Development Services Agreement

Certain portions of this exhibit have been omitted pursuant to Rule 24b-2 and are subject to a confidential treatment request. Copies of this exhibit containing the omitted information have been filed separately with the Securities and Exchange Commission. The omitted portions of this document are marked with a ***.










*** Development Services Agreement






INTRODUCTION AND SCOPE






1 Parties




1.1 Elanco is



1.1.1 ElancoAnimal Health, a division of Eli Lilly and Company



1.1.2 an Indiana corporation.



1.2 Altairnano is



1.2.1 Altair Nanotechnologies, Inc.



1.2.2 a Nevada corporation.



2 Term



2.1 The Effective Date (this and other capitalized terms are defined in Exhibit A ) is retroactive to June 15, 2007.



2.2 The Expiration Date is December 31, 2010.



3 Background



3.1 Elanco is a global research-based corporation that develops, manufactures and sells animal health products.




3.2 Altairnano is an innovator and supplier of advanced novel, ceramic Nanotechnologies which are used in products that exhibit ground-breaking performance and maintains a staff that are knowledgeable, experienced and skilled at development of Nanotechnologies for the alternative energy, life sciences and performance materials markets based on its proprietary manufacturing process.




3.3 Elanco wishes to engage Altairnano to develop a manufacturing process for ***.




3.4 Altairnano wishes to accept the engagement.




4 Scope of Agreement



4.1 This Agreement applies to the Services and Products set forth in Exhibit B .




4.2 Altairnano's Compensation is set forth in Exhibit B .







ALTAIRNANO'S RIGHTS AND OBLIGATIONS






5 Altairnano's General Rights and Obligations



5.1 Altairnano will furnish Elanco all Services, Deliverables and/or Products described by the Project Specifications.




5.2 Altairnano will provide everything it needs to furnish such Services, Deliverables and Products except for items or responsibilities the Project Specifications expressly assign to Elanco.






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5.3 The Compensation is the entire compensation Altairnano will receive for full performance of all its obligations under the Agreement, including all labor, materials, expenses, overhead, taxes and profit.




6 Development Services



6.1 Altairnano will manufacture Product at an Altairnano FDA approvable facility in accordance with cGMP, the Product Specifications, the Quality Agreement and Applicable Law.




6.2 Altairnano will complete the Services and deliver product on the delivery date(s) specified by Elanco in accordance with Exhibit B .




6.3 Altairnano will comply with any exposure guidelines set forth in any material safety data sheets. Altairnano will promptly inform Elanco of any adverse environmental, health or safety events related to the manufacture of the Product.




6.4 Altairnano will not, without Elanco's prior written consent, (i) make any changes to the Product Specifications or process used to manufacture the Product (including the manufacturing batch records incorporated into the Product Specifications or processes) or (ii) manufacture the Product in any facility other than any manufacturing facility specified in Exhibit B .




6.5 Altairnano will not rework or remanufacture lots of Product without approval in advance from Elanco and will only be acceptable if the procedures for reworking and remanufacturing the lots are validated as part of the registered process for manufacturing the Products and approved by Elanco.




6.6 Altairnano will not change raw material vendors without the prior written consent of Elanco.




6.7 Altairnano will develop and document contingency plans to ensure continuous supply of Product to Elanco. Such contingency plan will include, without limitation, Altairnano's plans for the maintenance of adequate raw materials to meet demand, equipment preventative maintenance plans, and inventory safety stock to cover line down situations.




6.8 Altairnano will file a Drug Master File (DMF) and Active Substance Master File (ASMF) for the API specified Exhibit D . Altairnano will provide Elanco with a Letter of Authorization and Letter of Access for Regulatory submissions. Altairnano will provide copies of the DMF and ASMF to Elanco. Altairnano will allow Elanco to review and approve the DMF and ASMF before the initial filing and before any subsequent changes and updates after the initial filings. Elanco will provide written consent.




7 Allocation of Resources



In addition to whatever remedies are available to Elanco at law, in equity or under this Agreement, if for any reason Altairnano's supply of Product at any time, including during a Force Majeure condition, is insufficient to meet its obligation to Elanco under this Agreement and to other customers under other agreements, purchase orders or arrangements, Altairnano will allocate the available resources to Elanco and its other customers on a pro rata basis, with Elanco ?s pro rata share being based on the most recent forecast provided by Elanco to Altairnano.





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8 Altairnano's Representations and Warranties



8.1 Altairnano represents and warrants that:




8.1.1 Altairnano is duly organized and in good standing under the laws of the jurisdiction of its formation, and any authorization necessary for making and performing under this Agreement have been given.




8.1.2 The making and performance of this Agreement do not conflict with Altairnano's governing documents or any contractual obligation to another.




8.1.3 Altairnano's performance under this Agreement (including, without limitation, performance of Services, manufacture of Product, and Altairnano's employment practices) complies with all Applicable Law.




8.1.4 All Product supplied by Altairnano under this Agreement is or was manufactured in accordance with the Product Specifications, cGMP, the Quality Agreement and Applicable Law.




8.1.5 All Product supplied by Altairnano under this Agreement conforms to the Product Specifications.




8.1.6 Altairnano has obtained all permits, licenses and other authorizations which are required under Applicable Law to manufacture the Product, perform the Services, and deliver the Products and/or Deliverables. Altairnano is in compliance, and during the term of this Agreement will take all actions necessary to comply, with all terms and conditions of any and all required permits, licenses and authorizations applicable to the manufacture and supply of Product.




8.1.7 No Product delivered to Elanco pursuant to this Agreement will be manufactured or processed in any equipment that has been used to process animal or human tissue.




8.1.8 All Products are free from defects in material and workmanship.




8.1.9 The Products are free from all liens, Claims and encumbrances.




8.1.10 Services will be rendered with that degree of skill and knowledge normally possessed and employed by members of the relevant trade or profession in good standing in the United States of America.




8.1.11 Altairnano will not infringe any rights (including trademark rights, copyrights, patents, trade secrets, privacy rights, or contractual rights) of any other Person in providing the Services or manufacturing the Product and no use of the Product, Work Product or Deliverables by Elanco consistent with this Agreement infringes such rights. This representation and warranty does not apply to infringement arising solely from Elanco's use of the Products, Work Product or Deliverables in a manner that is contrary to Altairnano's recommendations, or in combination with other materials, if Altairnano was not aware of and could not reasonably anticipate such combined use. Altairnano Intellectual Property used to provide the Services or manufacture the Products, or incorporated into the Products does not not infringe any rights (including trademark rights, copyrights, patents, trade secrets, privacy rights, or contractual rights) of any other Person.






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8.2 Without limiting any other representations or warranties in this Agreement, ALTAIRNANO DISCLAIMS ANY AND ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR PURPOSE.




9 Non-Compete



9.1 For and during the period this Agreement is in effect, neither Altairnano nor any of its Affiliates will manufacture any product, whether for itself or for any other third party, containing the API of any Product manufactured under this Agreement without obtaining Elanco's prior written consent, with express exception of API made for human use in accordance with Altairnano's agreement with ***. In the event Altairnano acquires or otherwise enters into a business which manufactures, markets or sells any product containing the API of any Product manufactured under this Agreement, Elanco will have the right to terminate this Agreement with ninety (90) days written notice.




10 Manufacturing Reporting. Upon request, Altairnano will, on a timely basis, provide Elanco with all information reasonably necessary for Elanco to comply with its regulatory requirements, including, without limitation, stability data, any changes to the master batch record or production or quality control procedures referenced in the master batch record and the detailed reason for such change.




11 Adverse Event Reporting. Altairnano will report to Elanco any adverse drug experiences, medical inquiries, or quality complaints of which Altairnano becomes aware involving the Product within twenty-four (24) hours of receipt. Elanco is responsible for responding to and/or reporting Product complaints, adverse drug experiences and medical inquiries. When requested by Elanco, Altairnano will provide reasonable assistance in responding to any complaints, adverse drug experiences, or medical inquiries, including reviews of retained samples and batch records, Product testing, and retaining samples. Elanco will report to Altairnano any Elanco Pharmaceutical complaints, adverse drug experiences and medical inquiries potentially related to Altairnano's manufacturing of the Product.




12 Regulatory Inspections. Altairnano agrees to inform Elanco within twenty-four (24) hours of any regulatory inquiry, communication or inspection which directly or indirectly affects the production of the Products. In the event of an inspection by any Government Authority which involves a Product, Elanco will be notified within twenty-four(24) hours of the issuance of the notice of inspection or the presence of an inspector. In the event there are written observations (or any other written communication) by a Governmental Authority which involve a Product, or any proposed written response by Altairnano to any such inspection, Elanco will be informed within twenty-four (24) hours and be provided with copies of all documentation within forty-eight (48) hours, and will have the opportunity to review and provide input to the response. If Elanco elects to provide input to the response, such input will be provided by Elanco to Altairnano as promptly as practicable.




13 Recalls




13.1 If Altairnano determines there is a defect, impurity, contamination or non-conformity in Product previously delivered pursuant to this Agreement, or for any other reason decides to recall Product, Altairnano will immediately notify Elanco, and will reimburse Elanco for the purchase price paid by Elanco for the recalled Product.






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13.2 In the event that Elanco is required or requested by any regulatory authority, or voluntarily decides to recall a Elanco pharmaceutical because of a defect in the Product due to any Fault of Altairnano, Altairnano will, in addition to the other remedies set forth in this Agreement, reimburse Elanco for (a) any cost expended by Elanco to effect the recall, (b) the purchase price and any related costs paid by Elanco for the Product effected by the recall, and (c) Elanco ?s cost of other materials contained in the recalled Elanco pharmaceutical and any Elanco pharmaceutical or work-in-progress that cannot be shipped or finished due to the condition requiring the recall.




14 Altairnano's Invoices




14.1 Timing . Altairnano will submit invoices as follows.




14.1.1 Invoices for the percentage of work completed during the billing period..




14.1.2 Product invoices will be submitted upon shipment.




14.2 Invoices . Each invoice must comply with Elanco's standard forms and procedures (as changed from time to time) and published on the internet at and with any specific requirements in this Agreement. Each invoice will be accompanied by:




14.2.1 Any additional information as Elanco may reasonably request in writing.




14.3 Currency . Invoices will be in United States dollars and payment will be in United States dollars.




15 Supplier Diversity Development




15.1 Altairnano agrees to endeavor to purchase annually from businesses that fall within one or more of the categories listed below. Within fifteen (15) days of the end of each calendar quarter, Altairnano will report to Lilly the amount (in United States dollars) of such purchases for the calendar quarter that just ended, itemized among such categories. Altairrnano will deliver the report to the address designated by Lilly.




MBE Minority business enterprises certified as such by an affiliate of the National Minority Supplier Development Council, Inc. Certification requirements can be found at www.nmsdc.org.
WBE Women business enterprises meeting the requirements for certification as such by the Women's Business Enterprise National Council. See www.wbenc.org for requirements. Actual certification desirable but not required.
WOSB Women-owned small business concerns as defined in 48 CFR 2.101 (at least 51% owned by women with management and daily business operations controlled by one or more women).
SDB Small disadvantaged business concerns as defined in 48 CFR 2.101 (which requires certification by the Small Business Administration under 13 CFR part 124 subpart B).






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VBE Veteran-owned small business concerns as defined in 48 CFR 2.101 (at least 51% owned by veterans with management and daily business operations controlled by one or more veterans). Self-certification is acceptable..
DVBE Service-disabled veteran-owned small business concerns as defined in 48 CFR 2.101 (veterans with service-connected disability own at least 51% and control management and daily business operations). Self-certification is acceptable.
HUB HUBZONE small business concerns as defined in 48 CFR 2.101 (based on census tract information, economic data, and unemployment rates in a particular geographic area).
8A Participants Participants, as defined in 13 CFR 124.3, in the Small Business Administration's Section 8(a) business development program of 13 CFR part 124 subpart A.
HBCU/MI Historically black colleges and universities or minority institutions, each as defined in 48 CFR 2.101.




16 Safety and Security




16.1 Altairnano will comply with, and will cause its Employees to comply with, policies and procedures that Elanco establishes to enhance the safety and security of its facilities and of Persons at or near its facilities.




17 Debarment




17.1 Altairnano certifies that it has not and will not use in any capacity the services of any Person debarred under 21 USC 335a(a) (as amended) (mandatory debarment) or 21 USC 335a(b) (as amended) (permissive debarment) in connection with this Agreement. Altairnano will require the same certification of its Subcontractors.




17.2 Altairnano will immediately notify Elanco in writing (with a copy to Elanco's legal counsel) of any actions taken or proceeding pending that threatens or confirms a debarment under this section. Altairnano will require its Subcontractors to notify it of any action taken or proceeding pending that threatens or confirms a debarment under this section, and Altairnano will immediately notify Elanco in writing (with a copy to Elanco's legal counsel) of any notifications from its Subcontractors.




18 Altairnano's Obligations at End of Term




18.1 Upon expiration, notice of termination or notice of cancellation of this Agreement, Altairnano will cooperate with Elanco to wind down and close this Agreement smoothly including, as reasonably required by Elanco, the completion of work in progress and the transfer of its obligations to another supplier, if applicable. Altairnano will also, at its sole expense; (i) promptly effect the removal of Elanco's Confidential Information from its systems and files and those of its Subcontractors (ii) deliver to Elanco any of Elanco's Property in Altairnano's possession or control, and (iii) promptly deliver to Elanco any Records of Elanco's Confidential Information in Altairnano's possession or control that are not Elanco's Property.




18.2 As an alternative to delivery of Elanco's Property or Records of Elanco's Confidential Information to Elanco, Elanco may direct Altairnano to destroy them or deliver them to another destination of Elanco ?s choosing. Elanco's exercise of this alternative must be in writing.






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ELANCO'S RIGHTS AND OBLIGATIONS






19 Elanco's General Rights and Obligations




19.1 Elanco will pay Altairnano the Compensation in accordance with the terms of this Agreement.




19.2 Elanco will perform any obligations expressly assigned to it in the Project Specifications or elsewhere in the Agreement.




20 Payment




20.1 Payment terms . Payment will be due forty-five (45) days after Elanco's accounts payable department receives an invoice that complies with the requirements of this Agreement, except that Elanco may withhold payment of any amount that it may reasonably dispute in good faith until such dispute is resolved.




20.2 Discounts . Should Elanco make payments within twenty (20) days after it receives an invoice, Elanco will receive a discount of two percent (2%) off the invoiced amount.




21 Changes to Product Specifications




Elanco, at its option from time to time, may request a change in the Product Specifications by notifying Altairnano in writing. The parties will work together in good faith to determine whether to implement the proposed change. As soon as possible, but in any event within thirty (30) days, after the change request is received by Altairnano, Altairnano will notify Elanco of any adjustments in compensation or delivery timing necessary to accommodate the changed Product Specifications. The revised Product Specifications will become applicable as of the date mutually agreed to by Elanco and Altairnano, and all references thereafter to the "Product Specifications" will refer to the Product Specifications as modified. The new Product Specifications will be attached to Exhibit D .




22 Access to Elanco's Facilities and Information Systems




22.1 Elanco retains its right to restrict or refuse any Person, including Altairnano' s Employees and representatives, access to its facilities, computers, or other information systems.




22.2 Such restriction or refusal excuses Altairnano's performance under this Agreement only if it renders Altairnano's performance impracticable, does not comport with Elanco's written procedures, and is manifestly unreasonable.




23 Elanco's Right to Cancel




23.1 Elanco may cancel this Agreement for any reason including convenience by written notice to Altairnano. Cancellation will be effective ninety (90) days after Altairnano receives the notice or on a later date if the notice so specifies.






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24 Elanco's Obligations at End of Term




24.1.1 In the event of any termination or cancellation of this Agreement before it expires Elanco's obligation to compensate Altairnano is reduced to the portion of the Compensation corresponding to Services and Products properly furnished prior to cancellation or termination, with the calculation of the amount of the reduction consistent with the provisions of this Agreement establishing the amount of Compensation







INFORMATION AND PROPERTY RIGHTS AND OBLIGATIONS






25 Property Rights




25.1 Specified property and intellectual property rights . All property and intellectual property rights are defined in the Collaborative Research, License & Commercialization Agreement between Altair Nanomaterials, Inc. and Elanco Animal Health, Articles II ...