Exhibit 10.35

 

[*] indicates that a confidential portion of the text of this agreement has been omitted.

 

DISCOVERY COLLABORATION AGREEMENT

 

This Discovery Collaboration Agreement (this “ Agreement ”) is effective as of September 9, 2009 (the “ Effective Date ”) and is made by and between Arana Therapeutics Limited (ACN 002 951 877), an Australian company having offices at Level 2, 37 Epping Road, Macquarie Park, New South Wales 2113, Australia (“ Arana ”), and XOMA Development Corporation, a Delaware corporation having offices at 2910 Seventh Street, Berkeley, California 94710, USA (“ XOMA ”).  Arana and XOMA are sometimes referred to herein individually as a “ Party ” and together as the “ Parties .”

 

BACKGROUND

 

A.           Arana is engaged in the research and development of product candidates, including without limitation Antibodies, for use in treating and/or preventing human diseases.

 

B.           XOMA has developed certain materials, technologies and related information, hereinafter identified as [*], the Discovery Know-How and the Systems, that are useful to the discovery, optimization and development of Antibodies and related proteins.

 

C.           Prior to the Effective Date, XOMA has conducted certain activities [*] to Arana’s satisfaction.

 

D.           XOMA and Arana, as specified herein, wish to form a collaboration directed toward identifying new Antibodies for diseases of interest to Arana and in the course of which , inter alia , XOMA would [*].

 

E.           Arana, on its own behalf and on behalf of its Affiliates, agrees to accept the Transferred Materials under the terms and conditions of this Agreement.

 

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, XOMA and Arana agree as follows:

 

Section 1.   DEFINITIONS

 

1.1   “ Affiliate ” means any corporation, company, partnership, joint venture and/or firm that controls, is controlled by or is under common control with a Party to this Agreement.  For purposes hereof, “control” means (a) in the case of a corporate entity, direct or indirect ownership of more than fifty percent (50%) of the stock or shares entitled to vote for the election of directors; (b) in the case of a non-corporate entity, direct or indirect ownership of more than fifty percent (50%) of the equity interests with the power to direct the management and policies of such non-corporate entity; or (c) possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the entity in question (whether through ownership of securities or other ownership interests, by contract or otherwise).

 

 

1.2   “ Antibody ” shall mean any molecule, including full immunoglobulin molecules ( e.g ., IgG, IgM, IgE, IgA and IgD molecules) and ScFv, Fv and Fab molecules, that has an amino acid sequence by virtue of which it specifically interacts with an antigen, immunogen or hapten or which elicits an immune response and wherein that amino acid sequence consists essentially of a functionally operating region of an antibody variable region, including any naturally occurring or recombinant form of such a molecule.

 

1.3   “ Antibody Product ” means any composition of matter or article of manufacture consisting essentially of an Antibody (a) alone or (b) integrally associated with a composition of matter or article of manufacture (including without limitation conjugates bound to a toxin, label or other moiety) providing therapeutic, half-life, safety or other advantages to the Antibody.

 

1.4   “ Applicable Interest Rate ” has the meaning specified in Section 13(d) hereof.

 

1.5   “ Arana Licensee ” means, solely with respect to Licensed Products, any Third Party to whom Arana licenses or grants rights, as part of a bona fide collaboration, development, commercialization or marketing arrangement, to develop, commercialize, market or distribute any such Licensed Product.  All arrangements with an Arana Licensee shall be pursuant to a written agreement, which will incorporate requirements on each Arana Licensee sufficient to ensure compliance with the provisions of Sections 7(b), 12(b)(ii), 12(c), and 14 and any other provisions of this Agreement expressly relating to Arana Licensees and provide (where possible under the governing law of such written agreements) that XOMA shall be a third party beneficiary thereof.  No Third Party shall be an Arana Licensee if such Third Party does not take material economic risk with respect to the development or commercialization of the Licensed Product that is the subject of the applicable arrangement; provided, that this sentence shall not prevent Arana from using any Third Party as a distributor or selling agent.

 

1.6   “ Arana Validation ” has the meaning specified in Section 3(c)(i) hereof.

 

1.7   [*]

 

1.8   “ Bacterial Cell Expression Patent Rights ” or “ BCE Patent Rights ” means the Patent Rights described on Schedule 1.8 .

 

1.9   “ Bankruptcy Code ” has the meaning specified in Section 18(c) hereof.

 

1.10   [*]

 

1.11   [*]

 

1.12    “ BLA ” means a Biologics Licensing Application or New Drug Application (each as defined in the FDC Act) and any other equivalent marketing authorization application or other license, registration or application seeking approval from a Regulatory Authority to market a Licensed Product in the Field in the Territory.

 

 

1.13   [*]

 

1.14   [*]

 

1.15   [*]

 

1.16   “ Change of Control ” means any transaction or series of transactions with respect to an entity as a result of which any person or group (as defined under the U.S. Securities Exchange Act of 1934, as amended) becomes, directly or indirectly, the beneficial owner of more than fifty percent (50%) of the total voting power of such entity’s equity securities or otherwise gains control of such entity.

 

1.17   [*]

 

1.18   “ Collaboration ” has the meaning specified in Section 2(a) hereof.

 

1.19   “ Collaboration Committee ” has the meaning specified in Section 2(b) hereof.

 

1.20   “ Combination Product ” has the meaning specified in Section 1.43 hereof.

 

1.21   “ Confidential Information ” means any information and data received by a Party (the “ Receiving Party ”) from the other Party or its Affiliates (the “ Disclosing Party ”) in connection with this Agreement or the Mutual Confidentiality Agreement effective as of February 27, 2009 between Arana Therapeutics (VIC) Pty Limited and XOMA (US) LLC.  Notwithstanding the foregoing, Confidential Information shall not include any part of such information or data:

 

(a)   which is or becomes public knowledge (through no fault of the Receiving Party); or

 

(b)   which is made available to the Receiving Party by a Third Party not under an obligation of confidentiality with the Disclosing Party (and such lawful right can be demonstrated by the Receiving Party’s written records); or

 

(c)   which is already rightfully in the Receiving Party’s possession at the time of receipt from the Disclosing Party (and such prior possession can be demonstrated by the Receiving Party’s written records); or

 

(d)   which is independently developed by an employee of the Receiving Party and/or its Affiliates without the aid, application or use of confidential information disclosed by the Disclosing Party (and such independent development can be demonstrated by the Receiving Party’s written records), provided such independent development does not breach any of the Receiving Party’s obligations under this Agreement.

 

1.22   “ Control ” or “ Controlled ” means, with respect to any (a) material, document, item of information, method, data or other Know-How or (b) Patent Right or other intellectual property right, the possession (whether by ownership or license, other than by a license granted pursuant to this Agreement) by a Party or its Affiliates of the ability to grant to the other Party access, ownership, a license and/or a sublicense as provided herein under such item or right with-

 

out violating the terms of any agreement or other arrangement with any Third Party as of the time such Party would first be required hereunder to grant the other Party such access, ownership, license or sublicense.

 

1.23   “ Disclosing Party ” has the meaning specified in Section 1.21 hereof.

 

1.24   “ Discovered ” means, in respect of an Antibody or Antibody Product, the derivation of such Antibody or Antibody Product from the identification, determination and/or confirmation of a Target and/or a Target’s associated ligand or receptor.

 

1.25   “ Discovery Know-How ” means the Know-How transferred to Arana or its Affiliates pursuant to Section 3.

 

1.26   “ Discovery Patent Rights ” means the Patent Rights described on Schedule 1.26 , which shall be updated from time to time by XOMA to reflect the status of such Patent Rights or as otherwise agreed in writing by Arana and XOMA.

 

1.27   “ Discovery Product ” means an Antibody or Antibody Product Discovered as a result of, or arising out of, the use of [*] the Discovery Know-How and/or the practice of the Discovery Patent Rights by Arana or its Affiliates, either on their own account or on behalf of an Arana Licensee as part of a bona fide collaboration with respect to that Antibody or Antibody Product, including without limitation through the use of [*] the Discovery Know-How and/or the practice of the Discovery Patent Rights to identify, validate or otherwise use a Target and/or its associated ligand or receptor.  As used herein, to “validate” a Target includes any activities by which, using [*], Discovery Know-How, Discovery Patent Rights and/or any Antibody arising therefrom, a Target is identified, determined and/or, confirmed as being significant in a disease or other biological pathway or used in any material manner to develop a therapeutic and/or prophylactic compound or product.

 

1.28   “ EMEA ” means the European Medicines Agency or any successor thereto.

 

1.29   “ Event of Default ” means an event described in Section 17(b)(i) hereof.

 

1.30   “ FDA ” means the United States Food and Drug Administration, or any successor thereto.

 

1.31   “ FDC Act ” means the United States Food, Drug and Cosmetic Act (or any successor thereto), as amended, and the rules and regulations promulgated thereunder.

 

1.32   “ Field ” means the Discovery, research, development, manufacture and/or commercialization of Antibody Products for (a) the treatment, palliation or prevention of any disease or condition in humans, [*].

 

1.33   “ First Commercial Sale ” means the first sale for use or consumption by the general public of a Licensed Product in a country after Regulatory Approval has been obtained in such country.  For the avoidance of doubt, First Commercial Sale shall not include the sale of

 

any Licensed Product for use in clinical trials or for compassionate use prior to Regulatory Approval.

 

1.34   “ GAAP ” means United States generally accepted accounting principles, as they exist from time to time, consistently applied.

 

1.35   “ ICC ” has the meaning specified in Section 18(h)(i) hereof.

 

1.36   “ Indemnitee ” has the meaning specified in Section 16(d) hereof.

 

1.37   “ Indemnitor ” has the meaning specified in Section 16(d) hereof.

 

1.38   “ Know-How ” means Confidential Information comprised of any and all know-how, trade secrets, data, processes, techniques, procedures, compositions, materials, devices, methods, formulas, protocols, and research, preclinical and clinical data and information, including any and all chemical, biochemical, toxicological, and scientific research information, whether in written, electronic, graphic or video form or any other form or format.  Know-How shall not include Patent Rights [*].

 

1.39   “ Laws ” means all laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of any federal, national, multinational, state, provincial, county, city or other political subdivision, domestic or foreign.

 

1.40   “ Licensed Know-How ” means, collectively, the Discovery Know-How and the TAE Know-How.

 

1.41   “ Licensed Patent Rights ” means, collectively, the Discovery Patent Rights and the TAE Patent Rights.

 

1.42   “ Licensed Product ” means an Antibody or Antibody Product that is either a Discovery Product or a TAE Product.

 

1.43   “ Net Sales ” means, with respect to a Licensed Product, the gross amount invoiced by Arana or its Affiliates or by any Arana Licensee for sales of such Licensed Product to customers which are not Affiliates (or which are Affiliates but are end users of such Licensed Product), less the following unreimbursed or non-refunded deductions with respect thereto, determined in accordance with GAAP and calculated in United States dollars and to the extent such amounts have not already been deducted from the amount invoiced:  (a) amounts actually allowed as volume or quantity discounts, rebates, price reductions, coupons, vouchers and co-pay assistance reimbursements, returns (including recalls), [*], and charge-backs, (b) sales, excise and turnover taxes. goods and services, value-added and other indirect taxes, and similar duties, levies and charges collected, charged or otherwise imposed directly upon and paid or payable by such party and its Affiliates, and (c) all other direct expenses or discounts, including but not limited to cash discounts, trade discounts, government and managed care discounts, custom duties and transportation and insurance charges.

 

 

In the event the Licensed Product is sold as part of a Combination Product (as defined below), the Net Sales from the Combination Product, for the purposes of determining royalty payments, will be determined by [*].

 

In the event that the average sale price of the Licensed Product can be determined but the average sale price of the other active compounds or active ingredients in the Combination Product cannot be determined, Net Sales for purposes of determining royalty payments will be calculated by [*].  If the average sale price of the other active compounds or active ingredients can be determined but the average price of the Licensed Product cannot be determined, Net Sales for purposes of determining royalty payments will be calculated by [*].

 

In the event that the average sales price of both the Licensed Product and the other active compounds or active ingredients in the Combination Product cannot be determined, the Net Sales of the Licensed Product shall be determined in accordance with the procedures set out in Section 18(h)(i).

 

As used above, the term “ Combination Product ” means any Licensed Product sold in conjunction with any other active component(s) (whether packaged together or in the same therapeutic formulation).

 

Free samples of Licensed Product and the disposition of Licensed Product for, or the use of Licensed Product in, preclinical or clinical (Phase 1–3) trials or other market-focused (Phase 4) trials in which Licensed Product is provided to patients without any payment shall not result in any Net Sales.

 

1.44   “ Patent Rights ” means all patents and patent applications existing as of the Effective Date and all patent applications claiming priority from the foregoing   thereafter filed and patents thereafter issued, including, without limitation, any continuations, continuations-in-part, divisionals, provisionals or any substitute applications, any patent issued with respect to any such patent applications, any reissue, reexamination, renewal or extension (including any supplemental protection certificate) of any such patent, and any confirmation patent or registration patent or patent of addition based on any such patent, and all foreign counterparts of any of the foregoing.

 

1.45   “ Phase 1 Trial ” means a human clinical trial in any country that is intended to initially evaluate the safety and/or pharmacological effect of a Licensed Product in subjects or that would otherwise satisfy the requirements of 21 C.F.R. 312.21(a), or its foreign equivalent.

 

1.46   “ Phase 2 Trial ” means a human clinical trial in any country that is intended to initially evaluate the effectiveness of a Licensed Product for a particular indication or indications in patients with the disease or indication under study or that would otherwise satisfy the requirements of 21 C.F.R. 312.21(b), or its foreign equivalent.

 

1.47   “ Phase 3 Trial ” means a pivotal human clinical trial in any country, the results of which could be used to establish safety and efficacy of a Licensed Product as a basis for a BLA or that would otherwise satisfy the requirements of 21 C.F.R. 312.21(c) or its foreign equivalent.

 

In the event of a Phase 2/3 trial, initiation of Phase 3 shall be deemed to have occurred upon a decision by Arana to continue enrollment for the pivotal portion of such trial.

 

1.48   “ Receiving Party ” has the meaning specified in Section 1.21 hereof.

 

1.49   “ Regulatory Approval ” means any and all approvals (including any applicable governmental price and reimbursement approvals), licenses, registrations, or authorizations of any federal, national, multinational, state, provincial or local regulatory agency, department bureau or other governmental entity that are necessary for the manufacture, use, storage, import, transport, promotion, marketing and sale of a Licensed Product in the Field in a country or group of countries.

 

1.50   “ Regulatory Authority ” means any governmental authority in a country or region that regulates the manufacture or sale of pharmaceutical products, including the FDA, the EMEA and the Australian Therapeutic Goods Administration, and any successors thereto.

 

1.51   “ Representatives ” has the meaning specified in Section 18(h)(i) hereof.

 

1.52   “ Research and Development ” means, solely with respect to the use of the Transferred Materials by Arana or its Affiliates, the conduct of activities relating to the Discovery of Antibodies for Targets, the identification, characterization, selection, optimization and research of Antibodies and Licensed Products and the conduct of all tests, clinical and other studies and other activities (including test method development, toxicology studies, statistical analysis and report writing, preclinical and other testing, packaging and regulatory affairs, product approval and registration activities) related thereto as are customarily performed in the biopharmaceutical industry as part of research and development of new products.  Research and Development may include without limitation (a) the Discovery of Antibodies that selectively bind to and act through Targets, (b) the development of assays for Antibodies to, inter alia, confirm the activity of such Antibodies or Target, and (c) the performance of affinity maturation on such Antibodies, in each case with the objective of identifying Antibodies that have potential as Licensed Products.

 

1.53   “ Royalty-Bearing Discovery Product ” means [*].

 

1.54   “ Services ” has the meaning specified in Section 4(a) hereof.

 

1.55   “ Systems ” means the informatics and other materials handling systems, associated software applications and related data systems, Patent Rights related to the foregoing (the “ Systems Patent Rights ”) and related Know-How (the “ Systems Know-How ”), each as more particularly described on Schedule 1.55 .  For the purposes of this Agreement, Systems shall not include any Third Party software, operating system, data device or other materials not actually integrated into the software applications and related data systems constituting the Systems.

 

1.56   “ Systems Know-How ” has the meaning specified in Section 1.55 hereof.

 

1.57   “ Systems Patent Rights ” has the meaning specified in Section 1.55 hereof.

 

 

1.58   “ TAE Know-How ” has the meaning specified in Section 1.63 hereof.

 

1.59   “ TAE Patent Rights ” has the meaning specified in Section 1.63 hereof.

 

1.60   “ TAE Product ” means an Antibody or Antibody Product which falls within a Valid Claim of the TAE Patent Rights at the time and in the jurisdiction of its manufacture or sale, or arose from the practice of a Valid Claim of the TAE Patent Rights at the time and in the jurisdiction of such activities.

 

1.61   “ Target ” means a gene and the products encoded by such gene, including, without limitation, (a) any partial or full-length DNA sequence from such gene (including any mutant or polymorphic forms thereof), (b) any RNA sequence (including any post-transcriptionally modified variants thereof) encoded by any such gene, (c) any peptide, polypeptide or protein (including any post-translationally modified variants thereof) encoded by any such gene, (d) any derivatives or fragments of any of the foregoing, and/or (e) any species variants or homologs of any of the foregoing.

 

1.62   [*]

 

1.63   “ Target Affinity Enhancement Technology ” or “ TAE Technology ” means (a) the materials and Know-How (the “ TAE Know-How ”) and (b) the Patent Rights (the “ TAE Patent Rights ”), each as more particularly described on Schedule 1.63 , that set forth an embodiment of the technology made available by XOMA for improving or enhancing the affinity of an Antibody.

 

1.64   “ Territory ” means all of the countries and territories of the world.

 

1.65   “ Third Party ” means any person or entity other than Arana, XOMA and their respective Affiliates.

 

1.66   “ Third Party Agreements ” has the meaning specified in Section 15(b)(ix) hereof.

 

1.67   “ Third Party Patents ” has the meaning specified in Section 15(b)(ix) hereof.

 

1.68   “ Transferred Materials ” means, collectively, [*], the Licensed Know-How, the Systems and/or any related materials actually transferred to Arana pursuant to this Agreement.

 

1.69   “ Valid Claim ” means, in respect of a Patent Right in the jurisdiction of that Patent Right, 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 that is not admitted to be invalid or unenforceable through reissue, disclaimer or otherwise, or (b) a claim of a pending parent patent application that was filed and is being prosecuted in good faith and has not been abandoned or finally rejected without the possibility of appeal or refiling.

 

1.70   [*]

 

 

1.71   “[*] Materials ” has the meaning specified in Section 5(e) hereof.

 

1.72   “[*] Specifications ” means Arana’s specifications for [*] set forth on Schedule 1.70.

 

Section 2.   COLLABORATION OVERVIEW

 

(a)   Objectives .  Arana and XOMA intend to collaborate in the Discovery of Antibodies and/or Antibody Products, with (in general) XOMA constructing and/or transferring certain materials and providing access to certain intellectual property rights and Arana conducting various Discovery and other activities, in each case as provided in or permitted by this Agreement (the “ Collaboration ”).  It is intended that the Collaboration will be conducted as a collaborative effort with activities by the Parties carried out primarily at each Party’s respective facilities, except as otherwise provided herein.

 

(b)   Committee .  As soon as practicable after the Effective Date, the Parties shall establish a committee (the “ Collaboration Committee ”) comprised of representatives designated by each of XOMA and Arana, each of whom shall have experience and seniority sufficient to enable him or her to make decisions on behalf of the Party he or she represents within the scope of the authority of the Collaboration Committee as provided herein, and each of whom shall be employed by the Party designating such representative.  The Collaboration Committee shall be responsible for overseeing the Parties’ interaction and performance of their respective obligations under this Agreement.  In reaching decisions or taking action, the Collaboration Committee shall strive for unanimity.  In the event unanimity cannot be reached on a question of whether or not a Party has complied with the requirements of this Agreement, the matter shall be referred for resolution pursuant to Section 18(h)(i).  For the avoidance of doubt, subject to the foregoing, each Party shall determine the manner in which it exercises its independent rights and complies with its independent obligations hereunder using its own personnel and facilities.

 

Section 3.     DELIVERABLES; DELIVERY

 

(a)   Deliverables .  Within [*] following the Effective Date, XOMA shall deliver [*], the Discovery Know-How relating thereto, the TAE Know-How and the Systems to Arana’s Melbourne, Australia facility, as evidenced by the Delivery and Receipt Acknowledgement in the form attached as Exhibit A .   XOMA shall provide [*] in the quantities, and together with the additional information, set forth in Schedule 3(a) .

 

(b)   Delivery .  Delivery of the Transferred Materials shall be made F.O.B. XOMA’s Berkeley, California facility, upon provision of the same to an independent carrier designated by XOMA and reasonably acceptable to Arana.  Title and risk of loss shall transfer to Arana upon such delivery, [*].

 

 

(c)   Arana Validation .

 

(i)           Arana shall have [*] to determine whether [*] is in accordance with the [*] Specifications [*] (“Arana Validation”) and to notify XOMA in writing of its determination, or [*] will be deemed to have passed the Arana Validation.  The Arana Validation shall be performed by Arana with the guidance of XOMA representatives, who shall be [*], it being understood that no portion of the Arana Validation, or any activities related thereto, will be conducted without the concurrence of XOMA’s representatives, including without limitation the activities set forth in Schedule 3(c)(i)(A) [*], and that Arana shall make no other use of [*] unless and until the Arana Validation is complete.  If, prior to the end of such [*] period, Arana notifies XOMA in writing that Arana is not satisfied with the results of the Arana Validation, then, [*], either (x) XOMA shall have a period of [*] thereafter to carry out work on [*] in order to bring it into accordance with the [*] Specifications [*], or (y) terminate this Agreement by giving thirty (30) days written notice to XOMA [*].

 

(ii)           If [*] set forth in clause (x) of the immediately preceding paragraph (i), then prior to the end of such [*] period and prior to delivery of the repaired or replacement collection of polynucleotides and associated biological material to Arana, XOMA shall provide to Arana such data as is reasonably necessary to determine whether such repaired or replacement collection of polynucleotides and associated biological material is in accordance with the [*] Specifications [*].  Arana shall have thirty (30) days following receipt of such data by Arana to determine whether it agree that such repaired or replacement collection of polynucleotides and associated biological material is in accordance with the [*] Specifications [*] and to notify XOMA in writing of its determination, or the replacement collection of polynucleotides and associated biological material shall be deemed to have passed the Arana Validation.  If, prior to the end of such [*] period, Arana notifies XOMA in writing that Arana is not satisfied with the results of the Arana Validation, then Arana may terminate this Agreement by giving thirty (30) days written notice to XOMA [*].

 

(iii)           Arana shall bear all costs and expenses incurred by it in connection with the activities conducted pursuant to this Section 3(c), will compensate XOMA for such activities at the rate of [*] per person per hour (the amount of which shall in any event not be less than that for the activities of [*] individual scientists for two [*] weeks) and will reimburse XOMA for all reasonable travel, lodging and other expenses of XOMA’s employees and consultants carrying out such activities documented to the reasonable satisfaction of Arana [*].

 

(d)   [*]

 

 

Section 4.   SERVICES

 

(a)   Services Defined .  Upon the request of Arana, XOMA agrees to perform the services described in Schedule 4(a) (the “ Services ”).  XOMA warrants that it has and/or will retain employees and/or consultants with the skills, ability and training necessary to, and that it shall, render the Services in a timely and professional manner consistent with industry standards in accordance with the terms of this Section 4, including Schedule 4(a).  Subject to the foregoing, the manner and means by which XOMA chooses to complete the Services are in XOMA’s sole discretion and control.  XOMA’s only service obligations with respect to the validation, implementation or use of the Transferred Materials at Arana shall be those expressly provided in Section 3(c) and this Section 4.

 

(b)   Compensation .  In consideration of the Services to be rendered hereunder, Arana agrees to pay XOMA the compensation set forth in Schedule 4(a).

 

(c)   Expenses .  Arana will reimburse XOMA for all reasonable travel, lodging and other expenses of XOMA’s employees and consultants rendering the Services documented to the reasonable satisfaction of Arana [*].

 

(d)   Other Services .  XOMA (including its employees rendering the Services) may conduct activities with and provide services to, and its consultants rendering the Services may perform services for or be employed by, Third Parties so long as doing so does not cause XOMA to breach its obligations under this Section 4 or any other provision of this Agreement.

 

(e)   Term . The Parties shall have no further rights or obligations with respect to this Section 4 (other than those accrued prior to such termination) upon the earliest of (i) termination of this Agreement in accordance with its terms, (ii) termination of this Section 4 by either Party upon a material breach by the other Party that is not cured within thirty (30) days of such other Party becoming aware of such breach, effective immediately upon written notice to the breaching Party, (iii) termination by Arana of this Section 4, at its discretion, upon prior written notice to XOMA [*].

 

Section 5.   GRANTS OF RIGHTS; [*]

 

(a)   [*], TAE Technology, Etc .  XOMA grants to Arana, on its own behalf and on behalf of its Affiliates, in the Field throughout the Territory, subject to the terms, conditions and limitations set forth in this Agreement:

 

(i)           an exclusive (except as to the use of [*] by XOMA and its Affiliates, as provided in Section 5(f)), non-transferable license and/or right, without the right to grant sublicenses, to use [*] to identify, isolate, modify, develop and exploit Discovery Products; and

 

(ii)           a non-exclusive, non-transferable license and/or right, without the right to grant sublicenses, to:

 

 

(x)           use the Systems and/or the Discovery Know-How, and/or practice the Systems Patents and/or the Discovery Patent Rights, in each case to Discover, identify, isolate, modify, develop and exploit Discovery Products; and

 

(y)           use the TAE Technology and/or the Systems, and/or practice the TAE Patent Rights and/or the Systems Patent Rights, in each case to alter, modify and/or express Antibodies and Antibody Products in order to discover, identify, isolate, modify and/or develop Licensed Products.

 

The grants provided for in this Section 5(a) include, to the extent required, a right and license to Arana, its Affiliates and any Arana Licensee, subject to the other limitations of this Agreement, to make, have made, use, sell, offer to sell, import or export any Licensed Product.  The grant provided for under Section 5(a)(i) includes any Patent Right (other than the BCE Patent Rights, Arana’s rights to which are addressed in clause (b) below), copyright or similar intellectual property right that is, as of the Effective Date, under the Control of XOMA and/or its Affiliates and shall be subject to all applicable limitations, restrictions and obligations provided for in this Agreement and any limitations or restrictions contained in any license or grant of rights from or other agreement with a Third Party the benefit of which is claimed by Arana, provided such terms (i) were made available in writing to Arana prior to the Effective Date, and (ii) are expressed to apply to collaborators or licensees of XOMA in the position of Arana under this Agreement.

 

(b)   BCE Patent Rights .  In addition, to the extent that the conduct by Arana of any of the activities expressly licensed by XOMA hereunder constitutes the practice of the BCE Patent Rights, Arana and its Affiliates shall be deemed to have a non-exclusive license, without the right to grant sublicenses, under the BCE Patent Rights to conduct such activities solely as provided in, and as limited by, the scope of the license grants in Section 5(a).  For the avoidance of doubt, the license granted pursuant to this Section 5(b) shall not include any right (i) to make or have made any quantities of any product, including an Antibody, in a prokaryote other than as reasonably necessary to conduct Research and Development activities, (ii) to conduct phage display other than with the Transferred Materials and/or (iii) to conduct any activities for a Third Party except as reasonably necessary for an Arana Licensee to make (but not manufacture using the BCE Patent Rights), use, sell, offer to sell, import or export a Licensed Product after the initial binding domains have been Discovered by Arana or its Affiliates.

 

(c)   Trade Secrets .  Arana and/or each person or entity, including authorized Third Parties, who has been given access by Arana to the Transferred Materials, the Systems and/or the Source Code or Software (as such terms are defined in Section 8) acknowledges formulae, algorithms and computational methods contained therein may constitute XOMA’s trade secret information.  Arana shall take reasonable steps to prevent the dissemination of the trade secret information contained therein and shall permit the dissemination of such information only to those persons or entities with a “need to know” such information who acknowledge their obligation to maintain the secrecy of such trade secrets and not to use them for purposes not authorized hereunder.  For the avoidance of doubt, Arana shall have an implied license to the trade secrets described in this Section 5(c) as is reasonably necessary to enjoy the benefits of the licenses other-

 

wise granted in this Agreement, to the extent such trade secrets do not form part of the Know-How expressly licensed under this Agreement.

 

(d)   [*] each of XOMA and Arana shall be obligated to keep accurate books and records sufficient to identify with reasonable specificity the uses to which [*] have been put and the Discovery Products which have been derived from or arose out of the use of [*].

 

(e)   Limitations on Use of Source Materials and Copies .  None of XOMA or its Affiliates shall [*], and XOMA agrees not to transfer, lend or otherwise make available [*] or [*] Materials (in whole or part) to any person other than XOMA’s Affiliates or Arana.  [*]  Subject only to the foregoing, Arana acknowledges that XOMA and/or its Affiliates may, on their own behalf or on behalf of one or more Third Parties (x) [*], and/or (y) undertake competitive activities directed to a Target, including using copies of the Licensed Know-How and/or the Systems.

 

(f)   Retention of Rights by XOMA .  XOMA shall retain (i) ownership of and the right to use [*] for itself and its Affiliates, including for the avoidance of doubt as part of a bona fide collaboration, development, commercialization or marketing arrangement with a Third Party, to develop, commercialize, market or distribute Antibody Products, and (ii) the ownership and right to use, license or otherwise exploit in any manner whatsoever the Licensed Know-How and the Systems, the Source Code or the Software (as such terms are defined in Section 8), [*], the Licensed Patent Rights and/or any other Patent Right, copyright or other item of intellectual property that covers or claims the Transferred Materials and/or their creation, construction or use.  [*]   Except as otherwise expressly provided in this Agreement, under no circumstances shall a Party hereto, as a result of this Agreement, obtain any ownership interest in or other right to any technology, know-how, patents, patent applications, gene or genomic sequence data or information, products, or biological materials of the other Party, including items owned, controlled or developed by, or licensed to, the other Party, or transferred by the other Party to said Party, at any time pursuant to this Agreement.

 

Section 6.   ARANA INVENTIONS; UNBLOCKING LICENSE

 

Without limitation to any other right Arana may have at Law, Arana shall be free to seek and obtain patent protection, except with respect to [*], the Discovery Patent Rights or the BCE Patent Rights themselves, for any inventions arising out of or relating to its authorized use or practice of the Transferred Materials, the Licensed Patent Rights, the Licensed Know-How, the Systems Patent Rights and/or the Systems Know-How, provided , however , that, solely to the extent such patent or patent application relating to such invention contains claims that would cover the use or practice of the Transferred Materials, the Licensed Patent Rights and/or any Systems Patent Rights, or would block XOMA, its Affiliates, licensees, partners or collaborators from full enjoyment of the same rights as are licensed hereunder to Arana, (a) Arana shall provide written notice of the filing of any such patent application to XOMA, and in the event Arana elects not to prosecute any such patent application or maintain any resulting patent, XOMA, at its own expense, but with the full assistance of Arana, shall be free to prosecute such patent application and/or maintain such patent, and (b) Arana shall be deemed to have granted to XOMA a non-exclusive, fully paid-up, irrevocable, worldwide license, in order for XOMA, and any Third Party working with XOMA, directly or without limitation as a licensee, partner or collaborator,

 

to enjoy the benefit, on its own behalf or on behalf of any Third Party, of the use or practice of the Transferred Materials, the Licensed Patent Rights and/or any patent or patent application covering the use of the Systems.  Such license shall not extend to claims of patents or patent applications relating to Antibodies or Antibody Products, or methods and processes involving therapeutic or diagnostic use of Antibodies or Antibody Products.  In the event that, after the Effective Date, Arana acquires Control of any Patent Rights to which this Section 6 would apply because the invention disclosures in such Patent Rights are covered by the first sentence hereof, then, subject to any limitations and obligations of any written agreement relating to such Patent Rights, Arana shall, at XOMA’s option, extend to XOMA the same rights to such Patent Rights as are otherwise provided for herein.

 

Section 7.   LIMITATIONS ON USE AND MODIFICATION

 

(a)   Certain Transfers .  All uses of the Transferred Materials shall initially be performed at Arana’s Melbourne, Australia facilities: provided , however , that Arana shall be free to move the Transferred Materials to any other site of its selection that is and will remain under its or its Affiliates’ control, it being understood that XOMA shall have no responsibility hereunder for any such transfer.  Any site at which the Transferred Materials will be used shall be and shall remain accessible to employees only of Arana and its Affiliates, shall be under the exclusive control of Arana or its Affiliates and shall have reasonable safeguards designed to protect the Transferred Materials from theft, destruction or unauthorized use.

 

(b)   Certain Limitations .  Arana acknowledges, represents and warrants that the transfers provided for by this Agreement arise out of and are part of the Collaboration; provided , however , that the use of the Transferred Materials and the practice of the Licensed Patent Rights and any other Patent Rights to which rights are granted pursuant to this Agreement may, subject to the applicable provisions of this Agreement, be used by Arana and its Affiliates for any other purpose including the discovery, development and subsequent commercial sale of any composition of matter in the Field.  Notwithstanding the foregoing, the following restrictions shall apply to the Transferred Materials:

 

(i)           Except by XOMA or with XOMA’s prior written consent, [*] may not be altered or modified.

 

(ii)           The Transferred Materials may not be transferred or disposed of to a Third Party; provided, however, that [*].

 

(iii)           Arana shall not use the Transferred Materials or practice the Licensed Patent Rights and any other Patent Rights to which rights are granted pursuant to this Agreement on behalf of any Third Party, [*] or otherwise engage in activities not directly associated with Arana’s or its Affiliates’ own internal discovery, research and development programs; provided , however , that, so long as the other limitations of this Agreement are satisfied, Arana may use the Transferred Materials or practice the Licensed Patent Rights and any other Patent Rights covered by this Agreement with respect to any Discovery Product as to which Arana or its Affiliates has either in-licensed or acquired rights from a Third Party where such in-license or grant of rights

 

is for the exclusive development of such Discovery Product or variants thereof by Arana or its Affiliates and the original licensor does not become an Arana Licensee with respect to such Discovery Product.

 

(iv)           Arana acknowledges that its rights to use the Transferred Materials are subject to all applicable limitations, restrictions and obligations provided for in the terms of any license or grant of rights from or other agreement with a Third Party the benefit of which is claimed by Arana, provided such terms (i) were made available in writing to Arana prior to the Effective Date, and (ii) are expressed to apply to collaborators or licensees of XOMA in the position of Arana under this Agreement.

 

(v)           None of the grants of rights or licenses herein or the use of any of the Transferred Materials extend to or permit Arana to work with or extend any benefit hereunder to (A) any composition of matter, article of manufacture or Know-How arising out of the unlawful use of any item of Know-How or practice of any Patent Right owned or controlled by XOMA or its Affiliates that is also licensed to Arana or (B) any Third Party who the directors of Arana know is engaged in such unlawful use or practice.

 

Section 8.   CERTAIN PROVISIONS RELATING TO SOFTWARE

 

(a)   Additional Definitions .  For purposes of this Section 8, the following terms shall have the respective meanings indicated below:

 

(i)   “ Applicable Patent Rights ” shall mean (A) in the case where XOMA is the grantor of rights, claims of patents that (I) are now or hereafter acquired, owned by or assigned to XOMA and (II) cover subject matter contained in the Source Code or the Software, and (B) in the case where Arana is the grantor of rights, claims of patents that (I) are now or hereafter acquired, owned by or assigned to Arana and (II) cover subject matter contained in the Covered Code or the Covered Software.

 

(ii)   “ Covered Code ” shall mean the Source Code and any Modifications to the Source Code made by Arana or any person or entity acting on Arana’s behalf.

 

(iii)   “ Covered Software ” shall mean the Software and any Modifications to the Software made by Arana or any person or entity acting on Arana’s behalf.

 

(iv)   “ Modifications ” shall mean any addition to, deletion from and/or other change to the substance and/or structure of the Source Code or the Software designated in item A.1 of Schedule 1.55 as non-encrypted.  When code is released as a series of files, a Modification is (A) any addition to or deletion from the contents of a file containing the Covered Code or the Covered Software and/or (B) any new file or other representation of computer program statements that contains any part of the Covered Code or the Covered Software.

 

 

(v)   “ Software ” shall mean the software, programs and/or computer instruction sets, other than the Source Code, consisting of the versions thereof existing and deployed at XOMA as of the Effective Date and more fully described in item A.1 of Schedule 1.55   and any changed or modified versions thereof that correct significant defects contained in the Software as of the Effective Date (“ Corrected Software ”).  Expressly excluded from the definition of Software are (A) other programs, software and/or computer instructions that XOMA derives from such programs, software and/or computer instructions or develops, acquires or obtains the right to sublicense during the term of this Section 8, as well as (B) any changed, modified or enhanced versions of the Software (other than Corrected Software).

 

(vi)   “ Source Code ” shall mean the human readable form of the Software designated in item A.1 of Schedule 1.55 as non-encrypted that is suitable for modification, including all modules it contains, plus any associated data files, interface definition files, scripts used to control compilation and installation of an executable computer instruction.

 

(b)   Corrected Software .  If, within the first [*] following the Effective Date, XOMA develops, licenses or acquires any Corrected Software, XOMA shall promptly provide Arana with a copy thereof.  All Corrected Software shall be deemed, in accordance with the terms and conditions of this Section 8 and without payment of additional consideration, to be included in the definition of Software.

 

(c)   Terms and Conditions .

 

(i)   Any reproduction, use or dissemination of any Covered Code or Covered Software, including without limitation, any Modifications thereof, shall be limited to activities undertaken by employees of Arana or its Affiliates who are subject to the confidentiality and intellectual property provisions of this Agreement.  Notwithstanding the foregoing, Arana may employ or use Third Parties to make Modifications or use the Covered Code or the Covered Software for purposes reasonably related to Arana’s or its Affiliates’ legitimate use as provided for by this Agreement, including this Section 8.  Arana shall not grant any such Third Party the right to access the Software designated in item A.1 of Schedule 1.55 as non-encrypted or the Source Code unless and until such Third Party executes a written confidentiality agreement that provides, in addition to the other terms and conditions of such agreement, that (A) the Third Party will abide, for XOMA’s and Arana’s benefit, by the limitations provided for in this Section 8 and the other provisions of this Agreement, (B) all work will be undertaken by such Third Party in a manner so as to establish that any such work is done as a “work made for hire” and (C) such Third Party will assign any patent rights to Arana such that they become Applicable Patent Rights.

 

(ii)   Arana shall retain and reproduce in all copies of the Covered Code and the Covered Software (A) the copyright and other proprietary notices and disclaimers of XOMA as they appear in the Source Code and the Software, respectively, (B) all notices in the Source Code and/or the Software that refer to this Section 8, and (C) to the extent it does not already exist, the notice provided for below:

 

 

“Portions Copyright (c) 2005-2009 XOMA Technology Ltd.  All Rights Reserved.

 

“This file contains Source Code or Software or Modifications thereof as defined in and that are subject to a software license and related terms between Arana Therapeutics Limited and XOMA Development Corporation.  You may not use this file except in compliance with that license and those terms.  Please obtain a copy of the software license and related terms between Arana and XOMA by contacting the Company Secretary, of Arana Therapeutics Limited, and read it before using this file.

 

“Unless otherwise stated, these materials are distributed on an ‘AS IS’ basis, WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, AND XOMA HEREBY DISCLAIMS ALL SUCH WARRANTIES, INCLUDING WITHOUT LIMITATION, ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, QUIET ENJOYMENT OR NON-INFRINGEMENT.  Please see the software license and related terms between Arana and XOMA for the specific language governing rights and limitations under that license and those terms.”

 

(iii)   For any Modifications, Arana must cause the modified files to carry notices stating that Arana changed the files and the date of such change.

 

(iv)   Arana will use commercially reasonable and diligent efforts to protect XOMA’s proprietary interests in and to the Software, the Source Code and XOMA’s Applicable Patent Rights by, as appropriate, ensuring that there is password protection of any computer or network containing any copies of the Covered Code or the Covered Software.  In addition, Arana will prohibit its employees from disclosing to unauthorized Third Parties the Covered Code or the Covered Software except under the conditions required by this Section 8 and the acknowledgement that the Software and the Source Code constitute Confidential Information of XOMA under this Agreement.

 

(d)   Arana Exclusive Rights .  Arana shall own all Modifications to the Source Code or the Software designated in item A.1 of Schedule 1.55 as non-encrypted created by Arana pursuant to this Section 8 and shall have no obligation to share or provide copies or updates thereof to XOMA.

 

(e)   Representations and Warranties Regarding Software and Source Code .  XOMA represents and warrants that (i) the Source Code and the Software were made by XOMA employees and constitute a “work made for hire” and were not authored or distributed to Arana in violation of any agreements between XOMA and any Third Party, including any “open source” licenses, and (ii) it is not actually aware of any intellectual property rights of a Third Party that are infringed by the use of the Software in accordance with this Agreement.

 

 

(f)   Limitations on Warranties and Support .  XOMA’s only obligations to provide to Arana updates to, revisions to or modifications of any of the Transferred Materials shall be those expressly provided in this Section 8.  Arana shall be responsible for providing, at its cost, any Third Party hardware or software required to deploy and operate the Systems.  The Covered Code or the Covered Software may contain in whole or in part pre-release, untested or not fully tested works, may contain errors that could cause failures or loss of data, and may be incomplete or contain inaccuracies.  Arana expressly acknowledges and agrees that use of the Covered Code or the Covered Software, or any portion thereof, is at Arana’s sole and entire risk.  UNLESS OTHERWISE STATED, THE SOURCE CODE AND THE SOFTWARE ARE PROVIDED “AS IS” AND WITHOUT WARRANTY, UPGRADES OR SUPPORT OF ANY KIND.  UNLESS OTHERWISE STATED, XOMA, ITS LICENSOR(S) AND CONTRIBUTORS (COLLECTIVELY REFERRED TO AS “XOMA” FOR THE PURPOSES OF THIS SECTION 8(f)) EXPRESSLY DISCLAIM ALL WARRANTIES AND/OR CONDITIONS, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES AND/OR CONDITIONS OF MERCHANTABILITY, OF SATISFACTORY QUALITY, OF FITNESS FOR A PARTICULAR PURPOSE, OF ACCURACY, OF QUIET ENJOYMENT AND OF NON-INFRINGEMENT OF THIRD PARTY RIGHTS.  XOMA DOES NOT WARRANT AGAINST INTERFERENCE WITH ARANA’S ENJOYMENT OF THE COVERED CODE AND THE COVERED SOFTWARE, THAT THE FUNCTIONS CONTAINED IN THE COVERED CODE OR THE COVERED SOFTWARE WILL MEET ARANA’S REQUIREMENTS, THAT THE OPERATION OF THE COVERED CODE OR THE COVERED SOFTWARE WILL BE UNINTERRUPTED OR ERROR-FREE, OR THAT DEFECTS IN THE COVERED CODE OR THE COVERED SOFTWARE WILL BE CORRECTED.  Arana acknowledges that neither the Covered Code nor the Covered Software is intended for use in the operation of nuclear facilities, aircraft navigation, communication systems or air traffic control machines, in which case the failure of the Covered Code or the Covered Software could lead to death, personal injury or severe physical or environmental damage.

 

(g)   Government End Users .  Each of the Covered Code and the Covered Software is a “commercial item” as defined in FAR 2.101.  Government software and technical data rights in the Covered Code or the Covered Software include only those rights customarily provided to the public as defined in this Section 8.  This customary commercial license in technical data and software is provided in accordance with FAR 12.211 (Technical Data) and 12.212 (Computer Software) and, for Department of Defense purchases, DFAR 252.227-7015 (Technical Data -- Commercial Items) and 227.7202-3 (Rights in Commercial Computer Software or Computer Software Documentation).  Accordingly, all U.S. Government End Users acquire the Covered Code or the Covered Software with only those rights set forth herein.

 

Section 9.   UPFRONT FEE

 

In consideration for the obligation to deliver a copy of [*] in accordance with the [*] Specifications, Arana shall pay XOMA a one-time, fee of Six Million United States Dollars (US$6,000,000), of which (a) Four Million United States Dollars (US$4,000,000) shall be payable on or not later than [*] following receipt by Arana of the Transferred Materials delivered pursuant to Section 3(a), and (b) Two Million United States Dollars (US$2,000,000) shall be

 

payable on the first anniversary of the  receipt by Arana of the Transferred Materials delivered pursuant to Section 3(a), [*] in both cases subject to receipt of an invoice issued by XOMA.