**EXHIBIT 10.61****January 4th, 2007****EXCLUSIVE LICENSE AGREEMENT****BETWEEN****ELI LILLY AND COMPANY****AND****PROSIDION LIMITED**
 

 
**CONTENTS**       Article Number   Page Number               **ARTICLE 1**  **1** **DEFINITIONS**  **1** 1.1 DEFINITIONS  1 1.2 FURTHER DEFINITIONS  12 **ARTICLE 2**  **12** **PURPOSE AND SCOPE OF THE LICENSE**  **12** 2.1 PURPOSE OF THE LICENSE  12 2.2 LICENSE GRANT  13 2.3 SUBLICENSES  13 2.4 PROSIDION KNOW-HOW  13 2.5 COVENANT NOT TO SUE  14 **ARTICLE 3**  **14** **ROLE AND RESPONSIBILITIES OF LILLY**  **14** 3.1 SCOPE OF LILLY’S RESPONSIBILITIES  14 3.2 REGULATORY ACTIVITIES  14 3.3 DILIGENCE OBLIGATIONS  15 3.4 THIRD PARTY OBLIGATIONS  16 3.5 NON-COMPETE  16 **ARTICLE 4**  **17** **ROLE AND RESPONSIBILITIES OF PROSIDION**  **17** 4.1 TECHNICAL INFORMATION PROVISION  17 4.2 REASONABLE TECHNICAL ASSISTANCE AND CO-OPERATION FOR TRANSITIONAL PURPOSES  17 4.3 MATERIALS PROVISION  17 4.4 NO ONGOING RESPONSIBILITY BEYOND TRANSITIONAL PURPOSES  18 **ARTICLE 5 INFORMATION REPORTING**  **18** 5.1 INFORMATION REPORTING  18 **ARTICLE 6 PAYMENTS AND FINANCIAL REPORTING**  **19** 6.1 UPFRONT PAYMENTS  19 6.2 MILESTONE PAYMENTS  19 6.3 ROYALTIES  20 **ARTICLE 7 CONFIDENTIALITY AND PUBLICATION**  **23** 7.1 OBLIGATIONS  23 7.2 AUTHORIZED DISCLOSURES OF CONFIDENTIAL INFORMATION  23 7.3 DISCLOSURES LEGALLY REQUIRED OR NECESSARY  23 7.4 DISCLOSURE OF THE TERMS OF THE AGREEMENT  24 7.5 PUBLICATIONS  25 **ARTICLE 8 REPRESENTATIONS, WARRANTIES AND DISCLAIMERS**  **25** 8.1 CORPORATE EXISTENCE AND AUTHORITY  25 8.2 AUTHORIZED EXECUTION; BINDING OBLIGATION  25 8.3 NO CONFLICTS  26 
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       Article Number   Page Number               8.4 ALL CONSENTS AND APPROVALS OBTAINED  26 8.5 EXISTING PATENTS IN THE TERRITORY  26 8.6 KNOW-HOW  27 8.7 DISCLAIMER OF IMPLIED WARRANTIES  27 8.8 LIMITATION OF LIABILITY  27 8.9 GUARANTEE OF PERFORMANCE OF AFFILIATES  27 8.10 NOT DEBARRED  28 8.11 LITIGATION  28 **ARTICLE 9 MUTUAL INDEMNIFICATION**  **28** 9.1 INDEMNIFICATION OBLIGATIONS  28 9.2 INDEMNIFICATION PROCEDURES  29 9.3 INDEMNIFICATION PAYMENT ADJUSTMENTS  30 9.4 INDEMNIFICATION PAYMENT  30 9.5 INSURANCE  30 9.6 SURVIVAL  32 **ARTICLE 10 INTELLECTUAL PROPERTY**  **32** 10.1 LILLY IMPROVEMENTS  32 10.2 PATENT EXPENSES  32 10.3 FILING, PROSECUTION AND MAINTENANCE OF PATENTS  32 10.4 INTERFERENCE, OPPOSITION, REEXAMINATION AND REISSUE  33 10.5 ENFORCEMENT  33 10.6 THIRD PARTY PATENTS  34 10.7 CERTIFICATION UNDER DRUG PRICE COMPETITION AND PATENT RESTORATION ACT  34 10.8 PATENT TERM RESTORATION  35 10.9 PATENT MARKING  35 **ARTICLE 11 TERM AND TERMINATION**  **35** 11.1 TERM  35 11.2 TERMINATION  35 11.3 TERMINATION FOR LILLY NON-COMPLIANCE WITH DILIGENCE OBLIGATIONS  36 11.4 TERMINATION AT WILL OF THE LILLY GKA PROGRAM BY LILLY  36 11.5 EFFECT OF TERMINATION; SURVIVING OBLIGATIONS  36 11.6 NON-EXCLUSIVE RIGHTS  38 11.7 RIGHTS IN BANKRUPTCY  38 **ARTICLE 12 DISPUTE RESOLUTION**  **38** 12.1 DISPUTES  38 12.2 DISPUTE RESOLUTION PROCEDURES  38 **ARTICLE 13 MISCELLANEOUS**  **41** 13.1 FORCE MAJEURE  41 13.2 ASSIGNMENT  41 13.3 CHANGE OF CONTROL  41 13.4 FURTHER ASSURANCES  41 13.5 SEVERABILITY  41 13.6 NOTICES  42 13.7 APPLICABLE LAW  42 
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       Article Number   Page Number               13.8 ENTIRE AGREEMENT  44 13.9 HEADINGS  44 13.10 INDEPENDENT CONTRACTORS  44 13.11 WAIVER  44 13.12 NO THIRD PARTY BENEFICIARIES  44 13.13 COUNTERPARTS  44 13.14 WAIVER OF RULE OF CONSTRUCTION  45 **SCHEDULE 1.1.20**  **46** **SCHEDULE 1.1.26**  **47** **SCHEDULE 1.1.58**  **48** **SCHEDULE 1.1.70**  **49** **SCHEDULE 4.3**  **50** **SCHEDULE 8.5**  **51** APPENDIX 1  **52** 
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**EXCLUSIVE LICENSE AGREEMENT**     THIS EXCLUSIVE LICENSE AGREEMENT (the “**Agreement**”) is made and is effective as of January4th, 2007 (the “**Effective Date**”) by and between:     (i) Eli Lilly and Company, a corporation organized and existing under the laws of the State ofIndiana, whose principal place of business is Lilly Corporate Center, Indianapolis, Indiana, 46285,United States of America (“**Lilly**”);**and**     (ii) Prosidion Limited, a company registered in England and Wales under registered number4600121 with its registered offices at Windrush Court, Watlington Road, Oxford OX4 6LT, UnitedKingdom (together with its parent company OSI Pharmaceuticals, Inc. (“**OSI**”) and its Affiliates,“**Prosidion**”).     Prosidion and Lilly are sometimes referred to herein individually as a “**Party**” andcollectively as the “**Parties**”.**RECITALS**     A. Prosidion is engaged in the research and development of pharmaceutical products and iscurrently engaged in the research and development of the Prosidion GKA Program (as hereinafterdefined).     B. Lilly is engaged in the research, development, manufacture and marketing of pharmaceuticalproducts and is interested in further research and development in the GKA (as hereinafter defined)area.     C. Prosidion desires to grant to Lilly exclusive license rights in the further research anddevelopment of the Prosidion GKA Program and clinical development and marketing of Product(s) (ashereinafter defined), and Lilly desires to receive such rights, subject to and in accordance withthe terms in this Agreement.     NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants hereincontained, the Parties hereby agree as follows:**ARTICLE 1****DEFINITIONS**     1.1 DEFINITIONS     When used and capitalized in this Agreement (other than the headings of the Articles andSections), including the foregoing recitals, the following terms shall have the meanings assignedto them in this Article and include the plural as well as the singular.
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     1.1.1 “**Adverse Event**” means any untoward medical occurrence in a patient or clinicalinvestigation subject administered a Product and which may or may not have a causal relationshipwith administration of such Product.     1.1.2 “**Affiliate**” means any Person that directly (or indirectly through one or moreintermediaries) controls, is controlled by, or is under common control with, a Party. For purposesof this definition only, the terms “controls,” “controlled,” and “control” mean: (i) the direct orindirect ability or power to direct or cause the direction of the management and policies of anentity or otherwise direct the affairs of such entity, whether through ownership of equity, votingsecurities or beneficial interest, by contract, or otherwise; or (ii) the ownership, directly orindirectly, of at least fifty percent (50%) of the voting securities (or other comparable ownershipinterest for an entity other than a corporation) of a Party.     1.1.3 “**API**” or “**Active Pharmaceutical Ingredient**” means the active pharmaceutical ingredientof PSN010 or GKA Back-ups in bulk form, which, if appropriately formulated and finished, wouldconstitute Product.     1.1.4 “**Applicable Laws**” means all applicable statutes, ordinances, regulations, rules ororders of any kind whatsoever of any Governmental Authority, including, without limitation, theRegulatory Laws, Prescription Drug Marketing Act, Generic Drug Enforcement Act of 1992 (21 U.S.C.Section 335a et seq.), and Anti-Kickback Statute (42 U.S.C. Section 1320a-7b et seq.), all asamended from time to time.     1.1.5 “**Calendar Quarter**” means the respective periods of three (3) consecutive calendar monthsending on March 31, June 30, September 30 and December 31.     1.1.6 “**Calendar Year**” means each successive period of twelve (12) months commencing on January1 and ending on December 31.     1.1.7 “**cGCP**” means the then current good clinical practices as defined in U.S. Regulations 21CFR Sections 50, 54, 56, 312 and 314, (or in the case of foreign jurisdictions, comparableregulatory standards), and in any successor regulation, including those procedures expressed orimplied in the Regulatory Materials with respect to any Product(s) provided to RegulatoryAuthorities.     1.1.8 “**cGLP**” means the then current good laboratory practice standards promulgated or endorsedby the FDA (or in the case of foreign jurisdictions, comparable regulatory standards), includingthose procedures expressed or implied in the Regulatory Materials with respect to any Product(s)provided to Regulatory Authorities.     1.1.9 “**cGMP**” or “**GMP**” means the then current good manufacturing practices for pharmaceuticalsas described in regulations promulgated by Regulatory Authorities as applicable to the Manufactureof Product(s), as such regulations are in effect at the time of Manufacturing Product(s).     1.1.10 “**Change Of Control**” means, with respect to either Party, any of the following events:(i) the acquisition by any entity of **“beneficial ownership”**(as defined in Rule 13d-3 under theUnited States Securities and Exchange Act of 1934, as amended) directly or indirectly, of fiftypercent (50%) or more of the shares of such Party’s capital stock, the holders of which havegeneral voting power under ordinary circumstances to elect at least a majority of such Party’sboard of directors or equivalent body (the **“Board of Directors”**) (the **“Voting Stock”**); (ii) theapproval by the shareholders of such Party of a merger, share exchange, reorganization,consolidation or similar transaction of such Party (a **“Transaction”**), if any party to theTransaction is an entity, other than a Transaction which would result in the beneficial owners ofVoting Stock of such Party immediately prior thereto continuing to
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beneficially own (either by such Voting Stock remaining outstanding or being converted intovoting securities of the surviving entity) more than fifty percent (50%) of the Voting Stock ofsuch Party or such surviving entity immediately after such Transaction; or (iii) approval by theshareholders of such Party of a complete liquidation of such Party or a sale or disposition of allor substantially all of the assets of such Party.     1.1.11 “**Combination Product**” means a product that includes PSN010 or a GKA Back-up in additionto at least one additional therapeutically effective active ingredient (whether coformulated orcopackaged) which did not arise from the Lilly GKA Program.     1.1.12 “**Commercialisation**” means all activities undertaken by Lilly before and after MarketingApproval for the Lilly GKA Program or otherwise relating specifically to the marketing, sale anddistribution of relevant Product(s) including, without limitation: (i) sales force detailing,advertising, education, planning, marketing, sales force training and distribution; (ii) scientificand medical affairs, including drug safety and regulatory affairs activities necessary per Lilly’sreasonable determination to maintain Marketing Approvals; (iii) Phase IIIB Trials and Post-ApprovalTrials; and (iv) the Manufacture of Product(s) intended for commercial sale, including, withoutlimitation, formulation, bulk API and/or drug product production, fill/finish, distribution,manufacturing process improvement and quality assurance technical support.     1.1.13 “**Commercially Reasonable Efforts**” means that level of effort and application ofexpertise and resource, typical in the pharmaceutical industry in the research, development andcommercialisation of a product or compound owned by a Third Party or resulting from its ownresearch efforts, that is of similar market potential and at a similar stage in its development orproduct life, taking into account issues of safety and efficacy, product profile, difficulty indeveloping the product, competitiveness of the marketplace for resulting products, the patentposition of the compound or product, the regulatory structure involved, the potential totalprofitability of the applicable products marketed or to be marketed, and other relevant factorsaffecting the cost, risk and timing of development and the total potential reward to be obtained ifa product is commercialised*.*In determining whether Commercially Reasonable Efforts have beensatisfied by Lilly, the fact that Lilly is required to comply with certain financial obligationshereunder to Prosidion shall not be a factor weighed (i.e., Lilly may not apply lesser resources oreffort to Product(s) because it has a financial obligation hereunder to Prosidion with respect tosales of Product(s), than it would to a product of its own).     1.1.14 “**Competing Product (s)**” means any product other than PSN010 or a GKA Back-up: **     1.1.15 “**Confidential Information**” means the Prosidion Confidential Information or the LillyConfidential Information, as applicable.     1.1.16 “**Control**” or “**Controlled**” means with respect to any intellectual property right, thatthe Party owns or has a license to such intellectual property right and has the ability to grantaccess, a license, or a sublicense to such intellectual property right to the other Party asprovided for in this Agreement without violating an agreement with a Third Party as of the timesuch Party would be first required under this Agreement to grant the other Party such access,license or sublicense; provided, however, that for rights acquired from Third Parties after theEffective Date, such access can be granted without additional cost. ** This portion has been redacted pursuant to a confidential treatment request.
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     1.1.17 “**Development**” means the conduct of all activities that are reasonably required toobtain Marketing Approval of a Product, including, without limitation: (i) non-clinical studies(including, without limitation, pharmacology, toxicology and pharmacokinetics); (ii) regulatoryaffairs, project management, clinical operations, medical writing, bio-statistics, data managementand drug safety, and clinical trials, in accordance with the cGLPs, cGCPs and cGMPs or otherdesignated quality standards and Applicable Laws; (iii) all activities relating to developing theability to Manufacture such Product, including, without limitation, formulation,stability/analytical, packaging, delivery technologies and devices, bulk API and/or drug productproduction, Manufacturing fill/finish, Manufacturing process development, and quality assurancetechnical support, clinical supplies distribution and quality control testing and release, untilsuch time as Manufacturing of such Product intended for commercial sale commences; and (iv) anyrequired post-Marketing Approval commitments.     1.1.18 “**EMEA**” means the European Medicines Evaluation Agency for the European Union, or asuccessor agency, which has jurisdiction over Marketing Approval of a pharmaceutical product ordevice in the European Union.     1.1.19 **     1.1.20 “**Existing Suppliers**” means, in relation to Section 3.1 (e), any existing suppliers ofgoods and/or services to Prosidion at the Effective Date, as set forth in Schedule 1.1.20.     1.1.21 **     1.1.22 “**FD&C Act**” means the U.S. Food, Drug and Cosmetic Act, as amended from time to time (21U.S.C. Section 301 et seq.), together with any rules and regulations promulgated thereunder.     1.1.23 “**FDA**” means the U.S. Food and Drug Administration, or any successor federal agency inthe U.S. having responsibility over U.S. Marketing Approvals.     1.1.24 “**Field**” means all indications for the treatment, prevention or diagnosis of conditionsin humans or animals.     1.1.25 **     1.1.26 “**GKA Back-up(s)**” means those back-up compounds to PSN010, within the Prosidion GKAProgram that are set forth in Schedule 1.1.26 and/or are covered by a Valid Claim of a ProsidionPatent.     1.1.27 “**Governmental Authority**” means any court, tribunal, arbitrator, agency, commission,official or other instrumentality of any federal, state, or other political subdivision, orsupranational body, domestic or foreign.     1.1.28 “**IND**” means an Investigational New Drug Application (together with all additions,deletions***,***and supplements thereto) filed with the FDA or other equivalent filing with anyapplicable Regulatory Authority outside the U.S., necessary to commence and conduct human clinicaltrials in a jurisdiction. ** This portion has been redacted pursuant to a confidential treatment request.
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     1.1.29 “**Information**” means any information Controlled by Prosidion as of the Effective Date orby Lilly during the Term that is necessary for the Research and Development of the Lilly GKAProgram and/or the Manufacture and Commercialisation of Product(s). Information may include, butis not limited to: (a) any and all inventions, know-how, developments, Lilly Improvements,materials, data, analyses, and the like, regardless of whether the information is stored ortransmitted in oral, documentary, or electronic form; and (b) information relating to research anddevelopment plans, experiments, results, compounds, therapeutic leads, candidates and products,clinical and preclinical data, trade secrets and Manufacturing, marketing, financial, regulatory,and other business information and plans, and all scientific, clinical, regulatory, marketing,financial and commercial information or data; in each case, to the extent necessary for theResearch and Development of the Lilly GKA Program and/or the Manufacture and Commercialisation ofProduct(s).     1.1.30 “**License**” shall have the meaning provided in Section 2.2.     1.1.31 “**Lilly Confidential Information**” means all information (scientific, clinical,regulatory, marketing, financial, commercial, or otherwise, including Lilly Know-How ) disclosed orprovided by, or on behalf of, Lilly to Prosidion or Prosidion’s designees in connection with thisAgreement whether disclosed or provided prior to, or after, the Effective Date and whether providedorally, visually, electronically, or in writing, except such information that Prosidion can show:               (a) was, prior to the date of Lilly’s disclosure, known to it, as shown by competentwritten evidence, or already in the public domain;               (b) became part of the public domain, after Lilly’s disclosure hereunder, through nobreach of this Agreement by Prosidion or by any person or entity to whom Prosidion disclosed suchinformation;               (c) was subsequently disclosed to Prosidion, without any restrictions, by a personor entity having lawful possession of, and a legal right to disclose, such information; or               (d) was developed by Prosidion without use, and independent, of Lilly ConfidentialInformation, as shown by competent written evidence.     1.1.32 “**Lilly GKA Program**” means the Research, Development, Manufacture and Commercialisationconducted by Lilly during the Term regarding development candidate PSN010 and/or GKA Back-ups. TheLilly GKA Program does not include within its meaning Lilly’s research, development, manufacturingor commercialization efforts with respect to compounds other than PSN010 or GKA Back-ups.     1.1.33 “**Lilly Improvement**” means any findings, developments, discoveries, inventions,additions, modifications, enhancements, formulations, or changes to the composition of matter, ormethod of use of, a Product, or its Manufacture made by, or coming under Control of Lilly or any ofits Affiliates or Sublicensees during the Term and developed in the course of the Lilly GKA Programand which are necessary in the Research and Development of the Lilly GKA Program and/or theManufacture and Commercialisation of Product(s), including without limitation, new or improvedmethods of synthesis, manufacture, ingredients, preparation, presentation, means of delivery,dosage, formulation, or analysis, whether or not patentable.     1.1.34 “**Lilly Know-How**” means all Information that Lilly Controls as of the Effective Date orduring the Term that arises from the Lilly GKA Program, including without limitation, any Lilly
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Improvements. Lilly Know-How does not include Lilly Patents or the information contained in apublished Lilly Patent.     1.1.35 “**Lilly Patents**” means all Patents Controlled by Lilly as of the Effective Date orduring the Term that arise from or are useful to the Lilly GKA Program, including withoutlimitation, any such Patents claiming the composition of matter or the use of Product(s) or anyLilly Improvements.     1.1.36 “**Lilly Rights**” means Lilly Patents, Lilly Know-How and any Lilly Improvements.     1.1.37 “**Major Market**” means any of the following jurisdictions: **     1.1.38 “**Major Pharmaceutical Company**” means any Third Party (which, for the avoidance ofdoubt, shall exclude OSI) which, during the immediately preceding fiscal year, ** Beginning withJanuary 1, 2008, the market capitalization value described above shall be increased by five percent(5%) annually.     1.1.39 “**Manufacture**” or “**Manufacturing**” or “**Manufactured**” means all operations involved in themanufacturing, quality control testing (including in-process, release and stability testing, ifapplicable), releasing, packaging and shipping of Product(s).     1.1.40 “**Marketing Approval**” means the act of a Regulatory Authority necessary for theManufacture, use, marketing and sale of a Product in the Field for one or more indications in acountry or regulatory jurisdiction in the Territory, including, without limitation, the approval ofan NDA by the FDA and EU Approval and satisfaction of all applicable regulatory and notificationrequirements.     1.1.41 “**NDA**” or “**New Drug Application**” means an application or set of applications (and anyother required registrations, notifications, forms, amendments or supplements) for MarketingApproval for Product(s) and/or pre-market approval to make and sell commercially Product(s), filedwith the FDA or with a Regulatory Authority anywhere in the Territory, including, withoutlimitation, all documents, data and other information concerning a pharmaceutical product which arenecessary for gaining Marketing Approval.     1.1.42 “**Net Sales**” means, with respect to Product(s), the gross amount invoiced by Lilly(including a Lilly Affiliate) or any Sublicensee to unrelated Third Parties, excluding anySublicensee, for Product(s) in the Territory, less:               (a) Trade, quantity and cash discounts allowed;               (b) Commissions, discounts, refunds, rebates (including, but not limited to, wholesalerinventory management fees), chargebacks, retroactive price adjustments, and any other allowanceswhich effectively reduce the net selling price;               (c) Actual Product returns and allowances;               (d) That portion of the sales value associated with drug delivery systems;               (e) Any tax imposed on the production, sale, delivery or use of the Product, including,without limitation, sales, use, value added taxes or excise taxes; and ** This portion has been redacted pursuant to a confidential treatment request.
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               (f) Any other similar and customary deductions.               Such amounts shall be determined from the books and records of Lilly, its Affiliates orSublicensees, maintained in accordance with U.S. Generally Accepted Accounting Principles (“**U.S.GAAP**”) or, in the case of Sublicensees, such similar accounting principles, consistently applied.Lilly further agrees in determining such amounts, it and its Affiliates will use Lilly’s thencurrent standard procedures and methodology, including Lilly’s then current standard exchange ratemethodology for the translation of foreign currency sales into US dollars and, in the case ofSublicensees, such similar methodology, consistently applied.               In the event that Product is sold as part of a Combination Product, the Net Sales of theProduct, for the purposes of determining royalty payments, shall be determined by multiplying theNet Sales of the Combination Product by the fraction, A / (A+B) where A is the weighted averagesale price of the Product when sold separately in finished form, and B is the weighted average saleprice of the other product(s) sold separately in finished form.               In the event that the weighted average sale price of the Product can be determined but theweighted average sale price of the other product(s) cannot be determined, Net Sales for purposes ofdetermining royalty payments shall be calculated by multiplying the Net Sales of the CombinationProduct by the fraction A / C where A is the weighted average sale price of the Product when soldseparately in finished form and C is the weighted average sale price of the Combination Product.               In the event that the weighted average sale price of the other product(s) can be determinedbut the weighted average sale price of the Product cannot be determined, Net Sales for purposes ofdetermining royalty payments shall be calculated by multiplying the Net Sales of the CombinationProduct by the following formula: one (1) minus B / C where B is the weighted average sale priceof the other product(s) when sold separately in finished form and C is the weighted average saleprice of the Combination Product.               In the event that the weighted average sale price of both the Product and the other product(s)in the Combination Product cannot be determined, the Net Sales of the Product shall be deemed to beequal to ** of the Net Sales of the Combination Product.               The weighted average sale price for a Product, other product(s), or Combination Product shallbe calculated once each Calendar Year and such price shall be used during all applicable royaltyreporting periods for the entire following Calendar Year. When determining the weighted averagesale price of a Product, other product(s), or Combination Product, the weighted average sale priceshall be calculated by dividing the sales dollars (translated into U.S. dollars) by the units ofactive ingredient sold during the twelve (12) months (or the number of months sold in a partialcalendar year) of the preceding Calendar Year for the respective Product, other product(s), orCombination Product. In the initial Calendar Year, a forecasted weighted average sale price willbe used for the Product, other product(s), or Combination Product. Any over or under payment due toa difference between forecasted and actual weighted average sale prices will be paid or credited inthe first royalty payment of the following Calendar Year. For the avoidance of doubt, excipientsshall not be considered products for the purpose of this definition of Net Sales.               Notwithstanding the above, the Parties agree that for the purposes of determining royaltypayments, in no event shall the value of Net Sales of the Product, where the Product is sold aspart of a ** This portion has been redacted pursuant to a confidential treatment request.
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Combination Product, be less than **.     1.1.43 “**Patent**” or “**Patents**” means: (a) patent applications (including provisionalapplications and applications for certificates of invention); (b) any patents issuing from suchpatent applications (including certificates of invention); (c) all patents and patent applicationsbased on, corresponding to, or claiming the priority date(s) of any of the foregoing; (d) anyreissues, substitutions, confirmations, registrations, validations, re-examinations, additions,continuations, continued prosecution applications, continuations-in-part, or divisions of or to anyof the foregoing; and (e) term extensions, supplementary protection certificates and othergovernmental action beyond the original patent expiration date.     1.1.44 “**Patent Expenses**” means all costs and expenses incurred by a Party after theEffective Date for the preparation, filing, prosecution and maintenance of a Prosidion Patentincluding, without limitation, costs and expenses related to Patent defense (e.g., the conduct ofany interference or opposition).     1.1.45 “**Person**” means a natural person, a corporation, a partnership, a trust, a jointventure, a limited liability company, any governmental authority or any other entity ororganization.     1.1.46 “**Phase I Trials**” means human clinical trials conducted in healthy volunteers orpatients anywhere in the world in accordance with cGCP intended to establish an initial safetyprofile and the pharmacokinetics and/or pharmacodynamics of Product(s).     1.1.47 **     1.1.48 “**Phase II Trials**” means human clinical trials conducted in patients anywhere in theworld with Product(s) in accordance with cGCP and intended to demonstrate efficacy and a level ofsafety in the particular indication tested, as well as to obtain a preliminary indication of theunit and/or daily dosage regimen required.     1.1.49 “**Phase III Trials**” means large scale human clinical trials conducted in patientsanywhere in the world in accordance with cGCP and intended to demonstrate efficacy and a level ofsafety in the particular indication tested sufficient to obtain Marketing Approval of Product(s).Phase III Trials include “bridging studies” which allow submission in a target country of clinicaldata generated from Phase III studies completed in other countries to be submitted in lieu ofrepeating Phase III studies in the target country.     1.1.50 “**Phase IIIB Trials**” means Phase III Trials commenced before receipt of MarketingApproval in the jurisdiction where such trials are being conducted, but which are not required forreceipt of Marketing Approval and are conducted primarily for the purpose of Product support (i.e.,providing additional drug profile data).     1.1.51 “**Post-Approval Trials**” means all clinical trials which are conducted after MarketingApproval for Product(s) has been obtained from an appropriate Regulatory Authority comprising oftrials conducted voluntarily by Lilly for enhancing marketing or scientific knowledge of anapproved indication and trials conducted due to request or requirement of a Regulatory Authority. ** This portion has been redacted pursuant to a confidential treatment request.
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     1.1.52 “**Plans**” means the written plans for the Research and Development of the Lilly GKAProgram and/or the Manufacture and Commercialisation of Product(s), prepared and implemented byLilly and provided to Prosidion for information on an ongoing basis.     1.1.53 “**Product**” means any product which includes as an active pharmaceutical ingredientPSN010 or a GKA Back-up for use either alone or in combination with one or more othertherapeutically active substances, including all formulations, line extensions and modes ofadministration thereof. For the avoidance of doubt, Product(s) shall include CombinationProduct(s). Product(s) shall not include Competing Product(s).     1.1.54 “**Product Launch**” means the date on which a Product is first shipped by Lilly, itsAffiliates or Sublicensees for commercial sale to a Third Party in the Territory followingMarketing Approval of Product, including, if applicable, any necessary pricing approval.     1.1.55 “**Prosidion Confidential Information**” means all information (scientific, clinical,regulatory, marketing, financial, commercial, or otherwise, including Prosidion Know-How) disclosedor provided by, or on behalf of, Prosidion to Lilly or Lilly’s designees in connection with thisAgreement (including its Affiliates and Sublicensees), whether disclosed or provided prior to, orafter, the Effective Date and whether provided orally, visually, electronically, or in writing,except such information that Lilly can show:               (a) was, prior to the date of Prosidion’s disclosure, known to it, as shown bycompetent written evidence, or already in the public domain;               (b) became part of the public domain, after Prosidion’s disclosure hereunder,through no breach of this Agreement by Lilly or by any person or entity to whom Lilly disclosedsuch information;               (c) was subsequently disclosed to Lilly, without any restrictions, by a person orentity having lawful possession of, and a legal right to disclose, such information; or               (d) was developed by Lilly without use, and independent, of Prosidion ConfidentialInformation, as shown by competent written evidence.     1.1.56 “**Prosidion GKA Program**” means Prosidion’s GlucoKinase Activator (“**GKA**”) programincluding all structure activity related chemistry, including development candidate PSN010 and allGKA Back-ups identified as at the Effective Date. Prosidion GKA Program does not include withinits meaning the Lilly GKA Program.     1.1.57 “**Prosidion Know-How**” means all: (i) Information that Prosidion Controls as of theEffective Date relating to the Prosidion GKA Program; and (ii) Prosidion Materials. ProsidionKnow-How does not include Prosidion Patents or the information contained in a published ProsidionPatent.     1.1.58 “**Prosidion Patents**” means all Patents Controlled by Prosidion as of the Effective Daterelating to the Prosidion GKA Program, including without limitation any such Patents claiming thecomposition of matter or the use of Product(s), as set forth in Schedule 1.1.58 and any Patentsfiled by Prosidion or Lilly after the Effective Date with respect to inventions Controlled byProsidion, which were conceived or reduced to practice under the Prosidion GKA Program, existing asof the Effective Date. Prosidion Patents shall also include any Patents in the Tanabe Territorythat revert to Prosidion from Tanabe pursuant to the Tanabe Agreement during the Term.
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     1.1.59 “**Prosidion Rights**” means Prosidion Patents and Prosidion Know-How.     1.1.60 “**PSN010**” means the lead development candidate, ** or a salt or otherderivative thereof, also known as PSN010, selected as of the Effective Date for clinicaldevelopment and currently in Phase I Trials.     1.1.61 **     1.1.62 **     1.1.63 “**Regulatory Authority**” means, in a particular country or jurisdiction, any applicablegovernment regulatory authority involved in granting Marketing Approval and/or, to the extentrequired in such country or jurisdiction, pricing approval of a Product in such country orjurisdiction, including without limitation: (a) in the U.S., the FDA, and any other applicablegovernmental or regulatory authority in the U.S. having jurisdiction over such Product, and anysuccessor government authority having substantially the same function; and (b) any foreignequivalent thereof in another jurisdiction.     1.1.64 “**Regulatory Law**” means the FD&C Act, together with any rules and regulationspromulgated thereunder. “Regulatory Law” shall also mean any applicable statutes, ordinances,regulations, rules or orders of any kind whatsoever of any Governmental Authority governing theimport, export, manufacture or distribution of Product(s) (including, without limitation, MarketingApproval) or reporting obligations with respect to product complaints or Adverse Events related toProduct(s), together with any rules and regulations promulgated thereunder.     1.1.65 “**Regulatory Materials**” means any regulatory submissions, notifications, registrations,approvals and/or other filings made to or with a Regulatory Authority that may be necessary orreasonably desirable to research, develop, make, have made, use, sell, have sold, offer for saleand import/export Product(s) in the Field in the Territory and shall include without limitation,NDAs and INDs or their equivalents in other jurisdictions.     1.1.66 “**Regulatory Submission**” means the submission by Lilly of Regulatory Materials to aRegulatory Authority for the purpose of seeking Marketing Approval.     1.1.67 “**Research**” means all activities undertaken with respect to the research andnon-clinical evaluation of PSN010 and/or GKA Back-ups under the Lilly GKA Program including,without limitation: (i) *in vivo*pharmacology studies; (ii) chemistry; and (iii) *in vitro*biology.     1.1.68 “**Sublicensee**” means any Third Party (including, without limitation, a distributor) towhich Lilly or any of its Affiliates grants any right to make, have made, use, sell, have sold,offer for sale and import/export Product(s) in accordance with Section 2.3. A Third Party who isgranted only the right to distribute or promote a Product (such as a contract sales organization)will not be considered a Sublicensee.     1.1.69 “**Tanabe**” means Tanabe Seiyaku Co., Ltd., which is party to a Termination Agreement withProsidion dated as of March 31, 2004 as appended hereto at Appendix 1 (the “**Tanabe Agreement**”)regarding certain GK Products (as defined within the Tanabe Agreement). ** This portion has been redacted pursuant to a confidential treatment request.
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     1.1.70 “**Tanabe Territory**” means the ** Territories set forth in Schedule 1.1.70and as detailed in Exhibit B to the Tanabe Agreement, in relation to which Tanabe has certainrights to develop and commercialise certain GK Products (as defined within the Tanabe Agreement).     1.1.71 “**Term**” has the meaning provided in Section 11.1.     1.1.72 “**Territory**” means all countries of the world excluding the Tanabe Territory, for solong as the rights of Tanabe to develop and commercialise GK Products (as defined within the TanabeAgreement) continue, and including the Tanabe Territory, when such rights of Tanabe no longersubsist.     1.1.73 “**Third Party**” means any Person other than Prosidion or Lilly and their respectiveAffiliates.     1.1.74 “**U.S.**” means the United States of America, including its territories and possessionsand the commonwealth of Puerto Rico.     1.1.75 “**Valid Claim**” means a claim of a Prosidion Patent in a country which: (i) but for thisAgreement, would be infringed by the Manufacture, importation, use or sale of Product (but only, inthe case of Prosidion Patents relating to the making or use of a Product, if unit sales of genericversions of Product, if any, in total do not exceed ** of Product in the relevant country in therelevant time period); (ii) has not expired or been revoked or held unenforceable or invalid by adecision of a court or other governmental agency of competent jurisdiction, unappealable orunappealed within the time allowed for appeal, and (iii) has not been abandoned, disclaimed oradmitted to be invalid or unenforceable through reissue, disclaimer or otherwise.     1.1.76 “**VDC**” means Vanderbilt Diabetes Centre which is party to a Termination Agreement withProsidion dated as of July 31, 2005 (the “**VDC Agreement**”) regarding certain rights relating tocertain Products (as defined within the VDC Agreement). ** This portion has been redacted pursuant to a confidential treatment request.
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     1.2 FURTHER DEFINITIONSIn addition to the foregoing terms, the following terms are defined in the Sectionscross-referenced below:   Defined Term SectionArbitrators Timeline 3.3 (c)Prosidion Materials 4.3Primary Contact 5.1 (a)Liabilities 8.9Prosidion Indemnitees 9.1 (a)Damages 9.1 (a)Prosidion Third Party Claim 9.1 (a)(ii)Lilly Indemnitees 9.1 (b)Lilly Third Party Claim 9.1 (b)(ii)Indemnitee 9.2 (a)Action 9.2 (a)Indemnifying Party 9.2 (a)Term 11.1Early Termination Notice 11.5 (b)(i)Intellectual Property 11.7Claim 12.2 (a)Arbitration Commencement 12.2 (b)(i)     1.3 The singular includes the plural and vice versa, words denoting any gender include allgenders.     1.4 Where the context so admits or requires, references to Lilly or Prosidion shall includetheir respective employees, officers, directors or agents.     1.5 Headings to Articles or Sections within this Agreement are for convenience only and shallnot affect the construction or interpretation of this Agreement.**ARTICLE 2****PURPOSE AND SCOPE OF THE LICENSE**     2.1 PURPOSE OF THE LICENSE.     Lilly shall use Commercially Reasonable Efforts to undertake all Research and Development ofthe Lilly GKA Program and Manufacture and Commercialisation of Product(s), in the Field in theTerritory, in accordance with the terms hereof, with the objective of obtaining Marketing Approvalof Product(s) in each country and regulatory jurisdiction throughout the Territory where Lillydetermines, in its reasonable opinion, that it is commercially appropriate to do so, as soon aspracticable to do so, and to Commercialise Product(s) in the Territory.
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     2.2 LICENSE GRANT.     Subject to the terms and conditions hereof, Prosidion hereby grants to Lilly an exclusive(even as to Prosidion) royalty-bearing license under the Prosidion Rights to research, develop,make, have made, use, sell, have sold, offer for sale and import/export Product(s) in the Field inthe Territory, subject to the rights of Prosidion detailed hereinafter (the “**License**”), togetherwith the right to grant sublicenses thereunder in accordance with Section 2.3.     Notwithstanding the foregoing, Prosidion shall retain the right to practice, and to grantlicenses (in relation to research collaborations or to external service providers) under, theProsidion Rights, other than to develop, make, have made, use, sell, offer for sale, have sold andimport/export Product(s) in the Field in the Territory, for the use of ** for researchpurposes as a control.     2.3 SUBLICENSES.               (a) Lilly shall be entitled to grant sublicenses to its Affiliates and Third Parties for thepurposes of Commercialisation provided that any sublicenses shall be on the terms set forth herein,and, in relation to sublicenses to non-Affiliates in the Major Markets, shall be entered into onlywith the prior written approval of Prosidion.               (b) Lilly shall notify Prosidion of the identity of any Sublicensee prior toexecution of a sublicense and shall provide to Prosidion a true and complete copy of eachsublicense agreement and each amendment thereto promptly after the sublicense or amendment has beenexecuted and delivered.               (c) No sublicense shall relieve Lilly of any of its obligations hereunder, and Lillyshall be responsible for the acts and/or omissions of its Sublicensees and for compliance by themwith obligations related hereto. Lilly shall take all steps necessary to enforce such complianceto the extent required to allow Lilly to fully comply with all of its obligations under thisAgreement.               (d) Any such sublicense shall be non-sublicensable, shall be granted in respect ofthe License, for any part of the Field within the Territory, or any part thereof, and shallincorporate terms and conditions at least equivalent to those contained herein.               (e) Any sublicense purported to be granted by Lilly and not complying with the termsof this Section 2.3 shall be deemed invalid and of no effect until such time as the discrepanciesare remedied.     2.4 PROSIDION KNOW-HOW.     Prosidion hereby grants a license to Lilly, and shall provide to Lilly access, to allProsidion Know-How Controlled by Prosidion at the Effective Date, as necessary for the purposes ofenabling Lilly to conduct Research and Development of the Lilly GKA Program and Manufacture andCommercialisation of Product(s) in the Field in the Territory, as contemplated herein. Prosidionacknowledges that Lilly has conducted, and in its sole discretion may continue to conduct, researchand development in the GlucoKinase area outside the course of the Lilly GKA Program. In additionto the License and the Prosidion Know-How license granted in this Section 2.4, Prosidion agreesthat Prosidion Know-How may be used by Lilly outside the course of the Lilly GKA Program forinternal research and ** This portion has been redacted pursuant to a confidential treatment request.
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development purposes, including by sharing with, under contract, *bona fide*collaborators aspart of research collaboration and contractors for services related to such research anddevelopment. The right to use the Prosidion Know-How as set forth in this Section 2.4 shallsurvive the expiration or termination of this Agreement.     2.5 COVENANT NOT TO SUE.     Prosidion hereby grants to Lilly for the duration of the Term, and Lilly hereby accepts, anirrevocable unconditional covenant not to assert any claim or file any law suit against Lilly underany Patents filed by Prosidion after the Effective Date that would be infringed by the research,development, making, having made, using, selling, having sold, offering for sale orimporting/exporting of PSN010 or a GKA Back-up in the Territory in the Field.**ARTICLE 3****ROLE AND RESPONSIBILITIES OF LILLY.**     3.1 SCOPE OF LILLY’S RESPONSIBILITIES.               (a) SCOPE. Lilly shall control and be solely responsible for the Research andDevelopment of the Lilly GKA Program and Manufacture and Commercialisation of Product(s), inaccordance with the Plans and as detailed herein.               (b) COSTS. Lilly shall be solely responsible for all costs and expenses arisingfrom its activities hereunder and/or relating to the Research and Development of the Lilly GKAProgram and Manufacture and Commercialisation of Product(s) from the Effective Date.               (c) COMPLIANCE WITH LAWS. Lilly will use Commercially Reasonable Efforts to conductResearch and Development of the Lilly GKA Program and Manufacture and Commercialisation ofProduct(s) efficiently and expeditiously and in a good scientific manner and in compliance in allmaterial respects with all requirements of Applicable Laws, including cGCPs, cGLPs and cGMPs, toachieve the objectives of the License efficiently and expeditiously.               (d) PLANS AND WRITTEN RECORDS. The activities to be undertaken by Lilly in thecourse of Research and Development of the Lilly GKA Program and Manufacture and Commercialisationof Product(s) shall be set forth in the Plans, which shall be provided to Prosidion on an on-goingbasis for information. In conformity with standard pharmaceutical and biotechnology industrypractices, Lilly will prepare and maintain, or will cause to be prepared and maintained, completeand accurate written records, accounts, notes, reports and data with respect to its activitieshereunder.               (e) EXISTING SUPPLIERS. Lilly shall reimburse Prosidion for any costs incurred by it afterthe Effective Date relating to goods and/or services commissioned in writing by Lilly with ExistingSuppliers.     3.2 REGULATORY ACTIVITIES.               Lilly shall control and be solely responsible for filing of Regulatory Materials in relationto the Research and Development of the Lilly GKA Program and for, and obtaining, all necessary
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Marketing Approvals in the Territory in respect of Product(s) and for all ongoingcommunications with the Regulatory Authorities from the Effective Date, including, withoutlimitation: (i) filing, maintaining and updating any INDs and NDAs for Product(s); (ii) reportingall Adverse Events and serious Adverse Events to the FDA or other Regulatory Authority; (iii)submitting Regulatory Materials to the FDA or other Regulatory Authority for Marketing Approval;(iv) handling medical and technical complaints and disputes with the FDA or other RegulatoryAuthority, patients and physicians; and (v) dealing with product recalls. All Regulatory Materials(including Marketing Approvals) for Products in the Territory shall be held in Lilly’s name andshall be owned solely by Lilly, including any data package exclusivity resulting from MarketingApprovals. Within ninety (90) days of the Effective Date, Lilly shall determine whatreasonable further actions shall be reasonably required to be conducted by Prosidion in relation tosafety data exchange with regard to clinical trials conducted by Prosidion prior to the EffectiveDate and notify Prosidion thereof. Prosidion shall thereafter have six (6) months to conduct suchactions.     3.3 DILIGENCE OBLIGATIONS.               (a) COMMERCIALLY REASONABLE EFFORTS. Lilly shall use Commercially ReasonableEfforts to conduct Research and Development of the Lilly GKA Program and in the Manufacture ofProduct(s) relating to Development, and in the Commercialisation of Product(s), so as to obtainMarketing Approval of Product(s) in each country and regulatory jurisdiction throughout theTerritory where it is determined by Lilly, in its reasonable opinion, to be commerciallyappropriate to do so, as soon as practicable to do so, and to Commercialise Product(s): (i) in theU.S.; (ii) in each Major Market outside the U.S.; and (iii) in each country in the Territoryoutside of the Major Markets that is determined by Lilly, in its reasonable opinion, to be feasibleand commercially attractive for marketing of the Product(s).               (b) RESEARCH AND DEVELOPMENT EFFORTS AND DEVELOPMENT-RELATED MANUFACTURING EFFORTS.If during the Term, Prosidion believes that Lilly is not using Commercially Reasonable Efforts toconduct Research and Development of the GKA Program or in the Manufacturing of Product(s) relatedto Development, Prosidion shall so inform Lilly in writing. If the Parties disagree as to whetherLilly is using such Commercially Reasonable Efforts then upon written request by either Party, suchdisagreement shall be resolved in accordance with Section 12.2(a) and thereafter in accordance withSection 12.2 (b).               (c) FAILURE IN RESEARCH OR DEVELOPMENT EFFORTS OR IN DEVELOPMENT-RELATEDMANUFACTURING EFFORTS. In the event that any arbitration conducted pursuant to Sections 3.3 (b)and 12.2 (b) determines that Lilly was not using Commercially Reasonable Efforts to conductResearch and Development of the GKA Program or in the Manufacturing of Product(s) related toDevelopment, Lilly shall pay Prosidion the sum of ** within thirty (30) days of suchdetermination. In addition, the arbitration will establish a reasonable timeline to achieve thenext critical development milestone (the “**Arbitrators Timeline**”).               (d) FAILURE TO MEET ARBITRATORS TIMELINE. In the event that Lilly fails to meet theArbitrators Timeline, Prosidion shall serve written notice upon Lilly and Lilly shall have ninety(90) days in which to rectify the breach or to provide evidence, to Prosidion’s satisfaction, thatany such delay or failure to meet the Arbitrators Timeline is the result of factors beyond Lilly’sreasonable control. If, after such ninety (90) day period, Lilly has still failed to meet theArbitrators Timeline, the matter shall be referred to arbitration for determination in accordancewith Section 12.2 (b). In the event that such arbitration determines that Lilly was not usingCommercially Reasonable Efforts: (i) to conduct ** This portion has been redacted pursuant to a confidential treatment request.
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Research and Development of the GKA Program; or (ii) in the Manufacturing of Product(s)related to Development; and/or (iii) to meet such Arbitrators Timeline, Lilly shall pay Prosidionthe sum of ** within thirty (30) days of such determination. Thereafter, for as longas Lilly remains in breach of the Arbitrators Timeline, Lilly shall pay Prosidion the sum of **per Calendar Quarter for each Calendar Quarter (or part thereof) that Lilly fails to meet theArbitrators Timeline, payable within thirty (30) days of the commencement of each such CalendarQuarter.               (e) SUBSEQUENT BREACHES. The aforementioned procedure in Sections 3.3 (b), (c) and(d) shall apply to each and every occasion in which Prosidion believes that Lilly is not usingCommercially Reasonable Efforts to conduct Research and Development of the GKA Program or in theManufacturing of Product(s) related to Development.               (f) COMMERCIALISATION EFFORTS. If, during the Term, Prosidion believes that Lillyis not using Commercially Reasonable Efforts to conduct the Commercialisation of Product(s) in theMajor Markets (including, for the avoidance of doubt, Manufacture related to Commercialisation),Prosidion shall so inform Lilly in writing. If the Parties disagree as to whether Lilly is usingsuch Commercially Reasonable Efforts then upon written request by either Party, such disagreementshall be resolved in accordance with Section 12.2 (a) and thereafter in accordance with Section12.2 (b).               (g) FAILURE IN COMMERCIALISATION EFFORTS. In the event that any arbitrationconducted pursuant to Sections 3.3 (f) and 12.2 (b) determines that Lilly was not usingCommercially Reasonable Efforts to conduct the Commercialisation of Product(s) in the Major Markets(including, for the avoidance of doubt, Manufacture related to Commercialisation), any damagesawarded by the arbitrators for the economic damage suffered by Prosidion by such breach shall belimited to **, to be payable within thirty (30) days of such determination, together with an awardfor specific performance by Lilly to rectify such breach from the date of the determination.               (h) SUBSEQUENT BREACHES. The aforementioned procedure in Sections 3.3 (f) and (g)shall apply to each and every occasion in which Prosidion believes that Lilly is not usingCommercially Reasonable Efforts to conduct Commercialisation of Product(s) (including, for theavoidance of doubt, Manufacture related to Commercialisation).               (i) For the avoidance of doubt, Lilly shall have the right to terminate this Agreementpursuant to Section 11.4 at any time during the process set forth in Sections 3.3 (b) to (h)(inclusive) and in such event, those payment obligations arising under such Sections shall applyonly up to the date of receipt of notice of termination by Prosidion.     3.4 THIRD PARTY OBLIGATIONS.               (a) TANABE AGREEMENT.                    (i) **               (b) VDC AGREEMENT. For the avoidance of doubt, Lilly shall have no liability orresponsibility to VDC under the VDC Agreement.     3.5 NON-COMPETE. ** This portion has been redacted pursuant to a confidential treatment request.
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     For a period of ** Lilly will not market, sell, detail or promote any CompetingProduct ****ARTICLE 4****ROLE AND RESPONSIBILITIES OF PROSIDION.**     4.1 TECHNICAL INFORMATION PROVISION.     Prosidion shall, within thirty (30) days of the Effective Date: (a) provide Lilly with accessto, and copies of, any technical information relating to the Prosidion GKA Program Controlled byProsidion and in its possession at the Effective Date (including Prosidion Know-How) which inLilly’s reasonable opinion is necessary to enable Lilly to undertake its responsibilitieshereunder; and (b) transfer and assign to Lilly all of its right, title and interest in and to allRegulatory Materials with respect to the Prosidion GKA Program (including all drug dossiers andmaster files with respect to any Product(s)); and (c) take such other actions and execute suchother instruments, assignments and documents as may be necessary to effect the transfer of rightshereunder to Lilly. Prosidion shall not provide, disclose or otherwise transfer any ProsidionKnow-How to any Third Party without the written consent of Lilly.     4.2 REASONABLE TECHNICAL ASSISTANCE AND CO-OPERATION FOR TRANSITIONAL PURPOSES.     Prosidion shall, for a period of nine (9) months after the Effective Date and for transitionalpurposes only, provide Lilly with all reasonable technical assistance and co-operation in relationto transfer to Lilly of: (i) technical information; and (ii) Regulatory Materials, each relating tothe Prosidion GKA Program Controlled by Prosidion and in its possession at the Effective Date, thatis reasonably useful or necessary to enable Lilly to conduct its responsibilities hereunder.     4.3 MATERIALS PROVISION.               (a) Prosidion shall, as soon as reasonably practicable but in any event no laterthan forty five (45) days after the Effective Date, sell and deliver to Lilly certain biologicalmaterials and/or chemical compounds related to the Prosidion GKA Program Controlled by Prosidionand in its possession at the Effective Date (the “**Prosidion Materials**”) as set forth in Schedule4.3, for use by Lilly as provided by this Agreement and without further charge to Lilly. Except asexpressly set forth herein, such Prosidion Materials are provided “as is” and without any warranty,express, implied or statutory, including without limitation warranties of merchantability, title,non-infringement, exclusivity, or fitness for a particular purpose. Prosidion shall not provide ortransfer any Prosidion Materials, including PSN010 and GKA Back-ups, to any Third Party during theTerm, without the written consent of Lilly, other than ** pursuant to Section 2.2.               (b) Notwithstanding the foregoing disclaimer of warranty in Section 4.3(a), forformulated PSN010 drug product and PSN010 API provided by Prosidion to Lilly under this Agreement,Prosidion represents and warrants that, at the time of shipment to Lilly: (a) the formulated PSN010drug product and PSN010 API shall not be adulterated nor misbranded within the meaning of 21 U.S.C.Sections 351 and 352 or any similar law or regulation in other countries: (b) such formulatedPSN010 drug product and PSN010 API has been manufactured in accordance with cGMPs, to the extentcGMP ** This portion has been redacted pursuant to a confidential treatment request.
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standards promulgated by the ICH are applicable; (c) such formulated PSN010 drug product andPSN010 API complied with Prosidion’s internal specifications; (d) such PSN010 API is qualitycontrol released for drug product manufacture as of the shipment date, by Prosidion’s or its ThirdParty contractor’s quality control unit using Prosidion’s standard quality control procedures forsuch materials; and (e) such formulated PSN010 drug product is certified as of the shipment date,as to manufacture in accordance with cGMPs and conformity with Prosidion’s internal specifications,by Prosidion’s or its Third Party contractor’s quality control unit using Prosidion’s standardquality control procedures for such materials.     4.4 NO ONGOING RESPONSIBILITY BEYOND TRANSITIONAL PURPOSES.     For the avoidance of doubt, it is agreed between the Parties that Prosidion shall have noongoing responsibility to Lilly hereunder to provide any technical assistance, advice orco-operation to Lilly other than as detailed in Article 4 in relation to transfer of activitiesfrom Prosidion to Lilly with regard to the Prosidion GKA Program, after the Effective Date.**ARTICLE 5****INFORMATION REPORTING**     5.1 INFORMATION REPORTING.               (a) PRIMARY CONTACTS. Each Party will designate a member of management who will bethe primary contact for that Party (the “**Primary Contact**”).               (b) RESPONSIBILITIES. Lilly shall be responsible for the dissemination ofinformation to Prosidion regarding Lilly’s activities hereunder and for the following:                    (i) Information dissemination and provision of the Plans and detailed progressupdates on the Research and Development of the Lilly GKA Program and Manufacture andCommercialisation of Product(s);                    (ii) Monitoring of Lilly’s diligence in carrying out its responsibilities hereunder;                    (iii) Periodic discussion of the overall goals and strategy of the Lilly GKA Program;                    (iv) Development of procedures for disclosure of Confidential Information and reviewand approval of publications; and                    (v) Carrying out any other duties assigned to Lilly with regard to informationreporting during the Term, as mutually agreed by the Parties.               (c) MEETINGS. The Parties shall meet at least once every ** throughoutthe Term for the purpose of information reporting hereunder. Such meetings may be in-person, viavideoconference or via teleconference. In-person meetings will be held at Lilly’s premises atIndianapolis, Indiana, unless the Parties otherwise agree. Each Party will bear the expenses ofits ** This portion has been redacted pursuant to a confidential treatment request.
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participation in meetings. At least five (5) business days prior to each meeting, Lilly shallprovide written notice to Prosidion of agenda items for the meeting, together with appropriateinformation related thereto. It is noted that Prosidion shall not be obligated to attend suchmeetings however, in the event that a meeting is not held in any ** period, whichevent shall only occur at the request of Prosidion, a detailed written report of the status of theLilly GKA Program will be provided to Prosidion.     (d) MINUTES. Material information provided or discussed at a meeting will bedocumented and signed by both Parties before the meeting ends. Reasonably detailed written minuteswill be kept of all meetings and will reflect, without limitation, material information provided atsuch meetings. Responsibility for keeping minutes will be held by Lilly. Meeting minutes will besent to Prosidion for review and approval within ten (10) business days after a meeting. Minuteswill be deemed approved unless Prosidion objects to the accuracy of such minutes within twenty (20)business days of receipt.**ARTICLE 6****PAYMENTS AND FINANCIAL REPORTING**     6.1 UPFRONT PAYMENTS.     In partial consideration of the granting of the License and rights hereunder, Lilly will payto Prosidion a non-refundable, non-creditable upfront payment of twenty five million U.S. Dollars($25,000,000) within ten (10) business days following the Effective Date. Such payment will bemade in immediately available funds via a Federal Reserve electronic wire transfer to a bankaccount designated by Prosidion.     6.2 MILESTONE PAYMENTS.               (a) MILESTONES. The development milestones listed below shall become due and owingupon first occurrence of the applicable milestone event. Lilly will notify Prosidion within **of the achievement of any such milestone by Lilly, its Affiliate or Sublicensee, and shall at suchtime or shortly thereafter provide Prosidion with substantiation of the achievement of themilestone. Lilly shall have ** following such notification of the achievement of a milestonelisted below, in which to pay the corresponding amount to Prosidion in immediately available fundsvia a Federal Reserve electronic wire transfer to an account designated by Prosidion:       **Cash Payment** **Milestones on PSN010** **(U.S. dollars)**      **     ** This portion has been redacted pursuant to a confidential treatment request.
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       **Cash Payment** **Milestones on GKA Back-ups** **(U.S. dollars)**      **         All milestones shall be paid on the first occurrence of such milestone being achieved. **     (b) NET SALES PERFORMANCE MILESTONES. The following performance milestones shallbecome due and owing upon the achievement of the relevant milestone and as set forth below:       **Cash Payment** **Milestone on Net Sales** **(U.S. dollars)**      **    Performance Milestones shall be calculated on cumulative Net Sales of all Product(s) during aCalendar Year and shall become due once at the first occurrence of meeting or exceeding such saleslevel. Lilly will notify Prosidion within ** following the close of the Calendar Quarter inwhich achievement of such Net Sales milestone occurs. Lilly shall have ** following suchnotification of the achievement of the milestone, in which to pay the corresponding amount toProsidion in immediately available funds via a Federal Reserve electronic wire transfer to anaccount designated by Prosidion.     6.3 ROYALTIES               (a) ROYALTY RATE. Royalties on sales of Product(s) shall be payable by Lilly toProsidion on Net Sales on a Product-by-Product and a country-by-country basis in the Territory asdetailed below. For the avoidance of doubt, in the event that Lilly acquires any rights toCommercialise Product(s) in relation to the Tanabe Territory, or if Tanabe fails to exercise ordiligently pursue its rights in the Tanabe Territory under the Tanabe Agreement, and Lillythereafter generates Net Sales in the Tanabe Territory, royalties shall be payable by Lilly on aProduct-by-Product and a country-by-country basis on Net Sales in the Tanabe Territory as set forthbelow:           **PSN010**  **GKA Back-up** **For Annual Net Sales Between:** **Royalty Rate (%)**  **Royalty Rate (%)**          **         ** This portion has been redacted pursuant to a confidential treatment request.
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               (b) ROYALTY CONDITIONS. Royalties shall be subject to the following conditions:                    (i) royalties shall be payable with respect to all Net Sales of Product(s);                    (ii) only one royalty shall be due with respect to the same sales unit ofProduct(s);                    (iii) no royalties shall be due upon the sale or other transfer of Product(s) amongLilly, its Affiliates and/or Sublicensees, but in such cases the royalty shall be due andcalculated upon Lilly’s, its Affiliates and/or Sublicensees’ Net Sales to the first independentThird Party;                    (iv) no royalties shall accrue on the disposition of Product(s) in reasonablequantities by Lilly, its Affiliates or its Sublicensees as samples (promotion or otherwise) or asdonations (for example, to non-profit institutions or government agencies for a non-commercialpurpose); and                    (v) that in the event Lilly generates Net Sales in the Tanabe Territory, theroyalties payable by Lilly on such Net Sales in the Tanabe Territory shall be decreased by theamount of any royalties that may become payable by Lilly to Tanabe on Lilly’s Net Sales of suchProduct(s) in the Tanabe Territory, evidence of which shall be provided to Prosidion.               (c) ROYALTY TERM. Lilly’s obligation to pay royalties on Net Sales of each Productin any country in the Territory will continue until the later of: (i) ** followingProduct Launch of such Product in such country; or (ii) the expiration of the last to expire of anyProsidion Patent having a Valid Claim.               (d) REPORTS; PAYMENT OF ROYALTY. Following Product Launch, Lilly shall furnish toProsidion a written report for the Calendar Quarter accounting for the Net Sales of all Product(s)subject to royalty obligations sold by Lilly, its Affiliates and/or its Sublicensees in theTerritory on a country-by-country basis during the reporting period, and detailing the royaltiespayable under this Agreement. Reports shall be due on the ** following the close of eachCalendar Quarter and on the ** day following the end of the duration of Lilly’s royaltyobligations hereunder. Each such report shall be certified by an authorised representative of theFinance Department of Lilly as being true, accurate and complete. In addition, an unofficialmonthly sales report of estimated royalties payable, detailed on a country-by-country basis, shallbe delivered to Prosidion within ** days following the close of each calendar month and on the** day following the end of the duration of Lilly’s royalty obligations hereunder. Lilly shallalso provide to Prosidion on the ** day following the close of each Calendar Quarter, anunofficial quarterly sales report of estimated royalties payable to Prosidion hereunder, detailedon a country-by-country basis, in the event that royalty estimates at such date differ from theamounts previously reported to Prosidion for such Calendar Quarter. Royalties shown to haveaccrued by each unofficial quarterly report and all other payments due under this Section 6.3 forsuch period or portion thereof shall be due and payable within ** days of the close of eachCalendar Quarter. In the event that royalties payable as detailed in the aforementioned certifiedreport provided by Lilly within ** days of the close of each Calendar Quarter differ from theroyalty payments received by Prosidion, any differences will be added to or subtracted from thesubsequent Calendar Quarter royalty payment, as applicable. ** This portion has been redacted pursuant to a confidential treatment request.
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               (e) MAINTENANCE OF RECORDS. Lilly shall keep and maintain (and cause to be kept andmaintained) complete and accurate records of the Net Sales by Lilly, its Affiliates and/orSublicensees, in sufficient detail to enable the royalties payable hereunder to be determined, andin accordance with U.S. GAAP. Lilly shall retain such records for at least ** afterthe close of any Calendar Quarter.               (f) ROYALTY AUDITS. Upon the written request of Prosidion, including one CalendarYear following the end of the duration of Lilly’s royalty obligations hereunder, Prosidion has theright to annually audit, using Lilly’s independent certified public accounting firm, or if suchfirm is also the independent certified public accounting firm of Prosidion or any of its Affiliatesor is not acceptable to Prosidion, through an independent certified public accountant selected byProsidion and acceptable to Lilly (which acceptance will not be unreasonably refused), atProsidion’s expense, and to have access during normal business hours on reasonable notice to, suchof the records of Lilly, its Affiliates and Sublicensees as may be reasonably necessary to verifythe accuracy of the royalty reports hereunder in relation to Net Sales and any royalties or otherpayments due thereon. The accounting firm shall be under a duty to keep confidential any otherinformation obtained from such reports. The fees charged by such accounting firm shall be paid byProsidion; provided, however, that if such accounting firm determines that Lilly underpaidroyalties by more than ** of the amount that was due, then the fees charged by such accountingfirm shall be paid by Lilly.               (g) If such accounting firm concludes that additional royalties were owed duringsuch period, Lilly shall pay the additional royalties within thirty (30) days of the date Prosidiondelivers to Lilly such accounting firm’s written report so correctly concluding.               (h) Lilly shall include in each sublicense granted by it pursuant to this Agreementa provision requiring the Sublicensee to make reports to Lilly, to keep and maintain records ofsales made pursuant to such sublicense and to grant access and audit rights to such records byProsidion’s independent accountant to the same extent required of Lilly under this Agreement.               (i) Prosidion shall treat all financial information subject to review under thisSection 6.3 or under any sublicense agreement, in accordance with the confidentiality provisions ofthis Agreement, and shall cause its accounting firm to enter into a reasonably acceptableconfidentiality agreement with Lilly obligating it to retain all such financial information inconfidence pursuant to such confidentiality agreement.               (j) PAYMENT EXCHANGE RATE. All payments to be made by Lilly to Prosidion under thisAgreement shall be made in Euros and shall be paid by bank wire transfer in immediately availablefunds to such bank account designated in writing by Prosidion from time to time. All payments duehereunder shall be deemed received when funds are credited to Prosidion’s account at a bankdesignated by Prosidion for the purpose and shall be paid by wire transfer in Euros. All paymentswill be determined in U.S. dollars pursuant to the terms of this Agreement and will be convertedinto Euros at the rate of exchange using the spot rate in effect for the purchase of Euros on thedate of payment.               (k) INCOME TAX WITHHOLDING. Where any sum due to be paid to Prosidion hereundershall be subject to any withholding tax, the Parties shall use all reasonable efforts to do allsuch acts and things and to sign all such documents as will enable them to take advantage of anyapplicable taxation treaty or agreement. In the event there is no applicable taxation treaty oragreement, or if an applicable taxation treaty or agreement reduces but does not eliminate suchwithholding or similar tax, ** This portion has been redacted pursuant to a confidential treatment request.
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Licensee shall pay such withholding or similar tax to the appropriate government authority,deduct the amount paid from the amount due to Prosidion and secure and send to Prosidion the bestavailable evidence of such payment sufficient to enable Prosidion to obtain a deduction for suchwithheld taxes or obtain a refund thereof including, without limitation, when received a copy ofthe official tax receipt evidencing payment of such tax to the appropriate taxing authority.**ARTICLE 7****CONFIDENTIALITY AND PUBLICATION**     7.1 OBLIGATIONS.     Except upon obtaining the other Party’s prior written consent to the contrary, each Partyagrees that it will:               (a) maintain in confidence, and not disclose to any person or entity (except asprovided in Section 7.2), the other Party’s Confidential Information for the Term of this Agreementand five (5) years thereafter; and               (b) not use such Confidential Information for any purpose except as contemplated inthis Agreement.     7.2 AUTHORIZED DISCLOSURES OF CONFIDENTIAL INFORMATION.               (a) PERMITTED PERSONS. Each Party may disclose Confidential Information of the otherParty, without such other Party’s prior written consent, to its and its Affiliates’ (or the otherParty’s and its Affiliates’) directors, employees, agents, consultants, permitted Sublicensees,suppliers, and other person or entities who:                    (i) need to know such Confidential Information to assist the Party in fulfilling itsobligations or exploiting its rights hereunder (or to determine their interest in providing suchassistance); and                    (ii) are bound by written confidentiality and non-use obligations no less stringentthan those contained herein.     7.3 DISCLOSURES LEGALLY REQUIRED OR NECESSARY.               (a) Each Party may also disclose the Confidential Information of the other Party,without such other Party’s prior written consent, to any person, entity, or government orregulatory authority to the extent that the law or governmental regulation requires suchdisclosure. In addition, Lilly may disclose Prosidion’s Confidential Information, withoutProsidion’s prior written consent, to any Person, entity, or government or Regulatory Authority tothe extent that such disclosure is: (i) necessary for obtaining, maintaining, or amending anyRegulatory Materials regarding Product(s) or satisfying any other regulatory obligation regardingsuch Product; or (ii) reasonably useful or necessary for the preparation, prosecution and defenseof Prosidion Patents or Lilly Patents.               (b) Except as provided in Section 7.3 (a), prior to disclosing the other Party’sConfidential Information under this Section 7.3, the disclosing Party, to the extent practicable,will give the other Party a copy of the Confidential Information to be disclosed and provide suchParty a reasonable
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opportunity to comment on the necessity and the text of the proposed disclosure.The disclosing Party agrees to consider such comments in good faith and to reasonably avail itselfof available means under the Applicable Law to minimize the disclosure of such ConfidentialInformation.               (c) COURT ORDERS. Each Party may also disclose the Confidential Information of theother Party, without such other Party’s prior written consent, pursuant to, and limited to theextent required by, an order of a Regulatory Authority or court of competent jurisdiction, providedthat it promptly notifies the other Party of the required disclosure in order to provide such Partyan opportunity to take legal action to prevent or limit such disclosure and, if asked, reasonablyassists the other Party in pursuing such action.               (d) LEGAL ACTIONS. Each Party may also disclose the Confidential Information of theother Party, without such other Party’s prior written consent, as is necessary to pursue or defendagainst a legal or regulatory action by one Party against the other with respect to this Agreement.A Party disclosing the other Party’s Confidential Information, pursuant to this Subsection, willuse reasonable efforts to minimize the disclosure of the other Party’s Confidential Information,including, without limitation, by seeking to file pleadings under seal.     7.4 DISCLOSURE OF THE TERMS OF THE AGREEMENT.               (a) TAX DISCLOSURES. Each Party agrees that it will maintain in confidence, and notdisclose, the terms of this Agreement without the prior written consent of the other Party, exceptas expressly authorized herein. If a Party receives a request from an authorized representative ofa U.S. or foreign tax authority for a copy of the Agreement, that Party may provide a copy of theAgreement to such tax authority representative without advance notice to, or the consent orcooperation of, the other Party, but the disclosing Party must notify the other Party of thedisclosure as soon as practicable.               (b) DISCLOSURE TO AUTHORIZED PERSONS. Either Party may disclose informationregarding the terms of this Agreement to: (i) its advisers, agents, consultants, permittedSublicensees and suppliers who need to know such information to perform their contractualobligations to such Party; and (ii) to a Third Party in relation to a due diligence exercise beingconducted by such Third Party, who needs to know such information to perform such due diligence,and in relation to (i) and (ii), provided such Third Parties agree to be bound by terms ofconfidentiality and non-use at least as strict as those set forth in this Agreement.               (c) DISCLOSURE ON ADVICE OF COUNSEL. If any Party, based on the advice of counsel,determines that a release of information regarding the existence or terms of this Agreement isrequired by law or regulation, then prior to any release of such information, that Party willnotify the other Party as soon as practicable and provide as much detail as possible in relation tothe proposed disclosure and will endeavor in good faith to provide the other Party with a minimumof five (5) business days to review and provide comments on the proposed release. The disclosingParty will use its best efforts to incorporate comments of the other Party to the extent consistentwith fulfilling its legal obligations.               (d) PUBLICITY. It is understood that the Parties intend to issue a mutuallyacceptable joint press release announcing the execution of this Agreement and agree that each Partymay desire or be required to issue subsequent press releases relating to the Agreement oractivities hereunder. The Parties agree to consult with each other reasonably and in good faith with respect to thetext and timing of such press releases prior to the issuance thereof, provided that a Party may notunreasonably withhold consent to such releases, and that either Party may issue such press releasesas it determines, based on advice of counsel, are reasonably necessary to comply with laws orregulations or for
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appropriate market disclosure. In addition, following the initial joint pressrelease announcing this Agreement, each Party shall be free to disclose, without the other Party’sprior written consent, the existence of this Agreement, the identity of the other Party and thoseterms of the Agreement and other information which have already been publicly disclosed in suchpress release or subsequent press releases in accordance herewith. Prosidion shall also beentitled to disclose the current clinical status of the Lilly GKA Program (for example, informationregarding phase of development completed or in process and regulatory status) and may also discloseinformation regarding data and results from the Lilly GKA Program but only to the extent that suchinformation has been publicly disclosed or published by Lilly.               (e) PUBLICITY REFERRAL. Unless otherwise directed in writing by Lilly, all mattersthat require Lilly’s review or consent under this Section must be referred to Lilly’s CorporateCommunications (Public Relations) department for review and approval at the address set forth inSection 13.6. Unless otherwise directed in writing by Prosidion, all matters that requireProsidion’s review or consent under this Section must be referred to OSI’s Head of Investor andPublic Relations, at the address set forth in Section 13.6.     7.5 PUBLICATIONS.     Lilly shall inform Prosidion of any publications related to the Lilly GKA Program and/orProduct(s). Upon prior written approval of Lilly, which approval shall not be unreasonablywithheld, Prosidion may after the Effective Date, submit manuscripts for publication orpresentation at conferences or symposia, relating to its activities on the Prosidion GKA Programconducted prior to the Effective Date and to publish or otherwise disclose such.**ARTICLE 8****REPRESENTATIONS, WARRANTIES AND DISCLAIMERS**     8.1 CORPORATE EXISTENCE AND AUTHORITY.     Each Party hereby represents and warrants to the other Party that, as of the Effective Date,it:               (a) is a corporation duly organized, validly existing and in good standing under thelaws of the state or country in which it is incorporated;               (b) has full corporate power and authority and the legal right to own and operateits property and assets and to carry on its business as it is now being conducted and iscontemplated in this Agreement (without making any representation as to the intellectual propertyrights except as provided in Section 8.5); and               (c) has the corporate power and full authority and the legal right to enter intothis Agreement and perform the obligations and duties contemplated under this Agreement.     8.2 AUTHORIZED EXECUTION; BINDING OBLIGATION.     Each Party represents and warrants to the other Party that, as of the Effective Date: (i) theexecution, delivery, and performance of the Agreement and the consummation of the transactionscontemplated thereby have been duly authorized and approved by all necessary corporate action onits part; and (ii) this Agreement has been duly executed and delivered by it and constitutes alegal, valid and binding obligation enforceable against it in accordance with this Agreement’sterms, except as the same
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may be limited by applicable bankruptcy, insolvency, reorganization,moratorium or other laws relating to or affecting creditors’ rights generally and by general equityprinciples, including judicial principles affecting the availability of injunction and specificperformance.     8.3 NO CONFLICTS.     Each Party represents and warrants to the other Party that its execution, delivery, andperformance of this Agreement:               (a) does not, except as otherwise described in this Agreement, require the approvalor consent of any person or entity, which has not already been obtained;               (b) does not, to the best of its knowledge, contravene any Applicable Laws; and               (c) does not contravene the provisions of, nor constitute a default under, itsarticles of incorporation or bylaws or any indenture, mortgage, contract or other agreement orinstrument to which it is a signatory, or any permit, or governmental authorization or grant.     8.4 ALL CONSENTS AND APPROVALS OBTAINED.     Except as otherwise described in this Agreement, each Party represents and warrants to theother that: (i) all necessary consents, approvals and authorizations of; and (ii) all notices to,and filings by such Party with, all governmental authorities and other persons or entities requiredto be obtained or provided by such Party in connection with the execution, delivery and performanceof this Agreement have been obtained and provided, except for those government approvals, if any,not required at the time of execution of this Agreement.     8.5 EXISTING PATENTS IN THE TERRITORY.     Prosidion represents and warrants that, as of the Effective Date:               (a) Schedule 1.1.58 lists all Prosidion Patents;               (b) To Prosidion’s knowledge, and other than as disclosed in Schedule 8.5: (i) thereis no litigation or arbitration, either pending or threatened in writing, alleging that anyProsidion Patent is invalid or unenforceable anywhere in the Territory; and (ii) Prosidion is thesole owner of the Prosidion Patents and has the right to grant to Lilly the licenses grantedhereunder;               (c) Prosidion has not previously granted (other than Tanabe pursuant to the TanabeAgreement or VDC under the VDC Agreement or service providers under service agreements withProsidion), and is not currently obligated (whether or not contingent on any future event or stateof affairs) to negotiate with any Third Party with respect to granting, any license or other rightin the Field in the Territory under the Prosidion Rights licensed to Lilly by this Agreement;               (d) Prosidion has not encumbered, with liens, mortgages, security interests or otherwise, theProsidion Rights;               (e) To Prosidion’s knowledge, none of the claims contained in any issued Prosidion Patent areinvalid or unenforceable and Prosidion has not received notice from any governmental authority orcourt that the claims set forth in any issued Prosidion Patents are invalid;
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               (f) Prosidion is in compliance in all material respects with, and has not received any noticeof breach pursuant to, any agreement relating to the Prosidion Rights, including without limitationthe Tanabe Agreement and the VDC Agreement;               (g) There are no pending or, to Prosidion’s knowledge threatened, claims against Prosidionasserting that any of the activities of Prosidion relating to the Prosidion GKA Program or theconduct of the activities contemplated herein by Lilly under the Lilly GKA Program (if carried outby Prosidion) would infringe or violate the rights of Third Parties;               (h) To Prosidion’s knowledge or belief, there are no Patents (other than the ProsidionPatents) that would be infringed by the use of PSN010 API in its current form for the treatment oftype 2 diabetes in the Territory; and               (i) Prosidion has not given any notice to any Third Party asserting infringement by such ThirdParty upon any of the Prosidion Rights.     8.6 KNOW-HOW.     Prosidion represents that know-how generated by Existing Suppliers with respect to PSN010 isowned or Controlled by Prosidion and it undertakes that it will, promptly after the Effective Date,provide to Lilly all Prosidion Know-How Controlled by Prosidion and in its possession at theEffective Date and to promptly procure the delivery to Lilly of all Prosidion Know-How held byExisting Suppliers.     8.7 DISCLAIMER OF IMPLIED WARRANTIES.     EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY OTHER REPRESENTATIONOR WARRANTY, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, STATUTE, OR OTHERWISE, ANDEACH PARTY SPECIFICALLY DISCLAIMS ANY AND ALL IMPLIED OR STATUTORY WARRANTIES INCLUDING WARRANTIESOF MERCHANTABILITY, OF FITNESS FOR A PARTICULAR PURPOSE AND OF NON-INFRINGEMENT.     8.8 LIMITATION OF LIABILITY.     NEITHER PARTY WILL BE LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, ORSPECIAL DAMAGES INCLUDING, BUT NOT LIMITED TO, LOST PROFITS ARISING FROM OR RELATING TO ANY BREACHOF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. HOWEVER, NOTHINGIN THIS SECTION IS INTENDED TO LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OFEITHER PARTY UNDER ARTICLE 9.     8.9 GUARANTEE OF PERFORMANCE OF AFFILIATES.     Each Party absolutely, unconditionally and irrevocably guarantees to the other Party, promptperformance when due and at all times thereafter of the liabilities (including, without limitation,indemnity obligations and liabilities), obligations, covenants, warranties, representations andundertakings (collectively, the “**Liabilities**”) of its Affiliates pursuant to this Agreement, andany and all modifications and amendments thereof.
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     8.10 NOT DEBARRED.     Prosidion represents and warrants that Prosidion is not debarred and has not used in anycapacity the services of any Person debarred under subsections 306 (a) or (b) of the Generic DrugEnforcement Act of 1992.     8.11 LITIGATION.     Prosidion represents and warrants that there are no pending or, to Prosidion’s knowledge,threatened judicial, administrative or arbitral actions, claims, suits or proceedings pending as ofthe Effective Date against Prosidion or its Affiliates which, either individually or together withany other, will have a material adverse effect on the ability of Prosidion to perform itsobligations under this Agreement or any agreement or instrument contemplated hereby.**ARTICLE 9****MUTUAL INDEMNIFICATION**     9.1 INDEMNIFICATION OBLIGATIONS.          (a) LILLY’S OBLIGATION. Lilly will defend, indemnify, and hold harmless Prosidion,Prosidion’s Affiliates, and the respective directors, officers, shareholders, employees, and agentsof Prosidion and Prosidion’s Affiliates (“**Prosidion Indemnitees**”), from and against any and allliabilities, damages, losses, penalties, fines, costs, interest, and expenses, including, withoutlimitation, reasonable attorneys’ fees, (“**Damages**”) arising from or occurring as a result of aThird Party’s claim, action, suit, judgment, or settlement against a Prosidion Indemnitee that isdue to or based upon:               (i) any breach by Lilly of an obligation, agreement, condition, covenant,representation, or warranty of Lilly under this Agreement; or               (ii) any negligent or more culpable act or omission of Lilly or a Lilly Affiliate,Sublicensee, or contractor or their respective directors, officers, shareholders, employees, andagents related to this Agreement; or               (iii) any product liability or other Third Party claim in connection with anyclaims, suits, or liabilities, arising out of the Manufacture, promotion, import/export, sale ofProduct(s) for or on behalf of Lilly or use by any person of such Product(s) ((i), (ii) and (iii)each, a “**Prosidion Third Party Claim**”),          provided, however, that Lilly will not be obligated to indemnify or hold harmless ProsidionIndemnitees from Damages from a Prosidion Third Party Claim to the extent that such Damages arefinally determined to have resulted directly from the negligent (or more culpable) act or omissionof a Prosidion Indemnitee or any breach by Prosidion of an obligation, agreement, condition,covenant, representation, or warranty of Prosidion under this Agreement. Lilly shall not beobligated to indemnify or hold harmless any Prosidion Indemnitee for any Damages due to or basedupon any product liability or other Third Party claim in connection with any claims, suits, orliabilities, arising out of the Manufacture, promotion, import/export, sale or use of Products orGK Products (as defined within the Tanabe Agreement) by or on behalf of Tanabe, other than in theevent that Lilly acquires such rights with regard to the Tanabe Territory from Tanabe during theTerm or in the event of a collaboration
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          between Lilly and Tanabe relating to research, developmentand/or commercialization of Product(s) and/or GK Product(s) in which events Lilly shall remainliable.          (b) PROSIDION’S OBLIGATION. Prosidion will defend, indemnify, and hold harmlessLilly, Lilly’s Affiliates and Sublicensees, and the respective directors, officers, shareholders,employees, and agents of Lilly and Lilly’s Affiliates (“**Lilly Indemnitees**”), from and against anyand all Damages arising from or occurring as a result of a Third Party’s claim, action, suit,judgment, or settlement against a Lilly Indemnitee that is due to or based upon:               (i) any breach by Prosidion of an obligation, agreement, condition, covenant,representation, or warranty of Prosidion under this Agreement, the Tanabe Agreement (save whereLilly has assumed such obligations pursuant to this Agreement or a subsequent agreement betweenProsidion, Lilly and/or Tanabe relating to rights and obligations under the Tanabe Agreement orwhere Prosidion’s performance of its obligations under the Tanabe Agreement has been frustrated byactions or omissions of Lilly), or the VDC Agreement; or               (ii) any negligent or more culpable act or omission of Prosidion or a ProsidionAffiliate or their respective directors, officers, shareholders, employees, and agents related tothis Agreement; or               (iii) any product liability or other Third Party claim in connection with anyclaims, suits, or liabilities, arising out of the Manufacture, promotion, import/export, sale ofProduct(s) for or on behalf of Prosidion or use by any person of such Product(s) in the event thatsuch rights revert to Prosidion under Section 11.5 (a) ((i) (ii) and (iii) each, a “**Lilly ThirdParty Claim**”) except to the extent caused prior to such reversion of rights for which Lilly shallremain liable,     provided, however, that Prosidion will not be obligated to indemnify or hold harmless LillyIndemnitees from Damages from a Lilly Third Party Claim to the extent that such Damages are finallydetermined to have resulted directly from the negligent (or more culpable) act or omission of aLilly Indemnitee or any breach by Lilly of an obligation, agreement, condition, covenant,representation, or warranty of Lilly under this Agreement.     9.2 INDEMNIFICATION PROCEDURES.          (a) NOTICE. Promptly after a Prosidion Indemnitee or a Lilly Indemnitee (each, an“**Indemnitee**”) receives notice of a pending or threatened Prosidion Third Party Claim or Lilly ThirdParty Claim, as the case may be (an “**Action**”), such Indemnitee shall give written notice of theAction to the Party to whom the Indemnitee is entitled to look for indemnification pursuant to thisArticle 9 (the “**Indemnifying Party**”). However, an Indemnitee’s delay in providing or failure toprovide such notice will not relieve the Indemnifying Party of its indemnification obligations,except to the extent it can demonstrate prejudice due to the delay or lack of notice.          (b) DEFENSE. Upon receipt of notice under Section 9.2 (a) from the Indemnitee, theIndemnifying Party will have the duty to either compromise or defend, at its own expense and bycounsel (reasonably satisfactory to Indemnitee), such Action. The Indemnifying Party will defendorsettle the claim, at its own expense and by its own counsel, any such matter involving theasserted liability of the Indemnitee. If, in the reasonable opinion of the Indemnitee, the claimcould result in the Indemnitee becoming subject to injunctive relief or relief other than thepayment of money damages that could materially adversely affect the ongoing business of theIndemnitee in any manner, the Indemnitee will have the right, at its option, to pay, compromise ordefend such asserted liability by its own counsel and its reasonable costs, expenses, and anypayment made therewith will be included as part of the
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indemnification obligation of theIndemnifying Party hereunder, subject to the determination of whether the Indemnifying Party isobligated to indemnify the Indemnitee pursuant to this Article 9. In any event, the Indemniteeand the Indemnifying Party may participate, at their own expense, in the defense of such assertedliability, provided, however, that such defense expense of the Indemnitee will not be anindemnified claim if the Indemnifying Party is defending such claim.          (c) COOPERATION. The Indemnitee will cooperate fully with the Indemnifying Partyand its legal representatives in the investigation and defense of an Action. The IndemnifyingParty will keep the Indemnitee informed on a reasonable and timely basis as to the status of suchAction (to the extent the Indemnitee is not participating in the defense of such Action) andconduct the defense of such Action in a prudent manner. All reasonable costs and expenses incurredin connection with such cooperation will be borne by the Indemnifying Party.          (d) SETTLEMENT. If an Indemnifying Party assumes the defense of an Action, nocompromise or settlement of such Action may be effected by the Indemnifying Party without theIndemnitee’s written consent (which consent will not be unreasonably withheld or delayed), unless:(i) there is no finding or admission of any violation of law or any violation of the rights of anyperson and no effect on any other claims that may be made against the Indemnitee; (ii) the solerelief provided is monetary damages that are paid in full by the Indemnifying Party; and (iii) theIndemnitee’s rights under this Agreement are not adversely affected.     9.3 INDEMNIFICATION PAYMENT ADJUSTMENTS.          (a) INSURANCE PROCEEDS OR OTHER RECOVERY. The amount of any Damages for whichindemnification is provided under this Article 9 will be reduced by the insurance proceeds receivedand any other amount recovered, if any, by the Indemnitee with respect to any Damages. However, anIndemnitee does not have an obligation to pursue an insurance claim relating to any Damages forwhich indemnification is sought hereunder.          (b) REFUND. If an Indemnitee receives a payment pursuant to this Article 9 andsubsequently receives insurance proceeds or other amounts with respect to the same Damages, theIndemnitee will pay to the Indemnifying Party an amount equal to the difference (if any) between:(i) the sum of the insurance proceeds received, other amounts received, and the indemnificationamount received from the Indemnifying Party pursuant to this Article 9; and (ii) the amountnecessary to fully and completely indemnify and hold harmless the Indemnitee from and against suchDamages. However, in no event will such refund ever exceed the Indemnifying Party’s payment to theIndemnitee under this Article 9.     9.4 INDEMNIFICATION PAYMENT.     Any amount owed by an Indemnitee to a Third Party, for which the Indemnifying Party has anobligation under this Article 9 to indemnify, will be due from the Indemnifying Party when suchamount is owed by the Indemnitee to the Third Party, whether upon entry of judgment, uponsettlement, or otherwise.     9.5 INSURANCE.     Lilly, at its own expense or through self-insurance, shall maintain product liabilityinsurance during the Term consistent with Lilly’s product portfolio product liability insurance atthat time and sufficient to cover its obligations hereunder. Lilly will provide certificates ofinsurance (or evidence of self-insurance) evidencing such coverage to Prosidion. Lilly, at its ownexpense or through self-
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insurance, shall during the Term, also maintain commercial generalliability insurance on a claims made basis consistent with Lilly’s commercial general insurance atthat time and sufficient to cover its obligations hereunder.
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     9.6 SURVIVAL.     The provisions of this Article 9 will survive any termination or expiration of this Agreement.Each Indemnitee’s rights under this Article 9 will not be deemed to have been waived or otherwiseaffected by such Indemnitee’s waiver of the breach of any obligation, agreement, condition,covenant, representation, or warranty contained in, or made pursuant to, this Agreement, unlesssuch waiver expressly (and in writing) also waives any or all of the Indemnitee’s rights under thisArticle 9.**ARTICLE 10****INTELLECTUAL PROPERTY**     10.1 LILLY IMPROVEMENTS.     All Lilly Improvements that arise from the conduct by Lilly of the Lilly GKA Program shall beowned by Lilly.     10.2 PATENT EXPENSES.     Lilly shall be responsible for all Patent Expenses relating to the Prosidion Patents from theEffective Date (save for any Patent Expenses incurred solely by Prosidion where Prosidion alonebrings an action pursuant to Section 10.6 or 10.7, for which Prosidion shall be responsible) andLilly shall be responsible for Patent Expenses in relation to Lilly Improvements.     10.3 FILING, PROSECUTION AND MAINTENANCE OF PATENTS.          (a) From the Effective Date, Lilly shall be responsible for, and shall usecommercially reasonable efforts in, the preparation, filing, prosecution and maintenance of allProsidion Patents and all Lilly Patents (including all Patent Expenses relating thereto).Prosidion agrees to cooperate fully with Lilly, its attorneys, and agents, at Lilly’s expense, inthe preparation, filing, prosecution and maintenance related to the Prosidion Patents and, uponrequest, to provide Lilly with complete copies of any and all documents or other materials thatLilly deems necessary to undertake such responsibilities. Lilly shall consider in good faith therequests and suggestions of Prosidion with respect to strategies for filing and prosecutingProsidion Patents for which it has responsibility hereunder. Lilly shall keep Prosidion informedof progress with regard to the preparation, filing, prosecution and maintenance of the ProsidionPatents. Before taking any material step in the filing, prosecution or maintenance of suchPatents, Lilly shall allow Prosidion to comment on the action proposed to be taken, at Prosidion’sexpense, and Lilly shall take into account any comments and suggestions of Prosidion, provided thatany such advice by Prosidion is given without any warranty or guarantee as to the results. Lillyshall provide Prosidion with copies of all relevant documents and correspondence with any patentoffice, including but not limited to, relevant applications, official letters, final responses toofficial letters, notice of all interferences, reissues, re-examinations, oppositions or requestsfor patent term extensions and any other documents which may be of importance for any action(s) tobe taken, prior to filing and sufficiently in time prior to the deadline for, or the intended datefor, the action to be taken, whichever is the earlier, but no later than (60) days prior to suchdate, provided that such period is available to Lilly. Prosidion shall communicate its comments onthe same to Lilly within thirty (30) days from the date onwhich Lilly provided such information to Prosidion or such shorter period as is required toenable Lilly to comply with any relevant deadline.
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          (b) In the event that Lilly desires to abandon any Prosidion Patent (whether by anyaction or inaction), Lilly shall provide reasonable prior written notice to Prosidion of suchintention to abandon (which notice shall, in any event, be given no later than thirty (30) daysprior to the next deadline for any action that may be taken with respect to such Prosidion Patentwith the applicable patent office) and Prosidion shall have the right, but not the obligation, toassume responsibility for the prosecution and maintenance thereof at Prosidion’s expense. IfProsidion does elect to assume such responsibility, Lilly shall execute and deliver any relevantdocuments necessary to aid or permit Prosidion to take such responsibility.          (c) Prosidion hereby grants Lilly’s in-house patent counsel a limited conflictwaiver, to the limited extent of any conflict of interest arising from the fact that: (i) Lilly hasthe right to control the preparation, filing, prosecution and maintenance of the Prosidion Patent;and (ii) Prosidion is the owner of the Prosidion Patents.     10.4 INTERFERENCE, OPPOSITION, REEXAMINATION AND REISSUE.          (a) INFORMATION. Each Party will, within ten (10) days of learning of such event,inform the other Party of any request for, or filing or declaration of, any interference,opposition, or reexamination relating to Prosidion Patents. Lilly and Prosidion will thereafterconsult and cooperate fully to determine a course of action with respect to any such proceedingsubject to the provisions of this Section set forth below.          (b) EXPENSE AND COOPERATION. Lilly shall be responsible for all of the expenses ofany interference, opposition, reissue, or reexamination proceedings relating to the ProsidionPatents as provided in Section 10.2. Prosidion will, at Lilly’s expense, cooperate fully withLilly and will provide Lilly with any information or assistance that Lilly may reasonably requestwith regard to any such action. Lilly will keep Prosidion informed of developments in any suchaction or proceeding. Decisions on whether to initiate such a proceeding and the course of actionin such proceeding, including settlement negotiations and terms, will be made by Lilly with theconsultation of Prosidion, provided, however, that Lilly shall not have the right to settle anyproceeding under this Section 10.4 with regard to a Prosidion Patent without the prior writtenconsent of Prosidion, which shall not be unreasonably withheld or delayed. Should Lilly decide notto take any action in relation to any interference, opposition, reissue or reexaminationproceedings relating to the Prosidion Patents then Lilly shall give Prosidion reasonable priorwritten notice (which notice shall in any event be given no later than thirty (30) days prior tothe next deadline for any relevant action) and Prosidion shall then have the right, but not theobligation, to assume responsibility for the relevant proceedings.     10.5 ENFORCEMENT.          (a) INFRINGEMENT BY THIRD PARTY. Each Party will, within ten (10) days of learningof such event, inform the other Party of any infringement of any Prosidion Patent relevant to theField and Territory. Lilly and Prosidion will thereafter consult and cooperate fully to determinea course of action including, without limitation, the commencement of legal action by either orboth Lilly and Prosidion, to terminate any infringement, subject to the provisions of this Section10.5 set forth below.          (b) PROSIDION PATENTS. Lilly shall have the first right to bring and control anyaction or proceeding with respect to infringement of any Prosidion Patent in the Field and in theTerritoryby counsel of its own choice, and Prosidion shall have the right, at its own expense, to berepresented in any such action by counsel of its own choice. If Lilly fails to bring any suchaction or proceeding with respect to infringement of any such Patent within: (i) sixty (60) daysfollowing the notice of alleged
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          infringement; or (ii) ten (10) days before the time limit, if any,set forth in the appropriate laws and regulations for the filing of such actions, whatever comesfirst, Prosidion shall have the right, but not the obligation, to bring and control any such actionat its own expense and by counsel of its own choice, and Lilly shall have the right, at its ownexpense, to be represented in any such action by counsel of its own choice.          (c) JOINDER. For any action by a Party pursuant to subsection (b) above, in theevent that such Party is unable to initiate or prosecute such action solely in its own name, theother Party will join such action voluntarily and will execute and cause its Affiliates to executeall documents necessary for such Party to initiate, prosecute and maintain such action. Inconnection with any action, Lilly and Prosidion will cooperate fully and will provide each otherwith any information or assistance that either may reasonably request. Each Party will keep theother informed of developments in any action or proceeding, including, to the extent permissible bylaw, the status of any settlement negotiations and the terms of any offer related thereto. NeitherParty shall have the right to settle any patent infringement litigation under this Section 10.5without the prior written consent of the other Party, which shall not be unreasonably withheld ordelayed.          (d) SHARING OF EXPENSES AND RECOVERY. The Party bringing any action shall bear thecosts and expenses of any action brought by it as provided above (except for the expenses of thenon-controlling Party’s counsel, if any) and shall retain any recovery realized as a result of anylitigation.          (e) SELECTION OF COUNSEL. In any case where a Party has the right to select counselof its choice, it shall first consult with the other Party regarding the selection of counsel andconsider in good faith the recommendations of the other Party.     10.6 THIRD PARTY PATENTS.     If a Party becomes aware of a potential infringement of a Third Party’s Patent or otherrights, or a Third Party asserts infringement of its Patent or other rights, based on the research,development, making, having made, use, sale, having sold, offering for sale and import/export anyProduct hereunder, the Party first obtaining knowledge of such a potential infringement or claimshall immediately provide the other Party notice of such potential infringement or claim and therelated facts in reasonable detail. In such event, the Parties shall agree how best to mitigate orcontrol the defense of any such potential infringement or claim that may include opposing the grantof any Patent upon which a later claim of infringement may be based. In the event the Partiescannot agree on the mitigation or defense of any such potential infringement or claim, suchmitigation or defense shall be controlled by Lilly; provided that Prosidion shall have the right toparticipate in such defense and to be represented in any such action by counsel of its selection atits sole discretion. Lilly shall also have the right to control settlement of such claim;provided, however, that no settlement shall be entered into without the written consent ofProsidion, which consent shall not be unreasonably withheld or delayed. Lilly shall pay anyexpenses (except for the expenses of Prosidion’s counsel, if any) and shall retain any recoveryrealized as a result of any litigation pursuant to this Section 10.6.     10.7 CERTIFICATION UNDER DRUG PRICE COMPETITION AND PATENT RESTORATION ACT.     Prosidion and Lilly each will immediately give notice to the other of any certification ofwhich they become aware filed under the U.S. “Drug Price Competition and Patent Term RestorationAct of 1984” claiming that Prosidion Patents covering a Product are invalid or that infringementwill not arise from the research, development, making, having made, use, sale, having sold,offeringfor sale and
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import/export of a Product by a Third Party. If Lilly decides not to bringinfringement proceedings against the entity making such a certification, Lilly will give notice toProsidion of its decision not to bring suit within twenty (20) days after receipt of notice of suchcertification. Prosidion may then, but is not required to, bring suit against the entity thatfiled the certification. Any suit filed by Lilly or Prosidion will be in the name of Prosidion ifit involves a Prosidion Patent, or in the names of both Parties if it involves collectively, aProsidion Patent and a Lilly Patent. For this purpose, the Party not bringing suit will executesuch legal papers necessary for the prosecution of such suit as may be reasonably requested by theParty bringing suit. In the event that Lilly brings suit under this Section 10.7, Lilly shall payany expenses (except for the expenses of Prosidion’s counsel, if any) and shall retain any recoveryrealized as a result of any litigation pursuant to this Section 10.7.     10.8 PATENT TERM RESTORATION.     The Parties hereto will cooperate with each other in obtaining patent term restoration orsupplemental protection certificates or their equivalents in any country worldwide where applicableto the Prosidion Patents. In the event that elections (e.g. which Patent will be extended if thereare choices to be made) with respect to such patent term restoration are to be made in theTerritory, Lilly shall have the right to make the election and Prosidion shall abide by suchelection. In making such election, the fact that Lilly is required to comply with certainfinancial obligations hereunder to Prosidion shall not be a factor weighed (ie Lilly may not makesuch election because it has a financial obligation to Prosidion for the royalty term detailed inSection 6.3 (c)).     10.9 PATENT MARKING.     Lilly shall mark all Products made, used or sold under the terms of this Agreement, or theircontainers, in accordance with all applicable patent-marking laws.**ARTICLE 11****TERM AND TERMINATION**     11.1 TERM.     This Agreement will remain in effect until Lilly ceases to have any financial obligations toProsidion under Article 6 hereof (the “**Term**”). Upon fulfillment of Lilly’s obligation to payroyalties under this Agreement on Net Sales of each Product in any country in the Territory, Lillywill have a fully paid-up non-exclusive license under the Prosidion Rights relating to such Productfor use in the Field in the relevant country in the Territory.     11.2 TERMINATION.     Each Party shall have the right to terminate this Agreement upon ninety (90) days’ writtennotice to the other Party upon the occurrence of any of the following:          (a) INSOLVENCY. In the event that the other Party makes a general assignment forthe benefit of creditors, files an insolvency petition in bankruptcy, petitions for or acquiescesin the appointment of any receiver, trustee or similar officer to liquidate or conserve itsbusiness or any substantial part of its assets, commences under the laws of any jurisdiction anyproceeding involving its insolvency, bankruptcy, reorganization, adjustment of debt, dissolution,liquidation or any other similar proceeding for the release of financially distressed debtors orbecomes a party to any proceeding or action
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          of the type described above and such proceeding oraction remains undismissed or unstayed for a period of more than sixty (60) days; or          (b) BREACH. Upon or after the breach of any material provision of this Agreement bythe other Party (other than in relation to a breach of Section 3.3 for which the provisions ofSection 3.3 (b) — (i) and Section 11.3 shall apply) and if the breaching Party has not cured suchbreach within the ninety (90) day period following written notice of termination by thenon-breaching Party. Notwithstanding the foregoing, in the event of a non-monetary default, if thedefault is not reasonably capable of being cured within the ninety (90) day cure period by thedefaulting Party and such defaulting Party is making a good faith effort to cure such default, thenotifying Party may not terminate this Agreement; provided, however, that the notifying Party mayterminate this Agreement if such default is not cured within ninety (90) days of such originalnotice of default. The right of either Party to terminate this Agreement as hereinabove providedshall not be affected in any way by its waiver of, or failure to take action with respect to, anyprevious default.     11.3 TERMINATION FOR LILLY NON-COMPLIANCE WITH DILIGENCE OBLIGATIONS.     In the event that Lilly fails to comply with any financial obligations arising under Sections3.3 (c), (d), (g) or (h), Prosidion shall be entitled to terminate this Agreement on sixty (60)days written notice to Lilly provided Lilly has failed to cure such breach within such sixty (60)day notice period.     11.4 TERMINATION AT WILL OF THE LILLY GKA PROGRAM BY LILLY.     Lilly shall also have the right to discontinue and/or terminate the Lilly GKA Program on** prior written notice to Prosidion. If Lilly exercises its right to terminatepursuant to this Section 11.4, it shall continue to perform its responsibilities hereunder up untilthe date of termination, except as otherwise agreed in writing by Prosidion and shall be solelyresponsible for any non-cancellable expenses in relation to Research, Development, Manufactureand/or Commercialisation of the GKA Program that cannot be reasonably avoided and that Prosidion,in its sole discretion, does not elect to continue with.     11.5 EFFECT OF TERMINATION; SURVIVING OBLIGATIONS.          (a) REVERSION OF RIGHTS TO PROSIDION. Upon termination of this Agreement byProsidion pursuant to Section 11.2 or 11.3 or by Lilly pursuant to Section 11.4:               (i) the licenses granted by Prosidion to Lilly under Section 2.2 shall automaticallyterminate and revert to Prosidion;               (ii) any permitted sublicenses granted under Section 2.3 by Lilly shall remain ineffect, but shall be assigned to Prosidion;               (iii) Lilly shall, and it hereby does, grant to Prosidion an exclusive (even as toLilly), irrevocable, perpetual license, with the right to sublicense, under the Lilly Rights toresearch, develop, make, have made, use, sell, have sold, offer for sale and import/exportProduct(s) in the Field in the Territory;               (iv) Lilly shall: (A) make available to Prosidion, within three (3) months of suchtermination, Information relating to the Lilly GKA Program and any Product(s) (other than in   ** This portion has been redacted pursuant to aconfidential treatment request.
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relation to brand rights of Lilly (including trademarks) which Lilly shall be permitted to retain)as may be reasonably necessary to enable Prosidion to practice the license granted under Section11.5 (a)(iii); (B) forthwith upon such termination, transfer and assign to Prosidion all of itsright, title and interest in and to all Regulatory Materials with respect to any Product(s), (tothe extent Controlled by Lilly), including all drug dossiers and master files with respect to anyProduct(s); and (C) within nine (9) months of such termination take such other actions and executesuch other instruments, assignments and documents as may be necessary to effect the transfer ofrights hereunder to Prosidion; (D) within nine (9) months of such termination and for transitionalpurposes only, provide Prosidion with all reasonable technical assistance and co-operation inrelation to transfer to Prosidion of: (x) technical information; and (y) Regulatory Materials, eachrelating to the Lilly GKA Program Controlled by Lilly and in its possession at such date oftermination, that is reasonably useful or necessary to enable Prosidion to continue with researchand development of the Lilly GKA Program and Manufacture and commercialisation of Product(s); and(E) if, following such termination, Lilly elects to abandon any Lilly Patents licensed to Prosidionpursuant to Section 11.5 (a), Prosidion shall have the right to maintain such Lilly Patents atProsidion’s expense and in Prosidion’s name; and               (v) To the extent Lilly is engaged in the Manufacture of Product(s) for sale as ofthe date notice of termination is given, Lilly shall Manufacture and supply Product(s) to Prosidionfrom the effective date of such termination until such time as Prosidion is able to secure anequivalent alternative commercial Manufacturing source and such site is qualified by the FDA, asrequested by Prosidion or until ** from the effective date of termination, whicheveris earlier. To this end, as of the effective date of such termination, at Prosidion’s option, allThird Party Manufacturing contracts to which Lilly or any of its Affiliates is a party shall beassigned to Prosidion, and in the event that assignment is not or cannot be undertaken, Lilly shallensure that the rights and benefits under such Third Party Manufacturing contracts shall betransferred to Prosidion. Further, upon Prosidion’s request, Lilly shall provide such technicalassistance as Prosidion may reasonably request to facilitate the transfer of Product(s)’Manufacturing responsibility to Prosidion or its designee. **          (b) LILLY EXPLOITATION OF COMPETING PRODUCT.          (i) Subject to Section 11.5 (b)(ii), upon termination of this Agreement by Lilly pursuant toSection 11.4 or in the event of termination by Prosidion pursuant to Section 11.3, the applicableprovisions in Section 11.5 (a)(i) through (v) above shall apply, and, in addition, where theapplicable notice of termination is given prior to Regulatory Submission in the Territory or anypart thereof (an “**Early Termination Notice**”) and in the event that Lilly subsequentlycommercialises a Competing Product ** the following royalty payments shall be payable by Lilly toProsidion on net sales of such Competing Product in the Field in the Territory, for a period of **on a country-by-country basis:      No. of years after Early TerminationNotice that               CompetingProduct is launched: Royalty Rate (%)    **            **     ** This portion has been redacted pursuant to aconfidential treatment request.
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          (ii) **          (c) SURVIVING OBLIGATIONS. Expiration or termination of this Agreement shall notrelieve the Parties of any obligation accruing prior to such expiration or termination. Except asset forth below or elsewhere in this Agreement, the obligations and rights of the Parties under thefollowing provisions of this Agreement shall survive expiration or termination of this Agreement:Articles 1, 8 and 9 and Sections 2.4, 7.1, 7.2, 7.3, 7.4, 11.1, 11.5, 11.6, 11.7, 13.6,and 13.7**.**          (d) RETURN OF CONFIDENTIAL INFORMATION. Within sixty (60) days following thetermination of this Agreement, each Party shall deliver to the other Party any and all ConfidentialInformation of the other Party in its possession of which it is not entitled to retain hereunder.     11.6 NON-EXCLUSIVE RIGHTS.     The foregoing rights and remedies of the Parties set forth in Sections 11.2, 11.3, 11.4 and11.5 are non-exclusive and without prejudice to any rights that either Party may have arising underApplicable Law or equity.     11.7 RIGHTS IN BANKRUPTCY.     All rights and licenses granted under or pursuant to this Agreement by Prosidion and Lillyare, and will otherwise be deemed to be, for purposes of Section 365(n) of the U.S. BankruptcyCode, licenses of rights to “**Intellectual Property**” as defined under Section 101 of the U.S.Bankruptcy Code. The Parties agree that the Parties, as licensees of such rights under thisAgreement, will retain and may fully exercise all of their rights and elections under the U.S.Bankruptcy Code. The Parties further agree that, in the event of the commencement of a bankruptcyproceeding by or against a Party under the U.S. Bankruptcy Code, the Party hereto that is not aParty to such proceeding will be entitled to a complete duplicate of (or complete access to, asappropriate) any such intellectual property and all embodiments of such intellectual property,which, if not already in the non-subject Party’s possession, will be promptly delivered to it: (a)upon any such commencement of a bankruptcy proceeding upon the non-subject Party’s written requesttherefor, unless the Party subject to such proceeding continues to perform all of its obligationsunder this Agreement; or (b) if not delivered under subsection (a) above, following the rejectionof this Agreement by or on behalf of the Party subject to such proceeding upon written requesttherefor by the non-subject Party.**ARTICLE 12****DISPUTE RESOLUTION**     12.1 DISPUTES.     The Parties acknowledge that disputes as to certain matters may from time to time arise whichrelate to either Party’s rights and obligations hereunder. It is the objective of the Parties toestablish procedures to facilitate the resolution of such disputes in an expedient manner by mutualcooperation. To accomplish this objective, the Parties agree to follow the procedures set forth inSection 12.2 if and when a dispute arises between the Parties.     12.2 DISPUTE RESOLUTION PROCEDURES.   ** This portion has been redacted pursuant to aconfidential treatment request.
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          (a) DISCUSSIONS BETWEEN THE PARTIES. If any claim, dispute, or controversy of anynature arising out of or relating to either Party’s rights and obligations under this Agreement,including, without limitation, any action or claim based on tort, contract or statute, orconcerning the interpretation, effect, termination, validity, performance and/or breach of thisAgreement (each, a “**Claim**”), arises between the Parties and the Parties cannot resolve the Claimwithin thirty (30) days of a written request by either Party to the other Party, the Parties agreeto refer the Claim to a member of the Lilly Policy Committee and the Chief Executive Officer ofProsidion for resolution. If, after an additional sixty (60) days, such officers have notsucceeded in negotiating a resolution of the Claim, then, upon the written request of either Party,where the Claim relates to: (i) a breach of Lilly’s obligations in Section 3.3, such Claim shall besubmitted to binding expedited arbitration as set forth in Section 12.2 (b); and (ii) any Claimarising under this Agreement other than that arising in connection with Lilly’s obligations underSection 3.3, such Claim shall be adjudicated by a court of competent jurisdiction.          (b) EXPEDITED ARBITRATION. The Parties agree that any Claim relating to a breach ofLilly’s obligations in Section 3.3 that cannot be resolved pursuant to Section 12.2 (a) above,shall be resolved by binding expedited arbitration in accordance with the Commercial ArbitrationRules of the American Arbitration Association as then in effect, except as modified herein:               (i) Each such expedited arbitration shall be conducted by a panel of three (3)arbitrators with relevant pharmaceutical and/or biotechnology industry experience appointed asfollows. One arbitrator shall be chosen by Prosidion and one arbitrator shall be chosen by Lillywithin fifteen (15) days from the notice of initiation of expedited arbitration. The thirdarbitrator shall be chosen by mutual agreement of the arbitrator chosen by Prosidion and thearbitrator chosen by Lilly within fifteen (15) days of the date that the last of such arbitratorswere appointed and shall be chosen taking into account the need to better understand the legal,business and scientific issues to be addressed in the arbitration proceedings (“**ArbitrationCommencement**”).               (ii) Within ** days of Arbitration Commencement, Prosidion shall servea brief on Lilly and the arbitrators, setting forth the factual and legal arguments with regard tothe Claim and providing all documents it proposes to use at the hearing in support of its position.Within ** days of receipt of Prosidion’s brief, Lilly shall serve a brief on Prosidion and thearbitrator setting forth the factual and legal arguments with regard to the Claim and providing alldocuments it proposes to use at the hearing in support of its position. Within ** days ofreceipt of Lilly’s brief, the Parties shall request any discovery that it believes is critical to afair resolution of the issues in dispute.               (iii) Within ** days of Arbitration Commencement, the arbitrators shall: (A) grantsuch discovery as deemed appropriate and require that such be completed within no more than **days; and (B) identify the issues that will be subject to a hearing; and (C) set a date for ahearing as to thepending Claim no more than ** days after the issues are identified in the event no discoveryis allowed. In no event shall the hearing begin any later than two (2) months after ArbitrationCommencement.               (iv) The arbitrator shall provide a hearing of sufficient length for each Party topresent its case but in no event longer than ** days in duration, at the completion of which, thearbitrator may allow post-hearing briefs to be filed within no more than ** days of the hearing.               (v) Within ** days of completion of the hearing or within ** days after thesubmission of post-hearing briefs, if allowed, the arbitrator shall render a reasoned arbitrationdecision on the Claim describing, in writing, the essential findings and conclusions on which thedecision is based,   ** This portion has been redacted pursuant to aconfidential treatment request.
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including the calculation of any damages awarded. In no event shall thedecision be rendered later than ** months after Arbitration Commencement. Thedecision shall be binding and not be appealable to any court in any jurisdiction. The arbitratorsshall be authorized to award damages solely as provided in Section 3.3. For avoidance of doubt,the arbitrators shall NOT be authorized: (A) to award non-economic damages, such as for emotionaldistress, pain and suffering or loss of consortium; or (B) to award indirect, incidental,consequential, special or punitive damages, or (C) to reform, modify or materially change thisAgreement or any other agreements contemplated hereunder; *provided, however,*that the damagelimitations described in parts (A) and (B) of this sentence will not apply if such damages arestatutorily imposed. The arbitrators shall also have the authority to grant specific performance.The prevailing Party may enter such decision in any court having competent jurisdiction.               (vi) Unless otherwise mutually agreed upon by the Parties, the arbitrationproceedings shall be conducted at the location of the Party not originally requesting theresolution of the dispute, unless mutually agreed between the Parties or requested by thearbitrators to be held at an alternative location. The Party not prevailing in the arbitrationshall bear its own attorneys’ fees and associated costs and expenses and those of the prevailingParty. Unless the Parties otherwise agree in writing, during the period of time that anyarbitration proceeding is pending and/or in process under this Agreement, the Parties shallcontinue to comply with all those terms and provisions of this Agreement that are not the subjectof the arbitration proceeding.          (c) DETERMINATION OF PATENTS AND OTHER INTELLECTUAL PROPERTY. For the avoidance ofdoubt, any Claim relating to the determination of validity of claims, infringement or claiminterpretation relating to a Party’s Patents shall be submitted exclusively to a court or otherbody of competent jurisdiction.          (d) INJUNCTIVE RELIEF. Nothing in this Section 12.2 shall prohibit any Party fromseeking immediate injunctive or other relief if such Party reasonably believes that it will sufferirreparable harm from the actions of the other.   ** This portion has been redacted pursuant to aconfidential treatment request.
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**ARTICLE 13****MISCELLANEOUS**     13.1 FORCE MAJEURE.     Neither Party will be held liable or responsible to the other Party nor be deemed to havedefaulted under or breached the Agreement for failure or delay in fulfilling or performing any termof the Agreement when such failure or delay is caused by or results from causes beyond thereasonable control of the affected Party including, without limitation, embargoes, acts of war(whether war be declared or not), insurrections, riots, civil commotions, or acts of God. Suchexcuse from liability and responsibility shall be effective only to the extent and duration of theevent(s) causing the failure or delay in performance and provided that the affected Party has notcaused such event(s) to occur. The affected Party will notify the other Party of such forcemajeure circumstances as soon as reasonably practicable and will make every reasonable effort tomitigate the effects of such force majeure circumstances.     13.2 ASSIGNMENT.     This Agreement will inure to the benefit and be binding upon each Party, its successors andassigns. The Agreement may not be assigned or otherwise transferred, nor, except as expresslyprovided hereunder, may any right or obligation hereunder be assigned or transferred by Lillywithout the prior written consent of Prosidion; provided, however, that either Party may, withoutsuch consent, assign the Agreement and its rights and obligations hereunder to an Affiliate or inthe event of a Change in Control. The rights and obligations of the Parties under this Agreementshall be binding upon and inure to the benefit of the successors and permitted assigns of theParties. Any attempted assignment not in accordance with this Section 13.2 will be void.     13.3 CHANGE OF CONTROL.     Prosidion shall give prompt notice to Lilly of Change in Control of Prosidion. If theacquiring or successor entity is a Major Pharmaceutical Company, Lilly’s obligations and/orProsidion’s rights under Sections 3.1(d), 5.1 and 7.5 shall terminate upon such Change of Controlof Prosidion. In such event, Lilly shall be required to provide, on a ** basis, toProsidion or such successor of Prosidion, as the case may be, a summary progress report on theLilly GKA Program and/or Product(s) sufficient to enable Prosidion or such successor, as the casemay be, to determine compliance by Lilly with its obligations under Section 3.3 and enforce itsrights thereunder.     13.4 FURTHER ASSURANCES.     The Parties intend that this Agreement contain all consents, licenses and authorizations fromone Party to the other necessary to enable each Party to perform its obligations hereunder. In theevent any further such consents, licenses or authorizations are necessary, each Party agrees totake such further actions and execute such further agreements as may be reasonably necessary tocarry out the intent and purposes of this Agreement.     13.5 SEVERABILITY.   ** This portion has been redacted pursuant to aconfidential treatment request.
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     In the event any one or more of the provisions contained in this Agreement should be heldinvalid, illegal or unenforceable in any respect, the validity, legality and enforceability of theremaining provisions contained herein will not in any way be affected or impaired thereby, unlessthe absence of the invalidated provision(s) adversely affect the substantive rights of the Parties.The Parties will in such an instance use their best efforts to replace the invalid, illegal orunenforceable provision(s) with valid, legal and enforceable provision(s) which, insofar aspracticable, maintains the balance of the rights and obligations of the Parties under thisAgreement.     13.6 NOTICES.     All notices which are required or permitted hereunder will be in writing and sufficient ifdelivered personally, sent by facsimile or e-mail to a current fax number or e-mail address for therecipient (and promptly confirmed by personal delivery, registered or certified mail or overnightcourier), sent by nationally-recognized overnight courier or sent by registered or certified mail,postage prepaid, return receipt requested, addressed as follows:   if to Prosidion, to: Prosidion Limited  Windrush Court  Watlington Road  Oxford OX4 6LT  United Kingdom  Attention: President and the General Counsel     Fax No.: **with a copy to: General Counsel  OSI Pharmaceuticals, Inc.  41 Pinelawn Road  Melville  New York 11747  United States  Fax No.: **if to Lilly, to: Eli Lilly and Company     Lilly Corporate Center  Indianapolis  IN 46285  United States  Attention: General Counsel  Fax No.: **or to such other address as the Party to whom notice is to be given may have furnished to the otherParty in writing in accordance herewith. Any such notice will be deemed to have been given whendelivered if personally delivered or sent by facsimile or e-mail on a business day, on the businessday after dispatch if sent by nationally-recognized overnight courier and on the third business dayfollowing the date of mailing if sent by mail.     13.7 APPLICABLE LAW.   ** This portion has been redacted pursuant to aconfidential treatment request.
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     The Agreement will be governed by and construed in accordance with the laws of the State ofNew York, without reference to any rules of conflict of laws.
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     13.8 ENTIRE AGREEMENT.     This Agreement contains the entire understanding of the Parties with respect to the Licenseand the Research and Development of the Lilly GKA Program and the Manufacture and Commercialisationof Product(s). All express or implied agreements and understandings, either oral or written,heretofore made by the Parties on the same subject matter are expressly superseded by thisAgreement. The Agreement may be amended, or any term hereof modified, only by a written instrumentduly executed by both Parties hereto.     13.9 HEADINGS.     The captions to the several Articles and Sections hereof are not a part of the Agreement noraffect the interpretation of any of its provisions, but are merely a convenience to assist inlocating and reading the several Articles and Sections hereof.     13.10 INDEPENDENT CONTRACTORS.     It is expressly agreed that Prosidion and Lilly will be independent contractors and that therelationship between the two Parties will not constitute a partnership, joint venture or agency.Neither Prosidion nor Lilly will have the authority to make any statements, representations orcommitments of any kind, or to take any action, which will be binding on the other, without theprior consent of the other Party.     13.11 WAIVER.     The waiver by either Party hereto of any right hereunder, or the failure to perform, or abreach by the other Party will not be deemed a waiver of any other right hereunder or of any otherbreach or failure by said other Party whether of a similar nature or otherwise.     13.12 NO THIRD PARTY BENEFICIARIES.     This Agreement is neither expressly nor impliedly made for the benefit of any Person otherthan the Parties.     13.13 COUNTERPARTS.     The Agreement may be executed in two or more counterparts, each of which will be deemed anoriginal, but all of which together will constitute one and the same instrument.
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     13.14 WAIVER OF RULE OF CONSTRUCTION.     Each Party has had the opportunity to consult with counsel in connection with the review,drafting and negotiation of this Agreement. Accordingly, the rule of construction that anyambiguity in this Agreement will be construed against the drafting Party will not apply.IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.       **ELI LILLY AND COMPANY** **PROSIDION LIMITED**       By: /s/ Dr. Steven Paul By: /s/ Dr. Anker Lundmose       Name: Dr. Steven Paul Name: Dr. Anker Lundmose       Title: Executive Vice President Title: President  Science/Technology           Date: 4th January 2007 Date: 4th January 2007
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**SCHEDULE 1.1.20****EXISTING SUPPLIERS********   **This portion has been redacted pursuant to aconfidential treatment request.
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**SCHEDULE 1.1.26****IDENTIFIED GKA BACK-UPS****   ** This portion has been redacted pursuant to aconfidential treatment request.
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**SCHEDULE 1.1.58****PROSIDION PATENTS**Prosidion Patents are the following Patents pending or issued as of the Effective Date:**   **This portion has been redacted pursuant to aconfidential treatment request.
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**SCHEDULE 1.1.70****TANABE TERRITORY****   ** This portion has been redacted pursuant to aconfidential treatment request.
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**SCHEDULE 4.3****TECHNICAL INFORMATION AND PROSIDION MATERIALS TO BE PROVIDED AFTER**