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Exhibit 10.3

LICENSE AGREEMENT

by and between

XIANGXUE LIFE SCIENCES LTD.

and

AXIS THERAPEUTICS LIMITED

June 29, 2018

 

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TABLE OF CONTENTS

 

    Page   ARTICLE I DEFINITIONS     3   ARTICLE II GRANT OF RIGHTS     7  
ARTICLE III DATA TRANSFER; DEVELOPMENT AND COMMERCIALIZATION; REGULATORY MATTERS
    8   ARTICLE IV PAYMENTS AND STATEMENTS     10   ARTICLE V REPRESENTATIONS
AND WARRANTIES     13   ARTICLE VI PATENT MATTERS     14   ARTICLE VII
CONFIDENTIALITY AND PUBLICITY     18   ARTICLE VIII TERM AND TERMINATION     19
  ARTICLE IX INDEMNIFICATION; LIMITATIONS OF LIABILITY     21   ARTICLE X
MISCELLANEOUS     22  

 

 

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THIS LICENSE AGREEMENT (this “Agreement”) is made as of June 29, 2018 (the
“Effective Date”), by and between Xiangxue Life Sciences Ltd., a company
organized and existing under the laws of the People’s Republic of China and
having its principal office at 2 Jinfengyuan Road, Guangzhou, China (“Licensor”
or “XLifeSc”) and Axis Therapeutics Limited, a company organized and existing
under the laws of Hong Kong and having its principal office at Unit 608-613 IC
Development Centre, No 6 Science Park West Avenue, Science Park, Hong Kong
(“Licensee” and together with Licensor, the “Parties” and each individually, a
“Party”) and, solely for the purposes of SECTION 4.1, Athenex, Inc. (“Athenex”).

B A C K G R O U N D:

WHEREAS, Athenex and XLifeSc intend to enter into a Shareholders Agreement (the
“Shareholders Agreement”), pursuant to which Athenex and XLifeSc will establish,
operate and manage the Licensee to offer certain goods and services in the
Territory;

WHEREAS, Licensor has developed a proprietary TCR-engineered T Cell Therapy; and
Licensor desires to license such technology to Licensee in connection with
creating therapeutic products for oncology indications in the Territory;

WHEREAS, each Party is willing to enter into this Agreement and grant the
licenses contemplated hereby on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual representations, warranties and
covenants herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties hereby
agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1. Meanings. Unless specifically set forth to the contrary herein, the
following terms, whether used in the singular or plural, shall have the
respective meanings set forth below:

(a) “Act” means the United States Food, Drug, and Cosmetic Act of 1938, as
amended, and the rules and regulations promulgated thereunder, or any successor
act, as the same shall be in effect from time to time.

(b) “Affiliate” means with respect to a Party (i) any corporation or business
entity of which more than fifty percent (50%) of the securities or other
ownership interests representing the equity, the voting stock or general
partnership interest are owned, controlled or held, directly or indirectly, by a
Party; (ii) any corporation or business entity which, directly or indirectly,
owns, controls or holds more than fifty percent (50%) (or the maximum ownership
interest permitted by law) of the securities or other ownership interests
representing the equity, voting stock or general partnership interest of a
Party; (iii) any corporation or business entity of which, directly or
indirectly, an entity described in the immediately preceding subsection (ii)
controls or holds more than fifty percent (50%) (or the maximum ownership
interest permitted by law) of the securities or other ownership interests
representing the equity, voting stock or general partnership interest of such
corporation or entity; or (iv) any corporation or

 

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business entity of which a Party has the right to acquire, directly or
indirectly, more than fifty percent (50%) of the securities or other ownership
interests representing the equity, voting stock or general partnership interest
thereof; provided, however that Licensee shall not be deemed an affiliate of
Licensor for the purposes of this Agreement.

(c) “Business Day” means any calendar day, except that if an activity to be
performed or an event to occur falls on a Saturday, Sunday or a day which is
recognized as a national holiday in the place of performance of an applicable
activity or occurrence of an applicable event, then the activity may be
performed or the event may occur on the next day that is not a Saturday, Sunday
or nationally recognized holiday.

(d) “Calendar Quarter” means for each Calendar Year, each of the three (3) month
periods ending on March 31, June 30, September 30 and
December 31; provided, however, that (i) the first Calendar Quarter of any
period specified under this Agreement shall extend from the commencement of such
period to the end of the first complete Calendar Quarter thereafter; and
(ii) the last Calendar Quarter shall end upon the expiration or termination of
this Agreement.

(e) “Calendar Year” means, for the first Calendar Year of the Term, the period
commencing on the Effective Date and ending on December 31, 2018, and for each
successive year thereafter, the period beginning on January 1 and ending twelve
(12) consecutive calendar months later on December 31.

(f) “CFR” means the United States Code of Federal Regulations.

(g) “Claims” has the meaning set forth in SECTION 9.2.

(h) “Clinical Trials” means any clinical studies of a Licensed Product conducted
on humans.

(i) “Commercialize” or “Commercialization” means labeling, packaging, promotion,
marketing, supply, manufacture, having manufacture, import, export, sale, offer
for sale, use, distribution and register of Licensed Products, including any
educational or prelaunch activities.

(j) “Commercially Reasonable Efforts” means exerting such efforts and employing
such resources as would normally be exerted or employed by a Party for its other
drug candidates and pharmaceutical products of a comparable stage of development
and commercial potential.

(k) “Completion” means, with respect to any Clinical Trial, the completion of
treatment for the necessary number of patients required by the applicable
protocol and completion of the statistical analysis of the study data.

(l) “Control” means possession of the ability to grant the rights and licenses
as provided for herein without violating the terms of any agreement or
arrangement with any Third Party.

(m) “Data” means any and all research data, pharmacology data, preclinical data,
clinical data, chemistry, manufacturing and control (“CMC”) data, technical
information and/or all other similar information and documentation.

(n) “Develop” or “Development” means those activities undertaken with respect to
the Technology or Licensed Products which are devoted to the progression of a
potential pharmaceutical or biological product in Clinical Trials and any other
activities directed toward quality issues, publication, Regulatory Approval,
formulation, manufacture, production or CMC of the Technology or Licensed
Products, including any other pre-launch activities.

 

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(o) “Disputed Claim” has the meaning set forth in SECTION 9.4. (b).

(p) “Dollar” or “$” means the lawful currency of the United States.

(q) “Effective Date” has the meaning given in the preamble.

(r) “First Commercial Sale” means, with respect to any Licensed Product, the
first sale to a Third Party for end use or consumption of such Licensed Product
in a country after receipt of Regulatory Approval in such country or, where
Regulatory Approval is not required, then the first sale for end use or
consumption of a Licensed Product to a Third Party in that country in connection
with the nationwide introduction of such Licensed Product in that country.

(s) “IFRS” means International Financial Reporting Standards as adopted by the
International Accounting Standard Board, consistently applied.

(t) “Improvements” means all inventions, modifications, improvements and
Know-How, patentable or otherwise, made, created, developed, conceived or
reduced to practice by or on behalf of a Party and/or any of its Affiliates
during the Term, including without limitation developments in the manufacture,
formulation, ingredients, preparation, presentation, means of delivery or
administration, dosage, indication, methods of use or packaging and/or sale of
the Technology or Licensed Product.

(u) “Intellectual Property” means Patent Rights, Know-How, copyrights and works
of authorship, Proprietary Information and all other intellectual property
rights (except for trademarks, trade names and other source indicators),
including any Improvements thereto.

(v) “Investigational Drug Application” means an investigational new drug
application described in 21 CFR §312.23, obtained for purposes of conducting
Clinical Trials in accordance with the requirements of the Act and the
regulations promulgated thereunder, or the similar or equivalent application or
approval under applicable Laws in another country, including all supplements and
amendments thereto relating to the use of the Technology or Licensed Product.

(w) “Licensee Indemnified Parties” has the meaning set forth in Section 10.1.

(x) “Licensed Product” means any pharmaceutical or biological preparation in
final form (or, where the context so indicates, the form under development) that
contains or relates to the Technology.

(y) “Licensee Patent Rights” means all Patent Rights that are owned or
Controlled by Licensee as of the Effective Date and during the Agreement Term
and that are necessary or useful for the Development or Commercialization of the
Technology or Licensed Products, and Improvements thereto.

(z) “Licensor Intellectual Property” means the Licensor Patent Rights, Licensor
Know-How and other Intellectual Property that as of the Effective Date is owned
or Controlled by Licensor or any of its Affiliates or in the process of
development by Licensor or any of its Affiliates, including all TCR-engineered T
Cell Therapy and related Technologies as detailed in the due diligence materials
shared by Licensor or its Affiliates to Athenex prior to the Effective Date.

 

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(aa) “Licensor Know-How” means all Know-How that is owned or Controlled by
Licensor or any of its Affiliates or is in the process of development by
Licensor or any of its Affiliates, and Improvements thereto.

(bb) “Licensor Patent Rights” means all Patent Rights that are owned or
Controlled by Licensor or any of its Affiliates that are necessary or useful for
the Development or Commercialization of the Technology or Licensed Products, and
all Improvements owned or Controlled by Licensor or any of its Affiliates that
constitute Patent Rights.

(cc) “Know-How” means all proprietary information and technology, including
trade secret information, developments, discoveries, methods, techniques,
formulations, Data, and other information, whether or not patentable, and any
Improvements thereto.

(dd) “Law” means all laws, statutes, rules, regulations, treaties, ordinances
and other pronouncements of any governmental authority having the binding effect
of law.

(ee) “Losses” means any and all damages, awards, deficiencies, settlement
amounts, defaults, assessments, fines, dues, penalties (including penalties
imposed by any governmental authority), costs, fees, liabilities, obligations,
losses, lost profits and expenses (including court costs, interest and
reasonable fees of attorneys, accountants and other experts) awarded or
otherwise paid or payable to Third Parties.

(ff) “Major Jurisdictions” means the United States, the European Union and
Japan.

(gg) “New Drug Application” means a new drug application or biologics license
application filed in accordance with 21 CFR § 315.50 21 or CFR § 601.2 (as
applicable) in the United States, or any similar application filed in any of the
countries in the Territory under applicable Laws in such country for the
approval for the marketing of a pharmaceutical or biological product, together
with all subsequent submissions.

(hh) “Patent Rights” means any patents, patent applications, certificates of
invention, or applications for certificates of invention and any supplemental
protection certificates, together with any extensions, registrations,
confirmations, reissues, substitutions, divisions, continuations
or continuations-in-part, reexaminations or renewals thereof, including methods
of development, manufacture, formulation, preparation, presentation, means of
delivery or administration, dosage, packaging, sale or use thereof.

(ii) “Phase I Clinical Trial(s)” means a Clinical Trial that is intended to
initially evaluate the safety or pharmacological effect of a Licensed Product in
subjects or that would satisfy the requirements of 21 CFR § 312.2(a), or its
equivalent.

(jj) “Phase II Clinical Trial(s)” means a Clinical Trial that is intended to
initially evaluate the effectiveness of a Licensed Product in subjects or that
would satisfy the requirements of 21 CFR § 312.21(b), or its equivalent.

(kk) “Phase III Clinical Trial(s)” means a pivotal Clinical Trial, the results
of which could be used to establish safety and efficacy of a Licensed Product as
a basis for Regulatory Approval or that would satisfy the requirements of 21 CFR
§ 312.21(c), or its equivalent.

 

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(ll) “Prime Rate” means the rate announced from time to time by HSBC Bank, N.A.
as its “prime rate” in New York, New York USA which is the base rate upon which
other rates charged at such bank are based, and is the best rate available to
premium customers at such bank.

(mm) “Proprietary Information” means any and all scientific, clinical,
technological, technical, regulatory, marketing, financial, commercial
information, and any other non-public information whether communicated in
writing, orally or by any other means, including Know-How and Data.

(nn) “Regulatory Approval” means approval by the relevant Regulatory Authority
of a New Drug Application or other similar application, health registration,
common technical document, regulatory submission, notice of compliance and any
other license or permit required to be approved for the supply, manufacture,
use, storage, distribution, import, export, transport, promotion, marketing and
sale of a Licensed Product in a country, region or other regulatory
jurisdiction.

(oo) “Regulatory Authority” means any governmental authority in a country,
region or other regulatory jurisdiction that regulates the supply, manufacture,
use, storage, distribution, import, export, transport, promotion, marketing and
sale of a Licensed Product.

(pp) “SEC” means the United States Securities and Exchange Commission and any
successor agency having substantially the same functions.

(qq) “Technology” means the TCR-engineered T Cell Therapy, and any
pharmaceutically acceptable salts, hydrates, solvates, and prodrugs of the
foregoing, or mixtures thereof, as well as all related technologies.

(rr) “Territory” means worldwide, except in the People’s Republic of China. For
clarity, the “People’s Republic of China” does not include any Special
Administrative Regions thereof.

(ss) “Third Party” means a person or entity who or which is neither a Party nor
an Affiliate of a Party.

(tt) “Valid Claim” means any claim in an active patent application or issued in
an unexpired patent which has not been held unenforceable, unpatentable or
invalid by a decision of a court or other governmental agency of competent
jurisdiction following exhaustion of all possible appeal processes, and which
has not been admitted to be invalid or unenforceable through reissue,
reexamination or disclaimer and has not been terminated for failure to pay
maintenance fees.

ARTICLE II

GRANT OF RIGHTS

SECTION 2.1. License Grant by Licensor. Subject to the terms of this Agreement,
Licensor, on behalf of itself and its Affiliates, hereby grants to Licensee an
exclusive (even as to Licensor and its Affiliates), sublicensable right and
license throughout the Territory in and to the Licensor Intellectual Property,
to Develop and Commercialize Licensed Products and the Technology. Licensee may
use Affiliates or Third Parties located outside the Territory to assist in the
Development of Licensed Products with the prior written consent of Licensor,
which shall not be unreasonably withheld, conditioned or delayed. With respect
to sales to Third Party distributors or other parties purchasing Licensed
Product for resale, Licensee shall use Commercially Reasonable Efforts to
restrict such resales to within the Territory.

 

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SECTION 2.2. Retained Rights; No Implied Licenses. All rights not specifically
granted to a Party under this Agreement are reserved and retained by Licensor or
Licensee, as applicable. Nothing in this Agreement shall be deemed to constitute
the grant of any implied license or other right to any Party, to or in respect
of any Intellectual Property of the other Party, except as explicitly set forth
in this Agreement.

SECTION 2.3. Preservation of Intellectual Property Rights. Licensor shall not
assign, transfer, encumber, or grant any right in or to the Licensor
Intellectual Property inconsistent with the rights granted to Licensee under
this Agreement.

ARTICLE III

DATA TRANSFER; DEVELOPMENT AND COMMERCIALIZATION; REGULATORY MATTERS

SECTION 3.1. Delivery; Assistance.

(a) As soon as practicable, but in no event later than 45 days after the
Effective Date, Licensor shall deliver to Licensee copies, in a mutually agreed
form or media, of all Proprietary Information and materials in the possession or
control of Licensor as of such date and that relate to the Technology. Licensor
shall, at the request of Licensee, deliver to Licensee physical embodiments of
the Licensor Intellectual Property, including any applicable biological
materials or samples.

(b) During the Term, Licensor shall provide Licensee with such assistance as
Licensee may reasonably request (at Licensee’s cost and expense), including
making available at their place of employment (or such other location as the
Parties may mutually agree upon) such persons that were involved with the
creation, development or reduction to practice of the Licensor Intellectual
Property or the Technology, so that such persons may assist Licensee in its
efforts to evaluate, Develop and Commercialize the Technology and/or the
Licensed Products.

(c) During the Term, Licensor shall, upon the request of Licensee, provide
Licensee with any Data that is available to Licensor and is required for an
Investigational Drug Application or New Drug Application within 60 calendar days
of such request. If Licensor fails to comply with the foregoing, Licensee may
terminate this Agreement immediately by and upon giving written notice to
Licensor and, in such event, Licensor shall repay all payments that have been
made by Licensee to Licensor prior to such date.

SECTION 3.2. Development and Commercialization. Licensee shall use Commercially
Reasonable Efforts during the Term to Develop and Commercialize the Technology
and the Licensed Products in the Major Jurisdictions. Licensee shall be
responsible for all costs associated with Development and Commercialization of
the Technology and the Licensed Products in the Territory.

SECTION 3.3. Clinical Trials. Licensee shall be responsible for conducting and
administering, at its sole cost and expense, all Clinical Trials required for
any Regulatory Approvals in the Territory.

SECTION 3.4. Referencing Data. The Data and results of any Clinical Trials
conducted by a Party or its Affiliates, sublicensees or other partners shall be
made available to the other Party upon request at no cost to the requesting
Party, and each Party hereby grants to the other Party the non-exclusive,
royalty-free license to use such Data solely for the Development and
Commercialization of the Technology and Licensed Products, and subject to the
confidentiality obligations set forth herein.

 

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SECTION 3.5. Records. Licensee and Licensor shall each create records that
(i) reflect all work done, results achieved and Know-How developed that are
necessary or useful for the Development or Commercialization of the Technology
or Licensed Products and (ii) as may be required by applicable Laws. The
foregoing records shall be complete and accurate in all material respects and
maintained in sufficient detail and in a good scientific manner appropriate for
patent and regulatory purposes and in accordance with good industry practice.

SECTION 3.6. Promotional Materials and Activities. Licensee shall create and
develop the advertising and promotional materials for the Licensed Products in
the Territory. As holder of the Regulatory Approvals in the Territory, Licensee
shall be responsible, as applicable, for all submissions and interactions with
the Regulatory Authorities in the Territory regarding approval of all Licensed
Product-related promotional materials.

SECTION 3.7. Sales of Licensed Products. Licensee shall be responsible for all
sales of Licensed Products in the Territory. Licensee shall, in its sole
discretion, set all terms regarding Licensed Product sales, including terms
respecting credit, pricing, cash discounts, rebates, chargebacks, bad debt
write-offs, and other fees and charges, and returns and allowances.

SECTION 3.8. Compliance with Laws. Each Party shall comply with all applicable
Laws concerning the Development and Commercialization of the Licensed Products,
and shall obligate any sublicensees that it or its Affiliates may engage with
respect to Licensed Products to do the same.

SECTION 3.9. Regulatory Matters. From and after the Effective Date, Licensee
shall:

(a) Have sole authority and responsibility for the timely preparation, filing
and prosecution of all filings, submissions, authorizations or approvals with
Regulatory Authorities in the Territory, and shall own and control all such
filings, submissions, authorizations and approvals, including any
Investigational Drug Application or New Drug Application in the Territory.
Licensee shall provide copies of all such filings, submissions, authorizations
and approvals to Licensor upon Licensor’s reasonable request, at Licensor’s sole
cost and expense.

(b) Be the primary contact with each Regulatory Authority in the Territory and
be solely responsible for all communications with each Regulatory Authority that
relate to any Investigational Drug Application or New Drug Application in the
Territory, provided, however, that upon the reasonable request of Licensee,
Licensor shall provide appropriate personnel to participate in discussions with
any Regulatory Authority in the Territory and/or to assist and consult with
Licensee in its applications for Regulatory Approval, at Licensee’s cost and
expense.

(c) From and after receipt of each Regulatory Approval, have exclusive authority
and responsibility to submit all reports, amendments and/or other requirements
of applicable Law necessary to maintain such Regulatory Approvals and to seek
revisions of the conditions of each such Regulatory Approval in the Territory as
appropriate. Licensee shall have sole authority and responsibility to seek
and/or obtain any required approvals of any labeling, prescribing information,
package inserts, monographs and/or packaging used in connection with a Licensed
Product.

(d) Have the authority in the Territory concerning (i) the protocols for
Clinical Trials of Licensed Products, (ii) indications sought for any Licensed
Products, (iii) approval of all contracts relating to the Development of
Licensed Products, (iv) the formulation used in respect of a Licensed Product,
and (v) contracts relating to the Commercialization of Licensed Product.

 

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SECTION 3.10. Regulatory Cooperation. The Parties shall use Commercially
Reasonable Efforts to coordinate and cooperate in connection with their
respective compliance with all applicable Laws relating to the Development and
Commercialization of the Technology and the Licensed Products, including without
limitation providing the other Party with any Data or information required by
applicable Regulatory Authorities.

SECTION 3.11. Pharmacovigilence. During the Term, each Party shall promptly
inform the other Party, and provide appropriate notice to any applicable
Regulatory Authorities or other Third Parties in accordance with applicable
Laws, after such Party becomes aware of any serious adverse event (as defined by
the ICH Harmonized Tripartite Guideline on Clinical Safety Data Management) that
is directly or indirectly attributable to the use or application of any
Technology or Licensed Product.

SECTION 3.12. Product Recalls. If any Regulatory Authority having jurisdiction
requires or reasonably requests to recall a Licensed Product, (i) Licensee shall
promptly notify Licensor if such recall is in the Territory and (ii) Licensor
shall promptly notify Licensee if such recall is in the People’s Republic of
China. Licensee shall have the sole right and responsibility, at its expense, to
initiate all recall procedures required or requested by any such Regulatory
Agency in the Territory, and Licensor shall have the sole right and
responsibility, at its expense, to initiate all recall procedures required or
requested by any such Regulatory Authority in the People’s Republic of China.
Each Party shall be responsible, at its sole expense, for carrying out any such
recall as expeditiously as possible and in such a way as to cause the least
disruption to the sales of the Licensed Products and to preserve the goodwill
and reputation attached to the Licensed Product and to the names of Licensor,
Licensee and each of their respective Affiliates. Each Party shall maintain the
appropriate procedures and records to permit the recall of the Licensed Product
in accordance with applicable Laws.

ARTICLE IV

PAYMENTS AND STATEMENTS

SECTION 4.1. Upfront Equity Payment. As partial consideration for the license
and rights granted herein, within 45 Business Days of the Effective Date, and
provided Licensor has completed its delivery obligations under Section 3.1(a)
herein to Athenex’s complete satisfaction, Athenex shall irrevocably transfer
and convey to Licensor the number of shares currently issued and outstanding
voting common stock of Athenex that have a value of $5 million as of the
Effective Date. The stock price will be the lower of (i) the closing price of
such stock on the Effective Date or (ii) the volume weighted average price of
such stock for the ten (10) trading days immediately prior to the Effective
Date. Athenex and Licensor shall execute all other documents necessary to effect
the intent of this provision.

SECTION 4.2. Milestone Payments. In consideration of the rights granted by
Licensor hereunder, Licensee shall pay Licensor the following milestone payments
within 30 Business Days of the occurrence of the specified milestone event
below, with each milestone fee to be paid no more than once with respect to the
achievement of such milestone event. For clarity, the milestone events relating
to Clinical Trials and Regulatory Approvals in the People’s Republic of China
will be met when Licensor achieves such milestone events and such payments shall
be made by Licensee within 30 Business Days after receiving written attestation
from Licensor that such milestone event has occurred.

 

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Milestone Event    Payment              

Initiation of Phase II Clinical Trial in the United States

   $ *** million  

Initiation of Phase III Clinical Trial in the United States

   $ *** million  

Regulatory Approval in the United States

   $ *** million  

Initiation of Phase II Clinical Trial in the European Union

   $ *** million  

Initiation of Phase III Clinical Trial in the European Union

   $ *** million  

Regulatory Approval in the European Union

   $ *** million  

Submission of IND in the People’s Republic of China

   $ *** million  

Initiation of Phase II Clinical Trial in the People’s Republic of China

   $ *** million  

Initiation of Phase III Clinical Trial in the People’s Republic of China

   $ *** million  

Regulatory Approval in the People’s Republic of China

   $ *** million  

Initiation of Phase II Clinical Trial in Japan

   $ *** million  

Initiation of Phase III Clinical Trial in Japan

   $ *** million  

Regulatory Approval in Japan

   $ *** million  

Total potential milestone payments:

   $ 110 million  

SECTION 4.3. Royalties. During the Term, Licensor shall, pursuant to SECTION
4.5(a), pay to Licensee a royalty of ***% on annual (Calendar Year) aggregate
Income generated by sales of Licensed Products by Licensor (or any of its
sublicensees) in the People’s Republic of China, until the last to expire Valid
Claim in the People’s Republic of China. If any Licensed Products are covered by
more than one Valid Claim, multiple royalties will not be due for such Licensed
Product. For the purposes of this Section, “Income” means net income as
determined by accepted accounting standards.

SECTION 4.4. Set-off. In addition to (and without limiting) Licensor’s
obligations in ARTICLE IX, Licensee may set-off any milestone payments due to
Licensor to the full extent Licensee pays defense costs, redesign or replacement
costs or royalties, damages, settlements or other payments to any Third Party
related to claims or allegations that the Licensor Intellectual Property Rights
infringe the Intellectual Property of such third party.

 

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SECTION 4.5. Royalty Reports and Payments.

(a) Royalty Payments. Within 60 days following the end of each Calendar Quarter
that royalties are payable by Licensor to Licensee, Licensor shall submit to
Licensee a written report containing, with respect to such Calendar Quarter and
for the then-current Calendar Year through the end of such Calendar Quarter, an
accounting on a country-by-country basis of gross sales, Income, and the
royalties payable in accordance with SECTION 4.3(a) for such Calendar Quarter,
with a breakdown of all deductions taken in any such calculations, in accordance
with the definition of “Income.” Any conversion to United States Dollars shall
be calculated in accordance with SECTION 4.6(c). Royalties shown to have accrued
by each report shall be due and payable on the date such report is due.

(b) Each Party shall keep and shall require its Affiliates or sublicensees to
keep complete and accurate records in sufficient detail to permit accurate
determination of all amounts necessary for calculation and verification of all
payment obligations set forth in this SECTION 4.5 for a period of 36 months from
the end of the relevant Calendar Quarter.

SECTION 4.6. General Payment Provisions.

(a) All payments due and payable under this Agreement shall be made in United
States Dollars by bank wire transfer in immediately available funds to an
account designated by the Party receiving such payment.

(b) A Party may deduct the amount of any taxes imposed on such Party that are
required to be withheld or collected by such Party, its Affiliates or
sublicensees under applicable Law on amounts owing from the paying Party to the
receiving Party hereunder. Any such taxes required to be withheld or collected
shall be an expense of the receiving Party. The receiving Party shall provide
the paying Party any tax forms that may be reasonably necessary in order for the
paying Party to not withhold tax or to withhold tax at a reduced rate and the
paying Party shall apply the reduced rate of withholding, or dispense with
withholding, as the case may be, pursuant to such provided documentation. Each
Party shall provide the other with reasonable assistance to enable the recovery,
as permitted by applicable Laws, of withholding taxes, value added taxes, and
similar obligations resulting from payments made under this Agreement, such
recovery to be for the benefit of the Party bearing such tax. To the extent a
Party, its Affiliates or sublicensees pay such withholding taxes to the
appropriate governmental authority on behalf of the other Party, the paying
Party shall promptly deliver to the receiving Party proof of payment of such
taxes.

(c) For purposes of computing royalties on Income, the Income shall be converted
to United States Dollars using the year-to-date average rate of exchange for
United States Dollars used by Licensor for its internal financial accounting
purposes; provided, however, that if for any reason conversion into United
States Dollars cannot be made, then notwithstanding the provisions of SECTION
4.6(a), payment may be made in the currency of the People’s Republic of China by
deposit in the name of Licensee in a bank account designated by Licensee in such
country.

(d) Except as otherwise defined herein, all financial calculations by either
Party under this Agreement shall be calculated in accordance with IFRS. In
addition, all calculations shall give pro rata effect to and shall
proportionally adjust (by giving effect to the number of applicable days in such
Calendar Quarter) (i) for any Calendar Quarter that is shorter than a standard
Calendar Quarter or any Calendar Year that is shorter than four consecutive full
Calendar Quarters, or (ii) as a result of a determination, in accordance with
the terms of this Agreement, that the first or last day of such Calendar Quarter
(including as a result of termination of this Agreement) shall be deemed other
than the actual first or last day of such Calendar Quarter, or that the first or
last day of such Calendar Year shall be deemed other than the actual first or
last day of such Calendar Year.

 

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SECTION 4.7. Audits.

(a) Upon the written request of Licensee, Licensor shall permit an independent
certified public accounting firm of recognized standing, selected by Licensee
and reasonably acceptable to Licensor (provided that such accounting firm shall
not be retained or compensated on a contingency basis and shall have entered
into a confidentiality agreement with Licensor in form and substance reasonably
satisfactory to Licensor), to have access not more than once in any Calendar
Year, during normal business hours, to such of the records of Licensor as may be
reasonably necessary to verify the accuracy of the reports under SECTION 4.5(a)
for any Calendar Year ending not more than 24 months prior to the date of such
request. The accounting firm shall disclose to Licensor whether the reports are
correct or incorrect, the specific details concerning any discrepancies
(including the accuracy of the calculation of Income and the resulting effect of
such calculations on the amounts payable by Licensor under this Agreement) and
such other information that should properly be contained in a report required
under this Agreement (the “Audit Report”).

(b) If such accounting firm concludes that additional amounts were owed during
such year, and Licensor agrees with such conclusion, then Licensor shall pay the
additional payments, together with interest at the Prime Rate on the amount of
such additional payments, within 30 days of the date Licensee delivers the Audit
Report to Licensor. If such accounting firm concludes that amounts were overpaid
by Licensor during such period, Licensee shall repay Licensor the amount of such
overpayment, together with interest at the Prime Rate on the amount of such
overpayment, within 30 days of the date Licensee delivers the Audit Report to
Licensor. The fees charged by such accounting firm shall be paid by Licensee;
provided, however, that if an error in favor of Licensee of more than 5% of the
payments due hereunder for the period being reviewed is discovered, then the
reasonable fees and expenses of the accounting firm shall be paid by Licensor.

(c) Upon the expiration of 24 months following the end of any year for which
Licensor has made payment in full of amounts payable with respect to such year,
and in the absence of negligence or willful misconduct of Licensor or a contrary
finding by an accounting firm pursuant to this SECTION 4.7, such calculation
shall be binding and conclusive upon Licensee, and Licensor shall be released
from any liability or accountability with respect to royalties or other payments
for such year.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

SECTION 5.1. General Representations. Each Party hereby represents and warrants
to the other Party as follows:

(a) Such Party is a company duly organized, validly existing and is in good
standing under the laws of the jurisdiction of its incorporation, is qualified
to do business and is in good standing as a foreign corporation in each
jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification and failure to have such qualification
would prevent it from performing its obligations under this Agreement.

(b) The execution, delivery and performance by such Party has been duly
authorized by all necessary corporate action and does not and will not
(i) violate any provision of any Laws presently in effect having applicability
to a Party or any provision of its charter or bylaws; or (ii) conflict with or
constitute a default under any other agreement to which such Party is a party.

(c) This Agreement has been duly executed and is a legal, valid and binding
obligation of such Party, enforceable against it in accordance with the terms
and conditions hereof, except as enforceability may be limited by (i) any
applicable bankruptcy, insolvency, reorganization, moratorium or similar law
affecting creditor’s rights generally, or (ii) general principles of equity,
whether considered in a proceeding in equity or at law.

 

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(d) Such Party has obtained all authorizations, consents and approvals,
governmental or otherwise, necessary for the execution and delivery of this
Agreement, and to otherwise perform such Party’s obligations under this
Agreement.

(e) Neither Party, nor any of its Affiliates, are a party to, or are otherwise
bound by, any oral or written contract that will result in any Third Party
obtaining any interest in, or that would give to any Third Party any right to
assert any claim in or with respect to, any of such Party’s or the other Party’s
rights under this Agreement.

SECTION 5.2. Additional Representations and Warranties of Licensor. Licensor
represents and warrants to Licensee that:

(a) As of the Effective Date, to the knowledge of Licensor, (i) there is no
Third Party infringing, misappropriating or violating of any of the Licensor
Intellectual Property; and (ii) the Licensor Intellectual Property is valid and
enforceable where filed; (iii) the Licensor Patent Rights where filed are not
subject to any pending or threatened re-examination, re-issue, opposition,
interference, challenge, litigation proceeding or other claim, (iv) Licensor has
timely filed and prosecuted the patents and patent applications with respect to
the Licensor Intellectual Property in the Territory and (v) the use of the
Licensor Intellectual Property as authorized by this Agreement will not
infringe, misappropriate or violate the Intellectual Property rights of any
Third Party.

(b) Licensor has not committed any act, or omitted to commit any act, that may
cause the Licensor Patent Rights where filed to expire prematurely or be
declared invalid or unenforceable, or that would otherwise prohibit Licensor
from enforcing the Licensor Patent Rights where filed against any Third Party.

(c) As of the Effective Date in the Territory, (i) Licensor has the right to use
and disclose and to enable Licensee to use and disclose (in each case under
appropriate conditions of confidentiality) the Licensor Intellectual Property;
and (ii) the Licensor Intellectual Property is not subject to any encumbrance,
lien, license or claim of ownership by any Third Party that would conflict with
the terms of this Agreement.

ARTICLE VI

PATENT MATTERS

SECTION 6.1. Ownership of Inventions. As between the Parties:

(a) Licensor shall have and retain all right, title and interest in or Control
over, as applicable, all Intellectual Property (and Patent Rights arising
thereunder) (i) owned or Controlled by it on the Effective Date, subject to the
licenses and other rights in the Territory granted to Licensee under this
Agreement and (ii) that is discovered, made, first conceived, reduced to
practice or generated as a result of Development or otherwise during the Term
solely by or on behalf of Licensor (and, for the avoidance of doubt, such
Intellectual Property and Know-How, including Patent Rights, shall be
Improvements hereunder and will be licensed to Licensee as Licensor Intellectual
Property).

(b) Licensee shall have and retain all right, title and interest in or Control
over all Intellectual Property (and Patent Rights arising thereunder) (i) owned
or Controlled by it on the Effective Date (including the Licensee Patent Rights)
and related to the Technology and (ii) that is discovered,

 

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made, first conceived, reduced to practice or generated as a result of
Development or otherwise during the Term solely by or on behalf of Licensee (the
“Licensee Intellectual Property”) and related to the Technology, subject to the
underlying rights of Licensor in the Licensor Intellectual Property. Subject to
the terms of this Agreement, Licensee hereby grants to Licensor a royalty free,
non-exclusive, non-transferable, non-sublicensable (except with the prior
written consent of Licensee, not to be unreasonably withheld, conditioned or
delayed) license under any such Licensee Intellectual Property solely for use in
the People’s Republic of China. Upon Licensor’s reasonable request but at
Licensee’s expense, Licensee agrees to provide Licensor with access to any
tangible embodiments of the Licensee Intellectual Property that are necessary
for Licensor to use and exploit the Licensee Intellectual Property in the
People’s Republic of China.

(c) Licensor and Licensee shall jointly own all right, title and interest in or
Control over all Intellectual Property (and Patent Rights arising thereunder)
that is discovered, made, first conceived, reduced to practice or generated as a
result of Development or otherwise during the Term jointly by or on behalf of
Licensor and Licensee (“Jointly Owned Intellectual Property”). With respect to
Jointly Owned Intellectual Property, both Parties shall have the right to freely
use and exploit such Jointly Owned Intellectual Property, without any duty to
license or account to the other.

(d) Each of Licensor and Licensee shall require all of its and its Affiliates’
employees to assign all Intellectual Property that is discovered, made, first
conceived, reduced to practice or generated as a result of Development or
otherwise by such employees during the Term to Licensor or Licensee,
respectively. Each Party shall use Commercially Reasonable Efforts to require
any Third Parties who may develop Intellectual Property on behalf of a Party
pursuant to the terms of this Agreement to assign ownership to Licensor or
Licensee, as applicable.

SECTION 6.2. Maintenance and Prosecution.

(a) Licensor shall have the right and the obligation to file, prosecute and
maintain the Licensor Patent Rights in Licensor’s name, using patent counsel
selected by Licensor. Licensor shall pay all patent prosecution and maintenance
costs relating to the Licensor Patent Rights licensed hereunder. If for any
reason Licensor elects not to pay any applicable maintenance costs in the
Territory during the Term, or elects not to file an application for a Licensor
Patent Right, Licensor shall notify Licensee at least 45 days prior to the date
an applicable payment is due or the date any loss or forfeiture of rights may
occur, and Licensee may take over the maintenance and/or prosecution of such
Licensor Patent Rights; provided, however, that any existing Valid Claims of
such Licensor Patent Rights will be deemed no longer Valid Claims for purposes
of this Agreement and SECTION 4.3(a). Licensor shall promptly, but no less then
each Calendar Quarter, inform Licensee of all new Licensor Patent Rights in the
Territory. Licensor shall have the sole right to file, prosecute and maintain
all Jointly Owned Intellectual Property in the People’s Republic of China.

(b) Licensee shall have the first right to file, prosecute and maintain the
Licensee Patent Rights in Licensee’s name, using patent counsel selected by
Licensee. Licensee shall pay all patent prosecution and maintenance costs
relating to the Licensee Patent Rights. If for any reason Licensee elects not to
pay any applicable maintenance costs in the People’s Republic of China during
the Term, or elects not to file an application for a Licensee Patent Right in
the People’s Republic of China during the Term, Licensee shall notify Licensee
at least 45 days prior to the date an applicable payment is due or the date any
loss or forfeiture of rights may occur, and Licensee may take over the
maintenance and/or prosecution of such Licensee Patent Rights in the People’s
Republic of China. Licensee shall promptly, but no less then each Calendar
Quarter, inform Licensor of all new Licensee Patent Rights in the People’s
Republic of China. Licensee shall have the sole right to file, prosecute and
maintain all Jointly Owned Intellectual Property in all countries in the
Territory.

 

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(c) The responsible Party under this SECTION 6.2 shall solicit the other Party’s
review of the nature and text of any Patent Rights arising during the Term that
are necessary or useful for the Development or Commercialization of the
Technology or the Licensed Products and important prosecution matters related
thereto, each in reasonably sufficient time prior to the filing thereof, and the
responsible Party shall take into account the other Party’s reasonable comments
related thereto. Each Party shall execute all documents and take all actions as
are reasonably requested by the other Party with respect to any filings and
registrations referred to in this SECTION 6.2.

SECTION 6.3. Third Party Infringement.

(a) Each Party shall promptly give the other Party notice of any actual or
suspected infringement by a Third Party of any Licensor Intellectual Property or
Licensee Intellectual Property, which comes to such Party’s attention.

(b) Licensee shall have the first right, either directly or through its
Affiliates or licensees, to initiate and prosecute such legal action in the
Territory at its own expense and in the name of Licensor and/or Licensee, or to
control the defense of any declaratory judgment action in the Territory relating
to the Licensor Intellectual Property or Licensee Intellectual Property, and
Licensee shall provide Licensor with reasonable notice of any such action it
commences in respect of the Licensor Intellectual Property and keep Licensor
reasonably informed of any significant developments in such action. Licensor
shall render, at Licensee’s expense (including reasonable attorneys’ fees), all
assistance reasonably requested in connection with any action taken by Licensee
to prevent such infringement. The control of such action, including whether to
initiate any legal proceeding and/or the settlement thereof, shall solely be
under the control of Licensee; provided, however, that Licensee shall not settle
any such claim or proceeding in a manner that adversely affects Licensor’s
rights or which results in any material monetary payment by or financial loss to
Licensor, without the prior written consent of Licensor, which consent shall not
be unreasonably withheld or delayed.

(c) If Licensee elects not to initiate and prosecute an infringement or defend a
declaratory judgment action in any country in the Territory as provided in
SECTION 6.3(a) within 60 days after having become aware of such potential
infringement, then Licensor may elect to take such action that is reasonably
necessary and appropriate to terminate or prevent such infringement, including
instituting an infringement proceeding, at the sole cost of Licensor, provided,
however, that Licensor shall not enter into any settlement or compromise of any
claim relating to the Licensor Intellectual Property or Licensee Intellectual
Property that would result in any material monetary payment by or financial loss
to Licensee, or any loss of rights granted to Licensee under this Agreement,
without Licensee’s prior written consent, which consent shall not be
unreasonably withheld or delayed.

(d) Licensor shall have the first right, either directly or through its
Affiliates or licensees, to initiate and prosecute such legal action outside of
the Territory at its own expense and in the name of Licensor, or to control the
defense of any declaratory judgment action outside the Territory relating to the
Licensor Intellectual Property. If Licensor elects not to initiate and prosecute
an infringement or defend a declaratory judgment action in any country outside
of the Territory as provided in SECTION 6.3(c) within 60 days after having
become aware of such potential infringement, and such lack of action materially
harms Licensee or its business, then Licensee may elect to take such action that
is reasonably necessary and appropriate to terminate or prevent such
infringement, including instituting an infringement proceeding, at the sole cost
of Licensee, provided, however, that Licensee shall not enter into any
settlement or compromise of any claim relating to the Licensor Intellectual
Property that would result in any material monetary payment by or financial loss
to Licensor without Licensor’s prior written consent, which consent shall not be
unreasonably withheld or delayed.

 

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(e) For any legal action or defense contemplated by this SECTION 6.3, in the
event that any Party is unable to initiate, prosecute, or defend such action
solely in its own name, the other Party shall join such action voluntarily and
shall execute all documents necessary for the other Party to prosecute, defend
and maintain such action. In connection with any action contemplated by this
SECTION 6.3, the Parties shall cooperate fully and will provide each other with
any information or assistance that either reasonably may request.

(f) Any recovery or award obtained by either Party as a result of any action or
settlement commenced with respect to infringement within the Territory shall be
shared as follows:

(i) the Party that initiated and prosecuted, or maintained the defense of, the
action shall recoup all of its costs and expenses (including reasonable
attorneys’ fees) incurred in connection with the action, whether the recovery is
by settlement or otherwise;

(ii) the other Party then shall, to the extent funds remain after payment set
forth in subsection (i) has been made, recover its reasonably documented costs
and expenses (including reasonable outside attorneys’ fees) incurred in
connection with the action;

(iii) if Licensor initiated and prosecuted, or maintained the defense of, the
action inside the People’s Republic of China, the amount of any recovery
remaining then shall be retained by Licensor, with such amount being included in
Income for the applicable Calendar Quarter; and

(iv) if Licensor initiated and prosecuted, or maintained the defense of, the
action inside the Territory, the amount of any recovery remaining then shall be
retained by Licensor.

SECTION 6.4. Third Party Intellectual Property.

(a) In the event that a Party becomes aware of any claim that the Development or
Commercialization of Licensed Products hereunder infringes the intellectual
property rights of any Third Party in the Territory, such Party shall promptly
notify the other Party.

(b) Licensor shall have the first right and the obligation to defend and control
the defense of any action in the Territory related to the infringement of any
Third Party intellectual property by the Licensed Products in the Territory.
Licensor shall keep Licensee reasonably informed as to the progress of any such
action. Licensee shall render, at Licensor’s expense, all assistance reasonably
requested in connection with any action taken by Licensor. The control of such
action, including whether to initiate any legal proceeding and/or the settlement
thereof, shall solely be under the control of Licensor; provided,
however, that Licensor shall not settle any such claim or proceeding in a manner
that adversely affects Licensee’s rights or that results in any material
monetary payment by or financial loss to Licensee, without Licensee’s written
consent, which consent shall not be unreasonably withheld. Licensor shall pay
for all costs and expenses incurred in such defense. In addition, Licensor shall
pay all damages awarded or settlement payments made (including future royalty or
similar payments) to such Third Party.

 

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SECTION 6.5. Patent Term Extensions. The Parties shall cooperate with each other
in obtaining patent term extensions or restorations or supplemental protection
certificates or their equivalents in any country in the Territory where
applicable and where desired by Licensee. Elections with respect to obtaining
such extension or supplemental protection certificates shall be made in the same
manner and with the same relative priorities between the Parties as is
applicable to the prosecution and maintenance of Patent Rights pursuant to
SECTION 6.2.

ARTICLE VII

CONFIDENTIALITY AND PUBLICITY

SECTION 7.1. Non-Disclosure and Non-Use Obligations. During the Term and for a
period of 10 years thereafter, all Proprietary Information disclosed by one
Party to the other hereunder shall be maintained in confidence and shall not be
disclosed to any Third Party or used for any purpose except as expressly
permitted herein without the prior written consent of the Party that disclosed
it. The foregoing non-disclosure and non-use obligations shall not apply to the
extent that such Proprietary Information:

(a) is known by the receiving Party at the time of its receipt, as documented by
records;

(b) is or becomes in the public domain or knowledge without breach by either
Party of its confidentiality obligations;

(c) is disclosed to a receiving Party by a Third Party who may, to the knowledge
of the Receiving Party, lawfully do so and is not under an obligation of
confidentiality to the disclosing Party; or

(d) is developed by the receiving Party independently of Proprietary Information
received from the disclosing Party, as documented by contemporary written
records.

SECTION 7.2. Permitted Disclosure of Proprietary Information. Notwithstanding
SECTION 7.1, a Party receiving Proprietary Information of another Party may
disclose such Proprietary Information:

(a) to governmental or other regulatory agencies in order to obtain patents
pursuant to this Agreement, or to gain approval to conduct Clinical Trials or to
market Licensed Product, but such disclosure may be only to the extent
reasonably necessary to obtain such patents or authorizations and in accordance
with the terms of this Agreement or as otherwise requested by the Regulatory
Authorities;

(b) by Licensee to its agents, consultants, sublicensees or Affiliates in
connection with the Development or Commercialization, or to otherwise enable
Licensee to fulfill its obligations and responsibilities under this Agreement,
on the condition that such entities agree to be bound by confidentiality
obligations consistent with this Agreement; or

(c) if required to be disclosed by law, subpoena or court
order, provided that notice is promptly delivered to the non-disclosing Party in
order to provide such party a reasonable opportunity to challenge or limit the
disclosure obligations, and that any such disclosure made by the disclosing
party is limited to the extent required by law or court order.

SECTION 7.3. Certain Disclosures. Except as set forth in this Agreement or as
required by Law, neither Party shall make any press release or other public
announcement or other public disclosure to a Third Party concerning the
existence of or terms of this Agreement, the subject matter of this Agreement or
the activities contemplated hereunder, without the prior written consent of the
other Party, which consent shall include agreement upon the nature and text of
such release, announcement or

 

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other disclosure and shall not be unreasonably withheld or delayed; provided,
however, that the foregoing will not restrict disclosures made in connection
with any filing of information or materials with a stock exchange or the SEC or
any stockholders’ letter to private investors on the condition that if the
information is for investors, such investors agree to be bound by
confidentiality obligations consistent with this Agreement. Each Party agrees to
provide to the other Party a copy of any such press release or other public
announcement or disclosure as soon as reasonably practicable under the
circumstances prior to its scheduled release, and consider comments from such
Party in good faith. Each Party shall have the right to review and recommend
changes to any press release or other public announcement or
disclosure; provided, however, that such right of review and recommendation
shall only apply for the first time that specific information is to be
disclosed, and shall not apply to the subsequent disclosure of substantially
similar information that has previously been disclosed unless there have been
material developments relating to the Technology or the Licensed Product since
the date of the previous disclosure; provided, further, that each Party shall
provide to the other Party reasonable advance notice of any such subsequent
disclosure. Without limiting the generality of any of the foregoing, it is
understood that the Parties or their Affiliates may make disclosure of this
Agreement and the terms hereof in accordance with the rules and regulations of
the SEC, other governmental authority, or securities exchange, may file this
Agreement as an exhibit to any filing with the SEC, other governmental
authority, or securities exchange, and may distribute any such disclosure or
filing in the ordinary course of its business, provided, further, that to the
maximum extent allowable by the rules and regulations of the SEC, other
governmental authority, or securities exchange, and except as required by
applicable Laws, Licensor and Licensee shall seek to redact any confidential
information set forth in such filings, and each Party shall provide a draft of
the redacted version of this Agreement to the other Party no less than
5 Business Days prior to disclosure or filing with the SEC, other governmental
authority, or securities exchange, and give reasonable consideration to the
other Party’s comments regarding any proposed redaction.

SECTION 7.4. Publications. Neither Party may submit for written or oral
publication any manuscript, abstract or the like relating to the Technology or
Licensed Products, without the prior approval of the other Party, not to be
unreasonably withheld, delayed or conditioned. If a Party desires to submit such
publication, it shall first deliver to the other Party, for the other Party’s
review, the proposed publication or an outline of the oral disclosure at least
sixty (60) days prior to planned submission or presentation and shall consider
in good faith comments made by such other Party.

ARTICLE VIII

TERM AND TERMINATION

SECTION 8.1. Term; Termination.

(a) This Agreement is effective as of the Effective Date and will remain in
effect until the last to expire Valid Claim included in the Licensor Patent
Rights (“Term”).

(b) This Agreement will terminate automatically if the Shareholders Agreement is
terminated pursuant to the terms therein;

(c) Either Party may, without prejudice to any other remedies available to it
under this Agreement or at law or in equity, terminate this Agreement by
providing written notice to the other party (as used in this subsection, the
“Breaching Party”), in the event that the Breaching Party materially breaches
any term of this Agreement and fails to cure such breach within 60 days of
receiving notice of same (or, if such default cannot be cured within such 60-day
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commence and diligently continue actions to cure such default during such 60-day
period). Termination will become effective at the end of the 60-day cure period
unless the Breaching Party cures such breach during such 60-day period, or if
such breach is not susceptible to cure within such 60-day period, the Breaching
Party has commenced and is diligently pursuing a cure. The right of either
Licensor or Licensee to terminate this Agreement as provided in this SECTION 8.1
will not be affected in any way by such Party’s waiver or failure to take action
with respect to any previous breach or default.

SECTION 8.2. Effect of Expiration or Termination; Survival.

(a) Expiration or termination of this Agreement shall not relieve the Parties of
any obligation accruing prior to such expiration or termination, including all
accrued payment obligations arising under SECTION 4.3. In addition to any other
provisions of this Agreement which by their terms continue after the expiration
of this Agreement, the provisions of SECTION 3.6, SECTION 3.7, SECTION 3.8,
ARTICLE VII, ARTICLE IX, and ARTICLE X shall survive the expiration or
termination of this Agreement and shall continue in effect after the date of
expiration or termination. In addition, Licensor hereby grants to Licensee,
effective upon expiration of this Agreement, a non-exclusive, royalty-free,
fully paid-up, sublicensable license to the Licensor Know-How that may be
infringed by the Licensed Products.

(b) Payments of amounts owing to any Party under this Agreement as of its
expiration or termination shall be due and payable either (i) to the extent such
amounts can be calculated and a fixed sum determined at the time of expiration
or termination of this Agreement, thirty (30) days after the date of such
expiration or termination, or (ii) to the extent such amounts cannot be
calculated and a fixed sum determined at the time of expiration or termination
of this Agreement, thirty (30) days after the date on which such amounts can be
calculated and a fixed sum determined.

(c) Licensee and its Affiliates and sublicensees shall have the right to sell or
otherwise dispose of the stock of any Licensed Product subject to this Agreement
on hand or in process of manufacture as of the termination of this Agreement.
Within thirty (30) days after the effective date of termination of this
Agreement, Licensee shall notify Licensor of the amount of Licensed Product that
Licensee, its Affiliates and sublicensees then have on hand or in the process of
manufacture. Licensee shall have the right to sell in the Territory (subject to
Regulatory Approvals), such remaining stock of Licensed Product for a period
ending upon the earlier of: (i) Licensee’s, its Affiliates’ and sublicensees’
sale of all such remaining Licensed Product, or (ii) 6 months after such
termination, and terms and conditions of this Agreement shall apply to such
Licensed Product so sold. Licensor hereby grants Licensee, effective upon
termination of this Agreement, a non-exclusive license under the Licensor
Intellectual Property solely to sell such Licensed Product in the Territory,
subject to payment of all related amounts due under this Agreement. Any
remaining quantities of Licensed Product not sold during this period shall, at
Licensor’s election, either be destroyed by Licensee at Licensee’s cost or sold
to Licensor at Licensee’s procurement cost for such Licensed Product.

(d) Upon the termination of this Agreement: (i) each Party shall, at the request
of the other Party, return or destroy all copies of the other Party’s
Proprietary Information, provided, however, that a Party may keep one copy of
such Proprietary Information if required to comply with any Applicable Laws; and
(ii) if termination was for material breach of this Agreement by Licensee, the
(1) Licensee shall transfer to Licensor any and all Investigational Drug
Applications, Regulatory Approvals, and any other regulatory filings or
submissions made or filed for Licensed Product by Licensee or its designees, and
(2) Licensee shall transfer to Licensor any Data or materials relating to the
Technology or the Licensed Products.

 

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ARTICLE IX

INDEMNIFICATION; LIMITATIONS OF LIABILITY

SECTION 9.1. Indemnity. For purposes of this SECTION 9.1, “Licensor Indemnified
Parties” refers to Licensor, its Affiliates and the officers, directors,
employees, shareholders, agents and successors and assigns of Licensor and its
Affiliates, and “Licensee Indemnified Parties” refers to Licensee, its
Affiliates and officers, directors, employees, shareholders, agents and
successors and assigns of Licensee and its Affiliates.

SECTION 9.2. Licensee Indemnification. Licensee shall defend the Licensor
Indemnified Parties from and against all suits, claims, actions, demands,
complaints, lawsuits or other proceedings, (collectively, “Claims”), that are
brought by a Third Party, and shall indemnify and hold harmless to the fullest
extent permitted by law the Licensor Indemnified Parties from and against any
and all Losses, that arise out of or are attributable to (i) Licensee’s gross
negligence or willful misconduct in exercising or performing any of its rights
or obligations under this Agreement; or (ii) a material breach by Licensee of
any of its obligations, representations, warranties or covenants under this
Agreement; provided, however, that Licensee shall not be obligated to indemnify
Licensor under this SECTION 9.2, to the extent such Claim arose out of the gross
negligence or willful misconduct of Licensor or to the extent such Claim is
covered by Licensor’s indemnity below.

SECTION 9.3. Licensor Indemnification. Licensor shall defend the Licensee
Indemnified Parties from and against all Claims, in each case that are brought
by a Third Party, and shall indemnify and hold harmless to the fullest extent
permitted by law the Licensee Indemnified Parties from and against any and all
Losses that arise out of such Claims that are attributable to (i) the use of the
Licensor Intellectual Property as authorized by this Agreement infringing,
misappropriating or violating the Intellectual Property rights of such Third
Party, (ii) Licensor’s gross negligence or willful misconduct in exercising or
performing any of its rights or obligations under this Agreement; or (ii) a
material breach by Licensor of any of its obligations, representations,
warranties or covenants under this Agreement; provided, however, that Licensor
shall not be obligated to indemnify Licensee under this SECTION 9.3, to the
extent such Claim arose out of the gross negligence or willful misconduct of
Licensee.

SECTION 9.4. Indemnification Procedure.

(a) Each Party shall promptly notify the other Party in writing of any Claim.
Concurrent with the provision of notice pursuant to this SECTION 9.4(a), the
indemnified Party shall provide to the other Party copies of any complaint,
summons, subpoena or other court filings or correspondence related to such Claim
and will give such other information with respect thereto as the other Party
shall reasonably request. The indemnifying Party and indemnified Party shall
meet to discuss how to respond to such Claim. Failure to provide prompt notice
shall not relieve any Party of the duty to defend or indemnify unless such
failure materially prejudices the defense of any matter. Each Party agrees that
it will take reasonable steps to minimize the burdens of the litigation on
witnesses and on the ongoing business of the indemnified Parties including by
making reasonable accommodations to witnesses’ schedules when possible and
seeking appropriate protective orders limiting the duration and/or location of
depositions.

(b) Should either Party dispute that any Claim or portion of a Claim (“Disputed
Claim”) of which it receives notice pursuant to SECTION 9.4(a), is an
indemnified Claim, it shall so notify the other Party providing written notice
in sufficient time to permit such other Party to retain counsel and timely
appear, answer and/or move in any such action. In such event, such other Party
shall defend against such Claim; provided, however, that such other Party shall
not settle any Claim which it

 

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contends is an indemnified Claim without providing the indemnifying Party 10
Business Days’ notice prior to any such settlement and an opportunity to assume
the defense and indemnification of such Claim pursuant to this Agreement. If it
is determined that a Disputed Claim is subject to indemnification, the
indemnifying Party will reimburse the costs and expenses, including reasonable
attorneys’ fees, of the indemnified Party.

SECTION 9.5. Settlement of Indemnified Claims. The indemnifying Party under
SECTION 9.2 or SECTION 9.3, as applicable, shall have the sole authority to
settle any indemnified Claim without the consent of the other
Party, provided, however, that an indemnifying Party shall not, without the
written consent of the other Party, as part of any settlement or compromise
(i) admit to liability on the part of the other Party; (ii) agree to an
injunction against the other Party; (iii) separately apportion fault to the
other Party in any manner or (iv) agree to a settlement or compromise that would
result in any loss of rights or material liability to the other Party. The
Parties further agree that as part of the settlement of any indemnified Claim,
an indemnifying Party shall obtain a full, complete and unconditional release
from the claimant on behalf of the indemnified Parties.

SECTION 9.6. Limitation of Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE
TO THE OTHER OR ANY OF ITS AFFILIATES FOR ANY CONSEQUENTIAL, INCIDENTAL,
INDIRECT, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES (INCLUDING LOST PROFITS,
BUSINESS OR GOODWILL) SUFFERED OR INCURRED BY SUCH OTHER PARTY OR ITS
AFFILIATES, WHETHER BASED UPON A CLAIM OR ACTION OF CONTRACT, WARRANTY,
NEGLIGENCE, STRICT LIABILITY OR OTHER TORT, OR OTHERWISE, ARISING OUT OF THIS
AGREEMENT. THE FOREGOING SENTENCE SHALL NOT LIMIT THE OBLIGATIONS OF EITHER
PARTY TO INDEMNIFY THE OTHER PARTY FROM AND AGAINST THIRD PARTY CLAIMS UNDER
THIS ARTICLE.

ARTICLE X

MISCELLANEOUS

SECTION 10.1. Force Majeure. Neither Party shall be held liable or responsible
to the other Party nor be deemed to have defaulted under or breached the
Agreement for failure or delay in fulfilling or performing any term of the
Agreement during the period of time when such failure or delay is caused by or
results from events beyond the reasonable control of a Party, including fire,
flood, earthquake, explosion, storm, blockage, embargo, war, acts of war
(whether war be declared or not), terrorism, insurrection, riot, civil
commotion, strike, lockout or other labor disturbance, failure of public
utilities or common carriers, act of God or act, omission or delay in acting by
any governmental authority or the other Party. The affected Party shall notify
the other Party of such force majeure circumstances as soon as reasonably
practicable.

SECTION 10.2. Assignment. No Party may assign (including assignments by
operation of law) or assume in bankruptcy this Agreement or any of its rights,
interests or obligations hereunder, in whole or in part, without the prior
written approval of the other Party in its sole discretion. Any purported
transaction in violation of the foregoing shall be null and void ab initio and
of no force or effect.

SECTION 10.3. Severability. In the event that any of the provisions contained in
this Agreement are 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. In such event, the Parties covenant and agree to renegotiate any such
term, covenant or application thereof in good faith in order to provide a
reasonably acceptable alternative to the term, covenant or condition of this
Agreement or the application thereof that is invalid or unenforceable, it being
the intent of the Parties that the basic purposes of this Agreement are to be
effectuated.

 

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SECTION 10.4. Notices.

(a) Correspondence, reports, documentation, and any other communication in
writing between the Parties in the course of ordinary implementation of this
Agreement (but not including any notice required by this Agreement) shall be in
writing and delivered by hand, sent by email, or by overnight express mail
(e.g., FedEx) to any single representative designated by the Party which is to
receive such written communication.

(b) Extraordinary notices and communications (including but not limited to
notices of termination, force majeure, material breach, change of address, or
any other notices required by this Agreement) shall be in writing, hand
delivered or sent by overnight courier or express mail service (e.g., FedEx),
postage prepaid, or by facsimile or confirmed by prepaid registered or certified
air mail letter, return receipt requested, to the following addresses of the
Parties (or to such other address or addresses as may be specified from time to
time in a written notice):

if to Licensor to:

XIANGXUE LIFE SCIENCES LTD.

2 Jinfengyuan Road, Guangzhou, China

Attention: Mr. YongHui Wang

Tel. No.: +86 20 22211033

Fax No.: +86 20 22211666

E-mail: wyhsec@xphcn.com

if to Licensee to:

AXIS THERAPEUTICS LIMITED

Unit 608-613 IC Development Centre, No 6 Science Park West Avenue, Science Park,
Hong Kong

Attention: Johnson Y.N. Lau

Fax No.: +852 3706 5544

if to Athenex to:

Athenex, Inc.

Conventus Building, 1001 Main Street, Suite 600, Buffalo, New York 14203

Attention: Johnson Y.N. Lau

Fax No.: +852 3996 7454

 

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Any such communication shall be deemed to have been given when delivered if
personally delivered or sent by facsimile on a Business Day, upon confirmed
delivery by nationally-recognized overnight courier if so delivered, and on the
third Business Day following the date of mailing if sent by registered or
certified mail.

SECTION 10.5. Equitable Relief. Each of the Parties acknowledges and agrees that
the other Party may suffer irreparable and continuing damage for which there is
no adequate remedy at law in the event of a breach or threatened breach of this
Agreement. Accordingly, and notwithstanding anything herein to the contrary,
each of the Parties agrees that the other Party shall be entitled to seek
injunctive relief to prevent breaches of the provisions of this Agreement,
and/or to require specific performance of obligations under this Agreement and
the terms and provisions hereof, in any action instituted in any court or
tribunal having jurisdiction over the Parties and the matter, without posting
any bond or other security, and that such relief shall be in addition to any
other remedies to which such Party may be entitled, at law or in equity.

SECTION 10.6. Further Assurances. Each of the Parties shall take such further
actions as are necessary or desirable in order to effectuate the respective
rights and obligations hereunder.

SECTION 10.7. Applicable Law, Venue and Dispute Resolution. This Agreement,
including the validity hereof and the rights and obligations of the Parties
hereunder, shall be governed by and construed and interpreted in accordance with
the laws of Hong Kong, except to the extent that the matter in question is
mandatorily required to be governed by the laws of any other jurisdiction, in
which case it will be governed by the applicable provisions of such laws. Except
as provided in Section 10.5, all disputes that arise in connection with this
Agreement and the interpretation thereof shall first be discussed amicably
between the Parties. If the dispute cannot be settled in an amicable manner, it
will be settled by arbitration to be held in Hong Kong in conformity with
commercial arbitration rules of the International Chamber of Commerce. The award
rendered by arbitration shall be final and binding upon the Parties hereto, and
judgment may be entered by a court of competent jurisdiction.

SECTION 10.8. Entire Agreement. This Agreement, including the exhibits and
schedules hereto, contains the entire understanding of the Parties with respect
to the subject matter herein. All express or implied agreements and
understandings, either oral or written, heretofore made, including without
limitation any offering letters, letters of intent, or term sheets, are
expressly superseded by this Agreement. This Agreement may be amended, or any
term hereof modified, only by a written instrument duly executed by all Parties
hereto.

SECTION 10.9. Independent Contractors. It is expressly agreed that the Parties
will be independent contractors and that the relationship between the Parties
shall not constitute a partnership, joint venture or agency. Neither Party has
the authority to make any statements, representations or commitments of any
kind, or to take any action, that are binding on the other Party without the
prior written consent of such other Party.

SECTION 10.10. Waiver. The waiver by a Party hereto of any right hereunder shall
not be deemed a waiver of any other right hereunder, whether of a similar nature
or otherwise.

SECTION 10.11. Construction. The headings of this Agreement are for convenience
only and shall not affect its construction. This Agreement shall be construed as
if drafted jointly by the Parties. The use of the word “including” in this
Agreement shall mean “including without limitation.” Words such as “herein,”
“hereof,” and “hereunder” refer to this Agreement as a whole unless the context
otherwise requires.

 

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SECTION 10.12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Signatures to the
Agreement transmitted by fax, by email in “portable document format” (“.pdf”) or
by any other electronic means intended to preserve the original graphic and
pictorial appearance of the Agreement shall have the same effect as physical
delivery of the paper document bearing an original signature.

SECTION 10.13. No Third Party Beneficiaries. Except as specifically set forth
herein, none of the provisions of this Agreement shall be for the benefit of or
enforceable by any Third Party, including any creditor of either Party hereto.
No such Third Party shall obtain any right under any provision of this Agreement
or shall by reasons of any such provision make any claim in respect of any debt,
liability or obligation (or otherwise) against either Party hereto.

SECTION 10.14. Prior Approval. The Parties acknowledge and agree that the
effectiveness of this Agreement is conditioned on (i) the approval of the Board
and shareholder approval of Xiangxue Pharmaceutical Co. Ltd. and of Licensor and
(ii) the approval of the Securities Regulatory Committee and Shenzhen Stock
Exchange, and the Parties agree to take all reasonable actions and execute all
documents necessary to obtain such approvals.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first set forth above.

 

XIANGXUE LIFE SCIENCES LTD. By:  

 

Name:   YongHui Wang Title:   CEO AXIS THERAPEUTICS LIMITED By:  

 

Name:   Johnson Y.N. Lau Title:   CEO

Solely for the purposes of Section 4.1:

 

ATHENEX, INC. By:  

 

Name:   Johnson Y.N. Lau Title:   Chairman and CEO