EXHIBIT
10.1


 


EXECUTION
COPY


 


CONFIDENTIAL TREATMENT REQUEST


 


***  Portions denoted with
asterisks have been omitted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment.


 


AMENDED &
RESTATED COMMERCIAL RESEARCH AND LICENSE AGREEMENT


 


This Amended & Restated Commercial Research and License
Agreement (“Agreement”) is entered into as of November 6, 2009 (“Execution
Date”), by and between GlaxoSmithKline LLC, a Delaware limited liability
company (formerly known as SmithKline Beecham Corporation d/b/a
GlaxoSmithKline), with its principal place of business located at One Franklin
Plaza, Philadelphia, Pennsylvania 19101 (“GSK”) and SuperGen, Inc.,
a company organized under the laws of the State of Delaware, with its principal
place of business located at 4140 Dublin Blvd., Suite 200, Dublin, CA
94568 (“SGI”). Each of GSK and SGI hereinafter referred to as a “Party”
and together, the “Parties”.


 


On October 27, 2009, SmithKline Beecham
Corporation d/b/a GlaxoSmithKline effected a corporate conversion pursuant to
Delaware law into a Delaware limited liability company known as GlaxoSmithKline
LLC.


 


The Parties entered into that certain Commercial
Research and License Agreement, effective October 22, 2009 (“Effective
Date”) (“Prior Agreement”), and have elected to amend and restate
the Prior Agreement as set forth herein, effective as of the Execution Date.


 


SGI owns or possesses certain intellectual property
with respect to the discovery and development of novel drug compounds, and
believes that certain of these drug compounds may have the potential to be used
therapeutically for the treatment of human cancer and other diseases;


 


SGI desires to collaborate with a pharmaceutical
company with late-stage development and commercialization expertise, so as to
realize the therapeutic and commercial potential of the drug compounds;


 


GSK possesses expertise in the research,
development, manufacturing and commercialization of human pharmaceuticals, and
GSK is interested in developing the drug compounds discovered by SGI;


 


GSK desires to engage in a collaborative effort with
SGI pursuant to which SGI will carry out research and development programs to
discover and develop compounds, and GSK will have the GSK Option (as defined
below), exercisable at GSK’s sole discretion, to further develop and
commercialize such compounds for any and all uses in the Field (as defined
below) in the Territory (as defined below), all on the terms and conditions set
forth herein; and


 


Upon exercise by GSK of the GSK Option, SGI desires
to grant to GSK, and GSK desires to obtain, an exclusive license under the SGI
Patents (as defined below) to make, have made, use, sell, offer for sale and
import Products (as defined below) in the Field throughout the Territory on the
terms and conditions set forth herein.


 


The Parties hereby agree as follows:


 


1.                                                    DEFINITIONS


 


As used herein, the following capitalized terms will have the following
meanings, and singular forms, plural forms and derivative forms thereof will be
interpreted accordingly:


 


a.                                       “Adverse
Event” means any unfavorable and unintended sign including an abnormal
laboratory finding, symptom or disease associated with the use of a Compound or
a Product, regardless of 


 


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whether it is considered related to the Compound or Product,
that occurs during the course of the PoC Trial.


 


b.                                      “Affiliate”
means any corporation or other business entity that controls, is controlled by,
or is under common control with a Party. A corporation or other entity will be
regarded as in “control” of another corporation or entity if it (i) owns
or directly or indirectly controls at least fifty percent (50%) of the
outstanding shares or other voting rights of the other corporation or entity
having the right to elect directors or such lesser percentage that is the
maximum permitted to be owned by a foreign entity in those jurisdictions where
majority ownership by foreign entities is prohibited, or (ii) in the case
of a non-corporate business entity, if it possesses, directly or indirectly,
the power to direct or cause the direction of the management and policies of
the corporation or non-corporate business entity, as applicable, whether
through the ownership or control of voting securities, by contract or
otherwise.


 


c.                                       “Back-Up
Compound” means, with respect to a Lead Compound or Follow-On Compound in
the Project, a Compound that: (i) supplants or is intended to supplant
such Lead Compound or Follow-On Compound, as applicable, if such Lead Compound
or Follow-On Compound is removed from development and (ii) is within the
same chemical class as the Lead Compound or Follow-On Compound that it is
intended to supplant. If a Back-Up Compound supplants a Lead Compound or a
Follow-On Compound, then that Back-Up Compound will become the Lead Compound or
the Follow-On Compound, respectively.


 


d.                                      “Candidate
Selection Compound” means a Compound that meets its Candidate Selection
Criteria, or is deemed by the JRC, or by GSK as set forth in Sections 2(c)v.A
and 2(c)v.B, as having met its Candidate Selection Criteria.


 


e.                                       “Candidate
Selection Criteria” means those criteria for candidate selection agreed to
by the Parties within five (5) days of the Execution Date pursuant to a
letter agreement between the Parties.


 


f.                                         “Change of
Control Transaction” means, with respect to a Party, any transaction or
series of related transactions that constitutes: (i) the sale or lease of
all or substantially all of such Party’s business or assets to an
acquiring entity; (ii) any merger, consolidation, share exchange,
recapitalization, business combination or other transaction to which such Party
is subject, resulting in the exchange or sale of all or substantially all of
the outstanding shares of such Party for securities or other consideration
paid, issued, or caused to be issued, by the acquiring entity; or (iii) an
acquiring entity having obtained beneficial ownership of fifty percent (50%) or
more of the outstanding voting securities of such Party; unless in any of cases
(ii) or (iii) the stockholders of such Party as of the date prior to
the closing date of such transaction or series of related transactions hold
more than fifty percent (50%) of the voting securities in the surviving entity
in such transaction or its parent outstanding immediately after the closing of
such transaction or series of transactions (provided that a “Change of Control
Transaction” will not be deemed to have occurred by virtue of GSK at any time
holding more than fifty percent (50%) of the voting securities in SGI).


 


g.                                      “CLIMBTM”
or “CLIMB” means that certain proprietary process, comprising hardware,
software, bench chemistry, synthesis, analysis and testing used by SGI for the
purpose of the discovery, evaluation and development of new chemical entities.


 


h.                                      “Commercially
Reasonable Efforts” means efforts
that are consistent with the efforts and resources normally used by a
Party in the exercise of its reasonable business discretion, relating to the
research and development progression of a potential pharmaceutical product
owned by it 


 


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or to which it has exclusive rights, with similar product
characteristics, which is of similar market potential at a similar stage in its
development or product life, taking into account issues of patent coverage,
safety and efficacy, product profile, the competitiveness of the marketplace,
the proprietary position of the compound or product, the regulatory structure
involved, likelihood of obtaining regulatory approval, the profitability of the
applicable products (including, without limitation, pricing and reimbursement
status achieved), and other relevant factors, including without limitation
technical, legal, scientific and/or medical factors. For purposes of clarity, “Commercially
Reasonable Efforts” shall be determined on a market-by-market and
indication-by-indication basis for a particular Product and it is anticipated
that the level of effort may be different for different markets and may change
over time, reflecting changes in the status of the Product and the market(s) involved.


 


i.                                          “Compassionate Use Sales”
means the distribution or sale of Licensed Compounds as experimental
therapeutics prior to final FDA or foreign regulatory approval for use in humans.
For purposes of this Agreement, Compassionate Use Sales will also included “Named
Patient Sales” in jurisdictions where the latter term is used for the same or
similar purposes (e.g., EU).


 


j.                                          “Compound”
means any [***] owned or Controlled by SGI, as well as: (i) any pro-drugs
of such compounds, (ii) any metabolites of such compounds having [***]
target activity, (iii) all stereoisomers of such compounds including salts
of (i) (ii) and (iii), and any solvates or polymorphs of such
compounds. Compound will not include [***] and all stereoisomers, salts,
polymorphs, esters and acids of [***], or analogues of [***]. “Compound” will
also not include [***] or its derivatives or analogues, including [***].


 


k.                                       “Confidential Information”
means any proprietary or confidential information or material in tangible form
disclosed by one Party to the other hereunder that is marked as “Confidential”
at the time it is delivered to the receiving Party, or, if disclosed orally,
which is identified as confidential when disclosed and confirmed as such in
writing to the receiving Party within thirty (30) days thereafter, but in all
events excluding information that the receiving Party can demonstrate by
contemporaneously prepared competent evidence that:


 


i.                  is or becomes part of the public domain other
than by acts of the receiving Party in contravention hereof;


 


ii.               is disclosed to the receiving Party or its
Affiliates or Sublicensees by a Third Party who had the right to disclose such
Confidential Information to the receiving Party without obligation to the
disclosing Party;


 


iii.            prior to disclosure hereunder, was already in the
possession of the receiving Party or its Affiliates or Sublicensees without
obligation of non-use or nondisclosure; or


 


iv.           was independently discovered or developed by the
receiving Party without reference to or use of Confidential Information of the
disclosing Party.


 


l.                                          “Control” or “Controlled”
means the possession by a Party of the ability to grant a license or sublicense
as provided for herein without violating the terms of any agreement or other
arrangement with any Third Party that exists at the time of such license or
sublicense grant.


 






***              CONFIDENTIAL
TREATMENT REQUEST


Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.


 


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m.                                    “EMEA” means the
European Medicines Evaluation Agency, and any successor agency thereto.


 


n.                                      “EU Major Markets”
means Italy, Spain, France, Germany and the United Kingdom.


 


o.                                      “FDA” means the US
Food and Drug Administration and any successor entity thereto.


 


p.                                      “Field” means the
treatment, prevention, palliation or diagnosis of any disease or condition
adverse to human or animal health.


 


q.                                      “First Commercial Sale”
means, on a country-by-country, Product-by-Product basis, the first sale of a
Product to a Third Party for value, including Compassionate Use Sales. Registration samples, inter-company transfers
to Affiliates of a Party, transfers to a contract research organization or a
healthcare provider solely for clinical trial purposes in each case that do not
constitute a sale to a Third Party for value will not constitute a “First
Commercial Sale”.


 


r.                                         “Follow-On
Compound” means, with respect to the Lead Compound in the Project, a
Compound that (i) possesses a substantially different selectivity profile
towards [***] and/or [***], as the case may be, (ii) is from a [***] of
such Lead Compound or any Back-Up Compound to such Lead Compound, or (iii) is
reasonably expected to be [***] from such Lead Compound and from any Back-Up
Compound. For purposes of clarity, if a Back-Up Compound supplants a Follow-On
Compound, then that Back-Up Compound will become that Follow-On Compound.


 


s.                                       “GSK Group” means,
collectively, GSK and its Affiliates and its Sublicensee(s), if any.


 


t.                                         “GSK
Housemark” means the “GlaxoSmithKline” company name, any corporate logos of
the Seller, and, in each case, any variations thereof.


 


u.                                      “IND”
means an Investigational New Drug application, as defined in the US Food, Drug
and Cosmetic Act and the regulations promulgated thereunder, or any
corresponding foreign application, registration or certification.


 


v.                                      “Intellectual Property
Rights” means, collectively, all worldwide Patents, copyrights, copyright
registrations, trade names, trademarks, service marks, domain names and
registrations and/or applications for all of the foregoing, trade secrets,
know-how, rights in trade dress and packaging, goodwill and all other
intellectual property rights and proprietary rights, whether arising under the
laws of the US or the laws of any other state, country or jurisdiction.


 


w.                                    “Invention” means any
and all ideas, design, development, concepts, methods, procedures, processes,
improvements, inventions, know-how, technologies, data, discoveries, and
reductions to practice, whether or not patentable, which are first made,
conceived or first reduced to practice in the course of the joint or separate
activities of the Parties and/or their respective Affiliates and subcontractors
conducted in connection with this Agreement.


 


x.                                        “Joint Patent” means
any Patent claiming a Joint Invention.


 


y.                                      “Joint Patent Committee”
or “JPC” means the committee, established by the Parties to oversee
intellectual property matters related to the Project as further described in Section 3.


 


z.                                        “Joint Research Committee”
or “JRC” means the committee established by the Parties to oversee the
scientific and clinical progress of the Project, as further described in Section 3.


 






***              CONFIDENTIAL
TREATMENT REQUEST


Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.


 


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aa.                                 “Lead Compound”
means, at any particular point in time, the furthest advanced Compound within
the Project as identified by SGI.


 


bb.                               “Licensed Compound”
means those Compounds licensed to GSK upon GSK’s exercise of the GSK Option
pursuant to Section 4(a) which shall consist of: (i) the Lead
Compound, (ii) the Follow-On Compound, (iii) all Back-Up Compounds to
the Lead Compound and Follow-On Compound and (iv) all other Compounds [***] demonstrated by the Lead Compound or
Follow-On Compound as shown in [***] which are discovered or
made by SGI during the Research Term of this Agreement and for two years
thereafter in accordance with Section 4(i)ii.C.


 


cc.                                 “Major Indication”
means each of colorectal cancer, non-small cell lung cancer, prostate cancer or
breast cancer. In addition, Major Indications will also include such other
indications, separate and apart from the foregoing indications, that have an
incidence of at least Fifty Thousand (50,000) patients per year in the US, in
each case as approved by the JRC.


 


dd.                               “Manufacturing Cost”
means the following costs and expenses actually incurred by a Party (or its
Affiliates or Sublicensees, as applicable) in each case only to the extent
allocable to the manufacture or storage of the Compound or Product and included
in determining inventory value in its financial statements for the Compound or
Product when the accounting principles and policies as practiced and disclosed
in public regulatory filings are applied: costs of labor, costs of material,
third-party contract manufacturing costs, quality assurance and quality control
related expenses, directly incurred energy, utilities and other charges and
normal production overhead.


 


ee.                                 “MM” means million.


 


ff.                                     “NDA” means a New
Drug Application, as defined in 21 C.F.R. 314.5 et seq. or
its successor regulation and all amendments and supplements thereto, filed with
the FDA, or any corresponding foreign application, registration or
certification, filed with a Regulatory Agency.


 


gg.                               “Net Sales”
means, on a Product-by-Product basis, the gross amount invoiced on the last
sale of the Product(s) by any member of the GSK Group or SGI Group, as
applicable, to a Third Party, less reasonable and customary deductions for (i) actual
credits or allowances granted for damaged Products, including withdrawals and
recalls, returns or rejection of Products, price adjustments, and billing
errors; (ii) actual governmental and other rebates and chargebacks (or
equivalents thereof); (iii) actual sales, value-added and other taxes (but
in the case of value added taxes only to the extent such taxes are not
reimbursable or refundable); (iv) actual customs duties on sales made by
such member of the GSK Group or the SGI Group to the such Third Party; (v) normal and customary trade, cash
and quantity discounts, allowances, and credits actually allowed or paid such
Party; (vi) commissions allowed or paid to Third Party distributors,
brokers, or agents other than sales personnel, sales representatives, and sales
agents employed by such Party; (vii) transportation costs, including
insurance, for outbound freight related to delivery of Product to the extent
included in the gross amount invoiced; (viii) the actual amount of any
write offs for bad debt directly relating to sales of Product in the relevant
royalty reporting period; and (ix) any other items actually deducted from
gross invoiced sales amounts, in each case as reported by such Party in its
financial statements in accordance 


 






***              CONFIDENTIAL
TREATMENT REQUEST


Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.


 


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with, in
the case of GSK’s Net Sales, which is a component of turnover as reported by
GSK in its published financial statements, the International Financial
Reporting Standards, applied on a consistent basis, and in the case of Third
Party’s Net Sales, the U.S. generally accepted accounting principles applied on
a consistent basis.


 


If a Product is sold for consideration other than solely cash, the fair
market value of such other consideration, as determined by the Parties in good
faith, will be included in the calculation of Net Sales. Sales between or among either Party and
its Affiliates or Sublicensees will be excluded from the computation of such
Party’s Net Sales, but the subsequent final sales to a Third Party by such
Affiliates or Sublicensees will be included in the computation of such Party’s
Net Sales.


 


In the event a combination product (or bundling with any other product,
component, or service, for a single price) is formulated, royalties on
combination (or bundled) products will be calculated separately by multiplying
the total Net Sales of the combination (or bundled) product by the fraction
A/(A+B), where A is the actual average total invoice price throughout the
Territory, as the case may be, in each calendar quarter of the Product if sold
separately (e.g., without other therapeutically or prophylactically active
ingredients) and B is the sum of the actual average total invoice price
throughout the Territory of all other therapeutically or prophylactically
active ingredients or other components of the combination (or bundled) product
if sold separately.


 


In calculating the royalty on a country-by-country basis, the Party
shall use the countries representing eighty percent (80%) of the combination
product revenues to calculate a weighted average ratio that will then be
applied to all other markets globally it being understood that should said
countries represent less than eighty percent (80%) of the combination product
revenues as a basis for calculating a weighted average ratio to be applied to
other markets, the parties shall then confer in good faith to agree on the
selection of the countries to be included in the calculation of the royalty.
The markets representing eighty percent (80%) of the total world-wide business
shall be assessed on an annual basis of combination product if there are shifts
in relative sales of combination product and the selection of the countries to
be included in the calculation of the royalty shall be modified based on such
assessment. The Net Sales definition shall be permitted to be amended as
appropriate to reflect changes to each Party’s accounting rules (e.g.,
change from UK GAAP to IFRS) brought by merger, take-over or law, provided that
any and all such changes are net neutral to the royalties payable on Net Sales,
i.e., royalty rates must be adjusted to account for any such change such that
neither Party realizes a gain or a loss from its pre-change position. An
example of how the combination net sales mechanism would work is set forth on ExhibitB. The example is for illustrative purposes only and
not based on any actual data or country.


 


hh.                               “Paragraph
IV Litigation” means any litigation or pre-litigation response
commenced by a Party in response to a Third Party certification in accordance
with and within the time specified by Section 505(j)(5)(B)(iii) of
the Federal Food, Drug, and Cosmetic Act following submission to the FDA of a
certification in accordance with Section 505(j)(2)(A)(vii)(iv) of the
Federal Food, Drug, and Cosmetic Act solely with regard to claims of
infringement, invalidity and unenforceability of a Product-related patent.


 


ii.                                       “Patent” means (i) all
patents and patent applications in any country or supranational jurisdiction in
the Territory, (ii) any substitutions, divisions, continuations,
continuations-in-part, provisional applications, reissues, renewals,
registrations, confirmations, re-examinations, extensions, supplementary
protection certificates and the like of any such patents or patent 


 


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applications, and (iii) foreign counterparts of any of the
foregoing.


 


jj.                                       “Phase 1” means, with
respect to the US, the human clinical trials, as described in 21 C.F.R.
§312.21(a), as may be amended, and, with respect to any other country or
jurisdiction, the equivalent of such a clinical trial in such other country or
jurisdiction.


 


kk.                                 “Phase 2” means, with
respect to the US, the human clinical trials, as described in 21 C.F.R.
§312.21(b), as may be amended, and, with respect to any other country or
jurisdiction, the equivalent of such a clinical trial in such other country or
jurisdiction.


 


ll.                                       “Phase 3” means, with
respect to the US, the human clinical trials, as described in 21 C.F.R.
§312.21(c), as may be amended, and, with respect to any other country or
jurisdiction, the equivalent of such a clinical trial in such other country or
jurisdiction.


 


mm.                           “PoC” means proof of
concept.


 


nn.                               “PoC Criteria” means
the clinical and non-clinical criteria for determining if a Candidate Selection
Compound under study in a PoC Trial demonstrates a [***]. The PoC Criteria may
include one or more biomarkers. The initial PoC Criteria are to be agreed
between the Parties within five (5) days of the Execution Date pursuant to
a letter agreement between the Parties; provided, that more specific and/or detailed
PoC Criteria may be finalized in writing by the JRC (with input from the JPC)
during the Research Term with respect to Candidate Selection Compounds. It is
understood and agreed by the Parties that if more specific and/or detailed PoC
Criteria are not finalized in writing by the JRC that the PoC Criteria set
forth in the letter agreement will apply.


 


oo.                               “PoC Trial” means a clinical trial for a
particular Candidate Selection Compound to demonstrate the PoC Criteria.


 


pp.                               “Product”
means any pharmaceutical product that contains a Licensed Compound, whether or
not as the sole active ingredient, in any dosage form or formulation.


 


qq.                               “Project” means all
of SGI’s research and development activities on Compounds through completion of
a PoC Trial or earlier as agreed by the Parties.


 


rr.                                     “Regulatory Agency”
means, with respect to any particular country or, where applicable, a
multinational jurisdiction, the governmental authority, body, commission,
agency or other instrumentality of such country or multinational jurisdiction
(e.g., the EMEA with respect to the European Union), with the primary
responsibility for the evaluation or approval of pharmaceutical products before
a Product can be tested, marketed, promoted, distributed or sold in such
country or multinational jurisdiction, including such governmental bodies, if
any, that have jurisdiction over the pricing of such pharmaceutical product.
The term “Regulatory Agency” includes, without limitation, the FDA and the
EMEA.


 


ss.                                 “Regulatory Approval”
means, with respect to a nation or, where applicable, a multinational
jurisdiction, such approvals, licenses, registrations or authorizations that
are required to be obtained from a Regulatory Agency prior to the manufacture,
marketing and sale of a Product for use in the Field in such country or
multinational jurisdiction (including, where applicable, 


 






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pricing approvals necessary to obtain reimbursement).


 


tt.                                     “Regulatory-Based
Exclusivity Period” means, with respect to a Product in a country in
the Territory, that period of time during which a Regulatory Agency is
prohibited from granting of final approval of (i) an application to market
a Generic Product (as defined in Section 6(a)ii.B below), or (ii) an
application to market any product that relies upon Regulatory Approval of the
applicable Product or the safety and efficacy data used to support Regulatory
Approval of the Product.


 


uu.                               “Regulatory
Filing” means any filing with a Regulatory Agency relating to the clinical
evaluation or Regulatory Approval of a Product, including all Supporting Data.
Regulatory Filings include, without limitation, INDs and NDAs and their ex-US
counterparts. Regulatory Filings will include all documents, data and
information used or required to support a marketing application, manufacture,
sale or distribution of a Product.


 


vv.                               “Rejected Compound”
means a Compound that has failed to meet either the Candidate Selection
Criteria or the PoC Criteria.


 


ww.                           “Research Plan” means
the written plan that will describe the research and development activities
that are to be carried out by the Parties and agreed to by the Parties within
five (5) days of the Execution Date pursuant to a letter agreement between
the Parties.


 


xx.                                   “Research Term” means
that period from the Effective Date until the fifth anniversary of the
Effective Date, unless this Agreement is earlier terminated or extended in
accordance with its terms.


 


yy.                               “SGI Group” means,
collectively, collectively, SGI and its Affiliates and its Sublicensee(s), if
any.


 


zz.                                   “SGI IP” means SGI Know-How,
SGI Patents and SGI Technical Information.


 


aaa.                           “SGI Know-How” means
all tangible and intangible (a) [***]; whether stored or transmitted in
oral, documentary, electronic or other form, including regulatory
documentation, in each case with respect to (a) and (b) above,
created by SGI or its Affiliates after the Effective Date in the course of
performing the Research Plan that is directly related to Licensed Compounds or
Product(s) incorporating Licensed Compounds; but in all events excluding (i) any
or all of the foregoing that is owned or Controlled by a Successor prior to the
date that a Successor consummates a Change of Control Transaction with respect
to SGI or prior to any other transaction pursuant to which the Successor
succeeds to all or substantially all of SGI’s business or assets pertaining to
the subject matter of this Agreement, whether by merger, reorganization,
acquisition or otherwise and (ii) CLIMB and any other practices, methods,
techniques, trade secrets, inventions or any other information that SGI owns,
controls, uses or may use in the conduct of drug discovery research hereunder
or otherwise.


 


bbb.                        “SGI Patents” means
all Patents Controlled by SGI or its Affiliates during the term of this
Agreement (other than Joint Patents) that claim, generically or specifically,
the (i) composition of matter of a Licensed Compound(s) and/or
Product(s) comprising Licensed Compounds or (ii) method of use of
Licensed Compound(s) and/or Product(s) comprising Licensed Compounds,
or (iii) method of manufacture of Licensed Compound(s) and/or Product(s) comprising
Licensed 


 






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Compounds, but shall exclude any and all Patents owned or Controlled by
a Successor prior to the date that a Successor consummates a Change of Control
Transaction with respect to SGI or prior to any other transaction pursuant to
which the Successor succeeds to all or substantially all of SGI’s business or
assets pertaining to the subject matter of this Agreement, whether by merger,
reorganization, acquisition or otherwise.


 


ccc.                           “SGI Technical
Information” means all tangible and intangible information, data and
results created by SGI or its Affiliates prior to the Effective Date and
Controlled by SGI or its Affiliates as of the Effective Date that is directly
related to Licensed Compounds or Product(s) incorporating Licensed
Compounds or is otherwise disclosed by SGI to GSK, including all data, or
results generated through application of CLIMB to the Project; but in all
events excluding any or all of the foregoing that is owned or Controlled by a
Successor prior to the date that a Successor consummates a Change of Control
Transaction with respect to SGI or prior to any other transaction pursuant to
which the Successor succeeds to all or substantially all of SGI’s business or
assets pertaining to the subject matter of this Agreement, whether by merger,
reorganization, acquisition or otherwise, and shall exclude CLIMB and any other
practices, methods, techniques, trade secrets, inventions or any other
information that SGI owns, controls, uses or may use in the conduct of drug
discovery research hereunder or otherwise.


 


ddd.                        “Sublicensee” means
any entity to which GSK or SGI, as applicable, directly or indirectly sells or
distributes, a Product (including Third Parties authorized to make and sell a
Product and Third Parties that purchase from another that is authorized to make
and sell a Product), provided that such Third Party is responsible for some or
all of the marketing and promotion of such Product within its portion of the
Territory, but excluding wholesalers and physical distributors. For clarity,
any contract manufacturer that has rights to sell or otherwise distribute
Product(s) will be considered a Sublicensee for purposes of this Agreement.


 


eee.                           “Successor”
means any entity that succeeds to all or substantially all of SGI’s business or
assets pertaining to the subject matter of this Agreement, including by means
of a Change of Control Transaction.


 


fff.                                 “Supporting
Data” means all data and information relating to (i) the pharmacological
or toxicological properties of any Product, (ii) any pre-clinical or
clinical testing and experience in relation to any Product and (iii) the
chemical composition, synthesis, formulation, compounding, and manufacturing
and quality control testing of any Product, to the extent reasonably required
for purposes of any application for Regulatory Approval for a Product.
Supporting Data will also include, but is not limited to, copies of annual
reports, integrated study reports, protocols for clinical research and
pre-clinical studies, protocol changes and amendments, Chemistry, Manufacturing
and Control (CMC) sections and amendments, safety data, clinical databases,
case report forms and access to patient records, toxicity, safety and
metabolism reports and data, and pharmacokinetic data and reports and relating
to any Product, as well as, in general, data or information which would
typically be part of any submission to FDA or other Regulatory Agency for the
purpose of obtaining approval of any Product for any indication.


 


ggg.                        “Territory” means the
entire world.


 


hhh.                        “Third Party” means
any entity other than the GSK Group and the SGI Group and each of the members
thereof.


 


iii.                                    “Third Party Claim”
means a liability, loss, fine, penalty, damage, expense, action, or claim
brought against an Indemnitee (defined herein) by a Third Party, for which such
Indemnitee seeks indemnification under Section 14 hereof.


 


9

















 


jjj.                                    “US” means United
States of America.


 


kkk.                           “US$” means US
Dollars.


 


lll.                                    “Valid Claim”  means either (i) a
claim of an application for a Patent that claims, generically or
specifically, the (A) composition of matter of a Licensed Compound(s) and/or
Product(s) comprising Licensed Compounds or (B) method of use of
Licensed Compound(s) and/or Product(s) comprising Licensed Compounds that has been pending for no more than eight (8) years
from the earliest date on which such patent application claims priority, which
claim was filed in good faith and has not been cancelled, withdrawn or
abandoned, or (ii) a claim within an issued Patent that claims,
generically or specifically, the (A) composition of matter of a Licensed
Compound(s) and/or Product(s) comprising Licensed Compounds or (B) method
of use of Licensed Compound(s) and/or Product(s) comprising Licensed
Compounds that has not expired, lapsed, or been cancelled, withdrawn,
disclaimed or abandoned, and, in each case of (i) or (ii) has not
been dedicated to the public, disclaimed, or held unenforceable, invalid, or
been cancelled by a court or administrative agency of competent jurisdiction in
an order or decision from which no appeal has been or can be taken, including
through opposition, re-examination, reissue or disclaimer.


 


Other
Defined Terms


 




	
  Term

  	
   

  	
  Section

  
	
  “Agreement”

  	
   

  	
  Introductory Clause

  
	
  “Alliance Managers”

  	
   

  	
  Section 3(c)

  
	
  “Arbitratable Dispute”

  	
   

  	
  Section 16(b)iii

  
	
  “Chairperson”

  	
   

  	
  Section 3(a)i

  
	
  “Chief Patent Counsels”

  	
   

  	
  Section 3(b)ii

  
	
  “Competing Compound”

  	
   

  	
  Section 2(g)

  
	
  “District Court”

  	
   

  	
  Section 16(a)ii

  
	
  “Effective Date”

  	
   

  	
  Introductory Clause

  
	
  “Executive Officers” -

  	
   

  	
  Section 3(a)iv

  
	
  “Expiration in Entirety”

  	
   

  	
  Section 9(a)

  
	
  “Force Majeure Event”

  	
   

  	
  Section 17(b)

  
	
  “Generic Entry”

  	
   

  	
  Section 6(a)ii.B

  
	
  “Generic Product”

  	
   

  	
  Section 6(a)ii.B

  
	
  “GSK”

  	
   

  	
  Introductory Clause

  
	
  “GSK Indemnitee”

  	
   

  	
  Section 14(a)

  
	
  “GSK Inventions”

  	
   

  	
  Section 10(g)ii

  
	
  “GSK Loss”

  	
   

  	
  Section 14(a)

  
	
  “GSK Option”

  	
   

  	
  Section 4(a)

  
	
  “GSK Product IP”

  	
   

  	
  Section 9(e)v.B

  
	
  “GSK Royalty”

  	
   

  	
  Section 6(b)i

  
	
  “Indemnitee”

  	
   

  	
  Section 14(c)i

  
	
  “Indemnitor”

  	
   

  	
  Section 14(c)i

  
	
  “IP Conflict”

  	
   

  	
  Section 3(b)i.A

  
	
  “Joint Invention”

  	
   

  	
  Section 10(g)iii

  
	
  “License”

  	
   

  	
  Section 4(b)

  
	
  “Party” or “Parties”

  	
   

  	
  Introductory Clause

  
	
  “Payee”

  	
   

  	
  Section 6(g)

  






 


10

















 


Other Defined Terms


 




	
  “Payor”

  	
   

  	
  Section 6(g)

  
	
  “PoC Trial Data Package”

  	
   

  	
  Section 2(c)vi.A

  
	
  “Product Expiration”

  	
   

  	
  Section 9(a)

  
	
  “Product Trademark”

  	
   

  	
  Section 9(e)v.N

  
	
  “Publication”

  	
   

  	
  Section 11(f)

  
	
  “Reverted Products”

  	
   

  	
  Section 9(e)v.A

  
	
  “Reverted Territory”

  	
   

  	
  Section 9(e)v.A

  
	
  “Rules”

  	
   

  	
  Section 16(b)iii.A

  
	
  “SAR”

  	
   

  	
  Section 2(c)iv.B

  
	
  “SGI”

  	
   

  	
  Introductory Clause

  
	
  “SGI Indemnitee”

  	
   

  	
  Section 14(b)

  
	
  “SGI Inventions”

  	
   

  	
  Section 10(g)i

  
	
  “SGI Loss”

  	
   

  	
  Section 14(b)

  
	
  “SGI Royalty”

  	
   

  	
  Section 6(a)i

  
	
  “State Court”

  	
   

  	
  Section 16(a)ii

  
	
  “TPP”

  	
   

  	
  Section 2(c)ii

  






 


11














 


2.                                                    RESEARCH
TERM


 


(a)                        Initial Term. The initial
Research Term will be five (5) years from the Effective Date, unless this
Agreement is earlier terminated; provided that the initial Research Term may be
extended by GSK in its sole discretion, through completion of a PoC Trial if (i) such
PoC Trial has commenced prior to expiration of such 5-year period, and (ii) GSK
has paid SGI the milestone for first dosing in a Phase 1 clinical trial.
Otherwise the initial Research Term may be extended by mutual written agreement
of the Parties.


 


(b)                       Objectives;
Efforts.


 


i.                            During the Research Term, SGI shall use Commercially
Reasonable Efforts to perform the Research Plan to progress a Lead, Follow-On
and/or Back-up Compound through to completion of a PoC Trial in order to
demonstrate the PoC Criteria, including conducting the following:


 


A.           Stage 1, Stage 2 and Stage 3 activities (as
applicable and discussed in the Research Plan) for the Lead Compound, and as
appropriate a Back-up Compound to the Lead Compound, through to achievement of
the Candidate Selection Criteria;


 


B.             In the event that a Follow-On Compound is
established, Stage 1, Stage 2 and Stage 3 activities for the Follow-On
Compound, and as appropriate a Back-Up Compound to the Follow-On Compound,
through to achievement of the Candidate Selection Criteria; and


 


C.             For any Lead Compound, Follow-on Compound or Back-Up
Compound that is progressed beyond Candidate Selection, undertake IND-enabling
studies with an objective to progress such Compound(s) into Phase 1 clinical
trials, and subsequently to carry out a PoC Trial designed to demonstrate the
PoC Criteria.


 


ii.                         Following the Effective
Date, SGI shall devote a [***] to carrying out the Research Plan for the Lead
Compound. If GSK elects to establish the Follow-On Compound, SGI shall devote
an additional [***] to carrying out the Research Plan for the Follow-On
Compound. For clarity, such minimum resource commitment shall only apply to
activities undertaken prior to candidate selection of the Lead Compound or Follow-On
Compound.


 


iii.                      SGI shall use its best
endeavours to recruit an experienced, PhD level [***] within three (3) months
of the Effective Date, or if this is unsuccessful despite such best endeavours,
as soon as practicable thereafter. The [***] will support the collaboration
with GSK [***] within his/her role.


 


iv.                     No
material changes may be made to the Research Plan without the approval of the
JRC.


 


(c)                        Development of
Compounds.


 


i.                            SGI
Responsibility. Prior to GSK’s exercise of
the GSK Option, SGI will have primary responsibility for conducting the
pre-clinical and clinical development activities for all 


 






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with the Securities and Exchange Commission pursuant to a request for
confidential treatment.


 


12

















 


Compounds (including clinical trials and submissions to Regulatory Authorities)
in accordance with this Agreement and the Research Plan. SGI shall
declare a Lead Compound within [***] days of the Effective Date. GSK will have the
opportunity to provide advice to SGI (which will be considered by SGI)
regarding the development of the Compounds through GSK’s participation in the
JRC, and will have such other development responsibilities as are set forth in
this Agreement or are mutually agreed by the Parties in writing.


 


ii.                         PoC Trial
Design and Conduct. The JRC shall be responsible for the design of all PoC
Trials for each Compound which design will demonstrate (A) the [***],
through JRC-approved biomarker(s), which correlates to a clinical benefit
effect on disease consistent with a stated Target Product Profile (“TPP”),
thereby providing evidence of efficacy, safety and tolerability in the target
population; and (B) the establishment of a dose, consistent with the
demonstration of PoC Criteria and such efficacy, safety and tolerability
considerations, to move forward into larger focused clinical trials. The PoC Trial design will also include a
mutually agreed-to budget for the completion of such PoC Trial, which financial
responsibility shall be borne entirely by SGI, except as set forth in Section 3(a)iv.A The Parties agree that such budget shall
be agreed to using reasonable and customary per-patient costs as a basis
therefor.


 


iii.                      Design and
Budget Disputes.


 


A.           Any disputes regarding the
design of any PoC Trial, including with respect to content and endpoints of
such PoC Trial, that are not resolved by the JRC shall be presented to GSK to
make the final decision as provided in Section 3(a)iv.A


 


B.             Any disputes regarding the
budget for any PoC Trial that cannot be amicably resolved in accordance with Section 16(b)i
hereunder will be submitted for dispute resolution by outside experts in
accordance with Section 16(b)ii hereunder.


 


iv.                     Reports


 


A.           Progress Reports. During the Research Term, SGI
shall provide to the JRC written progress reports on a quarterly basis within
ten (10) days of the end of each calendar quarter regarding the status of
its activities for the Project to date, including summaries of data associated
with SGI’s research and development efforts and an assessment of the likelihood
of and timetable for completion of the Project and advancement of Compounds to
the next phase of research or development, as applicable. For clarity,
structures for Compounds that have been [***] (i.e., Compounds that are within
Stage 2), shall be disclosed within progress reports, and the Parties shall
discuss and agree a lead optimization strategy through discussion at the JRC,
drawing from such progress reports. All such exchanges will be coordinated by
the Alliance Managers.


 


B.             Candidate Selection Reports. At the time of
nomination of a Compound for Candidate Selection, SGI will provide a report
that will contain all information necessary for evaluation of the nominated
Compound against the Candidate 


 






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confidential treatment.


 


13

















 


Selection Criteria, including without limitation the following information:
(i) all chemical information including chemical structures of the
nominated Compound plus all other Compounds falling within the same Chemical Series (as
defined below), (ii) all biological results and data associated with the
nominated Compound, (iii) all patent filings that describe or claim the
nominated Compound, together with the results of novelty and patentability
searches undertaken by SGI.


 


For purposes of this Section 2(c)iv.B, “Chemical Series” means
a set of molecules of the same chemical class in which the structure activity
relationship (“SAR”) suggests a common mode of binding to an activity at
a biological target such as an enzyme, receptor, or cancer cell. The members of
the series may share key structural features, functional groups or shapes that
in three dimensional space are important in interacting with the target of
interest. Typically, a chemical series would comprise analogs of a lead
compound in which one or more individual atoms have been replaced, either with
a different atom or a different functional group(s).


 


v.                        Evaluation of
Candidate Selection Activities.


 


A.           In the event that SGI
determines that a Compound meets the Candidate Selection Criteria, SGI shall
promptly notify GSK in writing of such event and shall provide to the JRC a
candidate selection report (as described in 2(c)iv.B above). The
JRC will, at its next regularly scheduled meeting or at an ad hoc
meeting scheduled by the JRC (and in any event within thirty (30) days after
the JRC’s receipt of such report), review the report to confirm whether that
Compound meets the Candidate Selection Criteria, with GSK having the final
decision-making authority as to whether the first Lead Compound nominated by
SGI meets the Candidate Selection Criteria.


 


B.             In the event that GSK
determines that the first Lead Compound does not meet the Candidate Selection
Criteria that Lead Compound shall be deemed a Rejected Compound, and SGI shall
continue its research and development in accordance with the Research Plan and
the guidelines set forth in Section 2(b) during the Research Term to
progress another Compound with the goal of achieving Candidate Selection
Criteria. In the event that SGI determines that such other Compound meets the
Candidate Selection Criteria, SGI shall follow the reporting and evaluation
procedures set forth in Section 2(c)v.A above, provided, however, the JRC
shall have final decision-making authority as to whether the such Compound
meets the Candidate Selection Criteria.


 


C.             In the event that the JRC
fails to confirm that a Compound has met the Candidate Selection Criteria, then
either (1) GSK and SGI may agree in writing that SGI may conduct further
studies with that Compound in an effort to meet the Candidate Selection
Criteria, or (2) such Compound will thereby be deemed a Rejected Compound.


 


vi.                     PoC Trial Results


 


A.           Following completion of any
PoC Trial, in the event that SGI determines that a Compound meets the PoC
Criteria, SGI shall promptly notify GSK in writing of such event and shall
provide to the JRC a data package containing all analysis, results and raw data
from the PoC Trial for such Compound, and any related correspondence or
information received from or sent to any Regulatory Authority relating to such 


 


14

















 


Compound (“PoC Trial Data
Package”). Unless otherwise agreed to by the Parties, the JRC will schedule
an ad hoc meeting not more than thirty (30)
days after receipt of any such PoC Trial Data Package to review such PoC Trial
Data Package and determine whether such Compound meets the PoC Criteria. SGI
shall provide GSK with any additional information reasonably available to it
from the conduct of the Project (excluding any information related to CLIMB)
that GSK may reasonably request to assist GSK in evaluating the PoC Trial Data
Package.


 


B.             If a Candidate Selection
Compound does not meet the PoC Criteria or fails prior to completion of PoC,
the Parties may decide, subject to mutual written agreement, that (1) SGI
will conduct additional trials on that Candidate Selection Compound to achieve
PoC or, alternatively, (2) SGI shall progress another Compound through to
completion of a PoC Trial for that second Compound.


 


C.             Subject to GSK’s right to
exercise the GSK Option pursuant to Section 4(a), if, upon expiration of
the Research Term, there are no Back-Up Compounds or Follow-On Compounds being
progressed by SGI, or if the Back-Up Compounds or Follow-On Compound(s) being
progressed fail to achieve the PoC Criteria, either Party may terminate this
Agreement pursuant to Section 9(d)iv.


 


D.            If a Candidate Selection
Compound fails to meet the PoC Criteria, GSK nonetheless will have the right to
deem that Compound as having met the PoC Criteria and to exercise the GSK
Option to such Compound in accordance with Section 4(a). If GSK does not
elect to exercise the GSK Option to such failed Compound as set forth in Section 4(a) then
either (1) GSK and SGI may agree in writing that either party may conduct
further studies with that Compound in an effort to meet the PoC Criteria
subject to mutual written agreement as regards the budget and funding therefor
in accordance with Section 3(a)iv.A, or (2) that Compound will
thereby be deemed a Rejected Compound.


 


E.              If the JRC determines that
the Candidate Selection Compound achieves the PoC Criteria, and GSK elects not
to exercise the GSK Option within the [***] option exercise period pursuant to Section 4(a),
then either Party may terminate this Agreement in accordance with Section 9(d)iii,
and all rights in Compounds shall remain vested in SGI.


 


(d)                       Rejected
Compounds. In the event that a Compound (or in the case of a
PoC Trial, a Candidate Selection Compound) becomes a Rejected Compound in
accordance with the procedure set forth in Sections 2(c)v.B, 2(c)v.C and/or
2(c)vi.D, SGI will continue to conduct research and development activities on
another Compound in accordance with the Research Plan and the guidelines set
forth in Section 2(b) during the Research Term. If a Rejected
Compound is [***] with a Licensed Compound, then upon GSK’s exercise of the GSK
Option, such Rejected Compound shall be licensed to GSK as part of the License.
If a Rejected Compound is not [***] with a Licensed Compound, then it shall
remain with SGI for its own purposes, subject to Section 2(f).


 






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have been omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.


 


15

















 


(e)                        Additional
Program. Notwithstanding GSK’s exercise of the GSK Option, during the Research
Term, SGI shall continue to develop at least one (1) Back-Up Compound
through the achievement of the Candidate Selection Criteria and, if agreed by
the JRC, to develop a Follow-On Compound through the achievement of the PoC
Criteria, and GSK shall pay milestone payments to SGI for development of such
Back-Up Compound(s) and Follow-On Compound as set forth below. GSK will
have the right, at any time after exercising the GSK Option, to terminate
development of the Lead Compound in order to develop and commercialize either a
Back-Up Compound or Follow-On Compound from the Project.


 


(f)                          Limited
Non-Compete. During the Research Term, subject to Section 2(f),
SGI will not, outside of the Agreement, conduct research, development or
commercialization activities specifically targeted at identifying Compounds.
For the avoidance of doubt, activities required to confirm whether or not a
Compound is a Competing Compound (as defined below) shall not be construed as
representing the conduct of either research, development or commercialization
activities in violation of the foregoing.


 


(g)                       Competing
Compounds. If during the Research Term, in the course of
research conducted by SGI outside of this Agreement, either for its own or a
Third Party’s benefit, SGI discovers any compound that demonstrates [***]
(each, a “Competing Compound”), then SGI shall notify GSK promptly after
such discovery. GSK will have a [***] exclusive option to include such compound
as a Compound under the terms of this Agreement.


 


i.                            Acceptance of a
Competing Compound by GSK. If GSK opts to include such Competing
Compound as a Licensed Compound under the terms of this Agreement, then GSK, in
its sole discretion, shall designate such Compound as a Lead Compound, Back-Up
Compound to the Lead Compound, Follow-On Compound or Back-Up Compound to the
Follow-On Compound. GSK shall be obligated to pay any milestones that such
Compound shall achieve.


 


ii.                         Rejection of a
Competing Compound by GSK. If GSK opts not to include such Competing
Compound as a Licensed Compound under the terms of this Agreement, then all
rights in such Competing Compound(s) will remain with SGI and SGI will not
be restricted in any manner from researching and developing such Competing
Compound(s), except that SGI may not license or commercialize such Competing
Compound(s) for any purpose in the Territory until the expiration of the
Research Term.


 


iii.                      Test Procedure
for Competing Compound. SGI shall test whether a compound is a
Competing Compound by testing such compound for [***].


 


(h)                       Other SGI
Programs. GSK acknowledges and understands that SGI has
discovered and developed, and may continue to discover and develop, [***] or
[***] comprising at least [***] or its derivatives and analogues, including
[***], and further, that such compounds will not be considered Competing
Compounds and that SGI and its licensees and sublicensees may directly and
indirectly continue to develop such compounds, including [***], [***] and [***]
thereof, unabated and unaffected by this Agreement.


 






***              CONFIDENTIAL
TREATMENT REQUEST


Portions denoted with asterisks
have been omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.


 


16

















 


(i)                           Regulatory
Matters; Compliance.


 


i.                            Compliance. SGI shall
conduct all development activities in compliance with applicable laws, rules and
regulations. SGI shall ensure that development activities conducted by Third
Parties on its behalf are conducted in compliance with applicable laws, rules and
regulations, and, as applicable, cGMP, GLP and GCP.


 


ii.                         Data Integrity.


 


A.           SGI acknowledges the
importance of ensuring that the Project is undertaken in accordance with the
following data management practices:


 


(1)          data is being generated
using industry-accepted scientific techniques and processes;


 


(2)          data is being accurately and
reasonably contemporaneously recorded by persons conducting research hereunder;


 


(3)          data is being analyzed
without bias; and


 


(4)          data and results are being
stored securely and can be easily retrieved.


 


B.             SGI agrees that it shall use
Commercially Reasonable Efforts to carry out the Project so as to collect and
record any data generated therefrom in a manner consistent with the practices
set forth in Sections 2(i) and 2(ii).A(1)-(4) above.


 


iii.                      Ownership. SGI will own
and maintain all Regulatory Filings for Compounds developed during the Research
Term pursuant to this Agreement. In the event that any Regulatory Authorities
request a teleconference, videoconference, or meeting with SGI with respect to
a material matter relating to a Compound during the Research Term SGI agrees to
confer with GSK as to its response to such Regulatory Authorities prior to any
such teleconference, videoconference, or meeting. Upon exercise by GSK of the
GSK Option, as provided in Section 4, SGI (or its Successor in the event
of a Change in Control Transaction is consummated) shall transfer ownership of
such Regulatory Filings for such Compound to GSK, and provide GSK with copies
of Regulatory Filings. Thereafter, GSK (or its Affiliates) will own and
maintain all Regulatory Filings and Regulatory Approvals for Licensed
Compounds; provided that in the event of termination in accordance with Section 9(e)v
such ownership and maintenance responsibilities will revert to SGI. After
exercise of the GSK Option by GSK, SGI agrees to continue to reasonably
cooperate with GSK in responding to any inquiries from Regulatory Authorities
relating to the Regulatory Filings for Compounds developed during the Research
Term pursuant to this Agreement.


 


iv.                     Adverse Event
Reporting. Beginning on the Effective Date and continuing
until such time, if any, that GSK exercises the GSK Option as provided in Section 4,
SGI shall be responsible for reporting all Adverse Events in connection with
the activities of SGI under this Agreement to the appropriate Regulatory
Authorities in the countries in the Territory in which the Compound is being
developed, in accordance with the appropriate laws and regulations of the
relevant countries and Regulatory Authorities. GSK understands and agrees that
the Adverse Events database software currently in use by SGI are ARISg
5.0.2.2.7, WHO drug 2008 4th quarter and MedDRA 12.1, and SGI
agrees to deliver Adverse Events data to GSK in an agreed-upon data format.


 


(j)                           Subcontracting. Subject to the
terms of this Agreement, SGI may perform any activities in 


 


17

















 


support of its development of Compounds
through subcontracting to one or more Third Party contractors or contract
service organizations, provided, that: (A) none of the rights of GSK under
this Agreement are materially adversely affected as a result of such
subcontracting; (B) the contracts for any such Third Party subcontractor
to whom SGI discloses the Confidential Information of GSK will contain
appropriate obligations of confidentiality that are no less restrictive than
the obligations of SGI under Section 11; (C) SGI shall obligate such
Third Party to agree in writing to assign or license (with the right to grant
sublicenses) to SGI any Inventions (and SGI Patents or Joint Patents claiming
such Inventions) made by such Third Party in performing such services for SGI
that are necessary for the development or commercialization of Compounds; and (D) SGI
shall at all times be responsible for the performance of such subcontractor.


 


3.                                                    GOVERNANCE


 


(a)                        JRC. Promptly and
in any event within sixty (60) days after the Effective Date, the Parties shall
establish the JRC. The JRC will oversee the scientific and clinical progress of
the Project, as more specifically provided herein. SGI shall keep the JRC
reasonably informed of its progress and activities under the Project.


 


i.                            Membership. The JRC will
be comprised of two (2) representative employees from each of GSK and SGI.
Each Party shall provide the other with a list of its initial members of the
JRC no later than thirty (30) days prior to the first scheduled meeting of the
JRC. Each Party may replace any or all of its representatives on the JRC at any
time upon written notice to the other Party in accordance with 17(d) of
this Agreement, provided that such notice is received by the other party no
less than ten (10) days prior to the next scheduled JRC meeting. Each
representative of each Party shall have expertise in pharmaceutical drug
discovery and/or development. Any member of the JRC may designate a substitute
with substantially similar expertise to attend and perform the functions of
that member at any meeting of the JRC, provided that such designation is
noticed to the other party no less than ten (10)days prior to the next
scheduled JRC meeting. Each Party may, in its reasonable discretion, invite up
to three (3) non-member representatives of such Party to attend meetings
of the JRC as a non-voting participants, subject to the confidentiality
obligations of Section 11. The Parties shall designate a chairperson (“Chairperson”)
to oversee the operation of the JRC and prepare minutes as set forth in Section 3(a)iii,
each such Chairperson to serve a twelve (12) month term. The right to name the
Chairperson will alternate between the Parties, with SGI designating the first
such Chairperson.


 


ii.                         Meetings. During the
Research Term, the JRC shall meet in person or otherwise at least once each
calendar quarter, and more frequently as the Parties mutually deem appropriate,
on such dates, and at such places and times, as the Parties may agree.
Following GSK’s exercise of the GSK Option, the JRC will continue solely as a
forum to maintain information flow between the Parties regarding the
progression of Licensed Compounds, and to discuss and agree on SGI’s role, if
any, with respect to continuing development of Licensed Compounds after
exercise by GSK of the GSK Option pursuant to Section 4. Meetings of the
JRC that are held in person will alternate between the facilities of the
Parties, or such other place as the Parties may agree. The members of the JRC
also may convene or be polled or consulted from time to time by means of telecommunications,
video conferences, electronic mail or correspondence, as deemed necessary or
appropriate. Each Party shall bear all expenses it incurs in regard to 


 


18

















 


participating in meetings of the JRC, including
all travel and living expenses.


 


iii.                      Minutes. The
Chairperson shall be responsible for preparing and circulating minutes of each
meeting of the JRC, setting forth, inter alia, a
description, in reasonable detail, of the discussions at the meeting and a list
of any actions, decisions or determinations approved by the JRC and a list of
any issues to be resolved by the Executive Officers (as defined below) pursuant
to Section 3(a)iv. Such minutes will be effective only after approved by
both Parties at the next JRC meeting or via polling as described in Section 3(a)ii
above. With the sole exception of specific items of the meeting minutes to
which the members cannot agree and which are escalated to the Executive
Officers as provided in Section 3(a)iv below, definitive minutes of all
JRC meetings shall be finalized no later than thirty (30) days after the
meeting to which the minutes pertain. If at any time during the preparation and
finalization of the JRC minutes, the Parties do not agree on any issue with
respect to the minutes, such issue will be resolved by the escalation process
as provided in Section 3(a)iv.A-iv.C. The decision resulting from the
escalation process will be final and shall be recorded by the Chairperson in
amended finalized minutes for that meeting.


 


iv.                     Decisions. The JRC will
have the authority to make decisions only with respect to the issues set forth
in Sections 3(a)v.C to 3(a)v.E below. All other decisions with respect to the
Project will be made by SGI in its sole discretion, other than as set forth in Section 3(a)iv.A.
Except as otherwise expressly provided in Section 3(a)iv.A, all decisions
of the JRC will be made by unanimous vote, with each Party having collectively
one (1) vote in all decisions. Prior to GSK’s exercise of the GSK Option,
in the event that the JRC is unable to reach a unanimous decision within
fifteen (15) days after it has met and attempted to reach such decision, then
either Party may, by written notice to the other, have such issue referred to
the Chief Executive Officer of SGI and the Senior Vice President of Cancer
Research at GSK, or their designees or successors (collectively, the “Executive
Officers”), for resolution. The Executive Officers shall meet promptly to
discuss the matter submitted and to determine a resolution. If the Executive
Officers are unable to determine a resolution in a timely manner, which will in
no case be more than ten (10) days after the matter was referred to them,
the issue will be resolved as follows:


 


A.           Subject to the limitations
set forth in this Section 3(a)iv.A below, GSK will have final
decision-making authority with respect to any disputes concerning: (i) whether
to research and develop a Follow-On Compound after the Effective Date, (ii) whether
a Compound has met the PoC Criteria, and (iii) the PoC Trial design. For
purposes of clarity, decisions made in accordance with this Section 3(a)iv.A
shall be without imposition of additional costs on SGI and would not be
submitted to outside experts or arbitration for dispute resolution. If a final
decision made by GSK as set forth in Section 3(a)iv.A(iii) above
results in an increase in the projected cost of the PoC Trial, the Parties
shall discuss and agree to the allocation of costs with respect to such excess.
SGI will not be obligated to continue the Project until agreement is reached in
writing with respect to the allocation of costs and expenses, and such action
will not be considered a breach of this Agreement by SGI.


 


B.             If the Parties cannot agree
to a cost allocation mechanism as described in Section 3(a)iv.A above, and
such disagreement occurs during the conduct of a PoC Trial by SGI and such
disagreement threatens the continuation of such PoC Trial, then GSK 


 


19

















 


will have the right, but not
the obligation, to pay the costs of continuing such PoC Trial, including any
proposed increases, until such cost-sharing mechanism can be agreed to by the
Parties, whether such agreement is arrived at amicably in accordance with Section 16(b)i
or through outside experts in accordance with Section 16(b)ii.


 


C.             Except as set forth in Section 3(a)iv.A,
all disputed issues arising from the JRC will be submitted to dispute
resolution in accordance with Section 16(a)ii.


 


v.                        Responsibilities. The JRC will
perform the following functions, some or all of which may be addressed directly
at each meeting of the JRC:


 


A.           review SGI’s activities
during the Research Term;


 


B.             review the progress of the
Project against the Research Plan and approve material changes to the Research
Plan as set forth in Section 2(b)i;


 


C.             review, modify, update and
approve the PoC Trial designs in accordance with the terms of Sections 2(c)ii
and 2(c)iii;


 


D.            review and comment on the
Research Plan;


 


E.              subject to GSK’s decision-making
authority pursuant to Section 2(c)v.A to, confirm that a nominated
Compound(s) has met the Candidate Selection Criteria, or Section 3(a)iv.B
with regard to confirmation that Compound(s) have met PoC Criteria; and


 


F.              such other responsibilities
as may be assigned to the JRC pursuant to this Agreement or as may be mutually
agreed upon by the Parties in writing from time to time.


 


For clarity, the JRC will
have no authority beyond the specific matters set forth above in this Section 3(a)v,
and in particular will have no power to amend or modify the terms or provisions
of this Agreement. In addition, GSK (and neither SGI nor the JRC) shall have
the sole right to make decisions in its sole discretion with respect to (i) the
exercise of the GSK Option; or (ii) the development and commercialization
by GSK of Compounds (and resultant Products) after exercise by GSK of the GSK
Option with respect to such Compound; in each case so long as these decisions
impose no obligation, cost or expense on SGI, other than SGI’s continuing
obligation to carry on research and development of Compounds during the
Research Term in accordance with the Research Plan and the guidelines set forth
in Section 2(b). Additionally, prior to GSK’s exercise of the GSK Option,
SGI shall have the sole right to make decisions in its sole discretion with
respect to the disclosure of any chemical structure information to GSK and/or
the JRC with respect to any Compounds prior to nomination of a Compound for
Candidate Selection Criteria. If the Parties cannot agree as to whether an
issue is within the purview of the JRC, GSK or SGI, that issue will be referred
to the dispute resolution process outlined in Sections 16(b)i and 16(b)ii
below.


 


(b)                       JPC.


 


i.                            Role.


 


A.           After the JRC or GSK, as applicable
confirms that a Compound has met the Candidate Selection Criteria, the JPC will
be formed and will be responsible for (1) developing a strategy to protect
SGI Patents, including the filing, prosecution, 


 


20

















 


maintenance, enforcement and
defense of Patents included in the SGI Patents; (2) providing a forum for
the Parties to discuss material issues and provide input to each other
regarding such SGI Patents; (3) in the event of any conflict involving Third
Parties in relation to SGI Patents and Joint Inventions, e.g., a patent
interference proceeding or patent litigation (“IP Conflict”), the
selection of counsel, whether to settle and the terms of settlement, selection
of expert witnesses, the decision whether to drop a patent from infringement
litigation, communications with the US Federal Trade Commission or equivalent
foreign competition agencies and other material litigation issues, including
the text of briefs and motions, in each case in the context of patent matters
only. For purposes of clarity, any decision relating to Paragraph IV Litigation
shall rest exclusively with GSK in its sole discretion (except in the case of
Reverted Products, in which case such decision would rest exclusively with SGI).


 


B.             The members of the JPC and
their designees will have the right to participate in meetings with legal
counsel and to attend litigation hearings, depositions and meetings, as
allowable by applicable laws and the adjudicator. For the purposes of this section,
arbitration and mediation are considered litigation and within the remit of the
JPC.


 


C.             Periodically, or upon
request, the JPC shall report its activities and the status of SGI Patents
filings to the JRC.


 


ii.                         Decisions. Except as
otherwise provided herein and until GSK has exercised the GSK Option as
provided in Section 4(a), all decisions of the JPC will be made by
unanimous vote, with each Party having collectively one (1) vote in all
decisions. In the event that the JPC is unable to reach a majority decision
within fifteen (15) days after it has met and attempted to reach such decision,
then either Party may, by written notice to the other, have such issue
submitted to the chief patent counsel of GSK and SGI (“Chief Patent Counsels”),
or such other person holding a similar position designated by GSK or SGI from
time to time, for resolution. The Chief Patent Counsels shall meet promptly to
discuss the matter submitted and to determine a resolution. If the Chief Patent
Counsels are unable to determine a resolution in a timely manner, which will in
no case be more than fifteen (15) days after the matter was referred to them, (A) prior
to exercise of the GSK Option by GSK, the dispute shall be promptly decided by
SGI; and (B) after exercise of the Option by GSK, the dispute shall be
promptly decided by GSK.


 


iii.                      Meeting. The JPC will
meet on such dates and at such places and times agreed to by the Parties, but
the JPC shall meet at least three (3) times a year and more frequently as
needed leading up to and during any IP Conflict.


 


iv.                     Members. The
membership of the JPC will be comprised of two (2) representatives from
each Party, which representatives may or may not be JRC members. Each Party
agrees that at least one (1) of its representatives will be a patent
attorney admitted before the USPTO. Upon notice of at least ten (10) days
prior to a scheduled JPC meeting, a Party may substitute one (1) representative
for another as long as the total number of members does not exceed the maximum
agreed by the Parties, and such substituted representative has experience
substantially similar to the absent representative. Either Party may invite
additional individual(s) to attend a JPC meeting on an as-needed basis to
advise, or present information to, the JPC, provided that such invitation is
noticed to the other party no less than ten (10) days prior to the next
scheduled JPC meeting. Such


 


21














 


invited individual will be an observer only
and will not be a voting member of the JPC. Each Party shall bear all expenses
it incurs in regard to participating in all meetings of the JPC, including all
travel and living expenses.


 


v.                        JPC Survival. Once GSK has
elected to exercise the GSK Option, the JPC will continue solely as a forum to
maintain information flow between GSK and SGI regarding the SGI Patents, and to
discuss and agree on strategy in the event of an intellectual property dispute,
e.g., an infringement action. All decisions made after exercise of the GSK
Option with respect to the SGI Patents will be made at the sole discretion of
GSK so long as such decisions otherwise comply and are consistent with the
terms and conditions of this Agreement and do not impose any additional
obligations, costs or expenses on SGI. For purposes of clarity, GSK’s reduction
of royalty to SGI pursuant to Section 6(e) shall not be deemed additional
obligations, costs or expenses on SGI.


 


(c)                        Alliance
Managers. Promptly after the Effective Date, each Party
shall appoint an individual (who may or may not be an existing member of the
JRC) to act as alliance manager for such Party (each, an “Alliance Manager”).
Each Alliance Manager may thereafter be permitted (upon the agreement of each
of the Parties) to attend meetings of the JRC as a non-voting observer (unless
such Alliance Manager is a member of the JRC), subject to the confidentiality
provisions of Section 11. The Alliance Managers will be the primary point of
contact for the Parties regarding the activities contemplated by this Agreement
and shall assist in the facilitation of such activities hereunder as needed,
including the exchange of information described in Section 2(c)iv. The Alliance
Managers shall also be responsible for assisting the JRC in performing its
oversight responsibilities. The name and contact information for such Alliance
Managers, as well as any replacement(s) chosen by SGI or GSK, in their sole
discretion, from time to time, shall be promptly provided to the other Party in
accordance with Section 17(d) of this Agreement.


 


(d)                       JRC Survival. Once GSK has
elected to exercise the GSK Option, the JRC will meet only once a year and will
continue solely as a forum to maintain information flow between GSK and SGI
regarding the progression of Licensed Compounds, and to discuss and agree on
SGI’s role, if any, with respect to continuing development of Licensed
Compounds after exercise of the GSK Option (as described below under Section 4(a)).
Subject to GSK’s obligation to use Commercially Reasonable Efforts with respect
to its activities undertaken after exercise of the GSK Option, all decisions
made after exercise of the GSK Option with respect to the development,
manufacturing, progression or commercialization of any Licensed Compound will
be made at the sole discretion of GSK so long as such decisions otherwise
comply and are consistent with the terms and conditions of this Agreement and
do not impose any additional obligations, costs or expenses on SGI, other than
SGI’s obligation to continue to conduct research and development activities
during the Research Term in accordance with the Research Plan and the
guidelines set forth in Section 2(b).


 


4.                                                    OPTION
AND LICENSE


 


(a)                        Option Grant. SGI hereby
grants to GSK the exclusive option to obtain the License set forth in Section 4(b)
(“GSK Option”). The GSK Option is exercisable at GSK’s sole discretion
upon the occurrence of any of the following events: (i) upon written
confirmation by the JRC that a Lead Compound has met the PoC Criteria in
accordance with Section 2(c)vi.A, in which case, 


 


22

















 


GSK will have [***] from the date of such
confirmation to exercise the GSK Option, or (ii) if GSK deems that the Lead
Compound that has failed to meet the PoC Criteria as set forth in Section 2(c)vi.D,
is nonetheless acceptable to GSK in its sole discretion, GSK will have [***] from written confirmation from the JRC
that the Lead Compound has failed to meet the PoC Criteria to exercise the GSK
Option; or (iii) upon expiration of the Research Term, in which case GSK will
have [***] from the date of such expiration to exercise the GSK Option; or (iv)
upon a Change of Control as described in Section 8(a), in which case GSK will
have [***] from the date of notice from SGI of the Change of Control to
exercise the GSK Option. For purposes of clarity, GSK shall have one GSK Option
for the Project, exercisable at one of the points described in 4(a)i-iv above,
and on exercise of the GSK Option, GSK shall have rights to the Licensed
Compounds in the Project. The grant of the GSK Option is irrevocable except in
the event of a termination of this Agreement by SGI for material breach by GSK
and shall remain in place through the expiration of the Research Term so long
as this Agreement is not terminated by a Party pursuant to Section 9(d)iii.


 


(b)                       License Grant. Subject to
the terms and conditions of this Agreement and upon GSK’s exercise of the GSK
Option, SGI hereby grants to GSK (a) a worldwide, irrevocable, exclusive
license, with the right to sublicense, under the SGI Patents, SGI Know-How and
SGI’s interest in the Joint Inventions and Joint Patents, to make, have made,
use, sell, offer for sale and/or import Licensed Compounds and Products
comprising Licensed Compounds in the Field in the Territory, and (b) a
worldwide, irrevocable, non-exclusive license, with the right to sublicense,
under the SGI Technical Information to make, have made, use, sell, offer for
sale and/or import Licensed Compounds and Products comprising Licensed
Compounds in the Field in the Territory (collectively, “License”). The
License grant to GSK hereunder is irrevocable except in the event of a
termination of this Agreement by SGI for material breach by GSK.


 


(c)                        Retention of
Rights by SGI. Notwithstanding the foregoing, during the Research
Term, SGI will retain the right under the SGI IP to conduct development of
Back-Up Compounds and Follow-On Compounds through achievement of the Candidate
Selection Criteria or PoC Criteria, as the case may be.


 


(d)                       No Grant of
Rights to Third Parties. Until such time as the GSK Option pursuant
to Section 4(a) has expired, SGI shall not grant to any Third Party rights to
any SGI Patents or SGI Know-How which would conflict with the grant of the
resulting License to GSK. For the avoidance of doubt, the Parties understand
and agree that for so long as the GSK Option is in effect, such option will be
exclusive, and SGI shall have no right to offer or negotiate with any Third Party
the grant of any right, license, or any other encumbrance of any kind, in or to
any Compounds subject to that GSK Option, or any SGI Patents or SGI Know-How
exclusively pertaining to such Compounds, which would conflict with the grant
of a License to GSK.


 


(e)                        License Grant
Upon Expiration of the Royalty Term. SGI hereby grants to GSK a
worldwide, non-exclusive fully paid-up license, with the right to sublicense,
under the SGI Know-How and SGI Technical Information to continue to make, have
made, use, sell, offer for sale and/or import Licensed Compounds and Products
comprising Licensed Compounds in the Field in the Territory upon Expiration in
Entirety (defined in Section 9(a) below).


 






***              CONFIDENTIAL TREATMENT REQUEST


Portions denoted with asterisks
have been omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.


 


23

















 


(f)                          Regulatory
Filings. As soon as practicable after the exercise of the GSK Option, SGI
shall assign and transfer to GSK at SGI’s sole cost and expense, any Regulatory
Filings that SGI has filed with respect to any Licensed Compound, and take such
actions and execute such other instruments, assignments and documents as may be
reasonably necessary to effect the transfer of rights thereunder to GSK.
Concurrent with the exercise of the GSK Option by GSK, the Parties agree to
draft a transition plan to accommodate the transfer of any such Regulatory
Filings and related documents and materials.


 


(g)                       Supply. After GSK’s
exercise of the GSK Option, SGI agrees to expend Commercially Reasonable
Efforts to promptly transfer to GSK, at SGI’s Manufacturing Cost plus [***]
such supplies of clinical development material and supplies, and all bulk drug
substance or other materials used to manufacture the applicable Licensed
Compound then on hand, to enable GSK to continue development of the Licensed
Compounds.


 


(h)                       Third Party Manufacturing
Contracts. SGI agrees to expend Commercially Reasonable
Efforts to make any Third Party manufacturing contracts for supplies of
clinical development material wholly or partially assignable to GSK. In the
event that such an assignment cannot be made, SGI shall cooperate with GSK, for
a maximum period of twelve (12) months, to have such Third Party manufacturer(s)
continue to manufacture the clinical development material for which GSK shall
promptly reimburse SGI at SGI’s actual Third Party cost, plus [***], and GSK
shall expend Commercially Reasonable Efforts to (i) accelerate the search for
an alternative commercial manufacturing source for GSK, (ii) bring such
manufacturing in-house to GSK, or (iii) to enter into contract for such
manufacture with such Third Party manufacturer(s).


 


(i)                           Technology
Transfer after GSK’s Option Exercise.


 


i.                            Generally. After GSK
exercises the GSK Option for a Compound, SGI shall promptly deliver to GSK, at
no cost to GSK, all tangible embodiments of SGI Know-How, together with bulk
and final product manufacturing data and processes, batch records and
validation documentation; Third Party subcontractor information to the extent
permissible; Regulatory Filings and Supporting Data; and Adverse Event data.
The Parties, working through the JRC will use Commercially Reasonable Efforts to
plan and execute a mutually agreeable transition process designed to effect the
orderly transition and uninterrupted development of Licensed Compounds.


 


ii.                         Continuing
Cooperation.


 


A.           After the transfer described in Section 4(i)i above,
and for a 6-month period thereafter, SGI shall use Commercially Reasonable
Efforts to cooperate with GSK to provide GSK with the SGI Know-How to which GSK
has a right or license under this Agreement. During such 6-month period, SGI
would be responsible for its reasonable costs and expenses of such continuing
cooperation; provided, however, that after such 6-month period all of SGI’s
costs and expenses for such continuing cooperation would be borne by GSK.


 


B.             After exercise of the GSK Option by GSK, SGI agrees
to continue to reasonably cooperate with GSK in responding to any inquiries
from Regulatory Authorities 


 






***              CONFIDENTIAL TREATMENT REQUEST


Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.


 


24

















 


relating to the Regulatory Filings for Compounds developed during the
Research Term pursuant to this Agreement.


 


C.             For a period of [***] following expiration of the
Research Term, SGI shall not have the obligation of testing Compounds for
[***]; however if SGI becomes aware of a Compound that qualifies as a  Licensed  Compound hereunder, SGI agrees to
promptly notify GSK of the existence of such Compound and such Compound shall
be deemed a Licensed Compound in accordance with Section 4.


 


iii.                      Additional
Services. In the event that GSK requests SGI to provide GSK
with any materials or services beyond those set forth in Sections 4(i)i and
4(i)ii, such materials and/or services shall be scheduled and provided by SGI
to GSK on such terms and conditions as may be mutually agreed between the
Parties at the time of any such request, if, and only if, each of the Parties
mutually desire to engage in the transfer or provision of such additional
materials or services.


 






***              CONFIDENTIAL TREATMENT REQUEST


Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.


 


25

















 


5.                                                    FEES,
EQUITY, AND RESEARCH AND DEVELOPMENT MILESTONES


 


(a)                        Upfront Fee. GSK shall pay
to SGI US Two Million Dollars (US$2,000,000) within ten (10) business days
after receipt of an invoice therefor from SGI after the Effective Date.


 


(b)                       Stock Purchase. In accordance
with the terms and conditions of the Common Stock Purchase Agreement entered
into by the Parties effective October 22, 2009, attached hereto as Exhibit A, GSK agrees to purchase, and SGI agrees to sell and
issue to GSK, SGI common stock at a cash purchase price per share equal to one
hundred and ten percent (110%) of the average closing sale price of one (1) share
of the SGI common stock
as reported on for the thirty (30) consecutive trading days
immediately preceding the date of execution of this Agreement for an aggregate
purchase price equal to US Three Million Dollars (US$3,000,000).


 


(c)                        Follow-On Fee. In addition,
if a Follow-On Compound program is initiated following the Effective Date, GSK
shall pay to SGI a one-time fee of US [***] within ten (10) business days
following receipt of an invoice therefor from SGI.


 


(d)                       Lead Compound
Milestones. GSK shall make the following one-time payments to
SGI for the first Lead Compound to achieve the following milestones:


 


	
  Event

  	
   

  	
  Payment

  US$MM

  	
   

  
	
  Achievement of Candidate Selection Criteria

  	
   

  	
  [***]

  	
   

  
	
  First dosing in a Phase 1 clinical trial

  	
   

  	
  [***]

  	
   

  
	
  Exercise by GSK of the GSK Option

  	
   

  	
  [***]

  	
   

  



 


(e)                        Follow-On
Compound Milestones. In addition, GSK shall make the following one-time
payments to SGI for the first Follow-On Compound to achieve the following
milestones:


 


	
  Event

  	
   

  	
  Payment

  US$MM

  	
   

  
	
  Achievement of Candidate Selection Criteria

  	
   

  	
  [***]

  	
   

  
	
  First dosing in a Phase 1 clinical trial

  	
   

  	
  [***]

  	
   

  
	
  Achievement of PoC Criteria

  	
   

  	
  [***]

  	
   

  



 


(f)                          Back-Up
Compound Milestones. For each Back-Up Compound, up to a maximum of two (2)
Back-Up Compounds (i.e., a Back-Up Compound to each of the Lead Compound and a
Follow-On Compound), GSK shall make the following payments to SGI for each of
the first two (2) Back-Up Compounds to achieve the following milestones:


 


	
  Event

  	
   

  	
  Payment

  US$MM

  	
   

  
	
  Achievement of Candidate Selection Criteria

  	
   

  	
  [***]

  	
   

  
	
  Initiation of IND-enabling GLP studies

  	
   

  	
  [***]

  	
   

  
	
  First dosing in a Phase 1 clinical trial, so long as the Lead Compound
  or Follow-On Compound to which the Back-Up Compound relates, is not
  terminated within six (6) 

  	
   

  	
  [***]

  	
   

  



 






***              CONFIDENTIAL TREATMENT REQUEST


Portions denoted with asterisks
have been omitted and filed separately with the Securities and Exchange Commission
pursuant to a request for confidential treatment.


 


26

















 


	
  Event

  	
   

  	
  Payment

  US$MM

  	
   

  
	
  months of payment of the first dosing in a Phase 1 clinical trial
  milestone for such Lead Compound or Follow-On Compound

  	
   

  	
   

  	
   

  



 


(g)                       Licensed
Compound Milestones. GSK shall make the following one-time payments to
SGI for the first Compound to achieve such milestone:


 


	
  Event

  	
   

  	
  Payment

  US$MM

  	
   

  
	
  First dosing in a Phase 3 clinical trial (first Major Indication)

  	
   

  	
  [***]

  	
   

  
	
  First NDA approval by FDA (first Major Indication)

  	
   

  	
  [***]

  	
   

  
	
  Marketing Authorization Approval including Price and Reimbursement
  Approval in 3 of 5 EU Major Markets (first Major Indication)

  	
   

  	
  [***]

  	
   

  
	
  First NDA Approval by the Japanese MHLW (first Major Indication)

  	
   

  	
  [***]

  	
   

  



 


(h)                       If following
exercise of the GSK Option, a Licensed Compound is developed for a second Major
Indication, and if such Licensed Compound achieves any of the milestones set
forth above noted as “first Major Indication” in such second Major Indication, then
GSK shall pay a one-time payment to SGI [***] of the amounts as set forth above
noted as “first Major Indication” for the applicable milestone achieved.


 


(i)                           If following
exercise of the GSK Option, a Licensed Compound is developed for a first
non-Major Indication, and if such Licensed Compound achieves any of the
milestones set forth above noted as “first Major Indication” in such first
non-Major Indication, then GSK shall pay a one-time payment to SGI [***] of the
amounts as set forth above noted as “first Major Indication” for the applicable
milestone achieved.


 


(j)                           Except as set
forth above, all milestone payments and fees in this Section 5 shall be made
within forty-five (45) days from the date of receipt of an invoice from SGI.
GSK agrees to promptly notify SGI of the achievement of any of the foregoing
milestones, but in any event, such notification shall not be delayed by more
than ten (10) days from the date of each such milestone achievement. For
purposes of clarity, the transaction contemplated by Section 5(b) above is
subject to the payment terms specified in the Common Stock Purchase Agreement
and is specifically exempted from the timing requirements of this Section 5(j).


 


(k)                        All upfront and
milestone payments will be non-refundable.


 






***              CONFIDENTIAL TREATMENT REQUEST


Portions denoted with asterisks
have been omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.


 


27

















 


6.                                                    ROYALTIES


 


(a)                        Royalty to SGI


 


i.                            Royalty Rate. Subject to Section 6(a)ii-iii, GSK shall pay SGI royalties on annual Net Sales of each Product containing a
Licensed Compound during a calendar year, on a country-by-country and
Product-by-Product basis, in those countries of
the Territory in which there is a Valid Claim of an SGI Patent or a Joint
Patent (“SGI Royalty”),
in the amounts as follows:


 


	
  Annual Net Sales

  	
   

  	
  Royalty Rate

  	
   

  
	
  < $500M

  	
   

  	
  [***]

  	
  %

  
	
  > $500M < $1,000M

  	
   

  	
  [***]

  	
  %

  
	
  > $1,000M < $2,000M

  	
   

  	
  [***]

  	
  %

  
	
  >$2,000M

  	
   

  	
  [***]

  	
  %

  



 


The royalty rates in the table above are incremental rates which apply
only for the respective increment of annual Net Sales described in the Annual
Net Sales column and, thus, once a total annual Net Sales figure is achieved
during the calendar year, the royalties owed on any lower tier portion of
annual Net Sales are not adjusted up to the higher tier rate.


 


ii.                         Royalty
Reductions.


 


A.           For countries where there is
no Valid Claim within the SGI Patents or Joint Patents and the Regulatory-Based
Exclusivity Period has expired, royalty rates will be reduced by [***] so long
as Generic Entry has not occurred; provided however,
in the event that GSK elects to abandon any Joint Patent in a country that is
the only Patent covering the Product in such country, then (1) if SGI does not
elect to continue prosecution and maintenance of such Joint Patent, GSK will
receive the royalty rate reduction described above for Net Sales revenue from
that country, or (2) if SGI elects to continue prosecution and maintenance of
such Joint Patent, then GSK will not receive the royalty rate reduction
described above for Net Sales revenue from that country until such date as
there is no Valid Claim within such Joint Patent in such country. For the
avoidance of doubt, in either case of the foregoing (1) or (2), Generic Entry
in such country would reduce the SGI Royalties payable regardless of the
disposition of such patent prosecution and maintenance activities of the
Parties.


 


B.             If at any time, but only for
so long as, (1) a Third Party’s product(s) having the same active ingredient as
a Product (each, a “Generic Product”) enters the market in a given
country, and (2) such Generic Product(s) account for more than [***] of
aggregate unit sales of the Product and such Third Party product(s) in the
given country, as determined by, e.g., an IMS Health Inc. market measurement
study (“Generic Entry”), the applicable SGI Royalty will be reduced by
[***] in such country.


 






***              CONFIDENTIAL TREATMENT REQUEST


Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.


 


28

















 


C.             By way of example only, (1) in a
country where there is no Valid Claim of any SGI Patents or Joint Patents, as
described in Section 6(a)ii.A above, the royalty rate reduction will be [***]; (2)
in a country where there has been Generic Entry, as described in Section 6(a)ii.B
above, the royalty rate will be reduced by [***] in such country whether or not
a Valid Claim of any SGI Patents or Joint Patents
exists in such country.


 


iii.                      SGI Royalty
Term. The royalty term will commence upon First Commercial Sale and will
expire on a country-by country basis upon the later of either (A) expiration in
such country of the last Valid Claim within SGI
Patents or Joint Patents covering the
composition of matter or method of use of the Licensed Compound included in the
Product, or (B) ten (10) years after such First Commercial Sale in such
country, except as otherwise provided in Section 6(a)iv.


 


iv.                     Regulatory-Based
Exclusivity Period. Notwithstanding the foregoing in Section 6(a)iii,
if, after expiration of the last Valid Claim within SGI Patents or Joint
Patents  in a country, SGI can prove
by reasonably satisfactory documentary evidence, which is not contradicted by
reasonably satisfactory documentary evidence provided by GSK, that there exists
Regulatory-Based Exclusivity with respect to such Product in such country, GSK
shall continue to pay the SGI Royalty to SGI as set forth in Section 6(a)i for
so long as such Regulatory-Based Exclusivity Period continues in such country.


 


(b)                       Royalty to GSK.


 


i.                            Royalty Rate. If SGI, on
its own or with or through an Affiliate or Third Party, develops or
commercializes a terminated Licensed Compound (terminated in accordance with Section
9(d)ii or a Reverted Product (defined below)), subject to Section 6(b)ii, SGI
shall pay to GSK a royalty on Net Sales of Products containing such Compound or
such Reverted Products, as the case may be, as follows depending on the stage
at which GSK terminated development (“GSK Royalty”):


 


A.           If termination occurred
prior to the completion of Phase 3 trials, SGI shall pay a royalty equal to [***]
of Net Sales to GSK; and


 


B.             If termination occurred
following the completion of Phase 3 trials, SGI shall pay a royalty equal to
[***] of Net Sales to GSK.


 


ii.                         Royalty
Reductions.


 


A.           For countries where there is
no Valid Claim in the SGI Patents or Joint Patents and the Regulatory-Based
Exclusivity Period has expired, royalty rates will be reduced by [***] so long
as Generic Entry has not occurred; provided however,
in the event that GSK elects to abandon any Joint Patent in a country that is
the only Patent covering the Product in such country, then (1) if SGI does not
elect to continue prosecution and maintenance of such Joint Patent, SGI will
receive the royalty rate reduction described above for Net Sales revenue from
that country until the end of the term of such Joint Patent  in such country as if GSK had not elected to abandon
the 


 






***              CONFIDENTIAL TREATMENT REQUEST


Portions denoted with asterisks
have been omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.


 


29

















 


maintenance and prosecution
of such Patents, or (2) if SGI elects to continue prosecution and maintenance
of such Joint Patent, then SGI will not receive the royalty rate reduction described
above for Net Sales revenue from that country until such date as there is no
Valid Claim within such Joint Patent in such country. For the avoidance of
doubt, in either case of the foregoing (1) or (2), Generic Entry in such
country would reduce the GSK Royalties payable regardless of the disposition of
such patent prosecution and maintenance activities of the Parties.


 


B.             If at any time, Generic
Entry has occurred for a Product within a country, the applicable GSK Royalty
will be reduced by [***] in such country.


 


C.             By way of example only, (1) in a
country where there is no Valid Claim in a SGI Patent or Joint Patent, as
described in Section 6(a)ii.A above, the royalty rate reduction will be [***]; (2)
in a country where there has been Generic Entry, as described in Section 6(b)ii.A
above, the royalty rate reduction will be [***], whether or not a Valid Claim
of any SGI Patents or Joint Patents exists in such country.


 


iii.                        GSK Royalty
Term. The royalty term will commence upon First Commercial Sale of such
Product in the Territory and will expire on a country-by country basis upon the
later of either (A) expiration in such country of the last Valid Claim within SGI Patents or Joint Patents covering the composition of matter or method of use of the Licensed
Compound included in the Product, or (B) ten (10) years after First Commercial
Sale in such country, subject to Section 6(b)iv.


 


iv.                     Regulatory-Based
Exclusivity Period. Notwithstanding the foregoing in Section 6(b)iii,
if, after expiration of the last Valid Claim of any SGI Patents or Joint
Patents  in a country, GSK can prove
by reasonably satisfactory documentary evidence, which is not contradicted by
reasonably satisfactory documentary evidence provided by SGI, that there exists
Regulatory-Based Exclusivity with respect to such Product in such country, SGI
shall continue to pay the GSK Royalty to GSK as set forth in Section 6(a)i for
so long as such Regulatory-Based Exclusivity Period continues in such country.


 


(c)                        Royalty
Reduction Following Breach. If SGI materially breaches
this Agreement without cure as set forth in Section 9(c) of this Agreement, GSK
will have the right to terminate this Agreement pursuant to Section 9(c), and
continue to exercise its rights under this Agreement, including without
limitation obtaining the License, subject to the following royalty obligations
and royalty reductions as set forth in Section 6(b)ii for the period set forth
in Section 6(b)iii:


 


i.                            If termination
occurred prior to the Lead Compound achieving the Candidate Selection Criteria,
GSK shall pay to SGI a [***] royalty on annual Net Sales of all Products in the
Territory;


 


ii.                         If termination
occurred after the Lead Compound achieved the Candidate Selection Criteria but
prior to exercise by GSK of the GSK Option, GSK shall pay to SGI a [***]
royalty on annual Net Sales of all Products in the Territory.


 


(d)                       Third Party
Licenses for SGI R&D Activities. SGI shall be solely
responsible for satisfying all 


 






***              CONFIDENTIAL TREATMENT REQUEST


Portions denoted with asterisks
have been omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment.


 


30

















 


costs and payments of any kind (including,
without limitation, all upfront fees, annual payments, milestone payments and
royalty payments) for any licenses required from a Third Party for the conduct
of its research and development activities hereunder prior to the date that GSK
exercises the GSK Option. GSK shall be solely responsible for satisfying all
such costs and payments after the date that GSK exercises the GSK Option. It is
understood and agreed by GSK that SGI is not required to maintain any of the
licenses described in this Section 6(d), or satisfy any costs and payments
therefor, following exercise of the GSK Option by GSK; provided however, if
such licenses are required by GSK, in GSK’s discretion, SGI shall use
commercially reasonable efforts to assign such license to GSK or assist GSK in
obtaining a direct license from licensor at GSK’s cost.


 


(e)                        Third Party
Licenses for GSK Development, Manufacture or Commercialization Activities. With respect
to any license necessary for the development, manufacture or commercialization
of a Licensed Compound as determined by GSK following exercise of the GSK
Option (including the licenses as described in Section 6(d), if such licenses
are required for manufacture or commercialization by GSK), GSK shall be
responsible for satisfying all costs and payments of any kind (including
without limitation all upfront fees, annual payments, milestone payments and
royalty payments) for any such licenses and GSK may offset up to [***] of its
direct costs associated with acquiring such license(s) against any royalty
payments due to SGI; provided, that such offset will not reduce the relevant
royalty rates lower than the minimum threshold rates as follows:


 


	
  Annual Net Sales

  	
   

  	
  Royalty Rate

  	
   

  
	
  < $500M

  	
   

  	
  [***]

  	
  %

  
	
  > $500M < $1,000M

  	
   

  	
  [***]

  	
  %

  
	
  > $1,000M < $2,000M

  	
   

  	
  [***]

  	
  %

  
	
  >$2,000M

  	
   

  	
  [***]

  	
  %

  



 


GSK will be entitled to
carry forward uncredited amounts to future royalties due to SGI. For purposes
of clarity, any such license must be obtained by GSK from a Third Party which
party is neither an Affiliate of GSK nor a Sublicensee of GSK.


 


(f)                          Royalty Offset
Reduction. If the GSK Group uses the technology covered by a
license as described in Sections 6(d) and/or 6(e) above for products other than
Licensed Compounds and Products incorporating such Licensed Compounds, then the
costs associated with such license that are offset against royalties payable to
SGI will be reduced from a maximum of [***], by the ratio of the costs
associated with the number of such other products in relation to the costs
associated with the Products incorporating Licensed Compounds. By way of example only, if the GSK Group uses such a
technology to manufacture three (3) other products with a total combined cost
of $[***] and one (1) Product with a total cost of $[***] then the royalty
offset reduction will be [***], or $[***]/($[***] + $[***]).


 


(g)                       Payment,
Reporting and Timing. All royalties shall be paid quarterly within sixty
(60) days after the end of each calendar quarter on a Product-by-Product,
country-by-country basis. The


 






***              CONFIDENTIAL TREATMENT REQUEST  


Portions denoted with
asterisks have been omitted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment.


 


31














 


Party obligated to make royalty payment (“Payor”) shall submit
to the other Party (“Payee”), within sixty (60) days after the end of
each calendar quarter, on a Product-by-Product, country-by-country basis, a
written report showing Net Sales, Net Sales unit volume sold, the royalties
payable in US Dollars and the method used to calculate the royalty and the
exchange rates.


 


(h)                       Currency Conversion. All amounts
set forth in this Agreement, or in any Exhibit, are in US Dollars. If any
currency conversion will be required in connection with the calculation of
royalties or other payments hereunder, such conversion shall be made by the
parties, using the standard method to be employed by GSK in its Group
Consolidation process and in its annual accounts.


 


The current
standard method is sourced from Reuters/ Bloomberg, with US spot rates supplied
on a daily basis. The cumulative year-to-date average rates are calculated as
the average of the preceding 31st December spot rate plus the closing spot
rates of the relevant months to date, using the following as input:


 


·                  US Dollar and Euro input
to 4 decimal places


 


·                  All other currencies to
3 significant places (or to the nearest round number if over 999).


 


As an
example, the cumulative average rate for the 5 months to May will be
computed by taking the sum of the spot rates of the preceding 31st December, plus the month-end
spot rates for the 5 months to May, divided by 6.


 


The
resulting average rates are published to 3 significant figures (e.g.,
$1.44 for the Dollar, or Naira 168 for Nigeria), or to the nearest round number
if the currency is more than 999 (e.g., Bolivar 1,302 for Venezuela).


 


The
rounding process for a currency is that 0.5 is rounded up (e.g., $1.4350
is rounded up to $1.44).


 


If the
standard method for currency conversion employed by GSK in its Group
Consolidation process and in its annual accounts
changes, GSK will timely notify SGI of the new standard method in advance of it
being applied.


 


(i)                           Taxes.


 


i.                            Deductions and Withholdings. All amounts due under this Agreement shall be paid in
full without deduction for any applicable taxes, levies, imposts, duties and
fees of whatever nature imposed by or under the authority of any government or
public authority, except for tax legally required to be withheld. If a law or
regulation of any country of the Territory requires withholding of taxes of any
type, levies or other charges with respect to any amounts payable hereunder to
Payee, Payor shall promptly pay such tax, levy, or charge to the proper governmental
authority and shall furnish Payee with proof of such withholding or similar tax
in a form in accordance with the relevant taxation authority as evidence of
such payment. Payor shall have the right to deduct any such tax, levy or charge
actually paid from payment due to Payee or be promptly reimbursed by Payee if
no further payments are due to Payee. Payor agrees to provide reasonable
assistance to Payee in claiming exemption from such deductions or withholdings
under double taxation or similar agreement or treaty from time to time in force
and in minimizing the amount required to be so withheld or deducted and in 


 


32

















 


obtaining a repayment of tax withheld or
deducted. As GSK and SGI are both U.S. tax residents, each party hereto
acknowledges and agrees that it is not required by any applicable law to make
(and shall not make) any deduction or withholding for or on account of any tax,
levy or other governmental charge from any payment to be made by the other
party under this Agreement, unless either party transfers or assigns this
Agreement or its rights or obligations under this Agreement to a foreign party
or foreign Affiliate or otherwise becomes a resident for taxation purposes in
any country of the Territory other than the United States.


 


ii.                         Assignment
or Change in Tax Residency of GSK. In the event that GSK assigns or transfers its rights or obligations
under this Agreement, under Section 17(e) or otherwise, or that GSK
becomes resident for taxation purposes in any country of the Territory other
than the United States, any amounts payable hereunder to SGI shall be made
without any deduction for or on account of any tax, levy or charge imposed by
any law or regulation of any country of the Territory. If GSK or its assignee
or transferee is compelled to make any such deduction, it shall pay to SGI such
additional amounts as are necessary to ensure receipt by SGI of the full amount
which SGI would have received but for the deduction. GSK agrees to provide
reasonable assistance to SGI in claiming exemption from such deductions or
withholdings under double taxation or similar agreement or treaty from time to
time in force and in minimizing the amount required to be so withheld or
deducted and in obtaining a repayment of tax withheld or deducted. If SGI
receives a tax credit or other tax benefit for such taxes required to be
withheld and paid by GSK then SGI shall reimburse GSK the amount of the tax
credit or other tax benefit actually received and utilized by SGI (net of taxes
incurred by SGI with respect to such tax credit or tax benefit);provided,
however, that in the event a taxing authority denies the tax credit or other
tax benefit claimed by SGI, then SGI shall notify GSK of such denial and GSK
shall within forty-five (45) days of receipt of such notice return to SGI the
amount of the tax credit or other tax benefit disallowed.


 


iii.                      Assignment or Change in Tax Residency of SGI. In the event that SGI assigns or transfers its
rights or obligations under this Agreement, under Section 17(e), or that
SGI becomes resident for taxation purposes in any country of the Territory
other than the United States, any amounts payable hereunder to GSK shall be
made without any deduction for or on account of any tax, levy or charge imposed
by any law or regulation of any country of the Territory. If SGI or its
assignee or transferee is compelled to make any such deduction, it shall pay to
GSK such additional amounts as are necessary to ensure GSK’s receipt of the
full amount which GSK would have received but for the deduction. SGI agrees to
provide reasonable assistance to GSK in claiming exemption from such deductions
or withholdings under double taxation or similar agreement or treaty from time
to time in force and in minimizing the amount required to be so withheld or
deducted and in obtaining a repayment of tax withheld or deducted. If GSK
receives a tax credit or other tax benefit for such taxes required to be
withheld and paid by SGI then GSK shall reimburse SGI the amount of the tax
credit or other tax benefit actually received and utilized by GSK (net of taxes
incurred by GSK with respect to such tax credit or tax benefit);provided,
however, that in the event a taxing authority denies the tax credit or other
tax benefit claimed by GSK, then GSK shall notify SGI of such denial and SGI
shall within forty-five (45) days of receipt of such notice return to GSK the
amount of the tax credit or other tax benefit disallowed.


 


33

















 


(j)                           Method of Payment; Late Fees. Payments to
be made by Payor to Payee hereunder shall be paid by bank wire transfer in
immediately available funds to such bank account as is designated by Payee from
time to time. Any undisputed payments due under this Agreement which are not
paid by the date such payments are due will bear interest to the extent
permitted by applicable law at the prime rate announced by Citibank, N.A. for
the applicable time period plus five percent (5%). The foregoing shall exclude (i) changes
to bank details (e.g., IBAN or SWIFT code) less than ten (10) days by
Payor prior to payment by either Party or (ii) bank errors made by or on
behalf of Payor’s bank.


 


(k)                        Records and Inspection. Payor and its
Affiliates and Sublicensees shall keep complete and accurate books and records
in sufficient detail to permit Payee to confirm the accuracy of all payments
due hereunder. Such books and records shall be kept for at least five (5) years
following the end of the calendar quarter to which they pertain. Payee will
have the right to have such books and records audited by a Third Party
representative reasonably acceptable to Payor under confidentiality obligations
no less strict than a set forth in Section 11 (a nationally recognized
accounting firm) relating the accuracy of all payments due hereunder for the
preceding two (2) years. Payee may conduct such audits during normal
business hours no more than once in any twelve (12)-month period upon at least
thirty (30) days’ prior written notice to Payor. Payee shall bear the cost of
such audit, except that if the audit determines that Payor has made an
underpayment with respect to the audited period that is greater than five
percent (5%) of all amounts due in such audited period, then Payor shall reimburse
Payee for all costs incurred by Payee in connection with the audit, including
reasonable, documented, travel expenses actually incurred by Payee or its Third
Party auditor. If the audit validly determines that there has been any
underpayment, Payor shall promptly reimburse Payee the amount of such
underpayment together with interest on such unpaid amounts at the rate set
forth in Section 6(g). If the audit validly determines that Payor has made
an overpayment with respect to the audited period, Payor will be allowed to
credit the overpayment against future royalty payments due to Payee, without
interest.


 


(l)                           Royalties for Combination or
Bundled Products. Notwithstanding anything else contained in this Section 6,
in the event a combination or bundled Product is formulated, the Net Sales for
such combination or bundled Product will be calculated in accordance with the
formula set forth in Section 1(gg) and the applicable royalty rate will be
applied to such Net Sales amount.


 


7.                                                    SALES
MILESTONE PAYMENTS


 


(a)                        Sales Milestone Payments. GSK shall pay
to SGI the following one-time sales milestone payments based on the first
achievement of worldwide aggregate Net Sales, on a Product-by-Product basis,
for each Product:


 


US$[***] for first achievement of US$[***] for all
indications for such Product in one calendar year;


 


US$[***] for first achievement of US$[***] for all
indications for such Product in one calendar year;


 


US$[***] for first achievement of US$[***] for all
indications for such Product in one 


 






***              CONFIDENTIAL
TREATMENT REQUEST


Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.


 


34

















 


calendar year; and


 


US$[***] for first achievement of US$[***] for all
indications for such Product in one calendar year.


 


All milestone payments in this Section 7 shall
be made within sixty (60) days from the date of receipt of invoice from SGI,
following achievement of each such milestone, provided that GSK promptly
notifies SGI of the achievement of each such sales milestone, in each case no
later than thirty (30) days after the achievement of each such milestone. All
milestone payments in this Section 7 will be non-refundable.


 


8.                                                    CHANGE
OF CONTROL


 


(a)                        Change of Control. Upon SGI
consummating a Change of Control Transaction with an entity engaged in the
pharmaceutical or biotechnology business with a market capitalization of at
least US$1 Billion, GSK will have the immediate right, but not the obligation,
to exercise the GSK Option. If, as a result of such a Change of Control
Transaction, GSK exercises the GSK Option, (i) SGI shall license to GSK in
accordance with Section 4(b), the Licensed Compounds that have been [***]  by SGI to date including those that are furthest in
development with respect to the Lead Compound, the Follow-On Compound and any
Back-Up to the Lead and Follow-On Compound; and (ii) GSK shall pay
milestones and royalties to SGI or its Successor as follows:


 




	
  Stage
  at Which Option

  Exercised on Change of

  Control of SGI

  	
   

  	
  Percentage of Milestones

  and Royalties Payable

  
	
  Before
  Lead Compound meets Candidate Selection Criteria

  	
   

  	
  [***]%
  of applicable milestones and royalties

  
	
  After
  Lead Compound meets Candidate Selection Criteria but prior to initiation of
  clinical trials with the Lead Compound

  	
   

  	
  [***]%
  of applicable milestones and royalties

  
	
  After
  clinical trials have been commenced with respect to the Lead Compound but
  before completion of the PoC Trial for the Lead Compound

  	
   

  	
  [***]%
  of applicable milestones and royalties

  






 


Further, in the event of a Change of Control Transaction, SGI shall
provide reasonable cooperation, including technical assistance, to effect a
technology and Regulatory Filings transfer as described in Section 4(f) for
a Licensed Compound. In all cases, the Parties agree to draft a transition plan
to accommodate the transfer of any such technology, Regulatory Filings and
related documents and materials.


 






***              CONFIDENTIAL
TREATMENT REQUEST


Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.


 


35

















 


(b)                       No Exercise Upon Change of Control. If GSK elects
not to exercise the GSK Option upon SGI consummating a Change of Control
Transaction as described in Section 8(a) above prior to the Lead
Compound meeting the PoC Criteria, SGI shall continue development of Compounds
in accordance with this Agreement, and, upon GSK’s exercise of the GSK Option
on achievement of the PoC Criteria, GSK shall pay milestones and royalties to
SGI or its Successor in accordance with the provisions set forth in Sections 5, 6 and 7.


 


9.                                                    TERM
AND TERMINATION


 


(a)                        Term of this Agreement. This
Agreement will become effective upon the Effective Date and will continue
thereafter in full force and effect on a Product-by-Product and
country-by-country basis, unless terminated sooner in accordance with the terms
hereof, or until it expires on a Product-by-Product and country-by-country
basis upon the expiration of GSK’s obligation to pay any royalties or other
consideration to SGI hereunder in the applicable country with regard to the
applicable Product (such expiration of this Agreement with respect to a
particular Product in a particular country in the absence of termination is
referred to herein as “Product Expiration” and such expiration of this
Agreement with respect to all Products under this Agreement in all countries is
referred to herein as “Expiration in Entirety”).


 


i.                            Research Term. The Research
Term shall terminate as of the effective date of any termination of this
Agreement, unless the Project had terminated previously.


 


(b)                       Bankruptcy-Related Events.


 


i.                            Either Party may terminate
this Agreement upon (A) the bankruptcy, liquidation or dissolution of the
other Party; or (B) the filing of any petition (voluntary or involuntary)
for bankruptcy, dissolution, liquidation or winding-up of the affairs of the
other Party which is not dismissed within ninety (90) days after the date on
which it is filed or commenced; or (C) the proposal by a Party to be a
party to any dissolution or liquidation; or (D) assignment by a Party of
substantially all of its assets for the benefits of creditors.


 


ii.                         If an event as described in Section 9(b)i
above occurs, all rights and licenses granted under or pursuant to this
Agreement by one Party to the other Party are, and shall be deemed to be, for
purposes of Section 365(n) of the
Bankruptcy Code and any similar law or regulation in any other country,
licenses of rights to “intellectual property” as such term is defined in Section 101(35A) of the Bankruptcy Code. The Parties
agree that all intellectual property rights licensed hereunder are part of the “intellectual
property” as defined under Section 101(35A)
of the Bankruptcy Code subject to the protections afforded the non-terminating
Party under Section 365(n) of the
Bankruptcy Code, and any similar law or regulation in any other country.


 


(c)                        Termination for Material
Breach. Either Party may terminate this Agreement, as a whole, at any time
with sixty (60) days prior notice if the other Party materially breaches this
Agreement and such material breach is not cured by the breaching Party within
thirty (30) days after the non-breaching Party provides the breaching Party
with written notice of such breach, provided, however, if such material breach
cannot be cured through Commercially Reasonable Efforts within such 30-day
period and the breaching Party has within such time period promptly submitted a
written plan to cure such material breach through the application of
Commercially Reasonable Efforts, with a cure date reasonably acceptable to the
non-breaching Party, after the earlier of the cure date agreed to by the
non-breaching Party, 


 


36

















 


or the date the breaching Party ceases Commercially Reasonable Efforts
to cure such breach. Notwithstanding the above, in the case of a failure to pay
any amount due hereunder the period for cure of any such default following
written notice thereof will be ten (10) days and, unless payment is made
within such period, termination will become immediately effective at the end of
such period.


 


i.                            In the event that the Party
found to have committed a material breach is SGI, GSK may obtain the License to
the Licensed Compounds that have been [***] by SGI to date, including those
that are furthest in development with respect to the Lead Compound, the
Follow-On Compound and any Back-Up Compounds to each of the Lead Compound and
Follow-On Compound, subject only to the royalty obligations set forth in Section 6(c) above.
For purposes of clarity, if GSK is granted the License pursuant to this Section 9(c)i,
SGI shall not be entitled to any further milestone payments after the effective
date of termination for such material breach.


 


ii.                         In the event that the
Parties cannot in good faith agree as to whether an act or omission is a
material breach, the Parties agree to submit the matter to arbitration for
dispute resolution, who shall finally decide the matter in accordance with Section 16(b)iii
of this Agreement.


 


(d)                       Permissive Termination.


 


i.                            Termination of Entire
Agreement. GSK may terminate this Agreement in its entirety
for convenience, upon thirty (30) days prior written notice to SGI.


 


ii.                         Product-Specific Termination. GSK may
terminate this Agreement, for convenience, as to any Product, on a
country-by-country and Product-by-Product basis (i.e., for a particular Product
for all indications), upon thirty (30) days prior written notice to SGI. In any
such event, GSK’s license and rights with regard to the applicable Product in
the applicable geographic territory will terminate and such Product will be
treated as a Reverted Product (defined below) and the terms of Sections 6(b) and 9(e)v will apply.


 


iii.                      Election Not to Exercise. If the JRC
determines that the Lead Compound achieves the PoC Criteria, and GSK elects not
to exercise the GSK Option within the 90-day option exercise period, then
either Party may terminate this Agreement which termination will become
effective upon written notice to the other Party.


 


iv.                     Failure to Achieve PoC
Criteria. Following expiration of the Research Term, if the
Lead Compound fails to meet PoC Criteria and either (A) there are no
Back-Up Compounds or Follow-On Compounds or (B) the Back-Up Compounds and
Follow-On Compound(s) to that Lead Compound fail to achieve the PoC
Criteria, then in either case either Party may terminate this Agreement which
termination will become effective upon written notice to the other Party.


 


v.                        No Further Development of
Products. If, as a result of the decision, endorsement, vote
(or like mechanism for such election) by GSK’s then-Chairman of Research and Development
(or his or her successor) and/or its Product Management Board (as then 


 






***              CONFIDENTIAL
TREATMENT REQUEST


Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.


 


37

















 


constituted or any successor entity or individual thereto), GSK elects
to cease development and/or commercialization of all Products, GSK will
promptly send a notice to SGI of such election. In such case, SGI may elect to
terminate, upon prior written notice to GSK, this Agreement in its entirety or
as to any or all Compounds, Products, on a country-by-country,
Compound-by-Compound and Product-by-Product basis (i.e., for a particular
Compound or Product for all indications or for all Compounds or Products for
all indications).


 


(e)                        Effect of Expiration or
Termination. Upon Expiration in Entirety or termination of this
Agreement in its entirety for any reason, all rights and obligations of the
Parties hereunder will cease, except as explicitly provided for below:


 


i.                            Accrued Rights and
Obligations. Termination or any expiration of this Agreement
for any reason will not release any Party hereto from any liability that, at
the time of such termination, has already accrued to the other Party or that is
attributable to a period prior to such termination, nor preclude either Party
from pursuing any rights and remedies it may have hereunder or at law or in
equity that accrued or are based upon any event occurring prior to such
termination.


 


ii.                         Confidential Information. Upon
termination of this Agreement by either Party for any reason, the rights of
each Party to retain and use the Confidential Information of the other to
exercise its rights will be as set forth in this Section 9(e); provided,
however, that each Party may retain a single archival copy of the other Party’s
Confidential Information solely for the purpose of determining the extent of
disclosure of such Confidential Information hereunder and assuring compliance
with the surviving provisions of this Agreement.


 


iii.                      GSK Rights Upon Product
Expiration. Upon Product Expiration in any country with regard
to a particular Product, subject to GSK’s compliance with the surviving provisions
of this Agreement pursuant to Section 9(f), GSK’s License with respect to
such Product in such country will survive.


 


iv.                     Rights Upon Termination
Pursuant to Section 9(b). Upon termination of this
Agreement pursuant to Section 9(b), all licenses granted to the Party to
which the Section 9(b) event applies will terminate concurrently.


 


v.                        Rights Upon Other
Terminations. If SGI or GSK terminates this Agreement pursuant
to Section 9(c) or 9(d), then:


 


A.           Reverted Territory; Reverted
Products. The Territory, in the case of a termination in
whole, and the terminated country or countries (together with their territories
and possessions) in the case of a partial termination, will be deemed to be the
“Reverted Territory” effective as of the effective date of such
termination. In the case of a partial termination, the Reverted Territory will
thereafter be excluded from the Territory for all purposes under this
Agreement, but this Agreement will remain in effect in the remaining Territory.
All Products in the Reverted Territory will, effective upon the effective date
of such termination, be deemed “Reverted Products.”


 


B.             License to SGI. After
exercise of the GSK Option, GSK may, at its sole discretion, cease its
development or commercialization of Licensed Compounds at any time. In such
event, all licenses to GSK from SGI, including the Licenses, will terminate
upon such termination by GSK. At SGI’s option, GSK hereby grants and shall
grant to SGI, 


 


38

















 


effective upon such termination, a worldwide, perpetual, exclusive
license, with the right to grant and authorize sublicenses, under all
Inventions and Intellectual Property Rights owned or Controlled by GSK as of
the effective date of termination pursuant to Section 9(d)v above that
were created by GSK in the performance of this Agreement (1) that are
directly related to Reverted Products or the Licensed Compounds upon which the
Reverted Products are based and (2) to the extent that such Inventions and
Intellectual Property Rights are Patents, then those Patents that claim,
generically or specifically, the (I) composition of matter of Licensed
Compounds and/or Reverted Products comprising Licensed Compounds, (II) method
of use of Licensed Compounds and/or Reverted Products comprising Licensed
Compounds or (III) method of manufacture of Licensed Compounds and/or
Reverted Products comprising Licensed Compounds (collectively, “GSK Product
IP”), in each case of (1) and (2) to make, have made, use, sell,
offer to sell and/or import the Reverted Products or the Licensed Compounds
upon which the Reverted Products are based throughout the Reverted Territory.
The foregoing license shall include the right to use the bulk and final product
manufacturing data and processes, batch records and validation documentation;
subcontractor information, Supporting Data, know-how and Adverse Event data to
make, have made, use, sell, offer for sale and import the Reverted Products and
the Licensed Compounds on which the Reverted Products are based throughout the
Reverted Territory.


 


C.             Royalty to GSK. In the event
that SGI obtains the foregoing license from GSK, such license will be subject
to the royalty obligations set forth in Section 6(b) above.


 


D.            Third Party IP-related
Contracts. After SGI’s review, at SGI’s sole election and on
an agreement-by-agreement basis, GSK shall assign (or cause to be assigned) to
the extent permitted by their terms, to SGI all Third Party agreements with GSK
or its Affiliates containing a license under Intellectual Property Rights
claiming, or Inventions specific to or incorporated into, the development or
commercialization of Reverted Products to SGI in the Reverted Territory, or
grant (or cause to be granted) to SGI a sublicense thereunder of a scope
equivalent to that granted to SGI above in Section 9(e)v.B, and thereafter
SGI shall be fully responsible for all obligations due under such agreements.
GSK shall notify SGI in writing no later than ninety (90) days prior to any
such assignment or sublicense becoming effective (unless SGI agrees in writing
for it to earlier become effective), as well as of any associated financial
obligations. If SGI does not wish to assume any obligations associated with
such an assignment or sublicense, then SGI shall so notify GSK and GSK shall
not make such assignment or grant such sublicense (or cause it to be made or
granted). GSK agrees to expend Commercially Reasonable Efforts to make any such
Third Party contracts wholly or partially assignable to SGI without imposition
of any cost or expense upon SGI with respect to such assignment and without any
change in pricing or other commercial terms. In the event that such an
assignment cannot be made, GSK shall cooperate with SGI, including, e.g., by
granting a sublicense for which SGI shall reimburse GSK at GSK’s cost, and SGI
shall expend Commercially Reasonable Efforts to enter into a license or other
agreement with such Third Party licensor.


 


39

















 


E.              Further Sales. In the event
of any such termination, GSK may continue to sell its remaining inventory of
the applicable Reverted Product for a period of six (6) months from the
effective date of such termination, subject to the payment of royalties
pursuant to Section 6. GSK covenants that promptly after such 6-month
period that it and its Affiliates and former Sublicensees hereunder shall cease
to sell, and thereafter shall not sell, any Reverted Product in the Reverted
Territory.


 


F.              Regulatory Filings and
License Registrations. GSK shall assign and transfer (or cause to
be assigned and transferred) to SGI at GSK’s sole cost and expense, any
Regulatory Filings and government License registrations in the Reverted
Territory of GSK and its Affiliates with respect to any Reverted Product (or Licensed
Compound contained in a Reverted Product), and take such actions and execute
such other instruments, assignments and documents as may be reasonably
necessary to effect the transfer of rights thereunder to SGI. GSK shall, in
each sublicense that it grants hereunder, require the Sublicensee to transfer
any Regulatory Filings and License registrations in the Reverted Territory with
respect to any Reverted Product (or Licensed Compound contained in a Reverted
Product) in the event of a termination of this Agreement or such sublicense, to
SGI if this Agreement remains in effect, and to GSK if only such sublicense
terminates, in each case at no cost to SGI. In all cases and concurrent with
the termination event, the Parties agree to draft a transition plan to
accommodate the transfer of any such Regulatory Filings, government License
registrations and related documents and materials.


 


G.             Data Disclosure. To the extent
not already provided, GSK shall provide SGI with all Supporting Data in the GSK
Group’s possession with respect to any Reverted Product (or Licensed Compound
on which a Reverted Product is based), which SGI will be free to use in
accordance with the licenses granted under Section 9.


 


H.            Remaining Quantities. At the end of
the period described in Section 9(e)v.E above, at SGI’s sole election, on
a Reverted Product-by-Reverted Product basis and upon SGI’s written request,
GSK shall transfer to SGI, at GSK’s Manufacturing Cost plus [***] and the cost
of shipping for the Reverted Product, all quantities of reverted Licensed
Compounds and Reverted Products in GSK’s possession (including, without
limitation, clinical trial supplies and Products intended for commercial sale)
that have at least a remaining shelf life of twenty-four (24) months from the
date of transfer, in the case of a Territory-wide termination, or in their
possession and labeled specifically for sale in any country of the Reverted
Territory, in the case of a partial termination. GSK will have no obligation to
alter the labeling of such purchased Licensed Compounds and/or Reverted
Products for commercialization by SGI.


 


I.                 Ongoing Trials. If there are
ongoing trials of Reverted Products and the First Commercial Sale has not
occurred, then, at SGI’s sole election, GSK shall use Commercially Reasonable
Efforts to either (1) transfer responsibility of such trials to SGI, at
SGI’s sole expense, for completion of such trials, or (2) affect an
orderly 


 






***              CONFIDENTIAL
TREATMENT REQUEST


Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.


 


40

















 


wind-down of such clinical trials.


 


J.                Product Manufacture by GSK. If any
Reverted Product was manufactured by GSK at the time of such termination, then
GSK, at SGI’s sole election and written request, shall continue to provide for
manufacturing of such Reverted Product for SGI, at GSK’s Manufacturing Cost,
plus [***], for the Reverted Product from the time of the effective date of
termination, until such time (not to exceed twelve (12) months) as SGI is able
to secure an equivalent alternative commercial manufacturing source for which
Regulatory Approval has been obtained and from which quantities of Reverted
Product are approved by the applicable Regulatory Agency for commercial sale in
each country of the Reverted Territory. During the pendency of the 12-month
manufacturing period, GSK agrees to expend Commercially Reasonable Efforts to
accommodate such manufacture without additional capital expenditure; however,
if GSK notifies SGI in writing that it must increase its manufacturing capacity
to produce the Reverted Product(s), such increase in manufacturing capacity for
the Reverted Products will be at SGI’s sole discretion, and any costs
associated with this increase in manufacturing capacity will be borne solely by
SGI, provided that SGI has notified GSK of its approval of such costs in
writing. If SGI elects not to increase manufacturing capacity after
notification by GSK, then GSK has no obligation to supply Reverted Products to
SGI above and beyond GSK’s available capacity and SGI agrees to accelerate the
search for an alternative commercial manufacturing source. For purposes of
clarity, in the event of the continuation of such manufacturing by GSK,
royalties payable to any Third Parties based on the manufacture of a Reverted
Product will not be included as part of GSK’s Manufacturing Cost if the royalty
deduction provisions of Sections 6(e) and 6(f) are being applied by
GSK to royalty payments to SGI. If GSK is not making royalty payments to SGI
and such Third Party licenses are required for GSK to manufacture the Product
as it was being manufactured before termination, GSK may include such costs in
its Manufacturing Costs.


 


K.            Third Party Manufacturing
Contracts. If any Reverted Product was manufactured by Third
Parties for GSK, or GSK had contracts with vendors which contracts are
necessary for SGI to take over responsibility for the Reverted Products in the
Reverted Territory, GSK shall, at SGI’s sole option and election, without
charge to SGI, assign all of the relevant Third Party contracts to SGI to the
extent permitted by their terms. GSK agrees to expend Commercially Reasonable
Efforts to make any such Third Party manufacturing contracts wholly or
partially assignable to SGI. In the event that such an assignment cannot be
made, GSK shall cooperate with SGI, for a maximum period of twelve (12) months,
to have such Third Party manufacturer(s) continue to manufacture the
Reverted Products for which SGI shall reimburse GSK at GSK’s cost plus [***],
and SGI shall (1) accelerate the search for an alternative commercial
manufacturing source for SGI, or (2) expend Commercially Reasonable
Efforts to enter into contract for such manufacture with such Third Party
manufacturer(s).


 






***              CONFIDENTIAL
TREATMENT REQUEST


Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.


 


41














 


L.              Technical Assistance. Promptly
after the effective date of any Product Expiration, Expiration in Entirety or
termination of this Agreement, GSK shall provide reasonable cooperation,
including technical assistance, to SGI in addition to all documentation
reasonably necessary for a smooth transition of all GSK Product IP, GSK
Inventions, Regulatory Filings and other information related to the Reverted
Products and necessary for SGI to commence or continue to commercially
manufacture Reverted Products. Without limiting the foregoing, GSK shall
reasonably assist SGI, at SGI’s sole cost and expense, with the orderly
transition and uninterrupted manufacture, import and sale of Reverted Products.


 


M.         No Further Representations. GSK and its
Affiliates shall and GSK shall cause its Sublicensees to discontinue making any
representation regarding its status as a licensee of or distributor for SGI in
the Reverted Territory, for all Reverted Products. GSK and its Affiliates shall
and GSK shall cause its Sublicensees to cease conducting any activities with
respect to the marketing, promotion, sale or distribution of the Reverted
Products in the Reverted Territory.


 


N.            Trademarks. If GSK used,
with regard to any Reverted Product in a country in the Reverted Territory, any
trademark, tradename or logo solely with a Product (“Product Trademark”),
GSK shall assign its rights in such Product Trademark to SGI. Effective upon
the date of such assignment, maintenance of the Product Trademark will be at
SGI’s sole discretion and expense. For clarity, SGI will under no circumstance
receive any rights under other GSK trademarks, tradenames or logos or GSK
Housemark, except with respect to selling off of existing inventory in Reverted
Territory solely at GSK’s reasonable discretion.


 


(f)                          Survival. Upon
expiration or termination of this Agreement for any reason, the following will
survive such expiration or termination, subject to any later termination dates
provided for therein: Sections 1, 2(d), 4(e), 6(k), 9(e), 10(b), 10(c), 10(d),
10(f), 10(g), 11, 14, 15, 16, 17 and this Section 9(f).


 


10.                                             INTELLECTUAL
PROPERTY.


 


(a)                        Filing and Prosecution Prior
to Option Exercise. Prior to exercise by GSK of the GSK Option, SGI
shall be responsible, at its sole cost and expense, for filing, prosecuting,
maintaining, defending and enforcing all SGI Patents, provided however, after
confirmation by the JRC or GSK, as applicable, that a Compound has met
Candidate Selection Criteria, SGI shall coordinate the filing, prosecuting,
maintaining, defending and enforcing all SGI Patents with the JPC, further
provided that SGI retains final decision-making authority over the foregoing
matters until such time as GSK exercises the GSK Option. Upon exercise of the
GSK Option, Section 10(b) applies.


 


(b)                       Filing and Prosecution After
Option Exercise. Upon exercise of the GSK Option, GSK would
thereafter be responsible, at its sole cost and expense, for filing,
prosecuting, maintaining, defending and enforcing all SGI Patents that claim, generically or specifically, the (i) composition of
matter of a Licensed Compound(s) and/or Product(s) comprising
Licensed Compounds or (ii) method of use of Licensed Compound(s) and/or
Product(s) comprising Licensed Compounds. GSK shall keep SGI reasonably
and currently informed as to the status of the prosecution of such SGI Patents
and of all steps to be taken in the prosecution of such SGI Patents and shall
furnish SGI with copies of amendments thereto and other related correspondence
to and from patent offices and permit SGI to offer its comments thereon 


 


42

















 


before a submission to a patent office is made where there is material
effect on the scope of the patent coverage that may result is in issue. GSK
shall not allow any of such SGI Patents to be abandoned without notifying SGI
in writing at least sixty (60) days prior to the date on which the next action
or filing is due to be taken with respect thereto, and shall give SGI a
reasonable opportunity to assume responsibility for prosecuting and maintaining
such SGI Patents at its expense.


 


(c)                        Filing and Prosecution of
Joint Patents. GSK will be responsible, at its sole cost and
expense, for filing, prosecuting, maintaining, defending and enforcing all
Joint Patents. GSK shall keep SGI reasonably informed as to the status of the
prosecution of such Joint Patents. GSK shall not allow any of the Joint Patents
to be abandoned without notifying SGI in writing at least sixty (60) days prior
to the date on which the next action or filing is due to be taken with respect
thereto, and shall give SGI a reasonable opportunity to assume responsibility
for prosecuting and maintaining such Joint Patents at its expense.


 


(d)                       Infringement Claims. If
infringement of a Patent or other right by Licensed Compounds and Products
comprising Licensed Compounds included under the License is asserted by a Third
Party after exercise of the GSK Option, GSK will have the exclusive right to
defend and control the defense thereof, using counsel of its choosing, at its
expense. GSK shall keep SGI reasonably informed of developments in such
defense, including contemplation of settlement. If infringement by
a Third Party of an SGI Patent or a Joint Patent that claims the Licensed
Compounds or Products comprising Licensed Compounds included under the License
is discovered by SGI or GSK after exercise of the GSK Option, GSK will have the
exclusive right to defend and control the defense thereof, using counsel of its
choosing, at its expense. GSK shall keep SGI reasonably informed of
developments in such defense, including contemplation of settlement. GSK and
SGI will cooperate on a mutually written agreement to determine apportionment
of labor, costs and settlement/judgment monies. The Parties shall reasonably
assist one another and cooperate in any litigation at the other Party’s request
without expense to the requesting Party. The foregoing notwithstanding, in the
event GSK determines not to assert a Paragraph IV Litigation, such decision
will be final and SGI shall not seek to assert such Paragraph IV Litigation on
its own.


 


(e)                        Regulatory Data Protection. To the extent
required by law or permitted by law, each Party will use Commercially
Reasonable Efforts to promptly, accurately and completely list, with the
applicable Regulatory Authorities during the term of this Agreement, all
applicable Patents for any Product that such Party intends to, or has begun to
commercialize, and that have become the subject of a marketing application
submitted to FDA, such listings to include all so called “Orange Book” listings
required under the Hatch-Waxman Act and all so called “Patent Register”
listings as required in Canada. Prior to such listings, the Parties will meet
to evaluate and identify all applicable Patents. Notwithstanding the preceding
sentence, the Party holding the NDA for the applicable Product will retain
final decision making authority as to the listing of all applicable Patents for
such Product, regardless of which Party owns such Patent.


 


(f)                          Law. Inventorship
and rights of ownership of patentable subject matter first conceived or first
reduced to practice pursuant to this Agreement will be determined in accordance
with U.S. patent law. Rights of ownership of non-patentable subject matter will
be determined in accordance with the laws of the jurisdiction in which such
subject matter is developed.


 


(g)                       Ownership. Ownership of
all Inventions and other Intellectual Property Rights made in connection the
activities carried out pursuant to this Agreement will be as follows:


 


43

















 


i.                            Inventions and Intellectual
Property Rights made solely by SGI or its Affiliates’ employees or its agents,
without inventive contribution by GSK or its Affiliates’ employees or its
agents as determined in accordance with Section 10(f)will be solely owned
by SGI (“SGI Inventions”); and


 


ii.                         Inventions and Intellectual
Property Rights made solely by GSK or its Affiliates’ employees or its agents,
without inventive contribution by SGI or its Affiliates’ employees or its
agents as determined in accordance with Section 10(f) will be solely
owned by GSK (“GSK Inventions”); and


 


iii.                      Inventions and Intellectual
Property Rights made jointly by employees or the agents of GSK or its
Affiliates’ and SGI or its Affiliates’, as determined in accordance with Section 10(f),
will be jointly owned by SGI and GSK, with each Party having an undivided
ownership interest therein (“Joint Inventions”).


 


11.                                             CONFIDENTIALITY


 


(a)                        Treatment of Confidential
Information. Except as otherwise provided in this Section 11,
GSK and its Affiliates shall retain in confidence and use only for purposes
hereof any information, data, and materials supplied by SGI or on behalf of SGI
to GSK and its Affiliates hereunder, and SGI shall retain in confidence and use
only for purposes hereof any information, data, and materials supplied by GSK
or on behalf of GSK to SGI hereunder.


 


(b)                       Permitted Disclosures. To the extent
it is reasonably necessary or appropriate to fulfill its obligations or exercise
its rights hereunder or any rights which survive termination or expiration
hereof, GSK and SGI may disclose Confidential Information of the other Party to
their respective Affiliates, Sublicensees, consultants, outside contractors,
clinical investigators or other Third Parties provided that such entities or
persons agree in writing (i) to keep such Confidential Information
confidential to the same extent as GSK and SGI are required to keep such
Confidential Information confidential, and (ii) to use such Confidential
Information only for such purposes as GSK and SGI are entitled to use such
Confidential Information. Each Party or its Affiliates or Sublicensees may
disclose such Confidential Information to government or other regulatory
authorities to the extent that such disclosure (A) is reasonably necessary
to obtain patents or authorizations to conduct clinical trials with or to
market commercially the Products, provided such Party is otherwise entitled to
engage in such activities hereunder; or (B) is otherwise required by
applicable law or regulation; provided that if a Party is required to make such
a disclosure under Section 11(b)ii.B, it shall first have given prompt
notice to the other Party hereto to enable it to seek any available exemptions
from or limitations on such a disclosure or to apply for confidential treatment
or a protective order and take reasonable efforts to limit such disclosures to
the minimum extent possible.


 


(c)                        CLIMB. At no time,
during the term of this Agreement or otherwise, will SGI be required to
disclose information related to CLIMB other than information that is generated
as a direct result of the application CLIMB; such information in this context
is strictly limited to Compounds, Candidate Selection Compounds, Lead Compounds,
Back-Up Compounds and Follow-On Compounds.


 


(d)                       Terms of the Agreement. Each of the
Parties agrees not to disclose the terms of this Agreement to any Third Party
other than Affiliates or Sublicensees without the prior express written consent
of the other Party, which consent shall not be unreasonably withheld or
delayed, except (i) to advisors, legal counsel, existing and potential
investors and others on a need-to-know basis under conditions which reasonably
ensure the confidentiality thereof, (ii) 


 


44

















 


as required by any court or other governmental body or as otherwise
required by law in accordance with Section 11(b) above; (iii) in
confidence, in connection with the enforcement of this Agreement or rights
under this Agreement; (iv) in confidence, in connection with a merger,
acquisition of stock or assets, proposed merger or acquisition, or the like; (v) as
advisable or required in connection with any government or regulatory filings,
including without limitation filings with the SEC, provided that the filing
Party consults in good faith with the Party whose Confidential Information is
to be disclosed with respect to the specific disclosure and seeks confidential
treatment to the extent reasonably practical; and (vi) as required to be
disclosed in such Party’s financial statements as reasonably required or
recommended by such Party’s independent auditor.


 


(e)                        Publicity. The Parties
may release a joint press release promptly after the Effective Date. Except as
may be required by law, stock exchange or regulatory authority, neither Party
nor any of their respective Affiliates, shall originate any publicity, news
release or other public announcement, written or oral, relating to the
confidential terms or conditions contained herein without the prior express
written approval of the other Party, and agreement upon the nature and text of
such announcement or disclosure, which approval shall not be unreasonably
withheld. Each of the Parties understands that the other Party may be required
under applicable law to timely announce of the progression of a Product through
clinical development for regulatory or other purposes, e.g., a US Securities
and Exchange Commission 8K filing for a material event. A Party desiring to
make any such public announcement or other disclosure shall seek confidential
treatment to the extent reasonably practical and shall inform the other Party
of the proposed announcement or disclosure in reasonably sufficient time prior
to public release or disclosure, and shall provide the other Party with a
written copy thereof, in order to allow such other Party to comment upon such
announcement or disclosure or request confidential treatment thereof. Unless
disclosure is required by law in a shorter period of time, the Party receiving
the proposed release will have at least five (5) days to review any such
release.


 


(f)                          Publication. Reasonably in
advance of any oral or written presentation, or written submission for
publication (each a “Publication”) that will disclose any Invention
relating to a Licensed Compound or a Product for which a patent application has
not been filed in the US, Japan, with the European Patent Office or pursuant to
the Patent Cooperation Treaty, the Party wishing to make such a Publication
shall notify the other Party. In such event, the JPC will convene and discuss
filing patent applications claiming such Invention. During the term hereof,
neither Party shall make any Publication of any data or information produced as
a result of the activities carried out pursuant to this Agreement or otherwise
relating to Products without the other Party’s prior express written consent.
Any such Publication shall include an acknowledgment of the contributions of
each Party, consistent with customary scientific process.


 


(g)                       Clinical Trial
Register. GSK will have the right to publish clinical trial
protocols and summaries of results of all clinical trials conducted by either
Party with respect to a Product after the Effective Date of this Agreement on
GSK’s clinical trial register.


 


12.                                             ETHICAL
CONDUCT


 


(a)                        Policies. SGI agrees to
observe the principles of key GSK policies relating to research and 


 


45

















 


development to its conduct of the Project, to the extent of its
understanding of such principles and policies as summarized in the document
entitled “[***],” provided to SGI by GSK.


 


(b)                       Observation. SGI agrees
that GSK may observe SGI’s research and development activities related solely
to its conduct of the Project for the purposes of determining that SGI is
making a reasonable effort to observe the principles and polices described in Section 12(a),
upon thirty (30) days advance written notice, during normal business hours, at
GSK’s sole cost and expense, at such SGI facilities where such activities are
being conducted.


 


13.                                             INTENTIONALLY
LEFT BLANK


 


14.                                             INDEMNIFICATION


 


(a)                        By SGI. SGI hereby
agrees to defend, indemnify and hold harmless GSK and its Affiliates and their
respective directors, officers, employees and agents (each a “GSK Indemnitee”)
from and against any liabilities, losses, fines, penalties, damages, expenses
(including reasonable attorney’s fees and expenses incurred in connection with
the enforcement of this provision), to the extent based upon a Third Party
Claim brought after the Effective Date of this Agreement against GSK
Indemnitees, including but not limited to, any actions in contract (including
breach of warranty) or tort (including negligence, strict liability or
commercial torts) alleging:


 


i.                            any breach of any of the
representations and warranties of SGI contained in Section 15(a) hereof;


 


ii.                         the gross negligence,
recklessness or willful misconduct of SGI, its Affiliates or agents; or


 


iii.                      any development or
commercialization by SGI or its Affiliates or agents of any Reverted Products,
including without limitation, any manufacture, storage, use, importation, sale,
marketing, promotion or distribution of any Reverted Products.


 


Items (i) through (iii) are hereinafter
collectively referred to as a “GSK Loss.” SGI will have no obligation to
indemnify GSK Indemnitees, to the extent that any GSK Loss is due to the
negligence, recklessness, willful misconduct or otherwise caused by any GSK
Indemnitee.


 


(b)                       By GSK. GSK hereby
agrees to defend, indemnify and hold harmless SGI, and their respective
directors, officers, employees and agents (each an “SGI Indemnitee”)
from and against any liabilities, losses, fines, penalties, damages, expenses
(including reasonable attorney’s fees and expenses incurred in connection with
the enforcement of this provision), to the extent based upon a Third Party
Claim brought after the Effective Date of this Agreement against SGI
Indemnitees, including but not limited to, any actions in contract (including breach
of warranty) or tort (including negligence, product liability, strict liability
or commercial torts) alleging:


 


i.                            any breach of any of the
representations and warranties of GSK contained in Section 15(b) hereof;


 


ii.                         the gross negligence,
recklessness or willful misconduct of GSK or its Affiliates or agents; 


 






***              CONFIDENTIAL
TREATMENT REQUEST


Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.


 


46

















 


or


 


iii.                      any development or
commercialization of any Product by GSK or its Affiliates, or agents, including
without limitation, any manufacture, storage, use, importation, sale,
marketing, promotion or distribution of any Product.


 


Items (i) through (iii) are hereinafter
collectively referred to as a “SGI Loss.” GSK will have no obligation to
indemnify SGI Indemnitees, to the extent that any SGI Loss is due to the
negligence, recklessness, willful misconduct or otherwise caused by any SGI
Indemnitee.


 


(c)                        Indemnification With Respect
to Third Party Claims; Procedures.


 


i.                            To be eligible to seek
indemnification under this Section 14 in respect to a Third Party Claim, a
GSK Indemnitee or an SGI Indemnitee (each, an “Indemnitee”) shall
promptly give written notice thereof to the Party from whom indemnification is
sought (“Indemnitor”) within a reasonable period of time after the
assertion of such Third Party Claim by such Third Party; provided, however,
that the failure to provide written notice of such Third Party Claim within a
reasonable period of time will not relieve the Indemnitor of any of its
obligations hereunder, except to the extent that the Indemnitor is prejudiced
by such failure.


 


ii.                         The Indemnitor will have the
right to assume the complete control of the defense, compromise or settlement
of any Third Party Claim (provided that no settlement of any Third Party Claim
will include any admission of wrongdoing on the part of an Indemnitee or the
invalidity, unenforceability or absence of infringement of any patent owned in
whole or part by the Indemnitee, and shall not grant any right inconsistent
with the terms of this Agreement, without the prior express written consent of
such Indemnitee, which consent shall not be unreasonably withheld), including,
at its own expense, employment of legal counsel reasonably acceptable to the
Indemnitee. At any time thereafter the Indemnitor will be entitled to exercise,
on behalf of the Indemnitee, any rights which may mitigate the extent or amount
of such Third Party Claim; provided, however, that if the Indemnitor will have
exercised its right to assume control of such Third Party Claim, the Indemnitee
(A) may, in its sole discretion and at its own expense (which expense will
not be subject to indemnification hereunder), employ legal counsel to represent
it (in addition to the legal counsel employed by the Indemnitor) in any such
matter, and in such event legal counsel selected by the Indemnitee shall be required
to confer and cooperate with such counsel of the Indemnitor in such defense,
compromise or settlement for the purpose of informing and sharing information
with the Indemnitor; (B) shall, at its own expense, make available to
Indemnitor those employees, officers and directors or Indemnitee whose
assistance, testimony or presence is necessary or appropriate to assist the
Indemnitor in evaluating and in defending any such Third Party Claim (provided,
however, that any such access shall be conducted in such a manner as not to
interfere unreasonably with the operations of the businesses of Indemnitee);
and (C) shall otherwise fully cooperate with the Indemnitor and its legal
counsel in the investigation and defense of such Third Party Claim.


 


iii.                      The Parties shall cooperate
with each other in connection with any such claim, suit or proceeding and shall
keep each other reasonably informed of all material developments in connection
with any such claim, suit or proceeding.


 


(d)                       Reservation. If the
Parties acting in good faith cannot agree as to the applicability of Section 14
(a) and/or 14 (b) to a particular Third Party Claim, then each Party
(and its respective 


 


47

















 


Indemnitees) reserves the right to conduct its own defense of such
Third Party Claim and seek indemnification from the applicable Party upon its
resolution.


 


(e)                        Insurance.


 


i.                            SGI Insurance
Obligations. SGI shall
maintain, at its cost, with effect from prior to the date of first
administration of any Compound (including all Products and any product
based thereon) for testing in humans
hereunder and during the term of this Agreement, adequate insurance against
liability and other risks associated with its activities contemplated by this
Agreement, including its clinical trials and its indemnification obligations
herein, in such amounts and on such terms as are customary for prudent
practices in the biotechnology industry for the activities to be conducted by
it under this Agreement. SGI shall
furnish to GSK evidence of such insurance, upon request. SGI shall maintain in force from prior to the
date of first testing in humans and thereafter during the term of this
Agreement, at its cost, a general liability insurance policy providing coverage
in such amounts and on such terms as are customary for prudent practices for
drug development companies for activities similar to those that will be
conducted by it under this Agreement. SGI shall furnish to GSK evidence of such
insurance, upon request.


 


ii.                         GSK Insurance Obligations. GSK
hereby represents and warrants to SGI that it is self-insured against liability
and other risks associated with its activities and obligations under this
Agreement in such amounts and on such terms as are customary for prudent practices
for large pharmaceutical companies in the pharmaceutical industry for the
activities to be conducted by it under this Agreement. GSK shall furnish to SGI evidence of such self-insurance, upon request.


 


15.                                             REPRESENTATIONS


 


(a)                        Of SGI. SGI hereby
represents and warrants to GSK as of the Effective Date that:


 


i.                            SGI is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with the corporate power and authority to enter into this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all requisite corporate action on the part of SGI.
This Agreement has been duly executed and delivered by SGI and constitutes the
valid, binding and enforceable obligation of SGI, subject to applicable
bankruptcy, reorganization, insolvency, moratorium and other laws affecting
creditors’ rights generally from time to time in effect.


 


ii.                         SGI is not subject to, or
bound by, any provision of:


 


A.           any articles or certificates
of incorporation or by-laws;


 


B.             any mortgage, deed of trust,
lease, note, shareholders’ agreement, bond, indenture, license, permit, trust,
custodianship, or other instrument, agreement or restriction; or


 


C.             any judgment, order, writ,
injunction or decree or any court, governmental body, administrative agency or
arbitrator;


 


in each case, that will prevent, or be violated by,
or under which there will be a default as a result of, nor is the consent of
any Third Party required for, the execution, delivery 


 


48

















 


and performance by SGI of this Agreement and the
obligations contained herein, including without limitation, the grant to GSK of
the License described in Section 4 hereof.


 


iii.                      SGI will obtain all of the
applicable government authorizations, consents, approvals, licenses, filings or
registrations required for it to perform its obligations hereunder;


 


iv.                     SGI has the right to grant
all rights and licenses it purports to grant to GSK with respect to SGI IP
under this Agreement;


 


v.                        SGI has received no notice (A) that
any of the Patents in the SGI Patents are invalid or unenforceable; or (B) of
any settled, pending or threatened claim or lawsuit or legal proceeding of a
Third Party against SGI alleging that SGI Patents infringes or misappropriates
in part or in whole the intellectual property or intellectual property rights
of such Third Party;


 


vi.                     SGI has not granted as of the
Effective Date any right or license to any Third Party relating to any of the
SGI Patents or SGI Know-How that would materially conflict with any of the
rights or licenses granted to GSK hereunder; and


 


vii.                  SGI has not willfully withheld from GSK any material
data or information (exclusive of chemical structures) with respect to any or
all of the Compounds that SGI is actively developing for the Project as of the
Effective Date.


 


(b)                       Of GSK. GSK hereby
represents and warrants to SGI as of the Effective Date that:


 


i.                            GSK is a corporation duly
incorporated, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, with the corporate power and authority to enter
into this Agreement and to perform its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all requisite corporate action
on the part of GSK. This Agreement has been duly executed and delivered by GSK
and constitutes the valid, binding and enforceable obligation of each of them,
subject to applicable bankruptcy, reorganization, insolvency, moratorium and
other laws affecting creditors’ rights generally from time to time in effect.


 


ii.                         GSK is not subject to, or
bound by, any provision of:


 


A.           any articles or
certificates of incorporation or by-laws;


 


B.             any mortgage,
deed of trust, lease, note, shareholders’ agreement, bond, indenture, license,
permit, trust, custodianship, or other instrument, agreement or restriction, or


 


C.             any judgment,
order, writ, injunction or decree or any court, governmental body,
administrative agency or arbitrator,


 


in
each case, that will prevent, or be violated by, or under which there will be a
default as a result of, nor is the consent of any Third Party required for, the
execution, delivery and performance by GSK of this Agreement and the
obligations contained herein.


 


(c)                        Mutual Covenants. Each Party
hereby covenants to the other Party that:


 


i.                            All employees
of such Party and its Affiliates and Sublicensees will be under the obligation
to assign all right, title and interest in and to their Inventions and
discoveries, whether or not patentable, if any, to such Party as the sole owner
thereof;


 


49

















 


ii.                         In each case to
the best of each Party’s knowledge as of the Effective Date, it has not
knowingly employed and in the future shall not knowingly employ any individual
or entity debarred by the FDA (or subject to a similar sanction of EMEA), or
any individual who or entity which is the subject of an FDA debarment
investigation or proceeding (or similar proceeding of EMEA), in the conduct of
the activities or clinical contemplated hereunder. Further, to the best of each
Party’s knowledge as of the Effective Date, it has not knowingly retained or
used a contractor or consultant that has been debarred by the FDA (or subject
to a similar sanction of EMEA), or which is the subject of an FDA debarment
investigation or proceeding (or similar proceeding of EMEA), in the conduct of
the activities contemplated hereunder;


 


iii.                      Each Party
shall (A) to the extent required by applicable law, perform its activities
pursuant to this Agreement in compliance with GLP, GCP and cGMP, in each case
as applicable under the laws and/or regulations of the country and/or state
and/or local government wherein the applicable activities are conducted; and (B) with
respect to the care, handling and use in research and development activities
hereunder of any non-human animals by or on behalf of such Party, at all times
comply (and shall make reasonable efforts to ensure compliance by any of its
subcontractors) with all applicable federal, state and local laws, regulations
and ordinances, and also with the most current best practices for
comparable-sized pharmaceutical companies for the proper care, handling and use
of animals in pharmaceutical research and development activities, and with the “3R
Principles” (reducing the number of animals used, replacing animals with
non-animal methods whenever possible and refining the research techniques
used);


 


iv.                     Neither Party shall, during
the term of this Agreement, grant any right or license to any Third Party
relating to any of the Intellectual Property Rights it Controls which would conflict
with any of the rights or licenses granted to the other Party hereunder; and


 


v.                        Each Party shall notify the
other Party in writing promptly in the event that it has actual knowledge of
the material breach of any covenant under this Section 15(c) or the
material breach of any representation or warranty provided by SGI under Section 15(a) or
by GSK under Section 15(b).


 


(d)                       Disclaimer of Warranties. SGI AND GSK
EACH SPECIFICALLY DISCLAIMS THAT THE PROJECT WILL BE SUCCESSFUL IN WHOLE OR
PART. EXCEPT AS SET FORTH EXPRESSLY IN THIS SECTION 15(d), EACH PARTY
HEREBY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES AND CONDITIONS OF ANY KIND,
EXPRESSED OR IMPLIED, STATUTORY OR OTHERWISE, INCLUDING WITHOUT LIMITATION THE
WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND/OR
NON-INFRINGEMENT OF THE INTELLECTUAL RIGHTS OF THIRD PARTIES. WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, BOTH PARTIES ACKNOWLEDGE AND DISCLAIM ANY
WARRANTY AS TO: (I) THE SUCCESS OF ANY DEVELOPMENT ACTIVITY OR CLINICAL
TRIAL, STUDY OR TEST COMMENCED UNDER THIS AGREEMENT; OR (II) REGULATORY
APPROVAL, PRODUCT INTRODUCTION, SAFETY, USEFULNESS OR COMMERCIAL SUCCESS OF ANY
PRODUCT.


 


16.                                             GOVERNING
LAW; DISPUTE RESOLUTION


 


(a)                        Governing Law; Jurisdiction;
Venue.


 


i.                            This Agreement and any
dispute arising from the performance or breach hereof, and any dispute
resolution conducted thereby, will be governed by and construed in accordance
with the laws of the State of Delaware, excluding its rules governing 


 


50

















 


conflicts of laws.


 


ii.                         Except as set forth in Section 16(b) below,
each Party hereby irrevocably submits to the exclusive jurisdiction of (i) the
courts of the State of Delaware (each a “State Court”) and (ii) the
United States Court for Delaware (the “District Court”), for the
purposes of any action, suit or proceeding arising out of this Agreement or out
of any transaction contemplated hereby. Each Party agrees to commence any
action, suit or proceeding either in the District Court of if such action, suit
or proceeding may not be brought in such court for jurisdictional reasons, in a
State Court. Each Party further agrees that service of any process, summons,
notice or document by personal delivery, by registered mail, or by a recognized
international express delivery service to such Party’s respective address set
forth below will be effective service of process for any such action, suit or
proceeding in the District Court or State Court with respect to any matters to
which it has submitted to jurisdiction in this Section. Each Party irrevocably
and unconditionally waives any objection to the laying of venue of any action,
suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in the District Court or State Court, hereby and thereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum, hereby and thereby further
irrevocably and unconditionally waives its right to a jury trial.


 


(b)                       Dispute Resolution.


 


i.                            Initial Efforts. The Parties
recognize that disputes as to certain matters may from time to time arise
during the term hereof which relate to either Party’s rights and/or obligations
hereunder. Unless otherwise set forth
in this Agreement, including without limitation, disputes arising within the
JRC under Section 3, in the event of a dispute arising under this
Agreement between the Parties, either Party shall have a right to refer such
dispute to the respective Executive Officers, and such Executive Officers shall
attempt in good faith to resolve such dispute (subject always to the Parties’
final decision-making authorities pursuant to Section 3(a)iv). If the
Parties are unable to resolve a given dispute pursuant to this Section 16(b)i within thirty (30) days of referring such dispute to
the Executive Officers, then the dispute shall be settled by an outside expert
pursuant to Section 16(b)ii if such disputes arises within the JRC. All other disputes shall be
submitted to arbitration pursuant to Section 16(b)iii.


 


ii.                         Outside Experts’
Dispute Resolution. For purposes of dispute resolution under this Section 16(b)ii, “outside experts”
means at least one (1) but no more than three (3) independent,
neutral Third Parties, acceptable to each of GSK and SGI, that are, as required
by the matter in dispute, either a clinician or scientist with relevant
pharmaceutical industry experience. The use of outside experts will be solely
to resolve disputes arising under Sections 2 and 3, and not under any other Section of
this Agreement. The Parties shall enter into contract with the outside experts
on a case-by-case basis, and each Party shall bear one-half of such outside
experts’ costs and expenses. Outside Experts dispute resolution shall be
conducted in accordance with Section 16(b)iii.B(1-3) and the Rules (as defined below). Each Party shall prepare a
written report setting forth its position or proposal with respect to the
matter in dispute, and shall submit such report to the outside experts within
ten (10) days of the failure of the Executive Officers to resolve such
disputed matter. The outside expert(s)


 


51














 


will select one (1) of the requested positions as its decision,
and will not have the authority to render any substantive decision other than
to so select the position of either Party. The final decision of the outside
expert(s) with respect to the matter in dispute will be limited to a
finding fully in favor of one Party’s position, and no compromise or split
decisions will be allowed. For purposes of clarity, there will be no witnesses,
evidence, presentations, or other activities other than the written submission
of the Parties’ positions and proposals to the outside expert(s). The outside
expert(s) shall be required to submit a written report of their analysis
and recommendation regarding the disputed matter no more than thirty (30) days
after the Parties’ submissions. The decision of such outside expert shall be
binding on each of the Parties.


 


iii.                      Arbitration. Any
controversy or dispute that pursuant to the express terms of this Agreement is
subject to arbitration (“Arbitratable Dispute”) that the Parties are
unable to resolve pursuant to Section 16(b)i, shall be submitted to
binding arbitration. Despite the foregoing, Arbitratable Dispute will not
include controversies or disputes relating to validity or enforceability of
patents, ownership of intellectual property, scope of license grants, and
patent claim interpretation.


 


A.           The arbitration will be conducted in New York, New
York, U.S.A. except as may otherwise be agreed by the Parties, in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association then in effect (“Rules”). Each Arbitratable Dispute shall be
submitted to a single neutral arbitrator appointed in accordance with the Rules within
fifteen (15) days after the commencement of the arbitration period. Each Party
must bear its own attorneys’ fees, witness’ fees and associated costs and
expenses. Other than attorneys’ fees and expenses, the costs of arbitration
shall be borne equally by the Parties. Any judgment or decision rendered by the
arbitrator will be binding upon the Parties and will be enforceable by any
court of competent jurisdiction. Any arbitration hereunder will commence within
thirty (30) days after appointment of the arbitrator. The arbitrator will make
final determinations as to any discovery disputes and all other procedural
matters in accordance with the Rules. If any Party fails to comply with the
procedures in any arbitration in a manner deemed material by the arbitrator,
then the arbitrator will fix a reasonable time for compliance, and if the Party
does not comply within such period, then a remedy deemed just by the
arbitrator, including an award of default, may be imposed. The decision of the
arbitrator shall be rendered no later than one hundred and eighty (180) days
after commencement of the arbitration period.


 


B.             Arbitratable Disputes will be decided in accordance
with the foregoing provisions of this Section 16(b)iii and the following:


 


1.               Each Party to
the arbitration shall prepare a written report setting forth its position or
proposal with respect to the Arbitratable Dispute, and shall submit such report
to the arbitrator within the later of (I) forty-five (45) days following a
request by either Party for such arbitration, or (II) ten (10) days
after selection of the arbitrator.


 


2.               The arbitrator
will limit discovery as reasonably practicable to complete the arbitration in
the foregoing time frames.


 


3.               The arbitrator
shall select one of the requested positions as its decision, and will not have
the authority to render any substantive decision other than to so 


 


52

















 


select
the position of either Party. The final decision of the arbitrators under this Section 16(b)iii
with respect to the Arbitratable Dispute, will be limited to a finding fully in
favor of one Party’s position, and no compromise or split decisions will be
allowed.


 


(c)                        Injunctive
Relief. Notwithstanding any other provision of this Section 16, either
Party, at any time, may seek from a court of competent jurisdiction any interim
or provisional injunctive relief that may be necessary to protect the rights or
property of that Party.


 


17.                                             MISCELLANEOUS


 


(a)                        Non-Solicitation. Neither Party
may solicit, recruit, hire or retain as a consultant, directly, indirectly or
through a Third Party, any employees of the other during the term of this
Agreement or any extension thereof and for a period of twenty-four (24) months
thereafter, provided that any employee’s response to a Party’s general
advertisement in the newspaper, trade journal or on the internet will not be
deemed a breach of the provision by such Party.


 


(b)                       Force Majeure. Neither Party
will be held liable or responsible to the other Party nor be deemed to have
defaulted under or breached this Agreement for failure or delay in fulfilling
or performing any term hereof, other than an obligation to make payments
hereunder, when such failure or delay is caused by or results from fire; flood;
earthquake; tornado; embargo; government regulation; prohibition or
intervention; war; act of war (whether war be declared or not); insurrection;
act of terrorism; riot; civil commotion; strike; act of God or any other cause
where failure to perform is beyond the reasonable control and not caused by the
negligence or misconduct of the affected Party (“Force Majeure Event”)
so long as the affected Party has used Commercially Reasonable Efforts to
avoid, mitigate and/or overcome the effects of the Force Majeure Event.


 


(c)                        Severability. Both Parties
hereby expressly acknowledge and agree that it is the intention of neither
Party to violate any public policy, statutory or common law, rules,
regulations, treaty or decision of any government agency or executive body
thereof of any country or community or association of countries and
specifically agree that if any word, sentence, paragraph, clause or combination
thereof herein is found by a court or executive body with judicial powers
having jurisdiction over this Agreement or any of the Parties in a final
unappealed order, to be in violation of any such provisions in any country or
community or association of countries, then in such event such words,
sentences, paragraphs, clauses or combination will be inoperative in such
country or community or association of countries (or reformed, for example but
without limitation, to apply for a shorter period of time, such that their
effect is in compliance with law) and the remainder hereof will remain binding
upon the Parties.


 


(d)                       Notices. Any notice
required or permitted to be given hereunder shall be in writing and will be
deemed to have been properly given if delivered by an internationally
recognized overnight delivery service, delivery confirmation requested (e.g.,
FedEx) to the addresses given below for each Party or such other addresses as
may be designated in writing by the Parties from time to time during the term
hereof. Any such notice will be deemed received on the first business day after
posted with the courier.


 


If to SGI, addressed to:                                                      SuperGen, Inc.


4140 Dublin Blvd., Suite 200


Dublin, CA 94568


Attn: Legal Dept.


Facsimile: (925) 551-6483


 


53

















 


If to GSK, addressed to:                                                 SmithKline
Beecham Corporation, d/b/a GlaxoSmithKline


One Franklin Plaza


Philadelphia, PA 19101


Attn: Senior Vice President,
Worldwide Business Development


Facsimile: (610) 270-5166


 


with a copy to:                                                                                   SmithKline
Beecham Corporation d/b/a GlaxoSmithKline


2301 Renaissance Boulevard


King of Prussia, PA
19406-2772


Vice President and Associate
General Counsel, R&D Legal Operations


Facsimile: (610) 787-7084


 


(e)                        Assignment. This
Agreement may not be assigned or otherwise transferred, in whole or in part, by
either Party without the written consent of the other Party, which consent
shall not be unreasonably withheld; provided, however, that either Party may,
without such consent, assign this Agreement (i) to a Successor in
connection with a Change of Control Transaction or the transfer or sale of all
or substantially all of its business to which this Agreement pertains; and/or (ii) to
an Affiliate. Any purported assignment in violation of the preceding sentence
will be null and void. Except as otherwise expressly provided herein, any
permitted assignee shall assume all obligations of its assignor hereunder.
Subject to the foregoing, this Agreement will be binding on and inure to the
benefit of the Parties and their respective successors and permitted assignees.


 


(f)                          Performance by
Affiliates. Each of SGI and GSK acknowledge that their
obligations and rights hereunder may be performed and exercised by Affiliates
of SGI and GSK, respectively. Obligations of the Party for which one of its
Affiliates is performing hereunder will be deemed to extend to such performing
Affiliate. Each of SGI and GSK guarantee performance hereof by its Affiliates.
Wherever herein the Parties delegate responsibility to Affiliates or local
operating entities, the Parties agree that such entities shall not make
decisions inconsistent with this Agreement, amend the terms hereof or act
contrary to its terms in any way. If a Party’s Affiliate breaches any aspect
hereof in the performance of any activity which has been delegated to such
Affiliate, then the other Party will be entitled to proceed against the Party
whose Affiliate so breached, and will not first be required to proceed against
the Affiliate that so breached.


 


(g)                       Waiver. The failure
or delay of a Party to enforce or to exercise, at any time for any period of
time, any provisions hereof or any right or remedy hereunder will not be
construed as a waiver of such provision or right or remedy or of the right of
such Party thereafter to enforce or exercise the same; provided that such right
or remedy is not time-barred or otherwise precluded by law or by a writing
expressly waiving such right or remedy and signed by that Party seeking to
assert such right or remedy. The written waiver by either Party of a breach of
any term or provision hereof by the other Party will not be construed as a
waiver of any subsequent breach.


 


(h)                       No Implied
Licenses. Except as expressly and specifically provided
hereunder, the Parties agree that neither Party is granted any implied rights
to or under any of the other Party’s current or future patents, trade secrets,
copyrights, moral rights, trade or service marks, trade dress, or any other
intellectual property rights.


 


(i)                           Independent
Contractors. The Parties agree that the relationship of SGI and
GSK established 


 


54

















 


by this Agreement is that of independent
contractors. Furthermore, the Parties agree that this Agreement does not, is
not intended to, and will not be construed to, establish a partnership or joint
venture, and nor will this Agreement create or establish an employment, agency
or any other relationship. Neither Party will have any right, power or
authority, nor will they represent themselves as having any authority to
assume, create or incur any expense, liability or obligation, express or
implied, on behalf of the other Party, or otherwise act as an agent for the
other Party for any purpose.


 


(j)                           No Third Party
Beneficiaries. All rights, benefits and remedies hereunder are
solely intended for the benefit of SGI and GSK, and no Third Party, Affiliate
or Sublicensee will have any rights whatsoever to (i) enforce any
obligation contained herein; (ii) seek a benefit or remedy for any breach
hereof; or (iii) take any other action relating to this Agreement under
any legal theory, including but not limited to, actions in contract, tort
(including but not limited to negligence, gross negligence and strict
liability), or as a defense, setoff or counterclaim to any action or claim
brought or made by the Parties.


 


(k)                        Limitation of
Liability.


 


i.                            IN NO EVENT WILL EITHER
PARTY BE LIABLE TO THE OTHER PARTY FOR ANY LOSS OF PROFITS, LOSS OF BUSINESS OR
INTERRUPTION OF BUSINESS, OR FOR ANY OTHER INDIRECT, SPECIAL, INCIDENTAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES OF ANY KIND, EVEN IF SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH LOSS OR DAMAGES. IN NO CASE WILL EITHER
PARTY BE LIABLE FOR ANY REPRESENTATION OR WARRANTY MADE BY THE OTHER PARTY TO
ANY THIRD PARTY;


 


ii.                         IN NO EVENT SHALL SGI’S
LIABILITY FOR DIRECT DAMAGES BE GREATER THAN [***]; AND


 


iii.                      NOTHING IN THIS SECTION 17(k) IS
INTENDED TO LIMIT EITHER PARTY’S OBLIGATIONS UNDER SECTION 14 IN RELATION
TO AMOUNTS PAID TO A THIRD PARTY, BREACH OF SECTION 11, FRAUDULENT OR
WILLFUL MISCONDUCT OR GROSS NEGLIGENCE.


 


(l)                           Other
Obligations. Except as expressly provided herein or as
separately agreed upon in writing between SGI and GSK, each Party shall bear
its own costs incurred in connection with the implementation of the obligations
hereunder.


 


(m)                     Further
Assurances. At any time or from time-to-time on and after the
Effective Date, either Party shall at the request of the other Party (i) deliver
to the requesting Party such records, data or other documents consistent with
the provisions hereof, (ii) execute, and deliver or cause to be delivered,
all such consents, documents or further instruments of assignment, transfer or
license, and (iii) take or cause to be taken all such actions, as the
requesting Party may reasonably deem necessary or desirable in order for the
requesting Party to obtain the full benefits hereof and the transactions
contemplated hereby.


 


(n)                       Export Laws.
Notwithstanding anything to the contrary contained herein, all obligations of
SGI and GSK are subject to prior compliance with US export regulations and such
other US laws and regulations as may be applicable, and to obtaining all
necessary approvals required by the 


 






***              CONFIDENTIAL
TREATMENT REQUEST


Portions denoted with asterisks have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.


 


55

















 


applicable agencies of the government of the
US or the European Union. SGI and GSK, respectively, shall each use its best
efforts to obtain such approvals for its own activities. Each Party shall
cooperate with the other Party and shall provide assistance to the other Party
as reasonably necessary to obtain any required approvals.


 


(o)                       Governmental
Matters.


 


i.                            Governmental
Filings. To the extent, if any, that a Party concludes in good faith that it
is required to file or register this Agreement or a notification thereof with
any governmental authority, including without limitation the US Securities and
Exchange Commission and the Competition Directorate of the Commission of the
European Communities, in accordance with applicable laws and regulations, such
Party may do so, and the other Party shall reasonably cooperate in such filing
or notification and shall execute all documents reasonable required in
connection therewith, at the expense of the requesting Party. The Parties shall
promptly notify each other as to the activities or inquires of any such
governmental authority relating to this Agreement, and shall cooperate, to
respond to any request for further information therefrom at the expense of the
requesting Party.


 


ii.                         License
Registrations. GSK may, at its expense, register the License
granted hereunder in any country of, or community or association of countries
in, the Territory. SGI shall reasonably cooperate in such registration at GSK’s
expense. Upon request by GSK, SGI agrees promptly to execute any “short form”
licenses developed in a form reasonably acceptable to both GSK and SGI and
reasonably submitted to it by GSK from time to time in order to affect the
foregoing registration in such country. No such “short form” license will be
deemed to amend or be used to interpret this Agreement. If there is any
conflict between such a license or other recordation document and this
Agreement, this Agreement will control.


 


(p)                       Headings. The Section and
paragraph headings contained herein are for ease of reference purposes only and
will not affect in any way the meaning or interpretation of any provision
contained herein.


 


(q)                       Counterparts. This
Agreement may be executed in any number of counterparts, each of which will be
deemed an original but all of which together will constitute one and the same
document. A facsimile, telecopy or other reproduction of this Agreement may be
executed by one or more of the Parties and delivered by such Party by facsimile
or any similar electronic transmission device pursuant to which the signature of
or on behalf of such Party can be seen. Such execution and delivery will be
considered valid, binding and effective for all purposes. At the request of a
Party, all Parties agree to execute and deliver an original of this Agreement
as well as any facsimile, telecopy or other reproduction hereof.


 


(r)                          Amendment. The Parties
may amend, modify or alter any of the provisions hereof, but only by a written
instrument that explicitly refers to the provisions hereof which are being
amended and is duly executed by both Parties.


 


56

















 


(s)                        Entire
Agreement. This Agreement together with the attached Exhibits
and any and all letter agreements relating to the Research Plan, PoC Criteria
and Candidate Selection Criteria, which are hereby incorporated herein by
reference and made a part of this Agreement, constitutes the entire agreement,
both written or oral, between the Parties with respect to the subject matter
hereof, and supersedes all prior or contemporaneous understandings or
agreements, whether written or oral, between GSK and SGI with respect to such
subject matter.


 


[SIGNATURES APPEAR ON THE
FOLLOWING PAGE]


 


57

















 


The Parties have caused this Amended and Restated
Commercial Research and License Agreement to be executed by their duly
authorized representatives as of the Execution Date.


 


	
  GLAXOSMITHKLINE LLC

  	
  SUPERGEN, INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/ William J. Mosher

  	
   

  	
  By:

  	
  /s/ Michael Molkentin

  
	
  Name:

  	
  William J. Mosher

  	
   

  	
  Name:

  	
  Michael Molkentin

  
	
  Title:

  	
  Company Secretary

  	
   

  	
  Title:

  	
  Chief Financial Officer

  



 


58

















 


EXHIBIT SCHEDULE


 


	
  Exhibit A

  	
   

  	
  Common Stock Purchase Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  Example of How Net Sales is Calculated

  



 


59

















 


EXHIBIT A


COMMON STOCK PURCHASE AGREEMENT


 


See
attached


 


60















 


EXHIBIT B


 


EXAMPLE OF HOW 

COMBINATION NET SALES IS CALCULATED


 


Combination Product Calculation


 


	
   

  	
   

  	
   

  	
   

  	
  Cumulative

  %

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Ratio A

  	
   

  	
  Weighted Ave

  	
   

  
	
  Market

  	
   

  	
  Net Sales

  	
   

  	
  of Total

  Sales

  	
   

  	
  % of 80%

  Basket

  	
   

  	
  List Price

  Product A*

  	
   

  	
  List Price

  Product B*

  	
   

  	
  Total Price

  A+B

  	
   

  	
  to Total

  A/(A+B)

  	
   

  	
  Ratio A

  to Basket

  	
   

  
	
  UNITED
  STATES (PH)

  	
   

  	
  98000

  	
   

  	
  45.6

  	
  %

  	
  57.0

  	
  %

  	
  206.05

  	
   

  	
  133.75

  	
   

  	
  339.80

  	
   

  	
  60.6

  	
  %

  	
  34.5

  	
  %

  
	
  FRANCE
  (PH)

  	
   

  	
  19000

  	
   

  	
  54.4

  	
  %

  	
  11.0

  	
  %

  	
  126.91

  	
   

  	
  94.06

  	
   

  	
  220.97

  	
   

  	
  57.4

  	
  %

  	
  6.3

  	
  %

  
	
  ITALY
  (PH)

  	
   

  	
  12000

  	
   

  	
  60.0

  	
  %

  	
  7.0

  	
  %

  	
  89.59

  	
   

  	
  81.75

  	
   

  	
  171.34

  	
   

  	
  52.3

  	
  %

  	
  3.6

  	
  %

  
	
  UNITED
  KINGDOM (PH)

  	
   

  	
  8000

  	
   

  	
  63.7

  	
  %

  	
  4.7

  	
  %

  	
  152.14

  	
   

  	
  110.98

  	
   

  	
  263.12

  	
   

  	
  57.8

  	
  %

  	
  2.7

  	
  %

  
	
  PORTUGAL
  (PH)

  	
   

  	
  7000

  	
   

  	
  67.0

  	
  %

  	
  4.1

  	
  %

  	
  133.62

  	
   

  	
  79.28

  	
   

  	
  212.90

  	
   

  	
  62.8

  	
  %

  	
  2.6

  	
  %

  
	
  SPAIN
  (PH)

  	
   

  	
  6500

  	
   

  	
  70.0

  	
  %

  	
  3.8

  	
  %

  	
  120.65

  	
   

  	
  78.12

  	
   

  	
  198.77

  	
   

  	
  60.7

  	
  %

  	
  2.3

  	
  %

  
	
  MEXICO
  (PH)

  	
   

  	
  6000

  	
   

  	
  72.8

  	
  %

  	
  3.5

  	
  %

  	
  108.89

  	
   

  	
  53.27

  	
   

  	
  162.16

  	
   

  	
  67.1

  	
  %

  	
  2.3

  	
  %

  
	
  RUSSIA
  (PH)

  	
   

  	
  4500

  	
   

  	
  74.9

  	
  %

  	
  2.6

  	
  %

  	
  122.40

  	
   

  	
  63.15

  	
   

  	
  185.55

  	
   

  	
  66.0

  	
  %

  	
  1.7

  	
  %

  
	
  BELGIUM
  (PH)

  	
   

  	
  3900

  	
   

  	
  76.7

  	
  %

  	
  2.3

  	
  %

  	
  139.79

  	
   

  	
  99.88

  	
   

  	
  239.67

  	
   

  	
  58.3

  	
  %

  	
  1.3

  	
  %

  
	
  TAIWAN
  (PH)

  	
   

  	
  3600

  	
   

  	
  78.4

  	
  %

  	
  2.1

  	
  %

  	
  102.90

  	
   

  	
  61.32

  	
   

  	
  164.22

  	
   

  	
  62.7

  	
  %

  	
  1.3

  	
  %

  
	
  GERMANY
  (PH)

  	
   

  	
  3500

  	
   

  	
  80.0

  	
  %

  	
  2.0

  	
  %

  	
  194.26

  	
   

  	
  161.40

  	
   

  	
  355.66

  	
   

  	
  54.6

  	
  %

  	
  1.1

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Sales of 80% basket

  	
   

  	
  172,000

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  59.9

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Combination Sales

  	
   

  	
  215,000

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 






* Can be adjusted to take into account situations where
individual pack sizes differ from pack sizes used for combination


 


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