EXECUTION VERSION

Portions of this Exhibit have been redacted because they are both (i) not
material and (ii) would be competitively harmful if publicly disclosed.
Information that was omitted has been noted in this document with a placeholder
identified by the mark “[***]”.

Exhibit 10.1

LICENSE AGREEMENT

by and between

Durect Corporation

and

Gilead Sciences, Inc.

 

dated

July 19, 2019

 

 

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

Page

Article 1 DEFINITIONS

2

 

Article 2 GOVERNANCE

13

 

 

2.1

Joint Development Committee.13

 

 

2.2

Decision Making14

 

 

2.3

Day-to-Day Responsibilities15

 

 

2.4

Dissolution of the JDC15

 

 

2.5

Alliance Managers15

 

Article 3 LICENSES

15

 

 

3.1

License Grant.15

 

 

3.2

Option for Other Products16

 

 

3.3

No Other Rights17

 

 

3.4

[***]17

 

Article 4 DEVELOPMENT, REGULATORY MATTERS AND COMMERCIALIZATION

19

 

 

4.1

Development.19

 

 

4.2

Regulatory Matters.23

 

 

4.3

Pharmacovigilance24

 

 

4.4

Commercialization.24

 

 

4.5

Other Activities25

 

 

4.6

Compliance Provisions.26

 

Article 5 SUPPLY

27

 

 

5.1

Initial Development Supply of Product27

 

 

5.2

Later Development and Commercial Supply of Product.33

 

 

5.3

Commercial Supply of Excipients35

 

Article 6 PAYMENTS

36

 

 

6.1

Durect Costs36

 

 

6.2

Upfront Fee36

 

 

6.3

Milestone Payments.36

 

 

6.4

Royalty Payments38

 

 

6.5

Payment Method40

 

 

6.6

Taxes40

 

 

6.7

Indemnification for Withholding41

 

 

6.8

Inspection of Records41

 

 

6.9

Late Payment41

 

 

6.10

Currency Conversion42

 

Article 7 DATA; INTELLECTUAL PROPERTY

42

 

-i-

--------------------------------------------------------------------------------

TABLE OF CONTENTS

(Continued)

Page

 

 

 

7.1

Ownership and Use of Data.42

 

 

7.2

Ownership of Inventions44

 

 

7.3

Intellectual Property.44

 

 

7.4

Patent Prosecution.44

 

 

7.5

Assistance46

 

 

7.6

Defense of Third Party Infringement Claims46

 

 

7.7

Enforcement.46

 

 

7.8

Patent Marking48

 

Article 8 CONFIDENTIALITY

48

 

 

8.1

Confidentiality; Exceptions48

 

 

8.2

Certain Specific Information49

 

 

8.3

Authorized Use and Disclosure49

 

 

8.4

Prior Agreement50

 

 

8.5

Scientific Publications50

 

 

8.6

Publicity.51

 

 

8.7

[***]52

 

Article 9 REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

52

 

 

9.1

General Representations and Warranties52

 

 

9.2

Durect Representations and Warranties53

 

 

9.3

Additional Durect Covenants55

 

 

9.4

DISCLAIMER OF WARRANTIES56

 

 

9.5

Indemnification.56

 

 

9.6

Insurance57

 

 

9.7

LIMITATION OF LIABILITY58

 

Article 10 TERM AND TERMINATION

58

 

 

10.1

Term58

 

 

10.2

Termination by Gilead58

 

 

10.3

Termination by Durect.58

 

 

10.4

Termination by Either Party.59

 

 

10.5

[Intentionally left blank].60

 

 

10.6

General Effects of Expiration or Termination60

 

Article 11 DISPUTE RESOLUTION

62

 

 

11.1

Dispute Resolution62

 

 

11.2

Initial Escalation62

 

 

11.3

Binding Arbitration62

 

 

11.4

Injunctive Relief63

 

-ii-

--------------------------------------------------------------------------------

TABLE OF CONTENTS

(Continued)

Page

 

 

 

11.5

[***]63

 

 

11.6

Patent and Trademark Dispute Resolution64

 

Article 12 MISCELLANEOUS

64

 

 

12.1

Governing Law64

 

 

12.2

Waiver of Right to Trial by Jury64

 

 

12.3

Assignment64

 

 

12.4

Consequences of Bankruptcy64

 

 

12.5

Notices65

 

 

12.6

Waiver66

 

 

12.7

Severability66

 

 

12.8

Entire Agreement/Modification66

 

 

12.9

Relationship of the Parties66

 

 

12.10

Force Majeure66

 

 

12.11

Compliance with Laws/Other67

 

 

12.12

Counterparts67

 

 

12.13

Exhibits67

 

 

12.14

Further Assurances67

 

 

 

-iii-

--------------------------------------------------------------------------------

 

LICENSE AGREEMENT

This LICENSE AGREEMENT (this “Agreement”) is effective as of July 19, 2019 (the
“Effective Date”) by and between Durect Corporation, a Delaware company having
offices located at 10260 Bubb Road, Cupertino, California 95014 (“Durect”), and
Gilead Sciences, Inc., a Delaware corporation having offices located at 333
Lakeside Drive, Foster City, CA 94404 (“Gilead”).  Gilead and Durect are each
referred to herein by name or, individually, as a “Party” or, collectively, as
“Parties.”

BACKGROUND

A.Durect owns and controls rights in and to certain technologies and
compositions related to and comprising proprietary carrier materials, polymers
and systems for imparting controlled release, manufacturability, injectability
and/or stability-enhancing qualities to pharmaceutical products, including the
technologies and compositions known as the SABER® Formulation Platform (as
defined below).

B.Gilead is in the business of developing and commercializing pharmaceutical
products, including products incorporating the Active Agent (as defined below).

C.Durect and Gilead entered into that certain Research and Development Master
Services Agreement dated [***] (the “MSA”), pursuant to which the Parties agreed
to conduct research and development projects with respect to certain active
agents, and in connection therewith Durect granted Gilead an option to obtain an
exclusive license to exploit pharmaceutical products combining such agents with
Durect’s platform technologies and compositions.

D.Gilead desires to exercise such option and obtain from Durect such license
with respect to pharmaceutical products combining the Active Agent with Durect’s
SABER® Formulation Platform, and Durect desires to grant Gilead such a license,
all in accordance with the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements provided
herein below and other consideration, the receipt and sufficiency of which is
hereby acknowledged, Gilead and Durect hereby agree as follows:

Article 1
DEFINITIONS

The following capitalized terms shall have the meanings given in this Article 1
when used in this Agreement:

1.1“Accounting Standards” means with respect to a Selling Party, the generally
accepted accounting principles (GAAP) of the United States (“GAAP”) as generally
and consistently applied by such Selling Party across its operations.

1.2“Access Territories” [***].  

 

--------------------------------------------------------------------------------

 

1.3“Active Agent” means [***].

1.4“Affiliate” means with respect to a Person, any other Person who is directly
or indirectly controlling, controlled by or under common control with such
Person, for so long as such control exists.  For purposes of this Section 1.4
only, “control” means (a) direct or indirect ownership of more than fifty
percent (50%) of the stock or shares having the right to vote for the election
of directors of such corporate entity or (b) the direct or indirect possession
of the power to direct, or cause the direction of, the policies or actions of
such entity, whether through the ownership of voting securities, by contract or
otherwise.

1.5“Annual Net Sales” means, with respect to a calendar year, aggregate Net
Sales of all Products throughout the Territory during such calendar year, but
excluding, on a Product-by-Product and country-by-country basis, Products in
countries for which the Royalty Term has expired.

1.6“Applicable Laws” means, with respect to a Person’s activities under this
Agreement, any and all applicable laws, ordinances, orders, rules, rulings,
directives, treaties, statutes, interpretations, guidance document, policy,
writ, award, decree, injunction, judgment, stay, restraining order and
regulations of any kind whatsoever of any governmental or regulatory authority
(including the FDA), or national securities exchanges or securities listing
organizations, within the applicable jurisdiction applicable to such Person’s
activities under this Agreement, as may be in effect from time to time.

1.7“Business Day” means any day other than (a) a Saturday, Sunday or any other
day on which commercial banks in San Francisco, California, United States are
authorized or required by law to remain closed, or (b) December 26 through
December 31 (inclusive).

1.8 [***]

1.9“CFP” means [***].

1.10“Combination Product” means [***].

1.11“Commercially Reasonable Efforts” means [***].

1.12“Compulsory License” means, [***].

1.13“Contractor” means any contract research organization, contract manufacturer
or other Third Party with which Durect contracts for the performance of any
Durect Development Activities (including the manufacture of Product for
development) or for the manufacture and supply of Durect Excipients, in each
case in accordance with Section 4.1(b)(6), Section 5.1 or Section 5.3, as
applicable.

1.14“Control” means, with respect to any material, data or technical
information, or intellectual property right, that a Party or any of its
Affiliates (a) owns or (b) has a license (other than a license granted to such
Party under this Agreement) to such material, data or technical information, or
intellectual property right and, in each case (a) and (b), has the ability to
grant to the other Party access, a license, or a sublicense (as applicable) to
the foregoing on the terms and conditions set

-2-

--------------------------------------------------------------------------------

 

forth in this Agreement without giving rise to any payment obligation to any
Third Party or any violation of the terms of any written agreement with any
Third Party.  Notwithstanding anything to the contrary in this Agreement,
[***].  “Controlled” and “Controlling” shall have their correlative meanings.

1.15“Cover” means, with respect to any subject matter, [***].  “Covered” or
“Covering” shall have their correlative meanings.

1.16“Covering Claim” means,[***].

1.17“Dedicated Assets” means any capital assets that Durect acquires after the
Effective Date for the Durect Development Activities.

1.18“Distributor” means any Person appointed by Gilead or any of its Affiliates
or its or their Sublicensees, and that is not an Affiliate of any of them, to
distribute, market and sell the Products in one or more countries in the
Territory, in circumstances where the Person purchases its requirements of
Products from and is invoiced for such purchases by Gilead or its Affiliates or
its or their Sublicensees but does not make any royalty or other payment to
Gilead or its Affiliates or its or their Sublicensees based on sales by such
Person of Products or for (sub)license rights under Durect Intellectual Property
with respect to Products.

1.19“Drug Master File” means any and all submission(s) to any Regulatory
Authority that may be used to provide confidential detailed information
concerning facilities, processes, or articles used in the manufacturing,
processing, packaging, and storing of one (1) or more drugs or excipients
therefor to support regulatory filings, including but not limited to an IND,
MAA, Marketing Approval, an export application, or amendments and supplements to
any of these, as well as any non-clinical, toxicological or other data included
or referenced therein.

1.20“Durect Competing Product” means [***].  

1.21“Durect Costs” means [***].

1.22“Durect Intellectual Property” means, individually and collectively, the
Durect Know-How and Durect Patents.

1.23“Durect Know-How” means [***].

1.24“Durect Patent” means [***].

1.25“EMA” means the European Medicines Agency or any successor agency thereto.

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

1.27“Field” means [***]

1.28“Generic Product” means, [***].

-3-

--------------------------------------------------------------------------------

 

1.29“Generic Sublicensee” means [***].

1.30“IND” means an Investigational New Drug Application, as described in the FDA
regulations, 21 CFR §312.23, including all amendments and supplements thereto,
or similar applications (i.e., a filing that must be made prior to commencing
clinical testing of a pharmaceutical product in human subjects) filed with a
Regulatory Authority in any other jurisdiction.

1.31“Initiation” means, as the context requires, [***].

1.32“Japanese Regulatory Authority(ies)” means, individually and collectively,
the Ministry for Health, Labor and Welfare of Japan, and any successor entity
thereto, and the Pharmaceutical and Medical Devices Agency, and any successor
entity thereto.

1.33“Joint Patents” means [***].

1.34“MAA” (Marketing Approval Application) means an application filed with the
FDA as more fully defined in 21 C.F.R. §314.50 et. seq., or similar application
or submission filed with or submitted to any Regulatory Authority to obtain
permission to commence marketing and sales of a product in any particular
jurisdiction.

1.35“Marketing Approval” means, with respect to a pharmaceutical product in a
particular jurisdiction, approval or other permission by the applicable
Regulatory Authority sufficient to initiate marketing and sales of such product
in such jurisdiction, including [***]Pricing Approval.  

1.36“Material Breach” means a breach of this Agreement that [***].

1.37“Net Receipts” means [***].

1.38“Net Sales” means [***]

in each case [***] as determined from books and records of the Selling Party
maintained in accordance with applicable Accounting Standards.  [***]

In the event a Product is sold as part of a Combination Product in a country,
then the portion of the gross amount invoiced for sale of such Combination
Product in such country that is attributable to Net Sales for purposes of
determining payments based on Net Sales hereunder (the “Net Sales Allocation”)
shall be determined as follows:

(y)in the event that such Combination [***]

(z)(i) in the event that such Combination Product [***]

For clarity, in the event [***] (as adjusted in accordance with clauses [***]
above).

1.39“Non-Proprietary Product” means, with respect to a [***].

1.40“Other Formulation Platform(s)” means [***].

-4-

--------------------------------------------------------------------------------

 

1.41“Patent” means any of the following, whether existing now or in the future
anywhere in the world: (a) any national, regional and international patents and
patent applications, including provisional patent applications; (b) any patent
applications filed from such patents, patent applications or provisional
applications or from an application claiming priority thereto, including
divisionals, continuations, continuations-in-part, substitutions, provisionals,
converted provisionals, and continued prosecution applications; (c) any patents
that have issued or in the future issue from the foregoing patent applications
described in clauses (a) and (b), including utility models, petty patents and
design patents and certificates of invention; and (d) any extensions or
restorations by existing or future extension or restoration mechanisms,
including revalidations, reissues, re-examinations and extensions (including any
supplementary protection certificates and the like) of the foregoing patents or
patent applications described in clauses (a), (c) and (d).

1.42“Person” means any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization or government or
political subdivision thereof.

1.43“Phase 1 Clinical Trial” means [***].

1.44“Phase 2 Clinical Trial” means [***].

1.45“Phase 3 Clinical Trial” means [***] .

1.46“Pricing Approval” means [***].

1.47“Product” means [***].  

1.48“Product Technology” means[***].

1.49“Proprietary Product” means, [***].

1.50“Prosecution” means, with respect to a Patent, the filing, preparation,
prosecution (including conducting all correspondence and interactions with any
patent office and seeking, conducting and defending any and all interferences,
inter partes reviews, reissue proceedings, reexaminations, and oppositions and
similar proceedings), and maintenance thereof, including obtaining patent term
extensions, regulatory exclusivity, supplemental protection certificates, or
their equivalents with respect thereto.  When used as a verb, “Prosecute” means
to engage in Prosecution.

1.51“Regulatory Authority” means any federal, national, multinational, state,
provincial or local regulatory agency, department, bureau or other governmental
entity with authority over the marketing, development, commercialization,
manufacture, sale or other use or exploitation (including the granting of
Marketing Approvals) of Product in any jurisdiction, including the EMA, FDA and
Japanese Regulatory Authorities.

1.52“Regulatory Filing” means any filing or application with any Regulatory
Authority, including INDs, MAAs and authorization, approvals or clearances
arising from the foregoing, including Marketing Approvals and any related
packaging and pricing approvals, and all correspondence with any relevant
Regulatory Authority, as well as minutes of any material

-5-

--------------------------------------------------------------------------------

 

meetings, telephone conferences or discussions with any Regulatory Authority, in
each case with respect to Product.

1.53“SABER® Formulation Platform” or “SFP” means [***].

1.54“SAIB” means [***].

1.55“Sublicensee” means a Third Party that has received, directly or indirectly,
from Gilead or its Affiliate a sublicense, under Section 3.1(b), of the rights
granted to Gilead, provided [***]; provided further that [***].

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

1.57“Third Party” means any Person other than Gilead, Durect or their respective
Affiliates.

1.58“Third Party Supplier” means a contract manufacturer engaged for
manufacturing Product by Gilead and meeting the conditions set forth in
Section 5.2(e).

1.59“Valid Claim” means a claim of [***].

1.60“Violation” means that a Party or any of its officers or directors or any
other personnel of such Party (or other permitted agents of such Party
performing activities hereunder including Third Party contractors and their
respective officers and directors) has been:  (a) convicted of any of the
felonies identified among the exclusion authorities listed on the
U.S. Department of Health and Human Services, Office of Inspector General (OIG)
website, including 42 U.S.C. 1320a-7(a)
(http://oig.hhs.gov/exclusions/authorities.asp); (b) identified in the OIG List
of Excluded Individuals/Entities (LEIE) database
(http://exclusions.oig.hhs.gov/) or otherwise excluded from contracting with the
federal government (see the System for Award Management (formerly known as the
Excluded Parties Listing System) at http://sam.gov/portal/public/SAM/); or (c)
listed by any U.S. federal agency as being suspended, debarred, excluded or
otherwise ineligible to participate in federal procurement or non-procurement
programs, including under 21 U.S.C. 335a
(http://www.fda.gov/ora/compliance_ref/debar/) (each of (a), (b) and (c)
collectively the “Exclusions Lists”).

1.61Additional Definitions.  Each of the following capitalized terms shall have
the meanings set forth in the corresponding Sections of this Agreement indicated
below:

 

 

Definitions

Section

Acquiring Entity

1.8

[***]

[***]

Agreement

Preamble

Alliance Manager

2.5

 

[***]

Auditable Party

6.8

Auditing Party

6.8

Definitions

Section

Bankruptcy Code

12.4

Chairperson

2.1(c)

[***]

[***]

CMC

4.1(a)(5)

Commercialization Milestone Event

6.3(b)

-6-

--------------------------------------------------------------------------------

 

 

Definitions

Section

Definitions

Section

Commercialization Milestone

Payment

6.3(b)

Definitions

Section

 

 

Compulsory Licensee

6.4(d)

Confidential Information

8.1

Anticorruption Laws

5.1(h)(5)

Controlled or Controlling

1.13

Covered or Covering

1.14

[***]

[***]

Data

7.1(a)

Defending Party

7.6

Development Milestone Event

6.3(a)

Development Milestone Payment

6.3(a)

Dispute

11.1

Dollars or $

6.5

Durect

Preamble

[***]

[***]

Durect Controlled Patents

7.4(a)

Durect Development Activities

4.1(b)(1)

Durect Excipients

4.2(b)

Durect Indemnitees

9.5(b)

Durect Sole Invention

7.2

Durect Trademark

4.4(b)

Effective Date

Preamble

Enforcement Action

7.7(b)

Enforcing Party

7.7(d)

Exclusions Lists

1.60

FD&C Act

5.1(h)(4)

FCPA

5.1(h)(5)

Facilities

5.1(a)(2)

GAAP

1.1

Gilead

Preamble

Gilead Data

7.1(a)

Gilead Indemnitees

9.5(a)

Gilead Sole Invention

7.2

Gilead Specific Information

8.1(e)

[***]

[***])

[***]

[***]

Definitions

Section

Indemnify

9.5(a)

Invention

7.2

JAMS Rules

11.3(b)

JDC

2.1(a)

Joint Data

7.1(a)

Joint Invention

7.2

Losses

9.5(a)

Manufacturing Notice

5.2(c)

MSA

Preamble

Net Sales Allocation

1.38

Non-Conforming Product

5.1(i)(1)

Objection Notice

5.1(i)(2)

OECD Convention

5.1(h)(5)

Officials

4.6(b)

Optional Supply

5.2(a)

Original Payment

6.6

Party or Parties

Preamble

Payment

4.6(b)

Preliminary Supply Activities

5.1(a)(3)

Product Development Plan or PDP

4.1(a)(1)

Product Warranty

5.1(h)(9)

Product Trademarks

4.4(b)

Quality Agreement

5.1(g)

Requirements

4.1(a)(1)

Royalty Term

6.4(a)

Selling Party

1.38

[***]

[***]

Specifications

5.1(h)(1)

Technology Transfer Activities

5.2(d)(2)

Technology Transfer Plan

5.2(d)(1)

Term

10.1

Third-Party Claim

9.5(a)

U.K. Bribery Act

5.1(h)(5)

Upfront Fee

6.2

Work Plan

5.1(b)(2)

 

1.62Interpretation.  The captions and headings to this Agreement are for
convenience only, and are to be of no force or effect in construing or
interpreting any of the provisions of this Agreement.  Unless specified to the
contrary, references to Articles, Sections or Exhibits mean the

 

--------------------------------------------------------------------------------

 

particular Articles, Sections or Exhibits to this Agreement and references to
this Agreement include all Exhibits hereto.  Unless the context otherwise
clearly requires, whenever used in this Agreement:  (a) the words “include” or
“including” shall be construed as incorporating, also, “but not limited to” or
“without limitation;” (b) the word “will” shall be construed in the imperative
having the same meaning as the word “shall;” (c) the word “day” or “year” means
a calendar day or year; (d) the word “notice” requires notice in writing
(whether or not specifically stated) and shall include notices, consents,
approvals and other written communications contemplated under this Agreement;
(e) the words “hereof,” “herein,” “hereby” and derivative or similar words refer
to this Agreement (including any Exhibits); (f) the word “or” shall be construed
as the inclusive meaning identified with the phrase “and/or”; (g) provisions
that require that a Party, the Parties or the JDC “agree,” “consent” or
“approve” or the like shall require that such agreement, consent or approval be
specific and in writing, whether by written agreement, letter, approved minutes
or otherwise; (h) words of any gender include the other gender; (i) words using
the singular or plural number also include the plural or singular number,
respectively; (j) references to any specific law, rule or regulation, or
article, section or other division thereof, shall be deemed to include the
then-current amendments thereto or any replacement law, rule or regulation
thereof; (k) neither Party or its Affiliates shall be deemed to be acting “on
behalf of” or “under authority of” the other Party hereunder; and (l) the phrase
“non-refundable” shall in no way limit either Party’s right to pursue or receive
damages in connection with any breach of this Agreement.

Article 2
GOVERNANCE

2.1Joint Development Committee.

(a)Establishment.  Within [***] after the Effective Date, Gilead and Durect
shall establish a joint development committee (the “JDC”) to oversee, review,
monitor and coordinate the activities of the Parties under this Agreement and
serve as a forum for the exchange and discussion of information with respect
thereto, to the extent expressly and as more specifically provided in Sections
2.1(b), 2.2 and 2.3.

(b)Responsibilities.  The JDC shall be responsible for: (i) overseeing the
Parties’ activities under this Agreement; (ii) reviewing, monitoring and
coordinating the Parties’ activities relating to Durect Development Activities
under this Agreement; (iii) facilitating access to and the exchange of
information between the Parties related to the development of Product, including
technology transfer; (iv) reviewing and commenting on each Product Development
Plan and any amendment thereto (including as provided in Section 4.1(a)(4)); (v)
establishing, reviewing and approving each Technology Transfer Plan, including
the budget therein, and any amendments thereto; and (vi) undertaking or
approving such other matters as are specifically provided for the JDC under this
Agreement.

(c)Membership.  The JDC shall be comprised of an equal number of representatives
from each of Durect and Gilead, and unless otherwise agreed such number shall be
[***], with each Party’s Alliance Manager attending each JDC meetings as a
non-voting attendee.  Either Party may replace its respective JDC
representatives at any time with prior notice to the other Party in accordance
with Section 12.5, provided that such replacement is of comparable authority

 

--------------------------------------------------------------------------------

 

and scope of functional responsibility within that Party’s organization as the
individual he or she is replacing.  Unless otherwise agreed by the Parties, the
JDC shall have at least one (1) representative with relevant decision-making
authority from each Party such that the JDC is able to effectuate all of its
decisions within the scope of its responsibilities.  [***]as the chairperson for
the JDC [***] (the “Chairperson”), and Gilead shall appoint the [***]
Chairperson upon written notice to Durect.  The Chairperson of the JDC shall be
responsible for calling meetings, preparing and circulating an agenda in advance
of each meeting (any such agenda will include every matter requested by either
Party), and circulating minutes of each meeting within [***] thereafter, which
minutes shall reflect decisions of the JDC made in accordance with Section 2.2
and [***].

(d)Meetings.  The details of JDC activities, including frequency of JDC
meetings, shall be discussed and agreed between the Parties in good faith on an
ongoing basis as the development activities with respect to Product
progress.  However, unless the Parties agree otherwise, the JDC shall hold
meetings (either in person or by teleconference) at least [***] prior to [***],
and thereafter, the JDC shall meet at least [***], or as otherwise agreed by the
Parties.  Each Party shall bear its own costs related to its participation in
the JDC, including costs associated with its representatives attending such
meetings.  As appropriate, other employees of the Parties may attend JDC
meetings as observers upon at least [***] prior written notice to the other
Party before the applicable meeting, but no Third Party personnel may attend
unless otherwise agreed by the Parties in writing, in which case such Third
Party personnel shall [***]. Each Party may also call for special meetings to
resolve particular matters requested by such Party.

Decision Making

.  Decisions of the JDC shall be made by consensus of the members present in
person or by other means (e.g., teleconference) at any meeting, with at least
one (1) representative from each Party participating in making each such
decision and each Party will ensure that its member(s) participating in any such
meeting may effectuate any decisions.  The members of the JDC shall at all times
use good faith efforts to reach consensus on matters properly before the JDC;
however, in the event that the JDC is unable to reach consensus with respect to
a particular matter despite such good faith efforts, then either Party may, by
written notice to the other, refer the matter to the senior officers of the
Parties for resolution by good faith discussions for a period of at least [***]
.  In the event that the senior officers of the Parties are unable to reach
agreement with respect to such matter within such [***], [***]; provided,
however, [***].  Notwithstanding anything herein to the contrary, the JDC shall
not have any authority or right (A) to modify, amend or waive any term or
condition of this Agreement, (B) to determine any issue in a manner that would
conflict with any term or condition of this Agreement, (C) to make any
determination that any Party is in breach of this Agreement, or (D) to make a
decision that is expressly stated to require the mutual written agreement or
consent of the Parties.

Day-to-Day Responsibilities

.  Each Party shall: (a) be responsible for day-to-day implementation and
conduct of the activities hereunder for which it has or is otherwise assigned
responsibility under this Agreement, provided that such implementation is
consistent with the terms and conditions of this Agreement or the decisions of
the JDC within the scope of its authority as provided herein; and (b) keep the
other Party informed as to the progress of such activities as required by this
Agreement and as otherwise determined by the JDC.

-9-

--------------------------------------------------------------------------------

 

Dissolution of the JDC

.  The JDC shall continue to exist until the date [***], or such other end date
as may be mutually agreed upon by the Parties in writing.  From and after such
date, the JDC shall be dissolved and shall have no further obligations under
this Agreement, and Gilead shall directly handle any matters formerly delegated
to the JDC (subject to Section 2.2).

Alliance Managers

.  Promptly after the Effective Date, each Party shall appoint an individual to
act as alliance manager for such Party, which may be one of the representatives
of such Party on the JDC (each, an “Alliance Manager”).  During the Term, the
Alliance Managers shall be the primary point of contact for the Parties
regarding the development activities contemplated by this Agreement.  The
Alliance Managers shall attend all meetings of the JDC and shall be responsible
for assisting the JDC in performing its informational and review
responsibilities.  The name and contact information for each Party’s Alliance
Manager, as well as any replacement(s) chosen by such Party, in its sole
discretion, from time to time, shall be promptly provided to the other Party in
accordance with Section 12.5.

Article 3
LICENSES

3.1License Grant.

(a)License to Product.  Subject to the terms and conditions of this Agreement,
Durect hereby grants to Gilead an exclusive (even as to Durect), sublicensable
(through multiple tiers, subject to the provisions of Section 3.1(b)),
non-transferrable (except as set forth in Section 12.3), worldwide,
royalty-bearing right and license under the Durect Intellectual Property to
research, develop, manufacture and have manufactured (in accordance with
Article 5), use, offer for sale, sell, import, export, or otherwise exploit
Products (including as Combination Product(s)), in each case in the Field in the
Territory.  Gilead shall have the right to exercise such license through its
Affiliates, provided that Gilead shall be responsible for its Affiliates’
compliance with the terms of this Agreement including all relevant restrictions,
limitations and obligations. For clarity, the license granted under this Section
3.1(a) expressly excludes [***].

(b)Sublicenses.  The license granted under Section 3.1(a) includes the right to
grant and authorize sublicenses (through multiple tiers) within the scope
thereof to Third Parties, subject to the following:

(1)Gilead shall, [***]and

(2)Gilead shall be responsible for compliance of its Sublicensees with the terms
of this Agreement including all relevant restrictions, limitations and
obligations.

(c)Durect Rights.  The Parties acknowledge and agree that Durect has the rights
and licenses under the Durect Intellectual Property to conduct such activities
assigned to it under this Agreement or that it otherwise has the right to
conduct under this Agreement, including the Durect Development Activities and
those manufacturing and supply activities to be conducted by Durect pursuant to
Article 5.

Option for Other Products

.  

-10-

--------------------------------------------------------------------------------

 

(a)Generally.  During [***], Durect hereby grants to Gilead an exclusive option
to obtain, on an active ingredient-by-active ingredient basis [***], an
exclusive, worldwide license under Durect’s intellectual property to research,
develop, manufacture and have manufactured, use, offer for sale, sell, import,
export or otherwise exploit products incorporating active ingredients (other
than the Active Agent) for [***], which products [***], in each case in the
Field in the Territory.

(b)Exceptions.  Notwithstanding the foregoing Section 3.2(a), [***].

(c)Option Terms.  If Gilead provides notice exercising the option described in
Section 3.2(a) with respect to an active ingredient during the period set forth
in Section 3.2(a), the Parties shall promptly and acting in good faith
expeditiously finalize a new license agreement for such active ingredient[***];
provided, however, that[***].      

No Other Rights

.  Each Party acknowledges that the rights and licenses granted under this
Article 3 and elsewhere in this Agreement are limited to the scope expressly
granted.  Accordingly, except for the rights expressly granted under this
Agreement, no right, title, or interest of any nature whatsoever is granted,
whether by implication, estoppel, reliance, or otherwise, by either Party to the
other Party.  All rights with respect to know-how, Patents or other intellectual
property rights that are not specifically granted herein are reserved to the
owner thereof.

 

3.4[***].

Article 4
DEVELOPMENT, REGULATORY MATTERS AND COMMERCIALIZATION

4.1Development.

(a)General / Option.

(1)Subject to the terms and conditions of this Agreement, the Parties intend to
collaborate on the development [***].  Gilead will prepare an initial, high
level development plan for each Product, which plan shall set forth the initial
development activities to be conducted under this Agreement (any such product
development plan, as may be updated from time to time by Gilead through the JDC
and subject to Section 4.1(a)(4)), is hereinafter referred to as a “Product
Development Plan” or “PDP”).  Gilead will [***].  Durect shall [***].  The
timelines, anticipated Durect Costs, and other details associated with
performing the Durect Development Activities will be set forth in each PDP (such
details, the “Requirements”).  In the event that [***].  If Gilead chooses the
foregoing clause (ii) option, then [***].

(2)An initial, high level Product Development Plan for the first Product is
attached hereto as Exhibit 4.1(a)(2).

(3)At Gilead’s request from time to time, the Parties (including, through the
JDC) shall discuss in good faith each Product Development Plan (or an amendment
thereto) for each different (i.e., alternative formulation of) Product,
including discussing activities that could be potentially performed by
Durect.  [***].

-11-

--------------------------------------------------------------------------------

 

(4)From time to time upon agreement of the Parties (through the JDC), but no
less frequently than [***], the Parties (through the JDC) shall amend each PDP
to update activities for which Durect will be responsible and will obtain
reimbursement from Gilead.

(5)Each PDP may include, among other things, activities related to [***].  

(6)Except for the Durect Development Activities, which will be the
responsibility of and conducted by Durect or its Contractors, and subject to the
oversight of the JDC, [***] Gilead, directly or through its Affiliates or
Sublicensees, shall [***]; provided that [***], [***]  Gilead shall keep Durect
reasonably informed as to the progress of such development activities by
providing written reports of such activities and the data resulting therefrom on
[***] basis, or otherwise upon Durect’s reasonable request from time-to-time,
until, on a Product-by-Product basis, the earlier [***]  It is understood and
agreed that, as between the Parties, all development efforts for Product for the
Field in the Territory shall be at the sole expense of Gilead including
reimbursement of the Durect Development Activities that are pre-approved in
writing by Gilead, as set forth in Section 6.1.

(b)Durect Development Activities.

(1)Without limiting the foregoing in Section 4.1(a), on a PDP-by-PDP basis,
Durect shall [***], and Gilead shall [***] in accordance with the timelines,
budget, and deliverables set forth in the applicable PDP.  

(2)Durect shall conduct the Durect Development Activities using [***] in
accordance with each PDP.  Durect shall keep Gilead reasonably informed as to
the progress of all such Durect Development Activities, including by [***] and
more frequent verbal updates of such activities and the results thereof upon
Gilead’s reasonable request, in each case for so long as Durect is conducting
any such activities.

(3)Durect shall, for a period of no less than [***] (or such longer period of
time as may be required by Applicable Law) following the completion of all
Durect Development Activities, maintain (and shall cause its Affiliates and
Contractors to maintain) complete, current and accurate records of all Durect
Development Activities, and all data and other information resulting from such
activities.  Such records shall fully and properly reflect all work done and
results achieved in the performance of the Durect Development Activities in good
scientific manner appropriate for regulatory and Patent purposes, and shall be
prepared and maintained in accordance with Applicable Law.  Durect shall
document (and shall cause its Affiliates and Contractors to document) all
studies conducted by or on behalf of it hereunder in formal written study
records according to Applicable Law.  Gilead shall have the right to review and
copy such records (which records may be [***]) at reasonable times, as
reasonably requested by Gilead.

(4)Gilead shall have the right to audit and inspect Durect’s (and its
Affiliates’ and, [***], Contractors’) performance of activities in connection
with this Agreement (including the Durect Development Activities), which shall
include the right to access Durect’s records and facilities (including records
and facilities of its Affiliates or, [***], Contractors, which records may be
[***]) as reasonably requested by Gilead, and subject to Gilead’s reasonable
effort to

-12-

--------------------------------------------------------------------------------

 

provide at least [***] prior written notice, to confirm compliance with the
requirements of, and performance under, this Agreement.  Such inspection right
shall not be exercised more than [***] in any calendar year, unless for cause,
and Gilead shall use reasonable effort not to unreasonably interfere with the
Durect Development Activities or other business operations of Durect or its
Affiliates or Contractors, as applicable.  Notwithstanding anything to the
contrary, if Gilead has reason to believe that Durect’s (or its Affiliates’ or
Contractors’) performance of activities in connection with this Agreement is not
being, or was not, performed in compliance with the terms of this Agreement,
Gilead may undertake an inspection and audit without advance notice to Durect
(or its Affiliates or, [***], Contractors, as applicable). Durect shall use
Commercially Reasonable Efforts to [***]consistent with this Section 4.1(b)(4)
and, [***] without Gilead’s prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed.

(5)Gilead shall reimburse Durect for the Durect Development Activities that are
pre-approved in writing by Gilead, in accordance with Section 6.1.  For clarity,
Durect shall not be obligated to perform any activities for which Gilead does
not agree to reimburse the Durect Costs therefor.

(6)Durect shall commit such resources (including employees, agents, consultants,
facilities, equipment and materials) as are necessary to [***] perform the
Durect Development Activities, including using reasonably qualified personnel to
perform the Durect Development Activities.  Durect shall have the right to
engage Contractors for the performance of Durect Development Activities;
provided that, (x) prior to engaging any Contractor, [***], (y) any Contractor
engaged by Durect shall be bound by a written agreement with Durect that is
consistent with the terms of this Agreement, including intellectual property
ownership and confidentiality provisions consistent with those set forth in
Article 7 and Article 8, and (z) Durect shall remain responsible and liable for
its Contractors’ compliance with the terms of this Agreement, including all
relevant restrictions, limitations and obligations, and further including any
breach thereof; provided that [***].  For clarity, Durect’s Contractors as of
the Effective Date are listed on Exhibit 4.1(b)(6), and shall be deemed selected
by Durect [***]; provided, that Durect shall [***]

(7)Durect shall be solely responsible for the safety and health of its
employees, consultants and visitors, and for compliance with all Applicable Laws
related to health, safety and the environment, including providing its
employees, consultants and visitors with all required information and training
concerning any potential hazards involved in performing such activities and any
precautionary measures to protect its employees from any such hazards.  Durect
shall train its personnel assigned to perform activities under this Agreement to
ensure compliance with each PDP and ensure that any personnel so assigned shall
be capable of professionally and competently performing the Durect Development
Activities.

(8)In addition to Gilead’s obligation to provide Active Agent for purposes of
Durect’s manufacture and supply of Product pursuant to Section 5.1, Gilead, at
its expense, shall provide all Active Agent required for the [***] to be carried
out by Durect under each PDP and, pursuant to each PDP, Gilead shall further
provide [***]as specified in each PDP, and all such [***]shall be deemed
Gilead’s Confidential Information.  Without limiting the foregoing, Gilead has
provided or, prior to delivering any particular Active Agent, will provide to
Durect [***] that are applicable to such Active Agent and its safe and lawful
storage, use, handling and disposal.  Durect

-13-

--------------------------------------------------------------------------------

 

agrees not to use any Active Agent or any other tangible materials provided by
Gilead under this Agreement (which other tangible materials are set forth in
each PDP) for any purpose other than for the activities specifically
contemplated to be performed by Durect under this Agreement and set forth in
each PDP, and Durect shall not distribute or provide access to any Active Agent
or such other materials provided by Gilead to a Third Party (other than Durect’s
Contractors for the foregoing purpose) without Gilead’s prior written
permission.  Notwithstanding anything to the contrary herein, [***].  Without
limiting the foregoing, Durect shall not chemically or biologically modify the
Active Agent or such other materials except solely to conduct the activities set
forth in each PDP.  Upon termination or expiration of each PDP or this
Agreement, Durect shall, at Gilead’s reasonable expense and as instructed by
Gilead, return to Gilead or destroy (and certify such destruction in writing)
all unused Active Agent or such other materials provided by Gilead to Durect for
the performance of the Durect Development Activities.  Except as specifically
provided for hereunder, no rights or licenses are granted by Gilead to the
Active Agents by implication, estoppel or otherwise, and Gilead specifically
reserves all such rights.  The obligations of Durect under this Section
4.1(b)(8) shall also apply with respect to any Person to whom Durect provides
any Active Agents or such other materials, or delegates any of its activities
hereunder, and Durect shall be responsible for such Person’s compliance with
this Section 4.1(b)(8).  ANY MATERIALS PROVIDED BY GILEAD UNDER THIS SECTION
4.1(B)(8) (INCLUDING ACTIVE AGENT) ARE PROVIDED WITHOUT REPRESENTATION OR
WARRANTY OF ANY SORT, WHETHER WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING ANY
REPRESENTATION OR WARRANTY OF QUALITY, PERFORMANCE, MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE, AND GILEAD MAKES NO REPRESENTATION THAT THE USE OF
SUCH MATERIALS WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHT OF ANY
THIRD PARTY.

4.2Regulatory Matters.

(a)Subject to Section 4.2(b), Gilead (itself or through its Affiliates or
Sublicensees) shall (as between the Parties) control, have the exclusive right,
and be solely responsible for, at its expense, filing, obtaining and maintaining
all Regulatory Filings (including Marketing Approvals) for development and
commercialization of Product for the Field in the Territory.  Gilead, directly
or through its Affiliates or Sublicensees, shall [***].  Notwithstanding the
foregoing, Gilead shall provide to Durect [***], in each case as soon as
reasonably practicable.  Durect shall provide existing information in the
Control of Durect and assistance as reasonably requested by Gilead to support
Regulatory Filings, including without limitation, responding to inquiries of
Regulatory Authorities if requested by Gilead, and inspections of Durect records
and facilities by Regulatory Authorities if reasonably requested, in each case
at [***]expense.  

(b)As between the Parties, Durect shall control and be solely responsible for,
at its expense, filing, obtaining and maintaining Drug Master Files with respect
to [***] (collectively, the “Durect Excipients”).  For so long as [***], Gilead,
its Affiliates or Sublicensees shall have the right, at no cost, to
(i) reference such Drug Master Files, and (ii) in any country in the Territory
where there is no regulatory framework for referencing Drug Master Files, access
any necessary documents and data in such Drug Master Files, in each case (i) and
(ii) solely with respect to [***]for the purpose of obtaining and maintaining
Regulatory Filings (including Marketing Approvals) for Product under this
Agreement and subject to Gilead’s obligations of confidentiality

-14-

--------------------------------------------------------------------------------

 

under Article 8; and Durect shall provide appropriate letters of reference to
enable such reference right.  Durect will provide to applicable Regulatory
Authorities any information Controlled by Durect required by such Regulatory
Authorities to support the Drug Master Files in accordance with timelines
defined by such Regulatory Authorities applicable to the Drug Master Files or
any Regulatory Filing referencing the Drug Master Files.  Gilead will have the
right, and will be provided a reasonable period of time, not to exceed [***]in
each event unless otherwise agreed between the Parties, to review and comment on
the Drug Master Files or revisions thereto prior to each such submission by
Durect, which comments of Gilead will be [***].  Such reviews shall be
[***].  Durect shall notify Gilead (x) of the submission date for the Drug
Master Files to applicable Regulatory Authorities at least [***] prior to such
submission or revision thereto, (y) upon the filing of the Drug Master Files
with applicable Regulatory Authorities and (z) promptly regarding any material
issues arising with respect to the filing or maintenance of such Drug Master
Files, including any inspections of Durect’s facilities or records to facilitate
acceptance by applicable Regulatory Authorities of the Drug Master Files as
supporting Gilead’s application for approval by applicable Regulatory
Authorities of the Product.  Durect shall notify Gilead within [***] of Durect’s
receipt from applicable Regulatory Authorities of any notices of deficiency or
inspections [***].  Durect shall notify Gilead of any other notice of deficiency
when Durect believes such notice has a reasonable probability of [***].  Durect
agrees to use Commercially Reasonable Efforts to promptly resolve any such
deficiency, including accepting reasonable direction from Gilead on the manner
of resolving such deficiency, and shall keep Gilead informed of Durect’s
progress in correcting each such deficiency.  The cost of Durect’s personnel
associated with resolving such deficiency shall be borne solely by Durect.

(c)Gilead shall own the MAA and Marketing Approvals for the Product and Durect
shall own any and all Drug Master Files filed by Durect with respect to the
Durect Excipients.

(d)To the extent requested by Gilead, and at [***] expense, Durect shall
participate in meetings and other contact with Regulatory Authorities regarding
the Drug Master Files with respect to Durect Excipients or the manufacture of
the Product, including appearing directly in front of the FDA or EMA or Japanese
Regulatory Authority.  If Durect is contacted directly by the FDA or any other
Regulatory Authority concerning any Regulatory Filing by Gilead, Durect shall
[***].

Pharmacovigilance

.  The Parties acknowledge and agree that [***].

4.4Commercialization.

(a)General.  Gilead, directly or through its Affiliates or Sublicensees, shall,
as between the Parties, be solely responsible for, [***] commercializing (e.g.,
sell, offer for sale, detail, advertise, promote and distribute) [***] from and
after Marketing Approval [***].  It is understood and agreed that, as between
the Parties, all commercialization efforts with respect to Product for the Field
in the Territory shall be at the sole expense of Gilead, and that Gilead shall
have the exclusive right and decision-making authority with respect to all such
commercialization efforts.

-15-

--------------------------------------------------------------------------------

 

(b)Trademarks.  As between the Parties, Gilead shall have the sole right to
select the trademark(s) to be used in connection with Product in the Territory
(the “Product Trademarks”), and shall have all rights in and to such Product
Trademarks.  As between the Parties, Gilead will be responsible for the filing,
prosecution, maintenance and defense of all registrations of the Product
Trademarks, and will be responsible for the payment of any costs relating to
filing, prosecution, maintenance and defense of Product Trademarks in the
Territory.  In addition, to the extent not prohibited by Applicable Laws, [***],
Gilead, directly and/or through its Affiliates or Sublicensees, may seek to
obtain approval from the Regulatory Authorities to include on the labels and
packaging of Product and promotional materials for the Product (i) [***]and
(ii) [***].  If Gilead so elects, Durect shall provide the text and style to
Gilead of the Durect trademark (the “Durect Trademark”).  To the extent such
approval is received (and in any event in situations where approval is not
necessary), and in all cases in Gilead’s sole discretion, Gilead may include the
Durect Trademark on all of the foregoing materials.  Durect hereby grants to
Gilead and its Affiliates and Sublicensees a nonexclusive, nontransferable,
limited right to use the Durect Trademark on the foregoing materials to
acknowledge the Parties’ license arrangement in connection with the
commercialization of Product.  Notwithstanding the foregoing or anything to the
contrary herein, [***].  For clarity, the Parties acknowledge and agree [***].

Other Activities

.  The Parties acknowledge that, except as expressly provided in this Agreement,
(a) each of them may now or in the future engage in research, manufacturing,
development or commercialization activities that utilize technologies similar to
those contemplated by this Agreement, (b) nothing in this Agreement, including
any obligation to promote Products or any restriction on the use of Confidential
Information, shall create any obligation to utilize a separate sales force for
Products from that used for other products, (c) subject to [***], neither Party
shall be prevented from using any publicly available research results or other
information (including any publicly available information of the other Party) to
the same extent as Third Parties generally are legally permitted to do so, and
(d) it is anticipated that personnel in sales, marketing, clinical and
regulatory functions, regardless of level, will participate in multiple programs
and that management personnel will by nature of their leadership positions
participate in multiple programs.

4.6Compliance Provisions.

(a)General.  Each Party will conduct, and will ensure its Affiliates conduct,
all activities hereunder in compliance with all Applicable Law, and good
business ethics or good academic ethics, as applicable, and each Party will
promptly after it becomes aware notify the other Party in writing of any
deviations from any of the foregoing.  In addition, each Party hereby certifies
that it has not employed or otherwise used in any capacity, and will not employ
or otherwise use in any capacity, the services of any Person (i) debarred under
United States law (including Section 21 U.S.C. 335a) or any foreign equivalent
thereof or (ii) that is the subject of an FDA debarment investigation or
proceeding (or similar proceeding by any Regulatory Authority outside the United
States), in each case, in performing any portion of the activities
hereunder.  Each Party will notify the other Party in writing immediately if any
such debarment occurs or comes to its attention, and will, with respect to any
person or entity so debarred promptly remove such person or entity from
performing any such activities, function or capacity related to any such
activities.

-16-

--------------------------------------------------------------------------------

 

(b)Governments and International Public Organizations.  Neither Party will make
any payment (and shall ensure that its respective Affiliates do not make any
payment), either directly or indirectly, of money or other assets, including any
compensation Durect derives from this Agreement (hereinafter collectively
referred to as a “Payment”), to government or political party officials,
officials of international public organizations, candidates for public office,
or representatives of other businesses or persons acting on behalf of any of the
foregoing (hereinafter collectively referred to as “Officials”) where such
Payment would constitute a violation of any Applicable Law in connection with
this Agreement.  In addition, [***].

(c)No Authority.  Each Party acknowledges that no employee of such Party or its
Affiliates will have authority to give any direction, either written or oral,
relating to the making of any commitment by the other Party or its agents to any
Third Party in violation of terms of this or any other provisions of this
Agreement.

(d)Exclusions Lists.  Each Party shall not use (and will cause its respective
Affiliates not to use) in the performance of any activities under this Agreement
any Person (including any employee, officer, director or Third Party contractor)
who is (or has been) on the Exclusions List, or who is (or has been) in
Violation, in the performance of any activities hereunder.  Each Party hereby
certifies to the other Party that, [***].

Article 5
SUPPLY

Initial Development Supply of Product

.  

(a)General.  

(1)Durect shall, itself or through one (1) or more Contractors, supply to
Gilead, its Affiliates or its Sublicensees pursuant to the terms and conditions
of this Section 5.1 all quantities of Product and corresponding placebo ordered
by Gilead as reasonably required for the preclinical, non-clinical and Phase 1
Clinical Trial development of Product for which Gilead is responsible under this
Agreement [***].  Such supply shall be [***] (Incoterms 2010) [***].  At the
time of delivery of each shipment of Product under this Section 5.1, Durect
shall provide to Gilead [***], and containing any other information agreed upon
by the Parties.  

(2)Durect and its Contractors shall manufacture Product for Gilead only at
Durect’s or its Contractor facilities disclosed previously in writing to
Gilead.  Such facilities as of the Effective Date are set forth on Exhibit
5.1(a)(2) (collectively, the “Facilities”).

(3)Gilead and Durect acknowledge and agree that  [***] (the “Preliminary Supply
Activities”).  Durect and Gilead hereby agree, ratify and confirm that
notwithstanding the Effective Date of this Agreement, the terms and conditions
of this Agreement, including this Section 5.1, shall, apply to Durect’s
performance of the Preliminary Supply Activities. Durect and Gilead hereby agree
that they were and are bound by the terms and conditions of this Agreement,
including this Section 5.1, during the performance of such Preliminary Supply
Activities

-17-

--------------------------------------------------------------------------------

 

and that such ratification and confirmation shall not constitute a waiver of any
such terms and conditions.

(b)Supply.

(1)Phase 1 Clinical Trial Supply.  Set forth on Exhibit 5.1(b)(1) are the
quantity and batch numbers of Product and placebo to be supplied for first Phase
1 Clinical Trial purposes.  Following the Effective Date, the Parties shall
discuss and agree in writing upon the amount and delivery dates for supply of
Product and corresponding placebo, promptly upon request by Gilead, for any
other preclinical, non-clinical or Phase 1 Clinical Trial development of Product
for which Gilead is responsible under this Agreement in accordance with this
Section 5.1(b).

(2)Work Plans.  Following the Effective Date, Gilead and Durect shall mutually
agree upon a work plan for each order of Product and placebo to be manufactured
and supplied under this Agreement, which plan shall be in writing and in
substantially the same as form as Exhibit 5.1(b)(2) (each, a “Work Plan”).  From
time the Parties shall discuss each Work Plan, with [***].  Durect shall supply
Product to Gilead in accordance with each Work Plan and the terms of this
Agreement, and shall make each delivery in accordance with the delivery dates
and locations specified in the Work Plan (for clarity, as may be amended through
[***]).

(c)Failure to Supply.  If Durect is unable to supply sufficient quantities of
Product or corresponding placebo to fulfill the quantities reasonably required
for the preclinical, non-clinical and Phase 1 Clinical Trial development of
Product for which Gilead is responsible under this Agreement, [***].

(d)Packaging and Labeling.  Durect shall package and load Product in accordance
with Gilead’s packaging and labeling requirements [***], the Quality Agreement
[***] and [***]and in compliance with all Applicable Laws.  

(e)Title and Risk of Loss.  Title and risk of loss, damage or destruction to
Product shall remain with Durect and pass to Gilead in accordance with the
Incoterms set forth in Section 5.1(a)(1).  Durect shall maintain appropriate
insurance on Product until title and risk of loss passes to Gilead in accordance
with this Section 5.1(e).

(f)Transfer Price.  The transfer price for Product supplied pursuant to
Section 5.1(b)(1) shall be [***].  Without limiting the foregoing, the Parties
acknowledge and agree that any activities for which Durect was paid under the
MSA are not subject to further payments hereunder.  

(g)Quality Agreement.  The Parties acknowledge and agree that a quality
agreement between Durect and Gilead for supply of Product pursuant to this
Section 5.1 (“Quality Agreement”) shall be executed by the Parties no later than
[***] after the Effective Date, or sooner if needed for purposes of Phase 1
Clinical Trials.

(h)Representations and Warranties.  Durect hereby represents, warrants and, as
applicable, covenants to Gilead that:

-18-

--------------------------------------------------------------------------------

 

(1)Product supplied pursuant to this Section 5.1 shall be [***];

(2)Durect and its Contractors shall [***];

(3)[***];

(4)[***];

(5)[***];

(6)[***];

(7)[***];

(8)[***]; and

(9)[***].

For the avoidance of doubt, the covenants, obligations, representations, and
warranties set forth in this Section 5.1 for Product shall also govern [***].

(i)Nonconformity.  

(1)Within [***] following receipt of each delivery of Product supplied under
this Section 5.1, Gilead or its designee shall conduct an inspection of Product,
in accordance with Gilead’s standard inspection guidelines, and may reject such
quantities of Product on the grounds that such quantities fail to conform to any
warranty provided above in Section 5.1(g) (“Non-Conforming Product”).  Gilead
shall notify Durect in writing of Gilead’s rejection of Non-Conforming Product,
and shall return to Durect a representative sample of such Non-Conforming
Product, within such [***] period (or, in case of a latent defect or other
non-conformance that could not reasonably be detected within such [***] period,
within [***] of discovering such non-conformance).  

(2)If Durect disagrees that any Product rejected by Gilead is Non-Conforming
Product, Durect shall so notify Gilead in writing (“Objection Notice”) within
[***] of Gilead’s notice of rejection and the following procedures shall apply:
[***].  

(3)If (i) Durect does not provide an Objection Notice within [***] of Gilead’s
notice of rejection, (ii) the Parties agree that the rejected Product is
Non-Conforming Product within the [***] period provided above, or (iii) [***],
Gilead shall, at Durect’s request and in accordance with Durect’s instructions,
return to Durect or destroy, at Durect’s expense all such Non-Conforming Product
and Durect shall, [***].  

(4)[***].  

(5)[***].    

(6)[***].

-19-

--------------------------------------------------------------------------------

 

(j)Inspection/Observation Rights.  

(1)Upon reasonable advance notice (not less than [***]) and at reasonable
frequency [***].  

(2)Upon reasonable advance notice (not less than [***]) and at reasonable
frequency [***].

(3)In performing [***] in writing.

(4)[***].

(5)[***].

(k)Active Agent.

(1)Gilead will supply to Durect, [***], all quantities of Active Agent as are
reasonably required for the Durect Development Activities, including for
Durect’s manufacture and supply of Product pursuant to this Section 5.1.  At the
time of delivery of each shipment of Active Agent under this Section 5.1(k),
Gilead shall provide to Durect [***], and containing any other information
agreed upon by the Parties.  Such supply shall be [***] (Incoterms 2010)
[***].  Gilead hereby represents and warrants to Durect that Active Agent
supplied pursuant to this Section 5.1 shall be manufactured and supplied in
compliance with the PDP, all Applicable Laws and other Product Warranties set
forth in in Section 5.1(h), applied mutatis mutandis.  

(2)Durect shall [***].  Durect shall use Active Agent supplied by Gilead only
for performance of the Durect Development Activities, including for Durect’s
manufacture and supply of Product pursuant to this Section 5.1, in compliance
with this Agreement, the PDP, and all Applicable Laws, and shall not transfer,
supply or provide Active Agent to any Third Party other than Contractors
permitted pursuant to this Agreement.  Durect will not reverse engineer, alter,
modify or create derivatives of any Active Agent except as required for the
Durect Development Activities, including for Durect’s manufacture and supply of
Product pursuant to this Section 5.1, and shall use the Active Agent only in the
performance of the Durect Development Activities, including for Durect’s
manufacture and supply of Product pursuant to this Section 5.1, as specified in
this Agreement. Durect shall not use, and shall not permit the use of, the
Active Agent in human beings, or in any in vivo studies unless specifically
authorized by Gilead. Durect shall not distribute or release Active Agent to any
person or institution other than those under the direct supervision and
responsibility of Durect and shall ensure that no one will be allowed to take or
send Active Agent to any location other than the Facilities approved for such
Durect Development Activities, including for Durect’s manufacture and supply of
Product pursuant to this Section 5.1, unless Gilead gives its prior written
permission. Upon the completion of the Durect Development Activities, or
completion of Durect’s manufacture and supply of Product pursuant to this
Section 5.1, or earlier termination of this Agreement, Durect shall, and shall
cause its Affiliates and Contractors to, destroy (and certify such destruction
to Gilead) or return to Gilead (as instructed by and at the expense of [***])
all Active Agent received from Gilead that has not been consumed in the Durect
Development

-20-

--------------------------------------------------------------------------------

 

Activities or in Durect’s manufacture and supply of Product pursuant to this
Section 5.1, in accordance with all Applicable Laws and instructions given by
Gilead.  

(3)At all times, Gilead retains all right, title and interest in and to the
Active Agent.  Nothing in this Agreement or any Work Plan shall be construed to
grant or imply any right or license for Durect or any other Person on Durect’s
behalf to use, make or sell the Active Agent or to practice any invention
claimed in any Gilead Patents for any purpose other than to the extent necessary
to perform Durect Development Activities under this Agreement.  Gilead shall be
free without restriction to distribute the Active Agent to others and use them
for any purpose.  

(4)Without limiting any of Durect’s obligations with respect to Product and/or
the Active Agent, Durect shall not be allowed to do any testing on the Product
or Active Agent (including any impurities or degradation products thereof)
without the prior written approval of Gilead.

5.2Later Development and Commercial Supply of Product.

(a)Supply Terms.  Upon written agreement of the Parties, Durect may supply to
Gilead, its Affiliates or its Sublicensees quantities of Product and
corresponding placebo forecasted and ordered by Gilead as reasonably required
for Product under a given PDP, or for Phase 2 Clinical Trial or Phase 3 Clinical
Trial of Product (“Optional Supply”).  The Parties acknowledge and agree that
for such Optional Supply, the Parties shall negotiate in good faith and enter
into a separate supply agreement [***]; provided that, upon written agreement of
the Parties, the terms and conditions of Section 5.1 shall apply to such
Optional Supply.    

(b)Analytical Methods.  Upon notice from Gilead on a Product-by-Product basis
(which notice Gilead may give to Durect prior to [***]), the Parties shall
establish and approve (subject to Section 2.2), on a Product-by-Product basis, a
plan and [***]pursuant to which Durect shall transfer (or cause to be
transferred) to Gilead or its designated Affiliate or a Third Party Supplier a
detailed written description of all of the analytical methods used by Durect for
developing or manufacturing such Product and a list of all testing items,
including items of process testing and product testing during manufacturing and
equipment and reagents used for the testing.

(c)Election.  On a Product-by-Product basis, [***], Gilead shall provide written
notice to Durect referencing this Section 5.2(c) (the “Manufacturing Notice”)
and specifying whether Gilead will undertake the initial manufacture of such
Product or will use a Third Party Supplier to initially manufacture such Product
for Phase 2 Clinical Trial(s), Phase 3 Clinical Trial(s) and commercialization
of such Product.  For clarity, following delivery of such Manufacturing Notice,
Gilead shall have the right, itself or through any Affiliate or Third Party
Supplier, to manufacture such Product for research, Phase 1 Clinical Trials,
Phase 2 Clinical Trials, Phase 3 Clinical Trials and commercialization of
Product for the Field in the Territory.

(d)[***]

-21-

--------------------------------------------------------------------------------

 

(e)Conditions on Third Party Supplier.  Any Third Party Supplier that will be
engaged by Gilead to manufacture Product shall be (i) selected by [***] and
(ii) bound by a written agreement with Gilead that:

(1)is consistent with the terms of this Agreement, including intellectual
property ownership and confidentiality provisions consistent with those set
forth in Article 7 and Article 8, and

(2)provides that Gilead shall have the right to visit and inspect the Third
Party Supplier’s facilities for an audit prior to final selection of such Third
Party Supplier and thereafter at least [***] per calendar year.

(f)Inspection/Observation Rights.

(1)Gilead shall consider in good faith any reasonable request by Durect to
accompany Gilead on any of Gilead’s audits of a [***]; and

(2)In accompanying Gilead, Durect shall not unreasonably interfere with other
activities being carried out at the facilities, and shall observe all rules and
regulations applicable to visitors and to individuals employed at such
facilities which have been provided by Gilead or such [***]to Durect in writing.

(g)Reimbursement.  Gilead shall reimburse Durect for the Durect Costs reasonably
incurred by Durect in performing the [***]in accordance with Exhibit 1.21.

Commercial Supply of Excipients

.  Promptly after Durect’s receipt of the Manufacturing Notice, the Parties
shall negotiate in good faith and enter into a supply agreement, together with a
quality assurance agreement, pursuant to which Durect shall, itself or through
one (1) or more Contractor(s), supply to Gilead, its Affiliates or its
Sublicensees [***] quantities of Durect Excipients (including [***]) for
incorporation in Products for the Field in the Territory, and Gilead, its
Affiliates or its Sublicensees shall purchase [***]of Durect Excipients
[***]from Durect (subject to exceptions in the supply agreement in the case of
Durect’s material breach, supply failure or interruption or failure to maintain
safety stock).  Such supply agreement shall contain customary terms for the
supply of a pharmaceutical ingredient to address the forecasting, order,
delivery, and other customary provisions applicable to the supply of
pharmaceuticals, will include provisions and exceptions for supply failure or
interruption and for maintenance by Durect of safety stock, [***] quantities of
[***]; provided that such [***]; and provided further that, in no event shall
[***].  

-22-

--------------------------------------------------------------------------------

 

Article 6
PAYMENTS

Durect Costs

.  Gilead shall reimburse Durect for all Durect Costs incurred in accordance
with this Agreement and calculated in accordance with Exhibit 1.21, to the
extent consistent with the budget included in each PDP or otherwise mutually
agreed in writing by the Parties.  [***].  Durect shall invoice Gilead [***],
and all undisputed portions of such invoice shall be due and payable by Gilead
within [***] of the date of receipt of invoice from Durect.

Upfront Fee

.  In partial consideration of the rights granted to Gilead and the obligations
undertaken by Durect hereunder with respect to Product, Gilead shall pay to
Durect an initial fee in the amount of Twenty-Five Million Dollars ($25,000,000)
(“Upfront Fee”), payable within [***] after the Effective Date.  Such Upfront
Fee is payable pursuant to and in satisfaction of Gilead’s obligation to pay
Durect the Option Exercise Fee (as defined in the MSA) under the MSA with
respect to Product.  Such Upfront Fee shall be non-refundable, and shall not be
creditable against any other amount due hereunder or under the MSA.

6.3Milestone Payments.

(a)Development Milestones.  In partial consideration of the rights granted to
Gilead hereunder and subject to the terms and conditions set forth in this
Agreement, Gilead shall pay to Durect the amounts set forth in the following
table (each, a “Development Milestone Payment”) one-time upon the first
achievement of the corresponding milestone event (each, a “Development Milestone
Event”) by any Product:

 

Development Milestone Event

Development Milestone Payment

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

For clarity, in the event that [***].  For clarity, each Milestone Payment under
this Section 6.3(a) shall only be payable once upon the first achievement of the
applicable Development Milestone Event with respect to any Product under this
Agreement (irrespective of the number of Products that achieve such Development
Milestone Event) and no amounts shall be due for subsequent or repeated
achievements of such Development Milestone Event, whether for the same or a
different Product.  The maximum aggregate amount payable by Gilead pursuant to
this Section 6.3(a) is Seventy-Five Million Dollars ($75,000,000).

(b)Commercialization Milestones.  In partial consideration of the rights granted
to Gilead hereunder and subject to the terms and conditions set forth in this
Agreement, Gilead shall pay to Durect the amounts set forth in the following
table (each, a “Commercialization Milestone

-23-

--------------------------------------------------------------------------------

 

Payment”) one-time upon Annual Net Sales first meeting or exceeding the
corresponding amount in a given calendar year (each, a “Commercialization
Milestone Event”):

Commercialization Milestone Event

Commercialization
Milestone Payment

[***]

[***]

[***]

[***]

[***]

[***]

For clarity, in the event that [***].  For clarity, each Commercial Milestone
Payment under this Section 6.3(b) shall only be payable once upon the first
achievement of the applicable Commercial Milestone Event under this Agreement
and no amounts shall be due for subsequent or repeated achievements of such
Commercial Milestone Event; provided that [***].  The maximum aggregate amount
payable by Gilead pursuant to this Section 6.3(b) is Seventy Million Dollars
($70,000,000).

(c)Payment Terms.  Gilead agrees to determine and notify Durect within [***]
after achievement of each Development Milestone Event.  Durect will submit an
invoice to Gilead for the corresponding Development Milestone Payment.  Gilead
will make the corresponding Development Milestone Payment within [***] of the
invoice date, taking into consideration Section 6.6.  Gilead shall notify Durect
in writing of achievement of each Commercialization Milestone Event within [***]
of [***]. Durect will submit an invoice to Gilead for the corresponding
Commercialization Milestone Payment.  Gilead will make the corresponding
Commercialization Milestone Payment within [***] of the invoice date, taking
into consideration Section 6.6.  For clarity, all milestone payments under this
Section 6.3 shall be non-refundable and non-creditable.

Royalty Payments

.  In partial consideration of the rights granted to Gilead hereunder and
subject to the terms and conditions set forth in this Agreement and during the
applicable Royalty Term, Gilead shall pay to Durect the applicable royalty rate
on the corresponding Annual Net Sales in a given calendar year as set forth
below:

Portion of Annual Net Sales

Royalty Rate

[***]

[***]

[***]

[***]

[***]

[***]

(a)Royalty Term.  [***], Gilead’s royalty obligation shall commence on the first
commercial sale of a Product in a country and continue until the later of
(i) the expiration of all Valid Claims within the Durect Patents [***] with
respect to such Product in such country, or (ii) [***] from the first commercial
sale of such Product in such country (the “Royalty Term”).  The obligation to
pay royalties will be imposed only once with respect to the same unit of Product
sold by Gilead, its Affiliate or Sublicensees.  For clarity, the Royalty Term
for a given Product shall not

-24-

--------------------------------------------------------------------------------

 

be extended, nor shall a new Royalty Term be deemed to commence with respect to
a given Product, by virtue of a given Product being sold as part of a
Combination Product.  

(b)Reduced Royalty Payments.  In the event that any of the following events
described below happens [***], Gilead’s royalty rate payable to Durect under
this Section 6.4 shall be reduced as set forth below, provided that the total
reduction under this Section 6.4(b) [***]shall not exceed [***]; provided, that
[***]:

Event

Royalty

[***]

[***]

[***]

[***]

(c)Royalty Stacking.  During the Royalty Term, Gilead or any of its Affiliates
or Sublicensees may enter into a license under any intellectual property right
Controlled by a Third Party that is necessary in order to practice the Durect
Intellectual Property for the research, development, manufacture, use, offer for
sale, sale, import, export, and/or commercialization of Product for the Field in
any country of the Territory.  If Gilead or any of its Affiliates enters into
such a license, then (i) Gilead shall be responsible for paying to such Third
Party any royalties or other payments due to such Third Party in respect
thereof, and (ii) [***], royalties payable to Durect under this Section 6.4
during the applicable calendar quarter shall be reduced by an amount equal to
[***]of payments payable to such Third Party in connection with the sale or
other exploitation of such Product [***]within the Territory during the same
calendar quarter under such Third Party license; provided that in no event shall
the royalties payable to Durect for any Product [***]be reduced under this
Section 6.4(c) [***]by more than [***]during any calendar quarter.

(d)Net Receipts; Compulsory Licensees; Generic Sublicensees.  If a governmental
authority requires Gilead or any of its Affiliates or Sublicensees to grant a
Compulsory License to a Third Party permitting such Third Party to make and sell
a Product in a country in the Territory (each, a “Compulsory Licensee”) or
Gilead grants a sublicense to a Generic Sublicensee, sales of Product by (i) a
Compulsory Licensee pursuant to any such Compulsory License or (ii) a Generic
Sublicensee pursuant to any such sublicense [***]  In the event that, [***];
provided, however, that, subject to the terms and conditions set forth in this
Agreement, during the applicable Royalty Term for such Product in such country,
Gilead shall pay to Durect an amount equal to [***]under such a license with
respect to such Product in such country.  Any payments due and payable pursuant
to this Section 6.4(d) shall be calculated on [***] basis and paid along with
any royalties in accordance with Section 6.4(d).  For clarity, (x) sales of
Product by a licensee pursuant to any license or sublicense entered into in
connection with any such [***], and (y) a Compulsory Licensee is not a Generic
Sublicensee (and vice versa).

(e)Payment/Reports.  All payments under this Section 6.4 shall be due and
payable within [***] after [***] during which the corresponding Net Sales or Net
Receipts are [***]

-25-

--------------------------------------------------------------------------------

 

(including with respect to Sublicensees).  Together with any such payment,
Gilead shall deliver a report in a form set forth in Exhibit 6.4(e).  Without
limiting the foregoing, [***].

(f)Access Territories.  Notwithstanding anything contained herein to the
contrary, to the extent Gilead, its Affiliates or Distributors sell to or
distribute the Product through government agencies, not-for-profit
non-governmental organizations, physicians, pharmacies, other entities or
directly to patients, in Access Territories [***].

Payment Method

.  All payments due under this Agreement to Durect shall be made by bank wire
transfer in immediately available funds to an account designated by Durect.  All
amounts hereunder shall be made in the legal currency of the United States of
America, and all references to “$” or “Dollars” shall refer to United States
dollars.  Except as otherwise provided herein, all payments due to either Party
under this Agreement shall be due and payable within [***] of the date of
receipt of invoice from the other Party.

Taxes

.  Each Party will be responsible for all taxes, fees, duties, levies or similar
amounts imposed on its income, assets, capital, employment, personnel, and right
or license to do business.  Except as otherwise stated, each Party will be
responsible for its own sales tax, use tax, excise tax, value added tax (VAT),
goods and services tax (GST), consumption tax, and similar taxes based upon its
own activities under this Agreement.  The Parties shall use reasonable and legal
efforts to reduce or optimize tax withholding, to the extent not prohibited by
Applicable Law, on payments made pursuant to this Agreement.  Each Party agrees
to cooperate in good faith to provide the other Party with such documents and
certifications as are reasonably necessary to enable such other Party to
minimize any withholding tax obligations or liabilities or to avoid any double
taxation.  Notwithstanding such efforts, if Durect timely supplies all relevant
documentation and certifications reasonably requested by Gilead and Gilead
concludes in its reasonable discretion that withholding for taxes, fees, duties,
levies or similar amounts under the Applicable Laws of any country, political
subdivision, or taxing jurisdiction (not, however, including any income tax
imposed on Durect or any of its Affiliates by the United States or any political
subdivision thereof) is required with respect to any payment to Durect (an
“Original Payment”), Gilead shall: (a) withhold the required amount and pay it
to the appropriate governmental authority; or (b) deduct those withheld amounts
assessed thereon from any Original Payment or from any other payment owed by
Gilead hereunder.  Gilead shall provide to Durect such documentation as may be
reasonably requested by Durect, evidencing the payment of such withholding tax
to the appropriate governmental authority and the calculation of the amount of
such tax. The Parties will reasonably cooperate in completing and filing
documents required under the provisions of any Applicable Law in connection with
the making of any required tax payment or withholding payment, or in connection
with any claim to a refund of or credit for any such payment.  In the event that
a taxing authority retroactively determines that a payment pursuant to this
Agreement should have been subject to withholding (or to additional withholding
or similar) taxes, and the paying Party remits such withholding or similar taxes
to the governmental authority or Regulatory Authority, such Party will have the
right to: (i) offset such amount, including any interest and penalties that may
be imposed thereon, against future payment obligations of the Party under this
Agreement; or (ii) invoice the other Party for such amount, and the other Party
shall pay such amount within [***] after the receipt of such invoice.

-26-

--------------------------------------------------------------------------------

 

Indemnification for Withholding

.  If the applicable paying Party had a duty to withhold taxes in connection
with any payment it made to the other Party under this Agreement but such paying
Party failed to withhold, and such taxes were assessed against and paid by such
paying Party, then the other Party shall indemnify and hold harmless such paying
Party from and against such taxes (including interest, but not including any
related penalties).  If such paying Party makes a claim under this Section 6.7,
it shall comply with the obligations to cooperate imposed by Section 6.6 as if
such paying Party had withheld taxes from a payment to the other Party.

Inspection of Records

.  Each Party (the “Auditable Party”) shall (and in the case of (a) Gilead,
shall cause its Affiliates and Sublicensees to, and (b) Durect, shall cause its
Affiliates and Contractors to), keep full and accurate books and records setting
forth the particulars necessary to calculate the payments due hereunder, and
compliance with the other terms and conditions of this Agreement for up to the
previous [***] years.  Upon reasonable prior notice, which shall be no less than
[***] prior written notice, the Auditable Party shall permit the other Party
(the “Auditing Party”), by independent qualified public accountants engaged by
the Auditing Party and reasonably acceptable to Auditable Party, to inspect and
audit such books and records to confirm the payments due hereunder; provided
that such inspection shall not occur more often than once per calendar year;
provided further, that records for a particular period may only be audited
once.  The foregoing right of inspection and audit may be exercised during the
Auditable Party’s normal business hours.  Such accountants shall be required by
the Auditable Party to enter into a confidentiality agreement with Auditable
Party (or in the case of Gilead, it or its Affiliate or Sublicensee, as
applicable) in a form reasonably acceptable to Auditable Party, and shall not
disclose to the Auditing Party or any other person any information, except that
such accountant may disclose to the Auditing Party the deficiency or any
overpayment, and the degree thereof, including the dollar amount.  Any
undisputed amounts shown to be owed but unpaid, or overpaid and in need of
refund, shall be paid or refunded (as the case may be) within [***] after the
accountant’s report, with interest (as set forth in Section 6.9) from the
original due date.  The Auditing Party shall bear the cost of any such
inspection and audit; provided that if the inspection and audit shows an
under-payment of more than the greater of [***] percent ([***]%) and [***]
($[***]) of the amount due for the applicable period, then the Auditable Party
shall promptly reimburse the Auditing Party for all costs incurred in connection
with such inspection and audit.

Late Payment

.  Any undisputed payments or portions thereof due hereunder which are not paid
when due shall bear interest equal to the lesser of (a) the rate equal to the
[***] U.S. dollar London inter-bank Offered Rate (LIBOR) (or if LIBOR is phased
out, an industry standard equivalent rate) effective for the date that payment
was due, as published by Bloomberg (or if it no longer exists, a similarly
authoritative source), on the date such payment was due, plus an additional
[***] ([***]) basis points, or (b) the maximum rate permitted by Applicable
Laws, calculated on the number of days such payment is delinquent.  This
Section 6.9 shall in no way limit any other remedies available to either Party.

Currency Conversion

.  If any currency conversion shall be required in connection with the
calculation of amounts payable hereunder, including the calculation of Net Sales
expressed in currencies other than Dollars, such conversion shall be made using
the same standard currency conversion practices used by Gilead for preparing its
own public financial reporting purposes for the calendar quarter during which
the corresponding payment obligations arise (including with respect to

-27-

--------------------------------------------------------------------------------

 

Sublicensees).  Gilead shall inform Durect of any changes to such standard
currency conversion practices at least one (1) calendar quarter prior to such
changes becoming effective for purposes of this Agreement.

Article 7
DATA; INTELLECTUAL PROPERTY

7.1Ownership and Use of Data.

(a)Data (as distinct from Inventions which are addressed in Section 7.2)
generated in the course of performing the activities under the Agreement shall
be owned as follows: [***]. As between the Parties and subject to the licenses
and other rights provided herein and in the MSA, each Party shall continue to
own any and all data generated outside of the activities under this Agreement.  

(b)With respect to [***], subject to the terms and conditions of this Agreement,
including [***],

(1)Durect shall have the following [***].

(2)Durect’s rights to [***] shall be limited as follows:

(i) ***].  

(ii)[***].

(iii)[***].

(iv)[***].

For the avoidance of doubt, Durect shall have no right to [***].  

Ownership of Inventions

.  As between the Parties, all right, title and interest to inventions,
formulations, processes, and works of authorship (other than Data, which is
addressed in Section 7.1) made or otherwise developed in the course of
performing activities under this Agreement by or on behalf of either Party, or
by or on behalf of an Affiliate or Sublicensee of Gilead, or by or on behalf of
an Affiliate or Contractor of Durect, shall be owned as follows: [***]

 

7.3Intellectual Property.  

(a)Inventorship shall be determined in accordance with U.S. patent laws (without
reference to any conflict of law principles).  For clarity, when a clause of
Sections 7.1 or 7.2 refers to Data generated by, or Inventions invented by a
Party, such clause also refers to Data generated by or Inventions invented by,
respectively, such Party’s and its Affiliates’ employees, contractors, and
agents. Each Party shall promptly notify the other Party of any such Data and
Inventions in which the other Party would have an ownership interest under
Sections 7.1 or 7.2. Each Party hereby assigns its right, title and interest in
and to Data and Inventions that it Controls to the extent

-28-

--------------------------------------------------------------------------------

 

necessary to effect the ownership allocation set forth in Sections 7.1 and 7.2
above, and each Party shall cause its and its Affiliates’ employees,
contractors, and agents to execute all documents and do such other acts as may
be reasonably necessary to give effect to such ownership allocation as set forth
in Sections 7.1 and 7.2 above.

(b)For clarity, as between the Parties and subject to the licenses and other
rights provided herein and in the MSA, each Party shall continue to have the
sole and exclusive rights to all inventions, formulations, processes, and works
of authorship made or developed outside of the activities under this Agreement,
together with all intellectual property rights therein.

7.4Patent Prosecution.

(a)Durect Controlled Patents.  Subject to Sections 7.4(b) and 7.4(c), Durect
shall control the Prosecution of all Durect Controlled Patents at Durect’s
expense.  For purposes of this Section 7.4, “Durect Controlled Patents” means
[***]

(b)Notice.  With respect to each Durect Controlled Patent, Durect shall [***]

(c)Patents Claiming [***].  During the Term, Patents [***]shall be deemed Durect
Controlled Patents and the Prosecution thereof shall be subject to Sections
7.4(a) and 7.4(b) above.  Subject to the foregoing, as between the Parties,
Durect shall have the sole right (but not the obligation) to control the
Prosecution of such Patents at Durect’s expense, and Gilead shall have the sole
right (but not the obligation) to control the Prosecution of Patents claiming
[***] at Gilead’s expense.

(d)Joint Patents. [***]

Assistance

.  Each Party agrees to provide such support and information at the reasonable
request and expense of the other Party in connection with such other Party’s
activities in accordance with this Section 7.5, including providing any
necessary powers of attorney and executing any other required documents or
instruments for such Prosecution.  Durect will consider in good faith Gilead’s
reasonable request in obtaining at Gilead’s expense patent term extension or
supplemental protection certificates and the like with respect to any Durect
Patents for a Product, in each country and region where it is possible to do so,
provided, for clarity, that Gilead may not initiate any such extension,
certificate or the like without the prior written approval of Durect.  For
clarity, Gilead may initiate any patent term extension or supplemental
protection certificates and the like with respect to any Gilead Patents
(including Patents claiming Gilead Sole Inventions) or Joint Patents, in each
country and region where it is possible to do so at Gilead’s sole discretion.

Defense of Third Party Infringement Claims

.  If Product becomes the subject of a Third Party’s claim or assertion of
infringement of a Patent relating to the research, development, manufacture,
use, sale, offer for sale, exportation, importation, or commercialization of
Product for the Field in the Territory, the Party first having notice of the
claim or assertion shall promptly notify the other Party, and the Parties shall
promptly confer [***].  Unless the Parties otherwise agree in writing, each
Party shall [***] (the “Defending Party”).  Neither Party shall enter into any
settlement of any claim described in this Section 7.6 that adversely affects the
other Party’s rights or

-29-

--------------------------------------------------------------------------------

 

interests without such other Party’s written consent, which consent shall not be
unreasonably withheld, conditioned or delayed.  [***].  In any event, the other
Party shall reasonably assist the Defending Party and cooperate in any such
litigation at the Defending Party’s request and reasonable expense.

7.7Enforcement.

(a)Notice.  Subject to the provisions of this Section 7.7, in the event that
either Party reasonably believes that any Durect Patent is being infringed by a
Third Party or is subject to a declaratory judgment action arising from such
infringement, such Party shall promptly notify the other Party and shall provide
such other Party with available evidence of such infringement, and following
such notification, the Parties shall [***].

(b)Enforcement Action.  As between the Parties, [***] shall have the initial
right (but not the obligation) to initiate and control, at its expense, any
enforcement action (including the right to control the defense of any challenges
to [***]in such enforcement action) or defend any declaratory judgment action
(each, an “Enforcement Action”) with respect to [***]; provided, in each case,
that [***].  If [***] finds it necessary or desirable for [***], the Parties
shall [***]. During any such Enforcement Action, [***], including using
[***].  In the event that [***] Joint Patent in the Territory within [***] (or
such shorter period as is necessary to bring and maintain such action) [***].

(c)Other Enforcement Actions.  As between the Parties [***].

(d)Cooperation.  The Party commencing, controlling or defending any such
Enforcement Action under this Section 7.7 (the “Enforcing Party”) shall [***],
and such other Party shall have the right to [***].  In any event, the other
Party shall reasonably cooperate with the Enforcing Party, including providing
information and materials, at the Enforcing Party’s request and reasonable
expense.  The Enforcing Party shall have the right [***].  The Enforcing Party
shall also have the right to [***]; provided, however, no settlement shall be
entered into without the consent of the other Party if such settlement would
adversely affect the rights or interests of the other Party.

(e)Recoveries.  Any recovery received as a result of any Enforcement Action to
enforce any [***] pursuant to this Section 7.7 shall be used first to reimburse
each Party who bears documented, out-of-pocket costs and expenses (including
court, attorneys’ and professional fees) incurred in connection with such
Enforcement Action (which amounts shall be allocated pro rata if insufficient to
cover the totality of such expenses), and the remainder of the recovery shall be
allocated as follows: (i) if [***] is the Enforcing Party, such recovery shall
be [***]; and (ii) if [***] is the Enforcing Party, such recovery shall be [***]

Patent Marking

.  Gilead shall mark (or cause to be marked) Product marketed and sold hereunder
with appropriate [***]numbers or indicia, with reasonable advance notice to
Durect, to the extent required by Applicable Law and to the extent [***].

-30-

--------------------------------------------------------------------------------

 

Article 8
CONFIDENTIALITY

Confidentiality; Exceptions

.  Except to the extent expressly authorized by this Agreement (including as
provided in Section 7.1(b)(1), subject to Section 7.1(b)(2)) or otherwise agreed
by the Parties in writing, the Parties agree that the receiving Party shall keep
confidential and shall not publish or otherwise disclose or use for any purpose
other than as provided for in this Agreement any confidential and non-public
proprietary information or materials furnished to it by the other Party pursuant
to this Agreement (collectively, “Confidential Information”).  The obligations
of confidentiality, non-disclosure and non-use under this Section 8.1 shall be
in full force and effect during the Term and for a period of [***]
thereafter.  The receiving Party will return all copies of or destroy (and
certify such destruction in writing) the Confidential Information of the
disclosing Party disclosed or transferred to it by the other Party pursuant to
this Agreement, within [***] of the termination or expiration of this Agreement;
provided, however, that a Party may retain (i) Confidential Information of the
other Party to exercise rights and licenses which expressly survive such
termination or expiration pursuant to this Agreement, and (ii) one (1) copy of
all other Confidential Information in archives solely for the purpose of
establishing the contents thereof.  Without limiting the foregoing, Durect will
keep confidential, and will cause its Affiliates, employees, consultants,
licensees, sublicensees, professional advisors and Contractors to keep
confidential, the Gilead Specific Information on confidentiality terms at least
as protective as the confidentiality provisions of this
Agreement.  Notwithstanding the foregoing, Confidential Information shall not be
deemed to include information or materials to the extent that it can be
established by written documentation by the receiving Party that such
information or material:

(a)was already known to or possessed by the receiving Party without any
obligation of confidentiality, at the time of its disclosure to the receiving
Party hereunder;

(b)was generally available to the public or otherwise part of the public domain
at the time of its disclosure to the receiving Party hereunder;

(c)became generally available to the public or otherwise part of the public
domain after its disclosure hereunder other than through any act or omission of
the receiving Party in breach of this Agreement;

(d)was independently developed by the receiving Party (including its
Sublicensees, Third Party Suppliers, contractors or contract research
organizations) without use of or reference to the other Party’s Confidential
Information as demonstrated by documented evidence prepared by the receiving
Party contemporaneously with such independent development; or

(e)was disclosed to the receiving Party, other than under an obligation of
confidentiality, by a Third Party who had no obligation to the disclosing Party
not to disclose such information to others.

Certain Specific Information

.  Notwithstanding anything to the contrary contained herein, [***].  In
addition, [***].  

-31-

--------------------------------------------------------------------------------

 

Authorized Use and Disclosure

.  Each Party may use and disclose Confidential Information of the other Party
as expressly provided in this Agreement (including Durect’s use and disclosure
of [***]in accordance with Section 7.1(b)(1), subject to Section 7.1(b)(2)) and
as follows:

(a)under appropriate confidentiality provisions substantially equivalent to
those in this Agreement in connection with the performance of its obligations or
exercise of rights granted to such Party in this Agreement;

(b)with respect [***];

(c)with respect to [***];

(d)in communication with existing and potential, Third Party Suppliers,
contractors, investors, acquirers, consultants, advisors (including financial
advisors, lawyers and accountants) on a need to know basis, in each case under
appropriate confidentiality provisions and a written agreement substantially
equivalent to those of this Agreement; or

(e)to the extent mutually agreed by the Parties in writing.

For clarity, if and whenever any Confidential Information is disclosed in
accordance with this Section 8.3, such disclosure shall not cause any such
information to cease to be Confidential Information except to the extent that
such disclosure results in a public disclosure of such information (other than
by breach of this Agreement).

Prior Agreement

.  For all information disclosed by or on behalf a Party under the MSA
concerning the subject matter of this Agreement, an Active Agent or Product:
(a) as it relates to such information, the MSA is hereby superseded and replaced
by the terms of Article 8 of this Agreement; and (b) such information shall be
deemed Confidential Information of such Party (subject to the exceptions set
forth herein) and shall be subject to the other Party’s confidentiality and
non-use obligations under this Article 8.  For clarity, (i) all “Confidential
Information” (as defined in the MSA) disclosed by “Gilead” thereunder will be
deemed Confidential Information of Gilead hereunder and will be subject to the
terms and conditions of this Agreement and (ii) all “Confidential Information”
disclosed by “Durect” thereunder will be deemed Confidential Information of
Durect hereunder and will be subject to the terms and conditions of this
Agreement.  The foregoing shall not be interpreted as a waiver of any remedies
available to the “disclosing Party” as a result of any breach, prior to the
Effective Date, by the “receiving Party”, of its obligations pursuant to the
MSA.

-32-

--------------------------------------------------------------------------------

 

Scientific Publications

.  

(a)Durect shall not publish any information relating to the Product or any
Active Agent without the prior written consent of Gilead, unless such
information has already been publicly disclosed either prior to the Effective
Date or after the Effective Date through no fault of Durect or otherwise not in
violation of this Agreement.  Durect shall submit to Gilead any proposed
publication or public disclosure containing clinical or scientific results
relating to Product for the Field or any Active Agent at least [***] in advance
of the submission for the proposed date of publication or public disclosure to
allow Gilead to review such proposed publication or disclosure.  Gilead shall
notify Durect in writing within [***] from the day receiving such submission by
Durect if Gilead wishes to (i) remove its Confidential Information from such
proposed publication or presentation, in which event Durect shall remove such
Confidential Information from its proposed publication or presentation, or
(ii) request a reasonable delay in publication or presentation in order to
protect patentable information, in which event Durect shall delay the
publication or presentation for a period of no more than [***] to enable patent
applications to be filed in accordance with Section 7.4 protecting any
patentable inventions disclosed in such publication or presentation.  For
clarity, if Gilead fails to notify Durect during the [***] reviewing period as
provided under this Section 8.5, Durect shall be free to proceed with the
proposed publication or presentation.  

(b)Gilead shall have the right to make such publications as it chooses, in its
sole discretion, without the approval of Durect; provided that except as
otherwise expressly set forth in this Agreement, Gilead shall not disclose any
Confidential Information of Durect in such publication except with the prior
written approval of Durect (which approval shall not be unreasonably withheld,
conditioned or delayed) and shall use reasonable efforts to provide Durect with
prior written notice of any such publication and a copy thereof following
publication.  Gilead shall submit to Durect any such proposed publication
disclosing Confidential Information of Durect at least [***] in advance of the
submission for the proposed date of publication, and Durect shall notify Gilead
in writing within [***] from the day of receiving such submission if Durect
wishes to (i) remove its Confidential Information from such proposed
publication, in which event Gilead shall remove such Confidential Information
from its proposed publication, or (ii) request a reasonable delay in publication
in order to protect patentable information, in which event Gilead shall delay
the publication for a period of no more than [***] to enable patent applications
to be filed in accordance with Section 7.4 protecting any patentable inventions
disclosed in such publication.  For clarity, if Durect fails to notify Gilead
during the [***] reviewing period as provided under this Section 8.5, Gilead
shall be free to proceed with the proposed publication.  Notwithstanding the
foregoing, Gilead shall be entitled to make publications disclosing (x) any
Confidential Information of Durect which Durect has previously given Gilead
written approval to publish, and (y) the subject matter of any publications
Durect has previously published in accordance with Section 8.5(a), without the
approval of Durect.  If requested by Durect, Gilead shall indicate that Durect
is the owner and licensor of the Durect Intellectual Property in each
publication issued by Gilead regarding Product.

-33-

--------------------------------------------------------------------------------

 

8.6Publicity.

(a)Confidential Terms.  Each Party agrees not to disclose to any Third Party the
terms and conditions of this Agreement without the prior approval of the other
Party, except to advisors (including consultants, financial advisors, attorneys
and accountants), potential and existing bona fide investors and acquirers, and
in the case of Gilead, its potential and actual Sublicensees on a need to know
basis, in each case under circumstances that reasonably protect the
confidentiality thereof, or to the extent necessary to comply with the terms of
agreements with Third Parties, or to the extent required by Applicable Law,
including securities laws.

(b)Publicity and Public Disclosure Review. Durect may issue an initial press
release announcing the execution of this Agreement in the form of the press
release attached hereto as Exhibit 8.6(b), as may be amended by agreement of the
Parties prior to [***].  When Durect elects to make any additional public
disclosure under this Section 8.6(b), it will give Gilead reasonable notice to
review, comment on and approve in writing such statement, it being understood
that if Gilead does not notify Durect in writing within a [***] period or such
shorter period if required by Applicable Law of any reasonable objections, as
contemplated in this Section 8.6(b), such disclosure shall be deemed approved,
and in any event [***].  The principles to be observed in such disclosures shall
be [***].  Accordingly, Gilead [***].  Notwithstanding the foregoing or anything
to the contrary herein, the Parties acknowledge and agree that each Party may
make disclosures required by Applicable Law and the rules of a recognized stock
exchange without the written approval of the other Party; provided, however that
Durect shall give Gilead reasonable notice to review and comment on such
disclosures (except to the extent that exigent circumstances do not allow any
time for such review and comment).  As requested by Durect, Gilead shall [***]
Neither Party shall be required to seek the permission of the other Party to
repeat any information that has already been publicly disclosed by such Party,
or by the other Party, in accordance with this Section 8.6(b); provided that (i)
such information remains accurate as of such time, and (ii) such disclosure is
not misleading when viewed in the context of such previous public disclosure.

(c)Use of Names.  Except as expressly provided herein, neither Party shall
mention or otherwise use the name, logo, or trademark of the other Party or any
of its Affiliates (or any abbreviation or adaptation thereof) in any
publication, press release, marketing and promotional material, or other form of
publicity without the prior written approval of such other Party in each
instance.  The restrictions imposed by this Section 8.6(c) shall not prohibit
either Party from making any disclosure identifying the other Party that is
required by Applicable Law.

[***]

 

-34-

--------------------------------------------------------------------------------

 

Article 9
REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

General Representations and Warranties

.  Each Party represents and warrants to the other Party that, as of the
Effective Date:

(a)it is duly organized, validly existing and in good standing under the
Applicable Laws of the jurisdiction of its incorporation, and has full corporate
power and authority to enter into this Agreement and to carry out the provisions
hereof;

(b)it is duly authorized to execute and deliver this Agreement and to perform
its obligations hereunder, and the person executing this Agreement on its behalf
has been duly authorized to do so by all requisite corporate action;

(c)this Agreement is legally binding upon it and enforceable in accordance with
its terms and the execution, delivery and performance of this Agreement by it
does not conflict with any agreement, instrument or understanding, oral or
written, to which it is a party or by which it may be bound, nor violate any
material Applicable Law;

(d)it has not granted, and shall not grant during the Term, any right to any
Third Party which would conflict with the rights granted to the other Party
hereunder;

(e)it is not aware of any action, suit or inquiry or investigation instituted by
any Person which questions or threatens the validity of this Agreement;

(f)it shall, at all times during the Term, comply with all Applicable Laws
relating to the development, manufacture and commercialization of the Product;

(g)no government authorization, consent, approval, license, exemption of or
filing or registration with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, under any
Applicable Law currently in effect, is or will be necessary for, or in
connection with, the transaction contemplated by this Agreement, or for the
performance by it of its obligations under this Agreement (including, in the
case of Durect, the grant of the rights to Gilead hereunder), except as may be
required to seek or obtain an IND or applicable Regulatory Filings and except
for any filing required under antitrust laws; and

(h)it has obtained all necessary authorizations, consents and approvals of any
other Person that is required to be obtained by it as of the Effective Date for,
or in connection with, the transaction contemplated by this Agreement, or for
the performance by it of its obligations under this Agreement (including, in the
case of Durect, the grant of the rights to Gilead hereunder), except as may be
required to conduct seek or obtain approval of the applicable Regulatory
Authority or the clearance, approval, or expiration or termination of any
applicable merger control waiting period under antitrust laws, as applicable.

Durect Representations and Warranties

.  Durect represents and warrants to Gilead that, as of the Effective Date and
except as set forth in Exhibit 9.2:

-35-

--------------------------------------------------------------------------------

 

(a)Exhibit 1.24 contains a complete and accurate list of all Patents [***], in
each case [***], that are [***]to research, develop, manufacture and have
manufactured (in accordance with Article 5), use, offer for sale, sell, import,
export, or otherwise commercialize Product (including as Combination Products);

(b)[***];

(c)[***];

(d)[***];

(e)[***];

(f)[***];

(g)[***];

(h)[***];

(i)[***];

(j)[***];

(k)[***];

(l)[***];

(m)[***];

(n)[***];

(o)[***];

(p)[***]; and

(q)[***].

Additional Durect Covenants

.  Durect hereby covenants to Gilead that from and after the Effective Date:

(a)[***];

(b)[***]; and

(c)[***].

DISCLAIMER OF WARRANTIES

.  EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, DURECT AND GILEAD EXPRESSLY
DISCLAIM ANY WARRANTIES

-36-

--------------------------------------------------------------------------------

 

OR CONDITIONS, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, WITH RESPECT TO THE
SUBJECT MATTER OF THIS AGREEMENT (INCLUDING THE LICENSED TECHNOLOGY), INCLUDING
ANY WARRANTY OF MERCHANTABILITY, NONINFRINGEMENT, OR FITNESS FOR A PARTICULAR
PURPOSE.

9.5Indemnification.

(a)Indemnification by Durect.  Durect hereby agrees to defend, hold harmless and
indemnify (collectively, “Indemnify”) Gilead and its Affiliates, and its and
their agents, directors, officers and employees (the “Gilead Indemnitees”) from
and against any liability or expense (including reasonable legal expenses and
attorneys’ fees) (collectively, “Losses”) resulting from suits, claims, actions
and demands, in each case brought by a Third Party (each, a “Third-Party Claim”)
against any Gilead Indemnitee arising out of (i) [***], or (ii) [***].  Durect’s
obligation to Indemnify the Gilead Indemnitees pursuant to [***] shall not apply
to the extent that any such Losses are Losses for which Gilead is obligated to
Indemnify pursuant to [***].

(b)Indemnification by Gilead.  Gilead hereby agrees to Indemnify Durect and its
Affiliates, and its and their agents, directors, officers and employees (the
“Durect Indemnitees”) from and against any and all Losses resulting from
Third-Party Claims against any Durect Indemnitees arising out of: (i) [***],
(ii)  [***], (iii) [***], or (iv) [***].  Gilead’s obligation to Indemnify the
Durect Indemnitees pursuant to [***] shall not apply to the extent that any such
Losses are Losses for which Durect is obligated to Indemnify pursuant to [***].

(c)Procedure.  To be eligible to be Indemnified hereunder, the indemnified Party
shall provide the indemnifying Party with prompt notice of the Third-Party Claim
giving rise to the indemnification obligation pursuant to this Section 9.5 and
the exclusive ability to defend (with the reasonable cooperation of the
indemnified Party) or settle any such claim; provided that delay or failure to
give such notification shall not affect the indemnification provided under
Section 9.5(a) or Section 9.5(b), as applicable, except to the extent the
indemnifying Party has been actually prejudiced as a result of such delay or
failure; further provided, however, that the indemnifying Party shall not enter
into any settlement that admits fault, wrongdoing or damages without the
indemnified Party’s written consent, such consent not to be unreasonably
withheld, conditioned or delayed.  Each such notice of the Third-Party Claim
shall contain a description of the claim and the nature and amount of any Loss
(to the extent that the nature and amount of such Loss is 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
and Third Party Claims.  The indemnified Party shall have the right to
participate, at its own expense and with counsel of its choice, in the defense
of any claim or suit that has been assumed by the indemnifying Party, provided
that the indemnifying Party shall have no obligations with respect to any Losses
resulting from the indemnified Party’s admission, settlement or other
communication without the prior written consent of the indemnifying Party.  

Insurance

.  Each Party shall procure and maintain, during the Term, (a) commercial
general liability insurance, with limits of not less than [***] Dollars ($[***)
per occurrence and in the aggregate; (b) workers’ compensation insurance in
compliance with local state/jurisdiction requirements in which the work is to be
performed; (c) employer's liability insurance in amounts not

-37-

--------------------------------------------------------------------------------

 

less than [***] Dollars ($[***]) Bodily Injury by Accident-Each Accident, [***]
Dollars ($[***]) Bodily Injury by Disease- Policy Limit, and [***] Dollars
($[***]) Bodily Injury by Disease-Each Employee; and (d) automobile liability
insurance for bodily injury, property damage and automobile contractual
liability covering all hired autos with a combined single limit of liability for
each accident of not less than [***] Dollars ($[***]).  Notwithstanding the
foregoing, Gilead may elect to self-insure all or part of the limits described
above, in which case the foregoing shall not apply to the extent of such
self-insurance.  Carriers shall be rated by AM Best AVII (or equivalent) or
better.  All general liability policies shall name the other Party, its
officers, directors, employees and volunteers, as additional insureds (it being
understood that a blanket additional insured endorsement will meet this
obligation).  Each Party shall provide the other Party with evidence of such
insurance by furnishing a certificate of insurance upon request and shall
provide the other Party with written notice in accordance with the applicable
policy provisions of any cancellation, non-renewal or material changes in such
insurance; provided, that Gilead shall not be obligated to provide such evidence
or such written notice to the extent of its self-insurance.  Insurance coverage
shall be on an occurrence form, and if any such coverage is on a claims made
form, then coverage must be maintained for at least [***] following the
expiration or earlier termination of the Agreement.  Where permitted by law,
workers’ compensation insurance shall contain a waiver of the insurer’s
subrogation rights against the other Party.  [***].

LIMITATION OF LIABILITY

.  [***].

Article 10
TERM AND TERMINATION

Term

(x).  This Agreement shall become effective as of the Effective Date and, unless
earlier terminated pursuant to the other provisions of this Article 10, shall
continue in full force and effect [***] during the applicable Royalty Term (the
“Term”).  Upon such expiration with respect to a Product and country, the
license granted to Gilead in Section 3.1 shall become non-exclusive, fully-paid,
royalty-free, sublicensable, perpetual and irrevocable for such Product in such
country.

Termination by Gilead

.  Gilead shall have the right to terminate this Agreement in its entirety upon
[***] prior written notice to Durect.

10.3Termination by Durect.

(a) [***], then Durect may, upon [***] written notice to Gilead, terminate this
Agreement in its entirety; provided, however, that Durect will not have the
right to terminate this Agreement under this Section 10.3(a) if [***].

(b)(i) If Gilead [***], or (ii) if Gilead[***], Durect shall have the right to
terminate this Agreement in its entirety, for (i), upon delivery of written
notice to Gilead delivered within [***]of [***], and for (ii), upon [***] prior
written notice to Gilead, provided that Gilead fails to cure [***]during such
[***] period.

10.4Termination by Either Party.

-38-

--------------------------------------------------------------------------------

 

(a)Termination for Material Breach.  Either Party may terminate this Agreement
in its entirety in the event of the other Party’s Material Breach of this
Agreement, and such breach shall have continued for [***] after notice thereof
was provided to the breaching Party by the non-breaching Party.  Any such
termination shall become effective at the end of such [***] period unless the
breaching Party has cured any such breach prior to the expiration of the [***]
period, or, if such Material Breach is not susceptible to cure within such [***]
period, then such period shall be extended for an additional [***] so long as
[***].  Notwithstanding the foregoing, in the event that the Parties reasonably
and in good faith disagree as to whether there has been a Material Breach, the
dispute shall be resolved in accordance with Article 11 and [***].  If the
Parties reasonably and in good faith disagree as to whether there has been a
Material Breach, then: (i) the Party that disputes that there has been a
Material Breach may contest the allegation by referring such matter, within
[***] following such notice of alleged Material Breach, for resolution to [***],
who shall meet promptly to discuss the matter and determine, within [***]
following referral of such matter, whether or not a Material Breach has
occurred; provided that if such executives (or their designees) are unable to
resolve such dispute within such [***] period after it is referred to them, the
matter will be resolved as provided in Article 11; (ii) [***]; (iii) during the
pendency of such dispute, all of the terms and conditions of this Agreement
shall remain in effect and the Parties shall continue to perform all of their
respective obligations hereunder; and (iv) if it is ultimately determined that
the breaching Party committed such Material Breach, then the breaching Party
shall have the right to cure such Material Breach after such determination
within the cure period [***].

(b)Termination for Insolvency.  Each Party shall have the right to terminate
this Agreement upon delivery of written notice to the other Party in the event
that (i) such other Party files in any court or agency pursuant to any statute
or regulation of any jurisdiction a petition in bankruptcy or insolvency or for
reorganization or similar arrangement for the benefit of creditors or for the
appointment of a receiver or trustee of such other Party or its assets,
(ii) such other Party is served with an involuntary petition against it in any
insolvency proceeding and such involuntary petition has not been stayed or
dismissed within [***] of its filing, or (iii) such other Party makes an
assignment of substantially all of its assets for the benefit of its creditors;
provided that, in connection therewith, the provisions of Section 12.4 shall
apply.

10.5[Intentionally left blank].

General Effects of Expiration or Termination

.  To the extent this Agreement expires or terminates in its entirety, the
following shall apply:

(a)Reversion of Rights.  

(1)Upon termination but not expiration of this Agreement, the licenses granted
by Durect to Gilead in Section 3.1 will terminate and the rights granted
thereunder shall revert back to Durect.  

(2)Upon expiration but not early termination, the license granted in Section 3.1
shall survive as set forth in Section 10.1.

-39-

--------------------------------------------------------------------------------

 

(3)Upon expiration or termination, all licenses and rights granted by Gilead to
Durect will terminate.

(b)Sales Period.  Notwithstanding Section 10.6(a), upon any termination of this
Agreement other than termination by Durect pursuant to Section 10.3 or Section
10.4, Gilead shall have the right to market, distribute, offer to sell and sell
the remaining Product then in its inventory as of the date of such termination
[***] (subject to Gilead’s obligations under Article 6).  Notwithstanding the
foregoing, upon any termination of this Agreement, the Parties shall cooperate
in good faith to ensure an orderly transition and disposition of Product and
treatment of patients receiving Product (including patients in a clinical trial
or receiving Product following approval) in the Territory (including Access
Territories), in compliance with Applicable Law and instructions and/or guidance
of Regulatory Authorities.     

(c)Sublicense Agreements.  In the case of termination of this Agreement in its
entirety, any and all sublicense agreements entered into by Gilead or any of its
Affiliates with a Sublicensee pursuant to this Agreement shall survive such
termination of this Agreement, except to the extent that: (i) [***]; (ii) [***];
or (iii) [***].  Gilead shall, upon the written request of Durect, assign any
such sublicense (to the extent not terminated pursuant to subsections (i), (ii),
or (iii)) to Durect or its Affiliates and, upon such assignment, Durect or its
Affiliates, as applicable, shall assume such sublicense.

(d)Accrued Obligations.  Expiration or termination of this Agreement for any
reason shall not release either Party of any obligation or liability which, at
the time of such expiration or termination, has already accrued to the other
Party or which is attributable to a period prior to such expiration or
termination.

(e)Return of Confidential Information.  Upon termination or expiration of this
Agreement, each Party shall return or destroy all Confidential Information of
the other Party, as and to the extent required by Section 8.1.

(f)Non-Exclusive Remedy.  Notwithstanding anything herein to the contrary,
termination of this Agreement by a Party shall be without prejudice to other
remedies such Party may have at law or equity.

(g)General Survival.  [***] shall survive expiration or termination of this
Agreement for any reason.  Except as otherwise provided in this Article 10, all
rights and obligations of the Parties under this Agreement shall terminate upon
expiration or termination of this Agreement for any reason.  

Article 11
DISPUTE RESOLUTION

Dispute Resolution

.  The Parties agree that, except to the extent expressly provided otherwise
herein, any disputes arising out of or in connection with this Agreement (each,
a “Dispute”) shall be resolved through the procedures set forth in this
Article 11.

-40-

--------------------------------------------------------------------------------

 

Initial Escalation

.  With respect to all Disputes, if the Parties are unable to resolve any such
Dispute within [***] after such Dispute is first identified by either Party in
writing to the other, either Party shall have the right to refer such Dispute to
the senior executives for attempted resolution by written notice to the other
Party referencing the particular Dispute and this Section 11.2.  In such case,
the senior executives of each Party shall conduct good faith negotiations and
seek to resolve the Dispute within [***] after such notice is received.  If the
senior executives resolve such Dispute, a memorandum setting forth their
agreement to resolve the Dispute will be prepared and signed by both Parties if
requested by either Party.  In all events, the Parties shall cooperate in an
effort to limit the issues for consideration in such manner as narrowly as
reasonably practicable in order to resolve the Dispute.  Notwithstanding the
foregoing, any Dispute that is [***] shall, without any prior escalation to
senior executives in accordance with this Section 11.2, be immediately referred
to [***]arbitration in accordance with Section 11.5 below following the
conclusion of good faith negotiations of such [***]in accordance with this
Section 11.2.

Binding Arbitration

.  If the senior executives are not able to resolve such Dispute referred to
them under Section 11.2 within such [***] period, such Dispute shall be resolved
through binding arbitration, which arbitration may be initiated by either Party
by written notice to the other Party referencing the particular Dispute and this
Section 11.3 at any time after the conclusion of such period, on the following
basis:  

(a)The place of arbitration shall be San Francisco, California and all
proceedings and communications shall be in English;

(b)The arbitration shall be administered by JAMS pursuant to the Comprehensive
Arbitration Rules and Procedures of JAMS then in effect (the “JAMS Rules”);

(c)The arbitration shall be conducted by three (3) arbitrators, with each Party
selecting one (1) arbitrator and those two (2) arbitrators selecting the third
arbitrator.  The arbitrators shall be neutral, independent individuals with
experience in the biopharmaceutical business related to the matter of the
Dispute; provided that, in the event such arbitration is [***] conducted
pursuant to Section 11.5, such arbitrators shall also [***];

(d)Judgment upon the award rendered by such arbitrator shall be binding on the
Parties and may be entered by any court or forum having jurisdiction;

(e)Either Party may apply to the arbitrators for interim injunctive relief until
the arbitration award is rendered or the controversy is otherwise
resolved.  Further, either Party also may, without waiving any remedy under this
Agreement, seek from any court having jurisdiction any injunctive or provisional
relief necessary to protect the rights or property of such Party pending the
arbitration award;

(f)The arbitrators shall [***];

(g)Each Party shall bear its own costs and expenses and attorneys’ fees and an
equal share of the arbitrator s’ and any administrative fees of arbitration,
unless [***];

-41-

--------------------------------------------------------------------------------

 

(h)Reasons for the arbitrators’ decision should be complete and explicit,
including determinations of law and fact.  The written reasons should also
include the basis for any damages awarded and a statement of how the damages
were calculated.  Such written decision should be rendered by the arbitrators
following a full comprehensive hearing, as soon as practicable but in no event
later than [***] following the selection of the arbitrator under
Section 11.3(c);

(i)Except to the extent necessary to confirm an award or as may be required by
Applicable Law, and subject to Article 8, neither Party nor the arbitrators may
disclose the existence, content, or results of an arbitration without the prior
written consent of both Parties; and

(j)In no event shall an arbitration be initiated after the date when
commencement of a legal or equitable proceeding based on the dispute,
controversy or claim would be barred by the applicable statute of limitations;
provided that [***].

Injunctive Relief

.  Notwithstanding the provisions of Section 11.3, each Party acknowledges and
agrees that, due to the unique and valuable nature of the other Party’s
proprietary information and materials, there may be no adequate remedy at law
for a breach by such Party of Section 3.4, Article 7 or Article 8 of this
Agreement, that any such may breach may result in irreparable harm to the other
Party for which monetary damages would be inadequate to compensate such Party
and that the other Party shall have the right, in addition to any other rights
available under applicable law, to seek from any court of competent jurisdiction
injunctive relief to restrain any breach or threatened breach of, or otherwise
to specifically enforce, any covenant or obligation of such Party under such
provisions, without the necessity of posting any bond or security.  Any request
to a court of competent jurisdiction for relief as set forth in this
Section 11.4 shall not be deemed incompatible with the agreement to arbitrate or
a waiver of the right to arbitrate.

[***]

.  Notwithstanding anything to the contrary herein, solely in the event that a
Dispute is [***], such Dispute shall be decided by binding [***] arbitration as
follows.   [***].  Such decision of the arbitrator shall be binding on the
Parties.  Such [***] arbitration shall be concluded within [***] following
submission of [***] to arbitration in accordance with Section 11.3.  For
clarity, except to the extent expressly set forth herein, such [***] shall be
conducted pursuant to the terms of Section 11.3.

Patent and Trademark Dispute Resolution

.  Without limiting anything in this Article 11, any dispute, controversy or
claim relating to the ownership, scope, validity, enforceability or infringement
of any Patent rights Covering the manufacture, use or sale of Product or of any
trademark rights relating to Product shall be submitted to a court of competent
jurisdiction.

Article 12
MISCELLANEOUS

Governing Law

.  This Agreement and any dispute arising from the performance or breach hereof
shall be governed by and construed and enforced in accordance with the laws of
[***], without reference to conflicts of laws principles.

-42-

--------------------------------------------------------------------------------

 

Waiver of Right to Trial by Jury

.  EACH PARTY HERETO, TO THE EXTENT PERMITTED BY APPLICABLE LAWS, KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVES ITS RIGHT TO TRIAL OF ANY ISSUE BY JURY IN
ANY ACTION OR OTHER LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND THE TRANSACTIONS IT CONTEMPLATES.  THIS WAIVER APPLIES TO ANY
ACTION OR LEGAL PROCEEDING, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE.  Each Party hereto (a) certifies that no representative or attorney
of any other Party has represented, expressly or otherwise, that such Party
would not, in the event of any action, seek to enforce the foregoing waiver and
(b) acknowledges that it and the other Party have been induced to enter into
this Agreement, by, among other things, the mutual waiver and certifications in
this Section 12.2.

Assignment

.  This Agreement shall not be assignable by either Party to any Third Party
without the written consent of the other Party.  Notwithstanding the foregoing,
either Party may assign this Agreement, without the written consent of the other
Party, to an Affiliate of such Party or to a Third Party that acquires all or
substantially all of the business or assets of such Party to which this
Agreement pertains (whether by merger, reorganization, acquisition, sale,
operation of law or otherwise).  No assignment or transfer of this Agreement
shall be valid and effective unless and until the assignee/transferee agrees in
writing to be bound by the provisions of this Agreement.  Any attempted
assignment or transfer of this Agreement in violation of this Section 12.3 shall
be null and void.  Subject to the foregoing, this Agreement shall be binding on
and inure to the benefit of the permitted successors and assigns of the Parties.

Consequences of Bankruptcy

.  The Parties acknowledge and agree that all rights and licenses now or
hereafter granted under or pursuant to any Section of this Agreement are rights
to “intellectual property” as defined in Section 101(35A) of Title 11 of the
United States Code.  Each Party may elect to retain and may fully exercise all
of its rights and elections under Section 365(n) of Title 11 of the United
States Code.  The Parties further agree that, if a Party elects to retain its
rights as a licensee under any Bankruptcy Code, such Party will be entitled to
complete access to any technology licensed to it hereunder and all embodiments
of such technology.  Such embodiments of the technology will be delivered to the
licensee Party not later than: (a) the commencement of bankruptcy proceedings
against the licensor, upon written request, unless the licensor elects to
perform its obligations under this Agreement; or (b) if not delivered under this
Section 12.4, upon the rejection of this Agreement by or on behalf of the
licensor, upon written request.  Any agreements supplemental hereto will be
deemed to be “agreements supplementary to” this Agreement for purposes of
Section 365(n) of the Bankruptcy Code.  As used herein, “Bankruptcy Code” means
the U.S. Bankruptcy Code and any foreign equivalent thereto in any country
having jurisdiction over a Party or its assets.

Notices

.  Any notice, request, delivery, approval or consent required or permitted to
be given under this Agreement shall be in writing, shall refer specifically to
this Agreement and shall be deemed to have been sufficiently given if delivered
in person, transmitted by facsimile (receipt verified) or by express courier
service (signature required) or [***] after it was sent by registered letter,
return receipt requested (or its equivalent), provided that no postal strike or
other disruption is then in effect or comes into effect within [***] after such
mailing, to the Party to which it is directed at its address or facsimile number
shown below or such other address or facsimile number as such

-43-

--------------------------------------------------------------------------------

 

Party will have last given by notice to the other Party in accordance with this
Section 12.5.  This Section 12.5 is not intended to govern the day-to-day
business communications necessary between the Parties in performing their
obligations under the terms of this Agreement.

 

If to Durect, addressed to:

Durect Corporation
10260 Bubb Road
Cupertino, CA 95014
United States
Attention: Legal Department
Telephone: (408) 777-3577
Facsimile: (408) 777-1417

 

 

With a copy to (which shall not constitute notice):

Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, CA  94304-1050
United States
Attention:Ian B. Edvalson, Esq.
Telephone:(650) 493-9300
Facsimile:(650) 493-6811

 

 

If to Gilead, addressed to:

Gilead Sciences, Inc.
333 Lakeside Drive
Foster City, CA 94404
Attention:[***]
Facsimile:[***]

With a copy to (which shall not constitute notice):

 

 

 

Gilead Sciences, Inc.
333 Lakeside Drive
Foster City, CA 94404
Attention:[***]
Facsimile:[***]

Waiver

.  Neither Party may waive or release any of its rights or interests in this
Agreement except in writing.  The failure of either Party to assert a right
hereunder or to insist upon compliance with any term or condition of this
Agreement shall not constitute a waiver of that right or excuse a similar
subsequent failure to perform any such term or condition.  No waiver by either
Party of any condition or term in any one (1) or more instances shall be
construed as a continuing waiver of such condition or term or of another
condition or term.

Severability

.  If any provision hereof should be held invalid, illegal or unenforceable in
any jurisdiction, the Parties shall negotiate in good faith a valid, legal and
enforceable substitute provision that most nearly reflects the original intent
of the Parties and all other provisions hereof

-44-

--------------------------------------------------------------------------------

 

shall remain in full force and effect in such jurisdiction and shall be
liberally construed in order to carry out the intentions of the Parties as
nearly as may be possible.  Such invalidity, illegality or unenforceability
shall not affect the validity, legality or enforceability of such provision in
any other jurisdiction.  To the fullest extent permitted by Applicable Law, each
Party hereby waives any provision of Applicable Law that would render any
provision hereof illegal, invalid, or unenforceable in any respect.

Entire Agreement/Modification

.  This Agreement, including its Exhibits, sets forth all the covenants,
promises, agreements, warranties, representations, conditions and understandings
between the Parties and supersedes and terminates all prior agreements and
understandings between the Parties, including, solely with respect to the Active
Agent and Products hereunder, the MSA.  In the event of any conflict between
this Agreement and the MSA, this Agreement shall control, including with respect
to [***] of the MSA.  No subsequent alteration, amendment, change or addition to
this Agreement shall be binding upon the Parties unless reduced to writing and
signed by the respective authorized officers of the Parties.

Relationship of the Parties

.  The Parties agree that the relationship of Durect and Gilead established by
this Agreement is that of independent contractors.  Furthermore, the Parties
agree that this Agreement does not, is not intended to, and shall not be
construed to, establish an employment, agency or any other relationship.  Except
as may be specifically provided herein, neither Party shall have any right,
power or authority, nor shall they represent themselves as having any authority
to assume, create or incur any expense, liability or obligation, express or
implied, on behalf of the other Party, or otherwise act as an agent for the
other Party for any purpose.

Force Majeure

.  Neither Party shall be liable to the other for failure or delay in the
performance of any of its obligations under this Agreement for the time and to
the extent such failure or delay is caused by earthquake, riot, civil commotion,
war, terrorist acts, strike, flood, or governmental acts or restriction, or
other cause that is beyond the reasonable control of the respective Party.  The
Party affected by such force majeure will provide the other Party with full
particulars thereof as soon as it becomes aware of the same (including its best
estimate of the likely extent and duration of the interference with its
activities), and will use Commercially Reasonable Efforts to overcome the
difficulties created thereby and to resume performance of its obligations as
soon as practicable.  If the performance of any such obligation under this
Agreement is delayed owing to such a force majeure for any continuous period of
more than [***], the Parties will [***].

Compliance with Laws/Other

.  Notwithstanding anything to the contrary herein, all rights and obligations
of Durect and Gilead are subject to prior compliance with, and each Party shall
comply with, all Applicable Laws, including obtaining all necessary approvals
required by the applicable agencies of the governments of the United States and
foreign jurisdictions.  In addition, each Party shall conduct its activities
hereunder in accordance with good scientific and business practices.

Counterparts

.  This Agreement may be executed in two (2) counterparts, each of which shall
be deemed an original, and all of which together, shall constitute one (1) and
the same instrument.

-45-

--------------------------------------------------------------------------------

 

Exhibits

.  In the event of any inconsistencies between this Agreement and any Exhibits
or other attachments hereto, the terms of this Agreement shall control.

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 in connection with this Agreement or 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.

 

[The remainder of this page intentionally left blank; signature page follows]

 

-46-

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the Parties have caused their duly authorized
representatives to execute this Agreement effective as of the Effective Date.

 

Durect CORPORATION

GILEAD SCIENCES, INC.

By:

/s/James E. BrownBy:/s/Andrew Dickinson

Name: James E. Brown

Name: Andrew Dickinson

Title: CEO

Title: EVP, Corporate Development and Strategy

 

[Signature Page to License Agreement]

--------------------------------------------------------------------------------

 

 

 

List of Exhibits:

[***]

[***]