Contracts For Non Lawyers Life Sciences August 5, 2008

VLP Virtual Law School
Contracts for Non-Lawyers 101a:
Contracts for Life Sciences Companies

August 5, 2008

Ellen Leznik
Founding Partner, Virtual Law Partners LLP
eleznik@virtuallawpartners.com
(650) 321-1393

Why Do We Need Contracts?

 Contracts are more than promises – they are
agreements between the parties that the law
will enforce.
 Well-drafted contracts clearly show the intent
and responsibilities of the parties and provide
a business plan, or a “road map”, for a
specific transaction or business relationship.

2 August 5, 2008 Virtual Law Partners LLP

Basic Contract Provisions
 Defined terms
 Parties
 Purpose
 Parties’ responsibilities
 Description of the product or service (including
quality and quantity)
 Rights to the resulting product
 Standards of performance
 Price and payment terms


Basic Contract Provisions (cont’d)
 Risk allocation
 Indemnification and insurance
 Limitation on liability
 Confidentiality
 Representations and warranties
 Term and termination
 Applicable law
 Dispute resolution
 Contract construction


Contract Templates

 Contain necessary contract provisions for a
specific type of transaction
 Tailored for your company’s specific needs
 Can significantly reduce drafting and
negotiation effort
 Should be reviewed and updated regularly


Proper Use of Templates
 Use each template only for the specific type
of transaction for which it was designed:
CDA vs. MTA
MCDA vs. CDA
MSA vs. Services Agreement
MSA vs. CRO Agreement
CTA vs. CRO Agreement
CTA for Phase I vs. CTA for Phase III


Proper Use of Templates (cont’d)

 Customize the template before sending it to
the other party:
- Party name and address
- Contract term
- Signature block
- Exhibits


Proper Use of Templates (cont’d)

 Whenever possible, start the contracting
process with your own company’s template:
- Negotiation advantage
- Potentially lower legal cost
- Exceptions: government
contracts (e.g., CRADAs)


Frequently Negotiated Contract
Provisions

 IP ownership rights
 Indemnification
 Limitation on liability
 Representations and warranties
 Dispute resolution


IP Ownership Rights:
Sample Provision; Alternative Language

4. Ownership

4.1 Definition of Invention. “Invention” means any discovery, invention,
technology, result, data (including without limitation Study Data),
specimen, material, information, concept or idea, whether or not
patentable, resulting from, conceived or reduced to practice as a result
of conducting the Study, or conceived or made using the Study Drug or
Sponsor Confidential Information, together with all intellectual property
rights therein. Inventions shall include, but not be limited to, processes,
compositions, methods, software, tangible research products, formulas
and techniques, patents, copyrights and know-how, and any
improvements related thereto.

4.2 Disclosure of Inventions. Site, the Principal Investigator and Sub-
Investigator (if applicable) shall promptly disclose in writing to Sponsor
all Inventions made including, without limitation, those Inventions made
by Site and/or the Principal Investigator and Sub-Investigators.


IP Ownership Rights (cont’d)
4.3 Sponsor Inventions.

(a) Site and Principal Investigator agree and acknowledge that
Sponsor shall own all right, title, and interest in and to all Inventions.

(b) Site and Site’s employees (including the Principal Investigator
and any Sub-Investigators), agents, sub-contractors, affiliates, and related
personnel (including, but not limited to postgraduate students, research
fellows, and other students) shall, upon Sponsor’s request and at
Sponsor’s expense, execute such documents and take such other actions
as Sponsor deems necessary for Sponsor to obtain such ownership and to
apply for, secure, and maintain patent or other proprietary protection of
such Inventions.

(c) All Inventions and any information with respect thereto shall be
Sponsor Confidential Information subject to the confidentiality, non-
disclosure, and non-use obligations set forth in Section _ hereto.


IP Ownership Rights (cont’d)
4.4 Assignment Obligations. Site shall ensure that each of its
employees and any sub-contractors performing any part of the Study,
including, without limitation, the Principal Investigator and any Sub-
Investigators, shall have a contractual obligation to assign all inventions
and intellectual property rights therein created, discovered, or generated by
such personnel as a result of performing the Study during the term of this
Agreement to Site so that Site can comply with its obligations under
Section 4.3, and Site shall promptly obtain such assignments.

4.5 No Transfer of Rights. It is agreed that neither Sponsor, the
Principal Investigator, the Sub-Investigator (if applicable) nor Site transfers
to the other by operation of this Agreement any patent right, copyright,
trademark right, or other proprietary right of any party, except as expressly
set forth herein or as necessary to perform its obligations under this
Agreement.


Indemnification:

6. Indemnification

6.1 By Sponsor.
(a) Sponsor agrees to indemnify, defend, and hold harmless the
Principal Investigator, any Sub-Investigator, Site, and Site’s trustees,
directors, officers, and employees, and those of Site’s sub-contractors
whose services were pre-approved by Sponsor under Section __
(collectively, the “Site Indemnitees”) from any and all liability, loss,
damage, cost, and expense, including reasonable attorneys’ fees and
costs (collectively, “Losses”) in connection with any claim, demand or
lawsuit for bodily injury or property damage brought by a third party
arising from (i) any Study Drug or placebo supplied by Sponsor that is
dispensed or administered in the course of the Study in strict
accordance with the Protocol and Sponsor’s instructions, (ii) the
negligence, recklessness, or willful misconduct of Sponsor or its officers,
employees, agents, and representatives, (ii) a breach of the Sponsor’s
obligations under this Agreement, or (iv) a breach of any of Sponsor’s
representations and warranties made in Section __.


Indemnification (cont’d)

(b) Notwithstanding the foregoing, Sponsor shall not be
obligated to indemnify the Site Indemnitees to the extent that
Losses arise from (i) negligence, recklessness, or willful
misconduct on the part of any of the Site Indemnitees, (ii) a breach of
the Site’s obligations under this Agreement, (iii) a breach of any of
Site’s representations and warranties made in Section __, (iv) any
injuries occurring at the Study Location (other than injuries caused
by or attributable to any Study Drug or placebo supplied by
Sponsor that is dispensed or administered in the course of the
Study in accordance with the Protocol), or (v) a failure of any of the
Site Indemnitees to comply with any applicable FDA regulation or
other federal, state, or local law or regulation.


6.2 By Site.

(a) Site agrees to indemnify, defend, and hold harmless
Sponsor and its officers, directors, employees, agents, sub-contractors and
representatives (the “Sponsor Indemnitees”) from any and all Losses they may
suffer in connection with any claim, demand or lawsuit for bodily injury or property
damage brought by a third party arising from (i) the negligence, recklessness, or
willful misconduct on the part of the Site or its trustees, directors, officers, agents,
employees, sub-contractors, or related personnel (including, without limitation, the
Principal Investigator, Sub-Investigator (if applicable), postgraduate students,
research fellows, and other students), (ii) a breach of the Site’s obligations under this
Agreement, (iii) a breach of any of Site’s representations and warranties made in
Section 9, (iv) any injuries occurring at the Study Location (other than injuries caused
by or attributable to any Study Drug or placebo supplied by Sponsor that is dispensed
or administered in the course of the Study in strict accordance with the Protocol and
Sponsor’s instructions), or (v) a failure of any of the Site Indemnitees to comply with
any applicable FDA regulation or other federal, state, or local law or regulation.


(b) Notwithstanding the foregoing, Site shall not be
obligated to indemnify the Sponsor Indemnitees to the
extent that such Losses arise from (i) any Study Drug or
placebo supplied by Sponsor that is dispensed or
administered in the course of the Study in strict accordance
with the Protocol and Sponsor’s instructions, (ii) negligence,
recklessness, or willful misconduct on the part of any of the
Sponsor Indemnitees, (iii) breach of Sponsor’s obligations
under this Agreement, or (iv) a breach of any of Sponsor’s
representations and warranties made in Section __.


6.3 General Conditions of Indemnification.

(a) Each party's agreement to indemnify, defend, and hold the other party
and its respective indemnitees harmless is conditioned upon the indemnified party:
(i) providing written notice to the indemnifying party of the relevant claim, demand, or
lawsuit within twenty (20) days after the indemnified party has knowledge of such
claim, demand, or lawsuit, provided that a delay in providing such notice will not
relieve the indemnifying party of its obligations under this Section 6 unless the
indemnifying party is materially prejudiced by such delay; (ii) permitting the
indemnifying party to assume full responsibility and authority to investigate, prepare
for, and defend against any such claim, demand or lawsuit (subject to Section 6.4);
and (iii) assisting the indemnifying party, at the indemnifying party's reasonable
expense, in the investigation of, preparation for and defense of any such claim,
demand or lawsuit.

(b) The indemnifying party will not, in defense of a third party claim,
demand or lawsuit, except with the written consent of the indemnified party (such
consent not to be unreasonably withheld or delayed), agree to the entry of any
judgment or enter into any settlement which (i) does not include, as an unconditional
term thereof, the giving by the claimant or plaintiff to the indemnified party of a
release from all liability in respect thereof, or (ii) imposes certain non-monetary
obligations on the indemnified party.

(c) If the indemnifying party assumes the defense of a third party
claim, demand or lawsuit, the indemnifying party will not be subject to any
liability for any settlement of such claim made by the indemnified party
without the indemnifying party’s consent (but such consent will not be
unreasonably withheld or delayed).

6.4Separate Defense of Claims.

(a) In the event that the parties cannot agree as to the application
of Sections 6.1 and 6.2 hereto to any particular Loss within thirty (30) days
after one party notifies the other party of such action, the parties may
conduct separate defenses of such Loss.

(b) Each party further reserves the right to claim indemnity from
the other in accordance with Sections 6.1 and 6.2 hereto upon resolution of
the underlying claim, notwithstanding the provisions of Section 6.3(a)(ii)
hereto.


Limitation on Liability:

9. Limitation of Liability.

9.1 NEITHER THE COMPANY NOR THE PROVIDER SHALL BE LIABLE
TO THE OTHER FOR ANY PUNITIVE, CONSEQUENTIAL, INCIDENTAL, INDIRECT,
EXEMPLARY OR SPECIAL DAMAGES (INCLUDING LOST REVENUES OR LOST
PROFITS), IN CONNECTION WITH ANY CAUSE OF ACTION FOR BREACH OF
THIS AGREEMENT, EXCEPT FOR BREACH OF CONFIDENTIALITY OBLIGATIONS
UNDER SECTION 14. THE FOREGOING DOES NOT LIMIT EITHER PARTY’S
INDEMNIFICATION OBLIGATIONS UNDER SECTION 6.

9.2 Each party’s total aggregate liability to the other party arising out of or
in connection with any cause of action for breach of this Agreement shall in no event
exceed during the term of this Agreement the fees actually paid by Company to
Provider pursuant to Section _ during the most recent twelve (12) months. The
foregoing shall not apply to (i) any payments that are due and owing to Provider in
accordance with Section _, (ii) any indemnification obligations under this Agreement,
(iii) any liability arising from a cause of action other than breach of contract, or (iv) any
liability arising out of either party’s intentional or willful misconduct or any activities or
conduct in violation of applicable law.


Representations and Warranties:

9. Representations and Warranties

9.1 No Inconsistent Obligations or Constraints Upon Site. Site and Principal Investigator each
represent and warrant that they are qualified and permitted to enter into this Agreement and that
the terms of the Agreement are not inconsistent with their other contractual arrangements. Site
and Principal Investigator each warrant that they are not constrained by any existing agreement
in providing complete disclosures to Sponsor concerning obligations to be performed under this
Agreement.

9.2 Due Authorization. Each party represents and warrants that it is duly authorized to execute
and deliver this Agreement and to perform its obligations hereunder.

9.3 No Impairment; No Conflict. During the term of this Agreement, Site and Principal Investigator
each warrant that they will not enter into any agreement to provide services which would in any
way materially impair their ability to complete the Study in a timely fashion.

9.4 No Pending Litigation. Site and Principal Investigator each represent and warrant that: (a)
they are not currently involved in any litigation, and is unaware of any pending litigation
proceedings, relating to Site’s role in the conduct of a clinical trial for any third party; and (b) they
have not received any warnings from the FDA (or any equivalent oversight body in a country
other than the United States) relating to services they have provided to third parties during the
conduct of a clinical trial.


Representations and Warranties (cont’d)
9.5 No Debarred or Disqualified Person.

(a) Site represents and warrants to Sponsor that neither it, nor its IRB,
nor any of its employees or agents has been debarred pursuant to the 21 USC Part 335a, or
regulations promulgated thereunder or similar laws or regulations in any applicable ex-U.S.
jurisdiction, or disqualified by the FDA, nor have debarment or disqualification proceedings against
it, its IRB or any of its employees or agents been commenced. Site will immediately notify Sponsor
in writing if (i) any such proceedings have commenced, (ii) Site or any of its employees or agents is
debarred or disqualified by the FDA, or (iii) the FDA has inspected or given Site notice of the FDA's
intention to inspect Site.

(b) Site represents and warrants that it shall not employ, contract with, or
retain any person, directly or indirectly, to perform the Study under this Agreement if such a person
(a) is under investigation by the FDA for debarment or is presently debarred by the FDA pursuant to
21 USC Part 335a, or (b) has a disqualification hearing pending or has been disqualified by the FDA
pursuant to 21 CFR Part 312.70 or its successor provisions.

(c) In addition, Site represents and warrants that it has not engaged in
any conduct or activity which could lead to any of the above-mentioned disqualification or
debarment actions. Site shall immediately notify Sponsor in writing if during the term of this
Agreement Site or any person employed or retained by it to perform the Study engages in any
conduct or activity that could lead to any of the above-mentioned disqualification or debarment
actions.


Representations and Warranties
(cont’d)

9.5 Compliance of Principal Investigator. Site warrants that the Principal Investigator
and, if applicable, the Sub-Investigators, has executed this Agreement, and that the Principal
Investigator and, if applicable, the Sub-Investigators shall comply with all terms of this Agreement,
including, without limitation, federal and state laws and regulations governing record keeping, Study
conduct, receipt and disposition of Study Drug or Sponsor Materials, disclosure requirements,
confidentiality, ownership of inventions, and the obtaining of informed consent from individuals
participating in the Study.

9.6 Qualification of Principal Investigator and Sub-Investigator. Site warrants that
the Principal Investigator and, if applicable, all Sub-Investigators are qualified by training and
experience as appropriate experts to conduct the Study, as required under 21 CFR 312.53.

9.7 Financial Interests. Site warrants that it has no financial interests and/or
arrangements with Sponsor that will require disclosure to the FDA in accordance with 21 CFR Part
54.

9.8 No Felony Conviction. Site warrants that neither Site nor any Site official or
employee has been convicted of a felony under Federal law for conduct (i) relating to the
development or approval, including the process for development or approval, of any drug, product,
medical device, NDA, abbreviated NDA, PMA, 510(k) or IND; or (ii) otherwise relating to the
regulation of any drug product or medical device under the FD&C Act.


Representations and Warranties
(cont’d)

9.9 WARRANTY DISCLAIMER. SITE AND THE PRINCIPAL INVESTIGATOR EACH
UNDERSTAND AND AGREE THAT THE STUDY DRUG IS EXPERIMENTAL IN NATURE
AND THAT THE STUDY DRUG AND OTHER SPONSOR MATERIALS ARE PROVIDED
WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED, AND WITHOUT ANY
REPRESENTATION OR WARRANTY THAT THE USE OF THE STUDY DRUG OR
OTHER SPONSOR MATERIALS WILL NOT INFRINGE ANY PATENT, COPYRIGHT,
TRADEMARK, OR OTHER RIGHT.


Dispute Resolution:
Litigation – split jurisdiction

12.10 Governing Law.

(a) In relation to any legal action brought by Site and/or Principal
Investigator, this Agreement shall be governed by and construed in
accordance with the laws of the State of California without regard to its
conflict of laws principles, and the California courts shall have exclusive
jurisdiction.

(b) In relation to any legal action brought by Sponsor, this
Agreement shall be governed by and construed in accordance with the
laws of the State of Ohio without regard to its conflict of laws principles,
and the Ohio courts shall have exclusive jurisdiction.

(c) The parties hereby agree to submit to the jurisdiction and
venue of such courts as set forth in Sections 12.10(a) and (b).


Dispute Resolution:
Arbitration

• Dispute resolution.

23.1 Initial Dispute Resolution. All disputes, controversies, or
claims arising under or related to this Agreement, including, without
limitation, any action or claim based on tort, contract, or statute, or
concerning the interpretation, effect, termination, validity, performance
and/or breach of this Agreement (“Claim”), shall be first submitted to the
senior executives of the Parties and each such senior executive shall
attempt in good faith to resolve such Claim.

23.2 Arbitration. If the Parties are unable to resolve a given Claim
pursuant to Section 23.1 within thirty (30) days of the first submission of
such dispute to the senior executive officers, the Claim shall be finally settled
in binding arbitration under the Commercial Arbitration Rules of the
American Arbitration Association.


Dispute Resolution:
Arbitration (cont’d)

23.3 Arbitral Panel. The arbitral panel will be composed of three arbitrators (the
“Panel”). Each party shall appoint one neutral arbitrator, who is not affiliated with either
party. The two party-appointed arbitrators shall agree upon and appoint a third arbitrator
who shall also be neutral and not affiliated with either party and who will serve as the
chairperson of the Panel. All arbitrators shall be either a practicing lawyer (such term to
include lawyers working as an in-house counsel and professors of law teaching at an
accredited, or otherwise nationally recognized, school of law) or an active or retired judge,
each with substantial experience practicing law and with sufficient familiarity with the laws
of the State of Delaware.

23.4 Procedures.

(a) All decisions of the Panel will be by majority vote.

(b) The arbitration shall be conducted in English and a written
order shall be prepared within fifteen (15) days after the conclusion of the arbitration
hearing stating the reasons on which the award is based.


Dispute Resolution:

23.5 Venue and Governing Law.

(a) The place of the arbitration shall be Wilmington,
Delaware, U.S.A.

(b) The arbitrators shall apply the laws of the state of
Delaware to any dispute and shall agree to faithfully apply such law as a
condition of their appointment to the Panel.

23.6 Remedies. The Panel also shall be authorized to grant any temporary,
preliminary or permanent equitable remedy or relief the Panel deems just and
equitable and within the scope of this Agreement, including, without limitation,
an injunction or order for specific performance.


Dispute Resolution:

23.7 Panel Decision.

(a) The decision of the Panel shall be final and binding upon
the parties.
(b) Judgment on the award may be entered by any court having
jurisdiction over the person or property of the person against whom enforcement is sought.

23.8 Costs. Each party shall bear its own attorney’s fees, costs, and
disbursements arising out of the arbitration, and shall pay an equal share of the fees and
costs of the Panel; provided, however, the Panel 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, travel expenses, etc.),
and/or the fees and costs of the Panel.


Dispute Resolution:

23.9 Waiver of Rights. By agreeing to this binding arbitration provision, the
parties understand that they are waiving certain rights and protections which
may otherwise be available if a Claim between the parties were determined by
litigation in court, including, without limitation, the right to a jury trial, certain
rights of appeal, and a right to invoke formal rules of procedure and evidence.


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