Exhibit 10.1

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

A.P. PHARMA, INC.

and

MERIAL LIMITED

 

 

DEVELOPMENT AND LICENSE

AGREEMENT

 

 

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

CONTENTS

 

1    INTERPRETATION    2    1.1    Definitions    2    1.2    Construction    5
   1.3    Headings    6 2    GRANT OF LICENSE AND OTHER RIGHTS    6    2.1   
Grant of License    6 3    RESEARCH PROGRAM    7    3.1    Implementation    7
   3.2    Reports and Data    9 4    CONSIDERATION    9    4.1    Program R&D
Contract Services Fees and Costs    9    4.2    License Fee    9    4.3   
Milestones    10    4.4    Royalties    10    4.5    Exchange Rate    10 5   
ACCOUNTS AND PAYMENT OF ROYALTIES    11    5.1    Accounts and Records    11   
5.2    Statements and Payments    11    5.3    Inspection and Audit    11 6   
MERIAL’S RESEARCH, DEVELOPMENT AND EXPLOITATION OBLIGATIONS    12 7    TRIALS
REQUIRED FOR REGULATORY APPROVAL    12    7.1    Acknowledgment    12    7.2   
Merial’s Obligation    13    7.3    Steering Committee    13    7.4   
Assistance from APP    13 8    APP’S MATERIAL OBLIGATIONS    13 9   
IMPROVEMENTS    14    9.1    Representations and Warranties    14    9.2   
Pre-Existing Intellectual Property    15    9.3    Inventorship    15    9.4   
Notification of Improvements    15    9.5    Ownership    15    9.6    Filing,
Prosecution and Maintenance of Patents on Improvements    15    9.7    APP’s
Obligations    15 10    INFRINGEMENTS    15    10.1    Obligation to Report   
16    10.2    Enforcement and Defense    16    10.3    Patent Term Restoration
   17 11    TERM AND TERMINATION    17    11.1    Term    17    11.2   
Termination by Merial Without Cause    17

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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

   11.3    Termination by Merial for Cause    17    11.4    Termination by APP
for Cause    18    11.5    Termination for Change of Control    19    11.6   
Other Consequences of Termination    19    11.7    Survival    19 12   
CONFIDENTIAL INFORMATION    20    12.1    Definition    20    12.2    General
Obligations    20 13    REGISTRATION OF THE LICENSED PRODUCT IN THE TERRITORY   
22    13.1    Ownership of Licensed Product Registration    22    13.2   
Additional Testing    22    13.3    Contacts with the U.S. FDA and Other
Regulatory Agencies    22    13.4    APP’s Cooperation to Obtain and Maintain
Registration    23 14    LICENSED PRODUCT BRANDING    23    14.1    APP
Trademarks    23    14.2    Merial Branding    23 15    DISPUTE RESOLUTION    23
   15.1    Notice of Dispute    23    15.2    Dispute Resolution    23    15.3
   Mediation    24    15.4    Exchange of Information    24    15.5    Legal
Proceedings    24 16    REPRESENTATIONS AND WARRANTIES    24    16.1   
Corporate Existence and Power    24    16.2    Authority    25    16.3   
Absence of Litigation    25    16.4    No Approvals or Consents Required    25
   16.5    Patents; Prior Art    25    16.6    No Conflict    26    16.7    No
Prior Licenses    26 17    INDEMNITY    26    17.1    Indemnification by APP   
26    17.2    Indemnification By Merial    26    17.3    Mechanics    27 18   
INSURANCE    27 19    NOTICES    27    19.1    General    27    19.2   
Particulars for Delivery of Notices    27    19.3    After Hours Communications
   28    19.4    Process Service    29 20    Force Majeure    29 21    GENERAL
   29    21.1    Legal Costs    29    21.2    Amendment    29

 

(ii)

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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   21.3    Waiver and Exercise of Rights    29    21.4    Rights Cumulative   
30    21.5    Further Steps    30    21.6    Governing Law    30    21.7   
Assignment    30    21.8    Liability    30    21.9    Counterparts    30   
21.10    Entire Understanding    30    21.11    Relationship of Parties    31   
21.12    Ethical Business Practices    31

 

(iii)

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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

THIS DEVELOPMENT AND LICENSE AGREEMENT (“Agreement”) is made effective
September 4, 2009, by and between A.P. PHARMA, INC., a Delaware corporation with
offices at 123 Saginaw Drive, Redwood City, CA 94063 USA (hereinafter “APP”),
and MERIAL LIMITED, a company limited by shares registered in England and Wales
(registered number 3332751) with a registered office at P.O. Box 327,
Sandringham House, Sandringham Avenue, Harlow Business Park, Harlow, Essex CM19
5TG England, and domesticated in Delaware, USA as Merial LLC, with a principal
place of business at 3239 Satellite Boulevard, Duluth, Georgia 30096 USA
(“Merial”). References to Merial hereinafter shall include Merial’s Affiliates.

RECITALS

 

A WHEREAS, APP has identified and owns certain rights, patents, technical
information, formulations, processes, know-how, data, specifications,
characterization methods, characterization results, and other proprietary
information relating to their Biochronomer semi-solid poly (ortho ester) drug
delivery system, whether or not patented or patentable; and

 

B WHEREAS, APP and Merial entered into a Research and Development Agreement,
effective January 22, 2007, and as amended on December 10, 2007 and May 20,
2008, to undertake the proof-of-concept phase (“POC Phase”) of a collaborative
research program (“Program”) to produce and test a slow release [*] product
using the Technology for dogs and cats;

 

C WHEREAS, APP and Merial substantially completed the POC Phase and now are
prepared to undertake the full development phase of the Program (“FD Phase”);

 

D WHEREAS, Merial wishes to conduct additional clinical trials in relation to
the Technology and the Licensed Product(s), to conduct, jointly with APP, other
development activities in relation to the Technology and Licensed Product, and

 

E WHEREAS, the Parties have the capability, experience, and know-how to
undertake their respective duties under the FD Phase; and

 

F WHEREAS, Merial believes the Technology may have commercial application in the
Field and wishes to exclusively Exploit the Licensed Product(s) in the Field in
the Territory, and Merial has the capability, experience, and know-how to
Exploit the Licensed Product(s) in the Field in the Territory; and

 

G WHEREAS, APP has agreed to grant a license to Merial to conduct such clinical
trials and other development activities on the Licensed Product(s) and the
Technology and to Exploit the Licensed Product(s) in the Field in the Territory
on the terms of this Agreement.

NOW, THEREFORE, FOR AND IN CONSIDERATION OF THE PREMISES AND MUTUAL PROMISES,
TERMS AND CONDITIONS HEREINAFTER SET FORTH, AND OTHER GOOD AND VALUABLE
CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, THE
PARTIES DO HEREBY AGREE AS FOLLOWS:

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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1 INTERPRETATION

 

  1.1 Definitions

As used in this Agreement, the following defined terms shall have the following
respective meanings:

“Affiliate” means any corporation or business entity which controls, is
controlled by or is under common control with a Party, where a corporation or
business entity shall be deemed to control another corporation or business
entity if it owns, directly or indirectly, fifty percent (50%) or more of the
securities or other ownership interests representing the equity, the voting
stock or general partnership interest of such corporation or business entity.

“Agency” means any government regulatory entity in the United States (“U.S.”) or
European Union (“E.U.”) that reviews and grants product licenses for new animal
health products.

“APP Background IP” means the Intellectual Property Rights, particularly
know-how, Patent, and copyrights, owned or licensed by APP and utilized in the
performance of the Program which were in existence (as can be documented to
Merial’s reasonable satisfaction or otherwise demonstrated by competent proof in
a court of law) prior to initiation of the Program.

“APP Know-How” means (1) all ideas, technologies, and processes disclosed and
claimed in the Patent and any related know-how, technologies, methodologies and
processes made in the course of research by APP and (2) all ideas, concepts and
information in any form relating to the Patent, including trade secrets based
thereon and any technical and other information, standards, procedures, methods,
techniques, samples and advice, which has been developed or acquired by APP
before the Commencement Date or which is developed solely by APP or jointly by
APP and Merial if it relates [*], during the course of the Program.

“APP Trademarks” means any registered and unregistered trademarks, trade names
and logos that APP may grant Merial the right to use in relation to the Licensed
Product from time to time.

“Biochronomer Technology” means bioerodible polymer compositions comprising poly
(ortho esters) that may be prepared and formulated to provide the controlled
delivery of biologically active agents. Such compositions, their methods of
preparation and their uses are covered in APP Background IP and APP Know How.

“Budget” means the budget set out in Exhibit B.

“Business Day” means a day which is not a Saturday, Sunday, or bank or federal
holiday in Atlanta, Georgia, USA.

“Change of Control” means a transaction or series of transactions the result of
which is:

 

  (a) the transfer of ownership or voting control of more than 50% of the shares
or ownership of APP if that transfer is to a competitor of Merial or

 

  (b)

either Party sells or otherwise transfers all or substantially all of its assets
other

 

2

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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

 

than by operation of law or through the licensing by APP of its key programs,
including APF530.

For the sake of clarity, Change of Control does not include the refinancing of
debt which does not result in either (a) or (b) above.

“Commencement Date” means the date specified in the preamble to this Agreement.

“Commercially Reasonable Efforts” means the level of efforts, resources and
diligence, devoted in a sustained manner, that would be typically devoted by a
company in the business of developing and commercializing, as applicable, animal
health products with similar or comparable commercial or market potential at a
similar stage in their development or lifecycle stages, similar or comparable
profit potential and other relevant commercial, scientific and technical
considerations reasonably and customarily taken into account in the industry.
Such efforts, resources and diligence shall in no event be less than the efforts
that the party applies with respect to its other programs and products with
similar commercial potential consistent with the exercise of good business
judgment for the maximization of Licensed Product profits. Commercially
Reasonable Efforts requires that the Party, at a minimum: (a) promptly assign
responsibility for such obligations to specific, qualified employee(s) who are
held accountable for progress and monitor such progress on an ongoing basis;
(b) set and consistently seek to achieve specific and meaningful objectives for
carrying out such obligations; and (c) consistently make and implement decisions
and allocate resources designed to advance progress with respect to such
objectives.

“Confidential Information” means any information specified in Clause 12.

“Exploit” means to develop, manufacture, have made, market, have marketed, hire,
sell, have sold, license or otherwise dispose of or use for commercial purposes,
and “Exploitation” has a corresponding meaning.

“FD Phase” means the phase set out in the third WHEREAS clause

“Field” means applications in dogs and cats.

“Financial Year” means any 12-month period ending on 31 December and will
include the period between the Commencement Date and the next 31 December to
occur.

“Improvement” means any and all patentable or unpatentable improvements or
enhancements to, modifications of, or developments or inventions arising from or
based on the FD Phase during the term of this Agreement, including but not
limited to patentable changes in specifications, enhanced features, upgrades,
design changes or revisions to the Technology.

“Intellectual Property Rights” means all patent rights (including patent
applications), copyrights (including future copyrights), trademarks, trade
secrets, designs, and confidential and/or proprietary chemical substances,
technical information, data and assays necessary or useful to the FD Phase,
trade, business or company names, or other proprietary rights, common law and
equitable rights relating to Confidential Information.

“License” means the license specified in Clause 2.1.

“Licensed Product” means any product made, used, sold through or by means of the

 

3

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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

Technology licensed under this Agreement and incorporating [*] as the active
ingredient which is intended for administration to a non-human animal.

“Licensed Rights” means the rights to employ the Technology solely within the
Field, including the specific Patents described, and any Improvement patents,
divisions, continuations, continuations-in-part, and reissues of any patent that
issues therefrom.

“Merial Background IP” means the Intellectual Property Rights, particularly
know-how, patent rights, and copyrights, owned or licensed by Merial and
utilized in the performance of the Program which was in existence (as can be
documented to APP’s satisfaction or otherwise demonstrated by competent proof in
a court of law) prior to initiation of the Program.

“Merial Know-How” means all ideas, concepts and information in any form that
Merial has relating to the development, production, exploitation, and marketing
of animal health products, including ideas, concepts, information, and trade
secrets based thereon and any technical and other information, standards,
procedures, methods, techniques, samples and advice, including any such know-how
in relation to manufacturing, which has been developed or acquired by Merial
before the Commencement Date or which is developed solely by Merial or jointly
by Merial and APP if it [*] during the course of the Program

“Net Sales” means the net amount invoiced for sales of Licensed Product by
Merial, its Affiliates, licensees and assigns to non-affiliated third party
customers following deductions from gross sales for items listed in (i) through
(iv) below that either (a) [*], or (b) [*]:

 

  (i) [*];

 

  (ii) [*];

 

  (iii) [*]; and

 

  (iv) [*].

Such amounts shall be determined from Merial’s books and records maintained in
accordance with US GAAP. For the avoidance of doubt, in no event shall Net Sales
hereunder be construed to require Merial or it Affiliates to pay a Royalty on
more than one sale/transfer of the Licensed Product(s).

“Net Sales” shall not include a sale or transfer to an Affiliate, licensee, or
assignee, but the resale or transfer by such Affiliate, licensee or assign shall
be included in the Net Sales.

“Party” or “Parties” means either Merial or APP or both, as the case may be.

“Patent” means the patents and patent applications listed on Exhibit A and
(i) any re-examinations, revalidations, reissues, renewals, extensions,
supplementing protection certificates and term restorations, any confirmation
patent or registration patent or patent of addition based on any such patent,
and (ii) pending applications for patents including continuations, continuations
in part, divisional, provisional, statutory registrations, utility models,
design patents, confirmations, revalidations, and substitute applications and
inventors certificates, together with applicable foreign counterpart

 

4

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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

patens and patent applications, and all right to obtain patents and
registrations with respect thereto.

“Person” means a natural person, a corporation, a partnership, a trust, a joint
venture, a limited liability company, any governmental authority or any other
entity or organization.

“Program Data” means all data, results and all other data and information
generated as a result of the implementation of the Program. Program Data
includes all XP files, XP reports, development reports, analytical methods, SOPs
and instructions, and validation reports related to the Program.

“Program” means the collaborative development work which is based on Merial
Know-How and APP Know-How and is described in Exhibit “B”.

“Registrations” means such government approvals as are necessary to sell,
promote or distribute the Licensed Product(s) in the United States or in any
other country in the Territory within which Merial in its sole discretion
determines to Exploit the Licensed Product(s) in the Field in the Territory.

“Royalty” means the royalty calculated and payable in accordance with
Clause 4.4, and “Royalties” has a corresponding meaning.

“Task” means the separate tasks set out in Exhibit B.

“Technology” means the Patent and the APP Know-How, including Biochronomer
Technology.

“Technology File” means the file specified in Clause 8.4.

“Term” means the period specified in Clause 11.1.

“Territory” means the world.

“U.S. FDA” means the Food and Drug Administration of the United States of
America.

“Valid Claim” means a claim of an unexpired issued patent which shall not have
been withdrawn, cancelled, or disclaimed, nor held unenforceable, unpatentable,
or invalid by a court, tribunal, arbitrator or government agency of competent
jurisdiction in a final or unappealed or unappealable decision and which has not
been admitted to be invalid or unenforceable through reissue or disclaimer.

 

  1.2 Construction

Unless expressed to the contrary, in this document:

 

  (a) words in the singular include the plural and vice versa;

 

  (b) any gender includes the other genders;

 

  (c) if a word or phrase is defined its other grammatical forms have
corresponding meanings;

 

5

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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

  (d) “includes” means includes without limitation;

 

  (e) no rule of construction will apply to a clause to the disadvantage of a
party merely because that party put forward the clause or would otherwise
benefit from it;

 

  (f) a reference to:

 

  (i) a person includes a natural person, partnership, joint venture,
unincorporated association, corporation, a limited liability company, any
government or statutory body or authority, or any other entity or organization;

 

  (ii) a person includes the person’s legal personal representatives,
successors, assigns and persons substituted by novation;

 

  (iii) time is to local time in New York, N.Y;

 

  (iv) “$” or “dollars” is a reference to United States currency;

 

  (v) writing includes any mode of representing or reproducing words in tangible
and permanently visible form, and includes fax and e-mail transmissions;

 

  (vi) this Agreement includes all schedules and exhibits to it; and

 

  (vii) a clause, schedule or exhibit is a reference to a clause, schedule or
exhibit, as the case may be, of this Agreement;

 

  (g) if the date on or by which any act must be done under this document is not
a Business Day, the act must be done on or by the next Business Day; and

 

  (h) where time is to be calculated by reference to a day or event, that day or
the day of that event is excluded.

 

  1.3 Headings

Headings do not affect the interpretation of this document.

 

2 GRANT OF LICENSE AND OTHER RIGHTS

 

  2.1 Grant of License

 

  (a) Subject to the terms and conditions of this Agreement, for the term of the
Agreement, APP hereby grants to Merial an exclusive, sub-licensable license to
APP’s rights in the Technology and the Improvements (i) to Exploit Licensed
Products in the Field in the Territory and (ii) to conduct such clinical and
laboratory trials and other research and development activities in relation to
the Technology and the Licensed Product(s), as set forth in the Program, in
order to make the Licensed Product(s) and to enable Merial to obtain all
appropriate approvals and Registration(s) of the Licensed Product(s) necessary
to permit full Exploitation in the Field in the Territory (“License”).

 

  (b)

Merial shall have the right to sub-license its License in the

 

6

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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

 

Field. [*] Merial shall include this expected royalty in any terms negotiated
with the sub-licensee.

 

3 RESEARCH PROGRAM

 

  3.1 Implementation

 

  (a) The Parties agree to use Commercially Reasonable Efforts to undertake the
FD Phase of the Program, as drafted and as reasonably modified by agreement of
the Parties. As of the signing of this Agreement based on the information known
to date, APP believes that the Tasks will be completed according to the
timelines set out in Exhibit B. Promptly after, but no later than after [*]
business days, APP becomes aware of any matter (including but not limited to an
event, change or issue, technical or otherwise) that could have an adverse
impact on the Program’s timeline, APP will bring such matter to the attention of
Merial’s technical lead on the Steering Committee for consideration. The
timelines can be adjusted only by written agreement of the Parties and only if
the Parties have mutually identified and agreed to such adjustment in a writing
signed by both Parties. APP does not covenant or warrant any research results or
achievement of milestones and expressly disclaims any such warranties, express
or implied.

 

  (b) The Parties agree to undertake the Program set out in Exhibit B to this
Agreement for the Budget set forth in such exhibit. Promptly after APP becomes
aware of any matter (including but not limited to an event, change or issue,
technical or otherwise) that could have an adverse impact on the Budget ascribed
to any task, APP will bring such matter to the attention of the Steering
Committee for consideration. The Budget can be adjusted only by written
agreement of the Parties and only if the Parties have mutually identified and
agreed to such adjustment in a writing signed by both Parties. [*] APP will
submit an invoice for services performed in the prior [*]. The invoice [*] will
both be broken out by separate Tasks, the hours spent, [*], as the case may be
in [*] Task in the relevant time period covered by the invoice [*] Task in the
relevant time period, and the [*] in the relevant time period, and [*] through
the time period covered by the invoice. If no written objection from Merial is
received by APP within [*] business days of Merial’s receipt of the anticipated
work schedule, [*]. If Merial submits a written objection to Tasks identified in
[*] work schedule, APP can proceed with the Tasks scheduled for the [*],
provided APP has not made any changes to those Tasks from the most recent [*]
schedule of work which APP provided [*], and the parties will use their best
efforts to resolve Merial’s objection(s) within [*]. Notwithstanding the
foregoing, APP shall be entitled to submit to Merial an invoice for documented
costs incurred by APP in the course of performing Tasks conducted [*] in
connection with the Program and as consistent with the Budget and Exhibit C
within [*], and Merial shall reimburse APP for such costs incurred in connection
with such Tasks within [*] days after receiving such invoice.

 

  (c)

APP shall use its Commercially Reasonable Efforts to supply Merial with all
required materials, [*], to allow Merial to conduct all applicable studies and
evaluations needed to complete Agency license applications, as well as to
complete product license applications for other countries. APP will provide
reasonable technical assistance and advice, consultation, opinion papers,
reviews, white papers, research protocols, pertinent data and data
interpretation, results, and information to Merial related to the Technology
reasonably available to it and

 

7

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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

 

any newly produced research within any of the Licensed Rights conducted by its
employees or its agents in the conduct of clinical and laboratory trials,
registrations and related work. Merial shall pay APP for the provision of such
services, information, assistance and advice in accordance with Clause 4.1
below.

 

  (d) Both Parties will carry out the work associated with the Program in
accordance with the highest academic and professional standards. Furthermore,
the Parties shall use [*] to achieve the degree of reliability and accuracy that
is appropriate and accepted within the industry for work of this kind. APP and
Merial each represents that it has the requisite expertise, ability and legal
right to render the work and will perform the work in an efficient and ethical
manner. Both Parties will abide by all laws, rules and regulations that apply to
the performance of the work.

 

  (e) Unless otherwise specified in this Agreement or its Appendices and subject
to the terms of Article 4, each Party shall provide the personnel, offices,
laboratory facilities, animals, animal housing, equipment, field space,
utilities, techniques, reagents, and other supplies as needed by that Party for
the performance of that Party’s responsibilities under the Program. All
equipment purchased and paid for by either Party from its own funds, and for
which they are not reimbursed by the other Party, for the performance of the
Program shall be the property of that Party.

 

  (f) The Parties recognize and acknowledge that APP contemplates using the
services of contract manufacturing and analytical organizations for the FD Phase
of the Program, and, further, that if the Parties agree that APP is to carry out
research and development work [*], APP would do so through a contract research
organization. All third parties hired by APP to perform some or all of the
research contemplated hereunder must be approved in writing by Merial prior to
the third party beginning work which approval may not be unreasonably withheld,
except APP may, without Merial’s consent, hire an individual(s) to perform R&D
contract services under the Agreement at APP’s facilities under the supervision
of APP personnel.

 

  (g) In an effort to minimize the cost-of-goods associated with the Licensed
Product(s), the Parties agree to work collaboratively during the FD Phase to
optimize the sourcing and procurement of the License Product components and the
methods and/or site of manufacture. The selection of third parties for
procurement and manufacture requires the written consent of both Parties, such
consent not to be unreasonably withheld.

 

  (h) Merial shall be allowed to use and register its own trademarks for any of
the Licensed Products, and any such trademarks shall be the exclusive property
of Merial. Responsibility for trademark registrations in the Territory, as well
as the expenses associated with such registration(s), will be borne exclusively
by Merial.

 

  (i) Merial will at all times recognize the validity of any licensed trademarks
owned, used by, or licensed to APP and will undertake no actions to dilute the
value of such trademarks

 

  (j)

APP will at all times recognize the validity of any licensed trademarks owned,
used by, or licensed to Merial and will undertake no actions to dilute the value
of

 

8

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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

 

such trademarks.

 

  3.2 Reports and Data

 

  (a) All data and reports regarding the Program data shall be treated as
confidential information in accordance with Article 12 of this Agreement. Each
Party shall record all Program Data. [*]. Merial shall have full access to and
use of all Program Data, [*], as needed for Merial to exercise the rights
granted to it under this Agreement.

 

  (b) APP shall record all Program Data APP generates in XP files, and the XP
files shall contain full details and information on all tests carried out,
procedures used, and other data and information generated, whether successful or
not. [*].

 

  (c) APP will [*] during the FD Phase. APP and its Affiliates and licensees
shall [*] provided at least one of the following conditions has been met:
(i) [*]; (ii) [*]; (iii) [*]; (iv) [*]; (v) [*], or (vi) [*]. The Parties shall
attempt to resolve all disputes, controversies or differences which may arise
between the Parties hereto, out of or in relation to or in connection with this
Clause through discussions held between the heads of Research and Development of
the respective Parties, and if after [*] the dispute remains unresolved, the
dispute shall be resolved in accordance with Article 15.

 

  (d) APP agrees to make reasonable modifications [*] in the event [*] take
other appropriate action to protect its intellectual property rights.

 

  (e) Where useful for development and registration of a Licensed Product in the
Field, APP shall provide Merial with [*], provided that APP is not under an
obligation to a third party to keep such data confidential, in which event APP
will use reasonable efforts to obtain the consent of the third party to release
the information to Merial.

 

  (f) During the Term, APP can request, on behalf of itself and/or its
Affiliates and licensees, [*].

 

4 CONSIDERATION

 

  4.1 Program R&D Contract Services Fees and Costs

In order to implement the Program, Merial shall, upon execution of this
Agreement by both parties and receipt of an invoice from APP, [*], as set forth
in Exhibit B. Then going forward, Merial shall [*]. For clarity, APP shall have
the right to subcontract out the performance of R&D contract services by APP,
subject to Section 3.1(f), and such services shall [*]. The total budget cannot
[*]. APP can [*], and APP must receive [*]. APP can [*]. The parties expressly
acknowledge that they agree for [*] the costs of individual purchases of
materials or other consumables or the fees and expenses of agreed-upon third
party expenditures which are outside of the budget [*]. APP shall invoice Merial
[*], and payment shall be due within [*] of receipt of APP’s invoice by Merial.
[*].

 

  4.2 License Fee

In consideration of the license and other rights granted to Merial under this
Agreement by

 

9

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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APP, Merial agrees to pay to APP by electronic funds transfer to a bank account
nominated by APP in writing [*] dollars) upon receipt of a fully executed
original of this Agreement and an invoice from APP.

 

  4.3 Milestones

In partial consideration for APP conducting work under the FD Phase, Merial
agrees to pay APP by electronic funds transfer to a bank account nominated by
APP in writing the following non-refundable amounts at the defined milestones
described below:

 

  (a) [*] dollars) within [*] of the [*] for [*] and Merial’s receipt of an
invoice from APP; and

 

  (b) [*] dollars) within [*] of the [*] and Merial’s receipt of an invoice from
APP.

 

  4.4 Royalties

In addition to the license fees specified in Clause 4.2 and as partial
consideration for the license and other rights granted to Merial hereunder,
Merial agrees to pay to APP a Royalty on the Net Sales of Licensed Product
during the Term of this Agreement [*] as follows:

 

  (a) in the jurisdictions of the Territory [*]:

 

  (i) [*] of the portion of Net Sales less than and including [*] in a Financial
Year;

 

  (ii) [*] of the portion of Net Sales greater than [*] but equal to or less
than [*] in a Financial Year; and

 

  (iii) [*] of the portion of Net Sales greater than [*] in a Financial Year.

 

  (b) In the jurisdiction(s) of the Territory [*], would be:

 

  (i) [*] of the portion of Net Sales less than and including [*] in a Financial
Year;

 

  (ii) [*] of the portion of Net Sales greater than [*] but equal to or less
than [*] in a Financial Year; and

 

  (iii) [*] of the portion of Net Sales greater than [*] in a Financial Year.

 

  (c) In the event that Merial, [*]. Merial’s royalty obligation to APP on Net
Sales in any given country or market, [*].

 

  (d) In addition, APP will be entitled to receive from Merial [*], payment to
be made within [*] from receipt by Merial.

 

  4.5 Exchange Rate

All payments due under this Agreement shall be paid to APP in United States
currency in New York, NY, or at such other place as APP may reasonably designate
consistent with the laws and regulations controlling in any foreign country, but
not in any other currency. When Licensed Products are sold by Merial and its
Affiliates or sublicensees

 

10

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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for monies other than United States dollars, the sales shall be converted to
equivalent United States dollars on a monthly basis, and then the earned
Royalties will be determined on that amount. The exchange rate will be the
monthly periodic average rate that [*]. Merial will include the exchange rate
[*] in the statements described in Section 5.2.

 

5 ACCOUNTS AND PAYMENT OF ROYALTIES

 

  5.1 Accounts and Records

Throughout the Term, Merial must keep, in accordance with US generally accepted
accounting practices (“US GAAP”), true and accurate accounts and records of all
Net Sales and all other matters necessary to enable calculation of the Royalties
payable to APP under Clause 4.4.

 

  5.2 Statements and Payments

Within [*] after the close of each calendar quarter of the Financial Year (i.e.
the last day of the months of March, June, September and December) in which
Merial makes the first commercial sale of a Licensed Product in the Territory,
and within [*] after the end of each subsequent quarter, Merial shall:

 

  (a) provide to APP a statement:

 

  (i) specifying all Net Sales of the Licensed Product(s) [*] during that
quarter or, if there were no sales and/or no Net Sales during that quarter , a
statement to that effect; and

 

  (ii) showing the calculation of the Royalties payable to APP for that quarter
[*]; and

 

  (b) pay by electronic funds transfer into the bank account nominated by APP in
writing the Royalties due to APP under Clause 4.4 for that quarter.

 

  (c) Additionally, if applicable laws or regulations require the withholding of
taxes, the taxes will be deducted by Merial from the Royalty Payments and
remitted by Merial to the proper tax authority. Proof of payment shall be
provided to APP within sixty (60) days after payment. Merial will cooperate in
pursuing the refund of such tax, if such refund is appropriate in APP’s
determination.

 

  5.3 Inspection and Audit

 

  5.3.1

No more than [*] and on at least [*] prior written request by APP and confirmed
by Merial, Merial shall allow an independent certified public accounting firm in
the United States, selected by APP and reasonably acceptable to Merial, to
inspect and audit during normal business hours the accounts and records kept by
Merial under Clause 5.1, as may be reasonably necessary for the purposes of
verifying the accuracy of Merial’s Royalty statement and Royalty calculation,
pursuant to Clauses 4.4 and 5.2, respectively, for any quarter or Financial Year
ending not more than [*] months prior to the date of such requests. Such
accounting firm may only disclose to APP information relating to the accuracy or
inaccuracy of the Royalty statements and Royalty calculation hereunder. APP
and/or APP’s accountant shall not disclose the contents to any third party
without the prior

 

11

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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written consent of Merial except as required by government agencies or other
bodies that have the statutory or regulatory authority to receive such
information. Merial shall have the right to inspect any audit reports derived
from any such audit.

 

  5.3.2 Where, as a result of such an inspection or audit, it is discovered that
the accounts and records are inaccurate or the Royalties paid differ from the
Royalties payable under Clause 4.4, such difference, payments or adjustments
shall be made to the other Party to address such inaccuracy or differences
within [*] after the inspection or audit report revealing the inaccuracy. APP
shall pay any and all costs and expenses associated with the inspection and
audit of Merial’s records, unless a difference, favorable to APP, between the
Royalties paid and the Royalties payable exists and exceeds [*] of the payable
Royalties for the period under audit, in which case Merial shall pay for the
cost and expenses associated with that inspection.

 

  5.3.5 Upon expiration of [*] following the end of any Financial Year , the
calculation of Royalties payable with respect to such Financial Year shall be
binding and conclusive upon APP, and Merial shall be released from any liability
or accountability with respect to Royalties for such Financial Year. [*].

 

6 MERIAL’S RESEARCH, DEVELOPMENT AND EXPLOITATION OBLIGATIONS

 

  (a) Subject to Clause 6(b), Merial shall use Commercially Reasonable Efforts
to Exploit the Licensed Product(s) in the Field in the Territory, as soon as
practicable, consistent with sound and reasonable business practices and
judgment, as applied to the current market and as permitted by this Agreement.

 

  (b) Merial shall use Commercially Reasonable Efforts to obtain and maintain
[*] all necessary government or other permits, approvals, consents,
certifications, authorizations and Registrations necessary to Exploit the
Licensed Product(s) under this agreement in the Field in the Territory.

 

  (c) Merial shall use Commercially Reasonable Efforts to obtain and comply with
all Registrations obtained and all applicable laws in Exploiting the Licensed
Product(s) in the Field in the Territory under this Agreement.

 

  (d) Merial shall undertake its obligations under the FD Phase of the Program
that will include potential use of the Licensed Product(s) for the treatment of
pain in cats and dogs in the Field. The implementation of the Program will
provide a better opportunity for Merial to maximize the value of the Licensed
Product(s) and the amount of Royalties to be paid to APP. Both Parties, however,
understand and acknowledge the vagaries inherent in clinical trials and of the
regulatory environment and agree that the Program cannot produce guaranteed
financial results.

 

7 TRIALS REQUIRED FOR REGULATORY APPROVAL

 

  7.1 Acknowledgment

The Parties acknowledge that, as at the Commencement Date, the Technology, and
Licensed Product do not have regulatory approval in the Territory and that
further clinical trials in relation to the Technology and Licensed Product are
required in order to apply

 

12

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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and be granted such regulatory approval in the Territory. The Parties agree to
cooperate with each other in regard to all technical assistance and
documentation regarding the Licensed Rights and the requirements to obtain
Agency licenses for the Licensed Product(s).

 

  7.2 Merial’s Obligation

Merial, using the Merial Know-How, shall conduct clinical and laboratory trials
in relation to the Technology and the Licensed Product(s), as permitted by this
Agreement, and as may be necessary to obtain and maintain all Registrations,
[*], Merial may employ third parties to conduct some or all of these tests. The
draft reports of all such trials [*]. Such draft reports shall be considered
Merial’s Confidential Information and treated in accordance with Article 12.

 

  7.3 Steering Committee

 

  (a) The Parties shall, as soon as practicable after the Commencement Date,
form a Steering Committee comprising [*] nominated by Merial and [*] nominated
by APP to oversee and make recommendations in relation to the clinical and
laboratory trials conducted by Merial under this Article 7. In addition to these
[*] members, a Merial employee responsible for managing and protecting Merial’s
intellectual property shall be entitled to attend the Steering Committee
meetings in order to ensure timely patent filings.

 

  (b) The Steering Committee shall meet semi-annually face-to-face or by
telephone or other electronic means. Until Merial has obtained regulatory
approval of a Licensed Product and if the Steering Committee meets face-to-face,
every second face-to-face meeting will be held at APP’s premises, unless the
Steering Committee determines otherwise.

 

  (c) The Steering Committee will decide in good faith and based upon the best
available scientific and technical practices and results when the tasks of the
FD Phase of the Program should be launched and when the deliverables are
achieved.

 

  7.4 Assistance from APP

In addition to participation on the Steering Committee, and prior to obtaining
Registrations for the Licensed Product(s) filed by Merial, APP shall, upon
Merial’s reasonable request, provide or cause to be provided, as may be
available to APP, any consultation, opinion papers, reviews, white papers,
research protocols, data interpretation, expert opinions, and/or technical
assistance and advice in the conduct of its clinical and laboratory trials and
related work under Clause 7.2. Merial will reimburse reasonable and documented
expenses incurred by APP specifically linked to the preparation or delivery of
the requested work, including costs of materials, animal per diem costs, and lab
test expenses, if the expenses are approved in advance in writing by an
authorized representative of Merial. If the expenses are not so approved, APP
shall have no obligation to incur them.

 

8 APP’S MATERIAL OBLIGATIONS

APP acknowledges and agrees that in order for Merial to be able to meet its
obligations to obtain Registration(s) for the Licensed Product(s) and to Exploit
the Licensed Product(s)

 

13

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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in the Field in the Territory, APP must provide certain assistance and comply
with certain obligations, and that compliance with these obligations is partial
consideration for the Royalty payment made hereunder (“APP Material
Obligations”). For purposes of this Agreement, APP Material Obligations shall
include the following obligations of APP:

 

  (a) undertaking its responsibilities under the FD Phase of the Program;

 

  (b) transferring APP Know-How and all information related to research and
development of Licensed Product not already transferred to Merial within thirty
(30) days of execution of the Agreement;

 

  (c) transferring APP Know-How and all information necessary to file for
approval of the Licensed Product(s) with the U.S. FDA or other applicable
regulatory agency, including manufacturing know-how as required;

 

  (d) provision of technical support to Merial during the FD Phase and
registration of Licensed Product, as set forth in Article 7 above, upon Merial’s
written request. Merial will pay reasonable and documented expenses incurred by
APP specifically linked to the provision of such technical support If the
expenses are not so approved, APP shall have no obligation to incur them; and

 

  (e) [*]. Merial shall be entitled [*] upon (i) any commencement of a
bankruptcy proceeding by or against APP which has not been dismissed within
ninety (90) days, upon Merial’s written request therefor, unless APP or a party
designated by APP elects to continue to perform, and has the ability to so
perform, all of its obligations hereunder, or (ii) if not delivered under
(i) above, following the final rejection of this Agreement by or on behalf of
APP in such bankruptcy proceeding and in accordance with applicable law, upon
Merial’s written request therefor.

 

9 IMPROVEMENTS

 

  9.1 Representations and Warranties

9.1.1 Except as each Party has otherwise advised the other Party in writing
prior to the Commencement Date, each Party represents and warrants to the other
Party that as of the Commencement Date, (a) it has sufficient legal and/or
beneficial title and ownership under its Intellectual Property rights necessary
for it to fulfill its obligations under this Agreement and to grant any rights
thereto, including the right to grant a license thereto; and (b) to the best of
its knowledge, there is no material unauthorized use, infringement, or
misappropriation of any of its Intellectual Property rights by third parties
relevant to the Program or other rights granted under this Agreement.

9.1.2 APP represents and warrants that to the extent permitted by applicable law
each of its employees has entered into an agreement with APP that provides for
the assignment to APP of all inventions made by such employee during the course
of the employee’s employment with APP.

9.1.3 Merial represents and warrants that to the extent permitted by applicable
law each of its employees has entered into an agreement with Merial that
provides for the assignment to Merial of all inventions made by such employee
during the course of the employee’s employment with Merial.

 

14

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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  9.2 Pre-Existing Intellectual Property

Background IP owned by or licensed to either Party prior to the execution of
this Agreement shall remain the exclusive property of that Party.

 

  9.3 Inventorship

Inventorship of Improvements shall be determined in accordance with United
States Patent law.

 

  9.4 Notification of Improvements

If at any time during the Term either Party becomes possessed of any Improvement
(whether patentable or not), it must [*] days from such event communicate that
Improvement to the other Party providing full particulars.

 

  9.5 Ownership

Any Improvement which relates [*] and those which are made [*] shall [*]. Any
Improvement which relates [*] and those which are made [*] shall be [*]. All
other Improvements shall be [*]. Notwithstanding the other provisions of this
Clause, Improvements which relate solely to [*], whereas Improvements which
relate solely to [*].

 

  9.6 Filing, Prosecution and Maintenance of Patents on Improvements

 

  9.6.1 Merial shall have the right, but not the obligation, to (in its sole
discretion and at its own cost) file, prosecute, and maintain where so filed in
the Territory any patent applications and patent(s) [*] and on the Licensed
Product(s), including conducting any interferences, reissues, examinations,
oppositions, nullity proceedings and any similar proceedings. [*]. If [*] agrees
to grant and hereby does grant [*] the right to so proceed separately [*] and to
have [*] such other terms as are mutually agreed upon by the Parties. Both
Parties shall keep the other advised of the status of actual and prospective
patent filings and upon request, provide advanced copies of any papers related
to such filings, prosecutions, and maintenance of such patent filings. With
respect to all filings hereunder, [*] related to such filings, prosecutions, and
maintenance.

 

  9.6.2 If [*] files a patent application in its own name for [*] to grant and
hereby does grant to [*]. If [*] otherwise owns an Improvement [*] agrees to
grant and hereby does grant [*].

 

  9.6.3 Merial acknowledges ownership of the Technology by APP and does not
represent that it has any ownership rights in the Technology.

 

  9.7 APP’s Obligations

APP shall provide such necessary and reasonable assistance as Merial may
reasonably request in the [*].

 

10 INFRINGEMENTS

 

15

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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  10.1 Obligation to Report

Each Party must promptly report in writing to the other:

 

  (a) any actual or suspected infringement by a third party of any Patents or
other Intellectual Property Rights subsisting in the Improvements, Licensed
Product or the Technology; and

 

  (b) any allegation or claim by a third party of invalidity or unenforceability
of the Patents or other Intellectual Property Rights in the Technology, the
Improvements, or the Licensed Product(s) or that the Patents or other
Intellectual Property Rights in the Technology, the Improvements, or the
Licensed Product(s) infringe(s) that third party’s rights.

 

  10.2 Enforcement and Defense

 

  (a) [*], shall have the first right to initiate and prosecute such legal
action in the Field at its own expense (either in its own name or in the name of
both Parties) or to control any Opposition or Re-examination Proceeding or
declaratory judgment action relating to the Patents, the Improvements, and the
Technology, as they relate to the Licensed Product(s) in the Field. [*], to
either initiate and prosecute such action or to control any Opposition or
Re-examination Proceeding or such declaratory judgment action. [*] after the
date of notice of infringement, [*] have the right to bring suit. In any legal
action, the non-initiating Party shall have the right, at its expense, to be
represented by legal counsel of its choice.

 

  (b) For any action to terminate any infringement of Patent or any
misappropriation or misuse of Technology, in the event that either Party is
unable to initiate or prosecute such action solely in its own name, the other
Party will join such action voluntarily and will execute and cause its
sublicensees to execute all documents necessary for the other Party to initiate
litigation to prosecute and maintain such action. In connection with any action,
both Parties will cooperate fully and will provide each other with any
information or assistance that either may reasonably request. Each Party shall
keep the other informed of the developments in any action or proceeding,
including, to the extent permissible by law, the status of any settlement
negotiations and the terms of any offer related thereto.

 

  (c) [*] to settle any such legal action by granting a sublicense under the
Technology to the Licensed Product(s) in the Field. [*] to settle any such legal
action by granting a sublicense under the Technology to the Licensed Product(s)
in the Field [*] provided that such sublicense complies with Section 2.1(b).
Except as otherwise provided herein, neither Party shall have the right to
settle any legal action by granting a sublicense under the Technology for the
Licensed Product(s) in the Field without the consent of the other Party, which
shall not be unreasonably withheld.

 

  (d) Any recovery obtained by either or both Parties in connection with or as a
result of any action contemplated by this Article 10, whether by settlement or
otherwise, shall be shared in order as follows:

 

  (i) [*] costs and expenses incurred in connection with the action;

 

16

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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  (ii) [*] costs and expenses incurred in connection with the action; and

 

  (iii) the Parties shall be compensated from the balance of the recovery [*].

 

  (e) If, as a result of any final, unappealable or unappealed legal action, the
Patents or other Intellectual Property Rights in the Technology or the Licensed
Product(s) are deemed invalid or unenforceable or a determination is made that
the Patents or other Intellectual Property Rights in the Technology or the
Licensed Product(s) infringes a third party’s rights, [*].

 

  10.3 Patent Term Restoration

The Parties hereto shall cooperate with each other in obtaining patent term
restoration or supplemental protection certificates or their equivalents in any
country in the Territory where applicable to the Patents. In the event that
elections with respect to obtaining such patent term restoration are to be made,
the patent owner shall have the right to make the election and the other Party
agrees to abide by such election.

 

11 TERM AND TERMINATION

 

  11.1 Term

 

  (a) The term of the Program shall begin upon the Commencement Date and, unless
sooner terminated as hereinafter provided, shall continue in full force and
effect through the filing of the first NADA [*] or the [*] anniversary of the
Commencement Date whichever comes first (“Term”).

 

  (b) The term of the license granted by APP to Merial according to Clause 2.1
shall begin upon the Commencement Date and, subject to earlier termination in
accordance with its provisions, will continue until the date of expiry of the
last Patent.

 

  11.2 Termination by Merial Without Cause

During the FD Phase, Merial may terminate this agreement for any reason on
ninety (90) days prior written notice to APP. Once a Licensed Product has been
sold, Merial may terminate the agreement for any reason on six (6) months prior
written notice to APP. Notwithstanding the preceding, Merial shall not terminate
this Agreement per this clause, within six (6) months following the Commencement
Date.

 

  11.3 Termination by Merial for Cause

 

  (a) Merial may terminate this Agreement immediately on written notice to APP
if APP:

 

  (i) is in material breach of any of APP Material Obligations and fails to
rectify such breach within sixty (60) days after receipt of written notice from
Merial specifying the breach; or

 

  (ii)

during the FD Phase, is or becomes insolvent, is unable to pay its debts as and
when they become due, ceases to carry on business, or

 

17

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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proceedings are commenced, and not dismissed [*] after notice to APP, to have it
wound up or a receiver and manager (or other administrator) is appointed to all
or any part of its assets and undertakings.

 

  (b) For the purposes of this Clause 11.3, APP Material Obligations are limited
to the APP Obligations set forth in the following Articles and Clauses: 2, 3,
4.1, 7.1, 7.3, 7.4, 8, 9.5, 9.7, 10, 12, 13, 14.1, 17.1 and 18 and Exhibit B.

 

  11.4 Termination by APP for Cause

 

  (a) APP may terminate this Agreement immediately on written notice to Merial
if Merial:

 

  (i) upon sixty (60) days prior written notice to Merial if Merial has either
not filed an administrative NADA for a Licensed Product within [*] of the
Commencement Date or not commercialized a Licensed Product within [*] of
receiving approval of the administrative NADA and assignment of a NADA number
from the U.S. FDA;

 

  (ii) is in material breach of any of the Merial Material Obligations under
this agreement and fails to rectify such breach within sixty (60) days after
receipt of written notice from APP specifying the breach; or

 

  (ii) is or becomes insolvent, ceases to carry on business, or proceedings are
commenced to have it wound up or a receiver and manager (or other administrator)
is appointed to all or any part of its assets and undertakings.

 

  (b) For the purposes of this Clause 11.4, Merial’s Material Obligations under
this Agreement are limited to those set forth in the following Articles and
Clauses: 3, 4, 5, 6, 7.1, 7.2, 7.3, 9.5, 9.6, 10, 12, 13, 17.2, and 18, and
Exhibit B.

 

18

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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  11.5 Termination for Change of Control

If there is a Change in Control of a party, that party must notify the other
party in writing on or before the date the Change of Control takes effect. The
other party may then, within three (3) months after receiving such notice of
Change of Control, terminate this agreement on twelve (12) months’ notice to the
first party.

 

  11.6 Other Consequences of Termination

On the expiry or termination of this Agreement for any reason, and without
limiting the parties’ other obligations on termination specified in this Article
11:

 

  (a) Merial must pay to APP within [*] after the effective date of termination
all Royalties and license fees due and owing up to the effective date of
termination;

 

  (b) Merial may complete the manufacture or provision of any Licensed Products
in accordance with any contract it has entered into with any third party in
respect of such Licensed Products, not to exceed [*] from the date of
termination or expiration, and may sell its existing stocks of Licensed Products
provided it complies with its obligations to pay Royalties in accordance with
Article 4 and provide statements in accordance with Article 5;

 

  (c) Merial must cease using the Technology other than as necessary under this
Clause 11.6; and

 

  (d) Merial must promptly return to APP all materials, technical data and any
other information (including APP Know-How) supplied to Merial by APP, and all
copies of such materials in Merial’s possession, power or custody;

 

  (e) If termination is by APP for cause or by Merial without cause, [*],
including termination of any third-party contracts, disposal of raw materials
and work relating to the Program actually performed as of the time of
termination [*];

 

  (f) If termination is by Merial for cause under Clause 11.3(a), [*]. For the
sake of clarity, Merial shall retain all of its rights to bring an action
against APP for any other damages and any other remedy in law or equity; and

 

  (g) If a Licensed Product(s) has been launched by Merial prior to termination
for any reason except for termination for cause by Merial and Merial is
interested in licensing its rights in the Licensed Product(s) and the
Improvements to another party, APP shall have a first right of negotiation to
acquire a license, on commercially reasonable terms negotiated in good faith, to
Exploit in the Field in the Territory Merial’s rights in the Licensed Product(s)
and the Improvements.

 

  11.7 Survival

The provisions of Articles 9, 10, 11, 12, 14, 15, 16, and 17 shall survive the
termination or expiry of this Agreement. In the event that a third party
acquires substantially all of the assets of either Party, the third party shall
be bound by the terms of this Agreement through the remaining term. All rights,
options, assignments, and licenses granted under or pursuant to this Agreement
by either Party are, and will otherwise be deemed to be, for purposes of
Section 365(n) of the U.S. Bankruptcy Code, licenses of right to “intellectual
property” as defined under Section 101 of the U.S.

 

19

 

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with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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Bankruptcy Code. The Parties agree that Merial, as licensee of such rights under
this Agreement, will retain and may fully exercise all of its rights and
elections under the U.S. Bankruptcy Code. The Parties further agree that, in the
event of the commencement of a bankruptcy proceeding by or against either Party
under the U.S. Bankruptcy Code which has not been dismissed within ninety
(90) days, and subject to any applicable law, the Party hereto that is not a
party to such proceeding will be entitled to a complete duplicate of (or
complete access to, as appropriate) any such intellectual property and all
embodiments of such intellectual property with respect to the Program (including
the Technology File as defined above), and same, if not already in their
possession, will be promptly delivered to them (i) upon their written request
there for, unless the Party subject to such bankruptcy proceeding or a party
designated by such Party elects to continue to perform all of its obligations
under this Agreement, or (ii) if not delivered under (i) above, following the
final rejection of this Agreement in such bankruptcy proceeding by or on behalf
of the Party subject to such proceeding in accordance with applicable law, upon
written request there for by the non-subject Party.

 

12 CONFIDENTIAL INFORMATION

 

  12.1 Definition

In the course of satisfying their obligations hereunder, it is anticipated that
the Parties will have access to and/or learn confidential and/or proprietary
information and/or trade secrets of the other Party. Confidential and/or
proprietary information and materials (“Confidential Information”) means any
information that is provided to one Party (“Recipient”) by the other Party
(“Discloser”) or accessed by the Recipient in connection with this Agreement
(whether received before or after the Commencement Date) and shall include, but
are not limited to: (1) organizational structure, responsibilities and plans;
(2) methods of business operations, processes and practices; (3) sales and
financial data, projections and plans; (4) customer, client and employee
information; (5) business and marketing objectives, strategies and plans;
(6) know-how, research and scientific and technological developments;
(7) product information; (8) any information marked or stamped or verbally
designated as Confidential; (9) the terms of this Agreement and any related
agreement; (10) information which by its nature is confidential; and
(11) information the Recipient knows or ought reasonably to know is
confidential. The Discloser may disclose Confidential Information to the
Recipient either: (a) in writing; (b) by delivery of items; (c) by access to
information that may be contained in a data base; (d) by verbal discussion
and/or visual presentation; or (e) by any other means Discloser determines
necessary. “Trade Secrets” shall be defined as information, without respect to
form, belonging to the Discloser and licensed by it, including information
which: (i) derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by other persons
or entities who can obtain economic value from its disclosure or use; and
(ii) is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy.

 

  12.2 General Obligations

 

  (a)

Recipient agrees that any Confidential Information disclosed by Discloser under
this Agreement shall be maintained as confidential and that Recipient shall not
disclose any Confidential Information to any third party, except as provided
below, during the duration of this Agreement and for a period for [*] after the
termination or expiration of this Agreement. Confidential Information disclosed
to Recipient by Discloser shall be used only for the purpose of performing
Recipient’s obligations under this Agreement, and Recipient must seek prior
written approval

 

20

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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

 

from Discloser for any vendors, contractors, subcontractors, and third parties
that Recipient proposes to use to perform its obligations hereunder. Any such
vendors, contractors, subcontractors, and third parties must be bound by a
confidential disclosure agreement approved by the Discloser and containing terms
equivalent to those contained herein.

 

  (b) Nothing in this Clause 12.2 shall be construed to prevent Recipient from
disclosing Confidential Information of the Discloser to its Affiliates and their
respective employees, officers, directors and professional advisors (for the
purpose of seeking professional advice) on a “needs-to-know” basis, provided
that Recipient ensures such Confidential Information is treated as confidential
by such Affiliates and their respective employees, officers, directors and
professional advisors.

 

  (c) Recipient shall not have any obligation of confidentiality with respect to
Confidential Information that is in the public domain by use and/or publication
at the time of Recipient’s receipt from Discloser or thereafter becomes publicly
available through means other than disclosure by Recipient; was already in
Recipient’s possession prior to receipt from Discloser; is properly obtained by
Recipient from a third party with a valid right to disclose such Confidential
Information and such third party is not under any confidentiality obligation to
Discloser; or is disclosed by Discloser to any third party without an obligation
of confidentiality.

 

  (d) Recipient may disclose Confidential Information to the extent required by
law. In the event that disclosure of Confidential Information is required by
law, Recipient shall notify legal counsel for Discloser of such requirement
within five (5) business days of learning of the disclosure requirement and
shall allow Discloser an opportunity to oppose such process and seek a
protective order.

 

  (e) Merial may disclose its own Confidential Information and the Confidential
Information of APP as required and necessary to the applicable regulatory
agency, including the U.S. FDA, in order to obtain Registration(s) of the
Licensed Product(s); however, Confidential Information that is so disclosed
shall remain Confidential Information for all other purposes. For clarity,
notwithstanding anything to the contrary in this Agreement, neither Party shall
have the right to disclose Confidential Information belonging to the other Pary
in any patent filings without the other Party’s prior written consent.

 

  (f) Upon the expiration or termination of this Agreement, any and all
Confidential Information received by Recipient or in Recipient’s possession,
custody or control or the possession, custody or control of Recipient’s
employees, officers, agents or contractors, including any documents generated or
created by Recipient containing any Confidential Information, shall either be
promptly returned or destroyed, as certified by Recipient, except Recipient may
retain in Recipient’s confidential legal files solely for record purposes one
copy of any document created or generated by Recipient containing Confidential
Information.

 

  (g)

Recipient shall treat as confidential and shall not disclose, publish or use
(other than for purposes of this Agreement) and shall maintain as confidential,
any information which constitutes Discloser’s trade secrets (whether or not the
trade secrets are in written or tangible form) for as long as they remain trade
secrets

 

21

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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

 

under applicable law.

 

  (h) Neither Party will originate any publicity, news release, public comment
or other public announcement, written or oral, whether to the press, to
stockholders, or otherwise, relating to this Agreement, without the written
consent of the other Party, which consent shall not be unreasonably withheld or
delayed, except for such announcement which, in accordance with the advice of
legal counsel to the Party making such announcement, is required by law or the
regulations of the securities exchange on which such Party’s securities are
traded, if any. The Party making any required announcement will, unless
prohibited by law, give the other Party an opportunity to review the form and
content of such announcement and comment before it is made. Either party shall
have the right to make such filings with governmental agencies, including the
United States Securities and Exchange Commission, as to the contents and
existence of this Agreement as it shall reasonably deem necessary or
appropriate.

 

  (i) Notwithstanding anything in this Agreement to the contrary, any previous
Confidentiality Agreements between the Parties shall continue in full force
pursuant to the terms thereunder with respect to information exchanged between
the Parties prior to the Effective Date.

 

13 REGISTRATION OF THE LICENSED PRODUCT IN THE TERRITORY

 

  13.1 Ownership of Licensed Product Registration

 

  (a) Merial shall use Commercially Reasonable Efforts to obtain and maintain at
its own cost and expense and in its own name all Registrations, and upon
issuance, Merial shall be the sole owner of such Licensed Product Registrations.

 

  13.2 Additional Testing

Subject to the terms of Clause 7.4, in the event that there is a need to conduct
tests or studies in addition to the clinical tests necessary for obtaining or
maintaining a Registration for the Licensed Product(s) or subsequent to
obtaining Registration, any such activities will be performed by Merial at its
own expense.

 

  13.3 Contacts with the U.S. FDA and Other Regulatory Agencies

 

  (a) Merial exclusively shall deal with the U.S. FDA and any other regulatory
agencies from which Merial seeks approval of the Licensed Product(s).

 

  (b) Each Party shall promptly notify the other Party of any and all inquiries
received from the U.S. FDA and/or any other Regulatory Agency concerning the
Technology and/or Licensed Product(s) during the term of this Agreement, and it
shall notify the other Party of any information it receives from any source
regarding any threatened or pending action by a Regulatory Agency. Each Party
shall promptly provide to the other Party notice of and summary reports
regarding of any communications and/or meetings with the U.S. FDA or other
Regulatory Agencies. If the matter relates exclusively to the Licensed
Product(s) in the Field, Merial shall determine in its sole discretion the
response, [*]. If the matter relates to the Technology but not its inclusion in
the Licensed Product in the Field, APP shall determine in its sole discretion
the response, [*].

 

22

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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

  13.4 APP’s Cooperation to Obtain and Maintain Registration

APP acknowledges and agrees that it maintains, or will maintain in the future,
certain information, including manufacturing know-how, that is necessary for the
approval and maintenance of the Registration of the Licensed Product(s) in the
Field in the United States and elsewhere in the Territory, and APP agrees to
share with Merial all such information within APP’s control necessary to obtain
and maintain such Registration(s).

 

14 LICENSED PRODUCT BRANDING

 

  14.1 APP Trademarks

 

  (a) APP grants to Merial a non-exclusive royalty-free license during the Term
to use the APP Trademarks nominated by APP from time to time to brand, package,
promote, and advertise the Licensed Product(s) and to use in promotional and
instructional materials produced by Merial for the Licensed Product(s). APP
shall provide to Merial upon request a copy of the relevant APP Trademarks of a
quality suitable for reproduction.

 

  (b) Merial may only use such APP Trademarks with the prior approval of APP for
each type of use or application, such approval not to be unreasonably withheld.

 

  (c) When using an APP Trademark under this Clause 14.1, Merial must not allow
the appearance of the APP Trade Mark to be altered in any way (other than
proportional size adjustment) without APP’s prior approval, such approval not to
be unreasonably withheld.

 

  (d) Notwithstanding anything herein to the contrary, Merial shall not be
required to use the APP Trademark to Exploit the Licensed Product(s) in the
Field in the Territory.

 

  14.2 Merial Branding

Merial may elect to brand the Licensed Product(s) sold in the Territory with a
Merial brand name or trademark and will own all Intellectual Property Rights in
such brand name or trademark. At no time during this Agreement or after the
expiration or termination hereof shall APP have any interest in or ownership of
the Merial trademark or brand name selected by Merial to brand the Licensed
Product(s) in the Territory.

 

15 DISPUTE RESOLUTION

 

  15.1 Notice of Dispute

 

  (a) If a difference or dispute (together called a “Dispute”) between the
Parties arises out of or relates to this agreement, either Party may give the
other party a written notice of dispute adequately identifying and providing
details of the Dispute (“Notice of Dispute”).

 

  (b) Notwithstanding the existence of a Dispute, the Parties will, subject to
this agreement, continue to perform their obligations under this agreement.

 

  15.2 Dispute Resolution

Once a Notice of Dispute has been given under Clause 15.1, the Parties must

 

23

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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

take the steps required by this Clause 15.2 and use all reasonable endeavors to
resolve the dispute by negotiating in good faith:

 

  (a) initially between the chief executive officers of each Party or their
delegates, who must confer and endeavor to resolve the Dispute within fifteen
(15) Business Days, or such other period as they may agree. All aspects of every
such conference, except the fact of its occurrence, will be confidential; and

 

  (b) if the Dispute is not resolved under Clause 15.2(a), then the chief
executive officers or their delegates may refer the Dispute for resolution by
mediation under Clause 15.3.

 

  15.3 Mediation

 

  (a) If the Parties agree to refer the Dispute for resolution by non-binding
mediation, then the Parties agree to endeavor in good faith to settle the
Dispute by mediation before resorting to litigation.

 

  (b) The mediation will be conducted in Chicago, Illinois, before a mediator
jointly selected by the Parties. If the Parties are unable to agree on the
selection of the mediator, the Parties agree that the American Arbitration
Association shall select the mediator.

 

  (c) If the Dispute cannot be resolved within twenty (20) Business Days of
commencement of mediation or such other period as the Parties agree, either
Party may, after notice in writing of not less than ten (10) Business Days to
the other, commence legal proceedings in relation to that Dispute.

 

  (d) The Parties must bear equally the costs of the mediation, excluding each
Party’s legal costs.

 

  15.4 Exchange of Information

The Parties acknowledge that the purpose of any exchange of information or
documents or the making of any offer of settlement pursuant to this clause is to
attempt to settle the Dispute between the Parties. Neither Party may use any
information or documents obtained through the Dispute resolution process
established by this Article 15 for any purpose other than an attempt to settle a
Dispute between the Parties.

 

  15.5 Legal Proceedings

Except with respect to intellectual property matters, neither Party may commence
legal proceedings, other than proceedings seeking urgent interlocutory relief,
in respect of the Dispute without first complying with Clauses 15.1, 15.2 and
15.3.

 

16 REPRESENTATIONS AND WARRANTIES

 

  16.1 Corporate Existence and Power

 

  (a) As of the Commencement Date, APP represents and warrants to Merial that
it:

 

  (i) is a corporation duly organized, validly existing and in good standing
under the laws of the state in which it is incorporated, and

 

24

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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

  (ii) has full corporate power and authority and the legal right to own and
operate its property and assets and to carry on its business as it is now being
conducted and is contemplated in this Agreement, including, without limitation,
the right to grant the licenses granted hereunder.

 

  (b) As of the Commencement Date, Merial represents and warrants to APP that
it:

 

  (i) a company limited by shares registered in England and Wales and
domesticated in Delaware, USA as Merial LLC, and

 

  (ii) has full corporate power and authority and the legal right to own and
operate its property and assets and to carry on its business as it is now being
conducted and is contemplated in this Agreement, including, without limitation,
the right to grant the licenses granted hereunder.

 

  16.2 Authority

As of the Commencement Date, each Party represents and warrants to the other
that it:

 

  (a) has the corporate power and authority and the legal right to enter into
this Agreement and perform its obligations hereunder;

 

  (b) has taken all necessary corporate action on its part required to authorize
the execution and delivery of the Agreement and the performance of its
obligations hereunder; and

 

  (c) the Agreement has been duly executed and delivered on behalf of such
Party, and constitutes a legal, valid and binding obligation of such Party and
is enforceable against it in accordance with its terms.

 

  16.3 Absence of Litigation

As of the Commencement Date, Merial and APP each represent and warrant to each
other that each is not aware of any pending or threatened litigation (and has
not received any communication relating thereto) which alleges that the
activities of Merial or APP, with respect to the Technology, Patent, or Licensed
Product, or otherwise related to this Agreement, have infringed or
misappropriated, or that by conducting the activities as contemplated herein by
APP or Merial would infringe or misappropriate any Intellectual Property Rights
of any other Person.

 

  16.4 No Approvals or Consents Required

Except as otherwise described in this Agreement, each Party represents and
warrants to the other that all necessary consents, approvals and authorizations
of all governmental authorities and other Persons required to be obtained by
such Party in connection with entry into this Agreement have been obtained.

 

  16.5 Patents; Prior Art

Except as each Party has otherwise advised the other Party in writing prior to
the Commencement Date, each Party represents and warrants to the other Party
that as of the Commencement Date, (a) to the best of its knowledge, it has
sufficient legal and/or

 

25

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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

beneficial title and ownership under its intellectual property rights necessary
for it to fulfill its obligations under this Agreement; and (b) to the best of
its knowledge, there is no material unauthorized use, infringement, or
misappropriation of any of its intellectual property rights by third parties
relevant to the Program or other rights granted under this Agreement. As used
herein, “intellectual property rights” shall mean all patent rights, copyrights,
trademarks, trade secrets, and confidential and/or proprietary chemical
substances, technical information, data and assays necessary or useful to the
Program.

 

  16.6 No Conflict

Each Party represents and warrants to the other that the execution and delivery
of the Agreement by such Party and the performance of such Party’s obligations
hereunder (a) do not conflict with or violate any requirement of applicable law
or regulation or any provision of articles of incorporation or by laws of such
Party in any material way and (b) do not conflict with, violate, or breach or
constitute a default or require any consent under, any contractual obligation or
court or administrative order by which such Party is bound.

 

  16.7 No Prior Licenses

APP represents and warrants to Merial that prior to the Commencement Date,
neither it nor any APP Affiliate has granted any licenses or
covenants-not-to-sue to Third Parties with respect to the Licensed Product(s),
including, the right to Exploit the Licensed Product(s) in the Field in the
Territory.

 

17 INDEMNITY

 

  17.1 Indemnification by APP

APP hereby agrees to indemnify, hold harmless and defend Merial against any and
all expenses, costs of defense (including without limitation attorneys’ fees,
witness fees, damages, judgments, fines and amounts paid in settlement) and any
amounts Merial becomes legally obligated to pay because of any third party claim
or claims against it to the extent that such claim or claims (i) arise out of
the breach or alleged breach of any representation or warranty by APP hereunder,
or (ii) are due to the negligence or misconduct of APP; provided that (a) Merial
provides APP with prompt notice of any such claim and the exclusive ability to
defend (with the reasonable cooperation of Merial) and settle any such claim and
(b) such indemnities shall not apply to the extent such claims are covered by
Merial’s indemnity set forth in Clause 17.2 below.

 

  17.2 Indemnification By Merial

Merial hereby agrees to indemnify, hold harmless and defend APP against any and
all expenses, costs of defense (including without limitation attorneys’ fees,
witness fees, damages, judgments, fines and amounts paid in settlement) and any
amounts APP becomes legally obligated to pay because of any third party claim or
claims against it to the extent that such claim or claims (i) arise out of the
breach or alleged breach of any representation or warranty by Merial hereunder,
(ii) are due to the negligence or misconduct of Merial, or (iii) arise out of
the possession, manufacture, use, sale or administration of the Licensed
Product(s) by Merial or Merial’s Affiliates or sublicensees; provided that
(a) APP provides Merial with prompt notice of any such claim and the exclusive
ability to defend (with the reasonable cooperation of APP) or settle any such
claim and (b) such indemnities shall not apply to the extent such claims are
covered by

 

26

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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APP’s indemnity set forth in Clause 17.1 above.

 

  17.3 Mechanics

In the event that the Parties cannot agree as to the application of Clauses 17.1
and 17.2 above to any particular loss or claim, the parties may conduct separate
defenses of such claim. Each Party further reserves the right to claim indemnity
from the other in accordance with Clauses 17.1 and 17.2 above upon resolution of
the underlying claim, notwithstanding the provisions of Clauses 17.1 and 17.2
above requiring the indemnified Party to tender to the indemnifying party the
exclusive ability to defend such claim or suit.

 

18 INSURANCE

Each Party represents and warrants that it is covered and will continue to be
covered by a comprehensive general liability insurance program which covers all
of its own activities and obligations hereunder. Each Party shall provide the
other Party with written notice at least fifteen (15) days prior to any
cancellation or material change in such insurance program. Each Party shall
maintain such insurance program, or other program with comparable coverage,
beyond the expiration or termination of this Agreement during (i) the period
that any Licensed Product is being commercially distributed or sold other than
for the purpose of obtaining regulatory approvals by Merial or by a sublicensee,
Affiliate or agent of Merial and (ii) a commercially reasonable period
thereafter.

 

19 NOTICES

 

  19.1 General

Any notice or other written communications required or permitted to be made or
given hereunder may be made or given by either Party by fax communication to the
fax number set forth below, and such notice shall be followed up by depositing
the same in the mail, certified delivery, return receipt requested, postage
prepaid, and addressed to the mailing address set forth below.

 

  19.2 Particulars for Delivery of Notices

 

  (a) The particulars for delivery of notices are initially:

 

27

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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

APP

VP R&D

A.P. Pharma, Inc.

123 Saginaw Drive,

Redwood City, CA 94063

Fax: +1 650 365 9452 or +1 650 365 6490

Attention: Dr. John Barr

With a copy to:

Chief Executive Officer

A.P Pharma, Inc.

123 Saginaw Drive

Redwood City, CA 94063

Fax: +1 650 365 9452 or +1 650 365 6490

And a copy to:

Latham & Watkins LLP

140 Scott Drive

Menlo Park, CA 94025

Fax: +1 650 463 2600

Attention: Alan Mendelson

Merial

General Counsel

3239 Satellite Boulevard

Duluth, Georgia USA 30096

Fax: (678) 638-3960

With a copy to:

Global Head of R&D

3239 Satellite Boulevard

Duluth, Georgia USA 30096

Fax: (678) 638-3600

And for Intellectual Property Matters a copy to:

Global Head of IP

3239 Satellite Boulevard

Duluth, Georgia USA 30096

Fax: (678) 638-3350

 

  (b) Each Party may change its particulars for delivery of notices by written
notice to the other Party.

 

  19.3 After Hours Communications

If a communication is given:

 

  (a) after 5:00 p.m. in the place of receipt; or

 

  (b)

on a day which is a Saturday, Sunday, or bank or public or federal holiday in
the

 

28

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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

 

place of receipt,

it is taken as having been given at 9:00 a.m. on the next day which is not a
Saturday, Sunday, or bank or public or federal holiday in that place.

 

  19.4 Process Service

Any process or other document relating to litigation, administrative or
mediation proceedings relating to this Agreement may be served by any method
contemplated by this Article 19 or in accordance with any applicable law.

 

20 Force Majeure

 

  (a) For the purposes of this clause, “Force Majeure” means any circumstance
beyond the reasonable direct or indirect control and without the fault or
negligence of the Party claiming Force Majeure, including any act of God, act of
war, cyclone, fire, flood, explosion, storm or earthquake.

 

  (b) Delays in or failure of performance by a Party shall not constitute a
breach of this agreement by that Party if and to the extent any delay or failure
is caused by a Force Majeure, provided the Party claiming Force Majeure:

 

  (i) notifies the other Party in writing within three (3) Business Days of the
occurrence of the Force Majeure providing details of the Force Majeure and its
anticipated likely duration and effect; and

 

  (ii) uses its reasonable best endeavors to resume fulfilling its obligations
as promptly as possible and provides the other Party with written notice within
three (3) Business Days of the cessation of the Force Majeure.

 

  (c) If a delay caused by Force Majeure continues for more than [*] days,
either Party may terminate this agreement by giving thirty (30) days’ notice to
the other Party.

 

21 GENERAL

 

  21.1 Legal Costs

Except as expressly stated otherwise in this document, each Party must pay its
own legal and other costs and expenses of negotiating, preparing, executing, and
performing its obligations under this Agreement.

 

  21.2 Amendment

This Agreement may not be amended, replaced or varied, except in writing, signed
by both Parties, and making reference to this Agreement.

 

  21.3 Waiver and Exercise of Rights

 

  (a) A single or partial exercise or waiver by a Party of a right relating to
this document does not prevent any other exercise of that right or the exercise
of any other right.

 

29

 

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with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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  (b) A Party is not liable for any loss, cost, or expense of any other Party
caused or contributed to by the waiver, exercise, attempted exercise, failure to
exercise or delay in the exercise of a right.

 

  21.4 Rights Cumulative

Except as expressly stated otherwise in this document, the rights of a Party
under this document are cumulative and are in addition to any other rights of
that Party.

 

  21.5 Further Steps

Each Party must promptly do whatever any other Party reasonably requires of it
to give effect to this document and to perform its obligations under it.

 

  21.6 Governing Law

This Agreement is governed by and is to be construed in accordance with the laws
of the State of Delaware.

 

  21.7 Assignment

 

  (a) A Party may not assign this Agreement or any right or obligation hereunder
without the prior written consent of the other Party. Notwithstanding the
foregoing, Merial shall have the right to assign this Agreement to any of its
Affiliates without prior consent from APP; APP shall have the right to receive
any consideration due from Merial to APP under the Agreement, including
royalties, to a third party without prior consent from Merial; and either Party
shall have the right to assign, without prior consent of the other Party, its
rights and obligations under this Agreement to a successor to all or
substantially all of its business or assets to which this Agreement relates.

 

  (b) Any purported dealing in breach of this clause is of no effect.

 

  21.8 Liability

An obligation of two or more persons binds them separately and together.

 

  21.9 Counterparts

This document may consist of a number of counterparts and, if so, the
counterparts taken together constitute one document.

 

  21.10 Entire Understanding

 

  (a)

Any previous confidentiality agreements between the Parties hereto shall remain
in full force and effect. Subject to the foregoing, this Agreement contains the
entire understanding between the Parties as to the subject matter hereof;
provided, however, that (i) this Agreement shall not supersede the letter
agreement between the parties dated July 17, 2009, which shall continue in full
force and effect as provided therein, and (ii) this Agreement shall not
supersede the terms of the Research and Development Agreement effective
January 22, 2007, as amended, between the parties as to activities conducted
pursuant to the POC Phase prior to the Effective Date, and such Research and
Development Agreement shall continue in full force and effect to govern the

 

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with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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Parties’ rights and obligations with respect to the POC Phase as conducted
thereunder.

 

  (b) All previous negotiations, understandings, representations, warranties,
memoranda or commitments concerning the subject matter of this Agreement are
merged in and superseded by this Agreement and are of no effect. No Party is
liable to any other Party in respect of those matters.

 

  (c) No oral explanation or information provided by any Party to another:

 

  (i) affects the meaning or interpretation of this document; or

 

  (ii) constitutes any collateral agreement, warranty or understanding between
any of the Parties.

 

  21.11 Relationship of Parties

This document is not intended to create a partnership, joint venture,
employment, or agency relationship between the Parties.

 

  21.12 Ethical Business Practices

 

  (a) The Parties shall adhere to business practices in connection with this
Agreement which are in accordance with the letter and spirit of applicable laws
and ethical principles. Each Party represents and warrants to the other that all
transactions will be accurately reflected in their respective books and records,
and that no funds or other assets will be paid directly or indirectly to
government officials (or persons acting on their behalf) for the purpose of
influencing government decisions or actions. Violation of this policy may result
in the immediate termination of this Agreement.

 

  (b) No employee of Merial will have authority to give any direction, written
or oral, relating to the making of any commitment by APP or its agents to any
third party in violation of the terms of this Clause 21.12.

IN WITNESS THEREOF, the authorized representatives of the Parties hereto have
executed this Agreement effective on the day and the year first set forth above.

 

A.P. PHARMA INC.      MERIAL LIMITED:

/s/ Ronald Prentki

    

/s/ Jose G. R. Barella

(Signature)      (Signature) Ronald Prentki      Jose G. R. Barella Name (print)
     Name (print) President and CEO      Executive Chairman Title      Title

 

31

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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EXHIBIT A

Relevant Intellectual Property

Patents

[*]

 

1

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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EXHIBIT B

RESEARCH PROGRAM

[*]

 

2

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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

Exhibit C

[*]

 

3

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.