Exhibit 10.21


 


RESEARCH
AND DEVELOPMENT COLLABORATION,


OPTION AND
LICENSE AGREEMENT


 


BETWEEN


 


 


SMITHKLINE
BEECHAM CORPORATION D/B/A GLAXOSMITHKLINE


and


ANACOR PHARMACEUTICALS, INC.


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  1

  	
  DEFINITIONS

  	
  2

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  2

  	
  RESEARCH AND DEVELOPMENT
  COLLABORATION

  	
  16

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Overview

  	
  16

  
	
   

  	
   

  	
   

  
	
  2.2

  	
  Research Plans

  	
  16

  
	
   

  	
   

  	
   

  
	
  2.3

  	
  Research Collaboration Term

  	
  16

  
	
   

  	
   

  	
   

  
	
  2.4

  	
  Research Efforts; Diligence

  	
  17

  
	
   

  	
   

  	
   

  
	
  2.5

  	
  Additional Target

  	
  19

  
	
   

  	
   

  	
   

  
	
  2.6

  	
  Development of Collaboration Compounds

  	
  20

  
	
   

  	
   

  	
   

  
	
  2.7

  	
  Material Transfer

  	
  22

  
	
   

  	
   

  	
   

  
	
  2.8

  	
  Regulatory Matters; Compliance

  	
  24

  
	
   

  	
   

  	
   

  
	
  2.9

  	
  Research Collaboration Costs

  	
  25

  
	
   

  	
   

  	
   

  
	
  2.10

  	
  Subcontracting

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  3

  	
  MANAGEMENT OF THE COLLABORATION

  	
  26

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Joint Research Committee

  	
  26

  
	
   

  	
   

  	
   

  
	
  3.2

  	
  Joint Patent Subcommittee

  	
  30

  
	
   

  	
   

  	
   

  
	
  3.3

  	
  Joint Project Team

  	
  30

  
	
   

  	
   

  	
   

  
	
  3.4

  	
  Alliance Managers

  	
  30

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  4

  	
  GRANT OF RIGHTS

  	
  31

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Options

  	
  31

  
	
   

  	
   

  	
   

  
	
  4.2

  	
  Options

  	
  31

  
	
   

  	
   

  	
   

  
	
  4.3

  	
  License Grants

  	
  34

  
	
   

  	
   

  	
   

  
	
  4.4

  	
  Technology Transfer after GSK’s Option Exercise

  	
  35

  
	
   

  	
   

  	
   

  
	
  4.5

  	
  Third Party Licenses

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  5

  	
  POST-RESEARCH COLLABORATION
  ACTIVITIES

  	
  36

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  GSK Development and Commercialization

  	
  36

  
	
   

  	
   

  	
   

  
	
  5.2

  	
  GSK Diligence

  	
  36

  
	
   

  	
   

  	
   

  
	
  5.3

  	
  Anacor Development Compounds

  	
  36

  
	
   

  	
   

  	
   

  
	
  5.4

  	
  Safety Data Exchange

  	
  37

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  6

  	
  MILESTONES AND ROYALTIES; PAYMENTS

  	
  38

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Upfront Payment

  	
  38

  



 


i

















 


	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  
	
  6.2

  	
  Purchase of Stock

  	
  38

  
	
   

  	
   

  	
   

  
	
  6.3

  	
  Development Milestones Payable by GSK to Anacor

  	
  38

  
	
   

  	
   

  	
   

  
	
  6.4

  	
  Commercialization Milestones

  	
  43

  
	
   

  	
   

  	
   

  
	
  6.5

  	
  Royalties

  	
  43

  
	
   

  	
   

  	
   

  
	
  6.6

  	
  Payments by Anacor – No Exercise of Option by GSK

  	
  45

  
	
   

  	
   

  	
   

  
	
  6.7

  	
  Payments by Anacor – Post-Option Termination by GSK

  	
  46

  
	
   

  	
   

  	
   

  
	
  6.8

  	
  Reports and Payment of Milestones

  	
  49

  
	
   

  	
   

  	
   

  
	
  6.9

  	
  Reports; Royalty Payments

  	
  49

  
	
   

  	
   

  	
   

  
	
  6.10

  	
  Methods of Payments

  	
  49

  
	
   

  	
   

  	
   

  
	
  6.11

  	
  Accounting

  	
  49

  
	
   

  	
   

  	
   

  
	
  6.12

  	
  Taxes

  	
  50

  
	
   

  	
   

  	
   

  
	
  6.13

  	
  Late Payments

  	
  50

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7

  	
  EXCLUSIVITY

  	
  51

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Anacor Exclusivity

  	
  51

  
	
   

  	
   

  	
   

  
	
  7.2

  	
  GSK Exclusivity

  	
  52

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8

  	
  OWNERSHIP OF INTELLECTUAL
  PROPERTY RIGHTS

  	
  53

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Ownership

  	
  53

  
	
   

  	
   

  	
   

  
	
  8.2

  	
  Prosecution and Maintenance of Patents

  	
  53

  
	
   

  	
   

  	
   

  
	
  8.3

  	
  Patent Costs

  	
  55

  
	
   

  	
   

  	
   

  
	
  8.4

  	
  Defense of Claims Brought by Third Parties

  	
  56

  
	
   

  	
   

  	
   

  
	
  8.5

  	
  Enforcement of Anacor or GSK Intellectual Property
  Rights

  	
  57

  
	
   

  	
   

  	
   

  
	
  8.6

  	
  Other Agreement(s)

  	
  59

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  9

  	
  CONFIDENTIALITY

  	
  59

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Confidentiality; Exceptions

  	
  59

  
	
   

  	
   

  	
   

  
	
  9.2

  	
  Authorized Disclosure

  	
  60

  
	
   

  	
   

  	
   

  
	
  9.3

  	
  Press Release; Disclosure of Agreement

  	
  60

  
	
   

  	
   

  	
   

  
	
  9.4

  	
  Termination of Prior Agreement

  	
  61

  
	
   

  	
   

  	
   

  
	
  9.5

  	
  Remedies

  	
  61

  
	
   

  	
   

  	
   

  
	
  9.6

  	
  Publications

  	
  61

  
	
   

  	
   

  	
   

  
	
  9.7

  	
  Clinical Trial Register

  	
  62

  



 


ii

















 


	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  10

  	
  REPRESENTATIONS AND WARRANTIES

  	
  62

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  Representations and Warranties of Both Parties

  	
  62

  
	
   

  	
   

  	
   

  
	
  10.2

  	
  Representations and Warranties of Anacor

  	
  63

  
	
   

  	
   

  	
   

  
	
  10.3

  	
  Mutual Covenants

  	
  64

  
	
   

  	
   

  	
   

  
	
  10.4

  	
  Disclaimer

  	
  64

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  11

  	
  INDEMNIFICATION; INSURANCE

  	
  64

  
	
   

  	
   

  	
   

  
	
  11.1

  	
  Indemnification by GSK

  	
  64

  
	
   

  	
   

  	
   

  
	
  11.2

  	
  Indemnification by Anacor

  	
  65

  
	
   

  	
   

  	
   

  
	
  11.3

  	
  Procedure

  	
  66

  
	
   

  	
   

  	
   

  
	
  11.4

  	
  Insurance

  	
  66

  
	
   

  	
   

  	
   

  
	
  11.5

  	
  LIMITATION OF LIABILITY

  	
  66

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  12

  	
  TERM AND TERMINATION

  	
  67

  
	
   

  	
   

  	
   

  
	
  12.1

  	
  Term; Expiration

  	
  67

  
	
   

  	
   

  	
   

  
	
  12.2

  	
  Termination for Cause

  	
  67

  
	
   

  	
   

  	
   

  
	
  12.3

  	
  GSK Unilateral Termination Rights

  	
  68

  
	
   

  	
   

  	
   

  
	
  12.4

  	
  Termination for Insolvency

  	
  68

  
	
   

  	
   

  	
   

  
	
  12.5

  	
  Effect of Termination or Expiration

  	
  69

  
	
   

  	
   

  	
   

  
	
  12.6

  	
  Accrued Rights; Surviving Provisions of the
  Agreement

  	
  73

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  13

  	
  REGULATORY

  	
  73

  
	
   

  	
   

  	
   

  
	
  13.1

  	
  Tolling of Payment Obligations

  	
  73

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  14

  	
  MISCELLANEOUS

  	
  73

  
	
   

  	
   

  	
   

  
	
  14.1

  	
  Dispute Resolution

  	
  73

  
	
   

  	
   

  	
   

  
	
  14.2

  	
  Arbitration Request

  	
  74

  
	
   

  	
   

  	
   

  
	
  14.3

  	
  Costs

  	
  75

  
	
   

  	
   

  	
   

  
	
  14.4

  	
  Governing Law

  	
  75

  
	
   

  	
   

  	
   

  
	
  14.5

  	
  Assignment

  	
  75

  
	
   

  	
   

  	
   

  
	
  14.6

  	
  Performance Warranty

  	
  76

  
	
   

  	
   

  	
   

  
	
  14.7

  	
  Force Majeure

  	
  76

  
	
   

  	
   

  	
   

  
	
  14.8

  	
  Notices

  	
  76

  
	
   

  	
   

  	
   

  
	
  14.9

  	
  Export Clause

  	
  77

  



 


iii

















 


	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  
	
  14.10

  	
  Waiver

  	
  77

  
	
   

  	
   

  	
   

  
	
  14.11

  	
  Severability

  	
  78

  
	
   

  	
   

  	
   

  
	
  14.12

  	
  Entire Agreement

  	
  78

  
	
   

  	
   

  	
   

  
	
  14.13

  	
  Independent Contractors

  	
  78

  
	
   

  	
   

  	
   

  
	
  14.14

  	
  Headings; Interpretation

  	
  78

  
	
   

  	
   

  	
   

  
	
  14.15

  	
  Books and Records

  	
  78

  
	
   

  	
   

  	
   

  
	
  14.16

  	
  Further Actions

  	
  78

  
	
   

  	
   

  	
   

  
	
  14.17

  	
  Parties in Interest

  	
  78

  
	
   

  	
   

  	
   

  
	
  14.18

  	
  Construction of Agreement

  	
  79

  
	
   

  	
   

  	
   

  
	
  14.19

  	
  Supremacy

  	
  79

  
	
   

  	
   

  	
   

  
	
  14.20

  	
  Counterparts

  	
  79

  



 


iv

















 


RESEARCH
AND DEVELOPMENT COLLABORATION,


OPTION AND
LICENSE AGREEMENT


 


This RESEARCH AND DEVELOPMENT COLLABORATION,
OPTION AND LICENSE AGREEMENT (the “Agreement”) is entered into and
made effective as of the 5th day of October, 2007 (the “Effective Date”) by and between Anacor
Pharmaceuticals, Inc., a Delaware corporation having its principal place
of business at 1060 East Meadow Circle, Palo Alto, CA 94303 (“Anacor”), and  SmithKline Beecham Corporation d/b/a
GlaxoSmithKline, a Pennsylvania corporation having offices at One Franklin Plaza, Philadelphia, PA 19101
(“GSK”). Anacor and GSK are each referred
to herein by name or as a “Party” or,
collectively, as “Parties.”


 


RECITALS


 


WHEREAS,
Anacor possesses proprietary technology and know-how related to the discovery,
identification, synthesis and development of boron-based small molecule drug
candidates;


 


WHEREAS,
GSK possesses expertise in the pharmaceutical research, development,
manufacturing and commercialization of human pharmaceuticals, and GSK is
interested in developing such boron-based small molecule compounds as drug
products;


 


WHEREAS,
GSK desires to engage in a collaborative effort with Anacor pursuant to which
Anacor and GSK will jointly carry out research and development programs to
discover and develop boron-based small molecule compounds directed against four
targets, and GSK will have certain options, exercisable at GSK’s sole
discretion, to further develop and commercialize such compounds for any and all
uses in the Territory (as defined below), all on the terms and conditions set
forth herein; and


 


WHEREAS,
upon exercise by GSK of its option to such compounds, Anacor desires to grant
to GSK, and GSK desires to obtain, an exclusive license under Anacor IP (as
defined below) to make, have made, use, sell, offer for sale and import
Products (as defined below) in the Field (as defined below) throughout the
Territory on the terms and conditions set forth herein.


 


NOW,
THEREFORE, in consideration of the premises and mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties hereto
agree as follows:


 

















 


ARTICLE 1



DEFINITIONS


 


As used in
this Agreement, the following terms shall have the meanings set forth in this
Article 1 unless context dictates otherwise:


 


1.1          “Acceptance”
means the earliest date on which the FDA (or equivalent foreign Regulatory
Authority) notifies GSK in writing that it has accepted the NDA (or equivalent
foreign regulatory submission (e.g., MAA))
with respect to a Product for substantive review.


 


1.2          “Affiliate”
means any Person, whether de jure or de facto, which directly or indirectly through one (1) or
more intermediaries controls, is controlled by or is under common control with
a Party. A Person shall be deemed to “control” another Person if it (a) owns,
directly or indirectly, beneficially or legally, at least fifty percent (50%)
of the outstanding voting securities or capital stock (or such lesser percentage
which is the maximum allowed to be owned by a Person in a particular
jurisdiction) of such other Person, or has other comparable ownership interest
with respect to any Person other than a corporation; or (b) has the power,
whether pursuant to contract, ownership of securities or otherwise, to direct
the management and policies of the Person. For purposes of this Agreement, a “Person”
means any corporation, firm, partnership or other entity recognized as having a
separate existence under the law.


 


1.3          “Agreement”
has the meaning assigned to such term in the Preamble.


 


1.4          “Alliance
Managers” has the meaning assigned to such term in
Section 3.4.


 


1.5          “Anacor”
has the meaning assigned to such term in the Preamble


 


1.6          “Anacor
Collaboration IP” means any Collaboration IP Controlled by
Anacor or its Affiliates.


 


1.7          “Anacor Compound” means a boron-containing small molecule
compound Controlled by Anacor or an Anacor Affiliate.


 


1.8          “Anacor Development Compound” means a Collaboration Compound
for which Anacor would retain the right to continue to research, develop,
manufacture and commercialize, [***].


 


1.9          “Anacor
Diligence Failure Event” has the meaning assigned to such
term in Section 2.4.2.


 


1.10        “Anacor
Know-How” means any Information Controlled by Anacor or its 


 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 


2

















 


Affiliates on the Effective
Date or at any time during the Term (other than Collaboration Know-How) that
relates directly (but not necessarily exclusively) to, or is directly (but not
necessarily exclusively) useful in connection with, the making, using or sale
of an Anacor Compound, Collaboration Compound, GSK Development Compound and/or
Product in the Field in the Territory.


 


1.11        “Anacor
IP” means, collectively, (a) Anacor Patents, (b) Anacor
Know-How, (c) Anacor Target Patents, (d) Anacor Target Know-How, and (e) Anacor
Collaboration IP.


 


1.12        “Anacor
Patents” means any Patents in the Territory Controlled by
Anacor or its Affiliates on the Effective Date or at any time during the Term
(other than Collaboration Patents) that claim or cover (a) the composition of
matter and/or method of use of an Anacor Compound, Collaboration Compound, GSK
Development Compound and/or Product, or (b) the making, having made, using,
selling, offering for sale and/or importing of an Anacor Compound, Collaboration
Compound, GSK Development Compound and/or Product in the Field.


 


1.13        “Anacor
Target Know-How” means any Information Controlled by Anacor
or its Affiliates on the Effective Date or at any time during the Term (but
excluding Collaboration Know-How) that relates directly (but not necessarily
exclusively) to Targets or is reasonably useful for GSK to perform its
obligations with respect to such Targets under the Research Collaboration.


 


1.14        “Anacor
Target Patents” means any Patents in the Territory Controlled
by Anacor or its Affiliates on the Effective Date or at any time during the
Term (but excluding Collaboration Patents) that claim or cover the composition
or use of a Target or that would otherwise be infringed (absent a license as
provided herein) by GSK’s performance of its obligations under the Research
Collaboration.


 


1.15        “Annual
Net Sales” means total Net Sales in the Territory in a
particular calendar year. A “calendar year” means a period of twelve (12)
consecutive months beginning on January 1 and ending on December 31.


 


1.16        “Arbitration
Request” has the meaning assigned to such term in Section
14.2.


 


1.17        “Back-Up Compound” means, with respect to a Leading Compound,
any other Collaboration Compounds or GSK Development Compounds (as the case may
be) in Development that [***].


 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 


3

















 


1.18        “Breaching
Party” has the meaning assigned to such term in Section
12.2.1.


 


1.19        “Business
Day” means a day on which banking institutions in New York,
New York, United States are open for business.


 


1.20        “Calendar
Quarter” means a period of three (3) consecutive months
ending on the last day of March, June, September, or December, respectively.


 


1.21        “Candidate
Selection Activities” means, with respect to any
Collaboration Compound, the activities conducted to determine whether such
Collaboration Compound meets the Candidate Selection Criteria.


 


1.22        “Candidate
Selection Activities Report” has the meaning assigned to such
term in Section 2.6.5(b) and Section 2.6.5(c), as the case may be.


 


1.23        “Candidate
Selection Compound” means a Collaboration Compound resulting
from a Project that the JRC determines meets all of the Candidate Selection
Criteria.


 


1.24        “Candidate
Selection Criteria” means the criteria for selecting a
Candidate Selection Compound, as described in Section 2.6.2.


 


1.25        “Candidate
Selection Option” has the meaning assigned to such term in
Section 4.2.1(a).


 


1.26        “Candidate
Selection Option Compounds” 
has the meaning assigned to such term in Section 4.2.1(a).


 


1.27        “Candidate
Selection Option Deadline Period” has the meaning assigned to
such term in Section 4.2.1(a).


 


1.28        “cGMP”
means current Good Manufacturing Practices as defined in Parts 210 and 211 of
Title 21 of the U.S. Code of Federal Regulations, as may be amended from time
to time, or any successor thereto.


 


1.29        “Chairperson”
has the meaning assigned to such term in Section 3.1.1.


 


1.30        “Claims”
has the meaning assigned to such term in Section 11.1.


 


1.31        “Collaboration Compound” means each Anacor Compound that is
progressed through the Project(s) by Anacor during the Research Collaboration
Term pursuant to the terms of this Agreement, the Research Plan and as directed
by the JRC, including Candidate Selection Compounds, and all Leads and Back-Up
Compounds related thereto. A Collaboration 


 


4

















 


Compound shall not include [***].


 


1.32        “Collaboration
IP” means the Collaboration Know-How and the Collaboration
Patents.


 


1.33        “Collaboration Know-How”
means any Information pertaining to a Collaboration Compound that is
discovered, developed, invented or created solely by or on behalf of (a) a
Party (or its agents or contractors), (b) the Parties jointly (or jointly
through their respective agents or contractors), and/or (c) either or both of their
respective Affiliates, in each case pursuant to work conducted under the
Research Collaboration in accordance with the Research Plans and as directed by
the JRC or during the Research Collaboration Term.


 


1.34        “Collaboration
Patent” means any Patent that claims or covers Collaboration
Know-How.


 


1.35        “Combination
Product” means a Product that includes at least one other
therapeutically effective active pharmaceutical ingredient (whether
co-formulated or co-packaged with the GSK Development Compound or Anacor
Development Compound, as the case may be, in such Product) which is neither the
GSK Development Compound or Anacor Development Compound, as the case may be,
nor part of the same molecule as that containing such GSK Development Compound
or Anacor Development Compound. To be a Combination Product, the Product and
all its ingredients must be sold together as a single product and invoiced as
one product. Notwithstanding the foregoing, drug delivery vehicles, adjuvants,
and excipients shall not be deemed to be “therapeutically effective active
pharmaceutical ingredients,” and their presence shall not be deemed to create a
Combination Product.


 


1.36        “Competitive
Infringement” has the meaning assigned to such term in
Section 8.5.1.


 


1.37        “Confidential
Information” has the meaning assigned to such term in Section
9.1.


 


1.38        “Control,”
“Controls,” “Controlled” or “Controlling” means possession of
the ability to grant the licenses or sublicenses as provided herein without
violating the terms of any agreement or other arrangement with any Third Party.
A Party shall be deemed to Control Collaboration IP to the extent of its
individual or joint interest therein, as applicable.


 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 


5

















 


1.39        “Designated
Target” has the meaning assigned to such term in Section 2.5.


 


1.40        “Develop”
or “Development” means activities relating
to obtaining Regulatory Approval of a Product, and activities to develop
manufacturing capabilities for Products. Development includes, but is not
limited to, pre-clinical activities, pharmacology studies, toxicology studies,
formulation, manufacturing process development and scale-up (including bulk
compound production), quality assurance and quality control, technical support,
pharmacokinetic studies, clinical studies and regulatory affairs activities.


 


1.41        “Diligent Efforts” means the following: (a) with respect to
Anacor, such efforts that are consistent with the efforts and resources
normally used by Anacor in the exercise of its reasonable business discretion
relating to the research and development progression of a potential
pharmaceutical product owned by it or to which it has exclusive rights, with
similar product characteristics as the Collaboration Compound, which is of
similar market potential at a similar stage in its development or product life
as the Collaboration Compound, taking into account issues of patent coverage,
safety and efficacy, product profile, the competitiveness of the marketplace,
the proprietary position, the regulatory structure involved, profitability
(including pricing and reimbursement status achieved), and other relevant
factors, including technical, legal, scientific and/or medical factors; and (b)
with respect to GSK, such efforts that are consistent with the efforts and
resources normally used by GSK in the exercise of its reasonable business
discretion relating to a prescription pharmaceutical product owned by it or to
which it has exclusive rights, with similar product characteristics as the
Collaboration Compound or GSK Development Compound (as applicable), which is of
similar market potential at a similar stage in its development or product life
as the Collaboration Compound or GSK Development Compound (as applicable),
taking into account issues of patent coverage, safety and efficacy, product
profile, the competitiveness of the marketplace, the proprietary position, the
regulatory structure involved, profitability 
(including pricing and reimbursement status achieved), and other
relevant factors, including technical, legal, scientific and/or medical
factors.


 


1.42        “Disclosing
Party” has the meaning assigned to such term in Section 9.1.


 


1.43        “Dollars”
or “$” means the
legal tender of the U.S.


 


1.44        “Effective
Date” has the meaning assigned to such term in the Preamble.


 


1.45        “EMEA”
means the European Medicines Agency of the European Union, and any successor
agency thereto.


 


6

















 


1.46        “EU Major Markets” means [***].


 


1.47        “European Commission” means the executive body of the
European Union that has legal authority to grant marketing authorizations
approvals for pharmaceutical products in the European Union following
scientific evaluation and recommendation from the EMEA or other applicable
Regulatory Authorities.


 


1.48        “European
Union” or “EU” means all
countries that are officially recognized as member states of the European Union
at any particular time during the Term.


 


1.49        “Executive
Officers” has the meaning assigned to such term in Section
3.1.4.


 


1.50        “FDA”
means the U.S. Food and Drug Administration, and any successor entity thereto.


 


1.51        “Field”
means any use or purpose, including the treatment, palliation, and/or
prevention of any human or animal disease, disorder or condition; provided,
however, that the Field shall specifically exclude the treatment, palliation,
and/or prevention of onychomycosis.


 


1.52        “First
Commercial Sale” means, with respect to any Product, the
first sale for which revenue has been recognized by GSK or Anacor, as the case
may be, for use or consumption by the general public of such Product in any
country in the Territory after all required Regulatory Approvals have been
granted, or such sale is otherwise permitted, by the Regulatory Authority in
such country, excluding registration samples and compassionate use.


 


1.53        “First
Dosing in a Phase 1 Clinical Trial” means the date on which
the first subject is dosed in a Phase 1 Clinical Trial for a Collaboration
Compound that is conducted by or on behalf of Anacor or GSK (or an Affiliate or
Sublicensee of either Anacor or GSK).


 


1.54        “First
Dosing in Phase 2 Clinical Trial” means the date on which the
first subject is dosed in a Phase 2 Clinical Trial for a Collaboration Compound
that is conducted by or on behalf of Anacor or GSK (or an Affiliate or
Sublicensee of either Anacor or GSK).


 


1.55        “First
Dosing in a Phase 3 Clinical Trial” means the date on which
the first subject is dosed in a Phase 3 Clinical Trial for a GSK Development
Compound that is conducted by or on behalf of GSK (or an Affiliate or
Sublicensee of GSK).


 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 


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1.56        “Follow-On Compound” means, [***].


 


1.57        “FTE”
means (a) with respect to Anacor, a full-time technical person dedicated by
Anacor to the Research Collaboration, or in the case of less than a full-time
dedicated technical person, a full-time equivalent technical person year, [***].
Technical work on or directly related to the Research Collaboration to be
performed by Anacor or GSK may include experimental laboratory work, recording
and writing up results, reviewing literature and references, holding scientific
discussions, seminars and symposia, managing and directing scientific staff,
and carrying out management duties directly related to the Research
Collaboration.


 


1.58        “Generic
Product” means any pharmaceutical product sold by a Third
Party, not authorized by GSK, an Affiliate or sublicensee, and is approved in
reliance on the prior approval of a Product as determined by the applicable
Regulatory Authority, on the basis of it being comparable to and substitutable
for such Product.


 


1.59        “GSK”
has the meaning assigned to such term in the Preamble.


 


1.60        “GSK
Collaboration IP” means any Collaboration IP Controlled by
GSK or its Affiliates.


 


1.61        “GSK Development Compound” means [***].


 


1.62        “GSK Know-How” means any Information Controlled by GSK or its
Affiliates at any time during the Term (other than Collaboration Know-How) that
relates directly (but not necessarily exclusively) to a Collaboration Compound
and is directly (but not necessarily exclusively) useful for Anacor to (a)
conduct its obligations under the Research Collaboration in accordance with the
Research Plan, or (b) make, use or sell an Anacor Development Compound in the
Field in the Territory.


 


1.63        “GSK
IP” means, collectively, (a) GSK Patents, (b) GSK Know-How,
(c) GSK Target Patents, (d) GSK Target Know-How, and (e) GSK Collaboration IP.


 


1.64        “GSK
Patents” means any Patents in the Territory Controlled by GSK
or its Affiliates on the Effective Date or at any time during the Term (other
than Collaboration Patents) that claim or cover the composition of matter
and/or method of use of a Collaboration Compound and are directly (but not
exclusively) useful for Anacor to (a) conduct its obligations 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 


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under the Research
Collaboration in accordance with the Research Plan, or (b)  make, use or sell an Anacor Development
Compound in the Field.


 


1.65        “GSK
Target Know-How” means any Information Controlled by GSK or
its Affiliates on the Effective Date or at any time during the Term (but
excluding Collaboration Know-How) that relates directly (but not necessarily
exclusively) to Targets and is reasonably useful for Anacor to perform its
obligations with respect to such Targets under the Research Collaboration.


 


1.66        “GSK
Target Patents” means any Patents in the Territory Controlled
by GSK or its Affiliates on the Effective Date or at any time during the Term
(but excluding Collaboration Patents) that claim or cover the composition or
use of a Target or that would otherwise be infringed (absent a license as
provided herein) by Anacor’s performance of its obligations with respect to
such Targets under the Research Collaboration.


 


1.67        “Hit”
means a Collaboration Compound in Project 1 that, at the time
of GSK’s exercise of its Option with respect to Project 1, [***].


 


1.68        “HSR”
has the meaning assigned to such term in Section 4.2.2.


 


1.69        “IND”
means any investigational new drug application filed with the FDA pursuant to
Part 312 of Title 21 of the U.S. Code of Federal Regulations, and any
amendments thereto. References herein to IND shall include, to the extent
applicable, any comparable filing(s) outside the U.S. (such as a clinical trial
application in the European Union).


 


1.70        “Indemnitee”
has the meaning assigned to such term in Section 11.3.


 


1.71        “Information” means all tangible and
intangible (a) information, techniques, technology, practices, trade
secrets, inventions (whether patentable or not), methods, knowledge, know-how,
skill, experience, data, results (including pharmacological, toxicological and
clinical test data and results), analytical and quality control data, results
or descriptions, software and algorithms and (b) compositions of matter,
cells, cell lines, assays, animal models and physical, biological or chemical
material. As used herein, “clinical test data” shall be deemed to include all
information related to the clinical or pre-clinical testing of a Collaboration
Compound, or Product, including  patient
report forms, investigators’ reports, biostatistical, pharmaco-economic and
other related analyses, regulatory filings and communications, and the like.


 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 


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1.72        “Joint
Patent Subcommittee” or “JPS” has the
meaning assigned to such term in Section 3.2.


 


1.73        “Joint
Project Team “ or “JPT” has the
meaning assigned to such term in Section 3.3.


 


1.74        “Joint
Research Committee” or “JRC” has the
meaning assigned to such term in Section 3.1.


 


1.75        “Lead”
means a Collaboration Compound that the JRC determines meets all of the Lead
Declaration Criteria.


 


1.76        “Lead
Declaration Criteria” means criteria for selection of a Lead,
as described in Section 2.6.2.


 


1.77        “Lead
Declaration Report” has the meaning assigned to such term in
Section 2.6.5(a).


 


1.78        “Leading
Compound” means, at any particular point in time (a) with
respect to Projects 1 and 3, the furthest advanced Collaboration Compound or
GSK Development Compound (as the case may be) under each Project; and (b) with
respect to Projects 2 and 4 with respect to each Target Product Profile, the
furthest advanced Collaboration Compound or GSK Development Compound (as the
case may be) with respect to a given Target Product Profile.


 


1.79        “Losses”
has the meaning assigned to such term in Section 11.1.


 


1.80        “LeuRS” means bacterial leucyl tRNA synthetase.


 


1.81        “MAA”
means a regulatory application filed with the EMEA or MHLW,
as the case may be, seeking Regulatory Approval of a Product, and all
amendments and supplements thereto filed with the EMEA or MHLW, as the case may
be.


 


1.82        “Materials”
has the meaning assigned to such term in Section 2.7.1.


 


1.83        “Material
IP”  means,
collectively, Patents covering or claiming Materials and Know-How pertaining
specifically to Materials which, in each case (a) exist as of the date such
Materials are transferred as provided in Section 2.6, or (b) are conceived by
the “transferring Party” (as defined in Section 2.6.1) prior to its transfer of
such Materials to the other Party as provided in Section 2.6.


 


1.84        “MHLW”
means the Ministry for Health, Labor and Welfare of Japan,
or the Pharmaceutical and Medical Devices
Agency (the “PMDA,” formerly known as IYAKUHIN SOGO KIKO), or any successor to either of them, as the case may be.


 


1.85        “NDA”
means a New Drug Application (as more fully defined in 21
C.F.R. 314.5 


 


10

















 


et
seq. or its
successor regulation) and all amendments and supplements thereto filed
with the FDA.


 


1.86        “Necessary
License” has the meaning assigned to such term in Section
6.5.3(c).


 


1.87        “Net
Sales” means, with respect to any Product, [***]


 


[***]  For purposes of this Section, “Gross Selling Price” means the list price at which an active
ingredient is sold to a Third Party wholesalers, before discounts, deductions,
credits, taxes or allowances.


 


To the extent the Net
Sales is used herein with respect to Products containing Anacor Development
Compounds or Products containing those Collaboration Compounds to which Anacor
has rights following termination of this Agreement or a Project under this
Article 12, Net Sales shall have the meaning set forth above, with all
references to “GSK” replaced by “Anacor.”


 


1.88        “Non-breaching
Party” has the meaning assigned to such term in
Section 12.2.


 


1.89        “Option”
means, with respect to Project 1, the Candidate Selection Option and PoC
Option, and with respect to Projects 2, 3 and 4, the PoC Option only.


 


1.90        “Option
Deadline Period” means the Candidate Selection Option
Deadline or the PoC Option Deadline, as applicable.


 


1.91        “Option
Deadline Extension Period” has the meaning assigned to such
term in Section 4.2.2.


 


1.92        “Party”
or “Parties” has the meaning assigned to such term in the
Preamble.


 


1.93        “Patent
Costs” means the reasonable fees and expenses paid to outside
legal counsel and other out-of-pocket expenses paid to Third Parties, incurred
in connection with the Prosecution and Maintenance of Patents.


 


1.94        “Patent”
means (a) all patents and patent applications in any country or supranational
jurisdiction in the Territory, (b) any substitutions, divisions, continuations,
continuations-in-part, provisional applications, reissues, renewals,
registrations, confirmations, re-examinations, extensions, supplementary
protection certificates and the like of any such 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 


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patents or patent
applications, and (c) foreign counterparts of any of the foregoing.


 


1.95        “Payee”
has the meaning assigned to such term in Section 6.10.


 


1.96        “Payor”
has the meaning assigned to such term in Section 6.10.


 


1.97        “Person”
means any individual, partnership, joint venture, limited
liability company, corporation, firm, trust, association, unincorporated
organization, governmental authority or agency, or any other entity not
specifically listed herein.


 


1.98        “Phase
1 Clinical Trial” means a clinical trial of a pharmaceutical product on subjects that
generally provides for the first introduction into humans of such product with
the primary purpose of determining safety, metabolism and pharmacokinetic
properties and clinical pharmacology of such product.


 


1.99        “Phase
2 Clinical Trial” means a clinical trial of a pharmaceutical
product on subjects, including possibly pharmacokinetic studies, the principal
purposes of which are to make a preliminary determination that such product is
safe for its intended use and to obtain sufficient information about such
product’s efficacy to permit the design of further clinical trials.


 


1.100      “Phase
3 Clinical Trial” means one or more clinical trials on
sufficient numbers of subjects, which trial(s) are designed to (a) establish
that a drug is safe and efficacious for its intended use; (b) define warnings,
precautions and adverse reactions that are associated with the drug in the
dosage range to be prescribed; and (c) support Regulatory Approvals for such
drug.


 


1.101      “PoC
Compound Criteria” means criteria for selection of a clinical
PoC Compound, as described in Section 2.6.2.


 


1.102      “PoC
Compound” means a Collaboration Compound resulting from PoC
Trials that the JRC (or GSK pursuant to Section 3.1.4(a)) determines has
satisfied the PoC Compound Criteria.


 


1.103      “PoC
Option” has the meaning assigned to such term in
Section 4.2.1(b).


 


1.104      “PoC
Option Compounds” has the meaning assigned to such term in
Section 4.2.1(b).


 


1.105      “PoC
Option Deadline Period” has the meaning assigned to such term
in Section 4.2.1(b).


 


12

















 


1.106      “PoC
Trial” means, with respect to any Collaboration Compound, a [***]
Clinical Trial or a [***] Clinical Trial of such Collaboration Compound that is
reasonably designed to demonstrate successfully the PoC Compound Criteria. For
clarity, the PoC Trial is intended only to demonstrate the safety, and to
provide preliminary evidence of activity, of a particular Collaboration
Compound, and is not intended to be a pivotal trial or to otherwise provide
data sufficient to support Regulatory Approvals.


 


1.107      “PoC
Trial Report” has the meaning assigned to such term in
Section 2.6.5(c).


 


1.108      “Product”
means any product that includes a GSK Development Compound or Anacor
Development Compound, as applicable, or any base form, prodrug, ester, salt
form, crystalline polymorph, hydrate or solvate thereof, whether or not as the
sole active ingredient and in any dosage, form or formulation.


 


1.109      “Project”
means any of Project 1, Project 2, Project 3, or Project 4.


 


1.110      “Project
1” means the Research Collaboration activities conducted by
Anacor and/or GSK pursuant to the Research Plan, and the development activities
conducted by GSK after the exercise of an Option, for the discovery, use,
manufacture and development of Collaboration Compounds or GSK Development
Compounds, as applicable, that are inhibitors of the hepatitis C virus [***].


 


1.111      “Project
2” means the Research Collaboration activities conducted by
Anacor and/or GSK pursuant to the Research Plan, and the development activities
conducted by GSK after the exercise of an Option, for the discovery, use,
manufacture and development of Collaboration Compounds or GSK Development
Compounds, as applicable, that are antibacterial compounds [***].


 


1.112      “Project
3” means the Research Collaboration activities conducted by
Anacor and/or GSK pursuant to the Research Plan, and the development activities
conducted by GSK after the exercise of an Option, for the discovery, use,
manufacture and development of Collaboration Compounds or GSK Development
Compounds, as applicable, [***].


 


1.113      “Project
4” means the Research Collaboration activities conducted by
Anacor and/or GSK pursuant to the Research Plan, and the development activities
conducted by GSK after the exercise of an Option, for the discovery, use,
manufacture and development of Collaboration Compounds or GSK Development
Compounds, as applicable, [***].


 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 


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1.114      “Project
Termination” has the meaning assigned to such term in
Section 2.4.2.


 


1.115      “Prosecuting
Party” has the meaning assigned to such term in
Section 8.2.1.


 


1.116      “Prosecution
and Maintenance” or “Prosecute and Maintain” means, with
regard to a Patent, the preparing, filing, prosecuting and maintenance of such
Patent, as well as re-examinations, reissues, and requests for patent term
adjustments and patent term extensions with respect to such Patent, together
with the initiation or defense of interferences, the initiation or defense of
oppositions and other similar proceedings with respect to the particular Patent.
For clarification, “Prosecution and Maintenance” or “Prosecute and Maintain”
shall not include any other enforcement actions taken with respect to a Patent.


 


1.117      “Receiving
Party” has the meaning assigned to such term in
Section 9.1.


 


1.118      “Regulatory
Approval” means any and all approvals (including price and
reimbursement approvals, if required prior to sale in the applicable
jurisdiction), licenses, registrations, or authorizations of any country,
federal, supranational, state or local regulatory agency, department, bureau or
other government entity that are necessary for the manufacture, use, storage,
import, transport and/or sale of a particular Product in the applicable
jurisdiction.


 


1.119      “Regulatory
Authority” means the FDA, and any health regulatory authority
in any country in the Territory that is a counterpart to the FDA and holds
responsibility for granting regulatory marketing approval for a Product in such
country, and any successor(s) thereto, including the European Commission and
the MHLW .


 


1.120      “Research
Collaboration” means the program of research, discovery,
characterization, optimization and pre-clinical and clinical testing of
Collaboration Compounds pursuant to this Agreement and the Research Plans, as
described in Article 2.


 


1.121      “Research
Collaboration Term” has the meaning assigned to such term in
Section 2.3.


 


1.122      “Research
Plan(s)” has the meaning assigned to such term in
Section 2.2.


 


1.123      “Royalty
Term” has the meaning assigned to such term in
Section 6.5.4.


 


1.124      “Subcommittee”
has the meaning assigned to such term in Section 3.1.7


 


1.125      “Sublicensee”
means, with respect to a particular Product, a Third Party to whom GSK or
Anacor, as applicable, has granted a sublicense or license under any
Collaboration IP and/or the technology licensed to such Party pursuant to this
Agreement, but excluding distributors.


 


1.126      “Target
Product Profile” or “TPP” means,
with respect to each Target, the projected product profile that describes the
commercially relevant range of acceptable product 


 


14

















 


performance of a Collaboration
Compound against key product characteristics, which shall be used by the
Parties to guide and shape the progression of and development decisions for
Collaboration Compounds directed toward such Target.


 


1.127      “Target”
means any of the following:  [***].


 


1.128      “Term”
has the meaning assigned to such term in Section 12.1.


 


1.129      “Territory”
means the entire world.


 


1.130      “Third
Party” means any entity other than Anacor or GSK or an
Affiliate of Anacor or GSK.


 


1.131      “TPP
Subprogram” means the Research Collaboration activities
conducted by Anacor and/or GSK pursuant to the Research Plan, and by GSK after
the exercise of an Option for Project 2 or Project 4, for the discovery, use,
manufacture and development of Collaboration Compounds or GSK Development
Compounds, as applicable, for a particular TPP in Project 2 or Project 4. In
the event that Project 4 is an anti-viral program, Project 4 shall have only
one TPP Subprogram.


 


1.132      “Transfer
Record” has the meaning assigned to such term in Section 2.7.1.


 


1.133      “United
States” or “U.S.” means the United States of America.


 


1.134      “USPTO
Rules” has the meaning assigned to such term in Section
8.2.1.


 


1.135      “Valid
Claim” means any claim within an allowed or issued U.S.
patent or accepted or issued patent in a jurisdiction outside the U.S. that has
not expired, lapsed, been cancelled or abandoned, or been held unenforceable,
invalid or cancelled by a court of competent jurisdiction in an order or
decision from which no appeal has been or can be taken.


 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 


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ARTICLE 2


 


RESEARCH AND DEVELOPMENT
COLLABORATION


 


2.1          Overview. Pursuant to this
Agreement and as further discussed in this Article 2, Anacor and GSK will
jointly undertake the Research Collaboration, the scope of which is the discovery,
identification and development of boron-based small molecule compounds directed
toward the Targets, which small molecule compounds GSK shall have certain
options to exclusively license on a worldwide basis, as further discussed in
Article 4.


 


2.2          Research
Plans. The Research Collaboration activities will be carried
out by Anacor and GSK pursuant to a research operating plan for each Project
(as to each Project, the “Research Plan”),
which will outline anticipated discovery, research, and pre-clinical and
clinical development activities to be conducted by each Party during the
subsequent twelve (12) months in connection with the each of the Projects. The Research Plan for each of the Projects will be
finalized and presented to the JRC for review, comment and approval within
thirty (30) Business Days after the formation of the JRC or, in the case of
Project 4, within thirty (30) Business Days after the selection of the
Designated Target, if later. From time to time during the Research
Collaboration Term (but no less frequently than once per year), Anacor shall
update the Research Plans (or applicable portions thereof) for Project 2,
Project 3 and Project 4, and shall submit such updated Research Plans to the
JRC for review, comment, and approval. Similarly, from time to time during the
Research Collaboration Term (but no less frequently than once per year), Anacor
and GSK shall jointly update the Research Plan for Project 1 (or applicable
portion thereof) and shall submit such updated Research Plan to the JRC for
review, comment and approval. Once approved by the JRC, the updated Research
Plan for each Project shall replace the Research Plan for such Project
previously in effect. The Research Plans will be reviewed as necessary at each
meeting of the JRC, and at any other time upon the request of either Party, and
may be modified by the JRC, as appropriate, to reflect material scientific or
commercial developments. In the event of any inconsistency between a Research
Plan and this Agreement, the terms of this Agreement shall prevail and any such
inconsistent portion of such  Research
Plan is hereby expressly rejected.


 


2.3          Research
Collaboration Term. The Research Collaboration shall commence
as soon as practicable after the Effective Date and shall expire upon the sixth
(6th) anniversary of the Effective Date, but may be extended for up
to two (2) additional years by mutual written agreement of the Parties (as may
be extended, the “Research Collaboration
Term”). Notwithstanding the foregoing, the Research Collaboration
shall terminate (and hence the Research Collaboration Term shall expire) with
respect to a particular Project on the date on which GSK exercises (pursuant to
either Section 4.2 or Section 14.5) the maximum number of Options permitted
hereunder for such Project, as provided in Section 4.2.1(c), or on such other
date agreed by the JRC. Upon the expiration of the Research Collaboration Term
with respect to a particular Project, all obligations of the Parties to conduct
any further Research Collaboration activities under this Agreement with respect
to such Project shall terminate, but the other rights and obligations under
this Agreement shall not otherwise be affected.


 


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2.4                               Research
Efforts; Diligence. During the Research Collaboration Term, Anacor and GSK
shall each use Diligent Efforts to carry out and conduct their respective tasks
and objectives under the Research 
Collaboration in accordance with the terms of this Agreement, Research
Plans and as directed by the JRC (and JPT with respect to Project 1). In
support of these efforts, each Party shall maintain and utilize scientific and
technical staff, laboratories, offices and other facilities as needed to
perform such its respective Research Collaboration activities as set forth in
the Research Plan. Each Party shall use personnel with sufficient skills and
experience as are required to accomplish efficiently and expeditiously the
objectives of the Research Collaboration as set forth in the Research Plan in
good scientific manner and in compliance in all material respects with all
requirements of applicable laws, rules and regulations and in such number and
with such expertise as specifically set forth in Section 2.4.1 below. Further,
with respect to Project 2 and Project 4, it is the Parties’ mutual intent, and
Anacor acknowledges and agrees, that Anacor will initially focus its efforts on
the research and development of  Collaboration
Compounds that satisfy one of the following TPPs:  [***].


 


2.4.1                     Anacor and GSK Responsibilities. During the Research
Collaboration Term, and consistent with the Research Plan, as updated or
amended from time to time, Anacor and GSK shall provide the following
personnel:


 


(a)     Project
1 – Lead Generation


 


(i)                                    Anacor
and GSK shall [***].


 


(ii)                                GSK’s
[***]


 


(iii)                            Anacor’s
[***]


 


(b)     Project
1 – Lead Optimization


 


(i)                                    As
of the Effective Date, the Parties anticipate [***].


 


(ii)                                GSK
shall [***].


 


(iii)                            Anacor
shall [***].


 


(iv)                               For
the [***].


 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A
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COMMISSION.  CONFIDENTIAL TREATMENT HAS
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(c)     Projects
2, 3, and 4


 


(i)                                    For
each of Projects 2, 3, and 4, Anacor [***].


 


(ii)                                GSK
[***].


 


(d)                Each Party
agrees to keep full, clear and accurate records for a Project regarding the
FTEs provided pursuant to this Section 2.4.1 during the immediately preceding
[***] period. Each Party (the “Auditing Party”) shall have a right, upon not
less than [***] prior written notice to the other Party (the “Audited Party”),
to have an independent accounting firm (selected by the Auditing Party and
mutually acceptable to the Audited Party) review such books and records
relating to such FTEs with respect to such [***] time period for the sole
purpose of verifying compliance with this Section 2.4.1. Such audit shall not
be performed more frequently than once per calendar year and shall be conducted
under appropriate confidentiality provisions. Such examination is to be made at
the expense of the Auditing Party, except in the event that the results of the
audit reveal a shortfall in the number of FTEs provided by the Audited Party
(i.e., relative to the number of FTEs required by this Section 2.4.1) of [***]  of more over the period being audited, in which case
reasonable audit fees for such examination shall be paid by the Audited Party.


 


2.4.2                     Anacor Diligence Failure Event. In the event that at any
time during the Research Collaboration Term Anacor materially fails to conduct
the Research Collaboration with respect to a given Target and/or Collaboration
Compound in accordance with its diligence obligations under Section 2.4
(including 2.4.1), then GSK shall have the right to allege a failure of
diligence on the part of Anacor (an “Anacor Diligence Failure
Event”) by written notice of same to Anacor, such notice to set
forth the detailed basis for such alleged failure of diligence. Subject to
Section 2.4.3 below, upon receipt of such notice of an Anacor Diligence Failure
Event, Anacor shall have [***] within which to cure such Anacor Diligence
Failure Event. Upon conclusion of [***] cure period, if Anacor has not cured
such Anacor Diligence Failure Event to GSK’s reasonable satisfaction, GSK shall
have the right to immediately terminate, upon written notice to Anacor, the
Project to which the Anacor Diligence Failure Event relates (a “Project Termination”). Upon a Project Termination, the Leading
Compound with respect to such Project, all Back-Up Compounds and, solely with
respect to Project 1, Follow-On Compounds related thereto, and all other
Collaboration Compounds as provided in Sections 4.1.1(a)(iii), (b)(iii),
(c)(iii) and (d)(iii) (as applicable to the terminated Project) shall be deemed
to be GSK Development Compounds. In this regard but subject to Section 2.4.3,
Anacor shall grant and does hereby grant, as of the effective date of the
Project Termination, an exclusive (even as to Anacor and its Affiliates),
worldwide license (with the right to grant sublicenses) under the Anacor IP to
make, have made, use, sell, offer for sale and import Products 


 






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incorporating such GSK
Development Compounds from the terminated Project in the Field throughout the
Territory. GSK shall [***]. The remedies set forth in this Section 2.4.2 shall
be GSK’s sole remedy, and Anacor’s sole liability, in connection with an Anacor
Diligence Failure Event. The Parties understand and agree that, due to the
nature of the collaboration under this Agreement, damages to GSK resulting from
a material breach by Anacor of its diligence obligations under this Agreement
would be difficult to calculate accurately, and thus the remedies set forth
herein represent a rational relationship between the damages from the material
breach of diligence on the one hand, and the cumulative loss to GSK of its
expectation interest and its lost investment and lost potential return on
investment due to the upfront payment, milestone payments made and research
funding provided hereunder.


 


2.4.3                     Dispute. In the event that Anacor disputes the allegation of
an Anacor Diligence Failure Event in good faith, Anacor shall have the right to
submit such dispute to the Executive Officers in accordance with Section 14.1
within thirty (30) calendar days after receipt of notice of a Project
Termination from GSK as provided in Section 2.4.2 above. If the Executive
Officers are unable to resolve the dispute regarding an Anacor Diligence
Failure Event and Anacor decides to resolve such dispute through arbitration as
provided in Section 14.2, GSK shall be granted such license, but only on a
non-exclusive basis, and without the right to grant sublicenses except for
research and/or development purposes; provided however that upon the first
adjudication by arbitration pursuant to Section 14.2 or settlement of such
dispute in GSK’s favor, such non-exclusive license shall be converted to an
exclusive, worldwide license as provided in Section 2.4.2 above, with the
unrestricted right to grant sublicenses, and if the first adjudication by
arbitration pursuant to Section 14.2 or settlement of such dispute is not in
GSK’s favor, such non-exclusive license shall terminate and revert to Anacor. During
the entire time pending the final resolution of any such dispute,
including  during Executive Officer
consultation or during arbitration, settlement negotiations or any other
related legal proceeding, Anacor shall not grant any license to any Third Party
under the Anacor Compound IP or Anacor Collaboration IP with respect to the
same subject matter, which would conflict or otherwise interfere with the
potential exclusive license to GSK.


 


2.5                               Additional
Target.  As soon as possible but in
any event no later than the [***], GSK shall provide irrevocable (unless
otherwise agreed to by the Parties) written notice to Anacor of one (1)
additional Target to be included in the Research Collaboration as Project 4
(the “Designated Target”), which target shall
[***]. Once a Designated Target is selected, the Parties shall prepare a
Research Plan setting forth the activities to be conducted by Anacor and/or GSK
during the Research Collaboration Term for Project 4 and shall submit such 


 






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Research Plan to the JRC for
review, comment and approval. [***]


 


2.6                               Development
of Collaboration Compounds.


 


2.6.1                     Anacor Responsibility. Prior to GSK’s exercise of an Option
with respect to a Collaboration Compound and subject to Section 2.6.3, Anacor
shall have primary responsibility for conducting the pre-clinical and clinical
development activities for each Collaboration Compound in each Project (including clinical trials and submissions to
Regulatory Authorities) in accordance with this Agreement, the Research Plans
and as directed by the JRC (and JPT with respect to Project 1). GSK shall have the
opportunity to provide advice to Anacor (which shall be considered in good
faith by Anacor) regarding the development of Collaboration Compounds through
GSK’s participation in the JRC (and JPT with respect to Project 1), and shall
have such other development responsibilities as are set forth in this Agreement
or are mutually agreed by the Parties in writing.


 


2.6.2                     Target Product Profiles; Lead Declaration Criteria; Candidate Selection
Criteria; PoC Compound Criteria. The Parties acknowledge and agree
as follows:


 


(a)                  the Target
Product Profile(s), Lead Declaration Criteria 
(which Lead Declaration Criteria is subject to approval by GSK prior to
the first JRC meeting), Candidate Selection Criteria, and PoC Compound Criteria
for Project 1 are attached hereto as Exhibit 2.6.2(a);


 


(b)                  the Target
Product Profile(s), Lead Declaration Criteria, Candidate Selection Criteria,
and PoC Compound Criteria for Project 2 are attached hereto as Exhibit
2.6.2(b); and


 


(c)                  the Target
Product Profile(s), Lead Declaration Criteria, Candidate Selection Criteria,
and PoC Compound Criteria for Project 3 are attached hereto as Exhibit 2.6.2(c).


 


2.6.3                     PoC Trial Design. The JRC shall be responsible for the
design of all PoC Trials for each Collaboration Compound. Any disputes
regarding the design of any PoC Trial, 


 






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including with respect to
content and endpoints of such PoC Trial, that are not resolved by the JRC shall
be presented to GSK to make the final decision as provided in Section 3.1.4(a).
Notwithstanding GSK’s decision-making authority with respect to the PoC Trial
design for a given Collaboration Compound, in no event shall Anacor be required
to conduct a PoC Trial in which the PoC Trial design includes [***].


 


2.6.4                     Reports. During the Research Collaboration Term, Anacor and
GSK shall provide reasonable progress updates at each Calendar Quarter meeting
of the JRC on the status of their respective activities for each Project, [***].
[***] in advance of the applicable JRC meeting. All such exchanges of
Information shall be coordinated by the Alliance Managers.


 


2.6.5                     Evaluation of Lead Declaration, Candidate Selection Activities and PoC
Trial Results.


 


(a)               In the event
that Anacor determines that a Collaboration Compound meets the Lead Declaration
Criteria, Anacor shall promptly notify GSK in writing of such event and shall
provide to the JRC, not less than [***] prior to the next regularly scheduled
meeting, a data package containing a reasonably complete set of analysis,
results and raw data from the Lead generation and optimization activities for
such Collaboration Compound (the “Lead Declaration Report”).
The JRC will, at its next regularly scheduled meeting or at an ad hoc meeting
scheduled by the JRC (and in any event within [***] after the JRC’s receipt of
the Lead Declaration Report), review the Lead Declaration Report to confirm
whether the Collaboration Compound meets the Lead Declaration Criteria.


 


(b)               With respect to
[***], in the event that Anacor determines that a Collaboration Compound meets
the Candidate Selection Criteria, Anacor shall promptly notify GSK in writing
of such event and shall provide to the JRC, not less than [***] prior to the
next regularly scheduled meeting, a data package containing a reasonably
complete set of analysis, results and raw data from the Candidate Selection
Activities for such Collaboration Compound (for the purpose of this Section
2.6.5(b), the “Candidate Selection Activities Report”).
The JRC will, at its next regularly scheduled meeting or at an ad hoc meeting
scheduled by the JRC (and in any event within [***] after the JRC’s receipt of
the Candidate Selection Activities Report), review the Candidate Selection
Activities Report to confirm whether the Collaboration Compound meets the
Candidate Selection Criteria.


 


(c)               With respect to
[***], in the event that Anacor determines that a Collaboration Compound meets
the Candidate Selection Criteria, Anacor shall promptly notify 


 






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GSK in writing of such event
and shall provide to the JRC a data package containing all analysis, results
and raw data from the Candidate Selection Activities for such Collaboration
Compound, and any related correspondence or information received from or sent
to any Regulatory Authority relating to such Collaboration Compounds (for the
purpose of this Section 2.6.5(c), the “Candidate Selection
Activities Report”). Unless otherwise agreed to by the Parties, the
JRC will schedule an ad hoc meeting not more than [***] after receipt of any
such Candidate Selection Activities Report to review such Candidate Selection
Activities Report and determine whether or not such Collaboration Compound
meets the applicable Candidate Selection Criteria. If the JRC agrees that the
Collaboration Compound meets the Candidate Selection Compound Criteria, GSK
shall have a right with respect to Project 1 to exercise its Candidate
Selection Option as to such Collaboration Compound pursuant to Section 4.2.


 


(d)               Following
completion of any PoC Trial, in the event that Anacor determines that a
Collaboration Compound meets the PoC Compound Criteria, Anacor shall promptly
notify GSK in writing of such event and shall provide to the JRC a data package
containing all analysis, results and raw data from the PoC Trial for such
Collaboration Compound, and any related correspondence or information received
from or sent to any Regulatory Authority relating to such Collaboration
Compounds (the “PoC Trial Report”). Unless
otherwise agreed to by the Parties, the JRC will schedule an ad hoc meeting not
more than [***] after receipt of any such PoC Trial report to review such PoC
Trial Report and determine whether or not such Collaboration Compound meets the
PoC Compound Criteria. If the JRC agrees that the Collaboration Compound meets
the PoC Compound Criteria, GSK shall have a right to exercise its PoC Option as
to such Collaboration Compound pursuant to Section 4.2.


 


2.7                               Material
Transfer.


 


2.7.1                     To
facilitate the Research Collaboration, either Party (referred to in Section
1.77 and this Section 2.7 as the “transferring Party”) may, at its sole
discretion, provide to the other Party (referred to in this Section 2.7 as the “receiving
Party”) certain biological materials or chemical compounds, such as cell-based
assays or research tools, but excluding Collaboration Compounds, owned by or
licensed to the transferring Party (such materials or compounds provided
hereunder are referred to, collectively, as “Materials”)
for use by the receiving Party in furtherance of the Research Collaboration
pursuant to the Research Plans. All transfers of such Materials by the
transferring Party to the receiving Party shall be documented in writing (the “Transfer Record”), which Transfer Record shall set forth the
type and name of the Material transferred, the amount of the Material
transferred, the date of the transfer of such 


 






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Material and the proposed use
of such Material by the receiving Party.


 


2.7.2                     Except
as otherwise provided under this Agreement, all such Materials delivered by the
transferring Party to the receiving Party shall remain the sole property of the
transferring Party, shall only be used by the receiving Party in furtherance of
the Research Collaboration. The receiving Party shall not cause the Materials
be used or delivered to or for the benefit of any Third Party without the prior
written consent of the transferring Party. Further, the receiving Party shall
not use the Materials in research or testing involving human subjects, unless
expressly agreed by the transferring Party in writing.


 


2.7.3                     At
the time the transferring Party provides Materials to the receiving Party as
provided herein, the transferring Party shall grant, and hereby does grant to
the other Party a non-exclusive license under the Material IP Controlled by the
transferring Party or its Affiliates to use such Materials for the purpose set
forth in the Transfer Record. In any event, Material IP shall not become nor be
deemed Collaboration IP.


 


2.7.4                     The
transferring Party shall have sole control over all matters pertaining to the
prosecution of Material IP and the defense and enforcement of any Patents
included in the Material IP, in each case which Material IP is Controlled by
such transferring Party or its Affiliates. In the event that the receiving
Party conceives an invention based on its use of any Materials from the
transferring Party as provided in the Transfer Record and obtains patent
protection therefor, any such patents shall not fall within the Material IP
Controlled by the transferring Party or its Affiliates. However, receiving
Party shall and hereby grants to the transferring Party a non-exclusive,
non-sub-licensable (except as to the transferring Party’s Affiliates),
perpetual, worldwide, fully-paid and royalty-free license, under all of the
receiving Party’s rights in and to such patents and specifically related know
how, to conduct any research, development or commercial activities (either
alone or with a collaborator or subcontractor for such purposes) outside the
scope of this Agreement.


 


2.7.5                     THE
MATERIALS SUPPLIED BY THE TRANSFERRING PARTY UNDER THIS SECTION 2.7 ARE
SUPPLIED “AS IS” AND THE TRANSFERRING
PARTY MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER
EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE USE OF THE MATERIALS DOES NOT
INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK, OR OTHER PROPRIETARY RIGHTS OF A
THIRD PARTY.


 


2.7.6                     The
receiving Party assumes all liability for damages which may arise from its use,
storage or disposal of the Materials. The transferring Party will not be liable
to the receiving Party for any loss, claim or demand made by the receiving
Party, or made against the receiving Party by any Third Party, due to or
arising from the use of the Materials, except to the extent permitted by Law,
when caused by the gross negligence or willful misconduct of the transferring
Party.


 


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2.8                               Regulatory
Matters; Compliance.


 


2.8.1                     Compliance. Anacor shall conduct all pre-clinical activities
and Clinical Trials in good scientific manner, and in compliance in all
material respects with all requirements of applicable laws, rules and
regulations, and all other applicable requirements of cGMP, good laboratory
practice and current good clinical practice.


 


2.8.2                     Data Integrity.


 


(a)                                  Anacor
acknowledges the importance to GSK of ensuring that the Projects are undertaken
in accordance with the following good data management practices:


 


(i)                          data
is being generated using sound scientific techniques and processes;


 


(ii)                      data is
being accurately and reasonably contemporaneously recorded in accordance with
good scientific practices by Persons conducting research hereunder;


 


(iii)                  data is
being analyzed appropriately without bias in accordance with good scientific
practices; and


 


(iv)                     data and
results are being stored securely and can be easily retrieved.


 


(b)                                  Anacor
agrees that it shall use Diligent Efforts to carry out the Research
Collaboration so as to collect and record any data generated therefrom in a
manner consistent with the above requirements as set forth in subsection (a)
above.


 


2.8.3                     Ownership. Anacor shall own and maintain all regulatory
filings for Collaboration Compounds developed during the Research Collaboration
Term pursuant to this Agreement, including all INDs. In the event that any
Regulatory Authorities request a teleconference, videoconference, or meeting
with Anacor with respect to a particular Collaboration Compound during the
Research Collaboration Term, Anacor shall provide GSK with the opportunity to
have [***] representative appear as a [***] observer at any such
teleconference, videoconference, or meeting. Upon exercise of GSK of an Option
with respect to a Collaboration Compound as provided in Section 4.2 or Section
14.5, or upon GSK’s exercise of its rights pursuant to Sections 2.4.2, 4.2.1(e)
or 4.2.1(f), Anacor (or its successor in the event 


 






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of a Change of Control Event)
shall transfer ownership of such regulatory filings for such GSK Development
Compound, including all relevant INDs, to GSK, and provide GSK with copies of
such INDs and other regulatory filings, and all pre-clinical and clinical data
and results (including pharmacology, toxicology, formulation, and stability
studies). Thereafter, GSK (or its Affiliates) shall own and maintain all
regulatory filings and Regulatory Approvals for GSK Development Compounds
during the Term. In the event that any Regulatory Authorities request a
teleconference, videoconference, or meeting with GSK with respect to a
particular GSK Development Compound or Product, GSK shall provide Anacor with
the opportunity to have [***] representative appear as a [***] observer at any
such teleconference, videoconference, or meeting.


 


2.8.4                     Adverse Event Reporting. Beginning on the Effective Date and
continuing until such time, if any, that GSK exercises its Option with respect
to a Collaboration Compound as provided in Section 4.2 or Section 14.5, or
until such time, if any, that GSK exercises its rights pursuant to Sections
2.4.2, 4.2.1(e) or 4.2.1(f), Anacor shall be responsible for reporting all
adverse drug reaction experiences related to such Collaboration Compound in
connection with the activities of Anacor under this Agreement to the
appropriate Regulatory Authorities in the countries in the Territory in which
the Collaboration Compound is being developed, in accordance with the
appropriate laws and regulations of the relevant countries and Regulatory
Authorities. Anacor shall provide GSK notice of such event within forty-eight
(48) hours and provide copies of all reports to GSK as soon as possible prior
to  any 
filing with a Regulatory Authority. Through the JRC, GSK shall have the
right to review from time to time Anacor’s pharmacovigilance policies and
procedures. GSK and Anacor agree to cooperate and use good faith efforts to
ensure that Anacor’s adverse event database is organized in a format that is
compatible with GSK’s adverse event databases.


 


2.9                               Research
Collaboration Costs. Each Party shall bear its own costs in connection with
performing Research Collaboration activities. Promptly following [***], and
thereafter during the Research Collaboration Term on an annual basis, the
Parties shall review their respective commitments for the Research
Collaboration  to determine the
appropriate level of resources [***] to be contributed in the subsequent year
of the Research Collaboration Term, such resources to be determined by mutual
agreement of GSK and Anacor. Notwithstanding the foregoing, in no event shall
the total resources for all of the Projects be increased or decreased by [***];
provided, however, that following the end of the Research Collaboration Term
with respect to a Project, some or all of the resources that were focused on
such Project may be repurposed to uses outside the Research Collaboration
without violating the foregoing provision.


 






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2.10                        Subcontracting.  Subject to the terms of this Agreement
(including Section 2.4.1(b)(iv) with respect to Anacor), each Party shall have
the right to engage Affiliates or Third Party subcontractors to perform certain
of its obligations under this Agreement. Any Affiliate or subcontractor to be
engaged by a Party to perform a Party’s obligations set forth in the Agreement
shall meet the qualifications typically required by such Party for the
performance of work similar in scope and complexity to the subcontracted
activity. Notwithstanding the preceding, any Party engaging an Affiliate or
subcontractor hereunder shall remain principally responsible and obligated for
such activities. In addition, any Party engaging a subcontractor shall in all
cases retain or obtain Control of any and all intellectual property created by
or used with the relevant Party’s permission by such subcontractor directly
related to such subcontracted activity. However, it is understood that, in some
cases, it may not be commercially reasonable for such Party to obtain exclusive
Control of trade secrets or know-how to be created by such subcontractor. To
the extent that such exclusive rights cannot be obtained with respect to any
intellectual property from any such subcontractor, prior to entering into such
arrangement with such subcontractor, such Party shall bring such matter to the
JRC for a determination of whether to enter into such arrangement.


 


ARTICLE 3


 


MANAGEMENT OF THE COLLABORATION


 


3.1                               Joint
Research Committee. Promptly and in any event [***], the Parties shall
establish a committee (the “Joint Research Committee”
or “JRC”) as more fully described in this
Section 3.1. The JRC shall have review and oversight responsibilities for all
research and development activities performed hereunder, including oversight of
the Research Collaboration, in each case as more specifically provided herein. Each
Party agrees to keep the JRC informed of its progress and activities under the
Research Collaboration.


 


3.1.1                     Membership. The JRC shall be comprised of three (3) representatives
(or such other number of representatives as the Parties may agree) from each of
GSK and Anacor. Each Party shall provide the other with a list of its initial
members of the JRC no later than thirty (30) days prior to the first scheduled
meeting of the JRC. Each Party may replace any or all of its representatives on
the JRC at any time upon written notice to the other Party in accordance with
Section 14.7 of this Agreement. Each representative of each Party shall have
expertise (either individually or collectively) in pharmaceutical drug
discovery and development. Any member of the JRC may designate a substitute to
attend and perform the functions of that member at any meeting of the JRC. Each
Party may, in its reasonable discretion, invite


 






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non-member representatives of
such Party to attend meetings of the JRC as a non-voting participant, subject
to the confidentiality obligations of Article 9. The Parties shall designate a
chairperson (each, a “Chairperson”)
to oversee the operation of the JRC and prepare minutes as set forth in Section
3.1.3, each such Chairperson to serve a twelve (12) month term. The right to
name the Chairperson shall alternate between the Parties, with Anacor
designating the first such Chairperson.


 


3.1.2                     Meetings. During the Research Collaboration Term with
respect to a Project, the JRC shall meet in person or otherwise [***], and more
frequently as the Parties mutually deem appropriate, on such dates, and at such
places and times, as provided herein or as the Parties shall agree. Upon
conclusion of the Research Collaboration Term with respect to a Project, the
JRC shall meet, in person or otherwise, [***] to provide Anacor an update
regarding GSK’s efforts under such Project to develop and commercialize GSK
Collaboration Compounds (and Products incorporating GSK Development Compounds)
and otherwise to perform the responsibilities assigned to it under this
Agreement; provided, however, that during the [Royalty Term] for a particular Product, the Parties agree
to periodically discuss in good faith the frequency of such ongoing meetings
with respect to such Product. Meetings of the JRC that are held in person shall
alternate between the offices of the Parties, or such other place as the
Parties may agree. The members of the JRC also may convene or be polled or
consulted from time to time by means of telecommunications, video conferences,
electronic mail or correspondence, as deemed necessary or appropriate. Each
Party will bear all expenses it incurs in regard to participating in all
meetings of the JRC, including all travel and living expenses.


 


3.1.3                     Minutes. The Chairperson shall be responsible for preparing
and circulating minutes of each meeting of the JRC, setting forth, inter alia, a description, in reasonable detail, of the
discussions at the meeting and a list of any actions, decisions or
determinations approved by the JRC and a list of any issues to be resolved by
the Executive Officers pursuant to Section 3.1.4. Such minutes shall be
effective only after approved by both Parties. With the sole exception of
specific items of the meeting minutes to which the members cannot agree and
which are escalated to the Executive Officers as provided in Section 3.1.4
below, definitive minutes of all JRC meetings shall be finalized no later than
thirty (30) calendar days after the meeting to which the minutes pertain. If at
any time during the preparation and finalization of the JRC minutes, the
Parties do not agree on any issue with respect to the minutes, such issue shall
be resolved by the escalation process as provided in Section 3.1.4. The
decision resulting from the escalation process shall be recorded by the
Chairperson in amended finalized minutes for said meeting.


 






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3.1.4                     Decisions. Except as otherwise provided herein, all
decisions of the JRC shall be made by consensus, with each Party having
collectively one (1) vote in all decisions. In the event that the JRC is unable
to reach a consensus decision [***] after it has met and attempted to reach
such decision, then either Party may, by written notice to the other, have such
issue referred to [***], or such other person holding a similar position
designated by Anacor from time to time, and [***], or such other person holding
a similar position designated by GSK from time to time (collectively, the “Executive Officers”), for resolution. The Executive Officers
shall meet promptly to discuss the matter submitted and to determine a
resolution. If the Executive Officers are unable to determine a resolution in a
timely manner, which shall in no case be more than [***] after the matter was
referred to them, the issue shall be resolved as follows:


 


(a)               GSK shall have
final decision-making authority with respect to any disputes concerning (i) the
establishment of the PoC Compound Criteria; (ii) whether the PoC Compound
Criteria have been satisfied by a particular Collaboration Compound; and/or
(iii) subject to Section 2.6.3, the design, content, and endpoints of a PoC
Trial, in each case of (i), (ii) and (iii) without the requirement that such
dispute first be presented to a Third Party expert as provided in Section
3.1.4(b) or subject to further review pursuant to Section 14.1.


 


(b)               Except as set
forth in Section 3.1.4, the disputed issue shall be submitted to a mutually
agreed Third Party expert, who will be required to make a decision on such
issue within [***] after submission. The decision of such expert shall be
binding on the Parties without further review pursuant to Section 14.1. The
Parties shall [***] the costs of such expert.


 


3.1.5                     Responsibilities. The JRC shall perform the following
functions, some or all of which may be addressed directly at each meeting of
the JRC:


 


(a)               review and
coordinate all of the Parties’ activities under a Project during the Research
Collaboration Term for such Project;


 


(b)               subject to
approval of both Parties, review, comment on, and approve additional Target
Product Profiles for the Projects, as such additional Target Product Profiles
may be proposed from time to time by the Parties, and amend existing Target
Product Profiles for the Projects, provided that in any case a decision by a
Party shall not be subject to the dispute resolution process set forth in
Section 3.1.4;


 


(c)               review the
progress of each Project against the applicable 


 






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Research Plan;


 


(d)               prepare,
review, modify, update and approve the PoC Trial designs, which shall be
subject to the dispute resolution procedure set forth in Section 2.6.3;


 


(e)               review, comment
on, and approve the Research Plan for each Project;


 


(f)                 confirm that
a Collaboration Compound has satisfied the Lead Declaration Criteria, Candidate
Selection Criteria, or PoC Compound Criteria;


 


(g)              serve as an
information transfer vehicle to facilitate the discussion of Development and
commercialization of GSK Development Compounds and Products;


 


(h)              discuss and
attempt to resolve any deadlock issues submitted to it by any Subcommittee, in
accordance with the procedures established in Section 3.1.4; and


 


(i)                 such other
responsibilities as may be assigned to the JRC pursuant to this Agreement or as
may be mutually agreed upon by the Parties from time to time.


 


For clarity, the
JRC shall not have any authority beyond the specific matters set forth above in
this Section 3.1.5, and in particular shall not have any power to amend or
modify the terms or provisions of this Agreement. In addition, GSK (and not
Anacor or the JRC) shall have the sole right to make decisions in its sole
discretion with respect to (i) the exercise of an Option; or (ii) the development
and commercialization of GSK Development Compounds (and resultant Products)
after exercise by GSK of an Option with respect thereto.


 


3.1.6                     Anacor Right to Withdraw. Anacor shall have the right to
withdraw from participation on the JRC at any time after the sixth (6th)
anniversary of the Effective Date upon written notice to GSK. Upon withdrawal
from the JRC, GSK shall have the sole decision-making authority as provided in
Section 3.1.4(a) with respect to any matters that would otherwise have been subject
to Section 3.1.4(b).


 


3.1.7                     Subcommittee(s). From time to time, the JRC may establish
subcommittees to oversee particular projects or activities, as it deems
necessary or advisable (each, a “Subcommittee”).
Each Subcommittee shall consist of such number of members as the JRC determines
is appropriate from time to time. Such members shall be individuals with
expertise and responsibilities in the areas of pre-clinical development,
clinical development, patents, process sciences, manufacturing, regulatory
affairs, product development and/or product commercialization, as applicable to
the stage of development of the project or activity.


 


29

















 


3.2                               Joint
Patent Subcommittee. [***] after the Effective Date, the JRC shall
establish a Subcommittee (the “Joint Patent Subcommittee”
or  “JPS”) to be
responsible for the coordination of the Parties’ efforts in accordance with
Article 8 of this Agreement, including the review and filing of patent
applications and assessments of inventorship of inventions created during the
Research Collaboration Term. The JPS shall be comprised of an equal number of
representatives from each of GSK and Anacor and shall meet on such dates and at
such places and times agreed to by the Parties. All decisions of the JPS on
matters for which it has responsibility shall be made by consensus, with each
Party having collectively one (1) vote in all decisions. In the event that the
JPS is unable to reach a consensus decision within [***] after it has met and
attempted to reach such decision, then either Party may, by written notice to
the other, have such issue submitted to the JRC for resolution in accordance
with Section 3.1.4. Each Party will bear all expenses it incurs in regard to
participating in all meetings of the JPS, including all travel and living
expenses.


 


3.3                               Joint
Project Team.  [***] after the
Effective Date, the JRC shall establish a Subcommittee (the “Joint Project Team” or “JPT”) to
oversee the conduct of the Research Collaboration with respect to [***]. The
JPT shall be comprised of an equal number of representatives from each of GSK
and Anacor and shall meet on such dates and at such places and times agreed to
by the Parties. All decisions of the JPT on matters for which it has responsibility
shall be made by consensus, with each Party having collectively one (1) vote in
all decisions. In the event that the JPT is unable to reach a consensus
decision within [***] after it has met and attempted to reach such decision,
then either Party may, by written notice to the other, have such issue
submitted to the JRC for resolution in accordance with Section 3.1.4 and
3.1.4(a). Each Party will bear all expenses it incurs in regard to
participating in all meetings of the JPT, including all travel and living
expenses.


 


3.4                               Alliance
Managers. Promptly after the Effective Date, each Party shall appoint an
individual (who may or may not be an existing member of the JRC) to act as
alliance manager for such Party (each, an “Alliance Manager”).
Each Alliance Manager shall thereafter be permitted to attend meetings of the
JRC as a nonvoting observer (unless such Alliance Manager is a member of the
JRC), subject to the confidentiality provisions of Article 9. The Alliance
Managers shall be the primary point of contact for the Parties regarding the
collaboration activities contemplated by this Agreement and shall facilitate
all such activities hereunder including the exchange of Information described
in Section 2.6.4. The Alliance Managers shall also be responsible for assisting
the JRC in performing its oversight responsibilities. The name and contact
information for such Alliance Managers, as well as any replacement(s) chosen by



 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A
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COMMISSION.  CONFIDENTIAL TREATMENT HAS
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Anacor or GSK, in their sole
discretion, from time to time, shall be promptly provided to the other Party in
accordance with Section 14.7 of this Agreement.


 


ARTICLE 4


 


GRANT OF RIGHTS


 


4.1                             Options.


 


4.1.1                     Anacor
hereby grants to GSK the exclusive right, exercisable at GSK’s sole discretion
pursuant to the Options in Section 4.2 below, to elect to include any or all of
the following as GSK Development Compounds:


 


(a)               With respect to
[***];


 


(b)               With respect to
[***];


 


(c)               With respect to
[***]; and


 


(d)               With respect to
[***].


 


4.1.2                     During
the Research Collaboration Term, Anacor will not grant to any Third Party
rights to any Anacor IP that are inconsistent with or would interfere with the
grant of the licenses resulting from the exercise of the Options to GSK
hereunder. Subject to Section 5.3.2, any Option exercised by GSK shall be
irrevocable.


 


4.2                             Options.


 


4.2.1                     Exercise and Expiration of Options.


 


(a)                                  Subject
to Section 4.2.2 and only as to [***] only, within the [***] on which the JRC
confirms that a Collaboration Compound satisfies the applicable Candidate
Selection Criteria as provided in this Agreement (the “Candidate
Selection Option Deadline Period”), GSK may in its sole discretion
exercise its exclusive option (the “Candidate Selection Option”)
to develop and commercialize such Candidate Selection Compound, [***] related
thereto and all other Collaboration Compounds as provided in Section
4.1.1(a)(iii) (collectively, 


 






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COMMISSION.  CONFIDENTIAL TREATMENT HAS
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the “Candidate Selection Option Compounds”)  as
GSK Development Compounds by delivering to Anacor a written notice of GSK’s
exercise of the Candidate Selection Option prior to the expiration of the
Candidate Selection Option Deadline Period, specifying the Candidate Selection
Option Compounds for which such Candidate Selection Option is being exercised. Upon
GSK’s exercise of its Candidate Selection Option as provided herein, such
Candidate Selection Compound (and all other Candidate Selection Option
Compounds) shall be deemed GSK Development Compounds, GSK shall have no further
Options with respect to [***] and the Research Collaboration Term shall expire
with respect to [***]. In the event that GSK does not deliver written notice of
exercise of the Candidate Selection Option with respect to such Candidate
Selection Compound prior to the expiration of the Candidate Selection Option
Deadline Period, the Candidate Selection Option with respect to such Candidate
Selection Compound (and all other Candidate Selection Option Compounds) shall
expire and such Candidate Selection Compound (and all other Candidate Selection
Option Compounds) will continue to be progressed by Anacor under the Research
Collaboration pursuant to this Agreement, the Research Plan and as directed by
the JRC and JPT. Notwithstanding anything contained herein to the contrary, GSK
shall also have a right to exercise the Candidate Selection Option with respect
to all Projects and all TPP Subprograms hereunder pursuant to the terms set
forth in Section 14.5, even if the JRC has not confirmed that a Collaboration
Compound with respect to a Project or TPP Subprogram has achieved the Candidate
Selection Criteria. In the event that GSK exercises the Candidate Selection
Option pursuant to the terms set forth in Section 14.5, the Leading Compound
with respect to such the applicable Project or, in the case of Projects 2 and
4, the applicable TPP Subprogram, shall be deemed to be a Candidate Selection
Compound for the purpose of Section 4.1, and “Candidate
Selection Option Compounds” shall be defined as such [***] related
thereto, and all other Collaboration Compounds as provided in Sections
4.1.1(a)(iii), (b)(iii), (c)(iii) and (d)(iii), as applicable.


 


(b)                                  Subject
to Section 4.2.2 and with respect to [***] after the date on which the JRC
confirms that a Collaboration Compound satisfies the applicable PoC Criteria as
provided in this Agreement (the “PoC Option Deadline Period”),
GSK may in its sole discretion exercise its exclusive option (the “PoC Option”) to develop and commercialize such PoC Compound,
[***] related thereto, and all other Collaboration Compounds as provided in
Sections 4.1.1(a)(iii), (b)(iii), (c)(iii) and (d)(iii), as applicable
(collectively, the “PoC Option Compounds”),
as GSK Development Compounds by delivering to Anacor a written notice of GSK’s
exercise of the PoC Option prior to the expiration of the PoC Option Deadline
Period, specifying the PoC Option Compounds for which such PoC Option is being
exercised. Upon GSK’s exercise of its PoC Option as provided herein, (i) such
PoC Option Compounds shall be 


 






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COMMISSION.  CONFIDENTIAL TREATMENT HAS
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deemed GSK
Development Compounds, (ii) and GSK shall have no other Options with respect
to  Project 1 or 3, as applicable, (iii)
GSK shall have no other Options with respect to the TPP Subprogram for which
the Option was exercised in Project 2 or 4, as applicable, and (iv) the
Research Collaboration Term shall expire with respect to Project 1 or 3, as
applicable. In the event that GSK does not deliver written notice of exercise
of the PoC Option with respect to such PoC Compound prior to the expiration of
the PoC Option Deadline Period, the PoC Option with respect to such PoC
Compounds shall expire, Anacor will thereafter have all rights, itself or with
or through an Affiliate or Third Party, as provided in Section 5.3.1, to
develop and commercialize such PoC Compound as an Anacor Development Compound at
Anacor’s sole expense, subject to any applicable milestone and royalty payments
set forth in Section 6.6 if GSK grants Anacor the license set forth in Section
5.3.1, and all of the other PoC Option Compounds will continue to be progressed
by Anacor under the Research Collaboration as provided in this Agreement, the
applicable Research Plan and as directed by the JRC (and  the JPT in the case of Project 1).


 


(c)                                         For
clarity, GSK shall have the right prior to the expiration of the Research
Collaboration Term to exercise [***].


 


(d)                                         Following
exercise of an Option, GSK shall have sole responsibility for the further
development, manufacturing, and registration of the Collaboration Compounds
that became GSK Development Compounds as a result of an Option exercise (including clinical activities and
submissions to regulatory agencies) pursuant to the terms of this
Agreement.


 


(e)                                         With
respect to Projects 1 and 3, in the event that there are any unexercised
Options with respect to such Project(s) upon the expiration of the Research
Collaboration Term with respect to such Projects, GSK shall have the right,
exercisable in its sole discretion during the [***] after the end of the
Research Collaboration Term with respect to such Project(s) and upon prior
written notice to Anacor, to elect to have any Collaboration Compounds included
in such Project(s) [***], as confirmed by the JRC. In the event that GSK makes
the election as provided herein with respect to Project 1 and/or 3 [***].


 


(f)                                           With
respect to each TPP Subprogram for Projects 2 and 4, in the event that there
are any unexercised Options with respect to such TPP Subprogram(s) in such
Project(s) upon the expiration of the Research Collaboration Term with respect
to such Projects GSK shall have the right, exercisable in its sole discretion
during the [***] after the end of the Research Collaboration Term with respect
to such Project(s) and upon prior written notice to Anacor, to elect to have
any Collaboration Compounds included in such TPP Subprogram(s) [***]. In the
event that GSK makes the election as provided herein with respect to a TPP 


 






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COMMISSION.  CONFIDENTIAL TREATMENT HAS
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Subprogram in
Project 2 and/or 4 [***].


 


4.2.2                     HSR and Equivalent Foreign Laws. If GSK
reasonably determines in good faith prior to the expiration of the applicable Option
Deadline Period that the exercise of any Option by GSK under this Agreement is
required to be filed with the Federal Trade Commission (the “FTC”) under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 (15 U.S.C. §18a) (“HSR”) or with
equivalent foreign governmental authorities under any similar foreign law, the
applicable Option Deadline Period shall be extended automatically by [***] from
the original expiration of the applicable Option Deadline Period (the “Option Deadline Extension Period”) in the event that: (i)
the HSR (or similar foreign law) initial waiting period is still pending as of
the original date of the expiration of the Option Deadline Period; or (ii) a “Second
Request” to which GSK intends to respond is received from the FTC (or
equivalent foreign authority)  in
connection with such filing and clearance has not been granted as of the Option
Deadline Period. In the event that HSR (or similar foreign law) clearance has
still not been granted as of the expiration of the Option Deadline Extension
Period, Anacor and GSK shall promptly meet to discuss in good faith whether an
additional extension of the Option Deadline Extension Period is required. In
such event, such extension of the Option Deadline Extension Period shall only
be effective with the mutual written approval of the Parties, not to be
withheld by Anacor if GSK can demonstrate a credible basis to believe, based on
documented correspondence from the FTC (or equivalent foreign authority) that
such HSR (or similar foreign law) clearance is or will more likely than not be
forthcoming. In the event that HSR (or similar foreign law) clearance is not
granted upon expiration of the applicable Option Deadline Extension Period, the
applicable Option shall be deemed to have expired unexercised.


 


4.3                             License
Grants.


 


4.3.1                     Research Collaboration.


 


(a)               GSK hereby
grants to Anacor a non-exclusive, non-royalty bearing license under the GSK IP,
solely as and to the extent necessary or important to conduct activities for
which Anacor is responsible under the Research Plans during the Research
Collaboration Term.


 


(b)               Anacor hereby
grants to GSK a non-exclusive, non-royalty bearing license under the Anacor IP,
solely as and to the extent necessary or important to conduct activities for
which GSK is responsible under the Research Plans during the Research
Collaboration Term.


 






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4.3.2                     Development and Commercialization. Subject to the terms and
conditions of this Agreement and upon GSK’s exercise of the relevant Option in
accordance with Section 4.2,
Anacor shall be hereby deemed to have granted and hereby grants to GSK the
exclusive (even as to Anacor) right and license in the Territory, with the
right to grant sublicenses, under the Anacor IP to make, have made, use, sell,
offer for sale and import the GSK Collaboration Compounds as and into Products
in the Field during the Term.


 


4.4                             Technology
Transfer after GSK’s Option Exercise. [***] after GSK exercises its Option
for any GSK Development Compounds pursuant to Section 4.2 or Section 14.5, or
after GSK’s exercise of its rights under Sections 2.4.2, 4.2.1(e) or 4.2.1(f),
Anacor shall deliver to GSK, at no cost to GSK, all Information and material in
its possession and Control relating to such GSK Development Compounds. Anacor
shall use commercially reasonable efforts with respect to those activities for
which it is responsible to ensure orderly transition and uninterrupted
development of the GSK Development Compounds. Anacor shall use commercially
reasonable efforts to cooperate with GSK to provide GSK, at no cost to GSK,
with any other Information relating to such GSK Development Compound as may be
developed or identified by Anacor during the Term, to the extent that GSK has a
license under this Agreement to such Information.


 


4.5                             Third
Party Licenses.


 


4.5.1                     Anacor
shall be solely responsible for satisfying all costs and payments of any kind
(including all upfront fees, annual payments, milestone payments and royalty
payments) for any license(s) required from a Third Party for (i) use of any
Collaboration Compounds in connection with a Project, or (ii) the use of Anacor’s
proprietary boron chemistry platform technology as contemplated hereunder for
the discovery, research, manufacture or use of Collaboration Compounds or
Targets in a Project, in either case prior to the expiration of the Research
Collaboration Term with respect to such Project. In addition, Anacor shall be
solely responsible for satisfying all costs and payments of any kind (including
all upfront fees, annual payments, milestone payments and royalty payments) for
any license from a Third Party to Anacor that exists as of the Effective Date. Notwithstanding
anything to the contrary herein, this Section 4.5.1 does not apply to any
license from a Third Party to GSK that exists as of the Effective Date, and GSK
(and not Anacor) shall be solely responsible for satisfying all costs and
payments of any kind thereunder.


 


4.5.2                     If
GSK determines that it needs to obtain one or more licenses from one or more
Third Parties (other than any license described in Section 4.5.1) to
manufacture or 


 






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COMMISSION.  CONFIDENTIAL TREATMENT HAS
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commercialize any
GSK Development Compound, GSK shall inform Anacor. Anacor shall have the first
right to obtain such license(s). In the event that Anacor obtains such a
license, any Patents and/or Know-How licensed to Anacor under such license
shall be deemed to be Anacor Collaboration IP, and all costs and expenses
incurred by Anacor under such license(s) shall be [***] by Anacor and GSK. In
the event that Anacor decides not to pursue such license(s), GSK may do so. To
the extent a license obtained by GSK pursuant to this Section 4.5.2 is a
Necessary License, GSK shall be entitled to the credit set forth in Section
6.5.3(c).


 


4.5.3                     Except
as set forth in Sections 4.5.1 and 4.5.2, GSK shall be [***] responsible for
obtaining any licenses from Third Parties that GSK determines, in its sole
discretion, are required in order to lawfully research, develop, manufacture,
and commercialize GSK Development Compounds and Products in the Field in the
Territory. GSK shall be [***] responsible for any costs associated with such
licenses, subject to the royalty adjustment set forth in Section 6.5.3(c), if
applicable.


 


ARTICLE 5


 


POST-RESEARCH COLLABORATION
ACTIVITIES 


 


5.1                             GSK
Development and Commercialization. Following exercise of an Option with
respect to GSK Development Compounds for a Project, GSK, either itself and/or
by and through its Affiliates, Sublicensees or contractors, shall be
responsible for all development, manufacturing, marketing, advertising,
promotional, launch and sales activities in connection with the marketing of
such GSK Development Compounds and Products containing same. Except as set
forth in Sections 4.4 and 4.5, all costs associated with such activities shall
be borne solely by GSK.


 


5.2                             GSK
Diligence. Following GSK’s exercise of an Option with respect to GSK
Development Compounds for a Project, GSK shall use Diligent Efforts to develop
and commercialize such GSK Development Compounds.


 


5.3                             Anacor
Development Compounds.


 


5.3.1                     Option Expiration. In the event that the PoC Option Deadline
Period expires without GSK having exercised its PoC Option with respect to a
particular PoC Compound, Anacor shall have the exclusive right, at its sole
discretion, to develop such PoC Compound in the Territory in the Field as an
Anacor Development Compound and a Product, 


 






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alone or with any
Third Party or through any Sublicensee. GSK will have no further obligations to
make milestone payments to Anacor for such Anacor Development Compound. Upon a
written request from Anacor, GSK hereby grants to Anacor, conditional upon
Anacor’s request within [***] following the expiration of such PoC Option
Deadline Period, a non-exclusive license, with the right to grant sublicenses,
under the GSK IP for the use, manufacture, sale or commercialization of such
Anacor Development Compound, to further develop and commercialize such Anacor
Development Compound as a Product in the Territory in the Field. Solely in the
event that Anacor requests and receives such license from GSK, Anacor shall owe
to GSK the applicable milestone and royalty payments set forth in Article 6 for
such Anacor Development Compound. In the event that Anacor does not request,
within [***] following the expiration of such PoC Option Deadline Period, a
non-exclusive, sublicensable license under the GSK IP as provided herein, GSK
shall be free to grant to any Third Party rights under the GSK IP for the use,
manufacture, sale or commercialization of such Anacor Development Compound.


 


5.3.2                     GSK Development Termination. After exercising an Option with
respect to a particular set of GSK Development Compounds (i.e., a particular
Collaboration Compound, Back-Up Compounds related thereto, and in the case of
Project 1, Follow-On Compounds related thereto), GSK may, at its sole
discretion and without any penalty or liability, terminate its development or
commercialization of the GSK Development Compounds for a Project upon written
notice to Anacor. In such event: (a) all licenses in and to the Anacor IP for
such GSK Development Compounds granted to GSK by Anacor shall be immediately
terminated, and (b) GSK (i) hereby grants, conditional upon the occurrence of
such termination, an exclusive license, with the right to grant sublicenses, to
Anacor under GSK IP for the use, manufacture, sale or commercialization of such
Anacor Development Compound to further develop and commercialize such Anacor
Development Compound as a Product in the Territory in the Field, (ii) shall
transfer to Anacor, as soon as reasonably practicable after such termination,
all Information and material in its possession and Control with respect to such
Anacor Development Compound, and (iii) shall assign to Anacor any regulatory
filings related to such Anacor Development Compound. In the event of such
termination, Anacor shall owe to GSK the applicable milestone and royalty
payments set forth in Article 6 for such Anacor Development Compound.


 


5.4                             Safety
Data Exchange. The Parties shall negotiate in good faith a safety data
exchange agreement with respect to a Product promptly following the earlier of
(a) exercise of an Option with respect to such Product, or (b) notice from a
Party not then conducting clinical studies of plans to initiate a clinical
study with respect to such Product. The safety data 


 






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exchange agreement
shall facilitate management of safety for all Products covered under such
agreement in accordance with standards which are no less stringent than in the
ICH guidelines such that the Parties would be able to comply with all
regulatory and legal requirements regarding the management of safety data by
providing for the exchange of relevant information in appropriate format within
applicable timeframes.


 


ARTICLE 6



MILESTONES AND ROYALTIES; PAYMENTS


 


6.1                             Upfront
Payment. GSK shall pay to Anacor a non-refundable, non-creditable payment
of Twelve Million Dollars ($12,000,000) within [***] after receipt of an
invoice from Anacor.


 


6.2                             Purchase of Stock. Upon Anacor’s
request, GSK shall purchase a total of Ten Million Dollars ($10,000,000) of
Anacor equity in the first round of financing by Anacor after the Effective
Date that is either (a) an initial public offering or (b) a private equity
offering led by an independent investor and in which GSK’s investment is less
than fifty (50%) of the total funding in the financing with rights (other than
board representation and visitor rights) that are pari passu with the investors
in such financing. Such purchase and issuance of Anacor equity shall be subject
to the terms of a mutually agreed separate stock purchase agreement and other
agreements and related documents executed pursuant thereto. In the event of a
registered public offering, including an initial public offering, GSK agrees
that any shares purchased pursuant to the equity commitment hereunder that are
not part of the initial public offering shall be subject to the same lock-up
and underwriter offering limitations required of the other stockholders of
Anacor. In the event of a private offering, GSK agrees that any shares
purchased pursuant to the equity commitment hereunder shall be parri passu with
other preferred shareholders purchasing in the same offering as GSK.


 


6.3                             Development
Milestones Payable by GSK to Anacor.


 


6.3.1                     Project
1. GSK shall make the non-refundable, non-creditable milestone payments to
Anacor that are set forth below in either Section 6.3.1(a) or Section 6.3.1(b),
as applicable, upon occurrence of the corresponding milestone event with
respect to a Collaboration Compound resulting from Project 1. Such payments
shall be subject to the additional terms and conditions set forth in Sections
6.3.1(c), 6.3.5, 6.8, 6.10 and 6.12.


 






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(a)               Candidate Selection
Option. The following milestones shall apply in the event that GSK
exercises the Candidate Selection Option with respect to a Collaboration
Compound resulting from Project 1.


 


	
  Event

  	
   

  	
  Payment

  	
   

  
	
  [***]

  	
   

  	
   

  	
   

  



 


(b)               PoC Option. The
following milestones shall apply in the event that GSK exercises the PoC Option
with respect to a Collaboration Compound resulting from Project 1.


	
  Event

  	
   

  	
  Payment

  	
   

  
	
  [***]

  	
   

  	
   

  	
   

  



 


(c)               Clarification. [***]


 


6.3.2                     Project
2. GSK shall make the non-refundable, non-creditable milestone payments to
Anacor that are set forth below in either Section 6.3.2(a) or Section 6.3.2(b)
as applicable, upon occurrence of the corresponding milestone event with
respect to a Collaboration Compound resulting from Project 2. Such payments
shall be subject to the additional terms and conditions set forth in Sections
6.3.2(c), 6.3.2(d), 6.3.5, 6.8, 6.10 and 6.12.


 


(a)               Candidate Selection
Option. The following milestones shall apply in the event that GSK
exercises the Candidate Selection Option with respect to a Collaboration
Compound resulting from a TPP Subprogram in Project 2. For clarity, the Candidate
Selection Option milestone payments shall only apply pursuant to Section 14.5.


 






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  Event

  	
   

  	
  Payment

  	
   

  
	
  [***]

  	
   

  	
   

  	
   

  



 


(b)               PoC Option. The
following milestones shall apply in the event that GSK exercises the PoC Option
with respect to a Collaboration Compound resulting from a TPP Subprogram in
Project 2.


 


	
  Event

  	
   

  	
  Payment

  	
   

  
	
  [***]

  	
   

  	
   

  	
   

  



 


(c)               Clarification. [***]


 


(d)               Milestone Payment
Reduction. The milestones in Section 6.3.2(a) and 6.3.2(b) above assume
that the Collaboration Compound, GSK Development Compound or Product that
incorporates a GSK Development Compound has a [***].


 


	
  Target Product Profile

  	
   

  	
  Milestone Reduction

  	
   

  
	
  [***]

  	
   

  	
   

  	
   

  



 


6.3.3                     Project
3. GSK shall make the non-refundable, non-creditable milestone payments to
Anacor that are set forth below in either Section 6.3.3(a) or Section 6.3.3(b),
as applicable, upon the occurrence of the corresponding milestone event with
respect to a Collaboration Compound resulting from Project 3. Such payments
shall be subject to the additional terms and conditions set forth in Sections
6.3.3(c), 6.3.3(d), 6.3.5, 6.8, 6.10 and 6.12.


 


(a)               Candidate Selection
Option. The following milestones shall apply in the event that GSK
exercises the Candidate Selection Option with respect to a Collaboration
Compound resulting from Project 3. For clarity, the Candidate Selection Option 


 






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milestone payments shall
only apply pursuant to Section 14.5.


 


	
  Event

  	
   

  	
  Payment

  	
   

  
	
  [***]

  	
   

  	
   

  	
   

  



 


(b)               PoC Option. The
following milestones shall apply in the event that GSK exercises the PoC Option
with respect to a Collaboration Compound resulting from Project 3.


 


	
  Event

  	
   

  	
  Payment

  	
   

  
	
  [***]

  	
   

  	
   

  	
   

  



 


(c)               Clarification. [***]


 


(d)               Milestone Payment Reduction. Notwithstanding anything to the
contrary in Section 6.3.3(c) above, [***].


 


6.3.4                     Project
4. GSK shall make the non-refundable, non-creditable milestone payments to
Anacor that are set forth below in either Section 6.3.4(a) or Section 6.3.4(b),
as applicable, upon the occurrence of the corresponding milestone event with
respect to a Collaboration Compound resulting from Project 4. Such payments
shall be subject to the additional terms and conditions set forth in Sections
6.3.4(c) (if applicable), 6.3.4(d) (if applicable), 6.3.4(e) (if applicable),
6.3.5, 6.8, 6.10 and 6.12.


 


(a)               Candidate Selection
Option. The following milestones shall apply in the event that GSK
exercises the Candidate Selection Option with respect to a Collaboration
Compound resulting from Project 4. For clarity, the Candidate Selection Option
milestone payments shall only apply pursuant to Section 14.5.


 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 


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  Event

  	
   

  	
  Payment

  	
   

  
	
  [***]

  	
   

  	
   

  	
   

  



 


(b)               PoC Option. The
following milestones shall apply in the event that GSK exercises the PoC Option
with respect to a Collaboration Compound resulting from Project 4.


 


	
  Event

  	
   

  	
  Payment

  	
   

  
	
  [***]

  	
   

  	
   

  	
   

  



 


(c)               Clarification. [***]


 


(d)               Milestone Payment
Reduction. The milestones in Section 6.3.4(a) and 6.3.4(b) above assume
that the [***].


 


	
  Target Product Profile

  	
   

  	
  Milestone Reduction

  	
   

  
	
  [***]

  	
   

  	
   

  	
   

  



 


(e)               Anti-viral Target. In
the event that the Designated Target is an anti-viral target, the milestone
amounts set forth in this Section 6.3.4 shall be the same as the milestone
amounts that would have been applicable had the relevant Collaboration
Compound, GSK Development Compound or Product that incorporates a GSK
Development Compound been [***].


 


6.3.5                     Milestone
Event Definitions.


 


(a)               The phrase [***]
as used in this Article 6 means the date on which [***].


 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A
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COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 


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(b)               The phrase [***]
as used in this Article 6 means the date on which [***].


 


(c)               The phrase [***]
as used in this Article 6 means with respect to [***], the date on which GSK
sends written notice to Anacor that GSK is [***], in accordance with Section 4.2.1(a).


 


(d)               The phrase [***]
as used in this Article 6 means the date on which Anacor or its Affiliate or
Sublicensee or GSK or its Affiliate or Sublicensee, as applicable, receives
written notice from the [***] or its Affiliate or Sublicensee or by or on
behalf of GSK or its Affiliate or Sublicensee, as applicable, to commercialize
the [***] that incorporates a particular Anacor Development Compound or GSK
Development Compound, as applicable, in the Field in the [***].


 


(e)               The phrase [***]
as used in this Article 6 means the date by which GSK or its Affiliate or
Sublicensee has received (i) written notice from [***].


 


(f)                 The phrase [***]
as used in this Article 6 means the date on which GSK receives written notice
from [***].


 


6.4                               Commercialization
Milestones. GSK shall pay to Anacor, [***].


 


	
  Event

  	
   

  	
  Payment

  	
   

  
	
  [***]

  	
   

  	
   

  	
   

  



 


6.5                               Royalties.


 


6.5.1                     Project
1. Subject to Section 6.5.3, 6.9, 6.10 and 6.12, with respect to Products
containing GSK Development Compounds arising solely out of Project 1, GSK shall
pay to Anacor [***] in the Territory at the royalty rates as set forth in the
table below. The applicable royalty rates for a particular Product shall
depending on whether GSK elected the GSK Development Compound contained in such
Product by exercising a Candidate Selection Option or a PoC Option.


 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 


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  Annual Net Sales in the

  Territory

  	
   

  	
  Royalty Rate – [***]

  Option (1)

  	
   

  	
  Royalty Rate –

  [***] Option

  	
   

  
	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


6.5.2                     Projects
2, 3 and 4. Subject to Section 6.5.3, 6.9, 6.10 and 6.12, with respect to
Products containing GSK Development Compounds arising out of Project 2, Project
3 or Project 4, GSK shall pay to Anacor [***] in the Territory at the royalty
rates as set forth in the table below. The applicable royalty rates for a
particular Product shall depend on whether GSK elected the GSK Development
Compound contained in such Product by exercising a Candidate Selection Option
or a PoC Option. 


 


	
  Annual Net Sales in the

  Territory

  	
   

  	
  Royalty Rate – [***]

  Option (1)

  	
   

  	
  Royalty Rate –

  [***] Option

  	
   

  
	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


6.5.3                     Royalty
Adjustments.


 


(a)               Know-How Royalty. If,
on a country-by-country and Product-by-Product basis, there is no Valid Claim
of an issued Patent Controlled by Anacor or Controlled jointly by GSK and
Anacor that in either case covers [***] the GSK Development Compound included
in such Product, either at the time of First Commercial Sale or anytime
thereafter, then GSK shall have no obligation to pay to royalties on Net Sales
of such Product in such country at the royalty rates set forth in Sections
6.5.1 or 6.5.2, but rather, subject to Section 6.5.3(b), GSK shall pay to
Anacor a know-how royalty on Net Sales of such Product in such country at a
royalty rate [***] as set forth in the tables in Sections 6.5.1
and 6.5.2 above.


 


(b)               Royalty Reduction
for Competition. If at any such time that a Generic Product having the same
or substantially the same active ingredient as a Product incorporating the GSK
Development Compound enters the market in a given country, and such Generic
Product(s) accounts for [***] of Product and Generic Product in the given
country, the royalty rates set forth in Sections 6.5.1, 6.5.2, or 6.5.3, as
applicable, shall be [***].


 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A
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COMMISSION.  CONFIDENTIAL TREATMENT HAS
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(c)               Necessary Licenses.
If a Patent or Patents of a Third Party should exist in any country during
the Term covering the composition of matter or manufacture of a GSK Development
Compound, or the use of a GSK Development Compound in the Field, and GSK
determines in good faith and in its sole discretion that it would be
impractical or impossible for GSK or any Affiliate manufacture or commercialize
such GSK Development Compound without obtaining a royalty bearing license from
such Third Party under such Patent or Patents in a particular country (a “Necessary License”), then GSK shall be entitled to a credit,
against the any royalty payments due to Anacor upon sales of a Product
containing such GSK Development Compound in such country, of an amount [***] to a Third Party under such Necessary License
based upon the sales of such Product in such country, such credit not to [***]
that would otherwise be due to Anacor on Net Sales of such Product.


 


6.5.4                     Royalty
Term. The royalties due under Section 6.5.1 or 6.5.2 with respect to a
Product, even if reduced as provided in Section 6.5.3(b) or (c), shall commence
upon the First Commercial Sale of such Product in a particular country in the
Territory and will expire on a country-by-country basis upon the expiration in
such country of the last to expire Valid Claim of an issued Patent Controlled
by Anacor or Controlled jointly by GSK and Anacor [***] the GSK Development
Compound included in such Product. The royalties due under Section 6.5.3(a)
with respect to a Product, even if reduced as provided in Section 6.5.3(b) or
(c), shall commence on a country-by-country basis upon the expiration in such
country of the last to expire Valid Claim of an issued Patent Controlled by
Anacor or Controlled jointly by GSK and Anacor [***] the GSK Development
Compound included in such Product or, if no such Valid Claim exists at the time
of First Commercial Sale in a particular country in the Territory, upon the
First Commercial Sale of such Product in such country, and such royalties due
under Section 6.5.3(a) with respect to such Product shall continue thereafter;
provided, however, that in no event GSK shall have any obligation to pay a
royalty to Anacor as provided in Section 6.5.3(a) during the period that is [***]
in such country. The period during which GSK is paying any royalty to Anacor as
provided in this Section 6.5 is referred to in this Agreement as the “Royalty Term”).


 


6.6                               Payments
by Anacor – No Exercise of Option by GSK. With respect to any Collaboration
Compound that becomes an Anacor Development Compound upon GSK’s failure to
exercise its Option with respect thereto and that Anacor elects to develop
and/or commercialize pursuant to license granted by GSK (at Anacor’s request)
under the GSK IP pursuant to Section 5.3.1, 
Anacor shall pay the following milestone and royalty payments set forth
in Sections 6.6.1 and 6.6.2 as consideration for such license.


 


6.6.1                     Development
Milestones. Anacor shall make each of the following 


 






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COMMISSION.  CONFIDENTIAL TREATMENT HAS
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one-time,
non-refundable, non-creditable milestone payments to GSK that are set forth
below following the first achievement of the corresponding milestone event with
respect to the first (1st) Product that incorporates an Anacor
Development Compound. Such payments shall be subject to the terms and
conditions set forth in Section 6.3.5, 6.8, 6.10 and 6.12.


 


	
  Event

  	
   

  	
  Payment

  	
   

  
	
  [***]

  	
   

  	
   

  	
   

  



 


6.6.2                     Royalties.
For the period specified below and subject to Section 6.3.5, 6.6.3,  6.9, 6.10 and 6.12, Anacor shall pay to GSK [***]
incorporating an Anacor Development Compound, at the following royalty rates:


 


(a)               [***] if the
Anacor Development Compound incorporated in such Product arose out of Project
1; and


 


(b)               [***] for all
other Products.


 


Royalties due
under this Section 6.6.2 with respect to a Product incorporating an Anacor
Development Compound shall commence upon [***] of such Product in a particular
country in the Territory and will expire on a country-by-country basis upon the
expiration in such country of the last to expire Valid Claim of an issued
Patent Controlled by GSK or Controlled jointly by GSK and Anacor that [***] the
Anacor Development Compound included in such Product.


 


6.6.3                     Royalty
Adjustment. If, in a particular country, there is no Valid Claim of an
issued Patent Controlled by GSK or Controlled jointly by GSK and Anacor that [***]
the Anacor Development Compound included in the Product either at the time of
First Commercial Sale or anytime thereafter, then the royalty rate to be paid
by Anacor to GSK on Net Sales of such Product in such country shall be [***];
provided, however, that in no event Anacor shall have any obligation to pay a
royalty to GSK as provided in this Section 6.6.3 during the period that is more
than [***] in such country.


 


6.7                               Payments
by Anacor – Post-Option Termination by GSK. With respect to any GSK
Development Compound that becomes an Anacor Development Compound upon GSK’s
termination of its rights with respect to such GSK Development Compound
following Option 


 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A
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COMMISSION.  CONFIDENTIAL TREATMENT HAS
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exercise and that
Anacor elects to develop and/or commercialize under the license granted by GSK
(at Anacor’s request) pursuant to Section 5.3.2, Anacor shall owe the payments
set forth in Sections 6.7.1 and 6.7.2 as consideration for such license.


 


6.7.1                     Development
Milestones.


 


(a)               If GSK
terminated development of a GSK Development Compound that is now such Anacor
Development Compound [***] with respect thereto, [***].


 


(b)               If GSK
terminated development of a GSK Development Compound that is now such Anacor
Development Compound [***] with respect thereto but [***] with respect thereto,
Anacor shall make each of the following one-time, non-refundable,
non-creditable milestone payments to GSK after first achievement of the
corresponding milestone event with respect to such first (1st)
Product that incorporates such Anacor Development Compound. Such payments shall
be subject to the terms and conditions set forth in Section 6.3.5, 6.8, 6.10
and 6.12.


 


	
  Event

  	
   

  	
  Payment

  	
   

  
	
  [***]

  	
   

  	
   

  	
   

  



 


(c)               If GSK
terminated development of a GSK Development Compound that is now such Anacor
Development Compound [***] with respect thereto, Anacor shall make each of the
following one-time, non-refundable, non-creditable milestone payments to GSK
after first achievement of the corresponding milestone event with respect to
the first (1st) Product that incorporates such Anacor Development
Compound. Such payments shall be subject to the terms and conditions set forth
in Section 6.3.5, 6.8, 6.10 and 6.12.


 


	
  Event

  	
   

  	
  Payment

  	
   

  
	
  [***]

  	
   

  	
   

  	
   

  



 


6.7.2                     Royalties.
For the period specified below and subject to Section 6.3.5, 


 






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COMMISSION.  CONFIDENTIAL TREATMENT HAS
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6.7.3,  6.9, 6.10 and 6.12, Anacor shall pay to GSK a [***]
incorporating any such Anacor Development Compound, at the following royalty
rates:


 


(a)               [***] if GSK
terminated development of the GSK Development Compound that is now such Anacor
Development Compound [***] with respect thereto;


 


(b)               [***] if GSK
terminated development of the GSK Development Compound that is now such Anacor
Development Compound [***] with respect thereto but [***] with respect thereto;
and


 


(c)               [***] if GSK terminated development of the GSK
Development Compound that is now such Anacor Development Compound [***] with
respect thereto.


 


Royalties due
under this Section 6.7.2 with respect to a Product incorporating an Anacor
Development Compound shall commence upon [***] in a particular country in the
Territory and will expire on a country-by-country basis upon the expiration in
such country of the last to expire Valid Claim of an issued Patent Controlled
by GSK or Controlled jointly by GSK and Anacor that [***] the Anacor
Development Compound included in such Product.


 


6.7.3                     Royalty
Adjustment. If, in a particular country, there is no Valid Claim of an
issued Patent Controlled by GSK or Controlled jointly by GSK and Anacor that [***]
of the Anacor Development Compound included in the Product either at the time
of First Commercial Sale or anytime thereafter, then the royalty rate to be
paid by Anacor to GSK on Net Sales of such Product in such country shall be
reduced as follows; provided, however , that in no event GSK shall have any
obligation to pay a royalty to Anacor as provided in this Section 6.7.3 during
the period that is [***] in such country:


 


(a)               [***] if GSK
terminated development of a GSK Development Compound that is now such Anacor
Development Compound [***] with respect thereto;


 


(b)               [***] if GSK
terminated development of such Anacor Development Compound [***] with respect
thereto but [***] with respect thereto;


 


(c)               [***] if GSK
terminated development of such Anacor Development Compound [***] with respect
thereto.


 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION
OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.  CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
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6.8                               Reports
and Payment of Milestones. Anacor shall notify GSK in writing promptly, but
in no event later than [***], after each achievement of (a) the [***] milestone
set out in Section 6.3 that triggers a milestone payment as set forth in
Section 6.3 (to the extent achieved by Anacor or its Affiliate or Sublicensee),
and (b) each milestone event set forth in Sections 6.6 and 6.7. GSK shall
notify Anacor in writing promptly, but in no event later than [***], after the
achievement of all other milestones in Section 6.3. GSK shall pay the appropriate
milestone payments due for [***] or [***] as set forth in Section 6.3 within [***]
after it notifies Anacor that it has exercised the applicable Option, as
provided in Section 4.2, and GSK shall pay all other milestone payments due
within [***] after receipt of an invoice therefore from
Anacor following the achievement of the corresponding milestone event (or [***]
in the case of the milestone described in Section 6.8(a)). Anacor shall pay the
appropriate milestone payment as set forth in Sections 6.6 and 6.7 within [***]
after receipt of an invoice therefor from GSK following the achievement of the
corresponding milestone event.


 


6.9                               Reports;
Royalty Payments. Until the expiration of a Party’s royalty obligations
under this Article 6, such Party agrees to make written reports to the other
Party within [***] after the end of each Calendar Quarter covering all sales of
Products in the Territory by such Party, its Affiliates and Sublicensees for
which invoices were sent during such Calendar Quarter, each such written report
in reasonable detail as available to such Party stating for the period in
question:  (a) the total Net Sales for
each Product (including an itemization of the deductions applied to such gross
sales to derive such Net Sales); and (b) a calculation of the amount of royalty
payment due on such Net Sales pursuant to Article 6. The information contained
in each report under this Section 6.9 shall be considered Confidential
Information of the Party providing the report. Concurrent with the delivery of
each such report, the Party delivering such report shall make the royalty
payment due the other Party under Article 6 for the Calendar Quarter covered by
such report. In the case of transfers or sales of any Product between the
royalty-paying Party and an Affiliate or Sublicensee of such Party, a royalty
shall be payable only with respect to the sale of such Product to an
independent Third Party not an Affiliate or sublicensee of the seller.


 


6.10                        Methods
of Payments. All payments due from one Party (the “Payor”)
to the other Party (the “Payee”) under
this Agreement shall be paid in Dollars by wire transfer to a bank in the
United States designated in writing by Anacor.


 


6.11                        Accounting.
Payor agrees to keep full, clear and accurate records for a maximum period
of [***] after the relevant payment is owed pursuant to this Agreement, setting
forth the sales and other disposition of Product sold or otherwise disposed of
in sufficient detail to enable 


 






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royalties and
compensation payable to the Payee hereunder to be determined. Payor further
agrees, upon not less than [***] prior written notice, to permit the books and
records relating to such [***] period to be examined by an independent
accounting firm selected by Payee and reasonably acceptable to Payor for the
purpose of verifying reports provided by Payor under Section 6.9. Such audit
shall not be performed more frequently than once per calendar year and shall be
conducted under appropriate confidentiality provisions, for the sole purpose of
verifying the accuracy and completeness of all financial, accounting and
numerical information and calculations provided under this Agreement. Such
examination is to be made at the expense of Payee, except in the event that the
results of the audit reveal an underpayment of royalties, milestones, or other
payments to Payee under this Agreement of [***] for more
over the period being audited, in which case reasonable audit fees for such
examination shall be paid by Payor. When calculating Net Sales, the amount of
such sales in foreign currencies shall be converted into Dollars using the
standard methodologies employed by Payor for consolidation purposes. Payor
shall provide reasonable documentation of the calculation and reconciliation of
the conversion figures on a country-by-country basis as part of its report of
Net Sales for the period covered under the report.


 


6.12                        Taxes.
If a law or regulation of any country of the Territory requires withholding
of taxes of any type, levies or other charges with respect to any amounts
payable hereunder to Payee, Payor shall promptly pay such tax, levy, or charge
for and on behalf of Payee to the proper governmental authority, and shall
furnish Payee with documentation of such payment. Payor shall have the right to
deduct any such tax, levy or charge actually paid from payment due Payee or be
promptly reimbursed by Payee if no further payments are due Payee. Payor agrees
to assist Payee in claiming exemption from such deductions or withholdings
under double taxation or similar agreement or treaty from time to time in force
and in minimizing the amount required to be so withheld or deducted. The
recipient of any transfer under this Agreement of Patents, Information,
Collaboration Compounds, or Products, as the case may be, shall be solely
responsible for any sales, use, value added, excise or other taxes applicable
to such transfer.


 


6.13                        Late
Payments. Any amount owed by Payor to Payee under this Agreement that is
not paid within the applicable time period set forth herein shall accrue
interest at the rate of two percent (2%) above the then-applicable prime
commercial lending rate of Citibank, N.A., San Francisco, California, or, if
lower, the highest rate permitted under applicable law.


 






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COMMISSION.  CONFIDENTIAL TREATMENT HAS
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ARTICLE 7



EXCLUSIVITY


 


7.1                               Anacor
Exclusivity.


 


7.1.1                     GSK Development Compounds. Except pursuant to this
Agreement, during the Term, Anacor shall not, either alone or with or for any
Third Party, conduct any research, development, manufacturing, or
commercialization activities with respect to any GSK Development Compound.


 


7.1.2                     Collaboration Compounds. Except pursuant to this Agreement,
during the [***] after the Effective Date, Anacor shall not,
either alone or with or for any Third Party, research, optimize, develop, or
commercialize (a) any Collaboration Compound in such Project that is not an
Anacor Development Compound or any Product that incorporates such a
Collaboration Compound, or (b) any compound directed against a Target for such
Project against which a Collaboration Compound that is not an Anacor
Development Compound is directed. For clarity, this Section 7.1.2 shall not be
construed as prohibiting Anacor, either alone or with or for any Third Party,
from researching, developing or commercializing an Anacor Development Compound
in the Field in the Territory.


 


7.1.3                     Exceptions. Notwithstanding the foregoing in this Section
7.1, Anacor shall have the right to perform the following activities, either
alone or with or for a Third Party:


 


(a)               Research,
develop, manufacture, or commercialize compounds directed [***]. GSK hereby
grants to Anacor, a non-exclusive license, with the right to grant sublicenses,
under the GSK IP solely for the use, manufacture, sale or commercialization of
such [***] product, to further develop and commercialize such [***] product in
the Territory. For clarity, as used in this Section 7.1.3(a), the term [***].


 


(b)               Research,
develop, manufacture, or commercialize compounds (other than GSK Development
Compounds) directed against [***], including AN2690 and AN2718 (and any of their respective metabolites and
prodrugs, or any acid forms, base forms, esters, salts, stereoisomers,
racemates, tautomers and polymorphs of any of the foregoing);


 


(c)               Conduct
chemistry research against any target that, at the time Anacor initiates
research on such target, is not a Target; and


 






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(d)               Continue
research, and develop, manufacture, and commercialize compounds (other than GSK
Development Compounds) directed against any target referenced in Section
7.1.3(c), and Anacor may grant a Third Party a license to such compounds for
any purpose, including indications in the treatment of human disease, provided
that Anacor does not initiate or conduct such research using any of GSK’s
Confidential Information or any Information generated pursuant to this
Agreement.


 


7.2                               GSK
Exclusivity.


 


7.2.1                     Collaboration Compounds. Subject to Section 7.2.2, during [***]
the Effective Date, GSK shall not, either alone or with or for any Third Party,
research, optimize, develop, or commercialize (a) any Collaboration Compound
from Project 2 that is not a GSK Development Compound or any product that
incorporates such a Collaboration Compound, or (b) [***].


 


7.2.2                     Exceptions.


 


(a)               Section
7.2.1(b) shall not apply with respect to any compounds that are independently
developed by GSK, where “independently developed” means that GSK has
in-licensed from a Third Party or developed such compound without the use of
any Confidential Information of Anacor or using any Information developed under
this Agreement.


 


(b)               Notwithstanding
the foregoing in this Section 7.2, GSK shall have the right to conduct
non-clinical research, either alone or with or for a Third Party, with respect
to any compound described in Section 7.2.1(a) or 7.2.1(b) following the third
(3rd) anniversary of GSK’s exercise of the PoC Option with respect
to a GSK Development Compound arising out of Project 2, but only so long as GSK
continues to use Diligent Efforts to develop and commercialize such GSK
Development Compound as described in Section 5.2.


 


7.2.3                     GSK Activities. For clarity, except as expressly stated in
this Section 7.2, GSK may, either alone or with or for any Third Party,
research, optimize, develop and/or commercialize any compound directed against
the Targets.


 






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COMMISSION.  CONFIDENTIAL TREATMENT HAS
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ARTICLE 8



OWNERSHIP OF INTELLECTUAL PROPERTY RIGHTS


 


8.1                               Ownership.


 


8.1.1                     Solely-Owned Intellectual Property. Anacor shall retain all
of its rights, title and interest in and to the Anacor IP, and GSK shall retain
all of its rights, title and interest in and to the GSK IP, except to the
extent that any rights or licenses are expressly granted by one Party to the
other Party under this Agreement.


 


8.1.2                     Collaboration IP. GSK shall be the sole owner of any
Collaboration IP discovered, developed, invented or created solely by or on
behalf of GSK personnel, and GSK shall retain all of its rights, title and
interest thereto, except to the extent that any rights or licenses are
expressly granted thereunder by GSK to Anacor under this Agreement. Anacor
shall be the sole owner of any Collaboration IP discovered, developed, invented
or created solely by or on behalf of Anacor personnel, and Anacor shall retain
all of its rights, title and interest thereto, except to the extent that any
rights or licenses are expressly granted thereunder to GSK under this
Agreement. Any Collaboration IP that is discovered, developed, invented or
created jointly by or on behalf of GSK and Anacor shall be owned jointly by GSK
and Anacor, and all rights, title and interest thereto shall be jointly owned
by the Parties, except to the extent that any exclusive rights or licenses are
expressly granted to a Party under this Agreement. Except as expressly provided
in this Agreement, neither Party shall have any obligation to account to the
other for profits, or to obtain any consent of the other Party to license or
exploit patented jointly-owned subject matter, by reason of joint ownership
thereof, and each Party hereby waives any right it may have under the laws of
any jurisdiction to require any such consent or accounting.


 


8.2                               Prosecution
and Maintenance of Patents.


 


8.2.1                     Patent Filings. The Party responsible for Prosecution and
Maintenance of any Patents as set forth in Sections 8.2.2 and 8.2.3 below (the “Prosecuting Party”) shall use commercially reasonable
efforts to obtain a reasonable scope of protection for Collaboration Compounds,
using counsel of its own choice but reasonably acceptable to the other Party. Each
Party shall keep the other Party informed as to material developments with
respect to the Prosecution and Maintenance of such Patents, including by
providing copies of all office actions or any other substantive documents that
such Party receives from any patent office, including notice of all
interferences, reissues, re-examinations, oppositions or requests for patent
term extensions, and by providing the other Party the timely opportunity to
have reasonable input into the strategic aspects of such Prosecution and
Maintenance. In addition, Anacor will use commercially reasonable efforts to
obtain a reasonable scope of protection for Collaboration Compounds covered by
any claims of the Anacor Patents, using counsel of its own choice but
reasonably acceptable to GSK, and will consider and discuss in good faith
reasonable comments timely provided GSK. In light of the new prosecution rules
promulgated by the United States Patent and Trademark Office, effective
November 1, 2007, and the likelihood for future changes in US Patent System and
future changes to the European Patent Convention (EPC) (collectively, the “New Rules”) and rules of practice in effect at the Effective
Date (together with the New 


 


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Rules, the “Rules”) each Party will consult with the other Party prior
to the filing of any Patents on Collaboration IP. The Parties will come to an
agreement on filing strategy in view of the Rules (e.g., claim
limitations and continuation practice limitations mandated by the New Rules). In
addition, the Parties will discuss in good faith with each other the breadth of
any such Patent filings in countries outside of the United States. Should the
Parties fail to agree on any matter in this Section 8.2.1, such matter will be
presented to the JPS for resolution.


 


8.2.2                     Anacor Patents. In recognition that one or more of the
Anacor Patents is or may be licensed to one or more Third Parties, as described
in Section 8.6, during the Term Anacor shall use commercially reasonable
efforts to work in consultation with GSK to Prosecute and Maintain its Anacor
Patents in a manner that reasonably separates the compounds and related rights
licensed to such Third Parties from those Collaboration Compounds and related
rights licensed or to be licensed (pursuant to an Option) to GSK as
contemplated by this Agreement. Such consultation with GSK shall be done in a
manner allowing a reasonable opportunity by GSK and Anacor to provide input in
view of the Rules, and each Party agrees to give such input due consideration. Input
shall be provided and consideration undertaken and concluded in a timely manner
so as not to jeopardize the pendency of the application under review or
otherwise negatively affect or limit the rights of Anacor, GSK or any Third
Party licensee of Anacor IP. Should the Parties fail to agree on any matter in
this Section 8.2.2, such matter will be presented to the JPS for resolution.


 


8.2.3                     Collaboration Patents. The responsibility and strategy for
Prosecution and Maintenance of any Collaboration Patents shall be mutually
agreed by GSK and Anacor. The Parties shall cooperate to prepare and Prosecute
and Maintain patent applications included in the Collaboration Patents in a
manner that ensures a reasonable scope of protection for such subject matter and
preserves the rights of each collaborator in the Collaboration Patents. In the
event of any dispute regarding the Prosecution and Maintenance of any
Collaboration Patents and existing Third Party rights identified under Section
8.6, Anacor shall have the final say with respect to decisions made prior to
GSK’s exercise of its Option with respect to such Collaboration Patents or
after GSK’s termination of Development, and GSK shall have final say after such
exercise, with respect to those claims that cover any Collaboration Compound as
to which GSK exercises its Option; provided, however,
that neither Party can make a “final say” in any Prosecution or Maintenance
matter that decreases the number of continuation applications, divisional
applications or requests for continuing examination that the other Party (or
any Third Party) can Prosecute and Maintain within the Collaboration Patents. If
the decision of one Party would result in loss of the other Party’s right to
file a continuation application, a divisional application or a request for
continuing examination within in the Collaboration Patents, the matter will be
presented to the JPS for resolution.


 


8.2.4                     Target IP. Anacor shall use commercially reasonable efforts
to work in consultation with GSK to Prosecute and Maintain its Anacor Target
Patents, and GSK shall use commercially reasonable efforts to work in
consultation with Anacor to Prosecute and Maintain its GSK Target Patents;
provided, however, that neither Party shall be required to disclose any
confidential information that is not specific to the Research Collaboration. Input
shall be 


 


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provided and
consideration undertaken and concluded by the Parties in a timely manner so as
not to jeopardize the pendency of the application under review or otherwise
negatively affect or limit the rights of any Party hereto. Should the Parties
fail to agree on any matter in this Section 8.2.4, such matter will be
presented to the JPS for resolution.


 


8.2.5                     Prosecution Lapse. If, during the Term, the Party
responsible for prosecuting a Patent in the Anacor Patents or Collaboration IP
intends to allow such Patent to lapse or become abandoned without having first
filed a substitute, the Prosecuting Party shall, whenever practicable, notify
the other Party of such intention at least [***] prior to
the date upon which such Patent shall lapse or become abandoned, and such other
Party shall thereupon have the right, but not the obligation, to assume
responsibility for the Prosecution and Maintenance thereof at its own expense
with counsel of its own choice.


 


8.3                               Patent
Costs.


 


8.3.1                     Collaboration Patents. Each Party shall be responsible for
costs associated with the Prosecution and Maintenance of any Collaboration
Patents that it owns solely. Anacor and GSK shall share equally the Patent
Costs associated with the Prosecution and Maintenance of Patents in the jointly
owned Collaboration Patents, unless the Parties otherwise agree.


 


8.3.2                     Existing Anacor IP and GSK IP. Anacor shall be responsible
for one hundred percent (100%) of the Patent Costs incurred by Anacor prior to
and after the Effective Date in all countries in the Territory with respect to
any Anacor IP. GSK shall be responsible for one hundred percent (100%) of the
Patent Costs incurred by GSK prior to and after the Effective Date in all
countries in the Territory with respect to GSK IP.


 


8.3.3                     Patent Costs Following GSK’s Exercise of the Option. Notwithstanding
the foregoing, following GSK’s exercise of an Option, GSK, upon receipt of
invoice from Anacor, shall reimburse Anacor its reasonable and documented
Patent Costs associated with the Prosecution and Maintenance of all Anacor IP
over which Anacor has the responsibility for Prosecution and Maintenance and
which contain claims covering such Collaboration Compounds. Patent Costs
associated with the Prosecution and Maintenance of Patents licensed to Third
Parties shall be limited to [***]. All such reimbursements shall be limited to
those expenses incurred after the Effective Date. Anacor has the right to choose
outside counsel for Prosecution and Maintenance of Anacor Patents over which
Anacor has the responsibility for Prosecution and Maintenance; however, if GSK
is not satisfied with external counsel used by 


 






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Anacor after GSK
exercises its Option, GSK has the right to request that Anacor transfer
responsibility for Prosecution and Maintenance of such Anacor Patents to a
different external law firm that is reasonably acceptable to Anacor, which
request will not be unreasonably denied by Anacor. If Prosecution and
Maintenance of any Anacor Patent transferred to new outside counsel at GSK’s
request affects Anacor’s rights or those of a Third Party licensee of the
Anacor Patents, GSK will consult with Anacor before making any decision
relevant to the Prosecution and Maintenance of such Anacor Patent. Consultation
will be concluded in a timely manner so as not to adversely affect the rights
of any Party under the Anacor Patents. If GSK and Anacor are unable to agree on
Prosecution and Maintenance of such Anacor Patents, the matter will be decided
by the JPS. Requests by GSK that, in the judgment of the Anacor, will adversely
affect the existing Third Party rights identified under Section 8.6 will be
referred to the JPS for resolution.


 


8.4                               Defense
of Claims Brought by Third Parties.


 


8.4.1                     Collaboration Compounds. If a Third Party asserts that a
Patent or other right owned by it is infringed by the manufacture, use, sale or
importation of any Collaboration Compound as to which GSK has not exercised its
Option, or any Anacor Development Compound, Anacor shall have the primary right
but not the obligation to defend against any such assertions at its cost and
expense. In the event Anacor elects to defend against any such Third Party
claims, Anacor shall have the sole right to direct the defense of any such
Third Party claims and to elect to settle such claims. In the event that Anacor
elects not to defend against such Third Party claims within [***] of learning of same, GSK shall have the right,
but not the duty, to defend against such an action and thereafter shall have
the right to direct the defense of any such Third Party claim(s), including the
right to settle such claims, but only with the consent of Anacor, not to be
unreasonably withheld. In any event, the Parties shall reasonably assist one
another and cooperate in any such litigation at the other’s request without
expense to the requesting Party. Each Party may at its own expense and with its
own counsel join any defense brought by the other Party.


 


8.4.2                     GSK Development Compounds. If a Third Party asserts that a
Patent or other right owned by it is infringed by the manufacture, use, sale or
importation of any GSK Development Compound, GSK shall have the primary right
but not the obligation to defend against any such assertions at its cost and
expense. In the event GSK elects to defend against any such Third Party claims,
GSK shall have the sole right to direct the defense of any such Third Party
claims and to elect to settle such claims. In the event that GSK elects not to
defend 


 






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against such Third
Party claims within [***] of
learning of same, Anacor shall have the right, but not the duty, to defend
against such an action and thereafter shall have the sole right to direct the
defense of any such Third Party claim(s), including the right to settle such
claims. In any event, the Parties shall reasonably assist one another and
cooperate in any such litigation at the other’s request without expense to the
requesting Party. Each Party may at its own expense and with its own counsel
join any defense brought by the other Party.


 


8.5                               Enforcement
of Anacor or GSK Intellectual Property Rights.


 


8.5.1                     Duty to Notify of Competitive Infringement. If any Party
learns of an infringement, unauthorized use, misappropriation or threatened
infringement or other such activity by a Third Party with respect to any
Collaboration IP, Anacor IP or GSK IP by reason of the manufacture,
importation, use or sale of a product identical to or substantially similar to any
Collaboration Compound, within the Territory (“Competitive
Infringement”), such Party shall promptly notify the other Party and
shall provide such other Party with available evidence of such Competitive
Infringement.


 


8.5.2                     Prior to Exercise of Option. Prior to GSK’s exercise of its
Option, or after GSK’s termination of Development and commercialization, with
respect to the Collaboration Compounds that are the subject of any Competitive
Infringement, Anacor shall have the primary right, but not the obligation, to
institute, prosecute, and control any action or proceeding with respect thereto
by counsel of its own choice, and GSK shall have the right, at its own expense,
to be represented in that action by counsel of its own choice. If Anacor fails
to bring any such action or proceeding within a period of [***] after first
being notified of such Competitive Infringement, then GSK shall have the right,
but not the obligation, to bring and control any such action by counsel of its
own choice, and Anacor shall have the right to be represented in any such
action by counsel of its own choice at its own expense.


 


8.5.3                     Following Exercise of Option. Following GSK’s exercise of
its Option, and before GSK’s termination of Development and commercialization,
with respect to the Collaboration Compounds that are the subject of any
Competitive Infringement, GSK shall have the primary right, but not the
obligation, to institute, prosecute, and control any action or proceeding with
respect thereto by counsel of its own choice, and Anacor shall have the right,
at its own expense, to be represented in that action by counsel of its own
choice. If GSK fails to bring an action or proceeding within a period of [***]
after first being notified of such Competitive Infringement, Anacor shall have
the right to bring and control any such action by counsel of its own choice,
and GSK shall have the right to be represented in any such action by 


 






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counsel of its own
choice at its own expense.


 


8.5.4                     Share of Recoveries. If one Party brings any such action or
proceeding in accordance with this Section 8.5, the second Party agrees to be
joined as a party plaintiff where necessary and to give the first Party
reasonable assistance and authority to file and prosecute the suit. The costs
and expenses of the Party bringing suit under this Section 8.5 shall be borne
by such Party, and any damages or other monetary awards recovered shall be
shared as follows: (i) the amount of such recovery actually received by the
Party controlling such action shall first be applied to the out-of-pocket costs
of such action; and then (ii) any remaining proceeds shall be allocated between
the Parties (A) if such action related solely to GSK Development Compounds
(i.e., after exercise by GSK of its Option), allocated between the Parties such
that the Party bringing suit under this Section 8.5 retains [***] and the other Party retains [***] of such
amount, or (B) if such action related solely to products identical to or
substantially similar to Collaboration Compounds that are not GSK Development
Compounds, retained [***]. A settlement or consent judgment or other voluntary
final disposition of a suit under this Section 8.5 may be entered into
without the consent of the Party not bringing the suit; provided
that such settlement, consent judgment or other disposition does not
admit the invalidity or unenforceability of the relevant Patent in the Anacor
Patents, Anacor Target Patents, GSK Patents, GSK Target Patents, or
Collaboration IP, and provided further,
that any rights granted under the relevant Patent to continue the infringing
activity in such settlement, consent judgment or other disposition shall be
limited to those rights that the granting Party otherwise has the right to
grant.


 


8.5.5                     Other Infringement. Subject to Sections 8.5.1 through 8.5.4
above, with respect to the infringement of jointly owned Collaboration IP which
is not a Competitive Infringement, each Party may proceed in such manner as the
law permits. Each Party shall bear its own expenses, and any recovery obtained
by either Party may be retained by such Party unless otherwise agreed. In
addition, Anacor shall retain all rights to pursue an infringement of any
Patent solely owned by Anacor that is other than a Competitive Infringement,
and GSK shall retain all rights to pursue an infringement of any Patent solely
owned by GSK that is other than a Competitive Infringement.


 


8.5.6                     35 USC 271(e)(2) Infringement. Notwithstanding anything to
the contrary in this Section 8.5, for infringement under 35 USC 271(e)(2) where
GSK has exercised its Option under Article 4 of this Agreement and where GSK is
the holder of the applicable NDA, and for so long as GSK maintains or retains
its exclusive license under such Option, GSK has the sole right to initiate legal
action to enforce all Anacor IP licensed to it pursuant to Section 4.3.2 


 






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against
infringement or misappropriation by Third Parties or defend any declaratory
judgment action relating thereto at its sole expense


 


8.5.7                     Regulatory Data Protection. To the extent required by law or
permitted by law, each Party will use commercially reasonable efforts to
promptly, accurately and completely list, with the applicable Regulatory
Authorities during the Term, all applicable Patents for any Product that such
Party intends to, or has begun to commercialize, and that have become the
subject of a marketing application submitted to FDA, such listings to include
all so called “Orange Book” listings required under the Hatch-Waxman Act and
all so called “Patent Register” listings as required in Canada. Prior to such
listings, the Parties will meet to evaluate and identify all applicable Patents.
Notwithstanding the preceding sentence, the Party holding the NDA for the
applicable Product will retain final decision making authority as to the
listing of all applicable Patents for such Product, regardless of which Party
owns such Patent.


 


8.6                               Other
Agreement(s). GSK’s rights under this Article 8 with respect to any Anacor
Patents or Collaboration Patents shall be subject to the rights that one or
more Third Parties may have, or the obligations that Anacor may have, in each
case to file, prosecute, maintain, and/or enforce such Patents under the
agreement(s) listed in Exhibit 8.6.


 


ARTICLE 9



CONFIDENTIALITY


 


9.1                               Confidentiality;
Exceptions. Except to the extent expressly authorized by this Agreement or
otherwise agreed in writing, the Parties agree that the receiving Party (the “Receiving Party”) shall keep confidential and shall not
publish or otherwise disclose or use for any purpose other than as provided for
in this Agreement any Information or other confidential and proprietary
information and materials, patentable or otherwise, in any form (written, oral,
photographic, electronic, magnetic, or otherwise) which is disclosed to it by
the other Party (the “Disclosing Party”)
or otherwise received or accessed by a Receiving Party in the course of
performing its obligations or exercising its rights under this Agreement
including trade secrets, know-how, inventions or discoveries, proprietary
information, formulae, processes, techniques and information relating to a
Party’s past, present and future marketing, financial, and research and
development activities of any product or potential product or useful technology
of the Disclosing Party and the pricing thereof (collectively, “Confidential Information”), except to the extent that it can
be established by the Receiving Party that such Confidential Information:


 


9.1.1                     was
in the lawful knowledge and possession of the Receiving Party prior to the time
it was disclosed to, or learned by, the Receiving Party, or was otherwise
developed independently by the Receiving Party, as evidenced by written records
kept in the ordinary course of business, or other documentary proof of actual
use by the Receiving Party;


 


9.1.2                     was
generally available to the public or otherwise part of the public domain at the
time of its disclosure to the Receiving Party;


 


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9.1.3                     became
generally available to the public or otherwise part of the public domain after
its disclosure and other than through any act or omission of the Receiving
Party in breach of this Agreement; or


 


9.1.4                     was
disclosed to the Receiving Party, other than under an obligation of confidentiality,
by a Third Party who had no obligation to the Disclosing Party not to disclose
such information to others.


 


9.2                               Authorized
Disclosure. Except as expressly provided otherwise in this Agreement, a
Receiving Party may use and disclose Confidential Information of the Disclosing
Party as follows: (i) under appropriate confidentiality provisions similar
to those in this Agreement, in connection with the performance of its
obligations or exercise of rights granted or reserved in this Agreement (including
the rights to commercialize Products and to grant licenses and sublicenses
hereunder); or (ii) to the extent such disclosure is reasonably necessary
in filing or prosecuting patent, copyright and trademark applications,
prosecuting or defending litigation, complying with applicable governmental
regulations, obtaining regulatory approval, conducting pre-clinical activities
or clinical trials, marketing Products, or otherwise required by law; provided, however, that if a Receiving Party is required by
law or regulation to make any such disclosure of a Disclosing Party’s
Confidential Information it will, except where impracticable for necessary
disclosures, for example in the event of medical emergency, give reasonable
advance notice to the Disclosing Party of such disclosure requirement and,
except to the extent inappropriate in the case of patent applications, will use
its reasonable efforts to secure confidential treatment of such Confidential
Information required to be disclosed; or (iii) in communication with
investors, consultants, advisors or others on a need to know basis, in each
case under appropriate confidentiality provisions substantially equivalent to
those of this Agreement; or (iv) to the extent mutually agreed to in
writing by the Parties.


 


9.3                               Press
Release; Disclosure of Agreement. On or promptly after the Effective Date,
the Parties shall jointly issue a
public announcement of the execution of this Agreement in such form separately agreed upon between the Parties. Neither Party shall be
free to issue any press release or other public disclosure regarding the
Agreement or the Parties’ activities hereunder, or any results or data arising
hereunder, except with the other Party’s prior written consent, or except as
reasonably necessary to comply with all applicable national securities exchange
listing requirements or laws, rules or regulations. The Parties agree to
consult with each other reasonably and in good faith with respect to the text
and timing of any such press releases prior to the issuance thereof, and a
Party may not unreasonably withhold consent to such releases. Except to the
extent required by law or as otherwise permitted in accordance with this
Section 9.3, neither Party shall make any public announcements concerning this
Agreement or the subject matter hereof without the prior written consent of the
other, which shall not be unreasonably withheld. The principles to be observed
by Anacor and GSK in any such permitted public disclosures with respect to this
Agreement shall be:  accuracy and
completeness, the requirements of confidentiality under this Article 9, and the
normal business practice in the pharmaceutical and biotechnology industries for
disclosures by companies comparable to Anacor and GSK. Notwithstanding the
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has already been
publicly disclosed other than through any act or omission of a Party in breach
of this Agreement, either Party may subsequently disclose the same information
to the public without the consent of the other Party. Each Party shall be
permitted to disclose the terms of this Agreement, in each case under
appropriate confidentiality provisions substantially equivalent to those of
this Agreement,  to any actual or
potential acquirers, merger partners, and professional advisors. Each Party
shall give the other Party a reasonable opportunity to review all filings with
the United States Securities and Exchange Commission describing the terms of this
Agreement prior to submission of such filings, and shall give due consideration
to any reasonable comments by the non-filing Party relating to such filing,
including the provisions of this Agreement for which confidential treatment
should be sought.


 


9.4                               Termination
of Prior Agreement. This Agreement supersedes the Confidential Disclosure
Agreement executed by Anacor and GSK dated [***] (including
any and all amendments thereto). All information exchanged between the Parties
under that Agreement shall be deemed Confidential Information hereunder and
shall be subject to the terms of this Article 9.


 


9.5                               Remedies.
Each Party shall be entitled to seek, in addition to any other right or
remedy it may have, at law or in equity, a temporary injunction, without the
posting of any bond or other security, enjoining or restraining the other Party
from any violation or threatened violation of this Article 9.


 


9.6                               Publications.
Except as provided in this Agreement, neither Party or its Affiliates shall
publish or publicly disclose the results of any of the research and/or
development activities conducted under this Agreement, without the prior
written consent of the other Party, except
that after the expiration of all Options, the foregoing shall not
apply to Anacor for results that relate to any Anacor Development Compounds, or
to GSK for results that relate directly to any GSK Development Compounds. The
Parties recognize that it may be useful or required to publish or publicly
disclose the results of development work on Products, and GSK (and its
Affiliates and Sublicensees) only shall be free to publish or publicly disclose
such results, subject to the prior review by Anacor for patentability and
protection of its Confidential Information. GSK shall provide to Anacor at GSK’s
earliest practical opportunity any proposed abstracts, manuscripts or summaries
of presentations which cover the results of clinical development of any
Product, for review and comment as to matters relating to its patents and
Confidential Information. Anacor shall respond in writing promptly and in no
event later than [***] after receipt of the proposed material, or within such
reasonably shorter period as is required (and promptly communicated by GSK to
Anacor) by the relevant publication deadline, with 


 






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comments on the
proposed material, which GSK will consider in good faith but have no obligation
to accept, or a specific statement of concern, based upon either the need to
seek patent protection. In the event of concern, GSK agrees not to submit such
publication or to make such presentation that contains such information until
Anacor is given a reasonable period of time (not to exceed [***]) to seek patent
protection for any material in such publication or presentation which it believes
is patentable or to resolve any other issues. This Section 9.6 shall cease to
apply with respect to any Product upon the First Commercial Sale of such
Product. Furthermore, with respect to any proposed abstracts, manuscripts or
summaries of presentations by investigators or other Third Parties, such
materials shall be subject to review under this Section 9.6 to the extent that
GSK or Anacor (as the case may be) has the right to do so.


 


9.7                               Clinical
Trial Register. GSK shall have the right to publish the results or
summaries of results of all clinical trials conducted by either Party with
respect to a Product or Combination Product incorporating a GSK Development
Compound or, to the extent required by law, Anacor Development Compound, on GSK’s
clinical trial register, provided that Anacor shall have the right to review
all such summaries relating to an Anacor Development Compound prior to
submission of such publication.


 


ARTICLE 10



REPRESENTATIONS AND WARRANTIES


 


10.1                        Representations
and Warranties of Both Parties. Each Party hereby represents, warrants, and
covenants to the other Party, as of the Effective Date, that:


 


10.1.1              such
Party is duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has full corporate power and
authority to enter into this Agreement and to carry out the provisions hereof;


 


10.1.2              such
Party has taken all necessary action on its part to authorize the execution and
delivery of this Agreement and the performance of its obligations hereunder;


 


10.1.3              this
Agreement has been duly executed and delivered on behalf of such Party, and
constitutes a legal, valid, binding obligation, enforceable against it in
accordance with the terms hereof;


 






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10.1.4              the
execution, delivery and performance of this Agreement by such Party does not
conflict with any agreement, instrument or understanding, oral or written, to
which it is a party or by which it is bound, nor violate any law or regulation
of any court, governmental body or administrative or other agency having
jurisdiction over such Party;


 


10.1.5              no
government authorization, consent, approval, license, exemption of or filing or
registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, under any applicable
laws, rules or regulations currently in effect, is or will be necessary for, or
in connection with, the transaction contemplated by this Agreement or any other
agreement or instrument executed in connection herewith, or for the performance
by it of its obligations under this Agreement and such other agreements except
as may be required under the stock purchase agreement or to obtain HSR
clearance; and


 


10.1.6              it
has not employed (and, to the best of its knowledge without further duty of
inquiry, has not used a contractor or consultant that has employed) and in the
future will not employ (or, to the best of its knowledge without further duty
of inquiry, use any contractor or consultant that employs) any individual or
entity debarred by the FDA (or subject to a similar sanction of EMEA), or, to
the best of its knowledge without further duty of inquiry, any individual who
or entity which is the subject of an FDA debarment investigation or proceeding
(or similar proceeding of EMEA), in the conduct of the pre-clinical activities
or clinical studies of Collaboration Compounds and its activities under the
Research Collaboration.


 


10.2                        Representations
and Warranties of Anacor. Anacor hereby represents, warrants, and covenants
to GSK, as of the Effective Date, that:


 


10.2.1              To
the best of its knowledge, Anacor is the owner of, or has a license to, the
Anacor  IP;


 


10.2.2              To
the best of its knowledge, Anacor has the right to grant all rights and
licenses it purports to grant to GSK with respect to the Anacor IP under this
Agreement;


 


10.2.3              Anacor
has no present knowledge that (a) any of the Anacor Patents or Anacor Target
Patents are invalid or unenforceable; or (b) any settled, pending or threatened
claim or lawsuit or legal proceeding of a Third Party against Anacor alleging
that the Anacor IP infringes or misappropriates in part or in whole the
intellectual property or intellectual property rights of such Third Party;


 


10.2.4              Subject
to Section 7.1.3, Anacor has not granted as of the Effective Date, and
during the Term shall not grant, any right or license to any Third Party
relating to any of the Anacor IP that would conflict or interfere with any of
the rights or licenses granted to GSK hereunder; and


 


10.2.5              To
the best of its knowledge, Anacor has disclosed to GSK all material data and
Information, all material correspondence to/from any Regulatory Authority
regardless of whether such data and Information would have a positive, neutral
or negative impact on the 


 


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potential
commercial, scientific or strategic value or attractiveness of the
Collaboration Compounds in existence as of the Effective Date.


 


10.3                        Mutual
Covenants.  Each Party hereby
covenants to the other Party that:


 


10.3.1              All
employees of such Party or its Affiliates and working under this Agreement
shall be under the obligation to assign all right, title and interest in and to
their inventions and discoveries, whether or not patentable, if any, to such Party
as the sole owner thereof;


 


10.3.2              Such Party shall
not employ (or, to the best of its knowledge without further duty of inquiry,
shall not use any contractor or consultant that employs) any individual or
entity debarred by the FDA (or subject to a similar sanction of EMEA), or, to
the best of its knowledge without further duty of inquiry, any individual who
or entity which is the subject of an FDA debarment investigation or proceeding
(or similar proceeding of EMEA), in the conduct of its activities under any
Project;


 


10.3.3              Such
Party shall perform its activities pursuant to this Agreement in compliance
with good laboratory and clinical practices and cGMP, in each case as
applicable under the laws and regulations of the country and the state and local
government wherein such activities are conducted, and with respect to the care,
handling and use in research and development activities hereunder of any
non-human animals by or on behalf of such Party, shall at all times comply (and
shall ensure compliance by any of its subcontractors) with all applicable
federal, state and local laws, regulations and ordinances, and also with the
most current best practices in the industry for the proper care, handling and
use of animals in pharmaceutical research and development activities, subject
to the other Party’s reasonable right of inspection.


 


10.4                        Disclaimer.
Except as otherwise expressly set forth in this Agreement, neither Party
makes any representation or extends any warranty of any kind either express or
implied, including any warranty that any Patents are valid or enforceable or
that their exercise does not infringe any patent rights of Third Parties. Without limiting the generality of the
foregoing, each Party disclaims any warranties with regards to:  (a) the success of any study or test
commenced under this Agreement, (b) the safety or usefulness for any purpose of
the technology or materials, including any Collaboration Compounds, it provides
or discovers under this Agreement; and/or (c) the validity, enforceability, or
non-infringement of any intellectual property rights or technology it provides
or licenses to the other Party under this Agreement.


 


ARTICLE 11



INDEMNIFICATION; INSURANCE


 


11.1                        Indemnification
by GSK. GSK shall indemnify, defend and hold harmless Anacor, and its
Affiliates, and its or their respective directors, officers, employees and
agents, from and against any and all liabilities, damages, losses, costs and
expenses including, but not 


 


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limited to, the
reasonable fees of attorneys and other professionals (collectively, “Losses”), arising out of or resulting from any and all Third
Party  suits, claims, actions, proceedings or
demands (“Claims”) based upon:


 


11.1.1              the
negligence, recklessness or wrongful intentional acts or omissions of GSK
and/or its Affiliates and its or their respective directors, officers,
employees and agents, in connection with GSK’s performance of its obligations
or exercise of its rights under this Agreement;


 


11.1.2              any
breach of any representation or warranty or express covenant made by GSK under
Article 10 or any other provision under this Agreement; or


 


11.1.3              the
Development that is actually conducted by and/or on behalf of GSK (excluding
any Development carried out by and/or on behalf of Anacor hereunder), the
handling and storage by and/or on behalf of GSK of any chemical agents or other
compounds for the purpose of conducting Development by or on behalf of GSK, and
the manufacture, marketing, commercialization and sale by GSK, its Affiliate or
Sublicensees of any GSK Development Compound or Product;


 


except, in
each case above, to the extent such Claim arose out of or resulted from or is
attributable to the negligence, recklessness or wrongful intentional acts or
omissions of Anacor and/or its
Affiliates, or their respective directors, officers, employees or agents.


 


11.2                        Indemnification
by Anacor. Anacor shall indemnify, defend and hold harmless GSK and its
Affiliates, and its or their respective directors, officers, employees and
agents, from and against any and all Losses, arising out of or resulting from
any and all Third Party  Claims  based upon:


 


11.2.1              the
negligence, recklessness or wrongful intentional acts or omissions of Anacor
and/or its Affiliates and/or its or their respective directors, officers,
employees and agents, in connection with Anacor’s performance of its
obligations or exercise of its rights under this Agreement;


 


11.2.2              any
breach of any representation or warranty or express covenant made by Anacor
under Article 10 or any other provision under this Agreement; or


 


11.2.3              the
research and/or Development actually conducted by or on behalf of Anacor
(excluding any Development carried out by GSK), or the storage, handling,
manufacture, marketing, commercialization and sale of any Anacor Development
Compounds or any Product resulting therefrom by Anacor, its Affiliates, agents
or Sublicensees;


 


except, in
each case above, to the extent such Claim arose out of or resulted from or is
attributable to the negligence, recklessness or wrongful intentional acts or
omissions of GSK and/or its Affiliate, or their respective directors, officers,
employees and agents.


 


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11.3                        Procedure.
In the event that any person (an “Indemnitee”)
entitled to indemnification under Section 11.1 or Section 11.2 is seeking such
indemnification, such Indemnitee shall (i) inform, in writing, the indemnifying
Party of the claim as soon as reasonably practicable after such Indemnitee
receives notice of such claim, (ii) permit the indemnifying Party to assume
direction and control of the defense of the claim (including the sole right to
settle it at the sole discretion of the indemnifying Party, taking into
consideration in good faith any reasonable concerns or objections raised by the
Indemnitee; provided that such settlement does not
impose any obligation on, or otherwise adversely affect, the Indemnitee or
other Party), (iii) cooperate as reasonably requested (at the expense of the
indemnifying Party) in the defense of the claim, and (iv) undertake all
reasonable steps to mitigate any loss, damage or expense with respect to the
claim(s).


 


11.4                        Insurance.


 


11.4.1              Anacor’s Insurance Obligations. Anacor shall maintain, at its cost, with effect from prior to the date of first
administration of any Collaboration Compound (including all Products and
any product based thereon) for testing in
humans hereunder and during the Term thereafter, adequate insurance against
liability and other risks associated with its activities contemplated by this
Agreement, including its clinical trials and its indemnification obligations
herein, in such amounts and on such terms as are customary for prudent
practices in the pharmaceutical industry for the activities to be conducted by
it under this Agreement. Anacor shall
furnish to GSK evidence of such insurance, upon request.


 


11.4.2              GSK’s Insurance Obligations. GSK hereby represents and warrants to Anacor
that it is self-insured against liability and other risks associated with its
activities and obligations under this Agreement in such amounts and on such
terms as are customary for prudent practices for large pharmaceutical companies
in the pharmaceutical industry for the activities to be conducted by it under
this Agreement. GSK shall furnish to Anacor evidence of such self-insurance, upon request.


 


11.5                        LIMITATION OF LIABILITY. EXCEPT FOR A BREACH OF ARTICLE 9 OR FOR CLAIMS OF A THIRD PARTY
WHICH ARE SUBJECT TO INDEMNIFICATION UNDER THIS ARTICLE 11 OR AS OTHERWISE
EXPRESSLY STATED IN THIS AGREEMENT, NEITHER ANACOR NOR GSK, NOR ANY OF THEIR
AFFILIATES OR SUBLICENSEES WILL BE LIABLE TO THE OTHER PARTY TO THIS AGREEMENT,
ITS AFFILIATES OR ANY OF THEIR SUBLICENSEES FOR ANY INDIRECT, INCIDENTAL,
CONSEQUENTIAL, SPECIAL, RELIANCE OR PUNITIVE DAMAGES OR LOST OR IMPUTED PROFITS
OR ROYALTIES, LOST DATA OR COST OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES,
WHETHER LIABILITY IS ASSERTED IN CONTRACT, TORT (INCLUDING NEGLIGENCE AND
STRICT PRODUCT LIABILITY), INDEMNITY OR CONTRIBUTION, AND IRRESPECTIVE OF
WHETHER THAT PARTY OR ANY REPRESENTATIVE OF THAT PARTY HAS BEEN ADVISED OF, OR
OTHERWISE MIGHT HAVE ANTICIPATED THE POSSIBILITY OF, ANY SUCH LOSS OR DAMAGE.


 


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ARTICLE 12



TERM AND TERMINATION


 


12.1                        Term;
Expiration. This Agreement shall become effective as of the Effective Date
and, unless earlier terminated pursuant to the other provisions of this Article
12, shall expire as follows:


 


12.1.1              On
a Product-by-Product and country-by-country basis, on the date of the
expiration of all payment obligations under this Agreement with respect to such
Product in such country; or


 


12.1.2              In
its entirety upon the expiration of all payment obligations under this
Agreement with respect to the last Product in all countries in the Territory.


 


12.1.3              The
period from the Effective Date until the date of expiration of this Agreement
in its entirety, or as the case may be, until the date of the expiration of
this Agreement in part with respect to a given Product, may be referred to
herein as the “Term.”


 


12.2                        Termination
for Cause.


 


12.2.1              Termination for Material Breach. Either Party (the “Non-breaching Party”) may, without prejudice to any other
remedies available to it at law or in equity, terminate this Agreement, on a
Project-by-Project basis during the Research Collaboration Term, or in its
entirety, as may be appropriate to protect the interest of the Non-breaching
Party arising from such alleged breach, in the event the other Party (the “Breaching Party”) shall have materially breached or
defaulted in the performance of any of its material obligations hereunder (but
excluding any diligence failure by Anacor) either with respect to a particular
Project or the Agreement as a whole, and such default shall have continued for [***]
after written notice thereof was provided to the Breaching Party by the
Non-breaching Party, such notice describing with particularity and in detail
the alleged material breach.


 


12.2.2              Disagreement. If the Parties reasonably and in good faith
disagree as to whether there has been a material breach, the Party which seeks
to dispute that there has been a material breach may contest the allegation in
accordance with Section 14.1. Notwithstanding the above sentence, the cure
period for any allegation made in good faith as to a material breach under this
Agreement will run from the date that written notice was first provided to the 


 






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PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 


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Breaching Party by
the Non-breaching Party. Any such termination of the Agreement under this
Section 12.2 shall become effective at the end of such [***] period, unless the
Breaching Party has cured any such breach or default prior to the expiration of
such [***] period. The right of either Party to terminate this Agreement, or a
portion of this Agreement, as provided in this Section 12.2 shall not be
affected in any way by such Party’s waiver or failure to take action with
respect to any previous default.


 


12.2.3              Termination by GSK due to Anacor Diligence Failure Event. For
clarity, GSK’s rights with respect to a material breach by Anacor with respect
to its diligence obligations hereunder are exclusively as set forth in Section
2.4.2.


 


12.3                        GSK
Unilateral Termination Rights. GSK shall have the right, at its sole discretion
and without any penalty or liability, exercisable at any time during the Term,
to terminate this Agreement for any reason or no reason at all, (a) in its
entirety upon [***] written notice to Anacor, or (b) with respect to a Project,
immediately upon written notice to Anacor, in each case (a) and (b) subject to
the obligations set forth in Section 12.5.2.


 


12.4                        Termination
for Insolvency.


 


12.4.1              Either
Party may terminate this Agreement, if, at any time, the other Party shall file
in any court or agency pursuant to any statute or regulation of any state or
country, a petition in bankruptcy or insolvency or for reorganization or for an
arrangement or for the appointment of a receiver or trustee of the Party or of
substantially all of its assets, or if the other Party proposes a written
agreement of composition or extension of substantially all of its debts, or if
the other Party shall be served with an involuntary petition against it, filed
in any insolvency proceeding, and such petition shall not be dismissed within [***]
after the filing thereof, or if the other Party shall propose or be a party to
any dissolution or liquidation, or if the other Party shall make an assignment
of substantially all of its assets for the benefit of creditors.


 


12.4.2              All
rights and licenses granted under or pursuant to any section of this Agreement
are and shall otherwise be deemed to be for purposes of Section 365(n) of Title
11, United States Code (the “Bankruptcy Code”)
licenses of rights to “intellectual property” as defined in Section 101(56) of
the Bankruptcy Code. The Parties shall retain and may fully exercise all of
their respective rights and elections under the Bankruptcy Code. Upon the
bankruptcy of any Party, the non-bankrupt Party shall further be entitled to a
complete duplicate of, or complete access to, any such intellectual property,
and such, if not already in its possession, shall be promptly delivered to the
non-bankrupt Party, unless the bankrupt Party 


 






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COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 


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elects to
continue, and continues, to perform all of its obligations under this
Agreement.


 


12.5                        Effect
of Termination or Expiration.


 


12.5.1              Upon Expiration. Following the expiration of the Term
pursuant to Section 12.1, the following terms shall apply:


 


(a)                                  Subject
to the terms and conditions of this Agreement, following expiration of the Term
with respect to a Product incorporating a GSK Development Compound in a country
pursuant to Section 12.1.1, GSK shall have an exclusive, fully-paid and
royalty-free right and license, with the right to grant sublicenses, under the
Anacor IP, solely to continue to make, have made, use, sell, offer to sell and
import such Product in the Field in such country, for so long as it continues
to do so.


 


(b)                                  Subject
to the terms and conditions of this Agreement, following expiration of the Term
with respect to a Product incorporating an Anacor Development Compound in a
country pursuant to Section 12.1.1, Anacor shall have an exclusive, fully-paid
and royalty-free right and license, with the right to grant sublicenses, under
the GSK IP, solely to continue to make, have made, use, sell, offer to sell and
import such Product in the Field in such country, for so long as it continues
to do so.


 


(c)                                  Subject
to the terms and conditions of this Agreement, following expiration of the Term
with respect to this Agreement in its entirety pursuant to Section 12.1.2, GSK
shall have an exclusive, fully-paid and royalty-free right and license, with
the right to grant sublicenses, under the Anacor IP, solely to continue to
make, have made, use, sell, offer to sell and import Products containing GSK
Development Compounds in the Field in the Territory, for so long as it
continues to do so.


 


(d)                                  Subject
to the terms and conditions of this Agreement, following expiration of the Term
with respect to this Agreement in its entirety pursuant to Section 12.1.2,
Anacor shall have an exclusive, fully-paid and royalty-free, right and license,
with the right to grant sublicenses, under the GSK IP, solely as necessary to
continue to make, have made, use, sell, offer to sell, and import Products
containing Anacor Development Compounds, for so long as it continues to do so.


 


12.5.2              Upon Unilateral Termination by GSK.


 


(a)                                  In
the event of a unilateral termination of this Agreement in its entirety or any
Project by GSK pursuant to Section 12.3, the following terms shall apply:


 


(i)                                    Notwithstanding
anything contained herein to the contrary, all licenses granted to GSK with
respect to GSK Development Compounds from a terminated Project(s), if any, for
which GSK has previously exercised its Option as of the effective date of such
termination shall terminate;


 


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(ii)                                All
unexercised Options with respect to such Project(s) as of the date that Anacor
receives such notice from GSK shall be cancelled and of no force and effect;


 


(iii)                            If
the Parties have discovered one or more Collaboration Compounds (other than GSK
Development Compounds) under the Research Collaboration with activity against a
Target that is the subject of the terminated Project (or in the case of
termination of the entire Agreement, any Project), such Collaboration Compounds
shall be deemed to be Anacor Development Compounds, and the terms of Section
5.3.1 shall apply with respect to such Anacor Development Compounds;


 


(iv)                               With
respect to a given GSK Development Compound (or Product that incorporates a GSK
Development Compound), (A) such GSK Development Compound shall be deemed to be
an Anacor Development Compound; and (B) the terms and conditions of Section
5.3.2 shall apply with respect to such Anacor Development Compound.


 


(b)                                  All
of Anacor’s exclusivity obligations under Section 7.1 shall immediately
terminate and no longer be of any force or effect with respect to the
Project(s) being terminated and the Target(s) and Collaboration Compounds
relating to such terminated Project(s).


 


12.5.3              Upon Termination by GSK for Cause.


 


(a)                                  In
the event of a termination of this Agreement in its entirety by GSK pursuant to
Section 12.2.1 before the end of the Research Collaboration Term, the
Research Collaboration Term shall terminate.


 


(b)                                  In
the event that GSK terminates a Project or this Agreement in its entirety
pursuant to Section 12.2.1:


 


(i)                                    All
Options with respect to the terminated Projects (or in the case of termination
of the entire Agreement, all Options) that are unexercised as of the effective
date of termination shall be cancelled and of no force and effect; and


 


(ii)                                If
the Parties have discovered one or more Collaboration Compounds under the Research
Collaboration with activity against a Target that is the subject of the
terminated Project (or in the case of termination of the entire Agreement, any
Project), GSK shall have a perpetual exclusive license, with the right to grant
sublicenses, under Anacor’s interest in the Anacor IP to make, have made, use,
sell, offer for sale and import such Collaboration Compounds as GSK Development
Compounds and Products derived therefrom in the Field in the Territory, subject
to the following royalty obligations:


 


(1)                                 if
termination occurred before the Collaboration 


 


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Compound became a
Candidate Selection Compound, GSK would pay Anacor a royalty on [***] at a rate
equal to [***] in the Territory; and


 


(2)                                 if
termination occurred after the Collaboration Compound became a Candidate
Selection Compound, GSK would pay Anacor a royalty on [***] at a rate equal to [***]
in the Territory.


 


(iii)                            All
of GSK’s exclusivity obligations under Section 7.2 shall immediately terminate
and no longer be of any force or effect with respect to the Project(s) being
terminated and the Target(s) and Collaboration Compounds relating to such
terminated Project(s).


 


12.5.4              Upon Termination by Anacor for Cause.


 


(i)                                    In
the event of a termination of this Agreement in its entirety by Anacor pursuant
to Section 12.2.1 before the end of the Research Collaboration Term, the
Research Collaboration Term shall terminate.


 


(b)                                  In
the event that Anacor terminates a Project or this Agreement pursuant to
Section 12.2.1:


 


(i)                                    All
Options with respect to the terminated Projects (or in the case of termination
of the entire Agreement, all Options) that are unexercised as of the effective
date of termination shall be cancelled and of no force and effect. For clarity,
GSK shall not be permitted to exercise any Options after receiving notice of
Anacor’s termination under Section 12.2.1, without Anacor’s prior written
consent, unless and until Anacor agrees, or it is determined pursuant to
Section 14.1, that GSK has cured the applicable breach in a timely manner.


 


(ii)                                If
the Parties have discovered one or more Collaboration Compounds under the
Research Collaboration with activity against a Target that is the subject of
such Project, Anacor shall have a perpetual exclusive license, with the right
to grant sublicenses, under the GSK IP to make, have made, use, sell, offer for
sale and import such Collaboration Compounds as Anacor Development Compounds
and Products derived therefrom in the Territory, subject to the following
royalty obligations:


 


(1)                                 If
termination occurred before the Collaboration 


 






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PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 


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Compound became a
Candidate Selection Compound, Anacor would pay GSK a royalty on [***] at a rate
equal to [***] in the Territory; and


 


(2)                                 If
termination occurred after the Collaboration Compound became a Candidate
Selection Compound, Anacor would pay GSK a royalty on [***] at a rate equal to [***]
in the Territory.


 


(iii)                            If,
on the effective date of termination, there are GSK Development Compounds with
activity against a Target that is the subject of such Project (or in the case
of termination of the entire Agreement, any Project), Anacor shall have a
perpetual exclusive license, with the right to grant sublicenses, under the GSK
IP to make, have made, use, sell, offer for sale and import such GSK
Development Compounds as Anacor Development Compounds and Products derived
therefrom in the Territory, subject to the following royalty obligations:


 


(1)                                 If
termination occurred before the GSK Development Compound became a Candidate
Selection Compound, Anacor would pay GSK a royalty on [***] at a rate equal to [***]
in the Territory; and


 


(2)                                 If
termination occurred after the GSK Development Compound became a Candidate
Selection Compound, Anacor would pay GSK a royalty on [***] at a rate equal to [***]
in the Territory.


 


(c)                                  In
the event of a termination of this Agreement in its entirety or with respect to
any Project(s), all of Anacor’s exclusivity obligations under Section 7.1 shall
immediately terminate and no longer be of any force or effect, with respect to
the Project(s) being terminated and the Target(s) and Collaboration Compounds
relating to such terminated Project(s).


 


12.5.5              Regulatory Filings. Upon termination of this Agreement by
Anacor pursuant to Section 12.2.1 or by GSK pursuant to Section 12.3:


 


(a)               If Prior to
First Commercial Sale of Product: At no cost to Anacor, GSK would
exclusively license or assign and deliver to Anacor all relevant documents,
safety databases, regulatory filings, and manufacturing information to the
extent pertaining specifically to any Products and which is necessary or
important for commercial use and exploitation in the Territory; and


 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 


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(b)               If Following
First Commercial Sale of a Product: At no cost to Anacor and with respect
to all affected countries, GSK would exclusively license or assign and deliver
to Anacor all relevant documents, safety data, regulatory filings,
manufacturing information, trademarks as well as any other information, data
and materials reasonably requested by Anacor, to the extent pertaining
specifically to any Products and which is necessary or important for commercial
use and exploitation in the Territory. In addition, at no cost to Anacor, GSK
shall provide for reasonable transitional support, such support to be not less
than nine (9) months in countries in which the Product is approved for
marketing.


 


12.6                        Accrued
Rights; Surviving Provisions of the Agreement.


 


(a)               Termination,
relinquishment or expiration of this Agreement for any reason shall be without
prejudice to any rights that shall have accrued to the benefit of any Party
prior to such termination, relinquishment or expiration including the payment
obligations under Article 6 hereof and any and all damages arising from
any breach hereunder. Such termination, relinquishment or expiration shall not
relieve any Party from obligations which are expressly indicated to survive
termination of this Agreement.


 


(b)               The provisions
of Articles 9 and 11 and Sections 2.7.2 (first sentence only), 2.7.4, 2.7.5,
2.7.6, 6.11, 8.1, 8.4, 8.6, 12.5, 12.6, 14.4, 14.8, 14.10, 14.11, 14.14, 14.15,
14.17, and 14.18, as well as any applicable definitions in Article 1, shall
survive the termination or expiration of this Agreement for any reason, in
accordance with their respective terms and conditions, and for the duration
stated, and where no duration is stated, shall survive indefinitely.


 


ARTICLE 13



REGULATORY


 


13.1                        Tolling of Payment Obligations. If the exercise by GSK of
any Option under Article 4 requires the making of filings under HSR, or under
any similar premerger notification provision in the European Union or any other
jurisdiction, then all rights and obligations related to the exercise of such
Option shall be tolled until the applicable waiting period has expired or been
terminated or until approval or clearance from the reviewing authority has been
received, and each Party agrees to cooperate at the request of the Party which
decides in its sole discretion to respond to any such request for information
to expedite review of such transaction.


 


ARTICLE 14



MISCELLANEOUS


 


14.1                        Dispute
Resolution. Unless otherwise set forth in this Agreement, in the event of a
dispute arising under this Agreement between the Parties, the either Party
shall have a right to refer such dispute to the respective Executive Officers,
and such Executive Officers shall attempt 


 


73

















 


in good faith to
resolve such dispute. If the Parties are unable resolve a given dispute
pursuant to this Section 14.1 within sixty (60) calendar days of referring such
dispute to the Executive Officers, either Party may have the given dispute
settled by binding arbitration pursuant to Section 14.2.


 


14.2                        Arbitration
Request. If a Party intends to begin an arbitration to resolve a dispute
arising under this Agreement, such Party shall provide written notice (the “Arbitration Request”) to the other Party of such intention
and the issues for resolution. From the date of the Arbitration Request and
until such time as the dispute has become finally settled, the running of the
time periods as to which Party must cure a breach of this Agreement becomes
suspended as to any breach that is the subject matter of the dispute.


 


14.2.1              Additional
Issues. Within twenty (20) Business Days after the receipt of the
Arbitration Request, the other Party may, by written notice, add additional
issues for resolution.


 


14.2.2              No
Arbitration of Patent/Confidentiality Issues. Unless otherwise agreed by
the Parties, disputes relating to Patents and non-disclosure, non-use and
maintenance of Confidential Information shall not be subject to arbitration,
and shall be submitted to a court of competent jurisdiction.


 


14.2.3              Arbitration
Procedure. The Arbitration shall be held in the continental United States
under the rules of the American Arbitration Association (“AAA”).
The arbitration shall be conducted by three (3) arbitrators who are
knowledgeable in the subject matter at issue in the dispute. One (1) arbitrator
will be selected by Anacor, one (1) arbitrator will be selected by GSK, and the
third arbitrator will be selected by mutual agreement of the two (2)
arbitrators selected by the Parties. The arbitrators may proceed to an award,
notwithstanding the failure of either Party to participate in the proceedings. The
arbitrators shall, within fifteen (15) calendar days after the conclusion of
the arbitration hearing, issue a written award and statement of decision
describing the essential findings and conclusions on which the award is based,
including the calculation of any damages awarded. The arbitrators shall be
authorized to award compensatory damages, but shall not be authorized to award
non-economic damages or punitive damages, or to reform, modify or materially
change this Agreement. The arbitrators also shall be authorized to grant any
temporary, preliminary or permanent equitable remedy or relief the arbitrators
deem just and equitable and within the scope of this Agreement, including an
injunction or order for specific performance. The award of the arbitrators
shall be the sole and exclusive remedy of the Parties (except for those
remedies set forth in this Agreement). Judgment on the award rendered by the
arbitrators may be enforced in any court having competent jurisdiction thereof,
subject only to revocation on grounds of fraud or clear bias on the part of the
arbitrators. Notwithstanding anything contained in this Section 14.2 to the
contrary, each Party shall have the right to institute judicial proceedings
against the other Party or anyone acting by, through or under such other Party,
in order to enforce the instituting Party’s rights hereunder through specific
performance, injunction or similar equitable relief.


 


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14.3                        Costs.
Each Party shall bear its own attorneys’ fees, costs, and disbursements
arising out of the arbitration, and shall pay an equal share of the fees and
costs of the arbitrators; provided, however, that the arbitrators shall be
authorized to determine whether a Party is the prevailing Party, and if so, to
award to that prevailing Party reimbursement for its reasonable attorneys’
fees, costs and disbursements (including, for example, expert witness fees and
expenses, photocopy charges and travel expenses).


 


14.4                        Governing
Law. This Agreement and any dispute arising from the performance or breach
hereof shall be governed by and construed and enforced in accordance with the
laws of the State of New York without reference to conflicts of laws
principles.


 


14.5                        Assignment.
Either Party may assign this Agreement to any Affiliate of such Party
without the prior written consent of the other Party; provided, that such Party
provides the other Party with written notice of such assignment and remains
fully liable for the performance of such Party’s obligations hereunder by such
Affiliate. Further, each Party may assign this Agreement without the prior
written consent of the other Party, to its successor in interest by way of
merger, acquisition, or sale of all or substantially all of its assets to which
this Agreement relates; provided, that such Party provides the other Party with
written notice of such assignment; provided further, that  if
such assignment involves a transaction in which Anacor: (a) merges or
consolidates with any other entity (other than a wholly-owned subsidiary of
Anacor); or (b) effects any other transaction or series of transactions, such
that the stockholders of Anacor immediately prior thereto, in the aggregate, no
longer own, directly or indirectly, beneficially or legally, at least fifty
percent (50%) of the outstanding voting securities or capital stock of the
surviving entity following the closing of such merger, consolidation, other
transaction or series of transactions (a “Change in Control Event”),
then GSK shall, notwithstanding anything in this Agreement to the contrary,
have the right to either:  [***]


 


14.5.1              Solely with respect to the [***];


 


14.5.2              In the event that [***]


 


14.5.3              In the event
that a Change in Control Event occurs [***];


 


14.5.4              In
the event that a Change in Control Event occurs [***]; and


 


14.5.5              In the event
that a Change in Control Event occurs [***].


 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 


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[***]  The terms and conditions of this Agreement
shall be binding upon and shall inure to the benefit of the  successors, heirs, administrators and
permitted assigns of the Parties.


 


14.6                        Performance
Warranty. Each Party hereby acknowledges and agrees that it shall be
responsible for the full and timely performance as and when due under, and
observance of all the covenants, terms, conditions and agreements set forth in
this, Agreement by its Affiliate(s) and Sublicensees.


 


14.7                        Force
Majeure. No Party shall be held liable or responsible to the other Parties
nor be deemed to be in default under, or in breach of any provision of, this
Agreement for failure or delay in fulfilling or performing any obligation of
this Agreement when such failure or delay is due to force
majeure, and without the fault or negligence of the Party so failing
or delaying. For purposes of this Agreement, force
majeure is defined as causes beyond the control of the Party,
including acts of God; acts, regulations, or laws of any government; war; civil
commotion; destruction of production facilities or materials by fire, flood,
earthquake, explosion or storm; labor disturbances; epidemic; and failure of
public utilities or common carriers. In such event Anacor or GSK, as the case
may be, shall immediately notify the other Parties of such inability and of the
period for which such inability is expected to continue. The Party giving such
notice shall thereupon be excused from such of its obligations under this
Agreement as it is thereby disabled from performing for so long as it is so
disabled for up to a maximum of ninety (90) calendar days, after which time
Anacor or GSK, the Party not affected by the force
majeure, may terminate this Agreement. To the extent possible, each
Party shall use reasonable efforts to minimize the duration of any force majeure.


 


14.8                        Notices.
Any notice or request required or permitted to be given under or in connection
with this Agreement shall be deemed to have been sufficiently given if in
writing and personally delivered or sent by certified mail (return receipt
requested), facsimile transmission (receipt verified), or overnight express
courier service (signature required), prepaid, to the Party for which such
notice is intended, at the address set forth for such Party below:


 


	
  If to Anacor, addressed to:

  	
   

  	
  Anacor Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  1060 East Meadow Circle

  
	
   

  	
   

  	
  Palo Alto, CA 94303-4230

  
	
   

  	
   

  	
  Attention: Chief Executive Officer

  
	
   

  	
   

  	
  Facsimile:   (650) 739-0139

  



 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 


76

















 


	
  with a copy
  to:

  	
   

  	
  Cooley Godward Kronish LLP

  
	
   

  	
   

  	
  Five Palo Alto Square

  
	
   

  	
   

  	
  3000 El Camino Real

  
	
   

  	
   

  	
  Palo Alto, CA 94306

  
	
   

  	
   

  	
  Attention: Glen Y. Sato, Esq.

  
	
   

  	
   

  	
  Facsimile:   (650) 849-7400

  
	
   

  	
   

  	
   

  
	
  If to GSK, addressed to:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SmithKline Beecham Corporation d/b/a GlaxoSmithKline

  
	
   

  	
   

  	
  One Franklin Plaza

  
	
   

  	
   

  	
  Philadelphia, PA 19101

  
	
   

  	
   

  	
  Attn:   Senior Vice President,
  Worldwide Business 

  Development

  
	
   

  	
   

  	
  Facsimile: (610) 270-5166

  
	
   

  	
   

  	
   

  
	
  with a copy
  to

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SmithKline Beecham Corporation d/b/a GlaxoSmithKline

  
	
   

  	
   

  	
  2301 Renaissance Boulevard

  
	
   

  	
   

  	
  King of Prussia, PA 19406-2772

  
	
   

  	
   

  	
  Vice President and Associate General Counsel, Business 

  
	
   

  	
   

  	
  Development Transactions Team

  
	
   

  	
   

  	
  Facsimile: (610) 787-7084

  



 


or to such other address for
such Party as it shall have specified by like notice to the other Parties,
provided that notices of a change of address shall be effective only upon
receipt thereof. If delivered personally or by facsimile transmission, the date
of delivery shall be deemed to be the date on which such notice or request was
given. If sent by overnight express courier service, the date of delivery shall
be deemed to be the next business day after such notice or request was deposited
with such service. If sent by certified mail, the date of delivery shall be
deemed to be the third business day after such notice or request was deposited
with the U.S. Postal Service.


 


14.9                        Export
Clause. Each party acknowledges that the laws and regulations of the United
States restrict the export and re-export of commodities and technical data of
United States origin. Each party agrees that it will not export or re-export
restricted commodities or the technical data of the other party in any form
without the appropriate United States and foreign government licenses.


 


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


 


77

















 


as a continuing
waiver of such condition or term or of another condition or term.


 


14.11                 Severability.
If any provision hereof should be held invalid, illegal or unenforceable in any
jurisdiction, the Parties shall negotiate in good faith a valid, legal and
enforceable substitute provision that most nearly reflects the original intent
of the Parties and all other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in order to carry
out the intentions of the Parties hereto as nearly as may be possible. Such
invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of such provision in any other jurisdiction.


 


14.12                 Entire
Agreement. This Agreement, together with the Schedules and Exhibits hereto,
set forth all the covenants, promises, agreements, warranties, representations,
conditions and understandings between the Parties hereto and supersede and
terminate all prior agreements and understanding between the Parties. There are
no covenants, promises, agreements, warranties, representations, conditions or
understandings, either oral or written, between the Parties other than as set
forth herein and therein. No subsequent alteration, amendment, change or
addition to this Agreement shall be binding upon the Parties hereto unless
reduced to writing and signed by the respective authorized officers of the
Parties.


 


14.13                 Independent
Contractors. Nothing herein shall be construed to create any relationship
of employer and employee, agent and principal, partnership or joint venture
between the Parties. Each Party is an independent contractor. Neither Party
shall assume, either directly or indirectly, any liability of or for the other
Party. Neither Party shall have the authority to bind or obligate the other
Party and neither Party shall represent that it has such authority.


 


14.14                 Headings;
Interpretation. Headings used herein are for convenience only and shall not
in any way affect the construction of or be taken into consideration in
interpreting this Agreement. Further, in this Agreement:  (a) the word “including” shall be deemed to
be followed by the phrase “without limitation” or like expression; (b) the
singular shall include the plural and vice versa; and (c) masculine, feminine
and neuter pronouns and expressions shall be interchangeable.


 


14.15                 Books
and Records. Any books and records to be maintained under this Agreement by
a Party or its Affiliates or Sublicensees shall be maintained in accordance
with U.S. generally accepted accounting principles in the case of Anacor, and
shall be maintained in accordance with International Financial Reporting
Standards (IFRS) in the case of GSK, consistently applied, except that the same
need not be audited.


 


14.16                 Further
Actions. Each Party shall execute, acknowledge and deliver such further
instruments, and do all such other acts, as may be necessary or appropriate in
order to carry out the expressly stated purposes and the clear intent of this
Agreement.


 


14.17                 Parties
in Interest. All of the terms and provisions of this Agreement shall be
binding upon, and shall inure to the benefit of and be enforceable by the
Parties hereto and their 


 


78

















 


respective
successors, heirs, administrators and permitted assigns.


 


14.18                 Construction of Agreement. The terms and provisions
of this Agreement represent the results of negotiations between the Parties and
their representatives, each of which has been represented by counsel of its own
choosing, and neither of which has acted under duress or compulsion, whether
legal, economic or otherwise. Accordingly, the terms and provisions of this
Agreement shall be interpreted and construed in accordance with their usual and
customary meanings, and each of the Parties hereto hereby waives the
application in connection with the interpretation and construction of this
Agreement of any rule of law to the effect that ambiguous or conflicting terms
or provisions contained in this Agreement shall be interpreted or construed
against the Party whose attorney prepared the executed draft or any earlier
draft of this Agreement.


 


14.19                 Supremacy.
In the event of any express conflict or inconsistency between this Agreement
and the Research Plan or of any Schedule or Exhibit hereto, the terms of this
Agreement shall control. The Parties understand and agree that the Schedules
and Exhibits hereto are not intended to be the final and complete embodiment of
any terms or provisions of this Agreement, and are to be updated from time to
time during the Term, as appropriate and in accordance with the provisions of
this Agreement.


 


14.20                 Counterparts.
This Agreement may be signed in counterparts, each and every one of which shall
be deemed an original, notwithstanding variations in format or file designation
which may result from the electronic transmission, storage and printing of
copies of this Agreement from separate computers or printers. Facsimile signatures
and signatures transmitted via PDF shall be treated as original signatures.


 


* - * - * - *


 


79

















 


IN WITNESS
WHEREOF, the Parties have caused this  Research and Development Collaboration,
Option and License Agreement to be executed by their duly authorized
representatives as of the Effective
Date.


 


 


	
  Anacor
  Pharmaceuticals, Inc.

  
	
   

  
	
  By:

  	
  /s/ David P. Perry

  	
   

  
	
   

  	
   

  
	
  Name:  David P. Perry

  
	
   

  	
   

  
	
  Title: President & Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  SmithKline
  Beecham Corporation

  
	
  d/b/a
  GlaxoSmithKline

  
	
   

  	
   

  
	
  By:

  	
  /s/ Donald F. Parman

  	
   

  
	
   

  	
   

  
	
  Name:  Donald F. Parman

  
	
   

  	
   

  
	
  Title: Vice President &
  Secretary

  



 

















 


EXHIBIT
1.31


 


[***]


 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 

















 


EXHIBIT
2.6.2(a)


 


TARGET
PRODUCT PROFILE(S), [***]


 


 


[***]


 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 

















 


EXHIBIT
2.6.2(b)


 


TARGET
PRODUCT PROFILE(S), [***]


 


 


[***]


 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION
OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.  CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTION.


 

















 


EXHIBIT
2.6.2(c)


 


TARGET
PRODUCT PROFILE(S), [***]


 


 


[***]


 






[***]  THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 

















 


EXHIBIT
8.6


 


License, Development, and Commercialization Agreement, executed on
February 2, 2007, between Anacor and Schering Corporation