COLLABORATIVE RESEARCH & LICENSE AGREEMENT

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LIPID SCIENCES, INC | ELANCO ANIMAL HEALTH

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Title: COLLABORATIVE RESEARCH & LICENSE AGREEMENT
Date: 11/8/2006

COLLABORATIVE RESEARCH & LICENSE AGREEMENT, Parties: lipid sciences inc , elanco animal health

Exhibit 10.3

Portions of this agreement, marked by asterisks (***), have been omitted pursuant to a request for confidential treatment. The omitted information has been filed separately with the Securities and Exchange Commission

COLLABORATIVE RESEARCH & LICENSE AGREEMENT

between

LIPID SCIENCES, INC.

and

ELANCO ANIMAL HEALTH

This COLLABORATIVE RESEARCH & LICENSE AGREEMENT (the "Agreement") is effective from the Effective Date by and between:

LIPID SCIENCES, INC. (" Lipid Sciences "), a publicly-traded Delaware corporation, having a place of business at 7068 Koll Center Parkway - Suite 401, Pleasanton, CA 94566;

and

ELI LILLY AND COMPANY , an Indiana corporation, operating through its Elanco Animal Health division and having a principal place of business at 2001 W. Main Street, Greenfield, Indiana 46140 (" Elanco ").

INTRODUCTION

A. WHEREAS, Lipid Sciences and/or its Affiliate(s) have developed proprietary technology for, and are the owners and/or exclusive licensees of patents claiming, delipidation-based methods and systems for the production of treatments for viral or bacterial infections, among other ailments ("Immunological Products").

B. WHEREAS, Lipid Sciences and/or its Affiliate(s) have facilities and personnel that enable it to design and develop various kinds of Immunological Products.

C. WHEREAS, Lipid Sciences and/or its Affiliate(s) possess know-how, expertise and intellectual property rights pertaining to the design and development of these Immunological Products.

D. WHEREAS, Elanco is engaged in the research, development, marketing, manufacturing and distribution of animal health products for use in, on or near live animals.

E. WHEREAS, Elanco desires to design, develop and manufacture certain Immunological Products for use in, on or near live animals.

F. WHEREAS, Lipid Sciences and/or its Affiliate(s) desire to collaborate with Elanco in the development of one or more Immunological Products for animal health applications, subject to the terms and conditions set forth herein.

NOW THEREFORE, in consideration of the foregoing premises and the following mutual covenants and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

ARTICLE I

1.1 Interpretation . In this Agreement, unless the context otherwise requires, a reference to:

- - - (a) a paragraph, section, exhibit or schedule is a reference to a paragraph, section, exhibit or schedule to this Agreement;

- - - (b)                                  any document includes a reference to that document (and, where applicable, any of its provisions) as amended, novated, supplemented or replaced from time to time;
      
      (c)                                   a statute or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of any of them;
      
      (d)                                  the singular includes the plural and vice versa, except as it regards the definitions in Sections 1.27 and 1.28 of this Agreement;
      
      (e)                                   a Party, person or entity includes:
      - (i) an individual, firm, company, corporation, association, trust, estate, state or agency of a state, government or government department or agency, municipal or local authority and any other entity, whether or not incorporated and whether or not having a separate legal personality; and
        
        (ii) an employee, agent, successor, permitted assign, executor, administrator and other representative of such party, person or entity;
      (f)                                     one gender includes the other;
      
      (g)                                  "written" and "in writing" include any means of reproducing words, figures or symbols in a tangible and visible form;
      
      (h)                                  a month or year is a reference to a calendar month or calendar year, as the case may be; and
      
      (i)                                      individuals or persons include companies and other corporations and vice versa.

1.2 "Affiliate" means any corporation or other entity that controls, is controlled by, or is under common control with a Party to the Agreement. A corporation or other entity will be regarded as in control of another corporation or entity if the latter corporation or entity owns or directly or indirectly controls more than fifty percent (50%) of the voting stock or other ownership interest of the former corporation or other entity, or if the latter corporation or entity possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the former corporation or other entity or the power to elect or appoint fifty percent (50%) or more of the members of the governing body of the former corporation or other entity. An Affiliate will be bound under this Agreement in the same manner as if it were a party hereto.

1.3 "Agreement" means this formal legal document if ultimately signed by both Parties, effective as of the Effective Date.

1.4 "Confidential Information" means all know-how, trade secrets, technical information, specifications, data, formulae, intellectual property or software of a Party relating to or arising out of this Agreement including, without limitation:

- - - (a)                                   all communications between the Parties or information of whatever kind whether recorded or not and, if recorded, in whatever medium, relating to or arising out of the Product Development Plan, the Design & Development Program, the Improvements, the Lipid Sciences Patent Rights, the Elanco Patent Rights, the Elanco Inventions, Lipid Sciences Inventions, Lipid Sciences Technology, Elanco Technology or the Agreement, whether disclosed prior to or after entering into the Agreement;
      
      (b)                                  any information that the Party indicates in writing is information of a confidential nature or which is marked "confidential"; and
      
      (c)                                   all copies of the communications, information, notes, reports and documents in whatever form referred to in paragraph (a) or (b) of this definition.

1.5 "Design & Development Program" means the work performed by Lipid Sciences and Elanco and/or their respective Affiliate(s) in accordance with the Product Development Plan as revised from time to time as provided in the Agreement.

1.6 "ECI" or "Employment Cost Index" means the "Private Industry, Compensation, 12-Month Percent Change, Not Seasonally Adjusted - ECU10002A" with respect to Total Compensation in Private Industry for All Workers (annual rate or average of the relevant year’s four calendar quarters if not annual), Series Id ECU10002A; using 2007 as the base year for purposes of indexing within the context of this Agreement, as published by the U.S. Bureau of Labor Statistics and available at the following URL: http://data.bls.gov/cgi-bin/surveymost?ec, or its successor site.

1.7 "Effective Date" means the last date of signature on the Agreement.

1.8 "Elanco Compound" means one or more active ingredients directly resulting from Lipid Sciences Technology that is selected by Elanco for development and commercialization of Product(s) and/or New Product(s).

1.9 "Elanco Invention" means any Invention by Elanco and/or its Affiliates (other than a joint invention) that is discovered, made, or conceived and reduced to practice during or as a result of the Design & Development Program. For clarity, any invention by Elanco and/or its Affiliates outside the Design & Development Program will be solely owned by Elanco and/or its Affiliates.

1.10 "Elanco Patent Rights" means any and all Patent Rights owned and/or controlled by Elanco during the term of the Agreement.

1.11 "Elanco Technology" means Technology, including know-how and trade secrets, owned and/or controlled by Elanco as of the Effective Date of the Agreement and/or developed during the term of the Agreement.

1.12 "Field" means all applications and uses of the Lipid Sciences Technology and Lipid Sciences Patent Rights for Products. For clarity, "Field" does not include any human applications or uses.

1.13 "First Commercial Sale" of any Product(s) and/or New Product(s) means the first sale for use by an end-user customer of such Product(s) and/or New Product(s) in a country.

1.14 "First Payment" means the first payment, e.g., a technology access fee or a payment made due to a first Regulatory Agency submission, made by Elanco to Lipid Sciences pursuant to the payment terms of Article V for any Product(s) and/or New Product(s).

1.15 "GxP" means compliance with all relevant Regulatory Agency requirements for Good Clinical Practices, Good Laboratory Practices, and Good Manufacturing Practices.

1.16 "Immunological Products" means: proprietary delipidation-based methods and systems for the production of treatments for viral or bacterial infections, among other ailments, of which Lipid Sciences and/or its Affiliate(s) are the owners and/or exclusive licensees having the right to enforce and sublicense.

1.17 "Improvements" means: (a) any modification of Lipid Sciences Technology, Elanco Technology or an Elanco Compound, provided such modification, if unlicensed, would infringe one or more Valid Claims of Lipid Sciences Patent Rights or Elanco Patent Rights; and (b) any beneficial modification of a component or material useful in a Product(s) and/or New Product(s); in each of (a) and/or (b) for use in the Field or New Field, which is reduced to practice within the term of the Agreement.

1.18 "Invention" means patentable ideas and/or discoveries conceived by one or more employee(s) or agent(s) of Lipid Sciences or Elanco, which arise under and during the term of this Agreement. "Sole Invention" means an Invention discovered, made, or conceived and reduced to practice solely by Lipid Sciences employee(s) or agent(s) or solely by Elanco employee(s) or agent(s). "Joint Invention" means an Invention discovered, made, or conceived and reduced to practice jointly by Lipid Sciences employee(s) or agent(s) and Elanco employee(s) or agent(s).

1.19 "Joint Patent Rights" means Patent Rights to a Joint Invention.

1.20 "Lipid Sciences Invention" means any Invention by Lipid Sciences and/or its Affiliates (other than a joint invention) that is discovered, made, or conceived and reduced to practice during or as a result of the Design & Development Program. For clarity, any invention by Lipid Sciences and/or its Affiliates outside the Design & Development Program will be solely owned by Lipid Sciences and/or its Affiliates.

1.21 "Lipid Sciences Patent Rights" means any and all Patent Rights owned and/or controlled by Lipid Sciences and/or its Affiliates in the Field or New Field during the term of the Agreement.

1.22 "Lipid Sciences Technology" means Technology, including know how and trade secrets, owned and/or controlled by Lipid Sciences as of the Effective Date of the Agreement and/or developed during the term of the Agreement, and includes, without limitation, Immunological Products and delipidation-based immunological technology for use in, on or for animals.

1.23 "Net Sales" means, with respect to a Product(s) and/or New Product(s), the gross amount invoiced by Elanco (including an Elanco Affiliate) or any sublicensee thereof to unrelated Third Parties, excluding any sublicensee, for Product(s) and/or New Product(s) in the Territory, less the following:

- - - (a)                                   Customary trade, quantity and cash discounts allowed;
      
      (b)                                  Third Party Agent commissions, discounts, refunds, rebates, chargebacks, retroactive price adjustments and similar allowances, limited to reasonable adjustments and allowances which effectively reduce the net selling price;
      
      (c)                                   Actual Product(s) and/or New Product(s) returns or allowances;
      
      (d)                                  Any tax imposed on the sale, delivery or use of the Product(s) and/or New Product(s), including, without limitation, sales, use, excise or value added taxes, but excluding any tax on income; and
      
      (e)                                   Any other similar and customary deductions.
  Such amounts will be determined from the books and records of Elanco, Elanco Affiliates and/or sublicensee(s) (as applicable), maintained in accordance with U.S. Generally Accepted Accounting Principles (also known as "GAAP" ) or, in the case of sublicenses, such similar accounting principles, consistently applied. Elanco further agrees in determining such amounts, it will use Elanco’s then-current standard procedures and methodology, including Elanco’s then current standard exchange rate methodology for the translation of foreign currency sales into U.S. Dollars or, in the case of sublicensees, such similar methodology, consistently applied.

1.24 "New Field" means all applications and uses of the Lipid Sciences Technology and Lipid Sciences Patent Rights for New Products. For clarity, "New Field" does not include any human applications or uses.

1.25 "New Product(s)" means any *** that incorporates, uses or implements Lipid Sciences Technology and/or Lipid Sciences Patent Rights and that is ultimately sold by or for Elanco inside the New Field in the Territory, whether such embodiment was in existence prior to the effective date of a collaborative research and commercialization agreement, or is developed or improved under that agreement. ***

1.26 "Notice" means the definition provided in Section 11.7.

1.27 "Parties" means Lipid Sciences and Elanco.

1.28 "Party" means Lipid Sciences or Elanco.

1.29 "Patent Rights" means rights under all patents, provisional and non-provisional, owned or controlled by the Parties (including all reissues, extensions, substitutions, confirmations, re-registrations, re-examinations, re-validations, patents of addition, supplementary protection certificates or the equivalents thereof) and under all provisional and non-provisional patent applications (including, without limitation, all continuations, continuations-in-part and divisionals thereof), in each case, claiming an Invention which is necessary or useful for the design, development, testing, use, manufacture or sale of a Product(s) and/or New Product(s) that results from the Agreement.

1.30 "POC Study" means the initial proof-of-concept study that Elanco will conduct at its expense as consideration for the rights granted under this Agreement. The criteria for establishing this POC Study are described in Exhibit A of this Agreement. As additional consideration to Lipid Sciences for entering into this Agreement, Elanco will also provide technical advice regarding the detailed design and scope of this POC Study, at no charge to Lipid Sciences.

1.31 "Primary Contact Person" will be the respective individuals designated by Lipid Sciences and Elanco, as noted in Exhibit C, who will be responsible for the day-to-day interactions between the Parties related to the Design & Development Program and the management of the day-to-day operations of the Design & Development Program. Each Party may change its Primary Contact Person upon Notice to the other Party.

1.32 "Product" means any *** that incorporates, uses or implements Lipid Sciences Technology and/or Lipid Sciences Patent Rights, whether such embodiment was in existence prior to the Effective Date, or is developed or improved under the Agreement. ***

1.33 "Product Development Plan" means the written development plan for Product(s) and/or New Product(s) (including a corresponding budget), as amended from time to time by the Parties.

1.34 "Program Year" means each twelve (12) calendar month period during the term of the Design & Development Program, except in the first Program Year in which case the Program Year will not be twelve (12) calendar months in length, but will be the period from the Effective Date to 31-December-2007.

1.35 "Reasonable Commercial Efforts" means effort, expertise and resources normally used by the Party in the development and/or commercialization of a compound or product owned or controlled by such Party which is of similar market potential at a similar stage in its development or product life, taking into account issues of safety and efficacy, product profile, the competitiveness of the marketplace, the proprietary position of the compound or product, the regulatory structure involved, the profitability of the applicable products, and other relevant factors.

1.36 "Regulatory Agency" means any one of the U.S. Department of Agriculture (USDA); Environmental Protection Agency (EPA); Food and Drug Administration (FDA); Food Safety and Inspection Service (FSIS); or any counterparts thereof in jurisdictions outside of the USA.

1.37 "Steering Committee" means the joint committee composed of representatives of Lipid Sciences and Elanco, as described in the Agreement.

1.38 "Technology" means written specifications, sketches, drawings, schematics, prototypes, methods, protocols, know-how, trade secrets, all proprietary data, information, inventions, regulatory submissions or other intellectual property of any kind, excluding Patent Rights, to the extent necessary or useful for the research, development and commercialization of Product(s) and/or New Product(s) in the Field or New Field, and any other information or tangible material and any data related thereto that is useful in the Field or New Field.

1.39 "Territory" means worldwide.

1.40 "Third Party" means any entity, including any natural person, other than Lipid Sciences or Elanco and their respective Affiliates.

1.41 "Valid Claim" means either (a) a claim of an issued and unexpired patent which has not been held permanently revoked, unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and which has not been admitted to be invalid or unenforceable through re-examination, reissue or disclaimer or otherwise; or (b) a claim of a pending patent application, which claim was filed in good faith and has not been abandoned or finally disallowed without the possibility of appeal or refiling of said application.

ARTICLE II

2.1 License Grant. Subject to the terms of the Agreement, Lipid Sciences and its Affiliates hereby grant to Elanco and its Affiliates the sole and exclusive license under Lipid Sciences Technology, Lipid Sciences Patent Rights, Lipid Sciences Inventions and Lipid Sciences Improvements in the Field and Territory to research, develop, make, have made, use, sell, offer for sale, import and sub-license, Product(s).

2.2 Rights Retained by Lipid Sciences. Lipid Sciences retains the sole and exclusive right outside the Field in the Territory to use for any purpose any Lipid Sciences Technology, Lipid Sciences Patent Rights, Lipid Sciences Inventions and Lipid Sciences Improvements (including, without limitation, to research, develop, make, have made, use, sell, offer for sale, import and license products). For clarity, Elanco and its Affiliates cannot research, develop, make, have made, use, sell, offer for sale, import or sublicense any Lipid Sciences Technology, Lipid Sciences Inventions, Lipid Sciences Improvements or Lipid Sciences Patent Rights outside the Field, unless Elanco and/or its Affiliates enter into a separate agreement with Lipid Sciences and/or its Affiliates. Furthermore:

- - - (a) no license or other rights are granted to Lipid Sciences to Elanco Technology, Elanco Patent Rights or Elanco Inventions, except solely for the benefit of Elanco and its Affiliates;
      
      (b) no license or other rights are granted to Elanco to Lipid Sciences Technology, Lipid Sciences Patent Rights or Lipid Sciences Inventions, except as provided in this Agreement;

- - - (c) Elanco and its Affiliates acknowledge that, as of the Effective Date, no license or other rights are necessary to be granted, or are granted, to Lipid Sciences by Elanco and its Affiliates for the purposes of the Agreement, except to the extent disclosed in writing by Elanco to Lipid Sciences prior to work commencing under the Product Development Plan or under the Design & Development Program for the development of the Product in the Field; and
      
      (d) Lipid Sciences and its Affiliates acknowledge that, as of the Effective Date, no license or other rights are necessary to be granted, or are granted, to Lipid Sciences by Third Parties for the purposes of the Agreement, except to the extent disclosed in writing by Lipid Sciences to Elanco prior to work commencing under the Product Development Plan or under the Design & Development Program for the development of the Product in the Field.

2.3 Rights Reverting to Lipid Sciences . If any Product(s) and/or New Product(s) or indication reverts to Lipid Sciences pursuant to Section 5.1, then Lipid Sciences will have the exclusive right inside the Field or New Field and within the Territory to use any Lipid Sciences Technology, Lipid Sciences Patent Rights, Lipid Sciences Improvements and Lipid Sciences Inventions to develop, make, have made, use, sell, import or sub-license Product(s) and/or, as applicable, New Product(s).

2.4 Sublicenses. Subject to the other provisions of the Agreement, Elanco shall have the sole right to sublicense any and all rights licensed to Elanco under Section 2.1. Any such sublicense by Elanco shall be consistent with the terms of the Agreement, and shall include an obligation for each such sublicensee to comply with the applicable obligations of Elanco set forth in the Agreement.

2.5 Trademarks. Elanco will be free to use and to register in any trademark office any trademark for use with a Product(s) and/or New Product(s) in its sole discretion, except for trademarks proprietary to Lipid Sciences and its Affiliates. Elanco will own all right, title and interest in and to any such trademark in its own name during and after the term of the Agreement, except for trademarks proprietary to Lipid Sciences and its Affiliates.

ARTICLE III

3.1 Formation and Composition. A joint committee comprised of four (4) members, two (2) named representatives of each of Elanco and Lipid Sciences (the "Steering Committee" ) is being appointed pursuant to this Agreement. Each Party has provided the other Party in writing with the name, title, e-mail address, telephone number and facsimile number of their respective Steering Committee members and such information is set forth in Exhibit C. The Steering Committee will meet as needed, but not less than once each quarter during the term of the Design & Development Program. Such meetings will be at such times agreed to by Lipid Sciences and Elanco, and will alternate between the offices of the Parties unless the Parties otherwise agree, or will be in such other form (e.g., telephone or video conference) as the members of the Steering Committee will agree.

3.2 Steering Committee Functions and Powers. The Steering Committee will be responsible for the direction and overall supervision and management of the Design &

Development Program consistent with each Party’s internal policies and procedures. The principal functions of the Steering Committee will be to:

- - - (a)                                   create Design & Development Program(s) and Product Development Plan(s);
      
      (b)                                  monitor the progress and results achieved under the Design & Development Program and to revise, as necessary, the Product Development Plan;
      
      (c)                                   foster the collaborative relationship between the Parties;
      
      (d)                                  facilitate the transfer, development and commercialization of technology in accordance with the Agreement;
      
      (e)                                   determine potential New Products, identify and approve the development of New Products; and
      
      (f)                                     such other functions as agreed by the Parties.

A Party may change one or more of its representatives to the Steering Committee at any time. Members of the Steering Committee may be represented at any meeting by another member of the Steering Committee, or by a deputy. Either Party may permit additional employees and consultants to attend and participate (on a non-voting basis) in the Steering Committee meetings, subject to the confidentiality provisions of the Agreement.

3.3 Decisions of the Steering Committee. A quorum of the Steering Committee will be present at any meeting of the Steering Committee if at least two (2) representatives of each Party are present at such meeting in person or by telephone or videoconference. If a quorum exists at any meeting, a unanimous vote of the members of the Steering Committee present at such meeting is required to take any action on behalf of the Steering Committee, with the exception of any actions taken pursuant to Section 3.4.

3.4 Elanco’s Right to Control Commercialization. Notwithstanding the responsibilities and duties of the Steering Committee, Elanco will have the right to choose Product(s) and/or New Product(s) for development and commercialization, including formulation, means of administration and other factors that appear most promising for further development. Promptly upon making a selection, Elanco will notify the Steering Committee in writing.

3.5 New Products. Elanco has the first option right to commercialize all applications and uses of the Lipid Sciences Technology and Lipid Sciences Patent Rights for New Products ("Option Right"). Therefore, if Elanco determines that, pursuant to the results obtained by the Design & Development Program, Product(s) and/or New Product(s) are commercially viable, upon the payment of relevant payments described in Article V of this Agreement, Elanco and its Affiliates will have the sole and exclusive license under Lipid Sciences Technology, Lipid Sciences Patent Rights, Lipid Sciences Inventions and Lipid Sciences Improvements in the New Field and Territory to research, develop, make, have made, use, sell, offer for sale, import and sub-license the New Product(s) in accordance with the following terms:

3.5.1. Exercise of Option Right by Elanco. To exercise the Option Right, Elanco shall propose to the Steering Committee, in writing, the commercialization of any New Product(s); within three (3) months, the Steering Committee shall complete a Product Development Plan for said New Product(s). Provided Elanco pays the additional payments described in Article V of this

Agreement, the Option Right shall be deemed to have been exercised by Elanco, the Option Right shall be deemed to have been granted to Elanco by Lipid Sciences, and the New Product(s shall be deemed to have been approved for development by the Steering Committee.

3.5.2. Termination of Option Right by Elanco. The Option Right for any New Product terminates sixty (60) days after Elanco receives Notice from Lipid Sciences that any payment due under Article V has not been received, provided that, during that sixty (60) day period, Elanco has not made such payment to Lipid Sciences. After the Option Right terminates for any New Product, Lipid Sciences has full right and authority to pursue, or have others pursue, the research and/or commercialization of the relevant New Product.

3.5.3. Limitations on Option Right. In order to effectively manage the development pipeline, if, after exercising its Option Right(s), Elanco has not made a First Payment for three (3) New Product(s), Elanco must first obtain the written approval of the Steering Committee before exercising its Option Right to commercialize any additional New Product(s).

Notwithstanding Sections 2.1 and 3.5, this Agreement does not serve to grant to Elanco or its Affiliates a license under Lipid Sciences Technology, Lipid Sciences Patent Rights, Lipid Sciences Inventions and Lipid Sciences Improvements to generally use Lipid Sciences Technology in a field outside the Field or New Field or to research, develop, make, have made, sell, offer for sale, import and sub-license products other than Product(s) or New Product(s).

3.6 Chair. The Steering Committee will be chaired by one Elanco representative appointed by Elanco for the first Program Year, then one Lipid Sciences representative (or Elanco representative at Lipid Sciences’s request) appointed by Lipid Sciences for the second Program Year and alternating accordingly thereafter. The chair does not have a second or casting vote.

3.7 Minutes and Reports. The Steering Committee will be responsible for keeping accurate minutes of its deliberations that record all proposed decisions and all actions recommended or taken. Within ten (10) business days of each meeting, the chair will provide the Parties with draft minutes of such meeting and a draft of a written accompanying report describing in reasonable detail the status of the Design & Development Program, a summary of the work and progress to date, any issues requiring resolution and any proposed decisions and actions recommended or taken to all members of the Steering Committee. Within thirty (30) days of each meeting, the Steering Committee will approve final versions of the meeting minutes and the accompanying report and such minutes and accompanying report will thereafter be recognized as duly accepted by the Parties. All records of the Steering Committee will be available to both Parties.

3.8 Information and Results. Except as otherwise provided, the Parties will make available and disclose to one another all results of the work conducted pursuant to the Design & Development Program prior to and in preparation for the Steering Committee meetings, by the deadline and in the form and format to be designated by the Steering Committee.

3.9 Subcontracts. Subject to the provisions of the Agreement, the Parties may subcontract to Affiliates and Third Parties portions of the Design & Development Program to be performed, provided the subcontracting Party has obtained the prior consent of the Steering Committee; and provided, however, that such Affiliates and Third Party subcontractors will be required to enter into appropriate confidentiality agreements (said agreements of which signed copies will be submitted to the Steering Committee) unless such subcontracting would not require the transfer

of Confidential Information to the Affiliate or Third Party subcontractor, and further provided that the Parties’ rights under the Agreement are not adversely affected.

ARTICLE IV

4.1 Performance of Design & Development Program. The Steering Committee will establish a program under which the Parties will use Reasonable Commercial Efforts to collaboratively develop Product(s) and/or New Product(s), with the initial goal of ***. The Parties will use Reasonable Commercial Efforts to perform the design and development tasks as described in the initial Product Development Plan subsequently attached as Exhibit A. The Design & Development Program will be conducted by the Parties in good scientific manner, and where necessary, in compliance with all applicable GxP and ISO9001 design requirements.

4.2 Product Development Plan. The Design & Development Program will be conducted in accordance with the Product Development Plan that describes the work to be pursued by the Parties during each Program Year. Except for the first Program Year, the Product Development Plan will be updated and approved by the Steering Committee no later than sixty (60) days prior to the start of each Program Year. The Product Development Plan in effect at any time may not be amended except as agreed in writing by the Steering Committee. If at any time during the Program Year, either Party determines that a change to the Product Development Plan would benefit the Design & Development Program, such Party will prepare and submit to the Steering Committee a written proposal detailing its proposed changes to the Product Development Plan. Any budget for Lipid Sciences’ costs under a modified Product Development Plan that are to be reimbursed by Elanco will be approved by the Steering Committee before Lipid Sciences commences any work on such modified Product Development Plan.

4.3 Sharing of Testing, Marketing, Manufacturing and Regulatory Data. Parties will provide to each other, at no charge, access to testing, pilot manufacturing and regulatory data relevant to Product(s) and/or New Product(s) in the Field or New Field, or if required for regulatory purposes.

4.4 Results and Records. The Parties will make available and disclose to one another all results of the work conducted pursuant to the Design & Development Program, and will keep such records as described herein; provided that each Party will maintain such results and records of the other Party in confidence in accordance with the confidentiality provisions in the Agreement, and will not use such results or records except to the extent otherwise permitted by the Agreement. The Parties will maintain records of the results in sufficient detail and in good scientific manner appropriate for patent purposes, and in a manner that properly reflects all work done and results achieved in the performance of the Design & Development Program (including all data in the form required to be maintained under any applicable governmental regulations). Such records will include reports, research notes, charts, graphs, computations, analyses, recordings, photographs, and other graphic or written data specifically relevant to the Design & Development Program.

4.5 Availability of Employees. Each Party agrees to make its employees and non-employee consultants reasonably available at their respective places of employment to consult with the other Party on issues arising during the Design & Development Program and in connection with any request related to a Product(s) and/or New Product(s) or the Design & Development Program from any Regulatory Agency, including regulatory, scientific, technical and clinical testing issues.

4.6 Visit of Facilities. Representatives of the Parties may, upon reasonable advance notice and at times reasonably acceptable to the other Party, visit the other Party’s facilities where the Design & Development Program is being conducted, and consult informally, during such visits and by telephone, facsimile and e-mail, with the other Party’s personnel performing work on the Design & Development Program.

4.7 &nbs

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