Exhibit 10.26

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH
“[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE
SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION
REQUESTING CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE
ACT OF 1934.

 

 

 

 

 

 

 

 

 

 

 

 

LICENSE AGREEMENT

 

by and between

 

THE SCRIPPS RESEARCH INSTITUTE,
a California nonprofit
public benefit corporation

 

and

 

FATE THERAPEUTICS, INC.
a Delaware corporation

 

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LICENSE AGREEMENT

 

This License Agreement is entered into and made effective as of this 24th day of
August, 2010 (the “Effective Date”), by and between THE SCRIPPS RESEARCH
INSTITUTE, a California nonprofit public benefit corporation (“TSRI”), and Fate
Therapeutics, Inc., a Delaware corporation (“Licensee”), each located at the
respective address set forth in Section 14.17 below, with respect to the facts
set forth below.

 

RECITALS

 

A.                                TSRI is the owner of certain Licensed Patent
Rights and has the right to grant licenses under such Licensed Patent Rights,
subject to the rights set forth in Sections 2.8 and 2.9 of this Agreement.

 

B.                                 TSRI desires to have the Licensed Patent
Rights developed and commercialized to benefit the public and is willing to
grant a license thereunder to Licensee.

 

C.                                 Licensee desires to obtain a license under
the Licensed Patent Rights and to use the Licensed Biological Materials pursuant
to the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the mutual covenants and conditions set
forth herein, TSRI and Licensee hereby agree as follows:

 

1.                                    Definitions.  Capitalized terms shall have
the meaning set forth herein.

 

1.1                            Affiliate.  The term “Affiliate” shall mean any
entity which directly or indirectly controls, or is controlled by, or is under
common control with, Licensee.  The term “control” as used herein means (a) in
the case of corporate entities, direct or indirect ownership of at least fifty
percent (50%) of the stock or shares entitled to vote for the election of
directors or with the power to direct the management and policies of such
corporate entities; or (b) in the case of non-corporate entities, direct or
indirect ownership of at least fifty percent (50%) of the equity interests with
the power to direct the management and policies of such non-corporate entities. 
All Affiliates shall be deemed to be licensees under Section 2.1-2.4 of this
Agreement.

 

1.2                            Confidential Information.  The term “Confidential
Information” shall mean any and all proprietary or confidential information of
TSRI or Licensee which may be exchanged between the parties at any time and from
time to time during the term of this Agreement.  Confidential Information shall
also include any information which, given the circumstances surrounding
disclosure, would be considered confidential by the disclosing party. 
Information shall not be considered confidential to the extent that either party
can establish by competent proof that it:

 

a.                                     Is publicly disclosed through no fault of
the receiving party, either before or after it becomes known to the receiving
party; or

 

b.                                    Was known to the receiving party without
obligation of confidentiality prior to the date of this Agreement, which
knowledge was acquired

 

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independently and not from the disclosing party (including such party’s
employees, consultants or agents); or

 

c.                                     Is subsequently disclosed to the
receiving party without obligation of confidentiality in good faith by a third
party who is not under any obligation to maintain the confidentiality of such
information, and without breach of this Agreement by a receiving party; or

 

d.                                   Has been published by a third party not in
breach of any obligation of confidentiality; or

 

e.                                     Was independently developed by the
receiving party without the use of or reliance on the Confidential Information
of the disclosing party.

 

If Confidential Information is required to be disclosed by the receiving party
by law or court order, the party required to make such disclosure shall limit
the same to the minimum required to comply with the law or court order, and
shall use reasonable efforts to attempt to seek confidential treatment for that
disclosure, and prior to making such disclosure by the receiving party shall
notify the other party, not later than ten (10) days (or such shorter period of
time as may be reasonably practicable under the circumstances) before the
disclosure in order to allow that other party to comment and/or to obtain a
protective or other order, including extensions of time and the like, with
respect to such disclosure.

 

1.3                            Field.  The term “Field” shall mean all fields.

 

1.4                            Licensed Biological Materials.  The term
“Licensed Biological Materials” shall mean the materials identified in Exhibit A
and supplied by TSRI to Licensee, together with any progeny or mutants of such
materials, or unmodified derivatives of such materials (defined as substances
created by Licensee that constitute an unmodified functional sub-unit or product
expressed by such materials).

 

1.5                            Licensed Patent Rights.  The term “Licensed
Patent Rights” shall mean rights arising out of or resulting from (a) the
U.S./PCT Patent Application(s) set forth on Exhibit B; (b) the foreign patent
applications associated with the application(s) referenced in sub clause
(a) above; (c) the patents issued from the application(s) referenced in sub
clauses (a) and (b), and in sub clauses (d) and (e) below; (d) divisionals,
continuations, reissues, reexaminations, renewals, and extensions of any patent
or application set forth in sub clauses (a)-(c) above; and (e) all claims of
continuations-in-part that are entitled to the benefit of the priority date of
the application(s) referenced in sub clause (a) above.

 

1.6                            Licensed Product.  The term “Licensed Product”
shall mean any product (a) the manufacture, use, importation, sale or offer for
sale of which would, in the absence of the license granted by this Agreement,
infringe a Valid Claim of any of the Licensed Patent Rights, or (b) that is
comprised of, utilizes or incorporates Licensed Biological Materials, or
(c) that is discovered, developed or made using a Licensed Process.

 

3

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1.7                            Licensed Process.  The term “Licensed Process”
shall mean any method or process (a) claimed in a Valid Claim of any of the
Licensed Patent Rights, (b) the practice of which would, in the absence of the
license granted by this Agreement, infringe a Valid Claim of any of the Licensed
Patent Rights, or (c) that utilizes or incorporates Licensed Biological
Materials.

 

1.8                            Net Sales.  The term “Net Sales” shall mean the
gross amount invoiced by Licensee and its Affiliates or its Sublicensees, or any
of them, on all sales of Licensed Products and Licensed Processes, less
(a) discounts actually allowed; (b) credits for claims, allowances, retroactive
price reductions or returned or rejected goods; (c) amounts invoiced and
actually paid for third party transportation, insurance or shipping charges to
an end user of the Licensed Product or Licensed Process; (d) any taxes or other
governmental charges actually paid in connection with the sale, transportation,
or delivery of Licensed Products or Licensed Processes (but excluding what are
commonly known as income taxes and value-added taxes).  Net Sales shall include
all consideration invoiced by Licensee, its Affiliates or its Sublicensees in
exchange for any Licensed Products or Licensed Processes including without
limitation any monetary payments or, with regard to any other property paid in
exchange for any Licensed Products or Licensed Processes, an amount in cash
equal to the fair market value of such property.  For purposes of determining
Net Sales, a sale shall be deemed to have occurred when an invoice therefore is
generated, the Licensed Product shipped for delivery or the Licensed Process
completed or provided.  Sales of Licensed Products or Licensed Processes by and
amongst Licensee, its Affiliates or Sublicensees shall be excluded, unless the
Affiliates or Sublicensees consume the Licensed Products or Licensed Processes,
and only the subsequent sale of such Licensed Products or Licensed Processes to
unrelated parties shall be deemed Net Sales hereunder.

 

1.9                            Research Tool.  The term “Research Tool” shall
mean a Licensed Product, Licensed Process or Licensed Biological Material that
is designed and developed solely for use in performing basic research including,
without limitation, basic research having as its primary purpose understanding
the biology or pathology of cells or cell lines and diseases or disorders
affecting them, or education purposes, and not for Commercial Drug Development
purposes.  “Commercial Drug Development” includes the following activities:
(a) any human clinical use or veterinary use (including, without limitation,
therapeutic, prophylactic or diagnostic use); (b) any screening of compound
libraries; (c) any development, manufacture or provision of any commercial
pharmaceutical, healthcare or consumer products, processes or services; or
(d) any provision of services related to the above (a)-(c).

 

1.10                    Sublicensee.  The term “Sublicensee” shall mean any
third party (other than an Affiliate) to whom Licensee grants a sublicense with
respect to the rights conferred upon Licensee under this Agreement, as
contemplated by Section 2.6.

 

1.11                    Valid Claim.  The term “Valid Claim” shall mean a claim
of any issued and unexpired patent within the Licensed Patent Rights which has
not been revoked or held unenforceable, unpatentable or invalid by a decision of
a court or governmental body of competent jurisdiction in a ruling that is
unappealed or unappealable, and which has not been

 

4

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admitted to be invalid or unenforceable through reissue or disclaimer or
otherwise.  The term “Valid Claim” shall also include the claims of a pending
patent application within the Licensed Patent Rights which have not been
(i) cancelled, withdrawn, abandoned or fmally disallowed without the possibility
of appeal or refiling of such application, or (ii) pending for a period of more
than [***] from the date of the first examination of the patent application.

 

2.                                    Grant of License.

 

2.1                            Grant of Exclusive License for Licensed
Products.  TSRI hereby grants to Licensee and Licensee accepts, subject to the
terms and conditions of this Agreement, an exclusive worldwide license, with the
right to sublicense, under the Licensed Patent Rights, including, without
limitation, to make and have made, to use and have used, to sell and have sold,
to offer to sell and have offered for sale, and to import and have imported
Licensed Products in the Field.

 

2.2                            Grant of Exclusive License for Licensed
Processes.  TSRI hereby grants to Licensee and Licensee accepts, subject to the
terms and conditions of this Agreement, an exclusive worldwide license, with the
right to sublicense, under the Licensed Patent Rights to make and have made, to
use and have used, to practice and have practiced, to offer to sell and have
offered for sale, to sell and have sold, and to import and have imported any
Licensed Processes in the Field.

 

2.3                            Grant of Exclusive License for Licensed
Biological Materials.  TSRI hereby grants to Licensee and Licensee accepts,
subject to the terms and conditions of this Agreement, an exclusive worldwide
license, with the right to sublicense, to the Licensed Biological Materials to
make and have made, to use and have used, to sell and have sold, to offer to
sell and have offered for sale, and to import and have imported, and to transfer
and distribute any Licensed Biological Materials in the Field.

 

2.4                            Research Tools.

 

a.                                     For clarity, Research Tools are subject
to the license grants in Sections 2.1-2.3, Section 2.8, the retained rights set
forth in Sections 2.9, and the due diligence requirements in Section 6.

 

b.                                    If TSRI reasonably believes that a
Licensed Product, Licensed Process or Licensed Biological Material should be
classified as a Research Tool hereunder, [***].  If the Parties are unable to
reach agreement regarding the classification within [***] after receipt of such
notice, either party may request resolution of such issue in accordance with the
dispute resolution process set forth in Section 14.9 (and, during any such
process, such Licensed Product, Licensed Process or Licensed Biological Material
shall not be classified as a Research Tool under this Agreement).

 

c.                                     If such item is ultimately classified as
a Research Tool as provided above, then Licensee shall comply with the due
diligence obligations set forth in Section 6.2.b.

 

*                      Confidential Information, indicated by [***], has been
omitted from this filing and filed separately with the Securities and Exchange
Commission

 

5

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2.5                            Covenants Not To Grant Third Party Licenses.  As
of the Effective Date and until this Agreement is terminated, TSRI covenants not
(i) to grant to any third party any licenses or any rights to Licensed Patent
Rights in the Field, or (ii) to grant to any third party any licenses or any
rights to, or to transfer samples of, Licensed Biological Materials in the
Field, except as permitted under Sections 2.8 and 2.9 hereof.

 

2.6                            Sublicensing.  Licensee shall have the right to
grant and authorize sublicenses to any party with respect to the rights
conferred upon Licensee under this Agreement.  Sublicensees shall not have the
right to further sublicense without TSRI’s prior written consent, which will not
be unreasonably withheld or delayed.  Any sublicense granted under this
Section 2.6 shall be subject in all respects to the applicable provisions
contained in this Agreement as are needed to enable Licensee to comply with this
Agreement (including the provisions regarding governmental interest, reservation
of rights, development efforts, reporting, audit rights, indemnity, insurance,
limited warranty, disclaimer, limitation of liability, confidentiality, and
rights upon expiration or termination).  It is anticipated that Licensee may
enter into agreements with third parties wherein some of the rights granted
herein will be transferred to third parties who are performing a service for
Licensee, such as a contract manufacturer or contract research organization, but
specifically excluding agreements that contain the rights to sell, or offer for
sale Licensed Products or Licensed Processes.  These types of service agreements
are not subject in all respects to the applicable provisions contained in this
Agreement as are needed to enable Licensee to comply with this Agreement but
shall include the following provisions contained herein: indemnity, insurance,
limited warranty, disclaimer, limitation of liability, and confidentiality.  In
the event of a conflict between this Agreement and the terms of any sublicense,
the terms of this Agreement shall control.  Licensee shall forward to TSRI a
copy of any and all fully executed sublicense and service agreements within
thirty (30) days of execution.

 

2.7                            No Other License.  This Agreement confers no
license or rights by implication, estoppel, or otherwise under any patent
applications or patents or other intellectual property of TSRI other than
Licensed Patent Rights regardless of whether such patents or intellectual
property are dominant or subordinate to Licensed Patent Rights.

 

2.8                            Governmental Interest.  Licensee and TSRI
acknowledge that TSRI has received, and expects to continue to receive, funding
from the United States Government in support of TSRI’s research activities. 
Licensee and TSRI acknowledge and agree that their respective rights and
obligations pursuant to this Agreement shall be subject to the rights of the
United States Government, existing and as amended, which may arise or result
from TSRI’s receipt of research support from the United States Government,
including but not limited to, 37 CFR 401, the NIH Grants Policy Statement and
the NIH Guidelines for Obtaining and Disseminating Biomedical Research
Resources.

 

2.9                            Reservation of Rights.  TSRI reserves the right
to use for any internal basic research or educational purposes any Licensed
Patent Rights and Licensed Biological Materials licensed hereunder, without TSRI
being obligated to pay Licensee any royalties or other compensation or to
account to Licensee in any way.  During the term, including any

 

6

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extension thereof, of the Research Funding and Option Agreement dated
February 19, 2008 between Licensee and TSRI (“Research Agreement”), TSRI will
not enter into any agreements with any other third party for the performance of
sponsored research in the same field of research described in Appendix A of such
Research Agreement.

 

In addition, TSRI reserves the right to grant non-exclusive licenses to use the
Licensed Patent Rights and Licensed Biological Materials for internal basic
research and educational purposes to other nonprofit or academic institutions,
and in no event for any Commercial Drug Development activities.  TSRI may
distribute Licensed Biological Materials to other nonprofit or academic
institutions (but in no event to any for-profit third party) for the uses
expressly permitted above, under the terms of a Material Transfer Agreement with
such institution (an “MTA”).  Licensee may request on an annual basis a list of
the parties with whom TSRI has entered into an MTA for Licensed Patent Rights
and Licensed Biological Materials, and TSRI shall provide such list within
thirty (30) days of its receipt of such request by Licensee.

 

2.10                    Know-how License.  TSRI grants to Licensee a
non-exclusive license to utilize the information, and materials listed on
Exhibit D in the exploitation of the License Patent Rights.

 

3.                                    Royalties.

 

3.1                            License Issue Fee.  Licensee agrees to pay and
shall pay to TSRI a noncreditable, nonrefundable license issue fee in the amount
of Ten Thousand U.S. Dollars (U.S. $10,000) within fifteen (15) days of the
Effective Date (the “License Issue Fee”).  Failure of Licensee to make this
payment shall render this Agreement null and void (ab initio).

 

3.2                            Minimum Annual Royalty.  Licensee agrees to pay
and shall pay to TSRI a nonrefundable minimum annual royalty in the amount of
[***].  The first payment is due no later than January 1, 2010 and on
January 1st of each subsequent calendar year until the first January 1 after the
first commercial sale of the first Licensed Product by Licensee or any of its
Sublicensees, at which time the amount of the minimum annual royalty shall
become and shall remain [***] (the “Minimum Annual Royalty Fee”).  Such payments
shall be credited against running royalties due for that calendar year and
Licensee’s royalty reports shall reflect such a credit.  Such payments shall not
be credited against milestone payments (if any), Sublicensing Payments (if any),
nor against royalties due for any preceding or subsequent calendar year.

 

3.3                            Running Royalties.  Licensee agrees to pay and
shall pay to TSRI a running royalty, on a country-by-country basis, in the
following percentage amounts of Net Sales of Licensed Products sold or
transferred, or Licensed Processes performed, by Licensee, Affiliates or
Sublicensees,

 

a.                                     where such sale or transfer or
performance in the applicable country then infringes one or more Valid Claims
contained in the Licensed Patent Rights for such country: (i) [***]; (ii) [***];
(iii) [***]; and (iv) [***]; provided, however, where such sale or transfer or
performance in the applicable country does not then infringe one or more Valid
Claims contained in the Licensed Patent Rights for such

 

*                      Confidential Information, indicated by [***], has been
omitted from this filing and filed separately with the Securities and Exchange
Commission

 

7

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country, the running royalty percentages as set forth above in 3.3.a(i)-(iv), as
applicable, shall be reduced by [***]; and

 

b.                                    where the manufacture, use or sale of such
Licensed Product or Licensed Process is not covered by a Valid Claim in any
country but utilizes, is comprised of or incorporates Licensed Biological
Materials or was discovered, developed or made using any Licensed Process: [***]
in any country.

 

3.4                            Royalty Increase.  Notwithstanding Section 3.3,
in the event Licensee, an Affiliate, or a Sublicensee directly or indirectly
initiates any action or proceeding in or before any court or patent office
alleging that (i) any of the Licensed Patent Rights are invalid or
unenforceable, or (ii) no royalties, Sublicense Payments, milestone payments,
patent costs or other monies are due or required to be paid to TSRI under this
Agreement because some or all of the Licensed Patent Rights are invalid or
unenforceable (collectively “Challenges”), the royalty rates specified in
Section 3.3 shall be increased to the following rates: [***]; provided, however,
that such increase shall only be applied to a Licensed Product and/or a Licensed
Process covered by the Licensed Patent Right(s) that are the subject of such
Challenge (and shall not be applied, for the avoidance of doubt, to a Licensed
Product and/or a Licensed Process that is covered by Licensed Patent Rights that
are not the subject of such Challenge).  Any such increase shall be effective
during the pendency of such Challenge from the date Licensee first initiates
such Challenge, and thereafter during the term of the Agreement, provided that
at least one (1) claim that covers such Licensed Product or Licensed Process
within the Licensed Patent Rights being Challenged is held to be valid and
enforceable as a result of such Challenge.  Licensee (i) agrees that [***].

 

3.5                            Royalty Credit.  If Licensee, its Affiliate or
its Sublicensee is required to license or acquire technology (including, but not
limited to, patent rights and/or other intellectual property rights) from a
third party in order to practice the Licensed Patent Rights or to develop or
commercialize a Licensed Product or Licensed Process because the exploitation of
the Licensed Patent Rights would infringe that third party’s intellectual
property rights without obtaining a license to such third party technology,
[***], then Licensee may deduct up to [***] of the amount paid to such third
party from the payments owing to TSRI for such Licensed Product or Licensed
Process [***].  The above offset right is subject to the requirement that
Licensee, its Affiliate or its Sublicensee shall not decrease the royalty or
other amounts owed to TSRI under this Agreement by more than [***] of the amount
due.  Notwithstanding the above, Licensee, its Affiliate or its Sublicensee
shall have no right to deduct or offset any royalties or other amounts with
respect to any third party technology that is the subject of any cross license
or similar arrangements (whether in the same or related transactions) where
Licensee, its Affiliate or its Sublicensee grants or provides to such third
party or its affiliates licenses, options or other rights to existing or future
technology, intellectual property, research or development activities or other
information or materials.  Licensee will give TSRI advance written notice of any
third party arrangement sufficiently prior to seeking to deduct any payments to
the third party under the terms of this Section 3.5 in order to allow TSRI and
Licensee to mutually determine whether such third party’s technology is required
in order to practice or exploit the Licensed Patent Rights.

 

*                      Confidential Information, indicated by [***], has been
omitted from this filing and filed separately with the Securities and Exchange
Commission

 

8

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3.6                            Combination Products.  If a Licensed Product or
License Process is sold in combination with another component(s), which other
component(s) if sold alone would not be subject to a royalty payment hereunder,
then Net Sales as applicable, from such combination sales, for purposes of
calculating the amounts due under this Section 3, shall be calculated by
multiplying the gross selling price of the combination product by the fraction
A/(A+B), where A is the gross selling price, during the royalty period in
question, of the Licensed Product or Licensed Process sold separately, and B is
the gross selling price, during the royalty period in question, of the other
component(s), sold separately.  If the other component(s) are not sold
separately during that royalty period, then the Net Sales, as applicable, on the
combination product shall be as reasonably allocated between such Licensed
Product and such other component(s) as mutually agreed upon by License and TSRI,
based on the relative value contributed by each component; provided, however,
that the Net Sales allocated to such Licensed Product shall not be less than
[***] of the Net Sales of such combination product.

 

3.7                            Royalty Floor.  In no event may the royalty owed
to TSRI be reduced by more than [***].  Licensee may utilize either the
Combination Products or the Royalty Credit calculation at its discretion, but
may not use both.

 

3.8                            No Multiple Royalties.  No multiple royalties
shall be due because any Licensed Product or Licensed Process is covered by more
than one of the Licensed Patent Rights.  In such case, Licensee shall pay only
one royalty at the highest of the applicable rates pursuant to Section 3.3
above.

 

3.9                            Arms-Length Transactions.  On sales of Licensed
Products or Licensed Processes which are made in other than an arm’s-length
transaction, the value of the Net Sales attributed under this Section 3 to such
a transaction shall be that which would have been received in an arm’s-length
transaction, based on sales of like quality and quantity products, services or
processes on or about the time of such transaction.

 

3.10                    Duration of Royalty Obligations.  The royalty
obligations of Licensee as to each Licensed Product or Licensed Process shall
continue on a country-by-country basis until (a) (i) the expiration of the last
to expire of a Valid Claim that covers such Licensed Product or Licensed Process
in that country, or (ii) in the countries where no Valid Claim was filed the
royalty obligation shall run concurrent with the last to expire Valid Claim in
the United States or Europe, or (b) for a Licensed Product or Licensed Process
not covered by a Valid Claim in any country but [***] after the date of the
first commercial sale of such Licensed Product or Licensed Process in such
country.  Upon the termination of Licensee’s royalty obligations with respect to
a Licensed Product or Licensed Process in a country, the license grants
contained in Sections 2.1.-2.3 shall become fully paid-up, royalty-free,
perpetual and irrevocable for such Licensed Product or Licensed Process in such
country.

 

3.11                    Other License Agreements.

 

a.                                     In the event that Licensee would be
required to pay a Licensee Issue Fee under (i) any other license agreements
arising from the Research Agreement or the Option Agreement dated January 5,
2009 between Licensee and TSRI

 

*                      Confidential Information, indicated by [***], has been
omitted from this filing and filed separately with the Securities and Exchange
Commission

 

9

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(“Option Agreement”), entered into between Licensee and TSRI (such written
agreements are collectively the “Other License Agreements”) and (ii) Section 3.1
under this Agreement, then the maximum aggregate Licensee Issue Fee Licensee
shall be required to pay under the Other License Agreements and this Agreement
shall be $[***] under the applicable sections of such agreements.

 

b.                                    In the event that Licensee would be
required to pay a Minimum Annual Royalty Fee under (i) any Other License
Agreements and (ii) Section 3.2 under this Agreement, then (x) the maximum
Minimum Annual Royalty Fee [***] shall be $[***] under the applicable sections
of such agreements; and (y) the maximum Minimum Annual Royalty Fee [***] shall
be $[***] under the applicable sections of such agreements.

 

c.                                     In the event that Licensee would, in
connection with the sale or transfer of a product or service, be required to pay
a royalty under (i) any Other License Agreements and (ii) Section 3.3 under this
Agreement in connection with the same sale or transfer, then Licensee shall be
required under the Other License Agreements and this Agreement only to pay a
single royalty under such agreements in connection with such sale or transfer,
such royalty to be payable at the highest of the royalties owed to TSRI under
the applicable sections of such agreements.

 

4.                                    Non-Royalty Revenues.

 

4.1                            Sublicense Payments.  Any and all revenues,
equity interests and other consideration paid to Licensee in consideration of
the grant to a third party of a sublicense to the Licensed Patent Rights and/or
Licensed Biological Materials to any Sublicensee that is not an Affiliate of
Licensee (collectively “Sublicense Revenues”) shall be reported and paid to TSRI
by Licensee on a quarterly basis within sixty (60) days of the end of the
applicable quarter in which such Sublicense Revenues are received by Licensee. 
Notwithstanding the foregoing, all royalties based upon transfers or sales of
Licensed Products or Licensed Processes, payments for or reimbursement for costs
for research and development (to the extent itemized in the sublicense
agreement), payments for or reimbursements for costs for patent prosecution,
defense, enforcement and maintenance, and payments for equity and debt
securities, so long as said payments reflect the current fair market value, and
not a premium thereon, shall be excluded from Sublicense Revenues.  Any non-cash
Sublicense Revenues received by Licensee from a Sublicensee or other third party
shall be valued at its fair market value as of the date of receipt, as
determined in good faith by Licensee.  Licensee shall pay to TSRI a
non-creditable, non-refundable percentage of these Sublicense Revenues according
to the following schedule (“Sublicense Payments”):

 

Sublicense Revenues received by Licensee(on a cumulative basis)

Percent of Sublicense Revenues payable to TSRI

 

 

Up to $[***]

[***]

 

*                      Confidential Information, indicated by [***], has been
omitted from this filing and filed separately with the Securities and Exchange
Commission

 

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$[***]

[***]

 

 

More than $[***]

[***]

 

Any milestone payment that Licensee makes to TSRI under Section 4.4 below upon
achievement of a given milestone event by a Sublicensee would be credited
against any payment due under this Section 4.1 only with respect to Sublicense
Revenues received in connection with achievement of the same milestone event.

 

To the extent that patent rights, other intellectual property rights or other
rights or obligations other than Licensed Patent Rights are sublicensed or
granted by Licensee, including, without limitation, pursuant to Other License
Agreements, that portion of the consideration received by Licensee and subject
to this Section 4.1 shall be equitably apportioned between the Licensed Patent
Rights and those other rights and obligations, and such apportionment shall be
reasonable and in accordance with customary standards in the industry.  Licensee
shall promptly deliver to TSRI a written report setting forth such
apportionment.  In the event TSRI disagrees with the determination made by
Licensee, TSRI shall so notify Licensee within [***] days of receipt of
Licensee’s report and the parties shall meet to discuss and resolve such
disagreement in good faith.  If the parties are unable to agree in good faith as
to such fair market values within thirty (30) days, then the matter shall be
submitted in accordance with the dispute resolution process set forth in
Section 14.9.

 

Notwithstanding the foregoing, with respect to any sublicense agreement, the
parties agree that the percentage of “Sublicense Revenues” attributable to such
sublicense agreement is not cumulative across Other License Agreements,
regardless of the number of Other License Agreements that are applicable to such
sublicense agreement, and regardless of whether sublicenses are granted under
more than one Other License Agreement.

 

4.2                            Increase in Sublicense Payments.  Notwithstanding
Section 4.1, in the event Licensee directly or indirectly initiates a Challenge
in or before any court or patent office, the percentages specified in
Section 4.1 shall be increased to the following rates:

 

Sublicense Revenues received by Licensee(on a cumulative basis)

Percent of Sublicense Revenues payable to TSRI

 

 

Up to $[***]

[***]

 

 

$[***]

[***]

 

 

More than $[***]

[***]

 

provided, however, that such increase shall only be applied to Sublicense
Revenues derived from the Licensed Patent Rights that are the subject of such
Challenge (and shall not be applied, for the avoidance of doubt, to Sublicense
Revenue derived from any Licensed Patent

 

*                      Confidential Information, indicated by [***], has been
omitted from this filing and filed separately with the Securities and Exchange
Commission

 

11

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Rights that are not the subject of such Challenge).  Any such increase shall be
effective during the pendency of such Challenge from the date Licensee first
initiates such Challenge, and thereafter during the term of the Agreement,
provided that at least one (1) claim that covers a Licensed Product or Licensed
Process within the Licensed Patent Rights being Challenged is held to be valid
and enforceable as a result of such Challenge.  [***]

 

4.3                            Product Development Milestones.  Licensee agrees
to pay and shall pay to TSRI the following non-creditable, non-refundable
product development milestones within sixty (60) days of the end of the
applicable quarter in which the first occurrence in the United States or Europe
of each milestone for the first Licensed Product or first Licensed Process to
meet such milestone as follows:

 

Milestone

Payment

 

[***]

 

Each such milestone shall be payable only once under the Agreement.  In the
event that any Licensed Product or Licensed Process would be subject to
development milestones and payments under this Section 4.3 as well as under any
Other License Agreements, then it is understood and agreed that such Licensed
Product or Licensed Process shall be subject to only a single schedule of
development milestones and payments under this Agreement and the Other License
Agreements.

 

5.                                    Royalty Payments.

 

5.1                            Sales by Licensee.  Royalties payable pursuant to
Section 3 herein, shall be payable by Licensee quarterly, within sixty (60) days
after the end of each calendar quarter, based upon Net Sales during the
immediately preceding calendar quarter.

 

5.2                            Sales by Sublicensees.  Licensee agrees to pay
and shall pay to TSRI, or cause its Sublicensees to pay to TSRI, all royalties
pursuant to Section 3 herein resulting from the Net Sales of its Sublicensees,
within sixty (60) days after the end of each calendar quarter, based on Net
Sales during the immediately preceding calendar quarter.

 

6.                                    Development and Commercialization
Activities.

 

6.1                            Commercial Development Plan.  Licensee has
provided to TSRI its development plan attached hereto as Exhibit C, under which
Licensee intends to bring the subject matter of the Licensed Patent Rights to
the point of commercial use (“Commercial Development Plan”), where such
Commercial Development Plan is subject to the mutual agreement by Licensee and
TSRI.  Pursuant to the Commercial Development Plan, Licensee shall use
commercially reasonable efforts to achieve the development benchmarks specified
in the Commercial Development Plan (“Benchmarks”) within the time periods set
forth in such specified in the Commercial Development Plan.  Notwithstanding the
foregoing, in the event that Licensee, its Affiliates or a Sublicensee, alone or
together, has expended a minimum of [***] (excluding amounts paid to TSRI under
the Research Funding and Option Agreement) per each

 

*                      Confidential Information, indicated by [***], has been
omitted from this filing and filed separately with the Securities and Exchange
Commission

 

12

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calendar year during the initial [***] period of development under such
Commercial Development Plan (where, for the avoidance of doubt, such period
shall commence upon the addition to this Agreement of the Licensed Patent Rights
that are the subject of such Commercial Development Plan) (“Initial Development
Period”), Licensee will be deemed to have complied with Licensee’s obligations
under this Section 6 in connection with such Commercial Development Plan for
each year during such initial [***] period.

 

6.2                            Licensee’s Commercialization Activities.

 

a.                                     Licensee shall use commercially
reasonable efforts and due diligence, or shall cause one or more of its
Affiliates and Sublicensees to use commercially reasonable efforts and due
diligence, to conduct research and achieve development of one or more Licensed
Products and Licensed Processes, as promptly as is commercially feasible. 
Following Licensee’s receipt of necessary regulatory approvals, Licensee or its
Affiliates or Sublicensees shall earnestly and diligently produce and sell
reasonable quantities of Licensed Products or Licensed Processes sufficient to
meet market demands.

 

b.                                    If a Licensed Product, Licensed Process or
License Biological Material is ultimately classified as a Research Tool under
Section 2.4, then Licensee shall use commercially reasonable efforts and due
diligence, or shall cause one or more of its Affiliates and Sublicensees to use
commercially reasonable efforts and due diligence to distribute and make such
Research Tool reasonably available to third parties on commercially reasonable
terms; provided, however, that Licensee shall not be obligated to make such
Research Tool available pursuant to this Section 6.2(b) to (i) third parties if
Licensee reasonably believes that the manufacture, use, offer for sale, sale or
import of such Research Tool might infringe the patent or other intellectual
property rights of a third party; or (ii) to for-profit third parties if
Licensee can reasonably demonstrate that such Research Tool may be materially
detrimental to a non-Research Tool it is currently developing and/or
commercializing under this Agreement.

 

c.                                     Licensee shall keep TSRI generally
informed as to Licensee’s progress in such research, development, regulatory
approval, marketing, production and sale, including its efforts, if any, to
sublicense Licensed Patent Rights, and Licensee shall deliver to TSRI an annual
written report of such efforts by June 30th of each calendar year and such other
reports of such efforts as TSRI may reasonably request.  In these annual
reports, Licensee shall describe its progress in complying with the Commercial
Development Plan and in achieving the Benchmarks and shall explain in detail the
reasons for any variances thereof.  Licensee shall also report in writing to
TSRI the dates when it has achieved the Benchmarks and the date of first
commercial sale of a Licensed Product or Licensed Process in each country within
thirty (30) days of such occurrences.  The contents of Licensee’s progress
reports to TSRI shall be deemed to be Licensee’s Confidential Information. 
Licensee may amend its Commercial Development Plan and/or the Benchmarks upon
TSRI’s prior written consent, which will not be unreasonably withheld if such
proposed amendment is supported by a detailed showing

 

*                      Confidential Information, indicated by [***], has been
omitted from this filing and filed separately with the Securities and Exchange
Commission

 

13

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by Licensee or its Affiliates or its Sublicensees using its best efforts and due
diligence in its performance of research and development of one or more Licensed
Products and Licensed Processes.

 

d.                                   Any time after the Initial Development
Period (or such later time as agreed in writing by TSRI and Licensee), in the
event (i) TSRI has a reasonable basis to believe, based on Licensee’s reports to
TSRI, that Licensee is not using commercially reasonable efforts and due
diligence as required under Sections 6.1 and 6.2.a, or (ii) Licensee has not
achieved the Benchmarks within the time provided in Exhibit C (as may be amended
as provided above), TSRI has the right to terminate this Agreement by providing
written notice to Licensee, where any such right to terminate shall be subject
to a [***] cure period by Licensee.  Failure to meet any of the Benchmarks
within the time provided in Exhibit C (as may be amended as provided above)
shall not constitute a breach by Licensee of this Agreement, but shall entitle
TSRI, at TSRI’s sole discretion, to terminate this Agreement as provided above
or convert the licenses granted under Sections 2.1-2.3 to a non-exclusive
license upon delivery of written notice to Licensee.  Notwithstanding the
foregoing, at any time after the initial one-year period of development under a
Commercial Development Plan (where, for the avoidance of doubt, such period
shall commence upon the addition to this Agreement of the Licensed Patent Rights
that are the subject of such Commercial Development Plan), in the event TSRI has
a reasonable basis to believe that Licensee is not using commercially reasonable
efforts and due diligence as required as required under Section 6.2.b, TSRI has
the right to convert, subject to a [***] cure period, the license granted under
Section 2.4 in connection with such Licensed Patent Rights to a non-exclusive
license upon delivery of written notice to Licensee.

 

6.3                            Reports on Revenues and Payments.  Licensee shall
submit to TSRI at the time payment is due after the end of each calendar
quarter, on a country-by-country and per Licensed Product and Licensed Process
basis, a royalty report (the “Royalty Report”) setting forth for such quarter:

 

a.                                     the number of units of Licensed Products
sold by Licensee, its Affiliates and each of its Sublicensees;

 

b.                                    the gross amount due or invoiced for such
Licensed Products by Licensee, its Affiliates and each of its Sublicensees;

 

c.                                     the gross amounts due or invoiced for all
Licensed Processes performed by Licensee, its Affiliates and each of its
Sublicensees;

 

d.                                   a detailed listing of any offsets under
Section 3.5 and deductions used to determine Net Sales of Licensed Products and
Licensed Processes pursuant to Section 1.8, and calculations on Combination
Products under Section 3.6;

 

*                      Confidential Information, indicated by [***], has been
omitted from this filing and filed separately with the Securities and Exchange
Commission

 

14

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e.                                     the amount of royalty due under
Section 3, or if no royalties are due to TSRI for any reporting period, the
statement that no royalties are due and an explanation why they are not due for
that quarterly period;

 

f.                                      the amount of Sublicense Revenues
received by Licensee; and

 

g.                                    the amount of Sublicense Payments due
under Section 4.1, or if no Sublicense Payments are due to TSRI for any
reporting period, the statement that no Sublicense Payments are due and an
explanation why they are not due for that quarterly period.

 

Such Royalty Report shall be certified as correct by an officer of Licensee. 
The contents of such Royalty Reports shall be deemed to be Licensee’s
Confidential Information.

 

6.4                            Royalty Payments.  Licensee agrees to pay and
shall pay to TSRI with each Royalty Report the amount of royalty and/or
Sublicense Payments due with respect to such quarter.  If multiple technologies
are covered by the licenses granted hereunder, Licensee shall specify which
Licensed Patent Rights and Licensed Biological Materials are utilized for each
Licensed Product or Licensed Process included in the Royalty Report.  All
payments due hereunder shall be deemed received when funds are credited to
TSRI’s bank account and shall be payable by check or wire transfer in United
States Dollars.

 

6.5                            Foreign Sales.  The remittance of royalties
payable on sales outside the United States shall be payable to TSRI in United
States Dollar equivalents at the official rate of exchange of the currency of
the country from which the royalties are payable, as quoted in the Wall Street
Journal for the last business day of the calendar quarter in which the royalties
are payable.  If the transfer of or the conversion into the United States Dollar
equivalents of any such remittance in any such instance is not lawful or
possible, the payment of such part of the royalties as is necessary shall be
made by the deposit thereof, in the currency of the country where the sale was
made on which the royalty was based to the credit and account of TSRI or its
nominee in any commercial bank or trust company of TSRI’s choice located in that
country, prompt written notice of which shall be given by Licensee to TSRI.

 

6.6                            Foreign Taxes.  Any tax required to be withheld
by Licensee under the laws of any foreign country for any royalties or other
amounts due hereunder or for the accounts of TSRI shall be promptly paid by
Licensee for and on behalf of TSRI to the appropriate governmental authority,
and Licensee shall furnish TSRI with proof of payment of such tax together with
official or other appropriate evidence issued by the applicable government
authority.  Any such tax actually paid on TSRI’s behalf shall be deducted from
royalty payments due TSRI.

 

15

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7.                                    Record Keeping.  Licensee shall keep, and
shall require its Affiliates and Sublicensees to keep, accurate records
(together with supporting documentation) of sales of Licensed Products and
Licensed Processes as appropriate to determine the amount of royalties,
Sublicense Payments, Product Development Milestone Payments and other monies due
to TSRI hereunder, as well as records regarding the calculations of royalty
offsets and Combination Products.  Such records shall be retained for at least
five (5) years following the end of the reporting period to which such records
relate.  Such records shall be available during normal business hours for
examination and copying by an independent certified public accounting firm
selected by TSRI and reasonably acceptable to Licensee for the purpose of
verifying that Licensee’s reports and payments are accurate and that Licensee is
in compliance with this Agreement.  In conducting such examinations pursuant to
this Section 7, TSRI’s accountant shall have access to, and may disclose to
TSRI, all records which TSRI reasonably believes to be relevant to the
calculation of royalties under Section 3, non-royalty revenues under Section 4
and Licensee’s compliance with this Agreement.  Such examination shall be at
TSRI’s expense, except that if such examination shows an underreporting or
underpayment of [***] or more for any twelve (12) month period, then Licensee
shall pay the cost of such examination (including without limitation TSRI’s
attorney’s fees, accountants fees and other costs), as well as any additional
payments that would have been payable to TSRI under this Agreement had Licensee
reported correctly, plus interest on such sum at the rate of [***] per month. 
All payments due hereunder shall be made within thirty (30) days of Licensee’s
receipt of a copy of the audit report.  TSRI may exercise its audit rights under
this Section 7 no more frequently than once in any calendar year.

 

8.                                    Patent Matters.

 

8.1                            Patent Prosecution and Maintenance.  From and
after the date of this Agreement, the provisions of this Section 8 shall control
the prosecution of any patent application and maintenance of any patent included
within Licensed Patent Rights.  TSRI shall (a) direct and control the
preparation, filing and prosecution of the United States and foreign patent
applications within Licensed Patent Rights (including without limitation any
reissues, reexaminations, appeals to appropriate patent offices and/or courts,
interferences and foreign oppositions); and (b) maintain the patents issuing
therefrom.  TSRI shall select the patent attorney, subject to Licensee’s written
approval, which approval shall not be unreasonably withheld.  Both parties agree
that TSRI shall have the right, at its sole discretion, to utilize TSRI’s Office
of Patent Counsel in lieu of or in addition to independent counsel for patent
prosecution and maintenance described herein, and the fees and expenses
associated with the work done by such Office of Patent Counsel and/or
independent patent counsel with regard to the preparation, filing and
prosecution of patent applications and maintenance of patents included within
Licensed Patent Rights shall be paid as set forth below.  Licensee shall have
full rights of consultation with the patent attorney so selected on all matters
relating to Licensed Patent Rights.  TSRI shall use its reasonable efforts to
implement all reasonable and timely requests made by Licensee with regard to the
preparation, filing, prosecution and/or maintenance of the patent applications
and/or patents within Licensed Patent Rights.

 

*                      Confidential Information, indicated by [***], has been
omitted from this filing and filed separately with the Securities and Exchange
Commission

 

16

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8.2                            Information to Licensee.  TSRI shall keep
Licensee timely informed with regard to the patent application and maintenance
processes.  TSRI shall deliver to Licensee copies of all patent applications,
amendments, related correspondence, and other related matters in a timely
manner.

 

8.3                            Patent Costs.  Licensee acknowledges and agrees
that the licenses granted hereunder are in partial consideration for Licensee’s
assumption of patent costs and expenses as described herein.  Licensee agrees to
pay and shall pay for all expenses referenced in Sections 8.1 and 8.2 hereof. 
In addition, Licensee agrees to reimburse and shall reimburse TSRI for all
patent costs and expenses previously paid or associated with Licensed Patent
Rights incurred by TSRI up to the Effective Date, less any such patent costs and
expenses previously reimbursed by Licensee under the Option Agreement.  Licensee
agrees to pay and shall pay all such past and future patent expenses associated
with the work on the Licensed Patent Rights performed by TSRI’s Office of Patent
Counsel and/or its independent counsel within thirty (30) days after Licensee
receives an itemized invoice therefor.  Failure of Licensee to pay patent costs
and expenses as set forth in this Section 8.3 shall immediately relieve TSRI
from its obligation to incur any further patent costs and expenses.  For the
avoidance of doubt, should Licensee not pay any patent costs and expenses due to
TSRI or independent counsel within thirty (30) days after Licensee’s receipt of
any itemized invoice therefor, TSRI shall have the right, at its sole
discretion, to cease all patent prosecution and allow Licensed Patent Rights to
go abandoned.  Such action by TSRI shall not constitute a breach of this
Agreement.  Payment can be made directly to independent counsel, or to TSRI. 
Licensee may elect with a minimum of ninety (90) days’ prior written notice to
TSRI, to discontinue payment for the filing, prosecution and/or maintenance of
any patent application and/or patent within Licensed Patent Rights.  Licensee
shall remain liable for all patent prosecution and maintenance costs incurred
prior to the date of notice of election and for a ninety (90) day period
following the date of such notice.  Any such patent application or patent so
elected shall immediately be excluded from the definition of Licensed Patent
Rights and from the scope of the licenses granted under this Agreement, and all
rights relating thereto shall revert to TSRI and may be freely licensed by TSRI.

 

8.4                            Ownership.  The patent applications filed and the
patents obtained by TSRI pursuant to Section 8.1 hereof shall be owned solely by
TSRI, assigned solely to TSRI and deemed a part of Licensed Patent Rights.

 

8.5                            TSRI Right to Pursue Patent.  If at any time
during the term of this Agreement, Licensee’s rights with respect to Licensed
Patent Rights are terminated in accordance with the terms of this Agreement,
TSRI shall have the right to take whatever action TSRI deems appropriate to
obtain or maintain the corresponding patent protection.  If TSRI pursues patents
under this Section 8.5, Licensee agrees to use commercially reasonable efforts
to cooperate fully, including by providing, at no charge to, all appropriate
technical data and executing all necessary legal documents.

 

8.6                            Infringement Actions.

 

8.6.1                Prosecution of Infringements.

 

17

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a.                                     Each party agrees to provide written
notice to the other party promptly after becoming aware of any infringement of
the Licensed Patent Rights by a third party and of any available evidence
thereof.  After receiving notice from the other party of a possible infringement
of the Licensed Patent Rights by a third party, the parties will consult with
each other about whether and to what extent such third party’s products or
activities are infringing upon the Licensed Patent Rights, and the extent to
which the infringing products or activities are damaging sales of Licensed
Products.  Within ninety (90) days of such notice, Licensee shall notify TSRI of
its decision and proposed course of action, where the date of Licensee’s notice
to TSRI, or the expiration of the ninety (90) day period, shall be known as the
“Commencement Date”.  If Licensee determines, in its reasonable commercial
discretion, and provides TSRI with its assessment supporting such determination,
that the prosecution of such infringement would be commercially unreasonable,
and TSRI does not object to such determination, then Licensee shall not have the
obligation as set forth under Section 8.6.1(d) to prosecute such infringement
and the consequences in Section 8.6.1(d) shall not apply; provided, however,
that TSRI shall then have the right, but not the obligation, to prosecute such
infringement.

 

b.                                    In the event Licensee is obligated to,
pursuant to Section 8.6.1(d) below, or elects to, pursuant to 8.6.1(a) above,
pursue a third party infringer, then Licensee may enter into settlements,
stipulated judgments or other arrangements respecting such infringement, at its
own expense, but only with TSRI’s prior written consent, which will not be
unreasonably withheld or delayed.  TSRI shall permit any action to be brought in
its name if required by law, and Licensee shall hold TSRI harmless from any
costs, expenses or liability respecting all such infringements.  TSRI agrees to
provide reasonable assistance which Licensee may require in any litigation
arising in accordance with the provisions of this Section 8.6.1, for which
Licensee shall pay to TSRI a reasonable hourly rate of compensation, including,
without limitation, joining such action as a party plaintiff if necessary or
desirable for initiation or continuation of such action; provided that the
Licensee reimburses TSRI promptly for any reasonable costs and expenses incurred
by TSRI in connection with providing such assistance.

 

c.                                     In the event Licensee is not obligated
to, pursuant to Section 8.6.1(d) below, pursue a third party infringer, then
Licensee shall notify TSRI in writing promptly and TSRI shall have the right,
but not the obligation, to prosecute such infringement on its own behalf.  If
TSRI prosecutes such infringement, then TSRI may, at its discretion, convert the
licenses granted to Licensee with respect to the patent(s) at issue to a
non-exclusive license.  Conversion by TSRI pursuant to this
Section 8.6.1(c) shall only be applicable to the country or countries within the
Licensed Patent Rights that are the subject of TSRI’s prosecution of such
infringement.

 

d.                                   Notwithstanding the foregoing Sections
8.6.1(b)-8.6.1(c), in order to maintain the licenses granted hereunder in force,
Licensee shall have the first right and obligation to prosecute any and all
third party infringements.  Unless Licensee

 

18

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and TSRI otherwise agree, pursuant to Section 8.6.1(a), that the prosecution of
any third party infringement is commercially unreasonable, failure on the part
of Licensee to prosecute any third party infringement within six (6) months
after the Commencement Date shall be grounds for termination of the licenses
granted to Licensee with respect to the patent(s) at issue, and such
patent(s) shall thereafter be excluded from the definition of Licensed Patent
Rights.  Termination by TSRI pursuant to this Section 8.6.1(d) shall only be
applicable to the country or countries within the Licensed Patent Rights that
are the subject of Licensee’s failure to prosecute such infringement.

 

8.6.2                Allocation of Recovery.  Any damages, settlements or other
recovery from an infringement action undertaken by Licensee pursuant to
Section 8.6.1 shall first be used to reimburse the parties for the costs and
expenses incurred in such action, and shall thereafter be allocated between the
parties as follows: (i) [***] to TSRI, (ii) and[***] to Licensee.  If Licensee
fails to prosecute any such action to completion or if TSRI prosecutes any such
action, then any damages, settlements, or other recovery, net of the parties’
costs and expenses incurred in such infringement action shall [***].

 

8.6.3                Defense of Infringements.  Licensee shall have the first
right, but not the obligation, to defend any suits against Licensee, Affiliates
or Sublicensees alleging infringement of any third party intellectual property
right due to Licensee’s use of the Licensed Patent Rights or its development or
commercialization of Licensed Products or Licensed Processes.  Licensee shall
promptly notify TSRI in writing of such claims, and TSRI and Licensee shall
confer with each other and cooperate during the defense of any such action.  If
Licensee finds it necessary or desirable for TSRI to become a party to such
action, TSRI shall execute all papers as may reasonably be necessary to add TSRI
as a party to such action.  Licensee shall bear all costs and expenses
associated with any such suit or action.  TSRI shall be entitled to, at its
expense, participate in and have counsel, selected by it and reasonably
acceptable to Licensee, participate in any such action.  In no event shall TSRI
have any out-of-pocket liability for costs of litigation or royalties, damages
and/or settlement amounts due to any third party (except for costs of its own
counsel as provided above).  If the third party intellectual property right is
held not to be infringed, unenforceable or invalid, any recovery of damages for
such suit shall be applied first [***] shall be entitled to keep the balance
remaining from any such recovery.  For the purpose of clarity, it is
acknowledged that this Section 8.6.3 shall in no way limit Licensee’s
obligations under Section 9.1 to indemnify, defend and hold harmless TSRI with
respect to third party claims alleging infringement of such third party’s
intellectual property rights.

 

8.6.4                Declaratory Judgment Actions.  If a declaratory judgment
action is brought naming TSRI or Licensee or any of its Affiliates or
Sublicensees as a defendant and alleging invalidity, unenforceability or
non-infringement of any Licensed Patent Rights, Licensee or TSRI, as the case
may be, shall promptly notify the other party in writing and Licensee may elect,
upon written notice to TSRI within twenty (20) days after receiving or giving
notice of the commencement of such action, to take over the sole control of such
action at its own expense.  TSRI shall be entitled to, at its expense,
participate in and have counsel, selected by it and reasonably acceptable to
Licensee, participate in any such action.  If Licensee does not defend

 

*                      Confidential Information, indicated by [***], has been
omitted from this filing and filed separately with the Securities and Exchange
Commission

 

19

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any such action, then TSRI shall have the right, but shall not be obligated, to
defend such action at TSRI’s expense.

 

9.                                    Indemnity and Insurance.

 

9.1                            Indemnity.  Licensee hereby agrees to indemnify,
defend (by counsel reasonably acceptable to TSRI) and hold harmless TSRI and any
parent, subsidiary or other affiliated entity of TSRI and their trustees,
directors, officers, employees, scientists, agents, successors, assigns and
other representatives (collectively, the “Indemnitees”) from and against all
claims, suits, actions, damages, liabilities, losses and other expenses,
including without limitation reasonable attorney’s fees, expert witness fees and
costs incurred by the Indemnitees, with respect to any third party claim [***]
(collectively “Claim”), that arises out of or relates to (a) [***], (b) [***],
(c) [***], (d) [***], (e) [***], and/or (f) Licensee’s or any Sublicensee’s
failure to comply with any applicable laws, rules or regulations, except that
[***].  Licensee’s obligation to defend such Claims shall apply to any third
party allegations or disputes that arise out of or relate to any of the items
described in subparagraphs (a) through (f) above.  Licensee shall not enter into
any settlement of such Claims that imposes any obligation on TSRI, that does not
unconditionally release TSRI from all liability or that would have a material
adverse effect on TSRI’s reputation or business without TSRI’s prior written
consent.  Notwithstanding the above, Indemnitees, at their expense, shall have
the right to retain separate independent counsel to assist in defending any such
Claims.  In the event Licensee fails to promptly indemnify and defend such
Claims and/or pay Indemnitees’ expenses as provided above, Indemnitees shall
have the right to defend themselves, and in that case, Licensee shall reimburse
Indemnitees for all of their reasonable attorney’s fees, costs and damages
incurred in settling or defending such Claims within thirty (30) days of each of
Indemnitees’ written requests.  This indemnity shall be a direct payment
obligation and not merely a reimbursement obligation of Licensee to Indemnitees.

 

9.2                            Insurance.  Licensee shall name TSRI and
Indemnitees as additional insured parties on any commercial general liability
and product liability insurance policies maintained by Licensee, its Affiliates,
and Sublicensees applicable to the Licensed Products, Licensed Processes and
Licensed Biological Materials.

 

9.2.1                Beginning at the time any such Licensed Product or Licensed
Process is being commercially distributed or sold (other than for the purpose of
obtaining regulatory approvals) by Licensee or by a Sublicensee, Licensee shall,
at its sole cost and expense, procure and maintain commercial general liability
insurance and product liability insurance in amounts and on terms consistent
with industry standards for similarly situated pharmaceutical companies
commercializing products, but in no case will such insurance be less than
$3,000,000 per incident and $5,000,000 annual aggregate.  During clinical trials
involving any Licensed Product, Licensed Process or Licensed Biological
Material, Licensee shall, at its sole cost and expense, procure and maintain
commercial general liability insurance in the same amounts and terms as
specified above.  Licensee’s commercial general liability insurance shall
provide coverage for personal injury, broad form property damage, advertising
injury, premises-operations, products and completed operations and contractual
liability including Licensee’s indemnity and other obligations under this
Agreement.  Licensee may elect to self-insure all or

 

*                      Confidential Information, indicated by [***], has been
omitted from this filing and filed separately with the Securities and Exchange
Commission

 

20

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part of the foregoing on commercially reasonable terms, which must be
pre-approved by TSRI in writing; however, TSRI shall be obligated to approve
such self-insurance if Licensee has and continues to maintain minimum cash
reserves covering such self-insurance or minimum book equity, in either case in
the amount of Five Hundred Million Dollars ($500,000,000), which Licensee
sufficiently demonstrates to TSRI in writing.  The insurance coverage amounts
specified herein or the maintenance of such insurance policies shall not in any
way limit Licensee’s indemnity or other liability under this Agreement.

 

9.2.2                In addition, Licensee, on behalf of itself and its
insurance carriers, waives any and all claims and rights of recovery against
TSRI and the Indemnitees, including without limitation all rights of
subrogation, with respect to either party’s performance under this Agreement or
for any loss of or damage to Licensee or its property or the property of others
under its control.  Licensee’s commercial general liability insurance policy
shall also include a waiver of subrogation consistent with this paragraph in
favor of TSRI and the Indemnitees.  Licensee shall be responsible for obtaining
such waiver of subrogation from its insurance carriers.  Licensee’s insurance
policies shall be primary and not contributory to any insurance carried by its
Sublicensees or TSRI.  Upon TSRI’s request, Licensee shall deliver to TSRI
copies of insurance certificates or binders and such waiver of subrogation that
complies with the requirements of this Section 9.2.2.  Licensee shall provide
TSRI with written notice at least fifteen (15) days prior to the cancellation,
non-renewal or material change in such insurance described in Section 9.2.1.  If
Licensee does not obtain replacement insurance providing comparable coverage
within such fifteen (15) day period, TSRI shall have the right to terminate this
Agreement for material breach under Section 12.3.

 

9.2.3                Licensee shall maintain such commercial general liability
insurance beyond the expiration or termination of this Agreement during (a) the
period that any Licensed Product or Licensed Process is being commercially
distributed or sold by Licensee or by a Sublicensee, Affiliate or agent of
Licensee; and (b) a reasonable period after the period referred to in
Section 9.2.3(a) above, which in no event shall be less than five (5) years.

 

9.3                            Pre-Challenge Requirements.  Licensee will
provide written notice to TSRI at least [***] prior to Licensee directly or
indirectly initiating a Challenge in or before any court or patent office. 
Licensee will include with such written notice [***] to enable the parties to
attempt in good faith to mutually resolve such issues.

 

10.                            Limited Warranty.

 

10.1                    Limited Warranty.  TSRI hereby represents and warrants
that, to the actual knowledge of TSRI, and only as of the Effective Date, (a) it
is the sole and exclusive owner, appointed agent for licensing or licensee of
all right, title and interest in and to the Licensed Patent Rights that exist as
of the Effective Date; (b) it has the power and authority to grant the licenses
provided for herein to Licensee, and that it has not earlier granted, or assumed
any obligation to grant, any rights in such Licensed Patent Rights to any third
party that have not been waived that would conflict with the rights granted to
Licensee herein; and (c) this Agreement constitutes the legal, valid and binding
obligation of TSRI, enforceable against TSRI

 

*                      Confidential Information, indicated by [***], has been
omitted from this filing and filed separately with the Securities and Exchange
Commission

 

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in accordance with its terms, except with respect to creditor’s rights generally
and the enforcement of equitable remedies.

 

10.2                    Licensee hereby warrants and represents this Agreement
constitutes the legal, valid and binding obligation of Licensee, enforceable
against Licensee in accordance with its terms, except with respect to creditor’s
rights generally and the enforcement of equitable remedies.

 

10.3                    Disclaimer.  EXCEPT AS PROVIDED IN SECTION 10.1, TSRI
MAKES NO OTHER WARRANTIES CONCERNING LICENSED PATENT RIGHTS, LICENSED BIOLOGICAL
MATERIALS OR ANY OTHER MATTER WHATSOEVER, INCLUDING WITHOUT LIMITATION ANY
EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR ARISING OUT OF COURSE OF
CONDUCT OR TRADE CUSTOM OR USAGE, AND DISCLAIMS ALL SUCH EXPRESS OR IMPLIED
WARRANTIES.  TSRI MAKES NO WARRANTY OR REPRESENTATION AS TO THE VALIDITY OR
SCOPE OF LICENSED PATENT RIGHTS, OR THAT ANY LICENSED PRODUCT, LICENSED PROCESS
OR LICENSED BIOLOGICAL MATERIAL WILL BE FREE FROM AN INFRINGEMENT ON PATENTS OR
OTHER INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR THAT NO THIRD PARTIES
ARE IN ANY WAY INFRINGING UPON ANY LICENSED PATENT RIGHTS OR LICENSED BIOLOGICAL
MATERIALS COVERED BY THIS AGREEMENT.  FURTHER, TSRI HAS MADE NO INVESTIGATION
AND MAKES NO REPRESENTATION THAT THE LICENSED PATENT RIGHTS OR LICENSED
BIOLOGICAL MATERIALS ARE SUITABLE FOR LICENSEE’S PURPOSES.

 

10.4                    Limitation of Liability.  IN NO EVENT SHALL EITHER PARTY
BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, EXEMPLARY OR CONSEQUENTIAL
DAMAGES (INCLUDING WITHOUT LIMITATION DAMAGES FOR LOSS OF PROFITS OR EXPECTED
SAVINGS) ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ITS SUBJECT
MATTER, EXCEPT FOR LIABILITY FOR BREACH BY SUCH PARTY OF ANY OF THE
CONFIDENTIALITY PROVISIONS IN SECTION 11 AND EXCEPT FOR LICENSEE’S INDEMNITY
UNDER SECTION 9.1.  TSRI’S AGGREGATE LIABILITY, IF ANY, FOR ALL DAMAGES OF ANY
KIND RELATING TO THIS AGREEMENT OR ITS SUBJECT MATTER SHALL NOT EXCEED THE
AMOUNT PAID BY LICENSEE TO TSRI UNDER THIS AGREEMENT.  THE FOREGOING EXCLUSIONS
AND LIMITATIONS SHALL APPLY TO ALL CLAIMS AND ACTIONS OF ANY KIND AND ON ANY
THEORY OF LIABILITY, WHETHER BASED ON CONTRACT, TORT (INCLUDING, BUT NOT LIMITED
TO NEGLIGENCE OR STRICT LIABILITY), OR ANY OTHER GROUNDS, AND REGARDLESS OF
WHETHER A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.  THE
PARTIES FURTHER AGREE THAT EACH WARRANTY DISCLAIMER, EXCLUSION OF DAMAGES OR
OTHER LIMITATION OF LIABILITY HEREIN IS INTENDED TO BE SEVERABLE AND INDEPENDENT
OF THE OTHER PROVISIONS

 

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BECAUSE THEY EACH REPRESENT SEPARATE ELEMENTS OF RISK ALLOCATION BETWEEN THE
PARTIES.

 

11.                            Confidentiality and Publication.

 

11.1                    Treatment of Confidential Information.  The parties
agree that during the term of this Agreement, and for a period of five (5) years
after this Agreement terminates, a party receiving Confidential Information of
the other party will (a) maintain in confidence such Confidential Information to
the same extent such party maintains its own proprietary information; (b) not
disclose such Confidential Information to any third party without prior written
consent of the other party; and (c) not use such Confidential Information for
any purpose except those permitted by this Agreement.  Notwithstanding the
foregoing, if a party is required by law, regulation or court order to disclose
Confidential Information of the other party, the party required to make such
disclosure shall (i) promptly send a copy of the order or notice to the other
party not later than ten (10) days before the proposed disclosure or such
shorter period of time as may be reasonably practical under the circumstances;
(ii) cooperate with the other party if the other party wishes to object or
condition such disclosure through a protective order or otherwise; (iii) limit
the extent of such disclosure to the minimum required to comply with the order
or notice; and (iv) use reasonable efforts to seek confidential treatment (i.e.,
filing “under seal”) for that disclosure.  In addition, a party may disclose
Confidential Information of the other party to its Affiliates and employees, to
Sublicensees and potential Sublicensees (in the case of Licensee), or to other
third parties who are investors or potential investors in connection with due
diligence or similar investigations or in confidential financing documents,
provided, in each case, that any such Affiliate, employee, Sublicensee,
potential Sublicensee or other third party investor or potential investor agrees
in writing to be bound by terms of confidentiality and non-use at least as
stringent as those set forth in this Section 11, but with no further right to
disclose or otherwise distribute TSRI’s Confidential Information.

 

11.2                    Publications.  Licensee agrees that TSRI shall have the
right to publish in accordance with its general policies, and that this
Agreement shall not restrict, in any fashion, TSRI’s right to publish.

 

11.3                    Publicity.  Except as otherwise provided herein or
required by any applicable law, rule or regulation (including, without
limitation, rules of the U.S. Securities and Exchange Commission and rules of
any stock exchange upon which Licensee’s securities may be listed), no party
shall originate any publication, news release or other public announcement,
written or oral, whether in the public press, stockholders’ reports, or
otherwise, relating to this Agreement or to any sublicense hereunder, or to the
performance hereunder or under any such sublicense agreements, without the prior
written approval of the other party, which approval shall not be unreasonably
withheld.  Scientific publications published in accordance with Section 11.2 of
this Agreement shall not be construed as publicity governed by this
Section 11.3.

 

12.                            Term and Termination.

 

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12.1                    Term.  Unless terminated sooner in accordance with the
terms set forth herein, this Agreement, and the licenses granted hereunder,
shall terminate upon termination of the royalty obligations as provided in
Section 3.10 hereof.

 

12.2                    Termination Upon Mutual Agreement.  This Agreement may
be terminated by mutual written consent of both parties.

 

12.3                    Termination by TSRI.  TSRI may terminate this Agreement
as follows:

 

a.                                     If Licensee does not make a payment due
hereunder and fails to cure such non-payment (including the payment of interest
in accordance with Section 14.2) within thirty (30) days after the date of
notice in writing of such non-payment by TSRI;

 

b.                                    If Licensee defaults upon its
indemnification and insurance obligations under Section 9 and the default has
not been remedied within thirty (30) days after the date of notice in writing of
such default by TSRI;

 

c.                                     As provided in Section 6.2;

 

d.                                   Upon written notice to Licensee in the
event of the filing of bankruptcy or the bankruptcy of Licensee or the
appointment of a receiver of any of Licensee’s assets, or the making by Licensee
of any assignment for the benefit of creditors, or the institution of any
proceedings against Licensee under any bankruptcy or insolvency laws;

 

e.                                     If Licensee is convicted of a felony
relating to the development, manufacture, use, marketing, distribution or sale
of Licensed Products, Licensed Processes or Licensed Biological Materials;

 

f.                                      In the event Licensee brings any
Challenge(s), TSRI has the right to immediately terminate this Agreement without
any liability and without any opportunity to cure by Licensee upon written
notice to Licensee.  In the event that Sublicensee brings any Challenge(s),
Licensee agrees that it will terminate such Sublicense;

 

g.                                    Except as provided in subparagraphs (a) -
(f) above, if Licensee commits a material breach of any of its obligations under
this Agreement and the material breach has not been remedied within ninety (90)
days after the date of notice in writing of such default by TSRI.

 

12.4                    Termination by Licensee.  Licensee may terminate this
Agreement by giving ninety (90) days’ advance written notice of termination to
TSRI.

 

12.5                    Rights Upon Expiration.  Neither party shall have any
further rights or obligations upon the expiration of this Agreement upon its
regularly scheduled expiration date,

 

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other than the obligation of Licensee to make any and all reports and payments
due under Articles 3 and/or 4 with respect to events that occurred prior to such
expiration in accordance with Sections 6.3, 6.4, 6.5 and 6.6, and to reimburse
patent costs and expenses accrued prior to expiration in accordance with
Section 8.3.  Notwithstanding the above, Sections 2.7, 2.8, 2.9, 2.10, 7, 9.1,
9.2, 10.3, 10.4, 11, 12.5, 12.8 and 14 shall also survive the expiration of this
Agreement.

 

12.6                    Rights Upon Termination.

 

12.6.1        Notwithstanding any other provision of this Agreement, upon any
termination of this Agreement prior to the regularly scheduled expiration date
of this Agreement, the licenses granted hereunder shall terminate and revert to
TSRI.  Except as otherwise provided in Section 12.7 of this Agreement with
respect to work-in-progress, upon such termination, Licensee shall have no
further right to develop, manufacture or market any Licensed Product, Licensed
Process, or to otherwise use any Licensed Patent Rights or any Licensed
Biological Materials.  Upon any such termination, Licensee shall promptly return
all materials, samples, documents, information, and other materials which embody
or disclose Licensed Patent Rights or any Licensed Biological Materials;
provided, however, that Licensee shall not be obligated to provide TSRI with
proprietary information which Licensee can show that it independently
developed.  Any such termination shall not relieve either party from any
obligations accrued to the date of such termination, including without
limitation the obligation of Licensee to make any and all reports and payments
due under Articles 3 and/or 4 with respect to events that occurred prior to such
termination or as provided in Section 12.7, in each case in accordance with
Sections 6.3, 6.4, 6.5 and 6.6, and to reimburse patent costs and expenses
accrued prior to termination in accordance with Section 8.3.  Notwithstanding
the above, Sections 2.7, 2.8, 2.9, 2.10, 7, 9.1, 9.2, 10.3, 10.4, 11, 12.6, 12.8
and 14 shall also survive the termination of this Agreement.

 

12.6.2        Any sublicense shall, upon the delivery of written notice by
Sublicensee, except those Sublicensee’s in default, to TSRI prior to termination
of this Agreement, survive termination of this Agreement on the same terms and
conditions set forth in the applicable sublicense for a period of [***]
following termination of this Agreement (the “Temporary License Period”);
provided however, that if such written notice is not delivered prior to
termination of this Agreement, such sublicense shall immediately terminate upon
termination of this Agreement.  In the event a Sublicensee provides such written
notice, as a condition precedent to TSRI’s obligation to grant the direct
license to such Sublicensee as set forth below, such Sublicensee must pay to
TSRI all past due royalties, non-royalty revenue, patent costs and all other
monies owed by Licensee to TSRI under this Agreement.  Upon TSRI’s receipt of
all such outstanding monies, TSRI shall enter into a license agreement directly
with such Sublicensee (the “New License Agreement”).  Each New License Agreement
shall be subject to the same non-financial terms and conditions as those in this
Agreement; provided, however, that each New License Agreement shall contain
substantially the same terms and conditions regarding sublicense scope,
sublicense territory, duration of sublicense grant, and diligence obligations of
the Sublicensee as the sublicense agreement between such Sublicensee and
Licensee.  Notwithstanding the above, TSRI’s obligation to enter into a New
License

 

*                      Confidential Information, indicated by [***], has been
omitted from this filing and filed separately with the Securities and Exchange
Commission

 

25

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Agreement is expressly conditioned upon each of the following: (i) Sublicensee
shall agree in the New License Agreement to terms providing that in no event
shall TSRI be liable to Sublicensee for any actual or alleged breach of such
sublicense agreement by Licensee; (ii) TSRI shall not have any obligations to
such Sublicensee other than TSRI’s obligations to Licensee as set forth herein;
(iii) each New License Agreement shall be subordinate and comply in all respects
to the applicable provisions of this Agreement, and the financial terms of each
New License Agreement, including without limitation, the running royalty rate,
shall be consistent with the terms of the sublicense agreement with Licensee,
but shall in no event be less than the corresponding financial terms set forth
in this Agreement, including without limitation the obligation to pay minimum
annual royalties and other monetary payments required to be made by Licensee to
TSRI; and (iv) in no event shall TSRI be obliged to accept provisions in the New
License Agreement (a) unless such provisions correspond to rights granted by
Licensee to Sublicensee in conformance with this Agreement, and such provisions
are not in conflict with the rights, duties and obligations accruing to Licensee
under this Agreement; or (b) where such provisions are inconsistent with the
legal obligations under any other sublicense agreement granted by Licensee, or
by applicable federal, state or local statute or regulation.  In the event
Sublicensee does not comply with the provisions of this Section 12.6.2, such
Sublicensee’s sublicense shall immediately terminate upon expiration of the
Temporary License Period.  Licensee must include or specifically reference this
Section 12.6.2 in each of its sublicense agreements.

 

12.7                    Work-in-Progress.  Upon any early termination of the
license granted hereunder in accordance with this Agreement, Licensee shall be
entitled to finish any work-in-progress and to sell any completed inventory of
Licensed Products covered by such license which remain on hand as of the date of
the termination, so long as Licensee sells such inventory in the normal course
of business and at regular selling prices and pays to TSRI the royalties
applicable to such subsequent sales in accordance with the terms and conditions
as set forth in this Agreement, provided that no such sales shall be permitted
after the expiration of six (6) months after the date of termination.

 

12.8                    Final Royalty Report.  Upon termination or expiration of
this Agreement, Licensee shall submit a final report to TSRI, and any payments
due TSRI and unreimbursed patent expenses invoiced by TSRI shall become
immediately payable.

 

13.                            Assignment; Successors.

 

13.1                    Assignment.  Any and all assignments of this Agreement
or any rights granted hereunder by Licensee without TSRI’s prior written consent
are void, except either party may assign this Agreement or rights granted
hereunder without the other party’s prior written consent (i) to an Affiliate of
the assigning party; or (ii) to a successor in connection with the merger,
consolidation or sale of all or substantially all of its assets to which this
Agreement relates.

 

13.2                    Binding Upon Successors and Assigns.  Subject to the
limitations on assignment herein, this Agreement shall be binding upon and inure
to the benefit of any successors in interest and assigns of TSRI and Licensee. 
Any such successor or assignee of

 

26

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Licensee’s interest shall expressly assume in writing the performance of all the
terms and conditions of this Agreement to be performed by Licensee.

 

14.                            General Provisions.

 

14.1                    Independent Contractors.  The relationship between TSRI
and Licensee is that of independent contractors.  TSRI and Licensee are not
joint venturers, partners, principal and agent, master and servant, employer or
employee, and have no other relationship other than independent contracting
parties.  TSRI and Licensee shall have no power to bind or obligate each other
in any manner, other than as is expressly set forth in this Agreement.

 

14.2                    Late Payments.  Late payments of any and all payments
due hereunder shall be subject to a charge of [***] per month, or [***]
whichever is greater.

 

14.3                    Governmental Approvals and Marketing of Licensed
Products.  Licensee shall be responsible for obtaining all necessary
governmental approvals for the development, production, distribution,
performance, sale and use of any Licensed Product or Licensed Process, at
Licensee’s expense, including, without limitation, any safety studies.  Licensee
shall have sole responsibility for any warning labels, packaging and
instructions as to the use of Licensed Products and for the quality control for
any Licensed Products or Licensed Processes.

 

14.4                    Patent Marking.  To the extent required by applicable
law, Licensee shall mark all Licensed Products or their containers in accordance
with the applicable patent marking laws.

 

14.5                    No Use of Name.  The use of the name “The Scripps
Research Institute”, “Scripps”, “TSRI” or any variation thereof in connection
with the advertising, distribution, sale or performance of Licensed Products or
Licensed Processes is expressly prohibited.  The foregoing notwithstanding,
without the consent of TSRI, Licensee may state that it is licensed by TSRI
under the Licensed Patent Rights and identify the inventors, their affiliation
with TSRI and their relationship to Licensee, and further, Licensee may comply
with disclosure requirements of all applicable laws relating to its business,
including, without limitation, United Sates and state securities laws.

 

14.6                    U.S. Manufacture.  Licensee agrees to abide by the
Preference for United States Industry as set forth in 37 CFR 401.14 (I), which
includes Licensee’s agreement that any Licensed Product or Licensed Process sold
in the United States shall be manufactured substantially in the United States.

 

14.7                    Foreign Registration.  Licensee agrees to register this
Agreement with any foreign governmental agency which requires such registration,
and Licensee shall pay all costs and legal fees in connection therewith.  In
addition, Licensee shall ensure that all foreign laws affecting this Agreement
or the sale of Licensed Products or Licensed Processes are fully satisfied.

 

*                      Confidential Information, indicated by [***], has been
omitted from this filing and filed separately with the Securities and Exchange
Commission

 

27

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14.8                    Use of Biological Materials.  Licensee agrees that its
use of any Licensed Biological Materials shall comply with all applicable
statutes, regulations, and guidelines.  Licensee agrees not to use the Licensed
Biological Materials for research involving human subjects or clinical trials in
the United States without complying with 21 CFR 50 and 45 CFR 46. Licensee
agrees not to use the Licensed Biological Materials for research involving human
subjects or clinical trials outside of the United States without complying with
the applicable regulations of the appropriate national control authorities.

 

14.9                    Arbitration.  Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, including without limitation
any and all Challenges, shall be settled by binding confidential arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (“AAA”), and the procedures set forth below.  In the event of any
inconsistency between the Rules of AAA and the procedures set forth below, the
procedures set forth below shall control.  Judgment upon the award rendered by
the arbitrators may be enforced in any court having jurisdiction thereof.

 

14.9.1        Location.  The location of the arbitration shall be in the County
of San Diego.  TSRI and Licensee hereby irrevocably submit to the exclusive
jurisdiction and venue of the American Arbitration Association arbitration panel
selected by the parties and located in San Diego County, California for any
dispute regarding this Agreement, including without limitation any Challenges,
and to the exclusive jurisdiction and venue of the federal and state courts
located in San Diego County, California for any action or proceeding to enforce
an arbitration award or as otherwise provided in Section 14.9.5 below, and waive
any right to contest or otherwise object to such jurisdiction or venue.

 

14.9.2        Selection of Arbitrators.  The arbitration shall be conducted by a
panel of three neutral arbitrators who are independent and disinterested with
respect to the parties, this Agreement, and the outcome of the arbitration. 
Each party shall appoint one neutral arbitrator, and these two arbitrators so
selected by the parties shall then select the third arbitrator, and all
arbitrators must have at least ten (10) years experience in mediating or
arbitrating cases regarding the same or substantially similar subject matter as
the dispute between Licensee and TSRI.  If one party has given written notice to
the other party as to the identity of the arbitrator appointed by the party, and
the party thereafter makes a written demand on the other party to appoint its
designated arbitrator within the next ten days, and the other party fails to
appoint its designated arbitrator within ten days after receiving said written
demand, then the arbitrator who has already been designated shall appoint the
other two arbitrators.

 

14.9.3        Discovery.  The arbitrators shall decide any disputes and shall
control the process concerning these pre-hearing discovery matters.  Pursuant to
the Rules of AAA, the parties may subpoena witnesses and documents for
presentation at the hearing.

 

14.9.4        Case Management.  Prompt resolution of any dispute is important to
both parties; and the parties agree that the arbitration of any dispute shall be
conducted expeditiously.  The arbitrators are instructed and directed to assume
case management initiative and control over the arbitration process (including
scheduling of events, pre-hearing discovery

 

28

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and activities, and the conduct of the hearing), in order to complete the
arbitration as expeditiously as is reasonably practical for obtaining a just
resolution of the dispute.

 

14.9.5        Remedies.  The arbitrators may grant any legal or equitable remedy
or relief that the arbitrators deem just and equitable, to the same extent that
remedies or relief could be granted by a state or federal court, provided
however, that no punitive damages may be awarded.  No court action shall be
maintained seeking punitive damages.  The decision of any two of the three
arbitrators appointed shall be binding upon the parties.  Notwithstanding
anything to the contrary in this Agreement, prior to or while an arbitration
proceeding is pending, either party has the right to seek and obtain injunctive
and other equitable relief from a court of competent jurisdiction to enforce
that party’s rights hereunder.

 

14.9.6        Expenses.  The expenses of the arbitration, including the
arbitrators’ fees, expert witness fees, and attorney’s fees, may be awarded to
the prevailing party, in the discretion of the arbitrators, or may be
apportioned between the parties in any manner deemed appropriate by the
arbitrators.  Unless and until the arbitrators decide that one party is to pay
for all (or a share) of such expenses, both parties shall share equally in the
payment of the arbitrators’ fees as and when billed by the arbitrators.

 

14.9.7        Confidentiality.  Except as set forth below, and as necessary to
obtain or enforce a judgment upon any arbitration award, the parties shall keep
confidential the fact of the arbitration, the dispute being arbitrated, and the
decision of the arbitrators.  Notwithstanding the foregoing, the parties may
disclose information about the arbitration to persons who have a need to know,
such as directors, trustees, management employees, witnesses, experts,
investors, attorneys, lenders, insurers, and others who may be directly
affected.  Additionally, if a party has stock which is publicly traded, the
party may make such disclosures as are required by applicable securities laws or
rules or regulations of any stock exchange upon which securities are traded or
listed, but will use commercially reasonable efforts to seek confidential
treatment for such disclosure.

 

14.10            Entire Agreement; Modification.  This Agreement and all of the
attached Exhibits set forth the entire agreement and understanding between the
parties as to the subject matter hereof, and supersede all prior or
contemporaneous agreements or understandings, whether oral or written.  There
shall be no amendments or modifications to this Agreement, except by a written
document which is signed by both parties.

 

14.11            California Law.  This Agreement shall be construed and enforced
in accordance with the laws of the State of California without regard to its
conflicts or choice of laws principles thereof.

 

14.12            Headings.  The headings for each article and section in this
Agreement have been inserted for convenience of reference only and are not
intended to limit or expand on the meaning of the language contained in the
particular article or section.

 

14.13            Severability.  Should any one or more of the provisions of this
Agreement be held invalid or unenforceable by a court of competent jurisdiction,
it shall be considered

 

29

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severed from this Agreement and shall not serve to invalidate the remaining
provisions thereof.  The parties shall make a good faith effort to replace any
invalid or unenforceable provision with a valid and enforceable one such that
the objectives contemplated by them when entering this Agreement may be
realized.

 

14.14            No Waiver.  Any delay in enforcing a party’s rights under this
Agreement or any waiver as to a particular default or other matter shall not
constitute a waiver of such party’s rights to the future enforcement of its
rights under this Agreement, excepting only as to an express written and signed
waiver as to a particular matter for a particular period of time.

 

14.15            Name.  Whenever there has been an assignment or a sublicense by
Licensee as permitted by this Agreement, the term “Licensee” as used in this
Agreement shall also include and refer to, if appropriate, such assignee or
Sublicensee (to the extent of such assignment or sublicense).

 

14.16            Attorneys’ Fees.  In the event of a dispute between the parties
hereto or in the event of any default hereunder, the party prevailing in the
resolution of any such dispute or default shall be entitled to recover its
reasonable attorneys’ fees and other costs incurred in connection with resolving
such dispute or default.  Notwithstanding anything to the contrary herein, the
parties agree that this Section 14.16 shall not apply and attorney’s fees and
costs shall not be awarded to either party with respect to any Challenge or any
action where Licensee alleges that it is not required to comply with or perform
some or all of the provisions of this Agreement based upon a good faith claim
that any of the Licensed Patent Rights are invalid or unenforceable.  TSRI and
Licensee each represent that it has been represented by its own counsel in the
negotiation and execution of this Agreement.  Each party further represents that
it has relied solely on the advice and representation of its respective counsel
in agreeing to this Section 14.16 and all of the other provisions of this
Agreement.

 

14.17            Notices.  Any notices required by this Agreement shall be in
writing, shall specifically refer to this Agreement and shall be sent by
registered or certified airmail, postage prepaid, or by facsimile machine,
charges prepaid, or by overnight courier, postage prepaid and shall be forwarded
to the respective addresses set forth below unless subsequently changed by
written notice to the other party:

 

For TSRI:

The Scripps Research Institute
10550 North Torrey Pines Road, TPC-9
La Jolla, California 92037
Attention: Vice President, Business Development
Fax No.: (858)784-9910

 

 

with a copy to:

The Scripps Research Institute
10550 North Torrey Pines Road, TPC-8
La Jolla, California 92037
Attention: Chief Business Counsel
Fax No.: (858) 784-9399

 

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For Licensee:

Fate Therapeutics, Inc.
10931 North Torrey Pines Road, Suite 107
La Jolla, CA 92037
Attention: Chief Financial Officer
Fax No.: (858) 875-1843

 

 

With a copy to:

Goodwin Procter LLP
Exchange Place
Boston, MA 02109
Attn: Kingsley L. Taft, Esq.
Telephone: (617) 570-1000
Facsimile: (6117) 523-1231

 

Notices shall be deemed delivered upon the earlier of (a) when received;
(b) three (3) days after deposit into the U.S. mail; (c) the date notice is sent
via telefax, telex or cable; or (d) the day immediately following delivery to an
overnight courier guaranteeing next-day delivery (except Sunday and holidays).

 

14.18            Compliance with U.S. Laws.  Nothing contained in this Agreement
shall require or permit TSRI or Licensee to do any act inconsistent with the
requirements of any United States law, regulation or executive order as the same
may be in effect from time to time.

 

31

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IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized representatives as of the date set forth above.

 

TSRI:

 

LICENSEE:

 

 

 

 

 

 

THE SCRIPPS RESEARCH INSTITUTE

 

FATE THERAPEUTICS, INC.

 

 

 

 

 

 

 

By:

/s/ Scott Forrest

 

By:

/s/ J. Scott Wolchko

 

 

 

 

 

 

 

 

Title: Senior Director, Business & Technology

 

Title:

CFO

Development

 

 

 

 

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EXHIBIT A

 

LICENSED BIOLOGICAL MATERIALS

 

[***]

 

*                      Confidential Information, indicated by [***], has been
omitted from this filing and filed separately with the Securities and Exchange
Commission

 

--------------------------------------------------------------------------------

 

EXHIBIT B

 

LICENSED PATENT RIGHTS

 

[***]

 

*                      Confidential Information, indicated by [***], has been
omitted from this filing and filed separately with the Securities and Exchange
Commission

 

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EXHIBIT C

 

LICENSEE’S COMMERCIAL DEVELOPMENT PLAN
(including Benchmarks)

 

Benchmark

 

Timeline

 

[***]

 

[***]

 

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

 

Notwithstanding anything to the contrary in the Agreement, in the event that
Licensee is unable to achieve a given Benchmark according to its applicable
timeline, Licensee may, on a one-time only basis under the Agreement, extend the
timeline by [***] by making a [***] payment to TSRI (where, for the avoidance of
doubt, all later occurring Benchmark(s) shall also be similarly extended by
[***].

 

*                      Confidential Information, indicated by [***], has been
omitted from this filing and filed separately with the Securities and Exchange
Commission

 

--------------------------------------------------------------------------------

 

EXHIBIT D

 

INFORMATION AND MATERIALS

 

TSRI and Licensee shall add items to this Exhibit D upon mutual agreement.

 

*                      Confidential Information, indicated by [***], has been
omitted from this filing and filed separately with the Securities and Exchange
Commission

 

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