratories independently analyzed the final data from CART-2. The primary endpoint of the trial was a change in coronary atherosclerosis, measured as total plaque volume after a 12-month treatment period compared to baseline values. Combined results of the final analysis from the two laboratories, which were based on an evaluation of intravascular ultrasounds from approximately 230 patients in the study, indicate that AGI-1067 reduced plaque volume by an average of 2.3%, which was statistically significant. Results from the patient group receiving both placebo and “standard of care” indicated a plaque volume measure that was not statistically different from baseline. While the plaque regression observed in the AGI-1067 group exceeded that observed in the standard of care group numerically, the difference did not reach statistical significance, although a trend towards significance was seen in one laboratory’s analysis. An important analysis from the trial, change in plaque volume in the most severely diseased subsegment, showed statistically significant regression from baseline by an average of 4.8%. The results also demonstrated a significant reduction in myeloperoxidase, an inflammatory biomarker that correlates with future cardiovascular events. Overall adverse event rates were similar in the AGI-1067 and standard of care groups, and AGI-1067 was generally well tolerated.

Based on the results of an End of Phase II meeting with the U.S. Food and Drug Administration (“FDA”), we developed a pivotal Phase III clinical trial protocol to evaluate AGI-1067 for the treatment of atherosclerosis. The Phase III protocol has received a Special Protocol Assessment from the FDA in 2003. A Special Protocol Assessment is written confirmation from the FDA that the protocol is adequately designed to support a New Drug Application (“NDA”) for the drug in the specified treatment area.

In 2003, we initiated the pivotal Phase III trial Aggressive Reduction of Inflammation Stops Events (“ARISE”), which is being conducted in cardiac centers in the United States, Canada, the United Kingdom and South Africa. ARISE will evaluate the impact of AGI-1067 on important outcome measures such as death due to coronary disease, myocardial infarction, stroke, coronary re-vascularization and unstable angina in patients who have CHD. The study will assess the incremental benefits of AGI-1067 versus the current standard of care therapies in this patient population. As such, all patients in the trial, including those on placebo, will be receiving other appropriate heart disease medications, including statins and other cholesterol-lowering therapies, high blood pressure medications and anti-clotting agents.

We originally planned to enroll in ARISE 4,000 patients who would be followed for an average of 18 months or until a minimum of 1,160 primary events, or outcome measures, had occurred. In February 2005, we announced that the FDA approved our proposed amendment to the ARISE Phase III clinical trial protocol. The changes to the ARISE clinical trial protocol were intended to enhance the trial as well as to accelerate its pace without affecting the Special Protocol Assessment with the FDA. The changes approved by the FDA included our plan to increase the number of patients in the study to 6,000, eliminate the minimum 12 month follow-up period for patients and decrease the minimum number of primary events to 990. We have completed patient enrollment with a total of 6,127 patients in the study. The revised target number of events will continue to yield greater than 95 percent statistical power to detect a 20 percent difference in clinical events between the study arms. We expect to complete the ARISE trial in the second half of 2006 and then plan to file an NDA with the FDA in early 2007.

In December 2005, as discussed below, we announced a license and collaboration agreement with AstraZeneca for the global development and commercialization of AGI-1067. Under the terms of the agreement we received an upfront license fee of $50 million and, subject to the achievement of specific milestones including a successful outcome in ARISE, we will be eligible for development and regulatory milestones of up to an aggregate of $300 million. The agreement also provides for progressively demanding sales performance related milestones of up to an additional $650 million in the aggregate. In addition, we will also receive royalties on product sales. AstraZeneca has the right to terminate the license and collaboration agreement at specified periods as further described in “Collaborations” below.

In October 2005, we entered into a commercial supply agreement with The Dow Chemical Company (“Dow”), a multinational pharmaceutical chemical manufacturing company, for the manufacture of the bulk active ingredient of AGI-1067. The agreement also provides for the manufacture of Probucol USP, the starting material used in the manufacturing process of AGI-1067. Under our joint license and collaboration agreement with AstraZeneca, the manufacturing agreement with Dow will be assigned to AstraZeneca which is responsible for supplying all of the manufacturing, packaging and labeling.

AGI-1096, our second v-protectant^® candidate, is a novel antioxidant and selective anti-inflammatory agent that is being developed to address the accelerated inflammation of grafted blood vessels, known as transplant arteritis, common in chronic organ transplant rejection. We are working with Astellas Pharma Inc. (“Astellas”) (formerly known as Fujisawa Pharmaceutical Co. Ltd.) to further develop AGI-1096 in preclinical and early-stage clinical trials. In a Phase I clinical trial investigating the safety and tolerability of oral AGI-1096 in combination with Astellas’ tacrolimus (Prograf^®) conducted in healthy volunteers, results indicated that regimens of AGI-1096 administered alone, and concomitant with tacrolimus, were generally well-tolerated, and there were no serious adverse events associated with either regimen during the course of the study. AGI-1096 has also demonstrated pharmacological activity in certain preclinical studies that were conducted as part of the ongoing collaboration. In February 2006, we announced the extension of our collaboration with Astellas to conduct preclinical and early-stage clinical trials, with Astellas funding all development costs during the term of the agreement. Astellas will also retain the exclusive option to negotiate for late stage development and commercial rights to AGI-1096.

We have also identified additional potential v-protectant^® candidates to treat other chronic inflammatory diseases, including asthma. We are evaluating these v-protectants^® to determine lead drug candidates for clinical development. We plan to develop these compounds rapidly and may seek regulatory fast track status, if available, to expedite development and commercialization. We plan to continue to expand upon our drug discovery efforts and new compounds using functional genomics to identify novel therapeutic gene targets. Functional genomics is the process by which one uses scientific models and techniques to discover and modify genes, measure the consequences of the modifications, and reliably determine the function of those genes.

Inflammation is a normal response of the body to protect tissues from infection, injury or disease. The inflammatory response begins with the production and release of chemical agents by cells in the infected, injured or diseased tissue. These agents cause redness, swelling, pain, heat and loss of function. Inflamed tissues generate additional signals that recruit white blood cells to the site of inflammation. White blood cells destroy any infective or injurious agent, and remove cellular debris from damaged tissue. This inflammatory response usually promotes healing but, if uncontrolled, may become harmful.

The inflammatory response can be either acute or chronic. Acute inflammation lasts at most only a few days. The treatment of acute inflammation, where therapy includes the administration of aspirin and other non-steroidal anti-inflammatory agents, provides relief of pain and fever for patients. In contrast, chronic inflammation lasts weeks, months or even indefinitely and causes tissue damage. In chronic inflammation, the inflammation becomes the problem rather than the solution to infection, injury or disease. Chronically inflamed tissues continue to generate signals that attract white blood cells from the bloodstream. When white blood cells migrate from the bloodstream into the tissue they amplify the inflammatory response. This chronic inflammatory response can break down healthy tissue in a misdirected attempt at repair and healing. Diseases characterized by chronic inflammation include, among others:

Atherosclerosis of the blood vessels of the heart is called coronary artery disease or heart disease. It is the leading cause of death in the United States, claiming more lives each year than all forms of cancer combined. Recent estimates suggest that over 13 million Americans are diagnosed with some form of atherosclerosis. When atherosclerosis becomes severe enough to cause complications, physicians must treat the complications themselves, including angina, heart attack, abnormal heart rhythms, heart failure, kidney failure, stroke, or obstructed peripheral arteries. Many of the patients with established atherosclerosis are treated aggressively for their associated risk factors, as with statins, which have been repeatedly shown to slow the progression of atherosclerosis and prevent future adverse events such as heart attack, stroke and death. Other risk factors associated with atherosclerosis include elevated triglyceride levels, high blood pressure, smoking, diabetes, obesity and physical inactivity. Many atherosclerosis patients also experience symptoms of angina and/or a history of acute coronary syndromes, such as myocardial infarctions and unstable angina. In addition, most of these patients have high cholesterol, and as a result, the current treatment focuses primarily on cholesterol reduction. Additionally, these patients are routinely treated with anti-hypertensives and anti-platelet drugs to help prevent the formation of blood clots. There are currently no medications available for physicians to treat directly the underlying chronic inflammation of atherosclerosis.

Organ transplantation takes place when an organ from a donor is surgically removed and placed in a recipient patient whose own organ has failed because of disease or infection. Except for transplants between identical twins, all transplant donors and recipients are immunologically incompatible. This biological incompatibility is a barrier that causes the recipient’s immune system to try to destroy or reject the new organ. A patient’s white blood cells produce special proteins called antibodies that are created specifically to “latch onto” the transplanted organ. While attached to the organ, the antibodies alert the rest of the immune system to attack the organ slowly and continuously. The current treatment for prevention of organ transplant rejection focuses on the use of powerful immunosuppressive drugs such as cyclosporin A, tacrolimus and rapamycin (sirolimus). These drugs, which are initiated during the acute rejection phase, need to be taken continuously after the transplant procedure, often cause side effects, and may fail to prevent long-term rejection of the transplant. Immunosuppressants may also impair the recipient’s immune system in order to reduce the immune response against the transplant. The Scientific Registry of Transplant Recipients reports that even with the use of immunosuppressants, patients run the risk of losing a donated organ during the first three years following transplantation, and roughly 50 percent of patients have functioning organ transplants after approximately ten years.

Rheumatoid arthritis is a common form of arthritis that is characterized by inflammation of the membrane lining the joint, which causes pain, stiffness, warmth, redness and swelling. The inflamed joint lining, the synovium, can invade and damage bone and cartilage. Inflammatory cells release enzymes that may digest bone and cartilage. The involved joint can lose its shape and alignment, resulting in pain and loss of movement. When the immune system works properly, it is the body’s defense against bacteria, viruses and other foreign cells. In an immune disorder like rheumatoid arthritis, the immune system works improperly and attacks the body’s own joints and other organs. In rheumatoid arthritis, white blood cells move from the bloodstream into the joint tissues. Fluid containing inflamed cells accumulates in the joint. The white cells in the joint tissue and fluid produce many substances, including enzymes, antibodies and other molecules, that attack the joint and can cause damage. In the United States, approximately 2.1 million people have rheumatoid arthritis. The cause of rheumatoid arthritis is not yet known, and the disease differs from person to person. Anyone can get rheumatoid arthritis, including children and the elderly. However, the disease usually begins in the young- to middle-adult years. Among people with rheumatoid arthritis, women outnumber men three-to-one. The disease occurs in all ethnic groups and in all parts of the world.

Current treatment methods for rheumatoid arthritis focus on relieving pain, reducing inflammation, stopping or slowing joint damage, and improving patient function and well-being, and include non-steroidal anti-inflammatory drugs, corticosteroids and drugs designed to slow the progression of disease, termed disease modifying anti-rheumatic drugs, or DMARDs. DMARDs can cause serious side effects, and include drugs that were originally designed to treat cancer, such as methotrexate. Modern treatments with DMARDs developed by other companies, Enbrel^® (etanercept) and Remicade^®(infliximab), have substantially improved the quality of life for people with rheumatoid arthritis. These drugs prove that blocking the activity of tumor necrosis factor, a molecule that stimulates a broad range of cellular activities implicated in the inflammation process, improves rheumatoid arthritis. However, both of these drugs must be injected and both increase the risk of severe infection.

Asthma is a common chronic inflammatory disease of the bronchial tubes, which are the airways in the lungs. Asthma is marked by episodic airway attacks that are caused by many stresses, including allergy, cold air, ozone or exercise. Asthma therapy has concentrated on the use of inhaled corticosteroids to reduce chronic inflammation and bronchodilators to provide symptomatic relief. Asthmatic patients, however, continue to experience flare-ups, or exacerbations, that are not prevented nor effectively treated by these medicines.

Many physicians are only now becoming aware of the key role of chronic inflammation in diverse diseases such as atherosclerosis and asthma for which existing anti-inflammatory treatments are incomplete and limited in use. As more physicians recognize that a wide range of chronic diseases are inflammatory in nature, we believe that these physicians will require safer and more effective anti-inflammatory treatments. We believe that one of these therapeutic approaches will be the administration of drugs designed to block the migration of white blood cells through blood vessel walls into inflamed tissues, unless the inflammation is due to infection.

We have developed a proprietary v-protectant^® technology platform for the treatment of chronic inflammatory diseases. This platform is based on the work of our scientific co-founders R. Wayne Alexander, M.D., Ph.D. and Russell M. Medford, M.D., Ph.D. In 1993, Drs. Alexander and Medford discovered a novel mechanism within arterial blood vessel walls that could control the excessive accumulation of white blood cells without affecting the body’s ability to fight infection. V-protectant^® technology exploits the observation that the endothelial cells that line the interior wall of the blood vessel play an active role in recruiting white blood cells from the blood to the site of chronic inflammation. V-protectants^® are drugs that block harmful effects of oxygen and other similar molecules, collectively called oxidants. Scientists have known for some time that some oxidants can damage cells, but have more recently determined that these same oxidants may also act as signals to modify gene activity inside cells. This change in gene activity leads to the production of proteins that initiate or maintain inflammation. The protein products of these cells, including an adhesion molecule, called VCAM-1, attract white blood cells to the site of chronic inflammation. We believe that an excess number of VCAM-1 molecules on the surface of cells is a disease state. We also believe that AGI-1067 and other v-protectants^® can act as antioxidants and can block the specific type of inflammation caused by oxidants acting as signals. We believe that v-protectants^® will provide this anti-inflammatory benefit without undermining the body’s ability to protect itself against infection.

AGI-1067 is our v-protectant^® candidate that is most advanced in clinical development. AGI-1067 is designed to benefit patients with CHD, which is atherosclerosis of the blood vessels of the heart. Atherosclerosis is a common disease that results from inflammation and the buildup of plaque in arterial blood vessel walls. Nearly 13 million people in the United States currently have diagnosed CHD. There are no medications available for physicians to treat directly the underlying chronic inflammation associated with CHD. Instead, physicians treat risk factors, such as high cholesterol and high blood pressure, to slow the progression of the disease. The anti-inflammatory mechanism of AGI-1067 represents a novel, direct therapeutic approach that may be suitable as a chronic treatment for all patients with CHD, including those without traditional risk factors.

We completed a 305-patient Phase II clinical trial of AGI-1067 called Canadian Antioxidant Restenosis Trial (“CART-1”) in May 2001. Results from the trial showed that the study met its primary endpoint, which was improvement in the size of the luminal area, or coronary artery opening, as measured by intravascular ultrasound six months after angioplasty, with statistical significance. CART-1 data also showed that after only six weeks of therapy, there was an apparent anti-atherosclerotic effect in blood vessels adjacent to the angioplasty site, but not involved in the angioplasty. In the trial, AGI-1067 was well tolerated, with no increase in serious adverse events versus placebo.

In 2004, we completed a Phase IIb clinical trial called CART-2, a 465-patient study that examined the effect of 12 months of AGI-1067 therapy on atherosclerosis and post-angioplasty restenosis. Two leading cardiac intravascular ultrasound laboratories independently analyzed the final data from CART-2. The primary endpoint of the trial was a change in coronary atherosclerosis, measured as total plaque volume after a 12-month treatment period compared to baseline values. Combined results of the final analysis from the two laboratories, which were based on an evaluation of intravascular ultrasounds from approximately 230 patients in the study, indicate that AGI-1067 reduced plaque volume by an average of 2.3%, which was statistically significant. Results from the patient group receiving both placebo and “standard of care” indicated a plaque volume measure that was not statistically different from baseline. While the plaque regression observed in the AGI-1067 group exceeded that observed in the standard of care group numerically, the difference did not reach statistical significance, although a trend towards significance was seen in one laboratory’s analysis. An important analysis from the trial, change in plaque volume in the most severely diseased subsegment, showed statistically significant regression from baseline by an average of 4.8%. The results also demonstrated a significant reduction in myeloperoxidase, an inflammatory biomarker that correlates with future cardiovascular events. Overall adverse event rates were similar in the AGI-1067 and standard of care groups, and AGI-1067 was generally well tolerated.

Based on the results of an end of Phase II meeting with the FDA, we developed a pivotal Phase III clinical trial protocol to evaluate AGI-1067 for the treatment of atherosclerosis. The Phase III protocol received a special protocol assessment from the FDA in 2003. A special protocol assessment is written confirmation from the FDA that the protocol is adequately designed to support an NDA for the drug in the specified treatment area.

In 2003, we initiated the pivotal Phase III trial, called ARISE, which is being conducted in cardiac centers in the United States, Canada, the United Kingdom and South Africa. ARISE will evaluate the impact of AGI-1067 on important outcome measures such as death due to coronary disease, myocardial infarction, stroke, coronary re-vascularization and unstable angina in patients who have CHD. The study will assess the incremental benefits of AGI-1067 versus the current standard of care therapies in this patient population. As such, all patients in the trial, including those on placebo, will be receiving other appropriate heart disease medications, including statins and other cholesterol-lowering therapies, high blood pressure medications and anti-clotting agents.

We originally planned to enroll in ARISE 4,000 patients who would be followed for an average of 18 months or until a minimum of 1,160 primary events, or outcome measures, had occurred. In February 2005, we announced that the FDA approved our proposed amendment to the ARISE Phase III clinical trial protocol. The changes to the ARISE protocol were intended to enhance the trial as well as to accelerate its pace without affecting the Special Protocol Assessment with the FDA. The changes approved by the FDA included our plan to increase the number of patients in the study to 6,000, eliminate the minimum 12 month follow-up period for patients and decrease the minimum number of primary events to 990. We have completed patient enrollment with a total of 6,127 patients in the study. The revised target number of events will continue to yield greater than 95 percent statistical power to detect a 20 percent difference in clinical events between the study arms. We expect to complete the ARISE trial in the second half of 2006 and then plan to file an NDA with the FDA in early 2007.

In December 2005, we announced a license and collaboration agreement with AstraZeneca for the global development and commercialization of AGI-1067. Under the terms of the agreement, we received an upfront license fee of $50 million and, subject to the achievement of specific milestones including a successful outcome in ARISE, we will be eligible for development and regulatory milestones of up to an aggregate of $300 million. The agreement also provides for progressively demanding sales performance related milestones of up to an additional $650 million in the aggregate. In addition, we will also receive royalties on product sales. AstraZeneca has the right to terminate the license and collaboration agreement at specified periods as further described in “Collaborations” below.

In October 2005, we entered into a commercial supply agreement with Dow for the manufacture of the bulk active ingredient of AGI-1067. The agreement also provides for the manufacture of Probucol USP, the starting material used in the manufacturing process of AGI-1067. Under our joint license and collaboration agreement with AstraZeneca, the manufacturing agreement with Dow will be assigned to AstraZeneca, which is responsible for supplying all of the manufacturing, packaging and labeling.

Organ transplant rejection is caused when patients’ immune systems recognize transplanted organs as foreign and, therefore, reject them. Acute rejection occurs soon after transplantation, while chronic rejection may take years. Recent industry sources report there are approximately 200,000 organ transplant recipients in the United States who are at risk of chronic organ transplant rejection. Chronic rejection is a major factor contributing to organ shortage.

Our second v-protectant^® candidate, AGI-1096, is a novel antioxidant and selective anti-inflammatory agent which is being developed to address the accelerated inflammation of grafted blood vessels, known as transplant arteritis, common in chronic organ transplant rejection. AGI-1096 inhibits the expression of certain inflammatory proteins, including VCAM-1, in endothelial cells lining the inside surfaces of blood vessel walls. We are working with Astellas to further develop AGI-1096 in preclinical and early-stage clinical trials. We have conducted two Phase I clinical trials of AGI-1096, including a trial investigating the safety and tolerability of oral AGI-1096 in combination with Astellas’ tacrolimus (Prograf^®) conducted in healthy volunteers. Results from the trials indicated that regimens of AGI-1096 administered alone, and concomitant with tacrolimus, were generally well-tolerated and there were no serious adverse events associated with either regimen during the course of the study. AGI-1096 has also demonstrated pharmacological activity in certain preclinical studies that were conducted as part of the ongoing collaboration. In February 2006, we announced the extension of our collaboration with Astellas, which will be funding all development costs during the term of the agreement. Astellas will also retain the exclusive option to negotiate for late stage development and commercial rights to AGI-1096.

We have also identified additional potential v-protectant^® candidates to treat other chronic inflammatory diseases, including rheumatoid arthritis and asthma. Rheumatoid arthritis is a chronic, progressively debilitating inflammatory disease that affects articular, or rotating, joints resulting in significant pain, stiffness and swelling and leads to degradation of the joint tissue. According to the Arthritis Foundation, there are 2.1 million people with rheumatoid arthritis in the United States. Approximately 70 percent of patients with rheumatoid arthritis are women.

Physicians treat rheumatoid arthritis in a stepwise fashion, starting with the occasional to regular use of anti-inflammatory agents such as aspirin or ibuprofen, and proceeding to treatment with DMARDs, which can potentially be toxic. The newer DMARDs target the modulation of tumor necrosis factor, tissue repair and proliferation. The recent successful introduction of new drugs for rheumatoid arthritis has highlighted both the market potential and the size and scope of the unmet medical need of these patients. These drugs are partially effective and may cause serious side effects.

In December 2005, we announced a license agreement and a co-promotion agreement with AstraZeneca for the global development and commercialization of AGI-1067. Under the terms of the agreement, we received an upfront license fee of $50 million in February 2006 in partial consideration for the licenses and other rights granted in the license agreement. We will be eligible to receive up to an aggregate of $300 million upon achieving certain development and regulatory milestones. We will also be eligible to receive up to an additional $650 million in the aggregate upon achieving progressively demanding sales performance related milestones.

In January 2004, we announced a collaboration with Fujisawa Pharmaceutical Co., Ltd. (“Fujisawa”) to develop AGI-1096 as an oral treatment for the prevention of organ transplant rejection. Under the agreement, we agreed to collaborate with Fujisawa to conduct preclinical and early stage clinical development trials, with Fujisawa funding all development costs during the term of the agreement. Fujisawa received an option to negotiate for late stage development and commercial rights to the compound. In April 2005, Astellas was formed through the merger of Fujisawa and Yamanouchi Pharmaceutical Co., Ltd. In February 2006, we extended the collaboration with Astellas.

Under the license agreement with Emory (the “Emory License Agreement”), Emory granted to us an exclusive license to make, use and sell methods and products covered by certain patents and patent applications owned by Emory relating generally to the treatment and diagnosis of VCAM-1 related diseases. On August 3, 2005, we amended the Emory License Agreement to provide that Emory will receive a portion of any milestones or royalties received by us from third parties (such as through our joint licensing and collaboration agreement with AstraZeneca) in exchange for a reduced participation in future revenues and the elimination of milestone payments. We must indemnify Emory for all claims and/or losses caused or contributed to by AtheroGenics arising out of our use of the license. We have procured commercial general liability insurance in specified amounts customary in the industry naming Emory as an insured. Under the terms of our collaboration agreement with AstraZeneca, all amounts due under the Emory License Agreement are the responsibility of AstraZeneca.

The Emory License Agreement will terminate on October 30, 2012; after that date, our payment obligations under the Emory License Agreement will cease, and we will be entitled to continue to use on a non-exclusive basis all inventions, data or other information described and claimed in the licensed patents and the licensed technology. Emory may terminate the agreement if, after Emory gives notice to us, we fail to make a payment, we fail to render progress reports, we incur specified financial problems, we decide to no longer develop licensed products under the agreement, or we breach a material term of the agreement. We may terminate the agreement upon advance notice to Emory, or if Emory violates certain material terms of the agreement.

Under our license agreement with The Regents of the University of California, we received a license to make, use and sell diagnostic and therapeutic methods and products using monoclonal antibodies in atherosclerosis and other diseases, which are claimed in applicable patent applications owned by The Regents of the University of California in the U.S. and Canada. We must make milestone payments to The Regents of the University of California upon occurrence of various product development events of up to $45,000 for each therapeutic application and $35,000 for each diagnostic application. In addition, we must pay to The Regents of the University of California a percentage of the net revenue we receive from the sale of products covered by the patents and patent applications and from our sublicensing the licensed patents and patent applications. The Regents of the University of California may terminate the agreement upon proper notice for violation of material terms of the agreement. The agreement expires in 2018, when the last patent covered by the license expires. We may terminate the agreement at any time upon prior notice to The Regents of the University of California. We must indemnify The Regents of the University of California for all losses and claims arising out of our use of the license. In addition, we have procured commercial liability insurance in specified amounts customary in the industry naming the University of California as an insured.

As part of our v-protectant^® technology patent portfolio, we also purchased U.S. Patent No. 5,262,439 under an agreement with Dr. Sampath Parthasarathy. The agreement provides for the payment of a royalty equal to a certain percentage of the gross selling price paid to AtheroGenics by a purchaser of any process, service or product in which any of the claimed inventions of the patent is utilized as a necessary component. These payment obligations will expire upon the last to expire valid claim in the jurisdiction where the patent is enforceable. Under the terms of our collaboration with AstraZeneca, all amounts payable to Dr. Parthasarathy are the responsibility of AstraZeneca.

2018 the specific compound AGI-1067 and its use to treat VCAM-1 mediated diseases including, among others, atherosclerosis, post-angioplasty restenosis and coronary artery disease. We also own U.S. Patent No. 6,121,319, which covers the use of a class of compounds including AGI-1067 to treat VCAM-1 mediated diseases. Applications corresponding to U.S. Patent No. 6,147,250 and U.S. Patent No. 6,121,319 have also been filed in foreign patent offices. The patents that we have exclusively licensed from Emory include the use of a substance that inhibits a class of oxidant signals to treat diseases mediated by VCAM-1.

Our patent coverage on AGI-1096 is based on patent filings that we own and patent filings exclusively licensed from Emory. We own U.S. Patent No. 6,617,352 and associated non-U.S. patent filings which describe AGI-1096 and its use to treat disorders mediated by VCAM-1. We also own U.S. Patent No. 6,670,398 which claims methods of using AGI-1096 for treating transplant organ rejection. These patents and any associated non-U.S. counterparts will expire in 2018.

In June 2001, we entered into a worldwide exclusive license agreement with the National Jewish Medical and Research Center. Under the agreement, National Jewish granted us an exclusive license under several of its U.S. and foreign patents and patent applications and related technical information to make, use and sell diagnostics and therapeutics for the treatment of human diseases, including inflammation and asthma. Under the terms of the agreement with National Jewish, we may grant sublicenses of our rights to others.

Under the agreement with National Jewish, we have assumed responsibility for all future costs associated with research and development of products developed from the licensed technology. We have also assumed responsibility for the costs of filing, prosecuting and maintaining the licensed patent rights. We granted National Jewish a warrant to purchase up to 40,000 shares of our common stock at an exercise price of $6.00 per share, subject to a vesting period. Under the agreement, we made an upfront payment in connection with the execution of the agreement and will pay milestone payments to National Jewish upon the achievement of certain clinical and regulatory milestones. Upfront and milestone payments could aggregate up to approximately $800,000. If we fail to meet various performance milestones by certain dates, some or all of the licensed technology will revert to National Jewish. We must also pay a royalty to National Jewish on net sales of licensed products. If we sublicense the licensed technology, we must pay to National Jewish a percentage of the amounts paid to us by the sublicensee.

We may terminate the license agreement with National Jewish at any time upon at least 90 days prior written notice. If we terminate the agreement in this manner, all licensed patent rights and related technology revert to National Jewish. Either party to the agreement may also terminate it upon a material, uncured breach by the other, or upon the bankruptcy or insolvency of the other. We must indemnify National Jewish for all losses and claims arising out of our use of the license. We will procure commercial liability insurance in amounts customary in the industry when required by the agreement.

Our commercial success will depend in part on our ability to manufacture, use, sell and offer to sell our product candidates and proposed product candidates without infringing patents or other proprietary rights of others. We may not be aware of all patents or patent applications that may impact our ability to make, use or sell any of our product candidates or proposed product candidates. For example, U.S. patent applications do not publish until 18 months from their effective filing date. Further, we may not be aware of published or granted conflicting patent rights. Any conflicts resulting from patent applications and patents of others could significantly reduce the coverage of our patents and limit our ability to obtain meaningful patent protection. If others obtain patents with conflicting claims, we may be required to obtain licenses to these patents or to develop or obtain alternative technology. We may not be able to obtain any licenses or other rights to patents, technology or know-how necessary to conduct our business as described in this report. Any failure to obtain such licenses or other rights could delay or prevent us from developing or commercializing our product candidates and proposed product candidates, which could materially affect our business.

Litigation or patent interference proceedings may be necessary to enforce any of our patents or other proprietary rights, or to determine the scope and validity or enforceability of the proprietary rights of others. The defense and prosecution of patent and intellectual property claims are both costly and time consuming, even if the outcome is favorable to us. Any adverse outcome could subject us to significant liabilities, require us to license disputed rights from others, or require us to cease selling our future products.

On January 30, 2002, Applied Genetics Incorporated Dermatics filed with the United States Patent and Trademark Office a petition to cancel the trademark “AGI.” Applied Genetics has not requested any monetary damages. We filed an answer to the petition on March 11, 2002. On July 12, 2002, the United States Patent and Trademark Office issued a suspension of the cancellation proceeding to allow the parties to negotiate a settlement. On December 28, 2005 the United States Patent and Trademark Office approved the settlement agreement and the cancellation proceeding was withdrawn.

We have entered into arrangements with third party manufacturers for the supply of AGI-1067 bulk drug substance and for the formulated drug product for use in our ongoing and currently planned clinical trials. In addition, we have entered into a commercial supply agreement for production of the bulk active ingredient of AGI-1067 with Dow. The supply agreement also provides for the manufacture, at our option, of Probucol USP, the starting material used in the manufacturing process of AGI-1067. Under our joint license and collaboration agreement with AstraZeneca, the supply agreement with Dow will be assigned to AstraZeneca, which is responsible for all of the AGI-1067 manufacturing, packaging and labeling.

The suppliers of the bulk drug substance for AGI-1067 operate under current Good Manufacturing Practice guidelines using cost-effective and readily available materials and reliable processes. The starting material used in the manufacturing process of AGI-1067 is Probucol USP, a material that is available from a number of suppliers worldwide. We have sufficient quantities to support development activities for the foreseeable future. Another third party supplier formulates AGI-1067 into the drug product under current Good Manufacturing Practice guidelines. We anticipate that these suppliers will be able to provide sufficient formulated drug product to complete our ongoing and currently planned clinical trials.

We plan to collaborate with large pharmaceutical companies to commercialize products that we develop to target patient or physician populations in broad markets. We believe that collaborating with large companies that have significant marketing and sales capabilities provides for optimal penetration into broad markets, particularly those areas that are highly competitive. We have entered into a license and collaboration agreement with AstraZeneca to commercialize AGI-1067. AstraZeneca has significant worldwide sales and marketing capability focused on pharmaceutical products with profiles similar to AGI-1067. Additionally, we plan to develop a sales force to promote our future products to appropriate patient or physician populations in narrow markets. We plan to co-promote AGI-1067 to targeted physician specialists in the U.S. By using our own sales and marketing organization for our products, we believe we can retain a higher percentage of the profits generated from the sale of those products.

Developments by others may render our product candidates obsolete or noncompetitive. We face intense competition from other companies with pharmaceutical, biotechnology and medical device companies for establishing relationships for collaborative arrangements with academic and research institutes and for licenses to proprietary technology. These competitors, either alone or in collaboration, may succeed in developing technologies or products that are more effective than ours.

We believe pharmaceutical, biotechnology and medical device companies, as well as academic and research institutions and government agencies, have drug discovery and development programs related to our named therapeutic areas of interest. Many of these companies and institutions, including, but not limited to, Pfizer, GlaxoSmithKline, Merck and Novartis, have targeted indications that overlap significantly with our targets and have substantially greater resources, longer operating histories, larger client bases and greater marketing and financial resources than we do. They may, therefore, succeed in commercializing products before we do that compete with us on the basis of efficacy, safety and price.

We plan to develop prescription-only drugs for the foreseeable future. The FDA is the regulatory agency in the United States that is charged with the protection of people who take prescription medicines. Every country has a regulatory body with a similar mandate. The European Union (“EU”) has vested centralized authority in the European Medicines Evaluation Agency and Committee on Proprietary Medicinal Products to standardize review and approval across EU member nations.

These regulatory agencies enforce comprehensive statutes, regulations and guidelines governing the drug development process. This process involves several steps. First, the drug company must generate preclinical data to show safety before human testing may be initiated. In the United States, the drug company must submit an Investigational New Drug application (“IND”) to the FDA prior to securing authorization for human testing. The IND must contain adequate data on product candidate chemistry, toxicology and metabolism and, where appropriate, animal research testing to support initial safety

Clinical trials, including the adequate and well controlled clinical investigations conducted in Phase III, are designed and conducted in a variety of ways. These Phase III studies are often randomized, placebo-controlled and double-blinded. A “placebo-controlled” trial is one in which one group of patients, referred to as an “arm” of the trial, receives the drug being tested and another group receives a placebo, which is a substance known not to have pharmacologic or therapeutic activity. In a “double-blind” study, neither the researcher nor the patient knows which arm of the trial is receiving the drug or the placebo. “Randomized” means that upon enrollment patients are placed into one arm or the other at random by computer. Other controls also may be used by which the test drug is evaluated against a comparator. For example, “parallel control” trials generally involve studying a patient population that is not exposed to the study medication (i.e., is either on placebo or standard treatment protocols). In such studies experimental subjects and control subjects are assigned to groups upon admission to the study and remain in those groups for the duration of the study. Not all studies are highly controlled. An “open label” study is one where the researcher and the patient know that the patient is receiving the drug. A trial is said to be “pivotal” if it is designed to meet statistical criteria with respect to pre-determined “endpoints,” or clinical objectives, that the sponsor believes, based usually on its interactions with the relevant regulatory authority, will be sufficient to demonstrate safety and effectiveness meeting regulatory approval standards. In most cases, two “pivotal” clinical trials are necessary for approval.

The results of product development, pre-clinical studies and clinical trials are submitted to the FDA as part of an NDA for an unapproved drug candidate, or as part of an NDA supplement if the drug product is already approved. Supplemental applications are submitted for various reasons, including new indications for use and new strengths. The FDA may deny approval of an NDA or NDA supplement if applicable regulatory criteria are not satisfied. In such cases, the FDA often concludes that additional clinical data, particularly from new pivotal studies, are needed. Even if such data are submitted, the FDA may ultimately decide that the NDA or NDA supplement does not satisfy the criteria for approval. Once an approval is issued, the FDA may withdraw product approval if ongoing regulatory standards are not met or if safety problems occur after the product reaches the market. In addition, the FDA may require testing and surveillance programs to monitor the effect of approved products that have been commercialized, and the FDA has the power to prevent or limit further marketing of a product based on the results of these post-marketing programs.

Satisfaction of FDA requirements, or similar requirements of foreign regulatory agencies, typically takes several years. The time required may vary substantially based upon the type, complexity and novelty of the product or disease. Typically, if a drug product is intended to treat a chronic disease, as is the case with the product candidates we are developing, safety and efficacy data must be gathered over an extended period of time, which can range from six months to three years or more. Government regulation may delay or prevent marketing of product candidates or new drugs for a considerable period of time and impose costly limits upon our activities. We cannot be certain that the FDA or any other regulatory agency will grant approvals for any indications for our product candidates on a timely basis, if at all. Success in early stage clinical trials does not ensure success in later stage clinical trials. Data obtained from clinical activities is not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. Even if a product candidate receives regulatory approval, the approval may be significantly limited to specific disease states, patient populations and dosages. Further, even after regulatory approval is obtained, later discovery of previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of the product from the market. In addition, we cannot predict what adverse governmental regulations may arise from future United States or foreign governmental action.

Any products manufactured or distributed by us pursuant to FDA approvals are subject to continuing regulation by the FDA, including record-keeping requirements and reporting of adverse experiences with the drug. Drug manufacturers and their contractors involved in the manufacture of drug components or the required testing of the drug or its components are required to register their establishments with the FDA and certain state agencies. As registered establishments, they are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with current GMP. These inspections are intended to assure that procedural and documentation requirements applicable to third party manufacturers are met in order to ensure that the product meets established specifications. We cannot be certain that we or our present or future suppliers will be able to comply with the current GMP and other FDA regulatory requirements. If our present or future suppliers are not able to comply with these requirements, the FDA may halt our clinical trials, require us to recall a drug from distribution or withdraw approval of the NDA for that drug.

The FDA has expanded its expedited review process in recognition that certain severe or life-threatening diseases and disorders have only limited treatment options. Fast track designation expedites the development process, but places greater responsibility on a drug company during Phase IV clinical trials. The drug company may request fast track designation for one or more indications at any time during the IND process, and the FDA must respond within 60 days. Fast track designation allows the drug company to develop product candidates faster based on the ability to request an accelerated approval of the NDA. For accelerated approval the clinical effectiveness is based on a surrogate endpoint in a smaller number of patients. In addition, the drug company may request priority review at the time of the NDA submission. If the FDA accepts the NDA submission as a priority review, the time for review is reduced from one year to six months. We plan to request fast track designation and/or priority review, as appropriate, for internal drug development programs.

Our research and development expenses in 2005, 2004 and 2003 were $71.3 million, $59.2 million and $46.7 million, respectively. We plan to increase our research and development expenses as we continue to invest in our clinical programs. We plan to focus our near-term research and development efforts on the continued development of the products in our current development pipeline, which include AGI-1067, AGI-1096 and other preclinical v-protectant^® compounds.

Our internet website is located at www.atherogenics.com. Copies of our reports filed under Section 13(a) or 15(d) of the Exchange Act, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to these reports, may be accessed from our website, free of charge, as soon as reasonably practicable after these reports are electronically filed with or furnished to the Securities and Exchange Commission. The reference to our website address does not constitute incorporation by reference of the information contained on the website, which should not be considered part of this document. Additionally, you may read and copy materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E. Washington, D.C. 20549. You can obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of AtheroGenics. AtheroGenics and its representatives may from time to time make written or oral forward-looking statements, including statements contained in this report and our other filings with the Securities and Exchange Commission and in our reports to our shareholders. Generally, the words, “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will” and similar expressions identify forward-looking statements. All statements which address operating performance, events or developments that we expect or anticipate will occur in the future, including projections of our future results of operations or of our financial condition, research, development and commercialization of our product candidates, and anticipated trends in our business, are forward-looking statements within the meaning of the Reform Act. The forward-looking statements are and will be based on our then current views and assumptions regarding future events and operating performance, and speak only as of their dates. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Our ability to generate revenue and achieve profitability depends on our ability, alone or with collaborators, to complete successfully the development of our product candidates, conduct preclinical tests and clinical trials, obtain the necessary regulatory approvals and manufacture and market the resulting drugs. We have had no significant revenue to date. We have experienced operating losses since we began operations in 1994. As of December 31, 2005, we had an accumulated deficit of approximately $294.7 million. We expect to incur additional operating losses and expect cumulative losses to increase substantially as our research and development, preclinical, clinical, manufacturing and marketing efforts expand. If we are unable to achieve and then maintain profitability, the market value of our common stock and our outstanding notes will decline.

We expect our research and development expenses to increase in connection with our ongoing activities. We believe that our existing cash, cash equivalents and short-term investments will be sufficient to enable us to fund our operating expenses, obligations under our financing arrangements and capital expenditure requirements for at least the next 12 months. Our future capital requirements will depend on many factors, including:

AGI-1067 could fail in clinical trials if we are unable to show that it is effective or if it causes unacceptable side effects in the patients we treated. While the plaque regression observed in the group treated with AGI-1067 in the CART-2 trial exceeded that observed in the standard of care group numerically, the difference was not statistically significant. Moreover, the results of our Phase II clinical trials of AGI-1067 are not necessarily indicative of the results we will obtain in our Phase III clinical trial of AGI-1067, particularly because the primary clinical endpoints of these trials are not the same. Failure in clinical trials of AGI-1067 would have a material adverse effect on our ability to generate revenue or become profitable. If we are not successful in commercializing AGI-1067, or are significantly delayed in doing so, our business will be materially harmed.

Our collaboration with AstraZeneca to develop AGI-1067 may ultimately not be successful. The success of any collaboration arrangement will depend heavily on the efforts and activities of our collaborator. In general, we cannot control the amount and timing of resources that AstraZeneca may devote to our collaboration. If AstraZeneca fails to assist in the development and commercialization of AGI-1067, or if AstraZeneca’s efforts are not effective, our business may be negatively affected. Our collaboration with AstraZeneca may not continue or result in commercialized drugs. If we do not maintain a successful collaborative partnership with AstraZeneca for the co-development and commercialization of AGI-1067, we may be forced to focus our efforts internally to commercialize AGI-1067. This would require greater financial resources and would result in us incurring greater expenses and may cause a delay in market penetration while we continue to build our own commercial operation or seek alternative collaborative partners.

AstraZeneca has the right to terminate the agreement at its election upon the occurrence of certain conditions. In particular, AstraZeneca may terminate the agreement: (1) upon 90 days prior written notice at any time during the 45 day period following the release of the final ARISE results; (2) at any time in the 30 day period following receipt of a letter from the FDA stating either that: (a) the FDA will not approve the application, or (b) it will only approve the application if specific conditions are met, and such conditions make it reasonably likely that (i) approval of AGI-1067 will occur more than 24 months

following the receipt of the FDA letter, or (ii) development costs will exceed a specified amount (unless we agree to pay any amount in excess of the specified amount); (3) if the FDA requires information or data from additional studies not contemplated in the original license agreement, when the added cost to AstraZeneca of complying with the FDA requirements is reasonably likely to exceed a specified amount (unless we agree to pay any amounts in excess of the specified amount); and (4) for any reason at any time during the one-year period following the third anniversary of receipt of FDA approval, upon giving us 365 days written notice at any time during that one-year period.

Other than AGI-1067, all of our other product candidates are in early stages of development, and only one other product candidate has undergone Phase I clinical trials. Our product candidates are subject to the risks of failure inherent in developing drug products based on new technologies. We do not expect any of our potential product candidates, including AGI-1067, to be commercially available until at least 2007. Our drug discovery efforts may not produce any other proprietary product candidates. Our failure to develop product candidates will limit our ability to generate additional revenue.

Product candidates we develop, alone or with others, may not prove safe and effective in clinical trials and may not meet all of the applicable regulatory requirements needed to receive regulatory approval. If we fail to adequately demonstrate safety and efficacy for any product candidate, we will not be able to commercialize that product candidate. Our failure to commercialize a product candidate will materially adversely affect our revenue opportunities. We will need to conduct significant research, preclinical testing and clinical trials before we can file product approval applications with the FDA and similar regulatory authorities in other countries. Preclinical testing and clinical trials are long, expensive and uncertain processes. We may spend several years completing our testing for any particular product candidate. Failure can occur at any stage.

The FDA or we may suspend our clinical trials at any time if either of us believes that we are exposing the subjects participating in these trials to unacceptable health risks. The FDA or institutional review boards at the medical institutions and healthcare facilities where we sponsor clinical trials may suspend any trial indefinitely if they find deficiencies in the conduct of these trials. The FDA and these institutional review boards have authority to oversee our clinical trials, and the FDA may require large numbers of test subjects. In addition, we must manufacture the product candidates that we use in our clinical trials under the FDA’s Good Manufacturing Practices.

Even if we achieve positive results in early clinical trials, these results do not necessarily predict final results. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials, even after achieving positive results in earlier trials. Negative or inconclusive results or adverse medical events during a clinical trial could cause the FDA or us to terminate a clinical trial or require that we repeat it.

timing and terms of any collaboration will depend on the evaluation by prospective collaborators of the trial results and other aspects of the drug’s safety and efficacy profile. If we are unable to reach agreements with suitable collaborators for any product candidate, we would be forced to fund the entire development and commercialization of such product candidates, and we may not have the resources to do so. If resource constraints require us to enter into a collaboration early in the development of a product candidate, we may be forced to accept a more limited share of any revenues this product may eventually generate. We face significant competition in seeking appropriate collaborators. Moreover, these collaboration arrangements are complex and time-consuming to negotiate and document. We may not be successful in our efforts to establish collaborations or other alternative arrangements for any product candidate.

In addition to our license and collaborative agreements with AstraZeneca to develop and commercialize AGI-1067, we have entered into and renewed a collaboration agreement with Astellas to develop AGI-1096 in preclinical testing and early-stage clinical trials and intend to pursue additional collaborations in the future with large pharmaceutical companies to commercialize other products that we develop to target patient or physician populations in broad markets. Our existing collaborations and any other collaboration that we may establish may not be successful. The success of any collaboration arrangement will depend heavily on the efforts and activities of our collaborators. Collaborators will likely have significant discretion in determining the efforts and resources that they will apply to these collaborations. The risks that we anticipate being subject to in collaborations include:

The termination of any collaboration that we may establish might adversely affect the development of the related product candidates and our ability to derive revenue from them. Collaborations with pharmaceutical companies and other third parties often are terminated or allowed to expire by the other party or by us. For example, in 2001, Schering-Plough and we terminated a collaboration that we had established for AGI-1067, and our existing collaboration with Astellas for the development of AGI-1096 is terminable by Astellas. Any future terminations or expirations would adversely affect us financially and could harm our business reputation. In that event, we might be required to devote additional resources to the product or product candidate, seek a new collaborator or abandon the product or product candidate, any of which could have an adverse effect on our business.

commercial supply agreement for production of AGI-1067 and Probucol with Dow. Under our joint license and collaboration agreement, the manufacturing agreement with Dow will be assigned to AstraZeneca, which is responsible for all of the AGI-1067 manufacturing, packaging and labeling activities. Our reliance on AstraZeneca and on other third parties for these services exposes us to various risks that could delay our clinical trials or hinder our commercialization prospects. These risks include the following:

Any products that we bring to the market may not gain market acceptance by physicians, patients, healthcare payors and others in the medical community. If these products do not achieve an adequate level of acceptance, we may not generate material product revenues and we may not become profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:

The development and commercialization of new drugs is highly competitive. Our competitors include large pharmaceutical and more established biotechnology companies. Moreover, there are approved products on the market for many of the diseases for which we are developing drugs. In many cases, these products have well known brand names, are distributed by large pharmaceutical companies and have achieved widespread acceptance among physicians and patients. Our competitors have significant resources and expertise in research and development, manufacturing, testing, obtaining regulatory approvals and marketing. Potential competitors also include academic institutions, government agencies, and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization. Any of these competitors could develop technologies or products that would render our technologies or product candidates obsolete or non-competitive, which could adversely affect our revenue potential. These third parties also compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to or necessary for our programs or advantageous to our business.

We have not previously sold, marketed or distributed any products and currently have no sales, marketing or distribution capabilities. As our drug candidates progress towards ultimate commercialization, we will need to develop our sales and marketing abilities and enter into agreements with third parties to perform these functions. Pursuant to our joint licensing and collaboration agreement, AstraZeneca will be responsible for the distribution and marketing of AGI-1067 in all markets throughout the world. In addition, AstraZeneca has agreed to fund a sales force of up to 125 people for three years. Prior to and during this three-year period, we may be unable to successfully hire and retain key sales and marketing personnel that we need to effectively manage and carry out the commercialization of AGI-1067, or any other drug candidates. Even if we manage to hire and retain necessary personnel, we may be unable to implement our sales, marketing and distribution strategies effectively or profitably. We have no experience in developing, training or managing a sales force and will incur substantial additional expenses in doing so. The cost of establishing and maintaining a sales force may exceed its cost effectiveness. In addition, we will compete with many companies that currently have extensive and well-funded marketing and sales operations. Lastly, in the event that AGI-1067 or another of our drug candidates is not approved for marketing by the FDA, or if AstraZeneca terminates our joint licensing and collaboration agreement, we may have incurred expenses for the buildup of a sales force that we may not be able to recover, and may have difficulty continuing to maintain the sales force and marketing infrastructure funded by AstraZeneca.

the Medicare Prescription Drug and Modernization Act of 2003, which expanded Medicare coverage of prescription drugs by establishing Medicare Part D, a voluntary, limited outpatient prescription drug program. While the Part D program may increase demand for our products, Part D prescription drug plans will have substantial leverage in negotiating the prices of drugs furnished through the program. This may result in lower prices for products that are provided through the Part D program than we might otherwise obtain. In addition, price concessions that we provide to Part D plans could adversely impact our pricing with non-Medicare third party payors.

A primary trend in the United States healthcare industry is toward cost containment. In addition, in some foreign countries, particularly the countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take six to 12 months or longer after the receipt of regulatory marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost effectiveness of our product candidates or products to other available therapies. The conduct of such a clinical trial could be expensive and result in delays in commercialization of our products.

Third party payors are challenging the prices charged for medical products and services, and many third party payors limit reimbursement for newly-approved healthcare products. In particular, third party payors may limit the indications for which they will reimburse patients who use any products that we may develop. Cost control initiatives could decrease the price we might establish for products that we may develop, which would result in lower product revenues to us.

The testing and marketing of medicinal products entail an inherent risk of product liability. Clinical trial subjects, consumers, healthcare providers or pharmaceutical companies or others selling our future products could bring product liability claims against us. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

us. Our ability to protect our product candidates from unauthorized or infringing use by third parties depends substantially on our ability to obtain and maintain valid and enforceable patents. Due to evolving legal standards relating to the patentability, validity and enforceability of patents covering pharmaceutical inventions and the scope of claims made under these patents, our ability to obtain and enforce patents is uncertain and involves complex legal and factual questions for which important legal principles are unresolved.

We may not be able to obtain patent rights on products, treatment methods or manufacturing processes that we may develop or to which we may obtain license or other rights. Even if we do obtain patents, rights under any issued patents may not provide us with sufficient protection for our product candidates or provide sufficient protection to afford us a commercial advantage against our competitors or their competitive products or processes. It is possible that no patents will be issued from any pending or future patent applications owned by us or licensed to us. Others may challenge, seek to invalidate, infringe or circumvent any patents we own or license. Alternatively, we may in the future be required to initiate litigation against third parties to enforce our intellectual property rights. The cost of this litigation could be substantial and our efforts could be unsuccessful. Changes in either patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property or narrow the scope of our patent protection.

Our patents also may not afford us protection against competitors with similar technology. We may not have identified all patents, published applications or published literature that affect our business either by blocking our ability to commercialize our product candidates, by preventing the patentability of our drugs to us or our licensors or by covering the same or similar technologies that may affect our ability to market our product candidates. For example, patent applications in the United States are maintained in confidence for up to 18 months after their filing. In some cases, however, patent applications remain confidential in the United States Patent and Trademark Office for the entire time prior to issuance as a United States patent. Patent applications filed in countries outside the United States are not typically published until at least 18 months from their first filing date. Similarly, publication of discoveries in the scientific or patent literature often lags behind actual discoveries. Therefore, we or our licensors might not have been the first to invent, or the first to file, patent applications on our drug candidates or for their use. The laws of some foreign jurisdictions do not protect intellectual property rights to the same extent as in the United States and many companies have encountered significant difficulties in protecting and defending these rights in foreign jurisdictions. If we encounter such difficulties in protecting or are otherwise precluded from effectively protecting our intellectual property rights in foreign jurisdictions, our business prospects could be substantially harmed.

Our research, development and commercialization activities, as well as any product candidates or products resulting from these activities, may infringe or be claimed to infringe patents or patent applications under which we do not hold licenses or other rights. Third parties may own or control these patents and patent applications in the United States and abroad. These third parties could bring claims against us or our collaborators that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages. Further, if a patent infringement suit were brought against us or our collaborators, we or they could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit.

As a result of patent infringement claims, or in order to avoid potential claims, we or our collaborators may choose or be required to seek a license from the third party and be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we or our collaborators were able to obtain a license, the rights may be nonexclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations, if, as a result of

There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical and biotechnology industries. In addition to infringement claims against us, we may become a party to other patent litigation and other proceedings, including interference proceedings declared by the United States Patent and Trademark Office and opposition proceedings in the European Patent Office, regarding intellectual property rights with respect to our products and technology. The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Patent litigation and other proceedings may also absorb significant management time.

Our commercial success will also depend on our ability to develop, manufacture, use, sell and offer to sell our product candidates and proposed product candidates without breaching our agreements with our patent licensors. We are a party to a number of license agreements, including exclusive licenses to technologies from Emory, covering aspects of our v-protectant^® technology, and the National Jewish Medical and Research Center, covering aspects of our MEKK technology platform. We expect to enter into additional licenses in the future. Our exclusive license with Emory requires us to take steps to commercialize the licensed technology in a timely manner. If we fail to meet these obligations, Emory can convert our exclusive license to a non-exclusive license, can grant others non-exclusive rights in the licensed technology or can require us to sublicense aspects of the licensed technology. Our license agreement with National Jewish requires us to develop the licensed technology in a timely manner. If we fail to meet these obligations, some or all of the licensed technology may revert to National Jewish. Our existing licenses impose, and we expect future licenses will impose, various diligence, milestone payments, royalty, insurance and other obligations on us. If we fail to comply with these obligations, the licensor may have the right to terminate the license, in which event we might not be able to market any product that is covered by the licensed patents.

In addition to patented technology, we rely on trade secrets, proprietary know-how and technological advances, which we seek to protect through agreements with our collaborators, employees and consultants. These persons and entities could breach our agreements, for which breaches we may not have adequate remedies. In addition, others could become aware of our trade secrets or proprietary know-how through independent discovery or otherwise. If we are unable to protect the confidentiality of our proprietary information and know-how, competitors may be able to use this information to develop products that compete with our products, which could adversely impact our business.

We cannot commercialize any of our product candidates, including AGI-1067 and AGI-1096, until the appropriate regulatory authorities have reviewed and approved the applications for the product candidates. The regulatory agencies may not complete their review processes in a timely manner and we may not obtain regulatory approval for any product candidate we or our collaborators develop. Satisfaction of regulatory requirements typically takes many years, if approval is obtained at all, is dependent upon the

type, complexity and novelty of the product and requires the expenditure of substantial resources. Regulatory approval processes outside the United States include all of the risks associated with the FDA approval process. In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action or changes in FDA policy during the period of product development, clinical trials and FDA regulatory review. The FDA has substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent regulatory approval of a product candidate.

We do not know whether planned clinical trials will begin on time or whether we will complete any of our clinical trials on schedule or at all. Product development costs to us and our collaborators will increase if we have delays in testing or approvals or if we need to perform more or larger clinical trials than planned. Significant delays may adversely affect our financial results and the commercial prospects for our products, and delay our ability to become profitable.

We rely heavily on independent clinical investigators, contract research organizations and other third party service providers for successful execution of our clinical trials, but do not control many aspects of their activities. We are responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with standards, commonly referred to as Good Clinical Practices, for conducting and recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Our reliance on third parties that we do not control does not relieve us of these responsibilities and requirements. Third parties may not complete activities on schedule, or may not conduct our clinical trials in accordance with regulatory requirements or our stated protocols. The failure of these third parties to carry out their obligations could delay or prevent the development, approval and commercialization of our product candidates.

We intend to have our products marketed outside the United States. In order to market our products in the European Union and many other foreign jurisdictions, we must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. AstraZeneca will have responsibility to obtain regulatory approvals outside the United States with respect to AGI-1067, and we will depend on AstraZeneca to obtain these approvals. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ from that required to obtain FDA approval. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or jurisdictions or by the FDA. We and any future collaborators may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our products in any market.

Any regulatory approval that we may receive for our current or future product candidates will be limited to those diseases and indications for which these product candidates are clinically demonstrated to be safe and effective. In addition to the FDA approval required for new formulations, any new indication to an approved product also requires FDA approval. If we are not able to obtain FDA approval for a broad range of indications for our product candidates, our ability to effectively market and sell our product candidates may be greatly reduced and our business will be adversely affected.

We are a small company with approximately 113 full-time employees. If we are unable to continue to attract, retain and motivate highly qualified management and scientific personnel and to develop and maintain important relationships with leading academic institutions and scientists, we may not be able to achieve our research and development objectives. Competition for personnel and academic collaborations is intense. We have entered into employment agreements with each of our executive officers. These employment agreements are terminable by the employee on short notice. Loss of the services of any of these officers or of our key scientific personnel could adversely affect the progress of our research and development programs. All of our other employees are at will employees. We do not carry key person insurance on any employee.

We have been contacted by the staff of SEC and the NASD regarding informal inquiries they are conducting related to our September 27, 2004 announcement of interim results from the CART-2 clinical trial for AGI-1067 and trading in our common stock surrounding that announcement. The SEC staff’s notice states that its inquiry should not be construed as an expression of opinion on the part of the SEC or its staff that any violations of law have occurred. The SEC and NASD staff have requested that we voluntarily provide them with documents and other information relating to that announcement. We are cooperating fully with these requests. Based on our review of the facts as to the September 27, 2004 announcement and trading in our common stock surrounding that announcement, we do not believe that we or any of our officers or directors have violated any laws related to these inquiries. However, we cannot predict the outcome of these inquiries, whether the SEC or NASD will undertake any form of investigation or proceeding relating to us or our officers or directors or when these matters might be resolved.

Our research and development involves the controlled use of hazardous materials, chemicals and various radioactive compounds. Although we believe that our safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, the risk of accidental contamination or injury from these materials cannot be eliminated. If an accident occurs, we could be held liable for resulting damages, which could be substantial. We are also subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory

The market price of our common stock, and the market prices for securities of pharmaceutical and biotechnology companies in general, have been highly volatile and may continue to be highly volatile in the future. During the period from January 1, 2005 to March 3, 2006, the closing sale price of our common stock on the NASDAQ National Market ranged from a low of $10.66 per share to a high of $21.14 per share. The following factors, in addition to other risk factors described in this report, may have a significant impact on the market price of our common stock:

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. Purported securities class action lawsuits were filed against us and some of our executive officers and directors in the United States District Court for the Southern District of New York on January 5, 2005 and February 8, 2005 (the “SDNY Actions”) and in the United States District Court for the Northern District of Georgia, Atlanta division on January 7, 2005, January 10, 2005, January 11, 2005 and January 25, 2005 (the “NDGA Actions”). Plaintiffs filed separate motions to consolidate these lawsuits in both the Southern District of New York and the Northern District of Georgia on March 7, 2005. In addition, three class members simultaneously moved for appointment as lead plaintiffs in both districts on March 7, 2005. On April 18, 2005, the Honorable Richard J. Holowell ordered the SDNY Actions consolidated under the caption “In re Atherogenics Securities Litigation” (the “SDNY Action”) and appointed lead plaintiff and co-lead counsel. On July 5, 2005, AtheroGenics filed a motion to transfer the SDNY Action to the Northern District of Georgia. On July 14, 2005, the plaintiffs voluntarily dismissed the NDGA Actions. The SDNY Action and the defendants’ motion to transfer that action to Georgia are still pending. The allegations in these lawsuits relate to our disclosures regarding the results of the CART-2 clinical trial for AGI-1067. The results of complex legal proceedings, such as these purported class actions, are difficult to predict. Each complaint seeks unspecified damages and, therefore, we are unable to estimate the possible range of damages that we might incur should any of these lawsuits be resolved against us. An unfavorable outcome or settlement of these lawsuits could harm our financial position. In addition, similar class action lawsuits may be filed against us and our executive officers and

If we do not achieve a significant increase in revenues, we could have difficulty making required payments on our outstanding convertible notes, our other existing indebtedness and any indebtedness that we may incur in the future. During each of the last five years, we had no earnings to cover our fixed charges. If we are unable to generate sufficient cash flow or otherwise obtain funds necessary to make required payments, or if we fail to comply with the various requirements of our convertible notes, our other existing indebtedness or any indebtedness which we may incur in the future, we would be in default, which would permit the holders of the notes and that other indebtedness to accelerate the maturity of the notes and that other indebtedness and could cause defaults under the notes and that other indebtedness. Any default under our convertible notes, our other existing indebtedness or any indebtedness which we may incur in the future could have a material adverse effect on our business, operating results and financial condition.

The conversion of some or all of the 1.5% convertible notes due 2012 or the 4.5% convertible notes due 2008 will dilute the ownership interests of existing shareholders. In January 2006, holders converted $14.0 million of the 4.5% convertible notes into 1,085,000 shares of our common stock. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the notes may encourage short selling by market participants because the conversion of the notes could depress the price of our common stock.

Purported securities class action lawsuits were filed against us and some of our executive officers and directors in the United States District Court for the Southern District of New York on January 5, 2005 and February 8, 2005 (the “SDNY Actions”) and in the United States District Court for the Northern District of Georgia, Atlanta division on January 7, 2005, January 10, 2005, January 11, 2005 and January 25, 2005 (the “NDGA Actions”). Plaintiffs filed separate motions to consolidate these lawsuits in both the Southern District of New York and the Northern District of Georgia on March 7, 2005. In addition, three class members simultaneously moved for appointment as lead plaintiffs in both districts on March 7, 2005. On April 18, 2005, the Honorable Richard J. Holowell ordered the SDNY Actions consolidated under the caption “In re Atherogenics Securities Litigation” (the “SDNY Action”) and appointed lead plaintiff and co-lead counsel. On July 5, 2005, AtheroGenics filed a motion to transfer the SDNY Action to the Northern District of Georgia. On July 14, 2005, the plaintiffs voluntarily dismissed the NDGA Actions. The SDNY Action and the defendants’ motion to transfer that action to Georgia are still pending. The allegations in these lawsuits relate to our disclosures regarding the results of the CART-2 clinical trial for AGI-1067. The results of complex legal proceedings, such as these purported class actions, are difficult to predict. Each complaint seeks unspecified damages and, therefore, we are unable to estimate the possible range of damages that we might incur should any of these lawsuits be resolved against us.

This annual report contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to certain factors, risks and uncertainties that may cause actual results, events and performances to differ materially from those referred to in such statements. These risks include statements which address operating performance, events or developments that we expect or anticipate will occur in the future, such as projections about our future results of operations or financial condition, research, development and commercialization of our product candidates, anticipated trends in our business, and other risks that could cause actual results to differ materially. You should carefully consider these risks, which are discussed in this annual report, including, without limitation, in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in AtheroGenics’ SEC filings.

AtheroGenics is a research-based pharmaceutical company focused on the discovery, development and commercialization of novel drugs for the treatment of chronic inflammatory diseases, including coronary heart disease, organ transplant rejection, rheumatoid arthritis and asthma. We have developed a proprietary vascular protectant, or v-protectant^®, technology platform to discover drugs to treat these types of diseases. Based on our v-protectant^® platform, we have two drug development programs in clinical trials and are pursuing a number of other preclinical programs.

AGI-1067, our first candidate, is our v-protectant^® that is most advanced in clinical development. AGI-1067 is designed to benefit patients with coronary heart disease, or CHD, which is atherosclerosis of the blood vessels of the heart. We are currently evaluating AGI-1067 in the Phase III clinical trial called ARISE (Aggressive Reduction of Inflammation Stops Events) as an oral therapy for the treatment of atherosclerosis. In December 2005, we announced a license and collaboration agreement with AstraZeneca for the global development and commercialization of AGI-1067. Under the terms of the agreement, we received an upfront license fee of $50 million and, subject to the achievement of specific milestones, including a successful outcome in ARISE, we will be eligible for development and regulatory milestones of up to an aggregate of $300 million. The agreement also provides for progressively demanding sales performance related milestones of up to an additional $650 million in the aggregate. In addition, we will also receive royalties on product sales. AstraZeneca has the right to terminate the license and collaboration agreement at specified periods as further described above in Item 1. “Business — Collaborations.”

From inception, we have devoted the large majority of our research and development efforts and financial resources to support development of the AGI-1067 product candidate. We will retain responsibility for the ongoing ARISE clinical trial and for regulatory filings in the United States. AstraZeneca will have full responsibility for pre-commercialization activities involving AGI-1067 and will oversee all aspects of the marketing, sales and distribution of AGI-1067 on a worldwide basis. AstraZeneca will also be responsible for all non-U.S. regulatory filings. Spending for the AGI-1096 program in 2005, 2004 and 2003 was funded by our collaborative development partner, Astellas. In 2004, we discontinued clinical development of AGIX-4207.

The nature, timing and costs of the efforts to complete the successful development of any of our product candidates are highly uncertain and subject to numerous risks, and therefore cannot be accurately estimated. These risks include the rate of progress and costs of our clinical trials, clinical trial results, cost and timing of regulatory approval and establishing commercial manufacturing supplies. These risks and uncertainties, and their effect on our operations and financial position, are more fully described above in our risk factors under the headings Risks Related to Development and Commercialization of Our Product Candidates and Dependence on Third Parties and Risks Related to Regulatory Approval of Our Product Candidates.

We have not derived any commercial revenues from product sales. We expect to incur significant losses in most years prior to deriving any such product revenue as we continue to increase research and development costs. We have funded our operations primarily through sales of equity and debt securities. We have incurred significant losses since we began operations and, as of December 31, 2005, had an accumulated deficit of $294.7 million. We cannot assure you that we will become profitable or receive any milestone-related revenues under our agreement with AstraZeneca. We expect that losses will fluctuate from quarter to quarter and that these fluctuations may be substantial. Our ability to achieve profitability depends upon our ability, alone or with others, to complete the successful development of our product candidates, to obtain required regulatory clearances and to manufacture and market our future products.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions and select accounting policies that affect the amounts reported in our financial statements and the accompanying notes. Actual results could significantly differ from those estimates. We have identified the following policies and related estimates as critical to our business operations and the understanding of our results of operations. A description of these critical accounting policies and a discussion of the significant estimates and judgments associated with these policies are set forth below. The impact of and any associated risks related to these policies on our business operations are also discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations.

As part of the process of preparing our financial statements, we are required to estimate expenses that we believe we have incurred, but have not yet been billed for. This process involves identifying services and activities that have been performed by third party vendors on our behalf and estimating the level to which they have been performed and the associated cost incurred for such service as of each balance sheet date in our financial statements. Examples of expenses for which we accrue include fees for professional services, such as those provided by certain clinical research organizations and investigators in conjunction with clinical trials, and fees owed to contract manufacturers in conjunction with the manufacture of clinical trial materials. We make these estimates based upon progress of activities related to contractual obligations and also information received from vendors.

We recognize revenue in accordance with the SEC’s Staff Accounting Bulletin (“SAB”) No. 101, Revenue Recognition in Financial Statements, as amended by Staff Accounting Bulletin No. 104, Revenue Recognition, (“SAB 104”). SAB 104 provides guidance in applying U.S. generally accepted accounting principles to revenue recognition issues, and specifically addresses revenue recognition for upfront, nonrefundable fees received in connection with research collaboration agreements.

In accordance with SAB 104, license fees, which are nonrefundable, are recognized when the related license agreements specify that no further efforts or obligations are required of us. In February 2006, we received a $50 million license fee in connection with our license and collaboration agreement with AstraZeneca. The upfront license payment will be recognized over the period that we estimate we are obligated to provide services to the licensee. In 2006, revenues will be approximately $23 million related to the amortization of the upfront license fee from AstraZeneca.

We have elected to follow Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), in accounting for our stock-based employee compensation plans, rather than the alternative fair value accounting method provided for under Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation (“SFAS 123”). We account for transactions in which services are received in exchange for equity instruments based on the fair value of such services received from non-employees, in accordance with SFAS 123 and Emerging Issues Task Force (“EITF”) Issue No. 96-18, Accounting for Equity Instruments that Are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure (“SFAS 148”), an amendment to SFAS 123, requires disclosure in the summary of significant accounting policies of the effects of an entity’s accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements.

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123(R), Share-Based Payment (“SFAS 123(R)”), which revises SFAS No. 123 and supersedes APB 25. SFAS 123(R) requires that companies recognize compensation expense associated with stock option grants and other equity instruments to employees in the financial statements and became effective as of January 1, 2006. SFAS 123(R) applies to all grants after the effective date and to the unvested portion of stock options outstanding as of the effective date. The pro forma disclosures previously permitted under SFAS 123 are no longer an alternative to financial statement recognition. We will adopt the provisions of SFAS 123(R) as of January 1, 2006 and we intend to use the modified-prospective method and the Black-Scholes valuation model for valuing share-based payments. We expect that the adoption will have a material impact on our results of operations and net loss per share. The actual impact of SFAS 123(R) cannot be predicted at this time because it will depend on levels of stock option grants and changes in valuation assumptions. However, had we adopted SFAS 123(R) in prior periods, the impact would have approximated the impact of SFAS 123 as previously described in the pro forma disclosures.

General and Administrative. General and administrative expenses were $9.1 million in 2005, compared to $6.6 million in 2004. The increase of $2.4 million, or 37%, is primarily due to an increase in the cost of AGI-1067 business development activities, including legal fees for the license and collaboration agreement with AstraZeneca and market research costs. Also contributing to the increase were higher legal fees related to the class action lawsuit.

As of December 31, 2005, we had net operating loss carryforwards and research and development credit carryforwards of $299.1 million and $9.4 million, respectively, available to offset future taxable income. The net operating loss carryforwards and the research and development credit carryforwards will expire between 2010 and 2026. Because of our lack of earnings history, the resulting deferred tax assets have been fully offset by a valuation allowance. The utilization of the carryforwards is dependent upon the timing and extent of our future profitability. The annual limitations combined with the expiration dates of the carryforwards may prevent the utilization of all of the net operating loss and research and development credit carryforwards if we do not attain sufficient profitability by the expiration dates of the carryforwards.

General and Administrative. General and administrative expenses were $6.6 million in 2004, compared to $5.9 million in 2003. The increase of $676,831, or 11%, was primarily due to a full year’s impact of the increase in directors and officers’ insurance premiums in 2004 compared to a partial year’s impact of the increase in premiums in 2003, an increase in professional fees in connection with compliance with the Sarbanes-Oxley Act of 2002 and consulting fees. Also contributing to the increase were business development expenses related to partnering activities, along with salary and personnel expenses.

Since inception, we have financed our operations primarily through sales of equity securities and convertible notes. At December 31, 2005, we had cash, cash equivalents and short-term investments of $182.5 million, compared with $66.9 million and $131.6 million at December 31, 2004 and 2003, respectively. Working capital at December 31, 2005 was $173.2 million, compared to $59.7 million and $124.8 million at December 31, 2004 and 2003, respectively. The increase in cash, cash equivalents and short-term investments and working capital in 2005 is due to funds received from the issuance of our 1.5% convertible notes in January 2005 that raised net proceeds of approximately $193.6 million. The decrease in cash, cash equivalents, short-term investments and working capital in 2004 is primarily due to the use of funds for operating purposes. The increase in cash, cash equivalents and short-term investments and working capital in 2003 is due to funds received from our follow-on stock offering in February 2003 of approximately $48.4 million and the issuance of our 4.5% convertible notes in August 2003 that raised net proceeds of approximately $96.7 million.

Net cash used in operating activities was $77.8 million in 2005 compared to $66.6 million in 2004 and $48.6 million in 2003. The increase in the use of cash in operating activities in 2005 is principally due to funding a net loss of $82.6 million. The increase in cash needed to fund the net loss is primarily attributable to expenditures for our ARISE Phase III clinical trial for AGI-1067, as well as other ongoing product development activities. For 2006, expenditures for the ARISE clinical trial are estimated to be approximately $33.0 million. We anticipate net cash usage in 2006 for ARISE and our other ongoing preclinical and clinical programs, as well as our other operating activities, to be in a range of $35.0 million to $40.0 million, which is net of the $50.0 million license fee received from AstraZeneca in February 2006.

Net cash used in investing activities was $51.7 million in 2005 compared to net cash provided by investing activities of $27.1 million in 2004 and $68.1 million used in investing activities in 2003. Net cash used in investing activities in 2005 and 2003 consisted primarily of net purchases of available-for-sale securities. Net cash provided by investing activities in 2004 consisted primarily of net sales of available-for-sales securities. Additionally, in 2005, $3.0 million was used to purchase equipment and leasehold improvements, which includes $1.9 million spent for commercial manufacturing equipment.

Net cash provided by financing activities was $196.5 million in 2005 compared to $2.3 million in 2004 and $146.1 million in 2003. Net cash provided by financing activities in 2005 consisted primarily of $193.6 million received from the issuance of 1.5% convertible notes in January 2005. Net cash provided by financing activities in 2004 consisted primarily of the proceeds received upon exercise of common stock options. Net cash provided by financing activities in 2003 consisted primarily of $48.4 million received from our follow-on stock offering in February 2003 and $96.7 million received from the issuance of our 4.5% convertible notes in August 2003.

In August 2003, we issued $100 million in aggregate principal amount of 4.5% convertible notes due 2008 through a Rule 144A private placement to qualified institutional buyers. These notes initially are convertible into our common stock at a conversion rate of 65.1890 shares per $1,000 principal amount of notes, or approximately $15.34 per share. Net proceeds were approximately $96.7 million. Interest on the 4.5% convertible notes is payable semi-annually in arrears on March 1 and September 1. As of December 31, 2005, we have recorded $1.5 million of accrued interest expense related to the notes, which is due March 1, 2006. In January 2006, we exchanged $14.0 million in aggregate principal amount of the 4.5% convertible notes for 1,085,000 shares of our common stock. From time to time, we may enter into additional exchange offers and/or purchases of these notes.

In January 2005, we issued $200 million in aggregate principal amount of 1.5% convertible notes due 2012 through a Rule 144A private placement to qualified institutional buyers. These notes are convertible into shares of our common stock at a conversion rate of 38.5802 shares per $1,000 principal amount of notes, or approximately $25.92 per share. Interest on the 1.5% convertible notes is payable semi-annually in arrears on February 1 and August 1. Net proceeds were approximately $193.6 million. As of December 31, 2005, we have recorded $1.3 million of accrued interest expense related to the notes, which is due February 1, 2006. We are using the net proceeds from the sale of the notes to fund the ongoing costs of the ARISE Phase III clinical trial for AGI-1067 and other research and development activities, including clinical trials, process development and manufacturing support, and for general corporate purposes, including working capital. Pending these uses, the net proceeds have been invested in interest-bearing, investment grade securities.

Based upon the current status of our product development and commercialization plans, we believe that our existing cash, cash equivalents and short-term investments will be adequate to satisfy our capital needs for at least the next 12 months. However, our actual capital requirements will depend on many factors, including those factors potentially impacting our financial condition as discussed in Item 1A. “Risk Factors” and the following:

The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive from our investments without significantly increasing risk. Some of the securities that we invest in may have market risk. This means that a change in prevailing interest rates may cause the fair value of the principal amount of the investment to fluctuate. For example, if we hold a security that was issued with a fixed interest rate at the then-prevailing rate and the prevailing interest rate later rises, the fair value of the principal amount of our investment will probably decline. To minimize this risk in the future, we intend to continue to maintain our portfolio of cash equivalents and short-term investments in a variety of securities, including commercial paper, all of which have a minimum investment rating of A1/P1, money market funds, and government and non-government debt securities. The average duration of all of our investments has generally been less than one year. Due to the short-

Management of AtheroGenics, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. AtheroGenics’ internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. AtheroGenics’ internal control over financial reporting includes those policies and procedures that:

We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, that AtheroGenics, Inc. maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). AtheroGenics, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

We have audited the accompanying balance sheets of AtheroGenics, Inc. as of December 31, 2005 and 2004, and the related statements of operations, shareholders’ (deficit) equity and cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of AtheroGenics, Inc.’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 9, 2006 expressed an unqualified opinion thereon.

Management determines the appropriate classification of debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. These investments are accounted for in accordance with SFAS 115. AtheroGenics has classified all investments as available-for-sale. Available-for-sale securities are carried at fair value, with the unrealized gains and losses, net of tax, reported in a separate component of shareholders’ (deficit) equity. Realized gains and losses are included in investment income and are determined on a specific identification basis.

balance sheet date in its financial statements. Examples of expenses for which AtheroGenics accrues include fees for professional services, such as those provided by certain clinical research organizations and investigators in conjunction with clinical trials, and fees owed to contract manufacturers in conjunction with the manufacture of clinical trial materials. AtheroGenics makes these estimates based upon progress of activities related to contractual obligations and also information received from vendors.

AtheroGenics has elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), in accounting for its stock-based employee compensation plans, rather than the alternative fair value accounting method provided for under SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS 123”). AtheroGenics accounts for transactions in which services are received in exchange for equity instruments based on the fair value of such services received from non-employees, in accordance with SFAS 123 and Emerging Issues Task Force (“EITF”) Issue No. 96-18, Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure (“SFAS 148”), an amendment to SFAS 123, requires disclosure in the summary of significant accounting policies of the effects of an entity’s accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements.

AtheroGenics computes comprehensive income (loss) in accordance with SFAS No. 130, Reporting Comprehensive Income (“SFAS 130”). SFAS 130 establishes standards for the reporting and display of comprehensive income (loss) and its components in the financial statements. Comprehensive income (loss), as defined, includes all changes in equity during a period from non-owner sources, such as unrealized gains and losses on available-for-sale securities. Comprehensive loss was $82,667,971, $69,639,434 and $53,277,226 for the years ended December 31, 2005, 2004 and 2003, respectively.

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123(R), Share-Based Payment (“SFAS 123(R)”), which revises SFAS 123 and supersedes APB 25. SFAS 123(R) requires that companies recognize compensation expense associated with stock option grants and other equity instruments to employees in the financial statements and is effective as of January 1, 2006. SFAS 123(R) applies to all grants after the effective date and to the unvested portion of stock options outstanding as of the effective date. Under SFAS 123(R), AtheroGenics must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at the date of adoption. The permitted transition methods are either a modified prospective method or a modified retrospective method. The modified prospective method requires that compensation expense be recorded for all unvested options at the beginning of the first quarter of adoption of SFAS 123(R), while the modified retrospective method requires that compensation expense be recorded for all unvested options beginning with the first period presented. Under the modified retrospective method, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented. The pro forma disclosures previously permitted under SFAS 123 will no longer be an alternative to financial statement recognition. AtheroGenics will adopt the provisions of SFAS 123(R) as of January 1, 2006 and it intends to use the modified prospective method and the Black-Scholes valuation model for valuing share-based payments. AtheroGenics expects that the adoption will have a material impact on its results of operations and net loss per share. The actual impact of SFAS 123(R) cannot be predicted at this time because it will depend on levels of stock option grants and changes in valuation assumptions. However, had AtheroGenics adopted SFAS 123(R) in prior periods, the impact would have approximated the impact of SFAS 123 as previously described in the pro forma disclosures.

Short-term investments consist of debt securities classified as available-for-sale and have maturities greater than 90 days from the date of acquisition. AtheroGenics has invested primarily in corporate notes and commercial paper, all of which have a minimum investment rating of A1/P1, and government agency notes. The realized loss from the sale of investments was $11,768 for the year ended December 31, 2005. There were no realized gains or losses from the sale of investments for the year ended December 31, 2004.

In August 2003, AtheroGenics issued $100,000,000 in aggregate principal amount of 4.5% convertible notes due September 1, 2008 with interest payable semi-annually in March and September. Net proceeds to AtheroGenics were approximately $96,700,000, after deducting expenses and underwriter’s discounts and commissions. The issuance costs related to the notes are recorded as debt issuance costs and other assets and are being amortized to interest expense over the five-year life of the notes.

The notes may be converted into shares of AtheroGenics’ common stock, at the option of the holder, prior to the close of business on September 1, 2008 at a conversion rate of 65.1890 shares per $1,000 principal amount of notes, representing a conversion price of approximately $15.34, subject to adjustment. Under certain circumstances, AtheroGenics may be obligated to redeem all or part of the notes prior to their maturity at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest and liquidated damages, if any, up to but excluding the maturity date.

The 1.5% convertible notes may be converted into shares of AtheroGenics’ common stock, at the option of the holder, at a conversion rate of 38.5802 shares per $1,000 principal amount of notes, which represents a conversion price of approximately $25.92, subject to adjustment. Under certain circumstances, AtheroGenics may be obligated to redeem all or part of the 1.5% convertible notes prior to their maturity at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest and liquidated damages, if any, up to but excluding the maturity date. In addition, under certain circumstances, AtheroGenics may adjust the conversion rate.

As of December 31, 2005, AtheroGenics has reserved a total of 14,234,953 shares of common stock for future issuance in connection with the 4.5% convertible notes and the 1.5% convertible notes. In addition, as of December 31, 2005, there was approximately $1,500,000 of accrued interest related to the 4.5% convertible notes, which is due March 1, 2006, and $1,250,000 of accrued interest related to the 1.5% convertible notes, which is due February 1, 2006.

SFAS No. 128, Earnings per Share, requires presentation of both basic and diluted earnings per share. Basic earnings per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed in the same manner as basic earnings per share except that diluted earnings per share reflects the potential dilution that would occur if outstanding options, warrants and convertible notes payable were exercised.

In November 2001, AtheroGenics’ Board of Directors adopted a Shareholder Rights Plan, declaring a dividend distribution of one common stock purchase right on each outstanding share of its common stock. Until the rights become exercisable, the rights will trade automatically with the common stock of AtheroGenics and separate rights certificates will not be issued. Under the rights plan, each right consists of an initial right and subsequent rights. Initial rights will be exercisable only if a person or group acquires 15% or more of AtheroGenics’ common stock, whether through open market or private purchases or consummation of a tender or exchange offer. Any shareholders who owned, as of November 9, 2001, in excess of 17% of AtheroGenics’ common stock will be permitted to acquire up to an aggregate of 20% of AtheroGenics’ outstanding common stock without triggering the rights plan. If, following the exercise of initial rights, a person or group again acquires 15% or more of AtheroGenics’ common stock, or a person or group who had previously acquired 15% or more of AtheroGenics’ common stock acquires an additional 10% or more of the common stock, the subsequent rights become exercisable. Each right will initially entitle shareholders to buy eight shares of common stock at an exercise price equal to 20% of the then current market value of the common stock, calculated and adjusted according to the terms of the rights plan. The number of shares that can be purchased upon exercise will increase as the number of shares held by the bidder increases.

The rights are intended to enable all shareholders to realize the long-term value of their investment in AtheroGenics. They will not prevent a takeover, but should encourage anyone seeking to acquire AtheroGenics to negotiate with the Board of Directors prior to attempting a takeover. The Board of Directors may redeem any non-exercisable rights at any time at its option at a redemption price of $.0001 per right. The rights plan expires at the close of business on November 8, 2011.

During 1997, AtheroGenics established an equity ownership plan (the “1997 Plan”) whereby options to purchase AtheroGenics’ common stock may be granted to employees, directors, consultants or contractors with exercise prices not less than the fair value of the shares on the dates of grant. The 1997 Plan, as amended, authorizes the grant of options for up to 3,724,416 shares of AtheroGenics’ common stock. As of December 31, 2005, AtheroGenics had 1,577,172 shares of common stock reserved for issuance under the 1997 Plan in connection with outstanding options or future grants. The 1997 Plan allows for grants of non-qualified options, incentive stock options and shares of restricted stock. Non-qualified options granted under the 1997 Plan may vest immediately for non-employees, but vest over a four-year period for employees. Incentive stock options generally vest over four years. The majority of the stock options granted under the 1997 Plan are incentive stock options.

During 2001, AtheroGenics established an equity ownership plan (the “2001 Plan”) whereby options to purchase AtheroGenics’ common stock may be granted to employees, directors, consultants or contractors with exercise prices not less than the fair value of the shares on the dates of grant. The 2001 Plan authorizes the grant of options for up to 2,000,000 shares of AtheroGenics’ common stock. As of December 31, 2005, AtheroGenics had 1,677,668 shares of common stock reserved for issuance under the 2001 Plan in connection with outstanding options or future grants. The terms of the 2001 Plan are substantially similar to the terms of the 1997 Plan.

During 2004, AtheroGenics established an equity ownership plan (the “2004 Plan”) whereby options to purchase AtheroGenics’ common stock may be granted to employees, directors, consultants or contractors with exercise prices not less than the fair value of the shares on the dates of grant. The 2004 Plan authorizes the grant of options for up to 4,500,000 shares of AtheroGenics’ common stock. As of December 31, 2005, AtheroGenics had 4,500,000 shares of common stock reserved for issuance under the 2004 Plan in connection with outstanding options or future grants. The terms of the 2004 Plan are substantially similar to the terms of the 2001 Plan and the 1997 Plan.

In 1999 and 2000, in connection with the grant of certain options to employees, AtheroGenics recorded non-cash deferred stock compensation of $13,989,088, representing the difference between the exercise price and the deemed fair value of AtheroGenics’ common stock on the dates these stock options were granted. Deferred stock compensation is included as a reduction of shareholders’ (deficit) equity and is being amortized to expense using the graded vesting method. The graded vesting method provides for vesting of each portion of the overall award over its respective vesting period, and results in higher vesting in earlier years than straight-line vesting. These options were fully amortized in 2004. During 2004 and 2003, AtheroGenics recorded amortization of deferred stock compensation for these options of $57,511 and $553,309, respectively.

In June 2001, in connection with the grant of certain warrants as part of a licensing agreement with National Jewish Medical and Research Center and options granted for the addition of new members to the Scientific Advisory Board, AtheroGenics recorded non-cash deferred stock compensation of $1,092,200. In August 2005 and December 2004, in connection with the modification of certain options held by employees who changed their status to become consultants, AtheroGenics recorded non-cash deferred stock compensation of $17,155 and $18,685, respectively. The fair value of the warrants and options for purposes of these calculations was determined by using the Black-Scholes model. These amounts are

included as a reduction of shareholders’ (deficit) equity and are being amortized over the vesting periods of the individual warrants and options. During 2005, 2004 and 2003, an additional $(81,269), $313,419 and $627,820, respectively, of non-cash deferred stock compensation was recorded due to re-measurement of the fair value of the options and warrants at each measurement date. During 2005, 2004 and 2003, AtheroGenics recorded a total of $184,293, $478,641 and $812,589, respectively, of amortization of deferred stock compensation for these options and warrants. At December 31, 2005, 56,000 shares of common stock were reserved for issuance upon the exercise of these outstanding warrants.

AtheroGenics has a defined contribution plan covering eligible employees, which is qualified under Section 401(k) of the Internal Revenue Code (“IRC”). Under the provisions of the plan, eligible participating employees may elect to contribute up to the maximum amount of tax deferred contribution allowed by the IRC. AtheroGenics may make a discretionary contribution. During 2005, AtheroGenics matched 50% of employees’ contributions, up to a maximum of 6% of the employees’ annual base compensation. AtheroGenics’ contributions to the plan for 2005, 2004 and 2003 aggregated $237,652, $204,094 and $161,576, respectively. AtheroGenics’ stock is not an eligible investment under this plan.

AtheroGenics’ net operating loss carryforwards and research and development credit carryforwards may be subject to certain IRC Section 382 and Section 383 limitations on annual utilization in the event of changes in ownership. These limitations could significantly reduce the amount of the net operating loss carryforwards available in the future. The utilization of the carryforwards is dependent upon the timing and extent of AtheroGenics’ future profitability. The annual limitations combined with the expiration dates of the carryforwards may prevent the utilization of all of the net operating loss and research and development credit carryforwards if AtheroGenics does not attain sufficient profitability by the expiration dates of the carryforwards.

On June 19, 1998, AtheroGenics entered into a ten-year operating lease for office and laboratory space through March 1, 2009. Monthly lease payments of approximately $89,400 began March 2, 1999, the date occupancy commenced. These payments are subject to increases during each successive 12-month period based on changes in the Consumer Price Index (“CPI”). Future increases in monthly lease payments due to increases in the CPI are considered to be contingent rentals, and, therefore, will be charged to expense over the lease term as they become payable. AtheroGenics may extend the lease term for two successive five-year periods. AtheroGenics’ other operating lease obligations are not significant.

In October 2005, AtheroGenics entered into a commercial supply agreement with The Dow Chemical Company for the manufacture of the bulk active ingredient of AGI-1067. The agreement also provides for the manufacture of Probucol USP, the starting material used in the manufacturing process of AGI-1067. Under AtheroGenics’ joint license and collaboration agreement with AstraZeneca, the manufacturing agreement with Dow will be assigned to AstraZeneca which is responsible for all of the AGI-1067 manufacturing, packaging and labeling activities.

In February 2006, AtheroGenics received an upfront license fee of $50,000,000 as part of a license and collaboration agreement with AstraZeneca, announced in December 2005, for the global development and commercialization of AGI-1067. In addition to the upfront license fee and subject to the achievement of specific milestones, including a successful outcome in ARISE, AtheroGenics will be eligible for development and regulatory milestones of up to an aggregate of $300,000,000. The agreement also provides

Management’s annual report on internal control over financial reporting. Section 404 of the Sarbanes-Oxley Act of 2002 requires management to include in this Annual Report on Form 10-K a report on management’s assessment of the effectiveness of our internal control over financial reporting, as well as an attestation report from our independent registered public accounting firm on management’s assessment of the effectiveness of our internal control over financial reporting. Management’s annual report on internal control over financial reporting and the related attestation report from our independent registered public accounting firm are located in Item 8 of this Form 10-K and are incorporated herein by reference.

Evaluation of disclosure controls and procedures. Our chief executive officer and chief financial officer are responsible for establishing and maintaining “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) for AtheroGenics. Our chief executive officer and chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report, have concluded that our disclosure controls and procedures are adequate and effective in timely alerting them to material information relating to us required to be included in our periodic SEC filings.

We have set forth information relating to the directors and executive officers and compliance with Section 16(a) of the Securities Exchange Act of 1934 under the captions “Nominees,” “Executive Officers and Directors,” “Board Meetings and Committees” and “Section 16(a) Beneficial Ownership Reporting Compliance,” respectively, in our proxy statement for our 2006 annual meeting of shareholders to be held on April 26, 2006. We are incorporating this information by reference in this Form 10-K. Our definitive proxy statement will be filed with the SEC no later than 120 days after December 31, 2005.

68 EX-10.34 2 g99853exv10w34.txt EX-10.34 COMMERCIAL SUPPLY AGREEMENT EXHIBIT 10.34 CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION COMMERCIAL SUPPLY AGREEMENT FOR PRODUCTION OF AGI-1067 AND PROBUCOL BETWEEN THE DOW CHEMICAL COMPANY AND ATHEROGENICS, INC. OCTOBER 6, 2005 TABLE OF CONTENTS

OCTOBER 6, 2005 Article 29 - Governing Law 30 Article 30 - Dispute Resolution 30 Article 31 - Arbitration 30 Article 32 - Rules of Construction 31 Article 33 - Use of Names and Public Announcements 31 Article 34 - Entire Agreement 32 Schedule 1 - Deliverables 33 Schedule 2 - AGI-1067 Specifications 34 Schedule 3 - Probucol USP Specifications 36 Schedule 4 - List of Compounds Referenced for Improvements 37

OCTOBER 6, 2005 COMMERCIAL SUPPLY AGREEMENT FOR PRODUCTION OF AGI-1067 AND PROBUCOL This Commercial Supply Agreement, effective on the Effective Date, is between DowPharma, a business unit of The Dow Chemical Company, a Delaware corporation with offices at 574 Building, Michigan Operations, Midland, MI 48674 ("DOW"), and Atherogenics, Inc., a Georgia corporation with offices at 8995 Westside Parkway, Alpharetta, GA 30004 ("AGIX"), each also singularly referred to as a "Party" and collectively referred to as the "Parties." In consideration of the mutual covenants set forth in this Agreement, Dow and AGIX agree as follows: ARTICLE 1 - DEFINITIONS "AFFILIATE" means, with respect to a Party, any corporation, company, partnership, joint venture and/or firm which controls, is controlled by or is under common control with such Party. As used in this Agreement, "control" means (a) in the case of corporate entities, direct or indirect ownership of greater than fifty percent (50%) of the stock or shares having the right to vote for the election of directors, and (b) in the case of non-corporate entities, the direct or indirect power to manage, direct or cause the direction of the management and policies of the non-corporate entity or the power to elect at least fifty percent (50%) of the members of the governing body of such non-corporate entity. Each Party acknowledges that the direct or indirect ownership of a lesser percentage of such shares will not necessarily preclude the existence of control. "AGI-1067" means [****]. "AGI-1067 PRICE" means the charge to AGIX for the contract manufacturing of AGI-1067 in United States dollars as shown in Article 7. "AGI-1067 PROCESS START-UP" means the process technology transfer to the Facility, [****] AGI-1067 Process Start-up shall be deemed completed once the first water batch demonstration of the AGI-1067 process is started. AGI-1067 Process Start-up shall be completed prior to the Process Validation Campaign. "AGI-1067 REQUIREMENTS" means the amount of AGI-1067 purchased by AGIX and the Marketing Partner world-wide during each Calendar Year. "AGI-1067 SPECIFICATIONS" means the written specifications established for the characteristics, quality and quality control testing procedures for AGI-1067, as developed and approved by AGIX and confirmed by Dow set forth in Schedule 2 as amended or supplemented from time to time in accordance with Section 4.4. "AGIX KNOW-HOW" means AGIX's proprietary business and technical information concerning AGI-1067 or Probucol and the processes used to Manufacture the AGI-1067 or Probucol, including, but not limited to, (a) business plans and AGI-1067 and Probucol forecasts; (b) AGI-1067, Probucol, raw material, packaging and equipment - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. Page 1 of 37 OCTOBER 6, 2005 specifications and samples; (c) process and manufacturing information consisting of descriptions, pertinent documents concerning methods, formulae and standards for the Manufacture of AGI-1067 or Probucol; (d) quality control information and data; (e) analytical procedures and data; (f) performance test data; and (g) all information that AGIX develops in the course of Manufacturing AGI-1067 or Probucol. "AGREEMENT" means this Commercial Supply Agreement, including the expressly referenced schedules, as amended from time to time by the Parties in accordance with Article 34. "AUTHORITY" AND "AUTHORITIES" means any government regulatory authority, including the FDA, that is responsible for granting approvals for (a) the Manufacturing of the AGI-1067 or Probucol by Dow, or (b) the manufacturing, marketing, sale and/or pricing of the Finished Drug Product by AGIX. "PRODUCTION YEAR" OR "PRODUCTION YEAR" means one year during this Agreement as it may apply to Minimum Requirements and Capacity Reserve Fees. In order to match the beginning of such Production Years with the anticipated timing of the NDA submission, each Production Year shall be defined as follows: 2006 - [****] 2007 - [****] 2008 - [****] 2009 - [****] 2010 - [****] 2011 - [****] 2012 - [****] The Production Year shall be defined as [****] during subsequent years during the Term of this Agreement. "CAPACITY RESERVE FEE" means the fee paid by AGIX to Dow if AGIX does not purchase the Minimum Requirements during a Production Year, as further defined in Section 6.1. "CERCLA" means the Federal Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. 6901 et seq., and the regulations promulgated thereunder, as may be amended from time to time. "CERTIFICATE OF ANALYSIS" AND "C OF A" mean a written document, signed by an authorized representative of Dow, listing the items tested, AGI-1067 Specifications or Probucol Specifications, testing methods and test results for a specific lot or batch of AGI-1067 or Probucol, as applicable. "CERTIFICATE OF COMPLIANCE" AND "C OF C" mean a written document, signed by an authorized representative of Dow, certifying that a specific lot or batch of AGI-1067 or Probucol was manufactured in accordance with cGMP, as applicable. - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. Page 2 of 37 OCTOBER 6, 2005 "CLAIM" or "CLAIM" means any legal or equitable causes of action (including but not limited to negligence; strict liability; other tort; express or implied warranty, indemnity or contract; contribution; or subrogation) related to or arising out of the performance or nonperformance of this Agreement. "CMC" means the chemistry, manufacturing and controls set forth in 21 C.F.R. 312 and 21 C.F.R. 314 or as otherwise required by applicable law for an Investigational New Drug Application (IND) and a New Drug Application (NDA), respectively all other foreign equivalents thereof, in each case as applicable to the relevant territory. "DELIVERABLES" means those items that Dow shall develop pursuant to this Agreement as are specifically set forth in Schedule 1 attached hereto (and incorporated herein by this reference). "DELIVERABLES FEE" means the compensation AGIX will pay to Dow for each Deliverable as specifically set forth in Schedule 1. "DOW KNOW-HOW" means Dow's proprietary business and technical information concerning Probucol and the processes used to Manufacture Probucol, including, but not limited to (a) Probucol production forecasts; (b) Probucol, raw material, packaging and Equipment specifications and samples; (c) process and Manufacturing information consisting of descriptions, pertinent documents concerning methods, formulae and standards for the Manufacture of Probucol; (d) quality control information and data; (e) analytical procedures and data related to the Manufacturing of Probucol; (f) performance test data related to the Manufacturing of Probucol; and (g) all information that Dow develops in the course of Manufacturing Probucol. Dow Know-how also includes Dow's proprietary fiber optic probe technology. "DMF" means a Drug Master File according to the usage of the FDA. For nations other than the United States, DMF means the corresponding filing with the appropriate Authority. "EPA" means the United States Environmental Protection Agency. "EFFECTIVE DATE" means the date of the last signature for initial approval of this Agreement. "EQUIPMENT" means any equipment or machinery at the Facility that is used by Dow in the Manufacturing, storage, quality control testing, or packaging of AGI-1067 or Probucol. "FACILITY" means Dow's manufacturing facility located in Midland, Michigan. "FDA" means the United States Food and Drug Administration. "FFDCA" means the Federal Food, Drug and Cosmetic Act, 21 U.S.C. Sections 301 et seq., and the regulations promulgateD thereunder, as may be amended from time to time. Page 3 of 37 OCTOBER 6, 2005 "FINISHED DRUG PRODUCT" means AGI-1067, in the final finished dosage form(s), fully manufactured, labeled and packaged for commercial sale and ready for administration to humans or animals for the prevention, treatment or diagnosis of a disease or condition. "FORCE MAJEURE EVENT" means any event beyond the reasonable control of the Party affected which prevents a Party from performing any obligation hereunder (other than the payment of money) by reason of unforeseen mechanical breakdown of facilities, fire, flood, strike, labor trouble, riot, revolt, war, drought, action of governmental Authority and laws, rules, ordinances and regulations (including, but not limited to, those dealing with pollution, health, ecology, or environmental matters), and acts of God. "GOOD MANUFACTURING PRACTICES" OR ("cgmp") means the current good manufacturing practices applicable to International Conference of Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH) Q7A "Good Manufacturing Practice Guidance for Active Pharmaceutical Ingredients" August 2001, as amended from time to time and current Good Manufacturing Practices for Active Pharmaceutical Ingredients defined in the FFDCA, and all other foreign equivalents thereof, in each case as applicable to the relevant territory. "IMPROVEMENTS" means methods, techniques, trade secrets, copyrights, know-how, data, regulatory submissions, and other intellectual property that is invented, discovered, or developed, on or after the Effective Date by Dow and employed in the Manufacture of AGI-1067. Technology that is invented, discovered, or developed, on or after the Effective Date by Dow and that is related to Dow Know-how shall not be considered an Improvement as defined herein. "IND" means an Investigational New Drug Application (as defined in 21 C.F.R. 312) filed with the FDA to commence human clinical testing of the Finished Drug Product or the corresponding application of any other Authority. "INITIAL TERM, RENEWAL TERM AND TERM" have the meanings set forth in Section 3.1. "LIABILITIES" has the meaning set forth in Section 15.1. "MANUFACTURE" or "MANUFACTURING" means all steps and activities necessary to produce a compound (e.g., Probucol, AGI-1067) including without limitation, the manufacturing, processing, packaging, labeling, holding, quality control testing and release of such compound in accordance with the terms and conditions hereof. "MARKETING PARTNER" means the company with whom AGIX enters into an agreement for purpose of marketing of the Finished Drug Product. Page 4 of 37 OCTOBER 6, 2005 "MINIMUM REQUIREMENT(S)" means the minimum amount of AGI-1067 or Probucol that is purchased by AGIX from Dow during a Production Year in order to satisfy the minimum purchase obligations under this Agreement, as further defined in Section 6.1. "NDA" means a New Drug Application (as defined in 21 C.F.R. 314) seeking regulatory approval to make, manufacture, use, market, and sell the Finished Drug Product in the United States for a particular indication or the corresponding application of any other governmental Authority or agency regulating prescription pharmaceuticals. "PATENT RIGHTS" means the rights and interests in issued patents and pending patent applications without limitation to any country, including, without limitation, all provisional applications, continuations, continuations-in-part, and divisionals, all letters patent granted thereon, and all re-issues, reexaminations and extensions thereof, and supplemental protection certificates relating thereto. "PRICE INDEX PROBUCOL" means the Producer Price Index for Medicinal and Botanical Chemicals (Series ID: WPU0631) as announced by the U.S. Department of Labor, Bureau of Labor Statistics. "PRICE INDEX AGI-1067" means an increase of [****] of the annual change in the PPI (WPU061403)). "PROBUCOL" means Probucol USP made under cGMP conditions. "PROBUCOL PRICE" means the charge to AGIX for the contract manufacturing of Probucol in United States dollars as shown in Article 7. "PROBUCOL SPECIFICATIONS" means the written specifications established for the characteristics, quality and quality control testing procedures for Probucol USP, as defined in Schedule 3 of this Agreement. "PROCESS VALIDATION CAMPAIGN" shall mean the batches of AGI-1067 from the initial AGI-1067 campaign at the Facility during which the process for commercial-scale manufacture of AGI-1067 (other than the probucol recovery and heptane recovery processes) shall be validated according to cGMP guidelines to produce AGI-1067 that meets AGI-1067 Specifications. "PROPRIETARY INFORMATION" means confidential information transferred in any form that is disclosed or developed pursuant to the terms of this Agreement. "QUALITY AGREEMENT" means the specific agreement between AGIX and Dow which provides the basis for responsibilities of AGIX and Dow related to the cGMP manufacture of AGI-1067 and Probucol. The Quality Agreement as amended from time to time is executed separately from this Agreement on or about the same date as this Agreement. This Quality Agreement provides an overall summary of responsibilities which are also discussed in Articles 2, 4, 10, 17 and 18. - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. Page 5 of 37 OCTOBER 6, 2005 "RCRA" means the Federal Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq., and the regulations promulgated thereunder, as may be amended from time to time. "TERMINATION FEE" means the fee paid by AGIX to Dow if AGIX chooses to terminate this Agreement early for the reasons stated in Article 20.3. "TECHNOLOGY" means all methods, techniques, trade secrets, copyrights, know-how, data, regulatory submissions, and other intellectual property of any kind owned by or licensed to AGIX relating to or necessary or useful for the Manufacture of AGI-1067. "TSCA" means the Toxic Substances Control Act, 15 U.S.C. 2601 et seq., and the regulations promulgated thereunder, as may be amended from time to time. "WASTE" means any hazardous substance and/or hazardous materials which is/are disposed or released in accordance with CERCLA; Waste which is handled in accordance with RCRA; and waste of any kind including, without limitation, routine process waste and by-products, which is/are not used, re-used or recycled. ARTICLE 2 - PURPOSE AND RESPONSIBILITIES 2.1 Dow agrees to Manufacture and sell AGI-1067 and Probucol to AGIX and AGIX agrees to purchase and receive AGI-1067 and Probucol from Dow, pursuant to the terms and conditions stated herein. 2.2 Dow's responsibilities are: (a) Procuring or making, unloading, handling and storing raw materials at the Facility; (b) Manufacturing AGI-1067 and Probucol; (c) Collecting and retaining for at least eight (8) years samples of the AGI-1067 and Probucol; (d) Handling and storing bulk AGI-1067 and Probucol under cGMP warehouse conditions reasonably specified by AGIX; (e) Packaging AGI-1067 and Probucol in accordance with AGI-1067 Specifications provided by AGIX and preparing AGI-1067 and Probucol for shipment; (f) Making AGI-1067 and Probucol available to a common carrier; (g) Providing information for labeling for Probucol and updating Probucol Material Safety Data Sheets; (h) Completing any and all required regulatory reports or filings and obtaining any and all approvals required by an Authority with respect to Probucol in all appropriate jurisdictions; (i) Keeping records and reporting to AGIX and applicable Authorities as may be required by law and this Agreement; and (j) Handling, storing, treating, and disposing of Wastes generated by Dow in connection with Dow's performance hereunder. Page 6 of 37 OCTOBER 6, 2005 2.3 AGIX's responsibilities are: (a) Transferring the necessary Technology, standards, AGI-1067 Specifications, analytical methods and samples to Dow in order for Dow to develop Deliverables and Manufacture AGI-1067 meeting the AGI-1067 Specifications. Any changes to AGI-1067 Specifications will be mutually agreed to by the Parties; (b) Providing information, such as supply requirement forecasts for AGI-1067 or Probucol, for supply and operations planning; (c) Providing information for labeling for AGI-1067 and updating of AGI-1067 Material Safety Data Sheets; (d) Completing any and all required regulatory reports or filings and obtaining any and all approvals required by an Authority with respect to the Finished Drug Product in all appropriate jurisdictions; (e) Providing retest period, storage and AGI-1067 stability parameters; (f) Storing delivered AGI-1067 and Probucol under reasonable conditions to maintain shelf life; and (g) Providing Dow with reasonable access to knowledgeable people to consult with Dow on the implementation of AGIX Know-how. Such consultations will be free of charge and will occur at mutually agreeable times and places. ARTICLE 3 - TERM 3.1 The "Initial Term" of this Agreement is from the Effective Date until October 1, 2012. This Agreement will automatically continue after the Initial Term for a period of five (5) years thereafter until October 1, 2017 (the "Renewal Term") unless one Party provides the other Party with written notice, on or before October 1, 2010, of the notifying Party's intention to let this Agreement expire at the end of the Initial Term. For purposes of this Agreement, the "Term" means, collectively, the Initial Term and the Renewal Term (if any), under this Agreement. 3.2 Either Party may, without cause, terminate this Agreement at the end of the Initial Term by giving written notice of termination at least two (2) years prior to October 1, 2012 or any anniversary thereof. 3.3 AGIX plans to submit an NDA for the Finished Drug Product in order to gain marketing approval from the FDA. AGIX shall make reasonable efforts to gain marketing approval for the Finished Drug Product from the FDA. If AGIX or the Marketing Partner does not receive marketing approval, then AGIX may terminate or renegotiate the terms of this Agreement, with the payment of a predefined Termination Fee as defined in Article 20.3. 3.4 The Parties recognize that AGI-1067 Requirements may be lower than expected. If AGI-1067 Requirements are below the Minimum Requirements of this Agreement for two consecutive years after FDA approval of AGI-1067, then AGIX and Dow shall renegotiate the terms of this Agreement. The Parties will negotiate in good faith alternatives within Dow for production of such AGI-1067 volumes that permit lower Minimum Requirements and/or Capacity Reserve Fees for AGI-1067 or Probucol. Page 7 of 37 OCTOBER 6, 2005 These alternatives may include a change in asset fit for AGI-1067 that would be more efficient at lower volumes. ARTICLE 4 - MANUFACTURE OF AGI-1067 AND PROBUCOL 4.1 Facility. Dow will conduct all Manufacturing of AGI-1067 and Probucol at the Facility, and will hold at the Facility all Equipment, packaging components (for bulk transport of AGI-1067 or Probucol) and other items used in the Manufacture of AGI-1067 and Probucol. 4.2 Equipment. Dow will supply and maintain, at Dow's expense, Equipment required for the purpose of Manufacturing the AGI-1067 and Probucol. 4.3 Changes in Manufacturing Process. Dow will follow standard Dow change control procedures that will require prior notification to and written approval by AGIX of any changes to AGI-1067 Specifications or Probucol Specifications, or major changes to Equipment, packaging or Manufacturing that could affect the quality of AGI-1067 or Probucol in any material respect. 4.4 Amendments of CMC, AGI-1067 Specifications or Probucol Specifications. Amendments to the CMC, AGI-1067 Specifications or Probucol Specifications may be made upon mutual written agreement of the Parties. If an amendment to the AGI-1067 Specifications or Probucol Specifications proposed by AGIX would entail significant additional expense for Dow, then the Parties will meet to discuss appropriate additional compensation to Dow. In addition, Dow may propose changes to the AGI-1067 Specifications or Probucol Specifications for AGIX's approval based on advances in Dow's production process and analytical techniques. 4.5 Cleaning. Dow is responsible for ensuring that adequate cleaning is carried out between campaigns of different products; for example, campaigns of AGI-1067, Probucol or another product. In support of this requirement, AGIX will provide information related to AGI-1067 toxicity to establish cleaning limits and the development of procedures for cleaning validation. 4.6 Packaging Components. Dow will purchase, at its own expense, packaging components and other items of any nature whatsoever that Dow may use in Manufacturing AGI-1067 and Probucol. All right, title and interest in and to such items, and in and to all work-in-process incorporating such items, will remain the sole property of Dow. Dow will ship AGI-1067 or Probucol to AGIX using packing specifications supplied to Dow by AGIX and agreed to by Dow. 4.7 AGI-1067 Labeling and MSDS. AGIX will provide the information for the labeling to be used on the AGI-1067 and on the packaging thereof at AGIX's expense. Dow will label AGI-1067 and ship AGI-1067 Material Safety Data Sheets as provided by AGIX and, as such, Dow does not warrant their accuracy or content. AGIX will update AGI-1067 labels and AGI-1067 Material Safety Data Sheets as necessary to comply with all applicable Authorities and promptly notify Dow of such changes. AGIX will be listed as Page 8 of 37 OCTOBER 6, 2005 the emergency contact on all AGI-1067 labels and AGI-1067 Material Safety Data Sheets. AGIX will satisfy all governmental requirements for registrations, permits, notices, reports, licenses, and supplier notifications and agrees to be the "responsible party" as that term is utilized in 29 CFR 1910.1200 (the Occupational Safety and Health Act Hazardous Communications Standard) with respect to manufacturing, packaging, labeling and AGI-1067 Specifications and use of AGI-1067 at AGIX's expense. 4.8 Probucol Labeling and MSDS. Dow will provide the information for the labeling to be used on the Probucol and on the packaging thereof at Dow's expense. Dow will label Probucol and ship Probucol Material Safety Data Sheets. Dow will update Probucol labels and Probucol Material Safety Data Sheets as necessary to comply with all Authority and promptly will notify AGIX of such changes. Dow will be listed as the emergency contact on all Probucol labels and Probucol Material Safety Data Sheets. Except as provided elsewhere in this Agreement, Dow will satisfy all governmental requirements for registrations, permits, notices, reports, licenses, and supplier notifications and agrees to be the "responsible party" as that term is utilized in 29 CFR 1910.1200 (the Occupational Safety and Health Act Hazardous Communications Standard) with respect to manufacturing, packaging, labeling and Probucol Specifications. Without limiting the forgoing, Dow will file with the FDA or foreign equivalent, in Dow's own name all DMFs or non-US equivalents required for Probucol. ARTICLE 5 - WARRANTY; TESTING; REJECTION AND SAMPLES 5.1 Warranty. Dow warrants and represents to AGIX that AGI-1067 and Probucol: (i) have been Manufactured in accordance with cGMP; (ii) will meet the AGI-1067 Specifications and Probucol Specifications at the time of delivery to the carrier at the Facility provided, however, that Dow will not be responsible for any failure of the AGI-1067 to meet the AGI-1067 Specifications that is due to the failure of raw material supplied by AGIX to meet the raw material's applicable specifications after passing Dow's normal testing for incoming materials; (iii) will not be adulterated or misbranded within the meaning of the FFDCA provided, however, that Dow will not be responsible for misbranding that is due to any labeling, instructions or package insert text provided to Dow by AGIX; and (iv) will be conveyed with good title and free of all lawful security interests, liens, or encumbrances. 5.2 Testing Requirements. Dow will be responsible for testing AGI-1067, Probucol and associated raw materials in accordance with mutually agreed upon test methods, as set forth in the AGI-1067 Specifications and Probucol Specifications. 5.3 Rejection of Delivered AGI-1067 or Probucol. (a) In the event that AGIX reasonably determines that any shipment of AGI-1067 or Probucol does not conform to any of the warranties set forth in Section 5.1, then AGIX will give Dow notice thereof (including a sample from such shipment) within sixty (60) days after receipt thereof. In such event, Dow will undertake appropriate testing of such sample and will notify AGIX whether it has confirmed such non-conformity within ten (10) days after receipt of such notice from AGIX. If Dow notifies Page 9 of 37 OCTOBER 6, 2005 AGIX that it has not confirmed such non-conformity, AGIX will submit the disputed shipment for testing to a mutually agreed upon independent testing laboratory of recognized standing in the industry. The findings of this laboratory will be binding on the Parties. The expenses of such laboratory testing will be borne by Dow if the testing confirms the non-conformity or by AGIX if the testing does not confirm the non-conformity. (b) If any AGI-1067 or Probucol delivered to AGIX pursuant to this Agreement does not conform to the warranty set forth in Section 5.1, Dow will reimburse or credit AGIX with the AGI-1067 Price plus AGIX's cost of the Probucol used to manufacture the AGI-1067 or Probucol Price paid on account of such AGI-1067 or Probucol as well as any transportation, repackaging and holding charges reasonably incurred by AGIX in connection with such non-conforming AGI-1067 or Probucol. At AGIX's election: (i) Dow will be relieved of any obligation to deliver any AGI-1067 or Probucol in replacement of such non-conforming AGI-1067 or Probucol, or (ii) Dow will replace the non-conforming AGI-1067 or Probucol with AGI-1067 or Probucol that conforms to the warranty set forth in Section 5.1 and Dow shall receive full payment with respect thereto. THE REMEDY IN THIS PARAGRAPH WILL BE AGIX'S EXCLUSIVE REMEDY THAT AGIX WILL HAVE HEREUNDER, OR AT LAW OR EQUITY, FOR BREACH OF DOW'S WARRANTIES UNDER SECTION 5.1. (c) Hidden Defect. If there is subsequently found to be a non-conformity in any shipment of AGI-1067 or Probucol or portion thereof which is attributable to Dow's sole negligence or willful misconduct, then any claim by AGIX related to a Hidden Defect may be deemed a rejection of delivery and shall be handled pursuant to Sections 5.3 (a) and (b) of this Agreement. To the extent possible, AGIX will obtain a sample for testing in order to establish non-conformity. If no sample can be obtained, AGIX shall detail in writing its reasons for believing such shipment is non-conforming. Either Party may submit such reasons to an independent third party agreeable to both Parties whose determination of conformity will be binding on both Parties. 5.4 Samples. Dow will retain a sample of each lot of AGI-1067 or Probucol tested for up to eight (8) years from the date of shipment; however, AGIX is responsible for retaining AGIX's own samples for FDA purposes. For each lot shipped, Dow will prepare a Certificate of Analysis setting forth the items tested, the AGI-1067 Specifications or Probucol Specifications and test results and forward the Certificates of Analysis to AGIX, or its designee, at the time the AGI-1067 or Probucol is shipped. ARTICLE 6 - QUANTITIES 6.1 Subject to and in compliance with the other terms and conditions of this Agreement including this Article 6, and provided that Dow obtains and maintains the capability to manufacture AGI-1067 and Probucol as required under Article 17 below, the parties agree as follows: (i) AGIX agrees that it shall purchase from Dow and Dow agrees that it shall sell to AGIX, AGI-1067 and Probucol as specified in Section 6.1(b) below during the Term of this Agreement; (ii) AGIX shall be entitled (but not obligated) to order and Dow shall be entitled (but not obligated) to supply additional amount(s) of Page 10 of 37 OCTOBER 6, 2005 AGI-1067 and Probucol during the Term of this Agreement; (iii) AGIX agrees that if AGIX purchases less than the Minimum Requirements of either AGI-1067 or Probucol during any Production Year, then AGIX shall pay a portion of the Capacity Reserve Fees as calculated in Section 6.1(c) below; and (iv) AGIX agrees that if AGIX does not purchase any AGI-1067 or Probucol during any Production Year, then AGIX shall pay the Capacity Reserve Fee for AGI-1067 as specified in Section 6.1(c) below during the Term of this Agreement. (a) Minimum Campaign Size - AGI-1067 and Probucol. The Parties have agreed that the minimum campaign size for AGI-1067 shall be [****] and the minimum campaign size for Probucol shall be [****]. However, on a one-time basis, Dow will complete a [****] AGI-1067 Process Validation Campaign for AGIX. The Minimum Campaign Size may be reduced upon mutual agreement of the Parties, for example, by Improvements or other changes in the process for Manufacturing AGI-1067 or Probucol. (b) Minimum Requirements - AGI-1067 and Probucol. The Parties have agreed on the following Minimum Requirements for AGI-1067 and Probucol for the following time periods during the Term of this Agreement: (i) for the time period consisting of Production Year 2006 only, the Minimum Requirements shall be [****] of AGI-1067, which obligation the parties acknowledge will be satisfied under the Process Validation Campaign as provided under Section 7.2 below; (ii) for the time period consisting of Production Year 2007 only, the Minimum Requirements shall be the larger of [****] of AGI-1067 or [****] of the AGI-1067 Requirements for such Production Year or [****] of Probucol; (iii) for the time period consisting of Production Year 2008 only, the Minimum Requirements shall be the larger of [****] of AGI-1067 or [****] of the AGI-1067 Requirements for such Production Year or [****] of Probucol; (iv) for the time period consisting of Production Year 2009 only, the Minimum Requirements shall be the larger of [****]of AGI-1067 or [****]of the AGI-1067 Requirements for such Production Year or [****]of Probucol; (v) for the time period consisting of Production Year 2010 only, the Minimum Requirements shall be the larger of [****] of AGI-1067 or [****] of the AGI-1067 Requirements for such Production Year or [****] of Probucol; (vi) for the time period consisting of Production Year 2011 only, the Minimum Requirements shall be the larger of [****] of AGI-1067 or [****] of the AGI-1067 Requirements for such Production Year or [****] of Probucol; and (vii) for the period of time consisting of Production Years 2012 through the remainder of the Agreement Term, the Minimum Requirements shall be the larger of [****] per year of AGI-1067 or [****] of the AGI-1067 Requirements for such Production Years, or [****] of Probucol. For the time period from 2008 through the remainder of the Agreement Term, if Dow's share of the AGI-1067 Requirements for such Production Year equals greater than [****], then AGIX shall be obligated to meet the Minimum Requirements for such Production Year solely by purchasing such amount of AGI-1067 based on Dow's share. For the time period from 2008 through the remainder of the Agreement Term, if Dow's share of the AGI-1067 Requirements for such Production Year equals less than [****], then AGIX shall have the option to meet the Minimum Requirements for such Production Year by purchasing either AGI-1067 or Probucol, however AGIX shall be obligated to purchase at least [****] AGI-1067 during any two (2) Production Year period starting in 2008 in order to meet the Minimum - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. Page 11 of 37 OCTOBER 6, 2005 Requirements. For each Production Year referenced above, Dow agrees to reserve its Facility for a time period appropriate to meet the applicable Minimum Requirements for AGI-1067 and Probucol. In the event that AGI-1067 is not approved in [****] as anticipated, the timing of the market share provision changes as it applies to the Minimum Requirements set above shall be modified. Dow's market share minimum shall remain at [****] of the AGI-1067 Requirements until one (1) year past AGI-1067 approval by the FDA. During the second (2nd) year after AGI-1067 approval by the FDA, Dow's market share minimum shall be lowered to [****] of the AGI-1067 Requirements. During the third (3rd) year after AGI-1067 approval by the FDA, Dow's market share minimum shall be lowered to [****]of the AGI-1067 Requirements. During the fourth (4th) year after AGI-1067 approval by the FDA, Dow's market share minimum shall be lowered to [****] of the AGI-1067 Requirements. During the fifth (5th) year after AGI-1067 approval by the FDA, Dow's market share minimum shall be lowered to [****] of the AGI-1067 Requirements for the remainder of the Agreement Term. (c) Capacity Reserve Fee - AGI-1067 and Probucol. The Parties have agreed on the following Capacity Reserve Fee for AGI-1067 and Probucol for the following time periods during the Term of this Agreement: (i) for the time period consisting of Production Year 2006 only, the Capacity Reserve Fee for AGI-1067 and Probucol shall be [****]; (ii) for the time period consisting of Production Year 2007 only, the Capacity Reserve Fee for AGI-1067 and Probucol shall be [****]; and (iii) for the period of time consisting of Production Years 2008 through the remainder of the Agreement Term, the Capacity Reserve Fee per year for AGI-1067 and Probucol shall be [****]. The Capacity Reserve Fee for AGI-1067 and Probucol will be considered satisfied if AGIX meets the Minimum Requirements listed above during such Production Years. The Capacity Reserve Fee for each Production Year shall be paid in [****] equal parts on a [****]basis during the Production Year, unless AGIX has committed orders according to the forecast as provided under section 6.2 below or has submitted a Purchase Order for quantities exceeding the Minimum Quantity for such year. This Capacity Reserve Fee shall be credited toward any purchase of AGI-1067 or Probucol during such Production Year. These calculations for the Capacity Reserve Fee are described in the following Examples: Example #1: [****] Example #2: [****] Formula: - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. Page 12 of 37 OCTOBER 6, 2005 A formula could be applied to explain the Capacity Reserve Fee payment. [****] [****] (d) AGI-1067 Requirements. For purposes of calculating the Minimum Requirements for AGI-1067 and Probucol for each Production Year, AGIX shall provide to Dow after each Production Year the total AGI-1067 Requirements for such Production Year. AGIX will allow Dow to audit production order records pertaining to AGI-1067 Requirements. 6.2 Forecasts and Orders. On a rolling quarterly basis, Dow and AGIX will establish eight (8) quarter written forecasts outlining AGIX's anticipated AGI-1067 and Probucol needs from Dow broken out by quarter. Such written forecasts for AGI-1067 and Probucol shall become a firm, committed order as follows: (a) AGIX will be required to purchase from Dow [****] of the forecasted amount(s) of AGI-1067 and Probucol set forth in the first (1st) and [****] in the second (2nd) quarter of each such forecast delivered hereunder. (b) AGIX will be required to purchase from Dow at least [****] of the forecasted amount(s) of the AGI-1067 and Probucol set forth in the third (3rd) and [****] in the fourth (4th) quarters of each such forecast delivered hereunder. (c) For successive and rolling forecasts delivered one quarter apart, the amount of positive or negative variance, if any, between the forecasted amount for the fifth (5th) quarter (becoming the fourth (4th) quarter), the fourth (4th) quarter (becoming the third (3rd) quarter), or the third (3rd) quarter (becoming the second (2nd) quarter) shall not in any case exceed [****], unless AGIX and Dow both agree in writing to accept a variance greater than [****]. Dow is not obligated to deliver quantities higher than [****] of AGI-1067 or [****] of Probucol during a calendar quarter, unless AGIX and Dow both agree in writing to fulfill such an order quantity. Such quantities may be increased by mutual agreement of the Parties. While purchase orders, invoices, or similar routine documents supplied by either Party may be used to implement or administer provisions of this Agreement, any provisions of these documents which add to, vary, modify or are at conflict with any of the provisions of this Agreement will be deemed deleted and will have no force or effect on either Party's rights or obligations under this Agreement. 6.3 Order Administration. The Parties recognize that detailed and continuing exchanges of information will be necessary in order to optimize the administration of this Agreement and Dow's supply of AGI-1067 and Probucol to AGIX, consistent with their respective rights and responsibilities under this Agreement. To that end, each Party will notify the other of the individual representative or representatives responsible for exchanging information and for resolving issues which arise affecting the Manufacture of AGI-1067 and Probucol by Dow for sale to AGIX. The designated representatives of AGIX and Dow will conduct a formal Sales and Operations Planning meeting ("S&OP") on a quarterly basis (or more often as required and agreed to by both Parties) to address volume and other issues that may arise under this Agreement, including allowing Dow the ability to efficiently meet AGIX's purchase needs. This S&OP process may be started upon execution of this Agreement if desired by both - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. Page 13 of 37 OCTOBER 6, 2005 Parties, but must be started upon FDA approval of the NDA for the Finished Drug Product. ARTICLE 7 - PRICE 7.1 AGIX will pay to Dow the Price for AGIX's purchase of AGI-1067 and Probucol that is set forth in this Article 7. AGIX will make all payments pursuant to this by check or wire transfer to a bank account designated in writing by Dow. All payments hereunder will be made in United States Dollars. 7.2 (a) AGI-1067 Process Validation Campaign. The AGI-1067 Process Validation Campaign will be run to successfully complete validation of the process to produce AGI-1067. This campaign will involve the production of [****] of AGI-1067 with overall production of approximately [****]of AGI-1067. (b) Deliverables from this AGI-1067 Process Validation Campaign are: [****]. (c) Pricing assumptions for this AGI-1067 Process Validation Campaign are: [****]. (d) The price for the completion of the AGI-1067 Process Validation Campaign is [****] for production of six (6) batches of AGI-1067. This price will be subdivided into three payments. First, upon executing this Agreement, AGIX shall pay Dow [****]. Second, when the AGI-1067 Process Start-up is completed, AGIX shall pay Dow [****]. Third, when the AGI-1067 Process Validation Campaign Deliverables are completed, AGIX shall pay Dow [****]. In the event of early termination pursuant to Section 20.3 herein occurring before completion of the Process Validation Campaign, the amount of either the second or third payments described in this section 7.2(d) shall be prorated for the portion of the work actually completed and such prorated amount shall be due and owing to Dow. 7.3 AGI-1067 Price (Base Case). For purposes of manufacture and supply of AGI-1067 under this Agreement (other than for purposes of the AGI-1067 Process Validation Campaign, which are governed by Section 7.2 above), the Parties agree that AGI-1067 Pricing assumptions for the base case are: [****] Dow shall provide reasons for the lower yield and possible steps to increase yield. Based on the listed assumptions under this Section 7.3, the Parties agree the AGI-1067 Price for AGI-1067 manufactured and supplied under this Agreement shall be as follows: AGI-1067 Pricing (Base Case) - ---------------------------- [****] 7.4 AGI-1067 Price (Recycle Case). For purposes of manufacture and supply of AGI-1067 under this Agreement (other than for purposes of the AGI-1067 Process Validation Campaign, which are governed by Section 7.2 above), the Parties agree that AGI-1067 Pricing assumptions for the recycle case are: [****] Dow has based the AGI-1067 Prices below on an assumed process for probucol recovery and recycle and - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. Page 14 of 37 OCTOBER 6, 2005 heptane recovery and recycle. If either of these processes needs to be changed during lab demonstration or scale-up work, then the AGI-1067 Prices below will be modified to reflect such changes. Based on the listed assumptions under this Section 7.4, the Parties agree the AGI-1067 Price or AGI-1067 manufactured and supplied under this Agreement shall be as follows: AGI-1067 Pricing (Recycle Case) - -------------------------------- ------------------------------------------- - -------------------------------- ------------------------------------------- - -------------------------------- ------------------------------------------- - -------------------------------- ------------------------------------------- [*-***]

7.5 Probucol Price. For purposes of manufacture and supply of Probucol under this Agreement, the Parties agree that Probucol Pricing assumptions are: [****]Based on the listed assumptions under this Section 7.5, the Parties agree the Probucol Price for Probucol manufactured and supplied under this Agreement shall be as follows: Probucol Pricing - -------------------------------- ------------------------------------------- - -------------------------------- ------------------------------------------- - -------------------------------- ------------------------------------------- - -------------------------------- ------------------------------------------- [****]

7.6 The parties further agree that pricing under Sections 7.2, 7.3, 7.4 and 7.5 above during the Term of this Agreement shall be adjusted on an [****]basis according to the changes (if any) in the Price Index Probucol from [****] of subsequent years and applied in [****]of the following year. For example, the annual price adjustment will be first applied in [****], based on the change (if any) in the Price Index Probucol from [****]. Likewise the AGI-1067 Price shall be adjusted annually according to the Price Index AGI-1067. For example, in the case of a year where the annual change in the PPI (WPU061403) is [****], Dow may [****], pursuant to the terms and conditions of this section 7.6, the AGI-1067 Price by [****]. 7.7 During the course of this Agreement, Dow will discuss with AGIX any additions of capital equipment to the Facility or process changes to the AGI-1067 or Probucol manufacturing process including addition of capital equipment, in order to increase capacity, improve AGI-1067 Price or Probucol Price (including Price Indices) or improve the quality of the AGI-1067 or Probucol. For each such proposed change, Dow will provide a proposal to AGIX outlining the anticipated capital and expense costs, the process validation costs, and the associated benefits from the capital equipment additions or process changes. AGIX may approve or reject such proposal. For accepted proposals involving capital equipment implementation, AGIX shall provide - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. Page 15 of 37 OCTOBER 6, 2005 Dow an upfront payment or a guarantee for a mutually agreed upon percentage of the capital implementation costs, with similar terms and conditions as described in this Agreement. 7.8 Warehousing. If requested by AGIX and upon mutual agreement of both parties, Dow will provide warehouse services for AGI-1067 or Probucol, such service to be provided at a price of [****] per pallet per month. This charge is based on floor space, so if pallets may be stacked, the charge would be based on the actual pallet floor space. Due to limited warehouse space, Dow will only reserve space for [****] of AGI-1067 or Probucol, assuming that [****]of AGI-1067 or Probucol can be stored within ten (10) "rows" of the Dow warehouse. On a periodic basis, Dow may be able to store quantities in excess of [****], but cannot reserve this space at this time. Storage charges shall begin (a) when Dow issues the Certificate of Analysis and an invoice for AGI-1067 or Probucol, such invoice to occur during the calendar quarter of AGIX's delivery date in the eight-quarter written forecast described in Section 6.2, even if Dow has Manufactured in advance of such delivery date, or (b) 60 days after Dow receives the Certificate of Analysis for Probucol not Manufactured by Dow. ARTICLE 8 - DELIVERY, TITLE, TRANSPORTATION 8.1 Title. Title to AGI-1067 or Probucol will transfer to AGIX upon delivery to the carrier at the Facility. Risk of loss passes simultaneously with the title. If Dow provides warehouse services for AGIX per Section 7.8, then title to AGI-1067 or Probucol will transfer to AGIX when storage charges begin pursuant to Section 7.8 herein. After transfer of title, during storage of AGI-1067 or Probucol at the Dow warehouse, AGIX shall bear risk of loss and be responsible for any purchase of inventory loss insurance, associated premiums and deductibles. 8.2 Transportation. All AGI-1067 and Probucol will be shipped in suitable containers as reasonably approved by AGIX. Dow will make transportation arrangements in line with the needs of AGIX. AGIX will absorb freight. Dow will prepay all freight and add the freight costs to the invoice. Emergency response for any emergencies or other incidents occurring during transit will be the responsibility of AGIX. 8.3 Export Licenses. In some instances it may be necessary to obtain an export or re-export license for AGI-1067 or Probucol. AGIX will be responsible for obtaining any necessary licenses at AGIX's expense. ARTICLE 9 - INVOICES AND PAYMENT 9.1 Invoices. AGIX will order AGI-1067 and Probucol and Dow will issue corresponding invoices at intervals consistent with the binding two (2) quarter portion of the rolling eight (8) quarter forecasts described in Section 6.5. AGI-1067 or Probucol payment will be due within thirty (30) days from the date of Dow's invoice which, in turn, will be issued upon AGI-1067 or Probucol shipment. AGI-1067 or Probucol will be delivered in increments of one (1) or more lots. - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. Page 16 of 37 OCTOBER 6, 2005 9.2 Interest. Any payments due Dow under this Agreement that are past due will bear interest calculated on a per annum basis from the due date to the date of actual payment at a fluctuating interest rate equal at all times to the prime rate of interest announced publicly from time to time by Citibank, N.A., plus two percent (2%), but in no case higher than the maximum rate permitted by applicable law. 9.3 Credit. If AGIX fails to pay any invoice on time, Dow may defer shipments, accelerate the due date on all amounts owed Dow, or require cash payments or other security. If Dow has commercially reasonable grounds to doubt AGIX's financial responsibility and AGIX fails to provide assurances or security satisfactory to Dow within three (3) business days of Dow's notice to AGIX of such doubt, then Dow may defer shipments, accelerate the due date on all amounts owed Dow, or require cash payments or other security. For purposes of the two immediately preceding sentences, payment by AGIX on a cash-with-order or cash-in-advance basis shall, so long as AGIX has no outstanding payment obligations to Dow, be deemed to constitute satisfactory security. AGIX agrees to pay all of Dow's collection costs including reasonable attorney fees. 9.4 Review. If Dow requires security from AGIX in advance of shipment at any time during the term of the Agreement, then Dow agrees to conduct a review of AGIX's financial condition in consultation with AGIX on at least a quarterly basis and will restore AGIX to normal payment terms as soon as Dow deems AGIX is financially responsible using commercially reasonable criteria. ARTICLE 10 - REGULATORY MATTERS: RECORDS 10.1 Compliance with Authority. Dow agrees to comply with all applicable Authorities in regard to Manufacturing the AGI-1067 or Probucol. 10.2 Regulatory Submissions. (a) By AGIX. AGIX will consult with Dow in the preparation and submission of, and will provide Dow with advance review / copies of, those portions of the CMC article of the IND or similar filings (NDA) to be made with Authorities that include or summarize information pertaining to the AGI-1067 or its intermediates such as Probucol, including the AGI-1067 Manufacturing process. AGIX will also consult with Dow in the preparation and submission of, and will provide Dow with advance review / copies of, answers to questions received from regulatory Authorities as the result of the review of AGIX's regulatory filings if those questions pertain to the Manufacturing processes operated by Dow under this Agreement. (b) By Dow. Dow shall submit a DMF for Probucol at no additional cost to AGIX. 10.3 Facility Inspections by AGIX. Subject to Facility safety and confidentiality limitations, Dow will permit representatives of AGIX to visit the Facility for the purpose Page 17 of 37 OCTOBER 6, 2005 of reviewing the Equipment, Manufacturing process, testing of the AGI-1067 and Probucol, batch and other internal records pertaining to the AGI-1067 and Probucol that are provided by Dow, and of conducting compliance audits associated with cGMP and other FDA regulations. Employees and other approved representatives of AGIX who enter onto Dow premises will comply with Dow's safety, security and confidentiality requirements. AGIX will give Dow reasonable notice of any proposed visit to the Facility and identify the individuals who will be in attendance. Dow is entitled to approve the individuals according to established Dow facility policies who will visit and AGIX may not designate contractors for such visits without Dow's prior permission, which permission shall not be unreasonably withheld. All visits will be during Dow's normal business hours on weekdays. Dow may inspect any documents, vehicles, or containers entering or leaving Dow's premises. Each employee and other approved representatives of AGIX who visit the Facility, or other Dow premises, will fully comply with the respective site's standard access requirements. 10.4 Facility Inspections by Government. During Dow's normal business hours on week days, Dow will allow governmental inspectors (such as inspectors from the FDA or EPA) acting pursuant to statutory authority to inspect the Facility in connection with the Manufacture of AGI-1067 and Probucol and to review required documentation, provided that such inspectors comply with Dow's safety, security and confidentiality requirements. All governmental inspectors of the Facility will be subject to the reasonable approval of Dow prior to the inspection. Dow will immediately notify AGIX of any governmental inspection of the Facility that is likely to negatively affect Manufacturing of AGI-1067 or Probucol. Dow will provide to AGIX a copy of any report and other written communications received from such governmental agency in connection with such visit or inspection, and any written communications received from any Authority or governmental agency relating to the AGI-1067 and Probucol, the associated Equipment or the associated Manufacturing processes, within ninety (90) business days after receipt thereof. 10.5 Complaints. AGIX and Dow will each maintain complaint files regarding the AGI-1067 and Probucol, including, without limitation, any AGI-1067 or Probucol quality complaints. Dow agrees to notify AGIX, to investigate and resolve such complaints and to take remedial action to avoid similar complaints in the future. 10.6 Regulatory Assistance. Dow agrees to provide to AGIX such information and assistance relating to the Manufacture of the AGI-1067 and Probucol as AGIX may reasonably require for purposes of applying for and maintaining all Authority registrations. In particular, following delivery of the AGI-1067, Dow will provide AGIX with a brief written report that describes the AGI-1067 Manufacturing process for potential use in the "Method of Manufacture" portion of a CMC registration. For Probucol, Dow will describe the Probucol Manufacturing process in a DMF that will be submitted by Dow to the FDA. 10.7 Debarment. Dow represents and warrants that: (a) as of the Effective Date, Dow has not been debarred and, to the best of Dow's knowledge, is not subject to a pending debarment; and (b) that Dow will not use in any material capacity, in connection with the Page 18 of 37 OCTOBER 6, 2005 Manufacture of AGI-1067 or Probucol under this Agreement, any person who has been debarred pursuant to section 306 of the FFDCA, 21 U.S.C. Section 335a, or who is the subject of a conviction described in such section. 10.8 Communications from Authorities. AGIX will promptly provide Dow with copies of all communications received by any governmental regulatory Authority that would require Dow's participation or impact Dow's performance under this Agreement including the Manufacture, analysis, testing and/or storage of AGI-1067 or Probucol and/or the operation of the Facility or any Equipment used in connection with any of the foregoing. AGIX will consult with Dow with respect to AGIX's regulatory filings related to this Agreement including, without limitation, the preparation and submission of CMC sections of the NDA (IND) and other sections of other filings with regulatory Authorities in countries in which AGIX may be seeking regulatory approval that includes or summarizes information pertaining to the Manufacturing process operated by Dow under this Agreement. AGIX will also consult with Dow in the preparation of answers to questions received from regulatory Authorities that result from the review of AGIX's regulatory filings if those questions pertain to the Manufacturing process. ARTICLE 11 - DISCLAIMER OF WARRANTIES THE LIMITED WARRANTIES CONTAINED IN ARTICLE 5.1 OF THIS AGREEMENT ARE DOW'S SOLE WARRANTIES WITH RESPECT TO AGI-1067 OR PROBUCOL AND ARE MADE EXPRESSLY IN LIEU OF AND EXCLUDE ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND ALL OTHER EXPRESS OR IMPLIED REPRESENTATIONS AND WARRANTIES PROVIDED BY COMMON LAW OR STATUTE. ARTICLE 12 - NOTICE OF CLAIMS ALL CLAIMS BY AGIX SHALL BE DEEMED WAIVED UNLESS MADE BY AGIX IN WRITING AND RECEIVED BY DOW WITHIN ONE YEAR OF THE RECEIPT OF AGI-1067 OR PROBUCOL PROVIDED, HOWEVER, THAT FOR ANY CLAIM WHICH IS NOT READILY DISCOVERABLE WITHIN SUCH ONE YEAR PERIOD SUCH CLAIM SHALL BE DEEMED WAIVED UNLESS MADE BY AGIX IN WRITING AND RECEIVED BY DOW WITHIN THREE YEARS AFTER RECEIPT OF THE AGI-1067 OR PROBUCOL AFTER WHICH TIME ALL CLAIMS BY AGIX SHALL BE DEEMED TO BE WAIVED. ARTICLE 13 - LIMITATION OF REMEDIES AND LIABILITY 13.1 EXCLUSIVE REMEDY. EXCEPT AS EXPRESSLY PROVIDED IN SECTIONS 5.3 and 15.1, AGIX'S EXCLUSIVE REMEDY AND DOW'S TOTAL LIABILITY TO AGIX FOR CLAIMS IS EXPRESSLY LIMITED TO THE REMEDY AS SET FORTH IN SECTION 5.3(b). AGIX WAIVES ALL OTHER CLAIMS BY AGIX AGAINST DOW. Page 19 of 37 OCTOBER 6, 2005 13.2 LIABILITY LIMITATION. IN NO EVENT SHALL EITHER PARTY be liabLE to THE OTHER PARTY for any incidental, consequential, special, AND EXEMPLARY or punitive damages EVEN IF ANY SUCH DAMAGES WERE FORESEEABLE. ARTICLE 14 - INTELLECTUAL PROPERTY 14.1 Know-how. Dow owns Dow Know-how and AGIX owns AGIX Know-how. AGIX will provide Dow with AGIX Know-how concerning the Manufacture, testing and packaging of the AGI-1067. It is understood that no Dow proprietary know-how will be used in the Manufacture, testing or packaging of the AGI-1067 14.2 Improvements. Improvements, regardless of inventorship or authorship, shall be the wholly-owned property of AGIX. Dow will, upon request of AGIX, promptly execute any and all applications, assignment or other instruments which AGIX shall deem necessary or useful in order to apply for and obtain patent protection worldwide for said Improvements. AGIX will bear the costs of preparation and filing of all said patent applications which AGIX elects to file. AGIX shall grant DOW a non-exclusive, royalty-free license to use such Improvements for manufacturing uses outside of the scope of manufacturing any compound referenced in Schedule 4. 14.3 Enforcement and Defense of Patent Rights. If, during the Term of this Agreement, Dow learns of any infringement or threatened infringement by a third-party of the patents comprising Patent Rights, Dow will promptly notify AGIX and will provide AGIX with any available evidence of such infringement. 14.4 AGIX Warranties. AGIX warrants that AGIX has no knowledge of any third-party intellectual property rights which would preclude the Manufacturing of AGI-1067 as contemplated herein. AGIX assumes all responsibility for use of any design, trademark, trade name, copyright or part thereof, appearing on AGI-1067. Should Dow receive credible notice, including, but not limited to a notice of infringement that would preclude the Manufacturing of AGI-1067, it has the right to suspend Manufacture of the AGI-1067 with 90 days written notification to AGIX of its intent to so suspend Manufacture of the AGI-1067, unless AGIX provides written assurance of indemnification. ARTICLE 15 - INDEMNITY 15.1 Dow's Indemnification of AGIX. Excluding matters covered under Section 15.4, Dow will indemnify and hold AGIX harmless from and against any and all liabilities, Claims, demands, damages, costs, citations from regulatory agencies, expenses or money judgments (including attorneys' fees) (collectively "Liabilities") incurred by, or rendered against, AGIX for property damage, damage to the environment or natural resources, bodily injury, sickness, disease, death of persons directly arising out of: (a) any damage to the environment or damage to natural resources at the Facility or a facility/location chosen by Dow specifically with regard to the disposal of Wastes generated by Dow in connection with Dow's performance of this Agreement, (b) failure to manufacture AGI-1067 or Probucol in conformity with the Specifications or in compliance with laws and regulations but only to the extent such failure arises solely from Dow's gross negligence or willful misconduct, and (c) any breach of this Page 20 of 37 OCTOBER 6, 2005 Agreement by Dow other than those covered by the remedies stated in Article 5.3, provided in each case (a), (b) and (c), however, that AGIX will give Dow notice in writing as soon as practicable of any such Liabilities and will permit Dow to undertake the defense thereof at Dow's expense. For purposes of Sections 15.1 and 15.4, "Liabilities includes assertions involving alleged violations of federal, state and local laws, regulations and ordinances including CERCLA, TSCA and RCRA, or comparable and applicable state statutes. Dow has no obligation to indemnify AGIX (including under common law) except as specifically set forth in this Section 15.1. 15.2 AGIX's Cooperation. AGIX will cooperate in the defense of any Liabilities Dow undertakes pursuant to Section 15.1 by providing access to witnesses and evidence, including documents, available to AGIX. AGIX will have the right to participate in the defense of any such Liabilities to the extent that, in its judgment, AGIX may be prejudiced thereby. 15.3 Dow consent for Settlement. In regard to any such Liabilities in which AGIX seeks indemnification by Dow, AGIX will not settle, offer to settle or admit liability or damages without Dow's express written consent. 15.4 AGIX's Indemnification of Dow. Excluding matters under Section 15.1, AGIX will indemnify and hold Dow harmless from and against any and all Liabilities incurred by or rendered against Dow for property damage, damage to the environment or natural resources, bodily injury, sickness, disease, death of persons, or any other damages which arise out of or in connection with the following: (a) after delivery of AGI-1067 or Probucol by Dow to AGIX (or AGIX's designee), the handling, storage, design, manufacture, testing, transportation, promotion, distribution, sale, use, treatment or disposal of the AGI-1067, Probucol or Finished Drug Product, unless soley caused by Dow's negligence or willful misconduct; or (b) AGIX visits to the Facility except to the extent caused by Dow's negligence or willful misconduct; or (c) alleged design, trademark, trade name or copyright infringement resulting from the use of any design, trademark, trade name, copyright or part thereof, or labeling appearing on the AGI-1067 or Probucol at AGIX's request; or (d) patent or copyright infringement for the Manufacture (including the process or Equipment used by Dow to produce AGI-1067), sale or use of any AGI-1067 made for AGIX pursuant to this Agreement. Dow will give AGIX notice in writing as soon as practicable of any such Claim or lawsuit and will permit AGIX to undertake the defense thereof at AGIX's expense. 15.5 Dow's Cooperation. Dow will cooperate in the defense of any such Liabilities that AGIX undertakes pursuant to Section 15.4 by providing access to witnesses and evidence available to Dow. Dow will have the right to participate in the defense of any such Liabilities to the extent that, in its judgment, Dow may be prejudiced thereby. 15.6 AGIX consent for Settlement. In regard to any such Liabilities in which Dow seeks indemnification by AGIX, Dow will not settle, offer to settle or admit liability or damages without AGIX's express written consent. ARTICLE 16 - INSURANCE Page 21 of 37 OCTOBER 6, 2005 16.1 CGL Coverage. At all times while the Agreement is in effect, AGIX will procure and maintain, at its own expense and for its own benefit, Comprehensive/Commercial General Liability Insurance (including contractual liability, products liability, and completed operations) with a bodily injury, death, and property damage combined single limit of $10,000,000 per occurrence. The scope of the coverage to be provided is to be similar to standard ISO forms (e.g., 1998 Commercial General Liability ISO form # CG 00 01 01 98 or CG 00 02 01 98). If the insurance to be provided is in a form similar to ISO policy form CG 00 02 01 98 (claims made form), then the policy shall contain an extended reporting period of at least five (5) years; any Retroactive Date under said policy shall be no later than the Effective Date of this Agreement. 16.2 Certificate of Insurance. AGIX will furnish Dow a certificate(s) from an insurance carrier (having a minimum AM Best rating of A) showing all insurance set forth above. The certificate(s) will include the following statement: "The insurance certified hereunder is applicable to all contracts between The Dow Chemical Company and the Insured. This insurance may be canceled or altered by AGIX only after ten (10) days' written notice to Dow." The insurance, and the certificate(s), will (a) name Dow (including Dow's officers, directors, employees, affiliates, agents, successors, and assigns) as additional insureds with respect to matters arising from this Agreement; (b) provide that such insurance is primary to any liability insurance carried by Dow; and (c) provide that underwriters and insurance companies of AGIX may not have any right of subrogation against Dow (including Dow's officers, directors, employees, affiliates, agents, successors, and assigns). The insurance will contain no more than an ordinary deductible. ARTICLE 17 - DOW FACILITY 17.1 Compliance with Authority. In Dow's performance of its obligations under this Agreement, Dow retains the obligations to maintain the Equipment and Facility in a manner that complies with all applicable federal, state and local laws and regulations which are in effect at the time, including CERCLA, RCRA, TSCA, and the FFDCA. Dow retains the sole right and authority to make all decisions with respect to the construction, maintenance and operation of Dow's Facility. Without limiting Dow's obligations, AGIX acknowledges that it may have certain independent obligations in order for AGIX to be in compliance with an Authority applicable to AGIX. 17.2 FDA Registration. The Facility is registered with the FDA pursuant to Section 510 of FFDCA. Dow will keep and maintain records as required by Dow's customary operating guidelines and all applicable Authority including the FFDCA, TSCA, CERCLA and RCRA. Dow retains exclusive ownership and responsibility of all Facility materials, reports and records. ARTICLE 18 - PRODUCT STEWARDSHIP 18.1 AGIX Obligations. AGIX acknowledges that it has requested Dow to contract manufacture AGI-1067 and Probucol for AGIX pursuant to AGI-1067 Specifications provided to Dow by AGIX and to Probucol Specifications. AGIX represents that it has Page 22 of 37 OCTOBER 6, 2005 used its own independent skill and expertise in connection with the design, selection and use of the AGI-1067, Probucol and Finished Drug Product. AGIX or its Marketing Partner is responsible for providing emergency assistance for the Finished Drug Product. AGIX: (a) will be responsible to provide AGI-1067 Material Safety Data Sheets and labels, (b) will follow safe handling, use, selling, storage, packaging, transportation, treatment and disposal practices (including special practices as AGIX's use of the AGI-1067, Probucol and Finished Drug Product require) and instruct its employees, contractors (including Dow), agents and customers in these practices (including the information contained in the most current AGI-1067 Material Safety Data Sheet or Probucol Material Safety Data Sheet), (c) will take appropriate action to avoid spills or other dangers to persons, property or the environment, and (d) understands and will comply (and has complied) with all applicable Authorities including governmental statutes, rules, regulations and ordinances promulgated by the EPA with particular attention to initial and periodic reports and filings required of a manufacturer under Articles 4, 5, 8, 12, and 13 of TSCA. Dow will assist AGIX in the completion of these reports and filings. 18.2 AGIX Disclosure Requirements. AGIX will file any Adverse Drug Experience Reports (ADERs) required under 21 CFR 314.80. AGIX shall notify Dow within 2 days of receipt of all ADERs which may require an FDA Field Alert Report as specified under 21 CFR 314.81. For the avoidance of doubt, AGIX is solely responsible for assessing the safety of Finished Drug Product and the potential need for any and all warnings to any and all consumers of the Finished Drug Product; Dow undertakes no duty whatsoever with respect to any and all consumers of the Finished Drug Product. 18.3 Dow Disclosure Requirements. Dow will report to AGIX, in writing and as promptly as practicable, any citations or complaints it receives concerning the AGI-1067 or Probucol, including any regulatory citations and complaints. AGIX will be responsible for handling such complaints, and Dow will cooperate to the extent reasonably requested by AGIX. ARTICLE 19 - FORCE MAJEURE 19.1 Excused Performance. The performance of the Party impacted by a Force Majeure Event, other than for payment for AGI-1067 or Probucol already delivered, under this Agreement is delayed, without liability, for the duration of a Force Majeure Event. 19.2 Notification. The Party whose performance is affected by a Force Majeure Event will give prompt written notice to the other Party stating the details and expected duration of the event. Once notice is given of a Force Majeure Event, the Parties will keep each other apprised of the situation until the Force Majeure Event terminates or this Agreement is terminated, whichever occurs first. Each Party has full management discretion in dealing with its own labor issues, and in determining how and when to perform obligations (other than payment for work already performed) under this Agreement when the other Party is involved in a strike, work stoppage or slowdown condition. Subject to the foregoing, the Party whose performance is affected by a Force Majeure Event shall take reasonable steps to remedy the Force Page 23 of 37 OCTOBER 6, 2005 Majeure Event with all reasonable dispatch. A Party not affected by a Force Majeure Event is entitled (without prejudice to its other rights and remedies under this Agreement or at law or in equity) to terminate this Agreement by written notice to the Party affected by the Force Majeure Event if a Force Majeure Event lasts for more than sixty (60) days. 19.3 Allocation. Dow will give prompt written notice to AGIX stating the details and expected duration of any Allocation. Dow may, during any period of shortage of any supplies, parts, raw materials, energy, utilities, Waste disposal capacity or capability, or labor that impacts the Manufacture of AGI-1067 or Probucol due to a Force Majeure Event, in Dow's discretion allocate its supply of such supplies, parts, raw materials, energy, utilities, Waste disposal capacity or capability, or labor among the various uses therefore in any manner that Dow believes is fair and reasonable. Dow will have no obligation to obtain supplies, parts, raw materials, energy, utilities, Waste disposal capacity or capability, labor or AGI-1067 or Probucol from a third party in order to supply Dow's excused contractual shortfall. Any supplies, parts, raw materials, energy, or utilities obtained by Dow from a third party solely for Dow's internal use are not subject to allocation. If Dow fails to supply AGI-1067 or Probucol pursuant to the terms of this Agreement or fails to Manufacture in compliance with cGMP, AGIX shall have the right to Manufacture or have Manufactured by a third party supplier up to 100% of the AGI-1067 or Probucol until Dow is again capable to supply AGI-1067 or Probucol that was forecast or ordered by AGIX pursuant to this Agreement. As used herein, failure to supply means the situation where Dow is one (1) month or more delayed on supplying the full amount of an order placed by AGIX hereunder. ARTICLE 20 - EARLY TERMINATION 20.1 For Breach. Either Party is entitled (without prejudice to its other rights and remedies under this Agreement) to terminate this Agreement upon: (a) written notice at any time if the other Party breaches a material obligation under this Agreement and such breach has not been remedied within sixty (60) days after the non-breaching Party provides written notice of such breach to the breaching Party; or (b) written notice by the Party not affected by a Force Majeure Event to the Party affected by the Force Majeure Event if a Force Majeure Event lasts for more than sixty (60) days; or (c) written notice in the event the other Party (i) voluntarily or involuntarily enters a bankruptcy or similar proceeding, or (ii) passes a resolution for winding up its business or a court of competent jurisdiction makes an order to that effect (otherwise than for the purpose of amalgamation or reconstruction), or (iii) a receiver is appointed in respect of substantially all of its assets. 20.2 Winding up of Obligations. Termination or expiration of this Agreement for any reason shall be without prejudice to any rights which shall have accrued to the benefit of either Party prior to such termination or expiration, and shall not relieve either Party from any of its obligations (including payment obligations) which shall have accrued prior to such termination or expiration. Upon termination AGIX will reimburse Dow for any reasonable uncancelable obligations incurred hereunder and for any AGI-1067 or Probucol manufactured by Dow hereunder prior to Dow giving or receiving notice of Page 24 of 37 OCTOBER 6, 2005 termination. Termination or expiration of this Agreement for any reason shall also be without prejudice to any rights or obligations which are expressly indicated to survive such expiration or termination, including, without limitation, those under Articles 9, 11, 12, 13, 15, 20, 23, 30 and 31 hereof. 20.3 Due to Finished Drug Product NDA Not Approved by the FDA. In the event that (a) the ARISE clinical trial for AGI-1067 is terminated for safety reasons; (b) AGIX decides that regulatory approval for AGI-1067 is unlikely and AGIX decides to withdraw AGI-1067 from clinical trials or does not submit an NDA for AGI-1067; or (c) the FDA does not approve the AGI-1067 NDA and AGIX does not pursue AGI-1067 commercialization, then AGIX may terminate or renegotiate the terms of this Agreement, with the payment by AGIX of a Termination Fee for AGI-1067 and Probucol. However, if AGIX receives an approvable letter from the FDA, but the actual approval is delayed, then the Agreement Term will be extended by the duration of the delay between the FDA approvable letter and actual FDA approval. If such termination occurs after validation of the AGI-1067 process, then the Termination Fee shall be [****]. For purposes of this Section 20.3 validation of the AGI-1067 process shall mean that AGIX has signed a validation report signifying that the Manufacturing process for AGI-1067 and equipment has been validated. If such termination occurs during or after the validation of the Probucol process, then the Termination Fee shall be [****]. For purposes of this Section 20.3 validation of the Probucol process shall mean that Dow has provided AGIX a signed validation report signifying that the Manufacturing process for Probucol and equipment has been validated. If termination occurs while Dow is making equipment modifications to its Facility in preparation for validating the AGI-1067 or Probucol processes, then Dow will make best efforts to reduce this Termination Fee by stopping the capital planning and equipment procurement and installation. At that time, AGIX shall be responsible for all capital costs incurred by Dow to the point of termination, including additional costs that Dow is unable to cancel, not to exceed the Termination Fees listed above. These Termination Fee obligations related to capital costs shall be removed once AGIX purchases [****] total of AGI-1067, or [****] total of Probucol, respectively, under this Agreement. In addition, these Termination Fee obligations shall be prorated as AGIX purchases the first [****] of AGI-1067 or the first [****] of Probucol. ARTICLE 21 - ASSIGNMENT This Agreement is not assignable or transferable by either Party unless to an affiliate which controls that Party without the prior written consent of the other Party which shall not be unreasonably withheld. Any attempted assignment or delegation in violation of the preceding sentence will be void. All validly assigned and delegated rights and obligations of the Parties hereunder will be binding upon and inure to the benefit of and be enforceable by and against the successors and permitted assigns of AGIX or Dow, as the case may be. - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. Page 25 of 37 OCTOBER 6, 2005 ARTICLE 22 - NOTICES Any notice to be given under this Agreement will be in writing and will be deemed given when received and may be sent by mail, email, express courier or facsimile to: If to AGIX: Attn: General Counsel AtheroGenics, Inc. 8995 Westside Parkway Alpharetta, GA 30004 Fax: (678) 336-2503 If to Dow: Attn: Legal Department The Dow Chemical Company 100 Larkin Center Midland, MI 48674 Fax: (989) 638-9783 Either Party may change its location or facsimile number to receive notices upon ten (10) days prior written notice. ARTICLE 23 - CONFIDENTIALITY OF INFORMATION 23.1 Each Party will use reasonable efforts to retain the other Party's Proprietary Information in confidence and not disclose the same to any third party nor use the same, except as expressly permitted. Excepted from these obligations of confidence and non use is that information which: (a) is available, or becomes available, to the general public without fault of the receiving Party; (b) was in the possession of the receiving Party on a non-confidential basis prior to receipt of the same from the disclosing Party; (c) is obtained by the receiving Party without an obligation of confidence from a third party who is rightfully in possession of such information and is under no obligation of confidentiality to the disclosing Party; (d) the receiving Party is legally required to disclose; or (e) is independently developed by the receiving Party. For the purpose of this Section 23.1, a specific item of Proprietary Information will not be deemed to be within the foregoing exceptions merely because it is embraced by more general information in the public domain or in the possession of the receiving Party. In addition, any combination of features will not be deemed to be within the foregoing exceptions merely because individual features are in the public domain or in Page 26 of 37 OCTOBER 6, 2005 the possession of the receiving Party, but only if the combination itself and its principle of operation are in the public domain or in the possession of the receiving Party. 23.2 Notwithstanding the provisions of Section 23.1(d), if the receiving Party becomes legally compelled to disclose any of the disclosing Party's Proprietary Information, the receiving Party will promptly advise the disclosing Party of such Proprietary Information in order that the disclosing Party may seek a protective order or such other remedy as the disclosing Party may consider appropriate in the circumstances. The receiving Party will disclose only that portion of the disclosing Party's Proprietary Information, which it is legally required to disclose. 23.3 Upon written request at termination by the disclosing Party, all Proprietary Information in whatever form will be returned to the disclosing Party upon termination of this Agreement, without retaining copies thereof except that one copy of all such Proprietary Information may be retained by the other Party's legal department solely for the purpose of policing this Agreement. 23.4 Notwithstanding the above in this Article 23, Dow will have a right, with AGIX's written permission to disclose AGIX's Proprietary Information to third parties to the extent reasonably necessary for Dow to accomplish its responsibilities contemplated hereunder; provided, however, that such disclosure to third parties will be made under confidentiality terms and conditions deemed by AGIX to be reasonable. 24.5 The obligation of confidentiality under this Article 23 survives for five (5) years following the termination of this Agreement. ARTICLE 24 - EXPORT CONTROL OF TECHNICAL DATA The Parties acknowledge their obligations to adhere to the United States export laws and regulations, such as Export Administration Regulations, International Traffic in Arms Regulations and regulations promulgated by the Office of Foreign Assets Control and the Parties agree to adhere to such laws and regulations. ARTICLE 25 - TAXES AGIX will pay to Dow (a) any applicable sales, use, gross receipts, or value-added tax that is imposed as a result of, or measured by, the sales, and (b) the amount of any and all other governmental taxes, duties and/or charges of every kind, excluding any income tax imposed upon Dow, that is hereafter imposed or increased, and which Dow may be required to pay with respect to the Manufacture, sale or transportation of AGI-1067 or Probucol, with respect to any material used in the Manufacture thereof. ARTICLE 26 - INDEPENDENT CONTRACTOR Dow is an independent contractor, with all the attendant rights and liabilities of an independent contractor, and not an agent or employee of AGIX. Any provision in this Agreement, or any action by AGIX, which may appear to give AGIX the right to direct or Page 27 of 37 OCTOBER 6, 2005 control Dow in performing under this Agreement means Dow will follow the desires of AGIX in results only. ARTICLE 27 - SEVERABILITY If any provision of this Agreement or the application thereof to any person or circumstance will, for any reason, and to any extent, be held to be invalid or unenforceable under applicable law, such provision will be deemed limited or modified to the extent necessary to make the same valid and enforceable under applicable law. Any invalid or unenforceable provision will be replaced with such new provision that will allow the Parties to achieve the intended economic result in a legally valid and effective manner. ARTICLE 28 - NON-WAIVER OF DEFAULTS Any failure by either Party at any time to enforce or require strict keeping and performance of any of the terms or conditions of this Agreement will not constitute a waiver of such terms or conditions and will not affect or impair such terms or conditions in any way, or the right of either Party at any time to avail itself of such remedies as it may have for any breach or breaches of such terms or conditions. ARTICLE 29 - GOVERNING LAW The interpretation, validity and performance of this Agreement will be governed by Michigan law, including Michigan's adaptation of the Uniform Commercial Code, without regard to Michigan's conflict of law rules. ARTICLE 30 - DISPUTE RESOLUTION In the event of any controversy or claim arising out of, relating to or in connection with any provision of, this Agreement, the Parties will try to settle their differences amicably and in good faith between themselves first, by referring the disputed matter to the President of AGIX and the Vice President or Global Business Director of DowPharma for Dow or their respective assignees. In the event such executives are unable to resolve such dispute within a thirty (30) day period, either Party may invoke the arbitration provisions of Article 31. ARTICLE 31 - ARBITRATION Any unresolved disputes arising between the Parties arising out of, relating to, in connection with or in any way connected with this Agreement or any term or conditions hereof, or performance by either Party of its obligations hereunder, whether before or after termination or expiration of this Agreement, will be finally resolved by binding arbitration, except that any dispute regarding the validity, scope or enforceability of Patent Rights will be submitted to a court of competent jurisdiction. The Parties will attempt to agree on a single mutually acceptable arbitrator to determine the issues in dispute. If the Parties are unable to agree on a single arbitrator, each Party will select one arbitrator and the two arbitrators selected by the Parties will select a third arbitrator. Page 28 of 37 OCTOBER 6, 2005 The three arbitrators so selected will constitute a board and will determine the issue in accordance with the rules of conciliation and arbitration of the American Arbitration Association. All arbitrators will have significant experience in the pharmaceutical or biotechnology industry. The arbitration will be conducted in English and will take place in Chicago, Illinois, and will be governed by the substantive laws of the State of Michigan applicable to contracts made and to be performed in that state, without regard to conflicts of law rules. Judgment upon the award rendered by the arbitrator(s) may be entered by any court having jurisdiction thereof. All fees, costs and expenses of the arbitrator(s), and all other costs and expenses of the arbitration, will be allocated in proportion to fault as determined by the tribunal such that the Party determined to be at fault will also bear the other Party's arbitration costs and expenses in proportion to such fault. Notwithstanding the foregoing, either Party may, on good cause shown, seek a temporary restraining order and/or a preliminary injunction from a court of competent jurisdiction, to be effective pending the institution of the arbitration process and the deliberation and award of the arbitration tribunal. ARTICLE 32 - RULES OF CONSTRUCTION The headings used in this Agreement are for the convenience of the reader and are not intended to have any substantive meaning. Unless the context of this Agreement otherwise clearly requires, (a) references to the plural include the singular, (b) references to the singular include the plural, (c) the terms "including" and "includes" are not limiting and have the inclusive meaning represented by the phrase "including without limitation", (d) the term "or" has the inclusive meaning represented by the phrase "and/or", (e) the terms "hereof", "herein", "hereunder", "hereto" and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement, (f) the terms "day" and "days" mean and refer to calendar day(s) and (j) the terms "year" and "years" mean and refer to Production Year(s). All Article, Section and Schedule references herein are to Articles, Sections and Schedules of this Agreement, unless otherwise specified. This Agreement will not be construed as if prepared by one Party, but rather according to its fair meaning as a whole, as if all Parties had prepared it. In the event of any conflict between this Agreement and any purchase order form, site-level execution agreements or other agreements which may be entered into by the Parties governing the same matters set forth herein, this Agreement will take precedence, unless such subsequent agreement specifically refers to this Agreement and indicates that such subsequent agreement will take precedence over this Agreement. ARTICLE 33 - USE OF NAMES AND PUBLIC ANNOUNCEMENTS Nothing in this Agreement shall be construed to allow either Party to utilize the name of the other Party, except with the prior written consent of the pertinent Party. AGIX shall have the right, however, to use the name of Dow in materials associated with regulatory submissions to the extent necessary to comply with regulatory requirements with respect to the Finished Drug Product. Except as otherwise required by law or regulation, neither Party shall make any public announcement concerning this Agreement or the subject matter hereof without the prior written consent of the other Page 29 of 37 OCTOBER 6, 2005 Party, unless the nature of the information has been previously disclosed or approved for disclosure. If the nature of the information has been disclosed or previously approved for disclosure, this Article 33 will no longer apply to that information. ARTICLE 34 - ENTIRE AGREEMENT This Agreement, along with the previously executed confidentiality agreement effective February 6, 2004, research agreement effective May 24, 2004 and license agreement effective November 11, 2004, constitutes the full understanding of the Parties and is a final, complete and exclusive statement of the terms and conditions of their agreement regarding the subject matter of this Agreement. To the extent that there are any conflicts between this Agreement and any other referenced agreements between the Parties, the terms of this Agreement shall control. All amendments or modifications to this Agreement will be in writing, identified as an Amendment to this Agreement and signed by an authorized representative of each Party. The Parties have caused this Agreement to be executed by their duly authorized representatives as of the Effective Date. ATHEROGENICS, INC. THE DOW CHEMICAL COMPANY By: /s/ RUSSELL M. MEDFORD By: /s/ ANDREW N. LIVERIS ---------------------------- -------------------------- Name: Russell M. Medford MD, PhD Name: Andrew N. Liveris Title: President & CEO Title: Chief Executive Officer Date: October 7, 2005 Date: October 27, 2005 Page 30 of 37 OCTOBER 6, 2005 SCHEDULE 1 - DELIVERABLES 1) Development Reports for all AGIX owned work conducted by Dow (Per license agreement, effective November 11, 2004) a. Lab b. Process 2) Pilot Plant Campaign Summary Report (Per license agreement, effective November 11, 2004) 3) Critical Process Parameter Work (Per license agreement, effective November 11, 2004) a. Appropriate Team Members b. Technical Support c. Reports 4) Process Validation a. Facilities b. Protocols and/or Master Plans c. API d. Summary Report e. Stability data 5) Pre-Approval Inspection a. Technical Support b. Regulatory Support c. Documentation 6) CMC support during NDA Preparation 7) DMF for Probucol, USP a. Reference letter to FDA b. Acceptable DMF on File Page 31 of 37 OCTOBER 6, 2005 SCHEDULE 2 - AGI-1067 SPECIFICATIONS [****] SCHEDULE 3 - PROBUCOL USP SPECIFICATIONS Specifications shall be those in the probucol monograph published by U.S. Pharmacopeia, 12601 Twinbrook Parkway, Rockville, MD 20852 in the most current United States Pharmacopeia - National Formulary (USP - NF). - ------- [****] indicates that certain confidential information contained in this document, has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. Page 32 of 37 OCTOBER 6, 2005 SCHEDULE 4 - LIST OF COMPOUNDS REFERENCED FOR IMPROVEMENTS [****] - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. Page 33 of 37 EX-10.35 3 g99853exv10w35.txt EX-10.35 LICENSE AND COLLABORATION AGREEMENT EXHIBIT 10.35 CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT MARKED [****] HAVE BEEN REDACTED AND HAVE BEEN FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION LICENSE AND COLLABORATION AGREEMENT BETWEEN ATHEROGENICS, INC. AND IPR PHARMACEUTICALS, INC. DECEMBER 22, 2005 THIS CONFIDENTIAL DOCUMENT IS SUBJECT TO A NONDISCLOSURE AGREEMENT BETWEEN THE PARTIES HERETO AND MAY NOT BE VIEWED BY, COPIED FOR OR DISTRIBUTED TO ANY PERSON NOT SUBJECT TO SUCH NONDISCLOSURE AGREEMENT OR NOT AUTHORIZED BY THE PARTIES HERETO. TABLE OF CONTENTS
Page ---- 1. DEFINITIONS.................................................................................... 1 2. PRODUCT DEVELOPMENT............................................................................ 17 2.1 Development Plan 17 2.2 Development Activities of the Parties 18 3. REGULATORY MATTERS............................................................................. 20 3.1 Regulatory Strategy 20 3.2 Regulatory Responsibility in General 20 3.3 Regulatory Authority Communications and Cooperation Between the Parties 23 3.4 Communications Concerning Product 24 3.5 Records 24 3.6 Safety Matters 25 4. COMMERCIALIZATION.............................................................................. 25 4.1 Global Commercialization Team and U.S. Commercialization Team 25 4.2 Commercially Diligent Efforts 25 4.3 Commercialization Plan 26 4.4 Commercialization Activities of the Parties 26 4.5 Commercial Manufacturing and Supply of Products 27 5. DILIGENCE AND COOPERATION...................................................................... 27 5.1 Information Sharing 27 5.2 Diligence Requirements 28 5.3 Failure To Use Diligence 29 6. GOVERNANCE..................................................................................... 29 6.1 General 29 6.2 Alliance Managers 29 6.3 Committees 30 7. LICENSES AND COVENANTS......................................................................... 34 7.1 License Grants to AstraZeneca 34 7.2 License Grants to AGIX 35 7.3 Rights Acquired from Third Parties 35 7.4 Covenants Concerning the Products, the Compound and the Field 36 8. PAYMENTS AND REPORTS........................................................................... 39 8.1 Upfront Payment 39 8.2 Milestone Payments 39 8.3 Royalties 41 8.4 Adjustments and Changes to Royalty Rates in Certain Circumstances 44
i 8.5 Payment; Report 48 8.6 Exchange Rate; Manner and Place of Payment 48 8.7 Representations and Covenants Concerning Certain Matters 51 9. INTELLECTUAL PROPERTY.......................................................................... 51 9.1 Ownership of Inventions; Obligation to Update 51 9.2 IPC53 52 9.3 Patent Prosecution 55 9.4 Patent Marking 57 9.5 Infringement by Third Parties 57 9.6 Infringement of Third Party Rights 59 9.7 Cooperation 59 9.8 Awards and Recovery 60 9.9 Costs 60 9.10 Trademarks 61 10. CONFIDENTIALITY................................................................................ 62 10.1 Nondisclosure Obligation 62 10.2 Permitted Disclosures 63 10.3 Use of Name 64 10.4 Publicity 64 10.5 Publications 65 11. REPRESENTATIONS AND WARRANTIES................................................................. 65 11.1 Corporate Existence and Authority 65 11.2 Authorized Execution; Binding Obligation 65 11.3 No Conflicts 65 11.4 All Consents and Approvals Obtained 66 11.5 AGIX Representations and Warranties. AGIX represents and warrants to AstraZeneca as follows: 66 11.6 Other Agreements 68 11.7 Debarment 68 11.8 Knowledge of Pending or Threatened Litigation 69 11.9 Pre-Existing Third Party Licenses 69 11.10 Disclaimer of Implied Warranties 70 11.11 Limitation of Liability 70 11.12 Guarantee of Performance of Affiliates 70 12. INDEMNIFICATION................................................................................ 71 12.1 AstraZeneca Indemnification 71 12.2 AGIX Indemnification 71 12.3 Indemnification Procedures 72 12.4 Indemnification Payment Adjustments 73 12.5 Indemnification Payment 74 12.6 Survival 74

ii 13. TERM AND TERMINATION........................................................................... 74 13.1 Term 74 13.2 Condition Precedent 74 13.3 Termination by AstraZeneca 75 13.4 Termination for Material Breach or Bankruptcy 76 13.5 Effects of Termination 77 13.6 Non-Exclusive Rights 81 13.7 Rights in Bankruptcy 81 13.8 Accrued Rights and Obligations; Survival 81 14. DISPUTE RESOLUTION............................................................................. 82 14.1 Procedure 82 14.2 Alternative Dispute Resolution 82 14.3 Arbitration Procedure 83 14.4 Special Rules for Disputes Concerning Diligence Covenant 84 15. MISCELLANEOUS.................................................................................. 84 15.1 Standstill 84 15.2 Termination of Certain Rights Upon AGIX Change of Corporate Control 84 15.3 Assignment 85 15.4 Force Majeure 86 15.5 Further Assurances 86 15.6 Severability 86 15.7 Notices 86 15.8 Jurisdiction and Venue 87 15.9 Affiliates 87 15.10 Entire Agreement 87 15.11 Headings 87 15.12 Independent Contractors 87 15.13 Waiver 88 15.14 No Third Party Beneficiaries 88 15.15 Cumulative Remedies 88 15.16 Counterparts 88 15.17 Waiver of Rule of Construction 88

Exhibit 1A ....... AGIX Compound Patents Exhibit 1B ....... Co-Promotion Agreement Exhibit 1C ....... Other AGIX Patents Exhibit 1D ....... Pre-Existing Third Party Licenses Exhibit 1E ....... Probucol Analog Exhibit 1F ....... Transition Services Agreement Exhibit 11.5 ..... Disclosure Concerning AGIX Representations and Warranties

iii LICENSE AND COLLABORATION AGREEMENT This LICENSE AND COLLABORATION AGREEMENT (the "AGREEMENT") is made and is effective as of December 21, 2005 (the "EXECUTION DATE") by and between ATHEROGENICS, INC., a corporation organized and existing under the laws of the State of Georgia ("AGIX"), and IPR PHARMACEUTICALS, INC., a corporation organized and existing under the laws of Puerto Rico ("ASTRAZENECA"). RECITALS A. AGIX is engaged in manufacturing, research and development of pharmaceutical products and is currently engaged in the development of AGI-1067. B. AstraZeneca is engaged in the research, development, manufacture and marketing of pharmaceutical products. AGIX and AstraZeneca wish to collaborate in the further clinical development and marketing of the Compound, upon the terms described in this Agreement and the Related Agreements (as defined herein). NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, the Parties hereby agree as follows: 1. DEFINITIONS When used and capitalized in this Agreement (other than the headings of the Sections and subsections), including the foregoing recitals, the following terms shall have the meanings assigned to them in this Section and include the plural as well as the singular. All financial and accounting terms not otherwise defined in this Agreement, whether capitalized or not, shall have the meanings assigned to them in accordance with generally accepted accounting principles based on International Accounting Standards/International Financial Reporting Standards as in effect from time to time ("GAAP"). "Accelerated Assumption Payment" has the meaning provided in Section 3.2(c)(i) hereof. "Action" has the meaning provided in Section 12.3(a) hereof. "ADR" has the meaning provided in Section 14.2 hereof. "ADR Request" has the meaning provided in Section 14.2(a) hereof. "Adverse Event" means any adverse medical occurrence in a patient or clinical investigation subject administered a pharmaceutical product and that does not necessarily have to have a causal relationship with any treatment, including as designated under 21 C.F.R. Section 312.32 and any other Applicable Laws. "Adverse Event Report" means any oral, written or electronically transmitted report of any Adverse Event. "Affiliate" means any Person that directly (or indirectly through one or more intermediaries) controls, is controlled by, or is under common control with a Party. For purposes of this definition only, the terms "controls," "controlled," and "control" means (i) the direct or indirect ability or power to direct or cause the direction of the management and policies of an entity or otherwise direct the affairs of such entity, whether through ownership of equity, voting securities, or beneficial interest, by contract, or otherwise, or (ii) the ownership, directly or indirectly, of at least 50% of the voting securities (or other comparable ownership interest for an entity other than a corporation) of a Party. "AGIX Compound Patents" mean those Patents listed in Exhibit 1A, including all foreign counterparts thereof, as supplemented and updated from time to time pursuant to Section 9.1(c) hereof. "AGIX Indemnitees" has the meaning provided in Section 12.1 hereof. "AGIX IP" means the Licensed Patents and AGIX Know-How. "AGIX Know-How" means Know-How Controlled by AGIX or any of its Affiliates on or after the Effective Date that is necessary or useful for the research, Development, Manufacture, Commercialization, use, sale, offer for sale or importation of the Compound and Products in the Field. "AGIX Losses" has the meaning provided in Section 12.1 hereof. "Alliance Manager" has the meaning provided in Section 6.2 hereof. "Annualized Quarterly Net Sales" means the Net Sales for a given Calendar Quarter multiplied by four (4). "Applicable Laws" means all applicable statutes, ordinances, regulations, rules, or orders of any kind whatsoever of any Governmental Authority, including, without limitation, the FD&C Act, Prescription Drug Marketing Act, Generic Drug Enforcement Act of 1992 (21 U.S.C. Section 335a et seq.), and Anti-Kickback Statute (42 U.S.C. Section 1320a-7b et seq.), all as amended from time to time in the Territory. 2 "Approvable Letter" means a written communication from the FDA to the owner of the application for Regulatory Approval stating that the FDA will not approve the application, or that the FDA will approve the application if additional information is submitted or specific conditions are met, pursuant to 21 C.F.R. Section 314.3(b). "Arbitration Panel" has the meaning provided in Section 14.3(a) hereof. "ARISE Results" means the statistical summary tables for efficacy and safety of the unblinded efficacy and safety results from the ARISE Study, which summary tables are determined by a Third Party statistician, mutually agreed to by the Parties in advance, to be complete and final, analyzed in accordance with the last Statistical Analysis Plan submitted to the FDA before locking the database of the ARISE Study for unblinding. "ARISE Study" means the pivotal Phase III Study being conducted by AGIX known as ARISE. "AstraZeneca Indemnitees" has the meaning provided in Section 12.2 hereof. "AstraZeneca IP" means AstraZeneca Patents and AstraZeneca Know-How. "AstraZeneca Know-How" means Know-How Controlled by AstraZeneca or any of its Affiliates that is necessary or useful for the research, Development, Manufacture, Commercialization, use, sale, offer for sale or importation of the Compound and Products in the Field. "AstraZeneca Losses" has the meaning provided in Section 12.2 hereof. "AstraZeneca Patents" means any Patents Controlled by AstraZeneca or any of its Affiliates on or after the Effective Date that are necessary or useful for the Development, Manufacture, Commercialization, use, sale, offer for sale or importation of the Compound or any Product in the Field. "Assumption Date" means the earlier of (i) the date of receipt of U.S. NDA Approval for the First Product and (ii) the date AstraZeneca pays to AGIX the Accelerated Assumption Payment. "Blocking Patent" means a patent owned or controlled by a Third Party that contains a Valid Patent Claim that (a) is necessary for the Manufacture or sale of a Compound or Product; and (b) the Development, use, Manufacture, sale, offer for sale or importation of such Compound or Product would infringe such Third Party's patent rights but for the grant of a license to such rights by such Third Party. "Business Combination" means any merger, consolidation, sale or transfer of all or substantially all of the assets, or other similar transaction to which AGIX is a party unless, following such transaction or transactions, (i) the individuals and entities who 3 were the beneficial owners of the outstanding voting securities of AGIX immediately prior to such transaction beneficially own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors or similar governing persons of the corporation or other entity resulting from such transaction ("SUCCESSOR") in substantially the same proportions as their ownership immediately prior to such transaction of such outstanding voting securities, and (ii) at least fifty percent (50%) of the members of the Board of Directors or similar governing body of the Successor were members of the Board of Directors of AGIX at the time of the execution of the initial agreement, or the action of the Board of Directors of AGIX, providing for such transaction. "Business Day" means any day other than a Saturday, Sunday or any day that is a banking holiday in the United States, United Kingdom or Puerto Rico. "Calendar Quarter" means the respective periods of three (3) consecutive calendar months ending on March 31, June 30, September 30 and December 31. "Calendar Year" means each successive period of twelve (12) months commencing on January 1 and ending on December 31. "cGCP" means the then current good clinical practices as defined in U.S. Regulations 21 C.F.R. Sections 50, 54, 56, 312 and 314, (or in the case of foreign jurisdictions, comparable regulatory standards), the International Conference of Harmonization (ICH) E6 "Good Clinical Practice: Consolidated Guidance," and in any successor regulation or any official guidance documents issued by a Regulatory Authority. "cGLP" means the then current good laboratory practice standards as defined by the FDA pursuant to 21 C.F.R. Part 58 (or in the case of foreign jurisdictions, comparable regulatory standards), and in any successor regulation or any official guidance documents issued by a Regulatory Authority. "cGMP" means the then-current good manufacturing practices as defined by the FDA pursuant to 21 C.F.R. Sections 210 and 211 and/or the current EC-GMP-Directives and relevant EC guidelines and the ECC-GMP-Guide and in any successor regulation or any official guidance documents issued by a Regulatory Authority. "Change of Corporate Control" means the occurrence of either of the following: (a) a Business Combination involving AGIX; or (b) a change in the beneficial ownership of fifty percent (50%) or more of AGIX's voting securities (whether in a single transaction or series of related transactions) where, immediately after giving effect to such change, the legal or beneficial owner of more than fifty percent (50%) of AGIX's voting securities is a Third Party or Group, excluding any equity investments by venture capitalists or 4 investment banks or other non-strategic investors, who alone or with their Affiliates, are not themselves in the business of developing and commercializing pharmaceutical products. "Coated Stent" means a stent coated with a Product for use in the Field. "Combination Product" means a Product in final form that includes one or more pharmaceutically active ingredients other than the Compound, in combination with the Compound that are sold as a fixed dose or separate doses in a single package and priced as one item. All references to Product in this Agreement shall be deemed to include Combination Product(s). "Commercialization" means all appropriate activities undertaken before and after Regulatory Approval pursuant to an approved Commercialization Plan for a Product or otherwise relating specifically to the marketing, sale and distribution of Products including, without limitation, (i) sales force detailing, advertising, education, planning, marketing, sales force training and distribution, and (ii) scientific and medical affairs. "Commercialization Plan" has the meaning provided in Section 4.3(a) hereof. "Commercially Diligent Efforts" means, with respect to the research, Development, Manufacture or Commercialization by a Party of a Compound or Product, as the case may be, efforts and resources reasonably used by an entity of similar resources and expertise as such Party (and in the case of AstraZeneca, AstraZeneca or its Affiliates), for such similar entity's own compounds or products (including internally developed, acquired and in-licensed compounds or products) with similar commercial potential at a similar stage in their lifecycle (assuming continuing development of such product), taking into consideration their safety, tolerability and efficacy, the competitiveness of alternative products, the likelihood of Regulatory Approval, their profitability (taking into account any payments payable under this Agreement), the extent of market exclusivity, cost to develop the Compound or Product, health economic claims, and other similar factors reasonably determined by AstraZeneca to be relevant. If, at the time of measurement of Commercially Diligent Efforts, the efforts and resources used by AGIX or AstraZeneca and their Affiliates, as the case may be, for such entity's own similar compounds and products (other than the Compound and the Product(s)) are greater than those used by an entity of similar resources and expertise, then "Commercially Diligent Efforts" shall mean such entity's level of effort and resources, rather than the efforts and resources used by an entity with similar resources and expertise. "Compete" means, with respect to a pharmaceutical product, that such product is in the same Uniform System of Classification (USC) class as another product, as reported by IMS or any comparable successor agency. 5 "Competing Generic Product" means, with respect to a Product, a product (i) having the same active pharmaceutical ingredient as the Compound, and (ii) that has been approved by applicable Regulatory Authorities for sale in the Field; provided, however, that a Competing Generic Product shall not include any product being sold or offered for sale by AstraZeneca or any AstraZeneca Affiliate. "Competing 1067 Product" means any pharmaceutical product that Competes with the Product. "Compound" means AGI-1067, which is [****]; including its pharmacologically acceptable salts, solvates, hydrates, hemihydrates, polymorphs, metabolites, free base forms, pro-drugs, esters, tautomers and if applicable, any isomers, stereoisomers, racemates, enantiomers and all optically active forms thereof. "Compound-Only Issue" means an issue relating to an AGIX Compound Patent or a claim included within an AGIX Compound Patent that in either case claims, or is directed to, solely the Compound or solely a Product. "Compulsory Sublicense" means a sublicense of the rights granted in this Agreement entered into by AstraZeneca or an AstraZeneca Affiliate because a court or other governmental agency of competent jurisdiction has required AstraZeneca or an AstraZeneca Affiliate to grant to a Third Party rights to make, have made, use sell, offer to sell or import the Product in a country in the Territory; provided, however, that any such requirement shall not include a requirement by a court or other governmental agency of competent jurisdiction resulting from a merger with or acquisition of or by another company or entity involving AstraZeneca, or the acquisition by AstraZeneca of other products. "Confidential Information" has the meaning provided in Section 10.1 hereof. "Control" or "Controlled" means, with respect to any intellectual property right, that the Party or its Affiliate owns or has a license to such intellectual property right and has the ability to grant access, a license, or a sublicense to such intellectual property right to the other Party as provided for in this Agreement without violating an agreement with, or infringing any rights of, a Third Person. "Co-Promotion Agreement" means the Co-Promotion Agreement between AstraZeneca Pharmaceuticals LP and AGIX dated as of the Execution Date and attached hereto as Exhibit 1B. "De Minimis Amount" has the meaning provided in Section 15.1 hereof. "Development" means the conduct of all activities that are reasonably required to obtain Regulatory Approval or create other Indications for a Product, including, without limitation: (i) toxicology, in vitro testing, in vivo testing, in silico testing, stability testing, - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 6 statistical analysis and report writing, packaging and regulatory affairs, pre-clinical studies and clinical trials in accordance with, to the extent applicable, the cGLPs, cGCPs and cGMPs or other designated quality standards and Applicable Laws; (ii) all activities relating to developing the ability to Manufacture the Compound and Product, including, without limitation, formulation, delivery technologies and devices, bulk production, fill/finish, Manufacturing process development, and Manufacturing and quality assurance technical support; (iii) Manufacture of clinical supplies of the Compound; and (iv) all interactions with any Regulatory Authority regarding the foregoing. "Development Budget" means the budget for Development activities that is included within each Development Plan, as such budget may be amended or updated from time to time in accordance with Section 2.1(d). "Development Costs" means the reasonable costs incurred by a Party or its Affiliates for Development of Product(s), as in accordance with the Development Plan, including without limitation (to the extent included in the Development Plan): (a) all out-of-pocket costs and expenses, including without limitation payments to investigators and contract research organizations, data management, statistical design and analysis, and document preparation; (b) fees incurred in connection with filings related to Regulatory Approvals; (c) the costs and expenses of clinical supplies for such efforts as set forth in the Development Plan, including the cost of clinical supplies of Products, costs and expenses incurred to purchase or package combination drugs or devices, and costs and expenses of disposal of clinical samples; (d) the costs of internal scientific, medical, technical or managerial personnel necessary to conduct the activities set forth in the Development Plan; and (e) any other costs necessary to conduct the activities described in the Development Plan. "Development Plan Outline" means the outline of the minimum items to be included in the Development Plan, which outline is contained in a letter delivered by AGIX to AstraZeneca on the date hereof. "Development Plan" means a written rolling three-year plan for the Development of Product(s), including, without limitation, a budget for such activities, as such plan may be amended or updated from time to time in accordance with Section 2.1(d). The Initial Development Plan has been agreed upon by the Parties and is included in a letter delivered by AGIX to AstraZeneca on the date hereof. "Development Program" means the activities undertaken by AGIX and AstraZeneca as set forth in the Development Plan. "Diabetes" means diabetes mellitus, insulin resistance, and complications of diabetes, excluding the treatment of diabetic retinopathy using nonsystemic preparations (such as eyedrops, intraocular injections or local ointments or creams or eye patches). "Dispute" has the meaning provided in Section 14.1(a) hereof. - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 7 "Drug Device" means a combination of the Product and a therapeutic device and/or a device used to deliver the Compound. "Effective Date" has the meaning provided in Section 13.2(a) hereof. "Exchange Act" has the meaning provided in Section 15.1 hereof. "Exclusive Market Product" means a product (other than a Product) sold or offered for sale by a person other than AGIX in a country that is the subject of a Valid Patent Claim directed to the composition of matter or use of such product in such country. "Expanded Field Indication" has the meaning provided in Section 7.4(a) hereof. "FDA" means the U.S. Food and Drug Administration, or any successor federal agency having responsibility over U.S. Regulatory Approvals. "FD&C Act" means the U.S. Federal Food, Drug, and Cosmetic Act, as amended from time to time (21 U.S.C. Section 301 et seq.), together with any rules and regulations promulgated thereunder. "Field" means intravenous , injectable, solid and all other dosage or delivery and therapeutic forms (oral and otherwise, and Drug Devices, such as Coated Stents) to treat, prevent or control atherosclerosis and related cardiovascular, renovascular, and cerebrovascular indications, including but not limited to peripheral vascular disease, post- coronary artery by-pass graft patency, restenosis following percutaneous coronary intervention, carotid artery disease, acute coronary syndrome, heart failure, stroke, impaired renal functions and Diabetes. "Field" shall not include any other indications not described in the preceding sentence, including, without limitation, other inflammatory and autoimmune diseases such as rheumatoid arthritis, asthma, chronic obstructive pulmonary disease, psoriasis, inflammatory bowel disease, and transplant vasculopathy, central nervous system diseases and other ophthalmic diseases and conditions not expressly included in the Field, such as treatment of diabetic retinopathy using nonsystemic preparations (such as eyedrops, intraocular injections or local ointments or creams or eye patches). "Final ARISE Results" has the meaning provided in Section 13.3(a). "First Commercial Sale" means the date on which a Product is first shipped in commercial quantities by AstraZeneca, its Affiliates, or Sublicensees, as the case may be, for commercial sale to Third Persons (other than AstraZeneca's Sublicensees) in a country in the Territory following Regulatory Approval of such Product in such country. "First Product" means the Product contemplated by the Initial Development Plan. 8 "GAAP" has the meaning provided in the first paragraph of this Section 1. "Generic Competition" means, for a Product sold in a country, a situation where the following three conditions exist and continue: (i) a court or agency of competent jurisdiction has cancelled or held invalid or unenforceable claims under the Licensed Patents, AstraZeneca Patents or Joint Patents prior to the expiration of the Royalty Term for such country, such that a Third Party may, without infringing any Licensed Patents, AstraZeneca Patents or Joint Patents and without a license from or other agreement from AstraZeneca, sell a Competing Generic Product in such country; provided, however, that Generic Competition shall be considered to no longer be in effect if such decision is reversed or modified such that any such claim in such Licensed Patent, AstraZeneca Patent or Joint Patent is reinstated or revalidated on appeal; (ii) a Competing Generic Product is being sold to the public in such country pursuant to required approvals from applicable Regulatory Authorities; and (iii) the Net Sales of the Product in such country are reduced by at least [****] compared with such Net Sales in such country immediately preceding the sale of such Competing Generic Product in such country. The comparison in clause (iii) above shall be measured for a given Calendar Quarter by comparing Net Sales in such country for (A) the twelve-month period immediately preceding and including the three months in such Calendar Quarter, with (B) the twelve month period preceding and including the month immediately preceding the month containing the date that AstraZeneca reasonably determines as the date the Competing Generic Product was first offered for sale to the public in such country, or was first shipped in such country in commercial quantities following receipt for such Competing Generic Product of required regulatory approvals from applicable Regulatory Authorities. Where less than twelve (12) months of Net Sales for the Product has occurred prior to the first sale of the Competing Generic Product, Net Sales shall be determined on an annualized basis. "Global Commercialization Team" means AstraZeneca's and its Affiliates' team responsible for the commercialization of Products throughout the world. "Governmental Authority" means any court tribunal, arbitrator, agency, commission, official or other instrumentality of any federal, state, or other political subdivision, or supranational body, domestic or foreign. "Group" means a group of related Persons deemed a "person" for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended. - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 9 "HSR" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Indemnifying Party" means the Party to whom the Indemnitee is entitled to look for indemnification, pursuant to Section 12.3(a) hereto. "Indication" means any use of the Product in the Field as approved by Regulatory Authorities. "Indication Fee" has the meaning provided in Section 7.4(a) hereof. "Indication Information" has the meaning provided in Section 7.4(a) hereof. "Indirect Taxes" means value added taxes, sales taxes, consumption taxes and other similar taxes. "Initial Development Plan" means that development plan which AGIX has previously agreed with the FDA will be completed prior to submission by AGIX of an NDA for the Product, and which is contained in a letter delivered by AGIX to AstraZeneca on the date hereof. "IPC Patent Counsel" has the meaning provided in Section 9.2(b)(iv) hereof. "IPC" has the meaning provided in Section 6.3(h) hereof. "JDC" has the meaning provided in Section 6.3(b) hereof. "JMC" has the meaning provided in Section 6.3(a) hereof. "Joint Inventions" has the meaning provided in Section 9.1(d) hereof. "Joint Patents" has the meaning provided in Section 9.1(e) hereof. "Know-How" means all tangible and intangible: (a) techniques, technology, practices, trade secrets, discoveries, inventions, methods, formulas, knowledge, know-how, skill, experience, tests, assays, test data and results (including pharmacological, toxicological, pre-clinical and clinical test data and results), technical, non-technical, analytical and quality control data, results or descriptions, drawings, plans, diagrams, software and algorithms; and (b) compounds, compositions of matter, cells, cell lines, assays, animal models and physical, biological or chemical material that, in either case, is Controlled by a Party or the Parties, or Affiliates of a Party on or after the Effective Date and that is necessary or useful for the Development, Manufacture or Commercialization of a Compound or Product. "Knowledge of AGIX" means the actual knowledge of the following AGIX employees: any Vice-President or Senior Vice-President of AGIX or higher, the Chief 10 Executive Officer of AGIX and, with respect to intellectual property matters, the Director of Legal Affairs and Intellectual Property, and, in the case of each such officer, such additional knowledge as could be obtained upon reasonable inquiry of AGIX employees and AGIX records. "Licensed Patents" means AGIX Compound Patents and Other AGIX Patents. "Licensed Probucol Analog" has the meaning provided in Section 7.4(b) hereof. "Major Market" means any of the following jurisdictions: [****]. "Manufacture" and "Manufacturing" means, with respect to a Product or Compound, the synthesis, manufacturing, processing, formulating, packaging, labeling, holding and quality control testing of such Product or Compound. "Material Restructuring" means the transfer to any Third Party by either Party of more than fifty percent (50%) of its fixed (tangible and intangible) assets as shown on the balance sheet of the Party at December 31, 2005. "Mixed Issue" means an issue relating to a Licensed Patent that is not a Compound-Only Issue. "NDA" means the single application or set of applications (and any other required registrations, notifications, forms or supplements) for a Product and/or pre-market approval to make and sell commercially a Product, filed with the FDA or with a Regulatory Authority anywhere in the Territory. "NDA Acceptance" means the acceptance in writing for regulatory filing of a NDA by the FDA. "Net Sales" means the gross invoiced amount on sales of Products to Third Parties by AstraZeneca, its Affiliates, distributors and Sublicensees (except for sales by Sublicensees who are parties to Compulsory Sublicenses and for sales by AstraZeneca to Sublicensees), after deduction of the following items: (a) discounts or rebates given that are consistent with AstraZeneca's group accounting (except for bundled Products as provided below); (b) amounts repaid or credited because of rejections, returns, refunds, recalls and the like; (c) rebates and similar payments made with respect to sales paid for by any government or Regulatory Authority (except for bundled Products); - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 11 (d) [****] net of the amounts described in clauses (a), (b), (c) and (e) in this definition, for transportation costs, distribution expenses, special packaging and related insurance charges; (e) taxes, excise taxes, Indirect Taxes, customs duties, customs levies and import fees paid on the sale, importation, use or distribution of a Licensed Product; and (f) bad debts actually incurred. Net Sales shall be calculated (i) using AstraZeneca's internal audited systems used to report gross invoiced sales as adjusted for any of the items in clauses (a) through (f) of the preceding sentence, and (ii) consistent with GAAP, with the exception of bundled Products in clauses (a) and (c), and bad debts in clause (f), of the preceding sentence. Where any discount or rebate (including rebates or payments described in clause (a) or (c) of the first sentence of this definition) is based on sales of a bundled set of products in which a Product is included, the discount or rebate would be allocated as actually credited unless the Product receives a higher than pro rata share of the discount or rebate then the bundled product receives. In such case, the Product discount or rebate shall be allocated to such Product on no greater than a pro rata basis based on the sales value (i.e., the unit average selling price multiplied by the unit volume) of the Product relative to the sales value contributed by the other products in the bundled set with respect to such sale. The calculation of Net Sales for Combination Products is set forth in Section 8.4(f) hereof and shall be the sole method for calculating Net Sales for such Combination Products. "Noncompulsory Sublicense" means any sublicense of the rights granted in this Agreement entered into by AstraZeneca or an AstraZeneca Affiliate, other than a Compulsory Sublicense. "Non-Exclusive Market Product" means a product sold or offered for sale by a person other than AGIX in a country that is not the subject of any Valid Patent Claim directed to the composition of matter or use of such product in such country. "Other AGIX Patents" means any Patents, other than AGIX Compound Patents, Controlled by AGIX or any of its Affiliates on or after the Effective Date that are necessary or useful for the Development, Manufacture, Commercialization, use, sale, offer for sale or importation of the Compound or any Products in the Field, including those Patents listed in Exhibit 1C and all foreign counterparts thereof, as supplemented and updated from time to time pursuant to Section 9.1(d) hereof. "Party" or "Parties" means AGIX and/or AstraZeneca. - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 12 "Patent" or "Patents" means (a) United States and non-United States patent applications (including provisional applications, continuation applications, continued prosecution applications, continuation-in-part applications, divisional applications, substitute applications, or abandoned applications and applications for certificates of invention), including without limitation patent applications under the International Treaties and Conventions, including the Patent Cooperation Treaty and the European Patent Convention; (b) any patents issued or issuing from such patent applications (including certificates of invention); (c) all patents and patent applications based on, corresponding to, or claiming the priority date(s) of any of the foregoing; (d) any reissues, substitutions, confirmations, registrations, renewals, patents of addition, validations, re-examinations, additions, continuations, continued prosecution applications, continuations-in-part, or divisionals of or claiming priority to any of the foregoing; and (e) term extensions, supplementary protection certificates and other governmental action which provide exclusive rights to a product beyond the original patent expiration date. "Person" means a natural person, a corporation, a partnership, a trust, a joint venture, a limited liability company, any Governmental Authority or any other entity or organization. "Plaque Regression Claim" means the date that AstraZeneca or its Affiliates (a) may through its sales representatives promote atherosclerotic plaque regression in connection with the promotion of a Product in the United States consistent and in accordance with the FD&C Act and (b) actually authorizes its sales force to engage in such promotion. "Pre-Existing Third Party Licenses" means the Patent Purchase Agreement between Sampath Parthasarathy, Ph.D. and AtheroGenics, Inc., dated April 26, 1995 and the License Agreement between Emory University and AtheroGenics, Inc., dated January 23, 1995, as amended August 3, 2005, as attached hereto as Exhibit 1D. "Probucol Analog" has the meaning set forth in Exhibit 1E. "Probucol Analog Fee" has the meaning provided in Section 7.4(b) hereof. "Probucol Analog Information" has the meaning provided in Section 7.4(b) hereof. "Product" means a pharmaceutical product that contains or incorporates the Compound, whether in development or approved by any Regulatory Authority, including all formulations, line extensions and modes of administration (including, without limitation, all delivery devices, dosage forms or other peripherals and consumables), including, without limitation, Combination Products. 13 "Product Complaint" means any written, verbal, or electronic expression of dissatisfaction regarding a Product including, but not limited to, actual or suspected product tampering, contamination, mislabeling, or wrong ingredients. "Product Launch" shall mean the date on which the First Product is first shipped in commercial quantities by AstraZeneca, its Affiliate or Sublicensee for commercial sale to Third Persons in the Territory (not Affiliates or Sublicensees) following Regulatory Approval of such Product. "Product Trademarks" means (i) the Trademarks for or relating to any Products and the registrations thereof, (ii) any pending or future Trademark registration applications relating to the Products, (iii) any unregistered Trademark rights relating to the Products as may exist through use prior to or as of the date hereof, (iv) any current or future modifications or variants of any of the foregoing rights, and (v) any future Trademarks adopted by AstraZeneca or its Affiliates for use in connection with the Products. "Promotable Diabetes Claim" means that AstraZeneca or its Affiliates (a) may through its sales representatives promote treatment or prevention of Diabetes in the United States consistent and in accordance with the FD&C Act and (b) actually authorizes its sales force to engage in such promotion. "Promotion" means those activities normally undertaken by a pharmaceutical company's sales force to implement marketing plans and strategies aimed at encouraging the appropriate use of a particular prescription or other pharmaceutical product, including detailing. When used as a verb, "Promote" means to engage in such activities. "Promotional Materials" means any printed or other materials bearing a Product name (trade name or generic name) used to promote Product, (examples include, but are not limited to, all promotional brochures, journal ads, brochures, selling aids, posters, reprints, video or audio tapes, press releases, service items, managed care pull through sheets, formulary presentations, price lists, monographs, Internet pages and websites, and telephone, radio or television advertisements) and materials produced by outside sources (examples include, but are not limited to, medical reprints, textbooks and CME materials) to the extent funded by, created in cooperation with, reviewed by or distributed by a Party, and any other items defined as labeling or advertising in Section 201(m) of the FD&C Act or 21 C.F.R. Section 202.1(l)(1) (as such sections may be amended from time to time). "Promotional Materials" shall also be deemed to include any advertising and promotional labeling bearing the Parties' names but not bearing a Product name (examples include "coming soon" or "reminder" advertisements) that may be used prior to obtaining Regulatory Approval to market, sell and distribute a Product to promote only the Indications of the Product. "Prosecution" has the meaning provided in Section 9.3(a) hereof. 14 "Recent Monthly Net Sales" means an amount equal to the aggregate monthly Net Sales of the Products during the last twelve (12) months preceding the date that notice of termination is provided by AstraZeneca to AGIX, divided by twelve (12). "Regulatory Approval" means any and all approvals (including, to the extent necessary, pricing approvals), licenses, registrations or authorizations of any Regulatory Authority, necessary for the Development, Manufacture or Commercialization of a Product. "Regulatory Authority" means, in a particular country or jurisdiction, any applicable government regulatory authorities involved in granting Regulatory Approval of Product in such country or jurisdiction, including without limitation, (a) in the United States, the FDA, and any other applicable governmental or regulatory authority in the United States having jurisdiction over Product, and any successor government authority having substantially the same function, and (b) any non-United States equivalent thereof. "Regulatory Materials" means any regulatory submissions, notifications, registrations, approvals and/or other filings and correspondence made to or with a Regulatory Authority, and any other records required to be maintained for possible audit by a Regulatory Authority, that may be necessary or reasonably desirable to Develop, Manufacture, market, sell or otherwise Commercialize Products in the Territory. "Related Agreements" means the Co-Promotion Agreement and Transition Services Agreement entered into by the Parties contemporaneously with this Agreement. "Representatives" shall be deemed to include each Person that is or becomes (i) an Affiliate of AstraZeneca, or (ii) an officer, director, employee, attorney, advisor, accountant, agent or representative of AstraZeneca or of any of AstraZeneca's subsidiaries or other Affiliates, providing such person is acting on behalf of AstraZeneca. "Royalty" or "Royalties" means the running royalties paid pursuant to Section 8.3. "Royalty Term" means, with respect to each Product, for each country in the Territory, the period of time commencing on the First Commercial Sale of such Product in any country and ending upon the expiration of the later of: (a) the last Valid Patent Claim of a Licensed Patent, a Joint Patent or an AstraZeneca Patent that would preclude a Third Party from developing, making, using, selling or importing such Product in such country; and (b) ten (10) years from the First Commercial Sale of such Product. "Secondary Market" means the following countries: [****]. "Standard Sales Price" means the published sales price for the Product in the relevant country. - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 15 "Sublicensee" means any Third Person (including, without limitation, a distributor) to which a Party or any of its Affiliates grants any right to make, use, market, or import and sell a Product in accordance with Section 7.1(c). Notwithstanding the foregoing, a Third Person who is granted only the right to distribute or promote a Product (such as a contract sales organization) shall not be considered a Sublicensee. "Successor" has the meaning provided in the definition of Business Combination. "Term" has the meaning provided in Section 13.1 hereof. "Territory" shall mean all countries of the world. "Third Party" or "Third Person" means any Person other than AGIX or AstraZeneca and their respective Affiliates. "Third Party Royalties" means upfront, milestone, royalty and any other similar payments paid by AstraZeneca or any AstraZeneca Affiliate to any Third Party for any Blocking Patent for the Development or Commercialization of Compounds or Products, other than pursuant to a Pre-Existing Third Party License. "Trademark" means any trademark, trade dress, brand mark, trade name, brand name, corporate name, logo or business symbol. "Transition Services Agreement" means the Transition Services Agreement between the Parties, dated as of the Execution Date and attached hereto as Exhibit 1F. "U.S." means the United States of America, including its territories and possessions. "U.S. Commercialization Team" means AstraZeneca's and its Affiliates' team responsible for the commercialization of Products in the United States. "U.S. NDA Approval" means approval by the FDA of the NDA filed with the FDA relating to a Product. "Valid Patent Claim" means a claim of an issued and unexpired Patent, together with any patent term extension, supplementary protection certificate, and/or regulatory approved period of exclusivity which has not been revoked or held unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction, and which is not appealable or has not been appealed within the time allowed for appeal, and which has not been disclaimed, denied or admitted to be invalid or unenforceable through reissue, re-examination, opposition, disclaimer or otherwise. 16 2. PRODUCT DEVELOPMENT 2.1 Development Plan (a) Contents of the Development Plan. The Development Plan shall, to the extent applicable, (i) identify the Product(s) to be Developed by the Parties, including any Combination Product(s), Coated Stent(s) and other Drug Devices; (ii) describe the overall program of Development for each such Product through Regulatory Approval (A) in all Major Markets; (B) in the Secondary Market taken as a whole; and (C) in other countries; (iii) describe the Development activities of the Parties, including preclinical studies, pharmacology, toxicology, ADME, formulation, Manufacturing of clinical supply, clinical pharmacology studies, clinical studies and regulatory plans and other key elements necessary to obtain Regulatory Approval for each such Product; (iv) specify plans and protocols for clinical studies (including protocol outlines for Phase IIIb and Phase IV clinical studies for label indication); and (v) establish a schedule for all such activities. In addition, the Development Plan shall include a detailed Development Budget that shall specify the Development Costs for all Development activities covered by the Development Plan supported by a financial business case. (b) Initial Development. The Initial Development Plan is contained in a letter delivered by AGIX to AstraZeneca on the date hereof. (c) Additional Development . The Parties shall, within one hundred eighty (180) days of the Effective Date, prepare a Development Plan, which shall describe the Development activities in addition to those activities described in the Initial Development Plan which will include additional Development activities both before and after submission of the NDA for the First Product, and an anticipated schedule for such activities. Such additional Development Plan shall comply with Section 2.1(a) and shall be consistent with the Development Plan Outline. The amendment shall become effective upon approval by the JMC. (d) Further Amendments to the Development Plan (i) The JDC shall prepare for approval by the JMC amendments and updates to the Development Plan at least once each Calendar Year. (ii) Prior to the Assumption Date, notwithstanding anything else in this Agreement to the contrary, no Development Plan or amendment to a Development Plan shall be inconsistent with or contradict the Initial Development Plan or Development Plan Outline; provided, however, that AstraZeneca shall remain subject to the obligations set forth in Section 2.2(c)(i). In addition, no Development Plan shall obligate a Party to undertake Development activities or expenditures beyond those 17 contemplated by the Initial Development Plan or Development Plan Outline without the written agreement of such Party. 2.2 Development Activities of the Parties (a) Compliance with the Development Plan. The Parties agree to use Commercially Diligent Efforts to carry out Development of Product(s) in accordance with the Development Plan under the direction and oversight of the JDC; provided, however, that: (i) Neither Party shall be obligated to incur Development Costs in excess of the amounts allocated to such Party as specified in the Development Plan; (ii) The JMC shall be responsible for strategic planning regarding Development of Products, and shall have the authority to approve the Development of Coated Stent(s), identify Combination Products for which Regulatory Approval will be sought, and identify any other potential Indications or Products. The JMC shall be responsible for approval of amendments to and updates of the Development Plan to provide for any such additional Products and to oversee Development of any such Products; and (iii) In no event shall the JDC or the JMC be authorized to take any action, including approving any amendment to the Development Plan, that would cause either Party to increase its Development Costs in excess of those expressly contemplated by the Agreement or the then approved Development Plan without the approval of such Party. (b) AGIX Development Activities (i) AGIX shall have responsibility, at its sole cost and at the direction of the JDC, for Development, including without limitation conducting and managing clinical studies, for those Development activities described in the Initial Development Plan. (ii) AGIX shall sponsor, prepare and submit, at its sole cost and at the direction of the JDC, the U.S. NDA with respect to such First Product; provided, however, that AstraZeneca shall cooperate and assist AGIX with such filing. (iii) AGIX may, at any time prior to the Assumption Date, in its discretion and at its own expense, elect to sponsor and conduct a FOCUS Study (Further Follow up Of AGI-1067 in ARISE Continuation as an Unblinded Study) and/or a LOCATE Study (Limited Outcome Collection following ARISE for Terminal Endpoints), unless the Parties otherwise agree to include either or both such studies in the Development Plan, in which case AstraZeneca shall pay the cost of such study or studies. 18 If AGIX elects to sponsor and conduct either such study or both studies, and if AstraZeneca does not terminate the Agreement pursuant to Section 13.3(a), then AstraZeneca shall thereafter be responsible for [****] of such Studies (including costs incurred by AGIX prior to and subsequent to the date when AstraZeneca elects not to terminate the Agreement pursuant to Section 13.3(a)). (iv) AGIX shall have the right to Manufacture clinical supplies of the Compound for its own Development activities pursuant to the Development Plan. (c) AstraZeneca Development Activities (i) Except as set forth in Section 3.2(c), AstraZeneca shall have responsibility, at its sole cost and at the direction of the JDC, for all Development activities described in the Development Plan associated with the Products that are not described in the Initial Development Plan, which shall include conducting and managing a Carotid Intima Medial Thickness (CIMT) Study (unless AstraZeneca can demonstrate that it would be commercially unreasonable to do so). (ii) Except as set forth in Section 3.2(c), AstraZeneca shall have responsibility, at its sole cost and at the direction of the JDC, for all Development activities described in the Development Plan necessary to seek Regulatory Approval for the Products in the Territory outside the United States, including without limitation conducting and managing clinical studies required for Regulatory Approval in such countries. (iii) The JDC shall identify, and the JMC shall have the authority to approve as a part of the Development Plan, potential post-marketing clinical studies, and AstraZeneca shall be responsible for conducting and managing such post-marketing Clinical Studies, with AGIX assisting in such management to the extent mutually agreed by the Parties. (d) Cooperation (i) Each Party shall assist the other Party in all Development activities to the extent reasonably requested and mutually agreed to by the Parties. (ii) AstraZeneca shall be entitled, but not required, to have three (3) representatives designated by AstraZeneca participate on AGIX's Development team prior to U.S. NDA Approval. AGIX shall provide space at its facility for such representatives to facilitate such participation. (iii) AGIX shall be entitled, but not required, to have three (3) representatives designated by AGIX participate on AstraZeneca's Development team after U.S. NDA Approval. AstraZeneca shall provide space at its facility for such representatives to facilitate such participation. - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 19 (e) Costs. Unless otherwise indicated in this Agreement or as otherwise agreed to by the Parties, each Party shall bear its own costs in connection with its activities under this Section. 3. REGULATORY MATTERS 3.1 Regulatory Strategy. The Parties shall work together through the JDC and the JMC to determine regulatory strategy in the Territory. 3.2 Regulatory Responsibility in General (a) AGIX's Responsibilities (i) AGIX shall be responsible for the preparation, submission, and maintenance of Regulatory Materials, including without limitation the NDA, for the First Product in the United States prior to the Assumption Date; provided, however, that AstraZeneca shall cooperate and assist AGIX as reasonably requested by AGIX. (ii) Promptly after the Assumption Date, AGIX shall assign to AstraZeneca all of AGIX's rights in and to all Regulatory Materials relating to the First Product, and shall take all other necessary actions required to allow AstraZeneca to assume ownership, possession and control of such Regulatory Materials. (b) AstraZeneca's Responsibilities (i) After the date of assignment described in Section 3.2(a)(ii), AstraZeneca shall be responsible for the preparation, submission and maintenance of Regulatory Materials for the First Product in the United States. (ii) AstraZeneca shall, to the extent set forth in the Development Plan, be responsible for the preparation, submission and maintenance of Regulatory Materials for the First Product in all countries outside of the United States. (iii) AstraZeneca shall, to the extent set forth in the Development Plan, be responsible for the preparation, submission and maintenance of Regulatory Materials for all other Products in the Territory. (c) Accelerated Assumption Payment (i) Notwithstanding anything herein to the contrary, at any time following payment by AstraZeneca to AGIX of the ARISE Milestone and the NDA Acceptance Milestone and prior to U.S. NDA Approval for the First Product, AstraZeneca may elect to pay to AGIX a nonrefundable, noncreditable payment of U.S. [****] (the "ACCELERATED ASSUMPTION PAYMENT"), and thereby (A) become the owner of - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 20 the Regulatory Materials in the United States for the First Product in lieu of AGIX, and (B) assume decision-making authority and responsibility for the preparation, submission and maintenance of Regulatory Materials and for interaction with Regulatory Authorities, with the JDC oversight as set forth in Section 6.3(b) and in accordance with the Development Plan, for any decisions concerning the First Product. Notwithstanding the foregoing, if Regulatory Approval for the First Product has not occurred within one hundred eighty (180) days of the Accelerated Assumption Payment, the Parties shall accept the label then proposed by the FDA for Regulatory Approval, so as to allow the Parties to promptly obtain U.S. NDA Approval for the First Product. (ii) If AstraZeneca makes the Accelerated Assumption Payment, AstraZeneca shall not be obligated to pay the U.S. NDA Approval Milestone. (d) Expenses (i) AGIX's Expenses. Prior to the Assumption Date, AGIX shall be responsible for the cost of preparing, submitting and maintaining the Regulatory Materials for the First Product in the United States. (ii) AstraZeneca's Expenses. AstraZeneca shall be responsible for the cost of preparing, submitting and maintaining the Regulatory Materials for (i) the First Product (a) in the United States after the Assumption Date, and (b) in all of the other countries other than the United States in the Territory and (ii) for all other Product(s) in the Territory. (iii) Cooperation Expenses. Each Party shall bear its own expenses incurred in cooperating with the owner of the Regulatory Materials or participating in the preparation, submission and maintenance of Regulatory Materials pursuant to this Section 3.2. (e) Ownership (i) Prior to the Assumption Date, AGIX shall own all Regulatory Materials and any applications and other filings made with the FDA relating to the First Product. (ii) Promptly after the Assumption Date as the Parties agree is appropriate, but no later than promptly after the date of U.S. NDA Approval, AstraZeneca shall own all Regulatory Materials and any applications and other filings made with the FDA relating to the First Product. (iii) AstraZeneca shall own all Regulatory Materials and any applications and other filings made with a Regulatory Authority relating to the First Product in all countries other than the United States in the Territory. Prior to the transfer of ownership of the Regulatory Materials to AstraZeneca as described in 21 Section 3.2(e)(ii), AGIX shall provide a right of reference to the Regulatory Materials and shall take all action necessary to effect such right of reference, to the extent necessary or useful for AstraZeneca to pursue Regulatory Approval of Products in countries other than the United States. (iv) AstraZeneca shall own all Regulatory Materials and any applications and other filings made with a Regulatory Authority relating to any other Product(s) in the Territory. (v) Notwithstanding anything in this Agreement to the contrary: (A) AGIX may keep archival copies of all Regulatory Materials that AGIX creates or receives during the Term; (B) AstraZeneca shall provide to AGIX promptly after their creation, and AGIX may keep, archival copies of any material Regulatory Materials (as agreed upon by the Parties) created subsequent to the Assumption Date, or in connection with Regulatory Materials created or received by or on behalf of AstraZeneca pursuant to this Agreement at any time during the Term, including without limitation Section 3.2(e)(i)-(iv); (C) AGIX shall have the right to use Regulatory Materials (including study protocols, study results, analytical methodologies, bulk and final product manufacturing process descriptions, batch records, vendor qualifications, validation documentation, and regulatory documentation) for its own internal use in connection with its research, development and commercialization activities consistent with the requirements of this Agreement but shall remain obligated under Section 10 with respect to such Regulatory Materials. (f) Periodic Updates. The owner of the Regulatory Materials shall be exclusively responsible (with reasonable cooperation from the other Party as may be requested by the owner of the Regulatory Materials from time to time) for all post-approval updates to Regulatory Materials, such as annual updates, supplements and amendments and routine maintenance of the submissions of the Regulatory Materials that must be provided on a Product at periodic intervals to the Regulatory Authorities. In addition, the owner of the Regulatory Materials shall be the sponsor of all filings for Indications. (g) Relationship with Regulatory Authorities. The Party who owns the Regulatory Materials shall have primary responsibility for interacting with Regulatory Authorities, chairing meetings with such Regulatory Authorities, responding to inquiries of such Regulatory Authorities, and other communications with such Regulatory Authorities, with regard to such Regulatory Materials or a Product, including but not 22 limited to, Regulatory Materials related to Indications and Drug Devices. Each Party shall provide to the other Party copies of any material Regulatory Materials (and any updates thereto and any other Regulatory Materials reasonably requested by a Party) submitted to Regulatory Authorities, within five (5) days of such Party's submission thereof to such Regulatory Authorities . 3.3 Regulatory Authority Communications and Cooperation Between the Parties (a) General. Each Party shall provide the other Party with a copy of all material correspondence received from a Regulatory Authority (and any other correspondence reasonably requested by a Party). Each Party shall consult and cooperate with the other Party in the preparation of its Regulatory Materials and any meetings or other correspondence with a Regulatory Authority. Each Party shall further consult with and keep the other Party regularly and fully informed of, the preparation, Regulatory Authority review and approval of NDA filings for which such Party is responsible. Each Party agrees to consider in good faith any comments or suggestions made by the other Party in relation to any Regulatory Materials, but the Party responsible for submitting such Regulatory Materials shall have the final authority to determine the content of such Regulatory Materials. In the event a Party is meeting in person or by telephone with or has a hearing before any Regulatory Authority, such Party shall provide the other Party with reasonable advance notice of the time and date of such meeting or hearing and any preparatory material for use in such meeting or hearing and a reasonable number of representatives of the other Party shall have the right to attend such hearing or meeting. (b) Communications With Regulatory Authorities. Except as otherwise provided in the Development Plan, the Party that does not own any particular Regulatory Materials shall not, without the prior consultation with, and agreement of the owner of the Regulatory Materials, or unless so required by law, correspond or communicate with Regulatory Authorities concerning a Product covered by such Regulatory Materials or any Regulatory Materials related thereto. Each Party shall keep the other Party informed of notification of any action by, or notification or other information which it receives (directly or indirectly) from any Regulatory Authority which: (i) raises any material concerns regarding the safety or efficacy of a Product; (ii) indicates or suggests a potential material liability for either Party to third parties arising in connection with a Product; (iii) is reasonably likely to lead to a recall or market withdrawal of a Product; (iv) relates to a Product, Regulatory Materials, Promotional Materials, samples, package inserts, the Indications, labeling, expedited and periodic Adverse Event Reports, medical inquiries, Product Complaints, this Agreement or the Related Agreements, or (v) is otherwise important to the Development and/or Commercialization of the Product. (c) Communications from Regulatory Authorities. In the event that a Party receives any communication or questions from any Regulatory Authority, such 23 Party shall promptly notify the other Party. The owner of the Regulatory Materials shall then prepare the response to the communication (except for responses to FDA communications regarding a loss, theft, or significant loss of the other Party's Product samples). Before submitting a response to a Regulatory Authority regarding correspondence received by a Party, the owner of the Regulatory Materials shall give the other Party a reasonable and timely opportunity to comment on the response to the extent such response may affect the other Party's rights or obligations under this Agreement. If it is necessary for such other Party to respond to the FDA or any other Regulatory Authority, such Party shall seek the input and approval of the owner of the Regulatory Materials before responding. (d) Audit by Regulatory Authority. If a Regulatory Authority desires to conduct an inspection or audit of AstraZeneca or AGIX with regard to a Product or this Agreement, AstraZeneca and AGIX each agrees to cooperate with the Regulatory Authority and the other Party during such inspection or audit, including by allowing, to the extent practicable, a representative of the other Party to be present during the applicable portions of such inspection or audit. In the event a Party receives notice that a Regulatory Authority intends to conduct such an inspection or audit, such Party shall promptly notify the other Party of receipt of such notice. 3.4 Communications Concerning Product. The Parties shall mutually agree upon procedures for communication and handling of Product Complaints and medical inquiries concerning a Product. All Product Complaints concerning suspected or actual Product tampering, contamination or mix-up (e.g. wrong ingredients) shall be notified to the owner of the Regulatory Materials by telephone immediately and delivered in writing within twenty-four (24) hours of receipt of the same. Except as mutually agreed, the other Party shall not take any other action in connection with any such Product Complaint without the consent of the owner of the Regulatory Materials. 3.5 Records. Each Party shall maintain records, in sufficient detail and in appropriate good scientific manner, that shall fully and properly reflect all work done and results achieved in the performance of its activities under the Development Plan and the Commercialization Plan. Each Party shall have the right, during normal business hours and upon reasonable prior notice, to inspect those records of the other Party referred to herein that are necessary or useful to the inspecting Party for any appropriate purpose under this Agreement, including for the purposes of making any required filings with Regulatory Authorities in order to obtain Manufacturing approvals and/or Regulatory Approvals. Each Party shall have the right to copy any such records to the extent such Party is required to have a copy to comply with Applicable Laws. Each Party shall maintain such records and the information disclosed therein in confidence in accordance with Section 10.1. 24 3.6 Safety Matters (a) Information. Until the Assumption Date, AGIX shall provide AstraZeneca with all information necessary or desirable for AstraZeneca to comply with all Applicable Laws with respect to the Compounds and the Products, as the case may be. In furtherance thereof, AGIX shall (a) develop appropriate adverse experience reporting procedures, (b) provide to AstraZeneca any material information on the Compounds or Products from preclinical or clinical laboratory, animal toxicology and pharmacology studies, as well as serious or unexpected adverse experience reports from clinical trials and commercial experiences with the Compounds or Products, and (c) report and provide such information to AstraZeneca in such a manner and time so as to enable AstraZeneca to comply with all Applicable Law in countries for which Regulatory Approval is or will be sought or in which the Product is being developed, marketed or sold. (b) Records and Notice. Until the Assumption Date, AGIX shall (a) maintain a record of any and all complaints it receives with respect to the Compounds of the Products, (b) notify AstraZeneca in reasonable detail or any complaint received by it within ten (10) days after the event, and in any event in sufficient time to allow AstraZeneca to comply with all Applicable Law in any country in which the Product is being developed, marketed or sold. (c) Safety Agreement. The Parties shall, unless both Parties otherwise agree, after the Execution Date but before the Assumption Date, negotiate and execute a Safety Agreement containing appropriate provisions addressing safety issues relating to Products which is consistent with the terms of this Agreement and the Related Agreements. 4. COMMERCIALIZATION 4.1 Global Commercialization Team and U.S. Commercialization Team. So long as AGIX is not Developing, Commercializing or Promoting a Competing 1067 Product, AGIX shall be entitled to have up to three (3) representatives designated by AGIX, at AGIX's expense, attend, observe and participate in meetings of each of the Global Commercialization Team and U.S. Commercialization Team having the relevant experience and skill appropriate for service on such Teams. Such representatives shall be regular working members of the Global Commercialization Team and U.S. Commercialization Team. AstraZeneca shall provide AGIX office space at its facilities for such representatives to facilitate such participation; provided that such representatives shall comply with all policies and reasonable restrictions imposed by AstraZeneca. 4.2 Commercially Diligent Efforts. AstraZeneca shall use Commercially Diligent Efforts to Commercialize Product(s) in the Territory as set forth in Section 5. 25 4.3 Commercialization Plan (a) Commercialization Plan. Within ninety (90) days after the Effective Date, the Global Commercialization Team shall prepare and provide to the JMC for the JMC's approval an initial commercialization plan summarizing the plan for Commercializing the Product given the stage of the Product at the time of such plan (as such plan may be updated pursuant to Section 4.3(c), the "COMMERCIALIZATION PLAN"). Promptly following such approval, AstraZeneca shall implement the activities described in the Commercialization Plan, including, to the extent set forth in the Commercialization Plan, pre-launch market development, market research and activities to increase scientific awareness of the Product. (b) Content of the Commercialization Plan. An outline of the anticipated principal components of the Commercialization Plan is included in a letter delivered by AGIX to AstraZeneca on the date hereof. The Commercialization Plan as approved by the JMC pursuant to Section 4.3(a), and as updated from time to time pursuant to Section 4.3(c), shall include, at a minimum, the items listed in such Commercialization Plan outline, unless the Parties otherwise agree. Upon adoption, the Commercialization Plan shall describe the overall plan for Commercializing each Product during the first three years after Product Launch of such Product in (i) each of the countries in the Major Markets, (ii) the Secondary Market, and (iii) other countries in the Territory to the extent applicable. The Commercialization Plan shall include for each Product, without limitation, (A) a comprehensive marketing, sales, pricing, distribution and licensing strategy for such Product, including market research and activities to increase scientific awareness of the Product and pharmacoeconomic activities and programs to support pricing of the Product; (B) estimated date of Product Launch, market and sales forecasts, in numbers of patients and local currency, and competitive analysis for such Product; and (C) production and inventory forecasts. The Commercialization Plan shall include a budget which shall detail the levels of spending for all Commercialization activities covered by the Commercialization Plan and the allocation of projected sales support and time such sales support shall be spending on the Commercialization of each such Product. (c) Updates to the Commercialization Plan. At least once per Calendar Year, the Global Commercialization Team shall prepare an updated Commercialization Plan, which shall cover the ensuing three Calendar Years. The Global Commercialization Team shall provide all such updated Commercialization Plans to the JMC for review and approval. 4.4 Commercialization Activities of the Parties (a) Compliance with the Commercialization Plan. The Parties agree to carry out their activities under the Commercialization Plan. 26 (b) AstraZeneca Activities. AstraZeneca shall be responsible for the distribution and Commercialization of each Product in the Territory, subject to the terms and conditions of the Co-Promotion Agreement which provides for AGIX's rights to co-promote Product(s) in the United States. (c) AGIX Co-Promotion Activities. AGIX shall have the right to co-promote Product(s) and certain other products in the United States in accordance with the Co-Promotion Agreement; provided, however, that AGIX shall only use Promotional Materials supplied to AGIX by AstraZeneca to promote Product(s). (d) Commercialization Costs. Except as provided in the Co-Promotion Agreement, AstraZeneca shall bear all costs for the Commercialization of Product(s) in the Territory, including pre-approval and market development activities. (e) Pricing Decisions. AstraZeneca shall have sole responsibility for setting pricing for all Product(s), provided that the initial pricing for any Product(s) shall be subject to JMC approval. (f) Booking Sales. AstraZeneca (and, as appropriate, its Affiliates and Sublicensees) shall record on its books all sales of Products worldwide. 4.5 Commercial Manufacturing and Supply of Products (a) Supply of Compound in Spray Dried Form. The Manufacture and supply of the active pharmaceutical ingredient in a spray dried form shall be effected in accordance with the Transition Services Agreement. (b) Management. Subject to the terms of the Transition Services Agreement, the JMC shall oversee Manufacturing pursuant to the Development Plan and the Commercialization Plan. (c) Product Packaging, Labeling and Formulation. AstraZeneca shall be solely responsible, at its sole cost, for supplying all of the requirements of Product formulation, packaging and labeling. AGIX shall use Commercially Diligent Efforts to facilitate any necessary transfer of technology to AstraZeneca or a Third Party chosen by AstraZeneca for Product formulation, packaging and labeling. 5. DILIGENCE AND COOPERATION 5.1 Information Sharing (a) Cooperation. The Parties agree to fully cooperate in sharing information regarding Development and Commercialization, including Manufacturing, of Products in order to keep each Party informed of material developments and to provide 27 each Party with necessary information (including without limitation any decision not to pursue Commercialization of Products in a particular country as contemplated by the Commercialization Plan) for each Party to make decisions in the manner set forth in this Agreement on material issues as they arise. (b) Technology Transfer. Each Party agrees to use Commercially Diligent Efforts to facilitate any necessary transfer of technology to the other Party, as reasonably requested by such other Party, to support the Development and Commercialization of Products as contemplated by this Agreement. 5.2 Diligence Requirements (a) Product Development. Each Party shall use Commercially Diligent Efforts to conduct Development of Product(s) in accordance with the Development Plan. Each Party shall conduct its portion of the Development Program, in a good scientific manner and in compliance in all material respects with all requirements of Applicable Laws, including cGCPs, cGLPs and cGMPs, to Develop Products as provided in the Development Plan. Each Party shall use Commercially Diligent Efforts to provide the other Party with all reasonable assistance and take all actions reasonably requested by that Party, without changing the allocation of responsibilities assigned in the Development Plan or this Agreement, that are necessary or desirable to enable each Party to comply with the terms and intent of this Agreement. Each Party shall use Commercially Diligent Efforts to assist the other Party, as provided in the Development Plan, to conduct Development of and obtain Regulatory Approvals of Products. (b) Commercialization (i) AstraZeneca shall, itself or through its permitted Sublicensees, use Commercially Diligent Efforts to Commercialize Products in each Major Market. (ii) AstraZeneca shall, itself or through its Sublicensees, use Commercially Diligent Efforts to Commercialize Products in the Secondary Market. All of the countries comprising the Secondary Market shall for this purpose be considered together as one market as a whole. The level of Commercially Diligent Efforts made in the Secondary Market shall take into consideration the total commercial potential of Products in the Secondary Market taken as a whole. (iii) Each Party shall conduct its portion of the Commercialization Plan in compliance in all material respects with all requirements of Applicable Laws. (c) Coated Stents. AstraZeneca shall, itself or through its permitted Sublicensees, use Commercially Diligent Efforts to Develop and Commercialize a 28 Coated Stent in the United States if, after the first U.S. NDA Approval, the JMC approves Development of a Coated Stent. AstraZeneca shall not have any other obligation to use Commercially Diligent Efforts (or any other level of efforts) to Develop or Commercialize a Coated Stent prior to any such approval, or in any jurisdiction outside the United States. 5.3 Failure To Use Diligence (a) Notice of Failure. If AGIX believes that AstraZeneca is failing to satisfy its obligations to use Commercially Diligent Efforts in accordance with this Section 5, AGIX may give AstraZeneca notice of such alleged failure, which notice shall describe such failure with reasonable specificity. (b) AstraZeneca Response. Within thirty (30) days following AstraZeneca's receipt of any such notice from AGIX, AstraZeneca shall provide AGIX with a written response specifying, in reasonable detail, whether or not it agrees with AGIX's belief and the reasons for its disagreement, if applicable. (c) Disputes. In the event of a dispute between the Parties with respect to whether AstraZeneca is using its Commercially Diligent Efforts in accordance with Section 5, as evidenced by notice from AstraZeneca of a disagreement pursuant to Section 5.3(b), such dispute shall be resolved in accordance with Section 14. Neither Party may initiate dispute resolution under Section 14 until sixty (60) days after receipt by AGIX of a notice of disagreement described in Section 5.3(b). 6. GOVERNANCE 6.1 General. The activities of the Parties pursuant to this Agreement shall be governed by the Alliance Managers, the JMC, the JDC, the IPC and such additional committees as established by the JMC, as provided in this Section 6. 6.2 Alliance Managers (a) Appointment and Roles. Promptly after the Effective Date, each of the Parties shall appoint a single individual to act as that Party's alliance manager (the "ALLIANCE MANAGER"). The role of the Alliance Managers is to facilitate the relationship between the Parties. Alliance Managers may attend JMC meetings, JDC meetings and any other meetings of additional committees or subgroups established by the JMC pursuant to Section 6.1 and shall support the chairpersons of each such committee and group in the discharge of their responsibilities. Alliance Managers shall be nonvoting participants in such Committee meetings, unless they are also appointed members of such Committee. Each Party's Alliance Manager shall alternate serving as the secretary to the JMC on an annual basis, starting with AGIX. 29 (b) Availability of Facilities. Each Party shall allow the other Party's Alliance Manager to spend any amount of time at the other Party's offices as is necessary for the other Party to perform its activities under this Agreement; provided that, each Alliance Manager shall comply with all policies and reasonable restrictions imposed by the Party hosting such Alliance Manager. (c) Changes in Alliance Managers. Each Party may change its designated Alliance Manager from time to time upon written notice to the other Party. 6.3 Committees (a) JMC (i) Formation and Duration. No later than thirty (30) days after the Effective Date, the Parties shall establish a Joint Management Committee ("JMC"). (ii) Activities of the JMC. The JMC shall be responsible for overall strategic and operational direction of the Collaboration, including without limitation: (A) developing and implementing accountability mechanisms for the JDC, IPC and any other committees formed under this Agreement; (B) overseeing the Manufacture of Product for commercial sales; (C) reviewing and approving the Commercialization Plan and Development Plan and any amendments thereto; (D) making decisions regarding Development for Indications and Combination Products and any Coated Stent or other Drug Device following the first Regulatory Approval of the first Product (however, the JMC will consider and plan, but not decide, such activities prior to such Regulatory Approval); provided that, the JMC shall have no obligation to approve Development for Combination Products that include Exclusive Market Products; (E) establishing additional committees or subgroups as the JMC deems necessary or appropriate; and (F) Product life cycle management relating to the Products. 30 (iii) Composition. Each Party shall designate up to four (4) representatives and a nonvoting Alliance Manager for membership on the JMC having the relevant experience and skill appropriate for service on the JMC. (iv) Meetings. During the Term and unless otherwise agreed to by the Parties, the JMC shall meet a minimum of four times each Calendar Year in accordance with a schedule determined by the Parties and to be held in Atlanta, Georgia or Puerto Rico, unless the Parties otherwise mutually agree. Additional ad hoc meetings of the JMC may be called by either Party upon reasonable advance notice to the other Party. A Party may attend any meeting of the JMC by teleconference, video or Webex. (b) JDC (i) Formation and Duration. No later than thirty (30) days after the Effective Date, the Parties shall establish a Joint Development Committee ("JDC"). (ii) Activities of the JDC. The JDC shall be responsible for oversight of all Development, including without limitation the following: (A) clinical trials (including Phase IV trials) of a Product; (B) preparing for approval by the JMC the Development Plans and the budgets of Development Costs and overseeing the implementation thereof ; (C) proposing updates and amendments to the Development Plan for approval by the JMC; (D) reviewing protocols for clinical studies of a Product; (E) reviewing and overseeing regulatory strategies for each Product (F) reviewing and approving the final Statistical Analysis Plan; and (G) reviewing, prior to its submission to the Third Party statistician of the ARISE Study, the ARISE Results. (iii) Composition. AGIX shall designate three (3) representatives and AstraZeneca shall designate three (3) representatives for membership on the JDC having the relevant experience and skill appropriate for service on the JDC. 31 (iv) Meetings. Prior to U.S. NDA Approval for the First Product, the JDC shall meet at least once a month. After U.S. NDA Approval and unless otherwise agreed to by the Parties, the JDC shall meet at least four times each Calendar Year. Such meetings shall be in accordance with a schedule and at a location mutually determined by the Parties. Ad hoc meetings of the JDC may be called by either Party upon reasonable advance notice to the other Party. Upon mutual agreement, such ad hoc meetings may be face-to-face or by teleconference, video or Webex. (c) Representatives. The Parties, through the committee structure, may establish and later change the number of representatives on the JMC or JDC committee as long as an equal number of representatives from each of AstraZeneca and AGIX are maintained. Each Party may change its representatives to the JDC or JMC at any time by written notice to the other Party. (d) Committee Chairs. The JMC shall be co-chaired by AstraZeneca and AGIX. Prior to the earlier of (a) the date U.S. NDA Approval is received and (b) the date that AstraZeneca makes an Accelerated Assumption Payment, the JDC shall be chaired by a representative of AGIX. After such date, the JDC shall each be chaired by a representative of AstraZeneca. (e) Expenses. Each Party shall bear the expense of the participation of its respective members and the Alliance Managers in the JMC and JDC meetings. (f) Agenda and Minutes. At least five (5) Business Days prior to each JDC or JMC meeting, each Party shall provide written notice to the other Party of agenda items proposed by such Party for discussion or decision at such meeting, together with appropriate information related thereto. At least two (2) Business Days prior to each JDC or JMC meeting, each Party shall provide written copies to the other Party of all presentations to be made at such meeting. Reasonably detailed written minutes shall be kept of all JDC and JMC meetings and shall reflect, without limitation, material decisions made at such meeting. Responsibility for keeping the JMC minutes shall alternate between the co-chairs of each Party, beginning with AstraZeneca. The chairperson of the JDC shall be responsible for keeping the JDC minutes. Meeting minutes shall be sent to each committee member for review and approval within five (5) Business Days after such meeting. Minutes shall be deemed approved unless a committee member objects to the accuracy of such minutes within ten (10) Business Days of receipt. (g) Decision-making (i) Decisions. The Parties' representatives on the JMC and JDC shall use all reasonable efforts, acting in good faith, to resolve all issues presented to them as expeditiously as possible. Each Party's representatives on the JMC and JDC shall make decisions by consensus. All JMC and JDC decisions shall be made by unanimous vote, and each Party's representatives shall collectively have one vote. 32 (ii) Decision-making Authority. Notwithstanding anything to the contrary, neither the JDC or the JMC shall have the authority to determine any of the matters for which (i) one or more of the Parties is allocated decision-making authority elsewhere in this Agreement or (ii) the Agreement provides that the matter in question is explicitly a matter requiring the mutual or joint agreement of the Parties. Each of the JDC and JMC shall be deemed to have a quorum if they have at least two (2) designated representatives from each Party. A quorum shall also be deemed to have been achieved if at least ten (10) Business Days written notice of a meeting, including a proposed agenda, has been provided for a meeting held by telephone conference or in Atlanta, Georgia or Puerto Rico. (iii) Disputes (A) JDC Disputes. The JDC, or either Party, may, after thirty (30) days (or such other period as the Parties otherwise agree) of good faith efforts to reach a unanimous decision on an issue, refer any unresolved issue to the respective heads of the appropriate department for each Party. If the department heads can not resolve such issue within ten (10) days, then such issue shall be referred to the JMC. (B) JMC Disputes. The JMC or either Party may, after thirty (30) days (or such other period as the Parties may otherwise agree) of good faith efforts to reach a unanimous decision on an issue refer such issue to the officers set forth in Section 14.1(b), or their designee. Such officers of the Parties shall meet promptly thereafter and shall negotiate in good faith to resolve the issues. If the issues were raised by the JDC and if they cannot resolve the issue within thirty (30) days of commencing negotiations, prior to the earlier of (i) the date U.S. NDA Approval is received and (ii) the date upon which AstraZeneca makes an Accelerated Assumption Payment, the resolution of such issue shall be determined by AGIX. For all other JMC issues, the resolution of any such issue shall be determined by AstraZeneca. (iv) Decisions Affecting Development and Commercialization Plans. Notwithstanding anything in this Section 6 to the contrary: (A) no decision by the JDC or the JMC shall affect AstraZeneca's control of all aspects regarding the Commercialization of Products; (B) neither Party's rights and obligations as contained in this Agreement can be amended without such Party's consent; (C) prior to the Assumption Date, no decision by the JDC or the JMC shall increase AstraZeneca's development obligations as set forth in the Development Plan Outline or AstraZeneca's commercialization obligations 33 as set forth in the Commercialization Plan outline included in a letter delivered by AGIX to AstraZeneca on the date hereof, without the consent of AstraZeneca; and (D) after the Assumption Date, AstraZeneca shall have authority to determine the resolution of any disagreement in the JMC with respect to the approval of the Development Plan governing activities following U.S. NDA Approval, even if such Development Plan was approved prior to U.S. NDA Approval. (h) IPC. No later than thirty (30) days after the Effective Date, the Parties shall establish an Intellectual Property Committee ("IPC"). The IPC shall be responsible for overseeing all intellectual property matters as further described in Section 9. The IPC shall be governed by the rules and procedures set forth in Section 9.2. 7. LICENSES AND COVENANTS 7.1 License Grants to AstraZeneca (a) License to AGIX IP. Subject to the terms of this Agreement, including Section 7.1(b) and Section 7.1(c), and AGIX's retained rights solely to the extent necessary to perform it obligations under the Transition Services Agreement, AGIX hereby grants to AstraZeneca an exclusive license, with the right to sublicense, under the AGIX Compound Patents, Other AGIX Patents and AGIX Know-How (other than as set forth in Exhibit 11.5), to research, develop, make, have made, use, sell, have sold, offer for sale and import the Compound and Products in the Field in the Territory. (b) Distribution and Co-Promotion (i) Neither AstraZeneca nor its Affiliates shall be permitted to appoint distributors to distribute, market or sell Products in any Major Market [****] without the prior approval of AGIX. (ii) AstraZeneca and its Affiliates shall have the right, in their sole discretion, to appoint distributors to distribute, market and sell the Products [****] and in any other countries in the Territory that are not part of the Major Market. (iii) AstraZeneca and its Affiliates shall have the right, in their sole discretion, to co-promote the Products with Third Parties in countries other than the Major Market and to appoint Third Parties to promote the Products in such countries. (iv) Notwithstanding the foregoing, AstraZeneca may appoint any Affiliate to distribute, market or sell Products without restriction. - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 34 (v) Notwithstanding anything herein to the contrary, AstraZeneca may engage contract sales organizations to Promote Products, provided that any sales of Products effected by any such organization are booked by AstraZeneca. (c) Sublicenses (i) Neither AstraZeneca nor its Affiliates shall be permitted to enter into any Noncompulsory Sublicenses in any Major Market [****] without the prior approval of AGIX. (ii) AstraZeneca and its Affiliates shall be permitted to enter into Compulsory Sublicenses and Noncompulsory Sublicenses in any country in the Territory other than a Major Market on the terms set forth in this Section 7.1(c). (iii) AstraZeneca and its Affiliates shall not enter into any Noncompulsory Sublicense of the rights granted in this Agreement with a Sublicensee to the extent permitted in this Section 7.1(c) unless the Sublicensee agrees to all applicable terms of this Agreement. (iv) No Compulsory Sublicenses or Noncompulsory Sublicense shall relieve AstraZeneca of any obligations it has under this Agreement. (v) AstraZeneca shall promptly notify AGIX upon entering into any Compulsory Sublicense and any Noncompulsory Sublicense. (vi) Notwithstanding the foregoing, AstraZeneca may enter into any Sublicense with any Affiliate without restriction, except as described in clauses (iii) and (iv) of this Section 7.1(c). (vii) All Sublicensees shall be bound by the provisions of Section 10 of this Agreement. 7.2 License Grants to AGIX. Subject to the terms and conditions of this Agreement, AstraZeneca hereby grants to AGIX a non-exclusive, royalty-free license, with the right to sublicense, under AstraZeneca IP and AGIX IP, to Develop, Manufacture and Commercialize the Compound and Products in the Field only to the extent necessary for AGIX to perform its obligations and exercise its rights under this Agreement and the Transition Services Agreement. AGIX shall promptly notify AstraZeneca upon entering into any sublicense under this Section 7.2. All such sublicensees shall be bound by the provisions of Section 10 of this Agreement. 7.3 Rights Acquired from Third Parties (a) Option. In the event that AGIX acquires or licenses, or has the opportunity to acquire or license, rights from any Third Party (other than the Pre-Existing - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 35 Third Party Licenses) that, if Controlled by AGIX would be Licensed Patents or AGIX Know-How, and where AGIX is required to pay upfront payments, royalties, milestones or other payments to such Third Party for such rights, then: (i) AGIX shall send AstraZeneca a written notice within thirty (30) days of when AGIX has licensed or otherwise acquired such rights; (ii) AstraZeneca shall have the option to acquire a Non-Exclusive Sublicense to such rights to Develop, Manufacture and Commercialize the Compound and Products in the Field during the Term from any Party where AGIX is required to pay royalties, milestones or other payments (including upfront payments) to such Third Party for such rights (to the extent that such Third Party permits such Sublicense to be granted to AstraZeneca); provided that AstraZeneca reimburses AGIX for a portion of the amounts paid by AGIX to such Third Party that are reasonably allocable to AstraZeneca as agreed to by the Parties based on the value to AstraZeneca of such Sublicense relative to its use by AGIX and Third Parties for other purposes; and (iii) The option described in this Section 7.3 may be exercised by written notice to AGIX at any time within sixty (60) days after receipt of the written notice described in Section 7.3(a)(i), which shall be accompanied by an undertaking by AstraZeneca to pay to AGIX the payments required by this Section 7.3. (b) Participation in Discussion with Third Parties. To the extent practicable and permitted, if AGIX identifies any rights described in Section 7.3(a) that are controlled by a Third Party and that were developed independently of AGIX and where AGIX is considering acquiring such rights solely for use in Development and Commercialization of the Compound and Products, AGIX shall permit AstraZeneca to participate in any discussions with such Third Party regarding obtaining a Sublicense to any such rights. 7.4 Covenants Concerning the Products, the Compound and the Field (a) Expansion of Field for the Compound. In the event that AGIX can reasonably demonstrate that the exploitation of the Compound in an indication outside of the Field (the "EXPANDED FIELD INDICATION") presents a reasonable commercial opportunity, then AGIX may, but shall not be required to, present to AstraZeneca all relevant information demonstrating such opportunity for the Compound in the Expanded Field Indication (the "INDICATION INFORMATION"). Any dispute regarding whether an Expanded Field Indication presents reasonable commercial opportunity shall be resolved in accordance with Section 14 of this Agreement. For the [****] Expanded Field Indications, within thirty (30) days of receipt of the Indication Information, (i) AstraZeneca shall pay to AGIX [****] and (ii) the Field shall automatically be expanded to include the Expanded Field Indication. Following the [****] payments of the Indication Fee as described in the preceding sentence, upon delivery of Indication Information regarding additional Expanded Field Indications, the - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 36 Field shall automatically be expanded to include such Expanded Field Indications, but no further Indication Fees shall be due to AGIX. AstraZeneca shall be free to Develop, Commercialize and Manufacture, in its discretion, the Compound and any Product within any Expanded Field Indication. The provisions of Articles 2, 3, 4, 5, 6 and Sections 8.1, 8.2 shall not apply to any Development, Manufacture or Commercialization of a Product within the Expanded Field Indication. AGIX shall not directly or indirectly Develop, Commercialize or Manufacture the Compound other than pursuant to this Agreement. (b) Expansion of Field for Probucol Analogs. In the event that AGIX can reasonably demonstrate that the exploitation of a Probucol Analog in the Field (the "LICENSED PROBUCOL ANALOG") presents a reasonable commercial opportunity, then AGIX may, but shall not be required to, present to AstraZeneca all relevant information demonstrating such opportunity for such Licensed Probucol Analog (the "PROBUCOL ANALOG INFORMATION"). Any dispute regarding whether an Licensed Probucol Analog presents reasonable commercial opportunity shall be resolved in accordance with Section 14 of this Agreement. For the [****] Licensed Probucol Analogs, within thirty (30) days of receipt of the Indication Information, (i) AstraZeneca shall pay to AGIX [****] and (ii) the definition of Compound under this Agreement shall automatically be expanded to include the Licensed Probucol Analog. Following the [****] payments of the Probucol Analog Fee as described in the preceding sentence, upon delivery of Probucol Analog Information regarding additional Licensed Probucol Analogs, the definition of Compound shall automatically be expanded to include such Licensed Probucol Analogs, but no further Probucol Analog Fee shall be due to AGIX. AstraZeneca shall be free to Develop, Manufacture and Commercialize, in its discretion, any Licensed Probucol Analog within the Field. The provisions of Articles 2, 3, 4, 5, 6 and Sections 8.1, 8.2 shall not apply to any Development, Manufacture or Commercialization of a Licensed Probucol Analog within the Field. AGIX shall not directly or indirectly Develop, Manufacture or Commercialize any Probucol Analog in the Field other than the Development, Manufacture or Commercialization of Products pursuant to this Agreement and otherwise pursuant to this Section. (c) Cooperation (i) Subject to Section 7.4(c)(iii), AGIX shall consult with AstraZeneca prior to engaging in any activity that AGIX believes could violate the requirements of this Section 7.4. As part of such consultation, AGIX shall provide to AstraZeneca such information as AstraZeneca reasonably requests to assist AstraZeneca in discussing such activities. (ii) Subject to Section 7.4(c)(iii), AstraZeneca may at any time initiate discussions with AGIX if AstraZeneca reasonably believes that AGIX has been violating or could violate the requirements of this Section 7.4. AGIX shall provide to AstraZeneca such information as AstraZeneca reasonably believes is necessary to assist - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 37 AstraZeneca in considering whether such activities constituted or could constitute such a violation. (iii) AGIX may, in lieu of consulting with AstraZeneca pursuant to Section 7.4(c)(i) or Section 7.4(c)(ii), or in lieu of providing information pursuant to either such section, elect to seek an opinion from a neutral outside patent counsel with appropriate legal and technical credentials as to whether a compound to be developed, manufactured or commercialized by AGIX is a Probucol Analog in the Field. AGIX shall inform AstraZeneca in writing promptly upon making any such election. AGIX shall select the neutral outside patent counsel from the list of appropriate outside patent counsel created by the IPC pursuant to Section 9.2(c)(i). Such counsel shall not disclose to AstraZeneca any discussions between AGIX and the counsel, or any other information provided to such counsel by AGIX. AGIX shall provide to AstraZeneca a copy of any such opinion, with such opinion to be redacted as AGIX reasonably considers appropriate to protect AGIX's proprietary interests. In the event such counsel determines that, in such counsel's opinion, the compound AGIX proposes to develop, manufacture or commercialize is not a Probucol Analog in the Field, AGIX shall (assuming its activities otherwise comply with Section 7.4(b)) be permitted to continue engaging in such activities subject to AstraZeneca's further right to initiate discussions pursuant to Section 7.4(c)(ii); provided, however, that to the extent AstraZeneca disagrees with such determination, AstraZeneca may refer such issue to arbitration in accordance with Section 14. In the event such counsel determines that, in such counsel's opinion the compound proposed to be developed, manufacture or commercialized is a Probucol Analog in the Field, AGIX shall cease such activities promptly; provided, however, that to the extent that AGIX disagrees with such determination, AGIX may refer the issue to arbitration in accordance with Section 14. If such neutral patent counsel determines that such compound is not a Probucol Analog in the Field and AstraZeneca refers such issue to arbitration pursuant to Section 14, AGIX shall be permitted to continue such activities during the pendency of such arbitration proceedings. (d) AGIX Activities Outside this Agreement. AstraZeneca shall not take any action that would prevent appropriate cardiovascular safety studies on Probucol Analogs being developed for therapeutic uses outside the Field, including, but not limited to, preclinical studies and clinical studies such as Thorough QT Studies or long-term cardiovascular safety studies required by Regulatory Authorities for clinical development and registration of such compounds for indications outside the Field; provided that no such study shall result in a label for a Probucol Analog that would permit a promotable efficacy claim in the Field. (e) Equitable Remedies. Each Party acknowledges that its breach of Section 7.4 would cause the other Party irreparable injury for which it would not have an adequate remedy at law. In the event of such a breach, the non-breaching Party shall be entitled to obtain injunctive relief, without the need to show damages or harm, in addition to any other remedies it may have at law or in equity. 38 (f) Certain AstraZeneca Actions Involving AGIX Patents. AstraZeneca shall not (i) directly or indirectly oppose, or assist any Third Party to oppose, in any patent office or court proceeding, the grant of any patent or patent application within the Licensed Patents, and, in any patent office or court proceeding, dispute or directly or indirectly assist any Third Party to dispute, the validity of any patent within the Licensed Patents or any of the claims thereof, including opposing any application for amendment thereto; or (ii) bring any claim or proceedings of whatever nature in relation to the Licensed Patents against AGIX and AGIX's Affiliates (and in respect of the foregoing their directors and officers) in respect of any activities carried out by them under any Licensed Patents which may be the subject of a Valid Patent Claim of the Licensed Patents; provided, however, that the foregoing shall not prohibit AstraZeneca from bringing an action against AGIX as the result of any breach of a representation, warranty, covenant or obligation by AGIX or Affiliates or otherwise under or arising out of this Agreement. (g) Non-solicitation. During the Term, neither Party, nor any of its Affiliates, or Representatives of such Party or Affiliate, shall, in any manner, directly or indirectly, independently, in concert with a Third Party, or on behalf of a Third Party, solicit to employ any of the officers or management employees of the other Party, or of any Affiliate of such other Party, as well as any employee in such other Party's, or the other Party's Affiliate's, research department, without in any such case obtaining the prior written consent of such other Party; provided that nothing herein prevents a Party from making general solicitations not directed to the other Party's or the other Party's Affiliate's employees, such as customary advertisements or website postings. 8. PAYMENTS AND REPORTS 8.1 Upfront Payment. In partial consideration for the licenses and other rights granted in this Agreement and the Related Agreements, AstraZeneca shall pay to AGIX a nonrefundable, noncreditable payment of Fifty Million Dollars (US $50,000,000) within three (3) Business Days following the Effective Date. Such payment shall be made in immediately available funds via a Federal Reserve electronic wire transfer to a bank account designated by AGIX. 8.2 Milestone Payments (a) Timing of Payment (i) The Parties shall be obligated to pay the milestones described in this Section 8 upon occurrence of the applicable milestone event and a notice from the Party that first becomes aware of the event to the other Party. 39 (ii) The Party obligated to pay the milestone shall have fifteen (15) days following receipt of each notification of the achievement of a Development Milestone listed below and the milestone listed in Section 8.2(e) in which to pay the corresponding amount to the other Party in immediately available funds via a Federal Reserve electronic wire transfer to an account designated by such receiving Party. (iii) Each Commercial Milestone listed below shall be payable with the Royalty due for the fourth Calendar Quarter of the Calendar Year in which the Commercial Milestone is met for the first time. If more than one Commercial Milestone is achieved in any Calendar Year, all Commercial Milestones due for such Calendar Year shall be payable with the Royalty due for the fourth Calendar Quarter of the Calendar Year in which the Commercial Milestones are met. (b) Disclosure of Development Milestone Obligation. Each Party shall inform the other Party within five (5) days of the achievement of any such Development Milestone by such Party, its Affiliate or Sublicensee, and shall provide the other Party with substantiation of the achievement of the milestone. (c) No Multiple Milestones. Each Development Milestone and Commercial Milestone shall be payable one time only and not for each Product or Indication or for each time that the "Annual Net Sales" (total Net Sales in a Calendar Year) exceeds a certain amount. 40 (d) Milestones Payable to AGIX
Payment Amount -------------- Development Milestones [****] TOTAL ACHIEVABLE DEVELOPMENT MILESTONES ...................................... $ 300 MILLION Commercial Milestones [****] TOTAL ACHIEVABLE COMMERCIAL MILESTONES .............................. $ 650 MILLION
Notwithstanding the foregoing, the [****] period specified for [****] shall be tolled (i.e., extended) for an additional period equal to the number of days between when it is determined that there are Final Arise Results and the date that AstraZeneca advises AGIX that it has initiated a CMIT Study. (e) Milestone Payable to AstraZeneca. AGIX shall pay AstraZeneca [****] upon Product Launch of a Coated Stent in the United States. 8.3 Royalties. AstraZeneca will pay to AGIX Royalties as provided in this Section 8.3. (a) Royalties for Sales in [****] During [****]. Except as provided in Section 8.4, for each of the first three Calendar Quarters of each Calendar Year during the applicable Royalty Term, AstraZeneca will pay AGIX, no later than forty-five (45) days following the end of each such Calendar Quarter, the following Royalties on Net Sales for such Calendar Quarter at the applicable royalty rates based on Annualized - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 41 Quarterly Net Sales of all Products sold in the [****], subject to adjustment in accordance with Section 8.4: (i) [****] if such Annualized Quarterly Net Sales are less than or equal to [****]; (ii) [****] if such Annualized Quarterly Net Sales are greater than [****] and less than or equal to [****]; (iii) [****] if such Annualized Quarterly Net Sales are greater than [****]and less than or equal to [****]; (iv) [****] if such Annualized Quarterly Net Sales are greater than [****] and less than or equal to[****]; (v) [****]if such Annualized Quarterly Net Sales are greater than [****] and less than or equal to [****]; and (vi) [****]if such Annualized Quarterly Net Sales are greater than[****] and less than [****]. The percentage rate specified in Sections 8.3(a)(i) through (vi) above shall apply to all Net Sales and not just Net Sales above the levels specified in each subsection. For example, if Net Sales in [****] for a Calendar Quarter are [****], the Royalty payable to AGIX for such sales would be [****]. For Annualized Quarterly Net Sales in [****] in excess of [****], a Royalty of[****] plus an additional Royalty of [****] of the amount in excess of [****] shall be paid. Thus, for example, if Net Sales in [****] for a Calendar Quarter are [****], the Royalty payable to AGIX for such sales would be [****]. (b) Royalties for Sales Outside [****] During [****]. Except as provided in Section 8.4, for each of the first three Calendar Quarters of each Calendar Year during the applicable Royalty Term, AstraZeneca will pay AGIX, no later than forty-five (45) days following the end of each such Calendar Quarter, the following Royalties on Net Sales for such Calendar Quarter at the applicable royalty rates based on the aggregate Annualized Quarterly Net Sales of all Products sold in all countries and jurisdictions in the Territory other than [****], subject to adjustment in accordance with Section 8.4: (i) [****] if such Annualized Quarterly Net Sales are less than or equal to [****]; (ii) [****]if such Annualized Quarterly Net Sales that are greater than [****]and less than or equal to [****]; - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 42 (iii) [****] if such Annualized Quarterly Net Sales are greater than [****] and less than or equal to [****]; and (iv) [****] if such Annualized Quarterly Net Sales are greater than [****]. The percentage rate specified in Sections 8.2(b)(i) through (iv) above shall apply to all Net Sales, and not just Net Sales above the levels specified in each subsection. Thus, for example, if Net Sales in all countries in the Territory [****] for a Calendar Quarter are [****], the Royalty payable to AGIX for such sales would be [****]. (c) Royalties Payable for the Fourth Calendar Quarter of Each Calendar Year. Except as provided in Section 8.4, although Royalties payable for the first three Calendar Quarters of each Calendar Year are based on Annualized Quarterly Net Sales pursuant to Section 8.3(a) and Section 8.3(b), total Royalties for each Calendar Year shall be based on total Net Sales for such Calendar Year. As the level of Annualized Quarterly Net Sales in each Calendar Quarter of a given Calendar Year increases or decreases, the Royalty payable for the fourth Calendar Quarter of such Calendar Year shall be adjusted so that the total Royalties due for such Calendar Year are paid for total Net Sales for the entire Calendar Year rather than Annualized Quarterly Sales. Thus, notwithstanding anything in this Section 8.3 to the contrary, Royalties owed and paid in respect of the fourth Calendar Quarter of each Calendar Year during the Term (and in respect of the final Calendar Quarter of the Term if it is not a fourth Calendar Quarter) shall be determined in accordance with this Section 8.3(c). (i) First, Royalties owed for Net Sales for the entire Calendar Year [****]shall be determined as follows, subject to adjustment in accordance with Sections 8.4: (A) [****] if such total Net Sales for such Calendar Year are less than or equal to [****]; (B) [****] if such total Net Sales for such Calendar Year are greater than [****] and less than or equal to [****]; (C) [****] if such total Net Sales for such Calendar Year are greater than [****] and less than or equal to [****]; (D) [****] if such total Net Sales for such Calendar Year are greater than [****]and less than or equal to [****]; (E) [****] if such total Net Sales for such Calendar Year are greater than [****] and less than or equal to [****]; - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 43 (F) [****] if such total Net Sales for such Calendar Year are greater than [****] and less than [****]. For total Net Sales for such Calendar Year [****] in excess of [****], a Royalty of [****] plus an additional Royalty of [****] of the amount in excess of [****] shall be paid. (ii) Second, Royalties owed for Net Sales for the entire Calendar Year for [****] shall be determined as follows, subject to adjustment in accordance with Section 8.4: (A) [****] if such total Net Sales for such Calendar Year are less than or equal to [****]; (B) [****] if such total Net Sales for such Calendar Year are greater than [****] and less than or equal to [****]; (C) [****]if such total Net Sales for such Calendar Year are greater than [****] and less than or equal to [****]; and (D) [****] if such total Net Sales for such Calendar Year are greater than [****]. (iii) Third, the sums determined pursuant to Section 8.3(c)(i) and Section 8.3(c)(ii) shall be added together. (iv) Fourth, the total Royalties paid by AstraZeneca in respect of the first three Calendar Quarters for such Calendar Year shall be subtracted from the amount determined pursuant to Section 8.3(c)(iii). (v) Finally, the Royalty due and payable in respect of the fourth Quarter of the Calendar Year shall equal the amount determined pursuant to Section 8.3(c)(iv). (vi) For example, if total Royalties paid in the first three Calendar Quarters of a given Calendar Year are [****], and Net Sales for such Calendar Year [****] are [****] and Net Sales for such Calendar Year for [****] are [****], and there are no adjustments pursuant to Section 8.4, the Royalty due for the fourth Calendar Quarter of such Calendar year is [****]. 8.4 Adjustments and Changes to Royalty Rates in Certain Circumstances (a) End of Royalty Term. Notwithstanding anything else to the contrary in Section 8.3, if, during the applicable Royalty Term in any country in the Territory, there ceases to be a Valid Patent Claim of a Licensed Patent, Joint Patent or - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 44 AstraZeneca Patent that would preclude a Third Party from developing, making, using, selling or importing such Product in such country, then during the remainder of the applicable Royalty Term, Royalties payable pursuant to this Section 8 shall be reduced in such country so that they would equal [****] of the Royalties that otherwise would have applied during such period in such country (taking into account all adjustments, including those under subsections (b) through (f) below), but for this Section 8.4(a). For example, if Net Sales [****] for the first Calendar Quarter of a particular Calendar Year was [****] and further assuming that on the day immediately preceding such Calendar Quarter there ceases to be a Valid Patent Claim of a Licensed Patent, Joint Patent or AstraZeneca Patent that would preclude a Third Party from developing, making, using, selling or importing such Product [****], and if the Net Sales [****] for such first Calendar Quarter was [****] (and further assuming that there were not other sufficient Net Sales [****] that increased the applicable royalty rate to more than [****]), then the Royalty payable to AGIX for such sales [****] would be [****]. Any such Royalties shall be payable at the times and under the circumstances otherwise provided in this Section 8. (b) Third Party Royalties (i) The Royalties required to be paid with respect to any particular country and any particular Calendar Quarter pursuant to Section 8.3 shall be subject to a reduction by AstraZeneca in an amount equal to [****] of the amount of Third Party Royalties (other than royalties and other payments paid pursuant to Pre-Existing Third Party Licenses arising out of the Development or Commercialization of Products) that were paid by AstraZeneca in such country during such Quarter to any Third Party that is or has at any time been an Affiliate of AGIX. (ii) The Royalties required to be paid with respect to any particular country and any particular Calendar Quarter pursuant to Section 8.3 shall be subject to a reduction by AstraZeneca in an amount equal to [****] of the amount of Third Party Royalties (other than royalties and other payments paid pursuant to the Pre-Existing Third Party Licenses arising out of the Development or Commercialization of Products) that are paid by AstraZeneca in such country during such Calendar Quarter; provided however, that: (A) such reduction may be made only to the extent such Third Party Royalties have not previously been subject to reduction pursuant to this Section 8.4; and (B) no reductions in royalties otherwise due to AGIX shall exceed an amount equal to [****]of the amount otherwise due in such country pursuant to Section 8.3 for such Calendar Quarter. Any amount that has not been reduced on such date because of this Section 8.4 shall not be eligible for further reduction in any succeeding royalty payment or payments due for - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 45 such Product. AstraZeneca shall be responsible for any financial obligations accruing after the Effective Date under the Pre-Existing Third Party Licenses arising out of the Development or Commercialization of Products. AGIX shall not amend a Pre-Existing Third Party License without the prior written consent of AstraZeneca; provided, however, that consent shall not be unreasonably withheld; provided further that AstraZeneca shall be permitted to withhold consent for any amendment that materially increases costs or that decreases AstraZeneca's rights under such Pre-Existing Third Party License. (c) Generic Competition. Notwithstanding anything else to the contrary in this Agreement, for any Product in any country in the Territory, if and so long as there is Generic Competition with respect to such Product, then AstraZeneca shall not be obligated to pay AGIX any Royalties pursuant to this Agreement in respect of Net Sales for such Product in such country. If Generic Competition commences and no longer exists in such country for such Product, then the Royalty obligations for Net Sales of such Product in such country shall be reinstated from the date of cessation of such Generic Competition until the end of the Royalty Term, or until Generic Competition occurs again in such country for such Product. (d) Sublicenses (i) During the applicable Royalty Term in each country in the Territory, for any Compulsory Sublicense, AstraZeneca will pay AGIX, no later than forty-five (45) days following the end of the preceding Calendar Quarter, a payment equal to [****] of all amounts received by AstraZeneca as consideration during such Calendar Quarter for any Compulsory Sublicense (either from the Sublicensee or any other Third Party) in the form of milestones, royalty payments or any other form of consideration (including, if the Sublicensee purchases Product from AstraZeneca for resale, the gross sales price paid by such Sublicensee minus AstraZeneca's costs for Manufacture of such Product), subject to adjustment in accordance with Section 8.4. (ii) Sales of Products under or as a result of Noncompulsory Sublicenses, for purposes of the definition of "Net Sales" and for calculating royalties under this Section 8.4, shall be deemed to be "Net Sales" by AstraZeneca. (e) Coated Stents. Notwithstanding anything else in this Section 8 to the contrary, if the JMC approves the Development and Commercialization of Coated Stents, the Parties will, prior to Product Launch of any such Product, negotiate in good faith the Royalties and any other payments to be paid to AGIX in respect of sales of such Product, with such terms to be based on terms then prevailing in comparable arrangements involving Third Parties and all other relevant factors. - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 46 (f) Combination Products (i) For Combination Products containing one or more Exclusive Market Product(s), in each country in which such Combination Product is sold, Net Sales shall be adjusted as follows: (A) Net Sales shall be multiplied by the Net Sales of the Combination Product during the applicable Calendar Quarter by the fraction A/(A+B), where A is the Standard Sales Price of the Product containing the same amount of Compound as the sole active ingredient as the Combination Product in question in such country and B is the Standard Sales Price of the ready for sale product containing the same amount of the other therapeutically active ingredient that is contained in the Combination Product in question in such country, in each case during the applicable Calendar Quarter. For clarity, if a Combination Product contains three or more active ingredients (including the Product), the Standard Sale Price of such additional Exclusive Market Products , calculated in the same manner as described above, shall be included in the denominator so that such fraction shall be A/(A+B1+ B2+...). (B) If sales of the Product or the Exclusive Market Product did not occur in such Calendar Quarter, then the most recent previous Standard Sales Price of the Product containing the same amount of Compound as the sole active ingredient as the Combination Product in question in the given country, shall be used. If, in a specific country, both a Product containing the Compound(s) and a product containing the other active ingredients in such Combination Product are not sold separately, a market price for such Product and such other active ingredients shall be negotiated by the Parties in good faith based upon the costs, overhead and profit as are then incurred for such Combination Product and all Products then being made and marketed by AstraZeneca and having an ascertainable market price that are comparable to such Product or such other active ingredients, as applicable; provided, however, that in no event shall the Royalty due to AGIX for such Combination Product be less than [****] of what the Royalty would have been if the Net Sales for such Combination Product were calculated by multiplying the number of units of the Combination Product sold times the selling price of such Product as if sold alone. (C) Notwithstanding anything else in this Section 8.4(f)(i) to the contrary, if AstraZeneca or one of its Affiliates or Sublicensees sells such a Combination Product in a country for less than [****] of the sum of the then-Standard Sales Prices of the Product and the Exclusive Market Product(s) that make up such Combination Product as sold separately in finished form in such country, then in no event shall the Royalty due to AGIX for such Combination Product be less than [****] of what the Royalty would have been if - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 47 the Net Sales for such Combination Product were calculated by multiplying the number of units of the Combination Product sold times the selling price of the Product as if sold alone. If the Product is not then sold separately in such country, then the most recent previous Standard Sales Price in such country of such Product shall be used. (ii) For Combination Products containing, as active pharmaceutical ingredients, only Non-Exclusive Market Product(s) and a Product, in each country in which such Combination Product is sold, the Net Sales for such Combination Product shall be calculated by multiplying the number of units of the Combination Product sold by the selling price of the Product as if sold alone. 8.5 Payment; Report (a) Reports. Following the First Commercial Sale of a Product, AstraZeneca shall furnish to AGIX, within forty-five (45) days following the end of each Calendar Quarter, a written report for such Calendar Quarter showing, for each Product in each country in the Territory, (i) the adjustments resulting from the deductions in the definition of "Net Sales" and from the calculation of the amount of any applicable reductions or limitations pursuant to Section 8.4 to the extent reasonably available to AstraZeneca on a global basis; (ii) total Net Sales; and (iii) the calculation of Royalties due. (b) Records and Audit. AstraZeneca shall maintain, and shall require its Affiliates and Sublicensees to maintain, for at least [****], complete and accurate books and records in connection with the sale of Products as necessary to allow the accurate calculation of the Royalties. 8.6 Exchange Rate; Manner and Place of Payment (a) Payments. Unless otherwise specified in writing by the receiving Party, all payments to be made by a Party making a payment under this Agreement shall be made in United States dollars and shall be paid by bank wire transfer in immediately available funds selected by the paying Party to a bank account designated in writing by the receiving Party from time to time. (b) Sales [****]. With respect to sales [****], Net Sales shall be converted from the local currency to United States dollars based on applicable currency exchange rates (as provided in Section 8.6(c)), and royalty amounts owed shall be calculated based on such dollar amounts and paid to AGIX. (c) Exchange Rate. The conversion of non-U.S. dollar sales into U.S. dollar sales shall be calculated in accordance with AstraZeneca's then current foreign exchange conversion methodology for external financial reporting to the Securities and Exchange Commission. - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 48 (d) Tax Liability. In the event that, between the Effective Date and the end of AGIX's second full tax year after Product Launch, any amount paid by AstraZeneca to AGIX under this Section 8 suffers tax to be withheld by AstraZeneca under applicable law or regulation ("Withholding Tax") for which AGIX cannot obtain offset against U.S. corporate tax liability before foreign tax credit for that year, then AstraZeneca shall, upon AGIX's claim to be delivered in writing within four (4) months of the end of the relevant year, advance AGIX the amount of such Withholding Tax to the extent that such offset has not been obtained. Within thirty (30) days after the actual filing date of a subsequent U.S. federal income tax return on which any amount of such Withholding Tax so advanced under the preceding paragraph is offset against AGIX's U.S. corporate tax liability as filed, AGIX shall repay to AstraZeneca the corresponding amount previously advanced to AGIX by AstraZeneca, without interest. In any event, all amounts advanced under this Section 8.6(d) by AstraZeneca to AGIX shall, to the extent not previously repaid pursuant to the immediately preceding sentence, be repaid by AGIX to AstraZeneca, without interest, no later than the [****] of the Product Launch. For the avoidance of doubt, [****]. AGIX will provide to AstraZeneca (or an agreed independent Third Party accountant at AGIX's cost) upon the occasion of each advance and within (30) days of filing of each relevant U.S. federal income tax return, supporting documentation or a statement from their auditors or appointed tax advisers that is sufficient to evidence the extent to which the Withholding Tax paid and temporarily borne by AstraZeneca can or cannot be credited wholly or in part against AGIX's U.S. tax for the relevant year when so prioritized. (e) Income Tax Withholding. Subject to Section 8.6(d), each Party shall pay any and all taxes levied on account of any license fee, royalty or milestone payments made to it under this Agreement. If any taxes are required by applicable law or regulation to be withheld by a Party, such Party shall (i) deduct such taxes from the payment made to the other Party, (ii) timely pay the taxes to the proper Governmental Authority, and (iii) send proof of payment to the other Party and certify its receipt by the Governmental Authority within thirty (30) days following such payment. If AGIX is entitled, subject only to any requirement to file a prescribed form or other documentation, the preparation and filing of which would not be unduly burdensome, under any applicable tax treaty or local law to a reduction of rate of any applicable withholding tax, upon AstraZeneca's prompt request therefore, AGIX shall deliver to AstraZeneca or the appropriate Governmental Authority (with the assistance of AstraZeneca) such forms or documentation, and AstraZeneca shall apply the reduced rate of withholding once formal confirmation of AGIX's entitlement thereto has been received from the relevant tax authority (f) Indirect Taxes. Notwithstanding anything else contained in this Section 8.6, this Section 8.6(f) shall apply with respect to Indirect Taxes. All payments are exclusive of Indirect Taxes. If any Indirect Taxes are chargeable in respect of any payments, the paying Party shall pay such Indirect Taxes at the applicable rate in respect of any such payments following the receipt, where applicable, of an Indirect Taxes - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 49 invoice in the appropriate form issued by the receiving Party in respect of those payments, such Indirect Taxes to be payable on the due date of the Payments to which such Indirect Taxes relate. (g) Late Fee. All past due amounts owed by one Party to the other Party under this Agreement shall bear simple interest at the U.S. Prime Rate, as reported by the Wall Street Journal, Eastern Edition, on the due date (or the next Business Day if the due date is not a Business Day), calculated based on the number of days between the actual date the payment is made and the date the payment was due; provided, however, that in no event shall such rate exceed the maximum legal annual interest rate. The payment of such interest shall not limit a Party from exercising any other rights it may have as a consequence of the lateness of any payment. (h) Audits (i) The Parties shall permit upon written notice to the other Party, at its own expense, a certified public accountant or a person possessing similar professional status and associated with an independent accounting firm acceptable to the Parties to inspect, during normal business hours, and not more than once in any Calendar Year, to audit the other Party's books and records as may be reasonably necessary to verify the accuracy of the financial reports furnished by the other Party pursuant to this Agreement or of any charges, reimbursements or payments made by the other Party pursuant to this Agreement, in respect of any Calendar Year ending not more than three (3) years prior to the date of such notice. (ii) Each Party recognizes that the Third Party performing any audit for a Party may perform accounting services for a Party, and each Party hereby waives any conflict of interest relating to the use of such accounting firm. (iii) Upon the expiration of the [****] following the end of any Calendar Year (or [****] with respect to Section 8.6(d)), the calculation of amounts payable with respect to such fiscal year shall be binding and conclusive upon the Parties, and the Parties shall be released from any liability or accountability with respect to payments for such year. (iv) The report prepared by any Third Party, if used by a Party, shall contain the conclusions of such Third Party regarding the audit and shall specify that the amounts paid pursuant thereto were correct or, if incorrect, the amount of any underpayment or overpayment. (v) In the case of any payment of Royalties, if such report shows any underpayment by AstraZeneca, AstraZeneca shall remit to AGIX within thirty (30) days after receipt of such report, (A) the amount of such underpayment; and (B) if such underpayment exceeds [****] of the total amount owed for the Calendar Year then being audited, the reasonable and necessary fees and expenses of such Third Party to - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 50 perform the audit, subject to reasonable substantiation thereof. If such report shows any overpayment by AstraZeneca, then at AstraZeneca's option, such overpayment shall either be refunded to AstraZeneca by AGIX within thirty (30) days of receipt of the audit report, or be creditable against amounts payable by AstraZeneca in subsequent payment periods. (vi) The Parties agree that all information subject to review under this Section 8.6(h) is Confidential Information and that each Party shall retain and cause any Third Party used for any audit to retain all such information in confidence. 8.7 Representations and Covenants Concerning Certain Matters (a) Insurance. AstraZeneca is and, throughout the Term, will remain a party to the insurance program designated internally as the AstraZeneca Group Insurance Programme on the same basis as any other Affiliate in the internally designated AstraZeneca Group. The AstraZeneca Group Insurance Programme policy indemnifies each Affiliate of AstraZeneca Group, including AstraZeneca, for any legal or contractual liability to compensate third parties for, inter alia, product liability subject to the policy's terms, conditions and limitations. (b) Balance Sheet. The unaudited balance sheet for AstraZeneca dated December 15, 2005 that has been delivered to AGIX is true and correct in all material respects and presents fairly the financial position of AstraZeneca as of the date thereof. (c) Material Restructuring. Each Party agrees that, in the event that a Material Restructuring of such Party is contemplated, no later than thirty (30) days prior to the consummation of such Material Restructuring, such Party will advise the other Party of such contemplated Material Restructuring and the Parties will discuss in good faith whether any amendments are required to this Agreement to ensure continued performance under the agreement by both Parties following any such Material Restructuring. 9. INTELLECTUAL PROPERTY 9.1 Ownership of Inventions; Obligation to Update (a) Ownership of Inventions. Each Party shall own any inventions that are first identified, discovered, developed, conceived or made solely by its employees, agents or independent contractors in conducting their activities hereunder. (b) Assignment. Each Party shall promptly execute all papers and instruments, and/or require, to the extent possible, its employees, agents, consultants or 51 independent contractors to execute such papers and instruments, as applicable, so as to effectuate the ownership of AGIX IP, AstraZeneca IP and Joint IP. (c) Obligation to Supplement AGIX Compound Patents. AGIX shall amend or supplement Exhibit 1A from time to time to include any Patent Controlled by AGIX or its Affiliates after the Effective Date that claims or is directed solely to the Compound or the Product or solely to the Development, Manufacture, formulation or use of the Compound or the Product in the Field. Upon such inclusion, any such Patent shall be deemed an "AGIX Compound Patent." (d) Obligation to Supplement Other AGIX Patents. AGIX shall amend or supplement Exhibit 1C from time to time to include any Patent Controlled by AGIX or its Affiliates after the Effective Date that is necessary or useful for the Development, Manufacture, Commercialization, use, sale, offer for sale or importation of the Compound or any Products in the Field. Upon such inclusion, any such Patent shall be deemed an "Other AGIX Patent." (e) Joint Inventions; Joint Patents. Inventions that are identified, discovered, developed, conceived or made jointly by employees, agents, consultants or independent contractors of each Party shall be deemed "JOINT INVENTIONS". To the extent that the Parties file Patents directed to Joint Inventions, such Patents shall be deemed "JOINT PATENTS," and ownership thereof shall be determined in accordance with United States patent laws. For purposes of this Section 9, any Joint Patents filed by the Parties shall be treated as AGIX IP. 9.2 IPC (a) IPC. The Parties shall form the IPC, pursuant to Section 6.3(h), which shall function under the procedures established in this Section 9.2, until the Parties agree to disband such committee, to oversee, facilitate, discuss, manage and implement the filing, procurement, enforcement, and defense of intellectual property matters relating to this Agreement in accordance with the terms hereof. (b) Composition (i) The IPC shall have two (2) named representatives of AGIX and two (2) named representatives of AstraZeneca, who may or may not be members of the JMC or the JDC. Each Party shall appoint its respective representatives to the IPC and may, from time to time, substitute one or more of its representatives, in its sole discretion, effective upon notice to the other Party of such change. (ii) The IPC shall be co-chaired by one (1) representative of AGIX and one (1) representative of AstraZeneca. 52 (iii) The IPC representatives shall have appropriate technical or legal credentials, experience and knowledge, and ongoing familiarity with Compounds, Products and related Patents and other intellectual property issues arising under this Agreement. Members of the IPC may delegate from time to time certain matters arising within the IPC as they from time to time deem appropriate. (iv) Each Party may designate its own internal or external patent counsel (who may or may not be a member of the IPC) who may attend IPC meetings ("IPC PATENT COUNSEL"). The Parties shall take reasonable efforts to preserve the lawyer-client privilege and work product privilege applicable to the communications and work of IPC Patent Counsel and other legal counsel, and shall enter into a shared-interest agreement. (v) Additional representatives or consultants may from time to time, by mutual consent of the Parties, be invited to attend IPC meetings, subject to such representative's or consultant's written agreement to comply with the confidentiality and non-use obligations equivalent to those set forth in Section 10, and provided that such additional representatives shall have no vote. (vi) Alliance Managers may attend any IPC meeting without notice or consent. (c) Governance. In matters where the IPC has jurisdiction to make decisions, such decisions shall be made by unanimous vote, with each Party's representatives on the IPC collectively having one (1) vote. (i) In the event that the IPC cannot or does not, after good faith efforts, reach agreement on an issue (including, but not limited to, the inventorship and ownership of Patents and Joint Patents under Section 9.1(e)) within thirty (30) days (or such shorter period as may be appropriate if prompt action is required), then such issue shall be referred to the officer employed by each Party who is in charge of intellectual property matters. If such officers cannot resolve such issue, such issue shall then be referred to a mutually agreed upon neutral outside patent counsel that has appropriate legal and technical credentials; provided, however, that a Party may object to the retention or continued retention of such counsel if such Party reasonably believes such retention would be prejudicial to its intellectual property interests (including, without limitation, conflicts of interest, such as if outside counsel prosecutes patents for compounds similar to the Compound on behalf of Third Parties, but excluding any perceived conflict of interest as a result of the application of the standards described in Section 9.2(c)(ii)). A list of appropriate counsel from which such neutral outside patent counsel may be selected shall be created by the IPC promptly after the Effective Date and approved by each Party. Such list may be updated from time to time as the IPC deems appropriate. Such neutral outside counsel shall consider the interests of both Parties when recommending a course of action. The IPC shall resolve issues in a manner consistent with the recommendation of the neutral outside patent counsel. 53 (ii) For any decisions concerning a Patent made by the IPC, or by the neutral counsel, described in Section 9.2.(c)(i), (A) that involves a Compound-Only Issue, such decision shall favor an outcome that allows for the strongest patentable scope of patent rights afforded for the Compound, taking into account the invention disclosed in light of any relevant prior art, and the longest possible term for such Patent. (B) that involves a Mixed Issue, such decision shall favor an outcome that allows for the strongest patentable scope of patent rights afforded for the Compound, taking into account the invention disclosed in light of any relevant prior art, and the longest possible term for such Patent; provided, however that such decision may not reasonably, materially jeopardize the validity, enforceability or scope of any claim of any Licensed Patent. (iii) The IPC may establish and revise from time to time rules for operation, in such form and detail as the IPC considers appropriate. (d) Authority and Jurisdiction (i) The IPC's decision-making authority shall be limited to matters related to Licensed Patents, Blocking Patents, Orange Book listings and patent term extensions. The IPC will discuss (but not decide) the status of AstraZeneca Patents, AGIX Know-How and AstraZeneca Know-How, and will discuss and review data and information, consider and advise on any technical issues that arise, and discuss patent application filing priorities. (ii) In no event shall the IPC have the right: (A) to modify or amend the terms and conditions of this Agreement; (B) to review, direct or control, or make any decisions or determinations with respect to, the Development or Commercialization or Manufacturing of the Compound or Product (except with respect to Patent or other intellectual property issues relating thereto); (C) to determine which personnel of a Party perform activities relating to matters affecting AGIX IP, or act as such Party's representatives on the IPC; (D) to make any decision with respect to a Party's Prosecution activities, except as provided for in Section 9.3; and 54 (E) to determine any such issue in a manner that would conflict with the express terms and conditions of this Agreement. (e) Meetings (i) The IPC shall meet in accordance with a schedule established by mutual written agreement of the Parties, but no less frequently than twice per year, with the location for such meetings to be mutually agreed by the Parties, with the first meeting of the IPC to occur no later than fifteen (15) days after the Effective Date. (ii) Either Party may call for non-scheduled meetings of the IPC upon reasonable notice, which shall occur at mutually agreeable times. The IPC, upon mutual agreement, may meet in person or by means of teleconference, videoconference, Webex or other similar communications equipment. (iii) No IPC meeting may be conducted unless at least one (1) representative of each Party is participating. (iv) Each Party shall bear its own expenses related to the attendance of such meetings by its representatives. 9.3 Patent Prosecution (a) Prosecution. As used herein, "PROSECUTION" shall mean the preparation, filing, prosecution and maintenance of patents or patent applications and includes any procedure or practice before an administrative agency such as the United States Patent and Trademark Office, or an equivalent agency, including but not limited to interferences, reexaminations, examinations, protests, reissues, oppositions, and the like. (b) Prosecution Activities (i) Subject to Section 9.3(b)(ii), AGIX shall control Prosecution of all Licensed Patents and Joint Patents, under the direction of the IPC. AstraZeneca shall have the right to comment on Prosecution activities by AGIX to the extent that such activities involve a Licensed Patent or Joint Patent. AGIX shall identify any such Prosecution activity to the IPC and provide the IPC copies of any official action, filing (including a draft patent application), communication, proposed submission in response to, and associated data or information, in a timely manner but in no case less than fourteen (14) days prior to the date any response to such official action or said application is proposed to be filed. AGIX and its patent counsel will reasonably consider AstraZeneca's comments thereon. If AstraZeneca does not provide AGIX with timely comments, AGIX shall be free to proceed with its submission or other contemplated action consistent with the direction of the IPC. 55 (ii) For any pending patent applications within the Licensed Patents or any new patent applications that would otherwise be included in the Licensed Patents that the IPC believes should be filed, AGIX shall file and Prosecute patent applications or, if in the IPC's judgment the filing or prosecution of such applications would materially adversely affect any Licensed Patents, claims within patent applications, that in either case claim or are directed solely to the Compound or Product, or the Development, Manufacturing, formulation or use thereof. Any Prosecution activity in such patent application shall be directed by the IPC, in accordance with Section 9.3(b)(i), and implemented by AGIX in a manner consistent with Section 9.2(c)(ii). (c) AstraZeneca Prosecution Activities. AstraZeneca shall control Prosecution of all AstraZeneca Patents, at its sole expense; provided, however, that AstraZeneca shall reasonably consider AGIX's comments thereon. AstraZeneca shall identify any such Prosecution activity to the IPC and provide the IPC copies of any official action, filing (including a draft patent application), communication, proposed submission in response to, and associated data or information, in a timely manner but in no case less than fourteen (14) days prior to the date any response to such official action or said application is proposed to be filed. AstraZeneca and its patent counsel will reasonably consider AGIX's comments thereon; provided, however, that resolution of any issue under this Section 9.3(c) shall be decided by AstraZeneca in its discretion. (d) Cooperation. In connection with any Prosecution activity, AGIX and AstraZeneca shall cooperate fully and will provide each other with any information or assistance that either Party reasonably requests, including executing all documents necessary with respect to any such Prosecution activity. If either Party becomes aware of any patents, information or proceeding that relate to a Licensed Patent or Joint Patent and that may adversely impact the validity, title or enforceability of such Licensed Patent or Joint Patent in the Territory, such Party shall promptly notify the other Party of such patent, information or proceeding; provided however that neither Party shall be obligated to disclose any information that would cause such Party to violate any confidentiality or nondisclosure obligation to a Third Party. (e) Abandonment. If AGIX elects to abandon or discontinue prosecution of or not maintain any claim in a Licensed Patent or Joint Patent anywhere in the Territory, then AGIX shall provide AstraZeneca with thirty (30) days' prior written notice of such determination, and shall provide AstraZeneca with the right, but not the obligation, to prosecute and maintain such claim at AstraZeneca's sole expense and, if requested by AstraZeneca, AGIX will reasonably assist AstraZeneca with the prosecution and maintenance of the Licensed Patent or Joint Patent. If AGIX elects to abandon or discontinue prosecution of a Joint Patent and AstraZeneca elects to prosecute such Joint Patent, AGIX will assign its interests in such Joint Patent to AstraZeneca. If AstraZeneca elects to abandon or discontinue prosecution of or not maintain any claim in an AstraZeneca Patent or Joint Patent anywhere in the Territory, where such claim is 56 necessary or useful for the Development, Manufacture, Commercialization, use, sale, offer for sale or importation of the Compound or any Product in the Field, then AstraZeneca shall provide AGIX with thirty (30) days' prior written notice of such determination, and shall provide AGIX with the right, but not the obligation to prosecute and maintain such claim at AGIX's sole expense and, if requested by AGIX, AstraZeneca will reasonably assist AGIX with the prosecution and maintenance of the AstraZeneca Patent. (f) Interference, Opposition, Protest, Reexamination and Reissue (i) AGIX shall inform the IPC of any request for, or filing or declaration of, any interference, opposition, protest, reexamination or reissue relating to any claim in a Licensed Patent or Joint Patent within thirty (30) days of learning of such event. The IPC shall review and consult with AGIX regarding any submission to be made in connection with such proceeding. AGIX shall give the IPC timely notice of any proposed settlement of an interference relating to any Licensed Patents or Joint Patents. (ii) AGIX shall conduct all activities in respect of any such proceedings in accordance with the direction of the IPC. Any decisions made by the IPC shall be made in accordance with Section 9.2(c)(ii). (g) Patent Term Extension. Where directed by the IPC, AGIX shall use reasonable efforts to obtain patent term extension or supplemental protection certificates or their equivalents in any country in the Territory where applicable to any Licensed Patent or Joint Patent that claims or is directed to a Compound or Product, and AstraZeneca shall provide reasonable assistance to AGIX (including the provision of copies of any necessary documents) to apply for such extension. (h) Expenses. Reasonable costs incurred by AGIX for any Prosecution activities described in this Section 9.3 shall be reimbursed in accordance with the procedures described in Section 9.9. 9.4 Patent Marking. Each Party shall mark all Products made, used or sold under the terms of this Agreement, or their containers, in accordance with all applicable patent-marking laws. 9.5 Infringement by Third Parties (a) Notice. If either Party learns of any infringement of any Licensed Patent or Joint Patent, or any misappropriation or misuse of AGIX Know-How, such Party shall promptly notify the IPC in writing of such infringement, misappropriation or misuse; provided, however that neither Party shall be obligated to disclose any information that would cause such Party to violate any confidentiality or nondisclosure obligation to a Third Party. 57 (b) Right to Bring and Prosecute Suit (i) AGIX shall have the first right, but not the obligation, to initiate and prosecute any legal action or other action or defense with respect to any infringement of the Licensed Patents or Joint Patents or misappropriation or misuse of AGIX Know-How by Third Parties, or to assume the defense in any declaratory judgment action relating thereto, and if necessary, to name AstraZeneca as a co-party. AstraZeneca shall cooperate fully with AGIX in any such action. AstraZeneca shall have the right in any action or defense brought under this Section 9.5(b)(i) to join such action voluntarily, at its own expense, in which case the Parties shall cooperate fully in all reasonable respects and will provide each other with any information or assistance that either Party reasonably requests in connection with any such action. (ii) If such action involves an AGIX Compound Patent and if, within ninety (90) days of receiving the notice provided for in Section 9.5(a) or thirty (30) days before the time limit, if any, set forth in the appropriate laws and regulations for the filing of such actions, whichever comes first, AGIX fails to institute or prosecute such action, or if AGIX informs AstraZeneca that it elects not to exercise such first right, AstraZeneca thereafter shall have the right to initiate and prosecute such action, or to assume the defense of such declaratory judgment action, and if necessary, to name or retain AGIX as a co-party. AGIX shall cooperate fully with AstraZeneca in any such action. (iii) Except as provided in Section 9.5(b), any legal action, other action or defense prosecuted or assumed by either AGIX or AstraZeneca under this Section 9.5(b), including the decision to initiate any such action, shall be subject to the direction and control of the IPC. (iv) Any decision by AGIX not to initiate any action under Section 9.5 that involves an Other AGIX Patent but that does not involve any claims in the Field shall be made by AGIX in its sole discretion and shall not be subject to the direction or control of the IPC. (c) Certifications. Each Party shall inform the other Party of any certification regarding any Licensed Patent that it has received pursuant to either 21 U.S.C. Sections 355(b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) or its successor provisions, or Canada's Patented Medicines (Notice of Compliance) Regulations Article 5, or any similar provisions in a country other than the United States and Canada, and shall provide the other Party with a copy of such certification within five (5) days of receipt by such Party. AGIX's and AstraZeneca's rights with respect to the initiation and prosecution of any legal action as a result of such certification or any recovery obtained as a result of such legal action shall be as defined in this Section 9.5. 58 9.6 Infringement of Third Party Rights (a) Notice. If any Product Manufactured, used or sold by either Party, its Affiliates, licensees or Sublicensees under this Agreement becomes the subject of a Third Party claim, or there is a reasonable and credible basis for a potential claim, of patent infringement relating to the Manufacture, use, sale, offer for sale or importation of a Compound or Product, the Party first having notice of the claim shall promptly notify the other Party, and the Parties shall promptly thereafter meet to consider the claim and the appropriate course of action. (b) Defense (i) The Party against which the action is brought shall have the right, but not the obligation, to defend itself against such claim or initiate any declaratory judgment action relating to a Compound or Product, or bring any such action necessary to protect its interest in such Compound or Product. (ii) The Party not defending against such claim or initiating a declaratory judgment action shall have a full right to participate in any such action at its own expense. (iii) The Party that defends any claim, or that brings any declaratory action, under this Section 9.6(b), shall keep the IPC informed of all material developments in any proceeding involving such defense or action. The IPC may discuss any matters affecting such defense or action, but shall not have the authority to direct any matter in such defense or action. 9.7 Cooperation (a) Joining Action and Documentation. Notwithstanding anything to the contrary in Section 9.5 or 9.6, for any action to terminate or defend against claims of any infringement described in Section 9.5 or 9.6, if either Party is unable to initiate or prosecute such action or defense solely in its own name, the other Party shall join such action voluntarily and shall execute all documents necessary to initiate litigation to prosecute and maintain such action or defense. In connection with any such action, AGIX and AstraZeneca shall cooperate fully in all reasonable respects and will provide each other with any information or assistance that either reasonably requests, including if required, furnishing a power of attorney, giving testimony, producing documents lawfully requested and using reasonable and diligent efforts to make available such employees who may be helpful with respect to such litigation action or defense. Any costs incurred as the result of such cooperation shall be borne equally by the Parties and subject to reimbursement in accordance with the procedures described in Section 9.9. 59 (b) Information and Decision-making by IPC. Each Party shall keep the other Party informed of developments in any action or proceeding described in Sections 9.5 and 9.6, including, to the extent permissible by law, the consultation and approval of any offer related thereto. All information and developments in any such action or proceeding shall be reported to the IPC and each Party shall reasonably consider or follow the direction and advice and consultation of the IPC with respect to any such action as provided in this Section 9. 9.8 Awards and Recovery (a) Reasonable out-of-pocket costs and expenses incurred by a Party in respect of any action described in Section 9.5 or 9.6, including without limitation attorney's fees, filing and court fees, and travel expenses, shall be borne equally by the Parties. Reimbursement for any such costs shall be in accordance with the procedures described in Section 9.9. (b) Any recovery obtained by either Party in connection with or as a result of any action contemplated by Section 9.5 or 9.6, whether by settlement or otherwise, shall be shared in order as follows: (i) Such recovery shall first be allocated to the Parties for reimbursement in respect of their proportional costs and expenses incurred in connection with the action after giving effect to the reimbursement provided for in Section 9.9; and (ii) Any remaining amounts after such reimbursement of the Parties' costs and expenses shall be [****]to AGIX and [****] to AstraZeneca, unless AGIX and AstraZeneca otherwise agree in writing. 9.9 Costs (a) Within thirty (30) days following the end of each Calendar Quarter, each Party will send a statement of reasonable out-of-pocket costs incurred under Section 9.3, or by either Party under Section 9.2, 9.5 or 9.6 (in such form and manner as the Parties shall agree from time to time) to the IPC for consideration and review; provided, however, that any costs incurred related to Pre-Existing Third Party Licenses arising out of the Development or Commercialization of Products shall be borne by AstraZeneca. (b) The IPC shall, within fifteen (15) days after receipt of the statements described in Section 9.9(a), determine whether the amounts reflected therein are reasonable and, to the extent such amounts are so determined to be reasonable, determine the net difference ("NET DIFFERENCE") between such reasonable amounts reflected in such two statements. - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 60 (c) Following the determination pursuant to Section 9.9(b), the Party that incurred the lower costs in such Calendar Quarter shall pay to the other Party, within sixty (60) days of the end of such Calendar Quarter, an amount equal to [****] of the Net Difference for such Calendar Quarter. (d) Any issues discussed by the IPC pursuant to this Section 9.9, which cannot be resolved by unanimous vote pursuant to Section 9.2(c) shall be determined pursuant to Section 14. 9.10 Trademarks (a) The Global Commercialization Team shall in good faith select Product Trademarks. The Global Commercialization Team may change the Product Trademarks at any time in its sole discretion upon the exercise of its good faith judgment. AstraZeneca shall own all Product Trademarks and be responsible for registering, maintaining and enforcing such Trademarks throughout the Territory. AstraZeneca shall also own any domain names directly associated with the Product in the Territory. (b) In the Territory, the Parties agree to work together in a cooperative fashion to cause, to the extent permitted by the FDA, the corporate Trademarks of both Parties to (i) appear in equal prominence on any Product package inserts, main promotional pieces for professionals (e.g., detail aids and printed advertisements), smaller promotional pieces where practical, exhibition stand panels and monographs; and (ii) be referenced at all investigator meetings and symposia, all Product specific press releases, and any direct to consumer advertising. (c) AGIX hereby grants AstraZeneca a non-exclusive, royalty free license to use AGIX's corporate Trademarks solely for purposes of Commercializing Products, which license shall terminate upon the expiration or earlier termination of this Agreement for any reason. (d) No Ownership or Rights in the Product Trademarks (i) Except as otherwise expressly set forth in this Section 9.10, nothing in this Agreement shall give either Party any rights, title or interest in and to any other Trademarks that are owned, licensed or maintained, as the case may be, by the other Party. AGIX acknowledges and agrees that AstraZeneca or its Affiliates, as the case may be, are the owners of all rights, title and interest in and to the Product Trademarks, including any form or embodiment thereof, and the goodwill now and hereafter associated with the Product Trademarks. AstraZeneca and its Affiliates acknowledge and agree that AGIX is the owner of all rights, title and interest in and to AGIX's corporate Trademarks, including any form or embodiment thereof, and the goodwill now and hereafter associated with the AGIX corporate Trademarks. - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 61 (ii) Neither Party shall, or knowingly cause another person to, contest or dispute or otherwise impair or endanger the validity of, or the exclusive rights of any Trademark, including Product Trademarks, owned, licensed or maintained, as the case may be, of the other Party or its Affiliates, or any part thereof, or the registrations thereof. (iii) AGIX acknowledges that all use of the Product Trademarks by or on behalf of AGIX shall inure to the benefit of AstraZeneca or their respective Affiliates, as the case may be. AGIX shall not be entitled to any compensation for any increase in the value of the Product Trademarks or in the goodwill associated therewith. AGIX (upon written request of AstraZeneca) shall assist AstraZeneca and their respective Affiliates to safeguard their full rights, title and interest in and to the Product Trademarks. 10. CONFIDENTIALITY 10.1 Nondisclosure Obligation (a) Confidential Information. All information disclosed by one Party to the other Party hereunder, including the terms of this Agreement ("CONFIDENTIAL INFORMATION"), shall be maintained in confidence by the receiving Party and shall not be disclosed to any non-Party or used for any purpose except to exercise its rights and perform its obligations under this Agreement without the prior written consent of the disclosing Party, except to the extent that the receiving Party can demonstrate by competent written evidence that such Confidential Information: (i) is known by the receiving Party at the time of its receipt and, not through a prior disclosure by the disclosing Party, as documented by the receiving Party's business records; (ii) is in the public domain other than as a result of any breach of this Agreement by the receiving Party; (iii) is subsequently disclosed to the receiving Party on a non-confidential basis by a Third Party who may lawfully do so; or (iv) is independently discovered or developed by the receiving Party without the use of Confidential Information provided by the disclosing Party, as documented by the receiving Party's business records. (b) Return of Confidential Information Upon Expiration or Termination of Agreement. Within thirty (30) days after any expiration or termination of this Agreement, each Party shall destroy (and certify to the other Party such destruction) or return such Confidential Information provided by the other Party as the other Party reasonably requests be destroyed or returned; provided, however, that (i) the foregoing 62 obligation shall not apply to any matter of Confidential Information otherwise provided for in this Agreement; and (ii) each Party may retain a single copy of the Confidential Information in its confidential legal files for the sole purpose of ascertaining its ongoing rights and responsibilities regarding the Confidential Information. 10.2 Permitted Disclosures (a) Permitted Disclosure. Each Party may disclose Confidential Information provided by the other Party without such other Party's written consent to the extent such disclosure is reasonably necessary in the following instances: (i) disclosure to governmental or other regulatory agencies in order to obtain or maintain Patents on Licensed Patents and Joint Patents and to obtain, maintain or amend any Regulatory Materials regarding a Product or satisfy any other regulatory obligation regarding a Product, but such disclosure may be only to the extent reasonably necessary to obtain Patents or obtain, maintain or amend such Regulatory Materials; (ii) complying with applicable court orders or governmental regulations, including without limitation rules or regulations of the Securities and Exchange Commission, or by rules of the National Association of Securities Dealers, any securities exchange or NASDAQ; provided, however, that the receiving Party shall first have given notice to the other Party hereto in order to allow such Party the opportunity to seek confidential treatment of the Confidential Information; (iii) disclosure to consultants, agents or other Third Parties solely to the extent required to accomplish the purposes of this Agreement or in connection with due diligence or similar investigations by such Third Parties; provided however that such Third Parties agree to be bound by confidentiality and non-use obligations at least equivalent in scope to those contained in this Agreement. (b) Written Agreements. Each Party shall obtain written agreements from each of its employees and consultants who perform work pursuant to this Agreement, which agreements shall obligate such persons to similar obligations of confidentiality and to assign to such Party all inventions made by such persons during the course of performing such work. Each Party will notify the other Party promptly upon discovery of any unauthorized use or disclosure of the Confidential Information of the other Party. (c) Required Disclosure. If a Party is required by judicial or administrative process to disclose Confidential Information that is subject to the non-disclosure provisions of Section 10.1, such Party shall promptly inform the other Party of the disclosure that is being sought in order to provide the other Party an opportunity to challenge or limit the disclosure obligations, provided that such Party's obligations to 63 comply with Applicable Laws shall not be affected by such obligations. Confidential Information that is disclosed by judicial or administrative process shall remain otherwise subject to the confidentiality and non-use provisions of this Section 10.2(c), and the Party disclosing Confidential Information pursuant to law or court order shall take all reasonable steps necessary, including without limitation obtaining an order of confidentiality, to ensure the continued confidential treatment of such Confidential Information. 10.3 Use of Name. Neither Party shall use the name of the other Party, without the prior written approval of the other Party, for any purpose other than informing employees who need to know about this Agreement; provided, however, that AstraZeneca may, without AGIX's prior written approval, use AGIX's name on marketing materials that were developed by or under the direction of the US Commercialization Team or Global Commercialization Team. Without limitation, these prohibitions apply to press releases, annual reports, prospectuses, public statements, educational and scientific conferences, Promotional Materials, governmental filings and discussions with public officials, securities analysts, investors and the media. However, subject to the requirements for review and approval that follow, these prohibitions shall not apply to a disclosure of the other Party's name, which counsel to a Party has advised is required by law or regulation or in response to requests for a copy of this Agreement or related information by tax authorities. 10.4 Publicity. It is understood that the Parties intend to issue coordinated press releases announcing the execution of this Agreement and agree that each Party may desire or be required to issue subsequent press releases relating to the Agreement or activities hereunder. The Parties agree to consult with each other reasonably and in good faith with respect to the text and timing of such press releases prior to the issuance thereof, provided that a Party may not unreasonably withhold consent to such releases, and that either Party may issue such press releases as it determines, based on advice of counsel, are reasonably necessary to comply with laws or regulations or for appropriate market disclosure. In addition, following the initial press releases announcing this Agreement, each Party shall be free to disclose, without the other Party's prior written consent, the existence of this Agreement, the identity of the other Party and those terms of the Agreement which have already been publicly disclosed in accordance herewith. (a) Publicity Referral. Unless otherwise directed in writing by AstraZeneca, all matters that require AstraZeneca's review or consent under this Section must be referred to the Corporate Communications Department for review and approval at the address set forth in Section 15.7. Unless otherwise directed in writing by AGIX, all matters that require AGIX's review or consent under this Section must be referred to the Corporate Communications Department, at the address set forth in Section 15.7. 64 10.5 Publications. The JMC shall develop procedures for review and approval of publications related to a Product or other activities of the Collaboration, and neither Party shall permit any publication in violation of such procedures. 11. REPRESENTATIONS AND WARRANTIES 11.1 Corporate Existence and Authority. Each Party hereby represents and warrants to the other Party that, as of the Execution Date, it: (a) is a corporation duly organized, validly existing and in good standing under the laws of the state, country or jurisdiction in which it is incorporated; (b) has full corporate power and authority and the legal right to own and operate its property and assets and to carry on its business as it is now being conducted and is contemplated in this Agreement and the Related Agreements (without making any representation as to the intellectual property rights except as otherwise specifically set forth in this Section 11); and (c) has the corporate power and full authority and the legal right to enter into this Agreement and perform the obligations and duties contemplated under this Agreement and the Related Agreements. 11.2 Authorized Execution; Binding Obligation. Each Party represents and warrants to the other Party that, as of the Execution Date (i) the execution, delivery, and performance of the Agreement and the Related Agreements and the consummation of the transactions contemplated thereby have been duly authorized and approved by all necessary corporate action on its part; and (ii) this Agreement and the Related Agreements have been duly executed and delivered by it and constitute a legal, valid, and binding obligation enforceable against it in accordance with such Agreement's terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting creditors' rights generally and by general equity principles, including judicial principles affecting the availability of injunction and specific performance. 11.3 No Conflicts. Each Party represents and warrants to the other Party that its execution, delivery, and performance of this Agreement or the Related Agreements: (a) does not, except as otherwise described in this Agreement or, in a Related Agreement, require the approval or consent of any Person, which has not already been obtained except for those government approvals, if any, not required at the time of execution of this Agreement; 65 (b) does not, to the best of its knowledge, contravene any Applicable Laws; and (c) does not contravene the provisions of, nor constitute a default under, its articles of incorporation or bylaws or any indenture, mortgage, contract or other agreement or instrument to which it is a signatory, or any permit, or governmental authorization or grant. 11.4 All Consents and Approvals Obtained. Except as otherwise described in this Agreement, each Party represents and warrants to the other that (i) all necessary consents, approvals and authorizations of, and (ii) all notices to, and filings by such Party with, all governmental authorities and other persons or entities required to be obtained or provided by such Party in connection with the execution, delivery and performance of this Agreement and the Related Agreements have been obtained and provided, except for those government approvals, if any, not required at the time of execution of this Agreement. 11.5 AGIX Representations and Warranties. AGIX represents and warrants to AstraZeneca as follows: (a) Owned Patents and In-Licensed Patents. As of the Execution Date and except as noted on Exhibit 11.5, (i) AGIX is the sole and exclusive owner of the entire right, title and interest in the Licensed Patents noted on Exhibit 11.5 as those owned by AGIX (the "Owned Patents"), and is entitled to grant the licenses specified herein. (ii) The Owned Patents are not subject to any encumbrance, lien or claim of ownership by any Third Party. (iii) AGIX is the sole and exclusive licensee of, and Controls all right, title and interest in and to the Licensed Patents noted on Exhibit 11.5 as licensed by AGIX (the "In-Licensed Patents") and is entitled to grant the licenses specified herein. To the Knowledge of AGIX, such rights are not subject to any encumbrance, lien or claim of ownership by any Third Party. (b) Prosecution Documents. As of the Execution Date, true, complete and correct copies of the complete file wrapper and other documents and materials that relate to the prosecution, defense, maintenance, validity and enforceability of the Owned Patents and the In-Licensed Patents and all licenses and other agreements regarding the Licensed Patents, as amended, have been made, or are available to AstraZeneca. (c) Pre-Existing Third Party License. During the term of this Agreement, AGIX shall not terminate any Pre-Existing Third Party License or breach 66 such license such that the other Party thereto would have the right to terminate such license. (d) Patent Prosecution. As of the Execution Date and except as set forth on Exhibit 11.5, the Licensed Patents (i) have been, to the Knowledge of AGIX, diligently prosecuted in accordance with all Applicable Laws and regulations, and (ii) have been filed and maintained properly and correctly, and all applicable fees have been paid to file and maintain such Licensed Patents. (e) Non-Infringement by Third Parties. As of the Execution Date, to the Knowledge of AGIX, there are no activities by Third Parties that would constitute infringement or misappropriation of any Licensed Patents. (f) Non-Infringement of Third Party Rights. As of the Execution Date, to the Knowledge of AGIX, except as disclosed in Exhibit 11.5. there are no Patents or trade secret rights owned or controlled by a Third Party, that would be infringed or misappropriated by the Development, Manufacture or Commercialization of Product(s), and AGIX has received no written claims relating to any such infringement or misappropriation. As of the Execution Date, to the Knowledge of AGIX, the use of Regulatory Materials did not infringe or misappropriate any Patent or trade secret rights owned or controlled by a Third Party. (g) Validity and Misappropriation. As of the Execution Date and except as set forth in Exhibit 11.5, to the Knowledge of AGIX, (i) the Licensed Patents are subsisting, or pending, and are not invalid or unenforceable, in whole or in part, and (ii) the conception, development and reduction to practice of the Licensed Patents have not constituted or involved the misappropriation of trade secrets or other rights or property of any Third Party. (h) Regulatory Materials. AGIX has made available to AstraZeneca all Regulatory Materials in its possession or Control regarding or related to the Compound. As of the Execution Date, AGIX has prepared, maintained and retained all Regulatory Materials required to be maintained or reported pursuant to and in accordance with cGCP and cGLP, to the extent required, and Applicable Laws and the Regulatory Materials do not contain any materially false and misleading statements. (i) Clinical Studies. AGIX has conducted, and has caused its contractors and consultants to conduct, any and all clinical studies related to the Compound in accordance with cGCP and cGLP, to the extent required, and Applicable Laws. (j) Existing Patents in the Territory. The Licensed Patents are not subject anywhere in the Territory to any pending or, to the Knowledge of AGIX, threatened re-examination, protest, opposition, interference or litigation proceedings. 67 (k) Employees and Agents. To the Knowledge of AGIX and except as set forth on Exhibit 11.5, AGIX has obtained from its employees and Third Parties involved, for or on behalf of AGIX, in the Development or Manufacture of the Compound or Product(s) rights to information that relate to the Compound or Product(s), that permit AGIX to grant to AstraZeneca the licenses and other rights granted to AstraZeneca hereunder. (l) Licensed Patents. As of the Execution Date, all of the Licensed Patents listed on Exhibit 11.5 are all of the Patents Controlled by AGIX that are necessary or useful for the Development, Manufacture, Commercialization, use, sale, offer for sale or importation of the Compound in the Field. 11.6 Other Agreements (a) AGIX represents to AstraZeneca that (i) prior to the Execution Date, it has not entered into any agreement, whether written or oral, or otherwise assigned, transferred, licensed, conveyed or otherwise encumbered its right, title or interest in or to, the AGIX IP, Regulatory Materials, or the Compound(including by granting any covenant not to sue with respect thereto), and (ii) it will not enter into any such agreements or grant any such right, title or interest to any Person, that in the case of (i) or (ii) of this Section 11.6(a) has prevented or would prevent AGIX from fulfilling its obligations under this Agreement. (b) AstraZeneca represents to AGIX that (i) it has not previously entered into any agreement, whether written or oral, and (ii) it will not enter into any such agreement or grant any such right, title or interest to any Person, that has prevented or would prevent AstraZeneca from fulfilling its obligations under this Agreement. 11.7 Debarment. Each Party represents to the other Party that it has not been debarred and is not subject to debarment and will not use in any capacity, in connection with such Party's obligations under this Agreement, any Person who has been debarred pursuant to Section 306 of the FD&C Act, or who is the subject of a conviction described in such section. AGIX agrees to inform AstraZeneca in writing immediately if it or any 68 Person who is performing services hereunder is debarred or is the subject of a conviction described in Section 306, or if any action, suit, claim, investigation or legal or administrative proceeding is pending or, to the Knowledge or AGIX, is threatened, relating to the debarment or conviction of AGIX or any Person performing services hereunder. 11.8 Knowledge of Pending or Threatened Litigation. Each Party represents and warrants to the other Party that, to its knowledge, there is no claim, investigation, suit, action or proceeding pending or, expressly threatened, against such Party before or by any governmental entity or arbitrator that is likely to impair the ability of such Party to perform any obligation under this Agreement. 11.9 Pre-Existing Third Party Licenses (a) AGIX represents and warrants to AstraZeneca that (i) the Pre-Existing Third Party Licenses are in full force and effect and have not been modified or amended other than as shown therein; (ii) neither AGIX nor, to the Knowledge of AGIX, any other party to a Pre-Existing Third Party License is in default with respect to a material obligation under, and neither such party has claimed or has grounds upon which to claim that the other party is in default with respect to a material obligation under a Pre-Existing Third Party License; and (iii) AGIX has not waived or allowed to lapse any of its rights under any Pre-Existing Third Party License, and no such rights have lapsed or otherwise expired or been terminated. (b) AGIX agrees that during the term of this Agreement: (i) AGIX will use commercially reasonable efforts to fulfill its obligations under each Pre-Existing Third Party License to the extent such obligations have not been delegated to AstraZeneca and to the extent that failure to do so would adversely affect AstraZeneca's or its rights hereunder; (ii) AGIX shall not terminate any Pre-Existing Third Party License in whole or in part, directly or indirectly, without AstraZeneca's prior written consent; (iii) AGIX shall promptly furnish AstraZeneca with copies of all reports and other communications AGIX receives from any party to a Pre-Existing Third Party License that relate to the subject matter of this Agreement; 69 (iv) AGIX shall promptly furnish AstraZeneca with copies of all reports and other communications that AGIX furnishes to a party to a Pre-Existing Third Party License that relate to the subject of this Agreement, and to the extent any such reports or communications relate to the efforts of AstraZeneca under this Agreement, AGIX shall give AstraZeneca a reasonable opportunity to review and comment upon such reports or communications before they are transmitted to any such other party; (v) AGIX shall furnish AstraZeneca with copies of all notices received by AGIX relating to any alleged breach or default by AGIX under any Pre-Existing Third Party License within three (3) Business Days after AGIX's receipt thereof and, if AGIX cannot or chooses not to cure or otherwise resolve any such alleged breach or default, AGIX shall so notify AstraZeneca within five (5) days thereafter and allow AstraZeneca, in AstraZeneca's sole discretion, to cure or otherwise resolve any such alleged breach or default; and (vi) AGIX, acting as an intermediary between each party to a Pre-Existing Third Party License and AstraZeneca, shall allow AstraZeneca to enjoy the direct benefit of all of AGIX's affirmative rights, to the extent they relate to the Licensed Patents. 11.10 Disclaimer of Implied Warranties. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT OR THE RELATED AGREEMENTS, NEITHER PARTY MAKES ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, STATUTE, OR OTHERWISE, AND EACH PARTY SPECIFICALLY DISCLAIMS ANY AND ALL IMPLIED OR STATUTORY WARRANTIES INCLUDING WARRANTIES OF MERCHANTABILITY, OF FITNESS FOR A PARTICULAR PURPOSE, AND OF NON-INFRINGEMENT. 11.11 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, OR SPECIAL DAMAGES INCLUDING, BUT NOT LIMITED TO, LOST PROFITS ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. HOWEVER, NOTHING IN THIS SECTION IS INTENDED TO LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF EITHER PARTY UNDER SECTION 12. 11.12 Guarantee of Performance of Affiliates. Each Party shall be liable for the performance of such Party's Affiliates and absolutely, unconditionally and irrevocably guarantees to the other Party: prompt performance when due and at all times thereafter of the liabilities (including, without limitation, indemnity obligations and liabilities), obligations, covenants, warranties, representations and undertakings of its Affiliates pursuant to this Agreement and the Related Agreements, and any and all modifications and amendments thereof. 70 12. INDEMNIFICATION 12.1 AstraZeneca Indemnification. AstraZeneca shall defend AGIX and its Affiliates, and their respective agents, directors, officers and employees (the "AGIX INDEMNITEES"), at AstraZeneca's cost and expense, and will indemnify and hold harmless the AGIX Indemnitees from and against any and all losses, costs, damages, fees or expenses (including reasonable attorneys' fees and other litigation expenses) ("AGIX LOSSES") incurred by or awarded against an AGIX Indemnitee relating to or in connection with any claim or action, regulatory investigation, or any other cause, brought against any AGIX Indemnitee by a Third Party arising out of: (a) the labeling, packaging, marketing, use and sale of the Products; (b) to the extent not controlled by AGIX, the Development, Manufacture and Promotion of the Products; (c) any breach by AstraZeneca of its representations, warranties, covenants or obligations made under this Agreement; or (d) any negligent act or omission or willful misconduct of AstraZeneca or its Affiliates or any of their employees, Sublicensees, contractors or agents, in performing its obligations under this Agreement; provided, however, that, the foregoing indemnity shall not apply to the extent that any such AGIX Losses are (i) attributable to the gross negligence or willful misconduct of the AGIX Indemnitees or (ii) otherwise subject to an obligation by AGIX to indemnify AstraZeneca Indemnitees under Section 12.2 or any Related Agreement. 12.2 AGIX Indemnification. AGIX agrees to defend AstraZeneca and its Affiliates, and their respective agents, directors, officers and employees (the "ASTRAZENECA INDEMNITEES"), at AGIX's cost and expense, and will indemnify and hold harmless the AstraZeneca Indemnitees from and against any and all losses, costs, damages, fees or expenses (including reasonable attorneys' fees and other litigation expenses) ("ASTRAZENECA LOSSES") incurred by or awarded against an AstraZeneca Indemnitee relating to or in connection with any claim or action, regulatory investigation, or any other cause, brought against any AstraZeneca Indemnitee by a Third Party arising out of: (a) to the extent controlled by AGIX, the Development of the Products; (b) to the extent controlled by AGIX, the Promotion of the Products; 71 (c) any breach by AGIX of its representations, warranties, covenants or obligations made under this Agreement; or (d) any negligent act or omission or willful misconduct of AGIX or its Affiliates or any of their employees, Sublicensees, contractors or agents, in performing its obligations under this Agreement; provided, however, that, the foregoing indemnity shall not apply to the extent that any such AstraZeneca Losses are (i) attributable to the gross negligence or willful misconduct of the AstraZeneca Indemnitees, or (ii) otherwise subject to an obligation by AstraZeneca to indemnify AGIX Indemnitees under Section 12.1 or any Related Agreements. 12.3 Indemnification Procedures (a) Notice. Promptly after an Indemnitee receives notice of a pending or threatened claim, demand, suit, action or proceeding brought or initiated by a Third Party (an "ACTION"), such Indemnitee shall give written notice of the Action to the Indemnifying Party to whom the Indemnitee is entitled to look for indemnification pursuant to this Section 12 (which notice shall describe, among other things, the nature and amount being claimed in such Action). However, an Indemnitee's delay in providing or failure to provide such notice shall not relieve the Indemnifying Party of its indemnification obligations, except to the extent it can demonstrate prejudice due to the delay or lack of notice. (b) Defense. Upon receipt of notice under Subsection (a) from the Indemnitee, the Indemnifying Party shall have the duty to either compromise or defend, at its own expense and by counsel (reasonably satisfactory to Indemnitee) such Action. The Indemnifying Party shall promptly (and in any event not more than twenty (20) days after receipt of the Indemnitee's original notice) notify the Indemnitee in writing that it wishes to assume control of the Action pursuant to this Section 12 and of its intention to either compromise or defend such Action. The assumption of the defense of an Action by the Indemnifying Party shall not be construed as an acknowledgement that the Indemnifying Party is liable to indemnify the Indemnitee in respect of the Action, nor shall it constitute a waiver by the Indemnifying Party of any defenses it may assert against any Indemnified Party's claim for indemnification. Once the Indemnifying Party gives such notice to the Indemnitee, the Indemnifying Party is not liable to the Indemnitee for the fees of other counsel or any other expenses subsequently incurred by the Indemnitee in connection with such defense, other than the Indemnitee's reasonable costs of investigation and cooperation. However, the Indemnitee shall have the right to employ separate counsel and to control the defense of an Action (and the Indemnifying Party shall bear the reasonable fees, costs, and expenses of such counsel) if: (i) the use of the counsel chosen by the Indemnifying Party would present such counsel with a conflict of interest; 72 (ii) the actual or potential defendants in, or targets of, such Action include both the Indemnifying Party and the Indemnitee, and the Indemnitee reasonably concludes that there may be legal defenses available to it that are different from or additional to those available to the Indemnifying Party (in which case the Indemnifying Party shall not have the right to assume the defense of such Action on the Indemnitee's behalf); (iii) the Indemnifying Party does not employ counsel reasonably satisfactory to the Indemnitee to represent the Indemnitee within a reasonable time after the Indemnitee's notice of such Action; or (iv) in the reasonable opinion of counsel to the Indemnitee, the claim could result in the Indemnitee becoming subject to injunctive relief or relief other than the payment of Losses that could have a materially adverse effect on the ongoing business of the Indemnitee; provided, however, that in no event shall the Indemnifying Party be obligated to bear the fees, costs and expenses of more than one (1) separate counsel for all of the other Party's Indemnitees in such Action. (c) Cooperation. The Indemnitee shall cooperate fully with the Indemnifying Party and its legal representatives in the investigation and defense of an Action. The Indemnifying Party shall keep the Indemnitee informed on a reasonable and timely basis as to the status of such Action (to the extent the Indemnitee is not participating in the defense of such Action) and conduct the defense of such Action in a prudent manner. (d) Settlement. If an Indemnifying Party assumes the defense of an Action, no compromise or settlement of such Action may be effected by the Indemnifying Party without the Indemnitee's written consent (which consent shall not be unreasonably withheld or delayed), unless (i) there is no finding or admission of any violation of law or any violation of the rights of any person and no effect on any other claims that may be made against the Indemnitee, (ii) the sole relief provided is monetary damages that are paid in full by the Indemnifying Party, and (iii) the Indemnitee's rights under this Agreement are not adversely affected. If the Indemnifying Party fails to assume defense of an Action within a reasonable time, the Indemnitee may settle such Action on such terms as it deems appropriate with the consent of the Indemnifying Party (which consent shall not be unreasonably withheld), and Indemnifying Party shall be obligated to indemnify the Indemnitee for such settlement as provided in this Section 12. 12.4 Indemnification Payment Adjustments (a) Insurance Proceeds Or Other Recovery. The amount of any Losses for which indemnification is provided under this Section 12 shall be reduced by the insurance proceeds received and any other amount recovered, if any, by the Indemnitee with respect to any Losses. An Indemnitee shall mitigate, to the extent such mitigation 73 does not otherwise harm such Indemnitee or is otherwise inconsistent with this Section 12, any Losses for which indemnification is sought hereunder and, to the extent such Losses are covered by Indemnitee's insurance, shall pursue an insurance claim relating to such Losses. (b) Refund. If an Indemnitee receives a payment pursuant to this Section 12 and subsequently receives insurance proceeds or other amounts with respect to the same Losses, the Indemnitee shall pay to the Indemnifying Party an amount equal to the difference (if any) between: (i) the sum of the insurance proceeds received, other amounts received, and the indemnification amount received from the Indemnifying Party pursuant to this Section 12 and (ii) the amount necessary to fully and completely indemnify and hold harmless the Indemnitee from and against such Losses. However, in no event shall such refund ever exceed the Indemnifying Party's payment to the Indemnitee under this Section 12. 12.5 Indemnification Payment. Any amount owed by an Indemnitee to a Third Person, for which the Indemnifying Party has an obligation under this Section 12 to indemnify, shall be due from the Indemnifying Party to the Third Person, whether upon entry of judgment, upon settlement, or otherwise. 12.6 Survival. The provisions of this Section 12 shall survive any termination or expiration of this Agreement. Each Indemnitee's rights under this Section 12 shall not be deemed to have been waived or otherwise affected by such Indemnitee's waiver of the breach of any obligation, agreement, condition, covenant, representation, or warranty contained in, or made pursuant to, this Agreement, unless such waiver expressly (and in writing) also waives any or all of the Indemnitee's rights under this Section 12. 13. TERM AND TERMINATION 13.1 Term. This Agreement shall commence on the Effective Date and shall be in full force and effect until the expiration of the last to expire Royalty Term or, if terminated earlier pursuant to Section 13.3 or Section 13.4, until the effective date of termination as provided in Section 13.3 or Section 13.4 (the "TERM"). The Parties shall be obligated to continue to perform all of their obligations, and enjoy all of their rights, under this Agreement until the end of the Term. 13.2 Condition Precedent (a) HSR Compliance. If required, each Party shall use Commercially Diligent Efforts to satisfy any applicable requirements under the HSR, and the regulations promulgated thereunder, including by making an initial HSR filing no later than five (5) Business Days after the Execution Date. This Agreement will not be 74 effective until the date ("EFFECTIVE DATE") of either satisfaction of any such requirements and the expiration or termination of all applicable waiting periods (including any extensions thereof), or when AstraZeneca determines and notifies AGIX in writing that no filings are required thereunder. All obligations, rights, duties and liabilities under this Agreement (except those contained in this Section and Sections 10, 14 and 15 of this Agreement) are subject to such date. (b) Cooperation. Each Party shall cooperate with the other Party in the prompt preparation, execution and filing of all documents that are required or permitted to be filed pursuant to HSR, and to notify the other Party upon receipt of any formal or informal requests for information from any antitrust agency in connection with any filings under HSR. Each Party shall bear its own costs with respect thereto (including the filing fees for HSR, which shall be paid by AstraZeneca). (c) Termination Right. If the Effective Date has not occurred within six (6) months after the Execution Date, notwithstanding that each Party having fulfilled its obligations under this Section, either Party has the right to terminate this Agreement without liability to the other Party by notice in writing with immediate effect. 13.3 Termination by AstraZeneca (a) ARISE (i) The JDC shall determine, within five (5) days after delivery by AGIX to the JDC of ARISE Results, whether such ARISE Results are complete and final ("FINAL ARISE RESULTS"). If the JDC is unable to agree unanimously as to whether such ARISE Results constitute Final ARISE Results within such five (5) day period, the matter shall be immediately referred to the JMC and, if the JMC cannot promptly resolve the matter, the officers set forth in Section 14.1(b), or their designee, for attempted resolution by good faith negotiations. In the event that the JMC and, if necessary, the designated executive officers, do not resolve the matter within thirty (30) days, the ARISE Results as submitted by AGIX shall for purposes of this Agreement be considered Final ARISE Results. (ii) AstraZeneca shall have the right, in its sole discretion and for any reason, to terminate this Agreement in its entirety, upon ninety (90) days' prior written notice, at any time during the [****] period following the date the ARISE Results are determined to be Final ARISE Results as described in section 13.3(a)(i). (b) Approvable Letter. AstraZeneca shall have the right, in its sole discretion and for any reason, to terminate this Agreement in its entirety, upon ninety (90) days' prior written notice, at any time during the [****] period following receipt of an Approvable Letter from the FDA if the Approvable Letter specifies additional - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 75 information or materials required, or specified conditions, that are reasonably likely to require, in order to obtain U.S. NDA Approval, either (i) more than twenty-four (24) months from receipt of such Approvable Letter to submit such additional information or materials to meet such condition, or (ii) reasonable out-of-pocket costs paid to Third Parties (whether or not AstraZeneca were to actually engage Third Parties for such activities or perform them internally) of more than [****] by AstraZeneca for items or activities not included in the Initial Development Plan, unless AGIX agrees to pay any amounts in excess of such [****]. (c) Additional Studies. AstraZeneca shall have the right in its sole discretion and for any reason, upon ninety (90) days' prior written notice, to terminate this Agreement in its entirety if the FDA, in an Approvable Letter subsequent to the Approvable Letter referred to in Section 13.3(b), requires information or data from additional studies not contemplated in the Initial Development Plan, where the reasonable out-of-pocket costs paid to Third Parties (whether or not AstraZeneca were to actually engage Third Parties for such activities or perform them internally) for such additional information or studies, when added to the cost to AstraZeneca of complying with the requirements described in Section 13.3(b), is reasonably likely to exceed [****], unless AGIX agrees to pay any amounts in excess of such [****]. (d) Elective Termination. AstraZeneca shall have the right, in its sole discretion and for any reason, to terminate this Agreement in its entirety, at any time during the one-year period following the third annual anniversary of receipt of U.S. NDA Approval, upon three hundred sixty-five (365) days' written notice to AGIX delivered at any time during such one-year period. 13.4 Termination for Material Breach or Bankruptcy (a) Breach. If a Party materially breaches any material term of this Agreement, the other Party may terminate this Agreement or any part thereof as specifically permitted by this Agreement, effective ninety (90) days after providing written notice to the breaching Party (or, in the case of a breach of the diligence obligation by AstraZeneca provided for in Section 5, one hundred and eighty (180) days or, if the breach of the diligence obligations are referred to arbitration under Section 14, as specified by the Arbitration Panel under Section 14.4), if within that time the breaching Party fails to cure its material breach and the non-breaching Party does not withdraw its termination notice. (b) Tolling of Time Periods. In the event that a Party initiates arbitration proceedings pursuant to Section 14 during the ninety (90) day cure period set forth in Section 13.4(a), such ninety (90) day period shall be extended during the pendency of any dispute resolution proceedings under Section 14 (i.e., until the Arbitration Panel issues a final decision) with respect to such termination notice. - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 76 (c) Bankruptcy. Either Party may terminate this Agreement if (i) the other Party files in any court or agency pursuant to any statute or regulation of any state or country, a petition in bankruptcy or insolvency or for reorganization or for an arrangement or for the appointment of a receiver or trustee of a Party or of its assets, (ii) the other Party proposes a written agreement of composition or extension of its debts, (iii) the other Party is served with an involuntary petition against it, filed in any insolvency proceeding, and such petition is not dismissed within sixty (60) days after the filing thereof, (iv) the other Party proposes or is a Party to any dissolution or liquidation, or (v) the other Party makes an assignment for the benefit of creditors. 13.5 Effects of Termination. If a Party terminates this Agreement under Section 13.3 or 13.4, all terms and provisions shall terminate as of the effective date of termination, except as otherwise expressly provided in this Section 13.5 and in Section 13.7. (a) AstraZeneca Elective Termination. If AstraZeneca terminates this Agreement pursuant to Section 13.3(d): (i) the provisions of Section 13.5(b) shall apply, except that the license grants in Section 7 shall terminate throughout the Territory; (ii) AstraZeneca shall pay to AGIX, on or before receipt by AGIX of the written notice described in Section 13.3(d), a nonrefundable, noncreditable payment, by immediately available funds via a Federal Reserve electronic wire transfer to a bank designated by AGIX, of an amount of cash equal to [****] Recent Monthly Net Sales; and (iii) AstraZeneca shall, upon the execution of a note (the documentation for which the Parties shall reasonably cooperate) to be held by AstraZeneca and reasonably satisfactory to the Parties and, in no event later than fifteen (15) days after receipt by AGIX of the written notice described in Section 13.3(d), make an unsecured loan to AGIX, on an interest-free basis, payable in full on or before the date that is thirty-six (36) months after the date such loan is made (with no payments of principal required prior to maturity), in an amount equal to [****] Recent Monthly Net Sales. (b) Termination for AstraZeneca Breach or Bankruptcy or Termination Pursuant to Sections 13.3(a)-(c). If AGIX terminates this Agreement pursuant to Section 13.4 or if AstraZeneca terminates this Agreement pursuant to Section 13.3(a), 13.3(b) or 13.3(c): - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 77 (i) the Parties shall (A) pay any amounts due pursuant to this Agreement prior to the date of termination; and (B) not enter into or incur, or be required to enter or incur, any material obligations in furtherance of the Development Plan or the Commercialization Plan without the written agreement of the Parties following notice of termination; (ii) AstraZeneca shall assign, or, in the case of (E) and (F) license, and promptly transfer to AGIX, or its Affiliates as requested by AGIX, and AGIX will assume and thereafter be fully responsible and liable for, at no expense to AGIX or its Affiliates, all of AstraZeneca's right, title and interest in and to: (A) all Regulatory Materials, Regulatory Approvals, drug master files and clinical trial agreements (to the extent assignable and not cancelled) for Product(s) or Compound(s); (B) all data, including clinical data, preclinical and clinical study protocols, materials and information of any kind or nature whatsoever, in AstraZeneca's possession or in the possession of its Affiliates or its or their respective agents related to the Product(s) or any Compound(s); (C) all trademarks and product logos related to Products; (D) all information related to Commercialization of the Product(s) or any Compound(s) including, but not limited to, market development and pre-launch scientific awareness program plans, market research studies, marketing plans, Promotional Materials, sales plans, sales territory assignments, physician targeting, and call plans; provided, however, that AGIX shall not use any Promotional Materials containing AstraZeneca's name in connection with the sale of any Product(s) or Compound(s) after the termination of this Agreement; (E) all material information, and any other information reasonably requested and required by AGIX, to the extent relating to the Development, Manufacture or Commercialization of the Compound and/or Products in the Field; (F) if so elected by AGIX, AstraZeneca shall grant to AGIX a license in all of AstraZeneca's interest in and to Joint Inventions and Joint Patents necessary or useful for the Development, Manufacture or Commercialization of the Compound and/or Products in the Field. In the event of such election, the Parties shall negotiate in good faith commercially reasonable terms for such license; provided, however, that such license shall be effective upon the election whether or not the terms have been negotiated and provided further that such license shall not include any up-front fees or milestone payments unless both Parties agree. If the Parties do not agree upon the terms of such 78 license after thirty (30) days of good faith negotiations, then either Party may refer the issue to Arbitration in accordance with Section 14. (iii) AstraZeneca shall return or provide to AGIX all Compounds within its possession or control and arrange for the AstraZeneca Sublicensees to return to AGIX all Compounds within such AstraZeneca Sublicensees' possession or control; (iv) all licenses granted by AstraZeneca to Sublicensees under the rights granted pursuant to Section 7 shall terminate; (v) AGIX shall revoke (and AstraZeneca shall allow revocation of) any powers of attorney for any AGIX Compound Patents and Other AGIX Patents that AstraZeneca holds as of the time of such termination; (vi) Until such time, if at all, that AstraZeneca assigns this Agreement and other assets to AGIX under Section 4.3 of the Transition Services Agreement, AstraZeneca shall supply (or cause its Third Party manufacturers to supply) Product(s) and/or Compound(s) to AGIX to the extent AstraZeneca had, prior to such termination, been Manufacturing Product(s) and/or Compound(s) and, at AGIX's request, shall assist in the transfer of Manufacturing processes to new suppliers; (vii) In the event that AstraZeneca supplies Product and/or Licensed Compounds pursuant to Section 13.5(b)(vi), AGIX shall pay AstraZeneca (A) its out-of-pocket costs, to the extent such Manufacture, transfer and distribution activities are conducted by Third Parties and/or (B) a reasonable market rate, to the extent that AstraZeneca conducts such Manufacture, transfer and distribution activities. The Parties will cooperate to effect such transfer as soon as practicable. In any event, AstraZeneca's obligations to transfer and supply under Sections 13.5(b)(vi) shall expire two (2) years after such termination; (viii) AGIX may elect to acquire an exclusive, royalty bearing license to intellectual property Controlled by AstraZeneca to the extent it is incorporated into a Compound or Product or is necessary or useful for the Manufacture thereof, with a right to sublicense, solely to develop, make, have made, use, sell, have sold, offer for sale, and import such Compound or Product in the Field in the Territory. In the event of such election, the Parties shall negotiate in good faith commercially reasonable terms for such license; provided, however, that such license shall not include any up-front fees or milestone payments unless both Parties agree; provided further that after ninety (90) days following such election either Party may seek Arbitration as to the terms of such license under Article 14; (ix) In the event that, at the time of termination, there is a Combination Product in Development that contains an Exclusive Market Product, or if such Combination Product has undergone a First Commercial Sale, the Parties shall, in 79 good faith, negotiate an arrangement under which (i) the Parties shall jointly Develop and Commercialize such Combination Product; (ii) each Party shall bear its own costs associated with its Commercialization activities; (iii) each Party shall share in the economic benefit of any such arrangement in accordance with the relative contribution of such Party's compound(s); and (iv) each Party would grant to the other Party a nonexclusive license to any intellectual property rights necessary solely to permit the arrangements described in this Section 13.5(b)(ix); and (x) In the event that, at the time of termination, there is a Combination Product in Development that contains only a Non-Exclusive Market Product, and no Exclusive Market Product, or if any such Combination Product has undergone a First Commercial Sale, AGIX shall acquire all rights to such Combination Product to the extent necessary and to the extent such rights are not available from any Third Party, and the provisions of Section 13.5(b)(i)-(viii) shall apply to such Combination Product (including AGIX acquiring from AstraZeneca any necessary licenses to intellectual property Controlled by AstraZeneca). (c) Termination for AGIX Breach or Bankruptcy. If AstraZeneca terminates this Agreement pursuant to Section 13.4: (i) The Parties shall pay any amounts due pursuant to this Agreement prior to the date of termination. (ii) AstraZeneca may elect to have all or any portion of the licenses granted to AstraZeneca pursuant to Section 7 and all of the covenants and obligations of AGIX, but not those of AstraZeneca, under Section 7 survive, in which case AstraZeneca's obligations to AGIX under Section 8 shall survive to the extent that AstraZeneca elects to retain any license grant hereunder. (iii) AstraZeneca shall have no further obligations under Section 5.2. (iv) The obligations of the Parties under Sections 2, 3, 4, 5 and 6 shall expire. (v) AGIX shall assign and promptly transfer to AstraZeneca, or its Affiliates as requested by AstraZeneca, at no expense to AstraZeneca or its Affiliates, all of AGIX's right, title and interest in and to: (A) all Regulatory Materials, Regulatory Approvals, drug master files and clinical trial agreements (to the extent assignable and not cancelled) for the Product(s) or any Compounds; (B) all data, including clinical data, materials and information of any kind or nature whatsoever, in AGIX's possession or in the possession of its Affiliates or its or their respective agents related to the Product(s) or any Compounds (in the event that such right, title and interest has not previously been assigned). Furthermore, AGIX shall cooperate and provide to AstraZeneca any powers 80 of attorney requested by AstraZeneca for Other AGIX Patents and AGIX Compound Patents. (vi) AstraZeneca may elect to have any agreements to which AGIX is a party providing for Manufacturing services assigned to AstraZeneca, to the extent permitted by such agreements. (d) Post-Termination Assistance. Upon termination of this Agreement due to breach or upon AstraZeneca terminating this Agreement pursuant to Section 13.3, the breaching Party or AstraZeneca, as the case may be, shall provide to the other Party at no cost, such additional appropriate technology transfer, transition assistance and post-termination services not otherwise specified in this Section 13, including without limitation, Manufacturing services and the continuation of the Supply of Product, necessary or useful for such other Party to effectuate its rights hereunder. (e) Return of Confidential Information. Upon expiration or termination of this Agreement, the Parties shall comply with Section 10.1(b). 13.6 Non-Exclusive Rights. The foregoing rights and remedies of the Parties set forth in Section 13.5 is non-exclusive and without prejudice to any rights that either Party may have arising under applicable law or equity. 13.7 Rights in Bankruptcy. All rights and licenses granted under or pursuant to this Agreement by AGIX and AstraZeneca are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of rights to "Intellectual Property" as defined under Section 101 of the U.S. Bankruptcy Code. The Parties agree that the Parties, as licensees of such rights under this Agreement, shall retain and may fully exercise all of their rights and elections under the U.S. Bankruptcy Code. The Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against a Party under the U.S. Bankruptcy Code, the Party hereto that is not a Party to such proceeding shall be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual property and all embodiments of such intellectual property, which, if not already in the non-subject Party's possession, shall be promptly delivered to it (a) upon any such commencement of a bankruptcy proceeding upon the non-subject Party's written request therefor, unless the Party subject to such proceeding continues to perform all of its obligations under this Agreement or (b) if not delivered under clause (a) above, following the rejection of this Agreement by or on behalf of the Party subject to such proceeding upon written request therefor by the non-subject Party. 13.8 Accrued Rights and Obligations; Survival. Termination of this Agreement by a Party pursuant to Section 13.4 shall not be a Party's sole remedy for a material breach of this Agreement, but shall be in addition to any other rights or remedies of a 81 Party under this Agreement. Termination or expiration of this Agreement shall not affect any accrued rights or surviving obligations of the Parties. The provisions of Sections 3.2(e), 9.1, 9.7(a), 10.1, 10.2, 11.10, 11.11, 13.1, 13.3, 13.4, 13.5, 13.6, 13.7, 13.8 and Sections 12, 14 and 15 shall survive the expiration or termination of this Agreement for any reason whatsoever. 14. DISPUTE RESOLUTION 14.1 Procedure (a) Scope. Any dispute arising out of or relating to this Agreement (a "DISPUTE") is subject to the provisions of this Section 14; provided, however, that Disputes regarding the scope, validity or enforceability of Patents are excluded from the scope of this Section 14, ("Excluded Disputes") and such Excluded Disputes shall be submitted to a court of competent jurisdiction. (b) Good Faith Negotiations. In the event of a Dispute that is not an Excluded Dispute, either Party may provide written notice of the Dispute to the other, in which event the Dispute shall be referred to the executive officers designated below or their successors or designees, for attempted resolution by good faith negotiations within fourteen (14) days after such notice is received. Said designated officers are as follows: For AGIX: President and Chief Executive Officer of AGIX For AstraZeneca: Chief Executive Officer of AstraZeneca PLC In the event the designated executive officers do not resolve such Dispute within the allotted fourteen (14) days, either Party may within thirty (30) days of the end of the fourteen (14) day period invoke the provisions of Section 14.2 hereinafter. 14.2 Alternative Dispute Resolution. Following the failure of settlement efforts pursuant to Section 14.1, any Dispute other than an Excluded Dispute , shall be subject to binding arbitration ("ADR") in the manner described below: (a) Request. A Party shall initiate an ADR to resolve a Dispute by providing written notice (the "ADR REQUEST") to counsel for the other Party, the issues to be resolved by the ADR. (b) Issues Covered. Within ten (10) Business Days after the receipt of the ADR Request, the other Party may, by written notice to the counsel for the Party initiating ADR, add additional issues to be resolved, if such issues had previously been addressed by the Executive Officers of the Parties pursuant to Section 14.1. Issues that had not previously been addressed by the Executive Officers of the Parties pursuant to Section 14.1, and issues not added within (ten) 10 Business Days of receipt of the ADR 82 Request, may not be subjects of the ADR invoked by the ADR Request and must be resolved, if at all, by initiation of separate Dispute proceedings. 14.3 Arbitration Procedure. The ADR shall be conducted pursuant to the JAMS Rules then in effect, except that notwithstanding those rules, the following provisions shall apply to the ADR hereunder: (a) Panel. The arbitration shall be conducted by a panel of three (3) arbitrators (the "ARBITRATION PANEL"). The Arbitration Panel shall be selected from a pool of retired independent federal judges to be presented to the Parties by JAMS. (b) Process. The time periods set forth in the JAMS rules shall be followed, unless a Party can demonstrate to the Arbitration Panel that the complexity of the issues, urgency of the Dispute or other reasons warrant extension or contraction of one or more of the timetables. For good cause shown, the Arbitration Panel may extend or contract such timetables, but in no event shall the timetables be extended so that the ADR proceeding extends more than eighteen (18) months from the date of the ADR Request. Within such time frames, each Party shall have the right to conduct such discovery as would be permitted by the Federal Rules of Civil Procedure. The Arbitration Panel shall not award punitive damages to either Party and the Parties shall be deemed to have waived any right to such damages. The Arbitration Panel shall in rendering its decision, apply the substantive law of the State of New York, excluding its choice of law rules that would require the application of the laws of another jurisdiction, except that the interpretation of and enforcement of this Section 14 shall be governed by the Federal Arbitration Act. The Arbitration Panel shall apply the Federal Rules of Evidence to the hearing. In the event that arbitration is initiated by AGIX, the hearing shall convene in New York, New York. In the event that arbitration is initiated by AstraZeneca, the hearing shall convene in Atlanta, Georgia. The fees of the Arbitration Panel and JAMS shall be paid by the losing Party, which shall be designated by the Arbitration Panel. If the Arbitration Panel is unable to designate a losing Party, it shall so state and the fees shall be split equally between the Parties. (c) Remedies. The Arbitration Panel is empowered to award any remedy allowed by law or equity, including money damages, prejudgment interest and attorneys' fees, and to grant final, or complete relief, but excluding punitive damages. By agreeing to arbitration, the Parties do not intend to deprive any court of its jurisdiction to issue a pre-arbitral injunction, pre-arbitral attachment, or other order in aid of arbitration proceedings and the enforcement of any award. Without prejudice to such provisional remedies as may be available under the jurisdiction of a court, the Arbitration Panel shall have full authority to grant provisional remedies (including without limitation injunctive relief) or to order any Party or Parties to request that a court modify or vacate any temporary or preliminary relief issued by that court, and to award damages for the failure of any Party to comply with the Arbitration Panel's orders to that effect. 83 (d) Fees. Except as set forth in Section 14.3(b) above, each Party shall bear its own legal fees and expenses against the Party losing the ADR unless it believes that neither Party is the clear loser, in which case the Arbitration Panel shall divide such fees, costs and expenses according to the Arbitration Panel's sole discretion. (e) Confidentiality. The ADR proceeding shall be confidential and the Arbitration Panel shall issue appropriate protective orders to safeguard each Party's Confidential Information. Except as required by law, no Party shall make (or instruct the Arbitration Panel to make) any public announcement with respect to the proceedings or decision of the Arbitration Panel without prior written consent of each other Party. The existence of any Dispute submitted to ADR, and the award, shall be kept in confidence by the Parties and the Arbitration Panel, except as required in connection with the enforcement of such award or as otherwise required by applicable law. (f) Judicial Enforcement. The Parties agree that judgment on any arbitral award issued pursuant to this Section shall be entered in the United States District Court for the Northern District of Georgia. (g) Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of New York, except for any of its choice of law rules that would require the application of the laws of another jurisdiction. 14.4 Special Rules for Disputes Concerning Diligence Covenant. In rendering any decision involving any Dispute relating to or arising out of Section 5, the Arbitration Panel shall specify: (a) the requirements, if any, considered necessary or appropriate for a Party to comply with Section 5, and (b) the deadline or deadlines for taking steps required for any such compliance, which deadlines may be shorter or longer than the one hundred eighty (180) day cure period specified in Section 13.4(a). 15. MISCELLANEOUS 15.1 Standstill. [****] 15.2 Termination of Certain Rights Upon AGIX Change of Corporate Control. Notwithstanding anything else in this Agreement to the contrary, unless otherwise specified by AstraZeneca within three (3) months after a Change of Corporate Control involving AGIX, the following provisions of this Agreement shall terminate: - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 84 (a) AGIX's right to participate in the JDC, JMC, Global Commercialization Team, U.S. Commercialization Team, and any other subcommittees or working groups established pursuant to Section 6.1, except as provided in Section 15.2(b); (b) AGIX and/or its successor shall continue to participate fully on the IPC, except that the IPC shall no longer have decision-making jurisdiction over all Licensed Patents, but instead shall have such jurisdiction only over Other AGIX Patents, with AstraZeneca having unilateral control over Prosecution, enforcement and defense of AGIX Compound Patents (and the rest of IPC jurisdiction and control would remain unaffected); (c) some or all of AGIX's rights as described in the Co-Promotion Agreement, to the extent and as provided therein. The Co-Promotion Agreement further provides that, under certain circumstances described herein, AstraZeneca may, following an AGIX Change of Corporate Control, object under certain circumstances to AGIX being permitted to continue to co-promote the Product; and (d) AstraZeneca shall assume control of Prosecution, enforcement and defense of all AGIX Compound Patents. AGIX shall cooperate in providing to AstraZeneca all information, assistance, assignments and other support reasonably requested to assist AstraZeneca in assuming such control. 15.3 Assignment. This Agreement shall inure to the benefit and be binding upon each Party, its successors and assigns, except as provided in Section 15.2. The Agreement may not be assigned or otherwise transferred, nor, except as expressly provided hereunder, may any right or obligation hereunder be assigned or transferred by either Party without the prior written consent of the other Party, provided, however, that either Party may, without such consent, assign the Agreement and its rights and obligations hereunder (i) to an Affiliate, provided such Affiliate has the financial resources to perform the obligations of this Agreement in the reasonable judgment of the other Party or (ii) in connection with the transfer or sale of all or substantially all of its assets or business to which this Agreement relates, or in the event of its merger or consolidation or change in control or similar transaction, or a sale of all or substantially all the pharmaceutical business assets of the Party; and provided further, that AGIX or an Affiliate of AGIX shall be permitted to sell, assign or transfer the right to receive Royalties owed by AstraZeneca to AGIX pursuant to Section 8 to one or more Third Parties, and shall be permitted in connection with any such sale, assignment or transfer, to assign the right to receive reports and audit rights pursuant to Section 8, but not any other rights hereunder, except to the extent the Parties otherwise agree in writing, to such Third Party or Third Parties. Any attempted assignment not in accordance with this Section 15.3 shall be void. 85 15.4 Force Majeure. Neither Party shall be liable for any delay or failure of performance to the extent such delay or failure is caused by circumstances beyond its reasonable control and that by exercise of due diligence it is unable to prevent, provided that the Party claiming excuse immediately notifies the other Party and uses and continues to use commercially reasonable efforts to overcome the same. 15.5 Further Assurances. The Parties intend that this Agreement contain all consents, licenses and authorizations from one Party to the other necessary to enable each Party to perform its obligations hereunder. In the event any further such consents, licenses or authorizations are necessary, each Party agrees to take such further actions and execute such further agreements as may be reasonably necessary to carry out the intent and purposes of this Agreement. 15.6 Severability. The provisions of this Agreement are severable. If any item or provision of this Agreement shall to any extent be invalid or unenforceable, the remainder of this Agreement shall not be affected thereby, and each term and provision of this Agreement shall be valid and shall be enforced to the fullest extent permitted by law. The Parties will use diligent good faith efforts to revise this Agreement as and to the extent reasonably necessary to effectuate their original intent and purpose under this Agreement. 15.7 Notices. All notices hereunder shall be in writing and shall be delivered personally, sent for next day delivery by internationally recognized courier service or transmitted by facsimile (transmission confirmed), with confirmation by next day delivery by an internationally recognized courier service, to the following addresses and facsimiles of the respective Parties or such other address or facsimile as is notified pursuant to this Section 15.7: If to AGIX: AtheroGenics, Inc. 8995 Westside Parkway Alpharetta, Georgia 30004 Attn: President and Chief Executive Officer Fax: (678) 336-2504 With a copy to: Arnold & Porter LLP Suite 900 1600 Tysons Boulevard McLean, Virginia 22102 Attn: Steve Parker, Esq. Fax: (703) 720-7399 86 If to AstraZeneca: IPR Pharmaceuticals, Inc. CARR 188 LOTE 17 SAN ISIDRO INDUSTRIAL PARK CANOVANAS, PR 00729 Attn: President and General Manager Fax: (787) 750-5332 With a copy to: Shiona McGillivray, Senior Legal Counsel AstraZeneca Alderley House Alderley Park Macclesfield Post Code SK10 4TF England 15.8 Jurisdiction and Venue. In connection with any Dispute arising hereunder or in connection with the subject matter hereof that is not settled in accordance with Sections 14.1 and 14.2, each of the Parties hereby consents to the non-exclusive jurisdiction and venue of the U.S. federal courts located within the Southern District of New York. Each Party hereby irrevocably waives any right that it may have to assert that any such court lacks jurisdiction, other than the grounds that such Dispute is covered by Section 14, or that such forum is not convenient. 15.9 Affiliates. Without limiting the generality of the foregoing, any obligations of AstraZeneca may be performed by any of AstraZeneca's Affiliates, including but not limited to AstraZeneca, and such obligations will be deemed satisfied upon full and complete performance by such Affiliate as specified in this Agreement. 15.10 Entire Agreement. This Agreement and the Related Agreements, herein and therein, including any exhibits expressly named and referenced herein and therein, constitute the entire agreement and understanding of the Parties and supersede any prior agreements or understandings relating to the subject matter hereof, including the Confidential Disclosure Agreement between AGIX and AstraZeneca Pharmaceuticals LP dated as of March 12, 2003. Any modification of this Agreement shall be effective only to the extent it is reduced to writing and signed by a duly authorized representative of each Party hereto. 15.11 Headings. The captions to the several Sections and subsections hereof are not a part of this Agreement, but are merely for convenience to assist in locating and reading the several Articles and Sections hereof. 15.12 Independent Contractors. It is expressly agreed that AGIX and AstraZeneca shall be independent contractors and that the relationship between the two 87 Parties shall not constitute a partnership, joint venture or agency. Neither AGIX nor AstraZeneca shall have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on the other, without the prior consent of the other Party. 15.13 Waiver. The failure on the part of a Party to exercise or enforce any rights conferred upon it hereunder shall not be deemed to be a waiver of any such rights nor operate to bar the exercise or enforcement thereof at any time or times hereafter. 15.14 No Third Party Beneficiaries. This Agreement is neither expressly nor impliedly made for the benefit of any Person other than the Parties. 15.15 Cumulative Remedies. No remedy referred to in this Agreement is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to in this Agreement or otherwise available under law. 15.16 Counterparts. The Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 15.17 Waiver of Rule of Construction. Each Party has had the opportunity to consult with counsel in connection with the review, drafting and negotiation of this Agreement. Accordingly, the rule of construction that any ambiguity in this Agreement shall be construed against the drafting Party shall not apply. END OF PAGE (signatures appear on following page) 88 IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date. ATHEROGENICS, INC. IPR PHARMACEUTICALS, INC. By /s/ RUSSELL M. MEDFORD By /s/ RUBEN FREYRE --------------------------------- ------------------------------- Name: Russell M. Medford M.D., Ph.D. Name: Ruben Freyre Title: President & CEO Title: President & General Manager EX-10.36 4 g99853exv10w36.txt EX-10.36 CO-PROMOTION AGREEMENT EXHIBIT 10.36 CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT MARKED [****] HAVE BEEN REDACTED AND HAVE BEEN FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION ================================================================================ CO-PROMOTION AGREEMENT BY AND BETWEEN ASTRAZENECA PHARMACEUTICALS LP AND ATHEROGENICS, INC. DATED AS OF DECEMBER 22, 2005 ================================================================================ TABLE OF CONTENTS ARTICLE I. DEFINITIONS........................................................................................... 1 1.1. Definitions........................................................................................ 1 1.2. Construction....................................................................................... 9 ARTICLE II. ENGAGEMENT........................................................................................... 10 2.1. Engagement of the Company.......................................................................... 10 2.2. Company Activities During the Funding Term, the Detail Funding Term and the Post-Funding Term...... 10 ARTICLE III. PROMOTION SERVICES.................................................................................. 11 3.1. Strategic Targeting Plan........................................................................... 11 3.2. Requisite Details.................................................................................. 12 3.3. Secondary Products................................................................................. 12 3.4. Services Provided by the Company................................................................... 13 3.5. Expertise of the Company........................................................................... 13 3.6. Coordination with AZ............................................................................... 14 3.7. Account Information and Support.................................................................... 14 3.8. Promotion Plan..................................................................................... 14 3.9. Promotional Materials.............................................................................. 15 3.10. Statements about the Products...................................................................... 15 3.11. Requests for Medical Information................................................................... 15 3.12. Compliance with Laws and Policies.................................................................. 16 3.13. Sales Meetings..................................................................................... 16 3.14. Reporting.......................................................................................... 17 3.15. Information Technology............................................................................. 18 3.16. Orders for Products; Terms of Sale................................................................. 18 ARTICLE IV. CONDUCT OF COMPANY SALES REPRESENTATIVES............................................................. 19 4.1. Training Programs.................................................................................. 19 4.2. Requirements for Hiring and Conduct of the Company Sales Force..................................... 19 4.3. Conduct by Company Sales Representatives........................................................... 20 ARTICLE V. SAMPLES............................................................................................... 20 5.1. Provision of Samples............................................................................... 20 5.2. Sample-Carry....................................................................................... 21 5.3. Sample-Send........................................................................................ 22 ARTICLE VI. FEES................................................................................................. 22 6.1. Calculation and Payment of Allowable Costs During the Funding Term................................. 22 6.2. Incentive Compensation............................................................................. 23 6.3. Detail Funding Term................................................................................ 24 6.4. Audit Rights....................................................................................... 24 6.5. Amendments......................................................................................... 25 6.6. All Inclusive...................................................................................... 25

-i- ARTICLE VII. SALES OPERATIONS GROUP.............................................................................. 25 7.1. Sales Operations Group............................................................................. 25 7.2. Appointment of Project Managers.................................................................... 26 ARTICLE VIII. ADVERSE REACTION REPORTING AND OTHER REGULATORY MATTERS............................................ 27 8.1. Regulatory Reporting............................................................................... 27 8.2. Threatened Agency Action........................................................................... 28 8.3. Reporting of Agency Actions........................................................................ 28 8.4. Maintenance of Records............................................................................. 28 8.5. Company Compliance Program......................................................................... 29 ARTICLE IX. RETURNED/RECALLED PRODUCT............................................................................ 29 9.1. Returned Product................................................................................... 29 9.2. Recalled Product................................................................................... 29 ARTICLE X. INDEPENDENT CONTRACTOR STATUS OF THE COMPANY AND THE SALES FORCE...................................... 29 10.1. Independent Contractor Status...................................................................... 29 10.2. No AZ Benefits..................................................................................... 30 10.3. No Recruitment..................................................................................... 30 10.4. Services Agreement................................................................................. 31 ARTICLE XI. NONCOMPETITION....................................................................................... 31 11.1. Noncompetition..................................................................................... 31 ARTICLE XII. CONFIDENTIALITY..................................................................................... 32 12.1. Nondisclosure Obligation........................................................................... 32 12.2. Permitted Disclosures.............................................................................. 33 12.3. Use of Name........................................................................................ 34 12.4. Publicity Referral................................................................................. 34 12.5. Publications....................................................................................... 34 ARTICLE XIII. TRADEMARKS AND OTHER RIGHTS........................................................................ 34 13.1. Product Trademarks................................................................................. 34 13.2. No Ownership or Rights in the Product Trademarks................................................... 35 13.3. Trademark Infringement............................................................................. 35 13.4. Other Rights....................................................................................... 35 ARTICLE XIV. WARRANTIES; INDEMNITIES; INSURANCE.................................................................. 35 14.1. Representations, Warranties and Covenants.......................................................... 35 14.2. AZ Indemnification................................................................................. 36 14.3. Company Indemnification............................................................................ 37 14.4. Indemnification Procedure.......................................................................... 37 14.5. Workers' Compensation and Liability Insurance...................................................... 39 ARTICLE XV. TERMINATION RIGHTS AND CONSEQUENCES.................................................................. 40

-ii- 15.1. Termination of the Agreement....................................................................... 40 15.2. Termination of Funding Term and Detail Funding Term................................................ 42 15.3. Effect of Termination.............................................................................. 42 15.4. Return of All Materials............................................................................ 43 15.5. Continuation of Promotion of Secondary Product..................................................... 43 ARTICLE XVI. MISCELLANEOUS....................................................................................... 43 16.1. Dispute Resolution................................................................................. 43 16.2. Governing Law...................................................................................... 44 16.3. Force Majeure...................................................................................... 45 16.4. Waiver............................................................................................. 45 16.5. Notices............................................................................................ 45 16.6. Entire Agreement................................................................................... 46 16.7. Successors and Assigns............................................................................. 47 16.8. Schedules and Exhibits............................................................................. 47 16.9. Counterparts....................................................................................... 47 16.10. Severability....................................................................................... 47 16.11. Applicable Laws.................................................................................... 47 16.12. Affiliates......................................................................................... 48 16.13. Expenses........................................................................................... 48 16.14. Further Assurances................................................................................. 48 16.15. Construction....................................................................................... 48 16.16. No Joint Venture................................................................................... 48

SCHEDULES & EXHIBITS Schedule 1.1 AZ Cardiovascular Compounds Schedule 3.2 SCHEDULE of Calls and Details Schedule 3.4 LIST OF SALES FORCE AND RELATED JOB DESCRIPTIONS Schedule 3.15 INFORMATION TECHNOLOGY AND COMMUNICATIONS MANAGEMENT REQUIREMENTS AND REPORTS Schedule 6.1A ALLOWABLE COSTS Schedule 6.1B ADJUSTMENTS TO ALLOWABLE COSTS Schedule 6.3 INCENTIVE COMPENSATION PLAN Exhibit 10.4 SERVICES AGREEMENT -iii- CO-PROMOTION AGREEMENT This CO-PROMOTION AGREEMENT (the "Agreement") is entered into as of December 22, 2005, by and between ASTRAZENECA PHARMACEUTICALS LP, a Delaware limited partnership ("AZ"), and ATHEROGENICS, INC., a Georgia corporation (the "Company"). AZ and Company are sometimes referred to in this Agreement individually as a "Party" and collectively as the "Parties". W I T N E S S E T H: WHEREAS, pursuant to the provisions of the License and Collaboration Agreement of even date herewith between IPR Pharmaceuticals, a corporation organized and existing under the laws of Puerto Rico ("AstraZeneca") and the Company (the "Collaboration Agreement"), AstraZeneca has licensed from the Company the right to develop, manufacture and market products containing AGI-1067. WHEREAS AstraZeneca has appointed AZ, its Affiliate, as a non-exclusive distributor in the Territory for the promotion of AstraZeneca products, including those covered by the Collaboration Agreement. WHEREAS, AZ and Company desire to optimize sales of the Products; and WHEREAS, the Parties hereto agree that the Company shall be entitled to co-promote the Products in the Territory to Target Prescribers (as defined herein), all on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the respective covenants, representations, warranties and agreements set forth herein, and intending to be legally bound hereby, the Parties hereby agree as follows: ARTICLE I. DEFINITIONS 1.1. Definitions Unless otherwise defined herein, all of the capitalized terms used in this Agreement shall have the respective meanings ascribed to them in the Collaboration Agreement. Unless specifically set forth to the contrary herein, the following terms shall have their indicated meanings when used in this Agreement: "Act" means the Federal Food, Drug, and Cosmetic Act, as amended, and the rules, regulations, guidances, guidelines and requirements of the FDA as may be in effect from time to time. "Adverse Event" means the development of an undesirable medical condition or the deterioration of a pre-existing medical condition following or during exposure to a Product, whether or not considered causally related to the Product, the exacerbation of any pre-existing condition(s) occurring during the use of a Product, or any other adverse experience or adverse drug experience described in the FDA's Investigational New Drug safety reporting and New Drug Application post-marketing reporting regulations, 21 C.F.R. Sections 312.32 and 314.80, respectively, as they may be amended from time to time. For purposes of this Agreement, "undesirable medical condition" shall include symptoms (e.g., nausea, chest pain), signs (e.g., tachycardia, enlarged liver) or the abnormal results of an investigation (e.g., laboratory findings, electrocardiogram), including unfavorable side effects, toxicity, injury, overdose, sensitivity reactions or failure of a Product to exhibit its expected pharmacologic/biologic effect. "Affiliate" means, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by or is under Common Control with such first Person. "Agency" means any governmental or regulatory authority in the Territory, including the FDA. "Agreement" has the meaning ascribed to such term in the Preamble hereof. "Allowable Costs" means reasonable, necessary and verifiable out-of-pocket costs incurred by the Company in connection with the Program that are specified in Schedule 6.1 hereto, as it may be amended by agreement of the Parties from time to time. "Anticipated Approval Date" means the date on which the Joint Management Committee determines that the Primary Product is reasonably anticipated to receive regulatory approval to be marketed in the United States. "Arbitrator" has the meaning ascribed to such term in Section 6.4(c) hereof. "Applicable Laws" means the American Medical Association Guidelines on Gifts to Physicians from Industry and the PhRMA Code on Interactions with Healthcare Professionals, and all federal, state and local laws, and the rules and regulations of all Agencies, in effect from time to time applicable to the marketing, promotion, distribution and sale of the Products in the Territory, including the Act (including guidances and guidelines published by the FDA on its publicly available web site), PDMA, federal and state "fraud and abuse" statutes and regulations, including but not limited to the Medicare and State Health Programs Anti-Fraud and Abuse Amendments of the Social Security Act (42 U.S.C. Section 1320a-7b(b), the "Safe Harbor Regulations" that are found at 42 C.F.R. Section 1001.952 et seq., and consumer protection and false claims statutes and regulations. "Approval Date" means the date on which the Primary Product receives regulatory approval to be marketed in the United States. -2- "AZ" has the meaning ascribed to such term in the Preamble hereof. "AZ Indemnified Party" has the meaning ascribed to such term in Section 14.3. "AZ Representative" means a Representative employed or contracted by AZ to Promote the Products. "AZ Sales Force" means the Sales Force and the other personnel employed or contracted by AZ for the Promotion of a Primary Product and any Secondary Product having a specialist-focused call deck, with a relative emphasis on cardiologists. "Calendar Quarter" means each of the four (4) consecutive three-month periods ending on March 31, June 30, September 30 and December 31. "Calendar Trimester" or "Calendar Trimesterly" means each of the three (3) consecutive four-month periods ending on April 30, August 31, and December 31. "Calendar Year" means each successive period of twelve (12) consecutive calendar months commencing on January 1 and ending on December 31. "Call" means an interactive in-person visit to and discussion with a medical professional with prescribing authority by a Representative that consists of one or more Details. "Change of Corporate Control" has the meaning ascribed to such term in the Collaboration Agreement. "Collaboration Agreement" has the meaning ascribed to such term in the Preamble hereof. "Commercially Diligent Efforts" of a Party mean those efforts that are consistent with Applicable Laws and with industry standards and practices followed by pharmaceutical companies in the Promotion of their pharmaceutical products with a comparable potential market. "Company" has the meaning ascribed to such term in the Preamble hereof. "Company Indemnified Party" has the meaning ascribed to such term in Section 14.2. "Company Representative" means a Representative employed or contracted by the Company. "Company Sales Force" means the Sales Force employed or contracted by the Company, which includes the Company Representatives required by Section 3.4 and the other personnel set forth on Schedule 3.4 (as such schedule may be amended from time to -3- time by the Sales Operations Group) assigned by the Company to implement the Program. Schedule 3.4 also sets forth all job descriptions relating to the Company Sales Force. The Company Sales Force shall have a specialist-focused call deck with a predominant emphasis on cardiologists. The Company shall not make any material changes to such job descriptions unless agreed to by the Sales Operations Group. "Compass" means the Compass software used by AZ, or any successor or compatible customer relationship management software selected by AZ. "Compete" means, with respect to a pharmaceutical product, that such product is in the same Uniform System of Classification (USC) class as another product, as reported by IMS or any comparable successor agency. "Competing Cardiovascular Product" means any pharmaceutical product that Competes with any of the products listed on Schedule 1.1. "Competing 1067 Product" means any pharmaceutical product that Competes with the Primary Product. "Control" and, with correlative meanings, the terms "Controlled by" and "under Common Control with," means (i) the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract, resolution, regulation or otherwise or (ii) the ownership, directly or indirectly, of more than fifty percent (50%) of the voting securities or other ownership interest of a Person (or, with respect to a limited partnership or other similar entity, its general partner or controlling entity). "Detail" means that part of a Call during which a Representative makes a presentation of a Product to a medical professional with prescribing authority such that the relevant characteristics of the Product are described by the Representative in a fair and balanced manner consistent with the requirements of this Agreement and Applicable Law and in a manner that is customary in the industry for the purpose of promoting a prescription pharmaceutical product. A sample drop shall not constitute a Detail. When used as a verb, "Detail" means to engage in a Detail. "Detail Funding Term" means the period during the Term, following the conclusion of the Funding Term, that AZ elects to fund the Company's activities (if it elects to do so) pursuant to Section 6.3, unless the Agreement is earlier terminated pursuant to Section 15.1 or the Detail Funding Period is terminated pursuant to Section 15.2. "Disclosing Party" means the party disclosing Confidential Information. -4- "Dispute" means any dispute arising between the Parties in connection with or relating to this Agreement, the transactions contemplated hereby or any document or instrument delivered in connection herewith or therewith. "Dispute Notice" has the meaning ascribed to such term in Section 16.1(a) hereof. "Disputing Party" has the meaning ascribed to such term in Section 17.1(c) hereof. "District Sales Manager" means a supervisor of Representatives assigned to defined regions of the Territory. "Employment Laws" means all federal, state, or local statutes, laws, ordinances, regulations or guidelines relating to (a) employment (including Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Employee Retirement Income Security Act, the Rehabilitation Act of 1973, the Family and Medical Leave Act, the Fair Labor -Standards Act, the Immigration and Reform Control Act of 1986, the National Labor Relations Act, the Americans With Disabilities Act, and all other applicable federal, state, or local statutes, laws, ordinances, or regulations, (b) safety and health (including the Occupational Safety and Health Act of 1970), and (c) the payment of taxes and required taxes and payments with respect to employees (including the Internal Revenue Code of 1986). "FDA" means the United States Food and Drug Administration and any successor agency having substantially the same functions. "Field Alert" has the meaning ascribed to such term in Section 8.1. "Funding Term" means the three (3) year period commencing on a date between the Anticipated Approval DATE and three months after the Launch Date of the Primary Product, unless the Agreement is earlier terminated pursuant to Section 15.1 or the Funding Term is terminated pursuant to Section 15.2. "Hardware" means the Laptops and the Territory Management Devices. "Hiring Profile" means the required minimum qualifications for Company Sales Force members, which shall not be materially different from those applicable to a similarly deployed AZ Sales Force, as set forth in Schedule 3.4. "Incentive Compensation" means the incentive compensation, if any, payable to the Company to compensate its Representatives, as determined in accordance with Schedule 6.2 hereof. "Indemnification Claim Notice" has the meaning ascribed to such term in Section 14.4. -5- "Indemnified Party" has the meaning ascribed to such term in Section 14.4. "Indemnifying Party" has the meaning ascribed to such term in Section 14.4. "Information Technology" means the Hardware and the Software. "JMC" means the Joint Management Committee as that term is defined in the Collaboration Agreement. "Laptops" shall mean the laptop computers, including, but not limited to, IBM ThinkPads and any successor devices provided by AZ to the Company in accordance with the terms hereof for use by the Company Representatives in accordance with the terms hereof. "Launch Date" means the date following the Approval Date on which AZ commences Promotion of the Product. "Losses" has the meaning ascribed to such term in Section 14.2. "Monthly Performance Report" has the meaning ascribed to such term in Section 3.14. "Neutral" means a disinterested, conflict-free individual not affiliated with either Party. "NorthStar" means the NorthStar software used by AZ and made available to the Company to maintain a database containing, among other things, information regarding medical professionals Detailed by Representatives entered via Territory Management Devices, or any successor or compatible software selected by AZ. "Notice" means any notice, request, report, statement or other communication to either Party. "PDMA" means the Prescription Drug Marketing Act of 1987, as amended, and the rules, regulations and guidelines promulgated thereunder and in effect from time to time. "Person" means any individual or entity, including a government or political subdivision, department or agency of a government. "PIR" means a professional information request as defined in Section 3.11. "Post-Funding Term" means the period during the Term after the conclusion of the Funding Term and the Detail Funding Term, if any. -6- "Primary Product" means any product containing the Compound as contemplated in the Collaboration Agreement, including any Combination Product (as such term is used in the Collaboration Agreement). "Product" means all Primary Products and any Secondary Product . "Product Labels and Inserts" means (i) all labels and other written, printed or graphic matter affixed to any container, packaging or wrapper utilized with Products, or (ii) any written material physically accompanying Products, including Product package inserts. "Product Quality Complaint" means any and all manufacturing or packaging-related complaints related to a Product, including (i) any complaint involving the possible failure of a Product to meet any of the specifications for such Product; (ii) any dissatisfaction with the design, package or labeling of a Product; or (iii) any Adverse Event that may involve the quality of the Product, including lack of effect, infection, or request for testing. "Product Trademarks" means (i) the Trademark for the Primary Product as determined by the Global Commercialization Team pursuant to the Collaboration Agreement, and the registrations thereof, (ii) the Trademarks for or relating to any other Products and the registrations thereof, (iii) any pending or future Trademark registration applications relating to the Products, (iv) any unregistered Trademark rights relating to the Products as may exist through use prior to or as of the date hereof, (v) any current or future modifications or variants of any of the foregoing rights, and (vi) any future Trademarks adopted by AZ or its Affiliates for use in connection with the Products. "Program" means the program of Promotion to be conducted by the Company during the Term in accordance with the Promotion Plan, the STP and the terms hereof. "Program Budget" has the meaning ascribed to such term in Section 6.1(a) hereof. "Project Manager" shall have the meaning ascribed to such term in Section 7.2. "Promotion" means those activities normally undertaken by a pharmaceutical company's sales force to implement marketing plans and strategies aimed at encouraging the appropriate use of a particular prescription or other pharmaceutical product, including detailing. When used as a verb, "Promote" means to engage in such activities. "Promotion Plan" means the annual plan (as it may be revised from time to time) for the Territory developed pursuant to the provisions of Section 3.8 hereof addressing, among other things, [****] - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. -7- "Promotion Policies" means the AZ Promotion Policies provided to the Company in writing from time to time. "Promotional Materials" means all written, printed or graphic material, other than Product Labels and Inserts, all premium items, and other materials provided by AZ for use by Representatives during Details relating to Products. "Public Announcement" means public announcements, press releases, or advertising, recruiting and other public documents. "Receiving Party" means the party receiving Confidential Information. "Representative" means a sales representative employed or contracted by a Party to conduct such Party's activities in connection with the Promotion Plan and who has been hired by such Party using its own proprietary recruiting and hiring standards and who satisfies the Hiring Profile. "Sales Force" means the full set of Representatives employed by a Party. "Sales InSite" means a Web-based application that interfaces with AZ's Microsoft Outlook software and offers Sales InSite tools that enable Representatives to utilize features including sample management, promotions, TimeTrax reporting, Submit PIR and adverse incident reporting, and any successor or compatible applications selected by AZ. "Sales Operations Group" means the group established by the Parties pursuant to Section 7.1 hereof. "Secondary Product" means an AZ Affiliate product promoted by AZ, in addition to the Primary Product, selected pursuant to the provisions of Section 3.3 hereof. "Services Agreement" means the Agreement with respect to services performed pursuant to this Agreement for AZ between the Company and each member of the Company Sales Force in the form attached as Exhibit 10.4 hereto. "Software" means Compass, NorthStar and Sales InSite, or other successor software selected by AZ. "Strategic Targeting Plan" or "STP" means the plan developed and amended from time to time in accordance with Section 3.1 that specifies, on a Calendar Trimester basis, Detailing strategy and obligations, [****] "Target Prescriber" means an office-based cardiologist or other physician specialist treating predominately cardiac and vascular disease with prescribing authority (including nurse practitioners and physician assistants in the office of such cardiologist with actual prescribing authority) who is identified in the applicable Strategic Targeting Plan. "Targeted Delivery Score," or "TDS", means the measurement of Sales Force's compliance to achievement of the STP (calculated at - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. -8- the individual and team levels of the Sales Force) by examining completion of actual Details against the Detail assignment at a physician-specific level. "Term" means the Term of the Collaboration Agreement, as defined in the Collaboration Agreement (including any termination of the Collaboration Agreement pursuant to its terms), or such shorter period as shall conclude upon the effective date of termination of this Agreement pursuant to Section 15.1. "Territory" means the United States of America. "Territory Management Devices" means the electronic devices to assist in territory management, including NEC Mobil Pro's and any successor or compatible devices selected by AZ for use by the Representatives. "Third Party Claim" has the meaning ascribed to such term in Section 14.4. "Trademark" means any trademark, trade dress, brand mark, trade name, brand name, corporate name, logo or business symbol. "Training Program" means the training program described in Section 4.1, including written or other recorded, videotaped or Web-based training materials, and in-person training meetings and on-line training programs, provided or made accessible to the Sales Force for training purposes. "Turnover" means, with respect to any period, the percentage obtained by dividing (a) the number of members of the Company Sales Force who were employed on the Sales Force at the beginning of such period and who were not continuously employed on the Sales Force during such period, by (b) the total number of members constituting the Sales Force at the beginning of such period (it being understood that a person may be employed continuously on the Sales Force during any period in a series of different positions on the Sales Force). "U.S. Commercialization Team" means the U.S. Commercialization Team as that term is defined in the Collaboration Agreement. 1.2. Construction Unless the context of this Agreement otherwise requires: (a) words of any gender include each other gender; (b) words using the singular or plural number also include the plural or singular number, respectively; (c) the terms "hereof," "herein," "hereby" and derivative or similar words refer to this entire Agreement; (d) the terms "Article," "Section," or "Schedule" refer to the specified Article, Section or Schedule of this Agreement; (e) the term "or" has, except where otherwise indicated, the inclusive meaning represented by the phrase "and/or"; and (f) the term "including" or "includes" means "including without limitation" or "includes without limitation." -9- ARTICLE II. ENGAGEMENT 2.1. Engagement of the Company (a) Subject to and in accordance with the provisions of this Agreement, AZ agrees to engage the Company for the Term to Promote the Products in the Territory from and after the Approval Date. Such engagement by AZ shall be on a nonexclusive basis, and AZ shall at all times have the right to market and Promote the Products in any manner and using the services of any Person that AZ in its sole discretion deems necessary or appropriate; provided that AZ shall notify the Company prior to entering into any additional Promotion arrangements with respect to the Products in the Territory. (b) The Company shall commence performing its Promotion obligations hereunder at any time between the Anticipated Approval Date and six (6) months after the Approval Date, to the extent and subject to the conditions provided in this Agreement. (c) On or before the Anticipated Approval Date, and not less than ninety (90) days prior to each annual anniversary thereafter, the Company shall send to AZ a written notice stating whether it wishes, during the next succeeding year (the "Suspension Period"), to engage in the activities contemplated by this Agreement. If the Company elects not to engage in such activities, the Funding Term and the Detail Funding Term shall for all purposes of this Agreement be terminated, effective upon commencement of the Suspension Period, and from thenceforth the Post-Funding Term shall be in effect and applicable for the balance of the Term. No election by the Company to not engage in any such activities shall prejudice its right to engage in such activities in succeeding years during the Post-Funding Term. (d) The Company shall Promote the Secondary Product during the Funding Term and such additional period as the Parties agree, subject to the terms and conditions of this Agreement. (e) The Company shall have the right to Promote the Products under this Agreement by means of a Sales Force consisting of its own employees or by contracting with an independent sales force provider pursuant to an independent sales force agreement, which provider shall be approved by AZ, which approval shall not be unreasonably withheld. The provisions of this Agreement, including Section 4.3, shall apply to such contracted Sales Force to the same extent as if they were employees of the Company and any references in this Agreement to employees of the Company shall apply with equal force to such contracted Sales Force. 2.2. Company Activities During the Funding Term, the Detail Funding Term and the Post-Funding Term -10- (a) During the Funding Term, (i) AZ shall reimburse the Company for the cost of its activities under this Agreement, to the extent provided in Section 6.1 and Section 6.2, and subject to the terms and conditions contained in this Agreement; and (ii) AZ shall conduct and pay for the training activities as described in Section 4.1(a). (b) Unless otherwise agreed to by the Parties, during the Detail Funding Term, if any, (i) AZ shall reimburse the Company for the cost of its activities under this Agreement, to the extent provided in Section 6.3, and subject to the terms and conditions contained in this Agreement; and (ii) AZ will conduct and pay for the training activities as described in Section 4.1(a). (c) During the Post-Funding Term, (i) the Company shall fund its activities under this Agreement; and (ii) the Company shall conduct and pay for the training activities (other than the preparation and cost of training materials which shall be borne solely by AZ) as described in Section 4.1(b). ARTICLE III. PROMOTION SERVICES 3.1. Strategic Targeting Plan (a) Within one hundred twenty (120) days after delivery by the Company to AstraZeneca of the Final ARISE Results, the U.S. Commercialization Team (which shall include representatives of the Company pursuant to the Collaboration Agreement), shall begin developing a Strategic Targeting Plan for the four (4) month period following the Approval Date. Such Strategic Targeting Plan shall be finalized no later than thirty (30) days prior to the Anticipated Approval Date. Any Strategic Targeting Plan [****], with a predominant emphasis on cardiologists, [****]. (b) Not less than thirty (30) days prior to the beginning of each Calendar Trimester during the Funding Term and the Detail Funding Term, if any, the U.S. Commercialization Team (which shall include representatives of the Company pursuant to the Collaboration Agreement), shall finalize an updated Strategic Targeting Plan for the next succeeding Calendar Trimester. (c) During the course of preparation of any Strategic Targeting Plan pursuant to Section 3.1(a) and Section 3.1(b), the Company may, through its representatives on the U.S. Commercialization Team, propose to AZ revisions to a draft Strategic Targeting Plan that the Company reasonably believes are appropriate, necessary or useful to permit the Company to (i) perform its obligations hereunder or (ii) allow the Company Sales Force to have opportunities comparable overall (in terms of quality and quantity of Calls, Details and other factors affecting Promotion) to those provided to the AZ Sales Force overall to Promote the Products. AZ shall consider any such proposed revisions in good faith, and discuss them with the Company to allow the adoption of a final Strategic Targeting Plan that considers the interests and obligations of the Parties, - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. -11- recognizing that AstraZeneca and its Affiliates controls the commercialization of the Products. (d) Once a Strategic Targeting Plan is finalized pursuant to Section 3.1(a) and Section 3.1(b), either Party may propose amendments thereto, and the Parties shall, at meetings of the U.S. Commercialization Team, discuss such proposed amendments in good faith and in a manner consistent with that described in Section 3.1(c) (e) If, in connection with any discussions between the Parties concerning the finalization of, or update or amendment to, a Strategic Targeting Plan, the Parties are unable to reach agreement concerning any matter, and if the resolution of such matter could be reasonably expected to have a material adverse effect on the Company's relative ability to Promote Products, as compared to the similarly deployed AZ Sales Force, such matter may be referred by either Party to the JMC for resolution pursuant to the terms of the Collaboration Agreement; provided, that the appeal process set forth in this Section 3.1(e) shall not operate to delay or otherwise impair AZ's ability to implement any STP, including any disputed portions thereof, which has been approved by the U.S. Commercialization Team pending any final decision by the JMC. 3.2. Requisite Details The Company shall, through the Company Sales Force, provide at least the minimum number of Calls and Details set forth in Schedule 3.2 to the applicable Target Prescribers in accordance with the Strategic Targeting Plan; provided that the Company Sales Force may provide up to [****], or a greater or lesser percentage if such greater or lesser percentage is provided for the AZ Sales Force, of the required number of Calls and Details each Calendar Year to non-Target Prescribers; provided that the Company believes in good faith that such Calls and Details to non-Target Prescribers are likely to result in increased sales of the Products. For each Calendar Trimester, the Company shall achieve a Targeting Delivery Score (currently, at least [****]) that is consistent with the Targeting Delivery Score for the AZ Sales Force assigned to the same Product for the same Calendar Trimester. Otherwise, the Company agrees within fifteen (15) business days of receipt of the Calendar Trimester TDS score, to provide AZ with an explanation for the underperformance and a corrective action plan designed to achieve a TDS score consistent with that of such AZ Sales Force in the next Calendar Trimester. Compliance by the Company with the foregoing sentence shall be determined by AZ's internal call reporting system. During the Funding Term and any Detail Funding Term, the Company shall perform its Promotion, Call and Detail obligations hereunder exclusively through the Company Sales Force. There will be a subset of targeted physicians that are the sole responsibility of the Company for Promotion, in order for AZ to be able to reasonably assess the Company's performance, which subset shall constitute cardiologists [****]. 3.3. Secondary Products - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. -12- The Secondary Product to be Promoted by the Company shall be selected by AZ from the list of AZ Affiliate products set forth in Schedule 3.3 attached hereto and disclosed to the Company within thirty (30) days prior to the Anticipated Approval Date. At any time during the Term, AZ shall have the right to substitute the Secondary Product with any other AZ Affiliate product appearing on Schedule 3.3; provided that AZ may not substitute any Secondary Product more than twice in any twelve-month period; and provided, further, that AZ may not substitute any Secondary Product unless it is also substituting such product for all or a substantial portion of AZ's own sales Representatives who are promoting the Primary Product. 3.4. Services Provided by the Company The Company shall provide Promotion services pursuant to this Agreement through a Sales Force of up to a total of one hundred twenty-five (125) members consisting of Representatives, District Sales Managers and other members of the Sales Force (including other managers), as determined by the Sales Operations Group within ninety (90) days prior to the Anticipated Approval Date and set forth on Schedule 3.4 hereto as necessary to supervise or support Company Representatives in order to implement the Program (it is currently anticipated by AZ that the ratio of Representatives to District Sales Managers would be approximately 10-to-1). A copy of the Company's recruiting and hiring standards shall be made available to the Sales Operations Group, and the Company shall not make changes to such standards if the proposed changes would materially impact the Hiring Profile, unless agreed to by the Sales Operations Group. Each member of the Company Sales Force shall be properly trained in accordance with the terms of ARTICLE IV. The Company, where necessary, shall make available its Project Manager and field management personnel to accompany Company Representatives on Calls and to ensure completion of the Calls consistent with the terms of this Agreement. It is AZ's expectation that the Company will ensure that each of the Company's District Sales Manager's working time spent in the field coaching the Company's Representatives shall be consistent with such time spent by AZ's District Sales Managers. The Company shall remove or reassign from the Program any member of the Company Sales Force as reasonably requested by AZ. All monies paid by AZ to the Company for incentive compensation shall be paid out in full to all field personnel. Based upon monthly performance data that AZ provides the Company, the Company shall generate and disseminate monthly incentive reports to field personnel. During the Funding Term, the Company Sales Force shall be dedicated exclusively to the Promotion of the Products. 3.5. Expertise of the Company The Company shall employ its expertise, best professional judgment, and where applicable its working relationships with the Target Prescribers, for the purpose of having Company Representatives Detail the Products consistent with the Strategic Targeting Plan. -13- 3.6. Coordination with AZ (a) Company Representatives shall remain exclusively under the supervisory authority of the Company's field management. AZ shall be responsible for the dissemination of Promotional Materials to the Company Representatives based on information provided by the Company. (b) Each Party's Sales Force shall provide information to their AZ or Company counterparts, respectively, regarding (i) completion of activities in connection with the Program; (ii) market, economic, regulatory and other developments that may affect the sale of the Products in the Territory; (iii) best selling and servicing practices of mutual benefit to the Parties, and account knowledge, at both the regional and national levels, relating to the Promotion of the Products by each Sales Force, intended to assist in the market share growth of the Products within each account. (c) During the Funding and Detail Funding Term, if any, the Company shall permit sales management personnel of AZ to conduct annual field observations with the Company's Representatives in order to allow AZ to evaluate overall quality assurance of the Program. During the Funding Term and the Detail Funding Term, if any, AZ shall permit a reasonable number of the Company's sales management personnel to conduct annual field observations with AZ's Sales Representatives in order to allow the Company to learn first hand some of AZ's best selling and servicing practices. Each of the foregoing field observations shall be granted by each Party upon reasonable advance notice from such other Party. 3.7. Account Information and Support The Company shall actively participate in managed market pull through activities and programs consistent with similar efforts by the AZ Sales Force in cooperation with, and in coordination with, AZ-designated account leaders. 3.8. Promotion Plan At least one hundred eighty (180) days prior to the Anticipated Approval Date, the U.S. Commercialization Team (which shall include representatives of the Company pursuant to the Collaboration Agreement) shall prepare the initial Promotion Plan for the Products. The initial Promotion Plan shall cover the first three (3) years following the Approval Date, and will be updated annually on a calendar year basis. The Company shall, within thirty (30) days of receipt, determine whether the initial Promotion Plan and any subsequent annual update thereof is sufficient to enable the -14- Company to perform its obligations hereunder; provided, however, that in no event shall any Promotion Plan alter the obligations of either Party under this Agreement. If the Company reasonably concludes that the Promotion Plan is not sufficient, the Company shall propose to AZ amendments to such plan. AZ shall review such proposed amendments and shall adopt any amendments to the Promotion Plan that the U.S. Commercialization Team in its good faith judgment deems appropriate. Subject to the foregoing requirements, the U.S. Commercialization Team may amend and modify the Promotion Plan in any material respect with not less than thirty (30) days' prior written notice to the Company. 3.9. Promotional Materials The Company shall determine the method and means of using the Promotional Materials, subject to compliance with the Promotion Plan. In Promoting the Products, the Company shall use only Promotional Materials provided by AZ. The Company shall immediately cease the use of any Promotional Materials when instructed to do so by AZ. The Company shall use the Promotional Materials only for the purposes contemplated by this Agreement. The Company shall ensure that Promotional Materials are not changed in any way (including by underlining or otherwise highlighting any text or graphics or adding any notes thereto) by the Company or the members of the Company Sales Force. AZ shall make available to the Company Representatives a quantity and quality per Company Representative of Promotional Materials that are equivalent to those that AZ makes available to AZ Representatives for similarly valued specialists, as described in the Strategic Targeting Plan. 3.10. Statements about the Products The Company shall make only those statements and claims regarding the Products, including as to efficacy and safety, that are consistent with the Product Labels and Inserts and the Promotional Materials. The Company shall not make any untrue or misleading statements or comments about the Products, competitors or other products. AZ shall instruct its Sales Force not to make any untrue or misleading statements or comments about the Products, competitors or other products. 3.11. Requests for Medical Information (a) AZ shall have the exclusive right to respond to all questions or requests for information about the Products made by any medical professionals or any other Person to the Company or a Representative that (i) warrant a response beyond the understanding or knowledge of the Representative or (ii) are beyond the scope of the Product Labels and Inserts or other Promotional Materials (a "PIR"). (b) The Company shall promptly communicate to the AZ Information Center or Medical Resources Department all PIRs received by the Company or Company Representatives. AZ shall provide to the appropriate Company representative, within a -15- reasonable time after receiving or sending any such communication, copies of correspondence related to such PIR. (c) In connection with the Promotion of the Products, the Company shall inform prescribers that they may contact the AZ Information Center regarding questions or requests for information about the Products by telephone or by completing a Medical Resource Form and faxing the completed form directly to AZ Medical Resources at the facsimile number provided on such form. AZ shall provide the Company with sufficient quantities of Medical Resource Forms and the Company shall provide such forms to prescribers. 3.12. Compliance with Laws and Policies (a) The Company shall perform all of its obligations under this Agreement in strict compliance with (a) the Promotion Policies, (b) Applicable Laws, and (c) Employment Laws. Each Party shall instruct its Sales Force not to take any action inconsistent with this Agreement that could jeopardize the good will or reputation of the Products or the other Party. (b) The Company shall be responsible for the compliance by all personnel assigned to the Program, whether as Company employees or independent contractors or agents, with Business Policies and relevant Corporate Integrity Agreement obligations, subject to AZ's obligations relating to the Training Program pursuant to Section 4.1. The Company shall report on or before thirty (30) days after the end of each quarter to AZ all allegations it has received and/or investigations it has commenced with respect to the alleged failure by a member of the Company Sales Force to comply with the Business Policies and relevant Corporate Integrity Agreement and what action, if any, was taken as a result. (c) AZ is a party to a Corporate Integrity Agreement entered into with the federal government (the "Corporate Integrity Agreement"). Company employees performing services under this Agreement are deemed Covered Persons under the terms of the Corporate Integrity Agreement. The Company employees deemed Covered Persons in the Corporate Integrity Agreement shall fulfill all training obligations set forth in the Corporate Integrity Agreement and certify their compliance with the training obligations set forth in the Corporate Integrity Agreement. The Company shall screen any employees providing services under this Agreement to AZ against the Health and Human Services Office of Inspector General and Government Services Administration Websites for excluded persons and shall not utilize any persons determined by such screen to be an excluded person in connection with the services provided under this Agreement to AZ. AZ shall notify Company in a reasonable time following any amendment to the Corporate Integrity Agreement and, to the extent permitted under Applicable Law, shall provide Company with a copy of any such amendment. 3.13. Sales Meetings -16- Each Party shall permit a limited number of the other Party's personnel to participate, at such other Party's cost and expense, in the portion of any sales meetings at which promotion and strategies relating to the Products are discussed, including the Party's annual sales meeting. The criteria for attending any such meeting shall be the same for each Party. 3.14. Reporting (a) AZ shall furnish the Company with an electronic report containing Call and Detail performance of each Party's Sales Force versus STP data, and TDS performance, within fifteen (15) calendar days after the end of each month during the Funding Term and any Detail Funding Term for the purpose of enabling the Company to monitor and manage its performance versus the requirements of this Agreement. (b) During the Funding Term and any Detail Funding Term, the Company shall furnish AZ with a written report containing the following information within fifteen (15) calendar days after the end of a particular month, organized and assimilated, with respect to such month (each, a "Monthly Performance Report"), as the case may be: (i) a roster of the active Company Representatives and vacancies on the Company Sales Force as of the end of such prior month; (ii) The utilization of field promotional dollars as expensed back through the Company's expense system and billed back to AZ, pursuant to Section 6.1 during such month by district, region and nation. (iii) The amount of time spent by the Company's District Sales Managers in the Field coaching Representatives; and (iv) At least thirty (30) days advance notice of face-to-face meetings scheduled by the Company, which are expected to involve more than ten (10) members of the Company Sales Force and have a duration of more than two (2) days. (c) The Company shall notify AZ in writing within twenty-four (24) hours upon the occurrence of any of the following: (i) The Company restructures, realigns or modifies any part of its internal corporate structure that directly supports the Program; (ii) The Company amends any of its sales force incentive compensation models after they have been initially set for the Calendar Year with respect to the Program. -17- (d) The Company shall provide, on a Calendar Trimesterly basis, a Turnover analysis indicating Turnover by region, by position, and by tenure. (e) The Company shall provide such other information as may be called for by the Promotion Plan or reasonably requested by AZ. 3.15. Information Technology Prior to the Anticipated Approval Date, AZ, at its expense, shall provide to the Company sufficient numbers of Laptops on which Compass is installed and Territory Management Devices on which NorthStar is installed (with requisite peripherals) to enable the Company to equip each Company Representative on the Company Sales Force with such Hardware and Software. The Company shall maintain and use the Information Technology in accordance with the policies and procedures set forth on Schedule 3.15. Until such time as the use of the Information Technology by the Company and Company Representatives in accordance with the terms hereof has been implemented fully, the Company and Company Representatives shall perform all recordkeeping, reporting, Product sample ordering, Promotional Material ordering and other communication functions necessary to enable the Company to perform its obligations hereunder in a manner reasonably determined by AZ. The Company, at its sole expense, shall replace, or at AZ's option, reimburse AZ for replacement of, Hardware and Software lost, damaged or destroyed while in the care, custody and control of the Company or any member of the Company Sales Force and that is not caused by normal wear and tear but only to the extent that such losses or damages are in excess of AZ's typical experience ratings for such types of losses with respect to its internal sales teams, as demonstrated by AZ's business records. AZ shall also provide to the Company whatever is reasonably necessary (in terms of software, hardware and other support) that is usable specifically for the purpose of enabling the Company to generate appropriate sales management reports and otherwise comply with the Company's reporting obligations under this Agreement. AZ's obligations to provide laptops, software, hardware and other support at its expense shall apply only during the Funding Term. 3.16. Orders for Products; Terms of Sale AZ shall have the sole responsibility and right to fill orders with respect to the Products. The Company shall not take orders for the Products, but if for any reason the Company should receive sales orders for the Products, the Company shall promptly forward such orders to AZ. All orders for Products shall be subject to AZ's acceptance, in its sole discretion. AZ may cancel any order for Products, or any part thereof, at any time after acceptance without thereby incurring any liability to the Company. AZ shall be solely responsible for responding to requests from physicians for individual patients who need a Product but are unable to afford it. Any such request received by the Company should originate from the patient's physician and be forwarded to AZ for processing in accordance with AZ's procedures. AZ shall have the sole right and responsibility for establishing and modifying the terms and conditions of the sale of the -18- Products, including the terms and conditions such as the price at which the Products shall be sold, whether the Products shall be subject to any trade or quantity discounts, whether any discount shall be provided for payments on accounts receivable, whether the Products shall be subject to rebates, returns and allowances or retroactive price reductions, the channels of distribution of the Products, and whether credit is to be granted or refused in connection with the sale of any Products. ARTICLE IV. CONDUCT OF COMPANY SALES REPRESENTATIVES 4.1. Training Programs (a) During the Funding Term and the Detail Funding Term, AZ shall provide and pay for the following training of the Sales Force: (i) Within 30 days prior to the Anticipated Approval Date or no later than 30 days after the hiring of any member of the Company's Sales Force, but in no event earlier than 60 days before Product Launch, AZ shall, at its own cost and expense, hold in-person meetings for each member for the Company's Sales Force prior to his or her commencement of Promotion of the Products hereunder. These meetings shall address the following matters: [****]. (ii) Following the completion of the Training Program described in Section 4.1(a)(i) for each member of the Company's Sales Force, AZ shall, at its own cost and expense, provide to each member of the Company's Sales Force [****] for reinforcement and refresher training with respect to the Program and Promotion Plan. (b) During the Post-Funding Term, the Company shall conduct and pay for training of the Company's Sales Force of the same type, and at the same times, as is described in Section 4.1(a), except that AZ shall pay for the creation and provision of the training materials described in Section 4.2(c). 4.2. Requirements for Hiring and Conduct of the Company Sales Force (a) The Company shall require each Company Representative to satisfactorily complete a series of role play scenarios of a Detail of the Products similar to that required for the AZ Sales Force. (b) District Sales Managers shall complete the same Training Program as Company Representatives, and shall be required to achieve a minimum score at the same level established for AZ District Sales Managers [****] on all Product tests. The Company shall maintain and make available to AZ upon request records of such test results. - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. -19- (c) AZ shall, throughout the Term, develop and provide training materials to support the Training Program for the Products, whether such Training Program is conducted by AZ during the Funding Term or the Detail Funding Term or by the Company during the Post-Funding Term, at AZ's expense. (d) Any training materials created by or at the direction of the Company at the Company's expense for use in the Training Program for the Products must be reviewed and approved by AZ prior to the Company's use thereof to ensure that materials properly use the Product Trademarks and contain accurate information about the Products; provided, however, that the foregoing shall not apply to the extent such training materials are applicable to products other than the Products. (e) Any Training Programs conducted by AZ or the Company shall be consistent with the requirements of this Agreement, the Corporate Integrity Agreement and Applicable Laws. (f) AZ may, at its own expense, observe the Company's training meetings and conduct compliance audits to ensure that the Company has complied with its obligations pursuant to this Section 4.1. (g) The Company shall obtain from any member of the Company Sales Force who leaves the employ of the Company or ceases to participate in the Program all training materials provided by the Company, and shall reuse such materials for the replacement member of the Company Sales Force. (h) The Company shall assign to the Company Sales Force only those individuals who demonstrate, after the Training Program described in Section 4.1(a) or Section 4.1(b), a thorough knowledge of the Products and the Products' associated disease entities, by achieving a minimum score at the same level established for the AZ Sales Force [****] on a Product sales orientation assessment test, and subsequent (refresher) tests, which tests shall be reviewed and approved by AZ. 4.3. Conduct by Company Sales Representatives The Company shall be legally responsible for the conduct of the activities of its Sales Force, including compliance with the requirements of this Agreement, Applicable Laws and the Corporate Integrity Agreement. The Parties will work together to design and support (a) Training Programs conducted by AZ and/or the Company to ensure such compliance; and (b) ongoing supervision and review by the Company of the recruiting, screening, training and monitoring of members of the Company Sales Force. ARTICLE V. SAMPLES 5.1. Provision of Samples - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. -20- AZ shall make Product samples available to the Company for use by Company Representatives in Detailing the Products at AZ's sole cost during the Term. Such Product samples shall be of the same quality and quantity on a per Representative basis as the Product samples that AZ makes available to the AZ Representatives for similarly valued specialists as described in the Strategic Targeting Plan. The U.S. Commercialization Team shall determine sampling strategy, including whether sample-send or sample-carry methods are utilized; provided that any such determination shall be applied consistently with the strategy used for the AZ Sales Force. In either case the Company and Company Representatives shall (i) use the Information Technology to order Product samples from AZ and to maintain accurate records of use and distribution of Product samples; and (ii) ensure that not less than [****] (or whatever lower amount of samples required to be provided by AZ Representatives for the Product) are provided to Target Prescribers in accordance with the Strategic Targeting Plan and that samples are provided to non-Target Prescribers only in such cases the Company reasonably believes that such deliveries are likely to result in increased sales of the Products. The Company shall comply with all requirements of the PDMA and any other Applicable Laws in connection with the storage, handling, transport and distribution of, and reporting requirements with respect to, Product samples and shall maintain written procedures to ensure that all Company Representatives so comply. 5.2. Sample-Carry If and when AZ utilizes sample-carry sampling methods, the Company and Company Representatives shall comply with the policies and procedures set forth in this Section 5.2. (a) AZ or its designated vendor shall ship Product samples directly to Representatives. The Representatives shall secure Product samples against theft, tampering, and diversion during storage and transport by them. The Company shall use Commercially Diligent Efforts to ensure that Company Representatives carry only those quantities of Product samples reasonably needed for a specific period; provided, however, that the Company shall, at AZ's reasonable request, audit the inventory of any Company Representative whose supply of Product samples is materially inconsistent with such Company Representative's need for such Product samples. In no event, however, shall any Company Representative carry more than a five (5) day supply of samples in his or her automobile. (b) The Company shall, prior to distribution of any sample Product by any Company Representative: (i) visually check the Product expiration date to ensure that the sample has a reasonable dating period remaining; (ii) verify, using the Promotion Policies, the Target Prescriber's or other prescriber's identity as a practitioner authorized by Applicable Law to receive drug samples; (iii) confirm that Product packaging is intact and includes the designation "sample" (if required); (iv) obtain an executed sample request form or electronic equivalent in accordance with the PDMA requirements; and - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. -21- (v) confirm Product identity to be accurate by visual inspection of the Product packaging. At the time of delivery, the Company shall obtain a receipt (which may be electronic using the Information Technology) from the Target Prescriber or other prescriber executed in accordance with the requirements of the PDMA. (c) The Company shall notify AZ within twenty-four (24) hours upon learning that any Product samples have been lost or stolen or have not been received as scheduled, or have otherwise not been handled in accordance with the requirements of the PDMA, and shall cooperate fully with AZ in making such investigations and reports as may be necessary under the PDMA and any other Applicable Laws or as may otherwise be requested by AZ. The Company shall provide AZ with monthly drug accountability reports within five (5) days after the end of each month in accordance with the requirements of the PDMA. In addition, the Company shall make drug accountability reports, information, sample request and receipt and any other records pertaining to samples or matters relating to the PDMA available to AZ within twenty-four (24) hours after AZ's request. (d) From time to time when required by AZ, the Company shall "close-out" inventories of carried Product samples in accordance with procedures determined by AZ. (e) Upon reasonable advance notice to the Company, AZ shall be entitled, at AZ's expense, to conduct an inspection and audit of the Company's samples of the Products, documents, records, and procedures, to ensure compliance with the provisions of this ARTICLE V. 5.3. Sample-Send If and when AZ utilizes procedures to send samples directly to prescribers, the Company shall utilize the Information Technology to enable AZ to maintain all records with respect to Product samples required by the PDMA (including the use of the Information Technology to obtain an electronic sample request form in accordance with the PDMA requirements). ARTICLE VI. FEES 6.1. Calculation and Payment of Allowable Costs During the Funding Term (a) Within thirty (30) days after the Approval Date, the Company shall submit a non-binding estimate of the Allowable Costs expected to be incurred for the portion of the remaining Calendar Year (the "Program Budget"). In all succeeding years during the Funding Term, the Company shall provide an estimated Program Budget to AZ one hundred twenty (120) days prior to the end of each Calendar Year during the -22- Funding Term to reflect estimated costs for the next Calendar Year. All estimated Program Budgets are subject to the approval of the U.S. Commercialization Team. (b) Not more than thirty (30) days prior to the beginning of each month during the Funding Term, the Company shall provide AZ with an invoice, using the form provided in Schedule 6.1A attached hereto, of the estimated Allowable Costs expected to be incurred in the next succeeding month (or portion thereof) in the Funding Term according to the Program Budget. The statement will specify the number of Company Representatives expected to be assigned to the Program. (c) Not more than forty-five (45) days after the end of each Calendar Quarter during the Funding Term, the Company shall provide AZ with a statement, using the form provided in Schedule 6.1B attached hereto, of any adjustments to the Allowable Costs based on the actual Allowable Costs incurred and shall specify the extent to which they vary from those specified in the statement provided pursuant to Section 6.1(b). The statement provided pursuant to this Section 6.1(c) shall specify the amount of any variance, the reasons for such variance, and a summary of the net amount overpaid or underpaid for the Calendar Quarter based on such statement. (d) AZ shall pay to the Company the amounts reflected on the invoice(s) described in Section 6.1(b), and, if any statement provided to AZ pursuant to Section 6.1(c) shows an amount due to the Company, the amounts reflected on such invoice(s), by check or wire transfer within thirty (30) days after receipt of such invoice(s). If any statement provided to AZ pursuant to Section 6.1(c) shows an amount due to AZ, AZ shall be permitted to reduce such amount against the amount due to the Company under the next invoice submitted to AZ pursuant to Section 6.1(b). In the event that the amount due to AZ exceeds the amount due to the Company under the next invoice, the Company shall remit to AZ, by check or wire transfer within thirty (30) days, such excess amount. (e) Schedule 6.1A and Schedule 6.1B shall be amended for any adjustment of Allowable Costs to reflect any additional costs reasonably incurred by the Company, with reasonable advance notice to the Sales Operations Group, in order to achieve relative parity with the AZ Sales Force in promotional effectiveness that were added by AZ for the benefit of the AZ Sales Force but not provided by AZ for the Company's Sales Force, during the Funding Term. 6.2. Incentive Compensation (a) AZ and the Company shall each provide a goal-based bonus or similar incentive payment plan for members of their respective Sales Forces to encourage promotion of the Products. During the Funding Term, the Company shall harmonize its incentive pay plans with those of AZ to AZ's reasonable satisfaction to facilitate the Sales Forces working together. -23- (b) The Company shall submit an invoice to AZ for all payments due in respect of any such bonus or incentive payment promptly after any obligation to make such payment has accrued during the Funding Term. AZ shall pay to the Company the amounts reflected on such invoice by check or wire transfer on or before AZ makes payments to any AZ Representatives for a comparable time period, and in a manner that allows for consistency of the timing for the payment of the same award by AZ for any AZ Representatives, but in any event, within thirty (30) days after receipt of such invoice. 6.3. Detail Funding Term On or before ninety (90) days prior to the conclusion of the Funding Term, AZ shall complete an assessment of the value of the Company's participation in the Program, and shall inform the Company in writing as to whether it wishes to continue to fund the Company's activities on the same basis as it did so during the Funding Term, or on some other basis, including on a per-detail basis. If AZ informs the Company that it wishes to continue such funding, the Parties shall negotiate the terms of any such arrangement in good faith. If AZ wishes to fund on a per Detail basis, the Parties shall negotiate a rate consistent with the then-going arm's length commercial rate per detail used by third parties in comparable arrangements. Notwithstanding the foregoing, neither Party shall be obligated to agree to the terms of any such arrangement. The period during which the Parties agree to continued funding pursuant to this Section 6.3 shall be called the "Detail Funding Term." 6.4. Audit Rights (a) Upon reasonable advance notice to the Company, AZ shall be entitled, at its expense, to have access to (i) the Company's internal call reporting system, and (ii) solely through review by a third party, books and records (including receipts, invoices and other proof of expenditures) in the Company's possession or control as they relate to the relevant Products, in each case for the purpose of verifying the Company's determination of Allowable Costs, and such other matters as AZ reasonably requests relating to the performance by the Company of its obligations under this Agreement; provided, however, that if such audit shows charges by the Company for Allowable Costs in excess of five percent (5%) of the total amount owed for the Calendar Year then being audited, the Company shall pay for the reasonable fees and expenses of such third party to perform the audit. AZ shall have the right to exercise this audit right no more frequently than once in each twelve (12) month period, unless AZ reasonably believes that the Company is not complying with its obligations under this Agreement; provided, however, that the Company shall not be required to maintain any receipts, invoices and other proof of expenditures described in this Section 6.4(a) for more than three (3) years. Any adjustment necessary under this section shall be made pursuant to Section 6.1(c). (b) Should AZ discover information indicating, in its opinion, an inaccuracy in the calculation of the number of Calls or Details, AZ shall so notify the Company in writing thereof (and shall set out its preliminary conclusions in reasonable -24- detail). The Company shall advise AZ in writing within thirty (30) business days of receiving such notice should the Company disagree with the determination of AZ. (c) If the Parties are unable to reach a mutually acceptable resolution of any such disagreement described in Section 6.4(b) within twenty (20) days, the disagreement shall be submitted for arbitration to a certified public accounting firm selected by each Party's certified public accountants or to such other Person as the Parties shall mutually agree (the "Arbitrator"). The decision of the Arbitrator shall be final, and the losing Party shall bear all of the costs and expenses of such arbitration, including the prevailing Party's reasonable attorneys' fees. (d) Upon reasonable advance notice to the Company, AZ shall be entitled, to the extent permitted by law and the Company's privacy policies, at its expense, to have access to the Company's books and records relating to the Company's compliance with Applicable Laws and the Corporate Integrity Agreement. Such books and records shall include any policies and procedures concerning compliance with Applicable Laws, and records of any investigations and remedial and disciplinary actions taken to address material violations of Applicable Laws. AZ may exercise this audit right no more frequently than once in each twelve month period, unless AZ reasonably believes that the Company is not complying with its obligations under this Agreement; provided, however, that the Company shall not be required to maintain any books and records described in this Section 6.4(d) for more than three (3) years. 6.5. Amendments In the event that AZ adds to or substitutes the Secondary Product to be Promoted by Company hereunder, the aggregate amounts of compensation payable under Sections 6.1 and 6.2 hereof shall not change, but the methodology of determining such compensation may be modified as agreed by the parties in writing and certain additional provisions of this Agreement may require mutually agreed upon modification, including the Strategic Targeting Plan. 6.6. All Inclusive The fees set forth in this Agreement constitute AZ's complete obligation to pay the Company for its services under this Agreement. Except as otherwise expressly provided in this Agreement, the Company shall be responsible for all of its costs and expenses incurred in connection with the performance of its obligations hereunder. ARTICLE VII. SALES OPERATIONS GROUP 7.1. Sales Operations Group -25- (a) The U.S. Commercialization Team, within the context of a global brand plan, shall make all decisions with respect to the strategy for the marketing and Promotion of the Products in the United States. The Company's input on such decisions may be provided by the Company representatives appointed to the U.S. Commercialization Team, pursuant to the Collaboration Agreement. Such decisions and input shall be made before and after the establishment, pursuant to Section 7.1(b), of the Sales Operation Group. (b) No later than sixty (60) days after delivery of the Final ARISE Results, the Parties shall establish a Sales Operations Group, directed and chaired by AZ and consisting of up to two (2) members from AZ and two (2) members from the Company. The chairperson's duties shall include site selection, logistics, agenda and facilitations. Each member of the Sales Operations Group shall be an employee of the Party that appointed such member. A member of the Sales Operations Group may be removed at any time, with or without cause, by the Party that appointed such member. The Sales Operations Group, as established, shall meet at least three times per annum. (c) The Sales Operations Group shall meet each Calendar Trimester and otherwise at the call of the chairperson to review, coordinate, and implement the Promotion Plan and to discuss other issues regarding the Program. In addition, the Sales Operations Group shall review and attempt to resolve issues pertaining to this Agreement. AZ shall carefully consider the Company's opinions and positions on all matters. The members of the Sales Operations Group will use reasonable efforts to reach consensus on all decisions. If the Sales Operations Group cannot decide any matter by consensus, such matter shall be referred to the U.S. Commercialization Team. Any matter not resolved by the U.S. Commercialization Team may be referred by either Party for resolution to the JMC pursuant to the Collaboration Agreement; provided that any appeal to the JMC shall not operate to delay or otherwise impair AZ's ability to implement any decisions reached by AZ's designees on the Sales Operations Group, including any disputed decisions, pending any final decision by the JMC. 7.2. Appointment of Project Managers The Parties shall each designate a single person ("Project Manager") through whom all significant communications (other than regulatory reporting, which shall be governed by ARTICLE VIII hereof) shall be channeled. For the Company, the Project Manager shall be the National Sales Manager described in Schedule 3.4. The Project Managers appointed by each of the Parties shall (i) function as a single point of contact in all substantive communications with the other Party relative to the Program, (ii) coordinate all Promotion activities, (iii) represent their respective Parties in matters pertaining to the Program, and (iv) attend Program coordination meetings as their respective Parties' representatives. Within forty-five (45) days after delivery by the Company of Final ARISE Results pursuant to the Collaboration Agreement, each Party shall notify the other in writing as to the name of the Project Manager it has so appointed. -26- Each Party may replace its Project Manager at any time, upon at least one (1) week's prior written notice to the other Party, provided, however, that any Project Manager chosen shall meet the criteria set forth in the profile in Schedule 3.4. ARTICLE VIII. ADVERSE REACTION REPORTING AND OTHER REGULATORY MATTERS 8.1. Regulatory Reporting (a) AZ shall be solely responsible for making all reports, submissions and responses to Agencies concerning the Products, including reporting Adverse Events and Field Alerts, each in conformance with Applicable Law; provided, however, that the Company shall have the right to make such other reports as are necessary to comply with laws, rules, regulations and requirements of the FDA applicable to it, at its sole expense; provided further, that the Company shall promptly provide notice to AZ of any communications with any Agency concerning the Products and shall, to the extent permitted by Applicable Law, attach copies of all such communications to the notice sent pursuant to this Section 8.1(a). In addition, AZ shall be solely responsible for (i) taking all actions and conducting all communication with all third Persons in respect of Products, including responding to all Product Quality Complaints in respect thereof, including complaints related to tampering or contamination, (ii) investigating all Product Quality Complaints, Adverse Events, and Field Alerts in respect of Products, and (iii) any appropriate follow-up information requests related to Adverse Event reports. The Company shall, at AZ's expense, cooperate with all of AZ's reasonable requests and use its reasonable best efforts to assist AZ in connection with (x) preparing any and all such reports with Agencies, (y) preparing and disseminating all such communications with third Persons, and (z) investigating and responding to any Product Quality Complaint or Adverse Event related to the Products. The Company shall put in place procedures and protocols that shall be actively managed by the Company to ensure that all relevant information regarding the matters referred to in this Article VIII that come to the attention of any member of the Sales Force is promptly conveyed to the Company so that the Company can comply with its reporting obligations hereunder. (b) The Company shall provide notice to AZ within twenty-four (24) hours from the time it becomes aware of an Adverse Event associated with use of a Product (whether or not the reported effect is (i) described in the full prescribing information or the published literature with respect to such Product or (ii) determined to be attributable to such Product) of any information in or coming into its, his or her possession or control concerning such Adverse Event by contacting the AZ Information Center by telephone at [****], or such other number as AZ may from time to time designate or by completing the Adverse Event Report Forms provided by AZ and submitting such form to AZ (which may be electronic forms provided via Sales InSite). - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. -27- (c) The Company shall notify AZ within twenty-four (24) hours of the time it becomes aware of any information that might necessitate the filing by AZ of a field alert report, as required under 21 C.F.R. Section 314.81(b)(1) (a "Field Alert"), as such regulation may be amended from time to time, by contacting the AZ Information Center by telephone at [****], or such other number as AZ may from time to time designate. (d) The Company shall notify AZ within twenty-four (24) hours of the time it becomes aware of any Product Quality Complaint associated with use of a Product by contacting the AZ Information Center by telephone at [****], or such other number as AZ may from time to time designate in writing. (e) AZ shall provide adverse drug experience information, including, but not limited to, any of the events described in Sections 8.1(a), (b), (c) and (d), regarding the Products to the Company to the extent such information is provided by AZ to its representatives. AZ shall also notify the Company immediately of any formal communication received by AZ from the FDA regarding any threatened or pending action that may affect the safety or efficacy claims of the Products or the continued marketing of the Products. 8.2. Threatened Agency Action The Company shall immediately notify the AZ Regulatory Affairs Department (with a copy to the AZ Legal Department) of any information the Company receives regarding any threatened or pending action by an Agency that may affect the safety or efficacy claims of the Products or the continued marketing and Promotion of the Products. Upon receipt of any such information, the Parties shall consult in an effort to arrive at a mutually acceptable procedure for taking appropriate action; provided, however, that nothing herein shall restrict AZ's ability to make a timely report of such matter to any Agency or take other action that it deems to be appropriate or required by Applicable Laws. 8.3. Reporting of Agency Actions AZ shall inform the Company, the Company District Sales Managers and/or the Company Sales Force of any information, announcements, reports, submissions, communications, resolutions, actions, decisions or meetings involving any Agency regarding a Product to the same extent and at the same time and subject to the same limitations and restrictions that it so informs any AZ District Sales Managers and/or members of the AZ Sales Force and subject to the same limitations and restrictions. 8.4. Maintenance of Records The Parties agree to maintain records and otherwise establish procedures to ensure compliance with all Applicable Laws and professional requirements that apply to the Promotion and marketing of the Products. - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. -28- 8.5. Company Compliance Program AZ acknowledges that the Company, consistent with good practice, will maintain a corporate compliance program that will include a mechanism for its employees to report, anonymously if they choose, any concerns about potential illegal activity, and that the Company will investigate any such reports. The Company will notify AZ of the substance of any such report that relates to the subject of this Agreement within a reasonable time after it is received, and before reporting any such activity to any Agency, unless the Company concludes that doing so would violate Applicable Laws or would compromise the Company's ability to complete an appropriate investigation. The Company will in any case inform AZ of the result of the investigation. ARTICLE IX. RETURNED/RECALLED PRODUCT 9.1. Returned Product AZ shall have the sole responsibility and right to accept any returned Products. The Company shall not solicit the return of any Products, but if for any reason the Company should receive any returned Products, the Company shall promptly notify AZ. Any Product returned to the Company shall be shipped by the Company to AZ's designated facility, with any reasonable shipping cost to be paid by AZ through a charge back invoice. The Company may advise the customer who made the return that the Product has been returned to AZ. The Company shall fully complete and deliver to AZ the returned goods form provided by AZ with respect to any returned Products. 9.2. Recalled Product At AZ's request, the Company shall use Commercially Diligent Efforts to assist AZ in obtaining and receiving any Product, including all samples thereof, that has been recalled or withdrawn from the market, and AZ shall reimburse the Company for any reasonable direct documented costs incurred by the Company in taking such actions. ARTICLE X. INDEPENDENT CONTRACTOR STATUS OF THE COMPANY AND THE SALES FORCE 10.1. Independent Contractor Status The status of the Company under this Agreement shall be that of an independent contractor. The Company shall not have the right to enter into any agreements on behalf of AZ, nor shall it represent to any Person that it has any such right or authority. The Company Sales Force shall not be, and shall not be considered to be, "employees" or "joint employees" of AZ for any purpose. AZ shall not be responsible for the control of any of the Company's employees. The Company shall be solely -29- responsible for determining all conditions of employment of the Company Sales Force. The Company shall be responsible for the means, manner, mode and methods of performing the Details hereunder, subject to the terms of this Agreement. 10.2. No AZ Benefits (a) The Company acknowledges and agrees that none of the Company Sales Force, nor anyone acting on its or their behalf, shall receive any employee benefits of any kind from AZ. In addition, the Company (on behalf of itself and the Company Sales Force and other employees, agents and contractors) declines any offer now or hereafter made to participate in any of AZ's benefit plans or programs. (b) The acknowledgement and declination set forth in Section 10.2(a) is intended to apply even if AZ is determined to be a co-employer or common law or statutory law employer of any of the Company's employees, including the Company Sales Force, notwithstanding the Parties' express agreement, and such employees' written acknowledgement, to the contrary. (c) AZ shall not maintain or procure any workers' compensation or unemployment compensation insurance for or on behalf of the Company Sales Force. The Company shall be solely responsible for paying all salaries, wages, benefits and other compensation that the Company Sales Force may be entitled to receive in connection with the performance of the services hereunder. The Company shall likewise be liable for all taxes, excises, assessments and other charges levied by any Agency on, or because of, the services to be provided by the Company under the terms of this Agreement. (d) The Company shall be responsible for (i) maintaining all necessary personnel and payroll records for all members of the Company Sales Force providing services pursuant to this Agreement; (ii) calculating their wages and withhold taxes and other government mandated charges, taxes, deductions, and contributions, if any; (iii) remitting such taxes, insurance, deductions, contributions or charges to the appropriate government entity; (iv) paying net wages and employee and other fringe benefits, if any, directly to such members of the Company Sales Force; and (v) providing workers' compensation and unemployment insurance coverage in amounts as required by law. 10.3. No Recruitment During the Funding Term or Detail Funding Term, if any, and for a period of one hundred eighty (180) days thereafter, the Company shall not attempt to actively recruit or solicit any AZ employees or personnel without the prior written consent of AZ, and AZ shall not attempt to actively recruit or solicit any Company employees or personnel without the prior written consent of the Company; provided that, notwithstanding the foregoing, each of the Company and AZ shall be permitted to engage -30- in general recruitment through advertisements or recruiting through head-hunters so long as the other Party's employees and personnel are not specifically targeted. 10.4. Services Agreement. Prior, and as a condition, to assigning any member of the Sales Force to provide services pursuant to this Agreement, the Company shall require each such member of the Company Sales Force to sign a Services Agreement in or substantially in the form attached hereto as Exhibit 10.4 and shall provide AZ with an originally executed copy of such agreement. ARTICLE XI. NONCOMPETITION 11.1. Noncompetition (a) During the Funding Term, neither the Company nor any of its Affiliates shall, directly or indirectly, market, Promote, sell or accept orders for the sale of any product other than the Products in the Territory, or assist or cooperate in any way with any other Person, in connection with the marketing, Promotion, selling or acceptance of orders for the sale of any product other than the Products in the Territory. (b) The Parties shall, prior to the commencement of any Detail Funding Term, agree upon the terms upon which the Company may or may not sell other products that might Compete with AstraZeneca products during the Detail Funding Term; provided, however, that, unless otherwise agreed by the Parties, the Company and its Affiliates shall be bound by provisions no less restrictive than those contained in Section 11.1(c). (c) [****], neither the Company nor any of its Affiliates shall, directly or indirectly, market, Promote, sell or accept orders for the sale of any Competing 1067 Product or any Competing Cardiovascular Product in the Territory, or assist or cooperate in any way with any other Person in connection with the marketing, promotion, selling or acceptance of orders for the sale of any Competing 1067 Product or any Competing Cardiovascular Product in the Territory. (d) The Company acknowledges that the temporal and geographic limitations set forth in this Section 11 are reasonable and necessary to protect the legitimate interests of AZ and agrees not to contest such limitations in any proceeding. The period of time during which the Company is prohibited from engaging in certain activities pursuant to the terms of this Section 11 shall be extended by the length of time during which the Company is in breach of any of the terms of this Section 11 as determined by any judicial or other legally binding proceeding. - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. -31- (e) The Company further acknowledges that the failure by the Company to comply with any of the provisions of this Section 11 will result in irreparable injury and continuing damage to AZ for which there will be no adequate remedy at law and that, in the event of a failure of the Company so to comply, AZ shall be entitled to such preliminary and permanent injunctive relief as may be proper and necessary to ensure compliance with all the provisions of this Section 11 without having to prove actual damages or to post a bond. AZ shall also be entitled to an equitable accounting of all earnings, profits and other benefits arising from any such violation, which rights shall be cumulative and in addition to any other rights or remedies to which AZ may be entitled in law or equity. ARTICLE XII. CONFIDENTIALITY 12.1. Nondisclosure Obligation (a) Confidential Information. All Information disclosed by one Party to the other Party hereunder, including the terms of this Agreement ("Confidential Information"), shall be maintained in confidence by the receiving Party and shall not be disclosed to any Person who is not a Party or an Affiliate of such Party, or used for any purpose except to exercise its rights and perform its obligations under this Agreement without the prior written consent of the disclosing Party, except to the extent that the receiving Party can demonstrate by competent written evidence that such Information: (i) is known by the receiving Party at the time of its receipt and, not through a prior disclosure by the disclosing Party, as documented by the receiving Party's business records; (ii) is in the public domain other than as a result of any breach of this Agreement by the receiving Party; (iii) is subsequently disclosed to the receiving Party on a non-confidential basis by a Third Party who may lawfully do so; or (iv) is independently discovered or developed by the receiving Party without the use of Confidential Information provided by the disclosing Party, as documented by the receiving Party's business records. (b) Return of Confidential Information Upon Expiration or Termination of Agreement. Within thirty (30) days after any expiration or termination of this Agreement, each Party shall destroy (and certify to the other Party such destruction) or return such Confidential Information provided by the other Party as the other Party reasonably requests be destroyed or returned; provided, however, that (i) the foregoing obligation shall not apply to any matter of Confidential Information otherwise provided for in this Agreement; and (ii) each Party may retain a single copy of the Confidential -32- Information in its confidential legal files for the sole purpose of ascertaining its ongoing rights and responsibilities regarding the Confidential Information. 12.2. Permitted Disclosures (a) Permitted Disclosure. Each Party may disclose Confidential Information provided by the other Party without such other Party's written consent to the extent such disclosure is reasonably necessary in the following instances: (i) disclosure to governmental or other regulatory agencies in order to obtain or maintain intellectual property protection (such as Trademarks) and to obtain, maintain or amend any Regulatory Materials regarding a Product or satisfy any other regulatory obligation regarding a Product, but such disclosure may be only to the extent reasonably necessary to obtain or maintain intellectual property protection or obtain, maintain or amend such Regulatory Materials; (ii) complying with applicable court orders or governmental regulations, including without limitation rules or regulations of the Securities and Exchange Commission, or by rules of the National Association of Securities Dealers, any securities exchange or NASDAQ; provided, however, that the receiving Party shall first have given notice to the other Party hereto in order to allow such Party the opportunity to seek confidential treatment of the Confidential Information; (iii) disclosure to consultants, agents or other Third Parties solely to the extent required to accomplish the purposes of this Agreement; provided however that such Third Parties agree to be bound by confidentiality and non-use obligations at least equivalent in scope to those contained in this Agreement. (b) Written Agreements. Each Party shall obtain written agreements from each of its employees and consultants who perform work pursuant to this Agreement, which agreements shall obligate such persons to similar obligations of confidentiality and to assign to such Party all inventions made by such persons during the course of performing such work. Execution of the Service Agreement shall be considered satisfaction of this obligation. Each Party will notify the other Party promptly upon discovery of any unauthorized use or disclosure of the Confidential Information of the other Party. (c) Required Disclosure. If a Party is required by judicial or administrative process to disclose Confidential Information that is subject to the non-disclosure provisions of Section 12.1, such Party shall promptly inform the other Party of the disclosure that is being sought in order to provide the other Party an opportunity to challenge or limit the disclosure obligations, provided that such Party's obligations to comply with Applicable Laws shall not be affected by such obligations. Confidential Information that is disclosed by judicial or administrative process shall remain otherwise subject to the confidentiality and non-use provisions of Section 12.1, and the Party -33- disclosing Confidential Information pursuant to law or court order shall take all reasonable steps necessary, including without limitation obtaining an order of confidentiality, to ensure the continued confidential treatment of such Confidential Information. 12.3. Use of Name Neither Party shall use the name of the other Party, without the prior written approval of the other Party, for any purpose other than informing employees who need to know about this Agreement; provided, however, that AstraZeneca or its Affiliates may, without the Company's prior written approval, use the Company's name on marketing materials that were developed by or under the direction of the U.S. Commercialization Team or Global Commercialization Team. Without limitation, these prohibitions apply to press releases, annual reports, prospectuses, public statements, educational and scientific conferences, Promotional Materials, governmental filings and discussions with public officials, securities analysts, investors and the media. However, subject to the requirements for review and approval that follow, these prohibitions shall not apply to a disclosure of the other Party's name, which counsel to a Party has advised is required by law or regulation or in response to requests for a copy of this Agreement or related information by tax authorities. 12.4. Publicity Referral Unless otherwise directed in writing by AZ, all matters that require AZ's review or consent under this ARTICLE XII must be referred to AZ's Project Manager for review and approval at the address set forth in Section 16.5. Unless otherwise directed in writing by the Company, all matters that require the Company's review or consent under this Section must be referred to the Corporate Communications Department, at the address set forth in Section 16.5. 12.5. Publications Pursuant to the Collaboration Agreement, the JMC (as such term is defined in the Collaboration Agreement) shall develop procedures for review and approval of publications related to a Product or other activities under the Collaboration Agreement or under this Agreement, and neither Party shall permit any publication in violation of such procedures. ARTICLE XIII. TRADEMARKS AND OTHER RIGHTS 13.1. Product Trademarks (a) The Company shall Promote the Products only under the Product Trademarks. -34- (b) AstraZeneca and its Affiliates hereby grant the Company a non-exclusive, royalty free license to use the Product Trademarks solely for purposes of satisfying its obligations hereunder, which license shall terminate upon the expiration or earlier termination of this Agreement for any reason. 13.2. No Ownership or Rights in the Product Trademarks (a) Except as expressly set forth in Section 13.1, nothing in this Agreement shall give either Party any rights, title or interest in and to any other Trademarks that, as the case may be, are owned, licensed or maintained by the other Party or its Affiliate. The Company acknowledges and agrees that AstraZeneca or its Affiliates, as the case may be, are the owners of all rights, title and interest in and to the Product Trademarks, including any form or embodiment thereof, and the goodwill now and hereafter associated with the Product Trademarks. (b) Neither Party shall, or knowingly cause another Person to, contest or dispute or otherwise impair or endanger the validity of, the exclusive rights of any Trademark, including Product Trademarks, owned, licensed or maintained, as the case may be, of the other Party or its Affiliates, or any part thereof, or the registrations thereof. 13.3. Trademark Infringement The Company shall promptly advise AZ of all cases of actual, potential or suspected infringement of the Product Trademarks that come to the Company's attention and shall render all assistance reasonably requested in connection with any action taken by AstraZeneca or its Affiliates. AstraZeneca or its Affiliates shall have sole control of such action. AZ shall be liable for reasonable expenses and reasonable attorneys' fees incurred by the Company at the specific written request of AstraZeneca or its Affiliates in connection with such actions. 13.4. Other Rights (a) The Company acknowledges and agrees that neither the Company, nor any of its Affiliates, shall have any right, title or interest in or to the Promotion Policies, each of which shall constitute Confidential Information and the sole and exclusive property of AstraZeneca and its Affiliates. (b) The Company acknowledges and agrees that all copyright and other intellectual property rights in the Promotional Materials shall remain vested in AstraZeneca. ARTICLE XIV. WARRANTIES; INDEMNITIES; INSURANCE 14.1. Representations, Warranties and Covenants -35- (a) Each Party represents and warrants to the other Party as follows: (i) it is a duly organized and validly existing corporation or limited partnership under the laws of its jurisdiction of incorporation or formation; (ii) it has full corporate or partnership power and authority and has taken all corporate or partnership action necessary to enter into and perform this Agreement; (iii) the execution and delivery of this Agreement and the transactions contemplated herein do not violate, conflict with, or constitute a default under its charter or similar organization document, its by-laws, partnership agreement, or the terms or provisions of any material agreement or other instrument to which it is a party or by which it is bound, or any order, award, judgment or decree to which it is a party or by which it is bound; and (iv) this Agreement is its legal, valid and binding obligation, enforceable in accordance with the terms and conditions hereof. (b) Each Party represents and warrants that it has not been debarred and is not subject to debarment and that it shall not use in any capacity, in connection with the services to be performed under this Agreement, any person who has been debarred pursuant to Section 306 of the Act or who is the subject of a conviction described in such section. The Company shall notify AZ in writing immediately if it or any member of the Company Sales Force is debarred or is the subject of a conviction described in Section 306 of the Act, or if any action, suit, claim, investigation, or legal or administrative proceeding is pending or, to the best of the Company's knowledge, is threatened, relating to the debarment or conviction of the Company or any member of the Company Sales Force. 14.2. AZ Indemnification AZ shall indemnify the Company, its Affiliates and their respective directors, officers, employees and agents (the "Company Indemnified Parties"), and defend and save each of them harmless, from and against any and all claims, lawsuits, losses, damages, liabilities, penalties, costs and expenses (including reasonable attorneys' fees and disbursements) (collectively, "Losses") incurred by any of them in connection with, arising from or occurring as a result of: (i) the breach by AZ of any of its obligations under this Agreement (including this Section 14.2); (ii) the breach or inaccuracy of any representation or warranty made by AZ in this Agreement; and (iii) infringement or alleged infringement of the Trademark or patent rights of any Person resulting from Promotion of the Products by the Company in accordance with the terms hereof. Notwithstanding anything else in this Section 14.2 to the contrary, (i) AZ shall not be obligated to indemnify the Company for those Losses for which the Company has an obligation to indemnify AZ pursuant to Section 14.3, as to which Losses each Party shall indemnify the other to the extent of their respective liability for such Losses; and (ii) AZ shall not be obligated to indemnify any Company Indemnified Party for any Losses that arise as a result of gross negligence or willful misconduct on the part of any Company Indemnified Party. -36- 14.3. Company Indemnification The Company shall indemnify AZ, its Affiliates and their respective directors, officers, employees and agents (the "AZ Indemnified Parties"), and defend and save each of them harmless, from and against any and all Losses incurred by any of them in connection with, arising from or occurring as a result of (i) the breach by the Company of any of its obligations under this Agreement (including this Section 14.3) or (ii) the breach or inaccuracy of any representation or warranty made by the Company in this Agreement. Notwithstanding anything else in this Section 14.3 to the contrary, (i) the Company shall not be obligated to indemnify AZ for those Losses for which AZ has an obligation to indemnify the Company pursuant to Section 14.2, as to which Losses each Party shall indemnify the other to the extent of their respective liability for such Losses; and (ii) the Company shall not be obligated to indemnify any AZ Indemnified Party for any Losses that arise as a result of gross negligence or willful misconduct on the part of any AZ Indemnified Party. 14.4. Indemnification Procedure (a) Notice of Claim. The indemnified Party (the "Indemnified Party") shall give the indemnifying Party (the "Indemnifying Party") prompt written notice (an "Indemnification Claim Notice") of any Losses or discovery of facts upon which such Indemnified Party intends to base a request for indemnification under Section 14.2 or Section 14.3, but in no event shall the Indemnifying Party be liable for any Losses that result from any delay in providing such notice. Each Indemnification Claim Notice must contain a description of the claim and the nature and amount of such Loss (to the extent that the nature and amount of such Loss are known at such time). The Indemnified Party shall furnish promptly to the Indemnifying Party copies of all papers and official documents received in respect of any Losses. (b) Third Party Claims. The obligations of an Indemnifying Party under this ARTICLE XIV with respect to Losses arising from claims of any third party that are subject to indemnification as provided for in Section 14.2 or Section 14.3 (a "Third Party Claim") shall be governed by and be contingent upon the following additional terms and conditions: (i) Control of Defense. At its option, the Indemnifying Party may assume the defense of any Third Party Claim by giving written notice to the Indemnified Party within thirty (30) days after the Indemnifying Party's receipt of an Indemnification Claim Notice. The assumption of the defense of a Third Party Claim by the Indemnifying Party shall not be construed as an acknowledgment that the Indemnifying Party is liable to indemnify any Indemnified Party in respect of the Third Party Claim, nor shall it constitute a waiver by the Indemnifying Party of any defenses it may assert against any Indemnified Party's claim for indemnification. Upon assuming the defense of a Third Party Claim, the Indemnifying Party may appoint as lead counsel in the defense of the Third Party Claim any legal counsel selected by the Indemnifying -37- Party which shall be reasonably acceptable to the Indemnified Party. In the event the Indemnifying Party assumes the defense of a Third Party Claim, the Indemnified Party shall immediately deliver to the Indemnifying Party all original notices and documents (including court papers) received by any Indemnified Party in connection with the Third Party Claim. Subject to clause (ii) below, if the Indemnifying Party assumes the defense of a Third Party Claim, the Indemnifying Party shall not be liable to the Indemnified Party for any legal expenses subsequently incurred by such Indemnified Party in connection with the analysis, defense or settlement of the Third Party Claim. In the event that it is ultimately determined that the Indemnifying Party is not obligated to indemnify, defend or hold harmless an Indemnified Party from and against the Third Party Claim, the Indemnified Party shall reimburse the Indemnifying Party for any and all costs and expenses (including attorneys' fees and costs of suit) and any Losses incurred by the Indemnifying Party in its defense of the Third Party Claim with respect to such Indemnified Party. (ii) Right to Participate in Defense. Without limiting Section 14.4(b)(i), any Indemnified Party shall be entitled to participate in, but not control, the defense of such Third Party Claim and to employ counsel of its choice for such purpose; provided, however, that such employment shall be at the Indemnified Party's own expense unless (A) the employment thereof has been specifically authorized by the Indemnifying Party in writing, (B) the Indemnifying Party has failed to assume the defense and employ counsel in accordance with Section 14.4(b)(i) (in which case the Indemnified Party shall control the defense). (iii) Settlement. With respect to any Losses relating solely to the payment of money damages in connection with a Third Party Claim and that will not result in the Indemnified Party's becoming subject to injunctive or other relief or otherwise adversely affect the business of the Indemnified Party in any manner, and as to which the Indemnifying Party shall have acknowledged in writing the obligation to indemnify the Indemnified Party hereunder, the Indemnifying Party shall have the sole right to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss, on such terms as the Indemnifying Party, in its sole discretion, shall deem appropriate. With respect to all other Losses in connection with Third Party Claims, where the Indemnifying Party has assumed the defense of the Third Party Claim in accordance with Section 14.4(b)(i), the Indemnifying Party shall have authority to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss provided that it obtains the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed). The Indemnifying Party shall not be liable for any settlement or other disposition of a Loss by an Indemnified Party that is reached without the written consent of the Indemnifying Party. Regardless of whether the Indemnifying Party chooses to defend or prosecute any Third Party Claim, no Indemnified Party shall admit any liability with respect to, or settle, compromise or discharge, any Third Party Claim without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld or delayed). -38- (iv) Cooperation. Regardless of whether the Indemnifying Party chooses to defend or prosecute any Third Party Claim, the Indemnified Party shall cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, provide such witnesses and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested in connection therewith. Such cooperation shall include access during normal business hours afforded to the Indemnifying Party to, and reasonable retention by the Indemnified Party of, records and information that are reasonably relevant to such Third Party Claim, and making employees and agents available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder, and the Indemnifying Party shall reimburse the Indemnified Party for all its reasonable out-of-pocket expenses in connection therewith. (v) Expenses. Except as provided above, the reasonable and verifiable costs and expenses, including fees and disbursements of counsel, incurred by the Indemnified Party in connection with any Third Party Claim shall be reimbursed on a calendar quarter basis in arrears by the Indemnifying Party, without prejudice to the Indemnifying Party's right to contest the Indemnified Party's right to indemnification and subject to refund in the event the Indemnifying Party is ultimately held not to be obligated to indemnify the Indemnified Party. 14.5. Workers' Compensation and Liability Insurance (a) The Company shall, at its own expense, provide and keep in full force and effect, during any period during the Term following the Approval Date (unless the Company elects not to Promote any Products pursuant to Section 2.1(c), in which case the Company's obligations under this Section 14.5 will apply at all times during the Term following the Company's commencement of any Promotion of any Products, the following kinds and minimum amounts of insurance: (i) Workers' Compensation. Workers' compensation statutory coverage as required by the laws of the states in which the services hereunder are performed; (ii) Employer's Liability. Employer's liability insurance with a limit of [****] for bodily injury by accident per person, [****] for bodily injury by accident, all persons and [****] bodily injury by disease policy limit; (iii) Automobile. Commercial automobile liability insurance with a [****] combined single limit on vehicles owned, leased or rented by the Company while performing services under this Agreement; (iv) General Liability. Commercial general liability insurance, including personal injury blanket contractual liability and broad form property damage, with a [****] combined single limit per occurrence; - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. -39- (v) Umbrella Liability. Umbrella liability insurance in the amount of [****] per occurrence and aggregate; (vi) Employer Practices Insurance. Employer practices insurance in the amount of [****] per occurrence; and (vii) Property Insurance. Property insurance covering the business property of the Company and others while at any unnamed location in the amount of [****]. (b) Such policies of insurance shall be in a form acceptable to AZ and shall stipulate that the insurance shall not be modified or canceled while this Agreement is in effect without thirty (30) days prior written notice to AZ. The Company shall provide AZ with proof of its compliance with this Section 14.5 within thirty (30) days after the date hereof. ARTICLE XV. TERMINATION RIGHTS AND CONSEQUENCES 15.1. Termination of the Agreement This Agreement may be terminated as follows: (a) By either Party: (i) in the event of a material breach of this Agreement by the other Party (other than those breaches and events described in Section 15.1(b) and Section 15.2, which shall be governed by Section 15.1(b) and Section 15.2), which breach if curable remains uncured sixty (60) days after written notice thereof is given to the breaching Party, or (ii) if the other Party shall file in any court or Agency, pursuant to any statute or regulation of any state or country, a petition in bankruptcy or insolvency or for reorganization or for an arrangement or for the appointment of a receiver or trustee of that Party or of its assets, or if the other Party proposes a written agreement of composition or extension of its debts, or if the other Party shall be served with an involuntary petition against it, filed in any insolvency proceeding, and such petition shall not be dismissed within sixty (60) days after the filing thereof, or if the other Party shall propose or be a Party to any dissolution or liquidation, or if the other Party shall make an assignment for the benefit of its creditors. (b) By AZ: (i) upon ten (10) days' prior written notice if: - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. -40- (A) the Company has failed to use Commercially Diligent Efforts to ensure compliance by its Sales Force with Applicable Laws or the Corporate Integrity Agreement, as evidenced by a pattern of failures by the Sales Force to so comply, which failures are not promptly rectified; or (B) the Company fails to report to AZ within three (3) business days of when the Company learns of any material violation by any Company Representative of Applicable Laws, excluding any violations of the American Medical Association Guidelines on Gifts to Physicians from Industry and PhRMA Code on Interactions with Healthcare Professionals, or the Corporate Integrity Agreement; or (C) the Company fails to report to AZ within ten (10) business days of when the Company learns of any material violation by any Company Representative of any violations of the American Medical Association Guidelines on Gifts to Physicians from Industry or PhRMA Code on Interactions with Healthcare Professionals; or (D) the Company did not adequately investigate, or take appropriate remedial or disciplinary actions as a result of investigation, into any alleged material violation(s) of Applicable Laws or the Corporate Integrity Agreement. (ii) within thirty (30) days after written notice from AZ to the Company that a Change of Corporate Control of the Company has occurred, if in the reasonable judgment of AZ any Person or group (as such term is defined in the Securities Exchange Act of 1934, as amended) involved in the Change of Corporate Control: (A) has a Competing Cardiovascular Product; or (B) is or has within the past ten (10) years been a party to any litigation to which AZ or any of its Affiliates is or has been an adverse party, where such litigation threatened a material business interest of AZ; or (C) has previously committed material violations of Applicable Law and AZ reasonably determines that such violations are such that the Promotion of the Product by such Person or group would be detrimental to AZ's business interests; or (D) has had a prior business relationship with AZ or its Affiliates and AZ reasonably determines that the conduct of such Person or group in such business relationship indicates that Promotion of the Products by such Person or group would be detrimental to AZ's business interests; -41- (iii) upon ten (10) days' prior written notice if the FDA causes the withdrawal from the market of or restricts the indications for the Primary Product or there is an imposition of restrictive federal or state price controls such that an obvious and substantial loss of sales for the Primary Product would result. (c) By the Company: (i) On or before the Anticipated Approval Date, for any reason; or (ii) At least ninety (90) days prior to each annual anniversary of the Approval Date, for any reason, with such termination to be effective upon such annual anniversary. (iii) Any termination by the Company pursuant to this Section 15.1(c) shall be in addition to the Company's right, under Section 2.1(c) to elect to suspend the Promotion of Primary Products and any Secondary Product in any year during the Term. 15.2. Termination of Funding Term and Detail Funding Term AZ may terminate the Funding Term or, if applicable, the Detail Funding Term: (a) Following a notice of deficiency and failure to cure such deficiency within sixty (60) days of such deficiency notice, if during two (2) consecutive months the total number of Calls, as reported by AZ's internal call reporting system or the Monthly Performance Reports, conducted for the Products is at least [****] lower than the percentage required for AZ Sales Representatives, or if compliance with the Strategic Targeting Plan, as measured by the Targeted Delivery Score, is at least [****] lower than the percentage required for AZ Sales Representatives; (b) Following a notice of deficiency and failure to cure such deficiency within sixty (60) days of such deficiency notice, if the number of Company Representatives performing services hereunder at any time after six (6) months after the Launch Date falls [****] below the level required by the Strategic Targeting Plan and remains below such level for more than sixty (60) consecutive days. 15.3. Effect of Termination (a) If the effective date of termination of this Agreement pursuant to Section 15.1, or the effective date of termination of the Funding Term or the Detail Funding Term, occurs other than at the end of a month, the Company's right to payment pursuant to ARTICLE VI (assuming it has satisfied the applicable conditions set forth in this Agreement) shall be prorated for the portion of the month during which the Agreement was in effect or the Funding Term or the Detail Funding Term continued. - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. -42- (b) Upon the effective date of termination of this Agreement pursuant to Section 15.1, the Company shall promptly cease all Promotion of the Products and promptly discontinue the use of any Product Trademarks. The termination of this Agreement shall be without prejudice to any rights or obligations of the Parties that may have accrued prior to such termination, and the provisions of Sections 8.1 (with respect to the Company's obligation to report to AZ), 14.2, 14.3, 14.4, 14.5 and Articles IX, X, XI, XII, XIII, XV and XVI shall survive any termination of this Agreement. Except as otherwise expressly provided herein, termination of this Agreement in accordance with the provisions hereof shall not limit remedies which may otherwise be available in law or equity. (c) Upon the effective date of expiration or termination of the Funding Term or the Detail Funding Term pursuant to Section 15.2 or 2.1(c), the Company shall have the right to continue to Promote the Primary Product pursuant to Section 2.2(c), subject to and in accordance with the terms and provisions of this Agreement. 15.4. Return of All Materials At the end of the Term, the Company shall promptly return to AZ all Product samples, all equipment and materials, Promotional Materials, and training materials that AZ provided to the Company in connection with the Program or otherwise pursuant to this Agreement in the possession of, or under the control of, the Company or the Company Sales Force; provided the Company shall have the right to purchase the lap top and Territory Management Devices from AZ at their respective then fair market value. 15.5. Continuation of Promotion of Secondary Product The Company would be permitted to continue to co-promote the Secondary Product after the conclusion of the Funding Term only upon the mutual agreement of the Parties. ARTICLE XVI. MISCELLANEOUS 16.1. Dispute Resolution (a) Except as provided in Sections 3.1(e), 6.4, 7,1(c), 11.1 and 12.4, the Parties shall attempt in good faith to settle any Disputes by negotiations between representatives who have decision-making authority regarding such Dispute. Within ten (10) days after either Party gives written notice of a Dispute to the other Party (the "Dispute Notice"), representatives of each Party having decision-making authority regarding the Dispute (subject to Board of Directors' or equivalent approval, if required), shall meet at a mutually acceptable time and place, and thereafter as often as they -43- reasonably deem necessary, to exchange relevant information and to attempt to resolve the Dispute. (b) If, within thirty (30) days after the Dispute Notice, the Parties have not resolved the Dispute, upon written request by either Party to the other Party, the Parties shall promptly appoint a mutually acceptable Neutral to act as a mediator. If the Parties are not able to agree on an acceptable Neutral within forty-five (45) days after the Dispute Notice, the JMC shall be responsible for selecting a qualified, disinterested, and conflict-free Neutral within fifteen (15) days of being approached by either AZ or the Company. The fees and costs of the Neutral shall be shared equally by the Parties. (c) The Neutral shall conduct the mediation pursuant to the rules and procedures of JAMS applicable to evaluative mediations. The Parties shall participate in the mediation to its conclusion; provided, however, that neither Party shall be obligated to continue to participate in the mediation if the Parties have not resolved the Dispute in writing within one-hundred and twenty (120) days after the Dispute Notice and if either Party shall have terminated the mediation by delivery of written notice of termination to the other Party following expiration of the one-hundred and twenty (120) day period. The results of the mediation shall not be binding upon the Parties; provided, however, that the Parties shall give good faith consideration to the settlement of the Dispute on the basis of such result. Notwithstanding any other provision hereof to the contrary, if one Party does not accept such result (the "Disputing Party") and either Party thereafter pursues any other judicial or nonjudicial remedy to conclusion, the Disputing Party shall pay the reasonable attorneys' fees, costs, and other expenses (including expert witness fees) of the other Party, if any, if the result of such other remedy is not more favorable to the Disputing Party than the result of the mediation. (d) Nothing in this Section 16.1 shall preclude either Party from seeking interim or provisional relief, including a temporary restraining order, preliminary injunction or other interim equitable relief concerning a Dispute either prior to or during the mediation if necessary to protect the interests of such Party. This Section 16.1 shall be specifically enforceable. (e) The Parties hereto agree that none of their respective conduct during the course of the mediation nor any of their respective statements made or information exchanged in connection with the mediation shall be deemed an admission of any kind by any Party. No such conduct, statements or information may be admitted as evidence by either Party in any other subsequent proceeding initiated by either Party. Without limiting the foregoing, no offer of settlement made in connection with the mediation shall be admitted as evidenced by the Parties hereto in any other subsequent proceeding initiated by either Party. 16.2. Governing Law -44- The interpretation and construction of this Agreement, and all matters relating hereto, shall be governed by the laws of the State of New York applicable to agreements executed and to be performed solely within such State excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction 16.3. Force Majeure Neither Party shall be liable for delay in delivery or nonperformance in whole or in part, nor shall the other Party have the right to terminate this Agreement except as otherwise specifically provided in this Section 16.3, where delivery or performance has been affected by a condition beyond a Party's reasonable control, including inability to obtain labor, materials or manufacturing facilities, provided that the Party affected by such a condition shall, within ten (10) days of its occurrence, give notice to the other Party stating the nature of the condition, its anticipated duration and any action being taken to avoid or minimize its effect. The suspension of performance shall be of no greater scope and no longer duration than is reasonably required and the nonperforming Party shall use its best efforts to remedy its inability to perform; provided, however, that in the event the suspension of performance continues for 60 days after the date of the occurrence, and such failure to perform would constitute a material breach of this Agreement in the absence of such force majeure, the nonaffected Party may terminate this Agreement by written notice to the other Party. 16.4. Waiver A Party's failure to enforce, at any time or for any period of time, any provision of this Agreement, or to exercise any right or remedy, does not constitute a waiver of such provision, right or remedy, or prevent such Party thereafter from enforcing any or all provisions and exercising any or all other rights and remedies. The exercise of any right or remedy does not constitute an election or prevent the exercise of any or all rights or remedies, all rights and remedies being cumulative. 16.5. Notices -45- Unless otherwise expressly provided for herein, all Notices shall be in writing, shall refer specifically to this Agreement and shall be hand delivered or sent by express courier service, costs prepaid, or by facsimile, to the respective addresses specified below (or to such other address as may be specified by Notice to the other Party): If to AZ, to: AstraZeneca Pharmaceuticals LP 1800 Concord Pike Wilmington, Delaware 19803 Attention: General Counsel Telecopier No.: 302-886-1578 With a copy to: IPR Pharmaceuticals, Inc. P.O. Box 1624 Canovanas, Puerto Rico 00729-1624 Attention: Chief Executive Officer Telecopier No.: (787) 750-5332 If to the Company, to: AtheroGenics, Inc. 8995 Westside Parkway Alpharetta, Georgia 30004 Attn: President and Chief Executive Officer Telecopier No.: (678) 336-2503 With a copy to: AtheroGenics, Inc. 8995 Westside Parkway Alpharetta, Georgia 30004 Attn: General Counsel Telecopier No.: (678) 336-2503 Any Notice delivered by facsimile or similar means shall be confirmed by a hard copy delivered as soon as practicable thereafter. The effective date of any Notice shall be: (a) the date of the addressee's receipt, if delivered by hand or express courier; or (b) the date of receipt if received by 5:00 p.m. local time on a business day or, if not, the first business day after receipt, if sent by facsimile. It is understood and agreed that this Section 16.5 is not intended to govern the day-to-day business communications necessary between the Parties in performing their duties, in due course, under the terms of this Agreement. 16.6. Entire Agreement This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior or contemporaneous -46- understandings or agreements, whether written or oral, with respect to the subject matter hereof. Each Party confirms that it is not relying on any representations or warranties of the other Party except as specifically set forth herein. No amendment or modification hereof shall be binding upon the Parties unless in writing and duly executed by authorized representatives of both Parties. 16.7. Successors and Assigns The terms and provisions hereof shall inure to the benefit of, and be binding upon, AZ, the Company and their respective successors and permitted assigns. Neither Party shall assign this Agreement without the prior written consent of the other Party, which consent shall not be unreasonably withheld; provided, however, that AZ shall have the right to assign or otherwise transfer this Agreement to its Affiliates or to any successor in interest in any manner to all or substantially all of the business to which this Agreement relates. Any attempt to assign, transfer, subcontract or delegate any portion of this Agreement in violation of this Section 16.7 shall be null and void. 16.8. Schedules and Exhibits All Schedules and Exhibits referred to herein or referred to in any other Schedule or Exhibit hereto are intended to be, and hereby are, specifically incorporated herein and made a part of this Agreement. 16.9. Counterparts This Agreement may be executed in one or more counterpart copies, each of which shall be deemed an original and all of which taken together shall be deemed to constitute one and the same instrument. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. 16.10. Severability If any provision hereof should be invalid, illegal or unenforceable in any respect, then, to the fullest extent permitted by applicable law, (a) all other provisions hereof shall remain in full force and effect and shall be liberally construed in order to carry out the intent of the Parties as nearly as may be possible, and (b) the Parties shall use their best efforts to negotiate a provision, in replacement of the provision held invalid, illegal or unenforceable, that is consistent with applicable law and accomplishes, as nearly as possible, the original intention of the Parties with respect thereto. To the fullest extent permitted by applicable law, each Party hereby waives any provision of law that would render any provision hereof prohibited or unenforceable in any respect. 16.11. Applicable Laws -47- Notwithstanding any other provision of this Agreement to the contrary, neither Party, nor such Party's Sales Representatives, shall be required to take any actions to Promote a Product, or any other action contemplated by this Agreement, that would reasonably be considered to be a violation of any Applicable Law. 16.12. Affiliates Each Party shall cause its respective Affiliates to comply fully with the provisions of this Agreement to the extent such provisions relate, or are intended to relate to such Affiliates, as if such Affiliates were expressly named as joint obligors hereunder. Without limiting the generality of the foregoing, any obligations of AZ may be performed by any of AZ's Affiliates, including but not limited to AstraZeneca, and such obligations will be deemed satisfied upon performance by such Affiliate. 16.13. Expenses Each of the Parties shall pay the fees and expenses of its respective counsel and other experts and all other expenses, except as otherwise expressly set forth herein, incurred by such Party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. 16.14. Further Assurances Each Party shall duly execute and deliver, or cause to be duly executed and delivered, such further instruments and do and cause to be done such further acts and things, including the filing of such assignments, agreements, documents and instruments, as may be necessary or as the other Party may reasonably request to carry out more effectively the provisions and purposes hereof, or to better assure and confirm unto such other Party its rights and remedies under this Agreement. 16.15. Construction The captions of this Agreement are for convenience of reference only and in no way define, describe, extend or limit the scope or intent of this Agreement or the intent of any provision contained in this Agreement. The language of this Agreement shall be deemed to be the language mutually chosen by the Parties and no rule of strict construction shall be applied against either Party hereto. 16.16. No Joint Venture Nothing contained in this Agreement shall be construed as creating a partnership, joint venture or agency relationship between the Parties hereto or, except as otherwise expressly provided herein, as granting to either Party the authority to bind or -48- contract any obligation in the name of or on the account of the other Party, or to make any statements, representations, guarantees or warranties on behalf of the other Party. END OF PAGE (signatures appear on following page) -49- IN WITNESS WHEREOF, the Parties have caused this Co-Promotion Agreement to be executed by their representatives thereunto duly authorized as of the date first set forth above. ATHEROGENICS, INC. ASTRAZENECA PHARMACEUTICALS LP By: /s/ RUSSELL M. MEDFORD By: /s/ DAVID R. BRENNAN --------------------------------- -------------------- Name: Russell M. Medford, M.D., Ph.D. Name: David R. Brennan President & CEO President & CEO SCHEDULE 1.1 AZ CARDIOVASCULAR COMPOUNDS [****] - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. SCHEDULE 3.2 [****] TO BE CREATED IN CONNECTION WITH DEVELOPMENT OF THE INITIAL STP PREPARED PURSUANT TO SECTION 3.1 - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. SCHEDULE 3.4 LIST OF SALES FORCE AND RELATED JOB QUALIFICATIONS [****] - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 1 2 SCHEDULE 3.15 INFORMATION TECHNOLOGY AND COMMUNICATIONS MANAGEMENT REQUIREMENTS AND REPORTS NOTE: THIS SCHEDULE 3.15 MAY BE AMENDED AT THE TIME OF INITIAL DEVELOPMENT OF THE STP OR FROM TIME TO TIME THEREAFTER AS DETERMINED IN GOOD FAITH BY THE U.S. COMMERCIALIZATION TEAM - - Voicemail Services AZ will provide the Company with voicemail services to all members of the Sales Force during the Funding Term. Use of voicemail will be consistent with and subject to AZ policies and procedures for voicemail use. - - Broadband Services/High Speed Internet Access: The Company District Managers and Representatives may be required to have broadband/high speed internet access. If required, during the Funding Term, AZ will provide reimbursement for the reasonable installation and monthly service costs for broadband services consistent with reimbursement levels provided to the AZ Sales Force. - - Support SMTP enabled mail exchange between AZ and Company. Consistent with the AZ standard, electronic mail will be supported via Simple Mail Transfer Protocol. The Company will use contact points within its organization to relay E-Mails from AZ throughout the organization. The Company will coordinate the distribution of E-Mail address lists at least on a monthly basis. - - Additional Hardware Upgrades Once Sales & Marketing has delivered application requirements, AZ will analyze the current server configuration and determine whether hardware upgrades are necessary. If additional hardware is required, AZ will provide at AZ's sole expense during the Funding Term. - - Information Technology (a) During the Funding Term, the Company shall use commercially reasonable efforts to cause each Representative to use the Information Technology to perform all record keeping, reporting, Product sample ordering, Promotional Material ordering, and other communication functions required by AZ in connection with the Program in accordance with procedures established from time to time by AZ, including, without limitation: (i) record all sales Calls and Details daily, including basic customer profile (name, address and DEA#, where applicable), activities (customer interaction date, type (Product Message, Service, etc.) and text description), sample distribution (date, Product and quantity), and customer coverage (product, owner); 1 (ii) where applicable, synchronize Compass, NorthStar, and Sales InSite each workday and at the end of the month; (iii) where applicable, review daily the activity of his or her AZ counterpart; (iv) review the Strategic Targeting Plan and plan the following business day's routing and sales Calls; (v) update the profile of Target Prescribers when and as appropriate; (vi) record completion of all assigned To-Do's; (vii) fulfill reporting requirements to District Manager; and (viii) where applicable, communicate with Sales InSite to: 1) report Territory business activity according to business rules of AZ (at least weekly) 2) report on sample management daily 3) order Promotional Materials as required (b) During the Funding Term, AZ, at its expense, shall provide the Sales Force with "Help Desk" support for the AZ supplied Information Technology consistent with the level of support provided to AZ's own internal sales Representatives who use similar technology. AZ shall also provide, at no cost to the Company, configuration services, distribution and shipping of the AZ Supplied Information Technology to the Company Sales Force. AZ shall be responsible for and bear the cost of any and all data line installation charges, long distance telephone charges, and data line maintenance fees incurred in connection with use of the Information Technology. (c) Title to and ownership of the AZ supplied Information Technology in the possession or control of the Company Sales Force shall at all times be vested exclusively in AZ; at no time and under no circumstance shall the Company or any Company Representative have title to, or any right or interest in or to, such Information Technology. The Company shall not take any action that is inconsistent with the right, title and interest of AZ in and to the Information Technology. The Company shall cause the Representatives to enter into any written agreements or acknowledgments reasonably requested by AZ in respect of the ownership and use of such Information Technology. The Company shall cause the Sales Force to store and handle the AZ supplied Information Technology in a secure, proper manner so as to ensure that the Information Technology remains in good, working condition and is not lost or stolen. The Company shall be financially responsible to and promptly reimburse AZ for any loss or damage to such Information Technology caused by loss or misuse from the time such Information Technology is received by the Company until the time such Information Technology is returned to AZ. Further the 2 Company shall be financially responsible to and promptly reimburse AZ for any loss or damage to such Information Technology caused by: (i) Information Technology not returned by a member of Company Sales Force upon expiration or earlier termination of the Funding Term; or (ii) a level of theft of such Information Technology greater than what can be expected within an AZ sales force. The Company will be responsible to pay AZ for the lesser of the net book value of the equipment or non warranty repair cost. (d) The Company shall cause all AZ supplied Information Technology issued to members of Company Sales Force to be returned to AZ as soon as reasonably possible upon the termination of employment or change in Sales Force assignment of such Company employee . The Company shall cause all (or any part) of the Information Technology issued to the Company by AZ to be returned as soon as reasonably possible to AZ upon termination of this Agreement or upon the request of AZ, if the Company chooses not to purchase such equipment at the then current market value. (e) Only the Software and other software approved by AZ shall be installed on or used in connection with the Hardware, and the Company shall not install on the Hardware any other Software. The Company shall not use the AZ Information Technology for any other purpose other than performing the Company's obligations under this agreement. Any other use is strictly prohibited. (f) Where applicable, and per program basis, each Representative shall be provided with access to an Outlook e-mail account strictly for use in connection with the services to be provided pursuant to this Agreement. (g) The Company shall cause its Sales Force to utilize access to the World Wide Web in a manner that is consistent with the AZ usage policy governing such access including any broadband applications AZ may require. 3 SCHEDULE 6.1A ALLOWABLE COSTS FOR THE SALES FORCE [****] - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 1 SCHEDULE 6.1B ADJUSTMENTS TO ALLOWABLE COSTS TO BE REIMBURSED TO THE COMPANY FOR THE PRECEDING CALENDAR QUARTER TO THE EXTENT NOT PREVIOUSLY REIMBURSED PURSUANT TO SECTION 6.1(b) OF THE AGREEMENT [****] - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 1 SCHEDULE 6.3 [****] TO BE CREATED IN CONNECTION WITH DEVELOPMENT OF THE INITIAL STP PREPARED PURSUANT TO SECTION 3.1 - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. EXHIBIT 10.4 SERVICES AGREEMENT (COMPANY EMPLOYEE MODEL) This Services Agreement ("Agreement") is made by and between AtheroGenics, Inc. (the "Company") and ____________________________________ ("Employee"). WHEREAS, the Company and Employee each acknowledge that Employee is an employee of the Company; WHEREAS, Company has entered into a Co-Promote Agreement (the "AZ Agreement") with AstraZeneca Pharmaceuticals LP ("AZ"); and NOW, THEREFORE, in consideration of the premises and mutual agreements herein contained, and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), and intending to be legally bound hereby, the parties hereto agree as follows: 1. General. The parties agree that the premises as set forth above are incorporated within and made a part of this Agreement. 2. Confidential Information (a) Employee acknowledges and agrees that he or she will have access to, or become acquainted with, Confidential Information of the Company and AZ. For the purposes of this Agreement, "Confidential Information" shall mean any information of the Company and AZ, whether or not developed by Employee, including but not limited to, information which relates to all ideas, designs, methods, discoveries, improvements, products or other results of the services provided pursuant to this Agreement and in connection with the AZ Agreement ("Services"), and trade secrets, product data and specifications, proprietary rights, business affairs, product developments, customer information or employee information. (b) Employee acknowledges and agrees that the Confidential Information constitutes valuable trade secrets of the Company and AZ. Employee shall keep all Confidential Information in confidence and shall not, at any time, without the Company's prior written consent, disclose or otherwise make available, directly or indirectly, any item of Confidential Information. Employee shall use the Confidential Information only in connection with the performance of the Services and for no other purpose. 3. Work Product (a) Employee agrees that all works capable of copyright protection that are created, in part or in whole, by him or her in connection with the Services (the "Copyright Work Product") shall be considered "works made for hire" within the meaning of the copyright laws of the United States and that the Company is and shall be the sole author of the Copyright Work Product, and the sole owner of all rights therein. If any of the Copyright Work Product is 1 deemed not to be a "work made for hire," then Employee hereby assigns to the Company all worldwide rights, title and interest in and to the Copyright Work Product. (b) Employee further agrees that the Company shall be the sole owner of all inventions, discoveries, concepts, ideas, methods, improvements or results, including all patents, trade secret rights and any other proprietary rights therein that are developed, written, conceived, reduced to practice or made by him or her, either solely or jointly with others, in connection with the Services (the "Other Work Product", collectively with Copyright Work Product, the "Work Product") and hereby assigns to the Company all worldwide rights to and title and interest in such Other Work Product. (c) Employee agrees to assign, and cause his or her successors and assigns to assign, to the Company all rights in and to (i) any invention developed, written, conceived, reduced to practice or made by him or her in connection with the Services and (ii) all applications for registration of any patent rights in any such invention worldwide, including all United States and foreign letters patent and United States and foreign letters patent granted upon any invention and all extensions, renewals and reissues thereof, and all rights to claim priority on the basis of these applications. Employee also agrees, and shall cause his or her successors or assigns to agree, to authorize the Commission of the United States Patent Office and the officials of any foreign country whose duty it is to issue patents on applications to issue all letters patent for such inventions to the Company, its successors and assignees. (d) Employee agrees to (i) execute all documents and perform all acts deemed necessary by the Company to evidence the Company's ownership of all of the foregoing Work Product; and (ii) assist the Company in obtaining, registering, maintaining and defending, at the Company's sole expense, all patents, copyrights, trade secret rights and other proprietary rights in and to the Work Product in any and all countries as may be determined by the Company. (e) Employee hereby irrevocably appoints the Company as his or her attorney-in-fact for the purpose of executing such documents in his or her name. 4. No Other Benefits. Employee acknowledges and agrees that he or she shall not receive any employee benefits or any other compensation of any kind from any entity other than the Company, but shall receive all compensation for all services performed hereunder from the Company. 5. Employee Representation. Employee represents and warrants to the Company that Employee has not been debarred and is not subject to debarment pursuant to Section 306 of the Federal Food, Drug, and Cosmetic Act, as amended, or is the subject of a conviction described in such section. Employee agrees to notify the Company in writing immediately if he or she is debarred or is the subject of a conviction described in Section 306, or if any action, suit, claim, investigation, or legal or administrative proceeding is pending or, to the best of Employee's knowledge, is threatened, relating to the debarment or conviction of Employee. [IN THE EVENT THE EMPLOYEE EXECUTING THIS AGREEMENT IS EMPLOYED BY A CONTRACT SALES ORGANIZATION, CONFORMING CHANGES TO THIS AGREEMENT WILL BE REQUIRED, CONSISTENT WITH THE SERVICES AGREEMENT OF AZ FOR USE WITH CONTRACT SALES ORGANIZATIONS.] 2 IN WITNESS WHEREOF, the parties have entered into this Agreement on this ____ day of ______________, ____. ATHEROGENICS, INC. By ____________________________________ Its: [EMPLOYEE] _______________________________________ [Name] 3 EX-10.37 5 g99853exv10w37.txt EX-10.37 TRANSITION SERVICES AGREEMENT EXHIBIT 10.37 CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT MARKED [****] HAVE BEEN REDACTED AND HAVE BEEN FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION. TRANSITION SERVICES AGREEMENT BY AND BETWEEN IPR PHARMACEUTICALS, INC. AND ATHEROGENICS, INC. DATE: DECEMBER 22, 2005 TABLE OF CONTENTS 1 Definitions................................................. 1 2 Construction................................................ 6 3 Amendment................................................... 6 4 Transition Assistance....................................... 6 5 Fees........................................................ 8 6 Invoicing, Payment, Recordkeeping and Audits................ 11 7 Representations and Warranties.............................. 12 8 Indemnification............................................. 13 9 Force Majeure............................................... 17 10 Term and Termination........................................ 17 11 Confidentiality............................................. 19 12 Use of Name................................................. 21 13 Notices..................................................... 21 14 Relationship of the Parties................................. 22 15 Rights Of Third Parties..................................... 23 16 Assignment.................................................. 23 17 Entire Agreement............................................ 23 18 Expenses.................................................... 23 19 Waiver and Non-Exclusion of Remedies........................ 24 20 Severability................................................ 24 21 Governing Law and Disputes.................................. 24 22 Equitable Relief............................................ 24 23 Environmental Provisions.................................... 25 24 Counterparts................................................ 25

EXHIBITS Exhibit 1 -- Process Improvements Exhibit 2 -- Estimated Spray Drying Capital Expenditure Exhibit 3 -- Estimated Manufacturing Start-Up and Other Costs Exhibit 4 -- Existing Agreements Exhibit 5 -- Dow Consent to Assignment (i) TRANSITION SERVICES AGREEMENT This Transition Services Agreement (the "AGREEMENT") is made as of December 22, 2005 and shall be effective as of the Effective Date (as defined herein) by and between (1) IPR Pharmaceuticals, Inc., a company organized and existing under the laws of Puerto Rico with an address at CARR 188 LOTE 17 SAN ISIDRO INDUSTRIAL PARK, CANOVANAS, PR 00729 ("ASTRAZENECA"); and (2) AtheroGenics, Inc., a Georgia corporation with principal executive offices at 8995 Westside Parkway, Alpharetta, Georgia 30004 (the "AGIX"). RECITALS (A) WHEREAS, AstraZeneca desires to receive certain transition services from AGIX to facilitate AstraZeneca's exercise of the manufacturing rights granted pursuant to the License Agreement; and (B) WHEREAS, AGIX is willing to provide such transition services on the terms and conditions set forth herein. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows: 1 DEFINITIONS Unless otherwise specifically provided in this Agreement, the following terms shall have the following meanings: 1.1 "AFFILIATE" means any Person that directly (or indirectly through one or more intermediaries) controls, is controlled by, or is under common control with a Party. For purposes of this definition only, the terms "controls," "controlled," and "control" means (i) the direct or indirect ability or power to direct or cause the direction of the management and policies of an entity or otherwise direct the affairs of such entity, whether through ownership of equity, voting securities, or beneficial interest, by contract, or otherwise, or (ii) the ownership, directly or indirectly, of at least 50% of the voting securities (or other comparable ownership interest for an entity other than a corporation) of a Party. 1.2 "AGIX INDEMNITEES" has the meaning set forth in Section 8.2. 1 1.3 "AGIX INFORMATION" means all data and information related to or comprised in Intellectual Property Rights and Know-How, as well as other information in relation to AGIX's general business operations, SDD, a SDD Manufacturing Process, the Final Commercial Products, a Manufacturing Process, an SDD Process Improvement, or a Process Improvement, which is owned by AGIX. 1.4 "APPLICABLE LAWS AND REGULATIONS" mean all applicable statutes, ordinances, regulations, rules, or orders of any kind whatsoever of any Governmental Authority, including, without limitation, the Food, Drug and Cosmetic Act, Prescription Drug Marketing Act, Generic Drug Enforcement Act of 1992 (21 U.S.C. Section 335a et seq.), and Anti-Kickback Statute (42 U.S.C. Section 1320a-7b et seq.), all as amended from time to time. 1.5 "ASTRAZENECA INFORMATION" means all data and information related to or comprised in Intellectual Property Rights and Know-How, as well as other information in relation to AstraZeneca's general business operations, SDD, a SDD Manufacturing Process, the Final Commercial Products, a Manufacturing Process, or a Process Improvement, which data and information is owned by AstraZeneca. 1.6 "CAPACITY RESERVE FEE" shall have the meaning set forth in the Dow Agreement. 1.7 "COMBINATION PRODUCT" means a Product in final form that includes one or more pharmaceutically active ingredients other than the Compound, in combination with the Compound, that are sold as a fixed dose or separate doses in a single package and priced as one item. All references to Product in this Agreement shall be deemed to include Combination Product(s). 1.8 "COMPOUND" means AGI-1067, which is chemically defined as [****], including its pharmacologically acceptable salts, solvates, hydrates, hemihydrates, polymorphs, metabolites, free base forms, pro-drugs, esters, tautomers, and if applicable, any isomers, stereoisomers, racemates, enantiomers and all optically active forms thereof. 1.9 "CONFIDENTIAL INFORMATION" has the meaning set forth in Section 11.1.1 hereof. 1.10 "CONTROL" or "CONTROLLED" means with respect to any Intellectual Property Right, that the Party owns or has a license to such Intellectual Property Right or Information and has the ability to grant access, a license, or a sublicense to such Intellectual Property Right to the other Party as provided for in this Agreement without violating an agreement with, or infringing any rights of, a Third Person as of the time such person would be first required under this Agreement to grant the other person such access, license or sublicense. 1.11 "DISCLOSING PARTY" means the Party disclosing Confidential Information. 1.12 "DOW AGREEMENT" means that "Commercial Supply Agreement for Production of AGI-1067 and Probucol between The Dow Chemical Company ("DOW") and - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 2 AtheroGenics, Inc." dated as of October 6, 2005, excluding any amendments thereto entered into after the Effective Date. 1.13 "EFFECTIVE DATE" means the Effective Date of the License Agreement. 1.14 "EXISTING AGREEMENTS" means the Dow Agreement and the other agreements set forth on Exhibit 4. 1.15 "FDA" means the United States Food and Drug Administration, or any successor federal agency having responsibility over United States Regulatory Approvals. 1.16 "FINAL COMMERCIAL PRODUCT" means a pharmaceutical product in ready-for-sale form, packaged and labeled dosage form marketed by or on behalf of AstraZeneca, its Affiliates or Sublicensees, now or in the future, that comprises or utilizes SDD or the Compound in its manufacture. 1.17 "FORCE MAJEURE" has the meaning set forth in Section 9.1. 1.18 "GOVERNMENTAL AUTHORITY" means any court, tribunal, arbitrator, agency, commission, official or other instrumentality of any federal, state, or other political subdivision, or supranational body, domestic or foreign. 1.19 "INDIRECT TAXES" means value added taxes, sales taxes, consumption taxes and other similar taxes. 1.20 "INFORMATION" means any information Controlled by either Party, including, but not limited to: (a) any and all inventions (whether or not patentable), Know-How, developments, materials, data, analyses, and the like, regardless of whether the information is stored or transmitted in oral, documentary, or electronic form; (b) information relating to research and development plans, experiments, results, compounds, therapeutic leads, candidates and products, clinical and preclinical data, trade secrets and manufacturing, marketing, financial, regulatory, personnel and other business information and plans, and all scientific, clinical, regulatory, marketing, financial and commercial information or data; (c) AstraZeneca Information; and (d) AGIX Information. 1.21 "INTELLECTUAL PROPERTY RIGHTS" means trade secrets, patent rights, trademarks, service marks, trade names, design rights, copyrights (including rights in computer software) and any rights or property similar to any of the foregoing in any part of the world, whether registered or not, together with the right to apply for the registration of any such rights, and all rights or forms of protection having equivalent or similar effect, in any part of the world. 1.22 "INVOICE CURRENCY" means United States dollars. 1.23 "KNOW-HOW" means all technical information or data relating to SDD, whether protected by Intellectual Property Rights or not, including, but not limited to technology, processes, specifications, formulas, procedures, techniques, SHE 3 Information, practices and instructions of, and scientific, analytical and technical data regarding the synthesis, manufacturing and pharmaceutical processing of SDD or the Compound. 1.24 "LICENSE AGREEMENT" means the License and Collaboration Agreement between AstraZeneca and AGIX, dated as of December 22, 2005, as the same shall be amended from time to time. 1.25 "LOSSES" means any and all liabilities, claims, demands, causes of action, damages, loss and expenses incurred directly in connection with this Agreement, including interest, penalties, and reasonable lawyers' fees and disbursements. 1.26 "MANUFACTURING PROCESS" means any process (or any step in or portion of any process) used or developed by AGIX, Third Party Suppliers, or AstraZeneca (or any of their Affiliates) as of the Effective Date or at any time thereafter, in manufacturing SDD or Final Commercial Product. 1.27 "MANUFACTURING START-UP AND OTHER COSTS" shall mean such expenditures estimated by AGIX as all reasonably necessary expenditures for the start up and launch of manufacture of SDD (other than those expenditures described as Spray Dried Capital Expenditures) as set forth in Exhibit 3. 1.28 "PARTIES" means AstraZeneca and AGIX and "PARTY" means either AstraZeneca or AGIX. 1.29 "PERSON" means a natural person, a corporation, a partnership, a trust, a joint venture, a limited liability company, any Governmental Authority or any other entity or organization. 1.30 "PROCESS IMPROVEMENT" has the meaning set forth in Section 5.3.1. 1.31 "PRODUCT" means a pharmaceutical product that contains or incorporates the Compound, whether in development or approved by any Regulatory Authority, including all formulations, line extensions and modes of administration (including, without limitation, all delivery devices, dosage forms or other peripherals and consumables), including, without limitation, Combination Products. 1.32 "RECEIVING PARTY" means the Party to whom Confidential Information is disclosed. 1.33 "REGULATORY APPROVAL" means any and all approvals (including pricing approvals to the extent necessary), licenses, registrations or authorizations of any Regulatory Authority, necessary for the development, manufacture and commercialization of a Final Commercial Product. 1.34 "REGULATORY AUTHORITY" means, in a particular country or jurisdiction, any applicable government regulatory authorities involved in granting Regulatory 4 Approval and/or, to the extent required in such country or jurisdiction, pricing approval of Final Commercial Product in such country or jurisdiction, including without limitation, (a) in the United States, the FDA, and any other applicable governmental or regulatory authority in the United States having jurisdiction over Final Commercial Product, and any successor government authority having substantially the same function, and (b) any foreign equivalent thereof. 1.35 "SAVINGS" has the meaning set forth in Sections 5.3.5 and 5.3.6, respectively. 1.36 "SAVINGS TRIGGER DATE" has the meaning set forth in Section 5.3.3. 1.37 "SHE INFORMATION" means to the extent applicable and available, and as agreed to by the Parties, safety, health and environmental information as it relates to SDD and SDD Manufacturing Process including, without limitation: safety data sheets, chemical hazard assessments, operational hazard test results and environmental assessments. 1.38 "SPRAY DRIED DISPERSION" or "SDD" means the Compound in spray-dried form. 1.39 "SDD MANUFACTURING PROCESS" means any process (or any step in or portion of any process) used or developed by a Party (or any of its Affiliates or Third Party Suppliers) as of the Effective Date or at any time thereafter, in manufacturing SDD. 1.40 "SPRAY DRYING CAPITAL EXPENDITURE" shall mean such capital expenditures estimated by AGIX as being all reasonably necessary capital expenditures relating directly to the spray drying process to manufacture SDD, which expenditures are estimated in Exhibit 2. 1.41 "SUBLICENSEE" means any Third Person (including, without limitation, a distributor) to which AstraZeneca or any of its Affiliates grants any right to make, use, market, or import and sell a Final Commercial Product in accordance with the License Agreement. A Third Person who is granted only the right to distribute or promote a Final Commercial Product (such as a contract sales organization) shall not be considered a Sublicensee. 1.42 "TERM" means the period beginning on the Effective Date and continuing until the date upon which this Agreement is terminated in accordance with Article 10. 1.43 "THIRD PARTY" or "THIRD PERSON" means any Person other than AGIX or AstraZeneca and their respective Affiliates. 1.44 "THIRD PARTY SUPPLIER" means a Person engaged by a Party, including, without limitation, Dow, for the supply of SDD or any aspect of the supply, manufacture or warehousing of SDD, its constituents or raw materials (such as Probucol), including the performance of a SDD Manufacturing Process. 5 1.45 "TRANSITION PERIOD" means the period commencing on the Effective Date and continuing until the receipt of the first Regulatory Approval for the Product. 2 CONSTRUCTION 2.1 Except where the context requires otherwise, whenever used the singular includes the plural, the plural includes the singular, the use of any gender is applicable to all genders and the word "or" has the inclusive meaning represented by the phrase "and/or." Whenever this Agreement refers to a number of days, unless otherwise specified, such number refers to calendar days. The headings of this Agreement are for convenience of reference only and do not define, describe, extend or limit the scope or intent of this Agreement or the scope or intent of any provision contained in this Agreement. The term "including" or "includes" as used in this Agreement means including, without limiting the generality of any description preceding such term. The wording of this Agreement shall be deemed to be the wording mutually chosen by the Parties and no rule of strict construction shall be applied against any Party. 2.2 References to Articles, Sections, Exhibits and Schedules refer to the Articles, Sections, Exhibits and Schedules of and to this Agreement. 2.3 The Exhibits and the Schedules (as amended from time to time by agreement of the Parties in writing) form part of this Agreement and have the same force and effect as if expressly set out in the body of the Agreement. Any reference to the Agreement includes the Exhibits and the Schedules. Any breach of the Exhibits or Schedules shall be deemed as a breach of this Agreement. 3 AMENDMENT Any amendment or modification of this Agreement (including any amendment of any Exhibit or Schedule hereto) must be in writing and signed by authorized representatives of both Parties. 4 TRANSITION ASSISTANCE 4.1 Transition Assistance. Following the Effective Date and continuing throughout the Transition Period, AGIX shall cooperate with AstraZeneca and provide AstraZeneca with all reasonable assistance as reasonably requested by AstraZeneca to facilitate manufacturing of the Final Commercial Product and Compound, including, without limitation, assistance regarding the Process Improvements. Such technical assistance shall include, without limitation, (i) transitioning to AstraZeneca relationships with Third Party Suppliers, vendors and contractors relating to the manufacture of raw materials, Compound and Spray Dried Dispersion and (ii) transferring to AstraZeneca financial, business, regulatory, technical and all other necessary or useful information relating to the manufacture and supply of raw materials, Compound and Spray Dried Dispersion. 4.2 Manufacturing Timelines. [****] - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 6 4.3 Assignment of Contracts and Other Rights. AGIX shall use commercially reasonable efforts to assign to AstraZeneca and, upon such assignment, AstraZeneca shall assume all rights and obligations of AGIX under the Dow Agreement and the other Existing Agreements, provided, however that AstraZeneca will, at AGIX's option, use commercially reasonable efforts to assign to AGIX such agreements, to the extent then still in effect, and any new agreements entered into by AstraZeneca relating to the manufacture of raw materials, Compound and Spray Dried Dispersion together with any equipment funded under Section 5.2 and used in connection with the manufacture thereof, and the right to the use thereof in the event that AstraZeneca terminates the License Agreement pursuant to Sections 13.3(a), 13.3(b), 13.3(c) or 13.3(d) of the License Agreement or AGIX terminates the License Agreement pursuant to Section 13.4 thereof, provided, however, that in the event that AGIX elects to have an agreement, equipment or the use thereof assigned to AGIX pursuant to this Section 4.3, AstraZeneca shall be relieved of its obligation pursuant to Section 13.5(b)(vi) of the License Agreement to supply Products and/or Compounds to AGIX. AGIX and AstraZeneca shall use commercially reasonable efforts to obtain any third party consents that may be necessary to effect the assignments required by this Section 4.3. Immediately following the execution of this Agreement, AGIX shall contact Niro to obtain Niro's consent to the assignment of PO#B24579 set forth on Exhibit 4 to AstraZeneca. In the event AGIX is unable to obtain Niro's consent, AGIX shall lease or, at AstraZeneca's option, assign the equipment purchased thereunder to AstraZeneca, for no addition consideration beyond that set forth herein, and shall pass through to AstraZeneca all warranties set forth in such purchase order. 4.4 Assistance Following Transition Period. Following the Transition Period, AGIX shall continue to provide such reasonable additional technical and regulatory assistance as reasonably requested by AstraZeneca, at AstraZeneca's expense. Such assistance may be provided by telephone, video conference or in-person at AstraZeneca's facility or at any third party's facility, as mutually agreed; provided that, the Parties reasonably agree to the scheduling of any such assistance. 4.5 Certain Additional Covenants. Following the date hereof, AGIX (i) will not enter into any contracts related to the manufacture or supply of Spray Dried Dispersion without the prior written consent of AstraZeneca, except that AGIX may take any of the foregoing actions in the ordinary course prior to the Effective Date without AstraZeneca's consent; (ii) will not terminate, take any action likely to result in a breach of or prepay any contract or obligation related to the manufacture or supply of Spray Dried Dispersion without the prior written consent of AstraZeneca; and (iii) will cause each of its Affiliates to comply with this Section 4.5. 4.6 Meetings. During the Transition Period, AstraZeneca shall notify AGIX promptly of any material developments with respect to, and shall keep AGIX informed on an ongoing basis regarding, the manufacture and supply of the SDD, the Compound and materials, and regulatory matters. During the Transition Period, 7 the Parties shall meet no less than monthly regarding the manufacturing, supply and regulatory filings related to the SDD, the Compound and materials. 5 FEES 5.1 Costs of Transitional Assistance. AstraZeneca shall reimburse AGIX for all costs and expenses reasonably incurred by AGIX in providing transition assistance hereunder. Promptly following the Effective Date, the Parties will agree on a process and rates for determining such costs and expenses. 5.2 Reimbursement for Capital and Other Expenses. 5.2.1 AstraZeneca shall reimburse AGIX for [****] of the capital and other expenses set forth on Exhibits 2 and 3 incurred by AGIX prior to the Effective Date. 5.2.2 After the Effective Date, AGIX shall reimburse AstraZeneca for [****] of the capital and other expenses set forth on Exhibits 2 and 3 incurred by AstraZeneca, up to the maximum AGIX payment levels specified on such Exhibits. 5.2.3 AstraZeneca shall pay to AGIX, within thirty (30) days following the last date that AstraZeneca is no longer entitled to elect to terminate the License Agreement pursuant to Sections 13.3(a), 13.3(b) or 13.3(c) (and has not exercised any such election to terminate the License Agreement), or prior to such last date, AGIX terminates the License Agreement pursuant to Section 13.4 thereof, an amount equal to (a) the capital and other expenses set forth on Exhibits 2 and 3 incurred by AGIX prior to the Effective Date and not previously reimbursed by AstraZeneca pursuant to Section 5.2.1 plus (b) any amounts paid by AGIX pursuant to Section 5.2.2 above. 5.2.4 All amounts payable pursuant to this Section 5.2 shall be made within thirty (30) days after receipt of an invoice therefor, accompanied by evidence of payment of such expenses. 5.3 Process Improvements. 5.3.1 As of the Effective Date, AGIX has proposed the following improvements to the manufacturing process, as more fully described in Exhibit 1 (the "PROCESS IMPROVEMENTS"): (a) [****] (Part A, Exhibit 1); (b) [****] (Part B, Exhibit 1); (c) [****] (Part C, Exhibit 1); and (d) [****] (Part D, Exhibit 1). - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 8 5.3.2 AstraZeneca shall have the right to determine which of the Process Improvements to implement and shall pay all costs associated with implementing any such Process Improvements. The Process Improvements described in Sections 5.3.1(a)-(c) shall be considered to have been implemented on the date that the price paid by AstraZeneca to any Third Party Supplier for SDD or the Compound is reduced to reflect such implementation (the "PROCESS IMPLEMENTATION DATE"). 5.3.3 AGIX shall not be entitled to receive Savings, if any, from any Process Improvement until the earlier of: (a) the date on which [****] of the Final Commercial Product sold by AstraZeneca, its Affiliates and Sublicensees in two consecutive calendar quarters is in the form of a 300mg tablet or (b) [****] from the First Commercial Sale (as defined in the License Agreement) of the Product. The earlier of such dates is referred to herein as the "SAVINGS TRIGGER DATE." 5.3.4 With respect to each of the Process Improvements set forth in Section 5.3.1(a)-(c), beginning on the Savings Trigger Date and continuing throughout the term of the License Agreement, AstraZeneca shall pay to AGIX on a quarterly basis, [****] of any Savings from such Process Improvement (as calculated in accordance with Sections 5.3.5 and 5.3.6 below) times the number of kilograms of Compound purchased by AstraZeneca, its Affiliates and Sublicensees (other than Third Party Suppliers) during such calendar quarter. 5.3.5 With respect to the Process Improvements set forth in Section 5.3.1(b) and (c) the term "SAVINGS" shall mean the difference between the per kilogram price of the Compound to AstraZeneca and its Affiliates and Sublicensees prior to the Process Implementation Date and the per kilogram price of the Compound to AstraZeneca and its Affiliates and Sublicensees immediately after the Process Implementation Date for such Process Improvement to the extent that any such reduction in price is attributable to the implementation of such Process Improvement. 5.3.6 With respect to the Process Improvement set forth in Section 5.3.1(a), the term "SAVINGS" shall mean (i) for the number of kilograms of Compound actually purchased by AstraZeneca, its Affiliates and Sublicensees, the difference between the per kilogram price of Compound prior to the Process Implementation Date and the per kilogram price of Compound to AstraZeneca, its Affiliates and Sublicensees, after the Process Implementation Date for such Process Improvement (both such prices as set forth specifically in the Dow Agreement) plus, (ii) for the number of kilograms of Probucol actually purchased by AstraZeneca, its Affiliates and Sublicensees, the cost reduction per kilogram as a result of reduced Probucol consumption, which cost reduction shall equal the average per kilogram price of Probucol during a calendar year times the fraction, where the numerator is the difference between the number of Probucol - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 9 kilograms required per kilogram of Compound prior to the Implementation Date and the number of Probucol kilograms required per kilo of Compound after the Process Implementation Date and the denominator is the number of Probucol kilograms required per kilogram of Compound after the Process Implementation Date. 5.3.7 The Parties acknowledge and agree that the calculations of Savings are based on the financial structure currently set forth in the Dow Agreement as of the Effective Date and that AstraZeneca may at any time seek to amend the Dow Agreement. In the event that AstraZeneca amends the Dow Agreement or structures its relationships with Third Party Suppliers in a manner that reduces the amounts that would be otherwise paid to AGIX pursuant to this Section 5.3.6 had the Dow Agreement remained in effect and unamended, AGIX shall be entitled to the amounts that would have been due under the Dow Agreement, unless such change was agreed to in advance by AGIX. 5.3.8 For the avoidance of doubt, all decreases in the price of Compound or SDD attributable to the Process Improvement described in Section 5.3.1(d) shall be retained by AstraZeneca. Furthermore, sales from AstraZeneca or any of its Affiliates to a Sublicensee or Affiliate shall be disregarded for purposes of the calculations set forth in this Section 5.3. 5.4 Capacity Reserve Fee. 5.4.1 If Regulatory Approval has not been obtained prior to [****], any Capacity Reserve Fees due to Dow under the Dow Agreement relating to any period prior to [****] shall be paid by AstraZeneca and, provided that AstraZeneca performs the validation run of the Compound for 2006 as specified in the Dow Agreement, reimbursed by AGIX. Thereafter, AstraZeneca shall pay any Capacity Reserve Fees due under Section 6.1(c) of the Dow Agreement, however, AGIX shall reimburse AstraZeneca for [****] of any Capacity Reserve Fees paid by AstraZeneca pursuant to Section 6.1(c) of the Dow Agreement for periods prior to receipt of the first Regulatory Approval. Any Capacity Reserve Fees that are due under the Dow Agreement for periods after receipt of the first Regulatory Approval shall be paid solely by AstraZeneca. Any Capacity Reserve Fees for the year in which Regulatory Approval is first obtained shall be prorated. 5.4.2 In the event that AGIX has reimbursed AstraZeneca for a Capacity Reserve Fee or a portion thereof and AstraZeneca's, its Affiliates' and Sublicensees' orders for that year exceed the minimum quantity specified in Section 6.1(b) of the Dow Agreement, AstraZeneca shall refund any reimbursement by AGIX for any Capacity Reserve Fee reimbursed by AGIX for such year. - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. 10 5.4.3 In the event the Dow Agreement is amended after the Effective Date hereof, for the purpose of this Section 5.4, AGIX shall receive the benefit of any reduction in the Capacity Reserve Fees or minimum quantities agreed to in any amendment, but shall not be subject to any increases with respect thereto. 5.4.4 Notwithstanding the provisions of the Dow Agreement, no Capacity Reserve Fees or portion thereof shall be payable by AGIX for any year in which the total cumulative quantity of Compound ordered by AstraZeneca from all of its Third Party Suppliers exceeds the minimum quantity specified in Section 6.1(b) of the Dow Agreement. 6 INVOICING, PAYMENT, RECORDKEEPING AND AUDITS 6.1 Except as otherwise provided herein, each Party shall pay all amounts due hereunder within thirty (30) days after receipt of an invoice therefor, accompanied by evidence of payment of such expenses. 6.2 All past due amounts owed by one Party to the other Party under this Agreement shall bear simple interest at the U.S. Prime Rate, as reported by the Wall Street Journal, Eastern Edition, on the due date (or the next business day if the due date is not a business day), calculated based on the number of days between the actual date the payment is made and the date the payment was due; provided, however, that in no event shall such rate exceed the maximum legal annual interest rate. The payment of such interest shall not limit a Party from exercising any other rights it may have as a consequence of the lateness of any payment. 6.3 All amounts payable hereunder are: 6.3.1 exclusive of Indirect Taxes, which, if payable, shall be borne and paid by each Party against the provision by the other Party of an appropriate Indirect Tax invoice; and 6.3.2 payable in the Invoice Currency. 6.4 Each Party shall maintain for at least five (5) years, complete and accurate books and records in connection with the fees payable hereunder as necessary to allow the accurate calculation of the amounts due to the other Party hereunder. 6.5 Audits 6.5.1 Each Party shall permit upon written notice to the other Party, at its own expense, a certified public accountant or a person possessing similar professional status and associated with an independent accounting firm acceptable to the Parties to inspect, during normal business hours, and not more than once in any calendar year, to audit the other Party's books and records as may be reasonably necessary to verify the accuracy of the financial reports furnished by the other Party pursuant to this Agreement 11 or of any charges, reimbursements or payments made by the other Party pursuant to this Agreement, in respect of any Calendar Year ending not more than three (3) years prior to the date of such notice. 6.5.2 Each Party recognizes that the Third Party performing any audit for a Party may perform accounting services for a Party, and each Party hereby waives any conflict of interest relating to the use of such accounting firm. 6.5.3 Upon the expiration of the three (3) years following the end of any Calendar Year, the calculation of amounts payable with respect to such fiscal year shall be binding and conclusive upon the Parties, and the Parties shall be released from any liability or accountability with respect to payments for such year. 6.5.4 The report prepared by any Third Party, if used by a Party, shall contain the conclusions of such Third Party regarding the audit and shall specify that the amounts paid pursuant thereto were correct or, if incorrect, the amount of any underpayment or overpayment. 6.5.5 In the case of any payments hereunder, if such report shows any underpayment by a Party, such Party shall remit to the other Party within thirty (30) days after receipt of such report, (A) the amount of such underpayment; and (B) if such underpayment exceeds five percent (5%) of the total amount owed for the Calendar Year then being audited, the reasonable and necessary fees and expenses of such Third Party to perform the audit, subject to reasonable substantiation thereof. If such report shows any overpayment by a Party, then at the audited Party's option, such overpayment shall either be refunded to such Party by the other Party within thirty (30) days of receipt of the audit report, or be creditable against amounts payable by such Party in subsequent payment periods. 6.5.6 The Parties agree that all information subject to review under this Article 6 is Confidential Information and that each Party shall retain and cause any Third Party used for any audit to retain all such information in confidence. 7 REPRESENTATIONS AND WARRANTIES 7.1 AGIX represents and warrants to AstraZeneca that: 7.1.1 To the best of AGIX's knowledge as of the Effective Date, the performance by AGIX of its obligations to AstraZeneca under this Agreement will not breach or be in conflict with any covenant or obligation of AGIX to any third party, and, to the best of AGIX's knowledge as of the Effective Date, will not infringe the Intellectual Property Rights of any Third Party; 12 7.1.2 There are no material contracts or other legally binding commitments of AGIX relating to the manufacturing, start-up or launch of supply of SDD other than the Existing Agreements, and (ii) there are no material contracts or other legally binding commitments of AGIX relating to the supply of raw materials or services in connection with supply of SDD other than the Existing Agreements; 7.1.3 AGIX represents and warrants to AstraZeneca that (a) the Existing Agreements are in full force and effect and have not been modified or amended other than as shown therein; (b) neither AGIX nor, to the knowledge of AGIX, any other party to an Existing Agreement is in default with respect to a material obligation under, and neither such party has claimed or has grounds upon which to claim that the other party is in default with respect to a material obligation under, an Existing Agreement; and (c) AGIX has not waived or allowed to lapse any of its rights under any Existing Agreement, and no such rights have lapsed or otherwise expired or been terminated. and 7.1.4 The estimates of Spray Drying Capital Expenditures and the Manufacturing Start-Up and Other Costs set forth on Exhibits 2 and 3 represent AGIX's good faith estimates as of the Effective Date of these expenses. For the avoidance of doubt, AGIX makes no representation or warranty that actual costs will equal these estimated costs. 7.2 EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT OR THE RELATED AGREEMENTS, NEITHER PARTY MAKES ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, STATUTE, OR OTHERWISE, AND EACH PARTY SPECIFICALLY DISCLAIMS ANY AND ALL IMPLIED OR STATUTORY WARRANTIES INCLUDING WARRANTIES OF MERCHANTABILITY, OF FITNESS FOR A PARTICULAR PURPOSE, AND OF NON-INFRINGEMENT. 7.3 NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, OR SPECIAL DAMAGES INCLUDING, BUT NOT LIMITED TO, LOST PROFITS ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. HOWEVER, NOTHING IN THIS SECTION IS INTENDED TO LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF EITHER PARTY UNDER ARTICLE 8. 8 INDEMNIFICATION 13 8.1 AGIX shall defend AstraZeneca, its Affiliates and their respective officers, directors, partners, shareholders, employees and agents and licensees (the "AZ INDEMNITEES"), at AGIX's cost and expense, and will indemnify and hold harmless the AZ Indemnitees from and against any and all Losses incurred by or awarded against an AZ Indemnitee only to the extent relating to or in connection with any and all claims or actions brought by an unaffiliated Third Party against any AZ Indemnitee arising out of a breach of a representation, warranty, covenant or obligation set forth herein, except to the extent that such Losses are (i) attributable to the gross negligence or willful misconduct of the AZ Indemnitees or (ii) otherwise subject to an obligation by AstraZeneca to indemnify AGIX Indemnitees under Section 8.2. 8.2 Except with respect to Losses required to be indemnified by AGIX pursuant to Section 8.1 above, AstraZeneca shall defend AGIX, its Affiliates and their respective officers, directors, partners, shareholders, employees and agents and licensees (the "AGIX INDEMNITEES"), at AstraZeneca's expense, and will indemnify and hold harmless the AGIX Indemnitees from and against any and all Losses incurred by or awarded against an AGIX Indemnitee relating to or in connection with any and all claims or actions brought by an unaffiliated Third Party against a AGIX Indemnitee arising out of a breach of a representation, warranty, covenant or obligation set forth herein, except to the extent that such Losses are (i) attributable to the gross negligence or willful misconduct of the AGIX Indemnitees or (ii) otherwise subject to an obligation by AGIX to indemnify AstraZeneca Indemnitees under Section 8.1. 8.3 Indemnification Procedures 8.3.1 Notice. Promptly after an Indemnitee receives notice of a pending or threatened claim, demand, suit, action or proceeding brought or initiated by a Third Party (an "ACTION"), such Indemnitee shall give written notice of the Action to the Indemnifying Party to whom the Indemnitee is entitled to look for indemnification pursuant to this Article 8. However, an Indemnitee's delay in providing or failure to provide such notice shall not relieve the Indemnifying Party of its indemnification obligations, except to the extent it can demonstrate prejudice due to the delay or lack of notice. 8.3.2 Defense. Upon receipt of notice under Section 8.3.1 from the Indemnitee, the Indemnifying Party shall have the duty to either compromise or defend, at its own expense and by counsel (reasonably satisfactory to Indemnitee, such Action. The Indemnifying Party shall promptly and in any event not more than twenty (20) days after receipt of the Indemnitee's original notice) notify the Indemnitee in writing that it wishes to assume control of the Action pursuant to this Article 8 and of its intention to either compromise or defend such Action. The assumption of the defense of an Action by the Indemnifying Party shall not be construed as an acknowledgement that the Indemnifying Party is liable to indemnify the Indemnitee in respect of the Action, nor shall it constitute a waiver by the 14 Indemnifying Party of any defenses it may assert against any Indemnified Party's claim for indemnification. Once the Indemnifying Party gives such notice to the Indemnitee, the Indemnifying Party is not liable to the Indemnitee for the fees of other counsel or any other expenses subsequently incurred by the Indemnitee in connection with such defense, other than the Indemnitee's reasonable costs of investigation and cooperation. However, the Indemnitee shall have the right to employ separate counsel and to control the defense of an Action (and the Indemnifying Party shall bear the reasonable fees, costs, and expenses of such counsel) if: (a) the use of the counsel chosen by the Indemnifying Party would present such counsel with a conflict of interest; (b) the actual or potential defendants in, or targets of, such Action include both the Indemnifying Party and the Indemnitee, and the Indemnitee reasonably concludes that there may be legal defenses available to it that are different from or additional to those available to the Indemnifying Party (in which case the Indemnifying Party shall not have the right to assume the defense of such Action on the Indemnitee's behalf); (c) the Indemnifying Party does not employ counsel reasonably satisfactory to the Indemnitee to represent the Indemnitee within a reasonable time after the Indemnitee's notice of such Action; or (d) in the reasonable opinion of counsel to the Indemnitee, the claim could result in the Indemnitee becoming subject to injunctive relief or relief other than the payment of Losses that could have a materially adverse effect on the ongoing business of the Indemnitee; provided, however, that in no event shall the Indemnifying Party be obligated to bear the fees, costs and expenses of more than one (1) separate counsel for all of the other Party's Indemnitees in such Action. 8.3.3 Cooperation. The Indemnitee shall cooperate fully with the Indemnifying Party and its legal representatives in the investigation and defense of an Action. The Indemnifying Party shall keep the Indemnitee informed on a reasonable and timely basis as to the status of such Action (to the extent the Indemnitee is not participating in the defense of such Action) and conduct the defense of such Action in a prudent manner. 8.3.4 Settlement. If an Indemnifying Party assumes the defense of an Action, no compromise or settlement of such Action may be effected by the Indemnifying Party without the Indemnitee's written consent (which consent shall not be unreasonably withheld or delayed), unless (i) there is no finding or admission of any violation of law or any violation of the rights of any person and no effect on any other claims that may be made 15 against the Indemnitee, (ii) the sole relief provided is monetary damages that are paid in full by the Indemnifying Party, and (iii) the Indemnitee's rights under this Agreement are not adversely affected. If the Indemnifying Party fails to assume defense of an Action within a reasonable time, the Indemnitee may settle such Action on such terms as it deems appropriate with the consent of the Indemnifying Party (which consent shall not be unreasonably withheld), and Indemnifying Party shall be obligated to indemnify the Indemnitee for such settlement as provided in this Article 8. 8.4 Indemnification Payment Adjustments 8.4.1 Insurance Proceeds Or Other Recovery. The amount of any Losses for which indemnification is provided under this Article 8 shall be reduced by the insurance proceeds received and any other amount recovered, if any, by the Indemnitee with respect to any Losses. An Indemnitee shall mitigate, to the extent such mitigation does not otherwise harm such Indemnitee or is otherwise inconsistent with this Article 8, any Losses for which indemnification is sought hereunder and, to the extent such Losses are covered by Indemnitee's insurance, shall pursue an insurance claim relating to such Losses. 8.4.2 Refund. If an Indemnitee receives a payment pursuant to this Article 8 and subsequently receives insurance proceeds or other amounts with respect to the same Losses, the Indemnitee shall pay to the Indemnifying Party an amount equal to the difference (if any) between: (i) the sum of the insurance proceeds received, other amounts received, and the indemnification amount received from the Indemnifying Party pursuant to this Article 8 and (ii) the amount necessary to fully and completely indemnify and hold harmless the Indemnitee from and against such Losses. However, in no event shall such refund ever exceed the Indemnifying Party's payment to the Indemnitee under this Article 8. 8.5 Indemnification Payment. Any amount owed by an Indemnitee to a Third Person, for which the Indemnifying Party has an obligation under this Article 8 to indemnify, shall be due from the Indemnifying Party to the Third Person, whether upon entry of judgment, upon settlement, or otherwise. 8.6 Survival. The provisions of this Article 8 shall survive any termination or expiration of this Agreement. Each Indemnitee's rights under this Article 8 shall not be deemed to have been waived or otherwise affected by such Indemnitee's waiver of the breach of any obligation, agreement, condition, covenant, representation, or warranty contained in, or made pursuant to, this Agreement, unless such waiver expressly (and in writing) also waives any or all of the Indemnitee's rights under this Article 8. 16 9 FORCE MAJEURE 9.1 Subject to Section 9.3, a Party's obligations under this Agreement will be suspended to the extent and for the duration that its performance is delayed, hindered or prevented by circumstances which are not within its reasonable control ("FORCE MAJEURE"). 9.2 For the purposes of this Section, Force Majeure includes acts or restraints of governments or public authorities, war, revolution, riot or civil commotion, strikes, lock-outs (except relating to a Party's own employees), blockage or embargo, explosion, fire, flood or natural disaster and any other events that are beyond the reasonable control of the affected Party. 9.3 A Party affected by any event of Force Majeure shall: 9.3.1 promptly in writing notify the other Party, explaining the nature, details and expected duration of such event. Such Party shall also notify the other Party from time to time as to when the affected Party reasonably expects to resume performance in whole or in part of its obligations hereunder, and notify the other Party of the cessation of any such event; 9.3.2 use diligent efforts to resume full performance of its obligations under this Agreement as soon as reasonably practical; and 9.3.3 pending such resumption, use commercially reasonable efforts to facilitate any efforts that the other Party may make to procure an alternative method by which its obligations under this Agreement may be performed. 9.4 If a Party anticipates that an event of Force Majeure may occur, such Party shall notify the other Party of the nature, details and expected duration of such event. 10 TERM AND TERMINATION 10.1 Term. This Agreement shall be effective during the Term. 10.2 Termination by Either Party. In addition to any other provision of this Agreement expressly providing for termination of this Agreement, this Agreement may be terminated immediately by either Party upon notice to the other Party in the following circumstances: 10.2.1 in the event of a material breach of this Agreement by the other Party, which breach remains uncured for sixty (60) days. 10.2.2 if the other Party shall file in any court or agency, pursuant to any statute or regulation of any state or country, a petition in bankruptcy or insolvency or for reorganization or for an the appointment of a receiver or trustee of such other Party or of its assets, or if the other Party proposes a written agreement of composition or extension of its debts, or 17 if the other Party shall be served with an involuntary petition against it, filed in any insolvency proceeding, or if the other Party shall propose or be a party to any dissolution or liquidation, or if the other Party shall make an assignment for the benefit of its creditors; 10.2.3 if any encumbrancer takes possession of any material part of the assets of the other Party; 10.2.4 if any distress, execution or other such process is levied or enforced upon or against any of the material assets of the other Party; 10.2.5 if the other Party ceases or threatens to cease to carry on the whole or substantially the whole of its business or that part of its business to which this Agreement relates; or 10.2.6 if the License Agreement is terminated pursuant to Sections 13.3(a), 13.3(b), 13.3(c) or 13.3(d) of the License Agreement or AGIX terminates the License Agreement pursuant to Section 13.4 thereof. 10.3 Effect of Termination. Without prejudice to any other rights or remedies which either Party may have, upon the termination of this Agreement, howsoever the same occurs, each Party shall: 10.3.1 immediately pay to the other Party all undisputed sums which at the date of termination are due and payable to the other Party under this Agreement, and 10.3.2 within thirty (30) days of such termination, at its own expense, return to the other Party any property of the other Party in its possession, custody or control, including all Confidential Information of that Party and copies of it; provided, however, that a Party may retain one (1) copy of the other Party's Confidential Information in order to ensure compliance with its obligations set forth in this Agreement. 10.4 Articles 1, 2, 8, 11-22 and Section 6.4, 6.5, 7.2, 7.3, 10.3, 10.4 and with respect to the effects of termination of the License Agreement, Sections 4.3 and 5.2.3 will survive expiration or termination of this Agreement, howsoever the same occurs. 18 11 CONFIDENTIALITY 11.1 Nondisclosure Obligation 11.1.1 Confidential Information. All Information disclosed by one Party to the other Party pursuant to this Agreement, including the terms of this Agreement ("CONFIDENTIAL INFORMATION"), shall be maintained in confidence by the Receiving Party and shall not be disclosed to any non-Party or used for any purpose except to exercise its rights and perform its obligations under this Agreement without the prior written consent of the Disclosing Party, except to the extent that the Receiving Party can demonstrate by competent written evidence that such Information: (a) is known by the Receiving Party at the time of its receipt and, not through a prior disclosure by the disclosing Party, as documented by the receiving Party's business records; (b) is in the public domain other than as a result of any breach of this Agreement by the Receiving Party; (c) is subsequently disclosed to the Receiving Party on a non-confidential basis by a Third Party who may lawfully do so; or (d) is independently discovered or developed by the Receiving Party without the use of Confidential Information provided by the Disclosing Party, as documented by the Receiving Party's business records. 11.1.2 Return of Confidential Information Upon Expiration or Termination of Agreement. Within thirty (30) days after any expiration or termination of this Agreement, each Party shall destroy (and certify to the other Party such destruction) or return such Confidential Information provided by the other Party as the other Party reasonably requests be destroyed or returned; provided, however, that (i) the foregoing obligation shall not apply to any matter of Confidential Information otherwise provided for in this Agreement; and (ii) each Party may retain a single copy of the Confidential Information in its confidential legal files for the sole purpose of ascertaining its ongoing rights and responsibilities regarding the Confidential Information. 11.2 Permitted Disclosures 11.2.1 Certain Permitted Disclosures. Each Party may disclose Confidential Information provided by the other Party without such other Party's written consent to the extent such disclosure is reasonably necessary in the following instances: 19 (a) disclosure to governmental or other regulatory agencies in order to obtain or maintain patents and to obtain, maintain or amend any regulatory materials regarding SDD or satisfy any other regulatory obligation regarding SDD, but such disclosure may be only to the extent reasonably necessary to obtain patents or obtain, maintain or amend such regulatory materials; (b) complying with applicable court orders or governmental regulations, including without limitation rules or regulations of the Securities and Exchange Commission, or by rules of the National Association of Securities Dealers, any securities exchange or NASDAQ; provided, however, that the receiving Party shall first have given notice to the other Party hereto in order to allow such Party the opportunity to seek confidential treatment of the Confidential Information; (c) disclosure to consultants, agents or other Third Parties (including Third Party Suppliers) solely to the extent required to accomplish the purposes of this Agreement or in connection with due diligence or similar investigations by such Third Parties; provided, however, that such Third Parties agree to be bound by confidentiality and non-use obligations at least equivalent in scope to those contained in this Agreement. 11.2.2 Written Agreements. Each Party shall obtain written agreements from each of its employees and consultants who perform work pursuant to this Agreement, which agreements shall obligate such persons to similar obligations of confidentiality and to assign to such Party all inventions made by such persons during the course of performing such work. Each Party will notify the other Party promptly upon discovery of any unauthorized use or disclosure of the Confidential Information of the other Party. 11.2.3 Required Disclosure. If a Party is required by judicial or administrative process to disclose Confidential Information that is subject to the non-disclosure provisions of Section 11.1.1, such Party shall promptly inform the other Party of the disclosure that is being sought in order to provide the other Party an opportunity to challenge or limit the disclosure obligations, provided that such Party's obligations to comply with Applicable Laws and Regulations shall not be affected by such obligations. Confidential Information that is disclosed by judicial or administrative process shall remain otherwise subject to the confidentiality and non-use provisions of this Article 11, and the Party disclosing Confidential Information pursuant to law or court order shall take all reasonable steps necessary, including without limitation obtaining an order of confidentiality, to ensure the continued confidential treatment of such Confidential Information. 20 11.3 Except as otherwise provided in this Agreement or the License Agreement, any Confidential Information which is disclosed by or on behalf of a Disclosing Party to the Receiving Party will remain the property of the Disclosing Party, and AstraZeneca at all times shall own the AstraZeneca Information, and AGIX at all times shall own the AGIX Information. 11.4 The obligations of each Party in this Article 11 will survive for a period of ten (10) years after the date of expiration or termination of this Agreement. 12 USE OF NAME 12.1 Except as provided under Section 12.2, neither Party may make any announcement about the transactions contemplated by this Agreement without the prior written consent of the other Party. 12.2 Except as set forth in the License Agreement, each Party shall not mention or otherwise use the name, insignia, symbol, trademark, trade name or logotype of the other Party or its Affiliates in any publication, press release, promotional material or other form of publicity without the prior written consent of the other Party in each instance, except for those disclosures for which consent has previously been obtained. The restrictions imposed by this Article 12 shall not prohibit either Party from making any disclosure identifying the other Party that is required by applicable law, rule or regulation or the requirements of a national securities exchange or another similar regulatory body; provided that any such disclosure shall be governed by Article 12. Further, the restrictions imposed on each Party under this Article 12 are not intended, and shall not be construed, to prohibit a Party from identifying the other Party in its internal business communications; provided that any confidential information in such communications remains subject to Article 12. 13 NOTICES 13.1 Notice Requirements Any notice, request, demand, waiver, consent, approval or other communication permitted or required under this Agreement shall be in writing and shall be deemed given only if delivered by hand or sent by facsimile transmission (with transmission confirmed) or by internationally recognized overnight delivery service that maintains records of delivery, addressed to the Parties at their respective addresses specified in Section 13.2 or to such other addresses of which notice shall have been given. Such Notice shall be deemed to have been given as of the date delivered by hand or transmitted by facsimile (with transmission confirmed) or on the second delivery day after deposit with an internationally recognized overnight delivery service. Any notice delivered by facsimile shall be confirmed by a hard copy delivered as soon as practicable thereafter. This Section is not intended to govern the day-to-day business communications 21 necessary between the Parties in performing their obligations under the terms of this Agreement. 13.2 Address for Notice For AstraZeneca: IPR Pharmaceuticals, Inc. CARR 188 LOTE 17 SAN ISIDRO INDUSTRIAL PARK, CANOVANAS, PR 00729 Fax: (787) 750-5332 Attn: President and General Manager With a copy to: Shiona McGillivray, Senior Legal Counsel AstraZeneca Alderley House Alderley Park Macclesfield Post Code SK10 4TF England For AGIX: AtheroGenics, Inc. 8995 Westside Parkway Alpharetta, Georgia 30004 Attn: President and Chief Executive Officer Fax: (678) 336-2504 With a copy to: Arnold & Porter LLP Suite 900 1600 Tysons Boulevard McLean, Virginia 22102 Attn: Steve Parker, Esq. Fax: (703) 720-7399 14 RELATIONSHIP OF THE PARTIES The status of a Party under this Agreement shall be that of an independent contractor. Nothing contained in this Agreement shall be construed as creating a partnership, joint venture or agency relationship between the Parties or, except as otherwise expressly provided in this Agreement, as granting either Party the authority to bind or contract any obligation in the name of or on the account of the other Party or to make any statements, representations, warranties or commitments on behalf of the other Party. All persons employed by a Party shall be employees of such Party and not of the other Party and all costs and obligations incurred by reason of any such employment shall be for the account and expense of such Party. 22 15 RIGHTS OF THIRD PARTIES The provisions of this Agreement are for the sole benefit of the Parties and their successors and permitted assigns, and they shall not be construed as conferring any rights in any other persons except as otherwise provided in this Agreement. 16 ASSIGNMENT This Agreement shall inure to the benefit and be binding upon each Party, its successors and assigns. The Agreement may not be assigned or otherwise transferred, nor, except as expressly provided hereunder, may any right or obligation hereunder be assigned or transferred by either Party without the prior written consent of the other Party, provided, however, that either Party may, without such consent, assign the Agreement and its rights and obligations hereunder (i) to an Affiliate, provided such Affiliate has the financial resources to perform the obligations of this Agreement in the reasonable judgment of the other Party or (ii) in connection with the transfer or sale of all or substantially all of its assets or business to which this Agreement relates, or in the event of its merger or consolidation or change in control or similar transaction, or a sale of all or substantially all the pharmaceutical business assets of the Party; and provided further, that either Party shall be permitted to sell, assign or transfer the right to receive any payments owed by the other Party pursuant to this Agreement to one or more Third Parties. Any attempted assignment not in accordance with this Article 16 shall be void. 17 ENTIRE AGREEMENT 17.1 This Agreement constitutes the entire agreement between the Parties with respect to the subject matter of the Agreement. This Agreement supersedes all prior agreements, whether written or oral, with respect to the subject matter of the Agreement. Each Party confirms that it is not relying on any representations, warranties or covenants of the other Party except as specifically set out in this Agreement. Nothing in this Agreement is intended to limit or exclude any liability for fraud. All Schedules and/or Exhibits referred to in this Agreement are intended to be and are hereby specifically incorporated into and made a part of this Agreement. 17.2 Where it is lawful to exclude them, all other conditions, representations and warranties which would otherwise be implied (by law or otherwise) will not form part of this Agreement. 18 EXPENSES Except as otherwise expressly provided in this Agreement, each Party shall pay the fees and expenses of its respective lawyers and all other expenses and costs incurred by such Party incidental to the negotiation, preparation, execution and delivery of this Agreement. 23 19 WAIVER AND NON-EXCLUSION OF REMEDIES 19.1 A Party's failure to enforce, at any time or for any period of time, any provision of this Agreement, or to exercise any right or remedy shall not constitute a waiver of that provision, right or remedy or prevent such Party from enforcing any or all provisions of this Agreement and exercising any rights or remedies. To be effective any waiver must be in writing. The rights and remedies provided herein are cumulative and do not exclude any other right or remedy provided by law or otherwise available except as expressly set forth herein. 19.2 The payment of the invoices by a Party will not operate as any waiver by such Party any right, power or remedy provided by law or under this Agreement. 20 SEVERABILITY To the fullest extent permitted by applicable law, the Parties waive any provision of law that would render any provision in this Agreement invalid, illegal or unenforceable in any respect. If any provision of this Agreement is held to be invalid, illegal or unenforceable, in any respect, then such provision will be given no effect by the Parties and shall not form part of this Agreement. To the fullest extent permitted by applicable law and if the rights or obligations of any Party will not be materially and adversely affected, all other provisions of this Agreement shall remain in full force and effect and the Parties will use their best efforts to negotiate a provision in replacement of the provision held invalid, illegal or unenforceable that is consistent with applicable law and achieves, as nearly as possible, the original intention of the Parties. 21 GOVERNING LAW AND DISPUTES The interpretation and construction of this Agreement shall be governed by the laws of State of New York excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. 22 EQUITABLE RELIEF A breach by either Party of Article 11 may cause irreparable damage and the non-breaching Party will not be adequately compensated by monetary damages. In the event of a breach, or threatened breach, of Section 11.1.1, the non-breaching Party shall be entitled to seek from any court of competent jurisdiction equitable relief, whether preliminary or permanent, without the need to show irreparable harm or the inadequacy of monetary damages as a remedy. Nothing in this Article 22 is intended, or shall be construed, to limit the Parties' rights to equitable relief or any other remedy for a breach of any provision of this Agreement. 24 23 ENVIRONMENTAL PROVISIONS Each Party shall comply with all environmental and occupational safety and health laws, rules, regulations and requirements relating to SDD and the raw materials used in connection therewith. 24 COUNTERPARTS This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which taken together shall be deemed to constitute one and the same instrument. An executed signature page of this Agreement delivered by facsimile transmission shall be as effective as an original executed signature page. [Signature Page Follows] 25 IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first set forth above. IPR PHARMACEUTICALS, INC. ATHEROGENICS, INC. By: /s/ RUBEN FREYRE By: /s/ RUSSELL M. MEDFORD ------------------ --------------------------------- Name: Ruben Freyre Name: Russell M. Medford, M.D., Ph.D. Title: President & General Manager Title: President & CEO EXHIBIT 1 PROCESS IMPROVEMENTS PART A: [****] PART B: [****] PART C: [****] PART D: [****] Exhibit 1-1 - --------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. PART A: [****] Part A-1 - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. PART B: [****] Part B-1 - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. PART C: [****] Part C-1 - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. PART D: [****] Part D-1 - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. EXHIBIT 2 ESTIMATED SPRAY DRYING CAPITAL EXPENDITURES [****] Exhibit 3-1 - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. EXHIBIT 3 ESTIMATED MANUFACTURING START-UP AND OTHER COSTS [****] Exhibit 3-2 - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. EXHIBIT 4 (1) The Dow Agreement (2) The addenda to the Research Agreement entered into by and between AGIX and Dow, dated November 11, 2005. (3) [****] (4) [****] - ------- [****] indicates that certain confidential information contained in this document has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. Exhibit 4-1 Exhibit 5 Dow Consent to Assignment Exhibit 4-2 EX-23.01 6 g99853exv23w01.txt EX-23.01 CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.01 Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm We consent to the incorporation by reference in the Registration Statements (Form S-3 Nos. 333-110160, 333-101174, 333-123895, and 333-64228 and Form S-8 Nos. 333-114953, 333-69552, and 333-55886) of AtheroGenics, Inc., of our reports dated March 9, 2006, with respect to the financial statements of AtheroGenics, Inc., AtheroGenics, Inc. management's assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of AtheroGenics, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2005. /s/ Ernst & Young LLP Atlanta, Georgia March 9, 2006 EX-24.01 7 g99853exv24w01.txt EX-24.01 POWERS OF ATTORNEY EXHIBIT 24.01 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Russell M. Medford, Mark P. Colonnese and Joseph M. Gaynor, Jr., and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K of AtheroGenics, Inc. for the fiscal year ended December 31, 2005, and any and all amendments thereto, and other documents in connection therewith, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-facts and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This power of attorney may be executed in multiple counterparts, each of which shall be deemed an original or a facsimile or photocopy of an original, and all of which together shall constitute one and the same power of attorney. This 1st day of March, 2006. /s/ MICHAEL A. HENOS -------------------------------------- Michael A. Henos /s/ R. WAYNE ALEXANDER -------------------------------------- R. Wayne Alexander /s/ DAVID BEARMAN -------------------------------------- David Bearman /s/ VAUGHN D. BRYSON -------------------------------------- Vaughn D. Bryson /s/ T. FORCHT DAGI -------------------------------------- T. Forcht Dagi /s/ ARTHUR M. PAPPAS -------------------------------------- Arthur M. Pappas /s/ WILLIAM A. SCOTT -------------------------------------- William A. Scott EX-31.1 8 g99853exv31w1.txt EX-31.1 SECTION 302, CERTIFICATION OF THE CEO EXHIBIT 31.1 CERTIFICATIONS I, Russell M. Medford, certify that: 1. I have reviewed this Annual Report on Form 10-K of AtheroGenics, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 10, 2006 /s/ RUSSELL M. MEDFORD -------------------------------------- Russell M. Medford President and Chief Executive Officer EX-31.2 9 g99853exv31w2.txt EX-31.2 SECTION 302, CERTIFICATION OF THE CFO EXHIBIT 31.2 CERTIFICATIONS I, Mark P. Colonnese, certify that: 1. I have reviewed this Annual Report on Form 10-K of AtheroGenics, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 10, 2006 /s/ MARK P. COLONNESE --------------------------------------------------- Mark P. Colonnese Senior Vice President of Finance and Administration and Chief Financial Officer EX-32 10 g99853exv32.txt EX-32 SECTION 906, CERTIFICATION OF THE CEO AND CFO EXHIBIT 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of AtheroGenics, Inc. (the "Company") on Form 10-K for the period ended December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Russell M. Medford, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ RUSSELL M. MEDFORD -------------------------------------- Russell M. Medford President and Chief Executive Officer Date: March 10, 2006 EXHIBIT 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of AtheroGenics, Inc. (the "Company") on Form 10-K for the period ended December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Mark P. Colonnese, Senior Vice President of Finance and Administration and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ MARK P. COLONNESE --------------------------------------------------- Mark P. Colonnese Senior Vice President of Finance and Administration and Chief Financial Officer Date: March 10, 2006 -----END PRIVACY-ENHANCED MESSAGE-----


(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the fiscal year ended December 31, 2005

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from to


Georgia		58-2108232
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
8995 Westside Parkway, Alpharetta, Georgia 30004 (Address of principal executive offices, including zip code)		(678) 336-2500 (Registrant’s telephone number, including area code)


		Page

PART I
Item 1.	Business		1
Item 1A.	Risk Factors		18
Item 1B.	Unresolved SEC Staff Comments		32
Item 2.	Properties		32
Item 3.	Legal Proceedings		32
Item 4.	Submission of Matters to a Vote of Security Holders		32

PART II
Item 5.	Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities		33
Item 6.	Selected Financial Data		34
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		35
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk		41
Item 8.	Financial Statements and Supplementary Data		43
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		61
Item 9A.	Controls and Procedures		61
Item 9B.	Other Information		61

PART III
Item 10.	Directors and Executive Officers of the Registrant		62
Item 11.	Executive Compensation		62
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters		62
Item 13.	Certain Relationships and Related Transactions		62
Item 14.	Principal Accountant Fees and Services		62

PART IV
Item 15.	Exhibits and Financial Statement Schedules		63
Signatures			67
EX-10.34 COMMERCIAL SUPPLY AGREEMENT
EX-10.35 LICENSE AND COLLABORATION AGREEMENT
EX-10.36 CO-PROMOTION AGREEMENT
EX-10.37 TRANSITION SERVICES AGREEMENT
EX-23.01 CONSENT OF ERNST & YOUNG LLP
EX-24.01 POWERS OF ATTORNEY
EX-31.1 SECTION 302, CERTIFICATION OF THE CEO
EX-31.2 SECTION 302, CERTIFICATION OF THE CFO
EX-32 SECTION 906, CERTIFICATION OF THE CEO AND CFO


	•	Continue aggressive development program for AGI-1067. We intend to rapidly develop AGI-1067 for the treatment and prevention of atherosclerosis in patients with CHD.

	•	Extend our v-protectant^® technology platform into additional therapeutic areas that address unmet medical needs. We believe that our v-protectants^® have the potential for treating a wide variety of other chronic inflammatory diseases. These indications include chronic organ transplant rejection, rheumatoid arthritis, asthma and other diseases. We have completed two Phase I clinical trials with positive results for AGI-1096, a v-protectant^® developed for the prevention of chronic organ transplant rejection.

	•	Expand our clinical product candidate portfolio. In addition to our existing discovery programs, we intend to acquire rights to other product candidates and technologies that complement our existing product candidate lines or that enable us to capitalize on our scientific and clinical development expertise. We plan to expand our product candidate portfolio by in-licensing or acquiring product candidates, technologies or companies.

	•	Commercialize our products. We plan to collaborate with large pharmaceutical companies to commercialize products that we develop to target patient or physician populations in broad markets. For example, we have entered into a license and collaboration agreement with AstraZeneca to commercialize AGI-1067 due to its applicability to broad commercial markets.


	•	atherosclerosis, including CHD;

	•	organ transplant rejection;

	•	rheumatoid arthritis; and

	•	asthma.



Therapeutic Program		Disease/Indication	Development Status

V-PROTECTANTS^®
	AGI-1067	Atherosclerosis	Phase III clinical trial
	AGI-1096	Transplant rejection	Phase I clinical trial
	AGI Series	Chronic asthma	Research
		Rheumatoid arthritis

MEKK TECHNOLOGY PLATFORM		Inflammatory diseases	Research


	•	Development. We have an obligation to use commercially diligent efforts to carry out the development of AGI-1067. We are also responsible for the costs of conducting and managing clinical studies through the filing of a NDA.

	•	Regulatory Approvals. We are responsible for applying for and obtaining regulatory approval of AGI-1067 in the United States; however, AstraZeneca will assist us with obtaining that approval. AstraZeneca will have full responsibility for all non-U.S. regulatory filings.

	•	Manufacturing. AstraZeneca is responsible for all activities related to AGI-1067 manufacturing, packaging and labeling. We will use commercially diligent efforts to facilitate any necessary transfer of technology to AstraZeneca or a third party chosen by AstraZeneca for AGI-1067 manufacturing, packaging and labeling.

	•	Marketing. AstraZeneca will be responsible for the distribution of AGI-1067 in all markets throughout the world. In addition, AstraZeneca will bear all costs for the marketing of AGI-1067 in all markets throughout the world, including pre-approval and market development activities. AstraZeneca will be solely responsible for setting pricing for AGI-1067, provided that the initial pricing will be approved by a committee consisting of our representatives and representatives from AstraZeneca.

	•	Co-Promotion. We will have the right to co-promote AGI-1067 in the United States. AstraZeneca will fund, for a minimum of three years, the formation and operation of a sales force of up to a total of 125 people. This sales force will focus on the cardiology field in the United States, and will co-promote both AGI-1067 and one other of AstraZeneca’s drugs (which drug will be selected by AstraZeneca) during that time.

	•	License Fee. On February 1, 2006 upon receiving Hart-Scott Rodino regulatory approval, AstraZeneca paid us the nonrefundable, noncreditable payment of $50 million in partial consideration for the licenses and other rights granted in the license agreement.

	•	Milestone Payments. We have the right to receive payments based on our achievement of certain development and commercial milestones, which amounts have an aggregate value of up to $950 million.

	•	Profit Sharing and Royalties. We also have the right to receive royalties from AstraZeneca, based on AGI-1067 sales in all markets.

	•	Term and Termination. The license agreement will be in effect until either (1) the regulatory period of patent exclusivity elapses or is revoked; (2) ten years from the first commercial sale of AGI-1067; or (3) either party materially breaches the license agreement. In addition, AstraZeneca will have the right to terminate the license agreement: (1) upon 90 days prior written notice at any time during the 45 day period following the release of the final ARISE results; (2) at any time in the 30 day period following receipt of a letter from the FDA stating either that: (a) the FDA will not approve the application, or (b) that it will only approve the application if specific conditions are met, and such conditions make it reasonably likely that (i) approval of AGI-1067 will occur more than 24 months following the receipt of the FDA letter, or (ii) development costs will exceed a specified amount (unless we agree to pay any amount in excess of a specified amount); (3) if the FDA requires information or data from additional studies not contemplated in the original license agreement, when the added cost to AstraZeneca of complying with the FDA requirements is reasonably likely to exceed a specified amount (unless we agree to pay any amounts in excess of a specified amount); and (4) for any reason at any time during the one-year period following the third anniversary of receipt of FDA approval, upon giving us 365 days written notice at any time during that one-year period.


	*Astellas Pharma Inc. (Formerly Known As Fujisawa Pharmaceutical Co., Ltd.) Agreement*


	•	To discover and develop v-protectants^® with enhanced potency and improved therapeutic properties. We are synthesizing novel compounds and testing them in a variety of biochemical and cell-based assays to discover and develop new, small molecule v-protectants^®. We believe that these v-protectants^® will have improved therapeutic properties and applicability across a wide range of chronic inflammatory diseases. We have identified several novel series of highly potent v-protectants^®.

	•	To identify novel anti-inflammatory therapeutic targets utilizing functional genomics. One part of our drug discovery platform is a set of techniques that connects our knowledge of genes, to agents that modify gene activity. This collection of methods, called functional genomics, enables us to select targets efficiently. Our targets for therapy may be the gene, the protein, another substance in the body that links to the protein, or the agent that induces the change. For example, oxidants are agents that induce changes in gene activity. We believe our functional genomics program may enable us to identify novel genes and their protein products that are critical to the chronic inflammatory disease process. We may progress these genes and proteins, if identified, into targets for novel classes of drugs.

	•	To develop new classes of v-protectant^® drugs based on the new therapeutic targets identified by our functional genomics program. We are identifying enzymes and other molecular targets that either control or are controlled by oxidant signals. We believe these discoveries will enable our chemists to synthesize the next generation of v-protectants^®. We intend to use these enzymes and other molecular targets for both internal efforts and as strategic collaboration assets.

	•	To develop a second broad platform for the discovery and development of a new class of anti-inflammatory drug candidates. As a result of entering into the license agreement with National Jewish Medical and Research Center in June 2001, we have expanded our research program to include the discovery and development of new drug candidates through the exploitation of the licensed technology.


	•	First, our scientists and their collaborators have pioneered the basic discoveries and research methodologies linking oxidant signals to vascular cell inflammation. These discoveries and research methodologies form the foundation for our proprietary drug discovery programs relating to chronic inflammation.

	•	Second, our scientific expertise, coupled with our expertise in clinical drug development, has enabled us to be the first company to conduct clinical trials of an orally-administered, small molecule v-protectant^®.

	•	Third, we believe our scientific, development and licensing expertise strongly positions us to acquire promising technologies and products discovered outside AtheroGenics.


	•	Phase I clinical trials explore safety, blood levels, metabolism and the potential for interaction with other drugs. Phase I typically proceeds from healthy volunteers to patients with the target disease. The study population during Phase I can include up to approximately 200 total subjects.

	•	Phase II clinical trials further support safety, and they establish the dose(s) or strength(s) of the drug to be used in the more extensive clinical investigations to be conducted during Phase III. These Phase II clinical trials may include hundreds of patients who have the target disease and who are receiving a range of background medications. In addition, Phase II clinical trials often verify the mechanisms of action proposed preclinically.

	•	Phase III clinical trials usually include at least two adequate and well controlled studies in the target population. For most chronic diseases, drug companies study a few thousand patients to assure a broadly applicable assessment of safety and efficacy.


	•	Phase IV clinical trials provide additional information to support marketing of the drug for its approved indication. Phase IV clinical trials may generate data to support promotion of the new drug in comparison with other approved drugs and to support healthcare economics claims. In addition, every pharmaceutical company is responsible for post-marketing surveillance for safety in the marketplace.


	•	Good Manufacturing Practices (“GMP”), which govern the formulation, manufacture, testing, labeling, packaging, release and monitoring of a drug throughout its life cycle;

	•	Good Laboratory Practices, which govern the use of a drug in animal studies to support establishment of safety or the disposition and metabolism of the administered drug, and handling of human or other biological samples for drug assays; and

	•	Good Clinical Practices, which govern the exposure of human subjects under our protocols. Good Clinical Practices set standards for the constitution and activities of institutional review boards that are charged with assuring that the appropriate person gives informed consent prior to study participation and protecting patients whether they receive an experimental drug, an approved drug or a placebo.


R. Wayne Alexander, M.D., Ph.D., Chairman		Chairman, Department of Medicine, Emory University School of Medicine
Victor J. Dzau, M.D.		Chancellor, Health Affairs, Duke University Medical Center
Erwin W. Gelfand, M.D.		Chairman, Department of Pediatrics, National Jewish Medical and Research Center
David G. Harrison, M.D.		Professor of Medicine, Director, Division of Cardiology, Emory University School of Medicine
Gary L. Johnson, Ph.D.		Professor and Chairman, Department of Pharmacology, University of North Carolina School of Medicine
Peter Libby, M.D.		Chief, Cardiovascular Division Department of Medicine, Brigham and Women’s Hospital
David M. Stern, M.D.		Dean, College of Medicine, University of Cincinnati


	*We have a history of operating losses, and we may not generate revenue or achieve profitability in the future.*


Item 1.	*Business*


	*AGI-1067*


	*AGI-1096*


	*Other V-Protectant^®* *Candidates*


	*If we need additional financing and cannot obtain it, we may not be able to develop or market our products.*


	•	the scope and results of our research, preclinical and clinical development activities;

	•	the timing of, and the costs involved in, obtaining regulatory approvals;

	•	our ability to establish and maintain collaborations, the financial terms of any collaborations and our ability to achieve pre- determined milestones in connection with such collaborations;

	•	the cost of commercialization activities, including product marketing, sales and distribution;

	•	the costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims and other patent-related costs;

	•	the costs related to purported class action lawsuits filed against us, as described under “Item 3. Legal Proceedings”; and

	•	the extent to which we acquire or invest in businesses, products and technologies.


	We depend heavily on the success of our most advanced internal product candidate, AGI-1067 for atherosclerosis, which is in clinical development. If we are unable to commercialize this product candidate, or experience significant delays in doing so, our business will be materially harmed.


	•	successful completion of clinical trials;

	•	receipt of marketing approvals from the FDA and similar foreign regulatory authorities;

	•	successfully preparing for commercial manufacturing arrangements with third party manufacturers, including our collaborator, AstraZeneca;

	•	commencing commercial sales of the product, in collaboration with AstraZeneca; and

	•	acceptance of the product in the medical community and with third party payors.


	*We are substantially dependent on our collaboration with AstraZeneca for the development and commercialization of AGI-1067.*


	*If we do not successfully develop our other product candidates, we will have limited ability to generate revenue.*


	*If we fail to demonstrate adequately the safety and efficacy of a product candidate, we will not be able to commercialize that product candidate.*


	We may not be successful in establishing collaborations for product candidates we may seek to commercialize, which could adversely affect our ability to discover, develop and commercialize products.


	•	a collaborator may develop and commercialize, either alone or with others, products and services that are similar to or competitive with the products that are the subject of the collaboration with us;

	•	a collaborator may change the focus of its development and commercialization efforts. Pharmaceutical and biotechnology companies historically have re-evaluated their priorities from time to time, including following mergers and consolidations, which have been common in recent years in these industries;

	•	the ability of our product candidates and products to reach their potential could be limited if our collaborators decrease or fail to increase spending relating to these products;

	•	a collaborator may terminate a collaboration in the event of a material breach by us; and

	•	a collaborator may fail to maintain or defend our intellectual property rights.


	*Third parties’ failure to synthesize and manufacture our product candidates to our specifications could delay our clinical trials or hinder our commercialization prospects.*


	•	A finding that a third party did not comply with applicable governmental regulations. Manufacturers of pharmaceutical products are subject to continual review and periodic inspections by regulatory agencies. Our present or future manufacturers may not be able to comply with the FDA’s current Good Manufacturing Practices regulations and other FDA regulatory requirements or similar regulatory requirements outside the United States. Failure of one of our third party manufacturers to comply with applicable regulatory requirements, whether or not related to our product candidates, could result in sanctions being imposed on us, including fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our product candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates and products.

	•	A failure to synthesize and manufacture our product candidates in accordance with our product specifications. We need to maintain a very low maximal amount of one of the starting materials used in the manufacture of AGI-1067. The starting material, probucol, was prescribed by physicians as a cholesterol-lowering agent until its manufacturer withdrew the drug from the market for efficacy reasons. We entered into a commercial supply agreement for production of AGI-1067 and Probucol with Dow and AstraZeneca is responsible for supplying all of the manufacturing, packaging and labeling under our joint licensing and collaboration agreement. A failure by AstraZeneca or other third party manufacturers to maintain an acceptable level of Probucol in the manufacture of AGI-1067 may result in chronic dosing of Probucol, which is associated with the occurrence of a rare side effect.

	•	A failure to deliver product candidates in sufficient quantities or in a timely manner. Any failure by our third party manufacturers to supply our requirements for clinical trial materials or commercial product, or to supply these materials in a timely manner, could jeopardize the initiation or completion of clinical trials or could have a material adverse effect on our ability to commercialize any approved products and thereby generate revenue.

	•	Termination or nonrenewal of an agreement by a third party, including our collaborator AstraZeneca, based on its own business priorities, at a time that is costly or inconvenient to us. Our product candidates and any products that we successfully develop may compete with product candidates and products of others for access to the third party’s manufacturing facilities. In addition, because we do not have any internal manufacturing capabilities, the termination of a supply or manufacturing agreement could severely impair our ability to manufacture our products and could have a material adverse effect on our financial condition and operating results.


	*The commercial success of any products that we may develop will depend on the degree of market acceptance by physicians, patients, healthcare payors and others in the medical community.*


	•	the prevalence and severity of any side effects;

	•	the efficacy and potential advantages over alternative treatments;

	•	the ability to offer our product candidates for sale at competitive prices;


	•	relative convenience and ease of administration;

	•	the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

	•	the strength of marketing and distribution support; and

	•	sufficient third party coverage or reimbursement.


	If our competitors develop and market products that are more effective, have fewer side effects or are less expensive than our current or future product candidates, we may have limited commercial opportunities.


	*We have not previously sold, marketed or distributed any products and may not be able to successfully commercialize AGI-1067, or other drug candidates.*


	If we are unable to obtain adequate coverage and reimbursement from third party payors for any products that we may develop or acceptable prices for those products, our revenues and prospects for profitability will suffer.


	If plaintiffs bring product liability lawsuits against us, we may incur substantial financial loss or may be unable to obtain future product liability insurance at reasonable prices, if at all, either of which could diminish our ability to commercialize our future products.


	•	decreased demand for any product candidates or products that we may develop;

	•	injury to our reputation;

	•	withdrawal of clinical trial participants;

	•	costs to defend the related litigation;

	•	substantial monetary awards to trial participants or patients;

	•	loss of revenue; and

	•	the inability to commercialize any products that we may develop.


	Our failure to protect adequately or enforce our intellectual property rights or secure rights to third party patents could materially adversely affect our proprietary position in the marketplace or prevent the commercialization of our products.