This excerpt taken from the EXEL 10-K filed Feb 27, 2007.
3.5 Backup Compounds.
(a) Provisions Relating to BMS Exercise of its Co-Development Option. If BMS does not exercise its Co-Development Option with respect to a Provisional Collaboration Program by the applicable deadline, then Exelixis shall retain all right, title and interest in all compounds generated for such Provisional Collaboration Program, subject to [ * ]. If BMS does exercise its Co-Development Option with respect to a Provisional Collaboration Program, then any compounds generated for such Provisional Collaboration Program (or Lead Op Program that became such Provisional Collaboration Program) that satisfy the definition of a Program Backup shall become part of the Collaboration Program, and, subject to Section 8.1(d), neither Party shall use any such compounds for any purpose outside of the Collaboration without the prior written consent of the other Party. The compounds generated for such Provisional Collaboration Program (or Lead Op Program that became such Provisional Collaboration Program) that do not
satisfy the definition of Program Backups shall become Unrelated Compounds, and Exelixis shall be free to use such Unrelated Compounds outside of the Collaboration, subject to Section 8.6. For clarity, BMS shall pay Exelixis the milestone payments described in Section 9.5 for Program Backups that are Royalty-Bearing Products and that meet the applicable milestone events.
(b) Provisions Relating to Exercise of the Exelixis Co-Development Option. In the event that Exelixis has exercised the Exelixis Co-Development Option with respect to a Collaboration Program, then the following terms shall apply with respect to Backup Programs:
(i) Commencement of a Backup Program. The Parties shall determine, via the JDC, whether or not to commence a backup program (a Backup Program) with respect to some or all of the Collaboration Programs, as well as the appropriate timing for such Backup Program(s). The Backup Program(s) shall be subject JDC oversight and decision making and to a Backup Research Plan to be established by the JDC prior to the start of backup work.
(ii) Exelixis Conduct of Backup Programs. Exelixis shall have the first right to conduct such backup work up until designation of a backup compound as a Development Candidate and shall promptly notify the JDC in writing whether Exelixis will conduct such Backup Program. Upon designation of a backup compound as a Development Candidate, the JDC shall determine [ * ] (with [ * ], in any case, having the right to perform [ * ]. In the event that [ * ] work on Backup Programs for Collaboration Programs shall be [ * ], to the extent such work is incurred and with reimbursement on a quarterly basis, up to [ * ] Dollars ($[ * ]) per Backup Program (such amount, the [ * ] Backup Funding); provided, however, that: (A) such [ * ] Backup Funding shall not be deemed to be [ * ] (except as set forth below); and (B) any costs associated with such Backup Program that are in excess of [ * ] shall be [ * ]. Notwithstanding clause (A) above, [ * ], then the [ * ] Backup Funding [ * ].
(iii) BMS Conduct of Backup Programs. If Exelixis notifies BMS that Exelixis will not conduct such Backup Program, or in the event that Exelixis opts-out of co-Development with respect to such Collaboration Program, then BMS may conduct such Backup Program and such any costs associated with such Backup Program shall be [ * ] and shall be [ * ]. Exelixis will transition to BMS any necessary [ * ] and other know-how necessary or reasonably useful for BMS to conduct such Backup Program.
(iv) Reporting and Accounting. Except as set forth in paragraph (ii) above, reporting and accounting of shared costs for the Backup Programs shall be as set forth in Section 4.6 for Development Costs.