Exhibit 10.1

CERTAIN INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT
MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY
DISCLOSED. OMISSIONS ARE DESIGNATED AS [†].

 

License and Collaboration Agreement

by and between

Xenon Pharmaceuticals Inc.

and

Neurocrine Biosciences, Inc.

Dated as of December 2, 2019

 

 

 

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

 

 

Table of Contents

 

 

 

 

Page

ARTICLE 1 DEFINITIONS

1

 

 

ARTICLE 2 LICENSES AND EXCLUSIVITY

14

2.1Licenses to Neurocrine

14

2.2Xenon Retained Rights

15

2.3Right to Sublicense

15

2.4License to Xenon

16

2.5Transfer of Xenon Licensed IP

16

2.6No Implied Licenses

16

2.7Exclusivity

16

2.8Acquisitions

16

 

 

ARTICLE 3 GOVERNANCE

18

3.1Joint Steering Committee

18

3.2Duration of the JSC

19

3.3Limitations of Committee Authority

19

3.4Committee Membership and Meetings

19

3.5Decision-Making

19

3.6Alliance Managers

20

 

 

ARTICLE 4 RESEARCH PROGRAM

21

4.1General

21

4.2Research Plan; Research Budget

21

4.3Designation of Development Candidates

21

4.4Research Term

21

4.5Research Costs

22

4.6Conduct of Research

22

4.7Research Records

22

4.8Research Reports

22

4.9University Collaborators

22

4.10Materials

22

4.11Subcontractors

23

4.12Consequences of the End of the Research Term

23

 

 

ARTICLE 5 INITIAL DEVELOPMENT PROGRAM

23

5.1Initial Development Program

23

5.2Initial Development Plans

24

5.3Development Efforts

24

5.4Development Costs

24

5.5Development Records

25

5.6Data Exchange and Development Reports

25

5.7Effect of Completion of the Initial Development Plan

25

i

 

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ARTICLE 6 DEVELOPMENT, REGULATORY AND MANUFACTURING

25

6.1Subsequent Development

25

6.2Subsequent Development Plans

25

6.3XEN901 INDs

26

6.4Development Efforts; Diligence

26

6.5Development Records

26

6.6Development Costs

26

6.7Co-Funding Option

27

6.8Subsequent Development Reports

28

6.9Voucher

28

6.10Regulatory

28

6.11Inventory

29

6.12Manufacturing

29

 

 

ARTICLE 7 COMMERCIALIZATION

30

7.1Commercialization

30

7.2Diligence

30

7.3Commercialization Reports

30

 

 

ARTICLE 8 FINANCIAL PROVISIONS

30

8.1Upfront Payments

30

8.2Reimbursement of Research Costs and XEN901 Initial Development Costs

31

8.3IND Milestone Payment for XEN901 Produc

32

8.4Co-Funding of Development Costs

33

8.5Development Milestone Payments

33

8.6Sales Milestones

35

8.7Royalty Payments

36

8.8Third Party Payment Obligations

39

8.9Currency; Exchange Rate

39

8.10Late Payments

39

8.11Taxes

39

8.12Financial Records and Audit

40

 

 

ARTICLE 9 INTELLECTUAL PROPERTY RIGHTS

40

9.1Inventions

40

9.2Patent Prosecution

41

9.3Patent Enforcement

42

9.4Orange Book Listing

43

9.5Patent Term Extensions

43

9.6Third Party Technology

43

9.7Trademarks

44

ii

 

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ARTICLE 10 REPRESENTATIONS AND WARRANTIES

44

10.1Mutual Representations and Warranties

44

10.2Additional Representations and Warranties of Xenon

44

10.3Additional Neurocrine Representations, Warranties and Covenants

47

10.4Mutual Covenants

47

10.5Disclaimer

47

 

 

ARTICLE 11 INDEMNIFICATION

48

11.1Indemnification by Xenon

48

11.2Indemnification by Neurocrine

48

11.3Indemnification Procedure

49

11.4Mitigation of Loss

49

 

 

ARTICLE 12 CONFIDENTIALITY; PUBLICATION

49

12.1Duty of Confidence

49

12.2Exceptions

50

12.3Authorized Disclosures

50

12.4Scientific Publication

51

12.5Publicity; Term of Agreement

51

 

 

Article 13 TERM AND TERMINATION

52

13.1Term

52

13.2Termination

52

13.3Effects of Termination

53

13.4Alternative to Termination

56

13.5Survival

56

13.6Termination Not Sole Remedy

56

 

 

ARTICLE 14 GENERAL PROVISIONS

56

14.1Force Majeure

56

14.2Rights in Bankruptcy or Insolvency

57

14.3Assignment

57

14.4Severability

57

14.5Notices

57

14.6Governing Law

58

14.7Dispute Resolution

58

14.8Entire Agreement; Amendments

60

14.9Headings

60

14.10Independent Contractors

60

14.11Waiver

60

14.12Cumulative Remedies

60

14.13Performance by Affiliates

60

14.14Limitation of Liability

61

14.15Waiver of Rule of Construction

61

14.16Business Day Requirements

61

14.17Counterparts

61

 

 

iii

 

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List of Exhibits

Exhibit A:

Xenon Patent Rights

Exhibit B:

XEN901

Exhibit C:

XEN393

Exhibit D:

XPC’535

Exhibit E:

XPC’391

Exhibit F:

Early Compounds

Exhibit G:

Excluded Compounds

Exhibit H:

Inventory (Quantity)

Exhibit I:

Initial JSC Members

Exhibit J:

Research Plan and Research Budget

Exhibit K:

Academic Agreements

Exhibit L:

XEN901 Initial Development Plan

Exhibit M:

XEN901 Neurocrine Development Plan

Exhibit N:

Specifications

Exhibit O:

Xenon’s supply agreements

Exhibit P:

Form of Share Purchase Agreement

Exhibit Q:

Third Party Agreements

Exhibit R:

Abstracts submitted prior to Effective Date

Exhibit S:

Press Release

Exhibit T:

NASA Compounds

Exhibit U:

Untested Compounds

Exhibit V:

Xenon IND Enabling Activities

 

 

 

iv

 

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LICENSE AND COLLABORATION AGREEMENT

This License and Collaboration Agreement (this “Agreement”) is made as of
December 2, 2019 (the “Effective Date”), by and between Xenon Pharmaceuticals
Inc., a Canadian corporation (“Xenon”), having its principal office at 200-3650
Gilmore Way, Burnaby, BC V5G 4W8, Canada, and Neurocrine Biosciences, Inc., a
Delaware corporation (“Neurocrine”), having its principal office at 12780 El
Camino Real, San Diego, California 92130, U.S.  Neurocrine and Xenon are
referred to in this Agreement individually as a “Party” and collectively as the
“Parties”.

RECITALS

WHEREAS, Xenon is a biopharmaceutical company discovering and developing
therapies for neurological disorders, including rare central nervous system
disorders;

WHEREAS, Neurocrine is a biotechnology company that discovers, develops and
commercializes therapies for neurological and other disorders; and

WHEREAS, Xenon and Neurocrine desire to establish a collaboration under which
the Parties will identify, research and develop sodium channel inhibitors,
including Xenon’s clinical candidate XEN901 and preclinical candidates XEN393,
XPC’535 and XPC’391, which compounds Neurocrine will have the exclusive right to
further develop and commercialize, all under the terms and conditions set forth
herein.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained herein, the receipt and sufficiency of which are hereby
acknowledged, Neurocrine and Xenon hereby agree as follows:

Article 1
DEFINITIONS

Unless the context otherwise requires, the terms in this Agreement with initial
letters capitalized will have the meanings set forth below, or the meanings as
designated in the indicated places throughout this Agreement.

1.1. “Academic Agreements” is defined in Section 4.9.

1.2. “Acquired Competing Product” is defined in Section 2.8(a).

1.3. “Acquired Competing Program” is defined in Section 2.8(a).

1.4. “Acquisition Party” is defined in Section 2.8(a).

1.5. “Active Pharmaceutical Ingredient” means any preclinically or clinically
active material that provides pharmacological activity in a pharmaceutical
product (excluding formulation components such as coatings, stabilizers,
excipients or solvents, adjuvants or controlled release technologies).

1

 

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1.6. “Affiliate” means, with respect to any Person, any other Person that
controls, is controlled by, or is under common control with such Person.  For
the purpose of this definition, “control” (including, with correlative meaning,
the terms “controlled by” and “under common control”) means the actual power,
either directly or indirectly through one or more intermediaries, to direct or
cause the direction of the management and policies of a Person, whether by the
ownership of more than fifty percent (50%) of the voting stock of such Person,
or by contract or otherwise.

1.7. “Alliance Manager” is defined in Section 3.6.

1.8. “Average 30-Day VWAP” means the average of the daily VWAPs of the Common
Shares for each of the thirty (30) Trading Days ending on, and including, the
Trading Day immediately preceding the relevant date, rounded to the nearest
whole cent.

1.9. “Change of Control” means, with respect to a Party, (a) the acquisition of
beneficial ownership, directly or indirectly, by any Third Party of securities
or other voting interest of such Party representing a majority or more of the
combined voting power of such Party’s then outstanding securities or other
voting interests, (b) any merger, consolidation or business combination
involving such Party with a Third Party that results in the holders of
beneficial ownership (other than by virtue of obtaining irrevocable proxies) of
the voting securities or other voting interests of such Party (or, if
applicable, the ultimate parent of such Party) immediately prior to such merger,
consolidation or business combination ceasing to hold beneficial ownership of
more than fifty percent (50%) of the combined voting power of the surviving
entity immediately after such merger, consolidation or business combination, or
(c) any sale, lease, exchange, contribution or other transfer to a Third Party
(in one transaction or a series of related transactions) of all or substantially
all of the assets of such Party.

1.10. “Clinical Trial” means a clinical trial in human subjects that has been
approved by an institutional review board, ethics committee or Regulatory
Authority, as applicable, and is designed to measure the safety and/or efficacy
of a therapeutic product.

1.11. “Co-Funded Costs” is defined in Section 6.7(c).

1.12. “Co-Funded Product” is defined in Section 8.4.

1.13. “Co-Funding Notice Period” is defined in Section 6.7(b).

1.14. “Co-Funding Option” is defined in Section 6.7(b).

1.15. “Combination Product” means (a) a pharmaceutical product that consists of
a Compound and at least one other Active Pharmaceutical Ingredient that is not a
Compound; or (b) any combination of a Product and another pharmaceutical product
that contains at least one other Active Pharmaceutical Ingredient that is not a
Compound, where such products are not formulated together but are sold together
as a single product and invoiced for a single price.  The other Active
Pharmaceutical Ingredient(s) in clause (a) and the other pharmaceutical
product(s) in clause (b) are each referred to as the “Other Product(s)”.

1.16. “Commercialize” or “Commercialization” means any and all activities,
whether undertaken before or after Regulatory Approval, that are directed to
marketing, promoting, distributing, detailing, offering for sale or selling a
Product (as well as importing and exporting activities in connection therewith),
including the commercial manufacture of Compounds and Products.

1.17. “Committee” means the JSC and each subcommittee or sub-team established by
the JSC.

2

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1.18. “Common Shares” means the common shares, no par value per share, of Xenon.

1.19. “Compound” means any of the following: (a) XEN901, (b) each DTC Compound
and (c) each Research Compound.

1.20. “Confidential Information” of a Party means all Know-How, unpublished
patent applications and other information and data of a financial, commercial,
business, operational or technical nature of such Party or any of its Affiliates
that is: (a) disclosed by or on behalf of such Party or any of its Affiliates or
otherwise made available to the other Party or any of its Affiliates, whether
made available orally, in writing or in electronic form; or (b) learned by the
other Party pursuant to this Agreement.

1.21. “Confidentiality Agreement” is defined in Section 14.8.

1.22. “Control”, “Controls” or “Controlled”, when used in reference to any
compound, Know-How, Patent Rights or other intellectual property rights of
either Party or its Affiliates, means the possession by such Party or its
Affiliates of the legal authority or right (whether by ownership, license or
otherwise) to grant a license, sublicense, access or other right (as applicable)
to such compound or under such Know-How, Patent Rights, or other intellectual
property rights to the other Party on the terms and conditions set forth herein
without breaching the terms of any agreement with a Third Party.

1.23. “Cover” means, with respect to the applicable Product and Patent Rights,
that but for the rights granted to a Person under such Patent Rights, the
manufacture, use, offer for sale, sale or importation of such Product by such
Person would infringe a Valid Claim included in such Patent Rights, or in the
case of a Patent Right that is a patent application, would infringe a Valid
Claim in such patent application if it were to issue as a patent with the
then-current claims.

1.24 “Covering Claim” is defined in Section 1.106.

1.25. “Develop” or “Development” means all development activities for any
Product, including all preclinical studies, clinical testing, manufacturing
development, process development, toxicology studies, manufacturing and
distribution of drug product for use in Clinical Trials (including placebos and
comparators), statistical analyses, and the preparation, filing and prosecution
of any NDA, MAA or other application for Regulatory Approval for any Product, as
well as all regulatory affairs related to any of the foregoing.

1.26. “Development Candidate” means a particular Development Track Compound or
Research Compound that is designated by the JSC to be progressed to IND-enabling
studies.

1.27. “Development Track Compound” or “DTC” means any of (a) XEN393, (b) XPC’535
and (c) XPC’391; provided that the compound in the preceding clauses (a)-(c)
that is not selected by the JSC as a Development Candidate pursuant to Section
3.1(h) to be the subject of IND-enabling studies pursuant to the DTC Initial
Development Plan (and such compound’s salts, hydrates, isotopes, solvates,
esters, free acids or bases, polymorphs, enantiomers, metabolites and prodrugs)
will be deemed a Research Compound and not a DTC.

1.28. “DTC Initial Development Plan” is defined in Section 5.2.

1.29. “DTC Product” means any Product containing a DTC.

1.30. “Disclosing Party” is defined in Section 12.1(a).

3

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1.31. “Dollar” means U.S. dollars, and “$” shall be interpreted accordingly.

1.32. “Early Compounds” means those Compounds listed on Exhibit F.

1.33. “EMA” means the European Medicines Agency or any successor agency thereto.

1.34. “Excluded Compound” means any compound listed on Exhibit G.

1.35. “Executive Officers” is defined in Section 3.5.

1.36. “FDA” means the United States Food and Drug Administration or any
successor governmental agency that is responsible for approving the sale of
pharmaceuticals in the United States.

1.37. “FDCA” means the United States Federal Food, Drug, and Cosmetic Act, as
amended.

1.38. “Field” means the treatment, cure, diagnosis, prediction, detection and/or
prevention of any disease, disorder, state, condition and/or malady in humans.

1.39. “Final Development Plan” is defined in Section 6.7(a).

1.40. “First Commercial Sale” means, with respect to any Product in any country
or jurisdiction in the Territory, the first arm’s length sale of such Product to
a Third Party by Neurocrine or its Affiliates or sublicensees for distribution,
use or consumption in such country or jurisdiction after Regulatory Approval has
been obtained for such Product in such country or jurisdiction.

1.41. “FTE” means the equivalent of a full-time employee’s work for a twelve
(12)-month period (consisting of a total of 2,080 hours per year of dedicated
effort), conducting activities under the Research Plan or under an Initial
Development Plan or otherwise under this Agreement.  In no event shall any one
individual be counted as more than one (1) FTE.

1.42. “FTE Cost” means, for any period, the FTE Rate multiplied by the number of
FTEs used in such period.

1.43. “FTE Rate” means [†] per FTE per year.

1.44. “GAAP” means U.S. generally accepted accounting principles.

1.45. “Generic Product” means, with respect to a particular Product and
regulatory jurisdiction, any pharmaceutical product that (a) is lawfully sold by
a Third Party that is not an Affiliate or sublicensee of Neurocrine under a
regulatory approval granted by a Regulatory Authority in such regulatory
jurisdiction to such Third Party and (b) contains the same Compound (or any
salt, hydrate, isotope, solvate, ester, free acid or base, polymorph,
enantiomer, metabolite or prodrug of such Compound) as such Product.

1.46. “Genentech License” means that certain Collaborative Research and License
Agreement between, on the one hand, Xenon, and on the other hand, Genentech,
Inc. and F. Hoffman-La Roche Ltd. (together, “Genentech”), dated as of December
22, 2011, as amended by Letter Agreement dated August 14, 2012, Letter Amendment
dated October 31, 2012, Letter Amendment dated December 20, 2012, Letter dated
December 23, 2014, Letter Amendment #4 dated August 29, 2013, Letter Agreement
dated November 19, 2015, Letter Amendment #6 dated November 10, 2015, Letter
Agreement dated May 8, 2015, and Amended and Restated Letter Amendment #7 dated
September 27, 2018, and as amended by Xenon and Genentech after the Effective
Date to the extent permitted under Section 10.2(r)(vii).

4

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1.47. “GLP” or “Good Laboratory Practices” means the then-current Good
Laboratory Practices for the methods, facilities and controls to be used in the
conduct of pre-clinical laboratory studies in the United States, including the
regulations promulgated under the FDCA, the requirements and standards endorsed
by the FDA as set forth in 21 C.F.R. Part 58, and comparable regulatory
standards promulgated by the EMA or any other Regulatory Authority applicable to
the Territory, in each case, as they may be updated from time to time, including
applicable quality guidelines promulgated under the ICH.

1.48. “GMP” or “Good Manufacturing Practices” means the then-current Good
Manufacturing Practices methods, facilities, and controls to be used for the
manufacture, processing, packing, or holding of a drug to assure that it meets
the requirements of the FDCA for safety and has the identity and strength and
meets the quality and purity characteristics appropriate to its intended use as
set forth in 21 C.F.R. Parts 210 and 211, European Directive 2003/94/EC,
Eudralex 4, Annex 16, ICH Guideline Q7A, and, with respect to any other country
or jurisdiction in the Territory, the equivalent laws, rules, or regulations of
an applicable Regulatory Authority at the time of manufacture, in each case, as
they may be updated from time to time.

1.49. “Governmental Authority” means any federal, state, national, provincial or
local government, or political subdivision thereof, or any multinational
organization or any authority, agency or commission entitled to exercise any
administrative, executive, judicial, legislative, police, regulatory or taxing
authority or power, or any court or tribunal (or any department, bureau or
division thereof, or any governmental arbitrator or arbitral body).

1.50. “ICH” means the International Council for Harmonisation of Technical
Requirements for Pharmaceuticals in Human Use.

1.51. “IND” means: (a) an Investigational New Drug Application as defined in the
FDCA and regulations promulgated thereunder or any successor application or
procedure (including any Clinical Trial application, Clinical Trial exemption or
similar or equivalent application or submission for approval) required to
initiate clinical testing of a Product in humans in the United States; (b) a
counterpart of any Investigational New Drug Application that is required in any
other country or jurisdiction in the Territory before beginning clinical testing
of a Product in humans in such country or jurisdiction to be filed with or
submitted to a Regulatory Authority in conformance with the requirements of such
Regulatory Authority; and (c) all supplements and amendments to any of the
foregoing.

1.52. “IND Acceptance” means, with respect to an IND for a XEN901 Product,
either (a) [†] days after submission of such IND to the FDA (such [†]-day
period, the “Initial Period”), if at such time the FDA has confirmed in writing
that it has no comments to such IND, or (b) if the FDA indicates during the
Initial Period that it will have comments to the IND, either (i) Neurocrine’s
failure to notify Xenon of a Neurocrine Negative IND Decision pursuant to
Section 6.3(b) within [†] days after Neurocrine’s receipt of such comments or
(ii) the JSC’s failure to make a JSC Negative IND Decision pursuant to Section
6.3(b) within the applicable time periods under Section 3.5, or (c) [†] days
after submission of such IND to the FDA, if at such time the FDA has taken no
action with respect to such IND.

1.53. “Indication” means a generally acknowledged disease or medical condition
with respect to which at least one adequate and well-controlled Clinical Trial
is required to support inclusion of such disease or medical condition in the
indication statement of a package insert approved by the FDA, EMA or PMDA for a
Product; provided that (a) prevention and treatment of the same disease or
medical condition shall not be separate Indications and (b) the treatment or
prevention of the same disease or medical condition in different populations
(e.g., adult and pediatric) shall not be separate Indications.

5

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1.54. “Initial Development Plan” means each of (a) the DTC Initial Development
Plan, and (b) the XEN901 Initial Development Plan, in each case, as amended,
modified or supplemented in accordance with this Agreement.

1.55. “Initial Development Program” is defined in Section 5.1.

1.56. “Initial Equity Purchase Price” is defined in Section 8.1(b).

1.57. “Initiation” means, with respect to a Clinical Trial of a Product, the
first dosing of the first human subject in such Clinical Trial.

1.58. “Inventory” means all quantities of Compound and Product that are (a) in
Xenon’s or its Affiliate’s possession as of the Effective Date or (b)
manufactured by a Third Party for Xenon or its Affiliate after the Effective
Date or prior to the Effective Date and in such Third Party’s possession as of
the Effective Date, as such quantities are described on Exhibit H.

1.59. “Joint Inventions” means any Know-How that is discovered, developed,
invented or created jointly by or on behalf of both Parties or their respective
Affiliates or Third Parties acting on their behalf as a result of exercising a
Party’s rights or performing its obligations under this Agreement.

1.60. “Joint Patent Rights” means any Patent Rights that claim Joint Inventions.

1.61. “Joint Steering Committee” or “JSC” is defined in Section 3.1.

1.62. “JSC Negative IND Decision” is defined in Section 6.3(b).

1.63. “Know-How” means any information, materials (e.g., biological materials,
chemical compounds), inventions, discoveries, improvements, developments,
processes, methods, protocols, procedures, techniques, formulas, data, know-how
and trade secrets, in each case, whether or not patentable, but excluding any
Patent Rights.

1.64. “Knowledge” of a Party means (a) the actual knowledge of any “executive
officer” (as defined in Rule 3b-7 promulgated under the Securities Exchange Act
of 1934) of such Party or any director level and above employees with direct
operational responsibility for intellectual property, legal or regulatory
matters, as the case requires, or (b) what any such individual should have known
following reasonable and due inquiry.

1.65. “Law” means any federal, state, local, foreign or multinational law,
statute, standard, ordinance, code, rule, regulation, resolution or
promulgation, or any order by any Governmental Authority, or any license,
franchise, permit or similar right granted under any of the foregoing, or any
similar provision having the force or effect of law.

1.66. “Major Indication” means any Indication that has a prevalence [†] of at
least [†].  For clarity, focal seizures is a Major Indication.

1.67. “Major Indication EE Milestone Equity Purchase Price” is defined in
Section 8.3(b).

1.68. “Major Market” means any of the U.S., Japan, the United Kingdom, Germany,
France, Italy and Spain.

1.69. “Materials” is defined in Section 4.10(a).

6

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1.70. “MAA” means a Marketing Authorization Application filed with the EMA.

1.71. “NASA Compound” means any compound listed or described on Exhibit T.

1.72. “NDA” means any New Drug Application, as defined in the FDCA, filed
pursuant to the requirements of the FDA, as more fully defined in 21 C.F.R. Part
314 et seq.

1.73. “Net Sales” means, with respect to any Product, the gross amounts invoiced
by Neurocrine and its Affiliates and sublicensees for sales of such Product in
the Field to unaffiliated Third Parties, less the following deductions with
respect to such sales that are either included in the billing as a line item as
part of the gross amount invoiced, or otherwise documented as a deduction in
accordance with GAAP, to be specifically attributable to the actual sales of
such Product:

 

(a)

rebates to national, state, or local government, including any Medicaid or other
rebate payments or other price reductions provided based on sales to any
Governmental Authority or Regulatory Authority in respect of any state or
federal Medicare, Medicaid or similar programs;

 

(b)

pricing adjustments, allowances, credits, chargeback payments, discounts,
rebates, fees and reimbursements or similar payments granted or made to managed
care organizations, group purchasing organizations or other buying groups,
pharmacy benefit management companies, health maintenance organizations and any
other providers of health insurance coverage, health care organizations or other
health care institutions (including hospitals), health care administrators,
patient assistance or other similar programs;

 

(c)

trade discounts (including cash, trade, quantity or other discounts or rebates),
credits or refunds;

 

(d)

credits, rebates or allowances on account of claims, billing errors, damaged or
defective goods, prompt payment, rejections or returns of Products, including in
connection with recalls;

 

(e)

amounts accrued for accounts receivable considered uncollectible in accordance
with the selling party’s accounting practices, consistently applied (it being
understood that any subsequent reductions in such accrual amounts due to
collections in subsequent periods shall be included in Net Sales when such
reductions occur);

 

(f)

reasonable distributors’, wholesalers’, inventory management and dispensing fees
in connection with Products;

 

(g)

outbound freight, postage, shipping, transportation and insurance charges, in
each case actually allowed or paid for delivery of Products;

 

(h)

taxes (other than income taxes), duties, tariffs, mandated contributions or
other governmental charges levied on the manufacture or sale of Products,
including VAT, excise taxes and sales taxes, and that portion of the annual fee
on prescription drug manufacturers imposed by the Patient Protection and
Affordable Care Act, Pub. L. No. 111-148 (as amended) actually paid and
reasonably allocable to sales of the Product; and

 

(i)

any other similar and customary deductions that are consistent with GAAP.

7

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Notwithstanding the foregoing, amounts received or invoiced by Neurocrine or its
Affiliates or sublicensees for the sale of Products among Neurocrine and its
Affiliates and sublicensees shall not be included in the computation of Net
Sales hereunder; unless such Affiliate or sublicensee is the end user of such
Product.

Notwithstanding the foregoing, Net Sales shall not include any transfers or
dispositions of Products at or below cost and supplied for use in Clinical
Trials or under early access, compassionate use, samples, named patient,
indigent access, patient assistance or other charitable or promotional purposes.

In the event any Product is sold in the form of a Combination Product, on a
country-by-country basis, Net Sales for such Combination Product shall be
calculated as follows:

 

(i)

If a Product containing the Compound that is included in the Combination Product
as its sole Active Pharmaceutical Ingredient (a “Sole Product”) and product(s)
containing the other Active Pharmaceutical Ingredient(s) in such Combination
Product are each sold separately in such country, Net Sales of the Combination
Product for any period will be calculated by multiplying the total Net Sales (as
described above) of the Combination Product by the fraction A/(A+B), where A is
the weighted average gross sales price in such country of the Sole Product in
the same formulation and dosage, and B is the weighted average gross sales price
in such country of the Other Product(s) sold separately in the same formulation
and dosage, in each case during the applicable period.

 

(ii)

If the Sole Product is sold independently of the Other Product(s) in such
country, but the weighted average gross sales price of the Other Product(s)
cannot be determined, Net Sales of the Combination Product for any period will
be calculated by multiplying the total Net Sales (as described above) of such
Combination Product by the fraction A/C, where A is the weighted average gross
sales price in such country of such Sole Product in the same formulation and
dosage and C is the weighted average gross sales price in such country of the
Combination Product, in each case during the applicable period.

 

(iii)

If the Other Product(s) are sold independently of the Sole Product in such
country, but the weighted average gross sales price of such Sole Product cannot
be determined, Net Sales of the Combination Product for any period will be
calculated by multiplying the total Net Sales (as described above) of such
Combination Product by a fraction determined by the following formula: one (1)
minus B/C, where B is the weighted average gross sales price(s) in such country
of the Other Product(s) sold separately in the same formulation and dosage and C
is the weighted average gross sales price in such country of the Combination
Product, in each case during the applicable period.

 

(iv)

If the calculation of Net Sales cannot be determined by any of the foregoing
methods, the Parties will determine Net Sales for the Combination Product in
good faith based upon the relative value of the Compound and Other Product(s) in
such Combination Product, and if the Parties fail to agree, they will submit the
determination to a mutually agreed independent Third Party expert, whose
decision will be final and binding on the Parties.

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1.74. “Neurocrine’s Commercially Reasonable Efforts” means, with respect to
Neurocrine’s obligations under this Agreement to research, Develop or
Commercialize a Compound or Product, the carrying out of such obligations or
tasks with a level of efforts and resources that are consistent with the
reasonable, diligent and good faith efforts that a biopharmaceutical company of
a similar size would normally use in the conduct of research, development and
commercialization of other similarly situated pharmaceutical products at a
similar stage of development or commercialization and with similar commercial
and market potential, taking into account all relevant factors, including patent
and regulatory exclusivity, safety and efficacy, product profile,
competitiveness of the market, and profitability (including pricing and
reimbursement); provided that with respect to Neurocrine’s obligations under
this Agreement to use Commercially Reasonable Efforts to complete a Phase 2a
Clinical Trial of a XEN901 Product for SCN8A-EE, after IND Acceptance of an IND
for XEN901 in SCN8A-EE and prior to the completion of such Phase 2a Clinical
Trial Neurocrine shall not be entitled to discontinue development of such XEN901
Product for SCN8A-EE solely as a result of the market potential and
profitability (including pricing and reimbursement) of such XEN901 Product for
SCN8A-EE.

1.75. “Neurocrine Development Plan” is defined in Section 6.2.

1.76. “Neurocrine Know-How” means all Know-How and Neurocrine’s interest in any
Joint Inventions, in each case that is/are (a) Controlled by Neurocrine or any
of its Affiliates (i) as of the Effective Date or (ii) thereafter during the
Term as a result of Neurocrine or any of its Affiliates exercising Neurocrine’s
rights or performing its obligations under this Agreement, and (b) reasonably
necessary or useful for the research, Development, manufacture or
Commercialization of Compounds or Products, but excluding any Know-How related
to any compound that is not a Compound.

1.77. “Neurocrine Licensed IP” means all Neurocrine Patent Rights and Neurocrine
Know-How and Neurocrine’s interest in the Joint Patent Rights.

1.78. “Neurocrine Negative IND Decision” is defined in Section 6.3(b).

1.79. “Neurocrine Patent Rights” means all Patent Rights, but excluding the
Joint Patent Rights, that are (a) Controlled by Neurocrine or any of its
Affiliates (i) as of the Effective Date or (ii) during the Term as a result of
Neurocrine or any of its Affiliates exercising Neurocrine’s rights or performing
its obligations under this Agreement, and (b) reasonably necessary or useful for
the research, Development, manufacture or Commercialization of Compounds or
Products, but excluding any Patent Rights to the extent claiming any compound
that is not a Compound.

1.80. “Neurocrine Research IP” means all Neurocrine Licensed IP that is
reasonably necessary or useful for Xenon to conduct its activities under the
Research Program, Initial Development Program or otherwise under this Agreement.

1.81. “Pain Field” means treating pain indications and pain associated with
other diseases or conditions by modulating NaV1.7.

1.82. “Patent Certification Notice” is defined in Section 9.3(a)(i).

1.83. “Patent Rights” means all patents and patent applications (which for the
purpose of this Agreement shall be deemed to include certificates of invention
and applications for certificates of invention), including all divisionals,
continuations, substitutions, continuations-in-part, re-examinations, reissues,
additions, renewals, revalidations, extensions, registrations, pediatric
exclusivity periods and supplemental protection certificates and the like of any
such patents and patent applications, and any and all foreign equivalents of the
foregoing.

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1.84. “Person” means any individual, partnership, limited liability company,
firm, corporation, association, trust, unincorporated organization or other
entity.

1.85. “Phase 1 Clinical Trial” means a Clinical Trial the principal purpose of
which is a preliminary determination of safety in healthy individuals or
patients, including the trials referred to in 21 C.F.R. § 312.21(a), or its
successor regulation, or the equivalent in any foreign country.

1.86. “Phase 2 Clinical Trial” means a Clinical Trial conducted in any country
that (a) would satisfy the requirements of 21 C.F.R. § 312.21(b), or its
successor regulation, or the equivalent in any foreign country, (b) is intended
to explore one or more doses, dose responses, and duration of effect, and to
generate initial evidence of efficacy and safety, for a Product in the target
patient population and (c) includes a control group of patients that receive
either a placebo, an active comparator or a lower dose of such Product than the
non-control group receives.  A Phase 2 Clinical Trial may be either a phase 2a
Clinical Trial or a phase 2b Clinical Trial but shall exclude in all cases any
phase 1/2 Clinical Trial or any open label Clinical Trial.

1.87. “Phase 3 Clinical Trial” means a Clinical Trial in an extended human
patient population designed to obtain data determining efficacy and safety of a
Product to support Regulatory Approval in the proposed therapeutic Indication,
as more fully described in 21 CFR § 312.21(c) or its successor regulation or the
equivalent in any foreign country.

1.88. “PMDA” means the Japanese Pharmaceuticals and Medical Devices Agency or
any successor entity thereto.

1.89. “Pricing Approval” means such governmental approval, agreement,
determination or decision establishing prices for a Product that can be charged
and/or reimbursed in any country or jurisdictions where the applicable
Governmental Authorities approve or determine the price and/or reimbursement of
pharmaceutical products.

1.90. “Product” means any pharmaceutical product that contains a Compound, alone
or in combination with one or more other Active Pharmaceutical Ingredients, in
any formulation, dosage form, or package configuration and for any mode of
administration.  For purposes of Section 8.6 and Section 8.7, all Products
containing the same Compound (including any salt, hydrate, isotope, solvate,
ester, free acid or base, polymorph, enantiomer, metabolite or prodrug thereof)
will be considered a single Product.

1.91. “Product Infringement” is defined in Section 9.3(a)(i).

1.92. “Product Marks” is defined in Section 9.7.

1.93. “Proof of Concept Study” is defined in Section 6.1.

1.94. “Receiving Party” is defined in Section 12.1(a).

1.95. “Regulatory Approval” means any and all approvals, licenses,
registrations, or authorizations of the relevant Regulatory Authority, including
Pricing Approvals, that are necessary for the Development, manufacture, use,
storage, import, transport or Commercialization of the applicable Product in a
particular country or jurisdiction.

1.96. “Regulatory Authority” means any applicable Governmental Authority
responsible for granting Regulatory Approvals for Products, including the FDA,
EMA, PMDA and any corresponding national or regional regulatory authorities.

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1.97. “Regulatory Exclusivity” means any exclusive marketing rights or data
exclusivity rights (other than Patent Rights) conferred by any Regulatory
Authority with respect to a Product in a given country or regulatory
jurisdiction, including orphan drug exclusivity, new chemical entity
exclusivity, data exclusivity and pediatric exclusivity.

1.98. “Regulatory Materials” means any regulatory application, submission,
notification, communication, correspondence, registration and other filings made
to, received from or otherwise conducted with a Regulatory Authority in order to
Develop, manufacture, market, sell or otherwise Commercialize a Compound or
Product in a particular country or jurisdiction.  Regulatory Materials includes
any IND, NDA or MAA or other foreign equivalents.

1.99. “Reimbursed Costs” is defined in Section 8.2.

1.100. “Research Budget” is defined in Section 4.2.

1.101. “Research Compound” means (a) any Select NaV Inhibitor that (i) is
Controlled by Xenon or any of its Affiliates as of the Effective Date, including
any NASA Compound, (ii) is identified or researched by Xenon or Neurocrine under
the Research Program or (iii) is claimed in the Xenon Patent Rights set forth on
Exhibit A, including the Early Compounds, but excluding in each case (i)-(iii)
XEN901 or any DTC and (b) any salt, hydrate, isotope, solvate, ester, free acid
or base, polymorph, enantiomer, metabolite or prodrug of any compound described
in the preceding clause (a), but in each case (a) and (b) excluding all Excluded
Compounds.

1.102. “Research Plan” is defined in Section 4.2.

1.103. “Research Product” means any Product that contains a Research Compound.

1.104. “Research Program” is defined in Section 4.1.

1.105. “Research Term” is defined in Section 4.4(a).

1.106. “Royalty Term” means, with respect to a Product and country, the period
commencing upon the First Commercial Sale of such Product in such country and
ending upon the latest of: (a) the expiration of the last-to-expire Valid Claim
in (i) the Joint Patent Rights filed during the Research Term or the [†] period
thereafter or (ii) the Xenon Patent Rights, in each case (i) and (ii) that Cover
such Product in such country (a “Covering Claim” for such Product and country);
(b) ten (10) years after such First Commercial Sale of such Product in such
country; or (c) the expiration of Regulatory Exclusivity for such Product in
such country.

1.107. “SCN8A-EE” means epileptic encephalopathy caused by a mutation in the
SCN8A gene.

1.108. “SCN8A-EE Milestone Equity Purchase Price” is defined in Section 8.3(b).

1.109. “Select NaV Inhibitor” means any compound that binds to and inhibits
either or both of the Targets as its primary mechanism of action (i.e., any in
vitro activity on any other target being inferior to the in vitro inhibition of
the Targets).

1.110. “Share Cap” is defined in Section 8.1(c).

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1.111. “Sublicense Agreement” means any agreement entered into following the
Effective Date, and pursuant to which Neurocrine, its Affiliate or sublicensee
grants a license, or an option or right to a license, under the licenses granted
to Neurocrine pursuant to Section 2.1, but excluding, in each case, any
agreements providing for outsourced contract research, regulatory, or
manufacturing services that pertain to a Compound or Product.

1.112. “Subsequent Development” is defined in Section 6.1.

1.113. “Subsequent IND Equity Purchase Price” is defined in Section 8.3(c)(ii).

1.114. “Subsequent SCN8A-EE IND Acceptance” is defined in Section 8.3(c).

1.115. “Targets” means the voltage-gated sodium channels NaV1.2 and NaV1.6.

1.116. “Technology Transfer” means the transfer of materials, documents,
information, protocols, components or other items that are necessary or
reasonably useful to manufacture Compounds and/or Products; provided that for
clarity, any such transfer shall not be deemed a transfer of title or any
license to intellectual property rights other than as expressly provided in
other provisions of this Agreement.

1.117. “Term” is defined in Section 13.1.

1.118. “Territory” means the world.

1.119. “Third Party” means any Person other than a Party or an Affiliate of a
Party.

1.120. “Third Party Technology” is defined in Section 9.6(a).

1.121. “Trading Day” means a day on which trading in the Common Shares generally
occurs on the Nasdaq Stock Market.

1.122. “Untested Compound” means any compound listed on Exhibit U.

1.123. “Unilateral Termination Notice” is defined in Section 13.2(a).

1.124. “United States” or “U.S.” means the United States of America, including
its territories and possessions.

1.125. “Valid Claim” means a claim of (a) an issued and unexpired patent (as may
be extended through supplementary protection certificate or patent term
extension or the like) that has not been revoked or held invalid or
unenforceable by a patent office, court or other governmental agency of
competent jurisdiction in a final and non-appealable judgment (or judgment from
which no appeal was taken within the allowable time period) and which claim has
not been disclaimed, denied or admitted to be invalid or unenforceable through
reissue, re-examination or disclaimer or otherwise, or (b) a pending patent
application that (i) has been pending less than seven (7) years from its
earliest priority date, (ii) was filed and is being prosecuted in good faith and
(iii) has not been cancelled, withdrawn or abandoned or finally rejected by an
administrative agency action from which no appeal has or can be taken.

1.126. “Voucher” is defined in Section 6.9.

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1.127. “VWAP” means, for any Trading Day with respect to a security, the per
share volume-weighted average price as reported by Bloomberg Financial L.P. or a
comparable nationally recognized financial information service provider for the
period from 9:30 a.m. New York City time to 4:00 p.m. New York City time or such
other primary trading session for such security for such Trading Day.

1.128. “XEN393” means (a) the compound having the structure set forth on Exhibit
C or (b) any salt, hydrate, solvate, isotope, ester, free acid or base,
polymorph, enantiomer, metabolite or prodrug of such compound.

1.129. “XEN901” means (a) the compound having the structure set forth on Exhibit
B or (b) any salt, hydrate, isotope, solvate, ester, free acid or base,
polymorph, enantiomer, metabolite or prodrug of such compound.

1.130. “XEN901 Development Budget” is defined in Section 5.2.

1.131. “XEN901 Initial Development Plan” is defined in Section 5.2.

1.132. “XEN901 Neurocrine Development Plan” is defined in Section 6.2.

1.133. “XEN901 Product” means any Product containing XEN901.

1.134. “Xenon’s Commercially Reasonable Development Efforts” means, with respect
to Xenon’s obligations under this Agreement to research or Develop a Compound or
Product, the carrying out of such obligations or tasks with a level of efforts
and resources that are consistent with the reasonable, diligent and good faith
efforts that a biopharmaceutical company of a similar size would normally use in
the conduct of research or development of other similarly situated
pharmaceutical products at a similar stage of development taking into account
all relevant scientific and regulatory factors, including the safety and
efficacy profile of the Compound or Product.

1.135. “Xenon Know-How” means all Know-How and Xenon’s interest in any Joint
Inventions, in each case that is/are (a) Controlled by Xenon or any of its
Affiliates (i) as of the Effective Date or (ii) thereafter during the Term as a
result of Xenon or its Affiliates exercising Xenon’s rights or performing its
obligations under this Agreement, and (b) reasonably necessary or useful for the
research, Development, manufacture or Commercialization of Compounds or
Products, but excluding any Know-How related to any compound that is not a
Compound.

1.136. “Xenon Licensed IP” means all Xenon Patent Rights and Xenon Know-How and
Xenon’s interest in the Joint Patent Rights.

1.137. “Xenon Patent Rights” means all Patent Rights, but excluding the Joint
Patent Rights, that (a) are Controlled by Xenon or any of its Affiliates as of
the Effective Date, including those set forth on Exhibit A; (b) are a result of
Xenon or any of its Affiliates performing Xenon’s obligations or exercising
Xenon’s rights under this Agreement and are Controlled by Xenon or any of its
Affiliates during the Term, but excluding any Patent Rights that otherwise arise
out of the Xenon Retained Rights set forth in Subsection 2.2(b), or (c) come
under the Control of Xenon or its Affiliates as a result of the Academic
Agreements, and in the case of each of (a), (b) or (c) that are reasonably
necessary or useful for the research, Development, manufacture or
Commercialization of Compounds or Products, but excluding any Patent Rights to
the extent claiming any compound that is not a Compound.  

1.138. “Xenon Retained Rights” means Xenon’s rights under the Xenon Licensed IP
that it expressly retains pursuant to the provisions of Section 2.2.

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1.139. “Xenon’s Share” is defined in Section 8.4.

1.140. “XPC’391” means (a) the compound having the structure set forth on
Exhibit E (b) any salt, hydrate, solvate, isotope, ester, free acid or base,
polymorph, enantiomer, metabolite or prodrug of such compound.

1.141. “XPC’535” means (a) the compound having the structure set forth on
Exhibit D or (b) any salt, hydrate, solvate, isotope, ester, free acid or base,
polymorph, enantiomer, metabolite or prodrug of such compound.

1.142. Interpretation.  This Agreement has been prepared in the English
language, and the English language shall control its interpretation.  In this
Agreement, unless otherwise specified:

 

(a)

“include”, “includes” and “including” shall be deemed to be followed by the
phrase “without limitation”;

 

(b)

the word “or” shall not be construed as exclusive;

 

(c)

references to any Articles or Sections include Articles, Sections and
subsections that are part of the related Article or Section;

 

(d)

words denoting the singular shall include the plural and vice versa, and words
denoting any gender shall include all genders;

 

(e)

words such as “herein”, “hereof” and “hereunder” refer to this Agreement as a
whole and not merely to the particular provision in which such words appear; and

 

(f)

the Exhibits and other attachments form part of the operative provision of this
Agreement, and references to this Agreement shall include references to the
Exhibits and attachments.

Article 2
LICENSES AND EXCLUSIVITY

2.1. Licenses to Neurocrine.

 

(a)

Exclusive License Grant.  Subject to the terms and conditions of this Agreement,
Xenon hereby grants to Neurocrine an exclusive (even as to Xenon and its
Affiliates), royalty bearing license, with the right to grant sublicenses
through multiple tiers as set forth in Section 2.3, under the Xenon Licensed IP,
subject to the Xenon Retained Rights set forth in Section 2.2, to research,
Develop, make, have made, use, sell, offer for sale, import, export and
otherwise exploit and Commercialize the Compounds and Products in the Field in
the Territory.  Such license is subject to the non-exclusive license under
certain of the Xenon Licensed IP that is granted to Genentech in the Genentech
License for internal research purposes.  The Parties acknowledge that certain of
the Xenon Know-How includes Know-How non-exclusively licensed to Xenon from
Genentech under the Genentech License, and that accordingly Neurocrine’s
sublicense thereunder is exclusive with respect to Xenon (subject to Section
2.2) and not with respect to Genentech.

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(b)

Non-Exclusive License Grants.

 

(i)

Screening.  Subject to the terms and conditions of this Agreement, Xenon hereby
grants to Neurocrine a non-exclusive, non-royalty bearing license with the right
to grant sublicenses through multiple tiers as set forth in Section 2.3, under
the Xenon Licensed IP, to screen compounds for identification as a Select NaV
Inhibitor in the Field in the Territory.

 

(ii)

Research.  Subject to the terms and conditions of this Agreement, Xenon hereby
grants to Neurocrine a non-exclusive, non-royalty bearing license with the right
to grant sublicenses through multiple tiers as set forth in Section 2.3, under
the Xenon Licensed IP to research Excluded Compounds in the Field in the
Territory.

 

(c)

Restriction.  Neurocrine shall not, directly or indirectly, Develop, seek
Regulatory Approval for, market or promote:

 

(i)

any Early Compounds in the Pain Field; or

 

(ii)

any Excluded Compound.

2.2. Xenon Retained Rights.  Notwithstanding the rights granted to Neurocrine in
Section 2.1(a), Xenon retains a non-exclusive, non-licensable, non-transferable
(except to Xenon’s Affiliates and permitted assignees pursuant to Section 14.3),
royalty-free, fully paid up worldwide right to use or reference (a) the Xenon
Licensed IP as reasonably necessary to conduct the activities allocated to Xenon
under this Agreement or under the Research Plan, Initial Development Plan and
Subsequent Development in accordance with the terms of this Agreement, and (b)
the Xenon Licensed IP for screening purposes only with respect to Compounds
other than XEN901, and each DTC and Research Compound that is designated as a
Development Candidate by the JSC; provided that (i) Xenon shall not conduct any
in vivo studies with any Compound under this clause (b) and (ii) Xenon shall not
publish the results of any activities under this clause (b) without Neurocrine’s
prior written consent.  Xenon hereby grants to Neurocrine a non-exclusive
license, with the right to grant sublicenses through multiple tiers in
connection with a sublicense under the licenses granted in Section 2.1, under
all Patent Rights resulting from Xenon’s use of the Xenon Licensed IP under the
preceding clause (b), solely as necessary for the practice of the licenses
granted in Section 2.1).

2.3. Right to Sublicense.  Neurocrine shall have the right to grant sublicenses
through multiple tiers, under any or all of the rights granted in Section 2.1,
to its Affiliates and to Third Parties; provided, the granting by Neurocrine of
a sublicense shall not relieve Neurocrine of any of its obligations hereunder,
including, without limitation, the obligation to make milestone and royalty
payments pursuant to Article 8, whether or not such payments are based on
activities of any of its Affiliates or sublicensees.  Each Sublicense Agreement
in which Neurocrine or its Affiliate or sublicensee grants a sublicense under
the Xenon Licensed IP shall be in writing and subject and subordinate to, and
consistent with, the relevant terms and conditions of this
Agreement.  Neurocrine shall provide Xenon with a copy of any Third Party
Sublicense Agreement (with all accompanying schedules, exhibits, and referenced
documents), and any amendment thereto, within [†]days after its execution;
provided that Neurocrine shall have the right to redact any (a) financial terms
and (b) other unrelated technical or business information, so long as such
redaction does not adversely affect the ability of Xenon to confirm such
Sublicense Agreement’s compliance with the terms of this Agreement.  

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2.4. License to Xenon.  Neurocrine hereby grants to Xenon and its Affiliates a
non-exclusive license, without the right to grant sublicenses, under the
Neurocrine Research IP solely to conduct the activities allocated to Xenon under
the Research Plan, Initial Development Plan and Subsequent Development or
otherwise under this Agreement in accordance with the terms of this Agreement.

2.5. Transfer of Xenon Licensed IP.  Promptly after the Effective Date, Xenon
shall provide Neurocrine with copies of all Know-How in the Xenon Licensed IP in
existence as of the Effective Date.  On an ongoing basis thereafter during the
Research Term, upon Neurocrine’s reasonable request, Xenon shall provide
Neurocrine with complete and accurate copies of all such Know-How generated
since the last such transfer under this Section 2.5.  The Parties shall
cooperate with each other in good faith to enable a smooth transfer of such
Know-How to Neurocrine.  Upon Neurocrine’s reasonable request during the
Research Term, Xenon shall provide reasonable technical assistance, including
making appropriate employees available to Neurocrine at reasonable and mutually
convenient times, places and frequency and upon reasonable prior notice, for the
purpose of assisting Neurocrine to understand and use the Know-How in the Xenon
Licensed IP in connection with Neurocrine’s Development of Products.  The
transfer of Xenon Know-How pursuant to this Section 2.5 shall be made in a
manner such that the value, usefulness and confidentiality of the Xenon Know-How
delivered by Xenon is preserved.

2.6. No Implied Licenses.  Except as explicitly set forth in this Agreement,
neither Party shall be deemed by estoppel or implication to have granted the
other Party any license or other right to any intellectual property of such
Party.  All rights not otherwise expressly granted hereunder by a Party shall be
retained.

2.7. Exclusivity.

 

(a)

Xenon’s Exclusivity.  During the Term, Xenon shall not, itself or with or
through any Affiliate or Third Party, and shall not grant any Affiliate or Third
Party any rights to, research, develop, manufacture or commercialize any Select
NaV Inhibitor, except for (i) the activities conducted under and in accordance
with the terms of this Agreement, and (ii) Excluded Compounds only as set forth
in the Genentech License; provided, however, that profiling whether a compound
is a Select NaV Inhibitor shall not be considered research in this Section
2.7(a).

 

(b)

Neurocrine’s Exclusivity.  During the Research Term and the one (1)-year period
thereafter, Neurocrine shall not, itself or with or through any Affiliate or
Third Party, and shall not grant any Affiliate or Third Party any rights to,
research, develop, manufacture or commercialize any small-molecule Select NaV
Inhibitor except for the activities conducted under and in accordance with the
terms of this Agreement.

2.8. Acquisitions.

 

(a)

Xenon.  

 

(i)

If, during the Term, Xenon or any of its Affiliates acquires or is acquired by a
Third Party (such Third Party, the “Acquisition Party”) (whether such
acquisition occurs by way of a purchase of assets, merger, consolidation, change
of control or otherwise) that is, at the time of such acquisition, engaging in
activities that would violate Section 2.7(a) (such activities, an “Acquired
Competing Program” and any product researched, developed, manufactured or
commercialized or otherwise exploited thereunder, an “Acquired Competing
Product”), then Xenon shall provide prompt written notice to Neurocrine of such
acquisition.  

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(ii)

In the case of an acquisition described in Section 2.8(a)(i) that results in a
Change of Control of Xenon, the Acquisition Party shall have the right to
continue such Acquired Competing Program (but not commence any new Select NaV
Inhibitor program) and such continuation shall not constitute a breach of
Section 2.7(a), provided that (A) such Acquisition Party conducts such Acquired
Competing Program independently of the activities under this Agreement; (B) such
Acquisition Party does not use any Xenon Licensed IP, Neurocrine Licensed IP or
Confidential Information of Neurocrine in the conduct of such Acquired Competing
Program; (C) such Acquisition Party establishes reasonable internal safeguards
designed to ensure that the foregoing requirements are satisfied, which
safeguards shall be subject to Neurocrine’s review and comment; and (D) such
Acquisition Party does not use in such Acquired Competing Program any
individuals (other than finance, human resources or legal personnel, except for
patent counsel, patent agents and other individuals involved in the preparation,
prosecution or review of patent applications and patents) who conducted any
activities under this Agreement or who conducted activities for Xenon with
respect to any Select NaV Inhibitors ((A)-(D), collectively, the “Xenon
Firewall”).

 

(iii)

In the case of an acquisition described in Section 2.8(a)(i) that does not
result in a Change of Control of Xenon, Xenon shall use commercially reasonable
efforts to Divest such Acquired Competing Program within [†] after the closing
of such acquisition, and shall complete such divestment within [†] after the
closing of such acquisition.  The conduct of such Acquired Competing Program by
the Acquisition Party during such [†] period shall not be deemed a breach of
Xenon’s obligations in Section 2.7(a), provided that such new Affiliate conducts
such Acquired Competing Program in accordance with the Xenon Firewall.  “Divest”
means the sale or transfer of rights to the Acquired Competing Program to a
Third Party without receiving a continuing share of profit, royalty payment or
other economic interest in the success of such Acquired Competing Program.

 

(b)

Neurocrine.  

 

(i)

If, during the Research Term or the [†] period thereafter, Neurocrine or its
Affiliates acquires or is acquired by a Third Party (whether such acquisition
occurs by way of a purchase of assets, merger, consolidation, change of control
or otherwise) that is, at the time of such acquisition, engaging in activities
that would violate Section 2.7(b) if conducted by Neurocrine during the Research
Term or the [†] period thereafter (the “Neurocrine Acquired Program”), then such
new Affiliate shall have the right to continue such Neurocrine Acquired Program
and such continuation shall not constitute a breach of Section 2.7(b), provided
that such new Affiliate conducts such Neurocrine Acquired Program independently
of the activities of this Agreement and does not use any Xenon Licensed IP,
Neurocrine Licensed IP or Confidential Information of Xenon in the conduct of
such Competing Program.  

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(ii)

If, during the Term of this Agreement, Neurocrine or its Affiliates acquires or
is acquired by a Third Party (whether such acquisition occurs by way of a
purchase of assets, merger, consolidation, change of control or otherwise) that
is, at the time of such acquisition, engaging in a Neurocrine Acquired Program,
then following the date of the consummation of the relevant acquisition, with
respect to Neurocrine’s, its Affiliates and sublicensees exercise of
Neurocrine’s Commercially Reasonable Efforts pursuant to this Agreement,
Neurocrine shall not be entitled to take into account such Neurocrine Acquired
Program or the patent and regulatory exclusivity, safety and efficacy, product
profile or market share or commercial potential of any product in the Neurocrine
Acquired Program in any determination with respect to the research, Development,
Commercialization or other exploitation of (including whether to seek Regulatory
Approval in respect of) Compounds or Products.

Article 3
GOVERNANCE

3.1. Joint Steering Committee.  The Parties shall establish a joint steering
committee (the “Joint Steering Committee” or the “JSC”), composed of [†]
representatives of each Party having research or development roles within such
Party, each having sufficient experience and responsibility within such Party to
make decisions arising within the scope of the JSC’s responsibilities.  The JSC
will at all times consist of an equal number of members from each Party.  The
JSC shall coordinate and oversee the Research Program and the Initial
Development Program, and shall in particular:

 

(a)

coordinate the activities of the Parties under the Research Plan and the Initial
Development Plans and oversee the implementation of such plans;

 

(b)

review reports delivered to the JSC pursuant to the terms of this Agreement;

 

(c)

monitor and discuss the progress of the Research Program and Initial Development
Program;

 

(d)

provide a forum for and facilitate frequent communications between the Parties
with respect to the Research Program and Initial Development Program;

 

(e)

except as set forth in Section 4.9, review and approve the publication of the
results of any studies of Compounds or Products completed prior to or ongoing as
of the Effective Date;

 

(f)

review a publication strategy for research and Development data arising out of
or generated in the course of the Research Program or Initial Development
Program;

 

(g)

select Research Compounds for advancing to subsequent stages of research and
preclinical development under the Research Program, including designating
Research Compounds as Development Candidates for advancing into IND-enabling
studies;

 

(h)

select the two (2) DTCs to be designated as the DTC Development Candidates for
which Xenon will conduct IND-enabling studies under the Initial Development
Program, to include at least the activities set forth on Exhibit V, but in any
event excluding any GMP manufacture, upon which determination such DTCs will
remain DTCs and the other DTC that is not designated as a Development Candidate
will become a Research Compound;

 

(i)

identify a list of approved vendors who may be utilized in connection with the
performance of activities pursuant to the DTC Development Plan;

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(j)

prepare and approve any amendments to the Research Plan, Research Budget and
Initial Development Plans, and approve the initial DTC Initial Development Plan;

 

(k)

discuss the Neurocrine Development Plans and Neurocrine’s activities thereunder;

 

(l)

if Neurocrine determines not to submit an IND to the FDA for a XEN901 Product on
account of the results of preclinical studies thereof, review preclinical
toxicity results generated after the Effective Date (e.g., from 6-month GLP
toxicokinetic rat studies or 9-month GLP toxicokinetic dog studies) and
determine whether the results are more likely than not to result in (i) such IND
not being accepted by the FDA, (ii) XEN901 being placed on complete or partial
clinical hold or (iii) such IND being accepted by the FDA but with non-hold
comments such that approved Indications or uses of such XEN901 Product would be
substantially limited, for example as a result of concerns with the preclinical
safety margin;

 

(m)

if, following Neurocrine’s receipt of FDA comments to an IND for a XEN901
Product, Neurocrine makes a Neurocrine Negative IND Decision pursuant to Section
6.3(b) and Xenon timely challenges such decision pursuant to such Section,
determine whether to agree or disagree with such Neurocrine Negative IND
Decision;

 

(n)

establish joint subcommittees or sub-teams, as appropriate, such as for
manufacturing, clinical and regulatory, each of which will include functionally
aligned representatives of each Party; and

 

(o)

perform such other functions as appropriate to further the purposes of the
Research Program or the Initial Development Program, as expressly set forth in
this Agreement or allocated to the JSC by the Parties in writing.

3.2. Duration of the JSC.  The JSC will disband upon the completion or earlier
termination of both the Research Program and Initial Development Program.

3.3. Limitations of Committee Authority.  Each Committee shall have only the
powers expressly assigned in this Article 3 and elsewhere in this Agreement and
shall not have the authority to: (a) modify or amend the terms and conditions of
this Agreement; (b) waive or determine either Party’s compliance with the terms
and conditions of this Agreement; (c) decide any issue in a manner that would
conflict with the express terms and conditions of this Agreement; or (d) make
any determination with respect to the applicable Party’s satisfaction of its
obligations hereunder to use Neurocrine’s Commercially Reasonable Efforts or
Xenon’s Commercially Reasonable Development Efforts, as applicable.

3.4. Committee Membership and Meetings.

 

(a)

Members.  Each Party’s initial members of the JSC are listed on Exhibit I.  Each
Party may replace (or with respect to newly formed Committees, appoint) its
representatives on any Committee by providing written notice to the other
Party.  Each Party shall appoint one (1) of its representatives on each
Committee to act as a co-chairperson of such Committee.  The co-chairpersons of
each Committee will be responsible for sending invitations and agendas for
Committee meetings to all members at least [†] days before the next scheduled
meeting and shall jointly prepare and circulate reasonably detailed minutes of
each Committee meeting, but will otherwise have no additional powers or rights
beyond those held by other Committee representatives.

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(b)

Meetings.  Each Committee shall hold meetings at such times as it elects to do
so or as either Party reasonably requests, but in no event shall such meetings
be held less frequently than once every [†].  Meetings may be held in person or
by means of audio or video teleconference, as mutually agreed between the
Parties; provided that a minimum of [†] meetings per calendar year will take
place in person.  In-person meetings shall be held at alternating locations
selected by the Parties.  Each Party shall be responsible for all of its own
expenses of participating in Committee meetings.  No action taken at any meeting
of any Committee shall be effective unless at least one (1) representative of
each Party is participating.

 

(c)

Non-Member Attendance. Each Party may from time to time invite a reasonable
number of non-member participants, in addition to its appointed representatives,
to attend the Committee meetings in a non-voting, observer capacity; provided
that such participants shall be bound by confidentiality and non-use obligations
consistent with the terms of this Agreement.  Each Party shall provide prior
written notice to the other Party if it has invited any Third Party (including
any consultant) to attend any Committee meeting.

3.5. Decision-Making.  All decisions, determinations, approvals or consents of
each Committee shall be made by unanimous vote, with each Party’s
representatives collectively having one (1) vote.  The Parties will strive to
reach consensus on all Committee decisions, acting in good faith and using
diligent efforts.  If after reasonable discussion and good faith consideration
of each Party’s view on a particular matter before any Committee that is within
its authority, the representatives of the Parties cannot reach unanimous
agreement as to such matter within [†] days after such matter was brought to
such Committee for resolution, such disagreement shall be referred to the JSC
(in the case of disagreements at any Committee other than the JSC) or the Chief
Executive Officer of Xenon or his/her nominee and the Chief Business Development
Officer of Neurocrine or his/her nominee (the “Executive Officers”) (in the case
of disagreements at the JSC) for resolution.  If the Executive Officers cannot
resolve such matter within [†] days after such matter has been referred to them,
then Neurocrine shall have the right to decide such matter; provided that
Neurocrine shall not use its final decision-making authority to approve any
amendment to (a) the Research Plan or to any Initial Development Plan that
requires Xenon to conduct any activities that Xenon reasonably determines that
it does not have the resources or capabilities to conduct or (b) the DTC Initial
Development Plan that would increase Xenon’s costs incurred thereunder that are
not reimbursed by Neurocrine without Xenon’s prior written consent (it being
understood that the DTC Initial Development Plan will at all times include the
information set forth in Section 5.2(a)).  Xenon agrees that it has the
resources and capabilities to conduct all activities allocated to Xenon in the
Research Plan and the XEN901 Initial Development Plan as of the Effective Date.

3.6. Alliance Managers.  In addition to the JSC described in Section 3.1,
Neurocrine and Xenon each acknowledge and agree that it would be beneficial to
the Research Program and the Initial Development Program for each to have a
senior representative with a general understanding of the activities under such
programs to act as an alliance manager (each, an “Alliance Manager”), and each
will appoint such person to the extent each Party in its sole discretion
determines it is practical.  It is envisioned that the Alliance Managers will
serve as a single point of contact within each Party with responsibility for
facilitating communication and collaboration between the Parties.  Each Party’s
Alliance Manager may attend JSC meetings as appropriate and will be provided
access to decision-making representatives of such Party.

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Article 4
RESEARCH PROGRAM

4.1. General.  Subject to the terms and conditions of this Agreement, the
Parties shall undertake a joint research collaboration during the Research Term
to discover, identify and preclinically develop Research Compounds (the
“Research Program”).  The Research Program is intended to include the
preclinical development of Xenon’s existing non-clinical Research Compounds and
the discovery of new back-up and follow-on Research Compounds to XEN901 and the
DTCs as clinical Development Candidates for subsequent Development and
Commercialization by Neurocrine.

4.2. Research Plan; Research Budget.  During the Research Term, the Parties
shall conduct the Research Program in accordance with a written research plan
that, at a minimum: (a) allocates research responsibilities between the Parties;
(b) sets forth the details and anticipated timing of the research activities to
be conducted by each Party; and (c) sets forth the minimum number of Xenon FTEs
conducting such activities (as amended, modified or supplemented in accordance
with this Agreement, the “Research Plan”).  The Research Plan will set forth
activities to be conducted by the Parties leading up to, and including the
preparation of, an IND for one or more Research Compounds, but will not
including the filing of such INDs by Neurocrine.  The Research Plan will be
conducted in accordance with an operational and research budget including all of
Xenon’s FTE Costs and the anticipated out-of-pocket costs to be incurred by
Xenon to conduct its activities under the Research Plan (the “Research
Budget”).  As of the Effective Date, the Parties have agreed upon an initial
Research Plan describing the research activities to be conducted in the first
year of the Research Program and corresponding initial Research Budget, which
are attached to this Agreement as Exhibit J.  From time to time during the
Research Term (and no less frequently than once per calendar quarter), the JSC
shall review the Research Plan and Research Budget and, as appropriate and to
the extent necessary, prepare and approve amendments thereto.  In addition, no
later than December 1 of each calendar year during the Research Term, the
Parties shall prepare an amended Research Plan and Research Budget describing
research activities and the research and operational budget for the subsequent
calendar year, which shall be submitted for review and approval by the
JSC.  Upon JSC approval of any amendment or modification to the Research Plan
and Research Budget, the JSC will attach such amended or modified Research Plan
and Research Budget to the minutes of the JSC meeting at which the same is
approved and provide a copy of such minutes to each Party within [†] days.  If
the terms of the Research Plan contradict, or create inconsistencies or
ambiguities with, the terms of this Agreement, then the terms of this Agreement
shall govern.

4.3. Designation of Development Candidates.  From time to time during the
Research Term, either Party may nominate a DTC or Research Compound as a
potential Development Candidate for the JSC’s consideration.  Promptly after
such nomination, each Party shall present to the JSC the data and results it has
obtained with respect to such DTC or Research Compound, and the JSC shall
determine whether such DTC or Research Compound shall be approved as a
Development Candidate or whether additional research activities should be
conducted with respect to such DTC Research Compound, after which such DTC or
Research Compound may be reconsidered for designation as a Development
Candidate.  If the JSC approves a particular DTC or Research Compound as a
Development Candidate, then the Parties shall proceed to IND-enabling studies of
such DTC or Research Compound during the Research Term as set forth in the
Research Plan.

4.4. Research Term.

 

(a)

Research Term.  The Research Program shall commence on the Effective Date and
end on the second (2nd) anniversary of the Effective Date, unless earlier
terminated or extended as set forth below (the “Research Term”).

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(b)

Extension.  The Research Term may be extended one time, by one (1) year, by the
Parties’ written agreement and the JSC’s approval of an amended Research Plan
setting forth the research activities to be conducted by the Parties during such
extension, and an amended Research Budget, which shall be agreed upon by the
Parties in writing.

4.5. Research Costs.  Each Party shall be solely responsible for all costs such
Party incurs to conduct its activities under the Research Plan; provided that
Neurocrine shall reimburse Xenon for the FTE Costs and out-of-pocket costs
incurred by Xenon in accordance with the Research Budget to conduct its
activities under the Research Plan, as provided in Section 8.2.

4.6. Conduct of Research.  Each Party shall conduct the activities assigned to
it under the Research Plan.  Each Party shall conduct such activities in
accordance with the timelines in the Research Plan, in good scientific manner
and in compliance with all applicable Laws.

4.7. Research Records.  Each Party shall maintain complete, current and accurate
records of all activities conducted by it under the Research Program, and all
data and other information resulting from such activities.  Such records shall
be in sufficient detail and in good scientific manner appropriate for regulatory
and patent purposes.  Each Party shall document all non-clinical studies in
formal written study reports according to applicable Laws and national and
international guidelines (e.g., ICH and GLP).  Neurocrine shall have the right
to review and copy such records maintained by Xenon at reasonable times and to
obtain access to the original documents to the extent reasonably necessary for
regulatory and patent purposes.

4.8. Research Reports.  Xenon shall keep Neurocrine reasonably informed of its
progress under the Research Program, and upon request provide Neurocrine with
copies of all data and results generated by or on behalf of Xenon in the course
of performing the Research Program.  Each Party shall provide the JSC with
reports detailing its Research Program activities and the results of such
activities at each regularly scheduled JSC meeting.  The Parties shall discuss
the status, progress and results of the Research Program at JSC meetings.

4.9. University Collaborators.  Neurocrine acknowledges that as of the Effective
Date, Xenon has entered into agreements with academic institutions to conduct
specified research using certain Compounds, as listed on Exhibit K, and that
Xenon may enter into similar agreements after the Effective Date solely as and
to the extent set forth on Exhibit K (collectively, the “Academic
Agreements”).  Except to the extent prohibited under an Academic Agreement,
Xenon shall keep Neurocrine reasonably informed of the activities under the
Academic Agreements, including by providing copies of any proposed publication
or presentation of the results of such research and any invention disclosure of
inventions made under such research, in each case within [†] days after Xenon’s
receipt thereof from the counterparty to any Academic Agreement.  Neurocrine
shall have the right to require Xenon to exercise its rights under the Academic
Agreements with respect to reviewing and commenting on publications and
presentations and exercising options or other rights with respect to
intellectual property arising thereunder (subject to Section 9.6 with respect to
any such intellectual property to be in-licensed by Xenon).

4.10. Materials.

 

(a)

During the Research Term or thereafter, in order to facilitate the conduct of
the Research Program or the performance of other activities under this
Agreement, either Party may provide to the other Party certain biological
materials or chemical compounds owned by the supplying Party for use by the
other Party, but excluding any Inventory transferred under Section 6.11 (such
materials or compounds, collectively, “Materials”).  All such Materials shall
remain the sole property of the supplying Party.

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(b)

The Materials-receiving Party agrees that the Materials:

 

(i)

shall be used only in the fulfillment of obligations or exercise of rights under
this Agreement and solely under the control of the receiving Party;

 

(ii)

shall not be used or delivered to or for the benefit of any Third Party without
the prior written consent of the supplying Party;

 

(iii)

shall be returned or destroyed immediately upon the request of the supplying
Party; and

 

(iv)

shall not be used in research or testing involving human subjects, in Clinical
Trials, or for diagnostic purposes involving humans.

 

(c)

EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE MATERIALS SUPPLIED UNDER
THIS SECTION 4.10 ARE SUPPLIED IN “AS IS” CONDITION WITH NO WARRANTY, EXPRESS OR
IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF
MERCHANTABILITY, TITLE, NON-INFRINGEMENT, EXCLUSIVITY, OR FITNESS FOR A
PARTICULAR PURPOSE.  ANY MATERIALS DELIVERED PURSUANT TO THIS SECTION 4.10 ARE
UNDERSTOOD TO BE EXPERIMENTAL IN NATURE AND MAY HAVE HAZARDOUS PROPERTIES.  THE
MATERIALS-RECEIVING PARTY WILL HANDLE THE MATERIALS ACCORDINGLY, AND WILL USE
PRUDENCE AND APPROPRIATE CAUTION IN ANY EXPERIMENTAL WORK, SINCE NOT ALL OF THE
MATERIALS’ CHARACTERISTICS MAY BE KNOWN.

4.11. Subcontractors.  Xenon shall not subcontract any of its obligations under
this Agreement to a Third Party without the prior written consent of Neurocrine,
which shall not be unreasonably withheld, conditioned or delayed.  Neurocrine
may perform its activities under the Research Program and its Development and
Commercialization activities through one or more subcontractors.  Upon any
permitted subcontracting by a Party, such Party shall remain responsible for the
work delegated to, and payment to, its subcontractors to the same extent it
would if it had done such work itself, and shall enter into a written agreement
with each subcontractor that is consistent with this Agreement, including
provisions relating to confidentiality, non-use and intellectual property.

4.12. Consequences of the End of the Research Term.  From and after the
expiration of the Research Term, Xenon will have no obligation to perform any
further activities in furtherance of the Research Program.

Article 5
Initial Development Program

5.1. Initial Development Program.  Subject to the terms and conditions of this
Agreement, the Parties will conduct a collaborative Development program for
XEN901 and the DTCs under the direction of the JSC.  Such program will
include:  (i) completion of any preclinical and clinical studies that are
ongoing as of the Effective Date of any XEN901 Product and the two (2) DTC
Products selected by the JSC pursuant to Section 3.1(h) as Development
Candidates, (ii) a pharmacokinetic drug-drug interaction and food effect Phase 1
Clinical Trial of a XEN901 Product to examine the adequacy of a new pediatric
formulation, and (iii) all preclinical studies of two (2) DTC Products
containing the two (2) DTCs designated as Development Candidates by the JSC
pursuant to Section 3.1(h), in each case, to the extent such preclinical studies
are required to support IND submission and preparation of an IND for each such
DTC Product (the “Initial Development Program”).

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5.2. Initial Development Plans.  The Initial Development Program shall be
conducted pursuant to two (2) Initial Development Plans, one (1) for XEN901 and
one (1) for the two (2) DTCs designated as Development Candidates.  If the terms
of an Initial Development Plan contradict, or create inconsistencies or
ambiguities with, the terms of this Agreement, then the terms of this Agreement
shall govern.  From time to time (and no less frequently than once per calendar
quarter), as set forth in Section 3.1(j), the JSC shall review each of the
Initial Development Plans and, as appropriate, and to the extent necessary,
prepare and approve amendments thereto.  Upon JSC approval of any amendment or
modification to an Initial Development Plan, the JSC will attach such amended or
modified Initial Development Plan to the minutes of the JSC meeting at which the
same is approved and provide a copy of such minutes to each Party within [†]
days.

 

(a)

DTC Development Plan.  The Initial Development Plan for the DTCs designated as
Development Candidates (the “DTC Initial Development Plan”) will, at a minimum:
(i) allocate activities between the Parties, (ii) set forth the timeline and
details of all preclinical activities to be conducted by the Parties to support
IND submission for each of the two (2) DTC Products and preparation of an IND
for each of the two (2) DTC Products and (iii) identify the Third Party vendors
approved by the JSC who may be utilized by either Party in connection with the
performance of activities allocated to such Party pursuant to the foregoing
subclause (i).  Within [†] days after designation of the first DTC as a
Development Candidate by the JSC pursuant to Section 3.1(h), the Parties will
prepare and agree upon, such agreement not to be unreasonably withheld,
conditioned or delayed, an initial DTC Initial Development Plan, and within [†]
days after designation of the second DTC as a Development Candidate by the JSC
pursuant to Section 3.1(h), the Parties will prepare and agree upon, such
agreement not to be unreasonably withheld, conditioned or delayed, an amendment
to the initial DTC Initial Development Plan to include activities and related
required information for the second DTC.

 

(b)

XEN901 Initial Development Plan.  The Initial Development Plan for XEN901 (the
“XEN901 Initial Development Plan”) will, at a minimum, set forth the timeline
and details of the completion of any preclinical and clinical studies by Xenon
of any XEN901 Product that are ongoing as of the Effective Date.  The XEN901
Initial Development Plan will include a detailed budget setting forth all FTE
Costs and out-of-pocket costs to be incurred by Xenon to conduct its activities
thereunder (the “XEN901 Development Budget”).  As of the Effective Date, the
Parties have agreed upon an initial XEN901 Initial Development Plan, including
XEN901 Development Budget, which is attached to this Agreement as Exhibit L.

5.3. Development Efforts.  Xenon shall use Xenon’s Commercially Reasonable
Development Efforts, and Neurocrine shall use Neurocrine’s Commercially
Reasonable Efforts, to conduct the Development activities assigned to such Party
under the Initial Development Plans.  Each Party shall conduct such activities
in accordance with the timelines in the Initial Development Plans, in good
scientific manner and in compliance with all applicable Laws.

5.4. Development Costs.  Each Party shall be solely responsible for all costs
such Party incurs to conduct its activities under the Initial Development Plans;
provided that (a) Neurocrine shall reimburse Xenon for the FTE Costs and
out-of-pocket costs incurred by Xenon in accordance with the XEN901 Development
Budget to conduct its activities under the XEN901 Initial Development Plan, as
provided in Section 8.2, and (b) the JSC may determine that Neurocrine will
reimburse Xenon’s FTE Costs and out-of-pocket costs to conduct any particular
activities under the DTC Initial Development Plan, in which case the JSC will
prepare a budget for such activities and Neurocrine will reimburse such costs as
provided in Section 8.2.  For clarity, Xenon shall be solely responsible for all
of Xenon’s FTE Costs and out-of-pocket costs incurred in connection with its
performance of activities pursuant to the DTC Initial Development Plan, except
as provided in the preceding clause (b).

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5.5. Development Records.  Each Party shall maintain complete, current and
accurate records of all activities conducted by it under the Initial Development
Program, and all data and other information resulting from such
activities.  Such records shall be in sufficient detail and in good scientific
manner appropriate for regulatory and patent purposes.  Each Party shall
document all non-clinical studies and Clinical Trials in formal written study
reports according to applicable Laws and national and international guidelines
(e.g., ICH, GCP, GLP, and GMP).  Neurocrine shall have the right to review and
copy such records maintained by Xenon at reasonable times and to obtain access
to the original to the extent necessary for regulatory and patent purposes.

5.6. Data Exchange and Development Reports.  Xenon shall promptly provide
Neurocrine with copies of all data and results generated by or on behalf of
Neurocrine in the course of performing the Initial Development Program,
including, in each case of data arising from Clinical Trials, in a form that is
reasonably suitable for Neurocrine to readily conduct statistical analysis using
such data or in such other form as the JSC may agree from time to time.  Each
Party shall provide the JSC with reports detailing its Initial Development
Program activities and the results of such activities at each regularly
scheduled JSC meeting.  The Parties shall discuss the status, progress and
results of the Initial Development Program at JSC meetings.

5.7. Effect of Completion of the Initial Development Plans.  From and after the
completion of the activities allocated to Xenon pursuant to either Initial
Development Plan, Xenon will have no obligation to perform any further
activities in respect of the Development of XEN901 Products or DTC Products, as
applicable to the completed Initial Development Plan, except as otherwise agreed
by the Parties in writing.

Article 6
DEVELOPMENT, REGULATORY AND MANUFACTURING

6.1. Subsequent Development.  Except for the activities set forth in the
Research Plan, the XEN901 Initial Development Plan, or the DTC Initial
Development Plan, Neurocrine shall be solely responsible, at its sole cost and
expense (but subject to the Co-Funding Option), for all Development of the
Compounds and Products (the conduct of such activities is referred to herein as
the “Subsequent Development”), including the conduct of a Phase 1b Clinical
Trial (e.g., open-label study in patients) or Phase 2 Clinical Trial of a XEN901
Product in children with SCN8A-EE (as described in the XEN901 Neurocrine
Development Plan, the “Proof of Concept Study”).  Notwithstanding the foregoing,
the Parties may mutually agree that Xenon will conduct particular activities
with respect to the Subsequent Development of XEN901 or a DTC that are not
included in an Initial Development Plan, in which case Neurocrine will reimburse
all FTE Costs and out-of-pocket costs incurred by Xenon to conduct such
activities.

6.2. Subsequent Development Plans.  Neurocrine shall conduct all Subsequent
Development of any Compound or Product pursuant to a development plan for such
Compound or Product (each, a “Neurocrine Development Plan”).  Each Neurocrine
Development Plan will set forth the timeline and summary of all preclinical and
clinical activities to be conducted by or on behalf of Neurocrine thereunder
with respect to the applicable Product.  The Neurocrine Development Plan for
XEN901 (as amended, modified or supplemented, the “XEN901 Neurocrine Development
Plan”) will include the timeline and details of the Proof of Concept Study.  As
of the Effective Date, Neurocrine has prepared the initial XEN901 Neurocrine
Development Plan, which is attached to this Agreement as Exhibit M.  Prior to
commencing Subsequent Development of any other Product, Neurocrine shall prepare
a Neurocrine Development Plan therefor and submit such Neurocrine Development
Plan to the JSC (or, if the JSC has disbanded, to Xenon) for review and
discussion.  If the terms of any Neurocrine Development Plan contradict, or
create inconsistencies or ambiguities with, the terms of this Agreement, then
the terms of this Agreement shall govern.

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6.3. XEN901 INDs.

 

(a)

Neurocrine will be responsible for submitting one (1) or more INDs to the FDA
for a XEN901 Product; provided that Neurocrine shall not be obligated to file
any such IND if the JSC determines that preclinical toxicity results generated
after the Effective Date (e.g., from 6-month GLP toxicokinetic rat studies or
9-month GLP toxicokinetic dog studies) are more likely than not to result in (i)
such IND not being accepted by the FDA, (ii) XEN901 being placed on complete or
partial clinical hold or (iii) such IND being accepted by the FDA but with
non-hold comments such that approved Indications or uses of such XEN901 Product
would be limited, for example as a result of concerns with the preclinical
safety margin.

 

(b)

If Neurocrine submits any IND for a XEN901 Product and receives comments from
the FDA, and as a result of such comments Neurocrine reasonably believes that
XEN901 is no longer capable of being Developed pursuant to the XEN901 Neurocrine
Development Plan and as otherwise expected to be Developed by Neurocrine in the
exercise of Neurocrine’s Commercially Reasonable Efforts (a “Neurocrine Negative
IND Decision”), then Neurocrine shall notify Xenon of such decision within [†]
days after receipt of such FDA comments.  Xenon shall notify Neurocrine of its
agreement or disagreement with the Neurocrine Negative IND Decision within [†]
days after receiving notice thereof from Neurocrine.  If Xenon notifies
Neurocrine of its disagreement within such [†] day period, then Neurocrine will
provide information reasonably supporting its decision to the JSC, and the JSC
will schedule an ad hoc meeting to discuss the matter and will determine whether
it agrees with the Neurocrine Negative IND Decision (a “JSC Negative IND
Decision”) or disagrees with the Neurocrine Negative IND Decision.  If (i) there
is a Neurocrine Negative IND Decision and Xenon either agrees with such decision
or fails to notify Neurocrine of its disagreement within the applicable [†]day
period or (ii) there is a JSC Negative IND Decision in accordance with Section
3.5, then in either case (i) and (ii), IND Acceptance will not be achieved with
respect to the applicable IND.  For clarity, a Neurocrine Negative IND Decision
or JSC Negative IND Decision will not create or nullify a presumption that
Neurocrine has satisfied Neurocrine’s obligations under Section 6.4.

6.4. Development Efforts; Diligence.  Neurocrine shall use Neurocrine’s
Commercially Reasonable Efforts to conduct all Development activities under the
Neurocrine Development Plans.  Neurocrine shall conduct such activities in
accordance with the timelines in the Neurocrine Development Plans, in good
scientific manner and in compliance with all applicable Laws.  Neurocrine shall
be solely responsible for all Subsequent Development; provided that Neurocrine
shall use Neurocrine’s Commercially Reasonable Efforts to Develop and seek
Regulatory Approval for at least two (2) Products in the Field in the Major
Markets.  Without limiting the foregoing, following IND Acceptance of an IND for
XEN901 in SCN8A-EE, Neurocrine shall use Neurocrine’s Commercially Reasonable
Efforts to complete a Phase 2 Clinical Trial of a XEN901 Product in SCN8A-EE.

6.5. Development Records.  Neurocrine shall maintain complete, current and
accurate records of all activities conducted by it under the Neurocrine
Development Program, and all data and other information resulting from such
activities.  Such records shall be in sufficient detail and in good scientific
manner appropriate for regulatory and patent purposes.  Neurocrine shall
document all non-clinical studies and Clinical Trials in formal written study
reports according to applicable Laws and national and international guidelines
(e.g., ICH, GCP, GLP, and GMP).

6.6. Development Costs.  Neurocrine shall be solely responsible for all costs it
incurs to conduct all Subsequent Development of Compounds and Products, subject
to Xenon’s Co-Funding Option as described below.

26

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6.7. Co-Funding Option.  On the terms set forth in this Section 6.7, Xenon shall
have the right to exercise the Co-Funding Option as described below with respect
to the first of a XEN901 Product or a DTC Product to reach the Co-Funding Notice
Period.  Upon the commencement of the Co-Funding Notice Period for one (1) such
Product, the Parties’ rights and obligations under this Section 6.7 will
terminate with respect to the other such Products.

 

(a)

For the first Major Indication for which Neurocrine intends to conduct a Phase 3
Clinical Trial of a XEN901 Product or the first Clinical Trial of a DTC Product
following a Successful Phase 2 Clinical Trial of such DTC Product, Neurocrine
shall prepare a development plan setting forth (i) for XEN901, its protocol for
such Clinical Trial as provided to the FDA, (ii) any other Development
activities necessary for NDA filing for such Product in such Major Indication,
and (iii) activities necessary for the preparation and filing of an NDA for such
Product in such Major Indication (the “Final Development Plan” for the
applicable Product).  Each Final Development Plan will include a detailed
estimated budget of Neurocrine’s internal costs at the FTE Rate and
out-of-pocket costs for all such activities.  Neurocrine shall provide the Final
Development Plan to Xenon promptly after preparation thereof.

 

(b)

Subject to the terms and conditions of this Agreement, Neurocrine hereby grants
to Xenon the right to elect to co-fund the Development of one (1) Product under
the applicable Final Development Plan, and to receive increased royalties on Net
Sales of such Product in the U.S. (the “Co-Funding Option”).  Such right shall
be exercisable by written notice to Neurocrine delivered during the Co-Funding
Notice Period.  Neurocrine shall notify Xenon promptly after the first to occur
of the following: (A) receiving FDA approval of the protocol for the Phase 3
Clinical Trial included in the Final Development Plan for a XEN901 Product, or
(B) the first Successful Phase 2 Clinical Trial of a DTC Product.  Within
[†]days after receipt of such notice from Neurocrine (the “Co-Funding Notice
Period”), Xenon shall have the right to exercise the Co-Funding Option for the
applicable Product by providing written notice to Neurocrine.  During the
Co-Funding Notice Period, Neurocrine shall provide to Xenon all information
reasonably requested by Xenon that is in Neurocrine’s possession and Control and
that would enable Xenon to make an informed decision as to whether to exercise
the applicable Co-Funding Option.

 

(c)

If Xenon exercises the Co-Funding Option for a Product, then the Parties shall
share equally all reasonable and documented costs and expenses that Neurocrine
incurs in connection with the Development of such Product in the applicable
Major Indication, except to the extent solely related to the Development of such
Product for Regulatory Approval outside the United States, from and after the
date of Xenon’s exercise of the Co-Funding Option (the “Co-Funded Costs”).  The
Co-Funded Costs shall include all pre- and post-launch Development costs
incurred by Neurocrine after Xenon’s exercise of the Co-Funding Option that are
directly related to Development activities conducted to enable the filing of an
NDA with the FDA for the applicable Product and Major Indication, but shall not
include costs and expenses that are solely related to the Development of such
Product for Regulatory Approval outside the United States.

 

(d)

If Xenon exercises the Co-Funding Option for a Product, Xenon will pay its share
of the Co-Funded Costs pursuant to Section 8.4, and the royalties applicable to
Net Sales of the applicable Product in the U.S. will be increased as set forth
in Section 8.7(c).

27

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

 

6.8. Subsequent Development Reports.  Neurocrine shall keep Xenon reasonably
informed as to the progress and results of its and its Affiliates’ and
sublicensees’ Subsequent Development of Products in the Territory.  Without
limiting the foregoing, from time to time, and in no event less than within [†]
days after the end of each calendar year during the Term, Neurocrine shall
provide Xenon with an updated Neurocrine Development Plan for each Product in
Development including significant ongoing or upcoming Development activities
expected to be performed in the following calendar year and a report that
summarizes the Subsequent Development activities performed in the prior calendar
year.  In addition, if Xenon has exercised the Co-Funding Option pursuant to
Section 6.7, then the Parties shall meet in person no less than once per
calendar year during the conduct of activities under the Final Development Plan
to discuss the Subsequent Development of the Product for which Xenon has
exercised its Co-Funding Option.  Neurocrine’s obligation to provide updated
Neurocrine Development Plans to Xenon, and if applicable, to meet in person to
discuss progress of the Subsequent Development, will terminate on a
Product-by-Product basis following the First Commercial Sale of such Product
anywhere in the Territory.

6.9. Voucher.  If the FDA grants Neurocrine a Rare Pediatric Disease Priority
Review Voucher in connection with the approval of an NDA for a XEN901 Product
(the “Voucher”), then Neurocrine may, at its option: (a) sell the Voucher to a
Third Party in an arm’s length transaction, in which case the revenue received
from such sale, less any reasonable and documented out-of-pocket costs incurred
by Neurocrine in connection with such sale, will be shared [†] between
Neurocrine and Xenon, with such payment to be made to Xenon within [†] days
after Neurocrine’s receipt of invoice from Xenon, such invoice to be issued
after Neurocrine reports such sale to Xenon (which Neurocrine shall do within
[†] days after the closing thereof); (b) keep the Voucher for its own use for a
product other than a Product, in which case Neurocrine shall pay to Xenon an
amount equal to [†] of the intrinsic value of the Voucher, which will equal the
average price of the [†] most recent (at the time of Neurocrine’s use of the
Voucher) arm’s length sales of a Rare Pediatric Disease Priority Review Voucher
for which the sale price was publicly disclosed, such payment to be made within
[†] days after Neurocrine’s use of the Voucher; or (c) use the Voucher for a
Product, in which case no payments would be due to Xenon.  If Neurocrine has not
sold the Voucher or used the Voucher for any product (including a Product)
within [†] years after the date the Voucher is granted to Neurocrine, then
Neurocrine will make the payment described in the preceding clause (b) to Xenon,
where the payment will be based on the [†] most recent publicly disclosed sale
prices at the end of such [†] year period.  If the FDA grants Neurocrine a Rare
Pediatric Disease Priority Review Voucher in connection with any Product other
than a XEN901 Product, Neurocrine will retain all rights to such voucher without
any payment or other obligations to Xenon.

6.10. Regulatory.

 

(a)

Neurocrine will be the regulatory sponsor and will be solely responsible for all
regulatory activities under this Agreement, except for any activities
specifically allocated to Xenon under the Research Plan or the Initial
Development Plans.  In no event shall Xenon submit any Regulatory Materials to
any Regulatory Authority, or communicate with any Regulatory Authority, with
respect to any Compound or Product without Neurocrine’s prior written
consent.  Neurocrine will own all Regulatory Materials for Compounds and
Products, including all NDAs, MAAs and Regulatory Approvals.

28

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

 

 

(b)

As soon as practicable after the Effective Date, Xenon shall transfer to
Neurocrine electronic copies (unless otherwise required by applicable Law) of
all Regulatory Materials relating to Compounds and Products, including all
INDs.  Upon the completion of such transfer, Xenon shall, and hereby does,
assign to Neurocrine all such Regulatory Materials, and shall promptly (and in
any case within [†] days) take all steps reasonably necessary to effect the
assignment to Neurocrine of all INDs included in such Regulatory Materials,
including submitting to any applicable Regulatory Authority a letter or other
necessary documentation (with copy to Neurocrine) notifying the Regulatory
Authority of the assignment.  Prior to the assignment of any such IND, Xenon
shall take all actions reasonably requested by Neurocrine with respect to the
maintenance or transfer of such IND.

 

(c)

Xenon shall provide assistance reasonably requested by Neurocrine in connection
with its regulatory activities for Compounds and Products.

6.11. Inventory.  Xenon hereby sells and assigns to Neurocrine, and Neurocrine
hereby purchases from Xenon, all of the Inventory, for no additional
consideration beyond the consideration set forth in Article 8; provided that
Neurocrine will reimburse Xenon for fifty percent (50%) of the documented costs
Xenon incurs to a Third Party manufacturer for any Inventory described on
Exhibit H that is manufactured after the Effective Date. Xenon may use the
Inventory to conduct its activities under the Research Program and the Initial
Development Program as provided in the Research Plan and Initial Development
Plans.  Xenon will deliver the Inventory DDP (Incoterms 2010) to the location of
Neurocrine or its designee as selected by Neurocrine.  Xenon represents and
warrants to Neurocrine that (a) the Inventory will meet the applicable
specifications set forth on Exhibit N, (b) the Inventory identified as GMP
materials on Exhibit H has been manufactured, stored and transported in
accordance with GMP and (c) all Inventory has been manufactured, stored and
transported in material compliance with all Laws applicable to such item of
Inventory.

6.12. Manufacturing.

 

(a)

Responsibility.  Neurocrine shall be solely responsible, at its sole expense,
for the manufacture of all Compounds and Products for use under this Agreement,
except as expressly set forth herein (including Material transferred by Xenon
under Section 4.10 and Inventory transferred under Section 6.11) or agreed by
the Parties in writing.  Exhibit O sets forth Xenon’s agreements with Third
Party contract manufacturers for the manufacture and supply of Compounds and
Products as in existence as of the Effective Date.  The Parties will determine
whether such agreements will be assigned to Neurocrine or whether Xenon will
supply to Neurocrine any materials manufactured thereunder.  If the Parties
agree that Xenon will supply to Neurocrine any Compound or Product manufactured
by Xenon’s Third Party contract manufacturer for use in any Clinical Trial, the
Parties shall enter into a commercially reasonable supply agreement and
associated quality agreement, under which Neurocrine shall purchase such
Compound or Product at a price equal to Xenon’s internal costs (at the FTE Rate)
and out-of-pocket costs to manufacture such Compound or
Product.  Notwithstanding anything in this Agreement to the contrary, this
Section 6.12 shall not constitute an agreement to transfer or assign any
agreements by Xenon or any of its Affiliates if an attempted transfer or
assignment thereof, without the consent of a Third Party, would constitute a
breach or other contravention under any agreement to which Xenon or any of its
Affiliates are a party.

29

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

 

 

(b)

Technology Transfer.  At a time reasonably requested by Neurocrine, Xenon will
conduct a Technology Transfer to Neurocrine or its designee to the extent
necessary or reasonably useful for the clinical or commercial manufacture of any
Compound or Product.  The Parties shall prepare a Technology Transfer plan
setting forth the procedures, activities and timelines for such Technology
Transfer.  Xenon shall provide reasonable assistance to Neurocrine in connection
with such Technology Transfer and any manufacturing process development
conducted by Neurocrine, including by making its technical personnel reasonably
available to Neurocrine for consultation and introductions to Xenon’s Third
Party manufacturer(s) for Compounds and Products.  For clarity, Xenon will
conduct such Technology Transfer for each Compound and Product for which
Neurocrine requests such transfer.

Article 7
COMMERCIALIZATION

7.1. Commercialization.  As between the Parties, Neurocrine will have the
exclusive right to conduct, and will be solely responsible for all aspects of,
the Commercialization of Products in the Territory, including: (a) developing
and executing a commercial launch and pre-launch plan, (b) manufacturing and
supplying Products for commercial use, (c) negotiating with applicable
Governmental Authorities and private payors regarding the price and
reimbursement status of the Products; (d) marketing and promotion; (e) booking
sales and distribution and performance of related services; (f) handling all
aspects of order processing, invoicing and collection, inventory and
receivables; (g) providing customer support, including handling medical queries,
and performing other related functions; and (h) conforming its practices and
procedures to applicable Laws relating to the marketing, detailing and promotion
of Products in the Territory.  As between the Parties, Neurocrine shall bear all
costs and expenses incurred in connection with the Commercialization of Products
in the Territory.

7.2. Diligence.  Neurocrine shall use Neurocrine’s Commercially Reasonable
Efforts to Commercialize each Product in each Major Market in which it receives
Regulatory Approval.

7.3. Commercialization Reports.  At least [†] prior to the planned commercial
launch of a Product, and annually thereafter following the First Commercial Sale
of such Product, Neurocrine shall provide Xenon with a report of Neurocrine’s
significant Commercialization activities with respect to such Product in the
Major Markets since the last such report.  Such Commercialization reports shall
include a summary of Commercialization activities performed in the prior
calendar year in the Major Markets and a summary of significant ongoing or
upcoming Commercialization activities expected to be performed in the current
calendar year in the Major Markets.

Article 8
FINANCIAL PROVISIONS

8.1. Upfront Payments.

 

(a)

Cash Payment.  Neurocrine shall pay to Xenon a one-time upfront payment of
thirty million Dollars ($30,000,000) within ten (10) business days after the
Effective Date.

30

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

 

 

(b)

Initial Equity Purchase.  In addition, concurrently with the entry into this
Agreement, the Parties shall enter into a share purchase agreement in the form
attached hereto as Exhibit P, pursuant to which Neurocrine shall purchase from
Xenon, and Xenon shall sell to Neurocrine, subject to Section 8.1(c), that
number of Common Shares equal to twenty million Dollars ($20,000,000) (the
“Initial Equity Purchase Price”) divided by $14.196, representing one hundred
twenty percent (120%) of the closing price for the Common Shares on the Trading
Day immediately prior to the public announcement of this Agreement, rounded down
to the nearest whole share, for an aggregate purchase price equal to the Initial
Equity Purchase Price.

 

(c)

Share Cap.  In the event the aggregate number of Common Shares purchased or to
be purchased under Section 8.1(b), Section 8.3(b) or Section 8.3(c)(ii), once
definitively calculated in accordance with such Section(s), would exceed 19.9%
of the total number of Common Shares outstanding as of the Effective Date
(without assuming the conversion or exercise of any options, warrants or
convertible securities) (the “Share Cap”), then the number of Common Shares to
be purchased under such Section(s) shall be automatically reduced (and the
applicable aggregate purchase price correspondingly decreased) such that the
Share Cap would not be so exceeded.

8.2. Reimbursement of Research Costs and XEN901 Initial Development
Costs.  Neurocrine shall reimburse the reasonable and documented FTE Costs and
out-of-pocket costs incurred by Xenon to conduct its activities under the
Research Plan and its activities under the XEN901 Initial Development Plan (and,
to the extent determined by the JSC, its activities under the DTC Initial
Development Plan) (such costs, collectively, to the extent permitted under the
following proviso, the “Reimbursed Costs”); provided that (a) Neurocrine shall
not be obligated to reimburse any FTE Costs in excess of the budgeted amount for
the applicable activity or any out-of-pocket costs in excess of [†] of the
budgeted amount for the applicable activity, and (b) with respect to any amounts
payable to a contract research organization, Xenon shall notify Neurocrine
promptly upon becoming aware that such amounts exceed or will exceed the
budgeted amount, and Neurocrine shall only be obligated to pay any such amounts
in excess of [†] of the budgeted amounts to the extent that Neurocrine approves
such excess in writing (which approval Neurocrine shall not unreasonably
withhold, condition or delay).  Within [†] days after the end of each calendar
quarter during which Xenon has incurred any Reimbursed Costs, Xenon shall submit
to Neurocrine a reasonably detailed invoice setting forth all such Reimbursed
Costs incurred in such calendar quarter.  Upon Neurocrine’s request, Xenon shall
promptly provide Neurocrine with reasonable supporting documentation and use
good faith efforts to resolve any dispute or inquiry that Neurocrine may have
over any amount so invoiced.  Neurocrine shall pay to Xenon the Reimbursed Costs
so invoiced (or the undisputed portion thereof) within [†] days after the
receipt of each such invoice.  For clarity, any Reimbursed Cost must be incurred
in accordance with the Research Plan or the XEN901 Initial Development Plan, and
Neurocrine shall have no obligation to reimburse any amount not contemplated by
either such plan or in excess of the amounts described above.

31

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

 

8.3. IND Milestone Payment for XEN901 Product.

 

(a)

Cash Payment.  Prior to any public announcement or disclosure by Neurocrine, and
in any event, within [†] days after IND Acceptance, Neurocrine shall notify
Xenon in writing if a XEN901 Product achieves IND Acceptance in either SCN8A-EE
or a Major Indication, whichever occurs first.  After the receipt of such notice
from Neurocrine, Xenon shall submit to Neurocrine an invoice for a payment of
(i) if the IND Acceptance is for SCN8A-EE, eleven million two hundred fifty
thousand Dollars ($11,250,000) or (ii) if the IND Acceptance is for a Major
Indication, four million five hundred thousand Dollars ($4,500,000).  Neurocrine
shall pay such amount to Xenon within [†] days after the receipt of such
invoice.  For clarity, Neurocrine will pay either the amount in the preceding
clause (i) or the amount in the preceding clause (ii) (if any), depending on
which IND achieves IND Acceptance first, but not both amounts, except as set
forth in Section 8.3(c).

 

(b)

Milestone Equity Purchase.  In addition, within [†]days after Xenon’s receipt of
notice from Neurocrine of IND Acceptance under Section 8.3(a) above, the Parties
shall enter into a share purchase agreement in the form attached hereto as
Exhibit P, pursuant to which Neurocrine shall purchase from Xenon, and Xenon
shall sell to Neurocrine, subject to Section 8.1(c), that number of Common
Shares equal to (i) if the IND Acceptance is for SCN8A-EE, thirteen million
seven hundred fifty thousand Dollars ($13,750,000) (the “SCN8A-EE Milestone
Equity Purchase Price”) or (ii) if the IND Acceptance is for a Major Indication,
five million five hundred thousand Dollars ($5,500,000) (the “Major Indication
Milestone Equity Purchase Price”), in each case (i) or (ii) divided by one
hundred fifteen percent (115%) of the Average 30-Day VWAP immediately prior to
the public announcement of the IND Acceptance, rounded down to the nearest whole
share, for an aggregate purchase price equal to the SCN8A-EE Milestone Equity
Purchase Price or the Major Indication Milestone Equity Purchase Price,
respectively.  For clarity, Neurocrine will purchase Common Shares (if at all)
having a value of either the amount in the preceding clause (i) or the amount in
the preceding clause (ii), depending on which IND achieves IND Acceptance first,
but not both amounts, except as set forth in Section 8.3.

 

(c)

Milestone True-Up.  Notwithstanding anything to the contrary in the preceding
Section 8.3(a) and Section 8.3(b), if IND Acceptance first occurs for a XEN901
Product in a Major Indication and subsequently occurs for a XEN901 Product in
SCN8A-EE within one (1) year after an IND for SCN8A-EE was first submitted to
the FDA (the “Subsequent SCN8A-EE IND Acceptance”), then Neurocrine shall make a
true-up cash payment and shall purchase an additional number of Common Shares as
follows:

 

(i)

Neurocrine shall notify Xenon prior to any public announcement or disclosure by
Neurocrine, and in any event, within [†] days after Subsequent SCN8A-EE IND
Acceptance.  After the receipt of such notice from Neurocrine, Xenon shall
submit to Neurocrine an invoice for a payment of six million seven hundred fifty
thousand Dollars ($6,750,000).  Neurocrine shall pay such amount to Xenon within
thirty (30) days after the receipt of such invoice.

32

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(ii)

Within [†] days after Xenon’s receipt of notice from Neurocrine of Subsequent
SCN8A-EE IND Acceptance under Section 8.3(c)(i) above, the Parties shall enter
into a share purchase agreement in the form attached hereto as Exhibit P,
pursuant to which Neurocrine shall purchase from Xenon, and Xenon shall sell to
Neurocrine, subject to Section 8.1(c), that number of Common Shares equal to
eight million two hundred fifty thousand Dollars ($8,250,000) (the “Subsequent
IND Equity Purchase Price”) divided by one hundred fifteen percent (115%) of the
Average 30-Day VWAP immediately prior to the public announcement of the
Subsequent SCN8A-EE IND Acceptance, rounded down to the nearest whole share, for
an aggregate purchase price equal to the Subsequent IND Equity Purchase Price.

8.4. Co-Funding of Development Costs.  If Xenon exercises the Co-Funding Option
under Section 6.7 for either a XEN901 Product or a DTC Product (the “Co-Funded
Product”) in a Major Indication, then within [†]days after the end of each
calendar quarter during which Neurocrine incurs any Co-Funded Costs, Neurocrine
shall submit to Xenon a reasonably detailed invoice setting forth all reasonable
and documented Co-Funded Costs actually incurred by Neurocrine in such calendar
quarter and invoicing Xenon for its fifty percent (50%) share of such Co-Funded
Costs (“Xenon’s Share”).  Upon Xenon’s request, Neurocrine shall promptly
provide Xenon with reasonable supporting documentation and use good faith
efforts to resolve any dispute or inquiry that Xenon may have over any amount so
invoiced.  Xenon shall pay to Neurocrine Xenon’s Share of Co-Funded Costs so
invoiced (or the undisputed portion thereof) within [†] days after the receipt
of each such invoice.  If Xenon is unable to pay the full amount of Xenon’s
Share of the Co-Funded Costs, then Xenon shall have [†] months after the
original due date to pay all past due amounts of Xenon’s Share of Co-Funded
Costs to Neurocrine; provided that if any milestone payment or royalty payment
is due from Neurocrine to Xenon during such [†] month period, Neurocrine shall
have the right to offset such past due amounts of Xenon’s Share of Co-Funded
Costs against such milestone or royalty payment.  If Xenon does not pay (or
Neurocrine does not otherwise fully recover) such past due amount of Xenon’s
Share of Co-Funded Costs within such [†] month period, then Neurocrine shall
have the right to terminate Xenon’s right to receive increased royalties (as set
forth in Section 8.7(c)) upon [†] days written notice to Xenon.  For clarity,
upon such termination, Neurocrine shall have no obligation to reimburse any
Co-Funded Costs previously paid by Xenon.  If Xenon does pay or Neurocrine fully
recovers such past due amounts of Xenon’s Share of Co-Funded Costs within such
[†]month period, and Xenon is subsequently unable to pay Xenon’s Share of
Co-Funded Costs, then Neurocrine shall have the right to terminate Xenon’s right
to receive increased royalties (as set forth in Section 8.7(c) upon [†]days
written notice to Xenon, without any [†] month cure period.

8.5. Development Milestone Payments.

 

(a)

Milestone Events.  Subject to the remainder of this Section 8.5, Neurocrine
shall pay to Xenon the Development milestone payments set forth in the table
below upon the first achievement of the corresponding milestone event.

33

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

 

Milestone Event for XEN901 Product

Milestone Payment

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

Total (for each Indication)

[†]

[†]

[†]

 

Milestone Event for DTC Product and Research Product

Milestone Payment

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

Total (for each Indication)

[†]

[†]

 

 

(b)

Milestone Conditions.  The development milestone payments under this Section 8.5
shall be subject to the following conditions:

 

(i)

“Successful” means, with respect to a Clinical Trial, that the results of such
Clinical Trial meet the pre-specified primary endpoint(s) set forth in the
protocol for such Clinical Trial without a Significant Safety
Signal.  Notwithstanding the occurrence of a Significant Safety Signal for a
Clinical Trial of a Product in an Indication, if Neurocrine proceeds with the
next stage of Development for such Product in such Indication, such Clinical
Trial will be deemed to be “Successful” and any unpaid Development milestone
payment shall immediately become due and payable, and shall be paid to Xenon in
accordance with Section 8.5(c).

 

(ii)

“Significant Safety Signal” means, with respect to a Clinical Trial of a
Product, that the results of such Clinical Trial indicate a safety finding that
either (A) is substantially irreversible and/or not monitorable in patients,
e.g., neurodegeneration, eye injury or cardiovascular damage, or (B) results in
Neurocrine’s decision not to continue the Development of such Product.  For
clarity, the occurrence of a Significant Safety Signal with respect to any
specific Compound or Product shall in no event relieve Neurocrine from its
obligations under Section 6.4.

34

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

 

 

(iii)

If an NDA is accepted for filing by the FDA for a Product and Indication, and at
such time a Phase 3 Clinical Trial has not been conducted for such Product and
Indication, then the milestones for the [†] and for [†] for such Product and
Indication shall be deemed achieved (and the corresponding milestone payments
payable) at the same time as the milestone payment for [†] for such Product and
Indication.

 

(iv)

The Development milestone payments set forth above for a particular Indication
are payable only if the relevant Product is Developed in such Indication.

 

(v)

Each Development milestone payment set forth above shall be due and payable (A)
only once for each Product or Compound (i.e., two (2) Products containing the
same Compound cannot trigger the same milestone payment for the same
Indication), (B) only once for any XEN901 Product and (C) for up to, but no more
than, three (3) Products that are not XEN901 Products, i.e., DTC Products and/or
Research Products, in each case regardless of how many times such milestone
event is achieved and/or the number of Products that achieve such milestone
event.

 

(vi)

The aggregate Development milestone payments under this Section 8.5 shall not
exceed three hundred twenty-five million Dollars ($325,000,000) for all XEN901
Products, and shall not exceed seven hundred forty-two million five hundred
thousand Dollars ($742,500,000) for all other Compounds.

 

(c)

Notice and Payment.  Neurocrine shall notify Xenon in writing within [†] days
after the first achievement of any Development milestone set forth in this
Section 8.5.  After the receipt of such notice from Neurocrine, Xenon shall
submit to Neurocrine an invoice for the corresponding Development milestone
payment.  Neurocrine shall pay such amount to Xenon within [†]days after the
receipt of such invoice.

8.6. Sales Milestones.

 

(a)

Sales Milestone Events.  Subject to the remainder of this Section 8.6,
Neurocrine shall pay to Xenon the sales milestone payments set forth in the
table below when the aggregate annual Net Sales of any Product sold in the
Territory in a calendar year first reach the corresponding threshold value
indicated below.

Annual Net Sales of each Product in the Territory first exceed:

Milestone Payment

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

Total Sales Milestone Payments (per Product)

$150,000,000

 

(b)

Milestone Conditions.  The sales milestone payments under this Section 8.6 shall
be subject to the following conditions:

 

(i)

The annual Net Sales of each Product in the Territory shall be considered
separately to determine whether any Net Sales threshold is achieved, and the Net
Sales of a Product sold in a country after the expiration of the Royalty Term
for such Product in such country shall not be included in the calculation of
annual Net Sales to determine whether any Net Sales threshold is achieved.

35

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(ii)

Each sales milestone payment set forth above shall be due and payable for up to
four (4) Products and only once for each such Product, regardless of how many
times such milestone event is achieved or the number of Products that achieve
such milestone event.  The aggregate sales milestone payments under this Section
8.6 shall not exceed six hundred million Dollars ($600,000,000).

 

(c)

Notice and Payment.  As part of the royalty report in Section 8.7(f), Neurocrine
shall provide written notice to Xenon if the aggregate annual Net Sales of any
Product in the Territory first reach any threshold value set forth in Section
8.6(a) above during the time period to which such report pertains.  After the
receipt of such notice from Neurocrine, Xenon shall submit to Neurocrine an
invoice for the corresponding sales milestone payment.  Neurocrine shall pay
such amount to Xenon within [†] days after the receipt of such invoice.

8.7. Royalty Payments

 

(a)

Royalty Rate.  Subject to the remainder of this Section 8.7, Neurocrine shall
make quarterly royalty payments to Xenon on the Net Sales of each Product in the
U.S. and outside the U.S., as calculated by multiplying the applicable royalty
rate set forth in the table below by the corresponding amount of incremental,
aggregated annual Net Sales of the applicable Product in the U.S. and in the
Territory outside the U.S. in the applicable calendar year.

For that portion of annual Net Sales of each Product in the Territory

U.S. Royalty Rate

Ex-U.S.

Royalty Rate

(i)For XEN901 Product

less than[†]

[†]

[†]

greater than or equal to[†]
but less than[†]

[†]

[†]

greater than or equal to[†]
but less than[†]

[†]

[†]

greater than or equal to[†]

[†]

[†]

(ii)For each DTC Product

less than[†]

[†]

[†]

greater than or equal to[†]
but less than[†]

[†]

[†]

greater than or equal to[†]

[†]

[†]

(iii)For each Research Product

less than[†]

[†]

[†]

greater than or equal to [†]
but less than[†]

[†]

[†]

greater than or equal to[†]

[†]

[†]

 

36

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(b)

Royalty Term.  Neurocrine’s obligation to pay royalties pursuant to this Section
8.7 shall expire, on a Product-by-Product and country-by-country basis, upon the
expiration of the Royalty Term for such Product in such country.

 

(c)

U.S. Royalty Rate Adjustment for Co-Funding.  If Xenon exercises its Co-Funding
Option under Section 6.7, then: (i) if the Co-Funded Product is a XEN901
Product, the U.S. royalty rates for such XEN901 Product set forth in Section
8.7(a)(i) above shall be increased by [†] percentage points in each tier (i.e.,
the first tier will increase from [†] to [†], the second tier will increase from
[†] to [†], and so on); or (ii) if the Co-Funded Product is a DTC Product, then
the U.S. royalty rates for such DTC Product set forth in Section 8.7(a)(ii)
above shall be increased by [†] percentage points in each tier (i.e., the first
tier will increase from [†] to [†], the second tier will increase from [†] to
[†], and so on).  For clarity, the foregoing adjustment shall not apply to
royalty rates outside the U.S. and shall not apply to any Product that is not
the Co-Funded Product.

 

(d)

Royalty Conditions.  The royalty payments under this Section 8.7 shall be
subject to the following conditions:

 

(i)

Only one (1) royalty shall be due with respect to each unit of Product, without
regard to whether there is more than one Valid Claim or Patent Rights covering
such Product.

 

(ii)

For the purpose of determining the applicable royalty tiers, the annual Net
Sales of each Product in and outside the U.S. shall be aggregated.  Once the
applicable royalty rates are determined, they will apply to Net Sales in or
outside the U.S. only, as applicable.  For example, if worldwide Net Sales of
the XEN901 Product are [†], where [†] of such Net Sales are in the U.S. and [†]
of such Net Sales are outside the U.S., royalties will be calculated by applying
the U.S. and ex-U.S. royalty rates to the pro rata portion (based on total Net
Sales in a calendar year) of Net Sales in each royalty tier, as follows:

Region

Net Sales

%

 

Deemed Sales < [†]

Royalty Rate

Royalty sub-total

 

Deemed Sales > [†]

Royalty Rate

Royalty sub-total

US

[†]

[†]

 

[†]

[†]

[†]

 

[†]

[†]

[†]

Ex-US

[†]

[†]

 

[†]

[†]

[†]

 

[†]

[†]

[†]

Global

[†]

[†]

 

[†]

 

[†]

 

[†]

 

[†]

 

 

Total Royalty Due

Implied Royalty Rate

[†]

[†]

[†]

[†]

[†]

[†]

 

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(iii)

In addition, the Net Sales of a Product sold in a country after the expiration
of the Royalty Term for such Product in such country shall not be included in
the calculation of annual Net Sales to determine the applicable royalty tiers.

 

(e)

Royalty Reductions.

 

(i)

If, during any calendar quarter in the Royalty Term for a Product and country,
(A) following the entry of a Generic Product to such Product in such country,
the Net Sales in such country of such Product are at least [†] less than the
average Net Sales for such Product in such country over the [†] immediately
preceding the launch of such Generic Product, or (B) there is no Covering Claim
for such Product in such country, then in each case the royalties payable under
Section 8.7(a) or Section 8.7(c), as applicable, on Net Sales of such Product in
such country will be reduced by [†] for the period of such Royalty Term that (A)
or (B) is applicable.  If such country is outside the U.S., then such royalty
reduction will be calculated by determining the portion of total Net Sales of
the relevant Product in a calendar quarter that is attributable to the country
in which such reduction applies, and by determining the total royalties for the
Territory outside the U.S. for such Product without reduction, and then reducing
by [†] the applicable portion (based on Net Sales) of such total royalties
attributable to the country in which such reduction applies.

 

(ii)

Neurocrine may deduct on a country-by-country basis from any royalties payable
to Xenon under this Section 8.7 with respect to any Product up to [†] of
royalties paid by Neurocrine or its Affiliates or sublicensees for any rights to
Third Party intellectual property that is used in the Development, manufacture
or Commercialization of such Product.

 

(iii)

Notwithstanding the foregoing in this Section 8.7(e), in no event shall the
operation of Section 8.7(e)(i) and Section 8.7(e)(ii), individually or in
combination, and on a country-by-country basis, reduce the royalties paid to
Xenon with respect to the Net Sales of any Product in any calendar year to less
than [†] of the applicable rate (based on the Product, country of sale and
whether such Product is a Co-Funded Product) for the lowest Net Sales tier set
forth in Section 8.7(a) or Section 8.7(c) (if such Product is a Co-Funded
Product).  Neurocrine may carry forward to subsequent calendar quarters any
deduction it is not allowed to take because of the limitations set forth in this
Section 8.7(e)(iii).

 

(f)

Royalty Reports and Payment.  Within [†] days after the end of each calendar
quarter, commencing with the calendar quarter during which the First Commercial
Sale of the first Product is made anywhere in the Territory, Neurocrine shall
provide Xenon with a statement, on a Product-by-Product and country-by-country
basis, of the amount of gross sales and Net Sales of each Products in each
country during the applicable calendar quarter, the applicable exchange rates,
and a calculation of the amount of royalty payment due on such sales for such
calendar quarter, including any royalty reductions and deductions under Section
8.7(e).  Concurrent with the delivery of the applicable quarterly report,
Neurocrine shall pay Xenon in Dollars all royalties owed with respect to Net
Sales for such calendar quarter.

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8.8. Third Party Payment Obligations.  Subject to Section 8.7(e)(ii) and Section
9.6, each Party shall be responsible for the payment of royalty, milestone and
other payments due to Third Parties under any agreements between such Party (or
its Affiliates) and Third Parties on account of Neurocrine’s and its Affiliates’
and sublicensees’ Development, manufacture and Commercialization of Products in
the Field in the Territory.  Without limiting the foregoing, Xenon shall be
solely responsible for all payments due under the Genentech License. In the
event that Xenon has failed to make any payment on account of Neurocrine’s or
its Affiliate’s or sublicensee’s sale of any Product when due under the
Genentech License, and has failed to cure such non-payment within the applicable
cure period under the Genentech License, Xenon will provide notice to Neurocrine
at least [†] days prior the end of the applicable cure period and Neurocrine
shall have the right, but no obligation, to pay any such royalties directly to
Genentech and to deduct any such royalties paid to Genentech against any
payments to Xenon under this Agreement.

8.9. Currency; Exchange Rate.  All payments to be made by a Party to the other
Party under this Agreement shall be made in Dollars by bank wire transfer in
immediately available funds to a bank account designated by written notice from
the Party receiving the payment.  The rate of exchange to be used in computing
the amount of currency equivalent in Dollars shall be the rate used by
Neurocrine or Xenon, as applicable, in its financial reporting in accordance
with applicable GAAP or other standard as then-used by Neurocrine or Xenon, as
applicable.  

8.10. Late Payments.  If a Party does not receive payment of any sum due to it
on or before the due date therefor, simple interest shall thereafter accrue on
the sum due from the due date until the date of payment at a per-annum rate of
prime (as reported in The Wall Street Journal (U.S., Eastern Edition) plus [†]
points or the maximum rate allowable by applicable Law, whichever is less.

8.11. Taxes.

 

(a)

Taxes on Income.  Each Party shall be solely responsible for the payment of all
taxes imposed on its share of income arising directly or indirectly from the
activities of the Parties under this Agreement.

 

(b)

Tax Cooperation.  The Parties agree to cooperate with one another and use
reasonable efforts to reduce or eliminate tax withholding or similar obligations
in respect of royalties, milestone payments and other payments made under this
Agreement.  The Parties also agree to cooperate with one another and use
reasonable efforts to provide information necessary for any U.S. federal, state,
or local tax compliance obligations related to any payments made under this
Agreement. To the extent a Party is required to deduct and withhold taxes on any
payment to the other Party, such Party shall deduct the amounts of such taxes
from the payment, pay such amounts to the proper Governmental Authority in a
timely manner and promptly transmit to the other Party an official tax
certificate or other evidence of such withholding sufficient to enable the other
Party to claim such payment of taxes.  The Party receiving the payment shall
provide the Party making the payment any tax forms that may be reasonably
necessary in order for the Party making the payment not to withhold tax or to
withhold tax at a reduced rate under an applicable bilateral income tax
treaty.  Each Party shall provide the other with reasonable assistance to enable
the recovery, as permitted by applicable Laws, of withholding taxes, value added
taxes, or similar obligations resulting from payments made under this Agreement,
such recovery to be for the benefit of the Party bearing such withholding tax or
value added tax.

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8.12. Financial Records and Audit.

 

(a)

Each Party shall maintain complete and accurate records in sufficient detail to
permit the other Party to confirm the accuracy of Reimbursed Costs, Co-Funded
Costs, Net Sales, royalty payments and other amounts payable under this
Agreement and to verify the achievement of sales milestone events under this
Agreement.  For a period of [†] years from the creation of individual records,
upon reasonable prior notice, such records shall be made available to the other
Party during regular business hours for examination at the auditing Party’s
expense, and not more often than once each calendar year, by an independent
certified public accountant selected by the auditing Party and reasonably
acceptable to the audited Party for the sole purpose of verifying for the
auditing Party the accuracy of the financial reports furnished by the audited
Party pursuant to this Agreement or of any payments made, or required to be
made, under this Agreement.  Any such auditor shall not disclose the audited
Party’s confidential information to the auditing Party, except to the extent
such disclosure is necessary to verify the accuracy of the financial reports
furnished by the audited Party or the amount of payments under this Agreement.

 

(b)

Any amounts shown to be owed but unpaid, or overpaid and in need of
reimbursement, shall be paid or refunded (as the case may be) within [†] days
after the accountant’s report.  If the audited Party is the Party that is
required to make such additional payment or refund, the audited Party shall also
pay interest (as set forth in Section 8.10) on such underpayment by or
overpayment to the audited Party from the original due dates.

 

(c)

The auditing Party shall bear the cost of such audit unless such audit reveals
an overpayment to, or an underpayment by, the audited Party that resulted from a
discrepancy in the financial report provided by the audited Party, which
underpayment or overpayment was more than [†] of the amount actually due for the
audited time period, in which case the audited Party shall reimburse the
auditing Party for the costs for such audit.

Article 9
INTELLECTUAL PROPERTY RIGHTS

9.1. Inventions.

 

(a)

Ownership.  Ownership of all Know-How arising under this Agreement shall be
based on inventorship as determined in accordance with the rules of inventorship
under United States patent laws.  Each Party shall solely own any Know-How
discovered, developed, invented or created solely by or on behalf of such Party
or its respective Affiliates or Third Parties acting on its behalf as a result
of exercising such Party’s rights or performing its obligations under this
Agreement.  The Parties shall jointly own any Joint Inventions.  Except to the
extent either Party is restricted by the licenses granted to the other Party or
exclusivity obligations under this Agreement, each Party shall be entitled to
practice, license, assign and otherwise exploit the Joint Inventions and Joint
Patent Rights without the duty of accounting or seeking consent from the other
Party.

 

(b)

Disclosure.  Each Party shall promptly disclose to the other Party all Know-How
made by such Party to which the other Party has a license hereunder during the
Term, and all invention disclosures or other similar documents submitted to such
Party by its or its Affiliates’ employees, agents or independent contractors
relating to such Know-How, and shall also respond promptly to reasonable
requests from the other Party for additional information relating to such
Know-How.

40

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(c)

Personnel Obligations.  Each employee, agent or independent contractor of a
Party or its respective Affiliates performing work under this Agreement shall,
prior to commencing such work, be bound by written invention assignment
obligations, including: (i) promptly reporting any invention, discovery, process
or other intellectual property right; (ii) presently assigning to the applicable
Party or Affiliate all of his or her right, title and interest in and to any
invention, discovery, process or other intellectual property; (iii) cooperating
in the preparation, filing, prosecution, maintenance and enforcement of any
patent and patent application; and (iv) performing all acts and signing,
executing, acknowledging and delivering any and all documents required for
effecting the obligations and purposes of this Agreement.  It is understood and
agreed that such invention assignment agreement need not reference or be
specific to this Agreement.

 

(d)

Joint Research Agreement.  This Agreement is a joint research agreement within
the meaning of pre-AIA 35 U.S.C. § 103(c) and AIA 35 U.S.C. § 102(c).

9.2. Patent Prosecution.

 

(a)

Xenon Patent Rights and Joint Patent Rights.

 

(i)

As between the Parties, Neurocrine shall have the first right to file, prosecute
and maintain all Xenon Patent Rights and all Joint Patent Rights in the
Territory, at its sole cost and expense.  For the purpose of this Article 9,
“prosecution” shall include any post-grant proceeding, including supplemental
examination, post grant review proceeding, inter parties review proceeding,
patent interference proceeding, opposition proceeding, reissue and
reexamination.  Xenon shall provide all information reasonably requested by
Neurocrine from time to time in connection with Neurocrine’s prosecution of the
Xenon Patent Rights and Joint Patent Rights.

 

(ii)

As soon as practicable after the Effective Date, Xenon shall transfer the
existing, complete patent files for all Xenon Patent Rights to Neurocrine, shall
file all documents necessary to transfer correspondence with the U.S. Patent and
Trademark Office and other applicable patent authorities to Neurocrine and shall
give Neurocrine’s patent counsel power of attorney thereto.  Xenon shall
cooperate with Neurocrine in the transfer of all prosecution and maintenance
responsibilities relating to the Xenon Patent Rights.

 

(iii)

Neurocrine shall keep Xenon reasonably informed of the status of all Xenon
Patent Rights and Joint Patent Rights and the scope and progress of its filing,
prosecution and maintenance of such Patent Rights, on at least a quarterly
basis.  Neurocrine shall consider in good faith all comments and recommendations
of Xenon with respect to such activities.

 

(iv)

Neurocrine shall notify Xenon of any decision not to file, to cease prosecution
or maintenance of, or not to continue to pay the expenses of prosecution and
maintenance of any Xenon Patent Rights or Joint Patent Rights in any
jurisdiction in the Territory, in each case without filing any other Patent
Rights in such jurisdiction disclosing the same subject matter and having the
same priority claim as the first Patent Rights.  Neurocrine shall provide such
notice at least [†] days prior to any filing or payment due date, or any other
due date that requires action, in connection with such Xenon Patent Rights or
Joint Patent Rights.  In such event, Neurocrine shall permit Xenon, at its
discretion and at its sole expense, to file or to continue prosecution or
maintenance of such Xenon Patent Rights or Joint Patent Rights.  Xenon’s
prosecution or maintenance of such Xenon Patent Rights or Joint Patent Rights
shall not change the Parties’ respective rights and obligations under this
Agreement with respect to such Xenon Patent Rights other than as expressly set
forth in this Section 9.2(a)(iv).

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(b)

Patent Rights Covering Neurocrine’s Sole Inventions. Neurocrine shall have the
sole right to file, prosecute and maintain all Neurocrine Patent Rights in the
Territory, at its sole cost and expense.

 

(c)

Cooperation.  Each Party shall provide the other Party, at the other Party’s
request and expense, all reasonable assistance and cooperation in the patent
prosecution efforts under this Section 9.2, including providing any necessary
powers of attorney and executing any other required documents or instruments for
such filing, prosecution or maintenance.

9.3. Patent Enforcement.

 

(a)

Product Infringement of Xenon Patent Rights and Joint Patent Rights.

 

(i)

Each Party shall notify the other promptly after becoming aware of (A) any
alleged or threatened infringement by a Third Party of any Xenon Patent Right or
Joint Patent Right, including any “patent certification” filed in the United
States under 21 U.S.C. §355(b)(2) or 21 U.S.C. §355(j)(2) with respect to any
Product or similar provisions in other jurisdictions (a “Patent Certification
Notice”), or (B) any declaratory judgment action by a Third Party that is
developing or commercializing a Compound or Product alleging the invalidity,
unenforceability or non-infringement of any Xenon Patent Right or Joint Patent
Right ((A) or (B), “Product Infringement”).

 

(ii)

Neurocrine shall have the first right to bring and control any legal action in
connection with any Product Infringement in the Territory at its own expense and
as it reasonably determines appropriate, and Xenon shall have the right to be
represented in any such action by counsel of its choice.  If Neurocrine does not
bring such legal action within [†] days after the notice provided pursuant to
Section 9.3(a)(i) or in the case of a Patent Certification Notice, within [†]
days of receipt of the same, then upon Neurocrine’s written consent, Xenon shall
have the right to bring and control any legal action in connection with such
Product Infringement in the Territory at its own expense.

 

(iii)

At the request and expense of the Party bringing the action under Section
9.3(a)(ii), the other Party shall provide reasonable assistance in connection
therewith, including by executing reasonably appropriate documents, cooperating
in discovery and joining as a party to the action if required.  In connection
with any such proceeding, the Party bringing the action under Section 9.3(a)(ii)
shall not enter into any settlement admitting the invalidity of, or otherwise
impairing the other Party’s rights in, the Xenon Patent Rights or Joint Patent
Rights without the prior written consent of the other Party, which shall not be
unreasonably withheld, conditioned or delayed.

 

(iv)

Any recoveries resulting from enforcement action under Section 9.3(a)(ii)
relating to a Product Infringement in the Territory shall be first applied
against payment of each Party’s costs and expenses in connection therewith.  Any
such recoveries in excess of such costs and expenses shall be shared by the
Parties as follows: if Neurocrine is the Party bringing the action, Neurocrine
will retain such excess recoveries, which will be deemed Net Sales of the
applicable Product subject to royalty payments to Xenon under Section 8.7, and
if Xenon is the Party bringing the action, Xenon will receive [†] and Neurocrine
will receive [†] of such excess recoveries.

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(b)

Other Infringements.  Xenon shall have the exclusive right to bring and control
any legal action to enforce the Xenon Patents against any infringement that is
not a Product Infringement, at its own expense and as it reasonably determines
appropriate.  Neurocrine shall have the exclusive right to bring and control any
legal action to enforce the Neurocrine Patent Rights against any infringement,
at its own expense and as it reasonably determines appropriate.

 

(c)

Joint Patent Rights.  Each Party shall notify the other promptly after becoming
aware of any alleged or threatened infringement by a Third Party of any Joint
Patent Right that is not a Product Infringement.  The Parties will confer
promptly thereafter to determine a course of action, and if the Parties fail to
agree, each Party shall have the right to enforce such Joint Patent against such
infringement.

9.4. Orange Book Listing. Neurocrine and Xenon shall discuss in good faith the
Patent Rights (including Xenon Patent Rights, Neurocrine Patent Rights, Joint
Patent Rights or other Patent Rights) that will be included in the Orange Book
maintained by the FDA or similar or equivalent patent listing source, if any, in
other countries in the Territory for Products, provided that Neurocrine shall
have the sole right to determine which Patent Rights will be included, after
considering Xenon’s comments in good faith.  Xenon will provide such assistance
as may be reasonably requested by Neurocrine in connection with such listing.

9.5. Patent Term Extensions. The Parties shall cooperate in obtaining patent
term restoration (under but not limited to the U.S. Drug Price Competition and
Patent Term Restoration Act and its foreign equivalents), supplemental
protection certificates or their equivalents, and patent term extensions with
respect to the Xenon Patent Rights and Joint Patent Rights in any country and/or
region where applicable.  Subject to the exercise of Neurocrine’s Commercially
Reasonable Efforts, Neurocrine shall determine which Xenon Patent Rights, Joint
Patent Rights and Neurocrine Patent Rights it shall apply to extend in any
country or region in the Territory for any Product, and shall file for such
extension at Neurocrine’s cost and expense.  Xenon shall provide all assistance
reasonably requested by Neurocrine in connection with such filings.

9.6. Third Party Technology.

 

(a)

If either Party becomes aware of any Third Party’s Patent Rights or Know-How
that are necessary or useful to Develop, manufacture or Commercialize in the
Field any Compound or Product (collectively, “Third Party Technology”), such
Party shall promptly notify the other Party, and the Parties shall promptly
thereafter meet to discuss such Third Party Technology.

 

(b)

Neurocrine shall have the first right (but no obligation) to attempt to obtain a
license to any Third Party Technology, and shall notify Xenon in writing prior
to initiating licensing negotiations for any such Third Party Technology.  If
Neurocrine elects not to obtain any such license, then Xenon shall have the
right (but no obligation) to negotiate and enter into a license agreement with
such Third Party with respect to such Third Party Technology; provided that
Xenon shall not enter into any such license unless the Third Party Technology so
licensed, to the extent otherwise within the scope of the definition of Xenon
Licensed IP, would be Controlled by Xenon; and provided further that Xenon shall
notify Neurocrine in writing prior to initiating licensing negotiations for any
such Third Party Technology, and prior to entering into such license agreement,
Xenon shall provide Neurocrine with a copy thereof and reasonable opportunity to
comment thereon and shall consider all such comments of Neurocrine in good faith
and shall not enter into such license agreement without Neurocrine’s prior
written approval, which shall not be unreasonably withheld, conditioned or
delayed.

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(c)

If Xenon enters into any agreement with a Third Party after the Effective Date
under which it obtains a license from such Third Party to Third Party Technology
that is necessary or useful to Develop, manufacture or Commercialize any
Compound or Product, then if Neurocrine desires to obtain a sublicense
thereunder, the Parties shall negotiate in good faith and determine an
allocation between the Parties of any payments thereunder that are owed to such
Third Party on account of Neurocrine’s Development, manufacture or
Commercialization of Products.

9.7. Trademarks.  Neurocrine shall have the right to brand Products using
Neurocrine related trademarks and any other trademarks and trade names it
determines appropriate, which may vary by country or within a country (“Product
Marks”).  Neurocrine shall own all rights in the Product Marks and shall have
the sole right to register and maintain the Product Marks in the countries and
regions that it determines, at Neurocrine’s cost and expense.

Article 10
REPRESENTATIONS AND WARRANTIES

10.1. Mutual Representations and Warranties.

  Each Party hereby represents and warrants to the other Party as follows:

 

(a)

Corporate Existence.  As of the Effective Date, it is a company or corporation
duly organized, validly existing, and in good standing under the Laws of the
jurisdiction in which it is incorporated.

 

(b)

Corporate Power, Authority and Binding Agreement.  As of the Effective Date, (i)
it has the corporate power and authority and the legal right to enter into this
Agreement and perform its obligations hereunder; (ii) it has taken all necessary
corporate action on its part required to authorize the execution and delivery of
this Agreement and the performance of its obligations hereunder; and (iii) this
Agreement has been duly executed and delivered on behalf of such Party, and
constitutes a legal, valid, and binding obligation of such Party that is
enforceable against it in accordance with its terms.

10.2. Additional Representations, Warranties and Covenants of Xenon. Xenon
represents and warrants and, as applicable, covenants to Neurocrine as follows,
as of the Effective Date:

 

(a)

Title; Encumbrances.  Except for the Xenon Know-How that is licensed to Xenon
pursuant to the Genentech License and the Xenon Know-How and Xenon Patent Rights
that are licensed to Genentech pursuant to the Genentech License, Xenon is the
sole owner of the entire right, title and interest in and to all Xenon Licensed
IP existing as of the Effective Date, free and clear from any mortgages,
pledges, liens, security interests, conditional and installment sale agreements,
encumbrances, charges or claims of any kind.  Xenon has the full and legal
rights and authority to license to Neurocrine the Xenon Licensed IP as set forth
herein.

 

(b)

Patent Matters.  Exhibit A is an accurate listing by owner, inventor(s), serial
number, filing date, country, and status of all Patent Rights owned or
in-licensed by Xenon as of the Effective Date that are reasonably necessary or
useful for the research, Development, manufacture or Commercialization of any
Compound or Product.

 

(c)

Control.  Xenon Controls and shall Control throughout the Term (i) all Patent
Rights and Know-How owned, invented or licensed by Xenon as of the Effective
Date that are reasonably necessary or useful for the research, Development,
manufacture or Commercialization of any Compound or Product and (ii) all NASA
Compounds.

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(d)

Validity.  Xenon does not have Knowledge of any fact or circumstance that would
cause Xenon to reasonably conclude that any of the Xenon Patent Rights existing
as of the Effective Date is, or will be upon issuance, invalid or unenforceable.

 

(e)

Inventorship.  As of the Effective Date, the inventorship of each Xenon Patent
Right existing as of the Effective Date is properly identified on each patent
and patent application.

 

(f)

Good Standing.  All official fees, maintenance fees and annuities for the Xenon
Patent Rights have been paid and all administrative procedures with Governmental
Authorities have been completed for the Xenon Patent Rights such that such
Patent Rights are subsisting and in good standing.

 

(g)

Duty of Disclosure.  Xenon has disclosed to Neurocrine in writing (i) all
information that is (A) known to any individual associated with the filing or
prosecution (as defined in 37 C.F.R. § 1.56(c)) of the Xenon Patent Rights
(excluding patent counsel outside the U.S.) and (B) material to patentability of
the Xenon Patent Rights (as defined in 37 C.F.R. § 1.56(b)), or that would be
considered material to patentability as defined in 37 C.F.R. § 1.56(b) but for
an exception under 35 U.S.C. § 102(b), and (ii) an indication to which Xenon
Patent Rights each piece of such information relates.

 

(h)

Prior Art.  To Xenon’s Knowledge, there is not any reference or prior art that
would anticipate the issuance of any claim as currently pending as of the
Effective Date in any Xenon Patent Rights.

 

(i)

Notice of Infringement.  Xenon has not received any notice or threat from any
Third Party asserting or alleging, and to Xenon’s Knowledge there is no basis
for any assertion or allegation, that any use of any Xenon Licensed IP or that
any research, manufacture or Development of Compounds or Products by Xenon prior
to the Effective Date infringed or would infringe the intellectual property
rights of such Third Party.

 

(j)

Notice of Misappropriation.  Xenon has not received any notice or threat from
any Third Party asserting or alleging, and to Xenon’s Knowledge there is no
basis for any assertion or allegation, that any use or creation of Xenon
Licensed IP or that any research, manufacture or Development of Compounds or
Products by Xenon prior to the Effective Date misappropriated the intellectual
property rights of such Third Party.

 

(k)

No Conflicts.  Xenon has not entered and shall not enter into any agreement with
any Third Party that is in conflict with the rights granted to Neurocrine under
this Agreement, and has not taken and shall not take any action that would in
any way prevent it from granting the rights granted to Neurocrine under this
Agreement, or that would otherwise materially conflict with or adversely affect
Neurocrine’s rights under this Agreement.

 

(l)

Third Party Technology.  To Xenon’s Knowledge, the conduct of the Research Plan
and Initial Development Plans in existence as of the Effective Date, and the
research, Development, manufacture and Commercialization of Compounds and
Products, does not and will not infringe any issued patents of a Third Party,
and there are no pending Third Party patent applications that, if issued with
the published or currently pending claims, would be infringed by any such
activities.

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(m)

Third Party Infringement.  To Xenon’s Knowledge, no Third Party is infringing or
has infringed any Patent Rights in the Xenon Licensed IP or has misappropriated
any Know-How in the Xenon Licensed IP.

 

(n)

No Proceeding.  There are no pending, and to Xenon’s Knowledge, no threatened,
adverse actions, suits or proceedings (including interferences, reissues,
reexaminations, cancellations, oppositions, nullity actions, invalidation
actions or post-grant reviews) against Xenon involving the Xenon Licensed IP or
any Compound or Product other than in ordinary course office actions.

 

(o)

Compliance.  To Xenon’s Knowledge, all discovery, research, Development and
manufacture of Compounds and Products by or on behalf of Xenon and its
Affiliates prior to the Effective Date was conducted in material compliance with
all Laws applicable to the conduct of such activities.

 

(p)

No Fraudulent Statements.  Neither Xenon nor its Affiliates, nor, to Xenon’s
Knowledge, any of its or their respective directors, officers, employees or
agents has (i) committed an act, (ii) made a statement or (iii) failed to act or
make statement, in any case ((i), (ii) or (iii)), that (x) would be or create an
untrue statement of material fact or fraudulent statement to the FDA or any
other Regulatory Authority with respect to the research, Development and
manufacture of any Compound or Product or (y) could reasonably be expected to
provide a basis for the FDA or any other Regulatory Authority to invoke its
policy respecting “Fraud, Untrue Statements of Material Facts, Bribery and
Illegal Gratuities”, set forth in 56 Fed. Reg. 46191 (September 10, 1991) and
any amendments thereto or any analogous laws or policies, with respect to the
research, Development and manufacture of any Compound or Product.

 

(q)

Disclosure.  Xenon has disclosed to Neurocrine prior to the Effective Date all
material information related to the Xenon Licensed IP, Compounds and Products,
and such material information is complete and accurate in all material respects.

 

(r)

Genentech.

 

(i)

Xenon has not granted any rights or licenses to Genentech to develop or
commercialize any Compounds.

 

(ii)

Xenon Controls all Know-How that was generated, licensed or used under the
Genentech License, and all Patent Rights claiming such Know-How, in each case
that is necessary or useful to exploit Compounds.

 

(iii)

None of the following Compounds has an [†]: XEN901, any DTC, any Early Compound.

 

(iv)

No Third Party has any rights to control, be informed of or provide any input
with respect to the prosecution of any Xenon Patent Rights.

 

(v)

Excluding all Academic Agreements, and except as otherwise listed on Exhibit Q,
as of the Effective Date Xenon is not a party to any agreement under which (A)
it receives a license to any Xenon Licensed IP or (b) any Third Party is granted
any rights with respect to Compounds, Products or Xenon Licensed IP (including
rights to receive payments).  Xenon has provided true and complete copies of all
such agreements (the “Third Party Agreements”) to Neurocrine prior to the
Effective Date.

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(vi)

Xenon is not in material breach of (and has not received written notice of
breach of) the Genentech License or any other Third Party Agreement, and this
Agreement is consistent with all Third Party Agreements and Xenon’s obligations
thereunder.

 

(vii)

Xenon will not take or fail to take any action that would constitute a material
breach of any Third Party Agreement.  Without Neurocrine’s prior written
consent, Xenon will not amend or terminate any of the Third Party Agreements in
any manner that would adversely affect the rights granted to Neurocrine under
this Agreement.

10.3. Additional Neurocrine  Representations, Warranties and Covenants.

 

(a)

Disclosure.  Without limiting the representations and warranties herein,
Neurocrine has had the opportunity to conduct its due diligence investigation of
the Xenon Licensed IP in connection with entering into this Agreement and has
conducted an independent investigation of the current condition and status of
the Xenon Licensed IP.  

 

(b)

Genentech License.  During the Term, to the extent reasonably necessary for
Xenon to comply with its obligations under the Genentech License, Neurocrine
shall use commercially reasonable efforts to provide Xenon with such information
relating to Neurocrine’s and its Affiliates’ and sublicensees’ sales of Products
as may be reasonably requested by Xenon.  

10.4. Mutual Covenants.

 

(a)

No Debarment.  In the course of its activities under this Agreement, neither
Party shall use any employee or consultant who has been debarred by any
Regulatory Authority or, to such Party’s Knowledge, is the subject of debarment
proceedings by a Regulatory Authority.  Each Party shall notify the other Party
promptly upon becoming aware that any of its employees or consultants has been
debarred or is the subject of debarment proceedings by any Regulatory Authority.

 

(b)

Compliance.  Each Party and its Affiliates shall comply in all material respects
with all applicable Laws in the performance of its obligations and practice of
its rights under this Agreement.

10.5. Disclaimer. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, NO
REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED, INCLUDING
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NON-INFRINGEMENT OR NON-MISAPPROPRIATION OF THIRD PARTY INTELLECTUAL PROPERTY
RIGHTS, ARE MADE OR GIVEN BY OR ON BEHALF OF A PARTY, AND ALL REPRESENTATIONS
AND WARRANTIES, WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE, ARE HEREBY
EXPRESSLY EXCLUDED.

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Article 11
INDEMNIFICATION

11.1. Indemnification by Xenon.  Xenon shall defend, indemnify, and hold
Neurocrine and its Affiliates and their respective officers, directors,
employees and agents (the “Neurocrine Indemnitees”) harmless from and against
any and all damages or other amounts payable to a Third Party claimant, as well
as any reasonable attorneys’ fees and costs of litigation incurred by such
Neurocrine Indemnitees, resulting from any claims, suits, proceedings or causes
of action brought by such Third Party (collectively, “Claims”) against such
Neurocrine Indemnitees to the extent arising or resulting from: (a) the conduct
of the Research Program or Initial Development Program by Xenon or any of its
Affiliates or subcontractors; (b) the negligence or willful misconduct of any of
the Xenon Indemnitees; (c) Xenon’s breach of any covenant, representation or
warranty set forth in this Agreement; or (d) following the termination of this
Agreement in its entirety or on a Product-by-Product basis, as applicable, the
Development, manufacture or Commercialization of Compounds and Products by or on
behalf of Xenon or its Affiliates or the use or practice of the Neurocrine
Licensed IP, Compounds or Products by or on behalf of Xenon, its Affiliates or
sublicensees (including any Claim arising from any personal injury, death or
property damage); except, in each case (a)-(d), to the extent such Claims (i)
arise out of or result from a breach by Neurocrine of any covenant,
representation or warranty of Neurocrine in this Agreement, or (ii) arise out of
or result from the negligence or willful misconduct of any Neurocrine
Indemnitees.

11.2. Indemnification by Neurocrine. Neurocrine shall defend, indemnify, and
hold Xenon and its Affiliates and their respective officers, directors,
employees and agents (the “Xenon Indemnitees”) harmless from and against any and
all damages or other amounts payable to a Third Party claimant, as well as any
reasonable attorneys’ fees and costs of litigation incurred by such Xenon
Indemnitees, resulting from any Claims against such Xenon Indemnitees to the
extent arising or resulting from: (a) the conduct of the Research Program or
Initial Development Program by Neurocrine or any of its Affiliates or
subcontractors; (b) the Development, manufacture or Commercialization of
Compounds and Products by or on behalf of Neurocrine or its Affiliates or the
use or practice of the Xenon Licensed IP, Compounds or Products by or on behalf
of Neurocrine, its Affiliates or sublicensees (including any Claim arising from
any personal injury, death or property damage); (c) the negligence or willful
misconduct of any of the Neurocrine Indemnitees; or (d) Neurocrine’s breach of
any covenant, representation or warranty set forth in this Agreement; except, in
each case (a)-(d), to the extent such Claims (i) arise out of or result from a
breach by Xenon of any covenant, representation, or warranty of Xenon in this
Agreement, or (ii) arise out of or result from the negligence or willful
misconduct of any Xenon Indemnitee.

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11.3. Indemnification Procedure.  As a condition to seeking indemnification
under Section 11.1 or Section 11.2, a Party (the “Indemnified Party”) shall
inform the other Party (the “Indemnifying Party”) of the Claim giving rise to
the obligation to indemnify pursuant to this Article 11 as soon as reasonably
practicable after receiving notice of the Claim; provided that any delay in
informing Indemnifying Party will relieve the Indemnifying Party of its
obligations under this Article 11 only to the extent it is actually prejudiced
by such delay.  The Indemnifying Party shall have the right to assume the
defense of any such Claim for which it is obligated to indemnify the Indemnified
Party.  The Indemnified Party shall cooperate with the Indemnifying Party and
the Indemnifying Party’s insurer as the Indemnifying Party may reasonably
request, and at the Indemnifying Party’s cost and expense.  The Indemnified
Party shall have the right to participate, at its own expense and with counsel
of its choice, in the defense of any Claim that has been assumed by the
Indemnifying Party.  Neither Party shall have the obligation to indemnify the
other Party in connection with any settlement made without the Indemnifying
Party’s written consent, which consent shall not be unreasonably withheld or
delayed.  If the Parties cannot agree as to the application of Section 11.1 or
Section 11.2 as to any Claim, pending resolution of the dispute pursuant to
Section 14.7, the Parties may conduct separate defenses of such Claim, with each
Party retaining the right to claim indemnification from the other Party in
accordance with Section 11.1 or Section 11.2 upon resolution of the underlying
Claim.

11.4. Mitigation of Loss.  Each Indemnified Party shall take and shall procure
that its Affiliates take all such reasonable steps and action as are reasonably
necessary or as the Indemnifying Party may reasonably require in order to
mitigate any Claims (or potential losses or damages) under this Article
11.  Nothing in this Agreement shall or shall be deemed to relieve any Party of
any common law or other duty to mitigate any losses incurred by it.

Article 12
CONFIDENTIALITY; PUBLICATION

12.1. Duty of Confidence.  Subject to the other provisions of this Article 12:

 

(a)

all Confidential Information disclosed by a Party or its Affiliates (the
“Disclosing Party”) under this Agreement shall be maintained in confidence and
otherwise safeguarded by the receiving Party and its Affiliates (the “Receiving
Party”), in the same manner and with the same protection as such Receiving Party
maintains its own confidential information; provided that, solely for purposes
of obligations under this Article 12, all Know-How generated under the Research
Program or the Initial Development Program that relates to a Compound or Product
will be treated as Neurocrine’s Confidential Information unless and until the
termination (but not expiration) of this Agreement in its entirety, for which
Neurocrine is the Disclosing Party and Xenon the Receiving Party;

 

(b)

the Receiving Party may only use any such Confidential Information for the
purposes of performing its obligations or exercising its rights under this
Agreement;

 

(c)

the Receiving Party may disclose Confidential Information of the other Party
only to those of its and its Affiliates’ employees, directors, agents,
contractors, consultants and advisers and, in the case of Neurocrine as
Receiving Party, its sublicensees, in each case, who have a need to know for the
purposes of, and for those matters undertaken pursuant to, this Agreement
(including exercising rights and fulfilling obligations); provided that such
Persons are bound by obligations no less stringent than those set forth herein
to maintain the confidentiality of the Confidential Information and to use the
Confidential Information in a manner consistent with the confidentiality
provisions of this Agreement; and

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(d)

if Confidential Information is jointly developed, neither Party may disclose
such Confidential Information without the consent of the other Party, except as
otherwise provided in this Agreement.

12.2. Exceptions.  The foregoing obligations as to particular Confidential
Information of a Disclosing Party shall not apply to the extent that the
Receiving Party can demonstrate that such Confidential Information:

 

(a)

is known by the Receiving Party at the time of its receipt without an obligation
of confidentiality, and not through a prior disclosure by the Disclosing Party,
as documented by the Receiving Party’s business records;

 

(b)

is in the public domain before its receipt from the Disclosing Party, or
thereafter enters the public domain through no fault of the Receiving Party;

 

(c)

is subsequently disclosed to the Receiving Party by a Third Party who may
lawfully do so and is not under an obligation of confidentiality to the
Disclosing Party; or

 

(d)

is developed by the Receiving Party independently and without use of, or
reference to, any Confidential Information received from the Disclosing Party,
as documented by the Receiving Party’s business records.

Any combination of features or disclosures shall not be deemed to fall within
the foregoing exclusions merely because individual features are published or
available to the general public or in the rightful possession of the Receiving
Party unless the combination itself and principle of operation are published or
available to the general public or in the rightful possession of the Receiving
Party.

12.3. Authorized Disclosures.  Notwithstanding the obligations set forth in
Section 12.1 and Section 12.5, a Party may disclose the other Party’s
Confidential Information to the extent such disclosure is reasonably necessary
in the following instances:

 

(a)

filing or prosecuting Patent Rights as permitted by this Agreement;

 

(b)

prosecuting or defending litigation;

 

(c)

complying with the listing rules of any exchange on which the Receiving Party’s
or its Affiliate’s securities are traded;

 

(d)

in regulatory filings that the Receiving Party has the right to make under this
Agreement;

 

(e)

to actual or potential investors, acquirors, sublicensees and other financial or
commercial partners solely for the purpose of evaluating or carrying out an
actual or potential investment, acquisition or collaboration; provided that in
each such case on the condition that such recipients are bound by
confidentiality and non-use obligations substantially consistent with those
contained in the Agreement (except that the term may be shorter, but at least
[†] years); or

 

(f)

as required by Law, judicial or administrative process, provided that in such
event the Receiving Party shall promptly inform the Disclosing Party of such
required disclosure to provide the Disclosing Party an opportunity to challenge
or limit the disclosure obligations, and use its reasonable efforts to cooperate
with the Disclosing Party’s efforts to ensure the continued confidential
treatment of such Confidential Information.  

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Confidential Information that is disclosed pursuant to this Section 12.3 shall
remain otherwise subject to the confidentiality and non-use provisions of this
Article 12.  

12.4. Scientific Publication.  Xenon shall not publish or otherwise publicly
disclose any results of studies carried out under this Agreement or prior to the
Effective Date related to the Compounds or Products without the prior written
approval of Neurocrine, which Neurocrine may grant or withhold in its sole
discretion, unless such information has already been publicly disclosed in the
same format either prior to the Effective Date or after the Effective Date
through no fault of Xenon and otherwise not in violation of this Agreement and
remains accurate at the time of re-publication, and except for the publications
listed on Exhibit R.  Nothing in this Agreement will restrict, or be deemed to
restrict, Neurocrine from publishing the results of any studies conducted
hereunder related to Compounds or Products.

12.5. Publicity; Term of Agreement.

 

(a)

The Parties agree that the terms of this Agreement are the Confidential
Information of both Parties, subject to the special authorized disclosure
provisions set forth in Section 12.5(d) and Section 12.2 and Section 12.3.

 

(b)

Neurocrine and Xenon have agreed on language of a joint press release announcing
this Agreement, which is attached hereto as Exhibit S, to be issued by the
Parties promptly after the Effective Date.

 

(c)

After release of such press release, if either Party desires to make a public
announcement concerning the material terms of this Agreement or any activities
hereunder, such Party shall give reasonable prior advance notice of the proposed
text of such announcement to the other Party for its prior review and approval
(except as otherwise provided herein), except that in the case of a press
release or governmental filing required by Law, the disclosing Party shall
provide the other Party with such advance notice as it reasonably can and shall
not be required to obtain approval therefor.  Each such press release shall
contain appropriate references to the other Party if so requested.  A Party
commenting on such a proposed press release shall provide its comments, if any,
within [†] days after receiving the press release for review.  Neither Party
shall be required to seek the permission of the other Party to repeat any
information that has already been publicly disclosed by such Party, or by the
other Party, in accordance with this Section 12.5(c), provided such information
remains accurate as of such time.

 

(d)

The Parties acknowledge that either or both Parties may be obligated to file
under applicable Laws a copy of this Agreement with the U.S. Securities and
Exchange Commission or other Governmental Authorities.  Each Party shall be
entitled to make such a required filing, provided that it requests confidential
treatment of the commercial terms and sensitive technical terms hereof and
thereof, including trade secret information, to the extent such confidential
treatment is reasonably available to such Party.  In the event of any such
filing, each Party will provide the other Party with a copy of this Agreement
marked to show provisions for which such Party intends to seek confidential
treatment and shall reasonably consider the other Party’s reasonable comments
thereon to the extent consistent with the legal requirements, with respect to
the filing Party, governing disclosure of material agreements and material
information that must be publicly filed.

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Article 13
TERM AND TERMINATION

13.1. Term.  The term of this Agreement (the “Term”) shall commence on the
Effective Date and, unless earlier terminated pursuant to Section 13.2, shall
continue on a Product-by-Product and country-by-country basis until the
expiration of the Royalty Term for such Product in such country.  Upon the
expiration of the Royalty Term for a particular Product and country, the license
granted by Xenon to Neurocrine under Section 2.1(a) with respect to such Product
and country shall become fully-paid, royalty free, perpetual and irrevocable.

13.2. Termination.

 

(a)

Unilateral Termination by Neurocrine.  Neurocrine may terminate this Agreement,
on a Product-by-Product and/or country-by-country basis or in its entirety, for
any or no reason, upon ninety (90) days written notice of termination to Xenon
(a “Unilateral Termination Notice”) which notice specifies the scope and
effective date of such termination; provided that such Unilateral Termination
Notice (i) will not be effective with respect to a XEN901 Product until
Neurocrine has used Neurocrine’s Commercially Reasonable Efforts to
complete  one (1) Phase 2 Clinical Trial for a XEN901 Product, (ii) will not be
effective with respect to a DTC Product until Neurocrine has used Neurocrine’s
Commercially Reasonable Efforts to complete one (1) Phase 1 Clinical Trial for a
DTC Product, and (iii) will not be effective with respect to this Agreement in
its entirety until Neurocrine has used Neurocrine’s Commercially Reasonable
Efforts to complete both of the trials described in the preceding clauses (i)
and (ii).  

 

(b)

Termination by Either Party for Material Breach.

 

(i)

Material Breach.  Subject to Section 13.2(b)(ii), each Party shall have the
right to terminate this Agreement upon written notice to the other Party if such
other Party materially breaches its obligations, representations or warranties
under this Agreement and, after receiving written notice from the non-breaching
Party identifying such material breach in reasonable detail, fails to cure such
material breach within [†] days from the date of such notice; provided that (i)
if such breach is capable of cure but is not reasonably capable of cure within
such time period, the breaching Party may submit a reasonable cure plan prior to
the end of such time period, in which case the other Party shall not have the
right to terminate this Agreement for so long as the breaching Party is using
commercially reasonable efforts to implement such cure plan, and (ii) if the
breach relates to one or more but not all Products and/or countries, then the
non-breaching Party will have the right to terminate this Agreement only with
respect to such Products and/or countries and not with respect to this Agreement
in its entirety.  Neurocrine’s failure to use Neurocrine’s Commercially
Reasonable Efforts pursuant to Section 5.3, Section 6.4, or Section 7.2, or
failure to make any payment due under Article 8, shall constitute a material
breach for purposes of this Section 13.2(b), subject to the right to cure under
this Section 13.2(b)(i) and the right to dispute under Section 13.2(b)(ii).  For
the sake of clarity, neither a Neurocrine Negative IND Decision nor a JSC
Negative IND Decision shall create or nullify the presumption that Neurocrine
has satisfied its obligation to use Neurocrine’s Commercially Reasonable Efforts
pursuant to Section 5.3, Section 6.4, or Section 7.2, and any determination with
respect to whether Neurocrine has satisfied such obligations is expressly
outside of the authority and jurisdiction of the JSC.

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(ii)

Disputed Material Breach. If the alleged breaching Party disputes in good faith
the existence or materiality of a breach specified in a notice provided by the
other Party in accordance with Section 13.2(b)(i), and such alleged breaching
Party provides the other Party notice of such dispute within the [†] day cure
period, then the non-breaching Party shall not have the right to terminate this
Agreement under Section 13.2(b)(i) unless and until the arbitrators, in
accordance with Section 14.7, have determined that the alleged breaching Party
has materially breached this Agreement and such Party fails to cure such breach
within [†] days following such arbitrators’ decision.  It is understood and
agreed that during the pendency of such dispute, all of the terms and conditions
of this Agreement shall remain in effect and the Parties shall continue to
perform all of their respective obligations hereunder.

13.3. Effects of Termination.

 

(a)

Upon the termination of this Agreement for any reason, all licenses and other
rights granted to Neurocrine under the Xenon Licensed IP shall terminate;
provided that if this Agreement is terminated with respect to one (1) or more
Products and/or countries but not in its entirety, then such termination will
apply only to the terminated Products (“Terminated Products”) and/or terminated
countries (“Terminated Territory”).

 

(b)

In addition, if this Agreement is terminated by Neurocrine pursuant to Section
13.2(a) or by Xenon pursuant to Section 13.2(b), then:

 

(i)

Neurocrine hereby grants to Xenon, effective as of the effective date of such
termination, a worldwide, exclusive license, with the right to grant sublicenses
through multiple tiers, under Neurocrine Licensed IP that is reasonably
necessary and was actually used by Neurocrine for the Development, manufacture
or Commercialization of Terminated Products, to research, Develop, make, have
made, use, sell, offer for sale, import, export and otherwise exploit and
Commercialize Terminated Products in the Field in the Terminated Territory;
provided that if any such Patent Rights or Know-How was in-licensed or acquired
from a Third Party and is subject to payment or other obligations to such Third
Party, Neurocrine shall promptly disclose such obligations to Xenon in writing
and such Patent Rights shall be subject to the license granted in this Section
only to the extent Xenon agrees in writing to be bound by such obligations and
reimburse all amounts payable to such Third Party following the effective date
of termination and as a result of Xenon’s exercise of such license with respect
to such Patent Rights or Know-How.  Such license will be royalty-free with
respect to any Terminated Product for which a Phase 2 Clinical Trial was not
completed prior to the effective date of termination, and otherwise will be
royalty-bearing with the royalty rate as follows based on the development stage
at the effective date of termination: if a Phase 2 Clinical Trial has been
completed but an NDA, MAA or equivalent has not been filed for such Terminated
Product, [†], if an MAA, NDA or equivalent has been filed but not approved for
such Terminated Product, [†]; if an MAA, NDA or equivalent has been approved for
such Terminated Product but First Commercial Sale has not occurred, [†]; and if
First Commercial Sale of such Terminated Product has occurred, [†].  The terms
of Article 8 will apply to the payment and reporting of such royalties, mutatis
mutandis.  Xenon will have the first right, and Neurocrine will have a back-up
right, to prosecute any Patent Rights licensed under the foregoing license that
Cover Terminated Products and no other compounds or products, under the terms of
Section 9.2(a), mutatis mutandis.

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(ii)

Neurocrine will use commercially reasonable efforts to assign or otherwise
transfer to Xenon all Regulatory Materials and Regulatory Approvals and copies
of all clinical and nonclinical data specific to Terminated Products in the
Terminated Territory Controlled by Neurocrine or any of its
Affiliates.  Neurocrine shall, and shall procure that its Affiliates shall, take
such actions and execute such instruments, assignments and documents as may be
reasonably requested by Xenon to effect the transfer of rights under such
Regulatory Materials and Regulatory Approvals to Xenon.  If applicable Law
prevents or delays the transfer of ownership of any such Regulatory Materials or
Regulatory Approvals to Xenon, Neurocrine shall grant, and does hereby grant, to
Xenon an exclusive (even as to Neurocrine and its Affiliates), irrevocable,
perpetual right of access and reference to such Regulatory Materials and
Regulatory Approvals for the Terminated Products in the Terminated Territory,
and shall cooperate with Xenon to make the benefits of such Regulatory Materials
and Regulatory Approvals available to Xenon or its designee(s) with effect from
the effective date of such termination.

 

(iii)

Neurocrine will transfer to Xenon copies of the patent files for (A) all Xenon
Licensed IP and (B) all Neurocrine Licensed IP that is exclusively licensed to
Xenon pursuant to Section 13.3(b)(i). Neurocrine will disclose to Xenon any
Know-How within the Neurocrine Licensed IP under that is exclusively licensed to
Xenon pursuant to Section 13.3(b)(i).

 

(iv)

If this Agreement is terminated with respect to the Territory, then following
receipt of written request from Xenon, Neurocrine shall deliver to Xenon all
safety data contained in the global safety database for the Terminated Products
and promptly transfer control of and responsibility for maintaining the global
safety database for the Terminated Products to Xenon.

 

(v)

If Neurocrine is, as of the effective date of termination of the Agreement,
party to any Third Party agreements (excluding license agreements) relating
solely to the Development, manufacture or Commercialization of the Terminated
Products in the Terminated Territory, then Neurocrine will assign to Xenon any
such Third Party agreements requested by Xenon, to the extent it has the right
under such Third Party agreements(s) to do so (and will use reasonable efforts
to obtain any required consents).  If Neurocrine is not able to assign any such
subcontracts, at Xenon’s request, or in the event that any Third Party agreement
pertains both to the Terminated Products and to any other product of Neurocrine,
Neurocrine shall use reasonable efforts to facilitate negotiations between Xenon
and any of Neurocrine’s subcontractors that at the effective date of termination
are performing any Development, manufacturing or Commercialization activities
with respect to the Terminated Products, subject to Xenon’s agreement to any
associated reasonable costs.

54

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(vi)

If this Agreement is terminated with respect to the Territory, then Neurocrine
shall transfer to Xenon, at Xenon’s request, any remaining inventory of the
Terminated Products, and components thereof and raw materials used by or on
behalf of Neurocrine in the manufacture of the Terminated Products that, in each
case, are in Neurocrine’s or its Affiliate’s possession as of the effective date
of termination at Neurocrine’s cost to procure such inventory; provided,
however, that to the extent any such inventory is necessary for Neurocrine to
perform its supply obligations under Section 13.3(b)(vii) (if any) after the
effective date of termination, then Neurocrine’s inventory transfer obligations
under the preceding provisions of this Section shall apply to any inventory that
is in Neurocrine’s possession as of the date Neurocrine’s obligations under
Section 13.3(b)(vii) expire or terminate (or, if earlier, as of the date that
Neurocrine no longer requires such inventory for the performance of such
obligations).  Within [†] days after the effective date of termination (or
within [†] days after such later date described in the preceding proviso, if
applicable), Neurocrine shall notify Xenon (i) of the quantity(ies) and type(s)
of the remaining inventory and the cost thereof and (ii) whether any such
inventory will need to be relabeled or repackaged to remove any Neurocrine
housemarks, and Xenon shall have [†] days after receipt of such notice in which
to notify Neurocrine of the quantity(ies) and type(s) of the remaining inventory
that Xenon wishes to purchase.  If Xenon does not so notify Neurocrine within
the applicable period specified above, or notifies Neurocrine within the
applicable period specified above that Xenon elects to purchase less than all of
the remaining inventory, then (A) in the case of inventory remaining in
Neurocrine’s possession as of the effective date of termination, Neurocrine
shall be entitled to elect to continue to sell such inventory for up to [†]
months after the effective date of termination, or to destroy such inventory,
and (B) in the case of inventory remaining in Neurocrine’s possession as of the
date Neurocrine’s obligations under Section 13.3(b)(vii) (as applicable) expire
or terminate (or, if earlier, as of the date that Neurocrine no longer requires
such inventory for the performance of such obligations), Neurocrine shall
destroy such inventory.  Any Terminated Product that is sold by Neurocrine after
the effective date of termination pursuant to this Section shall be subject to
payment of royalties pursuant to Section 8.7.

 

(vii)

If this Agreement is terminated with respect to the Territory, Neurocrine shall,
at Xenon’s request, use reasonable efforts to facilitate an orderly and prompt
transition of any manufacturing of the Terminated Products then being conducted
by Neurocrine and any of its Affiliates or Third Party subcontractors to Xenon
or its designee.  At Xenon’s request, while such manufacturing activities are
transitioned, Neurocrine shall supply Xenon or its designee with the Terminated
Products at a price equivalent to Neurocrine’s cost of manufacturing, provided
that Neurocrine shall not be obligated to continue to supply the Terminated
Products for more than [†] months following the effective date of termination.

 

(viii)

If, at the date of notice of termination, any Clinical Trial is being conducted
by Neurocrine with respect to any Terminated Products in the Terminated
Territory, then Xenon shall notify Neurocrine in writing within [†] days after
the notice of termination whether Xenon elects to have Neurocrine (i) wind down
such trial as soon as practicable, subject to compliance with ethical and legal
requirements; or (ii) transfer responsibility for and control of such Clinical
Trial to Xenon as soon as practicable.  Neurocrine shall use commercially
reasonable efforts to effect such transfer, and Xenon shall use commercially
reasonable efforts to assume responsibility for and control of such Clinical
Trial as promptly as practicable after the effective date of termination and, in
any event, within [†] months following the effective date of termination.  All
costs incurred in connection with such Clinical Trial prior to the effective
date of termination will be borne solely by Neurocrine and thereafter will be
borne solely by Xenon.

55

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(ix)

Neurocrine shall cause to be assigned to Xenon all rights in and to any Product
Trademarks solely relating to the Terminated Products in the Terminated
Territory.

 

(x)

Notwithstanding anything to the contrary herein, if any Terminated Product is a
Combination Product, then Neurocrine shall not be obligated to grant any
licenses or other rights or provide or assign any Regulatory Materials, data or
tangible materials to Xenon with respect to the Other Product(s) therein.

 

(xi)

At the sublicensee’s option, each sublicense granted by Neurocrine or its
Affiliates pursuant to a Sublicense Agreement will become a direct license of
Xenon, provided that (A) all accrued payment obligations to Neurocrine have been
paid by such sublicensee and such sublicensee is not otherwise in breach of such
Sublicense Agreement, and (B) such sublicensee agrees in writing to assume all
applicable obligations of Neurocrine under this Agreement.

 

(c)

Upon any termination of this Agreement in its entirety, each Party shall
promptly return to the other Party, or destroy and certify such destruction in
writing, all Confidential Information of such other Party.

13.4. Alternative to Termination.  If Neurocrine has the right to terminate this
Agreement pursuant to Section 13.2(b) for Xenon’s uncured material breach, then
in lieu of such termination, Neurocrine may elect, upon written notice to Xenon:
(i) to reduce all subsequent payments from Neurocrine to Xenon under this
Agreement by fifty percent (50%) or (ii) to terminate this Agreement.

13.5. Survival.  Expiration or termination of this Agreement shall not relieve
the Parties of any obligation accruing prior to such expiration or
termination.  Without limiting the foregoing, the provisions of Article 11 and
12, and Sections 4.10, 8.9, 8.10, 8.11, 8.12, 9.1(a), 10.5, 13.3, 13.5, 13.6,
14.3, 14.5, 14.6, 14.7, 14.12, 14.13 and 14.14 shall survive the expiration or
termination of this Agreement.

13.6. Termination Not Sole Remedy.  Termination is not the sole remedy under
this Agreement and, whether or not termination is effected and notwithstanding
anything contained in this Agreement to the contrary, all other remedies shall
remain available except as agreed to otherwise herein.

Article 14
GENERAL PROVISIONS

14.1. Force Majeure.  Neither Party shall be held liable to the other Party nor
be deemed to have defaulted under or breached this Agreement for failure or
delay in performing any obligation under this Agreement to the extent such
failure or delay is caused by or results from causes beyond the reasonable
control of the affected Party, potentially including embargoes, war, acts of war
(whether war be declared or not), acts of terrorism, insurrections, riots, civil
commotions, strikes, lockouts or other labor disturbances, fire, floods,
earthquakes or other acts of God, or acts, omissions or delays in acting by any
governmental authority or the other Party or unavailability of materials related
to the manufacture of Compounds or Products.  The affected Party shall notify
the other Party in writing of such force majeure circumstances as soon as
reasonably practicable, and shall promptly undertake and continue diligently all
reasonable efforts necessary to cure such force majeure circumstances or to
perform its obligations in spite of the ongoing circumstances.

56

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14.2. Rights in Bankruptcy or Insolvency.  All rights and licenses granted under
or pursuant to this Agreement by Xenon are, and shall otherwise be deemed to be,
licenses of rights to “intellectual property” as defined under Section 101 of
the U.S. Bankruptcy Code and for purposes of Section 365(n) of the U.S.
Bankruptcy Code, and of a “right to use intellectual property” as used in the
Bankruptcy and Insolvency Act (the “BIA”) and the Companies’ Creditors
Arrangement Act (the “CCAA” and, collectively with the BIA and U.S. Bankruptcy
Code, the “Bankruptcy Laws”).  The Parties agree that Neurocrine, as licensee of
intellectual property and of a right to use intellectual property under this
Agreement, shall retain and may fully exercise all of its rights and elections
under the Bankruptcy Laws.  The Parties further agree that in the event of a
rejection, disclaimer, or resiliation of this Agreement by Xenon in any
proceeding by or against Xenon under any of the Bankruptcy Laws, (a) Neurocrine
shall be entitled to a complete duplicate of (or complete access to, as
appropriate) any such intellectual property and all embodiments of such
intellectual property that are necessary for Neurocrine to practice its license
to such intellectual property, which, if not already in Neurocrine’s possession,
shall be promptly delivered to it upon its written request therefor, and (b)
Xenon shall not interfere with Neurocrine’s rights to such intellectual
property, and shall reasonably assist and not interfere with Neurocrine in
obtaining such intellectual property and such embodiments of such intellectual
property from another entity.  The term “embodiments” of intellectual property
means all tangible embodiments of the intellectual property licensed hereunder
to the extent of the license scope.  All rights, powers and remedies provided in
this Section 14.2 are in addition to and not in substitution for any and all
other rights, powers and remedies now or hereafter existing at Law or in equity
(including any of the Bankruptcy Laws) in the event of the commencement of a
case under any of the Bankruptcy Laws.

14.3. Assignment.  This Agreement may not be assigned or otherwise transferred,
nor may any right or obligation hereunder be assigned or transferred, by either
Party without the prior written consent of the other Party, which shall not be
unreasonably withheld, conditioned or delayed.  Notwithstanding the foregoing,
either Party may, without consent of the other Party, assign this Agreement and
its rights and obligations hereunder in whole or in part to an Affiliate of such
Party, or in whole to its successor in interest in connection with the sale of
all or substantially all of its shares or its assets to which this Agreement
relates, or in connection with a merger, acquisition or similar
transaction.  Any attempted assignment not in accordance with this Section 14.3
shall be null and void and of no legal effect.  Any permitted assignee shall
assume all assigned obligations of its assignor under this Agreement.  The terms
and conditions of this Agreement shall be binding upon, and shall inure to the
benefit of, the Parties and their respected successors and permitted assigns.

14.4. Severability.  If any one or more of the provisions contained in this
Agreement is held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby, unless the absence
of the invalidated provision(s) adversely affects the substantive rights of the
Parties.  The Parties shall in such an instance make a good faith effort to
replace the invalid, illegal or unenforceable provision(s) with valid, legal and
enforceable provision(s) which, insofar as practical, implement the purposes of
this Agreement.

14.5. Notices.  All notices which are required or permitted hereunder shall be
in writing and sufficient if delivered personally, sent by
internationally-recognized overnight courier or sent by registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:

57

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

 

If to Xenon:

Xenon Pharmaceuticals Inc.
200-3650 Gilmore Way

Burnaby, BC V5G 4WB

Canada

Attn: Legal Affairs Department

legalaffairs@xenon-pharma.com

with a copy to:

Pepper Hamilton LLP

 

3000 Two Logan Square

 

Philadelphia, PA 19103

Attn: Rachael M. Bushey, Esq.

If to Neurocrine:

Neurocrine Biosciences, Inc.

12780 El Camino Real

San Diego, CA 92130

Fax: 858-777-3488

Attention: Chief Legal Officer

or to such other address(es) as the Party to whom notice is to be given may have
furnished to the other Party in writing in accordance herewith.  Any such notice
shall be deemed to have been given: (a) when delivered if personally delivered
on a business day (or if delivered on a non-business day, then on the next
business day); (b) on the business day after dispatch if sent by
internationally-recognized overnight courier; or (c) on the fifth (5th) business
day following the date of mailing, if sent by mail.  All notices required or
permitted to be given hereunder, and all written, electronic, oral or other
communications between the Parties regarding this Agreement, shall be in the
English language.

14.6. Governing Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of New York and the patent laws of the
United States without reference to any rules of conflict of laws.

14.7. Dispute Resolution.  The Parties recognize that disputes as to matters
arising out of or in connection with this Agreement, including any question
regarding its formation, existence, validity or termination, or either Party’s
rights or obligations hereunder, but excluding any dispute arising from the JSC,
which will be resolved in accordance with Section 3.5 (collectively, “Disputes”)
may arise from time to time; provided however, and notwithstanding any decision
by the JSC, any disputes regarding an allegation of a Party’s material breach of
this Agreement shall be subject to the dispute resolution procedures set forth
in this Section 14.7.  It is the objective of the Parties to establish
procedures to facilitate the resolution of such Disputes in an expedient manner
by mutual cooperation and without resort to litigation.  To accomplish this
objective, the Parties agree to follow the procedures set forth in this Section
14.7 to resolve any such Dispute if and when it arises.

58

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

 

 

(a)

Resolution by Executives.  If any Dispute arises, either Party may refer such
Dispute to the Executive Officers, who shall meet in person or by telephone
within [†] days after such referral to attempt in good faith to resolve such
Dispute.  If such matter cannot be resolved by discussion of such officers
within such [†] day period (as may be extended by mutual written agreement),
such Dispute shall be resolved in accordance with the remainder of this Section
14.7.  The Parties acknowledge that discussions between the Parties to resolve
Disputes are settlement discussions under applicable rules of evidence and
without prejudice to either Party’s legal position.

 

(b)

AAA Arbitration.  Any Dispute that is not resolved through Executive Officer
negotiations under Section 14.7(a) shall be finally settled by binding
arbitration by a panel of three (3) arbitrators pursuant to the then-current
Commercial Arbitration Rules of the American Arbitration Association (“AAA
Rules”), except where they conflict with this Section 14.7, in which case this
Section 14.7 shall control.  Each Party shall nominate one (1) arbitrator and
the two (2) Party-nominated arbitrators shall then nominate the third
arbitrator, who shall serve as the presiding arbitrator, within [†] days after
the second arbitrator’s appointment.  The arbitrators shall not be current or
former employees or directors, or current stockholders, of either Party or any
of their respective Affiliates or sublicensees and each arbitrator shall have at
least [†] years of pharmaceutical industry experience.  At the request of a
Party, the arbitral tribunal shall have the discretion to order the disclosure
of specified documents by the Parties.  Such a request shall identify the
document(s) with a reasonable degree of specificity and establish the relevance
of the document(s) to the arbitration.

 

(c)

Seat; Language; Governing Law.  The seat, or legal place, of arbitration shall
be San Francisco, CA.  The language of the arbitration shall be English.  The
arbitrators will, in rendering their decision, apply the substantive law of the
State of New York, without reference to its conflict of laws principles.  

 

(d)

Relief.  Except as otherwise specifically limited in this Agreement, including
Section 14.14, the arbitral tribunal shall have the power to grant any remedy or
relief that it deems appropriate, whether provisional or final, including
injunctive relief.  Each Party retains the right to apply to any court of
competent jurisdiction for interim and/or conservatory measures, including
pre-arbitral attachments or preliminary injunctions, and any such request shall
not be deemed incompatible with, or a waiver of, this agreement to
arbitrate.  The arbitration award shall be final and binding on the Parties, and
the Parties undertake to carry out any award without delay.  Judgment on the
award may be entered in any court of competent jurisdiction.

 

(e)

Costs.  Each Party shall bear its own legal fees.  The arbitrators shall assess
their costs, fees and expenses against the Party losing the arbitration unless
they believe that neither Party is the clear winner, in which case the
arbitrators shall divide such fees, costs and expenses according to their
discretion.  The arbitrators, in the arbitrators’ discretion, may award
reimbursement of attorney’s fees to the prevailing Party.

 

(f)

Confidentiality.  The existence and content of the arbitral proceeding,
including any rulings or award, shall be kept confidential by the Parties and
the arbitrator except to the extent (i) required by applicable Law; (ii)
required to protect or pursue a legal right; (iii) required to enforce or
challenge an award; or (iv) approved by written consent of the
Parties.  Notwithstanding anything to the contrary herein, either Party may
disclose matters relating to the arbitration or the arbitral proceedings where
necessary for the preparation or presentation of a claim or defense in such
arbitration.  The arbitrators shall issue appropriate protective orders to
safeguard each Party’s Confidential Information.

59

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

 

 

(g)

Timing.  The hearing shall commence within [†] days after the selection of the
arbitrators.  The award shall be rendered within [†]months of the appointment of
the arbitral tribunal, unless the Parties jointly request an extension or the
arbitral tribunal determines, in a reasoned decision, that the interest of
justice or the complexity of the case requires that such limit be extended.

 

(h)

Survivability.  Any duty to arbitrate under this Agreement shall remain in
effect and be enforceable after termination of this Agreement for any reason.

 

(i)

Patent and Trademark Disputes.  Any dispute, controversy or claim relating to
the scope, validity, enforceability or infringement of any patents or trademarks
shall be submitted to a court of competent jurisdiction in the country in which
such patent or trademark rights were granted or arose.

14.8. Entire Agreement; Amendments.  This Agreement, together with the Exhibits
hereto, contains the entire understanding of the Parties with respect to the
subject matter hereof.  Any other express or implied agreements and
understandings, negotiations, writings and commitments, either oral or written,
with respect to the subject matter hereof are superseded by the terms of this
Agreement.  The Exhibits to this Agreement are incorporated herein by reference
and shall be deemed a part of this Agreement.  This Agreement may be amended, or
any term hereof modified, only by a written instrument duly executed by
authorized representative(s) of both Parties hereto.  The Parties agree that,
effective as of the Effective Date, that certain Confidential Disclosure
Agreement between the Parties dated March 26, 2019 (the “Confidentiality
Agreement”) shall be terminated, and that disclosures made prior to the
Effective Date pursuant to the Confidentiality Agreement shall after the
Effective Date be subject to the confidentiality and non-use provisions of this
Agreement.

14.9. Headings.  The captions to the several Articles, Sections and subsections
hereof are not a part of this Agreement, but are merely for convenience to
assist in locating and reading the several Articles and Sections hereof.

14.10. Independent Contractors.  It is expressly agreed that Xenon and
Neurocrine shall be independent contractors and that the relationship between
the two Parties shall not constitute a partnership, joint venture or
agency.  Neither Xenon nor Neurocrine shall have the authority to make any
statements, representations or commitments of any kind, or to take any action,
which shall be binding on the other Party, without the prior written consent of
the other Party.

14.11. Waiver.  The waiver by either Party hereto of any right hereunder, or of
any failure of the other Party to perform, or of any breach by the other Party,
shall not be deemed a waiver of any other right hereunder or of any other breach
by or failure of such other Party whether of a similar nature or otherwise.

14.12. Cumulative Remedies.  No remedy referred to in this Agreement is intended
to be exclusive, but each shall be cumulative and in addition to any other
remedy referred to in this Agreement or otherwise available under law.

14.13. Performance by Affiliates.  Each Party may discharge any obligations and
exercise any right hereunder through any of its Affiliates; and the performance
of such obligations or rights by any Affiliate shall be deemed to be the
performance by such Party.  Each Party shall cause its Affiliates to comply with
the provisions of this Agreement in connection with such performance.  Each
Party shall be responsible for ensuring the performance of its obligations under
this Agreement and any failure of any Affiliate performing obligations of a
Party hereunder shall be deemed to be a failure by such Party to perform such
obligations.  

60

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14.14. Limitation of Liability.  NEITHER PARTY SHALL BE LIABLE TO THE OTHER
PARTY FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR INDIRECT DAMAGES,
INCLUDING LOSS OF PROFITS, WHETHER IN CONTRACT, WARRANTY, TORT, NEGLIGENCE,
STRICT LIABILITY OR OTHERWISE ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREIN OR ANY BREACH OF THE TERMS OF THIS AGREEMENT,
REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES.  NOTWITHSTANDING
THE FOREGOING, NOTHING IN THIS SECTION 14.14 IS INTENDED TO OR SHALL LIMIT OR
RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF ANY PARTY UNDER SECTION
11.1 OR SECTION 11.2, OR DAMAGES AVAILABLE FOR A PARTY’S BREACH OF Article 12.

14.15. Waiver of Rule of Construction.  Each Party has had the opportunity to
consult with counsel in connection with the review, drafting and negotiation of
this Agreement.  Accordingly, the rule of construction that any ambiguity in
this Agreement shall be construed against the drafting Party shall not apply.

14.16. Business Day Requirements.  In the event that any notice or other action
or omission is required to be taken by a Party under this Agreement on a day
that is not a business day then such notice or other action or omission shall be
deemed to be required to be taken on the next occurring business day.

14.17. Counterparts.  This Agreement may be executed in two or more counterparts
by original signature, facsimile or PDF files, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.

{Remainder of page intentionally left blank}

 

 

 

61

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

 

 

Xenon Pharmaceuticals Inc.

 

By: /s/ Simon Pimstone

 

Name: Simon Pimstone

 

Title: Chief Executive Officer

 

 

 

Neurocrine Biosciences, Inc.

 

By: /s/ Kevin Gorman

 

Name: Kevin Gorman

 

Title: Chief Executive Officer

 

 

 

62

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Exhibit A

Xenon Patent Rights

 

Entry

Xenon Ref No.

 

Jurisdiction

 

Title

Appl. No.

 

Patent No.

Filing Date

 

Issue Date

Inventors

Owner(s)

Status

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

 

[Redactions continue for 12 pages]

 

 

1

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

 

Exhibit B

XEN901

 

[†]

 

 

2

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

 

Exhibit C

XEN393

 

[†]

 

3

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

 

Exhibit D

XPC’535

 

[†]

 

4

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

 

Exhibit E

XPC’391

 

[†]

5

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

 

Exhibit F

Early Compounds

 

ID

CID

Series

Exemplified in Xenon Patent Filing

Covered by Xenon Patent Filing

[†]

[†]

[†]

[†]

[†]

 

[Redactions continue for 24 pages]

 

 

 

 

6

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

 

Exhibit G

Excluded Compounds

 

ID

Series

Exemplified in Xenon Patent Filing

Covered by Xenon Patent Filing

[†]

[†]

[†]

[†]

 

[Redactions continue for 2 pages]

 

 

 

7

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

 

Exhibit H

Inventory (Quantity)

 

[†]

[†]

 

Lot Number(s)

Date of Release

GMP Status

Amount Remaining

Stability Data

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

 

[†]

Lot Number(s)

Date of Release

GMP Status

Amount Remaining

Strength(s)

Stability Data

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

 

[†]

Lot Number(s)

Date of Release

GMP Status

Amount Remaining

Strength(s)

Stability Data

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

 

[†]

8

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

 

[†]

ID

SSalt Code

Batch*

Current
Quantity
(g)**

Original
Quantity
(g)**

Projected change ***

Amount

Reason

Timeline

[†]

 

[†]

[†]

[†]

 

 

 

 

[†]

[†]

[†]

 

 

 

[†]

 

[†]

[†]

[†]

 

 

 

 

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

 

 

 

[†]

[†]

[†]

[†]

 

 

 

[†]

 

[†]

[†]

[†]

 

 

 

 

[†]

[†]

[†]

 

 

 

 

[†]

[†]

[†]

[†]

[†]

[†]

 

[†]

[†]

[†]

 

 

 

[†]

[†]

[†]

 

9

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

 

Exhibit I

Initial JSC Members

 

Neurocrine

[†]

 

Xenon

[†]

 

 

10

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

 

Exhibit J

Research Plan and Research Budget

 

Overarching Goals:

• Xenon and Neurocrine will collaborate in the conduct of a research program to
discover, identify and develop Research Compounds

• The goal of the Research Program will be to discover back-up and follow-on
compounds to XEN901 and XEN393 including from different chemical series, as
clinical development candidates

 

Key Action Items for Research Collaboration:

• Neurocrine and Xenon to work together to complete Research Plan, including
defining:

•

Each Party’s tasks and responsibilities over a two-year timeframe (three-year
collaboration if parties decide to extend by one year)

•

Specific objectives for years 1 and 2

•

Development Candidate Criteria

[†]

[†]

[†]

 

Potential Strategy:

 

Year 1 Budget:

 

[†]

[†]

[†]

[†]

[†]

[†]

 

 

 

 

 

11

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

 

Exhibit K

Academic Agreements

 

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

 

[†]

 

[†]

 

 

 

12

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

 

Exhibit L

XEN901 Initial Development Plan

 

The XEN901 Initial Development Plan includes activities associated with the
completion of the Phase 1 PK study, the 6- and 9- month GLP studies and CMC
activities associated with manufacturing campaigns for Phase 2 clinical
studies.  [†]

 

Activities

Dollars

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

 

 

[†]

 

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

 

 

[†]

 

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

 

 

[†]

[†]

 

[†]

[†]

 

 

13

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

 

Exhibit M

XEN901 Neurocrine Development Plan

 

[†]

 

 

 

14

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Exhibit N

Specifications

 

[†]

 

TEST

METHOD

ACCEPTANCE CRITERIA

TESTING FACILITY

[†]

[†]

[†]

[†]

 

[Redactions continue for 4 pages]

 

 

 

 

 

 

15

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Exhibit O

Xenon’s Supply Agreements

 

[†]

 

 

1.

[†] dated January 19, 2016 by and between Xenon Pharmaceuticals Inc. and [†];

 

 

2.

[†] dated July 24, 2019 by and between Xenon Pharmaceuticals Inc. and [†];

 

 

3.

[†] dated December 17, 2018 by and between by and between Xenon Pharmaceuticals
Inc. and [†];

 

4.

[†] dated October 5, 2017 by and between Xenon Pharmaceuticals Inc. and [†];

 

5.

[†] dated September 11, 2019 by and between Xenon Pharmaceuticals Inc. and [†];

 

6.

[†] dated November 12, 2019 by and between Xenon Pharmaceuticals Inc. and [†];
and

 

7.

[†] dated November 22, 2019 by and between Xenon Pharmaceuticals Inc. and [†]

 

[†]

 

1.

[†] dated December 24, 2018 by and between [†] and Xenon Pharmaceuticals Inc.;

 

2.

[†] dated June 24, 2019 by and between [†] and Xenon Pharmaceuticals Inc.;

 

3.

[†] dated August 7, 2019 by and between Xenon Pharmaceuticals and [†];

 

4.

[†] dated August 9, 2019 by and between Xenon Pharmaceuticals and [†];

 

5.

[†] dated June 26, 2019 by and between Xenon Pharmaceuticals and [†];

 

6.

[†] dated August 1, 2019 by and between Xenon Pharmaceuticals and [†];

 

7.

[†] dated July 9, 2019 by and between Xenon Pharmaceuticals and [†];

 

8.

[†] dated April 26, 2019 by and between Xenon Pharmaceuticals and [†];

 

9.

[†] dated May 28, 2019 by and between Xenon Pharmaceuticals and [†];

 

10.

[†] dated September 18, 2019 by and between Xenon Pharmaceuticals and [†]; and

 

11.

[†] dated October 1, 2019 by and between Xenon Pharmaceuticals and [†]

 

16

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

 

[†]

 

1.

[†] dated June 28, 2017 by and between Xenon Pharmaceuticals Inc. and [†];

 

2.

[†] dated January 14, 2019 by and between Xenon Pharmaceuticals Inc. and [†];

 

3.

[†] dated June 20, 2019 by and between Xenon Pharmaceuticals Inc. and [†];

 

4.

[†] dated August 16, 2019 by and between Xenon Pharmaceuticals Inc. and [†];

 

5.

[†] dated August 29, 2019 by and between Xenon Pharmaceuticals Inc. and [†];

 

6.

[†] dated September 4, 2019 by and between Xenon Pharmaceuticals Inc. and [†];

 

7.

[†] dated September 25, 2019 by and between Xenon Pharmaceuticals Inc. and [†];

 

8.

[†] dated October 28, 2019 by and between Xenon Pharmaceuticals Inc. and [†];

 

9.

[†] dated September 10, 2018 by and between Xenon Pharmaceuticals Inc. and [†];

 

10.

[†] dated March 12, 2019 by and between Xenon Pharmaceuticals Inc. and [†]; and

 

11.

[†] dated May 13, 2019 by and between Xenon Pharmaceuticals Inc. and [†]; and

 

12.

[†] dated June 13, 2019 by and between Xenon Pharmaceuticals Inc. and [†]

 

 

 

17

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Exhibit P

Form of Share Purchase Agreement

SHARE PURCHASE AGREEMENT

This Share Purchase Agreement (this “Agreement”), is made as of December 2, 2019
(the “Signing Date”), by and between Neurocrine Biosciences, Inc. (the
“Investor”), a Delaware corporation, and Xenon Pharmaceuticals Inc. (the
“Company”), a Canadian corporation.

RECITALS

WHEREAS, the Company and the Investor have entered into the Collaboration
Agreement; and

WHEREAS, pursuant to the terms and subject to the conditions set forth in this
Agreement, the Company desires to issue and sell to the Investor, and the
Investor desires to subscribe for and purchase from the Company, certain common
shares, no par value per share, of the Company (the “Common Shares”), in the
amount and at a purchase price determined in accordance with the Collaboration
Agreement; and

NOW, THEREFORE, in consideration of the following mutual promises and
obligations, and for good and valuable consideration, the adequacy and
sufficiency of which are hereby acknowledged, the Investor and the Company agree
as follows:

Article 1
Definitions

1.1 Defined Terms.  When used in this Agreement, the following terms shall have
the respective meanings specified therefor below:

“2014 Equity Incentive Plan” shall mean the Company’s 2014 Equity Incentive
Plan, as amended to date and as the same may be amended and/or restated from
time to time.

“2019 Inducement Equity Incentive Plan” shall mean the Company’s 2019 Inducement
Equity Incentive Plan, as amended to date and as the same may be amended and/or
restated from time to time.

“Affiliate” shall mean, with respect to any Person, another Person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such Person.  A Person shall be
deemed to control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.  Without limiting the generality of the foregoing, a
Person shall be deemed to control another Person if such Person (ii) owns,
directly or indirectly, beneficially or legally, more than fifty percent (50%)
of the outstanding voting securities or capital stock of such other Person, or
has other comparable ownership interest with respect to any Person other than a
corporation; or (ii) has the power, whether pursuant to contract, ownership of
securities or otherwise, to direct the management and policies of such other
Person.  For the purposes of this Agreement, in no event shall the Investor or
any of its Affiliates be deemed Affiliates of the Company or any of its
Affiliates, nor shall the Company or any of its Affiliates be deemed Affiliates
of the Investor or any of its Affiliates.

“Aggregate Purchase Price” shall mean $20,000,000.

18

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“Acquisition Transaction” shall mean (i) any sale, license, lease, exchange,
transfer or other disposition of the assets of the Company or any subsidiary of
the Company constituting more than 50% of the consolidated assets of the Company
in any one transaction or in a series of related transactions; or (ii) any
merger, consolidation, business combination, share exchange, reorganization or
similar transaction or series of related transactions involving the Company or
any subsidiary of the Company whereby the holders of voting capital stock of the
Company immediately prior to any such transaction hold less than 50% of the
voting stock of the Company or the surviving corporation (or its parent company)
immediately after the consummation of any such transaction.

“Agreement” shall have the meaning set forth in the Preamble.

“Board” shall mean the Board of Directors of the Company.

“Business Day” shall mean a day on which banking institutions in Burnaby,
British Columbia, Canada and San Diego, California, United States are open for
business, excluding any Saturday or Sunday.

“Change of Control” shall mean the transfer, in one transaction or a series of
related transaction, as a result of which any Person or group of Persons, other
than the Company, becomes the beneficial owner (as defined in Rules 13d-3 and
13d-5 of the Exchange Act) of more than 50% of the total voting power of the
voting securities of the Company.

“Closing Conditions” shall mean the conditions to Closing set forth in Article
6, Article 7, and Article 8 hereof.

“Collaboration Agreement” shall mean the License and Collaboration Agreement,
dated December 2, 2019, between the Investor and the Company.

“Company SEC Documents” shall mean the required reports, schedules, forms,
statements and other documents (including exhibits and all other information
incorporated therein) required to be filed by it under the Securities Act and
the Exchange Act, and any required amendments to any of the foregoing, with the
SEC.

“DOJ” shall mean the U.S. Department of Justice.

“Effective Date” shall have the meaning given to such term in the Collaboration
Agreement.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.

“FTC” shall mean the U.S. Federal Trade Commission.

“GAAP” shall mean generally accepted accounting principles in the United States.

“Governmental Authority” shall mean any multinational, federal, national, state,
provincial, local or other entity, office, commission, bureau, agency, political
subdivision, instrumentality, branch, department, authority, board, court,
arbitral or other tribunal exercising executive, judicial, legislative, police,
regulatory, administrative or taxing authority or functions of any nature
pertaining to government.

“LAS” shall mean the Nasdaq Notification Form: Listing of Additional Shares.

19

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“Law” shall mean any law, statute, rule, regulation, order, judgment or
ordinance having the effect of law of any federal, national, multinational,
state, provincial, county, city or other political subdivision.

“Material Adverse Effect” shall mean any change, event or occurrence that,
individually or in the aggregate, results in a material adverse effect on the
business, or results of operations, assets or condition of the Company and its
subsidiaries taken as a whole, provided, however, that no change, event,
circumstance, occurrence or development resulting from the following shall be
deemed (either alone or in combination) to constitute or shall be taken into
account in determining whether there has been a Material Adverse Effect: (A)
changes in conditions in the United States or global economy or capital or
financial markets generally, including changes in interest or exchange rates,
(B) changes in general legal, regulatory, political, economic or business
conditions or changes in generally accepted accounting principles in the United
States or interpretations thereof, (C) acts of war, sabotage or terrorism, or
any escalation or worsening of any such acts of war, sabotage or terrorism, (D)
earthquakes, hurricanes, floods or other natural disasters, (E) the announcement
of this Agreement, the Collaboration Agreement or the transactions contemplated
hereby and thereby, (F) any change in the Company’s stock price or trading
volume or any failure to meet internal projections or forecasts or published
revenue or earnings projections of industry analysts (provided that the
underlying events giving rise to any such change shall not be excluded, except
to the extent any such event is included in clause (A) through (E) of this
definition) or (G) any breach, violation or non-performance by the Investor or
any of its Affiliates under the Collaboration Agreement, provided, however, that
the events excluded in clauses (A), (B), (C) and (D) shall only be excluded to
the extent the effects of such events are not disproportionately adverse on the
Company and its subsidiaries as compared to other companies operating in the
Company’s industry.

“Person” shall mean any individual, partnership, joint venture, limited
liability company, corporation, firm, trust, association, unincorporated
organization, Governmental Authority or other entity, as well as any syndicate
or group that would be deemed to be a Person under Section 13(d)(3) of the
Exchange Act.

“Rule 144” shall mean Rule 144 promulgated under the Securities Act.

“SEC” shall mean the U.S. Securities and Exchange Commission.

“Securities Act” shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

“Stock Option Plan” shall mean the Company’s Amended and Restated Stock Option
Plan, as amended to date and as the same may be amended and/or restated from
time to time.

“Termination Date” shall mean the date that is six months following the Signing
Date.

“Third Party” shall mean any Person other than the Investor, the Company or any
Affiliate of the Investor or the Company.

“Transfer Agent” shall mean the Company’s transfer agent.

 

20

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Article 2
Purchase and Sale of Common Shares

Subject to the terms and conditions of this Agreement, at the Closing, the
Company shall issue and sell to the Investor and the Investor shall purchase
from the Company, 1,408,847 Common Shares (the “Purchased Shares”), for the
Aggregate Purchase Price.

Article 3
Closing; Deliveries.

3.1 Closing.  The closing of the purchase and sale of the Purchased Shares
hereunder (the “Closing”) shall take place remotely via the exchange of
documents and signatures at 9:00 a.m. New York City time on the Signing Date,
provided that all of the Closing Conditions (other than those conditions that by
their nature are to be satisfied at the Closing, but subject to the satisfaction
at such time of such conditions) have been satisfied or waived, or at such other
time, date, and location as the parties may agree.

3.2 Deliveries.

 

(a)

Deliveries by the Company.  At the Closing, or as soon as practicable
thereafter, the Company shall deliver, or cause to be delivered, to the Investor
the Purchased Shares, registered in the name of the Investor, and the Company
shall instruct the Transfer Agent to register such issuance at the time of such
issuance.  The Company shall also deliver at the Closing: (i) a certificate in
form and substance reasonably satisfactory to the Investor and duly executed on
behalf of the Company by an authorized executive officer of the Company,
certifying that the conditions to Closing set forth in Article 6 and Section 8.1
hereof have been fulfilled and (ii) a certificate of the secretary or assistant
secretary of the Company dated as of the Signing Date certifying (A) that
attached thereto is a true and complete copy of the Amended and Restated By-laws
of the Company as in effect at the time of the actions by the Board referred to
in clause (B) below and on the Signing Date; (B) that attached thereto is a true
and complete copy of all resolutions adopted by the Board authorizing the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby and that all such resolutions are in full force and effect
and are all the resolutions adopted in connection with the transactions
contemplated hereby and thereby as of the Signing Date; (C) that attached
thereto is a true and complete copy of the Company’s Restated Articles of
Incorporation as in effect at the time of the actions by the Board referred to
in clause (B) above and on the Signing Date; and (D) as to the incumbency and
specimen signature of any officer of the Company executing this Agreement on
behalf of the Company.

 

(b)

Deliveries by the Investor.  At the Closing, the Investor shall deliver, or
cause to be delivered, to the Company the Aggregate Purchase Price by wire
transfer of immediately available United States funds to an account designated
by the Company.  The Investor shall also deliver, or cause to be delivered, at
the Closing: (i) a certificate in form and substance reasonably satisfactory to
the Company duly executed by an authorized executive officer of the Investor
certifying that the conditions to Closing set forth in Article 7 hereof have
been fulfilled and (ii) a certificate of the secretary or assistant secretary of
the Investor dated as of the Signing Date certifying as to the incumbency and
specimen signature of any officer executing this Agreement on behalf of the
Investor.

21

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Article 4
Representations and Warranties of the Company

The Company hereby represents and warrants to the Investor that:

4.1 Organization, Good Standing and Qualification.

 

(a)

The Company has been duly continued and is validly existing as a corporation in
good standing under the Canada Business Corporations Act and is up-to-date in
all material corporate filings and has the corporate power and capacity to own,
lease and operate its properties and to conduct its business as described in the
Company SEC Documents and to enter into and perform its obligations under this
Agreement, except where the failure to be so qualified or in good standing or
have such power or authority would not, singularly or in the aggregate, have a
Material Adverse Effect.

4.2 Capitalization and Voting Rights.

 

(a)

As of the Signing Date, the authorized capital of the Company consists of:
(i) an unlimited number of Common Shares, of which (A) 25,880,178 shares are
issued and outstanding, (B) 2,964,029 shares are issuable upon the exercise of
outstanding stock options or upon the settlement of outstanding equity awards
issued pursuant to the 2014 Equity Incentive Plan, (C) 51,507 shares are
reserved for future issuance pursuant to the 2014 Equity Incentive Plan, (D)
155,250 shares are issuable upon the exercise of outstanding stock options or
upon the settlement of outstanding equity awards issued pursuant to the 2019
Inducement Equity Incentive Plan, (E) 244,750 shares are reserved for future
issuance pursuant to the 2019 Inducement Equity Incentive Plan, (F) 532,874
shares are issuable upon the exercise of outstanding stock options or upon the
settlement of outstanding equity awards issued pursuant to the Stock Option
Plan, (G) no shares are reserved for future issuance pursuant to the Stock
Option Plan and (H) 40,000 shares are issuable upon the exercise of outstanding
warrants to purchase Common Shares and (ii) an unlimited number of preferred
shares, no par value per share (the “Preferred Shares”), of which 1,016,000
Series 1 preferred shares are issued and outstanding. All of the issued and
outstanding Common Shares and Preferred Shares have been duly authorized and
validly issued and are fully paid and non-assessable, were issued in compliance
with applicable securities Laws.  None of the outstanding Common Shares and
Preferred Shares were issued in violation of any preemptive rights, rights of
first refusal or other similar rights to subscribe for or purchase securities of
the Company.

 

(b)

There are no authorized or outstanding options, warrants, preemptive rights,
rights of first refusal or other rights to purchase, or equity or debt
securities convertible into or exchangeable or exercisable for, any share
capital of the Company other than those described in the Company SEC
Documents.  

 

(c)

Except as disclosed in the Company SEC Documents, no Person has any right to
cause the Company to effect the registration under the Securities Act of any
securities of the Company, except for such rights as have been duly waived or
expired.

 

(d)

The Common Shares are registered pursuant to Section 12(b) or 12(g) of the
Exchange Act, and the Company has taken no action designed to, or which to its
knowledge is likely to have the effect of, terminating the registration of the
Common Shares under the Exchange Act nor has the Company received any
notification that the SEC is contemplating terminating such registration.

22

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4.3 Subsidiaries.  Except as otherwise disclosed in the Company SEC Documents,
the Company does not own or control, directly or indirectly, any corporation,
association or other entity.

4.4 Authorization.

 

(a)

This Agreement and the Collaboration Agreement have been duly authorized,
executed and delivered by the Company and, upon the due execution and delivery
of this Agreement and the Collaboration Agreement by the Investor, will
constitute valid and legally binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights generally
or by equitable principles relating to enforceability.

 

(b)

No stop order or suspension of trading of the Common Shares has been imposed or
to the Company’s knowledge, threatened by the Nasdaq Stock Market, the SEC or
any other Governmental Authority and remains in effect.

4.5 No Defaults.  The Company is not (i) in violation of its Articles of
Incorporation or By-laws or similar organizational documents; (ii) in default
(nor, with the giving of notice or lapse of time, would it be in default) under
any indenture, loan, credit agreement, note, lease, license agreement, contract,
franchise or other instrument (including, without limitation, any pledge
agreement, security agreement, mortgage or other instrument or agreement
evidencing, guaranteeing, securing or relating to indebtedness) to which the
Company is a party or by which it may be bound, or to which any of its
properties or assets are subject (an “Existing Instrument”); or (iii) in
violation of any law or statute or any judgment, order, rule or regulation of
any court or arbitrator or governmental or regulatory authority having
jurisdiction over the Company or any of its subsidiaries, except, in the case of
clauses (ii) and (iii) above, for any such default or violation that would not,
individually or in the aggregate, have a Material Adverse Effect.

4.6 No Conflicts.  The execution, delivery and performance of this Agreement and
the Collaboration Agreement, the issuance and sale of the Purchased Shares and
the consummation of the transactions contemplated by this Agreement and the
Collaboration Agreement (i) have been duly authorized by all necessary corporate
action and will not result in any violation of the provisions of the articles of
continuance or by-laws of the Company, (ii) will not conflict with or constitute
a breach of, or Default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company pursuant
to, or require the consent of any other party to, any Existing Instrument and
(iii) will not result in any violation of any law, administrative regulation or
administrative or court decree applicable to the Company, except, in the case of
clauses (ii) and (iii) above, for any such conflict, breach, violation or
default that would not, individually or in the aggregate, have a Material
Adverse Effect.

4.7 No Governmental Authority or Third Party Consents.  No consent, approval,
authorization or other order of, or registration or filing with, any court or
other governmental or regulatory authority or agency is required for the
execution, delivery and performance by the Company of each of this Agreement or
the Collaboration Agreement or the issuance and sale of the Purchased Shares,
except (i) such filings as may be required to be made with the SEC, with any
state blue sky or securities regulatory authority or any Canadian securities
regulatory authority, which filings shall be made in a timely manner in
accordance with all applicable Laws, and (ii) with respect to the Purchased
Shares, the filing with the Nasdaq Stock Market of, and the absence of
unresolved issues with respect to, an LAS and, if required, a Nasdaq Shares
Outstanding Change Form.

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4.8 Valid Issuance of Shares.  The Purchased Shares have been duly authorized
for issuance and sale pursuant to this Agreement and, when issued and delivered
by the Company against payment therefor at Closing, will be validly issued,
fully paid and non-assessable, and the issuance and sale of the Purchased Shares
is not subject to any preemptive rights, rights of first refusal or other
similar rights to subscribe for or purchase the Shares.

4.9 Litigation.  There is no action, suit, proceeding, inquiry or investigation
brought by or before any governmental entity now pending or, to the knowledge of
the Company, threatened, against or affecting the Company, would reasonably be
expected to have a Material Adverse Effect.  No material labor dispute with the
employees of the Company, or with the employees of any principal supplier,
manufacturer, customer or contractor of the Company, exists or, to the knowledge
of the Company, is threatened or imminent.

4.10 Licenses and Other Rights; Compliance with Laws.  The Company possesses
such valid and current certificates, authorizations or permits required by
state, federal, provincial or foreign regulatory agencies or bodies to conduct
its business as currently conducted and as described in the Company SEC
Documents (“Permits”), except where the failure to so possess could not
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect.  The Company is not in violation of, or in default under, any of
the Permits, except for such violations or defaults as could not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect,
and has not received any notice of proceedings relating to the revocation or
modification of, or non-compliance with, any such certificate, authorization or
permit, which, individually or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would reasonably be expected to,
individually or in the aggregate, result in a Material Adverse Effect.

4.11 Company SEC Documents; Financial Statements; Nasdaq Stock Market.

 

(a)

As of their respective filing dates each of the Company SEC Documents complied
in all material respects with the requirements of the Securities Act, the
Exchange Act, and the rules and regulations of the SEC promulgated thereunder
applicable to such Company SEC Documents, and no Company SEC Documents when
filed, declared effective or mailed, as applicable, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.  As of the Signing
Date, there are no outstanding or unresolved comments in comment letters
received from the SEC or its staff.

 

(b)

The financial statements of the Company included in its Annual Report on Form
10-K for the most recently completed fiscal year and in each of its quarterly
reports on Form 10-Q for the quarterly periods ended March 31, June 30, and
September 30 of the current fiscal year filed with the SEC as of the date of
this Agreement present fairly the financial position of the Company and its
consolidated subsidiaries as of the dates indicated and the results of their
operations and the changes in their cash flows for the periods specified; such
financial statements have been prepared in conformity with GAAP applied on a
consistent basis throughout the periods covered thereby, except as otherwise
disclosed therein and, in the case of unaudited, interim financial statements,
subject to normal year-end audit adjustments and the exclusion of certain
footnotes, and any supporting schedules included in the Company SEC Documents
present fairly the information required to be stated therein.

24

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(c)

The Common Shares are listed on the Nasdaq Stock Market, and the Company has
taken no action designed to, or which is likely to have the effect of,
terminating the registration of the Common Shares under the Exchange Act or
delisting the Common Shares from the Nasdaq Stock Market.  The Company has not
received any notification that, and has no knowledge that, the SEC or the Nasdaq
Stock Market is contemplating terminating such listing or registration.

 

(d)

Since the end of the Company’s most recent audited fiscal year, there have been
no significant deficiencies or material weakness in the Company’s internal
control over financial reporting (whether or not remediated) and no change in
the Company’s internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting. The Company is not aware of any change in its
internal control over financial reporting that has occurred during its most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting.

 

(e)

The Company maintains disclosure controls and procedures (as defined in Rule
13a-15(e) of the Exchange Act) that (i) are designed to ensure that material
information relating to the Company, is made known to the Company’s principal
executive officer and its principal financial officer by others within those
entities, particularly during the periods in which the periodic reports required
under the 1934 Act are being prepared; (ii) have been evaluated by management of
the Company for effectiveness as of the end of the Company’s most recent fiscal
quarter; and (iii) are effective in all material respects at the reasonable
assurance level to perform the functions for which they were established  The
Company has conducted evaluations of the effectiveness of its disclosure
controls as required by Rule 13a-15 of the Exchange Act.

 

(f)

There is and has been no material failure on the part of the Company or, to the
knowledge of the Company, any of the Company’s directors or officers, in their
capacities as such, to comply with any applicable provision of the
Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in
connection therewith, including Section 402 related to loans and Sections 302
and 906 related to certifications.

4.12 Absence of Certain Changes.  Since September 30, 2019, (i) there has not
occurred any event that has caused or would reasonably be expected to cause a
Material Adverse Effect on the Company and its subsidiaries, taken as a whole;
(ii) other than as described in the Company SEC Documents, the Company has not
entered into any transactions not in the ordinary course of business that are
material, individually or in the aggregate, to the Company; and (iii) other than
as described in the Company SEC Documents, there has not been any material
decrease in the share capital or any material increase in any short-term or
long-term indebtedness of the Company and there has been no dividend or
distribution of any kind declared, paid or made by the Company or any repurchase
or redemption by the Company of any class of share capital.

4.13 Offering.  Subject to the accuracy of the Investor’s representations set
forth in Sections 5.5, 5.6, 5.7, 5.9, 5.10 and 5.11 hereof, the offer, sale and
issuance of the Purchased Shares to be issued in conformity with the terms of
this Agreement constitute transactions which are exempt from the registration
requirements of the Securities Act and from all applicable state registration or
qualification requirements.  Neither the Company nor any Person acting on its
behalf will take any action that would cause the loss of such exemption.

25

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4.14 No Integration.  The Company has not, directly or through any agent, sold,
offered for sale, solicited offers to buy or otherwise negotiated in respect of,
any security (as defined in the Securities Act), that is or will be integrated
with the sale of the Purchased Shares in a manner that would require
registration of the Purchased Shares under the Securities Act.

4.15 Brokers’ or Finders’ Fees.  There is no broker, finder or other party that
is entitled to receive from the Company any brokerage or finder’s fee or other
fee or commission as a result of any transactions contemplated by this Agreement
or the Collaboration Agreement.

4.16 Investment Company.  The Company is not and, immediately after giving
effect to the offering and sale of the Purchased Shares and the application of
the proceeds thereof, will not be required to register as an “investment
company” under the Investment Company Act of 1940, as amended, and the rules and
regulations of the SEC thereunder.

4.17 No General Solicitation.  Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Purchased Shares by any
form of general solicitation or general advertising.  The Company has offered
the Purchased Shares for sale only to the Investor.

4.18 Foreign Corrupt Practices.  Neither the Company nor, to the knowledge of
the Company, any agent or other person acting on behalf of the Company has, in
the course of its actions for, or on behalf of, the Company: (i) directly or
indirectly used any funds for unlawful contributions, gifts, entertainment or
other unlawful expenses related to political activity, (ii) made any direct or
indirect unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or campaigns from
corporate funds, (iii) made any unlawful bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any domestic government official,
such foreign official or employee or (iv) violated in any material respect any
provision of the Foreign Corrupt Practices Act of 1977, as amended, or any
applicable non-U.S. anti-bribery Law.

4.19 Regulation M Compliance.  The Company has not taken, directly or
indirectly, any action designed to or that would reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common Shares to
facilitate the sale or resale of the Purchased Shares.

4.20 Office of Foreign Assets Control.  Neither the Company nor, to the
Company’s knowledge, any director, officer, agent, employee or Affiliate of the
Company is currently subject to any U.S. sanctions administered by the Office of
Foreign Assets Control of the U.S. Treasury Department.

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4.21 Development Matters.

 

(a)

The studies, tests and preclinical or clinical trials conducted by or on behalf
of the Company that are described in the Company SEC Documents (the “Company
Studies and Trials”) were and, if still pending, are, to the Company’s
knowledge, being conducted in all material respects in accordance with
experimental protocols, procedures and controls designed and approved for such
Company Studies and Trials; the descriptions of the results of the Company
Studies and Trials contained in the Company SEC Documents are, to the Company’s
knowledge, accurate in all material respects; the Company has no knowledge of
any other studies or trials not described in the Company SEC Documents, the
results of which are inconsistent with or call in question the results described
or referred to in the Company SEC Documents; the Company has made all such
filings and obtained all such approvals as may be required by the United States
Food and Drug Administration (the “FDA”) or any committee thereof and from any
foreign, state or local governmental authority exercising comparable authority,
or health care facility Institutional Review Board, except as could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect; and the Company has not received any notices or correspondence
from the FDA or any foreign, state or local governmental authority exercising
comparable authority requiring the termination, suspension or material
modification of any Company Studies and Trials that termination, suspension or
material modification would reasonably be expected to have a Material Adverse
Effect.

4.22 Intellectual Property.  

 

(a)

The Company owns, or has obtained valid and enforceable licenses for all
inventions, patent applications, patents, trademarks, trade names, service
names, copyrights, trade secrets and other intellectual property described in
the Company SEC Documents as being owned or licensed by them or which are
necessary in all material respects for the conduct of its business as currently
conducted or as currently proposed to be conducted (collectively, “Intellectual
Property”).  

 

(b)

To the Company’s knowledge, except as could not reasonably be expected,
singularly or in the aggregate, to have a Material Adverse Effect: (i) there are
no third parties who have rights to any Intellectual Property, except for
customary reversionary rights of third-party licensors or co-ownership rights
with respect to Intellectual Property that are disclosed in the Company SEC
Documents as being subject to a third party’s joint ownership interest or as
being licensed to the Company; and (ii) there is no infringement by third
parties of any Intellectual Property.  

 

(c)

Except as could not reasonably be expected, singularly or in the aggregate, to
have a Material Adverse Effect, there is no pending or, to the Company’s
knowledge, threatened action, suit, proceeding or claim by others: (A)
challenging the Company’s rights in or to any Intellectual Property, and the
Company is unaware of any facts which would form a reasonable basis for any such
action, suit, proceeding or claim; (B) challenging the validity, enforceability
or scope of any Intellectual Property, and the Company is unaware of any facts
which would form a reasonable basis for any such action, suit, proceeding or
claim; or (C) asserting that the Company infringes or otherwise violates, or
would, upon the commercialization of any product or service described in the
Company SEC Documents as under development, infringe or violate, any patent,
trademark, trade name, service name, copyright, trade secret or other
proprietary rights of others, and the Company is unaware of any facts which
would form a reasonable basis for any such action, suit, proceeding or claim.  

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(d)

The Company has complied in all material respects with the terms of each
agreement pursuant to which Intellectual Property has been licensed to the
Company, and all such agreements are in full force and effect as to the Company
and to the Company’s knowledge as to the other parties to such agreements.  The
product candidates described in the Company SEC Documents as under development
by the Company fall within the scope of the claims of one or more patents or
patent applications owned by, or exclusively licensed to, the Company.

4.23 Real and Personal Property.  The Company has good and marketable title in
fee simple (in the case of real property) to, or has valid and marketable rights
to lease or otherwise use, all items of real or personal property, which are
material to the business of the Company taken as a whole, in each case free and
clear of any security interests, mortgages, liens, encumbrances, equities,
adverse claims and other defects except such as do not, individually or in the
aggregate, materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company.  The
real property, improvements, equipment and personal property held under lease by
the Company are held under valid and enforceable leases, with such exceptions as
are not material and do not materially interfere with the use made or proposed
to be made of such real property, improvements, equipment or personal property
by the Company.

4.24 Environmental Matters.  Except as could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect:  (i) the
Company is not in violation of any federal, state, provincial, local or foreign
statute, law, rule, regulation, ordinance, code, policy or rule of common law or
any judicial or administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to pollution or
protection of human health, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating to the
release or threatened release of chemicals, pollutants, contaminants, wastes,
toxic substances, hazardous substances, petroleum or petroleum products
(collectively, “Hazardous Materials”) or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, “Environmental Laws”); (ii) the Company has
all permits, authorizations and approvals required under any applicable
Environmental Laws and is in compliance with their requirements; (iii) there are
no pending or, to the knowledge of the Company, threatened administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigation or proceedings relating to
any Environmental Law against the Company; and (iv) to the knowledge of the
Company, there are no events or circumstances existing as of the date hereof
that might reasonably be expected to form the basis of an order for clean-up or
remediation, or an action, suit or proceeding by any private party or
governmental body or agency, against or affecting the Company relating to
Hazardous Materials or any Environmental Laws.

4.25 Taxes.  The Company (i) has timely filed all necessary federal, state,
local and foreign tax returns (or timely filed extensions with respect to such
returns), and all such returns were true, complete and correct, (ii) has paid
all federal, state, local and foreign taxes, assessments, governmental or other
charges due and payable for which it is liable, including, without limitation,
all sales and use taxes and all taxes which the Company is obligated to withhold
from amounts owing to employees, creditors and third parties, and (iii) does not
have any tax deficiency or claims outstanding or assessed or, to its knowledge,
proposed against it, except those, in each of the cases described in clauses
(i), (ii) and (iii) above, that would not, singularly or in the aggregate,
reasonably be expected to have a Material Adverse Effect The accruals and
reserves on the books and records of the Company in respect of tax liabilities
for any taxable period not yet finally determined are adequate to meet any
assessments and related liabilities for any such period.

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4.26 Insurance.  The Company carries or is covered by, insurance in such amounts
and covering such risks as is adequate for the conduct of its business and the
value of its properties and as is customary for companies engaged in similar
businesses, at a similar stage of development, in similar industries.  The
Company has no reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business at a
cost that would not reasonably be expected to have a Material Adverse Effect.
The Company has not been denied any insurance coverage which it has sought or
for which it has applied.

Article 5
Representations and Warranties of the Investor

The Investor hereby represents and warrants to the Company that:

5.1 Organization; Good Standing.  The Investor is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware.  The Investor has all requisite corporate power and corporate
authority to enter into this Agreement, to purchase the Purchased Shares and to
perform its obligations under and to carry out the other transactions
contemplated by this Agreement.

5.2 Authorization.

 

(a)

The Investor has full right, power and authority to execute and deliver this
Agreement and the Collaboration Agreement and to perform its obligations
hereunder and thereunder; and all action required to be taken for the due and
proper authorization, execution and delivery by it of each of this Agreement and
the Collaboration Agreement and the consummation by it of the transactions
contemplated thereby has been duly and validly taken.

 

(b)

This Agreement and the Collaboration Agreement have been duly executed and
delivered by the Investor and, upon the due execution and delivery of this
Agreement and the Collaboration Agreement by the Company, will constitute valid
and legally binding obligations of the Investor, enforceable against the
Investor in accordance with their respective terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ rights generally or by equitable principles
relating to enforceability.

5.3 No Conflicts.  The execution, delivery and performance of this Agreement and
the Collaboration Agreement, the subscription for and purchase of the Purchased
Shares and the consummation of the transactions contemplated by this Agreement
and the Collaboration Agreement will not (i) conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Investor pursuant to, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Investor is a party, by which the Investor is bound or
to which any of the property or assets of the Investor is subject, (ii) result
in any violation of the provisions of the certificate of incorporation or
by-laws or similar organizational documents of the Investor or (iii) result in
the violation of any law or statute or any judgment, order, rule  or regulation
of any court or arbitrator or governmental or regulatory authority having
jurisdiction over the Investor or any of its subsidiaries, except, in the case
of clauses (i) and (iii) above, for any such conflict, breach, violation or
default that would not, individually or in the aggregate, have a material
adverse effect on the Investor’s ability to perform its obligations or
consummate the transactions contemplated hereby in accordance with the terms of
this Agreement.

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5.4 No Governmental Authority or Third Party Consents.  No consent, approval,
authorization, order, license, registration or qualification of or with any
court or arbitrator or governmental or regulatory authority is required for the
execution, delivery and performance by the Investor of each of this Agreement or
the Collaboration Agreement or with the subscription for and purchase of the
Purchased Shares.

5.5 Purchase Entirely for Own Account.  The Investor is subscribing for the
Purchased Shares as principal and acknowledges that the Purchased Shares shall
be acquired for investment for the Investor’s own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and the Investor has no present intention of selling, granting any participation
or otherwise distributing the Purchased Shares.  The Investor can bear the
economic risk of an investment in the Purchased Shares indefinitely and a total
loss with respect to such investment.  The Investor does not have and will not
have as of the Closing any contract, undertaking, agreement, arrangement or
understanding with any Person to sell, transfer or grant participation to a
Person any of the Purchased Shares.

5.6 Disclosure of Information.  The Investor has received or has had full access
to all the information from the Company and its management that the Investor
considers necessary or appropriate for deciding whether to purchase the
Purchased Shares hereunder.  The Investor further represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
Company, its financial condition, results of operations and prospects and the
terms and conditions of the offering of the Purchased Shares sufficient to
enable it to evaluate its investment.

5.7 Investment Experience and Accredited Investor Status.  The Investor is an
“accredited investor” (as defined in Regulation D under the Securities
Act).  The Investor has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the Purchased Shares to be purchased hereunder.

5.8 Acquiring Person.  As of the Signing Date, neither the Investor nor any of
its Affiliates beneficially owns, and immediately prior to the Closing, neither
the Investor nor any of its Affiliates will beneficially own (in each case, as
determined pursuant to Rule 13d-3 under the Exchange Act without regard for the
number of days in which a Person has the right to acquire such beneficial
ownership, and without regard to Investor’s rights under this Agreement), any
securities of the Company, except for securities that may be beneficially owned
by employee benefit plans of either the Investor or any of its Affiliates.

5.9 Residence. The Investor is not a resident or subject to the securities laws
of a Province or Territory of Canada and has complied with the applicable
securities legislation in the jurisdiction of its residence, in each case as
they relate to the purchase of the Purchased Shares hereunder.

5.10 No “Bad Actor” Disqualification.  The Investor has not taken any of the
actions set forth in, and is not subject to, the disqualification provisions of
Rule 506(d)(1) of the Securities Act.  The Investor’s responses in the
questionnaire delivered to the Company by the Investor related to qualification
under Rule 506(d)(1) are true and correct as of the Signing Date and will remain
true and correct as of the Closing.

5.11 Restricted Securities.  The Investor understands that the Purchased Shares,
when issued, shall be “restricted securities” under U.S. federal securities Laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such Laws the Purchased Shares may be
resold without registration under the Securities Act only in certain limited
circumstances.  The Investor represents that it is familiar with Rule 144, as
presently in effect.

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5.12 Legends.  The Investor understands that any certificates representing the
Purchased Shares shall bear the following legends:

 

(a)

“These securities have not been registered under the Securities Act of
1933.  They may not be sold, offered for sale, pledged or hypothecated in the
absence of a registration statement in effect with respect to the securities
under the Securities Act or an opinion of counsel (which counsel shall be
reasonably satisfactory to the Company) that such registration is not required
or unless sold pursuant to Rule 144 of the Securities Act.”;

 

(b)

“These securities are subject to transfer restrictions set forth in a Share
Purchase Agreement by and between Neurocrine Biosciences, Inc. and Xenon
Pharmaceuticals Inc.”; and

 

(c)

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST
NOT TRADE THE SECURITY BEFORE APRIL 3, 2020.”; and

 

(d)

any legend required by applicable state securities Laws.

5.13 Financial Assurances.  As of the Signing Date, the Investor has, and as of
the Closing, the Investor will have, access to cash in an amount sufficient to
pay to the Company the Aggregate Purchase Price.

5.14 SEC Reports.  The Investor has reviewed the Company SEC Documents.

Article 6
Investor’s Conditions to Closing

The Investor’s obligation to purchase the Purchased Shares at the Closing is
subject to the fulfillment as of the Closing of the following conditions (unless
waived in writing by the Investor):

6.1 Representations and Warranties.  The representations and warranties made by
the Company in Article 4 hereof shall be true and correct as of the Signing Date
and as of the Closing as though made on and as of the Closing, except to the
extent such representations and warranties are specifically made as of a
particular date, in which case such representations and warranties shall be true
and correct as of such date; provided, however, that for purposes of this
Section 6.1, all such representations and warranties of the Company (other than
Sections 4.1, 4.2, 4.3, 4.4, 4.5, 4.6, 4.8, and 4.11 hereof) shall be deemed to
be true and correct for purposes of this Section 6.1 unless the failure or
failures of such representations and warranties to be so true and correct,
without regard to any “material,” “materiality” or “Material Adverse Effect”
qualifiers set forth therein, constitute a Material Adverse Effect.

6.2 Covenants.  All covenants and agreements contained in this Agreement to be
performed or complied with by the Company on or prior to the Closing shall have
been performed or complied with in all material respects.

6.3 Collaboration Agreement.  The Collaboration Agreement shall not have been
terminated in accordance with its terms and shall be in full force and effect as
of the Closing.

6.4 No Material Adverse Effect.  From and after the Signing Date until the
Closing, there shall have occurred no event that has caused a Material Adverse
Effect.

6.5 Listing.  The Purchased Shares shall be eligible and approved for listing on
the Nasdaq Stock Market.

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Article 7
Company’s Conditions to Closing

The Company’s obligation to issue and sell the Purchased Shares at the Closing
is subject to the fulfillment as of the Closing of the following conditions
(unless waived in writing by the Company):

7.1 Representations and Warranties.  The representations and warranties made by
the Investor in Article 5 hereof shall be true and correct as of the Signing
Date and as of the Closing as though made on and as of the Closing, except to
the extent such representations and warranties are specifically made as of a
particular date, in which case such representations and warranties shall be true
and correct as of such date.

7.2 Covenants.  All covenants and agreements contained in this Agreement to be
performed or complied with by the Investor on or prior to the Closing shall have
been performed or complied with in all material respects.

7.3 Collaboration Agreement.  The Collaboration Agreement shall not have been
terminated in accordance with its terms and shall be in full force and effect.

Article 8
Mutual Conditions to Closing

The obligations of the Investor and the Company to consummate the Closing are
subject to the fulfillment as of the Closing of the following conditions:

8.1 Absence of Litigation.  There shall be no action, suit, proceeding or
investigation by a Governmental Authority pending or currently threatened in
writing against the Company or the Investor (i) that questions (A) the validity
of this Agreement or (B) the right of the Company or the Investor to enter into
this Agreement or to consummate the transactions contemplated hereby or thereby
or (ii) which, if determined adversely, would impose substantial monetary
damages on the Company or the Investor as a result of the consummation of the
transactions contemplated by this Agreement.

8.2 No Prohibition.  No provision of any applicable Law and no judgment,
injunction (preliminary or permanent), order or decree shall be in effect that
prohibits, makes illegal or enjoins the consummation of the transactions
contemplated hereby.

Article 9
Termination

9.1 Pre-Closing Termination.  This Agreement may be terminated at any time prior
to the Closing by:

 

(a)

mutual written consent of the Company and the Investor;

 

(b)

either the Company or the Investor, upon written notice to the other, if any of
the mutual conditions to the Closing set forth in Section 8 hereof shall have
become incapable of fulfillment by the Termination Date and such conditions
shall not have been waived in writing by the other party within ten business
days after receiving receipt of written notice of an intention to terminate
pursuant to this clause (b); provided, however, that the right to terminate this
Agreement under this Section 9.1(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure to consummate the transactions contemplated hereby
prior to the Termination Date;

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(c)

the Company, upon written notice to the Investor, so long as the Company is not
then in breach of its representations, warranties, covenants or agreements under
this Agreement such that any of the conditions set forth in Section 6.1, 6.2,
6.3, or 6.4 hereof, as applicable, could not be satisfied by the Termination
Date, (i) upon a material breach of any covenant or agreement on the part of the
Investor set forth in this Agreement, or (ii) if any representation or warranty
of the Investor shall have been or become untrue, in each case such that any of
the conditions set forth in Section 7.1, 7.2, or 7.3 hereof, as applicable,
could not be satisfied by the Termination Date;

 

(d)

the Investor, upon written notice to the Company, so long as the Investor is not
then in breach of its representations, warranties, covenants or agreements under
this Agreement such that any of the conditions set forth in Section 7.1, 7.2, or
7.3 hereof, as applicable, could not be satisfied by the Termination Date, (i)
upon a material breach of any covenant or agreement on the part of the Company
set forth in this Agreement, or (ii) if any representation or warranty of the
Company shall have been or become untrue, in each case such that any of the
conditions set forth in Section 6.1, 6.2, 6.3, or 6.4 hereof, as applicable,
could not be satisfied by the Termination Date.

9.2 Effect of Pre-Closing Termination.  In the event of the termination of this
Agreement pursuant to Section 9.1 hereof, (i) this Agreement (except for this
Section 9.2 and Article 11 hereof (other than Section 11.12), and any
definitions set forth in this Agreement and used in such sections) shall
forthwith become void and have no effect, without any liability on the part of
any party hereto or its Affiliates, and (ii) all filings, applications and other
submissions made pursuant to this Agreement, to the extent practicable, shall be
withdrawn from the agency or other Person to which they were made or
appropriately amended to reflect the termination of the transactions
contemplated hereby; provided, however, that nothing contained in this Section
9.2 shall relieve any party from liability for fraud or any intentional or
willful breach of this Agreement.

Article 10
Additional Covenants and Agreements

10.1 Market Listing.  From the Signing Date through the Closing, Company shall
use all commercially reasonable efforts to (i) maintain the listing and trading
of the Common Shares on the Nasdaq Stock Market and (ii) effect the listing of
the Purchased Shares on the Nasdaq Stock Market, including submitting the LAS to
the Nasdaq Stock Market.

10.2 Assistance and Cooperation.  Prior to the Closing, upon the terms and
subject to the conditions set forth in this Agreement, each of the parties
agrees to use all reasonable efforts to take, or cause to be taken, all actions
and to do, or cause to be done, and to assist and cooperate with the other party
in doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including using all reasonable efforts to
accomplish the following: (i) taking all reasonable acts necessary to cause the
conditions precedent set forth in Article 6, Article 7 and Article 8 hereof to
be satisfied (including, in the case of the Company, promptly notifying the
Investor of any notice from the Nasdaq Stock Market with respect to the LAS);
(ii) taking all reasonable actions necessary to obtain all necessary actions or
non-actions, waivers, consents, approvals, orders and authorizations from
Governmental Authorities and the making of all necessary registrations,
declarations and filings (including registrations, declarations and filings with
Governmental Authorities, if any); (iii) taking all reasonable actions necessary
to obtain all necessary consents, approvals or waivers from Third Parties; and
(iv) defending any suits, claims, actions, investigations or proceedings,
whether judicial or administrative, challenging this Agreement or the
consummation of the transactions contemplated hereby, including seeking to have
any stay or temporary restraining order entered by any court or other
Governmental Authority vacated or reversed.

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10.3 Lock-Up Agreement. During the period commencing with the Effective Date and
ending on the earlier of (i) the twenty-four (24) month anniversary of the
Effective Date and (ii) the date on which the Company first publicly announces
the results of a Phase 2 Clinical Trial for a XEN901 Product (each as defined in
the Collaboration Agreement) (the “Lock-Up Period”), without the prior approval
of the Company, the Investor shall not (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant for the sale or, or otherwise
dispose of or transfer any of the Purchased Shares (together with (a) any shares
of Common Stock issued in respect thereof as a result of any stock split, stock
dividend, share exchange, merger, consolidation, or similar recapitalization and
(b) any shares of Common Stock issued as (or issuable upon the exercise of any
warrant or other securities that is issued as) a dividend or other distribution
with respect to, or in exchange or in replacement of, the Purchased Shares (the
“Lock-Up Securities”)), including, without limitation, any “short sale” or
similar arrangement, or (ii) enter into any swap or any other agreement or any
transaction that transfer, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Purchased Shares, whether any such swap
or transaction is to be settled by deliver of securities, in cash or otherwise;
provided, however, that the foregoing shall not (A) prohibit the Investor or its
Affiliates from transferring Lock-Up Securities to an Affiliate of the Issuer if
such transferee Affiliate executes an agreement with the Company to be bound by
the restrictions set forth in this Section 10.3 and Section 10.4; (B) prohibit
the Investor or its Affiliates from selling or otherwise disposing of or
transferring Lock-Up Securities into a tender offer by a Third Party or an
issuer tender offer by the Company; and (C) restrict any sale or other disposal
or transfer of Common Shares which are not Lock-Up Securities held by an
executive officer or director of the Investor for his or her personal account,
or that may occur (or be deemed to occur) in connection with a Change of Control
of the Investor (replacing references to “Company” with “Investor” in the
definition of “Change of Control”). Transfers, sales and other disposals
referred to in clauses (A) through (C) above are referred to herein as “Excluded
Transfers”.

10.4 Sale Volume Limitation.  Following the expiration of the Lock-Up Period,
without the prior approval of the Company, Investor shall not offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant for the sale or,
or otherwise dispose of or transfer during any calendar month greater than
twelve and one-half percent (12.5%) of the aggregate number of Lock-Up
Securities held by Investor or its Affiliates as of the last day of the Lock-Up
Period; provided, however, that the foregoing shall not prohibit or restrict any
Excluded Transfers.

10.5 Standstill.  Without the prior approval of the Company, from the Effective
Date until the twenty-four (24) month anniversary of the Effective Date, the
Investor agrees that it will not, and will cause its Affiliates to not, directly
or indirectly:

 

(a)

purchase, offer to purchase, or agree to purchase or otherwise acquire
beneficial ownership (as determined in accordance with Rule 13d-3 and Rule 13d-5
under the Exchange Act) of any Common Stock, or any securities convertible or
exchangeable into Common Stock, excluding any shares of Common Stock acquired
pursuant to the transactions contemplated in the Collaboration Agreement;

 

(b)

make, or participate in, any solicitation of proxies to vote any voting
securities of the Company or any of its subsidiaries, or propose to change or
control the management or board of directors of the Company by use of any public
communication to holders of securities intended for such purpose; provided,
however, that nothing in this Section 10.5 shall limit the Investor’s ability to
vote or transfer (subject to Sections 10.3 and 10.4 hereof) its Common Stock;

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(c)

make a public proposal for a Change of Control, including a merger,
consolidation or other business combination transaction or tender offer related
thereto, or the purchase of all or substantially all of the assets of the
Company and its subsidiaries; or

 

(d)

knowingly encourage, accept, or support a tender, exchange, or offer proposal by
any Person other than the Investor, the consummation of which would result in a
Change of Control.

Notwithstanding anything to the contrary contained in this Agreement, (i) if at
any time (A) a Third Party enters into an agreement with the Company
contemplating a Change of Control, including a merger, consolidation or other
business combination transaction or tender offer related thereto, or the
purchase of all or substantially all of the assets of the Company and its
subsidiaries, or publicly announces its intention to do so, then the foregoing
restrictions set forth in this Section 10.5 shall be suspended and of no further
force or effect until the termination of such agreement or the public
announcement of a withdrawal or abandonment of such intention, at which time
such restrictions will be reinstated and apply in full force and effect or (B) a
Third Party commences, or publicly announces an intention to commence, a tender,
exchange, or offer that, if consummated, would result in a Change of Control,
then the foregoing restrictions set forth in this Section 10.5 shall be
suspended and of no force or effect until the expiration or termination of a
tender, exchange or offer that has been commenced or the public announcement of
a withdrawal or abandonment of an intention to commence a tender, exchange or
offer at which time such restrictions will be reinstated and apply in full force
and effect; (ii) the Investor shall not be precluded from making any
confidential offers or proposals to the Board in a manner reasonably believed
not to require the Company to make a public announcement of such offer or
proposal; provided that Investor shall not publicly disclose any such offers or
proposals; and (iii) Investor and its Affiliates shall not be precluded from
owning or acquiring interests in mutual funds or similar entities that own
capital stock of the Company, and nothing herein shall prohibit passive
investments by pension or employee benefit plans of Investor.

 

10.6 Legend Removal.

 

(a)

Certificates evidencing the Purchased Shares shall not contain the legend set
forth in 5.11(a) hereof: (i) following a sale of such Purchased Shares pursuant
to a registration statement covering the resale of such Purchased Shares, while
such registration statement is effective under the Securities Act, (ii)
following any sale of such Purchased Shares pursuant to Rule 144, (iii) if such
Purchased Shares are eligible for sale under Rule 144, without the requirement
for the Company to be in compliance with the current public information required
under Rule 144 as to such Purchased Shares and without volume or manner-of-sale
restrictions under Rule 144 or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the SEC).

 

(b)

The Company agrees that at such time as any legend set forth in Section 5.11
hereof is no longer required under this Section 10.6, the Company will, no later
than three (3) Business Days following the delivery by the Investor to the
Company or notice by the Investor to the Company of delivery by the Investor to
the Transfer Agent of a certificate representing Purchased Shares issued with
such legend (together with any legal opinion required by the Transfer Agent),
deliver or cause to be delivered to the Investor a certificate representing such
Purchased Shares that is free from such legend, or, in the event that such
shares are uncertificated, remove any such legend in the Company’s share
records.  The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer set
forth in Section 5.11 hereof.

35

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Article 11
Miscellaneous

11.1 Governing Law; Dispute Resolution.  This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York, without regard
to the conflict of laws principles thereof that would require the application of
the Law of any other jurisdiction.  Any disputes as to matters arising out of or
in connection with this Agreement will be subject to the procedures set forth in
Section 14.7 of the Collaboration Agreement.

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

11.3 Notices.  All notices which are required or permitted hereunder shall be
provided in accordance with Section 14.5 of the Collaboration Agreement.

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

11.5 Headings; Pronouns; Section References; English Language.  Headings and any
table of contents used in this Agreement are for convenience only and shall not
in any way affect the construction of or be taken into consideration in
interpreting this Agreement.  Whenever the context may require, any pronouns
used herein shall include the corresponding masculine, feminine or neuter forms,
and the singular form of names and pronouns shall include the plural and
vice-versa.  References in this Agreement to a section or subsection shall be
deemed to refer to a section or subsection of this Agreement unless otherwise
expressly stated.  This Agreement has been prepared in the English language, and
the English language shall control its interpretation.

11.6 Severability.  If, under applicable Laws, any provision hereof is invalid
or unenforceable, or otherwise directly or indirectly affects the validity of
any other material provision(s) of this Agreement in any jurisdiction (“Modified
Clause”), then, it is mutually agreed that this Agreement shall endure and that
the Modified Clause shall be enforced in such jurisdiction to the maximum extent
permitted under applicable Laws in such jurisdiction; provided that the parties
shall consult and use all reasonable efforts to agree upon, and hereby consent
to, any valid and enforceable modification of this Agreement as may be necessary
to avoid any unjust enrichment of either party and to match the intent of this
Agreement as closely as possible, including the economic benefits and rights
contemplated herein.

11.7 Assignment.  Except for an assignment of this Agreement or any rights
hereunder by the Investor to an Affiliate, neither this Agreement nor any of the
rights or obligations hereunder may be assigned by either the Investor or the
Company without (i) the prior written consent of Company in the case of any
assignment by the Investor or (ii) the prior written consent of the Investor in
the case of an assignment by the Company.

36

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

 

11.8 Parties in Interest.  All of the terms and provisions of this Agreement
shall be binding upon, and shall inure to the benefit of and be enforceable by
the parties hereto and their respective successors, heirs, administrators and
permitted assigns.

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

11.10 Third Party Beneficiaries.  None of the provisions of this Agreement shall
be for the benefit of or enforceable by any Third Party, including any creditor
of any party hereto.  No Third Party shall obtain any right under any provision
of this Agreement or shall by reason of any such provision make any claim in
respect of any debt, liability or obligation (or otherwise) against any party
hereto.

11.11 No Strict Construction.  This Agreement has been prepared jointly and will
not be construed against either party.

11.12 Survival of Warranties.  The representations and warranties of the Company
and the Investor contained in this Agreement shall survive the Closing and the
delivery of the Purchased Shares.

11.13 Remedies.  The rights, powers and remedies of the parties under this
Agreement are cumulative and not exclusive of any other right, power or remedy
which such parties may have under any other agreement or Law.  No single or
partial assertion or exercise of any right, power or remedy of a party hereunder
shall preclude any other or further assertion or exercise thereof.

11.14 Expenses.  Each party shall pay its own fees and expenses in connection
with the preparation, negotiation, execution and delivery of this Agreement.

11.15 No Publicity.  The parties hereto agree that the provisions of
Section 12.5 of the Collaboration Agreement shall be applicable to the parties
to this Agreement with respect to any public disclosures regarding the proposed
transactions contemplated by this Agreement or regarding the parties hereto or
their Affiliates (it being understood that the provisions of Section 12.5 of the
Collaboration Agreement shall be read to apply to disclosures of information
relating to this Agreement and the transactions contemplated hereby).

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

37

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IN WITNESS WHEREOF, the parties intending to be bound have caused this Share
Purchase Agreement to be executed by their duly authorized representatives as of
the Signing Date.

 

 

Xenon Pharmaceuticals Inc.

 

By:

 

Name:

 

Title:

 

 

 

Neurocrine Biosciences, Inc.

 

By:

 

Name:

 

Title:

 

 

 

38

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

 

Exhibit Q

Third Party Agreements

 

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

 

 

39

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

 

Exhibit R

Abstracts submitted prior to Effective Date

 

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

[†]

 

 

40

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

 

Exhibit S

Press Release

[gcta0gmba3ia000001.jpg]

 

[gcta0gmba3ia000002.jpg]

 

Neurocrine Biosciences and Xenon Pharmaceuticals Announce Agreement to Develop
First-in-Class Treatments for Epilepsy

 

Neurocrine Biosciences Gains Rights to XEN901, a Clinical Stage Selective Nav1.6
Sodium Channel Inhibitor, Being Developed for the Treatment of Epilepsy

 

Xenon Receives $50 Million Upfront and Up to $1.7 Billion in Potential
Development, Regulatory and Commercial Milestone Payments Across All Licensed
Products, as well as Option to Co-Fund XEN901

 

 

SAN DIEGO and BURNABY, British Columbia, Dec. 2, 2019 – Neurocrine Biosciences,
Inc. (Nasdaq: NBIX) and Xenon Pharmaceuticals Inc. (Nasdaq: XENE) announced a
license and collaboration agreement to develop first-in-class treatments for
epilepsy.

 

Neurocrine Biosciences gains an exclusive license to XEN901, a clinical stage
selective Nav1.6 sodium channel inhibitor with potential in SCN8A developmental
and epileptic encephalopathy (SCN8A-DEE) and other forms of epilepsy, including
focal epilepsy. In addition, Neurocrine Biosciences gains an exclusive license
to pre-clinical compounds for development, including selective Nav1.6 inhibitors
and dual Nav1.2/1.6 inhibitors. The agreement also includes a multi-year
research collaboration to discover, identify and develop additional novel Nav1.6
and Nav1.2/1.6 inhibitors.

 

“We are excited to enter into this agreement with Xenon and leverage their
expertise in precision medicine drug discovery to benefit the lives of people
with epilepsy and serious neurological disorders,” said Kevin Gorman, Ph.D.,
Chief Executive Officer of Neurocrine Biosciences. “The agreement with Xenon
strengthens Neurocrine Biosciences’ diverse and growing pipeline and reinforces
our long-term commitment of becoming a leading neuroscience-focused
biopharmaceutical company.”

 

“With its proven expertise in developing and commercializing treatments for
neurological disorders, we believe Neurocrine Biosciences is an ideal partner to
maximize the potential value of XEN901 for patients,” said Dr. Simon Pimstone,
Chief Executive Officer of Xenon. “Importantly, this collaboration represents a
significant investment in XEN901 and Xenon’s earlier-stage Nav1.6 and Nav1.2/1.6
inhibitor programs and allows for a broader development of these promising
compounds than we could accomplish independently. Furthermore, the additional
capital from this transaction will support our efforts to advance and expand our
proprietary pipeline.”

 

41

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

 

License and Collaboration Details / Financial Terms

Under the terms of the agreement, Neurocrine Biosciences will be responsible for
development costs associated with the programs and the agreement will be subject
to the following terms:

 

•

Upfront License Payment: Xenon will receive $50 million, including a $30 million
upfront payment in cash and a $20 million equity investment by Neurocrine
Biosciences at a Xenon per share price of $14.196.

 

•

XEN901 Investigational New Drug (IND) Milestone: Xenon will receive up to $25
million upon the U.S. Food and Drug Administration (FDA) acceptance of an IND
for XEN901, with 55% of the amount in the form of an equity investment in Xenon
at a 15% premium to Xenon’s 30-day trailing volume weighted average price at
that time.

 

•

Collaboration Milestones: Xenon may also be entitled to receive up to
approximately $1.7 billion in additional development, regulatory and commercial
milestone payments related to XEN901 and other licensed Nav1.6 or Nav1.2/1.6
inhibitor products.

 

•

XEN901 Royalties: Xenon will have the right to receive a tiered royalty ranging
from the low double-digits to mid-teen percentage in the U.S. and a tiered
royalty at slightly lower rates outside the U.S. based upon aggregate global net
sales.  

 

•

Other Product Royalties: Xenon will have the right to receive a tiered royalty
for other Nav1.6 and Nav1.2/1.6 inhibitor products ranging from the mid-single
to low double-digits in the U.S. and a tiered royalty at slightly lower rates
outside the U.S. based upon aggregate global net sales.

 

•

Xenon Co-Fund Option: Xenon retains an option to co-fund 50% of the U.S.
development costs of XEN901 or another product candidate in exchange for
increased U.S. royalties, reaching 20% of U.S. net sales at the highest royalty
tier for XEN901.  

 

•

Funded Collaboration: Neurocrine Biosciences will fund all clinical developments
costs associated with the development of product candidates under the
collaboration (subject to Xenon’s Co-Fund Option) and will also fund a research
collaboration up to 3 years with a minimum of 10 FTEs (full time equivalents) at
Xenon. Xenon will be responsible for certain pre-clinical and a portion of
certain near term manufacturing costs under the collaboration.

 

Neurocrine Biosciences anticipates filing an IND application with the FDA in the
middle of 2020 in order to start a proposed clinical trial for XEN901 in
SCN8A-DEE patients.

 

Conference Call Information

Neurocrine Biosciences will provide further commentary on the collaboration
during its presentation at the Evercore ISI 2nd Annual HealthCONx Conference at
8:45 a.m. EST on Tuesday, December 3, 2019.

 

Today, Xenon will host a conference call at 8:30 a.m. EST to provide commentary
on the collaboration. To access the call, please dial (855) 779-9075, or (631)
485-4866 for international callers, and provide conference ID number 3665957.

 

Live audio webcasts of these presentations will be available under “Investors”
on the companies’ respective websites at: www.neurocrine.com and
www.xenon-pharma.com. A replay of the webcast will be available for each
presentation approximately one hour after the conclusion of each event and will
be archived for approximately one month.

 

42

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

 

About XEN901 Program for Epilepsy

XEN901 is a potent, highly selective Nav1.6 sodium channel inhibitor being
developed to treat pediatric patients with SCN8A developmental and epileptic
encephalopathy (SCN8A-DEE) and other potential indications, including adult
focal epilepsy. A Phase 1 clinical trial was completed using a powder-in-capsule
formulation of XEN901 in healthy adult subjects.  Xenon has developed a
pediatric-specific, granule formulation of XEN901, and juvenile toxicology
studies to support pediatric development activities have recently been
completed.

 

About Neurocrine Biosciences

Neurocrine Biosciences (Nasdaq: NBIX) is a neuroscience-focused,
biopharmaceutical company with more than 25 years of experience discovering and
developing life-changing treatments for people with serious, challenging and
under-addressed neurological, endocrine and psychiatric disorders. The company's
diverse portfolio includes FDA-approved treatments for tardive dyskinesia and
endometriosis* and clinical development programs in multiple therapeutic areas
including Parkinson's disease, chorea in Huntington disease, congenital adrenal
hyperplasia, uterine fibroids* and polycystic ovary syndrome*. Headquartered in
San Diego, Neurocrine Biosciences specializes in targeting and interrupting
disease-causing mechanisms involving the interconnected pathways of the nervous
and endocrine systems. For more information, visit neurocrine.com, and
follow the company on LinkedIn. (*in collaboration with AbbVie)

 

About Xenon Pharmaceuticals Inc.

Xenon Pharmaceuticals (Nasdaq: XENE) is a clinical stage biopharmaceutical
company committed to developing innovative therapeutics to improve the lives of
patients with neurological disorders, including rare central nervous system
(CNS) conditions. We are advancing a novel product pipeline of neurology
therapies to address areas of high unmet medical need, with a focus on epilepsy.
For more information, please visit www.xenon-pharma.com.

 

Neurocrine Biosciences Forward-Looking Statements

In addition to historical facts, this press release contains forward-looking
statements that involve a number of risks and uncertainties. These statements
include, but are not limited to, statements related to the benefits to be
derived from transactions with Xenon Pharmaceuticals Inc. and the timing of
completion of our clinical, regulatory, and other development activities. Among
the factors that could cause actual results to differ materially from those
indicated in the forward-looking statements are: the Company’s future financial
and operating performance; risks or uncertainties related to the development of
the Company's product candidates; risks that the FDA or other regulatory
authorities may make adverse decisions regarding our product candidates; risks
that clinical development activities may not be completed on time or at all;
risks that clinical development activities may be delayed for regulatory,
manufacturing, or other reasons, may not be successful or replicate previous
clinical trial results, may fail to demonstrate that our product candidates are
safe and effective, or may not be predictive of real-world results or of results
in subsequent clinical trials; risks and uncertainties relating to competitive
products and technological changes that may limit demand for a product
candidate; risks that the benefits of the agreements with Xenon Pharmaceuticals
Inc. may never be realized; risks that our product candidates may be precluded
from commercialization by the proprietary or regulatory rights of third parties,
or have unintended side effects, adverse reactions or incidents of misuse; and
other risks described in the Company's periodic reports filed with the
Securities and Exchange Commission, including without limitation the Company's
quarterly report on Form 10-Q for the quarter ended September 30, 2019.
Neurocrine disclaims any obligation to update the statements contained in this
press release after the date hereof.

 

43

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Xenon Pharmaceuticals Forward-Looking Statements

This press release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995
and Canadian securities laws. These forward-looking statements and supporting
assumptions are not based on historical fact, and include statements regarding
the timing of and results from clinical trials and other development activities,
including those related to XEN901 and the other pre-clinical compounds covered
by our collaboration with Neurocrine Biosciences; the potential efficacy, safety
profile, future development plans, addressable market, regulatory success and
commercial potential of XEN901 and the other pre-clinical compounds covered by
our collaboration with Neurocrine Biosciences; the anticipated timing of IND, or
IND equivalent, submissions and the initiation of future clinical trials for
XEN901 and the other pre-clinical compounds covered by our collaboration with
Neurocrine Biosciences; our ability to achieve milestones in our collaboration
with Neurocrine Biosciences and our other development programs; the progress and
potential of our other ongoing development programs; and the potential receipt
of milestone payments and royalties from our collaborators and partners. These
forward-looking statements are based on current assumptions that involve risks,
uncertainties and other factors that may cause the actual results, events or
developments to be materially different from those expressed or implied by such
forward-looking statements. These risks and uncertainties, many of which are
beyond our control, include, but are not limited to: clinical trials may not
demonstrate safety and efficacy of any of our or our collaborators' product
candidates; our assumptions regarding our planned expenditures and sufficiency
of our cash to fund operations may be incorrect; our ongoing discovery and
pre-clinical efforts may not yield additional product candidates; any of our or
our collaborators' product candidates may fail in development, may not receive
required regulatory approvals, or may be delayed to a point where they are not
commercially viable; we may not achieve additional milestones in our proprietary
or partnered programs; the impact of competition; the impact of expanded product
development and clinical activities on operating expenses; adverse conditions in
the general domestic and global economic markets; as well as the other risks
identified in our filings with the Securities and Exchange Commission and the
securities commissions in British Columbia, Alberta and Ontario. These
forward-looking statements speak only as of the date hereof and we assume no
obligation to update these forward-looking statements, and readers are cautioned
not to place undue reliance on such forward-looking statements.

 

“Xenon” and the Xenon logo are registered trademarks or trademarks of Xenon
Pharmaceuticals Inc. in various jurisdictions. All other trademarks belong to
their respective owner.

 

###

 

Contact: Xenon Pharmaceuticals Inc.

Jodi Regts (Media & Investors)
604-484-3353
investors@xenon-pharma.com

 

Contact: Neurocrine Biosciences, Inc.

Navjot Rai (Media)

858-617-7623
media@neurocrine.com

 

Todd Tushla (Investors)

858-617-7143

ir@neurocrine.com

 

44

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Exhibit T

NASA Compounds and other Research Compounds

 

[†]

 

[Redactions continue for 8 pages]

 

 

 

 

45

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

 

Exhibit U

Untested Compounds

 

ID

CID

Series

Exemplified in Xenon Patent Filing

Covered by Xenon Patent Filing

[†]

 

[†]

[†]

[†]

 

[Redactions continue for 7 pages]

 

 

 

46

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

 

 

Exhibit V

Xenon Funded Activities for DTC Initial Development Plan

 

CMC

 

 

•

[†]

 

•

[†]

 

•

[†]

 

•

[†]

 

•

[†]

 

Non-Clinical

 

 

•

[†]

 

•

[†]

 

o

[†]

 

•

[†]

 

o

[†]

 

o

[†]

 

o

[†]

 

•

[†]

 

•

[†]

 

•

[†]

 

•

[†]

 

•

[†]

 

•

[†]

 

•

[†]

 

•

[†]

 

•

[†]

 

•

[†]

 

•

[†]

 

•

[†]

 

•

[†]

 

•

[†]

 

•

[†]

 

•

[†]

47